B 366004
CAUSES OF THE
GREAT FALL IN PRICES
ARTHUR CRIMP
ARTES
LIBRARY
1837
UM
VERITAS
UNIVERSITY OF MICHIGAN
E PLURIBUS UNUM
TUFBOR
SCIENTIA
OF THE
SI QUAERIS PENINSULAM AMOENAM
CIRCUMSPICE
„AS) AS/AS) (UPAJOJAI SHALOJNA
JU.U/{
1
}
HB
221
C956
WORKS BY THE SAME AUTHOR.
"KEY TO THE LONDON MONEY MARKET.”
Sixth Edition.
,
“ENGLISH MANUAL OF BANKING.”
Fourth Edition.
"THEORY OF STOCK EXCHANGE SPECULATION.”
Fourth Edition.
"NEW DEPARTURE IN THE DOMAIN OF POLITICAL
ECONOMY."
"THE FORMATION OF POLITICAL OPINION."
Second Edition.
LONGMANS, GREEN & Co.
“ PROPHECIES OF THE BI-METALLISTS.”
"ENGLISH JOINT STOCK BANKS."
"CRITIQUE ONPROGRESS AND POVERTY,'
by Henry George."
EFFINGHAM WILSON, Royal Exchange.
String
Crump
nihil
Ja o q r s
smes
Arthur
AN INVESTIGATION
INTO THE
CAUSES
OF THE
GREAT FALL IN PRICES
WHICH
TOOK PLACE COINCIDENTLY
WITH THE
DEMONETISATION OF SILVER BY
GERMANY.
ARTHUR
BY
CRUMP.
LONDON
34802
LONGMANS, GREEN, AND CO.
AND NEW YORK: 15 EAST 16th STREET
1889
All rights reserved
*From the commencement of our inquiry we
have been profoundly impressed with the extreme
complexity of the questions submitted for our con-
sideration."
* From the Final Report of the Gold and Silver Commission.
Reclass. 1-19-28 M. V.P.
INTRODUCTION
CONFUSION OF THOUGHT WHICH HAS
INTO THE CAUSES OF THE FLUCTUATIONS IN PRICES
:
CHAPTER II.
CAUSES WHICH PRODUCE FLUCTUATIONS IN PRICES
CHAPTER III.
SOME OF THE PRINCIPAL CAUSES OF THE DECLINE IN
THE SBBJECT OF THIS INVESTIGATION
CONTENTS.
CHAPTER I.
WRITERS
THE "
•
POSITION PREVIOUSLY TAKEN UP
""
HAS CHARACTERISED PREVIOUS ENQUIRIES
ECONOMIST ON THE
CHAPTER IV.
CC
38
THE EFFECTS UPON PRICES OF A BETTER SYSTEM OF DISTRIBUTING LABOUR 44
··
THE PRECIOUS METALS. GOLD IN ITS RELATION TO THE FALL IN PRICES . 53
AN AUTHORITY ON THE CAUSES OF THE CHANGE IN PRICES IN 1859
79
CHAPTER V.
THIS CHAPTER CONTAINS CHIEFLY POSITIVE EVIDENCE IN SUPPORT OF THE
CHAPTER VI.
VIEWS UPON THE CURRENCY AND KINDRED QUESTIONS OF CONTEMPORARY
• •
O
CHAPTER VII.
CHAPTER VIII.
IN PRICES
GOLD AND SILVER COMMISSION
··
SUMMARY.
APPENDIX.
PRICES WHICH ARE
··
•
34802
A POTENT CAUSE OF THE FALL IN THE PRICE OF TEA..
FINAL CONCLUSIONS FROM THE FOREGOING FACTS AND ARGUMENTS
""
PAGE
. 1
CAUSES OF THE FALL IN THE PRICE OF TEA FROM 1863 TO 1877 TRACED
STEP BY STEP FROM PUBLISHED CIRCULARS
··
:
..
..
··
:
..
3
16.
··
•
.. 139
88
116
148
. 180
.. 185
INTRODUCTION.
The following brief investigation relates to a subject
which has for some time ceased to excite anything like the
interest which was felt in it while hopes were still entertained
that something might be done in the direction of endeavouring
to rehabilitate silver through the joint action of the leading
Governments of the world. We have heard of late very few
complaints about there being any scarcity of gold, one reason
being that business generally is more prosperous, and people
are making money in very many cases, instead of losing it or
making none, as large numbers did for some years after silver
began to fall. We hear nothing, either, about there being any
increase in the supply of gold, although we see some of
the prices in Mr. Goschen's list, which will be found in an
Appendix, rising owing to specific causes, having no relation to
the supply of gold, which are plainly set out on p. 197. The
reasons for some of the changes downwards in the prices given
have been newly procured from the best sources, while the
fall in tea is traced from the circulars of an eminent firm in
the trade, and disposes effectually of any necessity for seeking
for the fall among currency influences. Although, as we
have said, keen interest in the question has somewhat sub-
sided, there is no reason on that account to abandon attempts
to throw some more light on the real influences which have
A
ii.
been at work. With so very complicated a question, it is
difficult to classify the subjects for discussion, and, we fear,
in this respect we shall be found fault with. The main
thing, however, is, to endeavour to produce a result which shall
be, as near as possible, a demonstration that prices did not fall
owing to a scarcity of gold, but that they did decline owing
to other causes, which are definitely assigned as having pro-
duced the fall in each case, apart from other and more
general causes, which will have affected all to some extent,
which will have affected certain groups, and which will
have exercised even a still more limited influence. The
means and the form are nothing compared with establishing
the fact that it is not necessary to attempt to prove that gold,
as an element in the problem, exercised no material influence
compared with those to whose agency the fall can be shown to
have been due. We set out to do this, and we hope we have
succeeded.
CHAPTER I.
CONFUSION OF THOUGHT WHICH HAS CHARACTERISED
PREVIOUS ENQUIRIES INTO THE CAUSES OF THE FLUCTUATIONS
IN PRICES.
THE
HE discussions which have been carried on, by
means not only of public meetings, but of books,
pamphlets and newspapers, ever since the demonetisation
of silver by Germany, regarding the influences which
many persons believe to have been the direct effect of
that act upon the prices of commodities, seem to us to
have been characterised by some confusion of thought,
which has in our time, as in the past, very much
misled the public whenever currency questions have
engaged attention. Whether or not we ourselves
are justified in stepping into the arena with the object
of endeavouring to make somewhat clearer what other
people seem to us to have confused by their argu-
ments remains to be seen; but we have been impelled
towards this endeavour under the pressure of a belief
that a good many people who have formulated their
views upon the various causes of the late heavy
fall in prices are labouring under delusions, and at
the risk of being ourselves on some points wrong, we
have decided to make the attempt at a further in-
vestigation, beyond a small part* we had previously
1
*See in Appendix a letter, entitled, "The Alleged Appreciation in the Value of
Gold, and the Fall in the Prices of Commodities," which appeared in the Economist
of May 19, 1883. .
A 2
4
taken, with the object of trying to come nearer to a
solution of the problem. We will premise this investiga-
tion by going back for light and leading on some
deceased renowned authorities-authorities, we believe,
as sound, if not sounder than any at present living-for
the purpose of clearing the ground and laying down a
foundation upon which to build the conclusions we shall
endeavour to arrive at.
The fluctuations in prices are well known to have
been investigated in the past by persons who were
considered by no less an authority than J. S. Mill
himself as "the most eminent authorities." We refer, of
course, to Messrs. Tooke and Newmarch. Before pro-
ceeding to cite the axioms by the light of which those
authorities worked, and by whose guidance they arrived
at their deductions, we will just refer to a sentence or
two of Mill's, in which he speaks of the confusion which
has hampered and misled the public at all times when
currency questions have occupied the public mind.
Mill remarks in Vol. II. Pol. Econ., p. 10, on Money:
"The illustration of these principles, considered in their
application to money, must be given in some detail, on
account of the confusion which, in minds not scien-
tifically instructed on the subject, envelopes the whole
matter; partly from a lingering remnant of the old
misleading associations, and partly from the mass of
vapoury and baseless speculation with which this, more
than any other topic of political economy, has in latter
times become surrounded."
Again, at p. 19 he says "But on a subject so full
of complexity as that of currency and prices, it is
5
400
necessary to lay the foundation of our theory in a
thorough understanding of the most simple cases,
which we shall always find lying as a ground-work
or substratum under those which arise in practice.
That an increase of the quantity of money raises prices
and a diminution lowers them, is the most elementary
proposition in the theory of currency, and without it we
should have no key to any of the others. In a state of
things, however, except the simple and primitive one
which we have supposed, the proposition only is true,
other things being the same." It is necessary to remark
here that this hypothesis, "other things being the same,"
is just the qualification which makes all the difference
when included as an element in the problem. A greater
change had been taking place during several years
previous to the great fall in prices in the "other things "
-i.e., in the circumstances generally affecting the
operation of supply and demand-than had perhaps ever
been witnessed before. We refer, of course, to the
improved means of production, improved machinery,
improved means of communication, to the diminished
purchasing power of certain classes, &c., &c., which is
treated of in detail in the letter to the Economist to
which we have referred. J. S. Mill continues: "We
can, however, point out one or two of the cautions with
which the principle must be guarded in attempting
to make use of it for the practical explanation of
phenomena; cautions the more indispensable, as the
doctrine, though a scientific truth, has of late years
been the foundation of a greater mass of false theory and
erroneous interpretation of facts than any other pre-
6
position relating to interchange. From the time of the
resumption of cash payments by the Act of 1819, and
especially since the commercial crisis of 1825, the
favourite explanation of every rise or fall of prices has
been the currency; and like most popular theories, the
doctrine has been applied with little regard to the con-
ditions necessary for making it correct. For example,
it is habitually assumed that whenever there is a greater
amount of money in the country, or in existence, a rise
of prices must necessarily follow.* But this is by no
means an inevitable consequence. In no commodity is
it the quantity in existence, but the quantity offered for
sale, that determines the value. Whatever may be the
quantity of money in the country, only that part of it
will affect prices which goes into the market of com-
modities, and is there actually exchanged against goods.
Whatever increases the amount of this portion of the
money in the country tends to raise prices. But money
hoarded does not act on prices. Money kept in reserve
by individuals to meet contingencies which do not
occur does not act on prices. The money in the coffers
of the Bank, or retained as a reserve by private bankers,
does not act on prices until drawn out, nor even then,
unless drawn out to be expended in commodities.
"It frequently happens that money to a considerable
amount is brought into the country, is there actually
invested as capital, and again flows out, without having
even once acted upon the markets of commodities, but
only upon the markets of securities, or as it is commonly,
*The italics are ours.
7
though improperly, called, the money market. Let us
return to the case already put for illustration, that of a
foreigner landing in the country with a treasure. We
supposed him to employ his treasure in the purchase
of goods for his own use, or in setting up a manufactory
and employing labourers; and in either case he would,
cæteris paribus, raise prices. But instead of doing
either of these things, he might very probably prefer
to invest his fortune at interest, which we shall suppose
him to do in the most obvious way-by becoming a
competitor for a portion of the stock, Exchequer bills,
railway debentures, mercantile bills, mortgages, &c.,
which are at all times in the hands of the public. By
doing this he would raise the prices of those different
securities, or, in other words, would lower the rate of
interest; and since this would disturb the relation
previously existing between the rate of interest on
capital in the country itself and that in foreign countries,
it would probably induce some of those who had floating
capital seeking employment to send it abroad for
foreign investment, rather than buy securities at home
at the advanced price. As much money might thus
go out as had previously come in, while the prices of
commodities would have shown no trace of its temporary
presence. This is a case highly deserving of attention;
and it is a fact now beginning to be recognised, that the
passage of the precious metals from country to country
is determined much more than was formerly supposed
by the state of the loan market in different countries,
and much less by the state of prices."
Writing in the Economist of April, 1845, on the
8
subject of currency and banking, Mr. John Wilson
remarked: "This confusion is apparent in most of the
discussions and writings of that time, and in a great
majority of all that have appeared since, and in no place
in a more remarkable degree than in the speeches with
which Sir Robert Peel introduced and supported his
new Bank Bill last year.
""
Having shown how easily even writers of repute
have fallen into error in treating these complicated
questions, we must endeavour to proceed warily a step at
a time, and to avoid as much as possible that dangerous
practice of prematurely deviating into side issues. It is
here that so many writers on these subjects are lured
into the jungle of difficulties, in which they only further
entangle themselves the more they struggle to get out.
These few citations sufficiently establish the fact
that there has been much confusion in the past among
some of those who have endeavoured to explain the
causes of the fluctuations in prices, and in order to avoid
falling into the same errors, we cannot do better than
collect from the writings of the best authorities the
statements of fact by the light of which they arrived
at what the best subsequent authorities accept as
sound deductions. Now, the point which seems to call
for attention on the threshold of our investigation is,
that the opinions held by so many persons in our
day as to the cause of the fall in prices which took
place coincidently with the heavy depreciation of
silver consequent on its demonetisation by Germany,
appear to have been formed by the light of principles
which have been more or less undermined, and thus
4
.9
rendered inoperative as maxims, such as that "an
increase in the quantity of money raises prices and a
diminution lowers them," which, as Mill remarks, is
ONLY true in a simple and primitive state, other things
being the same,
One of the great difficulties which has troubled
investigators in connection with this question is that
of proving to what extent the volume of actively
circulating currency has actually increased or diminished,
and to what extent changes in prices can be ascribed to
those fluctuations. When prices have moved either way,
it has been assumed that the quantity of metal currency
has increased or diminished to an extent sufficiently to
account for the movement in prices; but no attempt to
demonstrate such a proposition by verified data has ever
been made, so far as we know. At best it has only been
an inference, and we are of opinion that it can only
be an inference, owing to the intangible nature of the
data necessary, on the currency side, to enable a com-
plete demonstration to be arrived at. The demonstration
on the other side, by means of the verifiable data outside
currency influences, can be rendered sufficiently com-
plete to justify the investigator in coming to the con-
clusion that, although currency influences exercised
some influence in the present case, it was practically
immaterial. This is our view, in fact, of the lines upon
which an investigation should be undertaken, and upon
which we think it can be satisfactorily carried through.
We are further of opinion that what has come to light
since this matter first came up for discussion, now
already some years ago, satisfactorily establishes the
10
fact that an investigation on such lines will yield the
desired solution, while no other can. The object of this
investigation is to show that there was no scarcity of
gold, but rather the contrary, and further to demonstrate
by positive evidence that prices fell owing to causes out-
side currency influences.
Let us now get a foothold first of all upon a piece
of concrete ground, where we can take our stand,
and only leave it when we have laid a bit more of
concrete foundation to which we can safely pass.
First of all, then, the starting-point is the standard
of value.
A medium of exchange and a standard of
value are created but for one object, and that is the
facilitation of the exchange of commodities. They are
instruments to that end, and nothing more.
All are
agreed on that point, and therefore we can at once
proceed to the proposition, equally impossible to refute,
viz., that efforts have always been made to keep in
circulation the smallest quantity of currency consistently
with the requirements of business. Here, then, we
have two concrete stepping-stones which lead up to the
conclusions we are making for, the objects striven for
in practice being-
1. Facilitation of exchange;
2. At the least cost.
Let us examine the first, just to see, in passing, how
the propositions of the bi-metallists are compatible with
the automatic working of the facilitation of exchange
upon the most economical principles. That, of course,
is an indispensable element in every sound system of
currency. All engaged in commerce and banking have
11
been struggling from the first to diminish the friction
involved in the exchange of commodities, and why?
because friction means (1) expense, (2) delay. The
very instincts of traders would therefore guide them
in the direction of removing as fast as they could from
their path everything existing in the shape of cumber-
some currency.
We do not need to show how these two objects have
ceaselessly been striven for in the past by the united
efforts of all to save their time and money: we will then
merely take for granted that that proposition is proved,
and bring forward the latest evidence in further support
of it which has been placed before the public, and which
we have taken from the St. James's Gazette, as there
transplanted from the Economist.
ECONOMIES IN THE USE OF COIN.
The second report of the Gold and Silver Commission issued
this week contains some interesting information with regard to the
economies in the use of coin that have been effected in England during
recent years. The most important evidence on this branch of the
subject was that given by Mr. Bertram W. Currie. After reminding
the Commission that between 1873 and 1886 the number of bank
branches in England and Wales increased from 1,100 to 1,755, he
went on to show, from the experience of the bank with which he
himself is connected-Glyn, Mills and Co.-what the effect of this
extension of banking facilities has been. Comparing three days in
1880 with three days in 1887, he said:-
In 1880 the total number of cheques drawn on country banks for which
Glyn's acted as agents was in three selected days 19,950, and the number of
them under 1. was 462, or 2 per cent. of the whole. In 1887 the total number
of cheques in the three corresponding days was 35,090, against 19,950, and
1,481 of these were under 17., 4 per cent. of the whole, so that in these seven
years the percentage of cheques under 17. has increased from 2 per cent. to
4 per cent., and the total has increased from 19,950 to 35,090. Then over
il. and under 57. in the first period, 1880, there were 5,229 cheques in three days, or
26 per cent. of the whole; and in the second period, 1887, there were 11,682, or
32 per cent., so that the ratio of increase is largest in the small denomination, and
that, I think, is a strong argument in favour of what I have said; and if there was
any scarcity of gold, substitutes would be found which would remove any incon-
venience, or would obviate the evil of any such scarcity.
12
9
And dealing separately with suburban cheques, he stated that
whereas in 1880 Glyn's dealt with 620 of such cheques daily, of
which ninety-three were between £5 and £10, and 215 under £5, in
1887 they dealt with 1,250 cheques daily, of which 245 were between
£5 and £10, and 515 under £5. It is thus evident that the
multiplication of branch banks has greatly economised the use of
gold. As Mr. Currie put it, small traders, who previously had no
banking account, and were consequently compelled each to keep
a certain amount of gold in their shops, have now opened accounts,
and the cash they previously held has been liberated. Evidence of a
somewhat similar character was given by Mr. William Fowler, who
submitted the following statement of the country clearing of Messrs.
Barclay for the months of November, 1882 to 1886:
November.
1886
1885
1884
...
Number
of Cheques.
45,310
42,370
41,750
40,710
38,670
•
...
..
Total
Amount.
£1,131,300
1,056,200
I,192,900
I,194,900
I,163,400
1883
1882
Here, as the Economist observes, we have a considerable increase in
the number of cheques accompanied by a still greater proportionate
decrease in the average amount for which the cheques were drawn;
and the teaching from the figures is, that in the retail business of the
country cheques are taking the place of coin. Another economy to
which Mr. Currie directed attention is the displacement of coin by
postal notes.
•
-
Average per
Cheque.
£24.9
•
29.9
28.5
28.8
30.1
Take, he says, the postal orders, which were only established in 1881-82. The
postal orders in 1881-82 were in number four and a-half millions, and in amount
£2,000,000 sterling; in 1885-86 they were in number twenty-five and three-quarter
millions, and in amount 10,750,000 sterling. During the same period postal
money-orders, which to a certain extent may be said to compete with them, remained
nearly stationary--that is to say, the amount in the first period was £23,250,000,
and in the second period £22,000,000. Therefore it could not be said that the
postal orders had displaced the money orders. Well, then, I have taken the
following from our own experience: at Glyn's bank, 2,000 postal orders are dealt
with daily now, as against 500 postal orders six years ago.
Again, while in various ways we have been contriving to make a little
gold do the work which previously it took much gold to accomplish,
we are keeping a considerable stock of the metal lying idle.
We thus, in brief, demonstrate that at all times
and in all circumstances the great object has always
been to do with the currency as with the working of a
railway train, to bring friction down to the minimum,
and to grease the wheels at the least expense. It is all
a question of cost in both cases. If there is much
trade there will be more money, or its representative,
13
circulating. The money can never increase first, while
Governments continue to coin money in response to the
increasing requirements of trade. Its increase follows
that of the trade. Why? Because more money cir-
culating means more money spent in buying the metal,
and more money spent in coining and maintaining it
in circulation. If trade decreases money goes out of
circulation, and is melted down and either hoarded or
sold, just as the railway carriages are disposed of where
the traffic has so fallen off as not to require them any
longer.
What, then, is the rationale of this demonstrated
proposition? Simply, that now, as at all other times, if
commodities were not exchangeable with the utmost
facility consistently with the development of other parts
of the machinery of commerce and banking and at the
least cost which the ingenuity of man has been so far
able to devise, the community would cry out, as they
have always cried out before, until such amendments were
introduced as the sense of the sound-thinking portion of
the community demanded. To this some will say, "Some
of them are crying out!" We reply, "Who are they?
Do they constitute one per mille, and is there one sound
economist among them?"
The position, then, that we arrive at, so far, is this,
that the currency is an automatic machine, working
under similar influences to those which govern prices
generally, with this important exception, that when the
supply of precious metal exceeds the demand a much
longer time is required to consume the surplus than in
the case of any other commodity.
14
What is the great principle that governs prices ?
Supply and demand. Another way of putting this is the
following, which we may repeat with advantage, viz.:—
It is not the quantity of a commodity in existence
that determines the value, but it is the quantity offered
for sale.
If the owners of the Newcastle coal fields were to
find out that it would be in their interests to undersell
all other sellers of coal, as the German Government
undersold all other sellers of silver, would it be thought
sensible of other coal mine owners to rush about Europe,
and try to persuade people who were not interested in
maintaining the price of coal to combine for that
purpose? Wherein consists the difference between the
silver and the coal? They are both commodities, and
are governed, as regards their value, by the same laws,
silver not being entitled in the smallest degree to be
treated differently from coal.
To reinstate silver on the lines demanded by the bi-
metallists would be as sensible a proceeding as endeavour-
ing to compete with the railways by reviving the old
stage coaches. This becomes at once apparent when one
single fact is brought forward, which we believe we do
no injustice in saying that not many people include it
in their calculations. It is this, that a large and in-
creasing quantity of circulating coin, which was formerly
needed in a rougher state of our currency machinery, is
now collected in the banks, and unless the existing confi-
dence between individuals and nations becomes destroyed
by revolutions or wars, has been as good as again consigned
to the bowels of the earth from which it was extracted.
15
The great bulk of the gold held by the great European
national banks is never moved, and is never likely to be,
unless in circumstances such as we have mentioned.
While the greatest powers stand together politically for
mutual protection, as they stand now, the confidence
between man and man and between nation and nation,
which has relieved the precious metals of the duties
imposed upon them in a state of civilisation when a man
could not get an umbrella without having the sovereign
in his hand to pay for it, will be maintained, and the
medium of exchange will become more and more a
promise to pay on the thinnest piece of paper that can
be manufactured consistently with sufficient strength.
Thus we are, and have been for a long time past, in
the presence of a movement which is entirely opposed
any idea of extending or enlarging the metallic
machinery of the currency. The changes that are taking
place are in an opposite direction, and will, there is
every reason to believe, so continue.
CHAPTER II.
CAUSES WHICH PRODUCE FLUCTUATIONS IN PRICES.
1. Prices are the expression in coin of the realm
of the relative worth of commodities.
2. The appreciation or depreciation of the value
in commodities of these coins can only be caused by the
decrease or increase respectively of the amount of those
coins in circulation, and the change is generally a very
slow one. For example: if more coins are drawn into
active circulation, prices which have risen through the
exercise of greater purchasing power will remain
higher if the necessity of a larger active circulation
is maintained.
3. Therefore, to produce any effect upon prices at
all one way or the other, it is not sufficient that there be
a greater or less production of the metals used, but
that there be first an increase of purchasing power, and
that that increase operate sensibly upon the mass of
coined money not only in one country, but in all
countries using those metals. This was proved by the
action of Germany in demonetising her silver. High
prices are a distinct disadvantage, because a greater
proportion of capital must be kept employed to circu-
late commodities. Prices having fallen, less money is
required to circulate commodities.
17
The rise or fall in prices should be in proportion
to that which the increase in the gold bears to that
previously in circulation. Do those who attribute the fall
in prices to an appreciation of gold maintain that a
proportion of the amount in circulation equal to the
proportionate fall in prices had disappeared from the
metal circulation? Because it is only by removing it
from the active circulation, as we have said, that such an
effect upon prices as a whole could be produced. If our
investigation shows anything, it demonstrates that gold
was drawn from the hoards into active circulation, and
that the facts thus show that an opposite effect would
have been produced but for the circumstance that the
withdrawal of silver left a void in the necessary
volume of the German circulating medium; and
secondly, that less coined money was required in
proportion to the fall in prices. The domestic
circulation of gold has probably increased, while the
international circulation of bullion has unquestionably
largely decreased.
Mill says, in his "Political Economy," Vol. II., p. 19:
"When credit comes into play as a means of purchasing,
distinct from money in hand.
The connection
between prices and the amount of the circulating medium is
much less direct and intimate." And again at p. 22:
"An increase in the circulating medium conformable
in extent and duration to the temporary stress of
business does not raise prices, but merely prevents
a fall." The converse of this proposition would be,
that a decrease in the circulating medium "conform-
able in extent and duration" to the decline in the
B
18
activity of trade does not cause a fall in prices, but
merely prevents a rise.
As a result of the stagnation of trade there is a
gradual consumption of surplus commodities, the de-
clining prices not encouraging producers to burden
themselves with stocks. A contraction of the volume of
purchasing power causes food, &c., to become cheaper
through economised consumption, while there will be a
better yield as the result of more efficient individual
labour.
A contraction of credit and consequent fall in prices
draws gold into the country. Gold, however, is oftener
attracted by a fall in securities, which is the result of a
rise in the rate of interest, while the prices of commo-
dities are not affected.
The effect upon prices of the fluctuations in the
market value of money through the expansion and con-
traction of credit is quite a different thing from the effect
upon prices caused by an increase in the volume of money
circulating, which is the result of a demand for it to
facilitate the exchange of a greater quantity of com-
modities.
Mill says, Vol. II. "Political Economy," p. 39: "In
a state of commerce in which much credit is habitually
given, general prices at any moment depend much more
upon the state of credit than upon the quantity of
money."
Political economists have agreed that the average
prices of commodities, taken as a whole, are determined
by the cost of producing the precious metals. An ounce
of gold ought to exchange for as much of other commo-
19
dities as require for their production the same expendi-
ture of labour and capital. But this is one of those
axioms whose force, like others we have referred to,
diminishes under the influence of changing circum-
stances. The "other things" (not) "remaining the
same" to which Mill referred alter the position mate-
rially. For instance, at the present time a silver shilling
of the realm buys more than a piece of the same weight
uncoined. This is proved by the fact that the Govern-
ment has made large gains by its coinage of silver since
the price fell. The above axiom would only hold good
so long as the gold miner could take his gold to the
mint and get it coined at will. The current value of
silver coins would have sunk lower had the mints been
open for free coinage. There are consequently two
different values for both metals. The gold in circulation
as coin will buy much more than if all the gold in
existence were coined and put in circulation. This
proves that gold may exist largely in excess of currency
or mercantile requirements, and yet exercise no effect
whatever upon prices. The German, United States,
Italian and other requirements were taken from the
uncoined excess, and therefore did not directly affect
prices.
-
An article which, owing to changed circumstances,
can be produced more cheaply than before, or whose
value has fallen owing to its diminished utility, which
is always an element in value, will buy less gold, and
therefore in relation to that particular article gold may be
said to have appreciated. Most of the prices have thus
fallen, not owing, as some allege, to the appreciation of
B 2
20
gold, but owing to circumstances affecting their indi-
vidual value either as regards cost of production or
diminished demand or utility.
It should be remembered that the prices of
commodities may deviate very widely from that which
is their cost of production; that the extent to which an
individual can influence prices is just so much as the
extent of the purchasing power which he is able to
exercise; and, further, that speculative purchases may
considerably raise some prices, while others are un-
affected. Mere book credit purchases have the same
effect when they are made as if actual money passed;
and, again, it should never be forgotten, that after
a period of great inflation prices fall often as much
below their normal level as they were previously
forced above, through
through the forced sales of traders.
who cannot obtain the accommodation they require,
owing to a want of confidence arising out of the
commercial revulsion. Such fall need not be due
to anything affecting money, but owing to a contraction
of credit.
There is no doubt that silver has fallen in value,
owing to its diminished utility, which is a direct
consequence of its production having so exceeded
requirements as to render it less fitted to perform
the functions of a standard of value than before, and
some people argue that gold must have risen in value in
proportion, owing to its having been absorbed to fill the
vacuum. Let us examine this.
Let us examine this. Very little attention
seems to have been directed to the question of hoards
in this discussion, which is a point bearing very
21
materially upon the solution of this problem. The
supply of gold that was purchased for coinage purposes
by Germany and other countries would, it stands to
reason, be first taken from the most available sources,
the circulating currency being always the last to be
touched, for obvious reasons. Unless the actual circu-
lating currency is trenched upon, thus operating by
degrees over the whole area of currencies, there can be
no permanent general fall in prices, even from their
normal average level. It is well known that
Mr. Goschen's prices were very much above the normal
level.
We have said that Mr. Goschen's figures, upon
which he based his deductions that the fall in
prices was due to a scarcity of gold, were greatly
inflated. In proof of that contention we quote a
statement of Mr. Mundella from the Times, reported
in the debate on the depression of trade on 31st
October, 1884:
"Mr. Mundella said that the hon. gentleman had
compared the periods between the years 1869 and 1873,
and the years 1879 and 1883. But that period com-
prised those tremendous years of inflation when steel
rails, now selling at £5 a ton, were selling at £20 a ton,
and when iron was three times its present price. It
also included the period of the Franco-German War,
when, in fact, the whole manufacture of Europe was
thrown upon this country; and therefore it was hardly
fair to compare those two periods. Within the period
1879-83 every kind of manufacture was lower than it
had ever been in the memory of man. In the cotton
22
}
trade the quantity of raw material imported in 1878
was 1,176,500 lbs. ; in 1879, 1,173,326 lbs.; in 1882,
1,461,900 lbs.; and in 1883, 1,510,600 lbs. As to the
exports, of course the price of shirtings and such articles
depended on the price of the raw cotton at Liverpool;
and in 1878, the quantity of cotton piece-goods exported
was 3,618,665 yards; in 1882, 4,349,391 yards; and in
1883, 4,538,889 yards; so that regularly in that depart-
ment of industry there had been a large increase in the
exports. Then there was an enormous increase in the
annual amount of the deposits in the Post Office and
trustees' banks. In 1878 the amount was £19,344,000;
in 1879, £19,547,000; in 1882 it rose to £23,354,000;
and in 1883 to £24,123,000, or an increase of nearly
20 per cent. Then, again, what were the facts with
regard to the income tax? In 1879 the returns under
Schedules A, B, C, D and E amounted to £578,000,000,
and in 1882 to £601,000,000. Now, he would give the
other side of the picture, and give some account of
France, which was a protective country, and had been
for some time carefully nursing her trade. During the
eight months ending August 31, 1882, 1883, and 1884,
the value of the principal manufactured articles exported
from France was £48,895,000, £45,836,000, and
£41,493,000 respectively; and the total exports, in-
cluding agricultural produce, were in 1882, £92,217,000;
in 1883, £87,611,000; and in 1884, £81,617,000. Let
them look at the contrast of the two countries, and see
which system was producing the better results for its
people, The hon. member had said that the nation had
been fed upon promises for the last 40 years. All he
23
could say was, that anything more terrible than the
general suffering of the population 40 years ago it was
impossible to describe. When he was a youth it was for
the handloom weavers a life of chronic starvation; they
never had enough to eat, and the condition of the artisans
in the midland counties was one of terrible and constant
suffering. This did not begin to amend until the Corn
Laws were repealed."
The gold introduced into the German monetary
system was not abstracted from the circulation of
other countries, but was taken from hoards, or from the
reserves of bankers; consequently, there was, in fact,
no decrease in the gold currencies of some countries in
order to provide what Germany required. As far as
the operations of Germany were concerned, the gold
put by them into circulation to replace that of the
silver which they sold was as good as abstracted from
the bowels of the earth. Consequently, there could be
no real appreciation in the value of the metal in relation
to commodities as a whole, but, if anything, a depre-
ciation, as a result of the quantity in circulation being
greater than before. In a sense, it can be said that gold
has appreciated because you can buy more for a sovereign
than you could before the fall in prices; but we are of
opinion that it cannot be maintained with strict scientific
accuracy that the circulating medium can be said to have
risen in value because some other commodities have
depreciated. We shall have something more to say on
this subject farther on.
When Germany decided upon introducing a gold
currency, there was no disturbance of the equation of
24
international demand for commodities arising directly
from that introduction. The exchange was not in her
favour to the extent of compelling other countries to
export gold to Germany, in order to adjust any adverse
trade balance. It is seen, therefore, that the gold was
imported as a commodity on the same basis as if it had
been wool, cotton, or tea; and that the movement was
powerless to affect directly prices which, as far as
currency influences are concerned, can only be affected
over long periods by gradual changes in the whole
volume circulating.
If it can be proved, then, to demonstration, which
we believe it can, that the movements of bullion do not
affect prices as a whole until that movement either adds
to or subtracts from the gold in actual circulation
as coin, the increase even then being the effect and not
the cause, we seem to arrive at a proof that general
prices could not have been affected by the demoneti-
sation of silver by Germany in any other way than
as a result of the fall in the price of the commodity
silver, and as a result of the indirect loss thereby
sustained by a multitude of interests which were
bound up in the retention of the value of silver at
the price from which it fell. That there was a
multitude of interests sorely affected by that fall in the
value of silver is attested by the complaints of bi-
metallists, nearly all of whom are directly interested in
rehabilitating silver, which have been heard ever since,
and by the destruction wrought among the numbers
of corporate bodies and individuals whose property
in the East has fallen in value pari passu with that
25
of silver.
The stimulus given to the export of
Eastern produce to Europe by the fall in the Eastern
exchanges is matter of common notoriety, and would
of itself account for a large part of the fall in
Mincing Lane prices. The fall which took place was,
there can be no doubt, very largely the result of
speculation for the fall among those who were clever
enough to see what must be the result of the decline in
the Eastern exchanges. But we have to reckon beyond
this with the decline in the prices of European manu-
factured articles which have been exported to pay for
these increased imports of Eastern produce. With all
the complaints of the depression of trade, we know that
the volume of both imports and exports has remained
as great as before, if not larger, which proves that to
call it depression of trade is a misnomer. It is really
a depression of profits, owing to the decline in values,
aggravated by increased competition, both among manu-
facturers and producers of the raw material.
Mr. Tooke said, in 1832, before the Commons
Committee on the Bank Charter question: "In point of
fact and historically, as far as my researches have
gone, in every signal instance of a rise or fall of prices,
the rise or fall has preceded, and therefore could not
be the effect of, an enlargement or contraction of the
bank circulation."
Mr. Fullerton also said at the same time, "That
bank issues, since they cannot be increased in amount
unless there be an increased demand, cannot possibly
Mr. J. S. Mill accepts this as incon-
raise prices."
trovertible.
-
26
The demand of a Government for gold to establish
a gold standard is a very different thing from an in-
creasing demand for more currency in response to an
increase in the trade of a country, which gives rise to a
greater and more active interchange of commodities.
Such increase and greater activity respectively, being
due to the exercise of more extended purchasing
power, would first cause a rise in prices, which would
be followed by a natural expansion of the circulating
medium.
*
Regarding the vast accumulations of treasure known
to exist in France so long ago as when Mr. Fullerton
wrote his treatise on the subject of currencies, he then
said: "Of this vast treasure (estimated to amount to
£120,000,000 sterling) there is every reason to presume
that a very large proportion, probably much the greater
part, is absorbed in the hoards.
That the
quantity of specie accumulated in these innumerable
depôts not only in France, but all over the Continent,
where banking institutions are still either entirely want-
ing or very imperfectly organised, is not merely immense
in itself, but admits of being largely drawn upon, and
transferred even in vast masses from one country to
another with very little, if any, effect on prices, or other
material derangements, we have had some remarkable
proofs": among others, "the signal success which
attended the simultaneous efforts of some of the principal
European Powers (Russia, Austria, Prussia, Sweden and
Denmark) to replenish their treasuries, and to replace
*Fullerton on the "Regulation of Currencies.”
27
with coin a considerable portion of the depreciated paper
which the necessities of the war had forced upon them,
and this at the very time when the available stock of
the precious metals over the world had been reduced
by the exertions of England to recover her metallic
currency.
There can be no doubt that these
combined operations were on a scale of very extraor-
dinary magnitude, that they were accomplished without
any sensible injury to commerce or public prosperity, or
any other effect than some temporary derangement of
the exchanges, and that the private hoards of treasure
accumulated throughout Europe during the war must
have been the principal source from which all this
gold and silver was collected. And no person, I
think, can fairly contemplate the vast superflux of
metallic wealth thus proved to be at all times in
existence, and, though in a dormant and inert state,
always ready to spring into activity on the first indica-
tion of a sufficiently intense demand, without feeling
themselves compelled to admit the possibility of the
mines being even shut up for years together, and the
production of the metals altogether suspended, while
there might be scarcely a perceptible alteration in the
exchangeable value of the metal." This evidence, from
a very competent authority, seems to lessen very much the
force of Mr. Goschen's argument that the £200,000,000,
supposing such a sum were taken clean out of existing
active circulating currencies, which it was not, absorbed
ten years' supply, estimated at a yearly average of
£20,000,000.
Further referring to the currency doctrine and its
28
advocates, Mr. Fullerton wrote: "One might imagine
that they supposed the gold which is drained off for
exportation from a country using a currency exclusively
metallic to be collected by dribblets at the fairs and
markets, or from the tills of the grocers and mercers.
They never even allude to the existence of such a thing
as a great hoard of the metals, though upon the action
of the hoards depends the whole economy of inter-
national payments between specie-circulating commu-
nities, while any operation of the money collected in hoards
upon prices must, even according to the currency
hypothesis, be wholly impossible."
From Fullerton's "Political Economy" we find the
following quoted in J. S. Mill's "Political Economy,"
Vol. II., p. 223: "To come to the present time (1844),
the balance of payments with nearly all Europe has
for about four years past been in favour of this country,
and gold has been pouring in, till the influx amounts to
the unheard-of sum of about fourteen millions sterling.
Yet in all this time has anyone heard a complaint
of any serious suffering inflicted on the people of the
Continent? Have prices there been greatly depressed
beyond their range in this country? Have wages fallen,
or have merchants been extensively ruined by the
universal depreciation of their stock?
of their stock? There has
occurred nothing of the kind. The tenor of com-
mercial and monetary affairs has been everywhere
even and tranquil; and in France more particularly,
an improving revenue and extended commerce bear
testimony to the continued progress of internal pros-
perity."
29
What it is all-important should be kept in mind is,
that prices are not only not depressed or raised in
these times appreciably by additions to or abstractions
from the circulating currency, but that if they were, the
operation of cause and effect would be in an inverse
order to that which is generally believed.
Here we must introduce a leading axiom, which
must be firmly grasped before it is possible to under-
stand the real causes by which prices are influenced,
and it is this:-"It is the quantity of money constituting
the revenues of the different orders of the State, under
the head of rents, profits, salaries, and wages, destined
for current expenditure, according to the wants and
habits of the several classes, that alone forms the
limiting principle of the aggregate of money prices-
the only prices that can properly come under the
designation of general prices. As the cost of pro-
duction is the limiting principle of supply, so the
aggregate of money incomes devoted to expenditure for
consumption is the limiting principle of demand for
commodities."* It is most important to keep a clear
view of the application of those two principles, as
Mr. Tooke felt himself, and he leaves a record in his
book of his impressions on that particular point on
the same page from which we have taken the
foregoing extract, as follows:-"A view to those
simple and constantly operative principles, instead of
the doctrine of the effects of expansions and contrac-
tions of the quantity of paper-money issued by the
* Tooke's "History of Prices," p. 276.
30
Bank, will serve to throw a steady light upon the
circumstances determining the general state of trade
and of prices."
How little the actual fluctuations in the quantity of
currency affected prices, even so long ago as 1840, when
Mr. Tooke wrote his book, and how much was due to
other causes, is seen from what he wrote when then
investigating this question. He says: "The rationale of
the matter, as appears to me, is this: Prices are the
result of a certain ratio between the quantity of money
entering into the markets for commodities and the
quantity of commodities offering for sale on the other;
but the money, or that which performs the office
of money, that enters into the produce or wholesale
markets consists in a very small-I believe an infinitely
small-proportion of bank notes. Nine-tenths, or more
probably, ninety-nine hundredths, of the purchases and
sales of the wholesale markets are transacted through
the medium of book debts, or simple credit, and cheques
on bankers. It is the balances only of these transactions
that require the intervention of bank notes; and it
depends partly on the proportion of buyers and sellers
who keep accounts with the same banker whether any
beyond the smallest possible amount of bank notes is
employed for the final adjustment of the largest whole-
sale transactions in the markets for commodities." If
the proportion of the money with which commodities
were purchased in 1840 was "infinitely small," how
much smaller will it be now, with the increase in the
number of banks, the greater confidence and intelligence
which exists among all trading classes, to say nothing
31
of the purchases and sales that are effected by means
of the telegraph, in many different forms, which act
upon prices just as if solid gold were the purchasing
power.
Mill cites almost, if not quite, a parallel case of à
movement of gold as having taken place about the year
1844. It was not so large as that which followed the
demonetisation of silver by Germany, supposing always
that the estimate given is correct; but then we must
remember that a good deal of the gold taken from
England for coinage purposes quitted that country as soon
as it was put in circulation, causing a great outcry among
the Berlin financiers, who did not seem to have allowed
for such a contingency. What was the result? Before
effective measures could be taken to prevent it draining
away across the frontier into France, much of the new
coinage had entirely disappeared, and the work had to be
done over again, fresh supplies being purchased. It is
easy to understand, under these circumstances, that the
amount of gold apparently absorbed for German coinage
purposes was greatly in excess of what actually entered
permanently into the currency of that country. Indeed,
it is doubtful if the greater part of it is not at this
moment either in the German military chest or in the
vaults of the Imperial Bank, which would mean that the
hoards let loose by the Franco-German War, and drawn
upon afterwards, have returned to their hiding-places,
without, as the authorities we have cited testify regard-
ing previous movements, having directly exercised any
material effect upon prices at all.
The only material fall in prices which takes place
32
in these times as a consequence of large bullion move-
ments is the fall in securities which takes place in
response to a rise in the rate of interest. Foreigners
step in and buy the securities, and the adverse balance
is thus adjusted without the currency being affected in
the remotest degree.
The foregoing pages contain, we think, ample
evidence from the best authorities against the theory
that the rapid fall in prices experienced on the occasion
under review has been due any more to an alteration
in the volume of active currency than was at any
previous period the cause of a fall. We have shown
that the best authorities agree that an alteration in the
volume of the currency is always the effect and not
the cause of a general change in prices upwards or
downwards. Investigations having proved that it is so,
the demonstration must hold good until somebody can
upset the evidence on which it is founded. J. S. Mill
is not the sort of man to accept the evidence of Tooke,
Fullerton, and others, if he were not satisfied that it was
correct. If Mr. Goschen, and those who think with
him, adhere to their view, they are bound to upset the
evidence which seems to us to overthrow their argument,
or acknowledge that they are in the wrong.
So far, therefore, it appears that the best deceased
authorities are agreed that for general prices to be
either raised or lowered there must be a sensible
addition to or subtraction from the whole stock of
metals in active circulation in all countries, and that
such addition to or subtraction from the stock is not
the cause of a rise or a fall in prices, but is in all
33
cases the consequence.
Additions to or subtractions
from the currencies of the world are, in other words,
due, on the one hand, to a demand for more currency,
either to satisfy the requirements of a larger number of
inhabitants and to exchange commodities which have
risen to higher prices, or to assist in distributing a
larger quantity of commodities; and, on the other hand,
subtractions are due to either a shrinkage of inhabitants,
which would naturally throw the circulating medium,
like any other agency, out of employment to some
extent, to a decline in prices, or to a diminution in the
quantity of commodities to be distributed. It may be
said, à propos of these remarks, that we have admitted
that when the metals could be forced through the mints
prices were raised by an increase in the volume of
the currency. The quantity of coined money being
thus increased would, of course, gradually cause a rise
in prices; but the supply of silver from the mines has
never until of late years been so excessive as to threaten
to exercise a palpably injurious influence upon the
creditor class of the community, and when it did, the
mints were closed to private coiners. At previous
periods a rise in prices from that cause has, as we have
particularly pointed out in the letter to the Economist in
the Appendix, been so very slow as to be scarcely
perceptible to a generation. What we are now dealing
with is a fall of prices which was so rapid as in itself to
carry the proof with it that it was due to causes quite
apart from any change in the volume of the precious
metals in active circulation.
Up to this point we have been dealing chiefly with
с
34
negative evidence, with the object of demonstrating, as
we venture to think, that the reasons adduced for
asserting that the fall in prices after the Franco-German
War had no material relation to a change in the pur-
chasing power of gold as the consequence of an alleged
scarcity of that metal, and that, in fact, there has been
no material change in that purchasing power which is
due to a scarcity of that metal; but that its so-called
appreciation in relation to some commodities is due
simply to those commodities having fallen in price,
owing to the supply of them having, for various
reasons, exceeded the demand, or to their relative value
having declined through diminished utility. This, be it
observed, is a proposition differing essentially from that
of Mr. Goschen and endorsed by Mr. Giffen, and if it
can be made out, by showing with positive evidence,
that the fall in certain commodities was due entirely to
causes affecting those commodities individually, the
premises, and consequently the deductions, of those
gentlemen will, we venture to think, be proved to be
unsound.
Mr. McCulloch, we shall show further on, was of
opinion that silver could rise or fall in price "without
its being occasioned by a corresponding fall or rise in
gold."
The following extract from Mill touches upon the
Californian gold discoveries, which many thought at
the time, and apparently still think, was the direct
cause of the rise in prices that took place in many
articles, through the increase in the active gold
currency:
35
"The discovery of that gold gave rise to what was
equivalent to a new industry while it lasted. The gold
came to Europe and was sold, the English manufactures
of all kinds being returned to the miners, who founded
colonies where they were working. The result of the rise
in prices thus occasioned increased the currency require-
ments, and for the time there is no doubt much of that
gold was maintained in active circulation, sustaining
prices while the greater and more widespread purchasing
power was exercised."
It is true that when the equation of international
demand is unable to establish itself and the exchanges
are adverse, gold flows out until the contraction of
credit as a consequence of a rise in the rate of interest
has brought the inflated prices either of securities or
of some commodities we may have to sell down to a
point that will induce the foreigner to buy, and thus
adjust the balance; but such a movement exercises no
sensible effect upon the great volume of a nation's active
currency, so as to influence the normal level of general
prices. Over-trading is thus corrected; but in the case
under review there was no contraction of the circulation,
or any adverse movement in the exchanges. The gold
required was taken either from reserves or hoards, so
as to avoid even affecting the money market; so that
no material effect on prices such as we have seen
could result directly from those operations.
Mr. Wilson, the founder of the Economist, in writing
upon the influences which are exercised by the various
operations connected with the trade of the country,
remarks as follows: "With a purely metallic currency,
c 2
36
in all cases the circulation would be acted upon last, and
as an indirect consequence of other causes, but in the case
of an import and an export of bullion, it would only
be in extreme cases that the circulation would be acted
upon at all; for in case of an adverse exchange, which
only went so far as to reduce the reserve of coin in the
Bank to the proper proportion to the deposits, and there
stopped, a considerable export of bullion might take
place without any derangement of business, or any
sensible contraction of the circulation." This was exactly
what took place during the operation of Germany's
change of standard. The first effect of an import
or export of gold to
gold to correct the exchanges is
always produced exclusively on the bullion reserve
of the Bank of England. That is the first to be
touched and the circulation last. It may be urged in
reply to this, that as the gold leaves the Bank for export
the note circulation is contracted. That is true; but
even then there is simply a temporary contraction of
credit. The movement in these times never goes so far
as to cause a material decline in general prices. It is
well known that all the countries which are spoken of as
having absorbed these £200,000,000 of gold took it
designedly, so as to disturb the money markets and
trade as little as possible. There was practically no
influence exercised on the foreign exchanges by these
operations, and consequently the prices even of securi-
ties which are the first to suffer as soon as bullion begins
to move on any scale were not disturbed, much less the
prices of commodities.
If our premises so far are sound, viz., that more
37
coined money can only be drawn into circulation by an
increase of purchasing power or an extension of credit,
which, if used, is the same thing, and that prices will
remain higher while the increased demand for com-
modities is maintained, and with it the increased volume
of currency, we can demonstrate by converse reasoning
that if gold were not required to be drawn from the
hoards, what was needed must have been liberated from
active circulation by the decline in prices. In brief, the
exercise of more purchasing power means more active
circulation, and vice versa. Consequently, we seem to be
justified in concluding that there could be no resulting
scarcity of gold, but exactly the opposite.
CHAPTER III.
SOME OF THE PRINCIPAL CAUSES OF THE DECLINE IN PRICES
WHICH ARE THE SUBJECT OF THIS INVESTIGATION.
A
FALL in profits lowers to some extent the cost of
things which are manufactured by machinery.
The significance of this axiom becomes apparent
when considered in connection with the revolution in
production generally which has been developing in this
and other countries for years past. All who follow at
all the progress of manufacturing industry must be
aware that there has been an enormous development
of late years in the capacity both of this and other
countries to turn out articles by machinery which were
previously made by hand-looms and the like. Even
boots and shoes in our day are made by machinery.
This country, as is equally well known, for a long time
enjoyed practically a monopoly in the manufacture of
large machinery, for instance; but in recent years other
countries have worked up level with most of our manu-
facturers, and whereas formerly it was hardly necessary
for our manufacturers to heed the feeble efforts of other
nations to manufacture for themselves, now not a few of
our people are apprehensive on the score of whether even
they can hold their own in respect of some articles in
which our foreign rivals possess some indigenous or
other advantage over us. From the newspapers we
39
continue almost daily to realise the fact that our Conti-
nental competitors, particularly the Germans, are meet-
ing us in distant markets with a formidable rivalry,
which means not only that they can manufacture more
goods than their own people can consume, but that they
possess surplus energy and resources, which enable them
to divert to their own country a portion of the stream
of profits which formerly flowed to these islands. These
facts are so patent, that it is unnecessary to produce
statistics in support of them. They, however, throw a
searching light upon the gradual transformation which
has been making such perceptible progress in the
direction of undermining that preponderance which has
hitherto characterised the manufacturing industry of
this country.
Now the first thing that happens when a manufac-
turer perceives that his hold upon certain markets is
loosening is, that he seeks to cut out his rival by lowering
the price. To what extent the fight for supremacy in
that respect will be carried depends a good deal upon
the resources of the rivals. Our own manufacturer,
having had the start, will probably be the stronger, and
he will in certain cases endeavour, by extreme measures at
first, to starve out his rival altogether. This, however, is
a system of warfare that can only succeed for a time.
Other foreign competitors are sure sooner or later to
spring up and renew the warfare, until at last they
obtain a footing from which they cannot be entirely
dislodged. Then comes a time when the richer and
more powerful competitor realises the fact that dis-
cretion is the better part of valour, and they seek a
40
modus vivendi which has a false semblance of friendliness
that time alone can smooth down. It has taken a long
time for our foreign rivals to become formidable com-
petitors in any branch of manufacturing industries. In
some branches we shall probably always hold our lead,
so long as the existing sources of supply of materials are
what they are; but the best evidence of this country
having now to share the loaf with others than the
workers in the manufacturing industries of these islands
is to be found in the decline in prices, the real and
tangible causes of which it is the object of this work to
discover.
We set out in this chapter with the axiom that
"the fall in profits lowers to some extent the cost of
things which are manufactured by machinery." Prices
fell, as we well know, when hand-looms were superseded.
The prices of travelling fell when steam superseded
horses. The prices of everything fell when steam
connected the chief market places of the nation, and
facilitated the distribution of perishable goods. The
prices of things, again, fell pari passu with the growth
of financial institutions, founded to lend money on
security. There has been an enormous development in
this respect, the rivalry being as keen internationally
as that among the manufacturing industries. Per-
manently cheaper money follows the growth of inter-
national confidence. One hundred pounds in our day
can do the work which fifty years ago required many
times that sum. That means a corresponding loss to
the capitalist, and a proportionate lowering in the cost
of everything into which the machinery of money enters
41
as an element. With the growth of the telegraph
system, money in the shape of metal has been-in
proportion to the growth of operations in which money
plays a part-diminishing like the dew before the rays
of the sun. In other words, confidence annihilates money.
In our day, the amount of metal money required
diminishes in an inverse ratio to the increase in the
magnitude of the operations. The country shopkeeper
will not trust the village blacksmith with a shilling's
worth of nails for his horseshoes unless he produces the
coin. In the London Stock Exchange the aggregate
operations of the fortnight, as shown by the Clearing
House returns, reaches from one hundred and fifty to
two hundred millions of pounds, all of which is settled
without the intervention of one single gold sovereign.
This is a demonstration that confidence annihilates
money.
There is at the present time a visible and important
movement in the direction of the leading commercial
and financial houses of all nations striving to preserve
their good name in the markets of the world. Default-
ing States are at the same time seeking to reinstate
their credit, and to make some atonement for the past
recklessness of their borrowing. The flash of the
electric telegraph keeps everyone on the alert, both as
to his own financial status and that of his neighbour;
it searches every crevice in the channels of commerce.
The moment a weak spot developes itself it is whispered
far and wide in a moment-even the journals, unjusti-
fiable as it is, daring to give hints in such a way that
the capitalist lenders put their finger on the spot in
42
an instant. The moral and purifying effect of such
a system of commercial espionage is tremendous.
A great authority on the statistics of stocks of
grain, &c., &c., wrote to us some years ago that he had
then gone through the stocks held for the last forty
years, and found them then much the same. "London,"
he remarked, "when the Kingdom's imports were under
three millions, had, however, as much as now, when
thirteen millions are wanted." In proportion, therefore,
to the quantity consumed, the stocks held in granaries
were already, some years ago, about ten perhaps, very
much smaller, the surplus supplies being, to a large
extent, maintained afloat ready to be sent wherever
required. The sources of supply, it is hardly necessary
to state, have been revolutionised. California, and later
India, changed all the old standards. Unnamed countries
now send more than did formerly the chief sources of
supply, viz., the Baltic.
Prices had been nominally much inflated up to the
period of the great reaction which commenced when
the fall in silver occurred, through the custom which
prevailed in many branches of trade of habitually
allowing deductions. The destruction of middlemen,
to some extent in all branches and almost entirely in
others, through the extension of the telegraph and the
introduction of other facilities, enabled producers and
distributors to reach the consumer with greater ease and
at less cost. The growth simultaneously of competition
stimulated the downward tendency of nominal prices,
which became too strong for such resistance as is often
brought to bear by "rings" and syndicates of producers
ܒ
43
and traders, and the victory of the public ended, as such
movements often do in other departments, in the sort of
rout which the decline in the price of silver ultimately
brought about.
Eastern merchants foresaw that the fall in silver
would stimulate exports from the East, and sold heavily
in anticipation.
The use of cheques between European monetary
centres has to a large extent superseded the use of
gold, thus showing that greater international confidence
tends to throw metallic and paper currency more and
more out of employment.
All holders of silver have necessarily sustained a
heavy loss, which must more or less affect adversely
the prices of other things which they possessed, or that
they had hitherto been purchasers of.
By the extension of the telegraph much labour is
saved, in a great variety of ways. The granaries, for
example, containing the surplus stocks, are now chiefly
the ships themselves. England, as the largest holder
and buyer for herself, gets orders for other countries
from her ports-of-call, but the actual export remains
insignificant. Most countries producing enough for
their own consumption, it is only England, Belgium,
Holland, Switzerland, and sometimes France, which are
interested in the surplus supplies. One of the effects of
international trade has been to greatly enlarge the area
of production, and obviously the freer that trade is the
better for all consumers.
/
:
44
THE EFFECTS UPON PRICES OF A BETTER SYSTEM OF
DISTRIBUTING LABOUR.
One of the reasons why the commercial depression
of the past few years has adversely affected this and
other countries so much less than was the case in former
times is because the facilities for distributing unemployed
labour, both in this country and those to which labourers
principally emigrate, have been largely extended. The
extension of railways, in the first place, was the means of
bettering the condition of the labourer, by conveying
the surplus supply of food from one district to fill the
deficiency in another, more particularly of rapidly
perishable commodities. The cost now for carrying
100 lbs. of wheat from Chicago to New York is 9 cents,
whereas the value of that grain was consumed in going
the same distance twenty years ago. This was a distinct
gain to the existing powers of production to the extent
of the yield of the labour by such means set in motion.
The extension of the telegraph further aided the
movement, by putting the different districts into speaking
connection.
Secondly, the extension of railways, more par-
ticularly abroad, during the last twenty years or so,
supplemented the distribution of food according to
requirements by the distribution of labour, which is
even a still more useful work from the point of view of
the wealth of nations. The cheap transfer of idle
labour to a point where it is wanted is a factor in pro-
duction of the highest importance, and it is to be
regretted that statesmen have not at all times done
45
their best or wisest to guide the distribution of labour
into the right channels.
There is little doubt in the minds of thinking
economists that, in another direction, the Ministers
of General Grant made a great mistake in not
funding their greenbacks, and leaving to be re-
deemed their public bonds until a more fitting oppor-
tunity. Such a measure would have very materially
hastened a recovery from the stagnation in industry
which prevailed in the United States during President
Grant's tenure of office. One of the great evils of a
depreciated paper currency was laid bare by those errors
of State policy. One of the worst effects of such a
currency is to enhance retail more than wholesale prices,
causing a rush of labour into distribution instead of
into production. To encourage the extension of
machinery for facilitating distribution is a prime
necessity, no doubt, with statesmen, but the machinery
having to a large extent been perfected in that country,
it was surely, under the circumstances, a great error to
permit the continued existence of a condition of the
currency which starved the one and overfed the other.
Can it not with reason be contended that the
extension of banking facilities has brought with it an
important change affecting the currencies of the world,
which has had the effect of placing those currencies
more and more beyond the reach of the influences which
affected them before banks were introduced? Whereas
the circulating medium consisted almost exclusively of
metal before banks were invented, now by far the larger
part of the duty of that medium is discharged by bank
46
notes, or what is called circulating credit, and by
cheques, bills of exchange, and telegraphic transfers.
The establishment of banks, as we have said, caused a
large part of the metallic currency to be gathered
together into their strong rooms, thus forming their
reserves, and transferring the metal from floating
currency into more or less fixed capital.
If the quantity of money in circulation can be
moved about twice as rapidly, owing to improved means
of transit, half the volume can be dispensed with. This
applies more to international movements of gold than to
domestic. Every contrivance of an economic nature
which supersedes the use of metal currency dispenses
with it. We live in a time when metal, both gold and
silver, has been thrown out of international employment
upon a larger scale than has been experienced previously
during this century. The probabilities, therefore, are,
that there could have been no appreciation of gold
owing to its scarcity. Prices are not only depressed by
a diminution in the amount of purchasing power, but
by an increase in the quantity of goods. We know the
quantity of goods offering in the market has largely
increased of late years, owing to the much extended
area of production and the increased facilities.
It is well known that the incomes of the well-to-do
class, the owners of land, for instance, have been greatly
reduced of late years, and consequently "the decline in
the aggregate of money incomes devoted to expenditure
for consumption " must have exercised a powerful
influence in depressing prices.
A descent from inflation prices commenced with
47
the spread of the telegraph system, because it was soon
found to be safer and better to do business on the ready-
money system than on credit. A partial annihilation
of the credit system, which has so diminished the
number of bills of exchange in existence, exercised a
powerful influence in depressing prices.
The cost of putting their supplies of coal on the
foreign stations of the great ocean-carrying steamers
has fallen about one-half during the past twelve years,
the cost per ton having come down in that proportion
during that period from 45s. per ton.
In 1861, J. S. Mill wrote: "But there are still
extraordinary differences both of wages and of profits
between different parts of the world." All this has been
greatly changed during the last quarter of a century,
with the inevitable result of bringing down prices.
When profits are high and wages are high people can
afford to pay higher prices.
Tooke wrote as follows: "And it is well known that
sales made to satisfy engagements entered into beyond
the means of the debtors are commonly sold at a
depression as much below the fair value as the credit
prices were above the fair value."
The fall in silver impoverished shoals in the Eastern
trade, Eastern banks, Indian pensioners; some Eastern
merchants were almost swept away. Eastern banks
became gigantic pawnshops. The shipping trade
naturally suffered.
י
J. S. Mill says, p. 174, Vol. II., "Pol. Econ.”:
"The cheapness of a thing is not alone measured by
its money-price, but also by that price in comparison
48
with the incomes in money of consumers." The large
incomes of the landed proprietors of England and
Scotland, and simultaneously of all their tenants, were
falling seriously at the time of the demonetisation of
silver by Germany. In other words, the greatest in-
dustry of these islands, that of agriculture, was suffering
severely at that period, and for years afterwards, for
reasons only too well known. Simultaneously with the
fall in the prices of the products of British agriculture,
thereby reducing the money incomes of those directly
and indirectly depending upon them, these products were
being cultivated abroad over ever-increasing areas, re-
sulting in a continuous fall in prices, until corn reached
an unprecedentedly low level of value. Had there been
no fall in the value of silver at all and no disturbance
of the gold market, a considerable fall in prices must
have been caused by these circumstances, so far-reaching
have they been in their direct and indirect effects. The
effect upon the markets of the world of so serious a
diminution of the individual incomes in Great Britain
is immeasurable, to say nothing of the influences in
the aggregate upon the agricultural interests of other
European nations, all of whom have suffered more or
less severely from the competition of the United States
in cereals; from that of Australia and other parts in
meat and wool; from that of India in cotton and tea,
which comprise some of the leading staples in which
there has been such a great fall in price.
The fall in silver induced Eastern merchants and
bankers to carry on their business on a cash basis
instead of on a credit basis, the fluctuations and unsteadi-
•
49.
ness of the exchanges introducing so much uncertainty
into the business as to render the cash basis preferable.
A great contraction of credit was thus brought about,
causing a fall in prices.
It is very important to remember that money prices
rise from an increase of purchases on credit, just as they
would if acted upon by purchases for cash, and that they
fall by a contraction of credit, just as they would by a
decline in general purchasing power, or a permanent
withdrawal from circulation over a longer period of so
much coined money. It is well known that the exten-
sion of the telegraph to a large extent annihilated the
credit system. Every London banker will tell you that
bills of exchange have become scarcer and scarcer
during the last few years. To some extent, therefore,
we are able to demonstrate that prices have been forced
down by the withdrawal of a support which has nothing
to do with the currency, and which yet exercised a
potent influence in reducing values.
MONEY NOT IN CIRCULATION HAS NO EFFECT ON PRICES.
The last Bankruptcy Act exercised a powerful
influence in the direction of preventing traders from
making reckless speculative purchases on credit. Such
purchases having the same effect on prices as if made
with cash, prices would tend to fall to a more normal
level, owing to a general decline of speculative purchases.
Speculation in produce may be said, comparatively
speaking, to have almost vanished since 1868, when
harvest reports, telegrams, and other published accounts
of the progress of crops, &c., informed the whole world
D
50
of the position. Speculation remains in those cases
where between shipment and arrival the interval is
several months. Telegraphic extension has given
cohesion to value all over consuming countries; it has
developed ports-of-call, where cargoes await orders to go
where wanted. In recent years fluctuations have been
quicker and sharper. Besides, the facilities for dealing
for cash offered by the extension of the telegraph
caused a great diminution in the number of purchases
on credit, thereby tending to cause a decline in general
prices.
It will be remembered by those more familiar with
financial matters, that up to the time of the Franco-
German War there had been a great deal of borrowing
in England, more especially by foreign States, and that
the success of every new loan put into the hands of the
borrower new purchasing power to the extent of the
cash handed over by the agents for that loan. By this
means hundreds of millions of money which had pre-
viously laid more or less dormant sprang into life, and
exercised its effect upon the markets of the world,
irrigating, so to speak, every commercial channel through
which its fertilising power flowed, and drawing after the
newly-created purchasing power a mass of new coinage,
which would be maintained in circulation in proportion
to the extent of the requirements. That process might
very rightly be credited with causing some scarcity of
gold, although no complaint of the kind was heard at
the time, because more would be required; whereas the
counter movement whose effects we are inquiring into
would rather increase than diminish the available supply.
51
But the probabilities are, that the Californian gold dis-
coveries so increased the quantity of that metal that the
requirements, as far as new gold coinage was concerned,
were more than satisfied, notwithstanding the exercise of
the largely increased purchasing power which the bor-
rowing of the foreign Powers referred to occasioned.
Russia, it will be remembered, borrowed about that
time-i.e., from 1860 onwards-considerably over one
hundred millions sterling, to say nothing of the opera-
tions of the United States, Italy, Spain, Turkey, Egypt,
Peru, the South American Republics, &c.
What has subsequently affected the purchasing
power of nations?
Heavy debts. Borrowing came to an end for the
time with the Franco-German War.
Few people remember to what an extent all that
borrowing was the cause of the depression that followed.
Many foreign States were seriously crippled by having
to impose a crushing taxation, which obviously prevents
them buying our manufactures as previously. In addi-
tion, the proceeds of the loans in many cases have been
employed, if not in warlike preparations, in an unpro·
ductive manner.
An examination of the process by which metal
money is being relegated to the reserves of note-issuing
banks, except as regards the few pounds individuals
keep by them for current expenditure, might easily be
pursued further; but we have said enough to show what
a vast economic development has been latterly taking
place, which makes for the lowering of profits and the
decline in the cost of things. The tremendous blow at the
D2
52
foundations of silver as international currency struck
by Germany's demonetisation of the metal gave a great
speculative impetus to the operations of Eastern traders.
Many of those astute people saw clearly enough what
that demonetisation by Germany would soon mean upon
the prices of produce in Mincing Lane. They have been
the wise men of the East, and the bi-metallists the
foolish ones crying in the wilderness. A voice has been
raised by one set in support of a theory which appeared
to them on the surface to offer a solution of the problem,
but which was a mere phantom, receding, as time has
shown, farther into the distance the longer it is pursued.
Another set, by far the more astute of the two,
used these misguided theorists to help them to pump out
a hopelessly water-logged craft, which was destined to
settle further and further down into the element which
no longer acknowledged its utility, and whose unsea-
worthiness has caused it to be relegated to the inferior
rank of a second-class power among the currencies of
nations.
CHAPTER IV.
THE PRECIOUS METALS.
GOLD IN ITS RELATION TO THE
FALL IN PRICES.
TT is, we believe, an unfortunate fact, that the particular
period of history in which the lot of this generation
is cast will be looked back upon as one famed for the
number of its unsound economic teachers. We not only
possess no Adam Smith, Malthus, Ricardo, or John Stuart
Mill, but we have been treated for years past to a steady
downpour of unsound economic reasoning, the like of
which we believe it would be difficult to match.
Fortunately, there is an undercurrent of what we may
call operative sound, though unostentatious, good sense,
which in this country may nearly always be relied on,
sooner or later, to close the door against the efforts of
misguided theorists, however energetic.
All science, like all nature, is, with periods of pause
for repose, continuously unfolding itself. The old
maxims no doubt are trustworthy guides when viewed:
from the standpoint of the period when they were dis-
covered and elevated into that distinguished position;
but there will in most cases come a time when, like
other things, they are to some extent worn out. A
large proportion of the writers of any period expound
their views by the light, very often, of a course of
study, and often by the darkness of no study at all,
which can only partially guide them in the direction of
•
54
"
what they are seeking. We are inclined to think that
the utterances of even the best informed on economic sub-
jects have been in our time delivered, either by pen or
word of mouth, too much by the light of teaching which
itself requires revising, so as to bring it down to date.
We find ourselves to-day, in other words, in the presence
of phenomena which will not yield to an investigation
undertaken altogether on the old lines. We all know
how timid people with any reputation at all, whether
deserved or not, are of attempting to break new
scientific ground. So long as they reproduce what
others of much repute have said, there is no one who
dares to tell them they are wrong. Hence, we often get
new reasoning on present phenomena which is sought
to be explained by old maxims which only half apply.
We are ourselves of opinion that reasoning of this
kind has been put forward for several years past to
account for phenomena which can only be satisfactorily
explained by taking the hatchet and hewing a way
through the economic jungle, until we discover the true
causes of what we have seen.
Much has been written and said on this subject,
and still even the best reputed authorities acknowledge
themselves to be in considerable doubt whether their
views are sound or not. In attempting to account for
the fall in prices under review, we are of opinion that
conclusions have been jumped to on the old lines without
sufficient investigation, and that new causes were at
work, and still are at work, whose operations have yet
to be traced out and made as clear as the tangled
influences in operation in such changes ever can be.
55
We have heard much about the appreciation of
gold. What does this phrase mean? Some people say
the appreciation of gold is the same thing as the depre-
ciation of other things, of the relative value of which
gold is the measure. These no doubt are difficult
problems, and people in consequence, as a rule, shrink
from coming to close quarters with them, for fear of
making gross blunders, or of showing themselves to be
unsound reasoners. Such timidity is a weakness which
should not hinder any man from grappling with them
who is interested in getting at a true solution.
Now gold, although used chiefly to facilitate the
exchange of other things, is, we need hardly say, just as
much a commodity as anything else. When cotton
appreciates in value it becomes dear, not because flax
or indigo depreciates, but because, owing to the opera-
tion of supply and demand, you can get less of it in
exchange for other things. So it can only be said that
gold at any time appreciates because, owing to the opera-
tion of supply and demand, you can get less of it in
exchange for other things. In other words, for anything
to get dearer or cheaper something must happen to
affect either way its individual intrinsic value measured
in gold. To say that because some other things have
fallen in value owing to the operation of supply and
demand, or to diminished utility, therefore gold has
appreciated, is, we believe, scientifically incorrect.
Gold cannot be said to have either appreciated or
depreciated unless the quantity in active operation
has either materially decreased or increased, or its
exchange value in relation to everything else has been
56
O
affected. If it could be proved that Primrose Hill were
one solid nugget, weighing one hundred millions of tons,
from the moment that announcement was authoritatively
made gold would depreciate in value speculatively, and
people would be chary of holding any large quantity of
the metal, because they would fear, naturally, that more
gold might pass rapidly into circulation, thereby
doubling, say, the quantity of gold, and causing a fall of
one-half in its intrinsic value. But the depreciation,
until more had passed into circulation, would be purely
speculative. Prices, in reality, could not be otherwise
than speculatively affected until an addition had been
made to the number of the gold coins circulating.
Over long periods of time, prices, unless affected by
the operation of supply and demand, affecting each
-according to circumstances, remain at a level which is
measured roughly by the intrinsic value of the mass
of the metallic medium in active circulation.
We say roughly measured by the intrinsic value of
the mass of metal in circulation, because, as we have
already shown, our silver coins have been for years past
purchasing more than the equivalent weight of the
uncoined metal would buy. Had the mints been open
to private coiners, as was the case before the Latin
Union took fright, the silver coins would probably have
by this time bought less of commodities than they now
do, supposing always that the general collapse of prices
which we have seen had come about. We are thus, as
we have said, in the presence of the phenomenon that
there are two values for the precious metals, and that
the disparity is more sharply defined than it could be
57
were the free passage of the metals through the mints
unimpeded. The closing of the mints dams off the
supply from pouring into circulation, and lowers the
price per ounce of the uncoined metal. If the converse
were the case, as in a forced paper or debased currency,
the circulating coins themselves would, of course, dis-
appear. The silver tokens at present in circulation
may at the same time be said to purchase more of the
necessaries of life than they did before the downfall of
silver; and this is true; but this circumstance is accounted
for by the fact that the necessaries of life are produced
at a less cost in labour than formerly, owing to the
universal introduction of machinery where manual labour
was alone available; and that, although better machinery
is also used in the production of the precious metals,
commodities are produced with still greater facility.
If it be conceded that the intrinsic value of gold is
affected like that of other commodities, it must also be
admitted that, as we say of other articles of commerce,
they must come to market and exercise their influence
through the agency of supply before price can be
affected. Therefore gold cannot be said either to
appreciate or depreciate unless the quantity in circula-
tion as currency, either in its own or in a representativė
capacity, diminishes or increases sufficiently to affect
its exchange value. This we take to be a demonstration,
and all that can be said in attenuation of the argument
is, that the published evidence of an increase or decrease
in the supply on the one side, and an increase or decrease
in the supply of the metal from the mines on the other,
will exercise a speculative influence on its exchangeable
value in one direction or the other.
58
Having arrived at this point, in order to apply a
test, we must discover what were the movements of gold
during the period when the fall in prices was taking
place; because, if we can prove that the gold in circula-
tion did not diminish in amount in advance of the fall
in prices, but only in consequence of that fall, we
establish the fact that prices could not have fallen
through the direct influence of an appreciation in its
intrinsic value.
Gold going from hoards into active circulation, and
vice versa, is like grain going from the granaries to be
sold at Mark Lane. In the one case, as in the other, so
long as the hoards are untouched, whether of gold or of
grain, prices cannot be affected, unless speculatively,
through knowledge or rumour. If gold were apprecia-
ting in value through the effect of German purchases
for currency purposes, it would be likely to be attracted
from the chief sources of supply for the profit that was
to be obtained by exchanging it for other things. The
Bank of England, for instance, would experience a drain,
and the value of money in London would rise. The
altered position of which we have to take account in our
day is, that we do not draw upon the fixed currencies,
but upon the capital in the form of reserves in the
banks, which, if the drain goes far enough, causes a
rise in the rate of interest on capital. That advance in
the rate of interest must rise above a certain level all
over Europe before the fixed currencies can even be
touched. In all three cases, Germany, Italy and the
United States-the last-named direct from Australia-
took what they wanted without disturbing any European
59
money market in the least degree. Supposing other
countries have a silver standard, that makes no difference
if their paper currency is at the silver par. But nothing
of the sort to which we have referred was witnessed.
On the contrary, during the fourteen years from 1871
to 1884 that institution received £14,716,000 more than
it lost, as the following figures show :
GOLD.
IN.
£
7,534,000
4,065,000
2,034,000
954,000
1,681,000
5,534,000
6,039,000
2,577,000
899,000
•
•
•
•
·
:
:
ON BALANCE
DURING
1871
1872
1873
1874
1875
1876
1877
1878
1879
1880
1881
1882
1883
1884
•
OUT.
£
6,088,000
4,662,000
2,911,000
2,674,000
266,000
:
£31,317,000
£16,601,000
£14,716,000 in, on balance, for the 14 years.
Where, then, did the gold come from if it were not
taken from any of the great European centres? It came
partly from the floating surplus supply of international
60
5
currency, and partly from the hoards which had no doubt
been considerably disturbed by the Franco-German War.
It came, like the grain from the granaries, where there is
any profit sufficient to induce the owners to bring it to
market.
The question is always a debateable one whether
or not, as far as the bulk of the metallic currency of
Europe is concerned, any very material change took place
as a direct consequence of the action of Germany in
adopting a gold standard. Some people will argue that
because silver fell in its gold price through Germany
demonetising it, therefore gold must have appreciated
through the greater demand for it. Surely it is pos-
sible to make a profit by moving stores of gold from one
place to another without the article itself appreciating
in value. We know that the value of silver has fallen—
one very potent cause being its diminished utility, and
another the large excess of supply over demand. Here
are two tangible proofs, requiring us to make no further
investigation.
In the case of gold there are no similarly tangible
potent causes, while we think we can fully account for
the fall of prices without it being necessary to search
any like influences having affected gold.
for
Those who have had doubts in their minds whether
or not they were right in attributing the fall in prices
to an alleged appreciation in gold, had probably not
remembered when promulgating their views the fore-
going evidence contained in the researches of Tooke
and others, that in all cases they had found that a con-
traction of the currency always followed a fall in prices,
J
61
and never preceded it. If that were true when European
mints were open to the coinage of silver, how much
more certain is it now that that is the operation of cause
and effect, than when the flow of the metals through the
mints was unimpeded.
We repeat that we believe that the real truth of the
position is, that the amount of currency in circulation
generally, in proportion to the quantity of commodities
to be exchanged, has been steadily diminishing ever
since the fall in prices commenced, and that in con-
sequence, there has not only been no scarcity of gold at
any time, but that the supply available for currency
purposes has been steadily increasing, and going back
into the hoards from which some of it was drawn by
Germany.
The fact cannot be sufficiently emphasised that
there is in our time but little fluctuation in the quantity
of the metallic currency of countries in circulation, as
was formerly the case, except under circumstances of
generally rising or falling prices, as in the case under
notice, and that these currencies lie, comparatively
speaking, outside and beyond the influence of the effect
of the interchange of commodities between nations.
There was a time, and that not so very long ago, when
there was much less confidence between nations than
there is now. Under those former circumstances
there was a much larger volume of metallic money in
international circulation-chiefly silver-in proportion
to the volume of commodities exchanged inter-
nationally than there is now. There is no doubt
actually a much larger quantity of metallic money in
62
circulation in these times than there was fifty years ago,
which is a necessity, owing to the large increase in the
population almost everywhere, while the volume of
international transactions has increased in a still greater
ratio; but, on the other hand, the development of
economic science has enabled the leading nations not
only domestically, but internationally, to dispense to a
large extent with even the paper representatives of
metallic money which were formerly employed as a
medium. It is evident, therefore, that while the trade
of nations has expanded enormously around the central
pivot of metallic money, which consisted formerly
chiefly of the coins in circulation, and in later times of
the coins in circulation plus the bullion in Imperial and
National Banks, which is the security at the back of the
paper issues authorised by the respective Governments,
the influence exercised by international trade upon the
volume of coin in circulation has so declined as to
justify the statement that in our day the prices of com-
modities are scarcely touched by either the expansion or
contraction of the circulating medium, whether of coins
or paper, unless, as we have before said, it be a general
change either way of an unusual kind. It is true that
the occurrence of a financial panic at a great centre like
London would be followed by a compulsory contraction
in the circulation of Bank of England notes, as was
formerly frequently the case through the operation of a
sustained rise in the Bank of England rate of discount;
but these panics almost came to an end with the Black
Friday of 1866, and for several years past there has
been no longer any apprehension on that score, owing
63
to the rapid communication which has been established
between the great monetary centres not only of Europe,
but between the United States, India, and other of the
more important trading countries of the world.
The state of the foreign exchanges at no time
during the large operations that were being carried out
on behalf of the German Government indicated that any
adjustment of currencies was going on in consequence
of an abstraction from the active circulation. On the
contrary, the gold required to enable Germany to set up
a standard currency in that metal was bought precisely
as if any other merchandise were being purchased in the
markets of the world, and the operations were conducted
at times and in seasons when it would disturb as little as
possible the money markets of Europe. This proves, if
it proves anything, that the gold absorbed into the
circulation of Germany was taken, as we have said,
either from liberated gold currency, or from private
hoards and bankers' reserves, as and when it could be
conveniently obtained, and that the purchases did not
derange the permanent metallic currencies of the world
beyond effecting a mechanical readjustment, and con-
sequently did not disturb, through their direct influence,
the general level of the prices of commodities, any more
than if that gold had been dug out of the bowels of
the earth in California or Australia.
In our humble opinion, conclusions have been not
only erroneously arrived at that prices have fallen owing
to what is called an appreciation of gold, because less of
that metal is understood to have been discovered of late
years; but whether less or more has been discovered
64
does not affect the question, even if it be the fact that
the supply has fallen off, unless it can be proved that a
decrease in the supply means a diminution in the volume of
gold coins in circulation, and a consequent enhancement of
its value relatively to other commodities, and reflected
in a general fall in the level of all values.
The cost of production will obviously exercise a
continuously operative effect while the rate of consump-
tion keeps pace approximately with production; but
what applies to commodities which are consumed more
rapidly than the precious metals applies to gold only in
a qualified sense. As we have shown, the decrease of
coined metals through wear and tear is very slow. When
once a supply has been created, the element of cost of
production plays a smaller part, as regards its influence
upon the general stock, than is the case with a com-
modity more rapidly consumed.
The circulating medium-i.e., the metals and bank
notes convertible into metal on demand-are divisible
into two parts, one active and the other inactive.
According as trade is active or inactive, there is more
money in circulation, and less in reserve or hoarded,
and vice versa. If the incomes of communities increase,
they spend more, prices rise, and the active circulation
increases, absorbing a portion of the reserves. If
general incomes decrease, an opposite process com-
mences, until the minimum of active circulation is all
that is left moving, credit having contracted, bills of
exchange disappearing, and hoards and bankers' reserves
being at their maximum.
What has been the known effect, from time to time,
65
66
Mill says:
upon the mass of metal in existence as currency by the
additions from the mines, allowing for the abstraction
through the requirements for the arts, for loss and wear
and tear? What do the authorities say on this point?
Being so largely used, not only as
money, but for plate and ornament, there is at all times
a very large quantity of the precious metals in existence;
while they are so slowly worn out, that a comparatively
small annual production is sufficient to keep up the
supply, and to make any addition to it which may be
required by the increase of goods to be circulated, or by
the increased demand for gold and silver articles by
wealthy consumers. Even if this small annual supply
were stopped entirely, it would require many years to
reduce the quantity so much as to make any very material
difference in prices.† The quantity may be increased
much more rapidly than it can be diminished; but the
increase must be very great before it can make itself
much felt over such a mass of the precious metals as
exist in the whole commercial world."
*
Here we have to note that the quantity is much
more easily increased than diminished, and that, con-
sequently, we should be more likely to witness a rise in
prices from an increased quantity of metal currency than
a fall from a decrease in the quantity, supposing always
that the volume of the metal currency could be increased
by the mints being open to private coining, which is
practically no longer the case. But in both cases the
movement would be so slow that the best authorities
*"Pol. Econ." (Mill.) Vol. II.,
p. 28. + The italics are ours.
E
66
agree that the aggregate of prices have been in the
past raised by this particular cause only over a long
series of years. Mill's evidence on the subject is the
result of a careful investigation, and he says that
"it would require many years to reduce the quantity
so much as to make any very material difference
in prices." This view, which is supported by even
greater writers than Mill, is of itself, to our mind, a
demonstration that the position taken up by those who
have attempted to prove that the absorption of so much
gold metal by Germany, Italy, and the United States
for currency purposes caused the fall in prices is an
unsound one. It will no doubt be said in reply, that
no such amount as that alleged to have been absorbed
by the three countries named was ever before abstracted
from the available supply in so short a period. Our
rejoinder to that is, that it was taken from the hoards, the
increase or decrease of whose volume, as we have shown,
does not affect prices. We shall, however, endeavour
further to adduce not only negative, but positive evidence
in support of that theory.
Ricardo's well-known principle is as follows:—
"Gold and silver having been chosen for the general
medium of circulation, they are, by the competition of
commerce, distributed in such proportions amongst the
different countries of the world as to accommodate them-
selves to the natural traffic which would take place if
no such metals existed, and the trade between countries
were purely a trade of barter.'
That principle was no doubt applicable to the state
of things as they existed when Ricardo made his
67
examination, and as J. S. Mill says in referring to it,
"few are those who, even since his time, have had an
adequate conception of its scientific value." The question
for those who are thinking about these questions in
our day, however, is, to what extent has the scientific
value of that principle been disturbed by the cause of
the fall in the value of silver? We see one very
material change that has taken place, and that is, that
the full force of that principle of Ricardo's is no longer
applicable, because one of the two precious metals has
been practically dethroned, and is no longer "distributed
in such proportions amongst the different countries of
the world as to accommodate itself to the natural traffic
which would take place if no such metals existed."
Indeed, we might take up the same position with regard
to both metals; for we believe that the economic
changes that have been taking place, especially within
the last fifty years or so, have so altered the distribution
of the precious metals, that whereas formerly the nations
with the largest commercial dealings employed a corre-
sponding proportion of them, now the ratio is reversed.
England, for instance, has by far the largest share of
the world's trade, while her visible supply of gold is
only one-fourth of that, for instance, held by the Bank
of France. It is not at all unlikely that an investigation
would show that those nations whose state of civilisation
limits their credit in the markets of the world hold a
larger proportion of the precious metals relatively to
the extent of their trade. Wealth, it must be remem-
bered, does not consist in the possession of gold, but in
being in the possession of the power to purchase
_
E 2
68
it. What we have to discover, then, is, what has been
the effect of this inversion of Ricardo's principle,
always, be it remembered, from the strictly commercial
point of view? Silver, as we know, continues to flow
about the world much as it did before, only more
slowly, in much smaller quantities; but with these
limitations, that its circulation on Ricardo's principle is
confined to those countries which still have their mints
open to its free coinage. Elsewhere it will probably in
future be coined on the same principle as in England,
viz., as it may be required for purely domestic wants.
On this system, however much or little silver circulates
in a country, the limits of that country are the barrier
beyond which it will not pass, unless, which is im-
probable, its market value should rise beyond that at
which it circulates as coin. Silver ranks, consequently,
as far as currency is concerned, only upon a little
better level than copper, some of which is also used
to make money of. The utility of the metal having
been thus diminished, its value has consequently
fallen, being, besides, affected in the same direction by
a growing increase in the supply. We must give due
weight, however, to the fact that, as we see from day to
day, the role of silver as international currency is not yet
altogether played out. It continues to be bought and
shipped, chiefly to the East, and consequently, so far as
we are able to judge, the effect produced by Germany's
currency action is to the extent of having displaced
a certain quantity of silver from the previously existing
"general medium of circulation," supplying its place, so far
as the changed circumstances require, with gold. When
69
we arrive at this point, bearing always in mind that all
but two mints have been closed to its coinage, the great
difficulty of determining what further change has been
made commences. Here, it seems to us, investigators
fight shy of the more difficult problems involving the
breaking of new ground and the thinking out of new
issues. But if we are to get a clear view of the new
departure in the working of the world's currency, we
must endeavour as we proceed to penetrate to some
extent beyond the veil which hangs between us and
what has been going on in the direction of modifying
Ricardo's principle since silver lost the greater part of
its hold upon the currency systems of the world.
If all countries had done what Germany did, the
value of silver would have fallen very much lower, with
the probable immediate result of all the mints in the
world being closed to its free coinage, and its being
relegated to the inferior position of a purely domestic
currency. This has, under the pressure of circumstances,
nearly come to pass already, the mints of India and the
United States, as we have said, being the only ones left
open to its free coinage. Had all mints been closed at
once, the disturbance would have been, of course, very
much greater, involving probably the failure of some
banks connected with the East; but there would have
been a much more rapid recovery, because the evil of the
oversupply of the metal would have been cured by up-
rooting it. There were, however, so many interests
involved, that it was hardly to be expected that such
drastic measures could be adopted, even if all other
countries could have afforded to follow Germany's
70
example, which they could not. This, however, is in our
opinion what we are coming to, and it is only a question
of time when there will be no free mintage of silver, or
for that matter of gold either, in any country.
The demand of the bi-metallists, in fact, to have
the mints of all countries open for the free coinage of
silver is one of the most extraordinary which can be
conceived. Had their demand been acceded to, what
would have been the result at this moment? The
producers of that metal would have found a market for
their commodity among those more astute members of
the community who understood the advantages that
were to be derived from coining a depreciated metal into
money, with which they could discharge indebtedness
for a less sum of money than the creditor had a right to.
We take up no new position in thus advocating the
interests of creditors, and leaving the producers of one
particular commodity, which has been used up to a
certain period of our history as currency because it
was, under given conditions, suitable for that purpose,
to protect their individual interests as producers as
best they can with the aid of the laws of supply and
demand. Why the silver-mine owners, or the proprietors
of national banks, like the Bank of France, are to be
protected or relieved of their surplus supply by the
co-operation of other interests to save them from the
loss they have incurred through having too much of
the article, any more than holders of pig iron or copper,
we have never been able to understand. Why should
not iron merchants or copper smelters be permitted
to take their product to the mint and have it coined
71
into pence and halfpence just as well as silver-mine
owners?
This view was expressed as long ago as 1840, when
Mr. Tooke, in his "History of Prices," wrote as follows:*
"As to the hardship or injustice of being debarred from
taking the silver to the mint to be coined gratuitously
(as gold is), the Cornish miner might equally complain
that he has not the power of getting a better price for
his copper by having it coined at the mint and made a
legal tender than by selling it in the market. And
with still more reason might the exporter of goods to
Chili or Cuba declaim against the policy by which
copper, which he gets in return, should be excluded not
only from the mint, but from any market at all, for
consumption in this country. The claim is the most
absurd imaginable, if supposed to be on the part of
merchants; and the objection, consequently, to a gold
standard on that ground is perfectly frivolous."
Mr. Tooke subsequently added the following, which is
deserving the attention of bi-metallists generally, and
which we hope will open their eyes to the preposterous
nature of the claim they have put forward: "It is so
frivolous and absurd, that it may be supposed that I
have merely imagined such an objection. But I have
known it repeatedly urged, and it is gravely stated and
declaimed upon in a recent pamphlet, entitled, 'Corn
and Currency; or, How Shall We Get Through the
Winter? By A Merchant.""
Here is a bi-metallist of some fifty years ago labouring
under the delusion that the cure for a low price in corn
*Tooke's "History of Prices," p. 214.
72
was an edict from the Government granting permission
to anybody to create superfluous currency. Another fall
in prices revives the fallacy. We may here remark in
passing, regarding the proposal of the bi-metallists to
have silver coined and interchangeable with gold at a
fixed legal ratio, that we hear of no such claim being put
forward by the general public, or any section of them.
It should be recorded here that a ratio of, say, 20 to 1
would not be acceptable to them. They demand the
old ratio of 15 to 1, because no other would enable
them to recoup the losses they have sustained. Can
the bi-metallists engaged in trade point to an equal
number of persons out of trade and in no way interested
in the rehabilitation of silver who endorse their views?
So far as our observation has gone, the bi-metallists are
most of them either dealers in silver, or engaged in trade
which is directly or indirectly affected by the fall in the
value of that metal. What, do recognised authorities
say on that point? Mr. Tooke has the following:*
"The merchants are bound to regulate themselves by
the laws as they find them; the only parties to be
considered in the question of any alteration of them are
the public." Nobody, we should think, would venture
to contest the soundness of that proposition. That
being the case, what does the claim of the bi-metallists,
in a word, amount to? They are nothing more nor less
than protectionists in disguise: they are, in a word,
unfair traders. Those of them who are shareholders
in Eastern banks are interested in the price of silver to
*Tooke's "History of Prices," p. 215.
73
the extent of raising the value of their capital which is
being employed in India, China, &c., to the level from
which it has fallen. If that were done and they could
66
get out," they would join the great public, and would
look on with indifference. In its various forms, is not
this the mainspring of bi-metallism? Are the great
public such simpletons as to be hoodwinked with the
shallow arguments, dressed up in technical phraseology,
which seek to give a fictitious value to one commodity
more than to another, because it has in the past been
used for a purpose for which, to the same extent, it is
no longer required?
We now give some extracts which have no doubt
often been read before; but it is useful to run the eye
over them again when bringing the mind to bear upon
the special points under consideration.
"The introduction of money,
""* says Mill, "is a
mere addition of one more commodity of which the
value is regulated by the same laws as that of all other
commodities." He continues: "We shall not be sur-
prised, therefore, if we find that international values
also are determined by the same causes under a money
and bill system as they would be under a system of
barter; and that money has little to do in the matter,
except to furnish a convenient mode of comparing values.
All interchange is in substance and effect barter.
Whoever sells commodities for money, and with that
money buys other goods, really buys those goods with
his own commodities."
* "Pol. Econ." Vol. II., p. 158.
74
The following quotations bearing upon these points
we take from the same authority:-
*The relations of commodities to one another
remain unaltered by money: the only new relation
introduced is their relation to money itself; how much
or how little money they will exchange for; in other
words, how the exchange value of money itself is
determined."
† "Money is a commodity, and its value is deter-
+
mined like that of other commodities, temporarily by
demand and supply, permanently and on the average by cost
of production."
"The only new relation introduced is their relation
to money itself."
itself." This means that if the cost of making
any required addition to the metallic currency increases
or diminishes, the relation of money to commodities pro
tanto becomes altered. Now, seeing that prices all over
the world have become more equalised by means of the
telegraph and the greater facilities of communication by
rail and steamship than formerly, a mere change in
the distribution of the precious metals would exercise
scarcely any more disturbing effect than the tidal move-
ments to which each national currency is subjected in
the regular seasons. Formerly, when these greater
facilities did not exist, a large addition to any nation's
active currency was preceded by the well-known cause
of an advance in prices in a particular country as a
result of an increase in the volume of purchasing power,
thus attracting foreign commodities, and turning the
Mill, "Pol. Econ." Vol. II., p. 10. +Ibidem.
75
exchanges against us until the surplus currency had
distributed itself according to Ricardo's law, or had
retired into the reserves or hoards. In our day, the
world being practically one market, and there being
very little effect produced by the precious metals forced
through the mints by private persons, the currencies of
the world will be much steadier in volume, because the
effects produced by a rise in prices will spread rapidly
over the whole surface, instead of being, for some time
at least, merely a local influence.
Tooke says
says:-"It is to be remembered at all times,
that for prices generally to be permanently raised there
must either be a forced issue of inconvertible paper
money, or a permanent addition to the gold currency as
the result of an influx of the share our country would
naturally receive from an increased production of the
mines; always, be it observed, provided other things
remain the same; and that the rise in prices would be
in proportion to that which the increase in the gold
should bear to that previously in circulation.”
In this statement he, of course, assumes that there
is a free passage for the precious metals through the
mints of all countries, and that all currencies are fed
according to Ricardo's law, unhindered by any such
restrictions as have since been introduced. But gold is
in our day practically only coined by the Governments
of the nations that have established that standard, while,
as we know, all the mints but those of India and the
United States have been shut to silver. In these altered
circumstances, silver can no longer be forced into even
temporary circulation in Europe; but the process has
76
been reversed, and it can now instead only be drawn
into circulation when increased facilities for the inter-
change of commodities necessitate an increase in the
silver currency. This is as it should be.
This is as it should be. Governments
should simply permit new coins to be issued in response
to a demand for them, as in the case of other things. It
does not at all follow that because a country maintains
nominally a gold standard there is necessarily much
gold in circulation. In the case of Sweden, for
instance, where there is a gold standard, there is hardly
any gold to be seen at all in circulation. In Germany
there is no doubt much less actually circulating than
people imagine, and much less was actually purchased
and paid for when the change from the silver standard
was made than is generally supposed.
Supposing, for the sake of argument, the gold
Germany and other countries required was taken from
existing active circulations of gold coins, where is it
most likely that the money would have come from? No
one, we suppose, would hesitate to say that between
them England and France would supply by far the
larger part, in which case either there would have to be
an increase in the active note circulation, at all events
for a time, against the security of bar gold, or the
reserve of the Bank of England would run down so as to
cause an advance in the value of money. We know
that neither of these things occurred.
There was no
advance in the value of money, and no increase in the
note circulation. Supposing the active circulation of
gold had been affected by the requirements referred to
without there being any visible disturbance, one of two
77
:
things must have resulted. Either the void must have
been refilled by the mint authorities being called upon
to supply the deficiency, or gold must have been liberated
from its functions in sufficient volume to furnish
Germany and other nations with what they wanted
without creating any disturbance. We hold the opinion
that the required supply was in part, at all events,
furnished by the gold thus thrown out of employment.
Those who have jumped to the conclusion that there
must have been a scarcity of gold because an excep-
tionally large demand arose at a time when the supply
from the mines had been for some time falling off, think
they see the proof of their theory in the fall in prices,
an argument, we beg leave to say, which is unsound,
because it belongs to the order of reasoning, as we
claim to have shown, which puts the cart before the
horse.
The gold requirements of the three countries
referred to were satisfied quickly, whereas the fall in
prices was slow. The gold having been amassed quickly,
and before any great movement downwards in prices
had taken place, must have left a void, if it had come
out of the active circulation, which it would be necessary
the mint should refill. Do we find that the English
mint was called upon to refill any such void? No; on
the contrary, there was less gold minted, and it
continued to diminish in amount as the ten years from
1876 succeeded each other. Here is the statement from
the Deputy Master of the Mint for 1885:
1
78
Date.
Weight.
oz.
846,152.264
1876
1877
1878
1879
1880
1881
1882
1883
1884 452,826.068
1885
181,484-653
284,119.162
4,500.724
936,334.620
SOVEREIGNS.
Number
of
Pieces.
3,294,700
1,106,361
17,525
3,645,877
1
1
1,763,184
706,685
2,705,417-491 10,534,332
Value.
GOLD COINAGE.
£
s. d.
3,294,705 7 6
1,106,288 19 9
17,524 13 10
3,645,852 18 6
1,763,191 10 0
706,655 17 4
10,534,219 6 11
Weight.
Oz.
360,049.696
252,062.638
297,600.928
4,500.922
129,489.494
360,504.197
144,031.738
582,162.940
2,130,401-653
HALF SOVEREIGNS.
Number
of
Pieces.
2,804,000
1,962,800
2,317,506
35,050
1,008,362
2,807,411
1,121,600
4,533,605
16,590,334
Value.
£
s. d.
1,401,943 10 1
981,468 17 11
1,158,780 2 2
17,525 9 3
504,199 14 4
1,403,713 4 4
560,823 11 7
2,266,796 18 11
8,295,251 8 7
Total Value.
£
s. d.
4,696,648 17 7
981,468 17 11
2,265,069 1 11
35,050 3 1
4,150,052 12 10
1,403,713 4 4
2,324,015 1 7
2,973,452 16 3
18,829,470 15 6
79
AN AUTHORITY ON
ON THE CAUSES OF THE CHANGE
IN PRICES IN 1859.
In endeavouring to account for a considerable rise
or fall in the price of commodities, which has been
continuous in a number of the leading staples, it is
always useful to ascertain what other investigators
have assigned as the causes in former times. In looking
through some old numbers of the Economist, we came
across some valuable information, which we are of
opinion will throw considerable light upon the causes
of the fall in prices which has taken place in our time.
In the number of the Economist for 16th April, 1859,
we find the following article on
"" THE ALLEGED DEPRECIATION OF GOLD AT PRESENT.
Nothing is more curious than to observe the
different degrees of confidence with which various
writers speak of the depreciation or non-depreciation of
gold. The language of Mr. Cobden and of M. Chevalier,
though intimating a modified belief in the present depre-
ciation, is one of doubt and caution. They feel the
difficulty of the question, and their language is calm
and philosophical. A contemporary, who disagrees with
some of the remarks which we recently made on this
subject, does not, however, feel any hesitation. 'Any-
body,' it observes, 'who will tell us that the effect is
not already perceptible in a multitude of articles-from
horses to gloves or boots, from beef to brandy-we can
only say keeps his purse opener than his eyes, and does
not look at two sides of his shilling.' Mr. McCulloch,
80
on the other hand, whose practised habits of research
entitle his opinions at least to attention, observes:—
'There is nothing, in truth, whatever, in comparing the
prices of to-day with those of ten years ago, to entitle
anyone to affirm that the value of gold and silver has
undergone the smallest change in the interval.'
"Our own opinion, as we recently explained, is,
that long experience is required to give us the means of
ascertaining the effect of the gold discoveries on the
prices of the general multitude of commodities through-
out the commercial world. The effect is one which it
is difficult to track with accuracy; and though we can
predict the tendency of the cause, we cannot with
accuracy measure its power. It is certain that no such
startling and evident effects as many persons were
inclined to expect when the extreme fertility of the new
sources of supply was first disclosed to us have hitherto
happened. We see the great difference of opinion as to
those effects which still prevails. We cannot but think
it wise to abstain from very confidently predicting the
future when the best inquirers are disagreed respecting
the present.
"Let us, however, consider the facts a little more
in detail. Mr. Cobden justly observes that the prices of
commodities—one with another-must still be affected
by the panic of 1857. We are still,' he writes, 'in the
eddy of the crisis, and, notwithstanding, the prices of
the raw materials of our staple manufactures maintain
a high value as compared with any previous period.'
But this fact scarcely supports the inference which he
is inclined to deduce from it. Probably at no corre-
81
sponding period has there been so small a diminution in
the consumption of our manufactures and in the
demand for their materials. Eleven years ago our
exports fell from 58 millions in 1847 to 52 millions in
1848; in 1857 they were 122 millions, and in 1858 they
still amounted to 116 millions; a reduction of the same
amount-six millions in both cases, but on a quantity
which is now twice what it was then. The reduction
per cent. in consequence of this panic is therefore only
one-half what it was after the last one. We all know
that the domestic demand for our manufactures is much
greater than it was after the panic of 1847: our working
people are better off, our middle classes infinitely more
prosperous.
We need not therefore be surprised that
the demand for the raw material of our manufactures
has not fallen off, and that their price has not declined
as much as at former analogous periods. With the
facts before us we should wonder if they had declined
as much.
.
"Previously to the disturbance created by the panic
of 1857 the general prices of this country were carefully
investigated by two very competent inquirers. The late
Mr. Tooke and Mr. Newmarch discussed the subject in
a singularly complete manner. The general results of
their investigation were, that in all the commodities to
which their attention had been directed-
"Provisions and butchers' meat alone excepted—there have been
considerable fluctuations of price—fluctuations in many cases sudden and
violent during the six years 1851-56.
"That in the great articles of colonial and tropical produce—tea,
sugar, coffee, tobacco, raw cotton, raw silk, and indigo—the prices at the
opening of 1857 are scarcely higher than at the opening of 1851-allowing
F
82
for the special causes of disturbance in 1857 in the articles of tea, sugar,
and raw silk.
"That in butchers' meat and provisions the rise in price since 1850
has been almost continuous, until in February, 1857; the prices then preva-
lent are, in general terms, 40 to 50 per cent. higher than in January, 1851.
Of the causes which have specially contributed to this rise of price there
is given in Appendix iv. (page 454, seq.) a statement of some length.
“That in most of the raw materials of manufacture-flax, hemp,
timber, sheep's wool, and especially in oils, metals, tallow, and some
kinds of dyes—there has been a general tendency towards progressive
rise throughout the six years, resulting in a range of prices in February,
1857, varying from 30 to 60 per cent. on the prices of January, 1851.*
"That in cotton manufactures the price of yarn and cloth are, on the
whole, lower in 1857 than in 1851; and, in the case of superior kinds of
cotton cloth, there is in 1857 a reduction of about 25 per cent. on the
prices of 1851, notwithstanding a closely corresponding cost of raw cotton
at the two periods-the fall of the price of the finished article indicating,
it is to be presumed, increased economy in the processes of manufacture.
"That the material-bricks-principally employed in the London
building trade increased in price more than 50 per cent. between January,
1851, and January, 1853, but in February, 1857, has fallen to a point
very nearly the same as that at which it stood at the commencement of
the table. The wages of labour, however, in the London building trades
rose about 12 per cent. in July, 1853, and the advance has been generally
maintained.
"That in all the cases in which there have been, during the six
years, either fluctuations of magnitude, or a marked rise or fall of price,
the changes, in the first instance at least, admit of being explained by
purely mercantile reasons relating to supply and demand. In the striking
instances, for example, of the increased prices in 1857 as compared with
1851 of a large class of raw materials, an explanation is at hand in each
case, founded either upon a diminished supply available to meet an
undiminished demand, or a stationary supply available to meet an
enlarged demand :--as regards some of the most important commodities,
however—raw cotton and sheep's wool, oils and metals, for example—
*In connection with these circumstances, the details in the Supplementary
Chapter of Volume V. (page 640) should be referred to.
83
the immediate cause of the high price consists much more in extension
of the demand than in any failure of supply.
And if we seek to condense into still more general
terms the conclusions justified by the course of prices
since 1851,' we may say that-
"The groups of commodities which exhibit the most important
instances of a rise of price are the raw materials most extensively used
in manufacture, and the production of which does not admit of rapid
extension; and, second, that the groups of commodities in which there
is little, if any, rise of price in 1857 as compared with 1851 are articles
of colonial and tropical produce, the supply of which, drawn from a
variety of sources, does not admit of being considerably and expeditiously
enlarged.
"We cannot but think, therefore, that it is some-
what rash and peremptory to pronounce that there is
any depreciation of gold at present. Certainly there
has been no rise of prices since two of the most able
statistical writers in this country arrived at the above
conclusions. All that can be said is, that the fall of
general prices since that time is not so great as might
have been anticipated. But, as we have shown, even
this fact may be easily explained from the peculiarities
of the present period, as compared with previous similar
ones."
In the same number of the Economist appears the
following:-
"A very intelligent correspondent has written to us
respecting the price of silver, and we printed his letter
on the 26th March. The most elaborate investigation
of the recent price of silver which we have met with is
that of McCulloch, in the article in the Encyclopædia
Britannica,' to which we have repeatedly referred :-'It
(
F' 2
84
has been attempted,' he says, 'to show that gold has
fallen in value, by alleging that the value of silver, as
compared with it, has increased. But a rise may take
place in the comparative value of silver without its being
occasioned by a corresponding fall in the value of gold. The
value of silver is affected by a variety of circumstances
peculiar to itself; and if it has really increased during
the last half-dozen years, such increase may be satis-
factorily accounted for by the extraordinarily increased
demand for it in the East. It is, however, very doubtful
whether there has been any rise in the value of silver as
compared with gold. We subjoin an account of the
price of silver per oz. in London in the months of
March, July, and November annually since 1852, viz.: —
Price per Ounce.
Years.
1952....
1853...
1854...
1855...
1856.
1857...
1858...
•
March.
d.
601/
61&
617
60%
60
6132
61
•
July.
d.
601
611
613/2
61
61
61
November.
d.
... 617
617
611
60/1/1
621/
614
•
"It does not appear from this table that the price of
silver has risen during these seven years. It appears to
have fluctuated much less than might have been antici-
pated, its extremes being 60 and 621, making its value,
as compared with that of standard gold (at £3. 17s. 6d.
per oz.), as 15.5 to 1 and 14.97 to 1; but at an average
of the entire period there has been no sensible varia-
tion."
85
"This elaborate statement entirely confirms the view
taken in our former article. The quotations of silver
there given were those for the month of March in each
year. We have reason to believe that in March, 1856,
there were considerable fluctuations in the price of
silver. It will be found quoted in our SUPPLEMENT of
24th January, 1857, at from 60 to 61 for that month;
but slight fluctuations of this sort cannot affect a general
argument. Since our former articles were written
there has been a considerable rise in the price of silver,
in consequence of the stimulated demand for exportation
to the East."
Gold, it is true, has here paid for commodities, and
will, as a rule, be sold again whenever it exceeds the
needs of those who use it; but it is no less true that
many large provincial houses are compelled to hold a
large amount of gold, and fix the interest on it, so as to
render themselves independent of other sources of
supply in case circumstances should suddenly arise
necessitating a conversion of securities into cash, which
perhaps the stock markets would not admit of.
It was recognised years ago that the passage of
the precious metals from one country to another was
determined to a greater extent than had been supposed
by the condition of the money market. The precious
metals, in fact, can enter a country for investment upon
a large scale without disturbing prices at all, and leave
it again without either affecting them. The prices of
the securities invested in would be raised or sold, as the
case might be, but the prices of commodities would not
be in the least affected.
86
S
How little some of the bi-metallists have cared or even
thought about the interests of the community in their
efforts to forward their own interests is seen in the fact
that their demand to have silver rehabilitated could
only be granted at the expense of a large outlay of
money. Many no doubt have advocated the adoption
of such a course through sheer ignorance, while others
have done it knowing that it was the only means by
which they could recover what they had lost. How
little they have cared to see their theory carried into
practice in principle is seen by their steady adherence
to the ratio of 15 to 1. Any other ratio, such as 20 to
1, which is nearer what it is now, would not restore
to them the losses incurred by the depreciation of
their capital employed in the East. What impartial
bi-metallist, for example, could pretend to support
the bi-metallic theory after having further read the
following?
For years past some of the bi-metallists have been
advocating the maintenance of prices at the level from
which they have fallen during the last ten years, as if
there is any particular virtue in prices continuing at a
high level. Will a locomotive do its work any better
because the coal costs 30s. a ton instead of 16s. ? Is
there not a direct loss sustained in maintaining, say,
sixty millions of metallic currency in a country when
thirty millions, with prices reduced one-half, will suffice
to exchange precisely the same quantity of commodities?
And is not a community so much the poorer for having
to maintain in circulation a larger proportion of its
capital than there is any necessity for? Nothing is
87
clearer than the absurdity of the struggle which some of
these bi-metallists have been engaged in to maintain
what they call "the stability of values." Was ever such
a thing heard of as forming an association to maintain
"the stability of values"?
Silver is just as available now as it would be if
there were a fixed legal ratio, the only difference being
that the ratio is now fixed by the market, which
prevents debtors escaping from their liabilities at the
expense of their creditors.
In the Nineteenth Century for June, 1886, Mr. Sassoon
draws attention to Mr. Mulhall's statement in his "His-
tory of Prices," that "the quantity of silver is now only
nineteen times that of gold, whereas in 1850 it was
thirty-three times, and yet, strange to say, silver has
fallen." In what consists the strangeness in the face of
the fact that the effectiveness of one of the essential
elements in value, viz., utility, has been impaired? It
matters not how much or little of a thing exists, if it is
no longer wanted by people on the same scale as before
its commercial value must inevitably fall.
Mr. John Wilson says:-"It is obvious that the
smaller the quantity of coin which can be rendered
efficient for currency purposes, consistent with the
safety of public and private interests, the better for
all." The same authority wrote in the Economist of
March, 1845: "If trade increased, a greater number of
labourers became employed and more wages were paid;
and if commodities rose in price, the public would find
that they required to keep a larger portion of their
capital in money to answer those new calls; the circula-
tion would increase and deposits decrease."
CHAPTER V.
THIS CHAPTER CONTAINS CHIEFLY POSITIVE EVIDENCE IN
SUPPORT OF THE POSITION PREVIOUSLY TAKEN UP.
WE
E think the reader who is not hopelessly prejudiced
in favour of what we may call the double-
standard bi-metallic party will, after having read care-
fully what is contained in the preceding 87 pages, begin
to feel that the foundation upon which Mr. Goschen's
views as to the cause of the fall in prices under review
were based is not quite as firm as when he started with
us on this little expedition. We are well aware that in
putting our view of the case into such shape as we have
been able we have been guilty of much reiteration. It
is
very difficult to avoid it. In this respect anyone may,
we think, be held well excused if only he succeed, to
some extent, in disentangling some of the knots into
which this question has been dragged by the super-
heated efforts of many persons whose judgments were
not under that kind of guidance which afforded a fair
chance of their going straight.
We bring forward again, and in more detail, the
position taken up by Mr. Goschen at the Bankers'
Institute, because we think the reader will now have
got into his mind the other side of the argument, and
will be better able to see the force of the positive
evidence as to the true causes of the fall in prices which
we shall subsequently produce.
89
Mr. Goschen estimated that £200,000,000 had been
absorbed by Germany, Italy, and the United States.
His deduction was that the estimated annual production
of £20,000,000 had thus been absorbed; that the world's
requirements were to that extent cut off, and that the
metal had in consequence so appreciated as to account
for the fall in prices. That is the argument.
Mr. Goschen, in his address to the Institute of
Bankers, delivered April 18th, 1883, said: "But it is
not sufficient to state that the total supply of gold
available for the needs of circulation in the gold-using
countries of Europe has been absorbed. This additional
and extraordinary demand falls upon a supply of
£20,000,000, which has to furnish the wear and tear of
the coinage, and the total amount used for the purposes
of art and manufacture, besides the purposes of circula-
tion." Further on we read, "Economists will accordingly
ask themselves what result, if any, is such a phenomenon
likely to have produced? I think there is scarcely an
economist but would answer at once-'It is probable, it
is almost necessary, it is according to the laws and the
principles of currency, that such a phenomenon must be
followed by a fall in the prices of commodities generally.
Just as a large amount of gold poured into Europe in
1852 and subsequent years created a rise in prices, so
the counter-phenomenon must produce a fall.'" Then
Mr. Goschen goes on to remark, "It is a very curious
coincidence that while tea, coffee, and sugar have fallen
so materially, what we may call the luxuries of the
working man-tobacco, spirits, and beer-have not
fallen, or, at all events, not in the same proportion.
""
90
Mr. Goschen, in a letter to the Times of the 7th of
May, which he said was a brief summary of the argument
he used in his address at the Bankers' Institute, delivered
on April 18th, 1883, states:-"It is a received axiom
that prices of commodities are affected by changes in
the volume of the circulating medium in which they are
expressed. The late strain on the common stock of gold
must, therefore, have had some result. It must have
caused a general decline. Examined by the test of
present prices, these deductions are borne out by facts.
A general fall has occurred, though exceptional circum-
stances have maintained some prices."
Mr. Giffen said: "I think there is a permanent
appreciation in the value of the sovereign." Mr. Giffen
went on to say: "It would be of great interest to find
out the precise method by which the fall would be
brought about when gold has become scarcer and
scarcer. If that had been gone into, it might have
been apparent that where you ought to look for the
fall in prices first is in those wholesale commodities
which are dealt with in the great markets of the world,
the commodities upon which bankers are in the habit
of advancing. It is there we ought to expect first to see
a fall of prices as the result of the scarcity of gold.”
With the exception of what we shall put together
in the form of a summary, we shall now close the
argumentative part of our task, and simply bring for-
ward evidence which we have collected from time to
time as it has appeared in print in support of the
position we have taken up in the first four chapters.
In the Contemporary Review for October and
91
November, 1887, Mr. David A. Wells, with a clear and
sound perception of the real agencies which had been at
work in lowering prices, set himself the task of ex-
amining each article separately. Mr. Wells, in his article
on the fall in prices, premises his investigation with
remarking that “it is a universally accepted canon, alike
in logic and common sense, that extraordinary and
complex agencies should never be invoked for the
explanation of phenomena so long as ordinary and
simple ones are equally available and satisfactory for the
same purpose." The fall in the prices of the articles
referred to, as Mr. Wells says, is thoroughly capable
of explanation, and we recommend the explanations
as "ordinary and simple ones" to those economists who
so persistently "invoke complex agencies," with the
result that they worry the scientific world with the
everlasting sound of their fog-horns.
"What these agencies have been, how they have acted, and what
disturbing influences they have exerted on the world's prices, on the
world's industries, commerce, and consumption, and on pre-existing
relations of labour and capital, will, when fully told, constitute one of
the most important and interesting chapters of political economy and
commercial history. Such a complete exposition it is not at present
proposed to attempt; but the following statement of results, derived
from a study of what may be termed the recent production and price
experiences of a considerable number of important commodities, will,
it is thought, better contribute to an understanding of the situation,
and to a solution of the difficult economic problems involved in it,
than any other method hitherto adopted.*
"A general movement in prices is the resultant of a number of particular
movements, and in these particular movements, again, we find the proximate causes of
the distribution of the industrial forces of the world, and of the wealth which these
forces create."-J. S. NICHOLSON, Professor of Political Economy, University of
Edinburgh, Sc.
92,
"SUGAR.—The commodity of prime importance in the commerce
and consumption of the world which appears to have experienced the
greatest recent decline in price is sugar, which has fallen to a lower rate
than has ever been known in the history of modern commerce; the
wholesale price of fair refining sugars having been more than 114 per
cent. higher in 1880 than in the first half of the year 1887.*
Now, while improved methods of manufacture and greater and
cheaper facilities for transportation have undoubtedly contributed to
such a result, it has been mainly due to an apparent desire, as
M. Léroy-Beaulieu has expressed it, on the part of the Governments of
France, Germany, Austria, Belgium, Holland, Italy, and Russia, 'to-
make their national sugar industry the greatest in the world,' by
stimulating the domestic production of this commodity by the pay-
ment of extraordinary bounties on its exportation to other countries;
or, in other words, by competing with one another in paying large
sums for the purpose of speedily getting rid, at little or no profit, of
one of the most valuable and highly-desired products of human
industry.
66
"On the other hand, in order to neutralise to some extent the
exceptional advantages enjoyed through such an economic policy by
the producers of beet-sugar in Europe, some of the cane-growing
countries have felt obliged to encourage, by subsidies or tax exemptions,
their own sugar-production. In both Brazil and the Argentine
Republic the manufacturers of cane sugar have obtained a guarantee
from the State of a five to six per cent. return on their capital
invested, while all the machinery needed in this industry may be
imported free of duty. In the Spanish West Indies the Home Govern-
ment has finally (1887) felt compelled to relinquish the export duties
on sugars—the produce of Cuba and Porto Rico-which have long been
regarded as almost indispensable on account of revenue necessities;
while in South Africa and Australia the production of sugar has
also been encouraged to such an extent, that both of these countries
*How continuous and regular has been the decline in the price of sugars in
recent years is shown by the following table, which exhibits the average price of fair
refining sugars in bond (or free of duty) in New York from 1880 to July, 1887,
inclusive --
1880, 5·08 cents.
1882, 4.53 cents.
1884, 3.31 cents.
1885, 3.06 cents.
1886, 2.92 cents.
1887 (lowest to July), 2.37.
93
will hereafter be undoubtedly included among the number of important
sugar-exporting regions. In Central America, the British and Dutch
West India Islands, Guiana, and India (which last produces more
sugar than any other country) production has not as yet been
artificially encouraged, and, with the exception of the levying of export
taxes in certain localities, neither have any impediments been placed in
the way of the natural growth of production. But, at the same time, it
cannot be doubted that the recent increased facilities for transportation
and communication have, as before pointed out, been in the nature
of a stimulus to the production of sugar in common with all other
commodities, and have opened up large and fertile sections of the earth
which a quarter of a century ago were practically inaccessible.
“Under such conditions the increase in the production of sugar
entering into the world's commerce and available for general con-
sumption has been extraordinary. Mr. Sauerbeck estimates the
increase from 1872-73 to 1885-86 to have been 68 per cent. Other
authorities estimate the increase from 1853 to 1884, exclusive of the
product of India and China, to have been at the rate of 30 per cent.
for each decade, or about 100 per cent. compounded. In the Hawaiian
Islands, where a remission of duties on sugars exported to the United
States is equivalent to an export bounty of about 100 per cent., the
domestic production has increased from about 12,000 tons in 1875
(the year before the duties were remitted) to 110,000 tons in 1885—
an increase in eleven years of 750 per cent. The part that beet-
root sugar has played in this increase is shown by the circumstance
that, while in 1860 the proportion of this variety to the whole sugar
product of the world (commercially reported) was less than 20 per
cent., the product for 1886-87 is estimated as in excess of 55 per
cent.; Germany alone having increased her product from about
200,000 tons in 1876 to 594,000 tons in 1880-81, and to 1,155,000
tons in 1884-85; while the increase of the beet-sugar product in
the other bounty-paying States of Europe was not disproportionate.
"Of this extraordinary increase of product as large a proportion as
foreign markets would take was, as a matter of course, exported, in
order to obtain the benefit of the Government bounties on exports;
the sugar-export of Germany alone increasing from about 500,000
cwts. in 1876 to over 6,000,000 cwts. in 1885, and with every increase
94
of exportation the Government disbursements on account of export
bounties increased proportionally. The export bounty paid by Russia
is estimated to have been as high at one time as £6. 8s. per
ton; and that of France as between £7 and £8, entailing a present
direct and indirect tax (French colonial sugar being admitted to the
home market at reduced import rates), according to estimates recently
presented by M. Dauphin in the French Chamber of Deputies, of
£3,280,000 per annum. In Germany, the amount paid in the way
of subsidies on sugar was estimated by Deputy Gehlert, in a speech in
the German Reichstag in 1886, as having up to that time approximated
£8,000,000; while for the year 1885, £2,000,000, it was claimed,
would be necessary, or an amount equal to the total wages paid to all
workmen in all the German sugar refineries. As might also have been
expected, the profits of producers, and more especially of the sugar-refiners
working under the bounty (export) system, were at the same time
enormously increased. In Germany, the largest and best-managed beet-
sugar manufactories divided for a series of years dividends to the extent
of 60, 70, 90, and in one instance 125 per cent. per annum on the
capital invested; and corresponding results were also reported in
Austria, Russia, France, and Belgium. How rapidly and extensively
sugar has declined in price, consequent upon such an extraordinary
and unnatural increase in production, has already been pointed out.
How much of disaster this decline has brought to great business
interests and to the material prosperity, and even the civilisation, of
large areas of the earth's surface will be made a subject of future
notice.
"WHEAT.-The next important commodity to the recent production
and price experiences of which attention will be asked is wheat. The
average price of British. wheat for the last week in July, 1882, was
* "By a law passed in 1869 it was assumed that it took 12 centners of beet-
root to give one centner of crude sugar, and a tax was levied on this basis, and a
corresponding drawback allowed on exported sugar. Since then great improvements
have been made in the process of manufacturing, so that but 10 centners of roots
are necessary to produce one centner of sugar, instead of 12 as formerly; but the
Government continued to grant a drawback on the basis of 12. The export drawback
thus became an enormous premium to the producers, and the German manufacturers
have been enabled to supply all Europe with cheap sugar; till, to protect themselves,
the other States have had to increase their duties on the imports of foreign sugar."-
Report of United States Department of State by Commercial Agent Smith, Mayence,
January, 1887.
95
50s. per imperial quarter. For the corresponding dates in 1885 it was
32s. 11d., and in 1886, 31s. 3d. per quarter;* which last quotation was
the lowest since average market prices have been officially recorded.†
"The average price of wheat in the English markets for the decade
from 1870 to 1880 was 43 per cent. higher than the average of 1886;
and the average price from 1859 to 1872 was 68 per cent. higher than
the average of 1886.
"An analysis of the comparative prices of wheat in the United
States furnishes corresponding results; the average price of No. 2
spring wheat having declined in the Chicago market from $1.10
(gold) in 1872 to 763 cents in 1886, and 67 cents in July, 1887; a
price equivalent to 29s. per quarter in the harbour at Liverpool, or
86 cents per bushel, cost, freight, insurance included. This is about
the lowest price ever reported. The average annual export price of
wheat for the whole country declined from $1.24 per bushel in 1880, to
86.2 cents in 1885, and 87 cents in 1886. The average price of wheat
in Chicago from 1872-78 was $1.01 (gold), and the decline to the average
price of 1886 was about 28 cents, representing a loss to the American
producers of wheat on an average crop of at least $150,000,000 per
annum. For such results an all-sufficient explanation would seem to
be found in the circumstance that all investigation shows that the
comparatively recent increase in the world's supply of food has been
greatly in excess of the concurrent increase of the world's population;
that there has been in the last decade a large increase in the area of
land devoted to the cultivation of cereals; an increase (due to better
methods of tillage) in the average product per acre; and an immense
increase in the facilities for transportation, coupled with a greatly
reduced cost, which has made product more accessible and accordingly
more available for distribution. The most salient points of the evidence
tending to these conclusions are as follows: The cereal production
of the United States increased from 932,752,000 bushels in 1862 to
2,992,881,000 in 1884; and in acreage from 34,594,381 to 136,292,766;
* Economist.
†The Eton record gave only 26s. 9 d. per quarter as the price for the year 1761,
when reduced to Winchester bushels; but there is no certainty that the average for
the entire year was even in that one market as low as that, and still less that the
price was as low in more than one hundred and fifty English market towns as it was
in 1886.
*
96
or in the respective ratios of 452 and 338 per cent. respectively. The
average wheat production of the United States for the five years from
1881 to 1885 inclusive was 436,000,000 bushels; while for the ten
years preceding-some of which supplied the heaviest demands for
exportation ever experienced the average was only 366,000,000 bushels.
According to Mr. Neumann Spallart, a German statistician of repute,
the production of cereals in Europe doubled from 1869 to 1879; and in
the case of Russia her exports of wheat increased from 36,565,000
bushels in 1880 to 67,717,000 in 1884. According to figures of the
United States Bureau of Agriculture, the average production of wheat.
in Europe for the five years from 1875 to 1881, inclusive, ' increased
some 50,000,000 bushels over the average of the ten years preceding,
which included several seasons of unusually low yield in Western
Europe.' In 1862 the United States exported breadstuffs to the value
of $24,000,000; in 1872 the corresponding value was $87,000,000;
and in 1880, $288,000,000; and if since this latter year there has been
a decline in the value of American cereal exports, it cannot be attributed
to any impairment of ability to produce and export, if sufficient
inducements existed.* While, therefore, it is clear that the com-
parative product of the heretofore great wheat-producing countries
has not diminished, recent experiences are also making it evident
that the world is hereafter to derive important supplies of wheat from
sources which a few years ago did not exist, or were regarded as
of little importance. For example, British India, which in 1880
exported only 13,896,000 bushels, and whose increase of wheat exports
appears to be coincident with the increase of the railway mileage of
the country, in 1885 exported 39,312,000 bushels. During the
same period Australia and New Zealand, in which a rapid growth of
population inevitably tends to divert agricultural industry from wool-
producing to wheat-growing, increased their exports from 13,999,000
bushels in 1880 to 19,466,100 in 1885; and the Argentine Republic,
from 5,772 bushels in 1881 to 3,986,000 in 1884. All the indications
are, furthermore, that the increase of wheat supplies from new sources
is likely to be continuous and of great magnitude: from India, whose
* Of the respective wheat crops of the United States for the years 1884-5-6,
thirty per cent.-in the form of wheat and flour-has been exported; the largest
proportion ever recorded, except during the era of crop failures in Western Europe-
i.e., 1878-82.
97
internal and foreign commerce is yet only in its infancy, but is
developing with extraordinary rapidity under the influence of railroad
construction; * from the great wheat region of Manitoba, to open
which the Canadian Pacific Railroad was mainly constructed; from
Algeria and Northern Africa, which, once the granaries of the Roman
world, are now, for the first time for centuries, contributing something
to the world's surplus of cereals; and from the South American States
of the Argentine Republic and Chili, where extraordinary railroad
construction is rapidly drawing an extraordinary European immigration
to the finest of wheat-lands, which so recently as 1880 were practically
inaccessible. Great, also, as is the present wheat production of the
United States, Mr. Atkinson has shown that all the land at present in
actual use in that whole country for growing maize or Indian corn,
wheat, hay, oats, and cotton is only 272,000 square miles, out of
1,500,000 miles of arable land embraced in its present national domain ;
and also that the present entire wheat crop of the United States could
be grown on wheat-land of the best quality selected from that part of
the area of the State of Texas, by which that single State exceeds the
present area of the German Empire.
"In short, it would seem as if the world in general, for the first
time in its history, had now good and sufficient reasons for feeling free
from all apprehensions of a scarcity or dearness of bread. But while
this is certainly a matter for congratulation, are there not, on the
other hand, reasons for apprehension of serious disturbances to the
material interests of that large part of the world's population engaged
*"There is nothing more remarkable in the history of railway enterprise than
the development of the traffic that has occurred on Indian railways within the last
ten years, to go no further back. In 1876 the total quantity of goods traffic carried
on all the railways of India was 5,750,000 tons. In 1886 the quantity was about
19,000,000 tons. In the year 1876 the mileage open was 6,833 miles, so that the
volume of goods traffic carried per mile was about 800 tons. In 1886 the mileage
open was 12,376, so that the average volume of traffic carried per mile was over 1,500
tons. The aggregate volume of traffic in the interval had fully trebled, and the
average traffic carried per mile open had almost doubled. Notwithstanding these
remarkable results, the traffic which has been developed on the railways of India is
less, in proportion to the population, than that of any country in the world. This is
especially the case in reference to goods traffic, which only represents some 0.05 of a
ton per head of the population, as compared with three tons per head in Canada, and
over seven tons per head in the United Kingdom. But the goods traffic of India is likely
to develop very rapidly in the future, and especially in agricultural produce, of which
only about 4,000,000 tons are now annually transported, as compared with 75,000,000
tons in the United States for less than a fourth of the population."—Bradstreet's
(N.Y.) Journal.
G
98
in agriculture, from the continued abundant production and decline in
the price of their products?
“The effect of the extensive fall in prices of agricultural products
during the last decade has, as already pointed out, been most
disastrous to the agricultural interests and population of Europe. It
has reduced farming in England and Germany to the lowest stage of
vitality, and has had less, but similar, effects in France, Italy and
Belgium. It has brought almost to bankruptcy the sugar-producing
interests in the West Indies and the Dutch East Indies, and threatens
the continuance of productive industries, and even of civilisation, in
these countries.* In 1880, 44 per cent. of the entire population of the
United States were engaged in agriculture, and less than 7 per cent. in
manufactures; and since the year 1820, or for a period of sixty-six
years, the proportion between the agricultural and non-agricultural
exports of this country has been remarkably steady, the average for the
former for the whole of this period having been about 78 per cent. Up
to the present time there has been little tendency to change in these
proportions; but if the continued fall of prices of agricultural products
in the United States and other countries should compel their farming
populations to seek other employments, what other employments are
open to them? That the world will ultimately adjust itself to all new
conditions may not be doubted; but what of the period pending
adjustment? †
* "In consequence of the low prices of sugar in Europe and America, owners of
plantations, and their lessees, have speculated to such an extent, that they have placed
themselves on the brink of an abyss, and it is feared that this will totally stop the
production of sugar in Java. This event would be in every way a great catastrophe.
It would at once throw half-a-million of Javanese labourers out of employment, who
would increase the already enormous number of Malay pirates."-Journal des
Fabricants de Sucre, October, 1886.
† A recent writer in the Quarterly Review broadly contests the views above
expressed respecting the prospective increasing production and continued low prices
for wheat, and endeavours to prove that "it has been too hastily assumed that, in
the struggle for existence among wheat-growers, the British, the best farmers in the
world, will not be amongst the fittest who will survive.” In support of this conclu-
sion, the writer starts with the proposition that the returns of the cost of growing
wheat in Great Britain, collected in 1885, make the average about £8 per acre, and
venturing the opinion that, with the general reduction of the rents of British farming-
lands that have already taken place, and the practice of increased economies on the
part of British farmers, they can grow wheat with a profit of 40s. and 45s. a quarter
(although the average price of British wheat has not for some years reached that
level), next assumes that growers "in all parts of the world-with the doubtful
exception of India- cannot possibly keep up the present acreage of wheat at the
recent or any lower range of prices." The writer further concludes, from an exami-
99
"MEAT. The price of meat, according to the statistics of English
markets, exhibits no material decline, comparing the average prices
of 1867-77 and of 1878-85. But during the years 1885 and 1886
M
nation of American statistics, which he abundantly offers, that the area of wheat
acreage in the United States is diminishing, and that the average farm value of wheat
in that country for the years 1884-86 was about 33s., "which cannot," he says,
"yield a satisfactory profit under the most favourable circumstances."
The following reply to the conclusions of this writer in the Quarterly, so far as
they relate to the United States, which appeared in the columns of the New York
Commercial Bulletin (May, 1887), strikingly illustrates how different the situation
appears to a writer equally competent to discuss the question, when viewed from a
trans-Atlantic standpoint:
"These guesses about the cost of wheat-producing in this country are highly
interesting. Probably they will interest no one else so much as the American
farmers, who know that they do not know, and have a strong impression that other
people cannot tell them, the exact cost of raising wheat per acre. Very few of them
produce any one crop under such circumstances that they can actually compute, in
dollars or days' labour, what that separate crop costs them; and fewer still know what
they add to the value of their land by improvements, or take from it by exhaustion
yearly. But one thing a great many of them do know--that they are going to raise
more wheat next year than they did last, as they raised more last year than the year
before; and they have been selling wheat for several years at about 45 cents per
bushel in great regions like Kansas, Minnesota, and Dakota, and yet the business is
found so far profitable that the acreage in these very States enormously increases.
It is supposed that Dakota, which produced 22,800,000 bushels in 1880, and 22,000,000
bushels three years ago, will produce 30,000,000 bushels in 1887.”
[In 1880 the crop area of the State of Kansas was about 8,000,000 acres; for
the present year (1887) the area planted is believed to be in excess of 16,000,000 acres.]
"The farmer in this country is at the same time a land-improver and a land-
speculator in most of the wheat-growing States. He takes possession of a farm
under the Homestead Law by pre-emption or by purchase from corporations, the land
costing him so little that a single good crop or two pays for it outright. Then he
puts into it labour of his own, and of men hired, which he could not otherwise utilise
at all, and the cost of which he cannot compute, and thus adds year after year to its
value. The farmer who runs into debt can tell what his land costs him yearly, but
such are not the majority. Most farmers get a living out of the land for themselves
and families, to begin with, and make some improvements besides, and meanwhile are
gaining more, without any effort, than by all their labour; for while a farmer is
raising four or five crops, a settled State or county grows up about him. Towns and
cities start from the ground. Railroads and manufacturing establishments come to
enhance the value of his land. In a few years the ground that he bought for $1.25
to $5 per acre comes to be worth in market price $10, $20, or $30 per acre. Land
settled by men who are yet in their prime averages in value over $20 per acre for the
entire State of Iowa, or $13 for the entire State of Minnesota, or $10 for the entire
States of Kansas and Nebraska. That means for the owners of only a small farm a
yearly saving which not many wage-owners are able to accomplish, and in all the
more successful selections of land the increase in value, and the consequent return for
labour, are far greater.
"Just as long as this occupation of new land and development of new territory
are possible in this country, the most scientific calculation of the cost of growing
wheat will have as much to do with its continued production or with its average
price as it has to do with the height of mountains in the moon. Wheat-growing
will continue, and the yield in this country will greatly exceed the demand, and an
enormous surplus will be annually offered for sale at prices with which British
farmers cannot easily compete, where the cost of growing wheat averages about $40
per acre.'"'
G 2
100
the decline was very considerable, and extended also to most other
animal products. The percentage of fall in the carcase prices of dif-
ferent kinds and quantities of meat in London, as given by the
Economist of November 27, 1885, was, in comparison with the prices
for 1879, as follows:-For inferior beef, 43 per cent.; prime beef,
18 per cent.; prime mutton, 13 per cent.; large pork, 22 per cent.;
middling mutton, 27 per cent.
-
"The immediate cause of this decline was undoubtedly the new
sources of supply of live animals and fresh meats that have been
opened up to Europe, and especially to Great Britain, from other than
European countries; the value of the imports into Great Britain
from North America of live animals having increased from £217,000
in 1876 to £4,596,000 in 1885; of fresh meat from £390,000 to
£2,364,000; and of fresh meat from Australia and the River Plate
(transported through refrigeration) from £178,000 in 1882 to
£1,170,000 in 1885; a total increase of from £605,000 in 1876 to
£8,130,000 in 1885. The ability of the three countries named to
increase their exports of meat during such a brief period to such an
enormous extent constitutes of itself a demonstration of increased
production, and of the diminished price that is the invariable accom-
paniment of a surplus seeking a market. The decline in the average
export price of salt beef in the United States was from 8.2 cents per
lb. in 1884 to 6 cents in 1886 (26 per cent.); of salt pork from
8.2 cents to 5.9 cents (27 per cent.); of bacon and hams from 9.6
cents to 7.5 cents; and of lard from 9.4 cents to 6.9 cents. In the case
of lard oil, an exceptionally great decline in price in recent years-i.e.,
from an average of 94 cents per gallon (Cincinnati market) in 1881-82
to a minimum of 48.8 cents in 1886-is claimed to be due mainly
to the large production and more general use of vegetable oils;
cotton-seed oil in the United States, and palm and cocoa-nuts oils
in Europe. The effect of the increased quantity and cheapness of
these vegetable oils has been especially marked in England, France,
Italy, and Germany; and has also undoubtedly influenced the
price of tallow, the decline in which in English markets, comparing
the average prices of 1867-77 with those of 1886, has been 31 per
cent., while in the United States the price for 1884-85 was the lowest
on record.
101
"CHEESE.—American cheese experienced an extraordinary decline
in price, from 12 and 13 cents in 1880 to 8 and 10 cents in 1885;
and as the American contribution of this article of food to the
world's consumption has constituted in recent years a large factor,
the world's prices generally corresponded with those of the American
market. This decline in the United States was due mainly to
increased production; the relative prices of butter and cheese during
the year 1880-81 being so much to the advantage of the latter, that
large quantities of milk which had previously gone to the creameries
to be made into butter found their way into factories to be made into
cheese; and for the years 1883, 1884, and 1885 the annual receipts at
New York city averaged 25 per cent. in excess of the receipts for 1880.
Demand for export at the same time largely fell off, and so assisted in
the decline of prices; the same influences having also apparently
prevailed to a degree in other cheese-producing countries, the amount
recognised by the trade as supplied to the great cheese-consuming
countries, Great Britain, the Continent of Europe, and South America,
having increased from 1880 to 1884 to the extent of 14 per cent.
"FISH.-The year 1884 in the United States was notable for a
plethora of all kinds of dry and pickled fish on the one hand, and of
extremely low prices of such commodities on the other; mackerel
having touched a lower price in the Boston market than for any year
since 1849, while for codfish the price was less than at any time since
the year 1838.
"COFFEE AND TEA.-The decline in recent years in the price of
each of these great staple commodities has been almost as remarkable
as has been the case with sugar; coffee having touched the lowest prices
ever known in commerce in the early months of 1886, the price of
'ordinary,' or exchange standard No. 5,' having been 73 cents per
lb. in January of that year in the New York market; while, according
to Mr. Giffen, the decline in the price of tea, comparing 1882
with 1861, has been greater than that of sugar, or, indeed, of almost
any other article. In both cases the decline would seem to find a
sufficient explanation in a common expression of the trade circulars:
Our supplies have far outrun our consumptive requirements.' In
the case of coffee, the total imports into Europe and the United States,
comparing the receipts of the year 1885 with 1873, showed an increase
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102
of 57 per cent.; while the increase in the crops of Brazil, Ceylon, and
Java during the same period has been estimated at 52 per cent.
Subsequent to January, 1886, the price of coffee, owing to a partial
failure of the Brazil crop, rapidly advanced more than 150 per cent.,
ordinary' or 'exchange' standards having sold in New York in
June, 1886, at 22 cents per lb.—the highest point in the history of
American trade, unless possibly during the war, when entirely abnormal
circumstances controlled prices. From these high prices there was a
subsequent disastrous reaction and extensive failures. In the matter
of the supply of tea, the total exports from China and India increased
from 234,000,000 lbs. in 1873 to 337,000,000 lbs. in 1885, or 44 per.
cent.; the exports from India having increased from 35,000,000 lbs. in
1879 to 68,000,000 lbs. in 1885.*
"
Hops. The report of the German Hop-growers' Association for
1886 estimates the quantity grown throughout the world in that
year at 93,340 tons, and the annual consumption at only 83,200 tons;
so that there was an excess of production over consumption in 1886
of nearly 10,000 tons. As might have been expected, there was a
notable decline in the world's prices for hops.
"Such having been the production and price experience in recent
years of the world's great food commodities, attention is next invited
to a similar record of experience in respect to the metals.
“IRON.—Sir Lowthian Bell, recognised as one of the best autho-
rities on the production of iron and steel, in his testimony before the
Royal Commission of 1885, fixed the world's production of pig-iron
in 1870 at 11,565,000 tons, which increased to 14,345,000 tons in
1872. From that date production continued almost stationary until
* The present Chancellor of the Exchequer, Mr. Goschen, in his Budget speech
for 1887, called attention to the following curious incident of financial disturbance
growing out of a change in the quality of a staple commodity (tea), which, in turn, has
been contingent on a change in the locality or country of its production: "Whereas,
ten years ago," he said, "we received 156,000,000 lbs. of tea from China and
28,000,000 lbs. from India, or 184,000,000 lbs. altogether, in 1886 we received
145,000,000 lbs. from China and 81,000,000 lbs. from India. In the transfer of con-
sumption of tea from the tea of China to that of India we have to put up with a loss
of revenue, owing to the curious fact that the teas of India are stronger than the
teas of China, and therefore go further; so that a smaller quantity of tea is required
to make the same number of cups of tea." Mr. Goschen further called attention
to the fact that "the fall in the price of tea and sugar has been so great, that whereas
in 1866 a pound of tea and a pound of sugar would have cost 2s. 6d., and in 1876,
2s. 14d., in 1886 they would have cost only 1s. 74d., or 3d. less than they would have
cost in 1866 with all the duties taken off."
103
1879, when it was 14,048,000 tons. 'After 1879 an extraordinary
change became apparent in the volume of the make, for during the
ensuing five years the average make was 18,000,000 tons, and in 1883
it rose to 21,063,000 tons, or nearly 50 per cent. more than it was in
1879.' The witness further estimated that while the product of iron
increased in the United Kingdom at the rate of 131 per cent. from
1870 to 1884, the increase in the production of the rest of the world
during the same period had been 237 per cent.
"The tables of the American Iron and Steel Association, prepared
by Mr. James M. Swank, indicate an increase in the pig-iron product
of the world, from 1870 to 1886 inclusive, of about 100 per cent. All
authorities are, therefore, substantially agreed that the increase in the
production of this commodity in recent years has been not only far in
excess of the increase of the world's population in general, but also of
the increase of the population of the principal iron-producing countries.
Thus, for example, in the United States the production increased from
4,044,526 gross tons in 1885 to 5,683,329 tons in 1886, an increase of
1,638,803 tons, or 40 per cent.
"Under such circumstances the prices of pig-iron throughout the
world has rapidly declined, and in the case of some varieties touched
in 1885-86 the lowest points in the history of the trade. American
pig, which sold in February, 1880, for $45 per ton, declined almost
continuously until September, 1885, when the low point of $16g was
reached; while in Great Britain, Cleveland pig, which sold for
£4. 17s. 1d. in 1872, and £2. 5s. in 1880, declined to £1. 10s. 9d. in
1886. The decline in Bessemer steel rails in the English market was
from £12. 1s. 1d. in 1874 to less than £4 in 1887. In the United
States, Bessemer steel rails, which commanded $58 per ton at the mills
in 1880, fell to $28.25 at the close of the year 1884, returning to $39
in March, 1887.
"Reviewing specifically the causes which have contributed to the
above-noted extraordinary decline in the prices of iron, the following
points are worthy of notice :-
Mag
First. The testimony of Sir Lowthian Bell shows that foreign
countries have within recent years, and contrary to former experience,
increased their production of iron in a far greater ratio than Great
Britain, which was formerly the chief factor in the world's supply;
104
and in consequence have become formidable competitors with Great
Britain not only in their own territories, but also in neutral markets.
New fields of iron-ore have been discovered in Germany, France, and
Belgium, very analogous in point of character to those which, by
discovery and development, about the year 1850, in the north of
England, led to the subsequent great and rapid increase of British
iron production.
"Second. The power of producing iron with a given amount of
labour and capital has in recent years greatly increased. For example,
the average product per man of the furnaces of Great Britain, which for
1870 was estimated at 173 tons, is reported to have been 194 tons in
1880, and 261 tons in 1884.
"Third. The substitution of steel for iron has resulted in a notable
diminution of the consumption of iron for attainment of a given result;
or, in other words, more work is attainable from a less weight of
material. Sir Lowthian Bell, in his testimony before the Royal Com-
mission, stated that a ship of 1,700 tons requires 17 per cent. less in
weight of pig-iron in being built of steel rather than of iron, and is
capable of doing 7 per cent. more work.
Again, the quantity of pig-iron requisite for keeping a railroad in
repair will depend greatly upon the state in which iron enters into
construction; rails of steel, for example, having a far greater durability
than rails of iron.*
"A further example of recent economic disturbance consequent
66
* Opinions as yet vary greatly as to the comparative durability of iron and steel
rails. In the testimony given before the Royal Commission of 1885, Mr. I. T. Smith,
Manager of the Barrow Steel Company, gave it as his opinion that the life of a steel
rail is three times that of an iron rail, adding: "My reason for saying so is, that
I know that upon the London and North-Western Railway, where steel rails have
been now in use more than twenty years, they consider it so.'
Sir Lowthian Bell, also, in testifying before the Commission on the effect on the
iron trade of Great Britain from the expected longer duration of steel rails, says:
"Assuming iron rails to last twelve, and steel rails twenty-four years, instead of the
railways now in existence in the United Kingdom requiring 465,648 tons annually for
repairs, 232,824 tons will suffice for the purpose. Although this only involves the
saving of a comparative small weight of pig-iron, it means less work for remelting
and for our rolling-mills, say to the extent of 4,000 to 5,000 tons per week." The
difference in duration of iron and steel rails is not, however, in itself a complete
measure of the amount of pig-iron required for renewals. This arises from the fact
that an iron rail splits up and becomes useless long before the actual wear, as
measured by the diminution of weight, renders it unsafe, which often happens when
the loss of weight does not exceed 4 per cent. of the original weight. Steel rails, on
the other hand, go on losing weight until they are from 10 to 20 per cent. lighter than
when they were laid down, before becoming unsafe.
105
one of
upon changes in the manufacture of iron-characterised by the Secretary
of the British Iron Trade Association in his Report for 1886 as
the most remarkable of modern times'—is to be found in the rapid
disuse of the system invented about one hundred years ago by Henry Cort
for converting pig-iron into malleable iron by the so-called process of
'puddling.' Twenty years ago the use of this process was almost
universal-to-day it is almost a thing that has passed; and the loss of
British capital invested in puddling furnaces which have been abandoned
in the ten years from 1875 to 1885 is estimated to have approximated
£4,667,000, involving in Great Britain alone a displacement or transfer
of workmen to other branches of industry during the same period of
about 39,000.
“COPPER.—This metal touched the lowest price on record in 1886,
Lake Superior copper in New York falling from 25 cents per pound
in 1880 to 9 cents in August, 1886; and in the case of no other single
commodity is the connection between the decline in price and the in-
crease of production so well established and so significant. The increase
in the copper product of the world is estimated by Mr. Sauerbeck to
have been 97 per cent. in the thirteen years from 1873 to 1885 inclusive;
while, according to the Report of the United States Geological Survey,
1886, the increase from 1879 to 1885 was nearly 47 per cent. (46.8).
The countries which have most notably contributed to this increased
product have been the United States and Spain and Portugal; the
increase in the case of the former having been from 23,000 tons in 1879 to
74,053 tons in 1885; and in that of the latter from 32,677 tons to
45,749 tons in the same period. As in all other like cases, the disturbing
effect on the industries involved-mining and smelting-contingent on
this rapid and remarkable fall in prices, was very great, and in all
quarters of the world. In Montana, the Montana Copper Company,
with an annual product of 8,000,000 lbs. of pure copper, entirely
suspended operations; and the Anaconda Company, with an annual
product of 36,000,000 lbs., shut down twenty out of twenty-eight
furnaces, and discharged most of its hands at the mine. In Chili,
production during the year 1885 was diminished to the extent of about
10 per cent. In Germany, the great Mansfield mine, which reported
gross profits in 1884 of 5,675,000 marks, sustained a loss in the opera-
tions of 1885 of 653,338 marks, and its managers have since sought
106
relief by petitioning the Imperial Government for an imposition of a
higher tariff on the imports of copper into the Empire. For the years
1881-83 the great San Domingo mine in Portugal paid annual dividends
of 12 per cent.; in 1885 the annual rate was reduced to 3 per cent.
It is important also to note, as throwing light upon the problem of
the recent reduction of prices, that while in the case of copper the
increase of product has been confessedly immense, three other agencies.
—one permanent and the other two of a temporary character-have
contributed to its recent decline in price. The first is, that there has
been a reduction in the cost of mining, smelting, and marketing copper
at the principal mines of the world, owing to improved processes
and reduced rates of transportation contingent on railroad construction.
In the case of the Lake Superior mines this reduction is very
striking; in the 'Quincy' mine, for example, the cost of production
in cents per lb. having been reduced from 10.03 in 1881 to 7·50
in 1885, and in the Atlantic' from 13.80 to 9.37 in the corresponding
period. Second, the recent discovery and rapid development of new
and rich mines in Montana, Arizona, the Dominion of Canada, and else-
where, have left a feeling of apprehension in the world's market as to
the conditions of the supply of this metal in the future. Third, the
consumption of copper in Europe for the year 1886 fell off 14,000 tons
below the average for the two preceding years—a result attributed mainly
to the dulness of the shipbuilding and the various metal industries.
"LEAD experienced a decline, comparing the highest market prices
in New York in January, 1880 and 1885 respectively, of about 39 per
cent.; or, comparing the average prices for New York and London for
the same years, about 30 per cent. The world's production of lead
between the years 1880 and 1883 appears to have increased in
nearly the same ratio, or far in excess of the increase of the world's
population within the same period. With an approaching exhaustion
of a number of the heaviest lead-producing mines in the Rocky
Mountains,* and a notable decline in the lead product of British ores
(50,328 tons in 1882, as compared with 37,687 tons in 1885), the price
of lead tends to increase. The decline in the price of lead above noted
occasioned the suspension or bankruptcy of many English lead-mining
companies, and during the year 1885 much distress from this cause was
* Report of the United States Geological Survey, 1886.
107
reported as existing among English lead-miners. The following is an
example of another economic disturbance contingent on changes in the
production and price of lead: formerly the domestic supply in the
United States of white lead, and of all paints the basis of which is
oxide of lead, was derived almost exclusively from manufactories situated
upon the Atlantic seaboard; but with the discovery and working of the
so-called silver-lead mines of the States and Territories west of the
Mississippi, and the production of large quantities of lead as a product
residual or secondary to silver, the inducements offered for the manu-
facture of white lead and lead-paints, through local reductions in the
price of the raw material and the saving of freights, have been sufficient to
almost destroy the former extensive white lead and paint business in the
eastern sections of the United States, and transfer it to the western.
“NICKEL not many years ago was a scarce metal, of limited uses,
and commanded comparatively high prices. Latterly, the discovery of
new and cheaper sources of supply has tended to throw upon the market
an amount in excess of the world's present average yearly consumption
-estimated at between 800 and 900 tons—and as a consequence, there
has been over-production, and unsatisfactory prices to dealers.' There
is, moreover, little prospect that prices in respect to this metal will ever
revive—one mine in New Caledonia alone being estimated as capable
of producing two or three thousand tons annually, if required; while
the discovery of richer and more abundant ore deposits than have ever
before been known is reported as having resulted from the construction
of the Canadian Pacific Railway.
6
"TIN. The production and price experiences of this metal during
the last quarter of a century have been very curious. The world's
consumption of tin from 1860-64 constantly tended to be in excess of
production, and prices rose from £87 (the lowest figure) in 1864 to
£159 (the highest) in 1872. In this latter year the mines of Australia
began to produce very largely, and in a short time afforded a supply
equal to one-third of the world's current consumption. Under such
circumstances the price of tin rapidly declined, and in October, 1878,
touched £52. 10s., the lowest price ever known in history-a decline
of 66 per cent. For some years past, however, the product of tin
in Australia has been declining, that of the Straits' increasing, and
that of England and other countries remaining nearly stationary; but
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108
the consumption of tin throughout the world has gone on continuously
increasing, until now the surplus stock is being so rapidly reduced, that
unless new sources of supply are developed famine rates may again
occur, prices having advanced continuously from £52. 10s. in 1879
to £107 in June, 1887.
C
"TIN-PLATES.-Owing to a well-recognised tendency of consump-
tion to exceed production, tin-plates, in common with tin, ruled at what
were termed 'famine' prices in 1872, and for some years previous, the
average price for coke' plates being from 26s. to 27s. per ton. Since
1872 the decline has been in excess of 50 per cent.—the quotation for
the first half of the year 1887 having been from 12s. 6d. to 13s. per'
box. This remarkable and steady decline in the prices of this com-
modity during the last fifteen years is as clearly and certainly understood
as in the case of tin above noticed, and is referable to three causes:
First, the reduction in the cost of the metal tin; second, to the revolution
in the manufacture of iron, and the extensive substitution of steel
(plates) in place of charcoal and puddled iron plates; third, to new
processes of manufacture and tinning, a modern tin-plate mill turning
out every twenty-four hours more than double the product of old-
fashioned mills, without any increase in expenditure for motive power
or labour. Supply and consumption alike, under such circumstances, have
increased to an enormous extent, and the tin-plate trade, instead of being
a minor industry of the world, as was formerly and not remotely the
case, has become one of great magnitude. The decline in prices has,
however, brought nothing of prosperity to the British tin-plate manu-
facturing industry; as out of an average of eighty-two works in existence
during recent years in South Wales, there have been no less than forty
failures.*
"QUICKSILVER.-Excepting petroleum and quinine, the decline in
price of this metal seems to have been greater in recent years than that
* An attempt on the part of Germany to break in upon the almost complete mono-
poly of the manufacture of tin-plates enjoyed by Great Britain, by imposing a heavy
duty on their importation, has been singularly unsuccessful, domestic (German)
production and exports having diminished, and exports increased, as will appear from
the following table:-
1885
1878
··
•
•
YEAR.
•
:
:
:
Production.
Tons.
4,892
8,582
Imports.
Tons.
5,798
5,307
¡
Exports.
Tons.
186
1,696
-
109
of any other leading commodity-i.e., from £26 per flask (the highest)
on the London market, in 1874, to £5. 2s. 6d. (lowest) in 1884; and
from $118 (highest) to $26 (lowest) on the San Francisco market during
the same period; a decline of 77.1 per cent. The explanation of this
movement of price is to be found mainly in the circumstance that
California, which furnishes nearly one-half of the world's supply of this
metal, increased her production from 30,077 flasks in 1870 to 79,684 flasks
in 1877; and although, as the result of low prices, only ten of thirty
working mines of California were in operation in 1885 (none of which
paid a dividend in that year), the generally increased supply of quick-
silver, coupled with its diminished use in the reduction of silver ores—
consequent on the introduction and use of cheaper processes—has thus
far prevented any material augmentation in its price, the London quota-
tion for June, 1887, having been £6. 15s. per flask.
“SILVER.—The annual supply of silver from the mines of the
world has largely increased since 1872-73, the period covered by the
marked decline in the market price of silver; or, according to the esti-
mates of the Bureau of the Mint of the United States, from $65,000,000
in 1872 to $102,168,000 in 1881; $114,000,000 in 1883, and $124,000,000
in 1885, an increase in supply in fourteen years of 90·7 per cent.
"COAL.-The decline in the export prices of British coal, com-
paring the average for 1867-77 with 1886, was about 33 per cent. The
decline in the average annual price of anthracite coal (by the cargo at
Philadelphia), comparing 1870 with 1880, was 38 per cent., but as
between 1870 and 1886 it was only 6.6 per cent. The total production
of all kinds of coal in the United States in 1886, according to the
returns of the United States Geological Survey, shows a net gain of
1,785,000 short tons, as compared with 1885, but a loss in value at the
point of production of $4,419,420.
"The increase in the product of the five chief coal-producing
countries in the world-Great Britain, the United States, Germany,
France, and Belgium-from 1870 to 1886 inclusive, has been in excess
of 80 per cent.; Great Britain increasing her product from 109,000,000
tons in 1870 to 159,351,000 in 1885; and the United States from
38,468,000 in 1870 to 112,743,000 short tons in 1886. On the other
hand, the amount of coal displaced from use in the United States in 1886
by the introduction and use of natural gas is estimated by the United
110
States Geological Survey at 6,353,000 tons, valued at $9,847,000. In
Germany the increase reported was from 36,041,000 tons in 1873 to
55,000,000 tons in 1883. In 1870 the average output of coal per miner
in the British coal mines-counting in all the men employed—was 250
tons, an amount never before reached. In 1879 this average had
increased to 280 tons per man, and in 1884 the average for the five
preceding years was reported at 322 tons, an increase of 42 gross tons
of 21 cwts. per man per annum. For Germany the increase was from
261 tons in 1881 to 269 tons in 1883; and in Belgium, for corresponding
years, from 165 tons to 178 tons per miner.
"Recent inventions have also done much to reduce the amount of
coal formerly used to effect industrial results, particularly in the case of
blast-furnaces and coke-ovens. For example, at blast-furnaces coal was
formerly used for heating the boilers that furnished steam for blowing,
hoisting, &c., and for heating the air which was blown into the stacks.
Now, a well-ordered set of blast-furnaces does not use a single ounce of
coal, except what goes in to melt the ore. The whole of the heat used to
produce the steam required in connection with the furnace and for
heating the stoves for making the hot-blast is obtained from the gases
which rise to the top of the stacks in the process of smelting the iron,
and which formerly was all thrown away.
“PETROLEUM.-Crude petroleum declined in the American market
from an average of $3.86 (gold) per barrel in 1870 to 87 cents per
barrel in 1885 and 71 cents in 1886, a total decline of over 80 per
cent.
"The American annual production (including Canada) increased
during the same period from 5,510,745 barrels in 1870 to 30,626,100
barrels in 1882, declining to 25,798,000 barrels in 1886.
"That the production and price experiences of the great staple
fibres of commerce and consumption in recent years have not been
dissimilar to those of the foods and metals will also appear from the
following:-
COTTON. Comparing 1860 with 1885, the decline in the price of
American cotton (middling uplands) in the New York market has not
been material. The year 1886, however, witnessed a decline to a lower
point (81%) than has been reached, with one exception, since the year
1855, the exception occurring just after the failure of the Glasgow
111
Bank in Scotland, in 1878, the lowest quotations in both years being
exactly the same. On the other hand, the increase in the world's supply
of cotton in recent years has been very considerable, the American crop
increasing from 3,930,000 bales in 1872-73 to 6,575,000 bales in 1885-86,
or 67 per cent.; while the supply of the world for the corresponding
period is estimated to have increased from 6,524,000 bales to 8,678,000
bales, or at the rate of about 32 per cent. Such an increase in pro-
duction would undoubtedly have occasioned a more marked decline in
price had it not been for a great and coincident increase in the world's
consumption of cotton fabrics, which, in turn, was undoubtedly in con-
sequence of a material decline in the cost of the same, as the result of
improvements in machinery and methods of production; the equivalent
of the labour of an operative in the factories of New England having
increased from 12,164 yards in 1850 to 19,293 in 1870, and 28,032 in
1884; while the reduction in the price of standard sheetings from 1850
to 1885 has been about 10 per cent., and of standard prints and printing-
cloths during the same period approximately 40 per cent.
“WOOL.—According to the statistics of Mr. Sauerbeck (Journal of
Statistical Society, March, 1887), the price of merino wool (Port Philip,
Australia, average fleece), comparing the averages of the series of years
1867-77 and 1878-85, declined 10-7 per cent.; or, comparing the average
price of 1867-77 with that of the single year 1886, when wool was
cheaper than at any time within the memory of the present generation,'
27 per cent. Certain fibres classed with wool, and known as ‘alpaca '
and 'mohair,' and the grade of long-combing English wools known as
'Lincoln,' experienced a much greater decline after 1874-75, owing to
the curious circumstance that a change in fashion in those years almost
entirely and suddenly destroyed any demand for the before popular, stiff,
lustrous fabrics manufactured from such wools for female wear, and
substituted in their place the soft and pliable cloths that are made from
merino wools.
“The increase in the production and world's supply of raw wools,
from the years 1860 to 1885 inclusive, was about 100 per cent.
According to Mr. Sauerbeck's tables, the increase from 1873 to
1885 inclusive was 20 per cent.; according to Messrs. Helmuth
Schwartze & Co., of London, the increase from 1871-75 to 1881-85
was 23 per cent.; and from 1871-75 to 1886, 35 per cent. The wool-
112
clip of the United States increased from 264,000,000 lbs. in 1880 to
329,000,000 lbs. in 1885, or 24-6 per cent. in six years. Such an increase
in the world's supply of wool would undoubtedly have resulted in a
greater decline in prices had not the increase been accompanied, as was
the case with cotton, with a very marked increase during the last quarter
of a century in the world's consumption-i.e., from 2.03 lbs. of clean
wool per head in 1860 to 2.66 lbs. in 1886.
་
"SILK. The decline in the price of silk (Tsatlee), according to
Mr. Sauerbeck, from the average price of 1867-77 to the average of
1886, was about 40 per cent.; and the average increase in supply of all
varieties of silk-fibre, comparing 1873 with 1885, was reported by
the same authority as about 12 per cent. No relation between the
price movements of this commodity and supply and demand, or any
other agencies, can, however, be established which fails to take into
account the great increase in the use of ramie and other fibres and
materials, within recent years, as substitutes for or adulterations of silk in
the manufacture of fabrics, and which must obviously have an effect on
the price of raw silk equivalent to an increase in its supply.
"JUTE.-Good medium jute declined in the London market from
£17 per ton in 1874 to an average of £11. 10s. in 1886, or more than
32 per cent. The increase in exports from British India was from
5,206,570 cwts. in 1876 to 10,348,909 cwts. in 1883, or 98 per cent.
"NITRATE OF SODA.-The recent price experiences of nitrate of
soda (Chilian saltpetre) have been very curious. The supply of this
article, which corresponds to the more valuable nitrate of potash (true
saltpetre), is practically limited to one locality on the earth's surface
—a rainless, desert tract—in the province of Tarapacá, which formerly
belonged to Peru, but has recently been annexed to Chili. It is
cheaply and plentifully obtained, at points from fifty to ninety miles
from the coast, by dissolving out the nitrate salt from the desert
earth, which it impregnates, with water, and concentrating the solution
by boiling to the point where the nitrate separates by crystallisation. Up
to the year 1845 it was an article so little known to commerce that only
6,000 tons were annually exported; but as its value as a fertilising agent
in agriculture, and as a cheap source of nitrogen in the manufacture
of nitric acid, became recognised, the demand for it rapidly increased,
until the amount exported in 1883 was estimated at 570,000 tons, or
113
more than a thousand million pounds. To meet this demand and
obtain the profit resulting from substituting skilful for primitive methods
of extracting and marketing the nitrate, foreign capital, mainly English,
extensively engaged in the business. A large amount of English-made
machinery, and many English engineers and mechanics, were sent out
and planted in the desert; additional supplies of water were secured, and
a railroad fifty-nine miles in length constructed to the port of Iquique
on the sea-coast, for the transportation of coal, provisions, and other
material up, and the nitrate as a return freight down. So energetically,
moreover, was the work pressed, that at the last a most complete
establishment - constructed under English auspices, the business
employing, when in full operation, six hundred men-was prosecuted
unremittingly, by night (by the agency of the electric light) as well
as by day. The result was exactly what might have been anticipated.
The export of nitrate, which was 319,000 tons in 1881, rose to 570,000 tons
in 1883; and prices at the close of 1883 declined with great rapidity, to
the extent of more than 50 per cent., or to a point claimed to be below
the cost of production. Such a result, threatening the whole business.
with disaster, led to an agreement on the part of all the interests
concerned to limit from June, 1884, to January, 1887, the product of
every establishment to 25 per cent. of its capacity. But, notwithstanding
these well-devised measures, prices have not been restored to their
former figures, the average price per cwt. in London having been 10s. in
1886, as compared with an average of 14s. for 1867-77. For May, 1887,
the quotations had advanced to 11s. and 11s. 5d. This case is especially
worthy of notice, because it constitutes another example of a great and
rapid decline in the price of a standard and valuable commodity in the
world's commerce, and for which-all the facts being clearly understood
-it is not possible to assign any other cause than that of production in
excess of any current demand for consumption, and which in turn has
been solely contingent on the employment, under novel conditions, of
improved methods for overcoming territorial and climatic difficulties.
"Concurrently with the fall in the price of nitrate of soda, saltpetre,
or nitrate of potash, also notably declined from 28s. 3d. in 1880 to 21s.
in 1887 (for English refined), a fact which seems to find a sufficient
explanation in the circumstance that nitrate of soda can be used to a
certain extent as a substitute for nitrate of potash, and that the export
H
114
of the latter from India, the country of chief supply, increased from
352,995 cwts. in 1881 to 451,917 cwts. in 1885, or 36 per cent.
"PAPER.-A quarter of a century ago, or less, paper was made
almost exclusively from the fibres of cotton and linen rags; and, with an
enormous and continually increasing demand, paper and rags not only
rapidly increased in price, but continually tended to increase, and thus
greatly stimulated effort for the discovery and utilisation of new fibrous
materials for the manufacture of paper. These efforts have been so
eminently successful, that immense quantities of pulp suitable for the
manufacture of paper are now made from the fibres of wood, straw, and
various grasses, and so cheaply, that the prices of fair qualities of book-
paper have declined since the year 1872 to the extent of fully 50 per cent.,
while in the case of ordinary 'news' the decline has been even greater.
Rags, although still extensively used, have, by the competitive supply of
substitute materials, and a consequent comparative lack of demand, been
also greatly cheapened.
"QUININE.-But in no one article has the decline in recent years
been more extraordinary and thoroughly capable of explanation than
in the case of sulphate of quinine, a standard chemical preparation,
used extensively all over the world for medicinal purposes. In 1865 the
highest price of sulphate of quinine in the English market was 4s. 4d.
per ounce, which gradually advanced to 9s. 6d. in 1873, receding to
6s. 9d. in 1876. In the subsequent year, owing to an interruption in the
exportation of cinchona-bark from South America by civil war in New
Granada, and by low water in the Magdalena River, the price advanced
to the unprecedentedly high figure of 16s. 6d. per ounce, receding to 13s.
in 1879 and 12s. in 1880. In 1883, identically the same article sold in
Europe for 3s. 6d. per ounce, and in 1885 for 2s. 6d., a result entirely
attributable to the successful and extensive introduction and growth of
the cinchona-tree in the British and Dutch East Indies, and to the
further very curious circumstance, that while the cinchona-barks from
South America-the product of indigenous trees-yield on an average.
not over 2 per cent. of quinine, the bark of the cultivated tree in Java
is reported to yield 8 to 12 per cent.
"The decline in the prices of many chemicals, due to improvements
in methods and to excess of production, has also been very great-
the decline in soda-ash from 1872 having been 54 per cent., whilę
115
bleaching powders (chloride of lime) declined from £10 in 1873 to
£6. 15s. in 1878, receding to £9 in 1887.
"Many other commodities, of greater or less importance, might be
included in this investigation, with a deduction of like results; but this
is not necessary, for it is difficult to see how anyone can rise from an
examination of the record of the production and price experiences of the
commodities which have been specified-which, it must be remembered,
represent, considered either from the standpoint of qualities or values,
the great bulk of the trade, commerce, and consumption of the world—
without being abundantly and conclusively satisfied that the decline in
their prices which has occurred during the last ten or fifteen years, or
from 1873, has been so largely due to conditions affecting their supply
and demand, that if any or all other causes whatever have contributed to
such a result, the influence exerted has not been appreciable; and
further, that if the prices of all other commodities not included in the
above record had confessedly been influenced by a scarcity of gold, the
claims preferred by the advocates of the latter theory could not be fairly
entitled to any more favourable verdict than that of 'not proven.
In his letter to The Times of September 11th, 1887,
Mr. Daniel Watney took a right view of the currency
question then under discussion in reference to Indian
trade, when he wrote as follows:-"It would be a pity
to blame the currency question as though it acted in
some mysterious way as a protection to Indian industry,
when the cause is simply a natural development, which
has reached during the last 12 years, I believe, an
increase of 57 per cent., and which ought to be hailed
with the liveliest satisfaction by every patriotic
Englishman."
"""
H2
CHAPTER VI.
VIEWS UPON THE CURRENCY AND KINDRED QUESTIONS OF
CONTEMPORARY WRITERS.
URING the progress of the bi-metallic movement
UR
unsound views found favour in many quarters
where the Tory line had more or less to be adopted.
One of the threads of this line was Fair Trade, and it
was generally to be found advocated by people pro-
fessing the Conservative creed. It is always satisfactory
to find an organ of that party admitting, perhaps
inadvertently, into its columns facts which very seriously
undermine the arguments of Fair Traders and Protec-
tionists. The St. James's Gazette of January 12th, 1888, did
this when it summarised a Blue-Book on "Wages in the
Past Half-Century," issued by the Commercial Depart-
ment of the Board of Trade. The following is the
summary, which we take as an accurate condensation of
the facts. This paper disposes to a large extent of the
complaints and lamentations poured out by M. Emile de
Laveleye, to which we refer elsewhere.
"WAGES IN THE PAST HALF-CENTURY.
"One of the most valuable publications ever issued by a Govern-
ment Department has just been issued by the Commercial Department of
117
the Board of Trade. It consists of nearly 450 pages of tables, collected
from returns and statements relating to wages which have appeared in
Parliamentary papers for the last fifty years or more. Here at length
we have the most authentic data for deciding the much-discussed
question whether the earnings of the working classes have risen or fallen
during the past half-century. Whatever the truth may be, it lies
hidden in this mass of figures; and we may be sure that statisticians,
economists, and politicians will eagerly seek to discover it. Of
course the task is far from easy. The first difficulty is to reduce the
returns to a common basis. The rate of wages is given variously for
the day, the week, the month, and even the year; the hours of labour
are sometimes stated and sometimes not, and the classification of trades
is by no means uniform. To work out precise comparisons would, there-
fore, be a most laborious task, though the result would be well worth the
pains. We shall content ourselves with one or two examples roughly
selected.
"Take the Manchester cotton trade to begin with. In 1810 fine
spinners earned 42s. 6d. per week; four years later this had dropped to
32s.; and in 1832 the wages were as low as from 20s. to 25s. At
this figure they remained for a good many years; but in 1874 we find
them up to 42s. and even 50s.; in 1877 they ranged from 29s. 8d.
to 55s., according to the class of work and the number of spindles,
and then in 1883 we have a drop to 31s. These fluctuations are charac-
teristic of a good many trades: high wages in the early years of the
century, then a decided decrease, then (about 1874-79) a substantial
recovery, and finally, a fair average rate, midway between the great
inflations and depressions of former years. Colliers' wages fell from
21s. to 13s. in South Wales during 1840-44; rose to 36s. in 1877, and
fell again to 26s. in 1883. Iron-rollers earned as much as 69s. per
week in 1840, but only 45s. in 1845; this sum had fallen in 1849
to 35s. 6d.; then in 1877 we find a recovery to 42s. 6d. ; and in the last
return the rate is stated as 55s. The general rule thus established by
three of the chief industries of the country holds good in regard to the
great majority of the smaller trades; and it is gratifying to find that the
tendency now is an upward one, although the general rate of wages may
never again reach the abnormal height of ten or twelve years ago.
"For practical purposes the last two or three decades are the most
118
1
profitable to study. That, on the whole, wages are higher now than they
were during the period which immediately followed the introduction of
steam and of manufacturing machinery may be taken as proved. The
question which interests us at this moment is, whether they have advanced
or decreased during the modern industrial period in which the conditions
of production and consumption have not materially altered. In the cotton
trade there was during the years 1839 to 1859 an average advance in
wages of from 10 to 25 per cent. From 1859 to 1875 the advance
(after an intermediate depression) averaged a further 25 per cent. By
1877 a fall of about 10 or 15 per cent. had taken place; in 1880 we
find a slight rise, and this was fully maintained in 1883, when
wages were quite 30 per cent. above the rate of twenty years earlier.
These results are calculated on the Manchester rates. To deal with
those given for Glasgow, Bristol, and other places would take us too far
into details; and, besides, any comparison on the basis of locality
would be fallacious, except in the case of the chief seat of a trade,
seeing that, although twenty or thirty years ago wages in identical
trades varied greatly in different parts, the action of trade unions
has since tended to equalise them throughout the country. In the calico
printing and dyeing trade, there has been a marked increase in the wages
of the sketch-makers, die-cutters, and machine-engravers; but in the less
skilled departments of labour-the machine-hands, colour-mixers, &c.—
it has been somewhat slight. In the flax manufacture the past twenty
years have brought an increase of more than 15 per cent. in the rate of
wages. In Belfast, power-weavers were earning from 1s. to 1s. 3d. a day
in 1857; they now earn 1s. 10d., working only fifty-six hours a week
instead of sixty. In the woollen trade, the wages of sorters have been-
21s. in 1839, 22s. 6d. in 1859, 22s. to 32s. in 1866, 28s. in 1874, 24s.
in 1880, and 25s. in 1883; and, with few exceptions, similar fluctuations.
have taken place in the wages of other woollen mill-hands.
rule, the wages in the wool trade have been higher in the south of
England and in Scotland than in Yorkshire and Lancashire; but (as
in the linen trade also) they have been lowest in Ireland. It will
surprise no one to hear that wages in the silk trade have steadily
fallen. Men who are now glad to get 19s. a week would have found
plenty of employment at 36s. twenty years ago. On the other hand,
As a
1866 to from £3 to
first-class lace-makers have advanced from 35s. in
(
119
£5 in 1883; a truly astonishing increase, due, if we mistake not, to
improved technical knowledge. Even curtain-hands can earn from 70s.
to 80s. on piece-work.
(C
Leaving the textile trades, we come to coal and ironstone mining.
In these industries the wages are calculated on the output, and a skilful
workman can always earn a great deal more than a bungler. The
average wage in the Midland district in 1860 was 22s. 6d. ; in 1883 it was
25s. 9d. Colliers' wages touched their highest point in 1867-8, when a
good hewer could make £2 a week. Wages in the iron and steel
manufactures followed pretty much the same course as in coal and iron
mining. Puddlers in 1866 could earn from 7s. 6d. to 7s. 10d. a day; in
1877 only 5s. 7d.; and in 1883, 5s. 10d. Iron-moulders have maintained
a steady rate of 6s. for many years, though in some places they have gone
down as low as 5s.-notably at Newcastle in 1867-8. In the manufacture
of machinery there has been a gratifying increase since 1880, when men
who now earn from 33s. to 37s. per week earned only 30s. As for ship-
building, the transition from wood to iron and steel, and the migration of
the trade from the Thames, the Severn, and the Mersey to the Tees, the
Tyne, and the Clyde, can be clearly traced. On the Clyde fitters earned
27s. per week in 1863, 28s. 9d. in 1866, 30s. 6d. in 1880, and 33s. to
36s. (day work), or 42s. to 67s. (piece-work) in 1883. Since then there
have been, to our knowledge, some reductions, but they are not shown in
these returns.
"We must pass over the pottery, glass, leather, chemical, sugar,
paper, printing, brewing, building, and other trades, in order to come at
once to an industry which cannot be overlooked-agriculture. The
returns here are extremely full and precise, though they only go back
to 1860, and only come down to 1870. The wages of men, women, and
children are stated as at the end of each of three quarters of the year,
and for each county in England and Wales. Returns are also given
for Scotland and Ireland. One fact, at any rate, is clear at the first
glance there has been a considerable and general increase. The highest
rates recorded for 1860 become the normal rates in 1870, and in many
instances are exceeded. In some counties the increase has been as much
as 80 per cent. With this most gratifying fact we leave the subject for
the present."
120
The following appears in Bradstreet's of October
23rd, 1886-
("
MR. MORETON FREWEN AND THE SILVER QUESTION.
"Mr. Moreton Frewen has written to Bradstreet's,
arguing that the persistent fall in the price of American
wheat is really due to the fluctuations in Indian
exchange and the decline in the gold value of the silver
rupee. Referring to the evidence laid before the British
Royal Trade Commission, Mr. Frewen says:-
"Mr. Palgrave, the ex-editor of the London Economist, says:
'Speaking generally, every fluctuation of 1d. in the rate of exchange is
equivalent to an alteration of 17d. per quarter in the selling price of
wheat in England.' That is to say, the fall from 22d. to 16d. in the
value of the rupee has reduced the Mark Lane price of wheat by more
than 1s. a bushel, and has marked down the price of every bushel of
wheat grown on this continent 25c. The evidence received by the Com-
mission all pointed in one direction. Owing to the demonetisation and
suspension of coinage, silver is losing its exchange value in terms of
gold, but is not losing its value at home in the myriad-peopled East.
And if this is the case, and the evidence is most positive and conclusive,
then the present depression of prices for your agricultural exports is
abundantly accounted for.
"The above illustrates how men of Mr. Frewen's
views are prone to ground arguments for serious political
action on the surface facts of a given situation. Here is
an attempt to trace a great movement in commerce to
changes in the price of one of the articles constituting
the tool of commerce--money. What is this movement
in commerce? Nothing less than an increase in the
railway facilities of India from 6,705 miles in 1875 to
12,005 miles in 1884-5; along with this the export of
Indian wheat has developed from 10,429,000 bushels in
}
121
1876-77 to 39,313,000 bushels in 1885-86, the latter being
the highest yearly export yet recorded. Here are the
primary facts with respect to the recent course of India's
foreign trade. Back of these is the fact of the great
stimulus given to the production of wheat throughout
the world by the short crops of Europe just previous to
1879. Wheat-growing in the United States received an
immense stimulus. More wheat compelled cheaper
prices, and low prices, in turn, tend to bring about
increased consumption.
"Having regard to these great underlying facts, it
would be far more reasonable to conclude that the
fluctuations in the value of the rupee have been conse-
quent thereon than the contrary. Yet this conclusion
need not be set opposite the fallacies of Mr. Frewen.
To an extent it may be true that the price of wheat at
London is affected by the fluctuations in Indian exchange,
and that the price in the United States is in turn affected.
It is also true that when more rupees can be had for
Indian wheat, the seeming effect, in the first instance, is
to stimulate shipments. But only in the first instance.
Just here is the weak point of Mr. Frewen's case. He
assumes that the rupee is not losing its value at home
in the myriad-peopled East.' As to the assumed point,
facts are needed for light. In the first place, it is hardly
reasonable to suppose the influences making for the
serious decline in the price of silver, if not already, will
in good time be fully felt wherever silver is used as a
medium of exchange. But testimony as to the actual
facts is not wanting. These, as must necessarily have
been true, go to prove marked price reductions in India.
6
122
Mr. J. E. O'Conor, a statistician immediately familiar
with Indian affairs, has undertaken to analyse the course
of Indian exchanges and prices. Regarding the course
of prices, Mr. O'Conor's position was set forth as follows
in the letter of a London correspondent published in
Bradstreet's of September 25th:--
“To sum up the case roughly, Mr. O'Conor shows that prices have
fallen in India, say, 10 per cent. all round, and that therefore the Indian
producer has not gained. On the other hand, exchange has fallen by
20 per cent., which is a gain to the exporter; but against this must be
set a decline of about 30 per cent. in the gold prices obtained for the
exported product in the consuming markets. The exporter, therefore,
buys his goods 10 per cent. cheaper, but sells them at 30 per cent.
lower prices, thus making a loss of 20 per cent., which is about made up
to him by the decline in exchange. By this showing, then, the fall in
silver, to which the decline in exchange is due, has benefited neither the
producer nor exporter, and cannot, therefore, have stimulated the export
trade. On the other hand, the loss to the Indian Government on its
remittances has been very large.
"It is thus seen that the point assumed by Mr.
Frewen is clearly in dispute with both the facts and the
reasoning against his position.
"The readiness of Mr. Frewen, and others like him,
to attribute the increased Indian wheat movement to
fluctuations in the price of exchange is of a part with
the arguments of those who find in the actions of Govern-
ment a sufficient reason for the fall in silver. They
persistently refuse to make due allowance for the
tremendous results in improved means of transportation
which the locomotive and its belongings have brought
about."
One of the arguments of the bi-metallists has always
been that the business of the country was going to ruin
123
owing to their views not being adopted. Their great
cry has always been: "Look at the existing depression
in trade!" What are the hard facts of the case? We
will quote from the statistics prepared in January,
1885, by the late Professor Leone Levi for Sir Arthur
Bass, M.P., before the recovery in general business
had unmistakably manifested itself. In that report he
says:
"Since 1867 the population has increased from about 30,000,000
to 36,000,000, and many vicissitudes have occurred in the rates of
wages. After a period of unexampled prosperity in trade, the nation has
experienced all the bitter fruit of a protracted depression; the relations
between capital and labour have been frequently strained; and an
important conference is about to be held for the purpose of considering
whether the present system, whereby the products of industry are
distributed between the various persons and classes of the community, is
satisfactory, or, if not, by what means that system can be improved. It
is under these circumstances that you have desired me to renew the
inquiry into the amount of earnings of the labouring classes, and I have
much pleasure in laying before you the results of my investigations.
"SECTION I.-NUMBER OF EARNERS.
"I have taken the number of earners in the different industries
from the latest census, taking for my calculation only those under sixty-
five years of age. In 1867 I found the number of workers to be
11,018,000; in 1881 they were 12,200,000. Assuming the working
classes to comprise 70 per cent. of the population, and with small farmers,
crofters, and others to number 26,000,000 persons, or 5,600,000 families,
the 12,200,000 workers give 2.17 earners for every family.
"SECTION II.-WAGES.
"In most cases adult wages commence with the age of majority;
but in the case of domestic servants, factory labourers, and others,
persons of fifteen years and upwards usually earn full wages. In the
case of domestic servants, seamen, and others, the value of board and
lodging must be added to the money wages. So must the value of all
124
allotments of land to agricultural labourers, and so the value of uniforms,
liveries or other perquisites, wherever given.
"SECTION III.-EARNERS AND EARNINGS.
"The number of earners and the amount of their earnings in 1867
and 1884 may be taken as follows:
Occupations.
Professional....
Domestic
Commercial
Agricultural
Industrial
(6
..
..
Occupations.
..
··
Number of Earners.
1884.
£
400,000 300,000
£
10,000,000 40
59,000,000 40
£
16,000,000
2,400,000 1,700,000 96,000,000
900,000 700,000 45,000,000
1,900,000 2,700,000 57,000,000
6,600,000 5,600,000 307,000,000
39,000,000 60
55.14
84,000,000 34.14 31-2
226,000,000 46.10 40
12,200,000 11,000,000 521,000,000 418,000,000 42-14 38
Thus, with an increase of less than 11 per cent. in the number of
earners, there has been an increase of 24 64 per cent. in the amount of
earnings, the average earning per head having increased from £38 in
1867 to £42. 14s. in 1884, or in the proportion of 12.37 per cent.
66
Dividing the earners and earnings by age and sex, the results are
as follows:
...
1867.
1884.
Number of Earners.
1867.
Amount of Earnings.
Males under 20....... 1,650,000 | 1,200,000
Males, 20 and under 65.. 6,530,000 5,900,000
Females under 20
1,300,000 1,300,000
Females, 20 and under 65 2,720,000 2,600,000
1884.
1867.
Amount of Earnings.
1884.
Average
Earnings.
1867.
1884.
1884. 1867.
£
£
£ £
29,000,000 23,000,000 18 19
363,000,000 293,000,000 57.2 51.7
30,000,000 27,000,000 22-17 20-15
99,000,000
75,000,000 33 28.17
12,200,000 11,000,000 521,000,000 | 418,000,000 43-10 38
"The total earnings thus calculated include the value of board and
lodging wherever given. Deducting this item, the amount of money
earnings may be estimated at £470,000,000."
We there read what every political economist and
man of business with any penetrative insight into the
1867.
£
33
35
Average
Earnings.
125
}
course of events can discover for himself, if he will quit
the limit of the little circle within which his prejudices
are confined, that "after a period of unexampled pros-
perity in trade, the nation has experienced all the bitter
fruit of a protracted depression." No quack doctoring
in the form of bi-metallism is of any use in such circum-
stances. You might as well invoke the aid of the deities
to arrest the violence of the tempest, which is the result
of natural disturbances, and which is necessary to
readjust a balance which in the course of nature has
been temporarily upset.
The following appeared in The Pall Mall Gazette of
August 26th, 1886-
66 THE CASE FOR BI-METALLISM.
"BY M. EMILE DE LAVELEYE.
"Among the various causes of the present economic
crisis some are closely connected with the very progress
of civilisation; but there is certainly one which is solely
attributable to ill-judged legislation. I refer to the
proscription of silver. This metal, which from the
remotest antiquity was the universal monetary circu-
lating medium, has been suddenly rejected by the mints
of all countries, India alone excepted. The business
transactions of the world were accomplished by means
of two-wheeled chariots, one wheel being of white metal
and the other of yellow. There has been a general
agreement to break one of these wheels, and yet people
seem surprised that the commerce of the world should
be so considerably affected!
"Who can fail to observe the sad results of the
fall in prices? They are, alas! but too clearly visible.
126
Great lowering of rent, and consequent reduction in
expenditure of farmers and landlords, resulting in loss to
all industries which supply the wants of these two
important classes of consumers; cultivators losing money
and clamouring for State intervention and agrarian
measures-does not this, indeed, resume the Irish
question? Holders of mortgaged estates almost ruined;
for in many instances the property itself is no longer
worth the mortgage upon it;* railway receipts on the
decline, a most decisive proof of the stagnation of
business; commercial and business men losing in nearly
all their transactions, because the price of goods con-
tinues falling lower and lower; capital, meeting only with
deceptions in all trading enterprises, withdrawing itself
into such safe investments as Consols and the like; the
initiative spirit dying, if not already dead, for who
would dare to start any fresh enterprise when he sees
nothing but ruin on all sides?
-
"It might be thought that this general fall in the
price of provisions would be a benefit to the labourer and
artisan;
1; but of what avail is this if wages fall pro-
portionately, and more especially if employment becomes
scarce? Nothing is more cruel than a protracted period
of depression of prices. One hears incessantly of
failures,† suicides, strikes, riots, and disturbances of
all kinds. This is quite explicable. Coinage is the
blood of the social body. A disturbance in the monetary
* See article, St. James's Gazette, on Mortgages.
Never was there such a small number of commercial failures as since the fall
in prices.
Strikes have been almost unknown in this country of late years.
127
circulation is at best a very serious disease, and it may
prove fatal. I think none will deny that the production
of gold is very inferior to the requirements of the world.
Here are some statistics which clearly show this. The
annual production is £18,000,000; the consumption for
industries, which is ever on the increase, is £12,000,000;
the average annual export to India (1881-1884) is
£4,728,342; the losses, wear and tear amount to about
a million — total, £17,000,000. There remains, there-
fore, just one million sterling yearly for the monetary
requirements of the entire world, India excepted. Who
dare maintain that this is sufficient? The gold-pro-
ducing countries, such as America, Australia, and Russia,
are precisely those whose inhabited territory and popu-
lation are the most rapidly on the increase. They
therefore retain more and more of the gold they
produce for themselves. The quantity of gold sent by
Australia to England is yearly diminishing; and as for
America, not only she no longer sends us any, but she
yearly withdraws a portion from Europe. Between
1875 and 1884 the imports of gold to the United
States exceeded the exports by £25,000,000. After the
suspension of the Bland Act the exports of gold to
America will probably increase four or five millions
sterling annually. What will then become of the
European circulation? Even now-and the fact is
without example in economic history—coinage is very
nearly suspended in our Western world. France,
Belgium, and Holland have coined nothing for the last
six or seven years. All the fine machinery set up in the
mints is lying idle. In England some few millions have
128
been struck, but almost entirely from old sovereigns and
half-sovereigns re-melted. Between 1879 and 1884
England only coined altogether £792,283, and during
the same period Australia coined £24,112,000, and
America $381,955,000, or about £75,000,000—that
is to say, £30,000,000 more than its total production
of gold. The monetary stock in England is rapidly
diminishing. In 1877 Bagehot estimated that she
required an annual excess of importation of gold of four
millions sterling; and in point of fact, between
1858 and 1875 this excess rose, on an average, to
£4,432,000 annually. Between 1877 and 1884, accord-
ing to Bagehot's calculation, England ought to have
received an excess of £24,000,000. Instead of this, her
circulation lost £7,940,408 exported, and £16,000,000
absorbed in arts; making together £23,940,408. The
difference is therefore about 48 millions sterling.
"But it is argued gold is not lacking; it exists in
superabundance, as quantities of it are lying idle in
banks. It suffices to recall the most elementary principle
of economic science to understand at once that monetary
contraction never makes itself manifest by an absolute
lack of gold, save in countries absolutely drained of the
metal—as is, indeed, already the case in certain States.
As the supply of gold diminishes, cæteris paribus, prices
fall in proportion, and consequently less gold is necessary
for effecting the same number of exchanges. If you do
away with silver, gold will alone fulfil the same functions
as previously the two metals conjointly, the buying
power of the remaining coin having increased propor-
tionately to the fall in prices; and as, on the other hand,
↓
129
this fall in prices is productive of an intense crisis and
of general stagnation in business, commercial transactions
generally are restricted, and gold, being unemployed,
accumulates in banks. This is exactly what is now
taking place. For instance, the reserve in the Bank of
England is very small, and yet the rate of discount is
low, there being so few demands. If you were to reduce
the monetary stock to one-half what it is at present,
the disturbance produced would be so violent, that the
remaining gold would find no employment whatever; the
less gold there is the more it will appear superabundant,
for the less there is the less it is required. In pro-
hibiting silver, lawgivers have violated both Nature's and
History's laws; for Nature had placed at mankind's
disposal two metals specially suitable as means of
exchange, gold and silver, and History teaches us
that civilised communities have always used them
together.
"At the Paris Conference of 1878, Mr. Goschen
predicted the disastrous consequences of this fatal error.
If, he said, it be persisted in preventing silver from
performing the historic rôle reserved to it, the commercial
world will be subjected to a crisis more intense than any
we can recollect. In addition to this, the diminution in
the price of silver, which has fallen to 43d. the ounce,
entails upon England and English trade, and all Govern-
ment officials in India, losses which are attended with
very grievous results.
The Indian Treasury lost yearly
on Council drawings £4,000,000; and at the present
rate of exchange the loss would be more than £5,000,000.
All Indian officials lose 30 per cent. in their exchanges
I
130
for European money: and what is more serious still,
the export trade with the East, and with all silver-
standard countries, is subject to so much uncertainty
that it has become wholly disorganised. No country
suffers so much from all this as England.
"Again, the struggle for gold is simply death to
free trade, for all Governments will raise their import
duties, so as to keep as much gold at home as possible.
"Can this be the wish of English merchants and
traders? There are two questions which put this debate
on a very clear footing, and to which the opponents of
bi-metallism will have some difficulty in replying: first,
is one million sterling in gold sufficient to supply the
growing monetary requirements of the entire world?
And second, as in our Western world coinage has
altogether ceased, and arts annually absorb £10,000,000
of the monetary stock, can things continue thus? It is
clearly to the interest of Europe, and more especially of
England, unhesitatingly to accept any proposal or hint
coming from America to put in order the mechanism of
international exchange; for, on the one hand, that
country alone has nothing to lose, as she herself pro-
duces gold and silver, and at the same time absorbs a
large portion of our gold, £25,000,000 in eight years;
and, on the other, she has it in her power to crush the
European money market in the most cruel manner.
After the suspension of the Bland Act, which has now
become inevitable, the price of silver will still further
fall to 35d. per ounce, and perhaps even to 30d. per
If America, making use of her profits made of
late years on her monthly coinage of two millions of
ounce.
131
silver dollars, were to throw £20,000,000 of silver on
the London market for sale, exacting gold payment,
where should we all be? What value would silver have
after that? And what would be the loss to India and
to all traders with the East? And our banks, what
would become of them?
"One essential point must not be lost sight of. It is
not necessary for the establishment of international
bi-metallism that any State should sacrifice its freedom of
action as regards coinage, as was the case with the Latin
Union. A common understanding between them would
suffice; it is enough they should agree all to open their
mints on the same day to the free coinage of the two
metals, with a fixed ratio of value between them. None
need undertake to continue this system for any length
of time. If one State decide to abolish it, others can
do so too, and it would be merely a return to the existing
state of things; only an engagement should be entered
upon that no State should take advantage of its neigh-
bour's free coinage to secure gold in exchange for silver
-a proceeding which would, indeed, bring no real
advantage to itself.
"Europe need never fear being overrun with American
silver. As one pound of silver would be worth the same
amount of coin in the United States mints as in
European, a holder of silver in America would have it
coined and changed into gold there, if he so wished it.
He would gain nothing by paying the cost of his silver
crossing the Atlantic, as in Europe he would get no
more for it than in America. As Newton very truly
remarked, 'If the ratio between the two precious
I 2
132
metals is everywhere the same, there is no advantage in
sending away or in acquiring gold in preference to
silver.' But even if Gresham's law retain any force of
action, it would be applicable in America rather than
anywhere else, because both metals are produced there.
"It seems that England has much to gain and
nothing to lose in trying to come to an agreement with
the other European States to give bi-metallism a fair
trial."
us.
The foregoing article, from the pen of M. de
Laveleye, is typical of the attitude taken up by the
silver party, and therefore it is useful to analyse it.
The writer thinks that a chariot with one silver wheel
and one gold one is preferable to having the wheels con-
structed of the same metal. Why, he does not inform
"Coinage," we are told, "is the blood of the social
body." It is quite evident that coinage is here confused
with purchasing power. What is the use of coins, unless
there is some agency to put them in motion? What is
the use of blood in the veins, unless there is introduced
into the human body, by means of food, the heat and
energy necessary to make it circulate? We are told
that "the quantity of gold sent by Australia to Eng-
land is yearly diminishing," M. Laveleye apparently
not having observed that of late years gold has been
sent from Australia direct to the United States and
other parts, instead of first coming to England, as was
It is then stated that,
formerly the case.
(6 as for
America, not only she no longer sends us any, but she
yearly withdraws a portion from Europe." This is
entirely incorrect, the greater part of the gold
133
which has gone into the Bank of England during the
past few months having come from the United States.
We read that "the less gold there is the more it will
appear superabundant, for the less there is the less it is
required." Those who can reconcile the reasoning of
the latter part of this quotation with the sustained com-
plaint that the production of gold is unequal to require-
ments, must indeed possess a high order of reasoning
power. What M. Laveleye says about trade with the
East, and the loss sustained by Indian Civil Servants,
is disposed of farther on, in Chapter VII. It is truly
astonishing how erroneous have been the deductions
hastily drawn in reference to the general monetary and
trade operations between England and India. We are
told that "the struggle for gold is death to free trade."
M. de Laveleye is probably aware that the latest
manifesto issued by a President of the United States
was in favour of overthrowing the existing system of high
tariffs and in favour of free trade, while evidence has
been forthcoming in Germany and elsewhere to show
that protection was a failure. We will conclude our
criticism of this article by placing close to each other
the following quotations: "If America, making use of
her profits made of late years on her monthly coinage
of two millions of silver dollars, were to throw
£20,000,000 of silver on the London market for sale,
exacting gold payment, where should we be?" A little
farther on we read: "Europe need never fear being
overrun with American silver."
The following sound remarks bearing on this
question by Sir Lyon Playfair are worthy of a place
134
where they can be more conveniently reperused than
in the columns of even so widespread a journal as the
Times, from which we have extracted them :-
"Sir Lyon Playfair, in responding to the toast,
said he might perhaps make his remarks most useful by
explaining why it was that there had been such a long
and, with the exception of two years, 1880-81, nearly a
continuous depression of manufactures since 1873. It
was in such times of depression that protectionist policy
tried to steady its flickering flame, and faint hearts
among free-traders gave way to doubts. In his recent
speech at Leeds he explained that the enormous im-
provements in locomotion by sea and by land had made
the whole world the market for grain, and had pro-
foundly altered our great agricultural industry. This
cause had also operated partly to the advantage, partly
to the disadvantage, of our own manufacturing indus-
tries, but it was not the main cause of their long-
continued depression since 1873. There had been 12
periods of depression in this century, and formerly they
were at pretty regular intervals of ten years; but this
had altogether changed since 1873, and we ought to
find out the reason. The first point to remark was that
from 1873 to 1883 the depression was confined to
machine-using countries, though after that date it
gradually extended to hand-labour countries also. If we
excluded Russia, there were 300 millions of inhabitants
in machine-using countries and 1,000 millions in hand-
labour countries. In the former the depression had
been continuous and universal, whether they were at
peace or war, whether they were protectionist or free
135
trade in their policy. A universal result must have a
universal cause, and that was what they had to seek.
Since 1873 the progress of applied science had made
astonishing developments. A development which needed
centuries formerly for its consummation required, when
he was young, decades, and now only involved years,
and sometimes was at once complete. The telegraph
had altered wholly our system of commerce, while
railways and steamers had cheapened distribution
enormously. There were now more than 300,000
miles of railways in the world, and this was equal to
giving each inhabitant of the globe the powers which in
old times he would have had by lending him the use of
a horse for 12 working days in each year. In 1865, if
a bale of goods had to be transported 1,000 miles by rail,
58
per cent. of its cost at the factory was swallowed up
by transport; now only 20 per cent. was so consumed.
Transport by sea, owing to the economy of fuel and
labour, had been still more cheapened. The use of
machinery had largely increased production, but it had
at the same time displaced labour. A machine which
did the work of ten men displaced nine labourers, though
the wage of the machine worker was considerably raised.
This displacement of labour was universal since 1873.
In machine-made boots and shoes five-sixths of the old
labour had been displaced. In agricultural implement
making 600 men did now what 2,145 did in 1873; in
milling corn, 75 per cent. of labour had been displaced,
and in metal work about 33 per cent. Notwithstanding
this displacement, production had largely increased, and
so had the wages of the persons employed; but capital
136
had had to be content with smaller profits. He would
give one or two examples. In 1870 one man working
at iron furnaces produced 170 tons of iron, and in 1885
he produced 260 tons. But in the introduction of new
processes much capital and experience were lost. Thus
steel, which was formerly made in puddling furnaces,
was now produced in a wholly different way, and the
capital of more than four and a-half millions invested in
these furnaces was lost, while the labour of 39,000 men
was displaced. It was the same case in many other
manufactures. Thus coal-tar colours had substituted
dyes imported from other countries, and whole crops
had been swept away and the labour of their cultivators
displaced. Irrespective of these actual changes pro-
duced by science, increased production by improved
machinery, even in old manufactures, threw surplus
stock on the markets of the world, and, as price was
regulated by surplus, brought down profit to a minimum.
Take the case of cotton manufactures as an illustration.
In 1874 the speed of spindles was 4,000 revolutions per
minute, but in 1885 it had become 10,000 revolutions.
Consequently, more production could be obtained from
the machines. But the product was altogether in
excess of the growing population of the world, and
was distinctly above the demand. A cheap supply of
a commodity increased demand, but it did not imme-
diately alter the habits of a people. A working man who
was accustomed to wear one shirt per week would not,
to accommodate the cotton trade, suddenly change his
habits and wear one shirt every day, nor would his wife
137
one.
consent all at once to wash seven shirts weekly. Supply
must not only suit demand, but must consult the habits
of a population. This excess of supply over remunerative
demand and price had left a very small margin of profit
to the producer. At the same time, the more extended
use of machinery had caused a profound alteration in
domestic manufactures and handicrafts. The shoe-
maker's trade was an example. Formerly the shoe-
maker completed every part of a shoe, and was entire
master of his craft. Now machinery had invaded this
industry, and in the best manufactories there was much
division of labour, about 64 different operations being
carried on. Each operative in the manufactory, instead
of being a complete shoemaker, was only 1-64th part of
When new improvements lessened this division of
work, the displaced workmen were thrown out, without
having any complete vocation. He could not enter
more fully into details; but he hoped they would now
understand his point-that the universal cause which had
produced the universal depression was that industry and
commerce had not yet learnt how to adjust themselves
to the advances of science, which had put at their
disposal much more rapid and extensive means of produc-
tion. What was the remedy? He could tell them first
what was not the remedy. No nostrums of fair trade or
protection would help us in the least. Those would
simply put us in the bad position of protected countries,
which contracted largely their intercourse with the
markets of the world in order to shut out competition in
their own domains. England for its prosperity largely
138
depended on its export trade, and any restriction of that
would be absolute ruin. Taxation on foreign com-
modities must be ultimately paid by the consumers in
this country, and all taxation was a diminution from the
strength of labour and from the fertility of the soil."
CHAPTER VII.
""
THE ECONOMIST" ON THE
66
GOLD AND SILVER COMMISSION."
W
E had intended summarising the first report of the
Blue-Book on the Gold and Silver Commission,
but the following from the Economist will save us the
trouble.
On the Gold and Silver Commission there is no
need to attempt to elaborate the case against the
bi-metallists beyond what appeared in the Economist,
as follows, on 6th August, 1887 :—
“THE GOLD AND SILVER COMMISSION.
"Last week we showed that no definite information,
either as to the amount of the production of, or demand
for, gold and silver, has been elicited by the inquiry of
the Commission; nor have we gained from it any further
insight into the movements of the prices of commodities.
The result to which the investigations on this point have
thus far led is, that the series of index numbers published
in the Economist are about as reliable an indication of the
movements in the prices of wholesale commodities as can
be obtained. These index numbers are not to be taken
as a perfectly accurate reflex of the variations in prices,
both because they deal with only a limited number of
commodities, and because it is impossible in compiling
them to make exact allowance for the relative importance
140
:
of the different articles. No one can be more fully
sensible of their imperfection in these respects than we
are, and we follow with interest the attempts that others
have made to draw up a better record. What the
Commission has found, however, is, that although there
are points of difference between the Economist index
numbers and those which other statisticians have drawn
up, the broad results brought out are the same.
And as
regards what may be called the natural movement in
prices, the Economist record is a much better guide than
the records of prices which have been compiled in
Germany and the United States, since prices in those
countries have been materially influenced during late
years by tariff changes. It may be well, therefore, to
reproduce the table of index numbers for the past
seventeen years.
"INDEX NUMBER' REPRESENTING THE COMBINED PRICES OF
TWENTY-TWO LEADING COMMODITIES.
Close of .. 1877
1876
1875
1874
1873
1872
1871
1870
Close of .. 1886
1885
1884
1883
1882
1881
1880
1879
1878
""
""
""
""
""
""
""
""
•
2,059
2,023
2,098
2,221
2,342
2,435
2,376
2,538
2,202
••
""
""
""
""
""
""
"?
·
•
2,529
2,723
2,711
2,778
2,891
2,947
2,835
2,591
"Briefly stated, this shows a great rise of prices
between 1870 and 1873, followed by an almost con-
tinuous fall till 1886, in which year there was a slight
improvement. Unfortunately, there is no comprehensive
!
141
record whatever of the movements in retail prices. We
are thus left in doubt as to how far the purchasing
power of gold in retail transactions has increased, and it
is just in this retail business that the employment of
gold is largest. The general conclusion, however, to
which all available evidence on the part of the subject
points is, that although retail prices have fallen, they
have not fallen to the same extent as wholesale prices.
"Passing from the evidence as to the movements in
prices to that portion of the inquiry which was directed
towards eliciting information as to the alleged adverse
effect upon trade of the fall in the gold price of silver,
we come upon fresher ground, and to more definite con-
clusions. This is, of course, the most important part of
the investigation, because, unless substantial injury can
be shown to have resulted from the fall in silver, the
schemes of the bi-metallists have no raison d'étre, and on
such a crucial point as this it may be well rather to let
the witnesses speak for themselves, than to put any
interpretation of our own upon what they did
say. The
first witness examined on this point was Mr. Henry
Waterfield, the Financial Secretary at the Indian Office,
whose evidence was brought to a point by Mr. Cham-
berlain, thus:-
"1838. I understand that you consider that the fall in exchange is
a great injury to the Government of India, and the people that it
represents, but that it does not materially affect traders with India ?——
That is my view.
"1839. Or producers in India ?—I think that perhaps to some
extent it is of advantage to the producers as distinguished from the tax-
payers. In so far as they are producers, I think they may get an
advantage by the greater number of rupees which they receive for their
142
produce, but as taxpayers, the tax-paying community, I should say, has
to pay more taxes for its gold disbursements, and taking the country as
a whole, I think there is no advantage.
1840. But the producers in India would not receive a greater
number of rupees, would they? The purchasing value of the rupee in
India having practically remained the same, they would receive, cæteris
paribus, the same number of rupees for the same amount of produce that
they have done ?-Quite so.
"1841. Therefore, if they benefit at all, it is only by natural advan-
tages, or the railways, or similar things, which are independent of the
fall or fluctuation in exchange?—Yes.
“1842. But, as far as your opinion goes, neither the producers in
India, nor the purchasers of Indian produce, nor the exporters of
European goods to India, nor the Indian purchasers of European
imports, are materially affected by the fall in exchange ?-No, I think
not, in the long run, at all.
"1843. Then there is only one other class of people who are
affected, and those are the employés in the civil administration; but they
are beneficially affected, I think?—They are paid in rupees at the old
rate; but in so far as they have to remit their savings to England, or,
when they come on furlough, to draw their furlough pay in England, or
when they take their pensions, if the pensions are payable in rupees,
they are injured by the fall in exchange. If the pensions are payable in
sterling, they receive the same sterling amount as before, and therefore
I think are benefited.
“1844. But the soldiers?—The soldiers are benefited-that is, the
British soldiers.
"1853. Therefore we come to this, that in your opinion the one
ground for interference is the case of the Government of India ?—It is
the main ground, I think.
"It may perhaps be well to add that the reason
why the English soldiers are said to have benefited is
that their payment being calculated in gold, they get.
more rupees than before, and as the purchasing power
of the rupee in India has not diminished, they have a
greater command of commodities than formerly.
{
143
"This is what may be called official evidence,
and what we have next to deal with is the evidence
of persons actually engaged in trade with the East.
Amongst these, the first to be examined was Mr. J. K.
Bythell, a member of a Manchester firm, who thus
described the mode in which business with India is
conducted:--
“1905. I should like just to impress upon the Commission, first of
all, that nearly all of the business now, since telegraphic communication
was so perfect, is done simultaneously. There is very little produce
shipped, I believe, from India for sale, on what you might call specula-
tion, as merchants' speculation, and there are very few Manchester
goods, I think, shipped to India in that way. Business is nearly all
done either in execution of offers made, or through the exporter making
offers in the currency of the country in which he sells. For instance, if
we sell 1,000 bales of cotton to a man in England that will be at so
much per pound delivered in England. Well, we do not sell that unless
at the time we can contract for the cotton in India at a price fixed in
rupees, sell our bills on England at an exchange which the bank for the
time being will then fix for bills to be delivered when the produce is
ready, and engage our freight, so that, if we can close those three
operations in India, of course we have fixed our price in sterling, and if
we get the price fixed per pound simultaneously from our buyer in
Europe our transaction is closed, provided all parties to the contract.
fulfil it-provided we have no failure.
To this it was objected that, although the merchant
might thus shift the possibility of loss off from his own
shoulders, the risk would have to fall somewhere. But
Mr. Bythell demurred.
"1908. I do not think so, because the banks who buy the one class
of bill and sell the other put one transaction against the other, and
keep themselves covered from day to day as nearly as possible, I believe.
For instance, I believe if some bank manager here who had branches in
the East had telegrams to-day that his managers at his branches had
bought bills for forward delivery against produce to a very large extent,
144
he would practically cover himself almost immediately in some shape or
form here. He would either buy Council drafts from Government, or he
would buy silver, or he would buy from day to day bills drawn from
here against shipments to India.
"1909. That is, the base of the whole is on a fixed exchange. Of
course, I am only inferring what Eastern bankers' business is. I believe
you would find that the exchange banks, with their head offices in London
and their branches in the East, scarcely speculate at all. They put the
imports against the exports; and the silver and the Government Council
drafts, bills drawn by the Secretary of State for India, virtually finance
the balance.
In other words, the transaction, being completed by all
parties at the exchange of the moment, is practically
arranged at a fixed exchange, and no party to the
transaction need run an uncovered risk.
"Mr. R. Barclay, who is a strong bi-metallist, agreed
in the main with Mr. Bythell as to the possibility of
eliminating from trade with India the speculative
element so far as exchange is concerned, his statement
being:
"2241. In the great bulk of your transactions you secure yourself
against any speculative loss ?-As much as we can.
"2242. And on the whole you succeed?—Yes; and without violent
fluctuations, no doubt we would succeed.
This statement, however, he subsequently qualified by
explaining that if from any cause a manufacturer is
unable to complete his contract within the specified time,
he becomes liable for any loss on exchange that the
delay may cause, and that in this way he very frequently
suffers loss.
"The possibility of guarding in all cases against
loss on exchange was, however, denied by Mr. Paul F.
Tidman, of the firm of McTaggant & Co., East India
145
merchants, whose view of the subject may be gathered
from the following:
"2819. Some of the witnesses that we have examined have told us
that the particular source of loss [alteration in exchange] is obviated by
arrangement with the banks, and by telegraphic transfers, by which the
merchant exporting to the East and from the East is saved from all loss?
-Yes. I think, however, it must be evident to the Commission that
there is a risk incurred if the article which a man must take in exchange
for his goods falls in value between the time of the commencement of
his operation and the close. That risk must be borne by somebody, and
if I put it on to a bank I simply shift the risk, and the person who takes
that risk makes me pay for it. But, as a matter of fact, you will
find that, whereas it has been asserted that Eastern banks are always
willing to take this risk, there are times out of number when they decline
to do so, and when the purchase of goods is simply stopped because the
merchant cannot make his arrangement for the exchange.
On the other hand, however, Mr. A. D. Provand, M.P.,
the only other person examined on the business side of
the question, gave it as his opinion that the Indian
merchant can always 'cover' himself, but that in trading
with China and Japan it was impossible to do so, except
at a relatively high cost.
،
"As to whether the fall in exchange has or has not
stimulated the Indian export trade opinion differed.
Mr. Bythell holds strongly (Q. 1933) that the fall in
silver or the fall in exchange, put it in which way you
like, has been a very great benefit to the Indian pro-
ducer, and has largely helped to develop the export
trade.' As to national loss or gain, Mr. Barclay is not
quite clear.
“2422. Well, now, taking the broad view of the trade between the
United Kingdom and India, has not the course of it been that we get
K
146
1
from India a much larger valuation of commodities than we sent to
India?—Yes.
“2423. And we have been sending from year to year bullion, to
make up part of the balance ?—Yes.
2424. We buy commodities that we receive from India more
cheaply than before ?—Yes.
"2425. That is gain?-To this country, yes.
“2426. We sell the commodities that we send out more cheaply?
Yes.
“2427. That may be a loss?—A loss.
“2428. But if we get much more than we lose, and we make up
part of the balance in silver, which is cheaper, is there not, on the whole,
a balance of gain to the United Kingdom ?—Yes, in a sense.
“2429. Whatever Manchester or Lancashire may suffer, the United
Kingdom gains?—In a sense, yes; but it is not merely a matter of
balance; each may gain something as against its loss, and still both be
greatly worse off than if these difficulties did not exist.
“2430. Well, now turn our attention to India. In consequence of
the same facts, India has been able to develop a very large and
increasing manufacture and export of cotton goods to the East ?—Yes.
“2431. Is that a gain to India ?—A gain to India.
“2432. And what has India as a community lost ?—As against
that?
"2433. Yes. Nothing, as against that individually; Lancashire
has lost.
"2434. But you say the United Kingdom, as a whole, has gained ?—
By cheap produce.
“2435. The result is that the United Kingdom, as a whole, has
gained? No, I do not admit that. I said that the price of things that
we export has gone down; besides, cheap Indian produce would not
compensate England for the loss of her cotton manufactures.
“2436. India has gained through the fact that silver has become
cheaper relatively to other commodities. Why should we be discontented,
when we have a gain on both sides ?—It is not easy proving things off
hand, but you would find a difference.
This evidence may be left to speak for itself. Its general
tenor is to show that trade with the East is quite capable
147
of accommodating itself to alterations in the exchange-
able value of gold and silver; and that, while the fall in
silver has injured certain individuals and classes, it has
benefited others. Whether, if a balance could be struck
between the losses and the gain, the preponderance would
be on the side of the former or the latter is a question on
which opinions differ. For our part, we are inclined to
regard the net result of all such currency fluctuations
as adverse. But the question is, whether the loss or
inconvenience shown is so great as would warrant us in
entertaining revolutionary currency schemes, and to that
question the evidence laid before the Commission gives a
very emphatic negative. The case for bi-metallism has,
in fact, broken down completely, and in view of that
fact, it is hardly worth while to discuss again the schemes
of its supporters."
K2
1
CHAPTER VIII.
CAUSES OF THE FALL IN THE PRICE OF TEA FROM 1863
TO 1877, TRACED STEP BY STEP FROM PUBLISHED
CIRCULARS.
A
MONG the positive evidence which we have adduced
in support of our contention that the fall in prices
under review has been due almost entirely to causes
outside and independent of currency influences, we have
investigated, step by step, the causes of the decline in
the important article Tea. Messrs. W. J. and H.
Thompson were kind enough to let us have their file of
circulars from 1863 to 1877, and we have shown, by
extracts from these circulars, what have been the specific
causes of the fall in price in this article over that period.
Those engaged in the Tea trade watched, as a matter of
course, closely the effect of the causes described, and
accepted with confidence the change in the market
value, without feeling the slightest necessity of searching
elsewhere, either in the channels in which gold and
silver ebb and flow, or elsewhere within the currency
domain, for any subtle or obscure causes of the fall.
The reader who may be in doubt can here, in the article
of tea, follow the fall almost 1d. by 1d. per lb., and feel
the influence which is the cause of the depreciation
without any suspicion arising in his mind that there is
any necessity to look further for an explanation. In
the case of tea, the reduction in the duty had a good
deal to do with the fall in price. In May, 1863, the
149
duty was reduced from 1s. 5d. to 1s., having ruled at
1s. 5d. since 5th May, 1857, and in May, 1865, it was
again reduced from 1s. to 6d. The retail trade at once
lowered their prices 6d. per lb. As with tea, so it is in
most other articles, as we have shown in the investigation
by Mr. David A. Wells.
TEA.
Messrs. W. J. & H. Thompson's Annual Report of 8th January,
1863, states:—
Imports in 1862-106,500,000 lbs., against 92,750,000 lbs. in 1861.
Deliveries for exportation-27,500,000 lbs., against 13,950,000 lbs.
in 1861.
Imports-13 million lbs. more than last year, but only equal to our
requirements.
Exports-A surplus of no less than 13 million lbs., caused by large
demands for Canada, United States, with large additional shipments to
Russia.
A comparison of prices ruling at the close of the year 1862 shows a
fall ranging from 1d. per lb. up to 8d. per lb. over ten different sorts,
and a rise ranging from 1d. per lb. up to 5d. per lb. over six different
sorts.
Next circular of same date, referring to past month, states that new
imports have stiffened in price, whilst most of the old were difficult of
sale, even at easier rates. Comparing prices for the month, black tea
showed no alteration, but in some descriptions of greens there was a fall
of 2d. per lb.
Circular, 7th February, 1863.
Prices of several descriptions materially enhanced. Speculative
buying was stimulated by growing opinion that there would be some
reduction in amount of Customs duty. Stock showed sudden large
increase.
Circular, 6th March, 1863.
Speculation referred to above soon abated, and moderate business
followed at reduced prices. Stock again largely increased. Chancellor
of Exchequer stated he had no reliable data at present for his calculation
of surplus revenue.
150
Circular, 8th April, 1863.
Very limited business, in view of Budget being brought forward.
No material alteration in prices.
Circular, 8th May, 1863.
Long-promised reduction of tea duty announced; all payments
from 25th ultimo have been made at rate of 1s. per lb., in place of
1s. 5d. per lb. Prices settled down at 1d. to 3d. per lb. rise on settle-
ment of this question.
C
Circular, 9th June, 1863.
Prices decidedly lower for the month. Great disinclination to
purchase on the part of the dealers. Market flat and depressed.
Circular, 9th July, 1863.
Market continued in a state of considerable depression, with a lower
range of prices for almost all kinds.
Circular, 8th August, 1863.
Arrivals heavy. Attention directed to public sale of 12,472
packages, put up "without reserve.” Holders of new and old imports
again accepted lower prices for medium sorts, fine remaining about the
same. Prices all lower about 1d. per lb.
Circular, 9th September, 1863.
Market had been dull and inactive, it being found necessary to
accept lower prices to effect sales. Stock increase of 21 million lbs.,
compared with same month 1862.
Circular, 9th October, 1863.
Large new arrivals freely offered, but comparatively few sales made.
Prices show little alteration, except greens, which advanced 2d. per lb.
Stock increase, 18 million lbs.
Circular, 9th November, 1863.
Fair business done in several instances at higher prices. Arrivals
very numerous. Stock increase over 1862, 12 million lbs.
Circular, 9th December, 1863.
Small business done. Public sales unusually large. Double rise in
Bank rate and stringency in money, causing very serious fall. Stock,
23 million lbs. increase.
151
Annual Report for 8th January, 1864, says:
Notwithstanding the long-expected boon of the reduction of duty
to 1s. per lb., dealers have reason to recollect 1863, save during the
earlier months, as a time chiefly of heavy and continuous loss. Large
speculative purchases, made in a rising market prior to reduction in duty,
had mainly to be realised when all were sellers, while the numerous
arrivals and the accounts of further extended purchases in China, and
over-sanguine views as to newly-opened trade with Russia, led, month
after month, to increased heaviness.
Imports..
Home consumption
Exports..
Stock
1863.
1862.
136,500,000 lbs., against 106,500,000 lbs.
85,500,000
78,750,000
27,250,000
27,500,000
89,000,000
65,250,000
""
On comparing prices, 1863 showed a fall of from 1d. to 5d. per lb.
over eleven different sorts, and a rise of 2d. to 4d. per lb. over three
different sorts.
""
""
""
""
""
""
""
t
""
Circular, 9th January, 1864.
Arrivals numerous.
Business very moderate at unaltered prices.
Stock, 24 million lbs. increase against same month last year.
Circular, 9th February, 1864.
Market quiet; public sales not large. Prices of medium blacks
rather lower, but several descriptions of greens advanced 1d. to 2d. per lb.
Stock, 22 million lbs. increase.
Circular, 9th March, 1864.
Arrivals unusually numerous. Business fair, and some common
descriptions realised rather better prices, but medium and good kinds
rather lower.
Circular, 9th April, 1864.
Steady course of market, with prices unchanged. Stock increase
against same time 1863, 22 million lbs.
Circular, 9th May, 1864.
Lower and medium grades of Congou declined d. to 1d. per lb.
Very moderate extent of business. Chief feature, large public sales.
All orders from United States cancelled, owing to expected large addition
to import duty there. Bank rate raised to 8 per cent. on the 2nd, and
to 9 per cent. on the 5th inst.
152
S
Circular, 9th June, 1864.
Business was checked by the higher prices required by importers,
and demand, which had been increasing, greatly subsided. Prices showed
d. per lb. advance on common, and d. to 1d. per lb. on medium Congou.
Stock increase of 19 million lbs.
Circular, 9th July, 1864.
Market languid. Business difficult. Public sales small, but, never-
theless, they went off flatly, showing a slight decline in commonest
Congous.
、
Circular, 9th August, 1864.
Prices further receded, and the private market was dull and inactive ;
all green descriptions were also lower.
Circular, 9th September, 1864.
Business very limited. Lower prices ruled at public auctions.
Bank rate raised to 9 per cent. on 8th inst. Stock, 2 million lbs.
increase.
Circular, 8th October, 1864.
Private market for old imports dull and inactive, but no change.
in prices.
Circular, 9th November, 1864.
Cessation of arrivals created somewhat firmer market, aided by some
speculative purchases. Prices of most kinds of medium Congous again
lower. Stock, 18 million lbs. increase against 1863.
Circular, 9th December, 1864.
Business small and difficult. Inferior kinds put freely on the
market, and prices receded fully 1d. per lb. Prices of medium Congous
declined 1d. per lb.
Annual Report, 7th January, 1865.
Severe loss to import trade, owing to unduly high cost and
depression at home. Excepting a short period in the Spring, prices in
all but the finer qualities declined, the fall accelerated by money pressure.
Imports
Home consumption
Exports
•
1864.
1863.
123,000,000 lbs., against 136,500,000 lbs.
88,500,000
85,500,000
27,250,000
28,500,000
""
;;
99
""
""
""
153
Circular, 9th January, 1865.
Little change on month. Prices unaltered.
Circular, 9th February, 1865.
Arrivals numerous. Disinclination of trade to buy. Common
Congous full 1d. per lb. lower, also several kinds of green. Stock,
6 million lbs. increase compared with February, 1864.
Circular, 9th March, 1865.
Market remained in same stagnant state, sales showing further
reductions in several qualities. Stock, 17 million lbs. increase.
Circular, 8th April, 1865.
Less pressure to sell, imparting rather firmer tone to market.
Prices, however, remained generally unchanged. Stock, 11 million lbs.
increase.
Circular, 9th May, 1865.
The publication of the Budget on the 28th ult., reducing the duty
from 1s. to 6d. per lb., caused sudden excitement. In many cases
importers refused to sell even at 2d. per lb. over previous quota-
tions. Chief supply drawn from the stocks of the larger dealers. For
two days a fair extent of business was done at an advance of 1d. to ląd.
per lb. on fair to medium, and fully 2d. per lb. on fine qualities of
Congou, but at the public sales prices declined, Chancellor having agreed
to postpone alteration of duty until June 1st. Market became languid.
Stock, 4 million lbs. increase.
Circular, 9th June, 1865.
Prices unaltered, holidays and large clearances causing almost a
cessation of business.
Circular, 8th July, 1865.
Market dull and inactive. Large public sales on importers' account
marked “without reserve." Tendency of prices downwards. Common
and fair Congou d. to 1d. per lb. lower, and common greens about 1d.
lower. Stock, 500,000 lbs. as compared with July, 1864.
Circular, 9th August, 1865.
Prices for Congous unaltered. Market unchanged.
Circular, 9th September, 1865.
Private contract market firmer, and public sales passed off more
satisfactorily. Fine shipping green teas dearer, but common kinds
slightly lower.
154
į
Circular, 9th October, 1865.
Prices unaltered. Business fair.
Circular, 9th November, 1865.
Market firmer and active, at an advance in prices for most kinds, both
dealers and speculators operating freely. Congous 1d. per lb. higher;
Monings and Oolongs 1d. to 2d. dearer.
Circular, 9th December, 1865.
Fine "new" import Congous 1d. lower, and second class and
medium even lower. "Old" imports unaltered. Stock, 16 million lbs.
decrease,
Annual Report of 8th January, 1866, states:
The year 1865 will long be remembered for the accumulated losses
on the import of tea, owing to the continuous excess of supply, and the
extreme prices paid, leading to the ruin of many old-established firms.
Reaction in latter part of year, stimulated by unexpected reduction of
duty to 6d. per lb., the general prosperity of the working classes causing
a rapid increase in the consumption, while export demand was largely
augmented by the sudden peace in America. On the reduction of the
duty the retail trade at once lowered their prices 6d. per lb., causing
a demand for quality and enquiry for new teas to exclusion of old.
Imports..
Home consumption
Exports..
Stock
•
..
1865.
1864.
116,000,000 lbs., against 123,000,000 lbs.
98,000,000,,
88,000,000
33,000,000,,
80,000,000,,
28,500,000
95,000,000,,
""
""
""
""
""
On the year prices rose all round, ranging from 1d. per lb. to
6d. per lb.
Circular, 9th January, 1866.
Fair business. Prices for medium and second-class Congous 1d. to
2d. per lb. lower. Stock, 15 million lbs. increase against January, 1865.
Bank rate raised to 8 per cent. on 4th.
Circular, 9th February, 1866.
Fair business; but the lower qualities most difficult to realise at a
further decline in some cases. Better sorts of black leaf advanced fully
1d. per lb.
lb. Stock, 12 million lbs. decrease.
155
Circular, 9th March, 1866.
Market extremely quiet, and prices are maintained.
Circular, 9th April, 1866.
Easter holidays. Markets quiet. Congous unaltered, but finest
gunpowder 1d. to 2d. per lb. lower. Stock, 12 million lbs. decrease.
Circular, 9th May, 1866.
Last fortnight one of continued depression and inactivity, importers,
however, not pressing sales. Intense panic prevailing in all financial
matters. Prices unaltered.
Circular, 9th June, 1866.
Bank rate continued at 10 per cent. Tea market tolerably firm.
Prices nominally unaltered, but sales occasionally made at lower rates.
Stock, 13 million lbs. decrease.
Circular, 9th July, 1866.
No improvement in the market.
1d.
Fair quality Congou d. to
per lb. lower. Oolongs and common greens d. per lb. lower, but
Hysons 2d. per lb. lower.
Circular, 9th August, 1866.
reserve.
No improvement. Business restricted. Considerable sales without
Bank rate still 10 per cent. Prices generally unaltered. Stock,
8 million lbs. decrease.
Circular, 8th September, 1866.
Little doing beyond attention given to large public sale "without
reserve." Bank rate down to 5 per cent. Owing to pressure of sales
prices generally reduced.
Circular, 9th October, 1866.
Slight improvement during last fortnight. More business doing at
better prices. Common black leaf Congous rather dearer. Scented teas
1d. per lb. lower.
Circular, 9th November, 1866.
Extremely heavy market, with Congous of old import d. to
1d. per lb. lower; Kaisows of new import 1d. to 2d. per lb. lower.
Monings, 3d. per lb. lower. Tayshans and scented teas 1d. per lb.
lower. Stock, 4 million lbs. decrease.
156
1
Circular, 9th December, 1866.
Slightly better feeling, and prices rallied 1d. to 2d. per lb., followed,
however, by the greatest dulness, fair and medium at the end being 1d.
to 2d. per lb. lower.
The Annual Circular of 8th January, 1867, says:
The course of the year has been marked by no ordinary events:
war, pestilence, panics, both financial and commercial, the failure of
banks and of some firms previously enjoying the highest reputation,
creating for the time an amount of distress and distrust almost un-
paralleled. To importers and holders of tea generally it has been one of
heavy loss. The fall in some classes during the year was no less than
6d. to 8d. per lb., much of which was occasioned by the extreme
contract prices paid in China, especially for contract teas, notwithstanding
a general inferiority in quality, regardless of the large surplus export
which was hurried forward in the early part of the season, in the face of
the certainty of its causing a glut at home.
It is important here to note what Messrs. Thompson call particular
attention to in this circular, because it is in this, as in other trades, the
beginning of a new departure, arising out of the extension of the
telegraphic system, and the better means of communication and
transport, which at this period commenced to revolutionise the commerce
of the world, and to eliminate the middleman, whose large intermediary
profits had for so long kept up prices at an unduly high level,
thereby laying an unfair and unjust burden upon all consumers.
With the development of this new departure an element was
eliminated, the absence of which must of necessity be in itself the
cause of a fall in all prices, for it is well known that all intermediary
profits over and above that of the producer adds to the price.
paid by the consumer. Not only, therefore, has the elimination of
the merchant and other form of middleman conduced to the general fall
in prices which has been going on of late years, but it has occurred
concurrently with largely increased production of all the great staples of
commerce, and a very material reduction in the cost of transit from the
producer to the consumer or retail trader. Concurrently, again, with
the development of this new departure, the general welfare of the inha-
bitants of the world has so vastly improved, that the cash payment
system has been able to establish itself and break down the grinding
157
tyranny of credit. The necessaries of life people must have, and while
the supply of them was kept under the control of "rings" the consumer
was mulcted of 20, 30 and sometimes 50 per cent. more than the article
he bought was worth. The barriers enabling the merchant and pro-
ducer to do this have been thrown down, and what is the result to-day?
Producers and merchants, and the great army that distributes the article
to the public that consumes it, are continually crying out for Royal
Commissions of Inquiry and for the re-establishment of bi-metallism. For
a very long time these gentlemen have enjoyed themselves in the
warm corners of the world, but their time has come to turn out.
The imports during the past year into the United Kingdom have
been
139,000,000 lbs., against 116,000,000 lbs. in 1865
The deliveries for
home
tion
31,000,000
33,100,000
""
""
""
""
Exportation
The imports were thus 23 millions more than last year, and six millions
more than our deliveries.
consump-102,000,000
""
""
98,000,000,
Circular, 9th January, 1867.
Prices in some cases 1d. per lb. higher. Very fair business. Stock,
increase of 9 million lbs. compared with December, 1865.
""
Circular, 9th February, 1867.
Business moderate. Prices unaltered. Stock, 4 million lbs. increase.
Circular, 9th March, 1867.
Market had been extremely dull. Prices fully d. per lb. lower.
Stock, 13 million lbs. increase.
Circular, 9th April, 1867.
Increased heaviness. Quantity offering more than requirements.
Prices d. to 1d. per lb. lower. Stock, 12 million lbs. lower than corre-
sponding period 1866.
Circular, 9th May, 1867.
Improving tendency in prices. Stock, 14 million lbs. lower.
Circular, 8th June, 1867.
No change. Stock, 4 million lbs. lower.
158
1
Circular, 9th July, 1867.
Devoid of animation. Prices slightly lower. Stock, 1 million lbs.
lower.
Circular, 9th August, 1867.
Dull and depressed. Prices for some descriptions again a little
lower. Stock, 11 million lbs. lower.
Circular, 9th September, 1867.
Business limited. Congous unaltered in price, but scented Capers
and coloured Japans, 1d. to 2d. per lb. lower.
Circular, 9th October, 1867.
Numerous arrivals. More animation. Prices for fine Congous fully
maintained. Superior and medium, 1d. per lb. lower. Stock, 12
million lbs. lower.
Circular, 9th November, 1867.
Market generally quiet, some descriptions 1d. per lb. lower. Stock,
7 million lbs. lower.
Circular, 9th December, 1867.
Continued dulness in the market. Some descriptions again lower.
Stock, 17 million lbs. lower than for corresponding period of 1866.
The Annual Circular of 8th January, 1868, says:
Increasing deliveries. Supplies in the aggregate considerably
below them. Largely reduced stock should under ordinary circumstances
have had a favourable influence in prices. But increased dulness
prevailed, only enlivened by arrival of new crop. Even then, demand only
spasmodic, a reaction almost invariably following
prices on about the same level at close of 1866.
Imports
124,750,000 lbs., against 139,000,000 lbs. in 1866.
111,000,000
102,000,000,
each advance, so that
Deliveries for home
consumption
32,000,000
31,000,000
Circular, 9th January, 1868.
Improved demand, but arrivals considerable. Some descriptions 1d.
per lb. lower. Stock for last month of 1867, 18 million lbs. lower than
in January, 1866.
Exports
99
""
""
,,
""
""
""
Circular, 8th February, 1868.
Decided signs of improvement. Prices for siftings and broken leaf
¿d. per lb., and fair grades Congou d. to 1d. per lb. dearer.
159
Circular, 5th March, 1868.
Market quiet and transactions moderate. Prices d. per lb. lower
in some cases. Canton and Scented Orange Pekoes d. per lb. dearer.
Stock, 13 million lbs. lower.
Circular, 8th April, 1868.
Considerable activity. Dealers as well as speculators operating
freely. Prices for all common to medium grades of Congou advanced
d. to 1d. per lb. Stock, 10 million lbs. lower.
Circular, 7th May, 1868.
Market very quiet. Fear of increased duty since introduction of
Budget, coupled with latest China advices, causing importers to hold,
owing to anticipated heavy clearances. Siftings and broken leaf d. to
1d. per lb. higher, and common Congous slightly dearer.
Stock,
9 million lbs. lower.
Circular, 4th June, 1868.
Market extremely quiet. Prices slightly dearer.
lbs. lower.
Unusually quiet.
4 million lbs. lower.
No change.
123 million lbs. lower.
Stock, 12 million
Circular, 2nd July, 1868.
Prices, where any changes, slightly lower. Stock,
Circular, 13th August, 1868.
Prices again ruled lower for all kinds. Stock,
Circular, 10th September, 1868.
Notwithstanding arrival of new season's teas, business very small.
Where any changes, prices again lower. Stock, 9 million lbs. lower.
Circular, 8th October, 1868.
Greatest inactivity prevailed. Nothing but good and fine sorts
saleable. Prices of fair to medium Foochow teas, of new import, 1d. to
2d. per lb. lower. Scented and green teas also lower. Stock, 7 million lbs.
lower.
Circular, 5th November, 1868.
A fair business transacted. Prices without change. Stock,
11 million lbs. lower than at corresponding period of 1867.
Circular, 3rd December, 1868.
Dull and unsatisfactory market. Prices, where any change, d. to
1d.
per lb. lower. Stock, 6 million lbs. increase.
160
$
*
Annual Report, 13th January, 1869.
Severe fluctuations experienced during the past year. Opened
under the influence of extended deliveries and decreasing stocks. Stock
stood at 64 million lbs.-lower than it had been since 1862. A worse
feature even than the market being flooded with arrivals was the result
of inferior quality.
The following is deserving of special attention:-"If it is to be
admitted that the altered relations of trade in China will in future
necessitate an overwhelming supply during the early months, the position
at home must also be realised, viz., that with the increasing rapidity of
communication and freeness of transit, the necessity of any but a moderate
stock is a thing of the past; that large exports from China will inevitably
DEPRESS PRICES at home, for a time at least; and that, therefore, if the
trade hereafter is to be a remuncrative one, there must be a radical change
in the mode of buying, in the rates paid, and in the quality purchased.
The present system holds out a premium to the Chinese to make bad
tea, and has been the fertile source of ruinous loss."
Imports
Deliveries.
•
Exports
Stock on 31st Dec.
153,000,000 lbs., against 125,000,000 lbs. in 1867
106,000,000
36,000,000
88,000,000
111,000,000
32,000,000
77,000,000
""
""
""
رو
99
99
""
""
""
""
99
""
Circular, 15th January, 1869.
Moderate demand.
Much larger quantity offering than can be taken
by the dealers. Prices d. to 1d. per lb. lower. (On 31st ult.) Stock,
88 million lbs., against 77 million lbs. in 1867.
Circular, 11th February, 1869.
Steadier market.
Demand had continued good. Common Congou
d. to d. per lb. dearer. Other kinds unaltered. Stock, 100 million lbs.,
against 86 million lbs. in 1868.
Circular, 17th March, 1869.
No material change. Prices d. to d. per lb. lower. Stock,
104 million lbs., against 87 million lbs. in 1868.
Circular, 8th April, 1869.
A fair demand experienced since the Easter holidays. Scented
kinds 1d. per lb. lower. Common Congou rather firmer. Most good
161
K
kinds and fine very irregular. Stock, 102 million lbs., against 88
million lbs. in 1868.
Circular, 6th May, 1869.
Market had shown further signs of depression, and prices were
again lower for all descriptions, the pressure to realise being greater
than the trade could withstand. Auctions very large. Stock, 99
million lbs., against 81 million lbs. in 1868.
Circular, 3rd June, 1869.
Improved tone, with much better demand. Prices scarcely affected,
but fair and common Congous about d. per lb. dearer. Stock, 92
million lbs., against 84 million lbs. in 1868.
Circular, 7th July, 1869.
Little change either in tone of market or in prices. Stock, 86
million lbs., against 77 million lbs. in 1868.
Circular, 4th August, 1869.
Market firm, but few transactions. Prices firm, but unchanged.
Stock, 75 million lbs., against 70 million lbs. in 1868.
Circular, 9th September, 1869.
Demand had been strong for flavoury qualities. All grades freely
taken. New Season's Moning Congous about 1d. per lb. lower for
medium grades. Others unaltered. Stock, 68 million lbs., against
64 million lbs. in 1868.
2
Circular, 7th October, 1869.
Since our last, with one interval, there have been public sales each
day, increasing the panic, and showing differences now extending from
5d. to 6d. per lb. from the opening prices, and in the individual cases
of 2d. to 3d. per lb. within a week. The irregularities in price are
greater than ever known, much to the interest of buyers. The Private
Contract market is entirely disorganised, and nothing but teas with
point, for which high prices are paid and large profits secured, are
practically saleable.
Prices 1d. to 2d. per lb. lower for ordinary grades. Oolongs 3d. to
4d. per lb. lower than opening rates. Stock, 68 million lbs., against
65 million lbs. in 1868,
L
162
1
Circular, 4th November, 1869.
Market had been particularly dull and without animation. For the
majority of parcels lower prices continue to be accepted. The public
auctions closed with heaviness. Stock, 72. million lbs., against 67
million lbs. in 1868.
Circular, 2nd December, 1869.
Market had continued dull and heavy, and prices continued to
droop for all medium prices. Stock, 78 million lbs., against 81 million
lbs. in 1868.
Annual Report, 12th January, 1870.
On the bulk of the operations of the past year the result had been
loss and disappointment. The chief experiences were pressure to realise,
led by several public sales" without reserve," advertised as each vessel was
reported. This action induced almost panic. Most importers have been.
eager to sell, frightened by the fearful reduction in the value of old stock.
It was pointed out that "teas will be brought forward both earlier and
in larger quantities than before, that importers will sell on arrival,
that dealers, warned by the experience of each year, will confine their
buyings to their immediate wants." Hopes of revival in trade increase
as the disasters of 1866 are further removed by lapse of time.
145,000,000 lbs., against 153,000,000 lbs. in 1868
111,000,000
34,000,000
87,000,000
106,000,000
35,000,000
88,000,000
Imports..
Deliveries
Exportation ..
Stock, 31st inst.
""
در
""
""
55
""
""
Circular, 10th February, 1870.
Arrivals during last fortnight very numerous.
way, but sales difficult.
in 1869.
""
""
""
""
99
Circular, 13th January, 1870.
Decided improvement in tone of market since commencement of
year. Large quantity of tea brought forward, but price of good Congou
slightly firmer. Good medium to fine Monings 1d. per lb. dearer.
Stock, 87 million lbs., against 88 million lbs. in 1868.
Prices did not give
Stock, 89 million lbs., against 100 million lbs.
Circular, 13th April, 1870.
Publication of Budget on 11th inst. caused increased flatness in the
market. Prices unaltered. Stock, 107 million lbs., against 102 million
lbs. in 1869,
163
Circular, 12th May, 1870.
Market during past few days has continued very flat, owing to the
large sales by public auction and to further sales advertised; dealers
only buying when forced. Prices unaltered. Stock, 107 million lbs.,
against 99 million lbs. in 1869.
Circular, 9th June, 1870.
Holidays and discussions on the importers' alterations in the con-
ditions of sale chiefly occupied the attention of the trade. Prices
nominally unaltered. Stock, 101 million lbs., against 92 million lbs. in
1869.
Circular, 7th July, 1870.
Little business beyond public auctions. Prices without change.
Stock, 92 million lbs., against 86 million lbs. in 1869.
Circular, 4th August, 1870.
Moderate business, without change in prices since alterations in
conditions of sale. Stock, 79 million lbs., against 75 million lbs. in 1869.
Circular, 1st September, 1870.
Good business in new arrivals, but prices of inferior common black,
of old import, d. to 1d. per lb. lower. The finer grades of new season's
teas firmer. Stock, 79 million lbs., against 75 million lbs. in 1869.
Circular, 6th October, 1870.
Market continued firm. Prices unchanged. Stock, 73 million lbs.,
against 68 million lbs. in 1869.
Circular, 3rd November, 1870.
Good amount of business had been transacted. Prices for medium
black and red leaf firm; fine black leaf and scented teas 1d. per lb.
lower. Stock, 72 million lbs., against 68 million lbs. in 1869.
Circular, 1st December, 1870.
Market had been very quiet. Few sales effected showed great
irregularity, partly owing to decrease of orders from the country, and
partly to the quantity forced forward. Prices for common red and black
leaf d. per lb. lower, and medium black leaf 1d. per lb. lower. Stock,
76 million lbs., against 78 million lbs, in 1869.
L2
164
:
Annual Circular, 11th January, 1871.
Results of the course of the trade for the past year, on the whole,
satisfactory. In the earlier months the market was influenced by the
expectation of some alteration in the duty, and prices suffered when it
was ascertained there would not be any reduction. Heavy arrivals
taking place at the time also contributed to the general dulness.
Deliveries of Indian teas had increased in the year about 3 millions of
lbs. The imports show an equal advance, owing to the heavy shipments
vid the Suez Canal. Indian tea in increasing favour.
Imports
Deliveries
Exportation
140,000,000 lbs., against 145,000,000 lbs. in 1869
117,000,000
111,000,000
30,000,000,
34,000,000,,
• •
""
""
""
""
35
""
Circular, 12th January, 1871.
Attention of dealers directed to stocktaking. Prices showed a
slight decline. (On 30th ultimo, 1870) Stock, 79 million lbs., against
87 million lbs. in 1869.
Circular, 9th February, 1871.
Trade quiet. More offering than could be taken by the trade.
Prices for common to full grades of Congou rather weaker; good and
fine firmer. Stock, 90 million lbs., against 89 million lbs. in 1870.
Circular, 9th March, 1871.
Rather more activity in the market. Prices irregular, but no
material change. Stock, 98 million lbs., against 100 million lbs. in 1870.
Circular, 5th April, 1871.
No activity, with prices occasionally in favour of buyers. Green
teas also lower. Stock, 96 million lbs., against 107 million lbs. in
1870.
Circular, 4th May, 1871.
Market had been extremely dull. Dealers engaged in clearing
largely, fearing an increased duty. Prices for commonest grades of
Congou, green teas and scented Capers d. to 1d. per lb. lower. Stock,
97 million lbs., against 107 million lbs. in 1870.
Circular, 1st June, 1871.
Market continued firm. Extent of business limited. Deliveries on
satisfactory scale. Prices for common to fair grades of Congou dearer.
Stock, 89 million lbs., against 101 million lbs. in 1870.
165
Circular, 13th July, 1871.
Market had been particularly quiet. Only feature public sale, at
which several parcels of good to fine Monings were sold at reduced rates.
Prices for good to fine black leaf and Taysham Congous of medium
quality 1d. to 2d. per lb. lower. Stock, 82 million lbs., against
92 million lbs. in 1870.
Circular, 10th August, 1871.
Arrival of new season's teas being disappointing in quality, several
chops were sold at public auction fully 3d. per lb. below the first few
sales made. Stock, 71 million lbs., against 79 million lbs. in 1870.
Circular, 7th September, 1871.
Steadier market and more general business. Prices of common
Congou d. per lb. lower; fair to medium new brown leaf 1d. per lb.,
Oolongs 2d. per lb. lower; scented teas also lower. Stock, 79 million
lbs., against 74 million lbs. in 1870.
Circular, 5th October, 1871.
Market had been firm, with more business doing last week, excepting
inferior to common black leaf Congous, which were lower. Stock,
78 million lbs., against 73 million lbs. in 1870.
Circular, 2nd November, 1871.
Demand good, but business had been limited. Prices generally
unaltered. Stock, 73 million lbs., against 72 million lbs. in 1870.
Circular, 14th December, 1871.
Tone had been quiet, with small business. Prices unaltered. Stock,
82 million lbs., against 76 million lbs. in 1870.
Annual Report, 3rd January, 1872.
During past year deliveries had shown an unprecedented increase ;
on the one hand showing an elasticity in the consumption, consequent on
the low rate of duty, and on the other affording reassuring evidence to
those who feared that our export trade would decline owing to the direct
communication by steamers now established between Russia and China.
The result at one time threatened to be serious to importers, for not only
was the system of hurrying forward the new crop by the Suez Canal
carried to a dangerous extent, but much higher prices were paid to
China than the quality warranted, and as a natural consequence, under
166
1
the pressure to realise, some sharp losses were at first experienced.
Home consumption had been stimulated by the low retail price. Market
was beginning to be affected by increasing imports from India, the
general improvement in quality enabling the dealers to mix most
advantageously.
Imports
Deliveries for home
consumption
Exports
Stock (31st Dec.)..
167,000,000 lbs., against 140,000,000 lbs. in 1870
123,000,000
117,000,000
30,000,000
79,000,000
40,000,000
83,000,000
""
""
""
""
• ""
""
""
""
""
""
رو
""
Circular, 11th January, 1872.
Had been numerous arrivals. Large quantity offering. Demand
had been fair. Prices irregular, and frequently d. per lb. lower. Scented
orange Pekoe d. per lb. dearer. Stock (31st ult.), 83 million lbs.,
against 79 million lbs. in 1870.
Circular, 4th July, 1872.
Market continued extremely dull.
78 million lbs., against 82 million lbs. in 1871.
Circular, 1st February, 1872.
Market steady, but business moderate. Prices for Congous unaltered.
Green teas 1d. per lb. dearer. Stock (31st ult.), 83 million lbs., against
79 million lbs. in 1870.
Circular, 7th March, 1872.
Large quantity had been brought forward. Tone of market con-
sequently dull. Prices lower all round d. to 1d. per lb. Stock, 93
million lbs., against 98 million lbs. in 1871.
Circular, 4th April, 1872.
Easter holidays. Business quiet. Prices unaltered. Stock, 103
million lbs., against 96 million lbs. in 1871.
Circular, 2nd May, 1872.
No improvement in market. Prices irregular and occasionally
lower. Stock, 100 million lbs., against 97 million lbs. in 1871.
Circular, 6th June, 1872.
Market continued dull and heavy. Large quantities brought forward
at auction. Prices generally d. per lb. lower. Stock, 90 million lbs.,
against 89 million lbs. in 1871.
Prices unaltered. Stock,
167
Circular, 1st August, 1872.
Quantity offering very large. Prices unaltered.
lbs., against 82 million lbs. in 1871.
Stock, 78 million
Circular, 5th September, 1872.
Market had continued quiet.
Prices generally unaltered.
87 million lbs., against 79 million lbs. in 1871.
Stock,
Circular, 3rd October, 1872.
Some
Market had relapsed into a quiet state, after being better.
kinds a little dearer, but prices mostly unchanged. Stock, 82 million
lbs., against 78 million lbs. in 1871.
Circular, 7th November, 1872.
Business had been limited.
Prices, where any change, lower.
Stock, 83 million lbs., against 73 million lbs. in 1871.
Circular, 5th December, 1872.
Market had been quiet, and sales difficult to effect at the reduced
prices. Prices without change, except for district green teas, which were
1d. to 2d. per lb. lower. Stock, 88 million lbs., against 82 million lbs.
in 1871.
Annual Report, 8th January, 1873.
Results of the past year had been anything but satisfactory, with
the exception of the deliveries, owing to the high prices paid in China.
It was remarked "that unless prices are on a level at which they can act
without fear of loss, they will repeat their tactics of buying only from
hand to mouth another year, and such must have a tendency to affect
prices adversely, more especially with the present system of hurried ship-
ments, and the unexpected supplies from time to time by steamers.
Regarding Indian teas, it was remarked that they continued to increase
in favour, and must yearly exercise more and more influence upon the
general prices of China tea.”
From the above remarks, it is quite evident that the price of tea
was being steadily and continuously affected in buyers' favour, not only
by larger production in China itself, and by the greater rapidity with
which it could be brought to market, but also by the opening up of a
new field of production, which was destined to be a competitor equal in
the end, if not superior as a tea-growing country, to China itself.
Messrs. Thompson, in their annual report, tell us that "Up to the present
168
time, the increase in the quantity has been very gradual, but of late the
extensions in the gardens have been on a large scale, which in four or
five years must tell very materially. The pace at which this competition
of Indian tea was growing is seen from the fact that of the 4 million lbs.
increase in home consumption, 23 million lbs. is due to Indian tea; in short,
the rate of delivery has of late slightly exceeded that of the imports."
182,000,000 lbs., against 167,000,000 lbs. in 1871
127,000,000
123,000,000,
40,000,000,
83,000,000,
Imports
Deliveries
""
Exports
39,000,000,,
Stock (31st ult.).. 98,000,000,,
""
""
""
">
""
""
Circular, 9th January, 1873.
Improved demand. All descriptions but Congous were dull, and
prices in many cases lower. Stock (31st December), 98 million lbs.,
against 83 million lbs. in 1871.
Circular, 6th February, 1873.
Market quiet.
Business small. Prices generally lower. Stock,
105 million lbs., against 92 million lbs. in 1872.
Circular, 6th March, 1873.
Heavy arrivals and absence of demand from the country had caused
great depression in the market. At the auction prices very irregular,
and in many instances lower. Stock, 101 million lbs., against 93
million lbs. in 1872.
Circular, 3rd April, 1873.
Business had been almost at a standstill, no improvement being
looked for until after the Budget had been brought forward. No less
than nine vessels had been reported. Congous unaltered, but medium
grades of green d. to 1d. per lb. lower. Stock, 100 million lbs., against
103 million lbs. in 1872.
Circular, 1st May, 1873.
Fair business, without change in prices. Stock, 100 million lbs.,
against 103 million lbs. in 1872.
Circular, 5th June, 1873.
Business scarcely resumed since Whitsuntide holiday. Prices
unchanged. Stock, 83 million lbs., against 90 million lbs. in 1872.
}
169
Circular, 3rd July, 1873.
Large falling off in exports, but a satisfactory increase in home
consumption. Good to fair Congous d. per lb. dearer; other kinds
unaltered. Stock, 72 million lbs., against 78 million lbs. in 1872.
Circular, 7th August, 1873.
Fair demand for Congous at unchanged prices, but scented teas
generally 1d. per lb. lower. Stock, 68 million lbs., against 84 million lbs.
in 1872.
Circular, 4th September, 1873.
Market dull and quiet. Congous irregular and occasionally lower.
Stock, 73 million lbs., against 87 million lbs. in 1872.
Circular, 2nd October, 1873.
Market dull and quiet. Fair to medium grades of black leaf
Congous show d. per lb. decline. Stock, 78 million lbs., against
82 million lbs. in 1872.
Circular, 6th November, 1873.
Same depression continued. Heavy arrivals and high price of
money tended to reduce business to the smallest limits. At public auction
prices again ruled lower. Stock, 84 million lbs., against 83 million lbs.
in 1872.
Circular, 4th December, 1873.
Several arrivals during week, and a large quantity placed on the
market. Prices unchanged.
Annual Report, 6th January, 1874.
Importers had experienced severe losses, owing to the extravagant
prices paid last season for the second and third crops, though admitted
to be of inferior quality; while with the great competition for the new
crop this year, and the hurried manner in which, as of late, supplies
were sent forward, there was little probability of making any profit. All
the arrivals showed heavy losses. The passing of the Adulteration Act,
by checking the import of inferior and spurious teas, had caused importers
to suffer severely, and to an extent that could never have been contem-
plated by the Legislature. The exports had fallen off, owing to the
increase in the direct shipments to Russia, and a feature in the develop-
-
}
170
ment of the trade was the further increase of 4 millions in the home
consumption. Indian teas continued in strong demand, with prices
gradually tending upwards, stimulated by the improvement in quality.
164,000,000 lbs., against 182,000,000 lbs. in 1872
Imports
Deliveries..
131,000,000
127,000,000
39,000,000
34,000,000
97,000,000
98,000,000
··
Exports
Stock (31st ult.)
•
•
99
""
""
""
""
""
99
19
""
99
""
""
Circular, 8th January, 1874.
Market firm. Steady business. Prices fully maintained for all
kinds, with occasionally slight advance in medium to fine black leaf
Congous. Stock, 97 million lbs., against 98 million lbs. in 1872.
Circular, 5th February, 1874.
General election interfered with business. Deliveries had been
large. Stock, 92 million lbs., against 105 million lbs. in 1873.
Circular, 5th March, 1874.
Great dulness had prevailed. Small orders from the country.
Prices for common to medium grades of Congou d. decline in last
fortnight. Stock, 95 million lbs., against 101 million lbs. in 1873.
4
Circular, 1st April, 1874.
Greatest dulness had prevailed during the past week. Deliveries
had been very small. Prices unchanged. Stock, 95 million lbs.,
against 101 million lbs. in 1873.
Circular, 7th May, 1874.
Extent of business very limited. Prices unchanged, except for
inferior green teas, which were 1d. per lb. lower. Stock, 83 million lbs.,
against 96 million lbs. in 1873.
Circular, 4th June, 1874.
Very little business. Several thousand boxes of new season's
Tayshan Congous met with very poor reception. Prices generally un-
altered, but new season's Tayshan Congou and green lower. Stock,
72 million lbs., against 83 million lbs. in 1873.
171
Circular, 2nd July, 1874.
Market continued in a state of stagnation.
confined to public auctions. Prices unaltered.
against 72 million lbs. in 1873.
Almost entire business
Stock, 61 million lbs.,
Circular, 6th August, 1874.
Dealers bought cautiously. Brown leaf teas considered inferior in
quality. Prices of fine Monings firmer. New Kaisows had sold 1d.
per lb. lower than first day's sales. Old black leaf, good common to
medium, d. per lb. lower. Stock, 61 million lbs., against 68 million
lbs. in 1873.
Circular, 3rd September, 1874.
Market had been steadier, with fair amount of business. Common
Foochow grades were 1d. per lb. lower. Stock, 74 million lbs., against.
73 million lbs. in 1873.
Circular, 1st October, 1874.
Good demand for most classes of Congou, and prices rather better
for the medium to fine grades of Kaisow. Other kinds unaltered.
Stock, 74 million lbs., against 73 million lbs. in 1873.
Circular, 5th November, 1874.
Market continued extremely quiet, notwithstanding large deliveries
of last month. Prices of black leaf Congous d. per lb. lower. Moyune
kinds and Teenkais 1d. to 2d. per lb. lower. Stock, 77 million lbs.,
against 84 million lbs. in 1873.
Circular, 3rd December, 1874.
Market generally had been extremely dull. Prices of common
grades of Foochow Congous slightly easier. Fychow and Moyunes show
average fall of about 2d. per lb.
Annual Report, 5th January, 1875.
Had been fewer fluctuations than usual. In earlier months the
trade demand was active, accompanied by some speculation, but the
market collapsed, and continued depressed till the new crop came in, thus
showing how small is the influence of any temporary reduction in
stock. Losses had been considerable, not only owing to a relatively
higher range of cost as compared with the first crop, but also to
the increased shipments of these classes later in the season. The
172
excitement attending the Adulteration Act had subsided, but its
effects, coupled with continuous forced sales of Canton and green teas,
had further influenced prices in those descriptions. The whole range of
values had been altered, and unless a corresponding reduction could be
made in cost, the style and proportions of the trade must be entirely
changed. The state of the American market increased the depression of
green teas. The home consumption showed an increase of six million lbs.,
but the export had again fallen off two million lbs. Indian tea was
affecting more and more the VALUE of all the higher-priced China sorts,
fancy kinds included, and especially those from Foochow, and it being
certain that the quantity will increase, its growing influence on the
China trade cannot well be over estimated.
Imports
Deliveries
Exportation
158,000,000 lbs., against 164,000,000 lbs. in 1873
137,000,000
32,000,000
131,000,000
34,000,000
97,000,000
Stock (Dec. 31, 1874) 85,000,000
""
99
>"
99
""
""
""
""
""
""
""
""
Circular, 7th January, 1875.
Market had continued quiet until after holidays, when there was a
good demand for both descriptions of Congou. Arrivals numerous.
Prices maintained. Stock, 85 million lbs., against 97 million lbs. in 1874.
Circular, 4th February, 1875.
Little doing; market quiet; quantity offering large. Lower rates
ruled at public auction. Prices of brown leaf Congou rather lower;
other kinds unaltered. Stock, 101 million lbs., against 92 million lbs. in
1874.
Circular, 4th March, 1875.
Business quiet. Prices unchanged. Stock, 97 million lbs., against
95 million lbs. in 1874.
Circular, 1st April, 1875.
Business fair. Prices of Congou unaltered, but scented and green
teas rather better at public sale. Stock, 97 million lbs., against 95 million
lbs. in 1874.
Circular, 6th May, 1875.
Market had continued in a dull and inactive state, notwithstanding
large deliveries. Prices unaltered. Stock, 82 million lbs., against
83 million lbs. in 1874.
173
Circular, 3rd June, 1875.
Business limited. Market extremely quiet.
rather easier. New Tayshans 1d. per lb. lower.
against 72 million lbs. in 1874.
Prices for fair Congous
Stock, 71 million lbs.,
Circular, 1st July, 1875.
Pending arrival of new teas private contract market suspended, and
prices nominal. Scented Capers declined 1d. per lb. Stock, 71 million
lbs., against 72 million lbs. in 1874.
Circular, 5th August, 1875.
Slight improvement. Quantity offering far greater than dealers can
buy. Prices d. per lb. lower for fair to medium grades of brown leaf.
Stock, 71 million lbs., against 61 million lbs. in 1874.
Circular, 2nd September, 1875.
Rather better demand for medium to fine grades of Congou. Prices
occasionally showed some slight improvement, but for all common to
fair descriptions lower rates ruled. Stock, 85 million lbs., against 74
million lbs. in 1874.
Circular, 7th October, 1875.
Large business had been transacted, and prices improved slightly,
but a relapse soon occurred, the arrivals being heavy, and the probabilities
of a war with China being for a time averted. Stock, 86 million lbs.,
against 74 million lbs. in 1874.
Circular, 4th November, 1875.
Great dulness had prevailed, with business very limited. Arrivals
had again been heavy. Prices for common to black leaf Congou fully
d. per lb. lower. Common green teas and Foochow scented teas also
lower. Stock, 87 million lbs., against 77 million lbs. in 1874.
Circular, 2nd December, 1875.
Almost a cessation of business, excepting public sales, which had
been of small extent. The arrivals had been very heavy, the stock in
the United Kingdom being 97 million lbs., against 80 million lbs. last
year. Prices generally unaltered, but at public auction, grades of Congous
174
3
occasionally sold at easier rates. Stock, 97 million lbs., against 80
million lbs. in 1874.
Annual Report, 4th January, 1876.
The feature was the steady and large increase in the home consump-
tion, chiefly, however, of Indian growths. The whole of the China crop
being on offer within a few months, instead of being spread over the year,
as formerly, must necessarily affect prices in this market. The consumer,
on the other hand, benefited by the altered and hurried mode of trade.
During the last two months of the year a large business was transacted,
at advancing prices, but shortly after, notwithstanding the rapid reduction
in stock up to the 30th June, great indifference was shown on the part of
the trade, and prices gradually receded. The dispute between the dealers
and importers as to greater dispatch in the delivery of tea assisted
also to depress the market. For all common grades there had been a
generally declining market, and the early arrivals opened lower than had
been seen for some years. Uncertainty about the Adulteration Act,
combined with the unsettled state of the American market, caused lower
rates to rule than had ever been known.
Imports
Deliveries..
Exports
Stock (31st Dec., '75) 103,000,000
·
195,000,000 lbs., against 158,000,000 lbs. in 1874
145,000,000
32,000,000
137,000,000
32,000,000
85,000,000
""
""
99
""
""
""
""
""
99
""
1876.
Demand better. Common
Circular, 6th January,
Arrivals heavy. Quantity offering large.
grades unaltered. Fair to medium black leaf rather firmer. Stock, 103
million lbs., against 85 million lbs. in 1874.
Circular, 3rd February, 1876.
Moderate enquiry. At public sale common grades of Congou sold
rather easier. Stock, 101 million lbs., against 101 million lbs. in 1875.
Circular, 2nd March, 1876.
Demand continued limited. At public sales common grades of
Congou sold at lower rates. Prices for siftings to common Foochow
Congous d. per lb. dearer. Common to fair grades of scented Capers
175
and Foochow Pekoes d. per lb. dearer. Stock, 101 million lbs., against
97 million lbs. in 1875.
Circular, 6th April, 1876.
Market had been extremely quiet, and business limited. Quantity
brought to auction large. Prices for black leaf d. per lb. lower; price
of both descriptions 1d. per lb. down. Souchongs and Tayshan Congou
d. to 1d. per lb. down. Stock, 92 million lbs., against 93 million lbs. in
1875.
Circular, 4th May, 1876.
Dealers continued to restrict their purchases as much as possible.
Deliveries to end of April nearly one million less than last year, owing
to falling off in export. Prices for Congous generally unaltered. A few
medium to good occasionally rather dearer. Stock, 83 million lbs.,
against 82 million lbs. in 1875.
Circular, 8th June, 1876.
Principal business public sales, where a general decline had been
established in prices. Stock, 70 million lbs., against 71 million lbs. in
1875.
~
Circular, 6th July, 1876.
Market had dragged heavily on, with transactions quite on a retail
scale, and prices lower for most kinds. Prices for all old imports
lower. Stock, 57 million lbs., against 58 million lbs. in 1875.
Circular, 3rd August, 1876.
Again a dull and dragging market, with constant public sales. Black
leaf Congou unaltered, but fair to medium brown leaf and Paklings ¿d.
to 1d. per lb. lower. Stock, 68 million lbs., against 71 million lbs. in
1875.
Circular, 7th September, 1876.
Had been an improved feeling, although business transacted was
only limited. At public auctions common grades had again sold lower.
Stock, 90 million lbs., against 85 million lbs. in 1875.
Circular, 5th October, 1876.
Little alteration in tone of the market. Prices unaltered, except
for scented teas, which were 1d. to 2d. per lb. dearer for common to
medium. Stock, 99 million lbs., against 86 million lbs. in 1875.
176
:
Circular, 2nd November, 1876.
No improvement in tone of the market, the dealers still holding
back from purchasing. Public sales rather larger than of late, and lower
rates had ruled for most grades of Congou. Stock, 103 million lbs.,
against 87 million lbs. in 1875.
Circular, 7th December, 1876.
Excepting for common Congou for delivery, the enquiry for all other
kinds most limited. Prices of Congous unaltered, but green teas 1d.
per lb. lower for medium to fair grades. Stock, 105 million lbs., against
97 million lbs. in 1875.
Annual Report, 2nd January, 1877.
Record of last year formed no exception to late unsatisfactory
series of annual reports, so far as importers were concerned. Only
redeeming feature, a further expansion of clearances, but even these not
in same ratio of increase as in the preceding year, while the export had
fallen off 3 millions. Market had been "dragging and difficult," and
the prices obtainable, as a rule, scarcely exceeded "commissions," even
at the highest point, and then only for a small portion of the first crop
medium grades; while of late the losses on the common to fair kinds had
been heavy and continuous. This was due to the general state of trade
in 1876, the inferiority of the crop, the rapid shipments in excess of the
supplies of 1875, AND THE INEVITABLE RESULT OF ACCUMULATING A
STOCK BEYOND THE POWER OF THE TRADE TO COMPASS. The result
had been almost constant depression, the impossibility of making sales
beyond the daily requirements of the dealers unless by forcing off at
public auction, thus leading to lower and lower prices in most instances,
while in the face of all this, shipments had been going on in China at
rates confessedly above those ruling at home. The fear of DETERIORA-
TION in quality. It was significantly remarked that the imports from
India were steadily increasing in amount and improving in quality, which
must every year more and more affect the higher grades of China growth.
The average price of Indian tea had been fully maintained, the increase
of 3 millions being accompanied by an equal increase in the consumption.
177
Imports
Deliveries
Exportation
Stock
•
186,000,000 lbs., against 195,000,000 lbs. in 1875
150,000,000
145,000,000
29,000,000
32,000,000
110,000,000
103,000,000
""
99
""
""
""
""
99
""
99
39
""
""
Circular, 4th January, 1877.
Market had been dull and depressed. Prices for common grades of
black leaf Congous d. per lb. lower; common scented Capers d. per lb.
dearer.
Circular, 8th February, 1877.
Market in unsatisfactory state. Sales impossible at any fair rates,
Prices for fair to common grades of Congou d. per lb. lower, but at
auction prices in some cases showed a heavy decline. Souchongs and
Oolongs d. to 1d. per lb. lower. Finest lines of green teas fully
1d. per lb. dearer. Stock, 108 million lbs., against 101 million lbs. in
1875.
Circular, 8th March, 1877.
Business almost entirely confined to public sales, without reserve,
Prices generally d. to 1d. lower for common to fair grades; green teas,
fine gunpowders, and Hysons 2d. per lb. lower. Stock, 103 million lbs.,
against 101 million lbs. in 1876.
Circular, 3rd May, 1877.
Past month had been extremely dull and quiet, the bulk of the
business being at public auction. Prices of common to fair grades of
Congou irregular, and slightly lower; scented teas and green teas ad. to
1d. per lb. lower.
lb. lower. Stock, 88 million lbs., against 83 million lbs. in 1876.
Circular, 7th June, 1877.
Market during May continued dull and inactive throughout. Public
sales had been about the same in amount. Prices of commonest grade.
of Congou slightly better; new Tayshan Congous 2d. per lb.; scented
teas 1d.; green teas 1d. and 2d. per lb. lower. Stock, 76 million lbs.,
against 70 million lbs. in 1876.
Circular, 5th July, 1877.
New season's black leaf Congous had arrived. Quality considered
inferior. Dealers showed indifference in purchasing. After first day's
sale, large quantity sold, without reserve, at irregular rates, showing a
reduction varying from 2d. to 3d. per lb, No enquiry for teas of old
M
178
import. Business confined to public auction. Stock, 65 million lbs.,
against 57 million lbs. in 1876.
Circular, 2nd August, 1877.
Market had been steady, with fair amount of business. Prices
unaltered. Stock, 79 million lbs., against 68 million lbs. in 1876.
Circular, 6th September, 1877.
Rather better enquiry, but extent of business very limited. Prices
unaltered, excepting lower rates for the commoner grades of Congou.
Stock, 87 million lbs., against 90 million lbs. in 1876.
Circular, 4th October, 1877.
Market continued extremely dull.
but generally in favour of buyers.
99 million lbs. in 1876.
Prices at auction ruled irregularly,
Stock, 96 million lbs., against
Circular, 8th November, 1877.
Market continued in same dull and depressed state. At auctions
irregular and lower rates ruled. Scented teas 1d. per lb. lower. Stock,
107 million lbs., against 103 million lbs. in 1876.
Circular, 6th December, 1877.
Continued reports of short export from China, added to large
deliveries, had at length imparted some confidence. Prices for common
grades of Congou d. per lb. dearer. Stock, 111 million lbs., against
105 million lbs. in 1876.
Thompson's Report, 4th January, 1883.
It was
Results of tea trade for year 1882 had been unsatisfactory to
importers, while the dealers had been able to buy at cheaper rates than
ever known—in several instances below the cost of production.
thought that prices had reached their lowest in 1881, but the average
for the past year had been 15 to 20 per cent. less. The general trade
depression would account in a measure for this, but it had been aggra-
vated by the early and hurried supplies from China adding to the heavy
stock in the warehouses on the 31st May; and further, by the anticipation
of an excessive increase in the supplies from India. The quality of the
crop also, both from China and India, had been inferior from several
179
districts; but as regards Indian, improvement in this respect was reported,
while the quantity would be less than was expected. The growth of
the Indian export from year to year, it was added, must continue to
exercise a marked effect upon the value of all good and fine China teas,
more especially as the consumption of the former was largely on the
increase.
Thompson's Report, 4th January, 1884.
The year 1883 had not been a profitable one to the importer,
although the losses had been less severe than the previous season. The
favourable feature was the expansion of the trade, as shown by the
improved deliveries. The cost in China was moderate, but supplies
being hurried forward quicker than ever from both China and India,
there was naturally a greater pressure to realise, and the auctions being
very heavy, the grades in over supply were brought down to a low level,
from which they have only lately slightly recovered. The Indian crop
did not show the increase at one time expected, but the Ceylon teas were
appreciated, on account of flavour as well as strength, and the consump-
tion was largely on the increase, to the detriment of China.
M 2
;
SUMMARY.
i
!
FINAL CONCLUSIONS DRAWN FROM THE FOREGOING FACTS
AND ARGUMENTS.
O
So long as the metal money of the world could be
increased by private individuals being allowed to
carry silver to the mints to be coined, it is evident that
a gradual rise in prices over a long period would result
from an increase in the volume of the metallic money
in circulation. As regards silver, this is no longer
possible in Europe, and prices have not been influenced
by that cause for a period long anterior to the demone-
tisation of silver by Germany.
Germany. Neither have prices
been influenced by a decrease in the volume of silver
money in circulation, because, since the price of silver
has been falling from the period of the establishment of
the Latin Union, silver for manufacturing purposes
could be got cheaper by buying the raw material.
Gold may be said to have been minted exclusively
by the European Governments for a long time past, and
the requirements of the public have been satisfied as
they have made themselves felt. In neither case, there-
fore, can it be alleged that the metal currencies of
Europe have been forcibly increased simply for purposes
of profiting by the conversion of the metal into money, as
was formerly done upon no small scale. Consequently,
the movement of prices in either direction cannot for a
181
long time past have been due to hidden influences of
that kind, which in a more primitive period no doubt
were the cause of movements of prices both up and
down over long periods of time. The assumption, there-
fore, that the fall in prices which has occurred is due to
an order of influence that has died out appears to be an
erroneous one. Further proof of this is afforded by the
investigations of the economists to whose writings we
have referred, which prove that a rise or fall in prices
respectively has always preceded and never followed an
expansion of the active metallic currency on the one
hand and a contraction on the other.
What appears to be the cause of a rise or fall in
prices, and what some authorities have held to be these
causes, are in reality not causes, but effects. Had the
gold required by the different countries been abstracted
from the active circulations of the European communities
during the period referred to, the market value of money
at the great European centres could not have failed to
be so influenced, that a rise in the rates of discount of
the great national European banks must infallibly have
been the result. We have shown that the European
markets were not appreciably disturbed—that not only
was no gold withdrawn from the store of the Bank of
England, but that, on the contrary, some was added to
it. This we take to be a clear demonstration that, even
if it can be shown that the commercial supply of gold,
apart from that engaged in the active currencies of the
world, was diminished for the time by the sum more or
less roughly held to have been absorbed by Germany,
Italy, and the United States for gold currency purposes,
:
182
the rise in the relative value of the commodity gold
exercised an influence only upon the market value of
the metal, which influence was almost, if not entirely,
neutralised by the simultaneous action of the other
prices, which we have referred to in detail in the letter
quoted from the Economist.
The value of gold is after all but a relative value.
It is very easy to jump to the conclusion that because a
large demand for a thing springs up, there must be a
rise in its price and a scarcity of it, owing to its absorp-
tion. But gold occupies a very different position from
other commodities in this respect, that what is absorbed
for currency purposes, in the first place, does not dis-
appear as if consumed—is not perishable, except upon
an infinitesimal scale, compared with other perishable
articles. It is not at all inconceivable that at least three-
quarters as much old jewellery and other manufactured
articles of gold are melted down every year and re-
manufactured as there are articles manufactured out of
the new gold from the mines. There is much miscon-
ception on such points as these, and much erroneous
deduction drawn from false premises. Again, while
gold actively circulating may change relatively to com-
modities, while commodities may be said to remain
stationary, the converse may also take place. If the
quantity of commodities increases, no effect upon prices
is caused, unless the increased supply comes to market,
or there is reason to believe it will come to market. As
it is the aggregate of the purchases, constituting demand
on the one side, that influences prices over short periods,
as we have shown, so it is the aggregate of commodities
183
offering for sale and constituting supply that determines
them on the other. So also is it the slowly-changing
aggregate of gold actively employed which has been
coined and has entered the markets, there to remain as
circulating purchasing power, that regulates the level of
prices over long periods.
One important factor in this discussion is, that a
large amount of gold, probably a good deal more than
was required for the new gold currencies, was liberated
from its work by the fall in prices during the period
under review. Not only was gold liberated from its
work by that fall, but the new economic contrivances
were simultaneously displacing the metal.
The large increase in the production of commodities
was followed, first of all, by a struggle between the
middle-man and the consumer. The former tried his
best to keep up prices in the interests of his clients, the
producers. When silver broke away from the fictitious
level at which it had long been supported, Eastern
merchants saw the deluge was upon them, and their only
means of salvation was to "bear" Eastern produce.
This opened the flood-gates, and down went prices, head
over heels, silver among them. Like a collapse in the
markets for public securities, where prices have been run
up to a fictitious level of value for the purpose of
"getting the public in," the fall in many things was as
exaggerated as the previous rise. But it must always
be remembered, in such ebbs and flows of values, that
they very frequently go to extremes. There is no doubt
that large numbers of habitual speculators in Eastern
produce were ruined by the fall in prices, and they have
184
•
been permanently scared off the ground, owing, in the
first place, to their means being exhausted, and secondly,
owing to there being no longer the same opportunity of
making money by speculating.
The curtain behind which Polonius worked his arts,
to the prejudice of the general public, and for the benefit
of the army of Poloniuses who fattened in West-end
palaces, has been drawn aside, never again to be a screen
for the nefarious practices which have given so many
people an unfair start in the great terrestrial race. We
arrive, therefore, at the final conclusion, that the fall of
prices of which so much has been heard was not only
not due to any scarcity in the supply of gold, but was,
on the contrary, actually the cause of the supply increasing,
the fall in prices being itself the direct cause of the
metal being displaced from active circulation, and this
to a large extent furnishing the means, aided by the
hoards, by which the countries referred to were able so
easily, and without any disturbance to the loan, discount,
or gold markets of the world, to effect the change in
their standards of value, which continue to be maintained,
apparently with ease, without causing any sort of incon-
venience to any other nations.
1
(
A POTENT CAUSE OF THE FALL IN THE PRICE OF TEA.
Imports 1872, about
1883,
1872,
1883,
""
Deliveries 1872,
1883,
1872,
1883,
"1
""
""
APPENDIX.
""
""
""
""
""
""
""
""
99
""
17,000,000 lbs. Indian Tea
54,000,000
166,000,000 China
161,000,000
16,500,000 Indian
59,000,000
111,000,000 China
""
111,500,000
""
""
""
""
""
39
""
د,
""
""
99
""
39
99
""
""
The superior quality of Indian tea has had the effect of gradually
transferring the bulk of the demand for fine teas to Indian teas, to the
detriment of China teas of the finer grades. There is consequently
each season a large quantity of the latter left, which during the last few
months of the season have to be sold in absence of demand, and, there-
fore, at prices several pence below the ordinary average quotations of
fine grades. The lower quotations of this reduced scale then naturally
press on the medium grades just below, and so the entire scale of the
remaining China teas has undergone the shrinkage which has been
witnessed since about 1880.
Indian teas, therefore, have not only had the entire benefit of the
increased consumption, but are also gradually usurping the bulk of the
demand for teas of fine quality.
Unless any important alteration in the taste of the public, which
may be easily influenced by the frequently expressed opinions of medical
men that the considerably greater quantity of tannin contained in Indian
tea makes this injurious to health, takes place, fine China growths will
eventually entirely depend upon the demand for Russia, and the lower
grades only be shipped to this country.
186
↑
YEAR.
WAREHOUSE RETURNS.
China.
Indian.
Totals.
1872
165,817,090 17,264,000 183,081,000
1873
144,709,000 17,984,000 162,693,000
1874
141,274,000 17,591,000 158,865,000
1875
199,995,000
175,466,000 25,597,000 201,063,000
1876 159,958,000 28,829,000 188,787,000
1877 153,735,000 31,444,000 185,179,000
1878 164,076,000 35,919,000
148,658,000 37,518,000 185,176,000
160,187,000 46,377,000 206,564,000
1881 163,159,000 44,585,000 207,744,000
1882 160,630,000 53,812,000 214,442,000
1883 161,000,000 61,968,000 222,968,000
1879
1880
CUSTOMS RETURNS.
(Board of Trade.)
Totals (only).
185,000,000
162,304,000
161,603,000
198,277,000
185,698,000
186,230,000
205,461,000
184,510,000
Indian.
206,972,000 45,531,000
212,463,000 45,054,000
211,080,000 53,928,000
222,006,000 60,995,000
THE ALLEGED APPRECIATION IN THE VALUE OF GOLD, AND THE FALL
IN THE PRICES OF COMMODITIES.
To the Editor of the Economist (May 19th, 1883).
SIR, Mr. Goschen's letter to the Times of Monday, the 7th inst.,
on this subject, confirms the impression made in my mind when I read
his address to the Bankers' Institute, that he did not feel quite sure of
his ground. Among others, I was curious to see upon what data
Mr Goschen was going to make out his case, because the moment I
heard that he intended to attribute the fall in prices mainly to a rise in
the value of gold, I thought he was jumping too hastily to conclusions.
Mr. Goschen's arguments have been attacked from several sides,
Mr. Moxon, in the Economist of Saturday, the 5th inst., assisting in
demolishing a position which I venture to think was not sufficiently
reconnoitred before the assault was given, and, indeed, in my humble
opinion, was not so put in a state of defence from the commencement as
to be capable of resisting attack.
187
Let me first take the rise in prices, and see whether this can be
accounted for by other causes the influence of which is more easily traced
and gauged. It is well known, in the first place, that there was an out-
burst of business after the Franco-Prussian War, and that prices rose to
a high point, until the commercial crisis in the United States in 1873,
which went all round the world, caused a general reaction. That reaction
continued, with brief intervals of recovery, up to the declaration of war by
Russia against Turkey in the spring of 1877. The Mincing Lane
authorities tell us that with the political difficulties in that quarter the
real downward movement in some of the markets may be said to have
commenced, and business continued more or less unsettled until Sep-
tember, 1879, when the great speculative movement set in. This caused
prices to run up wildly until about the end of November, when the
reaction ensued, followed by heavy losses, with some failures. Previous
to this period there had been two important agencies at work tending
largely to increase production, which is one of the main, if not the chief,
causes of the low range of prices which has ruled since. The first of these
was the inflated prices ruling for some time, and the second the flow of
capital into new productive enterprise. The increase in the number of
joint-stock companies of all kinds has been very large of late years, thus
unduly stimulating competition, and preparing for difficulties which
favourable circumstances may postpone, but which sooner or later must
be felt by the holders of the vast quantity of shares which have been
created.
The success of the Suez Canal has kept the markets largely supplied
by steamers, and business has, besides, been revolutionised by the tele-
graph. Information regarding the coming crops in all parts of the world
now reaches the retail trader and the consumer by wire, instead of by
letter, as formerly. What was done by the Post Office before this change
is now done by the morning and evening papers. The prolonged specu-
lative movements of former years have to a great extent disappeared in
consequence. This sudden opening of the markets to all classes of
buyers has naturally given rise to very keen competition to secure
business, which now results in small profits and great risks to all con-
cerned. The recent action of the Bank of England towards the bill-
brokers seems to be the beginning of a general movement among the
banks, arising out of these changes, to get back into their old and safer
<
188
grooves as regards advances for short periods. Up to recently, credit
liabilities and advances on warrants and bills of lading seem to have been
too freely granted, thus encouraging over-trading, while the bad harvests,
and their effect upon trade, have contributed subsequently to the general
inactivity. Wholesale dealers no longer secure supplies in anticipation
of future requirements, which has a marked effect in preventing fluctu-
ations. Then there has been depression in freights, the improved means
of transit from the places of production to the ports of shipment, and
the fall in the value of silver, all contributing to lower prices.
The greater competition in business drives the consumer to the
cheapest market for everything, and to seek every means of securing
what he requires at the smallest cost. Co-operative stores have brought
prices down in every department, and as it becomes the fashion to be
less ostentatious in domestic affairs, the prices of many articles not
necessaries, and the charge for a variety of services, must be reduced
also. These are some of the more easily tangible causes of the fall in
prices to their present low level; but there are others not so easily seen
unless carefully searched for, and which have apparently escaped
Mr. Goschen's attention. That the general level of prices is determined,
up to a certain point, by the quantity of the circulating medium in active
existence is well known, but it has been long since recognised that prices
can be forced up from their real to a nominally higher level for a time by
other agencies, chief among which is credit. In proportion as confidence
is inspired in the credit giver, pro tanto will prices become inflated, until
circumstances bring about a reaction. Now, all who watch the course of
commercial affairs are aware that there has been for years previous to
the demonetisation of silver by Germany a large increase in the banking
and credit-giving facilities afforded by all countries. New companies
have not only afforded increased facilities, but have themselves been
busily engaged in propagating their own species, notably in France, with
the results which we see in the prostration of financial business,
especially at Paris, for eighteen months past, and from which that and
other French centres are still suffering. Here, then, is a potent factor,
which has been at work practically ever since the conclusion of the
Franco-German War. These new companies at first were the direct
means of raising prices, and since, by assisting in the creation of every
form of productive enterprise, have stimulated the reaction, from which
there is up to the present time no recovery.
}
189
Again, there is the increase of fixed capital, which always exercises
so much influence on prices at every renewed outburst of creative energy.
It is well known that commodities do not vary much in value, their
utility remaining the same, unless a greater or less quantity of labour is
expended on their production; but a rise in the value of the labour
without any variation in its quantity will cause a fall in the exchangeable
value of commodities in proportion to the increase in the amount of the
fixed capital which is employed. The greater the amount of fixed capital,
the greater the fall in prices. Of late years there has been a very large
increase in the fixed capital laid down all over the world, the most
notable instance being in the United States, which accounts for the
tenacity with which that Government adheres to the high tariff, and
which is one of the chief causes of the low prices in the English iron
markets. The low prices in many other departments can be accounted
for in part also by the large increase in the amount of fixed capital
brought to bear upon production. Every fall of profits lowers the
relative value of those commodities produced with capital of a durable
nature. The use of machines in all kinds of production has enormously
increased, and as competition is stimulated values must come down.
Moreover, such fixed capital being unavailable, like floating capital, for
transfer at will to other industries, it must be kept going, and is often
kept going at a loss in the hope of a recovery in values. Production on
this basis means, as long as it can be maintained, the fall of prices to the
minimum.
Attention should be directed to the composition of the table of
figures given by Mr. Goschen showing the fall in prices. All the
commodities enumerated are those of general necessity. It was long
since pointed out by Mr. Tooke" that an excess of quantity operates in
depressing the prices of commodities generally, but of corn more
especially, in a ratio much beyond the degree of that excess." This was
little noticed until the publication of the report of the Agricultural
Committee of 1821. In that report it is stated: "A fall in the price of
a commodity not of general necessity brings the article within the reach
of a greater number of individuals, whereas in the case of corn, the
average quantity is sufficient for the supply of every individual: all
beyond that causes a depression of the market for a great length of
time."
190
1
I have very briefly enumerated some of the more important hidden
causes which have caused a decline in prices. I will now endeavour to
discover whether the extra gold requirements of Germany, the United
States, Italy, Scandinavia, &c., have had anything at all directly to do
with the fall in prices.
The best of all guides, perhaps, to a solution of whether or not the
value of gold has appreciated is its value in labour. Adam Smith's
criterion of value is labour. Have wages fallen? No; on the contrary,
they have risen, notwithstanding the increased means of transit by which
idle labour can be brought to where it is wanted. Mr. Hankey humor-
ously suggested that as the salaries in the Bank of England had been
raised to meet the rise in prices which followed the discovery of the
Australian goldfields, it was only fair that as Mr. Goschen maintained
more could be bought now with the sovereign they should be lowered
again.
There is no doubt that prices did rise then owing partly to those
discoveries, because a new volume of gold was added to the world's
active store, and partly to prices being raised through the exercise of a
large new purchasing power; but the removal of a large quantity in
existence as a commodity from one part of the world to another cannot
be said at all to provide a basis upon which to found a coǹverse propo-
sition.
If this be admitted, then the fall in prices cannot be attributed to
a material extent to the movements of gold to the countries mentioned.
Besides, the gold thrown into circulation has taken the place of the silver
thrown out, and we should consequently only have arrived at the status
quo ante.
The gold that has been absorbed by the countries referred to
was not abstracted from the active circulation, to any material extent, of
any other country, but was purchased as it could be picked up here and
there from the floating surplus supply of the world. The surplus supply
of gold has been diminished and that of silver increased, the difference
being that silver has fallen through being abstracted from the active
circulation, while the gold which has replaced it was not.
There is another point to which we have seen no reference made,
and which in our view is very material. The fall in prices is much more
likely to be due in part to the depreciation of silver than to the appre-
ciation of gold. The holders of large quantities of silver have realised
}
191
the loss represented by the fall in the relative value of that metal, and
their purchasing power for a time has been correspondingly diminished.
As the development of the use of substitutes for the precious metals
proceeds, so in proportion is the effect lessened of any fluctuation in the
total amount of the metallic currency in active circulation.
It will be said perhaps that the less there is in circulation to be
acted on the greater will be the effect; but, on the other hand, the more
the precious metals are dispensed with altogether, the less will the
increase or decrease in the supply affect prices. Except as token money,
silver has to a large extent returned, it may be said, whence it came, to
its original state of existence as a commodity. Its resence, ptherefore, in
active circulation exercises a greatly diminished effect upon prices.
So long as gold and silver together were exchangeable for commo-
dities on the basis of the fixed ratio which existed everywhere, except
in England, up to the time of the closing of the foreign mints to the free
coinage of silver, which followed Germany's demonetisation of that metal,
any increase or decrease in the active circulation of either metal would
tend to influence prices in either direction.
We entertain very little doubt that the facilities afforded by foreign
mints for the free coinage of silver have been the means, for a very long
time past, of quite uselessly adding to the silver currencies of continental
nations, and, through that addition, of raising prices for the benefit of
producers, and at the expense of consumers.
It will perhaps be said in reply, you cannot force more currency
into circulation than is required for the exchange of a given quantity
of commodities, and that is no doubt true of paper or trust money, having
only a local currency; but you can continue to force the precious metals
into active circulation until you have reached a point when two half-
crowns come to be the quantity of silver given in exchange for an article,
which but for that unnecessary forcing of silver into active circulation
could have equally well been exchanged for two shillings and sixpence.
If the bi-metallists had their way, we might go on charging the
currencies of the world with metallic money, until at last we should
have to give ten of our shillings for an article which we now purchase
with two.
If such a process as this was not being carried out up to the period
of closing all the continental mints to the free coinage of silver, how do
192
we account for the continuous rise in the prices of commodities up to that
period, and their continuous decline ever since?
The circumstance does not attract sufficient attention, that there is
no longer the same importance attached to the intrinsic value of the
precious metals by the individuals of a nation. England has taken the
lead in this matter in respect of silver. For intrinsic value is being
substituted trust in respect of the lower order of coins, as it has been for
a long time with the larger forms of money. A five-pound bank note is
taken on trust. Now that the value of silver has fallen, our shillings and
half-crowns are nearer to their real value than they were before. Before
the fall in the value of silver they also were taken on trust. They bore
the stamp of the Mint upon them, as the five-pound notes bore the
promise to pay five pounds of the Bank of England.
But this trust only to a limited extent carries any value beyond the
borders of the country in which such currency is issued. Trust-money
is, however, always obtaining currency over a wide area. Bills of
exchange and cheques, within their respective limits, are trust-money.
They pass from hand to hand for value, but only where the stamp of
worth which they carry on their face is known.
As regards, therefore, the precious metals being distributed among
the nations of the earth according to the commercial status of each, the
automatic movement of silver has been materially interfered with. As
regards England, it was, as we well know, ousted from its position as a
partial indicator of prices.
After a very long interval, some three-quarters of a century, in fact,
the barriers arresting the further progress of that movement have been
thrown down by the Franco-German War.
The free passage of silver through the mints having thus been
stopped, as regards silver Ricardo's law becomes inoperative, and prices,
so far as the fluctuating supply of gold is concerned, will, we may
assume, be henceforth affected by the quantity of that metal only in
active circulation.
With reference to the special point upon which Mr. Goschen lays
so much stress, it may be remarked that before it can be shown that
prices have been influenced by what is called an appreciation of gold, it
must be proved that some of the gold circulating as money has been
withdrawn from active circulation, and that the mass, so distributed as to
193
keep prices at the nominal level at which they were before any change
was made, has sufficiently diminished as to cause an appreciable change
in the general level of prices.
Because gold was exported from other countries to Germany to
enable her to set up a gold currency, it does not necessarily follow that
gold coins were abstracted from the various gold currencies and melted
into 20-mark pieces. The probabilities, indeed, are, as we have already
said, quite the other way, since bar gold is much more easily dealt with,
and the process of converting it into genuine coins would be less expensive.
There is always a large surplus stock of gold in various parts of the
world ready to come to any given point if or even per cent. profit
can be made out of the operation of sending it to the purchaser.
For instance, in 1876 the stock of gold at the Bank of England rose
to £35,000,000 on the 20th September, a difference of £14,000,000
compared with the present amount. Where did that gold come from?
Was it abstracted from the circulating currencies of other countries?
When eagles come from the United States, napoleons from France, or
marks from Germany, are they ever melted into bars, and thus taken out
of circulation? They remain here a short time, and then return from
whence they came.
Writing on this subject in 1847, Mr. Tooke remarked as follows:-
"But beyond the stock which is requisite for this purpose (as merchandise
in transit), and which must always include more or less of surplus to
meet occasional extra demand, there must be a very considerable amount
of the precious metals applicable and applied as the convenient mode of
adjustment of international balances, being a commodity more generally
in demand and less liable to fluctuations in its market value than any
other. I will not venture, in the absence of any recognised grounds for
computation, to hazard an estimate of the amount so required; but
bearing in mind the immense extent of international transactions, and
the vicissitudes of the seasons and other circumstances affecting the
relative imports and exports of gold, raw materials and manufactures,
besides the variations in the market value of national and private
securities held interchangeably, the quantity of bullion required to be
constantly available for this purpose must be very large. Apart from
the stores in the various banks, it must be occasionally increased by coin
which has become superfluous in the circulation."
N
194
+
Unless there had been a surplus of gold available apart from the
quantity actively engaged for currency purposes, I am of opinion that
Germany could not have established a gold currency at all. To have
attempted to abstract a sufficient supply from existing active currencies
would have been an altogether hopeless task. The metal has been
bought from the surplus supplies as it could be conveniently obtained,
thus giving rise to the erroneous assumption that there was a struggle
for gold, and that there was not enough for the use of the world. The
fact of Germany, the United States, and Italy having procured what they
wanted showed conclusively that, so far as the requirements of those
countries were concerned, the gold in existence was sufficient to supply
their wants, and if any other country contemplates following their
example, a still further surplus supply would no doubt be forthcoming.
Regarding the export of money from a country, Ricardo says, “However
great the scarcity of coin might be, the exportation of money would be
limited by its increasing scarcity. Money is in such general demand,
and, in the present state of civilisation, is so essential to commercial
transactions, that it can never be exported to excess; even in a war such
as the present, when our enemy endeavours to interdict all commerce
with us, the value which the currency would bear from its increasing
scarcity would prevent the exportation of it from being carried so far as
to occasion a void in the circulation."
·
Lastly, Mr. Goschen takes a range of prices over so short a period
as ten years, and apparently believes that the change in the value of gold
has been so rapid as to account for the fall in prices. Dr. Adam Smith
says, when referring to changes in prices over the same period of ten
years, that it is too sudden to be ascribed to any change in the value of
silver, which is always slow and gradual, and he adds: “The suddenness
of the effect can be accounted for only by a cause which can operate
suddenly, such as the accidental variations of the seasons." In writing
on this subject Mr. Tooke says of the close of the seventeenth century:
It is indeed manifestly impossible to discover any cause for the
remarkably low prices from 1685 to 1692 but that of a succession of
favourable seasons, acting upon a probably extended cultivation." Lord
King, in a pamphlet published in 1804, stated that the rapid emission of
assignats, as a consequence of the French Revolution, must have driven a
large quantity of silver out of circulation; yet that violent operation does
195
not appear to have produced any perceptible effect on prices, or even on
the value of silver in Europe.
Mr. Tooke considers this evidence of Lord King "quite decisive
against the hypothesis of a considerable influence on the value of the
metals, by the quantity disengaged from the circulation of this country.
The amount of coin circulating in France immediately previous to the
Revolution was computed at nearly one hundred millions. Put it at
seventy-four millions, Peuchet's estimate, nearly the whole of it was
banished from circulation between 1790 and 1794, the major portion
coming to England. No distinctly perceptible increase of the bullion
prices of commodities followed this addition to the currencies of Europe,"
the fact being, of course, that the extra quantity was not really added to
the other countries' circulation.
It would appear, then, from the evidence here adduced, that Mr.
Goschen has been too hasty in attributing the fall in prices during the
last ten years to an appreciation in the value of gold, that the fall is not
to any material extent attributable to such appreciation, but that it has
been the result of other causes to which I have referred.
ARTHUR CRUMP.
The incomes which purchased tobacco, spirits and
beer did not suffer so much by the effects of the fall in
the value of silver and the value of land as those which
purchased tea, coffee, and sugar.
•
196
Sugar, brown Manila
Good and fine West Indian
Tea, sound common Congou
Coffee, mid. Plantation Ceylon
Cocoa, Guayaquil
Wheat
Rice, Rangoon
- Pepper
••
..
Metals-Iron, Scotch Pig
Lead, English
Copper
Tin, Foreign
•
Jute
Nitrate of Soda
Saltpetre
Wallsend (coals)
··
•
··
Wool-English Sheep
(half hoggett, half wether)
Mohair
··
Cotton, mid. Upland..
Fair Surat..
Australian ..
(average Victoria, washed)
Alpaca
Cochineal
Indigo
Hides, River Plate, heavy
Salted, light
•
•
Mr. GOSCHEN'S PRICES.
•
•
··
• •
··
•
•
•
•
•
•
•
1873.
16/6 cwt.
29/-
""
-/113 lb.
87/- cwt.
59/- to 60/- cwt.
£2 16/- gr.
9/6 cwt.
-/7 lb.
£6 7/- ton
£21 10/-
£91
£142
2/3 lb.
3/3
2/-
2/9
-19
•
""
""
""
""
""
""
دو
""
-/6,
2/5
7/3 to 7/6 lb.
-/8 lb.
-/8/3/10
£16 ton
""}
16/- to 16/6 cwt.
£1 10/6
£1 10/- ton
""
1883.
12/- cwt.
20/-
-/5 to −/5½ lb.
70/- cwt.
59/-,
£2-/6 qr.
7/- cwt.
-/5 lb.
""
""
£2 9/- ton
£13 15/-,
£65
£93
-/10 lb.
1/8"
1/10 "
1/3
-/5
-/41
-/10
6/6 to 6/10 lb.
-/74 lb.
""
>>
""
""
""
--/6,,
£10 10/- to £11 ton
12/- cwt.
19/-
18/- ton
""
1888.
9/- cwt.
14/6
""
-/4 lb.
75/- cwt.
68/-
£1 12/- qr.
6/9 cwt.
--/7 lb.
-
"}
£1 18/10 ton
£14 15/..
£80
£126
-/10 to -/10 lb.
1/0 lb.
1/5 to 1/6 lb.
-/10 lb.
-/5 to -/5 lb.
-/4 lb.
1/1
5/6 to 5/9 lb.
-/53 lb.
-/5 to -/5 lb.
£12 ton
10/- cwt.
17/-
16/6 ton
""
""
""
""
""
*
*This recovery was in sympathy with the rise in Copper and Tin.
CHANGE IN
LAST 5 YEARS.
- 3/- cwt.
5/6
-/1 lb.
-
+5/- cwt.
+9/-
8/- qr.
-/3 cwt.
+ -/13 lb.
10/2 ton
-
+ £1
+ £15
+ £33
S
p
"}
99
-1/-
-
""
""
-/03 lb.
-17,
-16 "
-/42,
+/0 lb.
+ -/3",
;)
""
· -/1,
""
· -/11,,
+ £1 ton
- 2/- cwt.
- 2/-
1/6,
""
"}
197
SUGAR has gradually fallen since the duties were abolished in
1874. Extended production of beet, and the lowness of freights, have
tended chiefly to the depression, also the excessive imports of foreign
refined.
TEA.-The increased use of Indian and Ceylon. Indisposition of
the trade to hold stocks, as tea will not keep.
COCOA (GUAYAQUIL).-This particular growth is influenced by the
extent of crop, which varies. The chief consuming country is Spain, but
during the last few years the use has increased amongst the trade here,
and supply has barely or at times not kept pace with requirements.
COFFEE fluctuates with the crops, especially of Brazil, and is
subject to constant speculative fluctuations. Ceylon high (now 85s.),
owing to leaf disease and diminished production.
WHEAT.-Foreign importations and low freights.
RICE varies with grain market, and the production of late years
has been very large. Bad potato crops generally stimulate speculation.
Visible supply large, especially for Siam.
PEPPER.-The high prices caused by speculation entirely. Produc-
tion "cornered."
SCOTCH PIG IRON.-Over-production, diminished requirements of
America.
LEAD.-Extended production in Europe, also in America, greatly
depressed prices. In Australia, a great deal produced. Both the latter
contains much silver. The higher prices of other metals.
COPPER.-Influenced by the movements of the syndicate. Prices
artificial. There is so much produced in America that prices must
ultimately return to a moderate level. Visible supplies in England and
France large.
TIN.-Entirely speculative, and much above former level, to which
it may return.
COTTON took many years to fall from the "famine" prices ruling
during the American War. Good crops American, low freights, have
brought prices down to about their nominal position. Surat follows
American.
stock here.
COCHINEAL -Present recovery owing to small
Decreased consumption in this country, partly through the use of other
dyes and the colour from cochineal going out of fashion.
198
I
INDIGO.-Supply rather in excess of demand. Less consumption of
blue cloth, &c.
JUTE.-Prosperity of trade in Dundee.
NITRATE OF SODA.-Vastly increased production and break up of
the combination in American markets. Depression in agriculture.
SALTPETRE.—Decreased consumption, nitrate of soda being largely
used in the manufacture of gunpowder.
BALLESTER
ZARIALNICE ZALAN
COPYRUS RUPET ČAS
UNIVERSITY OF MICHIGAN
3 9015 07486 7691
M
"