“Monetary distress tends to produce fall of prices; that fall of prices encourages exports and diminishes imports; consequently it tends to promote an influx of bullion. I can quote a fact of rather a striking character, which tends to show that a contracting operation upon the circulation tends to cheapen the cost of our manufactured productions, and therefore to increase our exports.” He then stated that during the panic he had received a letter “from a person of great importance in Lancashire,” begging him to use his influence with the ministry “to be firm in maintaining the act,—to be firm in resisting these applications for relaxation,” because in Lancashire the manufacturers were struggling to “resist the improperly high price of the raw material of cotton.” “That letter reached me the very morning that the letter of the government was issued [suspending the act], and almost immediately the raw cotton rose in price.”
Q. “The writer of that letter was probably a man of considerable substance, a very wealthy man, with abundant capital to carry on his business?
A. “He had recently retired from business. I can state another circumstance that occurred in London corroborative of the same results. Within half an hour of the time that the notes summoning the Court of Directors ... were issued, parties, inferring probably ... that a relaxation was about to take place, sent orders to withdraw goods from a sale which was then going on.”[361]
The history of half a century has justified the diagnosis of this eminent financier. As followed out by his successors, Loyd’s policy has not only forced down prices throughout the West, but has changed the aspect of civilization. In England the catastrophe began with the passage of the Bank Act.
No sooner had this statute taken effect than it necessarily caused a contraction of the currency at a time when gold was rising because of commercial expansion. Between 1839 and 1849 there was a fall in prices of twenty-eight per cent, and, severe as may have been the decline, it seems moderate considering the conditions which then prevailed. The yield of the mines was scanty, and of this yield India absorbed annually an average of £2,308,000, or somewhat more than one-sixth.
America was growing with unprecedented vigour, industrial competition sharpened as prices fell, and the year of the “Bank Act” was the year in which railway building began to take the form of a mania.
The peasantry are always the weakest part of every population, and therefore agricultural prices are the most sensitive. But the resources of a peasantry are seldom large, and, as the value of their crops shrinks, the margin of profit on which they live dwindles, until they are left with only a bare subsistence in good years, and with famine facing them in bad. The Irish peasants were the weakest portion of the population of Great Britain when Lord Overstone became supreme, and when the potato crop failed in 1845 they starved.
Although the landlords had lost their command over the nation in 1688, they yet, down to the last administration of Peel, had kept strength enough to secure protection from Parliament against foreign competition. By 1815 the yeomanry had almost disappeared, the soil belonged to a few rich families whose revenue depended on rents, and the value of rents turned on the price of the cereals. To sustain the market for wheat became therefore all-important to the aristocracy, and when, with the peace, prices collapsed, they obtained a statute which prohibited imports until the bushel should fetch ten shillings at home.
This statute, though frequently amended to make it more effective, partially failed of its purpose. A contracting currency did its resistless work, prices dropped, tenants went bankrupt, and, as the value of money rose, encumbered estates passed more frequently into the hands of creditors. Thus when Peel took office in 1841, the Corn Laws were regarded by the gentry as their only hope, and Peel as their chosen champion; but only a few years elapsed before it became evident that the policy of Lombard Street must precipitate a struggle for life between the manufacturers and the landlords. In the famine of 1846 the decisive moment came, and when Sir Robert sided, as was his wont, with the strongest, and abandoned his followers to their fate, he only yielded to the impulsion of a resistless force.
As a class both landlords and manufacturers were debtors, and, by 1844, cheap bread appeared to be as vital to the one as dear corn was to the other. With a steadily falling market the manufacturers saw their margin of profit shrink, and at last Manchester and Birmingham believed themselves to be confronted with ruin unless wages fell proportionately, or they could broaden the market for their wares by means of international exchanges. The Corn Laws closed both avenues of relief; therefore there was war to the death between the manufacturers and the aristocracy. The savageness of the attack can be judged by Cobden’s jeers at gentlemen who admitted that free corn meant insolvency:—