History of Theories of Economic Crises
Impetus given by the crisis of 1815
(1) Robert Owen in his writings of 1815, 1818, and 1823 [gave an] explanation of crises [as coming] from the contradiction between increased productivity because of machinery [on the one hand] and the reduced wages and intensified exploitation of the workers because of these same machines [on the other]. [His] demand: employment of the jobless by the state, and a greater share of the product to go to the workers.
(2) Malthus and Sismondi derive crises from the distribution of income. Malthus (1820)2: thrift and the drive for capitalization [i.e., accumulation] must lead to crises, unless consumption is expanded by unproductive consumption ([on the part of] the nobility, the military, government officials, etc.). [That is] according to Malthus. [But] according to Sismondi, mass consumption through the improvement of the workers’ conditions [can expand consumption]. The more evenly income is distributed, according to Sismondi, the smaller the danger of crises.
(3) Say polemicizes against Malthus and Sismondi, because [according to Say’s theory,] a general condition of overproduction is impossible. Overproduction in one sector only means underproduction in another. Supply is demand, and vice versa.3 This theory was enormously successful and had great influence, particularly on the liberal school of political economy.
(4) Marx
In 1886 in the United States an investigation undertaken into [economic] crises came up with 180 causes! [See the article] by Herkner entitled “Causes” in the Handwörterbuch der Staatswissenschaften.4
(5) Tugan-Baranovsky[.] Disproportion between production and consumption
(6) Sombart[.] Disproportion between lack of organization and organization
1815 England. [Aftermath of Napoleon’s] Continental System
1825 England. Exports to South America and Speculation
1836/37 England and the United States
1847
1857
1861
1866/7
1873
1882
1890/2
1893
1895
1900/1
1907/08
The Continental System. November 21, 1806 to 1812/1813. The entire coast of the European Continent [was affected]. Unworkable because of smuggling. Effects: rise of the cotton industry in Saxony. Here in the eighteenth century there were 25,000–30,000 spinners working by hand. Ruinous competition by imports from England forced a transition to spinning machines. In 1800 there were already 2,000 spinning jennys5 (hand-operated) in Saxony, and more than 150 mechanics were making them. Until 1798 these machines were used in small-scale production, in the cottage industry. In 1798 in Chemnitz a businessman [Verleger] for the first time brought many spinning machines together in one workroom. Now there soon came onto the scene a spinning jenny driven by water-powered machinery as in a water mill, and that wiped out small-scale production. The first “spinning mills” were introduced in Saxony in 1800. One started out with 620 spindles, the others with 432 each. This form of manufacture spread quickly then, and thanks to the Continental System, by 1813 there were more than 256,000 spindles in operation in the cotton industry. Around this time the (hand-operated) jenny disappeared completely. In 1813, the last uprising by 1,100 hand spinners in Vogtland [occurred].
Also, there was constricted purchasing power in the countries on the Continent. In 1815 in England, a crash, factory disturbances, destruction of machinery.
After 1815, soon [there was economic] recovery and a sharp upturn. Canal building, road construction, gas works for street lighting, banks, speculation. Particularly [with regard to] South America. Independence of the South and Central American countries (Argentina, Brazil, Mexico, Colombia, Ecuador, Peru, Chile). Gold and silver mining in Mexico and Peru (Potosi, now in Bolivia [formerly “Upper Peru”]). Beginning in 1824, the London Stock Exchange was flooded with South American securities. In 1824–25 countries of South and Central America issued government bonds in London worth more than 20 million pounds sterling (at 7–8 percent [interest rates]). In addition, [there was] an enormous quantity of shares, mainly in mining companies, part of which were completely imaginary. The [price of the] shares of the English-Mexican Company rose in the first month (December 1824 to January 1825) by 125 pounds sterling; those of the Real del Monte company, by 800 pounds sterling; those of the United Mexican Company, by 120 pounds sterling, and so forth. Everything was thrown into speculation on the stock exchange. Only a partial payment (of 5–10 percent) was enough for the purchase of shares, so that even poor people could participate. “Princes, aristocrats, politicians, officials, lawyers, physicians, clergy, philosophers, poets, maidens, wives, and widows—all threw themselves upon the stock exchange, in order to invest part of their fortune in enterprises of which nothing was known but the name” (the Annual Register of 18256).
The nominal capital of companies that were founded or projected in 1824–25, according to some estimates, reached 372 million pounds sterling. Of these, the companies that still remained, later on, had a nominal capital of 102 million pounds sterling.
Prices went sky high (cotton prices rose by 109 percent; pig iron, 77 percent; sugar, 39 percent). In 1825 [the prices of] cotton fabric went up by 23 percent. Rapid construction of new factories [took place] in Lancashire, as well as the expansion of existing factories, using credit from banks.
Export of British goods to Central and South America in 1821 was 2,942,000 pounds sterling; in 1825, it was 6,426,000 pounds sterling. The main product was cotton fabric. But part of this came back to Europe or went on to North America. The high prices in England were a strong attraction for imports. A rapid outflow of gold from England resulted. A backlash followed. Prices fell suddenly in London. The South American countries were not paying interest. The mining companies were paying no dividends. The Bank of England raised its bank rate sharply and refused to pay the best rate of exchange. A panic resulted. Within six weeks, 70 provincial banks collapsed, and a large number of small entrepreneurs and speculators were ruined along with them. The crisis of 1825 led to the universal introduction of the steam-powered loom and to a major technological upheaval in the iron foundries, along with major advances in technology in general.
In 1833–36, there were extraordinarily good harvests in England, and grain imports declined almost completely. As a result, a new upturn. At the same time strong exports of English capital to the United States: railroads, canals, industrial enterprises, the shares being sold in England for the most part. In 1835–36, new banks founded in the United States had a [total] capital of 52 million dollars. At the same time, the purchase of public lands in the West and speculation on those. In 1833, 4 million dollars were spent on public lands; in 1836, 24.8 million dollars.
All of this: a surplus of capital, a boom in trade and industry, [and] rising prices for goods and land created strong demand for European goods. In particular, English exports to the United States increased.
English exports [in general, are shown in the following table, the numbers being in thousands of pounds sterling:]
| English Exports to | 1832 | 1836 |
| United States | 5,468 | 12,486 |
| Northern European countries | 10,000 | 9,897 |
| Southern European countries | 5,867 | 9,001 |
| Asia | 4,235 | 6,751 |
| Central and South America | 4,272 | 5,955 |
In addition it happened that in 1833 and 1834 Spain and Portugal took out a large number of loans from England. Prices on the stock exchange [in England] rose swiftly. Likewise the prices of goods. Speculation began on English securities: railroad shares and bank shares. In 1836, 48 banks were founded in England (with low share prices, of [only] 10 or 5 pounds sterling).
NB: The nominal capital of the joint-stock companies founded between 1834 and 1836 [in England] amounted to 115.2 million pounds sterling. Of that, 69.6 million [was invested] in railroads; 23.8 million [went to] institutions connected with banking; 7.6 million to insurance companies; 7.0 million to mining enterprises; 3.7 million [was invested in] canal building, and so forth.
The high prices of goods in England quickly promoted imports into England.
In the United States a panic broke out: because of an 1836 restriction on land speculation (cash only). The American banks frantically sought to obtain gold from England, and consequently panic broke out in England as well, because of the strong outflow of gold. In 1837 there were 618 bank failures in the United States. [The panic in the U.S. had a] recoil effect on England: a run on the banks of south England. Bankruptcies of export houses, with the cotton industry suffering the most. (No bank failures [in England].) Unemployment—the Chartist movement.
The immediate cause: a bad harvest.
The depression reached its bottom in 1842. In 1843 and 1844 there were two good harvests, [which meant] cheap food and [increased] demand for manufactured goods. Then the opium war [of 1839–42]. 1842 saw the opening of the Chinese market (five [Chinese] ports were declared open to free trade, and the island of Hong Kong was surrendered to England). In 1844–45 boom times prevailed [in England], particularly in the cotton industry. A large number of [new] cotton mills were founded, with very high wages. Then [came massive] railroad construction.
[The following table shows the value of the] licenses for railroad construction granted by Parliament, and the value of those actually built [with figures in millions of pounds]:
| (Through December) | Licenses granted | Railroads actually built |
| 1843 | 81.9 | 65.8 |
| 1844 | 20.4 | 6.7 |
| 1845 | 60.5 | 16.2 |
| 1846 | 131.7 | 37.8 |
| 1847 | 44.2 | 40.7 |
| 1848 | 15.3 | 38.2 |
| 1849 | 3.9 | 29.6 |
This railroad construction created a huge demand for products and for labor (200,000 workers). Prices for iron increased enormously. From 1844 on, there was madder and madder speculation on railroad construction.
Then in 1845 a potato blight struck in Ireland and England, and the entire crop was destroyed. There were also bad grain harvests in 1845 and 1846. Famine in Ireland. Parliament had to authorize relief payments of 8 million pounds sterling. At the same time, however, there was mad speculation by the grain dealers. Then the cotton crop failed [in the United States]. In spite of this, the prices of cotton yarn and cotton goods did not go up at all, because demand went down. (Consumption of cotton fabrics in England in 1845 fell by [a quantity worth] 21 million pounds sterling, and in 1846, by 13 million pounds sterling.) Thereupon, there were cutbacks in the cotton industry. On top of that came business failures on a large scale among the grain speculators. In April and May 1847, English grain traders had purchased enormous quantities of grain [abroad] at the very highest prices. This grain was delivered in July and August (it took two months to transport it!) just as prices dropped because of the very good prospects for the harvest [in England in 1847]. The bankruptcies of the grain speculators brought bank failures in their wake: the Royal Bank in Liverpool, the Liverpool Credit Company, etc. After that a general panic broke out. Then the prices of railroad stocks fell. [A few figures will show this, as follows]:
| In December 1845 | In December 1849 | |
| Capital invested in railroad construction: | 100 million pounds sterling | 230 million pounds sterling |
| The stock exchange price that could actually be obtained for railroad shares amounted to: | 160 million pounds sterling | 110 million pounds sterling |
| Profits and losses amounted to: | Profits in 1845: 60 million pounds sterling | Losses in 1849: 120 million pounds sterling |
Ruin of many shareholders. In 1848 a general fall in prices. The cotton industry suffered the worst, and then the mining industry, coal and iron ore in particular.
In 1854–55, a crisis in Australia ([involving the newly discovered] gold deposits)
1857. First worldwide crisis.
Abolition of the corn laws in 1846 and from then on England’s transition to free trade. The free trade advocates prophesied that [with free trade] crises would not happen any more.
The discovery of gold deposits in California and Australia opened new markets for English industry. Until 1850 and 1851 gold production was mainly in Brazil and Siberia, the annual average extraction of gold in the whole world then being worth 150 million marks. By 1853, it had risen to 760 million marks (now, in 1909,7 it is 460 million dollars). The ending of the Crimean War in 1856 gave English industry new [opportunities for] expansion.
Meanwhile, however, capitalist industry in other European countries had also developed after the revolutions of 1848. Therefore the crisis now affected Germany, Sweden, Denmark, and above all, the United States.
Under the impact of political unrest (1848) European capital had flowed massively to the United States. According to an estimate by [Albert] Schäffle, during 1849–54, 1,000 million guilders (a guilder = +/–2 marks) were invested in American securities. There was an enormous boom in the United States. The Crimean War had interrupted the export of grain from Russia, which America took advantage of. The purchase of and speculation on public lands, and at the same time massive emigration to the United States from Germany, Russia, and Poland. In 1852–53 in the United States, public lands worth 1.7 million dollars were purchased, but in 1852–54, the figure was 20.4 million dollars. Along with that, a tremendous amount of railroad construction. In 1856, the rail network in the United States was enlarged by almost 4,500 miles and even more was projected. The prices of goods rose, which attracted imports. In 1857, the import of goods [into the United States] increased by 32 million dollars. A failure of the cotton crop, and [therefore] high cotton prices, but in spite of that, enormous expansion of the demand for cotton. American banks and import-export dealers engaged in colossal speculation on the import of goods from Europe.
In 1857, [there was] an exceptionally good grain harvest in Europe. That caused a series of bankruptcies among grain-exporting businesses in America. The failure of one small bank gave the signal for a panic on all the American stock exchanges. In December 1857, prices [in the United States] plunged by 20 to 30 percent.
The American crisis was immediately transmitted to England. In October, there was a suspension of payments by one Liverpool bank. Thereupon, panic in all of England.
From there the crisis was transplanted to France (where the bank rate had always been 4 percent, and only in 1847 went up to 5 percent; but in November 1857 it rose to 10 percent!).
There immediately followed a collapse in Hamburg, from which the crisis spread to Prussia and at the same time to Sweden and South America, with which Hamburg had strong trade relations.
The price of cotton per kilo rose from [the equivalent of] 60–80 pfennigs to 4–5 marks!
[Total] exports from England to the United States
In 1861, 23 million pounds sterling
In 1862, 11 million pounds sterling.
[Drop in the value of] Consumption of cotton in England
In 1860, 1,084 million pounds sterling
In 1862, 452 million pounds sterling
The cotton shortage brought about a general slowdown in English industry. To be sure, the cotton mill owners and cotton dealers not only did not suffer from this crisis but even gained from it. The blow fell mainly on the small manufacturers, who were ruined.
| Number of cotton mills in England | Number of spindles in England | |
| 1862 | 2,887 | 30,387 |
| 1867 | 2,549 | 32,000 |
On the other hand, the cotton shortage led to the enrichment of the big cotton mill owners. In mid-1861 very substantial stocks of unsold raw cotton and cotton goods had been built up. A consequence of the breaking-off of imports from the United States [because of the Civil War] was that prices for these stored-up goods experienced an extraordinary increase. According to one calculation, the mill owners and cotton traders gained more than 19 million pounds sterling from the [sale of the stocks of] raw cotton, and 16 million pounds sterling from the cotton goods, for a total of more than 36 million pounds sterling. Mainly the Lancashire capitalists.
It was different for the workers! By the 1860s the workers of Lancashire had reached the highest level within the English working class. They had the highest wages, and were the most intelligent and best-organized workers. Wages and working conditions were held to firmly established standards. Many workers had some savings. The percentage of those on relief was lower than anywhere else in the country. And it was precisely these workers who for several years were robbed of the very means of existence. Beginning in autumn 1861 unemployment grew so much that charity, both public and private, had to step in to an extraordinary extent. By January 1862 unemployment reached threatening dimensions. Cutbacks in production in the spring of 1862 were so large that by April, out of the 47,504 workers who had earlier been employed in the cotton industry in Manchester, only 23,722 remained fully employed, as against 15,393 on half-time, and 8,369 completely unemployed. In Blackburn and its surrounding areas, out of 40,000 workers, 8,459 were completely unemployed and most of the rest worked only 2–4 days a weeks. The workers had to pawn or sell their furniture, beds, etc., and the wives and children went begging. In May of 1862 the number of jobless workers in the county of Lancashire reached 58,000; according to some sources, the number was as high as 100,000. Large numbers of small business owners were [also] ruined. A relief committee was founded in London. The workers of Lancashire engaged in a struggle with local charity officials, who wanted to force the cotton mill workers to perform the crudest kinds of labor [at workhouses].
The behavior of the free-trade advocates was characteristic. [John] Bright was concerned above all to minimize the extent of the disaster. He claimed that impoverishment had been much worse under the Corn Laws in the early 1840s. He also defended the local charity officials energetically and demanded the least possible interference by the central government in the sphere of jurisdiction of the local poor-relief authorities. He opposed all large-scale relief action, because in his view that would only increase pauperism in Lancashire
The Tories, as always, did more for the workers than the liberal factory owners. In the House of Lords they defended quite warmly the demand of the workers for the elimination of forced labor. Meanwhile, the workers’ struggle with the local poor-relief authorities continued. In Blackburn a thousand unemployed workers refused to work at breaking up rocks.
In July [1862], out of the 355,000 workers in the textile mills of the county of Lancashire, 80,000 were completely unemployed, and the rest were employed only part of the time. Charity contributions however flowed in abundantly. The government and society feared social unrest, and that was the reason for charity action on a large scale. But it was precisely the cotton mill owners who were least inclined to make sacrifices, and complaints were printed [even] in the conservative newspapers that they [the mill owners] did not want to sign the lists [for charity donations]. In Parliament, Cobden spoke out sharply against the proposal that relief in the counties of England be organized on a broader basis. That would mean the ruin of the mill owners, said Cobden. He advocated a public loan that would provide relief [through a public works program]. Lord Palmerston stated publicly: “In reality they want to shift the entire burden from the wealthy to the poor.” However, the mill owners won.
In Manchester the mortality rate rose to a level 60–70 percent higher than in the rest of the country.
By an energetic struggle, the workers won their demands: [first,] that relief was to be paid entirely in money, instead of half of it being paid in kind; second, that forced labor be replaced by instruction at schools. Special schools were established for the workingmen, and sewing schools for their wives.
December 1862 was the high point of the crisis. In Lancashire and Cheshire [counties] 271,983 persons were receiving public assistance, [and] 236,310 were receiving [other types of] assistance. Out of those 271,983 on public relief, only 12,500 were at workhouses.8
At the end of January 1863, in the cotton-industry districts the number of those completely unemployed was 247,230, of those who were employed part time the number was 165,600, and those employed full time, 121,129. Wages were driven down by 10–20 percent! The mill owners once again walked off with the winnings!
At the end of 1862 a movement for emigration began. The best workers emigrated. Invitations came from New Zealand. One province in New Zealand offered 10,000 pounds sterling for emigrants from England. Large gatherings of workers began. They demanded public support to cover the costs of emigration. On top of that, there were storms of indignation against the mill owners.
In March 1863, in a number of small factory towns of Lancashire, workers began to engage in public disorders because public relief had been reduced. Stores were looted, etc. The Tories supported the emigration movement. However, the government, under pressure from the mill owners, provided credit amounting to 1.2 million pounds sterling for a public works program. Cobden defended this in order to counteract emigration. But these public works came into existence after the greatest need had already passed. The work consisted of road building, canal building, labor on aqueducts, the laying out of parks, etc. Thus public works were constructed at ridiculously low wages. A laughable number of workers were employed on these public works—8,324. Counting their families that meant 30–40,000 persons benefited somewhat from that.
By 1864 there was an upturn in the economic conjuncture. Cotton was being imported from India and Egypt, to replace American cotton, and soon the mill owners were complaining about the shortage of work hands.
English Imports of Raw Cotton:
In 1861, from India 15 million pounds sterling
from Egypt 10 million pounds sterling
In 1864, from India 52 million pounds sterling
from Egypt 20 million pounds sterling
The enormous amount of cotton imported from the Orient caused a severe monetary crisis in England.
There was a rapid outflow of silver to India and the East. The Bank of England tried to counteract this by frequently raising the bank rate. But trade and industry remained undisturbed. The founding of new companies flourished. In 1863–65 the joint-stock companies founded in England had a total nominal capital of 582 million pounds sterling. Speculative fever.
The end of the American Civil War gave new impetus to English industry.
England’s exports to the United States [increased as follows:]
1864 [exports were worth] 16.7 million pounds sterling.
1866 [exports were worth] 28.5 million pounds sterling.
[The following table shows the prices of goods during the boom and during the bust:]
| Increase in prices 1866 | Decrease in prices 1867 | |
| Coffee | +11% | –17% |
| Sugar | +11% | –9% |
| Tea | +31% | –23% |
| Silk | +27% | –9% |
| Flax and Hemp | +6% | –17% |
| Copper | +21% | –20% |
| Cotton | +15% | –28% |
All this led to a crisis in 1866. There was a sudden outbreak of panic in May as the result of the bankruptcy of a big firm, Overend & Co. In two weeks the reserves of the Bank of England were almost completely emptied. Banks that functioned as joint-stock companies failed, as did railroad companies. Those hit hardest by the crisis were the iron industry, the machine industry, and shipbuilding.
In 1869, a money and credit crisis in the United States.
Second worldwide crisis, 1873.
The years 1871–73 were a time of extraordinary industrial growth in all of Europe. Billions of francs as payment of war reparations from France poured into Germany. The founding of many new companies.
Statistics on joint-stock companies.
Germany and Austria become the main arena of stock market speculation. The building of new railroads, home building, real estate speculation, particularly in Vienna.
[The following table shows] the length of standard-gauge railroads in Germany:
| [Total length in kilometers] | |
| 1845 | 2,143 |
| 1855 | 7,326 |
| 1865 | 13,900 |
| 1875 | 27,881 |
| 1880 | 33,645 |
| 1890 | 41,818 |
| 53,822 |
In Austria, in the years 1867–73, among the newly licensed businesses were 175 [regular] banks, 34 railroad enterprises, 645 industrial companies, 104 housing and construction banks [Baubanken], 39 insurance companies, and 8 shipping companies, with a total amount of capital involved, all together, of 4 billion guilders. Only 682 [of these] companies actually came into existence, with joint-stock share capital worth 2,577 billion guilders.
The craze for the founding of new companies spread to the United States, where an enormous economic upturn had followed the end of the Civil War. Railroads: in the years 1870–73, in the United States, a network of new railroad lines of 23,406 miles was built. In 1864 there also began the system of high indirect taxation and high protective tariffs.
In England, unparalleled prosperity in the iron and coal industries.
Total value of exports from England to the US:
| 1870 | 28.3 million pounds sterling |
| 1872 | 40.7 million pounds sterling |
| 1873 | 14.6 million pounds sterling (showing the effects of the crisis [of 1873] |
Total exports of iron, steel, and hard coal from England [to all the world]:
Total exports from England of cotton, wool, and linen fabrics:
| Cotton | Wool | Linen fabrics | |
| 1868 | 53 million pound sterling | 19.6 | 7.1 |
| 1873 | 81.5 million pound sterling | 25.4 | 7.3 |
Statistics on pig iron production in England:
| Production ofpig iron in millions of tons | Median price for pig iron | |
| 1867 | 4.7 | 52 shillings, 6 pence |
| 1868 | 4.9 | 52 shillings, 9 pence |
| 1869 | 5.4 | 53 shillings, 3 pence |
| 1870 | 5.9 | 54 shillings, 4 pence |
| 1871 | 6.6 | 59 shillings |
| 1872 | 6.7 | 101 shillings, 10 pence |
| 1873 | 6.8 | 117 shillings, 3 pence |
The price rose so high because the expansion of production could not keep pace with the growing demand, caused by the increasing needs of railroad construction. In this connection, very heavy speculation on foreign loans developed on the London Stock Exchange.
In the years 1870–75 foreign loans taken out in London amounted to a value of 260 million pounds sterling! Most of these were Oriental governments, but they did not pay back the loans. At the end of the 1870s the following governments did not pay the interest on their loans or made only partial payments: Turkey, Egypt, Greece, Bolivia, Costa Rica, Ecuador, Honduras, Mexico, Paraguay, Uruguay, Peru, Venezuela, and Santo Domingo.
Total value of securities issued on American and European stock exchanges:
| 1870 | 4,560 million marks |
| 1871 | 12,560 million marks |
| 1872 | 10,110 million marks |
| 1873 | 8,722 million marks |
| 1874 | 3,368 million marks |
In general: great technological changes in the United States, England, Germany, etc.: machinery, steam power, railroads!
The crash began separately in the United States, with the collapse of speculation on the railroads, and in Europe, in Vienna on May 3, 1873.
By May 28 in Vienna there had already been 100 bankruptcies and shares had lost 300 million guilders in value. In June there was a panic in Germany. The value of securities suddenly fell by 30–50 percent.
The American crash intensified the general collapse.
Then a severe commercial crisis followed in England. There were more and more bankruptcies from 1873 to 1875 and even later. In 1878 some top-ranking banks failed. In England in 1878 there was a major crisis in the cotton industry and also in the iron industry and coal mining. The high point was 1879.
From 1873 to 1880 the crisis spread across Italy, Russia, Holland, Belgium, South America, and Australia and affected all the major branches of industry: iron and coal, textile, the chemical industry, the food industry, the railroads, and shipbuilding.
In France, recovery after the [Franco-Prussian] war, the Third Republic, and also the subsidence of Communism.9 In 1875 an upturn begins. Founding of the Union Générale and the Banque de Lyon by Bontoux, supported by the Catholic party in France and Austria—in opposition to the Rothschild group. Also the founding of the Vienna Agricultural Bank. [The Bontoux group] bought up its own shares, to make the house look more prosperous. To put their capital to use, new enterprises were founded on a massive scale: gas works, coal mines, insurance companies, railroads, etc. Newspapers were purchased in order to influence public opinion. The first collapse came in Lyon. A sudden plunge in the value of shares. Also in Vienna. On January 29, 1882, bankruptcy of the Union Générale.
Also in other countries: After 1879 a new upturn began. In the United States, the feverish building of railroads: in the years 1880–82, 28,240 miles [were added to] the railroad network.
[The value of] exports from England to the United States was:
| In 1878 | 14.6 million pounds sterling |
| In 1882 | 31.0 million pounds sterling |
[The value of] exports from England in general [was as follows (in millions of pounds sterling):]10
| Iron & Steel | Machinery | Cotton fabrics | Wool fabrics | Linen fabrics | |
| 1878 | 18.4 | 7.5 | 52,9 | 16.7 | 5.5 |
| 1882 | 31.6 | 11.6 | 62.9 | 18.8 | 6 |
In 1884 in the United States there was a severe economic crash involving the railroads. A general fall of prices in England followed, about 15–20 percent. The drop in prices [of agricultural products] on the world market has given rise to an entire body of literature. In particular, grain prices fell ([because of cheaper] transport, and American grain!). According to the price charts recorded in Hamburg, from 1884 to 1886 prices fell by 31 percent for agricultural products, by 7 percent for industrial products, and by 12 percent for products from colonies.
After 1886 [there was] a new industrial upturn.
Exports from England:
| Iron | Machinery | Coal | Cotton fabrics | Wool fabrics | Linen fabrics† | |
| 1886 | 21.7 | 10.1 | 9.8 | 57.4 | 19.7 | 5.5 |
| 1890 | 31.6 | 10.4 | 19.0 | 62.1 | 20.4 | 5.7 |
Exports to Argentina were especially strong.11
At the end of the 1880s a mad craze for founding new companies developed in Argentina.
In the years 1887–89, 250 joint-stock companies were founded in Argentina with a nominal capital of 764 million dollars.
The national debt of Argentina was:
| In 1874 | 10 million pounds sterling |
| In 1890 | 59.1 million pounds sterling |
London was the main source [of funding for Argentina]
The railroad network in Argentina:
| In 1883 | 3,123 kilometers |
| In 1893 | 13,691 kilometers |
This was the amount actually built. Much more was projected. In 1889 alone, [new] railroad construction was licensed for 12,000 kilometers.
In 1890 in Argentina there was a tremendous economic crash, and a revolution.12 As a result, there came a crisis in England. The largest English private bank, R. Baring & Co., collapsed in November 1890.
Then a crash in Transvaal followed, and in Mexico, Uruguay, etc.
A severe commercial crisis in England.
Railroad construction at a furious pace in both countries.
In the United States, in addition, the confused uproar of the “silver party” over currency policy; also, trust scandals (the “Whiskey Trust,”13 the cornering of the wheat market, etc.). Bankruptcies on a massive scale in the United States. Trade grinds to a halt completely. Failure of 600 banks in August 1893.
Total number of bankruptcies:
| 1890 | 7,538 with liabilities worth 93 million dollars |
| 1893 | 11,174 with liabilities worth 324 million dollars |
Among these, 74 railroad companies, with 29,000 miles of track, went bankrupt. In May 1893, the shares of the trusts fell in value by 25–50 percent.
Pig iron production:
| 1892 | 9,157,000 tons |
| 1893 | 7,124,000 tons |
March on Washington by the unemployed.14 Demand for public works (road building). On Easter Sunday in 1894 the first march began, and arrived in Washington on May 1. In Australia, the government had borrowed 112 million pounds sterling from English capitalists. Of that, 81 million pounds sterling went into railroad and streetcar construction.
Length of the railroad network in Australia:
| 1880 | 4,900 miles |
| 1895 | 15,600 miles |
Real estate and construction craze.
In 1891 the construction companies began to collapse. In 1893 a general crash. Almost all the Australian banks stopped payments.
In 1895 a stock exchange crisis.
In 1895 a crisis in the value of South African mines (extraction of gold began in Transvaal in 1882–85). The market value and assets of 146 gold trusts on October 1, 1895, were 5,095 million marks; on February 28, 1897, they were 1,960 million marks.
Beginning in 1896, an unparalleled upswing.
The Sino-Japanese war.
The Trans-Siberian railroad.
Trade treaty between Germany and Russia, upsurge of electric power technology, [an upsurge in] gold production in South Africa, Australia, and the Klondike (and Alaska).
NB: orders [and contracts] given out by the army and navy!
(Parvus’s pamphlet)15
1898 Bernstein!16
Terrible unemployment in Germany, Austria, England, Russia, France, Italy, Belgium, and East Asia. It first appeared in Russia.
In England imports fell by [the equivalent of] about 35 million marks, and exports by about 235 million marks, particularly the import of raw materials (cotton, etc.) and the export of coal and iron. — In Austria, an enormous drop in prices for iron goods and machinery, a colossal decline in exports, business cutbacks and unemployment.
In Russia the iron and coal industry as well as the oil industry suffered the most. Prices and [MS. Illegible—single word] fell, in part, by a third.
In China the Boxer Rebellion and the campaign by “the Huns” brought about a severe general crisis. Commerce was laid low completely. As a result Japan was also drawn into the crisis, because China, particularly its southeastern coastal districts, was a significant customer for Japan.
The United States remained unaffected. Indeed, it was registering great prosperity: there was full employment in the textile and iron industries, and strong demand on the railroads. As a result new trusts were formed and new businesses started. [All] that would contribute to the next major world crisis.
[The crisis of 1907] started out precisely from the United States.
In the years 1903–06 [there was] a boom. The military and the navy, high protective tariffs, high prices. Then a panic and the collapse of prices on the New York Stock Exchange, which spread to London, Berlin, etc. Almost all countries were affected.
In Germany in 1908 [there were] 11,581 bankruptcies (even in [the crisis of] 1901 there had been only 10,566).
The world crisis was most clearly reflected in the downturn in maritime shipping, which was unparalleled. The two largest shipping firms, H.A.S. and North German Lloyd, had none at all!17
[This was the] consequence of overproduction in shipbuilding during the boom. In north German harbors even at the beginning of 1909, ships with a capacity of two million freight tons were lying at anchor, unused. Trade unions.
NB: emigration!
Number of between-deck passengers from Hamburg and Bremen to New York:
| 1907 | 268,000 |
| 1908 | 77,000 (???Is that correct?)† |
On the North German Lloyd line alone:18
| 1908 | to America: 59,000 from America: 89,000 |
| 1909 | to America: 151,000 from America: 35,000 |
Crises in particular economic sectors!
Prices fall universally
Three sets of index numbers
| According to the "Economist" | Acc. to Palgrave | Acc. to Sauerbeck | |
| 1865–69 | 100 | 100 | 100 |
| 1870–79 | 93 | 97 | 97 |
| 1880–87 | 77 | 82 | 78 |
(different types of goods [calculated, using] different methods)
In 1886 a commission was established in England to investigate the causes of the economic slowdown. Various causes were explained: (1) increased cost of gold; (2) depreciation of silver; (3) protective tariffs by many countries as an obstacle to trade. But the explanations agreed mainly on two things: (1) radical changes in production technology; and (2) radical changes in the means of transport. The report of the commission states, among other things: “In recent years with the help of science, and with the application of machinery to the production and transport of goods in all countries of the world, a revolution of the greatest significance has been enacted in the vital relations of the entire civilized world. The quantity of labor that is required for the accomplishment of a particular result in the sphere of production or transport has diminished to an extraordinary extent and continues to diminish.”19
Technology: The total number of steam engines (in the world), expressed in horsepower amounted to: 6.3 million in 1850; 11.4 million in 1860; 19.5 million in 1870; 28.9 million in 1880; and 35 million in 1885. Of these: 10.5 million were in the United States; 9.7 million in England; and 14.8 million in the heartland of Europe.
Steam engines in Prussia
| Number of Steam Engines | Horsepower | |
| 1837 | 437 | 7,514 |
| 1840 | 634 | 12,279 |
| 1843 | 1,090 | 27,241 |
| 1846 | 1,491 | 41,130 |
| 1849 | 1,969 | 67,150 |
| 1852 | 2,833 | 92,476 |
| 1855 | 4,085 | 161,774 |
| 1861 | 8,685 | 365,631 |
| 1878 | 37,320 | 2,891,867 |
| 1885 | 48,868 | 1,426,739 |
| 1889 | 58,782 | 1,773,454 |
| 1901 | 99,096 | 4,328,778 |
(The figures for 1837–78 do not include locomotives or steam engines used on ships. The figures for 1885–1901 do not include locomotives or steam engines used on naval vessels.)
Transport: (1) railroads in the United States, Russia, India; (2) the Suez Canal (1869); (3) steamships replace sailing ships; (5) ships built of steel instead of wood; (5) enormous increase in the power of the machinery.
Freight costs become cheaper in the 1880s. The freight cost for [approximately] one quarter [ton] of grain (217.7 kilograms) from New York to England was: in 1874, 10.5 shillings; in 1884, 4 shillings; and from Odessa to England: in 1874, for one ton (1,000 kilograms), 40 shillings; in 1884, 16 shillings.
The steep drop in prices on the [world] market for agricultural products lowered the purchasing power of the rural population with regard to industrial products. According to one estimate, during the 1880s agricultural income in England declined by 42.8 million pounds sterling. In the United States in the 1880s the ruin of millions of [family] farmers occurred. They lost their farms on a massive scale or became tenant farmers instead of farm owners.
Statistics on the agricultural crisis20
[The table below shows] average prices on the most important markets for agricultural products in Prussia. [This table covers] four eight-year periods.
| 1868/69–75/76 | 1876/77–83/84 | 1884/85–91/92 | 1892/93–99/00 | |
| Wheat | 223 marks | 207 marks | 181 marks | 155 marks |
| Rye | 173 marks | 166 marks | 156 marks | 131 marks |
| Barley | 165 marks | 158 marks | 148 marks | 138 marks |
| Oats | 160 marks | 148 marks | 142 marks | 138 marks |
| Potatoes | 56 marks | 59 marks | 53 marks | 49 marks |
| Straw | 46 marks | 50 marks | 48 marks | 43 marks |
| Hay | 72 marks | 65 marks | 60 marks | 59 marks |
The Civil War in the United States and the [resulting] high prices for cotton provided the impetus for the expansion of cotton production in Egypt on an enormous scale. Cotton cultivation was introduced in Egypt under Mohammed Ali in the beginning of the nineteenth century, but not on a large scale. Now speculation enters in. The khedive Ismael Pasha stole land and converted it into cotton plantations. There was an entire revolution in crop cultivation, the irrigation system, deep ploughing, steam engines for pumping water, steam-driven ploughs (machines from England), and [the employment of] serf-type forced labor. Loans from English and French capitalists. In 1865, a collapse. In [???]21 in Egyptian cotton.
Cotton Cultivation in 1900:
| Area | Yield | |
| United States | 25 million acres | 9 million bales (500 lbs. per bale) |
| India | 1.5 million bales | |
| Egypt | 1.3 million bales | |
| World production | 14 million bales |
But Egyptian cotton, because of its quality, brings a higher price and is even imported by the United States in substantial amounts.
Bank rates in the 1860–80s:
| London | 1861–70 | 4.3% |
| 1871–75 | 3.5% | |
| 1876–80 | 2.9% | |
| 1885 | 2.5% | |
| Amsterdam | 1884–87 | 2.5% |
| Berlin | 1870s | 4.5% |
| 1884–87 | 3–3.5% |
The strong expansion of joint-stock companies also intensified competition in industry. Industry developed in a series of new countries: Germany, Austria, the United States, Russia. As a result of all this, an intensified competitive struggle on the world market. And from that, the strong efforts to form monopolies.
(1) Long-term protective tariff policies
(2) Cartels and trusts
[Eugene von] Bergmann[,] Geschichte der [Nationalökonomishen] Krisentheorien [History of the Political Economy of Theories on Crises], Stuttgart[:Kolhammer, 1895].
Max Wirth[,] Geschichte der Handelskrisen [History of Commercial Crises], Frankfurt[:J.D. Sauerländer,] 1858 (fourth edition, 1890).
Herkner’s article [entitled “Crises”] in the Handwörterbuch der Staatswissenschaften22
Tugan Baranowsky[,] Studien zur Theorie und Geschichte der Handelskrisen in England [(Studies in the Theory and History of Commercial Crises in England)], Jena[: G. Fischer,] 1901.
Parvus[,] Die Handelskrisis und die Gewerkschaften [The Trade Crisis and the Trade Unions], Munich: Verlag M. Ernst, 1907.
[Parvus,] Der wirtschaftliche Aufschwung und die Gewerkschaften [The Economic Boom and the Workers’ Movement], Dresden 1896(?)23
Georg Bernhard[,] Krach–krisis und die Arbeiterklasse [Crash—Economic Crisis and the Working Class], Berlin: Vorwärts, 1902.
Do cartels and trusts regulate production? (The crises since 1880)
Can cartels and trusts arbitrarily set prices?
Can cartels and trusts be expanded to include all [spheres of] production?
Cartels, trusts, and the working class.
Cartels, trusts, and tariff policy.
International contradictions
Legislation against cartels and trusts
Raw materials and processing
In 1911 [even] without [counting] the world market!24
| Chemical industry | 156, 405 |
| Textile industry | 922,817 |
| Metal and machine industry | 1,657,863 |
| Timber industry | 429,975 |
| (timber for building) | |
| (and for commercial use) |
Gold and silver as monetary material
Do cartels represent progress?
(2)25 “Regulation of Industry” — Crises
[Crises] since the 1880s[:] 1893 in America, 1900 in Europe, 1907 in America and Europe—the ups and downs are extremely sharp, as before. Other methods [are necessary.]
The trade unions suffer the least; those that are weaker suffer the most.
(3) Price policy. (1) on occasion [i.e., conditionally there might be?]: a trust [limited to?[the “homeland”; (2) competition from “outsiders”; (3) on the world market (export premiums, giveaway prices); (4) competition through surrogates; (5) all-sided? struggle among cartels [producing] finished goods, semi-finished goods, and raw materials.
(4) Can a “universal cartel” come into existence?
(5) [General] Trends: 1) Conglomeration ????26 the smaller [swallowed up] by the larger, elimination of the middleman; 2) High protective tariffs, international conflicts; 3) Subjugation of the state!; 4) Exhaustion of the mass of the people, and of the petty bourgeoisie.
(6) The position of the workers
In general: sharpening of the contradictions, greater anarchy [of production], acceleration of development.
(7) Trusts and tariff policy. [See] Table 59, Liefmann, this page
(8) Do cartels and trusts represent progress?
[A list of] crises [beginning with] 1815.27 [mention] Robert Owen
1815, 1825, 1836/9, 1847 England (South America, the United States)
Canal building, railroad construction, speculation, exports [from England] to America.
After 1825, the steam-powered loom and radical change in the smelting of iron.
1842 Opening of the Chinese market.
1857 world crisis (abolition of the corn laws in 1846; gold deposits in California and Australia in 1850 and 1851; the Crimean War in 1855. After the 1848 revolutions: [economic expansion in] France, Germany, Sweden, Denmark, the United States. The crisis breaks out in America, then [spreads to] England, France, Hamburg.
1861–65 the “cotton famine.”
In 1863 250,000 totally unemployed; 170,000 partly; only 122,000 fully employed.
1867 enormous imports to England from the Orient (cotton). After the American Civil War, an upturn.
1873 Second worldwide crisis: [involving] the United States, Germany, Austria, England, Italy, Russia, Holland, Belgium, South America. The iron industry.