Chapter XXI

The Effect on Trade of Political Complications and of Losses on the Debts of Defaulting States.

The depression in trade, of which we have been tracing the main causes, was no doubt in some degree enhanced by the fear lest the political complications connected with the Eastern Question might drag us into war. Indeed, the evil effects of war on trade are chiefly felt just before its commencement from uncertainty, and just after its close from reaction. Actual hostilities occasion a large expenditure on the part of Government, and a stimulus is given to a variety of trades. Hence a brisk demand for labour and corresponding animation among the retail dealers. Money is rapidly circulated, and for a time the industrial and mercantile classes enjoy a factitious and artificial prosperity. But at the close of a war a reaction sets in very much akin to that which followed the "leaps and bounds" of our commerce in 1872-3, and stagnation and distress ensue. Thus it was, after the termination of the long war with Napoleon in 1815, that the country underwent a commercial crisis more severe than any that she has since sustained. Hundreds of thousands page 93 were thrown out of work, and were driven to desperation. Incendiary fires, attempts at plunder, and "bread or blood" riots spread alarm throughout the country during the years 1816 and 1817. Again, the close of the war, with Russia in 1856 was succeeded by a severe panic in 1857. Numerous failures occurred, and the aggregate liabilities of the failed houses were computed to amount to £45,000,000. Government had to interfere, and saved commerce from a deadlock by empowering the Bank to extend its issues beyond their legal limits.

We do not think, however, that political apprehensions exercised much influence on the recent state of trade—certainly far less than resulted from the losses sustained by the British investing public through the non-payment of dividends by several indebted states. Not only did there ensue the immediate loss of the interest that was due, but also the fear that the capital itself was endangered. Neither individual nor national suspensions are often followed by a resumption of payments. When a country once forfeits its credit by the non-payment of its dividends, it loses one great incentive to the punctual performance of its engagements, viz., the hope of contracting fresh loans. These losses were, pro tanto, a diminution of the available capital of the country, and thus they contributed in a certain measure to the general depression. Fortunately the bulk of these losses fell on wealthy persons, to whom they brought disappointment, but not ruin. One compensating effect attended them. The faith of English capitalists in the solvency and morality of foreign governments was thoroughly shaken. Fewer fresh investments have been made abroad the last few years, and the savings of the country, roughly estimated at from £180,000,000 to £220,000,000 per annum, have mostly remained at home to accumulate into the unprecedentedly large sum that now lies nearly idle, and is eagerly seeking fresh fields for profitable employment.