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Home -> Orville Marcellus Powers -> Commerce and Finance -> Chapter X

Commerce and Finance - Chapter X

1. Chapter I

2. Chapter II

3. Chapter III

4. Chapter IV

5. Chapter V

6. Chapter VI

7. Chapter VII

8. Chapter VIII

9. Chapter IX

10. Chapter X

11. Chapter XI

12. Chapter XII

13. Chapter XIII

14. Chapter XIV

15. Chapter XV

16. Chapter XVI

17. Chapter XVII

18. Chapter XVIII

19. Chapter XIX

20. Chapter XX

21. Chapter XXI

22. Chapter XXII

23. Chapter XXIII

24. Chapter XXIV

25. Chapter XXV

26. Chapter XXVI

27. Chapter XXVII

28. Chapter XXVIII

29. Chapter XXIX

30. Chapter XXX

31. Chapter XXXI

32. Chapter XXXII

33. Chapter XXXIII

34. Chapter XXXIV

35. Chapter XXXV

36. Chapter XXXVI

37. Chapter XXXVII

38. Chapter XXXVIII

39. Chapter XXXIX

40. Chapter XL

41. Chapter XLI

42. Chapter XLII

43. Chapter XLIII

44. Chapter XLIV

45. Chapter XLV

46. Chapter XLVI

47. Chapter XLVII

48. Chapter XLVIII

49. Chapter XLVIX

50. Chapter L

51. Chapter LI

52. Chapter LII

Commerce Of England Continued.

Manufacturing; Postal System; Banking; Speculation;
Colonial Policy.

From exporting her wool and importing her manufactures
as England had done during the Middle Ages, she had in the
seventeenth century risen to the position of a manufacturing
nation, sending large quantities of cloth, metals and eastern
products brought first to England, to her colonies and to the
lands along the Baltic and Mediterranean. Thus we see her
England as a importing the products of Turkey and India or
Na^on^avu the fish of New Foundland and re-shipping them
gation Acts to France, Russia, Spain and Italy. Her trade in
woolens with the Netherlands continued in a prosperous con-
dition while her colonial trade developed rapidly. The carrying
trade was yet largely in the hands of the Dutch, and in order
to stimulate English ship-building so as to handle this trade
herself, and cripple the Dutch, Cromwell in 1651 had laws
enacted, called the Navigation Acts, by which vessels built in
England or a British colony alone could be employed in the
importation of goods into England from the three continents
of Asia, Africa and America, while European merchantmen could
introduce into British ports only the produce of the nations to
which they belonged. English ownership of vessels engaged
in foreign trade thus became a necessity, and the officers and at
least two-thirds the crew were required to be native born.
These laws continued in force until 1825 and no doubt gave
a great impetus to shipping, enabling England to gradually
obtain control of much of the carrying trade of the world, an
acquisition which she has continued to hold up to the present


Under Cromwell's wonderful energy affairs improved. War
ceased and prosperity for a time became more general than it
had been for two generations before. Agriculture continued to
improve and manufactures advanced. The manufacture of cotton
goods had its inception about this time. A cheap and efficient

postal service was established under government
Postl" system control and security, thus greatly facilitating trade

and industry. Prior to this time many modes of
conveying letters had been in vogue, but Cromwell, by the Act
of 1656, organized a postal department of the government,
appointed a postmaster-general and established a system of
post-roads throughout the realm. Thereafter the occupation of
carrying the mails was forbidden to private individuals. One
object of the act was to discover and prevent wicked and danger-
ous designs against the government, by exercising a censorship
over the mails. Home and foreign commerce steadily advanced.
As manufacturing and ship building increased, foreign markets
were sought and found for English products. The commerce
of the Netherlands was now on the decline, partly owing to' the
persecutions of the Spanish king and partly as the effect of the
Navigation Acts. Germany, another competitor of England,
Pro ress ot was severe ly injured by the Thirty-years' war

English (1619-1648), and with these two competitors

Manufactures practically out of the race, English commerce went
forward with increasing vigor and facility. Immigration from
the Flemish manufacturing centers was encouraged, and thou-
sands of weavers and dyers came to England bringing their
skill and sober habits, as an addition to the wealth of the realm.
At about this time also, Louis XIV of France committed his
egregious mistake which cost his country so much and bene-
fited England accordingly of expelling the Huguenots or
French Protestants, by the revocation of the Edict of Nantes
(1685) and 50,000 of his most skillful artisans went over to
England, carrying with them an accumulated capital of not less


than 3,000,000. These gave a new impetus to the manufact-
uring interests of Britain, and greatly benefited, especially the
silk, glass, paper and hardware trades. From the teaching of
these exiles the quality of English manufactures showed a marked
improvement, and tissues of silk, wool and linen soon attained a
high degree of perfection. Irish linen from home grown flax
attained a world wide renown from this period.

It had been customary for London merchants to deposit
their funds with the mint for safe-keeping, but Charles I
seized their funds, as a forced loan, and thus not only destroyed
the government credit but, by the same act, put an end to the
custom. City goldsmiths of high repute were next entrusted
origin of the w ^ valuable deposits, and they paid the mer-
chants interest and issued a form of negotiable
receipt, similar in effect to our bank notes. These
goldsmiths were money lenders and made advances to the gov-
ernment in times of need, taking as security mortgages on future
revenues. They advanced to Charles II the sum of 1,300,000,
at eight or ten per cent, interest, upon the security of the taxes.
Charles in 1672 refused to repay the loan, saying they must be
content with the interest, and this caused widespread panic and
financial disaster. William Paterson, a Scotchman, then came
forward and offered to provide the government with 12,000,000,
to be repaid by taxes on beer and other liquors. The outgrowth
of the whole matter was the establishment in 1694 of the Bank
of England, an institution which has been a powerful element
in the commercial progress and greatness of England, as well as
a balance-wheel to the world of finance. After the great bank
was established the business of banking became an avowed prac-
tice, and men who could inspire confidence by their character
and wealth became bankers and found the pursuit lucrative.

At about the time John Law was promoting his Mississippi
scheme of reckless speculation in France the English were
launching a similar wild project of the most visionary character,


now known as the South Sea Bubble. By this scheme they pro-
posed to pay off the national debt and all grow rich at a stroke.
The shares of the East India Company were at a high premium
and the Bank of England promised wonders, why
not a11 g et rich in stocks? John Blount, director
of an insolvent company trading in the South Seas,
from which not a penny of a dividend had been collected in ten
years, persuaded an easy ministry that he could wipe out the
national debt if granted an exclusive charter to the rich gold
mines yet undiscovered in the lands of the South Seas and all
the teeming fisheries which might exist there. Parliament made
the grant, and the directors began selling stock. The premium
went higher and higher until it reached more than 1,000 per
cent. Eich and poor alike embarked their means in the confi-
dent assurance of making a fortune. Shrewd bankers accepted
the stock as collateral for loans which ordinarily they would not
have considered. Hundreds of visionary companies were formed
and worthless stocks were floated to the amount of over 500,-
000,000 more than all the gold and silver in the world, and
exceeding several times the value of the landed property of
England. The bubble burst in 1720.* Bankers and goldsmiths
failed, dragging down thousands with them. Many opulent
families were brought to beggary and untold misery resulted
among the poor. Like every other scheme the object of which
is the making of something out of nothing, the South Sea Bubble
exploded and left widespread ruin. So clamorous were the peo-
ple for some satisfaction for their losses that Parliament was
obliged to interfere, and not only distribute the meager assets
of the company among its victims but punish the offenders.
Several of the directors were imprisoned, and all were fined
to an amount aggregating several million pounds.

While the events previously enumerated were transpiring at

*The pin that pricked the bubble was the discovery that Sir John Blount
and other promoters of the scheme had quietly disposed of their stock.


home, England was developing a colonial empire of large pro-
portions in America. Had her statesmen pursued the same
liberal and enlightened policy towards her American Colonies at
that time which characterizes her present system of colonial
government, she might have continued to hold and
Colonial Policy control her American possessions indefinitely, but
instead she proceeded upon the false theory that
her colonies were proper subjects to be governed and exploited
for the benefit of the mother country a theory which has been
steadily pursued by Spain up to the present time, resulting in the
loss of almost all of her colonial possessions. All imports to
the colonies from any other country in Europe were forbidden
in order to give English manufacturers a monopoly of the Ameri-
can trade. Then in 1660 an act was passed prohibiting the
colonies from exporting certain enumerated articles to foreign
countries without being first brought to England and there
unladen and then re-shipped by English, merchants. The
enumerated articles were tobacco, sugar, corn, iron, molasses,
ginger, cotton, indigo, coffee, skins and lumber just the com-
modities which the American and West Indian colonies produced
in most abundance.

The colonists were not only compelled to sell their surplus
products through English merchants and send them in English
vessels, but they were equally forced to buy all imported goods
from England. An act was passed in 1663 prohibiting any
article from being sent into the colonies except the same was
sent from an English port and in an English ship. Home manu-
factures among the colonies were discouraged and suppressed.
Woolen manufactures were forbidden in 1719 and iron in 1750.
Colonial hatters were not allowed to send hats from one colony
to another. Thus the colonists were hampered and forced to pay
unjust tribute to home ships and merchants. This unfair and
narrow-minded policy caused much discontent and irritation
among the Americans, and was openly and ably opposed by an


element in Parliament headed by the great statesman William
Pitt, but without result. Finally the culmination came on the
celebrated occasion when the citizens of Boston emptied a ship-
load of East Indian tea into their harbor, and war was openly
declared and begun in 1775.

We have now reached a period in history celebrated for social,
political and industrial revolutions. During the last quarter of
the eighteenth century the human mind seems to have awakened
to a new development and realization of its possibilities. The
principles of republican government were enun-
ciated by the American colonists in 1775, and their
war of independence fought to a successful issue
in 1783. The doctrine that the power of the state resided in the
people and not in the sovereign was the seed which, transplanted
to French soil, ripened into the great social and political revolu-
tion of France in 1789. In England during this period a mighty
though silent, industrial revolution was going on, occasioned by
the invention of improved machinery and the introduction of
steam power. Prior to this time nearly all of the manufacturing
in England, as well as other countries, had been done by hand
in the homes or little shops of the workmen, aided by their
families and apprentices. The methods were crude, tedious and
difficult, causing manufactured goods to be both imperfect and
expensive. A series of useful inventions following closely upon
each other changed all this, increased the power of production
in mining, manufacturing and agriculture a hundredfold or
more, and made England the richest nation in the world.

Henceforth by the use of labor-saving machinery men were

able to produce not only better wares and of more uniform

quality, but in far greater quantities in proportion

System** to the labor employed, and hence much cheaper

in cost. But in order to utilize this machinery

it became necessary that workmen should congregate, and thus

the introduction of machinery brought about the factory sys-


tern. Costly and intricate machines as well as buildings in which
to conduct the work were necessary. This required the amassing
of capital a new feature of the industrial problem. At first
factories were located near streams where water power could be
obtained, but with the advent of the steam engine they could be
located near towns where there was an abundant labor supply,
and as the means of transportation improved, less regard need
be had for the location of the raw product. The introduction
of the factory system marked an era in the industrial progress
of England and the world, and the bringing of workmen together
and into more intimate association with each other had a radical
influence upon them intellectually.

Chief among the inventions which brought about this indus-
trial revolution was the steam engine of James Watt, who took
out his patent in 1769. This was preceded in 1767 by the spin-
ning jenny invented by James Hargreaves, whereby many threads
could be spun at once instead of a single thread as heretofore,
and this to be followed later with improvements in the methods
of spinning and weaving wool and cotton by Arkwright, Cromp-
ton, Cartwright and others. These inventions completely revo-
lutionized the manufacture of cotton and woolen goods, and
these industries went forward with a bound. Manchester at-
tained great importance on account of the magnitude of its
factories. Liverpool, hitherto a straggling fishing town, became
a leading city, importing large quantities of raw cotton and ex-
porting the finished goods. Silk manufacture was similarly
promoted. The construction of machinery necessitated the use
of coal and gave a new impetus to mining, while
the use ^ the s ^ eam engine enabled the miners to

pump the water out of the mines a thing which
they had not been able to do by means of the crude hand pumps
formerly used. Processes of smelting and developing ore, and
the manufacture of steel were greatly improved. Birmingham
and Sheffield date their vast hardware and cutlery trade from


the invention of the puddling furnace by Cort in 1783, whereby
wrought iron was produced by the use of the coal found in close
proximity to both the ore and the limestone which is used as a
flux. By means of this invention immense quantities of ore were
utilized which would otherwise have been worthless.

Following closely upon the inventions enumerated above
came the Napoleonic wars, which engaged the most of the con-
tinent and threw a large share of European commerce into
English hands. At a prodigious cost immense armies were
Commerce kept in the field against France, and to supply the

wants of these required the employment of an in-
dustrial army at home. England had the advan-
tage that, while being a participator in the war, her fields and
cities were not devastated nor her territory invaded by the
armies. Prices were high and English goods in great demand.
Thus the period of war was a commercial advantage to England.
Meanwhile the development of the industries resulted in a
great improvement in the means of transit and commerce through-
out Britain. Goods manufactured must be sold and transported,
and better means of carrying were needed. Paths for pack-
horses were converted into wagon and cart roads, canals were
built, rivers cleared and .utilized, and the way thus paved for the
introduction of steam power to locomotion a little later.

After the fall of Napoleon and the restoration of peace
throughout Europe in 1815, there came a period of reaction and
commercial depression in England which lasted ten years. This
was caused chiefly by the efforts of continental nations to revive
their own shattered industries by means of severe protective
tariffs, which practically shut out English manufactures. A
After the series of bad harvests coming about the same time,

w^ together with the high taxes incident to the war,

1815 to 1825 placed the country in a severe strait. The distress

was aggravated by the so-called "Corn Laws," which were en-
acted as a means of relief to the farmers, and provided that no


corn should be imported unless the price was 80s a quarter.*
The result was expensive bread for the working classes, and the
many substitutes resorted to for bread raised the price of other
foods. Riots and public meetings were held among the mining
and manufacturing districts throughout the whole of England.
The period of greatest distress was from 1817 to 1819, and
during that time the strong arm of the government was neces-
sary to maintain peace and order. In 1819 came a severe
financial panic, and in the single year no less than 3,552 bank-
ruptcies occurred in England alone. Gradually an improvement
came. The Bank of England resumed specie payment in 1821.
Injurious laws and restrictions were modified, business with the
colonies increased and commerce revived.

During this period of war and commercial depression at
home England was growing rich in colonial possessions abroad.
She not only defeated the French in India as previously stated,
and extended her holdings in that direction, but acquired Ma-
lacca, Ceylon (1796) and the Cape of Good Hope (1806), besides
Australia and many minor dependencies. Captain Cook had
discovered New Zealand in 1769, and by his advice in 1788 a
shipload of convicts were sent out and Sidney was founded as a
Growth of penal colony. A few sheep were carried thither in

colonial 1797, and the fine pastures proved wonderfully

adapted to their rearing. The wool was of such
excellent quality that this, together with gold, subsequently
made Australia one of England's richest and most important

The period of 1825 to 1850 may be said to mark the tran-
sition stage from protection to free trade in England's com-
mercial policy. Prior to this time more or less severe restric-
tions had been placed upon manufacturing, agriculture and com-
merce. Numerous monopolies had been granted, as in the case

*A quarter equals 8.252 bushels in our measure and 80s per quarter
would be equivalent to about $2.36 per bushel.


of the Hudson Bay and East India Companies. The Navigation
Acts passed in 1651 continued in force, and every commodity,
raw and manufactured, was fettered with customs or excise
duties. A radical change in England's policy, requiring twenty-
five years for its consummation, was now to take place. In
The Change 1820 a company of London merchants sent up a
ti^p^T" petition to Parliament, praying that all duties ex-
Trade cept for purposes of revenue might at once be
repealed. A similar petition came from the Chamber of Com-
merce of Edinburgh. Parliament appointed a committee to in-
vestigate the question, and the report of the committee was
unanimously in favor of granting the relief asked. The Naviga-
tion Acts were at once modified and their severity relaxed. The
duties on raw silk and wool were reduced despite the opposition
of the wool growers. A Eeciprocity Bill was introduced by
Mr. Huskisson, President of the London Board of Trade, and
passed by Parliament, giving foreign ships equal advantages in
England to those accorded English ships trading in foreign
ports. For a period of nearly twenty-five years the pendulum
of public sentiment was swinging in the direction of free trade,
but it was not until 1849 that the Navigation Acts were entirely
repealed, the Corn Laws abolished, and England had committed
herself unreservedly to the policy of free trade.

Meanwhile the mighty impulse given to the iron trade and
the application of steam to transportation by land and water
were developing commerce and the industries to a still greater
degree. Fulton had demonstrated the use of steam for the pro-
pulsion of ships in 1807, and in 1838 the first steamship, The
Great Western, crossed the Atlantic. The voyage to America
Application which had hitherto required five or six weeks was
of steam to now suddenly reduced to a little more than a
Transportation week The Britigh fleet of merchant vessels in-
creased to twelve or fourteen times its size of thirty years be-
fore, and under free trade, England became the focus for ships-


of other nations bearing the products of nature and art from
every clime, and returning, radiated from the same ports
freighted with English manufactures for world-wide use. The
invention of the telegraph in 1846 was another great step in
advance, and with the penny post the means of communication
became so improved that supply and demand were regulated,
extensive fluctuations in prices avoided, and a steady and healthy
commerce promoted. The discovery of gold in Australia in 1851
led to extensive emigation to that colony, vastly increasing
the colonial trade of England. Within ten years gold was
sent to the mother country to the amount of 100,000,000.
This influx of the precious metal by cheapening money raised
prices of commodities generally, and thus stimulated production.
The opening of the Suez Canal in 1869 afforded a shorter and
quicker route to the East, and led to an extension of commerce
with India, China, Australia and the East Indies.
Possessions The culture of cotton was introduced into Aus-
tralia, and given a great impetus in 1861-1865 by
the scarcity of the American fiber, occasioned by the war of the
Kebellion which blockaded American ports, and soon Australian
cotton rivaled in quality the celebrated "Sea Island" growth.
Besides copper, tin, iron, wine and wheat, wool also came from
Australia in large quantities. From India and Ceylon came
cotton, indigo, jute, rice, wheat, horns, hides, tea and coffee.
Thus England's eastern possessions continued to expand, while
roads, canals, railroads and telegraph lines were constructed
throughout those colonies.

The English acquired the Cape of Good Hope (called Cape
Colony) from the Dutch in 1806. North of this colony were the
independent states of the Transvaal Eepublic and the Orange
Free State, still occujvied by Dutch Boers. These settlers, who
kept up a close intercourse with Holland, were engaged prin-
cipally in the rearing of sheep and the production of wool,
which latter was their chief export. Natal, a newer British de-


pendency than Cape Colony, was of growing importance^ and
produced arrowroot and sugar in considerable quantities. En-

gland exported to her South African possessions
South Africa apparel, furniture, cloths, iron, hardware, leather

and machinery, and in turn received from them
diamonds, gold, ivory, feathers and wool. The extensive dia-
mond fields proved a great attraction, as the supply of the
precious stones was said to be inexhaustible, and the Boers were
gradually pressed back. In order to secure more Boer terri-
tory, a mock contest was gotten up between a native chief and
the Boers, and by misrepresentation to the Boers a British
referee was actually appointed to decide the dispute. The decis-
ion was adverse to the Boers and the territory was immediately
ceded to the English. Friction between the English and Dutch
continued, until finally in 1899 open warfare was begun, result-
ing in a conflict lasting nearly three years. At fearful cost of
men and supplies, England subdued her antagonist and annexed
the territory of the Boer republics to the British Crown, the one
under the name of the Transvaal Colony and the other as the
Orange Eiver Colony.

The heavy draft upon the English treasury occasioned by
the South African war; the decline in the shipping interests of
the United Kingdom and the sale of several large steamship
lines to American capitalists; the severe decline in the acreage
of wheat in the United Kingdom (from 3,750,000 acres in 1872
to 2,000,000 in 1902), with similar decline in the acreage of
corn, together with the fact that Germany, France and the
England's United States have entered the field of manu-

facture as severe competitors of England, and have

Condition even secured important English contracts in steel

construction, have given rise to serious doubts whether the United
Kingdom will continue to lead the commerce of the world. The
overwhelming balance of trade between England and the United
States is now against England, and if this should continue for


a series of years, America, instead of being a debtor, would then
become a creditor nation, our dividends and interest would re-
main at home instead of going to England, and the financial
center of the world, now in London, would again move to the

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