26 OCTOBER 1867, Page 7


E wonder whether the Rouen Chamber of Commerce, when it invited other Chambers abroad to enlighten France on the present depression of her trade, really harboured a single doubt as to the answer which would infallibly be returned. French ingenuity excels in the discovery of channels for indirectly ventilating truths which it dare not otherwise discuss. Clearly the President of the Rouen Chamber has sat at the feet of Prevost Paradol and taken a lesson in his irony. The merchants of France could scarcely venture to memorialize their Government, and remonstrate on the disastrous effects of prolonged political uncertainty. But an invitation to foreign commercial associations requesting the favour of advice on the causes of the present univeral stagnation in trade had a fine cosmopolitan air to recommend it. With such a course no official would dare to find fault. Yet the result was absolutely certain. One reply only could be expected, and it came. From all quarters—from England, Holland, Prussia, Bavaria, Italy —a unanimous verdict was returned. The political situation is at the bottom of all the mischief. The commercial prosperity of Europe is succumbing under continued political suspense.

In an article last week we pointed out that the Liverpool reply assigned two principal causes. Politics and Protection were both made responsible for the present deplorable state. But while the economical shortcomings of the French reginw were roundly taken to task, some scruples were naturally felt as to lecturing a French institution on the political faults of its Government. We fancy that the value of the reply suffered somewhat in consequence. The Liverpool gentlemen failed in this respect to play into the hands of their friends in Rouen. The French Govern- ment is less Protectionist than its subjects, and we much doubt whether it was desired that the Free-Trade screw was to be put on. Besides, Protection is a chronic disorder, and France is suffering from an epidemic. What Rouen wanted to know is why now, in the year 1867, trade is paralyzed, more than at any time since France made its first great move in advance ; why, with the vaults of the Bank filled to an extent never reached before, business ap- pears to be at a complete standstill, and industry hopelessly disorganized ? "Protection," they might argue, "is at the worst, from your own point of view, a check to advancing prosperity, not the cause of a sudden and unexpected collapse. And you may be right in alleging that when the hour comes, our recuperative powers may be slower and less vigorous under Protection than under Free Trade. We may grant all that. But what is the special direct cause of our present disasters ?" The Liverpool reply, though courteously euphe- matic, is not silent on that point, and other Chambers of com- merce are quite explicit. The commerce of Europe is break- ing down under prolonged political suspense.

But is suspense worse than the reality ? It is long since we have seen really quiet times. Many more wars have occurred during the last thirteen years than during the pre- vious thirty. Yet in no period have industry and commerce taken more gigantic strides in advance, especially in France. Is it not a fact that war has lost a portion of its terrors for trade ? The Crimean war, the Italian war, the Danish war, the German war followed in quick succession, none of them accompanied by any great commercial catastrophes. Why, then, should merchants now be more anxious than ever ? Is it conceivable that the apprehension of hostilities should paralyze trade more than the hostilities themselves, especially after the experience gained War, for thirty years or more, was considered almost impossible, but its terrors were as great as its improbability. It was thought that the modern organization of international trade would break down at the first cannon-shot. Both views have proved incorrect. War is again not only a constant possibility, but a frequent pro- bability; and, nevertheless, trade has survived wars, and flourished during their continuance. Why, then should poli- tical alarms create such extreme, such unprecedented de- pression?

The fact is, trade can bear war ; it cannot bear rumours of war. Its organization is such that the events of three months hence are more important to it than the events of to- morrow. The system of credit lifts it over a certain interval in advance. The momentum, too, of commerce at this day is such that it cannot be stopped at will. The breaksman must look a long way ahead if he is to put on the break in time. Now, modern wars are short and sharp, and a war may be over before the headlong speed of trade can be stopped short. The map of Europe can be remodelled before a six months' bill falls due. Prussia had conquered Austria before a Trieste importer could cancel a coffee order in Brazil. A sudden war compels commerce to carry out the engagements of peace, but it gives no time for a general suspension of trade. Wars, too, have been localized beyond all expectation. It was scarcely to be believed that the Italian war would be confined to the actual combatants, and before the outbreak of the Prusso-Austrian war no one dared to anticipate the absolute neutrality of France. Wars in prospect always assume European dimension, and when those dimensions are reduced in actual wars there ensues a feeling of relief. But the chief evil which results from prolonged political suspense is the neces- sity which it imposes on all classes of bankers and traders to take precautions, often unnecessary, long in advance, to curtail transactions which it is not desirable to curtail, to stop the course of commerce long before the actual danger arrives, to bring about some of the evils of war without the war itself. Whoever wishes to be tolerably secure during war must begin to shorten sail many months before. It is often asked why during the height of a commercial crisis transactions do not decrease, why imports and exports continue on the previous scale, why bills remain as numerous, why, in short, the volume of commerce rolls on so long in the same proportions apparently unchecked ? If the Bank of England raises its rate to 10 per cent. it produces no visible effect. It appears as if no one discounted a single bill less. The truth is, the results of any check, political or financial, do not become visible till many months afterwards. Time must be given to importers to cancel their orders for goods given under more favourable auspices, to correspondents in China, India, the West Indies, South America. And how often before the letter of recall arrives the goods prove to have been shipped. If shipped, they must be paid for. If paid for, the bankers cannot refuse the credits which they had promised for such a contingency. Again, time must elapse before exporters can shorten the credits which they gladly give to their buyers *abroad in good times. Foreign countries seldom pay cash for

Manchester goods. Many manufacturers are glad if they see their money within the lapse of twelve months. They cannot change the course of their trade at a month's notice. They can cease to sell and to manufacture if they like. Bat they cannot force cash sales. Buyers and sellers, exporters and importers, Englishmen and foreigners, bankers and clients, are all committed for a certain number of months, and if any calamity comes they must fight their way through as they best can. But what they can do is to refrain from fresh transactions, and to take precautions that after a certain time their commitments may be small. And this is what has happened in Europe for the last year. We are now witnessing its full effects. Political alarms have lasted so long that all classes of traders in all countries have acted on a war policy for months and months. Buyers have held aloof, dreading to find themselves saddled with liabilities to pay, and with a stock which they cannot sell. Bankers have curtailed their credits in every direction, and ample time has been given for such caution to have its full effect. Money is plentiful beyond all measure, because cautious capitalists are afraid to lend, and cautious traders equally reluctant to borrow. And all this has lasted so long. From the first outbreak of the late German war till now, the pro- cess of shortening sail has been continuous, and at no time have there been prospects of calm weather ahead. Having once sacrificed the profits of a year on the principle of cau- tion, every one is naturally averse to launch out now. Better wait till the end. The aggregate liabilities of commerce at this moment we know to be excessively reduced, as is amply proved by the low rates of discount in London and in Paris, even if there were not corroborative evidence of every kind ; and no one could wish, while all remains unsettled, to see those liabilities increased.

The present situation, indeed, appears so natural, so neces- sary a consequence of the state of Europe for the last year, that any other might be considered extraordinary. The ten- dency to caution has been heightened by the rapid increase of many political disasters. For many years the sanguine men had it all their own way. The despondents have now had their turn. Commerce, as well as the Stock Exchange, has its " bears " and its "bulls," the men who never believe in anything hopeful, and the men who will never believe in any disaster. The story is told of the late Baron Rothschild that he used to say, "Providence is very kind ; it always favours the 'bulls.'" But the bulls have been hard hit of late in every department of trade, and are almost disappearing. As for the steady-going class, who stand half-way between "the bulls" and "the bears," neither over speculative nor over timid, they have to look a long way back for the time of their supremacy. It is long since we have had a period of prosperous com- mercial tranquillity. There have been brief bursts of excite- ment, high profits, and enormous liabilities,—followed very shortly by reaction and disaster. The regular, steady trade, on which the respectable, prudent merchant throve and pros- pered, has given way to trade in which fortunes have been won and lost and saved by the extremes. Trade has been spasmodic, and two classes have thriven most,—those who went with the stream when the pace was furious, but stopped in time,—and those who, always frightened at their own shadow, have at last been justified in their fright.

If Providence for many years favoured "the bulls," it is certain that the rulers of Continental Europe have done their best to indemnify "the bears." The disastrous stagnation of commerce and industry everywhere is the direct and inevi- table result of the unsettled state of Europe, and the long continued and legitimate apprehension of the imminence of war. France has suffered from short crops of corn and of wine, and the high tariff of the United States may check the export of the looms of Lyons. But the enormous accumu- lation of bullion in the Bank of France tells its own tale. Capital is there, but its employment is dangerous. Ever since '48 the more prudent bankers of Paris have acted on the idea that they might awake any morning to find Paris in a state of revolution. Hence their great caution and their horror of large liabilities. A Frenchman would always recoil from the vast transactions of his English competitors. But to this fear of complication at home he now adds, as a con- stant element, the fear of complication abroad. The French speculators have been ruined ; the French capitalists have been demoralized. The financiers of the Empire have suc- cumbed to the crisis ; the permanent capitalists of France meanwhile hold their hands. Thus capital lies idle at home, while the foreign customers of the French manufacturers, under the alarms created by the Imperial policy, diminish their purchases and contract their own liabilities. The Rouen Chamber of Commerce are justified in assuming that they do not suffer alone. The " solidarity " of commercial suffering is even accepted by those who sneer at the soli- darity of other international interests. English manufac- turers find their foreign buyers absent, their bankers nervous, their whole trade at a standstill, on account of Continental complications. We suffer in common with others, and as much as others, by the blunders of foreign Governments. And there are politicians amongst us who profess that England has no concern with what goes on abroad