MR. COWEN ON THE DEPRESSION OF TRADE.
MR. COWEN has turned the annual dinner of a Com- mercial Travellers' Association to useful account, by stating his theory of the causes of the present distress. It has been observed in the recent Indian famine that the ability of a people to bear up against scarcity depends almost as much upon the hope they have that the worst will soon be over, as upon the pittance which the Government gives them to keep them alive while the worst is still present. In some- thing the same way, any man who can show reasonable ground for thinking that the depression under which trade is now suffering will .pass away in due course, does something to help men to bear it. If the sufferings of to-day are to be traced to the same cause as the sufferings of yesterday, the pro-. spect is at all events better than if they lure attributable to some new calamity, the extent and duration of which it was impossible to forecast. It may be, of course, that this identity is only imaginary. Every crisis must have some features peculiar to itself, and the important thing is to ascertain the comparative importance of these new and special • features, by the side of the features with which we have been familiar in former years. In this respect Mr. Cowen takes the hopeful side. He holds that the causes now in operation are the causes that have been in operation in every similar period since 1824, and he infers that the storm will pass away as the others have passed away, because it has come as the others have come. There can be no harm in taking this view, whether it is realised or not, because the result of taking the opposite view would only be to para- lyse the exertions which are the more necessary in proportion as the crisis is serious. Nothing can be gained by preaching despair. If the distress were less generally felt, it might be well to heighten the tints in the picture, in order to bring the necessity of prudence and economy home to those who have to practise them. But when every man in trade is feeling the same pressure, there is no fear that the seriousness of the position will not be appreciated. The danger rather is that it will be appreciated too well, and that those upon whose zeal, industry, and economy the hope of improve- ment rests will become discouraged, and so allow things to grow worse, because it is not worth while to try to make them better. Mr. Cowen's speech will be a useful tonic for men in this condition. It can do no one any harm to be told that " the cloud now passing over us, though unusually dense, is destined to be succeeded by a season as bright and prosperous as any that have preceded it." It will not clear off if men sit down and fold their hands, and nothing is so likely to make them sit down and fold their hands as the belief that, do what they will, the prosperity of England is gone.
Mr. Cowen's first position is, that as there can be no such thing as a commercial depression which is at once universal and permanent, the present crisis will not be per- manent, because it can be shown to be universal. "Eng- land is not exceptional ; she is not suffering alone or chiefly. On the contrary, the change came to her nearly last, and has been less disastrous to her than to some other nations." If English trade had suffered while the trade of other countries had gone on expanding, or even maintaining its old level, there might, Mr. Cowen admits, have been cause for fear. But in Austria, in Germany, in the United States, in South America, the phenomena are precisely the same. Our neighbours are as badly off as we are. Thus, whenever prosperity returns to one country, there is no reason why it should, not return to all. Mr. Cowen next declares that he can lay his finger on the precise cause of the malady. It comes from the waste of capital in unprofitable enter- prises. In 1825 the panic was due to the extensive gambling in the shares of the South-American mines. Shares in mining Companies for which £70 had been paid ran up to £500 and even to £1,500. Those who bought them at these latter prices might as well have thrown their money into the sea, and when the shares themselves turned out to be worthless, there was nothing before their possessors but beggary and the Bankruptcy Court. Making haste to get rich brought its inevitable result,—at least the result which happens in so large a proportion of cases, that for the majority of mankind it becomes inevitable. The panic of 1846 was the same story over again. In September, 1845, there were 457 new railways projected, for the completion of which a capital of £200,000,000 would have been required. In so far as this capital was actually invested, it was sunk in enterprises many of which could never pay any dividend, while none could pay the enormous dividends demanded by share- holders who had bought their shares at exorbitant prices. Capital invested without interest means distress and • panic, and as one projected railway after another was abandoned, the proprietors found that besides bringing them no interest, the capital itself had disappeared. What they had thought to be a most profitable concern proved to be merely an old stocking, and what was worse, an old stocking with a hole through which the money hoarded in it disappeared. In 1857, the unexpected conclusion of peace caught those who had counted on the continuance of war prices, and whole trades found themselves burdened with stocks for which there was no longer any demand, or no demand except at peace prices. In 1865 there were 287 limited-liability Companies formed, with a nominal capital of £100,000,000, and only £12,000,000 of it paid up. It turned out that the world did not want to buy more goods from Joint-stock Companies than it had previously been ready to buy from private traders, and therefore this rush of enterprise showed only anxiety on the part of men who were not in business to appropriate the supposed profits of those who were. Before a year had passed it became clear that an increased desire to supply goods is not the same thing as an increased demand for them, and as the liabilities of the Companies were constructed with reference to their nominal, not to their real capital, 1866 saw the worst crisis. of recent times. In Mr. Cowen's opinion, the crisis under which trade is supposed to be suffering just now is simply a repetition in cause and effect of the Railway crisis of 1846. " English capitalists, under cover of State loans, have been over-specu- lating in railways abroad, just as they over-speculated in railways at home thirty years ago, and with a similar result." Nearly £500,000,000 have been lent to foreign Governments and foreign Companies during the last few years, and the greater part of this money has gone to making railway and other public works. These railways have not paid the dividends expected of them, and hi many cases the lines themselves have never been opened, so that the money spent in beginning them has been wholly wasted. The sudden cessation of enterprise abroad has not only involved many English capitalists in heavy losses, it has also brought temporary ruin upon other capitalists, who were merely sup- plying them with goods. In 1872, 975,000 tons of iron and steel were exported to the United States. In 1876, the export was only 100,000 tons. That is a very serious change to pass over an important industry in so short a space of time. It came so suddenly, that there was no time to make preparation against the storm, and the losses of the men who had been accustomed to turn a profit on 975,000 tons of iron instead of on only 100,000 tons, have to be added to the losses of the men whose money has gone to pay for all that weight of metal, now lying useless in unfinished railroads all over the world. This is Mr. Cowen's reason for looking hopefully upon the commercial future. A crisis which is produced by over- trading passes away after a time. New capital comes into existence, and for a time, at all events, it is employed with more prudence and judgment. This has been the case with all the former depressions traceable to this cause, and if the present depression can fairly be attributed to over-trading, there is no reason to doubt that it will disappear in the same way. Of course Mr. Cowen's prediction will count for nothing, if it can be shown that the present depression has a different origin from those that have gone before it. But there is no need to wander afield in search of a new cause, when the old cause is there to explain all the phenomena. That England has been over-trading again, cannot be denied ; that she has suffered, cannot be denied. Why should we suppose that the connection between the two facts is suspended, or assume that the suffering which in former years came from over-trading n ow comes from some more occult cause ?
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