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had been more carefully adjusted to the effectual demand, and involved the producers in difficulties.
Besides establishing a system of free trade, the next best thing that could be done to avoid the chances of gluts, or of improvident production in particular departments, would be a determination on the part of Government to withhold all relief, except in cases of extreme necessity, from those who have had the misfortune to be involved in them. We acknowledge that this seems, at first sight, rather a harsh doctrine; but we are satis. fied that, on examination, it will be found to be the only safe and really practicable line of conduct for the government of a great country to follow. Almost all the restrictions and prohibitions which now fetter our commerce, and restrict the spirit of enterprise, have been occasioned by Government stepping out of its proper province, and interfering for the relief of those who had got themselves entangled in difficulties. By this means, a very large proportion of the industry of the country has been placed on an insecure foundation; and merchants and manufacturers have been delivered from that natural responsibility under which every man ought to act, and been tempted to trust to the extrinsic support usually afforded by Government in the event of their speculations giving way. Were it possible, indeed, to grant such assistance without inflicting a real injury on the rest of the community, none would object to it; but, as this cannot be done, we confess it appears to us, not only that sound policy, but also that real humanity would dictate the propriety of its being withheld in all but extreme cases. We are glad too to be able to state, that this line of policy is sanctioned by the highest practical authority-by that of a gentleman who, if not at the very head, certainly ranks in the foremost class of mercantile men. In his able pamphlet on the Orders in Council, published in 1808, Mr Alexander Baring has expressed himself on this subject as follows:- The only beneficial care a government 'can take of commerce, is to afford it general protection in 'time of war, to remove by treaties the restrictions of fo'reign governments in time of peace, and cautiously to abstain from any, however plausible, of its own creating. If 'every law of regulation, either of our internal or external trade, 'were repealed, with the exception of those necessary for the 'collection of the revenue, it would be an undoubted benefit to commerce, as well as to the country at large. An avowed system of leaving things to take their own course, and of not lis'tening to the interested solicitations of one class or another for relief, whenever the imprudence of speculation has occasioned
'losses, would, sooner than any artificial remedy, reproduce that equilibrium of demand and supply, which the ardour of gain will frequently derange, but which the same cause will, when let alone, as infallibly restore.
The interference of the political regulator in these cases, is not only a certain injury to the other classes of the community, but generally so to that in whose favour it is exercised. If 'too much sugar be manufactured in Jamaica, or too much 'cotton in Manchester, the loss of those concerned will soon 'correct the mischief; but if forced means are devised to provide for the former a temporary increase of demand, which 'cannot be permanently secured, a recurrence to that natural state of fair profit, which is most to be desired by the planter, is artificially prevented by the very means intended for his relief. And if the cotton manufacturer, on the other hand, is to have his imprudences relieved at the expense of those em'ployed on linen, silk, wool, or other materials, the injustice, as well as the impolicy of such a remedy, need no illustration.
Whenever the assistance of Government is called for by any class of traders or manufacturers, it is usual to make the most splendid display of the importance of that particular 'branch to the nation at large. The West and East India interests, the ship-owners, the manufacturers, the American merchants, &c. have all the means of making these brilliant • representations; but it should be recollected, that the interest ' of the State consists in the prosperity of the whole; that it is contrary to sound policy to advance one beyond its natural means, and still more to do so at the expense of others; and that the only mode of ascertaining the natural limits of each, is to leave them all alone.'*
Without attempting to weaken the force of the conclusive observations we have now quoted by any farther remarks of our own, or by any reference to Mr B.'s late appearances in the House of Commons, we shall now dismiss this branch of our subject, and proceed to the consideration of the second, or to an examination of the causes of those revulsions which proceed from mercantile miscalculation, or, as it is more commonly, though less correctly termed, from over-trading, or over-speculation.
II. Over-trading may either take place when the currency is at its proper level, and when it rests on a secure foundation; or it may take place when the currency is in excess, and when
* An Inquiry into the Causes and Consequences of the Orders in Council, 1st Ed. p. 133.
it is inadequately secured, and when, consequently, it is liable to sudden fluctuations in its amount and value.
1. With respect to that over-trading which occasionally takes place when the currency is at its proper level, it may arise from a variety of causes. If a falling off were either apprehended, or had actually taken place in the accustomed supply of any commodity in general demand, or if any new and extensive markets were suddenly opened, there would undoubtedly be a greatly increased speculative demand for the articles that were supposed to be deficient in quantity, or that were understood to be suitable for the newly opened markets. This increased demand would occasion a rise of prices; and from the eagerness with which speculators crowd upon such occasions into the market, there is an extreme probability that prices would be raised beyond the proper level, and that there would be a dangerous recoil.
But the great hazard to which those who offer an unusually high price for any species of commodities, in the contemplation of a further advance, are exposed, depends on the difficulty of ascertaining the true state of the fact with respect to the grounds on which a deficient supply, or an increased demand, is anticipated. This, however, is evidently a practical question for the solution of the merchant, whose skill and sagacity are chiefly to be tried by the dexterity and success with which he conducts his business under such circumstances. The late cotton speculation, for example, took its rise, partly and chiefly from a supposed deficiency in the supply of cotton, partly from an idea that there was a greatly increased demand for raw cotton in this country and the Continent, and partly from a belief that the stocks on hand were unusually low. Now, it is plain that the success of those who embarked in this speculation must have depended entirely on two circumstances;-in the first place, that they were correct in the fundamental supposition, on which the whole speculation rested,-that the supply of cotton was no longer commensurate with the demand; and, second, that their competition did not raise the price so high as to diminish the consumption by the manufacturers in too great a degree to enable them to take off the quantity to be actually brought to market. If the merchants had been well-founded in their suppositions, and if their competition had not raised the price of cotton too high, the speculation would certainly have been successful. But, instead of being well-founded, the hypothesis on which the whole thing rested was perfectly visionary. There was no deficiency in the supply of cotton, but, on the contrary, a great superabundance; and though there had been such a deficiency, the excess to which the price was
carried must have checked consumption so much, as to have occasioned a ruinous decline. ‡
We subjoin an official account of the imports of cotton wool into Great Britain and Ireland in the years 1823, 1824, and 1825, specifying the countries whence the imports were made, the quantities imported from each, and the total quantities re-exported to foreign countries.
Perhaps we may be excused for mentioning by the way, that that party, and it is still unfortunately a very strong one, that is attached to those restrictions and prohibitions which the present Ministers have done so much to subvert, have availed themselves of the distress and ruin occasioned by the failure of the cotton and other speculations, to raise a clamour against the liberal policy of the Cabinet, and to represent the science on which that policy is founded as of no real utility, because the Economists did not warn the speculators of the ruin that awaited them! Nothing, however, can be more completely unfounded than this idea. Before an appeal can be made to the principles or professors of any science for assistance, care must be taken that there is no flaw in the facts on which the appeal is bottomed. Suppose one of our Liverpool friends had written to us, stating that he had obtained information, on which he could rely, that the crops of cotton in America, the East Indies, and Turkey were much below an average, and that the stocks on hand in this country were unusually low, we should certainly have thought that he was warranted in speculating on the advance of price that could hardly, under such circumstances, have failed to take place. But when it subsequently turned out that he was totally wrong in his facts, that the supply of cotton was not below an average, and that the quantity was fully commensurate with the demand; would not every one have scouted the idea of his blaming us, had he really done so, for advising him to engage in a losing adventure? The error, in such a case, would not have been ours, but his. He was a practical man whose business it was to be conversant with the real state of the markets. He had agents in America, in Egypt, and other parts of the world; and if he either directly attempted to draw inferences from false facts, or submitted these facts to others for their opinion, what could he expect but that the conclusions would be universally wrong? There was not, in point of fact, the smallest foundation
Notwithstanding this increased importation, the rise of price was so very great, that bowed Georgia, which had sold, when at the highest in 1823, at 10 d. per lib., rose in 1825, to 184d,;. and Bengal and Surat, which had sold when highest in 1823, at 8d. rose in 1825, to 13 d. (Mr Tooke's Considerations, p.196). Since then they have fallen, the former to about 7d., and the latter to less than 5d. per lib. The loss that the cotton speculators would have incurred, supposing they had been able to make good their engagements, has been moderately estimated at about two and a half millions Sterling! VOL. XLIV. No. 87.