The Great Boom

What followed was so extraordinary that men were at a loss for a precedent
This age of unexampled economic advance began with a boom which was all the more spectacular for having been, as it were, temporarily bottled up by the events of 1848.
This age of unexampled economic advance began with a boom which was all the more spectacular for having been, as it were, temporarily bottled up by the events of 1848.Wikimedia Commons

Few observers in 1849 would have predicted that 1848 would be the last general revolution in the west. The political demands of liberalism, democratic radicalism and nationalism though not the ‘social republic’ were to be gradually realized over the next seventy years in most developed countries without major internal upheavals, and the social structure of the developed part of the continent was to prove itself capable of resisting the catastrophic blows of the twentieth century, at least up to the present (1974).

The main reason for this lay in the extraordinary economic transformation and expansion of the years between 1848 and the early 1870s which is the subject of this chapter. This was the period when the world became capitalist and a significant minority of ‘developed’ countries became industrial economies.

This age of unexampled economic advance began with a boom which was all the more spectacular for having been, as it were, temporarily bottled up by the events of 1848. The revolutions had been precipitated by the last, and perhaps greatest, economic crisis of the ancient kind, belonging to a world which depended on the fortunes of harvests and seasons.

The new world of the ‘trade cycle’, which only the socialists as yet recognized as the basic rhythm and mode of operation of the capitalist economy, had its own pattern of economic fluctuations and its own secular difficulties. However, by the middle of the 1840s the gloomy and uncertain era of capitalist development looked like drawing to an end, the great leap forward was beginning.

1847–8 saw a trade-cycle slump and a severe one, probably made worse by coinciding with troubles of the ancient kind. Nevertheless, from a purely capitalist point of view, it was merely a rather sharp dip in what already looked like a very buoyant curve of affairs.

James de Rothschild, who regarded the economic situation in early 1848 with notable complacency, was a sensible businessman, though a poor political prophet. The worst of the ‘panic’ seemed to be over and long-term prospects were rosy.

And yet, though industrial production recovered quickly enough, even from the virtual paralysis of the revolutionary months, the general atmosphere remained uncertain. We can hardly date the start of the great global boom before 1850. What followed was so extraordinary that men were at a loss for a precedent.

Never, for instance, did British exports grow more rapidly than in the first seven years of the 1850s. Thus British cotton piece-goods, the vanguard of market penetration for over half a century, actually increased their rate of growth over earlier decades.

Between 1850 and 1860 they just about doubled. In absolute figures the performance is even more startling: between 1820 and 1850 these exports had grown by about 1,100 million yards, but in the single decade between 1850 and 1860 they grew by considerably more than 1,300 million yards.

The number of cotton operatives had grown by about 100,000 between 1819–21 and 1844–6, but at double this rate in the 1850s. And we are here dealing with a large and old-established industry and, moreover, one which actually lost ground in the European markets in this decade because of the speed of local industrial developments.

Wherever we look similar evidences of boom may be found. The export of iron from Belgium more than doubled between 1851 and 1857. In Prussia, in the quarter of a century before 1850, sixty-seven joint-stock companies had been founded with a total capital of 45 million Thaler, but in 1851–7 alone 115 such companies were established – excluding railway companies – with a total capital of 114·5 millions; almost all of them in the euphoric years between 1853 and 1857.5 It is hardly necessary to multiply such statistics, though contemporary businessmen, especially company promoters, read and diffused them with avidity.

What made this boom so satisfactory for profit-hungry businessmen was the combination of cheap capital and a rapid rise in prices. Slumps (of the trade-cycle type) always meant low prices, at all events in the nineteenth century. Booms were inflationary.

Even so, the rise of about one-third in the British price-level between 1848–50 and 1857 was remarkably large. The profits apparently awaiting producers, merchants and above all promoters were therefore almost irresistible.

At one point during this amazing period the rate of profit on paid-up capital of the credit mobilier of Paris, the finance company which was the symbol of capitalist expansion in this period (see chapter 12 below), touched 50 per cent.6 And businessmen were not the only ones to benefit.

As has already been suggested, employment grew by leaps and bounds, both in Europe and overseas, whither men and women now migrated in enormous numbers (see chapter 11 below). We know next to nothing about actual unemployment, but even in Europe one piece of evidence is decisive.

The sharp rise in the cost of cereals (i.e. the main element in the cost of living) between 1853 and 1855 no longer precipitated hunger-riots anywhere except in some very backward regions such as northern Italy (Piedmont) and Spain, where it probably contributed to the revolution of 1854.

High employment and the readiness to concede temporary wage rises where necessary, blunted the edge of popular discontent. But for capitalists the ample labour supplies now moving into the market were relatively cheap.

Hobsbawm, Eric. Age Of Capital 1848-1875

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