Politics and Prosperity

ON two facts in the present state of affairs every one will agree. We have been passing through a period of slackened prosperity, of greatly disturbed financial markets, of discouraging business conditions. Stock Exchange prices have been falling, at home and abroad; occasionally, in the past few months, there have occurred those convulsive movements which financial Europe calls ‘crises’ and which Wall Street calls ‘panics’ — both Wall Street and Europe, however, drawing mental distinctions, in the present use of the terms, between little panics and big ones. Some of the oldest and soundest investment securities in the world, British consols in particular, have fallen during the past few months to the lowest prices in twenty years or more. ‘Trouble’ was reported on the London market in July, on the New York market in August, at Berlin in the beginning of September, and at Paris near the end of it. With a varying degree of emphasis, bankers, merchants, and manufacturers in all these countries complained that business was disappointing.

All this is undisputed; and so is the fact that the season has been one of political disturbance. England’s people have been engaged in acrimonious controversy over the social and fiscal plans of the Asquith ministry, particularly the bill to curtail the time-honored legislative powers of the House of Lords. The French and German governments have been conducting, in such manner as at times to threaten war, a vigorous and prolonged dispute about Morocco. In October, Italy actually went to war with Turkey. Legislatures of almost all the great European states have been passing laws of a character which would once have been called purely socialistic. The weight of taxation on the well-to-do has been increased. Labor demonstrations in the form of strikes have been more numerous and violent in England, Germany, and Scandinavia than in many years; popular riots, partly induced by the cost of living, have been prevalent in France, and in Austria and Spain have had to be suppressed by the military. In China, a rebellion more formidable than any uprising since the great Taiping revolt of 1851, has shaken the imperial throne.

The United States, which entered 1911 after a political landslide such as completely reversed the administration majority in the House of Representatives, has had ahead of it all the year a presidential election whose result is perhaps more doubtful than any since 1896. Political ideas throughout the country have been in a state of agitating uncertainty. The Constitution has been complained of as decrepit and outof-date; the Supreme Court has been denounced, when it interpreted a law in a way that did not suit the ideas of certain factions and certain public men, for usurping legislative power. In some states, laws have been passed to enable a small minority of opposition voters at a preceding election to force the elected public officers immediately to the polls again in a special election, with a view to removing them from office. One state endeavored to set the example of extending this new political rule to judges, so that the voting proletariat might indirectly control judicial construction of the law. Meantime the courts and the government prosecuting officers were working out the highly disturbing problem of applying the Anti-Trust Law of 1890 to existing corporations. In October, the billiondollar Steel Trust, with 120,000 shareholders, was indicted.

Nothing, then, could seemingly be more natural than that a good part of the financial and business community should declare that ‘politics are ruining prosperity.’ That assertion is made most vehemently in financial England. It has been emphasized, there, by the bitterness of party feeling; the pressure of taxation; the holding of the balance of power in Parliament by the Irish; the belief that ancient political landmarks were being ruthlessly removed; the fact that consols not only went down but would not stop going down; the social unrest —more irritating to the rich, perhaps, because of their feeling that it followed large governmental concessions to the poor, provided by increased taxes. But the same assertion regarding politics and prosperity has been quite as insistently heard in America. On this side of the ocean, the trust prosecutions, the talk of new tariff legislation, and the uncertain drift of politics, have been widely assigned, not only as the immediate cause for such incidents as the autumn crash in the Steel Corporation’s shares, and the general Stock Exchange disorder, but as the real explanation of depression in general business.

Now, there are several inquiries to make in such a matter. First, and of primary importance, is it true, or not, that politics has had a hand in arresting prosperity? If it is true, did the financial and industrial set-back result from politics primarily, or was political unsettlement only a later and aggravating influence? If it is not true, then what was the cause?

All of these questions deserve careful and fair examination. They are highly practical questions, because business depression is to many of us the most personal of all considerations, and because we shall not be able even to shape our everyday plans with confidence until we know what is really wrong, and what prospect there is of righting it. When the source of trouble is something else than politics, there are always remedial measures for finance and industry to apply, and they are sometimes applied so automatically that only a brief lapse of time is necessary to restore prosperity, in the natural course of events. But if the trouble arises from politics alone, or even from politics primarily, the position becomes a little awkward.

Prosperity cannot then return, by inference, until the political situation changes. Reversal of the attitude of electorates, legislatures, and governments, here and abroad, is doubtless possible; but it is not exactly what can be classed as an early probability. The Englishmen who flocked to London just before the general election of December, 1910, to assure their City friends that provincial constituencies had changed their minds about the House of Lords, were as quickly put out of countenance as were the Americans whose Western tours, last spring or summer, had charged them with the tidings that the American people were getting tired of Anti-Trust agitation. Convincing evidence to the contrary followed close on the heels of each assurance. The press and the public, in America at any rate, are as far from calling a halt in such activities as they were before the business reaction and the decline on the Stock Exchange. But if the present trend of politics is the one sure preventive of trade revival, and if that trend is to continue, where are we to look for better times? Has Prosperity been permanently killed by Politics? Nobody believes anything of the sort. But in that case what are we to believe?

To begin with, it will hardly be denied that politics does have some influence on prosperity. Bad government has certainly ruined some prosperous communities in the past, and feeble or inefficient government has crippled them. Politics as a term is comprehensive enough to include a programme of public acts which lead to war, and war has undeniable influence on prosperity. Anarchy may result from misguided politics; the connection of politics and prosperity in some of the South American states is clear enough. Bigoted, narrow or oppressive government can paralyze national prosperity; it has done so in Russia. These illustrations are perhaps extreme. But unwise legislation, even in a progressive modern state, can certainly impair prosperity. Bad currency laws, we know, can do it; for if confidence in the standard of value is shaken, people will move slowly in their trade, and will sometimes place their surplus money elsewhere than in the country whose currency projects they distrust, and where lenders cannot be sure of getting back at maturity the full intrinsic value of their loan.

But the mere recital of these particular spheres of influence by politics on prosperity shows that it is not this sort of politics that the markets have lately been blaming. In England, for instance, the accusation is leveled against the ministry’s double programme of readjusting taxation so as to fall more heavily on the rich, and of readjusting the scheme of constitutional government so that the wealthy and titled classes will be shorn of much of the influence which they have hitherto exercised. In the United States, the complaint is not of an attack on wealth as such, but of an attack on organized wealth, acting through enormous combinations of capital and corporations. Politics, we know, may influence prosperity; but has this kind of politics really done so? Here we reach the heart of the question.

On general principles, and as a result of long experience, thoughtful men approach with reserve the argument that since times are bad, therefore something is wrong with government. That argument may itself be a trick of politics. There probably never lived a politician who did not appreciate the political value of ‘hard times’ or ‘good times,’ as the case might be, for a campaign slogan. The average voter does not reason deeply, but he knows when his own affairs are doing well and when they are not. If business is good, he is receptive to the plea that a change in legislative policies would be an experiment which might upset the agreeable equilibrium; why not, then, let well enough alone? And if business is bad, his instinct is to blame somebody for it. Such is human nature, indeed, that the more manifestly his own and his neighbors’ distresses were brought about by their personal rashness, misjudgment, or extravagance, the more infallibly will he and his neighbors seek for some other explanation.

Now, ‘ politics ’ is always an available explanation, because legislative sessions and governmental actions are never out of sight. The post hoc argument is at such times more convincing than all the orthodox logic in the world. Now that the crisis of 1907 is four years behind us, most people know that it was a world-wide phenomenon; that actual panic had broken out in the markets of four other continents than North America, before it broke out in New York City; that the collapse had been preceded and brought on by two years of straining credit close to the breaking point in every great market of the world; and that warnings based on these well-known facts had been sounded repeatedly from eminent quarters, home and foreign. But philosophers such as the Massachusetts congressman who, in December, 1907, explained that the panic then in progress ‘had been made inevitable’ by the ‘attitude with reference to prosperity and enterprise’ assumed by ‘gentlemen very responsible for the administration of the government,’ got a much wider hearing than the economic critics. It was a ‘Roosevelt panic.’

This was quite in line with precedent. Martin Van Buren had hardly been two months in office when the panic of 1837 swept over the United States. He was a highly conservative administrator, and he did much service, of a very useful sort, in allaying the severity of the subsequent depression. And even had his policies and purposes been the most nefarious, they would not have had time to cause a panic. Yet, a few weeks after the outbreak of that panic, the New York Merchants’ Committee of Fifty adopted public resolutions asking, ‘What constitutional or legal justification can Martin Van Buren offer to the people of the United States for having brought on them all their present difficulties?’ It was politics which had made the trouble, to be sure; not wild-cat banks, land-speculation, overborrowing, 20cent cotton, private extravagance, and absolute recklessness in finance.

On Grant, whose popular plurality for president, in the ‘boom times’ of 1872, was the largest ever polled up to that time, a large share of personal responsibility was laid by the bewildered and angry banking community, in the next year’s financial panic. Yet it would to-day be a little difficult, with all the admitted shortcomings of the Grant administration, to discover what the unlucky occupant of the White House had done to cause the business crash. The ‘political argument’ of Cleveland’s day is the most familiar of all. Chronology standing in its path, even the post hoc part of the argument was reversed. People were told that the tariff legislation of 1894 caused the panic of 1893, and a very large part of them believe it to this day.

Not only, in fact, does experience warrant some prima facie suspicion of the assigning of politics as the chief explanation of hard times, but the record sometimes brings us singularly close to the inference, not that politics was the dominant influence on prosperity, but that prosperity — or the absence of it — was a dominant influence on politics. Until Mr. Taft’s campaign in 1908, no party in power during an era of panic or hard times (waiving the disputed election of 1876) ever carried the presidency in the next election. One is reminded of M. Taine’s exposition of the part the great drought of 1788 in France, followed by harvest failure, by the coldest winter in eighty years, and by the crowding of an army of discouraged laborers into Paris, performed in bringing to a head the next year’s political revolution. Mr. Thorold Rogers has shown us that when the Long Parliament assembled at Westminster, it had behind it a prolonged and disastrous increase in the cost of living, in which ‘ wheat rose 209 per cent over the comparatively high prices of the first half of Elizabeth’s reign, meat 184, while labor, up to 1642, rose only 32 per cent.’

History will not assign crop failures and high cost of living as the primary cause of the misfortunes of Louis the Sixteenth and Charles the First; but we who know what sort of political conditions follow such circumstances, even in the twentieth century, will not easily challenge the assertion that the state of prosperity must have had some considerable influence on those episodes in past political history. In a general way, no one disputes the principle; but it is just as well to emphasize it in an inquiry which depends on the question which is cause and which is effect. There must certainly have been Frenchmen in 1789 who insisted that the provincial distress and cost of provisions were due to the storming of the Bastile, and Englishmen in 1641 who ascribed their trouble in meeting household bills to the mutinous House of Commons and the impeachment of Strafford.

All this might tempt us to investigate the question whether the present unsettled state of politics may not itself be a consequence of impaired prosperity. There is certainly something to say for that theory also; but if one wishes to avoid the embarrassment of arguing in a circle, it will be well to come back to the simple facts of the moment, and inquire just what has been the matter. If the falling markets and disappointing trade have not been caused by political influences which are plainly visible, then what was the cause of them? For, obviously, if all other influences than politics favored prosperous times and expanding trade, then the political argument will have the right of way.

Now, one curious fact about the trade depression of 1911 is that the very people who have been blaming politics for the business troubles and disappointments, have set forth a reasonably complete explanation of the state of things, based upon economic causes pure and simple. I have before me, as I write, a voluminous pamphlet issued by a Western banking institution. It was published this past autumn, with a view to ascertaining the actual state of business and the reasons for the existing depression; and for that purpose, inquiries had been addressed to several thousand banking and mercantile correspondents, throughout the country. The answers, carefully compiled, cite four main causes. First, of course, comes politics — usually particularized as government prosecution of the trusts and an impending presidential election. Then follows over-production in manufacture, whereby supply had outrun the possible demand. Disappointing grain harvests, with their restrictive influence on interior trade, are cited next. Along with these, there is very generally assigned a cause of much larger scope. The natural after-effects of a great financial crisis, it is repeatedly explained, had not worn off when merchants, manufacturers, and speculators engaged in premature efforts at another exciting ‘boom.’ But since the country’s condition called for retrenchment, economy, and rest, the returning strain on credit, in 1909 especially, made another period of severe reaction unavoidable.

The last of these explanations attracts attention. There are such things as cycles of prosperity: rising and receding waves of industrial activity. A great financial panic, such as that of 1907, is a landmark in the cycle, and it ought to be interesting to inquire what economic history usually shows to be the condition of things, four years or so after such an economic crisis.

The immediate sequel to such crises in America has been singularly uniform. During actual panic, with the hoarding of cash, the runs on deposit institutions, the bank failures, the wide-spread restriction of cash payment by banks to depositors, the clearing-house loan-certificates, the premium on currency, the collapse in stock and commodity prices, and the embargo on credit facilities, a feeling of despair pervades the community. But in one way or another, the acute stage of crisis is brought to an end. The hoarded currency rushes upon the market. Bank reserves pile up again. Money rates go to nominal figures. The stock market rises rapidly. A revulsion of sentiment in the business district is visible at once; and in a very few weeks or months, one begins to hear (as we did, from very good quarters, two or three months after October, 1907) that the panic was a passing incident — a ‘mere flurry,’ as Mr. Carroll D. Wright described it — which interrupted, but cannot have terminated, the era of prosperity. The result of this is that the process of prolonged readjustment and continuous liquidation, such as was essential for real recovery from the collapse occasioned by the financial orgy of the three or four preceding years, is interrupted and postponed.

The nature of the immediate response of financial and commercial markets to this altered state of mind is governed by circumstances. When actual panic in 1873 had spent its force, there was, so wrote the New York Financial Chronicle in a contemporary article, ‘a general rebound from the previous depression, and an expectation of renewed buoyancy in business affairs’; and this, though checked by repeated disappointments, lasted until the end of 1876. After the panic of 1893, the railway insolvencies, the corn crop failure, the government’s fiscal embarrassments, and the labor uprisings of 1894, gave longer life to depression and liquidation. But in 1895 — hardly a year-and-a-half after the acute stage of panic — the business community suddenly made up its mind that ‘boom times’ were normally at hand again. Feverish speculation began on every market; the Stock Exchange was violently excited; prices of wheat, cotton, dry goods, iron, steel,and copper rose from ten to fifty per cent . The country’s iron production for the year exceeded by a quarter of a million tons the highest previous record, and production of other commodities was similarly increased.

When the money-hoarding and currency premium of the last great panic ceased, in January, 1908, a similar sequel was at hand. Merchants organized ‘Prosperity Leagues,’ and held public meetings to advise immediate return to conditions prevalent before the panic. Concerted and organized efforts were made to misrepresent the financial situation. The ‘National Prosperity League’ addressed circulars to all American merchants and manufacturers, advising that the first of June be made ‘general reëmployment day.’ This episode, which seems so odd and childish four years afterward, was part of the history of the period.

And the business world responded — whether to such appeals or to the instinct which had inspired, on every previous occasion of the kind, the attempt to return at once to the departed ‘boom times.’ Recovery, even in 1908, was continuous though spasmodic; the stock market, where prices had already moved up again to relatively high figures, rushed in November into a fury of speculation for the rise. And 1909 repeated faithfully the story of 1895, at exactly the same distance of time from the panic period. Commodities of all sorts were held back from market for speculative purposes. Wheat was cornered, and put up in June, 1909, to $1.51 per bushel. Land values in the West rose again to the high prices of 1906. The country’s monthly iron production increased from 1,707,000 tons in February to 2,635,000 in December, whereas the highest monthly output, prior to the panic of 1907, had been 2,397,000. Cotton went to 16 cents a pound in December, 1909, and to 20 cents next year — the latter price being the highest in sixty-three years, except for the Civil War and paper-inflation period.

To conduct these speculative movements, and to finance the feverishly active trade, home bank resources were drawn upon to the point of strain, and new corporation securities were offered on the market in a sum-total actually double that of 1906, and close to the prodigious figure of the celebrated ‘boom year’ 1901. When the home investment market showed very natural inability to absorb these stocks and bonds, something like $150,000,000 were placed in Europe — this in spite of the fact that London’s own issue of new securities, during 1910, overtopped by $375,000,000 the highest previous yearly total, and that Paris and Berlin had similarly, in their own home fields, broken all precedent.

So much, then, for what happened in immediate sequel to the panic of 1907. An artificial, precarious, and in its nature temporary condition had been created, we have seen, in trade and industry. At a time when credit had just sustained a formidable shock, when banks and business men were still ‘carrying’ long lists of clients who could not pay their debts, and when capital had just been confronted with ruinous liquidation, an effort had been made to impose on capital and credit heavier requisitions than those under which the whole financial structure had lately toppled over. We have also seen that, after our other panics, a precisely similar position arose, under almost exactly parallel circumstances and at almost exactly the same distance of time from the panic shock itself. It is naturally in point, therefore, to inquire what happened after the premature ‘booms’ which followed 1873 and 1893. If the sequel to those older after-panic demonstrations was what the country has been witnessing in the past year or two, then the logic of the case should be reasonably clear, and our feet on solid ground.

The precedent does not fail us. The attempt to ignore the realities, after 1873, broke down disastrously in 1877, a year of profound discouragement and depression. Business activity came to a halt. Prices fell from ten to fifty per cent on all commodity markets. Stock Exchange values were demoralized; the investing public withdrew all support. Business failures were more numerous even than in 1874, manufacturing and transportation profits so curtailed that wages were reduced, with a series of labor demonstrations as a consequence, which culminated in the bloody riot of railway employees at Pittsburg.

This was a sequence of events not at all remotely suggesting 1911. After the premature ‘boom’ of 1895 came 1896, whose disordered markets, industrial discouragement, and increase of business mortality beyond the record of any previous year except 1893, closely repeated the story of 1877. Now, it is fair to warn the reader that when he studies even the contemporary story of the years which ended the ‘afterpanic boom’ of those two decades, he will again be confronted with the familiar political explanation. The Congress of 1877 was in a ferment over the Bland free-silver-coinage bill and the attack on specie resumption; and, in 1896, Bryan was making his first run for the presidency. To people who lacked economic and historical perspective, the argument that, but for ‘ politics,’ the after-panic boom would not have been checked at all, was as plausible then as now.

But in view of the ground which we have already covered, no further argument should be necessary to convince the open mind that the essential cause of the hard times was something quite outside of politics; and that even if the Bland bill and the Bryan campaign were serious aggravations to the financial depression of the period, they were as much the outcome of the country’s industrial depression as the cause of it. There is no reason to doubt that the intelligent historian who writes, a generation hence, of the present era, will say as much of 1911. We have been taking our medicine for the excesses of 1909. The past eighteen months have been the period of relapse in a convalescent who, when scarcely out of the sick-room, had insisted on plunging into activities which only robust health could have enabled him to sustain.

So that, on the face of things, economic precedent should have led us to anticipate, as a consequence purely of economic causes, precisely that business depression, financial unsettlement, and industrial discouragement, which have so strikingly characterized 1910 and 1911. History gave no reason for expecting anything else — even supposing a serene and cloudless political horizon. And yet, when sentiment is so powerful a force in sustaining or undermining financial confidence, when plans of finance and trade are so frequently affected by uncertainty as to the laws and conditions which concern them, and when business at large is suspicious and mistrustful of violent change in such conditions, it would be clearly unreasonable to allege that political disturbances have had nothing to do with the state of the past year’s market. Granting for the sake of argument that the world-wide political unsettlement of the period has been consequence rather than cause of the great industrial reaction, it would still remain true that, at some point, politics would of itself become a contributory influence. But what, then, is to be the way out of our present financial dilemma?

There are three possible ways out. Industrial revival, due to purely economic causes or to normal completion of liquidation in finance and industry, might cause a similar reaction in politics, bringing social and governmental affairs to a stable and satisfactory basis. Or automatic industrial recovery might altogether supersede, as an influence on business sentiment, the political unsettlement. Or, finally, it might turn out that the political ferment of the period was not, as the markets had imagined, evidence of social disintegration, but was the intermediate period on the way to a new and better condition of affairs — such as should inure to the ultimate great advantage even of trade and the money markets. In asking which of these three roads is likely to be the outlet from the present bewildering confusion, we have one very remarkable precedent to guide us.

It is somewhat more than sixty years since a political, social, and financial commotion has arisen of such scope as that which now prevails throughout the world. The politics of 1877 and 1896, unpleasant though they unquestionably were, will scarcely take rank as epoch-making disturbances with those of 1911. But the resemblances between 1911 and the famous year 1848 are numerous and close. That, too, was a year when, in almost every nation of the world, ancient political landmarks seemed in course of obliteration. New and radical ideas in politics had come suddenly to the front. Continental Europe was in a state of revolution. A popular uprising drove King Louis Philippe from the throne of France. The young generation of Prussians rose against King Frederick William; political concessions had to be made, even when the army was firing on the insurgents. Sicily revolted, and King ‘Bomba’ had to save himself by flight. Milan, Naples, and BudaPesth rose against Austrian rule, and a popular demonstration at Vienna overthrew Metternich and compelled the Emperor Ferdinand to abdicate.

In England, the Chartist movement was at its height, and huge open-air meetings were held to support the then alarming political programme of universal suffrage, equal electoral districts, vote by ballot, annual Parliaments, no property qualification for legislators, and payment of members. On the Continent the Prussian war over Schleswig-Holstein was still in progress — a war curiously similar, in character and purpose, to Italy’s present exploit in Tripoli.

In America, the Mexican War was just ending; it was followed by a split in the administration party over the question of slavery, which was destined shortly to split the country itself in two. The Abolition movement had begun to make itself heard in Congress and to derange the calculations of public men; it was in 1848 that the Free Soil convention at Utica, by nominating its own presidential candidates, had a hand in reversing Congressional majorities and in turning the presidency over to the Opposition. An even more singular parallel to recent events was presented in far-off China, where in 1848 there was beginning that popular discontent with the Manchu dynasty which, two years later, exploded in the famous Tai-ping rebellion, whose success in defeating the imperial army and capturing powerful provinces was never witnessed again in Chinese history until October, 1911.

Never since 1848 has any such political panorama been spread before the world until the present day, and there had been nothing like it between 1848 and the great French Revolution.

What, then, was the condition of finance and trade in 1848? Financial disturbance must logically, it would seem, have accompanied the political storm. In fact, 1848 was a year of industrial depression. British consols went from 90 to 80, the lower price being destined never again to be quoted in the market until September, 1910. French government five per cents fell from 1163/4 to 521/8, which was the lowest price since Napoleon’s retreat from Russia. The Bank of France suspended gold payments; ‘Government intervention alone,’ wrote a contemporary financial review, ‘saved it from insolvency’; and great financial houses went down at Paris, Marseilles, and Hamburg. All markets were depressed; Sauerbeck’s index number makes the average English price of all commodities 78 in 1848, against 95 in 1847. The Stock Exchange was demoralized during the Continental uprisings of the spring, and in October, 1848, when the Northwestern Railway of England announced its abandonment of a projected expenditure of £4,000,000 because of the prevalent distrust and the prostrated transportation industry, the market again broke from five to ten per cent. Meantime, a Royal Commission was sitting at London to investigate ‘the causes of the present commercial distress.’

Here at any rate, one would think, was politics creating unmistakable havoc with prosperity. But to be quite sure of our ground, we must look a little further even into 1848; and our inquiry will at once confront us with some interesting facts. Like 1911, the year 1848 came in sequence to a great financial panic. It was in 1847 that the furious railway speculation which had been raging throughout Europe collapsed in a memorable crash. In the autumn of that year, there had been a run on the Bank of England; the bank act had been suspended; discounts in the City had gone to 13 per cent, and the Stock Exchange money rate to 60. Banks had failed over England, Scotland, and the Continent. Drafts of great mercantile houses in the India trade had been stopped; the London Bankers’ Magazine estimated liabilities of defaulting English houses at £17,000,000. For a week or two in October, credit had been almost non-existent in Lombard Street, and the shock was felt throughout the world.

The panic of 1847 had been a sequel to the same wild financial excess as precedes all great crises of the sort; it had been caused, not only by overdone speculation and general extravagance, but by what the London Times then described as a ‘system of blind credit among leviathan houses.’ All that was ended by the panic of 1847, exactly as the identical practices, on an even larger scale, were ended by our 1907. But it was just as certain as it has been on every such occasion that a period of hard times, bad business, low prices, and financial unsettlement would follow. Had there been no political disturbance during 1848, it must nevertheless, in the recognized and inevitable sequence of events, have been a year of industrial depression. That was equally the sequel to the English panics of 1866 and 1890, when political skies, in the after-panic year, were clear.

To what extent the political upheaval of 1848 was itself made possible by the hard times in trade and industry, and to what extent it would have caused financial disturbance had it followed a prosperous year, I shall not stop to argue. This is the problem which has so repeatedly confronted us in the progress of this inquiry, and the answer is the same for 1848 and 1911. But the very fact that the depression of 1848 (like that of 1911), though accompanied by world-wide political commotion, was immediately caused by purely economic influences, gives point to the inquiry with which we began our retrospect of this older episode — how did finance and industry manage to emerge from the entanglement? Did business automatically improve, and the political situation with it? Was politics simply shaken off as an influence on finance? Or did the business world discover, after all, that there was more good than bad in the political upheaval of the day? These are the questions the answer to which ought to throw light on our own financial future. They were answered after 1848.

At the close of 1848, the London Times was able to write that, ‘ with produce of all descriptions showing a revival, and with the speculative mania effectually crushed,’ the new year was opening cheerfully. ‘Even if it be found impossible,’ it continued, ‘to preserve peace on the Continent, the evil consequences upon trade must still be small.’ The cheerful forecast was correct; the next year was a peaceful period in markets, and toward the end of 1849, a genuine and continued revival was in evidence, which financial historians describe as a new era of prosperity. The political situation also had improved, in the sense that order had been restored from chaos. In some states — notably Prussia and Hungary — the revolution had been subdued with a powerful hand. In others, France particularly, the insurgents were triumphant and their government in control. But in very few were the new conditions what the old had been. Even the Prussian and Austrian sovereigns made large concessions to constitutional reform, and were destined soon to have more extorted from them. France was a republic. The Chartist movement, in its menacing shape of 1848, had disappeared, but Parliamentary reform and extension of the franchise were placed irrevocably on the political programme of powerful English leaders. In the United States, the abolition campaign, though seemingly checkmated by the trend of national politics in the next few years, had, as a consequence largely of the agitation of 1848, become the really fundamental problem of the day.

But the question must yet be answered, whether finance and business, in their return to normal and prosperous conditions after 1848, had merely shaken off political influences, or had concluded that the political commotion of that famous year had brought, after all, more good than harm to the world at large. If the markets are assumed to anticipate the sober judgment of history on such matters, — if the stock market in particular was truthfully described by Macaulay, when he spoke of it as ‘the pulse which has for five generations continued to indicate the variations of the body politic,’ — then there can be no doubt about the answer. The events in the politics of 1848 which aroused such dismay and despair in the minds of rigid conservatives of the day, in and out of the Stock Exchange, have long since been placed by the verdict of sober history among the great forward movements of the century.

We know now, as the frightened bankers and business men of 1848 did not , that the political upheaval of that year was both necessary and inevitable, unless the social and political institutions of the period, and probably its financial institutions with them, were to enter on a chapter of decay. There are always excesses and misjudgment somewhere in a world wide movement of the sort, but they are corrected in the long run; for there is a vast deal of hard common sense in the people as a whole. Time sets right even the judgment of timid and suspicious financiers. We know, by the memoirs of a still older generation, what was said in their day concerning the English Revolution of 1689, the American Revolution, the Reform of the Corn Laws, the American Civil War, by conservative people who were overcome with fright as they witnessed the progress of those sweeping political innovations; and we know what was said of the same events, by similar people, two or three decades afterward.

It is quite possible that when the smoke and dust of the present worldwide political commotion have blown away, when orderly and permanent policies on the new lines of action have replaced what has seemed so much like chaos in the affairs of the various nations, we shall all regain some such clear historical perspective, and come to the conclusion that there were certain things in the social, political or industrial institutions of the present day which it was time to modify radically or remove entirely, if the genuine progress of the communities concerned with them were to continue.

This certainly does not mean, however, that everything must change. Some institutions which have seemed to be threatened in the prevalent political confusion will no doubt be found never to have been in peril. The world may not be ready to abandon them, or their roots may lie too deep in the groundwork of social welfare for a political storm to shake them. Neither state socialism in France nor political independence in Ireland has even yet been established, though Louis Blanc and John Mitchell were conspicuous figures in the events of 1848. A good many curious social or political schemes and propaganda, which appear at such times to be carrying everything before them, turn out to have been mere froth on the surface of the rising wave. This has always been so when a programme of innovation and reform, on the basis of heated political discussion, has become the order of the day. Such popular interest is indeed the quite inevitable signal for advocates of peculiar fads to assert themselves, and for excitable persons, who assume that since something is wrong, therefore everything must be wrong, to get the public ear. But these are passing demonstrations, under leadership which

The Constitution of the United States will hardly be patched up with sudden ‘happy thoughts,’ or our judiciary terrorized by special elections to remove them when their decisions are unpopular, merely because the prevalent agitation over real abuses has advertised such nostrums. The sober common sense which established constitution and judiciary, and which surrounded them with safeguards against popular whim and passion, is still in command of American politics. The world is not likely to see legislation seriously promoted by women breaking windows from the street, and chaining their persons to the grill of Parliament, or by union leaders announcing that labor is immune from the restrictions of the moral and statute law.

By the time the skies have cleared, these minor incidents will have been forgotten, and the really great reforms of the period will appear in their true relations. It will be easier for the community as a whole to understand them then, because judgment will no longer be clouded by resentment at industrial depression. For it must not be forgotten that the very reaction in business and liquidation in markets, which have given so dark a color, in the eyes of many people, to the political events of the period, were themselves the remedy for the economic evils which caused the present conditions in finance. We shall have prosperity again, as we did after 1848 and 1877 and 1896, and it will be more lasting because built up from the bottom on a stable basis.

But even if present impressions regarding public affairs were not to be obliterated by speedy return of good times in finance and industry, and even if business depression were to be long continued, it would still have to be remembered that there are more important things in the life of nations than rising markets or heavy surpluses on the annual balance-sheet. Certainly, some memorable achievements in the cause of popular liberty, sound government, and social progress, would never have come to pass if their authors and advocates had allowed the question of the markets to tip the scales, or if the people who rallied to the support of the new ideas had stopped to consider the danger of ‘disturbing business.’ Not the least interesting chapters of history are those which deal with longestablished institutions of the most evil sort, — the trade monopolies under the Tudors, the crushing taxes on peasant laborers under the old régime in France, the rotten boroughs before English Parliamentary reform, the institution of slavery in America, — which squarely blocked the path of civilization, but which had been accepted as essential parts of the social system, which were interwoven with property rights, and whose destruction was bound to shake the financial position of the day to its foundations. Fortunately for the world, a large enough part of the community was ready, at the critical moment in all these controversies, to make the choice rightly between principle and pocketbook.

Perhaps one reason why so many of the great political reforms have been carried to success in periods of hard times is that principles stand forth the more clearly when a community’s eyes are not dazzled by the glare of booming trade and successful speculation. But political reforms are remembered long after financial depression is forgotten; and no doubt this will be so on the present occasion. Possibly, after a reasonable lapse of time, when what is now controversy has become settled history, even the most conservative and old-fashioned of us will understand why, in the normal course of human progress, it was necessary that in 1911 the House of Lords should be shorn of its hereditary veto power; that the continental proletariat should revolt against increasing taxes, extravagant armaments, and excessive cost of living; that decrepit monarchical systems should be swept away; and that the United States government should demand the dissolution of industrial combinations which, in the wild ‘promotion period’ of the past ten years, had acquired absolute or potentially absolute dictatorial power over American industry.