| Author(s) | Friedrich Engels |
|---|---|
| Written | 11 December 1857 |
ENGELS TO MARX
IN LONDON
Manchester, 11 December 1857
Dear Moor,
Still VERY BUSY with bad debts and price reductions. Never before has overproduction been so general as during the present crisis, and there's no denying that this applies to colonial produce and also to corn. That's what's so splendid, and is bound to have tremendous consequences. After all, so long as over- production was confined to industry the thing was only half-way there, but as soon as agriculture is also affected, and in the tropics as well as in the temperate zone, it will become spectacular.
The outward and visible sign of overproduction is more or less always expansion of credit, but this time it's especially kite-flying: This system of making money by means of drafts on bankers or 'bill-brokers', which are either met or not before maturity according to how the thing has been arranged, is the rule on the Continent and among the continental houses in England. The commission houses here all do it. The system was taken to the most enormous lengths in Hamburg, where bills amounting to more than 100 million banco marks were in circulation. But there was some fearful kite-flying elsewhere and it was because of this that Sieveking, Sillam, Karr, Josling & Co., Draper, Pietroni & Co. and other London houses went under. For the most part they were the drawees in this LINE. Among the manufacturing businesses over here and in the HOME TRADE the thing was so arranged that instead of paying CASH IN A MONTH the fellows negotiated bills on themselves at 3 months and paid the interest. In silk manufacturing the practice increased proportionately to the rise in the price of silk. In short everyone operated in excess of his resources, OVERTRADED. Admittedly OVERTRADING is not synonymous with overproduction,- but it amounts to exactly the same thing. A MERCANTILE COMMUNITY which has a capital of £20,000,000 thereby possesses an ability to produce, trade and consume measured by this sum. If, on this capital and as a result of kite-flying, it does business presupposing a capital of £30,000,000, production will rise by 50% and consumption will also rise as a result of
prosperity, but by no means to the same degree, disons[1] 25%. At the end of a certain period there will inevitably be an accumula- tion of goods of an order 25% in excess of bona fide, i.e. of average requirements, even at a time of prosperity. This alone would be bound to precipitate the crisis, even if the money market, the weathercock of trade, were not already pointing in that direction. All that's needed is a CRASH and then, in addition to this 25%, a further 25% at least of STOCKS of all NECESSARIES will become A DRUG ON THE MARKET. The present crisis provides an opportunity for a detailed study of how overproduction is generated by the expansion of credit and by OVERTRADING. There's nothing new about the thing as such, save for the remarkably clear-cut lines along which it is now developing. In 1837-42 and 1847 they were by no means so clear-cut.
That is the pretty situation in which Manchester and the cotton industry now find themselves. Prices are low enough to permit of what the philistines call A SOUND BUSINESS. But as soon as there is the slightest increase in production, cotton will start going up, since there's none to be had in Liverpool. So they'll have to carry on working SHORT TIME, orders or no orders. Now admittedly there are orders, but they're from places that have not yet felt the intensity of the crisis; the commission houses know this and so they aren't buying, for to do so would involve endless wrangles, and bad debts into the bargain.
Today the market was again very depressed. Yarn worth 14 to 14'/2d is offered at ll'/2d and anyone offering 10'/4d can have it. The Indians are out of the market. The Greeks are stuck with their corn—almost all of them deal in this, it being their chief return freight (from Galatz and Odessa). The Germans can't buy for the reasons just mentioned. The HOME TRADE houses have forbidden their BUYERS to order anything at all. AMERICA OUT OF THE QUESTION. Italy is suffering from the general fall in price of her raw materials. Another month, and there'll be a very nasty situation here. Small spinners and manufacturers are going under every day.
Mercks in Hamburg only survived because of the 15 mill, advance from the government and on one day at least their house here sent away the spinners whose accounts were due. Mercks' head man in Hamburg is the ex-imperial minister Dr Ernst Merck, a lawyer but also partner.
Kindest regards to your wife and children. There's been no time today to go into your letter about France, etc., etc; il faudrait trop réfléchir.[2]
Your
F. E.