The monetary regimes of the early modern Atlantic have usually been described as based fundamentally on a bimetallic system of precious metals. Nonetheless, there are some cases that seem to contradict this general assumption. During the whole colonial period, that is, almost three centuries, Mexicans continually complained about chronic shortages of petty coins, notwithstanding the very large outputs of their world-renowned silver production and the Spanish colony's absolute monetary stability. Despite all complaints and petitions to the Spanish crown there was almost no legal copper coinage, not even in the eighteenth century – even though large volumes of copper coinage had been struck within Spain (Castile) itself, since 1599. Thus current token money for everyday payments consisted of different materials, such as lead, playing cards, cocoa (cacao) beans and the like, along with different forms of credit. At the same time that the Mexican colonists were complaining about chronic shortages of small coins, monetary complaints within Spain were directed instead at shortages of gold and silver. Copper coins and fractionary money were, however – as just indicated – always available, sometimes in overwhelming quantities, because of Spain's erratic monetary policies. In the eighteenth century, since copper or vellón coinage no longer presented a problem for the Spanish economy, a debate ensued instead about the possible utility of adopting paper money.

In Amsterdam the monetary situation differed considerably from that found in Spain (Castile) and in Mexico. In the seventeenth century, Amsterdam had emerged as the major financial centre for the Atlantic economies, in part because of the operations of its new Wisselbank (founded 1609), especially in utilizing a money of account ‘bank money’ whose value remained fixed in its fine silver contents (as shown in Herman Van der Wee's chapter in this volume). But in Amsterdam, in contrast to both Mexico and Spain, no chronic complaints about monetary shortages were to be found, despite the concerns of Dutch merchants about obtaining licences to export silver from the Spanish realms (to Amsterdam and then to various foreign regions). Therefore, we may conclude that the monetary functions of the two precious metals in Mexico, Castile and Amsterdam differed from each other and often varied in their forms and goals over the course of the seventeenth and eighteenth centuries.

At a time of financial crisis and loss of confidence in the international financial system not unlike the global financial crisis of 2008 in spirit if not specifics, a team of academics, policymakers, bankers and corporate leaders sought to reform the system and build support for their reforms. Drawing on archival and published sources, I have attempted to create a picture of the personalities, issues, debates and compromises that led to the adoption of flexible exchange rates and a modified Triffin Plan with special drawing rights in the International Monetary Fund (IMF). The work focuses on the contribution of the Bellagio Group of non-governmental, academic economists to an understanding of the problems and an exploration of alternative solutions.

Led by economist Fritz Machlup, the Bellagio Group was engaged in a grand experiment. Machlup called it a ‘test’ to find out whether this group could identify the differences in factual and normative assumptions that might explain the differences in prescriptions for solving the problems of the international monetary system. By design, the selection of the members of this study group would include the foremost protagonists of the most widely discussed monetary plans, distinguished scholars in the field of international finance and renowned teachers.

Contemporary policymakers and students of public policy and macroeconomics will find in Machlup's approach an analogue to the current Group of Twenty Finance Ministers and Central Bank Governors (G20), engaged in creating a framework for strong, sustainable and balanced growth, while putting out the fires of global and regional financial crisis.

Introduction

In the 1810s the River Plate and Chile gained independence after three centuries of Spanish dominion. From that point, British merchants opened for the very first time mercantile houses on the spot, marketing European manufactures in exchange for South American produce. During the first decades following independence, the main products imported by the new South American republics were textiles. These comprised over 80 per cent of British exports to the River Plate and Chile between 1815 and 1859 (see Figure 1.1).

Despite the predominance of textiles within British exports to these emergent markets, very little is known about the marketing chain of textile exports. This chapter sheds new light on this underexplored subject, by focusing on one aspect of this textile trade, namely, the marine insurance market in which British textile cargoes were insured before departing for the Southern Cone.

This chapter relies heavily on the business correspondence of Huth & Co., a London-based mercantile house with branches in Liverpool, Valparaiso, Tacna, Arequipa and Lima, and which was very active in the marine insurance market. However, this firm was just one among over 250 British merchant houses trading with the Southern Cone during the first half of the nineteenth century.

Introduction

John Shaw's business was but one small cog in the machinery of growth and development that transformed England into an industrial and urban nation. He made no great innovation; but with skill, vision and diligence he inserted himself into the spaces for opportunity being opened up in a changing society. He was a classic market-maker; taking and turning to his own account and advantage the gaps and separations between markets of supply and demand that formed between the nation's scattered cities, towns and villages. Every day he made judgements and connections, shouldered risk, and, perhaps above all else, laboured hard to bring together buyers and sellers, claiming profits as a due reward for the work he did in making trade happen. Market intermediation has often been seen as an essentially parasitic activity, creaming off the fruits of others’ productive labour. Conservative radical William Cobbett certainly saw it that way, describing middlemen as ‘locusts’ who ‘create nothing, who add to the value of nothing, who improve nothing, but who live in idleness, and who live well, too out of the labour of the producer and the consumer’. So far as John Shaw was concerned, Cobbett was certainly wrong about the idleness of the middleman and modern theory would hold he was wrong also about the function and value of market intermediation. Factoring represented the vital and indispensable yeast that brought ferment and growth to the economic system.

In the course of the long nineteenth century, roughly between 1750 and World War I, Europe's population was confronted with profound economic, demographic, social and political transformations that in retrospect wrought its transition from a pre-industrial to an industrial society. Although few of the developments contributing to this transition were in themselves novel, the acceleration in processes of proletarianization, demographic growth and agricultural and industrial reorganization cumulated in a process of structural and irreversible societal change which eventually resulted in the highly urbanized and industrialized society of twentieth-century Europe. This transition was not an automatic, self-evident or straightforward affair, but an uneven process at different speeds characterized by regional, temporal and structural discrepancies in the development of labour supply and demand. Structural changes at macro level resulted in changing constraints and opportunities at household level, and implied considerable challenges of adjustment. Migration constituted an important strategy in trying to adapt to the changes in households’ material conditions. At the same time, existing patterns of migration had to accommodate themselves to shifts in the structural conditions which had underlain most early modern migration practices. The uneven development of push and pull forces and the ‘embedded’ nature of many migration channels meant that migration patterns underwent a costly process of adaptation at different speeds, whereby costs and gains were distributed unequally.

Cities were certainly not the only possible destination for migrants. However, to the extent that cities formed the focal point of many of the economic, political and social transformations of the long nineteenth century, the evolution of urban migration patterns is of particular interest in assessing continuity and change in people's adaptive strategies. While urban migration was no new phenomenon, its scope and function were significantly altered as both cities and their hinterlands underwent structural transformations which remoulded the spatial distribution of income opportunities. To what extent did established patterns of urban migration succeed in adapting to the structural change in constraints and opportunities at points of origin and destination?

The year 1815 marked ‘a transitional period in the American economy’ according to the economic historian Douglass C. North. In his pioneering study of the antebellum American economy, The Economic Growth of the United States, 1790–1860, North stated that by the midpoint of the second decade of the century, ‘it was clear that the Atlantic economy and its components were very different from the western world of 1790’. For much of the period between 1790 and 1815 Europe had been at war, and rapid American economic development of the time ‘reflected our ability to take advantage of this war’. In addition, the almost fifty years following the end of the second war with Britain were ones of peace dominated by the tremendous expansion of an Atlantic economy ‘in which artificial national barriers to the free movement of goods, services, productive resources, and ideas were being relaxed’, and in which ‘the “anonymous” impersonal forces of the evolving international market were the basic influences’.

To understand the American economy and the transitions it experienced during the first thirty-five years of the new republic's existence, and in particular to assess the role of the Panic of 1819 in these transitions, it will be helpful to review the nature and process of economic change, domestic and international, in the years between the establishment of the Constitution and the end of the War of 1812. With this background in place, it will be possible to see the economic fortunes of the nation from the view of those who celebrated the Treaty of Ghent in 1815, witnessed the establishment of the Second Bank of the United States in 1816, and experienced the calamity of the Panic of 1819 three years later. It will also enable us to comprehend the nature of the postwar economy and appreciate the complexities faced by the Bank as it attempted to stabilize the monetary system. Finally, this background will help us begin identifying the origins of the Panic of 1819 and evaluating the role of various factors in generating America's first great depression.

Introduction

When John Shaw and Elizabeth Wilkinson met, perhaps across the counter of her mother and father's shop in Colne in late 1810, they found a love match that was sustain them in their lives together, public and domestic, for nearly fifty years. It was this deeply personal partnership that provided the framework and the reason for their partnership in enterprise. At times passionate and at others comfortable and companionable, or contentious and awkward; and at yet others bereft and sad, it was always a relationship they had chosen. This thing that they had made was theirs in its entirety and every dimension. They showed to it and each other great commitment and, ultimately, love – even if that love was framed within an intense religiosity such that, shortly before her marriage, Elizabeth could write of her hope that ‘May we strive to help each other on in the Heavenly road and by bearing each other's burdens fulfil one of the highest duties of our intended union’. They embodied and lived out what historians have come to term the companionate marriage.

Throughout, though, each remained absolutely distinct and unique, with a voice that rings out sharp and clear; Elizabeth fiercely independent, thoughtful, didactic, strong-willed and determined; John perhaps quieter, less confident and more anxious, but ultimately enduring, fond and sentimental.

The previous chapter looked at how Falconbridge organized its subsidiary in Kristiansand, how this subsidiary became integrated into the Norwegian business system, its relations with local and national authorities and the efforts to utilize and strengthen the refinery's expertise.

This chapter examines the configuration of the international nickel industry and the political economy of nickel. The industry was dominated by an oligopoly of two large firms that cooperated in a quasi-monopoly. The market power of industry leaders made it next to impossible for firms without a secure raw material base – or a competitive refinery – to succeed. While Raffineringsverket A/S had failed on both counts Falconbridge fared much better. This was the main reason why Falconbridge was able to increase production and employment in Kristiansand. The chapter thus shows what foreign ownership and vertical integration had ‘to offer’ its Norwegian refinery and it helps explain why Falconbridge was so welcomed. As we also will see, Falconbridge was little affected by the rising protectionism in the 1930s. In this case, Falconbridge was able to mobilize political support from Norway in important trade negotiations.

All this has important bearings on our story. It not only contributed to Falconbridge's success on world markets, but also to the fact that the Kristiansand subsidiary at last could utilize its internal resources and competitive advantages.

Market Power and Market Development during the Depression

Two features helped shape the rather peculiar structure of the nickel industry.

Bank panics and financial crises have been a staple of the United States economy for much of the nation's history. However, for many Americans at the beginning of the twenty-first century such economic crises are known only from history classes or from stories dredged out of the fading memories of parents and grandparents. Yet, within the last decade, events in Asia have demonstrated that the world is not free of the spectre of economic crisis stemming from problems originating in the financial sector. In addition, the near collapse of Long-Term Capital Management in 1998 brought the possibility of financial turmoil much closer than was comfortable for government officials, the financial community, and many American investors. Finally, the bursting of the stock market bubble in the late 1990s, the run-up of asset prices in the mid-2000s, particularly in housing markets, and growing concerns with unsustainable levels of debt continue to erode confidence in the economy. The nineteenth century, with its seemingly endless series of periodic financial panics and resulting economic distress, led Walter Bagehot, the English journalist and economist, to observe, ‘Much has been written about panics and manias … but one thing is certain, that at particular times a great deal of stupid people have a great deal of stupid money’. This money, he further suggested, is at intervals ‘particularly large and carving; it seeks for someone to devour it, and there is a “plethora” it finds someone, and there is “speculation” it is devoured, and there is “panic”’.

A great deal has been written about ‘speculations’ and ‘panics’ as forerunners of economic crises in the United States, particularly the many downturns of the post-Civil War nineteenth century and the Great Depression of the nineteen-thirties. However, relatively little attention has been paid to what is arguably this country's first modern business cycle – the depression following the Panic of 1819. As historian Cathy Matson indicates, ‘The Panic of 1819 was the first truly national depression American experienced, the first long-term financial crisis to prompt Americans to examine deeply their ideological moorings and reassess their still-fragile economic institution’.

With the onset of the Panic of 1819, Virginia found itself in the midst of substantial financial volatility combined with the much more significant loss of foreign markets for the state's agricultural staples. It was the latter that sent prices plummeting and stalled the Commonwealth's economy. Deflation coupled with debt created during the expansion following the end of the War of 1812 created a sharp decrease in business activity, falling property values and a general gloom across the Commonwealth. As a result, some Virginians looking for reasons behind the state's diminished prosperity blamed the people. For example, Governor James Preston in his letter to the General Assembly at the beginning of the 1819–20 session suggested that ‘we have rushed upon our own ruin’ as a result of our ‘love of ease and extravagance, and inordinate desire to grow suddenly rich’. Further, we have ‘thoughtlessly and imprudently … availed ourselves of the facilities heretofore demanded as indispensable for our national advancement’. Yet, according to Preston, ‘we can neither be ignorant of the causes, nor of the proper remedies to relieve us from the consequent embarrassments’. For the Governor the remedies were to ‘unite in our efforts to return to our habits of industry and oeconomy’.

However, urging renewal of the old ways of industry and suggesting individuals practise ‘oeconomy’ did little to help those made destitute by the depression. Instead of pointing a finger at people and urging them to improve their lot, others in the Commonwealth seemed willing, at least initially, to extend a helping hand to those less fortunate. According to one scholar who has written about Virginia at the time of the Panic, in Richmond the ‘extraordinary high prices’ of food and fuel in 1816–17 led to an extra three-month allowance for distribution to outdoor paupers. In addition, as the downturn developed in 1819 and beyond, the city continued to spend 20 to 25 per cent of its budget on the poor.