On the Crises of i8j7. 184/, and iS^j 45 



We have pointed out the probable causes. Generally, if not 

 always, the origin of the crisis can be traced to some excessive 

 change or changes in the permanent environment. The excess 

 itself, that is, the surplusage beyond the needs of the times, is 

 the real cause of the crisis. Change in the permanent environ- 

 ment alone involves no danger whatever so long as that change 

 is really permanent, 1. e., not in excess. But as we can conceive 

 that if all the capital of a country were suddenly diverted to rail- 

 way construction, sudden bankruptcy and paralysis of business 

 would inevitably result, so also can we conceive that excesses in 

 a much less degree may involve a country in serious financial 

 trouble. Certainly is that possible when the surplusage, though 

 seemingly slight, is found not only in one but in several enter- 

 prises. 



In 1837 England constructed too many railways and formed 

 too many joint-stock banks ; France formed too many literary 

 companies ; and the United States constructed too many rail- 

 ways, fonned too many banks, and extended the crop areas too 

 rapidly. The situation in the United States was rendered worse 

 by Biddle's speculation in cotton, which was a short-time influence 

 also. In 1847 England's speculation was confined to railways 

 with the result that railway building was disastrously overdone. 

 Coupled to this were general crop failures and a potato famine 

 in Ireland. In the United States there was almost an entire lack 

 of speculation. Close proximity to a depression following the 

 crisis of 1836-39 and a costly war, robbed us of crisis material, 

 i. e., capital. In 1857 the crisis in Europe was characterized by 

 speculation and over-investment in general. In the United States 

 the speculative spirit was concentrated upon railways. 



Now the origin of this impetus to build railways, to form 

 banks, to extend crop areas, etc., is frequently difficult to locate. 

 It may arise from a discovery or invention, from a labor dispute, 

 from som.e financial policy pursued by the banks, from govern- 

 mental subsidies, from increase of population, etc. But we can 

 locate it in its effect upon the permanent environment, and that 

 affords us a working basis. There w^e have the force in tangible 

 form and can observe its workings prior to the actual occurrence 

 of the panic, and that is, after all, the most that we care for. 



187 



