econintersect.com
       
  

FREE NEWSLETTER: Econintersect sends a nightly newsletter highlighting news events of the day, and providing a summary of new articles posted on the website. Econintersect will not sell or pass your email address to others per our privacy policy. You can cancel this subscription at any time by selecting the unsubscribing link in the footer of each email.



posted on 27 November 2015

Crisis Chronicles: The Cotton Famine Of 1862-63 And The U.S. One-Dollar Note

from Liberty Street Economics

-- this post authored by James Narron and Don Morgan

When the U.S. Civil War broke out in 1861, cotton was king. The southern United States produced and exported much of the world's cotton, England was a major textile producer, and cotton textiles were exported from England around the world. At the time, many around the world depended on cotton for their livelihood.

The South believed this so deeply that when the North blocked Southern ports to cut off the South's primary means of financing war - cotton sales - Southern leaders were sure that Britain would enter the war on their side. That never happened. So when cotton supplies dried up in late 1862, thousands in Manchester and Lancashire who either directly or indirectly depended on cotton for a living found themselves without work. In this post, we describe the British cotton famine of 1862-63 and the stoic British national response. We draw primarily from a fascinating BBC Radio broadcast on the subject and John Watts' matter-of-factly named Facts of the Cotton Famine, published in 1866.

"Cottonopolis"

Textile production began in England as far back as the 1770s, though in a small way. But by the 1860s, up to one million people were working in one way or another with cotton, and up to four million - about a fifth of the British population - were estimated to be either directly or indirectly employed by the cotton industry. At the peak of production, there were nearly 2,500 textile factories in Lancashire, directly employing about 430,000 people, mostly women. The weaving of textiles was concentrated in Lancashire, while spinning was dominant in Manchester.

Cotton brought relative affluence to these regions, with entire families sometimes working in the mills. Under the weak child labor laws then prevailing, children as young as ten would work at lower-paid, entry-level mill jobs like sweeping; in their teens, they could join women at the loom. Men took the higher-paying jobs, as engineers, for example. Owners demanded long hours to keep the capital-intensive factories running, but mill work paid better than farming. And workers were paid for their time rather than piece-rate.

Cotton brought prosperity not just to Manchester and Lancashire but throughout the area dubbed "Cottonopolis." Cotton was truly a global trade. It was imported through Liverpool from the newly opened farming lands in Louisiana, Mississippi, and Alabama, which we covered earlier in a post about the panic of 1819. Cotton from the southern United States, with its long fibers, was considered by many to be best in the world and it was certainly in high demand; about three quarters of British cotton imports were from the United States. Once the cotton was woven into fabric, the cloth was exported throughout the world, often displacing inferior locally sourced textiles.

Cotton Diplomacy

The year 1861 was a good one for the cotton harvest, and cotton exports to Britain and elsewhere continued until about mid-December. In late 1861, hoping to force Britain and other European countries to ally themselves with the Confederacy in the U.S. Civil War, some confederate states and cotton plantation owners announced an unofficial cotton "embargo" that sharply curtailed exports to these countries ("cotton diplomacy"). After stockpiled cotton was depleted in 1862, British mill owners addressed the shortage by reducing work hours and by seeking alternative cotton sources like India and Brazil. But by late 1862, mills started to close and by 1863, thousands were without work.

As the Northern blockade and cotton embargo continued, Southern leaders were sure that the economic losses incurred by Britain would force the country to enter the war in favor of the South. But despite the massive hardships brought on by the lack of cotton, Britain also depended on wheat from the northern U.S. states, and supplied the Union with the tools to make war: guns, ammunition, and ships. So rather than enter the war, Britain responded internally by raising huge sums for "relief," and though not until 1864, enacted a Public Works Act to put thousands to work building parks and other public infrastructures.

One of the hardest hit towns was Stalybridge, where just a handful of the factories remained open. British support was strong and relief funds helped support the unemployed: "The scale of relief at Stalybridge had been unusually high, and some of the recipients were quite as well off under the relief committee as when engaged at their ordinary employments" (Watts, Facts of the Cotton Famine). But when the local relief committee decided to substitute tickets for relief money, riots and looting erupted: "The mob then passed on to the clothing stores of the relief committee, which were speedily broken upon, and the stock thrown into the street, where a regular scramble ensued, each one helping himself or herself to the best which they could get hold of" (Watts, Facts of the Cotton Famine).

The protests lasted only a few days and proved to be one of the few demonstrations against a largely effective and stoic British response to the crisis. By 1864, cotton supplies from Egypt, India, and Brazil had filled the gap, but not all of the mills survived. The largest, most advanced, and most efficient prospered while the smaller, less advanced, and less efficient mills never re-opened.

From Cotton to Currency

The paper or substrate used to make U.S. currency today depends on the same long, durable southern U.S. cotton fibers coveted by the textile mills in Lancashire. The substrate for our currency is a cotton-linen blend that gives it extra durability to withstand the banknote printing process in which ink is pressed into the paper. The extra durability of the cotton substrate also means extra durability in circulation. While the low-denomination notes of most nations that use a paper substrate last only a couple of years before they are removed from circulation owing to wear and tear, the U.S. one-dollar note, with its long cotton fibers and linen,lasts nearly six years in circulation. Some countries with a less durable cotton substrate or a harsh climate or circulating conditions have switched to a more durable but costlier polymer substrate. Meanwhile, other countries have replaced their low-denomination paper notes with a high-denomination coin. But because of the longer life of U.S. notes, there's little reason to switch to a polymer substrate or to replace the one-dollar note with a one-dollar coin. But that's our view. Tell us what you think.

Disclaimer

The views expressed in this post are those of the authors and do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System. Any errors or omissions are the responsibility of the authors.

Source

http://libertystreeteconomics.newyorkfed.org/2015/11/crisis-chronicles-the-cotton-famine-of-1862-63-and-the-us-one-dollar-note.html#.Vk8NOPmrSUk


About the Authors

James Narron is a senior vice president in the Federal Reserve Bank of San Francisco's Cash Product Office.

Morgan_donaldDon Morgan is an assistant vice president in the Federal Reserve Bank of New York's Research and Statistics Group.

>>>>> Scroll down to view and make comments <<<<<<

Click here for Historical News Post Listing










Make a Comment

Econintersect wants your comments, data and opinion on the articles posted.  As the internet is a "war zone" of trolls, hackers and spammers - Econintersect must balance its defences against ease of commenting.  We have joined with Livefyre to manage our comment streams.

To comment, using Livefyre just click the "Sign In" button at the top-left corner of the comment box below. You can create a commenting account using your favorite social network such as Twitter, Facebook, Google+, LinkedIn or Open ID - or open a Livefyre account using your email address.



You can also comment using Facebook directly using he comment block below.





Econintersect Contributors


search_box

Print this page or create a PDF file of this page
Print Friendly and PDF


The growing use of ad blocking software is creating a shortfall in covering our fixed expenses. Please consider a donation to Econintersect to allow continuing output of quality and balanced financial and economic news and analysis.


Take a look at what is going on inside of Econintersect.com
Main Home
Analysis Blog
Are You Feeling the Economic Surge?
Big Mess in Italy
News Blog
Earnings And Economic Reports: Week Starting 05 December 2016
Early Headlines: Green Pty Cancels - Then Appeals PA Recount, IRS Serves Summons On Bitcoin Co, Most Mfg Jobs Lost To Automation, 2017 US Hosing Outlook And More
The Smartphone Market Is Not A Two-Horse Race
Italy's Referendum: What's At Stake And What You Need To Know
There Were Over A Million Casualties At The Somme
The Best Countries In The World
What We Read Today 03 December 2016 - Public Edition
Big Mac Index In Its 30th Year
What We Read Today 03 December 2016
Scientists Find Giant Underground Ice Reserve On Mars
Sustained 3 To 4% GDP Growth Is A Huge Stretch
New Earthquake Risk Model Confirms Possibility Of Statewide Earthquake In California
Subprime Auto Debt Grows Despite Rising Delinquencies
Investing Blog
How To Invest When The Fed Destroys Capitalism
Technical Thoughts: Manage Risk
Opinion Blog
Why Did Trump Win? A Different Perspective, Part 3
Jobs Without Disruptions Through Concordian Economics
Precious Metals Blog
Silver Prices Rebounded Today: Where They Are Headed
Live Markets
02Dec2016 Market Close: WTI Crude Climbed Back Up To Previous 51 Handle, US Dollar Index Trading At The100 Level, Oil Rig Count At 10-Month High
Amazon Books & More






.... and keep up with economic news using our dynamic economic newspapers with the largest international coverage on the internet
Asia / Pacific
Europe
Middle East / Africa
Americas
USA Government



Crowdfunding ....






























 navigate econintersect.com

Blogs

Analysis Blog
News Blog
Investing Blog
Opinion Blog
Precious Metals Blog
Markets Blog
Video of the Day
Weather

Newspapers

Asia / Pacific
Europe
Middle East / Africa
Americas
USA Government
     

RSS Feeds / Social Media

Combined Econintersect Feed
Google+
Facebook
Twitter
Digg

Free Newsletter

Marketplace - Books & More

Economic Forecast

Content Contribution

Contact

About

  Top Economics Site

Investing.com Contributor TalkMarkets Contributor Finance Blogs Free PageRank Checker Active Search Results Google+

This Web Page by Steven Hansen ---- Copyright 2010 - 2016 Econintersect LLC - all rights reserved