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The chronic depression of 1873-1896 affected the economic and political development path of the European continent, accelerated the modernization of European agriculture, and catalyzed the continent as a whole from free trade to trade protectionism.
At the same time, the game of trade policy promoted the adjustment of the political ecology of the European powers in the direction of conservatism, which to a certain extent aggravated the contradictions between imperialism and became one of the economic causes of the outbreak of World War I.
So how much impact did the trade policy game have on the economic transformation of Western Europe after the first economic crisis?
The main causes of chronic depression in Central and Western Europe
The chronic depression of 1873-1896, as the most serious economic crisis facing Europe before the economic crisis of 1929-1933, was the product of the combination of factors such as the false economic boom in Europe around the 70s, the "grain invasion" of agricultural producers such as the United States and Russia, and the dumping of manufacturing industries.
This chronic depression, which is essentially a "deflationary crisis", is manifested first in the rapid collapse of the financial order, and more significantly, in the continuous depression in agriculture, including the manufacturing recession.
Since the 70s, the economic development of the European continent has been with a certain pathological false prosperity, and the economic prosperity of the European continent before the mid-70s of the 19th century has a certain falsehood, and its wild expansion has deviated from the normal track of economic operation.
The creation of banks, credit companies, joint-stock companies, discount companies and other forms of credit institutions was all the rage around the 70s.
The construction of railroads, the establishment of banks, the construction of large cities, the progress of mining, iron and machine building, the great progress of commerce throughout the world.
This led to an unprecedented economic upsurge that was rising due to corporate creation, securities speculation, scams and trickery.
In particular, the creation of speculative companies became a prominent feature of the economic fanaticism of the period, such as Germany, which fell into "entrepreneurial mania", with only 295 new joint-stock companies established between 1851 and 1870.
Spurred on by French war reparations, a wave of business openings was set off throughout the country, and a large number of speculative joint-stock companies appeared in a short period of time, 207 in 1871, and even 479 in 1872.
In the financial sector, between 1871 and 1873 there were no less than 103 new registered banks in the securities market, and Austria was no less than that.
From 1870 to the first half of 1873, Austria-Hungary engaged in 528 securities issuances and entrepreneurial activities, involving a total of 2.5 billion florins, and the establishment of various banks and construction companies for speculative profits.
In the 70s of the 19th century, Russia was also the hardest hit by industrial indiscriminateness, and this barren land poured in a large amount of foreign capital and technology in a short period of time, setting off a wave of entrepreneurship.
Russia had only 78 companies with a total capital of 72 million rubles before 1861, while by 1873 357 joint-stock companies had been opened with a capital of 1.116 billion rubles.
Overinvestment combined with technological progress has led to overcapacity, leading to disorderly expansion of the domestic and international economies.
The fierce competition for profits in new investment areas will inevitably lead to a continuous decline in profit margins, and the unprofitable consequence is the disappearance of investment and the reduction of demand, resulting in a sharp contradiction between the huge production capacity of new investment areas and the sharp reduction in purchase demand.
The existing economic system began to be questioned, and interest rates fell to the point where even economists considered the possibility of treating abundant capital as a free good.
Interest rates plummeted, and the public realized that cyclical recessions could prolong indefinitely. The existing economic system also seems to be on the verge of collapse.
The grain invasion dealt a blow to the European agricultural economy
Since the 70s of the 19th century, grain from agricultural producing countries such as the United States and Russia has flooded into the European market, and the "grain invasion" includes two prerequisites, one is the transportation revolution.
The steam engine went out of the laboratory and combined with shipping and railway transportation, promoting the rapid spread of transportation networks in Europe, North America, India and other places, especially connecting inland agricultural areas, and fundamentally solving the obstacles of high cost of long-distance transportation of products.
This meant that the ocean-going transportation of large and low-value commodities such as wheat and rye could become a cost-effective transaction, and the geography of international trade had undergone a huge shift, and the opening of the Suez Canal in 1869 was one of them.
The second is the great development of agricultural production in the "virgin land" represented by the United States and Russia.
The invention of agricultural machinery and the application of advanced technology, coupled with low production costs, have promoted the development of agriculture in the direction of scale, resulting in a significant increase in the output of agricultural products.
U.S. wheat acreage grew from 18.99 million acres in 1870 to 36.8 million acres in 1886, with production in 1839, 235.88 million and 457.21 million bushels in 1839, 1870 and 1886, respectively.
Russia has been the breadbasket of Europe since the beginning of the 19th century, and the new opportunities for agricultural development in the south after the serf reform have pushed it to continue to maintain its status as a major grain producer.
The period from 1871 to 1895 was a period of wild growth in U.S. food exports, roughly coinciding with the duration of the agricultural depression in Europe.
Europe's share of U.S. transatlantic food exports grew from 68.3 percent to 94.8 percent in 1880. The share of European imports increased from 10.5 percent to 31 percent in 1880.
U.S. wheat exports rose from 31.3 million bushels to 153.5 million bushels during the same period, with Europe alone absorbing 144.8 million bushels in 1880, more than 94 percent of the total.
From 1860 to the end of the 19th century, Russian grain exports grew much faster than production, with 100 grain production and export in the 1860s.
In the 1890s and 1900s, 205, 230, and 505 and 555, respectively, it has been its largest export product category.
Only during the Great Famine of 1891-1892 did grain exports fall briefly, and grain from India, Australia, Argentina and Canada continued to flow to Europe.
France and Germany are the main food importers on the continent, and France has faced a large-scale influx of grain since the 70s.
According to customs statistics, wheat alone averaged 8 million bushels per year between 1860 and 1865, and 41 million from 1876 to 1880.
Germany quickly transformed from a major grain exporter to an importer, importing an average of 415,000 tons of wheat and exporting 562,000 tons per year between 1868 and 1872, with a trade surplus of 147,000 tons.
However, from 1873 to 1877, the average import was 586,000 tons, the export was 497,000 tons, and the trade deficit was 89,000 tons.
From 1868 to 1872, rye imported an average of 465,000 tons, exported 164,000 tons, had a trade surplus of 301,000 tons, and by 1873-1877 it imported 955,000 tons, exported 156,000 tons, and had a trade deficit of 798,000 tons.
Italy's grain imports also increased dramatically from 1,474 million quintals in 1881 to 10,159 million quintals in 1887.
The "grain invasion" was almost accompanied by the "livestock and meat invasion", in which frozen meat gradually replaced live livestock and entered the European market on a large scale, breaking the situation of European livestock and meat products that had long been dominated by Russia and Hungary.
The United States became the largest source of meat supply, with exports increasing from an average of 50 tons per year in the 70s to 65,000 tons in 1900, and opened up routes dedicated to exporting to the United Kingdom to supply the European meat market.
Argentina, Australia and New Zealand also became important meat suppliers, such as Australia, which traded almost zero frozen meat with Europe around the 70s, sending only 17,000 frozen sheep to Europe in 1881 and 3.3 million in 1891.
The more stable agricultural economy was broken and the shift more to unstable industries led to an increase in potential economic instability.
The impact of manufacturing dumping on the export capacity of continental Europe
For continental Europe, the Great Depression coincided with rapid growth in British exports. While the continent's manufacturing sector led to overproduction in the context of the Second Industrial Revolution, it was also under pressure from the dumping of manufactured goods in the UK.
The value of cotton yarn, Britain's main export, peaked in 1871-1872. The export value of steel and iron reached the largest in 1873 at 37.75 million pounds.
Exports from the traditional food industries, including wool, worsted yarn, also hit new highs in the early 70s. British exports to continental Europe peaked in size between 1871 and 1876.
Before the sixties and seventies of the 19th century, Britain became almost the only dumping country with its unparalleled advantage, and with the rise of industrial countries such as the United States and Germany, dumping has reached an unprecedented level in international trade since the 70s, and the United States and Germany have become the main targets of blame.
After Germany established an industrial system, it established a relatively complete dumping system in order to weaken or destroy competitors to seize the European market and deal with excess production capacity.
However, until the mid-90s, the United States was only a dumper of raw materials and agricultural products.
By the early 70s, raw materials accounted for 19.4% of the structure of US exports to Europe, 14.4% of unprocessed food, 4.8% of manufactured goods, and 3.4% of semi-finished goods.
After the mid-90s, U.S. exports of semi-manufactured goods and manufactured goods began to grow rapidly, from 1895 to 1914, total U.S. exports increased by nearly 240%, while manufactured exports increased by nearly 500% during the same period.
From 1892 to 1912, the United States exported 457.3 million US dollars in manufactured goods, of which 126.5 million US dollars were exported to the United Kingdom, and 208.3 million US dollars to Germany and 108.5 million US dollars to France.
Since the mid-90s, the trade protection sentiment in European industry has been largely aimed at American and German industrial goods, and excess production capacity has not found a fully absorbed market.
The "grain invasion" and manufacturing dumping are inseparable from the flourishing European free trade system. Taking advantage of the Anglo-French Cobden Merchant Agreement in 1860, the spark of free trade was introduced from England to France and quickly became a fire.
From 1861 to 1866, most European countries signed trade treaties and agreements with France, resulting in a cluster of trade treaties unprecedented in European economic history, thus forming a huge free trade network.
For this reason, the realization of a free trade network means that Europe as a whole is almost unable to take any defensive measures against the large-scale entry of goods from non-European regions, and it needs to face the resulting general impact on product markets.