Losing the Thread: Cotton, Liverpool and the American Civil War by Jim Powell (review)

Jim Powell’s Losing the Thread: Cotton, Liverpool and the American Civil War tells the story of the cotton crisis that wracked English manufacturers during the period of the American Civil War. The Confederacy, adopting the strategy dubbed King Cotton, placed an embargo on the vast supplies of cotton to which the industry had grown accustomed. The embargo was meant to induce the British government to come to the rescue of its manufacturers by intervening in the Civil War on behalf of the South. No sooner had the embargo been declared than the Union upped the ante, blockading Southern ports and reducing the cotton supply to a trickle. Supplies had been plentiful the previous year—the largest they had ever been—and stocks were high. Anticipating a quick resolution to the war, manufacturers hoped to bide their time. The war, however, was longer than most expected. Fears about the ensuing shortage gave rise to the first large-scale market in futures. Speculators bought and sold claims on the projected value of exports that passed through many hands before the cotton arrived at port (if indeed it ever did). Brokers exploited such opportunities for speculation. Some were ruined in the process, while others made fortunes. For many factories, reduced hours, or “short time,” became the norm, while others closed temporarily or were forced to close due to insolvency (41). Lost or reduced work produced famine-like conditions for workers made to bear the brunt of the crisis, which entered the annals of history as the Lancashire Cotton Famine.

Histories of the Cotton Famine have been written before. Arthur Arnold raced to complete his, The History of the Cotton Famine (1864), before the war had concluded. Most important among these histories is W. O. Henderson’s The Lancashire Cotton Famine 1861–65 (1934, revised 1969). Henderson’s study, like Arnold’s, focused on how the crisis affected the manufacturers and workers of Lancashire’s industrial towns. Powell shifts the focus to Liverpool, the nerve center of global commerce in the North. Drawing on a wealth of primary-source material produced by brokers and broker agencies, most notably the Liverpool Cotton Supply Association, he reconstructs a narrative of the crisis from the perspective of Liverpool rather than Manchester. This alone marks his study as an important addition to our knowledge of the period. Powell, however, desires not only to make an addition but also a correction, providing evidence that, he argues, refutes or qualifies two long-standing assumptions: one, that before the Civil War began, the cotton industry was threatened by a crisis of overproduction that would have reduced factory work irrespective of the war; and two, that Liverpool was eager to see trade with the South resume and was thus a hotbed of pro-Confederacy sentiment.

Adherents of the overproduction thesis tend to draw attention to the latent irrationality of an economic system prone to crises of overproduction. Karl Marx was an early proponent of the thesis. As a further example of the market’s irrationality, he noted how Indian producers, in a bid to make up lost supply, shifted their crops from food staples to cotton, contributing to conditions that led to actual famines. Powell passes over Marx’s commentary and the Indian famines in silence. Instead, he gathers statistical evidence gleaned from brokers’ reports, which he argues reveals there was no overproduction before or during the war (chapter 4). He quotes approvingly from an 1861 issue of The Economist (1843–present) that “‘over-production,’ and ‘over-supply,’ are purely relative terms, and are so vague and inaccurate that it would be well if we could forego their use” (87). From this perspective, even if instances of overproduction occur, these are considered temporary irregularities that the market can resolve. For Powell, this means that the enormous surplus from 1860 to 1861 could never have developed into a crisis of overproduction. Since the Indian and Chinese markets...