The Continental System: An Economic Interpretation

Heckscher, Eli F.
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Harald Westergaard, ed. C. S. Fearenside, trans.
First Pub. Date
Oxford: Clarendon Press
Pub. Date
14 of 30




THE immediate question, after the bomb which Napoleon had exploded, was what attitude Great Britain would assume toward the new blow directed against the very foundation of her trade and industry. We are confronted here with one of the points in the history of the Continental System which both at that time and later have been most often misunderstood.


Napoleon's intention was to strangle British trade with the Continent. The most natural counterblow of Great Britain in resisting this attempt at strangulation, and one in strict accord with the conceptions of those times, was to maintain the connexion with the Continent in every conceivable way. Nor is there any doubt that this was in reality the main line of action pursued by her, that is to say, chiefly by the British merchants and manufacturers. Consequently, the main economic conflict lay between the French measures of self-blockade and the British endeavours to break through that blockade. But the efforts of the British public authorities along this positive line, which was in reality the decisive one, were very much restricted by natural causes, over and above the extremely important fundamental condition created by the supremacy of the British fleet at sea. And with the usual inclination of mankind in the sphere of economics to attach too great importance to state measures and very little importance to the work of economic machinery itself, the main stress has been laid on obvious but in reality subordinate matters. It is by no means intended to follow the same course in this book; but what, from a deeper point of view, were the decisive matters on the British side do not belong—for reasons at which we have just hinted—to the external course of the Continental System and must therefore be left over for a later treatment.


It is true that one might regard one British measure as a positive counterblow, that is, an effort to compel the enemy, by economic or other pressure, to revoke his self-blockade decree. In form, indeed, this is what was attempted, inasmuch as all measures on both sides were represented as acts of reprisal, that is to say, as being caused by the aggressions of the enemy and as being intended to lead him into better ways. In the English official language the declared object was 'to restrain the violence of the enemy and to retort upon him the evils of his own injustice', as it was expressed in the Order in Council of January 7, 1807. And undoubtedly these declarations were in many cases seriously meant. But if such pressure was to be exerted in the sphere of economics, it almost necessarily had to take the opposite form to penetrating into the continental market: it had to be an effectual (i.e., import-preventing) blockade of the Continent. And this, as we well know, was just what people would not think of doing, for it would have implied, as was indeed said in Parliament, 'that France had shut the door against our commerce and that we had bolted it.'*15 Although this idea came up time and again, everything else contributed to put these positive counter-measures aside: Napoleon's obstinacy, which held out small hopes of any change in his tactics; the slight prospects of giving any appreciable strength to such pressure; and the direct disadvantages thereof for Great Britain's own industrial life. As before, therefore, nothing more was possible than a mere gesture, which was contradicted by every detail of actual trade life.


But by the side not only of attempting to break through the blockade, but also of placing obstacles in the way of imports with the object of bringing economic pressure to bear, there was a third, a negative line, namely, to try to injure the trade of France and her allies in the same way as Napoleon had sought to injure that of Great Britain. In other words, it was intended to cut off their exports, and in that way, according to the then prevailing view, to undermine the possibility of their economic prosperity, just as Napoleon intended to do as regards England. It was 'the policy of commercial rivalry', as distinct from the policy of retaliation, to use Canning's expression. This could not create direct pressure, such as would compel the annulling of a self-blockade; but its purpose, here as on the opposite side, would have been a slow weakening of the enemy financially and economically. This third line, however, clearly led to measures quite different from those of the second line, that is to say, not to a cutting-off of the supplies of the Continent, but to an attack on the trade of the Continent, and especially on its exports.


This third line was, of course, quite in accordance with the general tendency we know, and to that extent had possibilities quite different from those of the second line. But the actual conditions strictly limited this third line too, in a way even more strictly than the former, simply because England's fourteen-year-old supremacy on the sea had not left much of the independent maritime trade with the Continent; and even during peace time, moreover, that trade had had nothing like the same importance for the continental states as British trade had for Great Britain. With these three lines, however, the possibilities of state counter-measures were all but exhausted. From this it follows that the political measures of Great Britain against Napoleon's Continental decree were not, as a whole, of primary importance for the issue of the economic trial of strength. In order to make the connexion clear, however, we must enter into a somewhat detailed study of the nature of British policy; and this is in every respect so peculiar and casts so much light on the driving forces, that such an investigation well repays itself, even apart from the international consequences of the British measures and reaction of these consequences on the economic conflict itself.


What was possible and remained to be done by means of state measures on the part of Great Britain had chiefly to do with colonial trade, and especially with the part played by the neutrals in that trade. In order that this may be comprehensible, however, it is necessary to turn back a little and glance at the connexion between the mainland of Europe and the colonies, especially the West Indies, during the war period down to 1807.*16



The central point in the colonial trade at this time was formed by the West Indies, especially in their capacity as sugar producers; and among these the French and Spanish islands, especially Haiti and Cuba, were distinctly superior to the British islands, Jamaica, and the rest. The trade to the West Indian possessions of Napoleon and his Spanish ally, therefore, was regarded almost as the great prize of maritime commerce, which was sought after by the neutrals with the eager support of the European mother countries so long as they were powerless on the sea, while Great Britain wished to make use of her power to win this prize for herself. It is true that the foremost colony of all, Haiti, or, more correctly, its western or French third, St. Domingue, had suffered immensely from the many negro insurrections ever since the first years of the revolutionary wars; but sufficient was left to arouse the desire for gain. Furthermore, the remaining French colonies—Guadeloupe and Martinique in the West Indies, Guiana on the South American continent, Isle-de-France (now known as Mauritius) and Réunion and Senegal in Africa—were somewhat less damaged by the course of events during the war, while the Spanish possessions seem, on the evidence of outside witnesses, not to have suffered seriously. The country which lay handy to seize the trade with all these territories—which trade was jealously guarded in peace time—was clearly the United States. The latter had just begun its independent political existence and was seeking ways which might lead them away from the exclusive economic connexion with Great Britain that had been created and maintained during the colonial period. In this way there arose a triangular trade which was highly important for the Atlantic states of the American Union. Vessels proceeded with corn and timber to the French and Spanish West Indies, took on colonial goods there, especially sugar and coffee, which they conveyed to the European Continent, after which they returned, principally in ballast, but partly also with European industrial products. The balance of assets which the American merchants thus obtained on the Continent was used to liquidate the country's balance of liabilities to Great Britain for its textiles and iron goods, which continued to dominate the American market; but a considerable part of it was also re-exported to the rest of America, chiefly the French and Spanish West Indies themselves.


The whole of this trade was in conflict with the 'rule of 1756',*17 and, therefore, could not be tolerated in principle by Great Britain. But as the rule was interpreted during the revolutionary wars proper by the great legal authority, the British Judge of Admiralty, Sir William Scott, afterwards Lord Stowell—still to-day the great name in the sphere of the law of war at sea—it offered various possibilities to the neutrals, and particularly to Americans. Especially in the famous case of the Immanuel (1799) he elaborated the idea, on the one hand, that the neutrals could make no claim whatever to trade with enemy colonies during war, because those colonies, owing to the Old Colonial System, had been as inaccessible to them before the war as if they had been situated in the moon, and had been thrown open to trade only through the British naval victories. But, on the other hand, he also emphasized the fact that these prohibitions on trade in the products of enemy colonies held good only so long as those products had not formed part of a neutral country's stock of goods; and this he developed further in the case of the Polly in the following year, to the effect that the evidence of such a 'neutralization' should consist in the unloading of the goods in a neutral port and there passing them through the customs. Such a demand for what was called a 'broken voyage' was not difficult to fulfil, so much the less because the geographical position of the West Indies made it possible, with very little loss of time, for a vessel to put in at an American mainland port, especially Charleston, South Carolina, on its way to Europe. It was undoubtedly with full intention that the American government facilitated the matter by granting permission that when the goods were passed through the customs payment should be made by bond, and that practically the whole of the duty, with a very small exception (3½ per cent.), should be paid back on re-export. Consequently, the customs' treatment furnished the smallest possible guaranty that the goods had passed into neutral trade. When the unloading of the goods was required, the vessels had the possibility of going to a ship-building port in New England and using the time for the completion of repairs while the cargo was being discharged and reloaded. The trip thus became a 'circuitous voyage'.


The result of this peculiar manipulation may be illustrated in many ways. During the years of war the foreign trade of the United States underwent an extraordinary increase, while in the short peace interval there was an immediate decline; and the character of the trade is shown by the quite unique excess of re-exports, i.e., the exports of foreign products. It is true that the figures are not in all respects above dispute, but they are sufficiently reliable to merit reproduction.

Year Exports
Domestic goods Foreign goods Total Home

1790 $19,670,000 $540,000 $20,210,000 $22,460,000 $23,000,000
1791 18,500,000 510,000 19,010,000 28,690,000 29,200,000
1792 19,000,000 1,750,000 20,750,000 29,750,000 31,500,000
1793 24,000,000 2,110,000 26,110,000 28,990,000 31,100,000
1794 26,500,000 6,530,000 33,030,000 28,070,000 34,600,000
1795 39,500,000 8,490,000 47,990,000 61,270,000 69,760,000
1796 40,760,000 26,300,000 67,060,000 55,140,000 81,440,000
1797 29,850,000 27,000,000 56,850,000 48,380,000 75,380,000
1798 28,530,000 33,000,000 61,530,000 35,550,000 68,550,000
1799 33,140,000 45,520,000 78,670,000 33,550,000 79,070,000
1800 31,840,000 39,130,000 70,970,000 52,120,000 91,250,000
1801 47,470,000 46,640,000 94,120,000 64,720,000 111,360,000
1802 36,710,000 35,780,000 72,480,000 40,560,000 76,330,000
1803 42,210,000 13,590,000 55,800,000 51,070,000 64,670,000
1804 41,470,000 36,230,000 77,700,000 48,770,000 85,000,000
1805 42,390,000 53,180,000 95,570,000 67,420,000 120,600,000
1806 41,250,000 60,280,000 101,540,000 69,130,000 129,410,000
1807 48,700,000 59,640,000 108,340,000 78,860,000 138,500,000


We see here how the exports of foreign goods jumped from almost nothing to amounts which, at the close of the 'nineties, far exceeded the exports of domestic goods, and then during the peace year 1802-3 fell to little more than one-fourth of the amount for the last war year, but immediately after the outbreak of the new war rose to nearly half as much again as the exports of domestic goods in 1806. The following figures (given by Mahan) showing the exports to Europe of the two most important West Indian products during the few typical war years and peace years are also highly illuminative.

Product 1792

Sugar (lbs.) 1,122,000 35,000,000 82,000,000 20,000,000 74,000,000
Coffee (lbs.) 2,137,000 62,000,000 47,000,000 10,000,000 48,000,000


It may also be of interest to form a more graphic picture of this trade than can be given by figures. A sketch by the American historian, Professor McMaster, gives a mere summary of the abundant data, based on proceedings in prize-court cases as found in Stephen's book to which we have so often had occasion to refer:

The merchant flag of every belligerent, save England, disappeared from the sea. France and Holland absolutely ceased to trade under their flags. Spain for a while continued to transport her specie and her bullion in her own ships, protected by her men-of-war. But this, too, she soon gave up, and by 1806 the dollars of Mexico and the ingots of Peru were brought to her shores in American bottoms. It was under our (the American) flag that the gum trade was carried on with Senegal, that the sugar trade was carried on with Cuba, that coffee was exported from Caracas, and hides and indigo from South America. From Vera Cruz, from Cartagena, from La Plata, from the French colonies in the Antilles, from Cayenne, from Dutch Guiana, from the isles of Mauritius and Réunion, from Batavia and Manila, great fleets of American merchantmen sailed to the United States, there to neutralize the voyage and then go on to Europe. They filled the warehouses at Cadiz and Antwerp to overflowing. They glutted the markets of Emden, Lisbon, Hamburg and Copenhagen with the produce of the West Indies and the fabrics of the East, and, bringing back the products of the looms and forges of Germany to the new world, drove out the manufactures of Yorkshire, Manchester and Birmingham.


It was not to be expected that the British would look upon this development with approval. It took from them the trade with the enemy colonies, conveyed the products of these colonies to the enemy mother countries or gave them profitable sales in neutral markets, and consequently subjected the goods of the British colonies to an unwelcome competition on the Continent and at the same time created a market in America for the industrial products of the Continent which competed with those of Great Britain herself. Moreover, the shipping of the neutrals was considered to cause an enviable activity in the enemy ports; and, finally, it was considered to increase Napoleon's military power by relieving him of the necessity of providing convoys, which would have been necessary if the connexions had been provided by the French mercantile marine, and also by freeing him from the cares of supplying his colonies. These last matters implied a situation which the British would certainly have deprecated for their own part and which was also anything but welcome to Napoleon himself; but the other aspects of the situation involved many things which were bound to tempt Great Britain to interfere.


However, the British measures against the colonial trade of the Americans were comparatively mild for several years after the draconic law of November 6, 1793, regarding the confiscation of all vessels carrying products of the French colonies or conveying supplies to them had been revoked within two months. The absence of consistently maintained blockade declarations against the enemy colonies is especially striking. The instructions of 1794, 1798, and 1803, which we have previously mentioned,*18 aimed mainly at preventing only direct intercourse between the enemy mother countries and their colonies, and also, in the case of that of 1798, at drawing the trade through British ports. Beyond that, they wished to tolerate trade only in 'free goods', that is to say, goods which had passed into neutral hands. Thus the instructions of 1794 forbade direct intercourse between the port of an enemy colony and a European port, as well as trade in products which continued to be French property, while the instructions of 1798 allowed even direct intercourse with Europe provided a call was made at a European port belonging to Great Britain or the home country of the vessel. The instructions of 1803 introduced a certain modification of this, in that, curiously enough, a British port is no longer approved but only a port in the vessel's home country; and it is further laid down that the goods must belong to a citizen of the same country. Especially during the first years after the new outbreak of war in 1803 the treatment of the neutrals, both Americans and Danes, was unusually mild and their shipping was little disturbed. The number of captured vessels incorporated with the British merchant fleet was also smaller in the years 1803-6 than it was in the preceding or following years.*19


The 'neutralization' of enemy property resulting from the trade war itself, as well as from Sir William Scott's exposition of the law, assumed enormous proportions; and Stephen's book is full of characteristic and well-documented examples of the extent to which the regulations were evaded. These evasions, the number of which was legion, aimed at showing both that the trip was really (bona fide) begun in a neutral (American) port and that the goods were neutral property. With the former object new ship's papers were procured in an American port, sometimes, indeed, a new crew; in fact, there were occasions when two vessels exchanged cargoes so that they might both truthfully say that the cargo had been taken aboard in a neutral port. Moreover, separate insurances were taken for each trip, and the import duty was paid in the fictitious manner previously indicated.*20 With regard to the neutral ownership of the cargoes, the most grotesque situations arose. In this connexion an extract from Stephen's account, which is supported by references to the different legal cases, is well worth quoting:

Merchants who, immediately prior to the last war, were scarcely known, even in the obscure seaport towns at which they resided, have suddenly started up as sole owners of great numbers of ships, and sole proprietors of rich cargoes, which it would have alarmed the wealthiest merchants of Europe to hazard at once on the chance of a market, even in peaceable times. A man who, at the breaking out of the war, was a petty shoemaker in a small town of East Friesland, had, at one time, a hundred and fifty vessels navigating as his property, under Prussian colours... The cargoes of no less than five East Indians, all composed of the rich exports of Batavia, together with three of the ships, were contemporary purchases, on speculation, of a single house at Providence in Rhode Island, and were all bound, as asserted, to that American port; where, it is scarcely necessary to add, no demand for their cargoes existed.... Single ships have been found returning with bullion on board, to the value of from a hundred to a hundred and fifty thousand Spanish dollars, besides valuable cargoes of other colonial exports. Yet even these daring adventurers have been eclipsed. One neutral house has boldly contracted for all the merchandize of the Dutch East India Company at Batavia, amounting in value to no less than one million seven hundred thousand pounds sterling.


All this led, in the spring of 1805, to an alteration in the practice of the British law courts, which considerably damaged the possibilities of the American carrying trade. The highest British prize court, the Prize Appeal Court of the Privy Council, in the famous case of the ship Essex with its cargo from Barcelona to Salem, Massachusetts, and thence to Havana, declared both the vessel and the cargo forfeited, despite the fact that the latter had been unloaded and passed through the custom-house in the usual way in the American port (May 22). This precedent was immediately followed by two others in the Admiralty Court, whereby the intention of eluding the regulations was declared to be decisive as against the external criteria. At the same time the British went a more direct way to the end of obtaining control over the American colonies of the enemy, namely, by passing a series of laws which were promulgated in April and June 1805, and in July 1806. These were intended to encourage the importation of the products of those colonies either direct to England by licence or to the British West Indies, either to sixteen free ports established there or, with somewhat less liberty and on the basis of a licence, to other islands, with a somewhat varying right to be forwarded to the British home country. At the same time permission was given to send a return cargo from the British to the foreign colonies. To the sixteen free ports importation might be made in small vessels of any nationality whatsoever, that is to say, even of enemy nationality.*21


This new application of the law as regards 'circuitous voyages' aroused a great deal of feeling in the United States, and in April 1806, led to an American counter-measure; and at the same time there were issued the British blockade declarations concerning the North Sea coast and the English Channel on which we have previously touched.*22 The most important of these in all respects was the blockade which was proclaimed on May 16, 1806, on the initiative of the then British foreign secretary, the celebrated Whig politician, Charles James Fox. This created a strictly blockaded region between Ostend and the mouth of the Seine—that is to say, practically Havre—and also two less strictly blockaded regions to the north and to the south thereof—from Ostend to the Elbe and from the mouth of the Seine to Brest, respectively. Neutral vessels were conceded the right to call at the ports on the last two stretches, on condition that their goods were not contraband of war and did not belong to enemy subjects, and on the further condition that they had not been loaded in an enemy port and were not, to begin with, bound to such a port.


Like most of the British blockade regulations, this was very obscure; and it is not known to me how it was applied during the remainder of the year. Mahan's view that it liberated neutrals from the obligation laid down in the Essex case, honestly to import the goods of the enemy colonies before they were again exported to Europe, is not very satisfactory as an interpretation of the law;*23 for the condition was absolutely binding by the 'rule of 1756', even irrespective of the question whether any blockade had been ordered, and consequently it could not be regarded as annulled by the fact that the blockade had been made less strict on certain stretches.


Both in Great Britain herself and also in America and on the Continent of Europe, indeed, these different British measures during the years 1805 and 1806, especially the new exposition of the law in the prize courts, were regarded as serious blows against the neutral carrying trade. But the American trade statistics given above*24 do not point to this. On the contrary, they show a higher figure for exports of colonial goods during 1806 than during the year before or after; and the figures relating to captures do not show any considerable rise until the following year. It is possible, therefore, that in reality the application of the measures was such as Mahan has laid down. In any case, it may surely be considered clear that during 1806 Great Britain did not get rid of the neutral trade of which she disapproved or put an end to the advantages which, from a British point of view, this trade afforded to the enemy part of the Continent.


Then, at the close of the year, came Napoleon's Continental decree. Owing to the enormous emphasis with which it was proclaimed, as well as to the measures by which it was followed, this gave a tangible occasion for the discussion of new measures chiefly against the neutrals. The ministry which came to power in Great Britain after Pitt's death in January 1806, was under the leadership of Lord Grenville, who had for many years been Pitt's foreign secretary and fellow worker; and for the reason that it embraced many of the most gifted politicians in the country, it is known in history as the 'Ministry of All the Talents'. The foreign secretary at the start was Fox, the most Francophile of all British statesmen, and, after his death in the middle of September, the future leader of the Whig Party, the then Lord Howick, but better known under his later title of Earl Grey. This government was not inclined toward forcible measures; and the only British statesman after Pitt's death who was to some extent equal to Napoleon, but who did not belong to the Talents Ministry, namely, George Canning, somewhat later said disparagingly that the Grenville measures against the Berlin decree 'partook of all the bad qualities of half-measures'.*25



However, Lord Howick's governmental measure turned out to be the first step in the British counteraction which was to occupy the thoughts of the whole world during the following five years. Like its successors, it assumed the form of a measure by the King in Council, without the co-operation of Parliament, and it was therefore, from the point of view of public law, an Order in Council. Hence, this term became afterwards in the popular mind almost a proper name for regulations of this kind. The first Order in Council was issued on January 7, 1807, or a month and a half after the Berlin decree.*26 As a measure of reprisal against the Berlin decree and with the reference, previously quoted,*27 to the necessity of 'restraining the violence of the enemy and to retort upon him the evils of his own injustice', trade between enemy ports was entirely forbidden, and also trade between other ports at which the Berlin decree prevented English ships from calling. The members of the Grenville government afterwards maintained that this was only an application of the 'rule of 1756', which included a prohibition of coasting trade along the territory of the enemy. But if that had been the case, there would have been no use of asserting an intention of reprisal; and the opponents of the government—e.g., Lord Eldon, the Lord Chancellor in the following Ministry—also observed that the order went outside the alleged principle, in that it prohibited, for instance, trade between French and Spanish ports. Trade between the enemy mother country and her colonies was forbidden as a matter of course, but this implied nothing new. On the other hand, as regards coasting trade proper, it was more difficult to get at than any other part of the enemy's shipping, a point to which the domestic opponents of the government did not fail to call attention. On March 17, 1807, in a communication to J. G. Rist, the Danish chargé d'affaires at London at the time, Lord Howick amplified this further by declaring that there was no objection to neutral vessels carrying cargo to an enemy port, thence going in ballast to another port, and then carrying cargo from this last port to the home country. It was just the flourishing Danish Mediterranean trade that was hit by the new law; but apart from that the importance of the measure can not be regarded as great, except that to a certain extent it compromised the Whig Party with regard to the justifiability of measures of reprisal, and so far rendered difficult their position with regard to the more comprehensive measures of their successors in the same direction.*28


It was quite natural, therefore, that those who were in favour of more forcible measures on the part of the government, either against Napoleon or against the neutrals, were not satisfied with the January order. In this connexion we have first to think of Stephen and his supporters, who, according to the later evidence of his opponent, Brougham, constituted the great majority. It is true that Stephen's book had appeared as far back as the autumn of 1805, or more than a year before the issue of the Berlin decree; but there is nothing to indicate that either the man or his book had exerted any influence on the January order. The positive demands of Stephen are not quite clear, it is true; but in any case they can not be regarded as having been satisfied by the measure of the Grenville ministry. In many passages in his book Stephen assumes a negative attitude toward the thought of using the war as a pretext for commercial advantages, which he calls 'a morbid excess of sensibility to immediate commercial profit'; and as a warning example to his countrymen he mentions the action of the Dutch, during a siege, of selling powder to the enemy, whereby, he says, they 'preferred their trade to their political safety'. In accordance with this, he adopts for the most part a purely naval standpoint and urges that the neutrals, with very few exceptions, should be entirely prevented from dealing with enemy countries and in enemy goods, and especially with enemy colonies. In that way the enemy would be compelled to carry on his trade himself and to fetter his naval forces by convoying trading vessels and protecting his colonies and providing them with supplies; and by all these things the desired possibility of captures would also be secured to its fullest extent. Alongside all of this, however, we also find hints that more directly anticipate the following course of development, namely, that the goods of the enemy colonies might be conveyed to the British market and there taxed to such an extent as to prevent them from competing with those of the British colonies.


Stephen was closely connected with the English Tory politician, Spencer Perceval, who as prime minister was in company with Stephen at the time of his assassination by a lunatic in 1812; and it was from Perceval that there came the first positive criticism of the January regulations, viz., in the House of Commons on February 4, 1807. In his speech, too, we have the first complete explanation of the motives that lay behind the definitive Orders in Council; and to judge by the speech it would seem that the detailed framing of those orders was due less to Stephen than to Perceval. The latter clearly takes his stand, from the very first, on what we have designated above*29 as the 'third line' of policy, namely, that of trade rivalry. After a criticism of the January regulations he comes to what he regards as two possible expedients for meeting the Berlin decree. The one would be 'to exclude certain necessary commerce' from the territory of the enemy. But if this leads us to expect a plea for an effective blockade, we are immediately disabused; for it refers to the importation of French and Spanish colonial goods into France, with the object of at least making them dearer and thus strengthening the competitive power of the British goods. The alternative expedient, and the one which was to acquire practical importance, consists in the previously treated 'third line', namely, to turn the measures of France against herself by the order 'that no goods should be carried to France except they first touched at a British port. They might be forced to be entered at the custom-house and a certain entry fee imposed, which would contribute to enhance the price and give a better sale in the foreign market to your own commodities.' It is scarcely necessary to point out how faithfully the previously traced economic tendency of maritime blockade is here expressed, with sales on the enemy market as a self-evident aim. The second of these concrete proposals is somewhat influenced by the instructions of 1798, which in their turn stand in a certain connexion with the entrepôt or 'old colonial' system.


Perceval's contribution to the discussion became of great practical importance owing to the fact that some few weeks later, in March 1807, the Grenville ministry resigned and was succeeded by a government with the Duke of Portland as a figurehead prime minister, Canning as foreign secretary, and Perceval himself as chancellor of the exchequer. The minister of finance soon found occasion to take up afresh the question of measures against the Berlin decree, and that occasion arose in the West Indian interest, which to some extent had also lain behind Stephen's action. A West Indian petition which had been presented to the House of Commons as early as February had been referred to a select committee, whose report was ordered to be printed in August. The report strongly emphasized the American trade between the enemy colonies and Europe as the cause of the fall in the price of sugar, and this was stated to have gone so far that it no longer covered even the expenses of cultivation except on the largest estates in the British West Indies. In the debate on this report Perceval promised a prompt treatment of the question. We may regard as a first step toward the fulfilment of this promise an Order in Council which was issued only a few days afterwards (August 19), whereby vessels sailing under the flags of Mecklenburg, Oldenburg, Papenburg, or Kniphausen were declared lawful prize if they touched at an enemy port unless they were going from or coming to a British port. As the colours of these somewhat dubious North German principalities were commonly used as neutral flags in the more risky cases, this measure implies a first application of the new principle to a part of the pretended neutral trade.*30



The decisive step, however, was taken by three Orders in Council of November 11, 1807, supplemented by one of November 18, five of November 25, and one of December 18; and to these there were afterwards added further new ones, so that in the end the number of them amounted to no less than twentyfour. It is this system of ordinances, and especially the fundamental ordinance of November 11, that formed the foundation of British policy during the following period—in form, it is true, only until the spring of 1809, but in reality until the collapse of the Continental System. It is also these, and not the January ordinance, that are usually meant when reference is made to the Orders in Council. They were further supplemented in the spring of 1808 by no fewer than six less important statutes governing such points of the system as could not be put into execution without the consent of Parliament.*31


It is truly anything but easy to explain the purport of this far-reaching complex of regulations. The Orders in Council, in particular, are marvels of obscurity and rambling. We find the same matter scattered over several ordinances, which seemed absolutely to contradict one another, of the same day or with only a few days' interval. This incomprehensibility not only holds good for the people of later generations, but also for the people of that time; and the fogginess of the regulations was a standing butt for the jeers of the opposition. Thus, Lord Grenville declared his belief that the very persons who drafted them had scarcely understood their content; and he also alleged that four points in the same ordinance contained four contradictions, and that he was not a little proud of having been able to understand the connexion at last.*32 The often confused and mutually conflicting explanations of the ministers did not, as a rule, help to clear matters; and owing to the total lack of all special investigations, especially as to their connexion with general legislation regarding shipping and the colonies, certain points at the present time are not easy to interpret.*33 But this does not apply to the general line of thought, which is quite clear; and the pretended object of the measures can be distinguished without any considerable difficulty from their real objects. The fundamental idea is to be found practically in the germ as early as Perceval's speech in February.


Seldom, however, has the contrast between the policy officially proclaimed and the policy actually pursued stood out in a more striking way than in the chief of the three Orders in Council of November 11, the one which can properly be called the blockade ordinance.*34 After a declaration that the January ordinance had not attained its object, either of compelling the enemy to revoke his measure or of inducing the neutrals to take action to the same effect, this ordinance simply proceeds to copy the most important points of the Berlin decree. Thus not only all enemy countries with their colonies, but also all places from which the British flag is excluded (this last point has nothing corresponding to it in the blockade declaration of the Berlin decree), are declared to be subject to the same rule as if they were really blockaded in the strictest manner; and, further, all trade in their products is prohibited. Every vessel trading to those countries shall be fair prize, as well as its cargo and all goods coming from there.


But immediately following these draconic regulations are exceptions which entirely nullify the rule and make possible the very trade so rigorously prohibited. Out of alleged regard for the neutrals, in fact, it is declared that they shall still be allowed to provide themselves with colonial goods for their own consumption and even to carry on 'such trade with His Majesty's enemies as shall be carried on directly with the ports of His Majesty's dominions or of his allies'. And in this the true fundamental principle has found expression. Ignoring details, we may say that the real principal regulations, as distinct from the apparent ones, consists in permitting both direct trade between the home country of a neutral vessel and enemy colonies and also direct trade between the European British port and enemy ports. What is prohibited in the first place, therefore, is direct intercourse between the enemy colonies and their mother countries. But further, in the main, all direct intercourse between the enemy countries and other ports is prohibited, except when the 'other ports' are either European British ports or ports in the vessel's own country. That is to say, intercourse is also prohibited between enemy ports and neutral ports elsewhere than in the home country of the neutral vessels.


Thus the regulations left the intercourse of the neutrals, principally the Americans, with the enemy West Indian colonies so far undisturbed. But by preventing the American vessels from conveying the products of those colonies direct to any port on the European mainland, neutral or enemy, the Orders in Council practically cut them off from almost the whole trade with the enemy colonies, except in so far as they were willing to put in at a British port; for the intercourse which was still allowed between the enemy colonies and the United States itself was of no very great importance, the Union's requirements of West Indian products being quite insignificant. Consequently, we can not deny the existence of a certain amount of consistency in these measures, despite their seeming aimlessness; and this showed itself in a number of details.


The principal thing in all respects was the obligatory call at a British port. The intention of this regulation was presumably, above all, to raise the prices on the products of the enemy colonies and the enemy parts of the European mainland in all ports where they might compete with goods of Great Britain or her colonies.*35 For this purpose it was laid down that both goods of enemy destination and goods of enemy origin, as well as goods which had been loaded in an enemy port, should be discharged on the arrival of the vessel at a British port. The only exceptions were corn, flour, and other unmanufactured natural produce brought direct from the producing country, where there was no competition with British goods, and where it was thought possible, without inconvenience, to show a certain consideration for the exportation by the United States of their own products, as opposed to their re-exportation of colonial goods. The whole of this exception, however, furnishes very significant evidence of the long distance that Great Britain had travelled from the temporary plan of 1793 to starve out the Continent.


When the goods were afterwards to be exported again, the majority of the foreign goods, but not the British colonial goods, nor the actual products of neutral countries just mentioned, were subjected to customs dues; and in complete accordance with the aim of the whole measure these duties attained a considerable height: for instance, for coffee, 28s. per cwt.; for brown sugar, 10s.; and for white sugar, 14s. At the prices then current these rates would seem to have corresponded to at least 20 or 30 per cent. of the value.*36


What this meant for goods that had been brought under British control only by military pressure, appears from such a detail as the fact that a special provision in the most important of the statutes had to concede to the owner of the goods the right to allow them to be destroyed in port without duty.*37 But besides this there were also certain restrictions in the right to re-export these goods at all, still without the slightest intention of cutting off the enemy's supplies, although it often might seem so, but only in the interests of commercial rivalry. The greatest relaxations, therefore, curious as it may seem, were made in the permission to export to European ports, inasmuch as everything might go there, even enemy property (to be distinguished, of course, from commodities of enemy origin); this was otherwise excluded from all toleration by reason of the British denial of the rule that 'free ships make free goods'. The reason, of course, was that British statesmen, as usual, wished to force upon a reluctant enemy goods via England. All British and East Indian commodities and captured goods were allowed to go to enemy colonies; and foreign goods imported to England might go there by a licence which would always still further increase their price; while, finally, other places, chiefly, of course, the British colonies, might not, without special licence, receive six kinds of goods that played a special part in the colonial trade, namely, sugar, coffee, wine, brandy, snuff, and cotton.*38


But there were two commodities concerning which there arose a very vehement struggle, namely, raw cotton and cinchona bark, usually called Jesuit's bark. The former was naturally of the greatest importance in the continental industry that competed with the British, while the latter, as is well known, was a pièce de résistance in the older pharmacopoeia in all febrile maladies. After having originally thought of imposing an export duty on these goods too, the British government decided to prohibit their export. Here, at least, where an actual prohibition of export was created, one would expect to meet with an aim at the actual blockade of the Continent, which the opposition indeed often assumed, more or less bona fide, to be the real object of this measure. But, as a matter of fact, nothing was further from the thoughts of the government. Perceval, who in his capacity of chancellor of the exchequer introduced the bills on this subject, justified the prohibition on cinchona bark, it is true, by alleging that the greatest difficulties had already revealed themselves on the Continent, especially in Napoleon's armies, through the scarcity of medicaments, as was indeed shown by the fact that the price had increased sevenfold. But he went on immediately to say: 'The object of the prohibition in this instance was that it might ultimately be the means of introducing other articles into the Continent.' For these reasons the laws themselves authorized licences from the prohibitions, as Perceval again emphasized, in order to prevail on the enemy to receive British goods. 'There would be no difficulty,' he said, 'in obtaining any quantity of this article, the moment the enemy took off his prohibition from the importation of other articles.'*39 Thus the competition point of view was the deciding factor all along the line.


But it remained to regulate the control by seeing that the vessels went as a matter of fact to the British ports; and the regulations on this subject were among those that attracted the greatest attention, although they are not of equal interest in principle. The commanders of British war-ships and privateers were instructed, before the new regulations became known, to warn vessels on the way to enemy or other forbidden ports, and also to order them to make their way to specially named ports. Vessels on their way to an American port which was not in their own country were to go to Halifax in Nova Scotia (which was also used for similar purposes during the recent war) or to a West Indian free port; vessels south of the Equator were to go to Ceylon, to St. Helena or the Cape of Good Hope; and vessels on their way to Europe, either to Gibraltar or to Malta or to any port in the British Isles.


In addition to all this, finally, there were pure measures of reprisal, framed according to their French counterparts. Trading vessels were to remain enemy property and to be confiscated as such, even if they were sold to neutrals; and what was the most unreasonable of all the regulations, the mere possession of a French certificate of origin as to the non-British nationality of the cargo was to involve the confiscation of both ship and cargo. On the other hand, since the lack of such certificates involved capture on the part of the French, a neutral vessel, at least if it did not sail under British convoy, had, according to this last regulation, no alternative between breaking the orders of one power or the other, with the consequent risk of capture from one side or the other, provided, it is well to remark, that they wished to act openly and honestly, which therefore was practically impossible. The only effect of all this was the establishment of a system of double ship's papers, which gradually attained an immense scope; and thus in reality the consequence was that the laws of both sides were broken.


In this multiplicity of regulations—which, however, have not by any means been fully reproduced here—the most prominent thing of all is the obligation to call at a British port, with the possibilities thereby created of controlling and rendering dearer enemy products, especially enemy colonial goods. In the course of time, too, the British ministers managed to find a comparatively clear expression of their ways of thinking in this respect. This was especially the case in almost identical utterances made in the spring of 1812 by three of the ministers. As formulated by Lord Bathurst, the president of the Board of Trade, that is to say, minister of commerce, it ran as follows: 'France by her decrees had resolved to abolish all trade with England: England said, in return, that France should then have no trade but with England.'*40 This, of course, did away with the idea of blockade as such, and the licensing system took its place in the seat of honour, partly through the 'proviso' regulations of the ordinances themselves and partly through the licences expressly permitted in them.


This, however, was far from clear to everybody; nor was it approved by all to whom it was clear. Some of the home critics of the British government, somewhat later including Canning, who was a member of the government when the ordinances were issued but had to leave it in 1809, considered that they ought to be true to their alleged purpose of making the enemy feel the consequences of his own injustice and to that end cut off his supplies.*41 But more numerous were those attacks of the opposition which blamed the government for its advertised intention, doing so under the unfounded assumption that it was sincere. These critics dwelt on the impossibility of starving out the Continent, the small extent to which a shortage of certain articles of luxury was felt, the encouragement to new branches of production and the invention of substitutes which such a blockade might introduce into the Continent, and all the consequent injury to British industry and British colonies. In point of fact, however, all this criticism did not apply to the Orders in Council as they worked and as they were intended to work, but to Napoleon's Continental System. To that extent, therefore, it implied a recognition of the appositeness of that system, which was certainly not the intention of the critics. The real character of the government policy did not, however, escape criticism altogether, as when Lord Grenville in one of his first discussions on the Orders in Council, in the House of Lords on February 15, 1808, declared that: 'This principle of forcing trade into our markets would have disgraced the darkest ages of monopoly.' On the whole, however, it may be said that the criticism, usually very much embittered, missed the true point of the policy of the government.*42



In order to make the connexion clear, the British counter-measures to the Berlin decree have been followed to the close of the year 1807, and even somewhat beyond. But on the Continent the year 1807 had been rich in tremendous events with far-reaching consequences for the Continental System. At Tilsit Napoleon had prevailed upon Russia to join the great policy of reprisals in the event of her failure to mediate a peace between Great Britain and France; and naturally enough she failed. The bombardment of Copenhagen—Canning's act of violence against Denmark, which, as we know,*43 was quite superfluous—had thrown that country entirely into the hands of Napoleon and made its ruler, the Crown Prince Frederick, who shortly afterwards ascended the throne as Frederick VI, one of his few sincere allies. Meanwhile, Napoleon's own aggression against Portugal had put an end to the independence of that country after the royal family had fled to Brazil. The remaining states of Europe were either more or less purely subsidiary states to France, or at least had been so recently vanquished by Napoleon that they could not contemplate resisting the introduction of the Berlin decree. To the former category belonged the kingdoms of Italy (North Italy), Holland, and Naples, the Confederation of the Rhine, and in the main (for the present) Spain; to the latter, Prussia and Austria. Besides these, the kingdom of Etruria (Tuscany) was reduced to submission by military occupation and the other Italian territories by suitable pressure. Even Turkey bound herself to exclude British goods. In this connexion it was especially important that the great emporium of Leghorn was closed to the trade of England by the overthrow of the independence of Etruria. At the close of 1807, therefore, there was only one European state that openly refused to become a party to the Continental System; and that state was Sweden, the sole ally of Great Britain. Against her, accordingly, Russia, at the instigation of Napoleon, made the attack which was to end with the conquest of Finland and the deposition of Gustavus IV Adolphus. Thus during its very first year the Continental System attained a territorial range which far transcended even the boldest plans that had been formulated in the minds of its author's predecessors under the Convention and Directory, when they spoke of a blockade from the Tagus to the Elbe or from Gibraltar to Texel.

FIRST MILAN DECREE (Nov. 23, 1807)


At the same time Napoleon had laboured further at the internal structure of the system in forms which, in the main, belong to part III. After regulating in greater detail the treatment of British vessels and goods on the especially exposed coast-line of North Germany, he gave to certain provisions which applied to that coast validity for his own empire through the first Milan decree (November 23, 1807). This contained detailed regulations concerning the manner in which it was to be determined that vessels had called at a British port, concerning the confiscation of vessels and cargoes in this case (not merely their expulsion, as was prescribed in the Berlin decree), and concerning the certificates of origin previously mentioned touching the non-British provenience of goods.



It was during his stay in the kingdom of Italy that Napoleon was informed of the British Orders in Council of November 11; and he seems to have been seized by a violent fit of anger, which found expression in the second of the fundamental laws of the Continental System, namely, the second Milan decree, issued on December 17, 1807. The part of the Orders in Council to which he especially devoted his attention was the in itself not very remarkable examination (the warning) by British war-ships; but of course he also took notice of the obligatory call in England and the duty on re-exports. He hurled out his decree as a measure of reprisal against the English government, 'which,' he said, 'assimilates its legislation to that of Algiers,' and applied it only against such nations as failed to compel England to respect their flags, and also, as usual, made it valid only so long as England continued to disregard international law (Article 4). Every vessel which submitted to any of the three regulations—examination, call in England, or paying duty there—was declared to be denationalized; it had forfeited the protection of its own flag and, from the view-point of French legislation, had become English property (Article 1), and had thus become lawful prize both in port and at sea (Article 2). The doubt which had hitherto prevailed concerning the application of the Continental System by sea was thereby removed. The real content of the Milan decree is simply the express and unrestricted extension of the system from the Continent to the sea, in so far as French privateers could make it effective there. This fact finds expression in the curious formula that the British Isles are now declared in blockade both by land and by sea; and every vessel on its way to or from an English port, or an English colonial port, or even a port occupied by England, are declared to be fair prize (Article 3). Moreover, by attaching these regulations in the first place to the examination, which the neutrals almost entirely lacked the power of preventing, and not only to the call in a British port, where a certain amount of independent will might perchance remain for the masters of neutral vessels, the Continental System had approached the Nivôse law of 1798 more closely than in its previous workings; that is to say, it had come to apply against neutral shipping as such. This was quite deliberate on the part of Napoleon; and from this point of time dates his view that there were no longer any neutrals, inasmuch as they were either, and as a rule, Englishmen in disguise, or, at all events, had made themselves the accomplices of the English by accommodating themselves to the Orders in Council. This construction put upon non-French shipping applied almost as a matter of course to vessels, not only from allied, but also from purely vassal powers. On the very same day that the Milan decree was issued, for instance, Napoleon gave orders to Decrès, his minister of the marine, to detain a Russian vessel—that is to say, a vessel belonging to an allied nation—which had arrived in the port of Morlaix in Brittany; and for this order he gave the truly Napoleonic justification that it was either really English—in which case it was condemned as a matter of course—or that it was really Russian, and in that case should be detained to prevent it from being taken by the English. Decrès was also charged to give orders to the same effect to all French ports concerning Danish, Dutch, Spanish, and all other vessels, and to investigate whether the regulations were similarly applied in the vassal states. On this basis Napoleon afterwards systematically built up his treatment of non-French vessels in the ports of France and its subsidiary states, with gradually more and more developed protectionist tendencies as against shipping which was not purely French.*44


On the same day that the Milan decree was issued, Champagny, the foreign minister at the time, received orders to transmit it by a special courier to Holland, Spain, and Denmark, with the request that these nominally sovereign states should comply with (obtempérer à) it; and the continental powers immediately set to work to bring their legislation into accordance with the new decree of the master.*45 Of greater interest than the details of this development, which becomes important only in connexion with the inquiry into the actual workings of the system, is the attitude assumed by the United States—at that time almost the only remaining neutral power—toward this blow directed by both the belligerents mainly against neutral trade. The highly instructive development of the American attitude toward the Continental System went on alongside the development of European affairs down to the practical collapse of the system in 1812. It will form the subject of the next chapter.

Notes for this chapter

The expression was cited by Perceval in the House of Commons, Feb. 5, 1808. Hansard, vol. X, p. 328.
For the following account reference may be made, not only to the works previously cited, viz., those by Mahan, Roloff, Levasseur, Holm, Stephen (the quotation on p. 107 comes from his pp. 81-2), Johnson (from whom is taken the table on p. 103), and Martens, as well as to the Statutes at Large of the United Kingdom and Hansard's Parliamentary Debates, but also to J. B. McMaster's chapter in the Cambridge Modern History (Cambridge, 1903), vol. VII, pp. 323 et seq., and Channing, The Jeffersonian System, 1801-1811, in The American Nation: A History (New York and London, 1906), vol. XI, chs. 13-15. The quotation from McMaster on p. 104 is taken from his History of the People of the United States, vol. III, p. 225 (ap. Johnson, op. cit., vol. II, p. 28).
See p. 36.
See ante, pp. 45 and 81.
According to Porter (op. cit., p. 396), the number of ships captured and incorporated with the British mercantile fleet was as follows:

Year Ships Year Ships Year Ships Year Ships
1801 2,779 1804 2,533 1807 2,764 1810 3,903
1802 2,827 1805 2,520 1808 3,222 1811 4,023
1803 2,286 1806 2,564 1809 3,547 1812 3,899

See ante, p. 103.
45 Geo. III, cc. 34 & 57; 46 Geo. III, c. 111.
See ante, p. 81.
Mahan, Influence of Sea Power, &c., vol. II, pp. 269-70; also, Sea Power in its Relations, &c., vol. I, p. 108.
See ante, p. 103.
Hansard, vol. IX, p. 687 (June 30, 1807).
All these Orders in Council of 1807 are printed in Hansard, vol. X, pp. 126-48; but as some of them are not readily accessible outside of Great Britain, and as they are, moreover, very often incorrectly summarized, they are reproduced in app. I from Hansard.
See ante, p. 99.
Lord Eldon in the House of Lords, Feb. 15, 1808 (Hansard, vol. X, p. 475); Perceval in the House of Commons, Feb. 4, 1807 (Hansard, vol. VIII, p. 629). Lord Howick's declaration is given in Hansard, vol. X, pp. 402 et seq. Linvald, Bidrag til Oplysning om Danmark-Norges Handel og Skibsfart, 1800-1807, in Dansk Historisk Tidsskrift, VIII (1917), vol. VI, pp. 409, 433-4.
See ante, p. 99.
Lord Brougham, Life and Times of, written by himself (2d ed., London, 1871), vol. II, pp. 5, 7; Speeches of (Edinburgh, 1838), vol. I, p. 404; Stephen, War in Disguise, &c., pp. 38 et seq., 116 et seq., 163 et seq., 171; Hansard, vol. VIII, pp. 620-56; vol. IX, pp. 85-101, 1152-3; app. pp. lxxxi et seq.; Porter, op. cit., p. 379.
48 Geo. III, co. 26, 28, 29, 33, 34 and 37.
Hansard, vol. X, pp. 482-3; vol. XII, p. 774.
The reader is here referred to the text of the Orders in Council in app. I.
See app. i, no. v.
Cf., for instance, the utterances of Lord Bathurst, the president of the Board of Trade, and Lord Hawkesbury (afterwards Lord Liverpool), the home secretary; in the House of Lords, Feb. 15, 1808 (Hansard, vol. X, pp. 471, 485).
The figures relating to prices will be found in Tooke, A History of Prices, &c., vol. II, pp. 398, 414.
48 Geo. III, c. 26, s. 16 (the Principal 'Orders in Council Act'). Cf. Lord Erskine in the House of Lords, Mar. 8, 1808 (Hansard, vol. X, pp. 966-7).
This seems to the writer to be the only possible interpretation of the most obscure of all the ordinances, namely, the Order in Council of Nov. 25, 1807 (printed as no. IX in app. I), which is clearly the one alluded to by Grenville in his utterance previously cited (pp. 114-15), compared with the Order in Council of the same day (printed as no. X).
House of Commons, Feb. 22 and 24, Mar. 16, 1808 (Hansard, vol X, pp. 695-6, 728, 1168); 48 Geo. III, cc. 29, 33, 34.
House of Lords, Feb. 28, 1812. Hansard, vol. XXI, p. 1053. Almost to the same effect, of. Rose, vice president of the Board of Trade, in the House of Commons, Mar. 3, 1812, and Perceval on the same day and Apr. 17, 1812. Hansard, vol. XXI, pp. 1120, 1153; vol. XXII, p. 434. Cf. also, Lord Wellesley's utterance in 1811 (see below, p. 208).
See ante, p. 99.
The following are a few examples: First standpoint: Canning in the House of Commons, Mar. 3, 1812 (Hansard, vol. XXI, p. 1147); Lord Sidmouth, the former and far from eminent prime minister under the name of Addington, in the House of Lords, Feb. 17, 1809, and Feb. 28, 1812 (Hansard, vol. XII, pp. 791-2; vol. XXI, p. 1071). Second standpoint: Lord Auckland, president of the Board of Trade in 'All the Talents' and in his time the eponymous negotiator of the Eden Treaty, in the House of Lords, Feb. 15, 1808 (Hansard, vol. X, p. 468); Lord Henry Petty, chancellor of the exchequer in 'All the Talents' and afterwards Lord Lansdowne, in the House of Commons, Feb. 18, 1808 (Hansard, vol. X, p. 682); Whitbread, one of the principal speakers of the Opposition, in the House of Commons, Mar. 6, 1809 (Hansard, vol. XII, pp. 1167-8). Third standpoint: Lord Grenville, as above (Hansard, vol. X, p. 483). Cf. the more perspicacious criticism of Lord Grey, formerly Lord Howick, in the House of Lords, June 13, 1810 (Hansard, vol. XVII, pp. 545 et seq).
For the Scandinavian investigations the reader is referred to the leading authority on Danish history in the eighteenth and early nineteenth centuries, Professor Edvard Holm, Danmark-Norges Historie fra 1720 til 1814, vol. VII.
First Milan decree: Bulletin des lois, &c., 4th ser., bull 172, no. 2,912. Second Milan decree: Correspondance, no. 13,391; cf. also, Napoleon to Champagny, Jan. 10, 1810, no. 16,127; also, Napoleon to Decrès, no. 13,398.
Correspondance, no. 13,393; Martens, Nouveau recueil, &c., vol. I, pp. 458 et seq.

Part II, Chapter IV

End of Notes

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