The Lancashire Cotton Famine, also known as the Cotton Famine or the Cotton Panic (1861–65), was a depression in the textile industry of North West England, brought about by overproduction in a time of contracting world markets. It coincided with the interruption of baled cotton imports caused by the American Civil War and speculators buying up new stock for storage in the shipping warehouses at the entrepôt. This, as well as causing cotton prices to rise in China, in which trade had been steadily increasing following the Second Opium War and during the ongoing Taiping Rebellion. The increase in cotton prices caused the textile trade to rapidly lose two-thirds of its previous value of exports to China from 1861-1862.
The boom years of 1859 and 1860 had produced more woven cotton than could be sold and a cutback in production was needed. The situation was exacerbated by an overabundance of raw cotton held in the warehouses and dockyards of the ports and the market was flooded with finished goods, causing the price to collapse, while at the same time the demand for raw cotton fell. The price for raw cotton increased by several hundred percent due to blockade and lack of imports. The inaccessibility of raw cotton and the difficult trading conditions caused a change in the social circumstances of the Lancashire region's extensive cotton mill workforce. Factory owners no longer bought large quantities of raw cotton to process and large parts of Lancashire and the surrounding areas' workers became unemployed and went from being the most prosperous workers in Britain to the most impoverished.
Local relief committees were set up and appealed for money locally and nationally. There were two major funds, the Manchester Central Committee and the Mansion House Committee of the Lord Mayor of London. The poorest applied for relief under the Poor Laws, through the Poor Law Unions. Local relief committees experimented with soup kitchens and direct aid. In 1862, sewing classes and industrial classes were organised by local churches and attendance merited a Poor Law payment. After the Public Works (Manufacturing Districts) Act 1864 was passed, local authorities were empowered to borrow money for approved public works. They commissioned the rebuilding of sewerage systems, cleaning rivers, landscaping parks and surfacing roads. In 1864, cotton imports were restored, the mills were put back into production but some towns had diversified and many thousands of operatives had emigrated.
Background
The 1850s had been a period of unprecedented growth for the cotton industry in Lancashire, the High Peak of Derbyshire, and north east parts of Cheshire. The region had swamped the American market with printed cottons and was speculatively exporting to India. The populations of some mill towns in the Lancashire and the surrounding region had almost doubled, the profit to capital ratio was running at more than 30 per cent and a recession was looming. In 1861, the slave-owning Southern States of America, where most of the world's raw cotton was produced, declared their independence and attempted to secede from the United States of America. The situation quickly deteriorated, culminating in the outbreak of the American Civil War and leading to an immediate, protracted interruption of the cotton supply-first by a voluntary boycott by Southern planters who believed a run on the cotton would quickly debilitate the British economy and force them to intervene on the South's behalf. By the time it became clear that this strategy was ineffective, the resumption of cotton exports was prevented by the Union blockade of Southern ports.
In 1860, there were 2,650 cotton mills in the region, employing 440,000 people who were paid in total £11,500,000 per annum. 90 per cent were adults and 56 per cent female. The mills used of which 18,500 was generated by water power. The mills had 30.4 million spindles and 350,000 power looms. The industry imported of raw cotton a year. It exported 2.78 billion yards of cotton cloth and of twist and yarn. The total value of its exports was £32 million.
First year
Unsold cloth had been building up in the warehouses in Bombay (Mumbai); production had exceeded demand and short time working was inevitable. As indications came that trouble was possible, the American growers hurried to export their crop early. Almost enough of the 1861 crop reached Liverpool to supply the mills. Middling Orleans, the type of cotton that was used to gauge the prices, was selling for d a pound in June 1861.