AND THE CRISIS OF 1878 47 
advances for land purchases, a reversion to the old idols which 
had served them so badly in the débdcle of 1843. In Queensland 
the progress of mining and the favourable position of the cattle 
industry had attracted considerable capital from Great Britain, 
so that the northern state shared fully in the prosperous times 
upon which the other colonies had entered, and which occasional 
droughts did not seriously affect. 
These were the conditions from which arose the crisis of 1878 
in the Australian colonies, and its main interest is in the clear 
demonstration which, in common with the Queensland crisis of 
1866, it affords of the increasingly intimate connexion between 
the British and Australian financial systems. In 1873 an inter- 
national crisis, mainly German-American in its origin,! had 
spread over the industrial world of two continents. Yet Great 
Britain, in the very heart of the storm, escaped its worst effects. 
In her case, inconvenience rather than injury was the main 
effect, the worst feature of which was a bad financial scare with 
some loss to investors who were well able to bear it. But if she 
escaped the worst miseries of the moment she was not to go 
unscathed. Shrinking prices, stagnation, glutted markets, and 
unemployment slowly altered the picture until the accumulated 
effects of the 1873 crisis and the natural reaction from protracted 
prosperity culminated in the City of Glasgow Bank smash in 
1877. This course of events in Great Britain found a striking 
parallel in Australia, which escaped with Britain the worst 
effects of *73 only to suffer five years later. 
Here again was proof, if further proof were needed, of the 
effects of a sudden stoppage of loans upon the prosperity of the 
colonies. There was no apparent reason, other than inability 
or unwillingness on the part of Britain to maintain the stream 
of exported capital at its accustomed volume, why Australia 
should have shared in the discomforts of the depression following 
1878.2 Indeed the productive capacity of Australia in relation 
to the overseas debt had never been more sound; and the real 
prosperity of this time was not again approached until the vears 
* The crisis which arose in September was known in U.S.A. as the Jay Cooke 
panic from the financier whose failure invoked the storm. It ‘had its origin in 
fervid over-trading and speculation in U.8.A., and although England had no panic 
hér best customers were crippled’. (Wesley Mitchell.) 
" For an excellent statistical review of the whole Australasian situation in 1880 
see the remarkable paper by Sir F. Dillon Bell before the Royal Colonial Institute,