Napoleonic Sanctions

As wars are costly and cannot always be won by military means alone, wars are also economic struggles. Adversaries try to gain the upper hand by embargos and blockades, either in lieu of military action or in addition to it. Unable to defeat Britain by conventional means, Napoleonic France led a front of largely reluctant European states in suspending trade with the English. The plan failed. The embargo was not thoroughly enforced and Britain found new outlets for its merchandise abroad. Neither country was powerful enough to win the war by economic means alone.

Napoleonic Wars

Most of the rest of Europe had been at war against France for more than a decade before French victories at Austerlitz in 1805 and Jena-Auerstedt in 1806 put much of continental Europe under French control. Its emperor, Napoleon Bonaparte, installed family and allies as the new heads of several European states and required defeated adversaries enter into harsh treaties. However successful France was on land, Britain matched that success at sea, winning battles at Cape St Vincent, the Nile, Copenhagen, and Trafalgar that destroyed the navies of France and its allies.

Tiddy-Doll, the Great French-Gingerbread-Baker; Drawing Out a New Batch of Kings, His Man Hopping Talley, Mixing Up the Dough, print by James Gillray, 1806

Berlin Decree

More than any other, it was the French defeat at Trafalgar in 1805 that made an invasion of the British Isles impossible. Soon after, Britain began a partial blockade of the French and German coasts. In search of new ways to defeat one of its last remaining adversaries, Napoleon issued the Berlin Decree on November 21, 1806. The measure banned trade between Britain and France’s allies and client states; violators could have their goods confiscated. France had already extinguished its own trade with Britain and together with the new decree, this embargo came to be known as the Continental System.

The preamble to the decree accused Britain of violating international law, imprisoning persons engaged in trade, capturing merchant ships, and unjustly blockading ports. It accused the British of employing these measures to obtain commercial advantage to the detriment of continental Europe. In turn, Britain responded by expanding is existing blockade to all French ports, in Europe and its colonies abroad. The embargos escalated. Napoleon’s Milan Decree of December 17, 1807, declared that all neutral ships which traded in British ports were also in violation of the Continental System.

The blockades and embargos severed critical links between Britain and the continent. Prussia, Russia, and Germany provided more than 70% of Britain’s grain and British merchants had settled in North Sea and Baltic port cities, while continental merchants traded in London. One of these continental merchants affected by the embargo was the future banker Nathan Mayer Rothschild, then engaged in trading commodities and textiles from Manchester.

Evasion

The embargo was a porous one. British exports to continental Europe fell 25-50%, but not by 100%. Some of this was due to 19th century sanctions-busting. On the two poles of the continent, Portugal and Russia provided open avenues for British trade with Europe. France ultimately invaded both countries, in each case on the grounds of their trade with Britain, and these two campaigns marked the beginning of the end for Napoleonic France.

Trade, though illegal, was still profitable. The British came to see their own blockade as counterproductive. In the German states, they were ignoring their own blockade measures to allow smugglers through. In 1809, Britain’s blockade over northern Germany was lifted. Meanwhile, Napoleon’s Continental System became unpopular in the countries Napoleon had vanquished and forced the embargo upon.

Despite this, the extent of the smuggling may seem surprising but tariffs were high, even in the pre-war years. Because the incentive to bypass them was equally high, the smuggling trade was nothing new. The British had also implemented monetary controls in 1797 to prevent the export of gold abroad and a smuggling trade also grew around exporting British gold to Europe. Neither side seemed able or willing to fully enforce their trade controls.

Even reputable firms engaged in smuggling. An example was the Chapeaurouge family of Switzerland, an agent to Nathan Mayer Rothschild and known to French banking houses. They were heavily involved in smuggling English goods into France through Basel. To sidestep controls, merchants routed their trade through neutral ports and businesses were established in neutral cities to cover up the origins of English merchandize by false documents.

In Liverpool, the shipping firm Ewart & Rutson forged paperwork and organized smuggling trade through ports in the Azores and Gothenburg, ports outside direct French supervision. Ewart & Rutson supplied Rothschild’s clerk John Fox with a fake certificate that allowed him to pass as an American born in Nantucket, Massachusetts and the ship that transported him to Gothenburg to organize Rothschild’s trade with Europe was furnished with forged papers showing the ship was American. Another smuggling hub was Heligoland, a pair of islands off the German North Sea coast.

French enforcers could not be everywhere. When Mayer Amschel Rothschild found out that the French were opening letters in Hamburg, he suggested that his son in Britain route payments through Amsterdam. Thanks in part to his business network, Nathan Mayer Rothschild was able to successfully trade between Britain and continental Europe. It was his success in trafficking goods and bullion into Europe that positioned him to be hired by the British government to supply the Duke of Wellington’s armies.

New Markets

While trade with most of continental Europe was suppressed, British trade with the Baltics doubled in 1809 and Gothenburg became a sort of safe-haven for British trade. Essentially, trade with new markets elsewhere grew to make up for declining European trade. While their mother countries were occupied, South American ports opened to British trade. Thus, even compared to the years before Napoleon’s embargo began, British exports would actually rise before the end of the war.

The Plumb-pudding in danger, or, State Epicures taking un Petit Souper, print by James Gillray, 1805

Abandonment

Not only was either side unable to enforce the embargo, neither side really wanted to, at least not in its entirety. Both Britain and France wanted to allow some trade advantageous to them. By the last years of the Napoleonic Wars, even Napoleon himself was encouraging English smugglers, allowed them to buy goods in France in exchange for their help running French goods past the blockade to sell for British gold. Napoleon wanted to drain Britain of its gold reserves by these means.

English smugglers operating tiny oar-driven galleys, carried to France gold, escaped French prisoners, and the occasional spy returning from Britain. They were in turn permitted to carry French goods on their return trip to Britain. British customs enforcers had too few ships suited to stopping the smugglers. The trader-financier Rothschild himself was at least tangentially involved in this trade, using smugglers to transport gold to France which he could sell to French banks in exchange for bills payable in London, benefiting from the differential in exchange rates between Britain and France.

“A Frankforter who is now staying in Paris with a Frankfort passport, and goes by the name of Rothschild, is principally occupied in bringing British ready money from the English coast to Dunkirk, and has in this way brought over 100,000 guineas in one month. He is in touch with bankers of the highest standing at Paris, such as the firms of Mallet, of Charles Davillier, and Hottinguer, who give him bills on London in exchange for the cash.”
Nicolas François, Count Mollien, French minister of finance, in a letter to Napoleon

In the last years of the war, the British and French granted licenses to select merchants able to trade between the two countries. Britain suffered a poor harvest and both countries had economies in the doldrums. In the end, the Continental System was ineffectual and Napoleon’s attempt to bring commercial and financial ruin to Britain had failed. The ultimate end of the Continental System came with Napoleon’s defeat in 1814.

Lesson

The Continental System was not dissimilar to modern day economic sanctions. The French relied on their ability to enforce the embargo to accelerate their adversary’s capitulation. The plan failed. The British found new markets elsewhere and the embargo was accepted only in words but not in practice by France’s allies and client states. Further, neither side was that much economically stronger than the other, so both suffered from the embargo.

More from the Tontine Coffee-House

Read about other financial stories from the French Revolution and Napoleonic Wars, including Britain’s suspension of its gold standard, Napoleon’s creation of the Banque de France, and the indemnity imposed on France after his defeat. Lastly, consider subscribing to this blog’s newsletter here.