Panic of 1866

The Panic of 1866 was an international financial downturn that accompanied the failure of Overend, Gurney and Company in London, and the corso forzoso abandonment of the silver standard in Italy.

In Britain the economic impacts are held partially responsible for public agitation for political reform in the months leading up to the 1867 Reform Act. The crisis led to a sharp rise in unemployment to 8% and a subsequent fall in wages across the country. Similar to the "knife and fork" motives of Chartism in the late 1830s and 1840s, the financial pressure on the British working class led to rising support for greater representation of the people. Groups such as the Reform League saw rapid increases in membership and the organisation spearheaded multiple demonstrations against the political establishment such as the Hyde Park riot of 1866. Ultimately the popular pressure that arose from the banking crisis and the recession that followed can be held partly responsible for the enfranchisement of 1.1 million people as a result of Disraeli's reform bill.

The Panic decimated shipbuilding in London, and the Millwall Iron Works collapsed. Barely 16% of joint-stock companies weathered this tumult. The Companies Act 1862 created a financial boom which laid the groundwork for the larger banks of British finance during the latter half of the 19th century.

The primary importance of the expansion of credit was its role in foreign trade. Historians P.J. Cain and A.G. Hopkins note that "gentlemanly capitalism" (a class-conscious form of white-collar work in finance, insurance, shipping and the Empire) was the key to the growth of the Empire and its economic growth beginning in 1850. Historian David Kynaston notes the shift in the discount bills in the 1860s, particularly to finance supplies for the U.S. War between the States, and Richard Roberts describes the 1860s, 1870s and 1880s as the "internationalisation of the discount market".

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