Bad debt as toxic waste. For the high-flying bond traders who coined the phrase a half-dozen years ago, it was just a vivid metaphor. Then economic crash was followed by catastrophic oil-well blowout, and it came to seem an eerie premonition.
But is the tie between industrial poisons and speculative excess a mere accident of timing? History suggests otherwise. Deregulation, financial bubbles, and chemical contamination have a common heritage that goes back all the way to Victorian England. They became linked in 1880, when the great British statesman William Ewart Gladstone restructured the taxation of beer.
In those days English brewing was still a craft. Purity laws required natural ingredients, and they were reinforced by a heavy tax calculated on the weight of the grain that went into the beer. Brewers would accept only the best barley, which yielded the most beer per pound. Farmers, hard-put to find an outlet for the remainder of their crops, chafed at the restriction.
Gladstone's reform swept these rules away. Taxes were assessed on the beer rather than the grain, and ingredients no longer had to be natural. The new law was pushed forward with words much like more recent deregulations. "Our intention," the prime minister told Parliament, "is to admit all materials whatever to perfectly free and open competition." The statute was dubbed the "free mash tun," after the vessel used for the first stage of brewing.
Free and open competition was quick to disappoint the farmers. Brewers showed little interest in lower grades of domestic barley, turning instead to cheap substitutes from overseas. With their newly won liberty in the choice of ingredients, they looked as well to technologies conceived by the rapidly advancing science of chemistry. Technical advance set off a wave of consolidation among the United Kingdom's more than 2000 local breweries, most of them lacking the inclination or the capital to fully embrace the chemists' recommendations.
Adding to brewers' thirst for capital was a need to invest in retail outlets. Prohibitionist sentiment now limited the licensing of new pubs. As the value of existing establishments rose, publicans turned to their suppliers for assistance. The brewers, naturally enough, conditioned their aid on the recipient selling their brand exclusively. Each firm was driven to lock up sales outlets before its competitors, and the price of pubs soared.
Closely linked to this real estate frenzy was a bubble in brewery stocks. The spectacularly successful Guinness IPO of 1886 - in such demand that a mob seeking copies of the prospectus broke the front door of the underwriters' office - set off an avalanche of brewery offerings. Capital raised on the stock market was fed back into the purchase of pubs, fueling an arms race that drove their price even higher. The value of the real estate, in turn, justified the rising prices of brewery equities.
Now came the chemical consequences of the free mash tun. Brewers, no longer limited to natural ingredients, had turned to sugar made by breaking down starch with sulfuric acid. Arsenic is a common impurity in the ores from which the acid is made, and England was already troubled by overuse of this useful but poisonous element.
The Bostock firm of Liverpool, sugar purveyors to some 200 brewers, bought chemicals from Nicholson's of Leeds. Nicholson's made sulfuric acid in two variants, one free of arsenic and the other heavily contaminated. With demand growing, the arsenic-free grade was in short supply by early 1900. Finding no specifications from Bostock in its files, Nicholson's in March stopped shipping the brewer arsenic-free acid and sent the contaminated variety instead.
A tide of poisoning followed within months. The sickness, blamed at first on alcoholic overexuberance, was traced in November to arsenic in beer. By then 70 were dead and 6000 seriously ill. A Royal Commission, headed by the illustrious scientist Lord Kelvin, was empaneled to unravel the origin of the disaster and prescribe remedies.
Beer sales, unsurprisingly, collapsed in the afflicted areas. The leading brewers responded quickly and forthrightly, destroying contaminated inventories and resuming production only when the beer tested arsenic-free. But the damage to their trade could not be fully undone.
England's beer production had grown steadily through the nineties, but it dropped by 2% in 1900 and equally the year after. (In Ireland, sales kept rising - Guinness, who still used all natural ingredients, dominated the market there.) As a more affluent working class sought other diversions, and prohibitionists pressed their case, the decline continued at a slower pace for the remainder for the decade.
The fall of beer sales burst the brewers' financial bubble. With many companies unable to pay dividends, mergers and stock offerings ground to a halt. A weak recovery in 1902 and 1903 proved ephemeral, and 1905 brought a wave of bankruptcies.
The techniques used to promote deregulation have changed since 1880 - it's a long way from Gladstone's oratory to the Bush administration's chainsaw display. But the consequences, from real estate boom to stock bubble to toxic chemicals, seem little altered. Greed and folly, left unrestrained, surge heedless of the calendar toward their accustomed outlets.
Benjamin Ross is author of The Polluters: The Making of Our Chemically Altered Environment (Oxford University Press, 2010).