London’s Pepper Glut, Candle Auctions, and the 1697 Spitalfields Calico Riots

On January 21, 1697, thousands of furious silk and woolen weavers from Spitalfields—many of them women and apprentices—marched through the streets of London to Westminster and then besieged East India House on Leadenhall Street. The rioters attempted to force the doors of the corporate treasury before the Lord Mayor and the trained bands dispersed the crowd. Their grievance went to the heart of a profound structural transformation in early modern global commerce. Founded in 1600 to break the Dutch stranglehold on Indonesian and Malabar black pepper, the English East India Company had spent its first five decades battling recurring European pepper gluts that forced its directors to pay shareholder dividends in bags of spice and auction cargoes “by the inch of candle.” When plummeting spice margins pushed the Company to pivot toward painted and printed Indian cotton textiles—calicoes and chintzes—in the 1670s and 1680s, it unleashed a consumer price revolution that undercut English wool and silk manufacturers and triggered the first great protectionist backlash of the industrial age. ^[1]

The Seventeenth-Century Pepper Glut and Dividends in Kind#

The immediate catalyst for the founding of the English East India Company in 1600 had been a price shock in the European spice trade: in 1599, Dutch syndicates abruptly raised the wholesale price of black pepper in Amsterdam and London from 3 shillings per pound to between 6 and 8 shillings. Determined to capture direct access to the pepper ports of Banten in Java, Aceh in Sumatra, and the Malabar Coast of southwestern India, the early Company poured its silver Rials of Eight into bulk pepper procurement. ^[2]

Yet the economics of the Cape route soon produced an unanticipated crisis of oversupply. Combined annual European consumption of black pepper in the early seventeenth century stood at roughly 7 million pounds, while the English and Dutch companies together regularly shipped 9 to 10 million pounds into northern European ports. Because pepper accounted for more than 70 percent of the physical cargo weight of returning English East Indiamen between 1610 and 1650, the London wholesale price fell steadily—from above 2 shillings 6 pence per pound in the 1610s to 1 shilling 8 pence in the late 1620s, and finally to between 7 pence and 11 pence per pound during the severe commercial gluts of the 1640s and early 1680s. ^[3]

Unable to liquidate mountains of Malabar and Jambi pepper in London for cash without crashing the market even further, the Court of Directors repeatedly resorted to paying shareholders their capital distributions and dividends directly in bags and garbles of pepper. Throughout the liquidations of the Second and Third Joint Stocks in the 1620s and 1630s, merchants who had subscribed cash received warehouse warrants for thousands of pounds of black pepper valued at fixed internal accounting rates, leaving individual investors to dump their allocations on continental re-export markets in Hamburg, Leghorn, and the Levant.

In August 1640, the Company’s pepper mountain even became an instrument of royal fiscal coercion. Desperate for cash during the Second Bishops’ War against Scotland, King Charles I forcibly purchased the Company’s entire warehouse inventory of 607,522 bags and parcels of pepper on credit for £63,283—secured by personal bonds of customs farmers—and immediately dumped the spice onto the London cash market at a steep discount for £50,626, depressing wholesale prices while leaving the Company to chase royal repayment for years. ^[4]

“Sale by the Candle” at East India House on Leadenhall Street#

To prevent private cartels of London grocers from colluding to depress prices further, and to manage the orderly release of cargoes arriving from Surat, Madras, and Bantam, the Company institutionalized a quarterly public auction mechanism at East India House on Leadenhall Street known as “sale by the candle.”

Before each general court of sales—held four times a year in March, June, September, and December—the Company published printed cargo manifests listing every lot of pepper, indigo, raw silk, saltpetre, and cotton piece-goods, along with a minimum reserve upset price. Inside the Great Hall on Leadenhall Street, the Governor and Court of Directors sat on a raised dais beside a lighted tallow wax candle into which a pin had been inserted precisely one inch below the wick. As the auctioneer called each lot, wholesale brokers shouted ascending bids in increments of a farthing per pound for spices or a shilling per piece for textiles.

Bidding remained open only while the one-inch section of the candle burned down—typically between one and three minutes—filling the hall with frantic competition as the flame melted the wax around the pin. The instant the pin dropped into the brass candlestick (or the inch of wick flickered out), the last bidder who had spoken before the fall of the pin was declared the legal purchaser of the lot. As diarist Samuel Pepys recorded after attending East India House auctions in November 1660 and September 1662, the candle mechanism generated intense psychological urgency near the final flicker, maximizing wholesale price discovery while giving the Company transparent cash and bond settlement within specified prompt dates. ^[5]

The Pivot to Indian Piece-Goods and the Calico Craze#

While black pepper provided bulk ballast and steady re-export volume, its thin profit margins could not sustain the Company’s rising overhead and London bond interest after the Restoration. Beginning in the 1660s and accelerating dramatically between 1670 and 1690 under Sir Josiah Child, the Court of Directors engineered a strategic pivot toward Indian cotton and silk textiles produced in Gujarat, the Coromandel Coast, and Bengal. ^[6]

Originally, English factors in Surat had purchased coarse Indian cotton cloths merely as barter goods to exchange for pepper and cloves in the Indonesian archipelago. Once small parcels of fine painted and block-printed Indian cottons—known in England as calicoes (after Calicut), chintzes (from the vernacular chint, meaning spotted or variegated), and Bengal muslins—appeared at the Leadenhall Street candle auctions, they ignited an unprecedented revolution in European consumer taste. Unlike heavy, drab English woolen broadcloths that shrank when washed, or costly French and Italian silks that faded, Indian mordant-dyed and resist-printed cottons were lightweight, brilliantly colorfast when boiled, washable, and extraordinarily cheap.

The quantitative shift in the Company’s trade was staggering. In the early 1660s, the Company imported roughly 200,000 pieces of Indian textiles annually, accounting for less than a third of invoice value. By 1684—the peak year of the late-seventeenth-century boom—East Indiamen unloaded more than 1,760,000 pieces of Indian calicoes, chintzes, and silks in London, representing up to 75 to 83 percent of the Company’s total import value. Retail prices for ordinary painted calicoes fell to between 1 and 2 shillings per yard, allowing chambermaids and shopkeepers’ wives to dress in floral patterns that rivaled the wardrobes of aristocrats, while affluent households draped entire bedrooms in Coromandel palampores. ^[7]

The Spitalfields Weavers’ Riots of January 1697#

To England’s traditional textile sectors—the woolen clothiers of East Anglia and the West Country, the worsted weavers of Norwich, and the silk weavers of Canterbury and Spitalfields in eastern London (heavily reinforced by French Huguenot refugees after 1685)—the calico craze was an existential catastrophe. English mercantilist orthodoxy held that wool was the “staple of the kingdom” and that exporting silver bullion to India in order to import finished textiles exported English employment to Mughal artisans earning a fraction of London wages—typically 1 to 2 pence per day in Bengal and Coromandel compared with 1 shilling or more in London. ^[8]

By the winter of 1696–1697, the economic strain in Spitalfields reached a breaking point, compounded by the Great Recoinage of 1696, which contracted silver coin circulation and froze credit across London’s artisan workshops. In November 1696, the House of Commons began debating a bill to restrain the wearing of all wrought silks, bengals, and dyed, printed, or stained calicoes imported from Persia and the East Indies.

On January 21, 1697, when rumors swept Spitalfields that the House of Commons had rejected or stalled the anti-calico bill, an organized crowd of four to five thousand weavers, wives, and apprentices marched on Westminster Palace, crowding the lobbies of Parliament to demand protection. Returning eastward through the City that afternoon, the crowd converged on East India House on Leadenhall Street—the venue of the candle auctions—smashing windows and battering the outer gates before civic militias intervened and arrested the ringleaders. Two months later, when the House of Lords amended and effectively killed the bill in March 1697 at the urging of East India Company lobbyists and linen drapers, weavers again rioted in Spitalfields, attacking the townhouse of Deputy Governor Bohun and assaulting women seen wearing printed Indian chintz gowns in the streets.

The Calico Acts of 1700 and 1721 and the Industrial Consequence#

Although the Company defeated the 1697 bill, the political coalition between landed wool interests and urban silk weavers proved unstoppable. In 1700, Parliament passed the First Calico Act (11 Will. 3 c. 10), which took effect on September 29, 1701. The statute prohibited the importation for domestic use or wearing in England of all wrought silks and all painted, dyed, printed, or stained calicoes from India, China, or Persia. Crucially, however, the 1700 Act contained two exceptions that reshaped British business history: first, the East India Company could still import printed calicoes into bonded London warehouses for duty-free re-export to Europe, West Africa, and the American colonies; second, the Company could still import plain white Indian calicoes into England upon payment of customs duty.

London entrepreneurs immediately exploited the white-cloth loophole. Scores of domestic textile-printing workshops sprang up along the River Lea and the Thames around London, buying plain white Indian cottons at the Leadenhall candle auctions and block-printing or copperplate-engraving them in England in imitation of Indian chintz. Domestic calico consumption rebounded, provoking renewed riots in 1719–1720 during which Spitalfields weavers threw nitric acid (aqua fortis) onto women wearing printed cottons.

Parliament closed the loophole with the Second Calico Act of 1721 (7 Geo. 1 Stat. 1 c. 7), which imposed a £5 fine on any individual caught wearing printed or dyed pure cotton calico and a £20 fine on any merchant selling it, while exempting mixed linen-cotton fustians manufactured in Lancashire. By shielding British weavers and spinners from cheap, superior Indian pure-cotton fabrics for more than half a century while preserving the export market and domestic printing technology, the Calico Acts inadvertently created the protected incubator in which Lancashire’s mechanical spinning and cotton-manufacturing revolution took flight later in the eighteenth century.

Theoretical & Balance-Sheet Transmission Mechanism#

In the Kindleberger–Minsky taxonomy of financial instability (Kindleberger, 1978; Minsky, 1986) and Irving Fisher’s (1933) debt-deflation framework, speculative asset booms become systemic crises when credit expansion shifts balance sheets from hedge finance (cash flows covering principal and interest) to speculative and Ponzi finance (relying on rising asset prices and short-term margin roll-overs).

Once monetary tightening or an exogenous shock halts price appreciation, forced margin liquidations trigger Fisherian debt-deflation: fire-sale asset discounts erode bank collateral values, contracting credit supply across the real economy.

Sources and Further Reading

1. K. N. Chaudhuri, “ The East India Company and the Export of Treasure in the Early Seventeenth Century“, The Economic History Review, 1963. Peer-Reviewed / Academic Research
2. K. N. Chaudhuri, “ Pepper“, Cambridge University Press, 1978. Peer-Reviewed / Academic Research
3. Giorgio Riello, “ Learning and substituting: printing cotton textiles in Europe“, Cambridge University Press, 2013. Peer-Reviewed / Academic Research
4. Prasannan Parthasarathi and Giorgio Riello, “ Guesstimating the Size of the Trade in Indian Cotton Textiles in the Seventeenth and Eighteenth Centuries“, Cambridge University Press, 2020. Peer-Reviewed / Academic Research
5. Edward Baines, “ Calico Printing“, Cambridge University Press, 2012. Peer-Reviewed / Academic Research
6. Giorgio Riello, “ The Indian Apprenticeship: The Trade of Indian Textiles and the Making of European Cottons“, Brill, 2009. Peer-Reviewed / Academic Research
7. Irving Fisher — "The Debt-Deflation Theory of Great Depressions," Econometrica 1, no. 4 (FRASER Federal Reserve Archive, 1933): 337–357 Central Bank / Monetary Authority
8. Charles P. Kindleberger & Robert Z. Aliber — Manias, Panics, and Crashes: A History of Financial Crises (Palgrave Macmillan) Peer-Reviewed / Academic Research

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