Revolution In Prices At The Beginning Of Modern History.
The mere discovery of new and richer mines need not, of itself, lower the
price of the precious metals. Their price depends on their cost of
production; and it may be very much increased, even under the most
favorable natural conditions, by the unskillfulness of labor, the dearness
of the means of subsistence, of machinery and of auxiliary substances, by
insecurity to property or to the person; by war, oppressive taxes(845)
etc. The new mines can produce a decline in the price of the precious
metals only to the extent that, for the same amount of capital and labor
expended, they, spite of all such deductions, produce a greater
result.(846)
I opine that the price of metallic money, since the discovery of America,
has diminished until the present time in the ratio of from three to four
to one.(847) The prices of wheat in France, from 1800 to 1850, were about
seven times as great as in the second half of the fifteenth century; and
in England about six times as great. But, it is not to be overlooked here,
how wheat may have grown dearer in itself (_an sich_) and how gold
declined considerably less than silver. True, this decline of the precious
metals was not an entirely steady one. We meet at the beginning of the
modern era with a real revolution in prices. The prices of rye, in lower
Saxony, from 1525 to 1550, were twice as high as from 1475 to 1500.
According to Garnier, the French prices of wheat, from 1450 to 1500, were,
on an average, 408 francs of the present time per _setier_; from 1501 to
1520, 5 francs; from 1522 to 1540, 11.26 francs; from 1541 to 1560, 11.69
francs; from 1561 to 1580, 21.33 francs; from 1581 to 1600, 32.51 francs;
during the first half of the seventeenth century, 22.77 francs; in the
second half, 26.83 francs; from 1701 to 1750, 19.64 francs. Similarly in
England, where wheat cost, from 1560 to 1600, 2.64 times as much as from
1450 to 1500.(848)
Now, the increased production of the mines cannot be the only cause of
this great perturbation in prices. It commenced, in most countries, at a
time when the supplies from America were still too small to account for
such an effect. One of the chief causes of the phenomenon was, that
precisely at this period, there was in so many nations a transition from a
sluggish circulation of money, made still more sluggish by the custom
which everywhere prevailed of hoarding treasure, to a rapid circulation,
which was made still more rapid by the use of all kinds of substitutes for
money. (§ 123).(849) In the earliest ripe fruit of European civilization
(Italy), this transition had long been accomplished; and, on that account,
the value in exchange of the precious metals was there, for a long time
previous, comparatively low.(850)
From the second third of the seventeenth century, the value of the medium
of circulation seems, on the whole, to have remained stationary.(851)
Tooke seeks to demonstrate the steady decline of the value of money until
late in the eighteenth century, from the fact that the wages of labor
increased during that time; but I should rather connect the latter
phenomenon with the simultaneous elevation of the classes engaged in
manual labor. And so Adam Smith infers a rise in the price of money after
the beginning of the eighteenth century, from the prices of wheat;(852)
but it would be better to consider the cause of this to be the unusually
long series of good crops.(853) An equally unusually long series of bad
harvests, during the second half of the century, accounts satisfactorily
for the simultaneous rise of the medium prices of corn. The great war
which lasted from 1793 to 1815, too, according to a very prevalent
opinion, must have caused the value of money to decline; a fact which is
generally accredited to the increase of paper money in so many states.
Every great war may very easily have for effect to slacken the speed of
the circulation of money, to promote the hoarding and even the burial of
treasure for a rainy day, and to paralyze credit and its power to supply
the place of money. Hence, it seems preferable to seek for the cause of
the variations in price, during the great war, in the commodities
themselves whose price was affected; since their production must have been
enormously disturbed. It rendered the brawniest men and the most powerful
horses unproductive, and even employed them as agents of destruction. It
interrupted trade in a thousand ways, or drove it into unnatural channels,
and turned the intellectual interests of nations into every direction save
that of economic industry. To this must be added the absence of security
everywhere.(854)
The cessation of these restrictions upon production, in consequence of the
restoration of peace throughout the world and the great progress
afterwards made in almost all branches of industry, explain why, from 1818
to 1848, the precious metals have apparently stood higher than during the
period immediately preceding.(855)(856)