In order to justify their position it becomes necessary for the
advocates of continued demonetization of silver to insist that the fall
of prices is not due to the rise in the value of gold but to improved
methods of production.
Whatever the cause to which it is to be ascribed, the undoubted fact is
that a fall of prices throughout the western world set in concurrently
with the reduction of the world's money volume by the demonetization of
silver. It was well understood at the time by those who had given
consideration to the subject that demonetization alone would effect that
result. This is manifest from an article in the London Daily News, a
paper of exceedingly large circulation, quoted in the Journal of the
Statistical Society of England for 1873, page 395. Referring to the
adoption of the single gold standard by Germany the Daily News said:
As the annual new supply of gold throughout the world is reckoned
at little more than L20,000,000 ($100,000,000), and the usual
demand for miscellaneous purposes is very large, it follows that,
if the German Government perseveres in its policy, the strain upon
the existing stocks and currencies of gold will be most severe.
For a time, at least, unless the annual production of gold should
suddenly increase, the money markets of the world are likely to be
perturbed by this bullion scarcity, and the fall in the value of
gold----
which means the rise in prices that for some time had prevailed;
of which so much has been heard, will be checked or reversed.
The yield of gold did not "suddenly increase," and the intelligent
prophecy of the Daily News was fully realized, not merely to the extent
of a check to the rising prices; (or, as it is styled by the Daily News,
a check to the "fall in the value of gold,") but to the extent of an
immediate rise in the value of that metal, and a persistent and
deplorable fall in the general range of prices.
This prophecy that the "fall in the value of gold" would be checked by
the demonetization of silver; or, better, reversed by it, was welcome
reading to the creditor and income classes of England and of the world.
That it was "reversed," and the value of gold appreciated, is as plain
as that; one being subtracted from two, there is but one for a
remainder.
The immediate fall in prices of commodities was the natural, the
anticipated, and the deliberately intended result of that movement.
But we are now assured that this fall is not due to any monetary cause,
but to the greater efficiency of machinery in the production of
commodities.
No advocate of an increased volume of money denies that in a few
departments of manufacture there have since 1873 been improvements
tending to economize labor and cheapen products; but they emphatically
deny and challenge proof that improvements of mere detail in the
manufacture of some articles will account for the extraordinary fall of
price since that time in almost every product of industry. We are also
told that the development of the system of transportation, both by land
and sea, have tended to lower the price of commodities to the consumers.
I grant it. But we had those improvements before 1873.
The inventions made between 1873 and 1890, the period of falling prices,
were no more important or radical in their effect on industry,--tended
no more to cheapen commodities, than did those from 1850 to 1873, the
period of rising prices. Indeed the inventions which preceded 1873 were
as a whole much greater in scope, more far-reaching in result, and more
revolutionary in their effects on industry, than those of the later
period. All the great basic improvements had been invented, and had been
incorporated with the industrial system of all civilized countries long
before 1873, if we except the electric light and the telephone. We have
had the steam engine, the cotton gin, and the spinning-jenny since the
last century; the railroad and the steam-ship since the '30's; the
telegraph, the mechanical reaper, steam-plow, and other agricultural
labor-saving devices since the '40's; the sewing machine since 1854, and
the Bessemer process and steel rail since 1857.
The forced construction into which their position drives the advocates
of the gold standard is well illustrated in a recent number of a
magazine of high standing in this country, in which I find the
following:
But if it be demurred, does not a debt incurred, say, ten years
ago require to-day more wheat or iron for its satisfaction than
the sum could have bought when first borrowed? Certainly, but the
wheat or iron represents no more labor now then it did ten years
ago, and its increase in quantity stands for the new efficiency
which applied science has bestowed on toil.
Observe how deftly the writer places iron, in the manufacture of which
there have admittedly been some improvements, in the same category with
wheat, in the production of which the improvements within any recent
period have been of the most trifling character. It will be exceedingly
difficult to convince the farmers of this country, whose mortgages are
eating up the proceeds of their labor, that the enormous decrease in the
debt-paying power of their products is made up to them in "the new
efficiency which applied science has bestowed on toil."
As well might it be maintained that the rise of prices and the
concurrent wave of universal prosperity, experienced after 1849, was not
due to the increase of the world's money stock from the mines of
California and Australia, but to some sudden, unaccountable, and
complete loss of all improvements theretofore attained in the arts and
industries of the world.