Figure 2.23 shows the consequences of the long fall in returns to capital and the rise in real wages during this period. Wealth inequality declined. One study finds that the wealth-shares of the richest 1 percent in England shrank 20 percent in the years 1700–30. The source: Peter H. Lindert, “Toward a Comparative History of Income and Wealth Inequality,” in Y. S. Brenner, Hartmut Kaelbe, and Mark Thomas, eds., Income Distribution in Historical Perspective (Cambridge, 1991) 212–31, 220.
The passengers themselves perceived their economic situation in different ways, according to their station. The possessing classes described this era as one of prolonged depression. So it was for propertied elites, who were caught in a web of falling rents, rising labor costs and low prices. But for ordinary people, the times were more favorable. Wages increased at the same time that the cost of grain and shelter actually declined, and prices in general remained on the same level. A period that seemed a depression to manorial lords and rural proprietors (as well as to historians who read their letters and shared their perspective) was an age of improvement for artisans and laborers and the great majority of Europe’s population. Wealth and income were more broadly distributed. Inequality diminished.
Still, the question posed by Phelps-Brown and Hopkins demands an answer. What was the “secret of stability” in this age of equilibrium? A simple monetarist model, that seeks an explanation of price movements primarily in terms of the quantity of money in circulation, works no better for this period than for any other. New research by Michel Morineau finds evidence that American treasure flowed abundantly into Europe during the period 1660–1730, in quantities almost (but not quite) equal to the price-revolution that preceded it. But this time there was no long-term inflation.11
In France, a large increase occurred in the supply of silver and gold in circulation during this period. Voltaire estimated that the quantity of silver money increased from five hundred million livres in 1683 to twelve hundred millions in 1730. Modern economic and social historians generally agree that the quantity of gold and silver doubled or trebled in France during this period. But the cost of living did not go up.12
Further, the French monetary system in particular also suffered many debasements between 1660 and 1730. One scholar writes that “recoinage after recoinage so altered the value of the real money of France that it caused serious economic difficulties at home and abroad. . . . Only with the great monetary reform and consolidations of 1726 did this era end.” But prices did not rise.13
Other monetary systems were more stable than that of France. Dutch guilders and rixdollars remained perfectly stable from 1691 to the nineteenth century. British guineas, Venetian ducats and Portuguese crusados also preserved their value. In Europe as a whole, however, price stability in this period was achieved not because of monetary factors but in spite of them.14
A better explanation for the price equilibrium of this period may be found in the pattern of population growth, which was modest in the period 1650–1730. In England, for example, the number of inhabitants had increased more rapidly before this era—from 2.8 millions in 1541 to 5.3 millions in 1657. In the mid-seventeenth century, that trend broke. Population ceased rising and began to fall unsteadily for thirty years, reaching its nadir in the year 1686, at approximately 4.9 millions. Thereafter, it began to fluctuate, rising a little but remaining on the same plane. Not until after 1730 did it resume a pattern of rapid and sustained increase. This trend matched a thirty-year moving average in consumer prices with uncanny precision. The correlation was very close, with price movements lagging a few years behind demographic trends through most of the sixteenth, seventeenth and eighteenth centuries.15
Population movements were marked by many fluctuations. A slow rolling rhythm in fertility and sudden surges in mortality caused by outbreaks of epidemic disease. But the secular movements of prices and population were closely linked. This was the basis of the equilibrium in that period.16
In economic terms, that equilibrium should be understood as a period not of stasis but of stable growth. Production and productivity increased. Commerce flourished throughout Europe. Handsome neoclassical exchanges were constructed throughout the Western world. They symbolized improvements that were made in many sorts of markets. Labor markets, capital markets, land markets, commodity markets all were made to work more efficiently.
Banks multiplied rapidly: the Bank of England (1694), the Royal Bank of Scotland (1727), and many others.17 Every European country improved its roads, enlarged its ports and constructed canals and bridges. The growth of colonies also increased the wealth of Europe and improved its productivity. Marginal returns to capital and labor tended to be higher in the staple industries of colonial economies than in the mother-country.18
The great cities, as always the barometers a civilization’s health, prospered throughout Europe in this period. London was rebuilt to the taste of Christopher Wren and Inigo Jones, and took on the neoclassical character that it preserves to this day. Paris became the metropolis of Europe—its beautiful squares and broad boulevards began to be laid out in this period. Berlin as late as 1654 had been a small river settlement of about 5,000 inhabitants; by 1740 it had become a stately city with nearly 100,000 people. Vienna was transformed from a grim medieval fortress town into an imperial capital of great beauty. The Schönbrunn palace was begun in 1695 and the Belvedere in 1717. The city’s great baroque churches and state buildings date from this period.
At the opposite end of Europe, the people of Edinburgh constructed their “new city” in this era. In the words of David Daiches, the heavenly city of the eighteenth-century philosophers was realized in Scottish stone. As the cities were rebuilt, urban architecture flourished everywhere in Europe, from the baroque glory of Dresden to the Georgian grace of Dublin. The handsome colonial cities of Philadelphia, Calcutta and Batavia arose on the banks of the Delaware, the Hooghly and the Tjiliwong.
Social life became more orderly in this period. By the evidence of arrests and prosecutions, rates of violent crime diminished from the late seventeenth century well into the eighteenth century.
The equilibrium of this era also expressed itself in politics. The turbulence of the early and mid-seventeenth centuries came to an end in many European states during the period from 1660 to 1740. English historian J. H. Plumb observes that “political stability, when it comes, often happens to a society . . . as suddenly as water becomes ice.” That metaphor—a “change of phase” in the language of chemistry— perfectly describes a transition that happened in the politics of England, France, Germany, and Russia during the late seventeenth and early eighteenth centuries. These four nations achieved stability in different ways, but all experienced a change of phase in this age of equilibrium.
Figure 2.24 shows the same sustained decline in crime that occurred in every period of price equilibrium, after a sharp rise during the late stages of every price revolution. The downward trend that appears here in Kent’s homicide rates has also been found in many other English counties during the same period. The source is J. S. Cockburn, “Patterns of Violence in English Society: Homicides in Kent, 1560–1985,” Past and Present 130 (1991) 70–106.
Particularly striking was the growth of political stability in England. “The contrast between political society in eighteenth and seventeenth century England is vivid and dramatic,” Professor Plumb writes. “In the seventeenth century men killed, tortured and executed each other for political beliefs; they sacked towns and brutalized the countryside. They were subjected to conspiracy, plot and invasion. This uncertain political world lasted until 1715, and then rapidly began to vanish. By comparison, the political structure of eighteenth century England possesses adamantine strength and profound inertia.”
Plumb was wrong about inertia. In politics, as in economics, the equilibrium of the Enlightenment was a dynamic process, with many moving parts. But he was right about its stability and strength.19
Political stability was also achieved in Fran
ce during the long reigns of Louis XIV (1643–1715) and Louis XV (1715—1774). Its form was very different from that of the English-speaking nations. While England moved toward toleration and parliamentary government, France traveled in the opposite direction. Religious dissent was savagely repressed, the Etats généraux were ignored, the Parlements were reduced to judicial and administrative bodies, and the fetters of royal absolutism were riveted upon the body politic of a great nation.
Prussia created a stable polity in yet a third form. This was a militarist monarchy that derived its power from the Prussian army, and developed steadily under Frederick the Great Elector of Brandenberg (1688–1713), and his successors Frederick Wilhelm I (1713–1740), and Frederick the Great (1740–1786).
In Russia, Peter the Great (1682–1725) founded a fourth type of European state. It has been well-described as an autocracy “enserfed from top to bottom . . . in which all strata of the population without exception were required to perform service and pay dues to the ruler.”20
Many rulers were called “great” in this era: Louis Le Grand, Frederick the Great Elector, Frederick the Great, Peter the Great, Catherine the Great. These leaders were no more able than many of the failed monarchs who preceded them in the seventeenth century. The enlightened despots of Europe were consumed by vanity and greed. They quarreled incessantly with other princes, and squandered both the wealth of their nations and lives of their subjects on petty and destructive rivalries. But an age of equilibrium is kind to reigning kings. A reputation for greatness in a monarch often owes more to circumstance than to character.
The equilibrium of this era expressed itself not only in economics and politics, but also in a philosophical system that was called Die Aufklarung in Germany, Illuminismo in Italy, and the Enlightenment in England. Ironically, the only people of Europe who did not have a single word for this movement were the French, who did more than any others to create it. The Enlightenment is remembered in France not as an idea, but as an era and a set of individuals—the siècle des lumières.
The man who personified this era better than any other was Francois Marie Arouet (1694–1778), better known by his pen name, Voltaire. He thought of his own generation as the epigoni of an age that he called the siècle de Louis XIV. This epoch he defined as the time when “human reason in general was brought to perfection.” The young Voltaire recognized that this era was not “exempt from crimes and misfortunes.” He fought against evil all his life, and suffered many defeats. Nevertheless, his history of this era was suffused with a sense of satisfaction in the events of the recent past, and a feeling of confidence for the future.21
Voltaire’s way of thinking about history was different from our own. He did not think in modern terms of “material base” and “cultural superstructure.” If anything he tended to reverse that causal relationship, but he had no doubt of a close connection between economic and cultural processes. His history of this era was a paean to progress in both realms. He celebrated the era of Louis XIV not so much as the apotheosis of a great king, but as a time when “the middle classes enriched themselves by industry,” and the condition of peasants and laborers became much improved. In his mind these material events were connected to the great intellectual achievements of his age—to the science of Newton (1642–1727) and Halley (1656–1742), the literature of Racine (1639–99) and Molière (1622–73), the philosophy of Locke (1632–1704), Bayle (1647–1706) and Leibniz (1646–1716).
The work of these men had a fundamentally different texture from those who had preceded them by only a generation. They believed that the universe was a place of order and symmetry; that the world was within man’s power to understand and even to control.
These attitudes came to be shared by many people in the early eighteenth century. The great historian Edward Gibbon wrote complacently in his autobiography, “My lot might have been that of a slave, a savage, or a peasant, nor can I reflect without pleasure on the bounty of Nature, which cast my birth in a free and civilized country, in an age of science and philosophy.”22
The same spirit was expressed in many different ways by English literati such as Pope (1688–1744), by the German composers Bach (1685–1750) and Handel (1685–1759), by French social philosophers Montesquieu (1689–1755) and Quesnay (1694–1774), by scientists such as the Swedish Linnaeus (1707–1778) and the American Franklin (1706–1790), and by theologians such as Edwards (1703–1758) and Zinzendorf (1700–1760).
These men of the Enlightenment were keenly aware of evil in the world. But even as they struggled against injustice, and suffered from its effects, the world appeared to them as a place of order, harmony, equilibrium and balance. Their mechanical metaphors represented the union of dynamism and stability, a belief in the possibility of progress and order.s
The Enlightenment was an era with major social problems, but it was also a time when people believed that problems could be solved. The savants of this age disagreed in their solutions, but they shared a stubborn optimism that set them squarely apart from earlier generations. That attitude was a zeitgeist in the strict sense, a spirit grounded in the historical conditions of the age.23
The philosophical gentlemen of the enlightenment invented many of our modern social sciences—including the science of economics. Their economic ideas commonly took two countervailing forms. One would later be called mercantilism. It encouraged the active intervention of the state in economic processes, and was given its classical expression by the ministers of Louis XIV, notably Jean Baptiste Colbert. The other economic ideology would later be called laisserfaire. It was developed in this period by the French physiocrats, and in particular by Francois Quesnay. There is a story, perhaps apocryphal, of a conversation between Quesnay and the Dauphin:
“What would you do if you were King?” the Dauphin asked.
“Nothing,” said Quesnay.
“Then who would govern?”
“The law,” Quesnay replied.24
Many enlightened thinkers shifted back and forth from one of these economic ideas to the other. One historian has remarked upon their “characteristic oscillation between mercantilist and laisser faire thought.”25 Others became fierce partisans of a single ideology. But even as they differed with one another, the philosophes of the enlightenment shared a common cosmology.
The central assumption in this cosmology was an idea that Jean Ehrard calls la nature-horloge, the world as a piece of clockwork. Some believed that the machinery needed constant tinkering. Others thought that the machine would go of itself. But the major premise was the same: un univers-horloge, un Dieu horloger.26
These assumptions came to be widely shared in the early eighteenth century because they seemed to fit the empirical facts. The prevailing ideas of balance and equilibrium in the enlightenment were not merely a philosopher’s dream. They represented the world as it actually was—for a time.
THE THIRD WAVE
The Price Revolution of the Eighteenth Century
People of the same trade seldom meet together, even for merriment or diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.
—Adam Smith, Wealth of Nations (1776)
PARIS, September 3, 1729, the grand festival of the Dauphin’s birth. At Versailles, a little past three o’clock in the morning, the Queen was delivered of a healthy son, who became at birth heir-apparent to the throne of France. A royal messenger was ordered to carry the happy news to Paris. He spurred his horse forward, galloping toward the first light of dawn in the eastern sky. The sleeping city lay open before him.
In the year 1729, Paris was the capital not merely of a country but of a civilization. It was a city of dramatic contrasts. Some of its narrow and crooked streets had changed little since the thirteenth century. In other neighborhoods a great rebuilding was underway. The ancient city walls had been pulled down, and in their place royal engineers had laid out the first tree-lined boulevards. The old fortified gates had been rep
laced by open arcs de triomph. The Champs d’Elysses had been extended from the Tuileries as far as the Place d’Etoile. The Place des Victoires and Place Vendôme had been created, and those noble spaces were already surrounded by huge private hotels of the aristocracy and nouveau riche.1
Paris had many nouveaux riches in 1729. The city had become a great center of trade and finance. Only a few years earlier its hated usuriers had been confined behind heavy iron grilles in the serpentine passages of the rue Quincampoix. Now the richest usuriers were called financiers, and their mansions were scattered through the city. A great banque had recently been founded, and a new bourse had opened for the exchange of securities. Our modern language of finance was invented in the early eighteenth century. Much of it is French.
Paris had grown rich, but many Parisians remained desperately poor. Extravagant wealth and grotesque poverty lived side by side. Beggars died of hunger in the streets, while the rich rode past in gilded chairs on the shoulders of other human beings. The suffering poor crowded miserably into a maze of medieval tenements. Many lived like animals on close-built bridges above the river Seine, while the great families of France resided in magnificent mansions only a few streets away.
The cultural contrasts were equally dramatic. Paris in 1729 was the city of light, the seat of the Enlightenment, the heavenly city of the eighteenth-century philosophers. Its great libraries in the Bibliothèque Royal, the Bibliothèque Mazarin and the Bibliothèque Ste. Geneviève were the among the best in the world. Its elegant salons set the intellectual fashion for enlightened people everywhere.
At the same time Paris was also a capital of despotic darkness. It was the controlling center of an absolutism that ruled by terror, cunning, and brutal force. High above the city’s fabled rooftops rose the walls of the Bastille, where state prisoners were held for life without the slightest shadow of legality. Next to the river Seine stood the dark and silent mass of the Châtelet, the prison where ordinary Parisians were confined without warrant and punished without trial. In the center of the city was the Place Greve, where huge crowds gathered every week before the City Hall to watch obscene tortures inflicted upon shrieking victims.
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