Great Wave

by Fischer, David Hackett;

  Figure 3.07 estimates the flow of gold and silver to Europe from all sources during three centuries. The increase in the price revolution (1730–1800) was smaller than in the preceding price equilibrium (1660–1730). Overall the rhythm in both periods was much the same. The source is Michel Morineau, Incroyables gazettes et fabuleux métaux: les retours des trésors américains d’après les gazettes hollandaises (XVIe-XVIIIe siècles) (Paris, 1985), 578.

  Returns to commercial capital also increased rapidly in this period. A good barometer was the rate of interest. In the Netherlands, market-rates for short-term loans on the capital-rich Amsterdam Exchange had fallen as low as 1¾ percent during the period from 1700 to 1725. From this nadir, interest rates rose steadily during the eighteenth century. By 1738, the British Parliament was informed that interestrates in the Low Countries were normally 2 to 3 percent. They climbed to 3 or 4 percent during the War of American Independence (1775–83), and 4 to 6 percent by the early 1790s.

  Dutch interest rates tended to be the lowest in Europe, but similar trends appeared in every financial center. These movements were highly volatile, fluttering up and down in Europe’s still very small capital markets. Heavy wartime borrowing sent interest rates soaring; periods of peace brought them crashing down again. These fluctuations occurred on the curve of a rising secular trend. Through the eighteenth century, interest rates climbed higher and higher.20

  As the price-revolution continued, the rich and powerful generally did well for themselves. The mid-eighteenth century was a golden age for country gentry and landowning elites. The English agricultural reformer Arthur Young observed that rents increased sharply during the Seven Years War, and kept on increasing thereafter. In France, farm rents doubled during the middle decades of the eighteenth century. Land prices increased even more rapidly; the cost of real estate quadrupled in many parts of Europe during the eighteenth century. Here was another process that David Ricardo studied at first hand. Ricardian theories of rent and wages should be read not as timeless economic truths, but as highly perceptive historical descriptions of the eighteenth century price-revolution, in its middle and later stages.21

  Figure 3.08 follows the rise in market rates of interest on British public securities. The evidence shows a pattern of surges during major wars, and a long upward trend that matched the price revolution. Dutch interest rates rose from a range of 1.75 to 2 percent (1700–25) to a range of 8 to 10 percent (1798). In France, yields on rentes were highly volatile, rising from 2 percent in 1720 to 34 percent in 1798. Source: Sidney Homer, History of Interest Rates (1963, 2d ed., 1977, New Brunswick, N.J.), 161–62.

  Figure 3.09 finds that rent and real estate rose more rapidly than consumer prices. Values for England are in silver shillings per acre (1725–49=100); and for Europe in silver equivalents of local coinage (1731–40=100). Sources: Abel, Agrarkrisen und Agrarkonjunktur; and R. C. Allen, “Freehold Land and Interest Rates” Economic History Review 2d ser. 41 (1988) 33–50.

  While rent and interest kept up with inflation, wages fell behind. Money wages tended to increase a little, but did not keep pace with commodity prices. In consequence, real wages fell from as early as the 1730s to the nineteenth century. This trend appeared in England, France, Germany, Austria, Poland, and Denmark during the eighteenth century. It was the case both for free laborers in western Europe and serfs in eastern Europe. The same cause_increasing population—that drove up commodity prices also depressed real wages by expanding the size of the work force. Wilhelm Abel concluded from thirty years’ study of this subject that “with few exceptions, western and central European wages between 1740 and 1800 were left far behind by the rising price of cereals.”22

  The result of this decline in real wages in the eighteenth century was different from earlier price-revolutions. It caused much suffering among the poor, but no epidemic famines as in the fourteenth century and no decline of population as in the seventeenth. Here is a striking paradox in the history of price-revolutions. As one of these great waves followed another, rates of inflation increased but human suffering diminished. How could this have been the case?

  One important factor, beloved of classical economists, was the expansion and integration of world markets. Another was the improvement of income per capita, which meant that fewer people were living near the edge. A third was the growth of welfare which, however limited, helped to prevent starvation. The price of all these improvements was acceleration in rates of inflation, and diminution of its cruelest consequences.

  A case in point was the history of welfare. The great Hungarian scholar Karl Polanyi identified an important event in this long process. In 1795, the justices of Britain’s County of Berkshire met at the Pelikan Inn in Speenhamland, and agreed to make a change in their system of poor-relief. They ordered that “subsidies in aid of wages would be granted in accordance with a scale dependent upon the price of bread, so that a minimum income should be assured to the poor irrespective of their earnings.”

  This “Speenhamland system” spread rapidly across England, and was practiced during the next three decades, until abolished in 1834. It contributed to rising prices, even while controlling their effects. All of these events were part of the response to the price-revolution, after it was discovered as a secular trend.

  Figure 3.10 finds evidence of a long decline in real wages. It began as early as 1740 and continued through the full span of the price revolution, accelerating after 1775 in Italy, after 1780 in Germany, and after 1800 in England. Sources include E. H. Phelps-Brown and Sheila Hopkins, “Seven Centuries of the Prices of Consumables, Compared with Builders’ Wage Rates,” Economica 23 (1956) 296–315); Ruggiero Romano, Prezzi e salari e servizi a Napoli nei Secolo XVIII (1734–1806) (Milan, 1965); and Abel, Agrarkrisen und Agrarkonjunktur.

  Cultural Responses

  Soon after the price-revolution became clearly visible in the middle years of the eighteenth century, a change began to occur in the cultural mood. Intellectual historians have long noted this event without being able to explain it in a satisfactory way. In 1756, a massive earthquake destroyed a large part of the city of Lisbon. This disaster inspired an outpouring of literature throughout Europe, which expressed a new spirit of scepticism, confusion, pessimism and even cultural despair. The optimism of the young Voltaire’s Age of Louis XIV suddenly gave way to the darkness of his Poème sur le désastre de Lisbonne (1756) and the bitter satire of Candide (1759). Intellectual historians have suggested that the cause of this transformation was the Lisbon earthquake itself. This is an error. Natural catastrophes of that sort had occurred in every era. What was new was the response. In the mid-eighteenth century events began to be perceived in a different way.

  Another intellectual event in this era was a religious movement that overspread the Protestant world during the mid-eighteenth century. In English-speaking America it was named the Great Awakening, and began with the preaching of Jonathan Edwards in 1734. In Britain it was known as the evangelical movement and dated from the conversion experiences of John and Charles Wesley and George Whitefield in 1738. A similar movement developed in Scandinavia and Germany, where it was called pietismus. There were many names in different nations, but they referred to a great international movement that revived the “religion of the heart,” and rejected the optimism of the Enlightenment. Pietism in this sense flourished throughout Protestant Europe during the 1740s and 1750s, and continued to the end of the century.

  These intellectual trends were not mechanical reflexes of material processes. Their dynamics were more complex. One might hypothesize that cultural and material trends simultaneously expressed underlying imbalances in the Western world during the mid-eighteenth century.

  “A Scrambling among Ourselves:” Growing Instability

  Continuing imbalances created instabilities. Throughout Europe, commodity prices began to surge and decline, climbing sharply in the years 1739–41, 1755—58 and 1776–81, and falling rapidly in between. These movements coincided
with major European wars, a series of dynastic rivalries which expanded into world wars and people’s wars during the eighteenth century.23

  In 1739, a bizarre conflict called the War of Jenkins’ Ear began between Britain and Spain. This was a commercial dispute that grew into one of the first Jingo-wars in modern history. It started after Spanish officials mutilated an English interloper named Captain Robert Jenkins by cutting off his ear. Captain Jenkins presented the severed ear to Parliament in a handsome mahogany box. It became a cause of war between two great powers.24

  The affair of the unfortunate Captain Jenkins was followed by the War of the Austrian Succession (1740–1748), a dynastic conflict between the larger states of Europe. Fighting continued for a nearly decade in Europe and America, and prices rose sharply as a consequence of heavy military spending.

  An interval of peace followed that conflict, but the powers of Europe were soon at war again, in a larger struggle that German historians misnamed the Seven Years War. It actually lasted nine years from 1754 to 1763, and began in the wilderness of western Pennsylvania, when an obscure young Virginia officer named George Washington got into a fight with a French party, and was defeated. This small event led to a great world war, with heavy fighting in America, Asia, and central Europe. One of its many consequences was a surge in world prices. The price of grain rose sharply in London, Paris and Boston, and remained very high until the war ended.25

  The peace of Paris in 1763 was followed by a short but painful period of price deflation and economic depression. Twelve years later, the great powers went to war again, in a still larger world conflict that started on Lexington Green in Massachusetts, and drew in many nations. Great armies and fleets were set in motion around the world. The cost of war caused another sharp surge of inflation.

  As individuals and governments tried to cope in various ways, cultural stresses of high intensity began to develop in western society. The pattern was similar to that which had occurred in the great waves of the thirteenth and sixteenth centuries. Instabilities of many sorts developed. One of the most dangerous was the growth of inequality. This trend appeared in both Europe and America, where wealth became more concentrated in a few hands during the period from 1750 to 1790. Similar tendencies appeared in Britain and France, Scandinavia and Germany, Massachusetts and Virginia.26

  For the rich this was the best of times, an age when the lives of the privileged few were marked by what Talleyrand called the douceur de vie. In the twilight of the old regime, many European states experienced what has been called an aristocratic resurgence during the third and fourth quarters of the eighteenth century. In France, the nobility arrogated to itself an increasing share of what economists call “positional goods,” that is, goods that are limited in supply by their very nature: the top jobs, the most powerful offices, the highest honors. Major offices were increasingly restricted to the noblesse. After 1781, new army officers were required to have at least four “quarterings” of nobility in their ancestry. The effect of this rule was to expand opportunity for a narrow elite, and to restrict it for others. In the 1780s, all French bishops (135 in all) were of the nobility. Nearly all royal ministers were nobles. In retrospect, we know that this aristocratic resurgence was what German historian Martin Göhring calls a triumph der ständischen Idee, a triumph for the moment only. But within that moment the nobility seemed to carry everything before them. In a time of widespread suffering, they awakened intense resentment against themselves.27

  At the bottom of French society, the poor sank deeper in misery and degradation. Between a third and half of the people of France lived near the margin of subsistence, spending as much as 80 percent of their income on food alone. In the late eighteenth century, the numbers of the poor multiplied. Homelessness increased. Public roads were thronged with aged beggars, abandoned children, broken families, and able-bodied men without work.

  The disruption of families also increased. Through the period from 1730 to 1810, many studies have found a rapid rise in the proportion of children conceived and born outside of marriage. The same pattern appeared in European rates of illegitimacy and American rates of prenuptial pregnancy. Historians have struggled to explain these trends in various ways. None appear to have noticed that they correlated closely with rising prices, and with the social disruption that the price-revolution caused.

  Contemporary observers in the late eighteenth century were keenly aware of these trends. They remarked on the growth of social tensions and class conflict during the 1780s. In France, the American diplomat Thomas Jefferson observed that every man seemed to be either a hammer or an anvil, either a sheep or a wolf. He was describing a period as well as a place.

  Figure 3.11 compares ratios of births outside of marriage to all births by decade in 98 English parishes, with the Abel index of decennial wheat prices in England (grams of silver per 100 kilograms of wheat); and also illegitimacy ratios for France with the Abel series of French wheat prices. Sources are Abel, Agrarkrisen und Agrarkonjunktur, appendix; Yves Blayo, “Mouvement naturel de la population française de 1740 à 1829,” Population 25 (1970) 15–64; Peter Laslett, Karla Osterveen and Richard M. Smith, eds., Bastardy and Its Comparative History (Cambridge, 1980) 14–15.

  The growth of class conflict was attributed to “scarcity” and soaring prices. An anonymous English pamphleteer wrote in 1766:

  People not perceiving a scarcity, are apt to be jealous of one another; each suspecting another’s inequality of gain to rob him of his share, every one will be employing his skill and power, the best he can, to procure to himself the same plenty as formerly. This is but scrambling amongst ourselves, and helps us no more against our want, then the struggling for a short coverlet, by those who lie together, till it is pulled to pieces, will preserve them from the cold.

  The laborer’s share being seldom more than a bare subsistence, never allows that body of men time or opportunity to raise their thought above that, or to contest with the richer for their’s;—unless when some uncommon and great distress, uniting them in one universal ferment, makes them forget respect, and emboldens them to serve their wants with armed force; and then sometimes they break in upon the rich, and sweep all like a deluge. But this rarely happens, but in the MALADMINISTRATION OF NEGLECTED AND MISMANAGED GOVERNMENT.28

  The growth of inequality was an international trend in the late eighteenth century. It appeared in Europe, Great Britain and even in the new United States, where many studies have found a rapid increase in the concentration of wealth during the period from 1760 to 1830.

  The effect of growing inequality was to disrupt the moral economy of the western society, and to destabilize its material order. The humanitarian ethics of Christianity, which the Enlightenment had done much to reinforce, compelled the nations of western Europe to spend larger sums on social welfare than ever before. In France during the 1780s the poor received more than 20 million livres in government assistance alone, plus larger sums from the church and private individuals. This vast effort prevented the famines that had occurred in the fourteenth century, but intensified social tensions. In place of starvation there was hunger. Instead of despair there was rage—an emotion far more dangerous to the standing order.

  Inequality also created material strains within western society. As poor families devoted more of their income to bread, less remained for other things. The result was shrinkage of demand, which caused sharp contractions in markets for industrial goods. The economies of western Europe in the 1780s experienced the same combination of inflation and stagnation that marked the penultimate stage of every other price-revolution.

  Governments, caught in a spiral of increasing instability, struggled to maintain their solvency by raising taxes, as Britain did throughout its empire in 1763–75, and France attempted to do in 1783–88. Entrenched elites were able to shift these burdens away from themselves. The new taxes, like the old ones, fell heavily on those who were least able to bear them. In England, the resistance of the country ge
ntry to a trivial tax on cider in 1763 compelled the government to try the dangerous expedient of taxing America, with disastrous results for the empire.

  In France, the crown had long conciliated the nobility and haut bourgeoisie by exempting them from various taxes. The Marquis de Lafayette inherited an estate that paid him 140,000 livres a year, but he was exempt from the taille which took a large part of a peasant’s small surplus. Many rich bourgeois were also released from the taille. By and large it was paid by the people of middling estates, and by the working poor. There were other taxes, such as the capitation (a cross between a poll tax and an income tax) and vingtieme (“the twentieth”). Both were nominally paid by everyone, but the rich and strong could reduce these obligations by payment of a lump sum, which was much diminished by inflation. Indirect taxes such as customs duties, excise taxes and the hated salt tax were paid by all, but tended to be passed on to the consumer. Again, it was the poor and middling who bore the weight. Other taxes in kind, notably the corvée and the transport militaire, fell heavily upon the peasantry. This system of regressive taxation simultaneously increased social resentments, diminished the moral authority of the standing order, and shrank the government’s income.29

  Figure 3.12 is one of many studies that find growing inequality in the period 1750–1830. It surveys the distribution of taxable wealth in real estate (current dollars), for the town of Concord, Massachusetts, twenty miles west of Boston. The data are taken from town valuations in 1770 and 1826, and from the federal direct tax assessment in 1798. The source is D. H. Fischer, ed., Concord: The Social History of a New England Town, 1750–1850 (Waltham, 1983) 91, 222. Similar trends, with higher levels of inequality, appear for personal wealth, total wealth, and the distribution of real estate by acres.