Great Wave

by Fischer, David Hackett;

  Figure 3.26 compares monetary estimates from Peter Temin, The Jacksonian Economy (New York, 1969), 71, 159; and price indices from Historical Statistics of the U. S., E52, E135.

  Figure 3.27 surveys world stocks of gold and silver, which rapidly increased during the nineteenth century, while prices remained stable or declined. The source is Pierre Vilar, A History of Gold and Money, 1450–1520 (London, 1984), 352.

  Whatever the cause of the Victorian equilibrium may have been, its consequences were abundantly clear. A period of comparative poitical stability developed in Europe. The century from 1815 to 1914 was one of the few periods in that continent’s long and bloody history when there was no general war. The only exception was the Crimean War, which was kept securely in bounds. The nineteenth century was an era of many smaller wars, some of which were very costly in life and treasure. There were wars of national integration such as the Prussian wars against Denmark, Austria and France, the American Civil War, and the conflicts of the Italian Risorgimento. Small imperialist wars were also very numerous. In the reign of Queen Victoria, the British army fought six Ashanti wars, five Basuto wars, three Afghan wars, three Burmese wars, two Maori wars, two Matabele wars, two Boer Wars, two Sikh wars, two Sudanese wars, and altogether 230 colonial wars, punitive expeditions, and insurrections.21

  Figure 3.28 finds falling arrest rates in Chicago, falling crime rates in Stockholm, and falling conviction rates in London (five-year moving average of convictions in Middlesex County, 1834 58, and the Metropolitan Police District, 1869–1900). Sources include Ted Robert Gurr, Rogues, Rebels, and Reformers: A Political History of Urban Crime and Conflict (Beverly Hills and London, 1976), 38–40, 63; Wesley G. Skogan, Chicago since 1840: A Time-Series Data Handbook (Urbana, 1975); Theodore N. Ferdinand, “The Criminal Patterns of Boston since 1849 ,” American Journal of Sociology 73 (1967) 688–98, and Gurr, 39–46.

  Figure 3.29 shows that rates of illegitimacy declined in close association with the price of wheat during the nineteenth century. This long trend followed an earlier rise in bastardy during the price revolution of the eighteenth century, and preceded another sustained increase in the price revolution of the twentieth century. Plotted here are decennial ratios of illegitimate births per 100 live births in England and Wales (civil registration), compared with the Abel index of English wheat prices (decennial averages in grams of pure silver per 100 kilograms of grain). Sources include Peter Laslett, Karla Oosterveen and Richard M. Smith, eds., Bastardy and Its Comparative History (Cambridge, 1980), 17; and Wilhelm Abel, Agrarkrisen und Agrarkonjunktur, appendix.

  Figure 3.30 shows the sustained decline of alcohol consumption in the United States during the nineteenth century. Estimates include spirits, wine, and beer, converted to ethanol equivalents. Beer includes hard cider, the leading alcoholic beverage in early America. The source is Merton M. Hyman, et al., Drink, Drinking, and Alcohol Related Mortality . . .(New Brunswick, 1980) Many other studies have replicated these findings.

  The economic effect of these conflicts was to integrate an ever larger proportion of the world’s population into national and even global markets, and monetary systems. Many scholars have written about the effect of European contact on primitive monetary systems that Europeans called “pseudo-money.” French historian Fernand Braudel observes, “The fate of this pseudo-money after the European impact (whether cowries in Bengal, wampum after 1670 or the Congo zimbos) proves identical in every case where it can be investigated— monstrous and catastrophic inflation, caused by an increase in reserves, an accelerated and even hectic circulation, and a concomitant devaluation in relation to the dominant European money.”22

  But economic chaos was merely the first effect. The second result was economic order. Local markets were incorporated in a larger system, where price movements became progressively more stable. The price equilibrium of the Victorian era promoted political stabilization and integration, which further increased price equilibrium, which in turn brought more stability and integration.

  The effect of price equilibrium upon society was also to promote another sort of social integration. This was a period when crime declined throughout the western world, after a period of sharp increase in the crisis of the eighteenth century. In London, Bombay, and even in Chicago life became more orderly during the Victorian era. Indicators of social deviance and family disruption also declined: alcohol consumption fell sharply; so also did rates of prenuptial pregnancy and sexual deviance. All had risen during the eighteenth century.

  The most important cultural correlate of the Victorian equilibrium was what Walter Houghton calls the Victorian frame of mind. Houghton (not the best guide on this question, for he went to excessive lengths to stress similarities between the Victorians and ourselves) defined the Victorian mind-frame in terms of optimism, anxiety, the will to believe, dogmatism, rigidity, the commercial spirit, earnestness, enthusiasm, hero worship, love and hypocrisy. Different words appear in other lists—liberalism, improvement, confidence, strength, faith and certainty.

  Historian G. M. Young approached the subject in a different way. He organized the Victorian era into a chronology of thinkers, arranged by the year in which they reached the age of 35. This list of “floruits” began in the year 1830 with Arnold and Carlyle. It ended in 1901–2 with Wells, Galsworthy, and Stanley Baldwin. It is a list of high complexity, and cannot be encompassed by unitary generalizations. But in the phrase of one eminent Victorian, F. W. Maitland, there is in every era a “common thought of common things.” On this level, which the Victorians themselves called their zeitgeist, we may find elements of cultural unity.23

  In the Victorian era, as in the Enlightenment and the Renaissance, creative thinkers in many fields drew their conceptual models from their historical condition. Similar textures of thought appeared in the biology of Darwin (1809–82), the geology of Charles Lyell (1797–1875), the historiography of Leopold von Ranke (1795–1886), the economics of Karl Marx (1818–83), the politics of William Ewart Gladstone (1809–98) and the statecraft of Abraham Lincoln (1809–65).

  However different their ideologies may have been, these Victorians all thought of the world in dynamic terms as a process rather than a static state. All of them understood that world-process as a sequence of conflicts which were progressive, coherent, self-regulating and self-sustaining. The Darwinian principle of natural selection, the Rankean idea of historicism, the Marxian model of dialectical materialism, the Lyellian concept of geologic stratiology, the Lincolnian creed of liberal conservatism and the Gladstonian ideology of conservative liberalism shared those qualities in common.

  These large ideas resembled the Victorian equilibrium itself, which was a dynamic, progressive, self-balancing and self-sustaining structure of countervailing forces. Most of these thinkers (with a few exceptions such as Lincoln) also shared a spirit that H. G. Wells called “optimistic fatalism.” This, too, was an expression of the Victorian equilbrium, and an instrument by which it was maintained.

  THE FOURTH WAVE

  The Price Revolution of the Twentieth Century

  Wages chase prices, prices chase wages, and both

  chase their past history.

  —Clyde Farnsworth, 1977

  LONDON, June 22, 1897, Diamond Jubilee Day. The rain-washed streets of this proud imperial city sparkled in the summer sun, as the people of Britain prepared to celebrate the sixtieth anniversary of Queen Victoria’s accession to the throne. At precisely eleven o’clock in the morning, the Queen repaired to her Royal Message Room in Buckingham Palace and sent a telegram of congratulations to her subjects throughout the world—370 million of them. Then she put on an ostrich-feathered bonnet, unfurled a small parasol of white silk, and traveled in an open carriage to St. Paul’s Cathedral. Her escort included 50,000 troops in brilliant uniform from every part of the Empire. Above the rooftops of the city, thousands of Union Jacks flew in the summer breeze. In the narrow streets happy crowds doffed caps, waved white handkerchiefs, and ch
eered their aged Queen.

  In many ways, the London that Queen Victoria looked upon that morning still seems remarkably the same today. Buckingham Palace and the great Cathedral of St. Paul are outwardly the same, despite the depredations of the Luftwaffe and the London smog. The red coats of the Queen’s Brigade of Guards, and the scarlet tunics of their officers, are still the same—and so are the class-distinctions that those subtle shadings represent. The Household Cavalry in their gleaming cuirasses and high flowing plumes still look and sound the same as they clatter down the Mall on jet-black horses. The Royal Horse Artillery still dress in the same dark blue shell jackets and red busby bags on state occasions, as when they saluted their Queen-Empress on her anniversary a century ago.

  But these superficial resemblances are apt to be deceiving. The city of London today is far removed in time and mood and social circumstance from the metropolis that celebrated Queen Victoria’s Diamond Jubilee on June 22, 1897. The most profound differences are not to be found in the many material transformations: not in the swarms of small cars that choke the narrow streets of the City, or the hideous modern buildings that sprout like concrete weeds in Mayfair, or the shoals of tourists in shorts and tee-shirts at Piccadilly, or the muffled Arab women in Rolls Royces, parked three deep outside the shops of Knightsbridge.

  London is more profoundly different in less tangible ways—most of all, in its memories of the past and its expectations for the future. In 1897, nearly all of its inhabitants had lived their entire lives in an era of stability and comparative peace. No general war had marred the peace of Europe since 1815, except the brief unpleasantness in the Crimea. Every ten or twenty years the British economy had drifted into a commercial depression, but prosperity had rapidly returned. Real wages had risen for nearly a century, and prices had remained remarkably stable for many years. The purchasing power of the pound sterling was actually greater on Diamond Jubilee Day than it had been in 1819, when the old Queen was born. In 1897, a gilt-edged government security paid a steady 2 percent, which was thought to be an entirely reasonable return on capital. Inflation was regarded as a distant horror that was visited upon less deserving nations as divine punishment for their economic sins.

  On Diamond Jubilee Day in 1897, eminent Victorians contemplated the future with the same confidence that marked their memories of the past. Peace, progress, and stability were thought to be natural and normal in the world. They were firmly expected to continue.

  But it was not to be. The Victorian certainties that London celebrated on Diamond Jubilee Day had already begun to be left behind by events. When we look back on the economic indicators for the year 1897, they reveal to us in retrospect a pattern that was still mercifully invisible to those whose lives it would transform. Beneath the surface of events, the equilibrium of the Victorian era had come quietly to an end. On the day that the Queen and her subjects commemorated sixty years of stability and peace, a deep change was silently occurring in the structure of change itself. That sunny June morning in 1897, the Western world was entering a new era, which would be filled with horrors that the Victorians could scarcely have imagined, much less foretold. This new epoch has continued to our own time. One of its many material manifestations was a long movement that might be called the price-revolution of the twentieth century.

  Slow Beginnings, 1896–1914

  In the year 1896, wholesale commodity prices in Britain and the United States reached their lowest level in more than a century. Then, during the year of the Diamond Jubilee, they began to rise a little—not very much, not enough for anyone to notice. The increase was only about 1 percent that year, smaller than the range of annual fluctuations. But we may observe a large significance in that small advance. It marked the beginning of a price-revolution that would continue for more than a century.1

  Students of American history will observe an irony in the timing of this event. It began immediately after the presidential election of 1896. The major issues in that campaign were low prices and scarce money. The cost of living in the United States had shown no long-term secular increase since 1814. Commodity prices had actually fallen after 1870. It is not easy for us, the children of a long inflation, to understand that our ancestors in the 1890s felt as deeply threatened by falling prices as we have been by rising ones.

  The American presidential election of 1896 centered on that economic problem. Democratic candidate William Jennings Bryan terrified the possessing classes by proposing a bimetallic monetary standard, and “free and unlimited” coinage of silver, mainly to encourage higher farm prices and wages. Republican nominee William McKinley defended the gold standard, maintained a moderate position on silver, and pledged to protect the sanctity of property. McKinley won the election, and the possessing classes breathed a collective sigh of deliverance.2

  Ironically, they did so at the moment when prices began to creep upward. The same inflection-point simultaneously appeared in the price records of many Western nations: Austria-Hungary (1896–97), Belgium (1895–96), Britain (1896–97), Germany (1896–97), Italy (1897–98), Norway (1897–98), Spain (1896–97), Sweden (1895–96) and the United States (1896–97). Each of these countries had its own monetary system. All of them began to experience the price-revolution at the same time.3

  Figure 4.01 surveys annual price movements in the United States. Sources include Historical Statistics of the United States (1976), series E23, E135; Statistical Abstract of the United States (1988), table 735; Statistical Abstract of the United States (1993), tables 756, 764.

  Once begun, the new inflation continued at a moderate pace from 1896 to 1914, averaging between 1 and 2 percent each year. The rate of gain was variable: comparatively small in Britain and the United States; larger in Spain and Germany. But almost everywhere, the same upward tendency appeared.

  Rising prices were at first welcomed as a timely correction of a recent deflation that had caused many social problems. During the depression year of 1894, the wholesale price of wheat in the United States had fallen to fifty-six cents a bushel, the lowest since the eighteenth century. Rising prices promised relief for farmers, merchants, and manufacturers alike. The authoritative Financial Review commented, “A retrospect of 1897 is much more pleasing than was a similar retrospect of 1896. The year was marked by a decisive recovery of business . . . and at the year’s close we find the outlook more hopeful than for many years past.”4

  Figure 4.02 finds that the structure of change in the twentieth century was similar to other price revolutions, but not entirely the same. As before, magnitudes increased exponentially and the underlying rate of change remained stable. But this great wave showed less annual variability, and little expansion of amplitudes. Sources include Historical Statistics of the United States (1976), series E135; Statistical Abstract of the United States (1988–94). Trend lines are fitted with an Excel 5.0 program.

  The decade that followed, from 1897 to 1907, was marked by the same sense of sustained prosperity. A few short downturns did not disrupt the prevailing optimism. In the United States, a “rich man’s panic” in 1903 caused stock prices to drop sharply after the U.S. Steel Corporation missed a dividend and a merger plan collapsed in the American shipbuilding industry. But that disturbance was largely limited to Wall Street, and the speed of the recovery encouraged the general mood of confidence.

  A larger panic in 1907 caused a short but very sharp contraction. In the United States, unemployment surged from 2 to 8 percent in 1908. Producer prices fell a little in America, Britain, France, and Germany that year. But within a few months prosperity returned. By 1909, everything was moving up again. Wages were up. Profits were up. Employment was up. Farm income reached record levels.

  At first, the great wave of the twentieth century remained invisible to contemporary observers, much as every other price-revolution had been. But as early as 1904, the continuing rise of prices began to be recognized as a secular trend. A few alert contemporaries searched for an explanation.

  Som
e attributed the increase in price levels to an expansion in the supply of gold and silver. In 1886, the fabulous gold mines of Johannesburg had been discovered, entirely by accident. In 1890, gold was found on Cripple Creek in Colorado; the lucky finder, William Stratton, made a fortune of $125 million within a few years. Canadian gold began to flow from the Klondike in 1896. The Alaskan gold rush began in 1898. But these events were part of a long continuum of gold discoveries that had happened through the nineteenth century without raising prices. The rate of growth in gold production throughout the world was roughly the same before and after 1896. Moreover, the pace of secular increase in silver production actually declined during the 1890s.5

  After the fact, another monetarist explanation has been suggested by American economists who believe that the rise of prices after 1896 was caused by acceleration in the growth of the money supply within the United States—from 6 percent in the period 1879–97, to 7.5 percent in the years 1897–1914. That idea is mistaken. Another economist, Arthur Lewis, has demonstrated that the estimates on which it rests are an artifact of periodization—that is, on the choice of years that frame the temporal generalization. Annual fluctuations were large enough to make a major difference in that respect. Lewis finds that the growth of money (and national product) in the United States occurred at virtually the same pace, before and after 1896. Further, an expansion in the American money supply alone could not have set the price-revolution in motion. This was an international event. Prices began to rise simultaneously in most currencies and monetary systems throughout the world.6