18. Once again, the cost of energy was by far the most inflationary. One set of estimates for American wholesale prices shows the following increases from 1790 to 1814 (1790 = 100):
These data were computed from Warren and Pearson wholesale price indices in Historical Statistics of the United States, series E52–63.
19. John P. Post, The Last Great Subsistence Crisis in the Western World (Baltimore, 1977).
The Victorian Equilibrium
1. Francois Crouzet, L’économie de la Grande Bretagne victorianne, translated by Anthony Forster as The Victorian Economy (New York, 1982), is a good overview of British economic history of the nineteenth century. Other major works include R. Floud and D. McCloskey, The Economic History of Britain since 1700 (2 vols., Cambridge, 1981); E. J. Hobsbawm, Industry and Empire from 1750 to the Present Day (London, 1968); P. Mathias, The First Industrial Nation: An Economic History of Britain, 1700–1914 (London, 1959); P. Deane and W. A. Cole, British Economic Growth, 1688–1956 (2d ed., Cambridge, 1967). Still instructive is a great masterwork, J. H. Clapham, An Economic History of Modern Britain (3 vols., Cambridge, 1926–38).
Works comparing English and European economic development in the nineteenth century include P. K. O’Brien and C. K. Kyder, Economic Growth in Britain and France, 1780–1914: Two Paths to the Twentieth Century (London, 1978); Charles P. Kindleberger, Economic Growth in France and Britain, 1851–1950 (Cambridge, Mass., 1964); Simon Kuznets, Modern Economic Growth: Rate, Structure, and Spread (New Haven, 1966); and David S. Landes, The Unbound Prometheus: Technological Change and Industrial Development in Western Europe from 1750 to the Present (Cambridge, 1970).
2. Namier writes, “There was undoubtedly also an economic and social background to the revolution [of 1848]. Lean harvests in 1846 and 1847, and the potato disease, were causing intense misery in most parts of the Continent. Agrarian riots occurred in France, where 1847 was long remembered as lannée du pain cher.’” But most histories give little attention to this aspect of the revolutionary movement. Lewis Namier, 1848: The Revolution of the Intellectuals (1946; Garden City, 1964), 3; see also Priscilla Robertson, Revolutions of 1848: A Social History (New York, 1952), 56; Georges Duveau, 1848: The Making of a Revolution (1965; New York, 1967).
3. On German economic history, see Helmut Böhme, Deutschlands Weg zur Grossmacht . . . (Cologne and Berlin, 1966); Wolfram Fischer, Wirtschaft und Gesellschaft im Zeitalter der Industrialisierung . . . (Gottingen, 1972); Fritz Stern, Bismarck, Bleichroder, and the Building of the German Empire (New York, 1977); and Franz Schnabel, Deutsche Geschichte im neunzehnten Jahrhundert (4 vols., Freiberg, 1954).
4. Even the strongest surveys of American economic history in the past generation give little attention to price movements; see, for example, Lance Davis et al., American Economic Growth: An Economist’s History of the United States (New York, 1972), 363–65; and Douglass C. North, Growth and Welfare in the American Past: A New Economic History (Englewood Cliffs, N.J., 1966), which defines the American economy as a “price system” rather than a “planning system” (p. 8) but largely ignores the history of price movements.
5. E. M. Coulter, The Confederate States of America (Baton Rouge, 1950), 155.
6. See above, figures 1.02, 1.18, 2.02, 2.14, 3.02, 3.13.
7. Abel, Agrarkrisen und Agrarkonjunktur, 258.
8. Phelps-Brown and Hopkins, “Seven Centuries of the Prices of Consumables, Compared with Builders’ Wage-Rates”; for Germany see Abel, Agrarkrisen und Agrarkonjunktur, 244–64; for Sweden see Lennart Jörberg, A History of Prices in Sweden, 1732–1914, II, 334–49.
9. For real wages in the United States during the nineteenth century, see Historical Statistics of the United States, average annual and daily earnings of nonfarm employees, 1860–1900, series D735–38; and daily wage rates on the Erie Canal, series D718–21; and wage rates of artisans, laborers, and agricultural workers in the Philadelphia area, 1785–1830, series D715–17; also Peter H. Lindert and Jeffrey G. Williamson, “Three Centuries of Wealth Inequality,” Research in Economic History 1 (1976) 69–122.
10. Stephan Thernstrom, Poverty and Progress: Social Mobility in a Nineteenth-Century City (Cambridge, 1964), 20.
11. Ulrich B. Phillips, American Negro Slavery (Baton Rouge, 1966), 371.
12. Homer, History of Interest Rates, 181–215.
13. Ibid., 216–173; J. M. Fachan, Histoire de la rente française (Paris, 1904); Leonidas J. Loutchitch, Des variations du taux de l’intérêt en France de 1800 a nos jours (Paris, 1930).
14. Homer, History of Interest Rates, 205; Robert Blake, Disraeli (Anchor ed., New York, 1968), 295, 405, 716, 157, passim.
15. Abel, Agrarkrisen und Agrarkonjuntur, 237, 283.
16. Wrigley and Schofield, Population History of England, 1541–1871, 402–12. To call this revolution “economic” betrays a material bias that is stronger in the observer than the event. The revolution was other things before it became economic, but in other respects the interpretation is sound.
17. Davis, et al., American Economic Growth, chaps. 1–3; Kuznets, Modern Economic Growth; N. F. R. Crafts, British Economic Growth during the Industrial Revolution (Oxford, 1985); John J. McCusker and Russell R. Menard, The Economy of British America (Chapel Hill, 1985).
18. Kindleberger, Manias, Panics, and Crashes; 15, passim.
19. Peter Temin, The Jacksonian Economy (New York, 1969). These generalizations are in some respects at variance with Temin’s conclusions but consistent with his evidence. It is also interesting to observe that wholesale prices and specie supplies tended to move in unison, but consumer prices actually fell as the money supply increased sharply.
20. H. H. Lamb, Climate: Present, Past, and Future (2 vols., London, 1977), II, 481.
21. Byron Farwell, Queen Victoria’s Little Wars (New York, 1972), 364–71.
22. Fernand Braudel, Capitalism and Material Life, 1400–1800 (London, 1973), 332.
23. Walter E. Houghton, The Victorian Frame of Mind, 1830–1870 (New Haven, 1957), a valuable work, though it makes too much of similarities between Victorian and post-Victorian thought; G. M. Young, Victorian England: Portrait of an Age (New York, 1954).
The Price Revolution of the Twentieth Century
1. For a general cultural history of this transformation, see Jan Romein, The Watershed between Two Eras: Europe in 1900 (Middletown, 1978), a work of high importance in modern historiography.
2. An intelligent discussion of the “battle of the standards” appears in Richard Hofstadter’s introduction to William H. Harvey, Coin’s Financial School (Cambridge, 1963), 1–80.
3.G. L. Bach, The New Inflation; Causes, Effects, Cures (Providence, 1973), 4, 5.
4. Financial Review (1898) 1; Harold U. Faulkner, The Decline of Laissez Faire, 22.
5. Vilar, A History of Gold and Money, 1450–1920, 328, 352.
6. Many studies have shown that, once the long wave began, changes in the stock of money correlated roughly (very roughly) with price movements. Price movements and the money supply were associated as follows from 1890–1978:
See also Milton Friedman and Anna Jacobson Schwartz, A Monetary History of the United States, 1867–1960 (Princeton, 1963), 91; and W. Arthur Lewis, Growth and Fluctuations, 1870–1913 (London, 1978), 91.
7. World population has been estimated at 900 million in 1800, 1.2 billion in 1850, 1.625 billion in 1900, and 2.5 billion in 1950. The rate of increase was approximately the same in 1800–1850 (33 percent) and 1850–1900 (35 percent). From 1900–1950, the rate of gain was 54 percent, despite the horrific cost of two world wars. McEvedy and Jones, Atlas of World Population History, 342–43.
The important causal linkage was not to population growth alone but to the acceleration of population growth, relative to the pace of economic growth. The equilibrium of the Victorian era had also been a time of world population growth but at a slower rate, and in a stable relationship to economic change.
8. Quoted in W. David Slawson, The New
Inflation (Princeton, 1981), 6.
9. Geoffrey Barraclough, An Introduction to Contemporary History (Baltimore, 1967), chaps. 3, 4.
10. John Stevenson, British Society, 1914–1945 (Harmondsworth, 1984), 46–102; Arthur Marwick, The Deluge: British Society and the First World War (1965).
11. Carl T. Holtfrerich, “Political Factors of the German Inflation, 1914–1923,” in Nathan Schmukler and Edward Marcus, eds., Inflation Through the Ages: Economic, Social, Psychological, and Historical Aspects (New York, 1983), 400–16; Gordon Craig, Germany, 1866–1945 (New York, 1978), 342–57.
12. A. J. P. Taylor, English History, 1914–1945 (Oxford, 1965), 171.
13. R. A. C. Parker, Struggle for Survival; The History of the Second World War (Oxford, 1989), 76.
14. Historical Statistics of the U.S. (1976), series F4, 224.
15. Prisoner of war camps created their own internal economies in which cigarettes commonly functioned as money. Prices tended to fluctuate with the supply of tobacco, in a classical example of the monetarist model. But changing levels of aggregate demand also played a role.
16. Historical Statistics of the United States (1976), series E, 135. The two exceptional years were 1949 and 1955.
17. Eric F. Goldman, The Crucial Decade and After: America, 1945–1960 (New York, 1973), 25–26, 46–47.
18. Structural interpretations of inflation include those of Gardiner Means in “Simultaneous Inflation and Unemployment,” in Means et al., The Roots of Inflation: The International Crisis (New York, 1975), 19–27; also the many works of Robert Heilbruner.
19. Slawson, New Inflation, 51.
20. Slawson, New Inflation, also idem, “Price Controls for a Peacetime Economy,” Harvard Law Review 84 (1971) 1090–1107; and idem, “Fighting Stagflation with the Wrong Weapons,” Princeton Alumni Weekly, 23 Feb. 1983, 33–38. For other “new inflation” theories, see Robert Lekachman, Economists at Bay (New York, 1976); Dudley Jackson, H. A. Turner, and Frank Wilkinson, Do Trade Unions Cause Inflation? (Cambridge, 1974); and Bach, New Inflation.
The Troubles of Our Times
1. B. R. Mitchell, European Historical Statistics, 1750–1975 (2nd rev. ed., New York, 1981), 777.
2. Ibid., series C2, 177–80.
3. Charles S. Maier, “Inflation and Stagnation as Politics and History,” in Leon N. Lindberg and Charles S. Maier, eds., The Politics of Inflation and Economic Stagnation (Washington, 1985), 3–24.
4. Kozo Yamamura, “The Cost of Rapid Growth and Capitalist Democracy in Japan,” in Lindberg and Maier, eds., Politics of Inflation and Economic Stagnation, 467–508.
5. Arthur B. Laffer, “The Phenomenon of Worldwide Inflation: A Study of International Market Integration,” in Meisselman and Laffer, eds., The Phenomenon of Worldwide Inflation 27–52.
6. In 1979, American economist Lester Thurow advised his colleagues that they could not hope to understand the inflation that was then surging to high levels in the United States without entering a distant realm that he quaintly called “the long ago.” By “the long ago” he meant the year 1965. This observation was part of an argument commonly made by American economists, that the great inflation of the late twentieth century had its origin in fiscal and monetary decisions made during the Vietnam War. This was mistaken in at least three ways at once. The price revolution began seventy years earlier. Even the surge of the 1960s began before the United States sent large numbers of troops to Vietnam, and in another part of the world. Lester C. Thurow, The Zero Sum Society (New York, 1980), 43.
7. Rudiger Dornbusch and Stanley Fischer, Macroeconomics (New York, 1978), 316.
8. Robert Aaron Gordon, Economic Instability and Growth: The American Record (New York, 1974), 170.
9. The Nixon price and wage controls were imposed in three phases: phase I, August-November, 1971, prices, wages, and rents frozen for ninety days; phase II, November, 1971 to 1973, prices and wages controlled by a Pay Board and Price Commission; phase III; prices and wages restrained by largely voluntary restraints except in food, health, and construction industries, where mandatory controls continued until 1974. The impact of these measures may be seen in the following annual rates of change in price levels and economic indicators.
10. Stein, Presidential Economics, 186.
11. John M. Blair, The Control of Oil (New York, 1976), 264. Blair points out that the crisis became more severe because it came on top of an artificial domestic shortage that had been deliberately created by the Exxon corporation and other major corporations, who were trying to break the competition of discount dealers in the United States and independent Libyan suppliers. This conjunction of events, he writes, “set the stage for a virtual explosion of prices” (254).
12. Statistical Abstract of the United States (1984), tables 801, 810.
13. John Kenneth Galbraith, Economics in Perspective (Boston, 1987), 270.
14. International Financial Statistics 34 (1981) 45.
15. Robert Mabro, ed., The 1986 Oil Price Crisis: Economic Effects and Policy Responses (Oxford, 1988).
16. John A. Jenkins, “The Hunt Brothers: Battling a Billion Dollar Debt,” New York Times Magazine, 27 Sept. 1987.
17. New York Times, 15 Sept. 1986.
18. Part of this increase was caused by the fall of the dollar. But a multicurrency index of commodity prices kept by the Economist in London showed an increase of 16 percent in 1986–87. New York Times, 15 Sept. 1985.
19. Ibid.
20. Statistical Abstract of the United States (1984), tables 771, 772, 773, 775, 779, 780, 781, 782.
21. Boston Globe Oct. 4, 1987; Statistical Abstract of the United States (1984), 745; (1993) 1225.
22. Real wages are not an entirely accurate indicator of returns to labor. One must also add levels of employment to the level of wages. Unemployment became a chronic problem in western economies, and reduced the real returns to labor, especially in the United States, where unions and corporations favored comparatively high wages even at the price of high unemployment. When unemployment is taken into consideration, the movement of real returns to labor may be more nearly comparable to that in previous price-revolutions. Statistical Abstract of the United States, (1981), tables 606, 607.
The classic study of the relation between unemployment and inflation and the source of the Phillips curve is A. W. Phillips, “The Relation between Unemployment and the Rate of Change of Money Wage Rates in the United Kingdom, 1861–1957,” Economica 25 (1958) 183–299.
23. In the United States, from 1970 to 1992, average hourly and weekly dollars in constant (1982) dollars declined as follows:
24. Boston Globe, 4 Oct. 1987; Statistical Abstract of the United States (1984), 745; (1993), 1225.
25. Jeffrey G. Williamson and Peter H. Lindert, American Inequality: A Macroeconomic History (New York, 1980); James D. Smith, Modeling the Distribution and Intergenerational Transmission of Wealth, National Bureau of Economic Research, Studies in Income and Wealth, vol. 46 (Chicago, 1980); Gabriel Kolko, Wealth and Power in America (New York, 1962).
26. Frank Levy, Dollars and Dreams: The Changing American Income Distribution (New York, 1987), 1–22; U.S. Bureau of the Census, Household Wealth and Asset Ownership: 1984, Current Population Reports, Household Economic Studies, P-70, no. 7 (Washington, 1986).
27. New York Times, 6 Jan. 1980.
28. This flowed from a promise that President Reagan incautiously made in the election of 1984, that he would not raise taxes. The American electorate tends to be cynical about campaign promises, but studies have shown that politicians commonly try very hard to keep them, even at the cost of rigid adherence to wrongheaded policies that would have been abandoned if honor were not at stake. The Reagan presidency’s stubborn refusal to increase taxes in the face of fiscal disaster was a classic case in point.
29. Galbraith, Economics in Perspective, 272–273.
30. London Times, ca. 23–28 July 1987. Another factor was an obsession with the Phillips curve, with its trade-offs bet
ween unemployment and inflation. The Thatcher government, with its middle-class constituency, feared the latter more than the former.
31. New York Times 9 June 1988.
32. Harvey Cushing, The Life of Sir William Osler, vol. 1, chap. 14.
33. Mikhail Gorbachev, Perestroika: New Thinking for Our Country and the World (New York, 1987), 85.
34. The work of Maris Vinovskis has been specially important in studying population decline.
35. “What Happened to Inflation?” Economist, 16–22 Sept. 1995, 85.
36. Lester C. Thurow, The Future of Capitalism: How Today’s Economic Forces Shape Tomorrow’s World (New York, 1996), 185–193; Roger Bootle, The Death of Inflation: Surviving and Thriving in the Zero Era (London, 1996), 3–31.
Conclusion
1. Alfred, Lord Tennyson, “Locksley Hall, Sixty Years After, Etc.,” in Poems and Plays of Tennyson (Modern Library ed., New York, 1938), 833–840.
2. Silvester Bliss, Memoir of William Miller (n.p., 1853); Ruth Alden Dean, The Miller Heresy, Millenialism, and American Culture (Philadelphia, 1987); David Tallmadge Arthur, Come Out of Babylon: A Study of Millerite Separatism and Denominationalism, 1840–1865 (Rochester, 1970).
3. Galbraith, Economics in Perspective, 4.
4. See Stein, Presidential Economics, on Nixon’s administration as “conservative men with liberal ideas,” the increasing conservatism of Jimmy Carter, and the absurdity of Reaganomics.
5. In estimates of average rates of gain, much depends on periodization. These estimates are calculated from the point of inflection (ca. 1180, 1470, 1730, and 1896), to the maximum.
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