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Joseph Lowe.

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industry, our ministers would have been so deluded
by appearances as to mistake a rise in the })rice of
commodities for. an increase of national wealth, or
to imagine that war could, under any circumstances,
be conducive to commercial prosperity ? Had they
studied the lesson to be learned in the history of
Holland, and, in some degree, in our own, (since
intervals of stagnation have followed almost every
war since the revolution,) our public men Mould
have anticipated a reaction at a peace, and have
carefully circumscribed their expenditure during
the war. If we examine the discussions that have
from time to time taken place on one very material
question, — the state of our currency, — we shall hnd
the speeches of our leading men indicate little more
than an elementary knowledge of the subject.
These discussions began in 1810, when if we could
not resume cash payments, we miglit ha\ e desisted
from our measures against neutral navigation ; but
the degree to which the restraint imposed on that
navigation affected the credit of our bank paper was
unknown to parliament-, and inadequately felt by
the Cabinet. Nothing consequently was done ;
and, when at a subsequent date, and under \qv\
different circumstances, we mean in ISl'J, parlia-
ment did interfere with the currency, the measure
was ill-timed, and tended, if not to aggra\ate
the evil, to mislead tiie public in regard to its
cause.

After all these examples of error, does it seem
necessary to add that the labours of our ])ubhi



3li< Tlic Idle Wars.

men ought to be modelled on a new plan ? To gi\ c
a cursory attention to a multiplicity of topics, leads
to a knowledge very little beyond that of first im-
pressions : to obtain a satisfactory conviction, to
place our opinions on a firm basis, it is indispensable
to make a selection, to restrict the objects of en-
quiry, and to give a long continuance to our
research and reflection on the prescribed themes.
Looking round in private life, and extending our
view to men of eminence generally, commercial as
well as professional, what else tlian this limitation
of object and perseverance in pursuit, do we find to
form the basis of such characters, and to distinguish
them from the credulous multitude, from those who
listen with ready acquiescence to every plausible
assertion ? If the habits of our representatives are
different, if they unfortunately betray the absence
of such discrimination and perseverance, ought it
to be matter of surprise, that delusion should have
prevailed among them during so many years : that
a temporary rise of prices and increase of activity,
should have been mistaken for a permanent aug-
mentation of national wealth ; and that the unwel-
come discoveries of late years, the Jinale of which is
no less than a suspension of their incomes, should
have come on them by surprise ?



315



CHAP. X.

Value of Moneij.

iSPXTION I.

Fliutuatiun in the Value of Moniy or in the Price of
Commodities.

1 HE fluctuation in prices consequent on the great
political transitions of the age, has been already
discussed in our second chapter : at present our
object is to pursue the same inquiry on a more
comprehensive plan, and to carry back our views
to changes that have taken place in former ages.
Changes of this nature rank among the most in-
teresting subjects of inquiry in political economy.
To the reader of history, a knowledge of them
is indispensable to the formation of a correct es-
timate of the price of labour, of" tlie public revenue,
and of the comparative wealth of a nation at dif-
ferent periods ; while, in a practical view, an ac-
quaintance with this subject is of very serious
interest, as connected with the future value of
bequests, leases, and time-contracts generally. The
discussion naturally divides itself into the ibllowing
heads : —

The tendency of prices to fluctuate.

The impracticability of foreseeing or })reventing
such fluctuation.

A plan for lessening its injurious operation.



316 Fliichcatioii in llw Value (jf Moiiey.

Fuhlications on the Flucliialion of Prices. — The
tlocuments for forming an estimate of these changes,
have as yet been given to us scantily and im})er-
fectly, the subject never having engaged the atten-
tion of government, and but lately that of any of
our public bodies. In France, a country little
remarked for statistical research, the attempts
hitherto made to compare the rate of prices at dif-
ferent periods have been confined to a few literary
men : in England, one of the earliest was that of
Bishop Fleetwood, who collected prices of wheat
during a number of years from the 13th to the
17th century, and reduced them to money of our
present standard. His labours, published in I707,
formed the chief materials for the reasonings of
Dr. Smith, whose life was not prolonged until the
publication (in 1797) of a very valuable addition
to such collections by Sir Frederick Eden, in his
work on the " State of the Poor," the copious ma-
terials of which have been termed iijb?is perennis
for succeeding inquirers.

In 1798 there appeared in the Transactions of the
Royal Society, a tabular statement by Sir George
Shuckburgh, which, from the clearness of its form
(See Appendix), and the confidence of its deduc-
tions, obtained much more credit than it deserved,
being far from correct, even in the fundamental
points. In 1811, the late Arthur Young, alarmed
at the impression made on the public by the Report
of the Bullion Committee, and dreading a con-
traction of paper currency attended by a fall in the
price of agricultural produce, entered into re-
searches of great extent, both as to the past and
current prices of commodities, and published tlie
whole in a pamphlet, entitled " An Inquiry into
the Progressive Value of Money in England.*'

9



Fluctuation in the Value of Money. 81 7

This tract, however inaccurate in a theoretical
sense, has a claim to attention, as well for the
value of its materials, as for a correction of the
mistakes of Sir George Shuckhurgh. Since 1811,
serious beyond example as has been the fluctuation
of our prices, there has appeared no treatise of con-
sequence on the su])ject until Mr. Tooke's valuable
publication on " High and Low Prices since 1792.'*

Historical Skctcli of the Fluctuation of Prices. —
It is a prevalent notion that the money prices of
commodities have been progressively rising since
the Norman conquest, or even since the earliei*
period, when the luxury of Rome, and the revenue
paid to it by tributary provinces, disappeared be-
fore its rude invaders from the north and east.
To this opinion, however, there are several strong
objections. Tiie supply of gold and silver from
the mines, was, during the middle ages, scanty and
precarious ; while the numbers of the society re-
quiring the use of the precious metals, in other
words, the population of the west and central part
of Europe, were, in some degree, in a state of
increase. Dr. Smith, reasoning on the i)rice ol'
commodities generally, from the price of corn, and
foundinjr his view of the latter on the collections
of Bishop Fleetwood, assumes, that from the year
1200 to 1550, there was no considerable rise of
prices ; and that such rise did not begin till the
reign of Elizabeth, the time when the American
mines became productive on a large scale. The
import from that quarter, small as it would a})pear
in the present age, was sensibly telt at a time when
silver was very little used in manufiictuio, and not
largely in plate : its amount was, uniler such cir-
cumstances, almost wholly added to the circulating



;>18 Ftuctuat'ion in the Value of Moneij.

medium of Europe. This addition was considered
by Dr. Sniitli the main cause of* the rise of ])rices
which continued until towards the year 1(3,50, wlien,
from circumstances on which we shall enlarge pre-
sently, prices ceased to rise, and became either
stationary or declining. This state of things lasted
until ly^'i'j when, as is well known, a new ajra
commenced and continued until 1814.

Effect of a State of War. — Dr. Smith's view
of the progressive value of money is admitted
by Mr. Young, but neither of these writers has
thought of tracing a correspondence between the
fluctuations in the precious metals in the l6th and
17th centuries, and the political transactions of
Europe. A state of war tends, as we have showni
in a preceding chapter, greatly to advance prices,
and the rise in the reign of Elizabetli may, in no
inconsiderable degree, be ascribed to the increase
of military establishments in that age, to our de-
fensive attitude against Philip II., to the obstinate
contest carried on between him and his insurgent
subjects in the Netherlands, to the ci\dl wars of
France, and to the troubled state of Germany. On
the other hand, after the treaty of Westphalia, the
chief part of Europe enjoyed tranquillity, and the
effect on trade and agriculture, of reduced armies
and diminished taxes, is described by Sir W. Temple,
in a manner that strikingly resembles the state of
this country and the Continent since the late peace.

This political change accounts for the decline of
prices that prevailed after 16.50, but the applica-
tion of our theory is, it must be allowed, less clear
after 167^, when war was renewed on a great
scale, and continued, with comparatively little in-
termission, during forty years. Add to this, that



Fluctuation in t)ie lvalue of Money. 319

there took place, during all that time, an import of
specie from America, to an extent somewhat in-
creased ; viz. to the amount of three, four, or five
millions, annually. In what manner, under the
operation of this double cause of enhancement, are
we to account for prices experiencing no great
or permanent rise? Perhaps by the following
considerations : —

1. An increased use of the precious metals, in
plate, manufactures, and ornaments, in conse-
quence of the general increase of wealth.

2. An augmented export of them to the eastern
w^orld, chiefly through the means of the Dutch
East India Company.

3. The fact, that previous to I672, the supply
of agricultural produce in England, as in the north-
west of Europe generally, had become somewhat
more than equal to the consumption ; an excess of
which the effects are generally felt for a long
series of years.

The peace of Utrecht was the commencement
of a period of general tranquillity ; government
expenditure was reduced, labourers were restored
to agriculture, and the decline of prices became
general and progressive. In vain did our land-
holders look to the bounty on the export of corn,
for a counteraction of the fall in the market: they
exported largel}', and received premiums on a
liberal scale, but their abundant growth kept down
the home market, and the excess of sup})ly over
consumption continued during half a century, ter-
minating only in 176k Nor is it at all j)iobable
that it would have ceased at that time, peace hav-
ing been but lately concluded, had we not had a
succession of indifferent seasons : these raised



320 Fliicluation in the Value oj Money.

prices, ami the contest that ensued with our colo-
nies, prevented their fall.

After 1783, the restoration oi' peace tended,
naturally, to reduce prices, hut its effect was
retarded hy several causes, in particular, the de-
mand of hands for our manufactures, and the
occasional occurrence of indifferent seasons. After
1792, the progress of enhancement was accelerated
in an unexampled degree hy the general state of
war consequent on the French revolution. A rise
of prices progressive during twenty years, and
amounting at last to more than fiO per cent, ahove
those of 1792, overturned time-contracts through-
out the kingdom, depressing annuitants while it
raised tenants on lease, with various other classes,
above their former station, — an elevation, unfor-
tunately, of short duration, since they ha\e been
made to descend from it with still more rapidity in
the years that have followed the peace.

Can such Fluctuations be foreseen or prevented ? —
After this summary of facts in regard to the past,
the next and still more important point is to
ascertain how far such fluctuations are likely to
continue. But here the most indefatigable in-
quirer will find the result uncertain, and be obliged
to admit, that in so complicated a question, all
that we can do with confidence, is to state the
arguments on either side. Those in favour of the
rise of prices, are,

The contingency of war.

The probable increase of the produce of the
mines, from the application of steam-engines and
other improved machinery.

The farther substitution of bank paper for me-
tallic (Murencv ; a substitution, which, in its ge-



Fluchiat'nm in the Value of Money. .1^1

Hcral (though not in its local) effect, operates like
the increased productiveness of a mine.*

On the other hand, the arguments for the fall
of prices are equally substantial ; viz.

The tendency of all improvements in productive
industry, whether in agriculture, maiuiiacture,
mechanics, or navigation, to produce cheaj)ness.

The increasing demand for the precious metals,
ti'om the increasing population of the civihzcd
world.

As to England in particular, tlie tendency of a
country where prices are higher than in the neigh-
bouring states, to approximate (see p. 32.5), by
commercial intercourse, to the standard of other
countries.

Supplij of Specie from the Mines. — The amount
of specie extracted annually from American mines,
was computed in 17(^>0, at (),000,UUU/. sterling : in
the course of the succeeding twenty years, it hail
increased to fully 7,000,000/., and some time after
(Appendix to the Bullion Report of 1810) to
8,000,000/. In this, as in other res))ects, Mexico
is by far the foremost of the Spanish colonies, the
yearly ])roduce of lier mines being nearly hve mil-
lions sterling, while that of the rest of Sj)anish
America may be estimated at three millions more.
Adding to these, somewhat less than a million
sterlino- for Portucfucse America, and somewhat
more than another million for the mines of our
own hemisphere, we make a total of neaily li-n
millions annually added to the stock of the piccions

• Our niLMition of bank paper must always be understoocl as
o'C bank notes payable in cash : a resort to non-convertible paper
will, we take lor granted, be henceforth excluded from our
finnncja! creed.



322 Fluctuatiun in the Value of Money.

metals tlirougliout the world. From this, however,
is to be made, both at present and for some time
back, a deduction on account of the political
troubles of Spanish America: still the importation
is on a large scale, and would speedily produce
depreciation, were not the demands of the civilized
world on the increase.

Consumption of Specie. — The demands for the
produce of the mines, arise from various causes,
of which the greatest, by far, is the annual con-
sumption of it for plate, watches, gilding, and
ornamental manufacture, generally. The amount
of this admits of no satisfactory calculation, but is
probably (Appendix, p. [89]) not far short of two-
thirds of the total produce of the mines. Next
comes the demand for coin : the currency of al-
most all the Continent of Europe is metallic, and
an annual supply is requisite, partly to make good
accidental loss or the effect of wear, partly to meet
the increase of population. This, though not
large, may, when joined to the annual export of
specie to India and China, (to say little of losses
arising from shipwreck or hoarding), account for
the absorption of the remaining third of the pro-
duce of the mines. What then appears to be the
general result ? That in ordinary times these va-
rious sources of demand are equal, or nearly equal,
to the amount supplied from the mines ; but that
for some years back (since 1818), they appear to
have been more than equal, in consequence of the
extra-demand for gold on the part of the banks of
this country, Russia, and Austria, for the purpose
of substituting a metallic for a paper currency.

Dr. Smith, in adverting to the future supply of
specie from the mines, considered it an equal
chance that old mines may become exhausted, as
that new mines may be discovered, or the produce



Fluctuation in the Value of Money. SQS

of the old increased. Without contesting the ac-
curacy of this opinion in his age, it mW hardly be
doubted, that since the discovery of the powers of
steam, the a])plication of improved machinery to
the existing mines, would be productive of a very
considerable extension of produce ; but whether,
or in what time, it will be carried so far as to lower
materially the value of specie, it appears in xain to
conjecturc.

Circulation of Bank Paper. — -Our countrymen,
accustomed during more than half a century to
the use of bank notes, hav^e observed, with some
surprise, that a currency so cheap, and apparently
so easy of introduction, should, as yet, be hardly
known on the Continent. The bank of France,
though of undoubted stability, has found it prac-
ticable to establish branches in very few of the
provincial towns : several, containing a popula-
tion of 40,000 and upwards, are still without such
branches ; and there is not a private bank of circu-
lation in the whole country. The causes are, the
distrust excited by the recollection of the assignats,
the want of confidence in government, the absence
of commercial enterprise, as well as of the habits
of care and arrangement, which are indispensable
to success in a line of itself less profitable than is
commonly imagined. Holland, with all her com-
mercial improvements, has never adopted the bank-
note system, while in Austria, Russia, and Sweden,
the paper circulated is a forced government cur-
rency, not convertible into cash.

The obstacles to the circulation of bank
paper on the Continent, might })crliaps have
yielded to the effects of peace and augmented
trade, but they have been strengthened of late

Y 2



:^Q4> Find uati 011 in the Value of Money,

years, by tlie increased facility of ibrgery. It
would thus be vain to calculate on the extended
use of bank paper, or on any effect likely to arise
from it in regard to the value of the precious
metals.



Supply of Agricultural Produce. — Though corn
is so liable to fluctuation, as well from difference
of seasons, as from the occurrence of peace or
war, it is remarkable that a character of rise or fall
when once stamped on a period, is found to pre-
vail during a considerable time. Thus, the rise of
price begun in the early part of the reign of Eliza-
beth, continued, with only occasional intermissions
to lG50, not far short of a hundred years. At that
time began an a^ra of stationary, and, in some de-
gree, of decreasing prices, which, with temporary
suspensions during the indifferent seasons and ex-
pensive wars of the reigns of William and Anne,
continued until 1764. From that year until 1814,
we had no less than fifty years of brisk demand and
high prices ; while at present, as far as can be
judged from appearances, either in England or on
the Continent, we are entering on a period similar
to that which followed 1650 or 1713, — a period
when our growth being somewhat more than ade-
quate to the demand, the market long continued
heavy, and prices, in a great measure, stationary.

In what circumstances are we to look for the
cause of a stagnation continuing during so long a
period as half a century? In the investment of
capital and labour in agriculture, to an extent pro-
ductive of a surplus growth ; and in the fact, that,
as in the natural course of things, the producers
increase in the same proportion as the consumers,
the disproportion continues, year after year, until



FhictiuU'ton in I he Value ojMonei/. 3^5

the occurrence of some great national change, such-
as a war, or the direction of an extra portion of
labour to nnuuii'acturcs.

To return to the more immediate object oi" our
enquiry — the effect of the cost of corn on prices
generally. This effect is of the greatest import-
ance, botii as corn is the chief object of family
consinnption, and as it regulates, in a great mea-
sure, that other main constituent of prices, the rate
of labour. Since 18M



Online LibraryJoseph LoweThe present state of England in regard to agriculture, trade and finance; with a comparison of the prospects of England and France → online text (page 24 of 40)