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T. E. Cliffe (Thomas Edward Cliffe) Leslie.

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tended to make interest low. The subsequent distribution of
the precious metals, however, seems to us to have tended in
the opposite direction. Money spent, for example, in improving
the Landes, in building at Bilbao or St. Nazaire, in cultivating
cotton in Egypt, and cotton, tea, oil-seed, and other productions
in India, and in carrying such productions to the markets of
Europe, has reproduced itself with extraordinary profit, and
could be borrowed with profit at higher than ordinary interest.
In the future distribution of the precious metals, in like manner^
over markets in which prices will rise — thereby investing with
considerable pecuniary value resources which now have scarce
any pecuniary value at all — we may reasonably foresee a source
of high profit and interest for a long time to come. The very
spirit of mingled economy and enterprise, which adds to the
quantity of the capital in the loan market, by attracting
hitherto unemployed funds from the hoard, the till, and the
private account at the bank, tends to provide more profitable
employment for the capital seeking investment. ' It is,' in Mr.
Patterson's words, ' the utilization of hitherto useless things
which peculiarly characterizes our times. It is the utilization
of neglected resources, the accumulation and concentrated ap-
pliance of a thousand forces or savings, which is the basis of
our extending power. We are economizing our money like
everything else ; and this economy of capital, almost as much
as the new gold mines, is the agency which is giving to com-
merce its enormous expansion.'* In the production of gold in
mines utterly valueless less than a generation ago, and now
worth twenty milHons a year — in the reclamation of waste lands
and waste substances at home and abroad — in trade with new
markets and industrial enterprise in new regions — in the col-
lection and subsequent diffusion of formerly unemployed money,
the same principle is operative throughout : a principle on which
we may rely to find profitable use for the fresh produce of the
mines, and for the savings of our incomes for an indefinite period.

* The Eco)iomy of Capital. By R. H. Patterson.



The Neiv Gold Ilines, and Prices in Europe in 1865. 327

The same economical movement has brought petroleum* —
to take one of the latest examples of the redemption of wealth
from the regions of waste — and the new gold into the market,
and the former is a new demand for the latter. In every
neglected or undervalued resource in the natural world or in
human capacity there is a profitable investment for money, and
commercial enterprise is constantly finding fresh employment
for money, both in the purchase of new articles of value, and in
higher prices for things of which the value is enhanced by
improvement. Speaking of the non-vakurs (a term for which
we have no exact English equivalent) which still abound even
in the most civilized countries, M. About remarks that among
them should be classed, not only things absolutely wasted and
worthless from neglect, but also things whose value is only
partially realized, like land under corn, which would fetch more
under grass. Such things M. About designates as non-vakurs
relatives^ including among them all the insufficiently exercised
powers of humanity. An entire half of the French nation, he
adds — the whole female sex — belongs to the category of non-
valeurs relatives. But if women were enabled, by both custom
and law, to realize the full worth of their powers, the higher
prices their industry would obtain would denote, not a fall in
the value of money, but a rise in the value of women. So the
increase in the money earnings of coolies and ryots in India,
and fellahs in Egypt, denotes not a mere doubling or trebling
of counters of payment, but an elevation of the commercial
status of two nations. There is thus an important distinction
between the significance of a rise of prices in Calcutta and in
London ; in the latter it signifies generally either a scarcity of
commodities or a depreciation of money, but in the former it
signifies trade on better terms with the world, as well as a
change in the local value of money.



* * Thougli petroleum has been but four years an article of commerce, it has
already assumed the second place among the exports of the United States, and now
ranks next to breadstufFs. In 1860 scarcely any was exported ; last year the cxpoits
amounted to 32,000,000 gallons, while the domestic consumption Mas even greater.'
— Times, April 27, I860.



328 The Neiv Gold Mines, and Prices in Europe in 1865.

The question whether the new mines have lowered the
value of money in England is one the more difficult to answer
with precision, since, in addition to the absence of perfect
statistics, causes, such as bad seasons and the Russian and
American wars, have temporarily affected the prices of great
classes of goods. Setting aside these disturbances, the truth
seems to be, that while, on the one hand, such important
commodities as com, sugar, and coal* are cheaper than for-
merly, and the wholesale prices of textile manufactures,
although higher than during th*? depression of trade, for some
years before 1851, remained nearly stationary from that year
until the American war, — on the other hand, the prices of
animal food, of land, and of metal manufactures, have con-
siderably risen ; and the result would appear to be, that in
wholesale trade the general value of money was not sensibly
altered in England before the American war. But, speaking
of retail prices, into which higher rents, wages, and prices of
animal food more or less enter, we should say that the cost of
subsistence is decidedly greater to all classes, except agricul-
tural labourers, whose chief expenditure is on bread, sugar, and
tea ; and that fixed incomes by no means buy as much as they
used, especially in remote parts of the country. We believe,
too, witli an eminent economist, that the real rise of prices to
consumers is partially disguised in a deteriorated quality of
many things. The disguises which the fact that people are
really given less for their money may assume are numberless.
For example, the prices were the same at the bathing estab-
lishments of Biarritz last autumn as in former years, but the
visitor could often get nothing but a wet and dirty bathing
dress for his sous. French gloves, again, are not only dearer
than formerly, but seem made in order to tear ; and both in
England and France washerwomen are apt to spoil linen now
for the prices at which they used formerly to dress it.

But the effects of the new mines uj)on prices are far less
obscurely and far more satisfactorily discernible in countries

* 'Average shipping price of Newcastle coal: — 1841, 10s. Qd. per ton; 1850,
9«. &d. ; 1860, 9s.'— The Coal Question, p. 61, by "W. S. Jevons.



The New Gold Mines ^ and Prices in Europe in 18G-3. 329

like India, where they have directly or indirectly furuished the
means of raising the remuneration of industry, and cii-eulating
produce which had formerly little or no circulation. The
result of this influx of money into India is by no means merely
the trouble of carrying and counting more coins to do the same
business as formerly ; and so far as there has been such a
result, it might have been in a great measure avoided had the
Oovernment allowed gold to pass current as money. By the
•exclusion of gold, India has been obliged to fetch a much
bulkier material for its currency from a far greater distance,
and to incur an unnecessary loss, first, on the freight from
abroad ; next, on the coinage at the mint ; thirdly, on the
carriage through the country ; and fourthly, on the wear and
tear of so many more new coins. The great mines of Australia
seem to have been specially designed to provide, at a compara-
tively small cost, the additional money required by the
increased trade of India, and its Government, too, have resolved
to defeat the economy of nature. In contending, however, for
all possible economy in the monetary system of India and
every other country, we cannot adopt the opinion Mr. Patterson
appears to entertain, that the economy might be carried so
far as to dispense with the cost of metallic cui-rencies alto-
gether. Coin is better fitted for rough work and for the
labourer's pocket than bank-notes. It cannot, like paper, be
eaten by ants in the East, and is safer from water and fire.
Nor can we conceive that a currency would be safe from
depreciation by excess, unless based upon things possessing
intrinsic value like silver and gold. Mr. Patterson argues that
the value of money depends simply on its conventional use and
acceptance. But limitation of supply is in all cases an
indispensable condition of value ; and the history of assignats
in France, and greenbacks in America, shows that negotiability
does not constitute the determining element of the value of a
currency.* And taking this view of the monetary use and

* Mr. Bonamy Price says in a recent article : — ' The peculiarity of this com-
modity (gold) consists only in this, that every man agrees to take it in exchange
ior his goods. The general consent to make gold the medium of exchange consti-



330 The New Gold 3fmes, and Prices in Europe in 1865.

importance of the precious metals, it seems to be a question
worth considering, whether the future supplies are likely to be
sufficient to supply money enough for the rapid progress of the
backward parts of the world, and the immense development
their resources seem siu-e to obtain. Mr. Maine has remarked
that investigators of the differences between stationary and
l)rogressive societies must, at the outset, realize clearly the fact
that the stationary condition of the human race is the rule, the
progressive the exception ; and, when this reflection was made,
the condition of the greater part of Asia and of Northern Africa
might even have justified the proposition that a retrograde
condition of the human race was the rule. In the wildest
regions frequented by the nomad hordes of Central Asia, the
traveller discovers the vestiges of former cultivation and wealth.
But he can now perceive in such regions that while he stands
on the grave of an old civilization he stands also on the borders
of a new one. It seems certain, at least as regards Asia, which
contains the bulk of the human race, that not only the
stationary, but the retrograde communities will become pro-
gressive — will be reached by roads, railways, river navigation,
and Western commerce, and obtain the aid of Western capital
and skill. And it seems equally certain that the pecuniary value
of their produce will immensely increase ; that they will need
vast quantities of coin for its circulation ; and that the question



tiites the precise demand for gold, just as the general consent to make shoes of
leather constitutes the demand for leather.' But the social compact to wear shoes
does not detei-mine what they are worth ; that depends on the supply of leather
and competent shoemakers. The public consents to take shillings as well as
sovereigns ; but it is not their consent that makes a sovereign worth twenty
shillings, M'hich it would not be if gold were as easy to get as silver. So the
public may consent to take pieces of paper for coins, but how many must be given
for a horse or a cow or a loaf depends on the comparative scarcity of each. We
make this comment merely to illustrate the principle that the value of money
depends on its rarity, and not on convention and custom ; for we confess we do not
see the drift of Mi'. Price's arguments. He refutes some fallacies of the old
mercantile school which hardly required fresh refutation, and which are not
supported by any of the writers on currency he refers to. But he by no means
makes it clear whether he objects only to the particular provisions of the Bank
Charter Act, or to a metallic standard altogether, and to Sir Robert Peel's definition
of a pound.



The Netu Gold 3Iines, ana Prices in Europe in 18G5. 331

is one of importance, whether coin enough for the purpose will
be easily obtained. The steady decline of the produce of some
of the new gold mines might seem to justify a doubt on the
subject. But from Mexico and South America additional
supplies may be expected. Of Peru the British Consul says :
' Peru is one vast mine which the hand of man has only hitherto
scratched.' To the produce of the mines must be added the
vast sums that the progress of commerce will restore to circula-
tion from the hoards of Asia and Europe, which, even in such
places as Lapland, are great. Large sums of Norwegian money
are said by Mr. Laing, in his ' Journal of a Eesidence in Nor-
way,' to have disappeared in Lapland ; the wealthiest Lap-
landers having always been accustomed to live, like the poorest,
on the produce of the reindeer, and to bury the money coming
to them from Norway in places where their heirs often fail
to discover it.

The movement we have discussed is one which tends to
bring all buried and neglected riches to light; and we anticipate
from it both an ample provision of money and an increasing
demand for it ; although temporary fluctuations in both may
cause changes in prices.



XXI.

PEICES IN GERMANY IN 1872.*

The theoretical principles involved in what is called the gold
question are matters, for the most part, about which little con-
troversy exists, although there may be much respecting their
application to facts, from the difficulty of ascertaining the real
facts. The effect on prices of a great increase in the quantity
of the precious metals in the world depends on their distribu-
tion ; on the proportions converted into money on one hand,
and articles of use or ornament on the other, the latter consti-
tuting, in the hands of dealers, an addition to the demand for
money, not to the supply of it; on the activity of the part
converted into money, and the degree to which the volume of
metallic circulation is swollen by instruments of credit ; and,
lastly, on the course which the additional expenditure takes in
each country, and the conditions affecting the supply of the
things on which it is laid out. The mere statement of these
conditions shows such a multiplicity of agencies at work that
the necessity of proceeding by observation to determine the
actual movements of prices is evident ; indeed, extensive and
careful observation on the part of many inquirers is likely,
after all, to leave us in ignorance or doubt on some points, but
it cannot fail to afford much information, especially as foreign
countries must be the principal field of inquiry. On the distri-
bution of the precious metals, first of all, and the opening up
of new channels for the new streams of treasure, hang the
gravest issues affecting the classes with stationary incomes in
this country. The rise of prices has for some months attracted

* Fortnightly Eeview, November 1, 1872.



Prices in Germany in 1872. 333

considerable attention in England, and with good reason ; but
in many parts of the Continent it has been for more than a
decade the subject of remark and complaint, and in the earlier
attention to it abroad one may perceive the main reason why it
has received comparatively little at home until now. A much
more rapid fall must have taken place in the value of money in
England had there been no considerable fall in other parts of
the world, had the chief part of the additional gold which has
come into circulation in the last twenty-two years been poured
into English markets : a matter in itself sufficient to show how
deeply we are concerned in its distribution, and in the move-
ment of prices in other regions. The movement in Germany
in particular deserves investigation, as a country which has
undergone great economic as well as political changes in the
period of the new gold, and one in which several of the con-
ditions determining its action on prices can be most advanta-
geously studied. Grerman statistics afford fuller information
respecting local prices than are obtainable with respect to
England or any other great country. But in every country
the real movement of prices has been a number of different
local movements, and in Germany we can trace the causes
governing the modern changes not in German prices only, but
in prices throughout the world. Wide miscalculations respecting
the effects of the American silver mines on the value of money
in the sixteenth and seventeenth centuries arose from attending
only to some statistics of prices in a few principal markets.
Even two centuries after the discovery of the American silver
mines prices had not risen all over Europe in the manner com-
monly supposed. It was a partial, local, and irregular rise
over a limited area, whence the prodigious effect of the streams
of additional money in the localities which actually received
them ; prices rising enormously in London, for example, while
•wholly unaffected in part of the Highlands of Scotland and of
the west of Ireland, and but little affected even in some parts
of England itself not far from the metropolis. The monetary
phenomenon which now first strikes the eye on an iuspectiou
of German statistics is the extraordinary inequality of local



334 Prices in Germany in 1872.

prices, and it is one which throws a flood of light on both the
past and the probable future distribution of the produce of the
new mines of our own time.

In the month of December, 1870, to take ofiicial statistics
published by Dr. Engel, Director of the Eoyal Prussian
Statistical Ofiice,* the price of beef, putting silbergroschen and
pfennigen into English money, was '6d. a pound at Neidenburg,
in the province of Prussia, at the east of the kingdom, while it
was Q\d. at Aix-la-Chapelle, in the Ehine province. In the
same month butter was 9|f/. at Neidenburg, 12^d. at Berlin,
14|f7. at Magdeburg, in the province of Saxony, 15^?. at Dort-
mund, in Westphalia, and \Qd. at Aix-la-Chapelle. Straw was
10s. the schock at Braunsberg, in the province of Prussia, and
£2 12s. at Saarbriicken, west of the Ehine. Take again the
following statistics of a number of the most important articles
at various towns. (See Table on next page.) The prices are
given in silbergroschen and pfennigen in Dr. Engel's tables,
but the proportions will be sufiiciently indicated by the
figures.

Dr. Engel's tables give prices at other towns in each of the
different provinces, the naked statistics being presented in all
cases without theory or comment. The war in France may
probably have disturbed the markets in the towns nearest
the military operations during the latest period for which the
official statistics are published, and the military element is one
which we shall have to notice again as one of the conditions
besides the new gold affecting the movement of prices in
Europe. But it by no means accounts for the inequalities,
as is evident from the statistics of a number of years before
the war. Going back, for instance, to 1865, we find butter 7d.
a pound at Neidenburg, IQd. at Thorn, in the same eastern
province, and 13f rf. at Aix-la-Chapelle, at the extreme west of
the kingdom. The value of money, in short, is a local affair,
even in Prussia, though one of the most advanced countries in



* Zeitschrift des Koniglich Pretcssischen Statistichen Bureaus. Elfter Jahrgan^
1871. See also the statistics of prices in the volume published in 1867.



Prices in Germany in 1872.



335





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336 Prices in Germany in 1872.

Europe, and one of the best provided with internal communica-
tions. Some of the differences are partially accounted for by
differences in the fertility or in the harvests of different regions.
Grreat fortifications, as at Cologne, Coblentz, Mayence, Konigs-
berg, Dantzig, and Stettin, obstructing the growth and business
of towns, and raising the rents of houses, occasion other di-
versities. Other local causes affecting supply or demand were
recently assigned on the spot at other places in reply to my own
inquiry. But if special local causes alone were at work, the ris&
in some localities would be attended by a fall in others, because
the same sum of money cannot be in two places at once, and if
part of the money previously current had been drawn off to new
localities, there would be less left in the old ones ; whereas
we find a higher range of prices than formerly everywhere
throughout Germany, though the differences are surprising.
In Grermany, as in England, combinations and strikes are now
often referred to as the chief cause of rise in the present year in
the prices of many things, and of the greater cost of living at
particular towns. But this explanation fails to account for a
continuous rise of prices for twenty years before strikes or
combinations (which are of very recent appearance in Grermany)
were heard of ; nor could a rise of the mass of commodities take
place without either an increase in the money demand, or a
diminution, which is not pretended, of the supply. A rise in
money wages at the expense of emj)loyers may cause a change
in relative prices, and a rise of things produced mainly by labour^
but in that case things produced mainly by fixed capital, and
whose price consists largely of profit, would sustain a corres«
ponding fall. An altered distribution of money to the advantage
of the working classes, again, would lead to an increased expendi-
ture on their part ; their comforts and luxuries might accordingly
rise. But this in turn would be met by a corresponding diminu-
tion of expenditure on the part of other classes, and a correspond-
ing fall in some articles. A fall in the house-rents of the middle
classes, for example, would ensue, whereas what is particularly
complained of is a rise. The payments of France, on account of



Online LibraryT. E. Cliffe (Thomas Edward Cliffe) LeslieEssays in political economy → online text (page 31 of 41)