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

Essays in political economy online

. (page 33 of 41)
Online LibraryT. E. Cliffe (Thomas Edward Cliffe) LeslieEssays in political economy → online text (page 33 of 41)
Font size
QR-code for this ebook





a>
o




z
















to








.s




>










cT






■^











c?






3








-5




,-


Pi








CO




a








'T3


-&

o

^




c


dJ






3
^


o

p-1


o

Ph






o

X
a
02


3





Prices in Germany in 1872. 347

the latter. At a time when a general fall in the value of money
is taking place in consequence of the abundance of gold, the
change is diminished in England and augumented in Germany
by the change in the movement of money.' But the same
movement which has given Germany railways and steamers
has given it steam for manufacture and mining as well as for
locomotion, and all the mechanical and chemical inventions of
England and France in addition to its own. If we add great
legal and administrative reforms removing obstacles to production
and trade, and the spread of education, we may see reason for
greater relative progress and a greater relative increase of pecu-
niary incomes in many parts of Germany than in England,
though the actual scale of incomes and prices may still be higher
in England. The prices of Hamburg, it should be added, must
not be taken as representing the movement of prices throughout
Germany, where the real movement is made up of a number of
different local movements. Hamburg, long one of the chief
seats of German trade, has advanced much less in respect of
industrial activity, means of communication, wealth, and the
increase of money, than many other towns which have come to
the front in the last twenty years. Dr. Engel's tables supply
some additional information, showing, for example, the average
prices of some important commodities in the chief towns of each
province of Prussia in the two decades 1841-50 and 18G1-70
respectively. (See Table on preceding page.)

If, however, we compare the average prices of 18G1-70
with those of the immediately preceding decade 1851-60, we
find that while the rise in butter, tallow, beef, pork, hay, and
straw, has been a continuous one, wheat, barley, oats, peas, and
potatoes were, on the contrary, on the average of years, higher
in the decade 1851-60 than in 1861-70. The articles, how-
ever, which have risen continuously are much better measures of
the purchasing power of money in Prussia than those which
ranged higher in the first decade of the new gold period than
in the second, above the prices of 1841-50. The prices of
butter, tallow, beef, and pork, are taken on a more uniform
system throughout the different markets of the kingdom than



348



Prices in Germany in 1872.



those of the other articles. The seasons produce much more
violent fluctuations in grain and potatoes than in animal food ;
and animal food is both a much more important item than
bread and potatoes in the economy of the middle and wealthier
classes, and one better adapted to test an increased expenditure
on the part of the working classes — butter especially, on which
the working classes in the mining and manufacturing districts
at least of Prussia spend much more than on meat. Not to
encumber our pages with too many figures on one hand, and
because, on the other hand, butter, of all the articles in Dr.
Ee gel's statistics, affords the best criterion of the movement of
prices and the cost of living, let us take the price of that article
during a succession of years at various towns ; the year 1841
affording, as Dr. Engel's tables show, a fair standard of pre-
Californian prices for comparison : —

Peice of the Pound of Butter in Pfennigen.























oS


































































a>




to












bD










^












i-






rd






_bb








j3


3




o


o


Year.


'3

:0


"S
p


o

p-l






C3


to




'o

O




1841


73


71


70


96


84


64


81


64


75


75


1851


71


72


70


88


84


78


89


60


68


67


1852


80


80


84


95


86


90


89


64


77


93


1854


90


91


101


100


91


93


97


75


85


96


1855


95


103


106


110


91


98


104


82


93


100


1856


101


110


104


113


112


97


108


85


102


112


1857


104


104


102


117


120


102


118


88


113


129


1859


103


101


98


107


119


90


109


80


109


130


1860


92


95


88


104


108


82


95


75


91


111


1862


106


106


107


125


111


94


111


89


110


124


1863


105


107


109


120


114


102


108


73


104


122


1864


104


105


110


120


117


110


114


87


118


128


1865


110


112


116


125


118


113


120


92


125


137


1870


111


118


128


132


124


115


140


105


134


161



Prices in Germany in 1872.



349



These statistics exhibit, amid some curious irregularities, a
continuous rise at all the towns in the list, but a much greater
rise at Aix-la-Ohapelle, where the price has more than doubled,
than at Konigsberg, where the rise is a little more tlian 50 per
cent. "We have, however, no statistics of places where the rise
has been greater : places, that is to say, which before 1850 had
neither railway communication nor industrial activity, and
which now are in the front rank with respect to both. Aix-la-
Chapelle was a considerable town, and had the advantage of
a railway before the discovery of the new gold mines; but
there are now mining and manufacturing centres which twenty
3^ears ago were not to be found on the map, and it is in such
places that the scale of wealth, wages, rents, and the prices of
animal food, has changed most.

Dr. Engel's statistics do not come down to the present year ;
but Mr. Scott's report on ' the condition of the industrial
classes, and the purchase power of money ' in Wiirtemberg,
supplies figures showing a continuous rise in that part of
Germany since 1850 : —



Commodities.


April, 1870.


April, 1872.


Beef,


M.


^d.


Pork,


dd.


Id.


Veal,


b\d.


&kd.


Butter,


1\d.


I0\d.


Milk,


2\d.


Z\d.



The recent advance in these articles has, I am assured, been
greater in some parts of Germany, though I am not enabled to
authenticate the results of personal inquiry by official statistics.
It is more important to note that no statistics exhibit the real
increase in the cost of living in many German towns, since
they do not exhibit the increase of town wages and house-rents,
and of the retail prices of many things into which wages and
house-rent enter as principal elements. The practical change
in the value of money varies, of course, for different classes and



350 Prices in Germany in 1872.

different individuals, according to the course of their habitual
expenditure, since some things have risen more than others,
and some, both imported and manufactured in the country, not
at all. The classes who seem to be least affected by it as
consumers, are those who have no wages to pay, while their
own wages have risen considerably, and who have often a
cottage, a garden, and cow of their own. The classes with
stationary incomes, in whose expenditure house-rent, animal
food, and the wages of servants, form the chief items, are, of
course, the chief sufferers.

On the whole, it is evident that there has been a great
change in the value of money in Germany in the last twenty
years, though it has been different in different localities, and
we have no such array of statistics as would be necessary to
determine the exact amount of the fall in any locality. Still
less can we determine exactly the share of the new gold mines
in the fall. There were causes tending to raise prices in
Germany, though no new mines of extraordinary fertility had
been discovered. One cause, altogether distinct from the mines
in its nature, though indistinguishably associated with them in
its operation, is the improvement in the industrial and com-
mercial position of the Germans. In a country which has gold
mines of its own, the production of gold depends partly on the
powers and skill of the miners, and partly on the fertility of the
mines. Let both the efficiency of the miners and the produc-
tiveness of the mines largely increase, and there will be a vast
increase in the production of gold; but it will be impossible
to say how much is due to the miners, and how much to the
mines. Foreign trade, as economists put it, is the gold mine
from which nations without actual mines of their own get their
gold, and the fertility of the foreign mine and the efficiency
of the Germans who work at it have increased together.

Both causes together, nevertheless, fall short of explaining
the changes in German prices. Two other sets of causes have
been at work at the same time : one augmenting the amount
of the circulating medium and the rapidity of its circulation,
the other affecting the supply of some of the chief articles on



Prices in German fj in 1872. 351

which the cost of living nicaiul}^ depends. The improvements
in locomotion and in commercial activity which have so largely
augmented the money-making power of the Germans, have
also quickened prodigiously the circulation of money ; and the
development of credit, likewise following industrial progress,
has added to the volume of the circulating medium a mass of
substitutes for money which move with greater velocity. You
can send money by steamer and railway, but you can send credit
by telegram, and a new million at New York may raise prices
in a few hom's at Frankfort and Berlin. A much smaller
amount of money than formerly now sufhces to do a giveu
amount of business, or to raise prices to a given rauge ; and to
the increased amount of actual monej' now current in Grermauy
we must add a brisk circulation of instruments of credit. It is
true that some of the principal means of substituting credit for
coin, and economizing the use of the latter, have little or no
operation in Germany. Cheques, strange to say, are hardly in
use, and there is no Clearing-house. But there is a mass of
bank-notes ; and bills of exchange, for very small as well as
for large amounts, pass from hand to hand among people in
business almost as freely as bank-notes ; the same bill making
often a great number of purchases before it reaches maturity.
The transactions are, of course, liable to be reopened if the bills
be not met in the end, but otherwise they answer as payment
in cash. A small proportion of coin thus supports an immense
volume of circulating credit. Were the circulating medium
composed of coin alone, whatever the amount of the precious
metals issuing from the mines or circulating in other countries,
whatever the price of German commodities in the gold market
abroad, no rise of prices of German commodities at home could
take place without additional coin enough to sustain it. It
might be the conviction of people in business in Germany,
that, looking to international prices, and the relative cost of
production of German exports and other German commodities,
prices generally ought to be double their former amount ; yet,
in the absence of instruments of credit, only a doubled quantity
of coin, or a doubled rapidity of its circulation, could actually



352 Prices in Germany in 1872.

double prices, and give German labour and productions their
due value in relation to money. But, when credit comes in
as a substitute for coin, it may, with a small proportion of
money as a support, raise prices at home to the pitch which
equal amounts of labour and abstinence fetch in the foreign
market.

There has, then, been a plurality of causes, besides the
increased quantity of gold in the world, augmenting what for
shortness we may call the money demand for Grerman commo-
dities — the increased industrial and commercial powers of the
Germans, the more rapid cii'culation of money, and the rapid
augmentation of the circulating medium by a volume of credit.
But the question of prices is a question concerning the supply
of commodities no less than the money demand. An increased
money demand does not of necessity raise the prices of commo-
dities. That depends on the conditions affecting the supply of
each class of thing, for which there is a greater money demand.
A nation like the United States, possessing a vast territory of
prodigious fertility, might, with peace and free trade, see the
prices of almost all things falling in the markets of California
itself. An important class of considerations, connected with
the rise of prices in both Germany and England, is contained
in the question Dr. Lasj)eyres has raised : ' What commodities
become constantly dearer in the lapse of periods of time ? '
Adam Smith has given an answer which at least points in tha
right direction, if it involves an erroneous distinction between
corn and other sorts of rude produce in the case of old countries
which do not import the former : ' If you except corn and suck
other vegetables as are raised altogether by human industry,
all other sorts of rude produce — cattle, poultry, game of all
kinds, the useful fossils and minerals of the earth, &c. —
naturally grow dearer as the society advances in wealth and
improvement.' Among the sorts of rude produce particularly
referred to by Adam Smith in his elaborate exposition of the
subject as naturally growing dearer in the lapse of periods of
time is wood, and German statistics afford an illustration. In
Professor Eau's ' Grundsiitze der Volkswirthschaftslehre,' the



Prices in Germany in 1872. 353

following prices of a given measure of the same wood at
Wiirtemberg, in successive periods, are given : —

Fl. Kr.

1640— 16S0 37

1690—1730 57

1740—1780 2 14

1790—1830 8 22

Dr. Engel, again, gives statistics which show the conti-
nuous rise of carpenter's wood in another part of Germany
since 1830 : —

1830. 1840. 1851. 1860. 1865.

Carpenter's wood per klafter,
in silbergroschen,



I 50 75 102 130 ISO



Of course, the rise in price of things which grow naturally-
dearer in the progress of society is enhanced by any sudden
increase of money and fall in its general value, and it then
becomes impossible to apportion the influence of the different
agencies — increased consumption with growing scarcity or
greater cost of production on the one hand, and greater abund-
ance of money on the other. Every artificial obstruction to
the supply of important commodities inflicts an aggravated loss
■on those whose money incomes remain stationary while money
is falling in value. The rise in the price of animal food in
•Grermany, where there is a wide distribution of landed property
and a simple system of land transfer, may be ascribed mainly
to natural causes ; and a large part of the Grerman population
are either gainers by it as sellers, or unaffected by it as pro-
ducers for their own consumption. It is otherwise in a country
like England, in which laws in the supposed interest of an
insignificant number limit the supply of land in the market,
diminish its produce, and make food unnaturally dear. The
gold question has added enormously to the importance of the
land question in England, and the classes with fixed incomes
are especially concerned in both.

Persons with stationary incomes in this country are, as it
were, between several fires. They suffer from high prices,

2 A



354 Prices in Germany in 1872.

whether they spring from abundance of gold, from natural
dearth of commodities, or from the increase of population and
wealth. They suffer along with other classes, and the pros-
perity of other classes is a calamity to them. The main re-
sources they had to look to on the discovery of the new gold
mines were reforms in the laws relating to land in their own
country on the one hand, augmenting and cheapening the
produce of land, and industrial and economical progress in
other countries on the other, assigning to these the principal
share of the new treasure. Of all parts of Europe, England
is that in which the fall in the value of money, measured in
commodities — I do not say measured in labour — ought to have
been least sensible, on account of the nature of its imports,
the natural cheapening of manufactures, the improvements in
husbandry which legislation might have indirectly effected,
the example which all the rest of the civilized world had
set with respect to land laws, and the immense demand for
the treasure from the new mines which peace, liberty, industry,
and trade might have opened up in other countries to cir-
culate a vast increase of produce at much higher pecuniary
value than remoteness and poverty have hitherto allowed them
to bear. The new area in Europe, not to speak of Asia,
which civilization would open for the employment of new
money is enormous. The inequalities in the local prices of
Germany, the rise in its most progressive localities, the com-
paratively low prices in its backward localities, point to one
of the chief outlets to which people here, with fixed incomes,
might have reasonably looked for the absorption of the new
gold. Low as prices still are in many places in Grermany,
they are lower over great districts of Austria, and yet lower
over the greater part of Russia, two countries, moreover,
where inconvertible paper currencies resist the circulation of
the precious metals.

As matters stand, the increase of money in England has
far outstripped the increase of some of the most important
commodities. And when one reflects that the money comes



Prices in Germany in 1872. 355

from a new world of peace and liberty, in which production
never flags, while the demand for it in Europe is limited by
tlie policy of an old military world, and the supply of commo-
dities by the law of an old feudal world, the prospect before
those with whom money does not increase with house rent and
the price of food seems the reverse of encouraging.



2 A 2



XXII.

PRICES IN ENGLAND IN 1873.*

The movement of prices in England is a less simple matter
than the reasoning of some eminent economists indicates. The
advance in the cost of living is considerably greater than
appears from their calculations, and the new gold is but one
of the causes acting on prices. An attempt has been made to
measure the effect of the gold by comparing the average prices
of a number of important commodities during the period since
the new mines were discovered, with the average prices of a
previous period. Mr. Jevons, who adds rare mathematical
powers to high economic attainments, has adopted this method ;
but, in inquiries of this kind, the truth is seldom reached until
several methods have been tried, and probable truth only, not
mathematical precision, is attainable. The method of averages
fails in several ways. It does not show the real movement of
prices or the real depreciation of money ; the tables omit some
of the chief elements of the cost of living ; the prices compared
are wholesale prices, while the purchasing power of an income
depends on retail prices ; and, by ascribing the whole rise of
prices to the new gold, this method conceals the material fact
that the gold is only one of a plurality of causes lately tending
to raise them.

A comparison of the average prices of successive periods of
years may be useful to indicate the total profit and loss on
transactions in the periods compared, but is delusive as a
criterion of the change in the value of money. Suppose that
in the first decade after the discovery of the new mines prices

* Fortnightly Eevieiv, June 1, 1873.



Prices in England in 1873. 357

liad risen twenty per cent., and in the second decade had fallen
back to their old level, money at the end of the twenty years
would be of the same value as at the beginning, yet the average
prices of the whole twenty years would show a depreciation of
twenty-five per cent. Suppose, on the other hand, that prices
had risen steadily during both decades so as to range fifty per
cent, higher at their close, the real fall in the purchasing
power of money would be fifty per cent., yet an average would
show a fall only of twenty-five : that is to say, only half the
real fall. Take, as exemplifying the second supposition, tlie
movement of prices in the sixteenth century, after the discovery
of the American mines. Prices rose continuously in some parts
of Europe until money had sunk to a third of its former value ;
here an average, including the lower prices of the earlier years
of the movement, would far under-estimate the real depreciation.
So in England now, if the cost of living to large classes be
much greater than during most of the years since the new gold
mines were opened, the average prices of the whole period
afford no measure of the real diminution in tlie purchasing
power of fixed incomes. If house rent, the wages of servants,
indoor and outdoor, animal food of all kinds, coal, washing,
many articles of clothing, horses and horse-keep, cost now in
the aggregate, by a succession of rises, one-half more than they
did a generation ago, a householder would be a good deal out
in his reckoning were he to measure the present and future
purchasing power, say of a thousand a-year, by the average
prices of the past twenty-five years. The averages referred to,
moreover, omit some of the chief items in the cost of living.
No account, for example, is taken of the great rise in house
rent and wages in recent years, nor of the additional charges
which retailers make to consumers, partly to cover higher
wages, shop-rents, and other items in the cost of their own
business. The recent prices of many important articles, e. g.
butchers' meat, have risen far more than prices in the wholesale
market. The actual increase in the cost of living to large
classes, therefore, far exceeds the advance shown in tables
which Mr. Jevons and the 'Economist' have published. The



358 Prices in England in 1873.

living of the poorest class (of women especially), who pay no
wages, rarely eat animal food, and whose chief expenditure is
on bread, sugar, and tea, may, notwithstanding the rise of coal,
cost no more than formerly ; but, where the scale of expenditure
ascends to servants, meat and butter every day, and a tolerable
house, the change for the worse in the purchasing power of
fixed incomes makes itself more heavily felt than any statistics
show.

Free trade created in this country a demand for a larger
currency ; but the chief cause which has prevented a ruinous
rise of prices in England is that other parts of the world have
absorbed the bulk of the gold and silver sent into circulation.
Take a single fact. In the twenty -two years, 1850-1871,
inclusive, the imports of gold and silver into British India
amounted to £235,000,000 ; the amount exported was only
£27,000,000, and the mints of the three Presidencies coined
upwards of £145,000,000. In that period, therefore, India
alone absorbed £208,000,000's worth of gold and silver for
currency and other purposes : that is to say, an equivalent to
two-fifths of the addition made to the stock of the precious
metals by the new gold mines in the twenty-two years. What
probability is there that the development of Indian trade will
be such in the next twenty-two years as to absorb £208,000,000
more ?* The question forms part of a larger one. What chance
is there that, for the future, the progress of the rest of the
world in means of locomotion, production, and trade, will be
such as to divert from England all but a small fraction of the
new treasure the mines may yield ?

The international and local distribution of the precious
metals in the last twenty years has followed, in the main, the
path of the industrial and commercial development abroad.
Steamers, railways, the rise of manufactures, the growth of
trade — internal and external — have caused a prodigious increase
in the demand of foreign countries for money to carry on their

* Sir Richard Temple's able financial statement for 1873-4 shows that in
1872-3 the influx of treasure had almost ceased. The Mints of Calcutta and
Bombay were in a state of inaction.



Prices in England in 1873. 3,50

increased business, and represent the rise in both the quantity
and the market vahie of their productions. The same change
in the distribution of money has taken place over a great part
of the world which took place earlier in England itself. Places
formerly remote, undeveloped, and backward, ill-furnisli(3d
with both means of locomotion and money, have gained access
by steam to the best markets, have advanced in both industry



Online LibraryT. E. Cliffe (Thomas Edward Cliffe) LeslieEssays in political economy → online text (page 33 of 41)