Great Wave

by Fischer, David Hackett;

  Meanwhile, the revolutionary spirit spread rapidly to other nations. Everywhere in Europe and America, prices had risen and real wages had declined. The concentration of wealth increased. Elites became more assertive of their privileges, and social tensions grew more intense. These were international events, and so also was the response. The revolutionary rallying cry of liberty, equality and fraternity was invented not in France but in the Netherlands. Those powerful ideas were not disembodied abstractions, but concrete solutions to urgent problems. The result was a wave of revolutions, unprecedented in breadth and violence.

  In rapid succession, revolutions broke out in what is now Belgium (1789), Switzerland (1792), the Netherlands (1794), Poland (1794) and Ireland (1798). Revolutionary French armies toppled the old oligarchies of Genoa (1797), Venice (1797), Berne (1798), and many other Italian cities and Swiss cantons. Assassination was the fate of Sweden’s King Gustavus III (1792), and Russia’s Czar Paul I (1801). England’s prime minister Spencer Perceval (1812) was murdered by a bankrupt broker, John Bellingham. In the new republic of the United States, a peaceable revolution occurred when the Jeffersonian movement transformed a whiggish Federalist oligarchy into a representative democracy. Revolutions broke out in French and Spanish colonies of America. Others spread to every corner of the world. On the Comoro Islands in the Mozambique Channel, the African inhabitants marched against their Arab masters with banners that read “America is free! Cannot we be?”11

  Defenders of the old regime reacted by organizing counterrevolutionary movements that were more violent than the revolutions themselves. During the 1790s, the worst scenes of social violence in the western world were the work of conservative mobs in Spain who sought to purge that country of radical elements.12

  By the winter of 1792–93, Prussia, Austria, Britain, Spain, and Holland were at war against the revolutionary government of France. To pay its heavy military costs, the French government printed large quantities of unsecured money called Assignats which lost as much as eighty per cent of their face value in five years—a classic hyperinflation.13 Conservative regimes were also hard pressed. After war began, the Bank of England ceased to redeem its banknotes in specie. For atime Britain went off the gold standard, with a consequent decline in the purchasing value of its currency.14

  Prices soared in many nations. From 1790 to 1815, rates of increase were greater than in any previous price-revolution. Every European nation and monetary system was caught up in it, and the Americas as well. From Boston to Buenos Aires, the price of consumables trebled between 1794 and 1814. Grain prices rose sharply in Canada, the United States and Mexico during the same period. Between 1767 and 1839 the Middle East, the Balkans and Turkey experienced what has been called “the most inflationary period in Ottoman history.” The timing varied in detail, but the trends were almost everywhere the same.15

  This surge drove the overall rate of inflation above earlier long waves. The average annual increase had been one half of one per cent in the medieval price-revolution, and a little more than one per cent in the sixteenth century. The great wave of the eighteenth century averaged about 1.7 percent in England, mainly because of sharp increases in the period from 1793 and 1815.16

  Figure 3.17 shows the hyperinflations that were caused by the monetary policies of revolutionary regimes in France and the United States. The price trend in a more stable hard currency appears in the change in purchasing power of British sterling. Sources for Continentals are E. James Ferguson, The Power of the Purse: A History of American Public Finance, 1776–1790 (Chapel Hill, 1961); for Assignats, A. Bailleul, Tableau complet de valeur des Assignats (Paris, 1797); for British Pounds Sterling, B. R. Mitchell, British Historical Statistics (Cambridge, 1988).

  Those years were a period of war—not the dynastic quarrels of the mid-eighteenth century, but social upheavals that combined abstract appeals to high principle with savage violence such as the western world had not experienced since the crisis of the seventeenth century. Entire populations went to war with one another. In Russia, Canada and the United States, national capitals were looted and burned. In Spain, atrocities beyond imagining became commonplace during the Napoleonic Wars. Goya’s drawings captured the horror of war more powerfully than any western artist had done since Collot in the general crisis of the seventeenth century.

  The effect of war was to deepen the revolutionary crisis. Every age of glory in military history is an agony for ordinary people. So it was in the time of Napoleon and Nelson. The worst suffering came during the decade from 1805 to 1815, when after a brief interlude of peace the great powers went to war once again. Britain’s Royal Navy won mastery of the sea at Cape Trafalgar (1805), and the imperial army of France gained a hegemony on the European mainland in the battles of Austerlitz (1805) and Jena (1806).

  Thereafter the struggle changed. Two rival nations, each secure in its own sphere, turned to economic warfare. Britain imposed a vast blockade on Napoleonic Europe, while France closed the ports of the continent to British commerce. As the great wave approached its catastrophic climax, the two strongest nations in the western world went systematically about the business of wrecking each other’s economy. In this consummate act of human folly, markets were deliberately disrupted throughout western Europe. The price of food in Britain and France rose to unprecedented heights. Real wages plummeted, and poverty increased so rapidly that by 1812 more than half of all English families were dependent on some sort of poor relief.17

  The cost of economic warfare was a heavy burden even for noncombatants. The United States had flourished as a neutral trader from 1793 to 1805. Now its ships were seized by both Britain and France. The carrying trade of New England was destroyed, the staple commerce of the southern states was disrupted, and the United States was drawn inexorably into the vortex of war. Its economy slipped into a deep depression and yet prices soared, reaching their peak in the 1814 when commerce was at its lowest ebb. Massive surges occurred in the price of food and energy.18

  But the worst suffering was in the old world. In 1812 Napoleon recruited a huge army from his European dominions and sent it headlong to destruction in Russia. At the same time, the Peninsular War between Britain and France reached its climax of barbaric violence. Yet another war broke between the United States and Britain. Institutions everywhere were strained to the snapping point. The British government came the edge of insolvency in 1812; the American republic came close to disintegration in 1814. Finally it was the Napoleonic Empire that collapsed in bloody ruins.

  This general crisis, like those that had preceded it, was also an intellectual event. The certainties of the Enlightenment were destroyed by the disorders that overtook the Western world. Confidence in reason and progress was lost. Their apostles became martyrs.

  A case in point was the career of the Marquis de Condorcet, a kind, gentle, and highly principled gentleman-philosopher who embraced the Enlightenment, welcomed the Revolution, and became an early convert to its humanitarian ideals. He voted against the execution of Louis XVI and opposed the arrest of the Girondins. For those acts of humanity he was denounced as a traitor and driven into hiding, where as a fugitive he wrote an astonishing book called A History of the Progress of the Human Spirit. Pursued by the Jacobins, he lived like an animal in woods and abandoned quarries. Finally, he was caught by the peasants whose cause he had championed. Thrown into prison, abandoned by his friends, bleeding and in rags, this great apostle of progress took his own life on April 8, 1794.

  The melancholy fate of Condorcet was shared by the Enlightenment that he personified. The Revolution devoured not only its children but also its intellectual parents. During the period from 1790 to 1815, the dream of reason evaporated in the fires of war, and another mood began to dominate the intellectual life of the West. Its vehicle was the complex cultural ideology called romanticism, which had long been gestating in eighteenth century Europe. During the period from 1800 to 1815, romanticism rapidly gained strength and power, and became the d
ominant aesthetic movement in the western world.

  Romanticism was most of all a new epistemology. It valued feeling above reason, intuition above empiricism, and ambiguity above clarity. It tended to look backward to the past rather than forward to the future. It had little faith in reason or hope for human progress. In Europe it often expressed a mood of melancholy, drifting even to despair. Romanticism was Goethe’s sorrowful Young Werther, and the literature of Sturm und Drang. It was Stendhal’s tragic vision of society, and Wordsworth’s great escape into the company of clouds and daffodils. In America it was Poe’s tale of Gothic horror, Hawthorne’s scarlet letter, and Melville’s Captain Ahab. In England it was Byron’s Manfred and Childe Harold, hero-symbols of alienation from society and even from one’s self. The general crisis became a cultural revolution that transformed the values of the western world.

  The great wave reached its crest and broke with shattering violence during the Napoleonic Wars (1796–1815). With uncanny precision, prices reached their peak in each nation during the moment of its greatest military peril—Germany in 1808, Russia in 1812, Britain in 1812–13, the United States in 1814. The battles of Leipzig and Waterloo, Baltimore and New Orleans proved to be pivotal for the history of prices, as they were for politics and war.

  Thereafter, the secular trend suddenly broke and prices began to fall. This transition was not a clean and simple break. The new trend had barely begun when its progress was suddenly interrupted by one of the most severe moments of climate-stress in modern history. The years from 1814 to 1818 were marked by extremely harsh winters and cold wet summers. The worst came in 1816. In Europe, the summer of that year was cold, dark, wet and gloomy. A party of literati spent their ruined Swiss vacation indoors, writing horror fantasies that captured the prevailing mood. Mary Shelley invented Frankenstein and Lord Byron’s physician Dr. Polidori created The Vampyre. In the northern United States, 1816 was the “year without a summer.” Killing frosts occurred in every month, and crops were widely ruined. In Ohio folklore 1816 was called “eighteen-hundred-and-froze-to death.” New England remembered it as the Mackerel Year.

  Crop shortages were more severe in 1816–17 than in 1788, and food prices surged to high levels. But the cultural consequences were different than before. Grain poured into western Europe—Ukrainian grain from the new port of Odessa, American grain from Baltimore, Egyptian grain from Alexandria, Turkish grain from Constantinople. The growing integration of a global food market saved Europe from starvation.

  Governments had become more efficient in providing social welfare. As a consequence the poor did not starve in a period of scarcity. Mortality increased very little. In New England, the death rate actually declined during the coldest years.

  The new nation-states had also learned from hard experience how to control social violence before it reached the flashpoint of revolution. Standing armies, national guards, and new professional police forces throughout the western world prevented popular insurrections and food riots from overturning governments. The crisis of 1816 passed without major unrest.19

  After 1816 the weather improved, but the western world suffered yet another heavy blow. In the United States, a commercial panic began in 1819, and grew into a full-scale depression. Prices plummeted, pauperism increased, and unemployment became a more serious social problem than it ever been before. Once again, the new charitable organizations prevented starvation, and professional peacekeepers preserved order.

  Full economic recovery did not occur until the 1820s, a decade after Waterloo and half a century after revolutions had shattered the old regimes of many western nations. Only then did the crisis come to an end. A new equilibrium at last emerged.

  The Victorian Equilibrium, circa 1820–1896

  This new change-regime might be called the price equilibrium of the Victorian era. It coincided almost exactly with the life of Queen Victoria herself (1819–1901), and was closely linked to the cultural values that she represented. Its character was most clearly evident in Great Britain. Prices in that nation fell sharply from 1813 to the early 1820s, then fluctuated within a fixed range for more than fifty years. They fell again during the depression of 1873, and stabilized once more until nearly the end of the nineteenth century. There was no sustained inflation in Britain from 1820 to 1896.l

  Similar patterns also appeared in other nations, with variations that reflected their different histories. In Germany, prices came down rapidly during the period from 1815 to 1830. Thereafter, the general price level fluctuated on a flat plane for the rest of the nineteenth century. Here again, the equilibrium was not static. Every major political event in German history left its mark upon price movements. None changed the underlying pattern in a fundamental way, and some reinforced it.

  A case in point was the creation of the Zollverein, the customs union that began with a treaty between Prussia and Schwarzburg-Sondershausen (1819), and gradually expanded to include most of Germany by 1844. This economic union removed barriers to internal commerce, and created a more free and open national market. Between 1819 and 1844, prices in Germany became more stable than before, and more orderly even than in Britain.

  During the late 1840s, a period of bad weather and widespread crop failures briefly disrupted that stability, and caused a surge in prices through Germany and central Europe. These disturbances were partly responsible for the revolutions of 1848, which were set in motion by short crops and surging costs. After 1849, equilibrium rapidly returned.2

  Another period of price-volatility in Germany was caused by three wars of national unification: the Danish War (1864), the Austro-Prussian War (1866) and the Franco-Prussian War (1870). Prices rose sharply during these events. After 1871 they reverted to the general trend.3

  In the United States, the Civil War (1861–65) caused a burst of inflation that disrupted the underlying equilibrium, and departed from economic trends in Europe. In the northern states, the combined impact of the Civil War on supply and demand, marketing and manufactures, fiscal policy and the monetary system all combined to drive prices to higher.4

  An even greater disruption occurred in the southern Confederacy, which experienced extreme hyperinflation during the Civil War. So primitive was the economy of the slave states in 1861 that they lacked artisans with sufficient skills to engrave notes and bills. Lacking other resources, the Confederacy paid for the war by issuing unsecured paper currency: at first in small amounts and large denominations, later in many millions of little bills. Confederate dollars were so crudely lithographed that counterfeit money was detected by its superior quality. For a time, the value of this money was sustained by southern patriotism, and by high hopes of victory to come. As late as the spring of 1863, Confederate currency still held much of its value: the normal rate of exchange was two southern dollars to one Yankee greenback. After the Battle of Gettysburg, however, the exchange rate fell abruptly to four for one. Still, southern patriots continued to accept Confederate money at face value as late as 1865. The Confederacy never declared its notes to be legal tender; their value was a function of the loyalty of the people who accepted them. Nearly a billion dollars were issued during the conflict.5

  The Civil War and its painful aftermath were followed by rapid price deflation. By 1880 the effect of the war on American price levels had entirely disappeared. Thereafter, price trends in the United States rejoined the general equilibrium in the Western world. By the early 1890s, wholesale price indices in Britain, Germany and the United States moved almost as one.

  Figure 3.18 traces the movement of consumable prices in England from 1812 to 1914. A period of falling prices (1812–22) came after the crisis of the previous price-revolution. This deflation was followed by fluctuations on a fixed plane (1822–73), then by a second sharp deflation (1873–82), and yet another period of stability. The source is E. H. Phelps-Brown and Sheila Hopkins, “Seven Centuries of the Price of Consumables,” Economica 23 (1956) 740–41.

  The equilibrium of the Victorian era was
highly complex in its dynamics. Its underlying stability increased the visibility of many cyclical rhythms. There were harvest cycles in farm prices, inventory cycles in manufactures, and commercial cycles of many different lengths. There were diurnal cycles, weekly cycles, seasonal cycles, annual cycles, generational cycles and perhaps a fifty-year cycle. Many of these vibrations were highly regular in their complex cadence. As the equilibrium continued, the amplitudes of short-cycle movements (harvest fluctuations in particular) tended to diminish through time. This dampening process was typical of price equilibria in general, and very different from the expanding amplitudes that developed in price-revolutions.6

  Prices of specific commodities varied through space as well as time, but here again the variance tended to be highly stable and regular in its patterns. The price of grain was comparatively high in the urban-industrial heartland of western Europe and also in the more densely settled parts of the eastern United States. It was lower in central Europe and American midlands, and lowest in eastern Russia and the American West. This classic ring-pattern persisted through the nineteenth century, but differences between core and peripheral prices tended to diminish as world grain markets became more integrated.7

  Figure 3.19 surveys wholesale prices in Germany (1913=100), France (1901–10=100), and the U.S.A. (1910–14=100). The pattern was similar in all three nations: stable or declining prices from 1820 to 1896, punctuated by short surges of inflation (mostly war-related) that disrupted the prevailing equilibrium only for a few years. The sources are A. Jacobs and H. Richter, Die Grosshandelpreise in Deutschland von 1792 bis 1934 (Berlin, 1935); A. Chabert, Essai sur les mouvements des prix et des revenus en France de 1798 à 1820 (Paris, 1945); Historical Statistics of the United States (1976) series E40, 52.