Altogether, Wilhelm Abel observes from long and careful study that “Long-term trends in the price of grain . . . cannot be explained adequately by fluctuations in the circulation of money, though that has been attempted since the time of Jean Bodin (1568). Even when improved forms of the simple quantity theory are summoned to the rescue, the discrepancies of time apparent in the course of the price movements remain inexplicable.”10
In short, a monetary model is a necessary and important part of any causal explanation of price-revolutions, but it is not a sufficient explanation. Monetarism alone won’t do.
A second causal explanation is the Malthusian model, which centers on imbalances between economic and demographic growth. Here again, the approach of Malthus has much to teach us. Correlations between price-movements and population-growth are strong in most periods of world history. Many historians (not all of them) believe that a Malthusian model closely fits the evidence of the medieval price-revolution, and especially the general crisis of the fourteenth century. Some apply it with equal confidence to the general crisis in Europe during the seventeenth century, and to Africa in the twentieth century.
But most scholars also agree that for the period after Malthus published his Essays on Population (1798), his model no longer fits the historical facts in the Western world. From the late eighteenth century to our own time, European crises tended to develop from structural imbalances and systemic instabilities long before Malthusian “positive checks” came into play. This difference suggests that population pressures operated in conjunction with other factors that a Malthusian model alone does not consider. Malthusian (and neo-Malthusian) approaches help to make sense of many aspects of the problem. Like monetary models, they are a necessary part of any explanation of price-revolutions, but insufficient to the general explanatory task at hand.
Third, Marxist explanations are still favored by many academic historians in America and Europe, even after the collapse of Marxism as a ruling ideology throughout the world. At first glance, some parts of the wave-pattern seem to fit a Marxist frame. Changes in systems of production had a major impact on movements of prices, wages, rents and interest. Also, the imbalances that developed in each great wave rose in part from class-differences, and engendered class-conflicts in their turn. These patterns were strong in the late medieval and early modern eras. Many scholars, Marxist and non-Marxist alike, believe that the climax of the medieval price-revolution was part of a “crisis of feudalism” and a shift from one stage of production to another. Others have offered similar interpretations for the price-revolution of the sixteenth century, and some have tried to make sense of the long wave of the 20th century as a crisis of capitalism.
On closer scrutiny, however, major difficulties appear in the Marxist model. Tests of chronology show that the four waves of the modern era do not sit comfortably with the three systems of production that dominate Marxist analysis. Patterns such as “price scissors” which Marxist scholars believe to have been caused uniquely by the “crisis of feudalism” also appeared in every price-revolution. Events in the twentieth century that Marxists called the crisis of capitalism were a total catastrophe for socialism. Capitalist systems survived them; socialist systems collapsed.
Further, much of the historic role that Marxists assign to systems of production belongs to structures of exchange, and other material and cultural relations. Altogether, price revolutions and price-equilibria do not correlate with Marxist models of change in the organization of the means of production.
Marxist models remain heuristically useful in many ways. They prompt us to remember that history is about all humanity, not merely small elites. They remind us that class-relations are an important part of our problem, and they teach us to think in terms of long processes and large systems. But in conceptual terms, Marxist models are too narrow. In terms of chronology and historical fact, they are also mistaken.
A fourth model seeks an explanation for long waves in rhythms of agricultural production. The leading work is that of Ernest Labrousse, who argued that price fluctuations in the French economy were driven by the size of harvests, in which short crips sent up the price of grain, reduced the income of farmers, and caused the poor to spend a larger part of their meager wages on bread. These factors were thought to have caused the market for industrial goods to shrink, and to have created a general depression, which continued until better harvests brought lower prices and recovery. Other agrarian models of high complexity have been developed by the great German scholar Wilhelm Abel.11
This approach has many strengths. It works best for the time and place where it was invented: the history of rural Europe from the sixteenth to the eighteenth centuries. It helps to explain the movement of price-relatives, rents and wages in every price-revolution, and adds to our understanding of that distinctive combination of hard times and high prices which occurred in every general crisis.
But it does not work for the great wave of the twentieth century, or for North and South America in the early modern period. Another major weakness is its difficulty in explaining why harvest variations had very different consequences according to their timing within each great wave. Scarcities in early stages of a price-revolution, and in periods of price-equilibrium, did not have results as catastrophic as in periods of general crisis. The short harvests of the 1690s, though very severe, had nothing like the consequences of scarcity in the 1780s. To account for these disparities, one must move beyond the boundaries of an agrarian model.12
Yet another explanation might be sought in models of neoclassical economics, and especially in its laws of supply and demand. This approach is helpful in many ways. The rise and fall of prices may be understood as commonly the result of changes in levels of aggregate demand. Monetary models also have a neoclassical foundation, in their organizing idea of money as a commodity whose value fluctuates inversely with its supply. In these and other ways, neoclassical models have much to teach us about how a price-system works.
They are less successful in explaining why its workings change from one historical period to another. They help us to think clearly about price-movements as a function of supply and demand, but they do not explain why demand changes. They can help to model a great wave, but they cannot tell us why it begins, or why it develops its distinctive wave-structure, or why it suddenly comes to an end.
A French scholar observes from long experience that no historical problem of the long durée can be solved by economics alone. One might equally say that it cannot be solved by history alone. History and economics must advance together, if either is to advance at all. The nomothetic methods of economic theory and the idiographic tools of historical inquiry are complementary.13
Another approach to our problem is broadly ecological. It holds that great waves were set in motion by changes in environmental conditions. Many scholars through the years have tried to link changes in the earth’s climate and solar activity to price movements and general crises. Recently in climate-history, there has been much learned discussion of a cold period in the fourteenth century, of the Maunder minimum and solar flares during the seventeenth century, and of the “Little Ice Age” in the late eighteenth and early nineteenth centuries.14
All of these episodes appear at first sight to correlate with our major periods of crisis in Europe, and also in Asia, Africa, America and Oceania. Earlier global crises of the same sort have also been identified by ancient historians and paleontologists. Further research may reinforce them.
But in the modern period, ecological models run into difficulties when they are studied in detail. Chronology is the critical problem. The European crisis of the seventeenth century, for example, overlapped with the period of the Maunder minimum, but began fifty years earlier. In the late seventeenth, eighteenth and nineteenth centuries, the several distinct cold periods that are collectively called the Little Ice Age show a strong correlation with short-run fluctuations, but not with secular trends. In 1979, a gathering of meteorologis
ts, paleobotanists, chemists, physicists and historians at Harvard University generally concluded that changes in climate do not correlate closely with long-term economic change.15
Beyond doubt, climatic events were precipitants of crisis in 1315, in the 1590s and in the 1780s. They also functioned as powerful catalysts at various points in the wave sequence. But in light of present knowledge, environmental changes do not appear to have been the prime-movers of price movements in the modern era. This may change with further research, but at present ecological models are more useful in explaining fluctuations around the central trend, than in accounting for the trend itself.
Finally, there are historicist models which seek to explain things in their particulars. They begin with the idea that each historical event is unique, and seek to explain it in terms of special circumstances, distinctive details, and inner complexities. When historicists try to put the pieces together, they use a method of aggregation without generalization. The classic example was British historian H. A. L. Fisher who asserted that all of history is one great fact, about which there can be no generalization.
On the subject of price-revolutions, historicists have helped us to understand that each great wave was a unique event, and that details made a difference. But historicism cannot explain a general pattern that has recurred many times since the middle ages.
Each of these seven causal strategies helps to explain important aspects of our problem. None suffices to resolve it. The explanatory task at hand requires another approach which might combine their strengths and correct their weaknesses. Somehow, such an explanation should integrate ecological, demographic, social, monetarist and economic factors. It should do so without dissolving into an indiscriminate pluralism, or degenerating into ad hoc explanations. It should account for both similarities and differences between price-revolutions. How might this be done?
Another Causal Model: Autogenous Change
One promising possibility centers on the internal dynamics of price-revolutions themselves. It begins with an idea of a culture as a complex web of causal relationships which link material structures, cultural values, and individual actions. It also builds upon an idea of history as a sequence of contingencies, in the special sense of people making choices, and choices making a difference. Two vital elements in this approach are ideas of contingency and choice.
Let us begin in the late stages of a price equilibrium, when prices are more or less stable, real wages are rising, rents and interest rates are falling, social stability is increasing, material conditions are improving, and cultural expectations are growing brighter. In these periods, people begin to make major choices in different ways. They decide to marry earlier. They choose to have more children. They also make economic decisions in a different way, expanding the scale of their ambition and the scope of their activity. These choices are made not entirely or even primarily for reasons that can be explained in material terms, but because of changes in cultural mood and expectation.
The result of these choices is that aggregate demand grows more rapidly than supply. As it does so, the general price-level begins to rise. Some prices increase faster than others. Food, energy, and shelter lead the trend, partly because their supply is less elastic, and partly because demand grows more rapidly for life’s necessities. The prices of industrial products increase more slowly, because they are more easily produced in greater volume. Price relatives show their distinctive patterns. Rents and interest rates begin to climb, as demand grows for land and money. Real wages keep up at first but then begin to lag behind, partly because population growth has expanded the supply of labor, and partly because the dynamics of change favor people with positional goods.
For a time these trends develop within the same range of fluctuations as in the preceding period of equilibrium. When they move beyond that range, and become visible as a new secular trend, individuals and institutions make another set of decisions. By and large, they respond to inflation by making individual and collective choices that cause more inflation. The stock of money is deliberately enlarged to meet growing demand. Capitalists charge higher rates. Landlords raise the rent. Real wages fall farther behind. The cultural mood begins to change in a new way; there is a growing sense of material uncertainty and moral confusion.
The combined effect of these tendencies is to create growing imbalances within the cultural system. As returns to capital rise, and returns to labor fall, inequality increases in the distribution of wealth and income. These inequalities in turn create a problem of poverty and homelessness. They put a heavy strain on social relationships and intensify class conflicts.
This leads to another set of choices. Everyone tries to find a measure of protection or to profit from changing circumstances. People who possess power and wealth are best able to do so. For example, they demand tax-reductions and often receive them. Taxation becomes more regressive and public revenues fall behind expenditures. Fiscal imbalances develop. Public deficits increase, the cost of debt service rises, and governments are reduced to near-insolvency, and the springs of public action are weakened. The cultural mood changes once more, with a growing awareness of limits on human effort and a spreading sense of social pessimism—even social despair. Other imbalances begin to have similar consequences as people exercise choices in different ways.
These imbalances create instabilities. Prices surge and decline in swings of increasing amplitude. Markets of many kinds—capital markets, commodity markets, labor markets—become dangerously unstable. Production and productivity decline or stagnate, while prices continue to rise; together these trends create stagflation. Political instability increases, and with it comes social disorder, internal violence and international war. The cultural system becomes dangerously unstable; internal conflicts of value and identity grow more intense.
Things are specially hard for young people, who find it difficult to get good jobs, or start a family. They also have choices to make. Some decide to have children anyway, outside of marriage. The proportion of children born and raised outside marriage increases rapidly. Other young people turn against social institutions, or merely turn away from them. Crime increases. The consumption of drugs and drink goes up. People of age and wealth have very different experiences, and do not understand why their own children are so troubled. But the young and the poor, especially the working poor, are driven to despair.
Finally, a triggering event that might have caused a minor disturbance in another era creates a major crisis. The trigger itself might be a change in the weather—the heavy rains of the early fourteenth century, or the cold years of the eighteenth century, or drought in the twentieth century. It might be an epidemic or a war. It could be a malevolent monarch, or an incompetent president, or an irresponsible demagogue, or a dictator who is driven only by his own malevolence. More often—and most dangerously—it is a combination of disasters. Whatever they might be, these small events have sweeping consequences. They disrupt a cultural system that is dangerously unstable.
They tend to do so by straining the social fabric in several different directions at once. Established social fabrics are very strong and tough, and tenacious of their being. They are also highly resilient, and commonly deal successfully with stress. The danger comes when they are stressed in several ways at once. This is what happens in moments of general crisis. The result is a protracted period of political disorder, social conflict, economic disruption, demographic contraction and cultural despair.
This general crisis relieves the pressures that set the price revolution in motion. Afterward, the economic trends run in reverse. Demand falls and price-deflation follows. Real wages begin to rise. Interest and rent fall. Inequality continues for a time (the lag of effect of the last change-regime). There are other lag-effects, as people continue for a time to think in terms of the preceding period. But the new trends quickly take hold. As they do so, equality increases a little, or at least ceases to grow greater. A period of equilibrium develops, and the cul
tural mood becomes more positive. Population increases, and aggregate demand begins to grow. The pattern begins again.
Each of these stages develops from a sequence of choices that are framed by environing conditions. The choices are freely made, but they become part of the context for the next set of decisions. The interaction of individual choices have collective consequences which nobody intends or desires. This is specially so in the later stages of price revolutions. In a free market, individual responses to inflation commonly cause more inflation. Individual defenses against economic instability cause an economy to become more unstable.
This process might be called the irrationality of the market. It is so in the sense that it converts rational individual choices into collective results that are profoundly irrational. Far from being a benign or beneficent force, the market when left to itself is an unstable system that has repeatedly caused the disruption of social and economic systems in the past eight hundred years.
In important ways, the structure of this contingent process has changed through time. The balance between individual and institutional choices has tended to shift, and causal patterns have become more complex. The earliest wave in the thirteenth century was primarily a matter of population pressing against resources. In the second wave, monetary factors became more powerful and added strongly to demographic pressures—a tendency that Bodin and others were quick to notice. The third wave added yet another layer of institutional complexity in structural determinants such as the Speenhamland system, the banking system and securities exchanges, and also more complex dynamics of population growth and accelerating economic growth. The fourth wave contributed other layers of institutional complexity in regulatory floors without ceilings, administered prices, competitive inflation, wage-price spirals, other things.
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