The Great Wave
The Great Wave

The Great Wave

These great waves were punctuated by periods of a different nature—when prices fell a little, then found an equilibrium and fluctuated on a fixed plane. (Location 295)

Economists in the United States also have little memory of these historical events, except for the price-revolution of the sixteenth century, which is distantly remembered as proving the truth of the axiom that inflation is “always and everywhere primarily a monetary phenomenon,” as the American economist Milton Friedman wrote in another context. (Location 323)

All major price revolutions in modern history began in periods of prosperity. Each ended in shattering world-crises and were followed by periods of recovery and comparative equilibrium. (Location 367)

This growing gap between returns to labor and capital was typical of price-revolutions in modern history. So also was its social result: a rapid growth of inequality that appeared in the later stages of every long inflation. (Location 628)

price-revolution entered another stage, marked by growing instability. Prices rose and fell in wild swings of increasing amplitude. Inequality increased at a rapid rate. Public deficits surged ever higher. The economy of western Europe became dangerously vulnerable (Location 647)

to stresses that it might have managed more easily in other eras. (Location 649)

Production and productivity fell for both land and labor. Many were driven to the margin of subsistence.43 (Location 652)

The same combination of rising wages, falling rents and falling interest rates also appeared in every period of price equilibrium from the fifteenth to the nineteenth centuries. (Location 971)

This was a difficult time for people who lived on rents and interest. But for most ordinary folk who earned their bread by daily labor, life was better. (Location 978)

The growing gap between returns to labor and rewards to capital was one of the most important social consequences of inflation in the sixteenth century. (Location 1283)

The real wages of artisans and laborers fell farther behind the cost of living, while returns to land and capital continued to advance. (Location 1471)

Another consequence of scarcity was an increase in crime. The pattern was much the same as in the fourteenth century. (Location 1504)

At the same time that mortality increased, rates of fertility declined. From northern Germany to southern Spain, the number of inhabitants fell sharply after a long period of growth. In the cathedral of Toledo a clergyman named Sancho de Moncado studied his baptismal registers and found that the number of births dropped from the mid-sixteenth century to 1617 by 50 percent. (Location 1522)

Needy governments resorted to all the usual forms of fiscal folly. Some tried deficit financing on a large scale. Others systematically debased their coinage. (Location 1560)

The pace of price-inflation was greater this time, but the magnitude of price fluctuations was less extreme than in the medieval price-revolution. (Location 1607)

Some historians of agriculture have perceived this period as a time of rural depression. So it was at the start. Reports from the European countryside told a story of falling farm prices and growing poverty among landowners. (Location 1636)

But throughout the period from 1650 to 1730, returns to labor slowly increased. (Location 1640)

In England by the year 1735, the yield on long annuities sank as low of 3 percent. Dutch commercial loans drifted downward to 2 percent or even less in this period. (Location 1651)

this great movement began primarily because the acceleration of demand outstripped the increase of supply. (Location 2764)

Confidence in open, democratic institutions was weakened fatally in central Europe. These economic (Location 2824)

which in economic terms was an unstable combination of private ownership and public control, feudal fiefdoms and bureaucratic regulation, national autarchy and international conquest. (Location 2854)

In the immediate postwar years, inflation increased to double-digit levels—high by the measure of the American experience, but low by comparison with contemporary trends (Location 2891)

Those who believe that “price controls don’t work,” even in the short run, will find strong evidence to the contrary in the history of the American economy during World War II and the Korean War. (Location 2913)

found itself queuing up in long nerve-jangling lines. (Location 2923)

First came a meteoric rise in prices. . . . Gradually the store shelves began to fill; within months of the election of 1946, steaks and roasts were no longer drawing crowds. (Location 2925)

now refused to budge except for nickels. But the public was learning to live with inflation.”17 (Location 2927)

Institutional responses to rising prices reinforced inflation more powerfully than in earlier waves. (Location 2936)

The creation of regulatory floors without ceilings accelerated a dynamic process called the wage-price spiral by conservatives, and the price-wage spiral by liberals. (Location 2948)

International cartels pursued the same policy where they were able to do so. (Location 2951)

The impact on prices was the same. Wherever supply was held down, prices tended to rise. (Location 2954)

They discovered that they could increase profits and expand market-share by degrading their product, advertising relentlessly, packaging it in a different form, and raising its unit price. (Location 2959)

Market competition remained strong among candy-makers—in some respects, stronger than ever before. But it was no longer primarily price competition, and its effect on prices was the reverse of what neoclassical economic theory would lead us to expect. The more competitive the candy market became in America during the twentieth century, the more prices rose.20 (Location 2967)

The Johnson administration decided to expand public spending for social welfare in the United States and simultaneously fight a major war in Southeast Asia, without a large increase in taxes. (Location 2994)

the rapid increase of world population and the growth of aggregate demand were the primary cause of price increases. (Location 3002)

But it could not keep up with demand. (Location 3003)

When it fell below that level, as it did from time to time, inflation subsided. (Location 3004)

When the unemployment rate fell below 6 percent, the rate of inflation advanced more rapidly. (Location 3005)

But inflation did not end. Consumer prices continued to climb, and by 1968 the buoyant American economy began to boom again. (Location 3012)

The recession of 1968–71, writes economist Robert Gordon, combined “the worst of three worlds.” One might say that it combined the worst of five worlds. (Location 3018)

In fact, stagflation had happened in the later stages of every price-revolution from the thirteenth century to our own time. (Location 3022)

Short-term price and wage controls had worked well in recent applications. (Location 3043)

These acts were not unprecedented. Twice before the Arab states had tried to use oil as a strategic weapon. Twice the United States had stabilized prices by drawing on its vast petroleum reserves. (Location 3059)

Prices and wages were held ruthlessly in check by the instruments of a totalitarian state, but state planners were not able to restrain the pressures of aggregate demand. (Location 3097)

Suddenly, the world found itself awash in oil. Energy prices fell sharply, and petroleum-producing regions such as Texas and Alberta fell into deep depressions. (Location 3117)

After the crash, the confidence of investors collapsed, and the stock market was unable to serve its primary economic function of mobilizing capital for investment. (Location 3160)

It was marked by excess capacity and plummeting commodity prices. (Location 3165)

Everywhere in the world, established orders came under heavy strain. (Location 3352)

The result, as we have seen, was price-rationing in capitalist countries and state-rationing in the communist nations. (Location 3371)

The events of the late twentieth century increasingly resembled price-revolutions in the past. Once again, world systems were in crisis. This was a crisis not only in the conventional sense of a time when things hang in the balance. (Location 3420)

Rates of population-growth were plummeting throughout the world. Total numbers of people continued to rise, but rates of gain were coming down. (Location 3423)

collapse of overvalued security markets could cause panic, depression and deep deflation. (Location 3442)

We found evidence of four price-revolutions since the twelfth century: four very long waves of rising prices, punctuated by long periods of comparative price-equilibrium. (Location 3487)

All had a common wave-structure, and started in much the same way. The first stage was one of silent beginnings and slow advances. Prices rose slowly in a period of prolonged prosperity. Magnitudes of increase remained within the range of previous fluctuations. At first the long wave appeared to be merely another short-run event. Only later did it emerge as a new secular tendency. (Location 3490)

Food and fuel led the upward movement. Manufactured goods and services lagged behind. These patterns indicated that the prime mover was excess aggregate demand, generated by an acceleration of population growth, or by rising living standards, or both. (Location 3494)

The first stage of every price-revolution was marked by material progress, cultural confidence, and optimism for the future. (Location 3498)

commonly wars of ambition that arose from the hubris of the preceding period. Examples included the rivalry between emperors and popes in the thirteenth century; the state-building conflicts of the late fifteenth and early sixteenth centuries; the dynastic and imperial struggles of the mid-eighteenth century; and the world wars of the twentieth century. (Location 3500)

The third stage began when people discovered the fact of price inflation as a long-term trend, and began to think of it as an inexorable condition. (Location 3504)

Prices went higher, and became highly unstable. They began to surge and decline in movements of increasing volatility. (Location 3508)

Government spending grew faster than revenue, and public debt increased at a rapid rate. In every price-revolution, the strongest nation-states suffered severely from fiscal stresses: Spain in the sixteenth century, France in the eighteenth century, and the United States in the twentieth century. (Location 3509)

Returns to labor declined while returns to land and capital increased. The rich grew richer. (Location 3512)

Finally, the great wave crested and broke with shattering force, in a cultural crisis that included demographic contraction, economic collapse, political revolution, international war and social violence. These (Location 3518)

This short but very sharp deflation was followed by an era of equilibrium that persisted for seventy or eighty years. (Location 3520)

Real wages began to rise, but returns to capital and land fell. (Location 3522)

All were marked in their later stages by the emergence of ideas of order and harmony such as appeared in the Renaissance of the twelfth century, the Italian Renaissance of the quattrocento, the Enlightenment of the early eighteenth century, and the Victorian (Location 3527)

Second, as rates of change increased, a larger proportion of total price gains became concentrated in the later stages of each price-revolution. (Location 3539)

Fourth, from one wave to another, the final stage of cultural crisis became progressively less catastrophic. (Location 3548)

it became more sweeping in its social consequences. (Location 3553)

Every general crisis caused a social revolution, and the radicalism of these events increased through time. (Location 3553)

Every general crisis in modern history has improved the condition of ordinary people. It has also enlarged ideas of human dignity, freedom, and the rule of law. This tendency has become more powerful in each successive wave. (Location 3560)

climax was followed by a fall of prices, recovery of stability, and a long period of comparative price equilibrium. (Location 3563)

well for middle and later stages of price revolutions, but badly for early stages, and for periods of price equilibrium. (Location 3584)

In the late stages of every price-revolution, and especially during general crises, rates of homicide increase sharply in surges that correlate closely with price movements. (Location 3732)

A free market restores equilibrium only to break it down again, and to set in motion a new sequence of imbalances and instabilities with all the troubles that follow in their train. (Location 3767)

Markets today are highly regulated and actively manipulated by both public and private instruments. The real question is not whether we should interfere with the market, but what sort of interference we should make, and who will make it, and what its extent will be. (Location 3771)

open elections, and also hopes regulate its economic decisions by the operation of the free market, is specially vulnerable to the effect of unstable prices. (Location 3785)

Justice’s “real money” is money of exchange. It is issued by virtually all sovereign states and consists of coins and paper that pass physically from hand to hand. Justice’s “imaginary money” is called money of account. It exists only as an idea, and is used in bookkeeping and credit transactions. (Location 4262)

Opinion on the right holds that the modern social welfare system is largely responsible by paying unmarried women who have babies, and by giving them more (Location 4592)

Observers on the left believe that the cause is poverty and exploitation of the poor by the institutions of “late capitalist society.” (Location 4593)

general decline in the structure of “family values,” (Location 4594)

The three long surges in births outside of marriage all coincided with price revolutions. (Location 4631)