The Monetary Origins of the Price Revolution' Before the Influx of Spanish-American Treasure: the South German Silver-Copper Trades, Merchant-Banking, and Venetian Commerce, 1470-1540

This paper seeks to provide a new and chiefly monetary explanation for the origins of the sixteenth-century era of sustained inflation (c.1520 - c.1640) commonly known as the Price Revolution'; and in particular it provides an answer to the question: not, as traditionally posed, why did the Price Revolution commence so early; but rather why did it commence so late? Beginning with the French philosopher Jean Bodin (1568) and culminating with Earl Hamilton and Keynes (1929, 1936), most economists and historians had attributed this sustained European inflation to the influx of Spanish-American treasure', chiefly silver from Peru- Bolivia and Mexico. But with advances in our knowledge of price history in the post-war era, economic historians pointed out that European inflation had commenced as early as the 1520s, some three decades before any substantial amounts of silver had been imported from the Americas. They therefore sought an alternative explanation: unfortunately, one that wrongly made population growth the prime mover' for inflation, with grave deficiencies in their economic theory. Most have confused a change in relative prices (e.g. a rise in wheat prices) with a change in the overall price level (CPI). Only one (Jack Goldstone) has sought to link population growth, and urbanization in particular, to monetary variables: i.e. to changes in payment structures and thus to the income velocity of money (or to changes in Cambridge k).gold, silver, bullion, mining, inflation, Price Revolution, public finance, Spanish America, South Germany, England, Venice, Antwerp.

South German Silver, European Textiles, and Venetian Trade with the Levant and Ottoman Empire, c. 1370 to c. 1720: A non-mercantilist approach

A recurrent and indeed persistent problem in European economic history – a veritable deus ex machina -- from medieval to modern times, is Europe’s supposed ‘balance of payments’ problem in trade with the ‘East’. This supposed problem has often been couched in Mercantilist overtones: namely, that export of supposedly large volumes of precious metals, especially, silver to conduct trade with, first the Levant, and then with the rest of Asia meant a serious drainage of wealth from western Europe. This seems to be particularly true in the debate about the late-medieval ‘Great Depression’ in which some contend that this balance of payments ‘deficit’ led to monetary contraction, deflation, and then economic depression. This paper, while not denying periodic problems of monetary contraction and indeed deflation, provides a non-Mercantilist perspective on not just European but global trade from the fourteenth to early eighteenth centuries. It offers the following related theses: (1) That late-medieval monetary contraction was far more related to falling outputs of mined silver and to reductions in the income-velocity of coined money and the related problem of hoarding, the roots of which were the growth of international warfare from the 1290s, significantly financed by coinage debasements; and together they provided serious barriers to the international flow of specie and bullion, and indeed to the emergence of bullionist philosophies, which are the very core of Mercantilism. (2) That, insofar as such monetary contractions did lead to deflation, that deflation, in augmenting the purchasing power of silver (gram for gram), provided the profit motive for the technological solutions to this very same problem: namely, innovations in both mechanical and chemical engineering that produced the South German silver-copper mining boom, which quintupled Europe’s silver supplies from the 1460s to the 1540s, when even cheaper supplies of silver were arriving from the Spanish Americas. (3) That South German silver-copper mining boom, controlled by German merchant bankers who also controlled the now thriving fustian-textile (linen-cotton) industry, had two related consequences: (a) it was a major factor in the revival and expansion of the European economy in general and the growth of the Antwerp market in particular, via new transcontinental trading routes from Venice through Germany to the Brabant Fairs, based on a tripod of English woollens, South German metals, and Portuguese spices. (b) at the same time, it promoted a great expansion in Venetian trade with the Levant, to acquire not only Asian spices but also large quantities of Syrian cotton to feed the booming German fustians industry. (4) While the 15th-century Venetian trade with the Levant did indeed require large amounts of silver, perhaps enough to pay for two thirds of goods acquired in the Levant, the 16th century commerce with not just the Levant but the far larger Ottoman Empire benefited from a very new trade: the exports of fine quality Venetian woollens. This paper examines the reasons for both the rise and fall of the Venetian cloth industry (5) While traditional explanations for the rapid decline of the Venetian cloth industry in the 17th century have focused on Venice’s own ‘internal faults’, this paper offers an alternative explanation: how England’s new Levant Company and the English cloth industries so successfully gained a major share of Ottoman and Persian markets, at the direct expense of Venice: through a combination of diplomacy and superior naval technology. Their success meant that even less silver was required to conduct this trade with the Ottoman Empire, than had been true for Venice. (6) A further major factor in the decline of Venice in the 17th century was the final loss of the Asian spice trades, which had involved close Venetian ties with the Ottomans, to the Dutch and the English, who succeeded where the Portugese had failed. That story in turn allows us, with much more ample data, to examine the nature of vastly larger ‘balance of payments deficits’, so that as much as 80 percent of Asian goods had to be acquired with silver. That silver came not from Europe but principally from the Spanish Americas. Thus the major thesis of the paper is that first the South German and then the Spanish American silver mining booms greatly benefited Europe by promoting a vast increase in truly global trade.Venice, Levant, Ottoman Empire, South Germany, Antwerp, Portugal, England, Asia, East Indies, balance of payments, gold, silver, international trade,

The Low Countries' Export Trade in Textiles with the Mediterranean Basin, 1200-1600: A Cost-Benefit Analysis of Comparative Advantages in Overland and Maritime Trade Routes

This paper challenges the conventional wisdom in European economic history that long-distance maritime transport was always more cost-effective than overland trade routes. Thus the majority of historians in the past century have attributed the rapid decline of the medieval Champagne Fairs, governing the textile trades between the Low Countries, northern France, and Italy, to the establishment of an effective and permanent' direct sea-route between Italy and north-west Europe from the early 14th century (though the first, a Genoese galley, can be dated to 1277). The paper concludes by examining the various factors and forces that led to a fall in transport and transaction costs in the international textile trades, via the overland routes, including river routes, between north-west Europe and the Mediterranean basin from the later 15th to early 17th centuries.

South German silver, European textiles, and Venetian trade with the Levant and Ottoman Empire, c. 1370 to c. 1720: a non-Mercantilist approach to the balance of payments problem, in Relazione economiche tra Europa e mondo islamico, seccoli XIII - XVIII, ed. Simonetta Cavaciocchi

A recurrent and indeed persistent problem in European economic history – a veritable deus ex machina -- from medieval to modern times, is Europe’s supposed ‘balance of payments’ problem in trade with the ‘East’. This supposed problem has often been couched in Mercantilist overtones: namely, that export of supposedly large volumes of precious metals, especially, silver to conduct trade with, first the Levant, and then with the rest of Asia meant a serious drainage of wealth from western Europe. This seems to be particularly true in the debate about the late-medieval ‘Great Depression’ in which some contend that this balance of payments ‘deficit’ led to monetary contraction, deflation, and then economic depression. This paper, while not denying periodic problems of monetary contraction and indeed deflation, provides a non-Mercantilist perspective on not just European but global trade from the fourteenth to early eighteenth centuries. It offers the following related theses: (1) That late-medieval monetary contraction was far more related to falling outputs of mined silver and to reductions in the income-velocity of coined money and the related problem of hoarding, the roots of which were the growth of international warfare from the 1290s, significantly financed by coinage debasements; and together they provided serious barriers to the international flow of specie and bullion, and indeed to the emergence of bullionist philosophies, which are the very core of Mercantilism. (2) That, insofar as such monetary contractions did lead to deflation, that deflation, in augmenting the purchasing power of silver (gram for gram), provided the profit motive for the technological solutions to this very same problem: namely, innovations in both mechanical and chemical engineering that produced the South German silver-copper mining boom, which quintupled Europe’s silver supplies from the 1460s to the 1540s, when even cheaper supplies of silver were arriving from the Spanish Americas. (3) That South German silver-copper mining boom, controlled by German merchant bankers who also controlled the now thriving fustian-textile (linen-cotton) industry, had two related consequences: (a) it was a major factor in the revival and expansion of the European economy in general and the growth of the Antwerp market in particular, via new transcontinental trading routes from Venice through Germany to the Brabant Fairs, based on a tripod of English woollens, South German metals, and Portuguese spices. (b) at the same time, it promoted a great expansion in Venetian trade with the Levant, to acquire not only Asian spices but also large quantities of Syrian cotton to feed the booming German fustians industry. (4) While the 15th-century Venetian trade with the Levant did indeed require large amounts of silver, perhaps enough to pay for two thirds of goods acquired in the Levant, the 16th century commerce with not just the Levant but the far larger Ottoman Empire benefited from a very new trade: the exports of fine quality Venetian woollens. This paper examines the reasons for both the rise and fall of the Venetian cloth industry (5) While traditional explanations for the rapid decline of the Venetian cloth industry in the 17th century have focused on Venice’s own ‘internal faults’, this paper offers an alternative explanation: how England’s new Levant Company and the English cloth industries so successfully gained a major share of Ottoman and Persian markets, at the direct expense of Venice: through a combination of diplomacy and superior naval technology. Their success meant that even less silver was required to conduct this trade with the Ottoman Empire, than had been true for Venice. (6) A further major factor in the decline of Venice in the 17th century was the final loss of the Asian spice trades, which had involved close Venetian ties with the Ottomans, to the Dutch and the English, who succeeded where the Portugese had failed. That story in turn allows us, with much more ample data, to examine the nature of vastly larger ‘balance of payments deficits’, so that as much as 80 percent of Asian goods had to be acquired with silver. That silver came not from Europe but principally from the Spanish Americas. Thus the major thesis of the paper is that first the South German and then the Spanish American silver mining booms greatly benefited Europe by promoting a vast increase in truly global trade.Venice; Levant; Ottoman Empire; South Germany; Antwerp; Portugal; England; Asia; East Indies; balance of payments; gold; silver; international trade; textiles; woollens; worsteds; Old and New Draperies; fustians; spices; cottons; maritime trade; ship-building; piracy

Scots law: a system in search of a family?

Presented as a paper at the Irish Association of Comparative Law, this article looks at the classification of legal systems into families and examines where, among the many different models, Scots law fits in

Money, prices, wages, and ‘profit inflation’ in Spain, the Southern Netherlands, and England during the Price Revolution era, ca. 1520 - ca. 1650

This article re-examines Earl Hamilton’s famous 1929 thesis on ‘Profit Inflation’ and the ‘birth of modern industrial capitalism’: namely, that the inflationary forces of the Price Revolution era produced a widening gap between prices and wages, thus providing industrial entrepreneurs with windfall profits, which they reinvested in larger-scale, more capital intensive forms of industry. Hamilton’s analyses of price and wage data for 16th- and 17th-century Spain, France, and England led him to conclude that: Spain had enjoyed virtually no ‘profit inflation’, since wages had generally kept pace with prices; and that early-modern England had experienced the greatest degree of such ‘profit inflation’. Such a contrast in their national economic experiences helps to explain, in Hamilton’s view, why Spain subsequently ‘declined’, while England became the homeland of the modern Industrial Revolution. A major reason for the significance and fame of the Hamilton thesis was its enthusiastic endorsement by John Maynard Keynes, in his Treatise of Money, published the following year, in 1930. Subsequently, the Hamilton ‘profit inflation’ thesis was subjected to severe attacks: by John Nef (1936-37) and David Felix (1956). But they had to rely on the same dubious and indeed often untrustworthy price and wage data for England and France (and of course on Hamilton’s data for Spain, which was of much higher quality). Both rightly noted that the proper comparison had to be made between industrial wages and industrial prices, not the price level in general. Since industrial prices generally rose less than did the overall price level (heavily weighted with foodstuffs), they found much less evidence for ‘profit inflation’ than had Hamilton. Nef developed a counter thesis to argue that sharply rising raw material costs, especially for wood and charcoal, forced industrialists to devise new furnace technologies to burn coal instead of wood or charcoal: changes that not inly reduced such costs but resulted in much larger-scale, more capital-intensive forms of industry. In this revised paper, I offer new data to demonstrate that neither the ‘energy’ nor the new furnace technologies took place until after the 1640s. This study is based on newer sets of price and wage indices that appeared after their publications: those by Phelps Brown and Hopkins for England (which I have modified, after using their data sheets in the LSE Archives), and for this version, additional price date for England. For the southern Netherlands, I have utilized Herman Van der Wee Consumer Price Index. My analyses of both industrial prices and industrial wages suggest that, for England, there is more evidence for potential ‘profit inflation’, in some industries, than Nef or Felix had been willing to concede. But the major discovery was that the Antwerp region continuously experienced, over the 16th and 17th centuries, the contrary phenomenon: what Keynes had called ‘Profit Deflation’ (for him, a truly negative force), in that industrial wages rose faster than industrial prices. And yet indisputably the southern Netherlands had a much more industrialized and more rapidly growing economy than did England, at least until the Revolt of the Netherlands (1568-1609). The concept of ‘profit inflation’ is not, therefore, a useful analytical tool, if based only on labour costs. This study concludes with a brief examination of the effects on inflation on two other factor costs: land, in terms of real rents, and capital, in terms of real interest rates, which did fall with inflation. In all likelihood both such costs did lag behind industrial prices in early-modern England and the Low Countries (and contrary to Eric Kerridge’s 1953 assertions on English rents), though real interest rates lagged more than did real rents. While disputing the Nef thesis, I do analyse the forms and nature of other new, larger-scale industries in this era (mining, metallurgy shipbuilding). I also provide a new appendix on the role of coinage debasements, as an another important monetary factor in determining regional differences in inflation rates; and this contradicts the almost universal assumption that debasements were irrelevant.gold and silver bullion; money; coinage; Price Revolution; prices; consumer price indices; nominal and real wages; building craftsmen; masons; industrial products; profit-inflation; deflation; Spain; France; England; Netherlands