The historical perspective

Nothing new under the sun

H.C. Allen

Historians have long fallen from their high estate as society's chief priests. of political (let alone economic) diagnosis and prognostication. History itself is no longer regarded merely as 'past politics': even less is there much interest in the views of historians about present politics. The more instant arts of Economics, Sociology, Politics and their like alone command the public ear.

Historians must themselves bear a goodly measure of the blame for this situation, as they must for the analagous decline in the popularity of their subject as an academic study. Increasing specialisation and reluctance to take the long and broad view; a desiccating, if at first sight laudable, determination to seek an ever more elusive, and arguably sterile, impartiality; a tendency, particularly perhaps in Britain, to maintain the view that the closer events come to the present (when they become most important to us and to our understanding of the future) the less they are a respectable subject for historical analysis; and a deep distaste, even in their personal capacity., for sullying their professional reputation by trying to apply 'the lessons of the past' to the possible events of the future — all these things have robbed us, and rightly, of general attention and credence. Even economic historians, who, especially, ought to know better, have of late all too often combined the theoreticism of the economists with the disdain of the historians, for what they regard as not far removed from necromancy.

This is a pity, because many of our present prophets, most notably the economists (and especially those deeply addicted to their models), sadly lack the perspective which only the study of long periods of human history can give. Even the Economist, by no means normally a sinner in this respect, when (on July 13) analysing the current inflation and concluding that in modern British history 'periods of falling prices have been more common than periods of rising ones,' started its analysis from the year 1661. This is admittedly a pretty good stretch of time, and the choice of date is very understandable, as it was the seductive point at which the statistics beloved of economists ceased to be more than 'a bit unreliable.'

Yet it is also very odd indeed (sub specie, if not aeternitatis, at least saecuiorum) to begin such an analysis just after, or even just in, the very last gasp of the only near-universal inflation in modern history which can compare in intensity, duration and traumatic effect with that which we are now enduring — the so4called price revolution which began in the sixteenth century. For bur economic historians to neglect the possible parallels in this historical precedent is, surely a species of trahison des clercs.'

As a historian ignorant in economics and incompetent in economic history, I waited with bated breath for their professional reflections on this, urgent theme. In vain. So this fool feels he must-rush in where angels fear to tread. though such an amateur esquisse must be very much a second best.

It was in fact a casually begun, sun-bound, ship-board conversation with a coincidentally encountered colleague expert in Tudor social and economic history which prompted these thoughts. I was reflecting on the thesis I had recently heard advanced by Professor Mundell, the Canadian economist, that it was the final American dissociation of the dollar from gold by the Nixon administration which had loosed the pres.mt inflationary flood, because it had removed, the last restraint (other than that rare political virtue, self-restraint) on the capacity and desire of governments to satisfy the economic aspirations of their constituents by the uninhibited use of the printing press. It is, he said, the first time in history when there has been no real and practical limit to the amount of money which can be put into circulation: the sky is now the limit for fhe ,money supply, which has never really been the case before.

This seems to be true, but only just. In the sixteenth century it certainly appeared to men, and especially to the Spaniards (who controlled a huge proportion of the production), that the supply of new gold and silver from `the Indies' was virtually, if not absolutely, unlimited. The original (and supposedly, in enlightened Keynesian days, primitive) quantity theory of money ascribed the prodigious rise in prices at this time to that enormous and unprecedented increase in the supply of precious metals (that is to say the money supply) from the New World.

The classic history of the subject by Earl Hamilton refined this theory a good deal by

pointing out that it was as much, if not more, the economic uncertainty caused by the frequent — and of course deliberate — Spanish debasements of the coinage, to meet government needs, by the use of excessive quantities of base metals in the currency (a process as mysterious to the consumer in the sixteenth century as that of periodic governmental increases of the money supply by the printing press is to the consumer at the present day). that was responsible for the monetary inflation, in which there almost always appears to be an important psychological element as well. Was there not here, one asked oneself, a remarkably close analogue to the modern theories which ascribe our inflationary WS, almost wholly to an excessive supply of rnoneVi, A little trio self-satisfied no doubt, I advance" this next proposition to my shipmate, only to, receive a complacency-chilling douche or sea-water in reply, to the effect that no one no‘v accepted Earl Hamilton's somewhat naive theory as a sufficient explanation of the Price Revolution. Recent writings on the subject appear (he confessed that one at least of the writers he found it impossible to comprehend) to give much more weight to the significance in the sixteenth century of heavily increased pressure of growing population on scarce resources fa demand-inflation explanation which fits much better into the orthodox Keynesian mould) as the basic cause of the rise in prices. The cold sea-water stimulating no doubt as well as deflating, one then began to think that this in fact fell rather well into place as the counterpart of the other modern argument that it is 3 scarcity of world commodities relative to vvori.d population and above all to effective econotrur demand, especially as a result of modern demotratic popular processes (particularlY through organised trade unions) for demanding the satisfaction of men's ever-expanding economic aspirations, which is the fundamerl; tal cause of that world-wide epidemic inflation of which Britain has been and is experiencing so bad a case. One of the unhappy results of the way (verY seldom wholly rational) in which our fallible human minds work is the almost irresistible tendency to over-simplify our arguments. And the more theoretical and the less practical (tri,e, more model-based rather than fact-basew those arguments — which often means the more we forget that economics is about peoPle — the more rigid and monolithic they tend to become. One thing historians ought to be able to bring home is that great, and even little' events are almost never (as one says to one's, students, 'almost never say never') the result ol single, simple causes. But it may perhaps ,_h! cogently and yet realistically argued, on to! basis of the sixteenth-century experience, the'. the presence of two such prime movers as ad strongly sustained, if quite widely — indee wildly — fluctuating increase in the moneY., supply on the one hand, and a severe shortage °I :esources relative to a rapidly growing effective demand on the other, can be quite sufficient, in combination no doubt with other if lesser factors' to produce a price revolution such as We at currently undergoing. This would seem to indicate — it is hardlY revelation, but it may help — that a process ° simultaneously tightening the money stIPPIY' increasing production (i.e. realising resourcel and accepting an at least temporarily reduce , standard of living and very much reduce°. economic aspirations, is necessary to any Or' of real recovery from the inflationary disease. These may be said, however, and rightly, to be somewhat generalised, in fact pretty amorphonS' economic lessons to be learned, on the positive side, from our historical experience. What strikes one as considerably more pointed and vastly less vague is the negative lesson of the great inflati01,1 of the sixteenth century, which is that it ushere in one of the most turbulent and tragic periods in modern history.

The phenomenon is a very complex one'

seedless to say, but there' is not much doubt that the rise in prices played a large and, as the years pasSed, increasing part in that series of !Iternecine and international wars and disturtuances which continually rent the countries of ,.,',.11r,oPe in the period between the French Wars Religion in the second half of the sixteenth elltarY and the Thirty Years War in Germany In the first half of the seventeenth. The English Fivil War, centring on the fifth decade of the atter, partly because the religious aspect was teurl the whole and in the end less dominant than "Le Political and economic, was, it can be 11.1glieri, more directly than either of the others

e result of inflation.

In Germany the wars can be judge-d to have L)estPoned (and therefore dangerously to have 'saggerated the emotionalism of) German tlational unity. In France, as a consequence of tue Profound yearning which developed among nary people for order and some measure of fejtrity, it resulted in the absolute monarchy, ,7.nich introduced that strain of authoritarianWhich still, with pendulum swing, haunts "le French policy. In Spain, where the impact of the huge increase and unsettling instability oef the money supply was at its most direct and bvi erwhelming, the consequences were proba„ Y Most calamitous of all. The economic 'esults of the inflation there were to undermine the credit and prestige of the dynasty, to set tehlass against class, to put Spain on the road to '*-L'e loss of her great empire, and to delay until s'"e third quarter of the twentieth century ,13a,nish development as a modern commercial "ni%lindustrial power. _ „DAY comparison, perhaps the supreme social ;,.,"" economic achievement of Elizabeth I's "vemment in England was to restore the credit of the monarchy, at first principally by reforming the currency and steadily striving to rfaaintain its value, so that she could borrow at a :action of the rate of interest which the `°ntinually bankrupt Philip II of Spain had to L'eY. In this way she laid the basis of modern ritish commercial development. Even so, the ajivances in this, one of the most promising of ,.`,41glish eras of development ('sturdy beggars' hvithstanding), were no doubt set back drlany years by the onset of civil strife after her L—a,th. OWN, the Restoration of 1660, harking 'cic in effect to the Elizabethan system of Monarchy by consent, began to restore the lidational unity which the Puritan Revolution so eePIY damaged. • waIn Spain after the sixteenth century there s not even a civil war, but a gross 'Saggeration of the joint ideals of unalloyed Avn°Iic majesty and pure national unity, as as a great over-commitment in internafat. 1 Ja and imperial affairs, and, above all, a to „", unwillingness to devote sufficient energy a "le hard, basic, efficient, productive tasks of itrrti°dern economic society. One must nOt push ao`nr far, but there is a clear and impressive io,.;;'ogY with Britain today. Specifically it '-'ndes long international over-commitment, cinri enervating post-Imperial lethargy, and a „.`.sire for more and more of the world's goods i_thout being willing to earn them by hard, 7,1 ing, sustained and often unpleasant toil. eff "zabethan England avoided the worst eets of the price revolution because it was, so s sl?eak, on the economic periphery of Europe: trm got the immediate and total effect, with at,,InlatelY disastrous consquences. It can be G•tled

tno that modern Britain has, as the first and st sore aged industrial power, been the nation to r ess the earliest, fullest and most protracted ,_ttre of the present inflationary situation. Is four ne

ading in the same direction as Spain did tiltt/°. centuries ago? It is not a comforting c hy—one is frequently tempted to write off as ouc'erical the recent talk of the destruction of tie' society by inflation: the argument that no• tinTocratic system can stand for any length of (adman inflation rate of over 20 per cent a Mittedly a rather precise figure); the nal°gY with the Weimar Republic, and its at least partly consequential demise at the hands of Hitler; the comment that we are developing (especially in Ulster) those habits of terrorism which are endemic (as inflation is endemic) in Latin America; and the consequent risk, ultimately, of some form of armed take-over in Britain. When one reflects on what followed the great inflation of the Elizabethan era (one of the most favourable of all periods for English national morale), one is not likely to minimise the-risks of not curing our own price revolution before it is too late-. Can one, indeed, believe that almost any modern prophecy of. doom, should inflation not be controlled, is too gloomy to be true?

TO delve even farther back into history (and even farther beyond my professional competence), it has, I believe, been argued that monetary inflation was one of the most significant causes of the collapse of the Roman Empire. Is not one of the most insidious of our false assumptions that which supposes that modern civilisation is so special that it, quite uniquely among the cultures of mankind, will automatically endure indefinitely? That Wstern man has, in a purely wordly sense, the permanent assurance of eternal life? Death can come gs well by a thousand self-inflicted wounds as by an atomic holocaust.

Should we not occasionally glance from the capsule of our time-machine, outside the orbit of Western civilisation, and remind ourselves that this conjuncture of our affairs just might be the beginning of the end, not merely of Britain but of our whole society? It might even make us pull up our socks at last.

Professor Allen is Dean of the School of English and American Studies at the University of East Anglia.