Price revolution
Encyclopedia
Used generally to describe a series of economic events from the second half of the 15th century to the first half of the 17th, the price revolution refers most specifically to the relatively high rate of inflation
that characterized the period across Western Europe
, with prices on average rising perhaps sixfold over 150 years.
It was once thought that this high inflation was caused by the large influx of gold and silver from the Spanish treasure fleet
from the New World
, especially the silver of Bolivia
and Mexico
which began to be mined in large quantities from 1545. According to this theory, too many people with too much money chased too few goods.
The start of the price rises actually predated the large-scale influx of bullion from across the Atlantic, reflecting in part a quintupling of silver production in central Europe in 1460-1530: though this output fell by two-thirds by the 1610s, it was significant in fueling the early stages of inflation that undermined a price regime in place since the previous upsurge in silver production in 1170-1320.
Demographic factors also contributed to upward pressure on prices, with the revival (from around the third quarter of the 15th century) of European population growth after the century of depopulation and demographic stagnation that had followed the Black Death
. The price of food rose sharply during epidemic years, then began to fall very rapidly as there were fewer mouths to feed. At the same time prices of manufactured goods tended to rise because of dislocation of supply. Later on, increased population placed greater demands on an agricultural area that had contracted significantly after the 1340s, or had been converted from arable to less intensive livestock
production.
The increase in the proportion of Europe's population living in towns, though slight (in the region of one percentage point a century) until the 19th century, coupled with economic diversification, meant that there were more people to feed, but proportionately slightly fewer producers of staple food
s. Urbanization
also contributed to increased trade between Europe's regions, which made prices more responsive to distant changes in demand, and provided a channel for the flow of silver from Spain through western and then central Europe.
Increased trade and availability of manufactured and luxury goods, especially in the 16th century, had also encouraged many landowners to convert their tenants' payments from produce to cash. Initially, this had helped the wealthy to accumulate more of the trappings of wealth, but as prices rose, those landlords who received payment in cash found themselves in financial straits. They often took extreme measures to combat the problem - measures that would add to social unrest and ultimately to a worsened financial position for themselves and their tenants.
In England, for example, many lands held as common lands (pasture
s, fields, etc.) were enclosed
so that only the landlord could graze his animals. This forced his former tenants either to pay increased rents, which was close to impossible, or to leave their own farms. An increase in vagrancy meant more brigandage
, a movement to the towns in search of employment and, where no employment could be found, an increase in urban poverty and crime.
The inflation of c.1470-1620 eventually petered out with the end of the initial rush of New World bullion, though prices remained around or slightly below the levels of the first half of the 17th century until the onset of new inflationary pressures in the latter decades of the 18th century.
Inflation
In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a...
that characterized the period across Western Europe
Western Europe
Western Europe is a loose term for the collection of countries in the western most region of the European continents, though this definition is context-dependent and carries cultural and political connotations. One definition describes Western Europe as a geographic entity—the region lying in the...
, with prices on average rising perhaps sixfold over 150 years.
It was once thought that this high inflation was caused by the large influx of gold and silver from the Spanish treasure fleet
Spanish treasure fleet
The Spanish treasure fleets was a convoy system adopted by the Spanish Empire from 1566 to 1790...
from the New World
New World
The New World is one of the names used for the Western Hemisphere, specifically America and sometimes Oceania . The term originated in the late 15th century, when America had been recently discovered by European explorers, expanding the geographical horizon of the people of the European middle...
, especially the silver of Bolivia
Potosí
Potosí is a city and the capital of the department of Potosí in Bolivia. It is one of the highest cities in the world by elevation at a nominal . and it was the location of the Spanish colonial mint, now the National Mint of Bolivia...
and Mexico
Mina Proaño
Mina Proaño an underground silver mine located in central Mexico, is one of the world's largest and most profitable silver mines. The mine is located just outside the city of Fresnillo, Zacatecas; as a result the mine is also known as Mina Fresnillo. The mining operation is run by Peñoles, a...
which began to be mined in large quantities from 1545. According to this theory, too many people with too much money chased too few goods.
The start of the price rises actually predated the large-scale influx of bullion from across the Atlantic, reflecting in part a quintupling of silver production in central Europe in 1460-1530: though this output fell by two-thirds by the 1610s, it was significant in fueling the early stages of inflation that undermined a price regime in place since the previous upsurge in silver production in 1170-1320.
Demographic factors also contributed to upward pressure on prices, with the revival (from around the third quarter of the 15th century) of European population growth after the century of depopulation and demographic stagnation that had followed the Black Death
Black Death
The Black Death was one of the most devastating pandemics in human history, peaking in Europe between 1348 and 1350. Of several competing theories, the dominant explanation for the Black Death is the plague theory, which attributes the outbreak to the bacterium Yersinia pestis. Thought to have...
. The price of food rose sharply during epidemic years, then began to fall very rapidly as there were fewer mouths to feed. At the same time prices of manufactured goods tended to rise because of dislocation of supply. Later on, increased population placed greater demands on an agricultural area that had contracted significantly after the 1340s, or had been converted from arable to less intensive livestock
Livestock
Livestock refers to one or more domesticated animals raised in an agricultural setting to produce commodities such as food, fiber and labor. The term "livestock" as used in this article does not include poultry or farmed fish; however the inclusion of these, especially poultry, within the meaning...
production.
Staple food
A staple food is one that is eaten regularly and in such quantities that it constitutes a dominant portion of a diet, and that supplies a high proportion of energy and nutrient needs. Most people live on a diet based on one or more staples...
s. Urbanization
Urbanization
Urbanization, urbanisation or urban drift is the physical growth of urban areas as a result of global change. The United Nations projected that half of the world's population would live in urban areas at the end of 2008....
also contributed to increased trade between Europe's regions, which made prices more responsive to distant changes in demand, and provided a channel for the flow of silver from Spain through western and then central Europe.
Increased trade and availability of manufactured and luxury goods, especially in the 16th century, had also encouraged many landowners to convert their tenants' payments from produce to cash. Initially, this had helped the wealthy to accumulate more of the trappings of wealth, but as prices rose, those landlords who received payment in cash found themselves in financial straits. They often took extreme measures to combat the problem - measures that would add to social unrest and ultimately to a worsened financial position for themselves and their tenants.
In England, for example, many lands held as common lands (pasture
Pasture
Pasture is land used for grazing. Pasture lands in the narrow sense are enclosed tracts of farmland, grazed by domesticated livestock, such as horses, cattle, sheep or swine. The vegetation of tended pasture, forage, consists mainly of grasses, with an interspersion of legumes and other forbs...
s, fields, etc.) were enclosed
Enclosure
Enclosure or inclosure is the process which ends traditional rights such as mowing meadows for hay, or grazing livestock on common land. Once enclosed, these uses of the land become restricted to the owner, and it ceases to be common land. In England and Wales the term is also used for the...
so that only the landlord could graze his animals. This forced his former tenants either to pay increased rents, which was close to impossible, or to leave their own farms. An increase in vagrancy meant more brigandage
Brigandage
Brigandage refers to the life and practice of brigands: highway robbery and plunder, and a brigand is a person who usually lives in a gang and lives by pillage and robbery....
, a movement to the towns in search of employment and, where no employment could be found, an increase in urban poverty and crime.
The inflation of c.1470-1620 eventually petered out with the end of the initial rush of New World bullion, though prices remained around or slightly below the levels of the first half of the 17th century until the onset of new inflationary pressures in the latter decades of the 18th century.
External links
- The Price Revolution in Europe: Empirical Results from a Structural Vectorautoregression Model. Peter Kugler and Peter Bernholz, University of Basel, 2007 (Demonstrates that it was the increased supply of precious metals that caused it and notes the obvious logical flaws in the contrary arguments that have become fashionable in recent decades)