Centralized Monarchies and State-building

Date: 2015-10-07; view: 557.

But the result of inflation for ordinary peasants, laborers, and artisans were disastrous, since their wages and agricultural incomes did not keep pace with the cost of living. Making matters worse, governments faced with warfare and concerned with increasing the size and power of the State paid for these policies by taxing to commoners (aristocrats and the church were generally exempt from taxes across Europe), so that most of the burden fell on the backs of the peasants, laborers, and artisans. From the dawn of the development of Europe's capitalist economy, then, the growing wealth of the entrepreneurial classes were coupled with the growing misery of the laboring classes.

As I noted in an earlier lecture, in the mid-1400s Europe's population began recovering from the effects of the disastrous 1300s (the plague, famine, etc.). Europe's population nearly doubled in the 150 years between 1450 and 1600 (from 50 to 90 million). Compared to population growth in the 1700s, this increase seemed minor; still, the impact on the economy and on politics proved great. That was in part because population increased faster than did agricultural productivity. (Not until the 1600s would great advances in European agriculture really take root—the development of new plows, new seeds, and new crops rotations that included plants imported from the Americas.)

The increase in population relative to agricultural productivity meant that there was less surplus food per capita. Merchants, who were playing a larger and larger role in the marketing of grain and other food stuffs, took advantage of this market situation to raise prices for grain. That meant that the cost of food increased, which made life harder for the mass of the population—the peasants and urban artisans. But it also meant increased profits for the merchants and for large landowners who re-organized their lands to maximize the production of grain and whose land now rose in value. In Russia, for instance, the nobility in the rich "Black Earth" belt in the South began making greater demands on their serf laborers; in England, big landowning aristocrats used their power in Parliament to push forward laws on the enclosure of common lands, so that they could drive peasants off the land and use the land more profitably. The price revolution therefore helped to stimulate both serfdom in Russia and agrarian capitalism in England.

Another factor (besides population pressure) was involved in the "price revolution" of the late 1500s—which is what historians call the period of rapid inflation of grain prices: that factor was the importation of large amounts of silver from the Spanish colonies in the Americas. The importation of silver (most of which actually passed through the Spanish controlled Dutch port of Antwerp, not Seville as Coffin says), allowed the Spanish monarchy to pay off its very large foreign debt. The result, though, was that the value of silver coins declined (here, again, the law of supply and demand was involved—the supply of silver exceeded the actual capacity of the currency markets to absorb new silver, so that its value fell). The decline in the value of money reinforced the inflationary pressures created by population growth. Again, the result was higher profits for merchants and bankers who speculated in currency.