May is, 18»3.] 



♦ KNOWLEDGE ♦ 



289 



for arts and manufactures, while more gold has also been 

 required to meet the wants of an increasing population 

 and an increased balance of transactions in all gold-using 

 countries. 



No evidence is before us to prove that a fresh develop- 

 ment of banking expedients has to such an extent further 

 economised the use of gold as to neutralise this normal 

 rate of increase. On the contrary, it is believed that 

 in England alone the gold circulation has grown by 

 £20,000,000 in ten years. 



It is a received axiom that prices of commodities are 

 affected by changes in the volume of the circulating 

 medium in which they are expressed. The late strain on 

 the common stock of gold must, therefore, have had some 

 result. It must have caused a general decline. Examined 

 by the test of present prices, these deductions are borne 

 out by facts. A general fall has occurred, though excep- 

 tional circumstances have maintained the prices of some 

 articles and accelerated the fall of others far beyond the 

 average. 



But this general decline is not in itself a calamity. The 

 period of transition from a higher to a lower set of prices 

 is likely to be accompanied by much real sutlering and 

 more apparent suffering. But when the change has been 

 accomplished, commerce and manufactures may prosper as 

 before. The final disturbance will be limited to those cases 

 where individuals or corporations have permanent contracts 

 either to receive or to pay fixed sums of gold, and to those 

 further cases where exceptional circumstances of habit, 

 convenience, or sentiment will probably come into play. 



Such is my argument. In its main lines it seems to be 

 unassailable, though I may ha^•e failed in some of my illus- 

 trations, and have dwelt too little on qualifying circum- 

 stances. If my position is to be attacked, it must be shown 

 either that I am wrong as to the existence of the cause 

 which I allege, or that the results which I maintain to have 

 followed cannot be traced, or that ray description of the 

 facts as to gold and as to low prices may both bo correct, 

 but that it cannot be proved that the former have led to 

 the latter ; or, lastly, the general argument may be ad- 

 mitted, but its particular applications be disputed. 



No serious contentions have been put forward that I am 

 wrong as to the strain upon gold. My allegations as to 

 prices have been more seriously questioned. To those who 

 deny a fall in prices altogether, I would only say that, even 

 if they were right, the extraordinary demand for gold can- 

 not have been without a result. On this hypothesis it must 

 at least have had an effect in restraining a rise. If it is 

 contended that prices are not low, as I contend they are, it 

 must in any case be admitted that they would have been 

 higher if the circulating medium in which they are ex- 

 pressed had not been called upon to perform largely 

 increased work without a proportionate increase in the 

 supply. It is impossible to assert such a cause to have had 

 no effect. 



I am bound to say that I am myself astonished to see 

 in the case of how many articles prices have gone back to 

 the rates which prevailed before the gold discoveries of 

 1850. I was scarcely prepared to find that, taking an 

 average of the most important articles of consumption, 

 almost the whole of the advance in prices consequent on 

 the immense increase in the supply of gold thirty years 

 ago has been lost Even should this not be so to the full 

 extent, I think it will be admitted that I have at least 

 furnished substantial additional proof that prices are at 

 present ranging on a very low level. 



But very natural remonstrances have been made to me. 

 " It is all very well to speak of low prices in statistical 

 tables ; but is it true that prices have so far fallen to the 



individual purchaser and to the spender of money as to 

 establish the proposition that a sovereign goes further ? " 

 This question is so interesting and important that I should 

 like to examine it more fully in a future letter. At 

 present, I will confine myself to pointing out that, espe- 

 cially in the expenditure of the upper and middle classes, 

 the purchase of commodities forms by no means the largest 

 part ; on the other side are house-rent, rates and taxes, 

 wages, travelling, children's education, and numerous other 

 items for what I may call " services rendered," and it can 

 easily be shown why the prices paid for " services rendered " 

 do not fluctuate with the same rapidity as market prices. 

 In many cases tradition, or a professional code, or an actual 

 law has fixed an immutable scale. However the pur- 

 chasing power of gold may fluctuate, the physician, the 

 singing master, the dentist receives the traditional guinea, 

 the lawyer his 6s. 8d., the cabman his legal Gd. per mile. 



But the chief item of " services rendered," and one 

 requiring the fullest examination, is the question of 

 wages generally. The question would form part of any 

 further disquisition on the purchasing power of gold as 

 regards " ser\dces " as distinguished from commodities 

 generally. 



I now turn to the objections made, not to my contention 

 as to low prices, but as to their resulting from the particular 

 cause which I have discussed. Granting, it is asked, that 

 prices are exceedingly low, can you prove that facts con- 

 nected with gold are the determining cause 'i 



Some writers have appeared to show something approach 

 ing to irritation at the view that the situation of gold 

 should have largely influenced prices. I scarcely know 

 why, unless through the apprehension that the bi-metallists 

 may utilise the argument. I must repeat that to my mind 

 the connection between the additional demand for gold and 

 the position of prices seems as sound in principle as I believe 

 it to be sustained by facts. On the other hand, I cannot plead 

 guilty to the charge which has been made that I have over- 

 looked or denied the existence of other causes. I enume- 

 rated as possible contributory causes, the increased facilities 

 of communication, the operation of the telegraph, the pro- 

 gressive elimination of the profits of middle-men in inter- 

 national commerce, decreased specidation, and increased 

 production. At the same time, it is clear that many of 

 these causes were almost as fully developed during the 

 period 1870-75 as during the years 187.5-83. They must 

 have contributed over a course of years to cheapen the 

 cost of many commodities, but to my mind they do not 

 account alone for the prices of the last five years. Bad 

 harvests in England have, no doubt, also operated to a 

 considerable extent ; but it is not in England alone that 

 the fall in commodities has taken place. Nor has the 

 average of prices risen with the better harvests of the last 

 two years. 



With regard to the deductions to be drawn from my 

 general argument as to the probable eflects on commerce 

 and 'manufactures of a lower level of prices generally, 

 it is, I think, a matter of the highest moment to 

 the manufacturing community to consider whether the 

 present range of prices is still the result of what 

 is called " depression," of absence of prosperity, of 

 slackened demand, and so forth ; or whether we have 

 to deal with the circumstance that prices are affected 

 by a change in the purchasing power of gold. If the 

 latter view is correct, the sooner menmake up their minds to 

 it the better. They will then cease to base their operations 

 or found their hopes on the return to a scale of prices 

 which would, under existing circumstances, represent even 

 higher prices than before. So long as men think that the 

 low price that an article may command simply means bad 



