Forty Centuries of Wage and Price Controls

3

From Medieval to Early Modern Times

In the Middle Ages, the doctrine of the “just price” made price regulation a religious imperative. This concept, combined with the theological objection to interest (called “usury”), led to more and more economic regulation and undoubtedly was an obstacle to a rising standard of living.

Samuel Brittan and Peter Lilley in their recent book, The Delusion of Incomes Policy, tell us that

Charlemagne published tables of prices at times of crop failure and an ordinance of 806 stated that “Anyone who at the time of the grain harvest or of the vintage stores up grain or wine not from necessity but from greed—for example buying a modius for two denarii and holding it until he can sell it again for four, or six or even more—we consider to be making a dishonest profit.” It did not dawn on Charlemagne’s advisers, any more than on contemporary politicians, that speculators can by such conduct help to reduce price fluctuations. Professor Pounds, who quotes this ordinance, conjectures that Charlemagne achieved no greater success than Diocletian had done five hundred years before.1

CONTROLS IN ENGLAND

In England during the Middle Ages, not only the national governments but also guilds and municipalities engaged in price-fixing as a normal activity. In the thirteenth century, officials in England “felt themselves bound to regulate every sort of economic transaction in which individual self-interest seemed to lead to injustice.”2

In the year 1199, the government in London attempted to control the wholesale and retail price of wine. The law was difficult to enforce and eventually failed. In 1330 the passion for price-fixing stirred again and a new law was adopted requiring merchants to sell at a “reasonable” price, this figure to be based upon importation costs plus other expenses. In a few years, due to changing economic conditions, the price of wine rose far above the 1330 price and the government finally had to accept defeat once again.3

The many efforts to regulate the prices of wheat and bread in England came to a similar conclusion. The first attempt was apparently made in 1202; the leading law in this case was 51 Henry III which fixed precise prices for varying weights of bread. The economic historian Simon Litman notes that “The law was enforced locally on sundry occasions, but fell gradually into disuse.”4

Antony Fisher, in his incisive book, Must History Repeat Itself?, discusses the events in England following the supreme tragedy of the Black Death in 1348 when about half the population perished. Obviously, a labor shortage resulted from this human catastrophe and, equally obviously, there was a tremendous rise in wages. As usual, the government, at this time controlled by the large landowners, tried to cope with this economic crisis by passing more laws. “In the thirty years after the first post-Black Death statute called ‘the malice of labourers,’ nearly nine thousand cases of wage enforcement were tried by the courts and in nearly all judgment was given in the employer’s favor.”5 As a result of these anti-worker laws, many workers, not unnaturally, refused to sell their labor under what they regarded as unfair terms and others went from town to town trying to obtain the best wages possible. Economic dislocation followed and, as the workers became more and more angry, Wat Tyler’s rebellion took place in 1381.6

Efforts were also made to prohibit profit-making on lending and borrowing. As far back as the eighth century, Christians were forbidden to lend money at interest, but since this religious prescription did not prevent people wishing or needing to borrow money and did not apply to other religious groups, it was natural that some Jews became bankers and money lenders.

In 1364, Edward III had the City of London pass an ordinance against usury; an Act of Parliament on the subject followed in 1390. But loopholes in the law were quickly found (as they always are) and a more stringent Act was required in 1487. This too proved worthless. It was repealed nine years later.

“During the fourteenth and fifteenth centuries,” the historian W. J. Ashley tells us, “parliament and the executive left the matter [of regulation of prices, place of sale, and so on] almost entirely in the hands of the local authorities. . . . The municipal authorities frequently went beyond victuals, and regulated the prices of other articles of prime importance to the poorer classes, such as wood, coal, tallow and candles.”7

During the reign of the Tudor family (after 1485), Parliament (under the direction of the monarch, of course) “was not content with passing acts against practices which enhanced prices. It endeavoured to fix directly a fair price not only for victuals but also for other commodities.”8 Most of these regulations received little public support anyway, principally because of their lack of effect. The Tudor age was the age of the great Tudor inflation, an inflation which was certainly precipitated by the debasement of the currency under the reign of Henry VIII. His extravagant manner of living meant that money (in the form of precious metals) had to come from somewhere. It came from the edges and the purity of his coinage.

A SIXTEENTH CENTURY ECONOMIST ON CONTROLS

An economist of the time, John Hales, wrote a disquisition on the problems of inflation in the Tudor period, which, except for the spelling, could have been written yesterday.

Although it was probably written in 1549 and first published in 1581, it so well illustrates the perennial principles involved that several paragraphs are quoted here (two especially pertinent passages have been italicized by the co-authors).

Many thinges coulde I here save, and diuers forainge argumenttes coulde I make to proue it a thinge bothe honeste and necessary and behowfull to bring donne this highe price of victuall and all other thinges: but that I perceve your grace all reddy of your owine godly enclinacion muche bente vnto this purpose, for what cane be so prinsely so liberaull and so munificente a thing as to cawse that all men shall bye bothe ther victuall and all other thinges at a cheper price. But ther is yet one other thinge which wolde helpe somewhat for the chepnes of victuall, and that is, yf neyther the lorde Mayour of London nor no other officer might haue none auctorrite to sette eney price of victuall, For vndre the Cullour of a commone wealthe they abvse tidier auctorrite vnto ther owne proper Lucar. For yf eney mane do bringe eney Corne bi shippe vnto London, the Lorde Mayour hauinge eney plenty of Corne in granettes then will his Lordeshippe sette hime souche a lowe price of his Corne that he shall haue littell liste to bringe eney more vnto the Cittye. So that whan by souche means he hathe dryuen a waye all the Corne vitallers, thene he will sell his owne at what price hime selfe listeth. Lykewise whane the Lorde Mayour dothe come into the markett and cawseth heife and there a pigge to be pulled oute of a poore womans hande and to be solde by the Servauntes per chaunse vnto the Seruantes owne wife for halfe the price that it is worthe in the market or cause the Seruante to sell ij or iij baskettes full of egges for twise as maney a penney as is commonly solde in the markete: Do this eneythinge helpe the generall price of victuall? No surely, but it dothe mouche hindre it, for she that hathe by this means loste so mouche money vppon one daye: muste nedes sell a greate deall the derer at other tymes: or elles she sholde not recouer her losses, and be able to paye her rente. Lykewise the wardens of the bouchers in London: to thentent that they wolde haue but fewe bouchers to come oute of the contrye vnto the marketes in London: when they perceve eney yonge man of the Country that hathe newly sete vppe bouchers occupacon Resortinge vnto the markettes in London withe fleche, they by the Cullour of ther office and vndre pretense, that the saide fleshe is olde killid, or otherwise fawted will sell all his fleshe at halfe the price it is worthe, And thuse they will sarve hime twise or thrise vntill they haue vtterly ondon hime and dryven hime frome the Markete, or elles caused him to sell at souche highe and vn reasonable prise as the companey of Bouchers in london wolde haue hime to sell at: And thuse vndre the coulour of a Common weale they vse souche extreime tyrraney and Cruelnes that it wolde pitty a man’s harte to be holde it: I maruell therfor that this foresaid auctorrite is not taken a waye frome the foresaid officers, seinge that the longe experience haue so well declarid that the foresaid settinge of prices of victuall, do nothing at all bringe downe the highe price thereof. But I marvell mouche more at those men which have not only all Reddy seine the successe of price settinge, but also the sucesse of the moste parte of proclamacons and penaull Stattutes, and yet will holde oppinion this present derthe of victuall may be redressid bi setting of prices vppon victuall, but surly it is not the settinge of lowe prises that will aney thinge a mende the matter. But it muste be the takinge awaye of thoccation of the high prices. Yet I will not saye naye but the Rumor therof that souche lowe prices shoulde haue bine sette at a certen daye wollde haue donne very well, for the dought therof wolde haue cawside maney thinges to haue fawlen some thinge of price, And also haue cawsid maney men they shoulde not haue letten ther groundes at so highe rente as they shoulde elles haue donne. And also the proclayminge of souche prices at a certen daye wolde somethinge haue quiettid the myndes of the Commons, but now that they [sic, the] proclamacon shall immediatly take effecte, The commonaltye shall sone perceve that it will eyther Doo no good at all or elles mouche hurte, For yf it be not obseruide as it is not lyke to be then dothe it non goode, and yet it bringeth the people to a fardre disobedience. if it be so obseruide that nothinge be solde aboue the price rated in the proclamacion, then shall ther not halfe so mouche no nor the forthe parte of so mouche victuall be brought vnto the market as it was wonte to be: And what thronge and striffe is there thene lyke to be who shall fyrste catche vppon that which commith. And what shall thother sorte thene doo which cane gette non for no monney. They will surly spoyle for it before the[y] famishe and though it were a hundreth tymes proclaymede hight treason. And if it shoulde come there vnto (god graunte they doo no worse) But here vnto some mane will saye that ther is a good prouison in the proclamacion if the market slake that the Justicis of peace and other officers shall se the market fornesshede frome the farmes nexte adioninge. But surly I thinke if the Lorde Mayour of London and all thofficers that he hathe dide nothinge elles but provide vitall for the Cittye, yet shoulde they not be souche means provide to serve London two monthes: but that ther shoulde be, Seven tymes so muche more scacitie, then ther was yett. For how cane hit be that they nere London which paye x s. or xiij s. iiij d. for an Acre of grownde, shoulde sell ther butter by the pounde so goode chepe, as they which dwell Seven or eyght schore myles frome London paying not the forthe penney so muche rente for the lyke grounde. And some grounde becase it yeldeth far better Chise, and fare swetter and better coulorde butter thene maney other groundes dothe, hathe alwaies vppon that Consideracion beine set vppon a higher rente. And some one pounde of Chise is well worth iij pounde of the moste parte of other Chise. And surely if the proclamacion be kepte ye shall neyther haue eney muttons butter or Chise solde eyther in eney Market or other where for the space of one fortenight or a monthe before mighelmas, nor like wise so longe before hallomas, by cawse the Sellers will tarry so longe for the higher price, before this proclamacion the Richer sorte hade alwayes ther belly full of vitall were it neuer so deare, but the pore sorte hade maney a hongrey meall. This Proclimacon cannot bringe to passe that there shall nowe be Inoughe to serve bothe sortes. But as I said before the derthe of all thinges cannot be taken a wave in deade excepte all the cawses thereof be fyrste taken a wave, and then with outte doubte accordinge to the moste aunctiente and trewe principle in phisike: Cessant [sic] causa, cesset [sic] effectus.9

CONTROLS IN BELGIUM

In the sixteenth century misplaced economic controls were decisive in determining the fate of the most important city in what is now Belgium. From 1584 to .585, Antwerp was besieged by Spanish forces led by the Duke of Parma who was intent on maintaining the rule of the Habsburg Empire in the Lowlands. Naturally, during a siege, food quickly becomes a scarce commodity and prices accordingly rise. The City Fathers of Antwerp reacted as many others in their position have done before and since: they passed a law fixing a maximum price for each item of food. Severe penalties were prescribed for anyone who attempted to charge the market price.

“The consequences of this policy were twofold,” according to the historian John Fiske. “It was a long time before the Duke of Parma, who was besieging the city, succeeded in so blockading the Scheldt as to prevent ships laden with eatables from coming in below. Corn and preserved meats might have been hurried into the beleaguered city by thousands of tons. But no merchant would run the risk of having his ships sunk by the Duke’s batteries merely for the sake of finding a market no better than many others which could be reached at no risk at all. . . . If provisions had brought a high price in Antwerp they would have been carried thither. As it was the city, by its own stupidity, blockaded itself far more effectually than the Duke of Parma could have done.”

“In the second place,” Fiske concludes, “the enforced lowness of prices prevented any general retrenchment on the part of the citizens. Nobody felt it necessary to economize. So the city lived in high spirits until all at once provisions gave out. . . .”10 In 1585 the city of Antwerp surrendered and was occupied by the forces of Spain.

A similar but even worse disaster, made more costly still by government bungling, occurred in the Indian province of Bengal in the eighteenth century. The rice crop in 1770 failed completely and fully a third of the population died. A number of scholars attribute this disaster primarily to the rigid policy of the government which was determined to keep the price of grains down rather than allow it to rise to its natural level. A price rise, of course, would have been a natural rationing system permitting the available food to be stretched out until the next harvest. Without this rationing system, the reserve supplies were quickly consumed and millions died of hunger as a direct result.

For at least once in human history, however, government did learn by experience. Ninety-six years later, the province of Bengal was again on the verge of famine. This time the procedure was completely different, as William Hunter relates:

Far from trying to check speculation, as in 1770, the Government did all in its power to stimulate it . . . . A government which, in a season of high prices, does anything to check speculation acts about as sagely as the skipper of a wrecked vessel who should refuse to put his crew upon half rations . . . . In the earlier famine one could hardly engage in the grain trade without becoming amenable to the law. In 1866 respectable men in vast numbers went into the trade; for the Government, by publishing weekly returns of the rates in every district, rendered the traffic both easy and safe. Everyone knew where to buy grain cheapest and where to sell it dearest and food was accordingly bought from the districts which could best spare it and carried to those which most urgently needed it.11

The experience of Bengal, which had two failed harvests of major proportions within a century, provided a laboratory for testing the two policies. In the earlier case, price-fixing was enforced and a third of the people perished; in the latter case, the free market was allowed to function and the shortage was kept under control.

FOOTNOTES

1. Samuel Brittan and Peter Lilley, The Delusion of Incomes Policy (London: Temple Smith, 1977) p. 74.

2. W. J. Ashley, An Introduction to English Economic History and Theory (London: Longmans, 1923–5) Vol. 1, Part 1, p. 181.

3. Ibid., p. 191.

4. Simon Litman, Prices and Price Control in Great Britain and the United States During the World War (New York: Oxford University Press, 1920) p. 6.

5. Sir Arthur Bryant, The Fire and the Rose (New York: Doubleday, 1966) p. 61.

6. Antony Fisher, Must History Repeat Itself? (London: Churchill Press, 1974) pp. 34–35. See also, Agnes Dodd, History of Money in the British Empire and the United States (London: Longmans, 1911).

7. W. J. Ashley, op. cit., p. 30.

8. William Holdsworth, A History of English Law (London: Methuen, 1922–1926) Vol. 2, p. 377.

9. R. H. Tawney and E. Power, Tudor Economic Documents (New York: Barnes and Noble, 1963) Vol. III, pp. 338–41.

10. John Fiske, The Unseen World and Other Essays (Boston and New York: Houghton, Mifflin Co., 1904) p. 20.

11. Sir William Wilson Hunter, Annals of Rural Bengal (London: Smith, Elder, 1897) p. 7.