David Hackett Fischer. The Great Wave: Price Revolutions and the Rhythm of History. Oxford U.P., 1996. 536 pp.
ISBN: 0-195-05377-X, $35.00 (hardcover); ISBN: 0-195-12121-X, $16.95 (paper).

Reviewed by Thomas Ford Brown, Department of Sociology, Johns Hopkins University

In The Great Wave: Price Revolutions and the Rhythm of History, David Hackett Fischer explores the historical significance of patterns in the secular trend of prices to increase . As Wallerstein has imposed onto European history a geographical model of the world economy, as Arrighi has imposed a cyclical model of capitalist development, as Goldstein has imposed a cyclical model of war-making, now comes Fischer to superimpose yet another model onto history, this one focusing on price inflation.¹

Fischer observes, over the past eight centuries, four major price revolutions -- steep rises in prices -- punctuated by periods of relative equilibrium in which prices remained stable or grew at a slower pace. Fischer calls this a pattern of "price waves". His aim is to relate the price waves to historical events. He demonstrates how historical contingencies affected the wave structure, and how the waves in turn affected social and cultural developments, thus constituting the "rhythm of history".

At first gloss, Fischer's approach appears cognate with other conceptions of economic cycles such as Kondratieff waves, Braudel's "secular trend", and various business cycle models.² However, Fischer's waves differ from price cycles in both character and epistemic status. Price waves are "no more (or less) predictable than waves in the sea" (Fischer, 9). Fischer's waves differ from cyclical models in that waves are apparent on the surface of the data. The naked eye can see the wave pattern emerge when price trends over the past eight centuries are graphed. Cycles, on the other hand, are known through statistical inference, teased from the data through mathematical manipulations. Price cycles are regular, predictable, and of shorter duration than Fischer's price waves. Fischer's waves are far more variable than cycles in duration, magnitude, velocity, and momentum. They have lasted from 90 to 180 years, and are characterized by more irregularity than cycles.

The price wave, claims Fischer, is an historical fact -- not a theoretical model, and not an artifact of mathematical massage. The problem then becomes: what sense can we make of the wave? How does understanding the wave alter our conception of history? How might we modify our theoretical approaches to the historical development of capitalism, based on our new understanding of price waves?

Each wave begins with a long inflationary period. Fischer calls these the Medieval Price Revolution (1200-1320), the 16th Century Price Revolution (1520-1620), the 18th Century Price Revolution (1720-1820), and the 20th Century Price Revolution (1896-present). Price revolutions are followed by long periods in which prices remain relatively stable: Following the Medieval Price Revolution, the Equilibrium of the Renaissance. Following the 16th Century Price Revolution, the Equilibrium of the Enlightenment. Following the 18th Century Price Revolution, the Victorian Equilibrium.

Fischer holds that the four major price waves reveal commonalties in their structure. During the inflationary stage, populations grow while real wages fall. Returns to capital and land ownership increase. Social discord rises, as measured by indicators such as crime and illegitimacy. Governments experience fiscal crises, and revolution and wars become more likely.

During periods of equilibrium, however, real wages rise while returns to capital and land diminish. Crime and illegitimacy decrease, population growth slows, and governments experience more fiscal and political stability. There is a cultural florescence.

This interaction between the structure of price waves and historical events constitutes the analytical focus of the book. Fischer writes from the perspective of an historian, focusing on human experience rather than abstract numerical patterns. His book is articulate, ingeniously organized, and a pleasure to read. The core of the book is comprised of four chapters, one describing the story of each wave.

But Fischer is not a pure, ideographic historicist. Social scientists will find the book not only a fascinating empirical study, but also theoretically stimulating. Fischer evaluates seven competing theoretical explanations for the wave structure. He not only theorizes the causes and structure of the waves themselves, but also compares and contrasts competing theoretical explanations for a variety of outcomes related to price waves. These theoretical explorations are presented in a series of essays organized as appendices. Many readers will find the appendices the most valuable part of the book. And anyone interested in the topic will find Fischer's extensive annotated bibliography to be essential reading. Much of it references works in European languages that will be unfamiliar to English-only researchers.

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Fischer conceives of price waves as an autogenous process whose engine of self-reproduction is driven by individuals' aggregated actions and expectations. In times of price equilibrium, real wages are rising while rents and interest rates are falling. Confidence rises. People marry earlier and have more children, increasing the labor supply. This reduces real wages and thus increases returns to capital. Aggregate demand grows more rapidly than supply, and so prices begin to rise.

As inflation begins to become apparent to everyone, individuals and institutions react in ways that induce yet more inflation: "The stock of money is deliberately enlarged to meet growing demand. Capitalists charge higher rates. Landlords raise the rent. Real wages fall further behind" (Fischer, 247).

Increasing inequality leads to more poverty and homelessness, straining social relationships and intensifying class conflict. Social cohesion diminishes, and consequently people begin making more claims on the state and paying less in taxes. This leads to state fiscal crises. The growing hardships lead to despair, and pessimism spreads. Markets grow less stable. Production and productivity decrease or stagnate. Stagflation ensues. There is general cultural dissolution. Drugs, drink, and sexual infidelity become more common.

People lose the optimism that engendered the inflation to begin with. Widespread pessimism leads people to delay marriage and child-bearing. This reduces the labor supply, drives up wages, and reduces land rents. Inequality begins to decline and social solidarity starts to grow. As demands on state benefits fall, states become more stable and effective. Taxpayer resistance declines. Family and marriage become more possible and attractive. Domestic stability grows while bastardy decreases. But eventually, confidence leads to the usual problems, and the inflationary cycle begins once more.

There are major flaws in Fischer's presentation. First, he conflates two different types of inflation that each stem from different causes, and his theory fails to account for this divergence. One type of inflation results from a decline in the value of money relative to the value of other commodities. This type of inflation is caused by changes in supply and/or demand that alter the relative valuation between money and commodities. The second type of inflation results from the debasement of money. This occurs when the value of a given monetary unit of measurement is decreased by the government. In the past, this was accomplished by reducing the amount of precious metal in a given coin. Now, it is accomplished by increasing the supply of paper money.

The first type of inflation can easily span national boundaries and affect an entire world-economy. The second type is caused by state actions, and thus has more impact within national boundaries than beyond. When paper money is delinked from precious metals, its value becomes determined solely by state fiat. The consequence is that debasement becomes the only source of inflation. Inflation can now be contained within national boundaries.

The fundamental difference between the two types of inflation raises questions about Fischer's theory. In the first three price revolutions, inflation was driven by the decline in the value of money relative to other commodities. But the most recent price revolution has been driven by governments debasing their money. Indeed, inflation in the West since 1970 has been caused only by debasement. While the social disruptions consequent to each type of inflation may be similar, the causes are quite different. Is it possible to explain these two phenomena with the same theory?

The first type of inflation fits well into Fischer's theory. The value of precious metals relative to other commodities is clearly determined by aggregated individual actions in response to prevailing conditions. But when inflation is driven by state policy, the linkage between that policy and aggregated individual actions is less direct, and so Fischer's theory becomes less relevant. The fundamental problem here is that the first three price revolutions were driven by Malthusian processes, while the most recent is of a qualitatively different character.

There are also contradictions and lacunae in Fischer's linkage between his theoretical paradigm and his evidence. First, the rates of inflation vary considerably among historical periods. In earlier price revolutions, inflation was typically 1 to 3 percent per year. This is trivial compared to the 20th century experience, in which inflation rates greater than 70 percent occurred in several countries only last year. It becomes necessary to explain why modern economies can tolerate moderate inflation without experiencing the kinds of major social disruption that the same rate of inflation caused in earlier times. Second, we need to explain why inflation often spans national boundaries even in the modern era of floating currencies, considering that only state manipulation of the money supply can create "debasement" inflation. These questions highlight significant lacunae in Fischer's theory.

More damaging to Fischer's theory are the empirical contradictions. Crucial to his theory is the link between population growth and inflation, but this linkage only pertains until the 1820s. Population grew rapidly in Europe and the US during the later 19th century, yet prices remained stable, even deflationary during this period. Fischer's argument here is founded upon shifting comparisons that are highly questionable. For the 19th century, his empirical presentation describes a linkage between the growth rate of population and prices in England, which is substantively divergent from his theoretical link between population growth and prices.

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For the 20th century, he shifts his comparison to prices in the US and world population. But prices and population growth within any Western European country would show an inverse relation during that period. There is no convincing rationale for comparing US prices and world population. This selective use of evidence to support the theory seems out of character with Fischer's generally impeccable scholarship.

There are also empirical contradictions to Fischer's theoretical link between rising prices and inequality. Inequality in Florence increases while prices remain stable between 1330 and 1427. Inequality in the US decreases while prices rise between 1910 and 1970. Fischer expects real wages to fall during inflationary periods, but this doesn't happen between 1946 and 1970. All of these contradictions between evidence and theory are found in Fischer's own text. Clearly, his theory needs refinement.

These theoretical flaws do not undermine the book's importance. The theoretical problems that Fischer encounters do not warrant dismissing the entire enterprise, for he presents compelling empirical patterns that deserve close consideration and analysis. While his theoretical explanation for the price wave needs improving, the existence of the price wave itself is an historical fact, not a theory. Analyzing the interaction between price waves and historical events is clearly a worthwhile enterprise. It is also worth exploring whether our understanding of the 20th century price revolution and its social consequences can be improved by studying previous inflations.

And so the book's theoretical weaknesses should not distract us from its significant contributions. It is a truism that all models are wrong, but some are useful. Neoclassical economists may reject Fischer's theory out of hand for being insufficiently axiomatic, and in places, wrong. But scholars of the modern world-system will find in Fischer an eminently useful heuristic model for analyzing the role of inflation over the long duree. Even those who dismiss Fischer's theory out of hand will find the book valuable. The footnotes, appendices, and extensive annotated bibliography alone make it essential reading for scholars interested in the history of the modern world-system. After reading Fischer, any theorist blessed with the grand ambition of explaining the history of capitalist development (or should I say "cursed"?) will feel compelled to address the questions Fischer raises. Analyzing price waves is an important task, for the social consequences of inflation affect all humans, not just the great Braudelian beasts who roam the shadowy top layer of finance capitalism.

Notes

¹ See Arrighi, 1994; Braudel, 1992; Goldstein, 1988; Wallerstein, 1974.

² Goldstein surveys most major theories of economic cycles.

References

• Arrighi, Giovanni. 1994. The Long Twentieth Century. London/New York: Verso.
   
• Braudel, Fernand. 1992. The Perspective of the World. Berkeley: University of California Press.
   
• Fischer, David Hackett. 1996. The Great Wave: Price Revolutions and the Rhythm of History. New York/Oxford: Oxfordf University Press.
   
• Goldstein, Joshua S. 1988. Long Cycles: Prosperity and War in the Modern Age. New Haven: Yale University Press.
   
• Wallerstein, Immanuel. 1974. The Modern World System I: Capitalist Agriculture and the Origins of the European World-Economy in the SIxteenth Century. New York: Academic Press.

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