CHAPTER I
THE CONSEQUENCES TO SOCIETY OF CHANGES IN THE VALUE OF MONEY

Money is only important for what it will procure. Thus a change in the monetary unit, which is uniform in its operation and affects all transactions equally, has no consequences. If, by a change in the established standard of value, a man received and owned twice as much money as he did before in payment for all rights and for all efforts, and if he also paid out twice as much money for all acquisitions and for all satisfactions, he would be wholly unaffected.

It follows, therefore, that a change in the value of money, that is to say in the level of prices, is important to Society only in so far as its incidence is unequal. Such changes have produced in the past, and are producing now, the vastest social consequences, because, as we all know, when the value of money changes, it does not change equally for all persons or for all purposes. A man’s receipts and his outgoings are not all modified in one uniform proportion. Thus a change in prices and rewards, as measured in money, generally affects different classes unequally, transfers wealth from one to another, bestows affluence here and embarrassment there, and redistributes Fortune’s favours so as to frustrate design and disappoint expectation.

The fluctuations in the value of money since 1914 have been on a scale so great as to constitute, with all that they involve, one of the most significant events in the economic history of the modern world. The fluctuation of the standard, whether gold, silver, or paper, has not only been of unprecedented violence, but has been visited on a society of which the economic organisation is more dependent than that of any earlier epoch on the assumption that the standard of value would be moderately stable.

During the Napoleonic Wars and the period immediately succeeding them the extreme fluctuation of English prices within a single year was 22 per cent; and the highest price level reached during the first quarter of the nineteenth century, which we used to reckon the most disturbed period of our currency history, was less than double the lowest and with an interval of thirteen years. Compare with this the extraordinary movements of the past nine years. To recall the reader’s mind to the exact facts, I refer him to the table on the next page.

I have not included those countries—Russia, Poland, and Austria—where the old currency has long been bankrupt. But it will be observed that, even apart from the countries which have suffered revolution or defeat, no quarter of the world has escaped a violent movement. In the United States, where the gold standard has functioned unabated, in Japan, where the war brought with it more profit than liability, in the neutral country of Sweden, the changes in the value of money have been comparable with those in the United Kingdom.

Index Numbers of Wholesale Prices expressed as a Percentage of 1913 (1).

Monthly Average.United Kingdom (2).France.Italy.Germany.U.S.A. (3).Canada.Japan.Sweden.India.
1913100100100 100100100100100..
1914100102 96 10698100 95116100
1915127140133 142101109 97145112
1916160189201 153127134117185128
1917206262299 179177175149244147
1918227340409 217194205196339180
1919242357364 415206216239330198
1920295510624 1,486226250260347204
1921182345577 1,911147182200211181
1922159327562 34,182149165196162180
1923[A]159411582765,000157167192166179

(1) These figures are taken from the Monthly Bulletin of Statistics of the League of Nations. (2) Statist up to 1919; thereafter the median of the Economist, Statist, and Board of Trade Index Numbers. (3) Bureau of Labour Index Number (revised).

[A] First half-year.