Figure 2 - Trend of Prices Before and After the Great Wars of History
Since that time, however, the course of prices has been steadily upward. Between 1896 and the outbreak of the war, the index number of the U. S. rose about 50 per cent. Substantially the same increase took place in Canada, while in the United Kingdom there was a rise of 35 per cent. This rise before the war amounted, in the United States, to about one-fifth of one per cent. per month. During the war, however, the rise amounted in this country to 1½ per cent. per month, and abroad to much more—in Germany and Austria to 3 per cent. per month, and in Russia, apparently, to 4 or 5 per cent. per month. In the light of the excitement caused up to 1914 by the comparatively moderate increase in this country, we can better understand the Russian economic unrest when a far steeper ascent of prices got under way.
The total effect can be summed up as follows: between 1914, before the war, and November, 1918, the price level in this country (as indicated by the United States Bureau of Labor Statistics retail food index number) rose 79 per cent.; that in England (according to the Statist index number), 133 per cent.; that in France, approximately 140 per cent.; that in western Europe probably at least three-fold; and in Russia perhaps ten or twenty-fold.
The price level of the United States today is over three-fold that of 1896. Expressing the same fact in terms of the purchasing power of money, our dollar of today is worth only 30 cents of the money in 1896, so that as contrasted with the dollar of 1896 our dollar literally "looks like thirty cents."
COMMENTS ON FIGURE 2
Now it is a common belief, and one which seems to be borne out by the present situation, that war raises prices whereas peace lowers them. The matter is, however, not so simple. Each case must be considered on its own merits. Figure 2 shows price curves for the various wars.
In general prices have risen during wars. But there has not been any such uniformity of movement after wars. Moreover in most cases the price disturbances both during and after the wars had scarcely anything to do with the coming and going of the war. In only four of the cases on the chart is the rise of prices during the war really and clearly due to the war. In the Napoleonic Wars, the war of 1812, the Civil War, and the World War the rise of prices during the war was largely due to war inflation.