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REFERENCES
Dunn, R. S. (1979). The Age of Religious Wars. New York: W.W. Norton and Company.
Lockyer, R. (1974). Habsburg & Bourbon Europe 1470-1720. London: Longman.
Maland, D. (1973). Europe in the Sixteenth Century. London: Macmillan.
Merriman, J. (1996). A History of Modern Europe. New York: W.W. Norton and Company.
Munck, T. (1993). Seventeenth Century Europe 1598-1700. London: Macmillan.
Pennington, D. H. (1989). Europe in the Seventeenth Century. London: Longman.
Wernham, R. B. (1968). The Counter-Reformation and Price Revolution. New York: Cambridge.
PRICE REVOLUTION
(summary)
‘The fall in real wages took place against a backdrop of inflation that has come to be called the ‘Price Revolution’. Between 1500 and 1650, cereal prices incresed between five and sixfold, manufactured goods between two and threefold. Most of the rapid increse came in he second half of the sixteenth centurya result of both population growth and and the import of precious metals from the New World, America. Sixteenth century governtments understood little about the relationship between money supply and prices. Gold and silver from America flooded the international economy, raising commodity prices. As prices rose so did the deficitsof the state, which was the largest purchaser of both agricultural and manufactured goods. With huge deficits, states began to devaluate their coins in the mistaken belief that this would lower prices resulted in greater debt. The price revolution was felt throughout the Continent and played havoc with government finances, international trade, and the lives of ordinary people. A 500 per cent inflation in agricultural products over a century is not much by modern standards. Compounded, the rate averages less than 2 per cent a year. But the price revolution did not take place in a modern society or within a modern market economy. In the sixteenth century, this level of prices disrupted everything.’
PRICE REVOLUTION
The people of Europe during the sixteenth and seventeenth century became more money conscious than tehy has ever been before. Between 1521 and 1660 Spanish brought home from their Mexian ans Peruvian mines eighteen thousand tons of bullion, enough to treble the existing European silver supply and to enlarge the Europe gold supply by 20 per cent. Over half of this precious metal flooded in during the forty years of peak production, 1580-1620. Great pains were taken to funnel all of the treasure into Spain. Every spring a Spanish fleet, convoyed by warships, carried a year’s production of silver ingots from Carribean to Seville. Yet relativerly little of the precious metal remained permanently in Spanish hands. A small quantity was captured by English and Dutch pirates in their raids to the Spanish treasure fleets. A bit of them was smuggled into western Europe by Spanish colonists. The Spanish King did receive more than 25 per cent of the bullion which landed at Seville, but he could not keep it because he had to pay some payments to his foreign creditors and his armies those are in foreign countries. Most of the remained part went to the foreign merchants. It can be estimated that in 1600 nearly a third of Seville bullion was used to pay for French imports alone. In all those years Spain’s treasure circulated throughout western Europe.
Between the beginning of the sixteenth century and the middle of the seventeenth century Europeexperienced a long and startling inflationary spiral. Spain was hit first, because all the actions were the result of their treasury movements, and Spain was hit hardest. Spain paid four times as much for their commodities in 1600 as in 1500. In the twenteenth century, there was a higher inflation rate than this but sixteenth century Europewere not accustomed to this. For them, the price rise was a veritable price revolution. And it is vital to ask here: What caused it? In the view of Earl J. Hamilton, the inflation was directly related to the flood of American bullion. He has calculated that Spain’s annual bullion imports and price levels correlated very closely throughout the sixteenth century,. According to him as sson as the bullion imports declined in he seventeeth century, prices got stabilized. Hamilton’s econimic perspective has been disputed by other economic historians but some historians thought like me. In fact, we cannot accuse only the flood of metal froom America to Europefor the price revolution.
Another important factor is the rapid population increase. Population increase in the sixteenth century had substantial effect on theinflation rate.tehre was not only more omney to spend on any given commmodity but more demand for that commodity. The relaxation of the population pressure after 1590s, after price revolution’s effects got invisible, helps us to understand why prices stabilized again in the mid-seventeenth century. The increase in the proportion of Europe’s population living in towns, though slight until the 19th century, coupled wit economic diversities, meant that there were much more people to feed, however proportionately slightly fewer producers to staple foods. Urbanisation also contributed to increased trade between Europe’s trade regions, which made prices more responsive to changes in demand, and provided a channel for the flow of silver from Spain through western and then central Europe and then Ottoman Empire.
In every state in western Europe the price of goods have doubled or trebled between 1500 and 1650. In England the inflation was almost as severe as Spain. In the late sixteenth century, unskilled laborers in Spain, England, Franceand Germany must often have exhausted their entire wages in paying for minimum requirements of their life. Elderly people who live with their savings and people who has fixed incomes like teachers had to suffer all the happenings. To illustrate, if the landowner rented his land, he hired wage wage laborers to produce cashcrops, he was more likely to prosper. I think it is possible to conclude that large-scale farmers, if they were energetic, efficient, they could keep pace with the rising prices. I can also conclude that landed property, traditionally the only honorable form of wealth, was not in the sixteenth and seventeeth centuries’ best profit sources.
Among the most important effects of price revoluion was the strain it placed upon government budgets. Traditionally, taxation had been closely placed upon to the agriculture. Prices drew a considerable percentage of their revenue from their own private lands, te rest came from taxes from the farms and crops. The peasants were hit hardly by the price rise and their income rose mcuh more slower than the government expenses. To illustrate, in France the principal source of royal revenue was the taille, a low yield tax on peasant’s income. It did not occur to the sixteenth century French government that commerce offered a far more supply of capital than agriculture, and also for me that is the most effective way to increase government’s revenues and to encourage economic growth rate.
The era of the financial crisis continued in the first half of the seventeenth century. I can tell three factors for this progress. In my opinion the answer lies in a combination of sevral factors. First, there was a general seventeenth century rise in living standars among property holders and in accumulation of surplus wealth. Second, there was a wider circulation of specie and increased reliance on credit, both facilitated the use of Europe’s wealth as capital. And third, governments were devising better techniques for tapping the wealth by taxing the consumer more and the producer less.
The Price Revolution is a boon on the farmers and planters and the other directors of agricultural industry. Old prices for the products of the farm are doubled, or tripled, and sometimes even quadrupled. Though agricultural labor is scarce and its wages high, though the farmer pays more for machinery and fertilizers and manufactured goods, yet on the whole he is a great gainer in this era of high prices. This is the time to pay off the farm mortgage. The farmer who mortgaged his land for $3,000 when cotton was $75 a bale received the equivalent of forty bales of cotton. Now, if his cotton brings $150 a bale or more, he can pay off the debt by selling twenty bales or less. Naturally the great increase of farm profits and the amount of agricultural and other gains seeking investment have caused in some parts of the country an extensive speculation in farm lands. Prices are often reached which even present agricultural profits do not justify, and the chances are that, if the present prices of farm products seriously decline, some owners will have farms on their hands which will not pay a fair income on the investment.
The inflation of c.1470-1620, the effects of price revolution eventually petered out with the end of the initial rush of New World bullion, though prices remained around or slightly below the levels of the first half of the 17th century until the onset of new inflationary pressures in the latter decades of the 18th.
PRICE REVOLUTONS IN HISTORY
Until now, the world has seen four great waves of inflation and stability since 1200. Each of these waves began with a long inflation. Medieval Price Revolution (1200-1300), the 16th Century Price Revolution (1520-1620), the 18th Century Price revolution(1720-1820), and the 20th Century Price Revolution (1896-1897) were followed by long periods of stability. The interesting part is this, an important price movements occur and then a long period of stability happens. Another interesting point is, in each price revolution population grew and real wages felll, while returnson capital and land ownership rose and such measures of social discord as crime and illegitimacy increased. Governments saw increasing fiscal crises, and revolution and war become more prevalent. In the succeeding periods of stability, real wages rose, returns on land and capital fell, and social fiscal and political harmony were restored.
The important point here is, the first stage of each price revolution is one of progress, stability and optimism, followed by an event such as price revolutions and wars. The periods of equilibrium and stability were times of the great cultural strides and social and political progress: to illustrate, the Renaissance Equilibrium followed Medieval Price Revoluion, the Enlightenment Equilibrium followed the 16th Century Price Revolution and the Victorian Equilibrium came just after the 18th Century Price Revolution.
Today if we examine the previous price revlolutions, we will be seeing rapid rises in the price of food and energy, which habitually get excluded from inflation price indexes. As in past price inflations, energy prices are rising more rapidly than general manufactured goods. The reason manufactured goods are rising less rapidly is because of economic progress. The supply of manufactured goods can be expanded more rapidly to meet rising demand from a growing world population. The rising price of commodity goods is further exacerbated by monetary factors, which are becoming self-reinforcing. The quantity of money is expanding globally as governments and their central bankers try to meet the growing demands of their constituents. Government deficits are also soaring. What the government can’t raise in taxes, they make up for by printing more money.
The result is that prices continue to rise on all the things you need, while manufactured goods prices remain moderate due to increasing worldwide production. More people are living closer to the margin as the cost of all basic necessities rise as reflected in the chart of the CRB index. Rising prices are leading wealth inequality as those least able to afford it are hit the hardest by the rising costs of life’s basic needs of food, energy, and shelter. As prices rise, so does the crime rate and societal tensions. These conflicts and price increases will continue until they lead to a culminating crisis, either a war, an environmental catastrophe, an economic depression, or some new plague concocted from the vials of some terrorist's lab. History is repeating itself once again. As Turks say: History is made up of repetations, maybe not in the same way, but in a familiar rhythm.
WHAT IS INFLATION?
After explaining the price revolutions I want to explain briefly what the inflation is. Today many people talk about inflation, yet they do not know exactly what the inflation is and also inflation has become a poplular topic in this essay, I want to bring light to this point.In economics, inflation is the rise in the general level of prices. This is equivalent to a fall in the value or purchasing power of money. It is also the opposite of deflation.
Inflation may be caused by an increase in the quantity of money in circulation. This has been seen most graphically when governments have financed spending in a crisis by printing money excessively, often leading to hyperinflation where prices rise at extremely high rates. Another cause can be a rapid decline in the demand for money as happened in Europe during the black plague.
There are a number of methods which have been suggested to stop inflation. One method often attempted is simply instituting wage and price controls, which were tried in the United States in the early 1970s. However, most economists regard price controls as counterproductive in that they tend to distort the functioning of the economy. Monetarists emphasize increasing interest rates in the hope of reducing the money supply. Keynesians emphasize reducing demand, often through fiscal policy, using increased taxation or reduced government spending to reduce demand. Supply Siders advocate managing the pool of money in such a way as to fix the exchange rate between the currency and some reference currency such as gold. Types of inflation are demand pull inflation, cost push inflation and inflation induced by adaptive expectations, often termed the "wage-price spiral" . To sum up, simply inflation means an increase in the money supply, which was the cause of price increases. However some economists still prefer this simple meaning of the term, rather than to mean the price increases themselves.
PRICE REVOLUTION AND OTTOMAN STATE
The years of the warfare against Persia and Austria saw the Ottoman government confronted with serious financial difficulties. Revenue and expenditure were calculated in terms of the silver akçe or asper, the basic unit of coinage in the empire. The Ottomans, like the people of Europe, had suffered hitherto from a recurring shortage of the precious metals, gold and silver- a shortage so acute that it threatened at times to disrupt their silver based system of coinag. To overcome such moments of stress and strain the sultans controlled the silver mines, favoured the import and discouraged the export of coin and ullion, enlarged those sectors of the state business which involved transactions in kind rather than in cash, and also resorted at need to a measure of debasement in the coinage. This situation underwent a marked change, however, when the empire, from about 1580 onward, began to feel the effects of a severe inflation.
American silver has been regarded as a major cause of the price revolution which was affecting Europe at tat time. The great increase in the amount of silver avaiilable brought about, so it is argued, a prolonged inflation. Silver, flowing from the Americans into Spain and thence to Genoa and Ragusa, penetrated thereafter into the Ottoman Empire. As it moved eastwards through the channels of international commerce, the flood of slver left in its wake simiilar consequences in each of the countries that it overran, that is, a rapid rise in prices, depreciation of the coinage and debasement, counterfeiting, speculation and the like. This quantitaive view of the ‘price revolution’, this emphasis on the sudden large expansion of the circulating medium has been subject of late to much criticism.
Recent analyses have suggested that the rise in prices was not due to the influx of precious metals from the New World, America, but to other factors of equal or even greater effect. Attention has been drawn to the importance of an increase in population more rapid than the parallel expansion of the means of subsistence and thus productive of grave social imbalance- and there is indeed evidence to show taht the population of the Ottoman Empire, above all in Minor Asia, was increasing to a considerable degree at that time. That ‘price revolution’ should be attributed to the interaction of a number of different causes rather than to the action of one single cause.
In my opinion, it is too difficult to believe that the eastward movement of silver had nothing to do with the inflation which beset the Ottoman Empire and Ottoman government. It constituted a factor of disturbance in the complex and adverse situation now facing the Ottomans. Teh inflation occured at that time when the Porte was obliged to find and disburse enormous sums in connection with the long wars, first against Persia and then the second one against Austria to countenance a notable expansion in the paid forces and personel of the central regime.
The Porte decreed in 1584 a reduction in the silver content of akçe or asper from one-fifth to one- eighth of a dirham in order to alleviate the fiscal problems of that time. This basement of the coinage brought great profits to a government hard pressed to meet the highcost of the Persian war. It was also fraught with serious consequences. The ratio of akçe to the ducat declined from 60 to over 200. foreign coins began to drive teh debased Ottoman issues even from the internal and with a depreciating coinage, became more and more exorbitant in its fiscal measures and demands and thus aggravated the distress felt amongst the mass of the population as a result of the rise in prices.
COMMENT OF THE STUDENT
England and Dutch republics were fiscally the most effective seventeenth century states because they were the most commercialized. In the era of the rpice revolution, commercial profits proved to be mcuh more elastic than agricultural or indusrialprifits. I think in a crisis the most important point to pay attention is this ‘trade’ point. Ottoman Empire wanted to solve this commerce problems by Capitulations. They could guess the importance of the commerce profits rather than the industry or agriculture. However at this point they could not control the flood of silver or other metal coins, precious metals coming from wetern Europe, especially because of Capitulations. In Dutch and England, foreign trade profits were the greatest revenue of the king, however this foreign trade turned out to be blessing in disguise for Ottoman Empire because tha all empire could not receive the planned revenue especially between French and Ottoman State.
In addition, another way to overcome an economic crisis is to put taxes more on to consumers rather than producers. Production is the key for increasing the GDP and economic growth. I think it is not possible to overcome a crisis by burdening all taxes on producers because of their excess money. We have to think for a while and put burden of the tax a bit more on consumers. As we see in Turkey, the tax that was put burden on producers can not solve any problem. As production is the key factor, no one should harm this important point by high level of taxes.
For most of its six-century existence, the Ottoman Empire is best characterized as a bureaucratic, agrarian empire. The economic institutions and policies of this entity were shaped to a large degree by the priorities and interests of a central bureaucracy. As we mentioned before, it is vital to put taxes on consumers rather than producers. As I said before Ottoman Empire is based on agriculture and agrarians are the productive sector of the all Empire at that time. It was an important mistake that Ottoman governors made by putting heavy taxes on those producers.
Until the end of the sixteenth century, the rise of the Ottoman Empire was closely associated with military conquest. At that time agriculture continued to provide the economic livelihood for close to 90 percent of the population and key fiscal support for the Ottoman state. I think, puting taxe burdens on producers means punishing the 90 percent of the all empire because the all state was characterized by the ‘timar’ system. In the all empire, I think the first vital problems apperared with the production system and than the all institutions, like military.
It can be said that Ottoman industry was adversely affected by the price movements. Ottoman guilds, especially those in coastal regions, were hurt by the shortages arising from the exportation of raw materials to Europe. With the help of the industrial revolution also, European countries managed to sell their products in Ottoman State, that is influenced by price movements and Capitulations, at much more cheaper prices. Ottoman governors could not limit the foreign trade and those manufactures, precious metals continued to come from western Europe. At this point, the all state paid this crucial fault’s cost. All state encountered economic problems because of not controlling and limiting foreign commerce.
All of these show that Istanbul experienced a significant wave of inflation from the late sixteenth and to the middle of the seventeenth century when the prices increased by about five fold. This is the period usually associated with Price Revolution of the sixteenth century. The indices also show, however, that there occurred a much stronger wave of inflation beginning late in the eighteenth century and lasting into the 1850's when the prices increased by 12 to 15 times. Most of the latter increases were associated with the debasements that began in the 1780's and accelerated during the period of Mahmud II (1808-1839). In contrast, the overall price level was relatively stable from 1650 to 1780 and from 1860 until World War I.
In reality, the start of the rise in prices predated the large-scale influx of bullion from across the Atlantic, reflecting in part a quintupling of silver production in central Europe in 1460-1530: though this output fell by two-thirds by the 1610s, it was significant in fuelling the early stages of inflation and undermining a price regime in place since the previous upsurge in silver production in 1170-1320. some economic historians estimated that in 1600 nearly a third of the Seville’s bullion that we mentioned before was used to pay for foregin debts and for imports alone. The rise of the prices are very closely related to the flood of metal, however at this point it s crucial to control this flood. I think it is the most important and the easiest way of preventing a crisis. We can end a crisis before it starts with controlling our trade and commerce, the precious metals coming from foreign countries. If Ottoman Empire could achieve this, or other European countries, they would not have been influenced by the price revolution much.
We can add demographic factors for the price revolution’s happening reasons. Demographic factors also contributed fundamentally to upward pressure on prices, with the revival of European population growth after the century of depopulation and demographic stagnation that had followed the Black Death. Europe's population was ~60 million in 1500. Increased population placed greater demands on an agricultural area that had contracted significantly after the 1340s, or had been converted from less intensive livestock production. The increase in the proportion of Europe's population living in towns, though slight until the 19th century, coupled with economic diversification, meant that there were more people to feed, but proportionately slightly fewer producers of staple foods. Urbanisation also contributed to increased trade between Europe's regions, which made prices more responsive to distant changes in demand, and provided a channel for the flow of silver from Spain through western and then central Europe. It is easier to control foreign trade or commerce, precius metals coming from foreign countries, rather than the population. It is very hard to control population. Rapid population increse was another crucial factor for price revolution and I think governments of that time had to pay much more attention to commerce rather than population because even today it is too hard to control population growth rate.
In addition the price revolution that occured in the 16th century has some special features than the other price revolutions. As I mentioned before the first stage of each price revolution is one of progress, stability and optimism, followed by an event such as price revolutions and wars. The periods of equilibrium and stability were times of the great cultural strides and social and political progress. Each price revolution contains some common features like these. However 16th century price revolution has another feature. It contains the factor of foreign trade. The precious metals taht flooded from New World and foreign trade are some causes of 16th century Price revolution. This feature makes 16th Price Revolution special then the other ones because it is the only one contains these features.
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