The Recovery of Prices

IF our arguments are to hold good at all, finally we must try to explain the recovery of prices after the mid-1890s. Fortunately our problems here are less serious, provided we do not worry too much about the precise turning-point. This is reasonable because the five years from 1896 to 1900 can be considered as a vigorous cyclical upswing — a home boom topped off by a war. 1895 can be viewed simply as the trough of an eight-year cycle. It is the trend after the turn of the century, a distinctly though not sharply rising one, that we must discuss. The money supply was certainly much augmented by the gold discoveries in Australia, South Africa and the U.S.A. In Britain Higonnet found that bank money rose at almost twice the rate from 1895 to 1914 as in the previous two decades. In addition, there was a renewed burst of Professor Rostow’s long gestation investment — gold mining itself, the Boer War, the pre-1914 burst of investment in armaments and new spurts of railway-building. There is evidence of both a recovery of world industrial production and a slowing down in the rate of growth of supply of raw materials and food-stuffs and this despite a continued fall in transport costs.