The Great Wave: Price Revolutions and the Rhythm of History

by David Hackett Fischer

At the same time, rates of interest also rose very high. In the Italian city states, interest charged in actual transactions increased from 12 percent a year before 1230, to 20 percent later in the century. This rise was greater than the average increase of commodity prices. Real interest rose at a time when real wages were falling.39 Men of wealth were able to profit by the price-revolution in many ways. Powerful Italian merchants, for example, obtained laws that allowed them to insist on being paid in gold florins or ducats which held their value, but permitted them to pay wages and taxes in silver coins which were much debased. As a consequence, rich merchants grew richer, and the poor sank deeper into misery and degradation.40 This growing gap between returns to labor and capital was typical of price-revolutions in modern history. So also was its social result: a rapid growth of inequality that appeared in the later stages of every long inflation.