Historically Speaking: Inflation Once Had No Name, Let Alone Remedy

Empires from Rome to China struggled to restore the value of currencies that spiraled out of control

The Wall Street Journal

May 27, 2022

Even if experts don’t always agree on the specifics, there is broad agreement on what inflation is and on its dangers. But this consensus is relatively new: The term “inflation” only came into general usage during the mid-19th century.

Long before that, Roman emperors struggled to address the nameless affliction by debasing their coinage, which only worsened the problem. By 268 AD, the silver content of the denarius had dropped to 0.5%, while the price of wheat had risen almost 200-fold. In 301, Emperor Diocletian tried to restore the value of Roman currency by imposing rigid controls on the economy. But the reforms addressed inflation’s symptoms rather than its causes. Even Diocletian’s government preferred to collect taxes in kind rather than in specie.

A lack of knowledge about the laws of supply and demand also doomed early Chinese experiments in paper money during the Southern Song, Mongol and Ming Dynasties. Too many notes wound up in circulation, leading to rampant inflation. Thinking that paper was the culprit, the Chongzhen Emperor hoped to restore stability by switching to silver coins. But these introduced other vulnerabilities. In the 1630s, the decline of Spanish silver from the New World (alongside a spate of crop failures) resulted in a money shortage—and a new round of inflation. The Ming Dynasty collapsed not long after, in 1644.

Spain was hardly in better shape. The country endured unrelenting inflation during the so-called Price Revolution in Europe in the 16th and 17th centuries, as populations increased, demand for goods spiraled and the purchasing power of silver collapsed. The French political theorist Jean Bodin recognized as early as 1568 that rising prices were connected to the amount of money circulating in the system. But his considered view was overlooked in the rush to find scapegoats, such as the Jews.

ILLUSTRATION: THOMAS FUCHS

The great breakthrough came in the 18th century as classical economists led by Adam Smith argued that the market was governed by laws and could be studied like any other science. Smith also came close to identifying inflation, observing that wealth is destroyed when governments attempt to “inflate the currency.” The term “inflation” became common in the mid-19th century, particularly in the U.S., in the context of boom and bust cycles caused by an unsecured money supply.

Ironically, the worst cases of inflation during the 20th century coincided with the rise of increasingly sophisticated models for predicting it. The hyperinflation of the German Papiermark during the Weimar Republic in 1921-23 may be the most famous, but it pales in comparison to the Hungarian Pengo in 1945-46. Inflamed by the government’s weak response, prices doubled every 15 hours at their peak. The one billion trillion Pengo note was worth about one pound sterling. By 1949 the currency had gone—and so had Hungary’s democracy.

In 1982, the U.S. Federal Reserve under Paul Volcker achieved a historic victory over what became known as the Great Inflation of the 1960s and ‘70s. It did so through an aggressive regimen of high interest rates to curb spending. Ordinary Americans suffered high unemployment as a result, but the country endured. As with any affliction, it isn’t enough for doctors to identify the cause: The patient must be prepared to take his medicine.

Historically Speaking: The Long Road to Protecting Inventions With Patents

Gunpowder was never protected. Neither were inventions by Southern slaves. Vaccines are—but that’s now the subject of a debate.

The Wall Street Journal

May 20, 2021

The U.S. and China don’t see eye to eye on much nowadays, but in a rare show of consensus, the two countries both support a waiver of patent rights for Covid-19 vaccines. If that happens, it would be the latest bump in a long, rocky road for intellectual property rights.

Elijah McCoy and a diagram from one of his patents for engine lubrication.
ILLUSTRATION: THOMAS FUCHS

There was no such thing as patent law in the ancient world. Indeed, until the invention of gunpowder, the true cost of failing to protect new ideas was never even considered. In the mid-11th century, the Chinese Song government realized too late that it had allowed the secret of gunpowder to escape. It tried to limit the damage by banning the sale of saltpeter to foreigners. But merchants found ways to smuggle it out, and by 1280 Western inventors were creating their own recipes for gunpowder.

Medieval Europeans understood that knowledge and expertise were valuable, but government attempts at control were crude in the extreme. The Italian Republic of Lucca protected its silk trade technology by prohibiting skilled workers from emigrating; Genoa offered bounties for fugitive artisans. Craft guilds were meant to protect against intellectual expropriation, but all too often they simply stifled innovation.

The architect Filippo Brunelleschi, designer of the famous dome of Florence’s Santa Maria del Fiore, was the first to rebel against the power of the guilds. In 1421 he demanded that the city grant him the exclusive right to build a new type of river boat. His deal with Florence is regarded as the first legal patent. Unfortunately, the boat sank on its first voyage, but other cities took note of Brunelleschi’s bold new business approach.

In 1474 the Venetians invited individuals “capable of devising and inventing all kinds of ingenious contrivances” to establish their workshops in Venice. In return for settling in the city, the Republic offered them the sole right to manufacture their inventions for 10 years. Countries that imitated Venice’s approach reaped great financial rewards. England’s Queen Elizabeth I granted over 50 individual patents, often with the proviso that the patent holder train English craftsmen to carry on the trade.

Taking their cue from British precedent, the framers of the U.S. Constitution gave Congress the power to legislate on intellectual property rights. Congress duly passed a patent law in 1790 but failed to address the legal position of enslaved inventors. Their anomalous position came to a head in 1857 after a Southern slave owner named Oscar Stuart tried to patent a new plow invented by his slave Ned. The request was denied on the grounds that the inventor was a slave and therefore not a citizen, and while the owner was a citizen, he wasn’t the inventor.

After the Civil War, the opening up of patent rights enabled African-American inventors to bypass racial barriers and amass significant fortunes. Elijah McCoy (1844-1929) transformed American rail travel with his engine lubrication system.

McCoy ultimately registered 57 U.S. patents, significantly more than Alexander Graham Bell’s 18, though far fewer than Thomas Edison’s 1,093. The American appetite for registering inventions remains unbounded. Last fiscal year alone, the U.S. Patent and Trademark Office issued 399,055 patents.

Is there anything that can’t be patented? The answer is yes. In 1999 Smuckers attempted to patent its crustless peanut butter and jelly sandwich with crimped edges. Eight years and a billion homemade PB&J sandwiches later, a federal appeals court ruled there was nothing “novel” about foregoing the crusts.

WSJ Historically Speaking: Why Walls Rarely Keep Enemies Out

Photo: DEAGOSTINI/GETTY IMAGES

Photo: DEAGOSTINI/GETTY IMAGES

News of the latest theft of sensitive American information— this time of some 4 million records from the federal government’s Office of Personnel Management, allegedly by Chinese hackers—highlights the unfortunate truth about defensive walls. They may offer great psychological  comfort, whether as firewalls in the online world or stone walls and natural barriers in the real one, but they rarely work.

In the Book of Joshua, the Israelites engineered a brilliant victory by stamping their feet for seven days and blasting the walls of Jericho with their trumpets. In “The Aeneid,” Virgil described how the Trojans brought about their own downfall by bringing the famous wooden horse inside their gates. In his monumental “The Histories,” Herodotuslauded the courageous but futile last stand of the Spartans at the Battle of Thermopylae (480 B.C.) after they were betrayed by Ephialtes of Malis, who showed the Persians a secret route through the mountains that led to the back of the Greek lines. But these striking failures didn’t deter subsequent generations from believing that walls could keep them safe.

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