Changes in price levels in the 16th century profoundly affected every economic sector, but in ways that are disputed. The period witnessed a general inflation, known traditionally as the “price revolution.” It was rooted in part in frequent monetary debasements; the French kings, for example, debased or altered their chief coinage, the livre tournois, in 1519, 1532, 1549, 1561, 1571–75 (four mutations), and 1577. Probably more significant (though even this is questioned) was the infusion of new stocks of precious metal, especially silver, into the money supply. The medieval economy had suffered from a chronic shortage of precious metals. From the late 15th century, however, silver output, especially from German mines, increased and remained high through the 1530s. New techniques of sinking and draining shafts, extracting ore, and refining silver made mining a booming industry. From 1550 “American treasure,” chiefly from the great silver mine at Potosí in Peru (now in Bolivia), arrived in huge volumes in Spain, and from Spain it flowed to the many European regions where Spain had significant military or political engagements. Experts estimate (albeit on shaky grounds) that the stock of monetized silver increased by three or three and a half times during the 16th century.
At the same time, the growing numbers of people who had to be fed, clothed, and housed assured that coins would circulate rapidly. In monetary theory, the level of prices varies directly with the volume of money and the velocity of its circulation. New sources of silver and new numbers of people thus launched (or at least reinforced) pervasive inflation. According to one calculation, prices rose during the century in nominal terms by a factor of six and in real terms by a factor of three. The rate is low by modern standards, but it struck a society accustomed to stability. As early as 1568 the French political theorist Jean Bodin perceptively attributed the inflation to the growing volume of circulating coin, but many others, especially those victimized by inflation, chose to blame it on the greed of monopolists. Inflation contributed no small part to the period’s social tensions.
Inflation always redistributes wealth; it penalizes creditors and those who live on fixed rents or revenues; it rewards debtors and entrepreneurs who can take immediate advantage of rising prices. Moreover, prices tend to rise faster than wages. For the employer, costs (chiefly wages) lag behind receipts (set by prices), and this forms what is classically known as “profit inflation.” This profit inflation has attracted the interest of economists as well as historians; especially notable among the former is the great British economic theorist John Maynard Keynes. In a treatise on money published in 1930, he attributed to the 16th-century price revolution and profit inflation a crucial role in the primitive accumulation of capital and in the birth of capitalism itself. His analysis has attracted much criticism. Wages lagged not so much behind the prices of manufactured goods as of agricultural commodities, and inflation may not have increased profits at all. Then, too, inflation in Spain (particularly pronounced in the 1520s), or later in France, did not lead to a burst of enterprise. There is no mechanical connection between price structures and behaviour.
On the other hand, the price revolution certainly stimulated the economy. It clearly penalized the inactive. Those who wished to do no more than maintain their traditional standard of living had, nonetheless, to assume an active economic stance. The increased supply of money seems further to have lowered interest rates—another advantage for the entrepreneur. The price revolution by itself did not assure capital accumulation and the birth of capitalism, but it did bring about increased outlays of entrepreneurial energy. Landlords and peasants
The growing population in the 16th century and the larger concentrations of urban dwellers required abundant supplies of food. In the course of the century, wheat prices steadily rose; the blades of late medieval price scissors once more converged. Money again flowed into the countryside to pay for food, especially wheat. But the social repercussions of the rising price of wheat varied in the different European regions.
In eastern Germany (with the exception of electoral Saxony), Poland, Bohemia, Hungary, Lithuania, and even eventually Russia, the crucial change was the formation of a new type of great property, called traditionally in the German literature the Gutsherrschaft (ownership of an estate). The estate was divided into two principal parts: the landlord’s demesne, from which he took all the harvest, and the farms of the peasants, who supplied the labour needed to work the demesne. The peasants (and their children after them) were legally serfs, bound to the soil. These bipartite, serf-run estates superficially resemble the classic manors of the early Middle Ages but differ from them in that the new estates were producing primarily for commercial markets. The binding of the peasants of eastern Europe to the soil and the imposition of heavy labour services constitute, in another traditional term, the “second serfdom.”
In the contemporary west (and in the east before the 16th century), the characteristic form of great property was the Grundherrschaft (“ownership of land”). This was an aggregation of rent-paying properties. The lord might also be a cultivator, but he worked his land through hired labourers.
What explains the formation of the Gutsherrschaft in early modern eastern Europe? Historians distinguish two phases in its appearance. The nobility and gentry, even without planning to do so, accumulated large tracts of abandoned land during the late medieval population collapse. However, depopulation also meant that landlords could not easily find the labour to work their extensive holdings. Population, as previously mentioned, was growing again by 1500, and prices (especially the price of cereals) steadily advanced. Inflation threatened the standard of living of the landlords; to counter its effects, they needed to raise their incomes. They accordingly sought to win larger harvests from their lands, but the lingering shortage of labourers was a major obstacle. As competition for their labour remained high, peasants were prone to move from one estate to another, in search of better terms. Moreover, the landlords had little capital to hire salaried hands and, in the largely rural east, there were few sources of capital. They had, however, one recourse. They dominated the weak governments of the region, and even a comparatively strong ruler, like the Russian tsar, wished to accommodate the demands of the gentry. In 1497 the Polish gentry won the right to export their grain without paying duty. Further legislation bound the peasants to the soil and obligated them to work the lord’s demesne. The second serfdom gradually spread over eastern Europe; it was established in Poland as early as 1520; in Russia it was legally imposed in the Ulozhenie (Law Code) of 1649. At least in Poland, the western market for cereals was a principal factor in reviving serfdom, in bringing back a seemingly primitive form of labour organization.
No second serfdom developed in western Europe, even though the stimulus of high wheat prices was equally powerful. Harassed landlords, pressed to raise their revenues, had more options than their eastern counterparts. They might look to a profession or even a trade or, more commonly, seek at court an appointment paying a salary or a pension. The western princes did not want local magnates to dominate their communities, as this would erode their own authority. They consequently defended the peasants against the encroachments of the gentry. Finally, landlords in the west could readily find capital. They could use the money either to hire workers or to improve their leased properties, in expectation of gaining higher rents. The availability of capital in the west and its scarcity in the east were probably the chief reasons why the agrarian institutions of eastern and western Europe diverged so dramatically in the 16th century.