We are now slowly emerging from the scourge of Covid-19 and the main change in our economic management has been a massive surge in state spending, together with a call for a “Great Reset” to erode our freedoms further. It is therefore worth examining the emergence from two previous celebrated English outbreaks of plague, in 1348-49 and 1665, to see what they did differently. After doing so, one is forced to the conclusion that Middle Ages and Early Modern governments had more sense than we do.
The plagues of 1348-49 and 1665 left those societies with the same problems as we have, albeit in different degree. The deaths of so many prime age workers left businesses with a shortage of labor, tending to drive up wages – this was especially apparent after the death toll of 1348-49, much more severe than our own. Supply chains were disrupted, so there was a tendency for prices of food and other essential goods to rise and scarcities to appear. Infrastructure and societal patterns were disrupted, so there was a demand to “build back better” – this was especially true after the plague of 1665 since it was quickly followed by the devastating 1666 Great Fire that destroyed two thirds of the buildings in London.
After 1665, Charles II’s government focused on the Infrastructure problem. It made no attempt to meddle in the labor market, unlike its predecessor three centuries earlier, nor did it increase public spending in general or reduce interest rates – indeed, so tight were the finances at that time that public spending was squeezed – we hear from Samuel Pepys’ diaries of strict economies being undertaken and suppliers remaining unpaid, and in the following year the Navy was left unmanned, so the Dutch sailed up the River Medway (a tributary of the Thames) and burned much of it. Overall, the country was leading up to the 1672 Great Stop of the Exchequer – it was only after that event that its finances stabilized as trade rose rapidly.
However, in one area, the government of Charles II was proactive. It commissioned rebuilding plans from Christopher Wren and Robert Hooke while forbidding private rebuilding of the fire-prone buildings and narrow streets of mediaeval London. After inspection, the government adopted Wren’s rebuilding plan, laying out a new street pattern that exists in the City of London today, and forcing building in brick, without street overhangs. Wren also designed and oversaw the building of 50 new City churches, including the sublime new St. Paul’s Cathedral, which was completed in 1711, a decade before his death. A Monument designed by Wren and Hooke was erected near where the Great Fire began; it was 200 feet tall, the tallest structure in the City of London other than St. Paul’s.
However much the Biden administration spends on infrastructure, it will not be of the architectural quality of Wren’s churches and the remainder of rebuilt Restoration London. Indeed, the Administration recently took a step backwards architecturally, by repealing President Trump’s order that all new building in Washington should be Classical in style – this will cause new buildings to be constructed in the architecture-school-fashionable Modernist-Brutalist mode that has disfigured so many of our cities.
If Brutalism could be avoided, there is a reasonable criticism of uniform classicism in Washington’s buildings; as Lord Curzon said of Versailles, it is “Architecturally correct, but monotonous” (as the owner of the rather better Kedleston he was justified in offering that opinion). We would do better to go back beyond the derivative Greeks to the ancient cultures of Egypt and Babylon. Instead of rows of identical horizontal plinths and vertical columns, we could then have a much more interesting architecture of 45-degree angles, and ziggurat shapes with huge stone stairways winding round the outside and a gigantic bull on top. Look at the paintings of J.W. Martin such as “The Fall of Nineveh” for inspiration! A serious attempt to reproduce the building styles of ancient Nineveh would at last make Washington DC worth visiting for the architecture.
If Charles II’s infrastructure program beat anything Biden is likely to manage, we can also criticize Biden’s attempts at economic recovery, with reference to the policies pursued after 1348-49. On that occasion, wages rose sharply because of an acute shortage of labor to cultivate the suddenly excessive amount of land available. Consequently, as I described a few weeks ago, Parliament, dominated by landowners, passed the Statute of Labourers, 1351, setting wage rates for a variety of occupations, so as to prevent the working classes from bidding up wages. The result was continued labor shortages and eventually a freeing of the serfs, a highly desirable outcome in the long-term for all but the feudal barons.
This time, as in 1350-51, the barons are attempting to get the serfs back to the feudal holding, demanding that they return physically to their offices. “If you want to get paid New York rates, you work in New York” said James Gorman, CEO of Morgan Stanley in a message to staff this week. You can sense the fear behind his words; too many of his staff may well have discovered that, being among the most highly qualified and financially savvy people in the world, they have not the slightest need to trap themselves in the overpriced, filthy and dangerous canyons of New York. Gorman has given them until September 6 to return to full-time occupation of the office; that should be plenty of time in today’s job market to obtain alternative employment somewhere where the sun shines, the junkies don’t attack you and the employer has a more flexible attitude to remote work. Like the serfs of 1350, those of 2021 have discovered that there are other alternatives available.
The principal policy advantage of the medieval and early modern periods over today was in monetary policy. Neither had significant quantities of paper money. The Chinese Song dynasty’s paper money experiment had ended in inflation by 1350, as the Mongol invaders proved incapable of managing it with the Song’s tea-ceremony precision. Thus, at that stage money really consisted only of the various silver currencies created by the powers of Europe, most notably in northern Italy. In the 1660s, there was as yet no banking system in England that issued significant quantities of notes, and the wild monetary experiments of the 1690s in England and 1716-20 in France were still well in the future. Furthermore, there was still no long-term government debt market (in Britain – the Netherlands already had a well-functioning one) so there was no possibility of Keynesian “stimulus.”
Therefore, in the 1660s as in the 1350s, the money supply was almost entirely silver and gold coin, and the government could do nothing to stimulate it, or to run a budget deficit beyond a tiny and temporary amount. Consequently, fiscal and monetary policy were automatically much sounder than in 2021. Without excessive expansion of the money supply, interest rates remained at normal levels, giving appropriate signals to the market about which projects deserved funding.
Real interest rates declined somewhat after 1348-49, as they should have; the same amount of gold and silver coin was now supporting an economy that had a third fewer people in it. This stimulated wage rises, and further enriched the working-class ex-serfs, which not only contributed to a “Merrie England” but in the very long run ensured that the ex-serfs remained free and the English labor market moved onto a true willing-buyer willing-seller basis. After neither plague was there an artificial 25% increase in the money supply, as the Fed has inflicted on us in 2021. As the monks running policy in 1350 could have told you, that merely leads to price increases, since the demand for money has at least modestly declined with the loss of working and consuming lives.
The rigidity in the economic system in 1348-49 and 1665 that prevented either government deficit financing or rapid increases in the money supply was unquestionably bad for the economy in that it limited the creation of new businesses. A more flexible system, with widespread small-scale banking, such as Britain had in 1760-1844 is much better for that purpose. However, we will all soon regret the ability of modern governments to print money whenever they feel like it. To that extent, mediaeval and early modern economic policy was greatly superior to today’s. The architecture of their infrastructure program was better, too.
(The Bear’s Lair is a weekly column that is intended to appear each Monday, an appropriately gloomy day of the week. Its rationale is that the proportion of “sell” recommendations put out by Wall Street houses remains far below that of “buy” recommendations. Accordingly, investors have an excess of positive information and very little negative information. The column thus takes the ursine view of life and the market, in the hope that it may be usefully different from what investors see elsewhere.)