Tuesday, June 3, 2014

A US Wholesale Price Index 1860–1914

Below is a US wholesale price index graph from 1860–1914, with data from Hanes (1998).

The graph shows the inflation during the American civil war and the subsequent post-bellum deflation.

But it is also widely accepted that there was an anomalous period of deflation, not just in America, but throughout the world from 1873 to 1896 (Capie and Wood 1997; Saul 1985).

This is also reflected in the data, though it was clearly not continuous: there were brief inflationary periods within the 1873 to 1896 period, even though there was a persistent long-term deflationary tendency. Many business people at the time seem to have vehemently complained about the “deflation of profits” and “of prices.” There is considerable evidence (here, here, here) that in the UK business expectations were shocked and that investment levels declined. Similar problems seem also to have happened in America, where this was the heyday of the free silver and bimetallist political movements that opposed the gold standard.

The political and economic problems seem to have ended after 1896: for then the world experienced an inflationary period from 1896 until 1914.

Further Reading
“The Profit Deflation of the 1890s,” June 13, 2013.

“Alfred Marshall’s Judgement on the “Depression” of 1873–1896,” June 13, 2013.

“S. B. Saul on the Profit Deflation of the 1873–1896 Period,” June 14, 2013.

“Real US GNP Growth Rates, 1873–1896,” February 26, 2012.

Capie, F. H. and G. E. Wood, 1997. “Great Depression of 1873–1896,” in D. Glasner and T. F. Cooley (eds). Business Cycles and Depressions: An Encyclopedia, Garland Pub., New York. 287–288.

Hanes, C. 1998. “Consistent Wholesale Price Series for the United States, 1860–1990,” in Trevor J. O. Dick (ed.), Business Cycles since 1820: New International Perspectives from Historical Evidence. E. Elgar, Cheltenham, UK and Northampton, MA.

Saul, S. B. 1985. The Myth of the Great Depression, 1873–1896 (2nd edn.), Macmillan, London.


  1. Do you have evidence for real us gnp growth rate estimates per capita? There was an elevated period of immigration to the us in the late nineteenth century.

    1. I do not see how this is relevant to the question whether deflation depressed business confidence and investment.

    2. I do not see how it could NOT be relevant. For example, how would you explain supposedly depressed business confidence accompanied by unprecedented rise of living standard as measured (sort of) by per capita GNP?

  2. Whereas in the postwar period, the united states had a restrictionist and racist immigration policy. It is easy to cheat, to make productivity higher than it is, by restricting the competition to domestic workers.

    1. http://socialdemocracy21stcentury.blogspot.com/2012/09/us-real-per-capita-gdp-from-18702001.html

  3. The real mystery, as far as I am concerned, is why us unemployment was so low in the 1880's period, given that real growth was small.

    Given the numerous recessions in the 1873-1896 period, its remarkable that the the u.s. performed as well as 3.67 percent. (if you use the balke and gordon estimates) shouldn't a laissez faire policy have performed much worse than a 0.19% difference between the postwar era and the late nineteenth?

  4. I'm very, very suspicious of all these figures. they don't jive at all LK. The 1880's in the US. was apparently a low growth period, yet unemployment was low???

  5. FYI,
    3-4% unemployment, which was the average during the 1880's is phenomenal, especially compared to now.

    1. It is likely the unemployment figures are wrong, and underestimates: