The Role of the Price Revolution in European Industrialization: An Explanation with Respect to the Social and Economic Transformation of Europe

Abstract

The industrialization period of Europe was a milestone in the economic history. Its consequences are still faced by modern nation states. Hence, the roots of the Price Revolution – the great inflation of sixteenth century which was experienced in Europe – and its effects to this process was questioned in this thesis. First of all the social transformation of Europe – transition from feudalism to capitalism – was briefly analyzed by considering the mercantilist era as well. This period was important for us to focus on the monetization of the economies. At the same time, the relationship between the precious metal inflow, minting activities and the inflation was questioned. To create an insight on the case, price indexes of various cities in Europe and price trends of different sectors were given. Then, the demand base of the Price Revolution – its relationship with the population – was considered in the frame of quantity theory of money. Secondly, the real effects of the inflation was deciphered. Thus, the claim of profit inflation was questioned via real wages. Also, consumption patterns was taken into question to make a consistent analysis on the real effects of the prices. To illustrate, it was questioned that whether there was any alternative consumption good or not. This was important to understand capital accumulation among sectors. Consequently, the magnitude of prices on profits was analyzed. All in all, costs of energy as an input – coal prices – was examined to measure the real cause of the profitability. Finally, the exaggerated effects of the inflation on the industrialization of European economies was pointed out. Instead of looking at the role of inflation in the production process, it was shown that it is more convenient to look its role on the social transformation which have carried the economies to the industrialization by investigating the enclosure movements as well.