BEGINNING about the year I500, Europe ?) underwent what is now known as the price revolution, a secular upward movement of prices that is often ascribed to the influence of imports of precious metals from the New World. In many parts of the world similar movements can be observed today. While their causes are different and their incidence is more limited in scope, the current movements are sufficiently persistent and intensive to warrant comparison with the price revolution. Considerable attention has been paid to the inflations that various writers have observed in a number of Latin American countries. It seems, however, that the secular character of the phenomenon is not fully appreciated. The example of Brazil is outstanding in this respect and will be discussed in this paper. While similar trends may prevail in other Latin American countries, much specialized research will be necessary to obtain long-term series of prices and other relevant data. The work of the International Scientific Committee on Price History, which includes a number of remarkable studies on the movement of prices in European countries, deserves to be extended to cover price history in the Americas. The denomination of the currency in Brazil is apt to illustrate the price experience in that country. At one time, the real was the unit of money. Although it depreciated during the colonial period, the deterioration of its value apparently became pronounced only in the nineteenth century.2 The real fell into disuse as a result of this and was gradually replaced by a new unit, mil-redis, which contains one thousand units of the old currency. At present one milreis is worth five United States cents, and the value of one real, one thousandth of five United States cents, is too low to have any meaning. In I942 the cruzeiro was introduced as the monetary unit. It is equal to one mil-reis, but is, unl k the latter, subdivided only into one hundred smaller units, called centavos. As one centavo is worth only the hundredth part of five United States cents, the commercial relevance of this unit was all but nil even at the time of its creation. The smallest unit of practical significance is ten centavos, one-half of a United States cent. Depreciations of these magnitudes may seem small compared with the great German inflation and similar events which attended the close of the First and Second World Wars. But it must be considered that these were concentrated within a few years, while the Brazilian experience extends over more than a century. Thus the economic and social impacts of both types of phenomena are quite different. A violent inflation of short duration, followed by stabilization, is of the nature of a revolutionary upheaval that for the time being disturbs the balance of society. During the ensuing period of stability, however, tendencies are allowed to operate which might make for a return to the earlier position of social equilibrium. A middle class destroyed by a violent inflation of short duration may be revived under subsequent conditions of stability. In countries, however, where prices move upward almost continually, the formation of a strong middle class is prevented. It is perhaps for this reason that the view has been stated that neither capitalism itself nor the social institutions associated with it, democracy among them, can work efficiently and with comparative smoothness except on a falling trend in prices. 3 The relevant data for Brazil are shown in Table i. They indicate that from I840 to I940 prices increased thirteen-fold, and from I840 to I945, 28-fold. During the same period, the value of the leading foreign currency increased eight to ten times. The economic development of the country is reflected in the much more 'The research required for the preparation of this paper was facilitated by a Guggenheim Fellowship. 2 See Roberto C. Simonsen, Histo'ria Econo'mica do Brasil, 15oo-1820 (second edition, Sao Paulo, I944), Vol. I, p. I07. 3 Joseph A. Schumpeter, Business Cycles, Vol. 2 (New York, I939), pp. 465 ff.
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Apr 1, 1993
Freddy Delsaen 
Open Access