tury. Real wages increased during the great fall in prices, and complaints began to be made of the fall in real wages when prices began to move upwards. The charts constructed by Mr. Kitchin (Times Financial and Commercial Review, 1921) show that there is no close correspondence between movements in employment and movements in prices under ordinary normal conditions. The great and rapid increase in unemployment in the United Kingdom in 1021 might be partly ascribed to the stoppage of the progress of inflation and the check to speculation.
The fall in prices and in employment may also be partly as- cribed to the repudiation of contracts by foreign merchants when they were seen to be unprofitable. This facile repudiation of bargains is symptomatic of the laxity of moral fibre that follows on inflation. This weakening of business moral makes it more difficult for governments to meet the obligations of public indebtedness. There has been a revival of old ideas on lessen- ing the burden of public debts by disguised repudiation. It is said that the debts were incurred in depreciated money and therefore aught to be redeemed in depreciated money. It is proposed to stabilize the present level of purchasing power by changing the unit of value. How far such partial repudiation is necessary or desirable for any particular country (e.g. Ger- many) must be decided by the particular country. Even before the war the very moderate proposals for international bi- metallism were not found to be practicable.
The essential facts of the situation are that the United States and Japan have effectively kept to the gold standard, qua free- dom from specific depreciation, and the departure by the United Kingdom as compared with the United States has not been so great as to make the return to the gold standard imprac- ticable. It seems then that world prices will be reckoned on the gold standard, and the national prices of other countries will in the course of time be adjusted to the specific depreciation of their currencies in terms of gold. International trade in the last resort must be carried on in terms of commodities and serv- ices. A country cannot for an indefinite period have a stimu- lus to its export trade simply through the specific depreciation of its currency. So long as the specific depreciation (e.g. of the German mark) is greater than the general depreciation as regards purchasing power of labour and other things within the country itself, so long excess profits are earned on exports. But such a condition is obviously unstable. The general theory was explained by Prof. J. S. Nicholson in a paper (Jan. 1888) on the " Causes of Movements of General Prices," republished in the Money and Monetary Problems. The argument was primari- ly applied to the case of gold and silver, and the consequences of the great depreciation of silver relatively to gold, but it was shown that, mutatis mutandis, the same reasoning applied to gold and paper. The silver-standard countries found it desira- ble to adopt a gold or gold-exchange standard, and by analogy the paper-standard countries at present may be expected in time to revert more or less completely to the gold standard.
The gradual return to the gold standard will no doubt be accompanied by a general fall in prices. The fall, which was very rapid in 1920, slackened by the middle of 1921 but seemed likely to be resumed. One obstacle to the continued fall in wholesale prices and the spread of the fall to retail prices was the action of combination in restraint of competition. It is this reliance on combination to keep up prices which is the great obstacle to the policy of ensuring de facto deflation by increasing the amount of goods so as to use the superabundant money. When the world is suffering from the exhaustion of the World War and when production ought to be increased as much as possible to restore the pre-war standards of material comfort, it is paradoxical that limitation of production should be anywhere in favour. It might seem to Labour that limitation of hours or of days is a remedy for unemployment (the " lump of labour " theory), and it is possible that in some cases Labour and Capital could combine to insist on monopoly prices. The great obstacle, however, to the success of any such policy of artificial limitation to keep up prices is the difficulty of making all the combines world-wide in their reach.
LITERATURE. There is already a large literature dealing with inflation and its consequences during and after the World War. No doubt, as after the Napoleonic period, there will be prolonged con- troversy on the best methods to be adopted in restoring economic and financial equilibrium. The Report of the Committee on Cur- rency and Exchange, which was unanimously adopted by the delegates of the 39 nations present at the International Financial Conference at Brussels (Oct. 1920), confirmed the opinions expressed in the report of the Cunliffe Committee, which was drawn up with special reference to the United Kingdom. The Brussels report may be divided into four sections. The first deals with the meaning, causes and progress of the inflation in the World War, and points to the necessity of stopping the growth of inflation by the limitation of governmental expenditure to revenue and the limitation of the creation of credit to bona fide economic needs. The second section calls for increased production. In this connexion the abandonment of governmental control is advocated, but no reference is made to the dangers of limitation of production by the great combines. The third section recommends the return to the gold standard, but the opinion is given that it is useless to attempt to fix the ratio of existing fiduciary currencies to their nominal value. In the fourth section it is stated that deflation must be gradual and that no useful purpose could be served by any attempt to establish an international cur- rency or unit of account to impose artificial control on exchange operations. Supplementary volumes give details affecting various countries of the evidence on which the Report is based.
In the Financial and Commercial Review for 1920, issued by the Swiss Banking Corporation, convenient tables are given on p. 5 of the index numbers of the principal countries of wholesale and retail prices (England, France, the United States, Italy, Japan and Germany), and on p. 13 of the gold reserves and paper circulation of 17 principal countries for 1914, 1918, 1919 and 1920.
The following are useful works of reference: The Paper Pound of 1797-1821, a reprint of the Bullion Report of 1910 with introduction by Edwin Cannan (1919); J. S. Nicholson, Inflation (1919); R. G. Hawtrey, Currency and Credit (1919) ; R. W. Kemmerer, High Prices and Deflation (1920); the four Reports of Section F of the British Association on Currency and Credit in the War, edited by Prof. Kirckaldy, 1916-20, have been collated and brought down to the middle of 1921 in one volume entitled British Finance, 1914-1921, by Mr. A. H. Gibson; Irving Fisher, Stabilising the Dollar (1920); J. S. Nicholson, War Finance (2nd. ed. 1918); J. M. Keynes, Eco- nomic Consequences of the Peace (1920). The work by Yves-Guyot and A. Raffalovich, Inflation and Deflation (1921), gives in short compass a very valuable account of former periods of inflation begin- ning with John Law, and also gives in a short form the leading facts of the actual progress of inflation in the various countries in the World War. The writers reassert the classical opinions on the evils of inflation and advocate as rapid deflation as possible. H. S. Foxwell, Papers on Current^ Finance (1919), criticizes the generally accepted theories of inflation. The Review of Economic Statistics, issued monthly by the Harvard Committee on Economic Research, gives not only a general analysis of business conditions with probable forecasts (somewhat on the analogy of meteorological observations and deductions) but provides in a convenient form the statistics of changes in production and in financial conditions. (J. S. N.)
INFLUENZA (see 14.552). Under the conditions of existence that prevail in the civilized communities of to-day, the human respiratory tract must necessarily encounter a large variety of pathogenic bacteria and a great deal of irritating particulate matter. Such exposure is inevitable in factories, schools, trains, 'buses and, indeed, in all forms of social intercourse within confined spaces. Under these circumstances it is not to be wondered at that acute catarrhal affections of the respiratory mucous membranes, accompanied by pyrexia, should be common. To such affections the name " influenza " is frequently applied; and it is this loose employment of the word that is responsible for much of the confusion that exists in statistical records.
The explosive pandemic of influenza that burst upon the world in 1918 was something quite different from the sporadic pyrexial catarrhs above referred to, although the individual clinical picture, when uncomplicated, was much the same. In the absence of exact knowledge of the causative agent and in view of the fact that the individual clinical picture is such as may follow many different bacterial invasions, it is impossible, at present, to formulate a completely satisfactory definition. Here the term "influenza" will be used to imply " a pandemic outburst of disease characterized, clinically, by a rapid course, catarrh of the respiratory tract, pyrexia, and some degree of prostration; and, epidemiologically, by a tendency to occur in several successive waves at short intervals of time." This provisional definition is applicable to the visitation of 1918-9, to the outbreaks in 1890-1, in 1847-8, and perhaps to those in 1831-3-7, in 1803, and to other
