Full text: Borrowing and business in Australia

to produce commercial crises of the type just examined. The 
analysis of Tooke and Newmarch might, in fact, stand as a 
model for the examination of later crises. 
But, despite the fact that the economic consequences of the 
gold discoveries bear a strong family resemblance to those to 
be noticed later in connexion with the borrowing cycle, certain 
remarkable contrasts must also be indicated. The first of these 
goes far to explain some of those features which give the period 
its peculiar and characteristic significance. ‘In general terms 
the first effect of the gold discoveries was to confer upon the 
labourers the full benefit of what, in effect, amounted to a 
quadrupled demand for labour at quadrupled wages.” But the 
most dynamic change is to be found in the origin of the demand, 
not so much for labour, as for both foreign and home-trade 
commodities. The greatly increased wages ‘did not arise from 
the production for sale, after more or less delay, of some 
artificial commodity; but in the extraction by the labourers 
themselves of a universal instrument of exchange of intrinsic 
value, the process of distribution proceeding from the Labourers to 
the Capitalists and not from the Capitalists to the Labourers’. Here 
again, to digress for a moment, it is possible that in this cir- 
cumstance may be detected the source of the Australian 
tradition which has tended ever since to place an excessive and 
illusory value upon the function in production of labour as 
compared with capital, a tradition which is responsible for much 
of the industrial trouble of later years. 
A further contrast has reference to the behaviour of prices 
consequent upon the changes in demand and supply which 
occurred. The patient accumulation of Tooke and Newmarch 
of lists of current Australian prices! during the period of this 
cycle makes possible the statement of some of those broad 
tendencies which can be compared with later price movements. 
By an application of Cairnes’s theory of ‘non-competing’ groups 
the commodities examined fall, roughly, into three classes, in 
each of which the price reactions exhibit characteristic differ 
ences. These groups are, (i) Foreign Trade Commodities the 
supply of which could be readily increased by importing, 
especially from the United Kingdom. Prices in this groun rose 
! These exhaustive lists will be found in Appendix XXX to the History of Prices, 
PP. 830-44, They form a tribute to the soundness of the authors’ statistical method.

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