There is a principle, observed at length in my Wealth of Nations, that the price of every commodity resolves itself ultimately into wages, profit, and rent — and that when any one of the conditions governing these three is disturbed, the disturbance propagates through the whole body of commerce with a patience and thoroughness that no sovereign edict can easily interrupt. The present condition of prices in the United States of America offers, in this regard, a most instructive study.
The Personal Consumption Expenditures index — that measure by which the sovereign of that republic gauges the general advance of prices — has now reached its highest point in three years. The proximate occasion is a war prosecuted against Persia, which has introduced into the calculation of every merchant and every householder the additional cost of conveyance, of fuel, and of that general uncertainty which afflicts commerce wherever cannon speak. That uncertainty is itself a tax, though it appears in no schedule of duties and is levied by no collector. It falls nonetheless, and it falls, as such burdens almost invariably do, with the least discrimination upon those least able to bear it.
I have written, in my Theory of Moral Sentiments, that we naturally sympathize with the great and the prosperous, and are apt to overlook the quiet distresses of the humble. The present inflation invites precisely this oversight. The percentage point — a figure readily spoken at the tables of the comfortable — represents, for the labouring poor, the difference between sufficiency and want in the matter of bread, of fuel, and of those small necessaries without which no family conducts itself with dignity.
Across the Atlantic, the condition of Britain’s young people presents a separate though not unrelated concern. Youth unemployment in that kingdom has reached its highest measure in twelve years, a figure that admits of no cheerful interpretation. It is the peculiar misfortune of the young that their entrance into productive life, delayed or denied, leaves a mark not easily erased: habits of idleness, where they take root, prove stubborn tenants, and the skills ungained in early years are recovered only at great expense of time and encouragement.
The division of labour, which I described as the great engine of national opulence, depends at every link upon fresh hands willing and able to take their place in the chain. A generation held at the gate of useful employment is not merely a present loss to themselves; it is a deduction from the future wealth of the whole society that employs — or, in this case, declines to employ — them.
It is perhaps worth observing that the two phenomena here recorded — war-driven prices in one nation, structural idleness in the young of another — are not unconnected in their nature. Both represent, in different idioms, the same fundamental failure: an arrangement of interests in which the costs of great decisions are borne at a considerable remove from those who make them. This, history suggests, is not a novel arrangement. It is, however, one that repays continued attention.