Development Through Wage-Led Growth
Henry C.K. Liu

Part I:    Stagnant Worker Income Leads to Overcapacity
Part II:  Gold Keeps Rising as Other Commodities Fall
Part III: Labor Markets de-linked from the Gold Market
Part IV: Central Banks and Gold
Part V:  Central Banks and Gold Liquidity
Part VI: The London Gold Market
Part VII: Weak Political Response to Ineffective Financial Regulation

Part VIII: Gold and Fiat Currencies

Part IX: International Gold Agreements- Historical Political Context
Part X: The Rise and Decline of Institutional Economics  
Part XI: Critical Theory

Part XII: The Failed Revolutions of 1848 – The Economic Background

This article appeared in AToL on May 13, 2011

Up until the Revolutions of 1848, which began in France as a political agitation of the bourgeoisie against the Restoration monarchy, the political agenda of the working class had tended to fall in line with that of the bourgeoisie, to ride on the long political reform coat tail of bourgeois aspiration of capitalistic democracy and political equality as a class. The proletariat had hoped for a better economic position under a new bourgeois capitalistic political regime brought about by revolution against the agricultural economic social order of the aristocracy. But the proletariat as a class had not aspired to be ruler of the new post-revolutionary socio-economic order.
The Stake in Society Theory
In France as well as in Britain, the revolutionary agitation of 1830-1832 ushered in the re-ascendance of the bourgeoisie after the fall of Napoleon. The reigning liberal political doctrine at the time was the theory of “stake in society” which limits political rights and participation, mainly the right to vote and to hold office, to only people who have a financial “stake” in society, those who have something material to lose, such as monetary wealth, real property and other financial assets such as company shares and government bonds, because only persons with something valuable to lose in socio-economic change could be trusted to keep themselves informed to participate meaningfully in political debate and to vote reliably if not intelligently to preserve the class interest of stake holders. Members of the proletariat did not qualify as stake holders of society because they are men who did not own valuable assets beyond their undervalued labor sold at low wages, and therefore were not qualified to enjoy political rights and participation in government.
US Invitation to China to be a Stake Holder in the Existing World Order
Reviving the same stakeholder theory 175 years later to apply to contemporary global geopolitics, Robert Zoellick, then as US Deputy State Secretary, proposed in a speech in New York on Sept. 21, 2005 that the US should step up efforts to invite China to be a “responsible stakeholder” in the post-Cold War international order, notwithstanding that the stakeholder basis for global geopolitical participation is fundamentally undemocratic.
Since its founding in 1949, the foreign policy of the People’s Republic of China has been based on the principle that in a world order of sovereign nations, countries, big or small, should enjoy equal status in international relations. All nations, rich or poor, should be equal stake holders in a world order of sovereign nation states, and if not, then a new world order should be introduced to make it so.
The US was apparently calling for China to abandon its founding principle to join the US to be a stake holder in a world order still operating with residual rules of global imperialism, an obsolete world order that new China had committed to overthrow from the beginning of its revolutionary root and one that the US itself vowed to disengage from at the time of its declaration of independence from Britain in 1776.
Nineteenth Century Bourgeois Democracy in Europe
In France during the July Monarchy (1830-1848), about one adult in thirty could qualify to vote, meaning that only the more wealthy, the financial elite, were allowed full political rights. In Britain of the time of the first Reform Bill (1832-1867), about one in eight enjoyed the right to vote, meaning that Britain was four times more democratic than France, with even the petty bourgeoisie also enjoying political rights.
In England, conservative Tory landed interests blunted the advancement of industrial capitalism in politics, resulting in the passage of legislation protective of industrial workers rights. In France, the landed aristocracy had been stripped of political power in the French Revolution of 1789, some forty-one years before the establishment of the July Monarchy.
France under Louis Philippe in the July Monarchy was a more bourgeois but less democratic society than Britain. As France began to industrialized on the heel of British economic progress, French industrial labor was deprived of devious help from the French landed aristocracy, as the British factory workers had from British landed gentry, to make life difficult for rising industrial entrepreneurs by advocating labor rights in the name of social ethics that in practice were costly to bourgeois entrepreneurs. Still, political leaders in both countries believed that political democracy via universal suffrage would lead to ruin for any political order. Democracy was merely a useful slogan for the bourgeoisie to legitimize the emerging class struggle against the aristocracy.
Bourgeois Industrialism Excluded Labor from Sharing its Wealth
Bourgeois industrialism created new wealth from industrial production that was not predominantly derived from land ownership as it had been in the feudal agricultural economy. It did so by accumulating capital to finance new factories, but industrial labor was not allowed to share the new wealth created by workers whose productivity was increasingly enhanced by mechanization.
This was because profit was based on selling to the rich in the population manufactured products produced with low-wage workers, and profit was exclusively reserved for maximizing return on capital. In fact, in business economics, profit is defined as the margin of revenue over cost, the prime portion of which is wages. Higher wages can only come from lower profit.
Marx’s Concept of Class Struggle
This is the essence of Marx’s concept of class struggle. In industrial capitalism, the bourgeoisie as a class takes control of the process of wealth creation and wealth distribution through its control of capital.  The bourgeoisie usurps the natural rights of the proletariat as a class to share the wealth created by a fusion of capital and labor via a financial order in which the bourgeoisie imposes excessive rent for the use of capital needed to increase worker productivity. To survive even on a subsistence level, labor must give up its rightful share of wealth in the production process to serve the conspicuous consumption of owners or controllers of capital to keep production capacity fully utilized, even when capital comes from the imposed savings of workers, known today as pension funds. The working poor were told that without consumption by the rich, there would be no jobs for wage workers.
Industrial Revolution not Supported by Broad Consumer Market
While production increased with industrialization, the concept of a broad consumer market had not yet evolved in the 19th century as sound business principle or valid economic theory. Profit was reserved exclusively for high return on capital to support more capital formation to finance more investment in industrialization. The weak domestic market with low consumer demand due to low wages naturally pushed the development of international trade to capture luxury markets overseas to serve the financial elite in other countries and to secure supply of needed raw material. Workers are told they must accept low wages in order to maintain their country's competitiveness in international trade, which is necessary for promoting peace. Yet competition for new markets and raw material supply has led to recurring global wars.
Consumer Demand Sustained by Debt rather than High Wages 
In post-Cold War financial capitalism since the 1980s, consumer loans have been pushed on  low-wage workers in developed economies so that they could participate in consumerism needed to avoid overcapacity. This policy requires a continuously expanding money supply which central banking operating with fiat currency can gamely provide.
Subsequently, with the deregulation of financial markets, the securitization of debt began to blur the line separating equity from debt, or asset from liabilities, to create a super debt bubble that enveloped the entire global economy. Since the financial crisis that began in 2007, the massive debt has continued to drag down the global economy, with government bailouts shifting private toxic debt that wage-earning borrowers must repay within their lifetime, into public debt that can be legally passed on to future generations.
Capital Formation at the Expense of High Wages
New stock companies protected by law came into existence beginning in the 18th century to mine from growing capital markets more capital that was needed to finance the rise of the industrial factory system in Britain. Soon this financial capitalist process spread to France which as a late comer to industrialization and foreign trade, could not catch up and compete with Britain without resorting to lower domestic wages. Also, French labor did not received devious protection from the French landed aristocrats as its British counterpart did, because the aristocracy had been disfranchised by the bourgeois Revolution of 1789.  The output of iron, the key element needed in industrialization, rose 300% in Britain between 1830 and 1848, while in France, it rose only 65%. 
National income in Western Europe rose steadily but wage income did not follow it in locked step. French wages failed to rise on par with English wages throughout the 18th, 19th and 20th centuries. Low wages were a major factor behind the decline of the French economy relative to the rise of the British economy during this period.
The Iron Law of Wages
To rationalize rising income disparity, classical economists, such as David Ricardo (1712-1823), Thomas Robert Malthus (1766-1834) and Ferdinand Lassalle (1825-1864), proclaimed and refined the “Iron Law of Wages” which asserts that in the long run, real wages always tend toward the minimum level necessary only to sustain the wretched life of the worker.
Malthus argued that humanity is largely destined to live in poverty because an increase in productive capacity results in an increase in population. This theory has been proven false by actual data on falling birth rate in industrialized societies. Further, industrialization increases labor productivity at a geometric rate to require a high birth rate to sustain commensurate growth in demand to avoid overcapacity. For an industrialized economy to grow, increases in population is key prerequisite.
According to Lassalle, while wages cannot fall below subsistence level because without subsistence, laborers will then be unable to work, competition among laborers for employment will drive wages down to this minimal level. This argument follows from Malthus’ demographic theory, according to which population increases when wages are above the “subsistence wage” and falls when wages are below subsistence.
By assuming the demand for labor to be a given monotonically decreasing function that preserves the given order of the real wage rate, the theory then predicts that, in the long-run equilibrium of the system, labor supply (i.e. population) will be equated to the numbers demanded at the subsistence wage level. The justification for this view is that when wages are higher, the supply of labor will increase relative to demand, creating an excess supply of labor and thus depressing market real wages. On the other hand, when wages are lower, labor supply will fall, increasing market real wages. This would create a dynamic convergence towards a subsistence wage equilibrium with constant population.
This line of logic only holds when unemployment is always present to deprive labor of market power. Classical economics’ concept of a labor market is that unemployment is a positive function needed to maintain labor market equilibrium.
Lassalle’s Low-Wage State Socialism
Lassalle rejected the idea of Marx that the state was a class-based power structure with the function of preserving existing class relations and destined to “wither away” in a future classless society. Instead, Lassalle saw the state as an independent entity, an instrument of justice essential for the achievement of the socialist program.
Iron Law of Wages Accepted as Natural Law
The Iron Law of Wages was accepted as a natural law of economics even though there was nothing natural about it. The concept as advanced by Ricardo was logically consistent but not necessarily rational.
Upon odd concepts that appeared natural only to unique predatory conditions associated with the early stages of capitalistic industrialization and in the 19th century milieu of fascination with natural laws as permanent universal truth, Ricardo propounded his Iron Law of Wages, based on a blatantly anti-labor theory of value. Ricardo described how wages could be kept low systemically, and his theory was welcome by industrial capitalism as the reason why wages naturally remain low, rather than as an outcome of exploitation of one class by another.
Labor Market a Mutation of Slavery
The rise of a labor market in the Industrial Revolution was a socio-economic mutation of the institution of slavery in the agricultural economy. The labor market historically had been created by entrepreneurial industrialists who were forbidden from owning slaves as the landed aristocrats did before the bourgeois revolution. While the labor market is the product of socioeconomic progress, still when labor is treated as a commodity to be traded in a labor market, the arrangement is merely the commercialization of slavery.
Unemployment in a labor market then becomes a necessary controlling device to keep wages from rising to reduce profit margin, justified by the mythical claim that rising wages lead to inflation in the business cycle. Workers as a class must accept “structural unemployment” even in boom cycles because unemployment is needed to combat inflation which supposedly would lead to even more unemployment in the future. The myth of the needed role of structural unemployment was developed as a natural law in neo-classical economic that regarded the market as the prime venue of economic interaction.
The Dismal Science 
Economics was labeled a dismal science by Thomas Carlyle (1795-1881), Scottish historian, critic, and social writer, who argued that slavery was actually morally superior to the capitalistic market forces of supply and demand regarding labor as promoted by classical liberal economists of his time, since, in Carlyle’s view, the freeing up of the labor market by the emancipation of slaves had actually led to a moral and economic decline in the lives of the former slaves themselves.
Both Classical and Neo-classical economics have too long been accepting the malignant effects of human socio-economic construct as that of natural laws, rather than treating exploitation, greed and injustice, natural ingredient of successful participation in markets, as flaws in the human condition that needs to be contained by an alternative rational socio-economic structure that rewards good and penalizes evil. To be logical is not always the equivalent of being rational. A logically constructed system does not automatically become a rational system. This truth applies also to market economies, as pointed by Hungarian–British polymath Michael Polanyi (1891-1976).
Polanyi on Reciprocity - Critique of the Market Economy
Polanyi’s principal theme of his Origins of Our Time: The Great Transformation (1945) was that the world market economy in effect collapsed operationally in the 1930s. Yet this familiar system was of very recent origin and had emerged fully formed only as recently as the 19th century, in conjunction with capitalistic industrialization. The current globalization of markets following the end of the Cold War and the dissolution of the Soviet bloc is also of recent post-Cold War origin, in conjunction with the advent of the information age and finance capitalism operating in electronic markets.

Prior to the coming of capitalistic industrialization, the market played only a minor part in the economic life of all societies. Even where market places could be seen to be operating, they were peripheral to the main economic organization and activities of society. Polanyi argued that in modern market economies, the needs of the market determined social behavior, whereas in pre-industrial and primitive economies the needs of society determined economic behavior and the structure of markets.
Polanyi reintroduced the concepts of reciprocity and redistribution in human economic relationships. Reciprocity implies that people produce the goods and services they are best at and most enjoy in producing, and share them with others with joy. This is reciprocated by others who are good at and enjoy in producing other goods and services. There is an unspoken agreement that all would produce that which they could do best and enjoy most, and mutually share and share alike, not just sold to the highest bidder. All find their fulfillment in separate productive livelihoods.
The motivation to produce and share is not personal profit, but personal fulfillment, and avoidance of social contempt, ostracism, and loss of social prestige and standing. This motivation is still fundamental in finance capitalism, with the emphasis on accumulating the most financial wealth, which is accorded the highest social prestige. The annual report on the world's richest 100 as celebrities by Forbes is a clear evidence of this. The opinion of figures such as Bill Gates and Warren Buffet are regularly sought by the media on matters beyond finance, as if the possession of money itself represents a diploma of wisdom. 
Luttwak on Turbo Capitalism
Edward Luttwak, military strategist and historian, explains in his book Turbo Capitalism, "Super-winners are not only respected and admired for what they do but also for what they know, or rather for what it is assumed they must know. They are often asked to pronounce on the great questions of the day, even those far removed from their fields of competence. During 1997, for example, both the champion software marketeer Bill Gates and the champion currency speculator George Soros were constantly and respectfully cited in the American media on a great variety of subjects, including public education and the control of narcotics. Their interviewers assumed as a matter of course that the extent of their wisdom corresponds to the size of their incomes. Far from being condemned for greed, winners are held in the highest regard, and the greatest winners of all have almost an odor of sanctity."

Wealth and Money

Many religions consider the attitude toward money as often more indicative of a person's true worth than the mere possession of it. The same might be even more true for societies. This explains why modern societies, whose members would be obsessed with a single-minded quest for material wealth, would be constantly faced with recurring crises of values. The pursuit of maximization of wealth leads inevitably to the betrayal of human values that would otherwise forbid unconscionable exploitation of and impersonal disregard for others. (Please see my June 20, 2002 AToL article: Trade, Development and ‘Monstrous’ Markets)
Labor Theory of Value
The labor theory of value in economics maintains that in exchange, the value, though not necessarily the market price, of goods is measured by the amount of labor expended in their production.  The intrinsic value of labor then is the starting point against which all other values should be constructed in order for the market economy to serve people, rather than oppressing people to serve a diseased socio-economic order. When the intrinsic value of labor is high in an economic system, the resultant society is good in the philosophical sense of the word and in many ways good also in the material sense because high wages is a necessary ingredient of vibrant consumer demand. When the intrinsic value of labor is low, the resultant society will forgo goodness and the economy will suffer low consumer demand.
When the market price differs from intrinsic value, it causes either inflation or deflation, producing drags on economic growth. With the current international financial architecture of fiat currencies lorded over by dollar hegemony, the differential between market price and intrinsic value is magnified, usually at the expense of those whose labor actually produces the goods, for the benefit of those in command of capital and market power. Current Wall Street ideological rationalization notwithstanding, greed is not good. Greed is not to be confused with merely benignly wanting more; it is “wanting more” to the point of blindly risking self destruction. (Please see my March 7, 2006 AToL article: World Trade Needs a Global Cartel for Labor (OLEC) - Part II: Rising Wages Solve All Problems)
History of French Monetary System
The Revolutions of 1848 began in France, which, being a dominant power in Western Europe throughout much of history, was the leading center of monetary development in Europe.  The Frankish Kingdom (768-814) of Charlemagne (742-841), who was also Emperor of the Romans (Imperator Romanorum) from 800 to his death in 814, played an important role in setting the path of the immediate and future monetary and economic development of Europe.
Charlemagne, pursuing the monetary reforms of his father, Pippin the Short (714–768), abolished the Roman monetary system that had spread to the entire Holy Roman Empire. It was based on the gold sou issued by Rome, which had a weight measure corresponding to 4.5 grams of gold.  Charlemagne and the Anglo-Saxon King Offa of Mercia both took up the bi-metal system put in place by Pippin the Short.
Many surviving Mercia coins from Offa’s reign bear elegant relief depictions of King Offra with artistic quality superior to that of contemporary Frankish coinage. Some Mercia coins carry images of Offra’s royal wife, Queen Cynethryth, who had the distinction of being the only Anglo-Saxon queen ever depicted on a coin before modern time. Only three gold coins of Offa's issuance have survived to modern time: one is a copy of an Abbasid dinar of 774, and carries Arabic text on one side of the coin, with “Offa Rex” on the other side. The gold coins are of uncertain use, possibly used not in local circulation but as payment for alms or for gifts to Rome.
There were strong pragmatic reasons for this abandonment of the gold standard, notably because of a shortage of gold itself in Europe at the time, which was a direct consequence of the conclusion of peace with Byzantium, which resulted in the Holy Roman Empire ceding to the Eastern Roman Empire possession of Venice and Sicily and control of trade routes to Africa and to the East.
Bi-Metalism and Economic Democracy
This bi-metal monetary standard also had the effect of harmonizing and unifying the complex array of specie currencies in use at the commencement of Charlemagne’s reign, thus facilitating settlement of trade and commerce.
Charlemagne established a new monetary standard, the livre carolinienne (from the Latin libra, the modern-day pound), a unit of both money and weight based on a pound of silver which was set to be worth 20 sous (from the Latin solidus which was primarily an accounting device and never actually minted like the modern-day British shilling) or 240 deniers (from the Latin denarius, the modern-day British penny at 1/12 of a shilling). A silver-based currency open up trade to a large segment of the population who were not financially strong enough to deal in gold.
During this period, the livre and the sou were accounting units. Only the denier was a coin of the realm. The livre was the currency of France until 1795. Several different livres existed, some concurrently. The livre was the name of both units of account (similar to the way the dollar is used in mordern-day financial accounts and derivative instruments), and coins in circulation (similar to the way dollar bills are used in circulation). A transaction of one million livre would only be a notional value based on the value of one million pounds of silver, but not necessarily an actual physical exchange of that amount of silver.
As the price of silver denominated in the Franch livre fluctuated, the real value of the tranaction would also fluctuate, while the notional amount of silver remained constant in the transaction. This exchange value fluctuation affected the purchasing power of  the livre and is known as inflation or deflation in modern-day economics. This monetary system created by Charlemagne served as a model for many other European currencies, including the British pound, the Italian lira, the Spanish dinero and the Portuguese dinheiro.
Gold Inflation Transformed European Socio-economic Structure
The discovery of gold in the New World created gold inflation in Europe in the 17th through the19th centuries that transformed the European socioeconomic structure from feudal agricultural to bourgeois financial. This influx of gold greatly expanded the European economy, notwithstanding the impact of consistently high inflation. Napoleon financed his wars and his socio-economic reform efforts to transform Europe from its feudal root to a bourgeois society with the help of gold from the New World with gold-pushed inflation lessening the debt burden of Napoleonic France. Modern aversion against inflation has not always been based on valid rational theory or full understanding of historical facts.
Napoleon’s War on Feudalism
Napoleon’s attack on Europe was more than a quest for territorial expansion. His real target was European feudalism. The Napoleonic Code rejected the medieval feudal concept of judicial justice of trial by combat or trial by ordeal. Trial by ordeal was considered a judicium Dei: a procedure based on the premise that God would help the innocent by performing a miracle on their behalf. The practice traced to earlier roots, being attested as far back as the Code of Hammurabi (ca 1700 B.C.) and the Code of Ur-Nammu (ca 2100 B.C.).
The Napoleonic Code legitimized the concept of equality before the law for all individual citizens and granted the state total sovereign authority by law over its subjects, a totality that had not been enjoyed by the sovereign under feudalism. The limits of sovereign authority had been strictly prescribed by reciprocal feudal rites, the glue that held medieval society together. In France ,the pre-Revolution socio-political organizational structure of “three estates of the realm”, each with its separate legal systems, was superseded by the theory of a society composed of legally equally citizens operating under the Napoleonic Code. The rigid structure of estates in medieval society gave way to a less rigid structure of socio-economic classes through the legal order of the Napoleonic Code. 
The aristocracy lost its separate, special legal system that governed feudalism, applicable exclusively to its members with feudal birth rights of special privileges in taxation, office holding and military command that lied beyond the personal control of the sovereign, who was merely the “first before equals” in the hierarchical feudal order. In the Napoleonic era, the manorial system, the economic foundation of feudalism, was summarily liquidated, with peasants freed from the feudal status as wards of the landed aristocratic lords to become subjects of the state.
Within Napoleon’s Grand Empire, while the Church continued to assume supreme authority on spiritual matters, the Papacy lost its authority and control over secular affairs which became the exclusive mandate of the secular state under its lay ruler. The medieval system of gilds was abolished by Napoleon, with the proclamation of every individual’s right to work and freedom to learn and enter any trade or profession of his choice. Free trade within the Empire became a reality with Napoleon’s Continental System, and a new continental standard of weights and measures was adopted to facilitate a new monetary order to support empire-wide trade. 
German Monetary System
In Germany, the Mark would become the currency after the first unification in 1871 from the monetary foundation laid by Napoleon. Before the time of the first unification, the different German states issued a variety of different currencies, though most were linked to the Vereinsthaler, the currency of Prussia between 1857 and 1873. The Vereinsthaler, took its name from the Thaler, which was originally developed as a coin standard in the Holy Roman Empire and, as an internationally recognized trade coin, became a model for other countries.
The Thaler was established in 1566 by the Leipzig Convention. It was also the name of a unit of account in northern Germany and of a silver coin issued by its currency 1857. From 1750, the thaler was distinct from north German Reichsthaler unit of account in that it contained 1/14 of a Cologne Mark of silver, rather than 1/12, and was minted as a coin.
This change was implemented by Philipp Graumann and the system of 14 thaler to the Mark was known as the “Graumannscher Fuß”. The Cologne Mark was a unit of weight equivalent to 233.856 grams of anything, and in monetary account the substance was silver. The It was introduced by the Danish King Hans in the late 15th century and was used as a standard for weighing metals. Hans was King of Denmark (1481–1513), Norway (1483–1513) and as John II (Swedish: Johan II) of Sweden (1497–1501) in the Kalmar Union, and also Duke of Schleswig and Holstein.
The Kalmar Union was the historiographical term for a series of personal unions (1397–1523) that united the three kingdoms of Denmark, Norway (with Iceland, Greenland, Faroe Islands, Shetland, and Orkney), and Sweden (including Finland). Personal unions unite different states under a common monarch while the states’ boundaries, laws and national interests remain distinct.
The member countries of the Union had not technically given up their sovereignty, nor their independence, but operationally they were not autonomous, the common monarch holding the sovereignty and, particularly, leading foreign policy; diverging interests (especially the Swedish nobility’s dissatisfaction over the dominant role played by Denmark and Holstein) gave rise to a conflict that would hamper the union in several intervals from the 1430s until the union's breakup in 1523 when Gustav Vasa became king of Sweden.
The Cologne Mark came to be used as the base unit for a number of currency standards, including the Lübeck monetary system, which was important into northern Europe in the late Middle Ages, and the coinage systems of the Holy Roman Empire, most significantly the conventionsthaler, which was defined as one tenth of a Cologne Mark.
The Lübeck monetary system, originating in the Hanseatic city of Lübeck, was important in northern Europe in the late Middle Ages and into recent history. The system was based on the Cologne Mark which was approximately 230 grams of silver.  Lübeck was the capital and Queen City of the Hanseatic League – founded in the 12th century and prospered until the 16th century as the major trading centre for northern Europe. It has remained a centre for maritime commerce to modern times, particularly with the Nordic countries. It is a Unesco Heritage site.
The Hanseatic League  was an economic alliance of trading cities and their merchant guilds that dominated trade along the coast of Northern Europe. It stretched from the Baltic to the North Sea and inland during the Late Middle Ages and early modern period (ca 13th–17th centuries). The League was created to protect commercial interests and privileges granted by foreign rulers in cities and countries the merchants visited. The Hanseatic cities had their own legal system and furnished their own protection and mutual aid. Despite this, the organization was not a city-state nor can it be called a confederation of city-states, only a very small number of the cities within enjoyed autonomy and liberties comparable to those of free imperial city, formally ruled by the emperor only — as opposed to the majority of cities in the Holy Romann Empire, which were governed by one of the many princes of the Empire, such as dukes or prince-bishops. Free Cities also had independent representation in the Reichstag of the Holy Roman Empire. The legacy of the Hansa is remembered today in the name of the airline Lufthansa.
The Reichsthaler coin
The Leipzig Convention, the world’s oldest commercial fair, set the Reichsthaler as a coin containing 1/9 of a Cologne mark of silver. In the 18th century the Holy Roman Empire consisted of over 1,800 separate immediate territories governed by distinct authorities. In 1792 there were approximately 150 secular territorial rulers with the status of Imperial Estate. Leizig was the site of the Battle of the Nations, fought on October 16-19, 1813, by the coalition armies of Russia, Prussia, Austria and Sweden against the French Grand army of Napoleon.
The various German states within the Holy Roman Empire issued Reichsthaler together with smaller coins according to whatever system of subdivisions they chose. In 1754, the Conventionsthaler (containing 1/10 of a Mark of silver) replaced the Reichsthaler as the standard.
Reichsthaler as unit of account
At the same time as the Reichsthaler was being issued as a coin, it was also being used in much of Northern Germany as a unit of account, with the unit of account being worth ¾ of the value of a Reichsthaler coin. As a unit of account, the Reichsthaler was therefore equivalent to 1⁄12 of a Cologne Mark of silver. After 1754, this unit (now ¾ of a Convenstionsthaler, 3⁄40 of a Cologne Mark of silver) continued to be used, although it was more commonly referred to as simply a Thaler.
In most of the states using the Reichsthaler as a unit of account, it was subdivided into 288 Pfennig, with intermediate denominations such as the Groschen or Gutegroschen, worth 12 Pfennig (1/24 of a Reichsthaler), and the Mariengroschen, worth 8 Pfennig (1/32 of a Reichsthaler).
In 1750, Prussia adopted a Reichsthaler containing 1/14 of a Cologne Mark of silver. This standard was referred to as the "Graumannscher Fuß" after Philipp Graumann, its originator.

During the early 19th century, the smaller Prussian standard for the Reichsthaler replaced the larger standard in most of northern Germany. The Prussian standard also became part of the currency used in southern Germany following the currency union of 1837. The Thaler was worth 1¾ Gulden. These Thalers were replaced by the Vereinsthaler, of almost the same weight, in 1857.
Until 1821, the Thaler was subdivided in Brandenburg into 24 Groschen, each of 12 Pfennige. In Prussia proper, it was subdivided into 3 Polish Gulden, each of 30 Groschen (each Groschen = 18 Pfennige) or 90 Schilling. Prussia's currency was unified in 1821, with the Thaler subdivided into 30 Silbergroschen, each of 12 Pfennige.
In 1857, the Prussian Thaler was replaced by the Vereinsthaler, having become the standard across much of Germany.
It was from the Thaler that the United States dollar, the Swedish daler and the Dutch daalder took their names.
The Vereinsthaler replaced the Thaler at par and was replaced by the Mark at a rate of 1 Vereinsthaler = 3 Mark. The Vereinsthaler was subdivided into 30 Silbergroschen, each of 12 Pfenninge.
The Vereinsthaler was a silver coin containing 16-2/3 grams of pure silver used in most German states and the Austrian Empire in the years prior to unification. The Vereinsthaler
overvalued silver by 1-2/3 gram above the traditional silver/gold exchange of 15:1 in the rest of  Europe. Although the Mark was based on gold rather than silver, a fixed exchange rate of 3 Mark = 1 Vereinsthaler was used for conversion.
The development of a coordinated monetary system facilitated the emergence of monetary wealth from trade to replace the land-based wealth in material assets to allow the mergence of market economies and the emergence of the wage system. The general public stopped living on the land to live on monetary wages. Peasants, instead of being at the mercy of weather for good harvest, a reasonable portion of which was reserved for their Lord, now were at the mercy of industrialist entrepreneurs for wages which were set at subsistence levels regardless of the amount of profits their labor generated for their employers.

May 5, 2011
The Failed Revolutions of 1848 – The Political Background