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Cliometrics

John Lyons, Miami University

Lou Cain, Loyola University Chicago and Northwestern University

Sam Williamson, Miami University

Introduction

In the 1950s a small group of North American scholars adopted a revolutionary approach to investigating the economic past that soon spread to Great Britain and Ireland, the European mainland, Australia, New Zealand, and Japan. What was first called “The New Economic History,” then “Cliometrics,” was impelled by the promise of significant achievement, by the novelties of the recent (mathematical) formalization of economic theory, by the rapid spread of econometric methods, and by the introduction of computers into academia. Cliometrics has three obvious elements: use of quantifiable evidence, use of theoretical concepts and models, and use of statistical methods of estimation and inference, and an important fourth element, employment of the historian’s skills in judging provenance and quality of sources, in placing an investigation in institutional and social context, and in choosing subject matter of significance to history as well as economics. Although the term cliometrics is used to describe work in a variety of historical social and behavioral sciences, the discussion here focuses on economic history.

A quantitative-analytical approach to economic history developed in the interwar years through the work of such scholars as Simon Kuznets in the U.S. and Colin Clark in Britain. Characteristic elements of cliometrics were stimulated by events, by changes in economics, and by an intensification of what might be called the statistical impulse.

First, depression, war, the dissolution of empires, a renewal of widespread and more rapid growth in the Western world, and the challenge of Soviet-style economic planning combined to focus attention on the sources and mechanisms of economic growth and development.

Second, new intellectual currents in economics, spurred in part by contemporary economic problems, arose and came to dominate the profession. In the 1930s, and especially during the war, theoretical approaches to the aggregate economy and its capabilities grew out of the new Keynesian macroeconomics and the development of national income accounting. Explicit techniques for analyzing resource allocation in detail were introduced and employed in wartime planning. Econometrics, the statistical analysis of economic data, continued to grow apace.

Third, the gathering of facts – with an emphasis on systematic arrays of quantitative facts – became more important. By the nineteenth century governments, citizens and scholars had become preoccupied with fact-gathering, but their collations were ordinarily ad hoc and unsystematic. Thoroughness and system became the desideratum of scholarly fact-gathering in the twentieth century.

All these forces had an impact on the birth of a more rigorous way of examining our economic past.

The New Economic History in North America

Cliometrics was unveiled formally in Williamstown, Massachusetts, in the autumn of 1957 at an unusual four-day gathering sponsored by the Economic History Association and the Conference on Research in Income and Wealth. Most of the program was designed to showcase recent work by economists who had ventured into history.

Young scholars in the Income and Wealth group presented their contributions to the historical national accounts of the United States and Canada, spearheaded by Robert Gallman’s estimates of U.S. commodity output, 1839-1899. A pair of headline sessions dealt with method; the one on economic theory and economic history was headed by Walt Rostow, who recalled his undergraduate years in the 1930s at Yale, where he had been led to ask himself “why not see what happened if the machinery of economic theory was brought to bear on modern economic history?” He asserted “economic history is a less interesting field than it could be, because we do not remain sufficiently loyal to the problem approach, which in fact underlies and directs our efforts.”

Newcomers John R. Meyer and Alfred H. Conrad presented two papers. The first was “Economic Theory, Statistical Inference, and Economic History” (1957), a manifesto for using formal theory and econometric methods to examine historical questions. They argued that particular historical circumstances are instances of more general phenomena, suitable for theoretical analysis, and that that quantitative historical evidence, although relatively scarce, is much more abundant than many historians believed and can be analyzed using formal statistical methods. At another session Conrad and Meyer presented “The Economics of Slavery in the Antebellum South,” which incorporated their methodological views to refute a long-standing proposition that the slave system in the southern United States had become moribund by the 1850s and would have died out had there been no Civil War. Conrad and Meyer buttressed the point by showing that slaveholding, viewed as a business activity, had been at least as remunerative as other uses of financial and physical capital. More broadly they illustrated “the ways in which economic theory might be used in ordering and organizing historical facts.”

Two decades later Robert Gallman recalled that the Williamstown “conference did more than put the ball in motion … It also set the tone and style of the new economic history and even forecast the chief methodological and substantive interests that were to occupy cliometricians for the next twenty-one years.” What began in the late 1950s as a trickle of work in the new style grew to a freshet and then a flood, incorporating new methods, examining bodies of data previously too difficult to analyze without the aid of computers, and investigating a variety of questions of traditional importance, mostly in American economic history. The watershed was continent-wide, collecting the work of small clusters of scholars bound together in a ramifying intellectual and social network.

An important and continuing node in this network was at Purdue University in West Lafayette, Indiana. In the late 1950s a group of young historical economists assembled there, among whom the cross-pollination of historical interests and technical expertise was exceptional. In this group were Lance Davis and Jonathan Hughes and several others known primarily for their work in other fields. One was Stanley Reiter, a mathematical economist who traveled with Davis and Hughes to the meetings of the Economic History Association in September 1960 to present their paper explaining the new quantitative historical research being undertaken at Purdue – and to introduce the term “cliometrics” to the profession. The term was coined by Reiter as a whimsical combination of the words Clio, the muse of history, and metrics, from econometrics. As the years went by, the word stuck and became the name of the field.

To build on the enthusiasm aroused by that presentation, and to “consolidate Purdue’s position as the leader in this country of quantitative research in economic history,” Davis and Hughes (with Reiter’s aid) sought and received funds from Purdue for a meeting in December 1960 of about a dozen like-minded economic historians. They gave it the imposing title, “Conference on the Application of Economic Theory and Quantitative Methods to the Study of Problems of Economic History.” For obvious reasons the meetings were soon called “Clio” or the “Cliometrics Conference” by their familiars. Of the six presentations at the first meeting, none was more intriguing than Robert Fogel’s estimates of the “social saving” accruing from the expansion of the American railroad network to 1890.

Sessions were renowned from Clio’s early days as occasions for engaging in sharp debate and asking probing (and occasionally unanswerable) questions. Those who attended the first Clio conference established a tradition of rigorous and detailed analysis of the presenters’ work. In the early years at Purdue and elsewhere, cliometricians developed a research program with mutual support and encouragement and conducted an unusually large proportion of collaborative work, all the while believing in the progressiveness of their efforts.

Indeed, like Walt Rostow, other established economic historians felt that economic history was in need of renewal: Alexander Gerschenkron wrote in 1957 “Economic history is in a poor way. It is unable to attract good students, mainly because the discipline does not present any intellectual challenge …” Some cliometric young Turks were not so mild. While often relying heavily on the wealth of detail amassed in earlier research, they asserted a distinctive identity. The old economic history, it was said, was riddled with errors in economic reasoning and embodied an inadequate approach to causal explanation. The cliometricians insisted on a scientific approach to economic-historical questions, on careful specification of explicit models of the phenomena they were investigating. By implication and by declaration they said that much of conventional wisdom was based on unscientific and unsystematic historical scholarship, on occasion employing language not calculated to endear them to outsiders. The most vocal proponents declared a new order. Douglass North proclaimed that a “revolution is taking place in economic history in the United States … initiated by a new generation of economic historians” intent on reappraising “traditional interpretations of U.S. economic history.” Robert Fogel said that the “novel element in the work of the new economic historians is their approach to measurement and theory,” especially in their ability to find “methods of measuring economic phenomena that cannot be measured directly.” In 1993, these two were awarded the Nobel Memorial Prize in Economics for, in the words of the Nobel committee, being “pioneers in the branch of economic history that has been called the ‘new economic history,’ or cliometrics.”

The hallmark of the top rung of work done by the new economic historians was its integration of fact with theory. As Donald [Deirdre] McCloskey observed in a series of surveys, the theory was often simple. The facts, when not conveniently available, were dug up from surviving sources, whether published or not. Indeed the discipline imposed by the need to measure usually requires more data than would serve for a qualitative argument. Many new economic historians expended considerable effort in the 1960s to expand the American quantitative record. Thus, with eyebrow raised, so to speak, Albert Fishlow remarked in 1970, “It is ironic … to read that … most of the “New Economic History” only applies its ingenuity to analyzing convenient (usually published) data.'” Many cliometricians worked their magic not merely by relying on their predecessors’ compilations; as Scott Eddie comments, “one of the most significant contributions of cliometricians’ painstaking search for data has been the uncovering of vast treasure troves of useful data hitherto either unknown, unappreciated, or simply ignored.” Very early in the computer age they put such data into forms suitable for tabulation and statistical analysis.

William Parker and Robert Gallman, with their students, were pioneers in analyzing individual-level data from the United States Census manuscripts, a project arising from Parker’s earlier study of Southern plantations. From the 1860 agricultural census schedule they drew a carefully constructed sample of over 5,000 farms in the cotton counties of the American South and matched those farms with the two separate schedules for the free and slave populations. The Parker-Gallman sample was followed by Census samples for northern agriculture and for the post-bellum South.

The early practitioners of cliometrics applied their theoretical and quantitative skills to some issues well established in the more “traditional” economic historiography, none more important than asking when and how rapidly the North American economy began to experience “modern economic growth.” In the nineteenth century, economic growth in both the U.S. and Canada was punctuated by booms, recessions and financial crises, but the new work provided a better picture of the path of GNP and its components, revealing steady upward trends in aggregate output and in incomes per person and per worker. This last, it seemed clear from the work in the 1950s of Moses Abramovitz and Robert Solow, must have derived significantly from the introduction of new techniques, as well as from expansion of the scale and penetration of the market. Several scholars thus established a related objective, understanding – or at least accounting for – productivity growth.

Attempting to provide sound explanations for growth, productivity change, and numerous other developments in modern economic history, especially of the U.S. and Britain, was the objective of the cliometricians’ theory and quantification. They were much criticized from without for the very use of these technical tools, and within the movement there was much methodological dispute and considerable dissent. Nonetheless, the early cliometricians spawned a sustained intellectual tradition that diffused worldwide from its North American origins.

Historical Economics in Britain

Cliometrics arrived relatively slowly among British economic historians, but it did arrive. Some was homegrown; some was imported. When Jonathan Hughes expressed doubts in 1970 that the American style of cliometrics could ever be an “export product,” he was already wrong. Admittedly, by then the new style had been employed by only a tiny minority of those writing economic history in Britain. Introduction of a more formal style, in Britain as in North America, fell to those trained as economists, initially to Alec Cairncross, Brinley Thomas and Robin Matthews. Cairncross’s book on home and foreign investment and Thomas’s on migration and growth developed, or collected into one place, a great deal of quantitative information for theoretical analysis; their method, as David Landes noted in 1955, was “in the tradition of historical economics, as opposed to economic history.” Matthews’s Study in Trade Cycle History (1954), which examines the trade cycle of 1833-42, was written, he said, in a “quantitative-historical” mode, and contains theoretical reasoning, economic models, and statistical estimates.

Systematic use of national accounting methods to study British economic development was a task undertaken by Phyllis Deane at Cambridge. Her work resulted in two early papers on British income growth and capital formation and in two books of major importance and lasting value: British Economic Growth, 1688-1959 (1962), written with W. A. Cole, and a compendium of underlying data compiled with Brian Mitchell. Despite skeptical reviews, the basics of the Deane-Cole estimates of eighteenth- and early nineteenth-century aggregate growth were accepted widely for two decades and provided a quantitative basis for discussing living standards and the dispersion of technical progress in the new industrial era. Also at Cambridge, Charles Feinstein estimated the composition and magnitude of British investment flows and produced detailed national income estimates for the nineteenth and twentieth centuries, augmenting, refining and revising, as well as extending, the work of Deane and Cole.

All these studies belong to a decidedly British empirical tradition, despite the use of contemporary theoretical constructs, and contained nothing like the later claims of some American cliometricians about the virtues of using formal theory and statistical methods. Research in a consciously cliometric style was strongly encouraged in the 1960s at Oxford by Hrothgar Habakkuk and Max Hartwell, although neither saw himself as a cliometrician. Separately and together, they supported the movement, encouraging students to absorb both quantitative and formal analytical elements into their work.

The incursion of cliometrics into British economic history was – and has remained – neither so widespread nor so dominant as in North America, partly for reasons suggested by Hughes. Although economic history had been taught and practiced in British universities since the 1870s, after the first World War most faculty members were housed in separate departments of economic (and social) history that tended to require of their students only a modicum of economics and little of quantitative methods. With the establishment of new British universities and the rapid expansion of others, a dozen new departments of economic history were founded in the 1960s, staffed largely by people taught in history and economic history departments. The limited presence of cliometric types in Britain at the turn of the 1970s did not come from deficient demand, nor was it due to hostility or indifference. It was due to limited supply stemming from the small scale of the British academic labor market and an aversion to excessive specialization among young economists. Yet the situation was being rectified. On the demand side, British faculties of economics began to welcome more economic historians as colleagues, and, on the supply side, advanced students were being aided by post-graduate stipends and research support provided by the new Social Science Research Council.

During the 1970s a British version of new historical economics began to take shape. Its practitioners expanded their informal networks into formal institutional structures and scholarly ventures. The organized British movement opened in September 1970 at an Anglo-American “Conference on the New Economic History of Britain” in Cambridge (Massachusetts), followed by two others. From these meetings grew a project to re-write British economic history in a cliometric mode, which resulted in the publication in 1981 of a path-breaking two-volume work, The Economic History of Britain since 1700, edited by Roderick Floud and Donald [Deirdre] McCloskey.

Equally path-breaking, perhaps more so, was the outcome of parallel developments in English historical demography, whose practitioners had become progressively more quantitatively and theoretically adept since the 1950s, and for whom 1981 was also a banner year. Although portions of the book had been circulating for some time, E. A. Wrigley’s and R. S. Schofield’s Population History of England, 1541-1871: A Reconstruction and its striking revisions of English demographic history were now available in one massive document.

As in North America, after the first wave of “quanitifiers” invaded parts of British historiography, cliometrics was refined in the heat of scholarly debate.

Controversies

Cliometricians started or continued a series of debates about the nature and sources of economic growth and its welfare consequences that decidedly have altered our picture of modern economic history. The first was initiated by Walt Rostow, who argued that modern economic growth begins with a brief and well-defined period of “take-off,” with the necessary “preconditions” having already become the normal condition of a given national economy or society. His metaphor of a “take-off into self-sustained growth”, which first appeared in a journal article, was popularized in Rostow’s famous book, The Stages of Economic Growth (1960). Rostow asserted that “The introduction of the railroad has been historically the most powerful single initiator of take-offs.” To test this contention, Robert Fogel and Albert Fishlow both wrote Ph.D. dissertations dealing in part with Rostow’s view: Fogel’s Railroads and American Economic Growth (1964) and Fishlow’s American Railroads and the Transformation of the Antebellum Economy (1965). These books contain their estimates of the extent of resource saving that had accrued from the adoption of a new transport system, with costs lower than those of canals. Their results rejected Rostow’s view.

Until the cliometricians made a pair of disputatious incursions into its economic history, the American South was largely the province of regional historians – almost a footnote to the story of U.S. economic development. Sparked by Conrad and Meyer, for two decades cliometricians focused intently on the place of the South in the national economy and of slavery in the Southern economy. To what extent was early national economic growth driven by Southern cotton exports and how self-sufficient was the South as an economic region? Douglass North argued that the key to American economic development before 1860 was regional specialization, that Southern cotton was the economy’s staple product, and that much of Western and Northern economic growth derived from Southern demand for food and manufactures. Indeed, Conrad and Meyer had touched a nerve. Their demonstration of current profitability did not demonstrate long-run viability of the slave system; Yasukichi Yasuba was able to fill that gap by showing that slave prices were regularly more than enough to finance rearing slaves for future sale or employment. Many others tested and refined these early results. As a system of organizing production, American slavery was found to have been thriving on the eve of the Civil War; the sources of that prosperity, however, needed deeper examination.

In Time on the Cross (1974), Robert Fogel and Stanley Engerman not only reaffirmed the profitability and viability of Southern slavery, but they also made claims about the superior productivity of Southern versus Midwestern agriculture and about the relatively generous material comforts afforded to the slave population. Their book sparked a long-running controversy that extended beyond academia and prompted critical examinations and rebuttals by political and social historians and, above all, by their fellow cliometricians. A major critique was Reckoning with Slavery (by Paul David and others, 1976), as much a defense of cliometric method as a catalogue of what the authors saw as the method’s improper or incomplete application in Time on the Cross. Fogel subsequently published Without Consent or Contract (1989), a defense and extension of his and Engerman’s earlier work.

The remarkable antebellum prosperity of the Southern slave economy was followed by an equally remarkable relative decline in Southern per-capita income after the war. While the remainder of the American economy grew rapidly, the South stagnated, with a distinctively low-wage, low-productivity economy and a poorly educated labor force, both black and white. The next generation of cliometricians asked “Why?” Was it the legacy of the slave system, of the virtual absence of industrial development in the antebellum South, of post-Civil War Reconstruction and backlash, of continued reliance on cotton, of Jim Crow, or of racism and discrimination? Roger Ransom and Richard Sutch investigated share-tenancy, debt peonage and labor effort in maintaining cotton cultivation, using individual level data, some derived a la Parker and Gallman, from a sample of the manuscript U.S. Censuses. Gavin Wright focused on an effective separation of the Southern from the national labor market, and Robert Margo examined the region’s low level of educational investment and its consequences.

An entirely new line of investigation derived from the research on slavery, measuring the “biological standard of living” using anthropometric data. Richard Steckel’s paper on slave height profiles led directly to the discussion of “Anthropometric Indexes of Malnutrition” in Without Consent or Contract. In a corrective to the Fogel-Engerman interpretation of the slave diet, Steckel showed how stunted (and thus how poorly fed) slave children were before they came of working age. John Komlos discovered that heights (of West Point cadets) were declining even as American per capita income was rising in the years before the Civil War, what he called the “Antebellum Puzzle.” Elsewhere, Roderick Floud led a project employing anthropometric data from records of British military recruits, while Stephen Nicholas, Deborah Oxley and Steckel analyzed records for male and female convicts transported to Australia.

Industrialization and its new technologies in the U.S. long predate the Civil War. In writing about technological progress, economic historians had, before the 1960s, tended to concentrate on single industries or economies. Yet distinctive “national” technologies emerged in the early nineteenth century (e.g., contemporary British observers distinguished “The American System of Manufactures” from their own). Amid the early ferment of quantitative economic history in the United States, Hrothgar Habakkuk published American and British Technology in the Nineteenth Century: The Search for Labour-Saving Inventions, a truly comparative study. It was 1962, when, as Paul David writes, “economic historians’ interests in Anglo-American technological divergences were suddenly raised from a quiet simmer to a furious boil by the publication of … Habakkuk’s now celebrated book on the subject.” Habakkuk expanded on an idea that the apparent labor-saving bias of American manufacturing techniques was due to land so abundant that American workers were paid (relative to other factors) much more than what their British counterparts received, but he did not resolve whether the bias was due to more machines per worker, better machines, or more inventiveness.

One strand of the debate over what Peter Temin called Habakkuk’s “labor-scarcity paradox” left to one side the question of “better machines.” It fell to Nathan Rosenberg and Paul David to explore the distinctive technological trajectories of different economies. Rosenberg pointed to the emergence of “technologically convergent” production processes and to the importance of very low relative materials costs in American manufacturing. Paul David reviewed the debate, beginning to formulate a theoretical approach to explain sources of technical change (and divergence). He argued that an economy’s trajectory of technological development is conditioned, perhaps only initially, by relative factor prices, but then by opportunities for further progress based on localized learning from, or constrained by, existing techniques and their histories. David developed the concept of “path dependence,” which is “a dynamic process whose evolution is governed by its own history.”

The first systematic cliometric debate involving European economic history was over an alleged British technological and economic failure in the late nineteenth century. The slower growth of income and exports, the loss of markets even in the Empire, and an “invasion” of foreign manufactures (many American) alarmed businessmen and policymakers alike and led to opposition to a half-century of British “Free Trade.” Who was to blame for loss of competitiveness? Although some scholars attributed Britain’s “climacteric” to the maturation of the technologies underpinning her success during the Industrial Revolution, others attributed it to “entrepreneurial failure” and cited the inability or refusal of British business leaders to adopt the best available technologies. Cliometricians argued, by and large, that British businessmen made their investment and production decisions in a sensible, economically rational fashion, given the constraints they faced; they had made the best of a bad situation. Subsequent research has demonstrated the problem to be more complex, and it is yet to be resolved.

Many results of the cliometrics revolution come from the application of theory and measurement in the service of history; a converse case comes from the macro economists. Monetarists, in particular, have placed economic history in the service of theory, prominently in analyzing the Great Depression of the 1930s. In 1963, Milton Friedman and Anna Schwartz, in A Monetary History of the United States, 1867-1960, opened a discussion that has led to widespread, but not universal, acceptance among economists of a sophisticated version of the “quantity theory of money.” Their detailed examination of several episodes in American monetary development under varying institutional regimes allowed them to use a set of “natural experiments” to assess the economic impact of exogenous changes in the stock of money. The Friedman-Schwartz enterprise sought support for the general proposition that money is not simply a veil over real transactions – that money does matter. Their demonstration of that point for the Great Depression initiated an entire scholarly literature involving not only economic historians but also monetary and macro economists. Peter Temin was among the first of the economic historians to question their argument, in Did Monetary Forces Cause the Great Depression? (1976). His answer was essentially “No,” stressing declines in consumer spending and in investment in the late 1920s as initiating factors and discounting money stock reductions for the continued downturn. In a later book, Lessons from the Great Depression (1989), Temin in effect recanted his earlier position, impelled by a good deal of further research, especially on international finance. The present consensus is that what Friedman and Schwartz call “The Great Contraction, 1929-1933″ may have been initiated by real factors in the late 1920s, but it was faulty public policy and adherence to the Gold Standard that played major roles in turning an economic downturn into “The Great Depression.”

A broad new approach to economic change over time has emerged from the mind of Douglass North. Confronted in the later 1960s with European economic development in its variety and antiquity, North became dissatisfied with the limited modes of analysis that he had applied fruitfully to the American case and concluded that “we couldn’t make sense out of European economic history without explicitly modeling institutions, property rights, and government.” For that matter, making sense of a wider view of American economic history was similarly difficult, as exemplified in the Lance Davis and North venture, Institutional Change and American Economic Growth (1971). The core of North’s model, conceptual rather than formal, is that, when changes in underlying circumstances alter the cost-benefit calculus of existing arrangements, new institutions will arise if there is a net benefit to be realized. Although their approach arose from dissatisfaction with the static nature of economic theory in the 1960s, North and his colleagues nonetheless followed what most other economists would do in arguing that optimal institutional forms will arise dynamically from an essentially profit-maximizing response to changes in incentives. As Davis and North were quick to admit, their effort was “a first (and very primitive) attempt” at formulating a theory of institutional change and applying that theory to American institutional development. North recognized the limitations of his early work on institutional change and has endeavored to develop a more subtle and articulated approach. In Understanding the Process of Economic Change (2005), North stresses again that modeling institutional change is less than straightforward, and he continues to examine the persistence of “institutions that provided incentives for stagnation and decline.”

Retrospect and Prospect

In the 1960s, when the first cliometricians began to group themselves into a distinct intellectual and social movement, buoyed by their revisionist achievements, they (at least many of them) thought they could use their scientific approach to re-write history. This hope may not have been a vain one, but it is yet to be realized. The best efforts of cliometricians have merged with those in other traditions to develop a rather different understanding of the economic past from views maintained half a century ago.

As economic history has evolved, so have the environs economic historians inhabit. In the Anglophone world, economic history – and cliometrics within it – burgeoned with the growth of higher education, but it has recently suffered the effects of retrenchment in that sector. Elsewhere, a new multi-lingual generation of enthusiastic economic historians and historical economists has arisen, with English as the language of international discourse. Both history and economics have been transformed by dissatisfaction with old verities and values, by adoption of new methods and points of view, and by posing new or revived questions. Economic history has been beneficiary of and contributor to such changes.

Although this entry focuses on the development of historical economics in the United States and the United Kingdom, we note that the cliometric approach has diffused well beyond their boundaries. In France the economist’s quantitative approach was fostered when Kuznets’s historical national accounts project recruited scholars in the 1950s to amass and organize the agricultural, output and population data available, in a new histoire quantitative. Still, that movement was overshadowed by the Annales school, whose histoire totale involved much data collection but limited economic analysis. Economic history of France, produced in the cliometric mode by scholars trained there, did not arrive in force until the mid-1980s. French cliometrics was first written by economic historians from (or trained in) North America or Britain; the Gallic cliometrics revolution occurred gradually, for “peculiarly French” institutional and ideological reasons. In Germany similar institutional barriers were partially breached in the 1960s with the arrival of a “turnkey” cliometrics operation in the form of an American-trained American scholar, Richard Tilly, who went from Wisconsin to Munster. Tilly was joined later by a few central Europeans who received American degrees, and all have since taught younger German cliometricians. Leading cliometric scholars from Italy, Spain and Portugal likewise received their post-graduate educations in Britain or America. The foremost Japanese cliometrician, Yasukichi Yasuba, received his Ph.D. from Johns Hopkins, supervised by Simon Kuznets.

If cliometrics in and of continental Europe could trace its roots to North America and Britain, by the 1980s it had developed indigenous strength and identity. At the Tenth International Economic History Congress in Leuven, Belgium (1990), a new association of analytical economic historians was founded. Rejecting the use of “cliometrics” as descriptor, the participants endorsed the nascent European Historical Economics Society. Subsequently national associations and seminars have grown up under the umbrella of the EHES – for example, French historical economists have the Association Francaise de Cliometrie and a new international journal, Cliometrica, while the Portuguese and Spaniards have sponsored a series of “Iberometrics” Conferences.

Cliometrics has transformed itself over the past half-century, forging important links with other disciplines and continuing to broaden its compass, and interpreting “new” phenomena. They are showing, for example, that recent “globalization” has origins and manifestations going back half a millennium and, given the recent experience of the formerly Socialist “transitional” economies, they are showing that the deep historical roots of institutions, organizations, values and behavior in the developed economies cannot be duplicated by following simple formulae. Despite the presentism of contemporary society, economic history will continue to address essential questions of origins and consequences, and it seems likely that cliometricians will complement and sometimes lead their colleagues in providing the answers. Cliometrics is a well-established field of study and its practitioners continue to increase our understanding of how economies evolve.

Source Note: The bulk of this article is a condensed version of the introduction to Lyons, Cain, and Williamson, eds., Reflections on the Cliometrics Revolution: Conversations with Economic Historians (2008), copyright (c) The Cliometric Society, Inc., which receives the royalties; reproduced by permission. Readers should consult that book for a more complete presentation, notes, and a full bibliography.

Further Reading

Coats, A. W. “The Historical Context of the ‘New’ Economic History.” Journal of European Economic History 9, no. 1 (1980): 185-207.

“Cliometrics after 40 Years.” American Economic Review: Papers and Proceedings 87:2, (1997): 396-414 [commentary by Claudia Goldin, Avner Greif, James J. Heckman, John R. Meyer, and Douglass C. North].

Crafts, N. F. R. “Cliometrics, 1971-1986: A Survey.” Journal of Applied Econometrics 2, no. 3 (1987): 171-92.

Davis, Lance E., Jonathan R. T. Hughes and Duncan McDougall. American Economic History. Homewood, IL: Irwin, 1961. [The first textbook of U.S. economic history to make systematic use of economic theory to organize the exposition. Second edition, 1965; third edition, 1969.]

Davis, Lance E., Jonathan R. T. Hughes and Stanley Reiter. “Aspects of Quantitative Research in Economic History.” _Journal of Economic History_ 20:4 (1960): 539-47 [in which “cliometrics” first appeared in print].

Drukker, J. W. The Revolution That Bit Its Own Tail: How Economic History Has Changed Our Ideas about Economic Growth. Amsterdam: Aksant, 2006.

Engerman, Stanley L. “Cliometrics.” In The Social Science Encyclopedia, second edition, edited by Adam Kuper and Jessica Kuper, 96-98. New York: Routledge, 1996.

Field, Alexander J. “The Future of Economic History.” In The Future of Economic History, edited by Alexander J. Field, 1-41. Boston: Kluwer-Nijhoff, 1987.

Fishlow, Albert, and Robert W. Fogel. “Quantitative Economic History: An Interim Evaluation. Past Trends and Present Tendencies.” Journal of Economic History 31, no. 1 (1971): 15-42.

Floud, Roderick. “Cliometrics.” In The New Palgrave: A Dictionary of Economics, edited by John Eatwell, Murray Milgate and Peter Newman, vol. 1, 452-54. London: Macmillan, 1987.

Goldin, Claudia. “Cliometrics and the Nobel.” Journal of Economic Perspectives 9, no. 2 (1995): 191-208.

Grantham, George. “The French Cliometric Revolution: A Survey of Cliometric Contributions to French Economic History.” European Review of Economic History 1, no. 3 (1997): 353-405.

Lamoreaux, Naomi R. “Economic History and the Cliometric Revolution.” In Imagined Histories: American Historians Interpret the Past, edited by Anthony Molho and Gordon S. Wood, 59-84. Princeton: Princeton University Press, 1998

Lyons, John S., Louis P Cain, and Samuel H. Williamson, eds. Reflections on the Cliometrics Revolution: Conversations with Economic Historians. New York: Routledge, 2008.

McCloskey, Donald [Deirdre] N. Econometric History. London: Macmillan, 1987

Parker, William, editor. Trends in the American Economy in the Nineteenth Century. Princeton, N.J.: Princeton University Press, 1960. [Volume 24 in Studies in Income and Wealth, in which many of the papers presented at the 1957 Williamstown conference appear.]

Tilly, Richard. “German Economic History and Cliometrics: A Selective Survey of Recent Tendencies.” European Review of Economic History 5, vol. 2 (2001): 151-87.

Whaples, Robert. “A Quantitative History of the Journal of Economic History and the Cliometric Revolution.” Journal of Economic History 51, no. 2 (1991): 289-301.

Williamson, Samuel H. “The History of Cliometrics.” In The Vital One: Essays in Honor of Jonathan R. T. Hughes, edited by Joel Mokyr, 15-31. Greenwich, Conn.: JAI Press, 1991. [Research in Economic History, Supplement 6.]

Williamson, Samuel H., and Robert Whaples. “Cliometrics.” In The Oxford Encyclopedia of Economic History, vol. 1, edited by Joel Mokyr, 446-47. Oxford: Oxford University Press, 2003.

Wright, Gavin. “Economic History, Quantitative: United States.” In International Encyclopedia of the Social and Behavioral Sciences, edited by Neil J. Smelser and Paul B. Baltes, 4108-14. Amsterdam: Elsevier, 2001.

Citation: Lyons, John. “Cliometrics”. EH.Net Encyclopedia, edited by Robert Whaples. August 27, 2009. URL http://eh.net/encyclopedia/cliometrics/

The Economics of the Civil War

Roger L. Ransom, University of California, Riverside

The Civil War has been something of an enigma for scholars studying American history. During the first half of the twentieth century, historians viewed the war as a major turning point in American economic history. Charles Beard labeled it “Second American Revolution,” claiming that “at bottom the so-called Civil War – was a social war, ending in the unquestioned establishment of a new power in the government, making vast changes – in the course of industrial development, and in the constitution inherited from the Fathers” (Beard and Beard 1927: 53). By the time of the Second World War, Louis Hacker could sum up Beard’s position by simply stating that the war’s “striking achievement was the triumph of industrial capitalism” (Hacker 1940: 373). The “Beard-Hacker Thesis” had become the most widely accepted interpretation of the economic impact of the Civil War. Harold Faulkner devoted two chapters to a discussion of the causes and consequences of the war in his 1943 textbook American Economic History (which was then in its fifth edition), claiming that “its effects upon our industrial, financial, and commercial history were profound” (1943: 340).

In the years after World War II, a new group of economic historians — many of them trained in economics departments — focused their energies on the explanation of economic growth and development in the United States. As they looked for the keys to American growth in the nineteenth century, these economic historians questioned whether the Civil War — with its enormous destruction and disruption of society — could have been a stimulus to industrialization. In his 1955 textbook on American economic history, Ross Robertson mirrored a new view of the Civil War and economic growth when he argued that “persistent, fundamental forces were at work to forge the economic system and not even the catastrophe of internecine strife could greatly affect the outcome” (1955: 249). “Except for those with a particular interest in the economics of war,” claimed Robertson, “the four year period of conflict [1861-65] has had little attraction for economic historians” (1955: 247). Over the next two decades, this became the dominant view of the Civil War’s role industrialization of the United States.

Historical research has a way of returning to the same problems over and over. The efforts to explain regional patterns of economic growth and the timing of the United States’ “take-off” into industrialization, together with extensive research into the “economics” of the slave system of the South and the impact of emancipation, brought economic historians back to questions dealing with the Civil War. By the 1990s a new generation of economic history textbooks once again examined the “economics” of the Civil War (Atack and Passell 1994; Hughes and Cain 1998; Walton and Rockoff 1998). This reconsideration of the Civil War by economic historians can be loosely grouped into four broad issues: the “economic” causes of the war; the “costs” of the war; the problem of financing the War; and a re-examination of the Hacker-Beard thesis that the War was a turning point in American economic history.

Economic Causes of the War

No one seriously doubts that the enormous economic stake the South had in its slave labor force was a major factor in the sectional disputes that erupted in the middle of the nineteenth century. Figure 1 plots the total value of all slaves in the United States from 1805 to 1860. In 1805 there were just over one million slaves worth about $300 million; fifty-five years later there were four million slaves worth close to $3 billion. In the 11 states that eventually formed the Confederacy, four out of ten people were slaves in 1860, and these people accounted for more than half the agricultural labor in those states. In the cotton regions the importance of slave labor was even greater. The value of capital invested in slaves roughly equaled the total value of all farmland and farm buildings in the South. Though the value of slaves fluctuated from year to year, there was no prolonged period during which the value of the slaves owned in the United States did not increase markedly. Looking at Figure 1, it is hardly surprising that Southern slaveowners in 1860 were optimistic about the economic future of their region. They were, after all, in the midst of an unparalleled rise in the value of their slave assets.

A major finding of the research into the economic dynamics of the slave system was to demonstrate that the rise in the value of slaves was not based upon unfounded speculation. Slave labor was the foundation of a prosperous economic system in the South. To illustrate just how important slaves were to that prosperity, Gerald Gunderson (1974) estimated what fraction of the income of a white person living in the South of 1860 was derived from the earnings of slaves. Table 1 presents Gunderson’s estimates. In the seven states where most of the cotton was grown, almost one-half the population were slaves, and they accounted for 31 percent of white people’s income; for all 11 Confederate States, slaves represented 38 percent of the population and contributed 23 percent of whites’ income. Small wonder that Southerners — even those who did not own slaves — viewed any attempt by the federal government to limit the rights of slaveowners over their property as a potentially catastrophic threat to their entire economic system. By itself, the South’s economic investment in slavery could easily explain the willingness of Southerners to risk war when faced with what they viewed as a serious threat to their “peculiar institution” after the electoral victories of the Republican Party and President Abraham Lincoln the fall of 1860.

Table 1

The Fraction of Whites’ Incomes from Slavery

State Percent of the Population That Were Slaves Per Capita Earnings of Free Whites (in dollars) Slave Earnings per Free White (in dollars) Fraction of Earnings Due to Slavery
Alabama 45 120 50 41.7
South Carolina 57 159 57 35.8
Florida 44 143 48 33.6
Georgia 44 136 40 29.4
Mississippi 55 253 74 29.2
Louisiana 47 229 54 23.6
Texas 30 134 26 19.4
Seven Cotton States 46 163 50 30.6
North Carolina 33 108 21 19.4
Tennessee 25 93 17 18.3
Arkansas 26 121 21 17.4
Virginia 32 121 21 17.4
All 11 States 38 135 35 25.9
Source: Computed from data in Gerald Gunderson (1974: 922, Table 1)

The Northern states also had a huge economic stake in slavery and the cotton trade. The first half of the nineteenth century witnessed an enormous increase in the production of short-staple cotton in the South, and most of that cotton was exported to Great Britain and Europe. Figure 2 charts the growth of cotton exports from 1815 to 1860. By the mid 1830s, cotton shipments accounted for more than half the value of all exports from the United States. Note that there is a marked similarity between the trends in the export of cotton and the rising value of the slave population depicted in Figure 1. There could be little doubt that the prosperity of the slave economy rested on its ability to produce cotton more efficiently than any other region of the world.

The income generated by this “export sector” was a major impetus for growth not only in the South, but in the rest of the economy as well. Douglass North, in his pioneering study of the antebellum U.S. economy, examined the flows of trade within the United States to demonstrate how all regions benefited from the South’s concentration on cotton production (North 1961). Northern merchants gained from Southern demands for shipping cotton to markets abroad, and from the demand by Southerners for Northern and imported consumption goods. The low price of raw cotton produced by slave labor in the American South enabled textile manufacturers — both in the United States and in Britain — to expand production and provide benefits to consumers through a declining cost of textile products. As manufacturing of all kinds expanded at home and abroad, the need for food in cities created markets for foodstuffs that could be produced in the areas north of the Ohio River. And the primary force at work was the economic stimulus from the export of Southern Cotton. When James Hammond exclaimed in 1859 that “Cotton is King!” no one rose to dispute the point.

With so much to lose on both sides of the Mason-Dixon Line, economic logic suggests that a peaceful solution to the slave issue would have made far more sense than a bloody war. Yet no solution emerged. One “economic” solution to the slave problem would be for those who objected to slavery to “buy out” the economic interest of Southern slaveholders. Under such a scheme, the federal government would purchase slaves. A major problem here was that the costs of such a scheme would have been enormous. Claudia Goldin estimates that the cost of having the government buy all the slaves in the United States in 1860, would be about $2.7 billion (1973: 85, Table 1). Obviously, such a large sum could not be paid all at once. Yet even if the payments were spread over 25 years, the annual costs of such a scheme would involve a tripling of federal government outlays (Ransom and Sutch 1990: 39-42)! The costs could be reduced substantially if instead of freeing all the slaves at once, children were left in bondage until the age of 18 or 21 (Goldin 1973:85). Yet there would remain the problem of how even those reduced costs could be distributed among various groups in the population. The cost of any “compensated” emancipation scheme was so high that even those who wished to eliminate slavery were unwilling to pay for a “buyout” of those who owned slaves.

The high cost of emancipation was not the only way in which economic forces produced strong regional tensions in the United States before 1860. The regional economic specialization, previously noted as an important cause of the economic expansion of the antebellum period, also generated very strong regional divisions on economic issues. Recent research by economic, social and political historians has reopened some of the arguments first put forward by Beard and Hacker that economic changes in the Northern states were a major factor leading to the political collapse of the 1850s. Beard and Hacker focused on the narrow economic aspects of these changes, interpreting them as the efforts of an emerging class of industrial capitalists to gain control of economic policy. More recently, historians have taken a broader view of the situation, arguing that the sectional splits on these economic issues reflected sweeping economic and social changes in the Northern and Western states that were not experienced by people in the South. The term most historians have used to describe these changes is a “market revolution.”

Source: United States Population Census, 1860.

Perhaps the best single indicator of how pervasive the “market revolution” was in the Northern and Western states is the rise of urban areas in areas where markets have become important. Map 1 plots the 292 counties that reported an “urban population” in 1860. (The 1860 Census Office defined an “urban place” as a town or city having a population of at least 2,500 people.) Table 2 presents some additional statistics on urbanization by region. In 1860 6.1 million people — roughly one out of five persons in the United States — lived in an urban county. A glance at either the map or Table 2 reveals the enormous difference in urban development in the South compared to the Northern states. More than two-thirds of all urban counties were in the Northeast and West; those two regions accounted for nearly 80 percent of the urban population of the country. By contrast, less than 7 percent of people in the 11 Southern states of Table 2 lived in urban counties.

Table 2

Urban Population of the United States in 1860a

Region Counties with Urban Populations Total Urban Population in the Region Percent of Region’s Population Living in Urban Counties Region’s Urban Population as Percent of U.S. Urban Population
Northeastb 103 3,787,337 35.75 61.66
Westc 108 1,059,755 13.45 17.25
Borderd 23 578,669 18.45 9.42
Southe 51 621,757 6.83 10.12
Far Westf 7 99,145 15.19 1.54
Totalg 292 6,141,914 19.77 100.00
Notes:

a Urban population is people living in a city or town of at least 2,500

b Includes: Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, and Vermont.

c Includes: Illinois, Indiana, Iowa, Kansas, Minnesota, Nebraska, Ohio, and Wisconsin.

d Includes: Delaware, Kentucky, Maryland, and Missouri.

e Includes: Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, North Carolina, South Carolina, Tennessee, Texas, and Virginia.

f Includes: Colorado, California, Dakotas, Nevada, New Mexico, Oregon, Utah and Washington

g includes District of Columbia

Source: U.S Census of Population, 1860.

The region along the north Atlantic Coast, with its extensive development of commerce and industry, had the largest concentration of urban population in the United States; roughly one-third of the population of the nine states defined as the Northeast in Table 2 lived in urban counties. In the South, the picture was very different. Cotton cultivation with slave labor did not require local financial services or nearby manufacturing activities that might generate urban activities. The 11 states of the Confederacy had only 51 urban counties and they were widely scattered throughout the region. Western agriculture with its emphasis on foodstuffs encouraged urban activity near to the source of production. These centers were not necessarily large; indeed, the West had roughly the same number of large and mid-sized cities as the South. However there were far more small towns scattered throughout settled regions of Ohio, Indiana, Illinois, Wisconsin and Michigan than in the Southern landscape.

Economic policy had played a prominent role in American politics since the birth of the republic in 1790. With the formation of the Whig Party in the 1830s, a number of key economic issues emerged at the national level. To illustrate the extent to which the rise of urban centers and increased market activity in the North led to a growing crisis in economic policy, historians have re-examined four specific areas of legislative action singled out by Beard and Hacker as evidence of a Congressional stalemate in 1860 (Egnal 2001; Ransom and Sutch 2001; 1989; Bensel 1990; McPherson 1988).

Land Policy

1. Land Policy. Settlement of western lands had always been a major bone of contention for slave and free-labor farms. The manner in which the federal government distributed land to people could have a major impact on the nature of farming in a region. Northerners wanted to encourage the settlement of farms which would depend primarily on family labor by offering cheap land in small parcels. Southerners feared that such a policy would make it more difficult to keep areas open for settlement by slaveholders who wanted to establish large plantations. This all came to a head with the “Homestead Act” of 1860 that would provide 160 acres of free land for anyone who wanted to settle and farm the land. Northern and western congressmen strongly favored the bill in the House of Representatives but the measure received only a single vote from slave states’ representatives. The bill passed, but President Buchanan vetoed it. (Bensel 1990: 69-72)

Transportation Improvements

2. Transportation Improvements. Following the opening of the Erie Canal in 1823, there was growing support in the North and the Northwest for government support of improvement in transportation facilities — what were termed in those days “internal improvements”. The need for government- sponsored improvements was particularly urgent in the Great Lakes region (Egnal 2001: 45-50). The appearance of the railroad in the 1840s gave added support for those advocating government subsidies to promote transportation. Southerners required far fewer internal improvements than people in the Northwest, and they tended to view federal subsidies for such projects to be part of a “deal” between western and eastern interests that held no obvious gains for the South. The bill that best illustrates the regional disputes on transportation was the Pacific Railway Bill of 1860, which proposed a transcontinental railway link to the West Coast. The bill failed to pass the House, receiving no votes from congressmen representing districts of the South where there was a significant slave population (Bensel 1990: 70-71).

The Tariff

3. The Tariff. Southerners, with their emphasis on staple agriculture and need to buy goods produced outside the South, strongly objected to the imposition of duties on imported goods. Manufacturers in the Northeast, on the other hand, supported a high tariff as protection against cheap British imports. People in the West were caught in the middle of this controversy. Like the agricultural South they disliked the idea of a high “protective” tariff that raised the cost of imports. However the tariff was also the main source of federal revenue at this time, and Westerners needed government funds for the transportation improvements they supported in Congress. As a result, a compromise reached by western and eastern interests during in the tariff debates of 1857 was to support a “moderate” tariff; with duties set high enough to generate revenue and offer some protection to Northern manufacturers while not putting too much of a burden on Western and Eastern consumers. Southerners complained that even this level of protection was excessive and that it was one more example of the willingness of the West and the North to make economic bargains at the expense of the South (Ransom and Sutch 2001; Egnal 2001:50-52).

Banking

4. Banking. The federal government’s role in the chartering and regulation of banks was a volatile political issue throughout the antebellum period. In 1834 President Andrew Jackson created a major furor when he vetoed a bill to recharter the Second Bank of the United States. Jackson’s veto ushered in a period of that was termed “free banking” in the United States, where the chartering and regulation of banks was left entirely in the hands of state governments. Banks were a relatively new economic institution at this point in time, and opinions were sharply divided over the degree to which the federal government should regulate banks. In the Northeast, where over 60 percent of all banks were located, there was strong support by 1860 for the creation of a system of banks that would be chartered and regulated by the federal government. But in the South, which had little need for local banking services, there was little enthusiasm for such a proposal. Here again, the western states were caught in the middle. While they worried that a system of “national” banks that would be controlled by the already dominant eastern banking establishment, western farmers found themselves in need of local banking services for financing their crops. By 1860 many were inclined to support the Republican proposal for a National Banking System, however Southern opposition killed the National Bank Bill in 1860 (Ransom and Sutch 2001; Bensel 1990).

The growth of an urbanized market society in the North produced more than just a legislative program of political economy that Southerners strongly resisted. Several historians have taken a much broader view of the market revolution and industrialization in the North. They see the economic conflict of North and South, in the words of Richard Brown, as “the conflict of a modernizing society” (1976: 161). A leading historian of the Civil War, James McPherson, argues that Southerners were correct when they claimed that the revolutionary program sweeping through the North threatened their way of life (1983; 1988). James Huston (1999) carries the argument one step further by arguing that Southerners were correct in their fears that the triumph of this coalition would eventually lead to an assault by Northern politicians on slave property rights.

All this provided ample argument for those clamoring for the South to leave the Union in 1861. But why did the North fight a war rather than simply letting the unhappy Southerners go in peace? It seems unlikely that anyone will ever be able to show that the “gains” from the war outweighed the “costs” in economic terms. Still, war is always a gamble, and with the neither the costs nor the benefits easily calculated before the fact, leaders are often tempted to take the risk. The evidence above certainly lent strong support for those arguing that it made sense for the South to fight if a belligerent North threatened the institution of slavery. An economic case for the North is more problematic. Most writers argue that the decision for war on Lincoln’s part was not based primarily on economic grounds. However, Gerald Gunderson points out that if, as many historians argue, Northern Republicans were intent on controlling the spread of slavery, then a war to keep the South in the Union might have made sense. Gunderson compares the “costs” of the war (which we discuss below) with the cost of “compensated” emancipation and notes that the two are roughly the same order of magnitude — 2.5 to 3.7 billion dollars (1974: 940-42). Thus, going to war made as much “economic sense” as buying out the slaveholders. Gunderson makes the further point, which has been echoed by other writers, that the only way that the North could ensure that their program to contain slavery could be “enforced” would be if the South were kept in the Union. Allowing the South to leave the Union would mean that the North could no longer control the expansion of slavery anywhere in the Western Hemisphere (Ransom 1989; Ransom and Sutch 2001; Weingast 1998; Weingast 1995; Wolfson 1995). What is novel about these interpretations of the war is that they argue it was economic pressures of “modernization” in the North that made Northern policy towards secession in 1861 far more aggressive than the traditional story of a North forced into military action by the South’s attack on Fort Sumter.

That is not to say that either side wanted war — for economic or any other reason. Abraham Lincoln probably summarized the situation as well as anyone when he observed in his second inaugural address that: “Both parties deprecated war, but one of them would make war rather than let the nation survive, and the other would accept war rather than let it perish, and the war came.”

The “Costs” of the War

The Civil War has often been called the first “modern” war. In part this reflects the enormous effort expended by both sides to conduct the war. What was the cost of this conflict? The most comprehensive effort to answer this question is the work of Claudia Goldin and Frank Lewis (1978; 1975). The Goldin and Lewis estimates of the costs of the war are presented in Table 3. The costs are divided into two groups: the direct costs which include the expenditures of state and local governments plus the loss from destruction of property and the loss of human capital from the casualties; and what Goldin and Lewis term the indirect costs of the war which include the subsequent implications of the war after 1865. Goldin and Lewis estimate that the combined outlays of both governments — in 1860 dollars — totaled $3.3 billion. To this they add $1.8 billion to account for the discounted economic value of casualties in the war, and they add $1.5 billion to account for the destruction of the war in the South. This gives a total of $6.6 billion in direct costs — with each region incurring roughly half the total.

Table 3

The Costs of the Civil War

(Millions of 1860 Dollars)

South

North

Total

Direct Costs:

Government Expenditures

1,032

2,302

3,334

Physical Destruction

1,487

1,487

Loss of Human Capital

767

1,064

1,831

Total Direct Costs of the War

3,286

3,366

6,652

Per capita

376

148

212

Indirect Costs:

Total Decline in Consumption

6,190

1,149

7,339

Less:

Effect of Emancipation

1,960

Effect of Cotton Prices

1,670

Total Indirect Costs of The War

2,560

1,149

3,709

Per capita

293

51

118

Total Costs of the War

5,846

4,515

10,361

Per capita

670

199

330

Population in 1860 (Million)

8.73

27.71

31.43

Source: Ransom, (1998: 51, Table 3-1); Goldin and Lewis. (1975; 1978)

While these figures are only a very rough estimate of the actual costs, they provide an educated guess as to the order of magnitude of the economic effort required to wage the war, and it seems likely that if there is a bias, it is to understate the total. (Thus, for example, the estimated “economic” losses from casualties ignore the emotional cost of 625,000 deaths, and the estimates of property destruction were quite conservative.) Even so, the direct cost of the war as calculated by Goldin and Lewis was 1.5 times the total gross national product of the United States for 1860 — an enormous sum in comparison with any military effort by the United States up to that point. What stands out in addition to the enormity of the bill is the disparity in the burden these costs represented to the people in the North and the South. On a per capita basis, the costs to the North population were about $150 — or roughly equal to one year’s income. The Southern burden was two and a half times that amount — $376 per man, woman and child.

Staggering though these numbers are, they represent only a fraction of the full costs of the war, which lingered long after the fighting had stopped. One way to measure the full “costs” and “benefits” of the war, Goldin and Lewis argue, is to estimate the value of the observed postwar stream of consumption in each region and compare that figure to the estimated hypothetical stream of consumption had there been no war (1975: 309-10). (All the figures for the costs in Table 3 have been adjusted to reflect their discounted value in 1860.) The Goldin and Lewis estimate for the discounted value of lost consumption for the South was $6.2 billion; for the North the estimate was $1.15 billion. Ingenious though this methodology is, it suffers from the serious drawback that consumption lost for any reason — not just the war — is included in the figure. Particularly for the South, not all the decline in output after 1860 could be directly attributed to the war; the growth in the demand for cotton that fueled the antebellum economy did not continue, and there was a dramatic change in the supply of labor due to emancipation. Consequently, Goldin and Lewis subsequently adjusted their estimate of lost consumption due to the war down to $2.56 billion for the South in order to exclude the effects of emancipation and the collapse of the cotton market. The magnitudes of the indirect effects are detailed in Table 3. After the adjustments, the estimated costs for the war totaled more than $10 billion. Allocating the costs to each region produces a per capita burden of $670 in the South and $199 in the North. What Table 3 does not show is the extent to which these expenses were spread out over a long period of time. In the North, consumption had regained its prewar level by 1873, however in the South consumption remained below its 1860 level to the end of the century. We shall return to this issue below.

Financing the War

No war in American history strained the economic resources of the economy as the Civil War did. Governments on both sides were forced to resort to borrowing on an unprecedented scale to meet the financial obligations for the war. With more developed markets and an industrial base that could ultimately produce the goods needed for the war, the Union was clearly in a better position to meet this challenge. The South, on the other hand, had always relied on either Northern or foreign capital markets for their financial needs, and they had virtually no manufacturing establishments to produce military supplies. From the outset, the Confederates relied heavily on funds borrowed outside the South to purchase supplies abroad.

Figure 3 shows the sources of revenue collected by the Union government during the war. In 1862 and 1863 the government covered less than 15 percent of its total expenditures through taxes. With the imposition of a higher tariff, excise taxes, and the introduction of the first income tax in American history, this situation improved somewhat, and by the war’s end 25 percent of the federal government revenues had been collected in taxes. But what of the other 75 percent? In 1862 Congress authorized the U.S. Treasury to issue currency notes that were not backed by gold. By the end of the war, the treasury had printed more than $250 million worth of these “Greenbacks” and, together with the issue of gold-backed notes, the printing of money accounted for 18 percent of all government revenues. This still left a huge shortfall in revenue that was not covered by either taxes or the printing of money. The remaining revenues were obtained by borrowing funds from the public. Between 1861 and 1865 the debt obligation of the Federal government increased from $65 million to $2.7 billion (including the increased issuance of notes by the Treasury). The financial markets of the North were strained by these demands, but they proved equal to the task. In all, Northerners bought almost $2 billion worth of treasury notes and absorbed $700 million of new currency. Consequently, the Northern economy was able to finance the war without a significant reduction in private consumption. While the increase in the national debt seemed enormous at the time, events were to prove that the economy was more than able to deal with it. Indeed, several economic historians have claimed that the creation and subsequent retirement of the Civil War debt ultimately proved to be a significant impetus to post-war growth (Williamson 1974; James 1984). Wartime finance also prompted a significant change in the banking system of the United States. In 1862 Congress finally passed legislation creating the National Banking System. Their motive was not only to institute the program of banking reform pressed for many years by the Whigs and the Republicans; the newly-chartered federal banks were also required to purchase large blocs of federal bonds to hold as security against the issuance of their national bank notes.

The efforts of the Confederate government to pay for their war effort were far more chaotic than in the North, and reliable expenditure and revenue data are not available. Figure 4 presents the best revenue estimates we have for the Richmond government from 1861 though November 1864 (Burdekin and Langdana 1993). Several features of Confederate finance immediately stand out in comparison to the Union effort. First is the failure of the Richmond government to finance their war expenditures through taxation. Over the course of the war, tax revenues accounted for only 11 percent of all revenues. Another contrast was the much higher fraction of revenues accounted for by the issuance of currency on the part of the Richmond government. Over a third of the Confederate government’s revenue came from the printing press. The remainder came in the form of bonds, many of which were sold abroad in either London or Amsterdam. The reliance on borrowed funds proved to be a growing problem for the Confederate treasury. By mid-1864 the costs of paying interest on outstanding government bonds absorbed more than half all government expenditures. The difficulties of collecting taxes and floating new bond issues had become so severe that in the final year of the war the total revenues collected by the Confederate Government actually declined.

The printing of money and borrowing on such a huge scale had a dramatic effect on the economic stability of the Confederacy. The best measure of this instability and eventual collapse can be seen in the behavior of prices. An index of consumer prices is plotted together with the stock on money from early 1861 to April 1865 in Figure 5. By the beginning of 1862 prices had already doubled; by middle of 1863 they had increased by a factor of 13. Up to this point, the inflation could be largely attributed to the money placed in the hands of consumers by the huge deficits of the government. Prices and the stock of money had risen at roughly the same rate. This represented a classic case of what economists call demand-pull inflation: too much money chasing too few goods. However, from the middle of 1863 on, the behavior of prices no longer mirrors the money supply. Several economic historians have suggested that at this point the prices reflect people’s confidence in the future of the Confederacy as a viable state (Burdekin and Langdana 1993; Weidenmier 2000). Figure 5 identifies three major military “turning points” between 1863 and 1865. In late 1863 and early 1864, following the Confederate defeats at Gettysburg and Vicksburg, prices rose very sharply despite a marked decrease in the growth of the money supply. When the Union offensives in Georgia and Virginia stalled in the summer of 1864, prices stabilized for a few months, only to resume their upward spiral after the fall of Atlanta in September 1864. By that time, of course, the Confederate cause was clearly doomed. By the end of the war, inflation had reached a point where the value of the Confederate currency was virtually zero. People had taken to engaging in barter or using Union dollars (if they could be found) to conduct their transactions. The collapse of the Confederate monetary system was a reflection of the overall collapse of the economy’s efforts to sustain the war effort.

The Union also experienced inflation as a result of deficit finance during the war; the consumer price index rose from 100 at the outset of the war to 175 by the end of 1865. While this is nowhere near the degree of economic disruption caused by the increase in prices experienced by the Confederacy, a doubling of prices did have an effect on how the burden of the war’s costs were distributed among various groups in each economy. Inflation is a tax, and it tends to fall on those who are least able to afford it. One group that tends to be vulnerable to a sudden rise in prices is wage earners. Table 4 presents data on prices and wages in the United States and the Confederacy. The series for wages has been adjusted to reflect the decline in purchasing power due to inflation. Not surprisingly, wage earners in the South saw the real value of their wages practically disappear by the end of the war. In the North the situation was not as severe, but wages certainly did not keep pace with prices; the real value of wages fell by about 20 percent. It is not obvious why this happened. The need for manpower in the army and the demand for war production should have created a labor shortage that would drive wages higher. While the economic situation of laborers deteriorated during the war, one must remember that wage earners in 1860 were still a relatively small share of the total labor force. Agriculture, not industry, was the largest economic sector in the north, and farmers fared much in terms of their income during the war than did wage earners in the manufacturing sector (Ransom 1998:255-64; Atack and Passell 1994:368-70).

Table 4:

Indices of Prices and Real Wages During the Civil War

(1860=100)

Union Confederate
Year Prices Real Wages Prices Real Wages
1860 100 100 100 100
1861 101 100 121 86
1862 113 93 388 35
1863 139 84 1,452 19
1864 176 77 3,992 11
1865 175 82
Source: Union: (Atack and Passell 1994: 367, Table 13.5)

Confederate: (Lerner 1954)

Overall, it is clear that the North did a far better job of mobilizing the economic resources needed to carry on the war. The greater sophistication and size of Northern markets meant that the Union government could call upon institutional arrangements that allowed for a more efficient system of redirecting resources into wartime production than was possible in the South. The Confederates depended far more upon outside resources and direct intervention in the production of goods and services for their war effort, and in the end the domestic economy could not bear up under the strain of the effort. It is worth noting in this regard, that the Union blockade, which by 1863 had largely closed down not only the external trade of the South with Europe, but also the coastal trade that had been an important element in the antebellum transportation system, may have played a more crucial part in bringing about the eventual collapse of the Southern war effort than is often recognized (Ransom 2002).

The Civil War as a Watershed in American Economic History

It is easy to see why contemporaries believed that the Civil War was a watershed event in American History. With a cost of billions of dollars and 625,000 men killed, slavery had been abolished and the Union had been preserved. Economic historians viewing the event fifty years later could note that the half-century following the Civil War had been a period of extraordinary growth and expansion of the American economy. But was the war really the “Second American Revolution” as Beard (1927) and Louis Hacker (1940) claimed? That was certainly the prevailing view as late as 1960, when Thomas Cochran (1961) published an article titled “Did the Civil War Retard Industrialization?” Cochran pointed out that, until the 1950s, there was no quantitative evidence to prove or disprove the Beard-Hacker thesis. Recent quantitative research, he argued, showed that the war had actually slowed the rate of industrial growth. Stanley Engerman expanded Cochran’s argument by attacking the Beard-Hacker claim that political changes — particularly the passage in 1862 of the Republican program of political economy that had been bottled up in Congress by Southern opposition — were instrumental in accelerating economic growth (Engerman 1966). The major thrust of these arguments was that neither the war nor the legislation was necessary for industrialization — which was already well underway by 1860. “Aside from commercial banking,” noted one commentator, “the Civil War appears not to have started or created any new patterns of economic institutional change” (Gilchrist and Lewis 1965: 174). Had there been no war, these critics argued, the trajectory of economic growth that emerged after 1870 would have done so anyway.

Despite this criticism, the notion of a “second” American Revolution lives on. Clearly the Beards and Hacker were in error in their claim that industrial growth accelerated during the war. The Civil War, like most modern wars, involved a huge effort to mobilize resources to carry on the fight. This had the effect of making it appear that the economy was expanding due to the production of military goods. However, Beard and Hacker — and a good many other historians — mistook this increased wartime activity as a net increase in output when in fact what happened is that resources were shifted away from consumer products towards wartime production (Ransom 1989: Chapter 7). But what of the larger question of political change resulting from the war? Critics of Beard and Hacker claimed that the Republican program would have eventually been enacted even if there been no war; hence the war was not a crucial turning point in economic development. The problem with this line of argument is that it completely misses the point of the Beard-Hacker argument. They would readily agree that in the absence of a war the Republican program of political economy would triumph — and that is why there was a war! Historians who argue that economic forces were an underlying cause of sectional conflicts go on to point out that war was probably the only way to settle those conflicts. In this view, the war was a watershed event in the economic development of the United States because the Union military victory ensured that the “market revolution” would not be stymied by the South’s attempt to break up the Union (Ransom 1999).

Whatever the effects of the war on industrial growth, economic historians agree that the war had a profound effect on the South. The destruction of slavery meant that the entire Southern economy had to be rebuilt. This turned out to be a monumental task; far larger than anyone at the time imagined. As noted above in the discussion of the indirect costs of the war, Southerners bore a disproportionate share of those costs and the burden persisted long after the war had ended. The failure of the postbellum Southern economy to recover has spawned a huge literature that goes well beyond the effects of the war.

Economic historians who have examined the immediate effects of the war have reached a few important conclusions. First, the idea that the South was physically destroyed by the fighting has been largely discarded. Most writers have accepted the argument of Ransom and Sutch (2001) that the major “damage” to the South from the war was the depreciation and neglect of property on farms as a significant portion of the male workforce went off to war for several years. Second was the impact of emancipation. Slaveholders lost their enormous investment in slaves as a result of emancipation. Planters were consequently strapped for capital in the years immediately after the war, and this affected their options with regard to labor contracts with the freedmen and in their dealings with capital markets to obtain credit for the planting season. The freedmen and their families responded to emancipation by withdrawing up to a third of their labor from the market. While this was a perfectly reasonable response, it had the effect of creating an apparent labor “shortage” and it convinced white landlords that a free labor system could never work with the ex-slaves; thus further complicating an already unsettled labor market. In the longer run, as Gavin Wright (1986) put it, emancipation transformed the white landowners from “laborlords” to “landlords.” This was not a simple transition. While they were able, for the most part, to cling to their landholdings, the ex-slaveholders were ultimately forced to break up the great plantations that had been the cornerstone of the antebellum Southern economy and rent small parcels of land to the freedmen under using a new form of rental contract — sharecropping. From a situation where tenancy was extremely rare, the South suddenly became an agricultural economy characterized by tenant farms.

The result was an economy that remained heavily committed not only to agriculture, but to the staple crop of cotton. Crop output in the South fell dramatically at the end of the war, and had not yet recovered its antebellum level by 1879. The loss of income was particularly hard on white Southerners; per capita income of whites in 1857 had been $125; in 1879 it was just over $80 (Ransom and Sutch 1979). Table 5 compares the economic growth of GNP in the United States with the gross crop output of the Southern states from 1874 to 1904. Over the last quarter of the nineteenth century, gross crop output in the South rose by about one percent per year at a time when the GNP of United States (including the South) was rising at twice that rate. By the end of the century, Southern per capita income had fallen to roughly two-thirds the national level, and the South was locked in a cycle of poverty that lasted well into the twentieth century. How much of this failure was due solely to the war remains open to debate. What is clear is that neither the dreams of those who fought for an independent South in 1861 nor the dreams of those who hoped that a “New South” that might emerge from the destruction of war after 1865 were realized.

Table 5Annual Rates of Growth of Gross National Product of the U.S. and the Gross Southern Crop Output, 1874 to 1904
Annual Percentage Rate of Growth
Interval Gross National Product of the U.S. Gross Southern Crop Output
1874 to 1884 2.79 1.57
1879 to 1889 1.91 1.14
1884 to 1894 0.96 1.51
1889 to 1899 1.15 0.97
1894 to 1904 2.30 0.21
1874 to 1904 2.01 1.10
Source: (Ransom and Sutch 1979: 140, Table 7.3

References

Atack, Jeremy, and Peter Passell. A New Economic View of American History from Colonial Times to 1940. Second edition. New York: W.W. Norton, 1994.

Beard, Charles, and Mary Beard. The Rise of American Civilization. Two volumes. New York: Macmillan, 1927.

Bensel, Richard F. Yankee Leviathan: The Origins of Central State Authority in America, 1859-1877. New York: Cambridge University Press, 1990.

Brown, Richard D. Modernization: The Transformation of American Life, 1600-1865. New York: Hill and Wang, 1976.

Burdekin, Richard C.K., and Farrokh K. Langdana. “War Finance in the Southern Confederacy.” Explorations in Economic History 30 (1993): 352-377.

Cochran, Thomas C. “Did the Civil War Retard Industrialization?” Mississippi Valley Historical Review 48 (September 1961): 197-210.

Egnal, Marc. “The Beards Were Right: Parties in the North, 1840-1860.” Civil War History 47 (2001): 30-56.

Engerman, Stanley L. “The Economic Impact of the Civil War.” Explorations in Entrepreneurial History, second series 3 (1966): 176-199 .

Faulkner, Harold Underwood. American Economic History. Fifth edition. New York: Harper & Brothers, 1943.

Gilchrist, David T., and W. David Lewis, editors. Economic Change in the Civil War Era. Greenville, DE: Eleutherian Mills-Hagley Foundation, 1965.

Goldin, Claudia Dale. “The Economics of Emancipation.” Journal of Economic History 33 (1973): 66-85.

Goldin, Claudia, and Frank Lewis. “The Economic Costs of the American Civil War: Estimates and Implications.” Journal of Economic History 35 (1975): 299-326.

Goldin, Claudia, and Frank Lewis. “The Post-Bellum Recovery of the South and the Cost of the Civil War: Comment.” Journal of Economic History 38 (1978): 487-492.

Gunderson, Gerald. “The Origin of the American Civil War.” Journal of Economic History 34 (1974): 915-950.

Hacker, Louis. The Triumph of American Capitalism: The Development of Forces in American History to the End of the Nineteenth Century. New York: Columbia University Press, 1940.

Hughes, J.R.T., and Louis P. Cain. American Economic History. Fifth edition. New York: Addison Wesley, 1998.

Huston, James L. “Property Rights in Slavery and the Coming of the Civil War.” Journal of Southern History 65 (1999): 249-286.

James, John. “Public Debt Management and Nineteenth-Century American Economic Growth.” Explorations in Economic History 21 (1984): 192-217.

Lerner, Eugene. “Money, Prices and Wages in the Confederacy, 1861-65.” Ph.D. dissertation, University of Chicago, Chicago, 1954.

McPherson, James M. “Antebellum Southern Exceptionalism: A New Look at an Old Question.” Civil War History 29 (1983): 230-244.

McPherson, James M. Battle Cry of Freedom: The Civil War Era. New York: Oxford University Press, 1988.

North, Douglass C. The Economic Growth of the United States, 1790-1860. Englewood Cliffs: Prentice Hall, 1961.

Ransom, Roger L. Conflict and Compromise: The Political Economy of Slavery, Emancipation, and the American Civil War. New York: Cambridge University Press, 1989.

Ransom, Roger L. “The Economic Consequences of the American Civil War.” In The Political Economy of War and Peace, edited by M. Wolfson. Norwell, MA: Kluwer Academic Publishers, 1998.

Ransom, Roger L. “Fact and Counterfact: The ‘Second American Revolution’ Revisited.” Civil War History 45 (1999): 28-60.

Ransom, Roger L. “The Historical Statistics of the Confederacy.” In The Historical Statistics of the United States, Millennial Edition, edited by Susan Carter and Richard Sutch. New York: Cambridge University Press, 2002.

Ransom, Roger L., and Richard Sutch. “Growth and Welfare in the American South in the Nineteenth Century.” Explorations in Economic History 16 (1979): 207-235.

Ransom, Roger L., and Richard Sutch. “Who Pays for Slavery?” In The Wealth of Races: The Present Value of Benefits from Past Injustices, edited by Richard F. America, 31-54. Westport, CT: Greenwood Press, 1990.

Ransom, Roger L., and Richard Sutch. “Conflicting Visions: The American Civil War as a Revolutionary Conflict.” Research in Economic History 20 (2001)

Ransom, Roger L., and Richard Sutch. One Kind of Freedom: The Economic Consequences of Emancipation. Second edition. New York: Cambridge University Press, 2001.

Robertson, Ross M. History of the American Economy. Second edition. New York: Harcourt Brace and World, 1955.

United States, Bureau of the Census. Historical Statistics of the United States, Colonial Times to 1970. Two volumes. Washington: U.S. Government Printing Office, 1975.

Walton, Gary M., and Hugh Rockoff. History of the American Economy. Eighth edition. New York: Dryden, 1998.

Weidenmier, Marc. “The Market for Confederate Bonds.” Explorations in Economic History 37 (2000): 76-97.

Weingast, Barry. “The Economic Role of Political Institutions: Market Preserving Federalism and Economic Development.” Journal of Law, Economics and Organization 11 (1995): 1:31.

Weingast, Barry R. “Political Stability and Civil War: Institutions, Commitment, and American Democracy.” In Analytic Narratives, edited by Robert Bates et al. Princeton: Princeton University Press, 1998.

Williamson, Jeffrey. “Watersheds and Turning Points: Conjectures on the Long-Term Impact of Civil War Financing.” Journal of Economic History 34 (1974): 636-661.

Wolfson, Murray. “A House Divided against Itself Cannot Stand.” Conflict Management and Peace Science 14 (1995): 115-141.

Wright, Gavin. Old South, New South: Revolutions in the Southern Economy since the Civil War. New York: Basic Books, 1986.

Citation: Ransom, Roger. “Economics of the Civil War”. EH.Net Encyclopedia, edited by Robert Whaples. August 24, 2001. URL http://eh.net/encyclopedia/the-economics-of-the-civil-war/

Economic History of Premodern China (from 221 BC to c. 1800 AD)

Kent Deng, London School of Economics (LSE)

China has the longest continually recorded history in the premodern world. For economic historians, it makes sense to begin with the formation of China’s national economy in the wake of China’s unification in 221 BC under the Qin. The year 1800 AD coincides with the beginning of the end for China’s premodern era, which was hastened by the First Opium War (1839–42). Hence, the time span of this article is two millennia.

Empire-building

Evidence indicates that there was a sharp difference in the economy between China’s pre-imperial era (until 220 BC) and its imperial era. There can be little doubt that the establishment of the Empire of China (to avoid the term of “the Chinese Empire” as it was not always an empire by and for the Chinese) served as a demarcation line in the history of the East Asian Mainland.

The empire was a result of historical contingency rather than inevitability. First of all, before the unification, China’s multiple units successfully accommodated a mixed economy of commerce, farming, handicrafts and pastoralism. Internal competition also allowed science and technology as well as literature and art to thrive on the East Asian Mainland. This was known as “a hundred flowers blossoming” (baijia zhengming, literally “a grand song contest with one hundred contenders”). Feudalism was widely practiced. Unifying such diverse economic and political units incurred inevitably huge social costs. Secondly, the winner of the bloody war on the East Asian Mainland, the Qin Dukedom and then the Qin Kingdom (840–222 BC), was not for a long time a rich or strong unit during the Spring and Autumn Period (840–476 BC) and the following Warring States Period (475–222 BC). It was only during the last three decades of the Warring States Period that the Qin eventually managed to overpower its rivals by force and consequently unified China. Moreover, although it unified China, the Qin was the worse-managed dynasty in the entire history of China: it crumbled after only fifteen years. So, it was not an easy birth; and the empire system was in serious jeopardy from the start. The main justification of China’s unification seems to have been a geopolitical reason, hence an external reason – the nomadic threat from the steppes (Deng 1999).

Nevertheless, empire-building in China marked a major discontinuity in history. Under the Western Han (206 BC– 24 AD), the successor of the Qin, empire-building not only sharply reduced internal competition among various political and economic centers on the East Asian Mainland, it also remolded the previous political and economic systems into a more integrated and more homogeneous type characterized by a package of an imperial bureaucracy under a fiscal state hand in hand with an economy under agricultural dominance. With such a package imposed by empire-builders, the economy deviated from its mixed norm. Feudalism lost its footing in China. This fundamentally changed the growth and development trajectory of China for the rest of the imperial period until c. 1800.

It is fair to state that private landholding property rights, including free-holding (dominant in North China over the long run) and lease-holding (paralleled with freeholding in South China during the post-Southern Song, i.e. 1279–1840) in imperial China laid the very corner stone of the empire’s economy since the Qin unification. Chinese laws clearly defined and protected such rights. In return, the imperial state had the mandate to tax the population of whom the vast majority (some 80 percent of the total population) were peasants. The state also depended on the rural population for army recruits. Peasants on the other hand regularly acted as the main force to populate newly captured areas along the empire’s long frontiers. Such a symbiotic relationship between the imperial state and China’s population was crystallized by a mutually beneficial state-peasant alliance in the long run. China’s lasting Confucian learning and Confucian meritocracy served as a social bonding agent for the alliance.

It was such an alliance that formed the foundations of China’s political economy which in turn created a centripetal force to hold the empire together against the restoration of feudalism and political decentralization (Deng 1999). It also served as a constant drive for China’s geographic expansion and an effective force against run-away proto-industrialization, commercialization and urbanization. So, to a great extent, China’s political economy was circumscribed by this alliance. Occasionally, this state-peasant alliance did break up and political and economic turmoil followed. The ultimate internal cause for the break-up was excessive rent-seeking by the state, seen as a deviation from the Confucian norm. It was often the peasantry that reversed this deviation and put society back on its track by the way of armed mass rebellions which replaced the old regime with a new one. This pattern is known, superficially, as the “dynastic cycle” of China.

The Empire’s Expansion

China’s fiscal state and landholding peasantry both had strong incentives and tendencies to increase the land territory of the empire. This was simply because more land meant more resource endowments for the peasantry and more tax revenue for the state. The Chinese non-feudal equal-inheritance practice perpetuated such incentives and tendencies at the grass roots level: unless more and more land was brought in for farming, the Chinese farms faced the constant problem of a shrinking size. Not surprisingly, the empire gradually expanded in all directions from its hub along the Yellow River in the north. It colonized the “near south” (around the Yangtze Valley) and to the West (oases along the Silk Road) during the Western Han (206 BC – 24 AD). It reached the “far south,” including part of modern-day Vietnam, under the Tang (618–907). The Ming (1368–1644) annexed off-shore Taiwan. The Qing (1644–1911) doubled China’s territory by going further in China’s “far north” and “far west” (Deng 1993: xxiii). At each step of this internal colonization, landholding peasants, shoulder to shoulder with the Chinese army and bureaucrats, duplicated the cells of China’s agricultural economy. The state often provided emigrant farmers who resettled in new regions with material and finance aid, typically free passages, seed and basic farming tools and tax holidays. The geographic expansion of the empire stopped only at the point when it reached the physical limits for farming.

So, in essence, the expansion of the Chinese empire was the result of dynamics of the Chinese institutions characterized by a fiscal state and a landholding peasantry, as this pattern suited well with China’s landholding property rights and non-feudal equal-inheritance practice. Thus, one of the two growth dimensions of the Chinese agricultural sector was this extensive pattern in geographic terms.

Agrarian Success

In this context, the success of the geographic expansion of the Chinese empire was at the same time a success in the growth of the Chinese agricultural sector. Firstly, regardless of its ten main soil types, the empire’s territory was converted to a huge farming zone. Secondly, the agricultural sector was by far the single most important source of employment for the majority Chinese. Thirdly, taxes from the agricultural sector made up the lion’s share of the state’s revenue.

Private property rights over land also created incentives for the ordinary farmers to produce more and better. In doing so, the agricultural total factor productivity increased. Growth became intensive. This was the other dimension in the Chinese agricultural sector. It is not so surprising that premodern China had at least three main “green revolutions.” The first such green revolution, the dry farming type, appeared in the Western Han Period (206 BC–24 AD) with the aggressive introduction of iron ploughs in the north by the state (Bray 1984). The result was an increase in the agricultural total factor productivity as land was better and more efficiently tilled and more marginal regions were brought under cultivation. The second green revolution took place during the Northern Song (960–1127) with the state promotion of early-ripening rice in the south (Ho 1956). This ushered in the era of multiple cropping in the empire. The third green revolution occurred during the late Ming throughout mid-Qing Period (Ming: 1368–1644; Qing: 1644–1911) with the spread of the “New World crops,” namely maize and sweet potatoes and the re-introduction of early-ripening rice (Deng 1993: ch. 3). The New World crops helped to convert more marginal land into farming areas. Earlier, under the Yuan, cotton was deliberately introduced by the Mongols as a substitute for silk in the Chinese consumption of clothing to save the silk for the Mongols’ international trade. All these green revolutions had high participation rates in the general population.

These green revolutions significantly and permanently changed China’s economic landscape. It was not a sheer accident that China’s population growth became particularly strong during and shortly after these revolutions (Deng 2003).

Markets and the Market Economy

With a fiscal state which taxed the economy and spent its revenue in the economy and with a high-yield agriculture which produced a constant surplus, the market economy developed in premodern China. By the end of the Qing, as much as one-third of China’s post-tax agricultural output was subject to market exchange (Perkins 1969: 115; Myers 1970: 12–13). If ten percent is taken as the norm for the tax rate born by the agricultural sector, the aggregate surplus of the agricultural sector was likely to be some forty percent of its total output. This magnitude of agricultural surplus was the foundation of growth and development of other sectors/activities in the economy.

Monetization in China had the same life span as the empire itself. The state mints mass-produced coins on a regular basis for the domestic economy and beyond. Due to the lack of monetary metals, token currencies made of cloth or paper were used on large scales, especially during the Song and Yuan periods (Northern Song: 960–1127; Southern Song: 1127–1279; Yuan: 1279–1368). Consequently, inflations resulted. Perhaps the most spectacular market phenomenon was China’s persistent importation of foreign silver from the fifteenth to nineteenth centuries during the Ming-Qing Period. It has been estimated that a total of one-third of silver output from the New World ended up in China, not to mention the amount imported from neighboring Japan (Flynn and Giráldez 1995). The imported silver consequently made China a silver-standard economy, eventually causing a price revolution after the market was saturated with foreign silver which in turn led to devaluation of the currency (Deng 1997: Appendix C).

Rudimentary credit systems, often of the short-term type, also appeared in China. Houses and farming land were often used as collateral to raise money. But there is no sign that there was a significant reduction of business risks for the creditor. Frequent community and/or state interference with contracts by blocking land transfers from debtors to creditors was counter-productive. So, to a great extent, China’s customary economy and command economy overruled the market one.

The nature of this surplus-based market exchange determined the multi-layered structure of the Chinese domestic market. At the grass-roots level, the market was localized, decentralized and democratic (Skinner 1964–5). This was highly compatible with the de facto village autonomy across the empire, as the imperial administration stopped at the county level (with a total number of roughly 1,000–1,500 such counties in all under the Qing). At the top of the market structure, the state controlled to a great extent some “key commodities” including salt (as during Ming and Qing), wine and iron and steel (as under the Han). Foreign trade was customarily under the state monopoly or partial monopoly, too. This left a limited platform for professional merchants to operate, a factor that ultimately determined the weakness of merchants’ influence in the economy and state politics.

So, paradoxically, China had a long history of market activities but a weak merchant class tradition. China’s social mobility and meritocracy, the antitheses of a feudal aristocracy, directed the talent and wealth to officialdom (Ho 1962; Rawski 1979). The existence of factor markets for land also allowed merchants to join the landholding class. Both undermined the rise of the merchant class.

Handicrafts and Urbanization

The sheer quantities of China’s handicrafts were impressive. It has been estimated that in the early nineteenth century, as much as one-third of the world’s total manufactures were produced by China (Kennedy 1987: 149; Huntington 1996: 86). In terms of ceramics and silk, China was able to supply the outside world almost single-handedly at times. Asia was traditionally China’s selling market for paper, stationary and cooking pots. All these are highly consistent with China’s intake of silver during the same period.

However, the growth in China’s handicrafts and urbanization was a function of the surpluses produced from the agricultural sector. This judgment is based on (1) the fact that not until the end of the Qing Period did China begin importing moderate quantities of foodstuffs from outside world to help feed the population; and (2) the fact that the handicraft sector never challenged agricultural dominance in the economy despite a symbiotic relationship between them.

By the same token, urbanization rarely exceeded ten percent of the total population although large urban centers were established. For example, during the Song, the northern capital Kaifeng (of the Northern Song) and southern capital Hangzhou (of the Southern Song) had 1.4 million and one million inhabitants, respectively (Jones et al. 1993: ch. 9). In addition, it was common that urban residents also had one foot in the rural sector due to private landholding property rights.

Science and Technology

In the context of China’s high yield agriculture (hence surpluses in the economy which were translated into leisure time for other pursuits) and Confucian meritocracy (hence a continued over-supply of the literate vis-à-vis the openings in officialdom and persistent record keeping by the premodern standards) (Chang 1962: ch. 1; Deng 1993: Appendix 1), China became one of the hotbeds of scientific discoveries and technological development of the premodern world (Needham 1954–95). It is commonly agreed that China led the world in science and technology from about the tenth century to about the fifteenth century.

The Chinese sciences and technologies were concentrated in several fields, mainly material production, transport, weaponry and medicine. A common feature of all Chinese discoveries was their trial-and-error basis and incremental improvement. Here, China’s continued history and large population became an advantage. However, this trial-and-error approach had its developmental ceiling. And, incremental improvement faced diminishing returns (Elvin 1973: ch. 17). So, although China once led the world, it was unable to realize what is known as the “Scientific Revolution” whose origin may well have been oriental/Chinese (Hobson 2004).

Living Standards

It has been argued that in the Ming-Qing Period the standards of living reached and stayed at a high level, comparable with the most wealthy parts of Western Europe by 1800 in material terms (Pomeranz 2000) and perhaps in education as well (Rawski 1979). Although the evidence is not conclusive, the claims certainly are compatible with China’s wealth in the context of (1) the rationality of private property rights-led growth, (2) total factor productivity growth associated with China’s green revolutions from the Han to the Ming-Qing and the economic revolution under the Song, and (3) China’s export capacity (hence China’s surplus output) and China’s silver imports (hence the purchasing power of China’s surplus).

Debates about China’s Long-term Economic History

The pivotal point of the debate about China’s long-term economic history has been why and how China did not go any further from its premodern achievements. Opinions have been divided and the debate goes on (Deng 2000). Within the wide spectrum of views, some are regarded as Eurocentric; some, Sinocentric (Hobson 2004). But a great many are neither, using some universally applicable criteria such as factor productivity (labor, land and capital), economic optimization/maximization, organizational efficiency, and externalities.

In a nutshell, the debate is whether to view China as a bottle “half empty” (hence China did not realize its full growth potential by the post-Renaissance Western European standard) or “half full” (hence China over-performed by the premodern world standard). In any case, China was “extra-ordinary” either in terms of its outstanding performance for a premodern civilization or in terms of its shortfall for modern growth despite its possession of many favorable preconditions to do so.

The utility of China’s premodern history is indeed indispensable in the understanding of how a dominant traditional economy (in terms of its sheer size and longevity) perpetuated and how the modern economy emerged in the world history.

References

Bray, Francesca. “Section 41: Agriculture.” In Science and Civilisation in China, edited by Joseph Needham, Volume 6. Cambridge: Cambridge University Press, 1984.

Chang, Chung-li. The Income of the Chinese Gentry. Seattle: University of Washington Press, 1962.

Deng, Gang. Chinese Maritime Activities and Socio-economic Consequences, c. 2100 BC – 1900 AD. Westport, CT: Greenwood Publishing, 1997.

Deng, Gang. Development versus Stagnation: Technological Continuity and Agricultural Progress in Premodern China. Westport, CT: Greenwood Publishing, 1993.

Deng, Gang. The Premodern Chinese Economy – Structural Equilibrium and Capitalist Sterility. London: Routledge, 1999.

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Deng, K. G. “Fact or Fiction? Re-Examination of Chinese Premodern Population Statistics.” Economic History Department Working Papers no. 68, London School of Economics, 2003.

Elvin, Mark. The Pattern of the Chinese Past. Stanford: Stanford University Press, 1973.

Flynn, D. O. and Giráldez, Arturo. “Born with a ‘Silver Spoon’: The Origin of World Trade.” Journal of World History 6 no. 2 (1995): 201–21.

Ho, Ping-ti. “Early-Ripening Rice in Chinese History.” Economic History Review Ser. 2 (1956): 200–18.

Ho, Ping-ti. The Ladder of Success in Imperial China: Aspects of Social Mobility, 1368–1911. New York: Columbia University Press, 1962.

Hobson, J. M. The Eastern Origins of Western Civilisation. Cambridge: Cambridge University Press, 2004.

Huntington, S. P. The Clash of Civilisations and the Remaking of World Order. New York: Simon and Schuster, 1996.

Jones, E. L., Lionel Frost and Colin White. Coming Full Circle: An Economic History of the Pacific Rim. Melbourne and Oxford: Oxford University Press, 1993.

Kennedy, Paul. The Rise and Fall of the Great Powers. New York: Random House, 1987.

Myers, R. H. The Chinese Peasant Economy: Agricultural Development in Hopei and Shangtung, 1890–1949. Cambridge, MA: Harvard University Press, 1970.

Needham, Joseph, editor. Science and Civilisation in China. Cambridge: Cambridge University Press, 1954–2000.

Perkins, Dwight. Agricultural Development in China, 1368–1968. Edinburgh: Edinburgh University Press, 1969.

Pomeranz, Kenneth. The Great Divergence: Europe, China and the Making of the Modern World Economy. Princeton: Princeton University Press, 2000.

Rawski, E. S. Education and Popular Literacy in Ch’ing China. Ann Arbor: University of Michigan Press, 1979.

Skinner, G. W. “Marketing and Social Structure in Rural China.” Journal of Asian Studies 24 (1964–65): 3–44, 195–228, 363–400.

Citation: Deng, Kent. “Economic History of Premodern China”. EH.Net Encyclopedia, edited by Robert Whaples. November 7, 2004. URL
http://eh.net/encyclopedia/economic-history-of-premodern-china-from-221-bc-to-c-1800-ad/

Child Labor in the United States

Robert Whaples, Wake Forest University

Child labor was widespread in agriculture and in industry in U.S. economy up until the early twentieth century but largely disappeared by the 1930s.

In the colonial period and into the 1800s parents and guardians generally required children to work. Initially most of the population worked in agriculture and children gradually moved into tasks demanding greater strength and skills as they aged. Craig (1993) uses census data to gauge the impact and value of child labor in the middle of the 1800s. He finds that the activities of farm-owning families were not closely linked to the number and ages of their children. Within each region, families in different life-cycle stages earned revenues in almost exactly the same manner. At every life-cycle stage, farm-owning families in the Midwest, for example, earned approximately 30 percent of their gross farm revenue from growing cereal crops; 29 percent from dairy, poultry, and market gardens; 22 percent from land and capital improvements; and 15 percent from hay and livestock. In addition, Craig calculates the value of child labor by estimating how the total value of labor output changed in the presence of each type of family member. He finds that children under 7 reduced the value of farm output, presumably because they reduced their mothers’ economic activities. For each child aged 7 to 12 the family’s output increased by about $16 per year – only 7 percent of the income produced by a typical adult male. Teen-aged females boosted family farm income by only about $22, while teen-aged males boosted income by $58. Because of these low productivity levels, families couldn’t really strike it rich by putting their children to work. When viewed as an investment, children had a strikingly negative rate of return because the costs of raising them generally exceeded the value of the work they performed.

The low value of child labor in agriculture may help explain why children were an important source of labor in many early industrial firms. In 1820 children aged 15 and under made up 23 percent of the manufacturing labor force of the industrializing Northeast. They were especially common in textiles, constituting 50 percent of the work force in cotton mills with 16 or more employees, as well as 41 percent of workers in wool mills, and 24 percent in paper mills. Goldin and Sokoloff (1982) conclude, however, that child labor’s share of industrial employment began its decline as early as 1840. Many textile manufacturers employed whole families and – despite its declining share – child labor continued to be an important input into this industry until the early twentieth century.

In the mid-1800s the median age of leaving home was about 22.5 for males and 20.5 for females. Apprenticed children generally left home at much earlier ages, but this institution was not very strong in the U.S. One study of rural Maryland found that nearly 20 percent of white males aged 15 to 20 were formally bound as apprentices in 1800, but the percentage fell to less than 1 percent by 1860.

National statistics on child labor are first available in 1880. They show that the labor force participation rate of children aged 10 to 19 was considerably higher among black males (65.5 percent) and females (43.7 percent) than among white males (43.1 percent) and females (13.1 percent). Likewise, the rate among foreign-born children exceeded that of their counterparts born in the U.S. – by about 9 percentage points among males and 16 percentage points among females. These differences may be largely attributable to the higher earnings levels of white and native-born families. In addition, labor force participation among rural children exceeded urban rates by about 8 percentage points.

The figures below give trends in child labor from 1880 to 1930.

1880 1900 1930
Labor force participation rates of children, 10 to 15 years old (percentages)
Males 32.5 26.1 6.4
Females 12.2 6.4 2.9
Percentage of 10 to 15 year olds in agricultural employment
Males 69.9 67.6 74.5
Females 37.3 74.5 61.5

Note: 1880 figures are based on Carter and Sutch (1996). Other numbers are unadjusted from those reported by the Bureau of the Census.

These figures show that throughout this period agricultural employment dominated child labor, despite the fact that industrialization was occurring rapidly and agricultural employment fell from 48 percent to 25 percent of the work force between 1880 and 1930.

Data from the Cost of Living Survey of 1889-90 show the importance of child labor to urban households. While the family head’s income peaked when he was in his thirties, family expenditures peaked when he was in his fifties because of the contributions of children. Similarly, in a 1917-19 Department of Labor survey, among families with working children, children’s earnings accounted for an average of 23 percent of total family income.

The continuation of child labor in industry in the late nineteenth and early twentieth centuries, however, sparked controversy. Much of this ire was directed at employers, especially in industries where supervisors bullied children to work harder and assigned them to dangerous, exhausting or degrading jobs. In addition, working-class parents were accused of greedily not caring about the long-term well-being of their children. Requiring them to go to work denied them educational opportunities and reduced their life-time earnings, yet parents of laboring children generally required them to turn over all or almost all of their earnings. For example, one government study of unmarried young women living at home and working in factories and stores in New York City in 1907 found over ninety percent of those under age 20 turned all of their earnings over to their parents. Likewise, Parsons and Goldin (1989) find that children of fathers working in the textile industry left school about three years younger than those with fathers in other industries. They argue that many parents with adolescent children migrated to places, like textile centers, where their children could earn more, even though doing so didn’t increase overall family wages very much. On the other hand, Moehling (2005), using data from 1917 to 1919, finds that adolescents’ earnings gave them increased bargaining power, so that, for example, expenditures on children’s clothing increased as the income they brought into the household increased.

The earliest legal restriction on child labor in the U.S. was a Massachusetts law in 1837 which prohibited manufacturing establishments from employing children under age 15 who hadn’t attended school for at least three months in the previous year. Legislation enacted before 1880 generally contained only weak restrictions and little provisions for enforcement. In the late 1800s, however, social pressure against child labor became more organized under leaders such as Florence Kelley, Edgar Gardner Murphy and Felix Adler. By 1899, 44 states and territories had a child labor law of some type. Twenty-four states had minimum age limits for manufacturing employment by 1900, with age limits around 14 years in the Northeast and Upper Midwest, and no minimums at all in most of the South. When the 1900 Census reported a rise in child labor above levels of 1880, child labor activists responded with increased efforts including a press campaign and the establishment of the National Child Labor Committee in 1904. (Ironically, recent research suggests the Census was in error and child labor was already on the decline by 1900.) By 1910 seventeen more states enacted minimum age laws and several others increased age minimums.

Federal legislation, however, initially proved unsuccessful. The Keating-Owen Act of 1916, which prevented the interstate shipment of goods produced in factories by children under 14 and in mines by children under 16, was struck down in the Hammer v. Dagenhart (1918) ruling. Likewise, the Pomerane Amendment of 1918, which taxed companies that used child labor, was declared unconstitutional in Bailey v. Drexel Furniture (1922) on the grounds that it was an unwarranted exercise of the commerce power of the federal government and violated states’ rights. In 1924, the Senate passed a Constitutional amendment banning child labor, but it was never ratified by enough states. Finally, the Fair Labor Standards Act of 1938 prohibited the full-time employment of those 16 and under (with a few exemptions) and enacted a national minimum wage which made employing most children uneconomical. It received the Supreme Court’s blessing.

Most economic historians conclude that this legislation was not the primary reason for the reduction and virtual elimination of child labor between 1880 and 1940. Instead they point out that industrialization and economic growth brought rising incomes, which allowed parents the luxury of keeping their children out of the work force. In addition, child labor rates have been linked to the expansion of schooling, high rates of return from education, and a decrease in the demand for child labor due to technological changes which increased the skills required in some jobs and allowed machines to take jobs previously filled by children. Moehling (1999) finds that the employment rate of 13-year olds around the beginning of the twentieth century did decline in states that enacted age minimums of 14, but so did the rates for 13-year olds not covered by the restrictions. Overall she finds that state laws are linked to only a small fraction – if any – of the decline in child labor. It may be that states experiencing declines were therefore more likely to pass legislation, which was largely symbolic.

References:

Carter, Susan and Richard Sutch. “Fixing the Facts: Editing of the 1880 U.S. Census of Occupations with Implications for Long-Term Labor Force Trends and the Sociology of Official Statistics.” Historical Methods 29 (1996): 5-24.

Craig, Lee A. To Sow One Acre More: Childbearing and Farm Productivity in the Antebellum North. Baltimore: Johns Hopkins University Press, 1993.

Goldin, Claudia and Kenneth Sokoloff. “Women, Children, and Industrialization in the Early Republic: Evidence from the Manufacturing Censuses.” Journal of Economic History 42, no. 4 (1982): 741-74.

Moehling, Carolyn. “‘She Has Suddenly Become Powerful’: Youth Employment and Household Decision-Making in the Early Twentieth Century.” Journal of Economic History 65, no. 2 (2005): 414-38.

Moehling, Carolyn. “State Child Labor Laws and the Decline of Child Labor.” Explorations in Economic History 36 (1998): 72-106.

Parsons, Donald O. and Claudia Goldin. “Parental Altruism and Self-Interest: Child Labor among Late Nineteenth-Century American Families.” Economic Inquiry 27, no. 4 (1989): 637-59.

Citation: Whaples, Robert. “Child Labor in the United States”. EH.Net Encyclopedia, edited by Robert Whaples. October 7, 2005. URL http://eh.net/encyclopedia/child-labor-in-the-united-states/

Child Labor during the British Industrial Revolution

Carolyn Tuttle, Lake Forest College

During the late eighteenth and early nineteenth centuries Great Britain became the first country to industrialize. Because of this, it was also the first country where the nature of children’s work changed so dramatically that child labor became seen as a social problem and a political issue.

This article examines the historical debate about child labor in Britain, Britain’s political response to problems with child labor, quantitative evidence about child labor during the 1800s, and economic explanations of the practice of child labor.

The Historical Debate about Child Labor in Britain

Child Labor before Industrialization

Children of poor and working-class families had worked for centuries before industrialization – helping around the house or assisting in the family’s enterprise when they were able. The practice of putting children to work was first documented in the Medieval era when fathers had their children spin thread for them to weave on the loom. Children performed a variety of tasks that were auxiliary to their parents but critical to the family economy. The family’s household needs determined the family’s supply of labor and “the interdependence of work and residence, of household labor needs, subsidence requirements, and family relationships constituted the ‘family economy'” [Tilly and Scott (1978, 12)].

Definitions of Child Labor

The term “child labor” generally refers to children who work to produce a good or a service which can be sold for money in the marketplace regardless of whether or not they are paid for their work. A “child” is usually defined as a person who is dependent upon other individuals (parents, relatives, or government officials) for his or her livelihood. The exact ages of “childhood” differ by country and time period.

Preindustrial Jobs

Children who lived on farms worked with the animals or in the fields planting seeds, pulling weeds and picking the ripe crop. Ann Kussmaul’s (1981) research uncovered a high percentage of youths working as servants in husbandry in the sixteenth century. Boys looked after the draught animals, cattle and sheep while girls milked the cows and cared for the chickens. Children who worked in homes were either apprentices, chimney sweeps, domestic servants, or assistants in the family business. As apprentices, children lived and worked with their master who established a workshop in his home or attached to the back of his cottage. The children received training in the trade instead of wages. Once they became fairly skilled in the trade they became journeymen. By the time they reached the age of twenty-one, most could start their own business because they had become highly skilled masters. Both parents and children considered this a fair arrangement unless the master was abusive. The infamous chimney sweeps, however, had apprenticeships considered especially harmful and exploitative. Boys as young as four would work for a master sweep who would send them up the narrow chimneys of British homes to scrape the soot off the sides. The first labor law passed in Britain to protect children from poor working conditions, the Act of 1788, attempted to improve the plight of these “climbing boys.” Around age twelve many girls left home to become domestic servants in the homes of artisans, traders, shopkeepers and manufacturers. They received a low wage, and room and board in exchange for doing household chores (cleaning, cooking, caring for children and shopping).

Children who were employed as assistants in domestic production (or what is also called the cottage industry) were in the best situation because they worked at home for their parents. Children who were helpers in the family business received training in a trade and their work directly increased the productivity of the family and hence the family’s income. Girls helped with dressmaking, hat making and button making while boys assisted with shoemaking, pottery making and horse shoeing. Although hours varied from trade to trade and family to family, children usually worked twelve hours per day with time out for meals and tea. These hours, moreover, were not regular over the year or consistent from day-to-day. The weather and family events affected the number of hours in a month children worked. This form of child labor was not viewed by society as cruel or abusive but was accepted as necessary for the survival of the family and development of the child.

Early Industrial Work

Once the first rural textile mills were built (1769) and child apprentices were hired as primary workers, the connotation of “child labor” began to change. Charles Dickens called these places of work the “dark satanic mills” and E. P. Thompson described them as “places of sexual license, foul language, cruelty, violent accidents, and alien manners” (1966, 307). Although long hours had been the custom for agricultural and domestic workers for generations, the factory system was criticized for strict discipline, harsh punishment, unhealthy working conditions, low wages, and inflexible work hours. The factory depersonalized the employer-employee relationship and was attacked for stripping the worker’s freedom, dignity and creativity. These child apprentices were paupers taken from orphanages and workhouses and were housed, clothed and fed but received no wages for their long day of work in the mill. A conservative estimate is that around 1784 one-third of the total workers in country mills were apprentices and that their numbers reached 80 to 90% in some individual mills (Collier, 1964). Despite the First Factory Act of 1802 (which attempted to improve the conditions of parish apprentices), several mill owners were in the same situation as Sir Robert Peel and Samuel Greg who solved their labor shortage by employing parish apprentices.

After the invention and adoption of Watt’s steam engine, mills no longer had to locate near water and rely on apprenticed orphans – hundreds of factory towns and villages developed in Lancashire, Manchester, Yorkshire and Cheshire. The factory owners began to hire children from poor and working-class families to work in these factories preparing and spinning cotton, flax, wool and silk.

The Child Labor Debate

What happened to children within these factory walls became a matter of intense social and political debate that continues today. Pessimists such as Alfred (1857), Engels (1926), Marx (1909), and Webb and Webb (1898) argued that children worked under deplorable conditions and were being exploited by the industrialists. A picture was painted of the “dark satanic mill” where children as young as five and six years old worked for twelve to sixteen hours a day, six days a week without recess for meals in hot, stuffy, poorly lit, overcrowded factories to earn as little as four shillings per week. Reformers called for child labor laws and after considerable debate, Parliament took action and set up a Royal Commission of Inquiry into children’s employment. Optimists, on the other hand, argued that the employment of children in these factories was beneficial to the child, family and country and that the conditions were no worse than they had been on farms, in cottages or up chimneys. Ure (1835) and Clapham (1926) argued that the work was easy for children and helped them make a necessary contribution to their family’s income. Many factory owners claimed that employing children was necessary for production to run smoothly and for their products to remain competitive. John Wesley, the founder of Methodism, recommended child labor as a means of preventing youthful idleness and vice. Ivy Pinchbeck (1930) pointed out, moreover, that working hours and conditions had been as bad in the older domestic industries as they were in the industrial factories.

Factory Acts

Although the debate over whether children were exploited during the British Industrial Revolution continues today [see Nardinelli (1988) and Tuttle (1998)], Parliament passed several child labor laws after hearing the evidence collected. The three laws which most impacted the employment of children in the textile industry were the Cotton Factories Regulation Act of 1819 (which set the minimum working age at 9 and maximum working hours at 12), the Regulation of Child Labor Law of 1833 (which established paid inspectors to enforce the laws) and the Ten Hours Bill of 1847 (which limited working hours to 10 for children and women).

The Extent of Child Labor

The significance of child labor during the Industrial Revolution was attached to both the changes in the nature of child labor and the extent to which children were employed in the factories. Cunningham (1990) argues that the idleness of children was more a problem during the Industrial Revolution than the exploitation resulting from employment. He examines the Report on the Poor Laws in 1834 and finds that in parish after parish there was very little employment for children. In contrast, Cruickshank (1981), Hammond and Hammond (1937), Nardinelli (1990), Redford (1926), Rule (1981), and Tuttle (1999) claim that a large number of children were employed in the textile factories. These two seemingly contradictory claims can be reconciled because the labor market for child labor was not a national market. Instead, child labor was a regional phenomenon where a high incidence of child labor existed in the manufacturing districts while a low incidence of children were employed in rural and farming districts.

Since the first reliable British Census that inquired about children’s work was in 1841, it is impossible to compare the number of children employed on the farms and in cottage industry with the number of children employed in the factories during the heart of the British industrial revolution. It is possible, however, to get a sense of how many children were employed by the industries considered the “leaders” of the Industrial Revolution – textiles and coal mining. Although there is still not a consensus on the degree to which industrial manufacturers depended on child labor, research by several economic historians have uncovered several facts.

Estimates of Child Labor in Textiles

Using data from an early British Parliamentary Report (1819[HL.24]CX), Freuenberger, Mather and Nardinelli concluded that “children formed a substantial part of the labor force” in the textile mills (1984, 1087). They calculated that while only 4.5% of the cotton workers were under 10, 54.5% were under the age of 19 – confirmation that the employment of children and youths was pervasive in cotton textile factories (1984, 1087). Tuttle’s research using a later British Parliamentary Report (1834(167)XIX) shows this trend continued. She calculated that children under 13 comprised roughly 10 to 20 % of the work forces in the cotton, wool, flax, and silk mills in 1833. The employment of youths between the age of 13 and 18 was higher than for younger children, comprising roughly 23 to 57% of the work forces in cotton, wool, flax, and silk mills. Cruickshank also confirms that the contribution of children to textile work forces was significant. She showed that the growth of the factory system meant that from one-sixth to one-fifth of the total work force in the textile towns in 1833 were children under 14. There were 4,000 children in the mills of Manchester; 1,600 in Stockport; 1,500 in Bolton and 1,300 in Hyde (1981, 51).

The employment of children in textile factories continued to be high until mid-nineteenth century. According to the British Census, in 1841 the three most common occupations of boys were Agricultural Labourer, Domestic Servant and Cotton Manufacture with 196,640; 90,464 and 44,833 boys under 20 employed, respectively. Similarly for girls the three most common occupations include Cotton Manufacture. In 1841, 346,079 girls were Domestic Servants; 62,131 were employed in Cotton Manufacture and 22,174 were Dress-makers. By 1851 the three most common occupations for boys under 15 were Agricultural Labourer (82,259), Messenger (43,922) and Cotton Manufacture (33,228) and for girls it was Domestic Servant (58,933), Cotton Manufacture (37,058) and Indoor Farm Servant (12,809) (1852-53[1691-I]LXXXVIII, pt.1). It is clear from these findings that children made up a large portion of the work force in textile mills during the nineteenth century. Using returns from the Factory Inspectors, S. J. Chapman’s (1904) calculations reveal that the percentage of child operatives under 13 had a downward trend for the first half of the century from 13.4% in 1835 to 4.7% in 1838 to 5.8% in 1847 and 4.6% by 1850 and then rose again to 6.5% in 1856, 8.8% in 1867, 10.4% in 1869 and 9.6% in 1870 (1904, 112).

Estimates of Child Labor in Mining

Children and youth also comprised a relatively large proportion of the work forces in coal and metal mines in Britain. In 1842, the proportion of the work forces that were children and youth in coal and metal mines ranged from 19 to 40%. A larger proportion of the work forces of coal mines used child labor underground while more children were found on the surface of metal mines “dressing the ores” (a process of separating the ore from the dirt and rock). By 1842 one-third of the underground work force of coal mines was under the age of 18 and one-fourth of the work force of metal mines were children and youth (1842[380]XV). In 1851 children and youth (under 20) comprised 30% of the total population of coal miners in Great Britain. After the Mining Act of 1842 was passed which prohibited girls and women from working in mines, fewer children worked in mines. The Reports on Sessions 1847-48 and 1849 Mining Districts I (1847-48[993]XXVI and 1849[1109]XXII) and The Reports on Sessions 1850 and 1857-58 Mining Districts II (1850[1248]XXIII and 1857-58[2424]XXXII) contain statements from mining commissioners that the number of young children employed underground had diminished.

In 1838, Jenkin (1927) estimates that roughly 5,000 children were employed in the metal mines of Cornwall and by 1842 the returns from The First Report show as many as 5,378 children and youth worked in the mines. In 1838 Lemon collected data from 124 tin, copper and lead mines in Cornwall and found that 85% employed children. In the 105 mines that employed child labor, children comprised from as little as 2% to as much as 50% of the work force with a mean of 20% (Lemon, 1838). According to Jenkin the employment of children in copper and tin mines in Cornwall began to decline by 1870 (1927, 309).

Explanations for Child Labor

The Supply of Child Labor

Given the role of child labor in the British Industrial Revolution, many economic historians have tried to explain why child labor became so prevalent. A competitive model of the labor market for children has been used to examine the factors that influenced the demand for children by employers and the supply of children from families. The majority of scholars argue that it was the plentiful supply of children that increased employment in industrial work places turning child labor into a social problem. The most common explanation for the increase in supply is poverty – the family sent their children to work because they desperately needed the income. Another common explanation is that work was a traditional and customary component of ordinary people’s lives. Parents had worked when they were young and required their children to do the same. The prevailing view of childhood for the working-class was that children were considered “little adults” and were expected to contribute to the family’s income or enterprise. Other less commonly argued sources of an increase in the supply of child labor were that parents either sent their children to work because they were greedy and wanted more income to spend on themselves or that children wanted out of the house because their parents were emotionally and physically abusive. Whatever the reason for the increase in supply, scholars agree that since mandatory schooling laws were not passed until 1876, even well-intentioned parents had few alternatives.

The Demand for Child Labor

Other compelling explanations argue that it was demand, not supply, that increased the use of child labor during the Industrial Revolution. One explanation came from the industrialists and factory owners – children were a cheap source of labor that allowed them to stay competitive. Managers and overseers saw other advantages to hiring children and pointed out that children were ideal factory workers because they were obedient, submissive, likely to respond to punishment and unlikely to form unions. In addition, since the machines had reduced many procedures to simple one-step tasks, unskilled workers could replace skilled workers. Finally, a few scholars argue that the nimble fingers, small stature and suppleness of children were especially suited to the new machinery and work situations. They argue children had a comparative advantage with the machines that were small and built low to the ground as well as in the narrow underground tunnels of coal and metal mines. The Industrial Revolution, in this case, increased the demand for child labor by creating work situations where they could be very productive.

Influence of Child Labor Laws

Whether it was an increase in demand or an increase in supply, the argument that child labor laws were not considered much of a deterrent to employers or families is fairly convincing. Since fines were not large and enforcement was not strict, the implicit tax placed on the employer or family was quite low in comparison to the wages or profits the children generated [Nardinelli (1980)]. On the other hand, some scholars believe that the laws reduced the number of younger children working and reduced labor hours in general [Chapman (1904) and Plener (1873)].

Despite the laws there were still many children and youth employed in textiles and mining by mid-century. Booth calculated there were still 58,900 boys and 82,600 girls under 15 employed in textiles and dyeing in 1881. In mining the number did not show a steady decline during this period, but by 1881 there were 30,400 boys under 15 still employed and 500 girls under 15. See below.

Table 1: Child Employment, 1851-1881

Industry & Age Cohort 1851 1861 1871 1881
Mining
Males under 15
37,300 45,100 43,100 30,400
Females under 15 1,400 500 900 500
Males 15-20 50,100 65,300 74,900 87,300
Females over 15 5,400 4,900 5,300 5,700
Total under 15 as
% of work force
13% 12% 10% 6%
Textiles and Dyeing
Males under 15
93,800 80,700 78,500 58,900
Females under 15 147,700 115,700 119,800 82,600
Males 15-20 92,600 92,600 90,500 93,200
Females over 15 780,900 739,300 729,700 699,900
Total under 15 as
% of work force
15% 19% 14% 11%

Source: Booth (1886, 353-399).

Explanations for the Decline in Child Labor

There are many opinions regarding the reason(s) for the diminished role of child labor in these industries. Social historians believe it was the rise of the domestic ideology of the father as breadwinner and the mother as housewife, that was imbedded in the upper and middle classes and spread to the working-class. Economic historians argue it was the rise in the standard of living that accompanied the Industrial Revolution that allowed parents to keep their children home. Although mandatory schooling laws did not play a role because they were so late, other scholars argue that families started showing an interest in education and began sending their children to school voluntarily. Finally, others claim that it was the advances in technology and the new heavier and more complicated machinery, which required the strength of skilled adult males, that lead to the decline in child labor in Great Britain. Although child labor has become a fading memory for Britons, it still remains a social problem and political issue for developing countries today.

References

Alfred (Samuel Kydd). The History of the Factory Movement. London: Simpkin, Marshall, and Co., 1857.

Booth, C. “On the Occupations of the People of the United Kingdom, 1801-81.” Journal of the Royal Statistical Society (J.S.S.) XLIX (1886): 314-436.

Chapman, S. J. The Lancashire Cotton Industry. Manchester: Manchester University Publications, 1904.

Clapham, Sir John. An Economic History of Modern Britain. Vol. I and II. Cambridge: Cambridge University Press, 1926.

Collier, Francis. The Family Economy of the Working Classes in the Cotton Industry, 1784-1833. Manchester: Manchester University Press, 1964.

Cruickshank, Marjorie. Children and Industry. Manchester: Manchester University Press, 1981.

Cunningham, Hugh. “The Employment and Unemployment of Children in England, c. 1680-1851.” Past and Present 126 (1990): 115-150.

Engels, Frederick. The Condition of the Working Class in England. Translated by the Institute of Marxism-Leninism, Moscow. London: E. J. Hobsbaum, 1969[1926].

Freudenberger, Herman, Francis J. Mather, and Clark Nardinelli. “A New Look at the Early Factory Labour Force.” Journal of Economic History 44 (1984): 1085-90.

Hammond, J. L. and Barbara Hammond. The Town Labourer, 1760-1832. New York: A Doubleday Anchor Book, 1937.

House of Commons Papers (British Parliamentary Papers):
1833(450)XX Factories, employment of children. R. Com. 1st rep.
1833(519)XXI Factories, employment of children. R. Com. 2nd rep.
1834(44)XXVII Administration and Operation of Poor Laws, App. A, pt.1.
1834(44)XXXVI Administration and Operation of Poor Laws. App. B.2, pts. III,IV,V.
1834 (167)XX Factories, employment of children. Supplementary Report.
1842[380]XV Children’s employment (mines). R. Com. 1st rep.
1847-48[993]XXVI Mines and Collieries, Mining Districts. Commissioner’s rep.
1849[1109]XXII Mines and Collieries, Mining Districts. Commissioner’s rep.
1850[1248]XXIII Mining Districts. Commissioner’s rep.
1857-58[2424]XXXII Mines and Minerals. Commissioner’s rep.

House of Lords Papers:
1819(24)CX

Jenkin, A. K. Hamilton. The Cornish Miner: An Account of His Life Above and Underground From Early Times. London: George Allen and Unwin, Ltd., 1927.

Kussmaul, Ann. A General View of the Rural Economy of England, 1538-1840. Cambridge: Cambridge University Press, 1990.

Lemon, Sir Charles. “The Statistics of the Copper Mines of Cornwall.” Journal of the Royal Statistical Society I (1838): 65-84.

Marx. Karl. Capital. vol. I. Chicago: Charles H. Kerr & Company, 1909.

Nardinelli, Clark. Child Labor and the Industrial Revolution. Bloomington: Indiana University Press, 1990.

Nardinelli, Clark. “Were Children Exploited During the Industrial Revolution?” Research in Economic History 2 (1988): 243-276.

Nardinelli, Clark. “Child Labor and the Factory Acts.” Journal of Economic History. 40, no. 4 (1980): 739-755.

Pinchbeck, Ivy. Women Workers and the Industrial Revolution, 1750-1800. London: George Routledge and Sons, 1930.

Plener, Ernst Elder Von. English Factory Legislation. London: Chapman and Hall, 1873.

Redford, Arthur. Labour Migration in England, 1800-1850. Manchester: Manchester University Press, 1926.

Rule, John. The Experience of Labour in Eighteenth Century English Industry. New York: St. Martin’s Press, 1981.

Thompson, E. P. The Making of the English Working Class. New York: Vintage Books, 1966.

Tilly, L. A. and Scott, J. W. Women, Work and Family. New York: Holt, Rinehart, and Winston, 1978.

Tuttle, Carolyn. “A Revival of the Pessimist View: Child Labor and the Industrial Revolution.” Research in Economic History 18 (1998): 53-82.

Tuttle, Carolyn. Hard at Work in Factories and Mines: The Economics of Child Labor During the British Industrial Revolution. Oxford: Westview Press, 1999.

Ure, Andrew. The Philosophy of Manufactures. London, 1835.

Webb, Sidney and Webb, Beatrice. Problems of Modern Industry. London: Longmanns, Green, 1898.

Citation: Tuttle, Carolyn. “Child Labor during the British Industrial Revolution”. EH.Net Encyclopedia, edited by Robert Whaples. August 14, 2001. URL
http://eh.net/encyclopedia/child-labor-during-the-british-industrial-revolution/

International Shipping Cartels

Richard Sicotte, University of Calgary

The international shipping industry has been characterized by a remarkable degree of collusion for more than a century. The two features that are most astonishing are the length of time that some of these cartels have endured, and the wide latitude that regulatory authorities have given them. Firms in many industries have attempted to collude but typically they have met with only fleeting success. Also, since the late nineteenth century the United States has prosecuted firms that fix prices under the Sherman Antitrust Act (until quite recently, most other countries were relatively lenient in their treatment of cartels). Yet in both instances ocean shipping is an exception to the rule.

Fixed Costs and the Rise of Collusion

The rise of collusive practices in ocean shipping coincides with developments in the industry that considerably raised the costs — especially the fixed costs (costs that do not vary with the amount of cargo carried) — of engaging in the business. Many economists believe that fixed costs are important because the higher that they are relative to variable costs, the more likely it is that vigorous price competition will lead to business bankruptcies. This threat of bankruptcy in the presence of price competition provides a strong incentive for firms to collude.

Liner Service vs. Tramp Shipping

The particular developments in ocean shipping that are associated with raising fixed costs are the rise of liner service and the increased use of steamships. Liner service refers to that portion of the shipping industry that follows regular schedules. Liner shipping firms promise to depart a port on a given day regardless of whether the ship is full. Liner shipping is contrasted with so-called “tramp” shipping, which involves ships setting sail at indeterminate dates, often only when they have filled their cargo or passenger capacity. Liner services involve higher fixed costs than tramp shipping not only because of larger administrative overhead, but also because the necessity of following a fixed schedule creates more stringent capacity requirements. The number of vessels required for a given liner service is determined principally by frequency, distance and speed. For example, a weekly liner service between New York and Hamburg may require four ships. Some of those vessels may depart the ports only partially full; a tramp service carrying the same amount of cargo between New York and Hamburg could conceivably require fewer ships, because the tramps can wait until they are full before departing.

Liner shipping is most often associated with steamships, although regularly scheduled service by sailing vessels was not uncommon in the early nineteenth century. But with steamships, firms found it easier to comply with the fixed schedules characteristic of liner service because steamships, unlike sailing vessels, did not depend on favorable winds in order to maintain speed. Most steamships were also much more expensive than sailing vessels. Because the cost of the vessel represents a fixed cost in the shipping industry – interest or time charter payments must be made independent of the quantity of cargo or passengers carried – the transition to steamships represented a major increase in fixed costs.

Early Attempts at Collusion

Historical accounts of steamship companies in the nineteenth century confirm that much of the motivation for collusion was to raise prices and thwart further price competition. Steamship firms serving North Atlantic routes attempted to collude as early as the 1840s, shortly after the steamship was first applied there. The first cartels that had some staying power, however, served the trade between Britain and India, and Britain and China. By the beginning of the twentieth century, liner shipping companies had established cartels on nearly all world trade routes.

Shipping Conferences and Collusion

The principal activity of shipping conferences is to meet frequently in order to fix freight rates (or passenger fares in the case of passenger shipping conferences). Freight rates are typically set by commodity, with the highest value commodities charged higher rates than lower value commodities. The process of fixing rates can be immensely complicated, because lower cost carriers will prefer that the cartel fix lower rates than higher cost carriers will prefer. Simple fixing of rates may not be satisfactory, however. On the one hand, there is no control over non-price competition. For example, carriers might all wish to schedule vessels in a similar way with the result that vessels are still not carrying at full capacity. This is especially likely if the conference rates are higher than the competitive rates, which results in a lower quantity demanded. It might also be true that if firms are not competing on price, they may have an incentive to invest in higher quality vessels so as to attract more customers. Finally, collusion on prices must be enforceable. The cartels must be able to detect and deter member firms from secretly cutting rates and thereby attracting larger volumes. Clearly ocean carriers have much to gain from colluding on more than price.

Pooling Arrangements

Some cartels coordinate sailing schedules or create exclusive territories (control over specific ports or ranges of ports), and there has been at least one case in which the firms even restricted investment in newer, larger and faster ships. One of the most prevalent innovations introduced by conferences is a mechanism known as the “pool.” In a pool, the firms are each assigned a percentage of the total freight (or passengers) carried or revenue earned. The secretary of the conference collects data from the firms in order to make the pool operational. The firms that exceed their quotas must make payments to the firms that do not achieve their quotas. In this manner, the incentive to compete for greater volumes is diminished substantially. Similarly, quota arrangements might be devised and enforced such that lower cost firms carry greater amounts of freight than higher cost firms, which leads to greater aggregate profits. Still, agreements that extend beyond simple price-fixing are more costly to negotiate and carry out.

Factors Associated with Successful Collusion

In a study of a large number of freight cartels in the early twentieth century, it was found that approximately half of shipping conferences were of a stricter variety that included mechanisms like the pool or coordinated schedules. Evidence suggests that certain factors facilitated the negotiation and maintenance of these more complex cartel contracts. One of the most important factors was multi-market contact among cartel firms. Multi-market contact occurs when ocean carriers engage one another on more than one trade route. For example, if the firms in a given conference also participated together in other conferences, the conferences that they participated in were more likely to be of the stricter variety than if the firms in a given conference participated in other conferences, but not with each other. Evidence that multi-market contact facilitates collusion has also been found in other industries, such as airlines and hotels. Multi-market contact is thought to be important for two reasons. First, firms will be less likely to violate agreements because if they do so, they risk retaliation in many, if not most of the routes that they serve. Second, when firms have more experience working together, this may build trust and otherwise reduce the organizational and monitoring costs of maintaining higher degrees of collusion.

Another factor that was an important determinant of the extent of collusion was if a given conference happened to be dominated by a very large firm. Presumably, such dominant firms were more able to impose and enforce the terms of a complex agreement. Conferences with fewer members were also more likely to reach pooling or quantity agreements in addition to price-fixing. This is consistent with other works on cartels that have found that the fewer the number of firms, the easier it is to negotiate a cartel contract.

Responses to the Threat of Entry

A vital issue for shipping conferences is the threat of entry by non-conference (independent) ocean carriers, including tramps. The more successful that a cartel is in obtaining profits, the more incentives there are for new firms to enter the route to share in the spoils. Shipping conferences typically have employed two kinds of strategies against entrants and potential entrants. First, they often engage in predatory behavior (drastic cutting of rates) in response to entry. Rate wars reduce entrants’ incentives to stay in the business. Rate wars also send a signal to potential entrants that the cartel will respond strongly to any entry. This is meant to deter firms from entering the conference’s domain. There is evidence that conferences were more likely to engage in predatory behavior against weak entrants than well-established firms with substantial financial resources.

The second strategy that shipping conferences employ against entrants is to offer exclusive contracts to their customers. With such contracts, exporters or importers receive a discounted freight rate in exchange for a commitment to exclusively use the services of conference vessels. Breaches of the commitments carried financial penalties. In the case of one such exclusive contract, the deferred rebate, conferences withhold all or a portion of the rebate earned during a given period of time until continued allegiance to the conference could be verified, usually through the examination of statistics or by simply having agents observe the loading of competitors’ ships.

The Effects of Shipping Cartels on Social Welfare

Shipping conferences have been embroiled in a long-running controversy about their ultimate effects on social welfare. On the one hand, there is a school of thought that the cartel behavior is clearly detrimental, because through their participation in cartels firms are able to charge higher rates than would otherwise be obtained. On the other hand, the conferences themselves defend their practices as necessary for the very existence of the liner industry and undeniable benefits that regularly scheduled service brings for businesses and passengers. They argue that competition in liner shipping is unsustainable and destructive, and that the conferences are an efficient solution to an otherwise intractable market problem. If competition were to reign, the conferences argue that rates would immediately fall to un-remunerative depths and firms would all be driven to bankruptcy, or that only a monopoly would remain, which would be far worse than the cartel system. The destructive competition argument has recently been advocated by economic theorists using the economic concept of the core, which is the set of competitive equilibria. These theorists argue the core of the liner shipping market is empty – that is, there does not exist a competitive equilibrium and that conferences represent an efficient response to the problem. The controversy remains unresolved.

Governments’ Responses to Shipping Cartels

Throughout most of the past 125 years, governments have been very receptive to the arguments of destructive competition as applied to the ocean shipping industry. In 1909 the United Kingdom’s Royal Commission on Shipping Rings (conferences) issued a report in which the majority of the commission found that the conference system was necessary and its practices justified. The United States Congress first investigated the phenomenon immediately prior to World War I, and issued a report in 1914 also accepting the basic tenets of the destructive competition argument. The United States Shipping Act of 1916 granted shipping conferences conditional immunity from the nation’s antitrust laws, although Congress prohibited deferred rebates, which it deemed excessive. Other countries’ policies ranged from acquiescence to open support and encouragement.

The United States policy was relatively hard-line by contrast. After World War I, the United States required that all conferences be “open,” that is that any firm that wished to join the conference could not be excluded. This contrasted with the “closed” conference system employed on trade routes not involving the United States. Further, conferences were required to file copies of their agreements with a government agency charged with oversight of the industry.

After World War II, governments’ attitudes toward shipping conferences gradually hardened. The United States Congress again investigated the conference system after complaints of abuse were made in the 1950s. Court challenges to the conference system and some of its practices were made in the United States in the 1950s and 1960s. The United Nations also issued a Code of Conduct for Liner Conferences in 1974 (although it did not come into effect until 1983) to ensure that conferences accepted the lines of less developed countries as members.

Containerships and the Decline of Conferences

The liner shipping business was transformed after 1960 by the introduction of containerships. Containerships are one element in a global transportation network of unprecedented speed and security. Sea containers are inter-changed between ocean vessels, railcars and trucking chassis. Global point-to-point transportation firms and alliances are increasingly common and there is some question as to the continued relevance of shipping conferences in this inter-modal competitive environment. Indeed, non-conference carriers have become more prevalent in recent years and are carrying a greater proportion of freight than they did in the past.

Further, the United States Shipping Acts of 1984 and 1998 have weakened the ability of conferences to police their own members by mandating that firms have the right of “independent action” on rates and that they are permitted to negotiate large quantity “service contracts” with customers outside the conference price-fixing agreement. The European Commission has also regulated conferences more severely since the late 1980s. Additionally, exporters and importers are increasingly organized on an international level and have expressed their concerns about the conference system with increasing force. With their prodding, the Organization for Economic Cooperation and Development is currently reviewing liner conference pricing policies and other practices. The current decade is likely to see some very interesting developments in the area of international shipping conferences.

Further Reading:

Boyce, Gordon. Information, Mediation, and Institutional Development: The Rise of Large-Scale Enterprise in British Shipping, 1870-1919. Manchester, UK: Manchester University Press, 1995.

Deakin, Brian, and T. Seward. Shipping Conferences: A Study of Their Origins, Development and Economic Practices. Cambridge: Cambridge University Press, 1973.

Deltas, George, Konstantinos Serfes and Richard Sicotte. “American Shipping Cartels in the Pre-World War I Era.” Research in Economic History 19 (1999): 1-38.

Harley, Knick. “The Shift from Sailing Ships to Steamships, 1850-1890: A Study in Technological Change and Its Diffusion.” In Essays on a Mature Economy: Britain after 1840, edited by D.N. McCloskey. Princeton: Princeton University Press, 1971.

Hyde, Francis. Cunard and the North Atlantic, 1840-1973. Atlantic Highlands, NJ: Humanities Press, 1975.

Marriner, Sheila and Francis Hyde. The Senior John Samuel Swire, 1825-98: Management in Far Eastern Shipping Trades. Liverpool: Liverpool University Press, 1967.

Marx, Daniel. International Shipping Cartels: A Study of Industrial Self-Regulation by Shipping Conferences. Princeton: Princeton University Press, 1953.

Organization for Economic Cooperation and Development. Directorate for Science, Technology and Industry. Division of Transport. Regulatory Issues in International Maritime Transport. www.oecd.org/subject/regreform/products/Maritime_Trans.pdf Paris: OECD, 2001.

Pirrong, Stephen Craig. “An Application of the Core Theory to the Analysis of Ocean Shipping Markets.” Journal of Law and Economics 35, no. 1 (1992): 89-131.

Podolny, Joel and Fiona Scott Morton. “Social Status, Entry and Predation: the Case of British Shipping Cartels, 1879-1929.” Journal of Industrial Economics 47, no. 1 (1999): 41-67.

Scott Morton, Fiona. “Entry and Predation: British Shipping Cartels, 1879-1929.” Journal of Economics and Management Strategy 6, no. 4 (1997): 679-724.

Sjostrom, William. “Collusion in Ocean Shipping: A Test of Monopoly and Empty Core Models.” Journal of Political Economy 97, no. 5 (1989): 1160-79.

Stopford, Martin. Maritime Economics. New York: Routledge, 1997.

United Kingdom. Royal Commission on Shipping Rings. Report. Cmnd. 4668. London: His Majesty’s Printing Office, 1909.

United States. Advisory Commission on Conferences in Ocean Shipping. Report to the President and the Congress of the Advisory Commission on Conferences in Ocean Shipping. Washington: The Commission, 1992.

United States. House of Representatives. Committee on Merchant Marine and Fisheries. Report of the Committee on Merchant Marine and Fisheries on Steamship Agreements and Affiliations in the American Foreign and Domestic Trade under H. Res. 587. Document No. 805, 63rd Congress, Second Session. Washington: GPO, 1914.

United States. House of Representatives. Subcommittee on Antitrust. The Ocean Freight Industry. Report No. 1419, 87th Congress, Second Session. Washington: GPO, 1962.

Citation: Sicotte, Richard. “International Shipping Cartels”. EH.Net Encyclopedia, edited by Robert Whaples. August 14, 2001. URL http://eh.net/encyclopedia/international-shipping-cartels/

A History of the U.S. Carpet Industry

Randall L. Patton, Kennesaw State University

Paul Krugman (1993, p. 5) has written that “the most striking feature of the geography of economic activity…. is surely concentration” (emphasis in the original). There are few better examples of highly concentrated economic activity than the U.S. carpet industry. Today, carpet mills located within a 65-mile radius of Dalton, Georgia, produce about 85% of the carpet sold in the U.S. market. The U.S. industry accounts for about 45% of the world’s carpet production. While many segments of the textile industry have struggled in the post-World War II era, carpet makers have prospered. The U.S. carpet industry also exemplifies the southward drift of textile production within the United States during the twentieth century. Indeed, it is probably useful to conceptualize the U.S. carpet industry as two distinct industries with different trajectories. The early American carpet industry was, like other textile segments, a product of borrowed (from the United Kingdom) technology and skill that struggled throughout its existence against imports. The second American carpet industry grew from deep southern roots and utilized locally developed technology and skills. The second industry also came along at just the right time to ride the boom in consumer spending associated with the economic golden age that followed World War II.

The First U.S. Carpet Industry

The first U.S. carpet industry emerged at the end of the eighteenth century. Skilled weavers produced carpets and rugs with handloom technology. In its early years, American carpet makers encountered the same problem as other textile manufacturers – imports. Congress protected the infant U.S. industry, along with textiles generally, in 1816 and raised protective tariffs in the 1820s. In an early survey of the industry conducted in 1834, Timothy Pitkin found 20 carpet mills producing about 1 million square yards. By 1850, a government survey found 116 mills producing 8 million square yards of carpets and rugs (employing more than 6,000 workers). Twenty years later, U.S. carpet mills numbered 215, wove more than 20 million square yards, and employed 12,000 persons. In the nineteenth century Americans used carpet to cover poor quality, soft wood floors. A commentator wrote in 1872 that the “general use of carpets was a necessity some few years ago, from the fact that the floors of our houses were generally built of such poor material, and in such a shiftless manner, that the floor was too unsightly to be left exposed” (Greeley, 1872). The mid-nineteenth century saw the introduction of the varnished hardwood floor. With the hardwood floor came a declining demand for wall-to-wall carpets and an increasing demand for smaller rugs to provide stylistic accents.

Employment and production figures indicate that, although there was an incremental increase in productivity, production effectively rose in concert with the number of workers. Erastus Bigelow introduced power loom technology for various types of carpeting in the early 1840s, and others quickly followed with competing designs. Though Bigelow’s idea – the use of power looms in carpet production – would eventually result in great productivity gains, Bigelow’s own looms were not the primary source of the gains, nor did those gains materialize overnight. Handloom production outweighed power loom production as late as the 1870s in the Philadelphia area. Power looms were expensive and manufacturers had great difficulty in matching the quality of goods produced with handlooms.

Boom and Bust in the First Half of the Twentieth Century

After 1870, refinements in power loom technology allowed manufacturers to produce reasonable substitutes for higher quality handloom woven goods. This resulted in a decline in the production of the cheapest carpets as consumers moved toward higher quality goods as the price of higher quality weaves declined. Large rugs became a staple in upper-middle class American homes by the early twentieth century. Sales ballooned to more than 83 million square yards by 1923. Firms such as Bigelow-Hartford produced lavish catalogs and advertised products direct to consumers in the early twentieth century, bypassing the traditional commission agents who had dominated marketing in the nineteenth century. The industry seemed, however, to have peaked in 1923. Sales fell off even before the Great Depression, and the economic disaster of the 1930s offered no respite. Firms such as Bigelow and Mohawk struggled. Industry production hovered in the 60 million square yard range throughout the 1930s. Most mills converted to war production during the Second World War, a move that helped forestall a deeper crisis. Just after World War II, the industry experienced a brief boom, with sales jumping to nearly 90 million square yards in 1948, but the boom quickly turned bust. Even the seemingly robust sales of 1948 amounted to a scant increase over the peak of a quarter century earlier. When compared with population growth, the industry’s sales had actually declined. Worse still, sales fell through the early 1950s back into the 60 million yard range.

The Second U.S. Carpet Industry

Carpet in the United States had three salient characteristics in 1950. Carpets were (1) woven on power looms out of (2) wool in (3) mills located in the northeastern United States. In just one short decade, each of those critical elements had changed dramatically. By 1960, most carpet in the United States was made on tufting machines from synthetic fibers such as nylon in factories located in the southeastern United States – and the vast majority of these new mills were located in and around the Appalachian foothills town of Dalton, Georgia.

The U.S. economy entered a prolonged boom period after World War II that many historians have labeled the “golden age.” The release of pent-up consumer demand associated with the sacrifices of World War II, Keyenesian government policies aimed at maintaining a high level of demand, and other factors helped produce a period of unparalleled economic growth. Northeastern carpet manufacturers tried a variety of approaches during the late 1940s and early 1950s to reverse their industry’s fortunes, but had little success. Annual per household carpet consumption stood at 1.97 square yards in 1950, virtually unchanged from the beginning of the twentieth century. Industry executives expressed increasing frustration throughout the early 1950s with their inability to tap the booming housing market of the postwar period. Many northern carpet mills began to open new plants in the South. Moving south allowed older firms to escape unionized work forces, take advantage of the region’s lower labor costs and, occasionally, benefit from incentives offered by state and local governments in the region (Greenville, Mississippi, built a $4 million facility to entice the Alexander Smith Company in the early 1950s, for example). Bigelow, Mohawk, and other northeastern companies built facilities in Virginia, South Carolina, Georgia, and Mississippi during the 1950s.

With few exceptions, these facilities produced carpet using weaving technology. The shining new mills in Greenville, Mississippi and Liberty, South Carolina, used the latest and most productive looms and were constructed according to the most up-to-date standards – single-floor construction and concrete floors, for example, to make the use of lift trucks possible. Yet the industry encountered one insurmountable barrier. In spite of decades of incremental progress, woven carpets were still too expensive to penetrate the working class market. The wholesale price of woven carpets rose slightly during the 1950s. The quite modest increases were interpreted within the industry as something of a success.

The woven carpet manufacturers also tried other strategies to boost sales in the 1950s. Some manufacturers experimented with selling carpet “on time” (credit) through retailers; others emphasized style and elegance. The chief impact of the advertising campaigns seems to have been to raise awareness of and desire for carpeting in general. In 1949, this would have seemed a winning strategy.

Tufted Textiles Take the Floor

During the same decade, however, a new southern industry produced a cheaper substitute for woven goods – tufted carpets and rugs, whose sales grew from near zero in the late 1940s to more than 100 million square yards by 1958. The origins of this new carpet industry in the South can be traced to a combination of purposeful action and historical accident.

The Tufted Bedspread Industry

The historical accident, as Krugman called it, was the revival of the hand tufting tradition in northwest Georgia (and elsewhere in the region) in the early twentieth century. To create a tufted bedspread, the craftsperson inserted raised tufts of yarn into a pre-woven piece of backing material (generally cotton sheeting) to form a pattern, then boiled the sheeting to shrink it and lock in the tufts of yarn. Catherine Evans, a young woman living near Dalton, Georgia, saw an old hand tufted bedspread at a friend’s house in 1895. Evans duplicated the design and made a similar spread as a wedding gift. Evans and some of her relatives began teaching other area women the art of tufting. From these beginnings, a cottage industry developed. By the 1920s, local entrepreneurs had created numerous “spread houses.” The spread houses operated a putting out system, sending “haulers” into the countryside with sheeting and yarn. The haulers returned later to pay the farm families for their hand work and pick up tufted spreads for finishing – washing and, for some, dyeing. These spreads found a ready market, not just regionally, but in the northeast as well. (Wannamaker’s department stores stocked Georgia bedspreads in the 1930s.) This cottage industry became a source of economic growth in north Georgia even during the Great Depression.

Here the residue of purposeful action intersected with Catherine Evans’ historical accident. By the 1920s, the South had become home to the lion’s share of U.S. textile production. Some of this shift southward was due to capital movement from North to South, but most of the shift could be accounted for by new southern firms – large firms such as Georgia’s West Point Manufacturing and North Carolina’s Burlington Mills and smaller firms like Dalton, Georgia’s Crown Cotton Mill and American Hosiery Mill. After the Civil War, and especially after 1880, southern firms had borrowed northern technology, begun at the bottom of the quality chain with the coarsest fabrics, and initiated what might be called a process of regional learning. Much of this development was the result of a purposeful effort to industrialize the region. By the early twentieth century, the South still had not developed a regional textile machine-making industry, but the cotton mills, hosiery mills, and other textile firms had recruited and trained a large number of mechanics to maintain machinery purchased in the northeast. Mechanics from the Dalton area and nearby Chattanooga began adapting sewing machines for the purpose of inserting raised yarn tufts, and in the early 1930s many of the spread houses moved toward becoming spread mills, or factories. Spread mill owners employed a largely female work force to operate the sewing machines that now created the raised patterns.

From Spread Mills to Carpet Mills

By the end of the 1930s, a number of these firms had begun to experiment with multi-needle machines that could tuft wider swaths of backing material more quickly. Some firms, such as the cleverly named Cabin Crafts (to conjure the image of a cottage industry that already had ceased to exist) had begun making small rugs by covering the entire surface of a piece of backing material with tufts. Hosiery mill mechanics like Albert and Joe Cobble founded firms in the southern industrial dynamo of Chattanooga, Tennessee (less than 30 miles from Dalton) to build special machines for the tufted bedspread and small rug industry. From these technological roots, area entrepreneurs began experimenting with making large rugs and wall-to-wall carpeting with this tufting process. About 1949, the Cobble Brothers firm and an innovative Dalton spread making company, Cabin Crafts, introduced tufting machinery wide enough to produce carpeting in a single pass. Carpet makers could buy cheap pre-woven backing materials. Manufacturers tried cotton with mostly poor results. Eventually Indian jute became the primary backing material for tufted carpets through the 1960s. In the 1970s, manufacturers developed suitable synthetic substitutes for jute.

The traditional woven carpet industry primarily used wool. (One manufacturer lamented in 1950 that it was “unfortunate that the carpet industry was tied to the back of a sheep.”) Wool made an excellent material for floor coverings – it was durable and resilient. The new southern tufting mills used cotton yarn at first. Cotton did not compare with wool as a floor covering material – it crushed easily and wore more quickly. Yet already by 1955, southern carpet mills were selling more carpets than northern mills, in spite of the clearly inferior nature of the product. The key was price: the wholesale price of tufted carpet was about half that of woven products. Consumer surveys in the 1950s demonstrated that few carpet buyers could name the manufacturer of the carpets they had purchased. The same consumers were almost without exception unable to distinguish between a tufted and a woven construction with a visual inspection. The old woven firms’ ad campaigns of the 1950s probably helped move more tufted carpet than woven.

Synthetic Fibers

The tufted carpet industry experienced a meteoric rise in the 1950s, but many skeptics saw it as a fad that would fade. One machinery executive quipped that “every year was the last big year for tufting” in the 1950s, according to industry observers. The obvious inferiority of cotton made the argument plausible. Surely consumers, many in the old woven industry argued, would eventually tire of placing glorified bedspreads on their floors. Tufted manufacturers experimented with rayon (disastrously) and staple (chopped, spun) nylon (with some success) in the 1950s. The most significant breakthrough in terms of raw materials came in the mid-1950s from the DuPont Corporation. Woven manufacturers and others had experimented with DuPont’s nylon as a carpet fiber, but nylon lacked the bulk needed in floor coverings. DuPont helped insure that the bust never came by developing bulked continuous filament (BCF) nylon in the mid-1950s. DuPont’s initiative was clearly stimulated by the growth of carpet sales. In essence, tufted manufacturers created a market large enough to justify DuPont’s research and development costs. DuPont even helped the new industry along by launching its own ad campaign for carpets made with its trademark 501 nylon in the late 1950s and early 1960s.

BCF nylon helped insure the long-term future of the tufted carpet industry. Tufted carpets used, and still use, a variety of fibers. Staple nylon could be used in constructions and styles that were not possible with a continuous filament yarn – plush, lustrous constructions. And in recent years, the industry has made increasing use polypropylene and other continuous filament yarns. DuPont’s BCF nylon (and similar products introduced by Monsanto a bit later), however, fit perfectly with the least expensive, low pile height, loop constructions that sold best in the emerging modest income market.

By the end of the 1950s, the new tufted carpet industry had raced past the old woven industry. While the total volume of carpet sales skyrocketed, woven sales actually fell. Tufted products accounted for all the growth in the industry through the 1970s. Tufted carpet sales increased from about 6 million square yards in 1951 to nearly 400 million yards in 1968. Carpet finally became a staple of middle and working class home furnishings – indeed, it became the default floor covering over much of the nation for decades. The logjam had been broken by product substitution. Per household sales increased for the first time since the turn of the century. By 1990, Americans consumed over 12 square yards of carpet per family per year, up from 1.97 in the early 1950s. Woven sales drifted downward in the same period from 67 million yards to just over 40 million. Woven products did not disappear. High-end consumers still sought the assumed quality of woven goods, and woven products continued to dominate specialty commercial markets – hotel lobbies, casinos, etc. But tufted carpet achieved total dominance of not just the residential carpet market, but the residential flooring market in general.

Table 1

Average Mill Value of Carpet Shipments, 1950-1965 (price per square yard)

All Broadloom Carpet and Rugs Woven Tufted
1950 $6.26 $6.26 n.a.
1955 5.30 6.19 3.36
1960 4.50 6.56 3.49
1965 3.76 6.09 3.40

Table 2

Carpet Industry Output, 1951-1968 (square yards)

Tufted Carpet Shipments(square yards) Woven Carpet Shipments(square yards) Total IndustryShipments

(square yards)

1951 6,076,000 66,924,000 73,000,000
1960 113,764,000 52,044,000 165,808,000
1963 250,000,000 41,000,000 291,000,000
1968 395,000,000 40,000,000 435,000,000

The tufted carpet industry was the nation’s fourth fastest growing industry in the 1960s, trailing only aircraft, television picture tubes, and computers. Robert Shaw, CEO of Shaw Industries, for two decades the nation’s leading manufacturer of carpet, recalled the late 1950s and 1960s as the era of the “gold coast” in the Dalton area, an era in which demand constantly outstripped supply and small manufacturers and large could succeed with few controls and a “seat-of-the-pants” management style.

Carpet Capital: An Industrial District

The brief narrative sketched above outlines the emergence of an industrial district. By the 1960s, the district had developed several distinct features. The carpet complex was characterized by the rapid emergence of new firms. No single firm accounted for as much ten percent of the industry’s output. The industry had developed from the deep roots of textile manufacture and, specifically, bedspread making. Carpet making emerged out of a process of regional learning (albeit a small region, similar to Jane Jacobs’ “city regions”). Carpet manufacture was also a decentralized affair. A few large firms, such as Cabin Crafts and E.T. Barwick Mills, spun some of their own yarn and finished some of their own carpets in-house by the 1960s, but most of the hundreds of small firms relied on independent yarn spinning or production mills and independent commission finishing firms. Carpet finishing provided the industry with significant flexibility. Mills produced some carpets with pre-dyed yarns, but tufted significant yardage with undyed yarn. This allowed manufacturers to delay the critical decision on color until later, increasing the company’s flexibility. Commission finishing companies provided these services. Initially post-production dyeing was handled in dye becks, or large drums. That is, finishers dyed carpets by the piece (albeit large pieces, 900 feet or more in length). Dye becks were produced locally and regionally.

The Dalton district offered a classic example of the great Victorian economist Alfred Marshall’s industrial district based on external economies. Clearly this industry originated in northwest Georgia because of the peculiar skill set developed among managers, mechanics, and workers. The finishing companies and other suppliers clearly filled the role of Marshall’s “subsidiary trades” devoted “to one small branch of the process of production.” Innovation and ideas were “in the air,” as Marshall put it. With so many firms and workers in close proximity, improvements in technology, management practices, marketing, and other arenas were rapidly transmitted throughout the industry. Though different in many ways, Paul Krugman has observed, the relatively low-tech carpet industry of the Appalachian foothills was quite similar to the high-tech Silicon Valley in these respects.

In the 1960s, European firms introduced continuous dyeing equipment to the U.S. carpet market. Continuous dyeing equipment held out the potential for more effective use of mass production techniques – an endless stream of white carpet moving through a dye range capable of rapidly shifting colors. The continuous ranges were, however, frightfully expensive compared to dye becks. The relative expense of the equipment in this evolving industry offers a window into the strategic options available to management. A tufting machine might have sold for $10,000 in the late 1950s, with Cobble Brothers or some other firm offering in-house financing. Through the 1960s, the well-nigh indestructible tufting machines were available second-hand – a bit slower than brand new models installed by larger mills, but still effective for smaller product runs. That particular barrier to entry into this new industry was quite low. To establish a beck dyeing operation, the equipment alone would have cost more than $700,000 by the end of the 1960s. The stakes in finishing were much higher, but the risks were shared among the finisher and his many customers. Just one of the new continuous dye ranges in the early 1970s cost more than $800,000. The capital stakes rose for finishers.

The Maturing of the Industry

The carpet boom slowed in the 1970s as did the rest of the US economy. The recessions of the mid-1970s brought an end to the double-digit annual growth rates of the earlier period. In a slower growth environment, attention to cost became critical. Some firms adapted to the changing environment, but many did not. Adaptation generally involved vertical integration. Particularly during the 1980s, a few firms took the lead in bringing yarn spinning (and eventually production of extruded, continuous filament yarn) in-house, integrating backward toward raw materials. The most successful large manufacturers also integrated forward through finishing, investing in their own dyeing facilities. The recession of 1981-82 proved a pivotal moment – many smaller and mid-sized firms had continued to struggle along and occasionally prosper during the inflationary 1970s. The recession of the early 1980s claimed nearly half of the 285 mills that had been in operation in 1980; by 1992 the industry counted only about 100 mills, down dramatically from its early 1970s peak of more than 400. Shaw Industries, a revamped Mohawk Industries, and a few others bought competitors and moved the industry towards greater consolidation. Moreover, the top four firms, led by Shaw Industries, accounted for more than 80% of total production by the early 1990s.

The Industry Today

The carpet industry today is essentially the domain of a few large firms, led by Shaw Industries and Mohawk. The nation’s largest carpet making firms are headquartered in northwest Georgia. Shaw and other carpet firms have moved into the production and distribution of other flooring surfaces – tile, wood, vinyl, etc. – as carpet has slipped in market share. No longer the unchallenged leader in covering America’s floors, carpet is still the single most popular choice. Perhaps the most notable change associated with the industry today is its increasing use of workers of Hispanic descent. Since the late 1980s, Hispanic immigrants have moved in large numbers to Dalton, as they have to many new destinations throughout the nation. The region’s employers laud the immigrant workers as the saviors of the industry, a solution to the region’s recurrent labor shortages. Some community leaders and longtime residents express anxiety about the pace of cultural change in the small communities that still serve as hosts to the industry.

Bibliography

Cole, Arthur H., and Harold Williamson. The American Carpet Manufacture: A History and an Analysis. Cambridge, MA: Harvard University Press, 1926.

Deaton, Thomas M. From Bedspreads to Broadloom: The Story of the Tufted Carpet Industry. Acton, MA: Tapestry Press, 1993.

Ewing, John S., and Nancy Norton. Broadlooms and Businessmen: A History of the Bigelow-Sanford Company. Cambridge, MA: Harvard University Press, 1955.

Flamming, Douglas. Creating the Modern South: Millhands and Managers in Dalton, Georgia, 1884-1984. Chapel Hill: University of North Carolina Press, 1992.

Friedman, Tami J. “Communities in Competition: Capital Migration and Plant Relocation in the United States Carpet Industry, 1929-1975.” Ph.D. diss., Columbia University, 2001.

Greeley, Horace, et al. Great Industries of the United States: Being an Historical Summary of the Origin, Growth, andPerfection of the Chief Industrial Arts ofThis County. Hartford: J.B. Burr and Hyde, 1872.

Krugman, Paul. Geography and Trade. Cambridge, MA: MIT Press, 1993.

Patton, Randall L. Shaw Industries: A History. Athens, GA: University of Georgia Press, 2002.

Patton, Randall L., with David B. Parker. Carpet Capital: The Rise of a New South Industry. Athens, GA: University of Georgia Press, 1999.

Scranton, Philip. Proprietary Capitalism: The Textile Manufacture at Philadelphia, 1800-1885. Cambridge, MA: Cambridge University Press, 1985.

Scranton, Philip. Figured Tapestry: Production, Markets, and Power in Philadelphia Textiles, 1885-1941. Cambridge, MA: Cambridge University Press, 1989.

Walters, Billie J. and James O. Wheeler, “Localization Economies in the American Carpet Industry.” Geographical Review 74 (Spring 1984): 183-91.

Zuniga, Victor, and Ruben Hernandez-Leon, “Making Carpet by the Mile: The Emergence of a Mexican Immigrant Community in an Industrial Community of the U.S. Historic South.” Social Science Quarterly 81, no. 1 (2000): 49-66.

Citation: Patton, Randall. “A History of the U.S. Carpet Industry”. EH.Net Encyclopedia, edited by Robert Whaples. September 22, 2006. URL http://eh.net/encyclopedia/a-history-of-the-u-s-carpet-industry/

Carnegie, Andrew

Robert Whaples, Wake Forest University

Andrew Carnegie (November 25, 1835-August 11, 1919) rose from poverty to become an industrial magnate, as well as a prolific and influential writer. His writings celebrated individualism, competition, economic growth and democracy, and challenged the wealthy to practice a philanthropy that would elevate mankind.

When the Carnegie family emigrated from Scotland to western Pennsylvania, poverty compelled thirteen-year-old Andrew to work as a bobbin boy in a cotton factory at $1.20 a week. Making opportunities for himself, working hard, and learning fast, he quickly rose, becoming successively a messenger boy, telegraph operator, secretary to one of the Pennsylvania Railroad’s superintendents, and finally superintendent of the Pennsylvania Railroad’s western division in Pittsburgh at age twenty-three in 1859. During the Civil War, Carnegie helped organize the repair of the rail system around Washington, DC and then organized the Telegraphers Corps. While still working for the railroad during the war, he organized a partnership to manufacture railroad bridges.

Desiring greater autonomy, Carnegie left the railroad in 1865 to run his own enterprises. He marketed bonds and invested in oil and railway sleeping cars, but his primary business was iron-making. Introducing the cost-accounting techniques of the railroad industry and hiring trained chemists, he ruthlessly adopted procedures that cut per-unit costs and soon emerged as one of the industry’s dominant forces. Following a personal demonstration Carnegie decided to adopt Henry Bessemer’s new technology and enter the steel industry, building the Edgar Thompson Works in 1873, just as the Panic of 1873 hit. His deep financial resources allowed him to buy up his hard-pressed partners’ stakes cheaply and gain a majority share of the enterprise.

Carnegie looked upon his industrial rivals as enemies and worked ruthlessly to adopt innovations and cut costs in an effort to defeat them. In the process the price of steel was driven ever lower, benefiting steel buyers and users. In 1883, as steel prices collapsed amid another recession, Carnegie bought out a major competitor, taking ownership of the Homestead steel plant. Homestead became the scene of one of the era’s most famous confrontations between capital and labor in 1892, when the director of Carnegie’s operations, Henry Clay Frick, called on Pinkerton agents to wrest control of the plant from striking workers. Five strikers and three Pinkertons died in the confrontation. The state militia restored order and the union was soon broken, but Carnegie’s reputation was permanently tarnished in the eyes of many, despite the fact that he was living in his summer estate in Scotland when the events transpired.

In the 1890s Carnegie pushed for greater and greater vertical integration, as a way to cut costs and increase profits. He had previously acquired a dominant stake in Frick’s coke business and now leased recently-discovered ore deposits in Minnesota’s Mesabi Range, purchased lake steamers to handle his ore traffic and bought and extended a railroad to link his steel works to Lake Erie — thereby guaranteeing an uninterrupted flow of raw materials to his manufacturing plants. Simultaneously, he adopted the new Siemens open-hearth furnace in his steel works. By the end of the 1890s, Carnegie Steel Company was the world’s largest steel producer, manufacturing a quarter of the nation’s soaring steel output. Profits accumulated at an unprecedented rate, hitting $40 million in 1900. Carnegie’s competitive zeal and unwillingness to collude irked his competitors, as did his moves around 1900 to expand into producing steel goods in hoop, rod, wire and nail mills.

In 1901, amid the most comprehensive merger wave in American history, Carnegie sold his interests to J.P. Morgan’s syndicate. His personal fortune exceeded $300 million — about $6.7 billion at today’s (2004) prices — making him one of the world’s richest men. Thereafter he turned his attention to distributing his wealth and promoting international peace.

As much as he wanted to make money and outdo business rivals, Carnegie had a desire to influence public opinion, publishing numerous magazine articles and books. Carnegie’s general thesis was that America’s democratic institutions and the economic and social freedoms they encouraged were responsible for her ascendance over monarchical Europe. His message and style are exemplified in Triumphant Democracy (1886). “The old nations of the earth creep on at a snail’s pace; the Republic thunders past with the rush of the express,” it opens. Carnegie stood for a meritocracy in which, with integrity, thrift, self-reliance, optimism and hard work, any man and his family could ascend the economic ladder.

Until his later years, he defended the era’s relatively laissez-faire economic policies and championed a Social Darwinist law of competition, “for it is to this law that we owe our wonderful material development, which brings improved conditions in its train.” Carnegie argued that the high tariffs of the late 1800s had little impact on most American manufacturing industries because foreign producers could not have competed successfully in their absence and because American firms competed so vigorously with each other. (Indeed, economic historians agree that America’s comparative advantage in the late 1800s was in goods, like Carnegie’s steel, which relied on non-renewable natural resources.) Carnegie saw free trade as a goal that was not “within the reach of practical politics in the lives of those now living,” because there was no alternative revenue source for the federal government. However, free trade was a distant goal: “Far be it from me to retard the march of the world towards the free and unrestricted interchange of commodities. When the Democracy obtains sway through-out the earth the nations will become friends and brothers, instead of being as now the prey of the monarchical and aristocratic ruling classes, and always warring with each other; standing armies and war ships will be of the past, and men will then begin to destroy custom-houses as relics of a barbarous and monarchical age, not altogether from the low plane of economic gain or loss, but strongly impelled thereto from the higher standpoint of the brotherhood of man.”

While vast income inequalities were “inevitable,” Carnegie did not glorify greed and opulence. Instead, he argued in 1889 in The Gospel of Wealth, that “the man who dies rich dies disgraced,” because the wealthy man should “consider all surplus revenues which come to him simply as trust funds, which he is called upon to administer.” Excess wealth should be distributed by the man who created it, because of his superior wisdom, experience, and ability to administer. With these talents, he could do more to elevate the people, than they or the state could ever do. Carnegie emphasized that wealth should not be given to “charity,” but that it go to libraries, schools, museums and other projects that helped those who would help themselves. By the time of his death in 1919, he had overseen the distribution of nearly $350 million. This included the cost of constructing 2811 public libraries and donations for almost 8000 church organs, as well as funds to endow the Carnegie Foundation for the Advancement of Teaching, the Carnegie Institute of Technology, the Hero Funds, the Scottish Universities Trust, pensions for steelworkers, the Carnegie Institution in Washington, DC, and the Carnegie Endowment for International Peace. Carnegie’s Peace Palace at The Hague was dedicated in 1913. A year later World War I began, shattering Carnegie’s hopes and precipitating a slide into declining health and death.

References

Carnegie, Andrew. Triumphant Democracy; or, Fifty Years’ March of the Republic. New York: Scribners, 1886.

Carnegie, Andrew. Autobiography of Andrew Carnegie. Boston: Houghton Mifflin, 1920.

Hughes, Jonathan R. T. The Vital Few: American Economic Progress and Its Protagonists. Boston: Houghton and Mifflin, 1965.

Livesay, Harold. Andrew Carnegie and the Rise of Big Business. Boston: Houghton Mifflin, 1975.

Nasaw, David. Andrew Carnegie. New York: Penguin, 2006.

Wright, Gavin. “The Origins of American Industrial Success, 1879-1940.” American Economic Review 80, no. 4 (1990): 651-668.

Citation: Whaples, Robert. “Andrew Carnegie”. EH.Net Encyclopedia, edited by Robert Whaples. January 11, 2005. URL http://eh.net/encyclopedia/carnegie-andrew/

Oscar Douglas Skelton and Canada’s Economic History

Terry Crowley, University of Guelph

Oscar Douglas Skelton (1878-1941) provided the essential bridge between the founding of Canadian economic history by Adam Shortt in the late nineteenth century and its larger development by Harold Innis from the 1920s to the 1950s. More than Shortt, Skelton was the first to identify the parameters of the economic history of the northern dominion. Long before Canada became officially independent of Britain in 1931, Skelton’s writings hypothesized a nation that he saw coming into existence on the basis of colonial economic activities. These ventures were forged in both private and public spheres in defiance of a vast geography that otherwise would have prohibited the formation of a national identity.

As one of the earliest professionally trained political economists, Oscar Skelton turned to history after acquiring a distaste for intellectual attempts to make the world conform to theoretical paper sketches purporting to elucidate immutable laws. The diachronic methods of historical study appeared to him to provide knowledge with more satisfying richness and complexity than the synchronic approaches of the more theoretically minded. As a scholar who was also a public intellectual intimately involved in the political and economic currents of his time and place, Skelton taught at Queen’s University in Kingston (Ontario), published extensively in a variety of media, and eventually became Undersecretary of State for foreign affairs and the closest advisor of two Canadian prime ministers, William Lyon Mackenzie King and Richard Bedford Bennett.

Born into Anglo-Irish stock in Shelbourne, Ontario, Oscar Skelton received his earliest education locally and in neighboring Orangeville, north of Toronto. At Queen’s University he studied Classics and went on to graduate work in the subject at the University of Chicago, but finding the program unsatisfactory, he returned to Kingston to take more courses in political economy from Adam Shortt. Having already developed a fine writing style that communicated with verve and color, Skelton returned to Chicago in 1905 where he prepared a thesis in its department of political economy on Marxism. Department chair James Laurence Laughlin, who had founded the Journal of Political Economy, served as his advisor, but by the time he graduated in 1908 he regretted that he had not studied with Robert Hoxie, a labor economist. Work in political economy at Chicago proved formative to the young man by introducing him to such great thinkers as Thorstein Veblen. With this intellectual formation Oscar Skelton was soon able to surpass Adam Shortt whose academic preparation had been in philosophy and science before he had turned to economic history. Skelton’s doctoral dissertation about socialism (largely Marxism) led to his disenchantment with formalized theory and his turn to historical study. By the time the thesis was published as book in 1911 – acclaimed by Vladimir Lenin and British guild scholar G.D.H. Cole – Oscar Skelton not only accurately predicted the command economy that would ensue under communism but he also arrived at a position that sided fully with the historicists within the emerging discipline of economics rather than with the marginalists.

Employed at Queen’s University, Skelton held the Sir John A. Macdonald Chair, became chair of the Department of Political and Economic Science as the two disciplines progressively disentangled themselves, and then Dean of Arts before he was appointed to the federal government in 1924. During this time he published seven books of history and economic history, as well as innumerable scholarly and popular articles. More than any of his other works, Skelton’s volumes on the economic history of Canada from Confederation in 1867 to 1912, his studies of banking, and his volume on railroad builders gave shape to an emerging subject. In these writings Skelton reinvented a colony of the United Kingdom as the North American nation that he wanted to see come about.

As a liberal nationalist Skelton was concerned with collective identities as they expressed themselves in both political and economic spheres. His economic history of Canada since Confederation was the first to examine consistently how markets were organized and economic space was shaped by public and private sectors. Concerns about structures, evolution, and state policy were interwoven with a keen eye to external developments over which the country had little control. Canadians were viewed as restless people striving for material betterment within a context that was only partially of their own making. As a trading nation and as a colony, Canada was dependent on the vagaries of strangers; the talents of Canadians rested in being able to make the best of changing conditions in the United Kingdom or the United States. The country’s nineteenth-century regional economies based on fishing, farming, lumbering, mining, and manufacturing had moved increasingly into national and international markets through the force of technological change and commercial policies. Reciprocity between the British North American colonies and the United States from 1854 to 1866 had extended the possibility of increased trade, but after it failed, both countries pursued protectionist policies despite Canadian efforts to break the juggernaut. This trend reached its apogee in 1879 with John A. Macdonald’s national policy tariffs, but in Skelton’s view protection had been waged at a price to consumers and the country as a whole. Economic stagnation in the 1880s and the return of depression between 1893 and 1896 increased emigration to the United States.

Canada’s fate was only partially determined by her geographical proximity to the burgeoning republic; Canadian ingenuity and ties to the United Kingdom were equally important. Willingness to grasp opportunities provided by technology allowed the creation of a country that might otherwise have been little more than remotely scattered regions pursuing desperate policies. “The railway found Canada scarcely a geographical expression and made it a nation,” Skelton exclaimed. This bold stroke bordered on technological determinism and flew in the face of Canadian imperialists who saw the country as only British North America. It also countered Toronto historian Goldwin Smith’s view that rampant anti-Americanism alone seemed to hold the country together. While carefully delineating how Canadian interest in railroads developed, and not ignoring its seedier side as a corrupting influence in political life, Skelton pursued his argument, reserving the most fulsome praise for the Canadian Pacific Railway completed to British Columbia in 1886. Prior to its construction, Skelton thought, Canada “covered half a continent, but in reality it stopped at the Great Lakes. There was little national spirit, little diversity of commercial enterprise. Hundreds of thousands of our best born had been drawn by the greater attraction of the United States’ cities and farms, until one-fourth of the whole people were living in the republic.”

There was also a larger conclusion to be drawn. If Canadians had managed to construct the largest railroad in the world before the Russian Trans-Siberian, and since the ratio of people to railroad kilometers was also the highest, the C.P.R. carried even greater significance. “Here, again,” Skelton thought, “if railways were Canada’s politics it was not only because Canadians were materialists, but because they were idealists. They were determined in spite of geography and diplomacy, in spite of Rocky Mountains and Lake Superior wilderness, Laurentian plateaus and Maine intrusions, that Canada would be one and independent.” Skelton’s principal contentions about the role of geography and historical links to Europe in Canadian history were not far from the mind of a young Harold Innis when, two years after Skelton’s The Railway Builders appeared in 1916, he embarked on a doctoral program in political economy at the University of Chicago to write a dissertation on the Canadian Pacific Railway.

Skelton also struck another theme in Canada’s economic history that proved enduring. What, Skelton asked, was the country’s fate: “to link our commercial destinies with Great Britain or the United States – or neither?” Maintaining that Canadians sought advantage where they could, his question proposed the context within which he saw national history evolving. Oscar Skelton portrayed Canada as having existed precariously not just within a colonial relationship but between two poles on either side of the Atlantic. Sometimes, as his statistical studies of World War One finances showed, Canada moved closer to the United States, other times it stood more aloof despite the advantages he believed that freer trade would bring, especially in stemming emigration to south of the border.

If Adam Shortt was the father of economic history in Canada as Harold Innis said, then Oscar Skelton was the vital spur who combined Shortt’s rigorous methodology with far reaching interpretations challenging the imagination. Shortt had been so entranced by the new methodology of documentary evidence that his output was highly fragmented and displayed little coherence. Skelton, in contrast, had the ideas, flare for writing, and dedication and discipline, although his political histories were unabashedly whiggish in their present-mindedness and Liberal bias. Oscar Skelton made his most original contributions in economic history where his connection of state policy and market logic in economic development was suggestive to Innis and his work influenced other economic historians such as William A. Macintosh. Innis’ studies in the economic history of Canada, and later of communications, also assumed the same determinist bent that had appeared in Skelton’s work. Oscar Skelton proved to be a formative influence in the development of economic history in Canada.

References

Berger, Carl. The Writing of Canadian History: Aspects of English-Canadian Historical Writing since 1900. Toronto: University of Toronto Press, 1986.

Crowley, Terry. Marriage of Minds: Isabel and Oscar Skelton Reinventing Canada. Toronto: University of Toronto Press, 2003.

Ferguson, Barry. Remaking Liberalism: The Intellectual Legacy of Adam Shortt, O.D. Skelton, W.C. Clark and W.A. Mackintosh, 1890-1925. Montreal: McGill-Queen’s University Press, 1993.

Innis, Harold. Staples, Markets, and Cultural Change: Selected Essays. Daniel Drache, editor. Montreal: McGill-Queen’s University Press, 1995.

Skelton, Oscar. Socialism: A Critical Analysis. Boston and New York: Houghton Mifflin, 1919; London: Constable & Co., 1911.

Skelton, Oscar. General Economic History of the Dominion, 1867-1912. Toronto: Publishers’ Association of Canada, 1913. Prepared for Canada and Its Provinces, vol. 9: 95-276.

Skelton, Oscar. “Early Banking in Upper and Lower Canada”; “The Merchant’s Bank of Prince Edward Island”; “The Bank of British Columbia.” In A History of the Canadian Bank of Commerce, edited by Victor Ross, vol. 1. Toronto, 1920.

[Skelton, Oscar]. “Historical Sketch.” In Fifty Years of Banking Service, 1871-1921: The Dominion Bank. Toronto: Dominion Bank, 1922.

Watson, A. John. Marginal Man: The Dark Vision of Harold Innis. Toronto: University of Toronto Press, 2006.

Citation: Crowley, Terry. “Oscar Douglas Skelton and Canada’s Economic History”. EH.Net Encyclopedia, edited by Robert Whaples. January 16, 2007. URL
http://eh.net/encyclopedia/oscar-douglas-skelton-and-canadas-economic-history/

The Use of Quantitative Micro-data in Canadian Economic History: A Brief Survey

Livio Di Matteo, Lakehead University

Introduction1

From a macro perspective, Canadian quantitative economic history is concerned with the collection and construction of historical time series data as well as the study of the performance of broad economic aggregates over time.2 The micro dimension of quantitative economic history focuses on individual and sector responses to economic phenomena.3 In particular, micro economic history is marked by the collection and analysis of data sets rooted in individual economic and social behavior. This approach uses primary historical records like census rolls, probate records, assessment rolls, land records, parish records and company records, to construct sets of socio-economic data used to examine the social and economic characteristics and behavior of those individuals and their society, both cross-sectionally and over time.

The expansion of historical micro-data studies in Canada has been a function of academic demand and supply factors. On the demand side, there has been a desire for more explicit use of economic and social theory in history and micro-data studies that make use of available records on individuals appeal to historians interested in understanding aggregate trends and reaching the micro-underpinnings of the larger macroeconomic and social relationships. For example, in Canada, the late nineteenth century was a period of intermittent economic growth and analyzing how that growth record affected different groups in society requires studies that disaggregate the population into sub-groups. One way of doing this that became attractive in the 1960’s was to collect micro-data samples from relevant census, assessment or probate records.

On the supply side, computers have lowered research costs, making the analysis of large data sets feasible and cost-effective. The proliferation of low cost personal computers, statistical packages and data spread-sheets has led to another revolution in micro-data analysis, as computers are now routinely taken into archives so that data collection, input and analysis can proceed even more efficiently.

In addition, studies using historical micro-data are an area where economic historians trained either as economists or historians have been able to find common ground.4 Many of the pioneering micro-data projects in Canada were conducted by historians with some training in quantitative techniques, much of which was acquired “on the job” by intellectual interest and excitement, rather than as graduate school training. Historians and economists are united by their common analysis of primary micro-data sources and their choice of sophisticated computer equipment, linkage software and statistical packages.

Background to Historical Micro-data Studies in Canadian Economic History

The early stage of historical micro-data projects in Canada attempted to systematically collect and analyze data on a large scale. Many of these micro-data projects crossed the lines between social and economic history, as well as demographic history in the case of French Canada. Path-breaking work by American scholars such as Lee Soltow (1971), Stephan Thernstrom (1973) and Alice Hanson Jones (1980) was an important influence on Canadian work. Their work on wealth and social structure and mobility using census and probate data drew attention to the extent of mobility — geographic, economic and social — that existed in pre-twentieth-century America.

However, Canadian historical micro-data work has been quite distinct from that of the United States, reflecting its separate tradition in economic history. Canada’s history is one of centralized penetration from the east via the Great Lakes-St. Lawrence waterway and the presence of two founding “nations” of European settlers – English and French – which led to strong Protestant and Roman Catholic traditions. Indeed, there was nearly 100 percent membership in the Roman Catholic Church for francophone Quebeckers for much of Canada’s history. As well, there is an economic reliance on natural resources, and a sparse population spread along an east-west corridor in isolated regions that have made Canada’s economic history, politics and institutions quite different from the United States.

The United States, from its early natural resource staples origins, developed a large, integrated internal market that was relatively independent of external economic forces, at least compared with Canada, and this shifted research topics away from trade and towards domestic resource allocation issues. At the level of historical micro-data, American scholars have had access to national micro-data samples for some time, which has not been the case in Canada until recently. Most of the early studies in Canadian micro-data were regional or urban samples drawn from manuscript sources and there has been little work since at a national level using micro-data sources. However, the strong role of the state in Canada has meant a particular richness to those sources that can be accessed and even the Census contains some personal details not available in the U.S. Census, such as religious affiliation. Moreover, earnings data are available in the Canadian census starting some forty years earlier than the United States.

Canadian micro-data studies have examined industry, fertility, urban and rural life, wages and labor markets, women’s work and roles in the economy, immigration and wealth. The data sources include census, probate records, assessment rolls, legal records and contracts, and are used by historians, economists, geographers, sociologists and demographers to study economic history.5 Very often, the primary sources are untapped and there can be substantial gaps in their coverage due to uneven preservation.

A Survey of Micro-data Studies

Early Years in English Canada

The fruits of early work in English Canada were books and papers by Frank Denton and Peter George (1970, 1973), Michael Katz (1975) and David Gagan (1981), among others.6 The Denton and George paper examined the influences on family size and school attendance in Wentworth County, Ontario, using the 1871 Census of Canada manuscripts. But it was Katz and Gagan’s work that generated greater attention among historians. Katz’s Hamilton Project used census, assessment rolls, city directories and other assorted micro-records to describe patterns of life in mid-nineteenth century Hamilton. Gagan’s Peel County Project was a comprehensive social and economic study of Peel County, Ontario, again using a variety of individual records including probate. These studies stimulated discussion and controversy about nineteenth-century wealth, inheritance patterns, and family size and structure.

The Demographic Tradition in French Canada

In French Canada, the pioneering work was the Saguenay Project organized by Gerard Bouchard (1977, 1983, 1992, 1993, 1996, 1998). Beginning in the 1970’s, a large effort has been expended to create a computerized genealogical and demographic data base for the Saguenay and Charlevoix regions of Quebec going back well into the nineteenth century. This data set, known now as the Balsac Register, contains data on 600,000 individuals (140,000 couples) and 2.4 million events (e.g. births, deaths, gender, etc…) with enormous social scientific and human genetic possibilities. The material gathered has been used to examine fertility, marriage patterns, inheritance, agricultural production and literacy, as well as genetic predisposition towards disease and formed the basis for a book spanning the history of population and families in the Saguenay over the period 1858 to 1971.

French Canada has a strong tradition of historical micro-data research rooted in demographic analysis.7 Another project underway since 1969 and associated with Bertrand Desjardins, Hubert Charbonneau, Jacques Légaré and Yves Landry is Le Programme de recherche en démographie historique (P.R.D.H) at the University of Montréal (Charbonneau, 1988; Landry, 1993; Desjardins, 1993). The database will eventually contain details on a million persons and their life events in Quebec between 1608 and 1850.

Industrial Studies

Only for the 1871 census have all of the schedules survived and the industrial schedules of that census have been made machine-readable (Bloomfield, 1986; Borsa and Inwood, 1993). Kris Inwood and Phyllis Wagg (1993) have used the census manuscript industrial schedules to examine the survival of handloom weaving in rural Canada circa 1870 (Inwood and Wagg, 1993). A total of 2,830 records were examined and data on average product, capital and month’s activity utilized. The results show that the demand for woolen homespun was income sensitive and that patterns of weaving by men and women differed with male-headed firms working a greater number of months during the year and more likely to have a second worker.

More recently, using a combination of aggregate capital market data and firm-level data for a sample of Canadian and American steel producers, Ian Keay and Angela Redish (2004) analyze the relationships between capital costs, financial structure, and domestic capital market characteristics. They find that national capital market characteristics and firm specific characteristics were important determinants of twentieth-century U.S. and Canadian steel firms’ financing decisions. Keay (2000) uses information from firms’ balance sheets and income accounts, and industry-specific prices to calculate labor, capital, intermediate input and total factor productivities for a sample of 39 Canadian and 39 American manufacturing firms in nine industries. The firm-level data also allow for the construction of nation, industry and time consistent series, including capital and value added. Inwood and Keay (2005) use establishment-level data describing manufacturers located in 128 border and near-border counties in Michigan, New York, Ohio, Pennsylvania, and Ontario to calculate Canadian relative to U.S. total factor productivity ratios for 25 industries. Their results illustrate that the average U.S. establishment was approximately 7% more efficient than its Canadian counterpart in 1870/71.

Population, Demographics & Fertility

Marvin McInnis (1977) assembled a body of census data on childbearing and other aspects of Upper Canadian households in 1861 and produced a sample of 1200 farm households that was used to examine the relationship between child-bearing and land availability. He found that an abundance of nearby uncultivated land did affect the probability of there being young children in the household but the magnitude of the influence was small. Moreover, the strongest result was that fertility fell as larger cities developed sufficiently close by for there to be a real influence by urban life and culture.

Eric Moore and Brian Osborne (1987) have examined the socio-economic differentials of marital fertility in Kingston. They related religion, birthplace, and age of mother, ethnic origin and occupational status to changes in fertility between 1861and 1881, using a data set of approximately 3000 observations taken from the manuscript census. Their choice of variables allows for the examination of the impact of both economic factors, as well as the importance of cultural attributes. William Marr (1992) took the first reasonably large sample of farm households (2,656) from the 1851-52 Census of Canada West and examined the determinants of fertility. He found fertility differences between older and more newly settled regions were influenced by land availability at the farm level but farm location, with respect to the extent of agricultural development, did not affect fertility when age, birthplace and religion were held constant. Michael Wayne (1998) uses the 1861 Census of Canada to look at the black population of Canada on the eve of the American Civil War. Meanwhile, George Emery (1993) helps provide an assessment of the comprehensiveness and accuracy of aggregate vital statistics in Ontario between 1869 and 1952 by looking at the process of recording vital statistics. Emery and Kevin McQuillan (1988) use case studies to examine mortality in nineteenth-century Ingersoll, Ontario.

Urban and Rural Life

A number of studies have examined urban and rural life. Bettina Bradbury (1984) has analyzed the census manuscripts of two working class Montreal wards, Ste. Anne and St. Jacques, for the years 1861, 1871 and 1881. Random samples of 1/10 of the households in these parts of Montreal were taken for a sample of nearly 11,000 individuals over three decades. The data were used to examine women and wage labor in Montreal. The evidence is that men were the primary wage earners but the wife’s contribution to the family economy was not so much her own wage labor, which was infrequent, but in organizing the economic life of the household and finding alternate sources of support.

Bettina Bradbury, Peter Gossage, Evelyn Kolish and Alan Stewart (1993) and Gossage (1991) have examined marriage contracts in Montreal over the period 1820-1840 and found that, over time, the use of marriage contracts changed, becoming a tool of a propertied minority. As well, a growing proportion of contract signers chose to keep the property of spouses separate rather than “in community.” The movement towards separation was most likely to be found among the wealthy where separate property offered advantages, especially to those engaged in commerce during harsh economic times. Gillian Hamilton (1999) looks at prenuptial contracting behavior in early nineteenth-century Quebec to explore property rights within families and finds that couples signing contracts tended to choose joint ownership of property when wives were particularly important to the household.

Chad Gaffield (1979, 1983, 1987) has examined social, family and economic life in the Eastern Ontario counties of Prescott-Russell, Alfred and Caledonia using aggregate census, as well as manuscript data for the period 1851-1881.8 He has applied the material to studying rural schooling and the economic structure of farm families and found systematic differences between the marriage patterns of Anglophones and Francophone with Francophone tending to marry at a younger average age. Also, land shortages and the diminishing forest frontier created economic difficulties that led to reduced family sizes by 1881. Gaffield’s most significant current research project is his leadership of the Canadian Century Research Infrastructure (CCRI) initiative, one of the country’s largest research projects. The CCRI is creating cross-indexed databases from a century’s worth of national census information, enabling unprecedented understanding of the making of modern Canada. This effort will eventually lead to an integrated set of micro-data resources at a national level comparable to what currently exist for the United States.9

Business Records

Company and business records have also been used as a source of micro-data and insight into economic history. Gillian Hamilton has conducted a number of studies examining contracts, property rights and labor markets in pre-twentieth century Canada. Hamilton (1996, 2000) examines the nature of apprenticing arrangements in Montreal around the turn of the nineteenth century, using apprenticeship contracts from a larger body of notarial records found in Quebec. The principal question addressed is what determined apprenticeship length and when the decline of the institution began? Hamilton finds that the characteristics of both masters and their boys were important and that masters often relied on probationary periods to better gauge a boy’s worth before signing a contract. Probations, all else equal, were associated with shorter contracts.

Ann Carlos and Frank Lewis (1998, 1999, 2001, 2002) access Hudson Bay Company fur trading records to study property rights, competition, and depletion in the eighteenth-century Canadian fur trade and their work represents an important foray into Canadian aboriginal economic history by studying role of aboriginals as consumers. Doug McCalla (2005, 2005, 2001) uses store records from Upper Canada to examine and understand consumer purchases in the early nineteenth century and gain insight into material culture. Barton Hamilton and Mary MacKinnon (1996) use the Canadian Pacific Railway records to study changes between 1903 and 1938 in the composition of job separations, and the probability of separation. The proportion of voluntary departures fell by more than half after World War I. Independent competing risk, piecewise-constant hazard functions for the probabilities of quits and layoffs are estimated. Changes in workforce composition lengthened the average worker’s spell, but a worker with any given set of characteristics was much more likely to be laid off after 1921, although many of these layoffs were only temporary.

MacKinnon (1997) taps into the CPR data again with a constructed sample of 9000 employees hired before 1945 that includes 700 pensioners and finds features of the CPR pension plan are consistent with economic explanations regarding the role of pensions. Long, continuous periods of service were likely to be rewarded and employees in the most responsible positions generally had higher pensions.

MacKinnon (1996) complements published Canadian nominal wage data by constructing a new hourly wage series, developed from firm records, for machinists, helpers, and laborers employed by the Canadian Pacific Railway between 1900 and 1930. This new evidence suggests that real wage growth in Canada was faster than previously believed, and that there were substantial changes in wage inequality. In another contribution, MacKinnon (1990) studies unemployment relief in Canada by examining relief policies and recipients and contrasting the Canadian situation with unemployment insurance in Britain. She finds demographic factors important in explaining who went on relief, with older workers, and those with large families most likely to be on relief for sustained periods. Another unique contribution to historical labor studies is Michael Huberman and Denise Young (1999). They examine a set of individual strike data of 1554 strikes for Canada from 1901 to 1914 and conclude that having international unions did not weaken Canada’s union movement and that they became part of Canada’s industrial relations framework.

The 1891 and 1901 Census

An ongoing project is the 1891 Census of Canada Project at the University of Guelph under Director Kris Inwood, which is making the information of this census available to the research public in a digitized sample of individual records from the 1891 census. The project is hosted by the University of Guelph, with support from the Canadian Foundation for Innovation, the Ontario Innovation Trust and private sector partners. Phase 1 (Ontario) of the project began during the winter of 2003 in association with the College of Arts Canada Research Chair in Rural History. The Ontario project continues until 2007. Phase II began in 2005; it extends data collection to the rest of the country and also creates an integrated national sample. The database includes information returned on a randomly selected 5% of the enumerators’ manuscript pages with each page containing information describing twenty-five people. An additional 5% of census pages for western Canada and several large cities augment the basic sample. Ultimately the database will contain records for more than 350,000 people, bearing in mind that the population of Canada in 1891 was 3.8 million.

The release of the 1901 Census of Canada manuscript census has also spawned numerous micro-data studies. Peter Baskerville and Eric Sager (1995, 1998) have used the 1901 Census to examine unemployment and the work force in late Victorian Canada.10 Baskerville (2001a,b) uses the 1901 census to examine the practice of boarding in Victorian Canada while in another study he uses the 1901 census to examine wealth and religion. Kenneth Sylvester (2001) uses the 1901 census to examine ethnicity and landholding. Alan Green and Mary MacKinnon (2001) use a new sample of individual-level data compiled from the manuscript returns of the 1901 Census of Canada to examine the assimilation of male wage-earning immigrants (mainly from the UK) in Montreal and Toronto. Unlike studies of post-World War II immigrants to Canada, and some recent studies of nineteenth-century immigration to the United States, they find slow assimilation to the earnings levels of native-born English mother-tongue Canadians. Green, MacKinnon and Chris Minns (2005) use 1901 census data to demonstrate that Anglophones and Francophone had very different personal characteristics, so that movement to the west was rarely economically attractive for Francophone. However, large-scale migration into New England fitted French Canadians’ demographic and human capital profile.

Wealth and Inequality

Recent years have also seen the emergence of a body of literature by several contributors on wealth accumulation and distribution in nineteenth-century Canada. This work has provided quantitative measurements of the degree of inequality in wealth holding, as well as its evolution over time. Gilles Paquet and Jean-Pierre Wallot (1976, 1986) have examined the net personal wealth of wealth holders using “les inventaires après déces” (inventories taken after death) in Quebec during the late eighteenth and early nineteenth century. They have suggested that the habitant was indeed a rational economic agent who chose land as a form of wealth not because of inherent conservatism but because information and transactions costs hindered the accumulation of financial assets.

A. Gordon Darroch (1983a, 1983b) has utilized municipal assessment rolls to study wealth inequality in Toronto during the late nineteenth century. Darroch found that inequality among assessed families was such that the top one-fifth of assessed families held at least 65% of all assessed wealth and the poorest 40% never more than 8%, even though inequality did decline between 1871 and 1899. Darroch and Michael Ornstein (1980, 1984) used the 1871 Census to examine ethnicity, occupational structure and family life cycles in Canada. Darroch and Soltow (1992, 1994) research property holding in Ontario using 5,669 individuals the 1871 census manuscripts and find “deep and abiding structures of inequality” accompanied by opportunities for mobility.

Lars Osberg and Fazley Siddiq (1988, 1993) and Siddiq (1988) have examined wealth inequality in Nova Scotia using probated estates from 1871 and 1899. They found a slight shift towards greater inequality in wealth over time and concluded that the prosperity of the 1850-1875 period in Nova Scotia benefited primarily the Halifax- based merchant class. Higher levels of wealth were associated with being a merchant and with living in Halifax, as opposed to the rest of the province. Siddiq and Julian Gwyn (1992) used probate inventories from 1851 and 1871 to study wealth over the period. They again document a greater trend towards inequality, accompanied by rising wealth. In addition, Peter Wardhas collected a set of 196 Nova Scotia probate records for Lunenburg County spanning 1808-1922, as well as a set of poll tax records for the same location between 1791 and 1795.11

Livio Di Matteo and Peter George (1992, 1998) have examined wealth distribution in late nineteenth century Ontario using probate records and assessment roll data for Wentworth County for the years 1872, 1882, 1892 and 1902. They find a rise in average wealth levels up until 1892 and a decline from 1892 to 1902. Whereas the rise in wealth from 1872 to 1892 appears to have accompanied by a trend towards greater equality in wealth distribution, the period 1892 to 1902 marked a return to greater inequality. Di Matteo (1996, 1997, 1998, 2001) uses a set of 3,515 probated decedents for all of Ontario in 1892 to examine the determinants of wealth holding, the wealth of the Irish, inequality and life cycle accumulation. Di Matteo and Herb Emery (2002) use the 1892 Ontario data to examine life insurance holding and the extent of self-insurance as wealth rises. Di Matteo (2004, 2006) uses a newly constructed micro-data set for the Thunder Bay District from 1885-1920 consisting of 1,293 probated decedents to examine wealth and inequality during Canada’s wheat boom era. Di Matteo is currently using Ontario probated decedents from 1902 linked to the 1901 census and combined with previous data from 1892 to examine the impact of religious affiliation on wealth holding.

Wealth and property holding among women has also been a specific topic of research.12 Peter Baskerville (1999) uses probate data to examine wealth holding by women in the cities of Victoria and Hamilton between 1880 and 1901 and finds that they were substantial property owners. The holding of wealth by women in the wake of property legislation is studied by Inwood and Sue Ingram (2000) and Inwood and Sarah Van Sligtenhorst (2004). Their work chronicles the increase in female property holding in the wake of Canadian property law changes in the late nineteenth-century, Inwood and Richard Reid (2001) also use the Canadian Census to examine the relationship between gender and occupational identity.

Conclusion

The flurry of recent activity in Canadian quantitative economic history using census and probate data bodes well for the future. Even the National Archives of Canada has now made digital images of census forms available online as well as other primary records.13 Moreover, projects such as the CCRI and the 1891 Census Project hold the promise of new, integrated data sources for future research on national as opposed to regional micro-data questions. We will be able to see the extent of regional economic development, earnings and convergence at a regional level and from a national perspective. Access to the 1911 and future access to the 1921 Census of Canada will also provide fertile areas for research and discovery. The period between 1900 and 1921, spanning the wheat boom and the First World War, is particularly important as it coincides with Canadian industrialization, rapid economic growth and the further expansion of wealth and income at the individual level. Moreover, the access to new samples of micro data may also help shed light on aboriginal economic history during the nineteenth and early twentieth century, as well as the economic progress of women.14 In particular, the economic history of Canada’s aboriginal peoples after the decline of the fur trade and during Canada’s industrialization is an area where micro-data might be useful in illustrating economic trends and conditions.15

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Footnotes

1 The helpful comments of Herb Emery, Mary MacKinnon and Kris Inwood on earlier drafts are acknowledged.

2 See especially Mac Urquhart’s spearheading of the major efforts in national income and output estimates. (Urquhart, 1986, 1993)

3 “Individual response” means by individuals, households and firms.

4 See Gaffield (1988) and Igartua (1988).

5 The Conference on the Use of Census Manuscripts for Historical Research held at Guelph in March 1993 was an example of the interdisciplinary nature of historical micro-data research. The conference was sponsored by the Canadian Committee on History and Computing, the Social Sciences and Humanities Research Council of Canada and the University of Guelph. The conference was organized by economist Kris Inwood and historian Richard Reid and featured presentations by historians, economists, demographers, sociologists and anthropologists.

6 The Denton/George project had its origins in a proposal to the Second Conference on Quantitative Research in Canadian Economic History in 1967 that a sampling of the Canadian census be undertaken. Denton and George drew a sample from the manuscript census returns for individuals for 1871 that had recently been made available, and reported their preliminary findings to the Fourth Conference in March, 1970 in a paper that was published shortly afterwards in Histoire sociale/Social History (1970). Mac Urquhart’s role here must be acknowledged. He and Ken Buckley were insistent that a sampling of Census manuscripts would be an important venture for the conference members to initiate.

7 Also, sources such as the aggregate census have been used to examine fertility by Henripin (1968) and mortality by Bourbeau and Legaré (1982)).

8 Chad Gaffield, Peter Baskerville and Alan Artibise were also involved in the creation of a machine-readable listing of archival sources on Vancouver Island known as the Vancouver Islands Project (Gaffield, 1988, 313).

9 See Chad Gaffield, “Ethics, Technology and Confidential Research Data: The Case of the Canadian Century Research Infrastructure Project,” paper presented to the World History Conference, Sydney, July 3-9, 2005.

10 Baskerville and Sager have been involved in the Canadian Families Project. See “The Canadian Families Project”, a special issue of the journal Historical Methods, 33 no. 4 (2000).

11 See Don Paterson’s Economic and Social History Data Base at the University of British Columbia at http://www2.arts.ubc.ca/econsochistory/data/data_list.html

12 Examples of other aspects of gender and economic status in a regional context ar e covered by Muise (1991), Myers (1994) and Seager and Perry (1997).

13 See http://www.collectionscanada.ca/genealogy/022-500-e.html

14 See for example the work by Gerhard Ens (1996) on the Red River Metis.

15 Hamilton and Inwood (2006) have begun research into identifying the aboriginal population in the 1891 Census of Canada.

Citation: Di Matteo, Livio. “The Use of Quantitative Micro-data in Canadian Economic History: A Brief Survey”. EH.Net Encyclopedia, edited by Robert Whaples. January 27, 2007. URL
http://eh.net/encyclopedia/the-use-of-quantitative-micro-data-in-canadian-economic-history-a-brief-survey/