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Paying for Hitler’s War: The Consequences of Nazi Hegemony for Europe

Editor(s):Scherner, Jonas
White, Eugene N.
Reviewer(s):Harrison, Mark

Published by EH.Net (October 2016)

Jonas Scherner and Eugene N. White, editors, Paying for Hitler’s War: The Consequences of Nazi Hegemony for Europe. New York: Cambridge University Press. 2016.  viii + 468 pp. $120 (hardcover), ISBN: 978-1-107-04970-3.

Reviewed for EH.Net by Mark Harrison, Department of Economics, University of Warwick

Paying for Hitler’s War is the outcome of a conference held in Washington, DC, in 2009 under the auspices of the German Historical Institute. Its goal is a deeper understanding of the economics of German occupation during World War II. Eighteen authors, among them the editors, Jonas Scherner (Norwegian University of Science and Technology) and Eugene N. White (Rutgers University), contribute an introduction and three chapters on German war aims for the occupation of Europe and the forms and methods of exploitation of the occupied territories, followed by thirteen more chapters devoted to particular countries or regions of Europe. The latter cover countries that were occupied militarily (France, Belgium, Netherlands, Norway, Denmark, Czechoslovakia, Poland, and Ukraine), as well as neutral Sweden and belligerent Finland and Bulgaria.

As a topic for research, the economics of occupied Europe is not new (see Dallin 1957; Milward 1970, 1972; Liberman 1996; Kay 2006; and Klemann and Kudriashov 2012), but it is far from exhausted. Scherner, White, and their co-authors go beyond the existing literature in geographical detail and also in considering the impact of the wartime occupation regime or other relations with Germany on postwar developments.

Section I is entitled “Germany’s Wartime Dilemma.” The dilemma is not explicitly defined, and there are at least two candidates. One dilemma was the extent to which Germany planned to rely on external versus internal revenues — a blurry distinction, given that by 1940 Greater Germany already included Austria and parts of Poland, Czechoslovakia, and France. Another dilemma was the extent to which Germany could allow short-term confiscation and enslavement to undermine the medium-term sustainability of economic life under occupation.

Chapter 1 (Carsten Burhop) addresses an aspect of the first dilemma. To what extent did the Hitler regime base its war aims on the plans that the German government entertained in the desperate spring months of 1918, when it seemed that Allied resistance might be broken before the German home front collapsed. Did the Kaiser’s Germany inspire Hitler’s later ambitions for a system of dependent states in Eastern Europe and preferential trade with the West? Burhop argues that there is little evidence for continuity. This negative finding usefully closes off one garden path down which lazy thinkers have wandered from time to time. At the same time, here if not in some other chapter, another legacy of the Great War might have been considered: memories of the Allied blockade. In setting their immediate objectives for conquest, Hitler and his circle were strongly influenced by the recollection of Germany’s economic difficulties in World War I, which they attributed to the blocking of German imports by the Allies. Preparing for World War II, they faced the problem that their economy remained dependent on external sources of food and other materials, and they concluded that conquest would provide the means of war.

As things worked out, Germany’s wartime economic exploitation of its neighbors was of major importance for the war. German military spending reached around 70 percent of nominal national income in the later stages of the war, while net foreign saving accounted for 15 percent (Klein 1959: 256). This alone would put the likely contribution of external resources to Hitler’s war spending above 20 percent. But this is a lower bound, to which should be added the contribution of foreign labor to domestic production. Chapter 3 (Johan Custodis) estimates that by 1944 one fifth of the German workforce was made up by foreign workers, forced and “free,” who added as much as ten percent to German production.

Paying for Hitler’s War confirms some of the patterns suggested by past research. The basic extractive methods that Germany imposed were everywhere similar: if you have the power to crush all resistance and the will to use it, you don’t have to adapt sensitively to national or local differences. Chapter 2 (Scherner) shows that in every country the occupation regime imposed a direct tax (occupation costs), an indirect tax (bilateral trade using an overvalued Reichsmark), forced borrowing (unpaid clearing balances), and a labor draft. The combination of these mechanisms extracted a lot or a little, depending on a few basic conditions. Important factors included the prewar level of economic development of the territory, and the extent to which state capacity survived military defeat. In France (Chapter 4, White), Belgium (Chapter 6, Martijn Lak), and the Netherlands (Chapter 7, Kim Oosterlinck and White), the authorities under occupation were able to manage German demands by mixing fiscal and financial repression. Where the state was destroyed, as in Ukraine (Chapter 15, Kim Christian Priemel), looting was the alternative.

Other factors in the intensity of exploitation included the population’s rank in the National Socialist hierarchy of races, the extent of insurgency, and the distance from the front line. Taking everything into account, much more was extracted from Western Europe than from the East. As Chapters 3 and 4  confirm, by 1943 France was transferring more than half of its national output to Germany and at the same time France was the largest supplier of forced and POW labor to the Reich.

In more detail Chapter 3 examines the role of foreign and especially prisoner-of-war labor in the German war economy. Custodis agrees with Klemann and Kudriashov (2012) that the economic losses imposed on the occupied territories by the “hunt for labor” were much greater than the benefits to Germany. Death rates among Polish and Soviet prisoners-of-war were particularly high, depleting these countries’ postwar prospects. Much of this chapter is devoted to hunting down differences among competing estimates; the activity is useful, but could have been placed in an appendix.

This topic shows us that, while German policies were largely the same everywhere, the local experiences of interaction with Germany were almost infinitely variable. While the war continued, these variations were suppressed by the common straitjacket of occupation. When German power collapsed, the local variation exploded: suddenly, every country was different again.

Section II is entitled “The Occupied West.” Chapter 4 focuses on France. German levies were financed by a mix of fiscal and financial repression. Subject to very high rates of extraction, the French GNP collapsed as the war progressed. The end of the war did not cancel all debts, and in France as elsewhere in Europe elites and electorates had lost much of their faith in the market economy, so the exit from a war economy was complicated by the persistence of heavy taxation and financial controls. Marshall Plan Aid and the Treaty of Rome were two steps on France’s gradual path back to a free market economy.

Chapter 5 (Marcel Boldorf) shows that the German occupation of France led to a huge redistribution of rents. Collaboration with the occupation authorities was widespread in the economy, as in government and society. Most branches of the economy were devastated but war suppliers prospered. French businesses often collaborated with former competitors as well as with government, and anti-competitive business ties persisted after the war. Chapters 6 and 7 tell similar stories for Belgium and Netherlands. The wartime burden on the Belgian economy remains unclear, unlike the French burden which looks well established. The burden on the Dutch population was tempered by its “high” racial status, and also by a thriving underground economy. The Dutch postwar recovery was particularly complicated by its dependence on defeated Germany for a revival of trade.

Chapter 8 (Fabian Lemmes) considers German construction projects in France and Italy, administered by the Todt Organization. These accounted for most French and Italian wartime construction, and were implemented through a compliance system that combined rewards and penalties. Their long term consequences remain unclear.

Section III turns to “Northern Europe.” Chapter 9 (Harald Espeli) evaluates Norway’s wartime burdens. These were heavy, partly because the size of the German occupation army was very large relative to a small national population. Still, the chapter argues that war damages and losses were not as heavy as was claimed after the war. As in Western Europe, there was considerable continuity of fiscal and industrial policy into the postwar period, not all of it necessary. Chapter 11 (Steen Andersen) considers Denmark’s “mild” occupation.

Two chapters are devoted to countries that retained their sovereignty in unlikely circumstances. Chapter 10 (Eric Golson) shows that Sweden, sovereign but surrounded, had to offer incentives to both sides to uphold its neutrality. Over time, as the German threat was increasingly confined by the rise of Allied power, Swedish policy adapted flexibly in favor of the Allies. There is a contrast with Sweden, discussed in Chapter 12 (Jari Eloranta and Ilkka Nummela). Having already been attacked by the Soviet Union, Finland ended up going to war on the same side as Germany, even though with much more limited objectives, and paid a heavy price for doing so.

The most devastating outcomes of the war are discussed in Section IV, “Eastern Europe.” There, military defeat was accompanied by the collapse of states and currencies, the tearing up of national boundaries, and the implementation of plans to starve and murder tens of millions of people.

Did Nazi wartime occupation pave the way for Soviet postwar domination in Eastern Europe? Chapter 13 (Jaromír Balcar and Jaroslav Kučera) argues that in Czechoslovakia the occupation was severe but not a disaster. It did not pave the way for a command system after the war. When the governing elite chose its path towards a regulated economy, they were inspired, not forced, by Moscow. Different emphases appear in two other chapters. In Chapter 14 (Vera Asenova), wartime Bulgaria is described as locked into a protected bilateral trade relationship with Germany. When the war ended, the country moved smoothly to a similar relationship with the Soviet Union. Chapter 16 (Ramona Bräu) argues that the devastation of Poland’s physical and human capital under Nazi occupation made it much easier for the communists to impose a centralized command economy after liberation.

A common theme of this heartbreaking book is that the costs of crime to society are generally greater than the gains to the criminal. This was as true as ever when the thief was a state and the instrument was its army. Chapter 15  is soaked in sadness for Ukraine, which “had the worst of the war. Its suffering did not start in 1941 and did not end in 1944, but peaked in between, with its Jewish population suffering near annihilation” (p. 416).

This is a book for specialists. While students and interested lay readers may struggle to extract the pattern from the details, others will find that Paying for Hitler’s War marks an important new stage of scholarship about that tragic conflict.

References:

Dallin, Alexander. 1957. German Rule in Russia, 1941-1945: A Study of Occupation Policies. London: Macmillan.

Kay, Alex J. 2006. Exploitation, Resettlement, Mass Murder: Political and Economic Planning for German Occupation Policy in the Soviet Union, 1940-1941. New York: Berghahn Books.

Klemann, Hein, and Sergei Kudriashov. 2012. Occupied Economies: An Economic History of Nazi-Occupied Europe, 1939-1945. London: Bloomsbury.

Klein, Burton H. 1959. Germany’s Economic Preparations for War. Cambridge, MA: Harvard University Press.

Liberman, Peter. 1996. Does Conquest Pay? The Exploitation of Occupied Industrial Societies. Princeton: Princeton University Press.

Milward, Alan S. 1970. The New Order and the French Economy. Oxford: Clarendon Press.

Milward, Alan S. 1972. The Fascist Economy in Norway. Oxford: Clarendon Press.

Mark Harrison is the author of One Day We Will Live without Fear: Everyday Lives under the Soviet Police State (Hoover Institution Press, 2016).

Copyright (c) 2016 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator (administrator@eh.net). Published by EH.Net (October 2016). All EH.Net reviews are archived at http://eh.net/book-reviews/

Subject(s):Military and War
Geographic Area(s):Europe
Time Period(s):20th Century: WWII and post-WWII

Confederate Political Economy: Creating and Managing a Southern Corporatist Nation

Author(s):Bonner, Michael Brem
Reviewer(s):Pecquet, Gary M.

Published by EH.Net (September 2016)

Michael Brem Bonner, Confederate Political Economy: Creating and Managing a Southern Corporatist Nation. Baton Rouge: Louisiana State University Press, 2016. x + 260 pp. $48 (hardcover), ISBN: 978-0-8071-6212-5.

Reviewed for EH.Net by Gary M. Pecquet, Department of Economics, Central Michigan University.

Historian Michael Bonner examines how the government, bureaucrats, industrial leaders and ordinary citizens interacted under the pressures of emergency wartime conditions to create a distinct Confederate political economy. The Confederate war economy dispensed with many of the normal features of a market economy just as the United States did in prosecuting the two world wars during the twentieth century.

Although the extent of the Confederate government’s economic control was unprecedented by American standards, Bonner correctly contends that the Confederate political economy was never a top-down command economy, as Louise Hill (1936) and as William Davis (1994) have contended. Bonner correctly dispatches the claim that the Confederacy adopted a “State Socialist” model. According to him, “The State Socialism argument overlooks the capitalists, both the agricultural capitalist slaveholders and the growing class of industrial capitalists, who facilitated the dramatically increased production of war materiel” (p. 222, fn. 44).

Instead, Bonner draws from Nobel-laureate Edmund Phelps’ Mass Flourishing (2013) and finds the Confederate war economy to be neither free market, nor state socialism. Bonner finds that the Confederate war economy compared more closely to the authoritarian “corporatist” economic model (aka “Fascism,” aka “crony capitalism”) adopted throughout Europe during the early-to-mid twentieth century to preserve traditional social values from dynamic capitalistic.  Markets are tolerated, but subject to significant government oversight and regulation.

Confederate leaders did not intentionally set up an authoritarian regime, but the corporate model emerged out of wartime expediency. Special provisions in the new Confederate Constitution conferred additional powers to the executive branch: a six-year Presidential term, a line-item veto and executive control over government expenditures. In addition, The Confederate Supreme Court was never appointed and approved; nor did the Congress even establish federal courts for judicial review. Moreover, although Confederate congressmen and senators continued to stand for elections, wartime pressures for patriotism reduced the role of political parties and prevented gridlock. This gave President Jefferson Davis a free hand to contract with selected private firms to secure war supplies. Initially, the Confederacy lacked a bureaucracy and trained public servants so it often relied upon the assistance from states for enforcement.

The Confederate authorities had to negotiate with private interests in order to ensure reliable supplies of essential military goods. They also developed an ad hoc policy towards railroads. The Confederacy conscripted men into military service and imposed a system of wartime passes upon civilians to prevent espionage.

Bonner describes thorough narratives the corporatist interworking between the Confederate government and private manufacturers. These included the Tredegar Iron Works of Richmond and the Shelby Iron Works of Alabama, near Birmingham. Drawing largely from Charles Dew (1966), Bonner describes the rise of entrepreneur/businessman Joseph Reid Anderson, who built the Tredegar Iron Works ten years before the beginning of the war. Tredegar secured early contracts from the emerging Confederate government in February 1861 and continued to sell to both private railroads as well as the government. Bonner does a good job describing the contractual negotiations between Tredegar and government purchasing agents. Due to the onslaught of rampant inflation, the company faced rising costs and accusations of price gouging by Confederate politicians. These complaints increased and by late 1862, an army ordinance officer accused the company of yielding excessive profits of 30 to 50 percent or even as high as “60-80% in recent months” (p. 80). After 1863 the company asked five more times for price increases and the accusations of profiteering only got worse. But Tredegar was the major supplier of iron to the Confederacy and continued to obtain contracts. We may regard this process of price increases followed by accusations and new contracts as a bi-lateral negotiating process taking place during times of depreciating currency values. (Incidentally, this process was not substantially different from the union-management negotiations under periods of continuous price inflation in certain twentieth-century corporatist nations.)

Compared to Tredegar, Shelby Iron Works of Alabama was a latecomer. Largely from new primary sources, Bonner uncovers details of crony capitalism between the Shelby Company and government purchasing agents. At Shelby, prospective owners sought to expand operations, but wanted government protection from risks, so with the help of an influential Confederate purchasing agent, they secured a $75,000 loan from the Confederacy. But the private/public partnership created conflicting expectations that undermined the effectiveness of the operation. The company was supposed to repay the loan, but the government expected that the added facilities should be used to fill government orders, not private orders. The government officials feared that Shelby iron might be sold at higher prices to private buyers. The government also aided the Shelby works by exempting key employees from the draft. The major point of contention between Shelby and government was the means of payment (sound money or depreciated Confederate notes and bonds). Eventually, however, Shelby agreed to accept payment in fixed prices, with an eye to renegotiating new terms as prices increased. But in this case, Confederate officials could threaten Shelby’s labor supply by denying draft exemptions, so they may have held an advantage.

The Confederacy did embark upon a major government-run business. At the beginning of the war, the South had only four small local gunpowder mills. The Confederate government decided to create a single, large government-owned gunpowder factory at a secure location to provide its wartime requisitions. This single factory successfully supplied the Confederate armies for most of the war.

Bonner does a good job showing how Woodrow Wilson’s administration adopted the Confederate corporatist model as it mobilized the economy for participation in World War I. Although the Confederacy stumbled into cozy business-government relationships, the Wilson Administration consciously followed the same pattern. The Wilsonian World War I regime was not a top-down command-and-control system, but one that mixed government force and favors with private cooperation. Like the Confederacy, the WWI selective service relied upon the cooperation of local draft boards. Wilson’s government takeover of the railroads worked much the same way as Confederate control over rails. In both cases, the governments had to rely upon the railroad owners’ expertise giving business the upper hand in setting policy.

Bonner’s book provides a helpful addition to the study of early twentieth century Progressive economic policy. His book exploring Confederate mobilization provides a complimentary narrative to Robert Higgs’ (1987) analysis of the growth of government in Crisis and Leviathan. Bonner does not consider the role of intellectual history. Corporatism originated in Europe as the “German Historical School” and adherents taught its doctrines in American universities. Wilson adopted the theories of corporatism from his university professors (Pecquet and Thies, 2010). What Bonner shows us is that the practice of wartime mobilization also flowed out of a preexisting pattern that remained in the memories of contemporary historians.

References:

Davis, William C. 1994. A Government of Our Own: The Making of the Confederacy. New York: Free Press.

Dew, Charles B. 1994. Bond of Iron: Master and Slave at Buffalo Forge. New York: W. W. Norton.

Higgs, Robert J. 1987. Crisis and Leviathan: Critical Episodes in the Growth of American Government. Oxford University Press.

Hill, Louise B. 1936. “State Socialism in the Confederate States of America,” in Southern Sketches, Charlottesville, VA: Historical Publishing.

Pecquet, Gary M. and Clifford F. Thies. 2010. “The Shaping of the Political-Economic Thought of a Future President: Professor Ely and Young Woodrow Wilson at ‘The Hopkins,” The Independent Review, 15 (2) 257-277.

Phelps, Edmund. 2013. Mass Flourishing: How Grassroots Innovation Created Jobs, Challenge and Change. Princeton, NJ: Princeton University Press.

Gary M. Pecquet has published numerous articles on nineteenth and early twentieth century American economic history. The most recent of these works (with Clifford F. Thies) is “Reputation Overrides Record: How Warren G. Harding Mistakenly Became the Worst President of the United States,” The Independent Review (Summer 2016). He can be reached for comment at pecqu1g@cmich.edu.

Copyright (c) 2016 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator (administrator@eh.net). Published by EH.Net (September 2016). All EH.Net reviews are archived at http://eh.net/book-reviews/

Subject(s):Government, Law and Regulation, Public Finance
Military and War
Geographic Area(s):North America
Time Period(s):19th Century

The Path to Sustained Growth: England’s Transition from an Organic Economy to an Industrial Revolution

Author(s):Wrigley, E. A.
Reviewer(s):Jones, Eric

Published by EH.Net (June 2016)

E. A. Wrigley, The Path to Sustained Growth: England’s Transition from an Organic Economy to an Industrial Revolution.  Cambridge: Cambridge University Press, 2016.  xi + 219 pp. $30 (paperback),  ISBN: 978-1-316-50428-4.

Reviewed for EH.Net by Eric Jones, La Trobe University.

The surviving watermills of England are elaborately kitted out with levers, gears and a canny use of gravity.  They are neatly designed to save labor, like Dutch windmills or the tools of Tokugawa Japan.  It has always seemed surprising that societies able to advance so far in technique could not go further, but their sources of energy were too limited.  The central thesis of Tony Wrigley’s tightly argued, supremely well documented and mostly cautious book is that theirs were organic societies, waiting, so to speak, like the whole world to be liberated by steam power.

At the heart of the volume is a cluster of seventeenth and eighteenth century developments that must in retrospect seem preparatory.  During the former century transport was already being improved.  Rising productivity in agriculture meant more food and farm-produced industrial inputs and had the additional effect of releasing land for other purposes.  These purposes would have had to include growing more fuelwood except that substituting coal for wood as a source of heat energy (earlier than for mechanical power) was simultaneously land-saving.  Meanwhile labor was released to move to London, long a sink of population whose death rate exceeded its birth rate.  English marital practice, Hajnal-style, aided and abetted by the Old Poor Law, made fertility responsive to economic fluctuations.  Growth potential was therefore not swamped by an unremitting rise in population.  There were positive effects on consumer demand; Wrigley is much taken by Jan de Vries’s industrious revolution.  These changes were linked in various and sometimes obscure ways but are set out here in an ably clarifying fashion.  Into the preternaturally responsive mix came the adoption of steam as motive power.  It came fast, making England the Workshop of the World.  To Wrigley’s eyes, the industrial revolution was complete by 1851 but — the uptake of steam being so readily imitated — the country’s primacy did not last.

I shall shortly sum up my admiration for the volume.  Before doing so, however, it is a reviewer’s task to raise doubts and hesitations.  They fall into two parts.  One refers to the degree of life still left in England’s “organic economy” in the first half of the nineteenth century; this is downplayed by relentless insistence on the limitations of organic economies and their dependence on plant photosynthesis.  The inorganic world based on fossil fuels was bound to win in the end (though perhaps not the ultimate end, as Wrigley admits in a coda about environmental costs) but understanding the economy before steam finally took over does require detailed acknowledgement that older methods long continued.  Not only did they continue but some were improved – the “sailing ship syndrome.”  Historically this matters because declining sectors are still sectors, as it were.  Moreover an insistence on the defects of organic economies is easily overdone, for example by quoting the Danish historian, Thorkild Kjaergaard, in saying that coal and iron saved the Europe of 1800 from “ecological disaster.”  Kjaergaard himself lays heavy (though comparably over-emphatic) stress on the role of clover.

My other concern is about what might be seen as an excessively technocratic approach, the price, maybe, for clarity.  Automatic responses to changing relative factor prices — inert inducement mechanisms, the Achilles’ heel of the economist — are not in the forefront of the analysis but even so the technical advances are made to emerge somewhat automatically.  There is no real agency; culture and ideas scarcely figure.  Inventors and entrepreneurs may have been few but they were not automata.  Wrigley does not aim to delve into such matters and one might receive the impression that really he does not deign to do so.  He is certainly too astute to explain each advance as “caused” by its predecessor, indeed he tackles the interactive problem head on.  Yet there is no exploration beyond the (genuinely intriguing) knock-on effect of many a change, no analysis of the type of society that could respond so creatively to its practical opportunities and little more than similarly mechanistic explanations (enlightening though they are in themselves) of the failure of England’s continental rivals to do so.  If an economy shifts to a new, far cheaper, source of energy it must beat the costlier prior system, ceteris paribus; at the abstract level, what more is there to say?  Once steam power reigned, the effects seem obvious, but they did not arrive ex nihilo.  Without showing precisely why English society at a particular period was the first to adopt the crucial inorganic changes, one might almost entertain the teasing notion that the shift was virtually a truism.

This book digests Tony Wrigley’s lifetime work, advances it and ties it together: population history, urban history, interpreting the classical economists, and above all his insistence that the greatest propulsion of all was the move to coal as a source not merely of heat energy but of mechanical energy.  The author is not of the wordiness is next to godliness school, which is inherently meritorious, but the work can read a little like an accountancy manual, especially when picking its way through the complexities of occupational structure.  Its value lies in cramming in an enormous mass of numerical data, much of it recently compiled, and working without fuss through complicated arguments to eliminate seeming alternatives to its own interpretations.  Wrigley’s take on the emergence of the industrial revolution (more precisely the sustained growth of the title) is notably coherent and genuinely important.  This is no everyday monograph but as indispensable an addition as one can find to the literature on economic history’s chief watershed.

Eric Jones, Emeritus Professor, La Trobe University, and former Professorial Fellow, Melbourne Business School, is the author of Locating the Industrial Revolution: Inducement and Response (World Scientific, 2010), The Fabric of Society and How It Creates Wealth (Arley Hall Press, 2013) [with Charles Foster], and Cultures Merging: A Historical and Economic Critique of Culture (Princeton, 2016, paperback).

Copyright (c) 2016 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator (administrator@eh.net). Published by EH.Net (June 2016). All EH.Net reviews are archived at http://eh.net/book-reviews/

Subject(s):Economic Development, Growth, and Aggregate Productivity
Economywide Country Studies and Comparative History
Geographic Area(s):Europe
Time Period(s):18th Century
19th Century

Famines in European Economic History: The Last Great European Famines Reconsidered

Editor(s):Curran, Declan
Luciuk, Lubomyr
Newby, Andrew G.
Reviewer(s):Alfani, Guido

Published by EH.Net (June 2016)

Declan Curran, Lubomyr Luciuk and Andrew G. Newby, editors, Famines in European Economic History: The Last Great European Famines Reconsidered. New York: Routledge, 2015. xvii + 267 pp. $160 (hardcover), ISBN: 978-0-415-65681-8.

Reviewed for EH.Net by Guido Alfani, Dondena Centre for Research on Social Dynamics, Bocconi University.

In the recent historiography on famine, some episodes have tended to attract most of the attention. This is especially the case of the Great Irish Famine of 1845-50, which surely was a major event in the European history of the last two centuries — an event which however, as is often the case, can be understood fully only in comparison to others. This book, edited by Declan Curran, Lubomyr Luciuk and Andrew Newby, aims to provide us with this much-needed comparative perspective.

The book is organized in nine chapters (plus introduction), evenly divided between three of the main famines affecting Europe during the nineteenth and twentieth centuries. Apart from the Great Irish Famine, the book covers another relatively well-researched episode, the Holodomor (“Death by Starvation”) affecting Ukraine in 1932-33, as well as an important but not internationally well-known episode involving northern Europe and particularly Finland, the “Great Hunger Years” of 1867-68. All these famines were characterized by particularly high death tolls, which (according to the estimates summarized in the editors’ introduction) amounted to about 1 million in 1845-50 in Ireland, 100,000-150,000 in 1867-68 in Finland and 1.9 million in 1932-33 in Ukraine. Notice that these figures do not include victims caused by these famines outside the boundaries of the three specific geographic areas that the book focuses on (see below).

Overall, the authors of the chapters explore in considerable detail the political and cultural consequences of famines. In Ireland and Ukraine in particular, the “politicisation” of famine — i.e. the way in which the crisis is used in the political discourse — and its “appropriation in collective memory and national identity formation” (p. 3) is particular apparent, while the case of Finland is singled out as one in which famine underwent (to a degree at least) a process of collective forgetfulness. A particularly interesting aspect is that of “culpability,” which has also to be understood in the context of areas which were all peripheries in much broader empires. So, while in Ireland and in Ukraine a discourse with political undertones developed blaming respectively the British and the Russians, in Finland the political center was never indicated as the culprit for the catastrophe, presumably because in 1867-68 Finland was a largely self-governed and well-identified territorial entity within the Russian Empire.

There is much to like in this book, particularly because many chapters provide interesting new information which will surely be of great use to other scholars. The attention dedicated to the famine in Finland in 1867-68 is particularly welcome. However, the book as a whole also has a few shortcomings, which somewhat hinder its ambitious comparative aims. A first problem, is that it never provides a clear definition of what a famine is — a topic which was quite contentious until recently, but has probably been settled (at least temporarily) by Cormac Ó Gráda with his recent definition of famine as a “a shortage of food or purchasing power that leads directly to excess mortality from starvation or hunger-induced diseases.”[1] Quite obviously, all three episodes covered by Curran, Luciuk and Newby’s book fit into this definition (as they were characterized by mass mortality) — but the book is never entirely clear regarding the very important issue of causation. As Ó Gráda makes explicit, a famine can be due either to production problems (a shortage of food) or to distribution problems (a lack of purchasing power or “entitlement” to resources, à la Amartya Sen[2]). Quite obviously, this issue is also key to understanding correctly the debate about culpability of political authorities, which seems to be close to the heart of many of the authors of this book and consequently, a more detailed and encompassing discussion of famine causation would have been useful.

A second problem is that the book does not attempt to place the three specific episodes into an even broader perspective. First of all, the large literature on the continental European famines of the early modern period is almost entirely neglected. This matters because, as clearly shown by a very recent attempt at a comparison of European famines in the very long run (which admittedly the authors could not know about)[3], some reference to at least the main earlier episodes — like the famous “years of misery” of 1693-97 when famine ravaged most of the continent[4] (including Finland where the overall mortality might have been in the order of 25-33%, i.e. about three times the rate which can be estimated for 1867-68[5]) or the terrible famine of  the 1590s[6] — considerably puts a different complexion, in relative terms, on the European famines of the nineteenth and twentieth centuries. Additionally, the three famines covered by the book were not exclusive to Ireland, Finland and Ukraine but also affected other areas, which is an important aspect to consider when assessing both the issue of causation, and that of the use of famine in the political discourse. So for example, the so-called “Great Irish Famine” was only one component (although admittedly the main one and by far) of a much broader crisis associated to the failure of the potato crops caused by a fungal disease (phytophthera infestans), a crisis which also affected the Low Countries, northern Spain (Galicia) and parts of Germany[7] (this is only mentioned in passing in Curran’s chapter), while the Ukrainian famine of 1932-33 also affected (albeit less severely) other regions of the Soviet Union[8].

Notwithstanding these limitations, there is no doubt that Curran, Luciuk and Newby provide us with a very useful book, which advances our knowledge in many directions and especially regarding the political and cultural consequences of famine. It will be of considerable interest to all researchers working on modern famines.

Notes:
1. C. Ó Gráda, Famine: A Short History (Princeton University Press, 2009), p. 4.
2. A. Sen, Poverty and Famine: An Essay on Entitlement and Deprivation (Clarendon Press, 1981).
3. G. Alfani and C. Ó Gráda (eds.), Famine in European History (Cambridge University Press, forthcoming 2017).
4. M. Lachiver, Les années de misère: La famine au temps du Grand Roi, 1680-1720 (Fayard, 1991).
5. M. Lappalainen, “Death and Disease During the Great Finnish Famine 1695-1697,” Scandinavian Journal of History 39 (4), 2014: 425-47.
6. G. Alfani, Calamities and the Economy in Renaissance Italy: The Grand Tour of the Horsemen of the Apocalypse (Palgrave, 2013).
7. C. Ó Gráda, R. Paping and E. Vanhaute (eds.), When the Potato Failed. Causes and Effects of the Last European Subsistence Crisis, 1845-1850 (Brepols, 2007).
8. R.W Davies and S.G. Wheatcroft, The Years of Hunger: Soviet Agriculture, 1931-33 (Palgrave, 2004).

Guido Alfani is Associate Professor in Economic History at Bocconi University (Milan, Italy). He is the author of Calamities and the Economy in Renaissance Italy: The Grand Tour of the Horsemen of the Apocalypse (Palgrave 2013). guido.alfani@unibocconi.it

Copyright (c) 2016 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator (administrator@eh.net). Published by EH.Net (June 2016). All EH.Net reviews are archived at http://eh.net/book-reviews/

Subject(s):Agriculture, Natural Resources, and Extractive Industries
Economywide Country Studies and Comparative History
Historical Demography, including Migration
Household, Family and Consumer History
Markets and Institutions
Geographic Area(s):Europe
Time Period(s):19th Century
20th Century: Pre WWII

Britain and European Monetary Cooperation, 1964-1979

Author(s):Hirowatari, Kiyoshi
Reviewer(s):Needham, Duncan

Published by EH.Net (May 2016)

Kiyoshi Hirowatari, Britain and European Monetary Cooperation, 1964-1979. Basingstoke, UK: Palgrave Macmillan, 2015. xiii + 276 pp. $115 (hardcover), ISBN: 978-1-137-49141-1.

Reviewed for EH.Net by Duncan Needham, Centre for Financial History, University of Cambridge.

In 1982 the Deputy Governor of the Bank of England remarked: “in 1960 sterling still accounted for 38 per cent of the world’s currency reserves.  By 1970 this had fallen to 13 per cent, and by 1980 only 2 per cent” (p. 1).  Kiyoshi Hirowatari explains why in the context of Britain’s changing relationship with the European Economic Communities.  He casts his net wide, incorporating American, French and German concerns about international monetary policy.  There are some complex issues, and Hirowatari explores these with great insight.  I shall focus on two: monetary sovereignty and adjustment to current account imbalances.

First, however, we must define the issue at the heart of the volume — the sterling balances.  These were overseas countries’ official and private holdings of short-term sterling assets.  A legacy of Empire, they grew during World War II as Britain wrote IOUs, particularly to countries that accommodated British forces.  The sterling balances formed part of overseas central banks’ reserves; they were also held privately to facilitate trade with the UK.  Either way, these short-term liabilities far exceeded the Bank of England’s gold and dollar reserves.  Britain may not have been insolvent on her external account (until the 1970s at least), but she was illiquid.  Herein lay the problem.  How to maintain confidence such that the sterling balance holders would not embarrass the Bank of England by demanding their money back all at the same time?  Various schemes were proposed; some were even implemented. But what (former navy Lieutenant) Jim Callaghan called “the shifting cargoes” were an ever-present threat to the buoyancy of the British economy.  Significant withdrawals would necessitate tighter policy, exacerbating the “stop-go” cycle that contemporaries believed to be at the heart of British relative underperformance during the post-war Golden Age (see Dow (1964)).

Hamlet’s father-in-law-to-be advised: “neither a borrower nor a lender be.”  But as Hirowatari reminds us, it is better to be a lender than a borrower — unless you are American (see below).   The alternative is a loss of monetary sovereignty, defined as “supremacy or autonomy over monetary matters” (p. 5)   Just as the Suez Crisis exposed the UK’s lack of Great Power autonomy, so the sterling crises of 1964-66 exposed her lack of monetary autonomy.  The Labour government’s plans for a more productive economy, launched in 1965, foundered in July 1996 with the austerity measures implemented to shore up sterling.  “Labour’s Suez” forced a reluctant Harold Wilson to seek a European solution to the sterling balances with the “second try” at EEC membership.  Conservative leader Ted Heath (chief negotiator during the first application) had already set sail for the Continent, having convinced himself that “pooling sovereignty” did not necessarily entail “surrendering sovereignty” — you gain a bit of everybody else’s, and the sum may add up to more than the parts.

It may now seem remarkable that the British believed that “Europe’s large reserves [could be] married to Britain’s large liabilities via the City of London” to preserve sterling’s reserve currency status (pp. 19 and 40).   Equally remarkable that hard-headed German politicians (such as Helmut Schmidt and Willy Brandt), German and Belgian bankers (Herman Joseph Abs and Louis Camu), and Belgian economists (Robert Triffin) could agree.   Hirowatari explains why.  German fears of inflation militated against the Deutsche mark becoming a reserve currency; the Bundesbank would never cede monetary control in this way.  Why not employ sterling, and the existing financial infrastructure of the City of London instead?  Triffin was enthusiastic, anticipating the emergence of a European financial market with London at its hub performing the role “played by England alone up to the 1914-1918 War” (p. 37).   This might counterbalance the mighty dollar whose “benign neglect” was creating such turbulence for the Europeans.  The problem was the French, concerned that the sterling balances might become a channel for French capital to flow to New York.  Their insistence that the U.S. play by the rules of the game” would come to naught.  When Britain did join the EEC, it was left to the bankers at the BIS to worry about stabilizing the sterling balances.

Samuel Brittan (1970, p. 455) points out that post-war British Chancellors “behaved like simple Pavlovian dogs responding to two main stimuli: one was a ‘run on the reserves’ and the other was ‘500,000 unemployed’.”   Part of the reason Britain was so prone to runs on the reserves was that Keynes had lost the argument in 1944 over a symmetric response to current account imbalances.  Surplus nations could continue accumulating reserves while deficit nations were invariably forced to deflate — apart from the Americans.  As issuers of the world’s major reserve currency, they could continue running “deficits without tears” (Chivis, 2006, p. 708).   And when things got too choppy, they could scupper the whole enterprise, as Nixon did in August 1971.   Not so the British, who had to deflate with every current account squall.  One of Hirowatari’s themes is repeated British attempts to force countries running persistent current account surpluses to inflate (to be “good creditors”).  But as the Dutch central banker Marius Holtrop pointed out, why should the thrifty ant share its resources with the profligate cricket? (The British were still losing this argument in September 1992 when the Germans refused to support sterling within the ERM, see Szász (1999), p. 13.)

Lord Halifax may or may not have remarked to Keynes that “they have the money bags.  But we have all the brains” (p. 202).  But this is really a story about “muddling through,” tacking towards Europe when sterling-dollar diplomacy no longer afforded safe haven, tacking away when it became clear that European reserves would not be lashed to short-term British liabilities.  And Hirowatari tells the story with clarity.  Aside from some minor errors (e.g. William S. “Rylie” should be “Ryrie” (p. 32); “Harold” Pimlott should be “Ben” Pimlott (p. 120); and Britain joined the ERM (just) before Thatcher’s defenestration (p. 185)) — and the awkwardness of placing references at the end of the volume — I had only three issues.   First, the repeated suggestion that the British economy was “in decline.”  “Relative decline” — yes; “absolute decline” — no.  Second, the detailed insights into the academic thinking behind Labour’s currency policy are not matched with similar analysis of Conservative thinking.  Sometimes it feels as if Heath was manning the bridge alone.   Finally, the structure.  Having navigated to the end of the Heath government at the end of Part I, we return to Suez at the beginning of Part II. Hirowatari explains why he did not structure his volume chronologically.  I was not convinced that the thematic approach was the better course.

References:

S. Brittan (1970), Steering the Economy: The Role of Treasury.

C.S. Chivvis (2006),“Charles De Gaulle, Jacques Rueff and French International Monetary Policy under Bretton Woods,” Journal of Contemporary History, vol. 41, no. 4.

J.C.R. Dow (1964), The Management of the British Economy, 1945-1960.

A. Szász (1999), The Road to European Monetary Union.

Duncan Needham is the author of Monetary Policy from Devaluation to Thatcher, 1967-1982 (Palgrave, 2014).

Copyright (c) 2016 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator (administrator@eh.net). Published by EH.Net (May 2016). All EH.Net reviews are archived at http://eh.net/book-reviews/

Subject(s):Financial Markets, Financial Institutions, and Monetary History
Government, Law and Regulation, Public Finance
Geographic Area(s):Europe
Time Period(s):20th Century: WWII and post-WWII

Why Did Europe Conquer the World?

Author(s):Hoffman, Philip T.
Reviewer(s):Eloranta, Jari

Published by EH.Net (April 2016)

Philip T. Hoffman, Why Did Europe Conquer the World? Princeton: Princeton University Press, 2015. vii + 272 pp. $30 (cloth), ISBN: 978-0-691-13970-8.

Reviewed for EH.Net by Jari Eloranta, Department of History, Appalachian State University.

Philip Hoffman, Professor of History and Business Economics at California Tech and recent president of the Economic History Association, is a prolific scholar, whose work has primarily focused on early modern Europe, especially French economic history and financial markets. Hoffman’s new book focuses on a pivotal issue in world history, namely how Europe came to rule the world. This is, needless to say, a hugely ambitious book and one that no scholar analyzing transitions in global history can overlook. It is a daunting task to attempt such an endeavor, let alone succeed as Hoffman has. This book will change interpretations of European warfare, the financing of conflicts, transitions in other regions of the world, the causes of the Industrial Revolution, and the Great Divergence — topics that are at the forefront of history, economics, and political science today.

Hoffman takes on big theories of history and development in this book, similar to other grand theorists like Jared Diamond (1999), Charles Tilly (1992), David Landes (1998), Joel Mokyr (1992), and Daron Acemoglu and James Robinson (2005). The pivotal question for all social scientists remains: Why are some so rich and some so poor? Whereas explanations for the different development paths have ranged from biological (Diamond) to geographical and cultural (Landes) and institutional (see e.g. North 1990), Hoffman follows a similar path as Tilly, Larry Neal (2000), and Niall Ferguson (2001), who argue that understanding the costs and impacts of warfare is the key to this puzzle. Tilly (1992) pointed out that capital and coercion are pivotal components in the rise of Europe over the last thousand years and that the constant need to fund warfare led to the creation of public debt and sharing of power between sovereigns and merchants. And, as Ferguson (2001) argues, military spending was the crucial component in this transition, since it led to other financial, fiscal, and institutional innovations. Hoffman is able to go a step beyond these somewhat blunt insights to provide a theoretical and (partially) empirical foundation that fills in many of the gaps and challenges the other “big” historical frameworks.

Hoffman poses a question for a potential time traveler similar to the one asked by Landes: How did Europe go from a patchwork of small and seemingly powerless communities one thousand years ago to a position of military and political dominance by the end of the millennium? Why did the world not become dominated by the Chinese or some of the other worthy contender? He answers the question by turning to a model of tournaments — the “tournament” for domination in Europe in conjunction with other cultural and historical developments explains Europe’s global success. Ultimately, the key to Hoffman’s explanation is warfare. As he correctly points out, Europeans have been almost constantly at war. Historically, most of their sovereigns’ spending went toward military purposes, and even lavish palaces like Versailles represented only a minuscule part of the state budget. His model links the high probability that European rulers would go to war to the high value of the victor’s prize, and similarity of resources, military technology, and ability to mobilize those resources (absence of a hegemon is crucial). Moreover, the political cost of attempting to win the prize must have been fairly low, and rulers were willing and able to learn from these conflicts. Thus, Hoffman’s four conditions for Europeans’ path toward global dominance include frequent war, high (and consistent) military spending, adoption and advancement of gunpowder technology, and relative lack of obstacles to military innovations. Europeans enjoyed low fixed costs for going to war, distances were small, variable costs for mobilization were low, and there was a merchant base that helped with the financing of conflicts.

One of the key elements in Hoffman’s explanatory framework is the ability of rulers to extract revenue from the society. His comparative data — which are by necessity a bit sporadic for China and other states around the globe — prove that European rulers collected, in per capita terms, much higher revenues and invested them into warfare. He also shows, based on his research into early modern European revenue systems and military producers, that the high military spending in Europe also translated into sustained productivity growth in the military sector. He even goes further to suggest that this was linked to the eventual Industrial Revolution, which is a bit harder to verify. Positive technological externalities may arise from military technologies, but significant crowding out effects cannot be ignored.

This book is particularly interesting when Hoffman engages in comparative research to examine various empires and regimes around the world in this period. While specialists in the histories of these polities may find details that they disagree with, the overall argument about China’s stagnation from the fifteenth century onward (or later, depending on whether one ascribes to the views of Pomeranz (2000) or Broadberry and Gupta (2006)) is quite convincing. Eschewing some of the more traditional explanations, for example China’s turn inwards in the fifteenth century, Hoffman makes a case for the tournament model here as well. He shows that Chinese tax collection rates were low, and that the focus on defending against nomads meant lower military spending on navies. Also, the investment in gunpowder technology was not consistently high, and thus the Chinese eventually fell behind the Europeans, which was displayed amply in the Opium Wars of the nineteenth century. Similar arguments can be made as to why Japan and India also stagnated, although some of the reasons differed. Interestingly enough, Hoffman also assigns a large role in Europe’s bellicosity to Christianity; rather than pulling European nations together, Christianity became a source of almost constant conflict, starting with the Crusades, divisions within the Catholic Church, and then the wars of religion in the sixteenth and seventeenth centuries.

In general, Hoffman’s model and the empirical support presented in the book are impressive and persuasive. One could, of course, offer some counterarguments. For example, Hoffman’s model is probably not as all-encompassing as he suggests; in many ways his framework complements the broader models about the role played by geography, nature, climate, and human interactions. Moreover, he inordinately downplays the role played by the modes of financing wars — why it may make a difference whether tax revenue or loans were used to extend conflicts. Ultimately the European (or originally Dutch/British) model of financing wars with the support of domestic merchants and markets with low interest rate loans was a huge advantage when Europe entered the age of total wars at the end of the eighteenth century. Finally, it is hard to discount the role raw materials and other natural resources played in assigning winners and losers in these tournaments. The classic argument by Pomeranz (2000) about the lack of coal near developing urban centers in China as a major hindrance to its industrialization is a good example of this line of thinking. Regardless of these small reservations, this book is a classic of economic history, which should be required reading by scholars everywhere, and will be a starting point for many debates about the role conflicts and military spending have played in historical processes.

References:

Acemoglu, D. and J.A. Robinson (2005) Economic Origins of Dictatorship and Democracy, Cambridge University Press.

Broadberry, S. and B. Gupta (2006) “The Early Modern Great Divergence: Wages, Prices and Economic Development in Europe and Asia, 1500–1800,” Economic History Review, 59(1), 2-31.

Diamond, J. (1999) Guns, Germs, and Steel: The Fates of Human Societies, W.W. Norton.

Ferguson, N. (2001) The Cash Nexus: Money and Power in the Modern World, 1700-2000, Basic Books.

Landes, D. (1998) The Wealth and Poverty of Nations: Why Some Are So Rich and Some So Poor, W.W. Norton.

Mokyr, J. (1992) The Lever of Riches: Technological Creativity and Economic Progress, Oxford University Press.

Neal, L. (2000) “How It All Began: The Monetary and Financial Architecture of Europe during the First Global Capital Markets, 1648–1815,” Financial History Review, 7(2), 117-140.

North, D. C. (1990) Institutions, Institutional Change and Economic Performance, Cambridge University Press.

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

Tilly, C. (1992) Coercion, Capital, and European States, AD 990-1992, Blackwell.

Jari Eloranta (elorantaj@appstate.edu) is a Professor of Comparative Economic and Business History at Appalachian State University and author of several articles on military and government spending, including (with Andreev Svetlozar and Pavel Osinsky) “Democratization and Central Government Spending, 1870–1938: Emergence of the Leviathan?” Research in Economic History (2014).

Copyright (c) 2016 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator (administrator@eh.net). Published by EH.Net (April 2016). All EH.Net reviews are archived at http://eh.net/book-reviews/

Subject(s):Economywide Country Studies and Comparative History
Financial Markets, Financial Institutions, and Monetary History
Military and War
Industry: Manufacturing and Construction
Geographic Area(s):General, International, or Comparative
Time Period(s):General or Comparative

The Oxford Handbook of the Italian Economy since Unification

Editor(s):Toniolo, Gianni
Reviewer(s):Prados de la Escosura, Leandro

Published by EH.Net (October 2015)

Gianni Toniolo, editor, The Oxford Handbook of the Italian Economy since Unification. New York: Oxford University Press, 2013. xiv + 785 pp. $170 (cloth), ISBN: 978-0-19-993669-4.

Reviewed for EH.Net by Leandro Prados de la Escosura, Department of Social Sciences, Universidad Carlos III.

In addition to being a leading scholar of the economic history of modern Italy, Gianni Toniolo has been throughout his career an outstanding citizen. He has had a leading role in debates on Italy’s economic performance since the 1970s — initially as an active member of the new generation of distinguished economic historians that challenged and renovated the conventional narrative. More recently, he has led a new generation of young economists and economic historians in a major revision of Italian economic history that focuses on standards of living and income distribution.

The Oxford Handbook, a most ambitious re-interpretative project in modern European economic history, is the latest proof of Toniolo’s good citizenship. The purpose of this collective effort is assessing Italian long run economic performance within an international perspective. A common element in the contributions to the volume is addressing historical issues from a present day’s perspective and emphasizing its policy dimensions. This feature differentiates the volume from conventional economic history texts. The wide variety of issues considered does not harm the volume’s unity. In addition, the book is well written and accessible to the non-technical reader.

The volume is divided into five parts: aggregate growth and policy; sources of growth and welfare; international competitiveness; firms, banks, and the state; and the regional divide. For each topic within each of the five sections, the editor has chosen two or three specialists, usually an international scholar in the field and an Italian economist or economic historian. Such a bold idea proves to be a success. An excellent quantitative appendix, that includes a new set of GDP estimates from the output and expenditure sides, together with new series of labor quantity, capital stock and total factor productivity, completes the volume.

Part I on aggregate growth and policy represents, perhaps, the most ambitious interpretative section of the volume. It starts with a thoughtful introduction by the editor that constitutes a good guide for the rest of the volume. In contrast to the relative decline during the Early Modern era, Italy experienced sustained growth and catching up to the leading economies for most of the twentieth century, separating two phases (pre-1896 and post-1992) of sluggish performance and falling behind.  The process of international convergence was accompanied by internal divergence between north and south. The introduction is followed by Harold James and Kevin O’Rourke’s assessment of Italy’s performance during the first globalization and its subsequent backlash, in which they stress pre-World War II capital scarcity and highlight the specificity of interwar industrial policy under the lead of state-owned industrial conglomerate IRI. Then, Andrea Boltho compares Italy to Germany and Japan, countries defeated in World War II and great successes in the postwar, which slowed down significantly at the turn of the century.  Lack of major reforms during the reconstruction years, administrative inefficiencies, permanent conflict in industrial relations, and the gap between North and South are pointed out as Italy’s distinctive elements. Nicholas Crafts and Marco Magnani carry out a path-breaking interpretation of Italy’s catching up during the Golden Age and lagging behind since 1992. Their main argument is that institutions and policy choices that allow success in a far-from-frontier economy differ from those required for a close-to-frontier economy. Thus, Italy successfully performed as a far-from-frontier economy in the so-called age of Fordist manufacturing within a stable context of growing export demand, diffusion of U.S. technology, and high investment opportunities, with regulation, industrial policy, government intervention, and undervalued exchange rates as the main policy instruments. As Italy got closer to the technological frontier, factor and product markets’ flexibility and human and intangible capital accumulation became central to growth opportunities and Italy fell short of achieving them, as the delayed diffusion of information and communications technologies confirms. In the closing paper, Marcello de Cecco provides an original insight on how major issues in Italian economic performance were addressed by foreign scholars in which dualism receives particular attention.

Part II on sources of growth and welfare represents the most empirical section of the volume and provides a quantitative background for the rest of the volume’s contributions. It opens with a major contribution by Alberto Baffigi (that represents a collective endeavor) to produce a new set of historical national accounts with homogeneous GDP series from the supply and demand sides, at current and constant prices, over one hundred and fifty years. In the next chapter, Stephen Broadberry, Claire Giordano and Francesco Zollino compute new series of capital and labor and combine them with Baffigi’s new GDP series to draw trends in labor and total factor productivity (TFP) that place Italy in comparative perspective. Their analysis of the sources of growth reveals that during 1913-1993, TFP drove labor productivity growth (in which structural change played a relevant part) especially during growth accelerations. However, up to 1913 and, then, since 1993, factor accumulation dominated long-run growth. Italy appears to have come full circle. Andrea Brandolini and Giovanni Vecchi address standards of living in a comprehensive way to conclude that modern economic growth in Italy was compatible with substantial achievements in human development and the eradication of extreme poverty. The evolution of Italy’s educational system is addressed in Giuseppe Bertola and Paolo Sestito’s essay. They find that insufficient education levels (in both quantity and quality) represent a much more relevant obstacle for growth and catching up in today’s advanced Italian economy than during the Golden Age. In their assessment of emigration, Matteo Gomelli and Cormac Ó Gráda stress the positive self-selection of migrants and the favorable impact of migration on living standards and growth, as well as on reducing regional discrepancies. Lastly, Luigi Guiso and Paolo Pinotti use the enfranchisement of 1912 to investigate whether civic capital had an effect on democratization. After enfranchisement, electoral turnout declined but more in the South than in the North, which was more civic-capital intense. From this finding they conclude that formal democratization had a lower impact in the South as lower civic capital reduced political participation and, hence, did not contribute to closing the North-South gap.

Part III focuses on the international competitiveness of the Italian economy. It starts with a complete survey of the evolution of comparative advantage by Giovanni Federico and Nikolaus Wolf who emphasize the association between economic growth and export performance. They stress the dynamic role of manufacturing exports from World War I to 1980, when low-tech exports dominated and competitiveness declined, especially during the last two decades. Virginia di Nino, Barry Eichengreen, and Massimo Sbracia show that Italy’s currency was mostly undervalued between unification and the 1990s, after which it became overvalued. Undervaluation stimulated growth through export expansion and a more efficient resource allocation. Federico Barbiellini Amidei, John Catwell, and Anna Spadavecchia, who investigate technological innovation, highlight the major role played by international transfers of technology. Italy creatively adopted foreign technology, as industries’ innovation was driven more by engineering and design than by R&D. Since the 1990s, imports of foreign disembodied technology slowed down while R&D expenditure lagged behind advanced countries deepening the gap. A most informative chapter on the emergence and expansion of Italian multinationals by Fabrizio Onida, Giuseppe Berta, and Mario Perugini closes Part III.

The theme of Part IV is how firms and industries evolved and what the role played in it by banks and public policies. Franco Amatori, Matteo Bugamelli, and Andrea Colli assess how firms reacted to different technological paradigms in a global economy. During the first three-fourths of the twentieth century, industry, especially small and medium-size firms, performed satisfactorily. However, in the latest phase of globalization, small-size firms were unable to take full advantage of the information and communication technology, while suffered increasing competition from emerging countries. Inability to manage social conflict and to create a modern institutional framework seems to underlie Italy’s disappointing performance during the last two decades. The impact of credit allocation on growth and efficiency since World War II is at the core of Stefano Battilossi, Alfredo Gigliobianco, and Giuseppe Marinelli’s essay. They find a contribution of Italian banks to economic growth up to 1970, while overregulation and financial repression — a result of policies socially motivated and serving vested political interests — had a negative impact between the 1970s and mid-1990s. Liberalization had a positive effect on the banking system that responded to growth opportunities and directed credit towards promising industries. Banks, thus, should not be blamed for Italy’s current structural problems. In their chapter, Fabrizio Balassone, Maura Francese, and Angelo Pace find support for the hypothesis of a negative association between public debt and growth over the long run through a reduction in capital accumulation. Nonetheless, unlike the experience of the late nineteenth and early twentieth century, reducing public debt from  1995 to 2007 did not have a positive effect on growth. Delayed fiscal consolidation and the size of public expenditure and deficits appear as the explanation. In this section’s closing paper, Magda Bianco and Giulio Napolitano address the impact of public administration on the efficiency of the Italian economy.

In Part V, dedicated to the regional divide, Giovanni Iuzzolino, Guido Pellegrini, and Gianfranco Viesti focus on the changes in regional convergence of GDP per head since unification and find a declining North-South gap between the late nineteenth and mid-twentieth century that gave way to its increase during the Golden Age, to be followed by a reduction that has stabilized since the 1980s. In human development terms, however, the divergence partially closed over time. Brian A’Hearn and Anthony Venables investigate, in turn, the role of internal geography and foreign trade patterns in regional disparities showing that location of natural advantage and access to domestic and international markets favored the North over time, rejecting the hypothesis of an inverted-U pattern of regional inequality. Water abundance permitted intensive agriculture after unification; largely inward-looking industrialization in the early twentieth century also gave advantage to the North with its larger and more sophisticated markets. In the post-World War II era agglomeration in the North facilitated its access to European Community markets.

I cannot refrain from adding some succinct remarks after reading such a fascinating volume. As regards the quantitative part, it needs to be said that Baffigi’s chapter would by itself justify the volume. However, the way the new series are presented is a bit disappointing. One misses the presentation of long-run trends in GDP and GDP per head and the contribution due to supply and demand components.

In the excellent chapter by Broadberry, Giordano and Zollino it seems surprising that human capital is not considered independently. This decision implies that in the estimates any potential contribution of labor quality is included in the residual, rendering TFP estimates an upper bound of its actual magnitude. In turn, using full time equivalent workers (FTE) fails to take into account the decline in hours worked per employed worker that probably results in a downward bias in labor productivity levels and growth.

Some additional questions emerge. Are broad capital accumulation and efficiency gains, complementary or alternative? Does TFP growth follow capital accumulation? Should it be concluded that Italy exhausted its catching-up potential as it got closer the technological frontier? Other national experiences, such as Korea’s, tend to suggest otherwise.

On the contentious issue of inequality, the Italian historical experience appears of great interest. A’Hearn and Venables do not find confirmation for the hypothesis of an inverted-U pattern of regional inequality. Such a finding is consistent with the results for personal income distribution by Brandolini and Vecchi. This coincidence suggests a possible association between them as differences in average incomes between rich and poor regions will be most probably an element in overall inequality and would explain, perhaps, the absence of a Kuznets curve in Italy.

As the reader will realize, the long journey through this lengthy book is worth pursuing. Italian and European economic history is better and more thoughtful after the appearance of The Oxford Handbook of the Italian Economy.

Leandro Prados de la Escosura is the author of “Economic Freedom in the Long Run: Evidence from OECD Countries (1850-2007),” Economic History Review (forthcoming).

Copyright (c) 2015 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator (administrator@eh.net). Published by EH.Net (October 2015). All EH.Net reviews are archived at http://eh.net/book-reviews/

Subject(s):Economic Development, Growth, and Aggregate Productivity
Economic Planning and Policy
Economywide Country Studies and Comparative History
Financial Markets, Financial Institutions, and Monetary History
Industry: Manufacturing and Construction
International and Domestic Trade and Relations
Living Standards, Anthropometric History, Economic Anthropology
Urban and Regional History
Geographic Area(s):Europe
Time Period(s):19th Century
20th Century: Pre WWII
20th Century: WWII and post-WWII

Currency Politics: The Political Economy of Exchange Rate Policy

Author(s):Frieden, Jeffry A.
Reviewer(s):Officer, Lawrence H.

Published by EH.Net (January 2015)

Jeffry A. Frieden, Currency Politics: The Political Economy of Exchange Rate Policy. Princeton, NJ: Princeton University Press, 2014. xi + 301 pp. $40 (cloth), ISBN: 978-0-691-16415-1.

Reviewed for EH.Net by Lawrence H. Officer, Department of Economics, University of Illinois at Chicago.

Jeffry A. Frieden, Professor of Government at Harvard University, has written a fine book on the determinants of decision-making regarding exchange-rate regime and, to some extent, exchange-rate level within the selected regime. The book is readable for both economists and political scientists. I recommend Currency Politics to both sets of scholars. Economists will learn about the political aspects of exchange-regime choice and political scientists about the economic aspects.

There are seven formal chapters, preceded by an introduction and followed by a brief concluding section. The references constitute a useful if selective body of literature, and the index is well-done. Chapter one, titled “The Political Economy of Currency Choice,” presents the author’s theory. Chapters two and three, dealing with the U.S. experience from 1862 to 1879, is the section of the book most relevant to economic historians. The exchange-regime controversies during the greenback and silver-controversy periods are well analyzed within the author’s theoretical framework. Attention is paid to contemporary views and to pertinent data, and innovative econometric investigations are included.

Chapters four (European Monetary Integration), five and six (Latin American experience) are empirical but not historical, as they deal with recent experience. Chapter seven (“The Politics of Exchange Rates: Implications and Extensions”) is bizarre, running breathlessly from case to case, even discussing China’s undervalued currency.

The author’s model involves exchange-rate regime determination by the relative political strengths of economic groups advantaged by exchange-rate stability (gold standard, euro, peg to dollar or deutschmark) and groups advantaged by exchange-rate flexibility and domestic currency depreciation. The former groups generally include the financial sector, producers of differentiated products (“specialized manufacturers”), and foreign-currency debtors; the latter, mainly tradables producers. Frieden warrants praise by economists for his uniform and careful attention to economic incentives as analytical support for his approach.

Very impressive is Frieden’s voting model to test the greenback-period economic groupings for “soft money” (against gold, currency contraction, and deflation) versus “hard money” (in favor of return to the former gold standard, and the contraction and deflation to make this possible). A voting model with Congressional (House) district as the unit has creative dependent and explanatory variables, based on Census data. For the 1860s, twenty-four votes involving the Contraction Act (or its suppression) and the redemption medium (gold or greenbacks) for government bonds, are incorporated. Results are consistent with the author’s theory: “Members of Congress specifically were more likely to vote for soft money if their constituency was less wealthy, and if more of their constituency’s economic activities were in import-sensitive manufacturing (i.e., in New England and Pennsylvania) or farming, especially of export crops” (pp. 95-96).

For the 1870s, a similar analysis involves six House bills, five of which failed to become law — but no matter. With a later Census, data are richer, and explanatory variables now include debt by Congressional district. This leads to an unexpected result, as districts with larger debt are in favor of gold! Frieden explains this anomaly by inferring that concern about nominal debt was not an important motivating force. Hmm!

The chapter on European monetary integration gives Frieden the opportunity to investigate the impact of domestic-price pass-through effects of exchange-rate change, an integral part of his model. Now the econometrics has countries as the basic unit, as is also the case for the Latin American experience.

The book is full of wise insights, some of which seem obvious. For example, “the more open an economy is, the more politically controversial its currency policy is likely to be” (p. 249). The author also notes the well-known flexibility of wages and prices in enhancing the classical gold standard. He makes the important point, not always emphasized, that the sustainability of the classical gold standard was founded on the consensus of elite groups internationally: countries must follow gold-standard rules, and rules should not be altered to fit the preferences of national governments — whence the U.S. deflationary policy during the greenback period, in order to return to the gold standard. As befitting a political scientist, Frieden notes the lack of democracy — hence the absence of political power of groups benefitting from currency depreciation — in fostering the stability of the gold standard. I wish that he had devoted more attention to this oft-neglected aspect of the gold standard.

I also wish that Frieden had applied his model — both theoretically and, data permitting, econometrically — to other cases of exchange-rate regime controversy, especially the various bullionist periods (in particular, English and Swedish). He says nothing about these experiences.

Without doubt, however, Frieden has set a high political-economic standard against which other interdisciplinary studies of exchange-rate regimes will have to measure themselves.

Lawrence H. Officer is Professor of Economics at University of Illinois at Chicago. His most recent books are Two Centuries of Compensation for U.S. Production Workers in Manufacturing and Everyday Economics: Honest Answers to Tough Questions, both published by Palgrave Macmillan.

Copyright (c) 2015 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator (administrator@eh.net). Published by EH.Net (January 2015). All EH.Net reviews are archived at http://eh.net/book-reviews/

Subject(s):Financial Markets, Financial Institutions, and Monetary History
Geographic Area(s):General, International, or Comparative
Europe
Latin America, incl. Mexico and the Caribbean
North America
Time Period(s):19th Century
20th Century: Pre WWII
20th Century: WWII and post-WWII

Industrial Policy in Europe after 1945: Wealth, Power and Economic Development in the Cold War

Editor(s):Grabas, Christian
Nützenadel, Alexander
Reviewer(s):Felice, Emanuele

Published by EH.Net (September 2014)

Christian Grabas and Alexander Nützenadel, editors, Industrial Policy in Europe after 1945: Wealth, Power and Economic Development in the Cold War. New York: Palgrave Macmillan, 2014. xiii + 388 pp. $110 (hardcover), ISBN: 978-1-137-32989-9.

Reviewed for EH.Net by Emanuele Felice, Department of Economic History, Universitat Autònoma de Barcelona.

This book, edited by Christian Grabas and Alexander Nützenadel (Humboldt University, Berlin), is an ambitious collection of essays about the history of industrial policies in Europe, and beyond, after the Second World War (mainly during the economic miracle, 1945-1973). The topic is not novel, of course, plenty of studies have been devoted to it, but this volume can boast an impressive coverage and broad perspective, unparalleled thus far: not only countries from both the Western and the Eastern blocks are analyzed and discussed, but attention is also paid to a part of the Third World under the influence of Western Europe.

The general flavor of the book, about a more favorable consideration of industrial policies and economic planning, also is a reason of interest. As stated in the Introduction (p. 2), “for a long time industrial policy appeared old-fashioned, something that belonged to a distant past when mercantilism ruled economic philosophy in Europe. The industrial sector seemed to fade away, marginalized by the Internet boom, the financial sector and other expanding branches of the knowledge economy.” According to the authors, the global financial turmoil has thrown into question many of these assumptions, given that countries with a sounder industrial sector, such as Germany or France, have weathered the crisis better than countries more heavily depending on services (United Kingdom, United States); furthermore, the neo-liberal credo of superior market efficiency is no longer a dogma, as a consequence of the crisis, and economic planning has been revitalized, up to the point that some are even talking of a New Marshall Plan (here intended as “long-term strategies of industrial growth”) which would help overcome the present troubles of Southern European countries. One may disagree with the first part of this reasoning, arguing that industry in itself is not a guarantee of stability (after all, in the medium term more service-oriented countries, such as the United States or the United Kingdom, are performing better than more industrial-oriented, such ones as Italy), but the second part seems less disputable: industrial policy and industrial development are back to the fore, in all the European countries (the good as well as the bad performing ones) and throughout the world — I would add: because the rise of China is a product of industrial policy. In view of this, an in-depth reconsideration of industrial policies carried out in one of the most economically successful regions of the world, during its economic miracle, is surely praiseworthy and may appeal to a worldwide public.

The book is divided in three parts, about industrial policies in Western Europe (I), the debate at a transnational level in the European Community and its influence beyond Europe (II), and industrial policies in the Soviet Bloc (III). In part I, after an introductory chapter significantly subtitled “Planning the Economic Miracle,” by James Foreman-Peck, each country is treated as a separate chapter (Britain, France, West Germany, Sweden, Italy, Spain). In a similar way, Part III has an introductory chapter named “Industrial Policy and Its Failure in the Soviet Bloc” (please note the contrast with the title chosen for Western Europe), by Ivan T. Berend, and then three chapters dedicated, respectively, to the German Democratic Republic, Hungary, and the Soviet Union. Part II is the most original one, with chapters discussing the Marshall Plan in a global perspective (by Daniel Speich Chassé), the debate about a common European industrial policy (by Laurent Warlouzet), and the early industrial development policy of the European Economic Community in Francophone West Africa (by Martin Rempe) and the African-Caribbean-Pacific group (by Guia Migani). Above all, the subjects covered in the last two chapters have received, so far, little attention; it is right to put them in this intermediate position, given that these are policies planned by Western European countries.

To say it in a different way, I strongly agree with the overall structure of the book and acknowledge its underlying ambition. Such an ambition, however, is only partly fulfilled. A few pieces are missing, mainly concerning the Eastern bloc (what about Czechoslovakia, or what about such a peculiar experience as the Yugoslavian one?), but this is after all excusable — there is hardly a book that can claim total coverage. The main point is that this volume brings together a wide range of scholars and methods (from political sciences, to sociology, to economic history), each one dealing with a specific subject (i.e. with a different national case) in that particular perspective. In the editors’ view, this is a strength: “Each analysis is always based on the contemporary definitions of industrial policy, which vary over time and from one country to another”; furthermore, “because even the priorities of policy makers to influence the sectoral structural change in the respective European countries have often been quite different, all chapters focus on a changing diversity of approaches, institutions and instruments of industrial policy, and their specific outcomes” (p. 7). This may cause serious problems, though. De facto, we are unable to compare and thus to assess the different industrial policies by a common yardstick; for the same reason, for some countries the picture may not be satisfactorily exhaustive, nor correct. For instance, the chapter about Italy, by Christian Grabas, has a savor of well-informed economic history, although it is mainly a good collection of second-hand literature; but it dedicates only two pages to the crucial experience of development policies in Southern Italy, arguably the most important — and coherent — industrial development policy which was carried out in that period by the Italian state (although at that time it was called “regional development policy”). Conversely, the chapter about Spain, by Joseba De la Torre and Mario García Zúñiga, extensively (9 pages) deals with the regional impact of industrial policy, which arguably was less important there than in Italy.

In view of this, it may not be coincidental that the book lacks a conclusive chapter, one aiming to summarize which policies succeeded the most and why. It is true that the Introduction contains two pages of “overall results,” but these rather focus on common features, such as the fact that industrial policies were regarded as a pivot of economic policy in general, or that they were often used as short-term measures to cope with economic downturn. According to the editors, it is this last characteristic that “may explain the failure of many programmes in this field” (p. 8), since declining industries, with subsequent inefficient allocation of resources, were often subsidized. And yet this interpretative framework is not entirely convincing. It is not only that industrial policies mostly failed. It is that, paradoxically, the countries which in that period grew at a faster rate were those of less industrial policy, at least according to the analyses from this book. In the case of Western Germany, the author (Stefan Grüner) plainly recognizes that “intervention through industrial political measures played a smaller role between 1950 and 1975 than in other European countries, such as France or Great Britain” (p. 105); but in that period Western Germany, and its industry, performed far better. In the case of Italy, the second best-performing country in the economic miracle, industrial policies, or at least economic planning, are considered to have been mostly a failure. Indeed, what worked well in Italy’s miracle years were state-owned enterprises; due to the different approach used, how state-owned enterprises worked in other contexts, namely in France, is not very clear; for Britain, a poignant but necessarily fleeting comparison with Italy is proposed only in the introductory chapter by Foreman-Peck.

To conclude, in my view the book makes a considerable and admirable effort in order to provide a broad comparative picture of industrial policies in European countries. To this scope, a common interpretative framework, or at least some in-depth conclusive remarks (for instance, via comparing industrial policies by main subjects: state-owned enterprises versus subsidies to private enterprises, sectoral planning versus regional development policies) would have helped.

Emanuele Felice (ClaudioEmanuele.Felice@uab.cat) is visiting professor of Economic History at the Universitat Autònoma de Barcelona. His main research interests are on Italy’s long-run economic growth and the Italian North-South divide. He has published several articles in international journals and a number of books, including Perché il Sud è rimasto indietro (il Mulino, 2013: Why Southern Italy Is Backward). In 2013 he won the Hamilton Prize of the Spanish Association of Economic History, for the best international article published in top journals of economic history and related areas.

Copyright (c) 2014 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator (administrator@eh.net). Published by EH.Net (September 2014). All EH.Net reviews are archived at http://www.eh.net/BookReview

Subject(s):Economic Planning and Policy
Geographic Area(s):Europe
Time Period(s):20th Century: Pre WWII

Catch Up: Developing Countries in the World Economy

Author(s):Nayyar, Deepak
Reviewer(s):Ward-Peradoza, Marianne

Published by EH.Net (May 2014)

Deepak Nayyar, Catch Up: Developing Countries in the World Economy.  Oxford: Oxford University Press, 2013.  xvii + 221 pp. $45 (hardcover), ISBN: 978-0-19-965298-3.

Reviewed for EH.Net by Marianne Ward-Peradoza, Department of Economics, Loyola University Maryland.

Deepak Nayyar, Professor Emeritus at Jawaharlal Nehru University, takes us on a journey tracing the contours of developing country participation in the world economy from the second millennium to the present.  Catch Up thus goes beyond the traditional post-1950 assessment of development experiences, providing additional context and some new perspectives on developing country economic performance.  In particular, the author seeks to contrast divergence between developed and developing countries in the nineteenth and early twentieth centuries with the closing of the gap that occurred in the late twentieth and early twenty-first centuries.  In addition to the evolution over time, the analysis highlights the disparity in outcomes across regions in the developing world.  For the purposes of this study, the developing world is Africa, Asia (excluding Japan), and Latin America including the Caribbean.

The book is divided into two broad sections.  The first, comprising chapters 2 and 3, examines the period 1000 to 1950.  The second section, chapters 4 through 9, focuses on the post-1950 period, and considers the nature of developing country participation in the world economy since 1950.  Nayyar supports his arguments throughout using GDP, population, trade, and manufacturing data along with inequality and poverty measures for developed and developing countries.  While it is possible to raise various questions about data choices and sources, these issues are tangential and do not appear to affect the overall argument.   Two striking points emerge from the analysis.  First, divergence before 1950 and catch up in recent decades are more about divergence and subsequent catch up in Asia, and India and China in particular, than in developing countries as a group.  Second, regional disparities in economic performance across developing countries are substantial.
Chapters 1 through 3 provide the foundation for the analysis of “catch-up” in the post-1950 period.   Chapter 1 identifies the issues to be addressed.  Chapter 2 documents the process of divergence that characterized the interaction between developed and developing countries in the two centuries before 1950.  While developing countries dominated world manufacturing production in 1750, this situation would soon change.  Between 1820 and 1950 the share of world GDP for developing countries (called “The Rest”), fell from 63.1% in 1820 to 27.1% in 1950.  This dramatic decline occurred largely due to declines in GDP, particularly manufacturing output, in India and China.   Over the same period, the “West” increased its share of world GDP from 36.9% in 1820 to 72.9% in 1950.  Chapter 3 seeks to identify the factors that set the stage for the observed divergence.  The factors identified include the development of initial conditions in Europe during 1500-1700, the start of the industrial revolution in Britain and its expansion to Europe, and the global economy of the late nineteenth century.

Chapter 4 picks up in the post-1950 period, and documents the end of divergence between developing and developing countries, and the beginnings of the process of catch-up.  Between 1950 and 1980, developing countries continued to fall behind industrial countries, though at a slower pace than in the nineteenth century.  The period 1950-2008 was characterized by a closing of the gap in levels of GDP and GDP per capita relative to industrial countries and higher growth rates in developing countries.  As with the divergence for the period before 1950, this process of catch up is driven by GDP gains in Asia, as Latin America maintained its position relative to industrial countries and Africa continued to fall behind.

Chapter 5 focuses on international trade, international investment and international migration. While developing countries have experienced expansion in their share of world trade as compared to 1900, the disparities in outcomes across regions remain.  In the post-1950 period, Asia has seen dramatic gains in the share of world trade, while Africa experienced declines, and Latin America after declines in the 1990s, remains at approximately 1970 levels.  The data on foreign investment is for a much shorter period, starting in 1990.  Activity was again more heavily concentrated in Asia with the significance of international investment at the end of the twentieth century similar to levels at the end of the nineteenth century.
Chapter six focuses on structural change across regions.  Asia emerged as the only developing region showing the classic pattern of structural change with a reduction of GDP and employment shares in agriculture, along with increases in manufacturing and services.  Asia was also the only region that saw a substantial increase in its share of world manufacturing valued added.   For developing countries as a group, there is a transition in the composition of merchandise exports over time from primary products, to low-technology manufactures, to medium-technology manufactures to high-technology manufactures.  This stands in contrast to the late nineteenth century when developing countries exported primary products and imported manufactured goods.

Chapter seven focus on the performance of fourteen individual countries identified as leaders.  The author considers four countries in Latin America, eight countries in Asia and two countries in Africa.  These examples, encompassing a wide range of endowments, transition paths and development models, highlight the diversity of approaches that can produce successful outcomes.   The broad lessons that emerge are the importance of physical infrastructure and access to education (called initial conditions by the author), enabling institutions to support the process of industrialization, and supportive governments.

Chapter eight address the evolution of poverty and inequality across countries and people.  While inequality across countries has declined since 1950, inequality within countries, including developing countries has increased.  Similarly, poverty rates have declined somewhat since 1980 but the number of people classified as poor (living below PPP $1.25 and PPP $2 per day) remains substantial.  While Asia has driven the catch up process that is the central theme of this book, it remains home to over seventy percent of the world’s poor.

Chapter 9 concludes, outlines opportunities and potential problems for developing countries, and sketches some possibilities for the future.  The author sees the beginning of the twenty-first century as heralding a shift in the world balance of power similar to the rise of Britain in the nineteenth century, and the rise of the United States in the twentieth century.  What does this mean for the twenty-first century?  While the analysis highlights the importance of Asian economies in the recent catch up process, it remains unclear if any potential shift in the world balance of power will tilt toward one country, or several countries.

This book will be of interest to anyone interested in the evolution of the world economy. The focus on the role of developing countries in this process provides a new perspective on this important topic. Perhaps the most useful aspect of this book is that it integrates a long history of complex and multifaceted growth experiences across the developing world into a coherent and concise format, making it accessible to a wide audience.  Scholars from across the social sciences, policy-makers, students and general readers will all find this book interesting and insightful.

Marianne Ward-Peradoza is Associate Professor of Economics at Loyola University Maryland.  Her research is focused at the intersection of economic history, economic development and international macroeconomics.  She is working on international comparisons of incomes and productivity for a variety of industrial countries in the late nineteenth and early twentieth centuries and several Caribbean countries in the twentieth century.

Copyright (c) 2014 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator (administrator@eh.net). Published by EH.Net (May 2014). All EH.Net reviews are archived at http://www.eh.net/BookReview

Subject(s):Economic Development, Growth, and Aggregate Productivity
Geographic Area(s):General, International, or Comparative
Africa
Asia
Latin America, incl. Mexico and the Caribbean
Time Period(s):18th Century
19th Century
20th Century: Pre WWII
20th Century: WWII and post-WWII