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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 ( Published by EH.Net (June 2016). All EH.Net reviews are archived at

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.

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).

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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.


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 ( Published by EH.Net (May 2016). All EH.Net reviews are archived at

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.


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 ( 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 ( Published by EH.Net (April 2016). All EH.Net reviews are archived at

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).

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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.

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Subject(s):Financial Markets, Financial Institutions, and Monetary History
Geographic Area(s):General, International, or Comparative
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 ( 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.

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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 ( Published by EH.Net (May 2014). All EH.Net reviews are archived at

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

Confronting Decline: The Political Economy of Deindustrialization in Twentieth-Century New England

Author(s):Koistinen, David
Reviewer(s):Neumann, Tracy

Published by EH.Net (May 2014)

David Koistinen, Confronting Decline: The Political Economy of Deindustrialization in Twentieth-Century New England. Gainesville, FL: University Press of Florida, 2013. xii + 331 pp. $75 (hardcover), ISBN: 978-0-8130-4907-6.

Reviewed for EH.Net by Tracy Neumann, Department of History, Wayne State University.

Studies of deindustrialization have largely focused on the impact of industrial restructuring on workers and communities in declining of Northeastern and Midwestern manufacturing centers in the last quarter of the twentieth century. The term evokes images of places like Newark, Cleveland, Pittsburgh, and Detroit, not bucolic New England or bustling Boston. With Confronting Decline: The Political Economy of Deindustrialization in Twentieth-Century New England, David Koistinen sets out to change this. In his study of the collapse of New England’s textile industry, Koistinen challenges commonly held ideas about when and where deindustrialization began, and argues that contemporary responses to industrial decline have a much longer history than scholars have recognized.

Like their counterparts in the electronics, steel, and auto industries later in the century, after World War I Northern textile producers responded to competitive pressures from the rapidly industrialized, poorly unionized New South by disinvesting in their New England mills, closing some down and moving others to the booming Piedmont. Koistinen carefully reconstructs the constellation of political interests that sometimes worked together and sometimes found themselves – union officials, rank and file workers, industrialists, businessmen, bankers, and government officials – at odds as they responded to New England’s industrial decline. From the 1920s to the 1990s, regional leaders employed distinct but overlapping strategies of retrenchment, federal assistance, and economic development to combat the economic effects of deindustrialization. The tactics and supporters of each strategy remained remarkably consistent, Koistinen argues, because the region’s political economy and the interests of New England’s economic actors changed very little. The only major discontinuity he finds is in the role of federal, state, and local officials, which was minimal in the 1920s and increased steadily across the twentieth century.

Koistinen characterizes retrenchment as a “push to reduce the government burden on the corporate sector through cutbacks in social legislation and taxes,” and dates its emergence to the early 1920s (pp. 2-3). Unsurprisingly, business interests, and particularly manufacturers in declining industries, were the principal advocates of retrenchment. Unions and their liberal allies, by contrast, called for greater federal intervention to alleviate economic disparities between Northern and Southern textile producers and temper the social effects of industrial restructuring. Koistinen finds that while business won some tax reductions and liberal reformers achieved some labor and social welfare protections, neither approach was particularly successful in tempering textile producers’ economic incentives for disinvestment.

Economic development, the third prong of Koistinen’s paradigm, was more successful. Liberals, conservatives, labor, and industrialists fought each other over retrenchment and federal assistance, but economic development offered a less politically contentious arena in which rival interests could work together. Koistinen broadly construes economic development as private and public efforts to “compensate for losses in the declining sectors by strengthening the region’s existing industries and fostering the emergence of new ones” (p. 3). Such endeavors were widely popular with the general public, government officials, and commercial, bank, utility, and railroad executives who were invested in reviving New England’s economy to ensure the long-term success of their enterprises. From the mid-1920s into the early postwar period, economic development was primarily a private-sector endeavor. Banking, commercial, and industrial leaders established the New England Council in 1925 to revive the region’s flagging economy and, as Koistinen amply demonstrates, from its inception the organization saw research expertise, advanced technology, and innovative managerial techniques as the keys to restoring the region’s economic competitiveness. The New England Council, in Koistinen’s telling, functioned on a regional level very much like the better-known civic organizations that formed during and after World War II to remake Philadelphia, Pittsburgh, Chicago, and St. Louis.

Chapter 4 on the long history of economic development in New England and Chapter 7’s new interpretation of the growth and development of the Route 128 research corridor are real standouts. Koistinen shows that the Boston area’s emergence as an advanced technology hub was shaped as much by the ready availability of venture capital and commercial bank loans for small businesses as it was by individual entrepreneurial initiative or the long arm of MIT. At the close of World War II, New York City and Los Angeles were the country’s most important advanced technology hubs. Boston outpaced its competitors because regional leaders had, beginning in the 1920s, launched a successful campaign to secure loans and seed funds for small businesses and new ventures. Together with promotional campaigns similar to those that fostered industrial development in the South and Southwest, regional leaders cultivated R&D and high technology enterprises in the 1920s in much the same way as their counterparts would in the 1970s and 1980s. Because of MIT and its associated private and federal labs, Koistinen concludes that Boston was bound to develop as a technology center, but without the region’s long history of economic development, it would likely have been much smaller.

Confronting Decline establishes broad continuities between public and private responses to industrial disinvestment across the twentieth century and will surely force a wholesale reconsideration of when and where deindustrialization began. Koistinen’s otherwise excellent study falters, however, when he turns to deindustrialization in the 1970s and 1980s. His quick survey of retrenchment, federal assistance, and economic development in the U.S. and Western Europe in the last decades of the twentieth century feels tacked on and lacks the analytical rigor of the earlier chapters. He unconvincingly elevates his three-part paradigm to a predictive model, arguing that any economically mature area experiencing deindustrialization will respond to industrial decline in a way that fits one of his three categories. And finally, while the book is framed as a study of deindustrialization in New England, it is largely about Massachusetts and, after 1945, metropolitan Boston. When Koistinen discusses declining mill towns, Massachusetts makes sense as a generalizable case study; when he turns to economic development centered on high tech enterprises, Boston and Route 128 are exceptional not just in the region, but in the nation. The disappointing final chapter and the geographical overreach, however, are minor concerns compared to the book’s important achievements.
Tracy Neumann is the author of “Privatization, Devolution, and Jimmy Carter’s National Urban Policy,” Journal of Urban History (forthcoming)

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Subject(s):Economic Planning and Policy
Industry: Manufacturing and Construction
Urban and Regional History
Geographic Area(s):North America
Time Period(s):20th Century: Pre WWII
20th Century: WWII and post-WWII

An Economic History of Nineteenth-Century Europe: Diversity and Industrialization

Author(s):Berend, Ivan T.
Reviewer(s):Voth, Hans-Joachim

Published by EH.Net (March 2014)

Ivan T. Berend, An Economic History of Nineteenth-Century Europe: Diversity and Industrialization. Cambridge: Cambridge University Press. 2013.  xviii + 521 pp. $45 (paperback), ISBN: 978-1-107-68999-2.

Reviewed for EH.Net by Hans-Joachim Voth, Department of Economics, University of Zurich.

Like a mythical animal out of an old fable, Ivan Berend’s latest book is a two-headed creature. On the one hand, it is an erudite, readable, and insightful overview of nineteenth-century economic history, written by a scholar who commands encyclopedic knowledge with ease, and more often than not displays an ability to package all this wisdom intelligently. On the other hand, there are serious lapses of judgment, oversights, and missing key concepts and references in the literature; and there are also serious issues with the writing, structure, and analysis.

The first chapters bring the reader up to speed about how the author thinks economic history should be done, and what happened before the nineteenth century (part I). Part II looks at success (“Successful Industrial Transformations of the West”), and Part III describes the causes of failure in the periphery. The part on success contains chapters that look at science and education, agriculture, transport, business and finance, demography, and the role of the state. A full section examines Europe’s interactions with the rest of the world. The part on failure examines mechanisms for the transmission of the “Western spark,” at the advantages of being on the periphery, and the state as predator (Balkans and the borderlands of Austria-Hungary). Throughout, the author weaves together an enormous literature with a light touch. The description of how in Bosnia-Herzegovina in the period before World War I, illiterate teachers taught prayers to children, with neither understanding what the words meant, is a perfect way to start the section on stagnation in the periphery. Oddly, the same anecdote is repeated, almost word for word, later in the book.

The Industrial Revolution takes center stage – as is only to be expected in a book on nineteenth century European economic history. The author moves from the description of (in the words of an anonymous schoolboy cited by T.S. Ashton [1]) the “wave of gadgets” that washed over England in the eighteenth century to broader explanations of why industrialization occurred and how it spread. Some parts here feel like a throwback to the days of W.W. Rostow’s stages of economic growth [2], with a mechanical summary of how many boxes on the list of requirements for take-off a country has managed to tick. Berend also approvingly cites Robert Allen’s recent work on the role of high wages (and cheap coal) in explaining why the Industrial Revolution was British [3] – the argument being that dear labor and abundant energy gave strong incentives to create technologies that economized on the former by using the latter. This is an example of what economists call directed technological change, and it is typically invoked to explain, say, the rising college premium in an age of falling energy prices. There are several issues with this view (not least the fact that English wages were not very high once one factors in high levels of productivity – as pointed out by Cormac O’Grada, Morgan Kelly, and Joel Mokyr [4] – and not cited by Berend), and the book does not quite rise to the level of even-handed and insightful discussion that this reviewer would have liked to see.

The conclusion at the end of Chapter 1 illustrates some of the issues and problems in this book: “The reasons behind the British Industrial Revolution are extremely complex (my emphasis). … The British Industrial Revolution … was not a deus ex machina, but rather the outcome of six hundred years of gradual progress and change inside Europe… Industrialization is a complex civilizing process, ‘a phenomenon which exists only on a certain level in the cultural, economic, social … evolution of man’ (Zamorski 1998, 36). Socio-economic and cultural developments occurred in a very symbiotic way, inspiring and engendering one another” (p. 77). We never learn what these symbiotic relationships actually are. A lack of clarity pervades the analysis here; there is no ordering of factors, no discussion of what mattered more or less, no description of what produces complex interactions. The book itself has actually surprisingly little to say on cultural and social antecedents of industrial development.

There are significant lacunae in several sections. Institutional approaches, especially when married to rigorous economic analysis, are unevenly covered. For example, this must be one of the few books on economic development published in the last decade or so that does not cite a single book or paper by Daron Acemoglu. Important work on the “Rise of Atlantic Europe” gets no billing [5], nor does the attempt to identify the effects of exogenous institutional change through the French Revolution. Similarly, demographic forces and their interaction with living standards are not given much room (though Greg Clark’s theory that differential reproductive process is at the heart of development makes a cameo appearance). Given that in the mind of many, the nineteenth century marks the point in history when Malthusian forces started to weaken, this is more than just an oversight. While citing such obscure works as Joseph Love’s Crafting the Third World: Theorizing Underdevelopment in Rumania and Brazil (1996), the book builds no bridges to current influential work in economics on the determinants of long-run growth. Inexplicably, it misses “unified growth theory” (and all the associated empirical analysis) entirely [6, 7, and 8].

One of the early chapters makes it clear where the author positions himself in the profession – firmly in favor of “old-style” economic history in the tradition of Fernand Braudel and Carlo Cipolla, and opposed to new-fangled Cliometrics. This chapter cites some negative remarks about quantitative economic history by Nobel Laureate Robert Solow, before then moving on to note that some of new economic history is perhaps not all bad. The book also makes bold claims about how economics-inspired economic history can never take culture and social dynamics seriously: “Socio-political and cultural factors, and all of those other phenomena that are impossible to quantify or incorporate into a few factors of an economic model, are evidently marginalized in the analysis. In many ways, however, it is precisely those qualitative features, those knowledge, social-cultural, and behavioral patterns and those historically determined characteristics that are the most profound factors influencing economic growth” (p. 16).  It is hard to take the confident verdict (“impossible to quantify or incorporate…”) seriously. The author arrives at this conclusion by ignoring a vibrant, rapidly growing literature that thinks about precisely these questions – with seminal contributions by Alesina, Guiso, Sapienze, Zingales, Nunn, Becker and Woessmann, to name only a few [9, 10, 11, and 12]. Similarly startling is the absence of any reference to the recent work by Besley, Persson, and others on state capacity [13, and 14] – a topic the book touches on but never quite gets to grip with.

To sum up, inside the actual book, there is an ambitious, erudite, wide-ranging, and often highly insightful manuscript that is struggling to get out – but failing. Apparently, the project did not receive the tender, loving care from the editorial process that could have helped. The publisher (Cambridge University Press) did not produce professional graphs; the book is adorned with numerous charts straight out of Excel that would look poor in a fifth-grader’s class report, with 3-D lines thrusting upwards at weird angles to illustrate that three numbers increased over time, pointless legends (“S1″) right next to graphs with a single line, and pie charts drawn from such an angle as to distort the proportions completely. The index is almost comically bad. For example, the entry on “Western Europe” comes with no less than 111 individual page entries (“272, 273, 274, 276, 277…”), but only six sub-headings – which virtually guarantees that no reader will be able to find anything in this book other than by playing search-and-cite.

Despite the numerous shortcomings, this book contains a broad-ranging overview of key developments in the European economy between 1800 and 1900. As such, it can usefully serve as a textbook for an introductory class on European economic history – provided it is supplemented with all the essential readings the author left out.

1. T.S. Ashton, The Industrial Revolution, 1760-1830 (CUP Archive, 1948).
2. W.W. Rostow, The Stages of Economic Growth: A Non-Communist Manifesto (University Press, Cambridge, 1960).
3. R.C. Allen, The British Industrial Revolution in Global Perspective (Cambridge University Press Cambridge, 2009).
4. M. Kelly, J. Mokyr, and C.Ó. Gráda, “Precocious Albion: Factor Prices, Technological Change and the British Industrial Revolution” (2012).
5. D. Acemoglu, S. Johnson, and J. Robinson, “The Rise of Europe: Atlantic Trade, Institutional Change, and Economic Growth,” American Economic Review 95, 546–579 (2005).
6. O. Galor, From Stagnation to Growth: Unified Growth Theory (Elsevier, 2005;, pp. 171–293.
7. O. Galor, and O. Moav, “Natural Selection and the Origin of Economic Growth,” Quarterly Journal of Economics 117, 1133–1191 (2002).
8. Q. Ashraf, and O. Galor, “Dynamics and Stagnation in the Malthusian Epoch,” American Economic Review 101, 2003–41 (2011).
9. L. Guiso, P. Sapienza, and L. Zingales, “Long Term Persistence” (NBER Working Paper 14278, 2008).
10. S. O. Becker, and L. Woessmann, “Was Weber Wrong? A Human Capital Theory of Protestant Economic History,” Quarterly Journal of Economics 124, 531–596 (2009).
11. N. Nunn, and L. Wantchekon, “The Slave Trade and the Origins of Mistrust in Africa,” American Economic Review 101, 3221–3252 (2011).
12. N. Fuchs-Schundeln, and A. Alesina, “Good-Bye Lenin (Or Not?),” American Economic Review 97, 1507–1528 (2007).
13. T. Besley, and T. Persson, “The Origins of State Capacity: Property Rights, Taxation, and Politics,” American Economic Review 99, 1218–1244 (2009).
14. T. Besley, and T. Persson, “State Capacity, Conflict, and Development,” Econometrica 78, 1–34 (2010).

Hans-Joachim Voth is the author (with Mauricio Drelichman) of Lending to the Borrower from Hell: Debt, Taxes, and Default in the Age of Philip II (Princeton University Press, 2014).

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 ( Published by EH.Net (March 2014). All EH.Net reviews are archived at

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