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When Sugar Ruled: Economy and Society in Northwestern Argentina, Tucum?n, 1876-1916

Author(s):Juarez-Dappe, Patricia
Reviewer(s):Johnson, Lyman L.

Published by EH.NET (October 2010)

Patricia Juarez-Dappe, When Sugar Ruled: Economy and Society in Northwestern Argentina, Tucum?n, 1876-1916. Athens: Ohio University Press, 2010. xiii + 233 pp. $32 (paperback), ISBN: 978-0-89680-274-2.

Reviewed for EH.Net by Lyman L. Johnson, Professor of History, University of North Carolina — Charlotte.

This book is a useful contribution to the history of Argentina during the era of economic? expansion that had been initiated by national integration and institution building in the decades following 1861. Patricia Juarez-Dappe, Associate Professor of History at California State University, Northridge, provides a well-researched survey of four decades of growth in Tucum?n driven by the rapid expansion of its sugar industry. Historians and economists with limited knowledge of Argentine history might wonder why this case deserves focused attention given the already-large literature devoted to the impressive expansion of the national economy in this period. Juarez-Dappe shows that while Tucum?n tracked the fast-rising arc of Argentine economic growth, imitating in many details the national experience, the character and legacy of the province’s expansion diverged in crucial ways from national experience.

Once potential profits from sugar production were demonstrated by early innovators, landowners moved from tobacco and other long-established crops to sugar and investors provided the capital to develop large and efficient refineries. Profits rose dramatically as new technologies, especially railroads and steam engines, increased efficiency and contributed to economies of scale in Tucum?n. As the industry expanded, estate managers and refinery owners attracted laborers from surrounding provinces and then enforced the discipline required by the rhythms of the sugar cycle with the support of a pliant provincial government. The prodigious wealth produced in the countryside as this process matured allowed the province’s modernizing government to transform its tax regime and harvest revenues that paid for the delivery of expanded and improved education, medical services and hygiene as well as to remake San Miguel, the provincial capital, as a modern city.?

While Argentina’s remarkable economic growth in this period was driven by profits from a rapidly expanding agricultural sector, Tucum?n’s prosperity during the sugar era was fundamentally unlike that of the still more profitable provinces of the Argentine littoral. Those regions grew rich from the profitable export of wheat, beef, mutton and other products to Europe. Tucum?n’s sugar producers, on the other hand, depended almost entirely on the national market. Given Argentina’s fast-rising population and accumulating wealth, price equilibrium and profitability could be sustained during the first stages of the modernization of sugar production in Tucum?n despite dramatically increased production. As a result, the province’s planters and refiners enjoyed many advantages relative to those in other Western Hemisphere sugar-producing nations who were forced to accept ever-lower prices in the increasingly competitive export markets of the Atlantic Basin.

Over time falling international prices and increased Atlantic market integration meant that this advantage could not be sustained permanently. Ultimately, the prosperity of Tucum?n’s sugar sector would come to depend on the willingness of the Argentine national government to protect it from foreign competition. Wealth transfers from the households of Buenos Aires and other littoral cities to the farmers, agricultural laborers and refiners of Tucum?n and other provinces were managed by national political leaders to service their own electoral ambitions. Once profits and market stability came to depend on political deals and electoral alliances, rather than price competitiveness, Tucuman’s sugar sector entered a dark cul-de-sac that offered little potential for continued modernization or for the stimulation of other sectors of the provincial economy. While the sugar industry’s growing reliance on protection is acknowledged by the author, she does not engage this topic in depth. If the story had been pursued beyond 1916, these issues would have been forced to the center of the discussion.

The author is more interested in the process of modernization and consolidation of the provincial sugar industry and describes this process in a thorough and convincing way, providing the reader with a rich array of detail drawn from her intensive excavation of archival resources. In addition to samples drawn from national censuses, the records of the provincial statistical office, and civil and criminal records, Juarez-Dappe uses notary records to great effect. These rich sources are seldom consulted by national era economic historians, although they are routinely used in systematic ways by colonial historians with excellent results. In addition, to these archival sources, Juarez-Dappe has thoroughly surveyed the secondary literature, supplanting earlier works of synthesis with her fresh account.?

The result is a dense descriptive narrative of Tucum?n’s sugar industry that ranges widely to include changing patterns of land use, the introduction of new technologies, and the fast-changing relations between sugar growers and the owners of refineries. The author also provides a very useful examination of the provincial labor regime, examining in turn migration, work, housing, and labor discipline. This broad survey is organized topically, allowing the reader to follow changes in, say, land use or technology across time. This same organization limits the author’s ability to analyze the specific effects of changing market conditions or altered political and fiscal policies on the allocation of land, labor, technology, and capital across the period. Despite this limitation, Juarez-Dappe has provided a comprehensive and highly readable introduction to this topic.

Lyman L. Johnson is Professor of History at the University of North Carolina at Charlotte. His recent books include Workshop of Revolution: Plebeian Buenos Aires and the Atlantic World, 1776-1810 (forthcoming Duke University Press); Aftershocks: Earthquakes and Popular Politics in Latin America (edited with J?rgen Buchenau); and Death, Dismemberment, and Memory. He has served as president of the Conference on Latin American History. ??? ??????????

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Subject(s):Agriculture, Natural Resources, and Extractive Industries
Economywide Country Studies and Comparative History
Geographic Area(s):Latin America, incl. Mexico and the Caribbean
Time Period(s):19th Century
20th Century: Pre WWII

The Japanese Consumer: An Alternative Economic History of Modern Japan

Author(s):Francks, Penelope
Reviewer(s):Mosk, Carl

Published by EH.NET (April 2010)

Penelope Francks, The Japanese Consumer: An Alternative Economic History of Modern Japan. New York: Cambridge University Press, 2009. xii + 249 pp. $33 (paperback), ISBN: 978-0-521-69932-7.

Reviewed for EH.NET by Carl Mosk, Department of Economics, University of Victoria.

The standard economic interpretation of Japanese consumption revolves around the so-called ?Japanese consumption problem?: domestic consumption demand was weak and has never been a driver of aggregate economic growth. Rather, the main drivers of Japan?s economic growth have been ? depending on whose account you read ? either domestic investment or exports. Japan?s famed miracle growth is basically a supply side story of productivity growth in heavy manufacturing ? iron and steel, chemicals, heavy machinery ? driven by imported technology, structural change involving the draining of rural labor out of villages into a burgeoning industrial belt, and the exploitation of scale economies through exports. In this book Penelope Francks rejects the standard explanation, emphasizing an alternative story, one revolving around the evolution of consumer demand, a story in which housewives as opposed to male factory workers play a dominant role.

Francks sets the stage for her demand-driven, bottom-up, thesis in Chapter 1 with two arguments: the consumer revolution in eighteenth century England was as important as the incipient industrial revolution (suggesting that the same holds for eighteenth- and nineteenth-century Japan prior to its forcible opening up by the Western powers); and Japanese consumption cannot simply be understood in terms of the growing penetration of Western goods and preferences. Rather Japan?s consumption history is unique and needs to be told from the bottom-up focusing on household demand for foodstuffs, clothing, household furnishings, and leisure activities. One of the great virtues ? indeed pleasures ? of the book is concreteness partly achieved through detailed description, partly achieved through the presentation of numerous reproductions of woodblock prints and photographs mostly taken by the author?s husband. Accounts of how and where Japanese eat their dinners, where and how they sleep in cramped apartments, how a Tokyo family manages to extract the maximum impact out of a tiny driveway (where they squeeze an automobile, drying laundry and a garden) bring home the realities of consumption in Japanese consumer culture to the reader. Those interested in the specifics of Japanese lifestyles ? historically and in the contemporary world ? will be well served by this volume.

The next two chapters demonstrate that consumerism spread in late Tokugawa Japan. Chapter 2 deals with cities, Chapter 3 with rural village life. A key argument developed in these chapters is that consumerism gradually spread outward geographically ? from castle towns in the fiefs and from great metropolitan centers like Edo and Osaka under the shogun?s administration ? and downward socially, city merchants (and later wealthy farmers in rural districts) imitating the behavior of the samurai elite. Promoting this consumer demonstration effect was the sankin k?tai system whereby daimy? and their selected samurai retainers were required to attend the shogun?s court in Edo on an alternating schedule. Commoners observed the elite travelling back and forth from sophisticated Edo to the hinterland in their finery and accompanied by their possessions. As their per capita incomes improved during the closing century of the Tokugawa period (1750-1868), commoners began purchasing the commodities and services originally reserved for the elite. Attempts to restrict the consumption of elite clothing ? sumptuary edicts issued by the shogun?s administration ? were evaded by city merchants and villagers alike. Trickle down was alive and well during the twilight decades of the Tokugawa shogun.

With the opening up of Japan and the establishment of the treaty ports in late Tokugawa and early Meiji Japan the consumer demonstration effect evolved, becoming two pronged, dualistic. On the one hand Japanese began imitating the consumer behavior of the Westerners living in the treaty ports: beer consumption and clothing fashioned from broad looms favored by the Americans, Dutch and English living in the treaty port enclaves caught on among the Japanese. On the other hand as per capita incomes rose among the Japanese ? fostered by the introduction of Western-style technology and by welfare gains associated with the abandonment of autarky ? the diversity and quality of traditional products consumed by the elite leaped, stimulating imitation among a growing middle class. In short the evolution of Japanese consumerism became increasingly dualistic, on the one hand reflecting Westernization, on the other hand reflecting a breathtaking explosion in the already well entrenched arena of traditional Japanese goods. Testifying to this dualism was the proliferation of goods that combined Western manufacturing techniques ? and often reflected Western consumer tastes in design and presentation ? with the creation of domestic Japanese products, spawning hybrids neither completely Western or completely Japanese. Picture a Japanese businessman wearing a Western?style suit, sporting a watch and spectacles, while walking on wooden geta worn by earlier generations of Tokugawa era elites and commoners alike; picture a Japanese bride wearing a silk kimono produced in a steam-driven factory. Francks ably tells this seemingly contradictory story in Chapter 4 of her book.

Chapter 5 takes us through the interwar years, emphasizing the spread of suburbs and department stores associated with the proliferation of inter-city electric railroads and intra-city trams allowing commuters to trek into great industrial belt metropolises like Yokohama, Nagoya and Kobe to work during the day, returning to bedroom communities chock a block with rice producing villages in the evenings. Once again, as in the Tokugawa period, urban consumerism spread out to embrace rural Japan.

The dark valley of World War II, the American Occupation and the consumer revolution during Miracle Growth (1955-1975) is the subject of Chapter 6. The focus is on consumer durables, especially those employing electricity. Life in the high-rise danchi apartments built in profusion through Japan?s Honsh? industrial belt stretching from the Tokyo/Yokohama conurbation in the north through Nagoya and Toyota City to the Osaka/Kyoto/Kobe complex in the southwest provides the concrete stage on which the electric household consumer revolution is described.

Finally Chapter 7 takes up the era of the rise in the yen/dollar exchange rate and the bubble economy that burst in the early 1990s. In this chapter Francks focuses on the diffusion in automobile ownership, globalization of consumerism ? a subtle discussion of a Japanese chef imitating a French chef who specializes on producing French-cuisine-infused Japanese food is a specially clever vehicle for telling the story of globalization of preferences ? and growing dissatisfaction with globalized materialism spawning a boom in nostalgia for the products of the Tokugawa past. Chapter 8 summarizes the argument of the book and a Statistical Appendix presents seven useful tables, most drawn from aggregate level features of consumption demand.

An economist might quibble with some of the analysis in the account given by Francks. Much of her discussion can be decomposed into income and relative price effects: Engel?s Law and the income and price elasticity of demand can account for many of her examples. An economist would be tempted to analyze Japanese demand for quality and diversity in consumption in terms of hedonic price theory, and so forth. But this quibbling would be unfair to Francks, who is an historian of culture. Her richly illustrated volume makes a strong case for an alternative interpretation of Japanese economic development, one that economic historians should take seriously in the years to come.

Carl Mosk is Professor of Economics at the University of Victoria. His most recent books are Japanese Economic Development: Markets, Norms, Structures (Routledge, 2007/2008) and Traps Embraced or Escaped: Elites in the Development of Modern Japan and China (World Scientific, 2010, forthcoming).

Subject(s):Markets and Institutions
Geographic Area(s):Asia
Time Period(s):20th Century: WWII and post-WWII

The Encyclopedia of Strikes in American History

Author(s):Brenner, Aaron
Day, Benjamin
Reviewer(s):Dubofsky, Melvyn

Published by EH.NET (October 2009)

Aaron Brenner, Benjamin Day, and Immanuel Ness, editors, The Encyclopedia of Strikes in American History. Armonk, NY: M.E. Sharpe, 2009. xxxix + 750 pp. $155 (hardcover), ISBN: 978-0-7656-1330-1.

Reviewed for EH.NET by Melvyn Dubofsky, Departments of History and Sociology, Binghamton University.


This is not your typical historical encyclopedia. Nor is it what one might expect to find in a reference work whose ostensible subject is strikes in American history. Unlike a similar volume edited by Ronald Filippelli and published nearly twenty years ago (1990), Labor Conflict in the United States: An Encyclopedia, which featured articles on more than 250 strikes listed alphabetically from A to Z, this new encyclopedia consists of mini-essays on a variety of subjects related to labor conflict. Instead of treating its subject matter alphabetically, it organizes its 65 short essays into five parts and three sub-sections with seven introductions written by the three editors. In addition to the editors, 59 scholars, largely academic historians, contributed to the encyclopedia, several writing more than one entry. The volume includes an elaborate apparatus that identifies all its contributors, provides a chart of the abbreviations used, features a full historical time-line, a topic finder, name and subject indexes, additional bibliography beyond the ample references found at the conclusion of each entry as well as a general introduction to the volume and a typology of strikes, both written by one of the editors, Aaron Brenner, holder of a doctorate in history from Columbia and currently employed by the Service Employees International Union. His coeditors are Immanuel Ness, a professor of political science at Brooklyn College, CUNY, author and editor of several books on contemporary workers and labor relations, and Benjamin Day, the director of two Massachusetts health care lobbying groups and a doctoral student at the New York State School of Industrial and Labor Relations.

As is the case with any volume built on the contributions of sixty-two individual authors, the quality and usefulness of the essays vary enormously. Overall, I found Parts I, ?Strikes: Theory and Practice,? and III, ?Strike Waves,? to contain several of the better and more interesting contributions. Three of the mini-essays in Part I stand out: Gerald Friedman?s fine description and analysis of ?theories of strikes,? Christopher Phelps? exegesis of ?socialist theories of strikes,? and Kim Phillips-Fein?s ?corporate strike strategy,? drawn from her recent book on conservative business thought and strategy in the mid- and late twentieth-century United States. None of the contributions in Part III are quite as good but, taken together, the five entries here cover several of the more notable strike waves in U.S. history. It is unfortunate, however, that the editors chose to focus the section on relatively short and somewhat singular strike waves rather than those of greater duration linked to the expansion and contraction of the national and world economies.

The remaining four parts of the encyclopedia offer a much more mixed bag with fewer goodies and more lemons. In Part II, ?Strikes and Working-Class Culture,? for example, I found the selection of topics puzzling. Why an entry devoted to Polish workers and strikes but not Jewish, Italian, British, or any one of several other ethnic groups that played an even larger role in strikes and union history? Why the role of the Catholic Church but not Protestant churches, or the Communist Party Trade Union Unity League but not the IWW, or A.J. Muste?s Workers party and the various socialist and anarchist labor groups that represented different aspects of working-class culture? It is hard to discern what links working women?s style of dress, strike songs, civil rights strikes, hate strikes, and North Carolina women on strike (subjects of other entries) as vital facets of working-class culture.

The final two parts of the encyclopedia cover respectively strikes in the public sector and in the private sector, with the latter part encompassing the largest number of entries and the most pages in the book. Here as elsewhere in the volume the quality of the entries varies as does their authors? treatment of the subject matter. Several focus on specific incidents of labor conflict such as Joseph Slater?s well-wrought entry on the 1919 Boston police strike, Myrna Donahoe?s on the less significant 1985-87 Watsonville, CA cannery strike, and Gary Zabel?s narrative of the Boston University strike of 1979. Nearly all the other entries focus on multiple strikes in specific industries or service sectors over extended time periods. Yet some authors prove more concerned with the growth and evolution of specific trade unions than with analysis of any single strike or series of industrial conflicts. Among the entries that I found most informative were Andrew Dawson?s treatment of strikes and union evolution in the motion picture industry, Teresa Ann Case?s description of labor conflict on the railroads between 1877 and 1922, and Dorothy Sue Cobble?s analysis of strikes by waitresses, drawn largely from her book and published articles on the same subject.

Almost without exception the entries in the encyclopedia, especially those that treat individual unions and specific strikes, cover their subjects from the perspective of the strikers and/or union leaders. Rarely does the reader see the evolution of industrial relations or the dynamics of conflict through the eyes of the businessperson or the enterprise. The authors refuse to hide their overt pro-worker sympathies.

Given the idiosyncratic structure of the encyclopedia, the choice of subjects covered or omitted, and the perspectives on labor-management relations shared by the authors, the volume will probably be most useful for undergraduate students seeking a foundation on which to construct a research paper about the general history of industrial conflict in the United States, the dynamics of such conflicts in a specific sector of the economy, or the evolution of trade unionism in different economic settings or among different sorts of workers.

Melvyn Dubofsky, Distinguished Professor of History and Sociology (Emeritus) at Binghamton University, SUNY, is the author and editor of numerous books in U.S. labor history and a forthcoming article in the next issue of the journal Labor History, ?A Stroll Down Memory Lane: My 50 Years-plus Association with Labor History.?

Subject(s):Social and Cultural History, including Race, Ethnicity and Gender
Geographic Area(s):North America
Time Period(s):20th Century: WWII and post-WWII

The American Economic History Reader: Documents and Readings

Author(s):Malsberger, John W.
Marshall, James N.
Reviewer(s):Dighe, Ranjit S.

Published by EH.NET (December 2008)

John W. Malsberger and James N. Marshall, editors, The American Economic History Reader: Documents and Readings. New York: Routledge, 2008. xiv + 556 pp. $55 (paperback), ISBN: 978-0-415-96267-4.

Reviewed for EH.NET by Ranjit S. Dighe, Department of Economics, State University of New York College at Oswego.

Malsberger and Marshall, a historian and an economist at Muhlenberg College, have produced a different kind of course book. While supplemental readers of primary documents or recent scholarship are nothing new, this book combines the two and weaves them together with impeccably concise yet informative introductory essays on each topic. Although this book seems designed to be used in conjunction with a standard American economic history textbook, it could conceivably work well as a stand-alone text, especially for more advanced students who do not require a lot of background.

The book appears to have been organized for a one-semester course in American economic history from the colonial period to the present. Altogether, the book consists of 65 primary documents and 33 essays, grouped into 13 chapters, i.e., about one for each full week of the semester. Notably, just over half of the chapters cover post-1900 topics. The chapter topics are as follows: mercantilism and the colonial economy; the economy of the new nation; railroads; slavery; labor in industrializing America; the rise of big business; the New Era of the 1920s; the Great Contraction; the New Deal, World War II, and Keynes; the postwar Keynesian consensus; the collapse of that consensus in 1969-1980; Reaganomics; Clintonomics. (The book also contains Robert Whaples?s 1995 article ?Where Is There Consensus Among American Economic Historians?? as an appendix.) The average chapter is about forty pages long, so depending on one?s students? capacity for assigned reading, the instructor might be better off using the book as a stand-alone text or omitting some of the topics.

Indeed, considering the editorial choices that go into any economic history course, I am guessing the editors would expect and encourage other instructors to omit a topic or two and perhaps supplement the reader with favorite topics and readings of their own. For example, one might want to cover the economics of the Civil War and the Populist movement. Or one might want to spend more time on productivity growth, which receives scant mention here. (Neither the post-World War II productivity boom nor the post-1973 slowdown gets much more than a passing acknowledgment, and productivity does not appear in the book?s index.) The same goes for the great migrations of African-Americans and women into the nonagricultural work force in the twentieth century, and the great waves of immigration in American history. But the editors can hardly be criticized for omitting some vital topics, in view of the space limitations of a one-volume reader and the idiosyncratic nature of these choices.

The primary documents are generally well chosen. They include some familiar ones (such as the U.S. Constitution, Alexander Hamilton?s ?Report on Manufactures? and ?Plan for Supporting Public Credit,? and Ida Tarbell?s Standard Oil history); contemporary articles, including many by famous economists (such as Adam Smith on the colonies, John Maynard Keynes on the Great Depression, and Milton Friedman and Walter Heller on much of the twentieth century); statements by U.S. presidents (from Andrew Jackson to George W. Bush); and some obscure gems (such as two reward listings for runaway apprentices in the 1830s, which are oddly similar to reward listings for runaway slaves). Many of these documents have been excerpted for easier reading, and the editors further aid the reader with a half-page introduction to each chapter?s set of documents, providing needed context and explanation. With such a large number of primary documents, virtually all scholars will encounter at least a few that they have not read before.

The book?s greatest strength is probably the historiography it provides, especially as it moves from contemporary accounts in each chapter?s Documents section to classic and more current economic history research in the Essay section. For example, the chapter on the colonial economy includes Smith?s ?Of Colonies? as a Document and then, as Essays, Robert Paul Thomas?s 1965 article on the Navigation Acts and Larry Sawers?s 1992 article on the same. The chapter on railroads, instead of focusing on Robert Fogel and his critics, goes back further, beginning its Essays section with Leland Jenks?s 1944 article ?Railroads as an Economic Force in American Development,? Fogel?s original straw man. The chapter on the Great Contraction includes Irving Fisher?s classic 1933 debt-deflation article as a Document, then moves on in the Essays section to Milton Friedman?s monetarist account and then Christina Romer?s more eclectic account. As with the Documents, the Essays sections all begin with concise half-page introductions that provide a perfect road map for the reader.

The book is not so strong on cosmetics. There are a number of proofreading errors, especially in names (among the misspelled names are Jonathan Hughes and E. Cary Brown). One of the excerpted documents on the Great Contraction includes a passing reference to the untimely death of Governor Strong of the New York Fed, but it appears to have no antecedent in this book, leaving the inexpert reader to wonder who Strong was and what his policies were. Also, considering the large number of primary documents, a bit more attentiveness to dates and timelines would help. Case in point: Thomas Whately?s ?The Regulations Lately Made,? originally published in 1765 as a defense of the Stamp Act. The only date listed for it here is 1775, which may be correct as regards the particular reprint used but which could easily lead students astray if they assume it was written during the Revolution and that England was publicly talking about reviving that long-since-repealed act.

Another cosmetic problem is the less-than-user-friendly layout, a likely result of having to cram almost a hundred documents and essays, plus the editors? introductory essays, into a single volume. Even the paperback edition is heavy, and each page looks like a chore: tall, wide, small-font text, no pictures or graphs. Perhaps the publisher would be willing to try lighter, less dense, and cheaper split editions (say, one for pre-1900 and one for post-1900) in the future?

A cautionary note: Expect the vast majority of college students to struggle with the older primary documents, which reflect a different, more rococo style of writing. A humanities professor (whose students might have been expected to have some exposure to older writings) once tested his students? comprehension of the long opening sentence of the Declaration of Independence and found that it eluded the majority of them.[1] An economics professor (the reviewer) repeated this experiment and found an even larger majority that missed the gist of the sentence. Teachers should anticipate spending a good bit of time walking their students through these primary documents.

With these caveats in mind, the book is a godsend to American economic historians and their students. For the right group of students and the right course, it offers a great way to organize the material. Even for professors who would not assign the book, it is an excellent desk reference and a helpful source of background and color for one?s lectures. As a tool for beginning literature reviews, the book is an outstanding reference. Its strength in historiography makes it a must for virtually any academic library.

Reference: 1. David Mulroy, The War Against Grammar. Portsmouth, NH: CrossCurrents, 2003.

Ranjit S. Dighe is associate professor of economics at the State University of New York College at Oswego. His research interests include wages and Keynesian economics in the Great Depression, monetary populism, and the political economy of Prohibition. He is the author of ?The U.S. Business Press and Prohibition,? Social History of Alcohol and Drugs 22(2): 6-20 (Spring 2008).

Subject(s):Economywide Country Studies and Comparative History
Geographic Area(s):North America
Time Period(s):20th Century: WWII and post-WWII

The Money Men: Capitalism, Democracy, and the Hundred Years’ War over the American Dollar

Author(s):Brands, H.W.
Reviewer(s):Cowen, David J.

Published by EH.NET (October 2007)

H.W. Brands, The Money Men: Capitalism, Democracy, and the Hundred Years’ War over the American Dollar. New York: W.W. Norton, 2006. 239 pp. $24 (hardcover), ISBN: 978-0-393-06184-0.

Reviewed for EH.NET by David J. Cowen, Quasar Capital Partners.

The previous twenty-one works of H.W. Brands, the Dickson Allen Anderson Centennial Professor of History at the University of Texas, have covered a wide range of topics and eras. His books have spanned the gamut of American history, from the eighteenth century and a biography of Benjamin Franklin to the nineteenth century and a history of the California Gold Rush, and then on to the twentieth century and a discourse on the United States in the Middle East. He is a comfortable storyteller and this extends to biography, with tomes to his credit about Andrew Jackson and Woodrow Wilson. In his most recent work, The Money Men: Capitalism, Democracy, and the Hundred Years’ War over the American Dollar, Brands combines his skill sets of biography and history to render a flowing work about early American finance, a period covering roughly the beginning of the finance system under the stewardship of Alexander Hamilton to the 1907 financial panic and its aftermath.

The opening chapter logically starts with Hamilton and is called “The Aristocracy of Capital.” It moves quickly through his early years on Nevis and days as a young officer in the continental army. The theme that remains constant is that Hamilton “contended that economics ruled the world, eventually if not at once” (p. 21). The resourceful Hamilton is followed as he seizes the opportunity where others might see failure; for instance Brands describes Hamilton’s leadership after the conclusion of the Revolutionary War at the Annapolis Convention, which laid the groundwork for the Constitutional Convention; and the subsequent creation of the National Government, when his appointment as Secretary of the Treasury led to his promotion of funding and bank legislation. Brands does not break any new ground on these topics and is simply retelling the story. He reminds us that Hamilton’s funding and banking plans were an all-or-nothing proposition for “wound one limb and the whole tree shrinks and decays” (p. 46). Given Brands’ writing style, which is telling a broader story, it is inevitable that some matters will be marginalized or forgotten. For instance, he has omitted any mention of the creation of the Mint, which defined the dollar as the measure of money.

In the second chapter called “The Bank War,” we are introduced to the two warring factions: the capitalists championed by Hamilton and the democrats led by Thomas Jefferson. Brands opts to gloss over the stormy closure of the First Bank, simply rolls the discussion forward quickly to the Second Bank, and focuses on the autocratic President, Nicholas Biddle, representing capitalism, versus President Andrew Jackson, representative of the democrats. The fabled Bank War moves quickly and is an enjoyable read. In some parts of the book Brands leans too heavily on quotes, some of which fill over half a page, but here the quotes add to the action in what is history articulated in an enjoyable fashion. As Brands explains, it became personal between the two as Jackson thundered that “The Bank … is trying to kill me, but I will kill it!” (p. 91). With Jackson’s victory “the lesson seemed clear … when democracy and capitalism collided at the ballot box, democracy won” (p. 85). When Jackson gave the order to withdraw federal deposits and redeploy them to state banks, Biddle, to his eternal shame, exacerbated tensions by constricting bank loans and curtailing money. Brands labels Biddle the bad apple, devoting much space pinning the blame on him, and hence championing democracy rather than capitalism. But here is where we need clarification, for there is another way to look at the aftermath of the Bank War: it was not democracy vs. capitalism, but rather with the reshuffling of the Federal deposits it was simply the State Banks winning at the expense of the Federal Bank, or one brand of capitalism versus another brand of capitalism. Furthermore, he has lumped both Bank Wars together; however, recall that the First Bank was a Federalist institution destroyed by the Jeffersonian Republicans, and yet these were the same Republicans who pushed for and chartered the Second Bank when in the wake of the War of 1812 the nation’s finances were asunder.

The third chapter, entitled “The Bonds of the Union,” discusses the strong growth and revolutions in transportation, industry and markets seen in the years roughly between 1825 and 1850. It was about connectivity, brought about by canals and then the railroads, bringing together distant locales to the eastern seaboard, and the wealth that was subsequently produced for the few. Brand next presents the California Gold Rush and that precious metal is introduced, which provides segue into our third ‘money man,’ financier Jay Cooke. He became synonymous with the selling of war bonds at a time when the cost of the war to the Union was $1 million per day. Cooke’s ingenious plan to sidestep the banks and sell bonds directly to the public exceeded all expectations and Brands tell us “Cooke may have become the person most vital to the Union war effort, after Lincoln” (p. 121). By the final tally, Cooke & Company placed a staggering $1 billion plus in U.S. Government Bonds.

The fourth chapter is called “The Great Gold Conspiracy” and is the shortest chapter in the book. We meet again Jay Cooke, who in concert with Jim Fisk, Jr. and Jay Gould, attempted to corner the market in gold in 1869. The plan ended in disaster when the government stepped in to sell to the bulls, but Gould escaped ruin when he surreptitiously switched allegiances and himself became a seller. We learn more about the mechanics of the market in this chapter: and not just the gold market but also how the equity market functioned in this age of railroad wars, with various consortiums and individual operators looking for personal gains at the expense of any level of morality and legislation. But capitalism is a loser in this chapter for we learn about its seamier side as the standards of insider trading and stock manipulation are revealed.

The fifth chapter is entitled the “Transit of Jupiter” and we are left guessing as to why it is called that (unfortunately it is never answered). The chapter encompasses much ground, from the gold scandal introduced in Chapter Four all the way through the aftermath of the Panic of 1907, all covered in a fleeting forty pages. We see more scandal and rapidly move from financial panic in 1873 to financial crisis in 1893. J.P. Morgan emerges as a financier, amasser of capital, savior of the financial system, and enigmatic greedy capitalist all rolled into one. Morgan reorganizes the railroads and insists on seats on the boards of the companies he invests in. He hosts summit meetings in various industries, leading one to believe that he alone is pulling the purse strings on the capitalist system. Because this is top down history, we do not first hand see or feel the pain and difficulty of the man on the street or farm impacted by this money interest.

Brands does try to bring this struggle to the fore in the great gold and silver debate, whereby the capitalists and hard money men line up in favor of gold and the western farm interest and debtors prefer silver. In short, silver was perceived as the money of the people and gold the money of the wealthy. For Brands then “gold and silver were simply the latest proxies in the historic contest between capitalism and democracy, between wealth and commonwealth” (p. 175). There is a juxtaposition between Morgan on one side, stepping in to rescue the financial system time and again when it hiccups, and William Jennings Bryan on the other, champion of the people, with his famous indictment against the gold standard: “you shall not press down upon the brow of labor this crown of thorns! You shall not crucify mankind upon a cross of gold!” (p. 184).

The Money Trust, led by Morgan, became too pervasive and too powerful not to escape notice. By the early twentieth century and with Theodore Roosevelt in the White House, the handwriting was on the wall for Morgan and the Money Men. But not before one final climatic incident, when in 1907 a financial panic caused Morgan to ride in again on his proverbial white horse to stem the tide. But this play has been seen before, a system on the brink of financial ruin only to be rescued by the same Money Men some believe caused the convulsions in the first place. The Senate convened a committee in 1912 to look into the ‘money trust’ question, hauling Morgan and others in front of their committee. Morgan died in the next year, many believe from the stress of being embarrassed in front of the committee.

The “Epilogue” argues how the money question concluded with the creation of the Federal Reserve System, a central bank that could set the interest rate level and bear ultimate responsibility for the fiscal system. The Fed was in reality the Third Central Bank of the United States, having birthed 77 years after the Biddle/Jackson fight shuttered the Second Bank of the United States. Brands concludes that in spite of the Federal Reserve’s missteps in the aftermath of the 1929 Great Crash, the central bankers have done a credible job and therefore the money question, once so central to the politics of the United States, has been resolved and is out of the main of the political debate.

There are only a few illustrations in the book, but the cover is interesting, as the faces of the main subjects are in a similar vein to the portraits of the luminaries on our currency. Of course Hamilton is the only one of the Money Men described who is actually on our legal tender as he graces the $10 bill, and his picture on the cover is top billing along with Morgan. The faces of Biddle, Gould and Cooke are smaller and relegated to the lower portion of the cover.

Brands should be applauded for writing about the money question, which has often been overlooked in U.S. history. He tackles head-on the intrinsic strain between democracy and capitalism for “the driving force of democracy is equality, of capitalism inequality” (p. 16). In short, we can ask the question does capitalism have a conscience? We are left after reading this saying that if it does, it certainly takes a lot of turns to achieve it.

Brands’ style is to liberally intersperse quotes into the text. These quotes are cited in the end notes, which has the benefit of making the book much easier to read. Of course, the shortcoming is for the serious scholar who sees a quote about Hamilton such as “that power which holds the purse strings absolutely, must rule” (p.25) and will wonder exactly when he said this ? when he was a soldier pointing fingers at a feckless Congress, or later when he was Secretary of the Treasury? Turning to the end notes we see that it can come from any part of thirteen pages in Joanne Freeman’s Writings of Alexander Hamilton (2001), and as a secondary source that question is not easily answered. A second drawback to this style is that he can overuse quotes and therefore they lose their impact. For instance, Brands so liberally uses quotes from a lecturer from the University of Chicago under the nom de plume “Coin,” that most of the pages 167-173 feel like a string of quotes.

This is history seen through the leadership’s eyes and that makes sense if one is writing to a general audience. This is introductory history that is story telling, and as a result big omissions occur, like the First Bank scrip bubble 1792 or the First Bank War conclusion of 1811, or the irony that many Republicans liked banks, especially if they could receive the loans of those banks for themselves. Brands is trying to sell the point as democracy vs. capitalism, as if one has to win. But isn’t the winner the system itself? Our democratic capitalism has produced a system of government that has produced an amazing relative standard of living for its citizens, and if there is a winner that is where the gold medal lies.

But these flaws are minor for the audience that Brands is trying to reach. This book is an easy read and contains a lot of enjoyable prose. It is a likeable and painless read for just about anyone with an interest in American History.

David J. Cowen is an independent scholar in the New York City area. He is the Managing Partner of Quasar Capital Partners, a macro hedge fund. He is co-author (with Robert E. Wright) of Financial Founding Fathers: The Men Who Made America Rich, published by the University of Chicago in 2006 and of “The First Bank of the United States and the Securities Market Crash of 1792,” Journal of Economic History 60 (December 2000).

Subject(s):Financial Markets, Financial Institutions, and Monetary History
Geographic Area(s):North America
Time Period(s):20th Century: Pre WWII

Market Services and the Productivity Race, 1850-2000: British Performance in International Perspective

Author(s):Broadberry, Stephen
Reviewer(s):Field, Alex

Published by EH.NET (June 2007)

Stephen Broadberry, Market Services and the Productivity Race, 1850-2000: British Performance in International Perspective. Cambridge: Cambridge University Press, 2006. xvii + 409 pp. $95 (cloth), ISBN: 0-521-86718-5.

Reviewed for EH.NET by Alex Field, Department of Economics, Santa Clara University.

As I was preparing this review of Stephen Broadberry’s latest book, my daughter leaned over to see what I was currently reading. She glanced quickly at the cover, shook her head and said, in a voice tinged with pity, “Dad, that just looks incredibly boring.” Then, catching sight of the word ‘productivity’ in the title, and knowing something of my own recent work, she added, apologetically, “Oh, did you write this?”

Such are the occupational hazards facing those of us who study productivity history, hardy but sensitive souls whose pulse can quicken in the presence of minute differences in rates of TFP increase. For a general audience, this book will indeed be slow going. But for those interested in the motors of economic growth and development, considered particularly from a comparative perspective, this work is a notable achievement. In it, Broadberry brings together research on the comparative productivity performance since the 1870s of Britain, the United States, and Germany. The emphasis is on Britain, and Broadberry’s main theme is the necessity of focusing on the service sector, not just or even principally manufacturing, in understanding Britain’s relative decline. Differential trends in service sector productivity, not industry, he argues, explain most of the movement in the comparative productivity performance of Britain’s aggregate economy.

How can this be? The basic story is that U.S. productivity in manufacturing in 1870 was already about fifty percent higher than it was in Britain, and the same was true 120 years later. Britain was ahead of the U.S. and Germany in 1870 not because of its lead in industry but because of its lead in services. By 1890, however, the U.S. had caught up and subsequently forged ahead in services, widening its lead in the sector up through the Second World War. Thus it was differential productivity trends in services, not any fundamental alterations in trends in manufacturing, that account for most of the overtaking and surpassing of Britain by the United States in aggregate labor productivity.

Critical to the story is the Chandlerian theme of the transition from low volume, high margin to high volume low margin operations, particularly in transportation, communication, and distribution (Chandler, 1977). The models for such transition originated in the United States, and it was the more rapid diffusion of such organizational methods in the U.S. that enabled it to overtake Britain in services and in the overall economy by 1890. But not all service sectors were equally amenable to this transition, explaining why Britain’s relative decline was not more severe. With respect to Germany, Britain’s continuing lead in services relative to Germany accounted for its ability to maintain an overall productivity advantage with respect to that country through about 1960.

Modern business enterprise originated in the U.S. in the railroad and telegraph sectors, spreading to wholesale and retail distribution, before being adopted in some sectors of manufacturing. Britain’s relative productivity decline was most notable in transport and communication and distribution, whereas the country retained a strong position in finance, a sector which offered unfavorable terrain (at least until recently) for the adoption of high volume low margin operations. Broadberry attributes the slower service sector productivity growth in Britain to labor resistance to work intensification combined with the fact that many services, unlike manufactures, weren’t tradeable, and therefore didn’t face the same competitive pressures. For industrial products, poor productivity performance eventually meant they were replaced by imports and the sector shrank. For nontradeable services, and those protected by non-tariff regulatory barriers, poor productivity performance could persist, dragging down comparative productivity performance for the entire economy. Still, Broadberry is at pains to present a variegated view of the British service sector, emphasizing areas where its comparative advantages in organizing through networks rather than internal firm hierarchies continued to serve it well. Germany’s success in overtaking Britain after 1960 is explicable in terms of a different structure of labor relations and patterns of human capital formation after the Second World War.

The book has three sections. The first is concerned principally with laying out the argument and presenting the data. The second focuses on broad explanations for the comparative productivity trends (I did not find that the theoretical model in chapter 5, based on the work of Broadberry and Ghosal, added much). The third section presents a series of detailed historical/empirical chapters dissecting the performance of different parts of the British service sector in different time periods, carrying the story forward through the 1990s. Taken together this material provides a compelling case that it is both possible and necessary to focus on the service sector in understanding productivity history at the national level and in comparative perspective. The data for services may not always be quite as good as they are for industry, but there is much more here than one might imagine, and it is unworkable and unjustifiable to restrict our attention to manufacturing simply because “the light is better there.”

One of the difficulties with the book and the way the data are presented, however, is the melding of a narrative structure focusing on the one hand on the history of British productivity growth and on the other hand on its comparative productivity performance with respect to the U.S. and Germany in different time periods. From an historical perspective, one is principally interested in what drove aggregate productivity forward, both in individual countries and in the world as a whole. There are of course also reasons for measuring comparative productivity performance at different times, but excessive focus on these numbers risks obscuring important aspects of the process of economic growth. For example, compare two time periods in which there is apparently no change in comparative performance. It makes a big historical difference whether this is because there was no change in levels in either country or because levels in both countries increased at the same rate. To his credit, Broadberry provides detailed time series data on the evolution of levels for the individual countries. Still, because the narrative is principally couched in terms of the explanation of relative decline, Broadberry finds himself repeatedly compelled to emphasize that even in periods in which the country may have performed poorly in comparison with other countries, the absolute growth rate of labor productivity in Britain was high by world historical standards.

The point I am making is separate from but in a sense related to the important methodological issues which have motivated the exchanges between Broadberry on the one hand and Ward and Devereux on the other. To calculate comparative productivity ratios one chooses a benchmark year, calculates value added per worker or per hour in the domestic currencies of each country, and then converts the value added in the two countries to a common metric using a PPP adjusted exchange rate. Using domestic rates of economic growth, one then projects forward and backwards. Because of index number and other problems, however, growth rates from one PPP based comparative productivity benchmark will not always or necessarily produce a later or earlier comparative productivity measure consistent with a later or earlier PPP based benchmark. Broadberry has tried to address this problem by choosing 1937 as a benchmark (unlike Maddison, who used 1990), and by using other benchmarks as a check on the projections forward and backwards using domestic growth rates. He is persuaded the methodology is defensible, and the remaining discrepancies tolerable, but he will probably not satisfy all of his critics. Those seeking more detailed discussion of these problems, which also bedevil work on contemporary economies, should consult, for example, Ward and Devereux (2003).

There are some aspects of Broadberry’s treatment of U.S. productivity history with which I differ. For example, he endorses Abramovitz and David on the importance of capital accumulation rather than TFP in explaining trends in U.S. labor productivity growth in the last third of the nineteenth century (p. 109). But TFP growth in the U.S. private domestic economy was over 1 percent per year from the early 1870s through 1906, lower of course than rates experienced in the second quarter of the twentieth century but certainly respectable and indeed substantially higher than during a comparable period of the twentieth century (Field 2008, forthcoming).

Secondly, Broadberry correctly identifies very strong labor productivity and TFP growth in transportation and communication in the 1930s as part of what underlay the continuing advance of U.S. service sector productivity and the consequent widening of the US/UK productivity gap during the Depression years. But this was not necessarily a period of increasing “industrialization” of transport services as Broadberry suggests (p. 12). The introduction of modern business enterprise in railroads occurred in the last third of the nineteenth century. The growth sector within transportation in the 1930s was trucking, a sector comprised of small, non-hierarchically organized companies. What is striking about the 1930s in the U.S. is not only the extraordinarily high TFP growth in trucking (a rapidly growing sector), but the relatively strong advance in the railroad sector, which, in contrast with the 1920s, was experiencing capital shallowing. Since railroads were still such a large part of the economy, this mattered (see Field, 2006). As Broadberry’s narrative indicates (pp. 230-235), nothing comparable happened in railroads in Britain. Greater emphasis on the importance for the United States of the Depression build out of the surface road network, and the role of street and highway spending in the U.S. in generating spillovers in transportation would have made the narrative historically richer (Field, 2003).

There is also some tendency to be too dismissive of trends in industry in explaining the huge gap opened up between the U.S. and Britain by the 1950s. The driver of aggregate trends in comparative productivity, Broadberry asserts, are trends within the respective service sectors. But his own data show that the widening of the US/UK productivity differential between 1870 and 1960 was more marked in industry (250.4/153.6) than it was in services (137.7/85.9) (Table 2.1). Table 2.1 includes data for industry ? construction and mining as well as manufacturing ? and it is true that the increase in manufacturing alone, although substantial, was not as dramatic as in the service sector as a whole. My point is that whereas the surge in U.S. service sector productivity certainly played a very important part in widening the productivity lead opened up by the U.S. at mid-century, trends in industry and in manufacturing also contributed substantially. Broadberry’s larger thesis is sustained, however, because whereas by 1990 faster productivity growth in British industry and manufacturing had restored the US/UK advantage to roughly where it had been in 1870, the same cannot be said for services.

Finally somewhat more emphasis, particularly in the US/UK comparisons, on changing sectoral shares in explaining aggregate productivity growth would have been useful. For example (p. 28) “over the long run, Britain was overtaken at the aggregate level because of a loss of labour productivity leadership in services.” It would be fairer to say that Britain was overtaken because of a loss in productivity leadership in services combined with the very sharp growth in the share of services, particularly in the United States. (The UK-German analysis does place considerable emphasis on the retention of a large agricultural sector in German and its implications in terms of a smaller service sector.)

These are small bones to pick. Broadberry has written an impressive book that will interest economic historians and students of economic growth, particularly those focusing on Britain.


Chandler, Alfred D. 1977. The Visible Hand: The Managerial Revolution in American Business. Cambridge: Harvard University Press.

Field, Alexander J. 1987. “Modern Business Enterprise as a Capital-Saving Innovation,” Journal of Economic History 47 (June 1987): 473-85.

Field, Alexander J. 2003. “The Most Technologically Progressive Decade of the Century,” American Economic Review 93 (September): 1399-1414.

Field, Alexander J. 2006. “Technological Change and U.S. Economic Growth in the Interwar Years,” Journal of Economic History?? 66 (March 2006): 203-36.

Field, Alexander J. 2008. “U.S. Economic Growth in the Gilded Age,” Journal of Macroeconomics 29 (prepared for submission to a special issue).

Ward, Marianne and John Devereux. 2003. “Measuring British Decline: Direct vs. Long Span Income Measures,” Journal of Economic History 63: 826-51.

Alex Field is the Michel and Mary Orradre Professor of Economics at Santa Clara University. His current research interests include U.S. productivity history and the implications of evolutionary theory for the behavioral sciences.

Subject(s):Economywide Country Studies and Comparative History
Geographic Area(s):North America
Time Period(s):20th Century: WWII and post-WWII

The Best Transportation System in the World: Railroads, Trucks, Airlines, and American Public Policy in the Twentieth Century

Author(s):Rose, Mark H.
Seely, Bruce E.
Barrett, Paul F.
Reviewer(s):Childs, William R.

Published by EH.NET (May 2007)

Mark H. Rose, Bruce E. Seely, and Paul F. Barrett, The Best Transportation System in the World: Railroads, Trucks, Airlines, and American Public Policy in the Twentieth Century. Columbus: Ohio State University Press, 2006. xxvi + 318 pp. $50 (cloth), ISBN: 0-8142-1036-8.

Reviewed for EH.NET by William R. Childs, Department of History, Ohio State University.[1]

This book makes some contributions to our understanding of national transport regulatory politics in the twentieth century. The narrative is based on a good balance of secondary and primary sources, reasserts the importance of the presidency in regulatory matters, moves back to the 1950s the origins of the deregulation movement, and offers an initial synthesis of deregulation after 1980.

But the book is uneven in its contributions in part because it is more narrowly constructed than its title suggests. It is a book about the politics of transport regulation of three industries at the national level (railways, trucks, and airlines; water carriers are barely mentioned). The authors are not much concerned with state or local regulation or regulatory federalism or with other industries that were deregulated (e.g., banking and savings and loans). Most significantly, they do not focus analytically on economics (industry structures) and management decision making (management strategies and firm structures) and how those elements intertwined with regulatory politics. To these three historians, “the state” (a concept that they do not define clearly) made all of the decisions in regulation; economics hardly mattered; and, management (especially railroad executives) rarely made mistakes. Politics trumped economics, technology, and individuals, both before and after deregulation.

The book begins with a long preface in which the authors reveal that longtime conversations among them ? all historians of technology ? had led to the conclusion that “the introduction and operation after 1920 of technical means of delivering transportation services ? railroads, trucks, and airlines alike ? rested on distinctly political decisions made in political arenas. In virtually every discussion of transportation innovation, regulation, and deregulation, we find that politics was in the driver’s seat” (xii). Towards the end of their preface, they note: “Stated once again, in the realm of framing these three main transportation industries, their firms, and their markets, leaders of the American state always sat squarely in the driver’s seat” (xix).

Chapter 1 focuses on how the Interstate Commerce Commission (ICC) “framed” the railway industry (although at times Congress and the president make appearances in the narrative). Much of the chapter focuses on rate making, especially on the valuation project and value of service approaches, and the attempt, buttressed by the Transportation Act of 1920, to accept the “natural monopoly” aspect of railways and consolidate them into a more effective transportation system. The authors note, however, that this state action neglected to take into account the rise of a new industry, motor trucking. The ICC (and Congress) “had structured the railroad industry and attempted to set the terms of the railroad marketplace down to the last detail” (28). So rigidly focused on politics, the authors do not take into account the rapid appearance of motor trucking in the 1910s and 1920s as a new transport mode, and the difficulties railway management, ICC commissioners, and lawmakers faced in responding to the new technology.

Chapter two narrates the policy transition from consolidation to coordination of rail, truck, and water carriers, which some policy makers trumpeted in the late 1920s and 1930s. State actors, the authors maintain, enabled railways’ “new competitors” (trucks and airlines, and curiously, water carriers) to compete while restraining railways’ abilities to respond. (Water carriers, of course, had influenced railway rate structures as far back as the last quarter of the nineteenth century.) The tone of this and the preceding chapter takes on that of Railway Age, which was one of the key sources cited. The authors assert that the idea of “coordination” rested on the assumption that “each form of transport was different [and] that the public was better off if each mode, such as trucks or trains, remained a freestanding enterprise in competition with one another” (32). “The result was a ‘national’ system composed of separate transportation industries and separate transportation markets, each now defined variously as technology or mode and governed by several equally disconnected policies and regulatory agencies” (33). In part, this analysis makes some sense, but it misses some subtle and important points. For some public officials, “coordination” involved state planning through which each mode would perform what it did best (that is, follow its natural economic evolution), thus eliminating inefficiencies brought on by competition among the various modes. The authors do not take into account economic structures of the transport modes; they do not emphasize the ideas behind the political results; they ignore the fact that interest group politics (based in economic self-interests and on ideas) undermined what some on the ICC (Joseph B. Eastman, for example) desired; and they underplay the management decisions of railway executives.

Following a fine summary in Chapter 2 of the early years of airline regulation, Chapter 3 focuses on regulation of the airlines between 1944 and the early 1970s. Again the authors present the national state as the shaper of the industry, in this case through the efforts of the Civil Aeronautics Board (CAB). The government had been both promoter and regulator of the nascent industry, offering mail contracts to help sustain the new businesses and limiting competition. Not until World War II, however, did the CAB gain more influence to shape the industry through controlling entry, price, and routes. By the 1970s, however, it had come to be viewed as a failed regulatory agency. Unlike with the railways, the authors admit that airline management made some mistakes (e.g., not understanding the overcapacity wrought by jets nor the attempts by CAB to offer service to more than business class customers), but they do not emphasize this theme. To them the CAB ? or the state ? had created the industry and had failed to promote and regulate it effectively.

Chapter 4 is a sprawling survey of railroad and truck regulation in the postwar era before deregulation emerged. It furnishes at times a useful synthesis, but its most important contribution is its focus on President Dwight D. Eisenhower and his administration’s efforts to bring about deregulation. The chapter notes the effectiveness of truckers in blunting the administration’s efforts to help the railways, includes a testy analysis of rate bureaus, and offers a survey of railway mergers, with an extended section on the Penn Central merger. There, the authors list some of the problems (e.g., management failed to see that the computer systems in each firm did not match the other’s and labor leaders failed to note the cultural differences between the working groups), but they still insist that the railway problem was mostly tied to the regulatory system, which the ICC/state had imposed.

Chapter 5 continues the focus on presidential initiatives in the deregulation movement. President Lyndon B. Johnson included a coordinated transportation system in his approach to “fine-tuning” the economy. While he did get a Department of Transportation (in 1966), he did not get the centralized, presidential clout he thought necessary to shape a coordinated and efficient transportation system. Chapter 6 shows how President Richard M. Nixon “helped move the idea of deregulation from the realm of the thinkable ? where Eisenhower and Kennedy had left it ? into the mainstream of American politics” (151). Collapse of the Penn Central in the spring of 1970, along with a less robust economy than Johnson had enjoyed, shaped Nixon’s approach. He was the first to meet with the railway executives and union leaders about deregulation; he saw the significance of utilizing the consumer movement to promote deregulation; and, he was able to do what Eisenhower, Kennedy, and Johnson had not ? gain presidential appointment power for the chair of the ICC (a theme that the authors overplay, in that while it was a political issue it was not all that significant to reforming the regulatory state).

Although in office only a short while, Gerald R. Ford deserves the treatment received in Chapter 7. President Ford’s staff organized an anti-regulatory public relations campaign and carefully identified and organized pro-deregulation members in Congress. The result was modest but notable ? passage of the Railroad Revitalization and Regulatory Reform Act of 1976. In exchange for furnishing loans to ailing railroads and devising Conrail, the act began to loosen government rate controls and to allow abandonment of service (which the ICC, following the law, had restricted, thus maintaining high operations costs, which in turn undermined railway efficiencies and competitiveness). The regulatory regime from the 1920s was still in place, however, and there was not much movement on deregulating trucks and airlines. Still, the authors persuasively argue that President Ford’s efforts laid the groundwork for more political success very soon.

In Chapter 8, the authors show that President Jimmy Carter, while bringing no new ideas to the arena, nevertheless promoted deregulation through the regulatory commissions and in Congress. This is one area in which Carter appeared to have developed effective congressional relations, for he was able to bring about deregulation of airlines in 1978 and trucks and railways in 1980. Yet, the authors go too far in their assertions. Take for example their conclusion on truck deregulation (which opened entry to the industry and relaxed rate controls): “Carter and his top officials … had created one market for all truckers, replacing distinct submarkets” (203). Instead of a singular force ? the “state” ? it was a combination of changing economic conditions, shifting political powers, and new ideas about consumerism, regulation, and economic growth that shaped the decision to open up trucking competition. Carter’s administration played a role, but it was not the omnipotent one asserted by the authors.

The last chapter, “The American State and Transportation, 1980-1995,” includes a useful overview of what happened after the flurry of deregulation statutes in the late 1970s and early 1980s. Essentially, the authors argue that deregulation spread through the processes of “devolution” and “deinstitutionalization,” thus giving more freedom to transport executives to follow market forces. The ICC was dismantled; Congress preempted state regulatory commissions of their powers; intermodal activity increased; railways merged and abandoned unprofitable routes; new airlines entered and left the industry, with a resulting concentration as airlines took up defensive positions in airport hubs. The authors consistently follow their theme of “state” construction; for the airline industry, they conclude that “In reality, the absence of overt federal action to limit the growth of fortress hubs had framed the postderegulation airline industry” (237).

There is no concluding chapter, although the last few pages restate the authors’ point of view about “state” powers and add a new perspective not specifically noted earlier: “The barrier to understanding deregulation of transportation firms in 1978 and 1980 as more than a simple withdrawal of the federal government from markets rests upon the limits of language and with our ideologically driven conceptualization of a market as a counterpart to an imagined state of political nature ? a place sacred in its origin and lacking institutional constraint. Rather than dichotomizing markets and regulation, it makes more sense to perceive them along a continuum shaped in both cases by the leaders of the American state ? with regulation and deregulation representing different types of legal and administrative strategies for organizing the activities of transportation managers and workers” (238).

In summary, the book offers a mixed bag of ideas and insights. On the one hand, the shifting of the deregulation movement in time (back to at least the 1950s) and in focus (on the executive branch) is notable and important. On the other hand, the authors’ point of view throughout the book undermines the contributions they make. No one can deny that politics is part of the story, or that “the state” is involved in shaping regulation (and deregulation). Without acknowledging it directly, however, the authors have completely ignored the powerful argument Thomas K. McCraw made in Prophets of Regulation (Cambridge, MA: Belknap Press, 1984): “More than any other single factor, this underlying structure of the particular industry being regulated has defined the context in which regulatory agencies have operated” (p. 305, emphasis in original). McCraw understood regulation to be a political art (p. 63), but one that took place within the context of industry structures and natural economic markets. My own research in regulation has confirmed this conclusion. For Rose, Seely, and Barrett, apparently, there is nothing natural about industry structures; they do not shape politics but politics shape them. This point of view, rigidly applied throughout the book, undermines the important contributions noted above.

[1] The reviewer did not have any direct input into this volume.

A note on the authors: During the preparation of the manuscript, Paul Barrett, Department of Humanities at Illinois Institute of Technology became ill, passing away in 2004. Bruce Seely (Michigan Technological University/NSF) and Mark Rose (Department of History, Florida Atlantic University) continued the preparation of the manuscript. Seely drafted the first two chapters; Barrett the third; and Rose 4-9.

William R. Childs has published most recently The Texas Railroad Commission: Understanding Regulation in America to the Mid-Twentieth Century (College Station, TX: Texas A&M University Press, 2005).

Subject(s):Transport and Distribution, Energy, and Other Services
Geographic Area(s):North America
Time Period(s):20th Century: WWII and post-WWII

Railroading Economics: The Creation of the Free Market Mythology

Author(s):Perelman, Michael
Reviewer(s):Vedder, Richard

Published by EH.NET (January 2007)

Michael Perelman, Railroading Economics: The Creation of the Free Market Mythology. New York: Monthly Review Press, 2006. 238 pp. $20 (paperback), ISBN: 1-58367-135-8.

Reviewed for EH.NET by Richard Vedder, Department of Economics, Ohio University.

The good news about Michael Perelman’s new book is that it is a highly readable, lucidly written, and provocative account of the evolving American economy. Moreover, readers of this site would be pleased that this is a rare economist who draws very heavily on insights from economic history and even the history of economic thought in reaching conclusions about the contemporary American economy. Also, the book has lots of solid footnotes showing a serious appreciation of much of the relevant scholarly literature of the past century or more.

Alas, the bad news is that Perelman is almost certainly wrong, and I suspect most American scholars reading his book would agree. He believes the fundamental core of microeconomic theory as taught by more than 95 percent of American academic economists is misguided and that the American economy is in real decline. A radical economist (who has published more in the Review of Radical Economics — at least seven papers — than in any other scholarly journal), Perelman avoids most of the maddening invective and polemics that sometimes pervades heterodox works, but in the final analysis he thinks Americans live in a society run by a bunch of greedy financiers who seriously exploit workers and cause enormous waste.

According to Perelman, classical economics emerged out of an agrarian society where the presumption of pure competition was fairly reasonable. Over time, however, massive capital-intensive businesses evolved, notably the railroads, with very high fixed costs. The neoclassical notion that profit-maximizing firms would produce where marginal costs equaled marginal revenue and price (in pure competition) simply did not fit the reality of these new natural monopolies. Competition was destabilizing, led to overinvestment, and paved the way for unscrupulous financiers like Jay Gould. In Perelman’s view, “the increasing relative importance of fixed costs means that … competition … would lead to utter chaos” (p. 46). A group of “railroad economists” or corporatists understood all this, but they were largely ignored by conventional economists who developed a “quasi-religious” and “ideological” (p. 99) fervor towards their theoretical models, a fervor that persists today.

Perelman thinks that in pursuing competition, prices were forced so low that many railroads were forced into bankruptcy, much as is happening in airlines today. This opens the door for the “financial capitalists” who make money reducing competition (via mergers) and reorganizing bankrupt companies, getting rich in the process and hurting workers of the involved companies. The Enron/WorldCom problems of the early twenty-first century are not that different from those created by J.P. Morgan organized mergers of a century earlier, best symbolized by the formation of U.S. Steel.

In Perelman’s eyes, the instability arising from the lack of realization of the importance of fixed costs, the machinations of financial interests, and so forth, have caused internal contradictions in capitalism. He opines that “an economy built increasingly on finance is a disaster waiting to happen” (p. 198), concluding “I look forward to the day when we no longer rely on competition for monetary rewards … when cooperation and social planning replace the haphazard world of the market place” (p. 200). In Perelman’s world, “success will … depend upon the education and empowerment of workers rather than their exploitation” (p. 200).

As neo-Marxist accounts go, this one is far less polemical and hysterical than some, but it still simply does not accord with critical facts. Business is not beset with continually rising relative fixed costs, for example, a basic assumption of the book. The largest and most successful businesses of modern times — the Microsofts, Wal-Marts, Googles, major pharmaceutical companies, etc., are mostly firms with little debt and often even large cash hoards. Fixed costs are a trivial part of expenses. Many so-called natural monopolies (e.g., cable and phone companies, electric utilities) are actually becoming more competitive over time with technological change, and the share of American workers employed by large (Fortune 500) firms has declined sharply. Moreover, Perelman’s characterization of contemporary economist’s acceptance of Marshallian economic theory is badly distorted, as he writes as if economists have largely ignored imperfect competition, information costs, etc., while that is very far from the truth.

Despite Perelman’s assertions, by any standard measures, economic instability has declined sharply in the last sixty years. For example, the standard deviation on the annual unemployment rate or growth rate of real GDP was far lower in the last half of the twentieth century than the first half. Two-thirds of a century has passed since we had a year with a ten percent unemployment rate, while there were seventeen such years in the fifty years from 1891 to 1940. “Crises” and “depressions” predicted by Perelman are happening less often and with smaller levels of severity, not greater as the analysis in this volume seems to predict. Real average consumption per American has risen two percent a year in the over one hundred years since the “railroad economists” inveighed about excessive competition, hardly a sign of economic decline or massive worker exploitation. America’s immigrant problem is one of finding human ways of excluding newcomers, not obtaining them, a sign the nation retains a role as a magnet to people who come from economies that, on average, are far less capitalist than America. Where market’s have been suppressed, in places like North Korea or Cuba, people are poor relative to neighbors living in market economies with all of the speculation, financial excesses, and occasional mal-investments that so disturb Perelman.

Richard Vedder, Distinguished Professor of Economics at Ohio University, is coauthor of the just released The Wal-Mart Revolution (AEI Press, 2006). His next book will be on income growth, equality and public policy in the United States.

Subject(s):Transport and Distribution, Energy, and Other Services
Geographic Area(s):North America
Time Period(s):20th Century: WWII and post-WWII

American Railroads and the Transformation of the Ante-bellum Economy

Author(s):Fishlow, Albert
Reviewer(s):Majewski, John

Classic Reviews in Economic History

Albert Fishlow, American Railroads and the Transformation of the Ante-bellum Economy. Cambridge, MA: Harvard University Press, 1965. xv + 452 pp.

Review Essay by John Majewski, Department of History, University of California – Santa Barbara.

Albert Fishlow and the Road to the New Economic History

Albert Fishlow’s 1965 book, American Railroads and the Transformation of the Ante-bellum Economy, received widespread praise when it was initially reviewed. Jeffrey Williamson considered it “as the ripest fruit thus far to come from the vineyard of the new economic historian.”[1] Stuart Bruchey similarly ranked American Railroads as “the finest product of the ‘new’ economic history.”[2] Fishlow’s impressive evidentiary base and his carefully drawn conclusions have made American Railroads an enduring classic that is still cited today. There is more to the story of American Railroads, though, than that of well-crafted scholarly work. The book’s forty-year career is a window from which one can glimpse the transition from the “Old Economic History” to the “New Economic History.”

American Railroads is Fishlow’s award-winning Harvard dissertation written under the supervision of Alexander Gerschenkron. Fishlow’s project was, to say the least, ambitious for a graduate student: he wanted to systematically evaluate the impact of railroads on the antebellum economy. Fishlow started by calculating the social savings of railroads, which can be roughly defined as the railroad’s reduction in freight and passenger rates over the next best alternative. Calculating the social savings of antebellum railroads, given the period’s uneven statistical sources, presented Fishlow with an immense challenge. His statistical appendices, which totaled more than 150 pages, indicate how rigorously he tackled the problem. The quantitative element of American Railroads reflected the rise of the New Economic History, which was transforming their field through the use of formal models and sophisticated statistical techniques. Gerschenkron, in fact, also served as mentor for Paul David and Peter Temin, two other distinguished contributors to the New Economic History.[3]

Fishlow’s conclusions, though, differed significantly from those of Robert Fogel, often considered the leading figure of the cliometrics revolution. Fogel famously argued that railroads made a relatively small contribution to U.S. economic growth in 1890. Fishlow, on the other hand, estimated the social savings of railroads in 1859 was 4 percent of GNP. Extrapolating to 1890, Fishlow calculated, produced social savings of least 15 percent of GNP, far higher than Fogel’s estimate of 5 percent. The key difference rested on the way each defined social savings. Fishlow estimated the social savings by comparing railroads to actual alternatives available in the antebellum period. Fogel, on the other hand, calculated the social savings of railroads to a vast system of improved roads and canals that nineteenth-century Americans might have built in the absence of railroads. Fogel, in essence, compared railroads to an economy that did not exist. What William R. Summerhill calls “Fishlovian” and “Fogelian” counterfactuals have different strengths and weaknesses.[4] Fishlow’s method generally results in upper-bound estimates of social savings, but avoids what Fishlow called “[t]he inherent difficulties of measuring what never occurred” (p. 58).

If Fishlow and Fogel philosophically disagreed over the nature of social savings, their work nevertheless had much in common. Both criticized W. W. Rostow, who claimed that antebellum railroads constituted a “leading sector” that induced widespread industrialization via backward linkages to coal, iron, and machinery. Such bold claims, in fact, initially sparked Fishlow’s interest in railroads, and his book provides a devastating critique. Fishlow shows, for example, that most locomotives in the antebellum period burned wood, which meant that railroads used a surprisingly little coal. As for iron, Fishlow demonstrates that railroads accounted for only 20 percent of net consumption in the 1850s. Twenty percent was certainly significant, as Fishlow notes, but hardly revolutionary. Nor did railroads single handily create the machinery industry. Fishlow argues that the production of locomotives created “no strategic breakthroughs” in steam engine design and production (p. 152). Steamboats, in fact, demanded far more in the way of large, sophisticated engines.

In Fishlow’s account, Midwestern farmers and agricultural processing industries (such as flour milling) benefited the most from railroads. Railroads led to the creation of new farms and the growth of towns and cities that could market and process the growing surplus of grains, hogs, and cattle. Fishlow persuasively argued that these railroads were not built ahead of demand. Midwestern railroads, in fact, ran through densely populated areas, which intensified development in locales best suited for commercial agriculture. Almost from the very beginning, these railroads made substantial profits, which one would not expect from developmental enterprises built ahead of demand. Private capital markets (with occasional help from local governments) financed most Midwestern railroads, thus confirming that investors expected these companies to make money sooner rather than later.

Fishlow’s argument has important implications for understanding the relationship between government policy and economic development. Since antebellum railroads generally made money, investment from the national or state governments was not important. To the extent it occurred at all, government investment led “to excess and wasteful construction” (p. 310). The U. S. case showed that investment in railroads — an example of “social overhead capital” — produced high social rate of returns, but only in the context of a vibrant market economy. Fishlow presciently warned that underdeveloped nations — especially those “wracked with large and unproductive agricultural sectors, illiteracy, concentrations of wealth, frequently wasteful government intervention” — should avoid mechanistically investing in “social overhead capital” to magically replicate the U. S. experience (p. 311). The generally poor record of large-scale infrastructure projects in many parts of Africa, Asia, and Latin America underscores the salience of Fishlow’s point.[5]

Fishlow’s conclusion foreshadowed a shift in his research to contemporary development issues, where he often focused on Brazil and other Latin American nations. The influence of American Railroads, not surprisingly, subtly waned. The comparison with Fogel’s Railroads and American Economic Growth is instructive. Whereas Fishlow’s book remained an expensive hardback, Fogel’s book was published in paper, suggesting a wider readership in undergraduate courses and graduate seminars. Fogel, of course, never shied away from debate and controversy. His 1979 article “Notes on the Social Saving Controversy” — which defended his previous arguments with new evidence and new models — effectively gave him the last word in the debate.

That Fogel’s book received more sustained attention than Fishlow’s attests to its greater appeal to up-and-coming cliometricians. Fogel formally modeled his conception of social savings. Equations fill entire pages of Railroads and American Economic Growth, and even the book’s subtitle, Essays in Econometric History, has a strong cliometric flavor. Fishlow, on the other, eschewed formal models expressed as algebraic equations. Instead of running regressions, Fishlow presented most of his statistical evidence in descriptive tables. As D. McCloskey has argued, Fogel’s provocative rhetorical approach — which combined the confrontational approach of a courtroom lawyer with the technical apparatus of a cutting-edge scientist — appealed to new generation of economic historians.[6]

One might think that the practitioners of the old economic history would embrace Fishlow’s work as a more conservative alternative to Fogel’s aggressive counterfactual models. Alfred Chandler, for one, certainly found Fishlow’s approach more compatible with own view that railroads fundamentally transformed the American economy. Many other traditional economic historians, though, criticized Fishlow’s conclusions. Carter Goodrich, in particular, believed that Fishlow had underestimated the importance of government action. Goodrich considered himself part of the “American System” synthesis that stressed the importance of government investment in the early American economy. Goodrich seriously questioned few of Fishlow’s specific findings, but argued that the broader history of internal improvements — whether the canals of the Early Republic or the transcontinental railroads of the Gilded Age — showed the necessity of government investment.[7] Goodrich’s critique subtly changed the question from the role of railroads in the antebellum period to the role of government in the nineteenth century economy. That, of course, is a far different question than Fishlow asked, and one that has still not been fully answered to this day. If Goodrich’s critique did not undermine Fishlow’s evidence or analysis, it highlighted the profound differences between cliometricians and those using more traditional historical methods. Politics, ideology, and culture — not counterfactuals and social savings — most interested Goodrich and his intellectual heirs.

Here, then, is the bittersweet career of American Railroads. Fishlow’s impressive scholarship was not quite econometric enough to hold the attention of economists, yet proved too statistical to appeal to the more traditional economists and historians. One might interpret the fate of American Railroads as a cautionary tale of the troubles that befall interdisciplinary scholarship in an age of specialization. Such a dire assessment is unwarranted. Fogel may have grabbed the headlines, but Fishlow’s careful analysis and extensive research have provided scholars with a treasure trove of hard-earned knowledge. That Fishlow’s book is included in this series testifies to its significance. In his preface to American Railroads, Fishlow apologized (in 1965!) for writing yet another book about railroads. Future generations will certainly acknowledge their debt to Fishlow’s work as they write their own histories of railroads and government policy.


1. Jeffrey G. Williamson, Economic History Review, (April 1967): 196.

2. Stuart Bruchey, American Historical Review, (April 1967): 1098.

3. For more details on Gerschenkron’s Harvard workshop, see Eugene N. White’s interview of Fishlow in Samuel H. Williamson, John S. Lyons, and Louis P. Cain (eds.), Reflections on the Cliometric Revolution: Conversations with Economic Historians (forthcoming, 2006).

4. William R. Summerhill, Order against Progress: Government, Foreign Investment, and Railroads in Brazil, 1854-1913 (Stanford: Stanford University Press, 2003), 215-16.

5. William Easterly, The Elusive Quest for Growth: Economists’ Adventures and Misadventures in the Tropics (Cambridge, MA: MIT Press, 2001), 25-44.

6. D. N. McCloskey, The Rhetoric of Economics (Madison: University of Wisconsin Press, 1985), 113-137.

7. Carter Goodrich, “Internal Improvements Reconsidered,” Journal of Economic History, (June 1970): 289-311.

John Majewski is an associate professor in the history department at UC Santa Barbara. He is the author of A House Dividing: Economic Development in Pennsylvania and Virginia before the Civil War (Cambridge University Press, 2000), and is currently writing a book on the political economy of Confederate secessionists. He thanks John Lyons and Robert Whaples for their helpful comments on this review.

Subject(s):Transport and Distribution, Energy, and Other Services
Geographic Area(s):North America
Time Period(s):19th Century

Jay Cooke’s Gamble: The Northern Pacific Railroad, the Sioux, and the Panic of 1873

Author(s):Lubetkin, M. John
Reviewer(s):Fender, Ann Harper

Published by EH.NET (July 2006)

M. John Lubetkin, Jay Cooke’s Gamble: The Northern Pacific Railroad, the Sioux, and the Panic of 1873. Norman, OK: University of Oklahoma Press, 2006. xviii + 380 pp. $30 (hardcover), ISBN: 0-8061-3740-1.

Reviewed for EH.NET by Ann Harper Fender, Department of Economics, Gettysburg College.

Lubetkin’s major contribution lies in his description, based on numerous primary sources, of the Northern Pacific Railroad’s surveys in the summers of 1871, 1872, and 1873 for its line through the Dakota/Montana territories. A prologue of several chapters provides a setting for the surveys by examining the history of the Northern Pacific Railroad and Jay Cooke’s involvement with it. Early chapters of the book also summarize Cooke’s life and business dealings, especially his selling of Civil War bonds, prior to his involvement with the Northern Pacific. Additional chapters include material on the history of North American European/Indian contact and an interesting technological history of surveying. An epilogue of sorts follows the chapters on the surveys. These chapters focus on the problems of the Northern Pacific, the downfall of Jay Cooke & Co., and the Panic of 1873 and ensuing depression. Along the way, Lubetkin introduces a large, colorful cast of characters, with impressive biographical material about each. He weaves together the unlikely components of his title. U.S. Grant, Sitting Bull, George Custer, Confederate general turned railroad surveyor Tom Rosser, various financial saints and villains, alcoholic generals, the geography of Minnesota and Dakota and Montana territories and their extreme weather are among the people and conditions in his story. A postscript briefly describes what happened to the book’s main characters after 1873; an appendix summarizes an eyewitness account of a post-blizzard rescue of an 1871 surveying party.

The story begins when Jay Cooke, casting about after 1865 for a way to use his bond sales expertise, became interested in Minnesota and virtually empty lands west of it. Simultaneously, the Northern Pacific Railroad, existing in name only, had fallen into the hands of Vermont businessman and politician, J.Gregory Smith, who needed cash and apparently thought he might get it through the proceeds of Northern Pacific bond sales. Smith, the clearest villain of the book, presided over the Vermont Central Railroad. Why anyone would think that a second transcontinental railroad was a good idea so soon after the completion of the first is a bit of a mystery (until one recalls the recent “” bust). Cooke was sufficiently cautious to send in 1870 an expeditionary group to examine the lands along a potential Northern Pacific route from Lake Superior to Puget Sound. That group reported rich soils, possible coal seams, and abundant timber along various parts of the route, which encouraged Cooke to raise money for the railroad. Additional interest was created by what was soon to become Yellowstone National Park and its potential tourism business. Federal land grants along the route gave the promise of funds to complete the line and enrich investors. One cautionary note arose with the unknown area between roughly Bismarck and the Yellowstone River. Nomadic Sioux tribes, having been compressed into this region, understandably did not want their hunting territory further decreased. Pressure from the Crow tribe to the south and from Metis to the north made incursions by settlers intolerable for the Sioux. Despite this Indian threat, the Northern Pacific proceeded, with lines being constructed from east and west. Simultaneously, surveyors were hired to mark the line in the unknown Yellowstone region. Because of the Sioux threat, military escorts accompanied the surveyors; the survey took three summers, partly because Indian attacks materialized. These surveying expeditions included many hundreds of men, wagons, and animals, and created substantial provisioning nightmares. Using his sources Lubetkin brings alive the expeditions and the problems that vexed them. Various Civil War veterans staffed the Dakota Territory military units; an ex-Confederate general was surveyor and then chief engineer for the Northern Pacific. Especially on the 1873 expedition, which included the colorful and self-promoting George Custer, newspapermen were included and made regular reports to eastern papers.

One of the author’s main contentions is that stories filed by these reporters and by Custer greatly exaggerated the Indian attacks, thereby scaring off potential NPRR bond purchasers. This in turn led to problems for the railroad and for Cooke and Co., which had committed substantial resources to it. Cooke’s New York partners, concerned that Cooke had over-committed to the railroad, took (perhaps duplicitous) actions that shut down Cooke’s banking houses and effectively put Cooke into personal bankruptcy. The failure of Jay Cooke & Co. strongly contributed to the Panic of 1873. These contentions along with the descriptions of the nefarious spending and contracting practices of Northern Pacific executives and the relationships between businessmen and politicians, are interesting business history, but without the numbers and detail that might test quantitatively the contentions. Although Lubetkin deserves high marks for pulling together these facets, it seems likely that macroeconomic conditions and slowing credit growth caused the panic and the downfall of Cooke. Lubetkin’s economic history is narrative rather than cliometric, historical rather than economic. Although not expressed as such, however, issues of network industries, economies of scale, principal-agent problems, public choice, and rent seeking fill his book.

Both the book’s “Preface” and the accompanying publisher’s brochure explain how Lubetkin, a retired cable television executive, came to write Jay Cooke’s Gamble and it is a story that gives hope to cynical college professors. The author, as an undergraduate at Union College in the 1950s, found in his fraternity house a book about the College’s class of 1868. He returned to the subject of that volume many years later to write a book. One class member was Edward Jordan, later a surveyor for the Northern Pacific. Lubetkin located Jordan’s journals and correspondence about the Yellowstone surveys. These led him to the research for his second book. Lubetkin writes with infectious enthusiasm. He provides considerable detail. His extensive bibliography includes an impressive array of primary sources; even his secondary sources tend to be from regional historical magazines that are not widely accessible. (He has contributed some of his primary sources to the U.S. Military History Institute in Carlisle, PA.) The book includes old photos of people and places, modern photos that Lubetkin has taken of locations pertinent to the story, and modern renditions of historical maps. The book seems exhaustively researched. Whether it includes the latest more narrowly academic sources on Jay Cooke and others active in railroads and finance circa 1873 I cannot address, but most of the biographies he cites are fairly old. If these are the latest, it seems likely that Lubetkin has opened, or perhaps reopened, a fruitful avenue of research. Certainly his book is informative on a wide array of topics and great fun to read.

Ann Harper Fender is professor of economics at Gettysburg College. Her last publication, “Experimental Economics,” appeared in the papers of a conference at the Varna Economics University, Bulgaria, and resulted from a Fulbright Fellowship in Bulgaria. She is currently working on a book about the fur trade based on Hudson’s Bay Company journals and is contemplating the economic similarities among the fur trade, nineteenth century railroads, and twentieth/first century telecommunications.

Subject(s):Transport and Distribution, Energy, and Other Services
Geographic Area(s):North America
Time Period(s):19th Century