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Finance, Intermediaries, and Economic Development

Author(s):Engerman, Stanley L.
Hoffman, Philip T.
Rosenthal, Jean-Laurent
Sokoloff, Kenneth L.
Reviewer(s):Guinnane, Timothy W.

Published by EH.NET (September 2004)

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Stanley L. Engerman, Philip T. Hoffman, Jean-Laurent Rosenthal, and Kenneth L. Sokoloff, editors. Finance, Intermediaries, and Economic Development. New York: Cambridge University Press, 2003. ix + 350 pp. $70 (hardback), ISBN: 0-521-82054-5.

Reviewed for EH.NET by Timothy W. Guinnane, Department of Economics, Yale University.

The ten essays that comprise this volume all study intermediaries in the markets for capital, for labor, and for inventions. Intermediation is now a central issue in the economics and economic history literature: how do economic agents find each other, and how do the problems of finding each other affect economic growth? This constellation of questions not surprisingly has been an area in which conversations between economists and economic historians have been especially fruitful. The essays collected here should be a part of that conversation.

Larry Neal and Stephen Quinn lead off the volume with a discussion of the personal networks at the heart of London’s financial activities in the seventeenth century. Such networks were especially important in London, they stress, because London lacked a public bank that processed bills of exchange. This imposed a cost, as defaults in London were harder to observe, and London bills less secure; but the authors stress that the recycling of gold reserves through fractional-reserve banks helped fuel London’s dynamic, market-oriented financial system in this period.

Eugene N. White traces the efforts to devise a set of rules to govern the Paris bourse in the eighteenth and early nineteenth centuries. The competing (and complementary) goals are familiar to us today: the government wanted a thick, liquid market in its own securities, wanted to earn revenue by taxing the market directly or indirectly, and was concerned about fair securities pricing (or at least the perception of fairness). Before the Revolution a very highly regulated market provided low-cost trades to investors, but this system died with the financial ruin of the intermediaries who made it work. Napoleon had little love for financiers, but under his regime the markets recovered.

Philip T. Hoffman, Gilles Postel-Vinay, and Jean-Laurent Rosenthal study the competition between bankers and notaries for the role of intermediary in financial markets in nineteenth-century Paris. (The chapter is entitled “No Exit,” the English title of Jean-Paul Sartre’s meditation on hell, Huis Clos. This play, which deals with three characters who have been shut in together for far too long, includes the famous line “l’enfer, c’est les autres.” Hoffman, Postel-Vinay, and Rosenthal have been working together for a long time … perhaps they are trying to tell us something?) Each type of agent had distinct advantages; the banker enjoyed greater liquidity and less cumbersome bankruptcy proceedings, while the notary could more effectively commit to prudence, since in the event of failure he risked ejection from the notarial corporation forever. Eventually the bankers prevailed, in part because of the nature of the changing financial market, in part because of the government’s concern to preserve the core functions of the notaries.

Angela Redish’s study of the mortgage market in Upper Canada in the early nineteenth century starts from the fact that Canada, like the U.S., had no specialist mortgage banks. This study draws on the mortgage-registration system to estimate the amount of mortgage indebtedness and both the sources and reasons for mortgage debt. Her estimates show a large increase in new mortgages in the latter part of the study (1830-1850), and imply that mortgages were for significant amounts, more than the cost of a fully-stocked farm. Lending patterns suggest the importance of local sanctions for failure to repay; only the elite could borrow outside the local area. Most mortgages appear to have been made to finance purchase of a farm.

John B. Legler and Richard Sylla return to an old and central theme in U.S. economic history, the spatial integration of capital markets. Their focus is the New Orleans stock market in the period 1871-1913. They ask whether southern capital markets were integrated with the national capital markets (here represented by the New York stock exchange). Their answer echoes Howard Bodenhorn’s conclusion that the Southern capital market became less integrated with the national markets after the Civil War.

Kenneth A. Snowden’s contribution traces the transformation of the local Building and Loan associations of the 1880s to the Savings and Loans that collapsed in the 1980s. This is an admirable contribution to American financial and institutional history. Snowden stresses that the Depression-era regulation that probably doomed the Savings and Loan industry was itself a product of the development of the Building and Loan, the predecessor institution.

Naomi R. Lamoreaux and Kenneth L. Sokoloff present an intriguing and important part of their long study of the role of patent rights in the development of U.S. technological leadership in the nineteenth century. Here they focus on the creation of a set of intermediaries, lawyers and patent agents who matched inventors with investors, and thus allowed each side of this market to specialize in what they did best. They emphasize that these intermediaries in turn succeeded because of two features of the U.S. infrastructure, the patent system itself, and the transportation and communication system that facilitated trade in goods and ideas.

Dianne Newell studies a different type of intermediary in Vancouver in the late nineteenth and early twentieth centuries. The historiography has long stressed that British Columbia needed to import both capital and labor to deliver on the promise of its abundant natural resources. We know where the capital and labor came from, but who put it all together? Newell focuses on the amazing careers of two ethnic Chinese entrepreneurs, Chang Toy and Yip Sang. They leveraged their merchant activities and experience to become investors, labor brokers, and, as Newell argues, important but neglected players in the development of the local economy. Efforts to restrict the role of Asians in the British Columbia economy shaped their efforts, but did not frustrate these and other immigrant intermediaries.

Robert C. Allen’s chapter characteristically poses an important puzzle, and uses economic reasoning to flesh out admittedly imperfect evidence. Soviet industrialization in the 1930s clearly required capital accumulation. Where did that capital come from? As Allen notes, “even Stalin balanced his budget,” so that capital must have come from either foreign lending or transfers from other parts of the Soviet economy. For decades a favored account has stressed transfers from agriculture: the state used its control over pricing to extract real resources from farmers. Allen notes that this agricultural surplus hypothesis has undergone attacks both empirical and theoretical. His own account stresses that the actual changes in relative prices were small relative to other sources of accumulation, such as terror-induced migration into cities. Allen’s discussion will certainly not be the last word on the subject, but clarifying lines of his discussion he has certainly advanced understanding of the issue.

Michael Bordo, Michael Edelstein, and Hugh Rockoff ask whether the Gold Standard was a “Good Houskeeping Seal of Approval” during the inter-war period. Partly because of Bordo and Rockoff’s work on the late nineteenth century, many scholars believe that the Gold Standard served precisely this function for the period 1880-1914 or so. But the inter-war gold standard was very different: feeble and short-lived, nobody really knew who was committed to playing by the rules. More important, it was less a Gold Standard than a gold exchange standard, which implied a more fragile situation. Bordo, Edelstein, and Rockoff find, however, somewhat to their surprise, that the Good Housekeeping model applies to the interwar period as well. Countries that appeared to be committed to gold paid less for credit than countries that lacked this commitment. As they note, there are other features of the political and economic situation they do not try to account for, but this chapter as it stands is another useful clue to the performance of the world economies in the 1920s and early 1930s.

The essays published here were all presented at a conference held in honor of Lance Davis. The volume is, in all but name, a Festschrift. (The only clear indication of its real function is an afterword on Davis’s career. This afterword is both a nice appreciation and an interesting overview of the career of one of the original cliometricians.) Academic publishers have decided that they do not like the Festschrift format, presumably on commercial grounds. I have been told that the Festschrift is little more than a dumping grounds for papers unpublishable in journals, and that the honoree’s friends usually bloviate on their pet themes rather than present fresh work. Examples of such collections exist, but it’s an unfortunate generalization, as this book ably demonstrates.

This is an unusually strong and coherent collection of essays, much better than most conference volumes and similar collections that publishers seem only too happy to bring out. Most of the essays here would be good candidates for publication in refereed journals. Some are even better, as the authors put to good use the less stringent space limitations of the chapter format. The Lamoreaux and Sokoloff chapter, to take one example, is an excellent piece of research, and would be accepted enthusiastically by any of the major economic history journals. Many journal editors would balk at a publishing a paper the length of Snowden’s chapter, to take another example, but as it stands the piece is a very fine, self-contained economic and institutional history of the transformation of an important institution. At half the length it could only be superficial and incomplete. Redish’s chapter is primarily descriptive, and might not pass muster in the “hypothesis – test – conclusion” world of cliometrically-oriented journals. Yet both the topic and the quality of her discussion make this a useful paper for anyone interesting in either Canadian economic history or the broader question of mortgage finance. The Festschrift format also helps to place some papers in context. The Legler and Sylla chapter, for example is a fine contribution on its own. But it is best viewed as an elaboration of a theme forcefully argued by Lance Davis, who famously demonstrated the slow and imperfect integration of U.S. investment markets after the Civil War. On commercial grounds alone the publishers would have done well to announce the book as what it is, a Festschrift for Lance Davis, one of the leading economic historians of his generation. The essays do justice to his extensive and wide-ranging body of work, and being frank about what it is would have garnered the volume a wider audience.

This is an excellent collection of essays and will find a welcome place on the shelves of any library, as well as any economic historian who admires the work of Lance Davis.

Timothy W. Guinnane is professor of economics and history at Yale University. His recent publications include “Delegated Monitors, Large and Small: Germany’s Banking System, 1800-1914.” Journal of Economic Literature (2002); and, with John C. Brown, “Fertility Transition in a Rural, Catholic Population: Bavaria, 1880-1910,” Population Studies (2002). He is co-editor, with William A. Sundstrom and Warren C. Whatley, of History Matters: Essays on Economic Growth, Technology, and Demographic Change (Stanford University Press, 2003), which is a Festschrift-in-drag for Paul A. David.

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Subject(s):Labor and Employment History
Geographic Area(s):North America
Time Period(s):20th Century: WWII and post-WWII

Yankee Don’t Go Home! Mexican Nationalism, American Business Culture, and the Shaping of Modern Mexico, 1920-1950

Author(s):Moreno, Julio
Reviewer(s):Schell Jr., William

Published by EH.NET (September 2004)

Julio Moreno, Yankee Don’t Go Home! Mexican Nationalism, American Business Culture, and the Shaping of Modern Mexico, 1920-1950. Chapel Hill, NC: University of North Carolina Press, 2003. xi + 319 pp. $59.95 (cloth), ISBN: 0-8078-2802-5; $21.95 (paperback), ISBN: 0-8078-5478-6.

Reviewed for EH.NET by William Schell, Jr., Department of History, Murray State University.

University of San Francisco professor Julio Moreno opens his book Yankee Don’t Go Home with a description of Sears Roebuck’s grand opening in Mexico City and a question: “Why was Sears so successful at entering the Mexican market a few years after popular nationalism drove American companies out of Mexico” (p. 1)? From this question flows a series of inquiries. How did Mexican and American domestic and geopolitical interests come to coincide? Why did Mexico’s promoters of import substitution industrialization (ISI) encourage American reentry into its economy? What role did Mexican advertising and media professionals play in this convergence?

By the late-1920s Moreno explains, pragmatic Mexican politicos, scrambling to institutionalize the revolution and their legitimacy, decided to pursue the “reconstruction of modern Mexico … under the banner of industrial capitalism” (p. 229). The most efficient means to that end and to turn Mexican workers into consumers would be to infuse Mexican economic culture with yanqui business methods. Obviously that would necessitate some degree of American economic involvement, a significant problem given Mexican national consciousness was shaped by a revolution laden with anti-Americanism.

State-building politicos faced a conundrum — how to put “a nationalist and revolutionary spin” on their plan to substitute “consumer democracy” for political democracy (pp. 151 and 44). Fortunately Mexico’s advertising agents then organizing as a profession proved willing collaborators. Versed in advertising techniques pioneered by American firms like J. Walter Thompson, these self-styled “prophets of capitalism” sold their fellow citizens a Mexican version of the American dream with consumer goods as revolutionary rewards. In doing so, they refashioned Mexican national identity “syncretizing … American and Mexican values … [to] forg[e] … a middle ground that allowed the coexistence of apparently conflicting values” (pp. 6 and 82-112).

American-style modernization evoked opposition by Catholic conservatives, just as it had during the Porfiriato. While desiring “a comfortable standard of living” for Mexicans, conservatives felt unbridled materialism and consumerism would erode traditional family and spiritual values. Nonetheless Acc?on Cat?lica readily employed mass media and techniques of modern advertising to warn of the dangers of “obsession with material wealth” — particularly on women (p. 226). They decried sexually suggestive advertising for cosmetics, hosiery, and (especially) feminine hygiene products (figs. 3.4, 3.5 and 7.3) fearing their daughters and wives would become “preoccupied with [their] physical appearance[s]” and “spend most of [their] time at beauty salons and movie theaters” (p. 221). Thus the Church resisted the consumerism preached by Thompson’s “commercial missionaries” and their Mexican acolytes (p. 155).

Official Washington only slowly recognized that Mexico’s pragmatic revolutionaries had adopted “consumption and material prosperity as synonyms for democracy and national identity” and was slower still to take advantage of the opportunity offered (p. 4). Not until the eve of World War II did it established the Office of Inter-American Affairs under Nelson Rockefeller to merge commercial speech and political propaganda. Although U.S. trade with Mexico was relatively insignificant, Rockefeller encouraged American businesses to take the long view and continue advertising in Mexico. To promote American products was to promote American cultural values and thus undercut German fascism and, during the Cold War, Communism. Over time yanqui businessmen came to see this iteration of Dollar Diplomacy carried on by Sears and other “commercial diplomats” as more “progressive” and effective in promoting U.S. interests than State Department diplomacy (pp. 172, 230-231).

In the final analysis, Mexican state builders and official Washington employed the same means to achieve different ends. Mexican state builders opened markets to American firms while simultaneously promoting ISI. American firms seeking Mexican markets had to appeal to national traditions and culture while simultaneously finding ways to accommodate or circumvent government ISI programs. Thus Palmolive adorned its soap with the image of Nuestra Se?ora de Guadalupe (fig. 4.8) while the Westinghouse subsidiary Industria Electrica de M?xico ran ads supporting nationalist “buy at home” campaigns (fig. 4.11). American operations south of the border were Mexicanized which facilitated the transmission of things Mexican to the other side while, pari passu, Mexican consumer culture and modernity took on a yanqui color.

Moreno’s inquiry into the interplay of cultures and economics in post-revolutionary Mexico is a worthy enterprise that taps fresh and rich archival sources. Moreno gets the big picture right. Architects of the institutional revolutionary state pursued a two-track policy — supporting Washington’s geopolitical positions while offering American businesses limited entry into the Mexican economy to supply consumer goods, an essential precondition to recast Mexican workers as consumers. Once a consumer mentality was established, demand for goods and services would create the conditions for successful ISI. Moreno also deserves praise for emphasizing Mexico’s primacy in directing and shaping its relationship with the U.S. by anticipating Washington’s responses to global events.

Although I think the evidence insufficient to support his assertion that “government leaders … saw advertising as the driving force of Mexico’s industrial and commercial growth” (p. 25), I tend to agree that “advertising images bridged conflicting values in Mexican society (by) creat(ing) a setting in which the national and the global coexisted” (p. 151). Still Moreno’s development of his theme and use of evidence seems haphazard. For instance, he reproduces ads for Colgate and Hormel from 1943 (figs. 2.3 and 2.4) ostensibly to show American use of advertising to carry anti-Axis propaganda and to “‘militarize’ the Mexican population” (p. 77). While this militarization is central in Hormel’s ad, Pueblo Sano ?Patria Fuerte!, juxtaposing exercising children with an infantryman under arms, it is illustrated less well, if at all, by Colgate’s use of the inconspicuous win-the-war unity logo routinely placed in wartime ads.

The ads do, however, raise questions relating to Moreno’s major themes of cultural syncretism and the emergence of a “middle-ground” between Mexican and American values. Colgate’s ad uses Mexican models and Moreno later examines Colgate’s cultural sensitivity in its advertising at length but without reference to this ad (pp.137-146). Meanwhile the visual evidence of Hormel’s shows little syncretism. Its cartoon pitchmen look as if they sprang from the Dick-and-Jane reader, leaving me (if not Moreno) to wonder just whose nation might be strengthened by eating Spam.

Moreno recognizes that, in their “reconstruction of modern Mexico (revolutionaries) … recycled processes that were fundamental to nation building during the (Porfiriato)” (p. 113). Yet his work seems oddly disconnected from Porfirian studies. He caricatures the Porfiriato, fashioning strawmen to heighten contrasts between the ancien r?gime and its revolutionary successor as when he notes: “Unlike the D?az administration, government representatives after 1917 believed that the state should sponsor or direct the economy and … actively support Mexico’s industrial and commercial growth.” This differs not at all from the protectionist, interventionist Porfirian state described by Steven Haber, Edward Beatty, Sandra Kuntz Ficker and others.

More disconcerting given his focus on media management to achieve geopolitical and domestic goals, Moreno seems unaware of the D?az regime’s innovative international press operation. Porfirian spin-doctors used advertising and propaganda techniques every bit as sophisticated as those Moreno describes for the post-revolutionary period. The regime’s Bureau of Information, headed by Paul Hudson, a powerful and influential publisher, sold Mexico and D?az to the world while burying all negative reports. His Mexican Herald introduced Mexicans to consumer culture, generating the same sort of syncretism, while his Modern Mexico shamelessly touted wildly over-valued tropical lands to na?ve North American investors. In 1910, he directed an amazingly successful propaganda campaign pumping up Mexico’s Centennial while refuting charges of barbarism and rumors of political unrest then circulating. As a result American investment actually increased as Francisco Madero launched his revolution.

Linda Hall has judged Moreno’s book a “highly readable narrative (that) … makes a significant contribution to the field” (cover notes). I found it plodding, uninteresting, and, with the substitution of repetition for analysis, rather less informative than might be expected. Ultimately, when reviewers disagree so sharply, all those interested in the important questions of culture and economy Moreno presents should read and decide for themselves.

William Schell, Jr. is a professor of history at Murray State University in Western Kentucky. He authored Integral Outsiders: The American Colony of Mexico City, 1876-1911 (2001) and “Silver Symbiosis: ReOrienting Mexican Economic History,” Hispanic American Historic Review 81 (2001). His commentary “Opposing Military Tribunals,” aired on NPR’s Morning Edition (Dec. 2001).

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Subject(s):International and Domestic Trade and Relations
Geographic Area(s):Latin America, incl. Mexico and the Caribbean
Time Period(s):20th Century: WWII and post-WWII

The Status of Women in Classical Economic Thought

Author(s):Diman, Robert
Nyland, Chris
Reviewer(s):Rima, Ingrid H.

Published by EH.NET (August 2004)

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Robert Dimand and Chris Nyland, editors, The Status of Women in Classical Economic Thought. Cheltenham UK: Edward Elgar, 2003. ix + 315 pp. $95 (hardcover), ISBN: 1-8440644-78-8.

Reviewed for EH.NET by Ingrid H. Rima, Department of Economics, Temple University.

Robert Dimand and Chris Nyland have brought together fifteen essays, six of which have been previously published in leading journals, to examine little known insights that eighteenth and nineteenth century classical economists had about the relatively inferior status of women in their societies. Despite their disparate national backgrounds and areas of contemporary specialization, the contributors’ essays “hang together” surprisingly well. This is surely attributable to the skill of the editors, both in inviting contributions and guiding their cohesiveness. The leitmotif that links them is their recognition that classical economists were neither without interest or voice relating to the status of women. The historical origins of modern day gender conservatism is quite clearly attributable to classical thinkers who, like Jean-Baptiste Say and William Nassau Senior, were politically rather than philosophically oriented. Given the political unrest implicit in the class inequalities of the eighteenth and nineteenth centuries, the concern of Say and Senior was directed chiefly to maintaining civil stability and order in spite of the harsh working conditions of unmarried single mothers and widows. Their argument, which still has present-day adherents, was that the lower wages of women (and their associated poverty) is in large part a reflection of the fact that a man’s wage is necessarily a requisite for a family, rather than a single person. Counterarguments were being expressed in the writings of reformers like Mary Wollstonecraft in her A Vindication of the Rights of Women (1792), and Priscilla Wakefield’s “Reflections on the Present Condition of the Female Sex” (1798), which extended the relevance of Smith’s productive labor to women. Editor Dimand provides further details about her work in his chapter 10. Along with the insights provided by Evelyn Forget about the alternative work opportunities provided for unmarried women in quasi-convent communities established by the state, and favored by J. B. Say, we learn that the harsh era of post-Napoleonic France was not without influential socially concerned classical thinkers.

While the great English jurist Jeremy Bentham shared the concerns of most conservative English thinkers who feared the repetition in England of the revolutionary attitudes that prevailed in France, he also recognized that English law excluded women from their rightful freedoms and opportunities. Even though Bentham’s Utilitarianism provided a philosophical foundation for greater gender equality as a modus operandi for realizing greater social “happiness,” it was the fear that these revolutionary attitudes were capable of crossing the English Channel that prevailed. The essays in this volume thus establish that the conventional wisdom that classical thinkers, with few exceptions, which included John Stuart Mill and his wife, Harriet, focused almost exclusively on the economic role of men, and were unconcerned with women, is patently untrue. Each of the contributors, Annie L. Cot, Evelyn Forget, Peter Groenewegen, Thomas Heenan, and David Levy, in addition to the two editors, provide analyses that enlighten us about the nature of classicists’ interest in the sources of gender inequalities, and the possibilities for readdressing them.

The secondary theme of the collection — namely that the cultural and economic transformation of the status of women lends itself to explanation in terms of Adam Smith’s “stages of social history” view of economic progress — is presented with less assurance than the first. The origin of Smith’s stages of social history perspective is attributed by editor Nyland to one John Millar, a fellow Scotsman and faculty member at Glasgow. Smith is said to have developed the stages of history perspective in his Lectures on Jurisprudence (1766). Nyland explores the theme in two chapters: Chapter 5, “Adam Smith’s Stage Theory and the Status of Women,” and Chapter 6, “Women’s Progress and the End of History.” The essential conclusion of Chapter 5 is that with the achievement of the commercial stage “productivity and wealth accumulation reaches a stage that makes possible very important changes in the state of society and particularly in relation to women” (p. 117). Yet, Millar is reported to have opined that “an end point to the rise of women had (by then) been reached” (p. 120). Thus, in chapter 6 “Women’s Progress and the End of History,” the focus shifts to Malthus’s views on the importance to society of preserving the traditional form of marriage, leading Nyland to an ambivalent assessment of the likely ongoing progress of women and the inference that the social evolution of women may well require a society that has developed beyond capitalism. Nyland further suggests Smith’s “stages of economic development” perspective for explaining the possibilities for changing the status of women has been obscured partly because his Lectures languished unpublished for more than a century, so that “he never published the [stages of history] argument” (p. 6). This is not entirely accurate; the sequel to the Lectures (1766) was his magnum opus, The Wealth of Nations (WN) (1776), which carries forward the theme of stages of social history in its Book III “of the Different Progress of Opulence in Different Nations.” This is the briefest and least studied part of the five books comprising The Wealth of Nations, and has yet to receive the critical attention it deserves. With this book, Smith is returning to the “stages of social history” theme introduced earlier in his Lectures on Jurisprudence (1766) to speculate about the origin of economic surplus and its role in the relationship between “the higher and lower orders” of the economic hierarchy.

Joseph Schumpeter once observed that the materials of Book III of WN would have made an excellent starting point for an historical sociology of economic life (Schumpeter 1954, p.187.) Smith’s focus in the Lectures is on the societal aspects of economic behavior, and on the institutions within which the economic process is carried out during the stages of economic development that preceded the nascent industrial economy of the England of his own day. This differs from the perspective of the four other books, in which Smith’s focus is on the relationship between economic rather than social classes.

Class conflict (of which gender conflict is surely an integral part) is the likely outcome when the stationary state “in which that full complement of riches which the nature and its institutions permits it to acquire” (Smith 1776, I, viii, p. 82) — in which there are no ongoing additions to the economic surplus — has been attained. When the growth process becomes attenuated at some future time that is still too distant to contemplate, with the emergence of a stationary state (which Smith describes China as having already achieved), the inference can be made that gender conflict is as likely to become aggravated as class conflict. The prospect for both gender and class conflict in a “slow growth” or “no growth” economy seems inevitable as those who are poor come to recognize they are involved in a zero-sum game.

A difficulty that is encountered in understanding Book III is that it is often necessary to interpolate passages from the Lectures and from other Books of WN to develop Smith’s underlying historical perspective and their relationship to class enmity. Thus it seems that the extension of Smith’s stages of social history perspective to incorporate gender conflict (as well as class conflict) requires a linking of the argument to the growth of society’s social surplus, which is ongoing until the advent of the stationary state. The conflict to which the classical economists addressed themselves is among social classes — workers (women as well as men), capitalists and landlords. Book III extends the stages of history analysis from the Lectures to anticipate that class conflict is the likely outcome when the stationary state is reached. It is surprising to encounter the renaming of the classical stationary state, which is so central to classical thinking, especially after Smith, as “the end of history stage.”

Be that as it may, this is a small distraction that does not take away from the recognition this volume provides about the contributions of classical thinkers to the origins of gender conflict.

References:

Ingrid Rima (1998) “Class Conflict and Adam Smith’s Stages of Social History”, Journal of the History of Economic Thought, 20 (1).

Joseph Schumpeter (1954), History of Economic Analysis, Oxford University Press, New York.

Adam Smith (1937 [1776]) The Wealth of Nations, Modern Library, New York.

Ingrid Rima’s publications include Development of Economic Analysis, Routledge (sixth edition), 2000.

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Subject(s):History of Economic Thought; Methodology
Geographic Area(s):Europe
Time Period(s):19th Century

Baetica Felix: People and Prosperity in Southern Spain from Caesar to Septimius Severus

Author(s):Haley, Evan W.
Reviewer(s):Grantham, George

Published by EH.NET (July 2004)

Evan W. Haley, Baetica Felix: People and Prosperity in Southern Spain from Caesar to Septimius Severus. Austin: University of Texas Press. 2003. xviii + 277 pp. $45 (hardcover), ISBN: 0-292-73464-6.

Reviewed for EH.NET by George Grantham, Department of Economics, McGill University.

Classical economic history is currently experiencing a revolutionary paradigm shift stimulated by archaeological findings culled from numerous emergency excavations that are a continuing by-product of Europe’s post-war construction boom. Its proponents represent a new generation of classical scholars possessing passing acquaintance with conventional economic theory, and aided by an increasingly digitized corpus of literary texts and inscriptions. Although still embryonic, the new classical economic history marks the first major shift in the economic historiography of Antiquity since the 1930s, when the founders of the Annales School displaced the birth of western civilization from its traditional place in Greece and Rome to the Middle Ages. The revaluing of medieval society — which focused on the economic achievement of the eleventh through thirteenth century — had its counterpart in the devaluing of antiquity, henceforth stylized as an economic failure explained by cultural and sociological factors inimical to innovation, enterprise, and investment. The new archaeological evidence and reinterpretation of the available textual material refute this pessimistic vision. Taken together with recent evidence showing the persistence of Roman political, administrative and legal structures, and the continuity of commercial contacts between the different parts of the old economy through the early medieval period, it is becoming increasingly clear that a new chronology of the “rise of the West” is in order. That new chronology must shift the starting point of European economic growth from the so-called “barbarian centuries” following the fall of Rome to the Late Iron Age, when the economic links between the different parts of western Europe were originally forged..

The present contribution to this literature is a survey of the rural economy of Southwest Spain from the accession of Augustus in 27 BC to the middle of the third century AD. The province of Baetica was one of the most prosperous parts of the Roman Empire, richly endowed with lead and silver mines, possessing fertile soils, and drained by a river system navigable to the Mediterranean coast whence grain, wine, olive oil, and fish sauce were exported to points on the Mediterranean littoral. A lightly settled hinterland of Phoenician and Carthaginian trading posts punctuated here and there by Iberian oppida, Baetica appears to have “taken off” during the long peace ushered in by the Augustan era. Archaeological data suggest an acceleration of rural settlement and foreign trade lasting through the first century AD. The magnitude of that growth is impossible to assess, but in the first two centuries AD, the annual export of Baetican oil to Rome probably approached seven million liters. The province’s advanced farming was described in first century AD by the agronomist Columella, whose father operated an estate there. The wealth it generated was the foundation of several senatorial fortunes and many lesser ones. At the top of the social scale Trajan’s Spanish ancestors are known to have participated in the oil trade, and his successor Hadrian (whose mother hailed from Cadiz) is thought to have possessed an estate there. One of the book’s central questions concerns the extent to which families lower on the social ladder benefited from the province’s exceptional agricultural and commercial opportunities. Precisely what caused the surge in agricultural production and export cannot be inferred from archeological evidence alone, which tells us only about the facilities for production and the pattern of trade insofar as they have left physical remains. Like other classicists, Haley privileges the role of government demand to explain Baetica’s participation in the Roman economy. The chief textual evidence for this hypothesis consists of documents showing that the importing of staples to Rome was under the administrative control of the annona, the bureau which licensed traders charged with importing the capital’s food supply. While the importance of that function is evident from imperial decrees exempting shippers from jury duty and other onerous municipal offices, regulations requiring merchants importing foodstuffs to Rome to keep half their capital in the provisioning trade by no means imply that the provisioning trade was “non-commercial.” The regulations attempted to prevent merchants from avoiding the financial burden of municipal service by nominal participation in it. None of this makes the state the engine of growth. A more likely scenario for the expansion of Baetica’s export economy is that growing prosperity in the western and central Mediterranean widened trading opportunities, thereby facilitating a division of labor based on regional comparative advantage. Haley proposes that the export of foodstuffs to Rome was originally cross-subsidized by shipments of precious metals, but it is likely that civil peace, stable government, a system of law suited to the needs of trade, and lengthy history of long-distance commerce in metals and fish sauce provided a sufficient foundation for trade in the bulkier agricultural staples.

The bulk of the book is devoted to describing the evidence for economic growth in the early Roman era. Chronologically arranged chapters open with a brief review of the political and administrative history followed by a survey of the archaeological findings on the pace of settlement, production, and export of the main agricultural staples. Haley adopts a cautious stance with respect to generalizing from this evidence. The general impression is that agricultural expansion began under Augustus and flagged somewhat during the troubled period following his death. A long period of vigorous growth marked by the construction of villas, farmsteads and facilities for pressing and bottling wine and olive oil began around AD 50 and lasted into the early second century. The province seems to have remained reasonably prosperous into the fourth century. As befits a specialist work, much of the discussion is given over to detailed criticism of particular findings, which makes for tedious reading by non-specialists. It contains an excellent discussion of stamps and painted inscriptions on amphorae that recorded the weight, contents, shipper, and other relevant commercial information, all of which testify to the sophistication of Roman trading technique. It is hard to credit the hypothesis that the Roman economy was in any way primitive.

Economic historians in a hurry will turn to the final chapter on the province’s income distribution. On the questionable assumption that population growth was roughly constant between 25 BC and 170 AD, Haley concludes that per capita income rose substantially. It is hard to know what to make of this argument, which would seem to be ignotium per ignotius, but it is not implausible. The estimate of the level of per capita has scattered documentary support suggesting that small farmers and skilled workers may have earned incomes exceeding by nine-fold the cost of bare subsistence as calculated by the cost of an annual ration of wheat. Comparing this ballpark estimate of family income with the minimum property qualification for jurors recorded on the recently discovered tablets of the Lex Irnitana, Haley conjectures that possibly half of the province’s population met the qualification for membership in the Roman “middle class.” We know little of this class of farmers and small businessmen, although some had small funerary inscriptions inscribed to record their accomplishments. That they may have constituted a significant proportion of the population suggests that the stylized picture of a society divided between a wealthy minority monopolizing wealth and political authority and a majority of plebs scratching out subsistence from tiny plots of poorly cultivated land is mistaken. Commercialization in the first two Roman centuries was not a reflection of luxury consumption by the super-rich, but the response to demand from hundreds of thousands of families whose incomes compared favorably with those that supported the expansion of trade in early modern and early industrial Europe.

That the economy of classical antiquity was organized by markets from at least the middle of the first millennium BC seems irrefutable. There is enough evidence to prove that the Roman economy extended beyond the limes into the “barbarian” territories of central and northern Europe and Africa. Yet to know that fact is ultimately to know little about the processes that caused that economy to expand and to contract. What part of economic change belongs to demographic events? What part to technological change? What part to path-dependent processes driven by increasing return? What part to fiscal and monetary events? And behind these economic causes, what part of change can be attributed to the evolution of political, administrative and social structures? What part to long-term changes in the distribution of wealth and power? Recent events remind us that one cannot take the stability of background conditions for granted, and that high-stakes politics is not simply white noise relative to the groundswell of an economy’s fundamental data. The classical economy was at once similar to and different from the economies of the later pre-industrial era. Defining and analyzing those similarities and differences is the central task of classical economic history.

Subject(s):Economywide Country Studies and Comparative History
Geographic Area(s):Europe
Time Period(s):Ancient

The Laces of Ipswich: The Art and Economics of an Early American Industry, 1750-1840

Author(s):Raffel, Marta Cotterell
Reviewer(s):Miller, Marla R.

Published by EH.NET (July 2004)

Marta Cotterell Raffel, The Laces of Ipswich: The Art and Economics of an Early American Industry, 1750-1840. Hanover, NH: University Press of New England, 2003. xii + 156 pp. $24.95 (paperback), ISBN: 1-58465-163-6.

Reviewed for EH.NET by Marla R. Miller, Department of History, University of Massachusetts — Amherst.

From the 1750s to the 1840s, women throughout the town of Ipswich, Massachusetts were heavily engaged in creating and sustaining the only successful commercial production of handmade bobbin lace in the United States, an enterprise that thrived for almost a century before the advent of machine-made lace undermined their efforts. The New England lace makers described in Marta Cotterel Raffel’s The Laces of Ipswich: The Art and Economics of an Early American Industry, 1750-1840 certainly have not garnered sufficient attention among historians of early American labor, craft and women. Raffel, an independent scholar and lace-maker herself, seeks to remedy this oversight by providing the first-ever study of this important chapter in the braided histories of women and work, craft production, and industrialization.

In the eighteenth century, most North American consumers purchased French, Flemish, Brussels or English lace imported by local merchants. A constellation of factors, however, combined to create a thriving network of lace makers in Ipswich, as environmental, economic and political change conspired to reconfigure the local economy. Though once a port town rivaling Salem, in the 1740s shifting sands gradually reduced the opening of the Ipswich River, closing the harbor to larger ships; at the same time, a general mid-century economic depression was exacerbated by events associated with the mounting imperial crisis. Lace-making, Raffel argues, enabled Ipswich women to cushion these blows. By 1776, she asserts, enough women were engaged in the craft that, “unlike other areas, the residents were poised to meet the demand for domestic lace” brought about by the Revolution and its aftermath (p. 20). By the turn of the nineteenth century, some 600 women — more than 1 in 4 of the adult female population — across as many households were engaged in lace production, creating a uniquely identifiable domestic alternative to imported lace, and a major commercial enterprise for Ipswich families.

The subtitle aside, this is really a book about art; economics is discussed in only the most general sense, in ways that specialists will find largely unsatisfying. But as a study of the art and craft of lace-making, this slim volume is effective and informative. In many ways a model of material culture study, Raffel’s well-illustrated book demonstrates clearly the value of cultivating an intimate understanding of the processes and tools associated with early American crafts. As a lace-maker, she is able to extract extraordinary insight from the surviving bobbins, pillows (the platform on which the lace is created), and parchments (the paper patterns), from portraits showing lace on garments, and of course from extant examples of the lace itself. Close study of the bobbins and kits, for example, suggests that these tools were supplied by a single source, hinting at the presence of commission merchants. Patterns of pricking in surviving parchments can reveal whether the lace produced from them was intended for personal or commercial use. Careful examination of a lace-trimmed cape revealed that the garment’s maker was not necessarily familiar with the lace itself, since the embellishment was applied with the wrong side facing out, giving a fascinating little glimpse into the limits of one consumer’s fashion knowledge. Insights like these throughout the book provide readers with an intimate view of the lace-maker’s craft from the perspective of a practitioner.

Unfortunately, Raffel’s core question — how it came to be that, in a town of some 4500 residents, more than a quarter of the women embraced lace-making for commercial markets, producing collectively more than 40,000 yards per year — remains unanswered. Though certainly the convergence of several commercial crises would have given Ipswich women every reason to look for alternate sources of income, the same was of course true for women in communities across New England. How these Ipswich residents came to lace making, why it thrived as it did, and why nothing similar was attempted by neighboring communities, remains unexplained. Though the author posits, for example, that “most of the women who made lace in Ipswich had emigrated from the lace-making centers of England” (p. 52), no evidence is offered to support that assertion, while elsewhere in the volume, brief biographical sketches of known lace-makers include only women born in Ipswich. Moreover, close consideration of the lace itself reveals that most Ipswich lace was made in the European style (with the footside, or sewing edge, to the left of the lace) as opposed to the English style (with the footside to the right), suggesting perhaps that it was not English immigrants at all who proved influential, but rather unidentified artisans from the Continent (p. 70; on p. 68, the author also suggests that perhaps Ipswich lace reflects an “amalgamation” of the two influences). There is surely a fascinating story behind the emergence of lace-making in Ipswich, but important elements of that phenomenon are not yet understood.

Similarly, there is more complex and substantive analysis yet to be done on the gender and market relations that shaped this effort. For example, Raffel posits that the appearance of commission merchants (as evidence by the distribution of uniform bobbins and kits) corresponds with the entrance of men into what had been a primary female sphere of activity; however, later in the study she documents the efforts of lace merchant Mary Sutton, who centralized the collection of Ipswich lace for Boston and Portsmouth markets, and who seems (at least from the evidence presented) at least as likely a candidate for organizing the lace workforce and their tools as any yet-unknown male figure(s). In addition, women were “involved,” she asserts, in lace-making’s movement into factories, but how and to what extent is not described. Raffel does not attempt to ground her project in the sizeable scholarly literature of women, work, artisanry and industrialization, and so the study does not engage in any sustained way with the larger questions scholars in those fields have been wrangling with in recent years.

Though specialists in the history of clothing and textiles will find much of value here, professional historians with broader interests will find much to quibble with in this book. Still, Raffel has made a significant contribution to the study of women and work in early America simply by recovering, with great sensitivity and insight, the work of the lace-makers themselves. The story of this early and isolated foray into domestic lace production is fascinating, and this volume provides a real service in its informed analysis of the material remains of lace making as it emerged in coastal Massachusetts.

Marla R. Miller directs the Public History program at the University of Massachusetts –Amherst. Her research and writing explores women and work in the early Republic. Her book on women’s work in rural New England’s clothing trades, The Needle’s Eye: Women and Work in the Age of Revolution, is scheduled to appear in Spring 2005 from the University of Massachusetts Press.

Subject(s):Social and Cultural History, including Race, Ethnicity and Gender
Geographic Area(s):North America
Time Period(s):19th Century

The Political Economy of Stalinism: Evidence from the Soviet Secret Archives

Author(s):Gregory, Paul R.
Reviewer(s):Harrison, Mark

Published by EH.NET (July 2004)

Paul R. Gregory, The Political Economy of Stalinism: Evidence from the Soviet Secret Archives. New York: Cambridge University Press, 2003. xi + 308 pp. $90 (cloth), ISBN: 0-521-82628-4; $32 (paper), ISBN: 0-521-53367-8.

Paul R. Gregory and Valery Lazarev, editors, The Economics of Forced Labor: The Soviet Gulag. Stanford, CA: Hoover Institution Press, 2003. xvii + 212 pp. $15 (paperback), ISBN: 0-8179-3942-3.

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

In 1945 Allied victory in Europe opened up the archives of Hitler’s Germany to investigation. Sponsored by the U.S. and British strategic bombing survey groups, a number of talented young economists including John Kenneth Galbraith and Nicholas Kaldor spent years combing through twelve years of records. The results of their work included path-breaking studies of the political economy of the Third Reich.

The Soviet state collapsed in 1991. Its economic administration was more complex than that of Nazi Germany by an order of magnitude, and it lasted for many decades. It presented a far greater puzzle to western social, political, and economic thought. The records that it left are much more comprehensive. But economists are barely involved in their exploitation, most of which is being left to social and political historians.

Paul Gregory is one of a small band who have promoted economic research in the Russian archives; the other major figure, on my side of the Atlantic, is Robert W. Davies. For much of the last decade Gregory has been carrying on this work in collaboration with Russians and other westerners. Both the books under review use this research to investigate the Soviet economy and its institutions under Stalin. Gregory’s monograph, The Political Economy of Stalinism, generalizes from it to make a textbook for economists and economically-minded historians. The volume that he has co-edited with Valery Lazarev, The Economics of Forced Labor, brings together a series of new archive-based investigations on a specific theme, the role of labor coercion in the Soviet economy.

From a methodological point of view the most important shared aspiration of the two books is to extend the domain of economic analysis. Traditionally, western Sovietological economists thought of the Soviet economy as comprised of two spheres. One was the sphere of “mission oriented” activities that aimed at maximizing technological objectives regardless of cost, e.g. building sputniks. The other was the sphere of economic activities that aimed to maximize an economic benefit, e.g. building refrigerators (e.g. Berliner 1976, p. 506-9). It seemed obvious that economic analysis could throw more light on the latter than the former. One of the main contributions of new research has been to extend economic analysis to Soviet centralized decision making with regard to the adoption and pursuit of major technological and institutional missions including collectivization, forced industrialization, the foundations of centralized planning, and the development of the Gulag archipelago. What emerges is that these were also “economic activity” in the sense that the players were all looking for a payoff of one kind or another, and the costs they were willing to incur or impose on others depended on the private stakes.

First, The Political Economy of Stalinism. The argument of the book runs as follows. In Chapter 1 Gregory asks whether we should view the rise and fall of the Soviet economy in terms of “The Jockey or the Horse?” What was more important: the qualities and decisions of individual leaders (the jockey) or their institutional context and constraints (the horse)? He concludes that this is a largely false distinction: the Soviet command economy fostered dictatorship and those who are self-selected for dictatorship tend to conform to a type. Thus, “the jockey and horse are not selected independently” (p. 21). No one could have beaten Stalin to the leadership who was not even more controlled, crafty, and brutal than Stalin himself. In chapter 2 Gregory goes on to argue that the emergence of a command system with Stalin in charge was a largely inevitable consequence of the Bolshevik revolution. The defining event was the decision to collectivize peasant agriculture in 1929, which was intended to fix a growing crisis of grain marketings. Gregory argues that this crisis was largely a result of government policy, but the policy did not result from any misunderstanding of economics. Rather, government policy pursued more accumulation than the peasantry and market forces were prepared to allow, and Stalin’s response was then to abolish the market and subordinate the peasantry directly to the state.

Chapter 3 outlines the five “Principles of Governance” of the new Stalinist state, which Gregory identifies as a command system based on collective farming and forced industrialization; the suppression of views that diverged from the party’s general line; the merging of the ruling party with the state; the prohibition of factions and the subordination of interest groups to the encompassing interests of the party-state; and Stalin as a personal dictator empowered to settle disputes among the top leaders. The result was to place an astonishing workload on Stalin personally; since he had the right to arbitrate on all important decisions, and to select what was important, the result was that agents at lower levels passed a vast array of unselected trivia up to him. Gregory calls this “The Dictator’s Curse.” Although he chafed against it, Stalin preferred it to the alternative which could have left him out of the loop on decisions that might afterwards have turned out to be significant.

Given a dictatorship, what kind of dictator was Stalin? In chapter 1 Gregory outlines various types of dictator: benevolent, proprietary (i.e. Olson’s “stationary bandit”), selfish, or one that holds the ring. The Stalin that emerges from the chapters that follow is not benevolent, mainly proprietary, sometimes selfish and sometimes ring-holding when it suited him. The stationary bandit emerges most clearly in Chapter 4, which deals with the core of Stalinist economic policy. Here Gregory outlines a model of investment maximization subject to an inherited capital stock and a workforce that supplies effort subject to a “fair” wage. He substantiates this model with reference to two things: Stalin’s well-known obsession with accumulation, and his watchful concern for worker discontent that the archives have revealed. The secret police monitored worker morale and kept Stalin well informed. Stalin controlled this dissatisfaction in two ways: locally by redeploying consumer goods when signs of discontent appeared to grow critical and, when discontent became general, by cutting investment back. Although Stalin could maximize the volume of investment in this way, however, he could not make it efficient and the history of the period abounds in what look like disastrous decisions when it came to detailed allocation.

Chapters 5 to 9 deal, respectively, with long term planning at the center, the tensions between central planners and industrial ministries, opportunistic behavior within the ministries, the process of planning within the ministries, and the implementation of financial controls. Gregory suggests that long term plans were primarily political and motivational instruments that aimed to shift the focus and balance of power in Soviet institutions by flushing out opponents and enabling others to signal loyalty. When long term plans were broken down into operational targets for each sector responsibility for implementation had to be delegated, and this created scope for the pursuit of departmental and personal self-interest. This formed the basis of perennial plan bargaining. Because the producers themselves controlled the vital information about requirements and achievements the result was that Stalin’s planning agency, Gosplan, clashed repeatedly with the industrial ministries not only over real demands and supplies but also over information. Stalin kept Gosplan loyal and relatively truthful only by keeping it small and disinterested in the fulfillment of plans. Even so, Gosplan had to compromise with industry, for example, by leaving central plans highly aggregated; this gave industry control over fulfillment in detail.

Detailed allocation was then governed largely by intra-ministerial decisions. This was the point at which centralized guidance and the requirements of efficiency lost most of their impact. Ministerial planning was largely retrospective and plans usually remained preliminary; they were rarely taken to the final stage of official confirmation, which made them easier to revise. A detailed study of decision making in the chief administration for metallurgy shows that, while orders and information shuttled up and down the ministerial hierarchy, everyone engaged in characteristic forms of opportunism. To their inferiors, each official demanded rigorous implementation of orders, while bargaining with and concealing resources from those above them. Real allocation took place at a level far below that of the plans; more effort went into ensuring supplies than organizing production. Loyalty and personal promotion went hand in hand; the promotion of individuals required a growing number of high level positions, met by continually promoting sub-ministerial organizations to ministerial status. Regardless of their personal profile, all ministerial officials behaved in much the same way in relation to their own fiefs. Finally, in forming the motives for opportunism money was more important than has been thought, not necessarily for personal enrichment but for easing the path to plan fulfillment, and financial controls were chaotic.

Gregory concludes with a retrospective on the whole Soviet era, including the collapse of 1991. The inner logic of the system boiled down to coercion. “The extreme concentration of historical power was not a historical accident” (p. 252). “The system’s founders … clearly understood … that enterprises must be coerced if resources are allocated administratively. The system had to wait more than fifty five years for a dictator to come along who did not understand this basic principle” (p. 256). This would make it seem as if the fault for the Soviet collapse lay with Gorbachev. Gregory also argues, however, that the coercive system did not only concentrate power; it also deprived the dictator of criteria with which to make efficient decisions, and it deprived those below him of any motivation towards efficiency. Poor information and bad motivation was combined with complexity that increased through time and returns that diminished to the point of no return.

More detailed light is shed on coercion in the Soviet economy by the second book under review, The Economics of Forced Labor. This book results from collaboration between the editors, Gregory and Valery Lazarev, and several Russian scholars; there are also contributions by another American, a Britisher, and a German, so the cast of characters is genuinely multinational. Robert Conquest provides a short foreword after which Gregory’s introduction sets out the main lines of historical development of the Gulag (chief administration of labor camps of the Soviet interior ministry, NKVD, later MVD). This information, mostly already known, provides the context for the subsequent chapters. In the 1920s there was just one Soviet forced labor complex on the northern Solovetskii islands. The first big expansion came with the collectivization of peasant agriculture which threw hundreds of thousands of well-to-do peasant families into captivity; the Gulag was created in 1930 to handle the sudden inflow. After that, recruitment became big business and by the early 1950s there were about 2.5 million penal laborers, mostly engaged in forestry, mining, and construction; they formed significant shares of the workforce in these sectors, but never more than about 3 percent of the total workforce including farm workers, and less than this in terms of the value of national output. By the end the Gulag had evolved a complex functional and production branch structure; it employed “freely-hired” civilians in large numbers, and rented many of its own inmates out to civilian employers; it employed guards in a ratio that rose as high as one to ten inmates, but many of the guards were themselves inmates.

The introduction is followed by three overview chapters, five case studies, and concluding remarks by Valery Lazarev. Chapter 2 by Andrei Sokolov, “Forced Labor in Soviet Industry,” provides often neglected context in terms of the mechanisms of the wider Soviet labor market. The important thing here is that the growth of the Gulag was part of a wider process that had largely substituted coercion for other incentives by the end of the 1930s. State employees now faced draconian penalties of imprisonment and forced labor for lateness, minor absenteeism, and unauthorized departures; these remained in force until Stalin’s death. Wartime decrees imposed still harsher penalties on violations by workers in defense industry and transport. These laws were widely flouted yet still netted fifteen million convictions in twelve years, including a million Gulag terms of between three and ten years. They were thus a major recruiting sergeant for the labor camps. This also illustrates a fact that is not widely appreciated: although the Gulag population was smaller than western observers had sometimes guessed, it also had high turnover with many entering the system for relatively short periods before returning to society.

In chapter 3, Oleg Khlevniuk gives a short account of the political turning points in the history of the Gulag, and goes on to tackle two questions about the efficacy of forced labor. He shows that the Gulag authorities gradually lost faith in the utility of marshalling human masses into unskilled employment at gunpoint; forced labor became increasingly mechanized and skilled and even began to attract wage payments. There was a process of “conversion of slaves to serfs” (p. 57). Khlevniuk also questions the developmental role of forced labor in the sense that the projects on which it was employed were valued at cost, but the cost was much greater than their true worth to society. “Many prisoner-built projects were difficult, or almost impossible, to build with free workers, but was it necessary to build them at all?” (p. 64). The White Sea-Baltic Canal and the Baikal-Amur Mainline would not have been undertaken in a market economy, not because a market economy lacked the “advantages” of socialism but because they would never yield a profit under any system.

Aleksei Tikhonov analyzes “The End of the Gulag” in chapter 4. In 1953, within three months of Stalin’s death, MVD chief Lavrentii Beriia had released one and a half million prisoners, 60 percent of the gulag’s inmates. Tikhonov points out that this could not have been prepared overnight. In fact, elements within the MVD wanted to put an end to the growing financial losses of the Gulag, and were also alarmed by its high rates of recidivism. Seeing that the Gulag was not working in terms of either exploitation or rehabilitation, they had been trying to scale it down since 1949 with proposals to convert a large part of the camp workforce to exiled laborers, “freely-hired” although not free to go home. Ironically the original reformers were themselves victimized after Stalin died.

The next five chapters cover more specific aspects arising from forced labor in Noril’sk (Leonid Borodkin and Simon Ertz), the Far East (David Nordlander), Noril’sk again (Ertz), the White Sea-Baltic Canal project (Mikhail Morukov), and Karelia (Christopher Joyce). Some highlights: the experience of the Far Eastern camps illustrates the perennial tension between the possibilities for exploiting the forced laborers and the requirements of maintaining them. The Karelian camps show the experimental process by which the authorities learned the scope and limits of the exploitation of forced labor. The White Sea-Baltic Canal project was initially seen as a story of “successful” completion, and this stimulated illusory expectations for the future. The Gulag leaders willingly undertook the building of Noril’sk as a result because they underestimated the risks and difficulties that would arise. The operation of Noril’sk helped to expose illusions about the ease with which the inmates could be manipulated and coerced into supplying effort. The “profitable” exploitation of forced labor proved an elusive goal. As time went on the authorities lost faith in unbridled coercion and heavy punishments, and turned more and more to positive inducements including higher wages and early release in return for extra effort.

Both the volumes that I have reviewed here adopt the methodology of social science. Narrative provides background but is not the central focus. Alternative hypotheses are formulated and tested informally. The standards of evidence and proof are not those that are usually available in conventional applied economics. There are figures and tables but no large quantitative datasets and hardly any regressions. The great bulk of the evidence is qualitative: decrees, memoranda, judgments, letters, reports of conversations, and anecdotes. The argument proceeds mainly by illustration. This is characteristic of the new institutional economic history associated with the writing of figures such as Douglass C. North and Avner Greif. At the present it is not clear that anyone can do better.

One possible criticism of both books is that while it is obvious that the source materials are new it is not so clear that the conclusions are always novel. To give an example from each book: Gregory finds that the main purpose of long term plans was motivational, but Eug?ne Zaleski (1971, p. 291) also concluded that the main role of these plans was to act as a “vision of growth.” Several contributors to The Economics of Forced Labor note the surprising importance of positive incentives in securing effort from prisoners who were apparently completely powerless and whose reservation wage was apparently close to zero; but the same point was made before by Rasma Karklins (1989). Indeed, in the early chapters of his Gulag Archipelago Alexander Solzhenitsyn (1974) provided an extended analysis of the labor economics of the camps, based on anecdote and memoir; the incentives that he described are quite different from those emphasized by the work presently under review, and it would be of interest to see discussion of the possible reasons for this divergence. Having said this, there can be no doubt that the general level of evidential detail and economic analysis in the present works is greatly superior to anything that has been available hitherto.

These books share still other features. There is something in them to challenge everyone. Both assume some background knowledge of Russian and Soviet history and will be read with great interest by specialists and Honors students. Historians may find that they need to rethink historical problems in terms of the economic choices that were available. Economists will find themselves challenged by unfamiliar institutions and unusual problems to solve; in the past year I have used The Political Economy of Stalinism as a textbook for economics undergraduates who have been excited by the opportunity to think outside the boxes of Micro 101. As a teacher of economics and economic history I believe that these books signal new directions in the study of the Soviet economy that have interesting parallels with the new thinking in economic history and political economy associated with scholars like Greif and Daron Acemoglu. They will greatly influence the ways that we teach and do research in the future.

In summary, if you want to know more about where Soviet economic history is going I strongly recommend that you read these exciting new books. The Hoover Institution has generously made the full text of The Economics of Forced Labor available free of charge; the URL is:

http://www-hoover.stanford.edu/publications/books/gulag.html.

References: Berliner, Joseph S. 1976. The Innovation Decision in Soviet Industry. Cambridge, MA: MIT Press.

Karklins, Rasma. 1989. “The Organisation of Power in Soviet Labour Camps.” Soviet Studies, 41:2, pp. 276-297.

Solzhenitsyn, Alexander. 1974. The Gulag Archipelago, 1918-1956. Volume 1. London: Collins/Fontana.

Zaleski, Eug?ne. 1971. Planning for Economic Growth in the Soviet Union, 1918-1932. Chapel Hill, NC: University of North Carolina Press

Mark Harrison is professor of economics at the University of Warwick and honorary senior research fellow of the Centre for Russian and East European Studies, University of Birmingham. He is the author of a number of books and articles on Soviet economic history including “The Political Economy of a Soviet Military R&D Failure: Steam Power for Aviation, 1932 to 1939,” Journal of Economic History, 63:1, 2003, pp. 178-212. He edits the PERSA (Political Economy Research in Soviet Archives) Working Papers, available from http://www.warwick.ac.uk/go/sovietarchives.

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

The Economics of Forced Labor: The Soviet Gulag

Author(s):Gregory, Paul R.
Lazarev, Valery
Reviewer(s):Harrison, Mark

Published by EH.NET (July 2004)

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Paul R. Gregory, The Political Economy of Stalinism: Evidence from the Soviet Secret Archives. New York: Cambridge University Press, 2003. xi + 308 pp. $90 (cloth), ISBN: 0-521-82628-4; $32 (paper), ISBN: 0-521-53367-8.

Paul R. Gregory and Valery Lazarev, editors, The Economics of Forced Labor: The Soviet Gulag. Stanford, CA: Hoover Institution Press, 2003. xvii + 212 pp. $15 (paperback), ISBN: 0-8179-3942-3.

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

In 1945 Allied victory in Europe opened up the archives of Hitler’s Germany to investigation. Sponsored by the U.S. and British strategic bombing survey groups, a number of talented young economists including John Kenneth Galbraith and Nicholas Kaldor spent years combing through twelve years of records. The results of their work included path-breaking studies of the political economy of the Third Reich.

The Soviet state collapsed in 1991. Its economic administration was more complex than that of Nazi Germany by an order of magnitude, and it lasted for many decades. It presented a far greater puzzle to western social, political, and economic thought. The records that it left are much more comprehensive. But economists are barely involved in their exploitation, most of which is being left to social and political historians.

Paul Gregory is one of a small band who have promoted economic research in the Russian archives; the other major figure, on my side of the Atlantic, is Robert W. Davies. For much of the last decade Gregory has been carrying on this work in collaboration with Russians and other westerners. Both the books under review use this research to investigate the Soviet economy and its institutions under Stalin. Gregory’s monograph, The Political Economy of Stalinism, generalizes from it to make a textbook for economists and economically-minded historians. The volume that he has co-edited with Valery Lazarev, The Economics of Forced Labor, brings together a series of new archive-based investigations on a specific theme, the role of labor coercion in the Soviet economy.

From a methodological point of view the most important shared aspiration of the two books is to extend the domain of economic analysis. Traditionally, western Sovietological economists thought of the Soviet economy as comprised of two spheres. One was the sphere of “mission oriented” activities that aimed at maximizing technological objectives regardless of cost, e.g. building sputniks. The other was the sphere of economic activities that aimed to maximize an economic benefit, e.g. building refrigerators (e.g. Berliner 1976, p. 506-9). It seemed obvious that economic analysis could throw more light on the latter than the former. One of the main contributions of new research has been to extend economic analysis to Soviet centralized decision making with regard to the adoption and pursuit of major technological and institutional missions including collectivization, forced industrialization, the foundations of centralized planning, and the development of the Gulag archipelago. What emerges is that these were also “economic activity” in the sense that the players were all looking for a payoff of one kind or another, and the costs they were willing to incur or impose on others depended on the private stakes.

First, The Political Economy of Stalinism. The argument of the book runs as follows. In Chapter 1 Gregory asks whether we should view the rise and fall of the Soviet economy in terms of “The Jockey or the Horse?” What was more important: the qualities and decisions of individual leaders (the jockey) or their institutional context and constraints (the horse)? He concludes that this is a largely false distinction: the Soviet command economy fostered dictatorship and those who are self-selected for dictatorship tend to conform to a type. Thus, “the jockey and horse are not selected independently” (p. 21). No one could have beaten Stalin to the leadership who was not even more controlled, crafty, and brutal than Stalin himself. In chapter 2 Gregory goes on to argue that the emergence of a command system with Stalin in charge was a largely inevitable consequence of the Bolshevik revolution. The defining event was the decision to collectivize peasant agriculture in 1929, which was intended to fix a growing crisis of grain marketings. Gregory argues that this crisis was largely a result of government policy, but the policy did not result from any misunderstanding of economics. Rather, government policy pursued more accumulation than the peasantry and market forces were prepared to allow, and Stalin’s response was then to abolish the market and subordinate the peasantry directly to the state.

Chapter 3 outlines the five “Principles of Governance” of the new Stalinist state, which Gregory identifies as a command system based on collective farming and forced industrialization; the suppression of views that diverged from the party’s general line; the merging of the ruling party with the state; the prohibition of factions and the subordination of interest groups to the encompassing interests of the party-state; and Stalin as a personal dictator empowered to settle disputes among the top leaders. The result was to place an astonishing workload on Stalin personally; since he had the right to arbitrate on all important decisions, and to select what was important, the result was that agents at lower levels passed a vast array of unselected trivia up to him. Gregory calls this “The Dictator’s Curse.” Although he chafed against it, Stalin preferred it to the alternative which could have left him out of the loop on decisions that might afterwards have turned out to be significant.

Given a dictatorship, what kind of dictator was Stalin? In chapter 1 Gregory outlines various types of dictator: benevolent, proprietary (i.e. Olson’s “stationary bandit”), selfish, or one that holds the ring. The Stalin that emerges from the chapters that follow is not benevolent, mainly proprietary, sometimes selfish and sometimes ring-holding when it suited him. The stationary bandit emerges most clearly in Chapter 4, which deals with the core of Stalinist economic policy. Here Gregory outlines a model of investment maximization subject to an inherited capital stock and a workforce that supplies effort subject to a “fair” wage. He substantiates this model with reference to two things: Stalin’s well-known obsession with accumulation, and his watchful concern for worker discontent that the archives have revealed. The secret police monitored worker morale and kept Stalin well informed. Stalin controlled this dissatisfaction in two ways: locally by redeploying consumer goods when signs of discontent appeared to grow critical and, when discontent became general, by cutting investment back. Although Stalin could maximize the volume of investment in this way, however, he could not make it efficient and the history of the period abounds in what look like disastrous decisions when it came to detailed allocation.

Chapters 5 to 9 deal, respectively, with long term planning at the center, the tensions between central planners and industrial ministries, opportunistic behavior within the ministries, the process of planning within the ministries, and the implementation of financial controls. Gregory suggests that long term plans were primarily political and motivational instruments that aimed to shift the focus and balance of power in Soviet institutions by flushing out opponents and enabling others to signal loyalty. When long term plans were broken down into operational targets for each sector responsibility for implementation had to be delegated, and this created scope for the pursuit of departmental and personal self-interest. This formed the basis of perennial plan bargaining. Because the producers themselves controlled the vital information about requirements and achievements the result was that Stalin’s planning agency, Gosplan, clashed repeatedly with the industrial ministries not only over real demands and supplies but also over information. Stalin kept Gosplan loyal and relatively truthful only by keeping it small and disinterested in the fulfillment of plans. Even so, Gosplan had to compromise with industry, for example, by leaving central plans highly aggregated; this gave industry control over fulfillment in detail.

Detailed allocation was then governed largely by intra-ministerial decisions. This was the point at which centralized guidance and the requirements of efficiency lost most of their impact. Ministerial planning was largely retrospective and plans usually remained preliminary; they were rarely taken to the final stage of official confirmation, which made them easier to revise. A detailed study of decision making in the chief administration for metallurgy shows that, while orders and information shuttled up and down the ministerial hierarchy, everyone engaged in characteristic forms of opportunism. To their inferiors, each official demanded rigorous implementation of orders, while bargaining with and concealing resources from those above them. Real allocation took place at a level far below that of the plans; more effort went into ensuring supplies than organizing production. Loyalty and personal promotion went hand in hand; the promotion of individuals required a growing number of high level positions, met by continually promoting sub-ministerial organizations to ministerial status. Regardless of their personal profile, all ministerial officials behaved in much the same way in relation to their own fiefs. Finally, in forming the motives for opportunism money was more important than has been thought, not necessarily for personal enrichment but for easing the path to plan fulfillment, and financial controls were chaotic.

Gregory concludes with a retrospective on the whole Soviet era, including the collapse of 1991. The inner logic of the system boiled down to coercion. “The extreme concentration of historical power was not a historical accident” (p. 252). “The system’s founders … clearly understood … that enterprises must be coerced if resources are allocated administratively. The system had to wait more than fifty five years for a dictator to come along who did not understand this basic principle” (p. 256). This would make it seem as if the fault for the Soviet collapse lay with Gorbachev. Gregory also argues, however, that the coercive system did not only concentrate power; it also deprived the dictator of criteria with which to make efficient decisions, and it deprived those below him of any motivation towards efficiency. Poor information and bad motivation was combined with complexity that increased through time and returns that diminished to the point of no return.

More detailed light is shed on coercion in the Soviet economy by the second book under review, The Economics of Forced Labor. This book results from collaboration between the editors, Gregory and Valery Lazarev, and several Russian scholars; there are also contributions by another American, a Britisher, and a German, so the cast of characters is genuinely multinational. Robert Conquest provides a short foreword after which Gregory’s introduction sets out the main lines of historical development of the Gulag (chief administration of labor camps of the Soviet interior ministry, NKVD, later MVD). This information, mostly already known, provides the context for the subsequent chapters. In the 1920s there was just one Soviet forced labor complex on the northern Solovetskii islands. The first big expansion came with the collectivization of peasant agriculture which threw hundreds of thousands of well-to-do peasant families into captivity; the Gulag was created in 1930 to handle the sudden inflow. After that, recruitment became big business and by the early 1950s there were about 2.5 million penal laborers, mostly engaged in forestry, mining, and construction; they formed significant shares of the workforce in these sectors, but never more than about 3 percent of the total workforce including farm workers, and less than this in terms of the value of national output. By the end the Gulag had evolved a complex functional and production branch structure; it employed “freely-hired” civilians in large numbers, and rented many of its own inmates out to civilian employers; it employed guards in a ratio that rose as high as one to ten inmates, but many of the guards were themselves inmates.

The introduction is followed by three overview chapters, five case studies, and concluding remarks by Valery Lazarev. Chapter 2 by Andrei Sokolov, “Forced Labor in Soviet Industry,” provides often neglected context in terms of the mechanisms of the wider Soviet labor market. The important thing here is that the growth of the Gulag was part of a wider process that had largely substituted coercion for other incentives by the end of the 1930s. State employees now faced draconian penalties of imprisonment and forced labor for lateness, minor absenteeism, and unauthorized departures; these remained in force until Stalin’s death. Wartime decrees imposed still harsher penalties on violations by workers in defense industry and transport. These laws were widely flouted yet still netted fifteen million convictions in twelve years, including a million Gulag terms of between three and ten years. They were thus a major recruiting sergeant for the labor camps. This also illustrates a fact that is not widely appreciated: although the Gulag population was smaller than western observers had sometimes guessed, it also had high turnover with many entering the system for relatively short periods before returning to society.

In chapter 3, Oleg Khlevniuk gives a short account of the political turning points in the history of the Gulag, and goes on to tackle two questions about the efficacy of forced labor. He shows that the Gulag authorities gradually lost faith in the utility of marshalling human masses into unskilled employment at gunpoint; forced labor became increasingly mechanized and skilled and even began to attract wage payments. There was a process of “conversion of slaves to serfs” (p. 57). Khlevniuk also questions the developmental role of forced labor in the sense that the projects on which it was employed were valued at cost, but the cost was much greater than their true worth to society. “Many prisoner-built projects were difficult, or almost impossible, to build with free workers, but was it necessary to build them at all?” (p. 64). The White Sea-Baltic Canal and the Baikal-Amur Mainline would not have been undertaken in a market economy, not because a market economy lacked the “advantages” of socialism but because they would never yield a profit under any system.

Aleksei Tikhonov analyzes “The End of the Gulag” in chapter 4. In 1953, within three months of Stalin’s death, MVD chief Lavrentii Beriia had released one and a half million prisoners, 60 percent of the gulag’s inmates. Tikhonov points out that this could not have been prepared overnight. In fact, elements within the MVD wanted to put an end to the growing financial losses of the Gulag, and were also alarmed by its high rates of recidivism. Seeing that the Gulag was not working in terms of either exploitation or rehabilitation, they had been trying to scale it down since 1949 with proposals to convert a large part of the camp workforce to exiled laborers, “freely-hired” although not free to go home. Ironically the original reformers were themselves victimized after Stalin died.

The next five chapters cover more specific aspects arising from forced labor in Noril’sk (Leonid Borodkin and Simon Ertz), the Far East (David Nordlander), Noril’sk again (Ertz), the White Sea-Baltic Canal project (Mikhail Morukov), and Karelia (Christopher Joyce). Some highlights: the experience of the Far Eastern camps illustrates the perennial tension between the possibilities for exploiting the forced laborers and the requirements of maintaining them. The Karelian camps show the experimental process by which the authorities learned the scope and limits of the exploitation of forced labor. The White Sea-Baltic Canal project was initially seen as a story of “successful” completion, and this stimulated illusory expectations for the future. The Gulag leaders willingly undertook the building of Noril’sk as a result because they underestimated the risks and difficulties that would arise. The operation of Noril’sk helped to expose illusions about the ease with which the inmates could be manipulated and coerced into supplying effort. The “profitable” exploitation of forced labor proved an elusive goal. As time went on the authorities lost faith in unbridled coercion and heavy punishments, and turned more and more to positive inducements including higher wages and early release in return for extra effort.

Both the volumes that I have reviewed here adopt the methodology of social science. Narrative provides background but is not the central focus. Alternative hypotheses are formulated and tested informally. The standards of evidence and proof are not those that are usually available in conventional applied economics. There are figures and tables but no large quantitative datasets and hardly any regressions. The great bulk of the evidence is qualitative: decrees, memoranda, judgments, letters, reports of conversations, and anecdotes. The argument proceeds mainly by illustration. This is characteristic of the new institutional economic history associated with the writing of figures such as Douglass C. North and Avner Greif. At the present it is not clear that anyone can do better.

One possible criticism of both books is that while it is obvious that the source materials are new it is not so clear that the conclusions are always novel. To give an example from each book: Gregory finds that the main purpose of long term plans was motivational, but Eug?ne Zaleski (1971, p. 291) also concluded that the main role of these plans was to act as a “vision of growth.” Several contributors to The Economics of Forced Labor note the surprising importance of positive incentives in securing effort from prisoners who were apparently completely powerless and whose reservation wage was apparently close to zero; but the same point was made before by Rasma Karklins (1989). Indeed, in the early chapters of his Gulag Archipelago Alexander Solzhenitsyn (1974) provided an extended analysis of the labor economics of the camps, based on anecdote and memoir; the incentives that he described are quite different from those emphasized by the work presently under review, and it would be of interest to see discussion of the possible reasons for this divergence. Having said this, there can be no doubt that the general level of evidential detail and economic analysis in the present works is greatly superior to anything that has been available hitherto.

These books share still other features. There is something in them to challenge everyone. Both assume some background knowledge of Russian and Soviet history and will be read with great interest by specialists and Honors students. Historians may find that they need to rethink historical problems in terms of the economic choices that were available. Economists will find themselves challenged by unfamiliar institutions and unusual problems to solve; in the past year I have used The Political Economy of Stalinism as a textbook for economics undergraduates who have been excited by the opportunity to think outside the boxes of Micro 101. As a teacher of economics and economic history I believe that these books signal new directions in the study of the Soviet economy that have interesting parallels with the new thinking in economic history and political economy associated with scholars like Greif and Daron Acemoglu. They will greatly influence the ways that we teach and do research in the future.

In summary, if you want to know more about where Soviet economic history is going I strongly recommend that you read these exciting new books. The Hoover Institution has generously made the full text of The Economics of Forced Labor available free of charge; the URL is:

http://www-hoover.stanford.edu/publications/books/gulag.html.

References: Berliner, Joseph S. 1976. The Innovation Decision in Soviet Industry. Cambridge, MA: MIT Press.

Karklins, Rasma. 1989. “The Organisation of Power in Soviet Labour Camps.” Soviet Studies, 41:2, pp. 276-297.

Solzhenitsyn, Alexander. 1974. The Gulag Archipelago, 1918-1956. Volume 1. London: Collins/Fontana.

Zaleski, Eug?ne. 1971. Planning for Economic Growth in the Soviet Union, 1918-1932. Chapel Hill, NC: University of North Carolina Press

Mark Harrison is professor of economics at the University of Warwick and honorary senior research fellow of the Centre for Russian and East European Studies, University of Birmingham. He is the author of a number of books and articles on Soviet economic history including “The Political Economy of a Soviet Military R&D Failure: Steam Power for Aviation, 1932 to 1939,” Journal of Economic History, 63:1, 2003, pp. 178-212. He edits the PERSA (Political Economy Research in Soviet Archives) Working Papers, available from http://www.warwick.ac.uk/go/sovietarchives.

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

Inventing a Soviet Countryside: State Power and the Transformation of Rural Russia, 1917-1929

Author(s):Heinzen, James W.
Reviewer(s):Wheatcroft, Stephen

Published by EH.NET (June 2004)

James W. Heinzen, Inventing a Soviet Countryside: State Power and the Transformation of Rural Russia, 1917-1929. Pittsburgh: University of Pittsburgh Press, 2004. x + 297 pp. $44.95 (cloth), ISBN: 0-8229-4215-1.

Reviewed for EH.NET by Stephen Wheatcroft, Department of History, University of Melbourne.

James W. Heinzen of Rowan University, Glassboro, New Jersey has written a very interesting book on several aspects of the history of the People’s Commissariat of Agriculture of the RSFSR (NKZem-RSFSR) from 1917 to 1929. This was the main state agency in the Russian Soviet Federated Socialist Republic that was involved in agricultural administration during the period of War Communism and the New Economic Policy (NEP). The contribution of People’s Commissar A.P. Smirnov, 1922-28 in protecting agricultural specialists, and in promoting a cautious rightist economic policy has been underestimated and Heinzen’s book is welcome in providing us with more detail about the internal vedomstvennii (departmental) politics that surround developments that have generally been seen from the central party position. Such a broadening of the picture is necessary because the political conflict of the time, and the infamous struggles between the Rights, the Left and the Party Center have tended to dominate most accounts of this period, and to give the opinion that it was these struggles that dominated everything that was happening at the time.

A few historians, including R.W.Davies, E.A. Rees and myself have argued that while the party struggles determined who the political leader would be, policy was often determined on the ground in the key state agencies in a sort of political vacuum. Heinzen’s book is therefore a welcome addition to the growing number of vedomstvenii histories that are beginning to transform our understanding of how NEP worked, and why it collapsed.

The description of the early years of the People’s Commissariat and the precarious transition from Tsarist Ministry to Revolutionary People’s Commissariat is generally fine, but it is marred by an early blunder about the nature of this particular commissariat. On pages 21-22, when discussing the birth and early activities of the Commissariat, 1917-20, it is stated that “Unlike some commissariats, which were headed by an agency at the national level, the Commissariat of Agriculture was one of the so-called non-united commissariats, for which separate commissariats were established in each republic.” This is confused. In 1917-20 there was no Union of Soviet Socialist Republics. The country at this time was known as the RSFSR and federated with it Republics. NKZem-RSFSR was an agency at the national level. The distinction that Heinzen has introduced here at the birth of NKZem only became apparent after the formation of the USSR in 1922, when the decision was made not to create a People’s Commissariat at this time at the Union level. There was a reason for this, which relates to the fear that Lenin and other leading Bolsheviks had in the early stages of NEP that Party extremists would attempt to impose unrealistic universal plans on agriculture if an appropriate mechanism for this could be found. This is important for Heinzen’s story, because his story leads up to the establishment of an All-Union NKZem in 1929 precisely when such extremist and unrealistic plans were being launched.

My main criticism of the book is that it claims to be far more than it really is, that it doesn’t really cover all, or even all the important activities of NKZem RSFSR, and even more so does it fail to cover all the important aspects of state power and the transformation of rural Russia during this period.

I will just provide a few examples of the shortfalls in each of these cases.

The book spends little time looking seriously at the plans that were drawn up for the transformation of agriculture and how NKZem fitted into these plans, it also fails to provide much of an indication of the work actually carried out by NKZem, and it tends to suggest that very little was done.

Much of the planning for agricultural development was carried out in Gosplan, which was a universal centralized planning commission, which was set up at the same time that the policies which became known as NEP were accepted. Lenin initially opposed the creation of a Universal planning body, and only appears to have accepted it as a compromise for the party’s acceptance of NEP. Having been forced to accept Gosplan, he was keen to influence how it worked and was particularly anxious to ensure that it was staffed by cautious specialists. Lenin insisted that P.I. Popov, the non-party head of TsSU be the head of Gosplan Agricultural Sector. Popov, in his turn was determined to block any plan that required unrealistic surpluses of agricultural products to be extracted from agriculture. He quite reasonably insisted that major central planning needed to await improved statistical materials. There were at the time massive disputes over the size of grain harvests and even over the size of the population. Popov was also holding out for a midterm 1925 series of censuses to provide a serious basis for planning. The first multi-sectoral plan was drawn up as OSVOK in VSNKh because of Popov’s intransigence. Neither the Party Right, nor Smirnov in NKZem came to the support of Popov when he was attacked by Yakovlev and NKRKI in early 1926.

Subsequent conflicts over agriculture development were based on very shaky and distorted evaluations of agricultural reality. Lenin’s fear that the extremists would dominate the planning system and agricultural administration was becoming true. Smirnov was more involved in assisting Rykov to restrain the more extreme grain plans proposed for 1926 and 1927, but the failure to accumulate adequate reserves in combination with unwise pricing policy and poor weather, contributed to the grain procurement crisis of 1927/28. Kondratiev was a major victim of this crisis, not because the crisis provided a justification to attack NKZem, but because he was director of the Economic Conjuncture Institute of NKFin, where an article written by Vainshstein in the Bulletin edited by him warned that current policies were likely to lead to a restoration of War Communism.

Smirnov may have been a victim too, but he was probably more of a political figure than Heinzen suggests. His removal from NKZemRSFSR in March 1928 was not accompanied by dismissal, but with a move that could be interpreted as a promotion. He was already a member of the Party Orgburo, and in April he replaced Kubyak as a member of the Party Secretariat. He retained his important position as a member of STO until July 1929. His major demotion came relatively late after the XVIth Party Congress in July 1930 when he lost his place in the Secretariat and was demoted to Candidate member of the Orgburo.

As regards other neglected activities in NKZemRSFSR. One of the major achievements of NKZemRSFSR at this time was the extraordinary achievement of organizing the improvement of seed used for sowing.

Finally, on what may appear to be a fairly minor detail, Heinzen presents a confusing picture of the level of agricultural production in these years. He is generally correct in his text in describing the failure of grain production in the late 1920s to reach the pre-war level, but he does include a very misleading table which provides a totally different indication of the situation.[1] Although this may appear to be a minor matter I would argue that it is extremely important.

The main point about the Soviet countryside that was invented by Soviet State power in the late 1920s lies precisely in this confusion. The State invented a countryside that had abundant grain and where failure to market grain supplies was the result of peasant sabotage. Popov before 1926, and a whole stream of later heroic statisticians, (including surprisingly Osinskii) tried in vain to correct this distorted invention, and the major catastrophe that struck in 1932-33 was a consequence of this false invention. Any account of the politics of Soviet agriculture for this period which fails to describe this distortion is missing the main story. Heinzen’s account of the history of Smirnov’s attempts to protect rural specialists is important, but it does not live up to its claims to be a history of state power and the transformation of rural Russia, and unfortunately it fails to get to grips with one of the main distortions of the Soviet countryside that was invented at this time.

Note: 1. For most of his text Heinzen argues correctly, but in one critical table (table 4-1 on p. 140) he, for some reason, gives a totally misleading series which claims that mid 1920s levels of grain production were above the average pre-war level. The table comes from V.P. Danilov, the leading Russian authority on the Russian peasantry. But it is from a volume published in the USSR in 1977 at a time when the censor did not allow any figures to be published which disagreed with the current official assessments of the Soviet statistical system. So these are the ‘official’ Soviet figures of the time, which have been uncritically cited here. Danilov had no choice but to include these figures. Heinzen, should have known better, and in fact does know better. After the fall of the Soviet Union and the Soviet censor, Danilov was able to support other figures. Volume 3 of the important new series “Tragediya Sovetskoi Derevni,” which was produced under Danilov’s leadership, contains an appendix written by me which explains the distortions that were applied to the grain statistics of the late 1920s to make them appear larger than they were in reality. See V.P. Danilov et al., Tragediya Sovetskoi Derevni, Volume 3, Moscow 2001, pp. 842-865. As far as I am aware Danilov accepts my account of the scale of Russian grain harvests of this period, which is why he commissioned me to write that appendix.

Stephen Wheatcroft, together with R.W. Davies has just completed The Years of Hunger: Soviet Agriculture, 1931-33, Macmillan/Palgrave, 2004. This is volume 5 of The Industrialisation of Soviet Russia. He is one of the editors of the five-volume series led by V.P. Danilov, Roberta Manning and Lynne Viola, on “The Tragedy of the Soviet Village, 1927-1939,” Moscow, 1999-2004, and he is the author of the two articles on “Grain Balances and Harvest Evaluations” and on “Demographic Evidence of the tragedy’ in volume 3 of these volumes. He has written widely on Stalinist repression, the Famine and Stalinist Politics.”

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

Freedom from Want: American Liberalism and the Idea of the Consumer

Author(s):Donohue, Kathleen G.
Reviewer(s):Gerber, Larry G.

Published by EH.NET (June 2004)

Kathleen G. Donohue, Freedom from Want: American Liberalism and the Idea of the Consumer. Baltimore: Johns Hopkins University Press, 2003. xii + 326 pp. $45.95 (cloth), ISBN: 0-8018-7426-2.

Reviewed for EH.NET by Larry G. Gerber, Department of History, Auburn University.

Kathleen G. Donohue, assistant professor of history at the University of North Carolina, Charlotte, has written an ambitious book exploring the evolution of modern American liberalism from 1870 to 1940 by concentrating on changing conceptions of consumption and consumers. Donohue is not the first historian to consider the ways in which the development of a consumer-oriented society transformed American liberalism, but her carefully focused reading of a large and diverse group of economic and social theorists sheds new light on the intellectual underpinnings of post-New Deal liberalism.

Donohue begins by describing the ?producer paradigm? that dominated American thinking about the political economy in the late nineteenth century. She observes that ?classical liberals? assumed that only those responsible for the production of wealth were entitled to enjoy its benefits and that consumption was at best an unfortunate necessity because it represented the destruction of wealth. Donohue points out that going all the way back to the Puritans, Americans had consistently viewed consumption as a vice, but that only with the development of classical economics in the nineteenth century did the producer come to be seen as the embodiment of all that was good. Late nineteenth- century radicals and socialists may have differed sharply with liberals about the desirability of capitalism, but they shared the belief that the producer, whether worker or entrepreneur, ought to be at the center of the political economy and that the interests of consumers and producers were, in many ways, incompatible. Theorists as diverse as William Graham Sumner, Henry George, Richard Ely, Charlotte Perkins Gilman, and the early Thorstein Veblen all adopted a producerist worldview that assumed an individual?s identity and worth derived from his or her role as a producer.

In the last two decades of the nineteenth century, according to Donohue, a number of influential writers began to challenge the negative view of consumption and consumers that had become so widespread. Even though intellectuals such as Simon Patten and Edward Bellamy continued to view production as the key element of the economy, they began to lay the foundation for a more positive view of consumption that divorced the right to consume from the individual?s role as a producer. The Progressive era subsequently proved to be a ?turning point? in the development of a consumerist perspective as Veblen and consumer advocates such as Florence Kelley began to associate the public interest with the interests of consumers and to undermine the positive connotations that had long been associated with the category of producer.

It was not until the final years of the Progressive era and the 1920s, however, that a new generation of social theorists, including Walter Lippmann, Walter Weyl, Stuart Chase, Robert Lynd, and Rexford Tugwell, completed the theoretical reconstruction of classical American liberalism by arguing that the nation?s political system should be organized around the consumer rather than the producer. Although the new consumer-oriented liberals offered a variety of prescriptions as to how government might most effectively intervene in the economy to safeguard the interests of the consuming public, they all assumed that a strictly market-based, producer-oriented, system no longer promoted the well being of society.

Such ideas, Donohue admits, had little impact on American politics until the Great Depression created a radically new political environment. Even at the outset of the New Deal, consumer-oriented liberals had to contend with advocates of a more traditional producer-oriented approach for influence within the Roosevelt administration. However, the failure of the NRA helped pave the way for the triumph of a consumerist approach. Ultimately ?consumerist left liberals? such as Tugwell, Chase, William Trufant Foster, and others who at one time worked within the Agricultural Adjustment Administration played a key role in making ?freedom from want? a central tenet of American thinking. They thus prepared the ground for the triumph of a Keynesian approach to the economy that was based on the premise that a consumption-oriented economy best served the public interest.

Freedom from Want is a well crafted example of traditional intellectual history. Donohue?s close reading of the works of a variety of economic and political theorists not only provides interesting new insights into the thought of the individuals she examines, but also allows her to construct a compelling narrative of the dramatic change that occurred over a span of half a century in liberal thinking about the role of consumption and consumers in the political economy. Her analysis effectively highlights the way in which the development of a consumer-oriented approach to the political economy undercut the potential appeal of socialism, which continued to place the producer/worker at the center of the political and economic universe.

However, Donohue?s history of ideas does have some self-imposed limitations. Although Donohue acknowledges the significance of the Great Depression, for most of her study she does little to relate the theoretical works she examines to actual changes in the American economy. It would, therefore, be useful to read Donohue?s book in conjunction with James Livingston?s Pragmatism and the Political Economy of Cultural Revolution, 1850-1940 (UNC Press, 1994), which examines many closely related issues while attempting to link the concerns of more traditional intellectual history to a sophisticated treatment of economic developments.

In addition, except for her discussion of the NRA and AAA, Donohue rarely makes any effort to connect her analysis of what intellectuals wrote about the idea of the consumer to actual public policy developments. Moreover, her emphasis on the significance of the AAA for the subsequent emergence of a consumption-oriented New Deal liberalism offers a less complete and less convincing account of the triumph of Keynesian welfare state liberalism within the New Deal than does Alan Brinkley?s The End of Reform (Knopf, 1995).

Such criticisms are not meant to detract from the value of Donohue?s work. Her principal objective is to trace the gradual development of the intellectual foundations upon which modern liberalism was built, and in this regard she makes a significant contribution. No one narrative can portray all the dimensions of this story, but Donohue deserves praise for dealing in depth with so many diverse thinkers. At times, her distinctions between ?left liberals? and ?consumerist left liberals? and ?new liberals? as opposed to ?corporate liberals? or ?Veblenian liberals? can be confusing. Yet, the confusion may well be an accurate reflection of the fact that the development she traces from the producerist worldview of 1870 to the consumer-oriented consensus that had emerged by mid-century was not unilinear.

Larry G. Gerber is the author of The Limits of Liberalism (NYU Press, 1983) and numerous articles in such journals as Business History Review , Journal of Policy History, Journal of Economic History, and Social Science History. He has just finished a book manuscript entitled ?The Irony of State Intervention: American Industrial Relations Policy in Comparative Perspective, 1914-1939.?

Subject(s):Household, Family and Consumer History
Geographic Area(s):North America
Time Period(s):20th Century: Pre WWII

Agrarian Change in Late Antiquity: Gold, Labour and Aristocratic Dominance

Author(s):Banaji, Jairus
Reviewer(s):Grantham, George

Published by EH.NET (May 2004)

Jairus Banaji, Agrarian Change in Late Antiquity: Gold, Labour and Aristocratic Dominance. Oxford: Oxford University Press, 2002. xvii + 286 pp. $85 (hardcover), ISBN: 0-19-924440-5.

Reviewed for EH.NET by George Grantham, Department of Economics, McGill University.

Of the many unresolved issues in Europe’s pre-industrial economic history, few have proved more recalcitrant to scholarly investigation than the economic evolution of the Later Roman Empire. The biggest impediment is the loss of almost all documents concerned with the distribution of land, its productivity, the details of fiscal and monetary institutions that affected aggregate economic performance, and prices. Papyri preserved in the arid climate of Egypt and Syria provide some numerical evidence from the eastern half of the Empire, but the only information bearing on daily economic life in the Western Empire comes from the legal texts and a few dozen fragments of commercial correspondence preserved on wooden writing tablets. As a result, the picture of the late Roman economy has had to be pieced together from histories often composed a century after the facts they relate, contemporary religious polemics, and the two great digests of Roman Law compiled in the late 430s and the 560s. This is the stuff of which myths are made. The central myth of the later Roman economy is that it imploded into rural autarchy based on privatized local government by landlords who ruled over a large class of agricultural dependents in a kind of latent feudalism. These views are best known to modern economic historians through the works of Moses Finley.

Professor Banaji’s book is one of a growing number of recent publications to challenge this myth, whose roots go back to the narratives constructed by Italian Renaissance humanists, and more recently to Max Weber. A firm supporter of the ‘stages’ theory to economic and social evolution as expressed in the writings of B?cher, Weber argued on a priori grounds that the classical economy could not have been capitalist — by which he meant a society peopled by profit-maximizing agents coordinated by market prices — because western capitalism arose in the unique historical circumstances of the central Middle Ages. The classical economy was a household economy writ large through the agency of agricultural slavery. Weber conceded the existence of the market, but he argued that it was a hothouse plant rooted in the easily depleted soil of slavery, and withered when that institution decayed into a kind of latent feudalism for lack of new supplies of slaves. In the first and arguably best chapter of this book, Banaji draws on an extensive body of inscriptions, classical sources and archaeological reports to show that the market economy flourished in rural areas through the fourth and fifth centuries. The evidence mainly concerns North Africa and the Levant, but there is no reason to suppose it is unrepresentative of other parts of the Empire. While the documentary material is anecdotal, the overall demonstration seems solid, and accords with archaeological findings. One of the questions that evidence raises is why historians dismissed it for so long. In a useful review of the historiography, Banaji observes that Weber seems deliberately to have ignored a seminal study of Egyptian papyri by one of Mommsen’s students, which demonstrated the continuity of monetized exchange from era of the Ptolemies to the fifth century AD.[1] The general conclusion, then, is one that a growing number of classical scholars are prepared to accept — that the Roman Economy was a ‘market economy.’

Solving the taxonomical problem, however, is no more than a preliminary step to resolving questions about the path of the late classical economy. McCormick’s recent analysis of the digitized source material indicates that market connections between Western Europe and the Levant survived the fall of the Roman Empire in the West and the loss of North Africa and most of the Middle East to the Arabs in the seventh century.[2] His work also supports the generally accepted view that in the aggregate the Roman economy was probably shrinking from the third through the seventh century, which is not inconsistent with evidence showing the persistence of markets and of regional prosperity. In the absence of information that might make it possible to weight the likely experience of different parts of the Empire over this long period, one must withhold judgment. Nevertheless, Banaji’s suggestion that the fourth century and much of the fifth were fairly prosperous is plausible. We now know that the ‘invasions’ were less disruptive than over-romanticized accounts made them seem.

These questions, however, are secondary to the main purpose of the book, which is to argue that the gold standard instituted by Diocletian and his successor Constantine set the foundation for late classical prosperity. The solidus established at Trier by Constantine in 310 held its value in gold to the end of the Empire. The same cannot be said of the copper and silver coins that constituted the bulk of the circulating media. Following the arguments advanced by the Swedish historian Gunnar Mickwitz, Banaji argues that the new gold coinage revolutionized the late Roman economy by securing a stable money, and by providing a means by which financially astute bureaucrats could accumulate fortunes that they subsequently invested in land. The argument thus reverses the old historiography by asserting that the new currency system assisted the revival and indeed an expansion of a monetized economy. The logic is nevertheless confusing. It seems to go like this.

In the troubled middle decades of the third century, the old Roman fiscal system collapsed under the combined weight of repeated wars among competitors for the Imperial throne and invasions by barbarians taking advantage of a temporary power vacuum along the frontier. To meet pressing needs the Imperial state began to collect taxes in kind, which were paid directly to troops stationed in the districts where the taxes were being raised. In the conventional historiography the appearance of an in-kind fiscal system went hand in hand with the reversion to a ‘natural economy.’ According to Mickwitz and Banaji, taxes in kind went to the troops; the bureaucrats continued to be paid in cash, and so had an interest in a stable currency. The gold standard is thus explained by interest group politics. Banaji seems to accept the view that in the third century the economy was becoming less monetized, and that this trend reversed itself after the establishment of the solidus. The logic of this argument is very obscure. The value of the solidus relative to the price of ordinary commodities and labor (a semi-skilled worker earned three solidi per year) was so high that it can hardly have been used except as a store of wealth or in banking and wholesale commerce. Evidence of its being used in ordinary transactions most likely refers to its use as a unit of account. The value of other coins relative to the solidus varied systematically over time. One should be able to make some sense of the pattern, as the copper coinage was the principal medium of exchange. Unfortunately Banaji is not a trained economist. His monetary analysis is hopelessly contaminated by the attempt to explain the variations in the relative value of the copper, silver and gold coinage by a political sociology. The monetary history of the later Roman Empire deserves better.

The remainder of the book analyzes the evolution of landholding in Egypt from fifth to the seventh century. The main argument is that a class of large owners whose original fortunes came from high office gradually displaced the local gentry. Banaji argues that the former accumulated their fortunes in specie. Much of the discussion is given over to the commercial activities carried out on these estates. The material, which comes from a considerable body of extant papyri, is suggestive but the line of argument is lost in details that seem to be directed at several distinct issues. In view of that evidence the notion that landholding became more concentrated after the fourth century seems plausible. One is nevertheless hesitant to extend the generalization to other parts of the Empire. Egypt was always a special case.

I looked forward to reviewing this book, and have been greatly disappointed by it. Its learning is undirected and confusingly set out. It does not state hypotheses in a way that might permit the reader to judge whether they are supported or disconfirmed by the facts. This is partly the fault of the facts, which are scattered and hard to aggregate into an empirical argument. Yet one comes away with the sense that there are enough facts to support a well-argued hypothesis. The strong point of the book is its document of pervasive market activity. It ought to be possible to reason from this demonstration to develop some conjectures bearing on the supply and especially the demand for money after 300 AD. Banaji’s book suggests that there are sufficient facts around to attempt this. What is needed is a bit more formal reasoning to provide some structure around which the facts can be organized. As has become all too common in academic publishing, the copy editing is shoddy; some sentences are incomplete, and others so poorly constructed that getting through them is a labor of Sysyphus. The book stands as an object lesson in why economic history should be done by people who understand economics. The monetary and fiscal history of the Later Roman Empire remains an enigma.

References:

1. Ulrich Wilcken, Griechische Ostraka aus Aegypten und Nubien (1899).

2. Michael McCormick, Origins of the European Economy (2001).

George Grantham has been working for an intolerably long time on a book on the long-run economic history of pre-industrial agricultural productivity in Europe. Recent publications and working papers include “Rationality Revised: A Brief History of the Concept of Rationality in Economics” in The Social Sciences and Rationality: Promise, Limits and Problems, edited by Axel van den Berg and Hudson Meadwell (Transaction Press, forthcoming, 2004); “Contra Ricardo: On the Macro-economics of Europe’s Agrarian Age,” European Review of Economic History (1999); “The Early Medieval Transition: On the Origins of the Manor and Feudal Government” (September 2003); and “Economic Integration in the First Millennium BC: The Alphabetic Revolution” (July 2003).

Subject(s):Government, Law and Regulation, Public Finance
Geographic Area(s):Middle East
Time Period(s):Ancient