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The Invention of Coinage and the Monetization of Ancient Greece

Author(s):Schaps, David M.
Reviewer(s):Silver, Morris

Published by EH.NET (April 2004)

David M. Schaps, The Invention of Coinage and the Monetization of Ancient Greece. Ann Arbor: University of Michigan Press, 2004. xvii + 293 pp. $75 (cloth), ISBN: 0-472-11333-X.

Reviewed for EH.NET by Morris Silver, Department of Economics (Emeritus), City College of the City University of New York.

Briefly stated, David Schaps’ central argument runs as follows:

Coinage = Money (in the Greek experience the two are equated) was invented in Greece or Asia Minor (Lydia) in the later seventh or earlier sixth century. The Greeks eagerly copied/adapted this innovation and it spread rapidly in their cities during the sixth century. The result was a profound transformation in Greek economy and society. Before the Greek adoption of coinage, the ancient Mediterranean world knew only primitive money, not money as we know it. Primitive money was incapable of generating the revolution that Greece experienced.

I begin with a number of quotations capturing the argument and then, in the main part of the review, move on to consider the details.

This book will tell the story… of the development of money both in the Near East and in Greece up to the invention of coinage and its widespread adoption by the Greek cities, the only communities that adopted it wholeheartedly at its first appearance. (17)

Something new happened with the invention of coinage, and it produced a new idea that persists to our day. (5)

I have tried throughout only to sketch the ways in which Greek thought and behavior were changed by the introduction of money. (vii)

From the Greeks onward, we find a new way of speaking and ofthinking. Now a person might state the entirety of a household’s possessions in terms of money, as no member of a premonetary society would ever do. (16)

One of the central propositions of this book is that when we speak historically, the invention of coinage was the invention of money: that is, the concept that we understand as “money” did not exist before the seventh century B.C.E., when coins were first minted. There surely had been many items before that we may recognize correctly, as money, there were even places…where a single item performed all the functions associated with money. Never before, however, had these items been conceptualized as money, for money to the Greeks, as to us, was the measure of all things, something different in nature from all the valuables that might represent it. (15; emphasis in original)

All ancient Near Eastern societies had a conventional standard of value, usually precious metals or a specified grain. The standard of payment was always “primitive money,” never coin, and it did not always perform all the functions that coin was later to perform…. If Greece was the cradle of coinage and Lydia its birthplace, the societies of the Near East were its ancestors. (34)

Schaps links the unprecedented Greek adoption of coinage with Greek backwardness. The Greeks… who had only very primitive forms of currency, thought of coins as they had never thought of those items in which they had once traded, evaluated and paid. An ideal that had grown up in the East at a time when Greece had no need for it suddenly dawned on the Greeks when coins appeared. It was a time when the Greeks were in a period of economic and intellectual expansion for which their relatively primitive economic concepts did not provide an adequate basis…. Precisely because of their economic backwardness, they had no sufficient preexisting conceptual structure to compete with or subordinate the idea of money. (16-17)

Why did the ancient Near East (ANE) not move from a very evident monetization to “money, as we know it”? Technology would not have raised a barrier to the transformation. Why were coins so exciting to the Greeks and so uninteresting to their neighbors? The answer is that they filled a need peculiar to Greek society…. It was Greece that was searching for new forms of government and administration to manage the new complexity of the poleis and new ways of organization to maintain its people, and coins made that administration and that organization simpler and more manageable than spits and cauldrons [primitive money] could have done. (108)

This is interesting, but not entirely convincing. An alternative line of explanation is that coinage (guaranteed money) is not nearly as important economically as Schaps supposes. The alleged special interest of the Greeks in coinage may then reflect an ideological dimension peculiar to the Greeks. Schaps mentions “the particular Greek appreciation of the universality of money” (196). There is also a real question, explored below, whether Greece was really so backward monetarily as Schaps suggests.

Schaps’ presentation is quite clear and, obviously, there is rich material here. The view that coinage was invented by the Lydians is one that is generally accepted by scholars. I do have some problems with the equation of money with coinage and the meaning of “primitive money.” There is also something of a problem with respect to whom, according to Schaps, invented coinage: On the one hand, the Lydians invented coins and then the Greeks eagerly used them. On the other hand, the time when the Greeks eagerly used coins is the time of invention. These are relatively minor issues and I put them aside. On to the details!

I. Did the Ancient Near East Know Coinage?

A. Indirect Evidence

1. Schaps states that a “discussion of the factors that go into price determination does not form part of this book, for their importance arises in a money economy, and the point at which the Greeks achieved a money economy is the point at which this study ends” (30). I am not sure exactly what this means. Schaps is perhaps suggesting that the forces of supply and demand determine prices only in an economy with money, which he equates with coinage. This is, of course, completely false. Later Schaps adds “The Babylonian economy was still not, as it would become in the Hellenistic period, dominated by a market where prices changed each day; but it was not immune to the law of supply and demand” (49). This is a heroic understatement! Although we do not have daily price data, there is ample evidence of price changes and of the operation of supply and demand. Indeed, the Old Babylonian period (earlier second millennium BCE) has been characterized by Hallo (1958: 98) as one in which “there was a price on everything from the skin of a gored ox to the privilege of a temple office.”

2. Silver was indeed used as a means of payment in the ANE. However, rather than spreading through the population, it remained in the hands of merchants. “It never became, as coins eventually would, synonymous with wealth itself. It could not have done so, if only because too few people owned it. For this reason, the Babylonians never thought of silver as we think of money” (51).

The surviving documents do not demonstrate that Mesopotamians thought of money in the same way the Greeks did. Caution is justified about the reason for this presumed difference. There is evidence for the dispersal of precious metals in the population. As early as the middle of the third millennium in Ebla (in Syria) silver was used to purchase ordinary goods including clothing and grain as well as wine and semi-precious stones (Archi 1993: 52). Mesopotamian texts of the middle of the second half of the third millennium already show us street vendors, and, according to Foster (1977: 35-36, nn. 47, 48), the use of silver to pay rents and purchase dates, oil, barley, animals, slaves, and real estate; in addition, “silver was widely used in personal loans and was often in possession of private citizens and officials.”

3. Schaps asserts “The silver of the Near East had never been coined; it was weighed at each transaction, and the scale was an essential accessory to every sale” (49). This statement may reflect general belief, but it goes beyond the evidence. It is not true that ANE texts invariably mention weighing and/or scales. Indeed, to my knowledge, the mention of scales is infrequent. Nevertheless, Schaps is on strong ground in stressing the centrality of weighing in transactions recorded in the Bible.[1]

B. Direct Evidence

Schaps maintains that “an examination of the various primitive items that have at one time or another been claimed to be coins fails to reveal any clear example, and it may be useful to clear the air of the various hypotheses, which by their very number can create the false impression that coinage was common in the eastern Mediterranean Basin long before the Lydians and the Greeks” (222-23). Elsewhere he maintains that “the verisimilitude of the preceding suggestion is not much above zero” (235). Schaps may well be correct in rejecting this hypothesis. However, his treatment of the evidence leaves something to be desired.

1. The evidence is reasonably clear that the ANE went a good part of the way toward coinage by circulating ingots of guaranteed quality. Assyrian loan contracts of the eighth to seventh centuries use various formulas to advance “silver of (the goddess) Ishtar (of the city) Arbela (or Nineveh or Bit Kidmuri).” Lipinski (1979) argued brilliantly against interpreting this phrase to mean “temple capital.” Expressions of this kind, he suggested, refer to the quality of the metal, and their inclusion in contracts makes no sense unless the metal is impressed with a stamp of guarantee. The practice of guaranteeing metal quality, it may be added, probably goes back to the second millennium. The expression “silver of the gods” is found in texts from Mari in Syria and Amarna in Egypt. For example, in a letter concerning the disposition of an inheritance the king of Mari refers to the deceased person’s “silver of the gods” (Malamat 1998: p. 185; cf. CAD s.v. ilu 1.e).

In discussing the ingots from the temple of Arbela Schaps concludes: There was nothing particularly important about this development as far as Assyria was concerned. The temple’s ingots, even if stamped, were no more than good quality silver…. It will have been the business of a merchant to recognize them and to know good silver from bad, but there was nothing revolutionary about them. They may have come in convenient sizes…, but they were hardly standardized, and it is hard to imagine that a merchant would have failed to put them on the scale before accepting them. (92)

A guarantee of metal quality surely reduced the transaction cost of using money and it is therefore puzzling that Schaps considers this a development little or no importance. Moreover, he goes beyond the evidence in saying that the ingots were not standardized in weight. The texts do not say that the ingots were weighed.

2. Schaps writes of the Egyptian shaty “piece”: “It is regularly used as an item of account, not a medium of trade: that is, not ‘pieces’ but other items changed hands, bartered for each other and evaluated in terms of ‘pieces'” (224-25). In fact, there is evidence for the circulation of shaty‘s in texts of the Ramesside era (second half of the second millennium). In the Eighteenth Dynasty, a text (Papyrus Brooklyn 35.1453A) records the delivery of silver shaty‘s to a woman at the meryet “quay, marketplace” (Condon 1984: 63-65). In Papyrus Boulaq 11 merchants pay for quantities of meat and wine with shaty‘s (Castle 1992: 253, 257; Peet 1934). The texts do not say that the shaty‘s were weighed or tested for quality.

3. Schaps discusses the Egyptian Hekanakht letters of about 2000 BCE, but he does not refer to the following significant detail. Copper coins may be indicated when Hekanakht sends to his agent “24 copper debens” for renting land. James (1984: 245) explains that “the letter says quite clearly ’24 copper debens,’ not ’24 debens of copper,’ which ought to signify 24 pieces of copper each weighing, one deben.”

4. Schaps does not mention texts from the Assyrian trading station in Anatolia (earlier second millennium BCE) in which we sometimes find prices being expressed in terms of copper ingots, patallu and sad?lu. Thus, one Dakuku “owes 12 copper sad?lus as the price of donkey.” Dercksen (1996. 60, n. 179) notes that “quantity is expressed by simply giving the number of ingots instead of their weight [which] points to a more or less customary weight and size for this type” (emphasis added). I would add that use of the number of ingots also points to a standard quality.

5. Schaps defines “coin” as follows: “[A] coin is an object, usually but not necessarily of metal, which circulates as a medium of trade, and whose value is guaranteed by the stamp of the issuing authority” (223). He adds: “We may thus ignore without further discussions such items as spits, rings, and sealed bags of silver, which although they served many of the purposes that coins later served were not by themselves coins at all. They belong to the history of ‘primitive money’… (223).

Schaps’ dismissal of sealed bags of silver is most puzzling and instead of ignoring these, he offers a brief discussion of their significance. He concludes that “When silver was to be reused, a certain amount was given to the assayer in advance. Whatever the assayer did not use was sealed with a royal seal, obviating the need for weighing and assaying it again. The ‘sealed silver,’ then, is ordinary silver sealed in a sack, not a coin” (223-24).

In my view, sealed bags provide evidence for widespread use of “coinage” in the ANE. The background is as follows. Cuneiform sources of the first half of the second millennium refer to sealed bags of silver (e.g. kaspum kankum). We hear of “(silver) in lumps-sealed in a bag” (CAD s.v. kankua) and “x silver which is placed in its sealed bag” (CAD s.v. kan?ku 2). There is also mention of silver “marked” (udd?) with its weight (CAD s.v. id? 4.a). Copper might also be packed into purses called (c)hurshianu (CAD s.v.; Dercksen 1996: 66)

The sealed bags might be transferred: “I needed (and asked you for in writing) ten shekels of silver under seal.” x silver which PN gave to PN2 , and which is marked with the name of the merchant. (CAD s.v. s(umu 1.e); “you have sent me silver which is not fit for business transactions… send me silver, (in) a sealed bag” (CAD s.v. kaniktu 2). Oppenheim (1969) makes brief mention of cuneiform sources of the first half of the second millennium that refer to sealed bags of silver deposited with persons who used the silver in various transactions. Most directly, the practice of transacting with sealed bags of silver is reflected in the call, in eighteenth-century contracts from Mesopotamia (the city of Larsa), for merchants to pay for palace-owned goods with “sealed silver” (Stol 1982: 150-51). The transactional use of sacks is ignored by S.[2]

Some years ago, in reflecting on these references, it occurred to me that in eleventh-century-CE Egypt and elsewhere in North Africa, in Talmudic times (400-500 CE) and earlier in Carthage and in Rome (the tesserae nummulariae), various coins and (probably) metal fragments were kept in purses labeled on the outside with the contents and sealed by governments or private merchants. In addition to keeping the coins “fresh” — that is, preserving their full weight — Udovitch (1979: 267), who studied the usage in medieval Islam, explains: “these packaged and labeled purses made settlement of accounts much more convenient… by obviating the need to weigh, array, and evaluate coins for every individual transaction. Significantly, most payments and transfers of funds were executed by the actual physical transfer of the purses.” We may assume that these purses circulated among the wealthier classes.

Schaps responds as follows: “[Morris] Silver (126-27) obfuscates this point, going so far as to say that (medieval Islamic!) sealed purses ‘in short… were large denomination coins.’ This is surely to broaden the definition of a coin far beyond reason” (224, n. 9). Schaps obtained this quote from my 1985 edition. In 1995 I wrote: “In short, the sealed purses functioned as large-denomination ‘coins'” (161). The reason for the change in formulation is that numismatic specialists and antiquarians insisted that coins had to be made of metal. I was hammered on this, to an economist, unimportant detail. Schaps? properly broadened definition of “coin” makes my original formulation perfectly appropriate. Under his definition a “nickel,” as he says, can be wooden and “a dollar bill would also count as a ‘coin’ (223, n. 3). The important point is that there is evidence to suggest that the kaspum kankum functioned as/were coins!

6. Schaps does not mention evidence provided by Joann’s (1989). Hammurabi (1792-1750) paid/rewarded Mari’s soldiers with (mysterious) shamsh?tum “sun discs,” gold rings, silver of 5 or 10 shekels, and with small pieces of silver impressed with a seal. Joann?s bases himself on ARMT 25, 815 and a letter (A-486+) to Zimri-Lim, the king of Mari. The key word here is kaniktum from kan?kum “to mark a seal” (see CAD s.vv.). In the absence of (additional?) evidence for the use of kaniktum to make payments, Joann?s suggests that these sealed metal objects may have been “medals.” Perhaps. On the other hand, perhaps they were coins. Indeed, as far as I am aware, the evidence for coinage is more ample than the evidence for “medals”! The text is silent about whether and how Mari’s soldiers spent the small pieces of sealed silver.

7. Several bread-shaped ingots of the eighth century inscribed with the name of a king preceded by the Aramaic letter lamed have actually been found in the palace of Zinjirli, a north Syrian state located on the only good crossing of the Amanus mountains from east to west. The meaning of the possessive l is debated. One possibility is that it means “belonging to” in the sense of personal possession. Balmuth (1971: 3), however, suggests that it means “on behalf of” or “in the name of” (its meaning on coins of later times) and, therefore, that the inscription represents a royal guarantee of the metal. Any such guarantee might refer only to the quality of the metal or to both quality and weight. Schaps responds as follows: “But there is no indication that this disk… was ever meant to be currency at all, and coins did not become current in this area until centuries later” (91, n.52). Thus, Schaps comes close to saying that the ingot could not be a coin because they had not been invented yet! Schaps believes that the disks were designed for storage of wealth, not for making payments. Perhaps he has guessed right. The fact is, however, that there is simply no evidence beyond the inscribed ingots themselves.

As I will show next, Schaps requires much more from the Near Eastern coinage evidence than from the Greek.

II. Greek Coinage Evidence

1. There is clear evidence of a double standard in Schaps’ consideration of the Lydian evidence (93-6). The “Lydian” coins excavated in the Artemision at Ephesus are mostly dated to the seventh and earlier sixth centuries BCE. However, the dating remains controversial. Two of the pieces were dumps not coins. The significance of their inscriptions is still being debated. All but two of the ninety-three pieces conformed to the Milesian weight standard. There is no evidence that merchants would not have had to weigh them. There is no direct evidence that the coins circulated. The coins are made of the wrong metal, electrum instead of silver, gold, or copper. (Variation in the ratio of gold to silver, would seem to call for quality testing.) In short, despite numerous opportunities for raising objections, Schaps does not hesitate to call the finds in the Artemision, the “earliest datable coins” (93; emphasis added).

Schaps explains further: “The motivation behind the ‘cutting’… of such coins must have been quite different from the motivation of the temple of Arbela in casting its ingots. Ingots of a pound or so are a convenient way in which to store silver, and they were probably made for that purpose. Small and minutely subdivided weights of electrum [as in the Ephesus hoard], however, were undoubtedly made for payment not storage” (100). Possibly. However, there is evidence for the circulation of the Arbela ingots. A contract in which neither the temple nor its commercial agent is a party shows the silver being loaned out. The document originates some 50 miles from Arbela. On the other hand, no direct evidence is presented that the Ephesus coins circulated.

Contrast Schaps’ evaluation of the Artemision coins with his view of the Cappadocian lead disks, which may date to the mid-second millennium (225-26). The “ornamentation” on (one side) of the disks is similar but not identical. The disks “vary irregularly in weight.” They are made of the “wrong metal.” There is no evidence of “circulation from place to place.” Scholars have expressed doubts that “such small bits of lead could have had much monetary value” (225). “Nothing suggests that they are coins except their size and shape and the fact that they are made of metal…” (225). It would seem that ANE candidates for designation as early coins are always too large or too small or whatever.

2. Schaps does not demonstrate that the Greece took its inspiration from Lydian coins. Schaps explains: “The Greek coins were silver, not electrum…. The change to silver indicates that coins, even if they had begun as a solution to the problem of the variability of electrum, had come to be appreciated as what they now were: a countable unit of value” (104; emphasis added). Clearly, this terminology simply assumes an imitation and modification of Lydian coinage practices.

3. There are hints that the Greeks had long been familiar with “primitive money” or even coinage. Greek traditions and legends place coinage much earlier than the sixth century. Thus, Plutarch (Theseus 25.3) wrote in the first century CE that Theseus, the legendary unifier and king of Attica, issued coins. In the second century CE, the scholar Pollux (9.83), claimed that coinage was invented by the even more shadowy Athenian figure Erichthonius, an early king. We find reports in ancient literary sources that Pheidon, king of Argos, introduced a silver coinage possibly as early as the eighth century (see S 101-4).

Hacksilber “cut-silver” hoards have not been found inside Greece. However, an eighth century hoard was excavated in Eretria in Euboea. (The Taranto 1911 hoard is dated to c. 600.) Balmuth (1975: 296) suggests that “although many of these have been called silversmith’s hoards, the practicability of exchange by weight suggests that Hacksilber could simultaneously be both material for a jeweler and material for exchange.” Schaps does not “believe there was ever an internal bullion economy in Greece” (195).[3] However, Kim (2001) has presented evidence that money of weighed silver bullion was employed in the Greek world well before the introduction of coinage. There are references to the use of silver to pay fines in Solon’s time.

More importantly, Schaps provides evidence consistent with bullion usage. In the eighth century, at Gortyn in Crete, the leb?s “cauldron” was used to make payments. Schaps explains that “it is hard to escape the impression that cauldrons, as inconvenient as they may seem to be, were functioning as a means of payment… in which fines could be assessed and deposits demanded” (83, cf. 195). Actually, it is preposterous that physical cauldrons were used as means of payment. More reasonably, “cauldrons” might be the name for an ingot, perhaps stamped with the image of a cauldron. Mysterious monetary units are, after all, commonplace in the historical documents. Thus, a text from the ANE (Isin) records the purchase of an orchard for copper “hoes” ((c)haputu) inscribed with the name of the goddess Ninisina. Payments are also made in “sickles” and “axes” (CAD niggallu 1.b).

III. Alleged Revolutionary Effect of Coinage/Money

Schaps’ central proposition is not documented in a credible manner. In this endeavor, he receives only limited mileage from his strained identification of coinage with money. Sometimes he claims for money/coin the effects of Greek economic growth. In other instances, he admits that no revolution occurred. The quotations cited below illustrate his difficulties.

1. “The conceptual revolution that identified coins with wealth turned money into an item of which one could never have too much, or, indeed, enough” (175). What then of the Assyrian merchants of the early second millennium BCE whose wives scolded them “You love only money, and you hate your own life!” (Larsen 1982: 42)? More to the point, what of Solon (Fragment 13.43-45. 47-48, 71-73 West):

One hastens after one thing, another after something else; one man, desiring to bring home profit, wanders over the fishy sea in ships … another, whose concern is the curved plow, cleaves the thickly wooded land and slaves away for a year… but no limit of wealth [ploutou d’ouden terma] is clearly laid down for men; for those of us who now have the greatest livelihood [pleiston…bion] have twice the eagerness [diplasion specdousi]; who can satisfy [koreseien] all? (Balot 2001: 90)Presumably, this view originates in the late archaic period — i.e. before the Greeks adopted coinage. In any event, Solon does not link human acquisitiveness with coinage or money.

2. “To the extent, then, that Homeric society had distinguished prestige goods from nonprestige goods, money subverted the distinction: money could buy anything and could be gotten in exchange for anything. It follows that even a peasant or a shopkeeper could amass enough money to buy the most prestigious goods; and it followed from this that the possession of those goods, which is now open to everybody, no longer distinguished the best from the worst” (117).

3. “The history of the late archaic age in Greece is the story of the crumbling of oligarchies. This development was already underway before coinage had been invented…. Nevertheless, it is more than probable that money and the market had their share in continuing the process and in changing the entire concept of oligarchy” (120).

4. An (alleged) trend from socially embedded transactions to impersonal economics should not be attributed to the adoption of coinage. There is no doubt that economic transactions tended, as Greek society developed from the archaic age to the classical and the Hellenistic, to be more a matter of immediate mutual economic benefit and less a form of discharging social obligations. The invention of coinage certainly facilitated this change, which may, however, have been propelled more by simple population growth than by any technological or cultural development. (33)

5. “The agora grew up in the Kerameikos, the potters quarter, and excavations have found evidence of potters’ waste as far back as 1000 B.C.E., but there are not other signs of commercial or industrial activity before the growth of the agora itself [in the sixth century]” (113). “We cannot… prove that there was no retail trade before coins were invented; but what we have seen suggests that if there was any, there was not much” (115). The latter suggestion, however, does not depend so much on “what we have seen” as on what we have not, namely the archaic agora! “The place in which Athenians had previously congregated was hardly remembered by the Athenians and has not been securely identified to this day” (113).

In the end, Schaps offers a more balanced appraisal. The various participants “were all making a profit, and they were doing it in a way that would have been a good deal more difficult before the invention of coinage” (115). “Money, we may reiterate, did not create trade, but it marked the beginning of a new age of commerce in Greece” (122). “An expansion of retail trade was the first visible concomitant of coins. At this distance, we cannot tell which is cause and which is effect, but we can say at least that the marketplace and coinage grew up together” (196).

6. “Without money, the great temples, the dramatic festivals of Athens, its navy, and its democracy would have taken a very different form, if they had come to exist at all” (197). This is simply a reach.

7. “Merkelbach’s observation that a bordello was hardly conceivable before the invention of money is a plausible one, though the ‘money’ involved need not have been coins: the weighed silver of the Levant would also have been sufficient” (160). “Merkelbach’s observation” is “plausible” only because he does not identify money with coinage. How did Greeks pay for sexual services before the (alleged) “invention” of coinage/money in the sixth century? Schaps does not tell us.

8. “The ancient Greeks, even when money had become the universal medium of exchange, still considered the exchange of labor for money to be the exceptional case” (162). No revolution in the labor market.

9. “In sum, it appears that money never truly transformed Greek agriculture” (172).

Schaps, however, underestimates the market orientation of Greek agriculture in the later archaic period. Citing Hesiod (Works and Days 618-94), he (89, cf. 119) suggests that “Peasants might try to change an agricultural surplus into a more lasting form of wealth by sailing abroad during the seasons when the farm could be left alone.” What exactly was the “more lasting form of wealth” in these days (allegedly) before money/coin? With respect to Schaps? “agricultural surplus,” Redfield 2003: 168) points out that Hesiod advises “peasants” to “leave the greater part, and load as cargo the lesser” (Works and Days 690). Hesiod it seems can actually imagine farming entirely for export, although he is against it.” Moreover, Hesiod’s comment that “wealth means life to poor mortals” indicates an appreciation of production for the market.

IV. Peripheral Contributions

Apart from his central argument, Schaps makes a number of rather interesting and useful observations. Some examples follow.

“When the [Mycenaean] palaces had been burned and their far-flung bureaucracy dispersed, there will have been more need for exchange. The Homeric heroes did indeed have to weigh the value of a slave against the value of a tripod; if this seems to us a step toward the concept of money, it is not for that reason a sign of an expanding economy” (71). Thus, as I would see this, the Homeric era can be viewed and an “Intermediate Period” of a type familiar in Egyptian economic history.

Speaking of the marketplace in Athens, Schaps notes: These merchandises were not mixed: not only was there no one ‘general store’ that sold them all, but there was not even a single place where one could ‘do the shopping.’ Each merchandise had its own part of the agora, and a person would speak of being ‘among the fish’ or ‘among the banks.’ (167)

Or even, citing Aristophanes, “among the tragedies” (S 167, n. 19)!

Schaps (123) cites Aristophanes’ joke that a politician could win public support by lowering the price of sardines.

Schaps takes up private enterprise in the coinage business: It might, in theory, have happened that coining would have become a form of business, in which private individuals turned silver into coins that would have been accepted by the reputation of the coiner…. It did not happen in Greece. Once coinage was generally adopted in Greek cities, the coining of money was normally a state monopoly. (179)

By contrast, I would suggest, some of the inscriptions on the coins from the Artemision coins seem to be personal names, which leaves open the possibility that the issuers were private individuals.

Large business loans were made at Athens. “It is true, however, that large loans at Athens were, as far we can tell, never designed to be paid off in drips and drabs out of one’s regular income” (245).

There are also some rather unfortunate observations. “Behind the [Greek] prejudice [against merchants] though hardly ever explicitly expressed, lies a real paradox, namely, the syllogism that: (a) a trade should be fair; (b) if a trade is fair, both sides should remain with the same value; whence it follows that (c) if a person can increase his capital by trade, he is cheating someone” (177). It should be needless to say that there is no “real paradox.” An uncoerced exchange benefits both parties. Unless each contractor views his postexchange position to be superior to his preexchange position, exchange will not take place. Contrary to the Marxist perspective, exchange is productive. Specifically, trade rearranges an existing stock of goods in a way that enables each participant to become better off as measured relative to his own values at the time of deciding to trade. The creative nature of trade is little appreciated by scholars untrained in basic economic principles. Schaps (177, n. 7) compounds the problem by minimizing the contribution of the middleman in “making a market.” Later, he redeems himself by crediting the obolostat?s “obol weigher” for smoothing the function of the marketplace by “redistributing — for a fee — the coins that circulated in the market so that any seller could count on finding enough coins to start a day’s business” (186).

Concluding Remark

Not surprisingly, Schaps fails to demonstrate his thesis that coin=money revolutionized Greek economy and society. In my judgment, it is not nearly enough to cite the obvious advantages of coins in retail trade and to note that a Greek household might now express the entirety of its possessions in terms of money. With respect to the invention of coinage, the communis opinio has long been that it first appeared in the Greek world, not in the Near East. Schaps, to his credit, does explore the evidence for coinage in the Near East. However, he omits or misrepresents much and treats the remainder in an unbalanced manner. He has a tendency to make definitive statements not supported by evidence. Outside his central argument, he has many worthwhile things to say. The latter insights are sufficient to justify a favorable evaluation of the book.


1. In Genesis 23.16, Abraham “weighed” for Ephron’s field the sum of 400 shekels of silver kesep ‘?ber lass?cher. The latter phrase is usually translated “current money of the merchant,” but the literal meaning is “silver passing for the merchant.” The expression makes us focus on the kind of silver that would be employed in commerce. Hurowitz (1986: 290, n.3), taking note of the Old Assyrian usage kaspum asshumi PN (personal name) equlam ittiq — “silver will travel overland to the name of PN” — concludes that the silver “must have been of a standard, recognized quality.” There is no mention in Genesis of a test of the quality of the metal. Hence, it seems reasonable that a merchant’s stamp or seal guaranteed the silver. Schaps (91, n. 50) rejects this interpretation. He (228, n. 37) is correct in insisting that the silver was weighed

2. Despite the dangers, some biblical evidence should be noted. In 2 Kings 12.10-12 we read that in the ninth century under King Jehoash: a box with a hole bored in it was set up in the temple for the collection of silver [presumably silver pieces] for a repairs fund; at a certain point the Temple officers removed the silver from the box and “tied it up”/”bagged it” [warrasuru]; then the silver was counted [wayyimnu]; and then the “measured”/”regulated” [metukkan] silver was given to contractors who delivered it to various workers at the Temple who used it to purchase timber and stone. The text does not say that the sacks were opened in order to make payments. Thus, expressing all due caution, the most direct understanding is that the sacks circulated outside the Temple.

3. There is some reason to believe that terms originally meaning “weigh” came to have the meaning “pay” (compare S 228, n. 37) The Greek material provides a possible example of this kind of development in meaning. A law of Solon states: “Silver is to be stasimon at however much the lender may choose” (Kroll 2001: 78; Schaps 2001: 97). The orator Lysias (later fifth-earlier fourth century BCE) explains “This stasimon, my good man, is not a matter of placing in a balance but of exacting interest at whatever rate one may choose” (10.18). Schaps (2001: 98) concedes that stasis may refer to weighing but he opposes Kroll’s interpretation of Lysias as referring to an obsolete procedure, the weighing of silver on a scale: “The claim hinges on the presumption that stasimon ‘properly’ should mean ‘weighable'; but there are no parallels for such a meaning.” What then does stastimon mean in Solon’s law? According to Schaps (2001: 98) the word means “nothing more than ‘is to be paid’.”

In fact, there are no other examples of the use of stasimos in the meanings “weighing” (Kroll) or “paying” (Schaps). What is clear is that “There is an absolute connection between the adjective stasimos and the noun stasis, both derived from the verb hist?mi ‘to stand up, to cause to stand up” (David Tandy personal correspondence dated March 2, 2004; LSJ s.v. hist?mi). The verb hist?mi is well attested in the meaning “to weigh.”

In classical Athens, long after the introduction of coins, we find the term obolostate? “weigh obols” in the meaning “making small loans” (LSJ s.v.). There is evidence here of an evolution from “weighing” to “paying.”


CAD: Gelb et al., The Assyrian Dictionary of the Oriental Institute (University of Chicago)

LSJ: Lidell, Scott, Jones, Greek-English Lexicon References


Archi, Alfonso. (1993), “Trade and Administrative Practice: The Case of Ebla.” Altorientalische Forschungen, 20, 43-58.

Balmuth, Miriam S. (1971). “Remarks on the Appearance of the Earliest Coins.” In David G. Mitten et al. (eds.), Studies Presented to George M.A. Hanfmann. Cambridge, MA: Fogg Art Museum, 1-7.

Balmuth, Miriam S. (1975). “The Critical Moment: The Transition from Currency to Coinage in the Eastern Mediterranean.” World Archaeology, 6, 293-98.

Balmuth, Miriam S. (ed.) (2001). Hacksilber to Coinage: New Insights into the Monetary History of the Near East and Greece. New York: American Numismatic Society.

Balot, Ryan K. (2001). Greed and Injustice in Classical Athens. Princeton, N.J.: Princeton University Press.

Castle, Edward W. (1992). “Shipping and Trade in Ramesside Egypt.” Journal of the Economic and Social History of the Orient, 35,239-77.

Condon, Virginia. (1984). “Two Account Papyri of the Late Eighteenth Dynasty (Brooklyn 35.1453A and B).” Revue d’?gyptologie, 35, 57-82.

Dercksen, Jan Gerrit. (1996). The Old Assyrian Copper Trade in Anatolia. Leiden: Nederlands Historisch-Archaeologisch Instituut te Istanbul.

Foster, Benjamin R. (1977). “Commercial Activity in Sargonic Mesopotamia.” Iraq, 39, 31-44.

Gelb, I.J. et al. (eds.) (1956-). The Assyrian Dictionary of the Oriental Institute of the University of Chicago. Locust Valley, N.Y.: Augustin.

Hallo, William W. (1958). “Contributions to Neo-Sumerian.” Hebrew Union College Annual, 29, 69-107.

Hurowitz (Avigdor), Victor. (1986). “Another Fiscal Practice in the Ancient Near East: 2 Kings 12:5-17 and a Letter to Esarhaddon (LAS 277).” Journal of Near Eastern Studies, 45, 289-94.

James, T.G.H. (1984). Pharaoh’s People. Chicago: University of Chicago Press.

Joann?s, F. (1989). “108) M?dailles d’argent d’Hammurabi?” Nouvelles Assyriologiques Br?ves et Utilitaires, (no. 4 D?cembre), 80-1.

Kim, Henry S. (2001). “Archaic Coinage as Evidence for the Use of Money.” In Andrew Meadows and Kirsty Shipton (eds.), Money and Its Uses in the Ancient Greek World. Oxford: Oxford University Press, 7-21.

Kroll, John H. (2001). “Observations on Monetary Instruments in Pre-Coinage Greece.” In Balmuth (ed.), Hacksilber to Coinage, 77-91.

Larsen, Mogens Trolle (1982). “Caravans and Trade in Ancient Mesopotamia and Asia Minor.” Bulletin of the Society of Mesopotamian Studies, 4, 33-45.

Liddell, Henry George, and Robert Scott. (1968). A Greek-English Lexicon. Henry Stuart Jones and Roderick McKenzie, rev. ed. London: Oxford University Press.

Lipinski, Edward. (1979). “Les temples neo-assyriens et les origines du monnayage.” In Edward Lipinski (ed.), State and Temple Economy in Ancient Mesopotamia, II. Leiden: Brill, 565-88.

Malamat, A. (1998). Man and the Bible. Leiden: Brill.

Oppenheim, A. Leo. (1969). “Review of R. Bogaert.” Journal of the Economic and Social History of the Orient, 12, 198-99.

Peet, Thomas Eric. (1934). “Unit of Value s(‘ty in Papyrus Bulaq 11.” In M?langes Maspero, Vol. 1, Fasc 1. Cairo: Institut Fran?aise d?Archa?ologie Orientale du Caire, 185-99.

Refield, James M. (2003). The Locrian Maidens: Love and Death in Greek Italy. Princeton, N.J.: Princeton University Press.

Schaps, David M. (2001). “The Conceptual Prehistory of Money and Its Impact on the Greek Economy.” In Balmuth (ed.), Hacksilber to Coinage, 93-103.

Silver, Morris. (1985), Economic Structures of the Ancient Near East. Totowa, N.J.: Barnes & Noble Books.

Silver, Morris. (1995). Economic Structures of Antiquity. Westport, Conn.: Greenwood Press.

Stol, M. (1982). “State and Private Business in the Land of Larsa.” Journal of Cuneiform Studies, 34, 127-230.

Udovitch, Abraham L. (1979). “Bankers without Banks: Commerce, Banking, and Society in the Islamic World in the Middle Ages.” Center for Medieval and Renaissance Studies, University of California, Los Angeles, The Dawn of Modern Banking. New Haven. Conn.: Yale University Press, 255-74.

Morris Silver is Professor Emeritus of Economics in the City College of the City University of New York. His most recent publications about ancient economies are Taking Ancient Mythology Economically (Leiden: Brill, 1992) and Economic Structures of Antiquity (Westport, CT: Greenwood Press, 1995). “Modern Ancients” is forthcoming in Rollinger and Ulf (eds.), Commerce and Monetary Systems in the Ancient World , Fifth Annual Melammu Conference 2002. Professor Silver maintains a website on “Ancient Economies” at

Subject(s):Financial Markets, Financial Institutions, and Monetary History
Geographic Area(s):Middle East
Time Period(s):Ancient

British Trade Unions since 1933

Author(s):Wrigley, Chris
Reviewer(s):Friedman, Gerald

Published by EH.NET (March 2004)

Chris Wrigley, British Trade Unions since 1933. Cambridge: Cambridge University Press, 2002. viii + 106 pp. $40 (hardback), ISBN: 0-521-57231-2; $15 (paperback), ISBN: 0-521-57640-7.

Reviewed for EH.NET by Gerald Friedman, Department of Economics, University of Massachusetts at Amherst.

Professor of Modern British History at the University of Nottingham, Chris Wrigley prepared this volume for the Economic History Society as a summary text reviewing major issues in the history of British trade unions over the last seventy years. Despite its brevity, Wrigley’s text covers the most important topics in recent British history, including the rise of organized Labor in the mid-twentieth century, the role of unions in Britain’s survival and triumph in World War II, the question of a ‘British disease’ after World War II, and the decline of Labor since the election in 1979 of Margaret Thatcher. On each topic, Wrigley provides a succinct review of the major issues, a summary of recent scholarship, and a concise analysis. Both undergraduate and graduate students and all scholars unfamiliar with the terrain will find his work to be a useful introduction to the field.

Wrigley approaches British labor history judiciously, avoiding extreme statements or assertions of revolutionary changes. Instead, he emphasizes the continuity in British industrial relations and gradual historical change. He discounts, for example, arguments that the entry of Labor into Churchill’s wartime coalition governments marked a dramatic shift in the place of unions in British industrial relations. He acknowledges, for example, that British trade unions “emerged from the Second World War with both their size and their political and social status enhanced” (p. 7). But Wrigley also shows that union membership was growing rapidly even before the War, with half of the total growth in union membership for the 1935-45 period coming before 1939. Wrigley attributes much of the union growth in the 1930s to pro-union legislation and other state intervention in industrial relations by the National Government. Measures to rationalize wages and regulate competition, such as government sponsored Industrial Courts, had the effect of institutionalizing unions and insulating unionized firms and workers in them from nonunion competition. Wrigley questions whether these measures constitute full-blown corporatism in Britain. But they put wartime measures and union growth in a context of the longer term trend in British industrial relations towards corporatist-type arrangements.

Tight wartime labor markets and British Labor’s alliance with the government both contributed to continued rapid union growth during World War II. The appointment to the war cabinet of General Workers’ Union secretary general Ernest Bevin marked an explicit alliance of the British labor movement with the Churchill war government, and vice versa. Serving as Minister of Labor, Bevin supported regulations, such as the Emergency Powers (Defense) Act of 1940, that promoted production by restraining strikes and labor disputes. Wrigley outlines some of the concessions organized labor received in exchange for its support for production, including near automatic access to ministers and senior civil servants and regulations strengthening unions and their leadership. These two goals, maximizing production and strengthening unions, sometimes went together, such as when joint production committees of employers and trade union representatives were formed to discuss ways to boost production in the engineering and ordnance industries.

The involvement of unions in regulating labor relations and increasing production during World War II makes their post-war image particularly surprising. British unions were widely blamed for a ‘British disease’ where craft union organization led to disorderly labor relations, stagnant productivity, and inflationary wage settlements that forced monetary authorities to slow the economy. Drawing on an extensive scholarly literature, Wrigley defends British unions from most of these charges and denies that there was anything pathological about British industrial relations. Using comparative data on strike activity in ten industrialized economies, he shows that throughout the post-World War II period, the United Kingdom lost fewer workdays to strikes than most other countries. Wrigley also defends the macro-economic impact of British unions. Acknowledging that incomes policies were sometimes ineffectual, he vigorously defends them in general by arguing that agreements between governments and union leaders helped bring down inflation in some critical periods, such as when the Social Contract of the mid-1970s helped bring the inflation rate down quickly from 24 percent to 8 percent. Wrigley also cites evidence that incomes policies encouraged productivity bargains and sometimes fostered productivity growth.

After reaching over 12 million members in 1979, British trade union membership fell to barely 7 million members in 1997, or from over 50 percent of potential members to 30 percent. This marked a longer and further decline in union membership than in any previous period. Membership fell sharply during the Conservative Party governments of Margaret Thatcher and John Major, 1979-97, and has risen since the return of the Labor Party to power. The political climate was hostile to trade unions under the Conservative governments and Wrigley reviews a long series of legislation enacted to hinder unions and to discourage strikes. Still, it is hard to see how any, or even all, of this legislation could explain the period’s dramatic union decline.

It is also hard to explain the union revival under Tony Blair’s Labor Party government. Wrigley cites various efforts by unions to adapt to declining membership, including the amalgamation of several unions to save on administrative expense and to reduce jurisdictional disputes, as well as conscious efforts to recruit women, members of minority groups, and service and professional workers. He also cites union attempts to provide greater services to members to convince members, and nonmembers, of the value of union membership, including services such as discount credit cards, life insurance, telephone help lines, and legal services. Wrigley believes that these have “played a part in the … stabilization of membership at the end of the century” (page 39). One may question this conclusion.

Chris Wrigley has written a useful little book. It may be used profitably in undergraduate courses in British History, European Economic History, or Labor History. And it may be of value to scholars looking for a quick introduction and review of recent developments in British labor history.

Gerald Friedman has written on the economic history of the United States and Europe, on labor economics, and on the history of economic thought. He is the author of Statemaking and Labor Movements: The United States and France, 1870-1914 (Cornell University Press, 1998), and numerous articles on American and French unionism and union membership decline in advanced capitalist economies. Currently, he is writing a study of union decline in advanced capitalist economies, and a study of the decline of institutional economics in the United States.

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

The Size of Nations

Author(s):Alesina, Alberto
Spolaore, Enrico
, Enric

Published by EH.NET (February 2004)

Alberto Alesina and Enrico Spolaore, The Size of Nations. Cambridge, MA: MIT Press, 2003. x + 261 pp. $35 (cloth), ISBN: 0-262-01204-9.

Reviewed for EH.NET by Leonard Dudley, Economics Department, Universite de Montreal.

Nations tend to develop myths that attribute positive qualities to their founders and uniqueness to their political institutions. However, there is a quip attributed to Bismarck, “People will sleep better not knowing how their sausage and politics are made.” In this book, Alberto Alesina and Enrico Spolaore deconstruct the Bismarckian sausage factory in order to show us how states are made. They present their theoretical argument in eight steps, each beginning with a verbal outline followed by a formal model. Asterisks guide the non-technical reader around the algebraic danger zones. The result is a remarkable set of propositions that leaves little place for individual leaders, heroism, uniqueness, or even a subtitle.

The authors begin by discussing the simplest kind of law-making factory, a unitary state with pluralistic political institutions. They argue that in deciding where to place their political boundaries, voters trade off the advantage of a larger state in providing public goods at lower cost against the disadvantage of increased heterogeneity of preferences that would result. The authors show that total welfare is maximized when the world is divided into an optimal number of identical states.

Subsequent chapters add complexity to this initial core. A first modification allows for unilateral secession of border regions. Since residents of peripheral areas are more distant from the capital, where the public good is assumed to be produced, they receive fewer benefits for their taxes and therefore have an incentive to secede. As a result, under these more realistic assumptions, the equilibrium number of states is greater than the number that maximizes total welfare.

A second modification of the initial structure permits transfer payments that compensate potential secessionists in peripheral regions for the low benefits that they receive. If such schemes are feasible, then the equilibrium number of regions approaches the optimum. However, as the authors demonstrate in an elegant algebraic proof, if a border region agrees to join a larger state, there is a time-inconsistency problem. Once unification has occurred, since the median voter of the new state pays in taxes more than she receives in transfers, she will approve a decision to eliminate the transfer payments.

As Frederic Lane (1958) argued in a seminal paper, the vast majority of historical states do not fit the democratic model preferred by Western political economists. Rather, actual political decision-making has tended to be monopolized by a minority of citizens who provide protection in return for tax revenues. Alesina and Spolaore therefore devote a chapter to states ruled by a monopolizer of power. Their Hobbesian “Leviathan” is a ruler who need consider the welfare of only the fraction delta of his subjects. They demonstrate that when delta is equal to one-half, the result is the optimal number of states. More generally, with delta smaller than one-half, the outcome is a set of large states that are too few in number.

So far, the model predicts that actual democratic states will be too small to maximize the welfare of their citizens. How then can they account for evidence that the wealthiest states in terms of per-capita GDP tend to be small in terms of population? The authors devote a chapter to commercial policy, arguing that if trade barriers are lowered, it is easier for small states to be viable since they can reap scale economies by selling in foreign markets. As the authors recognize, however, trade policy is itself a function of country size, since smaller states will tend to favor freer trade.

The last three steps in the discussion deal with conflict, generalized war and federalism. The reader learns that there is also a two-way relationship between country size and conflict. For a given probability of conflict, a large country offers advantages to its citizens because it can produce the public good of protection more cheaply than a smaller country. However, since larger countries are less dependent on trade than smaller ones, a world of larger states can afford to have more frequent trade-disturbing international conflicts. As for the degree of decentralization, it depends on the extent of democracy. The higher the percentage of the population to be considered in political decisions, the greater is the optimal degree of decentralization.

An empirical chapter puts some of the authors’ principal hypotheses to the test. Are actual states too small for the efficient provision of public goods? Evidence that the public share is larger in small states than large states (with size measured by population), suggests that the cost of public goods is higher in the former. Does having too many states lower individual welfare? The higher per-capita GDP and faster per-capita economic growth in large states compared to small states in the postwar period again supports the theoretical result that the number of states is great than optimal from a welfare standpoint.

Finally, in an historical chapter, the authors apply their theoretical model to explain systematic changes in state size since the mosaic of small political units in medieval Europe. After 1500, they argue, the number of states declined, because an increase in trade restrictions and a greater frequency of international conflict made small states nonviable. Outside Europe, the movement to large empires was excessive, owing to the dictatorial nature of political power in these regions. In the late eighteenth and nineteenth centuries, rising external threats and a desire to have more weight in commercial disputes led to unification in the United States, Italy and Germany. Then, increasing protectionism in the late nineteenth century caused the industrialized countries to search for colonies as a vent for surplus production. Finally, a movement to free trade after World War II favored the breakup of colonial empires, including that of the Soviet Union, into a large number of small, open economies.

This book is a tour de force, offering a highly original synthesis of political science, economics, contemporary statistics, and historical facts. The argument is crystal-clear. And the authors succeed in building an inexorable momentum as they proceed step by step from the simplest model to the complexities of the real world. Their thesis that first, voters trade off the lower cost of public goods against increased heterogeneity in determining their state’s borders and second, this decision is sensitive to the probability of conflict and the cost of exporting to foreign markets, provides a powerful tool for explaining historical change.

But do the primary forces that determine state size lie on the demand side? For William McNeill (1982), it has been primarily military technology — a supply-side factor — that has determined state size. When military scale economies increased, he argued, it became less costly for centralized rulers to put down revolts in outlying regions. While the authors cite McNeill’s work, they fail to take into account that it implies a completely different vision of international conflict from the one they model. When military technology is stable over long periods, state borders will tend to remain in equilibrium and major conflicts should be the exception. Such was arguably the case for long periods of Chinese and Roman history, for the first part of the nineteenth century and for the last half of the twentieth century. Systematic conflict will then arise when the cost of providing protection changes, as occurred in the early modern period and between 1850 and 1950. In short, if we drop the assumption that the probability of conflict is exogenous, we need a theory that deals explicitly with changes in the cost of providing protection.

Moreover, on the demand side, can we assume that the willingness to trade. Too, is essentially exogenous? In his 1948 Beit lectures at Oxford University, Harold Innis (1950) argued that the size of nations was determined by the relative costs of storing, decoding and transmitting information. With the diffusion of standardized Latin and Carolingian script in the centuries preceding the high Middle Ages, he suggested, the cost of storing information in multiple copies fell. As a result, European states declined in size, and there arose considerable trade across political boundaries. In the early modern period, the diffusion of printing in the vernacular led a movement in the opposite direction, with the formation of large nation states and growing barriers to trade across linguistic borders. More recently, with a return toward the medieval pattern in many parts of Europe, can we ignore the decentralizing effects of the microelectronics revolution?

These considerations of military and informational technology suggest an alternative interpretation for the authors’ statistical results from the most recent period. The negative correlation between country size and the public share could reflect not the cost of public goods but the formation in the past of linguistic zones of different sizes. Voters today in large, heterogeneous states may simply be less willing to share their income than those in small, homogeneous states. If so, the negative correlation between the public share and country size need not be a sign that small states are inefficient.

The positive sign of country size in the income and growth regressions is also problematic. Here the effect of low income on the diffusion of military innovations is important. In the nineteenth century, the poverty of Africa and Asia made these regions easy prey for the colonial powers that conquered them in bits and pieces. When these powers subsequently retreated under pressure from nationalist movements, they left a large number of poor, small states whose boundaries bore no relationship to voter choice as modeled by the authors. Yet these states arguably dominate the authors’ regressions. Might causality not go from poverty to state size?

In short, by the end of the tour of the Bismarckian sausage factory, the reader will have satisfied her immediate hunger to understand how states are formed. Nevertheless, she will likely put the book down with the feeling that there is more to the question of the size of nations than the standardized frankfurters cranked out by Alesina and Spolaore. Of course, provoking the reader in this way may be precisely their intention. They have provided us with what will surely become a standard reference point for speculation about historical change.


Innis, Harold A., Empire and Communications (Oxford: Clarendon, 1950).

Lane, Frederic C., “Economic Consequences of Organized Violence,” Journal of Economic History, 18 (December 1958), pp. 401-417.

McNeill, William H., The Pursuit of Power (Chicago: University of Chicago Press, 1982).

Leonard Dudley is the author of The Word and the Sword: How Informational and Military Technology Have Shaped Our World (Oxford: Blackwell, 1991).

Subject(s):Urban and Regional History
Geographic Area(s):General, International, or Comparative
Time Period(s):20th Century: WWII and post-WWII

South Carolina and the New Deal

Author(s):Hayes Jr., Jack Irby
Reviewer(s):Couch, Jim

Published by EH.NET (January 2004)

Jack Irby Hayes, Jr., South Carolina and the New Deal. Columbia, SC: University of South Carolina Press, 2001. xvi + 290 pp. $34.95 (hardcover), ISBN: 1-57003-399-4.

Reviewed for EH.NET by Jim Couch, Department of Economics, University of North Alabama.

Jack Irby Hayes begins his book by describing the setting: in the 1930s South Carolina was a state in which slightly more than half of the population were African-American; more than half were Baptists; and approximately half were engaged in agriculture — which for all practical purposes meant the production of cotton. And South Carolina plantation owners at the time had a tremendous advocate in Senator Ed Smith, better known as “Cotton Ed” Smith. South Carolina’s other senator, James F. Byrnes, Hayes asserts, “emerged as the most influential senator from South Carolina — and quite possibly from the entire South — since John C. Calhoun” (p. 18). Both these individuals would play a large role in the implementation of Franklin Roosevelt’s New Deal.

After describing other members of South Carolina’s congressional delegation, Hayes focuses on the actual programs of the New Deal, how the various agencies were staffed, how they operated, and how each program impacted South Carolina. He criticizes the relief programs of the Hoover administration as unfair and too conservative. In particular, he asserts that local control meant an inequitable allocation of aid to “the unemployed middle class” in an effort to “not upset the existing class structure,” and that “obviously, it was time for the federal government to intervene in the interest of fairness and sufficiency for all” (p. 38).

Strangely, he then goes on to report egregious instances of corruption in the implementation of the new federal programs. The book provides additional evidence, albeit from a single state, to support the growing consensus among economists that the New Deal was little more than a gigantic vote-buying scheme. Politics, unfortunately, served as the impetus for much of the actions of the various agencies created by Roosevelt.

One anecdote tells how a particular congressman was punished for his rather prescient views. John J. McSwain represented South Carolina’s Fourth Congressional District where the cities of Spartanburg and Greenville are located. McSwain believed that air power represented the future of military combat and argued for a separate branch of the arm forces — an Army Air Corp – and wanted the number of planes expanded from 1800 to 4400. Furthermore, McSwain predicted that America would eventually be attacked from the air. Military officials dismissed his ideas and relations between the representative and members of Roosevelt’s cabinet grew ever more acrimonious. When Greenville applied for Public Works Administration funding for a post office, a swimming pool, an airport and a stadium, all the projects were delayed in an effort to send McSwain a message.

Support for FDR waned as the administration pushed for the so-called second New Deal. Hayes contends that the residents of South Carolina were less than excited about Roosevelt’s “attempts to advance African-Americans” (p. 156). He explains that the average South Carolinian “had in mind a fine tuning of a state and national economy already on the road to recovery, not the revolution in separation of powers, race relations, and industrial relations that followed” and began to “distrust at least a part of the New Deal as too Northern, too radical and too minority oriented” (p. 148).

Indeed, Hayes repeatedly asserts that Roosevelt’s unprecedented care for African-Americans created tension between the administration and South Carolina’s congressional delegation. However, in one of his most interesting chapters, “A New Deal for African Americans,” Hayes documents how many of these programs adversely affected blacks. A revolution of how blacks were treated simply did not occur. Hayes claims that the New Deal did offer some benefit to minorities: “for many blacks … the New Deal completed what historians call ‘psychological emancipation'” (p. 168). It is difficult to imagine that southern politicians were overly concerned about something as nebulous as psychological emancipation.

Hayes’ assertion that support for the administration fell off in FDR’s second term is certainly valid but his claim that racism was the cause ignores significant evidence to the contrary. The book completely ignores the work of the Senate Special Committee to Investigate Unemployment and Relief chaired by South Carolina Senator James Byrnes (in fact, the committee became known as the Byrnes Committee). The Committee was created in part to investigate the activities of the Works Progress Administration (WPA). Harry Hopkins, the Director of the WPA, was asked to explain why certain regions of the nation received larger appropriations than other sections. Hopkins was far less than forthcoming which led the New York Times to write (December 29, 1938): “The allocation of WPA funds cannot indefinitely be permitted to rest upon the personal discretion of any one man or small group of men. The relief funds belong to the whole country. Their allotment must be placed upon a basis that the whole country understands clearly and accepts as fair.”

Hayes criticizes Byrnes for attempting to alter WPA legislation by adding a uniform match of 25 percent (Hayes incorrectly reports a 50 percent matching requirement by Byrnes) so that every state and locality would face the same requirement. The author claims that “Byrnes was miffed by an earlier presidential promise to request no more than $1 billion” (p. 28) rather than the requested $1.5 billion. In reality, Byrnes, like other southern senators, had become cognizant of the fact that WPA matching requirements varied considerably from state to state. For example, Tennessee, a relatively poor state, contributed 33.2 percent of total WPA expenditures while the relatively rich state Pennsylvania contributed only 10.1 percent. South Carolina’s match was 20.8 percent. Georgia Senator Richard Russell bitterly complained: “the poorer states — discriminated against as they are in the matter of per capita expenditure, in monthly wage, and in hourly wage — are, in addition, required to contribute more from their poverty toward sponsored projects than the wealthier States are” (U.S. House of Representatives 1939: 210). The Byrnes proposal would have created a level playing field so that all states would be treated impartially. By rejecting a uniform match, the creation of WPA jobs were at FDR’s discretion and, as economists have shown, he used his discretion for political advantage sending more jobs and dollars to states he needed in the next election.

Hayes contends that Roosevelt went to work against the Byrnes proposal to save the program. “Realizing the Byrnes proposal would cripple the WPA, Roosevelt and Harry Hopkins … began to marshal the opposition” (p. 29). How the proposal would have crippled the WPA is not made clear in the book.

Likewise, Hayes points out that Byrnes was annoyed with the allocation of WPA largesse. Rather than portraying Byrnes as a representative fighting to make sure his constituents received an equitable slice of New Deal dollars, the author asserts, “Apparently, Southern nationalism emanating from the Confederate War was never far below the surface in the senator’s personality” (p. 29). Hayes is even more critical of South Carolina’s other senator: “Apparently paranoid in his advancing years, he claimed to have ‘uncovered’ nothing less than a conspiracy against the South and Southern Democracy” (p. 35). Hayes applauds the people of South Carolina and their representatives when they support the New Deal and castigates them when they begin to oppose it. The New Deal, he asserts, was too far reaching in its advancement of blacks and this caused their apostasy; not the fact that South Carolina received meager benefits while other, more politically valuable states, received the lion’s share.

His analysis of what the New Deal accomplished is equally shallow. Hayes asserts that the New Deal “shored up individual self-esteem and increased a passion for learning” (p. 203). He continues, the New Deal “recaptured the American spirit of community for all South Carolinians and restored their faith in capitalism, democracy and progress” (p. 203). Those readers interested in a serious analysis of the legislation should read Rethinking the Great Depression by Gene Smiley (2002).

Jim F. Couch is a Professor of Economics at the University of North Alabama. He is the coauthor of The Political Economy of the New Deal, Edward Elgar, 1999, with William F. Shughart.

Subject(s):Government, Law and Regulation, Public Finance
Geographic Area(s):North America
Time Period(s):20th Century: Pre WWII

Pattern and Repertoire in History

Author(s):Roehner, Bertrand M.
Syme, Tony
Reviewer(s):Nye, John

Published by EH.NET (January 2004)

Bertrand M. Roehner and Tony Syme, Pattern and Repertoire in History. Cambridge, MA: Harvard University Press, 2002. xii + 413 pp. $45 (cloth), ISBN: 0-674-00739-5.

Reviewed for EH.NET by John Nye, Department of Economics, Washington University in St. Louis.

The book under review constitutes one of the most intriguing, challenging, and at the same time, frustrating works I’ve come across in the last few years. The authors make their focus the creation of a “nearly” scientific approach to comparative historical sociology using examples drawn from the literature on the origin of revolutions and strikes, war and territorial aggression, and the problem of wartime logistics. But in another sense, the authors are interested in a deeper question which should be of special interest to the readers of EH.NET: How does one study history from a social scientific perspective?

They want to know: What constitutes relevant and irrelevant historical information? What does it mean to observe recurrent patterns in similar historical events? How do we “test” or verify our beliefs and claims? Economic historians have been especially concerned with these problems and have developed a variety of partial answers and a number of workable methodologies over the last few decades without coming up with a systematic or definitive answer to the problem.

After reviewing the various methodologies in common use in historical sociology, the authors make mostly common-sense decisions about the best way to proceed. They try to break up historical events into smaller, “component” parts. They compare and contrast these parts across similar historical episodes, and they analyze these parts and their interrelation using a mix of qualitative and quantitative description. They seem to be indifferent to formal statistical hypothesis testing, though I do not entirely understand why. Surely Cliometrics — for all its limitations — explicitly deals with many issues of importance to such sociological discussions. More inexplicably, they criticize the use of individual choice methodology as typically applied in economics and economic history, because individual choice theory ignores “group representation and collective consciousness” (p. 21). Yet when using what they consider a “compelling argument” against individual choice theory, they point to a criticism of Jack Goldstone against Gordon Tullock’s positing of the standard collective action problem. As we know, the standard problem of collective action makes it unprofitable for individuals to participate in a revolutionary movement if free-riding were possible. Goldstone makes the point that ‘”individuals do not decide to join, or not join, revolutionary movements as isolated individuals.” Instead, they decide “as part of groups to which they have prior commitments” (Goldstone 1999). “This leads us to analyze the role of social constraints” (Roehner and Syme, p. 21).

Yet this only seems to be an argument for expanding the set of considerations that affect the payoffs to individual actors without changing the desirability or viability of the individual choice methodology as the appropriate tool of analysis. Perhaps a “collective consciousness” technique (which I understand is neither universally agreed upon, well-established, nor battle-tested even in sociological circles) would do better than individual choice reasoning with modified collective constraints, but it seems a bit premature to simply assert the inadequacy of the individual choice methodology on the basis of this simple critique. More important, I see little in their actual historical cases and analysis which is not amenable to individual choice reasoning. Indeed, they use individual actor models throughout most of the book, albeit substituting the state as the individual actor. But this is a tradition that is no more controversial (albeit incompletely specified) in political economy than is the habit of treating firms as single individuals in the literature on industrial organization. These usages are certainly well-known to the authors — one of whom holds a position as a lecturer in economic history! Hence, this methodological discussion, no matter how interesting, seems less than essential for the success or failure of the bulk of the book.

Be that as it may, there is much pleasure and learning to be derived from a careful study of the substantive chapters. Their chapter on “General Strikes, Mushroom Strikes” contains much insight in the nature and timing of strikes and shows how a comparative perspective builds on the more narrowly constructed national studies of strike duration, which allow us to observe, for example, that strikes are more frequent in the Spring and Summer, and less frequent in the Autumn or Winter. An economist might point out that this would be a good example of individual choice in action since it is both more pleasant to be outside in the warmer months, and the opportunity cost of striking or, even worse, of losing employment (due to a failed strike) in winter months is greater than in the summer. The authors themselves look to problems of partial unemployment and seasonal disparities in work opportunities or demand for output (cf. coal in winter) as important explanations. This sort of reasoning — at the margin — is precisely what neoclassical microeconomic theory is all about. Economics reasoning is not to be applied to the average. It does not explain nor seek to explain why some people strike no matter the individual cost to themselves. Rather, economists argue that at the margin, the more costly it is to engage in an activity, the less it will be undertaken particularly when dealing with aggregates of separate actions. This is a common problem that pops up with some regularity in social science critiques of economics. Economics is said to be deficient in explaining why anyone bothers to vote in a large election, or participate in a large-scale strike, but it makes no such claims in the first place. And it is foolish to deny the usefulness of marginal reasoning either in economic history, or for that matter, for scientific analysis in general. Given their otherwise commonsensical approach to modifying scientific methodology to the study of sociology, the authors — and we — would have benefited from their explicit incorporation of economic reasoning in their work or with explicit confrontation on a case by case basis where such reasoning fails.

Much of the book is taken up with the analysis of warfare — both in the general subjects of “Warfare for Territorial Expansion” and “The Constraints of Logistics.” There is too much to go over here in a short review, as their discussions range from the Napoleonic Wars through the First and Second World Wars. Much of their discussion seems to match standard military history such as the fact that submarine warfare in the Atlantic had striking parallels in both the First and Second World Wars — suggesting that the internal logic of submarine warfare tended to dominate over ephemeral considerations. Yet these discussions only highlight the difficulty of pinning down the authors’ hypotheses. They ask “Would it be the same again in a future conflict even though nuclear propulsion has considerably altered the problem? We are convinced that the response to this question must be sought not in an evaluation of the technology of submersibles, but in a comparison of the economic and naval potential of the belligerents” (p. 263). (And surely it makes no sense to posit the economic and naval potential against technology, since the naval potential of the belligerents is surely determined in part by the technology of the instruments of naval warfare.) After a few rereadings of the subsequent analyses, I can only conclude that the authors answer with a resounding “Maybe.”

The authors, in my view both lose the opportunity to explore the interaction between technological characteristics and military capacity as well as the deeper question of which random events were genuinely significant for the war, and which events were driven by the logic of economic, military and political considerations For instance, in the chapter on logistics, one would have liked to have seen a discussion of the role of contingency in the Second World War, where surely the success of the attack on France had much more to do with risk-taking, Allied error, and sheer luck than the conduct of the War in the East after, say Stalingrad, when individual battles ceased to matter, and sheer numbers virtually guaranteed German defeat. The issues they do tackle are stimulating but whether I agreed with them or not, it was not always clear what “test” or comparison we should look to when deciding whether a particular set of comparisons was insightful or accurate.

So this is certainly an imperfect book, but in its verve and ambition, one which nonetheless should be commended to the attention of EH.Net readers.

John V. C. Nye specializes in French economic history and industrial organization. His publications include “Tax Britannica: Nineteenth Century Tariffs and British National Income,” (forthcoming in Public Choice, 2004). He is a founding member of the International Society for the New Institutional Economics (ISNIE).

Subject(s):Labor and Employment History
Geographic Area(s):General, International, or Comparative
Time Period(s):20th Century: WWII and post-WWII

Coping with Crisis: International Financial Institutions in the Interwar Period

Author(s):Kasuya, Makoto
Reviewer(s):Mitchener, Kris James

Published by EH.NET (December 2003)


Makoto Kasuya, editor, Coping with Crisis: International Financial Institutions in the Interwar Period. New York: Oxford University Press, 2003. xv + 235 pp. $64.50 (cloth), ISBN: 0-19-925931-3.

Reviewed for EH.NET by Kris James Mitchener, Department of Economics, Santa Clara University.

The interwar period offers an excellent laboratory for analyzing the effects of financial institutions on economies. Regulatory practices and institutional arrangements varied across countries at a time when banking crises were widespread and severe, and when responses by policymakers to the turmoil differed. Hence, a new book aimed at examining these crises from an institutional perspective has the potential to shed considerable light on the evolution of these differences as well as their lasting effects. Although the new volume edited by Makoto Kasuya moves us in the right direction, its selective coverage of the interwar period leaves the reader wishing for a more comprehensive treatment of the topic. There are some fine pieces of business history scholarship contained within its pages, but in terms of answering larger questions of a comparative nature, the ad hoc collection of articles in this edited volume limits its potential contribution.

It is not too difficult to root out the source of the problem — it is a conference volume. The chapters consist of papers presented at the twenty-sixth International Conference on Business History held at Mt. Fuji in September 2000. If one were apt to view current policy through the lens of history, then organizing a conference on interwar institutions and financial crises in Japan seems quite appropriate, given Japan’s financial crisis in the second half of the 1990s. The problem comes in translating the conference proceedings to a book about the institutional response to financial crises in the interwar period (as the title and author’s introduction suggest). The ten chapters focus on only five countries: Britain, France, Germany, the United States, and Japan. After an introductory chapter by the editor, the remaining chapters are divided into three broad categories: commercial banking (four chapters), universal banking (two chapters), and insurance and securities (three chapters). As might be expected, given the location of the conference, Japan receives a more thorough treatment (three chapters are devoted to its institutions); France, Japan, and Britain receive only a single chapter devoted exclusively to their institutions. One chapter per country might have been sufficient if all the papers followed a similar design and examined institutions in a like manner or alternatively surveyed banks, insurance, and securities in a parallel fashion. But the topics the chapters cover are quite distinct, ranging from the history of Merrill Lynch and its impact on middle-class investors in the United States after the Depression (Chapter 10 by Edwin Perkins) to the internal policy decisions of Mitsui Bank during the interwar period (Chapter 5 by Shinji Ogura). Because similar analysis is not provided for the five countries (some are written as business history articles while others have more of an economic history flavor), the scope for making comparisons across countries is not fully realized.

The introductory chapter by Kasuya provides a nice overview of the institutional makeup of each of the countries studied, and then attempts to draw out the linkages in the chapters by emphasizing the role that the Great Depression played in transforming institutions, industry structure, and regulation. He argues that financial regulations were tightened in all countries in the interwar period, especially around the time of the Great Depression. In fact, some countries had changed their regulations prior to World War I, while others weathered the storm quite well and saw little need to tighten regulation even after the Depression. Countries such as Australia and Canada came into the interwar period with banking systems that were better equipped to deal with large macroeconomic shocks. (Canada had developed an extensive system of branch banks and had implemented restrictions on real estate lending, while Australia, in response to the 1890s Depression, had weeded out weaker banks, raised capital standards, and also placed limits on its commercial banks’ ability to make loans against real estate.) Including counter-examples such as these would have further distinguished the comparative approach of the book. Kasuya’s introduction also emphasizes that the Depression induced regulatory change in many countries, but it is rather silent on why the response varied across countries. For the most part, it attributes regulatory change to public concern over the crises. However, it is quite likely that other factors such as interest group pressure and the private motives of regulators shaped regulatory outcomes during the interwar period. To cite one well-known example, the creation of the Federal Deposit Insurance Corporation in United States was as much the product of industry lobbying by unit bankers (who, despite their depleted membership ranks, were able to convince Congress that deposit insurance was preferable to interstate branch banking) as it was a response to public concern over banking instability. The book thus misses an opportunity to highlight other factors, besides public response to crises, that may help explain the evolution of differing financial institutions during the interwar period.

Nevertheless, some comparisons across countries can at least be made with respect to commercial banks. Using a sample of the career paths of senior executives of the 27 largest banks in France, England, and Germany, in chapter 2, Youssef Cassis examines the extent to which each of these countries had begun to put into place professional management structures and how the Depression shaped these efforts. The next chapter by Michael Collins and Mae Baker argues that British firms for the most part did not engage in long-term lending to industrial enterprises, even in spite of political and economic pressure to change their traditional lending practices. According to Ogura’s discussion in Chapter 5, commercial banks, including Mitsui Bank, also followed short-term lending policies (in part by expanding into the securities business) until the war with China led the government to put pressure on banks to provide more long-term loans to fund munitions companies. In a piece that is more economic than business history, Eugene White provides an interesting look at the origins of maturity mismatch, which he argues emerged as the result of New Deal policies that favored longer-term loans, a shift from pre-Depression practices of banks.

The remaining chapters consider universal banks and non-bank financial institutions, and the sparse coverage of countries makes comparisons more difficult. The chapter by Eric Bussiere is a well-developed case study on how Paribas became a universal bank (as practiced in Belgium) after World War I, but then moved away from this strategy to ensure its survival during the Depression. Harald Wixforth, on the other hand, looks more generally at large German banks in Chapter 7 and argues that they were in a weakened position prior to the Depression because of factors such as inflation, declining capital-to-asset ratios, and competition. Two of the chapters from the last section examine life insurance and securities markets in Japan (by Mariko Tassuki and Makoto Kasuya, respectively), and discuss how government regulation helped the former but mobilization for war hindered the growth of the latter.

Ultimately, what the book lacks is a way to bundle the articles into a balanced package that would appeal to economists and economic historians as well as business historians. The most obvious way to do this would have been to integrate the institutional analysis more fully with the macroeconomic history of the period, paying particular attention to the effects of the agricultural overhang and financing burden associated with World War I, the growth of new industries and the construction boom of the 1920s, and the Great Depression. From a broad perspective, understanding the evolution of financial enterprises during the interwar period is interesting because of the special relationship these firms have with the broader economy. Using macroeconomics to frame the institutional analysis might have meant that several interesting and important aspects of interwar finance and institutional innovation that ended up receiving short shrift in this volume could have also been included. Two in particular stand out. First, there is little comparative analysis related to the rise of consumer installment financing or hire purchase (in the United States, Canada, and Great Britain) — one of the most revolutionary aspects of finance during the 1920s and 1930s and one that has been linked to the severity of the Depression in the U.S. by economic historians such as Martha Olney. Second, and again in a comparative sense, the book does not illuminate which institutions or institutional innovations were crucial for financing the post-World War I investment boom that manifested itself in residential construction in the United States, Canada, Finland, Sweden, the Netherlands and other parts of Europe and in the growth of new technology sectors such as automobiles, radios, and other consumer durables. A comparative discussion of these issues would have been well received by scholars of the interwar period.

Kris James Mitchener is assistant professor of economics and Dean Witter Foundation Fellow in the Leavey School of Business, Santa Clara University, as well as a Faculty Research Fellow with the National Bureau of Economic Research. He is currently researching sovereign debt crises during the classical gold standard period and the effects of supervision and regulation on financial stability in the U.S. during the interwar period. His most recent publications are “The Great Depression as a Credit Boom Gone Wrong” (with Barry Eichengreen), Research in Economic History (forthcoming) and “The Productivity of U.S. States Since 1880.” Journal of Economic Growth (2003).

Subject(s):Macroeconomics and Fluctuations
Geographic Area(s):General, International, or Comparative
Time Period(s):20th Century: Pre WWII

The Sugar Industry and the Abolition of the Slave Trade, 1775-1810

Author(s):Carrington, Selwyn H. H.
Reviewer(s):Richardson, David

Published by EH.NET (September 2003)

Selwyn H. H. Carrington, The Sugar Industry and the Abolition of the Slave Trade, 1775-1810. Gainesville, FL: University of Florida Press, 2002. xxii + 362 pp. $59.95 (cloth), ISBN: 0-8130-2557-5.

Reviewed for EH.NET by David Richardson, Department of History, University of Hull.

As we approach the bicentenary of Britain’s abolition of its slave trade in 1807, debate over the origins of this remarkable event remains as lively as ever. At the heart of this debate lies the issue of the relative importance of economic and non-economic factors in determining abolition. For over a century after Parliament ended British slave trafficking, abolition was primarily portrayed as a victory of religiously inspired humanitarianism, but this consensus was broken when from the 1920s Caribbean-orientated historians claimed that though humanitarianism could not be ignored economic factors were paramount in dictating Britain’s ending of slave carrying from Africa in 1807. Central to this argument was the claim that the British slave-based planter class in the West Indies was in decline from the 1770s onwards and ultimately fell victim to an emergent British industrial capitalism that identified intellectually and politically with principles of free labor and free trade. This argument has been the subject of severe criticism, not least by Seymour Drescher (Econocide, 1977; The Mighty Experiment, 2002), but as shown by this latest book from Selwyn Carrington, a West Indian-born, Howard-based historian, it is still capable of attracting vigorous support. It remains to be seen whether Carrington’s new book proves to be the “classic study” in the decline thesis tradition that his fellow West Indian-born historian, Colin Palmer, predicts in his forward to the book (p. xvii).

In common with earlier exponents of the decline thesis, Carrington argues that the American Revolution was critical in simultaneously undermining the economic viability of British West Indian sugar production and the mercantilist philosophy which had given rise to sugar preferences and slavery. Fatally wounded by the loss of cheap North American provisions and of a mainland market for its rum after 1775, British West Indian slavery, according to Carrington, had run its course by the end of the eighteenth century, squeezed between rising costs of producing and marketing sugar, on the one hand, and inadequate demand for sugar in war-torn Europe, on the other. Carrington notes that West Indian planters actively sought to resolve their economic problems, anxiously trying to retain preferences in sugar markets, adopting, inter alia, new — and higher yielding — strains of sugar cane in the 1790s, and resorting to hired slave labor to ease their cash flow. But, he argues, all proved in vain, as planter profit margins on sugar production were steadily eroded after 1776 and ultimately almost totally eradicated in 1804-7 by sluggish wartime markets for sugar and inexorable increases in costs. Moreover, throughout the period 1783-1807, the British authorities did little to ease the plight of planters. For Carrington, therefore, an impoverishment of the British West Indian planter class that began with the American Revolution and was subsequently compounded by a growing over-production crisis in sugar provides the key to explaining Parliament’s decision to abolish the slave trade in 1807.

Carrington’s book is an elaborate endorsement of an argument, the essentials of which were first advanced some sixty years ago by Eric Williams in Capitalism and Slavery (1944). In doing so, it draws on a much greater evidential base than Williams did. Crucial to Carrington’s contribution to the decline thesis is his research on British colonial office papers as well as on the private papers of British planters, many of them absentees whose records are now lodged in archives scattered throughout Britain. Carrington is not the first scholar to draw on plantation papers, but the evidence he gleans from them is especially important to his story. They provide a wealth of data on the costs of sugar production as well as on the transport and sale of sugar and the profitability of plantation production, thereby ensuring that his study offers one of the most important sources of information we have on the financial workings of the West Indian economy between 1776 and 1807. Whether, however, the evidence that planters’ accounts offer provides convincing support for his general thesis that the British West Indies were in terminal decline after 1776 is more problematical. Some planters evidently felt under pressure during the decades before 1807, but, in the absence of planters’ comments in earlier periods, there is no reason to think their concerns after 1783 were exceptional. Moreover, providing a detailed catalogue of complaints about the economics of sugar production from absentee planters or even showing that profit margins on certain plantations were falling is far from conclusive evidence that the British West Indies as a whole were in economic decline before 1807, even less that such decline, if that was what it was, ultimately dictated British abolition of the slave trade. Indeed, evidence gleaned by other scholars such as John Ward (British West Indian Slavery 1750-1834, 1988) from plantation records similar to those used by Carrington shows that rates of return from British West Indian sugar planting just before 1807 were more or less identical to those achieved in the so-called “silver age” of sugar before the American Revolution. Furthermore, if Carrington’s case is difficult to reconcile with long-term trends in profitability, it is equally difficult to square with a post-1783 macro-picture that exhibits rising levels of sugar output and sales and buoyancy in slave markets through to 1807, prompted in part, but not exclusively, by expanding boundaries of the British West Indies after 1792, a point that Carrington almost totally ignores. In fairness to Carrington, he does offer some relevant macro-data, but what he presents relates to the older British islands and excludes output from Trinidad and British Guiana, and often neglects some well-known published sources of data. In short, he provides an inadequately delineated macro framework within which to locate and assess the reliability or partiality of findings based on a perusal of plantation records. Such methodological deficiencies in Carrington’s argument may be overlooked by those long convinced of the merits of economic explanations of Britain’s ending of its slave trade. They will, however, probably reinforce the skepticism of the decline theory’s critics, who will see in Carrington’s book evidence of a disjuncture between planter complaints and West Indian expansion after 1783, and will further encourage them to look beyond the economics of slavery itself in their continuing search for explanations of the abolitionists’ victory in 1807.

David Richardson is Professor of Economic History at the University of Hull in the UK and co-author of The Trans-Atlantic Slave Trade: a Database on CD-Rom (CUP, 1999). He has published numerous articles relating to the Atlantic slave trade and is currently doing research (with David Eltis (Emory) and Frank Lewis (Queen’s, Ontario)) on trends in slave prices and productivity in the British West Indies, 1673-1807.

Subject(s):Servitude and Slavery
Geographic Area(s):Latin America, incl. Mexico and the Caribbean
Time Period(s):19th Century

Corn and Capitalism: How a Botanical Bastard Grew to Global Dominance

Author(s):Warman, Arturo
Reviewer(s):Bogue, Allan G.

Published by EH.NET (August 2003)

Arturo Warman. Corn and Capitalism: How a Botanical Bastard Grew to Global Dominance. (Translated by Nancy L. Westrate). Chapel Hill: University of North Carolina Press, 2003 (originally published in Spanish in 1988). xiii + 270 pp. $49.95 (cloth,) ISBN 0-8078-2766-5; $24.95 (paper), ISBN 0-8078-5437-9.

Reviewed for EH.NET by Allan G. Bogue, Professor Emeritus, University of Wisconsin, Madison.

The distinguished Mexican anthropologist, Arturo Warman, published the Spanish language edition of this sweeping survey of the place of corn in world history since the sixteenth century in 1988. The colorful subtitle refers to corn’s disputed parentage and the fact that through history the crop has stayed outside “the system of accepted norms” (p. xiii). As a Mexican social scientist Warman became deeply interested in the social and economic significance of corn and planned a history of the crop’s place in Mexican life. Various scholarly projects prepared him for that work but he ultimately deferred it in favor of the current volume.

Several preliminary chapters lay a foundation for the book. Warman begins by describing the many useful American plants that have had major “repercussions” in “the development of the world economy, and the world market place.” At the heart of corn’s story, he writes, “lies the history of capitalism” (p. 11). The corn plant (Zea mays), Warman explains, has various amazing characteristics. Evolved from the grass teosinte, it does not propagate itself in nature, is self-pollenizing, is remarkably responsive to hybridization, is adaptable to a wide range of environments, has outstripped other food plants in its yields, is accommodative to complementary crops, is easily converted to edible form, and is capable of conversion into a myriad of derivative products ranging from bourbon to adhesives and automotive fuel, as well as providing livestock feed that enters the human diet as animal protein. Debate has raged as to whether the birthplace of corn was the Americas or Asia. Sketching the archeological evidence, Warman accepts Mexico as the place of origin.

Warman devotes most of the remainder of the book to tracing the history of corn in major areas of the world, dealing first with Asiatic locales. First introduced there in the early sixteenth century by the Portuguese, corn became a crop of the mountains and frontier regions and particularly a food of the poor. He links its history to the complex land tenures and labor intensive systems of cropping in that great region and the relation of this crop to other major crops including a number of other western immigrants. Corn, he explains, was an important part of the second great agricultural revolution that occurred in China during the nineteenth and twentieth centuries.

He follows with an account of the place of corn in the Atlantic slave trade. Slaves endured their passage to the new world on a diet consisting almost solely of corn meal paste, the grain’s high vitamin content warding off scurvy. Introduced primarily by the Portuguese, corn became a major crop in the African slave shipping areas and their hinterlands to meet the provisioning needs of the slavers. The crop adapted well to slash and burn agriculture. By the seventeenth century, corn was well established on the Atlantic coast of Africa and probably in much of the interior. With the decline of the slave trade in Africa, European nations developed colonial relations with its peoples. Corn now became increasingly important as a subsistence crop grown by peasants. Colonial administrators and white settlers emerged as a ruling class in the colonial dependencies and a native worker class emerged to provide labor for extractive ventures and settler agriculture. Corn products also sustained this labor sector but corn’s resistance to disease, short growth cycle, versatility, low requirements of capital and labor, and high yields also commended it to white farmers. Colonial land policies, Warman explains, benefited white interests and confined native populations in restricted areas, thus limiting native livestock operations. Hampered by natural hazards and colonial policies, peasants used corn both as sustenance and to provide agricultural surplus. Corn became, Warman concludes “one of the secret weapons in peasant resistance to colonial rule” (p. 81). In the era of national independence that followed the colonial era in Africa growth in the volume of commercial export crops — coffee, tobacco, cacao, and cotton — far outstripped growth in domestic food crops; a condition of dietary dependence prevailed. Corn flour was one of the cheapest foods per thousand calories available in urban African markets. The hope for future growth in food production in Tropical Africa lies, Warman suggests, in land reform.

Turning to Europe, Warman reviews the treatment of corn in European publications from the sixteenth century to the modern era. First grown as a curiosity in Andalusia and later as an agricultural crop, by the eighteenth century it had displaced long established cereals both in irrigated areas and in the subsistence peasant economy of northern Spain. By the end of that century corn was planted from the Black Sea to Gibraltar and, it was said, south of a line from the mouth of the Garonne to the Rhine above Strasbourg. It was often planted on land that formerly had been fallowed. Ripening at a time that had typically been one of food scarcity, it reduced the threat of famine and became the food of those who lived in “poverty, rural deprivation, and primitive … conditions.” Corn contributed vitally to the ongoing, “intellectual, political, industrial, and agricultural revolutions” then underway (p. 111). Finding no “ubiquitous and precise cultural agent” that accounted for the diffusion of corn growing through much of early Modern Europe, Warman identifies four “natural and social factors”: “growing conditions and the agricultural systems or their associated methods: population dynamics; trade, prices, and markets; and landownership and the relations of domination existing between landowners and direct producers” (p. 112). Their interaction, sometimes affected by more subtle influences, made corn “the bread of southern Europe’s poor.” But it also “generated wealth for landowners, shopkeepers and money lenders, overlords, and the new middle class,” who, ironically, ate wheat bread (p. 131). This occurred as an agricultural revolution took place between the sixteenth and eighteenth centuries involving more intensive cultivation of the land and dwindling use of fallow.

Two American agricultural exports had tragic consequences — the potato famines of the mid nineteenth century and the widespread incidence of pellagra in southern Europe and later in the southern United States. Those highly dependent on corn as a food might develop pellagra and this chronic disease, causing dermatitis, diarrhea, and ultimately dementia, battered the population of European corn growing regions during the nineteenth century. Warman describes the various efforts to explain the disease and the developing conviction that diets heavily dependent on corn were responsible. Such dependence was usually associated with poverty and such onerous rents that peasants could not eat a balanced diet. Pellagra was “a symptom of a process of fierce modernization in peripheral areas” (p. 150).

In telling the story of corn in the United States, Warman stresses the importance of Native American tutelage. “Once the settlers had fully grasped the secrets and potential of corn, they no longer needed the Native Americans. Indigenous peoples were wiped out, scattered or relocated as settlers penetrated even further inland” (p. 155). Warman’s discussion of American economic development sketches many of the familiar facts of that story. Corn was a basic crop in the long continuing American frontier experience but played “its most important and long-lasting role,” he writes, ” in the predominantly rural world of the American South” (p. 159). It was a staple of slave diets but these were apparently sufficiently varied that the slaves did not suffer from nutrition deficiency diseases. Corn cultivation was far more extensive than cotton in the South but the latter produced the wealth and contributed most to the development of class differences. Sharecroppers became so hard pressed that pellagra was endemic by the early twentieth century. U.S. Public Health Service researchers discovered that a diet rich in milk, meat, and beans countered the disease. In the 1930s the University of Wisconsin’s Conrad A. Elvehjem showed that nicotinic acid deficiency was the specific cause. The human digestive process failed to unlock corn’s content of this vitamin when it was prepared as food in certain ways. Warman here comments that “pellagra was a disease born of development, a product of a type of progress that was imposed, unjust, and unequal”(p. 173).

Prior to the nineteenth century corn’s history was “tied directly to human nutrition.” In the expanding, industrializing, railroad-building United States, however it also became “the raw material for the production of meat and dairy products” and in the first half of twentieth century the U.S. crop accounted for half of the world’s production. It was the “very backbone” of American agriculture (pp. 181, 183). During that era U.S. corn production was more or less stable. The successful development of hybrids, however, along with improvements in mechanization, and fertilizer and herbicide use resulted in unprecedented yields of the crop after World War II. Now American corn became a significant factor in the world trade in cereals. By the beginning of the twentieth century U.S. pioneer subsistence agriculture had been replaced by commercial farming but farmers still continued “to supply the largest part of the means of production”– “labor, motive power, seeds, organic fertilizers.” Now the farmer became increasingly dependent on the market for these things. A massive institutional framework developed to sustain and direct agriculture and agribusiness became the “dominant force” in American agriculture (pp. 186, 188). In 1954 the Agricultural Trade Development and Assistance Act of 1954 was designed “to use U.S. agricultural surpluses abroad in the effort to eradicate world hunger” (p. 190). Related programs followed and corn was a major element in the U.S. contribution. Because “corn entered the world market … as a food stuff for the poor and as forage for the rich it surmounted the inelasticity of demand typically associated with cereals” (p. 192).

In a final substantive chapter Warman describes the world market for food as it developed between the 1950s and the mid 1980s. Prior to World War II, Western Europe was the only major agricultural region that did not meet its own needs and also provide some export grains. By the 1960s only the United States, New Zealand, Australia, and Canada were independent producers. U.S. aid programs exacerbated this trend and “food dependence became a chronic and widespread phenomenon in many Third World countries” as did population explosions (p. 203). Wheat dominated in U.S. exports until the 1970s and then corn became increasingly important. American aid had generated “an entirely new market, whether by introducing the consumption of wheat or by displacing existing domestic production” (p. 205). The U.S., charges Warman, distributed aid with a view to its strategic political impact. The political considerations of the United States and its allies dictated the magnitudes of supply and demand, prices and the conditions of sale, that defined the world cereal market and interacted with domestic tariffs, subsidies, and other production controls (p. 209). By the 1970s five great multinational grain handling companies dominated world trade in cereals. After a food production crisis in Russia and a failure of the hybrid corn crop in the U.S. during the early 1970s, however, food production outpaced population growth. Although “corn’s incredible growth as a commodity for reexport was the most outstanding phenomenon.” most third world countries had entered a condition of dietary dependence (p. 212). Despite adequate world supplies of food at the time of writing, Warman identifies a major problem of distribution and future vulnerability to shortages.

In two concluding chapters Warman discusses the recent phenomenal expansion of food production in which corn has been an important part and the possible ways in which growth in food production may be sustained. He sees two available agricultural modes — “capitalized intensive agriculture, also known as scientific agriculture or production by the wealthy.” The other is traditional peasant agriculture, utilizing few resources beyond those readily available and controlled by the production unit. This is farming by the poor” (p. 218). The first of these, he argues, has not improved world diets in the past nor solved the problem of distribution. Advocates of the Green Revolution tried to increase production in peasant agriculture by the use of hybrid crop varieties but had very limited success because of the high costs involved. Warman identifies less expensive ways of increasing peasant production — reduction of fallowing, bringing marginal lands into production and land reform. “The only way to confront the problem of world hunger,” he argues, “is to increase peasant production, using the many and at times unimaginable means to achieve that goal” (p. 231).

In the final chapter “New Reflections on Utopia and the New Millennium,” Warman explains that he has attempted “to analyze some social processes in which corn has played an important role” (p. 232). From one perspective his book is a sweeping historical survey of the adoption of corn as a major food and feed crop in much of the world. In this respect it is a fascinating compendium of thought-provoking facts and illustrative statistics. The volume is also a somewhat sour Marxist critique of modernization and, one may argue, a defense of peasant agriculture. A few passages illustrate Warman’s perspective. Concluding his discussion of the Chinese case, he writes “Growing rural surpluses did not remain in the rural countryside or even in China itself. … They were transferred to foreign powers’ spheres of economic influence and accumulated there. Peasants were the source of agricultural know-how and labor, yet they were increasingly threatened … settling marginal lands on the nation’s domestic frontier. For many decades they accepted the destiny of peasants everywhere, unable to eat what they produced because it was prohibitively expensive. Thus they transformed corn and other American plants, previously foods for the poor, into essential resources for their very survival. They did even more, they carried out a [social] revolution” (p. 50). He summarizes the slave trade this way: “the slave trade was not destiny or fate, but a series of opportunities and limitations.” Those “opposed to slavery … were social groups with the emerging power and will to confront that circumstance. The slave trade was an aberration, but neither was it the result of a general law of historical development. Rather, it was history; something that happened, but that just as easily could not have taken place at all” (p. 65). In considering the European agricultural revolution of 1600 to 1800, Warman rejects the common assumption that it was “the result of the application of scientific knowledge to production, diffused by elites and intellectual vanguards,” preferring instead “the idea of revolution as a result of collective knowledge and collective action” (p. 119). Leaving discussion of pellagra, he argues, “Change was promoted in the periphery from above and from abroad in order to recreate society in accordance with an ideological model; the industrial millennium that sought to establish a homogenous world. … Pellagra was not simply a disease of poverty and deficiencies, but one of the many diseases of modernization, of development, of prodevelopment capitalism” (p. 150). And finally, the history of U.S. agriculture is a process of accumulation with very different and increasingly accelerated rhythms. It is also a history of inequality, of exclusion, and of subjugation. Each process created its own marginal groups” — Native Americans, rural poor, urban poor, migratory workers, food stampers (p. 193). “Marginalization threatens the American farmer, the most outstanding product of the U.S. democratic ideal” (p. 194). He contrasts these developments with the diversity, stability, community reinforcement, and population controls found in peasant societies.

Although the principle of comparative advantage was at work in the spread of corn, it was conditioned by relations of power and dominance, argues Warman; accumulated wealth put less powerful groups at severe disadvantage. He was apparently unaware of ongoing cliometric research on the profits of imperial enterprise. He does not offer a rigid formula of class differentiation; to him the process was one of diverse conditions and forces but invariably involved exploitation. In considering the sections dealing with corn’s history in the United States, Americanists will consider some of his judgments to be overstated. The achievements of American plant scientists are brushed aside in a sentence, and the mechanics of diffusion are described in terms more general than modern scholarship has achieved. Warman emphasizes the need for increasing the effectiveness of peasant agriculture’s national or regional dietary independence but he gives much less attention to the issue of population control. Warman’s translator has produced a lucid, stimulating, and informative narrative but the reviewer remains happy that he is not one of Warman’s peasants nor sentenced to relive the existence that he, himself, experienced as a farm boy, living the democratic ideal.

Allan G. Bogue is Professor Emeritus of History at the University of Wisconsin, Madison and has published widely in American agricultural and political history. His most recent book is The Farm on the North Talbot Road (University of Nebraska Press). His next article, “Oxen to Organs: Chattel Credit in Springdale Town, 1849-1900,” will appear in the forthcoming summer number of Agricultural History.

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

Agricultural Development in Jiangnan, 1620-1850

Author(s):Bozhong, Li
Reviewer(s):Pomeranz, Kenneth

Published by EH.NET (July 2003)

Li Bozhong, Agricultural Development in Jiangnan, 1620-1850. New York: St. Martin’s Press, 1998, and

Li Bozhong, Jiangnan de zaoqi gongyehua (Proto-Industrialization in the Yangzi Delta). Beijing: shehui kexue wenxian chubanshe, 2000.

Reviewed for EH.NET by Kenneth Pomeranz, Department of History, University of California at Irvine.

Like most other aspects of Chinese intellectual life, economic history suffered badly during the 1960s and 1970s. In the generation that began rebuilding the field thereafter, probably the single most productive scholar has been Li Bozhong, now of Qinghua University. Professor Li has also been noteworthy for his efforts throughout the last twenty years to encourage Chinese scholars to engage seriously with the very different paradigms favored by most of their colleagues in the West, Taiwan and Japan — and vice versa. Yet only a fraction of Li’s massive scholarly output is available to those who do not read Chinese. The following review attempts to hit many of the highlights of his work by considering two recent complementary volumes, only one of which is translated: Agricultural Development in Jiangnan, 1620-1850 and Jiangnan de zaoqi gongyehua (Proto-industrialization in Jiangnan). Together, they paint a fascinating, though incomplete, picture of the economy of the Yangzi Delta (or Jiangnan),1 which was the richest region in China, and among the richest regions in the world from roughly 1000 until the mid-nineteenth century, when the Opium Wars, Taiping Rebellion (1851-64 — probably the most destructive civil war in history, killing perhaps as many as 20,000,000 people), and the onset of rapid industrialization in Northwestern Europe fundamentally changed the social, political, and economic landscape.

In Agricultural Development, Li argues forcefully against two basic views of the Delta’s agriculture in the Ming (1368-1644) and Qing (1644-1912) periods: 1) the claims of some Chinese Marxist scholars that the Delta remained a subsistence-oriented “feudal” economy in which most peasants had very limited contact with the market until the nineteenth century; 2) the claim of some Western scholars that Malthusian pressures and very limited technological change produced a slow but steady trend of immiseration over the period from roughly 1250 (when the rate of technological progress seems to have slowed considerably) until at least the mid-nineteenth century, and perhaps until well into the twentieth century. (A variant of this latter view, sometimes called the “involutionary” position, claims that living standards remained basically unchanged over the long haul, while the amount of labor required to obtain this standard kept increasing, so that immiseration came in the form of more work for the same rather limited per capita output rather than in the form of a decline in per capita output.) Li argues instead that: a) positive technological change continued in Jiangnan agriculture throughout this period, particularly in the areas of fertilizer use and water control; b) local factor markets continued to become more efficient, facilitating the increasingly rational allocation of labor and capital; c) long distance trade in various products expanded dramatically, allowing the region to benefit by pursuing its comparative advantage in cotton and silk production, and importing rice, timber, soybeans, etc.; d) the gradual decline in farm size as population increased did not lead to under-employment.2 On the contrary, increased double-cropping and other measures meant that the labor year for peasant males stayed about the same, while output per labor day actually rose; meanwhile women increasingly exited agriculture (in which they had never been very productive anyway), and earned more per day by moving into rapidly-growing textile trades; e) deliberate fertility control became fairly widespread by the eighteenth century, considerably reducing any Malthusian pressures and; f) because of all these factors, both aggregate and per capita income increased slowly but steadily during this period. (Li does not attempt to calculate total factor productivity, but makes it clear that he thinks growth in output outstripped the rate of growth in inputs.) He sees these positive trends coming to an end — and even then, only a temporary end — with the coming of the Opium War (1839-42) and the Taiping Rebellion (1851-64), which he argues aborted the development of a national market, and led to the breakdown of law and order. (In a more recent paper, he has suggested a slightly earlier turning point, arguing that a prolonged period of exceptionally bad weather and flooding began about 1820, doing lasting ecological damage and contributing to the calamities of the mid-nineteenth century.)

The basic arguments of Proto-Industrialization are similar in spirit. Li’s most basic point — that handicraft production for the market by Delta households grew enormously between the mid-Ming and mid-Qing — is not much in doubt, but he adds a number of important further observations. First, he broadens the scope of inquiry beyond the relatively well-studied silk and cotton cloth industries, providing very useful discussions of food-processing, tool-making, bleaching and dyeing, residential construction, boat-building, and so on. While he does not have the level of detail on any one of these sectors that one would hope for, his work on most of these industries is a significant advance over anything we had before.

Second, Li shows us that the growth of production in almost all of these sectors was accompanied by increasing levels of specialization, in two senses: a) in the sense that the tasks of production were increasingly sub-divided; and b) that consumers were increasingly purchasing these goods rather than making them for themselves, and so increasingly concentrating their work effort on production for the market rather than “Z-goods” for auto-consumption. (The latter point is less well documented than the former; while Li is able to show burgeoning urban markets, both in the Delta and beyond, for all sorts of ready-made goods, the evidence on rural consumption is sparser.) Along with this increased specialization, Li also assembles evidence that the average size of production units was growing in most of these sectors. In the case of spinning and weaving, where most production continued to be done in households, he makes a generally convincing case that an increasing share of output was controlled by merchants operating on a large scale, who controlled access to often distant markets, imposed increasingly exacting quality standards in order to maintain those markets, and thus had an increasing influence on the production process, even without using credit and the provision of raw materials to control direct producers the way that European “putting-out” merchants often did.

Third, Li’s surveys of specific industries other than textiles make a strong case showing slow but continuing technological development, expansion of markets, and an increasingly complex division of labor. In contrast to an older version of Chinese economic history (pioneered by Japanese scholars in the 1930s, but later widely accepted around the world), which saw an enormous spurt of technological change during the Song dynasty (960-1279), followed by stagnation or even regression thereafter, Li argues that the Song revolutions have been over-emphasized: not because they weren’t important, but because the diffusion and subsequent small improvements of many major inventions pioneered in that period took centuries, and it was those processes that gave Song-era breakthroughs much of their impact. This, too, is a revision of the conventional wisdom that is gaining adherents among both Chinese and Western scholars. While Li has not unearthed enough quantitative data to let us make reliable estimates of, for instance, labor productivity for most of these sectors, what little we can do with this data tends to suggest continued improvements in most sectors, and snapshots of productivity levels in particular sectors that would compare well with other advanced areas in the world until probably some time in the eighteenth century. What we do not see, however, is a shift over time among sectors toward more capital intensive and energy intensive pursuits — and this, as we shall see, is crucial to Li’s overall argument.

Fourth, Li argues that the combination of proto-industrialization and rising yields in agriculture (discussed above) propelled a significant improvement in per capita income and standard of living between 1550 and 1850, despite significant setbacks in the mid-seventeenth century ( a period of civil war, foreign invasion, and massive epidemics) and a decline in the average size of family farms. Here he not only disagrees with the still-regnant Chinese Marxist orthodoxy, which insists that China remained essentially a subsistence economy until the Opium War, but also with American partisans of “involution,” who maintain that the late imperial period was characterized by miniscule gains in income achieved at the expense of very large increases in labor inputs. By contrast, his position comes much closer to what is sometimes called the “California school” of social and economic historians, who argue that economic development in the Delta more or less kept pace with that in the most advanced parts of Europe until the onset of widespread factory industrialization. (Full disclosure statement: this reviewer is a charter member of the California school.) But in some ways, he goes even further than they do: while most of the “Californians” see economic expansion (or at least per capita economic growth) in the Delta slowing by the late eighteenth century, Li’s argument in these two books (though not always since then) suggests that the basic dynamics of growth continued unchanged until China’s mid-nineteenth-century catastrophes.

But while Li is content to rely on largely exogenous factors to explain the decline of the Delta after 1840, he does devote considerable attention to analyzing why the highly productive agriculture, commerce and handicrafts he describes did not spawn something more like classical English industrialization sometime before that date. He argues that institutional structure, surplus available for investment, and the educational level of the workforce were all quite adequate, and that there was widespread interest in productivity-enhancing technological change. Consequently, he looks beyond social, intellectual, and political factors, and finds his answers in geography and the supply of natural resources. In particular, he emphasizes a dearth of energy sources that he says gave Jiangnan production a marked bias away from anything energy-intensive, creating what he calls “a super light industrial” economy. Being very densely populated (and to a great extent reclaimed from marshes, rather than by clearing forest), the Delta had relatively few trees and not very many large work animals; it had no coal or peat, and, being at sea level, relatively little water power. Conditions were even unfavorable for the large-scale use of wind power, though some windmills were established. Thus, Jiangnan did what it was best at: sustaining a very productive agriculture (especially in rice: cotton yields do not seem to have been outstanding), mobilizing the large numbers of people it could feed to produce handicrafts, and taking advantage of its location at the mouth of a river system draining roughly a third of China, plus the coastline and the one thousand mile Grand Canal, to engage in very widespread trade. That it did not shift much labor into areas in which it had serious natural deficiencies, such as energy-intensive heavy industry, should not blind us to what it did achieve, or to the ways in which, Li argues, Jiangnan’s “proto-industrialization,” like its Western counterpart, laid the basis for the growth of modern industry in the region later on.

Much of Li’s argument here parallels the arguments of Western scholars in the so-called “California school,” including myself: thus it is not surprising that I find most of his argument convincing, and welcome the wealth of additional data he has brought to bear. His reconstructions of agricultural productivity and factor inputs, while certainly open to question, are generally the best we have: in particular, I think his claim that both male and female labor productivity rose significantly between the sixteenth and eighteenth centuries, despite a large increase in population, is at least well-enough based that the burden of proof should now rest on those who wish to argue for stagnation or decline. (The problems with these estimates are that a) the documentary base is fairly narrow, and b) because this was an agriculture with both very high inputs of labor, fertilizer, etc., and very high outputs per acre, relatively small percentage changes in assumptions about either yields or the costs of inputs can lead to uncomfortably large changes in estimates of net output.) The particular care that Li has lavished on changes in fertilizer use and their effects has important implications for environmental history as well as economic history. In terms of industry, his attempt to broaden discussion beyond textiles is particularly welcome, as is his general argument that we should look at what happened within the major sectors of this economy, rather than focusing on why the relative size of light and heavy industrial sectors did not shift. And his attention to environmental and resource problems is also quite helpful, though I think there is evidence that these problems began to constrict the Jiangnan economy somewhat sooner than Li allows, and that some of them were exacerbated by state policies (especially restrictive mining policies, and very limited government investment in transportation infrastructure beyond maintaining the massive Grand Canal) in ways that he does not address. His discussion of the conditions for technological change also seems to me a bit too hurried. While he has certainly made an important contribution by showing that such change had not stopped in Qing-era Jiangnan, there is still some reason to think that its pace had slowed, and no sign that it was speeding up the way it was in Europe. And while Li makes a good case for enough literacy, availability of various manuals, and so on to perpetuate continued diffusion of best practices, we need to know considerably more than we currently do about the rate at which new innovations were being introduced, and about such matters as patterns of association among artisans, the extent to which they were aware of elite science, and what was happening in that science, among other things. But this is only to say that no one scholar can do everything. The main problem, for the foreseeable future, will remain data: Li’s re-interpretations of Chinese economic history have generated new hypotheses considerably faster than we have been able to find material that will satisfy skeptics. But this simply means that we can thank Li, along with his other contributions, for keeping ourselves and our students employed for quite some time to come.

Notes: 1. Technically, these two expressions are not synonymous, but they are now used interchangeably in Chinese studies. “Jiangnan,” meaning “South of the (Yangzi) River,” in Chinese, refers to only part of the geographic Delta, omitting the generally less prosperous North Bank. Most Westerners now use “Yangzi Delta” to refer to Jiangnan, rather than to a more geographically accurate, inclusive region. Jiangnan is also somewhat vague, since it does not refer to a political jurisdiction with officially set boundaries. Professor Li uses a fairly broad definition of the area, though still not as broad as that used by, for instance, Wang Yeh-chien or myself; some other scholars, such as Philip Huang, have adopted a much narrower definition, including only the most densely populated prefectures near Suzhou. Li’s Jiangnan, with an area of roughly 43,000 square kilometers (16,000 square miles), had perhaps as many as 36,000,000 people by 1850.

2. Li favors a population figure of 20,000,000 for Jiangnan in 1620, and 36,000,000 in 1850, for a 0.3 percent per annum growth rate. These figures roughly match those of Cao Shuji’s recent work on Chinese population (Zhongguo renkou shi (History of Chinese Population), Shanghai: Fudan daxue chubanshe, 2000), and appear to be widely accepted among Chinese scholars. Many Western scholars, however, favor a lower figure for 1850, following G. William Skinner’s argument that mid-nineteenth century population totals for various parts of China were seriously inflated. (“Sichuan’s Population in the Nineteenth Century: Lessons from Disaggregated Data,” Late Imperial China, 8:1 (1987): 1-79.) Population growth appears to have been minimal in the region after about 1770.

Ken Pomeranz is author of numerous works including The Great Divergence: China, Europe, and the Making of the Modern World Economy, Princeton University Press, 2000 and The Making of a Hinterland: State, Society, and Economy in Inland North China, 1853-1937, University of California Press, 1993.

Subject(s):Industry: Manufacturing and Construction
Geographic Area(s):Asia
Time Period(s):Medieval

The Market, the State, and the Export-Import Bank of the United States, 1934-2000

Author(s):Becker, William H.
McClenahan Jr., William M.
Reviewer(s):Bean, Jonathan J.

Published by EH.NET (July 2003)

William H. Becker and William M. McClenahan, Jr., The Market, the State, and the Export-Import Bank of the United States, 1934-2000. New York: Cambridge University Press, 2003. xii + 340 pp. $80 (cloth), ISBN: 0-521-81143-0.

Reviewed for EH.NET by Jonathan J. Bean, Department of History, Southern Illinois University – Carbondale.

In recent years, “globalization” has become a hot topic in U.S., European and world politics, as young (and not-so-young) demonstrators have taken to the streets protesting free trade and the policies of the World Bank and the International Monetary Fund. The resulting media attention has raised the name recognition of those institutions. Yet very few Americans could properly identify the Export-Import Bank as “the United States’ export credit agency” (p. ix) and one of the country’s chief instruments of free trade. In this superbly researched monograph, Becker and McClenahan highlight the important role “Ex-Im” has played, not only in promoting international trade but also in serving U.S. foreign policy interests. In so doing, they have made an important contribution to the scholarly literature on international trade. The hefty price tag and thick narrative, however, will prevent this book from reaching a broader audience.

This is a commissioned history; Becker and McClenahan were successful bidders for a sixty-fifth anniversary commemoration of Ex-Im’s founding. Despite its commemorative status, this is a serious scholarly study enriched by “full access to the Bank’s records and to its personnel,” including many oral interviews with agency history makers (p. x). In addition to on-site records, the authors delved into documents at the National Archives and at other government agencies. The Export-Import Bank agreed to ongoing peer review by the eminent professor of economic history Richard Sylla (New York University) and the authors retained copyright. The end result is an exhaustively researched manuscript that stands among the best-documented histories of any federal agency.

The Export-Import Bank began as the offspring of President Franklin D. Roosevelt’s diplomatic recognition of the Soviet Union in December 1933. Two months later, prodded by U.S. exporters hoping to pry open a new market, FDR established, by Executive Order, an Export-Import Bank to finance trade with the U.S.S.R., a venture that foundered on the issue of unpaid pre-revolutionary loans. Simultaneously, Roosevelt created a second Export-Import Bank to do business with a new, friendly regime in Cuba. The Banks’ trustees merged the two banks into one — originally financed by the Reconstruction Finance Corporation — and expanded Ex-Im’s mission to include markets around the world, except the U.S.S.R. The Bank received Congressional backing in 1935 and became an independent agency ten years later. By statute, Ex-Im was to avoid competing with commercial banks; assume risk on longer-term loans that they would not accept; yet still assure a reasonable chance of repayment. At the same time, President Roosevelt and his successors repeatedly called on the Bank to serve foreign policy ends that went against the grain of these statutory requirements. Thus, from the beginning, Ex-Im served the conflicting interests of exporters and the foreign policy establishment of the U.S. government. In short, the Bank navigated uneasily “between the state and the market” (p. 8) throughout its history.

One major theme is that “businesslike values” (p. 2) permeated the Bank but U.S. diplomats “tested many times” this “core market orientation” (p. 3). Tested indeed! The authors spend so much time on the fascinating, ever-changing role Ex-Im played in foreign policy that the reader gets the impression that the bankers at Ex-Im were helpless pawns in the hands of diplomats and governments friendly to the United States. This is undoubtedly a false impression gained by the weight of presentation, yet one that could have been countered by more frequent mention of “businesslike” statistics such as loan loss rates, profitability, and so on.

As it stands, the foreign policy story is one that should interest diplomatic historians: During the late 1930s, Ex-Im made risky loans to Latin American countries to forestall German Nazi intervention; after World War II, the Bank was the first U.S. agency to help reconstruct Western Europe before the Marshall Plan went into effect; during the 1950s and 1960s, it financed development projects in the Third World to counter communist movements. Later, in the 1970s, Ex-Im negotiated with the Organization for Economic Cooperation and Development (OECD) to “level the playing field” among export credit agencies in Europe and North America after that era’s brutal trade wars.

The past two decades have proven particularly challenging for the Export-Import Bank. The Reagan Revolution of the 1980s brought to power laissez-faire conservatives who were skeptical of subsidies for bankers. Meanwhile, a Third World debt crisis and a strong dollar led to plummeting U.S. exports, a weak Ex-Im portfolio, and a severe institutional crisis. During the early 1990s, however, the Bank “reinvented” itself by abandoning the direct credit market and relying almost exclusively on loan guarantees through private banks. The authors note that this strong market orientation is unique among Western export credit agencies, which are much more state-oriented. In the epilogue, the authors reflect on recent international financial crises that have reintroduced the potential of Ex-Im as a “lender of last resort” when private capital flees foreign markets.

There is no evidence of institutional bias in this organizational history. Becker and McClenahan give plenty of airtime to critics who have accused Ex-Im of serving as “corporate welfare” and as an agent of the U.S. military-diplomatic-industrial complex. If anything, their judgments on these controversies are too even-handed: After presenting both sides, the authors frequently hedge their judgments, leaving the readers to judge for themselves the merits of the case. A bit more controversy might have spiced up an otherwise dry and neutral presentation of the facts. For readers short on time, the authors provide a splendid summary in their introduction. Specialists will gain much more, however, from the detailed narrative that follows. Overall, this book earns “two thumbs up.”

Jonathan J. Bean is Professor of History at Southern Illinois University – Carbondale. He is the author of Big Government and Affirmative Action: The Scandalous History of the Small Business Administration (University Press of Kentucky, 2001).

Subject(s):International and Domestic Trade and Relations
Geographic Area(s):North America
Time Period(s):20th Century: WWII and post-WWII