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An Economic History of Twentieth-Century Latin America

Author(s):Cárdenas, Enrique
Ocampo, José Antonio
Thorp, Rosemary
Reviewer(s):Beatty, Edward

Published by EH.NET (February 2002)


Enrique C?rdenas, Jos? Antonio Ocampo and Rosemary Thorp, editors, An Economic History of Twentieth-Century Latin America, three volumes. New York: Palgrave, 2000. Volume 1: The Export Age: The Latin American Economies in the Late Nineteenth and Early Twentieth Centuries , 344 pp. $75 or ?52.50 (hardback), ISBN:0-333-91304-3; Volume 2: Latin America in the 1930s. The Role of the Periphery in World Crisis, 320 pp. $69.96 or ?50.00, ISBN: 0-333-63341-5; Volume 3: Industrialization and the State in Latin America: The Postwar Years, 360 pp. $75 or ?52.50, ISBN: 0-333-63342-3.

Reviewed for EH.NET by Edward (Ted) Beatty, Department of History, University of Notre Dame.

The three densely packed volumes that constitute An Economic History of Latin America in the Twentieth Century mark the culmination of a long-term project to present the region’s economic history from the 1870s through the late twentieth century. Their publication is a landmark event, and these volumes should provide an essential reference on the economic history of the region for some time to come. Each volume stakes out one of three principal subperiods: volume one examines the “Export Age,” ca. 1870 to the 1920s; volume two probes the region during the 1930s; while volume three focuses on the era of “accelerated industrialization,” ca. 1940-1980. Each volume begins with one or more introductory and thematically oriented chapters that set out the central economic and historiographic issues for the period, followed by chapter-length studies of particular countries. Argentina, Brazil, Chile, Columbia, Mexico, and Central America get chapters in each volume, while Peru is covered twice and Bolivia, Cuba, and Venezuela each once. The authors of the country studies in each volume all occupy central positions in their fields, and most are Latin Americans themselves. One of the many attributes of this collection is to disseminate their work widely in Britain and North America. Each chapter builds on the authors’ previous scholarship and most synthesize the central historiographic debates and contributions of the extant literature. This review will concentrate primarily on volumes one and three. The second volume is a reprint of Latin America in the 1930s, edited by Rosemary Thorp and first published in 1984. This ambitious project also yielded an overview volume, Progress, Poverty and Exclusion: an Economic History of Latin America in the Twentieth Century, written by Rosemary Thorp and published in 1998 by the Inter-American Development Bank and Johns Hopkins Press. It has been reviewed for EH.NET by Alan Taylor.

Volume one, The Export Age, traces how the expansion of world trade and investment largely drove Latin America’s export growth and was itself a product of nineteenth century revolutions in technology, transportation, and institutions. The result was an extraordinary demand for raw materials and the opportunistic response of most Latin American nations. While geography, natural resource endowments, and domestic social and political features shaped the particular way in which each nation engaged the world economy and was in turn shaped by that engagement, the underlying factors convincingly justify the unity of a regional periodization. While our understanding of the overall contours of this story and its periodization have in many ways remained unchanged over the past half century, important aspects have changed remarkably, even over the past decade. Several merit particular mention.

First, recent monographs have increasingly examined the significance of early industrialization in countries like Brazil and Mexico over the period 1880-1914. In these cases and others, investment in domestic manufacturing came precisely when producers in the North Atlantic countries could place ever cheaper and better quality goods in Latin American markets. While export growth and export linkages help us understand the changing domestic markets that made large scale domestic manufacturing possible, they were nowhere sufficient. New investments to import foreign technologies and erect large factories made sense only with programs of government protection, both at state and national levels. While these efforts are not detailed in any of the chapters here, there is widespread recognition of the role of the state in shaping investment patterns in the export sector as well as in other activities. Several chapters incorporate this revisionist story, although it is notably ignored in the title and to a great extent in the introductory chapter of volume one. We are left with the implicit conclusion that it is debatably anachronistic — misleading at most and overly narrow at least — to continue labeling the 1870-1914 era simply as Latin America’s “export age.”

Second, several of the contributions here suggest that if Latin America fell further behind the industrialized North Atlantic in the late nineteenth century (or, seen another way, did not take full advantage of opportunities for growth), it is not because the region exported too much, but that it exported too little. Beginning in the 1940s one common view of the region’s economic history (most visibly expressed by ECLA economists) held that the opening of Latin American economies in the nineteenth century and the export booms that accompanied this opening led to growth but also to underdevelopment, due in large part to a secular decline in terms of trade (see E.V.K. Fitzgerald’s account of this in chapter 3 of volume 3). The pessimism, which colored much of the scholarship on the export age before the 1980s, has given way to a more complex and mixed account. The revisionist argument that late nineteenth century export growth provided a significant foundation for twentieth century development (including physical infrastructure, manufacturing capacity, state capacity, and human capital) is present in a number of the accounts here. The chapters on Colombia and Bolivia state this most clearly (see, for instance, p. 62), but the theme runs throughout the volume. What is missing, however, is a broader assessment of the way in which linkages, spillovers, and externalities of export sector growth were not narrowly economic in scope but shaped fundamental social and political transitions during the 1880-1920 period. The chapters of Alan Knight on Mexico and Roberto Cort?s Conde on Argentina provide partial exceptions to this tendency. In contrast to the generally pessimistic tone of many earlier accounts of nineteenth century development — its dependent nature, limited technology transfer, rising inequality — this volume offers a more positive account of substantial growth, of a new foundation for future development, and of the creation of a modern state.

Volume two, Latin America in the 1930s, compiles papers first written in 1981 and 1982 and subsequently published in 1984. The current volume is an exact reprint. I touch on it only briefly here as it was extensively reviewed fifteen years ago. Despite its age, these contributions still stand as authoritative assessments of the region during and immediately following the Great Depression, and this holds true both for the summary chapters by Carlos D?az Alejandro and Charles Kindleberger as well as for the individual country studies. Two issues strike me as I read the volume now, nearly two decades after it was first written. First, the moderately revisionist view of these contributions still holds up: the Great Depression may constitute a turning point in economic thought and certainly helped shape the region’s move towards state-led industrialization, but in many important ways the 1930s witnessed a continuation of tendencies already apparent in the 1920s. In particular, nearly every one of these country studies note that import substituting industrialization (ISI) was already underway, and most decisively so in the larger nations. If in the early 1980s these authors attributed the beginnings of ISI to the 1920s, more recent research has placed its origins exactly in the so-called “export-era” of the late nineteenth century, as I noted above. Second, this volume represents the last chance for an examination of Latin America’s twentieth century history as yet uncolored by the economic debacle of the 1980s and the subsequent movement towards neoliberal openings. Although in its particulars the story presented here of the region’s response to 1930s trade and finance shocks differs in relatively minor ways from what might be written today, its tone throughout lacks the pervasive pessimism and critique of state-led industrialization which has largely characterized writing in the post-debt crisis era. This is not to say, however, that the accounts presented here can be ignored because they are dated — quite the contrary. They continue to provide our most authoritative assessment of the macro-economic crisis and response during that crucial era, and it might be argued that their pre-crisis perspective provides us with an important corrective to the consistently critical assessments of recent years. Needless to say, the more recent work of Enrique C?rdenas, Alan Taylor, and others provides essential new perspectives.

Volume three, Industrialization and the State in Latin America, makes the issue of state intervention explicit. Over the past decade or so there has been if not a revolution, then a significant shift in conventional views of Latin America’s post-war economic history. Although state-led industrialization, import substituting industrialization (ISI), or desarrollo hacia afuera has had its critics since the 1950s, it has been roundly vilified over the past decade or so as responsible for many if not most of the current ills of the region. The lead chapter in this volume provides a revisionist view — the first synthesis of the region and era written over a decade after its final collapse in the early 1980s. On one hand, the authors generally do not question the now-common acceptance of the inefficiencies generated by the long duration of highly protective policies, although most prefer not to dwell there long. Their macroeconomic focus tends to see costs in terms of the region’s lost opportunity to exploit the benefits of expanding world trade between 1950 and 1970, instead of in microeconomic inefficiencies. On the other hand, the authors balance this pessimistic view with an appreciation for the development that occurred in most countries through the period. This included most importantly the linkages of industrial growth to technological capacity, the emergence of effective national states, and the development of social infrastructure, including human capital. This is most explicit in the overview chapters and the account of Argentina, but runs through each chapter in some form. Most of the contributions in this volume also prefer to view the policy foundations of ISI as a result not of domestic policy errors or a rent-seeking political economy, but of rational short-term responses to international and macroeconomic circumstances in a world where few alternatives appeared feasible. By the 1960s, recurring macroeconomic crises and growing social conflict made the aggressive pursuit of alternative paths even more difficult. Although many countries began a retreat from the more aggressive version of ISI in the 1960s and 1970s (or began to include some export incentives, as in Brazil), its final demise was driven only by the severe external shocks and domestic crises of the early 1980s. How the substantial if problematic industrial growth that occurred from 1940 to 1980 was accompanied by a significant improvement in human development (though also by the persistence of high inequality) is alluded to but not explored in detail.

The editors’ decision to include chapters on technology (by Jorge Katz and Bernardo Kosacoff) and on the role of international institutions like the World Bank and IADB (by Richard Webb) in volume three should be commended. Both provide uncommon and extremely useful perspectives on central actors and outcomes of the ISI era. These two chapters provide novel views of the era of accelerated industrialization, but the chapter by Katz and Kosacoff is weakened by a vagueness that runs through many of the country studies as well. Despite the central role attributed to “institutions” in this chapter and in many of the country chapters, we get relatively little discussion of the nature of institutions: of the relationship between formal structure and administrative practice, of the way in which they structured incentives to invest in productive or rent-seeking activities, and of their mutability in the face of economic and political crises. Author after author asserts the importance of institution building in the post-war era, but institutions remain rather opaque black boxes throughout. The extensive contributions of recent work on property rights institutions and positive political economy finds little reflection here.

Most of the country chapters in volume three emphasize the tremendous change in social welfare experienced by most countries. In the companion volume, Progress, Poverty and Exclusion, Rosemary Thorp summarizes the change between 1900 and 1995: average per capita income (in constant US dollars) rose from $185 to $990, life expectancy increased from 29 to 68 years, while illiteracy fell from 71 percent to 10 percent. Most chapters here also point out how economic growth and average welfare did not mean better income distribution — often quite the opposite. What is not generally explored, however, is the relationship between social welfare and each country’s economic history. Although the implicit suggestion is that social welfare and economic growth are somehow linked, largely ignored is the more direct and causal relationship between politics — a combination of populist politics and the maturation of the basic elements of modern welfare states — and social welfare. The chapters on Venezuela and Brazil present the best accounts of the social consequences of particular growth experiences, although these two present more discouraging accounts of social welfare development than most other countries in the region. The problem throughout is not so much the uneven inclusion of social welfare issues, but rather the lack of an explanation for the relationship among social welfare, inequality, and economic growth.

All three volumes approach Latin American economic history largely from a macroeconomic perspective and with a particular emphasis on the international context. The influence of a distinctly British-style development economics is clear throughout. While the role of the state is a central component of nearly all national stories told in these volumes, and while institutional approaches are touched on here and there, accounting for domestic political economy is absent from most, as is the broader social context. Furthermore, issues such as labor, technology, and consumers receive relatively little coverage, with a few notable exceptions. These contributions, in other words, represent an approach rather removed from recent tendencies by economic historians in the United States to privilege microeconomic topics and institutions, especially those related to property rights and policies which shaped firms’ behavior.

Despite the superb quality of all of these country studies, I will offer two complaints. The first may not be entirely fair. The country studies in all three volumes provide — as advertised — economic histories of national export sectors and their linkages. Most admit up front that the export economy embraced neither most of the national labor force nor (in most cases) most of the nations’ GDP. While the accounts here are impressive, this historian still awaits a more broadly conceived economic history of Latin America since the mid-nineteenth century, an account that would incorporate a broader synthesis of economic and social history within the narrative story. One exception in this first volume is the fine synthesis of export, agricultural, and manufacturing issues in Mexico by Alan Knight, notably further outside the field of economic history than most of the contributors. Secondly (and more frustratingly), there are distressingly few citations and references in these volumes to scholarship after 1990 or so. Antonio Santamar?a Garc?a’s chapter on Cuba is a notable exception, and in general this problem is greatest in volume two (remember, a reprint of the 1984 volume) and in volume one, and somewhat less so in volume three. Given the wealth of new insights that economic historians of the region have offered over the past ten years, this suggests a volume that teeters on the verge of outdatedness at publication. Certainly the tremendous time and logistics that went into the production of these volumes necessitate substantial lag between composition and publication, but the gap here is occasionally striking. Together, however, these contributions succeed in reflecting the sea change in our understanding of the economic history of the long twentieth century in Latin America.

In conclusion, these volumes provide a sorely needed single source on the economic history of modern Latin America. With the exception of Victor Bulmer-Thomas’s broad and indispensable overview of the region, nowhere else is this available. These volumes will prove an enduring and much used reference for present and future economic historians. No other source matches the comprehensive, concise, and sophisticated accounts presented here. As important as this contribution is, however, it speaks only to the converted. Do these volumes speak to non-economic historians? Do they help convince historians of other persuasions that the economic history of their nations-of-study is not only interesting but necessary in order to understand social and cultural history? Do these volumes make this argument — at least implicitly — in a way that is accessible and compelling to those skeptical of the accessibility and relevance of economic history? I think the answer is a tentative yes, although I wish that I could say so with less hesitation. Recently the chasm between economic history, on one hand, and social and cultural history, on the other has widened considerably. This has been nowhere more true than within Latin American history in the United States. I recently attended a seminar of Latin American historians (at an institution not too far from my own) where I was shocked not so much by the presence of antipathy and scorn for social science approaches, as by its vehemence. What the broader community of Latin American scholars need from economic historians are works that seek to bridge or reach across that gap. With the exception of several chapter contributions here (for instance, those by Alan Knight and Roberto Cort?s Conde in volume one), these volumes do not accomplish this — although the introductory chapters by the volumes’ editors stand out in their clear, relatively non-technical, and authoritative presentation of a complex history. (I should note that the summary volume Progress, Poverty and Exclusion by Rosemary Thorp does a better job of presenting a compelling economic history to non-economists, although it too falls short of this ideal.) Most of the country chapters present sophisticated treatments of the nations’ macroeconomic experience over the past century. In doing so they offer a landmark resource for those already interested in the region’s economic history, but will not likely be read closely by others, and that is a shame.

This review cannot do justice to the rich variety of the thirty-three separate chapters collected in these volumes. Suffice it to say that nowhere else will the economist or historian find such a useful collection of concise and authoritative accounts. The concerns I have expressed in this review touch more on what I would have liked to see than on the quality of what is presented, which is excellent throughout. The introductory and overview chapters of the three volumes are alone worth the price of purchase. These should be required reading for every graduate student in the field — and for the rest of us as well. Together these volumes will provide an indispensable reference for future efforts to evaluate and re-evaluate what will continue to be a much-debated era in Latin American economic history.

Edward (Ted) Beatty is Assistant Professor of History at the University of Notre Dame and Fellow at the Kellogg Institute of International Studies. He has recently published a book on industrial policy in Mexico, Institutions and Investment: The Political Basis of Industrialization in Mexico before 1911 (Stanford University Press, 2001), and is currently working on the history of technological change in Mexico during the same period.

Subject(s):Economywide Country Studies and Comparative History
Geographic Area(s):Latin America, incl. Mexico and the Caribbean
Time Period(s):20th Century: WWII and post-WWII

Rising Life Expectancy: A Global History

Author(s):Riley, James C.
Reviewer(s):Easterlin, Richard A.

Published by EH.NET (February 2002)

James C. Riley, Rising Life Expectancy: A Global History. New York:

Cambridge University Press, 2001. xii + 243 pp. $50 (hardback), ISBN:

0-521-80245-8; $17 (paperback), ISBN: 0-521-00281-8

Reviewed for EH.NET by Richard A. Easterlin, Department of Economics,

University of Southern California.

Economic historians, who have been backing into life expectancy by way of

stature, will find this book of interest. It is a qualitative survey of the

nature and causes of increasing life expectancy since 1800. Today, global life

expectancy at birth is about 67 years; two centuries ago it was 30 years or

less. The first fifth of this book describes briefly the temporal and spatial

features of this “health transition.” The remainder is devoted to individual

chapters on six possible causes: (1) public health, (2) medicine, (3) wealth,

income, and economic development, (4) famine, malnutrition, and diet, (5)

households and individuals, and (6) literacy and education. In the author’s


Two main arguments are developed . . . . The first . . . is that individual

countries . . . devise their own strategies for reducing mortality. People have

always selected from the same six tactical areas [listed above]. . . . But

different countries have used those means in different ways . . . .

The second . . . deals with the implications of having extended survival in

this way . . . . [On the plus side] [t]he multiplicity of tactics . . . are

accommodations to the different characteristics and preferences of people . . .

. [On the negative side] old schemes are often maintained even as new schemes

are being adopted [and] . . . strategies that limit risks to survival and

foster the good health of a population may be remarkably inefficient (pp.


A great strength of this book is its global approach. Riley, professor of

history at Indiana University, is not constrained by the geographic paradigm

that dominates economic history (Britain, France, Germany, U.S., Russia, Japan,

and perhaps a few others). He sees the spread of rising life expectancy as a

continuous worldwide process, and in chapter after chapter strives assiduously

to include developing along with developed countries. The text, footnotes, and

end-of-chapter references provide valuable entr?e, not only to a vast

historical literature, but also to much contemporary work in demography and

public health, as well as that by specialists at the World Health Organization

and World Bank.

Riley sees parallels between the health transition and modern economic growth,

and laments the casual concern with the causes of life expectancy compared to

those of economic growth. For economic historians who still believe that

economic development is the prime mover behind life expectancy, this is a

non-issue. But Riley seemingly believes that development is not a very

important cause of increased life expectancy (chapter 4). I think he is right,

though, surprisingly, reference to the adverse impact on mortality of

development-induced urbanization is in chapters other than that on economic

development (pp. 148, 175). Indeed, if economic historians came to see both

modern economic growth and life expectancy as analogous phenomena, each driven

by advances in different areas of knowledge and technology, they might benefit

from comparative study of the two. Riley’s book would be a help in such study.

Although a useful survey, this is, at the same time, a frustrating book. While

accepting the concept of an industrial revolution, Riley rejects this

term for the breakthrough in life expectancy. “[T]he health transition has no

well-defined beginning point. It . . . was underway by 1800, but the discovery

of a period or country where it began is a quite difficult matter” (p. 6). Here

I think Riley is wrong. It is relatively easy to date the onset of a

revolutionary rise in life expectancy in country after country. (See Richard A.

Easterlin, “How Beneficent is the Market? A Look at the Modern History of

Mortality,” European Review of Economic History, 3 (1999), pp. 262-264.)

By contrast, views on the timing of the onset of economic growth differ

greatly; as an example, Rostow dates Britain at 1783-1830 and Sweden at

1868-1890, whereas Maddison puts them both at 1820.

The book is frustrating too because of its emphasis on the variability among

countries in routes to rising life expectancy. Riley’s statement that “[p]eople

have always selected from the same six tactical areas . . . [b]ut different

countries have used those means in different ways” gives the impression that

all six sources of life expectancy increase have been equally important, and

countries could virtually choose at random the mix they wished to use. In fact,

the opposite is the case. The critical breakthroughs that have made possible

the worldwide revolution in life expectancy are public health and medicine,

Riley’s categories (1) and (2). Absent the transformation in health production

functions arising from these sources, categories (3) through (6) would not have

transformed health and life expectancy. All countries that have experienced a

marked increase in life expectancy have done so by implementing a new

technology of disease control via new institutions, centering on, but not

confined to, a public health system. The role of public initiative has been

central in this transformation in all countries — “households and individuals”

and “literacy and education” in themselves would have been of little importance

had it not been for public action to disseminate new knowledge of disease

control and promote new household and business practices to implement this

knowledge. Nowhere is this clearer than in the biggest single accomplishment

improving health and mortality, the eradication of smallpox, which required

concerted action by national and international authorities (cf. p. 71). To the

extent there have been “different paths” followed by countries, it is largely

because of differences in the state of knowledge at the time of onset of the

“health transition.” Britain is charged by Riley with a costly emphasis on

sanitation that today’s developing countries could and should avoid. But

Britain’s path reflects the state of biomedical knowledge at the time (along

with Britain’s relatively high level of urbanization). It’s as though one would

chide Britain for its costly nineteenth century emphasis on a technology of

steam-powered railroads and factories, rather than using motor vehicles and

electric motors.

I suspect Riley would agree with this view of the causal primacy of public

health and medicine, because one can find support for much of it in the

chapters on the “six tactical areas.” But by emphasizing variability rather

than commonalities among countries, Riley downplays the central role in raising

life expectancy of new knowledge, and public action to implement this

knowledge, in country after country.

In sum, this book is a useful starting point for understanding the modern

revolution in mortality. But economic historians will want to go farther to

identify and quantify the uniformities among countries in the rise of life

expectancy and in the requirements of labor, capital, and new institutions

underlying this rise, and to test models of causation.

Richard A. Easterlin is University Professor and Professor of Economics at the

University of Southern California. He is the author of Growth Triumphant:

The Twenty-First Century in Historical Perspective (Ann Arbor: University

of Michigan Press, 1996).

Subject(s):Historical Demography, including Migration
Geographic Area(s):General, International, or Comparative
Time Period(s):20th Century: WWII and post-WWII

Capitalists in Spite of Themselves: Elite Conflict and Economic Transitions in Early Modern Europe

Author(s):Lachmann, Richard
Reviewer(s):Jones, Eric

Published by EH.NET (January 2002)

Richard Lachmann, Capitalists in Spite of Themselves: Elite Conflict and

Economic Transitions in Early Modern Europe. New York: Oxford University

Press, 2000. xii + 314 pp. $49.95 (hardcover), ISBN: 0-19-507568-4.

Reviewed for EH.NET by Eric Jones, Melbourne Business School and Graduate

School of International Business, University of Reading.

The entry price for writing “big picture” history is high. However novel his

or her own framework may be, the scholar is usually obliged to cite supporting

material reorganized from hundreds of books. Richard Lachmann’s contribution is

no exception, dealing as it does with the period of transition between 1500 and

1800, across England, France, Spain, the Netherlands and Florence. Throughout

much of the volume his objective is to explain changes in the distribution of

income among social groups but ultimately he brings his thesis to bear on the

issue of economic growth, chiefly by contrasting alterations in English

agrarian relations with those in France.

Most of the time he is engaged in a sustained debate about competition among

elites with other sociological historians, Marxists and Weberians, though a

little surprisingly not with Mosca or Pareto. Although Lachmann steers away

from the Marxist fixation with expropriation by “the” elite towards his own

theme of conflict among elites, Capitalists in Spite of Themselves seems

to be a phoenix arisen from the ashes of Marxism. The argument seems couched in

the type of code that Marxists, or sociologists, or both, delight in affecting.

Economists will find it harder to follow, though it is vigorously expressed,

impressive in its consistency and grounded in detailed cases. Perhaps a little

too much is claimed for the guiding idea; everything fits neatly but accepting

the results depends on going along with some very encompassing social

categorizations. Almost everyone else is held responsible for sins of omission,

for failing to account for paradoxes said to be resolved here. As Marxist-style

writings often do, the rhetoric put me in mind of the quip about Winston

Churchill, “I wish I were as certain of anything as he is of everything.”

The heart of the analysis is “elite conflict theory.” “Elite conflict is the

bright thread of agency that propelled structural changes in all situations”

(p. 231). We are told to ignore the attributes of individuals in favor of

taking their behavior to be determined by their “structural positions in

networks.” Structural analysis accordingly seems to make individuals into

automata. Individuals are assumed to be rational maximizers, responding to

opportunities, and everything thus depends on what opportunities are actually

presented to them. This is not so much a finding, which is implied here, as an

assumption, and a strong one at that. It is a unifying behavioral postulate, a

little like Realism in International Relations. Elites, like nation-states, are

destined to fall on any weakling should it stumble, and refrain from doing so

only as long as they are dissuaded by coalitions of competing forces.

Patrician disunity is common enough in history; various groups are constantly

falling out. But where did the golden opportunities come from that turned the

past into something other than battles between kites and crows, in time to

transform the early modern world? Major candidates include population change,

technological change, and the Discoveries. They are all exogenous to the model.

They are what offer the new opportunities; elites, meaning individual

maximizers cemented together, must compete to secure them, in doing so

destabilizing societies and leading to new equilibria. The very boldness of

Lachmann’s exposition brings the mechanistic character of this to the surface.

An even deeper unease arises from the way elites are reified: They have

interests, not friends (Realism again), and culture and ideology exist solely

to commit individuals to the interests of the group, because — credibly, but

ironically given the rather deterministic framework — they cannot always spot

their own interests in the maze of social life. Aside from the postulated

mechanics of the processes, it is a little disconcerting to find that the

typologies of elites are asserted more than demonstrated. None of this fits

naturally into the thinking of economists and economic historians.

When we come to the divergence between England and France, we are told that the

clue lies in the relative power of the Crown to eliminate rivals and form local

ties. Lachmann’s account, which is based on work by Robert Allen (though his

conclusion differs), shows England navigating its way between two dangers. On

the one hand it escaped from a bucolic peasantry able to hold onto its plots

and consume the produce and on the other hand avoided a parasitic state elite.

The English gentry did not need to invest in politics in order to keep their

estates. They secured the proceeds of productivity growth engineered by the

yeomen, without suppressing productivity levels. According to Allen their

capital was not usefully invested, though Lachmann has found a source that

prompts him to emphasize the share going into the funding of state debt,

military campaigns to obtain foreign markets, and passive investment in


The issue would be usefully approached regionally, which Lachmann shies away

from doing. Indeed he chides Goldstone and Thirsk, of all people, for

over-simplifying English agricultural regions and by implication with bothering

with regionalization. It is scarcely justified to carry on the debate merely at

national and occasionally county levels. Both those units are semi-arbitrary,

like all divisions. Treating England as a single unit will not do for important

purposes. Only regionalization can hope to explain the paradox of so much

“gentry” capital and so much inventiveness coexisting with

deindustrialization across southern England, at the same time as

industrialization occurred in the north. Lachmann is also extremely categorical

in stating that capital from the gentry’s hijacking of the yeomen’s revolution

was the ultimate source of English economic development. The case against the

“gentry,” or the magnates, will probably turn out to be much stronger than it

seems already. Their capital was not so much created and wasted on the land as

immolated there by the purchasers of estates who continually brought it in from

London trade, finance, the law, and public office. Nevertheless, we do not

really know what the proportions were, how much passive investing outside the

countryside the landowners undertook, or where most industrial capital came


Once upon a time there was something called the Time magazine effect.

Whether it holds true now I cannot say, but the idea was that every

professional found the reports most enlightening — except with reference to

his or her own field. Despite my hesitations about method and tone mentioned

above, I had the opposite sensation with this book. With the exception of an

intriguing chapter on religious change, I admired the parts I knew most about

(English agricultural and economic history) more than those with which I was

less familiar. The approach reminded me of an older sociological history, not

listed in the Bibliography, Barrington Moore’s Social Origins of

Dictatorship and Democracy (1966), which caused considerable excitement in

its day. Lachmann, too, shines an unfamiliar light on the fundamental questions

of why historical processes take place when and where they do.

Eric Jones is Professorial Fellow at Melbourne Business School and Professor

(part-time) at the Graduate School of International Business, University of

Reading. He is author of The European Miracle (Cambridge: third edition,

with a substantial afterword, forthcoming 2002) and The Record of Global

Economic Development (Edward Elgar, forthcoming 2002).

Subject(s):Social and Cultural History, including Race, Ethnicity and Gender
Geographic Area(s):Europe
Time Period(s):18th Century

Western Capitalism in China: A History of the Shanghai Stock Exchange

Author(s):Thomas, W. A.
Reviewer(s):McElderry, Andrea

Published by EH.NET (December 2001)

W. A. Thomas, Western Capitalism in China: A History of the Shanghai Stock

Exchange. Aldershot: Ashgate, 2001. xii + 328 pp. $74.95 (hardback), ISBN:


Reviewed for EH.NET by Andrea McElderry, Department of History, University of


W. Arthur Thomas of the University of Liverpool has written a very

straightforward descriptive history of the securities market in Shanghai from

the late nineteenth century to the present. The study centers on securities

trading in Shanghai’s International Settlement where the listed securities

were almost exclusively those of foreign companies and organizations. Along

the way Thomas provides glimpses of life in the International Concession and

sketches of its foreign residents. In the final two chapters on Chinese stock

markets, Thomas gives a useful summary of the Chinese government bond market

until 1940, which was the main activity on the Chinese stock exchanges, and

of the ins and outs of today’s emerging markets in Shanghai and Shenzhen.

Thomas begins with a brief account of the development of foreign trade in

China and of the foreign community in Shanghai. Crucial to both was the

formation of the International Settlement in Shanghai as a result of the

Treaty of Nanking, 1842 (which ended the Opium War) and subsequent agreements

between Chinese and foreign governments. In the International Settlement,

foreign residents lived under the jurisdiction of their own courts and at

least some of them elected their own Municipal Council since “there were

strict property qualifications attached to the franchise” (p. 20). Western

banks and trading houses located in the Settlement and it quickly became a

“flourishing emporium.”

The bulk of the book is an account of securities trading centered in the

International Settlement. Thomas’s main source of information is the weekly

share list and related material published in the Settlement’s English-language

newspaper, the North China Herald. In spite of “an extensive search of

libraries and other depositories,” Thomas did not find any records of the

Shanghai Stock Exchange founded in 1904 or the earlier Shanghai Sharebrokers’

Association, formed in 1898. The first share list appeared in 1866 and by then

Shanghai’s International Settlement had developed the conditions conducive to

the emergence of a share market: several banks, a legal framework for

joint-stock companies, and an interest in diversification among the

established trading houses (although the trading houses themselves remained


The supply of securities came primarily from local companies. In the early

days, banks dominated private shares but, by 1880, only the Hong Kong and

Shanghai (the local bank, so to speak) remained. Shipping, insurance, and

docks persisted to 1940 but were overshadowed by industrial shares after the

Treaty of Shiminoseki, 1895, which permitted Japan, and by extension other

nations who had treaties with China, to establish factories in Shanghai and

other treaty ports. Rubber plantations became the staple of stock trading

beginning in the second decade of the twentieth century. Fixed securities

balanced the “risky” shares of local companies, both in terms of dividends and

capital value. Those of the Shanghai Municipal Council and local utilities,

such as the Shanghai Waterworks, enjoyed the most consistent favor.

Shanghai had no shortage of people who were willing to risk investing in local

companies. Thomas has gleaned information about the foreign investors from

reports of company meetings in the North China Herald. Individuals,

most connected in one way or another with Shanghai’s foreign trading

companies, provided the main “supply” of investors in the early days. From the

mid-1890s, with the expansion of commercial activity and the introduction of

manufacturing, “the securities of local companies became attractive trade

investments for the corporate sector” (p. 83). Information on Chinese

investors comes largely from Yen-p’ing Hao’s work on compradors and Chinese

business development in the late nineteenth century. (See, Yen-p’ing Hao,

Commercial Revolution in Nineteenth Century China: The Rise of Sino-Western

Mercantile Capitalism, University of California Press, 1986, and The

Comprador in Nineteenth Century China: Bridge between East and West,

Harvard University Press, 1970.)

What stands out in chapters 7 through 9 detailing the fluctuations of the

market is the importance of rubber. In 1909-10 investment and speculation in

rubber plantations in Southeast Asia “produced a transformation in the share

list” (p. 145). By autumn 1910, 47 rubber companies were listed on the

Shanghai exchange. Not surprisingly, the boom did not last. Thomas details the

rise and subsequent crash of rubber shares, the general outlines of which are

known to those familiar with Shanghai financial history. What is not so well

known is that rubber recovered and remained a staple of the market until the

Japanese occupation of International Settlement in December 1941 brought an

end to the Shanghai Stock Exchange. For example, “a sharp and unexpected rise

in the price of rubber produced a big increase in share business” (p. 199) in

1925 after a major strike among Chinese workers in Shanghai. Rubber prices

collapsed in early 1928 on the heels of a crisis connected to Chiang Kai-shek

consolidating control over the Chinese part of Shanghai. Perhaps, Thomas

suggests, the fall in rubber prices was responsible for the ensuing enthusiasm

for greyhound shares. Greyhound racing had arrived in Shanghai in 1928 and

the shares in companies who ran the sport were briefly “the focus of all

activity” (p. 203). However, when “the flirtation with ‘the dogs’ had ended

the market returned to its main dealing medium, rubber shares” (p. 203).

Thomas’s study is the first account of foreign stock trading in Shanghai and,

as such, will be useful to those who examine various aspects of finance and

business in Shanghai and China. The book is also an addition to literature on

the history of stock trading. It would benefit from an analytical framework

grounded either in Chinese economic history or in comparative stock market

history. The latter is more realistic since the author is clearly not a China

specialist but is quite conversant with stock markets.

The book has a sense of having been written and published in a hurry.

Footnoting is inconsistent. At times, even quotations have no citations.

Material from the Cambridge History of China, one of the main secondary

sources on China, is sometimes cited by author but mostly cited only by volume

and page. Also the book, or at least the copy I have, needs some serious

copy-editing, especially for romanized Chinese words. Understandably spell

check doesn’t recognize the Chinese words, but even Hong Kong comes out

variously as Kong Kong and Honk Kong. More serious, Chinese names of authors

cited are sometimes, but not always, misspelled. For example, the frequently

cited works of Yen-p’ing Hao are often footnoted as Hoa. Less serious is the

lack of a standardized romanization system such as on page 138 where spellings

of Kang Youwei and the Kuang-hsu emperor come from two different systems.

Admittedly, the romanization of Chinese is a slippery slope and thus its

inconsistency can be put down as a quibble from a Chinese specialist who will,

no doubt, use the book as a reference.

Andrea McElderry’s publications on Chinese business history include a study

of Chinese stock exchanges, “Shanghai Securities Exchanges: Past and Present”

(Occasional Paper Series in Asian Business History #4), Brisbane: Asian

Business History Centre, University of Queensland, 2001.

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

Enriching the Earth: Fritz Haber, Carl Bosch, and the Transformation of World Food Production

Author(s):Smil, Vaclav
Reviewer(s):Johnson, D. Gale

Published by EH.NET (November 2001)

Vaclav Smil, Enriching the Earth: Fritz Haber, Carl Bosch, and the

Transformation of World Food Production. Cambridge, MA: MIT Press, 2001.

xxii + 338 pp. $34.95 (hardcover), ISBN: 0-262-19449-x.

Reviewed for EH.NET by D. Gale Johnson, Professor of Economics, Emeritus,

University of Chicago.

This is a book about nitrogen, an essential nutrient for all plants. It

begins with the discovery and demonstration of the role of nitrogen in plant

growth. The nitrogen available to plants has several natural sources — the

ammonia present in rain and that deposited by leguminous crops, supplemented

by manure, derived from both animals and humans. The story is told of the

intellectual conflicts between Justus von Liebig, who maintained that all

nitrogen available to plants came from the atmosphere, and researchers at the

famous Rothamsted Experimental Station in England who through experiments with

wheat showed that the nitrogen from the atmosphere was insufficient to have a

significant effect on yields while the application of ammonium sulfate or

manure resulted in significant increases in yields, roughly double those of

fields fertilized only by the nitrogen in rain. Professor Smil of the

Department of Geography of the University of Manitoba develops this and other

stories in an interesting and informative way.

The major story is the development of the process by which nitrogen can be

extracted from the air. In contrast to other sources of nitrogen, such as

guano and South American sodium nitrate, which were exhaustible, there is an

inexhaustible supply of nitrogen in the air. The problem was how to extract

that nitrogen at reasonable cost.

Chapter 4 deals with the work of Fritz Haber who achieved the successful

extraction of ammonia from the air. Chapter 5 discusses the role of Carl Bosch

and the BASF firm in the commercialization of the process. An important reason

for the rapid development of commercialization was the First World War.

Germany was cut off from its supply of nitrates, used in the production of

munitions. BASF stepped in and supplied the material.

In Chapter 8 Smil speculates about the effect that the availability of

synthetic nitrogen has had on the world’s population. He argues that the world

is enormously dependent on nitrogen and that less than half of the current

world population could be fed without the availability of synthetic nitrogen:

” . . . only about half of the population of the late 1990s could be fed at

the generally inadequate per capita level of 1900 diets without nitrogen

fertilizer. And if we were to provide the average 1995 per capita food supply

with the 1900 level of agricultural productivity, we could feed only about 2.4

billion people, or just 40% of today’s total” (p. 160).

Smil notes that during the nineteenth century that the world was able to feed

the unprecedented population increase from 1.0 billion to 1.6 billion by

expanding the cultivated area (p. 39). The expansion occurred primarily in

North America, Australia and Russia and was sufficient to permit an increase

in per capita food supplies. The expansion of area continued in the twentieth

century but concern was expressed at the beginning of the century that

insufficient land was available to meet the needs of the growing population.

William Crookes argued that if the low wheat yields that existed in the 1890s

were to continue (and they did for at least a half century), the increase in

global demand would result in a deficiency of wheat as early as the 1930s.

What Crookes did not foresee, and what Smil does not recognize, was the role

the tractor played in contributing to the food supply, especially in the

industrial nations, after World War I. It was estimated that draft animals

utilized a quarter of all the harvested output of American agriculture in the

1920s (Gray, 1924). In fact, researchers in the United States Department of

Agriculture wrote a long article in the early 1920s in which they indicated

that the United States would have to reduce its consumption of animal products

in order to feed a population of 150 million (Gray, 1924). The United States

reached a population 150 million in 1950 and was somewhat better fed than in

1920. Why were these very competent researchers wrong in their projection?

First, they did not foresee that by the time the population reached 150

million that horses and mules would be largely replaced by the tractor,

releasing up to a quarter of the nation’s crop output. Second, one reason for

their gloom was that grain yields in the United States had increased very

little since the 1860s and they saw no reason to expect significant yield

increases in the future.

Smil makes no mention of the tractor and other forms of mechanical power that

have contributed significantly to the available food supply for humans — true

much more so in the industrial countries than in the developing countries but

clearly significant for the world as a whole.

While there is no doubt that synthetic nitrogen fertilizer has had an enormous

impact on the world’s food supply, Smil largely fails to recognize that this

innovation was a necessary but not sufficient condition for the enormous

increase in food that has occurred over the last half century. The varieties

of grain available prior to the mid-1930s were not responsive to significant

amounts of added nutrients. Yields of corn and wheat in the United States were

essentially the same in the late 1920s as in the late 1860s or even in 1800

(USDA, 1962). The corn yield per acre averaged 25.3 bushels in 1866-70 and

26.5 in 1925-29, while wheat yields were 12.3 and 14.1. Wheat yields in

England were 2.08 metric tons per hectare in 1832-59 and 2.25 tons in 1918-45

(Austin and Arnold, 1989), an increase of less than 10 percent in nearly a


Hybrid corn, which became commercially available in the mid-1930s, was the

first variety of grain that was responsive to significant amounts of nitrogen

and other nutrients. By 1960 corn yields in the United States were double what

they were in the late 1920s and are now five times that level. In the 1960s

new high-yielding varieties of rice and wheat were developed and large yield

increases have been achieved. Smil notes that the use of nitrogen fertilizers

did not increase significantly until the late 1940s when U.S. consumption was

approximately 0.25 million tons; it reached 11 million tons by 1980. It didn’t

increase prior to the 1940s because it was not profitable to use.

It is very surprising that Smil says so little about the complementary

relationships between improved grain varieties and the rapid growth of

nitrogen application. I found only two brief references to hybrid corn (pp.

116 and 150) and one reference to the Green Revolution (p. 139), plus a rather

demeaning footnote.

The footnote (no. 30, p. 296): “The Green Revolution did little for yields of

nonstaple cereals, legumes and oil crops. Its diffusion has been very uneven .

. . and some of its socio-economic and environmental consequences have been

widely criticized in many books published since the 1960s.” There is no

recognition that grain yields in developing countries more than doubled

between 1964-66 and 1994-96 after a long period of stagnation and the daily

per capita supply of calories in the same countries increased by 23 percent

between 1970 and 1996 — a quite remarkable achievement for a flawed


It is rather ironic that a major environmentally adverse effect of modern

grain production is the leaching of nitrogen into rivers, lakes and other

sources of water supplies. Smil recognizes the negative effects of the high

level of use of synthetic nitrogen for the industrial countries (pp. 192-197)

and for rice in the developing countries (p. 219). It is somewhat odd for him

to attribute environmental costs to the Green Revolution without directly

acknowledging the role that his heroes — Haber and Bosch — had in harming

ecosystems throughout the world.

This is a remarkably well-documented book — there are 813 footnotes. It has a

high standard of scholarship. It makes a very strong case for the importance

of the extraction of nitrogen from the air for the lives of all of us.

Unfortunately the author largely ignores other important developments that

were essential for the effective utilization of synthetic nitrogen.

Together with important innovations in plant breeding, the availability of low

cost nitrogen broke the pattern of low grain yields that had persisted for at

least a century and probably longer. The world is a very different place as a



Austin, Roger B. and Michael H. Arnold (1989), “Variability of Wheat Yields in

England: Analysis and Future Prospects,” in Jock R. Anderson and Peter B. R.

Hazell, editors, Variability of in Grain Yields. Baltimore: Johns

Hopkins University Press, pp. 100-106.

Gray, L. C., et al (1924), “The Utilization of our Land for Crops, Pasture and

Forest,” in United States Department of Agriculture, Yearbook of

Agriculture 1923. Washington, DC: Government Printing Office.

United States Department of Agriculture (1962), Agricultural Statistics

1962. Washington, DC: Government Printing Office.

D. Gale Johnson is the Eliakim Hastings Moore Distinguished Service Professor

of Economics Emeritus at the University of Chicago. He is the author of

World Agriculture in Disarray, revised edition 1991 and “Agricultural

Adjustment in China: Problems and Prospects,” Population and Development

Review, Vol. 26, No. 2, June 2000.

Subject(s):History of Technology, including Technological Change
Geographic Area(s):General, International, or Comparative
Time Period(s):20th Century: WWII and post-WWII

After the Galleons: Foreign Trade, Economic Change and Entrepreneurship in the Nineteenth-Century Philippines

Author(s):Legarda, Benito J.
Reviewer(s):Giraldez, Arturo

Published by EH.NET (November 2001)


Benito J. Legarda, After the Galleons: Foreign Trade, Economic Change and Entrepreneurship in the Nineteenth-Century Philippines. Madison WI: University of Wisconsin Center for Southeast Asian Studies, 1999. x + 401 pp. $22.95 (paperback), ISBN: 1-881261-28-x.

Reviewed for EH.NET by Arturo Giraldez, Department of Modern Languages and Literatures, University of the Pacific.

The title of Benito Legarda’s book is somewhat misleading because the time span covered in the work begins well before the nineteenth century. In fact, After the Galleons is an economic history of the Phillippine Islands from the time of the arrival of Miguel Gomez de Legazpi’s expedition in 1565 to the independence from the metropolis in 1898. Legarda studies the Philippines’ evolution from an archipelago inhabited by almost self-sufficient communities to the era when it became an agricultural export economy dependent on external trade to meet domestic needs. But, as the author remarks: “The nineteenth-century Philippine economy did not start from scratch. The preceding Age of Transshipment dated back to pre-Hispanic times, and, during the centuries when it was in effect, a process of administrative unification and geographic consolidation took place that laid the groundwork for the rise of national consciousness” (p. 5).

These sentences outline the plan of the book. Part 1 studies Philippine trade from before the Spaniards’ arrival until 1815. Part 2 focuses on the domestic exports and economic changes in the Islands. Part 3, “Entrepreneurial Aspects,” studies the establishment of merchant houses, their activities and innovations. Legarda follows Joseph A. Schumpeter’s ideas on entrepreneurial activity, paying detailed attention to the agents responsible for the “creative responses” in the economy. Businessmen and firms are introduced in relation to new technologies, activities and financial institutions.

Fifteenth-century Chinese and Muslim (Persian and Arab) merchants frequented the archipelago’s coastal areas, attracting a population that established settlements dependent on sedentary agriculture and craft production. These communities, called “barangays,” traded among themselves and with the rest of Southeast Asia and China. Slaves, beeswax and gold were exchanged for porcelain, iron, lead, tin, silks, etc. The early connection with China was going to have a crucial role in Philippine history. The presence of the Spaniards dramatically changed the position of the Philippines with respect to the Asian continent and placed the Islands as one of the crucial points in the global economy created by the galleon trade. From 1565 to 1815 the ships came and went from Manila to Acapulco — “it was the longest shipping line in history” (p. 32). American silver and predominantly Chinese silks were the commodities exchanged between Mexico and the Philippines. A Ricardian model explains the trade. The bimetallic ratio of silver and gold in 1560 was 13 to 1 in Mexico, 11 to 1 in Europe and in China was 4 to 1. “China was long the suction pump that absorbed silver from the whole world” (p. 31). Obviously there were periods of convergence of bimetallic ratios, but until the end of the nineteenth century China continued to be the main receiver of the world’s silver. Considering the price differential in silver prices: “The opportunities for arbitrage profits were staggering” (p. 31). And indeed, they were. Net profits oscillated between 100 and 300 percent. The Chinese brought the wares for the galleons but they also provided supplies for shipbuilding, materials to the military garrisons and foodstuffs to Manila’s citizenry. Also the junks brought artisans and tradespeople to the Islands. The Chinese have played a crucial role in the Filipino economy since the sixteenth century up to the present.

The eighteenth century witnessed plans and proposals to change the monopolistic framework of the galleon trade. After the British occupation of 1762-64, war frigates sailed between Cadiz in Spain and Manila carrying European merchandise. The Royal Philippine Company founded in Madrid (1785) was “encouraged to try Asian ventures,” (p. 58) and the port of San Blas on the Pacific coast was established in 1766 to trade with the Philippines, challenging Acapulco’s position as the only Mexican port in the galleon route. The regulation of libre comercio in 1778 allowed several Spanish ports besides Seville and Cadiz to trade with the colonies, which provided Mexico with new sources of merchandise.

Revolutionary changes did not happen in the eighteenth century — Philippine commerce was still a transshipping operation — but they sowed the seeds of future developments: foreign merchants arrived in Manila; local merchants could travel to other Asian ports; export trade of native products was stimulated and local textile manufactures were encouraged. “And the combined effect of the tobacco monopoly and the domestic operations of export producers, including the company, was the start of agricultural specialization in the Philippines” (p. 90). The tobacco monopoly was established by Governor Jose Basco y Vargas by decree in 1781, was implemented in 1783 and was the main source of fiscal revenue for Spain in the Philippines. There was also a “tentative use of bills of exchange in transferring funds through Canton” (p. 89).

The decades from 1820 to 1870 were crucial in the economic history of the world and produced significant changes in the economy of the country. An increase in trade and navigation in Asia accompanied the opening of the Suez Canal. Goods like sugar, fibers, coffee, etc. became the main export commodities. The Spanish government granted shipping subsidies. As a result of all of this, in the Philippines there was “a saltatory rise in the level of foreign trade” (p. 179). These events and trends were common to the Southeast Asian transformations from subsistence to export economies. However, the trajectory followed by the Islands was different from the Southeast Asian path. The economies of the region’s colonial powers tried to increase agricultural output pressuring the peasants to produce more goods for export and to develop plantation agriculture. According to Legarda in the period between 1820 and 1870: “Neither pressure on the peasantry nor the development of large-scale plantation agriculture was primarily responsible for transforming the Philippines from a subsistence to an export economy” (p. 186). Such a role was played by foreign businesses — “they formed the main nexus between the Philippine economy and the currents of world trade” (p. 211). The foreign merchants introduced agricultural machinery, advanced money on crops which stimulated the opening of new agricultural areas and consequently exports grew. There was an increasing commodity concentration of exports (sugar, abaca, tobacco and coffee) to the United Kingdom, China, British East Indies, United States and Spain [Tables 1 to 5]. Textiles dominated imports accompanied by a decline of local manufacturing and in 1870 rice became an import commodity. “Both trends had significant social and demographic repercussions” (p. 178) [Tables 6 to 13].

British and Americans were predominant in the foreign trade. The Chinese occupied the position of intermediaries between foreign western merchants and the domestic market. In spite of the dominant presence of foreigners in the Philippine economy “a native middle class was rising” (p. 213).

In order to raise funds the merchant houses issued notes taking deposits in local currencies from people of different economic backgrounds. This capital was given as an advance to finance agricultural operations. “Liquid wealth” reached Filipinos in the countryside, at the same time the merchants’ exercised control over the supply of export commodities (p. 256).

The Philippines’ economic landscape was different from Southeast Asia, i.e. Malaya and Indonesia. Western foreigners, public entities, and the Chinese joined rising domestic entrepreneurs. The Spanish government participated financially in the origination of utility companies (steam navigation, telegraphy); western investors entered some joint ventures with local capital (rice, sugar mills, textile industry, railroads and electricity), and domestic businessmen invested in the tranways and created the brewing industry. “But the crucial dichotomy between economic initiative and political authority stamped the Philippine case as being more in the East Asian tradition than the Southeast Asian mold” (p. 289).

This processes of economic integration in the world market had its drawbacks. Income disparities between regions and occupations became more marked. The domestic textile industry could not compete with foreign imports. During the 1880s, ‘the decade of death,’ the lower income groups became more susceptible to diseases due to an imbalance between commercial and subsistence agriculture and due to the arrival of epidemics (p. 335). The upside of these transformations was improvement in communications (telegraphy, mail, cable, steamship lines, electricity, railroads), in finance (foreign banks arrived to Manila), and in infrastructure. The funds of the Obras Pias, a church institution employed in the past to finance the galleon trade, were used to establish the Banco Espanol-Filipino in 1851 and the Monte de Piedad (a savings bank and a pawn shop) in 1882. In the same year with Obras Pias monies coming from the cargo of the galleon Filipino, a municipal water system was built in Manila (pp. 337-38).

Benito Legarda quotes Victor Clark who wrote: “A period of industrial development and expansion immediately preceded the insurrection that marked the beginning of the end of Spanish rule in the Philippines” (p. 339). The United States’ occupation of the country after the war produced increases in exports, innovations in technology, and much higher standards of living. The Philippines’ economy now would resemble more closely the Southeast Asian model. “The price of twentieth-century progress would be economic dependence” (p. 340).

Historians of the Philippines have produced excellent work. Benito Legarda’s economic history of the archipelago is an important addition to this body of literature. For historians of Asia and of the Spanish Empire After the Galleons is essential, but Legarda’s care in placing the Philippines in the context of with global economic trends makes the book an excellent addition to the field of “World History.” For economic historians and development experts, Legarda has written an important book. With clarity, rigor and avoiding unnecessary jargon, After the Galleons addresses questions and processes that are still affecting our times. Scholars, graduate students and advanced undergraduates in economics, history and other social sciences should read Legarda’s work. It is an indispensable book.

Arturo Giraldez, along with his colleague Dennis O. Flynn, is the editor of The Pacific World: Lands, Peoples and History of the Pacific, 1500-1900 an 18-volume series published by Ashgate/Variorum. With Dennis O. Flynn and James Sobredo, he has edited in 2001 European Entry into the Pacific, the fourth volume of the series.


Subject(s):International and Domestic Trade and Relations
Geographic Area(s):Asia
Time Period(s):19th Century

Imagining Consumers: Design and Innovation from Wedgwood to Corning

Author(s):Blaszczyk, Regina Lee
Reviewer(s):Calder, Lendol G.

Published by EH.NET (August 2001)

Regina Lee Blaszczyk, Imagining Consumers: Design and Innovation from

Wedgwood to Corning. Baltimore: Johns Hopkins University Press, 2000. xiii

+ 380 pp. $45.95 (cloth), ISBN: 0-8018-6193-4.

Reviewed for EH.NET by Lendol Calder, Department of History, Augustana

College, Rock Island, IL.

Regina Blaszczyk brings something new to the oldest question asked by

scholars of consumer society: who wields decisive power — the people

themselves, commanding business, their servant, or “captains of consciousness”

manipulating the imaginations of the many for the private gain of a few? It is

a large question that typically attracts large answers. Thus, debates over the

question of power relations in a consumer society tend to be characterized by

metanarratives (e.g., Marxist analysis), abstract theoretical concepts (e.g.,

hegemony), and common-sensical assertions (“producers and audiences shape each

other”). But in Imagining Consumers, Blaszczyk grounds her arguments

on something not seen before: a cornucopia of archival research, painstakingly

acquired from untapped company archives of key firms in the household

furnishings business. Blaszczyk’s conclusion is bold. “Make no mistake,” she

writes, “supply did not create demand in home furnishings, but demand

determined supply” (p. 13). Imagining Consumers is a careful,

fine-grained monograph whose claims are firmly tethered to its assembled

evidence. As such, it will hardly end debate over the nature of power

relations in consumer society. But Blaszczyk succeeds in accomplishing at

least this much: the bar is now raised for those who want to argue that

consumers are the victims of business interests that create and manipulate

consumer desire.

Blaszczyk’s decision to study the household furnishings industry is an

interesting, highly commendable choice. As a researcher and curator of several

exhibits on the glassware and pottery industries for the Smithsonian’s

National Museum of American History (she is now an assistant professor of

history and American Studies at Boston University), Blaszczyk became

dissatisfied with a tendency she observed in historical studies of consumer

society. Historians of consumerism, she noted, either neglect to consider the

point of view of the companies making the goods (which is sort of like

studying medieval society without taking seriously the Catholic Church) or

focus too much on corporate giants such as Procter & Gamble and Coca-Cola,

companies whose well-known successes at creating demand for new products are

not typical of the businesses she was studying. Thus, Blaszczyk directs

attention to a sector of the consumer economy most scholars know little about,

despite the fact that it made some of the most meaningful artifacts of the

consumer revolution, goods like glassware, china, pottery, and bakeware.

Between 1898 and 1916, products for table and kitchen took up a surprising

thirteen per cent of the annual incomes of American households (p. 130). But

the value of these goods may be better measured by examining photographs of

the interiors of late-Victorian and early-twentieth century homes. It wasn’t

Crisco tins and Coke bottles that were displayed in the ubiquitous china

hutches, buffet cabinets, and sideboards, but dinner sets bought at

Woolworth’s, glassware ordered from Sears, and porcelain bric-a-brac given

away as premiums by tea-stores. China and glassware were central in the

creation of consumers’ identities, especially for working- and middle-class

housewives who used them as credentials of respectability and as exhibits of

personal taste. Blaszczyk has interesting things to say about how men and

women participated in consumer culture, though in different ways. But her

central concern is to show the truth behind the dictum laid down by marketing

guru Paul T. Cherington in 1931: “The consuming public imposes its will on

the business enterprise.”

In four case studies spread across seven chapters, Blaszczyk lays out the case

for how this was so in the pottery and glass trades. In two of the industries

studied — glassware and tableware — manufacturers were quick to discover

that the golden road to profits lay not in shaping consumers but in “imagining

them,” i.e., guessing at what they wanted, and designing products for them on

that basis. A basic strategy for how this could be accomplished had been

established years before by the celebrated English potter Josiah Wedgwood.

Partnered after 1769 with the Liverpool merchant Thomas Bentley, Wedgwood

forged a successful business empire based on two innovations that American

glass and crockery companies would later adopt. The first contribution

affected marketing: instead of trying to shape demand, Wedgwood endeavored to

meet it. Adopting a methodological agnosticism on the subject of good taste,

Wedgwood depended on “fashion intermediaries” like the well-connected Bentley

to fine-tune a sense of what the public wanted. Since public tastes varied and

were constantly changing, Wedgwood’s second innovative practice followed from

the first: “flexible batch production.” At Wedgwood’s pottery works, short

production runs were used to cater to various niches of taste, so that from

week to week output was highly variable when it came to color, decoration,

style, and price. As practiced by Wedgwood and his later American imitators,

flexible batch production aimed not for homogenous mass production but for an

endless flow of novel lines calculated to please various groups of consumers.

Well suited for the diverse American market, flexible batch production came

to dominate the furniture, silver, rug, textile, glassware, and pottery

industries. It also effectively closed the circle of the Wedgwood business

strategy, leaving owner-managers too busy with factory matters to have much

time for scheming about ways to manipulate demand. Instead, Blaszczyk finds

that they spent all their energies on getting their audiences in focus.

Imagining Consumers devotes many pages to explaining how American firms

such as the Homer Laughlin China Company used “fashion intermediaries” to

generate new product designs. From 1865 to 1945, fashion intermediaries —

whose porous ranks included workshop artisans, shopkeepers, salesmen, retail

buyers, home economists, and early market researchers — were primarily

responsible for the way things in American homes looked. High-style craftsmen,

name designers, and taste reformers (such as the well-known Walter Dorwin

Teague) may have left historians a more interesting corpus of ideas to write

about, but Blaszczyk finds that in the household goods business those who

attempted to create demand or shape taste to a single national style usually

failed. This was a lesson that Wisconsin’s Kohler Company, a leading maker of

sanitary fixtures in the 1920s, found out the hard way. One of the most

interesting accounts in the book is how Kohler tried to use national

advertising, consumer credit, and innovative product design in the 1920s and

1930s to create demand for the electric sink (an early version of the

electric dishwasher) and for colored, stylish bathroom fixtures. Both attempts

to shape public thinking about bathroom and kitchen plumbing ended in dismal

failure. Corning Glass Works had a similar experience with Pyrex dishware,

until the company learned the lesson followed by Wedgwood, Homer Laughlin

China, and other successful firms selling household durable goods: women would

not buy products they did not want, no matter how much was spent on making

them want the right things.

Thus, Blaszczyk finds that the household furnishings industries, more so than

with Ford, Procter & Gamble, Coca-Cola, and other corporate giants, grasped

the nature of America’s heterogeneous society and the egalitarian potentials

of the consumer revolution. Her history complicates heroic narratives of how

businesses operate, stories featuring powerful corporations employing legions

of scientists, industrial designers, and advertisers to manufacture consumers

as well as products. On the contrary, imagining consumers with the help of

fashion intermediaries was a messy, uncertain business at best, a marriage of

guesswork about what consumers wanted to workshop knowledge of what it was

chemically and financially possible to manufacture. Nevertheless, as is

evident from the commercial success of Fiesta tableware compared with the

failure of 1930s industrial designers to arouse popular enthusiasm for

streamlining, companies that honored consumer sovereignty instead of trying to

elevate it or overpower it generally came out ahead.

A short review risks oversimplifying Blaszczyk’s richly detailed argument.

There is no over-arguing of the case here; looking beyond the household

furnishings trade, Blaszczyk describes the nature of relations between

business and consumers in general as “a complex dialogue” (p. 1). Evidence

that runs counter to the main thesis is admitted, such as the way crockery

merchants in the 1880s used lavish advertising to persuade Americans that

Continental porcelain was more desirable than English pottery. Why merchants

succeeded in manipulating taste here when so many others failed to do the same

is left unexplained as a mysterious exception that proves the rule. Some may

wonder whether Kohler, Corning, and the other business failures in the book

were simply luckless when it came to hiring good advertising talent.

On the question of desire and how it is formed and by whom, Blaszczyk is

neither philosophical nor the first to argue there is more power in the

consumers’ corner than often believed. But she is the first to show from a

business perspective how and in what sense consumers have exercised a degree

of sovereignty over the businesses offering them choices. We await the

scholars who can meld Blaszczyk’s evidentiary approach with the theorizing

that will be necessary to explain the nature, origin, and structure — the

metaphysics — of consumer desire.

Lendol Calder, assistant professor of history at Augustana College, is the

author of Financing the American Dream: A Cultural History of Consumer

Credit (1999).

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

New Spain’s Century of Depression

Author(s):Borah, Woodrow Wilson
Reviewer(s):Salvucci, Richard

Project 2001: Significant Works in Economic History
Woodrow Wilson Borah, New Spain’s Century of Depression. Berkeley: University of California Press, 1951. 58 pp.
Review Essay by Richard Salvucci, Department of Economics, Trinity University.

An Obscure Century in a Backward Country: Woodrow Borah and New Spain’s Century of Depression

In 1938, the English novelist Graham Greene traveled to Mexico to investigate the condition of the Catholic Church under the regime of President Plutarco El?as Calles. While there, Greene interviewed the strongman of San Luis Potos?, General Saturnino Cedillo. In the most memorable terms, Greene called Cedillo “an Indian general in an obscure state of a backward country.” So my title, I fear, is a plagiarism, but an appropriate one. For certainly some who read this essay will wonder why a brief (58 pages) book about seventeenth?century New Spain (as Mexico was then known) counts as influential at all, let alone very influential? After all, Lesley Simpson, an authority on Mexico, famously labeled the seventeenth as Mexico’s “forgotten” century, and everyone from Adam Smith to Thomas Jefferson thought the Spanish empire both backward and obscure.

Influence, of course, is a matter of audience. There must be few economic historians of Latin America and fewer still of Mexico who are unfamiliar with the work of Woodrow Borah and the so-called “Berkeley School” of historical demography. Even with prevailing intellectual fashions, it is hard to believe that most English?speaking historians of Latin America have not heard of Borah, although whether or not they read his work in graduate school or after is much less certain. So I might best define my task as to explain why New Spain’s Century of Depression, published in 1951 as number 35 of the University of California Press’s celebrated Ibero?Americana series, should be counted one of the truly important works of twentieth?century economic history, especially for those who have yet to make its acquaintance. I take it for granted that colleagues in my field would agree. But it is a small field, and I am under no illusion that even its best work is widely known, much less regarded as a crucial contribution to economic historiography.

Woodrow Borah, who died in 1999, was one of the outstanding members of the postwar generation of Latin Americanists that included Howard Cline, Charles Gibson, John Lynch and Stanley Stein. At Berkeley, Borah, who was Abraham D. Shepard Professor of History, was one of a stellar cast of scholars drawn from a wide range of disciplines — Sherburne Cook, George Foster, James Parsons, John Rowe, Carl Sauer, and Lesley Simpson come immediately to mind. They exercised a profound influence on each other, sometimes as collaborators, but more often as valuable colleagues. What emerged from their work was a distinctive scholarship that brought together striking research and insights drawn from the natural and social sciences, precocious social science history, you might say. And Borah, his prodigious reading, meticulous scholarship and personal austerity notwithstanding, was one of this group’s more daring and imaginative members. Indeed, in a rueful aside, Borah once told me that his critics (there were a few) had accused him of “inventing Indians,” and this he meant quite literally, not in the now prosaic historicist sense of the term.

The burden of New Spain’s Century of Depression was to suggest the impact of the massive decline of the aboriginal population of Central Mexico (whom we can simply, if incorrectly, call Indians) on the material prospects of the Iberian conquerors (whom we can simply, and equally incorrectly, call Spaniards) and their descendants. As Borah understood it, the intent of the Spaniards was to live off the labor of the dense Indian population they had encountered in Central Mexico, a population accustomed to the rule of a privileged upper stratum by generations of Mesoamerican conquerors of whom the Aztec were simply the most recent. The Spaniards’ intention was no mystery. They announced they had come to the “Indies” (wrong again, but who’s counting?) to get rich, and that they had no intention of tilling the soil “like peasants” in order to do so. To accomplish their goal, the Spaniards, victorious in the wake of Cort?s’ historic expedition, rewarded themselves with the famous encomienda, the right to extract labor from the Indians. For some, like Cort?s himself, the encomienda was the source of great personal wealth and social prestige, although others, including some of Cort?s’ outspoken critics, were less richly rewarded.

For the encomienda to function as an avenue of accumulation, evidently, there had to be Indians to be distributed. At the time of the arrival of the Spaniards, Central Mexico perhaps supported an Indian population as large as 25 million. Within a century, shockingly, the same Indian population had fallen to less than a million, the victims of European disease, massive economic disruption, and the destruction of a coherent civilization that the Spaniards willingly exploited but never really understood. It was one thing for the encomienda to yield a comfortable existence for the Spaniards when Indian labor was abundant. But, obviously, such a system could hardly be expected to function when the people who supported it had disappeared. And here, then, is the gist of the argument of New Spain’s Century of Depression. What happens to a system of colonial expropriation when the society on to which it is fixed essentially disappears?

A bald summary can hardly begin to capture the twists and turns of the research agenda that New Spain’s Century of Depression ultimately entailed. When Borah published it in 1951, Sherburne Cook and Lesley Simpson had produced the population figures for New Spain on which he relied. It would require fully another quarter century, down to 1976, for what are now the standard estimates of early colonial population to emerge. There was considerable controversy along the way, and to an extent, there still is. Yet it is important to keep several things in mind. Much of the controversy regarding the population of New Spain involves the pre?contact population. About the course of events after the Spanish invasion there is far less doubt. The Indian population fell, and it fell sharply within a century, on the order of 90 percent. From an economic standpoint, only one thing really matters: factor endowments. Before the Conquest, labor was the abundant factor in Mexico. By 1620, land had become the abundant factor. No amount of scholastic contention about how many Indians there “really” were can alter that.

The other point is that even if Borah used imperfect population figures or made arbitrary assumptions, his scholarship was sound. He knew the sources and was particularly well versed in the documents associated with the relaciones geogr?ficas, the reports prepared to give Philip II of Spain an idea of what his Mexican dominions contained. While these documents are widely available today due to the efforts of the Instituto de Investigaciones Antropol?gicas in Mexico, it must have required considerably greater difficulty to master them fifty years ago. The impression from reading Borah’s notes is of a reasonably extensive investigation of the archival and printed materials available in the 1940s. In other words, you need to know something about the history of colonial scholarship to appreciate what Borah and his colleagues at Berkeley accomplished and some of the critics simply did not.

The conclusion to which Borah came was straightforward. Beginning sometime in the 1570s, an “economic depression besetting the Spanish cities because of the shrinkage of the Indian base [would last] more than a century,” and a “large number of white families must have found themselves reduced from comparative wealth to straitened circumstances as the drag in the Indian population forced a downward spiral in the economy of the European stratum”(p. 27). Although Borah presented his findings as a “hypothesis of a century?long depression” or “a hypothesis which needs much additional investigation,” the hypothesis is generally accepted as settled fact. It was not until the early 1970s that the work of the English historian Peter Bakewell raised questions about the impact of population decline on the fortunes of silver mining, but Borah’s view of the economic circumstances of the settlers went largely unchallenged. Even John Lynch, whose brilliant synthesis, Spain under the Hapsburgs (1981), called into question the entire notion of a Mexican depression in the seventeenth century, did not address the crucial issue that Borah raised. How did the elite of Mexican society — in effect the advocates, bearers, beneficiaries and putative defenders of colonialism — adjust when deprived of the Indian population on which it depended? My suspicion is that New Spain’s Century of Depression seemed logically unassailable. Borah’s citation (p. 23) of Viceroy Velasco the Younger’s report to Philip II in 1595 was especially acute: “those who consume are many and the Indians who produce are few.” What more could be said?

If you have persisted this far, you may, perhaps, think otherwise or wonder at the peculiar way in which Borah shaped his investigation. Borah did not discuss the fate of the Indians, other than to note that they “seemed doomed to relentless extinction” (p. 28). And even so, life did not come to an end in Mexico in 1576, or 1626, or 1676. Emigration from Spain continued, a fact of which Borah was quite aware. Moreover, if Cook and Borah’s later research indicated that the Indian population reached its nadir around 1620 — Borah puts its size at 750,000 — it began to recover thereafter and probably continued to do so until the 1730s, when severe epidemic disease made is reappearance. A century of population growth in a preindustrial society, however slow, does not square easily with falling living standards. And other developments, particularly the growth of colonial textile production in the middle decades of the seventeenth century, give pause as well. If a “depression” had taken hold, and more people were producing more goods, what sort of a depression was it?

To the extent that there was much data available to answer the question — and by and large, there was not — Borah made some attempt to address the objections, postulating, for instance, the existence of not one, but two economies, one Spanish, the other Indian. But there was not much he could make of the distinction, although there was a hint as to where research might lead. A dramatic change in the land-labor ratio, with the Indian population falling by 90 percent, surely affected the marginal productivity of Indian labor.

However, as Borah pointed out (p. 21), it was inconceivable that rising productivity could have offset the sheer decline in the Indians’ numbers, but the upward drift in real wages of Indian workers in cloth manufactories toward the end of the sixteenth century suggests the horrible irony of a decimated Indian population now better able to sustain itself in the face of Spanish demands. Here was one reason for the subsequent recovery in the Indians’ numbers, along with greater resistance to European disease, more aggressive defense of the Indians’ interests by the Spanish Crown, and even changes in diet — the Spaniards brought chickens with them, which came to be a ubiquitous presence in rural villages. While Borah never said as much in New Spain’s Century of Depression, Borah and Sherburne Cook would go on to argue years later that the material conditions of a reconstituted Indian society may well have been higher than they were before the Conquest. So, in a sense, Borah’s argument about “depression” was potentially revolutionary even if, in some sense, it proved a trap to the unwary who did not think its implications through. The historical intuition was of a very high order, but it was exercised by a scholar who turned twenty in 1932; who hailed from Utica, Mississippi; and for whom the term “depression” was less a technical one than a shorthand for widespread impoverishment.

Another feature of New Spain’s Century of Depression should be attractive to economic historians. It concerns the nature of institutional change that occurred under the pressure of population decline in the sixteenth century. One is sometimes struck by the fact that much (but by no means, all) of the economic historiography that relies on institutions for explanation often does a poor job of explaining why a country has a given set of institutions to begin with. In Latin America, some mix of Divine Providence, Indians, bizarre political culture, difficult geography and dumb luck often seem to be the reasons for the existence of Mexican institutions. This, for all practical purposes, means that institutions are treated as exogenously given. Well, they aren’t, or at least, not always. While Borah, of course, never wrote in these terms, he carefully links the emergence of a Mexican regime of labor and land institutions to the shifting factor endowments with which the colonists had to work. For Borah, the ultimate significance of the dramatic decline of the Indian population was the emergence of the hacienda (which reflected increasingly abundant land) and debt peonage (which reflected increasingly scarce labor). Indeed, this was another central message of New Spain’s Century of Depression. The institutions that had given rise to the Mexican Revolution of 1910 — the hacienda and debt peonage — were a product of the seventeenth century and of the demographic disaster that had destroyed the Indians. This was a remarkably clear statement of what had long been the liberal view of the causes of the Mexican Revolution. Anyone who doubts its durability need do little more than read Alan Knight’s monumental history of the Revolution (The Mexican Revolution, 1986), which largely restates the old verities.

For an historian from Mississippi, an account of “debt peonage” as the defining characteristic of rural labor may not have been untoward. But what exactly one means by “debt peonage” is another matter. Borah’s position was a moderate one. This was not slavery, open or disguised (the enslavement of Indians was forbidden under most circumstances), but an Indian peon who owed a landlord, or, indeed, any employer money was legally required to work for that employer (and for him or her alone) until the debt was discharged. The notion that debt created a form of chattel slavery in rural Mexico does not seem to have entered the vocabulary until well into the regime of President Porfirio D?az (1876-1880, 1884-1910) and provided one explanation for the Revolution in a place like Yucat?n. For a time, colonial historians went to another extreme, intent on showing the agency of free peasants as makers of their own world. They forgot that seventeenth-century Mexico was an unlikely venue for the emergence of a smoothly functioning labor market in which buyers and sellers of labor had no recourse to force or fraud. Indeed, conquest is precisely about force and fraud, depriving the conquered of their possessions, and making them do things they otherwise would never do.

A more fruitful way of viewing the phenomenon of debt peonage — or simply workers’ indebtedness, for debt did not invariably impede their mobility — is to understand how it allowed employers to determine the rate of discount at which workers in a shifting, unstable, and terribly uncertain world valued future income. There is no point in beating around the bush. Life expectancy at birth for a Mexican in the colonial period was about twenty years, and in view of the catastrophic changes that had visited the Indian world since 1519, we can only conclude that Hobbes was right, and that Mexicans knew it. Their lives were short enough, and nasty and brutish as well. In a world in which only God (and whose God was up for grabs too) knew what the future would bring, it made sense for ordinary people to get as much as they could up front, which, after all, is all the “debt” part of debt peonage meant. This was just an extreme form of live for today, for tomorrow, literally, who knew? Workers bargained for better advances and often sought to enlarge them and employers understood this. The wide variance of debts reported by farms and factories for which we have records shows that their owners struck quite different bargains with different workers, a form of price discrimination that allowed them to “pay” no more than they had to, certainly less than raising wages to market-clearing levels. In fact, in the disorganized and fluid circumstances of the late sixteenth and early seventeenth centuries, when Indian villages were forming and reforming under the pressure of Castillian administration, it would have been impossible to gauge the overall willingness of Indians to leave their communities to work for wages, or even the willingness of their communities to allow individuals to leave, a point to which Borah was quite sensitive (pp. 41-42).

Besides, the point of indebtedness was not necessarily to reduce mobility. The Spaniards had other ways of doing so, which is another aspect of the system of land tenure they devised. As Evsey Domar once wrote, it is impossible to have free labor, free land and a nonworking landlord class simultaneously. One of the three must disappear. In Mexico, the Church prevailed in the 1540s in the struggle against the frank coercion of Indian labor. For most purposes, the labor of enslaved Africans was simply too expensive, even though there was a sizeable black population in seventeenth?century Mexico. No, the Spaniards made another choice, to deprive the Indians of access to free land, for free land they very well may have had. The dramatic decline in the Indian population left vast expanses of Central Mexico essentially empty, so what was to prevent the Indians from moving on to the land as a subsistence peasantry, to the lasting dismay of the Spaniards? The answer is that the Spaniards consciously set about driving the Indians into villages over which they could exercise some level of control, as Bernardo Garc?a Mart?nez demonstrated in Los pueblos de la Sierra (1987). At the same time, they sanctioned land?grabbing by the settlers, usually in amounts far in excess of anything the settlers could reasonably cultivate. At a stroke, the Spaniards accomplished two things. First, they shifted to a system of agriculture that reflected the abundance of land, a regime vastly different from the preconquest one based on the intensive use of labor, of which the famous raised?ridged fields (chinampas) of the Valley of Mexico were but one example. Second, they regularized the settlers’ land titles at the beginning of the seventeenth century, effectively transferring much land to Spanish control, whether or not it was cultivated. The hacienda thus circumscribed the ability of the Indian communities to survive independently of the Spanish economy, and in so doing, obviated the need for a draconian regime of forced labor, at least in Mexico.

This dramatic transition, from an economy based on intensive agriculture and the exploitation of a dense indigenous population, to one that relied on extensive agriculture and scarce Indian labor could not be accomplished rapidly. Moreover, the shift from an economy with relatively high levels of personal wealth in the form of Indians held in encomienda to a poorer one with fewer Indians and no encomiendas reduced New Spain’s capacity to import. It was now necessary to produce at home many goods that were, in the early years of the colony, imported through Spain. A reduction in consumption and a reorientation of expenditure toward investment was required to accommodate such a change. Borah, for instance, noted that the construction of churches tended to slow dramatically in the 1570s (p. 31), attributing this primarily to a redeployment of scarcer labor. (The demand for churches sadly fell as well, for there were far fewer souls to fill them.) For Borah, presumably, all this was a depression. To a later generation of historians, however, notably the British school headed by John Lynch, Borah’s “depression” was more a case of deferred consumption, the redirection of productive effort toward mining, manufacturing and farming that a colony living on its own required. None of this could have come easily or cheaply — the mining and irrigation works, the granaries, fences, sugar mills, ranches and textile manufactories absorbed resources. Hence, for Lynch and his followers, the apparent stagnation of the Mexican economy in the seventeenth century was just that, an apparent stagnation that marked the reorientation underway, one that would result in the visible renewal of economic growth under the Bourbon monarchs of the eighteenth century. It was not so much that Borah was wrong about what he had seen, but that he had, instead, seen wrongly.

Viewed fifty years after its publication, New Spain’s Century of Depression reads much like the pioneering work it was, full of insight, largely intuitive, sometimes wrong in detail and premature in judgment, but, all the same, arresting and audacious. It was, above all, a great work of history, for it sought to explain the present through the past, and to explain in simple but persuasive terms how what was distinctively Mexican, the play of institutions, political economy and an emerging social structure, came together out of the shock of the Conquest in the sixteenth and seventeenth centuries. If there is anything disappointing about New Spain’s Century of Depression, it is that the response to it has been admiration or assent from most students of Latin American history, but few studies in which appropriately trained scholars have undertaken the work necessary to establish Borah’s hypothesis fully, or to revise and extend it in ways consistent with contemporary population studies. That is the problem with writing a classic about an obscure century in a backward country: it is hard to get people to notice. Those of us who spend our time studying the history of Mexico know full well how important Borah’s elegant “hypothesis” was. It is time for mainstream economic historians, and, one hopes, their students, to develop an interest in replying to Woodrow Borah’s pioneering work as well.

Richard Salvucci teaches economics at Trinity University in San Antonio, Texas. He was a colleague of Woodrow Borah’s at the University of California, Berkeley, from 1980 through 1989. He works on the economic and financial history of Mexico between 1823 and 1884.


Subject(s):Historical Demography, including Migration
Geographic Area(s):Latin America, incl. Mexico and the Caribbean
Time Period(s):17th Century

Reflections in Bullough’s Pond: Economy and Ecosystem in New England

Author(s):Muir, Diana
Reviewer(s):Knodell, Jane

Published by EH.NET (May 2001)

Diana Muir, Reflections in Bullough’s Pond: Economy and Ecosystem in New

England. Hanover, NH: University Press of New England, 2000. x + 312 pp.

$26 (cloth); ISBN 0-87451-909-8.

Reviewed for EH.NET by Jane Knodell, Department of Economics, University of


This is a history of the material lives of the peoples who have lived in the

area we know today as New England, starting with the original

hunter-gatherers, dwelling on the farmers and mechanics of the nineteenth

century, and ending with affluent suburban commuter-consumers. The author,

herself a New Englander of the latter variety who lives on Bullough’s Pond in

Newton, Massachusetts, is interested in the way in which the material

conditions of life have, time and time again over the span of tens of

thousands of years, eventually encountered ecological constraints, and in the

way New Englanders have repeatedly responded. The story is punctuated by two

“revolutions,” the Neolithic and the Industrial, which were the responses to

two different ecological-economic crises, and ends with the author’s

contemplation on the need for a comparable third revolution today.

The book’s scope is fairly vast. Its contribution is to weave disparate social

and natural scientific literatures together into a well-written, interesting

narrative. This is history made palpable and personal, written by one who has

hiked New England’s mountains and wandered along its beaches. It is written to

enlighten a general audience, not to engage in scholarly debate (although Muir

draws on a number of literatures within economic history and does not hesitate

to stake a claim here and there). Muir starts at the beginning. Drawing on

archeology, anthropology, and ethnohistory, she explains how, after early

hunter-gatherers depleted the population of large game animals, they

eventually turned to agriculture (the “Neolithic Revolution”) combined with

fishing and small game hunting in managed forests. This way of provisioning

depended on an ample supply of forested land near the coast, a supply which

was being depleted as the first Europeans arrived in southern New England. But

before the “crisis of coastal deforestation” could be joined, the native New

Englanders faced a crisis of “extermination” through exposure to Old World

diseases to which they had no immunity (pp. 21-22). This, of course,

facilitated the settlement and expansion of the European population.

We hear very little about the fate of the original New Englanders from this

point on, as the author turns to the colonial economy created with the

migration of the Puritans and the westward expansion of the European

economies. From the very beginning, immigration, and then export markets

provided the external demand needed to propel a largely agricultural economy

forward. By the late eighteenth or early nineteenth century, given the

British-imposed limit on westward settlement, this economy had occupied all

the decent farmland. The response? Manufacturing, followed by

industrialization — the second revolution. For Muir, the threat of a decline

in economic status was a powerful incentive to entrepreneurship. Although the

region “faced the prospect of economic decline, . . . standards of nutruition,

health, and education were high enough to enable men to search for new ways

to earn a living” (p. 107).

Shoes were the most successful of many preindustrial solutions. The book

details the advance of protoindustrialization and the peddling system of

distribution in the early nineteenth century, by which time the region was no

longer feeding itself. Muir suggests, though, that economic decline would only

be forestalled once Yankees began to invent “machines that made machines.”

Muir does a masterful job of reviewing the important inventions and process

innovations that culminated in mechanized production across the array of

consumer and capital goods produced in New England. Government munitions

contracts helped to fund the development of new metal-working tools and

processes, which were then adopted in other sectors. Along the way, the motive

shifted from preserving a middle-class way of life to earning greater profits

from standardization, lower costs, lower prices, and greater sales. This was

now an economy organized around the principle of expansion which faced

barriers to expansion located within itself (in this case the size of the

internal market), not in nature. And it was an economy that would subsequently

fail to avert economic decline in the early twentieth century, but this

receives relatively little attention here other than to credit federal defense

spending for the postwar Massachusetts Miracle.

The ecological angle comes back in as Muir details the environmental

degradation brought about by industrialization and urbanization. We learn

about the ecological impacts of agriculture, husbandry, charcoal production,

mills and dams, commercial logging, city sewers, and commercial fishing.

Although the earlier material ways of life also changed their natural

environments, modern industry and modern life have degraded the rivers,

forests, and atmosphere in ways that now, Muir argues, threaten to undermine

our well-being. Muir hopes that the pressure of population on limited

resources is pushing us into a Third Revolution, in which we will develop and

adopt alternatives to fossil energy. But it is far from clear that either the

profit incentive, assisted by government fiscal policy, as in the Second

Revolution, or declining living standards among those in a position to address

the problem, as in the First Revolution, will move us in this direction.

Jane Knodell conducts research on the evolution and performance of antebellum

monetary institutions, with an emphasis on interregional payments and finance.

She recently published “The Demise of Central Banking and the Domestic

Exchanges: Evidence from Antebellum Ohio”, Journal of Economic History,

September 1998. At the University of Vermont, she teaches a course on the

economic history of early New England.

Subject(s):Historical Geography
Geographic Area(s):North America
Time Period(s):General or Comparative

Political Institutions and Economic Growth in Latin America: Essays in Policy, History, and Political Economy

Author(s):Haber, Stephen
Reviewer(s):Hanley, Anne

Published by EH.NET (April 2001)


Stephen Haber, editor, Political Institutions and Economic Growth in Latin America: Essays in Policy, History, and Political Economy. Stanford, CA: Hoover Institution Press, 2000. x + 294 pp. $18.95 (paper), ISBN 0-8179-9662-1.

Reviewed for EH.NET by Anne Hanley, Department of History, Northern Illinois University.

Political Institutions and Economic Growth in Latin America is a book of essays that explore the important question of how, when and why institutions — the rules and regulations that permit and bound economic behavior — matter in the process of economic growth and development. There is widespread agreement among social scientists that institutions matter, but because this relationship is so difficult to test social scientists are unsure which institutions affect growth and to what degree. The principal problem, it seems, is that most research has studied cases that have long histories of well-developed markets. The question becomes one of feedback. Did the market evolve in anticipation of or in reaction to institutional innovation?

Stephen Haber, the editor of this volume as well as a contributor, argues that to truly test this hypothesis the social scientist needs cases where uncertainty and upheaval, rather than successful institutional and market evolution, reigned. We need cases where institutions departed from the progressive path to actually reduce property rights; where political regimes shifted abruptly; where social and economic revolutions made it impossible for markets to anticipate institutional change. What we need, in short, is to study Latin America. Latin America’s instability is so great, so legendary, that it makes it not just a possible laboratory but the perfect laboratory to test the central tenet of institutional theory.

The five essays in this volume, the product of a collaborative research symposium held at the Hoover Institution in 1998, examine a range of notions we hold to be true: access to capital is good for business development, railroads reduce costs and generate gains for the economy, education is critical to improving income levels and hence standards of living, clearly-specified contracts lower transactions costs, politicians can muck up the best of economies. The innovation is that the authors devise tests to measure how these truths behave in the face of political institutions that enhance, distort or diminish their power to transform economy and society.

The theoretical point of departure that binds these works together “is the notion that economic institutions cannot be studied in isolation from the institutions that regulate politics. Economic institutions, and their enforcement and refinement … are the result of both interest group demands and the specific features of decision making in the polity, which themselves are governed by institutions” (p. 10). Thus, the study of the origins and consequences of economic institutions also requires that we study the institutions that structure political decision making. The result is a powerful set of insights into Latin America’s persistent failure to break out of its poverty and rectify its inequality.

Stephen Haber takes the idea that access to capital is good for business development and applies it to Brazilian textiles to demonstrate how well-developed capital markets matter in economicgrowth. A sudden shift in political regimes brought on by a coup in 1889 ushered in a government friendly to business. This government, reversing decades of ambivalence toward domestic development, introduced sweeping changes to the regulatory environment that made it easy to form limited-liability joint-stock companies. The resulting improvements to capital mobility, Haber argues, promoted rapid industrial growth after 1890. In a rich and multi-layered analysis of the textile industry from 1866 to 1934, Haber finds that the joint-stock firms formed after the 1890 reform were larger, had higher rates of investment and growth, and higher total factor productivity than the private firms formed both before and after 1890. Institutional reform, then, created a positive environment for economic growth.

Alan Taylor addresses the stark fact that the gains of the early twentieth century, like those identified by Haber, didn’t last. Capital flows to Latin America dried up after the 1930s and incomes have fallen farther behind both the OECD and the Asian NICs ever since. For Taylor, who uses capital accumulation as a proxy for growth, an important part of the story lies in capital controls introduced by economic nationalists in the 1930s. Comparing Latin America to Asia, Taylor finds the greatest long-run distortions in the price of capital (hence its supply) in countries that actively intervened with capital controls to manage their economy vis-a-vis a disintegrating world order. Taylor correlates the propensity to intervene with the type of political regime and finds that the interveners had greater tendencies toward populism and even democracy than the regimes that didn’t intervene. In reading this essay one can’t help think that autocratic regimes allowing little competitive political participation might have produced a better record of economic growth for Latin America. Indeed, observes Taylor, Robert Barro’s “alarming claim that too much democracy may be bad for economic growth” is echoed in his findings for Latin America (p.152).

The idea that regimes responding to interest group pressures sacrificed growth for political gain is reinforced in William Summerhill’s outstanding essay on the distribution of railroad subsidies in nineteenth-century Brazil. He shows, as expected, that railroads reduced costs and generated gains for the economy. These gains could have been greater, however, because most of the rail lines generated an incredibly low or even negative social rate of return. Was the Brazilian government that bad at allocating its subsidies? From an economic standpoint the answer is yes, says Summerhill, but economic efficiency did not determine the placement of railroads. Political considerations did. This representative, majority rule, centralized government allocated benefits to regional projects via vote in parliament. This meant that provinces with more seats, and therefore more voting power, were more likely to capture the subsidies. The resulting railroad network corresponded to political benefits rather than economic efficiency, and the gap between the two “proved particularly acute in the context of low levels of overall productivity and income” that prevailed in nineteenth century Brazil (p. 64).

Productivity and income can both be increased by investment in human capital through education, but this is an area in which Latin America has clearly lagged behind other New World nations. In an engaging study comparing public education policies among New World countries Elisa Mariscal and Kenneth Sokoloff ask why only a few of the prosperous societies arising out of European colonization supported the establishment of primary schools. For them, the answer lies primarily in the extent of political participation. Analyzing data from across the Americas they find a strong positive correlation between the extent of the franchise and the spread of primary schools. In the US and Canada, adoption of universal (white) male suffrage in the nineteenth century was followed almost immediately by movements for tax-supportedschools. The many taxed themselves to provide schools for their children. In nations of restricted suffrage, however, universal education would require the few holding the right to vote to tax themselves to pay for the education of the rest. Since most nations of Latin America had either wealth or literacy voting requirements in the nineteenth century, political inequality was pronounced. Country by country data show this political inequality was responsible for regional differences in schooling. Given what we know about the strong relationship between education and income attainment, this is a powerful way of explaining Latin America’s poor record on equality and development.

Alan Dye’s research on Cuban sugar cane contracts rounds out this inquiry into political institutions nicely because it spans a period of no government meddling followed by active meddling and suggests how political considerations distort the efficient allocation of resources. In the pre-meddling period, cane supplies were delivered by independent growers to central mills based on contracts negotiated between grower and miller. Left alone, these parties over time worked out contract provisions that successfully reduced the costs of transacting cane. Overcapacity and international crisis in the 1920s and 1930s disrupted this relationship, however, when the government intervened to fix quotas for growers and millers. The reason for this intervention was political: the least efficient mills turned out to be Cuban owned while the more efficient mills were foreign owned. The quota system protected Cuban growers and millers in an environment that almost certainly would have wiped them out, but the action compromised long-run growth. Dye finds that sugar-to-cane yields, which had been making steady gains up to the 1920s, stalled as a result of economic nationalism.

The essays in this book, as well as the comments and critiques provided in a concluding chapter by Douglass North and Barry Weingast, all raise questions, qualifiers, and caveats that provide additional avenues of research into the relationship between political institutions and economic growth. The strongest case for research, implied but largely unstated here except in Summerhill’s concluding remarks, is that Latin America’s poor growth record has far more to do with local institutional arrangements than with the external culprits championed by dependency theory. The fine articles brought together by Stephen Haber in this volume demonstrate the power of wedding economic history to institutional history and the promise of doing so in the Latin American laboratory.

Anne Hanley is author of “Business Finance and the S?o Paulo Bolsa, 1886-1917″ in John Coatsworth and Alan Taylor, editors, Latin America and the World Economy since 1800 (Harvard University Press, 1998) and is currently writing a book on the role of financial institutions in Brazilian economic modernization.


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