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Land of Promise: An Economic History of the United States

Author(s):Lind, Michael
Reviewer(s):Dighe, Ranjit S.

Published by EH.Net (October 2012)

Michael Lind, Land of Promise: An Economic History of the United States. New York: Harper, 2012. vi + 586 pp. $30 (hardcover). ISBN: 978-0-06-183480-6.

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

Over the past two decades, Michael Lind has established himself as one of America?s leading public policy intellectuals. Through eight nonfiction books, numerous articles in publications such as Harper?s and Salon, and his work as a founding member of the New America Foundation, Lind has staked out an identity as a ?radical centrist? with iconoclastic policy positions that might be described as 21st-Century Whig. Lind has long called for policies in the tradition of Alexander Hamilton and Henry Clay, so it is fitting that his newest book is an economic history of the United States, from Hamilton?s time to the present.

The book?s overriding theme is threefold: (1) the Hamilton-Jefferson economic policy debate has never ended, although the particulars have of course changed over the years; (2) policies in the spirit of Hamilton and Clay are almost always right; (3) such policies deserve credit for much if not most of our economic progress. That is, Lind favors government action to promote industrialization and economic development by aiding manufacturing, imposing protective tariffs as necessary, extending and regulating credit through a central bank, financing infrastructure improvements, and forging public-private partnerships. While Lind sometimes makes pronouncements that almost no economic historians would agree with ? for example, he says the National Industrial Recovery Act was a success ? he presents his case with verve and usually a deft blend of economic statistics, historical detail, and quotes from contemporaries.

Although this book is published for a lay audience, perhaps one that is a center-left counterpart to the readers of John Steele Gordon?s popular economic history books, Lind clearly wants it to be academically respectable and of interest to academics. His endnotes (68 pages worth) draw on a range of current and classic works by academic economic historians. Past economists like Adam Smith and Henry C. Carey are quoted at length, and Lind shows a lively interest in the intellectual backdrop of each era. For example, we learn that industrialist Joseph Wharton founded the Wharton School of Finance and Economy in 1881 to promote protectionism, as a counterweight to the Northeastern and Southern universities that taught free-trade theory.

The book goes in chronological order with the chapters grouped into four sections: the Preindustrial Economy, the Age of Steam, the Motor Age, and the Information Age. Each section begins with a helpful page-long preview titled ?The Argument.?

The most that Lind can say for the economics of Thomas Jefferson ? and, perhaps surprisingly, Adam Smith ? is that they made sense in a ?largely static? preindustrial economy. Even then, Jefferson?s opposition to a national bank and a national debt put him at odds with Lind, not to mention the course of history. It is by now commonplace to note that in the long run Hamilton?s economic program became a reality and Jefferson?s vision of a nation of small farmers became increasingly obsolete. While Smith?s economics were obviously a lot more sophisticated than Jefferson?s, it is fascinating to hear that Smith was ?the favorite economist of America?s agrarians? and argued that Americans should continue to specialize in agriculture rather than try to develop their own manufacturing. Lind quotes from The Wealth of Nations: ?It has been the principal cause of the rapid progress of our American colonies toward wealth and greatness that almost their whole capitals have hitherto been employed in agriculture?. Were the Americans, either by combination or by any sort of violence, to stop the importation of European manufactures, and by thus giving a monopoly to such of their own countrymen as could manufacture the like goods, divert any considerable part of their capital into this employment, they would retard instead of accelerating the further increase in the value of their annual produce, and would obstruct instead of promoting the progress of their country toward real wealth and greatness.?

Lind says that James Watt and Matthew Boulton?s invention of the steam engine ? in 1776, the same year as the Declaration of Independence and the publication of The Wealth of Nations ? made Smith?s arguments obsolete by ushering in a new industrial revolution. While that is a striking coincidence, Lind later notes that steam power caught on only gradually, with water power providing almost half of the total energy in manufacturing as late as 1869. And Lind gives due credit to (Jefferson?s!) Embargo Act of 1807 and the autarchic years of the War of 1812 for jump-starting American manufacturing. Lind staunchly defends America?s protective tariffs of the nineteenth century, pressing the infant-industry case, though he concedes that high tariffs were no longer necessary by the end of the century. Regarding the tariff of 1816, he cites a remarkable statement from that year by Parliament?s Henry Brougham in favor of predatory British dumping after the war: ?it was well worthwhile to incur a glut upon the first exportation, in order, by the glut, to stifle, in the cradle, those rising manufactures in the United States, which the war had forced into existence, contrary to the natural course of things.?

A notable theme is that the South essentially continued to be a British colony in the antebellum period, with an undiversified economy that revolved around exporting raw cotton to British textile mills. Of course, a significant portion of the South?s raw cotton went to textile mills in New England, and King Cotton had other Northern retainers as well. Lind provides a remarkable quote from New York City Mayor Fernando Wood as secession began in 1860: ?As commercial people it is to our interest to cherish and keep so good a customer?. Not only let us avoid making war upon her peculiar system of labor but let us become even stronger defenders of the system than the South itself.? Wood even proposed that New York City and several adjacent counties secede to be their own city-state.

Andrew Jackson is the principal antebellum villain here, not only dismantling the Bank of the United States but also vetoing a bill to fund part of the National Road. Not until 1916 would the federal government again allocate funds toward a national road system. In the entire period from Washington?s inauguration to the eve of the Civil War, the states spent nearly nine times as much on transportation infrastructure as did the federal government.

Lind sees the Civil War as the ultimate battle in the Jefferson-Hamilton debate. Lincoln called himself ?an old-line Henry Clay Whig,? and during the war the Republican Congress would enact such Hamiltonian measures as the National Banking Act, the Homestead Act, higher tariffs, and lavish subsidies for rail construction. The Confederacy stood for slavery, a weak central government (except for enforcing slavery), and low tariffs; its constitution even forbade its congress from spending money on internal improvements or to promote manufacturing. Prominent among the reasons Lind gives for the Confederacy?s loss are the weakness of its central government and its lack of a manufacturing base; in short, the Confederacy was too Jeffersonian to be a viable opponent of the diversified Hamiltonian Union.

Although Lind attributes no small part of economic growth to enlightened government intervention such as infant-industry protection and state and federal investments in infrastructure, he devotes much space to private inventors and innovators. As in more academic economic histories, technological change is emphasized as the great driver of progress. Lind begins his sections on the Age of Steam, the Motor Age, and the Information Age with admiring surveys of the great inventors and inventions of those eras. Lind?s take on the private sector is similar to his take on the public sector: he likes big government and big business. (One chapter subsection is titled ?The Myth of the Robber Barons.?) Lind sees the rise of big business as primarily a matter of exploiting economies of scale, not of extracting monopoly rents from consumers, and takes a dim view of antitrust. In fact, Lind is generally pro-cartel, saying that cartels are good for stability and often for efficiency, such as when they share patents and technology. Lind notes that even Thomas Edison?s genius was subject to economies of scale: Edison?s great inventions were typically the product of various teams of engineers in research labs directed by Edison, with financing by the House of Morgan and the Vanderbilts. The turn-of-the-century merger movement and J.P. Morgan?s condemnation of ?ruinous competition? get praise; William Jennings Bryan?s and Louis Brandeis?s attacks on monopolies do not. In the twentieth century chapters, Lind decries the stepped-up antitrust enforcement that began in Franklin D. Roosevelt?s second term and which the Truman administration rejoined after the war as counterproductive and wasteful. He decries the Cellar-Kefauver Act of 1950, which decreed that horizontal mergers would invite antitrust prosecution, as giving rise to inefficient corporate conglomerates that produced scores of unrelated products and which would be fat targets for corporate raiders several decades later.

Lind?s fondness for cartels and government involvement may explain his positive view of the National Recovery Administration ?codes of fair competition.? Lind says the claim that they ?retarded recovery by imposing minimum wages is not taken seriously, except by those whom Hoover derided as ?die-hard liquidationists.?? But whether it was through a spike in real wages or through the monopolistic raising of prices and restriction of output, literally every academic economic history I have read of the First New Deal says the NRA retarded recovery. And it bears mentioning that it was also a failure as a public-private partnership; business, both large and small, went from cautious acceptance of the NRA to outright hostility. By the time it was declared unconstitutional by the Supreme Court in 1935, it had virtually no allies. Lind notes that Keynes said that the NRA had worthy goals of reform but ?probably impedes recovery.? Keynes actually went further and said that while ending deflation was important, ?there is much less to be said in favour of rising prices, if they are brought about at the expense of rising output,? i.e., as the result of a deliberate restriction of supply. ?Some debtors may be helped, but the national recovery as a whole will be retarded.?

(On a side note, Lind says that NIRA, for National Industrial Recovery Administration, was changed to NRA by Administrator Hugh S. Johnson after a Business Week article ridiculed NIRA as ?Neera My God to Thee.? The book has many little gems like that one.)

Public-private partnerships seem to get Lind most excited. The book begins with Hamilton?s Society of Establishing Useful Manufactures (SUM), which, far from being just another part of his neglected Report on Manufactures in 1791, became an industrial corporation in Paterson, New Jersey the same year and helped Paterson become a thriving and diversified factory town. Among other highlights, the SUM hired Edison to design an early hydroelectric power plant and Paterson became the site of the Wright Brothers? aeronautical company. The SUM lasted until 1945. Lind waxes eloquent about the Morrill land-grant universities and the agricultural innovation they spawned. And for all his praise of corporate R&D, he says, ?Even more important in the long run was the contribution of the federal government to innovation,? including the National Science Foundation, the National Institutes of Health, and defense-related research contracts that led to early computers and the Internet. One of the heroes of this book is Vannevar Bush, a relatively obscure engineer who directed the government?s Office of Scientific Research and Development and helped establish the National Science Foundation. Lind devotes an entire chapter to Bush, who epitomized the type of ?creative collaboration among government, the academy, and industry from which most transformative innovations in recent generations have emerged.? Bush was involved with the development of countless technologies from the atomic bomb to the jet engine to the personal computer. In addition to being a great administrator and inventor, Bush was a visionary with ideas ? say, for a computer-based networked library with a sophisticated search engine ? that were sufficiently specific to be a basic blueprint for later engineers who would bring those concepts to life.

A chapter on ?The Glorious Thirty Years? of post-World War Two prosperity leans heavily on John Kenneth Galbraith?s concept of ?countervailing power?: big business was oligopolistic and productive through economies of scale and scope; big labor helped make sure that those productivity gains translated into higher living standards; big government expanded the social safety net and the national infrastructure, notably through the interstate highway system. Lind sees a positive legacy for the short-lived NRA in the numerous government-sponsored cartels in such industries as airlines, trucking, and oil. These cartels, as well as established oligopolies in industries like automobiles and steel, helped stabilize the economy and avoid ruinous competition, Lind argues. In the financial sector, New Deal regulations like the Glass-Steagall Act made banking boring and the economy more stable.

As for what ended those glorious postwar decades, Lind recognizes that the 1970s productivity slowdown was worldwide but sees aggregate-demand factors at work too, principally in American trade flows and policy. As Germany, Japan, and other countries rebuilt their war-damaged capacity, it was inevitable that America?s trade surpluses would shrink. Lind says that the tide of imports was larger still due to Cold War policies designed to keep those countries out of the Soviet orbit by offering them one-way trade concessions. He further claims that the Japanese economic miracle of the 1960s?1980s would not have occurred without those concessions. As the economy weakened in the mid-1970s under the combined forces of the productivity slowdown and the OPEC oil shocks, the public rapidly lost faith in big business, big labor, and big government. ?The Great Dismantling? came with the deregulatory programs of Presidents Jimmy Carter and Ronald Reagan. While Lind acknowledges that deregulation may have made sense in the telephone industry and some others, he says deregulation was misguided in general and a disaster in airlines, electrical utilities, and finance. Carter was ?The First Neoliberal President? for his deregulation and his appointment of Paul Volcker to the Federal Reserve. Volcker?s shock therapy ended the high inflation of the 1970s but coincided with a 40 percent rise in the value of the dollar and accelerated deindustrialization. Lind quotes an oil executive at the time who said Volcker and Reagan (who reappointed Volcker) have ?done more to dismantle American industry than any other group in history.? Lind has surprisingly little on Reagan, perhaps because he wants to emphasize that Carter moved the country in a ?neoliberal? direction first. Yet Reagan was a more active dismantler ? for example, breaking up the air-traffic controllers union, consistently opposing an increase in the minimum wage, cutting anti-poverty programs, and calling for less government in general. Elsewhere Lind mentions Reagan as an example of inappropriate policy leadership in the Jefferson-Jackson tradition, but he offers few specifics. Which is unfortunate; whatever one?s politics, one has to admit that Reagan was one of the most consequential politicians of the postwar era, and his administration is arguably a bigger part of the story than we get here.

Regarding the crack-up of the economy in the late 2000s, Lind, like many analysts, traces it to the ?financial-market capitalism? that emerged in the wake of financial deregulation, an unbalanced ?bubble economy,? and over-securitization of mortgages. He contrasts today?s financial-market capitalism with the finance capitalism of J.P. Morgan?s time, arguing that Morgan, unlike today?s institutional investors, took a long-term ?buy and hold? view that was more keyed to fundamentals and stability. He adds that the growing wealth and income gap adds to the instability by weakening aggregate demand; the severe debt overhang and prolonged deleveraging among America?s middle class today would seem to support that view.

He concludes the book with a policy manifesto that he calls the Next American System, in homage to Clay?s American System. Lind?s system includes more government-funded R&D and infrastructure, industrial policy that promotes American manufacturing, and public-private partnerships like R&D banks to subsidize private innovation. In the financial sector Lind would bring back Glass-Steagall?s separation of commercial banking from the securities industry and impose a modest ?Tobin tax? on financial transactions to discourage speculation and raise revenue. Concerned with the failure of the post-1973 economy to distribute its gains to all income levels, Lind offers several possible ideas to raise lower and middle incomes, from an expanded earned-income tax credit to increased public employment to restrictions on unskilled labor immigration. (Like the economist George Borjas, he favors a point system for immigration that gives preference to skilled workers.) He also advocates ?universal social insurance,? financed out of current taxation, to replace dwindling employer-provided benefits.

As noted before, Lind?s book is intended for a lay audience, not an academic audience. Economic historians will find much to criticize here, most likely the general defense of protectionism and cartels, but the book is worth reading by anyone in search of provocative arguments and colorful details.

Ranjit S. Dighe is Professor of Economics at the State University of New York at Oswego. Email: ranjit.dighe@oswego.edu. His current research subjects include the economic conservatism of former New York Governor Alfred E. Smith.

Copyright (c) 2012 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator (administrator@eh.net). Published by EH.Net (October 2012). All EH.Net reviews are archived at http://www.eh.net/BookReview.

Subject(s):Economywide Country Studies and Comparative History
Geographic Area(s):North America
Time Period(s):19th Century
20th Century: Pre WWII
20th Century: WWII and post-WWII

Response to John Murray?s Review of Parasites, Pathogens, and Progress: Diseases and Economic Development

Author(s):McGuire, Robert A.
Coelho, Philip R. P.
Reviewer(s):McGuire, Robert A.
Coelho, Philip R. P.

Published by EH.Net (August 2012)

Response to John Murray?s review of Parasites, Pathogens, and Progress: Diseases and Economic Development — by Robert A. McGuire and Philip R. P. Coelho.

We feel obligated to comment on John E. Murray?s review (EH.Net, May 2012, http://eh.net/book_reviews/parasites-pathogens-and-progress-diseases-and-economic-development) of our book, Parasites, Pathogens, and Progress: Diseases and Economic Development (Cambridge, MA: MIT Press, 2011) because we are puzzled with what Murray wrote.? His review inaccurately portrays the book?s contents, evidence, and hypotheses.? The review was ?bad? in the sense that it neither informed the reader what the book was about nor did it accurately describe the book.? It was not ?bad? because it panned our book, but because the review gave little information about major aspects of what was actually in the book.? Many of the criticisms were erroneous or misleading.? More egregiously, in a number of instances the review contained factual inaccuracies.

There are a number of strands in Parasites, Pathogens, and Progress.? Among them are (1) an attempt to integrate the impact of infectious diseases into the physical and social evolution of humanity starting from around 200,000 years ago, (2) a critique of the Malthusian theory of population, arguing that diseases caused the poverty and misery that Malthus ascribed to over-population, (3) an economic analysis of the interactions of African slavery, including financial analysis and data that suggest that diseases were the key factor in the promotion and preservation of slavery in the American South, (4) an economic history of the regional impacts of diseases in the New World and their importance in American history prior to the twentieth century, and (5) a substantial amount of empirical evidence (mortality rates for various age and other cohorts for about two dozen infectious diseases) on the regional incidence of diseases in the United States during the nineteenth century.? What Murray says about our book is almost a caricature, claiming it is primarily about malaria, and what we say everyone knew except for the parts that are incorrect.

Among the notable absences from the review is our history of humanity (chapter 2) that emphasizes population growth, expanding markets, evolutionary theory, and Malthusian Doctrine; Murray does not mention these.? Murray does have a sentence about chapter 3: ?On the purely economic side, a set of verbal and flowchart models of economic growth stress connections between ever greater population density and increasing infectious disease rates.? Perhaps Murray thought that an entire chapter offering models of pre-modern long-run economic growth focusing on population growth, expanding markets, increasing specialization, increasing density and urbanization, and transportation developments, and the consequent spread of pathogens did not deserve further comment; we disagree.? If we are wrong in chapter 3, this is a major error and should be pointed out; but if we are correct, then it is a significant contribution.? While his review does acknowledge our hypothesis about slavery versus indentured servitude and differential disease susceptibilities, Murray completely neglects our formal analysis of slavery versus indenture servitude (and by extension the use of African versus European labor) in early America (chapter 4).? Our analysis depends on financial and microbiological considerations and includes evidence on prices, interest rates, life expectancies/length of service, and the net returns necessary for a slave or a servant to be profitable in early America.? Finally, Murray neither mentions the evolutionary theory that is critical to our view of humanity?s history and the economy, nor does he mention our claim that Malthus was wrong (chapter 2), but that Malthus had an intuition associating increased human density with poverty (chapter 3).? A criticism that Murray does not make is the absence of sufficient evidence to overthrow the Malthusian Paradigm; the lack of specific data and empirical tests would have been a legitimate criticism.

Murray is self-contradictory; he writes that our book ?synthesizes a considerable literature on infectious disease and U.S. economic history, particularly before 1900,? yet in the very next paragraph he claims that ?Much of the authors? case moves forward without reference to work of previous historians.?? This is insensible.? We do not know how to interpret his second comment that we are deficient in referencing; there are 27 pages in the ?References? containing nearly 500 entries, each cited in the text.? Murray does mention four works that we did not cite that he thought we should have.? Yet he chose to write a review that reads as if we cited none.? (If his criticism is that the book is not littered with footnotes, he is correct; we made a conscious choice to minimally footnote to make it more readable.)

Murray states: ?Readers familiar with the work of world historians such as William McNeill, Philip Curtin, or Alfred Crosby, or historians of medicine such as Kenneth Kiple, Todd Savitt, or Margaret Humphreys will find little new here.?? With the exception of Humphreys, the books mentioned certainly influenced us, but to claim that there is little in our book that is not contained in them is grossly inaccurate.? As noted, Murray says little about our first four chapters, but, to repeat, that is where we outline why we think that the Malthusian theory on population is incorrect, yet Malthusian intuition associating increased human numbers with poverty is correct.? Not one of Murray?s authors writes about this.? An easy refutation of Murray is in our chapter 4; we may be wrong in our analysis and modeling of the use (and profitability) of African slavery versus European servants in early America, still it is ours alone.? We trust that anyone reading Parasites, Pathogens, and Progress can see that Murray?s claim that it is mostly in McNeill, Curtin, Crosby, Kiple, Savitt, or Humphreys is bizarrely inaccurate.? If it were true, why would Alfred Crosby state on our back cover: ?Scientists, economists, historians, and a goodly number of the rest of us have long recognized diseases as a powerful influence on the course of human experience, but we have harvested less than we could have from that insight because our familiarity with the subject is so thin.? We can do a lot to cure that by reading this excellent study, Parasites, Pathogens, and Progress??

Murray also states that our emphasis on a changing biological environment is old hat, claiming that ?after McNeill?s Plagues and Peoples (1976) and Crosby?s Ecological Imperialism (1986), very few scholars believe in a static global disease environment.?? We admit our debts to these scholars, but if everybody knows this, then why do the texts not reflect it?? The three major textbooks in U.S. economic history (Atack and Passell, 1994; Hughes and Cain, 2011; Walton and Rockoff, 2010) do not cite McNeill or Crosby, or mention the Columbian Exchange.? It is true, however, that the two more recent texts do cite earlier articles of ours on the nexus between disease susceptibilities and slavery.

There are at least three especially egregious claims in Murray?s review.? First, Murray writes: ?The bulk of the book is given over to the importance of infectious disease, primarily malaria, in determining that the labor force in the South would be drawn from African slaves? (emphases added).? How did he ever come up with the idea that the bulk of our book is primarily about malaria?? In what we say about southern diseases, hookworm has more pages and more entries to it in the References than does malaria, so Murray?s claim judged solely against hookworm is incomprehensible.? Moreover, the text and the Index have more allusions to infectious agents than any non-computer can spell.? We explicitly write about ?hookworm, malaria, yellow fever? and other warm-weather diseases in chapter 5 (see pp. 80-81, 83, 89-91, 97, 105-110), albeit concentrating on hookworm and malaria.? In chapter 6, there is (1) a 4-page section on ?Yellow Fever and the Southern Urban Disease Environment? (pp. 122-25), (2) an 11-page section on ?Slave Plantations and the Southern Rural Disease Environment? (pp. 125-35) that includes a subsection titled ?Nutritional and Parasitic Diseases on Southern Plantations? (pp. 127-35), (3) a 17-page section titled ?Hookworm? (pp. 138-54), and (4) a 17-page section titled ?Malaria? (pp. 154-71).? One of the points of our book is that morbid diseases were major factors in determining settlement patterns in the New World.? Any reader can judge how much emphasis we devote to hookworm and other infectious diseases, and then determine if our primary focus is on malaria.? To claim that when we write about the American South our focus is ?primarily malaria? indicates that the reviewer was not reviewing what was written.

The second egregious claim Murray makes is when he pieces together quotes from two unrelated sentences to change the meaning of what we wrote.? On our discussion of Africans? relative susceptibilities to cold-weather diseases, he writes ??As a result,? they write (p. 100), ?there is (sic) an increase in the migration of European indentured servants? to the northern colonies.? To explain the absence of evidence for this claim, they note (p. 100) that ?reliable data for indentured servants bound for New England are not available.??? We did not say that.? The first sentence Murray quotes (?As a result, there is an increase in the migration of European indentured servants.?) is from a paragraph that begins on p. 99 in the book where the discussion is about the migration of Europeans to northern colonies.? The second quote (?reliable data for indentured servants bound for New England are not available?) is found two paragraphs later on p. 100 and is not related to the first quote.? It comes from a paragraph that begins with the following sentence: ?We can now illustrate the economic case for the relative absence of Africans in the northern colonies? (p. 100, emphases added).? Murray inserted his own clause (?To explain the absence of evidence for this claim?) after the first quote from our book, attaching it to the beginning of an unrelated clause in another sentence and completely changed the meaning of what we wrote.? The complete second sentence we wrote is: ?Because reliable data for indentured servants bound for New England are not available, we chose to utilize data about servants for the northern-most colony for which reliable data exist for the eighteenth century? (p. 100).? To repeat, the referred to data were utilized to ?illustrate the economic case for the relative absence of Africans in the northern colonies? (p. 100).

The third egregious claim of Murray is that he states ?the lack of such data [on New England servants], reliable or otherwise, was due to the tendency of indentured servants to avoid New England in the first place.?? Murray is wrong; he is writing as if he does not know about the migrations to America during the Colonial Period.? Because a large consistent dataset is not available, does not mean a market (or migrations) did not exist.? In chapter 5, we estimate the annual flows of indentured servants from data that are available on the stock of indentured servants in the three regions of colonial America.? The data on the number of indentured servants in New England (and in the other two regions) come from Edwin Perkins (1980) whom we regard as highly competent and a reliable source.? By making a few simplifying assumptions, we were able to estimate the flow of indentured servants into New England from its stock.? This is all detailed on page 102.? So what we have here is a reviewer taking what we would say was a careful explanation of how we derived annual flows from the stock of indentured servants, and then saying because explicit data on annual flows did not exist, the market did not exist.? If the market did not exist because of ?the tendency of indentured servants to avoid New England,? then, in the absence of spontaneous generation, where did the stock of indentured servants come from?

Murray entirely missed that chapter 5 is (1) about why Africans predominated in the southern colonies and northwest Europeans predominated in the northern colonies and (2) that our entire argument is about the relative nature of our hypothesis.? Relatively more Europeans (and indentured servants) went to New England than Africans; nothing in our hypothesis says anything about the absolute number of indentured servants going to New England compared to the total number going to the Middle colonies.? We provide evidence on the relative predominance of African slaves in the southern colonies and the relative predominance of Europeans (and indentured servants) in the northern colonies (pp. 100-102).

There are several other issues about our book that bedevil Murray.? He is concerned that we did not cite a source on the spread of disease in nineteenth-century America which, according to him, would have bolstered our case.? But the mentioned source has no explicit evidence on disease and contains biased data.? Murray criticizes our very brief discussion of the Antebellum Puzzle at the end of chapter 3 for its assertions and lack of evidence.? But he fails to note that the page and a half discussion was intended only as an example (and is titled as such) of the thinking contained in our model of long-run growth presented in chapter 3.? The evidence for the links between demographic and transportation developments and the spread of diseases is presented in chapter 7, and, additionally, in two appendices that present data on the links among density, urbanization, cities, population growth, and transportation (and other exchange facilitating) developments, and the spread of disease.? Murray believes that our discussion of differential disease (he incorrectly says malaria) susceptibility ?and its consequences for our history is widely accepted by historians.?? We are unaware of this wide acceptance, and we have no knowledge of any historians who blended together an analysis of the profitability of slavery with the differential effects of hookworm, malaria, and the other biological agents that are the major elements in chapters 5 and 6.? Murray also complains about our not documenting the use of quinine, yet everybody who is marginally conversant with malarial diseases in the nineteenth century knows about quinine.? Even Wikipedia recognizes the ubiquity of quinine; its entry on quinine states that it was commonly used prophylactically circa 1850 (its clinical usage predated 1850). What is commonly known should not be cited.? And, yes, we do write that ?it [quinine] was widely known and efficacious in combating malaria? (p. 161) without citation, still two pages later (p. 163) we cite Curtin (1989) as ascribing the reduction in malarial mortality to the increasing use of quinine after 1820.? A reduction in mortality should be enough to alert a perceptive reviewer to how widespread quinine was even in the absence of specific knowledge.

Murray?s reading of our book is very eccentric; it is akin to reading Walden as a survivalist guide.? We believe the review is orthogonal to objective reality; however, these are judgmental statements.? Readers can make up their own minds; after reading Parasites, Pathogens, and Progress, feel free to let us know if you think Murray?s depiction of its contents is reasonably adequate and complete.

References:

Atack, Jeremy, and Peter Passell (1994) A New Economic View of American Economic History from Colonial Times to 1940, 2nd edition, New York: W. W. Norton & Company.

Curtin, Philip D. (1989) Death by Migration: Europe?s Encounter with the Tropical World in the Nineteenth Century, New York: Cambridge University Press.

Hughes, Jonathan, and Louis P. Cain (2011) American Economic History, Boston: Addison-Wesley.

McNeill, William Hardy (1976) Plagues and Peoples, New York: Anchor Books.

Perkins, Edwin J. (1980) The Economy of Colonial America, New York: Columbia University Press.

Walton, Gary M., and Hugh Rockoff (2010) History of the American Economy, 11th edition, Mason, OH: South-Western, Cengage Learning

Robert A. McGuire is a research professor of economics at the University of Akron; Philip R. P. Coelho is a professor of economics at Ball State University.

Copyright (c) 2012 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator (administrator@eh.net). Published by EH.Net (August 2012). All EH.Net reviews are archived at http://www.eh.net/BookReview.

Subject(s):Economic Development, Growth, and Aggregate Productivity
Servitude and Slavery
Living Standards, Anthropometric History, Economic Anthropology
Geographic Area(s):North America
Time Period(s):17th Century
18th Century
19th Century

Jewish Economies: Development and Migration in America and Beyond ? Volume I: The Economic Life of American Jewry

Author(s):Kuznets, Simon
Lo, Stephanie
Weyl, E. Glen
Reviewer(s):Schiffman, Daniel A.

Published by EH.Net (August 2012)

Simon Kuznets, Jewish Economies: Development and Migration in America and Beyond ? Volume I: The Economic Life of American Jewry (edited by Stephanie Lo and E. Glen Weyl). New Brunswick, NJ: Transaction Publishers, 2012. liv + 239 pp. $50 (hardcover), ISBN: 978-1-4128-4211-2.

Reviewed for EH.Net by Daniel A. Schiffman, Department of Economics and Business Administration, Ariel University Center.

Simon Kuznets (1901-1985), the 1971 Nobel Laureate in Economics, is renowned for his contributions to development economics and national income accounting. This book documents a less well known aspect of Kuznets’ career ? his pioneering contributions to Jewish economic history.

This is the first volume of a two-volume set. The set consists of six papers, four of which were previously unpublished, published in Hebrew, or published in abridged form. The contents of Volume I are as follows:
1. “Preface” (Lo), a brief description of all six papers;
2. “Introduction: Simon Kuznets, Cautious Empiricist of the Eastern European Jewish Diaspora,” (Weyl), a forty-page essay which places the six papers within the context of Kuznets’ life and work;
3. “Economic Structure and Life of the Jews,” a draft that was published in abridged form in 1961, by the Jewish Theological Seminary in New York;
4. “Economic Structure of U.S. Jewry: Recent Trends,” a lecture delivered at the home of Israel’s President, originally published in Hebrew;
5. “Economic Growth of U.S. Jewry,” an unfinished, previously unpublished manuscript.

In these papers, Kuznets describes the economic transformation of world Jewry in the twentieth century, with an emphasis on immigration, human capital accumulation, occupational structure and income distribution. Readers who are familiar with Kuznets will recognize his unique methodology, which is characterized by careful definition of concepts, meticulous empirical analysis and fact-based theoretical insights. Kuznets’ findings include the following:
a. Jews have paid a heavy economic price to preserve their cohesion and identity.
b. Discrimination against Jews is highly irrational.??
c. Waves of immigration generate significant inequality, accompanied by cultural gaps, between veteran immigrants and newer arrivals.
d. In a pre-World War II sample of 12 nations, Jews were overrepresented in trade and finance and (to a lesser extent) industry and handicrafts. Jews were underrepresented in agriculture, transportation, communications and personal services.
e. In the early 1950’s, Israel integrated its immigrants by allowing them to consume more than they produced. This policy, combined with a high rate of investment in physical capital, necessitated large capital inflows from abroad.?
f. In 1957, American Jews were highly urbanized and educated, relative to the general U.S. population. Between 1910 and 1957, Jewish males shifted from industrial occupations to professional and technical occupations. In the 1950’s and 1960’s, Jewish females married later and had a lower birth rate, relative to the general population. Jewish females had a high labor force participation rate before marriage, but tended to leave the labor force after marriage. The distribution of income among Jews had a higher mean, greater rightward skewness and greater inequality than the general distribution of income.?

Why did Simon Kuznets devote time and energy to the study of Jewish economic history? Kuznets emigrated from Russia to the U.S. in 1922. As a secular Jew and staunch Zionist, he affirmed his Jewish loyalties by studying Jewish economic history and by promoting economic research at the Hebrew University in Jerusalem. However, he was ambivalent about his Jewish-oriented writings. In a 1973 letter, he declined Martin Feldstein’s proposal to disseminate “Economic Growth of U.S. Jewry” as a Harvard economics department working paper. Kuznets explained that his Jewish-oriented writings were less than fully objective, because the topics reflected his “interests and associations as a Jew.”

What motivated Weyl and Lo to edit Jewish Economies? In 2007, Weyl, who is now an economic theorist at the University of Chicago, wrote a term paper on Kuznets for an undergraduate history course at Princeton. Weyl consulted Kuznets’ personal papers and interviewed his children, Paul Kuznets and Judith Stein. After completing his Ph.D. in economics at Princeton in 2008, Weyl joined the Harvard Society of Fellows, where he collaborated with research assistant Stephanie Lo (currently an analyst at DC Energy). Weyl explains that he is drawn to Kuznets by virtue of their common background and challenges. Like Kuznets, Weyl was born into a secular Jewish family; like Kuznets, Weyl strives to create the proper balance between universalism and Jewish identity.

Weyl’s introduction is very enlightening. Using archival material and interviews, Weyl uncovers new facts about Kuznets’ personal and professional lives. Weyl also ventures into the realm of intellectual biography: He explores the connection between Kuznets’ background and his economic thought, and demonstrates the existence of important parallels between Kuznets’ general and Jewish-oriented works. For example:
? Kuznets emphasized the role of culture and institutions in Jewish economic life. This parallels his emphasis on culture and institutions in development (which was highly unconventional in the 1950’s).
? Kuznets hypothesized that over time, income inequality among Jewish immigrants would rise and then fall. This parallels the famous Kuznets curve, which posits an inverted-U relationship between development and income inequality.
? In the Middle Ages, European Jews were excluded from all professions except moneylending. This historical fact may have inspired Kuznets to assert (in Income from Independent Professional Practice, coauthored with Milton Friedman) that occupational licensure reduces competition.
? Kuznets saw immigration as a leading factor in Israel’s economic development. He also recognized the disastrous effect of U.S. immigration restrictions in the pre-Holocaust years. Not surprisingly, Kuznets’ general work is strongly pro-immigration.

Weyl suggests that some of Kuznets’ most famous (general) economic insights were inspired by his Jewish-oriented works. Unfortunately, conclusive evidence is lacking; Kuznets deliberately concealed his motivations, and maintained a strict separation between his general and Jewish-oriented works.

I have two minor quibbles with Jewish Economies. First, there is a small but growing post-Kuznets literature on Jewish economic history; contributors include Barry Chiswick, Carmel Chiswick, Maristella Botticini, Zvi Eckstein and Cormac ? Gr?da. Weyl and Lo do not bring this literature to the attention of the reader. Second, the introduction is marred by occasional typographical errors and incorrect cross-references.

In conclusion, Jewish Economies is an important scholarly contribution. It should be required reading for specialists in the fields of economic development, human capital and history of economic thought. Weyl and Lo have contributed to the economics literature in three ways: They have collected Kuznets’ virtually forgotten writings on Jewish economic history, revealed previously unknown aspects of Kuznets’ identity and worldview, and demonstrated important parallels between Kuznets’ general and Jewish-oriented works. Hopefully, the publication of Jewish Economies will stimulate further research on Jewish economists of the twentieth century.

Daniel A. Schiffman is a lecturer in economics at Ariel University Center in Israel. He specializes in economic history and history of economic thought. He has published articles on Jewish monetary thought and is a contributor to the Oxford Handbook of Judaism and Economics (2010).? E-mail: daniels@ariel.ac.il

Copyright (c) 2012 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator (administrator@eh.net). Published by EH.Net (August 2012). All EH.Net reviews are archived at http://www.eh.net/BookReview.

Subject(s):Development of the Economic History Discipline: Historiography; Sources and Methods
Education and Human Resource Development
Historical Demography, including Migration
Labor and Employment History
Geographic Area(s):Europe
Middle East
North America
Time Period(s):19th Century
20th Century: Pre WWII
20th Century: WWII and post-WWII

The Creative Society ? and the Price Americans Paid for It

Author(s):Galambos, Louis
Reviewer(s):Rahman, Ahmed S.

Published by EH.Net (July 2012)

Louis Galambos, The Creative Society ? and the Price Americans Paid for It. New York: Cambridge University Press, 2011. xiv + 322 pp. $28 (paperback), ISBN: 978-0-107-60099-7.

Reviewed for EH.Net by Ahmed S. Rahman, Department of Economics, United States Naval Academy.

Patterns in history suggest a cold truth ? global hegemonic and economic dominance never lasts. When relative decline comes, it inevitably invites questions of what went wrong, and the answers typically are of two possible flavors. The country changed too much and failed to stay true to its core strengths, or the country did not change enough and failed to adequately adapt. These days we wonder if are witnessing the downward plunge of another such wave, and in its wake comes a surge of studies outlining the sources of, and threats to, American exceptionalism. These form part of a larger narrative on the rise and potential eclipse of the West. By understanding the roots of Western success, we might judge whether we have strayed too far or hewed too close to them.

With The Creative Society, Louis Galambos has developed an ambitious work that uncovers a crucial root from which springs much of America?s strength and durability ? its class of professional workers. It is a comprehensive group that includes lawyers, doctors, scientists, teachers, administrators, business managers, policy specialists, and urban planners. Galambos, a professional himself and startlingly a character in his own tale, has spent his distinguished career studying institutional developments in America. Here he taps into that wealth of knowledge to discuss how these groups of creative Americans interacted with different ideas and institutions, covering (for the most part chronologically) the period from the 1890s up to the present day.

A work mainly about twentieth century America can cover many themes, and this book seems intent on discussing them all.? Race, gender, immigration, politics, national defense, trade, urbanization, corporate downsizing, income inequality ? virtually no potential topic is left off the table. The reader would be unhinged from such a maelstrom of subjects (all compressed in roughly 300 pages) were it not for the common thread tying it all together ? America?s educational system and the entrepreneurial and inventive people who were shaped by it.

There is much here that both economists and historians should enjoy. A critical question hovering over this work is where the rise of professionalism sits in the causal chain of events leading to American growth. Did skill-intensive technological developments raise the need for specialized human capital, or did America?s unique educational system produce the cadre of professionals that in turn developed the innovations of the American Century?

Galambos seems to answer with the latter, and provides a series of compelling examples in support of this. Through their American education and experience, these professionals helped expand scientific knowledge, improve medical care, develop new urban and suburban centers, and revolutionize business. All is not sunshine and roses however ? this creative society also led America into costly and arguably unnecessary wars, fostered hubris and entrenched interests, and helped create huge gaps in inequality along lines of skill, gender and race. The stitching together of all these leitmotifs is the product of robust and eclectic research that challenges us to think of America in a new light.

Like American culture itself, Galambos?s narrative propels forward through stories of bold ascent by unlikely characters: the chemist of modest means who wins the Nobel Prize (Ernest Lawrence), the shiftless student who revolutionizes city planning (James Rouse), the mediocre engineer who becomes a prominent turnaround specialist (Al Dunlap), and yes, the historian struggling to make sense of the world becomes an eminent professor at Johns Hopkins University and writes this book (Louis Galambos). Trying to understand American economic and social history through its most successful professionals is bold and novel. Galambos is a skilled raconteur, and he weaves his tales with style and wit.

There is also much here that may drive some to distraction. The work suggests itself to be a new historical paradigm. I did not quite find it that exactly ? the narrative is a bit too loose and unfocused, with too many shaky and unsupported normative statements. The writing itself is an entertaining and curious mash-up of biography, auto-biography, and institutional and cultural history. The book whipsaws back and forth between close-up personal portraits of individual professionals, and panoramic landscapes of American society. The approach is often enlightening and sometimes disorienting.

If the goal was to produce a truly new perspective of American social history, the approach doesn?t entirely work. The biographies sketched out (including one for our current president) are of exceptional people, who by construction do not constitute a representative sample of the creative society. Inductive analysis that mainly observes society?s winners can get one only so far in understanding the macro forces that shaped society as a whole. Moreover, it tends to undermine the purported importance of America?s education system. The characters portrayed make for compelling reading, but often they come at the expense of the system they are supposed to illuminate. The more impressive the set of characters appear to be, the more it appears that the rise of America was an accident of fortune, the mere product of having the right people in the right places at the right times.?
?
I also would have welcomed more comparative analysis, using the systems and institutions of other nations to form a backdrop by which to contrast America?s.? How did America?s educational and business systems compare to those from which they originated? The book makes clear that America?s strengths spring from its connections between education and enterprise, but how precisely, and how these differ from other nations, remains underexplored.

The tale ends with a number of contemporary challenges well known to most. Given the slew of problems constantly offered by the chattering class (conceivably a subset of Galambos?s professional class), I appreciated the author?s hopeful message that our rich endowment of creative workers will help us through our challenges. The book offers neither grandiose theories nor explicit solutions. What it does provide is a new and valuable appreciation of how professionals have shaped our history and culture, and the abiding sense that they will save us once again.

Ahmed Rahman is an Assistant Professor at the U.S. Naval Academy. He is the author (with Darrell Glaser) of ?Human Capital and Technological Transition: Insights from the U.S. Navy? (Journal of Economic History, September 2011). Email: rahman@usna.edu.

Copyright (c) 2012 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator (administrator@eh.net). Published by EH.Net (July 2012). All EH.Net reviews are archived at http://www.eh.net/BookReview.

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

The Reinterpretation of Italian Economic History: From Unification to the Great War

Author(s):Fenoaltea, Stefano
Reviewer(s):A'Hearn, Brian

Published by EH.Net (July 2012)

Stefano Fenoaltea, The Reinterpretation of Italian Economic History: From Unification to the Great War. Cambridge: Cambridge University Press, 2011. xxi + 296 pp. $85 (hardcover), ISBN: 978-0-521-19238-5. (First published in Italian as L?economia italiana dall?Unit? alla Grande Guerra, 2006.)

Reviewed for EH.Net by Brian A’Hearn, Department of Economics, University of Oxford.

This book brings together four decades of research on Italian industrialization by Stefano Fenoaltea. The backbone of this research, and of the book, is the author?s well-known estimates of industrial value added. These are presented in Chapter 1, which details their construction and offers a lucid discussion of technical issues from ?double deflation? to the treatment of unobserved sectors. Scrutiny of production and import series for individual industries reveals no evidence of the sort of supply-side discontinuity or ?great spurt? predicted by what Fenoaltea terms stages of growth theories. Instead, supply responded elastically to variation in demand throughout the 1861-1913 period. Chapter 5 investigates the role of railroads in establishing stages-of-growth prerequisites for industrialization, and finds that they did not play this role. Chapter 2 sets out the author?s alternative explanation of the industrial upswings of the 1880s and 1900s. In a reinterpretation of the Kuznets Cycle, Fenoaltea argues that British capital exports drove construction and broader investment booms in the periphery in general and Italy in particular.

Chapters 3 and 4 deal with Italy?s protectionist response to globalization. The first argues convincingly that the much-discussed agrarian crisis of the 1880s never happened. The perception of one arose from the lamentation of landowners in cereal-growing areas (who really were harmed by the ?grain invasion?) and an unreliable agricultural output series. In fact the 1880s were a period of structural change during which Italy followed its evolving comparative advantage into more labor-intensive production, not only in the booming industrial sector but also within agriculture, where an expansion of vineyards and citrus groves was underway. Chapter 4 shows how the tariff on imported grain from 1887 reversed these effects and contributed decisively to a growing tide of emigration. Internally, real wages were lowered; externally, the costs of labor-intensive exports, whether industrial or agricultural, were raised to the point that production in Italy became uncompetitive.

Chapter 4 exhibits as well as any other several of the book?s virtues. The writing is elegant and spare, with close logical reasoning and subtle argument throughout. And the range of scholarship and ingenuity on display is formidable: clever reasoning to coax from scattered evidence estimates of the quality of cotton textiles; polished expositions of various points of pure theory; detailed critiques of the Italian literature; minor asides on the history of economic thought (Hume, Ricardo, Marxist thinkers?); original applications of trade theory to migration (with a digression on the slave trade); and more besides.

The geography of industrialization is the subject of Chapter 6, which presents Fenoaltea?s estimates of regional value added in industry for several census years. The pattern discerned by the author in the earliest figures (for 1871) is that those regions were relatively industrialized which had recently hosted the national capitals (or in the case of Sicily a major regional capital) of pre-Unification states. Here were the markets wherein most of the agricultural surplus had been consumed in the ancien r?gime. So the now-familiar pattern of an Industrial Triangle in the Northwest observable in 1911 was not the perpetuation of an age-old pattern, but the emergence of something new. And it was not history but geography that drove this concentration, specifically the immobile factor of water power. A less-familiar pattern that emerges from the analysis, and a puzzle meriting further research, is what looks like a non-industrial economic boom in the Southern regions of Sicily and Apulia.

Much of this will be familiar to readers with an interest in Italian economic history; Fenoaltea is, after all, a well-known authority in the field. One element that is new in the picture is the author?s historiographical reflections. Of particular interest are insights into the way in which current events and current economic theorizing influenced the writing of history, as when 1960s concerns about balance of payments constraints on growth were inappropriately projected backward into a very different historical context. Another new element, and perhaps the aspect of The Reinterpretation of greatest interest to a general readership, is the author?s own model of development. Really, the model is not new; it runs consistently throughout Fenoaltea?s work. But it can be perceived much more clearly in the present collection than in the author?s separate publications. This approach might be called the ?mobile resources? model of development.

In this approach all productive resources are viewed as mobile to a greater or lesser degree. In the late nineteenth century, a commodity like raw silk was highly mobile, coal less so. A factor of production like capital was highly mobile, craft labor less so. Only physical location and natural resources are truly immobile. Less mobile resources tend to attract the more mobile, and determine the profitability of different activities in a given location. Because technology and markets evolve over time and are specific to a particular moment, history matters for Fenoaltea. But it is the history of the moment, of an equilibrium quickly reached, rather than a historical process that is path-dependent or longue-dur?e. He offers the example of the Ruhr, where ? given the technologies and markets of a particular historical moment ? relatively immobile coal attracted capital, entrepreneurship, labor, and iron ore to a region with no particular industrial or commercial heritage.

The model, which is nowhere elaborated en bloc, deserves a more explicit and comprehensive treatment. One point that could be made clearer is that the goal of the model is to explain development rather than growth: an economy?s specialization (sectoral composition) and size (attraction or loss of mobile resources) rather than its productivity or prosperity. The questions are not whether real wages will be high or low, but whether they will be earned at home or abroad; not whether the economy will be advanced or backwards, but whether it will be large and industrial or small and agricultural. Giving greater salience to this point would help resolve what can otherwise appear as contradictions. For example, Fenoaltea states more than once that there is nothing magic about industry relative to other sectors, but seems to accept industrialization as the appropriate goal for policy, and studies only that sector. Or, he quotes approvingly the liberal pronouncements of late-nineteenth century economists regarding trade policy, but also presents a model that ?fully justifies ? (mercantilist) policies aimed at developing non-agricultural exports, the luxury-good industries and the carrying trade.? What reconciles these views is the common goal of enabling an abundant labor force to attract other mobile resources to a growing economy in Italy. Industry is not important, in itself; a labor-intensive service economy would have served just as well, had the technology and markets of the time permitted.

Beyond greater clarity on this point, there are two areas in which the model could be improved. First, given the key role of geography, it is curious that domestic market access, which is a key feature of most new economic geography models, is not considered. Because domestic market access is endogenously determined, it implies an even more important role for policy in promoting development. Second, institutions are equally neglected in the model. Are they flexible (another mobile factor, in a sense) or unimportant? If part of the book is a retrospect on a career?s achievements, the further elaboration of Fenoaltea?s mobile resources approach and its application to fresh issues or time periods is a prospect to look forward to.

Brian A’Hearn is an economics tutor and fellow of Pembroke College, University of Oxford. He is the author of a number of articles on Italian economic history.

Copyright (c) 2012 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator (administrator@eh.net). Published by EH.Net (July 2012). All EH.Net reviews are archived at http://www.eh.net/BookReview.

Subject(s):Economic Development, Growth, and Aggregate Productivity
Economywide Country Studies and Comparative History
Industry: Manufacturing and Construction
Geographic Area(s):Europe
Time Period(s):19th Century
20th Century: Pre WWII

Law and Long-Term Economic Change: A Eurasian Perspective

Author(s):Ma, Debin
van Zanden, Jan Luiten
Reviewer(s):Sng, Tuan-Hwee

Published by EH.Net (June 2012)

Debin Ma and Jan Luiten van Zanden, editors, Law and Long-Term Economic Change: A Eurasian Perspective. Stanford: Stanford University Press, 2011. xiv + 358 pp. $65 (cloth), ISBN: 978-0-8047-7273-0.

Reviewed for EH.Net by Tuan-Hwee Sng, Department of Economics, National University of Singapore.

Researchers have long recognized the relationship between secure property rights and economic growth. Discussion on the subject, however, has often fallen into an oversimplified dichotomy between a ?progressive? West and a ?corrupt? East. As the editors of this volume — Debin Ma (London School of Economics) and Jan Luiten van Zanden (Utrecht University) — point out, the need to maintain some level of justice and fairness is probably shared by all societies. While they are not advocates of the revisionist view that the West?s decisive lead in the security of property only appeared with the advent of the industrial revolution, they recognize the need to study non-Western legal systems more systematically. Their admirable goal is to build ?a richer and subtler perspective on global legal traditions? that is ?much more than a simplistic tale of European exceptionalism.?

The volume brings together an impressive group of scholars with expertise on different parts of Eurasia to explore diverse aspects of property rights across space and time. Most of the 15 essays compiled in the volume originated in a conference on law and economic development held in Utrecht in 2007. Some of the questions that they addressed include: What are the main characteristics of a particular legal tradition? How did these characteristics evolve over time? How effective were different legal systems in the protection of property? Did differences in legal traditions contribute to the ?Great Divergence??

As one would expect from a collection of essays, many chapters in the volume are only loosely connected to one another under the broad theme of law and long-term economic growth. Some readers will enjoy the diversity. Others might have preferred a more focused comparative agenda. It is a matter of personal taste, but every reader should find something inside that is interesting and relevant to his/her own work.

The chapters are ordered from east to west, starting with Japan and ending with Britain. Very broadly, they can be classified into four groups: those arguing that an overly powerful state is the main obstacle to legal development; those seeking to explain the internal logic of individual legal systems without offering theories on ?what went wrong (right)?; those that analyze the transmission of legal institutions; and those that examine the performance of a specific institution in a local (British) context.

The State as an Obstacle to Legal Development

In the introduction, the editors offer a three-layer analytical framework to understand the evolution of law and legal institutions: culture provides the range of ideas; the state filters these ideas and selects those compatible with its interests; the ideas selected are then expressed as institutional rules. This is a simple yet powerful framework, with much food for thought.

Chapter 2, by John Haley, discusses the evolution of private law in the West and Japan. It argues that constraints on political power in Europe — itself the outcome of European geography, major tribal migrations between the third and the sixth centuries, the emergence of the church as a political player, and incessant warfare — prevented rulers in medieval Europe from adopting the kind of public-law system that emerged in imperial China. Instead, they were forced to accept adjudication as a principal means of maintaining order. According to Haley, the presence of similar political conditions (in particular, the existence of competing centers of power) also led to the development of an embryonic private-law order in early and medieval Japan. It was this ?shared institutional experience? that would allow Japan to adopt Western law successfully and with relative ease during the nineteenth century.

Recent revisionist scholarship has shown that the legal system in imperial China did a much better job of protecting property rights than previously thought. In Chapter 3, Debin Ma provides a critique of this view. Through a short review of the Chinese legal tradition, he argues that the imperial state?s desire to maintain its monopoly of power prevented the formation of an autonomous legal profession in China. Litigation masters who gave legal advice to ordinary people were driven underground as their presence was viewed by the state as a threat to a harmonious society, while court decisions continued to be made by magistrates with little legal expertise and whose primary concern was to satisfy the review from above. To Ma, ?[t]he rise of an independent legal profession in England and Western Europe and its absence in traditional China were merely reflective of two contrasting political structures at opposing ends of the Eurasian continent.?

The most theoretically oriented chapter in the volume is Metin Cosgel?s analysis of the adoption of legal and other innovations in the Ottoman Empire (Chapter 8). By building a theoretical framework to analyze interactions between a ruler, an organized religious and legal authority, and the citizenry, Cosgel suggests that the support of powerful groups in the society is an important factor that helps explain why the Ottoman state was quick to adopt some innovations (e.g. gunpowder technology) but not others (e.g. printing press, the legal concept of corporation).

In Chapter 10, Jerome Sgard asks why bankruptcy laws were first invented in medieval Europe and not elsewhere. Historically, societies without bankruptcy laws to manage commercial failures ex-post often imposed rules (e.g. usury laws) to prevent economic agents from taking too much risk ex-ante. While bankruptcy laws promote trade and investment by providing a mechanism to solve this dilemma, allowing the court to intervene in commercial affairs could also potentially lead to state predation. According to Sgard, it is therefore unsurprising that bankruptcy laws first emerged in northern Italy, where ?burghers and merchants could actually govern their local public affairs.? Republican institutions and bankruptcy statutes are natural complements.

Chapter 13, by Jaime Reis, studies the mortgage loan market in nineteenth-century Portugal. Using a new metric to identify the component in the interest rate that reflects institutional quality, Reis shows that creditor rights were weakly protected in Portugal between 1870 and 1910. By complementing his statistical analysis with a historical narrative, he argues that the relative high cost of credit observed cannot be attributed to flaws in the architecture of the Portuguese legal system. At root, the problem lies with political meddling with the judiciary and the appointment of judges based on political favoritism.

The Long-Term Evolution of Legal Arrangements

In Chapter 7, Anand Swamy?s insightful survey on land law in colonial India reflects the difficulties of promoting legal and economic development in traditional agrarian societies. In the late 1700s, the East India Company introduced a system of civil courts in Bengal with the belief that secure property rights would promote investment and growth. Over time, however, the colonists became increasingly worried that the court system, with its greater formalism and costs of access, might have disadvantaged poorer segments of society at a time when peasant demand for dispute resolution was rising due to the commercialization of agriculture. After the Mutiny of 1853, measures were readily adopted to curb the transfer of land. Ironically, concludes the author, ?at the height of its power, the colonial state was more fearful of market forces than at its insecure beginning.?

Akin to the situation in Colonial India, the judicial process in imperial China also placed much emphasis on the maintenance of social order. Mio Kishimoto points out in Chapter 4 that the imperial state in China saw the protection of private property rights as a means to reduce social tensions, not as an end in itself. An example used to illustrate the point was the imperial state?s willingness to tolerate the widespread custom of ?two masters to a land.? The custom weakened the rights of landowners by prohibiting them from replacing tenants at will and allowing a tenant to transfer cultivation rights without the landowner?s consent.

Kishimoto?s analysis is complemented by Harriet Zurndorfer?s case study (Chapter 5) on property litigation in sixteenth-century Huizhou (Anhui, China). The chapter discusses how population and commercial growth drove an increase in litigation and how the Chinese state and society coped with it.

Chapter 9, by Toru Miura, presents rich historical details on how legal institutions functioned in the Islamic Middle East. Miura highlights several unique features of the Islamic judicial system, including an emphasis on individual ownership, the reliance on oral testimonials instead of written documentation, and the role of the Islamic qadi as a mediator instead of a judge. Through a careful examination of the actual operation of the court, he shows that the Islamic court was far less arbitrary than commonly perceived.

The Transmission of Legal Institutions

The subject of institutional transmission features prominently in Chapters 6, 11, and 12, by Tirthankar Roy, Jessica Dijkman and Oscar Gelderblom, respectively. Roy traces the evolution of law in India between 1600 and 1900. Particular attention is paid to the way British colonial legislators, driven by a desire to secure the acquiescence of powerful communities to British rule, introduced the procedures of the common law system into India while preserving the content of India?s indigenous law. The result, however, was not a happy one. As multiple legal codes arose to reflect the diversity of the Indian society, the judicial process became unnecessarily costly in time and money. As Roy puts it, the colonial legal system was a ?monstrously inefficient hybrid.?

Dijkman?s chapter sets out to understand whether the development of debt litigation institutions in Holland between 1200 and 1350 led to its strong economic growth after 1350. She points out that many of the legal procedures for debt recovery used in medieval Holland were likely to be imports from the southern Low Countries. But unlike the case in colonial India, institutional transplantation worked well in medieval Holland. Dijkman?s analysis suggests that preexisting institutional similarities between the innovator and the follower matters. The towns of Holland could easily adopt innovations made by its neighbors because in most cases, doing so would require only modifying an existing institution rather than creating a new one.

In Chapter 12, Gelderblom surveys the institutions used by long-distance traders in Bruges, Antwerp, and Amsterdam between 1250 and 1650 to resolve disputes among themselves. He discusses how trade expansion led to the rise of consular courts in Bruges and Antwerp, and subsequently how, as business practices converged and local judges became more competent in adjudicating disputes among foreign merchants, local courts developed into the preeminent third party enforcer of contracts in the Low Countries.

Two British Institutions

Two chapters on Britain, one by Larry Neal on the London Stock Exchange and the other by Dan Bogart on the use of juries to approve infrastructural projects, conclude the volume. In Chapter 14, Neal describes the image of the pre-WWI London Stock Exchange as an entirely self-regulating entity as an ?illusion.? He argues that the exchange operated under the ?ever-present threat that the authorities could sanction the creation of a competing exchange,? and it was this fear of additional legislation that helped prevent the exchange from imposing self-interested restrictions on competition and innovation.

In the final chapter, Dan Bogart studies the link between British legal institutions and infrastructural development. After the Glorious Revolution, parliamentary acts gave juries, whose members often came from the landowning class, the authority to determine compensation for infrastructural projects such as roads, canals, and railways. Bogart finds empirical evidence showing that jury decisions were biased in favor of landowners. He warns, however, against taking the study as conclusive by pointing out that in pre-revolutionary France, infrastructural projects could take decades to receive the green light from the courts. By comparison, the system of juries, which often needed only a few months to reach a decision, could be more of a catalyst than an impediment to innovation.

Tuan-Hwee Sng is Assistant Professor of Economics at the National University of Singapore. He received his Ph.D. in economics from Northwestern University in 2011. His doctoral research has focused on the effects of geographic size on taxation and the quality of governance in Qing China and Tokugawa Japan, 1650-1850.

Copyright (c) 2012 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator (administrator@eh.net). Published by EH.Net (June 2012). All EH.Net reviews are archived at http://www.eh.net/BookReview.

Subject(s):Economywide Country Studies and Comparative History
Government, Law and Regulation, Public Finance
Geographic Area(s):Asia
Europe
Time Period(s):Medieval
16th Century
17th Century
18th Century
19th Century
20th Century: Pre WWII

Parasites, Pathogens, and Progress: Diseases and Economic Development

Author(s):McGuire, Robert A.
Coelho, Philip R. P.
Reviewer(s):Murray, John E.

Published by EH.Net (May 2012)

Robert A. McGuire and Philip R. P. Coelho, Parasites, Pathogens, and Progress: Diseases and Economic Development.? Cambridge, MA: MIT Press, 2011. viii + 343 pp. $30 (hardcover), ISBN: 978-0-262-01566-0.

Reviewed for EH.Net by John E. Murray, Department of Economics, Rhodes College.

An old saw proposes that holding a hammer makes everything look like a nail.? When Robert McGuire and Philip Coelho suggest (p. 5) that Jared Diamond?s bestseller (1997) should have been titled Germs, Germs, and Germs, the reader may think that the authors carry not a hammer but a microscope.? Everywhere in this history, germs appear as the critical and virtually only influence on economic development.? By the end the reader better understands microbes in American history, but may still wonder if natural resource endowments, property rights and contract law, accumulating human capital, and flexible markets played a role as well.

Parasites, Pathogens, and Progress synthesizes a considerable literature on infectious disease and U.S. economic history, particularly before 1900.? On the purely economic side, a set of verbal and flowchart models of economic growth stress connections between ever greater population density and increasing infectious disease rates.? These connections, they argue, counterbalance better known Smithian growth models in which increasing density leads to the division of labor and Malthusian anti-growth models in which increasing density leads to food shortages.? Traditionally in neither of these stories do infectious diseases play much of a role.? This book aims to fix that omission.? The authors write (p. 6), ?We do not claim that we are the first to bring parasites and pathogens into the history of humanity and the economy, but we do so with emphasis and conviction that are missing in other histories.?? Here is truth in advertising.? Readers familiar with the work of world historians such as William McNeill, Philip Curtin, or Alfred Crosby, or historians of medicine such as Kenneth Kiple, Todd Savitt, or Margaret Humphreys will find little new here.? The same disease agents, transmission processes, and racial differentials appear in this book as in the works of those historians.? To these factors the authors attribute monocausal explanatory power with iron single-mindedness.

Disease in economic development (or stagnation) is fascinating, and this book brings out much of that inherent interest, but with little subtlety.? Much of the authors? case moves forward without reference to work of previous historians.? Concerning European contact with the New World, they write (p. 33), ?The assumptions that the biological environment is unchanging and that the ecology is exogenous to human actions are spectacularly incorrect.?? But after McNeill?s Plagues and Peoples (1976) and Crosby?s Ecological Imperialism (1986), very few scholars believe in a static global disease environment.? The idea that disease might explain some of a historical episode rather than all of it generally is absent.? Two pages concern the irresistible Antebellum Paradox of declining adult heights and life expectancies in an era of increasing per capita incomes.? Expanding transportation networks integrated local, and then regional, and then national disease pools.? The authors conclude, ?The deteriorating disease environment affected the biological standard of living and, as a result, average heights fell? (p. 53).? Full stop.? But no scholar doubts that disease mattered, and most try to account for its influences.? Despite the strongly worded conclusion, no evidence supports their absolute attribution, nor can the authors rule out the explanatory power of trends in pork production, income distribution, infant mortality, and urbanization.? The publication with the best evidence for the transport-disease connection (Haines, Craig, and Weiss 2003) is not cited in this book.

The bulk of the book is given over to the importance of infectious disease, primarily malaria, in determining that the labor force in the South would be drawn from African slaves rather than bound Europeans or Indians.? The authors cast their story of racial differentials in malaria susceptibility against Kenneth Stampp?s claim in The Peculiar Institution (1956) that Africans, Europeans, and their descendants were equally vulnerable to Plasmodium.? In contrast, write McGuire and Coelho, a sound scientific literature has arisen that attributes differential mortality rates by race to physiological differences such as the presence or absence of sickle cells or the Duffy antigen.? This discussion, in Chapter 6, is clearly presented, even in its technical parts, as well as engaging and informative.? But it is a bit beside the point because the hypothesis of differential malaria susceptibility and its consequences for our history is widely accepted by historians.? As a typical example, Humphreys concluded ten years ago in her Malaria (2001, p. 28; not cited in this book), ?While no simple cause and effect can be directly established, and other diseases such as yellow fever certainly played their part, it can at least be concluded that malaria had a substantial impact on labor and settlement patterns in the American colonies, patterns that would ultimately lead to the Civil War.?

The authors occasionally succumb to the temptation to let inferences from their model replace historical evidence.? Here are two examples.? First, on the transition from temporarily-bound Europeans to permanently-bound Africans:? The authors describe a process of natural selection in favor of relative resistance of white people to cold weather diseases and of black people to hot weather diseases, which more or less accords with the scientific literature.? ?As a result,? they write (p. 100), ?there is (sic) an increase in the migration of European indentured servants? to the northern colonies.? To explain the absence of evidence for this claim, they note (p. 100) that ?reliable data for indentured servants bound for New England are not available.?? They seem unaware that the lack of such data, reliable or otherwise, was due to the tendency of indentured servants to avoid New England in the first place, contrary to the conclusions of the authors? model.? A second example concerns antebellum medical practice.? With no reference to its price, they assert (p. 161) that planters could afford quinine for their slaves, that a sufficient quantity of quinine to stem a malarial episode was cheaper than replacing a slave (almost certainly true), and there they stop.? Did planters actually provide quinine to their slaves?? We know from a standard work, Savitt?s Medicine and Slavery (1981, p. 155; not cited in this book), that in fact quinine was widely used on plantations.? A simple citation to Savitt?s findings would have completed their argument.

Disease has played an important role in American history, and the number of historians who think so are greater than this book seems to assume.? If infectious disease might have been overlooked at some point in the historiography, this book will help gain greater attention for its multifaceted influences.? Still, it would have helped the authors? case if they had contented themselves with nominating parasites and pathogens to join the ranks of relevant subjects for historical study, rather than asserting their near-exclusive primacy.

References:

Crosby, Alfred. Ecological Imperialism: The Biological Expansion of Europe, 900-1900. New York: Cambridge University Press, 1986.

Diamond, Jared. Guns, Germs, and Steel: The Fates of Human Societies. New York: W.W. Norton, 1997.

Haines, Michael, Lee Craig, and Thomas Weiss.? ?The Short and the Dead: Nutrition, Mortality, and the ?Antebellum Puzzle? in the United States,? Journal of Economic History 63 (2003): 382-413.

Humphreys, Margaret. Malaria: Poverty, Race, and Public Health in the United States.? Baltimore: Johns Hopkins University Press, 2001.

McNeill, William. Plagues and Peoples. New York: Anchor Press, 1976.

Savitt, Todd L. Medicine and Slavery: The Diseases and Health Care of Blacks in Antebellum Virginia.? Urbana: University of Illinois Press, 1978.

Stampp, Kenneth. The Peculiar Institution: Slavery in the Ante-Bellum South. New York: Vintage Books, 1956.

John E. Murray is Joseph R. Hyde III Professor of Political Economy at Rhodes College in Memphis, Tennessee.? His next book, The Charleston Orphan House: Children?s Lives in the First Public Orphanage in America, will be published by the University of Chicago in early 2013.

Copyright (c) 2012 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator (administrator@eh.net). Published by EH.Net (May 2012). All EH.Net reviews are archived at http://www.eh.net/BookReview.

Subject(s):Economic Development, Growth, and Aggregate Productivity
Servitude and Slavery
Living Standards, Anthropometric History, Economic Anthropology
Geographic Area(s):North America
Time Period(s):17th Century
18th Century
19th Century

Locating the Industrial Revolution: Inducement and Response

Author(s):Jones, Eric L.
Reviewer(s):Bogart, Dan

Published by EH.NET (December 2011)

Eric L. Jones, Locating the Industrial Revolution: Inducement and Response. Singapore: World Scientific, 2010. vii + 272 pp. $68 (hardcover), ISBN: 978-981-4295-25-3.

Reviewed for EH.Net by Dan Bogart, Department of Economics, University of California — Irvine.

The Industrial Revolution is often modeled as a national or continental phenomenon.? The most common questions are why did Britain industrialize first and not France, or why Europe and not Asia? However, there is a case to be made that the Industrial Revolution was a regional phenomenon. Here the classic question is why did northern England industrialize and southern England not. Southern England was more densely populated and had significant manufacturing ca.1700. Its de-industrialization poses a puzzle.??

Eric Jones?s most recent book, Locating the Industrial Revolution, studies the British Industrial Revolution from the perspective of the north-south divide. One of its main arguments is that pre-railway transport improvements led to more integrated product and factor markets within England and that once trade costs declined industry began to concentrate in the North and leave the South. The northward shift in manufacturing was gradual and out-migration from the South too slow to maintain southern living standards by the mid-nineteenth century.? Industrialization was painful for some in southern England.? A key question is whether the North had an initial comparative advantage in manufacturing because of natural resource advantages. Jones argues that endowments like coal did not decidedly favor the North. The argument is three-fold. First, the South had some natural resources, like timber. Second, it could have imported the resources it did not have, especially once transport costs declined. Third, southern decline included industries that did not use coal, including consumer goods industries. Although doubts are raised about the significance of coal, Jones does not put the argument entirely to rest. For some industries, like iron production, the North must have had a comparative advantage. It is possible that once these coal-using industries became concentrated in the North, firms in other industries found it economical to locate nearby. Thus there may have been little southern manufacturers could have done to stem the northward shift in industry. The key issue is whether location of workers in all sectors, including consumer goods, was largely dependent on endowments or whether other factors, like business practices, mattered too. In my opinion, the issue needs to be settled with fresh data and econometric techniques.

Jones offers an alternative theory — that southerners failed to ?respond? to northern competition, noting a lack of dynamism in its manufacturing sector. The reasons for its sluggishness are not made entirely clear.? Culture and institutions are referenced as being important factors in the industrial revolution as a national phenomenon, but they are not shown to have a bearing on the regional divergence.? For instance, Jones gives a critique of the landowning class, emphasizing their predilection for fox-hunting, conspicuous consumption, and bullying of the poor. While there is no denying that some landowners had these characteristics, it is not clear that southerners expressed them more than northerners. Perhaps what is most crucial is the relative size of the landowning class in the South. Pursuing the issue further it is not clear that blood sports and the peculiar social practices of landowners were growth retarding during early industrialization, no matter how repugnant they are to modern sensibilities. Jones argues that blood sports absorbed too much of the energy and capital of southern landowners. That may be true, but one could also argue that Britain?s landowning class played some role in propelling industrialization. They did provide much of the capital for transport improvements after all.

Borough and guild resistance to innovation is another classical explanation for southerners? failure to respond. Jones gives the example of the Exeter Weavers Company increasing its enforcement of anti-competitive practices as northern competition intensified. Although guilds are not the main focus of the book, they do raise some interesting questions for the north-south divergence. Perhaps there were some key differences in industrial practices within Britain, as there were across countries.

Transport improvements are an engine of change in Jones?s analysis. Infrastructure improvements in rivers, roads, and canals were indeed significant from 1700 to 1830. Equally important, there were technological changes in carriages and road-building and improvements in the structuring of transport firms.? The end results were a large decline in transport costs within road transport and large transport cost savings from shifting to canals and rivers. As one goes deeper there are some complications however. First, we lack estimates of the effects of transport improvements on industrial location or occupation in pre-railway Britain. Second, there is often an implicit assumption that transport changes were equal within the North and South. This may be incorrect. The North had more canals than the South and there is some evidence that southern counties spent less maintaining and improving local roads compared to northern counties. Intra-regional transport advantages could explain why the north was more responsive to the opportunities provided by a unified national market.

Jones has an interesting chapter relating to current debates about the differential fertility of the upper class. Greg Clark has argued that the rich in Britain had more children and were carriers of preferences more favorable to work and thrift.? Jones uses a study of his own ancestry to illustrate that the downwardly mobile tended to have fewer children. Some of the poorer members of the surrounding community also turned to criminal behavior.? The intention of the case study is not to settle the debate about fertility patterns and their implications for preferences, but rather to add some illustrations to the statistical abstractions offered in other studies.

Overall, Locating the Industrial Revolution is a welcome contribution to the literature. Most importantly, it incorporates and emphasizes spatial analysis in studying the industrial revolution. Those interested in the sources of industrial success will profit from its reading.

Dan Bogart has recently written ?Did the Glorious Revolution Contribute to the Transport Revolution? Evidence from Investment in Roads and Rivers,? Economic History Review (November 2011), as well as other work on Britain?s transport development during industrialization.

Copyright (c) 2011 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator (administrator@eh.net). Published by EH.Net (December 2011). All EH.Net reviews are archived at http://www.eh.net/BookReview.

Subject(s):Economic Development, Growth, and Aggregate Productivity
Industry: Manufacturing and Construction
Urban and Regional History
Geographic Area(s):Europe
Time Period(s):18th Century
19th Century

The Haves and the Have-Nots: A Brief and Idiosyncratic History of Global Inequality

Author(s):Milanovic, Branko
Reviewer(s):Maloney, Thomas N.

Published by EH.NET (December 2011)

Branko Milanovic, The Haves and the Have-Nots: A Brief and Idiosyncratic History of Global Inequality. New York: Basic Books, 2011. xiv + 258 pp. $28 (hardcover), ISBN: 978-0-465-01974-8.

Reviewed for EH.Net by Thomas N. Maloney, Department of Economics, University of Utah.?

With the emergence of the ?Occupy? movement in the Fall of 2011, the issue of income inequality has gained an unusually prominent place in the political conversation in the United States.? The discussion of inequality has always been present to some degree, especially during the past 30 years or so as inequality has grown by a variety of measures.? Still, the American public lately appears to be engaged with issues of distribution in a newly vigorous, if not always rigorous, way.

Branko Milanovic?s ?idiosyncratic history of global inequality? has thus appeared at a propitious moment.? In this book, Milanovic (an economist at the University of Maryland and the World Bank) combines three primary essays on income inequality with a series of brief ?vignettes? designed to illustrate and expand on some of the issues raised in the primary essays.? This structure is perhaps not best suited to a straight read-through but rather invites some ?grazing? by the reader, so that someone attracted to a five-page piece entitled ?Who Was the Richest Person Ever?? might become curious enough to take on the more meaty material.? The book is not aimed primarily at those with a professional background in these topics, though it might provide a few new insights even for them, and it will almost certainly provide some useful new examples for classroom discussion.

The first essay, ?Unequal People ? Inequality among Individuals within a Nation,? introduces various methods for measuring inequality across persons or households within a nation and documents long-run changes in these measures.? It also briefly examines the effect of growth on inequality as well as the effect of inequality on growth.? In addition, it provides a provocative discussion of the relationship between inequality and well-being and about what degree of inequality (if any) is harmful enough to justify some intervention by government. Here, Milanovic draws on the work of Atkinson, Edgeworth, Sen, Pareto, and Rawls.

The second essay, ?Unequal Nations ? Inequality Among Countries in the World,? shifts the focus to differences between average incomes, or between overall income distributions, across political entities.? Again, Milanovic attempts to provide some intuition about important aspects of measurement, here devoting a good deal of discussion to the meaning of ?purchasing power parity.?? He then documents broad increases in inequality between nations and considers why this increasing divergence has occurred in the face of greater global economic integration, which might be expected to produce some convergence in incomes.

The final essay, ?Unequal World ? Inequality among Citizens in the World,? treats the population of the globe as one income distribution and examines changes in that distribution over time.? The historical window of observation here is much more limited than in the first two essays, as individual or household level income data for a range of countries sufficient for examining the global distribution have been available only since the 1980s.? Milanovic argues that inequality by this ?global individual distribution? measure probably has not changed much over the past 30 years because broad increases in between- country and within-country inequality have been offset by income growth in India and China (which weigh heavily in the global distribution).?

Each of these three essays is followed by several short ?vignettes? which are used mainly to illustrate concepts introduced in the longer essays.? Some of these are relatively breezy ? for instance, Vignette 1.1, ?Romance and Riches,? tries to place the characters from Jane Austen?s Pride and Prejudice into the late twentieth century income distribution.? Others take on weightier topics (e.g., Vignette 2.7, ?Did the World Become More Unequal during Deglobalization??).? Despite this variety, there are some common themes that run through several of these short pieces and the longer essays.

One recurring theme considers how we define inequality, why we care about it, and how those definitions and priorities change over time.? While Ricardo and Marx discussed income distribution mainly in terms of aggregate shares flowing to different classes (landowners, capitalists, and workers), the advent of marginalism, along with the development of individual- and household-level social statistics, shifted attention to these smaller units and away from sectoral or class aggregates.? Inequality between nations was not of much interest prior to the industrial revolution, when average incomes were fairly near subsistence in most countries and so variation in averages across countries was rather limited.? Industrialization and unprecedented rates of growth in some countries widened these gaps considerably and prompted questions about the sources of these aggregate differences.? The study of a global individual-level distribution is dependent both on the development of individual-level statistics in a sufficient number of countries and also on the process of globalization itself, which exposes people to conditions in a greater variety of places and provokes curiosity about the scale and sources of individual-level income differences across the globe.

A second recurring theme is the growing importance of geographic dimensions of inequality, both within and between countries, and the potential consequences of this phenomenon.? In Vignette 1.8, Milanovic describes how substantial differences in mean incomes across regions in the USSR and in Yugoslavia generated political tensions which made it harder to hold those countries together.? He draws lessons from this history in speculating about the potential future of China in Vignette 1.9 and of the European Union in Vignette 3.3.?? He also focuses (in Vignette 2.4) on growing geographic differences in mean incomes as a source of large and challenging migration flows, especially in places where nations with very different mean incomes are physically proximate, as in the cases of the U.S. and Mexico, Albania and Greece, Indonesia and Malaysia, and Morocco and Spain.

In his preface, Milanovic says that he is concerned that public discussion of inequality is often stifled by invoking the notion that it is the ?natural? outcome of ?the market? and so cannot be usefully questioned or altered.? Given that concern, it is somewhat surprising that there is little detailed examination of the causes of inequality in this brief book.? The focus instead is on documentation of the broad patterns, along with a very engaging discussion of what various thinkers have said about the moral and ethical dimensions of inequality.? Milanovic does provide a lengthy list of suggested readings which should allow those interested to examine the causes of inequality in greater detail on their own.

The Haves and the Have-Nots is an enjoyable read which helps us see the ubiquitous phenomenon of inequality in new ways.? It is generally quite accessible and could be used as a supplementary text in courses on labor economics or on income distribution, though some students will require guidance through the more technical sections.

Thomas N. Maloney is Professor and Chair in the Department of Economics and Director of the Barbara L. and Norman C. Tanner Center for Nonviolent Human Rights Advocacy at the University of Utah.? He is the co-author, along with Nathaniel Cline, of ?Inequality in Economic History,? forthcoming in R. Whaples and R. Parker, editors, The Routledge Handbook of Modern Economic History.

Copyright (c) 2011 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator (administrator@eh.net). Published by EH.Net (December 2011). All EH.Net reviews are archived at http://www.eh.net/BookReview.

Subject(s):Income and Wealth
Geographic Area(s):General, International, or Comparative
Time Period(s):General or Comparative

Getting Better: Why Global Development Is Succeeding and How We Can Improve the World Even More

Author(s):Kenny, Charles
Reviewer(s):Garces-Voisenat, Juan-Pedro

Published by EH.NET (June 2011)

Charles Kenny, Getting Better: Why Global Development Is Succeeding and How We Can Improve the World Even More. New York: Basic Books, 2011. x + 246 pp. $27 (hardcover), ISBN: 978-0-465-02015-7.

Reviewed for EH.Net by Juan-Pedro Garces-Voisenat, Department of Economics, Wake Forest University.

What is human progress about? If well-being could be measured simply by average income per person, this book could well be titled ?Getting Richer.? It is quite clear that the last two centuries have seen a widespread increase in income per capita across the globe, as has been well documented by Angus Maddison (2001) among others. Even the poorest countries? — with some notable exceptions — have managed to improve, however slowly, in this indicator. But the main point of Charles Kenny in his book is that improvements in the quality of life have surpassed the increase in income by far, particularly in poor countries. Advances in infant mortality, school enrollment, life expectancy and communications are taken almost for granted in developing countries with relatively low income per capita, but they show a level that could have not even been imagined by the currently rich countries back when they had that same income per capita, as Kenny points out.

So what is the cause for the worldwide outcry about poverty nowadays? Kenny seems to find it somewhat unjustified, even though he realizes that they are referring basically to relatively low income in poor countries. And this is the main reason for the universal concern: the income gap between rich and poor countries has been widening in recent decades. It is worth noting that this has happened mainly because the rich have got extremely rich, while the poorer ones have not managed to grow at the same pace. If you add to that the fact that modern communications have made the reality of poor countries more accessible to the general public, then the circle is complete. People all over the world have opened their eyes to the reality of poverty in less materially advanced countries. In ages past, the disparity in global standards of living was simply unknown and unheard of for the common people.

It is this focus on income that Kenny finds misleading. Income cannot account for many components of the standard of living, starting with those that are provided by public services (health, education, etc.). Is the author?s argument something novel in the literature? Not really. Almost thirty years ago, Amartya Sen (1983) had already written about this misleading focus, when he introduced his capabilities approach to development, which would later serve as a basis for the design of the Human Development Index of the United Nations Development Program. The novelty of Kenny?s book is its factual character. All his arguments are backed by facts about the development experience of different countries. And this gives the book a certain liveliness which you rarely find in works about economic development.

In the first three chapters of the book, Kenny establishes the premises of his argument. He abounds on observations of the real world — especially developing countries — that tend to confirm the astonishing progress in standards of living throughout the world over the last century and a half or so; for example, some readers might be surprised to learn that life expectancy was lower in many countries of western Europe just over a century ago than it is today in most African countries. Kenny argues that this progress is due to the rapid spread of technologies and ideas. But he has to admit that, contrary to what could have been expected from the traditional Solow model of growth, there has been divergence in income per capita among rich and poor countries. There are many factors that could explain this, among which the difficult diffusion of process technologies — which greatly affect productivity — is one that particularly prevents convergence.

Chapters 4, 5 and 6 are devoted to showing how the countries of the world are converging in every aspect of modern life but income. The ?good news? announced by Kenny is that the world has escaped the Malthusian trap of overpopulation. Rapid technological advance and diffusion have overcome the trap. If there is any constraint that modern civilization faces, adds the author, it is not given by the carrying capacity of the Earth (which he estimates rather whimsically at a little over 13 billion people) but rather by the consumption patterns of the more affluent societies. He sounds particularly witty in his message to social planners: ?Sterilize the world?s billionaires first, then move on to a one-child policy for Switzerland, Luxembourg and the United States? (p. 67). As for Africa, there is a trap, but it is a trap of institutional history, not of overpopulation.

Kenny has yet ?better news? to announce; levels of education and health are converging around the world; political and civil rights are converging; everything that matters for quality of life is being driven to convergence in the steady state of the Kenny model, where the equation of motion describes the effective growth (generation and diffusion) of technology and ideas, to put it –loosely speaking — in a Solow-model framework. Income is neither an endogenous nor an exogenous variable in this model, because ?the best things in life are cheap? (p. 93). And this is the ?great news?: income is not a necessary condition to achieve a high quality of life. There doesn?t seem to be a causal relation from growth in income to improvements in basic education and health, nor to an increase in civil and political rights, and not even to subjective happiness, according to modern surveys. The message is clear and hopeful: the patterns of consumption and pollution of richer countries are not the only way –not even the most desirable way — to ensure quality of life.

The rest of the book deals with policy recommendations to maintain the progress in quality of life for developing countries. Even though Kenny is, no doubt, a friend of the free market, he is not to be confused with a libertarian. He flirts with the idea that a big government might be a good thing for poor countries if it provides the basic services in health, education and those necessary to achieve full civil participation in society. And even though — according to him — convergence in quality of life seems almost guaranteed in our world today, there is still room for a policy agenda. In Kenny?s view, the government should be a provider of public goods, a facilitator of the diffusion of technology and ideas, an educator (through modern means of communication) and a protector of civil liberties.

Finally, the author tackles the issue of the responsibility of rich countries in the task of development. He espouses neither the view of Easterly (2006) — that foreign aid to poor countries does more harm than good — nor that of Sachs (2005) — who proposes a sort of gigantic bailout of poor countries by rich ones to achieve a messianic ?end of poverty.? For Kenny, aid can be helpful and efficient if delivered to small local communities rather than to national governments, especially when these lack the support of solid institutions. Aid should also be directed to specific projects of quality-of-life improvement. One specific way in which richer countries could help is to allow worker immigration from poor countries; the author presents some evidence of the benefits of such policy. One should add that such a policy is not only of help for poor countries but also very beneficial for the richer ones, which experience an acute ageing of their populations.

At the end of this book, the lay reader might wonder in a state of confusion: What is development? From an intellectual point of view, the book has presented a thesis and an antithesis, for which it has provided ample evidence. But it seems to lack a synthesis. Perhaps the purpose of the author is to stimulate the search for that synthesis. But it is more likely that he knows the job is already done. One feels inclined to paraphrase Sen in stating that development is basically freedom; freedom from material poverty, freedom from hunger, freedom from marginalization, freedom from harassment and freedom to be able to live a full life, one that satiates the most profound aspirations of the human soul. Quality of life might be a step in the right direction, provided it is not sold to poor countries as a package of predetermined patterns of consumption, as Kenny rightly warns us against.

All in all, Kenny?s work is a balanced and fair view of the state of development in the world at the beginning of the twenty-first century. It is by no means a blind proclamation of the inevitable advent of terrestrial bliss. The author clearly states that there are many areas of development policy that need to be mended, not least those that impinge on the unequal distribution of world income. He is also conscious of the fact that the use of resources in the process of development requires some policy guidance and strict rules when the market is not able to solve the problems created by externalities, as it happens with global warming. But the central message remains a powerful and hopeful one: ?The success of development has been to reduce the cost and to spread the reach of the good life? (p. 111). May we enjoy it.

References:

Easterly, W. (2006), The White Man?s Burden: Why the West?s Efforts to Aid the Rest Have Done So Much Ill and So Little Good, New York: Penguin Press.

Maddison, A. (2001), The World Economy: A Millennial Perspective, Paris: OECD.

Sachs, J. (2005), The End of Poverty: Economic Possibilities for Our Time, New York: Penguin Press.

Sen, A. (1983). ?Development: Which Way Now?? Economic Journal, Vol. 93, Issue 372: 745-62

Juan-Pedro Garces-Voisenat is Visiting Assistant Professor of Economics at Wake Forest University.?? His most recent research explores the influence of education on institutional development and the measurement of the quality of education in developing countries, with particular reference to South America.? Email: garcesj@wfu.edu

Copyright (c) 2011 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator (administrator@eh.net). Published by EH.Net (June 2011). All EH.Net reviews are archived at http://www.eh.net/BookReview.

Subject(s):Economic Development, Growth, and Aggregate Productivity
Living Standards, Anthropometric History, Economic Anthropology
Geographic Area(s):General, International, or Comparative
Time Period(s):20th Century: WWII and post-WWII