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Centuries of Child Labour: European Experiences from the Seventeenth to the Twentieth Century

Author(s):Rahikainen, Marjatta
Reviewer(s):Tuttle, Carolyn

Published by EH.NET (November 2005)

Marjatta Rahikainen, Centuries of Child Labour: European Experiences from the Seventeenth to the Twentieth Century. Hampshire, UK: Ashgate, 2004. ix + 272 pp. $90 (hardcover), ISBN: 0-7546-0498-5.

Reviewed for EH.NET by Carolyn Tuttle, Department of Economics, Lake Forest College.

The debate over the persistence of child labor from the medieval era to the turn of the twentieth century is extended beyond Great Britain and the United States to include many other countries. The extent, significance and degree of exploitation of child labor is examined in Great Britain, France, Italy, Spain, Russia, Germany, Norway, Sweden, the Netherlands, and Denmark in this work. The extensive cross-country approach clarifies the many similarities in the nature of child labor while also highlighting important differences. Although the book is mainly a summary of existing literature, the synthesis places it into a framework which successfully supports the argument that child labor was primarily demand driven. The book’s original contribution to the literature is contained in the sections in each chapter which describe and quantify the use of child labor in Finland. Marjatta Rahikainen, a professor at the University of Helsinki in Finland, uncovered and translated letters and diaries of poor and working-class families to capture the type of work children did as well as their working conditions in the late nineteenth century. In addition, Rahikainen utilized international data bases containing the Population Census and Manufacturing Census of Finland, Italy, Germany, France, Russia and Great Britain.

Centuries of Child Labour focuses on the argument that the employment of children across countries was a demand-driven phenomenon. Demand increased during the pre-industrial and industrial phase of economic development which reduced children’s participation in education. Once the production processes of industrialization moved from labor intensive to capital intensive, the demand for children declined and education became a viable option. Rahikainen carefully integrates evidence from a variety of sources to support this argument. The belief that idle children are immoral children who will adopt deviant behavior and commit crimes was widespread in Europe. This lead to a social policy of putting orphaned and pauper children to work in French hopitaux, in English Hospitals or Workhouses, Danish Bornehus, Swedish barnhus, and Russian state-sponsored hospitals (pp. 24-30). This paved the way for poor and working-class families to send their children to work in the new factories, mills and mines. Particularly convincing evidence is contained in Tables 4.1-4.3 (pp. 133-135) which illustrate that the largest employers of children in all of the countries were the same — textiles, clothing/hosiery/footwear, tobacco, pottery, glassworks and mining. The fact that the employment of children was concentrated in a few industries and that these industries were very important to the economy of each country implies that there was something special or different about these industries that required the labor of children. In addition, children were cheap labor that allowed factory owners and miners to reap high profits. And despite being paid much less than adults, the money children brought home to their families made an essential contribution to the families’ survival. This explains why poor and working-class parents often ignored child labor and schooling laws, the opportunity cost of having their children at school was too high. Less convincing is the claim that children had the lowest productivity of all workers but were still hired because “children’s employers were more concerned about labour costs than about productivity” (p. 90). Unfortunately, this research asserts this claim for every type of work children did — ranging from picking weeds on the farm to spinning cotton thread in the factory — without offering any substantial evidence. Given the profit-maximizing behavior of producers, it is unlikely that employers would hire workers whose wage exceeded their value to the firm (productivity).

In analyzing the employment of children in every sector of the economy from the early seventeenth century to the early twentieth century, three very interesting conclusions emerge. The similarities across countries over the four centuries are: (1) “child labour has been strongly connected to adult workers’ freedom to choose their work”; (2) “the forms of child labour and the terms of employment seem to have anticipated changes in adult labour and the labor market”; and (3) “child labour has been closely connected to the lives and options of children who never worked, in other words middle-class and upper-class children” (p. 16). It becomes quickly apparent in Chapters 1-5 that children got the jobs no one else wanted — whether it was in war, in workhouses, in textile factories, in other people’s homes (as servants or apprentices), on the farm or street. Most adults who had worked independently in their cottage or on their farm were extremely reluctant to give up their craft or trade to work for someone else at a pace determined by a factory clock. The new industrial regimen required workers to follow orders, work long days with set recesses, and perform monotonous repetitive tasks. Consequently, children who were obedient to authority, dependent on their parents and energetic would be well suited to fill the growing demand for “industrious” workers. Secondly, children worked where they were needed and often filled the shoes of adult workers. Children began work as soon as they were able to walk and as they aged, they developed from unskilled assistants to laborers to skilled operators. It is clear from the many examples of child labor in this research, that the availability of poor and working-class children prevented bottlenecks from developing. This was particularly important because children were employed in the same industries in Russia, Germany, Italy and Finland as they were in Great Britain and the United States. Most of the industries which used child labor extensively — textiles, glassworks, earthenware, paper and mining — were the “leading industries” for industrialization. Thirdly, children from orphanages, workhouses, or poor families toiled all day so that children from middle-class and upper-class families could play and get an education. Experiencing a childhood was a privilege afforded only to the wealthy and landed classes, while the children of the lower classes made a premature transition into adulthood.

This research fills a void in the literature on the use of child labor across time and across continents. There is a plethora of research on the importance of child labor during the Industrial Revolution in Great Britain. Less has been written on France, Italy, and Germany. There is a dearth of research on the employment of children in Prussia and the Scandinavian countries. This book addresses the critical issues regarding the where and why of child labor by comparing and contrasting the economic and political circumstances in all of these countries. In addition, rather than simply focusing on factory labor, this research describes the employment of children in all sectors of the economy — the military, workhouses, cottage industry, farming, textile factories, coal mines, metal mines, tobacco, glassworks, pottery, brick-making, match manufacturing, street vending, workshops, and homes. The one drawback to covering so much is that each case cannot be investigated individually and discussed in detail. Consequently, the comparisons are only valid if the secondary literature from which they are drawn is accurate. Checking the assumptions, methodology and empirical estimations of each secondary source is beyond the scope of the reader but should be within the realm of the author.

As a history of child labor over four decades, labor historians, social historians, and economic historians will find this an excellent overview of the reasons why children worked and where they spent the bulk of their childhood.

Carolyn Tuttle is a Professor of Economics at Lake Forest College in Lake Forest, IL. She is currently completing a book about the Mexican women who work in maquiladoras for American-owned multinationals along the United States-Mexican border.

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

Tools of Progress: A German Merchant Family in Mexico, 1865-Present

Author(s):Buchenau, Jurgen
Reviewer(s):Francois, Marie

Published by EH.NET (April 2005)

Jurgen Buchenau, Tools of Progress: A German Merchant Family in Mexico, 1865-Present. Albuquerque: University of New Mexico Press, 2004. xi + 267 pp. $27.95 (paperback), ISBN: 0-8263-3088-6.

Reviewed for EH.NET by Marie Francois, Department of History, Auburn University.

The title of this book reflects in part the boom time for the German Boker family’s business enterprise during the positivist reign of Porfirio D?az (1876-1910), when Mexico experienced rapid liberal economic development. But the story starts earlier, when Robert Boker arrives as a “trade conquistador” to establish a hardware business during French rule under Maximilian, and continues through the 1990s. Jurgen Buchenau tells two parallel and interconnected stories in this engaging study. The first is about European immigration to Mexico, with the small German colony slowly transformed over a century and a half through accommodation, acculturation, and finally assimilation. The second story is about the changing political climates in which national and foreign entrepreneurs built, maintained, and sometimes lost their businesses in Mexico. While the Mexican climate for business ventures is the focus, German and worldwide political contexts were also important. This book is a successful marriage of elite family and business history which contributes an immigrant perspective to the literature which includes the studies by David Walker (1986) and Larissa Lomnitz and Marisol Perez-Lizaur (1987). The book also contributes to the growing literature on nineteenth- and twentieth-century Mexico City.

Buchenau, Associate Professor of History at the University of North Carolina in Charlotte, interprets this business immigrant family that identified as both Mexican and German through a framework of transnational theory. Building on his earlier work in diplomatic history, the author adeptly builds international relations into the story. He filters a wide range of sources through the concepts of diaspora, cross-cultural trade, cultural enclave, and hybrid identities, thus situating the book in world history literature. Diaspora here captures both thematic threads of the book — the dispersal of German families across the Atlantic, as well as the distribution of companies and goods in international trade. While primarily a book about doing business in Mexico in the past, readers will appreciate the pertinent background it offers to historicize today’s globalization trends, as the larger Boker family’s interests stretched across the Atlantic from Germany to Canada, the U.S., Mexico, and Argentina, and across the globe to Australia. Archival sources from Germany, Mexico, Great Britain and the United States are used in concert with company records, records from the German cultural institutions in Mexico City, and family sources. A member of the Boker family himself, Buchenau makes effective use of letters, diaries and photographs from family archives, with the richest material coming from extensive interviews with almost fifty members of the family. The book is organized into three parts. The first comprises two chapters covering the periods 1865-c. 1900 when the German family establish themselves in Mexico; the second has three chapters covering the family and its business during years of revolution in Mexico and world wars, c. 1900-1948; and the third consists of two chapters looking at the Bokers during the “Mexican Miracle” of the 1950-60s and its aftermath, c. 1948-present.

The immigration story chronicles the maintenance of German identity in family compounds, the development of German schools and clubs, the movement back and forth across the Atlantic between Germany and Mexico, changing socializing and marriage patterns, and the tracking of five generations of family diaspora in Mexico, the United States, Germany, and other parts of the world. Buchenau’s examination of the Colegio Al?man, which had Bokers on its board and in its classrooms, is particularly illuminating. The author distinguishes the Bokers from other foreign businessmen (Spanish merchants, French owners of department stores and textiles factories, Americans, and Chinese) as well as from other Germans. The small German colony was fairly unified in the nineteenth and early twentieth centuries, but the aftermath of World War II saw it splinter into at least five distinct communities along political and generational lines. This story is also situated comparatively in the Latin American immigration literature. Mexico was not a country that absorbed large numbers of immigrants, unlike the Southern Cone which absorbed hundreds of thousands of workers and refugees from Europe. Instead, Buchenau argues, Mexico experienced a “qualitative immigration” (p. 16) where a relatively few immigrants had a large impact. The Protestant German Bokers played key roles in the economy and occasionally politically, while practicing self-segregation socially from the Catholic Mexican mainstream. Not until the fourth generation did a few Bokers take Mexican spouses. With the separation of their Mexican business lives from their German private lives, the Boker women played to varying degrees a gendered role passing on German culture through language and lifestyle. The author successfully weaves emotions and perceptions into this analysis of cultural change as five generations of Boker men and women negotiated their relationship to both Mexico and Germany.

Taking a long view on the Boker hardware business, Buchenau highlights cycles in both the Mexican and world economy. The Casa Boker in the nineteenth century was the leading provider of imported tools, machinery, weapons, and household goods to a small modernizing middle class in Mexico City. By the twentieth century, the company found itself playing a declining role in the maturing consumer society. Into the twenty-first century, the Bokers are the “rearguard of globalization.” Challenging recent literature that emphasizes the role of U.S. capitalists in the modernization of Mexico, Buchenau argues that Europeans led the consumer revolution there. Without intermediaries such as the Bokers importing American goods along with European goods, American capitalism would not have had the reach it did in the late nineteenth century. This reviewer would have liked to have learned more about the merchandise sold by the early Casa Boker and the later Compa??a Ferretera Mexicana (Mexican Hardware Company, or CFM) which would allow a fuller look at the consumption contexts (such as domestic households, industrial arenas) of this business enterprise. Business historians will, nonetheless, find fascinating discussions and detailed examinations of business tactics and contrasting styles of successive generations of partners. The “kingly merchant”-minded German importers eschewed the emerging mass-marketing trends as consumption grew during the Porfiriato, sticking to their niche selling “inconspicuous goods” (p. 54). Careful diplomacy with revolutionary leadership combined with hiding the true ownership of the company amid Mexican nationalist fervor in the 1910s and 20s meant that the most tumultuous time in Mexican history was not bad for this particular business. In contrast, the firm was unable to avoid the biggest blow to company fortunes when it was taken over by the Mexican state during World War II after Mexico declared war on Germany, despite a careful “Mexicanization” of the company. Recovering control of the company after the war, the third generation of Bokers did not invest in the import-substitution “miracle” that hindered the growth of their import-based business. The mid-twentieth century company also faced a more combative union than in its heyday, and after the 1970s changing Mexican policies which alternated between hyperprotection and neoliberalism affected the company’s portfolio. Throughout the book, insight into organizational as well as operational decisions and outcomes will benefit those interested in issues such as the political and economic contexts for profit margins and the impact of shareholder interests in Germany on decision making by the closely held corporation’s directors in Mexico.

Tools of Progress is an intimate and fascinating examination of links between culture and economy in a transnational context. It successfully bridges disparate historiography on business, politics, immigration, and world history. Future historians of culture and economy will do well to follow Buchenau’s example.

Marie Francois is Associate Professor of History at Auburn University in Alabama. Her book, A Culture of Everyday Credit: Housekeeping, Pawnbroking, and Governance in Mexico City, 1750-1920, is forthcoming from the University of Nebraska Press.

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

Historical Encyclopedia of American Labor

Author(s):Weir, Robert E.
Hanlan, James P.
Reviewer(s):Friedman, Gerald

Published by EH.NET (November 2004)

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Robert E. Weir and James P. Hanlan, editors, Historical Encyclopedia of American Labor, two volumes. Westport, CT: Greenwood Press, 2004. xxii + 733 pp. $175 (hardcover), ISBN: 0-313-32864-1.

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

The development of scholarly disciplines built around the specialized narrative creates an ongoing need for new ways to bring new scholarship to the public. In history, this is often done through textbooks and in synthetic histories. For a long time, economic historians relied on the works of Louis Hacker and Thomas Corcoran, and have used textbooks by Harry Scheiber, Hugh Rockoff, Jonathan Hughes and Louis Cain, and Jeremy Atack and Peter Passell, among others. For nearly a century, labor historians have relied on the four-volume History of Labour in the United States put out by John R. Commons and his associates. In the last thirty years these have been supplemented by syntheses written by Irving Bernstein, David Montgomery and Herbert Gutman and his associates. Recently, several historical encyclopedias have been published to provide quick, short summaries of major findings in the scholarly literature. Gary Fink prepared two, one for American labor unions and one for labor leaders; and recently, Joel Mokyr and Robert Whaples, have edited such encyclopedias for economic history. There is an encyclopedia of strikes being prepared by Aaron Brenner. And, now, we have a new encyclopedia of American labor history prepared by two of the more prominent younger labor historians.

With a large number of relatively short entries, the real measure of an encyclopedia is its breadth of coverage rather than the depth of the individual entries. The Weir and Hanlan Encyclopedia, for example, has 396 entries, averaging under two pages each. The Encyclopedia does well with its choice of topics, providing a nice blending of the institutional concerns of the older labor history and the social movement focus of the no-longer-so-new labor history. Harking back to Commons and the old institutional labor history, there are 117 entries on labor unions, including many of the most important unions, such as the Knights of Labor, the American Federation of Labor, the Congress of Industrial Organizations, the United Mine Workers, and the Service Employees International Union. The Encyclopedia also picks up some of the less famous unions that are of particular interest because they highlight aspects of the American labor experience. These include an entry on a strong and conservative railroad craft union, the Brotherhood of Locomotive Engineers, as well as an article on the Brotherhood of Sleeping Car Porters, a union of black railroad service workers, and one on the International Union of Mine, Mill, and Smelter Workers, a radical industrial union prominent in the early part of the twentieth century.

The range of topics covered reflects an editorial choice common among labor historians. Sympathetic with the political left and a confrontational view of labor relations, the Encyclopedia tilts its coverage towards the more radical unions and topics. Among the topics that can be identified politically, 204 pages (nearly 40% of the entire Encyclopedia) can be associated with leftist topics, including syndicalist and communist unions. Less space is devoted to individuals and unions arguably more representative of America’s relatively conservative labor movement. Only 72 pages (13%) address centrist topics, and even less, only 41 pages, deal with conservative ones associated with Samuel Gompers and the old AFL. Mainstream but conservative ideas like “Voluntarism” and “Pure and simple unionism” are handled in short half-page and one-page entries; more space is devoted to “Bellamyite Nationalism” (one page) and “Utopianism” (two pages). Most major unions and labor organizations are covered, but there is disproportionate coverage towards radical and strike-prone organizations. The Dodge Revolutionary Union Movement, for example, was a short-lived and self-avowed militant organization of black autoworkers. It receives 2.5 pages, and the International Workers of the World gets three pages. By contrast, some of the largest and most important unions receive relatively little attention. The Teamsters and the Machinists are covered in one page each, and conservative unions in the railroad or construction trades, such as the Railway Clerks or the Plumbers, are neglected completely. Nearly half the pages devoted to unions are for organizations that can be identified with the syndicalist or communist left compared with 35% for the relatively moderate socialist center and only 18% on the right. Strikes and other instances of labor unrest also receive heavy coverage, including 127 pages or 24% of the Encyclopedia. A left tilt extends to the choice of biographical entries. Sixty-six biographies fill 105 pages (20%) of the Encyclopedia. Of these, 63% are associated with the left, compared with 18% with the center and only 18% with labor’s right. It is interesting that political sympathies did not lead the editors to over-represent women or minorities among their biographical subjects. White men comprise only 85% of the biographical pages compared with only 4% for blacks and 12% for women, a proportion that may even overstate the white male share of labor union leaders or members throughout American history.

The leftist tilt of the Encyclopedia reflects the feelings of most in the discipline of labor history where the central question continues to be “why is there no socialism in the United States?” or else “what can we do to move the United States to the left?” The Encyclopedia also reflects the profession’s disposition in defining labor history as the actions of workers and organized labor with relatively little regard for context or the actions of the other social actors. The Encyclopedia‘s editors deserve praise for including such employer topics as “Paternalism” and “Welfare Capitalism” along with “Scab” and “Boulwarism.” But the strategies and direct actions of employers still merit only 69 pages, or 13% of the Encyclopedia. More attention is given to economic history than to business history. Generously defined, economic history comprises over 100 pages. But these discussions leave out mention of economic growth, productivity, macroeconomic policy, unemployment, labor market discrimination, or trends in the level or distribution of wages.

The Encyclopedia is largely written by younger scholars. The editors themselves wrote or co-authored over 40% of the pages. (Weir signed 28% of the pages by himself and 8% with others; Hanlan did 8%.) Other authors include some of the best of the younger scholars, including Kevin Boyle, writing on the CIO and on “George Meany,” and Joseph McCartin, writing on the PATCO strike of 1981. Perhaps reflecting the role of younger scholars, the Encyclopedia extends further into the twentieth century than has most labor history. The last entry, on the case of Reeves v. Sanderson Plumbing Products dates from 2000! Nearly 15% of the Encyclopedia concerns events and people since 1966. The focus remains, however, in the classic years of American labor history. Fully a third of the pages date from the 1880-1914 period and another 13% date from the Great Depression years, 1930-46.

The Encyclopedia entries are almost all well-written and clear, and I identified surprisingly few mistakes for a work of this scale. The entries also contain bibliographic information which readers can use to pursue more detail on the topic. In many cases, I would have liked some more bibliographic references but the editors to some extent correct for this failing by including an excellent bibliography including a listing of useful web sites. The editors also include very extensive documentation in 55 appendices including excerpts from legislation, such as the Wagner Act of 1935 and the Taft-Hartley Act of 1947, contemporary descriptions of working conditions and strikes, and excerpts from biographies of prominent labor activists.

Comprising over 130 pages, the Appendices contain much valuable material; they are a real bonus when added to a valuable reference tool. The editors say that the Encyclopedia is directed at high school students. It would be valuable for them, but it also would be a useful resource for college students and libraries. Many graduate students would benefit from dipping into its resources. So would some faculty. I enjoyed reading it; and I learned from it. I guess that merits The Encyclopedia of American Labor History a strong recommendation.

References:

Jeremy Atack and Peter Passell, A New Economic View of American History: From Colonial Times to 1940, second edition. New York: Norton, 1994.

Irving Bernstein, The Lean Years: A History of the American Worker, 1920-1933. Boston: Houghton Mifflin, 1972.

John R. Commons, David J. Saposs, Helen L. Sumner, E. B. Mittelman, H. E. Hoagland, John B. Andrews, and Selig Perlman, History of Labour in the United States. New York. Macmillan Company, 1935-36.

Gary Fink, editor, Biographical Dictionary of American Labor Leaders. Westport, CT: Greenwood Press, 1974

Gary Fink, editor, Biographical Dictionary of American Labor. Westport, CT: Greenwood Press, 1984

Louis M. Hacker, The Triumph of American Capitalism: The Development of Forces in American History to the End of the Nineteenth Century. New York: Columbia University Press, 1946.

Jonathan Hughes and Louis P. Cain, American Economic History, fifth edition. Reading, MA: Addison-Wesley, 1998.

Bruce Levine et al, Who Built America? Working People and the Nation’s Economy, Politics, Culture, and Society. New York: Pantheon Books, c1989-c1992.

Joel Mokyr, editor, The Oxford Encyclopedia of Economic History. Oxford: Oxford University Press, 2003.

David Montgomery, The Fall of the House of Labor: The Workplace, the State, and American Labor Activism, 1865-1925. Cambridge: Cambridge University Press, 1987

Harry N. Scheiber, Harold G. Vatter, and Harold Underwood Faulkner, American Economic History. New York: Harper & Row, 1976.

Gary M. Walton and Hugh Rockoff, History of the American Economy. San Diego: Harcourt Brace Jovanovich, 1990.

Robert Whaples, editor, EH.Net Encyclopedia. http://eh.net/encyclopedia/

Gerald Friedman, the co-editor of the journal Labor History, is working on a book-length collective biography of several early American economists: Richard Ely, John Bates Clark, Wesley Clair Mitchell, and John Maurice Clark, plus another book, Can the Forward March of Labor be Restarted? — a study of trade union decline in advanced capitalist economies and the possibilities for labor renewal.

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

Consumerism in Twentieth-Century Britain: The Search for a Historical Movement

Author(s):Hilton, Matthew
Reviewer(s):Black, Lawrence

Published by EH.NET (September 2004)

Matthew Hilton, Consumerism in Twentieth-Century Britain: The Search for a Historical Movement. Cambridge: Cambridge University Press, 2003. xiii + 382 pp. ?17.99/$24.99 (paperback), ISBN: 0-521-53853-X

Reviewed for EH.NET by Lawrence Black, Department of History, University of Durham, UK.

Historians in Britain are currently entranced by consumption — not only due to the ?5 million AHRB/ESRC “Cultures of Consumption” program, but because it offers a bewildering array of topics and approaches to choose from (surveyed by Frank Trentmann, Journal of Contemporary History 39:3, 2004). It poses fundamental questions: do we work to earn, or earn to spend? Its appeal also lies in the shift from modernist producer to postmodern consumer identities. Simply, as Hilton (University of Birmingham, UK) contends “consumerism has been a mobilizing force at the heart of twentieth-century social and political history” (p. 3).

Consumerism assembles the politics of free trade, empire, citizenship, the state and environment (the latter absent from the Cambridge Economic History of Britain). But it has been disconcertingly marginal in accounts of twentieth-century Britain — whether due to producerist bias amongst historians, the pre-eminence of cultural studies in interpreting it or twentieth-century consumerism seeming more private and parochial or less radical or ideological than other social movements (peace, environmental) or than nineteenth-century consumerism (food rioters, moral reformers, the Co-op, free trade). The “search for a historical movement” is then both about plugging a historiographical gap by opening a consumer lens on modern Britain, but also about activists’ efforts to make a consumer movement. It reminds contemporary consumer campaigners of their antecedents — linking Mclibellers and BSE to Upton Sinclair or Which? magazine and the Co-op.

In discussions of free trade as a consumer-based political economy, the centrality of the politics of bread to working-class activity and how prices as much as wages were key to standard of living debates from the nineteenth century is outlined. World War One tied together diverse strands of consumer politics in criticisms of profiteering and the idea of state provision of necessities. Manifest in the Ministry of Food’s Consumer Council (1918-21), this had revolutionary implications (certainly compared to the meager Food Council that succeeded it), involving women, working-class consumers at the expense of the middle class and retailers.

Inter-war consumer politics reverted to a characteristic diversity — in so much as no agreed program emerged and it was powerless vis-?-vis producer ideologies, of labour or business. G.D.H Cole’s Guild Socialism and the ILP’s “Living Wage” platform had consumerist aspects (reminiscent of U.S. debates), yet could not command support within the British Labour movement. Contenders for a third way politics were the non-party experts of Political and Economic Planning (PEP), broadening consumer politics beyond necessity in the 1930s. Consumer politics disclosed much about inter-war British politics: the breakdown of free trade and rise of state intervention (also in forms like the Empire Marketing Board) and the entry of women into the public political arena.

If the “people’s war,” through state intervention and a recognition of popular desires, suggested a more consumerist prospect, it also reinforced some of the left’s traditional dichotomies. The Utility scheme, bringing key commodities within a state design and price regime and exempting them from purchase tax, differentiated utility and luxury goods both economically and morally. Extended post-war it seemed more paternalist than about “fair shares.” The Conservatives targeted women consumers by critiquing Attlee’s bureaucratic fondness for rationing. Initiatives like the Council of Industrial Design did more than gesture towards consumer rhetoric, but the opaque consumer Boards and Councils of the nationalized industries were less promising. As Hilton would have it, the idea of a state Consumer Advice Centre, which Young inserted into Labour’s 1950 manifesto, had the potential to bridge the politics of necessity and affluence and prefigured later developments. Certainly Harold Wilson’s investigations at the Board of Trade were more even-handed between producers and consumers than previously (or subsequently), but as had been (and would be) the case the idea fell foul of a small parliamentary majority, budgetary constraints and the left’s enduring prejudices. In short, it was judged a luxury. Were Conservatives more skilled in perceiving the consumer? Not innately, but it is suggested the left missed an opportunity to set an agenda of advice to match the Conservatives’ rhetoric of choice. Fatally, Hilton judges that by the later 1950s the Co-Op “lacked the imagination to step beyond an older politics of necessity” (p. 170).

It was thus business-influenced groups (and the press) that had started consumer advice and testing — Good Housekeeping Institute, the British Standards Institution in Shopper’s Guide — when affluence eroded the division between needs and wants in the 1950s. But their parochial, amateurishness, meant Which?, that the Consumers’ Association (CA) started up in 1957 soon dominated this market. The value-for-money information essential during austerity translated into a buyers guide when goods, advertising and brands proliferated under affluence. Professional technocrats almost to a man, the CA turned the comparative testing of goods and services from what one commentator styled “wittering drabness” into a hugely successful enterprise and the largest new voluntary association in post-war Britain. Started by ex-PEP and Labour figure Michael Young out of frustration with the left’s indifference to consumer matters, by the 1970s it was influential on (and indispensable to) official consumer policy.

CA was independent of business and often riled it, but this frankness endeared it to readers. Its economic impact on those at the receiving end like the British car industry is hard to gauge. CA was committed to realizing consumer sovereignty in the market by manufacturing rational consumers. It conceived the irrationalities of the market were produced by consumers’ lack of knowledge as well as the profit motive of business. CA was more than a product of the authority of the post-war expert — this was a grassroots social movement, connected to local campaigning groups by the 1960s. But for most of Which?‘s overwhelmingly middle class subscribers it was comparative test reports on washing machines and such like that were of use. This tension between everyday trade and broader agendas was reminiscent of the working-class Co-op. CA had a split personality, emblematic of consumerism, between a neo-liberal and social democratic ethos. Young urged consumerism should be more “than servants of the washing machine” and most ambitiously touted the idea of a consumers’ political party. Young himself emerges as epicentral to the thought and practice of modern consumerism.

The first peacetime state incursion into consumer matters as a whole (rather than specific commodity or industry) and new legislation might seem to signal the emergence of a consumer-citizenship, but in practice the Consumer Council (1963-70) marked a piecemeal change — dovetailing with rather than filling in for voluntarism. Its budget was small and it did not sit on government economic committees. The product of the business-minded Molony Committee, it was conciliatory towards manufacturers and retailers and treated consumers as shoppers. Its impact was felt through Teltag (rationalizing merchandise marks), education and a raft of legislation. The 1968 Trades Description Act attracted 40,000 cases in its first year and a half. The Office of Fair Trading, likewise pursued an individualist consumerism from 1973, clipped of broader concerns and by the 1980s chiefly administering competition policy.

The consumer movement’s proneness to drift from activism to materialism (or ‘self-interested complaining’, as Hilton saw one of CA’s TV rivals) impacted CA. Its million members by the late 1980s (it had been larger than the political parties since the late 1960s) were shoppers more than activists – the difficulty remained up-grading from a single issue to speaking for a collective. By isolating its leaders from members’ votes and hiving off other activities that were funded by everyday comparative testing, CA could circumvent consumer apathy. Its credit card issued in 1996 caused consternation amongst CA’s committed members (as in Labour ranks when the SDP allowed dues payment on credit cards). Equally, green and anti-globalization agendas renewed the CA’s social sensibilities.

By the 1970s Young (and others) recognized the state was needed to reach poorer consumers and even revived the mutual aid beliefs of the Co-Op. The National Consumer Council set up in 1975 and chaired by Young (who accepted with the proviso that he sat on the National Economic Development Council) was like the first Consumers’ Council a bolder entity and faced wage-price instability. It targeted disadvantaged consumers, encouraged credit unions, local advice centers (although these perished under 1980s local government cuts) and notions like consumer directors (paralleling workers on the Board). The NCC-CA Consumer Congress, an umbrella group for campaigners from Age Concern to the Protection of Rural England and Real Ale, that Young envisioned as a consumers’ TUC, proved too open-ended to have a cutting edge as a “third force.” Yet it also prefigured the extension of consumerist rhetoric in the 1990s in citizens charters and pervasive under New Labour — often more deliverer-driven than consumerists desired but not always as windy as skeptics surmised.

High profile anti-globalization protests against corporate hegemony, genetic modification, the WTO, or what Monbiot termed “affluenza,” do not unduly impress Hilton. While a by-product of the moderate style of the consumer movement Hilton has traced, they nonetheless charge material culture with political baggage and there is little novel in that. Adbusters or Naomi Klein’s No Logo (2000) tender characteristically hazy manifestoes. Except where openly anti-consumerist, Hilton can locate their more radical environmental and ethical tinges in the International Organisation of Consumer Unions (now Consumers’ International) that started in 1960. Funded by testing magazine subscribers, it has sustained a reforming agenda. In 1970 Young addressed the IOCU to the social costs of the “effluent society” and CI had a contingent at Seattle in 1999. Alongside headline-grabbers like Greenpeace, the IOCU forged networks with NGOs, the UN and developing nations for whose consumers necessity was more pressing than rational choice. In short, middle-aged housewives matter as much to consumerism as hooded protesters. Ethical Consumer‘s concern with workers’ (besides animal, environmental) rights had echoes in the U.S. consumer movement and for most consumers ethical purchasing — fairtrade coffee, Britain’s one million vegetarian — likewise assuages the luxury-need gap.

The book is divided — roughly around the Second World War — into sections on “necessity” and “affluence.” This usefully differentiates wants and choices from needs, but elsewhere Hilton is at pains to stress how a consumer politics might subvert such dichotomies. Equating affluence with material plenty, serves to downplay the manifold meanings affluence might bear in the context of a post-colonial, post-industrial and Cold War, besides post-war, Britain.

Hilton extols the virtues of the “consumer-citizen” (to borrow Cohen’s categories from A Consumer’s Republic) over the “consumer-customer.” The former has social and political characteristics, whereas the latter is reduced to economic transactions. A consumer politics might transcend the self-interested producer ideologies of business and workers in Labour and Conservative politics, plot a “third way” between the market and state control, enable a participatory civil society and act as a conduit for women into the public sphere. Hilton is persuaded of this potential radicalism, but much of the story is of constraints, shortcomings, waylaying tactics of incumbent powers and missed opportunities.

All too aware of “the difficulty of outlining a coherent politics of consumption” (p. 51), Hilton’s narrative at times sounds like a twentieth-century extension of E.P. Thompson’s “moral economy” making good market failures. But Hilton stresses the variety (except in World War One) of consumer consciousness, wary of making it a hostage to fortune as socialists did with class. A customer definition of consumerism, manageably confined to issues of choice and protection, could be as self-interestedly sectional as business or labour; a broader, more inclusive definition was prone to fragment. The Co-Op faced this dilemma and the CA, which occupies a heroic role in Hilton’s narrative, is admitted to have “not resolved this tension between consumerism and citizenship” (p. 341).

Especially under Young’s counsel, consumerism’s “attempt to create a new basis for social democracy” becomes “the dominant narrative within this history” (p. 337). In this respect, Hilton’s narrative can sound a little like Peter Gurney’s championing of the Co-op or Hutchinson and Birkitt’s of Social Credit in the 1920s, in its quest to locate alternatives to capitalism and its frustration at Labour’s marginalizing of the consumer. Hilton powerfully conveys a sense of consumerism as often invigorating the politics of the left, but also the trade union and Fabian reflexes that gave Labour its producerist outlook that saw consumerism (beyond necessity) as frivolous, unproductive or private luxury.

This social democratic subtext unduly shortchanges Conservative approaches to the consumer. Paternalist and libertarian strands of Conservatism might usefully have been explored through their consumer rhetoric. Baldwin’s party mastered the appeal to the housewife after 1918 more than opponents, couching it in terms of rising prices; Thatcher cultivated the aspirational property / shareowner consumer, warning of trade union wage demands. On the politics of inflation, Baldwin and Thatcher were at one on. Electoral politics are not always surely handled. The impression on voters of Labour’s proposed Consumer Advice Centre in 1950, Resale Price Maintenance (abolished by the Tories in 1964 despite business wishes) and the Office of Fair Trading are alleged. Debates over EEC entry — about prices and the fate of commonwealth trade — are thin. Hilton’s supposition that as it eclipses other identities “consumerism will eventually find political as well as cultural expression” (p. 11) verges on the determinist, not least since it is apparent political parties have co-opted besides sidelined consumer rhetoric.

Hilton resists the idea that the flourishing of consumerism — as a self-realizing act — in the 1950s and 1960s was a foretaste of 1980s’ free market individualism. The consumer movement shows that far from a nascent neo-liberal agenda, on offer was a negotiation with the market — recognizing both its dynamism and iniquities and crafting a rational, socially-conscious individual consumer. If anything it was a forerunner of Third Way politics of a 1990s Blair-Giddens variety: ideologically tentative, vaguely social democratic in ambition, disparate but inclusive.

Sourced from official committees, Consumer Councils, the Board of Trade and the Consumers’ Association archive, the focus is resolutely on the organized consumer movement and its institutional expressions. Since nowhere else is this surveyed in such detail, this is welcome and novel. It attends to a nation of shoppers, where historians have tended to focus on goods as evidence of “consumer society.” But this might disappoint readers seeking a more cultural history of consumerism. Hilton confesses “there is a book waiting to be written on the shaping of the consuming self” (p. 183), sourced from advertising, business and the “psy” industries. But this is not it, though Hilton is not unconcerned with identities vested in the world of goods. The “consuming self” features fleetingly, if often insightfully — such as in Hilton’s case for the more masculine qualities of the post-war consumer, as white-collar workers transposed productivist rationality into consumptive practices. Commodities themselves are scarce — this is an institutional account of material culture. This offers respite from the interpretive abandon of postmodernism and cultural studies and Hilton notes how Klein’s No Logo was premised upon a rejection of “self”-identity politics and takes to task the more “exaggerated interpretations” of department stores that have been offered.

An asset of Hilton’s remit is to focus on regular, everyday consumption — bread, domestic durables — rather than being dazzled by its more spectacular, conspicuous incidences. Nor does Hilton lack a rangy theoretical engagement — Bourdieu’s “habitus” trumps class in understanding precisely the disposition of CA activists and Castells’ informational “network society” draws out the potential for an international civil society of consumerism. But might the reader be entitled to some analysis of patterns, trends and forms of consumption: what and how much was consumed and by whom. Key dimensions of this story, as material as semiotic, are surely to be found in the role of (a selective list): TV (a media of advertising, taste, information), cars, washing machines, holidays, credit and debt, diet, marketing, supermarkets, Retail Price Index, fashion, the “black” market, fags and fuel (tax included), refrigeration and self-service shopping.

This is a hugely impressive study. It is hard to imagine how Hilton’s study will fail to establish consumerism squarely (and rightly) at the center of historical understanding of twentieth-century Britain or to become itself, for scholars and students alike, vital reading in the debate about interpreting this. As buys go, this is a must — not least it is even good value in paperback!

Lawrence Black is lecturer in Modern British History at the University of Durham. His latest book, edited with Hugh Pemberton, is An Affluent Society? Britain’s Postwar Golden Age Revisited (Ashgate, 2004). Current projects include studies of postwar British political culture and of playwright Arnold Wesker.

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

British Trade Unions since 1933

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

Published by EH.NET (March 2004)

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

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

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

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

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

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

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

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

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

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

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

A Dictionary of Economics

Author(s):Black, John
Reviewer(s):Whaples, Robert

Published by EH.NET (March 2004)

John Black, A Dictionary of Economics. Oxford: Oxford University Press, 2002, second edition. vi + 501 pp. $16.95 (paperback), ISBN: 0-19-0860767-9.

Reviewed for EH.NET by Robert Whaples, Department of Economics, Wake Forest University.

Economic History in a ‘Mainstream’ Reference Work

Oxford’s Dictionary of Economics would make an excellent gift — perhaps as a prize to the top student in an introductory economics class. It’s a fairly good buy, especially after noting that Amazon.com lists it at over $5 off the publisher’s price. The Dictionary “aims to provide for the needs of students of economics at A-level and in the ‘mainstream’ part of first degree courses, and of lay readers of journals such as The Economist,” and will generally serve these audiences well. It includes about 2500 definitions of concepts that are used in standard economics texts and terms connected with personal finances. The definitions are unusually clear and often include editorial comments about the broader importance of a concept or the controversies surrounding a theory or issue. I learned a lot just thumbing through its pages and will keep the volume close at hand.

I wouldn’t be reviewing the dictionary for EH.NET, however, unless more needed to be said about its treatment of economic history. I first flipped to the appendix, where there is a list of Nobel Prize winners in economics. Tellingly, Douglass North’s first name is misspelled. By chance, within minutes of beginning to browse the dictionary itself I came across the term “cliometrics.” The text offers this definition: “the application of quantitative methods in economic history. The main problem with applying econometrics to any but very recent economic history is the poor quality of the available data.” The first sentence has room for improvement. I would prefer something closer to “the application of economic theory and quantitative techniques to the study history,” and it would be informative to add something about the etymology of the term, but the tragedy of this definition and, perhaps, of the recent fate of the field of economic history, is that the author felt compelled to add his blunt, ill-informed aside. The thickness and richness of historical data sets has always amazed me and I assume this is true of almost anyone with even a passing familiarity with what is available to researchers. Thus, I can only attribute Black’s comment to gross ignorance. Is he representative of the vast body of ahistorical economists who flip right past the economic history articles that still appear in the leading mainstream journals and wouldn’t even consider picking up a journal or book with the word “history” in the title?

What can be done to solve the problem of the deafness of mainstream economists toward economic history? My preferred solution has always been to make the cost of obtaining economic history lower and lower — hence the existence of EH.NET, our database collection, our book reviews, our abstracts service, and especially How Much Is That? and the online Encyclopedia of Economic and Business History. These resources get a lot of traffic, but it is interesting and informative to see what types of economic history sell. The ten most frequently accessed articles in EH.NET’s encyclopedia last year are listed below (note that most of these articles have significant cliometric content):

1. “The Economics of the Civil War” by Roger Ransom
2. “Alcohol Prohibition” by Jeffrey Miron
3. “The Smoot-Hawley Tariff” by Anthony O’Brien
4. “Slavery in the United States” by Jenny Wahl
5. “The Economic History of Tractors in the U.S.” by William White
6. “Child Labor during the British Industrial Revolution” by Carolyn Tuttle
7. “The Depression of 1893″ by David Whitten
8. “The Works Progress Administration” by Jim Couch
9. “Women Workers in the British Industrial Revolution” by Joyce Burnette
10. “The Gold Standard” by Lawrence Officer

My conclusion is that the buying public (in this case probably mostly students) looks to economic history mainly for a recurrent trio of intriguing topics — human conflict (slavery and the Civil War), economic depression (Smoot-Hawley, 1893, the WPA), and the industrial revolution. Also, near the top of the list is another “sexy” topic — booze.

However, giving the product away for free has only limited success, because the demand curve for most economic history doesn’t seem to be very elastic. Is there some way to force feed this stuff to our colleagues and the public? Can we sugar coat it, so that they don’t know they’re getting it? The Economic History Association has recently shifted to subsidizing new producers — granting funds to budding economic historians in graduate school.

Interestingly, the Dictionary generally exudes a confidence about economic growth. For example, several figures discussing hypothetical economic trends (natural vs. logarithmic scales, trade cycles, and time trends) all depict strong upward trends in GDP — growth triumphant, as Richard Easterlin might say. Perhaps this is one of the discontents of growth — as the future looks brighter and brighter there is less of a compelling reason to look to the past?

Finally, there are a few errors and omissions in the Dictionary worth mentioning. For example, AFDC is identified as the U.S. federal welfare program — despite its replacement by TANF in 1997, and the ICC’s entry states that “its jurisdiction has since been extended to include transport by inland waterways, roads, and pipelines” belying the fact that it was terminated in 1996. “Black Monday” (October 19, 1987) is identified, but not “Black Tuesday,” (October 29, 1929). (Likewise, the entry titled “stock market crash” surprisingly refers only to October 19, 1987!) Perhaps due to its British origin several entities one would regularly see discussed in the business press, such as Fannie Mae and Freddie Mac, have no entries. A “chartist” is defined as “a person who believes there are recurring patterns in the behaviour of market variables over time, so that study of past variations assists in predicting the future.” There is no mention of William Lovett, the People’s Charter and the political economy of Britain in the 1830s and 1840s. The definition of exploitation doesn’t explain the neoclassical version of the term. The discussion of “globalization” gives the impression that “the process by which the whole world becomes a single market” has had a pretty uniform trend — leaving out the retrogression in the era from World War I to World War II. The space given to the Great Depression is woefully small — shorter even than the discussion given to nearby terms such as “gravity model,” “greenfield development,” and “greenhouse gases.” Likewise the slender discussion of “mercantilism” is shorter than discussions of “median,” “merit good,” and “migrants’ remittances.” The definition of public choice — “the choice of the kind, quantity, and quality of public goods to provide, and how to pay for them” — seems unduly restrictive. I would have preferred Dennis Mueller’s definition: “the economic study of nonmarket decision making, or simply the application of economics to political science.” Based on the evidence I’ve seen, the caveats about the quantity theory of money seem overly cautious: “maybe the quantity theory would work in the very long run, but it would be ages before this could be checked.” The paragraph about the “ratchet effect” neglects to mention arguments about the growth of government. The discussion of the “rustbelt” is inappropriately written in the present tense — “the rustbelt suffers from high obsolescence.” The entry on slavery appears to be uninformed by the intense debates triggered by Robert Fogel and Stanley Engerman’s findings. It unblinkingly states that while slavery has a long history, it is no longer generally practiced on humanitarian grounds and “because it is believed to be inefficient at providing incentives for work.” Other terms missing include “comparable worth,” “prime rate,” “social savings rate” and perhaps worst of all — “institution.”

Robert Whaples is the editor of EH.NET’s Encyclopedia of Economic and Business History at http://eh.net/encyclopedia.

Subject(s):Development of the Economic History Discipline: Historiography; Sources and Methods
Geographic Area(s):General, International, or Comparative
Time Period(s):General or Comparative

The Gifts of Athena: Historical Origins of the Knowledge Economy

Author(s):Mokyr, Joel
Reviewer(s):Khan, B. Zorina

Published by EH.NET (January 2003)

Joel Mokyr, The Gifts of Athena: Historical Origins of the Knowledge

Economy. Princeton, NJ: Princeton University Press, 2002. xiii + 376 pp.

$35 (cloth), ISBN: 0-691-09483-7.

Review Essay by B. Zorina Khan, Department of Economics, Bowdoin College.

The Gifts of Athena begins with an epigraph from Robert Hooke, a

celebrated experimental scientist often regarded as “England’s Leonardo,” who

died exactly three hundred years ago. Hooke noted that truly productive

insights were only to be attained by a “Cortesian army, well-Disciplined and

regulated, though their numbers be but small.” Hooke would not have hesitated

to induct Joel Mokyr into his “Cortesian army,” in any one of his guises as the

Robert H. Strotz Professor of Arts and Sciences and Professor of Economics and

History at Northwestern; President Elect of the Economic History Association;

or author of The Lever of Riches (Oxford University Press, 1990).

The Lever of Riches is a standard reference for anyone who wishes an

eclectic and thought-provoking treatise on the economic history of technology.

The Gifts of Athena updates us on Mokyr’s thinking over the last decade

on the role of knowledge in generating economic growth. Lest we become

entangled in the fascinating but ultimately insoluble labyrinth of

epistemology, he immediately limits the scope of inquiry to “useful knowledge”

related to natural phenomena that can be manipulated to enhance economic

welfare. Useful knowledge comprises two categories: propositional

knowledge about natural regularities; and prescriptive knowledge or

techniques.

Propositional knowledge (denoted by the symbol Omega) refers to generalized

principles such as natural laws and empirical observations obtained through

measurement and classification. The concept is not limited to science per se,

but also extends to mechanics, geography, engineering, and socially constructed

beliefs that might be incorrect, such as my grandmother’s conviction that

exposure to evening dew caused ague. Collective knowledge ranks more highly

than what any individual knows, and raises the key question of how individual

knowledge is diffused and aggregated into the public domain. Improvements in

Omega knowledge are due to discoveries of facts that had always existed but

were previously unknown, and provide the epistemic base for the set of

prescriptive knowledge. Prescriptive knowledge (denoted by the symbol Lambda)

consists of techniques, prescriptions, and instructions, which reside in human

memory, artifacts or storage devices. Indeed, the patent law makes just such a

distinction, and awards patents for net additions to the store of prescriptive

knowledge (inventions) but not for discoveries of the sort that would fall

within the primary Omega set.

Mokyr envisages the Omega set as a prior constraint, which limits the set of

feasible techniques: “The obvious notion that economies are limited in what

they can do by their useful knowledge bears some emphasizing simply because so

many scholars believe that if incentives and demand are right, somehow

technology will follow automatically” (p. 16). As of January 2003, we do not

have a cure for AIDS or the secret to cold fusion; such knowledge might or

might not exist, but effectively the only important fact is that we do not

currently have it and this constrains our current welfare. The components of

this set also influence the costs of acquiring or using techniques. If a

solution to an industrial problem is found through serendipity but the

underlying principles are unknown, the cost and riskiness of replication tend

to be high. The conceptual system is completed by pointing out that feedbacks

can occur when the body of prescriptive knowledge serves to increase the set of

propositional knowledge.

Mokyr then poses the question that the untutored reader undoubtedly will ask:

why do we need to know a theory of knowledge? The rest of the book provides an

answer: the advances in welfare that we enjoy today are the legacy of a

revolution in knowledge that occurred some three hundred years ago in Western

Europe. The credits for its intellectual origins are shared, but in terms of

its economic exploitation Britain led the way and other countries followed. The

role of useful knowledge in this process is illustrated in chapters that center

on the British Industrial Revolution, the factory system, health and the

household, political economy, and institutions in relation to technological

change.

Growth episodes did occur before the first Industrial Revolution, but were

subject to negative feedback mechanisms that ensured the spurts were

short-lived. For instance, rent-seeking guilds raised monopoly barriers and

other coalitions suppressed the diffusion of vital technological knowledge.

However, the most important obstacle to self-sustaining growth was the narrow

base of propositional knowledge in such areas as agriculture, transportation,

power, and medicine. Thus, when the Industrial Revolution did occur, it was due

to what Mokyr calls an “Industrial Enlightenment.” Expansions in the base of

propositional knowledge, and a positive feedback mechanism between the two

types of knowledge, proved to be critical. Those who focus simply on pure

scientific discoveries miss much of the point, since valuable knowledge was

also drawn from a combination of tatonnement and conscious insight. In

the eighteenth century, exogenous discoveries about nature, changes in

artisanal knowledge, and greater access to information combined with new

inventions to create productivity advances.

Mokyr emphasizes the importance of access to knowledge, and argues that the

Industrial Revolution was accompanied by a revolution in information technology

throughout Britain, France, Germany and Scandinavia. Scholars communicated with

investigators in other countries; experts, consultants and other specialized

professionals cooperated and transmitted knowledge by varied means including

networks, job mobility and industrial espionage. The cost of access fell partly

due to innovations in postal services, improved transportation, greater

availability of cheap reading matter, and standardization of information such

as in the use of mathematics as a means of communication. Access to knowledge

also became more systematic, as in the spread of alphabetization, compilations

of technical material in encyclopedias, and the Linnaean method of classifying

and identifying botanical specimens. By the time of the second Industrial

Revolution factors that favored improved access included an institutional

environment that engendered positive interactions and the spread of free market

principles.

Knowledge and technology also caused changes in the organization and location

of production from the household to the factory. The competence levels required

of manufacturing increased and necessitated the application of more knowledge

than the ordinary household could efficiently generate, for “the division of

labor is limited by the size of the knowledge set necessary to execute and

operate best-practice techniques” (p. 140). Other explanations of the factory

system such as the role of economies of scale, transactions costs, and

increases in the intensity of work, are not regarded as alternatives, but as

complementary to this proposition. Apart from the efficiencies of specialized

knowledge, factory owners had a vested interest in adding to the skills and

knowledge of their workforce, if only to socialize their workers into

appropriate behavior. Thus, the factory system itself functioned as a conduit

through which knowledge was created, recorded, and transmitted. The mechanics

who worked for Boulton and Watt were coveted by competitors because they

embodied firm-specific techniques, insights and habits. Today, modern

innovations in communications and information technology decrease the

comparative advantage of the workplace relative to the household, and offer

some workers the prospect of a return to household production.

The fifth chapter deals with the household’s use of technologies, and its

“recipes” or additions to prescriptive knowledge. Unlike markets, households

are not entirely subject to competitive pressures, so we unfortunately cannot

count on a Darwinian process to ensure the elimination of inefficient

homemakers. Nevertheless, changes in propositional knowledge at the household

level can be credited with significant advances in human welfare, such as the

fall in infectious disease that favorably affected the morbidity and survival

rates of infants. The results of empirical studies regarding sanitation and

hygiene had a significant impact on household practices and beliefs. Mokyr

highlights the “war on dirt,” the germ theory of disease and the “war on

insects,” and advances in nutritional science. These discoveries diffused due

to the “paternalism of the educated classes and the greed of commercial

salesmen” (p. 188). The working class was persuaded by the weight of

statistical evidence (some of it incorrect), and the judicious example of their

social superiors such as the British Ladies’ National Association for the

Diffusion of Sanitary Knowledge to emulate the “culture of respectability” (p.

207). These developments shifted the onus of dealing with death and diseases

from a passive reliance on the (unknowable) vagaries of Providence to the

(knowable) responsibility of individual households. As a result of this change

in health-related household knowledge, homemakers spent more time in creating

nutritious meals, a hygienic environment, and caring for children. Indeed, it

is possible that factors such as “overenthusiastic rhetoric and brainwashing by

soap commercials” (p. 212) may have led to a suboptimal and excessive level of

devotion to cleaning and housework. Moreover, this exaggerated commitment may

have delayed the entrance of some married women to the labor force.

The next chapter deals with the political economy of knowledge, and centers on

two propositions: first, the progress of useful knowledge is far more

influenced by political economic forces than we realize; and second,

technological inertia does not indicate that individuals are irrational, but

may be the outcome of rational choice. Entrenched elites may manipulate

cultural standards and religious principles to avoid innovations that threaten

their position. The existence of democratic free market processes is no

safeguard, and indeed under some circumstances may serve to enshrine

inefficient technologies to a greater degree than other less desirable

political systems. The final chapter concludes that “useful knowledge

mattered.” Expansions in the set of useful knowledge can be induced to some

extent by social agenda, appropriate institutions and relative prices.

Nevertheless, fundamentally its growth is a function of the dea ex

machina, for there is “a great deal of autonomy to it, which cannot be

explained in terms of demand or factor endowments” (p. 293).

Starvingmind.Net refers to the “peerless scholarship” of The Gifts of

Athena, for good reason. One is impressed by the plethora of allusions

drawn from science, economics, history, Greek mythology, studies of the effects

of fluoride on the tooth decay of Colorado children, household hints from

The Woman’s Book (1911), and some thirty nine pages of references. The

description it offers of the European experience is superb, and a fair reviewer

would not fault a work for achieving its aims admirably. An editor of my

acquaintance insists that what really matters is the subtitle, which suggests

that this book is about the historical origins of the knowledge economy. I

cheerfully admit to my biases, but I have strong doubts about the relevance of

the European experience to understanding either the information economy or

global technology and culture today.

Britain restricted useful knowledge to an elite (“whose numbers be but small”),

and its institutions functioned in such a way as to prohibitively increase the

costs of access to the working class. Had the United States crafted its own

institutions in the image of Britain my counterfactual suggests that I would

not be typing this review on my own computer, but instead would be sharpening a

formidable array of pencils. (Indeed, I acquired a PC before the British Patent

Office did.) Based on comparative economic history, I am more sanguine about

the effectiveness of efforts directed towards inducing increases in useful

knowledge unaided by Athena; I am less sanguine about the welfare gains from

improved access, in the absence of institutions deliberately designed to ensure

a process of democratization.

What does the book have to tell us about the information economy in 2003 and

beyond? As a careful economic historian, Mokyr is reluctant to engage in

futuristic predictions. He speculates that such large gains in useful knowledge

were experienced in the 1990s that they possibly amounted to another industrial

revolution. He highlights the fact that marginal access costs have been

“reduced practically to zero” (p. 77). However, contemporary applications are

admittedly not a major focus of the book. So perhaps it is once again Robert

Hooke who offers us the best insight into the ambiguities of the so-called

knowledge economy: his classic treatise, Micrographia (“humbly” placed

at Charles II’s “Royal feet ? [despite] the meanness of the Author, and

of the Subject”) was printed in 1665 to great acclaim; today anyone can have

access to the digital edition at Octavo.Com — for a price of $30, or $550 for

the “research edition.”

Zorina Khan is Associate Professor of Economics at Bowdoin College, Faculty

Research Fellow at the NBER, and a member of the editorial board of the

Journal of Economic History. She has published on the history of patents

and copyrights, as well as economic history and the law.

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

Boys in the Pits: Child Labour in Coal Mines

Author(s):McIntosh, Robert
Reviewer(s):Tuttle, Carolyn

Published by EH.NET (December 2001)

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Robert McIntosh, Boys in the Pits: Child Labour in Coal Mines. Montreal and Kingston: McGill-Queen’s University Press, 2000. xxviii + 305 pp. $34.95 (hardcover), ISBN: 0-7735-2093-7.

Reviewed for EH.NET by Carolyn Tuttle, Department of Economics and Business, Lake Forest College.

Robert McIntosh (National Archives of Canada) offers a completely new and bold perspective on the issue of child labor during the industrialization period of a country. Boys in the Pits: Child Labour in Coal Mines examines the socioeconomic and political conditions of boys employed in the Canadian coal mines during the nineteenth and early twentieth centuries. This book departs dramatically from the ongoing debate between the pessimists and optimists regarding the exploitation of children during the Industrial Revolution of Great Britain, the industrialization of the United States and the development of Latin America. McIntosh puts forth the interpretation that the boys who worked in the pits during Canada’s Industrial Revolution were not victims of economic growth but instead mature young men who wanted to work and fought for their rights as workers. This archival study complete with photographs and contemporary testimonies contributes to the current body of literature by offering a nontraditional approach to child labor, a statistical record of the employment of boys in coal mines located in Nova Scotia and a chilling account of the conditions of work both above and below ground in coal pits. McIntosh weaves the use of primary sources throughout the book in supporting his main hypothesis that “despite some individual testimony to the contrary, the weight of evidence is that boys entered the mine happily” (p.176). He uses industrial publications, union publications and records, the press and travelers’ accounts of their visits to mines, the publications of students of the industry, royal commission inquiries and provincial Department of Mines’ published annual reports to show that the pit boys were not powerless, immature, incompetent children but instead courageous, mature, independent workers who wanted to work.

McIntosh is extremely successful in accomplishing two of the three main objectives of this book. Unfortunately, the research presented falls short of obtaining his first and most important objective — to introduce, develop and support an entirely new hypothesis of why children worked. His examination of all the factors that affected the demand and supply of boys for employment in the coalmines is quite interesting and well supported with historical facts. His hypothesis– that the boys wanted to work — is clearly stated and developed but the evidence provided is insufficient, making his argument unconvincing. He is extremely successful, however, in achieving his other two objectives. The photographs, testimonies of workers, and commission inquiries provide a detailed description of the type of work and conditions of work in the mines as well as exploring the relationships of the pit boys to their employers and their co-workers (chapters 3 and 4). Lastly, he places the pit boys in the context of their families and communities to explain their role in the family, community and local economy (chapters 6, 7, and 5, respectively).

While telling the history of the boys in Canadian coal mines, McIntosh applies the theory of the labor market to explain the increase and then eventual decrease in the employment of pit boys. The increase in the employment of boys to work above and below ground occurred due to primarily economic and social factors. He attributes the increase in the demand for pit boys to: (1) the termination of the General Mining Association monopoly in 1858 (p. 45); (2) railway construction which lead to the development of new coal fields (p. 47); (3) technological advances (the steam engine, extensive division of labor and specialization) (pp. 65-68) and (4) the expansion of surface work (p. 70). He attributes the increase in the supply of pit boys to: (1) the tradition of family-based labor (p. 48); (2) the custom that working as a young boy was training for an adult occupation (p. 175); (3) the establishment of security for the family where the boys’ wages provided insurance and pensions (pp. 106, 115) and (4) the boys’ desire to enter the mines over attending school (p. 175). The identification and discussion of each of these factors is succinct and convincing except the last reason for an increase in supply, the boys’ desire to enter the mines. The problem with this analysis is discussed at greater length below. It would have been beneficial to comparative economists, economic historians and development economists if McIntosh had developed the comparison with Great Britain more fully to identify what factors were country-specific and what factors were shared by Great Britain as well. This additional analysis would have contributed nicely to the current examination of the employment of child labor in developing countries today in coal and metal mines.

In his concluding chapter, McIntosh briefly touches upon the reasons for the disappearance of the pit boys from Canadian coalmines. As in Great Britain, the changes in technology and the newly reconstructed view of childhood gradually removed boys from the coalmines. Unlike Great Britain, a decline in the demand for coal due to competition from the United States, the Great Depression and the emergence of alternatives (natural gas and electricity) caused a decline in the mining industry in Canada. The role of mining and schooling legislation in the employment of boys, however, was not clear. At one point McIntosh claims that child labor laws and schooling laws had little impact on the decrease in child labor (pp. 89, 90). This stands in direct conflict with his statement that the legislation that raised the minimum wage and established compulsory schooling attendance contributed to the decrease in pit boys (p. 172). The impact of child labor laws and schooling laws on the use of child labor should have been developed further with the aim to make a defendable decisive claim.

The controversial stance that McIntosh takes in this book that the pit boys were not victims exploited by their parents or capitalists, although provocative, is not entirely compelling. McIntosh offers three main arguments to support his thesis. His first argument rests on an in depth examination of wage and income data for the Sydney Mines from 1871-1901 (chapter 6). Quite convincingly he shows that the conventional links between child labor and subsistence did not hold in Sydney. In Tables 6.6 and 6.7 the data reveal that boys in high-income households were almost as likely to be employed as boys in low-income households (pp. 119-121). This is a very important finding and should be further investigated using wage and income data from other cities and provinces. McIntosh then uses this data on wage and income from Sydney to conclude that in Canada the pit boys wanted to work and were not forced by parents or mine owners (p. 122). This seems plausible but certainly not exhaustive of the possible interpretations of this finding. Furthermore, one should not make a generalization for the whole country based on one city in one province. As he mentioned in earlier chapters, it could be that boys worked to help their family achieve a higher standard of living (p. 125), security in times of crisis such as death or old age (p. 106), or an occupation for adulthood (p. 123). Consequently, this argument, although interesting, is only partially persuasive in revealing boys overriding desire to work.

In his second argument, McIntosh identifies the inherent characteristics associated with the pit boys to demonstrate that they were valued independent workers whose “experience in the mine is a record of achievement” (p. 179). Miners viewed them as valued co-workers and important contributors to family income. The pit boys, moreover, did not define themselves as victims but instead they were proud of their role in the family and the economy. They were productive members of the working-class who opted for work because in society it was identified as manly over school, which was identified as effeminate. In opposition to the traditional view of child labor as one of “a record of blighted childhood” (p. 178), these boys and young men had self-respect and fought for their rights as workers. McIntosh successfully provides both direct and indirect evidence to show that the boys were mature, self-reliant, courageous individuals who displayed initiative.

The third argument carefully develops how the socially stimulated “web of solidarity” among the pit boys created a political response of action (p. 149). Socially the movement from childhood to manhood for boys was marked by their entry into the mines. Fathers had experienced this and now their sons went through the same process. As McIntosh stated, “in the mining family, boys learned not simply that certain work was women’s; they also learned that men’s work warranted both women’s respect and the lion’s share of the available food, drink, and leisure time” (p. 123). Once in the mines, moreover, the evidence undeniably illustrates a collective loyalty among the pit boys. They talked back to adults, whether parents or managers, until they were organized as a branch of the miners’ union. If they were not satisfied that their grievances were being heard, they would strike. McIntosh helps the reader to appreciate the significance of their action by pointing out that the entire mine had to shut down when the boys walked out because their duties were essential to the safe and productive operation of the mine. Therefore, the fact that there were 47 strikes in Nova Scotia from 1880 to 1926 makes this argument convincing (p. 120).

In conclusion, Boys in the Pits offers a new view of child labor that is sure to create discussion and additional research among historians and economic historians alike. In sharp contrast to Great Britain’s fragile young victims of exploitation, young pit boys in the mid-nineteenth century were described by Canadian newspapers as “cheerful imps” and the older ones as “happy,” “bright,” “animated” young men whose contributions to the family, the mine and the economy were highly valued (pp. 90-91). McIntosh does a superb job of documenting and describing the employment of child labor in Canadian coalmines while developing the hypothesis that the pit boys were anything but victims.

Carolyn Tuttle is author of Hard at Work in Factories and Mines: The Economics of Child Labor during the British Industrial Revolution. Oxford and Boulder: Westview, 1999. In addition, she is the most recent winner of the Economic History Association’s Jonathan Hughes Prize for Excellence in Teaching Economic History

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

The Economy of Europe in an Age of Crisis, 1600-1750

Author(s):Vries, Jan de
Reviewer(s):Grantham, George

Project 2001: Significant Works in Economic History

Jan de Vries, The Economy of Europe in an Age of Crisis, 1600-1750. New York: Cambridge University Press, 1976. xi + 284 pp. ISBN: 0-521-29050-3.

Review Essay by George Grantham, Department of Economics, McGill University.

An Economy in Crisis

First published in 1976, The Economy of Europe in an Age of Crisis was chronologically the fourth in a series of general syntheses of European economic history commencing with Robert Lopez’s account of the medieval economic boom and carried forward by Harry Miskimin’s two volumes on the economic history of the Renaissance.1 The four works by two Yale professors of economic history and one of their students constituted as it were a ‘Yale’ history of the European economy, which was distinguished from other works by its attention to macroeconomics and the implications of general equilibrium. One recalls hoping for an ultimate volume from the pen of Yale’s other senior economic historian that would bring the story out of Europe to America and through the Industrial Revolution to the mid-twentieth century. Alas. The hungry sheep look up and are not fed. … Weep no more, woeful shepherds.

Jan de Vries’ contribution to this series deals with a particularly enigmatic period in the history of the European economy. The Age of Crisis began as a prolonged recession during which the older centers of economic growth, strung out like beads on a strand extending from the cities of Northern Italy to the trading and manufacturing towns of Flanders, fell into a deep economic sleep from which they were not roused until the coming of the railway. Elsewhere, sectarian violence, civil war and repeated incursions by Turkish troops ravaged vast regions of central and eastern Europe into the first decade of the eighteenth century; from the 1660s to 1713 commercial and real warfare between France, England and the Low Countries perturbed Europe’s most prosperous economies. Sovereign default occasioned by the financial burden of these conflicts ruined financial intermediaries; the supply of money declined and prices fell; population grew hardly at all and in some places actually declined. The paradox is that from this age of social and economic turmoil emerged an Industrial Revolution and the onset of sustained economic growth. The question addressed by The Economy of Europe in an Age of Crisis is how could this have happened. The answer is summed up by an aphorism and a label. The aphorism – ‘The division of labour is limited by the extent of the market’ — was Adam Smith’s; the label — an ‘Industrious Revolution’ — belongs to Jan de Vries.

To appreciate the how difficult it was in the early 1970s to explain how an economy of growth could emerge from an economy in crisis one must know something about the contemporary state of early modern economic historiography. The literature dealing with economic and social development between 1500 and 1800 fell into four broad classes: studies inspired by the stages theory of economic evolution, which were mainly concerned with the evolution of business and commercial organization; a literature on Mercantilism, which focused on economic policies of states and the attitudes and ideas that informed them; a literature centered on population, prices, and wages, which emphasized the Malthusian/Ricardian agricultural constraint on pre-modern economic growth; and a Marxist literature that viewed the period as the crucial transition from feudal to capitalist society. None of these approaches — with the latent exception of the Marxist labor theory of value — embodied an endogenous model of how the economy changed. Change came from outside the ordinary workings of the economy. Monographs on the economic history of particular industries and regions took the general economic context as exogenously given, as did the Malthusian literature, which interpreted falling wages and rising rents as infallible signs of overpopulation in an economy characterized by fixed production possibilities. Broader treatments like Braudel’s Material Civilization (1967) on the other hand, envisaged the period as a struggle between an aggressively expanding capitalist sector and agricultural traditionalism. Apart from some discussion of the relation between price levels and the supply of money, there was little economic analysis of factors affecting the general equilibrium of the economy.

The stages theory was the foundation of most narrative accounts of the period. As is well known, it hypothesizes a chronological taxonomy of economic forms or ‘stages’ that purports to describe in a generalized way how the western national economies progressed from familial and tribal self-sufficiency in the early middle ages to the economy of large-scale industry and international specialization of the nineteenth and early twentieth centuries. In the canonical sequence of stages the economies of early modern Europe occupy an intermediate position situated somewhere between the urban guild economy of the later middle ages and the industrial economy of the nineteenth century. The narrative thus emphasized the organizational response of urban and rural industrial enterprise to growth in trade, which was not explained but simply assumed to have happened for reasons of its own. The analysis of agricultural evolution was largely confined to the description of settlement patterns and modes of tenure. In the degree that the period was defined by the ‘stage’ attained by the most progressive nations, it was characterized by the expansion of municipal and regional market economies to a larger national level of aggregation.

Part of the appeal of this typology to the German historical economists most closely associated with it was its historical justification of protectionist policies accompanying Germany’s political unification in the nineteenth century, which combined reduced barriers to domestic trade with increased tariffs on imports from other countries. The departure from the abstract precepts of the theory of comparative advantage were rationalized as measures fitting the requirements of an economy that had not yet attained its ‘national’ stage of economic development. This argument was closely related to a relativistic proposition holding that economic motivation also varies across stages, an idea supported by philosophical traditions going back to Hellenistic times and by the striking social and economic disparities between rural and urban societies and between Europe and the underdeveloped world. The very magnitude of these disparities, however, caused scholars to conflate the supposed continuum of economic stages and behaviors into a dichotomy that contrasted a traditional rural sphere where social values and institutions worked to reproduce self-sufficient and self-sustaining communities, and a modern urban one where actions were motivated by the individualistic goals of social advancement and wealth maximization. This vision, which is most fully articulated in the sociologies of Emile Durkheim and Max Weber and which survives in the economic anthropology of Karl Polanyi and his followers, was adopted by the influential Annales historians as the central framework of their history of social and economic evolution. In the words of Braudel, the early modern economy was comprised of “two universes distinct from each other” — a rural world ruled by instinct and habit; and an urban world of “energy, innovation, new awarenesses, and even progress.”2 Economic and social development thus unfolded as a war between two mutually antagonistic worlds. This Manichean vision of social and economic process clearly left little space for the analysis of economic complementarities between town and countryside. The countryside and small towns were passive recipients of ‘energy’ emanating from the city. Metaphors like this provided little guidance as to how that energy was channeled, nor exactly how it was generated.

The second strand in early modern economic historiography revolved around the idea of Mercantilism. Coined by Adam Smith as an Aunt Sally, the term experienced rebirth in the late nineteenth and early twentieth century in works by economic historians like Schmoller, Cunningham, Ashley and Lipson, who held that the international division of labor reflected the unequal capacity of competitive nation states to protect their economic interest. To them the early modern period represented an age when princes tried to protect their people from the disquieting effects of rapid economic and social change. This rosy view of the paternalistic and authoritarian policies of seventeenth- and eighteenth-century government, which was advanced as a model for the paternalistic policies of the national welfare state, was devastatingly criticized in a monumental study by the Swedish economist Eli Heckscher, and in a comparative analysis of early modern France and England by the American economic historian John Nef.3 As the policies in question were quite diverse, the ensuing debate mainly emphasized questions of definition. Exactly what was Mercantilism? The quantitative significance of specific policies could not be analyzed given the limited available documentation, so the debate shed little light on the causes of economic change, although there are topics in this general sphere of enquiry that are more immediately fruitful of insight into this topic than the analysis of industrial and commercial regulations, most of which were easily circumvented. The first is the economic and administrative response to the transfer problem created by central taxation of rural districts; the second concerns the impact of military provisioning on the organization of the wholesale trade in cereals and other materials that were cumbersome to transport and costly to store. The Age of Crisis was an age of rising taxation and growing armies and navies. Neither trend could fail to affect industrial and commercial organization.

The third strand of economic historiography was unreservedly quantitative. Since the 1930s an international effort to collect prices and wages for the period prior to 1800 had provided numerical data that seemed to bear out the Ricardian hypothesis of an inverse correlation between movements in population and real income, which was explained as the joint consequence of a fixed supply of land and a static agricultural technology. By the 1970s compilations of crop yields and yield ratios further supported the impression that outside a few exceptional districts agricultural technology and agricultural productivity were indeed mired. At the same time, however, the price data indicated a positive correlation between the price of cereals relative to meat and dairy products, and growth in population. This was explained by the higher income elasticity of demand for animal products than for subsistence cereals; when population increased, real per capita income declined due to diminishing returns in farming, causing demand for meat and dairy produce to fall faster or rise more slowly than the demand for grain. Since scattered observations of the amount of land in different kinds of crops indicated a rise in the output of livestock products in periods when their relative price was increasing, the apparent increase in the output of the pastoral sector and the diffusion of forage legumes after 1650 could plausibly be explained as a consequence of demographic stagnation, which in the context of an unexplained upward drift in overall productivity generated the increase in per capita income needed to support the rising relative price of livestock. The difficulty with this demographic explanation of shifts in demand was that it didn’t explain how demand and agricultural production could increase in an otherwise stagnating economy, in which demand for all kinds of produce should have been contracting. Output had risen in a period when incentives to increase it seemed weak. The Ricardian paradigm was incomplete.

The final strand of the economic historiography suffered from no such logical misgivings. Marxist historians viewed the seventeenth century as crucial to the transition from ‘feudalism’ to capitalism. The defining event was the long English Revolution that began in the late 1620s and culminated in the substitution of a Dutchman for King James II in 1688. To English Marxist historians, the six decades represented the original ‘bourgeois’ revolution, which instituted political preconditions for capitalism. The crucial preconditions were the expropriation of the peasantry by Parliamentary acts of enclosure and the creation of a free labor market by the enactment of laws and judgments limiting the right of rural laborers to seek work outside their home parishes and the removing the right of all workers to combine in defense of wages and working conditions. Relieved of paternalistic regulations promulgated by Tudor and Stuart monarchs intended to protect peasants and maintain social stability, English landlords and businessmen could create a subservient force of free labor exploitation that was the source of the capital on which rested England’s later industrial supremacy. The crisis of the seventeenth century planted the seeds of capitalism and the industrial revolution. In a variant of this argument Wallerstein argued that the capital-creating surplus was extracted not so much from domestic labor, but from serfs and slaves in peripheral regions. Economics followed politics.

None of this added up to a theoretically coherent account of how the economy of the seventeenth and early eighteenth century gave birth to sustained economic growth. The stages literature described the changes in industrial organization, but could not explain them; the debate over mercantilism and the role of the state was virtually devoid of economic analysis of cause and effect. The Malthusian approach was more promising, and by the 1970s had been reinforced by outstanding regional studies in early modern agriculture and better demographic information, but the analysis was typically couched in terms of the tension between population and resources, and ignored the implications for agricultural productivity of farm specialization induced by the growth of cities and rural industrial districts. The Marxist approach focused on the evolution of social classes and politics.

The facts are that by the middle of the eighteenth century, the economies of the Netherlands, England, and in lesser measure France were significantly larger than they had been a century and a half earlier. Although some technical change had occurred, it was not enough to explain the apparent growth in output and productivity, since most production was done with the old techniques, albeit on a larger scale. The source of growth therefore had to be increased inputs. One input, however, could not have increased. Although population had expanded, the land available to supply it with food, fuel and building materials had not, which implies that the positive effect of a larger labor force should have been offset by diminishing returns. But in regions of Europe where population was rising, the standard of living — as evidenced by the kinds of goods people had in their homes when they died — had apparently increased.

De Vries’ proposed solution to the problem of how growth could proceed in the face of diminishing returns involved two correlations. The first was a regional correlation between the rate of urbanization and agricultural productivity. A survey of the agricultural regions of Europe reveals that places where the urban economy thrived were also places where agriculture prospered. In the Dutch Republic and southern England, the growth of Amsterdam (and other Dutch cities) and London created new incentives for nearby farmers to intensify and ameliorate methods of cultivation. It is now known that similar incentives had similar effects in other regions, most notably on the great farms that supplied Paris with grain and straw. By contrast, farming in the hinterlands of the declining Italian, Flemish and Iberian towns stagnated. Both economic logic and the price data indicate that the causal link runs from changes urban demand to changes in rural supply, rather than the other way round. De Vries also argued the traditional hypothesis that pre-existing differences in agrarian structure affected the rural response to changing market opportunity. The evidence for the exogeneity of rural institutions, however, is less convincing than the regional correlation between urbanization and agricultural productivity, as the regions where agrarian structure permitted an elastic response to market opportunity had the strongest market incentives to adjust agrarian institutions to that opportunity. In one part of the world such responses may nevertheless have worked to limit the range of subsequent response to economic opportunity. In Eastern Europe and in the American tropics, landowners used their political authority to solve the problems of growing labor scarcity caused by growing demand for produce by subjugating the labor force.

The second suggestive correlation is between urbanization and interregional trade. Between 1600 and 1750 much of the long-distance trade of Europe came to pass through a handful of entrep?ts situated on the southwest margins of the North Sea. Although geographical factors determined that this region would contain nodes of exchange between the Baltic and the Western Atlantic, it was the spatial economies of scale in distribution and exchange of economically useful information that caused them to capture the lion’s share of Europe’s trade with other continents as well as a significant share of her internal commerce. The entrep?t trade attracted related industries processing exotic materials and servicing the shipping and financial sectors. The growth in population supported by these activities was so large that it created a market large enough to induce economies of scale in production, of which the counterpart was rising real returns to capital, land and labor. De Vries noted that unlike other parts of Europe, where population growth lowered real wages, in urbanizing Holland and England it raised them. The land constraint was not absolutely binding. Spending the higher incomes created an effective market demand for more expensive kinds of farm produce, textiles and housewares, and so diffused the prosperity of the town into the countryside. The dynamic thus reflected the reciprocal relation between the extent of the market and the division of labour summarized by Smith’s famous maxim.

Economies of scale resulting from the concentration long-distance trade and related activities into a smaller number of large cities, however, could not fully explain how an economy in crisis could generate points of economic progress and prosperity. The major exogenous event in this century and a half of slowly growing population and imperceptibly improving technology was the colonization of North and South America and the growth of trade with Asia. The chief products of this expansion in Europe’s commercial space was increased supply and falling prices of exotic commodities, some of which are highly addictive. Unlike traditional commodities manufactured locally or within the household economy of peasant families, exotic goods and the cheaper kinds of manufactures available through trade had to be paid for with cash, which in the steady state could only be earned by exporting more goods to the urban sector. This, plus the demand for cash to pay increased taxes, explained why the extra rural income was not dissipated in leisure. The advent of exotic commodities and cheap manufactures changed tastes in a way that shifted the supply of labor, enterprise, and most likely capital, outward.

How, then, did the economy of crisis become an economy of growth? Part of the answer was the end of civil and religious warfare in Germany and the stabilization of government in France and England after 1720, which provided a period of comparative calm during which population could begin to grow again and the web of financial intermediation could be re-knitted. The continued growth of long-distance trade with Asia and the accelerated expansion of the European colonies in the New World imparted a further positive impetus, though its main effects happened late in the day. In the first century of the age of crisis the most important source of long-term growth was the dynamic scale economies associated with the concentration of trade and related activities on a handful of cities in Northern Europe. At first the growth of Amsterdam and perhaps London was at the expense of older centers like Antwerp, Venice and Genoa, but as overall activity stabilized and began to grow again after 1713, falling transaction and distribution costs fell throughout the continent. Declining costs of manufactured and imported goods improved the rural terms of trade, and induced more agricultural and industrial production in the countryside. The growing trade financed the improvement of transport facilities linking town and countryside, and provided the means of greater financial integration. The crisis, then, was in many ways a tipping event that led Europe’s economy to a new geographical and economic equilibrium. An important and as yet unanswered question is whether in the absence of the negative shocks of the seventeenth century the tipping would have favored southern Europe and the developing spine of development in central and western Germany, which were to be the heartland of Europe’s nineteenth-century industrialization.

Despite criticism from Dutch economic historians wedded to the Malthusian paradigm, De Vries’ economic model of the early modern transformation of the European economy has stood up well. Based to a large extent on the Hymer-Resnick model of gains from trade to be had from the specialization of rural households on agricultural production, and on Adam Smith’s scale economies, De Vries’ account of the dynamic returns to scale in the early modern economy found support in the arguments for increasing returns embedded in the economics of coordination failure and in the new trade theory of the 1980s and the early 1990s. In this respect, the book was ahead of its time. An Economy in Crisis has also influenced the reconstruction of Chinese economic history, where a similar dynamic has been found to operate with similar results.4 According to Kenneth Pomeranz a market-based division of labor in eighteenth-century China supported living standards comparable with the European standard of 1750.

One of the overlooked merits of this account of early modern economic development is its denial of the inevitability of an Industrial Revolution. Smithian trade dynamics could lift productivity for a long time, but not forever; it could alone give rise to the fundamental technological breakthroughs that have sustained economic growth since the late eighteenth century. Perfect property rights and easy trade might actually limit incentives to innovate by providing tradable substitutes for intellectual effort. These notions underlie Pomeranz’s assertion of an eighteenth-century Chinese ceiling that led to what he calls the Great Divergence. According to De Vries, the exceptionally commercialized Dutch economy was bounded by a similar ceiling.

As is to be expected some parts of the book have held up less well than the general model. The agricultural discussions are dated; it is now clear that French agriculture was more productive and less static than the accounts on which De Vries based his discussion indicated, and it appears that traditional husbandry was capable of supporting a more elastic supply response than was then believed to be possible. The role of structural determinants of regional differences in agricultural productivity is also problematic. The discussion of the role of rural industry in creating a proletariat reflects historical debates of an earlier time, and ignores the agricultural implications of a growing non-agricultural population. The analysis of the financial sector, including the evolution of commodity moneys, is less sophisticated and detailed than one would demand today. In particular, a new edition would have to incorporate the insights into public finance derived from the theory of rational expectations and the theory of games. A modern, longer treatment would also probably pay more attention to what one might call business cycles, bringing the short run back into the story of the long one. The study of population dynamics in this period has also progressed from its state in the early 1970s, and much more is now known about the role of women in the economy. A new edition would extend the discussion of technological change to the development of scientific institutions and scientific publishing. Nevertheless, it is surprising how well the book holds up. A recent textbook by Robert Duplessis covering the same ground has little more to say except in having more detail.5

In its modest way, The Economy of Europe in an Age of Crisis has made a signal contribution to the way we think about pre-industrial economic development. One might argue that the dynamics the book expounds are based on the atypical experience of a few rapidly growing regions; but this is the nature of dynamic economies of scale. They gather in business and enterprise from other places. One of the unanswered questions is how fragile was this trade-based growth. Was it rooted in the irreversible expansion of colonial trade, or did its continuance depend on the maintenance of stable trading relations? How integrated was the European economy of the seventeenth and early eighteenth century? How vulnerable was it to monetary instability? How close did it come to coming unraveled in the dark years between 1640 and 1660, and again between 1690 and 1713? How important for the subsequent growth of the European economy were the stabilization of finances and the political tranquility of Europe’s largest nation (France)? Exactly how crucial was the growth of population and production in North America? These are questions to which we still lack answers. That we can ask them is a tribute to the achievement of this remarkable little book.

Notes:

1. See Robert S. Lopez, The Commercial Revolution of the Middle Ages, 950-1350, Cambridge (1971); Harry Miskimin, The Economy of Early Renaissance Europe, 1300-1460, Cambridge (1969); and Harry Miskimin, The Economy of Later Renaissance Europe, 1460-1600. (Cambridge (1977).

2. Fernand Braudel, Afterthoughts on Material Civilization and Capitalism. Baltimore (1977), p. 17.

3. Eli Heckscher, Mercantilism, London (1935); John U. Nef, Industry and Government in France and England, 1540-1640, Ithaca (1964).

4. Philip Huang, The Peasant Economy and Social Change in North China, Stanford (1985); R. Bin Wong, China Transformed: Historical Change and the Limits of European Experience, Ithaca (1997); Kenneth Pomeranz, The Great Divergence: Europe, China, and the Making of the Modern World Economy, Princeton (2000).

5. Robert S. Duplessis, Transitions to Capitalism in Early Modern Europe. Cambridge (1997).

George Grantham was awarded the Cliometric Society’s annual prize — the Clio Can — in 2000. His recent publications include “La faucille et la faux: un cas de d?pendence temporelle?” Etudes Rurales (2000); “The French Agricultural Productivity Paradox: Measuring the Unmeasurable,” Historical Methods (2000); “Contra Ricardo: On the Macro-economics of Europe’s Agrarian Age,” European Review of Economic History (1999); and “Espaces priviligi?s: productivit? agricole et zones d’approvisionnement urbains dans l’Europe pr?-industrielle,” Annales. histoire, sciences sociales (1997).

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Subject(s):Economywide Country Studies and Comparative History
Geographic Area(s):Europe
Time Period(s):18th Century

The Cambridge Economic History of the United States, Volume III: The Twentieth Century

Author(s):Engerman, Stanley L.
Gallman, Robert E.
Reviewer(s):Libecap, Gary

Published by EH.NET (March 2001)

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Stanley L. Engerman and Robert E. Gallman, editors, The Cambridge Economic History of the United States, Volume III: The Twentieth Century. New York: Cambridge University Press, 2000. vii + 1190 pp. $99.95 (cloth), ISBN: 0-521-55308-3.

Reviewed for EH.NET by Gary Libecap, Department of Economics, University of Arizona.

This is, of course, a volume about an extraordinarily successful economy in the twentieth century. Surely, in terms of individual welfare and economic advancement, there has been no parallel in human history. We not only are extremely lucky to be part of it, but are challenged to understand its origins and progress across the century. This volume is indispensable for such an undertaking. The chapters address key aspects of the American economy and are written by leading scholars in the field. In this review, I summarize some of the highlights from each of the seventeen chapters. There is a very useful bibliographic essay at the end of the volume for more details on the broad patterns described in each chapter. This is the third volume in the Cambridge series on the development of the American economy, and one that serious economic historians will want to have readily available for reference in research and for use in the classroom.

The volume appropriately begins with an overview of the macro economy, “American Macroeconomic Growth in an Era of Knowledge-based Progress: The Long Run Perspective,” by Moses Abramovitz and Paul David. The introduction provides an excellent summary of the recent history of the American economy. Abramovitz and David point out that in the twentieth century there was a shift from extensive productivity growth that characterized the nineteenth century to intensive growth that relied more on technological and organizational change. This is sensible since the American economy moved from a frontier, natural-resource-based economy to a more mature, technology, energy-based economy. While late nineteenth-century technological change tended to be capital using and labor saving, twentieth-century technological change was more intangible capital using and tangible capital and labor saving. Data are provided detailing changes in total factor productivity growth in the transitional decades of 1879 to 1909. Beginning at this time, there was a shift to a greater role for intangible assets — education and training and organized investment in R&D — that would define the twentieth century. Key areas in the new economy were electricity, telecommunications, petroleum, the internal combustion engine, and later, the digital computer. Abramovitz and David outline the rising global position of the American economy over the century. They begin with a statistical profile of American growth since 1800, noting measurement problems, in the early period due to a lack of basic data and in the later period due to problems of comparability and definition of inputs and outputs. Interpretation of production during wars also presents challenges. Many of these issues are familiar to economic historians and were raised in Volume II of the Cambridge series. The authors examine what measured growth fails to capture in reflecting well-being, chiefly improvements in product quality and introduction of new goods and services for consumers whose qualities are not well represented in standard consumption bundles.

Over the twentieth century, the American population became more urban, more western, and more geographically mobile. In Chapter 2, “Structural Changes: Regional and Urban,” Carol Heim outlines the broad regional and urban/rural shifts that have taken place. Cities have grown and regionally, the West and South have gained, especially in the post-WWII period in terms of population and income per capita. There has been general convergence in population and income per capita across the country over the century. Heim emphasizes market and non-market forces, and what she calls hypermarket factors, resource decisions within large firms, in explaining these trends. As part of urban/regional changes, there has been a shift from manufacturing to service, an issue addressed later by Claudia Goldin in her chapter on labor markets. The chapter includes useful data by region on the breakdown of gainful employment by major sector in geographic divisions that reflect the major trends of the century.

The U.S. experience in the twentieth century was really a North American experience, and the growth of the Canadian economy is described in Chapter 3, “Twentieth Century Canadian Economic History,” by Alan Green. He has a particularly heavy load to carry, describing one hundred years of Canadian development in a single chapter. The patterns are similar to those observed for the United States with increased urbanization and industrialization and a movement away from the older wheat and timber-based economy. He points out, however, that the Canadian economy in the 1970s shifted to new natural resources — oil and iron ore production. All in all, Green outlines a record of economic and population growth that for many periods exceeded that of the United States. He briefly examines the sources of economic growth — increases in factor inputs and the growth of total factor productivity. Most interesting is his overview of the wheat economy from 1896-1929, which includes a description of the wheat boom and the staple theory of growth. Green summarizes Canada’s experience with the Great Depression, and although the Canadian economy suffered a sharp drop between 1929 and 1933, as did the U.S., there was a noticeable rebound thereafter that exceeded that of the U.S. The Canadian economy continued to grow, until a slowdown after 1973, where it performed less well than its southern neighbor.

Chapter 4 returns to the American economy with “The Twentieth-Century Record of Inequality and Poverty in the United States” by Robert Plotnick, Eugene Smolensky, Eirik Evenhouse, and Siobhan Reilly. Many of the chapters in the volume address the growth of the economy. This one examines distribution. The authors define inequality and poverty, with the poverty rate equaling the proportion of the population with income below a particular income level fixed in real terms. Inequality was at its highest levels in the century during the period from 1900 to World War I. It then declined during the war, but rose once again through 1929. Inequality fell during the Great Depression and WWII and continued to fall until 1967. It was flat and then trended upward after 1979. The authors claim that there is no single factor that underlies the record of income inequality. In the latter part of the century, where the data are the best, labor supply and demand factors play key roles. After 1979, increases in the demand for skilled labor and technological change bias toward skilled labor led to a premium for those workers. Additionally, there have been changes in the composition of industry, with a shift away from manufacturing toward services, that have increased the earnings of skilled labor and reduced the relative position of the less skilled. The end of the chapter contains an assessment of the public policy effects of tax and expenditures on inequality. The authors find that despite substantial changes in the level and composition of government spending programs in the post-WWII period, there has not been a detectable impact on the trend of inequality. Turning from inequality to the issue of poverty, there has been a clear, generally persistent downward trend through the century. The elderly have experienced a marked decline in poverty, but single-parent households have done less well. In assessing the effects of government programs on poverty, the authors conclude that policies have tended to reinforce, not offset, market factors. The chapter ends with very useful data appendices.

Certainly, one of the major events of the American economy during the twentieth century was the Great Depression, and Chapter 5, “The Great Depression,” is by a leading scholar of the issue, Peter Temin. Temin argues that credit tightness explains most of the fall in production and prices during the first phase of the depression. He discusses the confounding effects of five events that have been cited in the literature as contributing to the start of the depression — the stock market crash, Smoot-Hawley tariff, the first banking crisis, the world-wide decline in commodity prices, and a decline in consumption. He examines the role of the Fed and its adherence to the Gold Standard. Temin argues that a serious macroeconomic downturn due to these factors was turned into the Great Depression by the Federal Reserve’s actions in late 1931 to preserve the Gold Standard. The devaluation that followed the movement off the Gold Standard by the Roosevelt Administration was not followed by aggressive fiscal policy so that the economy deteriorated sharply through 1933. There was recovery between 1933 and 1937, before another downturn. Temin discusses the first New Deal and the actions of the NIRA and AAA and then briefly turns to the second New Deal. Gold inflows from an increasingly unstable Europe increased the money supply, and this helped fuel the recovery through 1937. But government policy brought about an end to that recovery with the recession of 1937. Recovery followed in 1939, largely stimulated by new gold inflows and then the build up for World War II.

Besides the Depression, the other major events of the twentieth century were wars, and in Chapter 6, “War and the American Economy in the Twentieth Century” Michael Edelstein, attempts to gauge the costs of war. This is a very interesting and ambitious chapter. During the twentieth century, there were four major military conflicts — World War I, World War II, the Korean War, and the Vietnam War — along with the Cold War. These conflicts demanded considerable change in the amount of resources devoted by the United States to military activities, which were quite small in the late nineteenth century. Edelstein gauges the direct and indirect costs of these wars, with the direct costs being expenditures for labor, capital, and goods, and the indirect costs including the lost lives, injuries, and destruction of capital and land. Estimates are provided for each as a share of GNP in Table 6.1. The Cold War was the most costly conflict in terms of direct expenditures. Edelstein then turns to the financing of these military conflicts, examining total expenditures and their funding through taxes, borrowing and inflation. Financing approaches are outlined in Table 6.2-6.9. One long-term effect was the apparent permanent increase in the income tax, which was raised by the Revenue Acts of 1941 and 1942. WWII and Korea were financed more by taxation, while Vietnam more by inflation. Finally, Edelstein examines the opportunity costs of the wars by examining the lost capital and investment in public and private enterprises, as described in tables 6.10-6.12. WWI’s opportunity costs included a reduction in nondurable goods consumption and investment in residential and business structures. WWII, held back any growth in consumption, and reduced investment, and the Cold War, Korea, and Vietnam reduced non-durable consumption and relied on deficit financing.

Another broad trend of the twentieth century was the growth of international trade. Peter Lindert, in Chapter 7, “U.S. Foreign Trade and Trade Policy in the Twentieth Century,” examines changes in America’s competitive advantage, the goals of government policy, and their impact on trade. Over the century, he finds a steady increase in the advantage of American skill-intensive goods, with exports increasing. This was not the case for natural resource-based exports. Lindert notes that some industries lost competitive advantage over time, particularly, steel and autos. Although protectionism rose and fell, efforts to promote infant industries never dominated U.S. trade policy. Lindert concludes that U.S. government intervention played no major role in determining which sectors increased or lost competitiveness. Market forces were dominant.

Chapter 8, “U.S. Foreign Financial Relations in the Twentieth Century” by Barry Eichengreen, continues the examination of international trade and monetary patterns. This is one of the best summaries of the financial history of the twentieth century I have seen. It is so complete that students should find it especially useful. The theme of the chapter is that international financial transactions and the institutions that governed them significantly influenced the growth and formation of the American economy. More narrowly, foreign investment led to railroad construction, and more broadly, the business cycle and responses to it were shaped by international capital flows. A related theme is that U.S. financial flows have affected other economies. U.S. capital contributed to European reconstruction following WWI and less positively, transmitted the American depression in the 1930s to other economies. American capital flows had an even greater impact after WWII. Eichengreen examines the gold standard and international financial management during WWI and the associated transformation of U.S. foreign finance. He notes that the United States became more of a creditor at that time, raising policy tensions for balancing internal and external financial markets. This tension was very apparent during the start of the depression, when the U.S. retreated from its international financial position with devaluation and the move off the gold standard. World War II and post-war reconstruction once again increased the role of the United States in the international monetary system. Eichengreen cites Lend Lease, other foreign aid through the Marshall Plan, international borrowing for reconstruction, the Bretton Woods Conference, and the IMF as examples of the key contribution provided by the U.S. in the latter part of the century.

Chapter 9, “Twentieth Century American Population Growth,” by Richard Easterlin shifts attention from financial flows to demographic patterns. This chapter by another leading scholar in the field provides valuable demographic data and charts that outline key trends. Easterlin summarizes patterns that emerged during the century — fertility and mortality continued to decline — and discusses contributing factors. Internal migration to the West, noted earlier in the volume by Carol Heim, is examined in more detail. During the twentieth century, international migration ebbed and flowed, and by the end of the period became a major contributor to population growth. Easterlin concludes with discussion of the implications of the general aging of the population, a pattern offset somewhat by immigration.

Another very complete and useful chapter is by Claudia Goldin, “Labor Markets in the Twentieth Century,” Chapter 10. Goldin summarizes major trends in American labor markets and provides valuable data to demonstrate those trends. Labor gained enormously over the century in terms of increases in real hourly earnings, enhanced worker benefits, reduced hours per week, a reduction in years of work over lifetime, and greater security in the face of unemployment, old age, sickness, and job injury. Goldin argues that these improvements were not really due to union activity or to legislation. They mostly followed from market conditions. Over the century, the face of labor changed. There was a decline in child labor and work by the elderly. The labor force participation of women, however, rose sharply from around 18 percent at the turn of the century to close to 50 percent of the labor force by the end. There were other changes in the labor market, including a shift from manufacturing to service with greater emphasis on skill. The distributional implications of this change in labor markets were noted earlier in Chapter 4. Goldin also points out that workers gained more protection from unemployment, acquired more formal education, and developed increased long-term relationships with firms over the century. At the same time, less discretion was given to supervisors and foremen in hiring and firing and more labor decisions were determined by formal workplace rules. There were fewer strikes and greater reliance on rewards than on punishment by managers. The observed evolution of modern labor markets in the U.S. has affected both individual well being and the performance of the macro economy. Still, Goldin points out that there are differences across region, among immigrants, and across skill levels. She summarizes major twentieth century intervention in the job market, including the enactment of Social Security legislation, OSHA, and the passage of the Wagner Act. Even so, Goldin argues that these actions did not fundamentally change labor markets. Rather, they reinforced market trends. Among the useful data provided are labor force participation; the industrial distribution of the labor force; occupational distribution; self employment figures; productivity measures; data on earnings, benefits, and hours; union membership; unemployment; wage inequality; black/white differences; and the contribution of education.

The discussion of labor markets continues in Chapter 11, “Labor Law” by Christopher Tomlins. Tomlins provides institutional background for the experiences described by Goldin. He traces the beginning of labor law in England and its transfer to the United States in the eighteenth century. He examines the roles of the judicial and legislative bodies in the U.S. in framing labor markets. Unionization, the adoption of workers’ compensation, the granting of anti-trust exemption to unions, the labor provisions of the NIRA and the Wagner Act, as well as Taft Hartley legislation are described.

Chapter 12 turns to agriculture, “The Transformation of Northern Agriculture, 1910-1990,” by Alan Olmstead and Paul Rhode. The well-written introduction summarizes changes in American agriculture in the north during the century, including the decline in the number of farms and farmers and increases in productivity. Improvements in transportation and communication better linked agriculture with the rest of the economy. Olmstead and Rhode examine three themes: sources of technological change, the farm crisis, and government intervention. They begin with discussion of regional contrasts in farm size and number of farms between 1910 and 1990. They emphasize the importance of technological change in explaining these trends. Most productivity change occurred after 1940. There was a labor-saving bias, and a machinery and fertilizer-using bias in technological change. Mechanization was spurred by the internal combustion engine and improved tractor design. The chemical and biological revolutions brought hybrid seeds. Olmstead and Rhode describe the roles of the federal government in providing telephone and electricity to rural areas, in promoting research through the Hatch Act and the agricultural experiment stations, and in subsidizing agriculture. Declining commodity prices, worsening terms of trade, and falling farm populations led to greater federal support of agriculture, beginning in the 1920s, expanding during the New Deal, and continuing through the rest of the century.

While international financial flows were described in Chapter 8 by Barry Eichengreen, Eugene White completes the discussion with focus on internal developments in Chapter 13, “Banking and Finance in the Twentieth Century.” White argues that twentieth century American economic growth was financed by a expanded flow of funds, channeled by alternating waves of financial institutional innovation and government regulation. Government regulation was expanded through adoption of the Federal Reserve System and through various pieces of New Deal legislation, such as the Glass-Steagall Act. White describes the tension that subsequently emerged later in the century between market forces and the regulatory structure that ultimately resulted in political pressure for deregulation. He describes the actions of the Federal Reserve Bank between1913 and 1929 and its relative ineffectiveness in the late 1920s and early 1930s in response to bank failures. This discussion effectively supplements that provided by Eichengreen and Temin. He outlines the consequences of the New Deal and its legacy for financial markets in the last part of the century.

The role of technological change in twentieth century American economic development was emphasized by Abramovitz and David in Chapter 1 and by Goldin in Chapter 10. David Mowery and Nathan Rosenberg examine technology in more detail in Chapter 14, “Twentieth-Century Technological Change.” The distinctive feature of the twentieth century, according to Mowery and Rosenberg, was the institutionalization of the inventive process within firms, universities, and government laboratories. There was emphasis on the use of the scientific method to promote invention and practical use of technology. The authors describe the organization of research and development and the incremental adoption of new technology to improve products and processes. They link the contribution of technology to the pattern of American economic growth. Mowery and Rosenberg note, as well, that as the century progressed, international flows of technology increased through reductions in trade barriers. They show that early technological change tended to be linked with resource endowments and occurred within the chemical and petroleum industries. But there were other examples and the chapter includes short case studies of the internal combustion engine, the automobile and airplane industries, plastics, synthetic fibers, pharmaceuticals, electric power and electronics in production and in consumer products, semi conductors, and of course, computer hardware and software. They provide measures of the growth of industrial R&D and its ties to university research and government investment.

Much R&D occurred within modern corporations, and Louis Galambos describes the development of the corporation in Chapter 15, “The U.S. Corporate Economy in the Twentieth Century.” He outlines the U.S. business system, and argues that there were three major changes: a shift to the corporate form of organization and the development of a high degree of concentration at the beginning of the century; the movement toward the multi-division firm in the 1940s and 1950s, as illustrated by Ford and AT&T; and most significantly, the development of global organizations in the latter part of the century.

Big business and big government collided, as described in Chapter 16, “Government Regulation of Business,” by Richard Vietor. Vietor argues that the growth of regulation over the century in part was due to market failure and in part due to the strategic use of government by firms to enhance their competitive position. He usefully summaries theories of regulation, including the public interest and capture views. Vietor also describes the role of regulatory bodies, which were increasingly influential across the century. He highlights early anti-trust policy, New Deal regulation, and social and environmental regulation in the latter part of the century. He also discusses the deregulation that took place in some industries, notably, in airlines, telecommunications, petroleum and natural gas, and utilities.

The final chapter, “The Public Sector,” by Elliott Brownlee completes the discussion introduced by Vietor. Brownlee describes the growth of government in the twentieth century with data on the relative sizes of the federal, state, and local sectors. He emphasizes Robert Higgs’ crisis argument in explaining the expansion of the public sector. The importance of WWI, the Great Depression, and WWII are noted. Deregulation, however, remains more difficult to understand.

As I indicated in the beginning of this review, Volume III of the Cambridge Economic History of the United States is a superb companion to the earlier two volumes and is an essential addition to the libraries of all serious students of the American economy.

Gary D. Libecap is former editor of the Journal of Economic History. His books include Titles, Conflict and Land Use: The Development of Property Rights and Land Reform on the Brazilian Amazon Frontier (with Lee Alston and Bernardo Mueller) University of Michigan Press, 1999; The Federal Civil Service and the Problem of Bureaucracy: The Economics and Politics of Institutional Change, (with Ronald Johnson), University of Chicago Press and NBER, 1994, The Political Economy of Regulation: An Historical Analysis of Government and the Economy (co-editor with Claudia Goldin), University of Chicago Press and NBER, 1994, and Contracting for Property Rights, New York: Cambridge University Press, 1989.

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