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Institutional Change and American Economic Growth

Author(s):Davis, Lance E.
North, Douglass C.
Reviewer(s):Morris, Cynthia Taft

Lance E. Davis and Douglass C. North (with the assistance of Calla Smorodin), Institutional Change and American Economic Growth. Cambridge: Cambridge University Press, 1971. viii + 282 pp.

Review Essay by Cynthia Taft Morris, Department of Economics, Smith College and American University.

Davis and North Launch Neoclassical Institutional Theory

This book is an early major step in the evolution of the thinking of Douglass North and his collaborators on the “new” neoclassical theory of institutional change — the institutional arm of the new economic history that began to flourish in the 1960s. Among the many notable later steps are The Rise of the Western World (1973) with Robert Paul Thomas and “Constitutions and Commitment: The Evolution of Institutions Governing Public Choice” with Barry Weingast (1989) — which ranks third in citations among articles ever published in the Journal of Economic History.

Lance Davis and Douglass North develop a theory of institutional change so familiar that it is easy to forget the theory was ever “new.” They lay out a model where the core logic of institutional change is neoclassical cost-benefit analysis and the motivating drive for institutional change is profit maximization. The goal of the authors’ “intellectual journey through American economic history [is] . . . to provide a description of the processes that have produced the present structure of economic institutions. That description, in turn, is the basis for a first (and very primitive) attempt at the formulation of a specified, relevant, and logical theory of the birth, growth, mutation, and, perhaps, death of these institutions. The book is a study of the sources of institutional change in American history. It is concerned with the relationship between economic organization and economic growth” (p. 4).

Chapter 1 presents the concepts and definitions (institutional and economic environments, institutional arrangement, institutional instruments, and institutional innovation). An institutional arrangement will be innovated if the expected net gains exceed the expected costs. Arrangements range from purely voluntary to totally government controlled and operated and seek to realize economies of scale, lowered transactions costs, internalization of external economies, reduction of risk, or redistribution of income (pp. 10-11).

Chapter 2 analyses the government’s role in redistribution. The authors’ purpose is to include the role of government in their theory of institutional change in spite of the unsatisfactory state of political theory. To exclude it would likely “yield a model of institutional change no more useful in the growth context than are the present models with their ceteris paribus assumptions about institutions” (pp.37-38). In their analysis, governments with effective coercive power will be the preferred vehicle for institutional innovations where governments are well developed but markets are not, where external benefits are large but property rights are dispersed, where benefits are substantial but indivisible, and where benefits are not increased and the goal is redistribution. The costs of using government to appropriate others’ wealth and income depends on the numbers and heterogeneity of the persons organized, the feasibility of excluding outsiders from benefiting, the complexity of political coalitions, the rules of the political game, and the character of electoral suffrage.

Chapter 3 specifies the dynamics of the model in the context of American history. The authors seek to predict both the institutional “level” of change and the time lag from first perception of profit opportunity to institutional innovation: New institutional arrangements will be innovated where profit or income opportunities appear that require institutional changes or where cost reductions can be achieved with new business forms or political moves redistributing income. Among many influences changing the benefits and costs of institutional innovations are changes in market size, technical change, changes in income expectations, organizational changes in closely related activities, cost reductions associated with government-financed information or reductions in risk, and political changes altering voting or property rights. All these except political changes have parallels in neoclassical theories of technical change. However, “to do no more than assert a relationship between income changes and arrangemental innovation is hardly a significant step; . . . it is our intention to offer a theory that helps predict (or explain) the emergence of these new or mutated arrangements. In particular, the theory predicts the level (individual, voluntary cooperative, or governmental) of the new institutional arrangement and the length of time that passes between the recognition of the potential profit and the emergence of the new arrangement” (p. 39).

The core of chapter 3 divides the causes of varying lags between the perception of an innovation and its successful emergence into four steps: perception and organization, invention, menu selection, and start-up time. (i) The time lag between perceived profit and the organization of a “primary action group” depends on how much profits there are and their certainty. (ii) Where no suitable options are immediately available, time is required for invention. (iii) Where options are available, time is required to search out and select the most profitable ones. (iv) The start-up time for the innovation will vary with the “level” of institutional change, that is, according to whether it is an individual arrangement (shortest lag), a voluntary cooperative one (a longer lag because of more complex arrangements), or a governmental innovation (a still longer lag because political organization is required).

The final chapter of Part I on the theory deals with the exogenous institutional environment, and thus the initial conditions in Davis and North’s model of institutional change. Chapter 4 sketches substantial historical changes in the institutional environment: the rules governing the extent and weighting of voting rights, the legal basis for private property, and “the expectational weights that the community chooses to apply to the future costs and revenues of particular arrangemental innovations — weights that are the product of experience triggered by events exogenous to the model” (p.65). Important sources of change in these three aspects of economic life are (i) the Constitution and its interpretation by the courts, (ii) the common law, and (iii) “the external changes in the political and economic life of the nation that affect the people’s attitudes toward government” (p. 65). A lively sketch of dramatic historical changes and fluctuations over 175 years in each of these categories follows.

Part II consists of six historical chapters in which Davis and North apply their model of institutional change to American economic history by telling vivid stories of changes in land policies, financial institutions, transportation, market structure in manufacturing, the organization of the service industry, and labor market changes affecting unions and education. These stories illustrate well the explanatory potential of their model by describing the history of business and labor responses to changing profit and income opportunities through the adoption of new institutions or adaptations of old ones. No attempt is made here to evaluate these stories since this reviewer has no specialized expertise in American economic history. Of necessity given space constraints, they are selective and reflect the specialties of the authors, as they themselves carefully state in the introduction to the book.

The great strength of the neoclassical theory of institutional change is that it yields an insightful and plausible “explanation” of a wide range of institutional changes over time in individual market economies where the private profit motive is strong and neoclassical-type market supply responses are already widespread. An enormous volume of literature has developed in response to the work of Douglass North and his colleagues. North himself has been an outstanding leader in the expansion of the scope of applications of neoclassical institutional theory.

The limitations of the theory are most evident in the study of cross-country differences in institutional responses to the challenges of opportunities for profit and higher incomes. The new economic theory of institutional change is a variant of historical challenge and response theories, all of which suffer from a similar problem. To quote Nathan Rosenberg’s discussion of David Landes’s Unbound Prometheus (1969), “the industrial world is full of ‘challenges’ and always has been. Why do some challenges in some places at certain times generate successful responses and at other times do not?” (1971, p. 498). Telling historical stories consistent ex post with theories of institutional change does not address the questions raised by many historical instances when profitable opportunities for institutional change did not bring forth historical responses that helped accelerate economic growth. Constrained by its focus on market opportunities and responses, the neoclassical institutional theory poorly accommodates institutional changes driven by nationalist, religious, or imperialist motives so intense as to sacrifice economic gain. Also, the theory accommodates poorly historical country-specific institutional developments that are the outcome of chance and strong path dependency such as are evident in historical patterns of private land acquisitions or foreign domination in some developing countries.

The limitations to the excellent work of North and his collaborators are noted here as a warning that no one theory handles well the diversity of comparative historical experience. Casual empiricism is the usual practice in delimiting the countries and periods to which each theory applies. Because of this, the entire literature on institutional change is particularly weak on the diverse consequences of similar economic, demographic, and technological changes in different institutional settings. We all need to delimit more effectively the domains to which familiar models apply (Morris and Adelman, 1988, p. 32).

References

David S. Landes. 1969. The Unbound Prometheus: Technological Change and Industrial Development in Western Europe from 1750 to the Present. Cambridge: Cambridge University Press.

Cynthia Taft Morris and Irma Adelman. 1988. Comparative Patterns of Economic Development, 1850-1914. Baltimore: Johns Hopkins University Press.

Douglass C. North and Robert Paul Thomas. 1973. The Rise of the Western World: A New Economic History. Cambridge: Cambridge University Press.

Douglass C. North and Barry Weingast. 1989. “Constitutions and Commitment: The Evolution of Institutions Governing Public Choice in Seventeenth-Century England,” Journal of Economic History, 49 (December): 803-832.

Nathan Rosenberg. 1971. “Review of the Unbound Prometheus,” Journal of Economic History, 31 (June): 497-500.

Cynthia Taft Morris is distinguished economist in residence, American University and Charles N. Clark Emeritus Professor of Economics, Smith College. She is past president of the Economic History Association.

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Subject(s):Markets and Institutions
Geographic Area(s):North America
Time Period(s):General or Comparative

The European Macroeconomy: Growth, Integration and Cycles 1500-1913

Author(s):Craig, Lee A.
Fisher, Douglas
Reviewer(s):Broadberry, Stephen N.

Published by EH.NET (October 2000)

Lee A. Craig and Douglas Fisher, The European Macroeconomy: Growth,

Integration and Cycles 1500-1913. Cheltenham, UK and Northampton, MA, USA:

Edward Elgar, 2000. xii + 389 pp. $120.00 (cloth), ISBN: 1-85278-643-4.

Reviewed for EH.NET by Stephen Broadberry, Department of Economics, University

of Warwick.

European economic history currently lacks a good textbook that might appeal

to undergraduate students with a background in economics. Floud and McCloskey

(The Economic History of Britain since 1700, Cambridge University

Press, second edition, 1994) exists, but there is nothing comparable for any

other European country or for the early modern period. This book by Lee Craig

and Douglas Fisher, both from North Carolina State University, is thus to be

welcomed as filling an important gap in the textbook market. It is to be

doubly welcomed, however, for doing an excellent job. In many ways, this book

builds on two earlier volumes, the first by Fisher (1992), The Industrial

Revolution: A Macroeconomic Interpretation, and the second by Craig and

Fisher (1997), The Integration of the European Economy, 1850-1913.

Parts III and IV of this book are essentially compressed and simplified

versions of the earlier two volumes, while parts I and II provide a

theoretical overview and a new section on the early modern period.

Part I sets out the theoretical framework, emphasizing four basic ideas that

recur throughout the book: (1) Institutions have an important role to play in

determining economic performance. In particular, increasing political and

economic integration plays an important role in helping to bring about

convergence of per capita incomes within and between countries. (2) Within a

given institutional setting, the long run rate of economic growth is driven by

population growth and technological progress, with investment affecting the

level of per capita income, but not the long run growth rate, as in the basic

neoclassical growth model. (3) Money and financial services play an important

role in real economic activity, but excessive monetary growth causes inflation

along simple quantity theory lines. (4) Business cycles are driven largely by

shocks to real activity, as in real business cycle models. Armed with this

theoretical toolkit, Craig and Fisher cut a swathe through European economic

history between about 1500 and 1914. The starting date reflects the belief

that integration within nation states had largely occurred by 1500, while

subsequent developments are seen as reflecting integration between those

states.

Part II deals with the growth of the European market economy 1500-1750 in four

chapters, covering population and agriculture (chapter 3), inflation, money

and banking (chapter 4), trade, industry and mercantilism (chapter 5) and

trends and cycles (chapter 6). There are some excellent sections here,

including the analysis of the price revolution in the sixteenth century and

the Kipper- und Wipperzeit inflation in terms of the quantity theory of money,

and the use of real wage data in England, Austria, Alsace, Germany and Spain

to make inferences about living standards. However, apart from population,

there is a serious shortage of macroeconomic data for many countries, so that

at times the authors seem constrained by their framework. Would it not be more

useful, for example, to get at the issue of European integration at this time

by using the abundant microeconomic data on variables such as grain prices,

rather than searching for a common European cycle in the fragments of

macroeconomic data?

Part III then turns to the First Industrial Revolution in Europe, 1750-1850,

with separate chapters on Britain (chapter 7), the “major” continental

economies of France, Germany and Belgium (chapter 8) and the “periphery”

(chapter 9). The discussion of Britain embraces the Crafts/Harley gradualist

view of growth during the Industrial Revolution, although I would have liked

more emphasis on the accompanying and more revolutionary structural change

that the British economy underwent at this time. Traditional microeconomic

themes such as the standard of living and other distributional issues receive

only the briefest mention, and although the “wave of gadgets” that spread

across the continent as well as Britain is discussed in chapter 8, the

treatment is brief by comparison with other texts. By contrast, a great deal

of space is devoted to an innovative attempt to identify a common

international cycle as a sign of the integration of the European economy.

Although the extent to which the peripheral countries can be seen as

integrated into the European economy and hence sharing in this common cycle is

limited, Craig and Fisher are keen to emphasize that right down to the “bottom

of the table,” all these countries were experiencing economic and population

growth rates that were uniquely rapid for any sustained period in their

history.

Part IV contains three chapters on the maturing of the Industrial Revolution

1850-1913 and a final chapter on growth and cycles 1500-1913. The chapters on

the 1850-1913 period cover population and overall economic growth (chapter

10), financial issues (chapter 11) and business cycles (chapter 12). With a

much more complete data set than for earlier periods, it is possible to show

clearly that most West European countries converged towards British levels of

per capita income between 1850 and 1913, but that South and East European

countries did not share in this process of convergence. It is also possible to

show how convergence was linked to a willingness to permit a shift of

resources out of agriculture and out of the industries of the First Industrial

Revolution into the industries of the Second Industrial Revolution. The fuller

data set for this period also permits a much more detailed analysis of the

role of money, drawing on the monetary approach to the balance of payments.

The close correlation of inflation rates across countries during the gold

standard era, combined with the very low correlation of monetary growth rates

across countries is explained by arbitrage in goods markets combined with a

commitment to fixed exchange rates, rather than by a specie-flow mechanism. As

in the previous sections, the chapter on business cycles identifies a common

European cycle.

There is much to commend in this approach. A broad sweep of history can be

covered without getting lost in excessive detail. And by sticking to some

basic ideas, Craig and Fisher have made the book accessible to students with

only a basic knowledge of economics. However, there are also drawbacks. One

concern is that by sticking to a macroeconomic approach, many of the issues

that economic historians have traditionally emphasized are simply not covered

or mentioned only briefly in passing. Maybe traditional texts do sometimes get

a bit bogged down in the details of how the spinning jenny worked, but the

macroeconomic emphasis of this book also has its drawbacks. For one thing, we

can probably be more confident about our knowledge of what happened in the

cotton industry than we can about the growth of national income during the

Industrial Revolution. This makes it instructive to work up to the aggregate

data from the micro evidence, not just to present micro data when macro

estimates are unavailable.

A second area of concern is that economics students studying economic history

should pick up a clear message that history matters. The authors do state at

the beginning that institutions are important, but much of the subsequent

material emphasizes smooth convergence on a global optimum apart from a few

exogenous shocks. One obvious way of emphasizing the importance of the

particular historical path taken would be to cover the twentieth century more

fully, since the period of European integration before 1914 was followed by a

long period of disintegration, some of the consequences of which are still

with us. The excluded twentieth century anyway looks eminently more suitable

for the quantitative macroeconomic treatment favored by the authors than the

included sixteenth and seventeenth centuries.

Overall, I found this a stimulating book. European economic history badly

needs a fresh approach and this is one way of doing it. It is to be hoped that

a paperback version will be issued, otherwise it may prove too expensive for

the mass undergraduate audience that it undoubtedly deserves.

Stephen Broadberry is Professor of Economic History in the Department of

Economics, University of Warwick, United Kingdom. He is currently an editor of

the European Review of Economic History, and his 1997 book, The

Productivity Race: British Manufacturing in International

Perspective,1850-1990, was published by Cambridge University Press.

Subject(s):Macroeconomics and Fluctuations
Geographic Area(s):Europe
Time Period(s):20th Century: Pre WWII

Public Spending in the 20th Century: A Global Perspective

Author(s):Tanzi, Vito
Schuknecht, Ludger
Reviewer(s):Middleton, Roger

Published by EH.NET (October 2000)

Vito Tanzi and Ludger Schuknecht, Public Spending in the 20th Century: A

Global Perspective. Cambridge and New York: Cambridge University Press,

2000. xvi + 291. $64.95 (cloth), ISBN: 0-521-66291-5; $22.95 (paperback),

ISBN: 0-521-66410-1.

Reviewed for EH.NET by Roger Middleton, Reader in the History of Political

Economy, University of Bristol, UK.

This is an ambitious work which can be approached from two standpoints: of one

that revisits Colin Clark’s (1945) much-cited hypothesis that there is some

critical level of public expenditure beyond which diminishing returns prevail;

and of the other as a contribution to the current global debate on economic

policy which is now dominated by the question of which model of capitalism

works best. In one sense few economists are better qualified to undertake

this study than these authors. Tanzi is the Director of the IMF’s Fiscal

Affairs Department and Schuknecht the Principal Economist in the European

Central Bank’s Fiscal Policies Division. Both have made significant

contributions to the applied fiscal policy literature and to the political

economy of state reform. But this book has ambitions to be more than a study

of the current policy debate; it purports to be a historical survey of the

growth of government since c.1870. Both seem to be economists, however,

largely innocent of the ways of economic historians and of the economic

history literature – also that of comparative public policy – and this has

quite significant ramifications for the conduct of their study and the

interpretation of the evidence. The problems raised are various. They range

from extraordinary statements, such as a reference to Keynes (1926) as ‘a

little known book’ (p. 4), through gross stereotypes of episodes in the

history of economic thought and policy regimes, and onward to ignorance of so

much of the literature on both government growth and the interpretation of

long-run economic growth (of which more later). There is also a populist tone

to much of this book which will grate with some readers, and not just those on

the political left who will in any case be unconvinced by the ‘Washington

consensus’ message.

But, enough of this for the present and instead let us progress to the

structure and organisation of this study, and of its conclusions, for there is

much here that is very valuable. The basic thesis is established early: that

the growth of public expenditure since c.1870 was not caused by inevitable

forces that made it imperative; that in terms of the standard socio-economic

indicators (taken as proxies for government policy objectives) smaller, better

focused government is better able to deliver than is big government; and,

therefore, there exists significant scope currently for the big spending OECD

states to contract their public sectors. Moreover, they argue, such fiscal

consolidation can be attained without incurring major economic or political

penalties. This thesis is pursued through four parts to the book: I, ‘The

growth of government: a historical perspective’ (chapters 1-3); II, ‘Gains

from the growth of public expenditure’ (chapters 4-6); III, ‘The role of the

state and government reform’ (chapters 7-9); and IV, ‘Recent experiences of

countries in reforming the government’ (chapters 10-12). The first two parts

rely heavily on two long-term cross-country datasets for the OECD states: one

on comparative public finance (where, despite the book’s title, revenuedata

is also included and analysed) and the other on socio-economic indicators.

These are provided for benchmark years (c.1870, 1913, 1937, 1960, 1980 and

1990s) and sub-periods (for growth rates) for as many of the OECD states, and

for as wide a range of social and economic indicators, as can be amassed as

far back towards c.1870 as is possible. The underlying data is a useful

resource in its own right, but it is unfortunate that the authors know so

little about the public finance history of the individual states (including

the existence of data sources often more suited than those general

statistical collections they have used) and are unaware of important

comparative work by authors such as Gemmell (1993), Steinmo (1993) or Castles

(1998) which covers much of the ground they do but tells much richer stories

about the growth of big government.

Tanzi and Schuknecht’s account of the rise of big government posits a

watershed around 1960. Until that point, and for the majority of countries,

the rise in public spending was matched by improved economic and social

welfare, whereas thereafter diminishing returns became established. They find

the rapid growth between 1960-80 remarkable, given that it occurred when most

countries were not engaged in war effort, there was no depression and the

demographic developments were generally fiscally friendly. Their explanation

is in terms of changed attitudes towards the role of the state – ‘the heyday

of Keynesianism and the time when governments were perceived by many to be

efficient in allocating and redistributing resources and in stabilizing the

economy’ (p. 16). My problem with such arguments is that they attempt to

provide overarching explanations for discrete blocks of time. An economic

historian would not work with 1960-80, would want to factor OPEC into the

argument, would raise doubts about the hegemony of Keynesianism in all OECD

countries, and would in any case retort that Keynesianism was in crisis during

the period of its supposed heyday and that fiscal retrenchment began well

before 1980 in some countries (Britain being a notable case).

I have problems also with the next stage, which involves dividing the OECD

into three groups on the basis of their 1990 status as having big, medium or

small public expenditure/GDP shares. The big spenders (shares of more than 50

per cent) thus comprise Belgium, Italy, the Netherlands, Norway and Sweden;

the medium (40-50 per cent) Austria, Canada, France, Germany, Ireland, New

Zealand and Spain; and the small (less than 40 per cent) Australia, Japan,

Switzerland, UK and the US. If the purpose of the exercise is to show that

between 1960-90 socio-economic welfare advanced more relatively in the small

spending group, then it matters intensely when and how we measure small. For

example, anyone who knows anything about the political and economic history of

postwar Britain will have reservations about the inclusion of the UK in the

small group, knowing full well that its ranking in the OECD in 1960 was very

different. Is a single observation, therefore, the appropriate way to proceed?

We have also the problem that the small group is dominated by the US, and

indeed this creates serious problems for the authors when it comes to the

social stability indicators where in terms of the propensity to imprison the

population and the divorce rate the US is quite out of line with the rest of

the OECD.

There is also a problem of conflation in the argument that the small group

have enjoyed the greatest relative gains in economic welfare since 1960

because they have not been afflicted by big government. As is well-known

amongst economic historians, comparative growth rates need in the first

instance to be located within a long-term catch-up and convergence framework

to accommodate the differing potential that individual economies have to grow

more rapidly than average to attain the GDP/worker-hour levels of the

productivity leader(s). There is no mention of this, and many will in any case

be unconvinced by what is described as the ‘new, modest, and understandably

controversial approach’ (p. 74) of inferring changes in socio-economic welfare

at the level of the nation state directly from improvements in the values of

the relevant socio-economic indicators. It is important to record that there

is no formal hypothesis testing here, no econometrics of any sort, and this

methodology is quite incapable of distinguishing causation from association.

For example, they argue that ‘countries with a large share of public provision

and financing of health care, such as the United Kingdom, do not show better

indicators than countries with a relatively smaller role for government in

health, such as Switzerland. It is therefore questionable as to how far

growing public expenditure is still contributing to these improvements.

Progress in health indicators seems to be more correlated with technical

progress and access to health care does not seem to differ much between

countries any more’ (pp. 91-2). What is not mentioned is the well-established

relationship between health and income (and its distribution) – as their Table

IV.2 (p. 79) shows GDP/capita was very nearly twice as high in Switzerland as

in the UK in 1990 and 2.14 times as high in 1960.

The book is on more solid ground, and makes more of a contribution, in two

areas. It provides a convincing account of how in practice the redistributive

effects of the interaction of welfare spending and tax regimes produce little

differences between the big and small spenders because when the total tax

burden becomes a large share of a country’s GDP, it is no longer very

progressive and, equally, when public transfers become very large, they tend

to be poorly targeted. Secondly, parts III and IV of the book provide a useful

summary of the Washington consensus on what the role of the state ought to be

and a blueprint for its achievement. It is thus likely to be widely read in

policy circles, but those who want more nuanced accounts of what occurred in

public spending will have to look elsewhere.

Roger Middleton’s recent books include Charlatans or Saviours?: Economists

and the British Economy from Marshall to Meade (1998), The British

Economy since 1945: Engaging with the Debate (2000) and (edited with Roger

Backhouse) Exemplary Economists: Introducing Twentieth-century

Economists (2 volumes, 2000).

References:

Castles, F.G. (1998) Comparative Public Policy: Patterns of Post-war

Transformation. Cheltenham: Edward Elgar.

Clark, C.G. (1945) “Public Finance and Changes in the Value of Money,”

Economic Journal, 55 (4), pp. 371-89.

Gemmell, N. (editor) (1993) The Growth of the Public Sector: Theories and

International Evidence. Aldershot: Edward Elgar.

Keynes, J.M. (1926) The End of Laissez-faire. London: Hogarth Press.

Reprinted in The Collected Writings of John Maynard Keynes. Vol. IX:

Essays in Persuasion. London: Macmillan (1972), pp. 272-94.

Steinmo, S. (1993) Taxation and Democracy: Swedish, British and American

Approaches to Financing the Modern State. New Haven: Yale University

Press.

Subject(s):Government, Law and Regulation, Public Finance
Geographic Area(s):General, International, or Comparative
Time Period(s):20th Century: WWII and post-WWII

The Great Divergence: China, Europe and the Making of the Modern World Economy

Author(s):Pomeranz, Kenneth
Reviewer(s):Lal, Deepak

Published by EH.NET (October 2000)

Kenneth Pomeranz, The Great Divergence: China, Europe and the Making of the

Modern World Economy. Princeton, NJ: Princeton University Press, 2000. x

+382 pp. $39.95 (cloth); ISBN: 0-691-00543-5.

Reviewed for EH.NET by Deepak Lal, Department of Economics, University of

California, Los Angeles.

Kenneth Pomeranz (Professor of History at the University of California,

Irvine) has written an important and scholarly book. Yet, despite his

scholarship, at the end of the day I was not convinced by his basic thesis.

The question he asks is one that has tantalized scholars for over a century:

Why did Europe alone of the great Eurasian civilizations escape the binding

land constraint and initiate that process of unbounded Promethean intensive

growth which has transformed humankind’s economic prospects, so that, mass

structural poverty need no longer be the universal scourge it has been for

millennia? As a scholar of China he uses the comparative method to see if any

advantages can be discerned which led core areas in Europe to diverge so

markedly from the core areas primarily in southern China, but also in Japan and

India. In this task, he brilliantly deconstructs the various materialist

explanations that have been advanced by economic historians to explain this

great divergence.

He shows quite convincingly that, until the turn of the eighteenth century,

there was no marked divergence in living standards between the Chinese and

European cores. He then painstakingly shows with an impressive command of the

Chinese literature (much of it recent) that various purported differences in

demography, ecology, accumulation and the pervasiveness of markets which have

been claimed to have given the Europeans an inherent advantage do not stand up

to scrutiny. As late as 1750, the similarities between the Yangtze Delta and

England were greater than the differences. So why did England and subsequently

Europe not follow the labor-intensive path of the “industrious revolution” of

their Far Eastern cousins, and instead take the capital-intensive path of the

industrial revolution?

His answer is in two parts. The first is that coal, which fueled the English

industrial revolution, was geographically not as readily available to the

eighteenth-century core in southern China, since it was concentrated in the

Northwest. The spectacular development of the coal and iron complex in the

northwestern China in the eleventh century, documented by Hartwell, was

dismantled and depopulated by the invaders of the twelfth century, and by the

fifteenth century when the region was stabilized China’s economic and

demographic center of gravity had shifted to the South. He notes that,

retrospectively, the returns to linking the Yangtze delta with the northwestern

coal deposits were huge, but that these returns were invisible ex ante, and it

is not clear what could have been done to realize them. But this explanation

surely will not do, for the Chinese state had acted under the Sung to

disseminate the new wet rice technology to southern China. If the coal-steam

technology had been available to China — as it was in principle but not

developed for reasons to be taken up below — could the powerful bureaucratic

authoritarian state that has ruled China not have taken the necessary action to

link these two geographical regions under its sway?

Nor does the relative geographical distribution of coal reserves in the various

Eurasian civilizations bear up as the decisive factor in the European

divergence, if we consider their location in another Eurasian civilization —

India. Its core lay in the eastern Gangetic plain — in modern Bihar — because

it was here that they found the iron deposits they needed for the iron

implements needed to clear the forests and the iron ploughshares for deep

ploughing. We now know that this area also contains India’s coal reserves. But

despite this, no one has claimed that the Indians could have developed the

coal-steam industrial revolution. By contrast, we know China had nearly all the

ingredients of this revolution in place by the eleventh century, and it still

did not take place. It is highly dubious that the geographical distribution of

its coal reserves had anything to with this lapse.

The second part of Pomeranz’s answer about the causes of the great divergence

is Europe’s discovery and exploitation — partly through trade — of the New

World. There can be no doubt that this extended Europe’s land frontier. But how

decisive was it and why could China not do something similar?

Pomeranz, himself in his last chapter in a section called “Comparisons and

Calculations: What Do the Numbers Mean?” admits the increment to the supply of

land- intensive products from the New World to Europe could not have been

large, but then uses various forms of handwaving including an appeal to chaos

theory to justify his thesis that they were the basis of the great divergence!

But it is the larger question — why did China not seek to exploit areas where

free land was available overseas to overcome its growing land constraint —

which points to the basic flaw in Pomeranz’s and other purely materialist

explanations for the great divergence. As Pomeranz shows, there were empty

lands in South East Asia which “like the post-contact New World, was sparsely

populated and capable of supplying vast quantities of land-intensive resources

that were in demand ‘back home.’ Chinese went there in significant numbers, but

South East Asia never became for coastal China what the New World was for

western Europe” (p. 200). Why? Because unlike Europe’s New World empires, “the

Chinese merchants . . . established themselves in South East Asia without state

backing” (p.200). This is the crucial point. To see why, it is important to

note two important points not even taken into account by Pomeranz.

First, under Kublai Khan the Chinese had created a powerful navy. The famous

admiral Cheng Ho took his “treasure ships” on expeditions to the India Ocean in

the fifteenth century, and William McNeill (The Pursuit of Power:

Technology, Armed Force, and Society since A.D. 1000, University of Chicago

Press, 1982) notes that these expeditions eclipsed anything that the later

Portuguese explorers could muster. Nor did Cheng Ho desist from coercion. He

sealed Chinese suzerainty everywhere he went if necessary by force. McNeill

argues that if the Chinese had continued to expand their overseas empire “a

Chinese Columbus might well have discovered the west coast of America half a

century before the real Columbus blundered into Hispaniola in his vain search

for Cathay. Assuredly Chinese ships were seaworthy enough to sail across the

Pacific and back. Indeed, if the like of Cheng Ho’s expeditions had been

renewed, Chinese navigators might well have rounded Africa and discovered

Europe before Prince Henry the Navigator died (1460)” (p.45).

But instead — the second point — after 1433 the Chinese abandoned their navy

and began to restrict foreign trade and contacts. The shipbuilding and

sea-going skills thereafter degenerated, and China continued in relative

isolation until the “new barbarians” came knocking at its doors in the

nineteenth century.

To understand this shift in policy and the accompanying closing of the Chinese

mind — and the comparable one in Japan following its adoption of the policy

sakoku under the Tokugawa — one has to look at what I have elsewhere (in

Unintended Consequences) called the “cosmological beliefs” of the

various Eurasian civilizations. As these cosmological beliefs are also related

to the different polities, they also help to explain the divergences in state

policy. It would take me too far afield to outline this story here. But without

bringing the mind back in, there is no way to explain China’s failure to

generate the coal-steam industrial revolution and the overseas empire, which

Pomeranz with so many other economic historians rightly see as the proximate

causes of the European miracle.

The great historian of Chinese science, Joseph Needham, used to maintain that

the rise of the West could not be explained in terms of a single or a few

factors but was due to a “package.” Pomeranz’s greatest service is to show that

the material differences in this “package” cannot account for the great

divergence — particularly once one discounts his own materialist differences

as being unconvincing. So as both Weber, and more recently Landes have

maintained, we are back to culture. Both, however, in my judgment got the date

of this cultural divergence wrong. I have argued in Unintended

Consequences that it goes back to at least the sixth century. But that is

another story.

One indication of this cultural divergence is provided by a visit to the great

archeological museum in Xian. The first few rooms of the collection show the

great cultural and scientific efflorescence in China from neolithic times to

the middle ages, and then in room after room there are the same shapes, the

same forms continuing in unending repetition — at least to this untrained eye.

It is to see a civilization that seemed to have seen itself as reaching

perfection and then being frozen in aspic from about the sixteenth century. By

contrast in England this was to be the age of Shakespeare, followed by those of

Locke, Newton, Hume and Smith. The sheer intellectual curiosity and

creativeness of these centuries preceding the industrial revolution are in

stark contrast to what was happening in the other great Eurasian civilizations.

If we are to understand the modern world it is this great divergence which

needs to be explained, and which Pomeranz’s book does not even touch upon.

Deepak Lal is James S. Coleman Professor of International Development Studies,

University of California, Los Angeles, and the author of Unintended

Consequences: The Impact of Factor-Endowments, Culture and Politics on Long Run

Economic Performance (MIT Press, 1998). A third collection of his essays

entitled Unfinished Business, was published by Oxford University Press

in 1999.

Subject(s):Economic Development, Growth, and Aggregate Productivity
Geographic Area(s):Asia
Time Period(s):General or Comparative

Regions, Institutions and Agrarian Change in European History

Author(s):Hopcroft, Rosemary L.
Reviewer(s):Grantham, George

Published by EH.NET (September 2000)

Rosemary L. Hopcroft, Regions, Institutions and Agrarian Change in European

History. Ann Arbor: University of Michigan Press, 1999. xiv + 272 pp.

$49.50 (cloth), ISBN: 0-472-1102303.

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

University, Montreal.

Explaining pre-industrial divergences in the agricultural performances of

European nations has been a major preoccupation of agricultural and economic

historians for decades, and constitutes, if not the holy grail of European

economic history, at least one of its consecrated mugs. Professor Hopcroft’s

book belongs to this sprawling enterprise. Like Adam Smith, she thinks that the

critical factor was the presence or absence of secure property rights in land

and its produce. Good property rights encourage agricultural innovation and

investment by narrowing the gap between private cost and private benefit and by

reducing uncertainty. Ill-defined property rights do the opposite. It stands to

reason, then, that regional agricultural divergence in the early modern era

must have been, to some degree, due to ex ante differences in agrarian

institutions affecting the exercise of private property rights in land. The

institutions Professor Hopcroft thinks are most important are the ones

associated with communal supervision of crop rotations, the timing of

agricultural operations and guaranteed free access of people and their

livestock to other people’s land. In brief, the book addresses the age-old

issue of whether “communal” agrarian customs constituted a significant

impediment to agricultural improvement.

This is well-tilled ground, which historians have cropped so frequently that

its soil is in danger of being exhausted. Professor Hopcroft claims to have

invented a new fertilizer that combines the purported insights of the new

institutional economics with the traditional techniques of comparative history.

The institutional part shows why “communal” forms of agrarian organization

should have been relevant to agricultural performance; the comparative part

tries to show that they were. The demonstration compares agricultural

institutions and early modern agricultural histories in England, France, the

Low Countries and Sweden. As studies of this type are legion, she

differentiates her product by making the comparisons not on nations but on but

on eighteen regions that comprised them, distinguished chiefly, though not

exclusively by the form of their agrarian regime. In principle the extra

observations should increase the degrees of freedom enough to control for

factors other than the agrarian regime. This assumes, however, that the

variables subject to the analysis are well-defined and that they possess a

common metric across the sample of regions. In addition, for the study to

transcend conventional national comparisons, the regional units should be

defined independently of the states in which they happen to be located. This

book meets neither of these conditions. The “regions” are drawn from national

historiographies, and thus do not cross national boundaries, while variables

like “access to markets” the “strength” of communal regulations, “feudalism”

and “propensity to seek communal solutions to conflicts over access to

resources” that enter the analysis are not defined nor probably are they

definable. This looseness means that the comparisons can prove nothing about

the impact of communal regulation of agriculture.

The extent and importance of communal regulation of agriculture in the

open-field districts of Europe where they flourished is in any event greatly

exaggerated. Professor Hopcroft competently surveys the standard literature on

the topic, but misses the important fact that most of the scholarship on which

it rests was conducted before the Second World War at a time when the study of

agrarian institutions was badly infected by the view that the shape of the

fields, vernacular architecture, peasant costume, dialects, tools and agrarian

regulations expressed the lasting “genius” of the folk (a term Marc Bloch

finessed by calling it “rural civilization”). After the War social

anthropologists and historians placed functional constructions on some of the

elements of the agrarian regime — most notably on the choice of techniques and

communal regulations. However, they maintained the original typological

framework of analysis, which minimized the variability of local agrarian

regimes, and hid from view the need to explain that variability in terms other

than a rigid historical path-dependence linking the observable institutions of

the eighteenth and nineteenth century to a dim medieval and pre-medieval past.

Professor Hopcroft accepts this historiography, which allows her to treat

“communal” agriculture as a pre-determined variable rather than an endogenous

one in her comparisons.

The book is organized as a general argument followed by a series of national

case studies, somewhat belying the claim that the analysis is about regions.

Chapter 1 surveys single-cause models of early modern agricultural development

and finds them inferior to a comprehensive multivariate approach. Chapter 2

supplies a somewhat potted account of the types and origins of European field

systems. Chapter 3 analyses the institutions from the standpoint of

transactions cost, and sets out supposedly testable hypotheses such as

“development will be most likely in countries and regions where state

institutions (particularly legal institutions) and policies decrease

transactions costs involved in production and exchange.” Chapters 4 through 8

carry out the tests of hypotheses on England, the Netherlands, France, Germany

and Sweden. Chapter 9 concludes that “less-communal” institutions were critical

in creating the agrarian conditions for agricultural innovation. Readers

unfamiliar with the standard literature on European agrarian history may

benefit from the bibliography, but on the whole the material is rather dated

and the conclusions drawn from it are unexceptional. This is not a book that

will change anyone’s mind about the topic it treats.

It is also essentially a book in historical sociology rather than historical

economics. As a doctoral dissertation in sociology, it no doubt meets the

analytical standards of its discipline, but it is far from meeting those of

professional historians and professional historical economists. Historians will

be dismayed by the cavalier utilization of secondary sources taken at face

value; economists will be appalled by its failure to meet elementary

definitional requirements of logical analysis; scholars specializing in the

history of agrarian institutions will wonder whether the book’s failure to

discuss comparatively recent work arguing the contrary hypothesis that common

field practices had little long-term effect on the history of agricultural

improvement (Meuvret 1971 and 1987; Grantham 1980) is intentional or just

grossly negligent. Fundamentally, however, this is a work that should not have

been undertaken by a fledgling scholar, even one as obviously intelligent as

Professor Hopcroft. The risks of reasoning from secondary works in history are

so great there ought to be a standing order preventing anyone who has not won

her spurs in hand-to-hand combat with original sources from undertaking it.

This is not because primary sources speak with unforked tongues — quite the

opposite. But they can be made to tell something like the truth by testing them

against each other and against the whole body of scholarship that concerns

them, and by reviewing that literature in their light. This multi-dimensional

triangulation is what gives seasoned historians and seasoned historical

economists a sense of what to trust and what to test. This is not a skill

lightly acquired. How many times have economic historians witnessed an

accomplished economist constructing hypotheses out of stylized facts that have

long been proven to be false, in the gullible belief that if the work once

passed a referee, its results must still be valid, something he would never do

in his own field of expertise. Professor Hopcroft is not an accomplished

economist, but she has fallen into the same trap. Deans being who they are,

assistant professors have to publish books that should not be published. The

best one can hope for is that these books stand untouched on university library

bookshelves, where the only damage they do is to the library budget. It is

painful to see an obviously talented and promising scholar waste her gifts on

an enterprise that cannot but fail. The work shows a strong and vigorous mind

working with tools that are inadequate to the task. As failures go, this is a

promising one.

References:

G. Grantham, “The Persistence of Open-field Farming in Nineteenth-century

France,” Journal of Economic History, 40 (1980), pp. 515-31.

Jean Meuvret, “La vaine p?ture et le progr?s agronomique avant la

R?volution,” in J. Meuvret, ?tudes d`histoire ?conomique.

Paris: Cahiers des Annales. 1971;

Jean Meuvret, Le probl?me des subsistances ? l’?poque Louis XIV. Vol

II. La production des c?r?ales et la soci?t? rurale,

chapter 1. Paris: 1987.

Subject(s):Markets and Institutions
Geographic Area(s):Europe
Time Period(s):General or Comparative

Les ?crits de Fernand Braudel and Les m?moires de la M?diterran?e: pr?histoire et antiquit

Author(s):Braudel, Fernand
Reviewer(s):Lai, Cheng-chung

Published by EH.NET (August 2000)

Fernand Braudel, Les ?crits de Fernand Braudel. Paris: Editions de

Fallois. Volume I, Autour de la M?diterran?e, 1996. 535 pp. 150 French

francs, ISBN: 2-87706-259-7. Volume II Les ambitions de l’histoire,

1997. vi +529 pp. 150 French francs, ISBN: 2-87706-290-2.

Fernand Braudel, Les m?moires de la M?diterran?e: pr?histoire et

antiquit?. Paris: Editions de Fallois, 1998. 399 pp. 150 French francs,

ISBN: 2-87706-304-6.

Reviewed for EH.NET by Cheng-chung Lai, Department of Economics, National Tsing

Hua University, Sinchu 30013, Taiwan.

Braudel’s Memories of the Mediterranean

Fernand Braudel’s miscellaneous writings were published by ?ditions de Fallois

in four volumes between 1996 and 2000. The first three volumes have their

respective subtitles under a common title Les ?crits de Fernand Braudel,

the fourth volume is an independent monograph on the ancient history of the

Mediterranean. Volumes II and III of Les ?crits contain Braudel’s

various essays that are, in my opinion, of secondary importance, on which I

have no particular points to offer. On the other hand, there is a common

subject between the first and the fourth volume that may be of interest to

Braudel readers, economic historians and scholars of the Mediterranean.

Braudel’s La M?diterran?e et le monde m?diterran?en ? l’?poque de Philippe

II (1949) is a masterpiece that is still in print half a century later.

There is another less well-known book on the Mediterranean that he edited La

M?diterran?e, l’espace et l’histoire (volume 1); La M?diterran?e, les

hommes et h?ritage (volume 2) (Paris: Arts et M?tiers Graphiques, 1977;

reprinted by the Edition Flammarion, 1985-6 in the Collection Champs Nos. 156,

167). There are twelve articles in this handsomely illustrated two-volume set

(often used as Christmas gift), in which Braudel contributed five: “La terre”,

“La mer”, “L’aube”, “L’histoire” and “Venise”.

Yet, Braudel had some other writings (about 850 pages) on the Mediterranean, a

major part of which is unfamiliar to many specialists of the Mediterranean

studies and unknown to most Braudel readers. They were published more than ten

years after his death in December 1985. We shall begin with Autour de la

M?diterran?e of 1996.

Autour was edited by Roselyne Ayala and Madame Paule Braudel, with a

Preface by Maurice Aymard, and a detailed index (pp. 511-32). This volume

collected writings of Braudel on the Mediterranean, including his early project

proposal, unpublished manuscripts, published texts and many reviews. It

contains three parts: North Africa (4 chapters), the Spanish Empire (4

chapters), Italy and the Mediterranean (6 chapters).

Among the abundant text, “Charles Quint” (pp. 171-212), which had already

appeared in his ?crits sur l’histoire II (1990), should not be reprinted

here. Another article, “Philippe II” (pp. 213-57), also appeared in ?crits

II, but it was retranslated from the Italian version, the original French

text is included here for the first time. For Braudel readers, neither of these

add any new information, except for being the “original version”.

The first two chapters of this volume attract me particularly. The very first

one entitled “The Early Researches” (pp. 15-28) has an old story. In 1927,

Braudel (aged 25) proposed doctoral dissertation subject to the Sorbonne,

entitled “Philippe II, Spain and the Mediterranean.” At the same time he used

this proposal to apply for a research scholarship from the Bourse Jules Ferry,

which he obtained in 1928. On March 29, 1929, he reported to the Bourse

explaining his work in progress and what he was going to do that summer. This

report could be found in the Archives municipales de Saint-Di? and had never

been published before. It reveals significant information about the young

Braudel: his eagerness, his ambitions, his methodology, his initial ideas about

the Mediterranean, and we can see that the initial project diverged

considerably from the finished book that was published in 1949.

A few things stand out. There is no room for diplomatic history, showing that

Braudel was already taking a different path. Surprisingly, he was very

interested in the religious life in Spain (p. 16). The great varieties of

documentation that he consulted also manifest his unique ways of selecting

information from the sea of archives in various Spanish cities (as listed on p.

16). He complained about the chaotic arrangement of files in the archives, he

would have been greatly relived had there been a photocopier, but he was wise

enough to use a movie camera to film the files and project them on the wall to

retrieve the information he needed. The zeal for the project that Braudel

showed in this report is evident, for instance, from the Naples papers alone,

he took 800 pages of notes. In the concluding paragraph, Braudel stated that in

early 1928 he had explained to his thesis supervisor Prof. Pag?s about the

progress of his project, some of his preliminary findings, and the questions to

be studied; he would be glad to mail the same document to the Bourse. If I were

to review the project, I would have endorsed it enthusiastically.

The second essay entitled “The Spanish and the North Africa, 1492-1577,” was

published in the Revue africaine in 1928 (Nos. 2-3, pp. 184-233 and

351-428). Henri Hauser (then professor of economic history at the Sorbonne)

wrote a comment on this long essay in Revue historique (1930): “for the

historians of the sixteenth century, this excellent study, with solid

documentation, has a rare value of critique and is remarkably suggestive.” This

long essay served as the “secondary thesis” (a kind of supplementary work to

show that the doctorate candidate’s view is not too narrow) when Braudel

presented his thesis in 1947. To his honor, it was Maurice Bataillon, then

professor at the Coll?ge de France who examined this secondary thesis (see

editor’s note on p. 31).

What strikes me in this 1928 essay (Braudel was aged 26) is that, although the

topic is quite general in nature and very broad in scope, it is easy to see

that Braudel was quite mature in writing this kind of traditional history. He

was able to present an overall structure of the topic and showed the masteries

of the rich documents that he consulted. What is even more attractive is his

talent to depict the historical scene with big and powerful brushes, the key

issues were organized systematically and the overall flow of the essay was

conquering. In short, in this essay Braudel clearly manifested a kind of

sophistication in the writing of traditional history, he would have been bored

had he remained any longer in this old camp. It is therefore unsurprising that

he soon switched to the new history camp, known as the Annales school,

advocated by Lucien Febvre and Marc Bloch in the early 1930s.

These two 1928 writings are particularly interesting because they allow us to

see how the young Braudel was shining. But they also serve as bad mirrors

reflecting that, except for the ingenious The Mediterranean (1949),

Braudel’s work on the Mediterranean in his more mature stage was not any more

brilliant than those written when he was a high school teacher in Algeria

before 1932.

*************************************************************************

Les m?moires de la M?diterran?e: pr?histoire et antiquit? (1998) was

edited by Roselyne Ayala and Paule Braudel, with a Preface by Jean Guilaine (a

professor at the Coll?ge de France) and Pierre Rouillard (a director of

research au C.N.R.S.). The book contains eight chapters, divided into two

parts, with 42 color plates and 15 maps (pp. 352-70); the index of names and

places is well prepared (pp. 371-93). As the book is printed directly from

Braudel’s manuscripts, the editors should be acknowledged for the many

editorial footnotes, which provide updated information and corrections on

Braudel’s inexact knowledge of archeological matters.

Why did Braudel write this volume and why was it published posthumously? The

publisher’s Foreword tells us that in early 1968 the famous publisher Albert

Skira in Geneva planned a series of illustrated books on the Mediterranean,

from its antiquity to the seventeenth century. Skira asked Braudel to do the

first volume for the series. Braudel complied and wrote it with great pleasure.

He soon completed the task (no more than eighteen months), as we can see from

his Acknowledgements (in four brief paragraphs) dated July 28, 1969. But

Skira’s health was declining in 1970 and he passed away three years later. Some

hesitations arose about the whole project when considering the high printing

costs, so the publisher finally aborted the plan. Braudel was then quite

involved in the writing of the second volume of Capitalism, it would

have cost him a lot of energy to do supplementary work in preparing maps and

illustrative materials on that Mediterranean book. He put the typescript aside

and forgot all about it.

But Madame Braudel and some other people did remember this almost completed

book. It would have been difficult to publish the manuscript as such because

many archeological discoveries and new techniques had rewritten the prehistory

of the sea since the 1970s. The solution was simple but arduous: publish the

manuscript as such, but seek clarification from specialists for ambiguities,

update the related literature, and offering supplementary evidence in the form

of footnotes. Readers are therefore reading Braudel’s original writings along

with new evidence provided by modern specialists.

How could Braudel complete 350 pages of writing so quickly? As we do not see a

long list of archives or references that he consulted, one wonders if this is

an original profound research or if this is a work of synthesis based on

unidentified secondary literature. In his Acknowledgments, Braudel stated that

“my own real researches covered only the 1450-1650 period. ? The present

volume, designated for the general public, allows me to undertake a fantastic

voyage to travel into the very longue dur?e. I seized the occasion”.

So, should we read it as a masterpiece or as a synthesis of the

state-of-the-field (1960s) by a great Mediterranean historian named Braudel?

One realizes that what is interesting in this volume would be Braudel’s views

of the topic, his ways of selecting the materials, but not his opinions as an

expert so far as the archeological aspect is concerned. His ambition was to

describe a pre-fifteenth century history of the Mediterranean such that it can

be connected to his already famous book covering the 1450-1650 period.

The table of contents reveals another message. In the eight chapters that were

divided into two parts we see again Braudel’s famous tri-partition of

historical time (the longue dur?e, conjoncture and event). One may think that

in this book that covers so many centuries, perhaps only the longue dur?e is

the appropriate notion. This is the case for the first five chapters (Part I),

in which the sea, the island, the catastrophes, in short the geography has the

central role. Most Braudel readers are familiar with this in all his books, so

we shall not be surprised to see that the second notion “conjoncture” plays a

central role in Part II. For instance, the section in entitled “Face aux

conjonctures” (pp. 223-25) begins with the statement: “Living in the

Mediterranean, the Carthaginians were necessarily sensible to the overall

movement of the sea, to its conjoncture. The history of the city follows step

by step the rhythms of the Mediterranean life.” By “conjoncture,” Braudel meant

the political, religious and economic crises of the era.

Is there room for the history of events, Braudel’s third notion of historical

time? Yes, Section II of Chapter 7 entitled “Error of Alexander the Great” (pp.

277-83) is an example. But Braudel was alert enough not to have a Part III for

the history of events alone, he combined the history of conjoncture and events

in Part II. How about Braudel’s other important notion, the “economic world”?

He had not forgotten it, as can be seen from Map 15 “L’Empire Romain sous

Septime S?v?re (193-211)” and the related pages (mainly in Chapter 8). If I

were shown this table of contents without knowing who was the author, I would

guess that it was by Braudel or by his imitators. The same framework of The

Mediterranean (1949) was simply applied to an earlier period.

As a general reader, I find the book intriguing, the scale and scope are broad,

and the story is attractively told; it expands my knowledge about the

Mediterranean. Although I have, as most general readers, no sufficient

background knowledge to judge the contents, I do have some feelings about the

book. The writing style is basically synthetic, there is no central argument to

be defended and no new concept is offered. Under the same Braudellien brushes,

I find the ancient history of the Mediterranean much less interesting than that

of the Philip II period.

Experts may have other complaints: the nature of the topic is not Braudel’s

specialty, little archeological insight is added, and no new historical

proposition is offered. Perhaps it is in this sense that Braudel was not

totally wrong to abandon the typescript. For him and the general readers, this

is merely a “popular” book, it should not be a representative volume among his

lifework; for specialists, it was wise for Braudel not to publish what he did

not really know about the pre-fifteenth century Mediterranean.

Cheng-chung Lai’s recent publications include “Braudel’s Key Concepts and

Methodology Reconsidered,” The European Legacy, 2000, 5(1): 65-86. He is editor

of Adam Smith Across Nations: Translations and Receptions of The Wealth of

Nations, Oxford: Oxford University Press, 2000.

Subject(s):Economywide Country Studies and Comparative History
Geographic Area(s):General, International, or Comparative
Time Period(s):General or Comparative

Living with the Century

Author(s):Cairncross, Alec
Reviewer(s):Rollings, Neil

Published by EH.NET (August 2000)

Alec Cairncross, Living with the Century. Fife: iynx, 1998. xvi + 320

pp. $50 (cloth), ISBN: 0-9535413-0-4.

Reviewed for EH.NET by Neil Rollings, Institute of Economic Research,

Hitotsubashi University, and Department of Economic and Social History,

University of Glasgow.

Before I start this review I should make it clear that Sir Alec Cairncross,

who died just after this book, his memoirs, had gone to press, has played an

important role in my academic career. Not only was he the Chancellor of the

University of Glasgow when I was appointed, but he was one of my referees and I

had also worked for him in preparing The Robert Hall Diaries 1947-53.

After my appointment he always found time when he visited Glasgow to see me and

to see how my work was progressing. I am sure that I am not the only young

academic who benefited from his generous support and encouragement.

There is a regular stream of memoirs and autobiographies from retired

politicians looking to set the record straight and, for the more famous, to

earn some easy money at the same time. By contrast, few economists have written

their memoirs. So one could well ask why Sir Alec Cairncross decided to write

his. The reason, I think, is that Cairncross was not a typical economist. His

main impact was not on the intellectual development of economics but through

its application, in particular through his influence on policy-making in

Britain. For many years he was at the center of government economic policy

formulation. In January 1940 and only twenty-eight years old, he entered

government service, first in the Economic Section, a small group of

professional economists at the center of government, (for eighteen months),

then briefly the Board of Trade, before spending the rest of the war working on

planning in the Ministry of Aircraft Production. From 1946 to 1949 he was

Economic Adviser to the Board of Trade and he finally returned to government

service from 1961 to 1969 as Chief Economic Adviser to the Government and then

as the first Head of the Government Economic Service. It is significant,

therefore, that the foreword to this book is written by Roy Jenkins, a

politician, and not by a fellow economist.

The chapters that cover this lengthy government service are perhaps the least

interesting to those that know Cairncross’s previous publications because he

has written widely on many of these experiences, for example in A. Cairncross

and N. Watts, The Economic Section 1939-61 (1989), Planning in

Wartime (1991), Years of Recovery: British Economic Policy 1945-51

(1985), and Managing the British Economy in the 1960s (1996). Indeed,

for the period when he was Chief Economic Adviser and the Head of the

Government Economic Service his diary has also been published.

It is elsewhere in the book that one finds more interesting material. The sheer

variety of his life and his activities is perhaps the most striking feature of

the memoirs. As a postgraduate he was in Cambridge in the 1930s and was one of

the founders of the Review of Economic Studies (later he was to help

establish the Scottish Journal of Political Economy). In 1944 he

published Introduction to Economics, which was one of the first

textbooks of modern economics and was to go through six editions, the last

being in 1982. And in the 1950s, his newly formed department at Glasgow was one

of the earliest in Britain to offer courses to business managers. In addition,

he was a member of a number of important committees in Britain, most notably

the Radcliffe Committee on the Working of the Monetary System; wrote a highly

influential report on regional growth point policy; and in 1969 became a master

of an Oxford college. Nor were his activities restricted to Britain.

Immediately after the war he was in Germany dealing with reparations, in 1950

he spent a year as Director of the Economics Division of the OEEC and for

eighteen months from 1955 was the founding Director of the Economic Development

Institute of the World Bank. Amongst his many activities in retirement were a

number of trips to China.

What is significant about this is that he was a generalist, dealing with micro

and macro issues, domestic and international affairs. He was a firm believer in

the power of human reason: economics was a way of thinking, whereby clear,

rational thought could provide the solution to a problem. Inevitably, this

meant he often had no knowledge of a particular subject prior to being asked to

consider it. It is hard to imagine that anyone now appointed to a position

equivalent to the Director of the World Bank’s Economic Development Institute

would know little about developing countries and the development literature, as

was the case with Cairncross. In the book he emphasizes how the twentieth

century has been the century of the economist and of economics, but also how

much, as a result, economics has developed over that time, not just

intellectually but also in terms of the number of practitioners and the extent

of specialization. It is highly unlikely that any young economist today would

be able in the next century to lead such a varied life and work in so many

different areas of economics. Nevertheless, we can all learn from Cairncross’s

belief that ‘to rest content with the familiar is a way of remaining

underdeveloped’ (p. 292).

Neil Rollings has just published, with Astrid Ringe, “Responding to Relative

Decline: The Creation of the National Economic Development Council,”

Economic History Review (May 2000). “Reluctant Europeans?: The

Federation of British Industries and European Integration, 1945-63,” written

with Alan McKinlay and Helen Mercer, will appear in Business History in

October 2000.

Subject(s):History of Economic Thought; Methodology
Time Period(s):20th Century: WWII and post-WWII

Civilization and Capitalism, 15th-18th Century

Author(s):Braudel, Fernand
Reviewer(s):Heston, Alan

Fernand Braudel, Civilization and Capitalism, 15th-18th Century, in 3 volumes, New York: Harper and Row, 1981-84, original editions in French, 1979.

Review Essay by Alan Heston, Departments of Economics and South Asia Regional Studies, University of Pennsylvania.

Fernand Braudel’s Civilization and Capitalism

Fernand Braudel is associated with the influential Annales School (La nouvelle histoire) that advocated a major break from the dominant narrative paradigm of the early twentieth century embracing an approach to history integrating the social sciences with a problem-focused history. Braudel is uniformly praised as one of the most influential historians of the twentieth century, but a hard act to follow. Braudel immersed himself into masses of materials and emerged with plausible broad-brush stories to tell, teaching others how to replicate this approach is problematic. While the Annales School has made only a small dent in the economic history curriculum in the United States, it has had much more influence on social history worldwide and on economic history in France, Europe and the rest of the world. Rondo Cameron (1989, p. 406) in speaking of Civilization and Capitalism says, “it contains a wealth of factual information, mostly correct, but the brilliance of its author’s rather idiosyncratic interpretation has been exaggerated by the popular press.” Whether one buys the whole quotation, one can certainly agree with Cameron that Braudel builds very idiosyncratic interpretations based upon a wealth of information, often very imaginatively used.

This essay will not pretend to cover the three volumes of Civilization and Capitalism but rather touch on some broad themes that have had influence on our understanding of world economic history. These themes include Braudel’s emphasis on the economic condition of every-man, on a global approach to economic and social history, and on the process of capitalism and its geographical spread. This essay will begin with Braudel’s uses of capitalism, and then take up themes from the volumes of Civilization and Capitalism.

Before dealing with capitalism, some background on Braudel’s career is needed. Many consider The Mediterranean and the Mediterranean World in the Age of Philip II (1966 English translation) published in France in 1949 as his defining work. Braudel began this research in 1923 at age twenty-one and it was envisaged as his doctoral dissertation and was to concentrate on the policies of Philip II in the form of a conventional diplomatic history. Braudel taught secondary school in Algeria from 1923 to 1932 and then lived in Brazil where he taught at the University of Sao Paulo from 1935 to 1937. During this period he kept up with developments in Paris including establishment of Annales in 1929 by Marc Bloch and Lucien Febvre. The long gestation period of this impressive work undoubtedly had much to do with how different was the final product from the original design. Braudel says that he began to see the sense of writing a history of the Mediterranean world in discussions with Febvre circa 1927 but that he did not find models upon which to build. And then in 1934 he began to find quantitative data on ship arrivals and departures, cargoes, prices and other economic data that he felt would be the bricks and mortar of an economic and social history of the Mediterranean. By 1939 he had an outline of what he wished to say, but he was captured by the Germans in 1940 and was imprisoned for the next five years where amazingly he wrote the first draft of The Mediterranean totally from memory. The Mediterranean focuses on the history of one world region in a wide-ranging intellectual breakthrough, involving the geographic setting, transport and communications, urban and hinterland developments, trade, empires and more political themes.

In 1950 his mentor, Lucien Febvre, asked Braudel, who was then teaching at the College of Paris, to contribute a volume to a series on world history. This series was to feature a volume on “Western Thought and Belief, 1400-1800,” that Febvre would prepare while Braudel would focus on the development of capitalism over the same period. Febvre died before he could complete his volume. Braudel succeeded Febvre in 1956 at the Ecole Pratique des Hautes Etudes where he headed the Sixth Section, history. Braudel took responsibility for preparation of what became a three-volume series and was sole editor of the Annales during its most influential period. Braudel published the first volume of Civilization and Capitalism in 1967, and it was translated as Capitalism and Material Life, 1400-1800 in 1973. Volume II, Les Jeux de l”Echange and volume III, Le Temps du Monde, were published in France in 1979; volume II was translated and published as The Wheels of Commerce in 1982 and volume III as The Perspective of the World in 1984, a year before his death. (When the three-volume set was prepared, Volume I, Les Structures du Quotidien: Le Possible et L’Impossible, was a substantially rewritten version of the 1967 edition and was published in France in 1979. The English translation, The Structures of Everyday Life: The Limits of the Possible, was published in 1981. That translation followed the form of the original translation, Capitalism and Material Life, 1400 – 1800, incorporating new materials and changes. In the text, Volume I will be referred to as Capitalism and Material Life.)

A number of centers that focus on aspects of his work were begun during Braudel’s lifetime. Immanuel Wallerstein was instrumental in establishing the Fernand Braudel Center at Binghamton University (SUNY) in 1976. Their journal, Review, begun in 1977, explores a variety of issues relating to the evolution of capitalism, and the study of world systems, about which more below. The Fernand Braudel Institute in Sao Paulo is a think tank that has a strong social dimension to its studies. The economic history emerging from these centers is likely to emphasize the impact of capitalism on the social structures of society and the dependencies involved in the evolution of a worldwide economy over the past five hundred years.

1. Capitalism

Braudel emphasizes that capitalism is something different from the market economy, a distinction that should be kept in mind in understanding Civilization and Capitalism. In lectures in 1976, he said, “…despite what is usually said, capitalism does not overlay the entire economy and all of working society: it never encompasses both of them within one perfect system all its own. The triptych I have described–material life, the market economy, and the capitalist economy–is still an amazingly valid explanation, even though capitalism today has expanded in scope.” (-Afterthoughts on Material Civilization and Capitalism, p. 112) Whether or not one agrees with Braudel, this is his explanation of the order of the three volumes moving from the lower level of the daily material life of everyman to the market economy to the highest level of capitalism. It is a structure of thinking that is rather alien to trends in economic research that seek to explain the behavior of households, markets and business firms using similar economic models, a point discussed further below.

What is capitalism? For Wallerstein capitalism is a system built upon the international division of labor in which the core of the resulting world system prospers, if not at the expense of the others, at least relative to others. A familiar enough theme from the recent Seattle World Trade Organization protests. While Wallerstein took inspiration from Braudel, this is not what Braudel means by capitalism. Braudel viewed the capitalist economy as in the above paragraph, namely as something above everyday material life and the operation of markets. Capitalism takes advantage of high profit opportunities generated by linking markets into a world economy. Braudel distinguishes between the world economy and a world economy, a distinction that is not felicitous, but as one searches for alternatives, such as “regional economy” for a “world economy,” it seems better to stay with his language.

For Braudel a world economy features a core capitalist city whose commercial and financial spread may be well beyond national political boundaries. However, for Braudel there may be several world economies operating at the same time, and for each there will be a dominant core city. Capitalism may utilize an international or larger spatial division of labor but the hegemony of any particular core city for a world economy will wax and wane over time. Further, Braudel believes there have been capitalist worlds from the Italian city states or earlier, whereas Wallerstein’s analysis relies more on a Marxian progression from feudalism to capitalism. Further, Wallerstein treats the political empires like Rome, the Ottomans or the Mughals as non-capitalist systems while Braudel would be inclined to see in them some capitalistic features. He says, “…I am personally inclined to think that even under the constraints of an oppressive empire with little concern for the particular interests of its different possessions, a world-economy could, even if rudely handled and closely watched, still survive and organize itself, extending significantly beyond the imperial frontiers; the Romans traded in the Red Sea and the Indian Ocean, the Armenian merchants of Julfa, the suburb of Isfahan, spread over almost the entire world; the Indian Banyans went as far as Moscow; Chinese merchants frequented all the ports of the East Indies; Muscovy established its ascendancy over the mighty periphery of Siberia in record time” (Perspective of the World, p. 55). Braudel’s position would clearly find support in Mancur Olson’s work.

One further point on capitalism concerns its origins. Wallerstein seeks the origins of the capitalist world system in the feudal breakdown of the agrarian society of Northern Europe in the sixteenth century. Braudel is less concerned with questions of origins, but would certainly place a European world economy much earlier, perhaps in fourteenth-century Italy. Braudel is equally uncomfortable with Max Weber and any attempt to tie capitalism to the Protestant reformation (see Stanley Engerman’s essay in this project). Again, his first line of attack would be to point to all of the developments in the Italian city states that long pre-dated Luther and Calvin.

One point deserves further mention, namely the emphasis that Braudel gives to the ebb and flow of world economies over time and space. There is an element of Joseph Schumpeter’s creative destruction in Braudel’s view of the process but with a spatial spin. Schumpeter saw new innovations involving new entrepreneurs replacing older businesses along with their technologies and labor force. For Braudel the slowly shifting boundaries of world economies have two important implications. First, some areas never become involved with a world economy and their economic level remains very low. And second, some areas that were in a world economy, and were perhaps a core city, lose their place as boundaries of world economies change over time.

2. Capitalism and Material Life

Braudel and the Annales School represented a reaction to traditional narrative history with its emphasis on major actors, usually political or economic elites. More problem-oriented social and economic history has been mainstream for such a long period that present-day readers are unlikely to see anything revolutionary in Braudel’s work. However, in Volume I the chapter headings at that time were themselves a statement, beginning at the lowest level of economic and social organization.

Braudel begins Volume I of Civilization and Capitalism with a discussion of world population during the fifteenth to nineteenth centuries, including an evaluation of the reliability of the numbers and a description of the balance of peoples around the world. Beginning his study with counting all of humanity, Braudel starts off with a global view, involving the rich and the poor, and all regions of the world. He takes on social classifications, like civilized and barbaric, providing an overview of global social divisions. Public health receives major emphasis throughout but certainly the importance of the education of mothers on the health of children does not find its way into Braudel’s treatment. It is a man’s world and although his wife, Paule, was an important contributor to his research, one has to look hard in Braudel for that half of humanity.

Braudel follows population in Capitalism and Material Life with chapters on the major categories of consumer expenditure, bread and cereals, other foods and drink, and clothing and housing. These chapters, enriched with appropriate illustrations, include the diets of the poor, food fashions of the rich, the lack of furnishings of the homes of the poor and middle classes, and the increasingly elaborate interiors of the more affluent. The treatment of fashion and necessity in clothing is wide ranging. While much of this is based on the research of others, it is an extraordinary synthesis of materials from many sources and it is good reading.

The focus on everyday life in Capitalism and Material Life represents a concern shaping many areas of study after 1950, a movement from the study of elites to those of more ordinary people. This entered archaeology, as excavations moved from the palaces and temples to remains of foods, bones, and the dwellings of the poor, or lack thereof. Braudel’s emphasis thus fit very well into much Marxian history and with a view that capitalism grew at the expense of the lower classes. The following quotation referring to Naples is in his chapter Towns and Cities, and is from one of several sketches of cities of the era. It gives the tone of Braudel’s treatment of income inequality.

“Both sordid and beautiful, abjectly poor and very rich, certainly gay and lively, Naples counted 400,000, probably 500,000 inhabitants on the eve of the French Revolution. It was the fourth town in Europe, coming equal with Madrid after London, Paris and Istanbul. A major breakthrough after 1695 extended it in the direction of Borgo de Chiaja, facing the second bay of Naples (the first being Marinella.) Only the rich benefited, as authorization to build outside the walls, granted in 1717, almost exclusively concerned them. As for the poor, their district stretched out from the vast Largo del Castello, where burlesque quarrels over the free distribution of victuals took place, to the Mercato, their fief, facing the Paludi plain that began outside the ramparts. They were so crowded that their life encroached and overflowed on to the streets. ? These ragged poor numbered at the lowest estimate 100,000 people at the end of the century” (Volume I, p. 532).

Here in the midst of a description of impoverishment in Naples we also have imbedded an estimate of the homeless as 20 to 25 percent of society, a typical quantitative illustration that Braudel uses to great effect. He also tells us that the rich have the political power to live in more desirable locations, nothing new there. It is not surprising that Marxist historians would find much to like in Braudel, but there is very little ideological in his writings.

In fact, Braudel is much more interested in putting the everyday life of all peoples in perspective by comparisons of 1400 to 1800 and to contemporary levels of living. Braudel admired Simon Kuznets’ work on national income but does not appear familiar with concepts like urban versus rural versus national growth rates, and his career predates the development of poverty weighted growth rates. But one senses from his discussions of material life that Braudel would have found these comfortable constructs with which to work. He also suggests that he would have liked to use cliometrics in the analysis of his period but that there were not adequate data. However, Braudel would have probably wanted to build up social and national accounts rather than deal with behavioral models.

3. The Wheels of Commerce

It is curious that Volume I devotes chapters to Money and Towns and Cities, which seem much more the subjects of Volume II, The Wheels of Commerce. However, Braudel looks at money as an indicator of the degree of monetization of societies and the complexity of their economies. And as we have noted, the increase in towns and cities during the 1400-1800 period meant an increasing number of poor making their material life in urban areas. On the other hand, this curious treatment may only reflect the evolution of Civilization and Capitalism, in which Capitalism and Material Life was fairly self contained and appeared thirteen years earlier than the remaining volumes.

Wheels of Commerce moves from markets to capitalism and society. Although Braudel does not use the language, he is concerned with the development of institutions, ideology and social norms. He offers a justification for employing the term capitalism, noting that it was not a term used by Marx, only his followers. Capitalism for Braudel involves not only the use of capital but also its position at the apex of material life. As discussed, it is this aspect of Braudel that has had a large influence on those associating the expansion of capitalism and world systems as necessarily intertwined. The first chapter of Wheels of Commerce is called the Instruments of Exchange, by which Braudel means the types of markets in which exchange took place; it is followed by a chapter on Markets and the Economy. The two may only be separate because together they are the length of an average book. Braudel deals with local commodity markets serving surrounding villages and market towns serving their hinterland, as well as wholesale and financial markets. Markets for financial instruments including bourses and exchanges, as well as credit institutions like banks, are also discussed. Bourses, after the Hotel des Bourses in Bruges where early meetings of merchants took place, also dealt in wholesale commodity trade, especially for articles like pepper, cotton, tea and the like. For Europe the 1400-1800 period sees the development of exchanges in Amsterdam and London that while subject to bubbles, also provided a basis for financial intermediation for even small investors.

In treating the development of markets Braudel gives emphasis to the geography of markets, and his treatment is often imaginative, though not terribly systematic. He analyzes the frequency and density of fairs and markets in England and France. He gives more cursory treatments of other parts of the world, though both India and China receive their fair due. G. William Skinner’s treatment of Chinese market towns and cities is discussed in terms of the hexagons of Walter Chrystaller and August Losch. Here Braudel argues that the size of the hexagon embracing different size market towns varies inversely with the density of population (II, pp.118-19). He then applies this to puzzles in French history about the varying boundaries of pays, which he argues may well have been due to changing population densities over time–a rather nice cross-section, time-series application.

Braudel asks questions about markets that are fundamental but often not treated systematically. When do wholesale markets emerge? What leads to the establishment of year-round shops versus occasional markets and fairs? Why did the number of shops proliferate during the 1400-1800 period? When are peddlers really agents of wholesalers and when are they petty traders? Braudel concludes that the expansion of markets was stronger in England than in France, though he does not probe further into why this may have been so. And he argues in terms of his view of hierarchy, that the development of capitalism was interdependent with the expansion of exchange. He also notes that France and particularly China had administrations that constrained the expansion in markets and hence the amount of capitalistic development.

How do markets relate to each other? One way they are integrated is through the activities of the same firm, most typically in this period, an extended family firm. Braudel examines these connections mainly in Europe. The extended family firm was a common practice of merchants from India, China and the Middle East, some of which are discussed by Braudel. While he recognizes the importance of business families in extending the boundaries of any world economy, this also poses a puzzle in some of the diasporas that Philip Curtin has described so well.

For example, in Asia, which in 1400 contained more than half of world population, income and wealth, there was an established pattern of trade prior to European incursions involving intersections of an East Asian world economy that was linked to an Indian world economy stretching from Malacca in the Malaysian Peninsula to Calicut and Cambay in Western India. This in turn joined with what Braudel terms an Islamic world economy extending from the East Coast of Africa through the Arabian Peninsula, Egypt, Turkey and Persia. However, when Vasco da Gama arrived in Calicut in 1498, it was not the core city of an Indian world economy, nor is it obvious that there was such a core city. Vijayanagar was a major South Indian empire at this time but its ability to expand northward was constrained by the presence of the five hostile Bahami kingdoms. The Mughal empire only emerges after 1526. Calicut is itself ruled by the Zamorin, a Hindu ruler whose state was physically quite small, and who did not have territorial ambitions. As Braudel notes, the proportion of Arabs, Indian Muslims, Hindus, and Chinese among the actual merchant groups and shippers varied over the centuries. Diasporas like Malacca and Calicut were home or branch office to Arabs, Armenians, Chinese, Hindus, Bohras, Khojas and similar Muslim groups, Jews, Malays and others. The activities of these traders seem to fit Braudel’s model of high profit seekers linking smaller markets. However, the claim that these Asian world economies of the fifteenth and earlier centuries involved core cities seems strained. Even after the Mughal, Ming, Ottoman and Persian empires were established, it is problematic.

The remaining chapters of Wheels of Commerce deal with the development of capitalism and the role of the state in markets and in establishing monopolies including a lengthy treatment of the activities of the merchant trading monopolies in Africa, Asia and the Americas. Braudel’s treatment of society is a wide-ranging social and political analysis including discussions of hierarchies, revolts and the state and social order. Braudel does not use the terminology, “social norms,” but in a section “Civilizations do not always put up a fight” (II, p. 555) he certainly explores their importance. He says, “When Europe came to life again in the eleventh century, the market economy and monetary sophistication were ‘scandalous’ novelties. Civilization, standing for ancient tradition, was by definition hostile to innovation. So it said no to the market, no to profit making, no to capital. At best it was suspicious and reticent. Then as the years passed, the demands and pressures of everyday life became more urgent. European civilization was caught in a permanent conflict that was pulling it apart. So with a bad grace, it allowed change to force the gates. And the experience was not peculiar to the West.”

4. The Perspective of the World

In his very ambitious last volume, Braudel deals with long cycles, the emergence of various world economies, historical problems in measuring GDP per person, the colonial economies and the industrial revolution. It is certainly successful in one of its aims, to treat the economic history of the 1400-1800 period as a story of the world, not simply Western Europe. There are rich discussions of Africa, the Americas, and Asia balancing well the perspective of the colonizer and the colonized. In his essay on Max Weber, Engerman (p. 5) places Weber and Braudel, along with David Landes, Joel Mokyr, Douglass North, Nathan Rosenberg and others as scholars dealing with the “perceived uniqueness of the Western European economy.” Let me close this essay by arguing that while Braudel has a lot to say about developments in Western Europe, he did not see a simple explanation of the causes of growth in the West, nor did he think this was the most interesting question to explore.

The uniqueness of Western European experience has certainly been taken as the phenomenon to be explained by many economic historians. Writers like Weber not only looked at European evidence in the Protestant Reformation but also offered explanations of why the religions of other societies, such as India, were less conducive to growth. Braudel is not at home with Weber, nor does he seem to give great importance to institutions like private property, contract, and the like. In fact, he does not seem to accept even the premise that there is something unique to be explained about the development of capitalism in Europe.

It might be argued that this is because of Braudel’s idiosyncratic view of capitalism. Let me again quote Braudel;

“Throughout this book, I have argued that capitalism has been potentially visible since the dawn of history, and that it has developed and perpetuated itself down the ages. (III, p. 620) … It would however be a mistake to imagine capitalism as something that developed in a series of stages or leaps–from mercantile capitalism to industrial capitalism to finance capitalism, with some kind of regular progression from one phase to the next, with ‘true’ capitalism appearing only at the late stage when it took over production, and the only permissible term for the early period being mercantile capitalism or even ‘pre-capitalism’. In fact as we have seen, the great ‘merchants’ of the past never specialized: they went in indiscriminately, simultaneously or successively, for trade, banking, finance, speculation on the Stock Exchange, ‘industrial’ production, whether under the putting-out system or more rarely in manufactories. The whole panoply of forms of capitalism–commercial, industrial, banking–was already employed in thirteenth century Florence, in seventeenth-century Amsterdam, in London before the eighteenth century”(III, p. 621).

Here Braudel strongly sees in his period and earlier the same business forms that exist today and to which others attribute the uniqueness of Western European experience.

However, the following quotation perhaps illustrates where Braudel imparts his own special view of capitalism. He says,

“The worst error of all is to suppose that capitalism is simply an ‘economic system,’ whereas in fact it lives off the social order, standing almost on a footing with the state, whether as adversary or accomplice: it is and always has been a massive force, filling the horizon. Capitalism also benefits from all the support that culture provides for the solidity of the social edifice, for culture–though unequally distributed and shot through with contradictory currents–does in the end contribute the best of itself to propping up the existing order. And lastly capitalism can count on the dominant classes who, when they defend it, are defending themselves.

Of the various social hierarchies–the hierarchies of wealth, of state power or of culture, that oppose yet support each other–which is the most important? The answer as we have already seen, is that it may depend on the time, the place and who is speaking” (III, p. 623).

Braudel has a number of elements of Schumpeter in his view of world economic history, in particular long cycles and creative destruction. One of his important insights shared by many others who stress uneven or unbalanced growth is that world economies have changing borders and that there are often areas not included in any world economy. Indian software programmers are writing for Oracle in Bangalore while other areas of India (and many other world areas) are as yet unaffected by the information technology revolution. Most large countries have special development programs for backward areas, of which many have had flourishing histories, such as natural resource-rich Bihar and Eastern Uttar Pradesh in India, the seat of the Mauryan Empire and the birthplace of the Buddha.

However, Braudel departs sharply from Schumpeter in how he views the capitalist entrepreneur. For Braudel the monopolistic character of capitalism is the key element of privilege and the link between the state and society. He says,

“The rise of capitalism in the nineteenth century has been described, even by Marx, even by Lenin, as eminently, indeed healthily competitive. Were such observers influenced by illusions, inherited assumptions, ancient errors of judgement? In the eighteenth century, compared to the unearned privileges of a ‘leisured’ aristocracy, the privileges of merchants may perhaps have looked like a fair reward for labour; in the nineteenth century, after the age of the big companies and their state monopolies (the Indies companies for instance) the mere freedom of trading may have seemed the equivalent of competition. And industrial production (which was however only one sector of capitalism) was still quite frequently handled by small firms which did indeed compete on the market and continue to do so today. Hence the classic image of the entrepreneur serving the public interest, which persisted throughout the nineteenth century, while the virtues of laissez-faire and free trade were everywhere celebrated. The extraordinary thing is that such images should still be with us today in the language spoken by politicians and journalists, in works of popularization and in the teaching of economics, when doubt long ago entered the minds of the specialists…”(III, pp. 628-9).

These closing quotations from Braudel restate his view that everyday material life and operation of markets proceed at one level while capitalism carries on at a higher level above the others. Further Braudel sees capitalism as closely related to the political elites of the world economy in which they are operating. While Braudel’s view of the world economy is shared by many Marxist historians it is also consistent with the writers like John Kenneth Galbraith and Mancur Olsen, with whom I sense more affinity.

5. Conclusion

One cannot write an economic history of the world of the last five hundred years and not at least list Fernand Braudel in your bibliography. But how well does Braudel stand up today? My answer would be very well indeed at several levels. Landes (1998, xvii) introduces his recent book with an account of the inability of contemporary medicine in 1836 to save Nathan Rothschild, the richest person in the world at the time, from death by blood poisoning. Braudel put medical advances and public health practices up front in Capitalism and Material Life as critical to the improvements in economic well being of the world in the early modern period, clearly a theme shared with Landes and many others. He likewise saw the importance of historical demography to our understanding of development of the global economy.

Related to these demographic themes is Braudel’s concern with how health and material well being were distributed. He saw the great inequalities generated in world economies, and thought it important to describe them. He documents inequalities in both the distribution of private and public goods and services and sees systems of privilege as part of past and present economies. And while he would have liked a more equitable world, this is not a major theme in Capitalism and Civilization. A major theme that has contemporary resonance is the uneven development of different geographic regions of the world, and the lack of convergence of world economies, and more particularly the persistence of regions that have never been part of a world economy, or were part of a world economy in the past, but not at present.

Braudel’s distinction between markets and capitalism is probably least likely to make it into mainstream economic history, yet in many ways it also has a very contemporary ring as we move towards becoming one world economy. It is not hard to imagine Braudel finding analogies in this period for phenomena like “not in my backyard” or the internet. In today’s world of mega-mergers that need support by one or more nation states, of Airbus-Boeing battles and of Microsoft anti-trust actions, the Braudel perspective of the world fits surprisingly well. The importance of being first when there are declining costs, learning by doing, or other scale factors that provide barriers to entry into markets are not foreign to the world that Braudel describes. Often, as in the case of the trading companies, monopoly was based upon government support as in the cable industry today, and much of the capitalism that Braudel describes is related to retaining government support or preventing government interference.

References:

Braudel, Fernand. 1966 (English translation, 1972-73). The Mediterranean and the Mediterranean World in the Age of Philip II. New York: Harper and Row.

Braudel, Fernand. 1977. Afterthoughts on Material Civilization and Capitalism. Baltimore: Johns Hopkins University Press.

Cameron, Rondo. 1991. Economic History of the World. New York: Oxford University Press.

Curtin, Philip. 1984. Cross-Cultural Trade in World History. London: Cambridge University Press.

Galbraith, John Kenneth. 1967. The New Industrial State. Boston: Houghton-Mifflin.

Landes, David S. 1998. The Wealth and Poverty of Nations: Why Some Are So Rich and Some So Poor. New York: W.W. Norton.

Olson, Mancur. 2000. Power and Prosperity: Outgrowing Communist and Capitalist Dictatorships. New York: Basic Books.

Schumpeter, Joseph. 1942. Capitalism, Socialism and Democracy . New York: Harper and Brothers.

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Fernand Braudel’s Civilization and Capitalism

Fernand Braudel is associated with the influential Annales School (La nouvelle histoire) that advocated a major break from the dominant narrative paradigm of the early twentieth century embracing an approach to history integrating the social sciences with a problem-focused history. Braudel is uniformly praised as one of the most influential historians of the twentieth century, but a hard act to follow. Braudel immersed himself into masses of materials and emerged with plausible broad-brush stories to tell, teaching others how to replicate this approach is problematic. While the Annales School has made only a small dent in the economic history curriculum in the United States, it has had much more influence on social history worldwide and on economic history in France, Europe and the rest of the world. Rondo Cameron (1989, p. 406) in speaking of Civilization and Capitalism says, “it contains a wealth of factual information, mostly correct, but the brilliance of its author’s rather idiosyncratic interpretation has been exaggerated by the popular press.” Whether one buys the whole quotation, one can certainly agree with Cameron that Braudel builds very idiosyncratic interpretations based upon a wealth of information, often very imaginatively used.

This essay will not pretend to cover the three volumes of Civilization and Capitalism but rather touch on some broad themes that have had influence on our understanding of world economic history. These themes include Braudel’s emphasis on the economic condition of every-man, on a global approach to economic and social history, and on the process of capitalism and its geographical spread. This essay will begin with Braudel’s uses of capitalism, and then take up themes from the volumes of Civilization and Capitalism.

Before dealing with capitalism, some background on Braudel’s career is needed. Many consider The Mediterranean and the Mediterranean World in the Age of Philip II (1966 English translation) published in France in 1949 as his defining work. Braudel began this research in 1923 at age twenty-one and it was envisaged as his doctoral dissertation and was to concentrate on the policies of Philip II in the form of a conventional diplomatic history. Braudel taught secondary school in Algeria from 1923 to 1932 and then lived in Brazil where he taught at the University of Sao Paulo from 1935 to 1937. During this period he kept up with developments in Paris including establishment of Annales in 1929 by Marc Bloch and Lucien Febvre. The long gestation period of this impressive work undoubtedly had much to do with how different was the final product from the original design. Braudel says that he began to see the sense of writing a history of the Mediterranean world in discussions with Febvre circa 1927 but that he did not find models upon which to build. And then in 1934 he began to find quantitative data on ship arrivals and departures, cargoes, prices and other economic data that he felt would be the bricks and mortar of an economic and social history of the Mediterranean. By 1939 he had an outline of what he wished to say, but he was captured by the Germans in 1940 and was imprisoned for the next five years where amazingly he wrote the first draft of The Mediterranean totally from memory. The Mediterranean focuses on the history of one world region in a wide-ranging intellectual breakthrough, involving the geographic setting, transport and communications, urban and hinterland developments, trade, empires and more political themes.

In 1950 his mentor, Lucien Febvre, asked Braudel, who was then teaching at the College of Paris, to contribute a volume to a series on world history. This series was to feature a volume on “Western Thought and Belief, 1400-1800,” that Febvre would prepare while Braudel would focus on the development of capitalism over the same period. Febvre died before he could complete his volume. Braudel succeeded Febvre in 1956 at the Ecole Pratique des Hautes Etudes where he headed the Sixth Section, history. Braudel took responsibility for preparation of what became a three-volume series and was sole editor of the Annales during its most influential period. Braudel published the first volume of Civilization and Capitalism in 1967, and it was translated as Capitalism and Material Life, 1400-1800 in 1973. Volume II, Les Jeux de l”Echange and volume III, Le Temps du Monde, were published in France in 1979; volume II was translated and published as The Wheels of Commerce in 1982 and volume III as The Perspective of the World in 1984, a year before his death. (When the three-volume set was prepared, Volume I, Les Structures du Quotidien: Le Possible et L’Impossible, was a substantially rewritten version of the 1967 edition and was published in France in 1979. The English translation, The Structures of Everyday Life: The Limits of the Possible, was published in 1981. That translation followed the form of the original translation, Capitalism and Material Life, 1400 – 1800, incorporating new materials and changes. In the text, Volume I will be referred to as Capitalism and Material Life.)

A number of centers that focus on aspects of his work were begun during Braudel’s lifetime. Immanuel Wallerstein was instrumental in establishing the Fernand Braudel Center at Binghamton University (SUNY) in 1976. Their journal, Review, begun in 1977, explores a variety of issues relating to the evolution of capitalism, and the study of world systems, about which more below. The Fernand Braudel Institute in Sao Paulo is a think tank that has a strong social dimension to its studies. The economic history emerging from these centers is likely to emphasize the impact of capitalism on the social structures of society and the dependencies involved in the evolution of a worldwide economy over the past five hundred years.

1. Capitalism

Braudel emphasizes that capitalism is something different from the market economy, a distinction that should be kept in mind in understanding Civilization and Capitalism. In lectures in 1976, he said, “…despite what is usually said, capitalism does not overlay the entire economy and all of working society: it never encompasses both of them within one perfect system all its own. The triptych I have described–material life, the market economy, and the capitalist economy–is still an amazingly valid explanation, even though capitalism today has expanded in scope.” (-Afterthoughts on Material Civilization and Capitalism, p. 112) Whether or not one agrees with Braudel, this is his explanation of the order of the three volumes moving from the lower level of the daily material life of everyman to the market economy to the highest level of capitalism. It is a structure of thinking that is rather alien to trends in economic research that seek to explain the behavior of households, markets and business firms using similar economic models, a point discussed further below.

What is capitalism? For Wallerstein capitalism is a system built upon the international division of labor in which the core of the resulting world system prospers, if not at the expense of the others, at least relative to others. A familiar enough theme from the recent Seattle World Trade Organization protests. While Wallerstein took inspiration from Braudel, this is not what Braudel means by capitalism. Braudel viewed the capitalist economy as in the above paragraph, namely as something above everyday material life and the operation of markets. Capitalism takes advantage of high profit opportunities generated by linking markets into a world economy. Braudel distinguishes between the world economy and a world economy, a distinction that is not felicitous, but as one searches for alternatives, such as “regional economy” for a “world economy,” it seems better to stay with his language.

For Braudel a world economy features a core capitalist city whose commercial and financial spread may be well beyond national political boundaries. However, for Braudel there may be several world economies operating at the same time, and for each there will be a dominant core city. Capitalism may utilize an international or larger spatial division of labor but the hegemony of any particular core city for a world economy will wax and wane over time. Further, Braudel believes there have been capitalist worlds from the Italian city states or earlier, whereas Wallerstein’s analysis relies more on a Marxian progression from feudalism to capitalism. Further, Wallerstein treats the political empires like Rome, the Ottomans or the Mughals as non-capitalist systems while Braudel would be inclined to see in them some capitalistic features. He says, “…I am personally inclined to think that even under the constraints of an oppressive empire with little concern for the particular interests of its different possessions, a world-economy could, even if rudely handled and closely watched, still survive and organize itself, extending significantly beyond the imperial frontiers; the Romans traded in the Red Sea and the Indian Ocean, the Armenian merchants of Julfa, the suburb of Isfahan, spread over almost the entire world; the Indian Banyans went as far as Moscow; Chinese merchants frequented all the ports of the East Indies; Muscovy established its ascendancy over the mighty periphery of Siberia in record time” (Perspective of the World, p. 55). Braudel’s position would clearly find support in Mancur Olson’s work.

One further point on capitalism concerns its origins. Wallerstein seeks the origins of the capitalist world system in the feudal breakdown of the agrarian society of Northern Europe in the sixteenth century. Braudel is less concerned with questions of origins, but would certainly place a European world economy much earlier, perhaps in fourteenth-century Italy. Braudel is equally uncomfortable with Max Weber and any attempt to tie capitalism to the Protestant reformation (see Stanley Engerman’s essay in this project). Again, his first line of attack would be to point to all of the developments in the Italian city states that long pre-dated Luther and Calvin.

One point deserves further mention, namely the emphasis that Braudel gives to the ebb and flow of world economies over time and space. There is an element of Joseph Schumpeter’s creative destruction in Braudel’s view of the process but with a spatial spin. Schumpeter saw new innovations involving new entrepreneurs replacing older businesses along with their technologies and labor force. For Braudel the slowly shifting boundaries of world economies have two important implications. First, some areas never become involved with a world economy and their economic level remains very low. And second, some areas that were in a world economy, and were perhaps a core city, lose their place as boundaries of world economies change over time.

2. Capitalism and Material Life

Braudel and the Annales School represented a reaction to traditional narrative history with its emphasis on major actors, usually political or economic elites. More problem-oriented social and economic history has been mainstream for such a long period that present-day readers are unlikely to see anything revolutionary in Braudel’s work. However, in Volume I the chapter headings at that time were themselves a statement, beginning at the lowest level of economic and social organization.

Braudel begins Volume I of Civilization and Capitalism with a discussion of world population during the fifteenth to nineteenth centuries, including an evaluation of the reliability of the numbers and a description of the balance of peoples around the world. Beginning his study with counting all of humanity, Braudel starts off with a global view, involving the rich and the poor, and all regions of the world. He takes on social classifications, like civilized and barbaric, providing an overview of global social divisions. Public health receives major emphasis throughout but certainly the importance of the education of mothers on the health of children does not find its way into Braudel’s treatment. It is a man’s world and although his wife, Paule, was an important contributor to his research, one has to look hard in Braudel for that half of humanity.

Braudel follows population in Capitalism and Material Life with chapters on the major categories of consumer expenditure, bread and cereals, other foods and drink, and clothing and housing. These chapters, enriched with appropriate illustrations, include the diets of the poor, food fashions of the rich, the lack of furnishings of the homes of the poor and middle classes, and the increasingly elaborate interiors of the more affluent. The treatment of fashion and necessity in clothing is wide ranging. While much of this is based on the research of others, it is an extraordinary synthesis of materials from many sources and it is good reading.

The focus on everyday life in Capitalism and Material Life represents a concern shaping many areas of study after 1950, a movement from the study of elites to those of more ordinary people. This entered archaeology, as excavations moved from the palaces and temples to remains of foods, bones, and the dwellings of the poor, or lack thereof. Braudel’s emphasis thus fit very well into much Marxian history and with a view that capitalism grew at the expense of the lower classes. The following quotation referring to Naples is in his chapter Towns and Cities, and is from one of several sketches of cities of the era. It gives the tone of Braudel’s treatment of income inequality.

“Both sordid and beautiful, abjectly poor and very rich, certainly gay and lively, Naples counted 400,000, probably 500,000 inhabitants on the eve of the French Revolution. It was the fourth town in Europe, coming equal with Madrid after London, Paris and Istanbul. A major breakthrough after 1695 extended it in the direction of Borgo de Chiaja, facing the second bay of Naples (the first being Marinella.) Only the rich benefited, as authorization to build outside the walls, granted in 1717, almost exclusively concerned them. As for the poor, their district stretched out from the vast Largo del Castello, where burlesque quarrels over the free distribution of victuals took place, to the Mercato, their fief, facing the Paludi plain that began outside the ramparts. They were so crowded that their life encroached and overflowed on to the streets. ? These ragged poor numbered at the lowest estimate 100,000 people at the end of the century” (Volume I, p. 532).

Here in the midst of a description of impoverishment in Naples we also have imbedded an estimate of the homeless as 20 to 25 percent of society, a typical quantitative illustration that Braudel uses to great effect. He also tells us that the rich have the political power to live in more desirable locations, nothing new there. It is not surprising that Marxist historians would find much to like in Braudel, but there is very little ideological in his writings.

In fact, Braudel is much more interested in putting the everyday life of all peoples in perspective by comparisons of 1400 to 1800 and to contemporary levels of living. Braudel admired Simon Kuznets’ work on national income but does not appear familiar with concepts like urban versus rural versus national growth rates, and his career predates the development of poverty weighted growth rates. But one senses from his discussions of material life that Braudel would have found these comfortable constructs with which to work. He also suggests that he would have liked to use cliometrics in the analysis of his period but that there were not adequate data. However, Braudel would have probably wanted to build up social and national accounts rather than deal with behavioral models.

3. The Wheels of Commerce

It is curious that Volume I devotes chapters to Money and Towns and Cities, which seem much more the subjects of Volume II, The Wheels of Commerce. However, Braudel looks at money as an indicator of the degree of monetization of societies and the complexity of their economies. And as we have noted, the increase in towns and cities during the 1400-1800 period meant an increasing number of poor making their material life in urban areas. On the other hand, this curious treatment may only reflect the evolution of Civilization and Capitalism, in which Capitalism and Material Life was fairly self contained and appeared thirteen years earlier than the remaining volumes.

Wheels of Commerce moves from markets to capitalism and society. Although Braudel does not use the language, he is concerned with the development of institutions, ideology and social norms. He offers a justification for employing the term capitalism, noting that it was not a term used by Marx, only his followers. Capitalism for Braudel involves not only the use of capital but also its position at the apex of material life. As discussed, it is this aspect of Braudel that has had a large influence on those associating the expansion of capitalism and world systems as necessarily intertwined. The first chapter of Wheels of Commerce is called the Instruments of Exchange, by which Braudel means the types of markets in which exchange took place; it is followed by a chapter on Markets and the Economy. The two may only be separate because together they are the length of an average book. Braudel deals with local commodity markets serving surrounding villages and market towns serving their hinterland, as well as wholesale and financial markets. Markets for financial instruments including bourses and exchanges, as well as credit institutions like banks, are also discussed. Bourses, after the Hotel des Bourses in Bruges where early meetings of merchants took place, also dealt in wholesale commodity trade, especially for articles like pepper, cotton, tea and the like. For Europe the 1400-1800 period sees the development of exchanges in Amsterdam and London that while subject to bubbles, also provided a basis for financial intermediation for even small investors.

In treating the development of markets Braudel gives emphasis to the geography of markets, and his treatment is often imaginative, though not terribly systematic. He analyzes the frequency and density of fairs and markets in England and France. He gives more cursory treatments of other parts of the world, though both India and China receive their fair due. G. William Skinner’s treatment of Chinese market towns and cities is discussed in terms of the hexagons of Walter Chrystaller and August Losch. Here Braudel argues that the size of the hexagon embracing different size market towns varies inversely with the density of population (II, pp.118-19). He then applies this to puzzles in French history about the varying boundaries of pays, which he argues may well have been due to changing population densities over time–a rather nice cross-section, time-series application.

Braudel asks questions about markets that are fundamental but often not treated systematically. When do wholesale markets emerge? What leads to the establishment of year-round shops versus occasional markets and fairs? Why did the number of shops proliferate during the 1400-1800 period? When are peddlers really agents of wholesalers and when are they petty traders? Braudel concludes that the expansion of markets was stronger in England than in France, though he does not probe further into why this may have been so. And he argues in terms of his view of hierarchy, that the development of capitalism was interdependent with the expansion of exchange. He also notes that France and particularly China had administrations that constrained the expansion in markets and hence the amount of capitalistic development.

How do markets relate to each other? One way they are integrated is through the activities of the same firm, most typically in this period, an extended family firm. Braudel examines these connections mainly in Europe. The extended family firm was a common practice of merchants from India, China and the Middle East, some of which are discussed by Braudel. While he recognizes the importance of business families in extending the boundaries of any world economy, this also poses a puzzle in some of the diasporas that Philip Curtin has described so well.

For example, in Asia, which in 1400 contained more than half of world population, income and wealth, there was an established pattern of trade prior to European incursions involving intersections of an East Asian world economy that was linked to an Indian world economy stretching from Malacca in the Malaysian Peninsula to Calicut and Cambay in Western India. This in turn joined with what Braudel terms an Islamic world economy extending from the East Coast of Africa through the Arabian Peninsula, Egypt, Turkey and Persia. However, when Vasco da Gama arrived in Calicut in 1498, it was not the core city of an Indian world economy, nor is it obvious that there was such a core city. Vijayanagar was a major South Indian empire at this time but its ability to expand northward was constrained by the presence of the five hostile Bahami kingdoms. The Mughal empire only emerges after 1526. Calicut is itself ruled by the Zamorin, a Hindu ruler whose state was physically quite small, and who did not have territorial ambitions. As Braudel notes, the proportion of Arabs, Indian Muslims, Hindus, and Chinese among the actual merchant groups and shippers varied over the centuries. Diasporas like Malacca and Calicut were home or branch office to Arabs, Armenians, Chinese, Hindus, Bohras, Khojas and similar Muslim groups, Jews, Malays and others. The activities of these traders seem to fit Braudel’s model of high profit seekers linking smaller markets. However, the claim that these Asian world economies of the fifteenth and earlier centuries involved core cities seems strained. Even after the Mughal, Ming, Ottoman and Persian empires were established, it is problematic.

The remaining chapters of Wheels of Commerce deal with the development of capitalism and the role of the state in markets and in establishing monopolies including a lengthy treatment of the activities of the merchant trading monopolies in Africa, Asia and the Americas. Braudel’s treatment of society is a wide-ranging social and political analysis including discussions of hierarchies, revolts and the state and social order. Braudel does not use the terminology, “social norms,” but in a section “Civilizations do not always put up a fight” (II, p. 555) he certainly explores their importance. He says, “When Europe came to life again in the eleventh century, the market economy and monetary sophistication were ‘scandalous’ novelties. Civilization, standing for ancient tradition, was by definition hostile to innovation. So it said no to the market, no to profit making, no to capital. At best it was suspicious and reticent. Then as the years passed, the demands and pressures of everyday life became more urgent. European civilization was caught in a permanent conflict that was pulling it apart. So with a bad grace, it allowed change to force the gates. And the experience was not peculiar to the West.”

4. The Perspective of the World

In his very ambitious last volume, Braudel deals with long cycles, the emergence of various world economies, historical problems in measuring GDP per person, the colonial economies and the industrial revolution. It is certainly successful in one of its aims, to treat the economic history of the 1400-1800 period as a story of the world, not simply Western Europe. There are rich discussions of Africa, the Americas, and Asia balancing well the perspective of the colonizer and the colonized. In his essay on Max Weber, Engerman (p. 5) places Weber and Braudel, along with David Landes, Joel Mokyr, Douglass North, Nathan Rosenberg and others as scholars dealing with the “perceived uniqueness of the Western European economy.” Let me close this essay by arguing that while Braudel has a lot to say about developments in Western Europe, he did not see a simple explanation of the causes of growth in the West, nor did he think this was the most interesting question to explore.

The uniqueness of Western European experience has certainly been taken as the phenomenon to be explained by many economic historians. Writers like Weber not only looked at European evidence in the Protestant Reformation but also offered explanations of why the religions of other societies, such as India, were less conducive to growth. Braudel is not at home with Weber, nor does he seem to give great importance to institutions like private property, contract, and the like. In fact, he does not seem to accept even the premise that there is something unique to be explained about the development of capitalism in Europe.

It might be argued that this is because of Braudel’s idiosyncratic view of capitalism. Let me again quote Braudel;

“Throughout this book, I have argued that capitalism has been potentially visible since the dawn of history, and that it has developed and perpetuated itself down the ages. (III, p. 620) … It would however be a mistake to imagine capitalism as something that developed in a series of stages or leaps–from mercantile capitalism to industrial capitalism to finance capitalism, with some kind of regular progression from one phase to the next, with ‘true’ capitalism appearing only at the late stage when it took over production, and the only permissible term for the early period being mercantile capitalism or even ‘pre-capitalism’. In fact as we have seen, the great ‘merchants’ of the past never specialized: they went in indiscriminately, simultaneously or successively, for trade, banking, finance, speculation on the Stock Exchange, ‘industrial’ production, whether under the putting-out system or more rarely in manufactories. The whole panoply of forms of capitalism–commercial, industrial, banking–was already employed in thirteenth century Florence, in seventeenth-century Amsterdam, in London before the eighteenth century”(III, p. 621).

Here Braudel strongly sees in his period and earlier the same business forms that exist today and to which others attribute the uniqueness of Western European experience.

However, the following quotation perhaps illustrates where Braudel imparts his own special view of capitalism. He says,

“The worst error of all is to suppose that capitalism is simply an ‘economic system,’ whereas in fact it lives off the social order, standing almost on a footing with the state, whether as adversary or accomplice: it is and always has been a massive force, filling the horizon. Capitalism also benefits from all the support that culture provides for the solidity of the social edifice, for culture–though unequally distributed and shot through with contradictory currents–does in the end contribute the best of itself to propping up the existing order. And lastly capitalism can count on the dominant classes who, when they defend it, are defending themselves.

Of the various social hierarchies–the hierarchies of wealth, of state power or of culture, that oppose yet support each other–which is the most important? The answer as we have already seen, is that it may depend on the time, the place and who is speaking” (III, p. 623).

Braudel has a number of elements of Schumpeter in his view of world economic history, in particular long cycles and creative destruction. One of his important insights shared by many others who stress uneven or unbalanced growth is that world economies have changing borders and that there are often areas not included in any world economy. Indian software programmers are writing for Oracle in Bangalore while other areas of India (and many other world areas) are as yet unaffected by the information technology revolution. Most large countries have special development programs for backward areas, of which many have had flourishing histories, such as natural resource-rich Bihar and Eastern Uttar Pradesh in India, the seat of the Mauryan Empire and the birthplace of the Buddha.

However, Braudel departs sharply from Schumpeter in how he views the capitalist entrepreneur. For Braudel the monopolistic character of capitalism is the key element of privilege and the link between the state and society. He says,

“The rise of capitalism in the nineteenth century has been described, even by Marx, even by Lenin, as eminently, indeed healthily competitive. Were such observers influenced by illusions, inherited assumptions, ancient errors of judgement? In the eighteenth century, compared to the unearned privileges of a ‘leisured’ aristocracy, the privileges of merchants may perhaps have looked like a fair reward for labour; in the nineteenth century, after the age of the big companies and their state monopolies (the Indies companies for instance) the mere freedom of trading may have seemed the equivalent of competition. And industrial production (which was however only one sector of capitalism) was still quite frequently handled by small firms which did indeed compete on the market and continue to do so today. Hence the classic image of the entrepreneur serving the public interest, which persisted throughout the nineteenth century, while the virtues of laissez-faire and free trade were everywhere celebrated. The extraordinary thing is that such images should still be with us today in the language spoken by politicians and journalists, in works of popularization and in the teaching of economics, when doubt long ago entered the minds of the specialists…”(III, pp. 628-9).

These closing quotations from Braudel restate his view that everyday material life and operation of markets proceed at one level while capitalism carries on at a higher level above the others. Further Braudel sees capitalism as closely related to the political elites of the world economy in which they are operating. While Braudel’s view of the world economy is shared by many Marxist historians it is also consistent

Subject(s):Markets and Institutions
Time Period(s):Medieval

From Mutual Aid to the Welfare State: Fraternal Societies and Social Services, 1890-1967

Author(s):Beito, David T.
Reviewer(s):Emery, J. C. Herbert

Published by EH.NET (August 1, 2000)

David T. Beito, From Mutual Aid to the Welfare State: Fraternal Societies

and Social Services, 1890-1967. Chapel Hill: University of North Carolina

Press, 2000. xv + 320 pp. $55.00 (cloth), ISBN: 0-8078-2531-x; $24.95 (paper),

ISBN: 0-8078-4841-7.

Reviewed for EH.NET by J. C. Herbert Emery, Department of Economics, University

of Calgary.

David Beito’s From Mutual Aid to the Welfare State is an impressive

examination of North American fraternalism and the extent of mutual aid

provided by fraternal orders over much of the twentieth century. Readers will

be struck by the range and scale of social services and types of insurance

provided by these organizations. In contrast to earlier studies of fraternalism

that have emphasized the exclusionary bases of these societies and that have

concluded that fraternal methods of insurance were failed methods, Beito

(History, University of Alabama) presents fraternal social insurance

initiatives as successful in covering much of the needy (poor) population in an

efficient manner. In the end, Beito argues that these successful fraternal

methods of dealing with economic need wilted beneath a growing web of

government regulation and were crowded out of the insurance markets by the rise

of government social insurance.

The strength of Beito’s work is the detailed case studies of the histories and

social service activities of several organizations. For example, the

examinations of children’s homes built and operated by the Loyal Order of the

Moose (Chapter 3) and the Security Benefit Association (Chapter 4) present the

diversity of fraternal approaches to aiding the “orphans” of their unfortunate

members. Despite the differences across fraternal children’s homes, both

contrasted sharply with character of publicly-run orphanages, and in this sense

provide examples of progressive approaches to social services. Beito then

provides some fascinating data on the economic outcomes of “alumni” of the

homes suggesting that fraternal orders were successful in providing for their

members’ orphans.

Similarly, Beito’s examinations of fraternal hospitals and sanitariums in

Chapters 9 and 10 provide a fresh perspective on how voluntary action could

provide needed hospital services. Given the perception of fraternalism as

largely a relatively well off, white man’s movement, Chapter 10’s examination

of hospitals built and operated by black fraternal orders provides a challenge

to some of the prevailing views of fraternal organizations. Clearly fraternal

mutualism was effective for meeting some of the economic needs for many

non-whites and poorer members of American society.

If there is a weakness with Beito’s book it is that he presents a peculiar view

of American fraternalism that is a product of his primary sources for evidence,

which are largely drawn from the post-World War I period for life insurance

fraternal orders. A primary example of the peculiar picture of American

fraternalism that Beito paints is his repeated claim that American and British

fraternal organizations differed substantially in that the British friendly

societies “focused almost exclusively on sick and funeral benefits and medical

services.” While the sick and funeral benefits were found in American

societies, Beito maintains that the “provision of insurance (life) was the most

visible manifestation of fraternal and mutual aid” (p. 2). Further, Beito’s

evidence reveals that the American organizations (to varying degrees) expended

a great deal of resources on hospitals and homes for orphans and the aged.

Beito’s description of the difference between British and American mutualism is

definitely accurate when comparing the American life insurance orders with the

British Friendly Societies that by definition provided only sick and funeral

benefits. It is probably true when comparing American fraternal organizations

generally with British friendly societies for the post-WWI period, but it is

still a very misleading general characterization of American fraternalism.

Beito provides little or no information on the American “friendly societies”

like the Independent Order of Odd Fellows or the Knights of Pythias that were

the two largest fraternal organizations providing sick and funeral benefits

before WWI and which had limited provisions of life insurance. Clearly these

two organizations were very much like the British societies in their focus on

sick and funeral benefits. Ignoring the IOOF and KP is not necessarily a minor

oversight. The IOOF had a membership 2.5 times the size of the Loyal Order of

the Moose and 4 times the size of the Fraternal Order of Eagles, two of the

larger organizations that Beito emphasizes in his study. The conclusion that

American fraternalism was not so exclusively focused on sick and funeral

benefits after WWI is largely more true because the IOOF and KP were

dismantling their sickness insurance arrangements and operating homes.

Reflecting these changes, the IOOF had considered the sick benefit as its

defining feature in the nineteenth century. By the 1920s, many Odd Fellows saw

the home program as the IOOF’s “crowning achievement” and the “brightest jewel

in its diadem.” Thus, if there is a distinction between British and American

fraternalism it is likely after WWI once the British friendly societies were

official sickness/health insurance providers under the Approved Societies

system and once the American fraternal orders were busy getting out of the

benefits business and into homes for orphans and the aged.

Beito’s focus on homes, hospitals, health insurance and life insurance also

leads to a misleading explanation for the decline of fraternalism. Beito

highlights the negative impact of insurance regulation on the fraternal

insurers and the “crowding out” of fraternal insurance by government insurance

activities and tax treatment of commercial insurance premiums. As such, in his

view most of the decline in fraternal insurance dates from the late 1920s,

through the 1930s and into the 1940s and 1950s. Once again, this may be an

accurate description for the life insurance orders, and for the case of homes

and other fraternal services, but it fails as an explanation for fraternal

benefit activities more generally. Fraternal sick benefit arrangements, which

were the hallmark of the largest orders in North America, were in decline as

early as the 1890s when the Knights of Pythias eliminated the requirement that

all subordinate lodges had to provide a stipulated sick benefit. The IOOF,

which in 1863 declared its stipulated sick benefit to be the order’s

“distinguishing characteristic,” had by 1925 declared that its stipulated sick

benefit was a “vitiation” of Odd Fellows’ principles and called for the

abolition of the benefit. In 1925 the IOOF’s supreme body eliminated the

compulsory requirement that IOOF subordinate lodges pay sick benefits following

at least three decades over which the generosity of the benefit had been

allowed to erode, and in many cases was reduced by limiting lengths of time the

full stipulated benefit could be claimed. In both the IOOF and KP examples, the

decline of the sick benefit arrangement looks identical to that described for

the Loyal Order of the Moose in 1953 in Beito’s final chapter “Vanishing

Fraternalism.” The difficulty for Beito’s explanation for the decline of

fraternal benefits is the fact that common developments across orders differed

in timing by several decades. The IOOF and KP withdrawals from the sickness

insurance market pre-date the rise of government regulation of fraternal life

insurance and the rise of government and other non-profit sources of health

insurance and hospital insurance.

Overall, Beito’s book is a worthwhile read for anyone interested in pre-Welfare

State social insurance, life insurance and fraternalism. For those readers

interested in the history of life insurance Beito clearly lays the foundation

for an important study into the interaction of fraternal and commercial

providers of life insurance. At the same time, readers should heed the cautions

that Beito gives in his book; first just as he suggests that “any quest to find

a ‘typical’ fraternal orphanage is probably fruitless” (p. 87) so too is any

quest to find a ‘typical’ fraternal order. Second, as he cautions on page 225

(in relation to the interpretation of a table which pertains to his study

generally), a reader may get an “inadequate picture of the general state of

fraternalism because it does not include information on the leading orders

supplying sick and funeral benefit.”

Herb Emery is Associate Professor of Economics at the University of Calgary.

He is the co-author (with George Emery) of the recently published A Young

Man’s Benefit: The Independent Order of Odd Fellows and Sickness Insurance in

the United States and Canada, 1860-1929 (Montreal & Kingston:

McGill-Queen’s University Press, 1999).

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

Essays on the Great Depression

Author(s):Bernanke, Ben S.
Reviewer(s):Margo, Robert A.

Published by EH.NET (July 1, 2000)

Ben S. Bernanke, Essays on the Great Depression Princeton: Princeton

University Press, 2000. vii + 310 pp. $35.00 (cloth), ISBN 0-691-01698-4.

Reviewed for EH.NET by Robert A. Margo, Department of Economics, Vanderbilt

University.

For many years, economic research on the origins and persistence of the Great

Depression bore a striking resemblance to historical research on the causes of

the American Civil War. Both sides to the respective debates talked past one

another, and little, if any, intellectual progress was made. Beginning in the

1980s, the situation began to change, at least in case of the 1930s, because of

a simple methodological innovation. That innovation was to look beyond time

series aggregates for a single country, either at dis-aggregated evidence

within countries or at aggregate outcomes across countries. Both types of

evidence are examined in Ben Bernanke’s new book, a collection of (mostly)

previously published articles. (Currently, Bernanke is the Howard Harrison and

Gabrielle Snyder Beck Professor of Economics, Professor of Economics and Public

Affairs, and Chair of the Economics Department, at Princeton University.)

Essays on the Great Depression is divided into three parts, made up of

nine substantive chapters in total, plus an index. Following a very brief

preface, Chapter 1 (“The Macroeconomics of the Great Depression”) presents the

basic themes of the book. Using a cross-country panel data set, Bernanke argues

that monetary factors, along with the Gold Standard, should be according

primary responsibility for the Depression. Adherence to the Gold Standard

resulted in monetary “meltdown” — the declines in the money stock,

accordingly, were non-neutral, because of negative effects of financial crisis

and sticky nominal wages on output growth. Countries that remained on the Gold

Standard did far worse than countries that abandoned it, and a case can be made

that staying on the Gold Standard was more or less an exogenous event – that

is, a “natural experiment.”

Part Two is made up of three chapters. Chapter 2 (“Nonmonetary Effects of the

Financial Crisis in the Propagation of the Great Depression”) is justly famous.

The paper argues that the US financial crises of the early 1930s had (negative)

effects on the real economy, essentially by driving up what Bernanke calls the

“cost of credit intermediation.” One of two chapters in the book to rely on

aggregate time series data for a single country, Bernanke shows (p. 58) that

including deposits of failed banks and liabilities of failed business in an

otherwise standard time-series regression helps to (negatively) predict output

growth. Chapter 3 (“The Gold Standard, Deflation, and Financial Crisis: An

International Comparison,” written with Harold James) reports a similar finding

using the international panel, while Chapter 4 (“Deflation and Monetary

Contraction in the Great Depression: An Analysis by Simple Ratios,” written

with Ilian Mihov) uses very simple methods (an identity linking the price level

to the nominal money supply, the monetary base, international reserves, and the

quantity and price of gold reserves) to decompose the sources of world-wide

deflation before and after 1931

Part Three, on labor markets, is made up of five chapters. Chapter 5 (“The

Cyclical Behavior of Industrial Labor Markets: A Comparison of the Prewar and

Postwar Eras,” written with James Powell) introduces the second major data set

examined in the book, pre-war monthly data on output, employment, hours, and

average hourly earnings for eight US manufacturing industries. Among its many

findings is the striking observation (p. 175) that prewar employers used

shorter hours to reduce labor during a business cycle downturn, while postwar

employers have relied on layoffs. Chapter 6 (“Employment, Hours, and Earnings

in the Depression: An Analyses of Eight Manufacturing Industries”), perhaps the

most influential of the lot, argues that nominal average hourly earnings did

not decline as much as one might expect during the downturn (that is, nominal

wages were sticky) because average weekly hours fell as well, and workers were

unwilling to accept drastic declines in the former given the declines in the

latter. Chapter 7 (“Unemployment, Inflation, and Wages in the American

Depression: Are There Lessons for Europe?” written with Martin Parkinson), the

shortest in the book at eight pages, examines whether the experience of the US

in the 1930s can shed light on certain features of recent European

macroeconomic behavior; namely, the persistence of high unemployment, and the

apparent lack of any influence of high unemployment on either the rate of

inflation or real wage growth. Bernanke concludes that, while there are some

useful lessons, “there are also large enough differences to make inferences

about policy treacherous” (p. 253). Chapter 8 (“Procyclical Labor Productivity

and Competing Theories of the Business Cycle: Some Evidence from Interwar

Manufacturing Industries,” also written with Martin Parkinson) uses the US

industry data to investigate “short run increasing returns to labor” (SRIRL)

during the interwar period. The key finding is that the degree of SRIRL appears

to have been similar in magnitude to the postwar period, which Bernanke claims

is “troubling for the technology shocks explanation of procyclical productivity

(and thus for the real business cycle hypothesis).” Chapter 9 (“Nominal Wage

Stickiness and Aggregate Supply in the Great Depression” written with Kevin

Carey) considers several econometric refinements to Eichengreen and Sach’s

well-known 1985 Journal of Economic History article on the gold standard

and the Great Depression. It concludes that the refinements do little to alter

Eichengreen and Sach’s findings, and concurs with Eichengreen and Sachs that

nominal wage stickiness was an important mechanism for propagating monetary

declines in the early 1930s.

Overall, Essays on the Great Depression is a mixed bag. Two of the

papers — “Non-Monetary Effects” and “Employment, Hours, and Earnings” — are

certifiable classics, and all the chapters are worth reading (or re-reading, as

the case may be). The quality of the prose is several notches better than the

usual fare in professional economics journals. The empirical analysis

demonstrates a practiced eye for what is important and what is not, attention

to historical and institutional detail, and a willingness to explore

alternative explanations. Conditional on when they were written, the

statistical analyses are state-of-the-art, an order of magnitude beyond what

passed for econometric sophistication in economic history journals at the time.

On the other hand, the value-per-dollar ratio is not particularly high. Eight

of the nine chapters are essentially copied (the type-setting is new and

consistent throughout) from their original sources, and six of these, being

from the American Economic Review, Journal of Political Economy,

and the like, are easily available (indeed, I bet most economists who

considering buying this book will have the originals, or most of them, on their

shelves already). The other two chapters were originally published in NBER

volumes, hardly less accessible except to the most library-challenged. That

leaves the three-page preface, the previously unpublished Chapter 4, and an

index as the new material — not much for the reader’s $35.00. I’m not

questioning Bernanke’s right to reprint his admittedly influential articles,

nor Princeton University Press’s decision to package them in a handsome volume

complete with a striking period photograph on the cover and laudatory blurbs

from Peter Temin, Barry Eichengreen, and Randall Kroszner on the back cover.

However, in the long run, scholarship on the Great Depression, along with

readers’ pocketbooks, would have been better served had these essays been

re-written into real chapters; with a real introduction and conclusion;

regressions re-estimated taking into account new data and new econometric

techniques; and new textual material interwoven throughout — in brief, if

Bernanke had written a real monograph. Even with a proper introduction and

conclusion, such a book, I suspect, would be a good deal shorter than this

volume’s 301 pages of rather small print — there is much unnecessary

repetition, indeed confusion, across the various chapters.

As a case in point, consider the treatment of wage stickiness throughout. In

Chapter 2, using his international panel, Bernanke (p. 31) concludes that

“countries in which nominal wages adjusted relatively slowly toward changing

price levels experienced the sharpest declines in manufacturing output.” Table

9 of Chapter 3 reports first-difference regressions of industrial production

(in logs) using evidently the same data set, noting that (p. 101) “only when

the PANIC variable [the dummy variable for financial distress] is included does

nominal wage growth have the correct (negative) sign … but it is not

statistically significant.” In Chapter 6, Bernanke (p. 236) simulates his US

industry model assuming “perfect wage adjustment to the cost of living.”

Remarkably, this assumption “had virtually no effect on the ability to track”

employment and hours, suggesting that “the importance of lagged adjustment for

explaining observed real wage behavior” during the Depression “may not have had

great allocative significance.” Then, drawing again on the international

evidence, Chapter 9 notes (p. 300) that “the correlation across countries of

high nominal wages and low output is interpretable as an allocational effect of

sticky wages.” Exactly what is going on here? Bernanke clearly views wage

stickiness in the 1930s as an economic puzzle, since few of the standard

post-WW2 institutional stories (e.g., unions, efficiency wages, and the like)

seem to have explanatory power. While I don’t disagree with Bernanke on this

point, greater familiarity with the economic history literature would have

alerted him to the stylized fact that wage stickiness long-predated the 1930s,

in the United States and other countries.

While I applaud Bernanke’s willingness to move beyond the standard US time

series, readers should keep in mind that all of the US data come from

conventional, if somewhat neglected sources, as do the international data.

Other than occasional asides, not much attention is paid to data quality, and

only rarely do readers get any sense of the sort of archival work that might

improve matters for future research. Some of the regressions (for example, in

Chapter 7) were estimated prior to Christina Romer’s revisions to the standard

(that is, Lebergott) labor force series, and thus invite re-estimation.

Finally, in a book of essays about the Great Depression, one might have

expected more attention paid to unemployment, particularly its uneven incidence

across the workforce, and the strikingly high levels of long-term unemployment

prevailing in the US and elsewhere.

Criticisms aside, Essays on the Great Depression displays one of the

great contemporary masters of applied macro-econometrics at work. In the grand

scheme of things, I am glad that Ben Bernanke is fascinated by the Great

Depression. Hopefully his personal obsession will translate in an expanded

audience for the work of economic historians. In any case, his book will more

than do as a fine and ready example of why the past continues to have useful

macroeconomics.

Robert A. Margo is Professor of Economics and of History at Vanderbilt

University, Nashville, TN, and a Research Associate of the National Bureau of

Economic Research. He will be on leave during the 2000-01 academic year as

Visiting Senior Scholar and Visiting Research Professor of Economics at Bard

College in Annandale-on-Hudson, NY. His most recent books are Wages and

Labor Markets in the United States, 1820-1860 (University of Chicago Press,

2000) and Women’s Work? American Schoolteachers, 1650-1920 (with Joel

Perlmann, forthcoming, University of Chicago Press, 2001).

Subject(s):Macroeconomics and Fluctuations
Geographic Area(s):North America
Time Period(s):20th Century: Pre WWII