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The Plans That Failed: An Economic History of the GDR

Author(s):Steiner, André
Reviewer(s):Polyakova, Maria

Published by EH.NET (April 2011)

Andr? Steiner, The Plans That Failed: An Economic History of the GDR. (Translated from German by Ewald Osers.) New York: Berghahn Books, 2010. xiii + 228 pp. $60 (hardback), ISBN: 978-1-84545-748-8.

Reviewed for EH.Net by Maria Polyakova, Department of Economics, M.I.T.

In 1945, the Third Reich unconditionally surrendered to the Allied forces of Great Britain, France, the United States and the Soviet Union. The Allies occupied Germany in the same year, splitting the country and its capital into four Zones of Occupation. The northeastern part of modern Germany became the Soviet Occupation Zone governed by the Soviet Military Administration. In 1949, four years after the end of the War, the Socialist Unity Party of Germany (SED) proclaimed the foundation of the German Democratic Republic (GDR), also known as East Germany, in place of the Soviet Zone. The political history of East Germany has had a number of academic and broad audience publications devoted to it. Detailed analysis of its economic history, on the other hand, has been surprisingly scarce in comparison.

Andr? Steiner, Research Director for the Department of Economic and Social History at the Center for Contemporary History Potsdam (ZZF) and professor of economic and social history at the University of Potsdam, attempts to reduce this gap. The study is meant primarily to provide an analytical summary of the existing research on the topic (both by Steiner himself and other scholars) and accomplishes its goal well.? In about 200 pages of condensed prose, Steiner presents a detailed, yet concise, overview of the key economic decisions and policies — and their consequences — that characterized the socialist German state from 1945 to 1990. In his account, Steiner relies on a number of primary and secondary sources that include published collections of documents, archival materials, and scholarly writings. Among these sources are diverse protocols from the political discussions of the time, contemporary legal and regulatory publications, as well as analytical books and articles written in the midst of the historical developments.

Steiner?s main questions are ?why things happened the way they happened and, above all, what alternatives were available and why they were not chosen? (p. 1) as well as ?how was it possible … that the system survived for forty years? (p. 7). Steiner rightfully claims that, just by observing the end result of the economic development in the GDR, we cannot be confident that the system of the centrally planned economy, in and of itself, was the key reason for the failure of East Germany.? To get closer to the heart of the matters, Steiner lays out the details of the economic development of the GDR in six chapters. In each chapter, he considers both the political economy of the policies and the daily experience of the GDR?s population during different ?political caesuras? (p. 8) of the GDR?s economic history. The hard work of organizing and explaining the often chaotic and controversial economic events (as well as their academic accounts) in East Germany, allows Steiner to conclude that, indeed, ?the crucial negative element was the planned-economy system? (p. 1). This conclusion will hardly surprise the readers familiar with East German history. The merit of the book, however, lies in its well-structured account of the events and the relevant primary sources. These serve to convince readers of the non-dogmatic objectivity of the book?s conclusion.??

Steiner devotes the first two chapters of the book to the discussion of the immediate post-war situation in the Soviet Zone and the first five years of the GDR?s existence. Steiner shows that the area of the Soviet Occupation was highly industrialized and produced a sizeable agricultural surplus. Its industry, however, critically depended on the supplies of raw materials from the Western territories — a fact that would later cause much trouble for the GDR?s government.? Steiner provides evidence that the Zone?s wartime destruction was lower than in its Western neighbor and should not have been inhibitive for the economic reconstruction.? The controversial attempts to nationalize agriculture, restore the production of consumer goods, and, at the same time, develop heavy industry, as instructed by the Soviet Union, were, however, inhibitive.

The Soviet dismantling of plants and the reorganization of the industrial structures had a severe effect on the capacities of the GDR?s industry. The book further accounts for the complications that the GDR?s new political leadership faced in trying to restart production and stabilize employment, monetary exchange, and the supply of consumer goods and food.? Harvest failures and the collectivization reforms of agriculture resulted in severe food shortages.? Dismantling, reparations and incentive mismatch in the manufacturing resulted in the escape of more than 4,000 producers to the West, while the remaining ones struggled to provide desirable quantity and quality. The difficult situation led to the strike of June 17, 1953 that was forcefully resolved with Soviet tanks.

In the third chapter, Steiner discusses the economic situation during the second decade after the end of the War. He characterizes this period as a time that experienced rapid growth from the post-war production level. At the same time, there were consumption shortages, severe underinvestment into the production of consumer goods and big waves of emigration to the West. It was also a period of further deep structural changes in all sectors of the economy. Steiner emphasizes the dependency of the young German state upon the Soviet command and its struggle of keeping up with its Western neighbor, which by this time clearly offered a much more attractive environment for the consumers and firms of the East. The chapter culminates with the request of the East German government to the Soviet Union to allow for the construction of the Berlin Wall to shut off emigration from the country.

Although the official justification for the construction of the Wall was political, Steiner argues that the real reason (and the one that East German policy-makers stressed in their internal discussions) was economic. In the next two chapters, Steiner discusses how the forceful hold of the population and firms within the country allowed the GDR?s government to pursue the economic reforms it desired. The SED still advertised that the goal of the GDR was to ?overtake? the living standards of the Western neighbor, but now it didn?t have to worry about the extensive emigration that was the consequence of the obvious failures in the past. Over the course of these two decades, the GDR?s government implemented an array of reforms that tied it closer to the Eastern bloc and were supposed to convince its citizens of the merits of the socialist system. Steiner argues that the reforms of the ?New Economic System?? and the ?Overtake without Catching Up? programs were often undermined by structural inconsistencies that followed the attempt ?to simulate market mechanisms without, however, introducing the foundations of a market economy? (p. 111).? The standard of living and the industrial output showed improvement in the sixties and seventies.? Consumer demand continued to be dictated by the government, however, rather than by the consumers themselves. That is, there was no way for the economy to signal its needs to the planners.
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Lastly, Steiner discusses another big problem, namely the indebtedness of the different parts of the system and its reliance on support from the Soviet Union. The country was severely indebted to both the East and the West. Within the country, companies relied heavily on subsidies from the state. East German exports were not competitive and the economy was not self-sustainable, relying to a considerable extent on the imports. The political events of the following decades led to a termination of the credit line from the West. At this point, as Steiner skillfully puts it ?reality caught up with the GDR: it was in an indebtedness trap? (p. 142). The last decade before the fall of the Berlin Wall saw the country struggling with debt, rising prices for raw material imports, the growing demands of the population, shortages, declining investments and productivity and, finally, renewed emigration to the West. The economic crisis and the dramatic changes in the political circumstances in the Eastern bloc eventually led to the fall of the Wall and the GDR in 1989.

As Steiner sums up, ?the socialist economic system?s immanent incapacity to produce structural and technological or innovatory change was the decisive cause of the GDR?s economic weakness in its final decade? (p. 193)

The 2004 German edition of the book with the original title Von Plan zu Plan: Eine Wirtschaftsgeschichte der DDR became a popular read in Germany. This is, of course, not surprising, given the low number of good systematic accounts of economic life in East Germany and the slowly fading heritage of the GDR?s economy and society in modern Germany. The audience for the English translation of the book might be harder to define. While it is unlikely to arouse a lot of interest among the non-German casual readers, it is at the same time too general for specialized researchers of East Germany?s economic history, who would probably prefer to use the German edition anyway. On the other hand, it would provide an excellent introduction for students and researchers who are just starting their work in the area of East Germany?s history, or for the researchers of state-owned enterprises and planned economies, who are interested in an overview of the historical precedent. Furthermore, Steiner?s bibliography presents an impressive scholarly reference to a large subset of primary and secondary sources that are available on the topic.

Maria Polyakova is a graduate student at the Department of Economics of the Massachusetts Institute of Technology.? One of her current research projects concerns the organization of the German industry in the first decade after World War II.

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

Subject(s):Economic Planning and Policy
Economywide Country Studies and Comparative History
Geographic Area(s):Europe
Time Period(s):20th Century: WWII and post-WWII

International Migration in the Age of Globalization: Historical and Recent Experiences.

Author(s):Solimano, Andrés
Reviewer(s):Cohn, Raymond

Published by EH.NET (December 2010)

Andr?s Solimano, International Migration in the Age of Globalization: Historical and Recent Experiences. New York: Cambridge University Press, 2010. xv + 223 pp. $27 (paperback), ISBN: 978-0-521-14248-9.

Reviewed for EH.Net by Raymond Cohn, Department of Economics, Illinois State University.

Few readers of this review will find Solimano?s book very worthwhile. Though the book is interesting and generally well done, the focus is on current immigration issues. Historical immigration — at least that before World War II — plays only a minor role. Even here, none of the material is new; instead, Solimano primarily discusses the findings of Jeff Williamson and his coauthors (mainly Hatton and Williamson, 1998 and 2005). Economic historians (or others) who read this book should do so only if they have an interest in current immigration. If that is the case, Solimano?s book is worth reading.

The book contains seven chapters, the first of which is an introduction and the last of which is a conclusion. Chapters 2 and 3 discuss, respectively, the reasons for and the effects of international migration. For anyone who has studied these issues, Solimano has little new to add. For someone who wants an introduction to the basics of international migration, these two chapters would be a good place to begin since the author?s writing is clear and the discussion is well-organized. Chapter 4 takes the theoretical material of the previous chapters and applies it to international migration since 1870, with most of the discussion centering on the 1870-1914 period. His main conclusion is that the ease of movement for people and financial capital are positively correlated throughout history. Chapter 5 takes a similar approach but discusses international migration to and from Latin America, mainly since World War II. Knowing relatively little about this area, I found chapter 5 of particular interest given the variety of situations faced by the different countries. Chapter 6 discusses the current international migration of ?elites,? and looks at the benefits and costs of these. In none of these chapters is the level of rigor very high. The book primarily explains and discusses the various issues with relatively little analysis.

In a few places, the author argues there should be a new international agency to handle migration issues. The IMF and World Bank are involved with the international flow of capital funds, and the World Trade Organization handles the international trade in goods, services, and natural resources. Human beings are the other item that moves internationally. The International Organization for Migration, which arose out of refugee issues after World War II, currently deals with some migration issues. For reasons that are never made clear, however, Solimano believes there is a need for a new agency. My guess is that Solimano feels the current organization is not as prestigious as the IMF, World Bank, and WTO, whereas a new organization would raise international migration issues to a higher level. The author proposes this new organization as a main idea of the book. However, most of the material presented simply surveys current migration issues and no extensive argument is presented that would convince an interested reader that a new organization is required. In addition, no discussion is included analyzing why the International Organization for Migration couldn?t play the role envisioned by Solimano.
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Two other places where the book could have been improved also deserve mention. The first is that some of his analysis is incomplete. For example, Solimano states that the current migration of health professionals out of less-developed countries to higher-income ones is detrimental to the former. I suppose that is true at a static level. However, he implicitly assumes that, if this type of migration was not possible, then all the existing health professionals would work at home and raise the level of health care. Given the depressing effects on income of such a restriction, however, many would probably go into other careers — and, over time, the incentives to gather medical skills would decline in these countries. Second, though Solimano includes the findings of some economic historians, other relevant sources are missing. When he discusses the growing importance of female migration (p. 131), he does not mention the work of Gabaccia (1996). In discussing the changes in sources and locations for migration before 1914 (chapter 3), Solimano does not reference the work of Nugent (1992). Finally, no historical sources are included in his discussion of the connection between immigration and economic growth (pp. 59-60).

At its core, this book discusses current public policy. Given the author?s background, that focus is not surprising. Solimano is currently President (and founder) of the International Center for Globalization and Development in Santiago, Chile. He previously worked for the World Bank, the Inter-American Development Bank, and the United Nations Economic Commission for Latin America and the Caribbean. This background has led Solimano to produce an interesting book that discusses the important issue of international migration but, unfortunately, not one that will be of much interest to economic historians. Instead, the book?s intended audiences are governmental and non-governmental actors along with ?intelligent laymen? interested in migration issues.

References:
Gabaccia, Donna (1996), ?Women of the Mass Migrations: From Minority to Majority, 1820-1930,? in Dirk Hoerder and Leslie Moch, eds., European Migrants: Global and Local Perspectives. Boston: Northeastern University Press.

Hatton, Timothy J., and Jeffrey G. Williamson (1998), The Age of Mass Migration: Causes and Economic Impact. Oxford University Press.

Hatton, Timothy J., and Jeffrey G. Williamson (2005), Global Migration and the World Economy: Two Centuries of Policy and Performance. Cambridge: MIT Press.

Nugent, Walter (1992), Crossings: The Great Transatlantic Migrations, 1870-1914. Bloomington: Indiana University Press.

Raymond Cohn is Professor of Economics, Emeritus, Illinois State University. He is the author of Mass Migration under Sail: European Immigration to the Antebellum United States, published in 2009 by Cambridge University Press.

Copyright (c) 2010 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator (administrator@eh.net). Published by EH.Net (December 2010). All EH.Net reviews are archived at http://www.eh.net/BookReview.

Subject(s):Historical Demography, including Migration
Geographic Area(s):General, International, or Comparative
North America
Time Period(s):19th Century
20th Century: Pre WWII
20th Century: WWII and post-WWII

When Sugar Ruled: Economy and Society in Northwestern Argentina, Tucum?n, 1876-1916

Author(s):Juarez-Dappe, Patricia
Reviewer(s):Johnson, Lyman L.

Published by EH.NET (October 2010)

Patricia Juarez-Dappe, When Sugar Ruled: Economy and Society in Northwestern Argentina, Tucum?n, 1876-1916. Athens: Ohio University Press, 2010. xiii + 233 pp. $32 (paperback), ISBN: 978-0-89680-274-2.

Reviewed for EH.Net by Lyman L. Johnson, Professor of History, University of North Carolina — Charlotte.

This book is a useful contribution to the history of Argentina during the era of economic? expansion that had been initiated by national integration and institution building in the decades following 1861. Patricia Juarez-Dappe, Associate Professor of History at California State University, Northridge, provides a well-researched survey of four decades of growth in Tucum?n driven by the rapid expansion of its sugar industry. Historians and economists with limited knowledge of Argentine history might wonder why this case deserves focused attention given the already-large literature devoted to the impressive expansion of the national economy in this period. Juarez-Dappe shows that while Tucum?n tracked the fast-rising arc of Argentine economic growth, imitating in many details the national experience, the character and legacy of the province’s expansion diverged in crucial ways from national experience.

Once potential profits from sugar production were demonstrated by early innovators, landowners moved from tobacco and other long-established crops to sugar and investors provided the capital to develop large and efficient refineries. Profits rose dramatically as new technologies, especially railroads and steam engines, increased efficiency and contributed to economies of scale in Tucum?n. As the industry expanded, estate managers and refinery owners attracted laborers from surrounding provinces and then enforced the discipline required by the rhythms of the sugar cycle with the support of a pliant provincial government. The prodigious wealth produced in the countryside as this process matured allowed the province’s modernizing government to transform its tax regime and harvest revenues that paid for the delivery of expanded and improved education, medical services and hygiene as well as to remake San Miguel, the provincial capital, as a modern city.?

While Argentina’s remarkable economic growth in this period was driven by profits from a rapidly expanding agricultural sector, Tucum?n’s prosperity during the sugar era was fundamentally unlike that of the still more profitable provinces of the Argentine littoral. Those regions grew rich from the profitable export of wheat, beef, mutton and other products to Europe. Tucum?n’s sugar producers, on the other hand, depended almost entirely on the national market. Given Argentina’s fast-rising population and accumulating wealth, price equilibrium and profitability could be sustained during the first stages of the modernization of sugar production in Tucum?n despite dramatically increased production. As a result, the province’s planters and refiners enjoyed many advantages relative to those in other Western Hemisphere sugar-producing nations who were forced to accept ever-lower prices in the increasingly competitive export markets of the Atlantic Basin.

Over time falling international prices and increased Atlantic market integration meant that this advantage could not be sustained permanently. Ultimately, the prosperity of Tucum?n’s sugar sector would come to depend on the willingness of the Argentine national government to protect it from foreign competition. Wealth transfers from the households of Buenos Aires and other littoral cities to the farmers, agricultural laborers and refiners of Tucum?n and other provinces were managed by national political leaders to service their own electoral ambitions. Once profits and market stability came to depend on political deals and electoral alliances, rather than price competitiveness, Tucuman’s sugar sector entered a dark cul-de-sac that offered little potential for continued modernization or for the stimulation of other sectors of the provincial economy. While the sugar industry’s growing reliance on protection is acknowledged by the author, she does not engage this topic in depth. If the story had been pursued beyond 1916, these issues would have been forced to the center of the discussion.

The author is more interested in the process of modernization and consolidation of the provincial sugar industry and describes this process in a thorough and convincing way, providing the reader with a rich array of detail drawn from her intensive excavation of archival resources. In addition to samples drawn from national censuses, the records of the provincial statistical office, and civil and criminal records, Juarez-Dappe uses notary records to great effect. These rich sources are seldom consulted by national era economic historians, although they are routinely used in systematic ways by colonial historians with excellent results. In addition, to these archival sources, Juarez-Dappe has thoroughly surveyed the secondary literature, supplanting earlier works of synthesis with her fresh account.?

The result is a dense descriptive narrative of Tucum?n’s sugar industry that ranges widely to include changing patterns of land use, the introduction of new technologies, and the fast-changing relations between sugar growers and the owners of refineries. The author also provides a very useful examination of the provincial labor regime, examining in turn migration, work, housing, and labor discipline. This broad survey is organized topically, allowing the reader to follow changes in, say, land use or technology across time. This same organization limits the author’s ability to analyze the specific effects of changing market conditions or altered political and fiscal policies on the allocation of land, labor, technology, and capital across the period. Despite this limitation, Juarez-Dappe has provided a comprehensive and highly readable introduction to this topic.

Lyman L. Johnson is Professor of History at the University of North Carolina at Charlotte. His recent books include Workshop of Revolution: Plebeian Buenos Aires and the Atlantic World, 1776-1810 (forthcoming Duke University Press); Aftershocks: Earthquakes and Popular Politics in Latin America (edited with J?rgen Buchenau); and Death, Dismemberment, and Memory. He has served as president of the Conference on Latin American History. ljohnson@uncc.edu???? ??? ??????????

Copyright (c) 2010 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator (administrator@eh.net). Published by EH.Net (October 2010). All EH.Net reviews are archived at http://www.eh.net/BookReview.

Subject(s):Agriculture, Natural Resources, and Extractive Industries
Economywide Country Studies and Comparative History
Geographic Area(s):Latin America, incl. Mexico and the Caribbean
Time Period(s):19th Century
20th Century: Pre WWII

Empire and Globalization: Networks of People, Goods and Capital in the British World, c. 1850?1914

Author(s):Magee, Gary B.
Thompson, Andrew S.
Reviewer(s):Michie, Ranald

Published by EH.NET (August 2010)

Gary B. Magee and Andrew S. Thompson, Empire and Globalization: Networks of People, Goods and Capital in the British World, c. 1850?1914. Cambridge: Cambridge University Press, 2010. xx + 291 pp. $32 (paperback), ISBN: 978-0-521-72758-7.

Reviewed for EH.NET by Ranald Michie, Department of History, University of Durham.

There is a recent fashion developing in the writing of economic history. That is to refer to the Global Financial Crisis of 2007/8 and the need to re-examine the operation of impersonal markets. This has created opportunities for those who have long been skeptical of the idea that markets were the product of forces beyond the influence of mankind. Instead, markets are seen as human constructs prone to irrationality and abuse. Applied to the 50+ years before 1914, the first age of globalization, this leads to the recognition that empires were a key feature of that time, with much of the world belonging to one European power or another. These varied between the land masses of Russia and Austria/Hungary to the maritime possessions of Britain, France, Germany, the Netherlands, Portugal and Spain. The existence of these imperial domains meant that the mass movement of people, goods and capital that took place at that time was not simply the random product of global economic integration but a process influenced by culture, politics and individual behavior. In this book the focus is on the creation of the British World, by which is meant that sub-set of the British Empire largely settled by British migrants, namely Australia, Canada, New Zealand and South Africa. Such an approach does create problems as this was not a self-contained unit while the position of an ex-member, the United States of America, is never fully clarified. Nevertheless, this approach does provide the authors, respectively an economic historian and an imperial historian, with a mechanism through which the process of globalization can be examined. Though there are a number of original contributions within this study, reflecting the research conducted by the authors, the material used for this is largely derived from an extensive reading of the work of others, including that of this reviewer.
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From this approach the British world emerges as a complex interconnected one involving multiple points of contact and circuits of exchange. Though Britain occupied a place at the center of this world there was no official direction and many of the currents bypassed it. Instead, this was a world unified through a shared identity, a common language, and the security provided by Britain?s military power.? Those who peopled it saw themselves as British even if they were no longer resident in that country or had been born there.? For this reason not all the inhabitants of those countries possessed this shared identity, especially the native races. In many ways this was an unstable world reliant on constant migration to and from Britain in order to reinforce this common identity. Between 1850 and 1914 an estimated 13.4 million emigrated from the British Isles with around 40 percent returning either permanently or temporarily. Though the greatest single stream went to the United States their presence there was swamped by both those long settled and those from a diversity of other countries. In contrast, these British migrants in the settler countries of the Empire were a major presence, while their letters, remittances and visits helped maintain strong links with family remaining in the UK. It is the study of this migration that lies at the heart of this book for its consequences are then traced in terms of consumption habits and the funding of investment.

As so many of those who lived in the settler countries of the Empire were British or of British origin their consumer tastes were easily satisfied by goods imported from Britain. However, this did not make these countries captive markets for British manufacturers. Other manufacturing nations soon seized the opportunity to sell goods in these markets, especially when they were better placed than British producers, as was the case with U.S. and Canada. Of even more importance was the growth of local manufacturing as it was better attuned to the changing needs of the population, as the example of beer shows. The conclusion drawn from this is that British industry did possess initial advantages in selling to these markets because of cultural affinity but only held onto them by remaining competitive in terms of price, product, distribution and marketing.? The rising proportion of British goods sold to these countries represented not a retreat into soft imperial markets by British industry but the ability of these countries to purchase more goods because of rising per capita income.? This section of the book contributes further to the rehabilitation of the once-maligned British manufacturing sector, especially as it reveals the great variety of products that it was supplying to distant markets.

The other consequence of this migration was to generate investment flows from Britain to these countries.? This was not just because of the flow of funds from a country where the returns to savers and investors were low to ones where they were high, because of conditions of supply and demand. What is examined in great detail is the role played by information flows in creating a climate in which British investors were favorably inclined to place their money in these countries. Evidence of a home bias among investors has been long known and the way the settler economies were perceived brought them within that. In addition, the degree of ongoing personal contact between Britain and these settler economies created openings for profitable investment by lowering the risks involved. This is something I explored in an article written thirty years ago and it is flattering to find it developed so expertly today!? The authors also extend this aspect of their study by looking at institutional links. British life insurance companies extended their operations to these countries as they followed their customers abroad and that also made them familiar with locally available investment opportunities.? Though there was a division between British domestic and overseas banking this did not extend to personnel, thus providing important contacts at that level.? What all this provides is a rational explanation for the imperial bias among British investors while being aware that other destinations were also of great importance, such as Argentina and, especially, the U.S.

What empires delivered before 1914 was a force for economic integration that placed flows of people, goods and money into particular channels. This is well argued though it must always be recognized that it did not preclude other flows as, for example, both the U.S. and the independent countries of Latin America were major participants in all these. However, this study goes beyond the economic by stressing the cultural dimensions of the British World. This is significant as Britain fought two world wars in the twentieth century based on this shared cultural identity and, arguably, owed its eventual victory to it as much as to the support of the U.S.? As the migration flows that bound these countries together faded after the 1950s so did this British World. By then, though, this British World was already in decline as the constituent countries forged their own identities, greatly influenced by the policies followed by their own governments.

Ranald Michie, University of Durham, is a specialist on modern financial history. His most recent publications are The Global Securities Market: A History (Oxford University Press, 2006) and Guilty Money: The City of London in Victorian and Edwardian Culture (Pickering and Chatto, 2009)

Copyright (c) 2010 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator (administrator@eh.net). Published by EH.Net (August 2010). All EH.Net reviews are archived at http://www.eh.net/BookReview.

Subject(s):Economywide Country Studies and Comparative History
Financial Markets, Financial Institutions, and Monetary History
Historical Demography, including Migration
International and Domestic Trade and Relations
Markets and Institutions
Geographic Area(s):General, International, or Comparative
Europe
Time Period(s):19th Century
20th Century: Pre WWII

The Cost of Living in America: A Political History of Economic Statistics, 1880-2000

Author(s):Stapleford, Thomas A.
Reviewer(s):Logan, Trevon

Published by EH.NET (February 2010)

Thomas A. Stapleford, The Cost of Living in America: A Political History of Economic Statistics, 1880-2000. New York: Cambridge University Press, 2009. xviii + 421 pp. $30 (paperback), ISBN: 978-0-521-71924-7.

Reviewed for EH.NET by Trevon Logan, Department of Economics, Ohio State University.

Thomas Stapleford of the University of Notre Dame has managed to make fascinating what is likely one of the most boring parts of economic theory ? the calculation of price changes. Indeed, standard textbooks at the undergraduate and graduate level pay little attention to such issues. He does so by bringing a keen insight into the analysis ? price indices are not simply economic measures, they are inherently political measures that reflect the growing interest of the state in human welfare and economic policy. While economists know well the theoretical differences between different ways of measuring price increases (Laspeyres, Paasche, Marshall, and so on), the development and use of these measures had a more intimate relationship with political and historical realities than we may realize. Stapleford?s book describes this relationship over the twentieth century in the United States.

It was quite wise for Stapleford to begin his book?s introduction by considering the controversy around the Boskin Commission?s work on whether or not the CPI was overstating inflation, which briefly caused the economics profession to reconsider what we knew about price indices (this is not to say that work had stopped before or after, but price indices are no longer a ?hot? topic in economic research). As he makes clear, very small changes in the CPI have big effects (he notes by the early 1950s a 0.5 percent change in the CPI would cause transfer payment changes of $1 billion). This strategy highlights the importance and the continuing debate about the proper measurement of the CPI. Stapleford also uses the introduction as an opportunity to lay out his main thesis: the idea that rationalization is the driving force behind the development of economic statistics (mainly the Consumer Price Index, CPI). To him, rationalization is the way that the state takes controversial issues and places them in the hands of bureaucrats behind a wall of objective ?science.? As an example, we do not decide to increase or decrease Social Security payments when we ?rationalize? the process by indexing the benefits to inflation. The Bureau of Labor Statistics (BLS) becomes a collection of experts who use a given technique (supposedly a ?scientific? one) to arrive at a number that has large effects on the economy. The key, to Stapleford, is to realize that such a decision is a decidedly political one with seen and unseen causes and consequences.

Overall, this is intellectual and political history of the first rate. Well researched, carefully argued, it does a good job of describing the technical difficulties in price indices without losing focus on the historical narrative. As a scholar of early consumer expenditure surveys myself, I was particularly impressed with Stapleford?s descriptions in the early chapters of the failed efforts to combine the state statistical bureaus into a national force with systematic evidence. While the data collected by the state bureaus has given economic and social historians a detailed picture of many aspects of working class life from 1870 to 1910 or so, Stapleford impressed upon me how much we lost by the inability to regularly and systematically survey workers, firms, and prices. But Stapleford ties this failure to politics ? there was simply very little need for the state bureaus to cooperate because there was no national consensus for what anyone would even do with the price series that could be created. Rather, since each state bureau had its own charge, resource constraints, and politics, the jumbled mass of surveys reflects the jumbled thinking about the usefulness of economic statistics at the time.

After these first chapters Stapleford is left to explain how we constructed and codified the CPI. In the remaining chapters (especially chapters 3 through 6) he builds his case ? in his narrative the impetus for the construction and maintenance of federal economic statistics, and the later canonization of them, took place from roughly 1910 to 1945. There was no one key event; the needs of World War I, the increasing concerns about labor disputes and wages in the 1920s and the Depression each exerted independent forces that not only caused a much larger federal presence in the economy, but a much larger federal measurement of the economy. World War I impressed upon the government (and its citizens) the need for efficient control of resources that needed to be harnessed for national defense. In the 1920s, both organized labor and big business saw the need for standard measures, which were many times used to settle labor disputes. This is key for Stapleford?s hypothesis of rationalization since both labor and business could appeal to ?objective? measures of the cost of production and consumption. The final movement was solidified by the Depression, which left the federal government with the duty to regulate the economy, and also gave it the power to define how that economy would be measured. Given the uses of the price measures in the decade before, it was natural to appeal to these economic statistics when setting goals and in dispersing transfers.

In Stapleford?s narrative the concept of ?purchasing power? was a politically loaded expression of progressives? desires for large changes in industrial relations, while the economic theorists and institutionalists argued about whether a ?true? cost of living could be accurately measured. These developments did not take place independently, as Stapleford shows time and again that the choice of method and, indeed, the decision to measure at all, were carefully navigated political processes. Stapleford shows that during FDR?s administration BLS officials used the economic circumstances to place themselves in a key position for national economic policies. For example, the Economy Act of 1933 allowed the federal government to reduce wages by up to 15 percent based on the BLS cost-of-living index. Stapleford shows that this technique of indexation gave the BLS a larger role in the macroeconomy as indexation proliferated, which he argues is consistent with his rationalization hypothesis. Even after the war the units of measurement they developed ? the series on prices and wages ? continued to exert influence after the New Deal policies were abandoned.

While the heart of the book ends at the beginning of the 1950s, Stapleford spends the last two chapters describing the way that the CPI came to be used as a macroeconomic measure, and even delineates the debates about what the index should be. By this Stapleford does not mean inflation as pi used in macroeconomic models, but for the way that through the 1970s the federal government more and more began to index transfers to inflation. This began with poverty lines in the Great Society, extended to Social Security, and by the early 1980s income tax brackets were indexed. By the end of this indexation movement roughly 50 percent of federal expenditures became tied to the CPI either directly or indirectly. While the CPI has long aimed to be a ?constant utility? measure, Stapleford concludes by noting that while theoretically advantageous, the problems with the ?constant utility? measure of the CPI continue to raise a number of troubling issues. (Chief among them is whose utility we are measuring.) Indeed, the BLS has recently begun developing alternative CPIs for different groups whose utilities may be more dependent on certain expenditure categories (as in the case of older Americans who spend more on health care).

There are naturally some drawbacks. One drawback of the book is that Stapleford paints with a relatively broad brush at times. He regularly implies that the CPI is intimately related to a host of other economic statistics, but this is truly a book about the intellectual history and political history of the CPI. This is not a critique of the book, but the focus could have been sharper if Stapleford had tempered his desire to use the CPI history and then cast a wider, more tenuous net to other measures, especially later in the book. As economic historians know well, unemployment, industrial production, and GDP itself are their own stories (and their histories certainly deserve to be revised or in some cases written as well). Another drawback is that the intellectual development of the indices, while covered well for the novice reader, takes a decided back seat to the politics, but to be fair that is exactly Stapleford?s point.

And perhaps putting the economics in the background was a good idea. About a year ago I was attending a seminar on the misuses of the Penn World Tables ? the large and well used panel dataset of country GDP and other macro indicators. The seminar speaker discussed the fact that revisions of the data changed the results of many well-cited and influential papers. These included studies of the effects of assassinations on growth, the relationship between volatility and growth, and civil conflict and growth. An elder statesman remarked that economists today do not pay much attention to issues such as the measurement of prices and inflation, and that we (as a profession) are worse for it. I agree. For some reason the thorny issues involved in something as ?simple? as a price index have fallen out of vogue in favor of what we like to think of as ?causal? policy analysis. The bite is that we know, without the use of instrumental variables and the sometimes fantastic stories that accompany their use, price index calculations are causally related to a host of economic issues. Even more, all of our time series or panel estimates depend, critically, on getting the prices right ? applied microeconomists are not exempted. One can only hope that Stapleford?s book will cause renewed interest into one of the most important (and non-mundane) economic statistics in use.

Trevon D. Logan is an Assistant Professor of Economics at Ohio State University and a Faculty Research Fellow at the National Bureau of Economic Research. Recent publications include “Economies of Scale in the Household: Puzzles and Patterns from the American Past” in Economic Inquiry, “The Transformation of Hunger: Demand for Calories Past and Present” in Journal of Economic History, and ?Health, Human Capital, and African-American Migration before 1910? in Explorations in Economic History.

Subject(s):Living Standards, Anthropometric History, Economic Anthropology
Geographic Area(s):North America
Time Period(s):20th Century: WWII and post-WWII

Agriculture and Economic Development in Europe since 1870

Author(s):Lains, Pedro
Pinella, Vincente
Reviewer(s):Grantham, George

Published by EH.NET (January 2010)

Pedro Lains and Vincente Pinella, editors, Agriculture and Economic Development in Europe since 1870. London: Routledge, 2009. xviii + 407 pp. $40 (hardcover), ISBN: 978-0-415-42487-5.

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

The seven decades leading up to World War II represent a distinct epoch in Europe?s long agricultural history as a transitional phase between late organic agriculture based on farm-produced inputs and the modern industrial forms that since 1960 have transformed western agriculture out of all recognition. Despite intervals of stagnation (and in war-torn economies contraction) productivity rose two to three times faster than in pre-industrial times. With the exception of Britain, whose precocious industrialization prior to the transport revolution provoked industrial hyper-specialization, Europe as a whole nevertheless remained fundamentally agricultural. In industrially advanced economies agriculture occupied a quarter to a third of the work force; on the backward periphery the proportion was half to four-fifths into the 1950s. Certain features of the agricultural history of this period are well-known: the politics of agricultural protection has been exhaustively studied, as have institutional innovations like the Danish cooperatives and German land banks. For advanced countries the statistical record is fairly complete. The main gap in our quantitative knowledge concerns eastern and southeastern Europe, where boundary changes and massive displacement of rural population make it difficult to collate and interpret the statistical record, and the Iberian peninsula, where scholars were late to mine the rich veins of data deposited in Spanish and Portuguese archives. The result is that until recently, it has been difficult to get an idea of the evolution of European agriculture as a whole.

The present work takes a big step in that direction. It consists of twelve country studies ranging from Portugal to Poland and Sweden to Turkey preceded by three fine introductory essays by Lains and Pinella, Olmstead and Rhode, and Broadberry that set out the methodological and historical issues raised by the collection, and in Broadberry?s essay, estimate the effect on aggregate productivity of agriculture?s declining share of the work force. The editors are to be congratulated for having gotten contributors to observe a common format, which helps bring out the common threads in a fascinating tapestry of national experiences. The format is a set of questions formulated by development economists in the 1960s to measure the effect of agricultural change on developing economies. To what extent did agriculture ?release? labor and capital to modern sectors? In what measure did agricultural demand support domestic manufacturing? In what measure did agricultural exports support the import of capital? How fast did productivity grow? I would have preferred a format based on historical categories of opportunity and response, but these are useful and important questions that do good service as a framework for assembling and interpreting the statistical material.

That material constitutes one of the collection?s major strengths. The series are well-presented and many are new, making the work an indispensable reference for economic historians of late nineteenth- and early-twentieth-century Europe. Special care was taken to adjust the data for boundary changes in the case of Germany, Poland, Greece, and Turkey. The French data are an exception and those interested in the statistical record to 1914 are referred to my reconstruction of the French agricultural capital stock and its attached estimate of total factor productivity.[1] The German data are especially helpful in showing the regional diversity of productivity growth in this period. Federico?s new capital stock series alters the traditional picture of utter stagnation in the 1880s and early 1890s, putting the long-term growth record before World War I on a par with other late nineteenth-century industrializing nations.

What generalizations can one draw from the forest of country studies? The number of countries covered makes it impossible to summarize individual contributions. All are excellent, and the best, like Wolf?s essay on Poland, Petmezas?s on Greece, and Pamuk?s on Turkey, are outstanding. Perhaps the simplest way is to interpret the outcomes as the product of the responses of millions of farmers and a dozen or so governments to the period?s specific sequence of opportunities and shocks. The main opportunity was expanding markets for farm produce in regions undergoing industrialization, which sustained cash flows needed to finance agricultural investments and the purchase of modern inputs. The regional unevenness of that opportunity goes a long way to explaining the regional unevenness in agricultural development on the eve of the Second World War. Agricultural countries like Denmark and the Netherlands, which did not experience intense industrialization benefitted from their proximity to markets in Britain, Belgium, and Germany. By contrast, farmers in southern Italy obtained almost no benefit from northern Italy?s late nineteenth-century industrialization. Pre-war Poland is a special and interesting case. Divided among three occupying powers, its western German partition experienced relatively high productivity growth based on markets around Berlin and the industrial district of Silesia. By contrast, a chain of mountains separated Austrian Galicia from urban and industrial districts in Lower Austria and Bohemia, and a tariff wall separated the province from the Russian partition centered on Warsaw, which had a deficit in foodstuffs. North-south differences in dietary traditions also mattered. The comparative advantage of Mediterranean agriculture in olive oil and wine could not be exploited because the cuisine of northern industrializing districts was based on beer and animal fats. The region might still have managed to find an opportunity in the export of citrus fruits, but that market was pre-empted in the 1880s and 1890s by California. The infestation of French and Italian vineyards by phylloxera in the 1880s gave a temporary boost to Greek currant exports, but recovery of French production after 1895 ended the brief boom, precipitating massive emigration of Greek peasants to America.

On the whole then, it would appear that agricultural development in this period was tributary to industrial and urban development rather than the other way round. As to the globalization of the grain trade, about which so much has been written, its impact was felt mainly by farmers provisioning urban markets, to which it was disproportionately oriented. Overall, however, declining transport costs, of which the ?grain invasion? was a prominent consequence, contributed to productivity growth by inducing more efficient land use. As to new technologies and new inputs, the main conditioning factors were the strength of market outlets, the availability of credit, and in the case of agricultural machines employed in field operations, farm size. In northern Europe yields rose most rapidly in districts where declining transport costs made it possible to import fertilizers and soil amendments onto poor soils. These advantages were largely lacking on the periphery, where high transport cost, poorly organized markets and credit, and low demand provided little incentive to invest in new inputs.

As to the farmers? responses, nothing in the record suggests that their reaction to events was economically irrational. The same cannot be said of governments, which adopted protectionist policies supporting rural incomes at the expense of urban consumers, and attempted to soften the cost of those policies by rationing and price controls. That autocratic as well as democratic governments pursued such strategies suggests the continuing need to accommodate the landed interest, including a generally conservative peasantry that still made up half the population. Yet in a long-run perspective it is unclear whether on balance protectionist policies significantly depressed productivity growth. Tariffs were often part of a broader program of public investment. In Portugal and Spain it took the form of roads, hydroelectric projects, and irrigation projects; in Italy, Spain, and Greece autocratic governments subsidized the draining and resettlement of malarial plains; the Swedish government promoted rural electrification. The major exception seems to have been Germany. In the 1930s Germany?s nationalistic pursuit of agricultural self-sufficiency deprived her farmers of the imported feed for livestock, with the result that per capita production of meat in 1939 was less than in 1913. There is no question that agricultural protection in the 1930s depressed real incomes. Yet given worldwide contraction in agricultural demand during the Great Depression it is doubtful that productivity would have grown significantly faster under a regime of free trade. On the whole, the responses of farmers and governments seem to have mattered less for growth in agriculture than the opportunities.

The other feature of this period was war. In successively reading the agricultural histories of the peripheral countries (Poland, Hungary, Portugal, Spain, and Greece and Turkey) one is impressed by the effect of political instability on productivity growth. It does not seem to make much sense to reduce that instability to the effects of insecure property rights, however. Wars, civil or foreign destroyed property, disrupted commercial connections, and displaced hundreds of thousands of people independently of the legal protection of private property. The Civil War in Spain brought large numbers of people to the brink of starvation and malnutrition that lasted through the 1940s. The most important expropriations occurred on disputed territory on the Ionian coast and the southern Balkans that were jointly populated by Greeks and Turks. But once the ethnic cleansings were carried out, the rights of the new owners were fully protected. Even so, productivity stagnated.

Few books can be said to be ?essential reading.? The present book is one of them. The bibliographies are in general full and up to date. The interpretations are within the space limitations imposed by this kind of work sensitive to the political and social context of agricultural change in this period. It is, however, only a beginning of the effort to place the development of Europe?s agriculture through the Continent?s classic phase of industrialization in a long-run perspective that incorporates the period?s technological and social-political specificity.

Reference:

1. George Grantham, ?The French Agricultural Capital Stock, 1789-1914,? Research in Economic History 16 (1996): 37-83.

George Grantham is a recently retired Professor of Economics at McGill University. His recent work includes ?Explaining the Industrial Transition: A Non-Malthusian Perspective,? European Review of Economic History (2008); ?Creating Abundance: Biological Innovation and American Agricultural Development: A Research Perspective,? Explorations in Economic History (2009) with Jeremy Atack and Peter Coclanis; ?French Agriculture, 1250-1550: Crisis or Continuity?? (forthcoming); ?Female Labour Supply in the Industrial Revolution? (forthcoming) with Franque Grimard; ?Science and Its Transaction Cost: The Emergence of Institutionalized Science in Europe, 1650-1850? (forthcoming); and ?What’s Space Got to Do with It? Distance and Agricultural Productivity before the Railway,? Journal of Economic History (forthcoming). He is also engaged in a translation of Francois Crouzet’s La Grande Inflation: La monnaie en France de Louix XVI a Napoleon.

Subject(s):Economic Development, Growth, and Aggregate Productivity
Geographic Area(s):Europe
Time Period(s):20th Century: WWII and post-WWII

Backwoods Consumers and Homespun Capitalists: The Rise of a Market Culture in Eastern Canada

Author(s):Craig, Béatrice
Reviewer(s):Gerriets, Marilyn

Published by EH.NET (January 2010)

B?atrice Craig, Backwoods Consumers and Homespun Capitalists: The Rise of a Market Culture in Eastern Canada. Toronto: University of Toronto Press, 2009. ix + 349 pp. $75 (cloth), ISBN: 974-0-8020-9317-2.

Reviewed for EH.NET by Marilyn Gerriets, Department of Economics, St. Francis Xavier University.

Backwoods Consumers is an excellent contribution to the literature exploring the social and economic structure of early settlements in North America. Craig studies the Madawaska region (in northwestern New Brunswick and northeastern Maine) from early settlement by Acadians and Canadiens in the late eighteenth century up to the last quarter of the nineteenth century. The book?s primary theme is the evolution of the relationship between rural people and markets. The theme is developed within the context of two literatures, the largely Canadian literature first dominated by the staples thesis and now exploring local exchange, and the largely American literature tracing the rise of market exchange and capitalism in early settlements. Her detailed description of the early process of settlement provides an excellent contribution to these literatures. The wealth and variety of source material enriches the study.

Madawaska was not as isolated as its location might suggest; settlers had connections through correspondence and travel that kept them aware of external market opportunities and of opportunities to settle elsewhere. Early settlers were drawn to the region by opportunities in the fur trade and on the excellent agricultural land along the Saint John River. Preference to live with people of their own culture also led Acadians to move to the area and Catholics from nearby parts of Quebec were comfortable to join them. Fur and wheat were the first goods exported from the region and from the earliest days settlers showed no reluctance to engage in market exchange. When rust and midges made wheat production impractical, farmers shifted to fodder crops for the timber shanty market. Fortunately, timber exports became viable in time to alleviate the difficulties caused by declining wheat production. Timber production created immigration, but an agricultural community was already well established before it began.

Local production of goods for local consumption was important. Sawmills built to produce lumber for export disappeared as soon as the timber industry declined, while custom saw mills providing boards for local construction persisted. Along with grist, carding and fulling mills, the custom mills provided a focal point for the emergence of villages. Craig?s sources enable her to determine that the charter families, the Acadians and Quebecois who first settled the region, invested in these mills. They carefully sought out land with water power when they acquired farm land, apparently recognizing the value of an opportunity to exploit water power with a mill.

Craig traces changes in patterns of consumption as well as in patterns of production. Initially, general store purchases were confined to inputs to production such as tools or cotton warps used in the weaving of homespun. By the early 1860?s new consumption patterns had emerged. Rather than acquiring a cotton gown ?for ever,? less durable items in the current style were desired. Young men purchased red flannel for shirts and black silk neckerchiefs. Tea, oil lamps and chamber pots became important household items. The ?world of goods? had clearly emerged by the 1860?s.

While her work clearly supports more recent Canadian research that stresses the importance of local exchange, Craig argues that the staples trades were important to the growth of the region. Timber workers? families provided good markets for a wide variety of agricultural goods. Access to the shanty market for fodder was very important to settlers? standard of living when surpluses of wheat could no longer be produced. The timber industry helped to provide the income that permitted the growth of consumption.

Craig?s pragmatism and common sense enables her to provide an accurate description of markets and of commercialization in Madawaska. Settlers eagerly engaged in market exchange from the first days of settlement; both store owners and farmers preferred payment in cash to payment in goods. Craig argues that Madawaskan residents did not enter markets to resist change, as others have argued, but they entered the market in order to become ?individualistic consumers.? The issue of the emergence of market exchange and of capitalism has been a contentious in the American literature. Craig argues that much of the contention has arisen from misconstruing definitions. She carefully sets out her own definitions of a capitalist and of capitalism, drawing on Fernand Braudel. I found no definition of capital, and she appears to equate financial assets with capital, an equivalence offensive to any economist. This economist finds Braudel?s definitions peculiar, and would prefer reliance on standard economics for a definition of capital, Karl Marx for a definition of capitalism and Karl Polanyi for discussion of the emergence of market institutions.

Better definitions might enable her to see more deeply into the extent and the limits of capitalism in Madawaska. Nonetheless she has done very well describing changes in the role of markets. In particular, she discusses how in the early days of settlement, patronage and government favoritism were important to securing access to farm land, access to locations for inns or trading posts and to government appointments. By the end of the period, political and economic activity had become more separate. To use Polanyi?s term, the economy was becoming disembeded from society at large.

The book is very rich and addresses many additional topics. Readers have good reason to pursue her discussion of the homespun textile industry, the divisions of Madawaskan society into groups defined by religion and date of settlement and the impact of the dispute over and the creation of a border between Maine and New Brunswick. The study is unique in its linking of individuals and families to the evolution of the economy and society. Craig has done an excellent job of examining the economic and social history of a neglected region.

Marilyn Gerriets, an economic historian and a professor in the Department of Economics at St. Francis Xavier University, Nova Scotia, is interested in the origins of differences in the paths of development of the Maritimes and Central Canada. She has written about agricultural resources and settlement, tariffs and trade and coal mining in Nova Scotia.

Subject(s):Markets and Institutions
Geographic Area(s):North America
Time Period(s):19th Century

Triumph of the South: A Regional Economic History of Early Twentieth Century Britain

Author(s):Scott, Peter
Reviewer(s):Wardley, Peter

Published by EH.NET (October 2009)

Peter Scott, Triumph of the South: A Regional Economic History of Early Twentieth Century Britain. Aldershot, UK: Ashgate, 2007. xiv + 324 pp. ?65 (cloth), ISBN: 978-1-84014-613-4.

Reviewed for EH.NET by Peter Wardley, Department of History, University of the West of England, Bristol.

In the Triumph of the South, Peter Scott, Director of the Centre for International Business History and Professor at the University of Reading, has drawn upon his research into specific aspects of interwar British economic and social history to provide an overview of regional development between 1870 and 1939. Scott?s investigations, that have utilized neglected or under-utilized sources, encompass the origins of British regional policy, private sector industrial estates, the nature of the English property market and its agencies, working class house-ownership, hire purchase, and the institutional barriers that impeded transport rationalization in both the coal mining industry and the coal carrying trade undertaken by British railway companies. At the heart of this study are chapters informed by this research that describe and analyze dynamic components of the interwar British economy: the new manufacturing industries of Greater London, the labor market that characterized the interwar industrial estates, and the long distance migration of workers recruited to the new factories. By contrast to vibrant industrial development in the ?South,? the manufacturing sector of depressed ?outer-Britain? experienced only limited innovation; relatively few new plants were established, the expansion of employment in the factories associated with the ?New Industries? was relatively small and their labor productivity was relatively low. Oddly, given the clearly demonstrated relative advantage of the ?South? in the provision of services, and the relative importance of these activities in both the region?s prosperity and economic expansion, apart from tourism the services sectors receive relatively little attention. For example, to select one specific dimension of change, whereas much is made of the failure to embrace technical innovation exhibited by the ?old staples,? and especially the coal industry, no mention is made of the comprehensive implementation of mechanization undertaken by British financial companies at the end of the 1920s. Furthermore, not only is the measurement of productivity growth in services presented here as a more problematic exercise than recent research has demonstrated but the early twentieth century domestic service sector is described as ?a very large employer, with very limited potential for productivity gains? (p. 24). In the context of this study, this is somewhat odd: if this were so in the interwar years, what then was the motive of those who purchased the millions of household appliances produced on the industrial estates so carefully enumerated here?

Scott?s authoritative treatment of the aspects of the interwar years he has so closely researched also stands in contrast with his less convincing consideration of the longer run historical context. The introductory chapters demonstrate a range of basic problems that are conceptual and definitional in kind, reflecting geo-political and economic ambiguities that could lead astray a more naive reader. It would have been useful to indicate very clearly that ?Britain? in this period is a political fiction as the functioning state was the ?United Kingdom,? a union of Britain and Ireland before 1921 and Britain and Northern Ireland after. In this book England gets the lion?s share of attention, Scotland some consideration, Wales little and Ireland none. This constrained perspective has broader analytical and interpretative consequences. A somewhat pessimistic stance towards British economic performance before the First World War depends to a large extent on a comparison of British income per capita data (Table 3.2, p. 33) relative to that of the world?s more developed economies. However, George Boyer?s chapter on ?Living Standards, 1860-1939? (Boyer, pp. 282-83; 294-95), the source upon which Scott relies, is not unmisleading in this context. Boyer, citing data estimated by Angus Maddison, and without mention of this distinction, reports the national income per capita of a ?Britain? which is really an ahistorical United Kingdom, a hypothetical economy defined by political boundaries that would be drawn only in 1921. Nevertheless, Maddison does provides disaggregated estimates for Irish and British income per capita, and it is the latter that Scott should be interested in, given that his story relates specifically to Britain. When Britain, strictly defined, is compared to the United States of America, the relative gap in national income per capita in 1913 is shrunk from that reported of just over five percent to less than three; by analogy to conventional measures of statistical significance, while the former might just about warrant mention, the latter difference would be usually be regarded as insignificant. Moreover, the same comparative perspective indicates that in 1913 British income per capita was in excess of thirty percent higher than that of Germany or France; how many Britons would not now be delighted by the restoration of a similar lead relative to the current level of output per person achieved in Germany and France? Clearly, and contrary to Scott?s gloomy prognosis, on the eve of the Great War the British economy was not failing.

This somewhat negative view also colors analysis of British economic agencies, especially the firms that populated the Victorian economy, and questionable assumptions bolster a rather thin international perspective. Although Britain was the location of most of the world?s largest industrial enterprises at the time of the Great Exhibition of 1851, and probably a third of the world?s largest companies in 1912, with Germany assumed wrongly here to outstrip Britain on this count, much is made of the detrimental consequences of the relatively small size of British firms. However, the significance of firms at the lower end of the corporate spectrum is also interpreted somewhat narrowly. It is difficult to see the existence of well-developed networks of small and medium enterprises (SMEs) that had been established in Britain in the nineteenth century as, per se, a peculiarly national impediment to economic growth. After all, the significant contribution to German economic development of the Mittelstand is well-established in the literature. Moreover, Philip Scranton has told a similar story concerning the contribution of the SMEs, which also saw the development of clusters, networks, external economies and regional specialisms, to American economic development before 1939. Given these international comparisons, that suggest otherwise, and taking the long run view, I remain puzzled also by the statement that, ?Sectoral specialisation appears to have been originally developed as a means of coping with Britain?s poor inland transport links? (p. 15). It is less surprising to read, however, that ?Poverty in rural Britain was even more widespread than in towns and cities? (p. 1).

The empirical database underpinning the introductory chapters that consider regional development in a quantitative framework are provided by statistics extracted from the United Kingdom Census of Population by Clive Lee and published in his British Regional Employment Statistics 1841-1971 and the recently published associated estimates of income per capita for British regions derived by Nick Crafts. Inspection of these data prompt the undisputable conclusion that London was not only the most prosperous region within the British economy in 1871 but that it subsequently and consistently enjoyed the more dynamic economic path to the twentieth century and beyond. Taking a long-run perspective this was only the restoration of a preeminence that had its origins in Norman, Saxon or even Roman times. However, the popular and enduring appeal of the Industrial Revolution does tend to color and even distort our views of British economic development such that the much remarked upon growth of manufacturing in the peripheries, especially cotton textiles in south Lancashire, woolen textiles in west Yorkshire and ferrous metal production and processing in south Wales, central Scotland and the north east of England, crowd out the relatively undramatic and less exotic incremental developments in Bristol, Birmingham and, especially, London. And London, often regarded as synonymous with the ?South,? provided England?s most populated urban center, its cultural center, the social focus of its elite, and the political capital that served first, England, then England and Wales, then the United Kingdom and, ultimately, at least until its more recent imperial retreat, the British Empire and its world. In this sense the ?Triumph of the South? has been persistent and enduring, a process of consolidation and confirmation rather than the outcome of a late nineteenth and early twentieth century contest that saw London emerge as the dominant victor over the industrial ?North? (which often stands as shorthand for all the British periphery). Put quite simply, and galling though this is to many a subject of British crown, the South rules.

This narrative was clearly established by Lee?s The British Economy since 1700, a pioneering text sensitive to regional differentiation that might have had more credit than allowed here as it also highlights the historic significance of the London?s national and international financial predominance, the consequences of London?s role as the global market place for international services, the impact of government policy, and the nature of labor processes found in Britain?s industrial heartlands. Moreover, not only have variants upon these themes long populated the continuing debate among economists and economic historians concerning British ?Declinism? but they also informed two highly visible critiques of more recent economic policy: first, the politically significant but economically ambiguous thesis propounded in the Sunday Times in 1974 by Robert Bacon and Walter Eltis that identified Britain?s problem in their diagnosis of ?Too Few Producers? and, a decade later, the proposition that services, and especially financial services, were privileged by policies introduced by Margaret Thatcher?s governments and then continued by New Labour, with damaging consequences for industry and the ?North.? These same issues now arise with the current reconfiguration of British politics produced by our contemporary recession.

Here I would suggest that Scott?s unique selling point is, his specialist research topics indicated above apart, the strong argument he proposes concerning the detrimental consequences of London?s successes and the resultant bifurcation of the interwar British economy that operated to the detriment of the ?North.? He opines that ?the ?Dutch disease? effect of London?s growing invisibles surplus progressively crowded out the commodity exports of Britain?s provincial regions? and that this was accentuated by re-investment overseas of surpluses on invisible trade which further enhanced its ?growing comparative advantage as a rentier and services-exporting, rather than industrial, nation? such that the growth of non-wage income ?began to crowd out its provincial export industries? (p. 281). However, although this thesis of relative regional deprivation is propounded with keen enthusiasm, if not zealous certainty, it remains largely untested and leaves at least two major questions abegging. The first asks if the adoption of economic policies less permissive to economic development in the ?South? would have resulted a better outcome for those who lived and worked in the ?North,? let alone higher incomes per capita across the whole economy? The second inquires as to the nature of an alternative economic policy regime that would have produced the beneficent counterfactual implicit in Scott?s story? Both questions loomed large for contemporaries and neither prompted an easily defined or uncontested policy response. Just as today.

References:

Boyer, George. ?Living Standards, 1860-1939,? in Roderick Floud and Paul Johnson (eds.), 2004. The Cambridge Economic History of Modern Britain, Vol. II: Economic Maturity, 1860-1939, pp. 280-313. Cambridge: Cambridge University Press.

Crafts, Nicholas. 2005. ?Regional GDP in Britain, 1871-1911: Some estimates,? Scottish Journal of Political Economy, 52, pp. 1-24.

Lee, C.H. 1979. British Regional Employment Statistics 1841-1971. Cambridge: Cambridge University Press.

Lee, C.H. 1986. The British Economy since 1700: A Macroeconomic Perspective. Cambridge: Cambridge University Press.

Maddison, Angus, 1995. Monitoring the World Economy. Paris: OECD.

Maddison, Angus (Home Page) ?Statistics on World Population, GDP and Per Capita GDP, 1-2006 AD.? Scranton, Philip. 2000. Endless Novelty: Specialty Production and American Industrialization, 1865-1925. Princeton: Princeton University Press.

Peter Wardley has written on “The Commercial Banking Industry and Its Part in the Emergence and Consolidation of the Corporate Economy in Britain before 1940,” Journal of Industrial History (October 2000) and [with Norman Gemmell] ?The Contribution of Services to British Economic Growth, 1856-1914,? Explorations in Economic History (1990). His more recent research appears in ?A Global Assessment of the Large Enterprise on the Eve of the First World War: Corporate Size and Performance in 1912,? a chapter published in Youssef Cassis and Andrea Colli (eds.) Business Performance in Theory and History (forthcoming, Cambridge University Press).

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

Mass Migration under Sail: European Immigration to the Antebellum United States

Author(s):Carson, Scott A.
Reviewer(s):Cohn, Raymond L.

Published by EH.NET (May 2009)

Raymond L. Cohn, Mass Migration under Sail: European Immigration to the Antebellum United States. Cambridge: Cambridge University Press, 2009. xiii + 254 pp. $85 (hardcover), ISBN: 978-0-521-51322-7.

Reviewed for EH.NET by Scott A. Carson, Department of Economics, University of Texas ? Permian Basin.

Before the 1960s, most analysts concluded that willing and able nineteenth-century European immigrants could easily stake their claim and take advantage of a dynamic labor market in the United States. Research by Stephen Thernstrom, Dean Esslinger and Sally and Clyde Griffen called this optimistic view into question, finding that upward occupation mobility was fairly limited for first generation migrants. This revisionist view itself has come into question more recently. Joseph Ferrie, for example, presents evidence that the mid-nineteenth century U.S. was, rather, a place of considerable upward occupational mobility. Raymond Cohn weighs in on this important question in his latest contribution to the economic history of American immigration. However, where others devote considerable attention to conditions awaiting immigrants, Cohn evaluates conditions in the Old World ? Britain, Germany, and Ireland ? before mid-nineteenth-century migration, conditions during transit, and conditions after immigrant arrival. In the end, Cohn supports the optimistic view that the U.S. was, indeed, a place of opportunity for those willing and able to make the passage.

Organized into nine chapters, Mass Migration under Sail has three broad sections. Chapters two through five address immigrant origins, their pre-migration occupations, and factors motivating immigration. A second narrative that distinguishes Mass Migration from other like works is chapter six, in which Cohn considers migrant conditions during transit. The remainder of the book, chapters seven and eight, consider immigrant status after arrival, and like other research in this recent vein of the migration literature, considers how immigrants influenced nineteenth-century U.S. economic growth. Thus, readers are given a comprehensive examination of nineteenth-century Northern European immigration, a migration wave that radically transformed U.S. culture and labor markets.

Of interest to economic and immigration historians is the way in which Cohn places the immigration decision into push and pull factors and how these interacted with European economic conditions. European push factors included overpopulation and the Napoleonic Wars. Pull factors included U.S. economic growth and kin effects. However, other non-push and pull factors played an important role. Shipping costs fell; ship capacity and the number of passenger ships increased. Between 1815 and 1860, approximately 5.2 million Northern Europeans immigrated to the U.S. The increased flow of immigrants is frequently attributed to the onset of the Irish potato famine. Cohn, however, demonstrates the increase in mass migration began as early as 1815; immigration increased rapidly between the 1820s and 1830s, well before the outbreak of the potato famine. While Britain was a primary source of colonial era migration, Germany and Ireland sent comparatively more immigrants during the antebellum period. Two German and Irish geographic regions were responsible for pre-1840s migration: Southwest Germany and Northern Ireland.

Immigrants took a variety of pre-migration routes and transportation means before they embarked for the U.S. British and Irish immigrants embarked from London and Liverpool; Germans left from Le Havre, Bremen, and Hamburg. While high mortality rates were prominent on specific passages, the in-transit death rate was relatively low, around 1.56 percent of total migrants. Of the small share of immigrants who died during transit, the primary mortalities were typhus and cholera. Major ports of arrival were New Orleans, Philadelphia, Baltimore, and Boston; however, New York became the primary U.S. port of arrival. In response to diseases carried by immigrants on ships, the New York State government sent immigrants with contagious diseases to the Marine Hospital and Wards Island. In response to port runners, in-transit disease, and post-arrival health costs imposed on 1840s and 1850s U.S. populations and on local governments, government reforms on both sides of the Atlantic were enacted, which reduced many of the problems facing immigrants.

The final two chapters of Mass Migration under Sail offer additional evidence that the nineteenth-century U.S. was, indeed, a place where immigrants could stake their claims for a new life. After arrival, German and Irish immigrants settled regionally by nativity within the U.S. The Irish accounted for 68 percent of all immigrants to the Northeast; Germans accounted for 47 percent of all immigrants to the Midwest; British immigrants accounted for 19 percent of immigrants to the Northeast and 20 percent of immigrants to the Midwest. After arrival, the British, German, and Irish achieved success in U.S. labor markets, and the British and German immigrants found opportunity in skilled occupations. Irish immigrants did not fare as well as the other two groups, but still fared better than had they remained in Ireland. Moreover, all three cohorts improved their average skills in the U.S. after arrival.

The last issue Cohn addresses is possibly the most relevant to modern economics. Does immigration help or hurt native labor and will migration lead to long run economic growth? The answers, of course, vary widely, but if current migration is like the mid-nineteenth century, immigration will probably increase the long-run rate of economic growth. During the nineteenth century, immigration extended the U.S. product market and allowed labor in manufacturing and agriculture to specialize. Larger pools of unskilled labor after 1845 put downward pressure on wages. However, over time, labor markets adjusted, migrants assimilated, and the economy moved forward. In this sense, Mass Migration under Sail is a valuable contribution to economic and migration history and gives perspective on current migration issues.

Scott A. Carson?s recent publications include ?Indentured Migration in America’s Great Basin,? Journal of Interdisciplinary History (2002) and ?The Effect of Geography and Vitamin D on African-American Stature in the Nineteenth Century: Evidence from Prison Records,? Journal of Economic History (2008).

Subject(s):Historical Demography, including Migration
Geographic Area(s):North America
Time Period(s):19th Century

Migration and Inequality in Germany, 1870-1913

Author(s):Grant, Oliver
Reviewer(s):Wegge, Simone A.

Published by EH.NET (April 2009)

Oliver Grant, Migration and Inequality in Germany, 1870-1913. Oxford: Oxford University Press, 2005. vii + 406 pp. $199.50 (cloth), ISBN: 0-19-927656-0.

Reviewed for EH.NET by Simone A. Wegge, Department of Economics, College of Staten Island ? City University of New York.

In this impressive work, Grant explores the economic transition that Germany underwent during its period of industrialization. The Kehrite School, inspired by a doctoral thesis Eckart Kehr published in 1930, has argued that prior to 1914 Germany did not make necessary and important social changes that would have modernized German democratic society and made government more accountable and accessible to non-elites, the vast majority of the German population.

Here, Grant presents an alternative view, namely that Germany was not that different or special in the challenges it faced in moving from an agricultural economy to a more industrial one. The country faced many of the typical problems that a developing country goes through when industrializing, including a surplus of labor, shifting demographics, a migrant population, and changing land tenure systems. Throughout the book, the author applies the Lewis model of labor surplus from development economics and finds again and again that it is very suitable for describing the evolution of the German economy and specifically how internal migration can fit in a stage-of-growth story.

While Grant?s main objective is to counter the Kehrite view and convince the reader that Germany faced ?normal? problems over which its politicians had little control, the largest part of the book, eight of the ten chapters, is not about political history but instead about how agriculture, industry, income inequality, and demographics changed over the course of four decades or so. Only the first and last chapters deal specifically with the sociopolitical economy of Germany. As such, the first and last chapters seem somewhat divorced from the middle eight chapters.

Grant?s work provides an explanation as to how the migration decisions of many Germans were related to the economic transformations taking place in the German economy. As the German economy expanded in the late nineteenth and early twentieth centuries, many workers had to make adjustments in leaving declining businesses and occupations and taking up better-paid ones in other parts of Germany or the world. By 1895 German emigration had decreased substantially from its heyday, and more Germans could find employment somewhere at home.

At the outset of Migration and Inequality, Grant suggests that Germany be considered among the group of late-stage developers like Russia, Italy and Spain, all of which adopted British technology. However, by 1890 Germany had a GDP per capita that was substantially larger than that of all three of these countries (Crafts, 1984, 440, Table 1). Using a Chernery-Syrquin framework, Crafts considers Germany to have industrialized later than Britain and Belgium but around the same time as France and well ahead of Italy, Russia and Spain (Crafts, 1984, 448-9). A bit more consideration of such findings would have been helpful.

In Chapter 3 Grant presents some of his main results on internal migration as it was affected by an economy on the path to industrialization. Here he provides a picture of who moved in and who moved out, and how the long-distance migration flows were related differentially to agriculture, industry and especially railroad building. He uses a number of sources, most of which are aggregated statistics previously published, but his key results in this chapter are based mostly on one city, Berlin. I would have preferred that he had examined more cities. He could at least have framed the results in light of other recent works on internal German migration such as Hochstadt (1999) on D?sseldorf and Jackson (1997) on the Ruhr Valley, a hotbed of industrial activity at this time. Both works are listed in the bibliography, but more effort towards placing his findings in the context of these works would have made this an even more valuable study.

Grant?s work also places a large emphasis on internal migration and less so on Germans who left for overseas destinations. Migration is analyzed at a macro and not at the micro level. This approach misses insights on selection patterns that could be gained from looking at how migrants differed from non-migrants. Of course, migration history is an enormous subject, and no single book on migration history can be all things to all scholars.

Chapter 4 expands on this work by describing what important variables influenced internal migration. Agricultural areas lost more than urban areas, as a significant amount of the internal migration consisted of classic rural-urban moves. Further, people were more likely to leave places with lots of large farms, a close proximity to cities and high rates of productivity growth in agriculture. Grant tackles demographic issues in Chapter 5. All sorts of demographic variables differed by region, with the upshot that after 1870, population growth was higher in the east than in the south: although both regions experienced sizable emigration flows the east still lost more people than the south, partly due to a much higher percentage of women who never married in the south.

With a heavy emphasis on eastern Germany, Chapters 6 and 7 discuss the popular view of nineteenth-century social scientists that there was something backward about the prevalence of large estates and a property-less agricultural labor force in the east when peasants in the rest of Germany tended to own their own holdings. Grant argues that higher wages in the urban centers convinced many young people in the east to abandon their parents? way of life, which prompted estate owners to seek seasonal laborers from Poland. Wages were low in the east partly because landowners had a substitute labor force.

Grant finds other evidence that migration in the decades after 1870 represented a release of surplus labor from conditions of underemployment, as the Lewis model predicts. Regions of high productivity growth in the agricultural sector were correlated with higher migration rates: as farmers became more productive they needed fewer workers. At the same time though, the product mix changed, towards more labor?intensive activities like root crops (sugar beets) and livestock. With suspected widespread underemployment across Germany many in agricultural areas could still be employed, and in the east a cheap seasonal labor force was available for such crops.

Grant also argues that in the 1870s and 1880s migration was more likely to take place from communities with high population densities, which validates the prediction of the Lewis Model he presents in Chapter 1. This result should be considered with some caution, as it is based on a regression with basically just one right-hand-side variable, population density. What else could be driving migration rates?

In Chapter 8, Grant finally discusses the process of industrialization in more detail, focusing on capital markets and Germany?s changing terms of trade as related to exports. ?Inequality,? part of what is promised by the book?s title, is finally tackled in Chapter 9, where Grant calculates Gini coefficients from Prussian tax statistics. Inequality was never that high in Germany but ironically it was higher in the urban sector than in the rural sector. Grant finds evidence for a Kuznets Curve and argues that his findings fit within the perspectives of Kuznets, Lewis and Weber.

Grant covers a lot of ground in his book. There are dozens and dozens of different tables and regression estimates spread throughout this work. Like a good detective he has dusted off many existing studies and sources of data from government and journal publications, many published more than a century ago and many of which have undergone little sophisticated treatment. By using modern statistical and regression analysis he sheds new light on these previously published sources. In fact there are so many tables and maps, I wish he had devoted a few pages to listing them in an organized fashion. He also goes out of his way to make this work user-friendly by placing most of the econometric results in the appendices and explaining their economic and social significance in the main body of each chapter. This feature makes the book very accessible to a variety of social and economic historians.

While he refers to long-standing debates stemming from the scholarship of Max Weber, Eckart Kehr and Kuznets, there could be more reference to the debates that economic historians are currently engaged in. As I mentioned above, comparison with Crafts? work would have been desirable. Using the insights of recent studies on internal migration within Germany would also have been helpful. Further, while Grant spends time comparing land ownership institutions between Britain and Germany, it would have been intriguing to know more about his thoughts on Britain?s own experience with a surplus of labor. Contrasting his findings with those of Baines (1985) would have been interesting, and perhaps this may provide Grant with an idea for further work.

In spite of these quibbles, Grant lays down piece by piece the argument that between 1870 and 1913, Germany was going through economic adjustment problems, and that these should be considered as a normal part of most industrialization processes, both historical and contemporary. This is the thesis of the book. Importantly, he argues that the Kehrite School, which viewed Germany as deeply flawed, has overlooked relevant economic realities and focused too much on internal political problems. Without trade, for instance, Germany could not have industrialized, as self-sufficiency would have entailed a higher agricultural labor force and allowed fewer for the factories. Here Germany needed food imports, which it supported with a moderate level of protection. Even the Kaiser acknowledged this.

Grant thus comes to reject the Kehrite School view that Germany suffered from internal socioeconomic flaws and could not make adequate political progress. Instead, he states on page 354 that ?the path to democracy was getting easier, not more difficult.? He goes further to conclude that ?The events of 1914 represented a derailment …? He thus provides his own particular views on the Sonderweg debate in German history, which attempts to trace the political-economic origins of the Nazi catastrophe. Luckily for him, his book ends in 1913. If we are to accept Grant?s view and reject the Kerite perspective that German sociopolitical evolution was misguided, we need a roadmap that takes us through World War I and further ? food for thought for future research.

For those interested in a case study of long-term economic development and transition, Grant provides a very interesting example in the form of Germany in the late nineteenth century. Germany industrialized inordinately quickly and came to dominate Europe not only economically but obviously politically in the twentieth century. Economic historians need to understand this particular case and compare it to others. Grant succeeds admirably in showing that it is relevant that we characterize historical processes accurately, both to understand the past and to examine carefully how socioeconomic evolution affects later periods. Lastly, Grant has provided a work that reminds economists and others of what insights they can gain on economic growth and political history by examining economic history.

References:

Baines, Dudley. Migration in a Mature Economy: Emigration and Internal Migration in England and Wales, 1861-1900. Cambridge: Cambridge University Press, 1985.

Crafts, N. F. R. 1984. ?Patterns of Development in Nineteenth Century Europe.? Oxford Economic Papers 36 (3): 438-58.

Hochstadt, Steve. Mobility and Modernity: Migration in Germany, 1820-1989. Ann Arbor: University of Michigan Press, 1999.

Kehr, Eckart. Battleship Building and Party Politics in Germany 1894-1901: A Cross-Section of the Political, Social, and Ideological Preconditions of German Imperialism. Chicago: University of Chicago Press, 1973.

Kehr, Eckart (ed. by Gordon A. Craig). Economic Interest, Militarism, and Foreign Policy: Essays on German History. Berkeley: University of California Press, 1977.

Jackson, James H. Jr. Migration and Urbanization in the Ruhr Valley, 1821-1914. Atlantic Highlands, N.J.: Humanities Press, 1997.

Simone A. Wegge is an associate professor of economics at the College of Staten Island and at the Graduate Center, both of the City University of New York. Her research focuses on European and German economic history, especially emigration. Her most recent paper is titled ?Network Strategies of Nineteenth-Century Hesse-Cassel Emigrants.? History of the Family 13 (3): 296-314.

Subject(s):Industry: Manufacturing and Construction
Geographic Area(s):Europe
Time Period(s):20th Century: Pre WWII