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Modernizing a Slave Economy: The Economic Vision of the Confederate Nation

Author(s):Majewski, John
Reviewer(s):Delfino, Susanna

Published by EH.Net (March 2011)

John Majewski, Modernizing a Slave Economy: The Economic Vision of the Confederate Nation. Chapel Hill: University of North Carolina Press, 2009. xiii + 240 pp. $40 (hardcover), ISBN: 978-0-8078-3251-6.

Reviewed for EH.Net by Susanna Delfino, Department of European Research, University of Genoa, Italy.

?A Modern Economy without Modernization? — A Southern Paradox

Scholarship of the past few decades has amply documented that, from the late 1700s, capitalist-oriented entrepreneurial and business forces were at work in the southern states, and that their strength and visibility increased during the first half of the following century. Defining the contours of a univocal southern economic vision in the antebellum era has, however, proved extremely challenging, exposing all the ambiguities and inconsistencies immanent in the thinking of elite southerners, from political economists to politicians, from planters to manufacturers, and to businessmen in general. Even the staunchest agrarians, in fact, did not fail to appreciate the desirability of an albeit moderate industrial development. The seeming contradictions, which stemmed from their effort to reconcile economic development — including industrialization — with the preservation and protection of the institution of slavery, resulted in the shaping of a distinctively southern idea of economic modernity which rejected the tenets of modernization as commonly understood in the North and Europe as well by the mid-nineteenth century.[1]??? ??? ????????

John Majewski?s Modernizing a Slave Economy focuses on Virginia and South Carolina to explore the implications of such inconsistencies in the shaping of the secessionists ideology and, ultimately, in accounting for the failure of the Confederate experiment. Whereas a traditional historiography had identified the principles inspiring secession in the defense of thoroughly agrarian values, minimal government, and laissez-faire, Majewski shows that the secessionist ideology comprised instead visions of industrial expansion and economic independence that ought to be achieved largely through government activism. As a result, Majewski argues, the experience of a centralized and highly bureaucratic Confederate nation was not ?a radical disjuncture but a natural outgrowth of southern attitudes established during the antebellum period? (p. 7).

To demonstrate his thesis, Majewski adopts multiple and intertwined perspectives: from the environmental, to the economic, and to the political. Such an approach provides him with a broad compass of sensibilities that make the analysis well articulated and sophisticated at every turn.
The environmental argument constitutes the core around which Majewski?s analysis unfolds. Through it, he illustrates the distance separating reality from imagination in the economic vision of white southerners, as well as in northern perceptions and representations of the South?s economy. By showing that the extremely widespread use of shifting — as opposed to continuous — cultivation was determined by the highly acidic composition of much of the South?s soil, he both refutes the cultural explanation upheld by northerners to account for the seemingly backward state of southern agriculture and pinpoints the objective limits to regional economic development. In fact, by leaving vast stretches of land unimproved, shifting cultivation resulted in low population density. This, in turn, generated negative effects on the extent and depth of markets and on transportation costs: two essential factors for the development and expansion of the manufacturing sector. Slavery, of course, aggravated the situation but, as the case of Maryland well illustrates, was not the primary cause for either shifting cultivation or the South?s difficulties in triggering a self-sustaining process of industrial development. While only a relatively small number of enlightened southerners fully understood the real nature of the problem with southern agriculture, most believed that it could be solved through a vast reform program. However, because of the complexity and scope of the actions needed, this could only be pursued through the support of state governments. Investment was needed in the fields of research and education, and in the funding of local agricultural societies that might introduce farmers to a correct use of fertilizers and to the advantages of crop rotation. Steps forward were made during the last few antebellum decades, but the results obtained did not match the efforts lavished by agricultural reformers. Majewski rightly ascribes those meager results to the relatively low short-term return that the southern state governments anticipated from massive investment in agriculture as opposed to more ?visible? undertakings, such as railroad building, in the face of both intrastate and interstate rivalries.

The connection Majewski identifies between agricultural reformism, pleas for state intervention in the economy, and secessionism is crucial to his thesis that social conservatism and economic development coexisted in the secessionists? vision of an independent southern nation. Political independence, in fact, was only an empty word if not accompanied by certain economic requisites — a manufacturing base to free themselves from northern dependence, and the establishment of direct trade links with Europe. Toward the achievement of these goals, the modernization of agriculture was central. As Majewski effectively contends, the strong focus secessionists placed on agriculture has been wrongly understood as revealing their adhesion to a traditional, outmoded vision of the South?s future. Quite the contrary, it conveyed their awareness that the quest for southern political independence implied economic diversification, including industrialization. In their envisioning of an independent southern Confederacy, secessionists were, however, caught in the straits of a number of more or less apparent inconsistencies. For example, they criticized the activist government and the gospel of modernization embraced by northerners while at the same time placing these very assumptions at the core of their southern nationalism.

As Majewski points out, the advocacy of state-promoted economic policies dated back to the antebellum era. The example of railroads is revealing in this regard. Heavy spending in railroad construction by the southern state governments — and eminently by those of Virginia and South Carolina — stemmed from the belief that this sort of intervention could make up for the structural problems impairing a ?natural? development of the South?s economy. Due to the sparseness and scantiness of the population, the building of railroads could not be sustained — as in the North — by local communities; but if the lines were built thanks to massive public investment, their beneficial effects would reverberate on the economy as a whole, stimulating the growth of commerce and manufacturing, opening new prospects for international trade, and uniting the several parts of the South. Such a course of action, however, ?produced a boom in railroad construction without revolutionizing the southern economy,? thus failing ?to correct the region?s fundamental economic problems? (p. 104).

In their desire to reconcile the creation of a modern economy with the protection of slavery, secessionists made gross mistakes in evaluation. Their quite simplistic understanding of economic interest, for example, led them to believe that the Confederacy would have won both international and internal support, even from the slaves themselves. Reality would prove completely different. This is not, however, the only paradox that Majewski identifies in his analysis of the political economy embraced by secessionists in their envisioning of the future of an independent southern nation, vis-?-vis the region?s economic and social conditions. Advocacy of free trade had traditionally been one of the mainstays of southern economic thought within the national fold. However, an independent South required both a free trade international policy and an albeit moderate protectionist one, to shield its infant industry from northern and foreign competition. Confederate nationalism was therefore based on mixed ideas of economic liberalism and state regulation. Ultimately, the vast array of either domestic and international issues the Confederate government had to cope with often required measures of opposite sign, resulting in the adoption of contradictory and therefore largely ineffective policies that contributed to the collapse of the Confederate nation.

Secessionists emerge from the pages of Modernizing a Slave Economy in a completely new light as opposed to previous interpretations: modern men with a vision, rather than backward-looking traditionalists. Throughout the book, slavery comes forward as the core problem in determining the ambivalence and incongruities steeped in southern economic thought. Majewski?s work demonstrates, once and for all, that the defense of slavery was not deemed incompatible with the quest for economic modernity by even the most conservative members of the southern elites. More generally, it reiterates the need to definitely abandon rigid, dichotomous understandings of the economic, cultural, and political assumptions underlying unionism and secessionism, respectively. Modernizing a Slave Economy confirms that love for the Union and secessionism; unionism and the defense of slavery; secessionism and the envisioning of an economically modern South could and did coexist in the minds of antebellum and Civil War white southerners.?

This book is absolutely original in its placing the consequences of shifting cultivation at the basis of the South?s failure to achieve higher standards of economic modernization in the late antebellum decades. Through this example, and in contrast with previous interpretations, it effectively downplays the pre-eminence of the cultural factor in accounting for the South?s relative failure in catching up with the North in terms of industrial development before the Civil War.[2] Culture did matter, of course, but its impact was most revealed by the inconsistencies immanent in southern thought, which concurred to define the traits of a southern paradox still difficult to grasp in its complexity and entirety. By suggesting a different kind of continuity between antebellum and Civil War southern political economy as compared with traditional interpretations, John Majewski opens important directions in historical investigation and sets a new standard in the scholarly debate. The scope and complexity of the subject indeed deserve further research toward an increasingly sophisticated understanding of southern history in the slave era.

1. In his monumental work on the South?s intellectual life, Michael O?Brien discusses the economic thought of southerners, illustrating its traits of ambivalence and modernity as well. He shows that not even the most conservative among them failed to acknowledge that the encouragement of manufacturing was central to the South?s future. Michael O?Brien, Conjectures of Order: Intellectual Life and the American South, 1810-1860, 2 vols. (Chapel Hill, NC: University of North Carolina Press, 2004).? I have also argued for a fundamental convergence of opinion among southern political economists and political thinkers on the subject of manufacturing. Susanna Delfino, La fabbrica dei sogni: dilemmi economici nel sud degli Stati Uniti tra l?et? della Rivoluzione e la crisi di met? Ottocento (Milano: Selene Edizioni, 2008).

2. The argument that the cultural factor was the main constraint to southern industrial development is set forth by Fred Bateman and Thomas Weiss, A Deplorable Scarcity: The Failure of Industrialization in the Slave Economy (Chapel Hill, NC: University of North Carolina Press, 1981).

Susanna Delfino is the author of La fabbrica dei sogni: dilemmi economici nel sud degli Stati Uniti tra l?et? della Rivoluzione e la crisi di met? Ottocento (Milano: Selene Edizioni, 2008).

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Subject(s):Agriculture, Natural Resources, and Extractive Industries
Economic Development, Growth, and Aggregate Productivity
Economic Planning and Policy
Geographic Area(s):North America
Time Period(s):19th Century

The Capital and the Colonies: London and the Atlantic Economy, 1660-1700

Author(s):Zahedieh, Nuala
Reviewer(s):Walsh, Lorena S.

Published by EH.Net (February 2011)

Nuala Zahedieh, The Capital and the Colonies: London and the Atlantic Economy, 1660-1700. Cambridge: Cambridge University Press, 2010. xvii + 329 pp. $95 (hardcover), ISBN: 978-0-521-51423-1.

Reviewed for EH.Net by Lorena S. Walsh, Colonial Williamsburg Foundation (retired).

Several recent investigations of early modern economic growth have emphasized the critical importance of overseas expansion — especially the rise of Atlantic commerce — in encouraging economic development and in inducing institutional changes initiated by new mercantile groups operating outside of royal circles (e.g., Robert C. Brenner, Merchants and Revolution: Commercial Change, Political Conflict, and London?s Overseas Traders, 1550-1653 [Cambridge, 1993]; Kenneth Pomeranz, The Great Divergence: China, Europe, and the Making of the Modern World Economy [Princeton, 2000], and Daron Acemoglu, Simon Johnson, and James Robinson, ?The Rise of Europe: Atlantic Trade, Institutional Change, and Economic Growth,? American Economic Review, 95 (2005), 546-579).? Some have also stressed the dynamic role of Atlantic port cities, London in particular, in bringing together strategically favorable combinations of financial and commercial expertise; skilled, well-paid workforces; and high levels of demand for food, fuel, manufactured goods, and new tropical products (e.g., Robert C. Allen, The British Industrial Revolution in Global Perspective [Cambridge, 2009]; and Acemoglu, et al, ?Rise of Europe?).

Nuala Zahedieh, a senior lecturer in economic and social history at the University of Edinburgh, provides a masterful account of Londoners? central role in facilitating economic development in the later seventeenth century that integrates literatures on colonial empire, commerce, the consumer revolution, and the Industrial Revolution.? A main focus of research is how merchants ?responded to the opportunities and challenges? offered by Britain?s early overseas expansion ?and set in place a durable mercantile system which underpinned both extensive and intensive growth and made the Industrial Revolution more likely?(p. 3).? She sees the later seventeenth century as a critical period when ?the rules of the game were established and the incentive structure that shaped investment and the accumulation of financial and human capital took lasting form?(p. 7).? Readers will find her discussion of the mercantilist system familiar, but less so her argument (developed from long years of research on colonial, especially West Indies, trade) that the seventeenth-century state ?did not have the resources to enforce commercial legislation which seriously raised private costs,? leading her to take evidence of general compliance with the Navigation Acts by the 1680s as ?a measure of increasing convergence between English and Dutch commercial capabilities and costs rather than as a forced shift towards inefficient providers?(pp. 6-7).?

Scholars? relative neglect of London?s later seventeenth-century commerce is understandable given the scarcity of aggregated commercial statistics, the loss of many London portbooks, and the daunting volume of those that have survived.? The Capital and the Colonies employs a systematic analysis of portbooks for 1686 (a peacetime year for which the records survive in full) and more limited samples of data from the 1660s and c. 1700 to provide a detailed statistical portrait of London?s Atlantic trade.? In addition to data on exports and imports, Zahedieh compiled a biographical database of colonial merchants identified in the 1686 portbooks which she uses to trace their careers and trading networks.? Less systematic research in mercantile papers and court records, promotional tracts, and economic literature supplements the portbook materials.? Extensive period illustrations of metropolitan and colonial cityscapes, public and commercial buildings, mercantile publications, ships, manufactories, and plantations lend visual concreteness to the text.

London was unique among European cities in the size of its population and manufacturing sector, its concentration of national political and legal institutions, and in its possession of three quarters of the nation?s merchant fleet, including most shipping devoted to lucrative West Indian and African commerce.? Atlantic trade not only constituted a growing proportion of overall trade, but, Zahedieh argues, had a qualitative significance beyond its actual volume and value in that it encouraged diversification in manufacturing and provided a high proportion of commodities traded in the new re-export sector, enabling London to challenge Amsterdam as Europe?s main redistribution center.

Colonial commerce was distinctive in its competitiveness, in its high transactions costs, and in its requirements for long credits and a high volume of shipping.? These characteristics all encouraged efficiency gains from take-up of best practices and from innovation. The trade was open, unregulated, and conducted by individuals rather than corporations.? As a result it stimulated modernized mercantile education, new associational activities, strenuous efforts to reduce transactions costs (including improvements in sorting, marketing, processing, and distribution of colonial products), and more effective solutions to risk mitigation and problems of trust and poor information (e.g., partnerships, marine insurance, bills of exchange, published price-currents, and multilateral settlements).?

Zahedieh finds increasing concentration of plantation commerce among large merchants specializing in particular commodities and regions in the 1680s, when falling commodity prices and increased taxes eroded profit margins and drove out small traders.? Colonial merchants seldom invested in overseas property, but made a massive contribution to expansion of empire in the form of short-term credit extended to settlers. The larger operators accumulated enough capital to diversify investment into shipbuilding, slave-trading, joint-stocks, insurance, wharves, industry, landed property, loans, and public credit. This decade was a turning point, as merchant concentration and specialization led to improved productivity, economies of scale, and reduced costs.? Zahedieh portrays the attempts of the later Stuarts to corner the profits of empire by restricting free trade among Englishmen as having limited success.? On the other hand, she sees the effect of the Glorious Revolution, not as leading to an economically optimal political arrangement, but as consolidating the capacity of the transatlantic trading elite to enforce regulation in its own interests and enhance ?the value and scale of rent-seeking enterprises at the expense of competition and efficiency? (p. 127), leading to a period of slower growth in colonial trade and shipping at the end of the century.

Unlike trade with Europe, colonial commerce required an unusually large fixed capital investment in the greater tonnage needed to transport large volumes of bulky goods over long distances.? Zahedieh argues that English- and plantation-built ships were better suited to most colonial commerce than were Dutch prototypes, and that it was long-distance commerce, rather than the protection of the Navigation Acts, that revived the English shipbuilding industry.? By 1700 plantation shipping accounted for 40% of London?s overseas trading capacity. Atlantic trade led as well to increased education among mariners in mathematical, mechanical and managerial skills, and expanded the market for navigational instruments.? It also contributed to London?s prosperity by stimulating the construction of wharfs and warehouses, and increasing the scale of naval refitting, repair, and provisioning trades.? Although technology and unit input costs were fairly stable across the period, increased volumes and growing experience with colonial conditions led to organizational improvements which made more efficient use of inputs. Greater awareness of seasonality and the accompanying need for careful timing, along with standardized containers, greater use of marine insurance, and the development of multilateral voyages all led to fuller use of shipping capacity and to reduced costs.

The volume of colonial imports more than trebled between the 1660s and 1700, when they accounted for a fifth of London?s inward trade and a third of its re-export trade to Europe.? And, as Zahedieh?s discussions of the fish, fur, timber, tobacco, sugar, cotton, and dye-stuffs trades demonstrate, merchants achieved efficiency gains in both production and distribution. Plantation products provided incentives to invest in improving skills, techniques, commercial infrastructure, and organization of industry, intensifying use of resources and strengthening manufacturing capacities.? Colonial imports proved a catalyst in changing domestic consumption patterns.? Innovations in retailing expanded aggregate demand, while availability of alternative beverages to beer, such as tea and coffee, along with increased use of sugar in alcoholic drinks and as a food preservative, reduced pressure on the nation?s grain supply.? Colonial imports also supplied industrial raw materials and provided a surplus of exotic commodities that were re-exported to pay for European goods.? Their prominence in domestic trade induced investment in an improved national transport network that reduced not just the cost of plantation products for British consumers, but also the cost of bringing goods to the metropolis.? Processing of colonial products, reserved by the Navigation Acts for the mother country and aided by access to skilled workers and cheap fuels in the metropolis, promoted diversification of the capital?s manufacturing sector.?

Zahedieh considers London?s export trade with colonies — which, fueled by colonists? voracious appetite for English goods and services, grew faster between 1660 and 1700 than did imports — to be equally influential as imports in driving expansion and change.? Included and valued in Zahedieh?s survey are the trades in servants and slaves and freight earnings, exports not listed in the portbooks.? Due to limited markets, high labor costs and skills shortage — rather than mercantilist regulations — colonists remained dependent on the mother country for most manufactures.? The high profits merchants could earn in this most profitable branch of colonial commerce ?focused entrepreneurial attention on different problems from those facing the high-fashion, high-cost, craft industries catering for the London elites? (p. 276).?? Making goods for distant American and African markets encouraged restructuring of industries around bulk production at low unit cost, while the growing re-export trade encouraged investment in new processing industries.? A surge in colonial demand in the late seventeenth century had a radical impact of the volume and character of the English export trade away from traditional wool fabrics to a wider array of textiles and ready-to-wear clothes, as well as metalwares, miscellaneous manufactures, and foods.

This sophisticated study in Atlantic economic history will interest metropolitan and colonial as well as Atlantic scholars, challenging them to take more account of the feedback effects and linkages for economic growth generated by overseas expansion, and the potential role of competitive long-distance trade in a wide array of ostensibly mundane commodities in helping to precipitate the Industrial Revolution.

??? ?
Lorena S. Walsh is the author of Motives of Honor, Pleasure and Profit: Plantation Management in the Colonial Chesapeake, 1607-1763 (Chapel Hill: University of North Carolina Press, 2010).

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 ( Published by EH.Net (February 2011). All EH.Net reviews are archived at

Subject(s):International and Domestic Trade and Relations
Markets and Institutions
Geographic Area(s):Europe
North America
Time Period(s):17th Century

The Politics of Provisions: Food Riots, Moral Economy, and Market Transition in England, c. 1500-1850

Author(s):Bohstedt, John
Reviewer(s):Ó Gráda, Cormac

Published by EH.Net (February 2011)

John Bohstedt, The Politics of Provisions: Food Riots, Moral Economy, and Market Transition in England, c. 1500-1850. Farnham, Surrey: Ashgate Books, 2010.? x + 312 pp. $100 (hardcover), ISBN: 978-0-7546-6581-6.

Reviewed for EH.Net by Cormac ? Gr?da, Department of Economics, University College Dublin.?

One of the classic set pieces in Alessandro Manzoni?s I Promessi Sposi is a famine scene set in seventeenth-century Milan, in which the hapless hero, Renzo, barely escapes with his life during a food riot.? Manzoni was a fan of the Enlightenment and of Adam Smith, so his account of Renzo?s folly is implicitly critical of those who would interfere with market forces, even during a famine.? Many economists would instinctively agree with him.? Some might change their minds, however, after reading John Bohstedt?s The Politics of Provisions, a masterly history of food riots in England.

Food riots were typically the product of commercialization and its handmaiden, the division of labor.? They were most likely in towns where the impact of sudden rises in food prices was most acutely felt, and where resistance was more easily organized.?? They were less likely in contexts of agricultural productivity growth and competitive, rapidly-adjusting markets.? Food riots thus became widespread in England during the Tudor-Stuart period, reached a peak on the eve of the Industrial Revolution, and petered out in the early Victorian era.

Politics of Provisions is built around the meticulous analysis of over seven hundred food riots occurring over a period of three centuries or so.? Riots are defined as collective action involving a dozen or more individuals.? Episodes might be over in a day or might last a week or two; they were more likely in areas with a tradition of collective action on other issues.?? Bohstedt?s census, which is available online [], is not a continuous three-century time-series; it focuses instead on episodes of peaks in rioting.? Thus Bohstedt identifies and documents in detail forty-five riots in 1740-41, but more than a hundred in 1756-57 and in 1766, and a further forty or so in 1772-73.? These are periods of extreme hardship well-known to scholars of subsistence crises in England and further afield.? Bohstedt contrasts the Tudor-Stuart period (c. 1550-1650) of rising population pressure and declining real wages with the following period (1650-1739) characterized by increasing market integration, an agricultural productivity growth that outstripped population, and (as a result) a decline in the number of scarcity crises (p. 266).? Then his third period (1740-1820) was what he calls the ?golden age of food riots.?

Bohstedt?s study is not an exercise in crude economistic determinism.? Although the riots were always caused by hunger, those who took part in them were not necessarily the most vulnerable or the poorest.?? They were more likely to be independent artisans and craftsmen, what Bohstedt calls ?masterless men? (p. 264).? The number of food riots grew as the growth in the number of ?masterless men.?? The rioters sought neither a return to bucolic self-sufficiency ? la Karl Polanyi nor social revolution ? la Karl Marx; according to Bohstedt they simply operated out of a deep conviction that the rich were bound to help in times of need.? Although their protests sometimes turned violent, the rioters were on the whole disciplined.? Moreover their actions, be they blocking exports, seizing food directly, and forcing prices down, succeeded in extracting concessions from the better-off.? Predicated on the ?moral economy? conviction that ?necessity knows no law,? the transfers of resources they that extracted saved lives.? Rioting worked.

The concessions gained by the rioters were by no means ad hoc only; some had lasting institutional consequences.? Thus, in January 1587 rioting led to the first book of ?dearth orders,? which directed local officials to regulate food supplies.? In the 1590s widespread rioting produced the codification in 1598 of the Elizabethan ?old? poor law, which would have an enduring impact on welfare and, some would argue, economic development; in 1756 widespread unrest prompted the creation of municipal food banks by the gentry; and in 1795 food riots in the south of England prompted magistrates in Berkshire to introduce their much maligned Speenhamland system of outdoor relief.? Bohstedt surmises that food riots were partly responsible for the elimination of famine in England after the 1620s, citing with evident glee E.P. Thompson?s panacea for famine: send cadres of food-riot instructors to countries at risk (pp. 33-34, 89).? The claim is plausible, although it must be qualified, given the evidence for excess famine mortality in England as late as the late 1720s and the early 1740s (Kelly and ? Gr?da, 2011).?

The correlation between rioting intensity, high food prices, and the threat of famine is striking.? The main outlier in this respect seems to be 1726-29, a period of famine which produced only twenty-one food riots (p. 97).? But did rioters succeed in reducing food prices?? While Bohstedt provides evidence on price controls, only micro-studies using high quality, high frequency data can really answer this question.? In order to be effective, did the riots have to reduce food prices?? One answer, set out by Malthus in An Investigation of the Cause of the Present High Cost of Provisions (1800) — prompted, incidentally, by the serious outbreak of food rioting in 1799-1800 (pp. 206-09) — is ?not necessarily.?? Malthus pointed out, rather mischievously, that riot-induced transfers of purchasing power from the rich to the poor might increase the price of staple food items.? Yet he also conceded, atypically, that the operation of the poor laws had ?been advantageous to the country? in averting famine in 1799-1800.

Although Bohstedt does not cite Karl-Gunnar Persson?s Grain Markets in Europe, the very different approaches taken by him and Persson nicely complement one another.? One of Persson?s key points is that for as long as food markets responded sluggishly to disequilibria, both spatial and intertemporal, governing elites actively sought to preempt shortages by storing food and controlling interregional trade.? They did so partly out of noblesse oblige, but also out of fear.? The increasing integration of markets reduced the likelihood of those local food shortages and price peaks which led to food riots.

Politics of Provisions is well-produced but, as is the rule with Ashgate, pricey.? It deserves to be widely read and known.? It will be of particular interest to historians interested in the evolution of markets and the role of institutions and in the social and economic history of industrializing England.

Morgan Kelly and C. ? Gr?da. ?The Poor Law of Old England: Institutional Innovation and Demographic Regimes,? Journal of Interdisciplinary History, XLI[3] (Winter, 2011), 339?366.

Karl Gunnar Persson, Grain Markets in Europe, 1500-1900: Integration and Deregulation, Cambridge: Cambridge University Press, 1999.

Cormac ? Gr?da is Professor of Economics, University College Dublin.? Recent publications include Famine: A Short History (Princeton, 2009) and Jewish Ireland in the Age of Joyce: A Socioeconomic History (Princeton, 2006).

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 ( Published by EH.Net (February 2011). All EH.Net reviews are archived at

Subject(s):Government, Law and Regulation, Public Finance
Household, Family and Consumer History
Markets and Institutions
Social and Cultural History, including Race, Ethnicity and Gender
Geographic Area(s):Europe
Time Period(s):16th Century
17th Century
18th Century
19th Century

Commerce before Capitalism in Europe, 1300-1600

Author(s):Howell, Martha C.
Reviewer(s):Trivellato, Francesca

Published by EH.NET (December 2010)

Martha C. Howell, Commerce before Capitalism in Europe, 1300-1600. New York: Cambridge University Press, 2010. xv + 365 pp. $30 (paperback), ISBN: 978-0-521-14850-4.

Reviewed for EH.Net by Francesca Trivellato, Department of History, Yale University.

Martha Howell opens her latest book with the assertion that ?Between 1300 and 1600, commerce left the margins of the European economy where it had been confined for centuries? (p. 1). But she is quick to warn readers that ?the commercial economy of those days was not a capitalist market economy, if by that term we mean the modern western economic system? (p. 8). It follows that we ought to understand the period between 1300 and 1600 as a transformative but distinctive epoch in the economic history of Europe, rather than as a forerunner of changes that matured in the seventeenth and eighteenth centuries.

Through a richly documented and lucid narrative, Howell illustrates the profound transformation that occurred in the ways in which men and women practiced and understood commercial transactions in the most urbanized regions of northern Europe. The geographical focus of the book is on the greater Low Countries (most of the primary sources are from the archives of Ghent, in modern-day Belgium), but the author also uses abundant secondary literature in order to draw several informed comparisons with the rest of the continent. The protagonists are ?ordinary householders, artisans, and shopkeepers, as well as … merchants and the financiers who worked between the courts or town halls and the commercial economy of the day? (p. 158).

Each chapter analyzes a meaningful facet of the rising commercialization of society. Chapter 1 illustrates the legal and economic process through which virtually any good became exchangeable on the market, including and especially land holdings. Changes in the legal classification of ?moveable? and ?immoveable? goods accompanied changes in the transfer of property at marriage and, more generally, conferred new meanings on notions of patrimony. Chapter 2 teases out the implications of the commercialization of society for conjugal love. Contrary to prevailing interpretations that attribute the rise in voluntary, romantic unions to an increased sexual division of labor and the domestication of family life, Howell argues that true companionship between husband and wife was necessary to weather the challenges of commercial life. In her words, ?love was by no means the antithesis of the market. It was the market?s helpmate? (p. 141). Chapter 3 continues to draw information from legal, administrative, and financial records to assess changes and continuities in the customs of gift-giving, and the concomitant rise of the concept of bribes. Chapter 4 revisits a well-known literature on sumptuary laws across Europe to show that clothing was the principal target of this legislation. As the power of money to shape social hierarchies grew, wardrobes ceased to be stable signifiers of one?s rank and anxieties about people?s ability to dress above their station intensified (this argument resembles one presented in Daniel Roche, The Culture of Clothing: Dress and Fashion in the Ancien R?gime, trans. Jean Birrell [Cambridge: Cambridge University Press, 1994]). The fifth and final chapter of the book expands the lens of analysis further to embrace all of Europe and new types of sources — the many texts written by jurists, moralists, theologians, and learned observers about the vices and virtues of commerce. Here Howell retraces the story of the attacks launched against trade and merchants with increased intensity after the commercial revolution of the twelfth century but also recaps the gradual process through which commerce was accepted as an honorable activity toward the end of her period. The novelty of her interpretation derives from a reading of well-known texts from the perspective of gender. She demonstrates that several authors made ?gathering and spending wealth ethical … by turning women into virtuous consumers and men into responsible providers? (p. 289). She adds, ?The narrative that excluded proper women from active participation in market production simultaneously gave men exclusive control of it? (p. 295).

As in her earlier work, Howell adopts a periodization that we rarely encounter in recent scholarship: 1300-1600. The advantage of this chronology is twofold. It provides a bridge between two classic chronologies and geographies of the birth of European capitalism: one centered on the medieval commercial revolution of southern Europe and one hinging on the seventeenth-century financial revolution of northern Europe. It also shifts the focus away both from the sixteenth century — which for Fernand Braudel and his followers was the fulcrum of nascent commercial capitalism — and from the seventeenth and eighteenth centuries, the rise of transoceanic trade, and the industrial revolution, which are arguably the periods and topics most investigated in the economic history of early modern Europe (particularly in the Anglophone literature). The drawback of embracing three centuries in one single study is most visible in the first three chapters, which are based on archival research and which draw most of the evidence from the earlier part of the period under consideration (in contrast to the last two chapters in which a process of change over time is most easily discernible through recourse to secondary sources). As a result, it is not always clear whether Howell believes that specific turning points existed in the period between 1300 and 1600 or whether we should consider it a fairly homogenous historical epoch.

At the crossroads of a monograph and a synthesis, this book is highly recommended to those EH.Net readers who wish to keep up with (and expose their graduate students to) an approach to the economic history of pre-industrial Europe that is prevalent among historians rather than economists. Echoing Karl Polanyi but also numerous historians of medieval and early modern Europe, Howell affirms that ?the commercialization of society was not just an economic history as we understand the term but a social, legal, and cultural story, and it is incomprehensible if told from the perspective of one of these modern conceptual categories alone. In fact, the social and cultural were the roots of the economic, not footnotes to it? (p. 263). Her effort to expose those roots is both erudite and sophisticated.

Francesca Trivellato is Professor of History at Yale University and the author of The Familiarity of Strangers: The Sephardic Diaspora, Livorno, and Cross-Cultural Trade in the Early Modern Period (New Haven: Yale University Press, 2009). Email:?

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 ( Published by EH.Net (December 2010). All EH.Net reviews are archived at

Subject(s):Business History
Economywide Country Studies and Comparative History
Markets and Institutions
Geographic Area(s):Europe
Time Period(s):Medieval
16th Century

Fixed Ideas of Money: Small States and Exchange Rate Regimes in Twentieth-Century Europe

Author(s):Straumann, Tobias
Reviewer(s):Hansen, Per H.

Published by EH.NET (November 2010)

Tobias Straumann, Fixed Ideas of Money: Small States and Exchange Rate Regimes in Twentieth-Century Europe. New York: Cambridge University Press, 2010. xix + 392 pp. $90 (hardcover), ISBN: 978-0-521-11271-0.

Reviewed for EH.Net by Per H. Hansen, Center for Business History, Copenhagen Business School.

Tobias Straumann is lecturer in history at the University of Z?rich and in economics at the University of Basel, and in his first book, Fixed Ideas of Money, he demonstrates his command of both disciplines while also drawing on international political economy (IPE) literature. As the title suggests Straumann?s point of departure is that states and central banks do not always make rational choices with respect to exchange policy, and that they have, therefore, ?fixed ideas of money.? This idea is not new, of course, since it has been put forward by Barry Eichengreen and Peter Temin, among others, who have argued that the gold standard was carried by a mindset that made it almost impossible for decision makers not to believe in it. What is new in Straumann?s book, however, is the shift in focus from the Great Powers to small states in Europe and the expansion of the time period to include the decades after Bretton Woods broke down in the early 1970s.

In focus is on three Scandinavian countries, Sweden, Norway and Denmark, as well as Belgium, the Netherlands, and Switzerland and — to a lesser degree — Austria. The author leaves Austria out of the analysis of the interwar period because of its tumultuous monetary history, but it is not entirely clear why the Austrian case would not be both interesting and relevant. The fact that the international financial crisis of 1931 began with the Credit Anstalt crisis and was an important immediate cause of Britain?s and the Scandinavian countries? decision to leave the gold standard in September 1931 seems to support this.

It is a difficult genre that Straumann has entered. Comparative economic history is often quantitative and cliometric in its approach, but Straumann actually delivers a few ?blows? to such approaches and to research that has stressed the importance of private interests and institutional variables in determining the exchange rate policy of small states. For instance, Straumann finds Beth Simmons? analysis of the interwar monetary problems insufficient and problematic. Instead he uses qualitative analysis based on what he calls ?narrative evidence.? This does not mean that the analysis lacks rigor, however. It could be argued that this approach may lose some strength — depth, thick description, search for meaning, and understanding rather than explanation — when applied across seven countries, but Straumann avoids this and does an impressive job. The book is not only based on a huge secondary literature but also on unpublished archival material mostly from the respective central banks, on published government material and national newspapers and so on. In order to master this literature, Straumann had to learn the Scandinavian languages along the way.

The book is organized in two main parts. The first part is structured chronologically and deals with the interwar period, while the second part, which analyses the post-Bretton Woods era, is thematically structured. In the first part, Straumann sets the record straight in four chapters that analyze the divergence of inflation and exchange rates during and after World War One, the return to prewar parity, monetary policy after September 1931, and the small Gold Bloc countries? insistence on staying the course until 1935 and 1936. In each chapter, Straumann places his analysis in the context of existing research and debates, and he concludes that the divergence during and after the war was not caused by monetary factors but by variations in trade deficits, and that the timing of the return to prewar parity was related to these imbalances as well. At the same time the heavy emphasis on returning to the old parity was a result of a wish to restore the old economic order, or as it was said in Denmark to restore the ?honest krone.? Straumann finds that policymakers did not change the focus of monetary policy after they left gold, and he disputes the idea that Sweden shifted to price targeting in the early 1930s or that the Danish central bank changed its monetary policy during the banking crisis of the 1920s. The debate on these issues is likely to continue, but Straumann?s comparative focus is a great strength.

In the last chapter of part one, Straumann discuss the Gold Bloc?s stubborn and problematic allegiance to gold into the mid-1930s, and he agrees with Eichengreen and Temin?s point that it was ideas rather than interests that determined this policy. Country size was also important, in that small states in general followed large states. Here, it would have been interesting to add a more detailed discussion of the differences between the Scandinavian and the small gold bloc countries with respect to what determined the different timing for leaving gold. The author argues that gold reserves, trade structure and the banking system explain the timing better than institutional frameworks, but how did the ?fixed ideas? matter for timing?

In the second part, size is again demonstrated to be an important variable. As before, small states preferred fixed exchange to floating regimes and this was mostly due to a sense of vulnerability, as also discussed in the IPE literature. Notably, some large countries, including the United States introduced a flexible exchange rate regime while the European Community set up the snake and then the European Monetary system with less rigid rules than the gold standard, and with some restrictions on capital mobility. As Straumann notes, the ?idea that exchange rates should be fixed proved to be remarkably persistent? (p. 172). It was only with the crisis of 1992 that Sweden — and later Norway — introduced a flexible exchange rate regime based on inflation targeting. As is well known, other small Western European states joined the Euro, while Denmark, apparently still suffering from ?Fixed Ideas,? pegged the krone to the Euro.

This process is discussed in four chapters, with chapters five and six focusing on the divergence of the 1970s and 1990s respectively, while chapters seven and eight look into the experience of Switzerland, Sweden and Norway with floating exchange rates. Straumann draws on economic theory in order to raise the relevant questions, and he finds, again, that ideas or perception was important. Policymakers in small open economies believed in pegged exchange rates, and it was only when Sweden and Norway broke with this ideal that ?Fixed Ideas? began to lose their power. And it was not accidental that it was these countries (and Switzerland from the 1970s) that first let go of the idea. They were financially open but not members of the EU, and therefore they were exposed to international markets. Straumann concludes that the shift to flexible exchange rates by Sweden and Norway was a watershed, and that it has served these countries well. Whether Denmark?s decision to peg the krone to the Euro is a good idea is not discussed.

Overall, ?Fixed Ideas? is a very welcome and important contribution to comparative economic and monetary history. The scale of the empirical material — quantitative as well as qualitative — is impressive, and the analysis is solidly grounded in the research literature. It seems that by now there is more or less consensus that ideas or even discourses and narratives mattered (and matters) a great deal for understanding financial and economic matters. In order to take this understanding to the next level, economic historians will have to draw on concepts and ideas (such as embeddedness, sense making and meaning) from sociology and cultural studies. Despite the few small problems I have raised, Fixed Ideas contributes in an important way to our understanding of small European states? exchange rate policy in the twentieth century, and in combination with other research it provides a good starting point for entering the next level.

Per H. Hansen is professor at the Center for Business History at Copenhagen Business School. He has published books and articles on Danish financial history, the business history of Danish design, organizational culture and change, among other things. He is currently working on an analysis of central bank cooperation during the 1931 international financial crisis.

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Subject(s):Financial Markets, Financial Institutions, and Monetary History
Geographic Area(s):Europe
Time Period(s):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. ??? ??????????

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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

Paying for the Liberal State: The Rise of Public Finance in Nineteenth-Century Europe

Author(s):Cardoso, José Luís
Lains, Pedro
Reviewer(s):Dincecco, Mark

Published by EH.NET (August 2010)

Jos? Lu?s Cardoso and Pedro Lains, editors, Paying for the Liberal State: The Rise of Public Finance in Nineteenth-Century Europe. Cambridge, UK: Cambridge University Press, 2010. xii + 310 pp. $85 (hardcover), ISBN: 978-0-521-51852-9.

Reviewed for EH.Net by Mark Dincecco, IMT Lucca Institute for Advanced Studies.


Paying for the Liberal State is a novel collection of case studies about the development of modern systems of public finance in core and peripheral European countries from the start of the nineteenth century to the eve of World War I. The work is edited by Jos? Lu?s Cardoso and Pedro Lains, both Research Professors at the Institute of Social Sciences at the University of Lisbon. The contributors are prominent scholars in European economic history.

By my count, Paying for the Liberal State makes three key contributions. Prior to its publication, there was no book-length investigation of the development of public finances in Europe after 1815. I view Paying for the Liberal State as a nineteenth-century counterpart to works on pre-modern public finances like The Rise of the Fiscal State in Europe, 1200-1815, edited by Richard Bonney (Oxford: Oxford University Press, 1999). With its focus on detailed case histories, Paying for the Liberal State also complements the cross-country, econometrics-oriented literature that covers the classic gold standard era from the 1870s to 1913. Finally, by providing a clear and accessible account of the evolution of public finances over the long run, Paying for the Liberal State will be of use to scholars in neighboring disciplines that study the interplay between politics and fiscal change. I describe other notable attributes of this book throughout my review.

The chapter ordering of Paying for the Liberal State runs according to relative fiscal sophistication. Britain represents the benchmark tax system. According to contributor Martin Daunton, the establishment of parliamentary budgetary control in 1688 was just one of many steps towards the creation of a fiscal regime that was truly legitimate in the eyes of taxpayers. Changes in tax composition, the extension of voter franchise, and instances of political leadership over the nineteenth century were also crucial elements to engender public trust.

Lack of legitimacy was one feature that distinguished the fiscal systems on the European continent from that of Britain. The chapter on the Netherlands by Jan Luiten van Zanden and Arthur van Riel draws heavily from their recent book (The Strictures of Inheritance: The Dutch Economy in the Nineteenth Century, Princeton: Princeton University Press, 2004). Van Zanden and van Riel provide a useful timeline of Continental political processes over the nineteenth century: the restoration of absolutist rulers after 1815, the transition to liberalism in the 1840s, and the extension of voting rights from the 1870s onwards. Their analysis of the failure of the ?enlightened? autocrat William I (reign, 1815-40) illustrates how transparency and political representation helped create a credible tax regime. Van Zanden and van Riel?s description of the importance of colonial possessions like Indonesia to the sustainability of Dutch finances is also of particular interest. The chapter on France by Bonney emphasizes two related factors that prevented nineteenth-century fiscal innovations. The longevity of an oligarchic social order, coupled with the broad failure of population growth, slowed the establishment of public trust in the French tax system.

The next chapters are dedicated to polities east of the Rhine River, where issues of state formation were crucial. The contribution by Mark Spoerer on Germany neatly describes the political geography of the German territories before unification in 1871. Spoerer concentrates on Prussia, the largest nineteenth-century state, and W?rttemberg, an example of the sort of impersonal tax systems that prevailed in the South. His discussion of tax competition and free-riding among pre-unitary polities should be of particular interest to political economists. The chapter on Italy by Giovanni Federico illustrates how the aggressive pre-unitary state of Piedmont made fiscal innovations to further its nationalistic ambitions. Federico also documents the continuity between Piedmontese tax institutions and those in the Kingdom of Italy, established in 1861, as well as the shortcomings of Piedmontese (and later, Italian) fiscal policies. The chapter on Austria-Hungary by Michael Pammer provides a lucid account of tax differences within the vast Empire. In contrast to Germany and Italy, Pammer?s work shows how fiscal problems can lead to the dissolution of states.

The remaining case studies are devoted to other aspects of the European experience. The chapter on Sweden by Lennart Sch?n highlights the unique features of its fiscal system. Peasants were represented in parliament since late medieval times and played an important role in Swedish politics, often forming alliances with the king against the nobility. The link between the traditional political power of the peasantry and the modern Swedish welfare state illustrates how history can influence current outcomes. Surprisingly, Swedish public finances relied upon archaic tax structures including payments in kind through most of the nineteenth century. The chapter on Spain by Francisco Com?n describes the interplay between politics and public finances in great detail. Negative political shocks including civil war repeatedly undermined efforts to enact fiscal reforms, no matter how important they may have been. The chapter on Portugal by Cardoso and Lains follows suit. Their take on the excruciating process of institutional change over the nineteenth century is sympathetic, as Portugal (like Spain) was ultimately able to establish modern fiscal structures.

The conclusion by Larry Neal employs comparative analysis to bring together the divergent case studies. Neal makes compelling use of Harley Hinrichs? classic model of tax transformation from traditional to modern economies (A General Theory of Tax Structure Change during Economic Development. Cambridge, MA: Harvard University Press, 1966). His contrast between Britain and the European continent is of particular interest. Drawing upon the carefully-established results from previous chapters, Neal argues that it was difficult to transfer British fiscal institutions abroad, though they were widely recognized as superior. This subtle point has implications for current policy debates: if Anglo tax structures were not easily replicated throughout Europe, with its shared history of economic and political traditions, then we might think that it will be even harder to export updated versions of them to the modern developing world, which has diverse historical legacies.

In total, Paying for the Liberal State is a valuable addition to the historical literature on European public finance. Jean-Laurent Rosenthal claims that the main policy problem for governments since 1800 has been to design and implement growth-enhancing fiscal strategies (Review of The British Industrial Revolution in Global Perspective, by Robert Allen. Journal of Economic History 70, no. 1 [2010]: 242-5). Through its detailed evaluation of the diverse ways in which nineteenth-century governments taxed, borrowed, and spent public funds, Paying for the Liberal State provides insights that help us to better understand this key challenge. By and large the book does not use the language or tools of modern political economics to frame its analysis. Now that a coherent set of case histories are in place, however, there is ample opportunity for enterprising research that builds upon the solid foundations that Paying for the Liberal State sets.


Mark Dincecco is Assistant Professor in the research area of Economics and Institutional Change at IMT Lucca Institute for Advanced Studies, located in Tuscany. His current manuscript, under contract with Cambridge University Press, examines political transformations and public finances in Europe from 1650 to 1913. Email:

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 ( Published by EH.Net (August 2010). All EH.Net reviews are archived at

Subject(s):Government, Law and Regulation, Public Finance
Geographic Area(s):Europe
Time Period(s):19th Century

False Economy: A Surprising Economic History of the World.

Author(s):Beattie, Alan
Reviewer(s):Jones,, Eric

Published by EH.NET (August 2010)

Alan Beattie, False Economy: A Surprising Economic History of the World.? New York: Riverhead Books, 2010.? xii + 353 pp.? $16 (paperback), ISBN: 978-1-59448-444-5.

Reviewed for EH.NET by Eric Jones, LaTrobe University.


This is a work of haute vulgarization by the world trade editor of the Financial Times, where Alan Beattie writes about economics, globalization, and development.? He does here, too, though concentrating on the historical background to an extent that presumably would not appeal to the everyday newspaper reader.? The book is framed around a number of contrasts and puzzles, including why the performance of the United States exceeds that of Argentina and how Washington, D.C. outclasses ancient Rome.? It asks why Egypt imports half its staple food; why asparagus is imported from Peru; why oil and diamonds can be more trouble than they are worth; why Africa does not grow cocaine; why Islamic countries sometimes perform poorly; why Indonesia prospered under a corrupt ruler whereas Tanzania stalled under an honest one; and why many situations are path-dependent.

This is a wide range of topics treated half as development issues and half as supposed lessons from the past.? Sometimes the selection is obscure, as when the United States rather than Australia is contrasted with Argentina.? But most of the material will be known to economic historians and the economist?s take on the problems involved will also be familiar, though this may not be true for the general reader and Beattie does possess a facility for finding piquant facts with which to illustrate his points.? I did not know, for instance, that one of Sir Robert Peel?s descendants has been battling protectionism as a policy director of the British Food and Drink Federation, though with less success than his illustrious forebear.? Nor did I know that the Bretton Woods conference was held in that remote place merely to buy off an isolationist New Hampshire senator.

In themselves such amusements do not take us far.? The motors of history, as Beattie seems to conceive them (he is always more definite-sounding than definite), are the choices made by governments and individuals.? He is dismissive of material constraints.? This approach, perfectly arguable though it may be, leaves unresolved the phase transitions between stultified and expansionary episodes.? Beattie tends to cut the Gordian Knots and forge ahead.? To cite a single case, he asserts that the difference between Islamic and Christian merchants was that the latter were powerful enough to overturn inconvenient laws.? Moreover, they were happy to alter the religious justifications for their behavior.? This emphasis on cultural malleability is a recurrent theme, and although I am happy to agree, it does leave hanging the question of the Christian merchants? special access to power.? Beattie does not investigate this but moves straight on to pull another rabbit out of another hat in a manner that is a tantalizing feature of his style.

The work is most successful when the author turns to his metier, world trade.? He notes that protection typically surrounds declining industries, exposes many of the ironies and absurdities of agricultural protection, and explains the success of small group lobbying in standard Olsonian terms.? The chapter on trade is followed by one on supply chains.? This introduces the disruptive technology of the shipping container and the more recent way in which mobile telephones have reduced information asymmetries.? Here, material factors somewhat mysteriously make an appearance, as when we are told that Africa does not grow the coca it re-exports in the form of cocaine because its transport and logistics are too poor.?

Bearing in mind the author?s job, I was reminded of the instructions supposedly given to journalists on the FT?s sister publication, The Economist: Simplify, then exaggerate.? Beattie over-fulfils these norms, skipping blithely from one topic and one anecdote to the next and larding them in passing with dogmatic interpretations.? An unexpected aspect of the book is that it is written in a jokey, slangy style quite unlike the sobriety of leading English newspapers.? At times the enfant terrible in Beattie?s make-up does make one laugh — his case for letting the Panda go extinct is effrontery writ large — but mostly it grates.?

The book lacks footnotes and lists only a very limited number of sources.? Though the range of topics covered often is interesting, False Economy fails to persuade the reader of its seriousness of purpose.? This is surprising in a work which claims to be offering poor countries the lessons of economic history and it misses a distinct opportunity to widen the reference base of non-specialists.? What is to be done about the market distortions that continue to beset us?? Beattie offers a paragraph of prescriptions that seems to me utterly empty, summed up in the stellar sentence, ?be aware when your country is getting stuck on the wrong path and be alert for opportunities to shift it.?? Will do.


Eric Jones, Emeritus Professor, La Trobe University, and former Professorial Fellow, Melbourne Business School, is the author of The European Miracle (Cambridge University Press, third edition 2003) and Locating the Industrial Revolution: Inducement and Response (World Scientific, 2010).

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 ( Published by EH.Net (August 2010). All EH.Net reviews are archived at

Subject(s):International and Domestic Trade and Relations
Markets and Institutions
Geographic Area(s):General, International, or Comparative
Time Period(s):General or Comparative
19th Century
20th Century: Pre WWII
20th Century: WWII and post-WWII

The Political Economy of the Dutch Republic

Author(s):Gelderblom, Oscar
Reviewer(s):Coffman, D’Maris

Published by EH.NET (April 2010)

Oscar Gelderblom, editor, The Political Economy of the Dutch Republic. Aldershot, UK: Ashgate, 2009. xv + 329 pp. $125 (cloth), ISBN: 978-0-7546-6159-7.

Reviewed for EH.NET by D?Maris Coffman, Centre for Financial History, Cambridge University.

This long-awaited volume should be a starting point for anyone who requires a grounding in the fiscal history of the Dutch Republic and the so-called ?Dutch model? of public finance as understood in the Anglophone literature. Yet despite the unassuming title, this collection of essays should be seen as much more than just required reading for fiscal historians of early modern Europe. Gelderblom?s placement of political economy ? defined by Adam Smith as a ?branch of the science of a statesman or legislator … [that] proposes to enrich both the people and the sovereign? (p. 2) ? at the center of the project offers a compelling example of a ?new financial history? that integrates studies of fiscal and monetary history with contemporary economic thought, political culture, economic and social realities, and great power relations. The result is that rare collection of essays that delivers far more than it promises.

In keeping with most contemporary fiscal history, Gelderblom?s introduction uses North and Weingast?s (1989) model for Britain as a framework for considering the Dutch Republic?s fiscal and financial innovations. Yet he emphasizes the need to consider continuities with Burgundian-Habsburg practice, as well as the possibility that by the eighteenth century even the most impressive ?fiscal, financial and economic reforms [were] simply not sufficient in competition with larger powers? (p. 6). The chronological sweep of the work is as impressive as its methodological reach.

In the opening essay, Erik S. Reinert offers an original and refreshing discussion of contemporary economic thought, particularly as it bore on the way in which foreign observers analyzed the structural properties of the Dutch economy. Reinert?s observation that the ?context-specific? quality of ?mercantilism has some clear analytical advantages over neo-classical economics as a tool to understand the rise and fall of the Dutch Republic? is appealing given the failure of mainstream economics to anticipate, diagnose, much less remedy, our own current financial and economic crisis (p. 19). The mercantilists? recognition (by no means uncontested) that ?economic wealth was not a zero-sum game? (which Reinert ascribes to Giovani Botero) permitted a distinction between ?feudal rents? and ?manufacturing rents,? ?trading rents,? and ?raw-material based rents? (p. 24). Their analytical stance, recognizable in managerial economics today, was to ask how particular nations might emulate their more successful neighbors. Yet unlike Adam Smith, whose analysis of Dutch decline floundered at the level of abstraction, these authors were also concerned with ?England?s success in ?blowing the Dutch out of the waters?? (p. 35). In some sense, the remainder of this collection serves as an extended meditation on whether or not contemporaries had it right.

James Tracy?s chapter, entitled ?Holland?s New Fiscal Regime,? makes a penetrating point about contingency. Despite Holland?s success in developing funded long-term debt instruments in the middle of the sixteenth century, the province was forced to devolve fiscal responsibility onto the towns (whose burghers demanded that in return for access to lucrative excise revenues) and even resort to short-term borrowing to meet the demand for new military expenditure amidst the Dutch Revolt. As with mid-seventeenth century England, knowledge of, and success with, certain institutional practices was not sufficient to ensure their survival. Rebuilding Holland?s credit, as Tracy observes, was about more than sound institutions; it required the cooperation of local elites.

Wantje Fritschy?s chapter on fiscal efficiency in Holland takes up the story with the Union of Utrecht. This chapter, rich in empirical detail, will be valuable to specialist audiences. For the general reader, the most important conclusion is simply that those ?stylized facts? about the inefficiency of tax collection in the province do not bear up under close scrutiny. Fritschy argues that elites were convinced of ?the utility of the public goods paid for by taxation? (p. 82). Jan de Vries? essay on the municipal regulation of bread prices continues in a similar vein the collection?s exploration of institutional practices. The distinction between the fixed and variable costs of bread production led to a ?fully monetized allocation of costs? (p. 90). Since consumers who could afford wheat bread preferred it to rye, the authorities were able not only to back-shift the economic incidence of the excise onto producers of grain, but also to cross-subsidize the production of rye bread (p. 98-99). As a result, the Dutch Republic was the only fiscal regime in Europe to tax successfully a product as necessary as bread, that ?staff of life? (p. 114).

Marjolein ?t Hart turns her attention to the Dutch Republic?s relations with its creditors, which she puts in a comparative perspective with France and England. She finds that not only was the market for public bonds robust, mature and transparent, but also, and crucially, that there existed a high level of mutual trust between state and local levels (p. 141). Specialists will delight in her reconstruction of the family networks of the Amsterdam receivers, their role as ?semi-public banks? and the details of the various annuities. The general reader, however, will be able to see why the Dutch public loans enjoyed such a relatively low rate of interest.

Marteen Prak and Jan Luiten van Zanden?s intriguing essay on ?tax morale? and ?citizenship? takes up the ideological basis for Dutch taxation. For them, as for the others, the cardinal case was Holland. While their focus on citizenship seems, at times, a bit strained, the conclusion that compliance turned on both the quality of the public goods delivered and the stakeholder interest in ?community? is entirely convincing. By contrast, Bas van Bavel?s discussion of rural development and landowning patterns in Holland dates the structural changes to the sixteenth century. Consolidations of tenancy and the growth of burgher landownership encouraged capital investment in infrastructure (via the water management boards) and the development of rural capitalism (p. 193). As Milja van Tielhof argues in the succeeding essay, the financing of water management did not always involve a proportional division of costs (p. 220). By the eighteenth-century, the morgengeld system appeared to be collapsing under its own weight.

Gelderblom?s essay on long-distance trade shifts attention away from the internal dynamics of the Dutch economy to the international arena. His tight comparison of the Dutch Republic and England (1550-1650) is helpful. From a fiscal standpoint, the Dutch benefited from more efficient species of indirection taxation, which funded the sale of annuities and bonds on open markets. In this account, the trade in VOC shares plays an important but secondary role. Yet for the author, the story is largely one of changing factor costs and with them shifting comparative advantages. Once England began to emulate the Dutch Republic in earnest, the outcome could hardly be doubted.

Richard Yntema?s exploration of the interprovincial Dutch beer trade turns on provincial trade policies. Although the Union of Utrecht established free trade, by the 1620s and 1630s the principle had come under pressure from powerful provincial brewing interests. The resulting ?tariff wars? had all but killed off interprovincial trade in beer by the early eighteenth century (p. 288). For the general reader, Yntema?s case study suggests an exception to the conventional wisdom that the Dutch Republic enjoyed a well-integrated economy.

In the final essay, Thomas Poell recounts the last two decades of the Dutch Republic. As elsewhere in Europe, Dutch revolutionaries found it difficult to dismantle the corporate structure of the state (p. 319). Poell?s narrative of the contest between unitarists and federalists sheds considerable light on the challenges, as well as the nature of local allegiances with the French. In what seemed little more than a throwaway remark at the very end, Poell compares the French failure in the Netherlands with their failures in Switzerland and Northern Italy. Yet in many ways, the similarities run deep.

The very institutional innovations, which coupled with the flexibility of state practices and the ideological commitments of elites to their local communities made it possible for the Dutch Republic to exploit her comparative advantages so successfully in the sixteenth and seventeenth centuries, in turn, made the Netherlands less competitive, as greater powers came on stream in the late seventeenth and eighteenth centuries. Institutional reforms may not have staved off ?Dutch decline.? Both the general reader and the specialist alike will come away from this collection of essays with a much better understanding of why.

D?Maris Coffman is the Mary Bateson Research Fellow at Newnham College of Cambridge University. There she directs the Centre for Financial History, which was founded in July 2009 with a generous grant from Winton Charitable Trusts. At Cambridge, she supervises students in economic and social history and lectures in financial history for the MPhil course. Email:

Subject(s):Government, Law and Regulation, Public Finance
Geographic Area(s):Europe
Time Period(s):17th Century

The Rise and Fall of the American System: Nationalism and the Development of the American Economy, 1800-1837

Author(s):Ha, Songho
Reviewer(s):Wahl, Jenny

Published by EH.NET (March 2010)

Songho Ha, The Rise and Fall of the American System: Nationalism and the Development of the American Economy, 1800-1837. London: Pickering and Chatto, 2009. xiii + 184 pp. $99 (hardcover), ISBN: 978-1-85196-999-9.

Reviewed for EH.NET by Jenny Wahl, Department of Economics, Carleton College.

This slim volume is part of a series on American financial history edited by Robert Wright. Although little new information or analysis appears in the monograph (a revision of the author?s dissertation), it is a compact summary of the concept and history of the American System that gathers together useful statistics on roll-call votes, obligations of the Second Bank of the United States, white and slave populations, federal expenditures for internal improvements, and land sales during the early Republic and antebellum periods. The thrust of the book is fairly conventional, although Ha does draw attention to one alleged feature of the American System ? its emphasis on cultural improvement ? more than most commentators. But he de-emphasizes what I consider a crucial factor that led away from the American System in the 1830s ? the underlying sectional tensions over slavery.

The book begins by exploring the phrase that gives rise to the title. Conceived by Alexander Hamilton and midwifed by Henry Clay (and, to a lesser extent, John Quincy Adams), the ?American System? began as a vision of a politically united, self-sustaining nation independent of Europe and especially England. The idea expanded over time to include specific programs designed to achieve this vision, such as high tariffs, federal spending on internal improvements, a national bank, and methods to disperse public lands.

The remainder of the book follows a historical timeline, touching upon Jeffersonian policies, the Missouri compromise, various tariff acts, controversies over the First and Second Banks of the United States, the nullification crisis, the Second Great Awakening, the financial panics of 1819 and 1837, and the Maysville Veto. Ha highlights one fascinating historical about-face: John C. Calhoun, father of the nullification doctrine and rabid states?-rights advocate by the 1830s, had earlier staunchly supported a national bank, urged federal spending on transportation to bind the union together more tightly, and aggressively pushed for high protective tariffs.

Arguably, the new spin in the book is its underscoring of the cultural dimension of the American System. Ha claims that John Adams supported education but only had time and energy during his administration to create the Library of Congress. Likewise, Jefferson, Madison, and Monroe apparently advocated establishing a national university but occupied themselves with other endeavors while in office. John Quincy Adams argued strenuously for ?social improvement,? although Henry Clay advised him that a national university was a hopeless proposition. The American System may have given lip service to the nation?s cultural betterment, but Ha?s book does not leave me convinced that this was really a key element of the program.

Ha, currently an assistant professor of American History at the University of Alaska-Anchorage, is clearly a champion of the American System and its supporters. At times, he seems almost starry-eyed: he states that the ?supporters of the American System … tried to push what they believed was good for the union, rather than what was popular with their constituents? (p. 93); they ?were forward-looking and progressive people [whose] main issue … was how to improve the United States? (p. 132). He characterizes the main issue for Jacksonians, on other hand, as ?how to stop the federal government from meddling in their lives and economics? (p. 132). The underlying subtext for the rival factions, however, was slavery. Although Ha acknowledges that slavery and the cotton economy tended to isolate the South, I think he could have gone farther with this theme ? states?-rights advocates, at bottom, worried most about federal ?meddling? with the peculiar institution.

What is more, Ha fails to grapple with the thorny question of whether the American System at its heart was necessarily ?good for the union.? He includes a striking quote from a speech by John Tyler, who argued that protective duties would actually operate as a tax on farmers by increasing the prices of necessities (p. 66). Yet Ha does not explore Tyler?s prescient statement. Tariffs impede free trade, impair the workings of comparative advantage, and indeed raise prices for domestic consumers, ceteris paribus. The main beneficiaries of tariffs are import-competing domestic producers (and, to some extent, the Treasury). Whether this result was truly ?good for the union? is not adequately examined in Ha?s book.

Ha?s epilogue claims that the American System died during Jackson?s reign but rose again, Lazarus-like, during the Civil War. He lists the Morrill Tariff, the National Bank Act, the Pacific Railroad Act, and the Morrill Land Grant Act as evidence, saying that ?George Washington, John Adams, Thomas Jefferson, James Madison, James Monroe, Henry Clay, and John Quincy Adams would have been pleased to know that their dream of national improvement was on its way towards implementation, despite the tumults of the Civil War? (p. 133). This seems a slight mischaracterization ? federalists and anti-federalists, like the poor, were and are always with us. The Whigs picked up the nationalist banner in Jackson?s time and maintained a strong political presence until the formation of the Republican Party. And the recent Tea Party movement and antics by Texas Governor Rick Perry (who fervently believes his state still has the right to secede) suggest that opponents of the American System are certainly alive and kicking as well.

Jenny Wahl?s recent publications include ?Give Lincoln Credit: How Paying for the Civil War Transformed the U.S. Financial System,? Albany Government Law Review (forthcoming June 2010) and ?Blacks, Whites, and Brown: Effects on the Earnings of Men and Their Sons,? Journal of African American Studies (2009) (with Nathan Grawe). She can be reached at

Subject(s):Transport and Distribution, Energy, and Other Services
Geographic Area(s):North America
Time Period(s):19th Century