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Knowledge Works: Managing Intellectual Capital at Toshiba

Author(s):Fruin, W. Mark
Reviewer(s):Robertson, Andrew

Published by EH.NET (July 1999)

W. Mark Fruin, Knowledge Works: Managing Intellectual Capital at

Toshiba.

Japan Business and Economics Series. New York: Oxford University Press,

1997. 256 pp. $39.95 (cloth). ISBN: 0195081951

Reviewed for H-Business and EH.NET by Andrew Robertson, Harvard University.

Awash

in a sea of high quality, meticulously engineered electronic and mechanical

products bearing the label “Made in Japan”, Americans — both inside and

outside academia — continue to wonder, despite Japan’s recent economic

troubles, “How does Japanese industry do it?” In Knowledge Works:

Managing Intellectual Capital at Toshiba, Mark Fruin addresses this

perennial question through a factory organization at Toshiba’s Yanagicho

factory. At irregular intervals from 1986 through 1992, Fruin entered Toshiba’s

workforce to observe the complicated social patterns that generate change at

Toshiba. Because Toshiba devolves most of its resources related to product and

process development to the factory level, working in the various sections

responsible for bringing

new products on line permitted Fruin to study at firsthand the technical,

social, and cultural relations that structure Toshiba’s larger technology

strategy. In

Knowledge Works, Fruin argues persuasively that Toshiba’s success during

the 1980s in responding to rapid shifts in market preference, to the quickly

strengthening yen, and to the establishment — sometimes voluntary,

sometimes not — of international trade quotas, stemmed directly from the

development of a new form of factory organization, a form beyond simple mass

production, a form Fruin terms the “Knowledge Works”.

Briefly, this

book is a useful and thought provoking study of how a single

factory is organized to support rapid innovation in both process and production

technology. Fruin presents a useful model — that is, the knowledge works —

for analysis of this industrial form and supports his claims with detailed

descriptions of the technical systems, social organization, institutional

values, and individual attitudes that underpin this

form. The book is not, however, without its flaws, most prominent being

Fruin’s desire to generalize this form as a source and explanation of Japan’s

national rather than Toshiba’s corporate comparative advantage.

In the term “knowledge works”, Fruin playfully emphasizes the central point of

the book: “Knowledge works” are places where “knowledge works”. Put a little

more elegantly and emphatically,

“Knowledge works are a force for a new age, a postproduction age, of

intellectual capitalism. Instead of

making things, a production problem pure and simple, making the right things,

in the right amounts, at the right times and prices, is the postproduction

problem. And because nothing stands still, making righter thing, in

righter amounts, at righter prices and times, must be the goal.

Post production , or intellectual capitalism, presumes information processing

abilities of a high order,

on-site differentiation and integration of functions, a

customer-is-always-right point of view, and quite emphatically, an

environmentally conscious mode of operations” (p. 24).

Knowledge works permit a higher degree of responsiveness to changes in markets

by permitting higher levels of differentiation in a factory’s product lines and

simultaneously higher levels of

integration technically,

socially, and culturally across the different groups managing, designing,

and producing these products. While management remains well attuned to the

short-term exigencies of the market, still more important to the continued

vitality of both the factories as knowledge works and Toshiba as a corporation

is management’s strategic commitment to factories as sites for not only the

production of better products but also the production of better skilled, more

knowledgeable, better motivated workers on better organized, better managed

lines. Knowledge works prosper not by the traditional mass production

strategies of de-skilling and the division of labor; instead, at Yanagicho, the

factory provides the site where technicians, engineers, and managers from not

only Yanagicho but also other Toshiba plants, group companies, suppliers, and

even outsiders cooperate to attain the “physical, spatial, and functional

integration of labor and information (p. 17).”

Understanding the characteristics

of the manufacturing processes undertaken in knowledge works as being

profoundly determined by the particulars of a given site’s history provides

Fruin a useful explanation to understand how Toshiba innovates so quickly. It

does so because on the factory

floor, the whole organizational panoply of managers, engineers, technicians,

suppliers, assembly personnel, inspection personnel and such are synchronized

by a common set of values, practices, and goals. Technical knowledge, social

contracts, and cultural

intuitions combine seamlessly to create the basis for rapid process and

product innovation. Continuous and ongoing renegotiations of these compacts is

the norm which permits flexible response by management and engineering in the

deployment of Yanagicho’s intellectual, financial, and labor resources.

While it is the social and cultural dynamism and cohesiveness of “knowledge

works” that power technical development at Toshiba, it is the technologies

themselves that create value for the company. Which technologies — and

consequently which complementary skills and what forms of organizational

knowledge — to develop is central in determining which markets any given

knowledge works can and will be able to service. Fruin notes the presence in

each of Toshiba’s

knowledge works of what he terms “Champion Lines”,

families of products that provide not only considerable revenue flows but also

considerable and ongoing innovation in both product and process development.

“They lay a threshold of organizational knowledge on which related products

can thrive, one that ultimately justifies the high risk and cost of creating

multifunctional capabilities in particular product departments [of, that is, a

knowledge works.] (p. 47)” Yanagicho’s

“Champion Line” — plain paper

copiers — has defined the trajectory of technical, product, and market

development for the whole factory complex since the mid-1980s. While the

knowledge works form enables Toshiba to participate in the crowded and highly

competitive domestic copier mark et,

at the same time, in developing the technical know-how necessary to compete in

this market, Toshiba augments, complements, and improves the basic technical

and organizational knowledge present at Yanagicho and thus drives change in the

other product families produced there. Indeed, of the thirteen product lines

produced in the Yanagicho plant, fully two-third are

“historically and technically linked” to its plain paper copier line (p.

48).

Having introduced the concept and architecture of the Knowledge Works in the

first two chapters, Fruin spends the majority of the book studying how Toshiba

management maintains, extends, and reproduces the structures that define a

knowledge works. The third chapter describes how management promotes the

education, socialization and acculturation of its workforce to the needs and

values of a knowledge works through a continual process termed organizational

campaigning. The fourth describes how Toshiba — or more accurately the

Yanagicho factory — manages its relations with suppliers, encouraging

excellence and cooperativeness through the strategic exchange of knowledge,

expertise, and personnel. In the fifth chapter,

Fruin uses a case study of the development of the SuperSmart card — a credit

card sized computer —

to demonstrate the potency of knowledge works to develop rapidly (in only 22

months) a product embodying multiple technological innovations. In the sixth

chapter, Fruin examines how Toshiba responded to the problems encountered in

exporting both the know ledge works concept and plain paper copier manufacture

to a plant in Irvine,

California. Not surprisingly, the seventh and concluding chapter reprises the

basic argument of the book, pointing to Toshiba’s potential for flexible and

speedy innovation that

results from the presence of a corporate factory system organized around

knowledge works.

As noted above, this is a useful and interesting book. Having worked in the

Yanagicho factory as an employee, Fruin writes with an authority born of

experience. At

the same time, the book is more than simply a diary of production line

experience. His experience is structured by new readings of old arguments in a

variety of literatures in management and economics.

Moreover, his method is not limited by overly fastidious attention to

disciplinary boundaries. In trying to understand what motivates workers to

participate, Fruin bravely enters the problematic realm of individual values,

culture, and inevitably history. Knowledge Works persuasively

demonstrates the importance of these less quantifiable and more local aspects

of human experience in Toshiba’s development of a factory-based capability to

respond to and generate rapid change.

Using this multidisciplinary approach combined with a fine detail derived from

careful field research, Fruin has formulated an argument that emphasizes the

importance of a particular cluster of factors — some cultural, some social,

some institutional, some political, some market, and some technical — in

enabling the creation of know ledge works at Toshiba.

By so tightly and persuasively linking the factors of the knowledge works’

creation to the particulars of Toshiba’s products, market, organization,

and culture, Fruin renders any generalization of the knowledge works concept

problematic. After making a good case for knowledge works being the source of

Toshiba’s comparative advantage, Fruin — too boldly in my view

– continues, making much the same claim regarding the sources of Japan’s

national comparative advantage. For example,

in his conclusion Fruin writes,

The widespread existence of Knowledge Works in Japan but the relative scarcity

(or nonexistence) elsewhere suggests the powerful impact of national

competition on manufacturing organization at home, the competitive edge enjoyed

by Japan’s industrial firms in established product markets,

and their ability to respond quickly, even preemptively, to new domestic and

overseas markets (p. 210).

Since no company has experienced exactly what Toshiba has experienced and since

only

a few even come close in terms of market, product lines, and such, it is

difficult to believe that the knowledge work per se is widespread even in

Japan.

This is not idle philosophizing. Over the course of the book, we do in fact

learn that many of the

most prominent Japanese companies are not configured in a knowledge works-like

style of production. For example, serving as they do radically different

markets, Toshiba and Toyoda do not, indeed could not, operate using the same

production models (p. 206)

; for Hitachi,

Mitsubishi, and NEC, R&D deployment is mostly focused — contrary to knowledge

works best practice — at laboratories that are neither physically nor

institutionally linked to specific factory sites (p. 57-59);

and the competitive cooperation found in Yanagicho’s dynamic and responsive

supplier network derives from the shared intangible assets fostered under the

knowledge works approach rather than the formal, more static, and more widely

spread fiscal and organizational relations defining

traditional keiretsu and kiygo shodan business groupings (p. 99). These are not

inconsequential differences. In the knowledge works model, the structure of the

supplier network, the factory level allocation of R&D, and the organization of

production are key structuring elements. By and large, its seems that

knowledge works — in the mode in which they are implemented at Yanagicho and

described by Fruin — could be as rare in Japan as they are abroad. By making

an argument that ties knowledge works so tightly to the specific technical,

institutional, and corporate history of Toshiba and its Yanagicho plant, Fruin

renders the imitation of knowledge works by Toshiba’s domestic competitors only

slightly less problematic than their transplantation from Toshiba

‘s plants in Japan to new factories in the United States.

Another way to estimate the influence of knowledge works on Japanese industrial

development would be to ask when they first came into being. In terms of

knowledge works influencing larger issues of national comparative advantage,

earlier would be better to allow time for dispersal. Indeed,

Fruin argues,

“Knowledge Works are not a recent, postwar invention. They appeared during the

interwar period as focal factories: multifunction and occasionally

multiproduct factories that bore administrative responsibility for serving

regional markets at a time when national markets were not well integrated.”

(p. 31).

Here and elsewhere in the book, Fruin times the advent of knowledge works as

during the inter war period. I do not wish to suggest that Fruin is wrong in

drawing links to this period; however, these must be termed only the barest

beginnings of certain aspects of the knowledge works structure. They should not

be mistaken for the structure itself. Given that certain knowledge works

structures at Yanagicho such as total productivity organizational campaigning

(p. 69), the establishment of factory oriented R&D structures (p. 191), and the

creation of an active and responsive Supplier Association (p. 9 7) all stem

from institutional changes undertaken in the period between the late 1970s and

mid-1980s, the development of the knowledge works form should be seen as a

product of the slow down in Toshiba’s corporate growth engendered by “Oil

Shocks” and the

ending of Japan’s period of high economic growth.

Thus, to my way of thinking, the organization defined as knowledge works is

both more recent and less widely spread in Japan than is suggested by Fruin’s

otherwise well constructed and excellently researched book.

Subject(s):Business History
Geographic Area(s):Asia
Time Period(s):20th Century: WWII and post-WWII

Studies in the Economic History of the Pacific Rim

Author(s):Miller, Sally M.
Latham, A.J.H.
Flynn, Dennis O.
Reviewer(s):Croix, Sumner La

Published by EH.NET

?

Sally M. Miller, A.J.H. Latham, and Dennis O. Flynn, editors, Studies in the Economic History of the Pacific Rim. Routledge Studies in the Growth Economies of Asia. London and New York: Routledge , 1998. 253 pp. $90 (cloth), ISBN 0-415-114819-7.

Reviewed for EH.NET by Sumner La Croix, Department of Economics, University of Hawaii and Barnard College.

In the introduction to this volume, Dennis Flynn and Arturo Giraldez write that they searched “for books and articles which might provide an overview of over four centuries of Pacific Rim interchange. For years scholars around the world have given the same answer: no long-term overview of the Pacific Rim exists in any language.” Since the failure by economic historians “to acknowledge an over 420-year trade relationship covering one third of the globe’s surface seemed like a glaring omission,” the editors and the University of the Pacific decided to sponsor “the world’s first conference on Pacific Rim History” in May 1994 (p. 3). The 14 papers in this edited volume are drawn from the papers presented at that conference.

In his essay “No Empty Ocean”, Paul D’Arcy sets the tone for the volume by observing that few scholars “have attempted to construct an image of the Pacific Ocean as a coherent entity in the way that Fernand Braudel has for the Mediterranean or K.N. Chaudhuri has for the Indian Ocean” (p. 21). Anthony Reid has, however, made a notable start for a corner of the Pacific with his excellent two-volume (1988, 1993) study of trade and growth in Southeast Asia from 1450 to 1680. D’Arcy’s observation raises, however, an important question for this volume: Is building a coherent image of the “Pacific Rim” a more quixotic enterprise than those undertaken by Braudel or Chaudhuri?

These are some reasons to think so, at least prior to World War II. First, the Pacific Ocean is surely a good organizing principle for a geographic region, but economies that are part of a geographic region may not be part of the same economic region unless they are linked by significant trade, investment, or migratory flows. Yet many economies in the Pacific Rim have for long periods engaged in little foreign trade or traded only with their proximate neighbors. Japan’s government heavily restricted foreign trade during the Tokugawa period until Admiral Perry’s black ships opened Japanese ports in the 1850s. Korea had similar trade policies until Japanese military pressure along the lines of the American model forced open foreign trade in the 1870s. Before western contact in 1778, Hawaii had no regular trade with other Pacific cultures due to its geographic isolation in the North Pacific and risky maritime technologies for sailing to distant countries.

Second, several essays in this volume highlight the important diffusion of ideas, technologies, flora, fauna, and disease that brought Asia-Pacific societies into contact with one another. Until the 1760s this diffusion was often the result of sporadic or accidental contacts rather than the result of ongoing trade, investment, or migratory flows. Although these spillovers linked many societies within the Pacific Ocean in a path-dependent fashion, the lack of regular contacts often precluded the specialization, trade, and deeper cultural exchanges that serve to link societies into a larger regional economy, polity, and culture.

Third, scholarly work on trade in the Pacific Ocean can only be productive if it is founded upon historical or archaeological records of trade. A.J.H. Latham’s essay, “The Reconstruction of Hong Kong Nineteenth-Century Pacific Trade Statistics”, provides a good example of the careful research needed to construct fundamental data series. Latham’s essay highlights the under-use of colonial records for Indonesia, the Philippines, Vietnam, and Burma. The extensive efforts undertaken to document colonial data in Indonesia cry out to be undertaken for other colonial regimes. [See the 15-volume Changing Economy of Indonesia series.] While several major research projects dedicated to building historical data on critical economic variables in East and Southeast Asia are now underway, such efforts need to be much higher on the research agendas for historians and economic historians studying Pacific Rim trade.

With the lofty aim of producing a history of trade in the Pacific Rim over the last 400 years, the volume opens with eight “overview” essays summarizing various aspects of the interaction between Pacific Rim economies. Essays by Paul D’Arcy (“No Empty Ocean: Trade and Interaction across the Pacific Ocean to the Middle of the Eighteenth Century”), Lionel Frost (“Coming Full Circle: A Long-Term Perspective on the Pacific Rim”), David Chappell (“Peripheralizing the Center: An Historical Overview of Pacific Island Micro-States”), John McNeill (“From Magellan to MITI: Pacific Rim Economies and Pacific Island Ecologies Since 1521″), Arthur P. Dudden (“The American Pacific: Where the West Was Also Won”), Annick Foucrier (“The French Presence in the Pacific Ocean and California, 1700-1850″), and Douglas Daigle (“Environmental Impacts of the Pacific Rim Timber Trade: An Overview”) raise, however, questions about the intended audience for the book. While these essays provide competent, brief surveys of the existing literatures, they break little new ground and, due to their brevity and enormous scope, are not sufficiently exhaustive or critical to focus other economic historians and historians on vital research questions at the frontier of these fields. Instead, the essays seem directed to a more general readership requiring only a brief introduction to each topic.

The other seven essays are more narrowly focused on country-specific industries and institutions significantly related to international trade. Karen Clay’s creative essay (“Trade, Institutions, and Law: The Experience of Mexican California”) nicely applies Avner Greif’s theory of merchant coalitions to California merchants engaged in international trade. Tsu-yu Chen (“The Development of the Coal Mining Industry in Taiwan during the Japanese Colonial Occupation”) assembles output and export data covering Taiwan’s coal mining industry but only begins the task of relating industry behavior to Japanese government policies on energy in the 1920s and 1930s. Frank King (“British Overseas Banking on the Pacific Rim, 1830-1870″) provides a detailed essay on the development of British banking in Asia and briefly discusses how the banking institutions facilitated regional trade. David St. Clair (“California Quicksilver in the Pacific Rim Economy, 1850-90″) provides an interesting analysis of U.S. exports of quicksilver to China. And R. Bin Wong”s suggestive essay (“Chinese Views of the Money Supply and Foreign Trade, 1400-1850″) contrasts Chinese attitudes towards amassing large sums of bullion with Western attitudes and in the process raises more questions than the very brief treatment can answer.

The editors rightly suggest (p. 17) that understanding the powerful influence of China on Asia-Pacific trade should be a central focus of future research. For more than a century after 1571 China imported 50 tons of silver annually from Spanish colonies in the Americas, thereby providing ongoing linkages between China, the Americas, and Europe (if not between China and other Pacific Rim economies). The sheer magnitude of China’s silver imports reinforces new research on China’s living standards. Ken Pomeranz (1997) has recently argued that 18th century living standards in the lower Yangtze reg ion of China were roughly comparable to those observed in England and the Low Countries. With its high per capita income and high population, China’s trade with other Asia-Pacific societies is central to any discussion of Pacific Rim trade between 1500 and 1850 and needs much more careful examination by scholars.

The essays in this volume provide the interested reader with brief overviews of trade between various Asia-Pacific economies, but, as the editors acknowledge, “most of the work [on this topic] remains to be done” (p. 17). A core research agenda focused on careful assembly of fundamental data on Asia-Pacific economies from under-exploited archival and archeological sources is the key to future progress.

References

Pomeranz, Kenneth (1997), “Rethinking 18th Century China: A High Standard of Living and its Implications,” Unpublished paper, University of California, Irvine.

Reid, Anthony (1988, 1993), Southeast Asia in the Age of Commerce, 1450-1680. 2 vols. New Haven: Yale University Press.

Sumner La Croix’s research focuses on the economic history and development of Asia and the Pacific Islands. He is currently the Alena Wels Hirschorn Visiting Professor at Barnard College.

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

The Political Economy of the New Deal

Author(s):Couch, Jim
II, William F. Shughart
Reviewer(s):Fishback, Price V.

Published by EH.NET (June 1999)

Jim Couch and William F. Shughart II, T he Political Economy of the New

Deal. Cheltenham, UK and Northampton, MA: Edward Elgar, 1998. xvi + 229

pp. $85 (hardback), ISBN 1-85898-899-3.

Reviewed for EH.NET by Price V. Fishback, Department of Economics,

University of Arizona.

fishback@bpa.arizona.edu

The New Deal is certainly one of the most dramatic peace-time expansions of

government activity in recorded history. As a result, numerous social

scientists and historians have tried to understand the political economy of the

New Deal. In

particular, a great deal of effort has been devoted to trying to explain the

dramatic differences in per capita New Deal spending across states that were

first mentioned prominently by Leonard Arrington

(1970). Jim Couch and Bill Shughart offer a book-length study that is devoted

to explaining those differences using public choice theory.

Franklin Roosevelt gave speeches that argued that the New Deal was designed to

promote “Relief, Recovery, and Reform.” New Deal administrators like Harold

Ickes and Harry Hopkins also consistently talked about noble goals for the New

Deal programs. Yet Leonard Arrington’s simple comparison of New Deal spending

per capita across the states quickly raises questions about how well the New

Deal met these goals. There was substantial variation in the distribution of

New Deal funds per capita across the states; the West fared well, while the

South fared poorly. This has led a number of economists to perform econometric

studies of the New Deal. Donald Reading

(1973) found that

the distribution of funds seem to be associated with improving federal land,

building highways, and helping to promote recovery.

However, there was little sign that the New Deal money was designed to reform

society because money was not being distributed

disproportionately to poorer areas. Gavin Wright (1974) then added the issue

of presidential politics to the analysis. His results show that the primary

goal in distributing New Deal funds was to ensure the reelection of Roosevelt,

as money was primarily

distributed to swing states and to areas where the money could be used most

productively to increase presidential electoral votes. John Wallis (1987) then

expanded the sample by obtaining information on New Deal spending from year to

year and obtaining more information on the movement of the economic variables

over the course of the decade. Wallis emphasized that Congress had structured

the New Deal so that state and local governments played a role in determining

how much they would receive from

the federal government. Wallis also worried about problems of simultaneity

bias arising in the coefficients on the unemployment variables. Gary Anderson

and Robert Tollison (1991) then added Congressional politics to the mix. Couch

and Shughart’s contribution tot his literature involves a book-length study

that describes a wide variety of New Deal spending and loan programs, offers

numerous anecdotes about their impact, and performs further econometric

analysis on the determinants of New Deal spending and loan across states.

The focus of the book is on developing a public choice analysis of the New

Deal. This is not really a new emphasis because all of the previous work has

used the same notion that people in government were acting in a self-interested

manner. What is new in the book is the combining of the econometric analyses

with extensive descriptive material and a very strong negative tone about the

motives of the Roosevelt administration. The econometric results from nearly

all the studies generally imply that a focus on reelection by political

leaders and pressures from interest groups did a great deal to shape the New

Deal. Couch and Shughart’s econometric results show very little evidence that

reform, recovery, and relief were key factors, although earlier econometric

work suggests that recovery and relief motives might have played a role. To

supplement the econometric results, Couch and Shughart, offer numerous tales of

malfeasance in the book, which offer a counterpoint to many books that heap

unadulterated praise on the New Deal programs.

People interested in the distribution of New Deal funds should read the book in

conjunction with a recent paper by John Wallis (1998) in

Explorations in Economic History. Wallis’s paper in part serves as a

book re view in the sense that Wallis goes through the analyses of all the

prior authors mentioned in the book and tries to compare the results of each

analysis using the same data and the same variables as closely as possible.

Wallis also offers some new insights that are not in this volume because the

book was in press at the time that the Wallis article appeared. Couch and

Shughart expand on the earlier econometric work by offering additional material

and by dissaggregating and examining some of the specific programs.

One of the central issues that Wallis (1998, 1987) was trying to do in his

analysis was take into account the impact on New Deal spending of the matching

features that were included in some programs, as well as differences in the

attitudes of state and local governments toward seeking and obtaining New Deal

funds. His technique involved using a lagged value of grants in the New Deal

distribution equation in a panel data set. In addition for the period 1937

through 1940 Wallis has tried to directly examine the impact of state spending

on New Deal distributions. Couch and Shughart challenge the notion that

matching institutions and local attitudes had much impact on New Deal spending.

They found evidence from the Congressional Record on the share

of WPA projects funded by local sponsors. Regression analysis shows that the

sponsor’s share of the program was negatively related to the amount of WPA

expenditures. Therefore, they argue that there was no simple mechanical

relationship between the money provided by state and local governments and the

“match” from the federal government. I tend to agree that there was no

mechanical relationship, but it is likely that the attitudes and activities of

the state and local governments did influence how much effort they devoted to

obtaining New Deal funds. Couch and Shughart really do not address this issue

well because they do not try to take into account the issues of simultaneity

bias in their regression equations. Wallis (1987) has already made the

theoretic al case that federal government spending and state and local spending

are endogenous and that there are feedbacks between the two. Thus,

it is somewhat surprising that Couch and Shughart ignore the issue by running

simple OLS regressions that ignore the endogeneity issues. They do offer some

criticisms of some of the work Wallis has done on the impact of state spending

on New Deal funds, but it would seem very important to test the issue directly

in their regression analysis.

Couch and Shughart press their argument that state and local activity was

relatively unimportant further by claiming that leaders in the South, which

received less than other regions, did not oppose New Deal programs. They claim

that southerners only opposed the Roosevelt administration late in the 1930s

(p. 212). They argue that nearly all of the southern congressmen voted for the

Emergency Relief Appropriation Act, and that most of the southern opposition

came about in response to the court-packing plan in 1937. Their claims of la ck

of southern opposition to the New Deal are not very convincing. The vote for

the enabling legislation was not even remotely close, suggesting that everybody

expected that the legislation would go through because it was just continuing

the programs already in existence. Further, they appear to have missed the

work of Lee Alston and Joseph Ferrie, who have articles in the Journal of

Economic History

(1985) and in the American Economic Review (1993) that show that

southern planters were strongly opposed to many New Deal programs,

particularly Social Security.

I was surprised by another omission. In their concise history of the Great

Depression, they do not mention the work on the impact of the gold standard on

the depression by Barry Eichengreen (Golden Fetters, 1992). My

impression is that most economists and economic historians see Eichengreen’s

book as the most comprehensive discussion of the issue.

So, what can we learn from the analysis in this book, which also summarizes

most of the literature on the issue? Couch and Shughart give strong emphasis

to the notion that politics and interest groups were the primary factors

shaping the New Deal. Their regression analysis finds little evidence that the

distribution of funds matched the noble rhetorical goals of reform, recovery,

and relief motives. They dismiss the notion that matching had much impact on

the distribution of funds. At this point I am not fully convinced that the New

Dealers did not at least partially try to achieve the noble goals in their

rhetoric. One issue that cannot be addressed with the econometrics is the idea

that the New Deal was conceived to solve a national problem of relief and

recovery. In fact, the 1930s led to all sorts of federal legislation on issues

that had been the state’s preserve because people seemed to believe that these

were national problems. It is clear that the Depression did not touch all

states equally, but it certainly touched each and every state to some extent.

Each state

received a significant amount of spending, at least $200 per capita. So

Roosevelt, Hopkins, Ickes and the rest of the New Dealers could at least claim

that they used resources to foster relief and recovery at a base level in each

state. The variation across states shows that other factors determined the

distribution beyond this base level. None of the regression analyses by any of

the scholars writing on this subject show any sign that the New Deal was

reform-minded, a finding consistent with most historians’

views of the Roosevelt

Administration. It is clear that political maneuvering played an important role

in this story in all of the analyses.

The question of whether or not the variation also reflected more noble motives

is still not fully answered. Different specifications show

different results. One problem with the Couch and Shughart analyses is that

they do not adequately control for problems with simultaneity bias, which was a

central feature of Wallis’s earlier analyses. My sense having followed all of

this literature care fully over the past decade is that the distribution of New

Deal funds was complicated. It was driven by some noble goals, some political

goals, and certainly by special interest pressures.

It was probably driven as well by sheer confusion because there we re so many

diverse programs that it seems likely (and historians have documented)

that the goals of some programs came into direct opposition to the goals of

other programs. All of these factors come together into a giant and very

complex stew that boiled

over into the largest peacetime expansion of government in U.S. history.

Price V. Fishback Department of Economics University of Arizona Tucson, AZ

85721

Price V. Fishback is the Frank and Clara Kramer Professor of Economics at the

University of Arizona. His book with Shawn Kantor on the origins of workers’

compensation laws is forthcoming from University of Chicago Press early in

2000. Fishback and Kantor are currently collaborating with various scholars on

a large-scale project examining the economic impact of the New Deal on the

economy using county- and city-level data.

References:

Alston, Lee and Joseph Ferrie, “Labor Costs, Paternalism, and Loyalty in

Southern Agriculture: A Constraint on the Growth of the Welfare State,”

Journal of Economic

History, 45 (March 1985): 95-117.

Alston, Lee and Joseph Ferrie, “Paternalism in Agricultural Labor Contracts in

the U.S. South: Implications for the Growth of the Welfare State,”

American Economic Review, 83 (September 1993): 852-76.

Anderson, Gary

M., and Robert D. Tollison, “Congressional Influence and Patterns of New Deal

Spending, 1933-1939,” Journal of Law and Economics,

34 (April 1991): 161-175.

Arrington, Leonard J., “Western Agriculture and the New Deal,”

Agricultural History, 49 (1970)

: 337-353.

Eichengreen, Barry, Golden Fetters: The Gold Standard and the Great

Depression, 1919-1939. New York: Oxford University Press, 1992.

Fleck, Robert Kenneth, “Essays on the Political Economy of the New Deal”

(Ph.D. thesis, Stanford University,

1994).

Reading, Don C., “New Deal Activity and the States, 1933 to 1939,” Journal

of Economic History, 33 (Dec. 1973): 792-810.

Wallis, John Joseph, “Employment, Politics, and Economic Recovery During the

Great Depression,” Review of Economics and Statistics, 69 (Aug.

1987): 516-20.

, “The Political Economy of New Deal Spending Revisited, Again: With and

Without Nevada,” Explorations in Economic History, 35 (April (1998):

140-170.

Wright, Gavin, “The Political Economy of New Deal Spending:

An Econometric Analysis,” Review of Economics and Statistics, 56 (Feb.

1974): 30-38.

Subject(s):Government, Law and Regulation, Public Finance
Geographic Area(s):North America
Time Period(s):20th Century: Pre WWII

Timken: from Missouri to Mars–A Century of Leadership

Author(s):Pruitt, Bettye H.
Reviewer(s):Mazzoleni, Roberto

Published by EH.NET (June 1999)

Bettye H. Pruitt. Timken: from Missouri to Mars–A Century of

Leadership.

Boston, Mass.: Harvard Business Scholl Press, 1998. xvii + 514 pp. Tables,

figures, photographs, appendices, notes, and index. $39.95 (cloth), ISBN

0-87584-887-7.

Reviewed for H-Business and EH.Net by Roberto Mazzoleni, Department of

Economics, University of Vermont.

Continuity and Change in the Growth of a Family Controlled U.S.

Manufacturing Firm

Established in 1899 by Henry Timken to commercialize tapered roller bearings

axles for carriages, the Timken Company today is a multinational corporation

with sales of about $2.6 billion (1998), 21,000 employees,

engaged in the manufacture and sales of bearings and alloy steel products that

find application in a wide variety of industries. To celebrate its

centennial, the Timken Company commissioned the Winthrop Group Inc. to write a

history of the firm. Timken: from Missouri to Mars–a century of leadership

in manufacturing is the result of historian Bettye H. Pruitt’s research

(with the assistance of Jeffrey R. Yost and others). Pruitt uses a variety of

sources, including internal corporate documents, personal correspondence of

several members of the company, as well as interviews with numerous individuals

from the company itself, its affiliates, and outsiders. The book’s rich detail

testifies to the quality and thoroughness of the author’s research. While

primarily focused on the business aspects of Timken’s life, the book also

discusses the firm’s relationship with the surrounding communities, its

philanthropic activities, and provides biographical sketches of many

individuals

associated with the firm,

including Timken family insiders as well as outsiders. These sections

contribute to establishing a link between the personalities of the firm’s

leaders and the culture of the organization. This is an important element in

the author’s assessment of Timken’s evolution. Pruitt emphasizes the firm’s

identity and sense of purpose as an anchor of stable values enabling the

strategic and organizational adaptation that allowed it to survive and

prosper. These cultural factors are linked to the Timken’s family continuing

control of the firm after a century of activity.

While the family ownership and control constitutes a distinctive feature of the

firm, the events in Timken’s history are in many respects quite representative

of U.S. manufacturing industries more generally, not only from a technological

and economic viewpoint but also from a cultural one,

as the author acknowledges in the book’s early pages. The chronological

sequence of chapters is punctuated by two focus chapters that describe the

company’s establishment of new production plants (see infra). These, Pruitt

argues, symbolize the technological and cultural differences between the mass

production

and the flexible manufacturing eras in Timken’s corporate history.

The origins of the Timken company can be traced as far back as 1855, to a

carriage business set up by Henry Timken, the son of German immigrants in

St.Louis, Missouri. During the 1890s,

Henry became involved in the development of anti-friction bearings and,

together with his nephew Reginald Heinzelman, he invented a tapered roller

bearing for which they received a patent in 1898. One year later, the Timken

Roller Bearing Axle Co. was incorporated for the commercialization of carriage

axles mounting their patented bearings. The growth of the bearing business

followed that of the automobile industry, although since the 1910s Timken began

to develop other markets for its products. Timken bearings were sold at a

premium over competing products, but over time, increased competition and the

possibility of vertical integration by car manufacturers threatened the

company’s future growth. Under the stewardship of Henry Timken’s son, Henry H.,

the

firm committed itself to competing on price and quality to sustain revenue

growth, a strategy that prompted Timken to seek cost savings by establishing an

in-house facility for steel production.

Pruitt suggests a transaction cost rationale for integration related to

Timken’s steel quality requirements which resulted in high steel prices,

monitoring and testing costs. Timken was also experiencing difficulties in

securing reliable supplies of high quality steel from electric arc furnaces.

These factors pushed Timken (and its main rival, Swedish firm SKF) to invest

in a facility for steelmaking. The decision was based on fairly inaccurate

estimates: the final investment costs exceeded the initial forecast by a full

order of magnitude (p.74). As a result, Timken was forced to seek external

finance from banks first, and to offer part of the company’s stock to the

public in 1922. In spite of the earlier reference to transaction and

manufacturing costs, Pruitt’s account indicates that the internal capability i

n steel production proved to be of fundamental value for the innovative

performance of the firm as it provided Timken with control over the interface

between bearing design and steel quality. Thanks to the learned capabilities in

product, process, and sales engineering, Timken experienced profit and revenue

growth throughout the 1920s.

Until the Great Depression, Timken’s policy of paying high wages had succeeded

at keeping unions out of its production plants. Only in the 1930s efforts by

the United Steel Workers to unionize the company’s plants in Canton, Ohio,

succeeded. The firm’s relationship with the union was marred by hostility. The

management spurned any interference with its control of shopfloor activities.

Timken was committed to a managerial style informed by hierarchical command

and control, a practice whose continuity inside the firm was facilitated by

recruiting executives through internal promotions.

The management’s anti-union stance played a role in 1950 when a

state-of-the-art production plant was set up in Bucyrus, Ohio, a rural area

that Timken hoped could provide a union-free environment. The new plant

featured extensive automation of the manufacturing process and focused on the

mass production of standardized products. Timken’s management could benefit

from vastly improved information systems and hoped that its control over the

production process would be unfettered by conflict with its labor force.

Generous employee compensation was expected to avert the unionization of the

plant.

At the same time, the firm intended to provide workers with the training needed

to realize job rotation programs and with team-based performance incentives.

The scale economies realized at the Bucyrus plant were the basis for Timken’s

retention of a firs t-mover advantage in the market for standardized tapered

roller bearings. In contrast with competitors whose product lines encompassed

alternative bearing designs, Timken remained committed to its time-honed

strategy of competing on price and quality in the tapered roller bearing

segment. The same conservatism was also visible in the company’s structure,

where the organization continued to be along functional lines. Pruitt

identifies these facts as symptoms of the incipient divergence of Timken’s

business

strategy and structure from the pattern typical of U.S. manufacturing firms.

These differences notwithstanding, Timken enjoyed a prolonged period of growth

and profitability. It developed a network of international affiliates whose

integration became an

important focus of managerial attention. Driven by the objective to coordinate

sales and production on a worldwide basis,

efforts were made to establish uniform quality and dimensional standards that

could realize interchangeability of products across plants. Whereas Timken’s

management effectively addressed these operational needs, it was not quite as

successful at developing an appropriate business strategy model for its

international affiliates. The business model behind the Bucyrus plant that

succeeded in the U.S. did not enjoy the same fate in other markets, partly

because the firm did not have a first-mover advantage vis-a-visits

competitors.

The competitive pressures in the U.S. bearing market increased during the

1960s. In the usual pattern, Japanese entrants first targeted the low-cost end

of the ball bearing business. Having succeeded in that market segment,

the Japanese firms began to aim at the low-end of the tapered roller bearings

market. Timken’s ability to withstand their competitive threat was the result

of its continuing commitment to modernize manufacturing facilities and expand

capacity. New plants were set up in Gaffney, South Carolina, in 1971 and in

Lincolntown, North Carolina, in 1979. To be sure,

competition put a squeeze on pro fit margins in the bearings business during

the 1970s, but Timken weathered the storm satisfactorily thanks to the

profitability of its steelmaking division. In that area too, Timken upgraded

and expanded manufacturing facilities (notice the acquisition of Latrobe Steel

in 1975) and developed other markets for its steel products in addition to

bearings.

By the late 1970s the firm’s ability to sustain continuous improvement in

bearings’ performance was diminishing. Problems had emerged in regard to the

quality of internal steel supplies. The response to this crisis,

initiated in 1978 as the Clean Steel Program, included a benchmarking exercise

conducted at steelmaking plants in Europe and Japan which revealed that Timken

needed to catch up with the industry’s best practice in order to secure its

competitive standing in the bearings business. In 1981 Timken decided to build

a new steel plant at Faircrest, Ohio.

These events were a watershed in the firm’s history. A prolonged period of

internal change ensued that wrought radical transformations in Timken’s

organization of shopfloor work as well as its corporate structure and culture.

Existing organizational practices had created an inward-looking culture that

failed to absorb useful managerial and technological knowledge from the

outside. The outcomes of the benchmarking exercise shook the management’s

confidence in the organization’s ability to identify and solve problems

internally and to generate the technological and organizational improvements

needed

to sustain the competitive position of the firm.

Outside consultants from McKinsey & Co. collaborated with insiders to

restructure the company. Even more important, they facilitated the overhaul of

the corporate culture, and particularly the abandonment of the strict top-down

approach to management that had characterized Timken since its early years. The

book’s final chapters portray Timken as an organization alert to the need for

strategic adaptation and willing to embrace change in response to external

events. In what may be considered a radical departure from the company’s

conventional wisdom, Joseph Toot Jr. described the Timken Company as having

moved from “a strict , traditional, product orientation toward the application

of certain skills which we

believed we possessed in an exceptional way” (p.393).

The book’s strength is without a doubt in its detailed account of the corporate

history, which a reader without an all encompassing interest in the matter may

find dizzying at times. While I found the

book pleasant and engaging to read for the most part, occasionally, the

author’s attempt to provide details ends up clouding the story line more than I

thought desirable, particularly toward the final chapters of the book. Perhaps

inevitably, the book touches only briefly upon events and issues that

interested readers will want to know more about. For example, Pruitt tells us

that while British Timken had been using Statistical Process Control

(SPC) after World War II, the U.S. headquarters’ efforts at standardizing

procedures across plants were responsible for its elimination. Pruitt says that

British Timken promptly conformed to the orders from Canton

(pp.232-234), but there is no way to tell whether British Timken benefited from

SPC, and if so, why did it simply conform to the orders? Considering that

quality control processes were resumed twenty years later, it would have been

interesting to learn more about the circumstances of SPC’s demise.

While the book rarely attempts to generalize from Timken’

s experience on specific issues, the introductory chapter places Timken’s

corporate history in a broader perspective provided by the scholarly debate

concerning the factors promoting corporate success and longevity. Pruitt lays

out two views, contrasting

Chandler’s [1] emphasis on a firm’s strategic focus on core businesses and

investments in organizational capabilities, with the cultural approach found in

Collins and Porras [2] and de Geus [3]

emphasizing a core ideology that “guides and inspires people

throughout the organization and remains relatively fixed for long periods of

time”

(p.xiii). This contrast does not receive much analytical attention in the rest

of the book. As Pruitt reckons, both themes appear in Timken’s history. This

suggests that the views presented as mutually exclusive need instead to be

integrated with one another. In fact, I would argue that Pruitt’s own narrative

supports the broad proposition that an organization’s culture (intended as a

constellation of values and norms of interaction) is an important determinant

of its capabilities. While the rich evidence discussed in the book clearly

bears on the nexus between culture and capabilities, the nexus is not

adequately developed. Pruitt’s recurring references to the legacy of “a

compelling sense of purpose and a cohesive corporate culture” (p.31), or the

“timeless importance of corporate purpose and identity” (p.xvi) seem to

identify these cultural factors as the key determinant of Timken’s longevity

and success. These emphases

are not supported, in my opinion, by adequate analytical arguments clarifying

the relationship between these concepts and corporate success.

Pruitt’s book provides interesting insights on a much broader range of themes

than my review suggests. Among them

, I would mention the discussions of patent litigation, the effects of

antitrust restrictions on its relationships to foreign subsidiaries, lobbying

for antidumping tariffs,

the development of internal R&D programs, technological developments in steel

and

bearing technologies, the firm’s relationship with standard-setting

organizations, as well as its marketing efforts with respect to particular

customers or industries. As a result, the book deserves the attention of a wide

audience of scholars, from business and economic historians to scholars of

industrial organization, strategic management, and technological innovation.

Notes:

[1] Chandler, Alfred D. Jr., Scale and Scope. The Dynamics of Industrial

Capitalism. Cambridge, Mass.: Belknap Press, 1990.[

2] Collins, James C. and Jerry I. Porras, Built to Last: Successful Habits

of Visionary Companies. New York, N.Y.: HarperCollins, 1994.

[3] de Geus, Arie, The Living Company: Habits for Survival in a Turbulent

Business Environment. Boston, Mass.: Harvard Business School Press, 1997.

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

The Economics of the Great Depression

Author(s):Wheeler, Mark
Reviewer(s):Wicker, Elmus

Mark Wheeler, editor, The Economics of the Great Depression. Kalamazoo,

MI: W.E. Upjohn Institute for Employment Research, l998. 220 pp. $25

(cloth), ISBN 0-88099-192-5; $15 (paper), ISBN 0-88099-191-7.

Reviewed for EH.NET by Elmus Wicker, Department of Economics, Indiana

University.

The Great Depression of the nineteen thirties remains perhaps the most

enduring economic enigma of the twentieth century despite the voluminous

literature it has generated.

There have been two general approaches to the study of the Great Depression: as

a specific country phenomenon and as a global even t.

Friedman and Schwartz (1965) preferred the former and concentrated on the U.S.

Charles Kindleberger (1973) and, more recently, Barry Eichengreen

(1992) have preferred the latter.

The occasion for this book was a series of six lectures given during the

academic year 1996-97 at Western Michigan University. The editor boasts that

these essays take a fresh approach to the study of the Great Depression, but it

is not always easy to detect wherein that “freshness”

resides.

Four of the six papers continue

the specific country approach: Robert Margo reexamines the U.S. labor market in

the thirties; James Fackler constructs and tests a macroeconomic model of the

U.S. for the l921-37 period, and Michael Bernstein attempts to revive a version

of the economic maturity hypothesis popular in the post World War II period.

David Wheelock links events in the Great Depression to the inflation bias of

the Fed and the ultimate collapse of the Bretton Woods international monetary

arrangements.

Carol Heim’s essay is the

only paper specifically global in scope. It examines the incidence of the Great

Depression in the U.S., the U.K. and in some less developed economies including

Latin America, India, China, and Japan.

If the Great Depression was a global event, it rarely

has received systemic and extensive treatment across continents. We know more

about what happened in the U.S. and Europe than we do about what happened in

Japan, China,

India and Africa. Carol Heim has performed yeoman service by drawing our

attention the

differential impact of the Great Depression across continents, among nations

and among industries within individual countries.

Heim begins by contrasting the depression’s impact on the U.S. and the U.K.

Great Britain, unlike the U.S., suffered from an industrial malaise during

1920s. The Great Depression simply exacerbated the situation. Still some

industries continued to grow while others declined, but labor failed to move

away from the depressed areas. In the U.S. the South managed to improve its

relative, if not its absolute, position partly as a consequence of labor

migration and the effects of the New Deal.

Heim breaks new ground when she describes the impact of the Great Depression on

the less developed countries. Japan continued to grow, while China does not

seem to have been affected. Heim attributes the moderate effects of the Great

Depression on the less developed countries to the

“delinking” of domestic currency from the international economy. Resources were

shifted from the export to domestic industries thereby stimulating economic

development. This is an interesting hypothesis which needs to be worked out

more fully than what was possible in a short lecture. The Great Depression as a

stimulus to economic growth in the less developed countries is a “fresh” and

provocative idea.

The other five papers treat the Great Depression as a specific country event.

James Fackler constructs an econometric model of the U.S. economy for the

period 1921-37. It is a variant of the standard aggregate demand

/aggregate supply with IS and LM underpinnings. His purpose is to attempt to

differentiate between alternative propagation mechanisms. He identifies three:

a decline in the money stock (Friedman and Schwartz),

autonomous changes in consumption (Temin) and

the debt-deflation or credit view (Fisher and Bernanke). Fackler recognizes

the they may not be mutually exclusive. It is doubtful how much we have learned

from this exercise.

Alternative propagation mechanisms can not be ruled out. The “best,” he

surmises, appears to be a shock to the IS curve whose source, however, can not

be

identified!

Robert Margo’s paper is more modest in its aspirations but, nevertheless,

makes two “fresh” contributions to the behavior of the labor market during the

Great Depress ion. He presents new evidence about the labor participation rate

of wives of husbands on WPA projects and the effects of the Great Depression on

income distribution. Using microeconomic data Margo refutes the “added worker

effect” hypothesis–that other family members have an incentive to seek

employment when the head of household becomes unemployed. What he finds is that

the WPA inhibited the wives of husbands on WPA from seeking a job. Even if

wages were relatively low on WPA projects, they were still better than what

married women could earn.

Margo’s conclusion that WPA work was essentially full time and excluded job

search is consistent with the Lucas-Rapping (1972) model of the Great

Depression where the labor market is presumably in continuous short

-term equilibrium.

Margo also questions the conventional wisdom that the Great Depression helped

to produce a more egalitarian distribution of income. This did not happen

because earnings differentials widened between skilled and unskilled

workers–the decline in hours worked was greater among the unskilled. By 1939,

however, the differential had returned to what it had been in the late 1920s.

Instead, a substantial decline in the inequality of wages occurred between 1940

and 1950.

The papers of Wheelock and Cecchetti are less concerned with the causes of the

Great Depression than with its legacies. Wheelock maintains that institutional

change spawned by the Great Depression imparted an inflationary bias to

monetary policy and completely undermined any

lasting commitment to the gold standard which led inevitably to the rejection

of the Bretton Woods agreement in 1971. He concludes correctly that the Fed’s

commitment to the full gold standard was weakened by gold sterilization in the

twenties, the priority of domestic stabilization objectives, a reluctance to

raise rates in 1931, and the final abandonment of gold temporarily in 1933. It

was not the Great Depression that weakened the U.S.

commitment to the gold standard but the realization when “push comes to shove”

exchange rate rigidity must be subservient to domestic stabilization

objectives.

Cecchetti derives three lessons of the Great Depression for current policy:

the central bank’s function as lender of last resort is of primary importance,

deflation is extremely costly, and the gold standard is very dangerous! One

lesson that we should have learned, but which Cecchetti omits, is that the

initial structure of the Federal Reserve (as embodied in the original Federal

Reserve Act) was faulty. All banks were not required to become members thereby

excluding those banks that later were in most need of Federal Reserve support.

A faulty Federal Reserve Act and not inept management was the primary cause of

the Fed not having done more.

Bernstein eschews the relatively short-run view of the Great Depression. He

prefers an explanation couched in terms of secular changes in technology and

shrinkage of investment outlets that bears a strong resemblance to the older

theories of Kalecki, Schumpeter, and Hansen.

The key is to be found in the concept of industrial maturity which he derives

from the work of the Austrian economist Joseph Steindl (1976). In the Steindl

version there were long-run tendencies toward capital accumulation in

capitalist development which

led to diminished competition and investment. Bernstein acknowledges that

Steindl’s explanation does not have the unequivocal support of the historical

evidence.

There is no simple interpretation of the Great Depression to which these six

essays point.

Nor do they make any pretense at summarizing the state of the art. They

represent a combination of singular efforts to come to terms with specific

problems. Some are more successful than others.

References:

Barry Eichengreen. Golden Fetters: The Gold Standard and the Great

Depression, 1919-1939. New York: Oxford University Press, 1992.

Milton Friedman and Anna Jacobson Schwartz, The Great Contraction,

1929-1933, Princeton: Princeton University Press, 1965.

Charles P. Kindleberger. The World Depression, 1929-1939. Berkeley:

University of California Press. 1973.

Robert E. Lucas and Leonard Rapping. “Unemployment in the Great Depression:

Is There a Full Explanation?” Journal of Political Economy, 80, 1972,

pp.59-65.

Joseph Steindl, Maturity and Stagnation in American Capitalism, New

York:

Monthly Review Press, 1976.

Elmus Wicker is Professor of Economics, Emeritus at Indiana University. He is

the author of Banking Panics of the Great Depression, Cambridge

University Press. 1996, and Banking Panics of the Gilded Age, Cambridge

University Press, forthcoming.

Subject(s):Macroeconomics and Fluctuations
Geographic Area(s):General, International, or Comparative
Time Period(s):20th Century: Pre WWII

Incorporating Women: A History of Women and Business in the United States

Author(s):Kwolek-Folland, Angel
Reviewer(s):Yeager, Mary A.

Published by H-Business@eh.net and EH.Net (April 1999)

Angel Kwolek-Folland. Incorporating Women: A History of Women and Business

in the United States Twayne’s Evolution of Modern Business Series. New

York: Twayne Publishers, Simon &

Schuster Macmillan, 1998. ix + pp. 275.

Bibliography and index. (cloth), ISBN 0-8057-4519-X.

Reviewed for H-Business by Mary A. Yeager, Department of History, University of

California, Los Angeles, California.

MAKING A DIFFERENCE: WOMEN AND BUSINESS HISTORY

Angel Kwolek-Folland’s Incorporating Women is the first survey to

synthesize the history of women and business anywhere in the world. Its

pioneering status raises a series of significant questions for the scholarly

and business communities and the public at large. Why have businesswomen in

America been the first women to have their history surveyed and synthesized?

And why now? In view of the fact that there is still a great deal that we do

not know about women in business, is the synthesis premature? What does the

synthesis offer historians of women and business and what is its significance

for future research? And finally, where do we go from here? [1]

ACCOUNTING FOR LEADERS

The practice of business and women’s history

in the United States has reached a historiographical cross-roads just when

demographic and economic changes are interacting to compel a dramatic

restructuring of American business. As we approach the millennium, old

certainties about the superior competitiveness of American business have given

way to the uncertainties of global capitalism run amok. Women, including those

with children, have become fifty-one percent of the labor force. They have

started more new businesses at a faster rate than men. T hey have earned more

baccalaureate and graduate degrees than have men across an increasing number of

professions. More women have climbed into the ranks of middle management,

while the small number of women at the very top has held its own.

For the first time in the history of American business, women who work have

begun to be perceived as a partial solution to the problems of competitiveness

rather than as a major social problem. No longer is the question whether single

or married women should work but

rather, how long women will work at a particular occupation and pay scale?

Will married women and men be able to juggle the kids and career demands to

suit personal and familial lifestyles?

The appearance of a historical synthesis of American women and

business at this time is significant because it has been pieced together from

two radically different historiographical traditions before a great deal of

substantive or systematic research on women in business has been completed.

Until relatively recently

, historians have used gender more often to exclude rather than to include the

opposite sex. American business history was generally written by and about men

in growth-oriented manufacturing firms.

American women’s history was written by and about women

who lived compartmentalized lives in private or public spheres.

More is known about women as workers than as businesspeople. Evidence on

women’s labor force-participation is abundant, quantifiable and relatively

accessible, embedded in government labor and occupational censuses, and

company records. As an activity, business confounds with multiple meanings and

definitions. It sweeps in production and trade, manufacturing,

agriculture and service, as well as producers, entrepreneurs, professionals,

workers and managers. As an occupation, it is notoriously ambiguous, often

swept into other occupational groupings, such as proprietors or administrators.

As a career or profession, it offers numerous choices, from clerks to

middle-level managers and corporate

executives.

Businesswomen have been hard to see and difficult to track. They have been

misfits in the male world of business and a privileged minority among women.

Their names have been erased in law and custom by those of husbands, fathers

and brothers.

Their economic activities have spilled across boundaries demarcating

households, families, firms and markets. Their multifaceted roles as wives and

mothers, daughters and widows have blurred their business identities. Most

female business activities have occurred in smaller corners and invisible

niches of the service sector rather than in growth-oriented manufacturing

industries, in family-oriented businesses and retail shops,

and in educational, philanthropic, and health-care and reform-oriented

institutions. The motives of businesswomen have involved a complex and changing

mixture of economic and non-economic factors. Their stories have tended to be

communal and familial, muffling individual decision-making strategies and the

competitive noises of

firms and industries.

Kwolek-Folland has learned from her subjects how to transform problems into

opportunities. She uses debates about working women as scaffolding for the

synthesis. Chapter titles evoke a succession of images about working women:

“Fem ale Economies,” “Mills and More,” “Difference at Work,” “Personal Work,”

“Crisis Management” and “Difference at Work.” Work offers women a way to gain

greater economic visibility. It expands opportunities to undertake business.

Indeed, women’s movement into white collar work in the late nineteenth and

earlier twentieth centuries marks, for her, one of the most important changes

for women in business in the past 300 years. Data on occupations and women’s

labor force participation are correlated generally with women’s increasing

involvement in business activities. Business activities are based on a gendered

division of labor. Women participate in business like workers participating in

the economy, as part of a proletariat, more often in feminized, sex-segregated

dead-end jobs and slower-growing niches of service-oriented industries.

Women’s status at work serves as a lightning rod for the debate over women’s

roles more generally. Debates about working women grow out of debates about

women’s place.

Businesswomen across the centuries have often adopted a work-oriented view of

business. Business has been a way to make a living and survive. So integral

has business been to women’s lives, that some women have steadfastly refused to

distinguish business from life. “You can never think of me as a business

woman,” one woman cautioned her daughter in 1910.

“That is because I make a business of life and living my business.”

“Business is just life,” American real estate entrepreneur Edith Mae Cummings

wrote in 1929, “and we had life long before we had business.”[2]

KWOLEK-FOLLAND, BRIDGE-BUILDER

Kwolek-Folland knows how to listen to women’s voices. She has designed the

synthesis to disrupt disciplinary boundaries that have kept women in separate

spheres a nd men the only players in a male-dominated business game.

Given that “Women have always been in business in America (p.1),”

Kwolek-Folland has defined her central challenge as one of “incorporation”:

how to bring “others,” particularly women of different

classes, races and ethnicities into American business history and how to bring

business into American women’s history.

Incorporation has the ring of a conservative project of integration. Cynical

feminists well-versed in the history of British legal traditions might well

hesitate. After all, English civil law recognized the man and wife as one,

but came to define the “one” as “male.” Who is incorporated into what? Who are

the “gatekeepers” of the incorporation process? What are the terms of

incorporation? And what are the results of the incorporation process, both

for those incorporated and for the incorporating body as a whole?

Kwolek-Folland does not ally with feminist theorists determined to tear down

business institutions in order to clear the playing field of businessmen.

Nor is she a neo-progressive reformer nipping at the heels of Charles and Mary

Beard. She is an artist in tone, style, and temperament, using conservative

colors to cover radical aims.

Double entendres bedevil the incorporation process. Incorporation is testily

political, both a form and process, interacting to constrain and liberate women

unevenly and unequally over time. Power is interpreted as direct authority and

indirect influence. Both the terms and outcome of the incorporation process

are contingent, dependent in part upon how societies regard and value “others”,

as reflected by women’s changing legal status and business activities.

Incorporation involves struggles over the meaning and significance of business

and its associated concepts of profit, risk,

entrepreneurship, and success. Kwolek-Folland defines business expansively as:

“engaging in economic activity in a market to seek profit and assuming the

financial responsibility for that activity.” (p.5). Profit is

often embedded in non-economic goals; risk is defined as much in personal and

familial as in monetary terms; entrepreneurship is defined broadly as “new”

areas of economic activity; success is linked to women’s emancipation and

autonomy.

To incorporate

women into the history of business Kwolek-Folland uses analytical tools derived

from political and women’s history. Social categories of race, gender,

ethnicity and class order human experiences along a continuum of differences

that reveal the dynamics of

power embedded in business activities and institutions. Kwolek-Folland regards

these social categories as a “force,” and more than occasionally, as an

“irrational force” which shapes “how businesses approach markets, make hiring

choices,

and create organizational forms.” (p.8). Women’s political struggles both

spearhead and reflect changes in business activities and structures,

shifting the meaning and influence of business in women’s lives.

Business is incorporated into women’s history through inequities and

asymmetries of power associated with different business structures and economic

activities and roles. Business organizations reinforce differences between men

and women and other women. Business imparts new meaning and significance to

these categories by serving as fickle emancipator of women’s roles and

conscious conservator of woman’s place. It bridges the divide that has

separated women’s private and public lives.

Underlying Kwolek-Folland’s assumptions about the importance of social

categories to the understanding and meaning of business is a reformer’s vision

of a

more equitable and just business system, one where gender differences are not

unequally valued, where social condition does not constrain business

opportunity, where a male standard is not synonymous with

a universal standard, and where men and women have equal chances to exploit

business opportunities. To liberate business from the shackles of a

male-dominated business history and to emancipate women from a private world of

love and ritual, she crafts a single, all-encompassing narrative to bestow

public and historical legitimacy on businesswomen.

SURVEYING THE SURVEY

The survey situates women within a chronological framework that evolves

primarily out of economic and business history. Except for the middle of the

twentieth century, when government policies take center stage, the

periodization scheme is based upon major changes in the nature and dynamics of

liberal, market-oriented capitalism, beginning with a pre-industrial period

and advancing jerkily with successive industrial revolutions across the

nineteenth and twentieth centuries. Women enter economic and business history

indirectly by way of their business activities and relationships with other

women and men in business and the larger society, as members of families, of

social-reform, educational, and political networks. Business enters women’s

history indirectly by way of opportunities and legal status,

through economic roles and activities that women assume as

producers,

entrepreneurs, managers and professionals.

Women jump start the business of colonization in the 1550s as dependent sexual

objects of colonizers’ imaginations. They end their business journeys in 1997,

still unevenly and unequally incorporated

into the business system as legal independents, on unequal terms relative to

men and to each other,

with laws that promise justice without protection. After four and a half

centuries of ever-diversifying business activities and at least three decades

of

debate and litigation about equal pay, businesswomen stand stalled in their

tracks. Women’s revolutionary breakthrough into the top tiers of management has

fizzled.

For Kwolek-Folland, the setbacks are more telling than the advances. As if to

underscore

how much and how little had changed with regard to women and their

relationship to business, she places powerful corporate tycoon Estee Lauder —

named “Outstanding Mother of the Year” in 1984,– atop the shoulders of Ojibwa

fur traders, market women, butter makers bankers, and factory girls. Gender

stereotypes have continued to dog women’s advance in the business world,

constructing their public personas even as women reconstruct the businessworld.

EVALUATING THE RESULTS

Kwolek-Folland’s survey and

synthesis have alerted us to power differentials embedded in difference.

Society’s unequal valuation of “others” nurtured a system of laws regarding

property rights, citizenship, suffrage, marriage and divorce that disadvantaged

women more than men and so me women more than others. Women’s status, as

reflected both in formal laws and informal customs, interacted with economic

conditions to shape women’s business opportunities and the manner of engaging

in business.

The framework enables us to see more clearly different women’s varying

experiences in the business world over time. Some businesswomen mimic the

monotonous and routine male shopkeepers and businessmen the world over, like

Rose Stolowy of Kansas City, Missouri, or Catherine Ferguson, a confectioner

shop-owner. Famous women, such as Rebecca Lukens, Amelia Earhart, and Oprah

Winfrey share brief appearances with their not-so famous contemporary

counterparts, like Phebe Cills, an African-American toy store owner, and the

infamous sisters Aida and

Minna Everleigh. Good businesswomen, like caterer Edith McConnell, coexist with

the less successful, such as Christina Barnes, who “negotiated the business

world with difficulty.” And then there are some who are larger than life, such

as the six-foot,

200 pound Sarah Bowman, who made money from prostitution AND the United States

Army,

only to die ungloriously of a tarantula bite in 1866.

Race opened opportunities for black businesswomen and professionals in

segregated niches of the economy and closed

them in areas dominated by whites. It imposed special social and economic

burdens upon black businesspeople as community builders and as economic

role-models. Black women undertook a variety of business roles even as slaves

and engaged in a range of business activities even though they gained both

property, voting and civil rights later than white women. Their work histories

were longer and more continuous than either white women or black men. Black

women boasted one of the nation’s first and most successful brothel-keepers,

the first female bank president, the first female self-made millionaire in

America, and one of the wealthiest celebrity queens in the entertainment

business.

Ethnicity affected whether women went into business at all. It proved

important to women’s control of property, as in the case of the early female

Dutch

settlers, and formative of entrepreneurial cultures, as in the case of Jewish

women, whom Kwolek-Folland celebrates as the most entrepreneurial of American

businesswomen. Len a Himmelstein Bryant (Lane Bryant Company),

Fanny Goldberg Stahl, Esther Mentzer (Estee Lauder) stand tall in the female

hall of business fame.

Class functioned as a marker of legal and economic status as well as a

gate-keeper of the incorporation process, promoting gender rules that

distinguished women from men and income bars that distanced lower from upper

income groups. It gave wealthier women an easier entree into politics and

educational institutions, which positioned them more strategically as leaders

in social reform and philanthropic institutions.

Business played a mixed role in the lives of women. On the one hand,

business structures operated to reinforce rather than undermine differences.

In the early 1800s textile owners hired young, single

white women because the skills associated with textile production were already

categorized as women’s work. Later, with the coming of managerial capitalism,

the gender coding of managerial and job rules kept women out of the

highest-paying highest status

jobs and paved the way for the feminization of clerical and personnel work. On

the other hand, business expanded women’s opportunities and control, empowering

women as owners and managers even as it reinforced differences between men and

women. Indeed, for some women in social-reform and political networks in the

late nineteenth century, business activities became a proto-feminist political

act.

Successive market-expanding industrial revolutions improved more than they

undermined business women’s economic well-being, generating more income and

greater autonomy and independence for businesswomen than was the case for women

who worked as employees of others. Only when the scope of government’s

involvement in women’s issues broadened across the 20th century

, did business assume a more threatening and ominous role as a major antagonist

in a series of sexual discrimination and affirmative actions cases. With regard

to some issues, such as paid family-leave, big business jumped ahead of the

government, offering its own assistance packages, while small business owners,

many of whom were women, protested on grounds that such legislation would

disadvantage them relative to larger rivals.

For Kwolek-Folland and the women whose experiences she surveys, business

activities generally were growth-enhancing and value-creating activities.

The historical purpose of business, after all, she concludes, has been “to

make people’s lives better or to raise the standard of living for as many as

possible.”(p.216).

Sighs of relief among business historians are likely to be matched by

discomfiting growls from feminists who have always seen more of the meanness

than the magic in the market and in business activities. Inevitably,

scholars in both camps will single out different

aspects of the survey and synthesis for praise and criticism. However, as a

business historian and free-farming feminist, with one eye on men and business

institutions, and the other on businesswomen and the world, I want to focus my

remarks on this unresolved paradox: Why has a study so steeped in the rhetoric

of power and difference not revealed more about how power and difference

actually operate in the business world? About what power means, how it is

expressed and used,

by whom for what ends? Why does a study about women and business so closely

resemble the histories of women at work?

A PARADOX and SOME PUZZLES

Social categories may well hide as much as they reveal about how power really

works in the world of business. Businesswomen have been swept into the history

of business armed with only one set of tools to differentiate them. Race,

ethnicity, class and gender have masked differences arising from women’s

individual capabilities and skills; they have made differences between and

among women of the same social categories difficult to see and to understand;

they have imposed an unnecessary uniformity upon women as a group.

The transformation of categories from inert, disembodied experiences into

causal forces, stalls early on. Business practices are overwhelmed by

cultural forces. Modern business tycoons stand atop the shoulders of Ojibwa

traders, but it is difficult to differentiate one businesswoman and business

from another or to account for differences in the performance and profitability

of business activities over time. Despite the fact that Indians held

dramatically different conceptions of gender roles, of property, autonomy and

responsibility, Indian women emerge as American history’s earliest

businesswomen and consumers.

Women as a group appear to share more similarities than differences but the

business experiences of men and women are allegedly more different than

similar. These hypotheses remain to be tested.

Women are described as having been more continuously and often

circumscribed in their choices and activities by the “family claim” then men

have been.

Yet, histories of businessmen in the pre-industrial period have suggested that

the family claim also structured the economic activity of men. We need to know

whether

women and men interpreted the claim differently and how their interpretations

influenced economic outcomes.

Kwolek-Folland’s definition of business is at war with business realities.

Why has business as “activity” been yoked to the claim of “financial

responsibility” rather than to market-and profit-oriented decisions, as has

been

customary in business history? The choice carries definite ethical and moral

connotations. It broadens the population of businesswomen and businesses but

pinches interpretive

possibilities. The price is operational imprecision and ambiguity.

Activities are different from decisions. Activities indicate little more than

a kind of busyness, industry or work; they are described by their properties.

Decisions are associated with

choices that businesspeople make in the course of doing business, in order to

remain in business. Financial responsibility literally refers to “a charge, a

trust, or duty for which one is responsible.” [3] If a reasonable understanding

of responsible

is that it has to be within the power of the one who is responsible, then how

is that determination to be made? What is meant by the assumption of financial

responsibility, and how is “responsibility” to be determined?

Kwolek-Folland does not consistently

or systematically apply the definition.

Instead, she offers an expansive interpretation whose meanings have to be

squeezed from an ever changing business context.

Kwolek-Folland regards “independence” to be the core of the legal definition of

business.

The ability to negotiate contracts and to acquire, use and dispose of

property is severely impaired without legal recognition and protection of those

rights. Without legal status as “independents,” women could do business as

dependents of others, but they could not profit from their own business

activities. Only as women gained legal recognition and protection as

“independents” and autonomous individuals with the right to their own bodies,

earnings and profits in the late nineteenth century, could they

exploit the same opportunities available to men who had those privileges and

rights.

The definition seems to deny that men and women have long strategized about the

ways in which they could shift, avoid or elide financial responsibility.

They have devised marriages and designed partnerships and firms with precisely

these goals in mind. The definition may be appropriately applied to women who

act as business proprietors, but how is it to be operationalized in a dynamic

world full of business activities undertaken by many individuals and groups

engaged in cooperative ventures, as members of family businesses,

partnerships or teams associated with single firms or corporate enterprise?

What if businesswomen assume financial responsibility but are not held

accountable?

By identifying women in business by their activities and roles as producers,

entrepreneurs, professional and managers, Kwolek-Folland constrains women’s

choices and robs them of the opportunity to exercise control or to assume

financial responsibility. Without interrogating activities or roles, it is

difficult to distinguish one businesswoman or type of business activity from

another, except insofar as production differs from trade and sales and service.

Managerial roles are gender coded but we need to know why and when the codes

took the form they did with respect to different businesses over time. To what

extent did individual women construct and re-construct managerial roles to suit

their own talents and capabilities?

In the 1950s entrepreneurial historians tried but generally failed in their

efforts to use role theory to link men in business to society. Roles represent

problematic psychological categories. Individuals and groups fulfill, perform

and create roles. Activities do not necessarily conform to prescribed roles.

Roles straight-jacket behavior but people also deviate from socially prescribed

roles. How is the historian to determine when women are performing roles

prescribed by society or crafting them as they proceed?

How have women conceived of their roles in business and how have they actually

behaved?

Racial and ethnic differences have also mattered to people’s conceptions of

business roles, activities and results. The survey builds upon studies of black

businesspeople to

suggest that their business strategies often were community-building strategies

as well. But not all of these interrelated strategies worked from the

standpoint of business longevity and profitability. What happened, for

example, when and if black businesswomen deviated from social expectations of

them as community builders?

Social categories need to be more systematically related to women’s

decision-making and organizational capabilities in particular businesses.

Kwolek-Folland surveys how some women

used skills developed in household and family or reform contexts to transform

socially-oriented businesses or non-profit institutions into profitable

businesses. However, we also need to know what kinds of decisions they made,

and which family or household decisions informed their business decisions.

Businesses differ according to operating rules and the short and long run goals

with respect to other institutions and society. Decisions and risks which

women undertake as owners or managers of hospitals

are likely to be different than the kinds of decisions made by women as family

partners, heads of families, or by businesswomen involved in the intensely

competitive cosmetic and restaurant businesses. Why were some women able to

transform household skills into effective business practices, when others

could not? Household production and consumption decisions of nineteenth century

middle-class women and twentieth century farm women gather social significance

primarily as gender dividing strategies. But

we also need to know how these decisions structured economic behavior and

outcomes.

The study suppresses the competitive forces that are at the heart of the

American business system. Although it argues from difference, it homogenizes

women as a group who seldom compete on the same playing field, either with men

or with other women in the same industry. Except in rare instances,

outcomes are seldom revealed nor evaluated. Individual female rodeo riders

compete with men, but we do not know whether they competed effectively or not.

We learn of Ellen Demorest’s pattern business but not of the competition she

experienced from Ebenezer Butterick, who eventually dominated the industry.

“Status” is another concept that creates problems for the survey and synthesis.

Kwolek-Folland employs status as a legal concept, as signifier of

reputation, of income and class, of women’s visibility and relative

equality/inequality in regard to men and other women. Yet indicators of status

do not always mesh with economic

realities. Given that social attitudes about women’s place have remained

stubbornly resistant to change,

Kwolek-Folland’s assertion that by the end of the nineteenth century, women had

achieved a legal status equal to that of men in business, is problematic.

Women could now do business and profit from their own endeavors but to what

extent did they? Data on female labor force participation and occupations pose

interpretive difficulties here. What are the causal lines of influence between

changes in legal

status and business activities?

The survey recognizes the difficulty of positioning irrational and rational

forces on the same economic stage. The problem is not simply a disagreement

about matters of meaning and definition. It also relates to the interpretive

tools that are used to analyze the evidence. To demonstrate how irrational

notions about race undermined the “myth of rationality” in business,

Kwolek-Folland offers a singular notable example, drawn from the history of

financial industries.

White providers of life insurance in the late nineteenth century refused to

sell insurance policies to black customers on the basis of actuarial

information which suggested that blacks had higher mortality rates than whites.

Citing evidence which linked higher mortality rates to environmental

conditions rather than to stereotypical notions about blacks as a group, she

concludes that white managers acted irrationally.

However, by allowing culture to subsume gender and race, and economic

rationalism to

define business practice, Kwolek-Folland misses an opportunity to examine how

and why notions of rationality, with respect to culture and economics,

sometimes complement rather than clash. If managers did not know what evidence

demonstrated, they are more

likely to make unilateral decisions on the basis of cultural predisposition

and habit. As long as other white competitors refused to market to blacks and

social attitudes condoned discrimination, then these actions may well have

produced economically efficient outcomes. Managers would have behaved

irrationally,

from an economic standpoint, only if they refused to sell to blacks when other

rivals were busily cashing in.

Determining why businesspeople do what they do has never been easy. But

economic tools of principal-agent theory are available to determine more

precisely when and why some individuals, rather than behaving act more like the

utility-maximizing automatons of neo-classical economics, act opportunistically

and with guile.

Kwolek-Folland’s

discourse about power is more tantalizing than effective.

Instead of directly confronting issues of power in the market, as business

historians have done when they analyze why some firms or businessmen wield

greater market power than others, she assumes that power adheres primarily in

social categories and institutional structures. Power floats ambiguously on the

surface of business life, seeping from institutional structures and emanating

from unequal relationships between people and things. What kind of

power is at issue is unclear. Kwolek-Folland defines power as direct authority

and indirect influence, yet it is unclear how power and influence operate with

regard to women in business. Is it the power and control that derives from

ownership status, from position, from skill, from unique talents in a

competitive market? Is it the power that comes from having more money and using

it to buy more capital to invest? Is it the competitive power that comes from

being in a technologically cutting-edge industry

at the right time? Is it he power that is embedded in women’s networks and

political activities, in the battle for suffrage and property rights? Is it the

power that derives from impotence and image, from gender and race, as the case

of government policies suggest?

Some businesswomen, like Oprah Winfrey, clearly have power. The survey suggests

that Oprah’s power derives from ownership of Harpo Entertainment Group.

“Winfrey’s control over this conglomerate,” reports Kwolek-Folland,

“gave her the ability

– rare in the business world – to shape the concern according to her personal

vision.”(p.196).

Mere ownership does not necessarily give control nor does it create an ability

to control. Businesspeople who own assets must also be skilled enough and

willing and able to use power to exert the kind of control that is necessary in

order to make money in an a high-stakes, intensely competitive game. Business

historians will want to know more about how Oprah acquired control and secured

the assets necessary to build and grow Harpo Productions. Why and when did

she choose the conglomerate form? Was this organizational form particularly

suited to the entertainment business and Oprah’s managerial style? The ability

to shape business according to one’s own vision may well be important to some

women and men in business, but some visions are likely to be more effective

than others in generating and sustaining returns.

The survey suggests several reasons why power is important in business.

Power seems to be important because women don’t have enough of it relative to

men, or because men have more of it than women and use it to keep women from

getting it and because more businessmen seem ready to wield it than

businesswomen. Power is also important with respect to

the ability to control business and influence government policy and legal

outcomes.

Yet, power is notable by its absence from legislative debates over economic

rights, suffrage, property and citizenship, from debates about regulatory

policies regarding

small and big businesses. The survey suggests that more women battled for

economic rights than for suffrage, but given that the nineteenth century

suffrage campaign proved more effective than the campaigns for economic rights,

we need to know why. Feminists and other leaders of women’s organizations put

in only brief appearances in the book,

and when they do, the survey reduces the infighting among feminist leaders

regarding different strategies to common goals. Business historians will want

to know more

about business’ roles in coalition building strategies. Which businesses and

businesspeople allied with female protagonists or antagonists in these

struggles?

In the twentieth century women’s leaders appear to have garnered more

legislative victories de spite the persistence of traditional attitudes

regarding women’s roles. Why? Kwolek-Folland attributes the results to a

massive social revolution. Other scholars have suggested that business may well

have had a hand in the “conquest of cool” that fueled

a cultural counter-revolution.[4] What was business’ role in these 20th century

revolutions compared to its role in nineteenth century women’s rights

campaigns?

The problem and the opportunity with the survey and synthesis at this stage is

that historians of women and business have focused upon a different set of

differences. Whereas business historians have studied the differences that

emanate from the structure, behavior, conduct and performance of businesspeople

and firms, historians of women have stressed the agency of individuals and

groups and the politics of liberation. Business historians have investigated a

different power dynamic, one associated with price and product competition,

with cost-saving technologies, and with decision-making strategies instead of

that associated with meaning and understanding.

Business historians have concerned themselves primarily with market power,

with the ability of firms to dominate industries and throw their weight around

without being held publicly accountable. They have studied regulatory

patterns to determine the extent to which government policies,

such as anti-trust, have clipped or augmented the market power of particular

firms in particular industries.

Kwolek-Folland expects other approaches and perspectives to increase the

scholarly returns from efforts to understand women and business. She

underscores how the American business system came to be built upon the notion

of difference while simultaneously revealing the dangers of arguments based on

difference. Beliefs about women’s differences from men in the late-nineteenth

century opened some doors for some women but closed others and barred women’s

continuous advance in the business world. Arguments on the basis of gender

differences kept women outsiders in the business world even as women made a

place for themselves in the businessworld.

Just as a business system built on gender difference is likely to crumble when

difference is no longer valued, so too is a synthesis built upon difference

likely

to unravel as women and men occupy the same historical stage. Kwolek-Folland’s

survey necessarily homogenizes women in order to emphasize the differences

between their experiences and those of men, in terms of business opportunities,

ownership and managerial rights, and access to credit, among other things.

Just how different those experiences were in fact remains to be determined by

more systematic comparison of their roles and activities with respect to a

variety of sectors and industries. Business historians are likely to see more

of the differences between iron-manufacturer Rebecca Lukens and prostitute

Sarah Bowman and more similarities between Rebecca Lukens and her male

competitor in Delaware.

Nevertheless,

only by constructing numerous bridges with a variety of tools are we likely to

understand precisely what difference men and women and business institutions

have made to the growth and development of various economic sectors over time.

If we are to turn problems of difference into exciting new

research opportunities, I caution against traveling alone down a separate but

equal road. Women and men in business have interacted throughout history inside

and outside of markets and firms, as family members, as marriage and business

partners, and as competitors, in different industries over time.

They have suffered asymmetries of power and inequities of income. Their

occupations as businesspeople have been jointly shaped by a structure of sexual

inequality. But they have both been engaged in a joint

enterprise that has as its ultimate objective, the generation of a higher

standard of living for everyone. Regardless of gender, race, ethnicity or

class,

business is still business and only survives in the long run if it generates

some income above its

costs. As a market-oriented activity and institution,

the study of business forces a focus on the interaction between men and women,

on the interconnections between families and firms, on the transgressing of

private and public boundaries. Bringing women into business raises new

questions about how business institutions deal with ideas of “masculinity” and

“femininity” and about how women deal with and view the business world. [5]

Kwolek-Folland has done more than grasp the possibilities. She has constructed

one bridge over troubled waters. It is up to others to undertake the

painstaking empirical research needed to build additional bridges. Only then

are women likely to undergo the transformation from workers in business to

businesspeople with different personalities, skills, competitive and

organizational abilities, business experiences, and institutional means of

support.

Mary Yeager Associate Professor of History Bunche Hall UCLA 405 Hilgard Avenue

Los Angeles, CA 90095-1473 310-273-6328 (h)

310

-825-3489 (0)

END NOTES

[1] For an illuminating discussion of the pros and cons of synthesis, see Eric

Monkonnen, “The Dangers of Synthesis,” in Notes and Comment, American

Historical Review, vol. 91, no.5 (December, 1986), 1146-1157.

[2] Zora Putn am Wilkins, Letters of a Business Woman to Her Daughter and

Letters of a Business Girl to Her Mother (Boston: Marshall Jones Company,

1923), p.4, and Edith Mae Cummings, Pots, Pans and Millions: A Study of

Woman’s Right to Be in Business, Her Proclivities and Capacity for Success

(National School of Business Science for Women: Washington, D.C.,

1929), p.100.

[3] The Compact Edition of the Oxford English Dictionary(New York:

Oxford University Press, 1971), r.v. “responsibility,” p. 2514.

[4] Thom as Frank, The Conquest of Cool: Business Culture, Counterculture,

And the Rise of Hip Consumerism (Chicago and London: University of Chicago

Press, 1997).

[5] See Mary A. Yeager, “General Introduction,” Vol. I, Women in

Business, 3 vols., The International Library of Critical Writings in

Business History (Aldershot, UK and Brookfield, US: Elgar Reference

Collection, forthcoming March 1999).

Subject(s):Social and Cultural History, including Race, Ethnicity and Gender
Geographic Area(s):North America
Time Period(s):20th Century: WWII and post-WWII

Builders: Herman and George R. Brown

Author(s):Pratt, Joseph A.
Castaneda, Christopher J.
Reviewer(s):Carlson, Paul

Published by H-Business@eh.net (March 1999)

BUILDERS: HERMAN AND GEORGE R. BROWN. By

Joseph A. Pratt & Christopher J.

Castaneda. (College Station: Texas A&M University Press, 1999.

Illustrations, notes, bibliography, index. $36.95.)

Reviewed for H-Business by Paul Carlson, Department of History, Texas Tech

University.

k6phc@ttacs.ttu.edu

Brothers Herman and George R. Brown turned their building company, Brown &

Root, into one of the largest and most successful engineering and construction

operations in the world. They were Texans (from Belton) and their company came

to possess the myth

and character of Texas–it was big and bold.

Started in 1919 by Herman (1892-1962) with a loan from his brother-in-law Dan

Root, the company struggled at first. George (1889-1983) joined the company in

1922, and they graded and surfaced roads. Dynamic growth came in the 1930s

Depression years when they won a contract for constructing a large dam across

the Colorado River in Central Texas, and during World War II the company burst

onto the national scene. After the war, the brothers took their operations

overseas, and in the 1950s they were wealthy and their company enjoyed national

prominence.

After Herman died in 1962, George sold Brown & Root to Halliburton Company.

However, the Brown Foundation, established by the brothers some years earlier,

carries

on philanthropic activities of all kinds.

This dual biography, crisply written and refreshingly direct, is well done.

It is largely uncritical business history. The Browns were big thinkers who

took on ambitious projects, and, at least as related here,

they succeeded at making money–money they poured into charitable projects and

into politics. They were conservative Democrats who were sometimes willing to

bend the rules of fair political contributions to support conservative business

candidates.

It is

a book of substance, and typical of the many new books coming from Texas A&M

University Press, it is attractively designed and handsomely packaged.

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

Market Dominance: How Firms Gain, Hold, or Lose It and the Impact on Economic Performance

Author(s):Rosenbaum, David I
Reviewer(s):Castaneda, Christopher J.

Published by EH.NET (March 1999)

?

David I. Rosenbaum, editor. Market Dominance: How Firms Gain, Hold, or Lose It and the Impact on Economic Performance. Westport, CT: Praeger, 1998. viii + 274 pp. $69.50 (hardcover) , ISBN: 0-275-95604-0.

Reviewed for EH.NET by Christopher J. Castaneda, Department of History, California State University, Sacramento.

Dominating Markets

Powerful firms can force the inefficient allocation of resources. If the mark et fails to discipline such firms, should government policy do so? In this collection of essays edited by David I. Rosenbaum, Professor of Economics at the University of Nebraska-Lincoln, fourteen authors study this issue by analyzing eleven dominant firms operating in ten industries. Each essay is essentially a case study that examines an industry dominated for varying time periods by a particular firm. In the case of automobiles, both Ford and General Motors are scrutinized in a single essay; the chapter on the tobacco industry probes several firms that comprise the Tobacco Trust. Altogether, the authors query issues related to corporate dominance in the oil, tobacco, aluminum, magnesium, film, automobile, computer, software, health insurance, and long- distance telephone industries. Some of the subjects, such as the rise of Standard Oil between 1865 and 1911, the early histories of Ford and GM, and AT&T’s long-term monopoly are familiar to students of big business. Other essays scrutinize less well known examples of firm dominance such as Blue Cross’s role in health insurance and Dow Chemical’s involvement in the magnesium industry.

The essays are expectedly complementary. They elucidate common factors that thematically link each story of dominance. Six traits generally characterize these firms in their rise to dominance, maintenance of monopoly, and (in most cases) loss of control. The common traits that facilitated the development of dominance in these examples are: being a first mover; strong leader ship; cost advantages often through economies of scale; effective product promotion to stimulate demand; strategic use of patents and technology; and general dominance through size. While these characteristics suggest that a generally efficient firm is most likely to attain a commanding position in its industry, efficiency provided only one path towards dominance; AT&T, Standard Oil, and the tobacco trust also achieved market control by preying on competitors and engaging in price wars.

The rise to dominance in these cases typically followed implementation of cost advantages. Dow and Alcoa had lower costs in certain stages of production; Ford pioneered cost efficient assembly line manufacture; GM lowered its costs through massive sales volume; and Kodak created cost advantages for itself by exploiting the complementary camera and film markets. Vertical integration, the authors contend, was not always an effective strategy for dominance; at GM integration facilitated lower cost production in the firm’s early years yet brought high costs later.

These cases also suggest common strategies for maintaining market control. Innovating and implementing new technology, and protecting it through patents, contributed to sustained dominance and generally empowered these firms; in other instances new technologies allowed businesses to challenge existing industry leaders. Strong and progressive management also characterized firms in control of their markets. Chief executives who understood their markets and were able to make insightful strategic decisions based on changing market conditions “led the evolution of their industries” (p. 234). Dominating firms controlled by dominating leaders are hallmarks of corporate America, yet all have finite life spans. Today we ponder the future of a Microsoft without Bill Gates. Indeed, a chief manager can also lead a firm to dominance and then take it to the house of problems. Henry Ford became “autocratic . . . . and unable to respond to changing market conditions” (p. 247). At Kodak and IBM, a variety of factors contributed to the decline of management’s sagacity and these firms’ loss of market control.

Microsoft and the Tobacco Trust are the only organizations in this study which remain dominant. The other firms lost their market control for a variety of reasons generally defined as a loss of advantage: management became arrogant and inflexible, market conditions changed, and the government flexed its own muscle. In the case of Standard Oil, a combination of new supply areas in the mid-continent and California along with a proliferation of Gulf Coast refineries changed the oil industry’s market structure as well as Standard’s position in that market. Federal anti-trust policy also contributed to the demise of many firms’ hold on their markets. The U.S. Supreme Court dissolved Standard Oil in 1911, AT&T’s monopoly ended with the Modified Final Judgment of 1982, anti-trust action directed at IBM changed its corporate strategy, and Microsoft is fighting a similar battle today.

These concise and brief case studies provide cogent summaries of the rise and fall of very big business within a market context. In the case of tobacco, the topic is not monopoly but oligopoly and the Tobacco Trust. The authors of this essay note that during the twentieth century, three to four firms consistently controlled from 80 to 98% of the cigarette sales market. For comparative purposes, the editor/authors might have included another essay on an industry dominated by oligopoly. For example, recent congressional debate about the efficacy of the Public Utility Holding Company Act (1935) suggests another industrial study which most likely contains similar lessons.

Ultimately, this collection of essays concludes that government intervention in markets is justifiable in certain instances. While dominant firms often bring technological innovation and more efficient production methods to their industries, they sometimes stifle competition and misuse the power that their very size creates. Since some “[d]ominant firms can become inefficient, yet remain dominant for many years” and others “can price inefficiently without attracting successful entry,” a government policy toward dominance is required (p. 253).

Not only should antitrust policy be used to prevent dominant firms from quashing competition, government should consider its antitrust policy within broader trade policy. Rosenbaum concludes that since in some industries only foreign competitors were able to overcome a U.S. dominant firm’s advantages, “a fairly open trade policy may be one tool to limit the power of dominant firms” (p. 254). It is not only market forces which determine the destiny of powerful firms, it is often price wars, strategic acquisitions, pricing schemes, and other management strategies intended to stifle competition that need to be controlled if not by the market then by policy. The call for reasonable domestic policy is somewhat muted in the sense that policy is described generically. Altogether, this is an interesting collection of essays which suggest that dominant firms should be responsive to reasonable rules of competition which, left unenforced by the “invisible hand” of the domestic market, should be exacted by foreign competitors or promulgated by government policy and law.

Christopher J. Castaneda is Associate Professor of History. His most recent work is Invisible Fuel: Manufactured and Natural Gas in American History, 1800-2000 (New York: Twayne Publishers, forthcoming 1999).

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

The Great Wave: Price Revolutions and the Rhythm of History

Author(s):Fischer, David Hackett
Reviewer(s):Munro, John H.

Published by EH.NET (February 1999)

David Hackett Fischer, The Great Wave: Price Revolutions and the Rhythm of

History. Oxford and New York: Oxford University Press, 1996. xvi + 536.

$35 (hardcover), ISBN: 019505377X. $16.95 (paperback), ISBN: 019512121X.

Reviewed for EH.NET by John H. Munro, Department of Economics, University of

Toronto.

Let me begin on a positive note. This is indeed a most impressive work: a

vigorous, sweeping, grandiose, and contentious, though highly entertaining,

portrayal of European and North American economic history, from the High Middle

Ages to the present, viewed through the lens of “long-wave” secular price-

trends. Indeed its chief value may well lie in the controversies that it is

bound to provoke, particularly from economists, to inspire new avenues of

research in economic history

, especially in price history. The author contends that, over the past eight

centuries, the European economy has experienced four major “price-

revolutions,” whose inflationary forces ultimately became economically and

socially destructive, with adverse consequences that provoked various complex

reactions whose “resolutions” in turn led to more harmonious, prosperous, and

“equitable” economic and social conditions during intervening eras of “price

equilibria”. These four price-revolutions are rather too neatly set out as the

following: (1) the later- medieval, from c.1180-c.1350; (2) the far better

known 16th-Century Price-Revolution, atypically dated from c.1470 to c.1650,

(3) the inflation of the Industrial Revolution era, from c.1730 to 1815; and

(4) the 20th century price-revolution, conveniently dated from 1896 to 1996

(when he published the book).

Though I am probably more sympathetic

to the historical concept of

“long-waves” than the majority of economists, I do agree with many opponents of

this concept that such long-waves are exceptionally difficult to define and

explain in any mathematically convincing models, which are certainly not

supplied here. For reasons to be explored in the course of this review, I

cannot accept his depictions, analysis

, and explanations for any of them. This will not surprise Prof. Fischer, who

is evidently not an admirer of the economics profession. He is particularly

hostile to those of us deemed to be “monetarists,” evidently used as a

pejorative term. After rejecting not only the “monetarist” but also the

“Malthusian,

neo-Classical, agrarian, environmental, and historicist” models, for their

perceived deficiencies in explaining inflations, and after condemning

economists and historians alike for imposing rigid models in attempting to

unravel the mysteries of European and North American economic history,

Fischer himself imposes an exceptionally rigid and untenable model for all four

of his so-called price-revolutions, containing in fact selected Malthusian and

monetarist elements from these supposedly rejected models.

In essence, the Fischer model contends that all of his four long-wave

inflations manifested the following six-part consecutive chain of causal and

consequential factors, inducing new causes, etc., into the next part of the

chain. First, each inflationary long-wave began with a prosperity created from

the preceding era of price-equilibrium, one promoting a population growth that

inevitably led to an expansion in aggregate demand that in turn outstripped

aggregate supply, thus — according to his model

– causing virtually ALL prices to rise. Evidently his model presupposes that

all sectors of the economy, in all historical periods under examination, came

to suffer from Malthusian-Ricardian diminishing

returns and rising marginal costs, etc. Second, in each and every such era,

after some indefinite lapse of time, and after the general population had

become convinced that rising prices constituted a persistent and genuine trend,

the “people” demanded and

received from their governments an increase in the money supply to

“accommodate” the price rises. As Fischer specifically comments on p. 83: “in

every price-revolution, one finds evidence of frantic efforts to expand the

money supply, after people have discovered that prices are rising in a secular

way.” Third, and invariably, in his view, that subsequent and continuous growth

in the money supply served only to fuel and thus aggravate the already existing

inflation. He never explains, however, for any of

the four long-waves, why those increases in money stocks were always in excess

of the amount required “to accommodate inflation”. Fourth, with such

money-stock increases, the now accelerating inflation ultimately produced a

steadily worsening impoverishment of the masses, aggravated malnutrition,

generally deteriorating biological conditions, and a breakdown of family

structures and the social order, with increasing incidences of crime and social

violence: i.e., with a rise in consumer prices that outstripped generally

sticky wages in each and every era, and with a general transfer of wealth from

the poorer to richer strata of society. Fifth, ultimately all these negative

forces produced economic and social crises that finally brought the

inflationary forces to a halt,

producing a fall in population and thus (by his model) in prices, declines that

subsequently led to a new era of “price-equilibrium,” along with concomitant

re-transfers of wealth and income from the richer to the poorer strata of

society

(where such wealth presumably belonged). Sixth, after some period of economic

prosperity and social harmony, this vicious cycle would recommence, i.e., when

these favorable conditions succeeded in promoting a new round of incessant

population growth, which inevitably sparked those same inflationary forces to

produce yet another era of price-revolution, continuing until it too had run

its course.

While many economic historians, using more structured Malthusian-Ricardian type

models, have also provided a similarly bleak portrayal of

demographically-related upswings and downswings of the European economy,

most have argued that this bleak cycle was broken with the economic forces of

the modern Industrial Revolution era. Fischer evidently does not. Are we the

reforecondemned, according to his view, to suffer these never-ending bleak

cycles– economic history according to the Myth of Sisyphus, as it were?

Perhaps not, if government leaders were to listen to the various nostrums set

forth in the final chapter,

political recommendations on which I do not feel qualified to comment.

Having engaged in considerable research, over the past 35 years, on European

monetary, price, and wage histories from the 13th to 19th centuries, I am,

however, rather more qualified

to comment on Fischer’s four supposed long-waves. Out of respect for the

author’s prodigious labors in producing this magnum opus, one that is bound to

have a major impact on the historical profession, especially in covering such a

vast temporal and spatial range, I feel duty-bound to provide detailed

criticisms of his analyses of these secular price trends, with as much

statistical evidence as I can readily muster. Problematic in each is defining

their time span,

i.e., the onset and termination of inflations. If many medievalists may concur

that his first long- wave did begin in the 1180s, few would now agree that it

ended as late as the Black Death of 1348-50. On the contrary,

the preceding quarter-century (1324-49) was one of very severe deflation,

certainly in both Tuscany (Herlihy 1966) and England. In the latter, the

Phelps Brown and Hopkins “basket of consumables” price index (1451-75 =

100) fell 47%: from 165 in 1323 (having been as high as 216 in 1316, with the

Great Famine) to just 88 in 1346. Conversely, while most early-modern

historians would agree that the 16th-Century Price Revolution generally ended

in the 1650s (certainly in England), few if any would date its commencement so

early as the 1470s. To be sure, in both the Low Countries and England, a

combination of coinage debasements, civil wars, bad harvests, and other

supply-shocks did produce a short-term rise in prices from the later 1470s to

the early 1490s; but thereafter their basket-of-consumables price-indices

resumed their deflationary downward trend for another three decades (Munro

1981, 1983). In both of these regions and in Spain as well (Hamilton 1934), the

sustained rise in the general price level, lasting over a century, did not

commence until c.1520.

For Fischer’s third inflationary long-wave, of the Industrial Revolution era,

his periodization is much less contentious, though one might mark its

commencement in the late 1740s rather than the early 1730s.

The last and most recent wave is, however, by far more the most controversial

in its character. Certainly a long upswing in world prices did begin in 1896,

and lasted until the 1920s; but can we really pretend that this so neatly

defined century of 1896 to 1996 truly encompasses any form of long wave when we

consider the behavior of prices from the 1920s?

Are we to pretend that the horrendous deflation of the ensuing Great Depression

era was just a temporary if unusual aberration that deviated from this

particular century long (saeclum) secular tend? Fischer, in fact,

very

rarely ever discusses deflation, ignoring those of the 14th century and most

of the rest. Instead, he views the three periods intervening between his price-

revolutions as much more harmonious eras of price-equilibria: i.e. 1350-1470;

1650 – 1730; 1820 –

1896; and he suggests that we are now entering a fourth such era. In my own

investigations of price and monetary history from the 12th century, prices rise

and fall,

with varying degrees of amplitude; but they rarely if ever remain stable,

“in equilibrium”.

Certainly “equilibrium” is not a word that I would apply to the first of these

eras, from 1350 to 1470: not with the previously noted, very stark deflation of

c.1325 – 48, followed by an equally drastic inflation that ensued from the

Black Death over

the next three decades, well documented for England, Flanders (Munro 1983,

1984), France, Tuscany (Herlihy 1966),

and Aragon-Navarre (Hamilton 1936). Thus, in England, the mean quinquennial PB

& H index rose 64%: from 88 in 1340-44 to 145 in 1370-74, fal ling sharply

thereafter, by 29%, to 103 in 1405-09; after subsequent oscillations, it fell

even further to a final nadir of 87 in 1475-79 (when,

according to Fischer, the next price-revolution was now under way). For

Flanders, a similarly constructed price index of quinquennial means

(1450-74 = 100: Munro 1984), commencing only in 1350, thereafter rose 170%:

from 59 in 1350-4 to 126 in 1380-84, reflecting an inflation aggravated by

coinage debasements that England had not experienced, indeed none at all since

1351. Thereafter, the Flemish price index plunged 32%, reaching a temporary

nadir of 88 in 1400-04; but after a series of often severe price oscillations,

aggravated by warfare and more coin debasements, it rose to a peak of 138 in

1435-9; subsequent ly it fell another 31%, reaching its 15th century nadir of

95 in 1465-9 (before rising and then falling again, as noted earlier).

Implicit in these observations is the quite pertinent criticism that Fischer

has failed to use, or use properly, these and many other price

indices–especially the well-constructed Vander Wee index (1975), for the

Antwerp region, from 1400 to 1700, so important in his study; and the Rousseaux

and Gayer-Rostow-Schwarz indices for the 19th century (Mitchell &

Deane 1962). On the other hand, he has relied far too much on the dangerously

faulty d’Avenel price index (1894-1926) for medieval and early-modern France.

Space limitations, and presumably the reader’s patience, prevent me from

engaging in similar analyses of price trends

over the ensuing centuries, to indicate further disagreements with Fischer’s

analyses, except to note one more quarter-century of deflation during a

supposed era of price equilibrium: that of the so-called Great Depression era

of 1873 to 1896, at least within England, when the PB&H price index fell from

1437 to 947, a decline of 34% that was unmatched, for quarter-century periods

in English economic history, since the two stark deflations of the second and

fourth quarters of the 14th century. (The Rousseaux index fell from 42.5% from

127 in 1873 to 73 in 1893).

My criticisms of Fischer’s temporal depictions of both inflationary long-waves

and intervening eras of supposed price equilibria are central to my objections

to his anti-monetarist explanations for them, or rather to his

misrepresentation of the monetarist case, a viewpoint he admittedly shares with

a great number of other historians, especially those who have found

Malthusian-Ricardian type models to be more seductively plausible explanations

of

inflation. Certainly, too many of my students, in reading the economic history

literature on Europe before the Industrial Revolution era, share that beguiling

view, turning a deaf ear to the following arguments: namely, that (1) a growth

in population cannot by itself,

without complementary monetary factors, cause a rise in all prices, though

certainly it often did lead to a rise in the relative prices of grain,

timber, and other natural-resource based commodities subject to diminishing

return and supply

inelasticities; and thus (2) that these simplistic demographic models involve

a fatal confusion between a change in the relative prices of individual

commodities and a rise in the overall price-level. Some clever students have

challenged that admonition,

however,

with graphs that seek to demonstrate, with intersecting sets of aggregate

demand and supply curves, that a rise in population is sufficient to explain

inflation. My response is the following. First, all of the historical prices

with which Fischer and my students are dealing

(1180-1750) are in terms of silver-based moneys-of-account, in the traditional

pounds, shillings, and pence, tied to the region’s currently circulating silver

penny, or similar such coin, while prices expressed in terms of the gold-based

Florentine florin behaved quite differently over the long periods of time

covered in this study. Indeed we should expect such a difference in price

behavior with a change in the bimetallic ratio from about 10:1 in 1400 to about

16:1 in 1650,

which obviously reflects the fall in the relative value or purchasing power of

silver — an issue virtually ignored in Fischer’s book. Second, the shift, in

this student graph, from the conjunction of the Aggregate Demand and Supply

schedules,

from P1.Q1

and P2.Q2, requires a compensatory monetary expansion in order to achieve the

transaction values indicated for the two price levels: from 17,220,000 pounds

and 122,960,000 pounds, which increase in the volume of payments had to come

from either increased

money stocks and/or flows. Even if changes in demographic and other real

variables, shared responsibility for inflation by inducing changes in those

monetary variables, we are not permitted to ignore those variables in

explaining historical inflations.

Admittedly, from the 12th to the 18th centuries, to the modern Industrial

Revolution era, correlations between demographic and price movements are often

apparent. But why do so few historians consider the alternative proposition

that much more profound, deeper economic forces might have induced a complex

combination of general economic growth, monetary expansion, and a rise in

population, together (so that such apparent statistical relationships would

have adverse Durbin-Watson statistics to indicate significant serial

correlation)? Furthermore, if population growth is the inevitable root cause of

inflation, and population decline the purported cause of deflation, how do such

models explain why the drastic depopulations of the 14th-century Black Death

were

followed by three decades of severe inflation in most of western Europe?

Conversely, why did late 19th-century England experience the above-noted

deflation while its population grew from 23.41 million in 1873 (PB&H at 1437)

to 30.80 million in 1896 (PB&H

at 947)?

Nor is Fischer correct in asserting that, in each and every one of his four

price-revolutions, an increase in money supplies followed rather than preceded

or accompanied the rises in the price-level. For an individual country or

region, however

, one might argue that a rise in its own price level, as a consequence of a

transmitted rise in world or at least continental prices would have quickly —

and not after the long-time lags projected in Fischer’s analysis — produced an

increase in money supplies to satisfy the economic requirements for that rise

in national/regional prices. Fischer, however, fails to offer any theoretical

analysis of this phenomenon, and makes no reference to any of the well-known

publications on the Monetary Approach to the Balance of Payments [by Frenkel

and Johnson (1976), McCloskey and Zecher (1976), Dick and Floyd (1985, 1992);

Flynn (1978) and D. Fisher (1989), for the Price Revolution era itself]. In

essence,

and with some necessary repetition, this thesis contends:

(1) that a rise in world price levels, initially arising from increases in

world monetary stocks, is transmitted to most countries through the mechanisms

of international commerce (in commodities, services, labor) and finance

(capital flows); and (2) that monetized metallic (coin) stocks and other

elements constituting M1 will be endogenously distributed among all countries

and/or regions in order to accommodate the consequent rise in the domestic

price levels, (3) without involving those international bullion flows that the

famous Hume “price- specie flow” mechanism postulates to be the consequences of

inflation-induced changes in national trade balances.

In any event, the historical evidence clearly demonstrates that, for each of

Fischer’s European-based price-revolutions, an increase in European monetary

stocks and flows always preceded the inflations. For the first,

the price-revolution of the “long-13th century” (c.1180-c.1325), Ian Blanchard

(1996) has recently demonstrated that within England its elf,

specifically in Cumberland-Northumberland, a very major silver mining boom had

commenced much earlier, c.1135-7, peaking in the 1170s, with annual silver

outputs that were “ten times more than had been produced in the whole of

Europe” for any year in

the past seven centuries. By the 1170s,

and thus still before evident signs of general inflation or a marked

demographic upswing, an even greater silver mining boom had begun in the Harz

Mountains region of Saxony, which continued to pour out vast quantities of

silver until the early 14th century. For this same

“Commercial Revolution” era, we must also consider the accompanying financial

revolution, also evident by the 1180s, in Genoa and Lombardy; and though one

may debate the impact that their deposit-

and-transfer banking and foreign-exchange banking had upon aggregate European

money supplies,

these institutional innovations undoubtedly did at least increase the volume of

monetary flows, and near the beginning, not the middle, of this first

documented

long-wave.

For the far better known 16th-Century Price Revolution, Fischer seems to pose a

much greater threat to traditional monetary explanations, especially in so

quixotically dating its commencement in the 1470s, rather than in the 1520s.

Certainly Fischer and many other critics are on solid grounds in challenging

what had been, from the time of Jean Bodin (1566-78) to Earl Hamilton

(1928-35), the traditional monetary explanation for the origins of the Price

Revolution: namely, the influx of Spanish

American treasure. But not until after European inflation was well underway,

not until the mid-1530s, were any significant amounts of gold or silver being

imported

(via Seville); and no truly large imports of silver are recorded before the

early 1560s (a

mean of 83,374 kg in 1561-55: TePaske 1983), when the mercury amalgamation

process was just beginning to effect a revolution in Spanish-American mining.

Those undisputed facts, however, in no way undermine the so-called

“monetarist” case; for Fischer, and far too many other economic historians,

have ignored the multitude of other monetary forces in play since the 1460s.

The first and least important factor was the Portuguese export of gold from

West Africa (Sao Jorge) beginning as a trickle in the 1460s;

rising to 170 kg per annum by 1480, and peaking at 680 kg p.a. in the late

1490s (Wilks 1993). Far more important was the Central European silver mining

boom, which began in the 1460s, at the very nadir of the West European

deflation, which had thus raised the purchasing power of silver and so

increased the profit incentive to seek out new silver sources: as a

technological revolution in both mechanical and chemical engineering.

According to John Nef (1941, 1952), when this German-based mining boom reached

its peak in the mid 1530s, it had augmented Europe’s silver outputs more than

five-fold, with an annual production that ranged from a minimum of 84,200 kg

fine silver to a maximum of 91,200 kg — and thus well in excess of any amounts

pouring into Seville before the mid-1560s. My own statistical compilations,

limited to just the major mines, indicate a rise in quinquennial mean

fine-silver outputs from 12,356 kg in 1470-74 to 55,025 kg in 1534-39 (Munro

1991). In England, 25-year mean mint outputs rose

from 18,932 kg silver in 1400-24 to 33,655 kg in 1475-99 to 59,090 kg in

1500-24; and then to 305,288 kg in 1550-74 (i.e., after Henry VIII’s

“Great Debasement”); in the southern Low Countries, those means go from 54,444

kg in 1450-74 to 280,958 kg in 15 50-74 (Challis 1992; Munro 1983,

1991).

In my view, however, equally important and probably even more important was the

financial revolution that had begun in or by the 1520s with legal sanctions for

and then legislation on full negotiability, and the contemporary establishment

of effective secondary markets (especially the Antwerp Bourse) in fully

negotiable bills and rentes, i.e., heritable government annuities; and the

latter owed their universal and growing popularity, compared with other forms

of public debt, to papal bulls (1425,

1455) that had exonerated them from any taint of usury. To give just one

example of a veritable explosion in this form of public credit (which thus

reduced the relative demand for gold and silver coins), an issue that Fischer

almost completely ignores: the annual volume of transactions in Spanish

heritable juros rose from 5 million ducats (of 375 maravedis) in 1515 to 83

million ducats in the 1590s (Vander Wee 1977). Thus we need not call upon

Spanish-American bullion imp orts to explain the monetary origins of the

European Price Revolution, though their importance in aggravating and

accelerating the extent of inflation from the 1550s need hardly be questioned,

especially, as Frank Spooner (1972) has so aptly demonstrated,

even anticipated arrivals of Spanish treasure fleets would induce German and

Genoese bankers to expand credit issues by some multiples of the perceived

bullion values. Fischer, by the way, comments (p. 82) that: “the largest

proportionate increases in Spanish prices occurred during the first half of

the sixteenth century — not the second half, when American treasure had its

greatest impact.” This is simply untrue: from 1500-49, the Spanish composite

price index rose 78.5%; from 1550-99, it rose by another 92.1% (Hamilton

1934).

Changes in money stocks or other monetary variables do not, however,

provide the complete explanation for the actual extent of inflation in this or

in any other era. Even if every inflationary price trend that I have

investigate d, from the 12th to 20th centuries, has been preceded or

accompanied by some form of monetary expansion, in none was the degree of

inflation directly proportional to the observed rate of monetary expansion,

with the possible exception of the post World War I hyperinflations.

Consider this proposition in terms of the oft-maligned, conceptually limited,

but still heuristically useful monetary equation MV = Py [in which real y = Y/P

= C + I + G+ (X-M)]; or, better, in terms of the Cambridge “real cash

balances” approach: M = kPy [in which k = the proportion of real NNI (Py) that

the public chooses to hold in real cash balances, reflecting the constituent

elements of Keynesian liquidity preference]. Some Keynesian economists would

contend that an increase in M, or in the rate of growth of money stocks, would

be accompanied by some

offsetting rise in y (i.e. real NNI), whether exogenously created or

endogenously induced by related forces of monetary expansion, and also by some

decline in the income velocity of money, with a reduced need to economize on

the use of money. Since mathematically V = 1/k, they would similarly posit

that an expansion in M,

or its rate of growth, would have led, ceteris paribus — without any change in

liquidity preference, to a fall

in (nominal) interest rates, and thus, by the consequent reduction in the

opportunity costs of holding cash balances, to the necessarily corresponding

rise in k (i.e., an increase in the demand for real cash balances; see Keynes

1936, pp. 306-07). Sometimes, but only very rarely, have changes in these two

latter variables y and V (1/k) fully offset an increase in M; and thus such

increases in money stocks have also resulted, in most historical instances, in

some non-proportional degree of inflation: a rising P, as measured by some

suitable price index, such as the Phelps Brown and Hopkins

basket-of-consumables. [Other economists,

it must be noted, would contend that, in any event, the traditional Keynesian

model is really not applicable to such long-term

phenomena as Fischer’s price-revolutions.

Keynes himself, in considering “how changes in the quantity of money affect

prices… in the long run,” said, in the General Theory (1936, p. 306):

“This is a question for historical generalisation rather than for

pure theory.”]

For the 16th-century Price Revolution, therefore, the interesting question now

becomes: not why did it occur so early (i.e., before significant influxes of

Spanish American bullion); but rather why so late — so many decades after the

onset of the Central European silver-copper mining boom?

Since that boom had commenced in the 1460s, precisely when late-medieval

Europe’s population was at its nadir, perhaps 50% below the 1300 peak, and just

after the Hundred Years’ War had ended, and just

after the complex network of overland continental trade routes between Italy

and NW Europe had been successfully restored, one might contend that in such an

economy with so much “slack” in under-utilized resources, especially land, and

with elastic supplies for so many commodities, both the monetary expansion and

economic recovery of the later 15th century , preceding any dramatic

demographic recovery, permitted an increase in y proportional to the growth of

M, without the onset of diminishing returns an d without significant inflation,

before the 1520s By that decade, however, the monetary expansion had become

all the more powerful: with the peak of the Central European silver-mining

boom and with the rapid increase in the use of negotiable, transferable

credit instruments; and, furthermore, with the Ottoman conquest of the Mamluk

Sultanate (1517), which evidently diverted some considerable amounts of

Venetian silver exports from the Levant to the Antwerp market.

The role of the income-velocity of money

is far more problematic. According to Keynesian expectations, velocity should

have fallen with such increases in money stocks. Yet three eminent economic

historians — Harry Miskimin

(1975), Jack Goldstone (1984), and Peter Lindert (1985) — have sought

to explain England’s16th-century Price Revolution by a very contrary thesis:

of increased money flows (or reductions in k) that were induced by demographic

and structural economic changes, involving interalia(according to their

various models) disproportionate changes in urbanization, greater

commercialization of the rural sectors, far more complex commercial and

financial networks, changes in dependency ratios, etc. The specific

circumstances so portrayed, however, apart from the demographic, are largely

peculiar to 16th- century England and thus do not so convincingly explain the

very similar patterns of inflation in the 16th-century Low Countries, which had

undergone most of these structural economic changes far earlier. Certainly

these velocity model s cannot logically be applied to Fischer’s three other

inflationary long-waves. Indeed, in an article implicitly validating Keynesian

views, Nicholas Mayhew (1995) has contended that the income-velocity of money

has always fallen with an expansion in money stocks, from the medieval to

modern eras, with this one anomalous exception of the 16th-century Price

Revolution. Perhaps, for this one era,

we have misspecified V (or k) by misspecifiying M: i.e., by not properly

including increased issues of negotiable credit; or perhaps institutional

changes in credit (as Goldstone and Miskimin both suggest) did have as dramatic

an effect on V as on M. Furthermore, an equally radical change in the coined

money supply (certainly in England), from one that had been principally gold

to one which, precisely from the 1520s, became largely and then almost entirely

silver, may provide the solution to the velocity paradox: in that the

transactions velocity attached to small value silver coins, of 1d., is

obviously far higher

velocity than that for gold coins valued at 80d and 120d. Except for a brief

reference to Mayhew’s article in the lengthy bibliography, Fischer virtually

ignores such velocity issues

(and thus changes in the demand for real cash balances) throughout his

eight-century survey of secular price trends.

Finally, Fischer’s thesis that population growth was responsible for this the

most famous Price Revolution (and all other inflationary long waves) is hardly

credible, especially if he insists on dating its inception the 1470s. For most

economic historians (Vander Wee 1963; Blanchard 1970;

Hatcher 1977, 1986; Campbell 1981; Harvey 1993) contend that, in NW Europe,

late-medieval demographic decline continued into the early 16th-century;

and that England’s population in 1520 was no more than 2.25 million,

compared to estimates ranging from a minimum of 4.0 to a maximum of 6.0 or even

7.0 million around 1300, the upper bounds being favored by most historians. How

– even if the demographic model were to be theoretically acceptable — could

a modest population growth from such a very low level in the 1520s, reaching

perhaps 2.83 million in 1541, and peaking at 5.39 million in 1656, have been

the fundamental cause of persistent, European wide-inflation, already underway

in the 1520s?

According to Fischer, the ensuing, intervening price-equilibrium

(c.1650-c.1730) involved no discernible monetary contraction, and similarly,

his next inflationary long-wave (c.1730-1815) began well before any monetary

expansion became — in his view — manifestly evident. The monetary and price

data, suggest otherwise, however, incomplete though they may be. Thus, the data

complied by Bakewell, Cross, TePaske, and many others on silver mining at

Potosi (Peru) and Zacatecas (Mexico) indicate that their combined outputs fell

from a mean of 178,692 kg in 1636-40 to one of 101,534 kg in 1661-5, rising to

a mean of 156,497 kg in 1681-5

[partially corresponding to guesstimates of European bullion imports, which

Morineau (1985) extracted fr om Dutch gazettes]; but then sharply falling once

more, and even further, to a more meager mean of 95,842 kg in 1696-1700. During

this same era, the Viceroyalty of Peru’s domestically-

retained share of silver-based public revenues rose from 54% to 96%

(T ePaske 1981); the combined silver exports of the Dutch and English East

India Companies to Asia (Chaudhuri 1968; Gaastra 1983) increased from a

decennial mean of 17,293 kg in 1660-69 to 73,687 kg in 1700-09, while English

mint outputs in terms of fine sil ver (Challis 1992) fell from a mean of 19,400

kg in 1660-64 (but 23,781 kg in 1675-79) to one of just 430.4 kg in 1690-94,

i.e., preceding the Great Recoinage of 1696-98. From the early 18th century,

however, European silver exports to Asia were well more

than offset by a dramatic rise in Spanish-American, and especially Mexican

silver production: for the latter (with evidence from new or previously

unrecorded mines: assembled by Bakewell 1975, 1984; Garner 1980,

1987; Coatsworth 1986, and others), aggregate production more than doubled

from a mean of 129,878 kg in 1700-04 to one of 305,861 kg in 1745-49.

Possibly even more important, especially with England’s currency shift from a

silver to a gold standard, was a veritable explosion in aggregate

Latin-American gold production: from a decennial mean of just 863.90 kg in

1691-1700

zooming to 16,917.4 kg in 1741-50 (TePaske 1998). Within Europe itself, as

Blanchard (1989) has demonstrated, Russian silver mining outputs, ultimately

responsible for perhaps 7%

of Europe’s total stocks,

rose from virtually nothing in the late 1720s to peak at 33,000 kg per annum in

the late 1770s, falling to 18,000 kg in the early 1790s then rising to 21,000

kg per year in the later 1790s.

Finally, even though changes in annual mint outputs are not valid indicators

of changes in coined money supplies, let alone of changes in M1,

the fifty-year means of aggregate values of English mint outputs (silver and

gold: Challis 1992) do provide interesting signals of longer-term monetary

changes: a fall from an annual mean of 348,829 pounds in 1596-1645 to one of

275,403 pounds in 1646-95, followed by a rise, with more than a full recovery,

to an annual mean of 369,644 pounds in 1700-49 (thus excluding the Great

Recoinage of 1696-98). Meanwhile, if the earlier Price Revolution had indeed

peaked in 1645-49, with the quinquennial mean PB&H index at 680, falling to a

nadir of 579 in 1690-94, the fluctuations in the first half of the 18th-century

do not demonstrate any clear inflationary trend, with the mean PB&H index

(briefly peaking at 635 in 1725-9) stalled at virtually the same former level,

581, in 1745-49. Thereafter, of course,

for the second half of the 18th century, the trend is very strongly and

incessantly upward, with almost a

doubling in PB&H index, to 1093 in 1795-9.

Whatever one may wish to deduce from all these diverse data sets, we are

certainly not permitted to conclude, as does Fischer, that inflation preceded

monetary expansion, and did so consistently. Such a view becomes all the more

untenable when the radical changes in English and banking and credit

institutions, following the establishment of the Bank of England in 1694-97,

are taken into account: the consequent introduction and rapid expansion in

legal-tender paper bank note issues (with prior informal issues by London’s

Goldsmith banks), and more especially fully negotiable,

transferable, and discountable Exchequer bills, government annuities,

inland bills and promissory notes, whose veritable explosion in circulation

from the 1760s, with the proliferation of English country-banks, hardly

requires any further elaboration, even if these issues are given short shrift

in Fischer’s book. In view of such complex changes in Britain’s financial and

monetary structures,

subsequent data on coinage outputs have even more limited utility in

estimating money stocks. But we may note that aggregate mined outputs of

Mexican silver more than doubled, from a quinquennial mean of 305,861 kg in

1745-49 to 619,495 kg in 1795-99, while those of Peru more than tripled, from

34,318 kg in 1735-39 (no data for the 1740s) to 126,354 kg in 1795-99 (Garner

1980, 1987; Bakewell 1975, 1984; J.

Fisher, 1975).

Having earlier considered the so-called and misconstrued

“price-equilibrium” of 182 0-1896, let us now finally examine the inception of

the fourth and final long-wave commencing in 1896. Fischer again contends that

population growth was the “prime mover,” despite the fact that Britain’s own

intrinsic growth rate had been falling from its

1821 peak [from 1.75 to 1.31 in 1865, the last year given in Wrigley-Davies-

Oppen-Schofield (1997)]. For evidence he cites an assertion in Colin McEvedy

and Richard Jones, Atlas of World Population History (1978) to the effect that

world population, having increased by 35% from 1850 to 1900,

increased a further 53% by 1950. Are we therefore to believe that such growth

was itself responsible for a 45.2% rise in, for this era, the better structured

Rousseaux price-index [base 100 = (1865cp +1885cp)/2]: from 73 in 1896 to 106

[while the PB&H index rose from 947 in 1896 to 1021 in 1913]?

As for the role of monetary factors in the commencement of this fourth long

wave, Fischer observes (p. 184) that “the rate of growth in gold production

throughout the world was roughly the same before and after 1896.” This

undocumented assertion, about an international economy whose commerce and

finance was now based upon the gold standard, is not quite accurate.

According to assiduously calculated estimates in Eichengreen

and McLean

(1994), decennial mean world gold outputs, having fallen from 185,900 kg in

1850-9 to 135,000 kg in 1880-9 (largely accompanying the aforementioned 44%

fall in the Rousseaux composite index from 128 in 1872 to 72 in 1895),

thereafter soared to

a mean of 255,600 kg in 1890-9 — their graph of annualized data shows that

the bulk of this increased output occurred after 1896 — virtually doubling to

an annual mean of 513,900 kg in 1900-14.

World War I, of course, effectively ended the international gold-standard era,

since the Gold- Exchange Standard of 1925-6 was rather different from the older

system; and the post-war era ushered in a radically new monetary world of fiat

paper currencies, whose initial horrendous manifestation came in the hyper

inflations of Weimar Germany, Russia, and most Central European countries, in

the early 1920s. For this post-war economy, Fischer does admit that monetary

factors often had some considerable importance in influencing price trends; but

his analyses, even of the post-war radical, paper-fuelled hyperinflations, are

not likely to satisfy most economists, either for the inter-war or Post World

War II eras, up to the present day.

This review, long as it is, cannot possibly do full justice to an eight-century

study of this scope and magnitude. So far I have neglected to consider his

often fascinating analyses of the social consequences of inflation over these

many centuries, except for brief allusions in the introduction, where I

indicated his deeply hostile views to persistent inflation for its inevitably

insidious consequences: the impoverishment of the masses, growing malnutrition,

the spread of killer-diseases, increased crime and violence in general, and a

breakdown of the social order, etc.

While some of

the evidence for the latter seems plausible, I do have some concluding quarrels

with his use of real wage indices. Much of our available nominal money-wage

evidence comes from institutional sources on daily wages, which, by their very

nature, tend to be fixed over long periods of time [as Adam Smith noted in the

Wealth of Nations (Cannan ed.

1937, p. 74), “sometimes for half a century together”). Therefore, for such

wage series, real wages rose and fell with the consumer price index, as

measured by, for example, our Phelps Brown and Hopkins basket-of-consumables

index. Its chief problem (as opposed to the better constructed Vander Wee

index for Brabant) is that its components, for long periods, constitute fixed

percentages of the total composite index,

irrespective of changes in relative prices for, say, grains; and they thus do

not reflect the consumers’ ability to make cost-saving substitutions.

Secondly, they are necessarily based on daily wage rates, without any

indication of total annual money incomes; thirdly, the great majority of

money-wage earners in pre-modern Europe earned not day rates but piece-work

wages, for which evidence is extremely scant.

But more important, before the 18th century (or even later), a majority of the

European population did not live by money wages; and most wage-earners had

supplementary forms of income, especially agricultural, that helped insulate

them to some degree from sharp rises in food prices. If rising food prices hurt

many wage-earners, they also benefited ma ny peasants,

especially those with customary tenures and fixed rentals who could thereby

capture some of the economic rent accruing on their lands with such price

increases. It may be simplistic to note that there are always gainers and

losers with both inflation and deflation — but even more simplistic to focus

only on the latter in times of inflation, and especially simplistic to focus on

a real wage index based on the PB&H index. And if deflation is so beneficial

for the masses, why, during the deflationary period in later 17th and early

18th century England, do we find, along with a rise in this real-wage index, a

rise in the death rate from 23.68/1000 in 1626 to 32.14/1000 in 1681,

thereafter falling slightly but rising again to an ultimate peak of

37.00/1000 in 1725 (admittedly an era of anomalous disease-related

mortalities), when the PB&H real-wage index stood at 60 —

some 24% higher than the RWI of 36 for 1626? One of the many imponderables yet

to be considered, though one might ponder that sometimes high real wages

reflect labor shortages from dire conditions, rather than general prosperity

and more equitable wealth and income distributions, as Fischer suggests.

Finally, Fischer’s argument that inflationary price-revolutions were always

especially harmful to the lower classes by leading to rising interest rates is

sometimes but not universally true, even if rational creditors should have

raised rates to protect themselves from inflation. Thus, for the Antwerp money

market in the 16th century,

the meticulous evidence compiled by Vander Wee (1964, 1977) shows that

nominal interest rates fell over this entire period [from 20% in 1515 to 9% in

1549 to 5% in 1561; and on the riskier short term loans to the Habsburg

government, from a mean of 19.5

% in 1506-10 to one of 12.3% in 1541-45 to 9.63% in 1561-55]. In the next

price-revolution, during the later 18th century, nominal interest rates did

rise during periods of costly warfare, i.e., with an increasing risk premium;

but real interest rates actually fell because of the increasing tempo of

inflation (Turner 1984), more so than did real wages for most industrial

workers.

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1522 Muster Returns and the 1524 and 1 525 Lay Subsidies,” Journal of

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1699,” in Christopher E. Challis, ed., A New History of the Royal Mint

(Cambridge: Cambridge University Press

, 1992), pp. 179-397; C.E. Challis,

“Appendix 1. Mint Output, 1220-1985,” pp. 673-698.

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in Nils Jacobsen and Hans- Jurgen Puhle, eds., The Economies of Mexico and Peru

during the La te Colonial Period, 1760 – 1810 (Berlin 1986), pp. 26-45.

Harry Cross, “South American Bullion Production and Export, 1550-1750,” in John

Richards, ed., Precious Metals in the Later Medieval and Early Modern Worlds

(Durham, 1983), Appendix II, p. 422.

T revor Dick and John Floyd, Canada and the Gold Standard: Balance of Payments

Adjustment under Fixed Exchange Rates, 1871 – 1913 (Cambridge and New York:

Cambridge University Press, 1992).

Barry Eichengreen and Ian W. McLean, “The Supply of Gold Under the

pre-1914 Gold Standard,” The Economic History Review, 2nd ser., 47:2 (May

1994),

288-309.

John Fisher, “Silver Production in the Viceroyalty of Peru, 1776-1824,”

Hispanic American Historical Review, 55:1 (1975), 25-43.

Douglas Fisher, “The Price Revolution: A Monetary Interpretation,” Journal of

Economic History, 49 (December 1989), 883 – 902.

John Floyd, World Monetary Equilibrium: International Monetary Theory in an

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Approach to the Balance of Payments,” Explorations in Economic History, 15

(1978), 388-406.

Jacob Frenkel and Harry G. Johnson, eds., The Monetary Approach to the Balance

of Payments (Toronto: University of Toronto Press, 1976),

especially Jacob Frenkel and Harry Johnson, “The Monetary Approach to the

Balance of Payments: Essential Concepts and Historical Origins,” pp. 21-45;

Harry Johnson, “The Monetary Approach to Balance-of-Payments Theory,” pp.

147-

67; Donald N. McCloskey and J. Richard Zecher, “How the Gold Standard Worked,

1880-1913,” pp. 357-85.

FS. Gaastra, “The Exports of Precious Metal from Europe to Asia by the Dutch

East India Company, 1602-1795 A.D.,” in John F. Richards, ed.,

Precious Metals in the Medieval and Early Modern Worlds(Durham, N.C.,

1983), pp. 447-76.

Richard Garner, “Long-term Silver Mining Trends in Spanish America: A

Comparative Analysis of Peru and Mexico,” American Historical Review, 67:3

(1987), 405-30.

Richard Garner,

“Silver Production and Entrepreneurial Structure in 18th-Century Mexico,”

Jahrbuch fur Geschichte von Staat, Wirtschaft und Gesellschaft

Lateinamerikas,17 (1980), 157-85.

Jack Goldstone, “Urbanization and Inflation: Lessons from the English Price

Revolution of the Sixteenth and Seventeenth Centuries,” American Journal of

Sociology, 89 (1984), 1122 – 60.

Earl Hamilton, American Treasure and the Price Revolution in Spain,

1501-1650 (Cambridge, Mass., 1934; reissued 1965).

Earl Hamilton, Money, Prices, and Wages in Valencia, Aragon, and Navarre,

1351 – 1500 (Cambridge, Massachusetts: Harvard University Press, 1936).

Barbara Harvey, Living and Dying in England, 1100 – 1540 (Oxford: Oxford

University Press, 1993).

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(Studies in Economic History series, London, 1977).

John Hatcher, “Mortality in the Fifteenth Century: Some New Evidence,”

Economic History Review, 39 (Feb. 1986), 19-38.

David Herlihy, Medieval and Renaissance Pistoia: The

Social History of an Italian Town, 1200-1430 (New Haven and London, 1966).

John Maynard Keynes, The General Theory of Employment, Interest and Money

(London, 1936).

Peter Lindert, “English Population, Wages, and Prices: 1541 – 1913,” The

Journal of Interdisciplinary History, 15 (Spring 1985), 609 – 34.

Nicholas Mayhew, “Population, Money Supply, and the Velocity of Circulation in

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48:2 (May 1995), 238-57.

Harry Miskimin, “Population Growth and

the Price Revolution in England,”

Journal of European Economic History, 4 (1975), 179-85. Reprinted in his Cash,

Credit and Crisis in Europe, 1300 – 1600 (London: Variorum Reprints,

1989), no. xiv.

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Munzpragung, Geldumlauf und Wechselkurse / Minting, Monetary Circulation and

Exchange Rates, (Trierer Historische Forschungen, Vol. VIII, Trier,

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John Munro, “Bullion Flows and Monetary Contraction in Late-Medieval England

and the Low Countries,” in John F. Richards, ed., Precious Metals in the

Medieval and Early Modern Worlds (Durham, N.C., 1983), pp. 97-158.

John Munro, “The Central European Mining Boom, Mint Outputs, and Prices in the

Low Countries and England, 1450 – 1550,” in Eddy H.G. Van Cauwenberghe,

ed., Money, Coins, and Commerce: Essays in

the Monetary History of Asia and Europe (From Antiquity to Modern Times)

(Leuven: Leuven University Press,

1991), pp. 119-83.

John Nef, “Silver Production in Central Europe, 1450-1618,” Journal of

Political Economy, 49 (1941), 575-91.

John Nef, “Mining

and Metallurgy,” in M.M. Postan, ed., Cambridge Economic History, Vol. II:

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pp. 456-93. Reprinted without changes, in the 2nd revised edn. of The Cambridge

Economic History of Europe, Vol. II, edited by M.M. Postan and Edward Miller

(Cambridge, 1987), pp. 691-761.

E.H. Phelps Brown and Sheila V. Hopkins, “Seven Centuries of en Centuries of

the Prices of Consumables Compared with B Building Wages,” Economica, 22

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Rates,” Economica, 23 (Nov. 1956),

reprinted E.H. Phelps Brown and Sheila V. Hopkins, A Perspective of Wages and

Prices (London, 1981), containing additional statistical appendices not

provided in the original publication.

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1493-1725 (Cambridge, Mass., 1972)

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in John F. Richards, ed., Precious Metals in the Medieval and Early Modern

Worlds (Durham, N.C.

, 1983), pp. 424-446.

John TePaske, “New World Gold Production in Hemispheric and Global Perspective,

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dertig jaar professoraat (Gent, 1975), pp. 413-47; reissued in English

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A Comparison Between England and the Southern Net herlands,

1400-1700,” Acta Historiae Neerlandicae, 10 (1978), 58-78.

Ivor Wilks, “Wangara, Akan, and the Portuguese in the Fifteenth and Sixteenth

Centuries,” in Ivor Wilks, ed., Forests of Gold: Essays on the Akan and the

Kingdom of Asante (Athens, Ohio

, 1993), pp. 1-39.

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History from Family Reconstitution, 1580- 1837 (Cambridge and New York:

Cambridge University Press, 1997).

Subject(s):Macroeconomics and Fluctuations
Geographic Area(s):General, International, or Comparative
Time Period(s):General or Comparative

Creating the Corporate Soul: The Rise of Public Relations and Corporate Imagery in American Big Business

Author(s):Marchand, Roland
Reviewer(s):Fones-Wolf, Elizabeth

Published by H-Business and EH.Net (January, 1999)

Roland Marchand. Creating the Corporate Soul: The Rise of Public Relations

and Corporate Imagery in American Big Business. Berkeley: University of

California Press, 1998. xi + 461 pp. Acknowledgments, illustrations, notes and

index. $39.95 (cloth), ISBN 0-520-08719-4.

Reviewed for H-Business and EH.Net by Elizabeth Fones-Wolf, West Virginia

University

On January 11, 1999 Time Magazine devoted a special edition to the

future of medicine. This issue featured a series of striking full and double

page advertisements sponsored by the pharmaceutical firm, Pfizer. While some

of the company’s 39 pages of advertising promoted Pfizer’s products, ma ny of

the others were designed to create a favorable public image of the firm.

Through this institutional advertising, readers learned about Pfizer’s history,

its concern for women’s health, its innovative research programs and its

longstanding commitment

to service. Pfizer presented itself as a friend of the family and as an

institution dedicated to improving the life of each American. In each

institutional ad, the firm proclaimed that life not profits “is our life’s

work.” Having established its concern for the public, Pfizer shifted from

image-shaping institutional advertising to advocacy advertising, using one of

the issues’ back pages to editorialize against government-led reform of the

healthcare system. Only the free market, CEO William Steere

sermonized, could provide quality healthcare.

Pfizer’s efforts to associate its firm with technological progress and service

and its attack on government regulation have deep historical roots.

Roland Marchand’s study of the creation of the corporate image uncovers the

origins of many of the themes and images still used today by corporations like

Pfizer in their institutional and advocacy advertising campaigns. It is a

major contribution to the growing literature on the history of public

relations, consumer culture, and advertising. This meticulously researched

work draws upon the records of major corporations, advertising agencies and

public relations counselors to analyze the strategies big business used to

attain legitimacy by creating a favorable public image during the first half

of the twentieth century. It combines a survey of the activities of a broad

cross section of firms with in-depth case studies of major companies such as

AT&T, the Pennsylvania Railroad, General Motors, General Electric, Du Pont and

Metropolitan Life Insurance.

In the early twentieth century, large

corporations faced a “crisis of

legitimacy” (p. 3). Appalled at the growing power and corruption associated

with newly emergent big businesses and by increasing industrial strife,

elements of the public began calling for greater state regulation. Some even

demanded the dismantling of the “soulless” giants who seemed to endanger

democracy and the traditional American way of life. This threat to corporate

freedom helped give birth to a host of public relations initiatives, ranging

from welfare capitalism and institutional advertising,

to factory tours and elaborate exhibits at the great world’s fairs, all

designed to create a positive image of the corporation. Like Andrea To ne,

The Business of Benevolence: Industrial Paternalism in Progressive

America, Cornell University Press, 1997), Marchand argues that welfare

capitalism, which provided services such as medical care, recreation,

pensions, and housing, was more than just a mechanism to undercut unionism and

promote worker productivity. By publicly demonstrating compassion for

employees and presenting the human face of American capitalism, welfare

programs served as a “safeguard against perceptions of soullessness” (p.1 5).

Welfarism also helped address corporate concern over the growing distance

between management and the rank and file, which Marchand labels

“the Lament.” The employee magazine, radio broadcasts, company films and

employee representation reunited “the family at one great dining table” (p.

113).

Much of the book is devoted to analyzing the evolution of institutional

advertising. Marchand used corporate records to reveal companies’ multiple

goals and multiple audiences. Metropolitan Life’s 1922 institutional

campaign, for instance, was aimed at both employees and the public. It sought

to shape political opinion, promote employee morale and corporate

consciousness, and develop for the insurance company a reputation for community

service. Similarly, General Motor’s 1920s advertising campaign aspired both to

create public goodwill by portraying GM as an agency of public service and to

stimulate a corporate consciousness among the often hostile divisions of the

firm. Marchand pays close attention to the language and visual imagery of the

ads themselves. This book lavishly reproduced almost two hundred of these

advertisements, both color and black-and-white. While some of the advertising

seems archaic, many of the themes and metaphors that Marchand identified have

become ubiquitous in modern-day institutional advertising. Early ads projected

the corporate image through architecture, using pictures of the factory or

corporate headquarters to symbolize qualities like stability, efficiency, and

security.

More familiar, however, are the AT&T ads from the early part of the century.

A trailblazer in corporate public relations, AT&T advertisements identified the

telephone with economic progress, featured women, sought to humanize the

company, and emphasized

the firm’s commitment to public service.

In the midst of the depression of the thirties, corporations worried less about

their soulless image and more about the future of capitalism.

Competing with the New Deal for public favor, business attempted to se ll

itself and the capitalist system. It looked to new mediums, especially radio

and movies, and reached out to insurgent workers with a common-folk style. New

converts, like Du Pont and U.S. Steel became committed to the mission of

carrying their “corporate message directly to the American

public” (p. 223). Other firms, like General Motors, longtime advocates of

public relations, expanded their image building activities. GM’s striking 1939

World’s Fair exhibit, Futurama, helped convey “the corporation’

s optimism about the capacity of private industry to promote prosperity and

create new jobs,” and suggested the “modernity, benevolence, and

forward-looking social vision of the corporation” (p. 303). World War II saw

yet a further expansion of corporate

public relations as companies connected their images to the war effort and

fought to offset growing wartime regulation of the economy.

In the early part of Creating the Corporate Soul, Marchand offers an

intriguing analysis of the roles of gender and

shifting boundaries in the development of corporate imagery. As he explains,

public relations and welfare capitalism, which were distant from production and

catered to public opinion, were initially viewed as feminine and potentially

subversive.

Gender

considerations shaped the content of ads. Uncomfortable with too

“feminine” an appeal, AT&T’s early institutional advertising shied away from

depicting the social role of the telephone. Welfare capitalism also pushed the

boundaries of conventional business behavior, creating expectations of

stewardship that firms were often hesitant to assume. The themes of gender and

boundaries appear, however, only in the first part of the book. One might have

wished for an extension of this promising analysis through the entire work.

Throughout, Marchand makes realistic appraisals of the corporate image building

campaigns. Many of the corporate assertions were hypocritical,

contradictory and down right false. Firms, for instance, commonly employed the

metaphor of

corporation as family. But, as Marchand observes, “what family would ‘fire’

its children when expediency so dictated?” (p. 107). AT

&T’s depiction of itself as an investment democracy was deceptive.

Similarly, the sit-down strikes made GM’s 1930s portrayals of employees happily

rushing to work hardly credible. Marchand acknowledges that the

“precise effect of institutional advertising campaigns was difficult to

estimate” (p. 201). Companies with political goals at times found the payoff

in favorable

legislation. In the 1930s professional polling services began surveying

popular attitudes toward large firms. They helped provide business the

necessary evidence of the effectiveness of corporate image building. By the

end of World War II, big business

had gained acceptance as a legitimate social institution and corporate

ideology was well on its way to becoming a dominate force in political

discourse.

Roland Marchand died before Creating Corporate Soul was published. It

is an important work and a

beautiful book that will stand as a fitting tribute to his distinguished career

as a historian.

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