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Reforming Financial Systems: Historical Implications for Policy

Author(s):Caprio, Gerald Jr.
Vittas, Dimitri
Reviewer(s):Haupert, Michael

EH.NET BOOK REVIEW

Published by EH.NET (December 1997)

Gerald Caprio, Jr. and Dimitri Vittas, editors, Reforming Financial Systems: Historical Implications for Policy. New York: Cambridge University Press, 1997. $49.95 (hardback). 222 pp. Index, bibliography. ISBN: 0-521-58115-X.

Reviewed for EH.NET by Michael Haupert, Department of Economics, University of Wisconsin- La Crosse. .

Reforming Financial Systems is a volume of collected papers presented at a 1994 seminar entitled “Financial History: Lessons of the Past for Reformers of the Present.” The essays in this volume address a number of interesting questions that have long challenged financial historians. Any student of financial history will find at least one essay of interest in this volume.

The essays are contributed by leading scholars in the field, and the topics cover a wide geographical and historical canvas, encompassing a variety of financial systems and topics. They range from broad, historical overviews, such as the Forrest Capie piece on the evolution of central banking, to the more specific, such as Randall Kroszner’s discussion of free banking in Scotland as a model for emerging economies. All of the essays are fairly brief, thus they are not in-depth studies of the topic which they address, but they do serve as nice overviews of various topics, and all include useful bibliographies from which an interested reader can proceed. As a result, the book would serve well as a supplementary textbook in a financial history course.

The essays can be divided into three categories: general topics in banking, country-specific examples of financial institutions, and comparative studies. The first category includes the aforementioned Capie essay and one by Anthony Saunders and Berry Wilson on contingent liability banking. The second includes the Kroszner essay, Frank Packer’s historical overview of the prewar Japanese banking system, Sam Williamson’s study of the development of industrial pensions in twentieth century America, a case study of the U.S. securities market by Richard Sylla, and an historical overview of deposit insurance in the U.S. by Eugene White. The final category includes comparative studies of bank regulation in Canada and the U.S. by Michael Bordo, thrifts in the U.S. and Europe by Dimitri Vittas, and a look at universal banking in Germany and the U.S. by Charles Calomiris.

In their introductory chapter, the authors nicely synthesize the lessons to be learned from each of the essays. While covering a diverse selection of topics and geographical regions, they do have a common theme. They stress two general lessons for contemporary government authorities and financial reformers: diversification and proper incentives. Regulators and overseers need to insure in some way that financial institutions diversify their risks. As the editors correctly note, most banks- and banking systems- encounter solvency problems because they fail to diversify. While it seems rather obvious to students of financial history, officials focusing on short-run performance can overlook this important fact.

The essays in this volume illustrate the numerous methods of ensuring diversification that have been employed throughout history, ranging from competitive banking to unlimited liability to branch banking to holdings of international assets. What works in one banking environment will not necessarily work as well in another, a truism as far as historians are concerned, but a point not always appreciated by contemporary policy-makers. The point emphasized by the authors in this volume is that while the options are diverse, the lesson is straightforward: diversify.

Creating incentive systems that will induce proper behavior by bankers as well as depositors, is the second general lesson extolled in these essays. Again, a wide variety of incentive systems have been employed throughout history. This seems to indicate that just about anything can work- as long as it is properly employed. However, a word of caution to contemporary policy-makers is provided by the editors when they point out that “the temptation to draw lessons from history can be overdone. Sometimes history does not teach clear lessons, or stated differently, one has to be extremely careful in applying the so-called lessons . . . a better acquaintance with history is a necessary ingredient in this endeavor” (p. 3).

Each essay is followed by a transcript of the discussion that followed each paper presentation. I did not find these discussion summaries particularly enlightening. The transcripts are poor substitutes for actual participation in the discussion, and do not add much to the papers they follow. This, however, is a minor quibble, since you can always skip them. I think their main value is to serve as a memory jog to those who were at the conference, but did not take notes during the discussions.

Perhaps the most important and enduring lesson these authors offer contemporary policy-makers is that reform takes time. This advice is directed specifically to central bankers by Forrest Capie in his essay on the evolution of central banks, but as this collection of essays illustrates, anything worthwhile seems to be worth waiting for. It is an important lesson for government officials who are often guilty of focusing on short-run results for political reasons to the detriment of the long-run stability of the financial system.

This volume is sure to please financial historians no matter what their specialty. In addition, it should appeal to scholars of contemporary monetary regimes, especially those focusing on developing financial institutions. Finally, it should be required reading for all government officials involved with the regulation of financial institutions.

Michael Haupert Department of Economics University of Wisconsin- La Crosse

Mike Haupert’s research interests are financial history. He has published articles on the American free banking era, and currently is studying the history of financing municipal baseball stadiums.

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Subject(s):Financial Markets, Financial Institutions, and Monetary History
Geographic Area(s):General, International, or Comparative
Time Period(s):General or Comparative

Escape from the Market: Negotiating Work in Lancashire

Author(s):Huberman, Michael
Reviewer(s):Wolcott, Susan

EH.NET BOOK REVIEW Published by EH.NET (December 1997)

Michael Huberman. Escape from the Market: Negotiating Work in Lancashire. New York: Cambridge University Press, 1996. xviii + 222 pp. $54.95 (cloth), ISBN: 0-521-56151-5.

Reviewed for EH.Net by Susan Wolcott, Department of Economics, Temple University and American University.

In Escape From the Market, Michael Huberman argues that even in the years before 1850 the textile labor market of Lancashire was not a spot market, but instead was characterized by a measure of worker autonomy. He brings together a great deal of the recent economic literature on labor markets and combines it with recent work on the social history of the Lancashire textile industry, much of it his own. The book is a useful summary of Huberman’s articles in this area.

Huberman has made many important contributions. The first is new data. These include output figures for one of the largest fine spinning firms in Lancashire, M’Connell and Kennedy; disaggregated British yarn production data; and refined and more complete measures of short-time working in the 1840s which illustrate that this practice was widespread at an earlier point in time than is commonly believed. What I found most intriguing about his analysis is the distinctions he draws between the labor markets in the coarse and fine spinning sections of the industry, and the somewhat overlapping categories of rural and urban. The “negotiating work” of the subtitle and the labor empowerment it implies refer primarily to the fine spinning sections, or what he calls the “primary sector”. He argues that in the coarse or “secondary” sector wages remained low and flexible because skill levels and management’s capital investments were low (at least until 1850, when the self-mover was more widely adopted). Labor’s disadvantageous bargaining position in the sector was further eroded because coarse spinning was predominantly located in the rural areas where the family was the work unit and management had an essentially captive labor market, thus harking back to the work of Gavin Wright on Southern US textile labor markets. Huberman also discusses the origins of the Lancashire lists- documents drawn up by labor and management which specified the payments required by yarn, machine and cotton type. These lists have an infamous history as an impediment to technological change. But this literature treats the lists as an exogenous factor. To my knowledge no one before Huberman has tried to consider the reasons for their creation.

Though the book touches on many issues affecting the Lancashire labor market in the first half of the 19th century, Huberman’s main theme appears to be that because of collective action by the male workers in fine spinning, management was forced to adopt a “fair management” strategy in the 1830s. The actions which brought management to their knees were the 1829 strike in the fine spinning sections, and the ability of workers to retaliate for “unfair” management actions by slowing down production. According to Huberman, such slowdowns were possible in the fine spinning sections because of the introduction of new technology (e.g. longer mules) with unknown maximum capabilities. To elicit maximum effort, management adopted a strategy of “fairness”. As described by Huberman, this strategy involved high and stable wages, and stable employment. To keep employment stable, management adjusted labor input through the use of short- time rather than layoffs, and when layoffs were necessary, applied seniority rules.

Huberman, however, goes further than the data support in ascribing market control to labor. Alternative explanations are dismissed or ignored. This is less of a problem when he is considering overt labor strategies of control. The power labor exhibited in the strike of 1829 is unambiguous, and labor’s role in the adoption of the lists marks another strong element in Huberman’s analysis. The problems lie more in Huberman’s attempts to infer evidence of labor’s day-to-day workplace control from the data.

One example of such a problem is Huberman’s attempt to show that management adopted stable wages in response to demand shocks after 1830. His theoretical analysis of this issue is sound. He argues that if managers have undertaken some type of implicit contract with workers then management would try to mitigate the variance of the wage over the course of the business cycle. Because they were not lowering wages, and consequently prices, in response to negative demand shocks, output would fall. Thus, in downturns, quantity would tend to vary more and prices less in the presence of such contracts than in their absence. In the empirical section, I expected him to stress differences in relative price and quantity variation in the fine spinning section- where he believes these contracts were adopted in the 1830s- and the coarse spinning sections- where he argues they did not exist until the end of his period (the sample stretches from 1822 to 1852). Indeed, the (1991) Explorations in Economic History article from which this section is drawn sets out a formal model contrasting wage and output variations in the fine and coarse sectors. But he does not find cross-sectoral differences. The relative price and quantity variations in the two sectors were virtually identical. In all sectors, throughout the time period, prices vary less than quantity in the “bad”, or below trend growth years, and in “good”, or above trend years, prices vary more than quantity. This Huberman takes as evidence of wage smoothing and so of “the fair wage policy”. Why? This result is not implied by the model he relies on. Further, it is a pattern seen across all periods, and all sectors, when his analysis would suggest that the “fair wage policy” was only extant in fine spinning, and then only in the post-1830 period.

On the whole, I did not find Huberman’s arguments concerning the adoption of “fair” wages and “fair management practices” convincing. But anyone must be convinced by his work that labor had at least some bargaining power over employers if for no other reason than workers could present a credible strike threat. Huberman also demonstrates that management was reluctant to layoff workers if for no other reason than a fear of losing trained labor. Huberman is successful in showing that the neoclassical paradigm of perfectly flexible labor markets was as inappropriate to early 19th century labor markets as it is to those of the late 20th century. Susan Wolcott Department of Economics Temple University and Department of Economics American University Susan Wolcott is author of “The Perils of Lifetime Employment Systems,” Journal of Economic History, June 1994 and “Did Imperial Policies Doom the Indian Textile Industry,” Research in Economic History (forthcoming).

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Subject(s):Labor and Employment History
Geographic Area(s):Europe
Time Period(s):19th Century

Making Health Work: Human Growth in Modern Japan

Author(s):Mosk, Carl
Reviewer(s):Kimura, Mitsuhiko

EH.NET BOOK REVIEW

Published by EH.NET (October 1997)

Carl Mosk, Making Health Work: Human Growth in Modern Japan. Berkeley: University of California Press, 1996. xv + 156 pp. $45.00 (cloth), ISBN: 0520083156.

Reviewed for EH.NET by Mitsuhiko Kimura, Department of Economics, Kobe University.

Anthropometric study is flourishing in economic history today. In this book Carl Mosk makes a solid contribution to that growing literature.

Mosk (Professor of Economics at the University of Victoria) begins by collecting and analyzing a set of anthropometric data for modern Japan (from the Tokugawa era to the mid-twentieth century). He examines height, weight and other related variables such as a composite index of these two (the body mass index) on the one hand and nutritional intake, public health and medicine, and labor input on the other. The second half of the book discusses Japanese economic history using the findings above. It is divided into three chapters on, first, the Tokugawa legacy, then the balanced economic growth between 1880 and 1920 and finally the unbalanced economic growth between 1920 and 1940.

The statistical data that Mosk has collected are not new; indeed, they are easily available and, except for the composite index, have been used commonly by researchers. But Mosk analyzes them in depth, thus clarifying social and economic factors affecting Japanese anthropometry since the Meiji era. This is a major contribution of this book. However, the main concern of Mosk in this book is not statistical analysis. Mosk’s goal is to develop a theory about Japanese economic history from a perspective of causes and effects of population quality represented by anthropometric characteristics.

Readers will find that Mosk has a wide and up-to-date knowledge of the literature on Japanese economic history and provides a good summary of it. This will help students who wish to have a quick review of the development of commodity and labor markets conditioned by the economic and social institutions of the Tokugawa regime and also patterns of agricultural and industrial growth, features of regional differentials, and government policies concerning modernization after the Meiji Restoration.

Mosk analyses secular improvements in net nutritional intake in terms of supply factors and demand factors in population quality. The former includes medical technology while the latter is “voiced through markets and social movements designed to assert the importance of the community over the market through the call for health-enhancing entitlements” (p. 59). Here “entitlements,” a term borrowed from A. K. Sen, means the legal right to resources that secure the quality of the human body- such as foodstuffs and public health. Using this conceptual framework Mosk puts more emphasis on demand factors than supply factors in explaining changes in population quality in modern Japan. This is an interesting thesis, but it seems to me that this theory needs elaboration because when Mosk talks about the supply of and the demand for population quality what he really means is sometimes ambiguous. For instance, he says that “the decline in fertility [during the Tokugawa era] tended to improve population quality on the supply side…[a]nd on the demand side the same households who by limiting supply enhanced quality also demanded greater work capacity and capabilities from their offspring” (p. 77). This statement will confuse many readers. In any event “supply of population quality” decided by households is a notion that is not readily understandable.

All in all, this book provides good material for Western students who are interested in Japanese economic history since the Tokugawa era and those who wish to gather anthropometric data for pre-war Japan or conduct cross-country studies in this field.

Mitsuhiko Kimura Department of Economics Kobe University

Mitsuhiko Kimura is Professor of Economics at Kobe University, Japan, specializing in the history of economic growth in Korea and Japan. He is currently working on understanding the causes of the economic disaster in North Korea from a long-term perspective.

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Subject(s):Living Standards, Anthropometric History, Economic Anthropology
Geographic Area(s):Asia
Time Period(s):General or Comparative

Growth Triumphant: The Twenty-first Century in Historical Perspective

Author(s):Easterlin, Richard A.
Reviewer(s):Costa, Dora L.

EH.NET BOOK REVIEW

Published by EH.NET (August 1997)

Richard A. Easterlin, Growth Triumphant: The Twenty-first Century in Historical Perspective. Ann Arbor, MI: The University of Michigan Press, 1996. Pp. xiv + 200. $37.50 (cloth), ISBN: 0472106945.

Reviewed for EH.NET by Dora Costa, Department of Economics, MIT.

In this masterful synthesis, Richard Easterlin (Department of Economics, University of Southern California) draws on the disciplines of economic history, demography, sociology, political science, psychology, and the history of science to present an integrated explanation of the origins of modern economic growth and of the mortality revolution. His emphasis is on long-term factors and on similarities across nations. His book should be easily accessible to non-specialists and will give them a sense of why economic history can inform our understanding of the future.

Richard Easterlin convincingly argues that technological change underlies both modern economic growth and the morality revolution. Underlying this technological change is a set of procedures and attitudes that include reliance on experiments and observed facts. In the case of modern economic growth, this technological change should not necessarily be equated with industrialization, but rather is simply the introduction of new technology, including agricultural, in the economy. This technological change has produced certain commonalities in development, including the gradual acceleration in real per capita income growth, urbanization, and the growth of a white collar work force.

According to Easterlin, modern economic growth began before the modern rise in life expectancy because technological change in the physical sciences preceded technological change in health and medicine, simply because the conceptual state of the physical sciences was far more advanced. Easterlin argues that although modern economic growth may have increased resistance to disease (for example, by increasing food intake), it also increased exposure to disease. In contrast, in developing nations the mortality revolution has often preceded economic growth both because we know how to control disease (e.g. sewage and clean water) and because the necessary public health investments are inexpensive. Because urbanization created demand for public municipal services, he views the rise of government as a direct consequence of technological change.

Once mortality, particularly childhood mortality, fell, Easterlin argues that we moved from a society of high to low fertility. At first the increase in the number of surviving children caused fertility to fall after families realized that they could achieve their target number of children with fewer births, then the target number of children fell as children became more expensive thanks to advances in education, urbanization, and the introduction of new goods. The population explosion of developing countries should, therefore, slowly reverse.

Easterlin presents a very optimistic picture of the future, arguing that modern economic growth will spread to all countries of the world and neither declining population growth nor an aging population will lead to economic stagnation. We have the technology and many of the preconditions for economic growth, such as institutions for the accumulation of physical and human capital and the mobility of labor and capital, are already present in developing countries. In an example of the sort of long-run perspective that the book is best at, Easterlin shows that even the aging of the baby boomers will not produce a dependency burden that is high by historic standards.

Within this optimistic scenario, he sees two causes for concern. One is that the spread of economic growth shifts the balance of power to newer, more populous developing countries that do not share our commitment to democracy and human rights and this may produce political as well as military clashes. The other is that income cannot buy happiness and that despite previously unimaginable levels of affluence, material concerns are as pressing as ever. According to Easterlin technology will always produce new goods that we will want and, because people measure happiness in relative terms, they will forever be stuck on a hedonic treadmill.

It is this last point, “the triumph of material wants over humanity” that I found controversial and whenever there is controversy, the drawbacks of a synthesis become readily apparent. The reader wants to know more, wants further breakdowns of the data. Easterlin cites surveys that show that people in both the United States and abroad are no happier than they were twenty years ago despite increases in per capita income. He also cites surveys that show that personal income, family, and health are individuals’ primary concerns in all countries surveyed. But, what about recent polls showing that 48 percent of U.S. workers had either cut back on hours of work, declined a promotion, reduced their commitments, lowered their material expectations, or moved to a place with a quieter life during the preceding five years? What about the tremendous decline in market hours of work, whether measured in terms of weekly hours, increased vacation time or sick leave, or increasing number of years spent in retirement? As wages have risen so has the opportunity cost of these hours. The history of modern economic growth is not just one of increasing numbers of consumer goods, but also one of increasing hours of leisure. These hours of leisure have enabled more and more individuals to achieve some kind of self-realization. There will always be individuals who will not know what to do with their free time or spend it in ways we disapprove of, such as watching television. But, what of the individuals who work in order to be rock climbers or who teach classes in order to do research? I am not surprised that when surveyed individuals state that they would like more money (more is always better than less), but the question that we must ask is whether they are willing to trade off time that could be spent with family members or in enjoyable pursuits for more material goods and how this trade-off has changed over time.

Dora L. Costa Department of Economics Massachusetts Institute of Technology

Dora Costa is author of a forthcoming (1998) book, The Evolution of Retirement: An American Economic History, 1880-1990.

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

Farm and Factory: Workers in the Midwest, 1880-1990

Author(s):Nelson, Daniel
Reviewer(s):Sundstrom, William A.

EH.NET BOOK REVIEW

Published by EH.NET (August 1997)

Daniel Nelson, Farm and Factory: Workers in the Midwest, 1880-1990. Bloomington, IN: Indiana University Press, 1995. 258 pp. Includes tables, bibliographical references, and index. $29.95 (cloth), ISBN: 0-253-32883-7.

Reviewed for EH.Net by William A. Sundstrom, Department of Economics, Santa Clara University.

Daniel Nelson’s latest book delivers both more and less than it promises. On the plus side, the book is actually more general than the title would suggest, providing a useful survey of much of the literature on twentieth-century American labor history. Although many of the book’s examples are drawn from midwestern industries and cities, much of the literature cited is not geographically specific. In this sense, the book is a worthy sequel to the author’s Managers and Workers (University of Wisconsin Press, 1975), updating, extending, and broadening that book’s coverage. The greatest virtue of Nelson’s work in the past has been his attention to both the management and labor sides of the employment relationship, as well as the political context of industrial relations. Farm and Factory shares these virtues, synthesizing a wide range of secondary sources from labor, social, and economic history. The book contains less original historical research than many of Nelson’s previous efforts, although it makes extensive use of his own work on such topics as company unions and rubber workers.

On the minus side, Nelson (Department of History, University of Akron) never makes a compelling case for the distinctiveness of the Midwest’s labor history, which would justify the book’s regional focus. Admittedly the region’s industrial composition was unlike that of other regions, with its unusual mix of agriculture and heavy industry. But Nelson claims that these quintessential midwestern sectors had relatively little influence on each others’ labor history. Thus it might be argued that the evolution of the institutions and politics of labor in the Midwest was largely shaped by industry rather than location. Contrast this implication of Nelson’s book with Gavin Wright’s Old South, New South, (Basic Books, 1986) another book about a regional labor market during the twentieth century. In it, Wright depicts a southern labor market that was truly unique in its institutions and development, in large part because of its isolation.

This is not to deny that Nelson has identified some aspects of the midwestern labor experience that had a unique regional character. The socialist and farm-labor political coalitions associated with such names as Robert LaFollette, for example, appear to have been a homegrown midwestern phenomenon; but at the same time, Nelson notes that such coalitions were short-lived and had little lasting influence. Nelson also notes that union density was higher than average in the Midwest, which became the crucible of the twentieth-century industrial union movement. Again, however, it is not clear whether this was the product of some peculiarly midwestern predisposition toward unionism or merely an accidental consequence of the region’s industrial structure. Such a question could be sorted out with careful comparative analysis, contrasting the industrial union movements in the Midwest and, say, the Middle Atlantic regions for similar industries. But Nelson’s book provides very little in the way of comparative research.

Farm and Factory is arranged in sections chronologically. The first period covered, 1880-1900, sets the stage. In 1880, about half of midwestern workers were engaged in farming, and farm employment increased in numbers over the next two decades. At the same time, the period witnessed a dramatic increase in the relative importance of industry. Because the demand for agricultural labor continued to grow, the industrial labor market depended largely on immigrant workers for its supply, rather than rural-urban migrants. The immigrant character of industrial employment was not, of course, unique to the Midwest at this time.

The book’s first chapter, on farming, includes the first installment of what was for me one of the book’s most fascinating recurring themes: the nature and evolution of women’s work. Nelson’s book demonstrates how much scholarship over the past two decades has been devoted to the area of women’s labor history. In the case of farming, Nelson describes the gender division of labor, how it differed across different farm products, and how by the second half of the century the increased complexity of the farming business (and perhaps the increased educational attainment of farm women) resulted in many farm wives assuming the role of business manager. Later in the book he examines the feminization of clerical work, and the postwar growth of women’s labor- force participation.

Nelson’s attention to clerical and service-sector labor is welcome, given the traditional emphasis of labor history on industrial work, but after a promising discussion of office work near the turn of the century in Chapter 3, the remainder of the book devotes only a handful of pages to the service sector and clerical or white-collar employment. No doubt this lacuna reflects shortcomings in the secondary literature that Nelson draws upon, as well as Nelson’s view that the character of office work was subject to less dramatic technological and institutional changes over the course of the century. Be that as it may, “farms and factories” are indeed the book’s central focus; the rest of the midwestern labor market is treated as a residual category that soaked up a growing share of the work force as employment in agriculture and industry shrank relatively and, eventually, absolutely.

Nelson’s history of labor and labor management in the mass production industries of the Midwest is fairly conventional. He highlights the role of the federal government in creating a political and legal environment that facilitated the rise of industrial unionism: the protective legislation of the NRA and NLRA and the subsequent wartime boost given to unionism by war production demand and government intervention. Nelson’s narrative of the sit-down strikes, the escalation of hostility between labor and capital during the thirties, and the rivalry between the AFL and CIO also suggests the importance of historical contingency in creating the system of labor relations that would persist over the decades that followed.

The book’s final chapters describe the brief postwar “golden age” of economic prosperity and relatively stable industrial relations between Big Business and Big Labor. Nelson provides a multifaceted picture of the demise of this golden age. Economic change was clearly one challenge: competition from lower-cost regions and foreign producers placed pressure on the region’s bread-and-butter manufacturing industries. To this conventional deindustrialization story Nelson adds another critical factor in the demise of union influence in the Midwest: rising racial tensions as the Great Migration brought large numbers of black workers into northern cities. The generally progressive stance on racial issues of the CIO unions alienated a large portion of the rank and file during the tumultuous sixties, with the consequence that “[r]ace, more than any other issue, undermined the unions’ carefully nurtured influence outside the workplace” (p. 187).

In his concluding chapter, Nelson traces the roots of the Midwest’s woes during the 1970s and 80s to various “institutional constraints” put into place beginning in the 1930s, which served to reduce the regional economy’s flexibility and innovativeness. “By the 1970s midwestern workers faced the worst of both worlds: some producers had become obsolete, while others continued to innovate in traditional ways (mechanizing operations, for example) that limited employment opportunities” (p. 203). This claim is provocative, and echoes some of the criticisms of U.S. institutional rigidities to be found in the work of authors like Sabel and Piore or Lazonick. But Nelson provides only the sketchiest defense of this view. Is it not possible that the Midwest was just a victim of bad luck, its economy more dependent on Rust Belt industries than other regional economies for largely unavoidable historical reasons? To shore up his claim of institutional failure, Nelson would have to show what other regions did differently to avoid the Midwest’s difficulties. Again, the absence of a comparative approach precludes his doing this.

In sum, Farm and Factory would serve as a solid textbook in twentieth century U.S. labor history, in spite of its regional focus. The coverage of union and nonunion developments, the evolution of personnel management, the role of politics and government, and nontraditional sectors and workers (including women and minorities) is, to my knowledge, unavailable anywhere else. This breadth of coverage, of course, comes at the cost of diminished depth. One particularly misses a compelling account of how the Midwest’s sad economic fate at the end of the century was the product of the region-specific historical evolution of its labor institutions and politics.

William A. Sundstrom Department of Economics Santa Clara University

William A. Sundstrom is Associate Professor of Economics at Santa Clara University. He is the author of numerous articles on the history of U.S. labor markets, including, most recently, “The Racial Unemployment Gap in Long-Run Perspective” (with Robert W. Fairlie), American Economic Review Papers and Proceedings (May 1997).

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

Emigration from Europe, 1815-1930

Author(s):Baines, Dudley
Reviewer(s):Wegge, Simone A.

EH.NET BOOK REVIEW

Published by EH.NET (August 1997)

Dudley Baines, Emigration from Europe 1815-1930. New York: Cambridge University Press, 1995. 84 pp. $10.95 (paper), ISBN: 0 521 55783 6; $34.95 (cloth), ISBN: 0 521 55270 2.

Reviewed for EH.NET by Simone A. Wegge, Department of Economics and Business, Lake Forest College.

This book is part of the series commissioned by the Economic History Society entitled New Studies in Economic and Social History. As such, the author’s intent is to summarize the literature on nineteenth-century European emigration, covering both key findings and current debates, as well as unresolved questions. Professor Baines meets this objective in admirable fashion, always communicating his ideas on migration in a well thought-out manner and making them easily accessible to both historians and economists. Baines knows the data and the issues, but even more importantly what we do not know and what we cannot answer at present. Baines (Department of Economic History, London School of Economics) focuses most of his discussion on understanding the motivations of emigrants but also touches on issues related to immigration, such as the effects of labor inflows on economies of the destination countries, or the assimilation of migrants in their adopted homelands.

In the first few chapters, Baines lays out the main questions of the literature. Chief on Baines’ list is the issue of how to model and ultimately explain emigration behavior. Throughout the book Baines makes use of two models of migration to discuss emigrant behavior, the standard Heckscher-Ohlin model in international economics that explains factor mobility, and a “core-periphery” model from development economics, which states that as more advanced core countries further industrialize their demand for unskilled labor or unskilled migrants increases. Baines raises a very interesting question in his discussion of migration models: can one explain emigration with a single elegant model? Unfortunately not, as the author appropriately points out, “…one problem has been the ability of different models to obtain different but statistically significant results about the same group of emigrants” (p. 20). Baines blames this on a lack of proper data as well as the use of inappropriate models.

A heavier dose of micro models could have been added to the presentation of the material. Oded Stark’s work on the microeconomics of migration comes to mind, particularly his emphasis on risk-avoidance, family decision models, and relative-deprivation as motivation for mobility. Still, Baines encourages readers to view migration more generally as an economic decision at the individual level: whether an individual decides to emigrate or not depends on how he perceives his economic options at home and abroad. Migration models at the individual level also help us to understand how emigrants are self-selected. The historical evidence shows that emigrants are self-selected on the basis of occupation, gender, and most importantly, on the basis of youth.

Further, Baines believes that the role of information is crucial to understanding the individual decisions of emigrants. What sorts of information did emigrants have about the various destination countries, and how did they view their prospects? All very difficult, if not impossible, questions to answer. Some of this we may be able to glean from emigrant letter studies. Emigrant letters, used to study the issue of information and motivation and ultimately chain migration, however, cannot be viewed as an unbiased source. Baines notes one of these biases, that some letters may have been written with the intent of encouraging the recipients to emigrate (p. 32). There are, however, additional biases. For example, emigrants only wrote home when there was someone to write to, thus leading the examiner of letters to uncover chains and perhaps over-emphasize the influence of chain effects on emigration behavior.

These sorts of observations buttress the author’s preference for studies of migration at the lowest level of analysis possible. Emigration rates, for instance, certainly vary by country but they also vary at the intra-country level as the author discusses in Chapter 4. Here Baines, as in his other writings, advocates breaking down the country emigration rates by region and preferably by village if they are to be understood properly. Baines refers to chain migration for a possible explanation, but may too hastily claim that regions with sustained traditions of high emigration rates were places where chain migration mattered the most (p. 28). I suggest that the reader defer to future research.

In contrast to the variance in rates, nations experienced both high and low points in the rate of emigration at similar points in time. Baines argues that there were enough differences between countries, and thus we must base this on the cyclical nature of the destination countries’ economies. The reader should note that the evidence for this (Brinley Thomas’ Migration and Economic Growth, Cambridge, 1973) is mostly for the decades after 1870. Here, Baines supports his argument on an examination of possible factors in European nations that might contribute to emigration, including high population growth rates, a fixed supply of land, political discrimination, and so forth. This exercise, he argues, does not help us to understand why more Europeans did not leave. Therefore, we should look at the various peculiarities facing potential emigrants in their hour of decision. Wage and unemployment rates are discussed, but according to the author future mileage might be gained by getting a hand on internal and return migration, as well as using cross-sectional rather than time series data. Baines should stress that we also need more studies of those who stayed.

Return migration is briefly considered in Chapter 5. Why did more people not return to their homelands? Indeed, more emigrants did return in the post-1860 era of cheaper transport. A more complete answer has to do with emigrants’ ages, the degree to which emigrants were economically connected with their family and community back in the homeland, and whether they were male. The percentage of men among the returnees was higher than among the emigrants (p. 36).

Emigration changed in other important ways over the nineteenth century, as Baines notes in Chapter 6. Early migrations tended to be composed of many families, while later migrations contained more single individuals. This is as of yet not completely understood, but Baines suspects that the decline in transport costs had the effect of making emigration decisions less final and more attractive to individuals who planned to return within a short period. But more simply, the drop in the real price of passage made emigration also more possible for a larger segment (younger) of the European population.

Baines discusses how industrialization over the nineteenth century made a difference for emigrants in Chapter 8. Many economists might think that little or no economic growth will induce high emigration rates, as the cases of Ireland and Italy demonstrate. But we also have England, which experienced heavy economic growth and high rates of emigration, making for a contrasting case study. Baines draws on the Scandinavian literature and his own work on Britain to expand this into a discussion on stage migration and internal migration. He argues that stage-migration is more important for Scandinavia than for England (p. 53).

Cross-country comparisons and almost two centuries of immigration experience provide a fertile backdrop in Chapter 9 for a discussion on the economic effects of immigration. In an environment where resources were abundant and laborers scarce, most destination countries did not experience a reduction in the rate of income growth over the historical period of analysis. When labor markets were affected, unskilled workers in industries with few economies of scale bore the brunt of wage declines, while “immigration allowed other workers to be upwardly displaced … into sectors that did have increasing returns” (p. 55). Hence, economies of scale, the ability of destination countries to increase investment, and the degree of segmentation of labor markets all played a part in determining whether immigrants were welcomed or disdained.

For the scholars and students wishing a concisely worded statement on the economic history of emigration, this is the book to read. Baines has a deep and thorough understanding of emigration and addresses many of the interesting and relevant questions in the literature. His intimate knowledge of the primary sources underlying emigration studies is well apparent in his advice to the reader about the biases and the quality of existing historical sources of migration data. Typical of other studies in this series, the bibliography contains short descriptions for many of the works cited, making for a helpful reference guide. Finally, those familiar with Baines’ other writings on emigration, in particular his book on British emigration, Migration in a Mature Economy (Cambridge, 1985), may wish that this little book had been quite a bit longer and contained even more of his insights into nineteenth century European emigration.

Simone A. Wegge Department of Economics and Business Lake Forest College

Simone Wegge is author of a dissertation entitled “Migration Decisions in Mid Nineteenth-Century Germany,” completed in May 1997.

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Subject(s):Historical Demography, including Migration
Geographic Area(s):General, International, or Comparative
Time Period(s):19th Century

Everyday Things in Premodern Japan: The Hidden Legacy of Material Culture

Author(s):Hanley, Susan B.
Reviewer(s):Honda, Gail

EH.NET BOOK REVIEW

Published by EH.NET (July 1997)

Susan B. Hanley. Everyday Things in Premodern Japan: The Hidden Legacy of Material Culture. Berkeley: University of California Press, 1997. xiv + 213 pp. $35.00 (cloth), ISBN: 0-520-20470-0.

Reviewed for EH.Net by Gail Honda, Department of Sociology, University of Chicago.

What do the objects which surround us–the food we eat, the clothes we wear, the homes we live in–tell us about how well we are living? How are they indicative of our health and physical well-being? Can we gauge our progress as a society by observing and analyzing the material world around us?

Susan B. Hanley, in her latest book on Tokugawa (1600-1868) Japan, culls a dazzling array of material evidence to argue that the level of physical well-being of the Japanese rose throughout the Tokugawa period, and that life in Tokugawa Japan was healthful relative to that in industrialized Europe. This high level of physical well-being, which existed on the eve of Japan’s industrial revolution (1868-1945), gave rise to a robust and literate labor force which enabled the Japanese to build a powerful industrial nation. Moreover, she argues, what we have come to know as everyday “traditional” Japanese material life, which was cultivated during the 250 years of the Tokugawa period, persisted through the middle of the twentieth century, and provided a foundation of stability which eased the often turbulent transition in government, the economy, and social structure.

With the discerning eye of a master novelist, and an equally engaging literary style, Hanley, Professor of Japanese Studies and History at the University of Washington, takes the reader on a tour of everyday life in Tokugawa Japan, all the while analyzing the objects of consideration and carefully piecing them together in her cogently honed argument. One can almost smell the rough-hewn walls and bare earthen floors of the early Tokugawa one-room commoner homes as she describes their cool, dark interiors and central gathering area for cooking and heating. By the end of the Tokugawa period, she writes, the typical commoner home had several rooms, raised foundations, wooden or tatami (rush mat) floors, and sliding paper doors which enabled the residents to open the interior to the sunshine and warm breezes of the outdoors. All of these changes, Hanley argues, led to a more healthful living environment which raised the level of physical well-being of the Japanese.

She defines the level of physical well-being as “the standard of living [defined as per capita income] plus ‘quality factors’ that can be positive or negative. . .Examples of quality factors are the quality and level of nutrition, incidence of disease, level of general health, number of children per family, the percentage of dependent persons, the size and quality of housing, the kind of heat available, and the many other aspects of life that affect our physical well being” (pp. 10-11). Hanley then analyzes the quality factors by examining what she calls material culture, or “physical objects that people use or consume in their everyday lives, most of which are either made or else natural objects put to specific use by people. . . [She] concentrate[s] on what are considered the basics: food, clothing, and shelter, and concomitant aspects such as hygiene and sanitation. The artifacts of daily life reveal use of resources, the level of technology, how people cooked, what kind of houses they lived in, and levels of comfort, sanitation, and health–in short, how people lived” (p. 12).

Specifically, Hanley finds that Tokugawa Japan’s material culture gave rise to many positive quality factors which elevated the the Japanese people’s physical well-being to a level higher than the standard of living alone would indicate. To cite a few examples of quality factors from the many intriguing ones she presents: the daily 1900-calorie Tokugawa diet of grains, vegetables, and soybean products was probably not only adequate for the body stature of people at the time (army recruits had an average height of 5’4″ in the late-nineteenth century), but was comparable to the late-nineteenth century English commoner diet of bread, porridge, biscuits, vegetables, milk, cheese, and lard. With regard to personal hygiene, Hanley points out that regular bathing was not an important part of Western culture until the nineteenth century, whereas in Japan accounts of public baths and references to bathing regulations indicate that bathing was a widespread custom by the eighteenth century. The Tokugawa water supply and sewage system were also quite healthful relative to systems in Europe because of the custom of collecting urine and night soil for fertilizer. Rather than allow human waste to collect in cesspools where excrement could seep into the subsoil, or to be flushed into rivers which fed into the drinking water supply, as was commonly done in the West, the Japanese assiduously collected, then bought and sold human waste and thereby avoided the problem of water supply contamination. As a result of many of these positive quality factors, life expectancy in Tokugawa Japan, Hanley demonstrates, was similar to that of nineteenth century Europe.

Thus, Hanley’s book is a valuable contribution to the literature in economic history, Japanese history, and historical demography in four primary ways: first, it offers plausible reasons and solid evidence for Japan’s success in industrializing beginning in the late nineteenth century; second, it stimulates cross-cultural comparisons by presenting evidence which can be reasonably compared across countries; third, it provides insight into and information on the everyday life of Japanese commoners during the Tokugawa period; and fourth, it discusses life expectancy, fertility control, and family structure, all important gauges of the level of physical well-being in Tokugawa Japan. Thoroughly researched and highly readable, Everyday Things in Premodern Japan will not only be widely used as a reference book, but will surely be savored by many whose interest will be held from cover to cover.

Gail Honda Department of Sociology University of Chicago

Gail Honda is author of “Differential Structure, Differential Health: Industrialization in Japan 1868-1940,” in the forthcoming book, Health and Welfare during Industrialization (University of Chicago Press), edited by Richard Steckel and Roderick Floud. In August 1997, she will move to the Department of History at the University of Hawaii where she will teach Japanese history and continue her research on economic development and health.

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Subject(s):Social and Cultural History, including Race, Ethnicity and Gender
Geographic Area(s):Asia
Time Period(s):19th Century

Small Firms in the Japanese Economy

Author(s):Whittaker, D. H.
Reviewer(s):Blackford, Mansel G.

EH.NET BOOK REVIEW

Published by H-BUSINESS (July 1997)

D. H. Whittaker, Small firms in the Japanese Economy. Cambridge and New York: Cambridge University Press, 1997. xii + 238 pp. ISBN: 0-521-58152-4

Reviewed for EH.Net by Mansel G. Blackford, Department of History, The Ohio State University. (blackford.1@osu.edu)

This densely packed volume is a very valuable contribution to our growing, but still limited, knowledge of small manufacturing firms in Japan. Whittaker examines the historical evolution and recent operations of small manufacturers in the Ota Ward of Tokyo, one of Japan’s leading industrial districts. Throughout his account Whittaker compares the companies of Ota Ward to the development of small manufacturers elsewhere in Japan; and in his penultimate chapter Whittaker, a Lecturer in Japanese Studies and Senior Tutor at the University of Cambridge, offers a revealing comparison of what has taken place in the Ota Ward to the development of small manufacturers in Birmingham, the United Kingdom.

In his first three chapters Whittaker presents a broad overview of how Japanese policymakers have looked upon small manufacturers, the formation of industrial districts in Japan, and the historical contribution of small industrial firms to Japan’s economic ascent. Whittaker succinctly relates the development of small industrial firms from the time of the Meiji Restoration of 1868 into the post-World-War-II period, carefully delineating fluctuations in that development to the growth of larger manufacturing firms. His balanced account calls into question facile assumptions sometimes made about the development of a dual economy in Japan. Small industrialists, Whittaker observes, have remained very important in recent decades. The world of small and medium-sized firms or SMEs (those employing no more than 300 workers), he asserts, is “every bit as representative of modern Japan as that of large firms” (p. 3). SMEs, Whittaker points out, accounted for just under three-quarters of Japan’s manufacturing employment and over half of its industrial output in 1993. Nor are most SMEs simply subcontractors for larger firms; in fact, over 40 percent do not subcontract at all. Instead, most SMEs have been, and remain, Whittaker shows, independent enterprises horizontally linked in industrial districts (Whittaker looks especially at the historical evolution of such districts in Gunma and Nagano Prefectures). Even so, governmental officials, Whittaker notes, long denigrated SMEs as archaic holdovers from feudal times, only very recently coming to see them as possible engines of economic growth.

Following his overview, Whittaker turns to a close examination of small firms (those with fewer than seventy employees, and usually with no more than twenty) and medium-sized companies (those with seventy to eighty employees) in machine industries (metal products, machinery making and equipment, transportation equipment, electrical machinery, and precision equipment) in Tokyo’s Ota Ward. Whittaker derived information about the firms from a wide variety of surveys, reports, articles, and his own interviews with the owners and workers in twenty of the businesses (he conducted the interviews between 1989 and 1995, visiting most of the businesses at least twice, once at the height of Japan’s “bubble” boom and once during the recession following its collapse). What emerges is a compelling picture of small manufacturing companies in present-day Japan and, in addition, useful insights into fundamental changes occurring in Japan’s economy. Whittaker takes a topical approach to his subject, devoting separate chapters to discrete issues.

Chapter 4 surveys the industrial development of Ota Ward, an area of fifty-four square kilometers in which 40,000 businesses employed 350,000 people in the early 1990s. From modest beginnings in the Meiji era, Ota Ward became one of Japan’s leading industrial districts during the interwar years and then especially after World War II. As large firms moved out of the ward in search of more land and workers in the 1970s and 1980s, small firms became even more important than they had earlier been. The number of factories in the ward peaked at 9,190 in 1983, declining to 7,160 a decade later. Most of these were small: only one-tenth had more than twenty employees in 1990, down from one-third thirty years earlier. Despite recent problems (dealt with in a later chapter), Ota Ward remains, Whittaker concludes, a viable entity: “The combination of flexibility and specialization within individual firms (as well as across firms) has in turn endowed the district with a flexibility, durability, and adaptability, as well as an upgrading dynamic” (p. 74).

Chapters 5 and 6 look at ties linking Ota Ward’s small industrialists with larger manufacturers in vertical subcontracting arrangements and, even more importantly, varied horizontal webs connecting the ward’s small companies to each other. Subcontracting, Whittaker shows, entails more than the exploitation of small firms by large ones. To be sure, elements of exploitation exist, but in many cases “the line between cooperation and coercion may be a fine one” (p. 90). Becoming increasing significant in the 1990s are horizontal ties–often very informal connections–of all sorts between Ota Ward’s small industrialists, creating some sense of community among them. One of the great strengths of this book is how Whittaker carefully explores those ties, a major contribution to an understanding of how work flows from firm to firm in industrial districts. Chapters 5 and 6 will be of special value for scholars interested in the dynamics of industrial district development. Upon reading them, I was struck by some similarities to the development of industrial districts in the United States, as described by Philip Scranton.

Chapters 7 and 8, by contrast, peer inside the small industrial firms to understand their internal dynamics. Whittaker is able to uncover the motivations of the founders of the small manufacturing firms, finding “a type of individualism at odds with the normal groupist image of Japanese society and industry” and a type of entrepreneurship that “is not of a swashbuckling, high-risk-high-return nature” but, is, rather, “craft or productionist” oriented (p. 127). Here, I was reminded very much of James Soltow’s findings about machinery makers and metal workers in New England. Innovative and skilled, the founders of Ota’s small industrial firms and their workers–many of whom went on to start their own firms–are, Whittaker finds, a dying breed. As these founders retire, few members of the current generation are taking over the helms of the small manufacturers. Disliking the long hours and hard work, the sons and daughters are turning to other pursuits, (as are the offspring of employees in the firms for similar reasons), leading to more small business closures than start-ups, and bringing into question the future of small industrial firms in Ota Ward and elsewhere in Japan.

In Chapter 9 Whittaker discusses the impacts of national and regional governmental policies upon Ota’s businesses and the involvement of the businesses in formulating those policies. He concludes that on balance “government support for SMEs is significant,” especially in the realm of financing, but that “the primary reason for the survival and upgrading of small firms in Ota and in Japan has been their own efforts” (p. 165).

Chapter 10 presents a comparative look at the development and present-day activities of small industrial firms in Birmingham. While small businesses in Birmingham and Ota Ward were similar in some ways, they shared different fates, with Birmingham’s “fall being spectacular” (p. 182). Misguided government policies, an unwillingness of workers to change their ways, mergers creating inefficient big businesses, and excessive competition among small firms are the salient factors cited by Whittaker for Birmingham’s industrial decline.

In Chapter 11 Whittaker directly addresses the issue of whether or not small industrial firms can be a prime source of economic revival in present-day Japan. Whittaker is no cheer leader for small business. In a balanced analysis, he concludes that both large and small companies will continue to play important roles in the future: “For better or for worse, large companies and their offspring will remain key players in Japan’s economy in the foreseeable future, even if their contribution to economic growth is muted. Rather than wishing them away, an important question will be what types of relationships can small, entrepreneurial firms forge with them” (p. 212).

Both scholars and policymakers can profit from reading this book. Historians, political scientists, and economists will benefit from this detailed look at the evolution and present-day operations of one of Japan’s leading industrial districts. Whittaker’s account is the most valuable analysis of small business in Japan currently available in English, complementing and going beyond David Friedman’s analysis of Sakaki and providing both more depth and breadth than Penelope Franck’s survey of small business development across the nation. Policymakers will learn a great deal about the effectiveness and lack of effectiveness of the Japanese government’s efforts to nurture small business development. In short, Small firms in the Japanese Economy is a sophisticated account which I hope will find a large audience.

Mansel G. Blackford Department of History The Ohio State University

Mansel Blackford is the author of A History of Small Business in America (New York: Twayne Publishers, 1991); and The Rise of Modern Business in Great Britain, the United States and Japan (Chapel Hill: University of North Carolina Press, 1988, second edition in preparation).

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

The Worst Tax? A History of the Property Tax in America

Author(s):Fisher, Glenn
Reviewer(s):Wallis, John Joseph

EH.NET BOOK REVIEW

Published by EH.NET (June 1997)

Glenn W. Fisher, The Worst Tax? A History of the Property Tax in America. Lawrence, KS: University Press of Kansas, 1996. x + 244 pp. $35.00 (cloth), ISBN: 0700607536

Reviewed for EH.NET by John Joseph Wallis, Department of Economics, University of Maryland.

From the question mark in the title one might expect that this book would try to answer the question: is the property tax a good or a bad tax? And from the remainder of the title one might expect a general history of the property tax throughout the nation and throughout the nation’s history. This very interesting book does not deliver on either of the implicit promises in its title, but it is worth a closer look in any event.

Fisher begins with a general discussion of the property tax and fiscal policy in late 18th and early 19th century America. The focus then shifts to Kansas. An intensive study of the property tax in Kansas makes up the bulk of the book. In the last chapter and conclusion, the discussion shifts back to more general questions and a wider focus.

It is hard to fault the approach, however, since there is no “American property tax,” there are only property taxes in the individual states and, as Fisher makes clear, there are really thousands of local property taxes administered under an umbrella of state supervision. The nature of state administration varies widely from state to state and over time. Making generalizations is, as a result, a hazardous business.

Fisher focuses on the implication of two common changes in the property tax structure in the middle part of the 19th century, and, by example, how those changes played out in Kansas. These are constitutional or legislative provisions mandating uniformity and universality in property taxation. Uniformity means that all property that is liable to the tax is taxed at a uniform rate. Universality means that all valuable property in the state is subject to taxation. Uniformity combined with universality implies that all property in a state, tangible and intangible, land, buildings, inventories, animals, equipment, etc. must be assessed and taxed at the same rate.

Uniformity and universality are important both as a reflection of the political climate of the mid-19th century, and for the confusion and difficulties they ultimately created in the administration of the property tax. After the debt crisis of the early 1840s, when state governments began moving toward rather than away from the property tax as their main source of revenue, the property tax became the fiscal mainstay of both state and local governments. It was at that point that uniformity and universality provisions were widely enacted as reform measures. The essential idea behind them was that the wealthy and the privileged escaped property taxation through unfair assessment (uniformity) and their ability to transform their wealth into untaxed assets (universality).

The reforms opened up another can of worms, perhaps one bigger than the universe. For uniformity and universality to work, there had to be a system of state-wide assessment on all property. In most states, assessment was a function of local governments with some state cooperation and supervision. Full implementation of the reforms would have required complete centralization of the revenue system at the state level, which nobody wanted. This federalism issue was further complicated by the intractable difficulties in assessing many types of intangible property.

Ultimately, the general uniform and universal property tax was replaced by a more specific and well defined property tax, which in most states became a tax on real estate. The real estate tax was easier to define and administer and easier to equalize across local governments, although it is still plagued with problems of assessment. The change occurred in the 20th century at the same time that state governments were moving away from property taxes towards sales and income taxes. The shift was underway before the 1930s, picked up speed during the depression, and was complete by the middle years of the 20th century. Today, state governments collect a very small share of property taxes and property taxes are a very small share of total state revenues.

Fisher’s study illuminates clearly how these forces were at work in Kansas. Whether Kansas accurately mirrors what happened in other states it unclear. This book makes an important step in the right direction. It awaits another 40 or so similar studies on property taxation in other states.

John Joseph Wallis Department of Economics University of Maryland

John Wallis is a student of the history of America. Recent publications include (with Jac Heckelman) “Railroads and Property Taxes,” Explorations in Economic History, 34 (1), January 1997; “The Impact of the New Deal on American Federalism,” (with Wallace Oates), forthcoming in The Defining Moment, Michael Bordo, Claudia Goldin, and Eugene White, editors, NBER, University of Chicago Press; “Early American Federalism and Economic Development, 1790-1840,” Public Finance and Environmental Economics: Essays in Honor of Wallace E. Oates, Robert Schwab, editor, forthcoming, Edward Elgar.

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

The Dynamic Society: Exploring the Sources of Global Change

Author(s):Snooks, Graeme Donald
Reviewer(s):Clark, Gregory

Graeme Donald Snooks, The Dynamic Society: Exploring the Sources of Global Change. New York and London: Routledge, 1996. xvii + 491 pp. $84.95 (cloth), ISBN: 0415137306. $24.95 (paper), ISBN: 0415137314.

Reviewed for EH.Net by Gregory Clark, Department of Economics, University of California- Davis .

For most of the time in any discipline the mundane dominates, and the subject seems to advance at a glacial pace. Old disputes are chewed over, small concessions gained and conceded. There are no sweeping visions, no sustained programs of discovery. The subject is maintained almost as much by institutional inertia as by intellectual passion. Economic history in the eyes of many is firmly stuck on just such hard and unyielding terrain. No one has published a paper yet entitled “The Heights of Norwegians Inferred from a Sample of 23 File Clerks, 1906-1908: A Quantile Bend Estimate,” but given enough time they will.

There is thus always an incipient demand for bolder conjectures, for the big idea that can inject excitement and remake the subject. But pursuing the big idea, seductive as it is, has its dangers. The big idea is inevitably at the beginning ill-formed, and weakly supported. Thus those who venture the big idea need strong egos and selective blindness – they have to withstand the carping of the Lilliputians, and the rejection of the journal referees. But at the same time the ego cannot be too strong, the vision too selective. Therein lies a kind of madness. The innovator has to be able to respond to criticism, but not be overwhelmed by it, to connect with the audience yet not become its servant. The pursuer of the big idea has to walk the thin line between hearing too well and being deaf to reason.

It was thus with some trepidation that I read early in Graeme Snooks’ new book “we need a simple but robust model that can explain the emergence and development of life over the last 4 billion years” (p. 7). It was with even more fear that I noted at the end of the book on page 431 a ten page glossary of “Snookspeak,” including “great linear waves of economic change,” “existential models,” “funnel of transformation,” “strategic- crisis hypothesis” – the new language we need to express the “simple but robust” theory. There was going to be no middle ground for the reviewer of this book – no “a solid contribution to the literature on developments in animal husbandry, which perhaps focuses a little too much on sheep.” Snooks has reached for the big prize. He is either an innovative visionary, or he has crossed over the line into self delusion. For what Snooks attempts in this book, aided only by pen, paper and frequent trips to the glossary, is to produce a theory of life that encompasses and surpasses all of economics, biology, history, psychology, and sociology. To raise the stakes even further this improbable concoction is emblazoned with warm commendations from no less than Douglass North, Nobel Laureate, Baron Herman van der Wee, and Stanley Engerman.

What is Snooks’ new post-Darwinian theory of life and everything? There is at maximum one person who knows, and if he does know, he is unable to communicate it. This is not a case where I can outline the theory, and then ask how well it corresponds to what we know. What the theory is is the central mystery. For example, the theory, Snooks states, employs existential as opposed to deductive models.

“Existential models are empirical models of reality – or models of existence – and can be contrasted with the logical or deductive models of physics and economics, which are merely constructs of the mind….As existential models are based upon dynamic timescapes, they can liberate us from the limitations of deductive thought. They set free the imagination to range over the actual patterns of existence. And in these patterns we can see the dynamic processes of reality” (pp. 433-4).

In California we have many examples of people liberated from the limitations of deductive thought, and often they too have important ideas they need to tell us. So it turns out that Snooks not only wants to rewrite the history of the last 4 billion years, he also, en passant, is introducing entirely new modes of thought, which should, maybe after some refinement, be able to effect a substantial reformation of the physical sciences.

The above example is the book at maximum wackiness. There are many parts, even whole pages, where the exposition is clear: the discussions of crustal formation (yes, the crust of the earth), Hitler’s aims (irrational), the oxygen content of the atmosphere, aggression in men and women (as evidenced by auto accidents), the walls of Jericho, blue-green algae, Henry Thomas Buckle (1821-1862), sea level changes, the Holy Roman Empire, post Keynesians, the ice age, linear time, volcanic eruptions, the nuclear family, Frederick Nietzsche, Joel Mokyr, dinosaurs, dolphins, and the Domesday Book, to name a few examples. The only problem is what the connection of the episode at issue is to the big idea. I know the theory is dynamic, which is why the front cover has charging horses on it, whereas Darwin was static. Dynamism is everywhere – more than one page of the index alone is devoted to dynamism in all its varieties, including “dynamics of the earth: formation of crust.” Change we learn occurs because of dynamism. I also learned that the theory is “economic,” and that it involves “paradigm shifts,” but the theory itself remains hidden from the view of a reviewer trapped in the prison of deductive logic.

To take a specific example, Snooks argues, with some persuasion to someone whose knowledge of the subject is limited to the New York Times, that the attempt by many scientists to explain the extinction of dinosaurs by natural catastrophes is unconvincing. But what is Snooks’ alternative explanation? Dinosaurs were doomed, he assures us, by “having exhausted their dynamic strategies” and further dinosaurs “suffered from over-expansion owing to the exhaustion of their dynamic opportunities” (pp. 77-78). And that’s it. With those trenchant observations, Snooks having dispatched the dinosaur issue between pages 76 and 78 as rapidly as an asteroid impact, marches quickly on to tackle the bigger problems. The survival of some organisms, largely unchanged, from long before the era of the dinosaurs is, I presume, because they did not exhaust their dynamic opportunities to not change. Aristotle, who claimed that objects fell towards the earth because it was in their nature to fall, looks like a model of positivist science compared to Snooks.

Another example, closer to the workaday concerns of economic historians, is “technology as a dominant dynamic strategy.”

“The technological paradigm shift is a widespread human response – occurring in both the Old and New Worlds – to critical episodes in the relationship between population and natural resources owing to the exhaustion of the prevailing technological paradigm. A paradigm shift involves a technological transformation that provides, in a relatively short space of time – when looking forwards rather than backwards – a quantum leap in access to the resources of a niggardly natural world” (pp. 239-240).

Leaving aside the interesting metaphysical claims about time, what is the content of this view? Snooks claims there have been only three technological paradigm shifts: the shift from scavenging to hunting in the Paleolithic, the shift from hunting to agriculture in the Neolithic, and the shift from agriculture to industry in eighteenth century England. He argues that each shift is created by changes in relative factor prices. Now of course, for the first two shifts we know nothing of factor prices. Indeed, again based only on the authority of the New York Times, it has just been discovered that the shift from scavenging to hunting occurred about 100,000 years ago, much earlier than previously thought. Does this matter to Snook’s theory? Not as far as I can tell. When the shift occurred it was undoubtedly the result of population pressure and a stagnant scavenging technological paradigm.

So the only paradigm shift for which we have any evidence on relative scarcities is the Industrial Revolution, the cause of which was “with the growing pressure of population on natural resources, as the old technological paradigm was progressively exhausted, came a rise in prices: of natural resources relative to labour; of labour relative to capital; and of organic relative to inorganic natural resource” (p. 265). This claim is at least clear, but is both theoretically and empirically implausible. Why should population pressure raise the price of labor relative to capital? Why didn’t population pressure in the high middle ages spark an Industrial Revolution? Why wasn’t the Industrial Revolution in China? And empirically the substitution of inorganic for organic resources in Britain before 1850 was a trivial element of the Industrial Revolution, as the work of von Tunzelman, McCloskey, and Crafts clearly shows. But as with the demise of the dinosaurs, Snooks can only allocate about three pages of the book to his discoveries about the Industrial Revolution paradigm shift before he has to rush on to bigger things.

I could go on, but this is enough to convey the point. As we go about the mundane tasks of economic history, trying to prise the occasional nugget of knowledge from hard and stony ground, I am sure we will hear periodically from Graeme Snooks. He will come zooming past, gesticulating wildly and shouting excitedly about new marvelous discoveries made from the comfort of his armchair: discoveries that only he, and possibly Doug North, Herman van der Wee and Stan Engerman, can see and share.

Gregory Clark Department of Economics University of California- Davis

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Subject(s):History of Technology, including Technological Change
Geographic Area(s):General, International, or Comparative
Time Period(s):General or Comparative