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Modern Manors: Welfare Capitalism Since the New Deal

Author(s):Jacoby, Sanford M.
Reviewer(s):Berkowitz, Edward

Sanford M. Jacoby. Modern Manors: Welfare Capitalism Since the New Deal. Princeton: Princeton University Press, 1997. xii + 345 pp. Notes and index. $35.00 (cloth), ISBN 0-691-01570-8.

Reviewed for H-Business by Edward Berkowitz , George Washington University

Welfare capitalism represents one of those marginal academic side-shows that nonetheless has surprising staying power. At various times historians have shown interest in ways that firms have distinguished themselves by being model employers. The heads of these firms, unlike their stereotypical colleagues, do not believe in the classical theory of labor supply in which workers present themselves in an infinite supply at the market price. Instead, they understand that workers are valuable commodities who become even more valuable once they receive some form of on- the-job training. Hence, these employers, either out of a sense of paternalistic benevolence or, more likely, a dollars-and-cents understanding of the labor market, have tried to reduce turnover by linking pay to the company’s productivity and by improving the conditions of work beyond those of their competitors. In the conventional historiography, the hey-day of this form of welfare capitalism comes in the 1920s, when businessmen held a sort of moral sway over the nation.

Then, in the 1930s, welfare capitalism breaks down in the face of the collapse of the labor market that we call the depression. As the price of labor falls and the demand for products declines, benevolence no longer pays substantial dividends. Government steps in to offer a sort of alternative form of welfare capitalism. Through legislation the government mandates that workers have the right to bargain through representatives of their own choosing and workers also have the right to pensions and unemployment compensation that are supplied by the government, rather than the company. Historians have argued about the role of welfare capitalists or corporate liberals in the creation of the twin peaks of New Deal regulation: the Wagner Act and the Social Security Act. Whatever the results of this argument, the outcome remains the same. In the 1930s, the torch gets passed from welfare capitalism to a new world in which both unions and the government, often acting in tandem, have a substantial presence. Welfare capitalism is a subject for the first third of the twentieth century and not more recent times.

Of course, that conventional view is just plain wrong. We know, for example, that there was a corporate welfare revival in the postwar era and that welfare capitalism remains alive and well today. In the latest round of health reform, for example, the Clinton administration, just like the Nixon administration before it, tried to create a plan that would mandate health insurance coverage. Clinton had no intention of having the government become the primary supplier of health care. Instead, he wanted to make sure that all employers supplied it their employees. He wanted to enforce a welfare capitalist norm, in other words.

That suggests the need for a comprehensive history of welfare capitalism since the New Deal, and, within the constraints of the evidence, Sanford Jacoby has provided it. His book is a scholarly and thoughtful look at the welfare capitalist practices of three companies in the era from the 1930s to the 1960s. His basic argument is that welfare capitalism did not die in the 1930s. To be sure, not all firms followed its course. As we know, many large nationally based industrial firms succumbed to pressures from the CIO and entered into collective bargaining agreements with unions. Jacoby’s three firms, each for its own reason, escaped from the union movement. Each developed an alternative management structure that bound employees to the company.

In the case of Kodak, executives could build on the paternalist traditions of George Eastman who, for example, offered periodic bonuses to his employees. In creating welfare capitalist practices, Kodak also took advantage of its location in Rochester New York, a location that allowed it to hire ethnically homogeneous workers–plain white bread Wasps–who were perhaps less susceptible to union influences than members of other ethnic groups. Even more important, Kodak had a virtual monopoly on photographic film and suffered less from the depression than did those companies in more competitive markets where the cross elasticities of substitution (if I remember my economics right) were greater. Protected from some of the forces that gave rise to unions in other firms, Kodak invested a great deal in keeping the unions out, offering its employees profit sharing plans and a wide array of recreational programs and other amenities. Above all, Kodak worked hard to minimize lay-offs by planning ahead for the seasonal variations in the photography business and, if necessary, by moving workers from one job to another. As a result of all these practices, Kodak kept unions away and practiced an alternative form of labor relations that might be called welfare capitalism.

Sears Roebuck, the Chicago company that began as a mail order house and emerged as the nation’s largest retailer in the postwar era, produced a different style of welfare capitalism. It existed in a much more competitive product market, and it operated stores in locations from coast to coast. Like Kodak, Sears experimented with a form of profit-sharing but, unlike Kodak, Sears could not fight unions through overt means. Sears had to do business in places like Gary, Indiana or Lansing, Michigan where it probably would have been a bad practice to bad mouth unions in the late 1930s and early 1940s. As a means of controlling its work force, Sears did more than offer good wages and working conditions. It also initiated an attitude survey program which, as Jacoby notes, “became one the largest and most sophisticated applications of behavioral and social science research to personnel problems in industry” (p. 111). Sears used the data from the survey to identify sources of employee grievances and correct personnel problems. In a more manipulative sense, Sears also used the surveys to identify potential union organizers and to keep them from proselytizing other employees.

Thompson Products, the third of Jacoby’s companies, was a much more traditional industrial manufacturer. Located in Cleveland, a highly unionized, ethnically heterogeneous town, Thompson products made parts for automobiles and later for airplanes. Unlike Kodak and Sears Roebuck (whose leader in its early days was Julius Rosenwald, an important figure in Chicago and national philanthropic circles), Thompson did not have much of a welfare capitalist tradition before the New Deal. In 1933 Frederick C. Crawford took over the company and, among other things, started a personnel department and new welfare programs. His main contribution, however, was in the creation and maintenance of a series of what Jacoby describes as “semiautonomous company unions and a bevy of human relations programs” (p. 142). In Cleveland, unlike in Rochester, some semblance of a union was necessary. At Thompson Products, at least in its Cleveland plants, that union took the form of a company union that was resilient enough to withstand challenges from the United Auto Workers.

Why did Jacoby choose these three companies? I think it is because the records of these companies were available to him and, as he notes and business historians can certainly appreciate, the records of private companies, particularly the labor relations aspects of those companies, are not easy to obtain. Because of his choice, he has to strain a bit to establish these companies as ideal types of welfare capitalist employers, yet his analysis suggests that particular factors account for developments in each of the companies. It matters, for example, that Frederick Crawford took over Thompson Products, that Marion Folsom, an extraordinary welfare capitalist statesman, worked for Kodak, and that Robert E. Wood followed Julius Rosenwald as head of Sears. Other companies, no doubt, have their singular individuals and their particular factors that might have changed Jacoby’s story if he had chosen them.

Still, what is here is more than enough to establish Jacoby’s point that, by the 1950s, there was a non-union alternative in the world of industrial relations. Most of the nation’s attention was focused on labor unions and on collectively bargained wage agreements. It was an era when labor relations was still an important journalistic beat and writers like Abe Raskin of The New York Times wrote about labor relations in the auto and steel industries. A small academic cottage industry in labor relations developed, led by professors such as California’s Clark Kerr, Princeton’s Fritz Harbison and Richard Lester and Harvard’s John Dunlop. These people tended to write about unions as institutions and about the “mature” form of collective bargaining. In their spare time, many acted as arbitrators or mediators and thus took a formal role in the labor relations process. Intellectuals with a wide audience, such as John Kenneth Galbraith, viewed union-management relations as an important manifestation of American pluralism. With all the attention on unions, the commentators overlooked the robust nature of welfare capitalism. As the appeal of unions faded in the face of global competition and the general stagnation of the economy in the 1970s, welfare capitalism once more became visible. It meshed with the Japanese style of teamwork that came into vogue; it seemed to offer more flexibility than did the rule-bound style of industrial relations common to unionized workplaces. More recently, however, as the workforce has become more educated, the times seem to have once again bypassed welfare capitalism. Modern workers, particularly educated and advantaged workers, as Jacoby notes, often appear to be like nineteenth-century craftsmen. They drift from company to company, adding lines to their resumes and providing their own form of security through pensions and health insurance that they maintain on their own. As if to underscore the importance of these independent workers, the Clinton administration may soon convert the Social Security system so that part of it becomes a private savings account.

One of Jacoby’s main contributions in this very impressive book is to illustrate how modern welfare capitalists have come to grips with the Wagner Act and the Social Security Act. Executives from all three of his companies became involved in national politics. General Wood of the Sears Roebuck Company was a traditional conservative, involved in things like the America First Committee. Frederick Crawford became the head of the National Association of Manufacturers and played a key role in the modifications of the Wagner Act that led to the Taft-Hartley law. In particular, Thompson Products fought to preserve the right to appeal to its workers on behalf of its company-controlled union, despite warnings from the National Labor Relations Board that such appeals represented tampering with representation elections. Marion Folsom of Kodak became the leading business expert on social insurance and fought to preserve Social Security and unemployment compensations in forms that blended seamlessly into welfare capitalist practices. These companies, then, did not run away from the New Deal so much as they learned to adapt its regulatory structure to their purposes.

Without a doubt, this book is an important one that will be read both for the data it provides on the three companies and for its more general points about the persistence of welfare capitalism beyond the New Deal. The research is almost overwhelming as is the general degree of erudition in the book. It is, to be sure, an academic book in which the author occasionally takes excursions into trendy academic topics to the detriment of establishing a clear line of argument. Hence, there are digressions on such topics as the gender composition of the labor force during World War II, the nature of industrial psychology, and the organizing tactics of the United Auto Workers. Some of the writing is a little over-elaborate and demands close attention from the reader, as in this sentence (p. 74): “In theory, Kodak wage dividends plans should have been a factor in the company’s performance during the early 1930s, since profit sharing makes wages more sensitive to economic conditions, which, in turn, shields employment levels during hard times.” I could have used more help with the implicit economic theory in that sentence and would have preferred that it contain fewer clauses. Still, an academic monograph is an appropriate place to display one’s learning and it is clear that Sanford Jacoby has much to teach. One can predict with confidence that this book will exercise an important influence over modern American historiography; it represents an extremely impressive achievement.

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

American Work Values: Their Origin and Development

Author(s):Bernstein, Paul
Reviewer(s):Frey, Donald

EH.NET BOOK REVIEW

Published by EH.NET (February 1998)

Paul Bernstein, American Work Values: Their Origin and Development. Albany: SUNY Press, 1997. 368 pp. $59.50 (cloth), ISBN: 079143257.

Reviewed for EH.NET by Donald Frey, Department of Economics, Wake Forest University.

Bernstein surveys a massive literature about work values and attitudes, including a wide array of primary sources. The bibliography alone is some 66 pages and runs the gamut from original Puritan expositions of the “Protestant ethic” through some of the most recent opinion surveys on work attitudes. Someone interested in this field should check this book if for the bibliography alone.

As the bibliography makes clear, this is a book with a wide sweep. Bernstein documents the development of American work values, attitudes, and practices from the earliest colonial years through the 1990s. He organizes his material around four “continuities” or themes: 1) the search for job security; 2) the belief in work as opportunity; 3) the evolving work ethic (starting with the religious view of work as “calling” and ending with the contemporary “worth ethic”); 4) the debate over the community’s obligation to those without work.

Perhaps as interesting are the “discontinuities” that mark the transitions between the several stages of development that Bernstein delimits. The era of the Puritan ethic, Bernstein says, lasted into the first part of the eighteenth century; this was when work was understood as a divine calling. The second era, work as opportunity, began with Benjamin Franklin and lasted through much of the nineteenth century; one worked for utilitarian goals, and virtues became means to an end. As Bernstein surveys the present century, he discovers at least three distinct eras: the era of efficiency (Taylorism), the “human relations” era, and a new “human resources” era.

Common to all the eras are the four “continuities,” which play out in ways unique to each era. For example, the Puritan notion of the “deserving and undeserving poor” shares much with the welfare-reform concepts of the 1990s, including similar perceptions of the motives of the poor.

For each of his eras, Bernstein describes both the work values articulated by the dominant members of society (whether Puritan clergymen or top business managers) as well as the counter values of the economically weak members of society. This is an intriguing approach, but it has its weaknesses. The articulate members of society leave a rich lode of writings to be mined. The poor, unemployed, or enslaved, leave far less of a record, and Bernstein often is forced to infer their values. This problem gets worse the further one goes back in time. In the present era, Bernstein can rely on opinion surveys and the like to get a reading of the values of the otherwise inarticulate; however, in the colonial era it is much more difficult to infer the values of those without a voice. Would the economically weak have held the counter values Bernstein has inferred, or might they have internalized the dominant values after all?

Value systems are important in understanding human behavior (probably as much as maximization models), and Bernstein makes a meaningful contribution in expositing them. However, his work suffers from some weaknesses. It is ironic that Bernstein writes more clearly and is more convincing in his analysis of earlier centuries than the present one. In dealing with values in the twentieth century, Bernstein becomes unclear and much less convincing. He tends to equate changing management practices (Taylorism, welfare capitalism, etc.) with changes in values. Surely value systems are more fundamental than passing management practices and are rooted more deeply in the society at large; consequently values should have more staying power than management strategies. Does management’s adoption of, or giving up of, say, time-and-motion studies really represent a change in a whole society’s values? Or are management practices merely an adaptation at the margins of more enduring societal values? It is difficult to believe that there have been at least three different major values eras in the twentieth century; surely values have more staying power than that. The management practices and philosophies that Bernstein equates with twentieth-century American work values seem to be far less deeply rooted in the culture than, say, the utilitarian values of a Benjamin Franklin, which some commentators argue are with us still.

Another weakness of the book is that Bernstein allows the abundant data of the twentieth century to drown his ideas. He writes more convincingly of the dominant values of earlier centuries, it seems to me, precisely because he sticks to values clearly articulated by good representatives of their times. In his discussion of recent years Bernstein seems to get bogged down citing almost any court case, election result, opinion-survey result, or researcher’s observation that has any relation to work. The result is somewhat disjointed and unconvincing.

Bernstein’ treatment of Affirmative Action in the workplace provides a good example of the weakness of his treatment of the present century. After pages of details about Affirmative Action’s genesis and evolution, Bernstein ends with a seven-line paragraph that concludes that Affirmative Action simultaneously affirms and denies key American work values; hence, presumably, the mixed response to Affirmative Action and its mixed prospects. This reader would have expected the emphasis to be reversed: Bernstein should have given a short explanation of Affirmative Action, then have given a detailed analysis of why the program both taps into and simultaneously rejects central American values.

In sum, this book provides a solid overview of the development of American work values, attitudes, and practices over several centuries. Bernstein does a very good job until he reaches the twentieth century. In fact, his chapter on the Puritan work ethic is superior. The unstated thesis of the book, that fundamental values are central to understanding economic behavior, is indisputable. Therefore, works like this one enhance our understanding of economic behavior, and complement other, more abstract, methods of analysis. Finally, the bibliography alone makes the book worthwhile.

(Paul Bernstein is currently adjunct professor of management at Rochester Institute of Technology. He is former dean of graduate studies and former dean of liberal arts there, too.)

Donald E. Frey Department of Economics Wake Forest University

Donald Frey is professor of economics and has taught courses on ethics and economics in both the Master of Arts in Liberal Studies program and the economics department at Wake Forest University. He is author of “The Good Samaritan as Bad Economist: Self-Interest in Economics and Theology,” in Cross Currents: Journal of the Association for Religion and Intellectual Life (Fall 1996).

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Subject(s):Social and Cultural History, including Race, Ethnicity and Gender
Geographic Area(s):North America
Time Period(s):General or Comparative

The Allure of the Foreign: Imported Goods in Postcolonial Latin America

Author(s):Orlove, Benjamin
Reviewer(s):McCants, Anne E. C.

EH.NET BOOK REVIEW

Published by EH.NET (February 1998)

Benjamin Orlove, editor, The Allure of the Foreign: Imported Goods in Postcolonial Latin America. Ann Arbor: University of Michigan Press, 1997. viii + 226 pp. $42.50 (cloth), ISBN: 0472106643.

Reviewed for EH.NET by Anne E.C. McCants, Department of History, Massachusetts Institute of Technology.

One of the drawbacks of the standard geographical organization of the historical discipline (broadly defined to include economic history and historical anthropology and sociology) is that scholarship about those regions considered peripheral to Europe and the United States is little read outside of its own subfield. This isolation occurs despite the fact that such scholarship is often heavily influenced by the themes and concerns (and even the methodologies) of the dominant fields in the discipline. Not surprisingly, this unbalanced relationship impacts even the narrative content of regional studies, with primacy often automatically accorded to those historical events which specifically connect the periphery to the “center.”

This volume edited by Benjamin Orlove, on a topic- the import of European goods into Latin America during the nineteenth and early twentieth centuries- which lends itself easily to a Eurocentric analytical focus, works hard to avoid this pitfall. Moreover, this volume offers all scholars interested in the political and domestic economies of consumption an innovative methodological model to follow, one which seamlessly interweaves the work of historians and anthropologists as well as the standard economic history narrative of the postcolonial Latin American economy with a theoretically informed cultural analysis. The introduction to the volume, written by Orlove (an anthropologist) and Arnold Bauer (an historian) begins with the explicit claim that their project is committed to paying “attention to internal social factors” in explaining the “varied responses to European goods” in Latin America and other parts of the pre-industrial world (p. 1). Their goal is not to reject outright the old export-centered interpretation of Latin American development, but rather to balance it with an understanding of the “partially autonomous” nature of imports and consumption (p. 7). In particular, they want to highlight the important role played by consumption (whether of imports, domestic imitations, or “native” products) in the shaping of new national identities and the establishment and legitimation of social hierarchies within that national experience.

While not all of the individual contributions to this volume live up to the high standards set in the introduction, several are particularly interesting and worth highlighting here. Not surprisingly, the substantive chapter by Orlove and Bauer on the consumption of foreign wine, hot beverages, and houses (in fact building materials and architectural design) in Chile during the Belle Epoque nicely demonstrates the principles they set forth at the outset. They do not discount the importance of macroeconomic forces in their account of the spread (and ultimate imitation) of these foreign goods. Nonetheless, they focus their discussion on the twin issues of European goods as “status markers” and as signs of “modernity” (pp. 116 and 118). They employ both quantitative and qualitative data to tease out what they call the “contradictory pressures to use goods to demonstrate national distinctiveness and global commonality- a contradiction that expressed itself in a tension between national and cosmopolitan styles” (p. 116).

The chapter by Erick Langer on the distribution and meaning of foreign cloth imports among the Chiriguanos in the Lowland Frontier of Bolivia uses very limited source materials in an impressively creative way. His work challenges many of the standard assumptions regarding the interaction between Western goods and indigenous peoples, most notably that the latter are slow to adapt and change, and that consumption of the former will evolve in a linear (progressive) way from little use to greater dependence. He documents convincingly that in the initial period of frontier contact between the Chiriguanos and mestizo ranchers power resided disproportionately with the former; and moreover, that that power was parlayed into significant consumption of highly desired European textiles. It was only with the development of the encroaching cattle economy, the rise of a functioning labor market for nearby Argentine sugar plantations, and the mining boom which put financial resources into the hands of the Bolivian state, that the Chiriguanos lost their command over imports and saw serious reductions in their standard of living. Langer’s analysis of this development in reverse is equally sensitive to issues of ethnography, political power, and neoclassical economics.

Finally, the chapter by Josiah Heyman on the changing meaning of import consumption along the Mexico-United States border between the Porfirian 1880s and 1890s and the present is worth noting separately. Using government import statistics, household inventories, and extensive field interviews, Heyman develops a richly nuanced description of the cultural meanings attached to a variety of US-made goods, as well as to the retail sources for those goods. Most importantly, he documents the changing nature of those meanings over time, even in some cases among the same individuals. This leads him to the provocative conclusion that “neither the meaning of nationhood nor of import is constant” (p. 180); followed by the suggestion that the meanings of standards of living may also vary greatly across different political contexts. This is certainly rich food for thought for economic historians, many of whom are deeply committed to the enterprise of assessing past standards of living.

In short, this is a book worth reading beyond the immediate circle of scholars whose work focuses on the development of the Latin American economy and polity. Much of the source material, and the strong commitment to cultural analysis found in this volume will not be overly familiar to economic historians. But many of the questions raised, and the evidence presented to answer them, make an important contribution to areas of inquiry of long-standing interest to economic historians.

Anne E.C. McCants Department of History MIT

Anne McCants is the author of Civic Charity in a Golden Age: Orphan Care in Early Modern Amsterdam (University of Illinois Press, 1997). She is currently working on a project dealing with the emergence of consumer culture in the Dutch Republic.

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Subject(s):International and Domestic Trade and Relations
Geographic Area(s):Latin America, incl. Mexico and the Caribbean
Time Period(s):19th Century

Health and Welfare During the Industrial Revolution

Author(s):Steckel, Richard
Floud, Roderick
Reviewer(s):Craig, Lee A.

EH.NET BOOK REVIEW

Published by EH.NET (January 1998)

Richard Steckel and Roderick Floud, editors, Health and Welfare during Industrialization. National Bureau of Economic Research Policy Report. Chicago: University of Chicago Press, 1997. ix + 465 pp. $72.00 (cloth), ISBN: 0-226-77156-3.

Reviewed for EH.NET by Lee A. Craig, Department of Economics, North Carolina State University.

One of the oldest and most persistent debates in economic history concerns the “standard of living” during the “Industrial Revolution”. Indeed, it is one of the few debates that both ante-date the Cliometric Revolution and has survived it more or less in tact; furthermore, the meaning of the terms themselves is not immune from controversy. In the past two decades a growing body of research focusing on biological indicators of Homo sapiens’ well being- a biological standard of living, if you will – since the eighteenth century has emerged. Two pioneers of that research, Richard Steckel and Roderick Floud, have put together a collection of essays entitled Health and Welfare during Industrialization, and as these things go in academic publishing it is probably as close as one can get to one-stop shopping on the subject.

The volume begins with an editors’ introduction to the various biological measures employed in the essays, and for the uninitiated this is a good place to start. That piece is followed by an excellent essay by Stan Engerman, who reviews the conceptual and practical issues involved in defining and measuring the “standard of living”. Depending on one’s pain threshold, one might recommend the essay to colleagues who uncritically employ components of the national income and product accounts in time series analysis.

The body of the volume contains nine essays covering various indicators, biological and otherwise, of well-being among eight countries: The United States (Dora Costa and Steckel), Britain (Floud and Bernard Harris) and the United Kingdom (Paul Johnson and Stephen Nicholas), Sweden (Lars G. Sandberg and Steckel), France (David Weir), Japan (Gail Honda), Germany (Sophia Twarog), the Netherlands (J.W. Drukker and Vincent Tassenaar), and Australia (Greg Whitwell, Christine de Souza, and Nicholas). The biological indicators, which are calculated for one or more countries, include mortality rates, life expectancy, and the body mass index (BMI), but perhaps the most useful measure, because of the information it conveys and because of its considerable availability over time and space, is human stature.

As the first industrial country, Great Britain is a particularly interesting case. While the British were tall by European standards in 1800, from the late eighteenth century to the middle of the nineteenth century the trend in average height was downward, suggesting a biological counterpart to the Kuznets’ curve. At least some groups in the United States, Australia, and Germany also experienced declines in mean stature. Although the timing and explanations vary dramatically across countries, they each correspond roughly with a period that might arguably be labeled as one of “industrialization”. Interestingly, Human Development Indices (HDI) series for Britain, the United States, and Germany do not show the same pronounced downturns as the heights. Since HDI generally includes some combination of literacy, per capita output, and life expectancy, this finding suggests some divergence between these measures and stature.

The other countries studied do not reveal the same trend in heights however, the way in which they avoided the externalities associated with industrialization varies from country to country. In France, for example, Weir argues that the relatively slow pace of urbanization and an increase in parents’ investment in their children’s health contributed to the steady rise in stature. In the Netherlands, Sweden, and Japan a combination of slow urbanization, high literacy, and late industrialization- that is after the germ theory of disease had motivated improvements in public health- ameliorated the externalities experienced by the early industrializers.

The volume concludes with a very useful summary by the editors. Specifically, Steckel and Floud compare levels and trends of five “socioeconomic indicators” (per capita GNP, stature, life expectancy, literacy, urbanization) between c. 1800 and c. 1950 for the eight countries analyzed in the other essays. Although some of the figures are, to put it generously, the product of creative calculations, the authors are careful to qualify their conclusions accordingly.

When offering an overall review of the essays in this volume it is difficult to separate them from the broader research agenda from which they were generated. I would say the essays (and the agenda) offer at least two major contributions and raise a set of related questions. The first contribution is simply that they offer more data. The second is that they offer a different approach to the standard of living question. While the former may not be controversial, the latter surely is, and there are those who might not welcome a new approach, or at least not this particular approach. Since Marshall, the principles of economics have rested on the foundation of individual optimization based on relative prices and subject to an income constraint. In these essay one must ask, What is being optimized? What are the relative prices? What is the income constraint? Of course the anthropometricians only need to address these questions if they see their research as a product of those principles. A sense of that need will no doubt vary from researcher to researcher, and to be sure, neo-classical control of the field is not carved in stone. One might argue that the anthropometricians have stated their case, and the intellectual marketplace will decide if that case is to become part of the canon. It is worth noting that in the introduction Steckel and Floud address these issues indirectly by referring to related neo-classical research in the health and development fields.

Whatever one’s views on the relative weights of the contributions versus the questions, it is safe to say that henceforth no one will be able to claim cliometric literacy or write knowingly on the “standard of living debate” without reference to the issues addressed in and raised by this volume. In that sense we are all anthropometricians now.

Lee A. Craig Department of Economics North Carolina State University

Lee Craig is Associate Professor of Economics at North Carolina State University. His paper, “Nutritional Status and Agricultural Surpluses in the Antebellum United States,” with Tom Weiss, is forthcoming in Studies on the Biological Standard of Living in Comparative Perspective, J. Komlos and J. Baten, editors, Stuttgart, Franz Steiner Verlag.

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Subject(s):Income and Wealth
Geographic Area(s):General, International, or Comparative
Time Period(s):19th Century

BFGoodrich: Tradition and Transformation, 1870-1995

Author(s):Kerr, K. Austin
Blackford, Mansel G.
Reviewer(s):Simons, Kenneth L.

EH-NET BOOK REVIEW

Published by H-Business@eh.net (December, 1997)

Mansel G. Blackford and K. Austin Kerr. BFGoodrich: Tradition and Transformation, 1870-1995. Columbus: Ohio State University Press, 1996. x + 507 pp. Tables, photographs, appendices, notes, and index. $30.00 (cloth), ISBN 0-8142-0696-4; unreleased (paper), ISBN 0-8142- 0697-2.

Reviewed for H-Business by Kenneth L. Simons, Royal Holloway, University of London

Insights from an American Industrial Experience

Blackford and Kerr’s history of B.F. Goodrich traces the development of the company as it produced a changing range of products from 1870 to 1995. Through this history, the authors provide insights into several universal themes about industrial competition and organization of American manufacturers in the 1900s. Blackford and Kerr make no attempt to generalize conclusions beyond the experiences of Goodrich, but merely provide scholarly descriptions of the company’s history in a way that addresses the universal themes. In American manufacture of automobile tires, B.F. Goodrich became the first producer when in 1896 it filled an order from the Winton Automobile Company of Cleveland. As automobile production expanded, Goodrich was well-placed to stay a leader in this profitable new market by branching out from bicycle tires and other rubber products into automobile tires. The company licensed key tire patents and helped set up the Clincher Tire Association and its system of production quotas. Yet the quotas spurred manufacturers with low allocated sales to develop alternative technologies. Worse, Goodrich management lagged in tire plant investment and improvement. By 1916, competitor company Goodyear surpassed Goodrich with a 21% market share in automobile tires, and Firestone too surpassed Goodrich by the mid-1920s. Although Goodrich hung on among the industry’s “big four”, its relative inattention to manufacturing meant that, from the 1920s on, high costs often plagued profits in the company’s tire operations. After World War II, despite sporadic major investments in tire manufacturing, profits remained elusive. In 1988, Goodrich sold its tire interests.

The company had other products to rely on, some in lucrative growth markets. After tires, a second key product was polyvinyl chloride, PVC. In experiments to improve the bonding between metal and rubber, company scientist Waldo Semon in 1926-1927 stumbled on a means to turn the polymer of vinyl chloride into a flexible, jellylike plastic. Managers did little to commercialize plasticized PVC until the late 1930s. World War II highlighted PVC’s advantages, as the military funded rapid construction of production facilities. A key initial use was the coating of electrical wires and cables. By around the end of the war, Goodrich apparently had a capacity to produce annually over 10 million pounds of PVC. By 1966, Goodrich’s output reached 260 million pounds, and by 1971, 456 million pounds. Other firms also produced PVC, including Union Carbide by 1941, but through 1955 the firms involved reaped high profits through “unspoken agreements to maintain prices” (p. 236). Goodrich did not attempt to bar competitors from the market using patents; in any case alternative patents could easily be gained via minor chemical variations. In 1955, Dow Chemical began selling a key raw material that previously had to be produced as part of the PVC manufacturing process. Entry of new producers yielded twenty manufacturers by 1958, and prices plummeted. The easy flood of PVC profits ceased, although Goodrich managed to maintain less striking profits by pioneering new uses for PVC and by developing the industry’s lowest- cost production facilities. Nonetheless, PVC as a commodity chemical became less attractive as a continuing line of business, and Goodrich sold most of its PVC operations in 1993.

Such juggling of product markets was typical for Goodrich, which began its existence in 1870 as a diversified rubber producer. By 1902 it produced rubber items such as bicycle tires, tubes and hoses, molded goods, druggist sundries, golf balls, and conveyor belts. >From its work on chemical additives (to make rubber longer-lasting and quicker to produce), synthetic rubber, and new means to use rubber, the company developed a range of chemical products that led to the formation in 1942 of a separate chemical division, and its reorganization as a wholly owned subsidiary in 1945. Provision of airplane tires, brakes, and other equipment beginning in 1909 led to a small aeronautics department in 1917, and eventually to an aerospace division. In addition to expanding internally, the company purchased firms in strategically related markets or with strategically key technologies. Especially from the 1970s on, executives used divestitures and acquisitions to reshape the company. In the 1980s and 1990s, Goodrich shed its mature markets, notably rubber products and PVC, in favor of two high-growth areas involving materials science: specialty chemicals and aerospace. The authors trace Goodrich’s growing pains, organizational change and continuity, and managerial strategy as the company mutated through different markets over time.

Other themes that recur at various points throughout the book include price collusion and antitrust investigation, reasons for and consequences of laboratory research, difficulties in capturing the monetary returns to important product improvements and patents, strategies in developing distribution networks, influence of personalities on corporate strategy and change, labor unions and strikes, and the thwarting of takeover attempts. These themes may not be addressed as deeply as many readers would like, and clearer thesis statements about them, and comparisons with typical American industrial experience, might have helped the authors focus their information gathering and presentation. However, the authors perhaps can be forgiven these weaknesses, since desirable information may be difficult or impossible to obtain. Moreover, the Goodrich story often provides thought-provoking insights on these themes. A startling insight of this sort is the role of US firms’ infighting over the new radial tire technology in contributing to those firms’ loss of market share to Michelin and other foreign competitors. When Goodrich realized through European subsidiaries that Michelin’s radial tire was an important advance, Goodrich developed its own version of the radial. However, its major competitors Goodyear and Firestone were not ready to produce radials. Goodyear characterized radials as being problematic and promoted its own “bias/belted” tires to customers, thus slowing development of radial sales in the US; moreover, major automakers would not install radials as original equipment on cars unless at least two large manufacturers could supply them. As a result the US manufacturers held back from investments in radials. Also, Goodrich blocked attempts by Goodyear to purchase firms in Holland and New Zealand that would have given radial technologies to Goodyear; again US tire makers’ move into radials was slowed. Earlier investments in radials could have helped defend against international competition by radial makers that eventually cut deeply into US firms’ sales.

One issue that is little addressed is the relative importance of in- house engineering work versus the purchase of equipment in lowering firms’ manufacturing costs. Blackford and Kerr portray Goodrich’s profitability troubles in automobile tires as resulting, seemingly most importantly, from its laggardliness in improving manufacturing processes. This portrayal seems reasonable given others’ findings on the subject [1]. However, the authors come across as implying that lowering costs was mainly a matter of purchasing new equipment, and they do not analyze the relative proportion of in-house engineering work required for cost reduction. (They do mention a specific case, converting tire building machines for radial tires, in which in-house conversion of equipment seems to have been less appropriate than purchasing new equipment. Nonetheless, this does not demonstrate that in-house engineering work was the less promising approach at other times or for other aspects of the manufacturing process, and it stills leaves open the question of engineering costs required to learn about and install equipment from suppliers.) Hard evidence about the size and activities of production engineering and related workforces is difficult to come by, so the contribution to cost reduction of equipment purchases versus in-house engineering remains an open question in economic and historical research.

The book is organized not by themes of this sort, but by chapters corresponding to historical eras, with subdivisions into a lengthy string of product categories. This layout is more prolonged than many readers will care to bear. Fortunately, the subheadings and index provide a means to investigate product markets and some key themes by reading selected chapters. And to their credit, the authors manage to write most of the subsections in a way that invites interest. In occasional instances, ambiguities make readers uncertain about what to believe (e.g., how specifically might Goodrich’s 1954 acquisition, the Sponge Rubber Company, have begun “to fail in the face of management controls imposed from Akron”, p. 225; in what manner did Goodrich’s 1971 divestitures of various rubber products and of its subsidiary Motor Freight cost “about $10 million”, p. 301). But such ambiguities are rare, a tribute to the care with which the book was written.

The research throughout appears scholarly and unbiased. Blackford and Kerr enjoyed full access to Goodrich’s company archive, record books from executive meetings, and other sources. Of course, they also draw on relevant books, trade journals, archives, and interviews. BFGoodrich funded their research, and the company’s chairman and CEO John Ong commented on drafts at the authors’ request, but Ong stressed to them that “the decision about what to say in the book was [the authors’], and [the authors’] alone” (p. ix). Publication via Ohio State University Press apparently was a mandate of the project.

Blackford and Kerr’s BFGoodrich is likely to interest not only persons concerned with BFGoodrich, and not only business historians, but also academics concerned with industrial organization economics, corporate strategy, and organizational studies, plus management practitioners more broadly. It could provide an interesting catalyst for discussion if used as a course text. More importantly, it is a catalyst for all readers to reflect on important themes of industrial experience.

Note: 1. For a general overview of factors affecting competition in US tire manufacturing, see French [1991]. Excellent early studies of labor productivity improvements in US tire manufacturing, and their correlation with the installation of new equipment, are by Gaffey [1940] and Stern [1933]. Regarding the nature of technological changes taking place in the tire industry’s manufacturing processes, and their relation to firms’ profits and survival, see especially Warner [1966] and Klepper and Simons [1997].

References: French, Michael J. The U.S. Tire Industry. Boston: Twayne Publishers, 1991. Gaffey, John D. The Productivity of Labor in the Rubber Tire Manufacturing Industry. New York: Columbia University Press, 1940. Klepper, Steven, and Kenneth L. Simons. “Technological Extinctions of Industrial Firms: An Enquiry into their Nature and Causes.” Industrial and Corporate Change, vol. 6 no. 2, 1997, pp. 379-460. Stern, Boris. Labor Productivity in the Automobile Tire Industry. Bureau of Labor Statistics Bulletin 585, Washington, D.C., US Government Printing Office, 1933. Warner, Stanley L. Innovation and Research in the Automobile Tire and Tire-Supporting Industries. PhD dissertation, Harvard University, 1966.

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Subject(s):Business History
Geographic Area(s):North America
Time Period(s):General or Comparative

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