EH.net is owned and operated by the Economic History Association
with the support of other sponsoring organizations.

The Defining Moment: The Great Depression and the American Economy in the Twentieth Century

Author(s):Bordo, Michael D.
Goldin, Claudia
White, Eugene N.
Reviewer(s):Cain, Louis P.

Published by EH.NET (September 1998)

Michael D. Bordo, Claudia Goldin, and Eugene N. White, editors, The Defining

Moment: The Great Depression and the American Economy in the Twentieth

Century. An NBER Project Report. Chicago: The University of Chicago

Press, 1998. xvi + 474 pp. $60.00 (cloth). ISBN: 0-226-06589-8

(cloth), 0-226-06589-8 (paper).

Reviewed

for EH.NET by Louis P. Cain, Departments of Economics, Loyola University of

Chicago and Northwestern University.

The “moment” is the Great Depression; what is being “defined” is public policy.

The editors have assembled twelve papers from a distinguished cast of authors

who are closely associated with their subject. The papers discuss almost all

of the programs that persisted from the First and,

particularly, the Second New Deals, but few of those that did not. In their

introduction,

the editors discuss that this is potentially a controversial hypothesis, but

most of the papers simply explain why they agree or disagree with the

proposition, and some do find this was NOT a

“defining moment.” Whether each reader ultimately accepts or

rejects the hypothesis may be little more than a matter of definition.

In any event, each of the papers makes a substantial contribution to our

understanding of the depression. Most will be widely cited. Many readers,

including undergraduates, will want to consult the volume for more than one

paper. Thus, in the interest of disclosure, a thumbnail sketch of each of the

papers is appropriate. These brief synopses emphasize the relation of each

paper to the volume’s general theme. Each contains much more.

The

collection is divided into four sections of three papers each. The first is

entitled “The Birth of Activist Macroeconomic Policy.” Charles Calomiris

and David Wheelock ask whether the substantial changes in the monetary

environment of the 1930s had lasting effects? Those familiar with Wheelock’s

work will not be surprised to note they find little change in the thinking of

the Federal Reserve System. One effect of the New Deal banking laws was to

shift power from the Fed toward the Treasury,

a shift they feel imparted an inflationary bias, especially when conjoined with

the more activist approach to policy that was undertaken concurrently. The

most important legacy of the depression was the departure from gold creating

“the permanent absence

of a ‘nominal anchor’ for the dollar” (63).

The Bretton Woods dollar system allowed the Fed to “stumble” into the inflation

of the 1960s, and the continued absence of something like the gold standard

“provides an enduring legacy of uncertainty” (63) as to monetary policy in the

long run.

Brad De Long notes that the U.S. did not have a fiscal policy

in the

contemporary sense of the term before the Great Depression. It borrowed

heavily during periods of war and tried to redeem the debt as quickly as

possible during periods of peace. Government deficits in peacetime were rare

until

the 1930s, when they proved unavoidable despite the fiscal conservatism of both

Hoover and FDR. Yet, even before Keynes, there was an understanding that

“deficits in time of

recession helped alleviate the downturn” (83). After the second World War, a

fiscal policy consensus emerged that De Long characterizes as: “set tax rates

and expenditure plans so that the high-employment budget would be in surplus,

but do not take any steps to neutralize automatic stabilizers set in motion by

recession” (84).

That consensus proved hard to maintain: “The U.S. government simply lacks the

knowledge to design and the institutional capacity to exercise discretionary

fiscal policy in response

to any macroeconomic cycle of shorter duration that the Great Depression

itself” (82). What has persisted is the willingness to adopt a fiscal policy

stance that imposes a cost — perhaps higher than necessary (higher inflation,

lower saving and productivity) — to insure that there is no return to

Depression-era conditions.

Deposit insurance, the topic of Eugene White’s essay, was a result of the

Depression and is generally considered to be one of its great successes.

Banks became a scapegoat, and the

restrictions placed on the banking business diverted part of what they once

did to other parts of the financial sector. Banking became smaller than it

might have been. Deposit insurance was an attempt to insure the banking system

did not fail again.

White attempts to estimate bank failures under the assumption that deposit

insurance was not adopted. He finds that a stronger, larger banking system

would have resulted in lower failure rates and higher recovery rates.

Thus, it is possible the FDIC increased bank losses. A more important outcome

is that the FDIC changed the distribution of losses. The cost of those losses

is now “distributed to all depositors and hidden in the premialevied on banks”

(119). Thus, even if losses increased, they were unseen by individual

depositors, with the result that a marginal institution remains extremely

popular.

The second part, “Expanding Government,” begins with a paper by Hugh Rockoff on

the expansion of the government sector, largely as a result of a large number

of new federal programs. As Rockoff notes,

“it is easy to see that there was an ideological shift … it is harder to see

what produced it” (125). This ingenious article looks back at the publications

of economists in the 1920s and earlier and finds there were champions for

almost all of the New Deal programs. Curiously, one of the programs economists

did not endorse, one measure that FDR did not champion, was deposit insurance.

When the Depression came and the economic doctors were called, microeconomists

had what they considered successful prescriptions. Some part of that must have

been conditioned by the role of the government in World War I. But another

part is something that Rockoff does not discuss, and it surely is one of the

factors producing an ideological change within the profession.

Even before the Great Depression, the competitive paradigm was under attack.

The merger movement at the turn of the century called into question the

assumptions of constant returns to scale and easy entry and exit. The

emergence of a consumer society called into question the assumption of

homogeneous products. Robinson and Chamberlin’s models are independent of the

Depression, and what impact they would have had in the absence of the

Depression is unclear. It is clear that FDR came into the White House with a

mandate to do something, and the economic doctors had a long list of things to

try, things that had been used successfully elsewhere.

John Wallis and Wallace Oates argue persuasively that the New Deal had a

profound effect on the nature of American federalism through its use of a

little used fiscal instrument — intergovernmental grants. Before the

Depression, different levels of government operated with a much greater degree

of independence than they would thereafter. Intergovernmental grants created

the necessity for cooperation that has characterized the fiscal federalism ever

since; “fiscal centralization and administrative decentralization” (170). They

argue that the new structure was conducive to the growth of government. Like

Rockoff, they note the growth of the federal government did not come at the

expense of state and local governments; both grew. They show how this new

pattern was “the result of the struggle between state and national

governments, and also between the president and Congress, for control over

these programs” (178). How much of this has to do with a states rights’ bias

in the legislative and judicial branches, and how much with the depression

itself, is uncertain.

Gary Libecap examines the regulatory laws effecting agriculture between 1884

and 1970 and the budgetary expenditures that were derived from those laws

between 1905 and 1970. His contention is that “the New Deal increased the

amount and breadth of agricultural regulation in the economy and …

shifted it from providing public goods and transfers to controlling supplies

and directing government purchases to raise prices” (182).

Acreage restrictions and government purchases were the most apparent of what

he terms, “unprecedented, peacetime government intervention into agricultural

markets” (216). Abstracting from those policies, Libecap asks what

agricultural policy might have been in the absence of the Depression.

He believes it would have been more like it had been, but that is the result

of an exercise in which he subtracts laws passed after 1939 with a direct link

to “key New Deal statutes.” One wonders how many any of those statutes would

have been passed in any event; some represent ideas that pre date the

depression.

In the first paper of Section III, “Insuring Households and Workers,”

Katherine Baicker, Claudia Goldin, and Lawrence Katz note that there are three

differences between the system of unemployment compensation in the U.S. and

elsewhere: experience rating, a federal-state structure, and limitations on

benefit duration. The question they address is how that system would have been

different had it not been created during the New Deal. There is an implicit

assumption the U.S. ultimately would have adopted some form of unemployment

compensation in the absence of the Depression. To how many other New Deal

programs is this assumption relevant? The authors point to the federal-state

structure as the key difference. Their counterfactual

system is strictly a federal system with no experience rating, a system

consistent with the administration’s recommendation. We got the system we did

because, “The federal-state structure and the manner in which the states were

induced to adopt their own

UI legislation assured passage of the act and guaranteed its

constitutionality” (261). They criticize the system for not having

“changed with the times,” but that is no surprise after reading Wallis and

Oates.

While most people look to the labor legislation of the 1930s as “a defining

moment,” Richard Freeman argues that to be defining an event must “lock in

certain outcomes that persist … when, given a blank slate, society could have

developed something very different” (287). This test creates two interesting

dichotomies in Freeman’s story. The first concerns the framework versus the

results. The legal framework for private sector labor relations has persisted,

and Freeman considers that framework to be

“outmoded.” On the other hand, the unionization attendant to the adoption of

that framework “looks more like a diversion from American

‘exceptionalism’ … than a critical turning point in labor relations”

(287). The density of private sector unions today is similar to what it was

just after the

turn of this century; the voice of those unions in national political discourse

is barely audible. The second dichotomy concerns private versus public unions.

State regulation of the latter has resulted in a relatively stable environment

in which collective bargaining proceeds with less confrontation, but that may

be because public sector managers are not as accountable to the taxpayers as

private sector managers are to the company’s profits. In sum, Freeman

acknowledges that the framework in which lab or relations takes places was

defined during the Depression, but that was not a “defining moment” for labor

relations.

In their study of the creation and evolution of social security, Jeffrey Miron

and David Weil do not examine the role the Great Depress ion might have played

in the program’s adoption. Their emphasis is on the evolution of the program

since its inception. They find that “in a mechanical sense,

there has been a surprising degree of continuity in social security since the

end of the Great

Depression” (320). That is, there has been little change in what each of the

parts does; it is clear the balance between them has changed and that change

has had an impact on the economy. As the population has aged, the balance

between the old-age assistance component,

the basic response to the depression, and the old-age and survivors insurance

component has transformed what was an insurance program benefiting few to a

transfer program benefiting many.

Doug Irwin’s paper on trade policy begins the final section, “International

Perspectives.” Irwin shows that, during the 1930s, the locus of control of

trade policy passed from the legislative to the executive branch of government

largely as a result of “the depression as an

international phenomenon”

(326). Smoot-Hawley marked the end of the old approach. By the end of the

1930s, the average tariff rate had decreased from over 50% to less than 40%.

In another ten years it would be below 15%. While part of this change is

attributable to trade policy,

part should be attributable to fiscal policy (a return to the days of the

Underwood tariff) as the federal income tax came to play a much larger role,

especially in the 1940s. Similarly, the Reciprocal Trade Agreements Act was

passed during the depression, but it was not “institutionalized”

until after World War II. When, during the war, Republicans moved to seek

congressional approval and to protect domestic firms competing with imports, it

was clear that the policy changes of the 1930s would persist. Then, after the

war, “the new economic and political position of the United States in the world

… made a return to Smoot-Hawley virtually unthinkable” (350).

The paper by Maurice Obstfeld and Alan Taylor is in many ways the most

expansive in the volume. They begin by investigating more than a century of

data on capital mobility, then propose a framework in which both the downtrend

initiated by the Great Depression and the uptrend of recent years can be

understood. The framework is a policy “trilemma” faced by all national

policymakers: “the chosen macroeconomic policy regime can include at most two

elements of the ‘inconsistent trinity’ of (i) full freedom of cross-border

capital movements, (ii) a fixed exchange rate, and (iii) an independent

monetary policy oriented toward domestic objectives” (354). To the authors,

the

Great Depression was caused by subordinating the third element to the second.

Under the classic gold standard, monetary policy was concerned with exchange

rate stability, not

domestic employment, and capital mobility was facilitated. The abandonment of

gold led to a system

“based on capital account restrictions and pegged but adjustable exchange

rates, one whose very success ultimately led to increasingly unmanageable

speculative flows and floating dollar exchange rates….” (397).

The gold standard plays an equally prominent role in the paper by Michael Bordo

and Barry Eichengreen. To address the question of what the Great Depression

meant for the international monetary sy stem, they examine a counterfactual

world without the Great Depression — but with World War II and the Cold War.

They assume the gold standard would have persisted through the 1930s, been

suspended during the war, and resumed in the early 1950s. Under

these assumptions, “the depression interrupted but did not permanently alter

the development of international monetary arrangements”

(446). The system that did develop in the U.S. was very different than the

hypothesized one, but the factors that ultimately led to the collapse of the

Bretton Woods arrangements would have caused the collapse of the gold standard

– and possibly at an earlier date. Those factors include “the failure of the

flow supply of gold to match the buoyant growth of the world economy and hence

of government’s demand for international reserves” (447).

This, in turn, led to questions about U.S. official foreign liabilities and the

gold convertibility of the dollar. Bordo and Eichengreen believe that,

in these circumstances, a floating system would have resulted leaving us with

more or less what we have today. If one accepts the “ifs” in their argument,

the institutional structure that emerged in the wake of the Great Depression

postponed the transition.

This is a remarkable thought on which to end this volume. Calomiris and

Wheelock discuss the Fed’s recent emphasis on price stability as a short-run

policy concern as a “throwback.” Obstfeld and Taylor discuss the deregulation

and recent growth of the financial sector as creating

a barrier to the reimposition of capital controls. Both discussions concern

long-run adjustments the economy has made as a result of the abandonment of

gold, but both would have taken place had there been no Great Depression if

Bordo and Eichengreen are

correct.

The editors point to four common themes supporting the “defining moment”

hypothesis (6). “First, skepticism about the efficacy of government

intervention withered as the public adopted the attitude that the government

could ‘get the job done’

if the free market did not.” It is unquestionably the case that there was a

loss of faith in the tenets of the competitive model. While this faith was

wavering among social scientists well before the depression, the general

bewilderment of the 1930s created a search for someone who was willing to try

anything. To paraphrase the late John Hughes, before the Great Depression the

federal government only knew how to spend money on rivers, harbors, and post

offices. As Rockoff documents, there were a number of other projects waiting

in the wings.

“Second, many innovations introduced by the New Deal were forms of social

insurance.” While much of the First New Deal took the form of World War I

programs modified for peacetime use, many of the Second New Deal programs were

aimed at ameliorating specific types of suffering, particularly those where

successful experiments had been tried elsewhere. Some undoubtedly would have

been adopted eventually; the depression meant they started earlier than

otherwise would have been the case.

“Third, the character of federalism moved from ‘coordinate’ to

‘cooperative’ with extensive intergovernmental grants, giving greater influence

to centralized government.” This change in form, it is argued,

was necessary to get them through Congress and the Supreme Court, but that is

not necessarily a result of the Great Depression; the states rights’ bias was

present much earlier.

“Last, the conduct of economic policy … changed to give more weight to

employment targets and less

to a stable price level and exchange rate.”

These changes in turn imparted what several authors refer to as a bias in favor

of inflation, but, in a simple Phillips curve world, what developed was a bias

against a return to the conditions of the 1930s. To put it as simply as

possible, those who lived through the Great Depression defined for

policy-makers then and for their grandchildren today that all possible steps

should be taken to avoid repeating the trauma.

Louis P. Cain Departments of Economics Loyola University of Chicago and

Northwestern University

Louis Cain and the late Jonathan Hughes are the authors of American Economic

History published by Addison Wesley. Cain’s article with Dennis Meritt,

Jr., “The Growing Commercialization of Zoos and

Aquariums,”

appeared in the Journal of Policy Analysis and Management, Spring 1998.

His article with Elyce Rotella, “Urbanization, Sanitation, and Mortality in the

Progressive Era, 1899-1929,” will appear in Gerard Kearns, W.

Robert Lee, Marie C. Nels on, and John Rogers, editors, Improving the

Public Health: Essays in Medical History.

Subject(s):Economic Planning and Policy
Geographic Area(s):North America
Time Period(s):20th Century: Pre WWII

The Vanishing Irish: Households, Migration, and the Rural Economy in Ireland, 1850-1914

Author(s):Guinnane, Timothy W.
Reviewer(s):Gemery, Henry A.

Published by EH.NET (August 1998)

Timothy W. Guinnane, The Vanishing Irish: Households, Migration, and the Rural Economy in Ireland, 1850-1914. Princeton, NJ: Princeton University Press, 1997. ix + 335 pp. $39.95 (cloth), ISBN: 0-691-04307-8.

Reviewed for EH.NET by H.A. Gemery, Department of Economics, Colby College.

Over the post-Famine years from 1841 to the eve of World War I, the Irish population fell from 8.2 million to 4.1 million–a complete reversal of the rapid population growth of the pre-Famine era. By 1881 nearly 40% of the Irish-born were living elsewhere. As late as 1911, with slowing emigration, 33% resided elsewhere (p. 104). In studying the why and how of this de-population, Timothy Guinnane (Yale University) examines, at the rural, household level, the decision-making giving rise to major features of that demographic experience: “the rarity of marriage, large families, …. extensive emigration” (p. 7). None of these features alone, Guinnane argues, were unique to Ireland, but the three in combination were.

Before examining why young Irish people made the decisions about marriage, childbearing, and emigration they did, Guinnane undertakes a survey of the Irish rural economy, the role of the state as well as the “several church,” and the demographic patterns of the post-Famine era. After that survey, there follows a detailed examination of household decision-making and it is here that the full range, subtlety, and depth of analysis come into play. The empirical data available are limited and imperfect. As Guinnane ruefully admits, the empirical circumstance is somewhat similar to the drunk-under-the-lamppost anecdote–searching where the light is best. The specific example of this is the “somewhat unusual procedure of going backward in historical time,” i.e. using manuscript census samples from 1901 and 1911 together with tax valuation data to infer individual behavior and decision-making for much earlier, empirically darker, decades (p. 133). However, such data in combination with less detailed, published census material and demographic work done by O Grada, Connell, and others, provide the basis for Guinnane’s attempt to “visualize the [economic and demographic] decisions as people of the day saw them” (p. 17). Thus, Guinnane aims for what he notes (quoting Hammel) as “culturally smart microeconomics” (ibid).

The first step in analysis is with “Households and the Generations,” an examination of the household structures characterizing rural Ireland, the patterns of impartible and partible inheritance, farm size, and the evidence against primogeniture. Guinnane finds a large number of extended family households (“the real Irish departure from the nuclear-family model” p. 142) where an efficiency logic militated against primogeniture, and where increasing emigrant opportunities changed notions of intra-family equality to one of “giving one son a solid farm and the others a chance at good life elsewhere” (p.164). In support of that logic, Guinnane finds that few farms were subdivided in the post-Famine period and the average holding increased, suggesting that amalgamation of holdings became more common.

The analysis then turns to “Coming of Age” and “The Decline of Marriage” where Guinnane finds a Malthusian model of nuptiality (a trade-off between personal consumption and marriage/family) largely a failure. Three grounds are cited: many of the never-married were heads of prosperous households, many remaining in Ireland and remaining unmarried could have emigrated to “a decent life overseas,” and rising rural incomes in the 1851-1911 period were directly at odds with the Malthusian preventative check of increasing poverty (p. 227). Other causal hypotheses, demographic, cultural, and religious are also rejected. Neither a sex imbalance argument nor the role of Catholicism in serving as a brake on marriage are perceived as plausible. Post-Famine emigrant flows were surprisingly evenly balanced across the sexes; thus leaving the remaining home population with a balanced sex ratio as well. A “marriage squeeze” was then, in Guinnane’s judgement, an unlikely occurrence. The Catholicism argument encounters “a simple empirical weakness,” i.e. marital status differences between Catholics and Protestants in Ireland were minor, and overwhelmingly Catholic areas abroad, like the Quebec Province of Canada, did not exhibit high celibacy. Rather, the causes of the rise in permanent celibacy in Ireland are found in economic circumstance: land tenancies made more secure and valuable by the Land Acts, and in the development of a poor relief system with, late in the period, an old age pension system as well. The former meant a rise in the value of an eventual succession to an Irish tenancy relative to the value of emigration. The latter provided a security that substituted, to a degree, for the necessity of family and children. Thus, Guinnane develops “a perspective on marriage” that is quite “Becker-like” in pointing to the altered costs and benefits of marriage and the rise of “marriage substitutes” (p. 238). The outcome, in the Irish case, was a weakened incentive to marry coupled with a rising attractiveness of emigration. By 1911 then, cohort celibacy rates (for ages 45-54) of 25% appeared (Table 4.1).

While celibacy rose, marital fertility remained comparatively high, though Guinnane notes that “recent studies … produce stronger evidence for the beginnings of a fertility transition in Ireland by 1911″ (p. 255). An index of marital fertility (referenced to 1000 for a population with uncontrolled fertility) falls from 868 in 1840 to 769 in 1911 (p. 249). More refined measures of fertility such as cohort parity analysis indicate a beginning adoption of fertility control measures, though fertility remained high by European standards of a fertility transition. Guinnane observes: “The Irish fertility transition consisted, it seems, of couples reducing their families from seven to nine children down to four to six, a number very high by contemporary European standards but demonstrating fertility control nonetheless” (p. 259).

If there is an understated dimension to this nicely-detailed demographic history, it lies with the primacy of emigration in determining the magnitude of the Irish population decline. That point is more evident in Cormac O Grada’s chapter on the same period, “Population and Emigration, 1850-1939″ in his Ireland: A New Economic History, 1780-1939 (1994). In all decades from 1861 to 1926, the net external migration rate dominates the population change rate with its negative impact being nearly double the positive contribution of natural increase (O Grada, Table 9.6). In Guinnane’s analysis, emigration and the emigration decision are never absent–its empirical dimensions (though aggregate population ion change is never decomposed into its components), the coming of age and leaving home, the impact of emigration decisions on nuptiality and fertility. Indeed, a fair portion of the chapter defining the demographic setting is given over to emigration with discussions of migrants’ characteristics and chain migration. Yet, for all that, the decision to leave seems less well defined than are others. That is, perhaps inevitably, a result of the inability to bring empirical evidence to bear directly on mig ration decisions. Unlike the case with two of the major contributions of the work–the empirical base given to discussions of nuptiality and marital fertility–the micro-evidence on migration may be beyond reach.

In this work, as in Guinnane’s earlier a articles on economic-demographic interrelations in Ireland, the case is made for “a more careful integration of microeconomic analysis and institutional detail” (p. 276). It is that sort of careful integration that makes The Vanishing Irish a major contribution to both economic and demographic history.

H.A. Gemery Department of Economics Colby College

Hank Gemery has written articles and monographs on trans-Atlantic migration in periods from the colonial era through the twentieth century.

?

Subject(s):Historical Demography, including Migration
Time Period(s):16th Century

And Still They Come: Immigrants and American Society, 1920 to the 1990s

Author(s):Barkan, Elliott
Reviewer(s):Suzuki, Masao

EH.NET BOOK REVIEW

Published by EH.NET (August 1998)

Elliott Robert Barkan, And Still They Come: Immigrants and American Society, 1920 to the 1990s. Wheeling, Illinois: Harlan Davidson, 1996. xi + 262 pp. Illustrations, bibliographical essay, index. $12.95 (paper), ISBN: 0-88295-928-X.

Reviewed for EH.NET by Masao Suzuki, Department of Economics, Mills College. . Immigration to the United States has boomed over the last 30 years, as increasing movements of goods, capital, and people across borders have coincided with more liberal U.S. immigration laws. Record numbers of immigrants (although still below levels of 100 years ago as a percentage of the population) combined with a new economic landscape have also raised popular misgivings about immigration. Elliot Robert Barkan, professor of history and ethnic studies at California State University, San Bernardino, wrote And Still They Come as a history of immigrants and their children in the context of social and economic changes such as the Great Depression, post-World War II suburbanization, and recent globalization. The book extends from the 1920s, which saw the enactment of legislation restricting immigration, through piecemeal liberalization in the post-World War II period, to the recent period of mass immigration and rising nativism.

Barkan begins with the passage of the restrictive Immigration Act of 1924 and how immigrants faced hostility, both in the economic boom of the 1920s, as well as the Depression of the 1930s–the most severe being the deportation and repatriation of more than a half a million Mexicans and their American-born children during the 1930s. World War II and the ensuing cold war began the erosion of the discriminatory immigration and naturalization laws as our country began to open its doors to war brides and refugees, and as the laws excluding Asians and barring them from citizenship were repealed.

The second half of And Still They Come continues with the legislative changes in U.S. immigration law from 1965 to 1990, and discusses the characteristics of recent immigrants, their lives in the United States, and the recent debates about the costs and benefits of immigration. The book ends with a large appendix of tables with data on immigration from the 1920s to the present, and a bibliographic essay covering scholarly works on immigration and immigrants.

And Still They Come exhibits both strengths and weaknesses from its effort to survey the sweep of 20th-century U.S. immigration history. One of its strong points is its emphasis on the diversity of the immigrant experience (including diversity and differences among immigrants from the same country) and its sympathetic presentation of their lives in the United States. Reading the chapter on ethnic adaptation brought back my own memories of hearing Spanish, Chinese, and Tagalog (Filipino) as often as English in a crowded California mall, and seeing a Sikh teenager with his unshorn hair bound in a topknot dressed in an urban style with oversized high-tops, baggy pants and a wool shirt.

Histories of late 19th and early 20th century immigration often stress the largely male composition of the last wave of mass migration, but rarely does one see comments on the fact that most immigrants today are women. And Still They Come does not neglect this aspect of twentieth century immigration, pointing out that this trend can be seen as early as 1926. Barkan’s book also makes a strong effort to integrate the experiences of Asians, Latinos, and other immigrants of color within an overall appraisal of the immigrant experience.

These strengths notwithstanding, there are also a number of shortcomings to the book. One major problem with Barkan’s book is that it begins with the restrictive immigration legislation of the 1920s, skipping over the mass immigration of the turn of the century and the growing nativism. In particular, the lack of an overview of earlier immigration and restriction makes it hard to answer the excellent question of his last chapter entitled “The 1990s: New Directions or Full Circle?” While Barkan’s book is a sequel to Alan Kraut’s The Huddled Masses: The Immigrant in American Society, 1880-1921 (1982), an introductory chapter would be very helpful and make And Still They Come much more useful as an introduction to 20th-century immigration to the United States.

The broad sweep of the book leads to uneven coverage. For example, even though Asian immigrants are prominent throughout the book, the bibliographic essay fails to mention Yuji Ichioka’s The Issei (The Free Press, 1988), which is not only a definitive text on early Japanese immigrants to the U.S., but also is one of the few histories that draws extensively on Japanese-language records. While the bibliographic essay is informative, it is organized by topic and not explicitly connected to the text. The statistical data is contained in the appendix whereas integrating the data tables into the main text would give them more impact.

Another shortcoming is that And Still They Come at times goes too far in the direction of an ethnic history. For example there is a discussion of the ethnic revival among Americans in the 1970s and 1980s which, while interesting, mainly involved the grandchildren of immigrants. This leads the book to try to cover even more ground than it can reasonably do.

Last, but certainly not least, I felt that And Still They Come could have drawn more on studies of immigration by economists. While issues of immigrant entrepreneurship and current debates about the impact of immigrants on government finance and the labor market are addressed, other questions are not. One important issue is the concern of George Borjas and others that the skills composition of immigrants has declined relative to native-born Americans. This issue would fit well into the Barkan’s historical concerns, since this was also an issue that led to a literacy requirement for immigrants in 1917. (Coincidentally, the literacy requirement was promoted by the Immigration Restriction League, founded by recent graduates of Harvard University, where Borjas now teaches.) This shortcoming also shows up in Barkan’s bibliographical essay section on Immigration and Economic Issues, which mentions relatively few works by economists.

Masao Suzuki Department of Economics Mills College

Masao Suzuki is author of “Success Story? Japanese Immigrant Economic Achievement and Return Migration, 1920-1930,” Journal of Economic History, Vol. 55, No. 4 (Dec. 1995): 889-901.

?

Subject(s):Historical Demography, including Migration
Geographic Area(s):North America
Time Period(s):20th Century: WWII and post-WWII

Losing Control? Sovereignty in an Age of Globalization

Author(s):Sassen, Saskia
Reviewer(s):Aaronson, Susan Ariel

EH-NET BOOK REVIEW

Published for H-Business@eh.net (April 1998)

Saskia Sassen. Losing Control? Sovereignty in an Age of Globalization. University Seminars/Leonard Hastings Schoff Memorial Lectures. New York: Columbia University Press, 1996. xvi + 148 pp. Bibliographic references and index. $24.95 (cloth), ISBN 0-231-10608-4.

Reviewed by for H-Business by Susan Ariel Aaronson , George Mason University

Reordering the World?

The spoken word is often easier to understand than the written word. That’s why I was eager to tackle a series of lectures on globalization by Columbia University Professor Sasskia Sassen. This collection however, is a tough hike. The language is like a jungle that the reader must cut through.

Although Sassen’s words are a thicket, it is a hike worth taking. Sassen’s turf has been well traveled by economists, business leaders, policy analysts, and historians, but Sassen brings a different perspective as a professor of Urban Planning who teaches at Columbia’s Graduate School of International and Public Affairs. She is interested in how a new economic system centered on cross border flows and global communication has affected “two distinct features of the modern state: sovereignty and exclusive territoriality”(p. xii). She wants the reader and listener to see how it will affect the institution of economic citizenship as a “strategic research site and nexus” (pp. xiii) (this is what I mean by a jungle of unnecessary words). Sassen alleges that “we must consider the possibility that there exists a form of economic citizenship that empowers and can demand accountability from governments.” But these economic citizens are not people; they are “firms and markets”: “The fact of being global gives these actions power over individual governments…I use the concept as a kind of theoretical provocation, outside the accepted lineage of the concept of citizenship” (p. xiv). Finally, Dr. Sassen is concerned about immigration and worries that we need to “deconstruct the state” in its role in the migration process. “It is in this sense,” she says, “that immigration is a strategic site to inquire about the limits of the new order…it is embedded in a larger dynamic of trasnationalization (sic) of economic spaces and human rights regimes” (p. xvi)

Sassen begins by tracing the evolution of the term sovereignty. Here her path is easy to follow. She describes how sovereignty has been affected by globalization and how globalization has been accompanied by the creation of new legal regimes and practices. To many observers that process has been U.S. driven. In many countries, international or transnational has become “a form of Americanization” (p. 18). Who can disagree as we listen to Madonna and type on our IBM computers while wearing our Levi’s jeans. Finally she notes that the “virtualization” (a new word?) “of economic activities is a challenge both to regulation and to business. “This,” she concludes, “may signal a control crisis in the making” (p. 21).

Sassen argues that this crisis is occurring at the same time that “global capital has made claims on national states, which have responded through the production of new forms of legality” (p. 25). These new legal regimes “negotiate between national sovereignty and the transnational practices of corporate economic actors” (p. 26). Thus, sovereignty is being transformed by economic globalization. The next two chapters compare how economics is undermining the role of states, while immigration in contrast is “renationalizing politics.” Chapter Two tries to relate these developments to the notion of citizenship and the rights associated with citizenship. Here Sassen has forged something new. She argues that our notions of citizenship will change as the global economy changes. Global forces challenge the authority of the nation states. “There are enormous problems,” she notes “of state membership for aboriginal communities, stateless people, and refugees” (p. 34). She believes the challenges of globalization and “virtualization” will have important implications for human rights, and who or what will enforce these rights: “Today’s welfare state crises, growing unemployment and growing earnings inequality…can certainly be read as signaling a change in all the highly developed countries in the entitlements of citizens.” Other analysts of globalization such as Dani Rodrik have taught us that globalization has undercut the social bargain that many democratic capitalist nations have adopted since the Great Depression (a welfare state, regulation, and capitalism). However, Sassen adds that international investments searching for global opportunities “do not favor the growth of a large middle class.” Thus, “economic globalization has hit at some of the major conditions that have hitherto supported the evolution of citizenship and particularly the formation of social rights” (pp. 37-38). All of us should worry if globalization undermines democracy. At the same time, however, Sassen notes that the powerful in the global economy, (global corporations, international financiers) have acquired new rights and that there is “a consensus among states to further the interests of economic globalization.” But Sassen shows no primary sources or evidence of government action over time to illustrate this allegation. She cites two articles in one book and her own forthcoming work to prove this point [1]. She then notes that fifteen agencies around the world (including the Justice Department) reviewed the merger of Gillette and Wilkenson in 1989 and acceded to it. But does this prove the consensus she alleges? I doubt it. The evidence she cites might also be used to make the opposite point. The fact that so many agencies reviewed this merger illuminates, I believe, elite and public concerns about the consequences of globalization and a desire to hamper and halt it. (We certainly hear this in the ongoing debates over refunding the IMF and in fast-track authority, how Congress grants authority to the President to negotiate trade agreements.) Moreover, globalization often pits one national champion against another. (We see this in the 1980 market competition between Japan’s Komatsu and America’s Caterpillar Corporations and even more recently the European Community’s response to the Boeing/McDonnell Douglas merger.) Governments weigh such mergers to ensure that some of their taxpayers, citizens, consumers, and shareholders benefit. Government actions can tilt the balance.

Sassen’s last chapter addresses how in the face of globalization, nations have retained sovereignty to control immigration. In fact, this week NPR noted that the largest police force in America was that of the Immigration and Naturalization Service. Sassen notes “a fundamental framework roots all the immigration policies of the developed countries in a common set of conceptions” (p. 64). She sees globalization behind many changes in immigration (“the international activities of the governments or firms of countries receiving immigrants may have contributed to the formation of economic links…that may invite the movement of people” [p. 84]). However, Sassen notes that human rights challenge immigration policies because “human rights are not dependent on nationality, unlike political, social, and civil rights” (p. 89). In recent years, court cases have shown that individuals and non-state actors brought claims based on the notion of international human rights codes as expanding international law. This lets the judiciary mediate “between these agents and the international legal order.” The result, she claims has been a shift to the rights of individuals “from an exclusive emphasis on the sovereignty of the people and right to self-determination” (p. 95). This has devalued the institution of citizenship, affecting “the configuration of the international order” (pp. 96-97). But perhaps the international defense of human rights may also make us better citizens because of our willingness to defend and attribute rights to individuals in states that do not honor or enforce human rights. I don’t see this phenomenon as a big negative but something positive.

This chapter ends with a summation of globalization’s impact upon sovereignty but no answers as to what to do about it. Moreover, the author has no suggestions for the public who surely should be worried about the effect on them as citizens in democratic regimes challenged by globalization. I will look forward to reading Sassen’s upcoming work on these issues. However, I wish she had not left us hanging.

Notes:

[1]. James H. Mittelman, ed., Globalization: Critical Reflections International Political Economy Yearbook vol. 9 (Boulder, Co: Lynne Riener, 1996).

?

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

Between the Dollar-Sterling Gold Points: Exchange Rates, Parity, and Market Behavior

Author(s):Officer, Lawrence H.
Reviewer(s):Taylor, Alan M.

Published by EH.NET (March 1998)

Lawrence H. Officer, Between the Dollar-Sterling Gold Points: Exchange Rates, Parity, and Market Behavior. Cambridge: Cambridge University Press, 1996. xxi, 342 pp. $59.95 (cloth), ISBN: 0521365384.

Reviewed for EH.NET by Alan M. Taylor, Department of Economics, Northwestern University.

Lawrence Officer has been making influential contributions to international and monetary economics and history for many years. He is perhaps best known to economic historians for his work on exchange market arbitrage under gold (or read, metallic) standards. In a series of tightly-argued journal articles he challenged the widely accepted revisionist scholarship that had sought to depict the gold standard as inefficient and unstable, building his case on a monumental collection of primary data, careful statistical inference, and elegant theory. The present book extends and buttresses these arguments, sustaining a well-documented analysis of this monetary regime for over three hundred pages. The work focuses on the U.K.-U.S. foreign exchange market and leaves us with probably the most comprehensive and informative single treatise on this centuries-old institution. The work will be invaluable to macroeconomic historians interested in Britain and the U.S. in the late nineteenth and early twentieth centuries, and it should provide a good model for others wishing to understand similar monetary regimes at other times and places.

The introduction itself lays out the plan of the book. Officer makes his key point here that the subject is not just about whether gold points were violated, but that a complete analysis must examine the position of the exchange rate as an object of study, at all points inside and outside the gold-point boundaries. To this end, the author makes the case for getting the best possible data, at the highest frequency, for the longest time span. Finally, the key questions of market integration and efficiency (of the market and of the regime) are to be considered.

Part One of the book lays down the key historical and institutional features of the landscape from the beginning of the dollar-sterling gold standard in 1791 (when the U.S. went to a formal metallic standard) to its demise in 1931 (when Britain suspended convertibility). The laws and mechanics of coinage, minting, convertibility of paper to metal, dealings in the market and at banks, and so forth are all carefully described. The text and tables note significant legislative acts forcing regime changes for both countries in this entire time span, including changes in the metal of the standard for the U.S., and changes in parities for both countries (i.e., the metal content of the unit of account). Periods of convertibility and inconvertibility are shown.

Part Two comprises an exhaustively constructed data set to permit the study of this institution. First, the relatively simple job of computing implied parities is achieved using the information on metallic content in Part One, plus data on market prices of gold and silver (in U.S. bimetallic episodes). We find that from 1837, until 1931, after its initial wavering, the dollar-pound parity rate settled at the famous 4.8665635 point for well nigh a century. The market exchange rate was not so stable, and a long chapter discusses the sources and their quality, usefulness, and representativeness. Officer is eventually able to present data on the dollar-pound exchange rate for the entire period at quarterly frequency. In addition, monthly series are constructed for some periods: 1890-1906; 1925-1931; and, for a Bretton-Woods era comparison, 1950-66. Pre-1879 great care is taken (following Perkins, not Davis and Hughes) to adjust the bills of exchange to a uniform zero (“sight”) maturity. This ensures temporal consistency with the later cable rates; it also reflects the ultimate dominance of the sight bill as an instrument in the 1879-1914 heyday of the gold standard. An implicit sight rate is derived from the price of non-demand bills and the British interest rate. Care is also taken to find a mid-point of the buy-sell rates, using information on brokers’ commissions; and further care to correct the exchange rate for devaluations of paper during paper standard periods. This level of care exceeds previous studies, and survives testing for the consistency and homogeneity of the series. This is probably the best quality data for the dollar-sterling exchange rate we now have for the entire period; it will be an essential series for future scholars. Some interesting patterns appear just from a quick look at this series (Figure 7.1, p. 102): the volatility of the exchange rate declined dramatically in the early nineteenth century; the standard deviation in 1791-1820 was about 4-6%, but had fallen to less than 0.5% after 1871, and less than 0.2% in 1901-14.

Part Three makes the next logical step: comparing the above exchange rate series with the level of known arbitrage costs; i.e., the question is whether the exchange rate remained within the gold points. This is a point of departure for another exhaustive data-building effort. To construct gold points requires information on costs of freight, insurance, brassage, knowledge of any gold devices used by the monetary authorities, and interest costs due to the time delay of shipment across the Atlantic Ocean. All of these are put together with the same thoroughness as the exchange rate data. The care taken places these estimates on a far firmer footing than earlier estimates which had typically cut corners (cf. Clark, who had assumed ad hoc constant transaction costs). And the method is clearly far superior to any of the simpler techniques offered in other sources: taking a consensus estimate of brokers; using the terribly flawed gold flow data in a revealed preference method; using a pure max-and-min spread (violations impossible!); or using piecemeal aggregate arbitrage cost data from temporally disjoint sources. Essentially Officer proceeds with a laborious first-principles approach: each and every arbitrage cost component is individually estimated, then summed up, at each point in time. This consumes 62 pages; it is hard to imagine any improvement on these series for gold import and export points in this market, and this is the model for similar work on any other market.

The data are valuable and inform two integration tests in Part IV. The decline of gold point spreads mirrors that of the decline of exchange rate volatility, as expected. After 1880, this spread was at an all-time low level (even looking forward to 1925-1931 and Bretton Woods) of just above 1.0% for gold arbitrage. (Compare with around 5% in 1780, falling to about 2% in the 1840s). Officer sees this as improved “external” integration (external to the gold points) over time. Officer then studies whether even within the band, the exchange rate can reveal improved “internal” integration over time. Econometrically this section is less fully developed. For example, the relevant time series properties of the exchange rate series are not fully spelled out, making for some problems of inference. It is not clear whether we expect, say, a random walk between the gold points. (And what about beyond?) In a complicated nonlinear model such as this, the unconditional (raw) distribution of the exchange rate can have peculiar shapes. Officer, however, considers that a uniform distribution is “natural” (p. 189) in this zone. For the criterion of “internal integration” as Officer terms it, the focus is on whether “on average” the deviation of the exchange rate from parity is less than half the gold point spread, looking at absolute deviations. Again, by this measure, integration rapidly increases prior to the 1870s, then holds steady. A big jump is seen in the 1820s. Econometrics aside, this chapter places greater emphasis on explaining long-run tightening in the exchange rate distribution, and, especially within the band. As an explanation, Officer considers the role of the Second Bank of the United States critical in reducing dispersion in the 1820s. This trend was assisted by private agents such as the House of Brown, and, later in the nineteenth century, the New York private banks.

Part V conducts various tests for violations of market efficiency. The first test looks at gold-point violations: they are few– only four months during 1890-1906, and none in 1925-1931, for example. Far fewer than in previous studies, we should note. Thus Officer’s findings are very favorable to an efficient gold standard. Earlier work is faulted for using the wrong data (e.g., cable rates) or poor measures of arbitrage costs (bad gold point estimates). Correspondingly, Officer tests for failures of uncovered interest arbitrage (following Morgenstern), covered interest arbitrage and forward speculation for the 1925-31 period. Here there are substantial failings, with unexploited profit opportunities. These are seen as following from episodic losses of confidence in the regime. It would be interesting to see similar work on the classical gold standard regime pre-1914. However, in Part VI some comparisons are drawn and, under auxiliary assumptions about the exchange rate distribution (once more) it is shown that the interwar standard was not markedly worse than its prewar cousin. Part VII concludes.

Overall, this book offers an exhaustingly comprehensive analysis of the dollar-sterling market from the 1790s to the early post-WWII period. The data work cannot be faulted, and pushes our knowledge to a much higher plane than ever before. The empirical analysis confirms our priors concerning the convergence of this market on a high level of integration by 1880. The work leaves open some interesting doors for more sophisticated econometric analysis that could engage future scholars, but in many other respects this is the final word.

(Lawrence H. Officer is Professor of Economics at the University of Illinois, Chicago.)

Alan M. Taylor is an Assistant Professor of Economics at Northwestern University, a Faculty Research Fellow of the National Bureau of Economic Research, and a 1997-98 National Fellow at the Hoover Institution, Stanford University. His current research is in two main areas: the evolution of global capital markets, and the economic history of Argentina. He serves as co-editor of the EH.Net discussion list EH.Res.

Subject(s):Financial Markets, Financial Institutions, and Monetary History
Geographic Area(s):General, International, or Comparative
Time Period(s):19th Century

Ideologies and Institutions: American Conservative and Liberal Governance Prescriptions Since 1933

Author(s):Piper, J. Richard
Reviewer(s):Reagan, Patrick D.

J. Richard Piper. Ideologies and Institutions: American Conservative and Liberal Governance Prescriptions Since 1933. Lanham, Md.: Rowman and Littlefield, 1997. ix + 451 pp. Tables, notes, bibliography, and index. $74.00 (cloth), ISBN 0-8476-8458-X; $27.95 (paper), ISBN 0-8476-8459-8.

Reviewed for H-Pol by Patrick D. Reagan , Tennessee Technological University

Political History Redivivus

Over the last fifteen years, scholars in political science, historical sociology, and a slowly reviving political history have called for renewed attention to the role of the state, political parties, ideology, and institutions in different societies.[1] Yet an inherent tension between the synchronic snapshot of the social scientist and the diachronic tapestry of the historian has oftentimes hindered this rebirth of interest in the state side of the state and society nexus. While the social scientist looks to test a hypothesis or build a model, the historian usually looks for the particulars to explain the context and changes over time. The two approaches do not always work in concert. In this ambitious, but repetitious work, University of Tampa political scientist J. Richard Piper attempts to synthesize the last generation of work by the new institutionalists in order to understand the changing relationship between political ideologies and state institutions over time. This thoroughly researched, unevenly written account might be taken as a good example of the renaissance of political history that traces the changes in liberal and conservative ideologies, policies, and governmental institutions between the emergence of New Deal liberalism after 1933 and the fragmentation of Reagan conservatism by 1993. The implicit assumption behind Piper’s approach is that there has been an ongoing ideological debate between liberals and conservatives vying for capture of the presidency, control of Congress, activist use of the federal court system, and maneuvering through the institutions in a system that Theodore Lowi has called “interest-group liberalism.”[2] Piper seeks to test two major theses. Have liberal and conservative coalitions used ideological values and prescriptions to create theories of governance, to propose principled policies, to use institutions to implement programs, and to rely on established and new institutional power bases to reflect those assumptions? Second, have ideologically based recommendations by liberals and conservatives had real consequences (even if unintended ones) on government institutions and operations? Moving beyond a traditional focus on the presidential synthesis, Piper identifies five areas for study including constitutional interpretation, the administrative state, federalism, presidential-congressional relations, and the role of the judiciary to test these two hypotheses.

Rather than providing a synchronic methodology aimed at confirming a social science theory or model, Piper recognizes the value of longitudinal historical study as the best way of making sense of continuity and change over time. In four parts, each dealing with a specific time period, he tracks changes in values and programmatic policies, power bases, theories of governance, and the instrumental origins and impact of theories of governance. During the 1933-1945 period, the New Deal system of interest-group liberalism emerged based on a flexible interpretation of the Constitution, expansion of the administrative state, coexistence with a federalist polity, presidential leadership of a strong executive branch and a weak Congress, and a bifurcated attitude of judicial activism in socioeconomic matters and judicial restraint in civil liberties. In the following period of 1945-1966, liberal Democratic presidents and Eisenhower via Modern Republicanism consolidated this liberal ideology which culminated in the revival of domestic reform and an ongoing activist Cold War foreign policy under Kennedy and Johnson. Yet already by the mid-1960s, Piper argues, this liberal-dominated ideology based in the presidency and Democratic interest groups was being challenged by conservatives in Congress and the postwar emergence of new conservative intellectuals, journals, and think tanks that modified and revived the old right ideology. In a period of flux from 1966 to 1981, conservatives–bolstered by the addition of former New Dealers turned neoconservatives, the New Right, and the religious right–articulated their ideology based in part on the old right’s values of an immutable Constitution, resistance to the administrative state, a highly decentralized federal system, a conservative coalition in Congress to check the power of the New Deal presidency and state, and a conservative judicial activism that between 1890 and 1937 had forestalled the development of the welfare state. By the 1981-1993 period, conservative ideology had replaced liberalism as the regnant set of values, policies, programs, and power bases. Post-Goldwater conservatism under Ronald Reagan became possible due to the fusion of traditional and libertarian ideas, newfound religious faith, corporate financing, trust in a charismatic president, distrust of liberals in Congress, and market-oriented policies in the guise of privatizing reforms. Conservatism had become the new ruling ideology, in rhetoric, if not always in practice.

In twenty-one chapters packed with factual narrative and thought-provoking insights, Piper walks the reader through post-1933 American political history. Each of the four major parts includes chapters on values and policies, liberal and conservative power bases, the liberal theory of governance, the conservative theory of governance, and the complex interplay of politics as ideology, power bases, and what can be done. Piper’s footnotes read like a running historiography of the new political history drawing not only on such well known interpretations by Samuel Lubell, Arthur M. Schlesinger, Jr., and James MacGregor Burns, but also the more recent, broadened political history of Walter Dean Burnham, Alonzo Hamby, Steven M. Gillon, Barry Karl, William Leuchtenburg, Allan J. Matusow, Kim McQuaid, and Nicol C. Rae. Significantly, he also makes good use of wide reading on the history of modern American conservatism as found in key works by Gary Dean Best, Sidney Blumenthal, Sara Diamond, Paul Gottfried and Thomas Fleming, Jerome L. Himmelstein, Sidney Milkis, George H. Nash, James Patterson, A. James Reichley, Peter Steinfels, James L. Sundquist, and George Wolfskill. Readers of H-Pol could develop a useful bibliography of the new political history while familiarizing themselves with some of the best work among political scientists using the new institutional approach just by combing through Piper’s notes and bibliography. Use of conservative and liberal commentators’ articles and books as the narrative converges toward the present shows the tremendous amount of research in secondary and published primary sources that the author has done for this work.

Much of what Piper has to say is worth reading and thinking about, but there are serious flaws in organization and style. Piper could have combined alternating chapters on liberal and conservative ideology in each of the four chronological parts for a more focused, comparative, and analytically useful work that would have benefited from some careful editing. The writing style throughout leaves much to be desired. After reading the parts on 1933-1945 and 1945-1966, this reader is tired of the repeated use of terminology that begs for definition, explication, and analysis that never comes. In the conclusion, Piper suggests that his research indicates considerable continuity over time on the ideological position of liberals and conservatives regarding constitutional interpretation, a federalist polity, and the positive role of the administrative state while attitudes about presidential-congressional relations and judicial interpretation changed dramatically. He leaves the reader wondering if more state-level case studies might clarify how once conservative, rural-dominated state governments came to become the “laboratories of democracy” heralded by the New Democrats of the 1990s. Finally, he suggests that future research might take up historical comparisons, using Leonard D. White’s classic studies as a takeoff point to consider how Jeffersonian/Hamiltonian and Progressive/New Deal ideological prescriptions may have been earlier examples of this ongoing debate, while crossnational studies inspired by the example of Samuel Beer’s work on Great Britain may have a “range of interesting and fruitful possibilities…even wider than in American history” (p. 404). Toward the end of this interesting work, Piper leaves the reader with a troubling comment that has implications worth discussing further in such venues as H-Pol: As the United States nears the dawn of a new millennium, the conservative and liberal coalitions that have battled each other during the major part of the twentieth century are fragmented and more than a little exhausted by their struggles. Liberalism in particular has shown signs of possibly terminal illness since the late 1960s, and the end of the Cold War has recently removed a major source of unity in an increasingly divided conservative coalition. (p. 391)

Perhaps the most valuable attributes of this work include its broad historical scope, a large research base of secondary accounts by scholars as well as political memoirs and journal commentaries by participants and contemporary observers, and nine tables summarizing congressional roll call analyses to determine ideological divisions in Congress and how they changed over time. Piper’s inclusion of liberal and conservative “wordsmiths” writing in The New Republic, The Nation, The National Review, Commentary, Modern Age, The Public Interest and some newspapers suggests that his implicit assumption about the value and consequence of political ideas goes beyond the heavy number crunching statistical models of post-World War II American behavioral political science. In this account, liberalism and conservatism are not presented as simplistic caricatures but rather as serious, complicated ideologies involving debates not only between liberals and conservatives but also among diverse proponents within each camp. Piper appreciates the irony of unintended consequences over time as well. By the 1980s, Reagan and Bush conservatives came to favor strong presidential leadership, an activist anti-Communist foreign policy, and executive branch use of the administrative state and judicial appointments for their own conservative ideological ends. During the same period, neo-liberals learned to appreciate and use congressional power, a principled foreign policy, increasingly professionalized state governments, and judicial review to stay in the debate. The parties of Herbert Hoover and Franklin Roosevelt had come a long way in just sixty years according to Piper. A reading of this sophisticated work suggests that political and neo-institutional history truly has been revived under the leadership of a new generation of political scientists and historical sociologists such as Theda Skocpol, while historians are only beginning to catch up.

Notes:

[1]. Key works in the new institutionalism include Bringing the State Back In, eds. Peter B. Evans, Dietrich Rueschemeyer, and Theda Skocpol (Cambridge, Eng., 1985); William E. Leuchtenburg, “The Pertinence of Political History: Reflections on the Significance of the State in America,” Journal of American History 73 (December 1986): 585-600; Gabriel A. Almond, “The Return to the State,” American Political Science Review 82 (September 1988): 853-874; Alan Brinkley, “The New Deal and the Idea of the State,” in The Rise and Fall of the New Deal Order, 1930-1980, eds. Steve Fraser and Gary Gerstle (Princeton, 1989), pp. 85-121; David Brian Robertson, “The Return to History and the New Institutionalism in American Political Science,” Social Science History 17 (1993): 1-36.

[2]. Theodore J. Lowi, The End of Liberalism: The Second Republic of the United States (New York, 1969, 1979).

?

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

The Rise, Fall, and Replacement of Industrywide Bargaining in the Basic Steel Industry

Author(s):Magnum, Garth L.
McNabb, R. Scott
Reviewer(s):Stanger, Howard R.

EH-NET BOOK REVIEW

Published by H-Business@eh.net (March, 1998)

Garth L. Mangum and R. Scott McNabb. The Rise, Fall, and Replacement of Industrywide Bargaining in the Basic Steel Industry. Labor and Human Resources Series. New York: M. E. Sharpe, 1997. xvii + 209 pp. Tables, figures, notes, bibliography, and index. $62.95 (cloth), ISBN 1-56324-982-0; $21.95 (paper), ISBN 1-56324-983-9.

Reviewed for H-Business by Howard Stanger , Buffalo State College

Economists Garth Mangum and R. Scott McNabb have written a very good overview of collective bargaining in basic steel since the historic 1937 agreement between the leader of the industry’s oligopoly–U.S. Steel–and the Steel Workers’ Organizing Committee (SWOC), later the United Steelworkers of America (USWA). Their emphasis is on the interaction of both product and labor markets on collective bargaining structure and outcomes (most notably wages), benefits and industry viability. They also pay careful attention to managerial choices pertaining to technology and labor relations.

Since the birth of the U.S. Steel Company in 1901, oligopoly defined the structure of the American basic steel industry. But unlike most oligopolies, steel was characterized by product and technological homogeneity and regional fragmentation. The relevant labor market required identical skills in each mill, little labor pool competition as a result of geographic separation in the product market, and formal internal labor market structures offering workers a high degree of job security and long-term attachment. Given the cyclical nature of the industry, layoffs occurred periodically. This structure enabled the USWA to bargain for above-average wages. One problem was that market fragmentation had spawned wage inequities within single plants and companies and across firms and regions. The union’s drive to remedy wage inequities, along with the peculiarities of the industry, created favorable conditions for industrywide collective bargaining.

Both labor and management found this centralized form of bargaining in their best interests. According to the authors, the union had pursued industrywide bargaining in the 1950s in order to take wages out of competition, to assure that every steelworker doing the same job got the same pay throughout the industry, to put industry competition on the basis of managerial competence rather than the ability to obtain cheap help, and to ensure wage differences among firms did not force a race to the bottom. Company concerns were parallel: to assure that no competitor was able to gain the advantage of cheaper labor rates and to prevent the union from whipsawing wages upward by shutting down one firm while the others supplied the homogeneous product, then forcing the pattern one by one on the rest (p. 93).

Labor cost uniformity was not expected; in fact, the parties accepted a narrow range of wages so long as all competitors were part of the collective agreement. Within the broad parameters of economic laws, the authors discuss other factors which contributed industrywide bargaining. For example, between 1942 and 1947, the steelworkers and a number of large firms jointly established the Cooperative Wage Study (CWS) which, through extensive job evaluation, sought to remove wage inequities in northern states. By 1954, with the eradication of the southern wage differential, “the steel industry had virtually a single wage scale for almost all of the steelmaking operations under contract with the USWA, irrespective of size, relative profitability, or geographical location. Given an industrywide wage structure and job evaluation format, it then requires no great intellectual leap to see that formalization of industrywide collective bargaining was the next logical step” (p. 40).

Other factors had to fall in to place, however. In 1955, the USWA announced that union president David J. McDonald would head all negotiation committees to ensure contract uniformity. Second, in 1956, management and labor respectively, created the Coordinated Committee Steel Companies (CCSC) and the USWA’s Basic Steel Industry Conference (BSIC) to conduct negotiations. Finally, federal government gave its imprimatur to industrywide bargaining during World War II and the Korean conflict. In 1956, industrywide bargaining was officially born.

During the 1959 negotiations, the first industrywide bargaining round, a 116-day strike occurred, which, according to the authors, planted the “seeds of dissolution” of the bargaining structure. During this time, steel imports became a competitive concern for steel management. Exacerbating the industry’s woes was management’s hesitance–based upon inaccurate industry forecasts– to modernize facilities. When they did invest, they implemented quickly outmoded processes. These missteps created opportunities for foreign steel firms and, by the 1970s, leaner nonunion minimills. The results were devastating: falling industry profit rates, the shuttering of obsolete plants, divestment out of steel, and zero net investment between 1955 and 1980. The book’s institutional and economic framework prevents a discussion of the human and social costs of dislocation which, in this reviewer’s opinion, is an important consequence of bargaining and a serious omission.

To deal with frequent strikes in the post war period which forced steel users to seek other suppliers, primarily foreign producers, the parties established the Experimental Negotiations Agreement (ENA) in 1973. In exchange for lucrative compensation gains, the USWA gave up its right to strike. This potential solution to the industry’s plight was nullified by the inflationary economy of the 1970s, which made the ENA a very costly pact as compensation costs drastically cut into firm profits. In 1980, reeling from the ENA’s deleterious effects, the CCSC unilaterally ended it and girded itself for the 1983 round of negotiations which began early in 1982.

The 1983 agreement was the first concessionary contract for the USWA. Contemporaneously, the union experienced a change of leadership with the untimely death of Lloyd McBride and the ascendancy of the visionary Lynn Williams. With the industry and the union in flux, the oligopolistic wage structure and industrywide bargaining were vulnerable. By 1985, the CCSC abandoned industrywide bargaining after some firms withdrew immediately after the 1983 round. Diminishing “commonality of interests” based upon different financial positions was a major reason for its demise. The authors argue that developments affecting both product markets and technology between 1986 and 1995 rendered industrywide bargaining as obsolete as the many plants that closed in the preceding decades. However, the industry outlook became much brighter. American firms were now more competitive in international markets, with many engaging in joint ventures with foreign concerns to speed up modernization, raise productivity, and ensure survival. With help from union wage, benefit and work-rule concessions during the 1983 and 1986 rounds, output per employee rose a phenomenal 40 percent between 1986 and 1993. Profits also turned up.

The search for a new bargaining structure began in 1986 with the return of single company agreements. The authors go into detail regarding individual contract settlements in this and subsequent rounds of negotiations. By the 1990 round, wage and benefit cuts had been restored. One major difference between this era of single company pacts was the end of U. S. Steel’s leadership. With its corporate name changed to USX to reflect its diversification strategy into oil and gas, U. S. Steel was no longer the chief labor policymaker and lead agreement. The bitter six-month strike there in 1986 created an even stronger adversarial labor relationship, just as anachronistic as industrywide bargaining. This would become meaningful during the 1993-94 round, when the USWA unveiled its “New Directions” strategy of labor-management cooperation. It is in this area that the authors make new contributions to the literature on steel labor relations. Promoted by Lynn Williams, New Directions has at its core two key principles: 1) that no group has a greater stake in a company than employees, and 2) the best path to ensure business success was to involve employees in business decisions. For its part, the union “would agree to long-term contracts, some relaxation of restrictive work rules, and cooperation in reducing steel company workforces, as long as that was accomplished by attrition. In return, the union would require a high degree of job security for its membership, adequate funding arrangements for the company’s ‘legacy costs, and a greater say in how the steel companies were run” (p. 134). Inland Steel was the first to agree to this approach when it signed a six-year deal. The union won decision-making authority at all levels of the company. By the end of the round, all major firms signed similar deals, with slight firm-specific deviations, including the level of union involvement. Overall, a general pattern re-emerged. Mangum and McNabb explore New Directions and other innovations such as the jointly-established, industrywide Career Development Program (1989) through a handful of interviews and McNabb’s personal experience as a program counselor at the Institute for Career Development in Indiana. While the generalizability of a very limited number of persons interviewed can be questioned, the are careful not to draw firm conclusions. Progress at certain facilities of National Steel and Bethlehem Steel has been offset by initial failures at certain U.S. Steel and LTV plants. The authors are correct to note that high trust relationships and commitment are necessary to make innovative workplace programs succeed. The reverse also holds. They also contend that the USWA’s new program could have only come about by a “thoroughly chastened management–and only in the absence of the dominant industry leadership that had prevailed prior to 1985″ (p. 169).

At present, even with basic steel doing quite well for a mature industry, the future of labor relations and bargaining structure are indeterminate. Still, the authors return to their conviction that there is a strong link between product and labor markets. They argue that New Directions tightens this link: “Instead of merely reacting to the product market within labor-market negotiations, the New Directions model, when fully utilized, would have the union participating as a partner in product-market decisions that affect the entire industry” (p. 192).

Mangum and McNabb do a nice job of reviewing the literature on the history of collective bargaining in the steel industry from institutional and economic perspectives. They also provide their audience with a heavy dose of industry economics–perhaps too much in places. The book is loaded with easy-to-read tables of relevant industry and employment cost data. For a single source, written in a straight-forward manner, this book has a lot to offer. However, it is not without some weaknesses. First, steel bargaining relations are rarely compared with other industries, particularly as it pertains to changes in the bargaining structure. The breakup of centralized bargaining structures has been going on in a number of industries since the 1970s. Industrial relations scholars have been examining the decentralization of bargaining in the United States and Europe. This growing literature was omitted by the authors. Second, the authors missed an opportunity to provide a theoretical or conceptual framework on the antecedents and consequences of bargaining structures. Here the literature is not as rich, but could still be useful for comparison. Finally, there is no discussion on the implications of decentralized bargaining on bargaining power and outcomes. In general, unions are disadvantaged by decentralized bargaining, although it can be argued whether the bargaining structure is either a cause or consequence of union weakness.

?

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

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.

?

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).

?

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.

?

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