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British Conservatism and Trade Unionism, 1945-1964

Author(s):Dorey, Peter
Reviewer(s):Phillips, Jim

Published by EH.NET (October 2009)

Peter Dorey, British Conservatism and Trade Unionism, 1945-1964. Farnham, UK: Ashgate, 2009. xi + 200 pp. $100 (hardcover), ISBN: 978-0-7546-6659-2.

Reviewed for EH.NET by Jim Phillips, Department of Economic and Social History, University of Glasgow.

Peter Dorey, a Reader in British Politics at Cardiff University, extends his lengthy list of publications on post-1945 British politics with this study of the Conservative Party and trade unionism. Conservatives in Britain spent most of the twentieth century struggling against trade unions, exaggerating their strengths, stereotyping their characteristics, and seeking to weaken their rights. There were major confrontations between Conservative governments and trade unions, with the 1926 miners? lock-out and General Strike, and the great miners? strike for jobs in 1984-85. Of lesser drama but still pointing to underlying tension between Conservatives and unions were arguments about unemployment in the 1930s, inflation in the 1960s and then unemployment ? again ? and stagflation in the 1970s. So this book looks at a highly unusual period in Britain?s twentieth century development, when stable growth, full employment and the electoral advance and popularity of the Labour Party ? trade unionism?s formal and ideological political partner in the UK ? combined to alter Conservatism?s approach to economic and social management. Along with accepting the welfare state and the mixed economy of public as well as private enterprise, Conservatives broadly sought a more harmonious and cooperative relationship with trade unionism. This was pursued through the so-called voluntarist approach to industrial relations, where trade unions were free to conduct their affairs through negotiation and agreement with employers, subject to minimal state interference. Dorey?s discussion, part of Ashgate?s Modern British Economic and Social History series, consists of six chapters. An examination of the long pre-1945 period is followed by a chapter on 1945-51, and then two chapters each on the 1951-60 and 1960-64 periods.

The analysis illuminates especially the efforts made by Conservative governments between 1951 and 1964 to seek and maintain harmonious relations with trade unions. This involved ministers containing and indeed sometimes suppressing anxieties expressed within the Conservative Party about the dangers of working with rather than challenging trade unions, particularly once concerns were being articulated from the mid-1950s onwards about the supposed connection between Britain?s two main averred economic problems, relative decline and labor power. The discussion is fairly well written, and drawn from a very deep knowledge of documentary material in Conservative Party archives, Prime Minister?s files, and Ministry of Labour papers. Dorey shows an awareness of some key issues: the impact of full employment on industrial relations and the economy, changing social relations in the workplace, and the electoral advantage perceived in balancing the interests of business with those of trade union representatives. He tells us much in the process about Conservative attitudes to trade unions. But at the same time he tells us very little about trade unions, which appear one-dimensionally, essentially as uncomplicated institutions of economic and social management, to be manipulated into position by their officials and government ministers. There is little sustained analysis of how unions were changing, as influence moved to the shopfloor in the context of full employment, or how enhanced social expectations and increased post-1945 working class political confidence were pushing many unions leftwards. So the discussion of grassroots Conservative attitudes that emerges from Dorey?s reading of the party?s files is not balanced by corresponding shopfloor and social perspective on trade unions. This is partly a question of sources used, with no work at all undertaken on union material. This makes for a rather odd and one-sided history of the Conservative-trade union relationship.

The book also fails to engage with historical or social science literature, and in this respect its original contribution and impact is hard to establish. In the first half of the book, for instance, Dorey refers in several places to developing Conservative interest in the late 1940s and early 1950s in ?Human Relations,? or ?Industrial Relations as Human Relations.? Obvious opportunities to connect this discussion to debates in mid-twentieth century industrial sociology or early twenty-first century historical literature on post-1945 industrial relations are not taken. Nor, when dwelling on the views of Conservative activists and their decided rejection of accommodation with organized labor, does Dorey integrate in any effective way debates about the post-1945 consensus and the limited reconstruction of social relations in the 1950s. Dorey?s shortened horizons in this respect are further underlined by his highly curious bibliography, which features nothing published since 2000. The book that emerges from this unsatisfying juxtaposition of detailed but narrow archive work and limited historiographical engagement reads as an interesting and extended research note rather than an original contribution to post-1945 economic and social history.

Jim Phillips is a Senior Lecturer in the Department of Economic and Social History at the University of Glasgow. His publications on post-1945 industrial politics in Britain include The Industrial Politics of Devolution: Scotland in the 1960s and 1970s (Manchester: Manchester University Press, 2008), and ?Business and the Limited Reconstruction of Industrial Relations in the UK in the 1970s,? Business History, 51 (2009), pp. 801-16. He is currently writing a history of the 1984-85 miners? strike in Scotland.

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

The Development of Monetary Economics: A Modern Perspective on Monetary Controversies

Author(s):O'Brien, D. P.
Reviewer(s):Dimand, Robert W.

Published by EH.NET (June 2008)

D. P. O’Brien, The Development of Monetary Economics: A Modern Perspective on Monetary Controversies. Cheltenham, UK: Edward Elgar, 2007. xv + 265 pp. $115 (hardcover), ISBN: 978-1-84720-260-4.

Reviewed for EH.Net by Robert W. Dimand, Department of Economics, Brock University.

The eminent historian of classical political economy Denis O’Brien, Professor Emeritus of Economics at the University of Durham, has gathered together his work on monetary economics from Jean Bodin in the sixteenth century to Thomas Joplin and Walter Bagehot in the nineteenth century. Some of the chapters have been previously published, while others are new. All have been written since his Thomas Joplin and Classical Economics (1993) (one chapter of which is reprinted here) and since his earlier collection, Methodology, Money and the Firm (2 volumes, 1994). A companion volume collects his writings in the same period on non-monetary aspects of classical economics. Seven of the nine chapters (not counting the five-page introduction) have been published from 1993 to 2003, but the book is a unified, coherent historical analysis of the classical theory of monetary policy and its roots, parts of which were published as the project progressed, rather than an ex post assemblage of disparate essays. Any scholar interested in the Currency School/Banking School debate or in the emergence of the concept of a lender of last resort will need, and want, to read this material. Any such scholar will, indeed, have already read parts of the book that have appeared in prominent and easily accessible places, such as the three chapters published in History of Political Economy (on Jean Bodin’s quantity-theoretic analysis of inflation in 2000, on monetary base control and the 1844 Bank Charter Act in 1997, and on the concept of lender of last resort in 2003). An essay on Bagehot and stabilization appeared in the Scottish Journal of Political Economy in 2001, and two chapters, on the Banking School/Currency School controversy and on the stability analysis of those two schools, are reprinted from Blaug et al., The Quantity Theory of Money from Locke to Keynes and Friedman (1995). But the two new chapters, on John Law’s Money and Trade (1705) and on John Locke’s debate with his critics about the rate of interest (the two chapters being linked by Law’s borrowing of Locke’s argument that a plentiful supply of money encourages economic growth), are also necessary reading for anyone studying that era of monetary economics, and it is well worth rereading the other essays together as components of a connected historical narrative and analysis. O’Brien argues that a close look at the critiques of Locke by Joseph Massie and David Hume, and at their empirical claims about how the interest rate is related to the profit rate, reveals that historians of economics have been too generous to Massie and Hume as critics of Locke, and too harsh on Locke. Given the extent and accessibility of the reprinted chapters, and given the price of academic books, the temptation is to persuade one’s university library to order the book, rather than buying a personal copy. Apart from the chapter on Jean Bodin, in which the Salamanca School is also discussed, the story is exclusively British (and David Hume appears primarily as a critic of Locke, rather than as a pioneering theorist of international monetary equilibrium).

As O’Brien’s readers have come to expect, these essays are erudite and clearly argued, and include rational reconstruction of earlier theorizing as formal models. Chapter 9, the one chapter from O’Brien (1993) reprinted in the present volume, is “Joplin’s Model: A Formal Statement.” (O’Brien discerns in Joplin a complex model that anticipated the neo-Keynesian synthesis of income-expenditure and monetary models.) Chapter 3 includes “A Formal Statement of Law’s Model.” Chapter 8, on Bagehot, includes “A Formal Treatment of Stability” (showing that the model is stable when Bagehot’s prescription is followed for the Bank Rate, emphasized by Bagehot as the core policy tool). Chapter 10 is a formal treatment of the stability analysis of the Banking and Currency Schools with an inbuilt cycle and with the money supply (rather than the Bank Rate) as the policy variable. As O’Brien (p. 5) summarizes the findings of Chapter 10, “Employing a formal treatment, it proves possible to demonstrate that the prescriptions of the Currency School would, had they targeted the right money supply, have been stabilizing, while those of the Banking School left the price level indeterminate and magnified fluctuations. At best, and only after filling a major gap in the theoretical position of the Banking School, any equilibrium would only be a saddle point.” The clause about targeting the right money supply is crucial. O’Brien presents careful regression analysis in Chapter 6 to argue that the British price level was controlled by the country bank note issue rather than by the Bank of England note issue, and that the Bank of England note issue did not act as a monetary base controlling the country bank note issue, so that Thomas Joplin (in many ways the hero of O’Brien’s story) was correct that the Bank Charter Act of 1844 targeted the wrong money supply. The Currency School’s advocacy of counter-cyclical control of the money supply by the Bank of England to stabilize the price level and the balance of payments had a sounder theoretical basis than the Banking School’s leaning to a more passive money supply, but, as a matter of fact rather than theory, the Bank of England did not control the British money supply.

Not only was Joplin insightful in his critique of the Bank Act of 1844, but, according to O’Brien, Joplin’s analysis of the liquidity crisis of 1825 set out the case for a lender of last resort that is usually attributed to Walter Bagehot (with earlier partial discussions by Sir Francis Baring and Henry Thornton). Joplin stressed the importance of a central reserve that would enable the lender of last resort to lend freely at a penalty rate during a liquidity crisis (contrast the actions of the Federal Reserve since August 2007, expanding credit during a liquidity squeeze but also repeatedly lowering its target for the overnight inter-bank rate) and argued that lending by the lender of last resort during a liquidity crisis would not raise the price level because of the increase in demand for precautionary balances. O’Brien (pp. 163-66) notes that Joplin’s 1825 analysis was immediately taken by Vincent Stuckey, of the banking firm Stuckey and Bagehot, and speculates that, through Stuckey, Joplin’s 1825 article influenced Stuckey’s nephew Walter Bagehot.

O’Brien’s blend of careful reading, historical context, representation by formal models, and cliometrics is skilful and lucid. These essays are of lasting value and have established O’Brien alongside David Glasner, Thomas Humphrey, David Laidler, Anna Schwartz, and Neil Skaggs as one of the foremost authorities on British classical monetary economics. This has been one of the most studied areas of the history of economic thought, yet, as O’Brien demonstrates, there are still new and important things to say about the subject.


Mark Blaug, Walter Eltis, D.P. O’Brien, Don Patinkin, Robert Skidelsky, and G. Wood, 1995. The Quantity Theory of Money from Locke to Keynes and Friedman. Aldershot, UK: Edward Elgar.

John Law. 1705. Money and Trade Considered with a Proposal for Supplying the Nation with Money. Edinburgh: Andrew Anderson. Reprinted New York: A. M. Kelley, 1966.

D.P. O’Brien, 1993. Thomas Joplin and Classical Macroeconomics: A Reappraisal of Classical Monetary Thought. Aldershot, UK: Edward Elgar.

D.P. O’Brien, 1994. Methodology, Money and the Firm, 2 volumes. Aldershot, UK: Edward Elgar.

Robert W. Dimand is Professor of Economics, Brock University, St. Catharines, Ontario, Canada. Email: He recently published on “Macroeconomics, Origins and History of” and “Monetary Economics, History of,” in The New Palgrave Dictionary of Economics, second edition (2008).

Subject(s):History of Economic Thought; Methodology
Geographic Area(s):Europe
Time Period(s):19th Century

The New Comparative Economic History: Essays in Honor of Jeffrey G. Williamson

Author(s):Hatton, Timothy J.
O'Rourke, Kevin H.
Taylor, Alan M.
Reviewer(s):Bogart, Dan

Published by EH.NET (May 2008)

Timothy J. Hatton, Kevin H. O’Rourke, and Alan M. Taylor, editors, The New Comparative Economic History: Essays in Honor of Jeffrey G. Williamson. Cambridge, MA: MIT Press, 2007. ix + 417 pp. $40 (cloth), ISBN: 978-0-262-08361-4.

Reviewed for EH.NET by Dan Bogart, Department of Economics, University of California, Irvine.

It is a testimony to Jeffrey Williamson that so many influential scholars have contributed to a book honoring his career. The list of contributors reads like a ‘who’s who’ in comparative economic history. In the opening chapter, Timothy Hatton, Kevin O’Rourke, and Alan Taylor summarize the ‘the New Comparative Economic History’ and Williamson’s contribution to it. In a nutshell, this line of research analyzes the sources of economic growth, the importance of institutions, and the impact of globalization by making comparisons between actual economies. An illuminating contrast is made with early cliometrics, which addressed questions by constructing counterfactuals with the help of theory and calibration. There is no doubt that comparative research is making contributions to core questions in economic history. As a survey of the chapters reveals, comparative economic historians have an incredible amount of data at their disposal and when combined with modern empirical tools much can be learned. Still there are some problems or challenges that need to be kept in mind. One complication is that much cross-country or cross-regional variation cannot be meaningfully accounted for with standard variables. Another is that few variables can be taken as exogenous in the long-run, making identification quite complicated. Lastly, more theory is needed to understand how economic and political processes evolve over the long run.

The main contribution of the book is to offer a sample of the latest research in comparative economic history. The sample is not random to be sure, but the chapters do cover a wide range of issues ? migration, income convergence (and divergence), inequality, international trade, and international finance ? all of which have been central to Jeffrey Williamson’s research. Most of the contributions are fairly specialized and address a particular issue. William Collins (chapter 7) uses micro-census data from 1940 to 2000 to document that the educational convergence of the southern U.S. was largely driven by the higher education attainment of southern-born children and supplemented by the absorption of high human capital in-migrants. The chapter makes several contributions to the literature on migration and education in the “New South.” Leah Platt Boustan (chapter 11) shows that the nineteenth century migration of Russian Jews to the U.S. can be explained by the U.S. unemployment rate and the stock of the Jewish population in the U.S., while religious violence in Russia had modest long-run effects. Her chapter would be of interest to scholars studying the Jewish Diaspora and the estimation of immigration flows.

Several chapters are devoted to income convergence, divergence, and inequality. Robert Allen (chapter 1) compares real wages in India and Europe over the long-run and finds they were similar until the seventeenth century, when a divergence began, particularly in comparison to England. The chapter offers new insights on the timing of the Great Divergence. Greg Clark (chapter 2) uses a calibrated model of the British economy to argue that population growth accounts for the structural differences between Britain and its European competitors, not the productivity growth associated with the Industrial Revolution. The chapter makes a contribution to recent literature on the formal modeling of the British economy from 1780 to 1860. Leonardo Prados de la Escosura (chapter 12) presents new estimates of inequality and poverty in Latin America since 1850. They show that inequality increased steadily from the late 1800s to the 1970s, while poverty counts declined, largely due to economic growth. This chapter will be of interest to those who study the dynamics of growth, inequality, and poverty over the long-run. George Boyer (chapter 13) shows there was significant convergence in non-income measures of living standards across the Atlantic economy from 1870 to 1930. He argues that improvements in the 3 l’s ? longevity, learning, and leisure ? helped to slow emigration from northwestern Europe to the New World in the 1900s. The results suggest the need for broader measurements of welfare in the first era of globalization. Cormac O Grada (chapter 14) examines the divergence and convergence of welfare measures in Britain and the Netherlands from 1500 to 1850 and Ireland and Italy from 1950 to 2000. The chapter quantifies the higher welfare gains from rapid initial growth followed by slower subsequent growth compared to slow initial growth followed by rapid growth. His chapter makes a contribution to the literature on the welfare consequences of “economic miracles.”

Several more chapters are devoted to commodity market integration, international trade, and protection. Suleyman Ozmucur and Sevket Pamuk (chapter 3) find mixed evidence for commodity market integration across Europe between 1500 and 1800. Tests based on coefficients of variation and cointegration show no evidence of integration for rice, sugar, honey, and butter, and partial support for integration in wheat and olive oil. Their findings have relevance for the “When Did Globalization Begin” debate. Giovanni Federico and Karl Gunnar Persson (chapter 4) revisit the issue of integration in world wheat markets by studying the variance in prices from 1800 to 2000. They find that much of the cross-national variance was due to differences in wheat prices between free-trade and protectionist countries and among protectionist countries. Their findings will be of interest to the growing literature on the determinants of market integration. Kevin O’Rourke and Alan Taylor (chapter 8) provide evidence that in land abundant economies greater democracy raised tariffs, and in labor abundant economies greater democracy lowered tariffs. They also find that in countries with high capital to labor ratios greater democracy lowered tariffs. Their chapter contributes to the literature which confronts historical data with trade and political economy models. Timothy Hatton and Jeff Williamson (chapter 9) investigate why trade was more restricted compared to immigration in the first era of globalization and trade was less restricted compared to immigration in the second era of globalization. They argue that tariffs were a more important revenue source in the nineteenth century than today and that policy backlashes against immigration were more muted in the nineteenth century because of the limited franchise, developmental coalitions, and party politics. Their chapter suggests that the first era of globalization can offer some interesting insights on the modern immigration debate.

Two chapters deal with international comparisons of productivity. Alan Olmstead and Paul Rhode (chapter 5) study how improvements wheat breeding in the nineteenth century prevented yields from significantly declining as production shifted to colder and drier places. Using case studies from several countries, they show how wheat breeding became a global enterprise with an exchange of ideas between every continent. Their analysis emphasizes a somewhat forgotten aspect of the first globalization: international knowledge transfers. Using cross-country regression analysis, Gayle Allard and Peter Lindert (chapter 15) find evidence that employment protection legislation and product market regulation reduced employment and productivity since the 1960s. They also find that coordinated wage setting and welfare state transfers either increased employment and productivity or did little to reduce them. This chapter contributes to the broader literature on the efficacy of Anglo-American institutions versus Continental European institutions.

Finally, there are two chapters analyzing financial markets from a comparative perspective. Richard Grossman (chapter 6) shows that bank capital to asset ratios declined in most countries from 1840 to 1940. Cross-country regression analysis reveals that banking crises increased capital to asset ratios, but government regulations, like minimum capital requirements, had little influence. This chapter shows convergence in a key variable across banking systems, and suggests the benefits of comparative research in banking history. Holger Wolf and Tarik Yousef (chapter 10) examine the timing of exit from the Gold Standard during the Great Depression. They find that greater deflation or recession hastened exit, as did the exit of trading partners. Interestingly, greater political instability slowed exit from the Gold standard. Their results should be of interest to scholars studying the determinants of monetary policy in the Great Depression.

Dan Bogart is an assistant professor of economics at the University of California, Irvine. His research focuses on government policies towards the infrastructure sector in Britain and throughout the world in the eighteenth and nineteenth centuries. Recent publications include “Nationalizations and the Development of Transport Systems: Cross-Country Evidence from Railroad Networks, 1860-1912″ (forthcoming, Journal of Economic History); “Turnpike Trusts and Property Income: New Evidence on the Effects of Transport Improvements and Legislation in Eighteenth Century England,” (forthcoming in the Economic History Review); and “Inter-modal Network Externalities and Transport Development: Evidence from Roads, Canals, and Ports during the English Industrial Revolution” (forthcoming in Networks and Spatial Economics).

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

John Maynard Keynes and International Relations: Economic Paths to War and Peace

Author(s):Markwell, Donald
Reviewer(s):Lawlor, Michael S.

Published by EH.NET (February 2008)

Donald Markwell, John Maynard Keynes and International Relations: Economic Paths to War and Peace. Oxford: Oxford University Press, 2006. xv + 320 pp. $85 (hardcover), ISBN: 0-19-829236-8.

Reviewed for EH.Net by Michael S. Lawlor, Department of Economics, Wake Forest University.

This book will be of interest to economists in general, and to Keynes specialists in particular. It focuses on the topic of the international relations views expressed by Keynes over his long career, from his involvement in the First World War as a Treasury official and as Lloyd George’s economic advisor at the Paris Peace Conference; through his interwar position as a prominent analyst of international monetary problems; to the part he played in the British Treasury during the Second World War. There he was very influential on the policies of how Britain would pay for the war, the form that the post-war international payment systems would take under the Bretton Woods system, and the negotiation of the terms of the American post-war loan to Britain in 1946, shortly before his death.

The fact that this book solely focuses on this limited facet of Keynes’s multi-dimensional career, that Markwell is a political scientist and therefore uses much non-economic material, consisting mostly of primary internal memoranda from the Treasury office and other governmental units, and that he frames his arguments in terms of the secondary scholarship on international relations in political science ? both of which are unfamiliar territory for most economists ? adds to the freshness and usefulness of this study. It should also be added ? and I don’t think Markwell would disagree ? that some of the debates and contexts for Keynes’s activities in this regard have already been well discussed in both Robert Skidelsky’s (2000) and Donald Moggridge’s (1992) biographies of Keynes. These books provide a thorough background and context for the many issues, events and personalities surrounding Keynes’s involvement in international relations. I would suggest one of these volumes for further reading to those who find this to be an area of interest. Markwell’s book goes beyond them, and is a useful companion to them, in its bringing together the various strands of Keynes’s ideas, writings and activities with respect to international relations in one place. This treatment adds focus to the material in a way that Keynes’s biographers, necessarily more focused on the grand sweep of his career, were not able to do.

More broadly, this book is instructive to this reviewer for the opportunity it offers to ponder the importance of context for the application of some of the fundamental tenets of economic theory. Ironically, perhaps this is precisely because of Markwell’s lack of focus on economics and due to his use of the aforementioned wealth of policy evidence on Keynes’s extensive involvement in government and international affairs. Markwell’s analysis requires the economic reader to follow Keynes into the task of applying economic theory to knotty problems of international politics and thereby to think hard about the validity of the abstract nature of economic principles in various real geopolitical scenarios of great import (like the two World Wars), to consider what role economic factors may play in the development of hostilities between nations, and to consider seriously the compatibility of microeconomic truths with macroeconomic truths when their application is not just a hypothetical example, but a real live political circumstance.

To first take up the issue of the contextual nature of the application of economics to political situations consider the situation that Keynes, and all western economists and political analysts, faced in the period from the end of the First World War, through the slump and depression of the thirties. What concerned them most was the question of how to re-create the era of rising prosperity and smoothly functioning world trade that had characterized Europe and America in the period before 1914. From the end of the First World War and the Paris Peace Conference on, Keynes was one of the first and most prominent (but by no means the only) international figures who felt that this goal required a lasting peace that would allow Germany to regain its rightful place, for reasons of geography and size, as the economic engine of Europe.

This was Keynes’s message in the book that first made him internationally famous, The Economic Consequences of the Peace. This book, as Markwell shows, grew from Keynes’s fears that restoring prosperity to Europe was wholly lost sight of in the blind rush to revengefully heap reparations and crippling terms of defeat upon a prostrate Germany. Keynes’s sometimes over-the-top criticism of the principals at the conference ? with Lloyd George, George Clemenceau and Woodrow Wilson coming particularly under extensive personal attack, some thought bordering on ridicule ? stemmed from the fact that Keynes believed that their actions, as opposed to their hypocritical words, would lead to an unstable peace.

Thus, at some risk to his own influence and career, Keynes quit his role in the negotiation of the Paris peace treaty and returned to England to hastily write his reaction to that experience in the form of The Economic Consequences. It was a book that both criticized the leaders of England and France for cowardice, in being unwilling to challenge the popular clamor for revenge upon Germany, and that laid bare the flaws of the peace terms that the French and British political leaders had, Keynes thought, bamboozled President Wilson into signing. These plans, he felt, were counterproductive of a lasting peace and unrealizable to boot, because Germany could never meet its reparations obligations so long as its internal economy was crippled by the terms forced upon it by the treaty.

All this is well known to Keynes scholars and to students of the World War One period. What Markwell adds is context and detail to Keynes important role in the struggle to win both the war and the peace. What can be learned by all economists from his experience is that the dire nature of the post-war European economies, particularly those of the losing Axis powers, could not automatically be reversed unless attention was paid both to their immediate needs in the form of relief aid of one kind or another and also to their more long-term need to foster investment and trading institutions that would ensure the growth and permanence of economic prosperity. In asking how this would be achieved, Markwell classifies the nature of Keynes’s arguments at this crucial historical juncture as a species of a “liberal-idealist” one.

At the end of 1918, Keynes had a clear view of some of the elements of the post-war order he wished to see. His liberal-idealist faith in free trade, on which he had been brought up, was unshaken. He had urged the abandonment of inter-Allied debt and Britain’s forgoing her share of reparations, which he hoped would go to assist the new states. He had urged a moderate approach to reparations; and clearly wished the defeated powers to be treated so that they would not need assistance to avoid starvation, unemployment, anarchy, or perhaps Bolshevism. The fundamental views which underlay his action at the peace conference, and which were to be expounded in The Economic Consequences, were already formed and were shared by many others (p. 53).

Thus Keynes began his career, as many economists have before and since his time, as a solid proponent of free trade as the primary means to bring about international peace. This brings us to the second issue raised above: to what extent, and how, are economic factors causative of acrimony and war between nations? Any modern economist could profit by considering this question in light of Markwell’s book. Here, Markwell writes, Keynes’s view matured over the course of his career. The standard argument pits free trade against imperialism. Free trade, it is thought in the standard liberal argument, may have peaceful benefits as an unintended consequence, if it make customers out of potential enemies. Moreover, since mutually beneficial gains for any two countries can be shown (and this is one of the principle lessons of a liberal economics) to lead to rising prosperity for both trading partners, there is a potential for any two countries to both benefit from trade. Trade, so this argument goes, would make traders reluctant to upset trading by aggression and war, and so free trade may tend to reduce international aggression and war.

On the other side, the argument of imperialism starts from the premise that it is beneficial for a country to run a favorable balance of trade, and an expanding export market, in that this tends to keep manufacturers and producers of tradable goods and services at home in a prosperous and expanding state. By this argument developed countries (note not firms directly, but perhaps state action spurred by firms) will seek means to maximize export opportunities in particular and may also vie to receive exclusive preferences for their goods and services in these markets, as well as trying to ensure scarce inputs to the production process, such as raw materials and/or natural resources that are in short supply at home. How is this accomplished? By the argument of imperialism, it is accomplished by military and diplomatic maneuvers that allow powerful states to dominate weaker states and to assemble official or semi-official trading empires.

The economic analysts of the liberal tradition in England ? Smith, Ricardo, Burke, Mill, and Marshall ? can be identified as the major proponents of the former idea. Dissenters from this tradition both in England and on the continent ? like Hobson, Lenin and Luxembourg ? can be identified with various twists on the latter idea in Keynes’s time. Markwell makes it clear that Keynes early in his career came down exclusively on the side of the liberal conception of free trade ? hence his categorizing of Keynes’s earliest arguments into those of a “liberal-idealist” camp. He recognized and believed in the potential of free trade to promote peace and harmony among nations, and he thought that by reestablishing Germany’s power to participate in trade with it neighbors, a lasting peace could be established in Europe after World War One.

It must be said, though, that the history of Europe and the world in the nineteenth century and leading up to the war in 1914, offered evidence supportive to both sides of this debate. On the one hand Britain, France, Germany and in fact most of Europe, had all grown prosperous in this period by trading with other nations, particularly was this so in the case of Britain, a small island economy with vast global trading interests. But each had also sought to carve out for itself some exclusive markets for its exports, and some exclusive sources of raw material for it own producers, through the conquest of overseas empires. This vying for power internationally had become so commonplace among European governments that part of this activity became known in England by the playful title of the “The Great Game.”

But imperialism and empire were not topics that engaged Keynes, either by upbringing or by temperament. In order to reassert the classical liberal argument he had been brought up on in this context he, like many of his fellow British liberals, made a crucial distinction between empires and exclusive trading blocks. “Empires,” according to Keynes (in 1903), need not lead to exclusive trading blocks. An empire that was founded and run on proper political principles, as he thought was the case of the British Empire, could lead to a loose confederation of states for which association with Britain was “to provide facilities for the growth under freedom and justice without molestation from abroad of these young nations … [W]hen a country becomes part of the Empire it is free to pursue it own destiny, in its own way. Because our ideal is democratic” (p. 19).

This somewhat condescending (to the colonial countries) and benign view of empires was in sharp contrast to both the imperialism theorist’s view of empires, as well as to those of other English political and ideological leaders (of the so called “Round Table”) who, after World War One, wanted to work for the imperial unity and exclusivity of trade relations between the various members of the British Empire. Keynes criticized the notion that empires necessarily would form into exclusive trading blocks that excluded all others, and that empires should lead to this state of affairs. He excoriated the latter in particular, exemplified for Keynes by the “German dream of Mittel-Europa.” It was a conception of empire based on “exclusivity” and the attempt to “monopolize” for the home country producers’ markets for their exports and sources of food and raw materials. This, he lamented, led to new frontiers “between greedy, jealous, immature, and economically incomplete, nationalist states” (p. 20). Worse, competing for such imperial preferences by nation-states, such as the British Round Table thinkers advocated, could lead to conflict and war.

Thus, the question that formed the international relations context in which Keynes wrote during and immediately after the First World War, was whether war could only stem from a perverse international policy in pursuing the potential gains from free trade (what Markwell calls the liberal-idealist position) or whether war was a natural outcome that could be expected from an inevitable imperialist-capitalism by which states would naturally vie for national power by assembling competitive exclusionary trading blocks (what Markwell identifies as the “realist” view).. Keynes, at this stage, as we have seen, favored the first argument ? that free trade only caused war when it was perversely pursued along the lines of imperial, exclusive terms. If trade and empires could be based on openness of markets and democracy, such as British experience in the pre-war period showed to Keynes was possible, then empires could be a beneficial source of cosmopolitanism and peace.

So what did Keynes at this early stage in his development think were the economic causes of war? Wars could result, said the younger, classical liberal Keynes, from “impoverishment, population pressure, penetration by foreign capital and the ‘competitive struggle for markets'” (p. 3). Note this fits our conclusion in the previous paragraph, by carefully excluding free-trade from those causes, so long as it is not pursued in exclusionary terms. So the interesting questions for economists today ? trained to believe unreflectively and in the abstract in the eternal verity of the potential for mutual gains from trade ? to take from this study of Keynes are as follows: Are there some possible circumstances under which this gain will not automatically arise in the context of actual situations of international relations? Does economic theory itself suggest conditions in which we may want to abandon a dogmatic attachment to what seems like a species of economic Truth? It turns out that the historical analog to these questions in the present case is “how did Keynes’s view of the role of economics in international relations evolve over his career?”

One way to answer these questions is by following Markwell in identifying three further stages in Keynes’s evolution in this regard ? identified as his “early liberal institutional, protectionist and mature liberal institutionalist” (p. 3) positions. All three stages could be thought of as instances where Keynes did not so much abandon the above-listed catalogue of the potential economic causes of war, but rather thought of extensions to the first cause ? economic “impoverishment.” His extensions were of two varieties. First in the 1920’s, and again in the 1930’s, Keynes suggested extensions from the contextual perspective of then current national and international events. Later in the 1930’s, and from the theoretical perspective of his General Theory, he suggested further, more economically fundamental extensions to this factor. Put another way, as he matured in terms of both experience and theoretical framework, he added to this list of the potential economic causes of war the crucial factors of monetary disorder, trade imbalances and unemployment. Even later, with special reference to Hitler and Germany, he added that there is no proper economic cause that extended to a nation’s possible reaction to “impoverishment” by embracing what he called a “brigand.” That is to say, economics had no explanation or remedy for a nation that was led by “a madman or a gambler” that was willing to risk war for personal power (p. 198). (Markwell convincingly shows on pp. 197-203 that Keynes was never pro-German or an appeaser, as he has sometimes been accused.)

Let us take the first stage of the evolution of Keynes’s views to begin. As Britain suffered through the slump of the twenties and as most of the West similarly suffered though the worse experience of the Great Depression in the thirties, Keynes came to blame these continued difficulties in restoring prosperity on the lack of existence a of well-functioning international monetary order. In particular, he was convinced that the gold standard had become a shackle on Britain, and on western expansion in general, because it forced weakened economies, such as he identified Britain as being since the First World War, to run a high-interest-rate policy for international reasons (to protect its gold reserves) that was wholly inconsistent with a needed internal low-interest-rate policy to restore employment and prosperity. This again deviated from the belief that free trade would automatically restore prosperity in any political context. In this case, and barring international agreement on an alternative system that bitter experience had taught him was not likely, it would be better for Britain to unilaterally either peg its pound below its pre-war parity rate ? and by such a devaluation encourage the output of its exporters – or, as eventually transpired in 1931, to abandon the gold standard altogether.

Even as this was his best counsel on short-term policy, Markwell shows Keynes was continuously preoccupied in this period, roughly 1922-1932, with finding a solution to the question of what possible type of international arrangement could be agreed upon by many nations and managed with some high degree of efficiency that would not rely upon what Keynes considered the immiserating and trade-inhibiting policies of the gold standard [1].

So the second-stage of the development of Keynes’s views on international relations was that he came to feel strongly that a return to the pre-1914 prosperity in Europe required the adoption by international agreement of an alternative to the former gold standard that would attract wide participation. This could only happen, he thought, if there were strong international leadership (which he long looked for from the U.S., as far back as the end of the First World War, but did not actually witness until World War Two). Moreover, Markwell clearly shows that in all of his many writings and participation in conferences devoted to this topic, Keynes was very fluid and pragmatic about the form that such a system should take. He was willing to compromise his own vision of a U.S./British-led system of managed (flexible) fixed exchange rates and the form that a managed stock of international liquidity reserves and payment media would take, if it would encourage wider agreement. (He stressed that the search for unanimity was an evil to be avoided.)

This fluidity as to details was to serve him well when he was negotiating with America during the Second World War over Lend-Lease and especially the post-war monetary system in that the Americans had firmly held demands and alternative plans of their own, which when added to Britain’s weak financial position, meant that Keynes was forced to negotiate from a distinctly weak position. Thus, the 1923-30 period was the stage of Keynes’s developing international relations views that Markwell calls “early liberal institutionalist.” Free trade could be beneficial, he was saying, but only if a properly functioning international monetary institution was adopted.

Briefly, we proceed on to the third stage of Keynes’s views on the economic element in international relations. Here the question becomes more starkly the universal nature of the coincidence of free trade and peaceful international relations. This stage arose out of Keynes’s participation on the Macmillan Committee on Trade and Finance (1929-31), the Economic Advisory Council set up by Ramsey McDonald, and particularly its Committee of Economists (created in July 1930, and to which also belonged William Beveridge, A. C. Pigou and Lionel Robbins) and in the pages of the political affairs journal that he headed at the time, the New Statesman. All of this activity arose from the need to respond to the international crisis that arose from the Great Depression and its particular impact on Britain.

In this and the fourth stage of Keynes’s grappling with international relations questions, Markwell emphasizes continuity in Keynes’s evolving views. The economist in me wants to call the first issue one of political context and, therefore not economically fundamental. But Markwell makes a good case that the last two stages of Keynes’s thought in this regard should be seen as merging into, and reinforcing, one another. The fourth phase he identifies is the period after 1933, sometime between 1934 and 1936, depending on when one judges Keynes to have been in control of the central propositions of his General Theory.

To go back, we should start with describing the third stage of Keynes’s views that Markwell describes as his “protectionist” phase. This occurred when, in the early years of the Great Depression, 1929-33, and to quite a bit of controversy, Keynes advocated protectionist measures for Britain, especially higher tariff barriers, as a way of combating the British unemployment of that period. He contextualized this recommendation by arguing that this unemployment had unfortunately occurred within a world system where the gold standard made the pursuit of free trade for “creditor” countries (such as Britain was since 1914) a road to even higher domestic unemployment than it was already experiencing. This was because, in order to maintain its balance of payments, it was forced to run a high-interest rate policy and deflation to protect its reserves. In this circumstance, and again barring a better international monetary system that seemed so impossible to him at that dark stage in history, Keynes gave a limited endorsement to British protectionist policy in the then-current economic emergency and for the short term. One detects almost a reluctance on his part to do so. And, indeed, his about-face was controversial enough on the Economists Committee that Robbins found it necessary to both author a dissenting minority report, attack Keynes’s position in the press and later author, with Beveridge and other LSE economists, a book defending free trade even in this context (Beveridge et al. 1931).[2] Consider Markwell’s comment on Keynes in this period: “Keynes’s renunciation of free trade came, hesitantly, and then boldly, in proposals, first, for emergency tariffs, and, secondly, for greater national self-sufficiency and economic isolation. Keynes moved from admitting that the classical connection between free trade and peace was an argument against a tariff, but one outweighed by the economic emergency; through saying that his proposed tariffs could also help international amity; to denying that free trade did in fact promote peace” (p. 153).

His argument in the context of such an economic emergency as the Great Depression seems to have been analogous to the old saw that “the patient cannot stand the cure.” He thought that Britain was in such a crisis with regard to unemployment, that her money wages were too rigid for deflation to work its classic role in bring down costs, that the gold standard had so limited the range within which domestic economic policy had to maneuver, and that so many other countries were reacting to this crises by erecting tariff barriers of their own (effectively exporting their unemployment problems to Britain), that he had become “reluctantly convinced” (p.154) that protectionism was the best temporary policy Britain could pursue in this circumstance.

Economists, and particularly specialists in macroeconomics and in Keynes’s thought, might immediately wonder if the drafting of the General Theory of Employment, Interest and Money did not have a profound effect on Keynes’s ideas on this question. Less historically minded economists might also wonder if, and how, the perspective of macroeconomics might alter one’s view of the universal argument for the benefits from trade. Again the history of Keynes’s own international relations positions offers examples of him facing exactly this question. Consequently, the fourth and last stage that Markwell identifies in Keynes’s evolving views on international relations ? what he calls the “mature liberal institutionalist” phase ? was based on just this issue. Again depending on when one judges the proposition of the General Theory to have been drafted, in some period during the middle part of the 1930s, Keynes developed a more fundamental economic theory framework in which to argue the point about protectionism that we have seen him making on pragmatic policy grounds in the early years of the Great Depression. In the General Theory and after, Keynes insisted that the question of the economic causes of war and the advisability of protectionist, anti-trade measures depended on how close the economy was to full employment ? and this extended to his advice to the government during the Second World War, when he judged the economy to have met this condition. Short of this internal goal, Keynes said that countries were unlikely to reap the potential benefits from free trade described by classic liberal economics. This was because the temptation was too strong for any one country to erect tariff barriers around itself to boost the demand for domestic producers. It was Keynes’s view that the policies of many nations since 1929 offered examples of this. Since competitive attempts to export domestic unemployment to another country eventually ended in lowering employment in them all, protectionist policies became a second best solution in this context. Better that each county should act in isolation from international forces to raise domestic employment to its full potential, by lowering interest rates and bolstering demand for domestic industry in any way possible. According to Keynes, “if our central controls succeed in establishing an aggregate volume of output corresponding to full employment as nearly as practicable, the classical theory comes into it own again from this point onwards” (p. 186).

Here we can quote Markwell to the effect that Keynes hereby modified his position on the economic causes of war in a fundamental way:

In short, Keynes’s argument was both that laissez-faire did not have the tendency to peace claimed for it, and that a reformed capitalism along the lines he advocated would much improve the prospects for peace. Keynes said that ‘the new system might be more favourable to peace than the old has been.’ It is not clear whether by this Keynes meant simply that past causes of war would be absent, or that with these gone and free trade, some of the mechanisms classical liberals claimed were the means by which free trade actively promoted peace would work again. Such mechanisms included the creation by trade of vested interests in peace, and the promotion of moral solidarity between nations trading with each other.

Here is the final issue that modern economists might profit from pondering as a result of reading this book. Keynes was saying in the 1930s that countries had first to ensure full employment before they could anticipate the mutual economic gains and the possible peace dividends that trade holds out. If the economic system of a free-market economy does not automatically tend toward full employment, but needs to be managed to attain this goal consistently through time (and surely this is the basic lesson of macroeconomics even to this day), then it is a mistake to think and preach that free trade is some sort of divinely given cure for all economic ills, in all contexts, domestic and foreign.

Keynes, of course, should not be looked on as an infallible guide in pondering this issue. He was fallible in judgment even within the field of international relations that Markwell surveys here. For one, his self confidence about his cleverness in designing policy fixes often led to disastrous negotiations on his part with his official American counterparts during the Second World War. Harry Hopkins, the special advisor to U.S. President Franklin Roosevelt, reportedly expressed this irritation in his comment that Keynes was “one of those fellows that just knows all the answers” (Chandavarkar, 2001).

Moreover he showed a complete lack of understanding of the American political process. Used to dealing exclusively with ministers and their Whitehall staff in the more centralized English system, he was dismayed by the power of individual Congressman. Also, not only was Keynes unnecessarily rude to these Congressman, who he often gave the impression that he considered them provincial and beneath him, but his haughty behavior was also unwise, in that those very Congressmen could hold up American aid for British needs. He similarly accused the White House and State Department of being too timid in its relations with Congress, not realizing that the American Constitution gave Congress control of appropriations, whatever the White House may have negotiated for with the British.

But Keynes’s faults were more than outweighed by his many talents. Keynes’s insight into how economies work, combined with his ability to understand and exert influence over the process of policy creation, is unlikely to be seen again in today’s era of extreme specialization. As such, modern economists, whether they agree with his judgments or not, can learn valuable lessons in the political economy of policy application from following his career in international relations in the context of numerous actual international crises. Markwell does a fine job in showing, over numerous issues, how difficult and how much skill is required to apply economic reasoning in the realm of international relations. Markwell’s greatest attraction for an economist is that he shows how Keynes pursued this activity with skill and subtlety in the context of many of the weightiest geopolitical issues to face the West in the twentieth century. It is one measure of Keynes’s and others’ ultimate success in this context that it is hard now to even imagine Germany and England at war. We, as economists, can learn a great deal from a recounting of his experiences in establishing this peaceful and prosperous state of affairs in Europe. Perhaps it might even make us a bit humble to contemplate that it may be in large part due to Keynes’s own work both in economics and politics, to the wisdom of the architecture and implementation of the Marshall Plan, which was surely in the spirit of Keynes’s ideas, and to the way in which economies have been managed since his time, that we have the luxury of not facing his unpalatable choice between free trade and full employment.


1. Also note that Keynes therefore wanted to destroy what he considered a “barbarous relic” of the nineteenth century, the belief that the gold standard operated “automatically” to restore international imbalances and that this meant it would encourage trade. Alternatively, a major message of Keynes throughout this period was that the gold standard was not, in fact, operating automatically by the pre-war rules of the game in the period after World War One because the U.S. and the Federal Reserve System refused to let its own eventual control of the majority of the world’s monetary gold cause U.S. prices to rise. Keynes thought this unfairly forced upon all other “creditor” nations the problems, noted above, of choosing to abandon international monetary arrangements, to competitively devalue its currency or to run a ruinous deflation.

2. It is instructive to modern economists that Robbins later, in his autobiography (Robbins, 1971), recanted his opposition to Keynes during those depression years.


Chandavarkar, A. 2001. “A Fresh Look at Keynes: Robert Skidelsky’s Trilogy.” Finance and Development, Vol. 38, no. 4, December.

Moggridge, Donald. 1992. Maynard Keynes: An Economist’s Biography, Routledge.

Robbins, Lionel C. 1971. Autobiography of an Economist, Macmillan.

Skidelsky, Robert. 2000. John Maynard Keynes: Fighting for Britain, Macmillan.

Michael S. Lawlor is Professor of Economics, Wake Forest University, Winston-Salem, North Carolina. His most recent publication on Keynes is The Economics of Keynes in Historical Context: An Intellectual History of the General Theory (2006).

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

Slavery, Family and Gentry Capitalism in the British Atlantic: The World of the Lascelles, 1648-1834

Author(s):Smith, S.D.
Reviewer(s):Burnard, Trevor

Published by EH.NET (August 2007)

S.D. Smith, Slavery, Family and Gentry Capitalism in the British Atlantic: The World of the Lascelles, 1648-1834. Cambridge: Cambridge University Press, 2006. xv + 380 pp. ?55/$99 (cloth), ISBN: 0-521-86338-4.

Reviewed for EH.NET by Trevor Burnard, Department of American Studies, University of Sussex.

How did “people from a family no-one knows” amass a great fortune? Simon Smith, in this splendid examination of the Atlantic world context of interconnected family members of a mercantile and then landed dynasty that made its money (and occasionally lost it) in the burgeoning economies of the West Indies, especially Barbados, provides an engrossing answer to this question. He examines the rise to great wealth of the Lascelles family, a Yorkshire family who made money in various ways in Barbados and who established themselves as a leading aristocratic family in Yorkshire, prominent for their building of Harewood House, one of the truly great homes of northern England.

The Lascelles, of course, are not, nowadays, an unknown family, having married into the British Royal Family in the early twentieth century. Their current prominence was the impetus behind this investigation. Harewood House entered into collaboration with the University of York, where Smith taught until this year, in order to bring out of the shadows the role that slavery and the plantations had played in the Lascelles’ acquisition of great wealth. The Lascelles were one of the first, and most prominent, examples of what was a new and, to many, disturbing phenomenon in eighteenth century Britain: nouveau riche men of uncertain pedigree who deployed wealth made in Britain’s growing empire into establishing themselves as landed gentlemen. Like Russians today or Americans in the late nineteenth century, colossally wealthy West Indians (Smith outlines carefully just how rich the first two generations of Lascelles were, with wealth of nearly ?900,000 at mid-century and over ?1.3 million at 1800) joined East Indian nabobs in fundamentally disturbing settled English social structures by the sheer extent of their fortunes.

Smith tells us a great deal about the Lascelles family and their fortunes. His work is based on enormous research and the employment of extremely sophisticated methodologies designed to extract meaning out of resistant sources. Smith recreates the social and economic world of a group of super merchants in the eighteenth century British Empire. (Some, like the Lascelles, very successful; others, like Gedney Clarke, to whom he devotes an especially fine chapter, failures due to overreaching and an unfortunate combination of circumstances in Atlantic trade.) These were men who both shaped and also profited from the growth of plantation commerce in the center of British American slave economies. Because slavery is so central to wealth creation in the West Indies in this period, Smith devotes an interesting, if not entirely well integrated, chapter on the enslaved population, where he complicates and extends our understanding of slave demography.

His work adds substantially to debates on gentry capitalism and on how respectable and well-connected gentlemen used their commercial networks to flourish in the poorly regulated but expanding colonial economy. They helped to make that colonial economy achieve the sort of integration that David Hancock has outlined in his work on London merchants in the Atlantic trade. It is important to note, however, that Smith is less convinced than Hancock that integration had truly occurred in the Atlantic World of commerce during the eighteenth century. Smith’s work contributes to a developing literature on Atlantic trade and on eighteenth-century business networks. Indeed, network analysis is crucial to his work. He illustrates, echoing work done by scholars looking at networks created by Scots in the Caribbean, that doing business through a complex network of business associates connected by kinship and other ties was the only effective way of reducing risk and assuring business success in a remarkably underinstitutionalized Atlantic world economy. But networks hampered merchants as much as they helped. They limited outsider involvement and accentuated the importance of manipulating access to political patronage. In the long run, as he shows, the successes of the Lascelles were unsustainable in a new world of tighter regulation and more coercive imperial policies. Here, Smith says important and suggestive things about institutional business deficiencies in Atlantic commerce that should be taken up by scholars exploring nineteenth century West Indian decline.

His study is the best study of a merchant-planter family since Richard Pares’ investigations, including one on the Lascelles family, over a half century ago. He engages actively with the influential arguments Pares made concerning what we might call the “Adam Smith” problem. That problem concerned the extent to which the wealth of the sugar colonies derived from investment from England or was instead self-generated in the colonies. Adam Smith argued for the former; Pares for the latter. Simon Smith’s analysis of the credit-debt networks of Henry Lascelles lends support to his namesake’s position, suggesting that most of the money for plantation expansion came from Britain. Nevertheless, his careful research (he is brilliantly insightful into the little studied topic of colonial credit and debt) modifies significantly Adam Smith’s contentions. He shows that mid-eighteenth century English merchants were confident enough in the future prosperity of West Indian property that they were willing to extend considerable amounts of long-term credit to planters. This credit extension fuelled not only plantation development in the older, established colonies but also remarkable growth in the regions of the British West Indies acquired after the Seven Years’ War. Smith’s figures cast light upon how this boom development occurred, thus opening up possibilities for future research in plantation development in the Ceded Islands. The amount of money flowing into the Caribbean was truly astounding but created what Smith calls a “labyrinth of debt” that drew creditors such as the Lascelles into much more direct involvement in the plantation economy as planters than they had wanted. The Lascelles, significantly, grew their fortune through trade and especially through government contracts gained through their connections on both sides of the water. By the latter part of the eighteenth century, however, foreclosures on over-extended planters had made them reluctant slave owners with a large portfolio of West Indian property that they would have preferred not to have. Their aim was to transform their West Indian interests into English property. They were able to do this reasonably successfully but the property they were forced to acquire meant that they remained tied to the West Indies. Smith’s study is a useful reminder that the customary image that we have of the imperial center dictating to the colonial periphery is a misleading characterization of imperial trade networks. The colonies and the metropolis were separate places but were integrally and complexly related. The degree of integration can be seen in the Lascelles family itself ? neither West Indian nor English but a mixture of both. The degree of integration between metropolis (even a provincial metropolis such as Yorkshire) and colonies makes one wonder whether Smith is right to discount Pares’ argument about pump-priming. If we think of the Lascelles family as more West Indian than British or, better, as transatlantic brokers, then the geographical source of capital is murky. If the credit that the Lascelles family gave to planters came from England but derived from plantation profits, who can say where exactly it originated?

Any doubts about the importance to England and to the empire of entrepreneurial merchant-planters, such as Henry Lascelles and Gedney Clarke, will be dispelled after reading this dauntingly well-research book. At times, Smith makes us work quite hard, not drawing out as clearly as he might the implications of the empirical research that he has done. It is a book that warrants close reading because of the many insights hidden away in tables and footnotes. But any work we put in will be well rewarded. No other book since Pares’ work has illuminated so clearly the reality of gentry capitalism in the eighteenth century Atlantic world. To place anyone with Pares, a scholar of awesome erudition, is to praise effusively. Smith’s work is a work of major scholarship by a man immersed in the sources and attuned to current historiographical controversies. It should have a transformative effect on developing scholarship in an especially dynamic field.

Trevor Burnard is Professor of American History at the University of Sussex and will be Professor of the History of the Americas at the University of Warwick in September 2007. His most recent book is Mastery, Tyranny and Desire: Thomas Thistlewood and his Slaves in the Anglo-American World (Chapel Hill, 2004).

Subject(s):Servitude and Slavery
Geographic Area(s):Latin America, incl. Mexico and the Caribbean
Time Period(s):19th Century

Governance, Growth and Global Leadership: The Role of the State in Technological Progress, 1750-2000

Author(s):Moe, Espen

Published by EH.NET (July 2007)

Espen Moe, Governance, Growth and Global Leadership: The Role of the State in Technological Progress, 1750-2000. Burlington, VT: Ashgate, 2007. ix + 308 pp. $100 (hardcover), ISBN: 978-0-7546-5743-9.

Reviewed for EH.NET by Peter T. Leeson, Department of Economics, George Mason University.

There is no shortage of research examining the sources of prosperity. In Governance, Growth and Global Leadership, political scientist Espen Moe of the Norwegian University of Science and Technology contributes to this research, but does so by way of analyzing a more specific, and thus more manageable, contributor to wealth creation: technology.

Moe argues that three key factors explain why some countries have achieved this progress, emerging as global leaders of industry, while other have not: human capital, government’s ability to resist catering to vested interests, and “political consensus and social cohesion.”

Through these factors Moe aims to marry “Schumpeterian growth theory” ? the idea of a simultaneously creative and destructive growth process ? with Mancur Olson’s theory of special interest groups to create a general framework that sheds light on the history of technological change.

The marriage is a fruitful, if familiar, one. In order for technology to advance and economies to grow, governments must permit innovations and individuals must have the human capital to apply them. The problem is that older, well-established producers have incentives to block such invention since it often destroys the market positions they enjoy. If old industrial leaders are able to capture the state, government will raise barriers to change, privileging the status quo and thwarting technological progress.

Governments that can resist the pressure to cater to such interests facilitate the process of creative destruction and with it economic growth. Those that cannot resist the pressure stifle this process and encourage economic stagnation. “Political consensus and social cohesion” enter the picture by creating the conditions of broad-based support among political leaders and the populace for economic policy that allows new producers to compete openly with old ones, or by adding to the pressure that vested interests apply to government to preserve existing arrangements.

The core framework here is not “new;” but great originality in the context of the voluminous literature that examines economic growth and development is difficult to achieve. More importantly, theoretical innovation is not Moe’s goal. The application of this framework to the history of technological progress is both novel and interesting and serves the author’s primary purpose, which is an empirical one.

To make his argument Moe considers nine case studies of technological progress or stagnation between 1750 and 2000. His case studies are presented in the context of five substantive chapters. Each of these is devoted to a different industry, presented chronologically in terms of its economic significance.

Chapter 2 contrasts England and France’s experience with the cotton textile industry during the First Industrial Revolution. Chapter 3 again considers England and France, but in the context of the iron industry in first half of the nineteenth century. In chapter 4 Moe compares German and British technological success in the chemical industry between the second part of the nineteenth century and World War I. Unlike the previous chapters, chapter 5 examines only one country ? the U.S. ? and the rise of the automobile industry in the interwar period. The sixth and final substantive chapter contrasts American and Japanese progress in the information and communications technology (ICT) industry from the Cold War era until the turn of the new century.

These case studies persuasively point to the important (primarily negative) role of government in facilitating technological progress, namely through resisting pressure from industrial stakeholders to undermine Schumpeterian entrepreneurs or privilege the status quo. Likewise, they effectively highlight how “political consensus and social cohesion” reduced or applied this pressure, enabling or preventing technological advance. Overall, the evidence Moe musters does a nice job of illustrating the utility of his proposed Schumpeter-Olson marriage in the context of the history of technological progress and growth.

I have only one noteworthy complaint. In light of the importance that both vested interests and human capital play in Moe’s framework, it would have been useful if his analysis focused more on how government can and has used “human capital building” to cater to vested interests and block Schumpeterian growth. Although, as chapter 6 discusses for example, state-led research and development has figured prominently in ICT development in a number of countries, we cannot, prima facie, take this human capital building as a positive force contributing to technological and developmental progress.

Like all other government activities, state-sponsored research and development, education, and so on, are subject to traditional public choice concerns and may be used by political actors to cater to vested interests or nefariously guide the process of technological change in other ways. In short, technological “progress” encouraged by government may not reflect economic progress in that it may constitute an inefficient use of resources.

A technology that could not support itself without state-subsidized R&D, for example, but because of this R&D “makes it” and eventually comes into wide use is not necessarily a “win” from the standpoint of economic development. For one thing, we never enjoy the alternative, potentially superior technological innovations that would have come along if R&D resources had been allocated according to market forces instead of political criteria.

This objection notwithstanding, Governance, Growth and Global Leadership tells a compelling story of technological progress since 1750. Economic historians, particularly those with a strong interest in economic growth and development, will enjoy it.

Peter T. Leeson is the BB&T Professor for the Study of Capitalism at George Mason University. His recent research explores the law, economics, and organization of pirates ( and has been covered in the New Yorker and the Financial Times.

Subject(s):Industry: Manufacturing and Construction
Geographic Area(s):North America
Time Period(s):20th Century: WWII and post-WWII

Market Services and the Productivity Race, 1850-2000: British Performance in International Perspective

Author(s):Broadberry, Stephen
Reviewer(s):Field, Alex

Published by EH.NET (June 2007)

Stephen Broadberry, Market Services and the Productivity Race, 1850-2000: British Performance in International Perspective. Cambridge: Cambridge University Press, 2006. xvii + 409 pp. $95 (cloth), ISBN: 0-521-86718-5.

Reviewed for EH.NET by Alex Field, Department of Economics, Santa Clara University.

As I was preparing this review of Stephen Broadberry’s latest book, my daughter leaned over to see what I was currently reading. She glanced quickly at the cover, shook her head and said, in a voice tinged with pity, “Dad, that just looks incredibly boring.” Then, catching sight of the word ‘productivity’ in the title, and knowing something of my own recent work, she added, apologetically, “Oh, did you write this?”

Such are the occupational hazards facing those of us who study productivity history, hardy but sensitive souls whose pulse can quicken in the presence of minute differences in rates of TFP increase. For a general audience, this book will indeed be slow going. But for those interested in the motors of economic growth and development, considered particularly from a comparative perspective, this work is a notable achievement. In it, Broadberry brings together research on the comparative productivity performance since the 1870s of Britain, the United States, and Germany. The emphasis is on Britain, and Broadberry’s main theme is the necessity of focusing on the service sector, not just or even principally manufacturing, in understanding Britain’s relative decline. Differential trends in service sector productivity, not industry, he argues, explain most of the movement in the comparative productivity performance of Britain’s aggregate economy.

How can this be? The basic story is that U.S. productivity in manufacturing in 1870 was already about fifty percent higher than it was in Britain, and the same was true 120 years later. Britain was ahead of the U.S. and Germany in 1870 not because of its lead in industry but because of its lead in services. By 1890, however, the U.S. had caught up and subsequently forged ahead in services, widening its lead in the sector up through the Second World War. Thus it was differential productivity trends in services, not any fundamental alterations in trends in manufacturing, that account for most of the overtaking and surpassing of Britain by the United States in aggregate labor productivity.

Critical to the story is the Chandlerian theme of the transition from low volume, high margin to high volume low margin operations, particularly in transportation, communication, and distribution (Chandler, 1977). The models for such transition originated in the United States, and it was the more rapid diffusion of such organizational methods in the U.S. that enabled it to overtake Britain in services and in the overall economy by 1890. But not all service sectors were equally amenable to this transition, explaining why Britain’s relative decline was not more severe. With respect to Germany, Britain’s continuing lead in services relative to Germany accounted for its ability to maintain an overall productivity advantage with respect to that country through about 1960.

Modern business enterprise originated in the U.S. in the railroad and telegraph sectors, spreading to wholesale and retail distribution, before being adopted in some sectors of manufacturing. Britain’s relative productivity decline was most notable in transport and communication and distribution, whereas the country retained a strong position in finance, a sector which offered unfavorable terrain (at least until recently) for the adoption of high volume low margin operations. Broadberry attributes the slower service sector productivity growth in Britain to labor resistance to work intensification combined with the fact that many services, unlike manufactures, weren’t tradeable, and therefore didn’t face the same competitive pressures. For industrial products, poor productivity performance eventually meant they were replaced by imports and the sector shrank. For nontradeable services, and those protected by non-tariff regulatory barriers, poor productivity performance could persist, dragging down comparative productivity performance for the entire economy. Still, Broadberry is at pains to present a variegated view of the British service sector, emphasizing areas where its comparative advantages in organizing through networks rather than internal firm hierarchies continued to serve it well. Germany’s success in overtaking Britain after 1960 is explicable in terms of a different structure of labor relations and patterns of human capital formation after the Second World War.

The book has three sections. The first is concerned principally with laying out the argument and presenting the data. The second focuses on broad explanations for the comparative productivity trends (I did not find that the theoretical model in chapter 5, based on the work of Broadberry and Ghosal, added much). The third section presents a series of detailed historical/empirical chapters dissecting the performance of different parts of the British service sector in different time periods, carrying the story forward through the 1990s. Taken together this material provides a compelling case that it is both possible and necessary to focus on the service sector in understanding productivity history at the national level and in comparative perspective. The data for services may not always be quite as good as they are for industry, but there is much more here than one might imagine, and it is unworkable and unjustifiable to restrict our attention to manufacturing simply because “the light is better there.”

One of the difficulties with the book and the way the data are presented, however, is the melding of a narrative structure focusing on the one hand on the history of British productivity growth and on the other hand on its comparative productivity performance with respect to the U.S. and Germany in different time periods. From an historical perspective, one is principally interested in what drove aggregate productivity forward, both in individual countries and in the world as a whole. There are of course also reasons for measuring comparative productivity performance at different times, but excessive focus on these numbers risks obscuring important aspects of the process of economic growth. For example, compare two time periods in which there is apparently no change in comparative performance. It makes a big historical difference whether this is because there was no change in levels in either country or because levels in both countries increased at the same rate. To his credit, Broadberry provides detailed time series data on the evolution of levels for the individual countries. Still, because the narrative is principally couched in terms of the explanation of relative decline, Broadberry finds himself repeatedly compelled to emphasize that even in periods in which the country may have performed poorly in comparison with other countries, the absolute growth rate of labor productivity in Britain was high by world historical standards.

The point I am making is separate from but in a sense related to the important methodological issues which have motivated the exchanges between Broadberry on the one hand and Ward and Devereux on the other. To calculate comparative productivity ratios one chooses a benchmark year, calculates value added per worker or per hour in the domestic currencies of each country, and then converts the value added in the two countries to a common metric using a PPP adjusted exchange rate. Using domestic rates of economic growth, one then projects forward and backwards. Because of index number and other problems, however, growth rates from one PPP based comparative productivity benchmark will not always or necessarily produce a later or earlier comparative productivity measure consistent with a later or earlier PPP based benchmark. Broadberry has tried to address this problem by choosing 1937 as a benchmark (unlike Maddison, who used 1990), and by using other benchmarks as a check on the projections forward and backwards using domestic growth rates. He is persuaded the methodology is defensible, and the remaining discrepancies tolerable, but he will probably not satisfy all of his critics. Those seeking more detailed discussion of these problems, which also bedevil work on contemporary economies, should consult, for example, Ward and Devereux (2003).

There are some aspects of Broadberry’s treatment of U.S. productivity history with which I differ. For example, he endorses Abramovitz and David on the importance of capital accumulation rather than TFP in explaining trends in U.S. labor productivity growth in the last third of the nineteenth century (p. 109). But TFP growth in the U.S. private domestic economy was over 1 percent per year from the early 1870s through 1906, lower of course than rates experienced in the second quarter of the twentieth century but certainly respectable and indeed substantially higher than during a comparable period of the twentieth century (Field 2008, forthcoming).

Secondly, Broadberry correctly identifies very strong labor productivity and TFP growth in transportation and communication in the 1930s as part of what underlay the continuing advance of U.S. service sector productivity and the consequent widening of the US/UK productivity gap during the Depression years. But this was not necessarily a period of increasing “industrialization” of transport services as Broadberry suggests (p. 12). The introduction of modern business enterprise in railroads occurred in the last third of the nineteenth century. The growth sector within transportation in the 1930s was trucking, a sector comprised of small, non-hierarchically organized companies. What is striking about the 1930s in the U.S. is not only the extraordinarily high TFP growth in trucking (a rapidly growing sector), but the relatively strong advance in the railroad sector, which, in contrast with the 1920s, was experiencing capital shallowing. Since railroads were still such a large part of the economy, this mattered (see Field, 2006). As Broadberry’s narrative indicates (pp. 230-235), nothing comparable happened in railroads in Britain. Greater emphasis on the importance for the United States of the Depression build out of the surface road network, and the role of street and highway spending in the U.S. in generating spillovers in transportation would have made the narrative historically richer (Field, 2003).

There is also some tendency to be too dismissive of trends in industry in explaining the huge gap opened up between the U.S. and Britain by the 1950s. The driver of aggregate trends in comparative productivity, Broadberry asserts, are trends within the respective service sectors. But his own data show that the widening of the US/UK productivity differential between 1870 and 1960 was more marked in industry (250.4/153.6) than it was in services (137.7/85.9) (Table 2.1). Table 2.1 includes data for industry ? construction and mining as well as manufacturing ? and it is true that the increase in manufacturing alone, although substantial, was not as dramatic as in the service sector as a whole. My point is that whereas the surge in U.S. service sector productivity certainly played a very important part in widening the productivity lead opened up by the U.S. at mid-century, trends in industry and in manufacturing also contributed substantially. Broadberry’s larger thesis is sustained, however, because whereas by 1990 faster productivity growth in British industry and manufacturing had restored the US/UK advantage to roughly where it had been in 1870, the same cannot be said for services.

Finally somewhat more emphasis, particularly in the US/UK comparisons, on changing sectoral shares in explaining aggregate productivity growth would have been useful. For example (p. 28) “over the long run, Britain was overtaken at the aggregate level because of a loss of labour productivity leadership in services.” It would be fairer to say that Britain was overtaken because of a loss in productivity leadership in services combined with the very sharp growth in the share of services, particularly in the United States. (The UK-German analysis does place considerable emphasis on the retention of a large agricultural sector in German and its implications in terms of a smaller service sector.)

These are small bones to pick. Broadberry has written an impressive book that will interest economic historians and students of economic growth, particularly those focusing on Britain.


Chandler, Alfred D. 1977. The Visible Hand: The Managerial Revolution in American Business. Cambridge: Harvard University Press.

Field, Alexander J. 1987. “Modern Business Enterprise as a Capital-Saving Innovation,” Journal of Economic History 47 (June 1987): 473-85.

Field, Alexander J. 2003. “The Most Technologically Progressive Decade of the Century,” American Economic Review 93 (September): 1399-1414.

Field, Alexander J. 2006. “Technological Change and U.S. Economic Growth in the Interwar Years,” Journal of Economic History?? 66 (March 2006): 203-36.

Field, Alexander J. 2008. “U.S. Economic Growth in the Gilded Age,” Journal of Macroeconomics 29 (prepared for submission to a special issue).

Ward, Marianne and John Devereux. 2003. “Measuring British Decline: Direct vs. Long Span Income Measures,” Journal of Economic History 63: 826-51.

Alex Field is the Michel and Mary Orradre Professor of Economics at Santa Clara University. His current research interests include U.S. productivity history and the implications of evolutionary theory for the behavioral sciences.

Subject(s):Economywide Country Studies and Comparative History
Geographic Area(s):North America
Time Period(s):20th Century: WWII and post-WWII

European Aristocracies and Colonial Elites: Patrimonial Management Strategies and Economic Development, 15th-18th Centuries

Author(s):Janssens, Paul
Yun-Casalilla, Bartolomé
Reviewer(s):Álvarez-Nogal, Carlos

Published by EH.NET (March 2007)

Paul Janssens and Bartolom? Yun-Casalilla, editors, European Aristocracies and Colonial Elites: Patrimonial Management Strategies and Economic Development, 15th-18th Centuries. London: Ashgate Publishing, 2005. x + 282 pp. $100 (hardcover), ISBN: 0-7546-5459-1.

Reviewed for EH.NET by Carlos ?lvarez-Nogal, Department of Economic History, Universidad Carlos III de Madrid.

The aristocracy does not normally appear in analyses of economic growth for the pre-industrial period. More attention has usually been paid to the peasantry, a much larger and more homogeneous group. Before the Industrial Revolution, agriculture was the dominant activity employing most of the population. Historians interested in social or political areas had studied the nobility but little attention had been paid to its economic dimension. This may have been because the aristocracy was seen as a parasitic class or a rent-seeking group whose mere existence stood in the way of economic growth.

Paul Janssens, Professor at the Katholieke Universiteit, Brussels, and Bartolom? Yun-Casalilla, Professor at the European University Institute, Florence, remind us, in this magnificent collection of essays written by experts in the field, that the economic importance of the aristocracy under the ancien r?gime was due to their influential position in the institutional framework of society rather than simply to the number of aristocrats. Aside from the way in which wealth was distributed in that period, the aristocracy controlled most of the factors of production and, in addition, enjoyed a dominant position in the political institutions of the young European states. This meant that they were able to play a vital role in the development or lack of development of these societies.

This book brings this important social class into the debate surrounding economic growth and the prerequisites of the Industrial Revolution. It focuses on various European aristocracies and colonial elites and evaluates the strategies behind the decisions taken. The point of view adopted is that of supply, seeing aristocrats as investors in agriculture and other sectors or as innovators in the field of management of patrimonies, rather than taking the angle of demand and considering the aristocracy as wealthy consumers. Their contribution to economic growth is studied as if they were entrepreneurs taking or missing opportunities. Their influence in the establishment of property rights and behind advances in the workings of the market is also analyzed.

The book addresses three large questions. Were these large fortunes managed with maximization of profits or with socio-political criteria in mind? Did this situation change over the period under study? How and to what extent did change or lack of change affect economic performance in these societies?

One of the most interesting aspects of this book, despite the enormous difficulties involved, is the attempt to address these questions from a comparative point of view including as many countries and regions as possible. This approach leads to the conclusion that no single aristocratic model in the pre-industrial period existed and neither is it possible to offer a general model to explain its behavior.

Institutions are central to all the studies in this volume. There is no doubt about the influence of the aristocracy on the workings and development of the states during the ancien r?gime but, at the same time, the huge effect which the norms and traditions present in each society had on their behavior cannot be denied. For example, aristocracies became more important where crown estates and ecclesiastical properties were sold or redistributed as happened in England, France, Holland, Poland and Venice compared to regions like Portugal, Austria, Spain, Naples and Prussia where royal and ecclesiastical properties survived. On the other hand, the accumulation of national stocks of capital in the hands of commercial and industrial elites instead of in aristocratic hands would diminish the macro-economic significance of the aristocracy and lead the privileged group to make strategic changes.

Patrick O’Brien highlights three main areas present in many of the studies included in this book: the share of capital stock under noble control, the strategies and policies pursued by rich families for managing their patrimonies and the openness of aristocracies to talent and enterprise from outside their traditional networks.

The differences between the different European aristocracies in each of these areas are vital in an understanding of the influences of these groups on the economy. For example, the high proportion of real estate in the hands of the English aristocracy during the Industrial Revolution, noted by Robert Allen, allowed access to cheaper finance than that enjoyed by the rest of society. This explains the active investment of the landed classes in the non-agricultural sector, paving the way for a rapid industrialization of the island.

The book invites the reader to draw his or her own conclusions, in the light of the studies included, regarding the question of whether the differences between European aristocracies and ruling elites can explain the paths towards success or failure followed by each country before and during the Industrial Revolution.

The studies included in the book are organized geographically: Northern, Southern, Central and Eastern Europe and Colonial America (British North American, Peruvian and Brazilian colonial elites). The collection contains an introduction and fifteen chapters, each of which would deserve a review in its own right. The first is a general approach by Yun-Casalilla and the book closes with some considerations by O’Brien. While acknowledging the significant role played by the European aristocracy, the book avoids the error of “overcoming the prejudices by making the ancient r?gime nobles into standard-bearers of progress, modernization and economic growth.”

This collection of essays is an excellent first step but it also reveals that further research, measurement and analysis is needed before economic historians can begin to evaluate possible positive or negative contributions of the aristocracy to variations in national growth rates across Europe.

Carlos ?lvarez-Nogal is Assistant Professor of Economic History at the Universidad Carlos III de Madrid. His research spans the areas of early modern economic history, monetary and financial topics. His books include El cr?dito de la Monarqu?a Hisp?nica durante el reinado de Felipe IV (Junta de Castilla-Le?n, 1997) and Los banqueros de Felipe IV y los metales preciosos americanos, (1621-1665) (Banco de Espa?a, 1997). He is currently working on international networks of bankers in the seventeenth century.

Subject(s):Economywide Country Studies and Comparative History
Geographic Area(s):North America
Time Period(s):Medieval

New Frontiers in the Economics of Innovation and New Technology: Essays in Honour of Paul A. David

Author(s):Antonelli, Cristiano
Foray, Dominique
Hall, Bronwyn H.
Steinmueller, W. Edward
Reviewer(s):Bessen, James

Published by EH.NET (February 2007)

Cristiano Antonelli, Dominique Foray, Bronwyn H. Hall and W. Edward Steinmueller, editors, New Frontiers in the Economics of Innovation and New Technology: Essays in Honour of Paul A. David. Cheltenham, UK: Edward Elgar, 2006. vii + 485 pp. $160 (cloth), ISBN: 1-84376-631-0.

Reviewed for EH.NET by James Bessen, Boston University School of Law.

This festschrift of fifteen papers (plus an introduction and a postscript) reflects the breadth of Paul David’s work, both in the range of subjects and in the methods used. The postscript, written by Dominique Foray, compares David’s work to a theatrical performance that includes roles for Galileo and Edison, as well as Pomo Indians and !Kung bushmen, nymphs, reapers and robots, sex, blood and more. The collection in the book, no less broad (although probably less theatrical), has something for everyone.

The papers are grouped into three sections, reflecting important themes in David’s work: path dependence, the economics of knowledge and the diffusion of innovation. The significance of David’s contributions in each of these areas is developed in the introductory essay by the editors and this provides a general, but brief, introduction to his large body of work.

The first chapter, by Andrea P. Bassanini and Giovanni Dosi explores why technology markets tend to be monopolies. This paper presents a theoretical model to challenge Brian Arthur’s (1989) widely-cited model of competing technologies. Arthur’s model has been used to argue that technological monopolies result from unbounded increasing returns. The paper shows that Arthur’s result is not general, but follows instead from specific assumptions of linearity and limited heterogeneity among agents. The authors do find, however, that increasing returns combined with a high rate of technological change frequently generate stable near-monopolies in a more general model.

Cristiano Antonelli, in the second chapter, develops a high level overview of different kinds of technological path dependence and relates this to issues of dynamic economic efficiency.

Franco Malerba and Luigi Orsenigo study the evolution of the pharmaceutical industry, looking at the interrelations between technology, regulation and market structure. They begin with a very nice summary of the development of pharmaceutical search technology over the past fifty years, noting cross-country differences in regulation and differences in the roles of imitative firms and market leaders. They follow this with a simulation model for the “random screening” era that reproduces some of these relationships.

John Cantwell uses patent data in an innovative way to explore path dependency of large firms regarding their choices of technological specialization. These firms maintained patterns of specialization — that is, high levels of patenting relative to their industry peers in certain specialties — for periods of sixty years or longer. Interestingly, Cantwell also finds some general trends in technological diversification: the large firms in chemical and electrical industries initially increased their diversification, followed, over the last several decades, by a trend toward greater technological concentration.

Two papers, one by G. M. Peter Swann and one by Robin Cowan, look at issues of path dependency in tastes for art. Swann uses correlations in auction prices for the paintings of different artists to map these relationships. Cowan models the cyclical nature of changes in these relationships.

Beginning the section on the economics of knowledge, W. Edward Steinmueller picks up on Paul David’s theme of organization and learning. He looks at historical examples, including the transitions from craft organization to the American system of manufactures to Fordism to GM’s “flexible mass production” to inform a discussion of current-day issues of learning and organization in the use of information technology to enhance product variety.

Dominique Foray and Lilian Hilaire Perez cover some less familiar history, comparing Paul David’s “open science” with the “open technology” of the Lyon silk industry, which bore some similarities to examples of shared innovation discussed by Allen, von Hippel and others. Lyon established a sophisticated system of rewards for inventors with incentives to share their knowledge. This led to an extended period inventiveness. In contrast, the British silk industry, where a larger share of inventions was patented, was relatively backward. Foray and Hilaire Perez make a very useful comparison between the features of the Lyon system and those of open science.

Jacques Mairesse and Laure Turner directly explore the nature of scientific collaboration by using data on co-publication to measure the intensity of collaboration. Using this measure, they investigate how the intensity of collaboration varies with geographical location and technological specialization.

Patrick Cohendet and Ash Amin look at knowledge and the nature of the firm, stressing interactions between “epistemic communities” and “communities of practice” within the firm.

Ashish Arora, Andrea Fosfuri and Alfonso Gambardella ask how institutions affect the creation and development of markets for technology. In numerous papers and a book (2001), these authors have explored aspects of technology markets. Here, with an eye toward policy, they look specifically at the roles of standards, well-defined property rights and institutions that encourage risk-taking. The article provides a nice overview of a large range of policy-related issues from an institutional perspective. At times the authors seem a bit too enthusiastic. For example: “It is difficult to think that a market … could ever function properly without property rights …” I suspect that economic historians might think of examples of trade pre-dating property rights or examples of illicit trade outside the realm of property rights. Nevertheless, the article provides a useful overview.

Arora, Fosfuri and Gambardella argue that global technology markets allow small countries to specialize in technology fields in an international division of innovative labor. Stefano Brusoni and Aldo Geuna explore patterns of national specialization and also the integration of different types of technical knowledge. They develop indices of specialization similar to those used by Cantwell in the paper discussed above, but based on data of peer-reviewed papers in chemistry and pharmacology instead of patent data. They also measure the integration of knowledge across areas of basic research, applied research and applied technology and engineering. They find that large European nations do not integrate basic research into pharmaceutical technology as well as the U.S. does; they propose that this explains why EU R&D managers in pharmaceuticals rely on U.S. research. They also claim, perhaps controversially, that their measures might serve as a policy guides — governments might facilitate national specialization by supporting integrated knowledge development.

The book’s section on the diffusion of innovation begins with a chapter by Bronwyn Hall and Manuel Trajtenberg that reports on attempts to identify General Purpose Technologies using patent statistics. Paul David (1990) persuasively argues that the diffusion of electric motors one hundred years ago bears important similarities to the diffusion of computer technology today. Both have been called General Purpose Technologies (GPT), but some researchers have felt that too many technologies can be called GPTs for the term to be a useful analytical tool. The authors of this paper explore the use of a variety of statistics based on patent citations to see if they can derive a measure of “generality” and identify GPTs. Their results are mixed. Using a combination of statistics, they identify twenty highly ranked patents; most are related to using computers, especially for interacting and working at a distance. These technologies seem to fit the intuitive description of GPTs. On the other hand, the authors note several possible biases that may have influenced this result.

The next chapter, by Luis M. B. Cabral presents a theoretical model of technology diffusion that includes adopter heterogeneity (like David’s 1969 model) and also network effects.

In the final chapter, Paul Stoneman and Otto Toivanen also build a model of technology diffusion, this one based on a real options approach. They then apply this model to data on international diffusion of robot technology, using a sophisticated econometric model. They use the estimated model to conduct policy thought-experiments, for example, testing the effects of macro-economic stability on a nation’s diffusion rate for robot technology.

The research in this book exhibits a wide variety of methods, topics and styles. Few readers will find all of the contributions worthwhile or interesting. But few who have an interest in technological innovation will fail to find something of value.


Arora, Ashish, Andrea Fosfuri and Alfonso Gambardella (2001), Markets for Technology: The Economics of Innovation and Corporate Strategy, Cambridge, MA: MIT Press.

Arthur, W. Brian (1989), “Competing Technologies, Increasing Returns, and Lock-in by Historical Events,” Economics Journal 99: 116-31.

David, Paul A. (1969), “A Contribution to the Theory of Diffusion,” Research Center in Economic Growth, Memorandum No. 71, Stanford University.

David, Paul A. (1990), “The Dynamo and the Computer: An Historical Perspective on the Modern Productivity Paradox,” American Economic Review 80: 355-61.

James Bessen, Lecturer in Law, Boston University School of Law and Director, Research on Innovation has, following Paul David, written about learning-by-doing in “Technology and Learning by Factory Workers: The Stretch-Out at Lowell, 1842,” Journal of Economic History (2003). He is a former innovator and entrepreneur who wrote one of the first desktop publishing programs. Now he writes about technological innovation and patents. Current works include (with Eric Maskin) “Sequential Innovation, Patents, and Imitation,” RAND (2007); (with Robert M. Hunt) “An Empirical Look at Software Patents,” Journal of Economics and Management Strategy (2007) and a book (with Michael J. Meurer), Do Patents Work? The Empirical Evidence That Today’s Patents Fail as Property and Discourage Innovation, and How They Might Be Fixed (forthcoming 2008).

Subject(s):History of Technology, including Technological Change
Time Period(s):20th Century: WWII and post-WWII

A Deus ex Machina Revisited: Atlantic Colonial Trade and European Economic Development

Author(s):Emmer, P.C.
Pétré-Grenouilleau, O.
Roitman, J.V.
Reviewer(s):Engerman, Stanley L.

Published by EH.NET (January 2007)


P.C. Emmer, O. P?tr?-Grenouilleau and J.V. Roitman, editors, A Deus ex Machina Revisited: Atlantic Colonial Trade and European Economic Development. Leiden: Brill, 2006. xxix + 358 pp. $134 (cloth), ISBN: 90-04-15102-8.

Reviewed for EH.NET by Stanley L. Engerman, Departments of Economics and History, University of Rochester.

These fourteen essays, based upon a conference held in September 2001, all by European scholars and with all but one by historians, are concerned with two major staples of the study of modern European economic development. First is the role of foreign trade, particularly colonial trade, upon the economic expansion of the different European economies. Second is the related issue of the impact of external versus internal forces on institutions and market size, and thus on economic changes. Several touch on the Eric Williams question of the role of the slave trade in industrialization, but this is not a major concern in this volume relative to the broader issue of colonial shipping and trade.

The essays differ in method, approach, and at times, conclusions, but all are useful in providing information about the areas studied. Only half the essays contain tables, making for a total of thirty-seven, while fewer provide the nine figures. Nonetheless most essays are quite useful in presenting relevant data, and there are numerous useful sources to the examination of specific countries and colonies. As often in these type of studies, authors play down the role of so-called small numbers in suggesting a limited impact for trade, using terms such as “dynamic,” “at the margin,” “qualitative,” “spill over effects,” “important and dynamic side effects,” and “cultural factors” to bolster the argument for importance. In discussing the claim that small causes have large effects, Patrick O’Brien astutely notes that “we might rhetorically inquire if small outcomes could flow from large changes to endogenous variables.”

The short introduction by the editors is well-done and provides a useful summary of the conclusions of most of the essays. The three main general conclusions are: (1) “With the possible exception of Britain — trade to and from the non-Western world was marginal and served as a chasse gard?e for uncompetitive firms,” since mercantilist policies permitted them to be non-competitive. And the taxes and losses in warfare needed to define and administer colonies were quite expensive. Trade within Europe “was many times larger” than trade with the rest-of-the-world. (2) “Spin-off effects of non-European trade were limited in economic as well as in geographic scope.” (3) The “‘British model’ of expansion and colonial trade seems to have been the exception, not the rule,” although “even in the British case, there are signs that the exploitation of its colonial empire benefited a few at the expense of many.”

The substantive essays are of two types. First are the more general ones covering the entire continent, and second are the several country studies of the leading European nations. These are Spain, Portugal, the Netherlands, Britain, France (given two essays), the Baltic Nations, Denmark-Norway, and Sweden. Their coverage runs from the fourteenth to the twentieth century, with most attention to the years after1600.

The first two essays, by Patrick O’Brien and Michel Morineau, provide excellent surveys of different aspects of the major debates. O’Brien places the writings of Smith, Marx, Weber, and more recent analysts in perspective, in explaining Asian-European differences, and points to a recent “Eurocentric Comeback,” in explaining the start and the sustaining of the Industrial Revolution. Morineau describes trading patterns between Europe and its colonies, and argues for the role of foreign markets and the colonial use of slave labor in spurring economic development in the West. Bouda Etemad presents a very useful set of tables on trade and related data for six major European countries for the period between 1860 and 1913. He points to a shift back to the importance of intra-European trade after the start of the nineteenth century. In his description of changing patterns of trade by France, Patrick Verley states that, within Europe, “the colonies played a minor role in industrialization.” This was apparently true not only of France, which fell behind, but of England, which maintained its leads in trade and economic development despite the gains of Germany and the U.S. after the last third of the nineteenth century. In an interesting discussion of intra-European trade, based on coastal shipping data from 1400 to 1900, G?rard Le Bou?dac, sketches the changing fortunes of the European nations over time, including the sharp decline of France, losing out, first, to the Dutch, and then to the British.

The study of the Spanish colonial trade by Manuel Bustos Rodr?guez details the patterns under mercantile control and then the rise of free trade in 1778, focusing on regional differences within Spain. Niels Wiecker and Horst Pietschmann’s essay on Portugal does not present any overall analysis, but does provide an excellent bibliographic review of the relevant literature in several languages. Pieter Emmer’s essay contains a useful survey both of the general pattern of European colonization and a detailed description of the Dutch developments over several centuries, dealing with the initial rise of Dutch shipping and then its decline with the British expansion. The reasons given for the Dutch decline are the superior British system of revenue collection, the willingness of British migrants to leave Britain and to go the Americas, and the acceptance by British consumers of the payment of subsidies to British shippers and West Indian planters.

Based upon his many years of excellent research and analysis, Fran?ois Crouzet discusses British exports from 1701-1913, emphasizing the changes over time in the importance of the different markets for British exports. Two essays on France approach the problem quite differently. Guillaume Daudin attempts to measure profits from intercontinental and colonial trade. While these added only a small percentage to French income and savings, Daudin argues for a large effect because of the additional impact upon capital formation. On the other hand, Olivier P?tr? Grenouilleau examines the relevant literature from 1600 to 1960, arguing that the foreign trade had limited impact on economic growth but only after the late nineteenth century and not in the period of industrialization. This was due, in part, to the earlier impact of colonial trade having had undesirable effects, limiting the pace of economic growth.

The three essays in the section on the Baltic Region cover areas not generally discussed in the industrialization debate. A regional overview by Pierrick Pourchasse describes the failures of France and the Netherlands and the rise of the British in shipping and in shares of trade after the start of the eighteenth century, permitting them “to gain control of the trade with the North and, therefore, to supply without difficulty the industrial sectors of prime importance to the British economy, such as shipbuilding and the metal industry.” Dan H. Andersen’s study of Denmark does give some attention to the role of the slave trade, and the African and Caribbean markets. The conclusion that is slavery and sugar did not have a very great impact on the Danish economy, nor since Danish industrialization did not really start until the middle of the nineteenth century, on overall industry, except for sugar refining. The discussion of Swedish economic development by Leos M?ller points to the “invariably insignificant” Swedish colonial trade, not surprising since the Swedish colonial empire was rather small and transient. There were foreign markets for Swedish exports of iron, at first to the Netherlands and then to Britain. Also of note is the discussion of the trade between Sweden and China, which contributed to Swedish growth, as did, according to M?ller, Swedish trade in general.

The value of this volume is in its wider geographic coverage, and the primary focus of these essays on the nature and role of colonial and foreign trade. There are questions to be raised about aspects of the analysis in many of the essays and the particular conclusions reached, but that will not reduce their value in presenting information. This is an important book, to be read by historians of early modern Europe and of the economic changes in those years.

Stanley L. Engerman is John H. Munro Professor of Economics and Professor of History at the University of Rochester.

Subject(s):International and Domestic Trade and Relations
Geographic Area(s):Europe
Time Period(s):20th Century: Pre WWII