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A Living Wage

Author(s):Glickman, Lawrence B.
Reviewer(s):Schneirov, Richard

H-NET BOOK REVIEW Published by H-SHGAPE (April, 1998)

Lawrence B. Glickman. A Living Wage: American Workers and the Making of Consumer Society .Ithaca and London: Cornell University Press, 1997. xvi + 220 pp. Notes, bibliographical references, index $35.00 (cloth). ISBN 0-8014-3357-6.

Reviewed for H-Net by

Richard Schneirov, Indiana State University

This book has enormous implications for historians of the Gilded Age and Progressive Era. To understand precisely how first requires a capsule summary of nineteenth century labor historiography. From the 1960s through the early 1980s, U.S. labor historians sought to write a history of the making of the American working class much in the manner done so masterfully for the English working class by Edward P. Thompson. New labor historians located a nascent socialist critique of the wage labor system in a working class version of artisan republicanism grounded in the classical labor theory of value. Most of the new generation of labor historians found that the career of labor republicanism came to a halt in the late nineteenth century with the defeat of the Knights of Labor and rise of the pure and simple or business unionism, commonly associated with the American Federation of Labor. Other historians pushed back the “fall” of labor into the twentieth century, but in most cases a working class that was “made” throughout most of the nineteenth century was “unmade” at some point in the twentieth.[1]

For nonlabor historians of the Gilded Age and Progressive Era, the conclusions of the new labor historians tended to reinforce a much older view of American history as exceptionalist–that is, lacking sharp class divisions and a viable socialist or labor political presence as existed in Europe and Britain. In the newest version of the old story, exceptionalism was not inherent in American history but emerged historically out of working class failure.

A Living Wage is so important because it provides us with some of the conceptual tools required for resolving labor history’s impasse. Glickman grounds the fin de siecle crisis, whose resolution created the foundation for modern America, in the dissolution of a producers’ understanding of how value was constructed. With the sundering of the labor theory of value from the calculus determining prices and wages–the premise for neoclassical economic theory–the producers’ critique of the wage labor system lost its intellectual and ultimately its cultural force. One outcome which Glickman does not discuss is the marginalist revolution, which facilitated the acceptance of corporate administered prices and wages. Glickman’s book tells of a different outcome, one that emerged out of the late nineteenth century labor movement. Accepting the modern premise that wages no longer were determined by the cost of labor, trade union activists, inspired by the writings of eight-hour theorist Ira Steward, began to promote a needs theory of value, according to which human needs would have priority over market forces in determining wages. In the terms of the day, labor advocated a “living wage” whose value would be determined by the ever-expanding needs and wants of workers in their capacity as consumers. As Samuel Gompers’ associate Frank Foster put it, “It is not the value of what is produced which determines the wages rate, but the nature and degree of the wants of the workers” (p. 70). Whether labor leaders knew it or not, the new regulative principle was quite in accord with the thinking of Marx whose maxim of socialism was “from each according to his ability, to each according to his needs.”

The significance of this development has been largely ignored by labor historians because the doctrine of the living wage and its corollary, the need for a constantly rising (American) standard of living, necessarily entailed the acceptance of what was then called “wage slavery.” Many historians have viewed the abandonment of the goal of self-employment through producers’ cooperation and the acceptance of a consumerist consciousness as equivalent to a passive and narrowly apolitical acquiescence in the inevitability of capitalism. But, as Glickman shows, the living wage doctrine was actively constructed by workers themselves, partly out of the producers’ ideal of a moral economy as an alternative to the commodification of toil, but also out of an acceptance of those very relations. In Glickman’s view acceptance, rather than being equivalent to acquiescence, was the necessary condition for actively reshaping and regulating market relations according to an ethical standard external to those relations, viz. workers’ self-perceived needs.

Glickman traces the development of living wage thinking from its first flowering in the eight-hour movement of the late 1880s to the rise of the 1890s trade union label movement long associated with business unionism. Inherent in both movements, according to Glickman, was the vision of a “social economy” that abandoned the idea that wages should return to workers the full fruits of their labor. Though much of the old producerist vocabulary continued to frame labor leaders’ thinking, Glickman demonstrates that trade unionists tried to reshape and control market relations by making them subject to a socially determined standard of living emerging from the sphere of consumption and collective bargaining.

By the early twentieth century, reformers outside the ranks of labor picked up the living wage ideal and turned it into a Progressive reform, known as the minimum wage. Because the minimum wage was defined as a subsistence wage fit only for those, like immigrants and women, working below the American standard, AFLers pulled back from the movement. Yet, even the minimum wage challenged the prevailing legal doctrine of freedom of contract and the still powerful producerist ethical ideal that wages should be based on an equivalent of services rendered. The idea that wages should be based on consumers’ proliferating needs and wants eventually came into its own during the New Deal. In their understanding of the 1930s depression as due to underconsumption, New Dealers and progressive businessmen endorsed the idea that rising purchasing power, which in part depended on rising wages, was necessary for the successful functioning of a mass production economy. The 1938 Fair Labor Standards Act establishing a minimum wage is for Glickman a monument to the triumph of a nonproducerist and nonmarket criterion of value determination in regard to wages.

The implications of Glickman’s book are at least several. It strongly suggests that historians abandon a time-honored view of pure and simple trade unionism as “conservative” and circumscribed by “bread and butter” concerns. To the contrary, Glickman provides us with a way of understanding this consciousness as an integral part of an ongoing class formation that occurred simultaneously with an accommodation to wage labor. Moreover, by demonstrating that socialism could have both a consumerist and producerist foundation, this book furthers the understanding that socialist principles and relations were intermixed in twentieth century corporate capitalist society and in modern liberalism.[2] Finally, it provides a way in which a re-thought labor history can incorporate the history of women workers and feminists whose agency was often focused in the sphere of consumption rather than production.

The book does have several limitations that should be mentioned. First, by promiscuously mixing quotations from the 1880s with those from the early twentieth century, Glickman misses the opportunity to suggest in specific ways how and why this new consciousness developed historically. In this regard, some labor historians will be disappointed that the book does not directly confront the prevalent argument that the living wage was gained only by abandoning skilled workers’ control over the workplace. Second, there is a basic ambivalence in Glickman’s treatment of consumption. At some points, he argues that organized workers began to view the sphere of consumption as displacing the sphere of production. At other points, he suggests that workers merely understood that the two spheres were interrelated and of roughly equal importance in determining class identity, a more defensible position. Finally, there is an implication in the book that the labor movement was the sole or prime source in defining an American standard of living. This ignores the long nineteenth century history of Whig and Republican sponsored protective tariff proposals that party spokesmen argued were necessary to protect high American wages.

These qualms should not detract unduly from a provocative and important monograph. Glickman’s book is concise (162 pages of text), well written, and his argument is easy to follow, making it accessible to undergraduates as well as graduate students. It promises to become a major text for the next round of rethinking labor history in the Gilded Age and Progressive Era.

Notes

[1]. For example, see Kim Voss, The Making of American Exceptionalism: The Knights of Labor and Class Formation in the Nineteenth Century (Cornell University Press, 1993); for a survey see Larry G. Gerber, “Shifting Perspectives on American Exceptionalism: Recent Literature on American Labor Relations and Labor Politics,” Journal of American Studies, 31 (1997): 253-74.

[2]. Martin J. Sklar, The United States as a Developing Country: Studies in U.S. History in the Progressive Era and the 1920s (Cambridge, 1992); James Livingston, Pragmatism and the Political Economy of Cultural Revolution, 1850-1910 (University of North Carolina Press, 1994); and Richard Schneirov, Labor and Urban Politics: Class Conflict and the Origins of Modern Liberalism in Chicago, 1864-1897 (University of Illinois Press, 1998).

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

Hayek: Economist and Social Philosopher, A Critical Retrospect

Author(s):Frowen, Stephen
Reviewer(s):Horwitz, Steven

EH.NET BOOK REVIEW

Published by EH.NET (June 1998)

Stephen F. Frowen, ed., Hayek: Economist and Social Philosopher A Critical Retrospect. New York: St. Martin’s Press, 1997, xxvi + 324 pp. $59.95 (cloth), ISBN: 0-312-12902-5.

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Reviewed for EH.NET by Steven Horwitz, Department of Economics, St. Lawrence University, Canton, NY.

HAYEK: ONCE OVER LIGHTLY

Reviewing an edited collection is always difficult, mainly because the range of contributions, in both content and quality, is often so vast. In the case at hand, the challenge is even greater because the work of Hayek that serves as the basis for these papers is itself so broad. The papers and comments are mostly by European scholars and are taken from a conference memorializing the first anniversary of Hayek’s death. Collected by Stephen Frowen, an Honorary Research Fellow in the Department of Economics at University College London, the papers in Hayek: Economist and Social Philosopher span the range of Hayek’s contributions, from his work in technical economics, to his social philosophy, to his work on the philosophy of mind. Although the main papers vary in their quality, what emerges from the best of them is a fairly consistent picture of the main themes of Hayek’s work, and perceptive suggestions about where work in the Hayekian tradition could go next. I will approach the contents thematically.

The contribution by Barry Smith looks at Hayek’s work on theoretical psychology. Hayek’s 1952 book The Sensory Order has been the subject of renewed interest in the last few years as Hayek scholars have examined the relationship between his view of the mind and his economics and political philosophy. Smith’s paper nicely explicates Hayek’s “connectionist” view of the mind and contrasts it with the “symbolic” approach employed by many in artificial intelligence who are attempting to model the human mind. For Hayek, the mind is a spontaneous order, analogous to those of the social world that have long interested him, that emerges out of the particular patterns of neural firings that take place in the brain. Of particular importance in this view is that we are unable to be consciously aware of all that we “know.” Several of Hayek’s well-known contributions to economics in the 1930s and 40s focused on the role of knowledge in economic theory and as several contributors to this volume note, the roots of that epistemological stance can be found in Hayek’s work on the structure of the mind, which began in the early 20s.

The papers by Manfred Streit and Steve Fleetwood show the relationship between the concern with tacit knowledge and the way in which we understand social action and social order. Streit concisely lays out the connections between our “constitutional ignorance,” the role of spontaneous order, and the view of humans as rule-followers. Our ignorance prevents us from designing social orders, such as a market economy, whole-cloth. The same ignorance prevents us from understanding all of the possible causes and consequences of our individual choices. Thus, as individuals we must rely on rules, social conventions and norms as substitutes for detailed explicit knowledge, and, as a society we must rely on broader social rules and institutions to coordinate the choices made by those individuals. Those rules and institutions embody the tacit knowledge of tradition. Streit nicely applies this Hayekian approach to basic issues in competition policy, industrial policy, and the transition from “plan” to market. Of particular interest is his comparison of Hayek to Eucken and the “strong state” view of the German ordo-theorists.

Fleetwood’s excellent paper argues that Hayek’s work on “social rules of conduct” is best understood as an extension of his earlier work on the price system as a telecommunication device. Social norms and institutions supplement the communicative role of prices. Fleetwood is clear to show how these broader institutional considerations derive from Hayek’s work on the nature of knowledge and ignorance. We need these non-price institutions because neither our own minds, nor prices alone, are sufficient to ensure economic coordination. Mark Perlman’s paper in the volume also argues that Hayek’s emphasis on the market as an institution sets him apart from the strict neoclassical tradition and finds him in the company of many American institutionalist economists.

Several of the papers in the volume take up various issues in Hayek’s contributions to monetary theory and macroeconomics. Hansjorg Klausinger looks at the evolution in Hayek’s thinking on monetary policy by contrasting his early commitment to “neutral money” to his later proposals for competitive currencies. Klausinger rightly notes that Hayek was always concerned to find that monetary policy which would eliminate inflation, and that his eventual move to competitive currencies was based on his empirical observation that, mostly due to seigniorage considerations, central banks would be unable to resist the temptation to inflate. Klausinger does not point out that even with properly-motivated actors, centrally directing the money supply faces the same sorts of epistemological barriers as Hayek saw confronting attempts at centrally directing economic resources in general. Klausinger also does not ask the question of whether a system of competing currencies would be an effective way of reaching the neutral money policy norm that Hayek so clearly favored in his early work. I would argue that the answer to that question is “yes,” if “competitive currencies” is understood as a “free banking” system as found in Selgin (1988) rather than competing, fiat currencies.

G. R. Steele’s “Hayek and Keynes on Capital” does a good job in exploring the role that capital played in the Hayek-Keynes debate of the 1930s. In particular, he notes that Keynes’s unfamiliarity with the German language tradition blinded him to the Bohm-Bawerkian foundations of Hayek’s capital and monetary theory. This point is central, I would argue, to any attempt to reassess those debates. From a Hayekian perspective, Keynes might best be read as taking Wicksell’s core insights and yanking them off of their Bohm-Bawerkian foundations.

Ray Richardson on Hayek and the trade unions and Otmar Issing on currency competition both raise the issue of whether particular policy pronouncements or broad historical interpretations one finds in Hayek have sufficient empirical support. Richardson nicely shows how Hayek’s wholesale condemnation of the coercive role of trade unions is never backed up with any evidence, and that what evidence does exists suggests that the efficiency-damaging effects of British unions have not been nearly as bad as Hayek seems to suggest. Issing is skeptical of Hayek’s call for an end to central bank-produced fiat currency mainly because we have such little knowledge of the likely outcome of a competitive system. Although it is true that Hayek argued for competition precisely on the grounds that we cannot know what the future holds, it is equally true that monetary historians have produced some substantial evidence on the actual workings of competitive monetary systems prior to central banking. A good deal of that evidence shows that such systems were far better behaved that traditionally believed. Issing is either unaware of that work or has chosen to ignore it. What these two papers do point out, however, is that Hayek scholars are going to need to do a better job in convincing economists and policy makers that their theoretical and political claims can be empirically substantiated.

Overall, this collection is a good introduction to the broad themes of Hayek’s work. One general complaint is that too many of the papers seem unaware of the numerous contributions to Hayekian scholarship on this side of the Atlantic. As a result, several papers simply reiterate themes that have been pursued, often better, by other writers in recent years. Nonetheless, I would still recommend this book to those looking for a very broad and sympathetically critical exploration of Hayek. More serious Hayek scholars, however, are likely to find the recent edited collections by Birner and Van Zijp (1994), Colonna and Hagemann (1994), and Colonna, Hagemann, and Hamouda (1994) more satisfying.

References:

Birner, Jack and Rudy van Zijp, eds.. 1994. Hayek, Co-ordination, and Evolution: His Legacy in Philosophy, Politics, Economics, and the History of Ideas. New York: Routledge.

Colonna, Marina and Harald Hagemann, eds.. 1994. Money and Business Cycles: The Economics of F. A. Hayek, vol. 1, Aldershot, UK: Edward Elgar.

Colonna, Marina, Harald Hagemann, and Omar Hamouda, eds.. 1994. Capitalism, Socialism, and Knowledge: The Economics of F. A. Hayek, vol. 2, Aldershot, UK: Edward Elgar.

Selgin, George A.. 1988. The Theory of Free Banking: Money Supply Under Competitive Note Issue, Totowa, N.J.: Rowman and Littlefield.

Steven Horwitz is Associate Professor of Economics at St. Lawrence University in Canton, NY. He is the author of Monetary Evolution, Free Banking, and Economic Order (Westview, 1992) and the forthcoming Microfoundations and Macroeconomics: An Austrian Perspective (Routledge). He has also published numerous papers on Hayek and the Austrian school.

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Subject(s):History of Economic Thought; Methodology
Geographic Area(s):General, International, or Comparative
Time Period(s):20th Century: WWII and post-WWII

Records of American Business

Author(s):O'Toole, James M.
Reviewer(s):Jimerson, Randall C.

EH.NET BOOK REVIEW

Published by H-Business@eh.net and EH.Net (May 1998)

James M. O’Toole, ed. The Records of American Business. Chicago: Society of American Archivists, 1997. xvii + 396 pp. Bibliographical references and index. $39.95 (cloth), ISBN 0-931828-45-7.

Reviewed for H-Business and EH.Net by Randall C. Jimerson , Western Washington University

The Challenges of Documenting Modern American Business

The challenges of documenting American business have led archivists to develop techniques for selection, appraisal, and use of a wide variety of records that provide essential information for depicting aspects of business history and corporate operations. Often working closely with business historians and corporate leaders, archivists have attempted to mine the rich resources worthy of preservation from vast mountains of modern business records. In order to understand past and present approaches taken by archivists to preserve documentation important both to company officials and to outside researchers, this book is essential reading. The Records of American Business provides a variety of perspectives on the current state of archival practice, both for in-house corporate archives and for repositories that collect records relating to American business and enterprise.

This volume is a tangible result of the Records of American Business Project (RAB), sponsored by the Minnesota Historical Society and the Hagley Museum and Library and funded in part by the National Endowment for the Humanities. This project brought together the two collecting repositories with the largest holdings of business records in North America in a joint effort “to refine and redefine the appraisal and use of corporate records” (p. vi). Many of the essays in this volume were first presented at the RAB symposium in April, 1996. By that time, the project had broadened its scope to include many of the most significant institutions and individuals actively engaged with American business records, including corporate archivists, archivists from universities and historical societies, and independent consultants. The variety of perspectives offered in this volume is impressive. The diversity of views indicates that there is no consensus concerning a particular approach to solving archival conundrums, but rather a healthy discourse representing different viewpoints.

The Records of American Business begins with a foreword by the editor, James M. O’Toole, who outlines some of the major themes that emerge from this collection of fourteen essays. One of the most basic issues is placement: should business firms establish in-house archival programs, or place their records at an external research institution? Other issues include the complex process of appraisal, by which archivists determine the long-term value of records. Changing technology has had a significant impact on archival operations, particularly in business firms, which often have confronted new technologies, such as the computer, before other institutions. Finally, O’Toole makes a strong case for the necessity of business archives to redefine their clientele and to build alliances of all kinds with other groups. “Only if alliance building comes to be seen as part of the core of archival services–equal in importance to appraisal, arrangement, description, preservation activities, and all the other familiar archival tasks–will archivists be able to meet the multifarious challenges of modern records,” he concludes (p. xvi). O’Toole insists that these essays have a wider applicability than American business records, since all archivists face similar challenges and problems. This is true, but in straining to make the point he overreaches, advising the reader to substitute the word “academic” or “religious” or whatever term applies to your own setting whenever the word “business” appears (p. vii). I tried this; it simply doesn’t work all the time. Many of the issues presented here apply only, or principally, to a business context. After all, that is the presumed rationale for a volume devoted to business records. That said, it is true that many of these techniques can be adapted to fit other types of institutional settings, and the volume will be useful for all archivists, and it should find a wide audience.

In his introduction, “Business and American Culture: The Archival Challenge,” Francis X. Blouin, Jr., director of the Bentley Historical Library at the University of Michigan, provides the context for the essays that follow. Quoting Calvin Coolidge’s famous dictum, “The chief business of the American people is business,” Blouin writes that, despite the enormous impact of business institutions on American life, relatively little is known about them. Blouin blames this in part on trends in academic history, which has not focused much attention on business institutions, and in part on the fact that, compared to political, religious and educational institutions, “there is very little documentation with which to work” (p. 1). Blouin discusses the narrow definition of business, as “a set of organizations that have structure and purpose focused on the delivery of goods and services,” and the broader sense of the term, as “an institution that defines culture and values” (p. 3). Both senses should be considered in reading the diverse articles in this volume, he says. Blouin then provides a succinct overview and interpretation of the essays to follow, showing how they relate to three major challenges facing archivists dealing with business records: appraisal, use, and technical issues. This volume presents a variety of perspectives, Blouin states, and this pluralistic approach appears necessary to meet the needs of a diverse group of users.

The fundamental divergence represented here is between corporations that establish their own internal archives and “external” repositories, such as universities, historical societies, and research libraries, which collect records from many different business firms. Although archivists generally encourage businesses to maintain their own archives, over the past decade there has been “a downward trend in the creation of business archives programs in corporations” (p. 351), and several major corporations have closed well-established and apparently successful archives programs, according to Winthrop Group consultant Karen Benedict. Benedict, formerly corporate archivist for Nationwide Insurance, provides an analysis of the choices facing company officials in deciding between maintaining an in-house archives program or placing company records in an outside repository. Although arguing strongly for the first option, Benedict acknowledges that many companies will prefer contracting out for archival services. This, at least, is preferable to destroying caches of significant historical documentation, which is all too common among corporations worried about disclosure of sensitive information.

Many of the reasons for this concern for corporate privacy are implicit in the essay by Philip F. Mooney of Coca-Cola, who is curiously the only contributor actively employed as an in-house business archivist. Mooney contrasts archival myths about business archives with the corporate reality he sees daily. He contends that corporations are “a historic by their very nature” (p. 60), and that in-house “archival professionals need to develop more precise tools to measure bottom-line contributions” (p. 61) and must “constantly seek new opportunities to market [the archives] resources and service to its constituents” (p. 63). Although a few business leaders might appreciate the value of history for institutional memory, decision-making or maintaining corporate culture, Mooney counters that they are rare exceptions. Corporate archivists will have a difficult time justifying their contributions to the financial well-being of the company.

Despite these difficulties, Marcy Golstein depicts in-house business archives moving from a narrow traditional focus to a more flexible approach emphasizing a variety of business uses for archival records. A former archivist for AT&T, now working as a consultant, Goldstein emphasizes corporate archives as “the repository of the corporate memory” (p. 41) and as “knowledge management centers and not historical warehouses” (p. 54). Such arguments sound persuasive, but the declining numbers of corporate archives suggest that fewer business executives are convinced that the costs and potential liabilities of in-house archives justify their continuation.

To demonstrate that some corporate executives have championed the establishment and development of in-house archives, the volume presents brief excerpts from oral history interviews with three such business leaders. These statements repeat some of the traditional arguments in support of in-house archives, but there is not much context or background with which to form a clear perspective on their comments. It would have been more interesting to hear comments from different viewpoints, such as an executive who opposes funding for archives or one who was converted from a skeptic to a true believer. This would help us understand the challenges faced by corporate archivists.

The other side of the debate, comprising most of the essays in this volume, is framed by archivists who do not have direct ties to in-house archives. While corporate archivists seem to be waging a battle for survival and attempting to adapt to ever-changing corporate climates, several major archival institutions have been developing significant research collections of business records. Many of these collections result from business closings or corporate takeovers, with surviving records often being spotty or coming to a repository without opportunity for the archivist to determine in advance which records should be saved. The challenges faced in such circumstances involve selection and acquisition, appraisal, and filling documentary gaps. These are the themes explored in the remaining essays.

The “complex relationship between historical scholarship and the keeping of archival records” is the theme of the lead essay, by Michael Nash of the Hagley Museum and Library. Writing more for archivists than for business historians, Nash provides an historiographic survey from the founding of the Business Historical Society in 1925 to recent studies that focus on trends in American economic, political, and social life, and the impact of gender, race, and workers on business. From a citation study of more than 67,000 footnotes in fifty major business history monographs and five leading journals, Nash concludes that “over time, there appears to be a declining reliance on archival sources” from business firms (p. 35). Nash offers only a few observations based on this finding, principally that archivists should make a more systematic effort to collect records from industry trade associations, lobbying groups, political action committees, and other entities that “can potentially provide the sources that scholars are seeking in order to document the relationship between business, culture, politics, and society” (p. 35). Unfortunately, this recommendation is the final sentence of his essay, so there are no specific suggestions for how this can be accomplished.

The most ambitious effort to answer the questions raised by Nash comes from Mark A. Greene and Todd J. Daniels-Howell, both archivists at Minnesota Historical Society (MHS), who first proposed the RAB Project. Their essay presents a lengthy case study of the MHS effort to develop a pragmatic approach to selecting modern business records for archival preservation. The “Minnesota Method” they developed is based on the assumption that “all archival appraisal is local and subjective” (p. 162), but that, through careful analysis of both records creators and the records themselves, archivists can establish appraisal and selection criteria that are “rational and efficient relative to a specific repository’s goals and resources” (p. 162). The strategy they propose includes: defining a collecting area; analyzing existing collections; determining the documentary universe, including relevant government records, printed and other sources; prioritizing industrial sectors, individual businesses, geographic regions, and time periods from which records will be sought; defining functions performed by businesses and the collecting levels needed to document major functions; connecting documentary levels to priority tiers; and updating this process every three to seven years. They outline priority factors used in making these decisions, documentation levels, and decision points to refine the priority levels. This Minnesota Method combines features of archival approaches to collection analysis, documentation strategy, appraisal, and functional analysis. Complete with eight flow charts, as well as other outlines and charts listing various procedural steps and criteria, the essay presents a detailed explanation of this strategy. Despite the authors’ statement that this “pragmatic method of selection … may seem a modest goal on paper” (p. 206), many archivists would find it a daunting task to adapt the Minnesota Method to their own repositories. The essay’s greatest value, however, is in outlining the complex issues that must be addressed in making appropriate and effective decisions regarding archival selection and acquisition. This is one essay that clearly suggests applicability to other types of historical records beyond the sphere of business.

Whereas Greene and Daniels-Howell focus on documentation for entire industries, Christopher T. Baer examines appraisal of records within a single firm. Baer draws on his extensive experience at the Hagley Museum and Library to explain four parameters that shape his approach to appraisal of business records. Baer’s approach reflects a number of influences, including Alfred D. Chandler’s seminal work and Michael E. Porter’s “Five Forces” of competitive strategy. The four parameters he posits for evaluating business records are function (actions required to achieve elemental purposes), structure (i.e., external structure), strategy (referring to both strategy and tactics), and detail (level of specificity and completeness for a particular record). In explaining the application of such criteria, Baer reviews much of the business management literature of recent decades and provides detailed analysis of factors affecting appraisal of business records. Ultimately, however, he concludes that the parameters he describes are “at best a kind of mental road map” and that the efficacy of appraisal decisions rests “in the archivist’s ability to use them in practice” (p. 120). The archivist is not a scientist searching for abstract truths but “a technologist who must occasionally work in the absence of or in advance of theory and who must use a variety of tools to produce a useful product in response to conflicting and often irreconcilable demands” (p. 121). Baer’s model, not quite as complex as the Minnesota Method, provides a useful starting point for any archivist facing the daunting task of analyzing and appraising voluminous records of a modern business firm. Following a detailed model may not make the work easier, but it should improve the quality and reliability of appraisal decisions.

Compared to the lengthy essays just considered, Bruce Bruemmer’s essay on functional analysis in the appraisal of business records will seem either a welcome relief for harried archivists or a simplistic solution to a complex problem. Bruemmer, archivist of the Charles Babbage Institute at the University of Minnesota, focuses on the documentation needs of individual companies. Borrowing from earlier work by Helen Samuels, Joan Krizack, and others, he applies the concept of functional analysis to business records. This appraisal method concentrates on documenting the most important functions of an organization, rather than its structural hierarchy. Instead of selecting records based on their relationship to the offices that generated them, functional analysis examines the underlying functions performed by the organization as a basis for records appraisal. Particularly as electronic records replace traditional means of communication, archivists must define the documentary needs of the organization at the middle or even the beginning of the records cycle. As Bruemmer argues, “Functional analysis is one of the few tools at the command of archivists to help guide archival practice in the electronic environment because it dictates documentary requirements before records are analyzed” (p. 155). In addition to the proximate goal of ensuring adequate documentation of business, he posits the further goal of strengthening the role of business archivists: “If we rise to the challenge, we may discover that the archive itself has become an essential business function” (p. 158). Although less sweeping in its purview and less complex in its design, functional analysis provides another useful model for documenting modern American business.

As historians well know, the history of business is not told entirely through the records generated by business firms. The forms of “external documentation” that supplement corporate records, according to Timothy L. Ericson, include a broad array of sources created by an individual or agency outside the company. Ericson, archivist at the University of Wisconsin-Milwaukee, examines the types of records that document businesses, including printed materials, newspapers, government records, personal papers of business founders or former employees, photographic and cartographic records, oral history, electronic data bases, and the World Wide Web. In some cases, these external sources may be the only records available for studying certain companies, either because official company records have been lost or destroyed or because of access restrictions placed on such records. In some situations, Ericson contends, such limited documentation might be all that is needed for companies that have limited national or even local impact. In other cases, external documentation may provide “a more appropriate level of information” (p. 319) than detailed records of every action taken within a corporation. This approach will be especially useful for small or defunct businesses, for businesses subject to extensive government regulation, to fill documentary gaps, or when only general or summary information is required.

Several essays in The Records of American Business examine specific types of records that are important for business archives. Richard J. Cox examines the impact of electronic records on corporate archives, emphasizing the internal value of business records as evidence and the role of archivists in protecting intellectual property, transaction security, integrity of data, and privacy. James E. Fogerty makes a strong case for the value of oral history in filling gaps in the documentation of business and in explicating corporate culture. Oral history “allows the creation of documents that cut through the formal record of organization to the internal and dynamic record of everyday operation” (p. 264). Ernest J. Dick, another former corporate archivist now working as a consultant, likewise argues for the importance of sound and visual records in providing a more complete documentation of corporate memory and a clearer understanding of corporate culture.

Most of the essays in this volume address the concerns and needs of archivists, scholars, and corporate officials. An important counterpoint is provided by John A. Fleckner, chief archivist at the National Museum of American History, Smithsonian Institution. Starting from the paradox of the public’s dislike of history as an academic subject despite its fascination with history outside the classroom, Fleckner discusses the popular presentation of business history. Drawing examples from history museums, historical sites, corporate depictions of history, and a variety of popular history publications, Fleckner distinguishes three distinct purposes served by popular history of business–to educate an audience; to contribute to business objectives; and to entertain. He urges archivists to look beyond their traditional audiences for business records–scholars and business executives–and to recognize the broader potential for some business records to become “the grist for journalists, public affairs staff, and other popular writers who unlock the history of business to much wider audiences” (p. 345). Given the public’s fascination with old products and advertisements, for example, and the boundless allure of nostalgia, this may well be a valuable approach for archivists to take. Many business advertisers have already discovered this.

The final essay in the volume, “Business Records: The Prospect from the Global Village,” by Michael S. Moss and Lesley M. Richmond, seeks to broaden the perspective beyond the United States. The title is a bit misleading, since the essay deals mainly with the United Kingdom and only tangentially with other European countries, and, after 368 pages of detailed discussion of American business records, this brief essay seems more an afterthought than an integral part of the discussion. Still, the essay does afford a few comparative insights. Reporting that throughout Europe use of business records for research “remains disappointingly low” (p. 381), the authors conclude, “Although a few family historians occasionally consult certain categories of business records … the majority of users seem to be enthusiasts seeking information about a product or service that has captured their imagination” (p. 382). The latter type of use is barely hinted at in other essays in the volume, though for many types of business records it holds true equally in the United States. For example, the majority of researchers in certain collections of railroad records consist of model railroaders and other hobbyists. Moss and Richmond also point out that public sector archives can earn revenue by providing research services for distant researchers, and by selling copies of items in their collections. Particularly significant are their comments about the relationship between historians and archivists. “Throughout Europe there is a complaint, echoing North America, that the archival community has lost contact with historians” (p. 386), they conclude, citing criticism of appraisal methods and demands that more records be preserved for research use. “The historians, for their part, need to understand the issues that confront the archivist and to be aware that they no longer (if they ever did) represent more than a mere fraction of the user community; the records they need for their research are very vulnerable to deaccessioning programmes,” they write (p. 387). Finally, due to the growth of a global economy, they argue that archivists from all countries need to exchange ideas about documentation, appraisal, and use of business records. This call for international collaboration and joint projects is, perhaps after all, a fitting conclusion to a volume of essays about American business records.

The Records of American Business will not be the last word on the subject. But it is a significant step forward in providing broad coverage of a wide range of issues, concerns, and perspectives regarding the selection, appraisal, and use of modern business records. It is essential reading for anyone interested in the process and outcome of archival efforts to ensure adequate documentation of American business in the coming decades.

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Subject(s):Business History
Geographic Area(s):General, International, or Comparative
Time Period(s):General or Comparative

The Wealth and Poverty of Nations: Why Are Some So Rich and Others So Poor

Author(s):Landes, David S.
Reviewer(s):De Long, J. Bradford

EH.NET BOOK REVIEW

Published by EH.NET (April 1998)

David S. Landes, The Wealth and Poverty of Nations: Why Are Some So Rich and Others So Poor. New York: W.W. Norton, 1998. 544 pp. $30.00 (cloth) ISBN: 0393040178.

Reviewed for EH.NET by J. Bradford De Long, Department of Economics, University of California-Berkeley.

David Landes has studied the history of economic development for more than half a century. His look at economic imperialism and informal empire in nineteenth-century Egypt (Bankers and Pashas) tells the story of how small were the benefits (either for Egyptian economic development or for the long-run power and happiness of the ruling dynasty) bought at extremely high cost by borrowing from European bankers. His unsurpassed survey of technological change and its consequences in Europe since 1750 (The Unbound Prometheus) remains the most important must-read book for serious students of the industrial revolution. His study of clock-making as an instance of technological development (Revolution in Time) provides a detailed look at a small piece of the current of technological development. His works are critical points-of-reference for those who seek to understand the Industrial Revolution that has made our modern world.

Now David Landes turns to the grandest question of all: the causes of the (so far) divergent destinies and relative prosperity levels of different national economies. The title echoes Adam Smith, but Landes is interested in both the wealth and poverty of nations: Adam Smith lays out what went wrong as the background for his picture of how things can go right, while Landes is as interested in the roots of relative–and absolute–economic failure as of success.

He pulls no punches–of Columbus’s followers treatment of the inhabitants of the Caribbean, Landes writes that “nothing like this would be seen again until the Nazi Jew hunts and killer drives of World War II.” Landes makes no compromises with any current fashion. Readers will remember how columnist after columnist decried high-school history standards (which, truth be told, were not very good) that required students to learn about a fourteenth-century African prince, Mansa Musa, but not about Robert E. Lee; readers of Landes will find three pages on Mansa Musa, and none on Master Robert.

We are all multiculturalists now; or, rather, serious historians have long been multiculturalists.

Nevertheless, Landes’s economic history is a profoundly Eurocentric history. It is Europe-centered without apologies–rather with scorn for those who blind themselves to the fact that the history of the past 500 years is Europe-centered.

Now Landes does not think that all history should be Eurocentric. For example, he argues that a history of the world from 500 to 1500 should be primarily Islamocentric: the rise and spread of Islam was an “explosion of passion and commitment… the most important feature of Eurasian history in what we may call the middle centuries.”

But a history oriented toward understanding the wealth and poverty of nations today must be Eurocentric. Goings-on in Europe and goings-on as people in other parts of the world tried to figure out how to deal with suddenly-expansionist Europeans make up the heart of the story of how some–largely western Europe and northwest Europe’s settler ex-colonies–have grown very, very rich.

Moreover, relative poverty in the world today is the result of failure on the part of political, religious, and mercantile elites elsewhere to pass the test (rigged very heavily against them) of maintaining or regaining independence from and assimilating the technologies demonstrated by the people from Europe–merchants, priests, and thugs with guns in the old days, and multinationals, international agencies, and people armed with cruise missiles in these new days–who have regularly appeared offshore in boats, often with non-friendly intent. To try to tell the story of attempted assimilation and attempted rejection without placing Europe at the pivot is to tell it as it really did *not* happen.

Thus Landes wages intellectual thermonuclear war on all who deny his central premise: that the history of the wealth and poverty of nations over the past millennium is the history of the creation in Europe and diffusion of our technologies of industrial production and sociological organization, and of the attempts of people elsewhere in the world to play hands largely dealt to them by the technological and geographical expansions originating in Europe.

He wins his intellectual battles–and not just because as author he can set up straw figures as his opponents. He wins because in the large (and usually in the small) he has stronger arguments than his intellectual adversaries, who believe that Chinese technology was equal to British until 1800, that had the British not appeared the royal workshops of Mughal India would have turned into the nucleus of an industrialized textile industry, that equatorial climates are as well-suited as mid-latitude climates to the kind of agriculture that can support an Industrial Revolution, that Britain’s industrial lead over France was a mere matter of chance and contingency, or any of a host of other things with which Landes does not agree.

Landes’s analysis stresses a host of factors–some geographical but most cultural, having to do with the fine workings of production, power, and prestige in the pre-industrial past–that gave Eurasian civilizations an edge in the speed of technological advance over non-Eurasian ones, that gave European civilizations an edge over Chinese, Arabic, Indian, or Indonesian, that made it very likely that within Europe the breakthrough to industrialization would take place first in Britain.

And by and large it is these same factors that have made it so damn difficult since the Industrial Revolution for people elsewhere to acquire the modern machine technologies and modes of social and economic organization found in the world economy’s industrial core.

Landes’s account of why Eurasian civilizations like Europe, Islam, and China had an edge in technological development over non-Eurasian (and southern Eurasian) civilizations rests heavily on climate: that it is impossible for human beings to live in any numbers in “temperate” climates before the invention of fire, housing, tanning, and sewing (and in the case of northern Europe iron tools to cut down trees), but that once the technological capability to live where it snows has been gained, the “temperate” climates allowed a higher material standard of living.

I am not sure about this part of his argument. It always seemed to me that what a pre-industrial society’s standard of living was depended much more on at what level of material want culture had set its Malthusian thermostat at which the population no longer grew. I have always been impressed by accounts of high population densities in at least some “tropical” civilizations: if they were so poor because the climate made hard work so difficult, why the (relatively) dense populations?

It seems to me that the argument that industrial civilization was inherently unlikely to arise in the tropics hinges on an–implicit–argument that some features of tropical climates kept the Malthusian thermostat set at a low standard of living, and that this low median standard of living retarded development. But it is not clear to me how this is supposed to have worked.

By contrast, I find Landes’s account of why Europe–rather than India, Islam, or China–to be very well laid out, and very convincing. But I find it incomplete. I agree that it looks as if Chinese civilization had a clear half-millennium as the world’s leader in technological innovation from 500 to 1000. Thereafter innovation in China appears to flag. Little seems to be done in developing further the high technologies like textiles, communication, precision metalworking (clockmaking) that provided the technological base on which the Industrial Revolution rested.

It is far from clear to me why this was so. Appeals to an inward turn supported by confident cultural arrogance under the Ming and Ch’ing that led to stagnation leave me puzzled. Between 1400 and 1800 we think that the population of China grew from 80 million to 300 million. That doesn’t suggest an economy of malnourished peasants at the edge of biological subsistence. That doesn’t suggest a civilization in which nothing new can be attempted. It suggests a civilization in which colonization of internal frontiers and improvements in agricultural technology are avidly pursued, and in which living standards are a considerable margin above socio-cultural subsistence to support the strong growth in populations.

Yet somehow China’s technological lead–impressive in printing in the thirteenth century, impressive in shipbuilding in the fifteenth century, impressive in porcelain-making in the seventeenth century–turned into a significant technological deficit in those same centuries that China’s pre-industrial population quadrupled.

Landes’s handling of the story of England’s apprenticeship and England’s mastership–of why the Industrial Revolution took place in the northwest-most corner of Europe–is perhaps the best part of the book. He managed to weave all the varied strands from the Protestant Ethic to Magna Carta to the European love of mechanical mechanism for its own sake together in a way that many attempt, but few accomplish. Had I been Landes I would have placed more stress on politics: the peculiar tax system of Imperial Spain, the deleterious effect of rule by Habsburgs and Habsburg puppets on northern Italy since 1500 (and the deleterious effect of rule by Normans, Hohenstaufens, Valois, Aragonese, and Habsburgs on southern Italy since 1000), the flight of the mercantile population of Antwerp north into the swamp called Amsterdam once they were subjected to the tender mercies of the Duke of Alva, more on expulsions of Moriscos, Jews, and French Protestants (certainly the Revocation of the Edict of Nantes was an extraordinary shock to my seventeenth-century DeLong ancestors), the extraordinary tax burden levied on the Dutch mercantile economy by the cumulated debt of having had to spend from 1568 to 1714 fighting to achieve and preserve independence, and so forth.

I also would spend more time on Britain itself. I, at least, find myself wondering whether Britain’s Industrial Revolution was a near-run thing–whether (as Adam Smith feared) the enormous burden of the Hanoverian fiscal-military state might not have nearly crushed the British economy like an egg. Part of the answer is given by John Brewer’s Sinews of Power, a work of genius that lays out the incredible (for the time) efficiency of Britain’s eighteenth-century fiscal-military state. Most of the answer is the Industrial Revolution. And some of the answer is (as Jeffrey Williamson has argued) that the burden of the first British Empire did indeed significantly slow–but not stop–industrialization.

I don’t know what I think of all the issues in the interaction of the first British Empire, the British state, and British industrialization. Thus I find myself somewhat frustrated when Landes quotes Stanley Engerman and Barbara Solow that “It would be hard to claim that [Britain’s Caribbean Empire was] either necessary or sufficient for an Industrial Revolution, and equally hard to deny that [it] affected its magnitude and timing,” and then says “That’s about it.” I want to know Landes’s judgment about how much. Everything affects everything else, and when economic historians have an advantage over others it is because they know how to count things–and thus how to use arithmetic to make judgments of relative importance.

But the complaint that a book that tries to do world history in 600 pages leaves stuff out is the complaint of a true grinch.

So where does Landes’s narrative take us?

If there is a single key to success–relative wealth–in Landes’s narrative, it is openness. First, openness is a willingness to borrow whatever is useful from abroad whatever the price in terms of injured elite pride or harm to influential interests. One thinks of Francis Bacon writing around 1600 of how three inventions–the compass, gunpowder, and the printing press–had totally transformed everything, and that all three of these came to Europe from China. Second, openness is a willingness to trust your own eyes and the results of your own experiments, rather than relying primarily on old books or the pronouncements of powerful and established authorities.

European cultures had enough, but perhaps only barely enough. Suppose Philip II Habsburg “the Prudent King” of Spain and “Bloody” Mary I Tudor of England had together produced an heir to rule Spain, Italy, the Low Countries, and England: would Isaac Newton then have been burned at the stake like Giordano Bruno, and would the natural philosophers and mechanical innovators of seventeenth and eighteenth century England have found themselves under the scrutiny of the Inquisition? Neither Giordano Bruno, Jan Hus, nor Galileo Galilei found European culture in any sense “open.”

If there is a second key, it lies in politics: a government strong enough to keep its servants from confiscating whatever they please, limited enough for individuals to be confident that the state is unlikely to suddenly put all they have at hazard, and willing once in a while to sacrifice official splendor and martial glory in order to give merchants and manufacturers an easier time making money.

In short, economic success requires a government that is, as people used to say, an executive committee for managing the affairs of the bourgeoisie–a government that is responsive to and concerned for the well-being of a business class, a class who have a strong and conscious interest in rapid economic growth. A government not beholden to those who have an interest in economic growth is likely to soon turn into nothing more than a redistribution-oriented protection racket, usually with a very short time horizon.

Landes writes his book as his contribution to the project of building utopia–of building a much richer and more equal world, without the extraordinary divergences between standards of living in Belgium and Bangladesh, Mozambique and Mexico, Jordan and Japan that we have today. Yet at its conclusion Landes becomes uncharacteristically diffident and unusually modest, claiming that: “the one lesson that emerges is the need to keep trying. No miracles. No perfection. No millennium. No apocalypse. We must cultivate a skeptical faith, avoid dogma, listen and watch well…”

Such a change of tone sells the book short, for there are many additional lessons that emerge from Landes’s story of the wealth and poverty of nations. Here are five: (1) Try to make sure that your government is a government that enables innovation and production, rather than a government that maintains power by massive redistributions of wealth from its friends to its enemies. (2) Hang your priests from the nearest lamppost if they try to get in the way of assimilating industrial technologies or forms of social and political organization. (3) Recognize that the task of a less-productive economy is to imitate rather than innovate, for there will be ample time for innovation after catching-up to the production standards of the industrial core. (4) Recognize that things change and that we need to change with them, so that the mere fact that a set of practices has been successful or comfortable in the past is not an argument for its maintenance into the future. (5) There is no reason to think that what is in the interest of today’s elite–whether a political, religious, or economic elite–is in the public interest, or even in the interest of the elite’s grandchildren.

It is indeed very hard to think about problems of economic development and convergence without knowing the story that Landes tells of how we got where we are today. His book is short enough to be readable, long enough to be comprehensive, analytical enough to teach lessons, opinionated enough to stimulate thought–and to make everyone angry at least once.

I know of no better place to start thinking about the wealth and poverty of nations.

(This review is a longer draft of a review subsequently published (at 1/3 the length) by the Washington Post..)

J. Bradford De Long Department of Economics University of California- Berkeley

De Long is co-editor, Journal of Economic Perspectives; Research Associate with the National Bureau of Economic Research; visiting scholar, Federal Reserve Bank of San Francisco; and former (1993-1995) deputy assistant secretary (for economic policy), U.S. Treasury.

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

Losing Control? Sovereignty in an Age of Globalization

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

EH-NET BOOK REVIEW

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

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

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

Reordering the World?

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

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

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

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

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

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

Notes:

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

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

Calvinists Incorporated: Welsh Immigrants on Ohio’s Industrial Frontier

Author(s):Knowles, Anne Kelly
Reviewer(s):Cosgel, Metin

EH.NET BOOK REVIEW

Published by EH.NET (March 1998)

Anne Kelly Knowles, Calvinists Incorporated: Welsh Immigrants on Ohio’s Industrial Frontier. Chicago: University of Chicago Press. 1997. xxiii + 330 pp. $24.95 (paper), ISBN: 0226448533.

Reviewed for EH.NET by Metin Cosgel, Department of Economics, University of Connecticut.

Nowhere is the relationship between religious culture and economic performance more complex than in the experiences of immigrants who strive to improve their economic position while trying to preserve deeply held religious values. In Calvinists Incorporated Anne Kelly Knowles tells the fascinating story of a community of Welsh immigrants who settled in Jackson and Gallia counties of Ohio during the first half of the nineteenth century. Although recent studies of European migration have revised the earlier belief that immigrants quickly lost their native culture, they have not fully explored the two-way interaction between the immigrants’ culture and their common desire for economic success. Knowles fills this gap by focusing on the key turning points in the history of this community and exploring the moral dilemmas faced by these strict Calvinists in their decisions to emigrate and to choose settlements and economic activities.

Focusing narrowly on a community of Welsh immigrants, Knowles addresses issues that have broader significance. One of the heavily debated issues in economic history has been about whether and how there has been a transition from moral to market economy. Against arguments that view the two types of economy as being distinct and incompatible, and consistent with the recent consensus that acknowledges their coexistence in any society, Knowles shows the plurality of economic behavior and motivations among the Welsh immigrants that she studies. She finds that they were both family-oriented yeomen farmers and competitive industrial entrepreneurs and that their religious values served both to constrain behavior and to facilitate economic success. Based on careful and detailed analysis of the decisions made by this community in various contexts, she provides an illuminating example of the complex interaction between economic change and cultural values and institutions.

The book consists of an introduction that discusses general themes and five chapters that focus on key decisions of this community by reconstructing their culture and economy in different contexts and scales. Chapter 1 studies the historical geography of Welsh emigration to the United States in the national context of the early nineteenth century in order to determine the representativeness of those who left for Jackson and Gallia. It also establishes spatial features of Welsh emigration, the relationship between emigration and internal migration, and the social characteristics of Welsh emigrants at the time. The next two chapters examine the range of migration possibilities for the rural people in the county of Cardiganshire in Wales in their search for greater economic opportunities. Chapter 2 focuses on internal migration. It examines the long-standing migration traditions within Britain and the moral concerns that explain why so few people from one part of Cardiganshire participated in these migrations. The localized cultural and economic reasons for why they instead chose to emigrate to Jackson and Gallia are explored in Chapter 3. Remaining on the scale of locality, Chapter 4 examines the relationship of Welsh settlers with the rapidly growing charcoal iron industry, their novel involvement in the industry through community corporations, and the way this involvement created new tensions within the community along with economic success. Moving between the national and local scales, the final chapter discusses the Welsh Calvinist immigrant experience in its moral context. Focusing on the major points of transition for the community, it shows the way confrontation between religious values and new opportunities created new social formations and the way culture and economy reinforced each other.

In reconstructing the history of Welsh migration, Knowles draws on an impressive range of sources and displays an admirably high level of scholarship. For example, because official records provide little specific information about Welsh migration flows before the end of the nineteenth century, she turns to obituaries printed in Welsh American religious magazines and other supplementary sources to painstakingly construct a database of individual immigrants that contains geographical and biographical information about 1,772 individuals (available in an appendix). Similarly, she uses interviews, British and U.S. census records, records of furnace companies, maps and atlases, and a variety of other primary and secondary sources (all listed in a 23 pages long bibliography) to incorporate the rich detail into the history in its different scales and contexts. Maintaining a close attention to the details of individual histories and geographies, she skillfully weaves together the details to reconstruct the history of the community and to analyze larger issues surrounding the relationship between economy and culture.

Calvinists Incorporated is an excellent work of historical geography that should also be of interest to economic historians, cultural anthropologists, and social science historians in general. Through a close study of a community’s history, it enriches our understanding of the relationship between religious culture and economic performance and introduces new methods for studying histories of immigrant groups. Knowles’s methods for constructing a database of individual biographies and biographical approach to community reconstruction will set new precedents.

(Knowles is lecturer in geography at the Institute of Earth Studies, University of Wales, Aberystwyth.)

Metin M. Cosgel Department of Economics University of Connecticut

Metin Cosgel’s paper, “Productivity of a Commune: The Shakers, 1850-1880,” with John E. Murray, is forthcoming in the June 1998 issue of The Journal of Economic History.

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Subject(s):Historical Demography, including Migration
Geographic Area(s):North America
Time Period(s):19th Century

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

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

EH-NET BOOK REVIEW

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

EH.NET BOOK REVIEW

Published by EH.NET (February 1998)

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

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

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

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

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

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

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

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

Anne E.C. McCants Department of History MIT

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

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

Globalizing Capital: A History of the International Monetary System

Author(s):Eichengreen, Barry J.
Reviewer(s):Selgin, George

Published by EH.NET (October 1997)

Barry J. Eichengreen, Globalizing Capital: A History of the International Monetary System. Princeton: Princeton University Press, 1996. viii + 223 pp. $24.95 (cloth), ISBN: 0-691-02880-X.

Reviewed for EH.NET by George Selgin, Department of Economics, University of Georgia.

In 1892 the English economist Robert Giffen published an article entitled “Fancy Monetary Standards.” Objecting to a recent proposal for a new monetary standard aimed at stabilizing the purchasing power of money, Giffen observed that “Governments, when they meddle with money, are so apt to make blunders…that a nation which has a good money should beware of its being tampered with.” If we mess with the gold standard, in other words, “we can never tell…what confusion and mischief we may be introducing.” (1)

A generation later, the gold standard was not only tampered with, but largely dismantled. The international monetary system has been witness to a great deal of “confusion and mischief” ever since, including such “fancy” payments arrangements as the IMF, the EPU, the BIS and the EMS, elaborate multinational structures designed by international committees, and regularly shorn-up by exchange controls, stand-by arrangements, SDR’s, gold-pools, and other ad-hoc devices aimed at forestalling major devaluations.

The ultimate failure of all such arrangements, as well as the abandonment of the international gold standard itself, has led Berkeley economist Barry Eichengreen to wonder whether any system of fixed, or at least relatively stable, exchange rates can survive in a world of democratic governments. His book, Globalizing Capital: A History of the International Monetary System, supplies a negative answer. Elaborating a thesis put forth by Karl Polanyi in 1944, Eichengreen argues that modern democratic governments are bound to yield to pressures to pursue goals, such as the avoidance of cyclical unemployment, that conflict with the maintenance of fixed or pegged exchange rates. The history of the international monetary system, according to Eichengreen, is largely a history of major governments’ gradual, grudging acknowledgment of a conflict between internal and external monetary stability, and their generally unsuccessful efforts to overcome the conflict by means of international cooperation. Eichengreen’s book tells the story in four meaty but easily digested chapters (plus an introduction and conclusion, both very brief), covering the gold standard, the interwar period, the Bretton Woods System, and post-Bretton Woods developments.

Eichengreen’s general thesis offers a useful starting point for understanding the often Byzantine political economy of international monetary relations, and he is at his best when offering pithy public-choice explanations for major international monetary developments. For example, Eichengreen accounts for Germany’s seemingly self-destructive support for monetary union by noting that “Germany desired not just an integrated European market, but also deeper political integration in the context of which [it] might gain a foreign policy role. Monetary union was the quid pro quo.” Not the last word, perhaps, but as good and succinct an explanation as I’ve read so far.

Some of Eichengreen’s explanations are perhaps a little too simple, as when he attributes the dollar’s decline after the mid-1980s to the fact that an overvalued currency “imposes high costs on concentrated interests,” whereas an undervalued currency “imposes only modest costs on diffuse interests.” (Just how does America’s involvement in the Louvre Accord of 1987–a failed attempt to restrain the fall of the dollar–square with this public-choice insight? Could it be that the dollar’s decline was simply unavoidable?)

I also wonder whether Eichengreen’s main point concerning the incompatibility of democracy with stable exchange rates really gets to the root cause of the move to floating exchange rates. In some loose sense, of course, democratic pressures fueled the abandonment of the international gold standard and of later schemes for pegging exchange rates. But we should not forget the context: previous changes in domestic monetary arrangements that subjected money to government control. Of particular importance was the establishment of central banks, which removed the enforcement of the gold- standard mechanism from the hands of private, competing bankers, increasing the risk of both a suspension of payments and subsequent yielding to inflationary pressures. Twentieth-century voters might never have developed a taste for accommodative monetary policies had non-democratic governments of previous centuries not set a precedent for such policies by reshaping monetary arrangements to serve their own fiscal ends. After all, the survival of the prewar regime was not so much a reflection of governments’ “single minded pursuit of exchange rate stability” (as Eichengreen claims) as it was a largely unintentional byproduct of private financial firms’ contractual obligations to their customers.

Eichengreen also tends, in my view, to overstate the extent to which democratic nations must rely upon accommodative central bank policies, unhindered by fixed exchange rates, to avoid financial and macroeconomic turmoil. For example, in discussing the success of recent currency board-like arrangements, he argues that they have worked best where banking systems have been heavily internationalized, treating the openness of a nation’s banking system as a given. But that openness is itself to some extent at least a matter of policy. The voters may well favor demand-management approaches to structural alternatives for avoiding financial instability; but this preference has more to do with special-interest politics standing in the way of desirable structural reforms than with sound economic theory.

Nor is it altogether obvious that the international gold standard promoted internal macroeconomic instability. Although the standard proved deflationary until the mid-1890s, this deflation does not seem to have stifled economic growth. (Even Marshall, whom Eichengreen cites as a critic of gold, suggested that the deflation might actually have been beneficial.) This isn’t to deny that the nineteenth century was marked by numerous financial crises in some countries; but those crises and later ones as well had more to do with faulty financial legislation than with any shortage of gold. Thus Scotland, with its relatively free banking system, was largely untouched by the banking crises that forced English banks to seek last-resort aid while also forcing the Bank of England to increase its fiduciary issue; and during the 1907 “credit squeeze” in the United States, private Canadian banks helped make up for a shortage of U.S. currency due in large part to legal restrictions on U.S. banks. (The Canadian banks ran into legal limits themselves, which were then loosened.)

The restored gold standard of the 20s and 30s was another matter entirely. Here central banks played an active role, mainly by trying to run the gold standard on the cheap, supplementing gold reserves with holdings of foreign exchange (instead of further devaluing their currencies or enduring more deflation so as to achieve a higher, sustainable relative price of gold). This cartel-like arrangement could only work so long as creditor central banks resisted the temptation to cash in their foreign exchange holdings. It was, consequently, far more vulnerable to speculative collapse than its prewar counterpart.

In short, while Eichengreen credits “collaboration among central banks and governments” with the maintenance of the gold standard, I am inclined to think that government and central bank involvement tended to undermine the gold standard’s success. The Canadian case is again relevant here, for Canada had little difficulty maintaining its gold standard until 1914 while avoiding financial crises without the help of a central bank, even while experiencing massive capital inflows. The point is of fundamental importance, because it suggests that, notwithstanding what Keynes argued in 1941, a stable exchange rate regime might be just as “automatic” and unreliant upon the chimera of “international cooperation” as one based upon free-floating rates.

On the whole, though, I highly recommend Eichengreen’s book. It is largely compelling, thought-provoking, highly informative, and a pleasure to read.

1. Robert Giffen, “Fancy Monetary Standards,” in Economic Inquiries and Studies (London: George Bell and Sons, 1904), pp. 168-9.

George Selgin Department of Economics University of Georgia

George Selgin is an Associate Professor of Economics at the University of Georgia. His recent publications include Less Than Zero: The Case for a Falling Price Level in a Growing Economy (London: Institute of Economic Affairs, 1997) and Bank Deregulation and Monetary Order (London: Routledge, 1996).

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

John Stewart Kennedy: The Man Who Found the Money

Author(s):Engelbourg, Saul
Bushkoff, Leonard
Reviewer(s):Churella, Albert J.

EH.NET Book Review

Published by H-Business (August 1997)

John Stewart Kennedy: A Transitional Financier

Reviewed by Albert Churella, Department of History, The Ohio State University, for H-Business

Saul Engelbourg and Leonard Bushkoff. The Man Who Found the Money: John Stewart Kennedy and the Financing of the Western Railroads. East Lansing: Michigan State University Press, 1996. xiv+257pp. Maps, notes, bibliography, and index. ISBN 0-87013-414-0 (cloth).

During the second half of the nineteenth century, financial intermediaries became more specialized and more professionalized in response to the vastly increased capital requirements of the rapidly growing railroad network, and of other industries as well. The Man Who Found the Money describes the personal journey of one mid-level financier who played an important role in the American economy, although he was never so powerful or well known as Jay Gould, Jay Cooke, or J. P. Morgan. During his career, John Stewart Kennedy (1830-1909) moved from early efforts as a commission agent to later involvement in railroad finance, and finally to a retirement devoted to carefully tailored philanthropy. As his professional abilities matured in tandem with American financial markets, Kennedy became both more successful and more focused on specific types of financing. In the process, Kennedy–like contemporary J. P. Morgan–was always acutely aware that trust was far more important than adherence to any rigidly defined code of professional conduct. Still, despite Kennedy’s almost paranoiac efforts to maintain the trust of his business associates, he often engaged in financial transactions that, in the eyes of later financial professionals, seemed to indicate serious conflicts of interest. Kennedy, like most transitional financiers, would have been puzzled by this notion, believing that so long as the relatively informal financial arrangements of the time worked in the best interest of all concerned, then investors could earn profits, financiers could maintain public trust, and “conflict of interest” was a matter of no great consequence.

Kennedy spent much of his childhood in Glasgow, Scotland, and received there a solid education that enabled him to rise quickly from a shipping clerk to a salesman of rails and other iron products. In 1856, he became a junior partner in M. K. Jesup & Co. and subsequently spent most of his time in the United States. Kennedy served primarily as a commission merchant for various U.S. railroads, performing a wide variety of financial transactions that ranged from procuring rails and other supplies to paying interest on bonded debt to arranging for additional capital. These activities were hardly routine or specialized–instead, Kennedy relied on personal knowledge and on a carefully cultivated network of contacts in Europe and the United States, all of whom were bound together by mutual trust.

In 1868, Kennedy became a private commercial banker when he established J. S. Kennedy and Co. in New York City. (His growing financial independence may well have been influenced by the American Civil War, which had provided countless business and financial opportunities, but the authors do not mention this pivotal event in their book). Like most such banks, Kennedy’s was a small operation, with only a few partners and clerks to assist him. Kennedy still served as a commission merchant, often representing both railroad buyers and equipment sellers–hence concern over the issue of conflict of interest. Increasingly, however, Kennedy became more involved in the management of new or financially weak railroads. As a representative of the Scottish-American Investment Company, for example, Kennedy not only helped funnel Scottish capital into the U.S., he also helped rescue Scottish investors from some of their unwise investments. During the late 1870s, Kennedy helped to restore the City of Glasgow Bank to financial solvency; an activity that brought him scant financial reward, but that increased greatly the respect and trust accorded him by his financial contemporaries.

During the 1870s and 1880s, Kennedy helped to arrange financing for components of what later became the Great Northern Railway, bringing him into close association with “Empire Builder” James Jerome Hill. Kennedy’s new role as “James Hill’s emissary to the world of high finance” (p. 104) caused him to dissolve J. S. Kennedy and Co. in 1883, although he still continued to serve as a commission merchant for the procurement of two specialized items–steam locomotives and rails– for Hill. As a director and officer of the Minneapolis and Manitoba (the chief precursor to the Great Northern), Kennedy helped to shape that railroad’s policies. Kennedy and Hill had very different visions for the road’s future, however, since the former favored a conservative financial strategy that emphasized slow long-term growth as the territory served by the railroad became more developed, while the latter favored operational cost savings and frequent short-term financial offerings that would provide the railroad with just enough capital to make a rapid push to the Pacific.

Disagreements with Hill, while never terribly acrimonious, nonetheless helped to persuade Kennedy to retire. Other issues contributed to this decision. These included growing conflicts with other railroads in the Northwest (including the Chicago, Burlington & Quincy, the Chicago, Milwaukee & St. Paul, and the Northern Pacific) and stress-related illnesses stemming from involvement in several lawsuits over the course of his career and from continual efforts to defend his reputation against charges that conflicts of interest had undermined his trustworthiness. Even after his 1888 resignation from his position as vice president of the Minneapolis and Manitoba, Kennedy remained active in railroad finance. He moved gradually from professional activities to philanthropy during the 1890s, giving away a large portion of his $67 million fortune to museums, libraries, hospitals, and other charitable institutions.

The life and career of John Stewart Kennedy is certainly a fitting choice for a book. His financial dealings spanned two continents and encompassed a period that began with the first tentative railroad consolidations and ended with the Northern Securities Case of 1904. He helped to finance one of the most important railroads to be built in the United States, and served as a close adviser to railroad magnate J. J. Hill. His career reflected the broad nineteenth-century transition from the diversified activities of general commission merchants to the emergence of private commercial banks to the development of specialized financiers.

One of the most frustrating aspects of this work, however, is that Kennedy has not been effectively integrated into these larger developments. The brief segments at the beginning and end of each chapter do provide a broad overview (occasionally too broad, giving information that is almost self-evident), but these passages are often poorly integrated with the body of the text–possibly an artifact of the dual authorship of the book. The book is also somewhat disjointed, with an abundance of short chapters, one-sentence paragraphs, and awkward transitions; all indicative of a merited condensation of a much longer work–a condensation that was not, unfortunately, accompanied by a thorough rewriting. More specifically, sharper editing would have helped to reduce the frequency of cliches, jargon, and (often mixed) metaphors; for example: “In effect, events were in the saddle, and men could only ride.” (p. 142)

Without question, this is a thoroughly researched and highly detailed work. The authors (primarily Engelbourg) have marshaled an impressive array of information from a wide variety of manuscript collections and published secondary sources. While earlier works, such as Dolores Greenberg’s pioneering study of Morton, Bliss & Company, offer a more comprehensive and better-integrated overview of mid-level finance during the nineteenth century, The Man Who Found the Money is still of value to historians of nineteenth-century railroad finance for its encyclopedic coverage of an important individual financier of that era.

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