Toniolo on Berend, _An Economic History of Twentieth-century Europe: Economic Regimes from Laissez-faire to Globalization_

[eh.net-review at eh.net]

Published by EH.NET (April 2007)

Ivan Berend, _An Economic History of Twentieth-century Europe: 
Economic Regimes from Laissez-faire to Globalization_. New York: 
Cambridge University Press, 2006. xv + 356 pp. $35 (paperback), ISBN: 
0-521-67268-6.

Reviewed for EH.NET by Gianni Toniolo, Department of Economics, Duke 
University and Università di Roma.


Before taking up his current position of Professor of History at 
UCLA, Ivan Berend spent most of his scholarly life in Hungary where 
he was, among other things, Rector of the Budapest University of 
Economics and President of the Hungarian Academy of Sciences. At the 
edge of Eastern and Western Europe, endowed with a highly educated 
and cosmopolitan upper middle class, Hungary provides an excellent 
observation point for European history. It comes as no surprise, 
therefore, that after writing extensively on central and eastern 
Europe, Berend felt the time had come for him to offer his overall 
view of the eventful economic history of twentieth-century Europe. To 
do so, he chose the textbook format (or rhetoric). The result is a 
relatively short book, presumably aimed at upper undergraduates but 
sure to be appreciated by the general public as well.

The six chapters are structured around the prevailing ideologies of 
the times rather than according to the traditional political or 
economic partitions of twentieth-century history. Thus, the first 
chapter deals with the pre-World War I "laissez-faire system," the 
second with the decline of laissez-faire and the rise of "regulated 
market systems," the third and the fourth with the fascist and 
socialist regimes, the fifth with the so-called mixed economy and the 
welfare state. The title of the final chapter is "Globalization: 
Return to Laissez-faire?" A strong emphasis on ideology, including 
the final question mark, will have an intellectual appeal to 
Europeans over forty while it is likely to puzzle not only most 
American students but also many of their Old Continent counterparts, 
particularly economics majors. But, indeed, meminisse juvabit (it is 
useful to remember) and Berend's book will help to inoculate readers 
against the current loss of memory of how heavily European history 
has been burdened by ideology, as well as against the assumption that 
we are now living in a post-ideological world.

The first pages in the book deal with "the gradual transformation [of 
Europe] from protectionism cum bimetallism to free-trade cum gold 
standard" (p.11). As most scholars do, the Cobden-Chevalier Treaty of 
1860 and the general adoption of gold convertibility in the 1870s are 
taken as the watershed between a world still imbued with mercantilist 
ideology and one identified with "laissez-faire." Berend then 
proceeds to touch upon the rise of modern sectors (sometimes called 
the "second industrial revolution"), the changing position of Europe 
in the world and of individual countries within Europe. A mix of 
aggregate statistics and sectoral case studies (some of them aptly 
encapsulated in useful boxes) describe the rise of German economic 
power, the beginning of the Scandinavian catching up and the lagging 
behind of the eastern and southern peripheries. Among the latter, the 
fairly good performance of Italy is duly depicted. All this factual 
material is well organized and written: students will find it useful 
as an introduction to some of the main topics in pre-1913 European 
economic history. There are, however, two curiosities students are 
likely to have but remain unanswered. The first is the reasons why 
Europe's "western offshoots" grew so much faster than Western Europe 
(which Berend characterizes as the core of the world economy as late 
as 1913). If, by the 1880s, the United States already led Western 
Europe (if not Britain) in aggregate productivity and per capita GDP, 
why was Europe unable to close the gap? The second question is: how 
widespread were laissez-faire practices and what impact did they have 
on growth? Berend acknowledges that the "laissez-faire ideology ... 
became the Zeitgeist in the advanced countries although it remained a 
shallow practice" (p.13), but the second part of this statement 
receives little attention in the following pages. One has to wait for 
the chapters on the interwar period for a brief mention of the 
"globalization backlash" highlighted by the tariff movement of the 
1880s. Little is also said about domestic economic legislation which, 
in several countries, retained more than just the flavor of 
mercantilism: regulation and red tape remained quite pervasive. And 
students may wonder if there is a link between the questions. The 
United States enjoyed more than their fair share of protectionism but 
domestic free trade allowed the exploitation of regional comparative 
advantages within a large country. It is likely that tariffs and 
other restrictions on international trade made the exploitation of 
comparative advantages more difficult in the Old Continent and 
students would possibly be interested in exploring how far Europe's 
fragmentation goes in explaining the diverging rates in productivity 
growth between the two sides of the Atlantic.

A large portion of the book (three chapters) is devoted to the 
"regulated market system," fascist economic dirigisme and centrally 
planned economies. This will possibly turn out to be the most useful 
and interesting part as far as students and educated laypersons are 
concerned, if nothing else because I know of no other comparable 
compact account of how policymaking everywhere, if with very 
different connotations, became state-centered and inward looking 
between 1914 and 1950. Chapter 2, dealing with the democratic 
countries, collapses in less than fifty pages a good standard review 
of 1914-1950. The "novelty" here is perhaps the emphasis on the 
Zeitgeist, even though one wonders whether the economy was driven by 
ideology, as sometimes the author seems inclined to believe, or it 
was the economy's failure to shape new economic and political ideas. 
The chapter on the varieties of European fascisms covers also the 
Iberian Peninsula into the 1970s, to the fall of Franco and Salazar. 
The differences between the Fascist and Nazi regimes are excellently 
outlined. Had the author dealt more in detail with macroeconomic 
policies, the similarities between the running of the economy by 
Fascism and most democratic governments would have become more 
apparent. Chapter 4, on centrally planned economies, also crosses the 
World War II threshold to cover the period up to the fall of the 
Berlin wall. This way of arranging the material compacts the 
narrative on Eastern Europe, if at the expense of a comparison 
between and interaction with the market economies west of the river 
Elbe. Berend takes a balanced approach highlighting not only the 
shortcomings but also the successes of the centrally planned 
economies in generating rapid growth, in enhancing education and 
research as well as in creating a comprehensive welfare state. The 
reasons that eventually produced increasing inefficiency are 
highlighted together with the too-little-too-late reform attempts.

The last two chapters are devoted to postwar growth in Western Europe 
and to the apparent recent globalization challenge to Europe's 
economic success. In an interesting departure from most of the recent 
English-language literature in the field [1], Berend strongly 
emphasizes the positive role played by the state in the phase of 
rapid catch-up growth. This is not Eichengreen's argument about the 
immediate postwar advantages of coordination, drawing on the 
long-standing debate on the "varieties of capitalism," but rather the 
sheer appreciation of the role played by state-owned companies in 
technology transfer, infrastructure building, and trend setting in 
industrial relations. Rehabilitation of the state-run enterprise in 
most contexts during the 1950s and 1960s is worth pursuing by 
economic historians provided, however, that the explanation of its 
early success is matched by a consistent account of its most recent 
failure. The last chapter, covering the 1970s to the 1990s, does not 
take up the challenge. This chapter is the one I find least 
convincing. In particular, I have three main disagreements with the 
treatment of the period. (i) One finds it difficult to agree with 
Berend that [in 1973] "the seemingly 'endless' prosperity [of Europe] 
came to an abrupt halt" (p. 280). This may possibly be true for the 
centrally planned economies, but Western Europe continued to catch up 
with the United States in GDP per capita and in output per hour 
worked, which around 1990 was about equal on the two sides of the 
Atlantic. Within-Europe convergence also continued. (ii) World-wide 
divergence in across-county income distribution became less rather 
than more polarized from the 1980s onward. (iii) The final section on 
Europe as a rising superpower neglects the huge debate on the reasons 
for the post-1995 new divergence between European and American GDP 
growth. On the other hand, one would definitely agree with Berend on 
his harsh judgment about international management of the "transition 
process". The "third postwar settlement" of the twentieth century 
that took place after the end of the Cold War resembled more the 
ill-fated "first postwar settlement" than the virtuous "second" one.

When compacting into a single book such a long and eventful history 
as that of twentieth-century Europe, an author knows beforehand that 
he will not satisfy in detail any of his colleagues working in the 
field. I am sure that Ivan Berend nurtured no illusion in that 
respect. Yet, for all the things that I would have liked to have seen 
covered differently, this is a fascinating book commending high 
admiration for the breadth of the material covered (in several 
languages), for the clarity of presentation (a flowing prose is 
coupled with simple graphs, interesting boxes, a good bibliography 
and index) and, most of all, for the novelty of the approach which, 
as I said at the beginning, draws from the author's personal 
perspective at the edge of Western and Eastern Europe. Nowhere else 
has history been as rich and contradictory as in the Old Continent 
during the twentieth century. Wars, depression, rapid growth, 
ideologies of all kinds, changing social and political regimes, the 
abyss of human depravation and the creation of the most humane and 
socially inclusive society ever seen in the history of mankind: all 
this and more was compacted in twentieth-century Europe. Berend 
succeeds in offering an engaging perspective into this enormous 
variety of situations, abrupt changes and reverses. This is precisely 
the mark of the great historian.

Note:
1. Two freshly-published excellent books are: Barry Eichengreen, _The 
European Economy since 1945_ (Princeton University Press, 2007) and 
Larry Neal, _The Economics of Europe and the European Union_ 
(Cambridge University Press, 2007).


Gianni Toniolo's most recent books are _The Global Economy in the 
1990s: A Long-run Perspective_ (Cambridge University Press, 2006), 
which he edited with Paul Rhode; and _Central Bank Cooperation at the 
Bank for International Settlements_ (Cambridge University Press, 
2005).

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