Hanes on Rhode and Toniolo, eds., _The Global Economy in the 1990s: A Long-Run Perspective_

[eh.net-review at eh.net]

Published by EH.NET (July 2007)

Paul W. Rhode and Gianni Toniolo, editors, _The Global Economy in the 
1990s: A Long-Run Perspective_. New York: Cambridge University Press, 
2006. xiv + 319 pp. $35 (paperback), ISBN: 0-521-85263-3.

Reviewed for EH.NET by Christopher Hanes, Department of Economics, 
State University of New York at Binghamton.


This excellent book collects papers presented at a Duke University 
conference in 2004, run by Rhode (now in the economics department at 
the University of Arizona) and Toniolo (University of Rome and Duke 
University economics department) -- and attended by this reviewer. 
Unlike many conference volumes, it is true to its title: each 
contribution compares economic developments of the 1990s with 
historical ones; and/or describes 1990s developments in the manner of 
economic history, weaving together statistics, narrative, and 
economic theory. The volume is also much more cohesive than most 
books of its type.

A number of themes pop up in paper after paper, so that it is 
actually easier to describe the book in terms of these themes than by 
listing individual chapters. Growth in economy-wide total factor 
productivity, capital investment and the effects of information 
technology (IT) improvements, in the U.S. and Europe, are covered by 
Nicholas Crafts, Riccardo Faini, Alexander J. Field, Gavin Wright and 
Robert J. Gordon. Faini and Crafts discuss European regulations on 
labor and product markets as factors hindering growth. The possible 
role of computers as a "general purpose technology" like steam 
engines and electricity is the subject for Peter L. Rousseau, and is 
also discussed by Peter Temin, Crafts, Faini, Field, Wright, and 
Gordon. The late 1990s U.S. stock market boom is compared with the 
late 1920s boom by Eugene N. White, Gordon and Temin. Increasing 
income inequality in the U.S. is discussed by Temin, Wright and 
Gordon.

Though these contributors' topics overlap, each author has unique 
points to make. Gavin Wright argues that total factor productivity 
growth is not driven only by technological advance, but is the result 
of complicated interactions between technological opportunities, 
managerial innovations, unemployment rates and public policies with 
respect to education and wages. Gordon compares the 1990s with the 
1920s, not to understand the later period but to identify "rotten 
apples" in the 1920s boom that would have caused subsequent problems 
even if post-1929 monetary policy had been better. (His list includes 
bad bank regulation, low margin requirements on stock purchases, 
inventory management, and "overinvestment" in fixed capital.) White 
draws the lesson that monetary policy should not attempt to prick 
asset-market bubbles. Field argues that IT advance may be credited 
with 1990s TFP growth, but not with the investment boom and capital 
deepening that took place at the same time.

Three contributors resist peer pressure and discuss independent 
topics. Barry Eichengreen gives a general history of 1990s 
developments in international trade and finance, including rising 
capital mobility, trade negotiations, the rise and fall of the 
"Washington consensus," and the Asian crisis. Peter Lindert asks and 
answers some questions about social spending in the 1990s, focusing 
on public pensions and prospects for welfare-state programs in 
Eastern Europe and East Asia. Michael Bernstein discusses U.S. fiscal 
and regulatory policy, unfortunately edging into polemic and odd 
criticisms of academic economics. (Does Bernstein really think N. 
Gregory Mankiw is insufficiently Keynesian [p. 266]?)

Each paper is well-written -- with these authors, how could it be 
otherwise? -- and the book is flawlessly edited and produced, though 
I wish it had footnotes rather than chapter endnotes. The 
introductory chapter by Rhode and Toniolo is an appropriate mixture 
of swinging hyperbole ("The end of the so-called Cold War was 
undoubtedly the most important event in global history since 1945") 
and careful summary of the papers.

Of course, any reader will have a list of topics that he considers 
central to the economic history of the 1990s, but which this book 
does not cover in any substantive way. I was disappointed to find 
very little discussion of vertical disintegration (Chandler in 
reverse) in industrial organization; the revival of Britain and the 
astounding rise of those two old laggard economies, Ireland and 
Spain; the various paths followed by the economies of the former 
Soviet Empire; and the rise of inflation targeting through 
interest-rate setting as the basis of monetary policy. To make room 
for these and other topics, I would have been willing to hear a bit 
less about general purpose technologies.

But that is not a real criticism of the book. The book is better 
because a few topics are covered so thoroughly, from different points 
of view. I found myself making my own connections across chapters and 
wanting the different contributors to get together and hash out their 
differences. Reading Field on 1930s TFP, alongside Faini's discussion 
of different national income accounting techniques in the U.S. and 
Europe and how data details can affect apparent TFP growth, I 
wondered how much of the apparently high 1930s growth rates are a 
relic of the particular data and techniques used to construct those 
figures versus those for other decades. As Gavin Wright described the 
good effects of high-wage labor market policies in the postwar U.S., 
I wondered why apparently similar policies had bad effects in 1990s 
Europe. Reading Gordon on stock margin requirements in the 1920s, I 
wondered why White did not discuss them in his comparison of the 
equity premium in the 1920s and 1990s booms. It is a good sign when a 
conference volume makes a reader wish for another conference on the 
same topic.


Christopher Hanes is Professor of Economics in the State University 
of New York at Binghamton. He does research on macroeconomic and 
labor aspects of economic history.

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