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Going the Distance: Eurasian Trade and the Rise of the Business Corporation, 1400-1700

Author(s):Harris, Ron
Reviewer(s):Artunç, Cihan

Published by EH.Net (September 2020)

Ron Harris, Going the Distance: Eurasian Trade and the Rise of the Business Corporation, 1400-1700. Princeton: Princeton University Press, 2020. xiii + 465 pp. $40 (hardcover), ISBN: 978-0-691-15077-2.

Reviewed for EH.Net by Cihan Artunç, Department of Economics, Middlebury College.

 

In 670 CE, a merchant in Turfan, Central Asia, disappeared while traveling to trade goods he received on a loan from another, foreign, merchant. The debtor’s demise (and with him, one copy of the contract) called into question whether the terms of the loan could be satisfied. The question was finally settled, remarkably in the creditor’s favor. In 1469, Jakob the Elder, the managing partner of the Fugger family firm — one of the largest commercial enterprises in Europe at the time — passed away. Despite being wildly successful, the business almost collapsed as it convulsed through ad hoc arrangements for 43 years until finally transitioning to Jakob the Rich’s stewardship in 1512.

These are just some of micro case studies Ron Harris elegantly weaves to demonstrate the many different problems firms faced in long-distance Eurasian trade. Some risks were outside of merchants’ control. Pirates, bandits, and storms were real threats. But price fluctuations could be just as ruinous. It was difficult to verify any one associate’s claim. In a world with incomplete information, and where information flowed slowly, monitoring different agents, ships, partners, or branches became vital for any growing business. The risks were immense but so were the rewards. But, even if the firm successfully solved these problems and enjoyed growth, it could simply dissolve after the death of its controlling members, with no heir willing to take the reins and risk the fortune they inherited.

Today, businesses wrestle with many of the same issues. To solve the problems of information, agency, and different sources of risk, firms have to come up with a way to effectively monitor agents, coordinate the actions of different actors in the organization, and assign liability to members appropriately. Harris, a legal and economic historian at Tel Aviv University, takes advantage of his expertise in these literatures that are not always in conversation with one another. His careful study combines insights from contract theory and institutional economics with the rich body of evidence the history literature produced to show the similar and different ways in which societies responded to the organizational challenges involved in Eurasian trade, one of the most capital-intensive and risky economic activities before the 1700s.

Some solutions were simple and addressed related problems; these institutions appeared spontaneously in many places. Single ownership like itinerant traders (“peddlers”) or plain bilateral contracts such as loans or agency were endogenous to many areas and endemic across Eurasia. They became the building blocks of more sophisticated institutional arrangements.

Other solutions, like the commenda or the sea loan, emerged in one place but migrated all across Eurasia, through the expansion of empires or religion, the movement of people, and the merchants involved in Eurasian trade themselves. The sea loan allowed for more flexible assignment of liability. The lender took up the sea risk, the borrower assumed the business risk. It permitted the use of ships or goods as collateral. Originated in Phoenician and Greek practices, it was integrated into Roman law, survived Christian rules against usury, and spread across the Mediterranean and much of Eurasia. It remained an attractive way of organizing maritime trade until the arrival of the commenda. In its simplest version, the commenda resembled other bilateral contracts between an investor and a traveling partner to share profits from a venture. Commenda’s innovation was in separating the invested capital from both parties. Creditors could only make claims on the commenda capital, effectively giving both the investor and the traveling partner limited liability. One traveling partner could pool capital from many different investors by combining different commendas and could even entrust these pooled assets to another traveling partner through a new commenda. The form’s flexibility made it a popular organizational choice across Eurasia. Wherever the form migrated, the form could be adapted easily depending on that region’s institutional setup. The profit-sharing rule varied from place to place, as did what the investor could actually invest. But the broad contours remained the same.

Other institutions were so entrenched in the context where they first emerged, they could not migrate easily. The grand example Harris stresses is the business corporation. The idea of a legal person was developed in Western Europe within the Catholic Church. The Eastern Orthodox Church did not enjoy the same robust separation from a higher secular authority; Islam was too decentralized and non-hierarchical to make the corporate form an attractive option. The corporation migrated from the Catholic Church to European cities, which came to be somewhat autonomous as they became independent from the rural feudal system. Municipalities, universities, and guilds all took advantage of the corporate form. In other parts of the world, cities did not enjoy the same level of independence. But it was only the English and the Dutch who innovated by attaching joint stock to the corporation for a commercial objective. Harris argues that the commitment of the government to not arbitrarily expropriate assets was vital for this development. The corporation’s equity, a large pool of assets drawn from many investors, would be a tempting target for the executive. The firm had to convince its potential subscribers that their investment would be safe from expropriation or unexpected taxation, thus locking in capital for long periods of time. Harris further argues the business corporation, by allowing the English and the Dutch to scale up their operations and set up repeatable voyages from East Asia through the long and expensive Cape route, led to their ascendance in Eurasian trade at the expense of the Portuguese and the local players.

Perhaps the book’s most important contribution is the new typology of indigenous, migratory, and embedded institutions. Previous arguments on why certain institutions emerged or were adopted in some places but not others inevitably focused too much on the supply side. Harris improves on the existing views by comparing the complexity of said institutions and their reliance on other building blocks. It’s not that the Islamic Middle East or the Chinese Empire lacked sophisticated solutions. Far from it, the institutions that these regions developed — the waqf or the family lineage organization — also depended on the Islamic or the Chinese institutional complex to function effectively. These institutions, just like the business corporation, could not migrate alone without other complementary institutions. And because these regions had their own alternatives, they did not necessarily need the corporation until the corporation’s advantage in exploiting scale and scope became clear. The book thus develops a nuanced argument that demonstrates the depth of institutional solutions that different societies created and distances itself from the essentialist, Eurocentric arguments that unfortunately characterize some of this literature.

In explaining the corporation’s embeddedness in English and Dutch institutions, the analysis falls back to the all-too-familiar claims about commitment and checks on the executive. The recent reevaluation of that literature notwithstanding, this raises a question about whether the success of the English and Dutch East India Companies can be truly attributed to their organizational advantage or to some other English or Dutch institution that allowed the corporation to emerge there in the first place. Harris is careful in not pushing this line of argument too far and admits that private-state partnerships might have been functionally similar. Disentangling the state’s role from the organizational efficacy of the corporation will be an important question with which future research will have to grapple. Going the Distance makes an important step in this direction and provides an important analytical framework that will be useful in taking up this question.

 

Cihan Artunç is an Assistant Professor of Economics at Middlebury College. Recent publications include “Partnership as Experimentation” (with Timothy W. Guinnane), Journal of Law, Economics, and Organization (2019).

Copyright (c) 2020 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator (administrator@eh.net). Published by EH.Net (September 2020). All EH.Net reviews are archived at http://www.eh.net/BookReview.

Subject(s):Business History
International and Domestic Trade and Relations
Geographic Area(s):Asia
Europe
Time Period(s):Medieval
16th Century
17th Century

Colonial Ecology, Atlantic Economy: Transforming Nature in Early New England

Author(s):Roberts, Strother E.
Reviewer(s):Land, Jeremy

Published by EH.Net (September 2020)

Strother E. Roberts, Colonial Ecology, Atlantic Economy: Transforming Nature in Early New England. Philadelphia: University of Pennsylvania Press, 2019. vi + 271 pp. $45 (cloth), ISBN: 978-0-8122-5127-2.

Reviewed for EH.Net by Jeremy Land, Department of History and Ethnology, University of Jyväskylä.

 

Colonial Ecology, Atlantic Economy is a welcome addition to the historiography of several subsets of literature, including but not limited to colonial America, Atlantic World, New England, and Native American history. However, its most important contributions come from the intricately developed combination of environmental and economic history by Strother Roberts (Bowdoin College). He deftly weaves seemingly disparate narratives and aspects of the Connecticut Valley’s environmental history into the larger, transnational economy of the eighteenth-century Atlantic World. In asking how and to what extent the Connecticut Valley’s environment was altered by its integration into the global economy, Roberts highlights the ways in which humans, both Native Americans and European settlers, altered the environs of the Connecticut Valley to meet the consumer demands of the local and Atlantic economies.

In five chapters, an introduction, and a short epilogue, Roberts provides a dense and detailed analysis and history of the Connecticut Valley’s environment from just before European settlers arrived through the end of the eighteenth century. Throughout, Roberts makes it painfully clear that environmental history must be intimately local in its scope, while maintaining a clear eye on the global forces that encourages local actors to exploit their environments in particular ways. This book, therefore, is a prime example of a history that tangibly connects the local and the global. In the introduction, Roberts concurs with William Cronon in his famous environmental history, Changes in the Land, when he argues that commodity markets are intricately tied to environments. However, Roberts takes an additional step to show how this interaction “predated capitalist modernity” by exploring the changes Native Americans made to the landscape to meet the growing demand of the fur trade (p. 8).

In chapter one, Roberts describes the environment of the Connecticut River Valley prior to 1614 when Dutch explorers first arrived. Beaver dominated the valley, and as a result, the Connecticut River flowed steadily throughout the year as beaver ponds were created along its path. These ponds also sustained a wide variety of other species that helped feed and clothe Native Americans. Once Europeans arrived and began to trade with Native Americans for beaver pelts, Native Americans hunted beavers at an ever-increasing rate, initiating cascading effects on the environment of the valley. As beaver colonies were eliminated, the accompanying beaver ponds dried up, decimating entire ecosystems and reliant species. The river’s flow was no longer regulated, leading to flooding and increasing levels of erosion. By the turn of the century, the valley was unrecognizable to Native Americans who inhabited the area, and European settlers arriving in the valley encountered an already altered environment.

European agriculture, the subject of chapter two, slowly consumed native lands, and the Connecticut Valley’s environment was radically transformed from subsistence-based needs to market-focused crop and livestock production by the end of the seventeenth century. Roberts explores how the Connecticut Valley, like New England in general, developed intricate economic ties with the Caribbean and other mainland colonies. By the 1750s, regional specialization in the North American colonies pushed settlers in the Connecticut Valley to focus on wheat, livestock, and timber production to provision the rest of the British Empire. This specialization drastically reshaped the Connecticut Valley from a fertile, species-rich region into an agricultural production zone that resembled Europe more than the beaver-dominated valley of the first chapter.

Of these specialized goods , timber was simultaneously the most abundant and scarce resource that dominated the local economy. Chapter three details how European settlers arrived with a well-established understanding and practice of woodland conservation, though enacting and preserving those practices varied over time. Initially, the chilly winters and fledgling agricultural economy of New England pushed settlers to fell trees further and further into the ample forests of the region, but as the population grew and agricultural and livestock needs diversified, colonial and local governments pursued legal limits and policies to protect the dwindling timber resources of the region. Nevertheless, Roberts shows how regional and Atlantic market forces convinced Connecticut Valley residents and towns to abandon timber preservation in order to clear more land for agriculture and market production, leaning on regional marketplaces to find timber for their energy needs.

In the following chapter, perhaps the most important of the book, the region’s timber production placed Connecticut Valley residents squarely in the crosshairs of imperial efforts to both control and earmark the timber trade of the region for naval outfitting of the Royal Navy. The efforts of the British government to regulate the local use and felling of timber in the Connecticut Valley created a festering anger and antipathy toward imperial rule. Roberts provides numerous examples of local resistance to imperial policies and nicely situates the local resistance of Connecticut Valley residents with the growing regional and continental resistance of other North American colonies. By the 1750s and 1760s, settlers in the Connecticut Valley regularly ignored imperial limits on timber production, and colonial governments and courts frequently refused to enforce imperial policies or efforts to punish guilty parties. While placing the valley within the greater political and economic struggle of the coming American Revolution, Roberts remains focused on how these developments affected the environment, noting that salmon disappeared from Connecticut waters by 1800 due to the cumulative effects of sawmill waste and sawdust from timber production.

In the fifth and final chapter, Roberts explains how livestock production became a vital component of the Connecticut Valley’s economy. Market forces again were the primary reason why valley settlers sought to expand their production and trade in livestock and preserved meats. Ports such as Boston and New York continued to grow throughout the seventeenth and eighteenth centuries, as did their appetites for provisions for commercial and fishing fleets. In addition, the West Indies required an enormous supply of livestock and preserved meats to feed its massive slave populations, and Connecticut Valley residents were more than happy to meet that need. However, livestock production is enormously destructive of local environments, especially as lands are cleared and waters redirected for its use. Combined with agriculture and timber production, livestock production fundamentally altered the natural environment of the Connecticut River Valley. Roberts closes the book with an epilogue discussing the valley’s changes post-1800 when the Montague Canal opened, providing even greater access to the region’s interior to river-bound vessels. In addition, the growing industrialization of the area, initially reliant on waterpower, hastened the environmental change caused by humans.

On the whole, the book is enormously beneficial to understanding the ways in which the local environment is inextricably linked, via human activity, to the larger, global economy. The fourth chapter is by far the most important and impactful in its clear view of conflicting local and imperial needs, but the first chapter is essential reading for those seeking to comprehend the environment and economy of Native Americans prior to Europeans arriving. It should be essential reading for any Early American or Atlantic seminar, especially those discussing environmental history.

Jeremy Land is currently a CRISES Fellow at the University of Jyväskylä and, starting in 2021, will be a Postdoctoral Fellow in Economic and Social History at the University Helsinki. His recent articles include “Colonial Military Garrisons as Labor‐Market Shocks: Quebec City and Boston, 1760–1775” (with Vincent Geloso) Social Science Quarterly (2020) and “Illicit Affairs: Philadelphia’s Trade with Lisbon before Independence, 1700-1775” (with Rodrigo Dominguez) Historia (2019).

Copyright (c) 2020 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator (administrator@eh.net). Published by EH.Net (September 2020). All EH.Net reviews are archived at http://www.eh.net/BookReview.

Subject(s):Economywide Country Studies and Comparative History
Historical Geography
International and Domestic Trade and Relations
Geographic Area(s):North America
Time Period(s):16th Century
17th Century
18th Century

The Routledge Handbook of the History of Women’s Economic Thought

Editor(s):Madden, Kirsten
Dimand, Robert W.
Reviewer(s):Forget, Evelyn L

Published by EH.Net (August 2020)

Kirsten Madden and Robert W. Dimand, editors, The Routledge Handbook of the History of Women’s Economic Thought. New York: Routledge, 2019. xiv + 465 pp. $196 (hardcover), ISBN: 978-1-1388-5234-1.

Reviewed for EH.Net by Evelyn L Forget, Department of Community Health Sciences, University of Manitoba.

 

“By design this Routledge handbook is about women and about time and about economics. By design this handbook is global. Otherwise, this handbook is not easy to capture, condense, or consolidate into leading archetypes and primary themes” (p. 1). So writes Kirsten Madden on the first page of a fascinating adventure that draws together the wildly diverse writings of “a Soviet game theorist and a Liberian president; wives of noted nineteenth-century economists and Buddhist nuns from millennia past … revolutionaries, terrorists, even an assassin.”

This Handbook has an impressive geographical scope: women economists from Austria, Britain, China, India, Italy, Japan, Russia, the Soviet Union, sub-Saharan African nations and the U.S. are profiled. Chapters are organized by time, and most focus on the nineteenth and early twentieth centuries but the first chapter, written by Sheetal Bharat, on Indian women’s literature reaches as far back as the fifth century BCE, while the final chapters extend well into the twenty-first century. Almost all of the authors are women, with the exception of two male co-authors, and contributors range from senior scholars to graduate students.

Diverse themes are addressed. Eleven chapters address issues of gender and economy, exploring topics such as the crowding hypothesis and pay gaps, minimum wages, affirmative action, co-operation and household decision making. Other chapters explore colonialism, trade, economic development, economic statistics and finance. The experiences of women economists are not neglected; many of the economists in this collection confronted significant barriers to leave a record of their analyses. In fact, Madden writes, “one … concept crosses all the chapters: exclusion” — either because the economist herself was forced to overcome exclusionary practices or because she constructed works that spoke to the experiences of others excluded by economic practices (p. 2).

The Handbook does not aim to be exhaustive, nor does it establish a canon. It offers a selection of fascinating contributions of which many of us were unaware. As one might expect in such a variegated collection, contributions are somewhat uneven in tone and emphasis. Some chapters, such as “The First 100 Years of Female Economists in Sub-Saharan Africa,” by Lola Fowler and Robert Dimand, Giandomenica Becchio’s “Austrian School Women Economists” and Kirsten Madden’s “Anecdotes of Discrimination,” focus almost entirely on biography. Others, such as Shoshana Grossbard’s “Women’s Neoclassical Models of Marriage, 1972–2015,” lean heavily towards economic thought, traditionally understood. Other chapters combine the two and strive for a balance between the experiences of women economists and their writing. These include contributions such as “The Economic Thought of the Women’s Co-operative Guild” by Kirsten Madden and Joe Persky, Cléo Chassonery-Zaigouche’s analysis of the changing positions of Beatrice Potter Webb, Eleanor Rathbone and Millicent Garrett Fawcett on equal pay, and Marianne Johnson’s “Daughter’s of Commons; Wisconsin Women and Institutionalism.”

Co-editors Kirsten Madden, of Millersville University in Pennsylvania, and Robert Dimand, of Brock University Canada, have compiled a wonderfully diverse collection that should encourage us all to think more broadly about the history of economics. This collection, though, makes it very clear that we are at the very beginning stages of recovering the contributions of women economists. It is impossible to read any of these chapters, entertaining as many of them are, without asking some serious questions about historiography, and that may be the greatest contribution of this Handbook.

Historians of economics should be asking ourselves these questions.

Why do we need a Handbook of the History of Women’s Economic Thought? On one level, the answer is obvious. Existing collections, textbooks and even Handbooks of the History of Economic Thought include very few women. But why are women’s contributions not integrated into our understanding of “schools,” periods and themes? What are the consequences of exclusion? How does it affect the kind of histories we write?

If women economists were routinely included in standard histories of economics, would there still be a reason to have a Handbook of the History of Women’s Economic Thought? Is there some theme that binds together women economists and makes their work different from that of men? Madden’s focus on exclusion deserves more careful thought: how did exclusion manifest in particular times and places, and what were the consequences for the development of economic thought? Are there parallels, similarities and differences between the contributions of women economists and those of racialized economists?

How should we best organize a Handbook of Women’s Economic Thought? The editors’ decision to use a simple timeline makes sense at this stage of our knowledge, but should we organize by theme rather than date of contribution? If so, how do we identify the relevant themes? It isn’t obvious that the way we delineate standard histories of economic thought should be the most appropriate way to organize women’s contributions.

If we think about “themes” in the history of women’s economic thought, are there some that deserve greater attention than they have received to date? One thing that has always struck me, and it is apparent in this collection as well, is that women economists are very often embedded in the economies they write about in ways that “professional” economists, male and female, may not be. The women in this collection are activists more often than they are scholars and, while this may also have characterized male economists of the past, it persisted well into the twentieth and twenty-first centuries for many women writers. For example, Jessica Gordon Nembhard’s Collective Courage: A History of African American Cooperative Economic Thought and Practice (2014) delineates the dual role of economic writers and highlights the contributions of women. It builds on W.E.B. DuBois’s (1907) Economic Cooperation among Negro Americans, and brings another perspective to many of the same themes addressed in “The Economic Thought of the Women’s Co-operative Guild” written by Kirsten Madden and Joe Persky.

Every library needs a copy of this Handbook, and it should also find its way into the collections of historians of economics. This book will extend the boundaries of what is sometimes a very narrow field, both by including people who have been excluded, and by asking us to think again about some of the ways we define the field of economics and organize our knowledge of its past. We owe to Kirsten Madden and Bob Dimand, co-editors, as well as all the authors in this collection, a large vote of gratitude.

 

Evelyn L Forget is Professor of Economics in the Department of Community Health Sciences at the University of Manitoba, Canada. She is past president of the History of Economics Society, and her most recent book is Basic Income for Canadians: From the Covid-19 Emergency to Financial Security for All.

Copyright (c) 2020 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator (administrator@eh.net). Published by EH.Net (August 2020). All EH.Net reviews are archived at http://www.eh.net/BookReview.

Subject(s):History of Economic Thought; Methodology
Geographic Area(s):General, International, or Comparative
Time Period(s):General or Comparative

How Innovation Works: And Why It Flourishes in Freedom

Author(s):Ridley, Matt
Reviewer(s):Coelho, Philip

Published by EH.Net (August 2020)

Matt Ridley, How Innovation Works: And Why It Flourishes in Freedom. New York: Harper Collins, 2020. 406 pp. $30 (cloth), ISBN: 978-0-06-291659-4.

Reviewed for EH.Net by Philip Coelho, Department of Economics, Ball State University.

 

 

Matt Ridley, the author of The Rational Optimist, has written another excellent book; he is an imaginative thinker and a writer of clarity. This book is very worthwhile reading; still (like any project) it is not perfect. In this review, I will try to convey what he has done and point out where I have difficulties. The book’s 12 chapters explain the histories of innovation in various economic sectors. Chapter one is devoted to energy, Two to public health, et cetera. In the Introduction, Ridley explains why and what he is doing, and what he expects to accomplish; he defines innovation as: “like evolution … a process of … discovering ways of rearranging the world … that happen to be useful. The resulting entities are the opposite of entropy: they are more ordered, less random, than their ingredients were before” (p. 2). This is a very useful, non-didactic definition; it avoids semantic arguments (whether a person was or was not an entrepreneur, and what do entrepreneurs do) that bedevil business histories. The author is borrowing from his training as an evolutionary biologist by incorporating its analytics into a history of innovation. Ridley forthrightly states that he is not attempting to explain why, when or where innovation occurred, but “telling stories” about people turning inventions into “useful innovations [that] teach us, by the examples of their successes and failures, how it happened” (p. 7).

Chapter 1, “Energy” is illustrative of his methodology. Starting in the eighteenth century Ridley examines innovations in the production of energy from non-animal sources. The basic theme, reiterated throughout the book, is that innovation is an evolutionary process; it is accretive, not the product of lonely geniuses huddled and isolated in workshops. He puts forth three candidates (Denis Papin, Thomas Savery and Thomas Newcomen) as putative innovators (“Notice I do not call him an inventor; the difference is crucial” (p.15)) of the first successful steam engine. Ridley’s distinction is crucial; it identifies an inventor as a person who first conceptualizes a process and defines innovators as the people who make the invention economically useful. In the case of steam power, Hero of Alexandria employed rudimentary steam powered devices in the first century AD; still there were people using steam power centuries before Hero, so the case for identifying the person who first conceptualized steam power is, at best, quixotic. Still steam power was not economically useful before the developments that occurred in the eighteenth century. Then a series of innovators made steam power economic; it could be employed to produce goods and services in less costly ways than had been available previously. In 1698 Thomas Savery was granted a patent for an invention for the “raising of water by the impellent force of fire” (p. 18). This introduces another theme that Ridley returns to throughout his book: that patents are more than somewhat arbitrarily rewarded and they, more often than not, impede innovation. People who used the Newcomen engine had to pay royalties to the holders of the Savery patent no matter how much they had modified it. Similarly, Ridley argues that the Watt patents were obstacles in the way of improving the efficiency of the Watt steam engine.

There is a tension between the effects that patent protection laws have in stimulating innovation and the rent-seeking obstacles to innovations that patents provide. Ridley is firmly in the camp that argues that current patent laws discourage more innovations than they promote. If you throw in copyright laws — which in theory and in practice, (e.g. the film Bambi) can be almost perpetually protected — then I am in complete agreement with Ridley. This is an economic issue: as they are currently structured, do patent protection and copyright laws promote or impede innovation? The economic basis for granting “intellectual property” a favored place in the law and in public debate should be reconsidered.

In the “Energy” chapter, Ridley reprints a plea from an 1819 edition of the magazine The Chemist asking for funds to build a monument to Watt: “He is distinguished from other public benefactors, by never having made, or pretended to make it his object to benefit the public . . . This unpretending man in reality conferred more benefit on the world than all those who for centuries have made it their especial business to look after the public welfare” (p. 26). This is a great quote and it echoes the famous “invisible hand” passage from Adam Smith’s The Wealth of Nations, yet I have not been able to track down Ridley’s source. This is typical; he is rather cavalier about sourcing. There are no footnotes, nor page citations. Each chapter has its own section in “Sources and further reading section” (pp. 375-388). But if you are trying to find a particular reference be prepared to spend some time and be frustrated. After spending 40 minutes with various search engines, I failed to find either Ridley’s source for the quotation from The Chemist or the original. In another great passage in chapter 3 (“Transport”) — where he questions the wisdom of the (self-anointed?) scientific establishment — Ridley quotes an article in the Scientific American from 1906 doubting the veracity of the Wright brothers’ claim to heavier than air flight: “If such sensational and tremendously important experiments are being conducted … is it possible to believe that the enterprising American reporter … would not have ascertained all about them … long ago?” (pp. 100-01). Well the answer to that question is yes, it is possible to believe the high Pooh-bahs of the American scientific establishment were ignorant of what the Wright brothers were doing in 1906, let alone in 1903 at Kitty Hawk. I was successful in tracking down that quotation (Scientific American 1906, vol. 94: 40), it only took 20 minutes and access to a major university’s library and search engines.

Yet Ridley does not fare so well in chapter 6 (“Communication and Computing”) where he quotes Thomas Watson of IBM in 1943 as saying that “there is a world market for maybe five computers” (p. 203). It is a nice story, but it is either totally or heavily fabricated. The only quote from Watson in the public record (appropriately from Geek History: https://geekhistory.com/content/urban-legend-i-think-there-world-market-maybe-five-computers) that mentions five computers is from an IBM’s stockholders meeting, which says: “We believe the statement that you attribute to Thomas Watson is a misunderstanding of remarks made at IBM’s annual stockholders meeting on April 28, 1953. In referring specifically and only to the IBM 701 Electronic Data Processing Machine — which had been introduced the year before as the company’s first production computer designed for scientific calculations — Thomas Watson, Jr., told stockholders that ‘IBM had developed a paper plan for such a machine and took this paper plan across the country to some 20 concerns that we thought could use such a machine. I would like to tell you that the machine rents for between $12,000 and $18,000 a month, so it was not the type of thing that could be sold from place to place. But, as a result of our trip, on which we expected to get orders for five machines, we came home with orders for 18.’” The problem is that Ridley’s work is replete with wonderful anecdotes. I have no doubt that the vast majority are accurate, but detailed citations are valuable in both verifying and falsifying historical interpretations.

Another deficiency is that Ridley’s knowledge of the literature in economic history is incomplete; he attributes the growth of the American automobile industry to Henry Ford who “revolutionized the industry after 1908” (p. 92). This statement is both incorrect and contradictory to his hypothesis that innovations and economic changes are evolutionary, not revolutionary. Robert Thomas (1969) explains just what Ford did in the era of the Model T Ford. In 1908 both: “Buick and Ford introduced into the $1,000 price class for the first time automobiles of standard design [engines in the front, French type body work, steering wheel, etc.]. These designs, the Buick Model 10 and the Ford Model T, were similar to cars being sold in the $1,500-$2,000 price class” (Thomas p. 150). What Henry Ford did that made him different from competing producers is to make virtually identical cars year after year while simultaneously lowering prices. The automobile was changing rapidly during those years (selective transmissions replacing planetary transmissions, self-starters, increased horsepower, etc.) yet the Model T remained unchanged. By 1914 the Model T was selling approximately 45% of new cars sold in the U.S., yet it was receiving only 25% of the revenue from new car sales (Thomas, p. 153). What Ford did was to produce outdated cars whose primary competitors were used cars, not new cars. Essentially Henry Ford made a fortune by producing technologically obsolete vehicles at attractive prices. As the technology of the automobile advanced, Ford could not maintain his price/marketing strategy because many (most?) of the used cars for sale in 1920 had more desirable features than the 1920 Model T. At prices that Ford could profitably sell cars, consumers preferred the typical used vehicle to the 1920 Model T. The growth of the used car market forced Ford to change strategies; subsequently the Ford company followed the industry practice of annual model changes and improvements with constant or increasing prices.

Ridley’s deficiencies aside, the insights he provides in the various chapters ((2) Public Health, (3) Transport, (4) Food, (5) Low-Technology Innovation, (6) Communications and Computing, (7) Prehistoric Innovation, (8) Innovation’s Essentials, (9) The Economics of Innovation, (10) Fakes, Frauds, Fads, and Failures, (11) Resistance to Innovation, and (12) An Innovation Famine) are very perceptive and an educational delight. Ridley frustrates any who wish to replicate his analysis without undo effort, still every chapter has multiple non-obvious insights. Focusing on a few insights does not do justice to the book, yet it must be done otherwise the review would be too burdensome to read.

A theme that Ridley repeatedly emphasizes is the conservatism of government and the establishment in reaction to innovation. Patent and copyright law as obstacles to innovation have already been mentioned, but we should not forget our own sacred cows, the intelligentsia and academia. As a graduate student in the 1960s, I remember the future Nobel Prize winner, Douglass C. North, echoing the received wisdom of the time that no more aid or development projects should be directed towards countries (particularly India and Pakistan) because they were “basket cases,” that were too overpopulated and whose only fate was starvation and death for the many. Ridley (p. 134) suggests that this opinion had its genesis in the foreign services and development agencies. If that is the case, Paul Ehrlich’s Population Bomb (1968) is not entirely his responsibility. Nevertheless, it is risible that so many academics could have been so wrong about the near-term future of food production in the late 1960s through the mid-70s. In the same vein, government agencies in India tried to suppress the introduction of the hybrid wheats that were among the first products of the Green Revolution: “Indian bureaucrats were adamant that Mexican wheats should not even be allowed in the country, let alone encouraged. The biologists warned of devastation and disease if the wheats failed. The social scientists warned of ‘irreversible social tensions’ and riots if the wheats succeeded — and caused some farmers to make more money than others” (p. 133)

Ridley devotes an entire chapter to a history of the suppression of novelty. Things that were suppressed include coffee, margarine, genetically modified organisms, herbicides, and cellular telephony. Methods of suppression include diktats, regulations, patents, copyrights, legislation, commissions, and litigation. Every change affects someone negatively; if a change can be halted or delayed the costs of the change can be eliminated or reduced. Ridley relates how “land-use” (zoning) planning has reduced the population of San Jose during the Silicon Valley boom. Another, more completely examined example is that of the European Commission, which in 2014 mandated that energy efficiency (a “good” thing to the Commissioners, not so good for energy producers) of vacuum cleaners be tested in the absence of dust or debris. It so happens that the Dyson Cyclone vacuum cleaner is much more energy efficient than vacuum cleaners with bags because the bag cleaners operated less efficiently as the bags got filled with dust and debris. The (German) manufacturers of bagged cleaners had lobbied the Commission effectively. Dyson appealed the regulations through the courts and in November of 2018 he was vindicated. Still the delay cost Dyson sales and increased those of the makers of bagged cleaners. We may not have much reason to lament a billionaire’s decreased sales, but we should deplore the erroneous information produced by public agencies that deluded consumers.

There are many cases of innovations that Ridley examines that are worthy of full-scale economic analyses. Two that particularly intrigue me are the examples of corrugated roofing and bed-nets with insecticide embedded in them. We see corrugated roofing throughout in poor, tropical countries; I typically had given them no thought other than this is how the poor live in the tropics until this book. Corrugated roofs were a substantial improvement over other types of roofing for warehouses and industrial spaces in nineteenth century Britain. In poor countries today in the tropics they are symptomatic of improved living conditions; the alternatives to tin roofs are organic (straw, mud, and wood) that are more costly (including upkeep), less effective, a haven for insects and rodents, and not very useful for channeling rain for storage or irrigation. It would be nice to know the cost/benefit analysis comparing corrugated roofing to the alternatives and what something as innocuous as roofing does.

Bed-netting infused with insecticide is an interesting story. The bed nets were treated with insecticides to see how prophylactic they were in preventing malaria carrying mosquitoes from infecting people. Since the bed nets rarely escaped holes and tears, the people conducting the study kept it going even when the bed-nets were severely damaged. The researchers found that torn bed-nets retain a substantial amount of efficacy and are still effective in reducing the mosquito-borne transmission of malaria with bed-nets accounting for approximately “70 per cent of the six million lives saved worldwide [from death by malaria]” (p. 75).

There are other examples galore; if you have an interest in innovation, how it evolves, and how and why it is obstructed, then you should read this book. I recommend it highly. True it has difficulties — the lack of adequate citations and an index that is somewhat haphazard. Still I urge you to read it; I would recommend buying the e-copy for two reasons: 1) on most e-books you can do a word search and that reduces the importance of an index; and 2) the hard-bound (cloth) copy that I purchased is nearly falling apart after one (close) reading. The binding of this book does no credit to its publisher.

Reference:

Robert Paul Thomas, “The Automobile Industry and Its Tycoon,” Explorations in Entrepreneurial History, ser.2:6:2 (1969: Winter).

 

Copyright (c) 2020 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator (administrator@eh.net). Published by EH.Net (August 2020). All EH.Net reviews are archived at http://www.eh.net/BookReview.

Subject(s):History of Technology, including Technological Change
Geographic Area(s):General, International, or Comparative
Time Period(s):General or Comparative

Fellowship and Freedom: The Merchant Adventurers and the Restructuring of English Commerce, 1582-1700

Author(s):Leng, Thomas
Reviewer(s):Nye, Ellen M.

Published by EH.Net (August 2020)

Thomas Leng, Fellowship and Freedom: The Merchant Adventurers and the Restructuring of English Commerce, 1582-1700. Oxford: Oxford University Press, 2020. xi + 343 pp. $85 (hardcover), ISBN: 978-0-19-879447-9.

Reviewed for EH.Net by Ellen M. Nye, Department of History, Yale University.

 

Over the course of the seventeenth century, English trade expanded from a largely provincial affair to an enterprise of global dimensions. To understand the transformation of English commerce, Thomas Leng, Senior Lecturer in History at the University of Sheffield, examines the Merchant Adventurers, a leading player in early seventeenth-century English trade. Leng’s emphasis on the Hanseatic ports and the Low Countries, the core areas where the Merchant Adventurers operated, distinguishes him from scholars who examine the transformation of English commerce by looking at its expansion in the Mediterranean, Atlantic, and Indian Ocean. By following the Merchant Adventurers from its prominent position in the English late-sixteenth-century merchant community to its loss of trading privileges in 1689 after the Glorious Revolution, Leng charts its decline beginning in the 1620s. Instead of focusing on external factors impeding the Merchant Adventurers such as the navigation system, deteriorating Anglo-Dutch relations, and decreasing demand for English cloth, Leng investigates internal, endogenous causes for the Company’s decline while at the same time emphasizing its dynamic responses to changes at both a collective and individual level. Through his research, Leng intends to reshape our understanding of the Merchant Adventurers and of the structure of seventeenth-century English commerce more broadly, a field where Robert Brenner’s Merchants and Revolution (1993) continues to loom large.

Brenner narrated the transition from feudalism to capitalism in England through changing forms of mercantile organizations, from Crown-chartered corporations to free-trading merchant networks. In Brenner’s argument, the Merchant Adventurers – a company with a charter from the Crown that granted them control over membership and a monopoly on the licensed exports of unfinished broadcloth to designated market towns in Germany and the Low Countries – were the epitome of the “old merchants” who clung to their established privileges instead of engaging with new opportunities in the import and re-export trades in the Levant, East Indies, and Americas. The “new merchants” benefitted from new forms of commercial government during the English Civil War and then thrived through freer trade, moving adroitly across geographical borders leaving the Merchant Adventurers and the other “old merchants” largely unable to compete.

Leng argues against Brenner’s division between “old merchants” like the Merchant Adventurers and the “new merchants” of the Atlantic emphasizing instead how membership within the two groups overlapped (p. 9-10). Further, the seventeenth century “was characterized less by a succession of merchant groups replacing each other as the pace-setters of commercial change, as Brenner presented it, than by a transformation of the merchant community as a whole” (p. 310). In adapting to the changing circumstances of overseas trade, some Merchant Adventurers, Leng argues, were more dynamic and variegated than often appreciated, active, even if in a limited way, in emerging opportunities. The success of these merchants, then, fostered cleavages within the Company itself. Why did most Merchant Adventurers not engage more in the long-distance import and re-export and colonial trades? Leng rejects Brenner’s criticism of the Merchant Adventurers as complacent rent-seekers, arguing instead that the Merchant Adventurers’ trade was very time-intensive to learn, crowding out other commercial enterprises (p. 111). Further, he argues that they often lacked the connections necessary to flourish in new areas (p. 310). In the end, Leng successfully modifies Brenner’s argument by emphasizing the dynamic responses to change shown by some Merchant Adventurers, but, more broadly, he accepts earlier depictions of the Company as declining from the 1620s (p. 311) and as largely consisting of highly-specialized merchants who, due to structural constraints, rarely diversified into trade in new markets (p. 112).

Leng presents his argument in two parts, making extensive use of six surviving merchant letter books kept by Englishmen trading in Germany. He also examines port books, Company church records from Hamburg, and political petitions, treatises, and correspondence. His detailed description is all the more impressive given the loss of the official Company archive. The first part of his book discusses how corporate membership shaped the practices of individual merchants. Here through a discussion of apprenticeship, commercial networks, risk management, and Company discipline, Leng argues that the Merchant Adventurers constituted “a community with shared norms and values” (p. 30), that “influenced and to some extent regularized behavior” (p. 307). In other words, the Merchant Adventurers qualify, following Avner Grief, as an “institution” (p. 307). Social ties formed at least partially though participation in the corporation and maintained through family, fellowship, joint enterprise, credit, and painstaking correspondence were essential for achieving commercial success and managing the threat of financial failure. Unlike Grief, Leng follows Sheilagh Ogilvie in addressing the distributional effects of the Company. Admission to the Company through patrimony, service or the payment of an entrance fee was restricted to male “mere merchants” with English parentage. Through Leng’s account, we see the Company channeling trade into its centers and vehemently opposing interlopers while at the same time endeavoring to distribute trade equitably among its members (p. 154-5).

The second part of the book traces the Company’s responses to internal threats against corporate unity from its members and external hostility against its privileges in English politics. Leng, like Philip Stern in The Company-State (2011), emphasizes both the divisions within the Company and the institution’s embeddedness within larger economic, social, and political configurations. As some members contested Company policies, the Company similarly jockeyed for influence among a number of competing institutions, including the Crown and Parliament. Leng addresses events familiar to scholars of English history, like the Free Trade Bill, the Cokayne Scheme, the Civil War, and the Glorious Revolution, but discusses them as disputes over the proper organization of England’s trade and the correct role for corporate governance. Leng persuasively argues that as the dominant political economy in England grew increasingly hostile to the Merchant Adventurers’ privileges, the Company itself struggled to maintain corporate unity. The restructuring of commercial opportunities disrupted the Company’s traditional sources of community and shared identity. This then led to divides between members in London and those overseas over corporate governance and politics, including political fractures between members that complicate Brenner’s London-centric account of the Merchant Adventurers’ politics during the Civil Wars (p. 229).

This well-researched and clearly-written book will provide readers with an exciting new understanding of an important institution of early modern English trade. The book also raises interesting, as of yet unanswered, questions. If corporate disunity in the face of a hostile political economy condemned the Merchant Adventurers, were other more successful companies more cohesive? Leng clearly demonstrates the essential value of social ties in managing business within the Company, but these merchants’ engagement with foreign merchants is barely touched upon. Given the Company’s insular policies against marrying foreigners or hiring non-English agents (p. 96), what alternative means did merchants use to manage their commercial relationships outside of the Company? Further, while the Merchant Adventurers’ uneasy alliances with the Crown and Parliament are vividly described, we learn very little about the diplomacy and negotiations underlying the Company’s political position abroad. Due to Leng’s focus on internal corporate governance, in his account, a company founded to sell cloth to foreigners appears largely as an inter-English affair. Still, Leng should be commended for his clear description of a regulated company attempting to respond to hostile political environments and for breathing new life into important questions for understanding early modern globalization. His impressive monograph has much in common with the burgeoning literature on institutional logics, an approach that combines insights from institutionalism with those of cultural history. Through Fellowship and Freedom, we learn about both the power and the limitations of trading companies to shape individual actions in the early modern period.

 

Ellen M. Nye is a PhD candidate at Yale University studying the Levant Company

Copyright (c) 2020 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator (administrator@eh.net). Published by EH.Net (August 2020). All EH.Net reviews are archived at http://www.eh.net/BookReview.

Subject(s):Business History
International and Domestic Trade and Relations
Geographic Area(s):Europe
Time Period(s):16th Century
17th Century

The Economics of the Second World War: Seventy-Five Years On

Editor(s):Broadberry, Stephen
Harrison, Mark
Reviewer(s):Sahari, Aaro

Published by EH.Net (August 2020)

Stephen Broadberry and Mark Harrison, editors, The Economics of the Second World War: Seventy-Five Years On. London: CEPR Press, 2020. vii + 122 pp. free ebook, ISBN: 978-1-912179-31-2.

Reviewed for EH.Net by Aaro Sahari, Department of Philosophy, History and Arts, University of Helsinki.

 

The Economics of the Second World War is a concise overview on the economic history of the Second World War, or the “greatest conflict of an era of mass warfare” as editors Stephen Broadberry (Professor of Economic History, Oxford University) and Mark Harrison (Emeritus Professor, University of Warwick) define it. The book is divided into three sections and consists of sixteen short chapters written by a group of experienced historians of twentieth century economic, military and technology history. First, the origins of the war are discussed from European perspectives. Second, the conduct of war is analyzed. Third, the consequences of the conflict are examined. All chapters summarize earlier research findings. The book is a continuation to a 2019 work on the First World War by the same editors and also available from CEPR Press.

The first part, “Preparations for War,” re-evaluates the struggling German economy, Hitler’s rise to power, the Soviet economy and war preparations, and British economic management during the war. The role of the Great Depression in the NSDAP’s rise to power is a staple of historical literature but concrete economic evidence has been scarce. In the first chapter Hans-Joachim Voth (University of Zurich) presents recent econometric analyses on the linkages between the 1931 German banking crisis, failure of the Danat bank, regional historical antisemitism, and Nazi propaganda. The second chapter by Richard Overy (University of Exeter) continues on to re-evaluate the making of Germany’s war economy. Overy dismisses the myth of a blitzkrieg economy in favor of a transition onto war footing from 1936 onwards. The third chapter, by editor Mark Harrison, focuses on USSR before the war. Stalin’s Soviet Union was a warfare state in the 1930s, and the welfare of the people was sacrificed in favor of military development. Only this singular, brutal focus on external threats prepared USSR for the 1941 invasion. The last article on prewar developments, by editor Stephen Broadberry, analyses the fiscal and financial management of war in the UK. Together these four chapters point out the significance of the Great War in directing national economic policies of these three countries toward the Second World War.

In the second part, “Conduct of the War,” the discussion of war economics opens up to include United States, Japan, and various neutral and occupied countries. Eight articles provide a kaleidoscopic view of the Second World War using individual cases to highlight essential economic phenomena in the conduct of and survival in this global crisis. First, Phillips Payson O’Brien (University of St. Andrews) re-evaluates the vast literature on how the war was won through logistics, material attrition, and costly, novel military technologies in the air and at sea. David Edgerton (King’s College London) then reminds that a national economy isn’t a sufficient unit of study in the age globalization. The UK economy was better integrated to global trade networks than the German one, and thus more capable of shifting to a war-centric model. Price Fishback (University of Arizona) challenges the notion that the war raised the United States, “the arsenal of democracy,” out of depression. Long-term economic analysis provides quantitative proof that centrally directed war spending not only differs significantly from normal economic activities but also fails to explain changes in U.S. domestic economy. Mark Harrison (University of Warwick) uses economist Mancur Olson’s postwar research activities to analyze the impact of strategic bombing in the war to argue that supply-chain disruptions had limited, often indirect effects. Then, Tetsuji Okazaki (University of Tokyo) discusses the essential role of supplier networks in Japan’s wartime production of airplanes and the impact of extending production to new, inexperienced suppliers.

The last three articles in part II delve into the wider economic phenomena of the war. Hein Klemann (Erasmus University) revisits the strain of the German war effort on occupied European countries. He notes that poorer East European countries suffered more from the occupation than West European countries, and that the Nazi policy of “Germany first” led to production inefficiencies in all occupied territories. Eric Golson’s (University of Surrey) article on neutral countries’ economic activities is an essential, if unduly short, part of the overall story. Legal neutrality was typically maintained through economic concessions to offset military weakness. Finally, Alan Bollard (Victoria University) summarizes the essential role of economists to the war effort in key belligerent countries.

In the final part of the book, “Consequences of the War,” big societal phenomena are investigated. Cormac Ó Gráda (University College Dublin) summarizes the many, horrendous famines of the Second World War from a macro perspective. Walter Scheidel (Stanford University) discusses the impact of the war on lowering economic inequality globally and in leading to more equal economic regimes thereafter. Tamás Vonyó (Bocconi University) compares the role of population loss and migration patterns in East Germany, Eastern Europe and USSR to contextualize significant differences in postwar economic recovery. Finally, Pauline Grosjean (University of New South Wales) discusses differences in the societal impact of war – from institutional growth and increased resiliency to conflict traps and persistent public mistrust in institutions. These four articles provide a necessary social framework for the economic analysis of the Second World War.

The Economics of the Second World War provides a quick and convenient introduction into the topic of war and economy in the twentieth century. The book is a well written throughout, if a bit too short. Most of the discussed phenomena would have benefited from a more thorough examination. Fortunately, all authors have provided well curated lists of further reading for the inquisitive reader. A few omissions remain from the overall story. Essential trade networks remain abstract without a description of the logistics of war. Also, an economic foray into the global impact of the Second World War would have contextualized the articles well. Still, as it is The Economics of the Second World War provides a useful primer into the economic history of a complex, global conflict.

 

Aaro Sahari defended his PhD on Finnish industrial technopolitics (1918–1954) in 2018. He is a member of the editorial council for the Finnish Journal for the History of Technology — Tekniikan Waiheita — and the Finnish National Council for the History of Science and Technology. Sahari currently works on technology professionals’ tacit knowledge strategies and generational narratives.

Copyright (c) 2020 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator (administrator@eh.net). Published by EH.Net (August 2020). All EH.Net reviews are archived at http://www.eh.net/BookReview.

Subject(s):Military and War
Geographic Area(s):General, International, or Comparative
Europe
Time Period(s):20th Century: Pre WWII
20th Century: WWII and post-WWII

Shafiq, Aysha

First Name: Aysha
Last Name: Shafiq

Email(s): aysha.shafiq@graduateinstitute.ch
Homepage:

Affiliate:
Department: History
University: North Carolina State University
Street:
City: Raleigh
State: NC
Country: United States
Postal Code: 27607

Phone:
Fax:
Region:

Areas of Interest

  Primary Interest

  Subject: Historical Geography
  Geographic Area: Asia
  Time Period: 19th Century

  Additional Interest 1


  Subject: Agriculture, Natural Resources, and Extractive Industries
  Geographic Area: Asia
  Time Period: 20th Century: Pre WWII

  Additional Interest 2


  Subject: Economic Development, Growth, and Aggregate Productivity
  Geographic Area: Asia
  Time Period: General or Comparative

Family Firms and Merchant Capitalism in Early Modern Europe: The Business, Bankruptcy and Resilience of the Höchstetters of Augsburg

Author(s):Safley, Thomas Max
Reviewer(s):Guinnane, Timothy W.

Published by EH.Net (July 2020)

Thomas Max Safley, Family Firms and Merchant Capitalism in Early Modern Europe: The Business, Bankruptcy and Resilience of the Höchstetters of Augsburg. New York: Routledge, 2020. xii + 287 pp. $140 (hardcover), ISBN: 978-0-367-13710-6.

Reviewed for EH.Net by Timothy W. Guinnane, Department of Economics, Yale University.

 

In January of 1524, several members of the Höchstetter family and their friends gathered in Augsburg to sign a new agreement to regulate their ongoing business. The firm, “Ambrosius and Hans, the Brothers Höchstetter and Associates,” combined the leading members of a commercial family that had been operating in the area for over a century. In 1528, Ambrosius I Höchstetter (as the records call him) reached out to his wealthier and more famous rival, Anton Fugger, for counsel and assistance. Ambrosius recognized that his firm faced an insolvency crisis that had become an open secret during 1527. By 1529, the Höchstetters faced a protracted bankruptcy that resulted in their firm’s demise and considerable losses for its creditors. Ambrosius himself died an unpleasant death in prison in 1534.

While their ancestors had concentrated on textiles, the Brothers Höchstetter engaged in a broad range of financial and commercial dealings. Increasingly, they made loans to sovereigns, who in turn afforded the family preferential mining rights. A failed attempt to monopolize the supply of mercury precipitated the collapse, although other problems contributed.

The legal environment shaped the outcomes in two ways. First, although Augsburg was a major commercial center, it had little business law at the time, forcing enterprises to rely on the local common law (ius commune). Augsburg’s law was not up to a bankruptcy of this magnitude and complexity, although the city learned its lesson and adopted rules to cope with a wave of failures later in the sixteenth century. Second, the partnership agreement in question implied that in this firm, as with almost any firm at the time, most of the partners bore unlimited liability for the firm’s obligations. Everything the Höchstetters and other partners owned could be seized to satisfy debts, from commercial property to personal real estate and household items. The only exception was the property a wife brought to the marriage as her dowry.

The proceedings reflected egregiously bad behavior by Ambrosius I and other Höchstetters. Safley stresses that even when their conduct was legal, it offended contemporary norms of business conduct. Fugger helped Höchstetter to repay debts to politically or commercially important creditors to the detriment of others. Fugger apparently saw cooperation with Höchstetter as a way to ingratiate himself with powerful business interests and political patrons, as well as to eliminate an important rival. The Höchstetters used fictitious sales to put personal property beyond their creditor’s reach. Ambrosius continued to borrow money when he knew his firm was insolvent, relying on the ignorance of some lenders to pay off debts he viewed as more important. The family also concealed personal property that creditors saw as their only hope once the firm’s business assets were gone. A chest supposedly filled with silver spent considerable time travelling among houses belonging to Ambrosius and others, for example.

Political context matters a great deal in this case. Augsburg was a Free Imperial City. The “Free” meant that it had no ruler other than the Emperor. This gave the city some scope for action, but that scope was limited by a fact important to the initial Höchstetter success: the Hapsburgs were the Höchstetters’ most important patrons, responsible for their preferential treatment in mining and other ventures. Too late for Ambrosius I, the Emperor ordered all Höchstetters released from prison in 1541 after a doubtful representation that Augsburg was holding them illegally.

A different kind of context also matters. In 1521, a disgruntled former business associate tried to satisfy what he saw as a rightful debt by organizing an armed attack on Höchstetter goods in transit. Different jurisdictions did not recognize each other’s judgments, and extra-legal “enforcement” was not unknown. Thus it is not surprising that some Höchstetter associates prospered after the bankruptcy, never escaping suspicion that they did so using capital hidden from the firm’s creditors. Joachim I (a partner in the bankrupt firm and son of Ambrosius I) escaped Augsburg and went on to be made Denmark’s master of mines. He claimed, implausibly, that the capital he used to establish his post-Augsburg career was not the bankrupt firm’s. The Höchtstetter factor in Tyrol, Wolfgang Vittel, inherited nothing and had no partners, but was able to invest large sums in building and commercial projects in Hall. When he died in 1540, the Emperor ordered important assets sold to a Höchstetter at an implausibly low price, perhaps returning the funds in name to the family that had always owned them in reality.

Safley writes a clear, direct prose that eschews terminology that might alienate readers. He respects the limits of his evidence, noting instances where he is drawing a reasonable inference from an incomplete documentary record. And he acknowledges earlier work, including a remarkable chronicle of Augsburg by the Benedictine Clemens Sender (1475-1537). Economic historians will especially appreciate his discussions of capital markets in early-modern Europe. Ambrosius and his partners borrowed from many different wealthy people, some with clear kin or other ties to the family, others apparently unrelated. Many lenders were not from Augsburg, setting the Höchstetters apart from other commercial families that drew their capital more locally. More interestingly, Höchstetters borrowed small sums from many, fairly modest people.

Safley makes a strong case for studying bankruptcy. Ordinarily one would worry that any lessons drawn from failures would only pertain to firms that had reason to fail. The concern remains in this case; the Höchstetters, Safley emphasizes, were unusually aggressive by contemporary standards, and thus widely unloved even before their failure. The bankruptcy means that we know a great deal more about the Höchstetters than other businesses, however. Their failure exposed information ordinarily kept secret or written only in documents unlikely to end up in archives.

This study represents a model of analytical care and scrupulous respect for sometimes-recalcitrant sources. It would serve as an excellent introduction to the world of early-modern business enterprises. Safley notes, correctly, that scholars have not paid enough attention to bankruptcy. Family Firms and Merchant Capitalism makes a good start toward remedying that deficiency.

 

 

Timothy W. Guinnane is the Philip Golden Bartlett Professor of Economic History in the Department of Economics at Yale University. Recent publications include “Enterprise Form: Theory and History” (with Jakob Schneebacher), Explorations in Economic History (2020).

Copyright (c) 2020 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator (administrator@eh.net). Published by EH.Net (July 2020). All EH.Net reviews are archived at http://www.eh.net/BookReview.

Subject(s):Business History
Government, Law and Regulation, Public Finance
Geographic Area(s):Europe
Time Period(s):16th Century

Wehrheim, Lino

First Name: Lino
Last Name: Wehrheim

Email(s): lino.wehrheim@ur.de
Homepage: www.lino-wehrheim.net

Affiliate:
Department: Economic and Social History
University: Regensburg
Street: Haunstetter Str. 12
City: Augsburg
State:
Country: Germany
Postal Code: 86161

Phone:
Fax:
Region:

Areas of Interest

  Primary Interest

  Subject:
  Geographic Area:
  Time Period:

  Additional Interest 1


  Subject:
  Geographic Area:
  Time Period:

  Additional Interest 2


  Subject:
  Geographic Area:
  Time Period:

Takeshi Ishii, Takeshi

First Name: Takeshi
Last Name: Takeshi Ishii

Email(s): tamamo4050823-tksh@rf6.so-net.ne.jp
Homepage:

Affiliate:
Department: Economics
University: Hokkai-Gakuen University
Street: 5-40-902, Minami 14 Nishi 8
City: Chuo-ku, Sapporo
State: Hokkaido
Country: 日本
Postal Code: 0640914

Phone: 115331434
Fax:
Region:

Areas of Interest

  Primary Interest

  Subject: Labor and Employment History
  Geographic Area: Europe
  Time Period: 18th Century

  Additional Interest 1


  Subject: Household, Family and Consumer History
  Geographic Area: Europe
  Time Period: 18th Century

  Additional Interest 2


  Subject: Historical Demography, including Migration
  Geographic Area: Europe
  Time Period: 18th Century