Published by EH.Net (August 2019)

Nicholas Crafts, Forging Ahead, Falling Behind and Fighting Back: British Economic Growth from the Industrial Revolution to the Financial Crisis. Cambridge, UK: Cambridge University Press, 2018. vii + 152 pp. $25 (paperback), ISBN: 978-1-108-43816-2.

Reviewed for EH.Net by Tim Hatton, Department of Economics, University of Essex.

Nick Crafts is the most distinguished British economic historian of his generation. In this short book he distills the wisdom and experience of a lifetime’s study to provide a compelling analytical account of three centuries of British economic growth. The book is a revised and expanded version of the Ellen McArthur lectures given at the University of Cambridge. Apart from providing an up-to-date account of the macroeconomic dimensions of Britain’s growth experience in a comparative perspective, it has three important features. One is that it is firmly based on modern economic thinking and empirical analysis, in particular endogenous growth. The second is that it provides astute judgments on a variety of debates and controversies on growth-related topics in different economic eras. And finally, it links these insights together to provide a narrative of how and why the past influences the present. In short, history matters. All this is achieved in just 150 pages so that there is no loss of focus and the maximum insight is gained with the minimum of fuss.

The book opens with a brief primer on modern growth analysis. To provide a useful framework we must go beyond the Solow model and Crafts outlines a bare-bones endogenous growth model in which the rate of technological progress, relative to its potential, is conditioned by a country’s institutions. Most important are the effects of the institutional environment on incentive structures for innovation and investment. Crafts also stresses that the potential for growth varies widely, both across countries and especially over time, so that slow growth in one era may represent better performance, relative to potential, than fast growth in another.

The next chapter deals with the classic industrial revolution in Britain. Half a century of scholarship has revised down the pace of productivity growth and put its onset further back in time. From about 1650 there was slow but steady growth but it was not until the mid-nineteenth century that Britain pulled decisively ahead of its rivals, notably the Netherlands. One implication is to downgrade economic progress outside of the glamour industries of the industrial revolution: textiles and iron. Crafts argues that technological progress in the modern sectors made a large contribution to the modest growth rate, both directly and indirectly through increasing the rate of capital formation. Perhaps most important for subsequent development was the environment that produced this precociousness. The key British advantages were a large, well-functioning urban sector, good access to international markets, cheap capital, and an abundance of useful knowledge that could be deployed in technologies that used readily available coal. While these advantages put Britain somewhat ahead of the pack, they reinforced a pattern of specialization in what later became low-tech sectors, they promoted shop floor power, and they shaped a style of corporate governance that separated ownership from control.

The late nineteenth century was the high tide of British leadership and Britain was soon overtaken by the much faster growing United States. Did late Victorian Britain fail, and if so, why? Crafts argues that there was not much of a climacteric and that markets worked well in allocating resources. Compared with its own past Britain faltered only slightly, so if there was failure, it was mainly relative to the increased potential for growth. In this chapter on American overtaking, Crafts argues that the United States benefited from larger market size and from a configuration of factor endowments that favored directed technological change in progressive sectors. By 1913 the negative effects of Britain’s legacy of idiosyncratic industrial relations and poor corporate governance were apparent but not yet too damaging. That was soon to change. A substantial setback relative to the U.S. over the First World War was followed by productivity growth, which, while respectable relative to previous performance, fell further behind the United States. Although some have stressed the emergence of new industries in the interwar years, Crafts shows that their share in the economy was small and their productivity performance was modest. Structural change was inhibited by adversarial industrial relations in the 1920s and by persistently high and regionally concentrated unemployment. In response to the depression of the 1930s, the introduction of policies aimed at stimulating employment, notably the tariff and industrial rationalization, marked a significant retreat from competition in the product market.

From 1950 to 1973 the British economy grew faster than ever before in what has been dubbed the “golden age.” But other European economies grew even faster, partly as catch-up from income deficits in 1950. By 1973, Britain had been overtaken in GDP per capita by seven other countries, amounting to a cumulative shortfall of about 20 percent. Countries such France and West Germany emerged with corporatist structures that enhanced cooperation and eased technological transfer from the United States while Britain’s more liberal post-war consensus combined with anti-competitive economic policies had the opposite effect. This was partly a penalty of the early start and partly a result of policy developments that escalated from the Great Depression onwards. These policies included tariff protection, a complicated tax system with high marginal rates, the nationalization of large swathes of industry and misdirected R&D effort. Any reductions in market failure were outweighed by government failure, which is all the more costly in the context of endogenous growth. This indictment is perhaps the most controversial part of the book but Crafts provides convincing arguments to support it. Summing up: “Corporate governance and industrial relations were clearly recognizable as the grandchildren of their Victorian predecessors but having mutated into more problematic forms and with a greater downside in the environment of weak competition that prevailed in these early post-war decades” (p. 98).

In the decades from 1973 up to the financial crisis, productivity growth in the developed world slowed, but ironically, British relative performance improved. Crafts focuses on two key developments: the Thatcher experiment and the information and communications technology (ICT) revolution. Margaret Thatcher (Prime Minister from 1979 to 1990) introduced conservative fiscal policies, tax reform (shifting from direct to indirect tax) privatization of state enterprises, deregulation in industry and finance and, above all radical reforms to reduce the power of trade unions. Crafts argues that this reversed many of the pre-existing trends and improved economic performance largely though once-and-for-all productivity gains. Although Britain’s liberal market economy had proved bad for growth in the golden age, when combined with the Thatcher reforms, it performed better, particularly for the adoption of ICT. Nevertheless, short-termism and financial reforms may have contributed to the severity of the financial crisis. Although the focus is on these two elements, another lurks in the wings: Britain’s membership since 1973 in the European Union. This may have delivered a boost of up to 10 percent[1], in per capita income, due to the expansion of trade and to increased competition brought about by the single market reform of 1993. With Brexit looming, it would have been good to see a fuller analysis of the gains from EU membership.

Anyone with the slightest interest in British economic history should read this excellent book. It will also be useful to economists interested in economic growth and economic policy. And it will be a very valuable resource for students, especially in view if its brevity, but with the caveat that, in order to get the most out of it, they should have some prior knowledge of key economic concepts.

Endnote:
1. This figure comes from N. Crafts (2016), “The Impact of EU Membership on UK Economic Performance,” Political Quarterly, 87 (2), pp. 262-268.
Tim Hatton is Professor of Economics at the University of Essex, UK, and Director of the Centre for Economic History at the Australian National University. He was a founding editor of the European Review of Economic History and a recipient of the Clio Can. His recent work is on the heights of World War I British servicemen, emigration from the UK 1970-1913, the European migration crisis of recent years, and refugees and asylum policy since the 1990s.

Copyright (c) 2019 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 2019). All EH.Net reviews are archived at http://www.eh.net/BookReview.

Published by EH.Net (August 2015)

Stephen Broadberry, Bruce M. S. Campbell, Alexander Klein, Mark Overton and Bas van Leeuwen, British Economic Growth, 1270-1870. Cambridge: Cambridge University Press, 2015. xxxix + 461 pp. $40 (paperback), ISBN: 978-1-107-67649-7.

Reviewed for EH.Net by Karl Gunnar Persson,  Department of Economics, University of Copenhagen.

This collective work is an ambitious and careful attempt to reconstruct historical national income accounts for England/Britain over six centuries — from 1270 to 1870. GDP is estimated from the output side unlike the study by Gregory Clark (2010), which covers approximately the same period and reconstructs national accounts from the income side. The major results from these two studies differ profoundly: Clark is an advocate of “Malthusian stagnation,” while British Economic Growth presents a more dynamic view of the pre-industrial economy. The contrasting results are a reminder that historical national accounting is marred by the fragility of the underlying data and is sensitive to approximations and assumptions needed to reach an end result.
British Economic Growth, 1270-1870 begins by establishing population levels (chapter 1) and by implication population growth rates. It acknowledges that population level estimates differ by a wide margin for the medieval period and the authors opt for estimates in the middle of the existing range.

In chapters 2 and 3 agricultural volumes are reconstructed by first establishing the area of agricultural land in use, the share of different crops, the number of cattle, etc. Output for the different components can then be estimated using yields and conversion ratios for various crops and animals. The final step is to aggregate these outputs into an agricultural sector output. All this is done in a transparent way, largely based on primary sources.  The incremental nature of agricultural progress is visible in increasing yields and reduced fallows. However, for the medieval period the documentation stems from the estate sector which is a relatively small part of the agrarian sector, less than a quarter. Was the non-estate sector, run by tenants, sharecroppers and free-holders, more efficient? The authors indicate that there is some evidence that this was the case, but they nevertheless assume that conditions in the estate sector prevailed in agriculture at large. For the post medieval period, paradoxically perhaps, the documentation is thinner and farm accounts do not appear until the end of the eighteenth century

Chapters 4 and 5, which are devoted to industry and services, rely more on the secondary literature. Output volumes in the various subsectors are established in chapter 4, and then aggregated to GDP and GDP per head in chapter 5. The resultant pre-1700 GDP series are, of course, a major accomplishment of synthesis, while the post-1700 figures differ only marginally from those established by Nicholas Crafts and Knick Harley and they all rely heavily on Walther G.  Hoffmann’s (1955) pioneering work.

Part 2 of British Economic Growth, 1270-1870 has a more analytical approach, discussing how the new results compare to those of other studies. The central claim in the book is to stress the resilience of the growth process even when faced with continued population growth and resource constraints. When GDP per head increased after the Black Death, because of a softening of resource constraints, the Malthusian expectation would be that income would fall when population stated to grow again in the sixteenth century. The authors take an explicit non-Malthusian position showing that the expected reversal did not happen. In fact the authors argue that income per head doubled from the pre-Black Death period to the mid eighteenth century. Their target here is the argument of Clark (2010) and Michael Postan before him, that pre-industrial income per head was stationary in the long run. That is, income increases were transitory and the only permanent effect of technological change would be an increase in population. Chapter 6 is devoted to comparing real wages series with GDP per head. Clark’s reconstruction of GDP is driven by his real wage series which tend to support the Malthusian thesis. However, wage data are constructed from day wages and British Economic Growth argues that you can reconcile a stationary day wages series with increasing GDP per head by adjusting for known increases in days worked in the sixteenth to eighteenth centuries. The authors do not seriously challenge the validity of the day wage series as such, even if there is a discussion in the literature. One major problem is that the salaried working class was a quite small proportion of the labor force. Most people were tenants, free-holders and self-employed, and very little is known about their income and whether it tracked day wages.

How do you assess the accomplishment of this study in the face of alternative interpretations? One way is to look at the general consistency of the many claims made. One surprising result in chapter 7 is that kilocalorie use per head implied by the agrarian output and population series is more or less stable over the entire period. The implication is that the increase in income per head did not spill over into increased demand for calories, but only into more expensive calories, say, beer instead of porridge.  The calorie intake throughout is not far off the minimum requirement for an active life, and at the same level as in France in the eighteenth century, although French workers were known as being less productive in physically demanding work in that period. There are in fact a number of recent assessments of calorie supplies, reviewed by Morgan Kelly and Cormac Ó Gráda (2013), and while all studies apply the same methodology results differ too much for comfort. The most optimistic ones by Robert A. Allen and Craig Muldrew end up at calorie intake about 70 percent higher in the eighteenth century. Kelly and Ó Gráda suggest that agricultural output might in fact be underestimated in British Economic Growth.

Another puzzle refers to the sharp increase of the relative share of the non-agricultural labor force in the sixteenth and seventeenth centuries (chapter 9). Such a change would presumably have generated changes in consumption patterns in favor of industrial goods and services. However, changes in the consumption pattern of that magnitude are not entirely plausible given the reported slow growth of income. Is income growth underestimated for this period? Other indicators point in that direction. For example per capita consumption of metals had tripled by 1700 compared to its peak medieval level, which you would suspect to be associated with more vigorous growth of income.

British Economic Growth, 1270-1870 will be a work of reference, inspiration and controversy for decades to come. Some results will undoubtedly be challenged and revised. Others will stand the test of time. The claim that England/Britain was on a trajectory of slow income growth from medieval times is one of the results which probably will last.

References:

Gregory Clark (2010). “The Macroeconomic Aggregates for England, 1209-1869.”  Research in Economic History, 27: 51-140.

Walther G. Hoffmann (1955). British Industry, 1700-1950. Oxford: Basil Blackwell.

Morgan Kelly and Cormac Ó Gráda (2013). “Numerare est Errare: Agricultural Output and Food Supply in England before and during the Industrial Revolution.” Journal of Economic History, 73: 1132-63.

Karl Gunnar Persson is Professor Emeritus of Economics at University of Copenhagen.  A revised and enlarged edition of his book An Economic History of Europe: Knowledge, Institutions and Growth, 600 to the Present (in collaboration with Paul Sharp) was published in 2015 by Cambridge University Press.  karlgunnar.persson@econ.ku.dk

Copyright (c) 2015 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 2015). All EH.Net reviews are archived at http://eh.net/book-reviews/

Project 2001: Significant Works in Economic History

Phyllis Deane and W. A. Cole, British Economic Growth, 1688-1959: Trends and Structure. Cambridge: Cambridge University Press, second edition, 1967. xx + 350 pp.

Review Essay by Knick Harley, Department of Economics, University of Western Ontario.

Foundations of British Quantitative Economic History Phyllis Deane and W. A. Cole’s British Economic Growth, 1688-1959, first published in 1962, with a somewhat revised second edition in 1967, was the seminal work for a generation of economic historians, primarily, of course, of Britain but also for those working on other economies. Its influence was enhanced by the simultaneous publication of British Historical Statistics, edited by Brian Mitchell with Phyllis Deane, which presented the basic statistical raw material that lay behind the study along with detailed discussion and evaluation of the sources. The book stimulated those, like Max Hartwell, who shortly thereafter brought explicit economic models and statistical techniques to the study of British economic history, methodologically joining the ‘cliometricians’ in the United States. The basic quantitative outline Deane and Cole established also influenced more skeptical traditional economic historians even though these scholars rightly emphasized Deane and Cole’s own cautions about the speculative nature of many of the numbers and “were dubious of the basic methodology of (the) approach and . . . suspect(ed) that attempts to analyse the origins and causes of economic growth through the media of national income aggregates runs the risk of obscuring the significant factors, because the experience of the pre-industrial economy does not fit naturally into the conventional national income matrix” (p. xx). Today, although many specific estimates have been superseded — by research largely stimulated by Deane and Cole’s pioneering work (most obviously work on historical national income by Charles Feinstein, as well as by Peter Lindert, N.F.R. Crafts and myself on aggregate income prior to 1840, and by Sir Anthony Wrigley, Roger Schofield and their associates on demography) — Deane and Cole’s volume remains a required text for anyone working on the aggregate British economy over the past three centuries. Our picture of the aggregate growth of Britain during the Industrial revolution has changed significantly over the past few decades, but still rests fundamentally on Deane and Cole’s evidence and analysis. They provided an example of how quantitative economic history should be done, with the exhaustive and careful collection and aggregation of data from a wide range of sources. They saw themselves as historians in a continuing tradition and did not preach a new methodology or exalt the economist’s methodology over that of the historian. Their work set the framework on which traditional social and economic historians and historically minded economists have built.

Deane and Cole identified the key role of the national income estimates in the introduction to the second edition. “It is not possible to study economic growth without some sort of quantitative yardstick to indicate the timing, directions and pace of economic change at the national level (p. xx).” They set themselves the task of providing a broad outline of British national income and the breakdown of the sectoral distribution of value added and of the uses of output over three centuries. In a way, of course, they were following in Sir John Clapham’s footsteps and attempting to see the development of the British economy as a whole rather than concentrating only on the spectacular changes. By the 1950s national income accounts provided an obvious framework for such an overall view. Deane and Cole’s main research focused on the years before 1870 since other researchers had compiled estimates of income and several of its components for the later years. The estimates, and the detail of economic structure that they embody have provided an indispensable basis for the general equilibrium perception of economic development. In recent years the data have also provided the basis for explicit models that have attempted to use the computational power of modern computers to explore causal relationships in the industrial revolution.

Deane and Cole’s quantitative overview of British growth revised somewhat the prevailing picture of British industrialization. Traditional accounts had often emphasized the 1760s and 1770s as key decades of the beginnings of economic growth. Deane and Cole, however, found no discontinuity in those decades but rather accelerations in the 1740s and then in the last two decades of the eighteenth century. An industrial revolution, although somewhat delayed, survived in their estimates. Not only did per capita growth accelerate at the end of the eighteenth century, rapid growth, accompanied by rapid structural change in the economy, continued in early decades of the nineteenth century before slowing in the century’s middle third. Growth accelerated again in later decades of the century only to slow again at the end of the century. In the 1950s, when they conducted their research, the pattern of the twentieth century remained obscure. Late twentieth century growth still lay in the future.

From our present vantage, the book’s crowning achievement lies in its nineteenth-century income estimates. These are presented in Chapter IV “Changes in the Industrial Distribution of the Labour Force and Employment Incomes in the Nineteenth and Twentieth Centuries” and Chapter V “The Changing Structure of National Product.” These two chapters present estimates of National Product by sector of origin for nineteenth-century census years. The key numbers appear in their Tables 34 and 37. The decennial censuses collected data on individuals’ occupations, with reasonable success after 1841. This information provided the raw material on which, with the aid of wage data, they estimated labor income by broad sectors of the economy. Unfortunately the occupational material is deficient prior to 1841 so labor incomes in the first three nineteenth century benchmarks involve extensive extrapolation from later data. They complemented the census-based labor income estimates with income-tax-based estimates of property income. The income tax, both between 1799 and 1815 and after 1842, provided assessment information from which property income by broad sectors could be estimated, with varying degrees of difficulty. Combining the two sources resulted in current price estimates of national product at benchmark years. Deane and Cole were keenly aware of the limitations and approximations in the estimates and cautioned the reader extensively on the approximate nature of the income estimate. Nonetheless, the estimates have retained their general usefulness for more than a generation supplemented, of course, by Charles Feinstein’s work that has provided extensive revision and amplification.

Deane and Cole paid at least as much attention to the changing economic structure that their estimates revealed as they did to the aggregate figures of national income. They constantly considered questions of the relationship between growth and structure. In particular, they emphasized the rapid decline of agriculture in the decades around 1800, the rise of manufacturing and of services that occurred rather more unevenly, and the late nineteenth century important increase in income from abroad.

Chapter VI “The Growth of the Nineteenth-century Staples” extends the quantitative information by surveying the leading industries of the industrial revolution. The chapter retains the careful quantitative focus that characterizes the work, compiling estimates of value-added in the textile, mining, iron and transport industries. This serves to supplement and amplify the census-based aggregate estimates, providing more detailed estimates of the change in economic structure that accompanied nineteenth-century growth. Without the census-based benchmarks, however, the estimates would have limited value since it would be impossible to place the industries within the context of aggregate output. With the aggregate benchmarks, the industry studies provide an extremely useful, finer breakdown of parts of the manufacturing sector.

The sector studies, which give due consideration to each industry’s relative contribution to national income, raise some potential challenges to the conclusions of the indices of national income growth, which Deane and Cole do not address. In contrast to the national income figures, which show growth accelerating in the last years of the eighteenth century and then slowing by 1830, the industry studies show that these ‘leading sectors’ had their greatest impact during the railway age. Furthermore, the estimates of the growth of the ‘leading sectors’ between 1770 and the second quarter of the nineteenth century are considerably below the growth rates of the manufacturing aggregate suggested by the eighteenth-century index and the census-based current values of output deflated by a price index. Even the spectacularly growing textile sector increased more slowly than the estimated aggregate between 1770 and 1840. In particular, textile output increased by only a third between 1770 and 1800 while the index of manufacturing output in the national income index more than doubled. (Between 1800 and 1840 the textile index increased roughly six-fold while the estimated real output of the manufacturing sector increased about five-fold.) It is unfortunate that Deane and Cole did not make more of an attempt to reconcile these estimates.

Chapter VIII’s compilation of capital formation estimates also seemed to challenge the aggregate view of a rapidly growing industrial revolution followed by lower growth. Instead they also suggest that the railway age was the greatest discontinuity. In contrast to Walt Rostow’s assertion that capital formation increased rapidly during the traditional industrial revolution of the late eighteenth century, they find gradual acceleration over some seven decades between 1770 and 1840. If there was a discontinuity, it occurred during the railway age not at the time of the cotton spinning innovation.

When the book appeared, the estimates of national income for the eighteenth century and their implications for the timing and nature of the British industrial revolution probably commanded the most attention. Table 1 “The Social Accounts of England and Wales in 1688” based on Gregory King’s estimate from government investigations of the late seventeenth century provides Deane and Cole’s starting point. Chapter II “The Eighteenth-century Origins” begins with an extensive, and somewhat discouraging, overview of the available data relating to economic activity in eighteenth-century Britain. This discussion remains required reading for anyone undertaking serious research in the period. The centerpiece of the chapter, however, is undoubtedly Table 19 “Index Numbers of Eighteenth-century Real Output,” which quickly became accepted as the quantitative indicator of the course of the industrial revolution. In retrospect, however, it is clear that users of the figures (sometimes including the authors themselves) at times failed to appreciate the implications of the indices’ construction adequately. Deane and Cole, of course, carefully laid out their procedures. The real output series aggregates five component series — agriculture, export industries, home industries, rent and services and government and defense — using weights reflecting the structure of the economy about 1700. All the series, except that for government spending, are proxies from available data. Although the rationale for each proxy is carefully justified, it becomes apparent that the real output series is in fact narrowly based. Population estimates provided the main trends for agricultural output (with an adjustment for international trade in grain) and the service sectors — together nearly three-quarters of the index in 1700. For manufacturing, Deane and Cole adopted two separate procedures. They constructed an index from excise data for non-traded industries but for the larger traded manufacturing sectors they adopted an index that consisted of the sum of the official values of imports and exports.

The final section of Chapter 2, entitled “The Mechanics of Eighteenth-century Growth” attempts to provide an explanatory sketch of eighteenth-century growth. The output index revealed an upsurge in growth in the 1740s and then “a considerably sharper upward trend appears in the 1780s and 1790s.” Deane and Cole attempt to explain the periods of acceleration by reference to underlying trends in population and trade. At times here, I feel that the reasoning comes perilously close to circular since the index is constructed from population and trade growth. In a simple mechanical sense, the index accelerates in the 1740s because the estimated rate of growth of population accelerates, providing an estimate of accelerated growth for the majority of the aggregate series. In the 1780s and 1790s the acceleration comes, arithmetically, from the acceleration of the growth of the volume of foreign trade. At times Deane and Cole seem to attribute causal features to population and trade and seem to lose sight of the index’s construction. The relationships they find may simply be the result of the construction of estimates. I frequently find myself wanting formal presentations of models in order to understand the mechanisms they had in mind. Overall this section, although ambitious, now seems relatively unsuccessful.

Chapter 3, “Industrialisation and Population Change in the Eighteenth and Early Nineteenth Centuries” is a tour de force in demographic history that anticipated the important role that demography was to play in the evolution of our understanding of the industrial revolution. Here Deane and Cole used data from the samples of eighteenth-century parish register vital events collected by Rickman in the early nineteenth-century retrospective collections and published in the censuses. Their exploration of population change at the county and regional level is of particular interest. Although they emphasize the crudeness of the data, it becomes apparent that regional divergence had been a principal characteristic of eighteenth-century population movements. London was, of course, a center of high death rates and immigration. Rather more interesting, however, was the evidence of systematic interaction between the economic and population growth in the industrial regions of the west Midlands and the North. Baptisms and burials revealed exceptionally high rates of natural increase in the industrializing North and particularly the North-west relative to rest of the nation. Despite the serious limitations of the underlying data, the conclusion that growth was a social phenomenon that interacted with demography is now widely supported by more robust evidence.

Chapters VII on the factor composition of national income and Chapter VIII on capital formation represented less original contributions. These relatively short chapters primarily summarize the work of others, bringing together and combining various series that had previously been available only for shorter periods. The discussion integrates this additional information about the changing structure of the British economy. The chapters highlight the underlying ambition of the work to present the available data in as comprehensive a manner as possible and continue to emphasize the relationship between growth and the structure of national income. The discussion set an agenda to which others responded.

British Economic Growth largely defined the territory of British economic history for a generation. It placed the discipline firmly into a framework of national income accounts and its components — the industrial structure of value-added, the distribution of income among factor owners and the disposition of income. In doing so it encouraged researchers to think about the industrial revolution and subsequent growth in general equilibrium terms. That alone would have made it a great book. In addition, it stimulated much of the most important research of the next decades. Much of that research has resulted in superior estimates of national income and its components that have superseded Deane and Cole’s original efforts. Deane and Cole must be proud to have provided such a stimulus. Finally, despite revisions by many scholars, their estimates continue to be important building blocks in on-going research. The reader might keep in mind, for example, how much Nick Crafts’ and my own work on the industrial revolution rests on Deane and Cole. Our revisions of the likely path of income growth during the industrial revolution, although substantially changing Deane and Cole’s picture of growth before 1840, depend fundamentally on their estimates of national income at current prices in the middle of the nineteenth century. Equally, our computational general equilibrium models rest on a social accounting matrix derived from their 1841 national income estimates.

It is hard to think of greater praise for a book than to note that it stimulated research for over a generation and that it remains a fundamental source after nearly half a century.

C. Knick Harley was the 1999 winner of the Cliometric Society’s annual prize — the Clio Can. Among his recent articles are “Computational General Equilibrium Models in Economic History and an Analysis of British Capitalist Agriculture,” European Review of Economic History (2001); “Simulating the Two Views of the British Industrial Revolution,” Journal of Economic History (2000), with N.F.R. Crafts; and “Cotton Textile Prices and the Industrial Revolution,” Economic History Review (1998).

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Published by EH.Net (January 2023).

Debin Ma and Richard Von Glahn, eds. The Cambridge Economic History of China: Volume II. Cambridge: Cambridge University Press, 2022. 845 pp. $155 (hardback), ISBN: 978-1108425537.

Reviewed by Jamin Andreas Hübner, LCC International University and University of the People.

The second volume of The Cambridge Economic History of China picks up where the first volume left off (reviewed here). It covers 1800 to the present, which includes major turning points in the evolution of China’s economy. The most notable include Britain’s conquest of the flourishing Qing dynasty in the 1840s, its eventual collapse and the creation of the Republic of China in 1912, Mao’s establishment of the People’s Republic of China in 1949, the “Reform era” (post-1978), and the most recent phase (post-Great Recession), which is a return to top-down planning and Party conformity.

For over 2,000 years, “China has sustained the largest single human society on the planet through the development of one of the most sophisticated agrarian systems in history” (p. 87). Before British colonization of China, the Chinese empire was “the largest economy on earth” (p. 531), where the “Qing…enjoyed standards of living comparable or even superior to those of Europe” (p. 83). There was little indication that things would change. But the Opium Wars did just that. While trade with the West was fairly limited up to this point, the victorious British forced “free trade” (p. 83)—requiring that China open its ports abroad. As with any major change in trade, this was viewed as an investment blessing to some, but also “as a destructive force capable of impoverishing certain sectors of the population and economy” (p. 365). Furthermore, “foreign nationals were exempt from the jurisdiction of Chinese law” (p. 414).

This “semicolonial” subordination (p. 415) to western power inaugurated a great reversal that Kenneth Pomeranz, Andre Gunder Frank, and others have written about. Contrary to ordinary Eurocentric history, Western economic dominance was not a long-term, inevitable result of superior institutions founded over 2,000 years ago, but a highly contingent blip on the screen of Asian dominance in the world system. The book traces out these dramatic changes in chapters covering ideology, institutions and enterprises, finance, money, markets, business organization, foreign trade and investment, education, and other areas up to and beyond the Maoist era.

Readers may find interesting the unusual role played in the Chinese economy by Christian missionaries —who poured into the country starting in the 1860s. By the 1920s, “94% of Chinese counties had records of a missionary presence” (p. 391). This led to the development of a huge number of schools with new curriculum, as well as hospitals. “A great majority of the subjects in the curriculum of the new schools were novel to the Chinese” (p. 393), and improved healthcare opportunities facilitated further population growth (p. 394) and perhaps more critical reflection that helped the revolts of 1911. Readers also learn that (in crude and simplistic terms) “Communism and violent Communist movements originate from Christianity, and naturally the Christian church was essential for the creation of the first totalitarianism” (p. 541). That is, similar to Europe and Catholicism, the institutional churches and movements involved in China validated and empowered state ambitions.

The road to Chinese economic and political statism was gradual. “As early as 1912, Sun [Yat-sen] stated that all major industries in China should be owned by the state” (p. 185); China had to make up for lost time in industrialization. The world wars and threats of Japan provided further reason or opportunity to centralize economic control (p. 165, 186-87). The “institutional genes” of “imperial institution and secretive organization” (p. 543) also contributed to this move. By the time of Mao, the road to totalitarianism had already been laid, and Mao explicitly took Stalin’s model to greater extremes. However, some contributors contend, “Totalitarianism is foreign to the Chinese. When the CCP was established in 1921, the number of Chinese who knew constitutionalism was far more than those who knew Marxism or Bolshevism” (p. 543). There was nothing inevitable about China’s turn towards totalitarian communism—anymore than industrialization and capitalism was inevitable for the British over a century earlier. Whatever the case, the advent of the Maoist period was filled with contradictions not unlike the Bolshevik Revolution. Just as the Bolsheviks promised economic democracy and worker control but then reneged in 1918, so the Chinese Constitution “recognized the peasants’ rights to private land and the property rights of the owners of private firms”—only to nationalize/collectivize a year later (p. 549).

Maoism is popularly known for its cult around Mao and the “Great Leap Famine” (1958-1961), where about 30 million people (needlessly) died. This was apparently caused by (a) the use of grain to finance industrialization and repay Soviet debt instead of feeding Chinese people, (b) the cruel confiscation of metal from the population (including cooking tools) to support industrialization, and (c) the consolidation of agricultural cooperatives into ineffective “gigantic peoples’ communes” (p. 645). By this “Great Leap,” China would become “self-reliant,” and never worry about being colonized by the West again (p. 717-19). Maoism as a whole did eliminate excess wealth inequality, increase life expectancy and primary education, and achieved  “food security”; and China “fared better than many other countries—Meiji Japan and Industrial Revolution Britain come to mind—during the early stages of their industrialization” (p. 639). The Maoist consolidation also, in some ways, made the reform era more effective (p. 733), if not simply provided the industrial infrastructure for the next, and most successful phase of all (1970s-2008).

Formal recognition of private property came back in 2004 and, with other reforms, spurred a surge of private enterprise. Private investment, financial reform, entry in the WTO in 2001 (though see p. 827), and less restrictions empowered China’s economy. The Great Recession and Xi Jinping’s grand visions amplified—and overextended—China’s ambitions and initiated a resurgence of top-down control (p. 817-820) and a return of the leader’s personality cult. “Since 2013 all private firms and NGOs…are required to set up CCP branches within the firm and organization,” and “Discussions of constitutionalism and judicial independence are prohibited” (p. 562). Religious freedom is now being eradicated. Academics are facing new obstacles, like “restrictions on participation in international projects and conferences. Foreign textbooks now arouse suspicion” (p. 822). China is vastly better off than it was a half century ago. But the challenge is “how to overcome self-imposed obstacles that prevent improvements in knowledge and capabilities from generating intensive growth that outruns the accumulation of resources” (p. 823).

I greatly enjoyed this work, as much as the first volume. The research is incisive, clearly presented, and the volume is very cogently organized. At one point I wondered how the second volume might have been improved if the contributors had read or paid more attention to the first. I say this because second-volume contributors sometimes had contradictory different perspectives about pre-modern Chinese culture and socio-economic ideas, and this is an important topic given the stereotype of “Oriental Despotism” that economic historians are—or should be—trying to wash out of their clothes. Some discussion on the future impact relating to demographics (e.g., age, population, fertility) might also have been relevant and helpful.

Whatever the case, we stand in a very privileged position to be able to learn many lessons from such massive and historic economic system(s), and both volumes deserve a wide reading.

Dr. Jamin Andreas Hübner is a faculty member at the University of the People and a research fellow at LCC International University. He is a scholar of religion and economics, as well as an activist, and organizational leader, and is currently writing a book on cooperative economics.

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Published by EH.Net (August 2022).

Eric L. Jones. Barriers to Growth: English Economic Development from the Norman Conquest to Industrialisation. Palgrave Macmillan: Palgrave Studies in Economic History, 2020. xii + 153pp. £79.99 (hardback), ISBN 978-3-030-44273-6.

Reviewed for EH.Net by Mark Bailey, University of East Anglia.

The causes of the Industrial Revolution are one of the great debates in economic history. What were the forces that transformed human society from centuries of low productivity and organic economic activity to sustained growth, increased wealth per head, and technologically adaptive modernity? In this short, stimulating, and highly readable monograph, Eric Jones offers a fresh perspective on the reasons why the Industrial Revolution occurred so quickly and comprehensively in eighteenth- and nineteenth-century Britain. He considers how manifold minor and subtle institutional changes over the previous eight centuries slowly but inexorably eroded the inefficient customs and practices that had acted as obstacles, impediments and barriers to growth: the net result was to diminish the economy’s susceptibility to shocks (such as disease and extreme weather events), to improve the allocation and productivity of its resources, and hence to enhance its receptiveness to immense and widespread changes from the eighteenth century. He is not concerned with synthesising or critiquing the vast debate on the causes of industrialisation, and pays scant attention to other major debates on the earlier Great Divergence (whereby economic development in Europe pulled ahead of Asia) and the Little Divergence (whereby parts of northwest Europe pulled ahead of the rest of the Continent). He does not rehearse the standard explanations for ‘take off’, such as various prime mover models (e.g., the Protestant work ethic, falling interest rates) or the new technical innovations (e.g., steam power, railways), but instead maintains an unerring focus on elucidating the merits of his alternative line of argument with admirable clarity.

Shifting the focus of the debate away from the various engines driving economic growth to consider instead the gradual evaporation of the ‘deadweight costs of old practices and big blockages inch by inch one after the other’ (p. 144) is inspired. The modern mindset tends to associate economic growth with innovations that increase productivity and social product, but here we are asked to contemplate what had prevented growth and, by extension, how the removal of such impediments in turn stimulated growth. By addressing a familiar debate by posing a different question, Jones re-illuminates it with a searing shaft of light. He forces us to consider how, for example, extravagant and unproductive expenditure on the likes of castles and cathedrals had placed a burden on the productive sectors of the medieval economy ‘by tying up capital in structures designed to intimidate’ (p. 13), and how a reduction in that expenditure released capital for more productive purposes.

Jones argues that the slow reform of institutions and the erosion of customary forms of governance resulted in the better allocation of resources, improved technology and materials, and greater societal resilience to shocks. In the centuries before industrialisation, prolonged, varied, and minor institutional changes occurred at a glacial pace to reduce inexorably deadweight expenditure, to shift assets to people more likely to exploit them productively, to eliminate destructive domestic conflict through civil war, and to enable the exploitation of previously un- or under-utilised resources. These processes were not always linear—some intended improvements could end up choking advancement—and their benefits were sometimes inadvertent, although by the nineteenth century the waning of resistance to change, and the speed of institutional change, were startling. In all of this, Jones captures a common-sensical view that institutions evolve more slowly than technology changes, exerting a drag or brake on productivity gains, and their reform could take decades or centuries (p. 61). He is unquestionably correct to point out that prejudice and the want of a decent education meant that the productivity capacity of women and most of the lower orders of society remained low until the modern era.

Jones elucidates his arguments through eight short, sharp case studies of how various impediments to growth were gradually eroded in the pre-modern era. The first section of the book considers the erosion of obstacles, the second section coping with shocks. The chapters deal in turn with (section one) military and ecclesiastical building; the dissolution of the monasteries; civil war; communal farming and underused land; tithes; archaic institutions; obstructive infrastructure; and maladministration. Then section two consider disease; “insults to agriculture”; storms and adverse seasons; floods; and, finally, fire. The book is topped and tailed with an introduction and conclusion. All of the chapters are short, and each one is accessibly and clearly written. Referencing is light, seldom more than a dozen footnotes per chapter, and Jones’ earlier work features prominently among the citations. Quotable and telling lines jump out of the pages. Communal field systems are ‘a device for preserving equality in principle and poverty in practice’ (p. 53), and the voices and zeal of nineteenth-century social reformers ‘relegated the lifestyle of the Regency bucks to dark corners’ (p. 82).

While there is no synthesis or critique of the manifold other theories about and approaches to the causes of the Industrial Revolution, Jones is undoubtedly well informed about them. Nor does he attempt to measure the growth of the English economy over time to identify key phases for his readers, and so Broadberry, et al.’s monumental British Economic Growth 1270 to 1870 (2015) does not warrant a footnote. He is respectful of, but unimpressed by, overarching explanations for the Industrial Revolution based on an identified prime mover. He recognises that they provide a powerful conceptual framework to ‘put inchoate events into some type of order’ (p. 32) and render comprehensible the ‘bewildering surface of manifold events’, while exposing their limitations: taking predetermined abstractions as given, cherry-picking examples that fit the theory while overlooking detailed historical experience that does not, and confusing correlation with causation. Equally, Jones is fully aware that localised history can fail to identify key patterns, or segregate the significant from the insignificant, and can be too susceptible to ad hoc interpretations. So we are offered neither a new prime mover theory nor a fresh empirical study, but an alternative pathway for exploring an old conundrum. To illustrate his approach, Jones mines a succession of local examples from obscure local history journals and publications, and from the disused works of great historians, such as Hoskins, Willan, and Trevelyan. As he states, ‘local evidence sometimes alters one’s mind about relative significance and I do not always discern the world of my ancestors in the abstractions of my profession’ (p. 3).

The drawback with this approach, and with Jones’ predilection for citing his own work in a threadbare system of referencing, is that occasionally—but only occasionally—an important and relevant scholarly contribution is overlooked, an opportunity is missed, or a point is stretched too far. As an example of the latter, Jones states that the transition from wooden to stone bridges awaited the late eighteenth century, and cites lengthy disputes over their upkeep, as examples of obstructive infrastructure (pp. 70-1) in the pre-modern era, yet the work that he cites (Harrison, 2004) actually states that such disputes were not the norm and that most bridges were built of stone by 1700. As an example of the former, a whole chapter is devoted to the theory developed by Leander Heldring, James A. Robinson, and Sebastian Vollmer (2015) that the dissolution of the monasteries in the 1530s created a land market and harnessed the entrepreneurial zeal of the gentry, which combined to remove a dead weight from the economy and catapulted England and Wales to industrial growth. Jones deploys their essay skilfully to illustrate the benefits of his own approach while gently highlighting the limitations of such an overarching monocausal theory constructed by economists with limited grasp of the historical reality and scholarship. Yet the prominent and influential work of Bruce Campbell (2005, 2008) is omitted from the analysis, even though it reveals that the landed estates of religious houses comprised no more than 5% of the arable area of England, over half of which by the 1530s was in the hands of tenants in the form of leases or other forms of tenure. Thus we have a splendid example of economists and early modern historians overlooking important work in medieval history (they are not alone…medieval historians are also guilty of not engaging with economists and early modernists!), which has established that religious houses had direct control of less than 2% of the arable land of England. In which case, how can their dissolution have had such a transformative effect on the land market and the productive capacity of English agriculture, or, indeed, how can their dissolution have removed a significant obstacle to economic growth?

These observations do not detract from Jones’ fundamental argument, they simply underline the need for more careful formulation and exemplification. Jones selects various cogent examples of customary practices that impeded growth—such as tithe payments to the church, which were not removed until a parliamentary act in the nineteenth century—and, following his lead, other economic historians will be stimulated to contribute grist to his mill from their own areas of expertise. One example would be the history of tenures, whose structure evolved significantly between the thirteenth and seventeenth centuries. The peculiar institutional structure of land tenure before the Black Death of 1348-9 meant that the pressure of rising population caused land holdings to splinter, mean holding size to plummet and immiseration to spread, and therefore it acted as a major barrier to the growth of the medieval economy. In the decades after the Black Death this archaic structure was gradually dismantled through the adoption of more contractual and monetarised tenures, and the shift of a higher proportion of land from the seigniorial to the (hands on) peasant sector, both of which enabled more productive use of landed resources in the early modern period.

Another topic worthy of closer scrutiny is the development of the law, which in general receives bad press from Jones. He portrays property law as cumbersome and expensive until the introduction of a comprehensive system of land registration, and depicts the legal system more widely as corrupt, self-serving, protecting the interests of elites, and raising transaction costs for producers (e.g., pp. 36, 56, 138). While the English legal system was certainly neither equitable nor fair, it was better than the alternative. The development of a system of common law from the late twelfth century under the auspices of royal justices and officials, and the permeation of its principles and processes into the operation of many other local tribunals such as manorial and market courts, had profound, far-reaching, and inadvertent consequences in removing barriers to growth. It created a culture of decision-making and dispute resolution based on written proofs, precedents, formal modes of representation, and consistent treatment of similar wrongs. It was hostile to personal discretion and arbitrary judgements in social relations, and—to some extent—held the elite to account. It enabled land to be treated as an asset transferable for money rather than a gift in exchange for services, and its title to be defensible and heritable, therefore creating a liquid asset capable of acting as security for loans. It offered cheap, accessible, independent and (relatively) fair resolution in petty disputes over debt, trespass and breach of contract. In short, the development and spread of a legal system and culture reduced risks and transaction costs in commercial activities, providing a major incentive to the growth of factor and commodity markets. Indeed, Jones himself acknowledges that the presence of an independent legal tradition in Western Europe was a key element in the Little Divergence (p. 89).

This is a stimulating, enlightening, engaging, wise and learned book, packed with common sense and sharp analysis, and characterised by a lucid writing style gloriously free from jargon. Jones is a leading scholar at the top of his game, and provides a new perspective and a framework for analysing economic growth that will advance one of the great debates in economic history.

Mark Bailey is Professor of Late Medieval History, University of East Anglia. He is the author of The Decline of Serfdom in Late Medieval England (2014) and in 2019 was the James Ford Lecturer in British History at the University of Oxford; the Ford Lectures have been published as After the Black Death. Economy, Society and the Law in Fourteenth-Century England (2021).

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Published by EH.Net (July 2022).

Mark Koyama and Jared Rubin. How the World Became Rich: The Historical Origins of Economic Growth. Cambridge, UK: Polity Press. x + 259 pp. $24.95 (paperback), ISBN 978-1509540235.

Reviewed for EH.Net by Joel Mokyr, Departments of Economics and History, Northwestern University.

Full disclosure: this reviewer’s name appears on the back cover of this book having written an endorsement, known as a blurb. Given that in the 40 words of an endorsement one can say very little, this book merits a more detailed discussion.

Any scholar teaching economic history and wishing for an up-to-date survey of a large and important literature will find it useful to read this book to bone up on the recent research listed in the long and encompassing list of references. Furthermore, they should seriously consider having their students read it for their class. The book is a wide-ranging yet remarkably complete and accessible survey of the Great Enrichment, the emergence of modern and prosperous economies that provide us with a material standard of living that our ancestors could not have dreamed of. How and why modern economic growth occurred when and where it did, and how economists have tried to understand this phenomenon, is the theme of this book. It is written by two of the finest young senior scholars in our field, both with important contributions to the subject matter of this book.

Many of the issues this book raises are highly contentious in our profession, and for good reason: these are hard questions on which learned scholars can disagree and interpret the evidence in different ways. How much did institutions really matter? What was the role of culture in economic growth? Was geography destiny? What was the role of craft guilds in the economic development of early modern Europe? How to think about the role of imperialism and slavery in the Industrial Revolution and the subsequent growth of industrial powers? Were high wages good or bad for technological progress? Was war a positive factor in economic growth? Was the European Marriage Pattern a positive factor in the economic development of the Continent?

The ecumenical and balanced approach the authors take to these questions is much like the Rabbi in a famous Jewish story. According to the legend, a rabbi is holding court in front of a large audience of his pupils. A husband and wife appear before the rabbi, to discuss their troubled domestic life. First the husband gets to lay out his case, and he lists all the sins and vices of his wife. The Rabbi listens carefully and pronounces his verdict: the husband is in the right. Then his pupils appeal to him: you should hear the wife’s case as well. The Rabbi consents and listens to the woman lays out her powerful case against her lazy and violent husband. He then announces his second verdict: the wife is in the right. His best pupil protests: but Rabbi, how can they both be in the right? The Rabbi listens and pronounces: the pupil is right too.

Rubin and Koyama present balanced and fair surveys of made in the literature, but they are reluctant to take strong positions. Such an ecumenical approach sets them apart from Clark’s Farewell to Alms and McCloskey’s Bourgeois Dignity, where the authors take up similar issues but in a much stronger opinionated mode. That thoughtful and measured approach of the survey, its elegant and crystal-clear style, and the authors’ impressive knowledge of a large and complex literature make this book nothing short of ideal for teaching advanced courses on global economic history to economics students.

It is especially refreshing to see a book such as this that pays explicit attention to institutions and culture, two themes that until not so long ago were taboo in our field but now seem to play increasingly central roles. The book contains full chapters on each, and while the discussion is naturally far from exhaustive, the authors do an excellent job summarizing some of the best work in these areas. What remains, of course, unsolved is why different nations develop different institutions and how and why such institutions change over time and how exactly cultural beliefs help determine the institutions that society ends up with.

The one issue on which the book takes a relatively strong position is on the issue of European imperialism and the importance of slavery and the slave trade to the Industrial Revolution and the origins of Western technological leadership (chapter 6). In recent years the “new history of capitalism,” in its zeal to blame the West and Capitalism for all the ills of the world, has argued that the West grew rich largely at the expense of the Africans and Asians whom Europeans mercilessly enslaved, sold, and exploited. As more sophisticated and economically literate scholarship has shown, the famous thesis by Eric Williams and recent proponents (e.g., Berg and Hudson, 2021) that somehow the Industrial Revolution depended on European imperialism and the Atlantic slave trade cannot be seriously defended. While Atlantic ports have been shown to have been crucial for subsequent economic development (Acemoglu, Johnson and Robinson, 2005), the exact causal chains are still unclear, and Koyama and Rubin stress sensibly that without institutional support for technological progress, without a rule of law and constraints on the executive, and without a comparatively inclusive society, no amount of colonialism and oppression of non-Europeans would have triggered modern economic growth.

The insight that economists have brought to this literature is that economic growth is fundamentally a positive-sum game: on a global level, the economic success of the West did not — on average — impoverish the Rest. In the long haul it made the entire world much richer than before — just not quite as rich as Europe and its offshoots (with some major exceptions such as Japan and Singapore). The causality is more complex. Whatever it was that made Europe learn to control energy and materials as well as run their economic systems better, also allowed them to manipulate and exploit Asians and Africans. But if anything was causal here, it was not that Imperialism caused the Industrial Revolution but the reverse: as Daniel Headrick in his classic work on the topic (1981) showed decades ago, what made western Imperialism possible above all was better technology (see also Hoffman, 2015).

Moreover, it is striking how poorly the historical fit between Imperialism of any kind and economic growth really is. The Roman Empire was the mother of all predatory empires, yet it did not industrialize and experienced only limited technological change. Eighteenth century China and Russia both added enormous stretches of land to their realms, with no noticeable effects on economic growth. The British Industrial Revolution coincided with the loss of the North American thirteen colonies. While Britain was a successful commercial and maritime nation, the Smithian gains from trade with its Empire — as Deirdre McCloskey (2010) has persuasively argued — were by themselves never enough to trigger the Industrial Revolution, much less create the Great Enrichment. In per capita terms, one of the largest colonial empires was the Dutch one in the East Indies, yet it did not help the Dutch industrialize until late in the nineteenth century. Belgium initiated its lamentable adventure in the Congo only after it had industrialized. Perhaps most strikingly, the European imperial venture collapsed after World War II, yet those were exactly the years during which economic growth in Europe was most rapid — with the exception of Russia (which maintained its colonial empire until 1991). In short, Koyama and Rubin conclude that colonialism and the slave trade “played a large role in the making of modern world” (a suitably vague statement) but that evidence is “mixed” on whether it was responsible for the world becoming rich (a polite pronouncement of a Scottish verdict: not proven).

Where the book truly shines is pointing out why the Great Enrichment was relatively late in coming and why the pre-1750 world — with a few exceptions — remained poor. The authors admirably survey the consensus that has emerged on the subject. Three major factors held the economies back. First, as neo-Malthusians such as Galor and Clark have maintained, before 1750 population growth in many cases wiped out the fruits of productivity growth, such as they were. Second, predators of various kinds and extractive institutions (North-Wallis-Weingast’s “natural state”) not only pillaged and plundered the riches of the few places that had been economically successful, they extinguished incentives to invest and innovate. Finally, until institutions had been established to govern and control the accumulation and dissemination of useful knowledge, the opportunities for sustained technological progress remained too limited. As the authors point out in admirable detail, the Industrial Revolution meant that these three brakes on economic progress slowly dissolved to create the Great Enrichment, first in a few economies in the West, then in more and more places around the world.

At the end of the day, as the authors sum up in chapter 11, in 2022 “the world is rich.” Almost anywhere one lives in this world, material life is in all likelihood better that it was a century, let alone a millennium, ago. A rising tide lifted most ships on the planet, but rather unequally, and while global poverty and famine are a fraction of what they were in 1800, they are still with us — mostly because of incompetent or tyrannical governance. What is perhaps worth noting, however, is that while technology keeps advancing, with novel breakthroughs opening new horizons in material sciences, molecular genetics, energy physics, and much more, there seems to be little if any long-term progress in the institutions that underlay the economic miracles of the past two centuries. Not only do countries with weak institutions such as Russia seem to lack the capability to adopt more inclusive and open governance, but even in nations long committed to the Enlightenment visions of freedom, human rights, and democracy, the institutions that helped make us rich seem ever more fragile. The conflict between ever-more powerful technology and the brittle polities that deploy it may be the greatest challenge to our future.

References

Acemoglu, Daron, Simon Johnson, and James A. Robinson. 2005. “The Rise of Europe: Atlantic Trade, Institutional Change, and Economic Growth.” The American Economic Review 95 (2005), pp. 546-579.

Berg, Maxine, and Pat Hudson. 2021. “Slavery, Atlantic Trade and Skills: a Response to Mokyr’s ‘Holy Land of Industrialism’” Journal of the British Academy, Vol. 9, pp. 259–281.

Clark, Gregory. 2007. A Farewell to Alms. Princeton, NJ: Princeton University Press.

Galor, Oded. 2011. Unified Growth Theory. Princeton, NJ: Princeton University Press.

Headrick, Daniel R. 1981. The Tools of Empire. New York: Oxford University Press.

Hoffman, Philip T. 2015. Why Did Europe Conquer the World? Princeton, NJ: Princeton University Press.

McCloskey, Deirdre. 2010. Bourgeois Dignity: Why Economics Can’t Explain the Modern World. Chicago: University of Chicago Press.

North, Douglass C., John Joseph Wallis, and Barry Weingast. 2009. Violence and Social Orders. Cambridge: Cambridge University Press.

Joel Mokyr is the Robert H. Strotz Professor of Arts and Sciences and Professor of Economics and History at Northwestern University, and Sackler Professor, (by special appointment) at the Eitan Berglas School of Economics, Tel Aviv University. His most recent book is A Culture of Growth (Princeton University Press, 2017).

Copyright (c) 2022 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 2022). All EH.Net reviews are archived at https://www.eh.net/book-reviews.

Published by EH.Net (June 2022).

(Editor’s note: Because this review covers two books, Global Economic History and The Industrial Revolution, we have posted it twice, with one posting for each title, for the sake of easier searches.)

Robert C. Allen. Global Economic History: A Very Short Introduction. Oxford: Oxford University Press, 2011. xiv + 170pp. £8.99 (paperback), ISBN 978–0–19–959665–2.

Robert C. Allen. The Industrial Revolution: A Very Short Introduction. Oxford: Oxford University Press, 2017. xiv + 150pp. £8.99 (paperback), ISBN 978–0–19–870678–6.

Reviewed for EH.Net by Avner Offer, Professor Emeritus of Economic History, All Souls College, University of Oxford.

These two books are already classics. Robert Allen has spent decades investigating the cause of modern economic growth from early modern times to the 20^th century. He developed a metric for economic welfare, the minimum household subsistence basket, which has been estimated globally over the whole period, and an analytical framework for understanding the drivers of economic growth. These two books distil his findings and opinions. The learning is worn lightly: the books are reliably expert but are also succinct and highly readable. For the subject they cover, there is nothing better.

The first title, on global economic growth, is breath-taking in its grasp. It describes and accounts for the process of economic growth over five centuries in Asia, Europe, and the Americas. For each historical period and for each region the argument, framed in terms of cause and effect, delves down to the detail of institutions, technology, and welfare, supported by illuminating graphs and tables, most of them from data assembled by Allen himself. The past is sometimes allowed to speak in its own voice. The story is driven by a deep curiosity about how things work, for the ways that people and firms conduct themselves, with a hands-on relish for the feel of physical machinery. All this makes for a compelling read, and the books are deservedly very popular. The second of them, on the British Industrial Revolution, has all the virtues of the first, and adds an excellent chapter on social and political impacts which affirms a pessimistic view of worker welfare in a period of soaring business wealth. This grand project has encountered some controversy. Although firm in his own views, Allen also gives a generous hearing to other interpretations and especially those that stress the role of culture, knowledge, science, and civil society. If there is any partiality at all, it is not ideological but methodological.

The core issue is defined by Allen as why modern economic growth, and why initially in Britain and Europe more generally. Up to the 18^th century, China and India together dominated global manufacturing and had a large export trade with Europe, porcelain from China, fabrics from India. Why did manufacturing shift from the east to the west during the 19^th century, and why did it shift back again by the end of the 20^th century? Implicitly underlying the argument is a neoclassical (Cobb-Douglas, Solow) model in which growth arises from the combination of capital, labour, and technological innovation. The pace and direction of growth are determined by the relative costs of these factors. In 18^th century Britain labour was already costly in consequence of pre-industrial progress on a broad front, while capital was relatively cheap as a result of trading profits and large landowner rents. Hence there was a strong incentive for labour-saving technological innovation at the outset of the Industrial Revolution, and for the ensuing mechanical and chemical breakthroughs which gave Britain its industrial leadership. Where hands were cheaper there was no incentive to replace them with costly machines. In a process of incremental innovation Britain’s mechanised industry became the lowest-cost producer and dominated industrial exports worldwide for several decades.

But that cannot be the whole story, as Allen recognizes. If it is only a matter of the relative prices of capital and labour, why could capital not move to Asia, employ Asian labour, and export to Britain at even cheaper prices? That is what happened in the 20^th century, when Britain and the United States de-industrialised and saw their manufacturing move offshore within the space of a few short decades, stranding the abilities and skills of manufacturing workers at home.

To adequately tell the story of modern economic growth Allen needs to bolt on several extensions, which in the end make it a different model from the one that merely responds to relative prices. As he tells it, the initial triggers were actually two windfalls, firstly the maritime expeditions which opened up access to new commodities and created new markets and a great deal of wealth, part of it arising from the forcible enslavement of Africans.  Two centuries later this was followed by the serendipity of easily accessible coal in the United Kingdom. Both of these windfalls are taken to be necessary conditions for the growth that ensued. Countries less favourably positioned could eventually catch up and substitute for the missing factors and for the stimulus of high wages, by means of a standard ‘development package’ made up of removal of internal trade barriers, external tariffs, domestic transport development, an effective financial system, and mass education and literacy. First implemented in the United States in the early decades of the 19^th century, these policies were advocated influentially by Friedrich List in Germany (1841). The package was implemented successfully in continental Europe, but with mixed results in Latin America a century later, due to the economies there not being large enough to deploy manufacturing at a large enough scale.

The standard package provides a hint as to why capital could not be successfully exported to India to mechanise it early in the 19^th century. As Allen shows in the case of the British Industrial Revolution, what counted was not only the price of labour but also its quality. While Indian workers were illiterate, about half of British ones could already read and write at beginning of the 19^th century. Technical innovation in Britain took place within a rich ecosystem of a mature, articulate, urbanised civil society, with enterprise, science, curiosity, debate, and an elaborate subdivision of labour. For countries too far behind to implement the ‘standard package’ there was also a ‘Big Push’ catch-up option. Development was anticipated by heavy investment applied top-down in strategic sectors in manufacturing, agriculture, and education. First down this route were the Japanese, followed by the Soviet Union, and then successfully in Korea, Taiwan, and mainland China.

Allen’s books are satisfying to read as an acute historical account of economic development globally, but their theoretical framework is somewhat ad hoc. By stopping mostly at the end of the 19^th century they largely ignore intrinsic limitations of economic growth as an ultimate source of welfare. Applying another perspective can reveal a different weighting and significance for the crucial factors. One such perspective is the discipline of economics itself as it arose in the cauldron of the Industrial Revolution, namely the classical economics of Adam Smith, Malthus, Ricardo, Marx, and John Stuart Mill. Unlike the neoclassical economics which followed, the factors of production were initially labour, capital and land, the latter factor representing the benefits and costs of location and the bounty of natural resources. It has been argued that Nature was taken out of economics (or rather taken for granted entirely) from the 1870s onwards by neoclassical economists wary of Henry George’s proposals for concentrating taxation on land (Gaffney and Harrison, 1994).

Restoring land as a factor has several explanatory advantages. It embraces overseas discovery not as an inexplicable windfall but as an expansion of the Earth’s exploitable surface, and takes analytical account of the crucial role of distance in trade. It places a decisive emphasis on fossil fuel, not only as ‘cheap energy’ available in particular locations, but as a force multiplier which leveraged muscular effort by more than an order of magnitude. Arguably this was a sufficient condition for economic growth once the technical problems of extraction were solved by means of the Newcomen steam engine and its successors. From that point of view technological development was an extended effort to harness and deploy this force multiplier for human requirements, a process that was necessarily slow and uneven, yet eventually became the main driver of modern economic growth. Without the energy surge of coal, technical innovation in itself would have been of little or no avail.

One of Allen’s key concepts is the minimum subsistence basket, which forms the unit of account. It does not include rent as the cost of location, only a standard 5% addition for housing. One of the costs of urbanisation, however, is much higher location rents. When these are taken into account the terminal multipliers of living standards which he provides, especially in the West, are too high, and provide an overestimate of well-being which continues up to the present. In the big metropolitan cities today location rents can make up to a quarter of the cost of living, ignoring other costs of congestion like air pollution and travel time. In the Habakkuk thesis (mentioned by Allen) the high wages in North America are caused by the abundance of land and are otherwise inexplicable in his account of economic growth there: the land factor again.

Economic growth is currently on course to exhaust the resources required for human life by warming up the climate and running down water supplies and usable energy. We are running out of ‘land’ in its broad economic connotation. Growth threatens to undermine itself, and may well turn out to have been a reversible phase in human development. The untrammelled and destructive pursuit of gain is exacerbated by the meliorist bias of neoclassical growth theory. The current economic analysis of climate draws on the same optimistic Solow growth theory to dismiss the dire predictions of climate scientists, thus acting to slow down preventive action and making disaster more likely. In contrast, substituting usable energy for technological change in growth models provides a third driver for growth which is as measurable as labour and capital, which has a good long-run empirical fit (Hall and Klitgaard, 2010; Warr, et al., 2011). Technology, the imponderable factor in current growth theory, can also spring unwelcome surprises. General artificial intelligence, a prospective form of Schumpeterian creative destruction, threatens to make humanity itself redundant.

Allen knows about most of these complications, and this review is too short to do justice to the richness and subtlety of his account. These studies provide a landmark outline of global economic growth and the British Industrial Revolution in alignment with mainstream economic thinking today. After more than two centuries of reflection and writing, these admirable works also highlight how much still remains to be understood.

References

Gaffney, M., and F. Harrison. ‘Neo-classical Economics as a Stratagem against Henry George’. Pp. 29-122 of Corruption of Economics, ed. M. Gaffney. London: Shepheard-Walwyn (Publishers) in association with Centre for Incentive Taxation Ltd, 1994.

Hall, C. A. S., and K. A. Klitgaard. Energy and the Wealth of Nations: Understanding the Biophysical Economy. New York: Springer, 2012.

Warr, B., R. Ayres, et al. `Energy Use and Economic Development: A Comparative Analysis of Useful Work Supply in Austria, Japan, the United Kingdom and the US during 100 years of Economic Growth’. Ecological Economics 69: 1904-1917 (2010).

Avner Offer (https://sites.google.com/view/avoffer) is Chichele Professor Emeritus of Economic History, All Souls College, University of Oxford. His most recent book is Understanding the Private-Public Divide: Markets, Governments, and Time Horizons (Cambridge University Press, 2022).

Copyright (c) 2022 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 (June 2022). All EH.Net reviews are archived at https://www.eh.net/book-reviews.

Published by EH.Net (June 2022).

Stephen J. Macekura. The Mismeasure of Progress: Economic Growth and Its Critics. Chicago: The University of Chicago Press, 2020. 320 pp. $27.50 (cloth), ISBN 978-0226736303.

Reviewed for EH.Net by Daniel Gallardo-Albarrán, Rural and Environmental History Group, Wageningen University.

One major line of inquiry in economic history concerns the measurement of economic development in the long run. Over the past two decades, the field has thrived by furthering our understanding on important questions on the timing of the ‘Great Divergence’ or the consequences of industrialization for living standards (among others). However, there are issues at the core of this research strand that are often swept aside or are insufficiently tackled, as a result of using price-adjusted Gross Domestic Product (GDP), wages and similar metrics capturing purchasing power or economic output. For instance, which changes in an economy should count as economic development? How are narratives of long-term living standards influenced by the assumptions underpinning our measurement frameworks? These questions are of paramount importance to anyone interested in measuring or understanding long-run development, and Macekura’s work provides useful insights into them.

The Mismeasure of Progress presents a sweeping history of dissent, conflict, and disagreement around the concept of Gross National Product (GNP) and the growth paradigm, i.e., the idea that societies should maximize national income. Macekura follows the professional and intellectual trajectory of a number of experts who were crucial in developing and measuring GNP and GDP and establishing the system of national accounts, along with major critics of this endeavor. The book ultimately shows that the story does not end well for those critics who aspired to fundamentally change how societies measure national income and its preeminence in academic and policy circles, since GDP prevailed after all. However, knowing how their ideas developed is important to put in historical perspective current arguments against GDP.

The book contains six chapters as well as an introductory and a concluding chapter. The former sets the stage and draws parallels between current and past growth measurement critics. The development of the main argumentation of the book begins in the first chapter, which deals with a critical question: how did policy circles and the academic community come to associate living standards with GNP so narrowly? Before Simon Kuznets submitted his report on national income to the American Senate in 1934, concerns about the condition of the working classes triggered initiatives to gather information on different (non-income) aspects of people’s lives. For instance, the International Labor Organization conducted cross-national social surveys to measure workers’ access to food and shelter, and national statistical offices amassed data on suicides, crime rates, etcetera. However, the Great Depression and the Second World War consolidated national income statistics as a priority for policy makers, who used them to manage tight budgets and to mobilize large amount of resources for the war economy.

The construction of national income statistics and their adoption for economic policy was far from a smooth process, as the second and third chapters show. Already in the 1930s and 1940s, experts identified limits of national income as meaningful metric of economic activity and thus were skeptical of its usefulness to understand the economy of countries in different stages of development. Macekura illustrates this by highlighting the work of Phyllis Deane, a British economist tasked with measuring the economic capacity of the colonies in the 1940s. Her work in Zambia led her to criticize the national accounts as a clear comparable framework of economic activity, since it did not take into account that unwaged female labor and self-subsistence output were an important part of Zambian household production. In addition, a number of critics argued that the pursuit of growth had negative side effects for the natural environment and society, including greater poverty and inequality. The influential report Limits to Growth published by MIT in 1972 argued that ecological constraints would lead to a decline in population and living standards. An overemphasis on maximizing GDP was therefore misleading since economic growth had environmental costs that were not properly accounted for. Similarly, others argued that the pursuit of rationality and efficiency resulted in a spiritually aimless society too focused on mass consumerism.

Chapters four and five describe the crisis suffered by the growth paradigm in the 1970s and the search for alternatives that followed. The dependency of industrialized countries on fossil fuels (e.g., coal, oil) and other minerals (e.g., copper, zinc, lead) became increasingly clear to experts and the general public, as energy consumption surged after 1950 and economies suffered from the energy crisis of the 1970s prices when oil prices skyrocketed. For many, capitalist growth would ultimately lead to social disruption and conflict, although not everyone agreed. Intellectuals in the Global South saw maximizing GDP as a way to achieve prosperity and therefore opposed a zero-growth policy agenda in developing countries, which some even considered a new form of imperialist oppression. These discussions provided fertile ground for the development of social indicators that could replace GDP. Two influential metrics in this respect, which did not succeed in the end, were the Physical Quality of Life Index by Morris David Morris and the Measure of Economic Welfare by William D. Nordhaus and James Tobin.

Chapter six closes the main argumentation of the book by covering the revival and later debate of the growth paradigm during the last decades of the 20^th century. The reliance on market mechanisms to reactivate the stagnating economies of the 1970s gave further impetus to the idea that maximizing national income will lead to long-term economic and social stability. However, and unlike the predominance of the growth paradigm in the 1940s and 1950s, the arguments and initiatives of critics reached a much broader audience than before. One example is the well-known Human Development Index that was embraced by the United Nations to enrich public discussion about international development in 1990. Even though this and other measures quantifying the environment and female work did not end up replacing GDP, they have significantly broadened the ideas around what constitutes development and how to advance it.

My main quibble with The Mismeasure of Progress is that it remains mostly descriptive. It excels at presenting the origins of dissent around GDP and the growth paradigm, and how some concepts and metrics emerged, changed, and at last were discarded. However, it would have been useful and interesting if Macekura had explained in detail why such ideas were ultimately ignored. To be sure, some parts give hints at why that was the case, but I missed a chapter (or various sections) providing a systematic review of various explanations and how they compare against each other. In addition, although this is a minor criticism, there is some argument repetition in a few parts that could have been avoided by referring the reader to other chapters.

Overall, this is an interesting book that complements earlier work on the origins and evolution of GDP (by Diane Coyle) as well as more technical work on how GDP mismeasures important aspects of citizens’ lives (by Marc Fleurbaey and Didier Blanchet). I think the first three chapters are particularly valuable for teaching purposes to chart the complicated origins of national income and how economists, far from a homogeneous group interested in advancing a specific agenda, fought against some of the very things the international community value most these days, such as gender equality, sustainability, or inequality. And perhaps this is one of the key lessons to extract from it: there is a long tradition of experts arguing that growth is non-neutral and we can learn from their history to craft more compelling alternatives to measure living standards in both history and the present. Agreeing on a definition or metric of progress is elusive and maybe impossible, but having public discussions about the shortcomings of our measurement frameworks will bring us closer to something that resembles a consensus worth pursuing.

Daniel Gallardo Albarrán is assistant professor in Economic History at Wageningen University, where he researches the roots of global health inequality and their implications for global welfare disparities. He is currently conducting a project funded by the Dutch Research Council on the determinants of clean water and sanitation since 1850 from a global perspective, and he manages the research portal Long-Run Health Matters (www.lrhmatters.com).

Copyright (c) 2022 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 (June 2022). All EH.Net reviews are archived at https://www.eh.net/book-reviews.

Published by EH.Net (April 2022).

Martin Chick. Changing Times: Economics, Policies and Resource Allocation in Britain since 1951. Oxford: Oxford University Press, 2020. xiii + 440 pp. £31.49 (paperback), ISBN 978019955277.

Reviewed for EH.Net by Jim Tomlinson, Professor of Economic and Social History, University of Glasgow.

This long-awaited addition to the Oxford University Press’s Economic and Social History of Britain series provides a powerful and intriguing account of British economic policy and performance since 1951. The author, Martin Chick, has long taught economic history at the University of Edinburgh and has published widely cited books on energy and industrial policy. This is in part a straightforward textbook, offering a comprehensive, thematic account with summaries of a wide variety of relevant literature, and a formidable array of statistics (including a statistical appendix that runs to 40 pages). But it is more than a textbook, drawing on a wide range of economic theory as well as substantial research in the National Archives to provide new arguments on often familiar topics.

The most distinctive feature of the approach taken is the focus on the temporal and, to a lesser degree, spatial dimensions of economic and economic policy change. In Chick’s view, ‘Many of the cited policy changes reflected a shift in the proportionate emphasis on different forms of time, between the present and the future, as well as a shift in the apportionment of benefits between the public and the private, and the collective and the individual’ (p. 17). This approach is linked to an evident fascination with certain types of economic theory, ranging from the highly abstract accounts of how time has been built into economic thinking in the works of theorists such as Ramsay, Allais, Hayek, Keynes and Meade to the more recent and focussed work of, for example, Kaldor, Phelps, Stern and Kay.

This attention to economic theory, much greater than is typical in general economic histories, is used to provide an account which is seen as complementary to those which emphasize neo-liberal ideas as the basis for key changes in post-war economic developments. The book does not contest the standard narrative of Britain since 1951 seeing ‘a shift to and then away from what may be crudely characterized as collective, provisionist, often monopolistic, non-market-based approaches by government to the financing, sourcing, and distribution of health, housing, education, electricity and other services’ (p. 16). But, it suggests, this needs to be supplemented by a recognition of the ‘different and changing uses made of time in the public and private allocation of resources’ (p. 17).

One area where the ‘retreat of the state’ has been unambiguous in recent decades has been that of public investment, with public sector net investment falling from a peak of 7.6 percent in the late 1960s down to close to zero by the turn of the century. The argument here links this change not only to the pressures for higher current spending on health, education and social security constrained by the political obstacles to raising taxation. This in itself has put great pressure on devoting public resources to investment, but Chick argues persuasively that this was accompanied by a shift away from emphasizing the ability of governments to fund public investment projects more cheaply than the private sector, to a focus on testing and discounting the potential benefits of such investment. This is one area where a whole new apparatus of calculation, Cost Benefit Analysis and its corollaries, grounded in particular notions of time, has profoundly shaped public policy.

Necessarily central to a book which pays so much attention to economic theory is assessing how far such theory can be seen as a prime mover in changing policy. In the case of public investment, that link seems demonstrably important, though operating, as suggested, within political constraints on the level of taxation. Environmental policy, which commendably gets a chapter to itself in this book, is another where economic arguments have been central in shaping the debate. As is discussed here in admirably lucid terms, the debate over how to respond to global warming raises profound questions about how to deal with time, echoing century-old debates within economics. In the climate change debate, how to think about the consequences of the time lag between actions taken now and the benefits accruing to future generations is central. But the issue is spatial as well as temporal, as many of the efforts aimed at containing carbon emissions will have to be taken by the rich countries, with much of the benefit accruing to the poor parts of the globe.

How far have shifts in economic theory been responsible for changes in the welfare state? One of the many illuminating (and amusing) vignettes provided by this book is of the Treasury responses to the early Institute of Economic Affairs’ attacks on the NHS in the name of consumer choice: ‘99% rubbish: however, we ought not as impartial critics to forget the 1%’ (cited, p. 193). Such ‘rubbish’ fed into the purchaser/provider split which in various institutional configurations has impacted heavily on the NHS. On the other hand, it is worth noting that the much more radical changes to healthcare (essentially, the transition to an insurance system) that the IEA advocated have made little progress.

While deploying a distinctive approach to many topics, this book is fully alert to the current concerns which aminate much of the historiography. In particular, it is very strong on inequality and poverty, which gets not only a dedicated chapter but much discussion elsewhere. Indeed, partly because of the concern with time, and its obvious links with questions of investment, there is considerable discussion about asset ownership and its profound inequalities—much greater than for income, large as the latter have become since the 1980s. And rightly there is a focus in this context on housing, where both the spread of ownership and the uneven accrual of the benefits of that ownership are arguably central to the recent political economy of inequality.

Highly innovative in many regards, the book also has features of an arguably problematic conservatism in its approach to the post-war British economy. The introduction to the book is framed by two tables on changes in GDP. These are accompanied by a footnote which tells us ‘How well such a measure captures the value of all the output in modern economy is a matter of current debate’. Some might regard that as a masterpiece of understatement! In fact, that debate has been taking place ever since the concept of GDP was invented in the inter-war years, with some of the most powerful criticism coming from the key formulators of the concept, Simon Kuznets. But the point is not just about the underplaying of the profound conceptual problems raised by using GDP to measure economic progress. Comparisons of British GDP growth underpin a whole ‘declinist’ account of modern British economic history, which suggests that Britain has suffered from profound economic debilities in the postwar period (especially in the 1950s and 1960s). Chick’s approach is not as declinist as many who write about post-war Britain (for example, Nick Crafts’ recent Forging Ahead and Falling Behind), but it does affect the argument at important points. For example, the welcome attention to Britain’s deindustrialisation is framed in declinist terms, where stereotypically the unfavourable contrast is with Germany—though the table of comparative GDP shows British GDP/head exceeding Germany’s in recent years despite this contrast.

Deindustrialisation has undoubtedly been very important in Britain’s recent economic history, but seeing its significance in terms of the possible impact on the growth of GDP may miss much of the point. As noted, though perhaps underemphasized, by this book, structural change in employment away from industry has had profound implications for poverty and income distribution, and its spatial distribution. In turn this has fed into significant changes in social security. Last but not least, the change summarised by the evocative and largely accurate phrase about what has happened to the typical job –‘from coal to care’ — is very much linked to changes in the gendered distribution of work.

Jim Tomlinson is Professor of Economic and Social History at the University of Glasgow, and currently has a Leverhulme Trust Major Fellowship to work on ‘Defeating Mr Churchill: The Local, the Global and the Imperial in the Decline of Liberal Political Economy, 1900-1929.’

Copyright (c) 2022 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 (April 2022). All EH.Net reviews are archived at https://www.eh.net/book-reviews.

Published by EH.Net (October 2021)

Ulrich Pfister, Jan-Otmar Hesse, Mark Spoerer and Nikolaus Wolf, editors, Deutschland 1871: Die Nationalstaatsbildung und der Weg in die moderne Wirtschaft (Germany 1871: Nation Building and the Transition to Modern Economic Growth). Tübingen: Mohr Siebeck, 2021. xix + 454 pp. €99 (hardcover), ISBN: 978-3-16-160068-5.

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

January of 2021 marked the 150th anniversary of the first unified state in modern German history. For political and diplomatic historians the 1871 Empire (Reich) has long served as a milestone. For economic historians 1871 has held less significance. Some major institutions of German economic integration preceded the Reich. The Customs Union (Zollverein), which included nearly all of the states that later formed the Reich, dates to 1834. Most German states had adopted a common business code in 1861. Other institutions important to economic integration came long after 1871; for example, Germany lacked a common (civil) law code until 1900.

Prussia’s role within the 1871 “small German” Reich (“small” meaning it excluded Austria) poses a second issue. Prussia dominated the North German Confederation (1866-70), which served as the institutional model for the Reich. The new Reich had about 41 million inhabitants, of whom some 25 million were Prussians. Prussia alone was larger than all but a handful of other European countries at the time. France had about 36 million people (1872), the United Kingdom 31 million (1871), and Italy 27 million (1871). Prussia dwarfed other relatively-developed countries such as Belgium (4.8 million in 1866) or the Netherlands (3.6 million in 1869).

The collection under review here treats 1871 in two ways. Most contributors stress longer continuities rooted in pre-1871 history as well as the slow process by which the Reich advanced new forms of economic integration. Others push the significance of 1871 a bit harder, stressing that the Reich adopted some policies that would have been hard to imagine without it. The thoughtful editors’ introduction lays out four channels that could link the Reich to improved economic performance. The first is national identity; the nation-building that followed 1871 could awaken in Germans a “buy German” sentiment that would have meant less to someone who thought of herself as a Hessian or Saxon. Market integration, a second channel, features today in many studies in economic history, economic geography, and related fields. A third channel presumes that under the Reich, the state and federal governments developed new capacities to deliver services that might promote growth. The final channel runs through better economic institutions, including compulsory social insurance and better patent law.

The collection has nineteen chapters plus the editors’ introduction. The twenty-seven authors represent most of the active economic historians of Germany today, while the comparative chapters bring in leading scholars of other countries. The authors are major authorities in their own areas but do a good job of summarizing other views and pointing the reader to a range of literature. There is little technical material that would challenge interested readers from other disciplines. The collection has a “handbook” feel, albeit a handbook that is unusually comprehensive and scholarly.

Felix Kersting and Nikolaus Wolf begin with a fascinating discussion of the role nationalism played in German state formation, stressing the connections to economic and technological developments. This is well-trodden ground, but they offer new perspectives by bringing in insights from the recent literature on the economics of identity and culture. Readers will appreciate their stress on the way states and the movement for national unification used each other to advance often conflicting goals.

Alfred Reckendrees discusses cooperation among state officials before 1871. The states had long traditions of working together both formally and informally to address issues of common concern. Reckendrees stresses informal networks of officials who met and worked together in many different contexts. These networks laid the foundation for the Reich’s ability to coordinate the state offices responsible for executing important policy initiatives.

Gerold Ambrosius discusses the federal structure created in 1871. At one level, the Reich had sole competence for legislation in economic areas. On the other, the new entity at first had little of the requisite bureaucratic apparatus. The federal chancellor (Kanzler) began (with staff, of course) as the only real Reich functionary. The chancellor relied on the Prussian state’s ministries in the absence of Reich equivalents: thus the details of economic policy for the Reich were developed by officials in the Prussian trade ministry. This arrangement suited Otto von Bismarck, who served as both Reich chancellor and the Prussian equivalent (Ministerpräsident) until relieved by the Emperor in 1890. By the late 1870s the Reich had created some of its own ministries (such as Justice and Finance) and acquired a more direct role in policy after Bismarck’s departure.

Ulrich Pfister stresses significant developments in German economic growth starting in the 1870s, but explicitly sets aside the question of the Reich’s causal role in this change. The growth of both GDP per person and real wages was faster in the later nineteenth century than earlier. The industrial sector became relatively (much) larger and more heterogeneous than it had been during the early years of industrialization. One interesting finding notes that marriage rates became less dependent on short-term economic fluctuations later in the century. He interprets this (and other evidence) as reflecting a transition from an agrarian to an industrial economy.

Mark Spoerer explores the fiscal implications of the Reich’s federal character. By design, the Reich had little taxation power: the member states insisted on this provision to constrain the central government’s powers. This feature also limited the Reich’s ability to engage in costly nation-building. Major initiatives such as social insurance were largely self-funded. Towards the end of the nineteenth century, city and other local governments (Kommunen) assumed responsibility for many new functions, including clean water and sewage and later, provision of gas and electricity. By the 1880s, Prussia’s local governments took in more total tax income than the state itself.

Sebastian Braun and Jan-Otmar Hesse consider the Reich’s impact in an area where one would think a national government could make the most difference: developing and integrating the post, a telegraph system, and the railroad. Considerable effort prior to 1871 had resulted in only partial integration of these services across state boundaries. The Reich quickly created an all-German post office (1871) and, later, a telegraph system, but the railroad network remained largely uncoordinated until after World War I.

Michael Schneider describes the statistical services for the several states and their cooperation under the leadership of the Reich office created in 1872. Larger states such as Saxony and Prussia had long funded services that published often detailed reports on population, the economy, government operations, and other matters. These offices had coordinated to provide some common information such as the Customs Union censuses. But the main story was heterogeneity: smaller, poorer states could not afford the costs of the material churned out by Prussia and others, and different offices adopted conflicting definitions and approaches that reflected, in part, differences in local economies. The Reich office’s initial role was to persuade state offices to collect information in a standard way. Schneider focuses, quite usefully, on the difficulties involved in the census of enterprises (Betriebzählung).

Matthias Morys describes the adoption of the gold standard (1873) and the formation of the first all-German central bank, the Reichsbank (1875). Currency was one area for which the Reich had exclusive authority. Prior to 1871 the German states had, by agreement, simplified their many silver-based monetary systems into two. Morys argues that public opinion broadly favored shifting to the gold standard prior to the Reich, but the new federal entity’s sole legislative competence in this area made the process much easier. The Reichsbank, as Morys notes, was essentially a re-foundation of the Prussian central bank. The central bank at first was one of thirty-three note-issuing banks in the Reich (although the largest by far). As others failed or lost this authority, the Reichsbank’s unique all-German reach made it dominate even more than its purely legal role would imply.

Alexander Donges and Jochen Streb consider an area where the Reich had one of its greatest immediate impacts: patent law. Prior to 1871 the states had different attitudes towards patents. Prussia allowed patents but construed the novelty requirement quite narrowly. Once issued, Prussian patents had a short duration and were rarely renewed. Other states such as Saxony were more liberal in their interpretation of what deserved a patent. While there was widespread agreement on the need for an all-German patent law, the drastically conflicting views required serious compromise. The Reich patent law (1876) reflected Prussia’s narrow interpretation of what could be protected, but permitting repeated renewals.

Carsten Burhop and Felix Selgert take a different approach to the question of 1871, focusing sharply on the years just before and the years just after. By the turn of the twentieth century Germany’s firms could acquire finance from large universal banks or tap extensive equity markets. Burhop and Selgert trace the key steps in this financial system’s development to a process of deregulation in the years just before the Reich’s creation. The North German Confederation adopted general incorporation in 1870. This change, carried into the Reich, resulted in both many new banks organized as corporations, and many new corporations that wanted to access markets for their equities and bonds. Later moves amounted to a partial re-regulation and put remaining large banks at the center of the financial system.

Eva-Maria Roelevink and Dieter Ziegler take a historiographical approach to the question in their title: “How Organized was Capitalism in the Reich?” Their theme harks back to a literature from the 1960s and 1970s that viewed the late-nineteenth century German economy as run by various combinations of firms: lobbying groups (Verbände) that pushed for tariffs and other preferential treatment; cartels that raised prices above competitive levels; and inter-locking directorates and other, less formal connections among firms. The earlier literature argued that competition among firms under these conditions was largely illusory. The authors stress that these views pre-dated the opening of major archives (governmental in the former East Germany, businesses in the former West) and have not held up well to new evidence. In their view, the lobbies, cartels, and interlocking directorates were real and influential, but less so than earlier work claimed.

Tobias Jopp and Jochen Streb discuss social insurance. Bismarck’s complex of health, workplace accident, and old-age insurance (introduced in steps 1883-1891) reflects the specific political considerations of the Reich, but followed older models and reacted in part to unsatisfactory, earlier reform efforts. This chapter also considers the recent literature on how Bismarck’s social insurance affected emigration (German workers became less likely to emigrate, suggesting they valued social insurance); fertility (probably not at all); and savings (for which there is evidence of crowding out).
Thilo Albers and Charlotte Bartels address the evolution of income and wealth distribution during the nineteenth and early twentieth centuries. This chapter faces an especially severe version of the data constraints that shape all economic history, and the authors carefully explain their sources and what those sources can say. They detect three phases: (1) slowly increasing equality into the early 1870s, reflecting both the “grain invasion” and industrialization; (2) more rapid increases reflecting a quicker pace of industrialization to roughly 1890; then (3) a more modest pace of rising inequality. The authors stress the essential role of inequality in the Reich’s politics and economic policies.

Sascha Becker, Francesco Cinnirella, and Erik Hornung describe the growth of the German educational system from the early nineteenth century. The strong role of religious institutions in education meant that even in the early nineteenth century, Germany’s Protestant areas had higher levels of schooling than its Catholic areas. Protestant areas also enjoyed smaller male/female gaps in educational attainment. By the mid-nineteenth century, several German states had enrollment figures meeting or exceeding most other countries in the world, and the system improved still more later in the nineteenth century. The authors argue that Germany’s well-educated workforce played an important role in the economic development of the higher-tech sectors of the “second industrial revolution.”

Wolf-Fabian Hungerland and Markus Lampe provide a rich overview of Germany’s international trade in this period. (“International” means “crossing the borders of the Customs Union.”) The data become much better after 1871, making the Reich’s direct impact on trade hard to study. Important policies such as tariffs and non-tariff barriers were important tools after 1871, but they had been before, as well. Hungerland and Lampe do a valuable service in stressing aspects of Germany’s international trade that get lost in simple tales. Germany’s most important trading partners were the United Kingdom and other developed areas of western Europe. Most trade was intra-industry.

Four final chapters offer comparative perspectives. Jean-Pierre Dormois stresses strong similarities in the motivations for the relatively high tariffs introduced in 1879 (Germany) and France (1892). Dormois argues that tariffs in this period reflect revenue concerns at least as much as efforts to protect particular sectors, a claim supported by the targets of these tariffs: Germany had no banana producers to protect. His claims that tariff protection was ultimately futile, however, may over-state his case.

Giovanni Federico’s account of Italian unification offers a clear account of the political history of unification and the institutional changes that followed. His comparative remarks on German unification stress differences. Italy had no Prussia; Sardinia-Piedmont, the closest thing to an Italian Prussia, had only 3.2 million people in 1860. While Italians had discussed a customs union inspired by Germany’s Customs Union, the proposals never led to action. One reason may have been the relatively weak incentives to trade within Italy. The newly unified Italian state adopted many new laws and institutions by adopting what existed already in Sardinia, and instead of a federal structure, moved to a highly-centralized, unitary state more like France than the Reich. Federico argues that any economic effects from unification per se reflect a long-term process of change brought about by institutional changes and other indirect effects such as better internal transport.

Max-Stefan Schulze provides a comparison from the Dual Monarchy. This discussion focuses on growth of economic aggregates and growth accounting exercises. Schulze stresses recent findings that rehabilitate Austria-Hungary from an older view that its economic performance was always weaker in the nineteenth century; Hungary, less developed than either Austria or the Reich, enjoyed faster productivity growth 1870-1910 than either. The chapter concludes with a brief discussion of regional issues covered in more detail in the author’s other publications (for example, Max-Stephan Schulze and Nikolaus Wolf, “On the Origins of Border Effects: Insights from the Habsburg Empire,” Journal of Economic Geography 9, no. 1 (2009): 117-136).

Nicholas Crafts compares the economic performance of the British and German economies in the period 1870-1914. The great theme is Britain’s putative “entrepreneurial failure,” a comparison that is apt because the literature usually stresses Britain’s performance relative to Germany. Crafts is the undisputed master of this and related material; for a recent overview, see his Forging Ahead, Falling Behind, and Fighting Back (Cambridge University Press, 2018).

So what did 1871 mean to the German economy? A natural way to consider 1871 is to consider an explicit counter-factual. For example, we could imagine a region dominated by a Prussian-led North German Confederation with independent, smaller states such as Bavaria remaining aloof. Curiously, only a few chapters even nod in this direction. Morys, for example, notes that in the absence of the Reich, the Prussian central bank would have enjoyed the dominant position in all of the German states that the Reichsbank actually acquired. While little more than a remark here, this kind of thinking raises the question of whether Prussia’s size and weight would have led to similar economic integration through the looser ties of the Customs Union and other inter-state agreements. This kind of thinking arises in many earlier discussions of German unification and deserves more attention than it receives here. None of the authors here ventures to say that the Reich had a particular overall impact, but it would have been nice to see some discussion of what was really just Prussian (for example).

This review reflects the German-language text cited above. An English version will appear soon in the Routledge series “Explorations in Economic History.” Anyone interested in modern German economic history will want to read this collection. Those interested in the comparative history of related topics will find these chapters both a great overview and an introduction to the research literature. Instructors in advanced undergraduate or graduate courses will want to use it to supplement the growing journal-article literature. Federico’s contribution on Italian unification will be especially valuable in teaching. In either language, this collection deserves a wide readership and the editors our gratitude.

Timothy W. Guinnane is the Philip Golden Bartlett Professor of Economic History in the Department of Economics at Yale University. Recent publications include “The Introduction of Bismarck’s Social Security and System and its Effects on Marriage and Fertility in Prussia” (with Jochen Streb) Population and Development Review, 2021, and “Creating a New Legal Form: the GmbH,” Business History Review, 2021.

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