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Forging Ahead, Falling Behind and Fighting Back: British Economic Growth from the Industrial Revolution to the Financial Crisis

Author(s):Crafts, Nicholas
Reviewer(s):Hatton, Tim

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.

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 ( Published by EH.Net (August 2019). All EH.Net reviews are archived at

Subject(s):Economic Development, Growth, and Aggregate Productivity
Economywide Country Studies and Comparative History
Geographic Area(s):Europe
Time Period(s):18th Century
19th Century
20th Century: Pre WWII
20th Century: WWII and post-WWII

British Economic Growth, 1270-1870

Author(s):Broadberry, Stephen
Campbell, Bruce M. S.
Klein, Alexander
Overton, Mark
van Leeuwen, Bas
Reviewer(s):Persson, Karl Gunnar

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.


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.

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 ( Published by EH.Net (August 2015). All EH.Net reviews are archived at

Subject(s):Economic Development, Growth, and Aggregate Productivity
Geographic Area(s):Europe
Time Period(s):Medieval
16th Century
17th Century
18th Century
19th Century

British Economic Growth, 1688-1959: Trends and Structure

Author(s):Deane, Phyllis
Cole, W. A.
Reviewer(s):Harley, Knick

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).


Subject(s):Economic Development, Growth, and Aggregate Productivity
Geographic Area(s):Europe
Time Period(s):20th Century: Pre WWII

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

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

Published by EH.Net (August 2020)

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

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


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

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

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

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

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

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


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

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

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

Growth: From Microorganisms to Megacities

Author(s):Smil, Vaclav
Reviewer(s):Coelho, Philip

Published by EH.Net (May 2020)

Vaclav Smil, Growth: From Microorganisms to Megacities. Cambridge, MA: MIT Press, 2019. xxv + 634 pp. $40 (cloth), ISBN: 978-0-262-04283-3.

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


Vaclav Smil’s Growth is formidable; he has acquired a wealth of knowledge over his life and career. Its coverage is encyclopedic, yet it is flawed by a lack of basic economic principles and any sense of his limits. Growth’s stated task is to deal “in realities as it sets the growth of everything into long-term evolutionary and historical perspectives and does so in rigorous quantitative terms” (p. xxiv). The stated task is literally impossible; an examination of the growth of everything is just as likely as a perpetual motion apparatus. Still the book has achieved substantial praise earning it an encomium from Bill Gates on the dust jacket, and a favorable mention in the New Yorker magazine (John Cassidy 2020). The book is formidable with a text of over five-hundred pages (divided into 6 chapters, and a coda), plus a separate preface. The first three chapters are devoted primarily to the mathematics of growth, and the growth of organisms/objects/things not usually under human purview. The last three chapters are devoted to the human economy/ecology.

Chapter 1 (“Trajectories: Or Common Patterns of Growth”) deals with how growth is depicted within mathematical models: linear, exponential, logistic, etc. What is lacking in his analysis is any sense that the actual details/history matter. Smil continuously states that exponential growth is a long run impossibility. Contra Smil, suppose that economic growth proceeds at a compound rate of one thousandth of 1 percent per year. Then output doubles every 69,000 years; is this an impossibility, or, if it is a problem, how many current resources should we devote to solving it? The point is that size matters. Details matter; Smil states: “Sails are a good example … [of obsolescence] as their development and deployment … [except for leisure] ended fairly abruptly during the second half of the nineteenth century, just a few decades after the introduction of steam engines” (p .3). This is palpably false; if you search Google’s images with the terms “sail shipping 1900” you will get pictures from New York and other ports showing vast numbers of merchant sail ships. Sail as a method of shipping freight was the most economical for long voyages until after World War I. What eventually led to the end of sail were canals (the Panama Canal in 1914, Suez in 1869) that ended voyages of more than 12,000 miles (except for the Australian wheat trade where sail was marginally economic into the 1930s). Authors cannot be experts on all subjects, so a little humility goes a long way. That virtue is absent in Growth.

In Chapter 1 Smil measures efficiency and growth in physical terms rather than basing it upon economic fundamentals. (This is done throughout the book. The index has twelve different entries under the rubric of “efficiency” and 32 separate page citations; none of them refer to prices or costs.) He discusses measures of output per acre and concludes “… their yield trajectory has been one of minimal gains or outright stagnation” (p. 29). Here he uses “yield trajectory” to measure progress. But the economist asks: why do we want a greater yield per acre? Instead, suppose we could have a greater yield per man-hour of labor in lieu of an increase in output per acre, which is more important? The answer is that it depends upon relative prices; thus, rice output per unit of land is higher in Japan than the U.S., but rice output per man-hour is greater in the U.S. Both societies’ agricultures are efficient given differences in the relative prices of inputs. This illustrates Smil’s fundamental error: he equates “efficiency” in physical terms rather than in economic (value) terms. Stressing the obvious, if you want to profit from your labors, you should attempt to maximize output per dollar spent; and not maximize output per unit of land, labor, or whatnot.

Chapter 2 (“Nature: Or Growth of Living Matter”) and Chapter 3 (“Energies: Or Growth of Primary or Secondary Converters”) deal with biological organisms. They illustrate Smil’s strengths (a compendium of facts and knowledge), and weaknesses (a lack of elementary economic analysis). He worries (p. 120) about the stagnation of China’s grain yield per acre and its “staple food self-sufficiency.” The economics of comparative advantage elude him. Chinese crop yields per acre are not increasing rapidly because labor inputs used in agriculture are falling, even more so when age-adjusted. The growth of Chinese manufacturing and service sectors has attracted low-wage labor from the countryside into cities. Real wages in both rural areas and cities have increased. This is what we expect with economic development: the transfer of resources from low-productivity sectors to high-productivity sectors. Self-sufficiency is a (desirable) casualty of economic growth. More than occasionally, it appears that Smil is advocating autarky, yet, inconsistently, he seems to approve of the growth of the Chinese economy that has lifted one-fifth of humanity from poverty. Economic growth means increased productivity, and increasing productivity demands trade among specialized producers.

Economists define “efficiency” as reductions of per unit cost (“cost” adequately measured to include real non-monetary costs and benefits). Repeatedly Smil uses physical measures of “efficiency.” “[Poultry] crowding is also a perfect illustration of how maximization of profit drives growth even as that growth is not optimal. Studies have shown that broilers convert feed more efficiently, grow heavier, and have lower mortality when given more space” (p. 148). The issue is how to define “optimal?” We are not discussing the ethics of crowding poultry. (Although if you are considering ethical issues, then, perhaps, you should consider what the poultry want. Humans, after all, grow heavier and have lower mortalities in the countryside rather than in cities, yet humans flock to cities.) Suppose instead of talking about poultry we were to discuss the production of micro-organisms, and if the production of these organisms convert energy into biomass at a greater rate when less densely packed, but that the costs of the less densely packed micro-organisms are twice that of the densely packed. Choosing a process that is more costly cannot be justified on an economic basis; it can only be justified normatively (you should use less energy, or you should use more space). If you “should” do something because of normative precepts, then you are not dealing in “realities.”

Chapters 4, 5, and 6 deal with the human economy and its history. The chapters are deeply flawed. I am particularly disturbed by the graphs that are here (and throughout the entire book); the graphs are fitted, smoothed, and sourced. Yet curves frequently extend beyond the present; consequently, they are predictive, not descriptive. The extrapolated data are not from the sources provided. Still the graphs are sourced as if the predictions are derived from the sources; this may mislead the unwary. The smoothing of the data reduces the graphs’ value as historical devices. Curve fitting may be useful as a predictive device, but not as a descriptive device.

In his discussion on sailing ships (pp. 272-73), he is particularly confused. Again, he measures growth (progress) in physical units. But it is not the speed of delivery that matters, but the costs. In the eighteenth century, shipping speeds fell as well as costs relative to those of the seventeenth century. In the 1600s, pirates were numerous and markets small. Bigger ships that were low-cost haulers in the Baltic and North Seas trades were uneconomic in the North Atlantic circa 1650 because they were slow, vulnerable to pirates, and their carrying capacity was too large for colonial markets. Their large cargo holds were useless because colonial traders could not provide a full load for them. Narrow, fast boats sturdily built, carrying cannons, with many sails (and sailors) could make a rapid crossing (reducing their exposure to piracy) and if attacked the sailors could put up a formidable resistance to pirates. Defensive measures were costly both in terms of ship construction, labor, and cargo capacity. Still, given the circumstances, swift vessels were more economical than vessels designed for carrying freight. As the world changed so did the optimal (least cost) method of shipping. With the growth of markets, specialized resources (the British and French navies) were devoted to vanquishing piracy. Increased markets meant that ships with large cargo capacities (wide beams, consequently slow) could load a full cargo quickly. Market production increased; specialized port facilities increased. These developments affected the trade. By 1760 in the North Atlantic colonial trade, port times were shortened by months. The reduction in port times meant that the slower mid-eighteenth century ships in the North Atlantic trade could make more passages per year than their faster mid-seventeenth century counterparts (Walton 1967). Even when discussing the speed of shipping, Smil manages to confuse readers; when assessing the speed of sailing ships he states: “These comparisons imply an approximate tripling of sailing speeds … during the course of 18 centuries, once again a minuscule average gain if it were seen as a steady process of improvement, and even the doubling from 15 to 30 km/h took about 400 years” (p. 274). Certainly, using a cosmic scale diminishes everything to insignificance, but to do so is to embrace nihilism.

Smil does not embrace nihilism, instead he aligns himself and advocates a Degrowth strategy. The Degrowth group believes that continued economic growth is undesirable for a variety of reasons. Among them are environmental deterioration, inequality, racism, and global warming. Smil starts with an outline of “the long-term growth of global population” (p. 303), and on the very next page concentrates on Europe: “The growth during antiquity and Middle Ages was limited by inherent difficulties in securing sufficient [resources].” He blames the lack of urban areas to the costs of producing and delivering food. But there are other interpretations; an examination of the data shows that people lived shorter lives during past epochs primarily due to infectious diseases, many of which were caused by water pollution. Wages/incomes in urban areas were always higher than in rural areas, but death rates in urban areas were typically whole number multiples of those in the countryside. Roman aqueducts, for a time, reduced the urban penalty but the decline and fall of Rome meant a vast reduction in the supplies of potable water. Smil’s economic history leaves much to be desired. He makes clear that he is neither enamored with economic growth nor economics, unfortunately his distaste appears to cloud his judgement.

One of the faults that he attributes to economic growth is that it has done little to ease economic inequality. “The extent of global inequality (unweighted by population) appeared to change little between 1950 and 1975, but increased during the last quarter of the twentieth century . . . while the population-weighted trend showed a significant convergence of national incomes from the late 1960s, nearly all of it attributable to China’s post 1980 rise and without its gains global inequality showed little change between 1950 and 2000” (p. 433). First the unweighted data are meaningless; I do not know of a legitimate reason that anyone would compute an index of inequality giving equal weights to Timor-Leste (population 1.2 million) and China (population 1.428 billion). Secondly, in 1960 China had the largest number of impoverished people in the world; since then over 800 million Chinese have graduated from the ranks of the impoverished. If Smil had used 2010 as the terminal year rather than 2000, then additional hundreds of millions of Indians would have joined the Chinese in leaving the impoverished. These are the results of economic growth. Smil is correct that economic growth is a cause of inequality. Part of this is due to arithmetic: if incomes increase the right-hand side of the distribution of incomes will move further from the origin. Another reason for increased inequality is that increasing wealth (economic growth) is a result of humans reallocating resources to produce more than the same resources would have produced otherwise. The increase in income/wealth that entrepreneurs get are both rewards and incentives. If you take away incentives and rewards from entrepreneurs, you may reduce inequality, but, on the downside, you may get an economy like Venezuela’s.

Smil is firmly aligned with the Degrowth faction, partly out of aesthetics (there is too much “waste”), partly out of environmentalism, and partly out of technological/scientific pessimism. The first two are normative, the pessimism is predictive. He believes that we have reached an apogee of sorts: “We may never see such a concatenation of technical advances (electricity, internal combustion engines, automobiles, powered flight, chemical syntheses) as we experienced in the 50 years preceding WWI” (p. .423). Pessimism does sell; people and media who are proponents of optimistic scenarios are alternatively, vilified or ignored. Economic history provides an optimistic scenario; given incentives and institutions that protect individual freedoms and properties, we should expect a series of achievements matching or exceeding those of the past. The human economy is analogous to nature’s ecology; the more resources that are available in nature (sunlight, water, warmth, soil, organisms) the more complex is the ecology. Complexity opens ecological niches for new/differentiated organisms. The human economy/ecology is the largest it has ever been and growing ever more complex. In large urban areas where there are multitudes of economic transactions, novel economic niches are propagating ever more rapidly. (Granted there are always costs, among them is that the transmission of pathogens is easier in densely populated areas.)

As for the decline in the rate of scientific progress, that is a possibility, the question is how probable? Since 1950 we have discovered that the mass of the universe is actually 10-fold more the mid-century estimates; the existence of dark matter and dark energy may have vast unforeseen effects. In 1950 quantum effects where blackboard stuff, now they are being extensively exploited even before we have a complete understanding of them, and there is a very real chance that instantaneous quantum communications may be possible. The biological sciences have knowledge and technologies that were science fiction in 1950. These examples are massively incomplete, as always, because as the boundaries of one science expand, the boundaries of other sciences are affected and there are feedback effects. Smil has good company among the technological/scientific pessimists. But there is a lesson here; William Thomson (Lord Kelvin) is equally famous for his intellectual achievements in the sciences, and his risible statements on the age of the Earth, the decline of the industrial economy, the impossibility of powered flight, and the end of the Earth.. Lord Kelvin’s example is a caution to all: you should know and respect your limits.


John Cassidy, “Steady State: Can We Have Prosperity without Economic Growth?” New Yorker. February 10, 2020.

Gary M. Walton, “Sources of Productivity Change in American Colonial Shipping,” Economic History Review (1967).


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

Global Economic History

Editor(s):Roy, Tirthankar
Riello, Giorgio
Reviewer(s):La Croix, Sumner

Published by EH.Net (December 2019)

Tirthankar Roy and Giorgio Riello, editors, Global Economic History. London: Bloomsbury Academic, 2019. xiv + 370 pp. £26 (paperback), ISBN: 978-1-4725-8843-2.

Reviewed for EH.Net by Sumner La Croix, Department of Economics, University of Hawai‘i-Mānoa.

Tirthankar Roy and Giorgio Riello invited twenty-one contributors to explore one specific question: Why does a global perspective on economic history matter? The volume focuses on the last five centuries and takes the Great Divergence as the fundamental phenomenon around which our understanding of global economic history should be organized. The Great Divergence refers to the gap in wages and living standards that emerged, sometime between 1700 and 1800, among the most successful economies in Europe and the most successful economies in the Middle East, China, and India.

The first seven of the book’s nineteen chapters are devoted to reviewing our understanding of the Great Divergence, which has generated an enormous literature in history and economic history since Ken Pomeranz’s 2000 book on this topic. In this volume (chapter 1), Prasannan Parthasarathi and Pomeranz review this debate and criticize researchers who argue that the divergence emerged as early as the late seventeenth century in India and China (Broadberry and Gupta, 2015) and those who argue that the application of science to produce useful productive knowledge was the “critical” development in the early years of the industrial revolution in Europe (e.g., Mokyr, 2016). Jack Goldstone (chapter 2) provides a lucid chapter on the dating of the Great Divergence that features discussions of “efflorescent” growth in leading economies prior to the nineteenth century. (Efflorescent growth occurs when a brief spurt in productivity leads to several decades of high but ultimately unsustainable output growth.)

Patrick O’Brien (chapter 3) and Karel Davids (chapter 4) consider “useful and reliable knowledge and technology as two of the key factors explaining differing trajectories of global economic change” (p. 10). Both express some skepticism that changes in science and philosophy were accumulating in Europe during the seventeenth and early eighteenth centuries that ultimately led to the Great Divergence. Regina Grafe and Maarten Prak’s (chapter 5) interesting chapter considers how changes in organizations and institutions across different levels of society were both a response to and a cause of economic growth. Trevor Burnard (chapter 6) reviews how the development of plantations in the Americas contributed to British and French growth in the seventeenth and eighteenth centuries, while Maxine Berg (chapter 7) considers how changes in global consumption patterns affected the emergence of the Great Divergence.

The next set of chapters addresses a broad set of factors behind the emergence of the world economy after 1500. In their wide-ranging survey of the growth of global trade, Tirthankar Roy and Giorgio Riello (chapter 8) argue that “soft globalization” — trade in luxury goods — was an important precursor to the nineteenth century emergence of “hard globalization” — mass trade in commodities. J.R. McNeill (chapter 9) provides a succinct review of interactions between the global environment and the world economy, including such topics as the Columbian exchange, the environmental consequences of plantation economies, the effect of industrialization on the environment and “a rumination upon the concept of the Anthropocene” (p. 158). Alessandro Stanziani (chapter 10) contrasts the development of free labor forces in Britain and France, and the rise of indentured labor as slavery was abolished. Kaoru Sugihara (chapter 11) discusses how differential resource endowments affected industrialization in different parts of Asia from the mid-nineteenth to the mid-twentieth century and then briefly reviews the process by which industrialization diffused throughout Asia in the second half of the twentieth century. Bernd-Stefan Grewe (chapter 12) discusses the recent use of “commodity histories,” “commodity chain” and “value chain” approaches in economic history and then applies and critiques applications of these approaches to the study of gold in the world economy. And Youssef Cassis (chapter 13) provides a short survey of the rise of global finance from 1850 that focuses on the rise of international financial centers in both developed and developing countries.

The volume closes with six short (13-20 pages each) tightly-argued chapters that provide regional perspectives to global economic change over the past 400 to 500 years: Gareth Austin (Africa), Alejandra Irigoin (South America), Debin Ma (East Asia), Peer Vries (Europe), Bishnupriya Gupta and Tirthankar Roy (South Asia), and J. Thomas Lindblad (Southeast Asia). The chapter by Alejandra Irigoin is particularly worth reading, as it stands as a plea for more research by economic historians on how trade flows in the Pacific Ocean evolved from their origins in the Spanish trade in silver and Chinese goods in the seventeenth century and how they ultimately affected the global economy.

The book benefits from lucid writing by its contributors who cover extensive terrain in a small amount of space as they argue for a more global perspective on virtually every important issue addressed by economic historians. The literature on the New History of Capitalism appears in several chapters, with some authors dangerously close to ignoring its many flaws in their acknowledgement of its insights (Hilt, 2017; Olmstead and Rhode, 2018). The volume is relatively short, just 359 pages, given its ambitions to cover so many topics and to provide regional overviews spanning several centuries. The brevity may be due to the authors’ desire for the book to serve as a textbook for global economic history courses (as stated on the back cover), but the brevity comes at the cost of giving too little attention to European developments. For example, the authors refer repeatedly to the eighteenth- and nineteenth-century industrial revolution but tell the reader almost nothing about it. As a textbook, it cannot stand alone, but as a stimulating summary of some of the new contributions to global economic history, it is well worth reading.


Broadberry, Stephen, and Bishnupriya Gupta. “The Early Modern Great Divergence: Wages, Prices, and Economic Development in Europe and Asia, 1500-1800,” Economic History Review 59 (2006), 2-31.

Broadberry, Stephen, Hanhui Guan, and David Daokui Li. “China, Europe, and the Great Divergence: A Study in Historical National Accounting, 980–1850,” Journal of Economic History 78 (2018), 955-1000.

Hilt, Eric. “Economic History, Historical Analysis, and the ‘New History of Capitalism,’” Journal of Economic History 77 (2017), 511-536.

Mokyr, Joel. A Culture of Growth: The Origins of the Modern Economy. Princeton: Princeton University Press, 2016.

Olmstead, Alan, and Paul Rhode, “Cotton, Slavery, and the New History of Capitalism,” Explorations in Economic History 67 (2018), 1-17.

Pomeranz, Kenneth. The Great Divergence: China, Europe, and the Making of the Modern World. Princeton: Princeton University Press, 2001.

Sumner La Croix, emeritus professor of economics at the University of Hawai‘i-Mānoa, is the author of Hawai‘i: Eight Hundred Years of Political and Economic Change, University of Chicago Press, 2019.

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 ( Published by EH.Net (December 2019). All EH.Net reviews are archived at

Subject(s):Economywide Country Studies and Comparative History
Markets and Institutions
Geographic Area(s):General, International, or Comparative
Time Period(s):16th Century
17th Century
18th Century
19th Century
20th Century: Pre WWII
20th Century: WWII and post-WWII

Hawai’i: Eight Hundred Years of Political and Economic Change

Author(s):La Croix, Sumner
Reviewer(s):Alston, Lee J.

Published by EH.Net (October 2019)

Sumner La Croix, Hawai’i: Eight Hundred Years of Political and Economic Change. Chicago: University of Chicago Press, 2019. ix + 309 pp. $60 (hardcover), ISBN: 978-0-226-59212-1.

Reviewed for EH.Net by Lee J. Alston, Department of Economics, Indiana University.

Economic and political development is a longitudinal process. Sumner La Croix (emeritus University of Hawaii) gives us 800 years of the development of Hawaii from its settlement by immigrants from the Society Islands in the mid-thirteenth century to the present. The settlement of Hawaii was unique because it was uninhabited when the Polynesians arrived, which means they did not face resistance. This does not mean that the settlers started with a tabula rasa. They brought with them the culture and institutions that they left in the Society Island. In Chapter 1, La Croix gives us a short history of Hawaii, a Cliff’s Notes to the book. I encourage the reader not to stop there because the book is too rich in the details of institutional change. Indeed, it is the best case study that I have read on long run development.

In Chapter 2, La Croix takes up the issue of voyaging and settling Hawaii. He relies on recent work by archeologists who have established that Polynesians traveled to Hawaii sometime in the mid-thirteenth century. The Polynesians migrated strategically, i.e., they did not discover Hawaii by chance but rather by taking longer and longer voyages until they discovered Hawaii. They found an uninhabited fertile land and they thrived economically and demographically. The population growth rate in the first century was perhaps the highest recorded anywhere. It slowed from the mid-fourteenth century to the mid-fifteenth century and slowed further to reach an estimated population of 400,000 by 1778, at the arrival of Captain James Cook. To support such a high population growth, land must have been fertile and initially abundant. La Croix maintains that the social structure was relatively egalitarian. The crop of choice was taro.

From Chapter 3 on La Croix adopts the framework of North, Wallis and Weingast (NWW) in Violence and Social Orders. The Polynesians brought their home institutions of chiefdoms to the Hawaiian Islands. They competed with one another and violence erupted frequently. In the language of NWW, the chiefdoms were fragile states. Over time, archaic states emerged that were more stable and became natural states with systems of taxation and a hierarchy. Relying on work of archaeologists, La Croix documents that the agricultural surplus allowed for recreation as well as a more hierarchical structure with the elite taxing those below to allow for investments in stone monuments. Taxation consisted of labor dues, and consumption by chiefs and their retinue as they moved across their states. Ritualistic human sacrifices helped established legitimacy. The archaic states encompassed entire smaller islands with the larger islands splitting into several states generally delineated by volcanic slopes. Despite rebellion and wars, the population continue to grow. Over time, agriculture expanded from ponded taro production to include large rain fed fields on volcanic slopes.

The arrival of Captain Cook in 1778 upset the relatively stable natural order in the Hawaiian states (Chapter 4). The interactions with the whites from the west meant a dramatic decline in population from disease, as much as an 80% drop in population between 1778 and 1831. This exceeds by far the decline in Europe from the Black Death. Amid the population decline, Hawaii experienced a resource boom in the extraction of sandalwood, mostly for the Chinese market. The decline in population and the rush for sandalwood meant a decline in agricultural production, yet somewhat perversely, wages did not increase because of consolidation of political power. In 1795, Kamehameha, one of the ruling chiefs on the island of Hawaii conquered all of the islands except for two minor islands. He did so by amassing an arsenal of weapons before other chiefs. Kamehameha established himself as King and cleverly solidified his power by cutting in the other chiefs on the rents from land and sandalwood. The new dominant network was powerful enough to extract more labor at lower wages in agriculture and sandalwood extraction. Kamehameha died in 1819 and was succeeded by his son, who, though he managed to stay in power, was less successful in managing the overharvest of sandalwood that was more or less depleted by 1830.

Two other booms followed the sandalwood boom (Chapter 5): supplying whaling ships and sugar cane cultivation by British, German and U.S. corporations. Both sugar and supplying whaling ships were labor intensive so wages rose considerably. Population continued to decline from new epidemics. La Croix maintains that in the face of increased power of foreign corporations, the King privatized most of the land including his own holdings. The rationale was that land held in private would be harder to usurp should a foreign power take over Hawaii. The King also adopted other western institutions, including more rule of law in general along with a written Constitution. In the language of NWW, Hawaii by mid-nineteenth century had become a mature natural state.

The monarchy by the mid-nineteenth century seemed relatively stable and accommodated the nascent sugar industry. What upturned the apple cart such that Hawaii became a U.S. territory in 1898? In Chapter 6 La Croix argues convincingly that two factors led to the increased power of the sugar industry, which in turn led to the U.S. toppling the monarchy: population growth in the U.S. West where Hawaii sold most of its sugar; and a reciprocal trade agreement with the U.S. in 1876 that eliminated any tariff on Hawaiian sugar.

After territorial status, native Hawaiians lost power and three forces dominated Hawaii: the sugar industry, the territorial government and the U.S. military. Native Hawaiians increasingly lost power. There was a positive side in that increasingly U.S. institutions became implanted but with fewer checks and balances because power resided in the territorial governor and not the legislature (Chapter 7). For most native Hawaiians, territorial rule was extractive and arbitrary. Chapter 9 “Statehood and the Transition to an Open-Access Order” follows more cleanly after Chapter 7. The details are fascinating on the forces that led to statehood, which Hawaiians overwhelmingly supported. Hawaiians viewed statehood as clearly superior to the colonial style rule of territorial status. With statehood came representation in the U.S. Congress and less arbitrary policies. Importantly, neither the territorial nor the state government ever properly redressed the former confiscation of crown lands and lack of secure property rights to land for the majority of Native Hawaiians. In Chapters 8, 10 and 11, La Croix chronicles the failed policies of territorial and state policies concerning homes, leases and land reform intended to benefit those left behind. The policies consistently never met their stated goals. Despite the failures, Hawaii boomed from the 1960s to today, largely through tourism from the U.S. In his concluding chapter, La Croix discusses the broad sweep of Hawaiian history including the importance of self-rule for 600 years that set the stage for the successful transition to statehood. Problems still exist concerning the recognition of the rich cultural Native heritage but there is strong advocacy for recognition. Overall, La Croix pulls together an amazing amount of interdisciplinary scholarship to shed light not just on Hawaiian economic and political development but on the larger process of institutional change.

I highly recommend this book.


North, Douglass C., John Joseph Wallis and Barry Weingast. 2009. Violence and Social Orders: A Conceptual Framework for Recorded Human History. Cambridge: Cambridge University Press.

Lee J. Alston (Professor of Economics, Indiana University and Research Associate, NBER) is co-author of Institutional and Organizational Analysis: Concepts and Applications, Cambridge University Press (2018) and Brazil in Transition: Beliefs, Leadership, and Institutional Change, Princeton University Press, (2016).

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 ( Published by EH.Net (October 2019). All EH.Net reviews are archived at

Subject(s):Economywide Country Studies and Comparative History
Geographic Area(s):Australia/New Zealand, incl. Pacific Islands
Time Period(s):General or Comparative

Uneven Centuries: Economic Development of Turkey since 1820

Author(s):Pamuk, Şevket
Reviewer(s):Williamson, Jeffrey G.

Published by EH.Net (April 2019)

Şevket Pamuk, Uneven Centuries: Economic Development of Turkey since 1820. Princeton, Princeton University Press, 2018. xiii + 352 pp. $35 (hardcover), ISBN: 978-0-691-16637-7.

Reviewed for EH.Net by Jeffrey G. Williamson, Department of Economics, Harvard University.

Uneven Centuries is an extraordinary economic history text, and for many reasons. Its author, Professor Şevket Pamuk of Bogaziçi University in Istanbul, is the country’s greatest living economic historian. That alone would insure a very good book, especially given that the author writes so well. But it also has no competition: there is no other modern economic history of Turkey available in English. It is also innovative in ways that will appeal to students, their teachers, and even to scholars looking to learn more about the evolution of the Turkish economy over the past two centuries. First, it is comparative so that Turkey’s performance can be gauged relative to the rest of the Middle East, to the rest of the Third World, and to the richer leaders in Europe and North America. Second, his narrative is supported by both quantitative and qualitative evidence. Third, each historical epoch analyzed in the book is preceded by a survey of the development literature brought to bear on the author’s assessment of Turkey’s performance, especially in terms of the economic policies implemented in both Turkey and the rest of the world. Fourth, Pamuk defines Turkey’s economic epochs in terms of domestic policy regimes and world economic environments, rather than by wars, revolutions and other dramatic historic events. Finally, the author does not search for Turkey’s sources of growth just by using standard growth and development theory, but rather makes extensive use of the new neo-institutional thinking associated with Douglas North, Daron Acemoglu, James Robinson, Dani Rodrik and their followers. One final, final introductory word: This book should be read more widely than just by scholars of the Middle East since Turkey is one of the very few Third World countries that have developed without colonial control.

There are eleven chapters in Uneven Centuries between its Introduction and Conclusion. Chapter 2 (Economic Growth and Human Development since 1820) sets the stage by documenting Turkey’s income and income per capita growth since 1820. But that’s not all. As does the rest of the book, it documents fertility, mortality, schooling, literacy, urbanization and other dimensions of human development. Chapter 3 (Institutions and the Ottoman Past) offers a rich description of complex Ottoman institutions and suggests how they might have influenced the economic performance presented in the previous chapter. I must confess that I found this and Chapter 6 among the most exciting in the book. Chapter 4 (Reforms and Deficits: Response to European Challenges) deals mainly with two issues. The first has been present throughout the two centuries, namely regional conflict with the central government’s power, in this case over the latter’s ability to extract more tax revenues thus to finance a better infrastructure and a stronger military to resist threats from the East (mainly Russia) and the West. The chapter also pays attention to institutional developments whose goal was to secure external capital to finance deficits resulting from the same perceived external threats. Chapter 5 (Opening to Foreign Trade and Investment) discusses Turkey’s response to the Industrial Revolution in western Europe and the evolution of the first big globalization boom. Turkey went open, thus flooding its economy with British manufactures and causing de-industrialization. They made that choice partly to insure Britain’s military support in response to perceived external threats. Chapter 6 (Economic Development and Institutional Change, 1820-1914) picks up where Chapter 3 left off, arguing why and how institutions changed as they did, or did not, and their likely impact on economic performance. Chapter 7 (From Empire to Nation State) covers the negative impact of war and revolution on the Turkish economy during the transition from an elderly empire to a young nation state. This and Chapter 8 (Economic Development and Institutional Change, 1914-1950) are the longest and richest parts of the book, partly because so much changed over those decades, partly because the evidence needed to assess contending views is so much more abundant, and partly because the period has generated such a lively growth and development literature. The last four chapters before the book’s conclusion deal with the modern era (1950-2015) and thus will be more familiar to most readers simply because the experience is more recent. But even here, the comparison with the rest of the Third World offers an impressive contribution. And for the first time in the book, Pamuk devotes much greater attention to who gained from growth, regions in the West vs. regions in the East, cities vs. the countryside, and rich vs. poor within those locations. The reason why Pamuk pays more attention to distribution issues in the second century than in the first are, presumably, two: the data are much better and the policy and world economic changes are so much more dramatic. Chapter 9 (Inward-Oriented Development after World War II) and Chapter 10 (Economic Development and Institutional Change, 1950-1980) assess the ISI policy period implemented everywhere in the Third World, but here the assessment is, once again, explicitly comparative making the sources of Turkish growth experience so much clearer. The same is true of Chapters 11 (Neoliberal Policies and Globalization) and Chapter 12 (Economic Development and Institutional Change, 1980-2015), the more recent period of what has been called hyper-globalization.

As I said at the start, Uneven Centuries is a very good economic history text. But I should stress that it is more than that. Even knowledgeable Turkey scholars will find a ton of research topics laid out for them on these pages.

Jeffrey G. Williamson is Laird Bell Professor of Economics (emeritus) at Harvard University and Honorary Fellow, Department of Economics, University of Wisconsin. His most recent books are The Spread of Modern Industry to the Periphery 1870-2007 (Oxford University Press 2017), edited with Kevin H. O’Rourke; Has Latin American Inequality Changed Direction? (Springer, 2017), edited with Luis Bértola; and Unequal Gains: American Growth and Inequality since 1700 (Princeton University Press 2016) with Peter H. Lindert.

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 ( Published by EH.Net (April 2019). All EH.Net reviews are archived at

Subject(s):Economywide Country Studies and Comparative History
Geographic Area(s):Middle East
Time Period(s):19th Century
20th Century: Pre WWII
20th Century: WWII and post-WWII

Routledge Handbook of the History of Global Economic Thought

Editor(s):Barnett, Vincent
Reviewer(s):McCann, Charles R. Jr.

Published by EH.Net (October 2018)

Vincent Barnett, editor, Routledge Handbook of the History of Global Economic Thought. London: Routledge, 2015. ix + 348 pp. $255 (hardcover), ISBN: 978-0-415-50849-0.

Reviewed by Charles R. McCann, Jr., Department of Economics, University of Pittsburgh.

This volume, viewed by the editor as a Cosmoconomy or Economographia, is but a “modest attempt to map the global contour-lines of economic ideas” — modest, that is, with respect to Ptolemy’s Cosmographia, itself “an early attempt to delineate the world’s physical geography” (p. 1). The editor freely admits to a lack of comprehensiveness, instead opting for “a condensed introductory overview and regionally coordinated analytical account of a significant number of national/regional traditions in economics . . . that will facilitate comparisons across nations and between historical eras” (p. 1).

In addition to Barnett’s Introduction and Conclusion, there are twenty-eight substantive chapters surveying the progress of economic thought as it developed in more than forty countries and regions. The volume is divided into five parts: Europe, the Americas, the Middle East, Africa, and the Asia-Pacific. Coverage includes not merely individual countries, but as well entire regions and even cultural groups, such as Spanish-speaking South America, Arab-Islamic Economics, North Africa (included among the Middle-Eastern countries), West Africa, Southern Africa, and the Asian Tigers.

Given the scope of the coverage, and the different approaches employed, it is not surprising that the quality and tone of each is uneven. The chapters are, for the most part, approximately ten pages or less in length, with two notable exceptions, these being the chapter on the United States (John King, 27 pages) and the one on England (Roger Middleton, 21 pages). It seems rather obvious why each would require more extensive coverage. Given the material and the manner of its presentation, it seems best to comment briefly on each chapter.

The United Kingdom is represented in the first three substantive chapters – England (Middleton), Scotland (Alexander Dow and Sheila Dow), and Ireland (Renee Prendergast). This is perhaps understandable, as their cultural and intellectual environments differed and to a somewhat great extent. Middleton, having noted the difficulty in identifying an “English” economics as distinct from a “British” variant, nonetheless defined “English economics” as “that produced by ‘English economists,’ with these defined as those working (at least for a major part of their career) in England which, in turn, encompasses Wales and Ireland (Northern Ireland from 1923)” (p. 17). Notably, however, this excludes Scotland, which, as Dow and Dow explain, became, with the development of an Enlightenment philosophy that “combined reason and evidence within a theory of human nature,” itself the product of a uniquely Scottish cultural and social milieu, the catalyst for the emergence of classical political economy (p. 38). As to Ireland, Prendergast informs us that, while Ireland may have produced economic theorists of great renown, nonetheless “there was nothing specifically Irish about their contribution.” Their recognition may be in the “models” they employed, “designed to facilitate an understanding of the real economy,” inspiring an awareness “of both specific institutional features, and the dangers of general maxims” (p. 56).

With respect to the development of economic thought on the continent, we have chapters on Italy (Pier Luigi Porta), Greece (Michalis Psalidopoulos), Spain and Portugal (José Luis Cardoso and Luis Perdices de Blas), Germany (Erik Grimmer-Solem), Sweden (Lars Magnusson), and Russia and Ukraine (Francois Allisson). Curiously, there are no chapters on the development of French or Austrian economic thought! The Italian Enlightenment is “the greatest contribution of Italian culture to the development of a common European tradition of civil rights and enlightened governance,” distinct from its French and Scottish counterparts “in its attention to the interplay between legislation and moral sentiments, civic culture and economic development, fiscal technique, and social structure” (p. 60). Significantly, the core of Italian economic thought lies in the civil tradition, “the product of a special blend of lay and religious motives, which stems from the re-discovery . . . of antiquity or the pre-Christian world” (p. 58). This focus continued through the nineteenth century. The presentation of the Greek tradition is somewhat disappointing, as its primary focus is on the period from 1830 to the present, thus omitting what should have been a fascinating discussion of the development of the ancient roots of modern economic thought. By contrast, Cardoso and Perdices de Blas set the stage for a review of the development of Spanish and Portuguese economics beginning in the sixteenth century with the works of the Scholastics, the contributions of which “were some of the side effects of their musings on the spiritual salvation of human beings in all their activities, especially those related with dangerous trading activities completely divorced from the honorable, virtuous life in the countryside” (p. 78). Sadly, note the authors, Spanish economists in the eighteenth century in particular, while cognizant of European contributions, nonetheless produced little in the area of economic theory, “showing a noticeable preference for studies on applied economics” (p. 81).

The chapter on the development of economic thought in Germany focuses primarily on the nineteenth and twentieth centuries, with the occasional nod to the eighteenth, due perhaps to the fact that Germany as a unified nation-state was formed only in 1871. Of significance is the influence it was to have in the United States and Japan, where the transfer of German ideals were implanted in the universities and ultimately became the foundation for the emergence of the American welfare state. Sweden is something of a late-comer if one employs the metric of “printed works,” which date only from the early eighteenth century; prior to this, Swedish economics “was defined in its Aristotelian meaning as an Art of Household Management” (p. 96). English, French, and German, and later Austrian, influences are particularly noticeable in early Swedish economic thought into the early twentieth century, when an identifiable Swedish School emerged. Finally, economic thought in Russia and the Ukraine, combined here due to the common history, did not really come into their own until the nineteenth century; again, the seventeenth and eighteenth centuries saw the publication of legal, political, and religious texts presenting economic ideas.

Part II, the Americas, is comprised of six chapters – the United States of America (J. E. King), Canada (Robin Neill), Mexico and Central America (Richard Weiner), the Caribbean (Mark Figueroa), Spanish-speaking South America (Veronica Montecinos), and Brazil (Patrice Franko). While American economic thought may be said to antedate independence from Britain, King’s primary focus is on the development of economic thought from the early nineteenth through the twentieth century. The story has been told numerous times, but the presentation is nonetheless quite compelling. Canadian economic thought is inextricably entwined with that of the United States, with Canadian economists having held important posts in American universities. The chapter on Mexico and Central America focuses primarily on Mexico, noting the influence of outside forces on the development of economic thought until the twentieth century, when there came into being a Mexican variant, rooted in culture and history (p. 145). The Caribbean economies suffered greatly from colonial administrations; the approaches to economics in these societies vary greatly, from Keynesian to Marxist, focusing primarily on issues of development and administration. Economic thought in Spanish-speaking South America developed in a highly-politicized atmosphere, with the influence of the Catholic Church assuming a prominent role. Finally, Brazilian economics tends to pragmatism, with approaches tuned to the needs of the times.

Part III, the Middle East, contains five chapters — Turkey and the Turkic linguistic zone (Eyüp Özveren), Israel (Yuval Yonay and Arie Krampf), Arab-Islamic economics (S. M. Ghazanfar), Persia/Iran (Hamid Hosseini), and North Africa (Hamed El-Said). The chapter of Turkish economics is more an excursion into economic history than the history of economic thought, as much of Turkish economics was absorbed from outside. In Israel, Don Patinkin and the “Patinkin boys” assume a starring role in the Americanization of an “Israeli economics” (pp. 194-97). The Arab-Islamic and Persian/Iranian contributions are taken to have roots in the seventh and eighth centuries with the writings of Arab and Islamic scholars; indeed, many of these scholars were producing important, if neglected, works during the European Dark Ages! Finally, the history of the economics of North Africa — Algeria, Egypt, Libya, Morocco, Tunisia, and Sudan — “suggests that the impact of economic ideas as pure theory has (at least in the short-run) been limited,” with economic policies “often generated by factors outside the economics profession” (p. 238).

Part IV, Africa, includes three chapters — West Africa (Gareth Austin and Gerardo Serra), Southern Africa (Tidings P. Ndhlovu and Nene Ernest Khalema), and Angola and Mozambique (Steven Kyle). African economics in general is a development of and reaction to colonialism and dependence on western European ideals. In West Africa, competition developed between those who advocated the assimilation of Western economic ideas and those who advocated an indigenous West African model, and, following independence from colonial rule, there emerged a sort of pan-African model, incorporating elements of Leninist socialism (pp. 246-47) and the identification of backwardness with dependency (p. 250). In southern Africa, colonialism “imprisoned the African ways of understanding commerce, utilising indigenous economic ideas, traditions, beliefs and ideologies” (p. 266). In Angola and Mozambique the Marxist ideology that came to dominate following the collapse of Portuguese colonial rule “is virtually indistinguishable from general justifications for authoritarian extractive regimes of any political stripe,” and so the post-independence ideologies “are in many ways simply extensions of the old colonial regimes under new management” (p. 270).

Part V covers, in five chapters, the Asia-Pacific Region — Australia and New Zealand (William Coleman), China (Zagros Madjd-Sadjadi), Southeast Asia (Cassey Lee and Thee Kian Wie), the Asian Tigers (Takashi Kanatsu), and India (Balakrishnan Chandrasekaran). Again it is curious that no chapter appears on the development of Japanese economic thought. Coleman begins with the assertion that “any story of economic thought in Australia and New Zealand will necessarily tell of the attempt to plant and cultivate in uncleared ground the long developed vine of older societies” (p. 281), and concludes with the observation that “there is no Australia in economics any longer. Australian economics is at an end” (p. 290). With respect to China, it is culture and religion more than anything else that influenced the development of economic thought, with Confucianism and Taoism, legalism and Maoism, at various times competing for dominance (p. 295). Indonesia and Malaysia, representative, we are told, of Southeast Asia, developed under Dutch and British rule, respectively, and so there emerged “no singular or identifiable school of thought in these countries.” Such writings on economic matters as there were centered problems of “reconstruction and development,” and a concern with ethnic conflict (p. 312). The Asian Tigers — Hong Kong, Singapore, South Korea, and Taiwan — to varying degrees relied on state-directed development, with the government working in concert with the private sector to achieve high levels of industrial growth. Finally, culture has been a dominating influence in Indian economic thought, which is seen as being “based fundamentally on the liberty and freedom of individuals within the ambit of the family system” (p. 323). Chandrasekaran argues that any commitment to a unique, indigenous economics was abandoned after independence, with academic economics focusing on Marxism and neoclassicism (p. 374).

This is indeed an interesting project, one that by its nature requires a great degree of selection as to the material to be included. One may point to flaws in the coverage — obvious choices excluded, unusual ones given treatment; the choice is quite idiosyncratic. Yet in many of the offerings there is much to find that should provoke more extensive study.


Charles R. McCann, Jr. is a Research Associate at the University of Pittsburgh, and the author of Individualism and the Social Order and Order and Control in American Social Thought, both published by Routledge, and, with Mark Perlman, the two-volume Pillars of Economic Understanding (University of Michigan Press), among other publications.

Copyright (c) 2018 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 ( Published by EH.Net (October 2018). All EH.Net reviews are archived at

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

British Imperialism and the Making of Colonial Currency Systems

Author(s):Narsey, Wadan
Reviewer(s):Schuler, Kurt

Published by EH.Net (June 2017)

Wadan Narsey, British Imperialism and the Making of Colonial Currency Systems. Basingstoke, UK: Palgrave Macmillan, 2016. xv + 356 pp. $115 (cloth), ISBN: 978-1-137-55317-1.

Reviewed for EH.Net by Kurt Schuler, Center for Financial Stability

There must be few cases of a publication by an active scholar so long delayed as this book. Wadan Narsey wrote the bulk of it as his dissertation at Sussex University (England), completing it in 1988. That was at the beginning of his career as a university professor in his native Fiji. His retirement, hastened by the military dictatorship of which he was an outspoken critic, gave him the leisure to revisit and revise the dissertation for publication. The result is a work that has at least as much interest as when it was first written. There were many critics of the world monetary system then; there are at least as many now. It is all the more important, then, to know whether previous incarnations of the world monetary system worked better than the present one, or whether they had hitherto neglected disadvantages that should weigh against them.

The central argument of the book is that the British government arranged colonial monetary systems much more for its benefit than for that of the colonies. The British government’s ability to commandeer colonial financial reserves in London was crucial to enabling the Bank of England and the London financial market to avoid a number of crises. Among Britain’s colonies, those with a white majority or a large white minority received more advantageous treatment than majority nonwhite colonies, contributing to their faster economic development.

After an introduction laying out the author’s arguments and how they differ from conventional views, the book discusses how Britain adopted the gold standard; the general outlines of the currency policies it established for its colonies; case studies of currency policies in India, the Straits Settlements (present-day Singapore and Malaysia), West Africa, and East Africa; how Britain used colonial currency reserves to support the often weak pound sterling, especially after World War I; British government influence on economists’ debates about currency boards in the period of decolonization; differences between imperial currency policies in white and nonwhite colonies; and a conclusion. There is much more material than a brief review can cover: the introduction specifies no fewer than nineteen misconceptions that the author aims to dispel. I will therefore focus on matters closely related to the central argument.

It may be useful to begin by describing the attitude of Britain and other modern colonial powers toward currency policy in their colonies. (This paragraph is a combination of facts Narsey discusses and my own observations.) All the colonial powers considered currency policy to be a power reserved to the imperial government, not left to the choice of local officials either appointed or elected. The colonial powers jealously guarded the prerogatives of minting coins, setting the legal value of foreign coins, chartering banks, and regulating note issues. The frequent result of their centralizing impulses was shortages of currency. Colonists tried to alleviate shortages by expedients that they hoped would escape imperial attention but that usually did not. All the colonial powers used currency policy to promote imperial ties over regional ties to countries outside the empire. At least for its larger colonies, every colonial power established a note issue and often a coinage distinct from its own. Doing so created the possibility of separating colonial from metropolitan currency policy in case of war or other exigencies. Also, given that the central banks of the nineteenth century colonial powers were privately owned, separating colonial from metropolitan note issue avoided giving the central banks even more influence than they already had. None of these points is typically mentioned in textbook accounts of money or even in many historical accounts of the world monetary system.

The book touches on the British monetary debates of the early nineteenth century, but to my taste gives insufficient attention to how they influenced British colonial currency policy. The first currency board was established in New Zealand in 1847 by a governor who had absorbed the ideas of what came to be called the Currency School of British economists. In keeping with the Currency School’s dislike of multiple note issuers, he persuaded the legislature to replace private competitive note issue with a government monopoly. Similarly, James Wilson, though a member of the opposing Banking School, contended when he became the top finance official for India that note issue was no necessary part of banking, and likewise replaced private competitive issue with a government monopoly that began in 1862. After that, government monopoly of note issue gradually spread to other British colonies in accord with the largely unexamined assumption that, like the minting of coins, it was properly a prerogative of the state.

Narsey spends considerable time arguing that the coinage system of most British colonies was disadvantageous to the inhabitants because there were no local gold coins, so redemption was in fiduciary silver coins having unlimited legal tender or funds in a London bank. He claims that the British government wanted the colonies as a dumping ground for British silver coins. I am unclear why that was such a big benefit, and who it benefited. The largest producers of silver were countries outside the British Empire. If the Royal Mint were the intended beneficiary as the producer of the coins, would it not have been more profitable to issue token coins? And from some theoretical standpoints, such as Knut Wicksell’s ideal of a pure credit economy, redemption in London funds seems superior to redemption in gold coins.

Narsey is on firmer ground with his criticism of note issues. By the time of World War I, currency boards had become the standard imperial prescription for colonies where private competitive issue had never taken root or was considered desirable to replace. Narsey assembles figures and damning archival evidence showing that over time, the British Treasury increasingly required colonial currency boards to concentrate their London reserves in low-yielding assets. Over the protests of colonial administrators and the Crown Agents, a government body that managed the London reserves of many colonies, reserves formerly invested in the securities of other British colonies, British municipalities, or long-term British government securities were shifted to short-term British government securities and bank deposits earning little or no interest. There was no justification in portfolio management for such concentration in short-maturity, low-yielding assets; it was simply a way for the British government to forestall a buildup of British liabilities to the colonies that they might at some point want to redeem for foreign currency.

Although Narsey focuses his analysis of London reserves on currency boards, he explains that there were also other types of colonial funds that combined were even larger. Colonial savings banks often invested in British securities. To enforce prudent finance, colonial governments had to hold reserves in London equal to a certain percentage of average revenue. The British government also expected marketing boards and other colonial entities with surplus funds to hold a large portion in London. As with colonial currency boards, over time the British Treasury required these bodies to hold increasingly large concentrations of short-maturity, low-yielding assets. Even aside from the question whether such large London reserves were necessary in the first place, low yields significantly reduced the amounts colonial governments earned, which they might have used for spending on roads, schools, public health, or other things having high economic returns.

It is well known that after World War II the British government was quite worried about the possibility that British colonies might want to exchange their sterling reserves for U.S. dollar reserves, on such a scale that Britain would be unable to satisfy the demands for redemption. Narsey contends that even before World War I, the stability of the London financial market and the Bank of England relied heavily at times on colonial reserves and the British government’s ability to direct them into channels that did not produce the best returns for colonial governments. His evidence is provocative but, because it is outside of his main focus, necessarily incomplete. If correct, it would upend the longstanding view of the Bank of England as a pillar of stability under the pre-World War I gold standard.

The imperial government allowed more latitude for local influence on currency policy in white colonies (or colonies with a large minority white population, notably South Africa) than in nonwhite colonies. White colonies were more often allowed to have private competitive note issue; substantial local asset backing for government note issue, rather than 100 percent external assets; gold coins; and their own mints. Narsey attributes the faster economic development of white colonies in part to currency policies that required less holding of foreign assets. I am skeptical that currency was a big factor. Countries populated mainly by the descendants of British settlers are not just among the most successful colonies that have ever existed, they are among the most successful nations. They are so successful that I doubt they are the proper standard of comparison. The long-independent countries of Latin America, or the countries of Central Europe that became independent after World War I, had even more autonomy than the white British colonies, hence even more possibility for making currency policy promote economic development. Most failed miserably, suffering episodes of exchange controls and high inflation that retarded their financial systems and did nothing to promote growth in the wider economy. The same is true in most former British colonies that have replaced currency boards with central banks. What under currency boards were often one-to-one exchange rates between the local currency and sterling frequently depreciated to rates of hundreds, thousands, or, in the case of Zimbabwe, trillions of local currency units per pound sterling. Hence despite the justice of Narsey’s criticisms about overconcentration of reserves in low-yielding assets, I suspect that currency boards were probably only modestly worse than the best available option and considerably better than some options for exchange rate policy and the structure of the monetary authority.

The book is right up my alley, but even taking that into account, I have more heavily underlined it and scribbled in the margins than anything I have read in years. Read it if you are or aspire to be a scholar of the world monetary system of the nineteenth to mid-twentieth centuries; the role of sterling in the system; British imperialism; or currency boards. You may find a substantial amount that you disagree with, as I did, but it will stimulate you. Reflecting its origins as a dissertation, the prose can be dense and repetitive, but it is because the subject matter is complex and not because it is laden with jargon or passive voice.

An old joke claims that there are two kinds of people, optimists and realists. Continually asking, as Narsey does, “Who benefits?,” is one of the marks of a realist. Economists are always in need of a dose of realism to remind ourselves that there are more things in heaven and earth than are dreamt of in our textbooks.

Kurt Schuler is Senior Fellow in Financial History at the Center for Financial Stability in New York. In the 1990s his writings on currency boards, mainly with Steve Hanke of Johns Hopkins University, influenced the establishment of currency board-like systems in Estonia, Lithuania, Bosnia, and Bulgaria. His most recent book is The Bretton Woods Transcripts (with Andrew Rosenberg, 2013). These are his personal views.

Copyright (c) 2017 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 ( Published by EH.Net (June 2017). All EH.Net reviews are archived at

Subject(s):Financial Markets, Financial Institutions, and Monetary History
Geographic Area(s):General, International, or Comparative
Australia/New Zealand, incl. Pacific Islands
Time Period(s):19th Century
20th Century: Pre WWII