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The Rise of the Western World: A New Economic History

Author(s):North, Douglass C.
Thomas, Robert Paul
Reviewer(s):Coelho, Philip R. P.

Project 2001: Significant Works in Economic History

North, Douglass C. and Robert Paul Thomas, The Rise of the Western World: A New Economic History. New York: Cambridge University Press, 1973. viii + 171 pp. ISBN: 0-521-29099-6.

Review Essay by Philip R. P. Coelho, Department of Economics, Ball State University. <00prcoelho@bsu.edu>

New or Old Economic History? Incentives and Development

This is a landmark book on the impact of property rights on European economic development. Published over a quarter of a century ago, its stated goal is “… to suggest new paths for the study of European economic history rather than … either [a detailed and exhaustive study or a precise empirical test that are the] … standard formats” (p. vii). North and Thomas attempt to identify the elements that allowed the Western European economy to rise to affluence. Their argument is made transparent in Chapter One (Theory and Overview): the key to growth was and is an efficient economic system. Efficient in the sense that the system of property rights gives individuals incentives to innovate and produce, and, conversely inhibits those activities (rent-seeking, theft, arbitrary confiscation and/or excessive taxation) that reduce individual incentives. They argue that property rights are classic public goods because: (1) once a more efficient set of property rights is discovered the marginal cost of copying it is low (compared to the cost of discovering and developing it); (2) it is prohibitively expensive to prevent other political jurisdictions from emulating a more efficient set of property rights regardless of whether they contributed to their construction; (3) and finally, the idea of a set of property rights, like all ideas, is non-rival — we can all consume the same idea and the “stock” of the idea is not diminished. These public good aspects lead them to conclude that there may be under investment in the attempts to create more efficient sets of property rights because the jurisdiction that invests in the development of property rights pays the entire cost of their development but receives only benefits that accrue to its jurisdiction, while other jurisdictions can get the benefits without any of the developmental costs. Thus, the problems of public goods and the “free riders.”

Chapter Two (“An Overview”) sets the historical stage for their analysis. North and Thomas begin with tenth-century Europe and an examination of the classic feudal system. They contend that relatively low population densities and the absence of security (both economic and personal) led to a retreat from market exchange to one of self-sufficiency and to the development of feudalism. Protection was valuable and had to be paid for, but in the absence of markets it was paid for in kind rather than money. Since agricultural output could not be exchanged in the market (land) lords demanded labor services (dues) rather than output shares. Labor dues could be used to produce a more desirable set of consumables than output shares. Lacking market exchange, manorial labor was more fungible than agricultural output. The authors argue that from kings down to peasants, the absence of markets was the mid-wife to feudalism. The second prong of their thesis is that in feudalism, as in any societal arrangement, there existed a myriad of details, known as the custom of the manor that allowed the system to function. Once established, these customs became the set of property rights that molded the economic and personal relationships of feudalism.

As the centuries progressed populations grew and manorial economies replicated themselves. North and Thomas contend that land was available at the constant marginal cost (the cost of clearing land) up to the thirteenth century. At the end of this period diminishing returns to labor employed in agriculture manifested itself. The growth of population densities and the establishment of political order allowed markets to emerge. Diminishing returns and emergent markets gave feudal lords incentives to convert their serfs’ labor dues into fixed money payments. The lords were better off receiving a fixed payment rather than labor dues because the market price for labor was falling due to Malthusian diminishing returns to labor in agriculture. The commutation of labor services into money payments could not be reversed when labor became more valuable during the plagues of the fourteenth century. Amending the custom of the manor was subject to severe transactions costs, consequently by the sixteenth century servile labor in Western Europe was not viable.

Part Two (Chapters 3-7) presents evidence to buttress this thesis. Chapter 3 explores property rights in humans and land, Chapters 4 and 5 develop the frontier movement and the settling of land. Chapter 6 explores diminishing returns to agriculture in the thirteenth century, and Chapter 7 the devastation associated with the fourteenth century. Part Three of the book deals with the period 1500 to 1700 and covers the “unsuccessful” national economies of Spain and France and the successful ones of Holland and England. North and Thomas argue that inefficient sets of property rights hindered economic growth in Spain and France, while more efficient sets promoted the economic growth of England and Holland.

The paragraphs above are a rough sketch of the North-Thomas thesis on the growth of Western Europe. How well have the last 25 years of the twentieth century treated it, and how much consideration should it be given? The first question is relatively easy to answer. Texts and books in European economic development and history generally cite The Rise of the Western World, with the notable exceptions of David Landes and Rondo Cameron. In the academic literature it is frequently cited: The Social Science Citation Index for the years 1986-1990 gives the book about fifteen citations per year (68 total citations in the entire five year period), and for the last decade of the twentieth century (and subsequent to North winning the Nobel Prize in economics) citations rose to about twenty per year.1 But how big is that? It is larger than most, but not in the league of scholarship that alters the way a subject is considered. A relevant example is Ester Boserup’s The Conditions of Agricultural Growth that, for the same period (1986-90), was cited 158 times, or more than twice as frequently as North and Thomas. I believe the citation count assessment of the significance of this book is relatively accurate. The Rise of the Western World is an addition to the historiography of property rights, but it does not accomplish its stated goal: to explain the rise of the West. Furthermore there are significant gaps in its argument.

First, its reliance on Malthusian population theory may be misplaced. In 1966 the aforementioned Ester Boserup published her work The Conditions of Agricultural Growth (not cited in North and Thomas). From empirical evidence she argued that increasing populations led to the intensification of economic activities: From hunting and gathering, to a long-cycle agricultural rotation mixed in with hunting and gathering, to settled agriculture. In Boserup’s analysis output per man-year rises in agricultural societies relative to hunting and gathering societies, but output per hour devoted to the acquisition of food may have fallen. Boserup’s thesis is much more sophisticated than (and contradictory to) the simple Malthusian framework that North and Thomas rely upon. She points out that it is extraordinarily difficult to compare outputs in societies with different levels of production intensity. Population densities lead to different modes of production and entirely different societies. An increase in population density increases the range of productive activities that can be produced for market exchange, and as Adam Smith explains increased specialization leads to increased output and the size of the market limits specialization. North and Thomas recognize this interdependency explicitly. They state that increasing specialization due to increasing population densities may have partially offset Malthusian diminishing returns. How do they know it was a partial offset? The evidence they offer on diminishing returns and a Malthusian crisis in medieval England is primarily derived from the works of James E. Thorold Rogers, who investigated six centuries of wages and prices in England.2

As a source, Rogers is an excellent compilation of manorial roles and other data sources, however he is not a transparent writer and he is difficult to interpret. In volume one of A History of Agriculture and Prices in England (1866) he states, “… we may… conclude that the price of the service [wage labor], in so far as it was affected by competition, represents fully the economical conditions of supply and demand, and is interpreted by the evidence of prices” (p. 253). This may be interpreted to mean that wages are an accurate representation of the laborers’ incomes, but that does not seem to be what Rogers meant. Two pages later he writes that: “In many cases the labourer or artisan was fed. In this case, of course, he received lower wages. … At Southampton, the various artisans are almost invariably fed, … [In 1385] we read … of an allowance instead of food. As a rule, however, the wages paid are irrespective of any other arrangement. Sometimes, but very rarely, and only in the earlier part of the period, the labourer is paid in kind.” And in Six Centuries of Work and Wages (1884), Rogers indicates that feeding workers was considered routine (pp. 170, 328, 354-55, 510, 540-541, etc.).

I interpret Rogers to mean that in the early centuries of his study day laborers did not normally receive family food allowances, but that they were typically fed on the job. Given the nature of work (agricultural labor from shortly after sunrise to sunset) and medieval food preservation and preparation technology, not feeding workers would have forced them to devote significant amounts of time away from working to food preparation and to feeding themselves (just getting bread would be a formidable task given their work hours and the work hours of bakers). Besides being fed on the job laborers frequently had other perquisites such as gleaning, allotments of beer, and small amounts of land for individual agricultural activities (kitchen gardens). All these in-kind payments are mentioned in Rogers (1866) and are considered normal. North and Thomas base their work not only on the wage data from Rogers, but also on his price data for agricultural products.3 In order to determine real wages, money wages are divided by an index of agricultural prices.4 Notice that the numerator typically ignores payments in kind and the denominator is exclusively a food index. Medieval workers’ consumption bundles had a heavy food component, but if one is being partially paid in food and resources devoted to food (kitchen gardens), then real wage indexes that focus solely on the costs of food may be seriously distorted unless the income (both in money and in kind) elasticity for food is one and the overwhelming preponderance of the budget is devoted to food. Mildly put, the data that North and Thomas rely upon to show Malthusian diminishing returns are not entirely adequate to the task.

Other sources question the use of the Malthusian paradigm. James Z. Lee and Wang Feng unequivocally deny that Chinese agriculture from 1300 to 1800 experienced Malthusian crises. Similarly, Julian L. Simon disputed the empirical validity of the Malthusian model. Others question the North and Thomas view of medieval English agriculture. Gregory Clark questions the view of a primitive English agriculture running into diminishing returns in the early fourteenth century.5 Certainly the fourteenth-century plague was a disaster to the European economy, but it does not follow that the plagues that devastated it were direct consequences of Malthusian diminishing returns. More likely it was, as William McNeill hypothesized, a result of an integrated Old World economy that led to the introduction of a “new” pathogen to a dense, flea-ridden European population.6

So there are difficulties with North and Thomas’s belief that the diseases of the fourteenth and fifteenth centuries are a manifestation of declining living standards (Malthusianism). They do not consider that the plague may have been exogenous, that pathogens are subject to their own dynamics and evolution and not necessarily a result of human intervention.7 North and Thomas simply assert that the plague was a result of over population, diminishing returns, and declining living standards. But if that is so, why did the plague reoccur after population had declined and (according to the data they rely upon) wages had increased? And why did plague occur earlier — in the mid-sixth century? North and Thomas do not have answers.

There is a straightforward explanation to these questions that is grounded in epidemiology: It is that the plague was a “new” disease to fourteenth-century Europe and its relatively dense population resulted in high rates of infection and mortality. These rates decreased as immunities (both acquired and genetic) became more predominant in the populations of Europe. What has this to do with Malthus and diminishing returns? Nothing: The simple Malthusian doctrine correlating high death rates with low living standards is suspect. It assumes that diseases are a function of poverty while there is evidence that the causation runs from diseases to poverty, and it is contradicted by data which show areas with high money incomes (cities) having higher death rates than those areas with low money incomes (rural areas). Consequently any line of reasoning that relies upon the Malthusian doctrine, as does The Rise of the Western World, is suspect.

There are other flaws in their thesis, some minor, some major. A minor omission is that they do not specify why the servile labor force accepted the original commutation of labor services to money payments. According to their high transactions cost model, “the custom of the manor” would have made the initial negotiations prohibitively costly. A simple observation that personal freedom to the individual was worth more than the value of the money payments would correct this omission. And, such an observation would reinforce their claim that when the purchasing power of a unit of money fell (inflation) the lords were unable to switch back to servile labor.

A more significant difficulty with their thesis is their claim that while diminishing returns to labor existed in the countryside, urban areas had constant returns. These are inconsistent with declining real wages, because migration from village to town will prevent agricultural wages from falling.8 Another difficulty is their lack of knowledge of antiquity: They seem to believe that institutional innovations such as insurance and bills of exchange were medieval innovations, but these were known and used at least by the Hellenistic era, and the ancients developed many contractual forms that were resurrected and used again during the European Renaissance.9

So North and Thomas’s book is not without its flaws, but blemishes and all it still makes significant contributions in its emphasis on an efficient set of property rights as a necessary condition for economic development to take place. In this emphasis North and Thomas returned to the fundamentals of economics and its founding father, Adam Smith, who said: “Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism, but peace, easy taxes and a tolerable administration of justice; all the rest being brought by the natural course of things.”

The Rise of the Western World is right to echo these sentiments. Since its publication in 1973 the modest increases in economic and personal freedom that the Chinese have experienced have led its population to a degree of affluence entirely unanticipated a quarter of a century ago. Similarly, the decline in law and order has bought economic and personal disasters to many in parts of Asia and Africa. The lesson seems a hard one to learn: the protection of the liberties of people to both their persons and properties is the most effective way to promote the general welfare in the long run. Short-run policies that restrict these liberties inevitably reduce welfare in both the short and long run. By focusing on this lesson in The Rise of the Western World, North and Thomas have done the profession and humanity a meritorious service.

Endnotes:

1. Counting citations is a tricky business because a slight change in the citation can result in an entry separate from the main one. Thus D.C. North and R.P. Thomas may be counted differently from D. North and R. Thomas.

2. North and Thomas cite other evidence, but much of this is ultimately derived from Rogers’s work. For example E.H. Phelps Brown and Shelia Hopkins’s works on wages and prices are based on data gathered from Rogers.

3. North and Thomas rely on the Phelps Brown and Hopkins works (1955, 1956, 1957) on real wages whose data are derived from the wage and price data of Rogers.

4. “Index” may not be a completely accurate term because the index frequently contains only one commodity; then, to be specific, it is a wage series expressed in wheat units.

5. Clark (1991) using labor inputs in harvesting as a proxy for wheat yields finds little change in output per acre over the medieval era. He observes that: “Interestingly the labour input on reaping wheat from 1250 to 1450 seems to have risen little, implying a constancy of yields over this period. This is consistent with the work of Titow and of Farmer on the Winchester and Westminster estates over the medieval period. … Wheat yields were fairly constant over the medieval period, the population losses of the Black Death having little impact on yields” (p. 454, footnotes omitted).

In another article, Clark (1988) observes that relatively low yields per acre in medieval England could be attributed to the relatively high interest rates. Taken together these observations do not lend support to the thesis that medieval Europe was in a Malthusian crisis because, if it were so, we would expect to see declining mean output per unit of labor and increasing mean output per unit of land as diminishing returns makes labor relatively abundant and land relatively scarce. The opposite would occur if, as a result of the Black Death, labor became relatively scarce.

6. North and Thomas do not recognize that the plague may have been the result of increasing living standards. As incomes rose trade increased and disease pools in different regions became integrated. Mortal diseases newly introduced to an area frequently have a devastating impact on the native population. For more on this see McNeill.

7. Exogenous in the sense that the plague was not a disease endemic to fourteenth-century Europe, although, most likely, it had appeared in Europe in the first millennium CE; see J. C. Russell for further information.

8. For a complete specification of this model see Chambers and Gordon.

9. Edward F. Cohen argues and presents persuasive evidence that these institutional forms were abundant in fourth-century BC Athens.

References:

Boserup, Ester. The Conditions of Agricultural Growth: The Economics of Agrarian Change under Population Pressure. Chicago: Aldine, 1965.

Cameron, Rondo. A Concise Economic History of the World. New York: Oxford University Press, 1989.

Clark, Gregory. “Yields per Acre in English Agriculture, 1250-1860: Evidence from Labour Inputs,” Economic History Review 44 (1991): 445-60.

Clark, Gregory. “The Costs of Capital and Medieval Agricultural Technique,” Explorations in Economic History 25 (1988): 265-94.

Chambers, Edward J. and Donald F. Gordon. “Primary Products and Economic Growth: An Empirical Measurement,” Journal of Political Economy 74 (1966): 315-32.

Cohen, Edward E. Athenian Economy and Society: A Banking Perspective. Princeton: Princeton University Press, 1992.

Lee, James Z. and Wang Feng. One Quarter of Humanity: Malthusian Mythology and Chinese Realities, 1700-2000. Cambridge, MA: Harvard University Press, 1999.

Landes, David S. The Wealth and Poverty of Nations: Why Some Are So Rich and Some So Poor. New York: Norton, 1998.

McNeill, William H. Plagues and Peoples. New York: Anchor Books, 1976.

Phelps Brown, E. H. and Shelia V. Hopkins. “Seven Centuries of Building Wages,” Economica 22 (1955): 195-206.

Phelps Brown, E. H. and Shelia V. Hopkins. “Seven Centuries of the Prices of Consumables, Compared with Builders’ Wage-Rates,” Economica 23 (1956): 296-314.

Phelps Brown, E. H. and Shelia V. Hopkins. “Wage-Rates and Prices: Evidence for Population Pressure in the Sixteenth Century,” Economica 24 (1957): 289-306.

Rogers, James E. Thorold. Six Centuries of Work and Wages. New York: G.P. Putnam’s Sons, 1884.

Rogers, James E. Thorold. A History of Agriculture and Prices in England. Oxford: Clarendon Press, 1866.

Russell, Josiah C. “That Earlier Plague,” Demography 5 (1968): 174-84.

Simon, Julian L. The Economics of Population Growth. Princeton: Princeton University Press, 1977.

Simon, Julian L. Population and Development in Poor Countries: Selected Essays. Princeton: Princeton University Press, 1992.

Simon, Julian L. The Ultimate Resource 2. Princeton: Princeton University Press, 1998.

Simon, Julian L. and Herman Kahn (editors). The Resourceful Earth: A Response to Global 2000. New York: Oxford, 1984.

Philip R. P. Coelho has written on long-run economic growth (“An Examination into the Causes of Economic Growth,” Research in Law and Economics 1985) and is currently working on the impact of morbid diseases on economic history and growth (see: “Biology Disease and Economics: An Alternative History of Slavery in the American South,” with Robert A. McGuire, Journal of Bioeconomics Vol. 1, 1999; “Epidemiology and the Demographic Transition in the New World,” Health Transition Review, Vol. 7, 1997; and “African and European Bound Labor in the British New World: The Biological Consequences of Economic Choices” with Robert A. McGuire, The Journal of Economic History, Vol. 57, 1997.)

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Subject(s):Servitude and Slavery
Geographic Area(s):Europe
Time Period(s):Medieval

An East Asian Challenge to Western Neoliberalism: Critical Perspectives on the ‘China Model.’

Author(s):Horesh, Niv
Lim, Kean Fan
Reviewer(s):Rawski, Thomas G.

Published by EH.Net (March 2020)

Niv Horesh and Kean Fan Lim, An East Asian Challenge to Western Neoliberalism: Critical Perspectives on the ‘China Model.’ New York: Routledge, 2018. viii + 171 pp. $165 (hardcover), ISBN: 978-1-138-92674-5.

Reviewed for EH.Net by Thomas G. Rawski, Department of Economics, University of Pittsburgh.

 
China’s remarkable growth spurt, now somewhat diminished as it navigates its fifth decade, has added a new chapter to long-standing international debates about the efficacy of industrial policy. A rising school of Chinese analysts, many with extensive experience in Western societies, has extended the scope of discussion by arguing that a “China model” may deliver better outcomes than the long-standing ideal of democratic politics and laissez-faire economics.

Niv Horesh and Kean Fan Lim cite “deep-seated suspicion” on the part of elites not just in China, but across East Asia, in the capacity “of free markets, or representative democracy … to pre-empt resource misallocation” (p. 3). They set out to “examine the historical framing of the China Model discourse, compared with perceptions of the broader East Asian and Western trajectories” (p. 2). Their broader objective is to investigate the extent to which postwar economic advances in East Asia, especially post-Mao China, have undermined worldwide adherence to the ideal of open markets and democratic politics.

The authors are well qualified to address these matters. Horesh, a professorial fellow at Durham University, has written several books and numerous articles; his work centers on Chinese economic history, but ranges widely across both time and space. Lim, an economic geographer based at Newcastle University, has produced a book and numerous articles focused mainly on contemporary China, but also encompassing regional and global issues.

Aside from brief introductory and concluding chapters, the book contains five loosely connected essays, three of which offer revised versions of previously published articles.

Chapter 2, “Restoring Tang Splendour?” offers a rambling account of “China’s new aspirational narrative of global leadership” (p. 12). The authors highlight the rhetorical U-turn that has transformed Confucius and his doctrines from Mao-era degradation into symbols of cultural continuity and historical exceptionalism.

Chapter 3, “CPC [Communist Party of China] Elite Perception of the US since the Early 1990s,” analyzes the writings of prominent “America watchers,” among them Wang Huning, a former college professor who has risen to the topmost echelon of China’s party hierarchy. The authors show how “a variety of voices compete for influence” within foreign policy circles, offering “divergent perceptions of the US” (p. 52), with younger, better-informed writers often adopting more critical perspectives on U.S. society than their older colleagues.

Chapter 4, “The Singapore Fever’ in China,” analyzes the People’s Republic’s “second overt attempt [following engagement with the Soviet Union during the 1950s] to learn from a particular country” (p. 59), which emerged from Deng Xiaoping’s 1978 visit to the island city-state. Engagement was intense: a 2014 essay noted that “More than 50,000 [Chinese] government officials” had received training in Singapore over the prior 20 years (p. 66). Nonetheless, Suzhou’s China-Singapore Industrial Park, the flagship bilateral cooperation project, faded into obscurity. This and other failed joint efforts reflect the complexity of China’s political economy, in which high-level endorsement of policy innovation may not suffice to ensure ground-level implementation unless reform initiatives are “aligned to local officials’ agendas” (p. 75).

Chapter 5, “The Chongqing vs. Guangdong ‘Models’ of Economic Development,” describes the very different strategies and policy mixes used to promote rapid growth in Guangdong, China’s most market-oriented region, and in Chongqing, the former wartime capital recognized as a province-level municipality (parallel to Beijing, Tianjin and Shanghai) in 1997, which relies on state-owned enterprises to drive development. The comparison highlights the difficulty of imposing uniform policies on a sprawling economy with wide regional variations in geography, incomes and production structures — features emphasized in recent historical work by National University of Singapore economist Tuan-hwee Sng.

Chapter 6, “China: An East Asian Alternative to Neoliberalism,” aims to consolidate and unify material from the earlier chapters. Here the authors’ failure to attach exact meaning to either “neoliberalism” or the “East Asian alternative,” coupled with their prolix style and propensity to digress, blurs their response to the sweeping issues with which they engage.

Despite these shortcomings, the authors’ wide knowledge of past and present East Asian economies and their fluent injection of historical as well as Japanese, Korean and Singaporean sidelights makes this volume a welcome addition to a literature that often portrays China’s contemporary economy as an autonomous entity whose past originates no earlier than 1949 or even 1976.

 
Thomas G. Rawski is Emeritus Professor of Economics at the University of Pittsburgh. Recent publications include Loren Brandt and Thomas G. Rawski, editors, Policy, Regulation and Innovation in China’s Electricity and Telecom Industries (Cambridge University Press, 2019).

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

Subject(s):Economic Development, Growth, and Aggregate Productivity
Economic Planning and Policy
Geographic Area(s):Asia
Time Period(s):General or Comparative
20th Century: WWII and post-WWII

Globalization and the Rise of Mass Education

Editor(s):Mitch, David
Cappelli, Gabriele
Reviewer(s):Dupraz, Yannick

Published by EH.Net (March 2020)

David Mitch and Gabriele Cappelli, editors, Globalization and the Rise of Mass Education. Cham, Switzerland: Palgrave Macmillan, 2019. xx + 338 pp. $140 (hardcover), ISBN: 978-0-3-030-25416-2.

Reviewed for EH.Net by Yannick Dupraz, Department of Economics, University of Warwick.

 
When a global pandemic is not forcing school closures, the majority of the world’s children now go to school. In 2018, the global net primary enrollment rate was estimated at 90.5% (World Bank 2020). In the last two centuries, the rise of mass education occurred at different dates in different countries of the world, connected through trade, colonization, migration, and the circulation of ideas. Globalization and the Rise of Mass Education brings together a diverse team of scholars (economists, historians and educationists) to give a fresh, global perspective on the expansion of schooling. The book offers accurate accounts of the state of research in the history and economics of education. It is also stimulating for anyone trying to take some distance and think about future research agendas. Like many edited volumes, the book suffers perhaps from a lack of unity. I was also a bit disappointed by the lack of comparative data.

Globalization and the Rise of Mass Education is not a global history of the rise of mass education, but a history of the links between mass education and globalization. The introduction outlines the relationship between globalization and education, taking perhaps too literal a definition of globalization: “the integration of labor, goods and capital markets” (p. 3). This is the classical economist definition of globalization, but the book has, with a few exceptions, little to say on the relationship between education and trade or capital flows. It has, however, a lot to say on the role of colonization, religious missions, and cultural influences broadly speaking. Therefore, the book does in fact take globalization in a much broader sense, as the existence of interactions between countries, irrelevant of the presence of market integration.

The book is divided in four parts. The first is concerned with the role of religious missions in the expansion of schooling. Both contributors make an excellent job of summarizing the recent literature on the subject: Felix Meier zu Selhausen covers the African continent, and Felipe Valencia Caicedo covers Latin America and Asia. Both insist on the historical importance of religious missions in providing education. Valencia Caicedo’s contribution also insists on the persistent economic and cultural legacy of religious missions in Latin America and Asia. Meier zu Selhausen’s main message is that, in Africa, the success of the missions’ education enterprise depended crucially on local characteristics (local demand for education and local supply of African teachers), a message that might be important for the literature assessing the long-term impact of missions on present day outcomes. One thing perhaps missing from these chapters is a discussion of whether, how and why religious schools ended up losing their importance. Meier zu Selhausen writes “while mission schools were responsible for the initial rise in mass education, most educational progress was achieved by the modern African state” (p. 28). I wonder to what extent the same could be said of Latin America.

The second part of the book is entitled “Colonial Legacies, Local Elites and Schooling.” In a first chapter, Sun Go and Ki-Joo Park give a comparative account of the rise of primary education in South Korea and Taiwan during the Japanese colonization. This is particularly interesting considering the rapid growth of these two countries after independence, often attributed to their relatively high level of human capital. The authors used primary sources to produce new internationally comparable estimates of enrollment, class size, and education expenditure, in the spirit of Lindert’s (2004) chapter on the rise of mass public schooling in Western countries. In a second chapter, Irina España-Eljaiek studies school development in Colombia during the first globalization. It is one of the only chapters to directly tackle the question of race and inequality in the provision of education: according to España-Eljaiek, racism explains why the increase in primary education following the export boom during the first globalization was not equally shared. Interestingly, the vision of religious missions emerging from this chapter is very different from the vision emerging from part I: “the Catholic missions were expensive, limited the subnational autonomy and had little impact on education” (p. 138).

The third part is concerned with international migration. The first two chapters ask the same question: was migration during the first globalization responsible for a brain drain or a brain gain in the sending country? The answer is important for anyone concerned about the consequences of emigration for developing countries. The first chapter, written by Matteo Gomellini and Cormac Ó Gráda, studies Italy and Ireland, while the second chapter, written by Johannes Westberg, studies Sweden. Emigration could be responsible for a fall in average human capital if emigrants were positively selected on education, while it could be responsible for a human capital increase if emigration increased the perceived returns to education, or if remittances from migrants increased the income available for spending on education. Though both chapters are very nuanced in their conclusions, they find little evidence for a brain drain and some evidence for a brain gain. Particularly striking is Westberg’s example of the potential for technology transfers because of the migration and re-migration of technical engineers from Sweden to the U.S.: 40% of the graduates from technical institutes between 1880 and 1919 emigrated to the U.S. 70% of these re-migrated, and played a major role in the development of Swedish industry (p. 208-209). Finally, a last chapter by Bruno Gabriel Witzel de Souza studies the impact of migration on human capital in the receiving country, by carefully reconstructing, using a wealth of archival material, the history of German schools in Brazil

The fourth part is concerned with how different ideas about education and school systems travelled around the world and shaped the expansion of education in various places. Nancy Beadie studies the exportation of the American education system to the colonial territories of Hawaii, Puerto Rico, Cuba and the Philippines. According to her, the logic behind the federal support for education expansion after the Civil War was then exported to the colonies. Pei Gao studies the emergence of Western-inspired modern education in China between the end of the nineteenth century and 1949. The implementation of a national education system was decentralized and depended a lot on local political elites. This is reminiscent of the history of the emergence of mass education in Western Europe and the U.S. (Lindert 2004). The chapter brings together data on public and private school supply and enrollment rates. The final chapter by David Mitch studies Iran, a too often overlooked country. It is concerned with how Iran achieved nearly universal literacy in the space of few decades, with surprising continuity between the Pahlavi dynasty and the Islamic regime. Both the Shah and the Ayatollah used education as a policy lever to achieve political goals.

My only concern with this much needed volume is that it perhaps lacks a unifying question. Each chapter stands on its own and there is little discussion between the different chapters. I had the feeling that the book was hesitating between two forms: 1) a history of how globalization (transfers of ideas, migration of people, missionary expansion and colonization) mattered for the expansion of mass education, and 2) a global, comparative history of education systems. In the end, I think what the book wants to be is 1), which means there is still room for writing 2), perhaps with the same contributors. I was also a bit disappointed by the lack of comparative data. Though individual chapters display new data, there was no attempt to harmonize and bring together these data to present a global quantitative vision of the rise of mass education in the last two centuries.

References:

Peter Lindert, Growing Public: Social Spending and Economic Growth since the Eighteenth Century (Vol. 1). Cambridge: Cambridge University Press, 2004.

World Bank. 2020. World Development Indicators.  https://data.worldbank.org/indicator/SE.PRM.TENR

 

Yannick Dupraz is a teaching fellow at the University of Warwick. His research interests are development economics and the economic history of Africa. A recent publication of his “French and British Colonial Legacies in Education: Evidence from the Partition of Cameroon,” Journal of Economic History 79(3).

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

Subject(s):Education and Human Resource Development
Geographic Area(s):General, International, or Comparative
Time Period(s):19th Century
20th Century: Pre WWII
20th Century: WWII and post-WWII

The Lion’s Share: Inequality and the Rise of the Fiscal State in Preindustrial Europe

Author(s):Alfani, Guido
Di Tullio, Matteo
Reviewer(s):Pezzolo, Luciano

Published by EH.Net (March 2020)

Guido Alfani and Matteo Di Tullio, The Lion’s Share: Inequality and the Rise of the Fiscal State in Preindustrial Europe. New York: Cambridge University Press, 2019. xii + 232 pp. $40 (hardcover), ISBN: 978-1-108-447621-8.

Reviewed for EH.Net by Luciano Pezzolo, Department of Humanities, Ca’ Foscari University of Venice

 
Since protesters gathered in Zuccotti Park in New York in 2011 inequality has been one of the most debated issues at both the academic and the popular level. Thomas Piketty’s (2013) work, largely relying on tax data, has provided an apparently solid base to the claim that in the capitalist world inequality is the usual state of affairs. Economic historians have been concerned with this problem too. Following Simon Kuznets’ work (1955), Jeffrey Williamson and Peter Lindert (1976) dealt with American inequality over three centuries, and Jan Luiten van Zanden (1995) wrote a pioneering essay on inequality in early modern western Europe.

The work of Guido Alfani, professor at the Bocconi University of Milan, and Matteo Di Tullio, researcher at the University of Pavia, adds to this literature by analyzing the process of economic inequality in the Republic of Venice between the sixteenth and eighteenth centuries. To this aim, fiscal sources (132 tax registers compiled between 1409 and 1801), provide the fundamental material for measuring the degree of inequality in both urban and rural environments. The estimi (tax registers) were drafted by local authorities in order to distribute direct taxes on both land properties and “heads.” The ample sample on which the authors rely counts five cities, thirteen towns and villages and eight rural districts, which are located in the central part of Veneto and in the territory of Bergamo.

The structure of state revenues, which is the subject of chapter one, was primarily made up of duties on consumption and transactions, while direct taxation provided about one fifth of revenues. Like any tax system, the Venetian one also reflected institutional and power relations: taxpayers, as far as direct taxation was concerned, were divided into city dwellers, inhabitants of the contado (the rural district around the main cities), ecclesiastics, Venetians, and privileged households and communities. These categories were often inscribed in specific estimi and consequently it is difficult to include the entire body of taxpayers in the dataset.

Chapter two addresses the issue of the number of rich and poor in Venetian society. The authors define poor as a household or individual whose assessed wealth is below 25 percent of the median; the rich are at least ten times above the median wealth. The data confirm that the presence of poor people tends to grow throughout the modern age up to 1800, and that their number is larger in the city than in the countryside. As for the rich, they also tend to grow. In short, the Venetian mainland witnessed an evident process of social polarization over the period here considered.

The same phenomenon emerges in chapter three, dedicated to economic inequality in the long run. During the early modern age, the general trend was towards inequality in almost all the areas examined. The data show that this process was more evident in the countryside than in the urban world, where average household wealth was higher. The plague of 1630 smoothed the trend for a short period, but it resumed shortly afterwards.

The fourth and final chapter considers the redistributive effects of taxation, seen as one of the main causes of the growing inequality in the Venetian state. Most (70-80 percent) of state revenue came from indirect taxes, while direct taxation covered the rest. The authors estimate that the impact of this tax structure on the various sections of the population was proportionally more disadvantageous for the poorer classes than for the richer ones. The regressive nature of taxation, common to most of the old regime states, would therefore have favored the process of inequality. This phenomenon was also accentuated by public spending, which was largely earmarked to the defense and debt service, while over the last two centuries of the Republic social spending accounted as low as 0.2-1.3 percent of the budget. It must be considered, however, that social spending (assistance to the poor and orphans, education, public health) was mostly managed by local institutions.

The chapter also offers a wide and interesting comparison with other Italian states (Tuscany, Piedmont, Kingdom of Naples), the Netherlands and the Southern Low Countries. All the cases considered show, despite different phases of growth and stagnation, a common growing inequality over the modern age. The main culprit is identified by the authors in the fiscal-military state, and the consequent fiscal and economic inequality it generated. The emergence of what was once called the absolute state has been the subject of much debate among scholars, but no one has so far emphasized the effects it produced in terms of social (in)equality. The merit of this book is that it has tackled the problem by analyzing a vast area for three centuries. The concept of the fiscal-military state, however, does not always seem to be useful to explain the inequalities between different countries. Most states of the early modern age were more a mosaic of privileges and immunities than that mythical monolithic organism that was built by nineteenth century historiography. It is problematic, for example, to identify in the Grand Duchy of Tuscany the typical features of an aggressive state taxation system that manages to affect the distribution of the wealth of its subjects.

If the state of the old regime seems unable to significantly change the level of inequality of the population, perhaps it is useful to widen our gaze to the market and its mechanism. Recent models developed by statistical physicists (Li, Boghosian and Li, 2019) have hypothesized that a simple exchange, even among equal actors, generates a tiny inequality. Consequently, the growth of transactions is to favor the increasing accumulation of wealth much to the benefit of a small group. It is then likely that the dynamics of inequality in the past could be considered more as a “natural” phenomenon, inherent in the functioning of capitalist markets, than the effect of factors such as relatively weak governments as economic actors.

References:

Kuznets, Simon (1955). “Economic Growth and Income Inequality,” American Economic Review, 45, 1-28.

Li Jie, Boghosian Bruce, and Li Chengli (2019). “The Affine Wealth Model: An Agent Based Model of Asset Exchange that Allows for Negative-wealth Agents and its Empirical Validation,” Physica A: A Statistical Mechanics and its Application, 516, 423-42.

Lindert, Peter and Williamson, Jeffrey (1976). Three Centuries of American Inequality. Madison: University of Wisconsin, Madison Institute for Research on Poverty.

Piketty, Thomas (2013). Le capital au XXIe siècle. Paris: Le Seuil.

Van Zanden, Jan Luiten (1995). “Tracing the Beginning of the Kuznets Curve: Western Europe during the Early Modern Period,” Economic History Review, 48, 643-64.

 
Luciano Pezzolo is Professor of Early Modern History at the Department of Humanities of Ca’ Foscari University of Venice. His main fields of research are financial and military history of late medieval and early modern Italy, on which a book, entitled Mars and Pluto, is to be published by Oxford University Press.

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

Subject(s):Government, Law and Regulation, Public Finance
Income and Wealth
Geographic Area(s):Europe
Time Period(s):Medieval
16th Century
17th Century
18th Century
19th Century

Before the Neoliberal Turn: The Rise of Energy Finance and the Limits to U.S. Foreign Economic Policy

Author(s):Selva, Simone
Reviewer(s):Naef, Alain

Published by EH.Net (October 2018)

Simone Selva, Before the Neoliberal Turn: The Rise of Energy Finance and the Limits to U.S. Foreign Economic Policy. London: Palgrave Macmillan, 2017. xv + 423 pp. $75 (hardcover), ISBN: 978-1-137-57442-8.

Reviewed for EH.Net by Alain Naef, Department of Economics, University of Cambridge.

 
An abundant literature focuses on Bretton Woods on the one hand, or the liberalization of markets and exchange rates in the 1970s and 1980s on the other. Little is known on the transition between these two periods, however. Simone Selva’s book attempts to make sense of this transition before the “Neoliberal Turn” in the late 1970s, by giving an account of U.S. currency and the functioning of the international monetary system. A Research Fellow in the history of international economic relations at the University of Naples L’Orientale, Selva brings an interesting approach to the subject, specifically tracking the role of the dollar from the 1950s to the late 1970s. Indeed, U.S. balance of payments issues first found their roots in Europe and were linked to postwar loans in the 1960s before the problem moved to Gulf countries in the 1970s. Petrodollars accumulated by oil producing countries had to be disposed of without causing the dollar to suffer. The book explores the struggles of different U.S. presidents to manage both their balance of payments and the dollar.

Chapter 2 describes how American balance of payment deficits in the 1960s conflicted with the country’s military objectives across the world. The Vietnam War was one of these commitments and was a strong inflationary force. As the Federal Reserve increased the money supply to support the Vietnam War in the late 1960s, the dollar weakened, eroding the U.S. competitive position in global markets. Chapter 3 shows how successive devaluations in Europe put more pressure on the U.S. balance of payments. The 1967 devaluation of sterling especially destabilized U.S. policies. This chapter also offers a detailed narrative of the gold crisis in 1967-68, when the price of gold surged and the Gold Pool was disbanded. The author nicely shows how troubles in the USSR prompted the regime to sell gold on the international gold market.

In Chapter 4, Selva argues that inflationary pressures were building up long before the first oil crisis of 1973 — arguing in effect that not all 1970s inflation can be blamed on the price of oil. He describes the Nixon Administration struggling to understand the link between developments in energy markets and the international monetary system. The chapter also offers an interesting account of how U.S. policymakers pushed American banks to open branches in Gulf countries, in an attempt to increase U.S. manufacturing and financial service exports to dollar surplus countries. These U.S. banks then channeled money into the Eurodollar (or Eurocurrency) market in London, where it was then loaned to European countries with balance of payments deficits. This was possible only as long as the Eurodollar market was capable of absorbing currency from oil producing countries.

Around 1974 OPEC countries shifted their investment from short-term (mainly Eurodollar) investments, to long-term ones (mainly loans to governments). Chapter 5 explores what happened when OPEC dollar surpluses overtook the Eurodollar market’s ability to absorb them. Oil producing countries began offering loans directly to governments starting with Egypt, Syria, and France, expanding to other Western countries. The American administration realized that direct investments in the U.S. would have a less detrimental effect on the dollar. Despite public outcry and fears of oil producing countries taking over U.S. firms, the Ford administration promoted direct petrodollar investment into the country. The Treasury actively encouraged OPEC investments in the US, which Selva illustrates with the example of a $100 million investment in telecoms giant AT&T, “openly approved by the Ford Administration” (p. 301).

The research is well documented with archival material across Europe and the U.S. Beyond the archives from international financial institutions, governments, and central banks, the author also relies on archives from the CIA which offer an objective and strategic assessment of the international monetary questions at the time. Selva does not shy away from the complexity of the international monetary system and manages to connect the domestic situation in the U.S. to the troubles of the international monetary system with skill. However, he sometimes lets this complexity cloud the clarity of his argument. The writing is dense. Some paragraphs extend over many pages, some sentences over many lines.

Nonetheless, Simone Selva’s contribution is a solid piece of serious scholarship that helps better understand the origins of the 1970s oil crisis, and how the U.S. managed its balance of payments. It offers a review of American policies at the point when markets became more open and oil production took the center stage in international finance. As such, this detailed analysis will benefit financial historians of the period as well as scholars interested in energy finance and modern American historians.

 

 

Alain Naef is a teaching fellow at the Economics Faculty of the University of Cambridge, where he is finishing a PhD on the role of reserve currencies during the Bretton Woods period. His latest working paper on the Gold Pool with Michael Bordo and Eric Monnet is available at https://ideas.repec.org/p/nbr/nberwo/24016.html and his work on central bank intervention is available at https://ideas.repec.org/p/cmh/wpaper/32.html.

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 (administrator@eh.net). Published by EH.Net (October 2018). All EH.Net reviews are archived at http://www.eh.net/BookReview.

Subject(s):Agriculture, Natural Resources, and Extractive Industries
Economic Planning and Policy
Financial Markets, Financial Institutions, and Monetary History
Government, Law and Regulation, Public Finance
Geographic Area(s):Europe
Middle East
North America
Time Period(s):20th Century: WWII and post-WWII

The Singularity of Western Innovation: The Language Nexus

Author(s):Dudley, Leonard
Reviewer(s):Sasaki, Yu

Published by EH.Net (May 2018)

Leonard Dudley, The Singularity of Western Innovation: The Language Nexus. New York: Palgrave MacMillan, 2017. vii + 316 pp. $170 (hardcover), ISBN: 978-1-137-40317-9.

Reviewed for EH.Net by Yu Sasaki, Waseda Institute of Advanced Study, Waseda University.

 
In The Singularity of Western Innovation, Leonard Dudley of Université de Montréal seeks to identify a cause of “Western innovation,” the term that encompasses the industrial revolution of the nineteenth century and the military revolution of the twentieth century. For Dudley, a primary cause is what he calls the “language nexus,” or the degree to which the main vernacular of a society was standardized in the preceding centuries. He argues that language standardization was far more advanced in Western Europe before 1800 than in contemporaneous eastern empires of Turkey, India, and China. Europe’s cultural precocity eventually led to key inventions in the modern era, including the steam engine, telegraph, electricity, and submarines. Given that these emerged from select Western states, namely Britain, France, and the United States as a British offshoot, the substantive question that is explored in the book is: what enabled these countries to lead in innovation? Addressing this puzzle is important to economic history, because it helps understand why it was Western Europe that economically “took off” first and not other world regions.

Dudley sets out to investigate this question in fourteen chapters that are organized in three sections. Each chapter clearly identifies a thesis and discusses it in a schematic fashion: on each topic, the European (mostly English) experience comes first as the benchmark case, followed by the brief comparison of the Ottoman, Indian, and Chinese cases. After the introductory chapter, Part I traces the extent to which vernaculars were developed in each society in Chapters 2 through 5. Chapter 2 lays out the foundation of language development by examining the dynastic cycle of the seventeenth century. It points out that while the eastern empires continued to suffer from the dynastic cycle — the pattern of the rise and fall of empires through financial instability, internal rebellion or external attack, and regime replacement — this cycle ceased in England as the power of the Parliament grew stronger relative to that of monarchy. This transformation ultimately gave England stability not only in finance but also in daily lives among ordinary citizens, giving an impetus for trust and cooperation in the subsequent centuries.

Chapter 3 discusses the adoption of print technology. In Europe, the metal movable type, invented by Johannes Gutenberg circa 1450, became the standard tool until the twentieth century. Non-European empires had a distinct experience with print. Although Jews brought Gutenberg presses to the Ottoman domain by the end of the fifteenth century, Istanbul banned private printing in Turkish or Arabic until 1726 (private printing in other languages was allowed). The main rationale for the ban is that the Ottomans relied upon oral communications by religious leaders to broadcast and maintain political authority. Printing presses would leave written records and political adversaries might take advantage of any inconsistency between those records and oral transmission to challenge the authority. In India, it was westerners who led the development of vernacular printing to understand local languages (and aid the business for firms such as the East India Company). It seems that the Mughals preferred hand-written materials to printed forms, and only in the late eighteenth century did vernacular print start by the initiative of an Englishman. China was the birthplace of movable type in the eleventh century, but woodblock printing, a more labor-intensive form, became standard until the late nineteenth century.

Chapter 4 describes literacy rates in the seventeenth century whose variation across the cases comes partly from the availability of the printing press and the size of the book market. Dudley argues in Chapter 5 that another factor that affected literacy was the extent to which the main vernacular of a society was standardized prior to industrialization. He uses the first publication date of a monolingual dictionary to measure language standardization. According to this definition, English was codified by 1658 and French, by 1680. Only in the twentieth century were Hindi, Turkish, and Mandarin Chinese standardized (in 1929, 1932, and 1937, respectively). The difference in the timing of standardization played a critical role, because a standardized language would reduce transaction costs and make collaboration easier in the age of urbanization, automation, and mass production.

The rest of the book discusses the consequences of pre-modern language rationalization for innovations in industrial and military technology, drawing examples from the West. Part 2 describes industrialization. Following an overview of each state’s ability to raise revenue reliably (Chapter 6), steam engines (Chapter 7), machine tools (Chapter 8), and rifles (Chapter 9) are examined. Part 3 focuses on the military dimensions: Chapter 10 goes over geopolitics at the turn of the nineteenth century. Chapter 11 discusses steam ships; Chapter 12, major conflicts between European and Asian powers; and Chapter 13, Europe’s overwhelming force of rifled firearms over Asian rivals. The concluding chapter compares the conventional model of geopolitical competition on Europe’s rise to the language hypothesis explored in the book.

One important contribution that Dudley’s book makes is his insight that language standardization is never a “natural” outcome. One reason, I suspect, is that it is hard to imagine how the uniform use of a language can have a direct and positive impact on the desired outcome for political and economic actors — be it greater revenue or greater trade. The monograph makes it clear that few, if any, pre-modern leaders put priority on investing in language standardization, as seen in the case of the Mughal Empire. There was also wide variation in such incentive within Europe, because countries such as Spain, the Netherlands, Germany, and Italy did not quickly follow the examples of Britain and France. Given the high fixed costs required to standardize a vernacular, what provides an incentive for language standardization? This question does not receive sufficient attention in the monograph. Future research could examine it to provide a fuller conceptual framework and offer an empirical test of the role of culture in understanding the process of economic development.

Dudley is right to underscore the importance of considering cultural dimensions when one seeks to address big questions such as “Why did Europe — or a specific subregion of it — industrialize first?” Here “culture” refers to a broad term that captures patterns of behavior with regard to actors’ choices of technology, codified rules, and policies, which conventional institutionalist arguments have difficulty explaining. For example, the Chinese relied on woodblock printing (a labor-intensive technology) even though a superior technology, movable-type print (a capital-intensive technology), was available. Their choice may in part be based on their shared preference for time-consuming but cheap labor over an efficient yet expensive technology. Future work can build on Dudley’s insight to shed greater light on the origins of European industrialization.

 
Yu Sasaki is an Assistant Professor at the Waseda Institute of Advanced Study in Waseda University, Tokyo. His recent publications include “Publishing Nations: Technology Acquisition and Language Standardization for European Ethnic Groups,” Journal of Economic History, December 2017. He is currently working on how cultural consolidation within states affects political and economic development on the state level, drawing from early-modern Europe.

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 (administrator@eh.net). Published by EH.Net (May 2018). All EH.Net reviews are archived at http://www.eh.net/BookReview.

Subject(s):History of Technology, including Technological Change
Social and Cultural History, including Race, Ethnicity and Gender
Geographic Area(s):General, International, or Comparative
Time Period(s):Medieval
16th Century
17th Century
18th Century
19th Century

The New Worlds of Thomas Robert Malthus: Rereading the Principle of Population

Author(s):Bashford, Alison
Chaplin, Joyce E.
Reviewer(s):Hammond, J. Daniel

Published by EH.Net (July 2017)

Alison Bashford and Joyce E. Chaplin, The New Worlds of Thomas Robert Malthus: Rereading the Principle of Population. Princeton: Princeton University Press, 2016. vii + 353 pp. $45 (cloth), ISBN: 978-0-691-16419-9.

Reviewed for EH.Net by J. Daniel Hammond, Department of Economics, Wake Forest University.

Alison Bashford and Joyce E. Chaplin have written a richly sourced and finely detailed account of the writing, reading, and interpretation of Thomas Robert Malthus’s Essay on the Principle of Population. Their focus is on the 1798 first edition of the Essay and the enlarged 1803 second edition. Bashford (University of Cambridge) and Chaplin (Harvard University) have distinguished records of scholarship in areas related to this project, including history of science, humans’ encounters with nature in early American history, demographic and environmental history, and history of eugenics. Their aim is to expand and reorient the context for reading Malthus’s Essay beyond the conventional. Thus the element in their title, “Rereading the Principle of Population.” This is important work, not the least because Malthus is so widely known, cited, and used as the basis for an intellectual category (Malthusianism), but little read or understood.

The most historically accurate readings of the Essay have set it within the political and economic discourse of England and France in the late eighteenth and early nineteenth centuries, the period from just prior to its first edition to the sixth and last (1826). The French Revolution is the event of prime significance for the first edition of the Essay. Malthus wrote in response to ideas of two Englishmen, his father Daniel Malthus and William Godwin, and a Frenchman, Nicolas de Condorcet. Malthus’s father was a political radical and friend of Jean-Jacques Rousseau. Malthus himself said that he began the essay from a conversation with his father. The primary subjects of his critique in the text itself are Godwin’s and Condorcet’s Revolution-inspired utopian writings. Bashford and Chaplin have no objection to this orientation for reading the Essay as an argument against utopian political ideas. Rather, they invite us to look beyond the issues that Malthus engaged in 1798 to the sources of data from which he derived his principle of population in the first and second editions. The sources were the new worlds of North America and the South Pacific. Malthus used accounts of European explorers to these new worlds and colonial censuses for evidence of unchecked population growth and the operation of checks on population. Bashford and Chaplin read the Essay in the context of the origins of the principle of population in these new worlds and its implications for them.

The book is in three parts. “Population and the New World” comprises two chapters on “Population, Empire, and America” and “Writing the Essay.” Malthus was a synthesizer of four strands of population analysis, each of which has long historical roots: (1) Judeo-Christian theology, (2) statecraft, (3) political arithmetic, and (4) political economy. Chapter one provides a condensed but fulsome account of these analytical strands as they were available to Malthus. Chapter two includes biographical information on Malthus and his publisher, Joseph Johnson. Their juxtaposition is interesting on several counts. Malthus was an Anglican clergyman and Johnson was a religious dissenter. Malthus was conservative, while Johnson moved in radical circles.  Johnson published a critique of war finance by Malthus’s tutor, Gilbert Wakefield. This led to libel charges against both Wakefield and Johnson. Johnson was fined and sentenced to six months imprisonment. He also published a volume of Benjamin Franklin’s political writings that included “Observations Concerning the Increase of Mankind.” This contained an anticipation (or source) of Malthus’s principle of population. Johnson became a force in the publishing trade with a stable of prominent authors including William Wordsworth, Samuel Taylor Coleridge, Mary Wollstonecraft and her husband and Malthus’s primary intellectual adversary, William Godwin.

The three chapters of part two are on three new worlds that figure prominently in Malthus’s second edition: New Holland (New South Wales), the Americas, and the South Sea. Where the first edition was largely a response to the utopian political theory, the second edition became a universal history of mankind built around the theme of the means by which population is checked. These chapters give richly textured accounts of the sources available to Malthus for incorporating information on the Americas, Australia, and the South Sea into the second edition and the use he made of them.

Part three, “Malthus and the New World, 1803-1834,” has a chapter each on the public issues of slavery and abolition and colonization and emigration as they related to the principle of population. In both cases Malthus’s principle of population was used to form arguments on either side of the issue. Malthus had become a recognized authority on population. The authors depict Malthus as timid about taking a stand on slavery, perhaps because of personal entanglements through income derived from sugar plantations. The West Indies and British slave trade are conspicuously absent from the otherwise worldwide scope of evidence surveyed in the 1806 edition. On the issue of emigration as an outlet for population Malthus opposed clearance and removal of excess population but not voluntary emigration. The final chapter in this section covers the reception of the 1803 essay in the new worlds up to Malthus’s death in 1834.

The book concludes with a coda. The coda opens with accounts of critical commentary after Malthus’s death regarding his purported indifference to the plight of the poor.  The authors conclude that this was far from the truth. Malthus was concerned to understand population dynamics in order to protect the poor from misery and vice. The coda proceeds to draw material and moral implications from Malthus’s analysis of the European settlement of new worlds in the Americas and South Pacific in the 1803 edition for contemporary and future economic development of “new worlds.” The material implications are that today as before, the poor bear the brunt of material “expansion” by the wealthy. The moral implications, referred to as “moral hazards” in the coda, are that the distribution of benefits and costs of economic development between the rich and poor is unjust.

The New Worlds of Thomas Robert Malthus gives considerably more attention to the 1803 edition of the Essay on the Principle of Population than to the 1798 edition, for it was in the enlarged second edition that Malthus dealt extensively with new world demographics. Further, the coda suggests that it is to the 1803 rather than the 1798 edition that we should turn today for insight into contemporary issues. The suggestion is that 1803-edition population principles have more relevance today and will in the future than the 1798-edition population principles. This suggests that Malthus made changes in substance rather than just in coverage between the first and second editions. This is an enduring question in historical interpretation of texts that underwent numerous or large revisions. In responding to reactions and suggestions of readers and to changing circumstances between one edition and the next, has an author more fully developed a thesis common to all editions or has the author changed the subject matter or thesis? The coda suggests the latter for Malthus.

If we accept the interpretation that the first edition was about British and European internal political issues and the second about English and European relations with lands and native peoples of the Americas and South Pacific, it is not clear to this reviewer that the second edition is more germane than the first to our time. The social and political revolutions of 1968 bear a resemblance to the French Revolution of 1789. The ancien régime remains under assault today as it was in the eighteenth century. Utopian visions of humans, their relations with each other, and with nature, are so embedded in modern culture that they go unrecognized. The objects of assault are no longer Monarchy, Aristocracy, and Church. They are the Constitution, Family, and Christianity. Conservatives, such as Malthus was, fight a rear-guard battle against what has become the Western revolutionary establishment of the early twenty-first century. Against this background it is instructive to reread the 1798 edition of An Essay on the Principle of Population.

J. Daniel Hammond is Hultquist Family Professor in the Department of Economics, Wake Forest University. He is the author of “Malthus, Utopians, and Economists,” Research in the History of Economic Thought and Methodology 33 (2015): 179-207.

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 (administrator@eh.net). Published by EH.Net (July 2017). All EH.Net reviews are archived at http://www.eh.net/BookReview.

Subject(s):History of Economic Thought; Methodology
Geographic Area(s):Australia/New Zealand, incl. Pacific Islands
Europe
Latin America, incl. Mexico and the Caribbean
North America
Time Period(s):18th Century
19th Century

The Rise of the Global Company: Multinationals and the Making of the Modern World

Author(s):Fitzgerald, Robert
Reviewer(s):Hannah, Leslie

Published by EH.Net (September 2016)

Robert Fitzgerald, The Rise of the Global Company: Multinationals and the Making of the Modern World. Cambridge: Cambridge University Press, 2015. xii + 622 pp., $30 (paperback), ISBN: 978-0-521-61496-2.

Reviewed for EH.Net by Leslie Hannah, London School of Economics.

This is a long-awaited magnum opus from a scholar whose encyclopedic knowledge of multinationals is well displayed in this volume.

It has two great strengths. The first is its coverage of the changing political contexts within which multinationals operated. Other studies are, of course, aware of the devastating effects of wars on (particularly German) multinationals, but no existing work ranges so confidently over the complexities nor adequately conveys the blindness with which participants at the time navigated their ways through the uncertainties created by expropriations and occupations. Those of us who have forgotten which politicians Lockheed bribed, the brand complications created by post-war splits, why the Japanese took over Germany’s Pacific colonies, or how the Kuwait Investment Office was viewed by western intelligence agencies, will find useful pointers to the relevant literature in the text and endnotes. His examples also raise some doubts in my mind as to whether the existing literature’s stress that governments are now more interventionist than in an earlier (supposedly laissez-faire) era is correct.

The second strength is the book’s eclecticism. Fitzgerald is, of course, familiar with the “Anglo-Saxon” country that dominated multinational investing in the nineteenth century (where he begins) and the larger one which dominates it in the twenty-first (where he ends). Yet he appears equally at home with the 1920s competition between the Banque de l’Indochine and Paribas, the extension of Canadian influence in the Caribbean, and Japanese multinationals’ weak modern risk management in Iran. For that reason this book could become a valued and much-thumbed addition to any business historian’s research bookshelf. An added attraction for that purpose (too often neglected in this age of internet searches of online publications) is its superb fifty–page index.

Unfortunately that is not how the publishers and/or author and/or editors have positioned the book. This is a volume in the Economic History Society’s series New Approaches to Economic and Social History, supposedly offering a “concise” survey for “advanced school students and undergraduate historians and economists.” Such words applied to this book risk prosecution under the UK Trade Descriptions Act. There is some attempt to summarize each chapter and sub-sections, but the treatment is far too detailed and unorganized for this purpose. Most undergraduates would find the multiplication of examples impenetrable and directionless and any professor would be doing students a grave disservice in recommending this as a textbook. It would be useful as supplementary reading to generate leads for an essay project (where it is richer in citation of contemporary sources and contains useful warnings against “present-mindedness” in Whiggish perspectives on the past), but Geoffrey Jones’ Multinationals and Global Capitalism, published by Oxford, would more suitably serve as the main course text.

Leslie Hannah lives in Tokyo and is Visiting Professor at the London School of Economics. He recently published (with Makoto Kasuya), “Twentieth Century Enterprise Forms: Japan in Comparative Perspective,” Enterprise & Society (2015).

Copyright (c) 2016 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator (administrator@eh.net). Published by EH.Net (September 2016). All EH.Net reviews are archived at http://eh.net/book-reviews/

Subject(s):Business History
Geographic Area(s):General, International, or Comparative
Time Period(s):19th Century
20th Century: Pre WWII
20th Century: WWII and post-WWII

The Rise and Fall of American Growth: The U.S. Standard of Living since the Civil War

Author(s):Gordon, Robert J.
Reviewer(s):Margo, Robert A.

Published by EH.Net (July 2016)

Robert J. Gordon, The Rise and Fall of American Growth: The U.S. Standard of Living since the Civil War.  Princeton, NJ: Princeton University Press, 2016. vii + 762 pp. $40 (cloth), ISBN: 978-0-691-14772-7.

Reviewed for EH.Net by Robert A. Margo, Department of Economics, Boston University.

This is the age of blockbuster books in economics. By any metric, Robert Gordon’s new tome qualifies.  It tackles a grand subject, the productivity slowdown, by placing the slowdown in the context of the historical evolution of the American standard of living.  Gordon, who is the Stanley G. Harris Professor in the Social Sciences at Northwestern University, needs no introduction, having long been one of the most famous macroeconomists on planet Earth.

The Rise and Fall of American Growth is divided into three parts.  Part One (chapters 2-9) examines various components of the standard of living, in levels and changes from 1870 to 1940.  Part Two (chapters 10-15) does the same from 1940 to the present, maintaining the same relative order of topics (e.g. transportation appears after housing in both parts).  Part Three (chapters 16-18) provides explanations and offers predictions up through 2040.  There are brief interludes (“Entre’acte”) between parts, a Postscript, and a detailed Data Appendix.

Chapter 1 is an overview of the focus, approach, and structure of the book.  Gordon’s focus is on the standard of living of American households from 1870 to the present.  The approach is both quantitative — familiar to economists — and qualitative — familiar to historians.  As already noted, the organization is symmetric — Part One considers the pre-World War II period, and Part Two, the post-war.  The fundamental point of the book is that that some post-1970 slowdown in growth was inevitable, because so much of what was revolutionary about technology in the first half of the twentieth century was revolutionary only once.

Chapter 2 draws a bleak picture of the standard of living ca. 1870, the dawn of Robert Gordon’s modern America.  From the standpoint of a household in 2016, conditions of life in 1870 would appear to be revolting.  The diet was terrible and monotonous to boot; homemade clothing was ill-fitting and crudely made; transportation was dependent principally on the horse, which generated phenomenal amounts of waste; indoor plumbing was all but non-existent; rural Americans lived their lives largely in isolation of the wider world.  In Gordon’s view, much of this is missing from conventional real GNP estimates.  Chapter 3 continues the initial story, focusing on changes in food and clothing consumption.  Gordon contends there was not much change in underlying quality but he argues that, by the 1920s, consumers were paying lower prices for food — having shifted to lower-priced sources (chain stores as opposed to country merchants) — and that most clothing was store-bought rather than homemade.

Chapter 4 studies housing quality.  As with other consumer goods, housing also improved sharply in quality from 1870 to 1940.  Gordon argues that much farm housing was poor in quality, while new urban housing was typically larger and more durably built.  Indoor plumbing, appliances and, ultimately, electrification dramatically enhanced the quality of life while people were indoors.  As elsewhere in the book, reference is made to hedonic estimates of the value of these improvements as revealed in higher rents. Chapter 5 details improvements in transportation between 1870 and 1940. These are grouped into three categories.  The first is improvement in inter-city and inter-regional transportation in rail.  This occurs chiefly through improvements in the density of lines and in the speed of transit. The second is intra-city which occurred with the adoption of the electric streetcar.  The third, and most important arguably, is the internal combustion engine and its use in the automobile (and bus).  Gordon especially highlights improvements in the quality of automobiles, noting that the car is not reflected in standard price indices until the middle of the Great Depression.

Chapter 6 details advances in communication from 1870 to 1940.  By current standards, the relevant changes — the telegraph, telephone, the phonograph, and the radio — might not seem like much but from the point of view of a household in 1870, these technologies enabled Americans to dramatically reduce their isolation.  As Gordon points out, one could phone a neighbor to see if she had a cup of sugar rather than visit in person, or listen to Enrico Caruso’s voice on the phonograph if it were not possible to hear him in concert.  The radio brought millions of Americans into the national conversation, whether it was to hear one of Franklin Roosevelt’s fireside chats or listen to a baseball game.  Chapter 7 discusses improvements in health and mortality from 1870 to 1940 which, according to Gordon, were unprecedented.  After summarizing these, he turns to causes, chief among which are improved urban sanitation, clean water, and uncontaminated milk.   Gordon also highlights improvements in medical knowledge, particularly the diffusion (and understanding) of the germ theory of disease.  Chapter 8 studies changes in the quality of work from 1870 to 1940.  These changes were wholly for the better, according to Gordon.  Work became less dangerous, more interesting, and more rewarding in terms of real wages.  Most importantly, there was less working per se, as weekly hours fell, freeing up time for leisure activity.  There was a marked reduction in child labor, as children spent more of their time in school, particularly at older ages in high school.   This was also the period leading up, as Claudia Goldin has told us, to the “Quiet Revolution” in the labor force participation of married women, which was to increase substantially after World War II. Credit and insurance, private and social, is the topic of Chapter 9.  The ability to better smooth consumption and also insure against calamity are certainly improvements in living standards that are not captured by standard GNP price deflators.  Initially the shift of households from rural to urban areas arguably coincided with a decrease in consumer credit but by the 1920s credit was on the rise due to several innovations previously documented by economic historians such as Martha Olney.   Households were also better able to obtain insurance of various types (e.g. life, fire, automobile); in particular, loans against life insurance were frequently used as a source for a down payment on a house or car.  Government contributed by expanding social insurance and other programs that helped reduced systemic risks.

Chapter 10 begins the second part of the book, which focuses on the period from 1940 to the present.  As noted, the topic order of Part Two is the same as Part One, so Chapter 10 focuses on food, clothing, and shelter.  Gordon considers the changes in quality in these dimensions of the standard of living to be less monumental than as occurred before World War II.  For example, frozen food became a ubiquitous option after World War II but this change is far less important than the pre-1940 improvement in the milk supply.  Quantitatively, perhaps the most important change was a reduction in relative food prices which, predictably, led to increase in the quantity demanded.  Calories jumped, and so did obesity and many related health problems.  For clothing, the chief difference is in the diversity of styles and, as with food, a sharp reduction in relative price holding quality constant.  In Chapter 11 Gordon notes that automobiles continued to improve in quality after World War II, mostly in terms of amenities and gas mileage; and their usefulness as transportation improved with the building of the interstate highway system.  Gordon is less sanguine about air transportation, arguing that quality of the travel experience deteriorated after deregulation which was not offset by reductions in relative prices.  For housing, the major changes was suburbanization and a concomitant increase in square footage.  The early postwar period witnessed some sharp improvements in the quality of basic household appliances, and somewhat later, the widespread diffusion of air conditioning and microwaves.

Chapter 12 focuses on media and entertainment post-1940.  Certain older forms of entertainment gave way to television, the initial benefits of which were followed by steady improvements in the quality of transmission and reception.  Similarly, there were sharp improvements in the various platforms for listening to music, with substantial advances in recording technology and delivery — the 78 gave way to the LP to the CD to music streaming and YouTube.  The technology to deliver entertainment also delivered the news in ever greater quantity (quality is in the eye of the beholder, I suppose).  Americans today are connected almost immediately to every part of the world, a level of communications unthinkable a century ago.  A surprisingly brief Chapter 13, recounts the history of the modern computer.  There is no way to tell this history without emphasizing just how unprecedented the improvements have been, from the very first post-war computers to today’s laptops and supercomputers.  Moore’s Law, understandably, takes center stage, followed by the Internet and e-commerce.   Gordon has a few negative things to say about the worldwide web, but the main act — why haven’t computers led a revolution in productivity — is saved for later in the book.

Chapter 14 continues the story of health improvements to the present day.  As everyone knows, the U.S. health care system changed markedly after World War II, in terms of delivery of services, organization, and payment schemes.  Great advances were made in cardiovascular care and treatment of infectious disease through the use of antibiotics.   There were also advances in cancer treatment, mostly achieved by the 1970s; the subsequent “war” on cancer has not been as successful.  Most of the benefits were achieved through diffusion of public health and expansion of health knowledge in the general public (e.g. the harmful effects of smoking).  Since 1970 the health care system has shifted to more expensive, capital intensive treatments primarily provided in hospitals that have led to an inexorable growth in medical care’s share of GNP, increases that most scholars agree exceed any improvements in health outcomes.  The chapter concludes with a mixed assessment of Obamacare.  Chapter 15, on the labor force, is also rather short for its subject matter.  Gordon recounts the major changes in the structure and composition of work since World War II.  Again, it is a familiar tale — improved working conditions due to the shift towards the service sector and “indoor” jobs; rising labor force participation for married women; rising educational attainment, at least until recently; and the retirement revolution.  Your faithful reviewer gets a shout-out in a brief discussion of the “Great Compression” of the 1940s; my collaborator in that work, Claudia Goldin (and her collaborator, Lawrence Katz) gets much more attention for her scholarly contributions on the subject matter of Chapter 15, understandably so.

Part Three addresses explanations for the time series pattern in the standard of living.  Chapter 16 focuses on the first half of the twentieth century, which experienced a marked jump in total factor productivity (TFP) growth and the standard of living.  Gordon considers several explanations, dismissing two prominent ones — education and urbanization — right out of the gate.   In paeans to Paul David and Alex Field, he argues that the speed-up in TFP growth can be attributed to the eventual diffusion of key inventions of the “Second” industrial revolution, such as electricity; to the New Deal; and, finally, to World War II.  Chapters 17 and 18 tackle the disappointing performance of TFP growth and the standard of living in the last several decades of U.S. economic history.  Despite remarkable accomplishments in science and technology the impact on average living standards has been small, compared with the 1920-70 period.  Rising inequality since 1970, which can be tied in part to skill-biased technical change, has made matters worse, as did the Great Recession.  While Gordon is not all doom and gloom, he definitely falls on the pessimist side of the optimist-pessimist spectrum — his prediction for labor productivity growth over the 2015-40 period is 1.2 percent per year, a full third lower than the observed rate of growth from 1970 to 2014.

I think it is next to impossible to write a blockbuster economics book without it being a mixed bag in some way or other.  Gordon’s is no exception.  On the plus side, the book is well written, and one can only be in awe of Gordon’s mastery of the factual history of the American standard of living.  We all know macroeconomists who dabble in the past.  Gordon is no dabbler.  One can find interesting ideas for future (professional-level) research in every chapter — graduate students in search of topics for second year or job market papers, take note.  Many previous reviewers have chided Gordon for his pessimistic assessment of future prospects.  Of course, no one knows the future, and that includes Gordon.  It is certainly possible that he will be wrong about productivity growth over the next quarter-century — but I for one will be surprised if his prediction is off by, say, an order of magnitude.

I am less sanguine about the mixed qualitative-quantitative method of the book.  I gave up reading the history-of-technology-as-written-by-historians-of-technology a long time ago because it was just one-damn-invention-after-another.  At the end of a typical article recounting the history of improvements in, say, food processing, I was supposed to conclude that no amount of money would get me to travel back in the past before said improvements took place — except I never did reach this conclusion, knowing it to be fundamentally wrong.  Despite references to hedonic estimation, TFP, and the like, in the end Gordon’s book reads very much like conventional history of technology.  More than a half century ago Robert Fogel showed how one could quantify the social savings of a particular invention, thereby truly advancing scholarly knowledge of the treatment effects. Yet Railroads and American Economic Growth is not even cited in Gordon’s bibliography, let alone discussed in the text.  If one’s focus is the aggregate, I suppose a Fogelian approach is impossible — there are too many inventions, and (presumably) an adding-up problem to boot.  What exactly, though, do we learn from going back and forth between quantitative TFP and qualitative one-damn-invention-after-another? I’m not sure.  There’s the rub, or rather, the tradeoff.

Criticisms aside, if you are into economics blockbusters, The Rise and Fall of American Growth belongs on your bookshelf, next to Piketty and the like.  Just be sure it is a heavy-duty bookshelf.

Robert A. Margo’s Economic History Association presidential address, “Obama, Katrina, and the Persistence of Racial Inequality,” was published in the Journal of Economic History in June 2016.

Copyright (c) 2016 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator (administrator@eh.net). Published by EH.Net (July 2016). All EH.Net reviews are archived at http://eh.net/book-reviews/

Subject(s):Economic Development, Growth, and Aggregate Productivity
History of Technology, including Technological Change
Household, Family and Consumer History
Living Standards, Anthropometric History, Economic Anthropology
Geographic Area(s):North America
Time Period(s):19th Century
20th Century: Pre WWII
20th Century: WWII and post-WWII

Coordination in Transition: The Netherlands and the World Economy, 1950-2010

Author(s):Touwen, Jeroen
Reviewer(s):van den Berg, Annette

Published by EH.Net (August 2015)

Jeroen Touwen, Coordination in Transition: The Netherlands and the World Economy, 1950-2010. Leiden: Brill, 2014. xiv + 385 pp. $154 (hardcover), ISBN: 978-90-04-27255-2.

Reviewed for EH.Net by Annette van den Berg, School of Economics, Utrecht University.

One of the great debates of the late twentieth century has been around the well-known study Varieties of Capitalism: The Institutional Foundations of Comparative Advantage (VoC) by Peter Hall and David Soskice, in which developed countries are characterized as either a Liberal Market Economy (LME) or a Coordinated Market Economy (CME), based on five interrelated criteria (spheres). Many scholars have applied the VoC approach since then — including economic historians — trying to reconcile the rather static nature of the approach with a historical, more dynamic analysis. Jeroen Touwen (lecturer in Economic and Social History at Leiden University, and the scientific director of the N.W. Posthumus Institute) adds to this line of research, by applying VoC to the case of the Netherlands after World War II in a careful, critical manner. This has resulted in an impressive and voluminous book of which the principal title, Coordination in Transition, neatly captures the key theme: How did a typical CME react to the structural changes as a result of ongoing globalization (influenced by trade liberalization and technological developments, foremost in information and communications technology), causing a shift to a market-based and knowledge-based economy? One of the new contributions of this book is that it also analyzes recent economic history of the Netherlands, in contrast with most other Dutch studies that only treat the twentieth century.

The Netherlands makes for an interesting case because it is seen as a successful and hybrid CME, with a liberal tradition in business relations as in Anglo-American countries; a strong welfare state like in Scandinavia; and a high degree of coordination similar to Germany. Also readers with no particular interest in the Dutch case (or those who think they already know the country, for that matter) will find this book worthwhile to read, as each chapter sets out with a broader treatment of theoretical considerations before analyzing the Netherlands, each time accompanied by a comparison with several other western OECD countries; and as the author makes relevant statements about (developments of) LMEs and CMEs in general. In so doing, he uses theoretical concepts from several socio-political fields of science, and of many statistical sources, thereby providing the reader with ample information and guidance for further research. The large number of interesting footnotes and references underline the thoroughness and dedication with which the book was written.

In my view, Chapter 2 is the most innovative part of the book because here the author comes up with a novel view on how the original, static VoC framework can accommodate for changes through time by adding a temporal dimension and by focusing on the central concept of non-market coordination, which not only encompasses state-induced regulation, but all kinds of information exchange and negotiation between different stakeholders operating at various levels in the economy. He argues that CMEs, despite all having become more liberal in reaction to structural change, remained characterized by a high degree of deliberative institutions (although often in an adjusted form). Hence, whereas Hall and Soskice theorized that due to institutional complementarities, deregulation of financial markets could “snowball into changes in other spheres as well,” possibly causing a break-up of CMEs, Touwen contends that the overall convergence to the LME did not take place, for which he provides plentiful evidence in the subsequent four chapters.

The limited space in this review does not allow me to elaborate on these chapters in depth. In a nutshell, in all of them Dutch postwar economic history is analyzed by focusing, in succession, on the business system, labor relations, the welfare state and economic policy. As these concern strongly overlapping topics an inevitable disadvantage thereof is that the same themes are addressed several times (be it from different perspectives), which is somewhat tiresome if one would read the whole book in one go. On the other hand, each chapter comes up with additional information and interesting details, thereby delivering further building blocks for the main message of the book: when faced by shocks and external threats, almost in all time periods (except during the polarized 1970s) the Dutch responded gradually but nevertheless adequately via an intricate system of coordination in all five distinguished spheres of the economy (in industrial relations, information sharing with employees, corporate governance, inter-firm networks, and vocational training). Although a deliberate choice of the author, it is a missed opportunity not to elaborate on this last-mentioned sphere, for reasons not explicitly mentioned.  Here and there he just touches upon this important topic, while a bit more comprehensive discussion thereof would have made the application of VoC to the Dutch case complete.

The book clearly describes how non-market coordination in the Netherlands originated in the interwar years and how it developed thereafter. At first this occurred in great harmony under guidance of the state (demand-side, Keynesian policy) in order to restore international competitiveness, culminating in the so-called Golden Years (1950s-1960s). There was close collaboration between government, employer associations and unions at all levels. During the stagflation period of the 1970s unemployment rose, labor relations hardened and the government failed to cut spending. Finally, forced by the structural changes in the world economy, by 1982 the sense of urgency was strong enough for all parties to switch to a more liberal, supply-side economic policy. Wage restraints were accepted in return for the creation of jobs, which were often part-time and temporary. The labor market thus became more flexible. Although this whole process coincided with a drastic reform of the welfare state, it was also accompanied by an active labor market policy, preventing segregation of the labor market as well as a rise in income inequality. So, “more market” went hand in hand with sustained coordination. Addressing the most recent time period, the financial crisis of 2007-10 clearly demonstrates the negative consequences of introducing too much free market, and underscores the continued need for coordination and government regulation. Touwen describes the success of the Dutch CME in terms of “managed liberalization under the wing of consultation.” The ability of non-market coordination to accommodate change forms the connecting thread.

Annette van den Berg (lecturer at Utrecht University School of Economics) is the author (together with Erik Nijhof) of “Variations of Coordination: Labour Relations in the Netherlands” in: K. Sluyterman (ed.), Varieties of Capitalism and Business History. The Dutch Case (Routledge, 2015) and (together with John Groenewegen and Antoon Spithoven) of Institutional Economics. An Introduction (Palgrave Macmillan, 2010). Her email address is j.e.vandenberg@uu.nl.

Copyright (c) 2015 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator (administrator@eh.net). Published by EH.Net (August 2015). All EH.Net reviews are archived at http://eh.net/book-reviews/

Subject(s):Economic Planning and Policy
Geographic Area(s):Europe
Time Period(s):20th Century: WWII and post-WWII