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Cities of Commerce: The Institutional Foundations of International Trade in the Low Countries, 1250-1650

Author(s):Gelderblom, Oscar
Reviewer(s):Hohenberg, Paul M.

Published by EH.Net (February 2014)

Oscar Gelderblom, Cities of Commerce: The Institutional Foundations of International Trade in the Low Countries, 1250-1650.  Princeton, NJ: Princeton University Press, 2013.  xii + 293 pp. $35 (hardcover), ISBN: 978-0-691-14288-3.

Reviewed for EH.Net by Paul M. Hohenberg, Rensselaer Polytechnic Institute.

In this book, Oscar Gelderblom, who is Associate Professor of Economic History at Utrecht University, sets out to embed the development of three major commercial centers in the ongoing debate over the rise of market-friendly institutions during the late Middle Ages and the early modern period.   Between them, the ports of Bruges, Antwerp, and Amsterdam held the top rank among north European commercial cities for the entire period.  Amidst all the wars, dynastic rivalries, economic cycles, and demographic and religious upheavals, the ships came and went, the goods piled up in warehouses and streamed out again, and the merchants bargained, bickered and borrowed – and often grew rich in the process.  In this fine book, we get a real sense of the riskiness associated with trade (no mention of the polyglot and multi-specie confusion that must have made things even more complicated) and of the efforts urban authorities made to cope with risk.

The focus on institutions is nothing new in economic history; indeed, the “old” economic history studied little else.  But the “New” practitioners look to the role of trade-enabling institutions in fostering the pervasive capitalist economy that was to come, grounded in private enterprise, laissez-faire government, and heavy use of capital.  One school of thought credits the strong nation state and its willingness to honor its debts to private persons. As Gelderblom points out, while this may hold for England, Continental territorial rulers more often hindered than helped trade.  A second school holds that private merchant networks were largely able to cope with the agency problems inherent in long-distance trade.[1]  Again, Gerlderblom believes (and documents) that it took additional institutional scaffolding to manage risk.

The present book offers a third model, one which puts the emphasis on urban institutions not only created to facilitate trade but adaptable to changing needs and circumstances.  Cities were propelled by the need to compete – not just for trade but for a nodal role in trade networks.  Success meant, in particular, the presence of foreign merchants who would reside, store goods, and engage in financial transactions as well as trade.

The bulk of the book is devoted to a close, highly detailed analysis of mechanisms in the three cities intended to deal with recurring problems.  The chapter headings tell the story: “The Organization of Exchange,” “Crossing Borders” (trade at a distance), “Conflict Resolution,” “The Protection of Trade” (from violence), and “Dealing with Losses.”  Using “thick description,” Gelderblom shows how urban mechanisms were generated, modified, and adapted to meet the needs of a disparate set of trades and traders under changing conditions.  The idea was both to supplement private arrangements and to circumvent often overly-rigid and archaic institutions of territorial rulers.

While giving due credit to the depth and breadth of learning these chapters display, I want to focus briefly on the principal argument that it was competition between cities that motivated institutions conducive to long-distance trade.  To do so requires closer attention to two meanings of the term.  Economists use competition to designate a market structure in which sellers that persist in the market must operate with a level of efficiency such that they can cover all costs at the prevailing price.  None has any special incentive to innovate, nor is there any push toward a hierarchy of “firms” (in this case ports).  Competition can also, however, imply rivalry, where the fight for survival or supremacy plays out between two (or a few) contenders.  Here a first mover advantage can prove decisive, providing ample incentive (in this case) to offer foreign merchants a more hospitable habitat with trade-friendly institutions.

Because the three cities succeeded one another as leading ports in the north European network, one expects the second meaning of competition to prevail.  One also expects to find (at least relative) institutional failure, first in Bruges and then in Antwerp, as they lost their primacy.  Yet this is just what we do not find.  In fact, institutional failure gets almost no attention beyond vague allusions to other places.  The decline of Bruges and Antwerp gets little notice; by implication, the causes were exogenous, largely the result of political struggles and aggression by territorial rulers.  Thus, the core argument loses some of its edge given the book’s near-exclusive focus on successful urban institutions in a world of sharp variation in the fortunes of commercial cities

The book is well-written, and only a few infelicities betray the fact that English is not the author’s primary language (and that copy-editing by publishers has fallen victim to the times).  I close with an observation, not a criticism: three things one might expect to find in a study of European trade in these four centuries shine, as the French say, by their absence: Mercantilism, usury, and the silting up of the Zwin (Bruges’ estuary).

1. Full disclosure: the two articles on which much of the recent literature is based appeared in the same issue of the Journal of Economic History.  The present reviewer, though proud as then-editor to shepherd two fine papers into print, did not foresee the impact they would have.  Nor did either win the Journal’s Cole Prize as the best paper published in that year. See Douglass C. North and Barry R. Weingast (1989), “Constitutions and Commitment: Evolution of Institutions Governing Public Choice,” Journal of Economic History 49 (4): 803-32; and Avner Greif (1989), “Reputation and Coalitions in Medieval Trade: Evidence on the Maghribi Traders,” Journal of Economic History 49 (4): 857-82.

Paul M Hohenberg is Professor of Economics Emeritus at Rensselaer and has written widely on European economic history and urbanization.  He is the author with Lynn Hollen Lees of The Making of Urban, Europe, 1000-1994 (Cambridge, MA: Harvard University Press, 1994).

Copyright (c) 2014 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator ( Published by EH.Net (February 2014). All EH.Net reviews are archived at

Subject(s):International and Domestic Trade and Relations
Markets and Institutions
Urban and Regional History
Geographic Area(s):Europe
Time Period(s):Medieval
16th Century
17th Century

Odd Couple: International Trade and Labor Standards in History

Author(s):Huberman, Michael
Reviewer(s):Baumann, Brittany A.

Published by EH.Net (October 2012)

Michael Huberman, Odd Couple: International Trade and Labor Standards in History. New Haven, CT: Yale University Press, 2012. xii + 237 pp. $65 (hardcover), ISBN: 978-0-300-15870-0.

Reviewed for EH.Net by Brittany A. Baumann, Department of Economics, Boston University.

In Odd Couple: International Trade and Labor Standards in History Michael Huberman argues that history in a global perspective reveals a causal relationship between free trade and labor standards. His claim is that not only did trade expansion induce the adoption of labor restrictions, but reverse causality exists as well. The pairing is ?odd? in that their relationship is not obvious, and the reverse causality may seem controversial. Nonetheless, the linkages are an interesting contribution to both economic history and modern perspectives on trade.

Between 1870 and 1914, changes in trade policy and labor standards were significant. The labor standards, which Huberman denotes as the ?labor compact,? pertain to labor regulations ? work age requirements, work hour restrictions ? and social entitlements ? accident insurance. As countries became increasingly open to trade, they also began adopting labor restrictions, precipitating the rise of welfare states. The traditional view is that industrialization led to rise of the factory system and urbanization, propagating a demand for greater protection of worker welfare, thereby leading to greater state intervention. Huberman stresses the significance of trade expansion as a causal influence for a labor compact. In eight thorough chapters Huberman describes how these two policies reinforced each other in the late nineteenth century Old and New Worlds. Historical data and regression analysis combined with his strong grasp of economic theory provide a convincing body of evidence.

Chapter 1 motivates the topic by focusing on the views of a political figure of the period, Emile Vandervelde, economist and patron of the Belgian Labor Party. Vandervelde was a steadfast supporter of free trade and influenced Belgium to become one of the first European economies to lift trade barriers. Vandervelde?s free trade ideology was the following: despite the welfare gains from trade in the form of higher wages, risks such as dislocation and employment uncertainty also rise in open economies. Hence, he believed free trade should be contingent on the adoption of labor standards to offset the costs of trade openness.

Huberman?s goal is to understand how this free trade ideology developed differently across nations and to reveal its linkage to labor standards. He limits his detailed analysis to three countries: Belgium to represent the labor abundant Old World; Canada, for the land abundant, richer New World; Brazil, for the New World of the southern hemisphere. Fortunately, the analysis also spans other important economies such as the U.S. and the UK.

Huberman divides the book in two parts: Part I describes how globalization induced the labor compact, and Part II describes the reverse causality. Chapter 2 that begins Part I paints a picture of the global economy in the late 1800s. To support his claim that international pressures explain the rise of the labor compact, he outlines the benefits and costs of trade, and shows why the labor compact reinforced the benefits and helped to offset the costs. The gains from trade are standard: increased market size, specialization, and, depending on the type of export, wages. Trade can be costly by lowering wages and raising employment risks, and its impact depends on the elasticity of substitution between foreign and domestic goods. To provide evidence of increased uncertainty in open economies, Huberman shows an increasing relationship between terms of trade and trade openness in both the Old and New Worlds. Huberman claims that the labor compact, besides providing social insurance against heightened trade risks, incentivized firms to invest in more efficient technology. This claim is powerful and is the recurring subject for the rest of the book. As evidence, Huberman uses regressions to uncover the effects of trade risk factors on labor legislation adoption, showing that legislation increases with trade openness. In logit regressions Huberman also reveals that trade facilitates country convergence in labor standards in Europe, yet not in the New World. He provides theoretical evidence that affirms that economies have incentive to harmonize labor standards in order to reap bilateral trade benefits.

Giving both empirical evidence and theory, Chapter 3 explains the divergence in labor and trade policy adoption between the Old and New Worlds. Adoption of labor standards was uneven and delayed in the New World compared to in Europe, as was free trade. The Stolper-Samuelson theorem can partially explain the opposing views between the Old and New toward free trade. The theorem predicts wages to fall in an economy, for example, Canada, exporting a land-abundant good. Immigration also contributed to lower wages. Hence, the New World was reluctant to support free trade since it hurt workers, and instead advocated tariff protection and immigration restrictions. On the other hand, Old World countries such as Belgium were inclined to support free trade by recognizing the benefits of a lower cost of living and reduced wage pressures for firms. In enacting free trade, countries advocated the labor compact in order to provide protections from trade risks. Coincidentally, Belgium adopted labor standards in a short period during which no tariffs were increased.

Chapter 4 develops the argument that open economies had incentives to harmonize their labor standards. The plethora of international conferences on labor standards, mostly held in Europe, motivates this view, and such conferences in fact did not contest free trade but had a primary goal of securing worker gains from trade with labor reform. Huberman confirms their significance by showing that country attendance was related to a higher likelihood of adoption. He suggests that bilateral labor treaties had more clout, given that a pair of countries had incentive to raise standards in order to gain market access through free trade. In a regression of trade costs on labor treaties, a significant negative relationship does exist for the Old World.?

The next three chapters are devoted to the reverse causality ? the labor compact inducing globalization. The main mechanism behind this causality is as follows: labor reform raised wages which raised firm productivity, shifting comparative advantage and enabling firms to export more. Here Huberman does justice to modern trade theory in describing the behavior of exporting firms: exporters are larger, pay higher wages, and are more productive and skill- and capital-intensive. By reducing labor supply and raising wages which incentivizes firms to become more efficient, the labor compact should induce more firms to export and thereby amplifies trade on both the intensive and extensive margins. This mechanism, however, lacks evidence and therefore appears weakly founded to an economist.

Odd Couple next turns to a discussion of the wage distribution. Chapter 5 explains how the trends in inequality during the period were related to the evolution of the labor compact and trade. Citing historical inequality experts Peter Lindert and Jeffrey Williamson, the author explains why inequality widened within New World countries relative to the Old: since the New World adopted a labor compact relatively later, the skill premium did not narrow in this region. Nevertheless heavy immigration would deliver the same effect, as Huberman mentions. Yet this argument is not complete in that this region was less open, and freer trade tends to raise inequality. Huberman continues by addressing between-country inequality and claims trade lessened inequality between the labor-intensive Old World and the labor-scarce New World. Although the trends in inequality are well-explained, the chapter seems to forget about the theme of Part II by leaving out the labor compact.

Fortunately the next chapter presents empirical evidence. Focusing on the textile sector, Huberman asserts that scarcity of labor ? a by-product of the labor compact ? induced exporters to upgrade technology. In charts of spindles per ring and per mule 1880-1914, he shows that the New World became more productive with greater specialization relative to the Old World. One reason would be that the New World adopted the labor compact more extensively during these years. As mentioned earlier, this mechanism is weak; Huberman even acknowledges that labor laws worsen trade flows in the short run by raising marginal costs, with regressions of trade balances to confirm it.? A multinomial logit model confirms trade openness increased convergence of low-cost labor laws, more so in the Old World, yet ironically confirms the opposite direction of causality. Thus the evidence is far from convincing.

Brazil presents a puzzling counter-example to his case. A collapse in trade in the 1920s proceeded implementation of labor laws, which Huberman?s hypothesis does not predict. Brazil only provides an example that the determinants of trade openness go far beyond labor policy. Nevertheless, the collapse of trade may have further stunted the rise of a welfare state. Huberman concludes that Brazil did not completely adopt a labor compact after enacting free trade in the 1980s because the economy lacked the historical precedent ? the precedent of adopting a labor compact during a period of global trade expansion.

Chapter 7 is an interesting, though somewhat extraneous, analysis of the divergent trends in labor hours of the New and Old Worlds. Both witnessed a decrease in hours since 1870, yet toward the end of the twentieth century the New World had relatively longer hours. The labor compact, being more fully adopted in the Old World, contributed to shorter hours due to greater regulation and work sharing. Huberman offers other sources of divergence: inequality and social emulation, labor power, work ethic, and religion. To connect to his hypothesis, Huberman shows that hours decline with trade openness in 1914, and the trend holds in 2000. Huberman hastily concludes that globalization contributed to a wedge between the social models of the New and Old Worlds.

In Odd Couple, Huberman provides a thorough description of the world economy during a phase of trade expansion and labor reform. An important conclusion is that the differences between the New and Old World labor standards and trade policy can actually explain the divergence in social models today. However, the book contains far-reaching conclusions. For example, Huberman asserts the collapse of trade in the 1930s was partially due to the failure to enact and harmonize labor standards. The passage of the New Deal along with the empirical evidence that recessions lead to collapses in trade flows drastically weaken this claim. The direction of causality from labor reform to trade expansion requires theoretical backing in addition to more empirical evidence. That the labor compact promoted higher efficiency and a shift of resources to export industries is another far-reaching assertion that remains unconvincing. Regardless, the book reveals unexpected yet interesting economic linkages and gives modern-day policy standards a new historical perspective.

Brittany A. Baumann is a Ph.D. candidate in Economics at Boston University. Her fields are International Economics, Macroeconomics, and Economic History.

Copyright (c) 2012 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator ( Published by EH.Net (October 2012). All EH.Net reviews are archived at

Subject(s):Government, Law and Regulation, Public Finance
International and Domestic Trade and Relations
Labor and Employment History
Geographic Area(s):General, International, or Comparative
Time Period(s):19th Century
20th Century: Pre WWII
20th Century: WWII and post-WWII

Eli Heckscher, International Trade, and Economic History

Author(s):Findlay, Ronald
Henriksson, Rolf G.H.
Lindgren, Hakan
Lundahl, Mats
Reviewer(s):Crafts, Nick

Published by EH.NET (August 2007)

Ronald Findlay, Rolf G.H. Henriksson, Hakan Lindgren and Mats Lundahl, editors, Eli Heckscher, International Trade, and Economic History. Cambridge, MA: MIT Press, 2006. xi + 560 pp. $50 (cloth), ISBN” 0-262-06251-8.

Reviewed for EH.NET by Nick Crafts, Department of Economics, University of Warwick.

This edited volume contains the proceedings of a 2002 conference which marked the fifth anniversary of Eli Heckscher’s death. The aim of the symposium was “to create a forum where economists and economic historians could meet to develop a picture of how relevant Heckscher’s research program and results are perceived to be by current practitioners” (p. x). Each area of Heckscher’s scholarship gets a separate section (parts II to VI) and there are also sections devoted to material of a more biographical nature relevant to the development of Heckscher’s views on methodology and politics (parts I and VII). This review focuses on parts II to VI which are the most interesting for the vast majority of the EH.Net audience.

Part II deals with Heckscher-Ohlin Trade Theory and contains chapters by Ronald W. Jones and Kevin O’Rourke. The former re-evaluates Heckscher’s 1919 paper and concludes that its contribution is truly seminal. The latter is an interesting econometric analysis of attitudes to globalization which concludes that high-skilled workers in OECD countries are relatively pro-globalization, as might be supposed on a Stolper-Samuelson view of the world. Strikingly, however, there is no paper that assesses how much Heckscher-Ohlin trade theory still has to contribute to the understanding of trade and industrial location in the era of the new international economics and the new economic geography.

Part III considers Historical Applications of Heckscher-Ohlin Theory and contains papers by Peter Temin, Ronald Findlay and Mats Lundahl, and Jeffrey Williamson. The first two are papers that seek to make bricks without (much) straw. Temin analyzes trade across the Mediterranean Sea in biblical times, while Findlay and Lundahl develop a Malthusian model with an endogenous frontier to look at demographic shocks in the 800 years ending with the Black Death. This is a nice model but seems to owe more to Malthus than to Heckscher. Williamson’s paper is an excellent econometric analysis of the pattern of tariffs during 1870 to 1938 which concludes that this was the era when Stolper-Samuelson (factor endowment) arguments mattered a lot. The standard of the papers in this section is notably high but unfortunately the breadth of the historical coverage is not really adequate to fulfil the aspirations of the conference organizers.

Part IV turns to Mercantilism and offers four quite varied papers. Lars Magnusson directly addresses the issue of how valuable Heckscher’s work is nowadays. He argues that although its analysis is seriously dated, nevertheless there is still value in the impressive command of historical detail. Deepak Lal explains how Mercantilism helped him to make sense of cycles of economic repression and reform in developing countries. Douglas Irwin summarizes his well-known game-theoretic analysis of mercantilist rivalry between the British and Dutch East India Companies. Finally, Joel Mokyr uses Heckscher as an excuse to develop some interesting points about the role of Enlightenment economic thinking ? especially the increasing realization that trade was not a zero-sum game ? in stimulating the Industrial Revolution. The sub-text of this section seems to be that, actually, the current relevance of Heckscher’s great work is quite limited.

Part V deals with The Continental Blockade, with weighty contributions from Francois Crouzet, Lance Davis and Stanley Engerman, and Patrick O’Brien. These authors offer differing views as to the current value of Heckscher’s work. Davis and Engerman conclude that, on the whole, it remains an essential work whose interpretations are still acceptable, while O’Brien is much more critical. He argues that to a modern audience the work seems Anglocentric and fails properly to understand how and why the British state defeated Napoleon’s attempt to close continental markets to British trade. Crouzet’s position is intermediate in that he sees the book as still deserving to be described as a masterpiece but nevertheless a rather partisan account.

Part VI is about Swedish Economic History. The most interesting of these papers to the general audience of economic historians is Lennart Schon’s essay on the 1870-1930 period of Swedish industrialization. He argues that prior to 1890 this followed a Heckscher-Ohlin trajectory based on exports of industrial products based on Swedish natural resources but subsequently technological progress was more central and a major structural transformation ensued. The other two papers in this section are probably for a more specialist readership. Johan Soderberg discusses Heckscher’s vision of economic development and suggests that his thesis that the Western world reached its apogee around 1900 is unpersuasive. Mats Morell looks at Heckscher’s analyses of food consumption in early-modern Sweden and suggests that although the conclusions may be more or less valid everything else was seriously flawed. Here, too, it seems that Heckscher no longer has a great deal to offer.

Overall, this is a collection in which many economic historians will find something of interest and the quality of most of the contributions is very high. On the other hand, few economic historians will want to read the whole set of papers. Those who do will quite possibly come to the view that, while Heckscher was indeed a major figure in the development both of economics and of economic history, his time has gone.

Nick Crafts is Professor of Economic History at the University of Warwick. His most recent publication is a volume edited with Ian Gazeley and Andrew Newell, Work and Pay in Twentieth-Century Britain, Oxford University Press, 2007.

Subject(s):International and Domestic Trade and Relations
Geographic Area(s):General, International, or Comparative
Time Period(s):20th Century: WWII and post-WWII

Africans and the Industrial Revolution in England: A Study in International Trade and Economic Development

Author(s):Inikori, Joseph E.
Reviewer(s):O'Rourke, Kevin H.

Published by EH.NET (October 2003)

Joseph E. Inikori, Africans and the Industrial Revolution in England: A Study in International Trade and Economic Development. Cambridge: Cambridge University Press, 2002. xxi + 576 pp. ?55 or $75 (hardcover), ISBN: 0-521-81193-7; ?19.95 or $29 (paperback), ISBN: 0-521-01079-9.

Reviewed for EH.Net by Kevin H. O’Rourke, Department of Economics, Trinity College Dublin.

This is a big book in every sense of the word. Drawing on more than two decades of scholarship in the field, Joseph Inikori (University of Rochester) has written a provocative, occasionally frustrating, and ultimately convincing monograph on one of the classic issues in our field, the causes of the British Industrial Revolution. His argument is that international trade was crucial to the success of that revolution, in particular trade with the Atlantic Basin (Africa, the West Indies, and the Americas); and that Africans on both sides of the Atlantic were central to this process, both as consumers and producers. As he shows, the notion that trade was a driving force behind the Industrial Revolution is hardly a novel argument, but it comes as a welcome contrast to the domestically-focused “west is best” arguments that are so common in the literature nowadays. What is more original is his attempt to quantify the volume of “African-produced” commodities entering the Atlantic trade, using occasionally heroic assumptions. The book is also marked by a constant emphasis on the demand-side consequences of international trade for economic growth, with the link being endogenous technological progress caused by the exigencies of producing for the overseas market.

The author makes frequent reference to the literature on “import substitution industrialization” (ISI), a concept introduced in Chapter 1, as a framework which he feels is useful when interpreting the British experience. A novelty of the treatment here is that Inikori shows quite persuasively that in many cases English industrialisation followed a path of “re-export substitution industrialization,” or RSI, with English merchants eventually selling British-made goods in Atlantic markets where previously they had sold Continental or Asian goods. While references to ISI, backward and forward linkages and so on may set some readers’ hackles on edge, as a description of what happened — and without necessarily going into issues of cause and effect — the concept is clearly quite useful.

Chapter 2 provides a very long run overview of English economic history from 1060 to 1850. A fairly standard account of economic and institutional developments up to 1660 is followed by an account of the industrial transformation the book is seeking to explain, with a heavy regional emphasis. Essentially, Inikori’s strategy is to argue that the various regions of England were largely disconnected from each other until the advent of the railroad (i.e. well after the Industrial Revolution had gotten under way); if this is the case, then they can be regarded as separate observations, and the variation between them can be used to “test” various theories of the Industrial Revolution. For example, arguments stressing the agricultural revolution fail his test, since the agricultural revolution was a southern phenomenon, whereas the industrial revolution was a northern one. At this point, the cliometrician will look for quantitative evidence to support the hypothesis of regions which were autarkic vis a vis each other, but some of which were linked to overseas markets: price evidence springs immediately to mind, but the reader will not find it here. Nor will the reader find much evidence on the internal integration (or lack thereof) of English labor markets, which is clearly important for the author’s strategy.

Chapter 3 will probably become the most widely read section of the book, and ought to become standard fare on graduate and advanced undergraduate reading lists. It contains a survey of the historiography of the Industrial Revolution, from Toynbee to today. Inikori shows that the literature on what caused British industrialization has moved from being largely focused on external trade (before the Second World War), to more internalist explanations after 1945, and that the pendulum may now be swinging back again. Inikori is impressively well-read (a quality which emerges throughout the book), and the chapter is elegantly written and entertaining.

Chapter 4 is in many ways the core chapter of the book. After a brief account of the development of the Atlantic economy, the book brings together a wide range of estimates of trans-Atlantic trade, as well as a more speculative allocation of this trade between trade in goods produced by Africans and other trade. The numbers seem big, although it would have been nice to have been given a yardstick to measure them by. Later chapters do, however, show that the flows of raw materials and manufactures into and out of Britain were very large when compared with the size of the sectors most concerned — a point made elsewhere by O’Brien and Engerman (1991), who also point out that these were precisely the sectors which were at the heart of the Industrial Revolution. And while the author’s technique of presenting an assortment of qualitative and quantitative evidence, and then reaching conclusions such as “export production in French America … was produced 100 percent by Africans” (p. 191) will certainly strike some as cavalier, Inikori’s overall conclusions regarding the very large share of international trade involving goods produced by Africans are surely correct.

Chapter 5 examines Britain’s role in the trans-Atlantic slave trade, and shows that Britons were responsible for shipping a very large proportion of all the slaves forcibly transported across the Atlantic, not just those shipped to British possessions overseas. There is also an interesting discussion of the losses sustained by the British slavers. Chapters 6 though 9 then look in detail at various channels through which the extensive Atlantic trade previously documented affected the development of the British economy. Chapter 6 shows that, not surprisingly, the English shipping industry and its ancillary industries were largely dependent on the Atlantic trading system for their growth, in part because of the high depreciation rates associated with maintaining ships off the African coast line. Chapter 7 argues that the risks associated with overseas trade, and the large needs for working capital not only of merchants but also of plantation owners and domestic exporters, stimulated the development of the British insurance industry and capital markets, which were heavily dependent on the Atlantic economy. Chapter 8 documents the obviously vital role of raw material imports produced by Africans in the New World and West Africa for the rapidly developing textile industry, while Chapter 9 looks at the equally obvious importance of the Atlantic market for the textile and metal industries, which were at the heart of the Industrial Revolution.

Inikori’s method is that of the old-style economic historian, and this book shows the virtues of the approach. There are no “killer” econometric or simulation results, clinching a particular argument about causality, but rather an accumulation of archival evidence and data which end up convincing the reader that trade with the Atlantic basin was indeed hugely significant for the key sectors of the rapidly industrializing British economy. Old-style history’s comparative advantage is in generating facts, and the facts presented here make one wonder how scholars could ever have thought about the Industrial Revolution without making trade a central component of the analysis. New-style history’s comparative advantage, on the other hand, is in assessing arguments about causality, and while this reviewer is convinced by the argument that absent international trade, there would hardly have been as much innovation and investment as in fact took place during the Industrial Revolution, a lot of cliometricians will probably conclude that Inikori’s argument is not as yet proven. The model of endogenous technical change central to his argument that trade drove invention is never precisely spelled out, and it is not clear what the key mechanisms were: is it competition with other nations in the competitive West African market (p. 428), or skilled labor scarcity in particular sectors, caused by booming export demand, giving rise to an incentive to mechanize (p. 464)? Should we regard this as muddled thinking, or a much-needed acknowledgement that the world is a complicated place? ? chacun son go?t.

Inikori is at considerable pains to stress that overseas demand was causally prior to domestic technical change. The regions which succeeded industrially were those that succeeded in exporting: QED. Of course, he acknowledges that successful regions may in principle have been good at exporting because they were successful at adopting new technology, but dismisses this based on timing: “northern counties became leaders in overseas sales before they became leaders in technological innovation. Hence, it was their leadership in overseas sales that led to their leadership in technological innovation” (p. 478). The preceding chapters make the case in greater detail for particular industries; this cliometrician could have done with more systematic evidence on the point. More generally, the debate between demand and supply-siders strikes me as beside the point: both should matter in general equilibrium, even in the complicated, dynamic general equilibrium environment of the real world. In order to industrialize, Britain needed to be able to generate innovations on the supply side, and in order to innovate it needed to sell the products thus produced on the demand side. Why prioritize one blade of the scissors over the other?

Inikori hasn’t answered all the questions, then: so much the better for the rest of us. But with the publication of this book, histories of the Industrial Revolution which neglect the roles of maritime power, colonial conquest and slavery ought to become a thing of the past.


O’Brien, Patrick K. and Stanley L. Engerman (1991), “Exports and the Growth of the British Economy from the Glorious Revolution to the Peace of Amiens,” in Barbara L. Solow (ed.), Slavery and the Rise of the Atlantic System (Cambridge: Cambridge University Press).

Kevin O’Rourke is Professor of Economics at Trinity College Dublin, a Research Fellow at the CEPR and a Research Associate at the NBER. He is currently an IRCHSS Government of Ireland Senior Fellow. He is the co-author of Globalization and History: The Evolution of a Nineteenth-Century Atlantic Economy (MIT Press, 1999, with Jeffrey G. Williamson), and is currently working on a history of international trade in the very long run (with Ronald Findlay).

Subject(s):Servitude and Slavery
Geographic Area(s):North America
Time Period(s):19th Century

International Trade and Political Institutions: Instituting Trade in the Long Nineteenth Century

Author(s):McGillivray, Fiona
McLean, Iain
Pahre, Robert
Schonhardt-Bailey, Cheryl
Reviewer(s):Nye, John V.C.

Published by EH.NET (July 2002)

Fiona McGillivray, Iain McLean, Robert Pahre and Cheryl Schonhardt-Bailey,

International Trade and Political Institutions: Instituting Trade in the

Long Nineteenth Century. Cheltenham, UK and Northampton, MA: Edward Elgar,

2002. x + 242 pp. $80 (hardback), ISBN: 1-84064-690-X.

Reviewed for EH.NET by John V.C. Nye, Department of Economics, Washington

University in St. Louis.

This stimulating and well-written volume is based on the papers originally

presented at a mini-conference held at Washington University in St. Louis.

(Which, it should be noted, I now regret having missed.) The four lengthy

essays plus a substantial introductory essay and conclusion share the common

theme of analyzing the link between political institutions and the history of

European — especially British — trade policy in the century between the

Napoleonic wars and the coming of the First World War. This unity of theme

makes for something more than a hastily assembled collection of conference

essays. Furthermore, some of the methodological issues that are addressed

should prove of additional interest for economic historians trying to balance

the demands of social scientific reasoning and historical detail.

The nineteenth century is, of course, of central importance for historians of

international commerce as the latter half of the century provided the first and

arguably the only true period of relatively free trade among the major European

powers. Furthermore, the special role of Britain as apologist for and most

prominent nation in the drive towards freer trade commands the attention of

theorists in international relations as well as the political economy of trade


The opening essay — in its own way perhaps the most impressive piece in the

book — points to the tensions that arise between those who focus on the

narrowly political details of a particular historical event or political

transition and the desire to construct more generalizable theories of political

economy and trade relations. Furthermore, even among the theorizers, there is a

real clash — almost a culture clash — between those who favor international

level, states-as-single-actors explanations of policy common to the work in

“Realism” and the theory of “Hegemonic Stability” and the more economically

oriented explanations (overlapping with work in public choice theory) that

focus on the role of domestic interests in competition with one another.

The former approach seems to be the more traditional “political” approach

focusing on policy strategy and power relations, while the latter — often

called Endogenous Tariff Theory (ETT) — is more economistic, drawing on the

metaphor of politics as interest group competition derived from ideas of

economists such as Olson, Buchanan and Tullock, or North. Indeed, the latter

approach is especially congenial to economic historians who have played no

small role in advancing the state of knowledge in this area.

The latter approach, while often faulted for its tendency to oversimplify or

ignore important historical detail, can count as its achievement the production

of a body of theory and empirical evidence that is unmatched in the literature.

As is noted in the introduction, “It is unlikely that any other approach could

boast a comparable number of logically interrelated testable propositions” (p.

9) with strong empirical support. In contrast, proponents of the work in the

various areas of Realism “disagree even about the main assumptions and central

claims of the theory” (p. 9) which to this reviewer seems to be an incredibly

damning indictment of that body of research.

But a greater problem occurs from the desire to reconcile work that focuses on

material interests — common to ETT and to other “economic” approaches —

versus studies that concentrate on the role of ideas or on political ideology.

This contradiction is not resolved and if anything is deepened by the examples

given in this book.

Pahre’s long essay on tariff treaty regimes in the nineteenth century is the

most general work in the book and is itself a fine demonstration of the

benefits to be derived from even a simplified special interest model. Focusing

on competition between importers and exporters in a reduced form political

model in which the ruler or state throws his support to one faction or the

other, Pahre gives us an analysis of the movement towards trade liberalization

in the nineteenth century which does not suffer from the tendency of many

writers to over-emphasize the role of Britain. As this reviewer has argued in

other work, France and Germany should be viewed as the major figures in the

spread and eventual retreat of liberal trade policies in the century. British

tariff reform early in the century was neither as dramatic as has been

presented to us nor did it engender a response in the major trading partners.

Only the 1860 Anglo-French Treaty of Commerce and other events having little to

do with unilateral moves on the part of the British spurred the spread of freer

trade through bilateral treaties with third parties contrary to the arguments

of purist free traders.

Any such model will be bound to have multiple caveats ranging from the reduced

form concerns to the non-incorporation of economic conditions to the relatively

simplistic political model employed. Even at the level of his analysis Pahre

has some difficulties with the empirical tests finding, for example, that

openness measures work better than average tariff levels for his hypotheses.

But nothing in his model really gets at openness per se, and openness, unlike

tariff levels, is as much a function of the underlying economic fundamentals of

the countries as of any political decisions that could have been made by the

tariff setting authorities. Nonetheless, the effort is still impressive, and

there is much in the overview for political scientists and economists to chew


McGillivray’s work focuses on the issue of U.S. tariff policy in the first few

decades after the Revolution. She uses recent work in economic history to

reject the claims of some political theorists that “under the Articles of

Confederation, states adopted beggar-thy-neighbour tactics towards each other”

(pp. 96-97). She points to the decentralized nature of the state system and the

prevalence of agricultural interests to explain why interstate trade flourished

among the states while the Republic found itself unable to create a unified

tariff regime which could be used to retaliate against the British. Though

employing neither formal theory nor detailed statistics, this essay shows how

suggestive arguments can still be developed with some rigor if they rely on

careful argument from theory and pay attention to the theoretically-relevant

findings of the historical literature.

A bigger problem arises when comparing Pahre’s work to the two essays by McLean

and Schonhardt-Bailey. McLean provides a nuanced, albeit fairly traditional,

account of the ideological aspects of the debates over repeal of the Corn Laws.

However, given that repeal of the Corn Laws did not decisively produce free

trade in Britain, and given the observations by Pahre and others regarding the

irrelevance of British tariff liberalization on the eventual spread of free

trade on the Continent, one is left to doubt the central role assigned to the

political debates by McLean. The struggle over the Corn Laws is no doubt

interesting in and of itself, but if Britain was neither the magnanimous free

trader of lore nor the successful free-trade hegemon of international relations

theorists, then this singular political event loses its central importance in

the historiography of nineteenth- century commercial policy.

Though broader and more analytic, Schonhardt-Bailey’s study of how ideas can be

strategically employed to nationalize what might have been seen as merely local

or narrowly ideological interests shares the same problem of overemphasis of

the role of the Corn Laws repeal. There is no attempt to distinguish between

political debates that were salient as politics versus the objective weight of

a given policy in the overall structure of British trade or tariffs. However,

the broader theoretical discussion of how ideas are generalized and the attempt

to use Continental examples in addition to the British back story make this

work rather more complementary to the Pahre essay than the work of McLean which

tends to stick out from the rest.

Indeed, the conclusion by Schonhardt-Bailey tries to reconcile all these papers

by arguing that they are complementary and co-exist by virtue of their

differing levels of analysis. While no one can argue with this sage and fairly

general claim, the case would have been better made if the four essays at least

took care to coordinate the background narrative or stylized facts that overlap

among them. If any claim is going to be made for the virtues of promoting these

differing levels of analysis we would benefit from seeing how they can all

combine to produce a whole greater than the sum of the parts. Sadly they lost a

great opportunity and the numerous contradictions among the component parts

leave the promise of the concluding chapter unfulfilled.

Nonetheless, none of these criticisms should detract from the value to be

derived from reading this remarkable volume. I do not exaggerate in saying that

this should be standard reading for international relations theorists as well

as economists and economic historians interested in the political economy of

trade reform.

John V. C. Nye specializes in French economic history and industrial

organization. His publications include “The Myth of Free Trade in Britain and

Fortress France: Tariffs and Trade in the Nineteenth Century” Journal of

Economic History (1991).

Subject(s):International and Domestic Trade and Relations
Geographic Area(s):North America
Time Period(s):19th Century

Jealousy of Trade: International Competition and the Nation-State in Historical Perspective

Author(s):Hont, Istvan
Reviewer(s):Meardon, Stephen

Published by EH.NET (October 2008)

Istvan Hont, Jealousy of Trade: International Competition and the Nation-State in Historical Perspective. Cambridge, MA: Harvard University Press, 2005. xviii + 541 pp. $50 (hardcover), ISBN: 0-674-01038-8.

Reviewed for EH.NET by Stephen Meardon, Department of Economics, Bowdoin College.

“Why do we need,” asks Istvan Hont in his introduction, “to rediscover repeatedly” what was already understood about Adam Smith by his first biographer over two centuries ago? Smith was no doctrinaire liberal and “simplistic quasi-Physiocrat” – as Dugald Stewart knew then and plenty of readers have found since. As Herbert Stein once put it in a Wall Street Journal op-ed, Smith “did not wear the Adam Smith necktie.”[1]

At the 2007 meetings of the History of Economics Society, where Hont won the award for best book in the field, one of its most eminent practitioners, Warren Samuels, posed nearly the same question. Samuels, though, was referring not to Hont’s book but instead to an older one by Donald Winch: Adam Smith’s Politics: An Essay in Historiographic Revision (Cambridge, 1978). The Society had just named Winch a Distinguished Fellow, in no small part for his manner of rediscovering the same thing three decades ago. Samuels was one of the panelists in an honorary session. “How many times will people keep making this point?”he asked the audience ebulliently, more in the tone of an exclamation.

Samuels surely intended it as a tribute, but it was an awkward one. Unless he meant that the point is common knowledge only because Winch, at long last, revealed it – which Dugald Stewart, among others, would not allow – his question implied that among Winch’s book’s many virtues one could not count originality of its punchline. And if the question was awkward when Samuels applied it to Winch, whose book appeared over a quarter century ago, then Hont would seem to be courting some risk by inviting us to apply it to him, too.

Like Winch’s admirable book, after all, Hont’s is a record of rediscovery that does not challenge the basic image of its subject (or subjects) – at least not the image that appears in the standard scholarly references, if not fashion accessories. Thus Smith appears as one who saw extraordinarily keenly the “blemishes” (as H. W. Spiegel put it) of an incipient capitalist society at the same time that he systematized its defense. Winch showed that this image is accurate, given the perspective from which it was drawn – and yet the perspective is anachronous. It sublimates Smith’s political philosophy; it reflects later generations’ preoccupations with “the strength and autonomy of a socio-economic realm [that] variously threatens, limits, or deflects the realm of the political,” and posits Smith as master of the first.[2] Smith’s own preoccupations were different. One may understand them better by revisiting the political dialogues in which he participated. The reward is a more thorough acquaintance with a personage whom one recognized all along.

There lies Winch’s answer to the sticky “Why again?” question. It is worth keeping in mind while considering Hont’s.

Hont’s answer is bound to be at least a little different: the subject matter of Jealousy of Trade overlaps that of Winch’s book but also extends well beyond it. One could fairly say the subject matter sprawls. Smith is front and center but is not given top billing. That honor is reserved for a theme: “the intersection of politics and the economy” in the eighteenth century, “the constitutive moment of modern politics” (p. 10).

The book’s title is borrowed from an essay by Hume, who despaired of the new penchant for carrying old international rivalries into the arena of trade. Smith, Hume, and their contemporaries, writes Hont, “wanted to explain how the conflation of the logics of war and trade arose in the seventeenth century and why it was so difficulty to exorcise them afterward” (p. 8). But the book ventures far afield from the conflation of war and trade per se. It embraces a lengthy introduction plus chapters grouped in three different sections, titled “Natural Liberty and Global Competition,” “Paradoxes of Reform and Transition,” and “Commercial Nation State.” The first includes consideration of theories of man’s innate sociability and its relation to commerce; how changes in the pattern of trade fomented jealousy of trade in Britain and Europe; and the Scottish Enlightenment’s “rich country–poor country” debate about the international distribution of the gains from trade. The second section includes explorations of Hume’s aversion to public debt, which he believed fostered military adventurism; the centrality of Smith’s critique of Physiocracy to his science of the legislator; and (in this instance in co-authorship with Michael Ignatieff) the demands of “justice” with respect to redistribution in Smith’s system. The third section investigates the deeper roots of the idea of nationalism and “nation-state” that grew out of the French Revolution. All of the chapters were published elsewhere, mainly in edited volumes, between 1983 and 1994.

It is in reference to the fifth and sixth chapters, on Smith’s understanding of Physiocracy and of justice, that Hont poses the “Why again?” question. (He claims (p. 111) to refer to the seventh chapter, but this appears to be a minor error.) His answer is two-fold. First, and echoing Winch, by drawing out painstakingly the intellectual and political context in which Smith wrote, we may “look at the dilemmas Smith himself faced.” Second, having taken a look, we will find that “they are often identical with our own predicament today”(p. 111).

If the second part of the answer signaled accurately an important purpose of several chapters, then it would mark a signal difference between Winch’s book and Hont’s. To Winch, after all, reacquaintance with Smith on Smith’s terms was purpose enough. But the second part of the answer misleads. The purpose of drawing parallels with the present day, although avowed repeatedly in the introduction–in one instance Hont professes to write with “eyes firmly fixed on the challenges of today” (p. 5)–is not only unmet, it is mostly untried.

The book is better for the omission. Because Hont’s eyes are actually fixed firmly on Smith’s moment (specifically, on an astonishing quantity of literature and archival evidence generated from it), we do indeed learn, in superb detail, about the dilemmas Smith and his contemporaries faced – and in those dilemmas, the forgotten origins or purposes of otherwise familiar ideas. The instances are too various to distill to a paragraph or two, but an example is in order. In chapter 5, “Adam Smith and the Political Economy of the ‘Unnatural and Retrograde’ Order,” Hont tells the story of Smith’s dispute with the Physiocrats over the proper way to reintroduce the “system of natural liberty” where it had been upended by Colbertism. Colbert had established in France an “unnatural” economic order that promoted manufactures at the expense of agriculture; the “four-stages theory” of history was the prop Smith used in common with Quesnay and his followers to debate the proper way to return to the natural order. But it was only a prop; the theory showed how manufacturing naturally followed agriculture, but not (or at least not obviously) how to return to the agricultural stage of society after Colbert’s deviation. The Physiocrats saw in the four-stages theory the need for an immediate and determined reorientation of the French economy toward agriculture. Smith saw in it a gap that could be filled adequately only by the political deliberation and gradual actions of “future statesmen and legislators” (quoted on p. 383). Thus Hont arrives, from one of several angles, at an insight into the intersection of politics and economics in the late eighteenth century. To Adam Smith, “the politics of natural liberty had to build on the existing unnatural order and the actual liberty it produced” (p. 375).

Insights like this are good enough; one need not believe that Smith’s predicament was identical to our own to be motivated to read it. But while the inflated claims of the book’s purpose are unnecessary, one can also guess the reason for their presence. Hont allows from the outset that “Jealousy of Trade is not a monograph,” but adds immediately that its chapters “are closely connected by their subject matter and argumentative purpose” (p. 5). “Closely” is a stretch, as the previous sketch of the contents of sections and chapters ought to show. The claim of a present-day purpose seems a half-hearted, because unexecuted, effort to unify the book’s disparate parts. A more earnest but equally regrettable effort is embodied in the one hundred and fifty-six page introduction. At that length, why not keep writing and complete the missing monograph?

Jealousy of  Trade is a compilation of glittering historical scholarship that creaks from the strain of the contrivances for compiling it. Its value lies in bringing much-deserved attention to a number of essays that otherwise would not have received it. That is value enough for an edited volume – but this volume declares greater aspirations. As ever, the peril of greater aspirations is greater disappointment. Few will want to read this book front to back. Those with a general interest in the subject will benefit from reading the introduction and identifying a chapter or two for more careful perusal. Specialists will be pleased to have at hand, in convenient form, a set of extraordinary essays for selective reexamination.

Notes: 1. Herbert Stein. 1994. “Remembering Adam Smith.” Wall Street Journal, April 6, p. A14. 2. Donald Winch. 1978. Adam Smith’s Politics: An Essay in Historiographic Revision. Cambridge University Press, p. 23.

Stephen Meardon is author of “Postbellum Protection and Commissioner Wells’s Conversion to Free Trade,” History of Political Economy (Winter, 2007) and “From Religious Revivals to Tariff Rancor: Preaching Free Trade and Protection during the Second American Party System,” History of Political Economy (forthcoming in supplement, 2008).

Subject(s):International and Domestic Trade and Relations
Geographic Area(s):Europe
Time Period(s):19th Century

Taste, Trade and Technology: The Development of the International Meat Industry since 1840

Author(s):Perren, Richard
Reviewer(s):Craig, Lee A.
, Lee

Published by EH.NET (December 2006)

Richard Perren, Taste, Trade and Technology: The Development of the International Meat Industry since 1840. Aldershot, UK: Ashgate Publishing, 2006. xi + 285 pp. $100 (cloth), ISBN: 0-7546-3648-8.

Reviewed for EH.NET by Lee A. Craig, Department of Economics, North Carolina State University.

Roughly an hour’s drive from my home in Raleigh, North Carolina, in the town of Tar Heel, one finds what is advertised as “the world’s largest pork slaughterhouse,” where the Smithfield Packing Company “processes” 30,000 animals a day. A hundred years ago, according to figures cited by Alfred Chandler, Armour and Swift each averaged about the same number of animals per day.[1] At the time, pork alone accounted for between two and four percent of U.S. GDP.[2] For good reason Chandler emphasized the meat industry in his masterful study of the rise of big business. The meat trade remains big business.

Richard Perren’s Taste, Trade and Technology documents the history of that business. Over the past three decades, Perren, Reader in Economic History at the University of Aberdeen (UK), has written extensively about the meat trade, and this volume serves as something of a summary of his research. It is the trading specifically, rather than production, which receives the majority of the focus, and it is the international component of that trading that gets the most detailed treatment. In particular Perren places British consumers at the center of the trade — the hub, so to speak — around which the major producer-exporters revolve. Those exporting countries include the United States, Argentina, Uruguay, Australia and New Zealand. This arrangement is appropriate enough, because in the late nineteenth century the huge British market imported the equivalent of roughly ten million animals a year, the majority of which came from the aforementioned exporting countries.

The volume is divided into three sections, each corresponding with a chronological era. The first era (1840-1914) covers what might be referred to the rise of the industry, and, as Perren writes, “the main development driving the whole process was technical change in the meat processing industry” (p. 38). Although meat, on the hoof or otherwise, had been traded for centuries, Perren documents the tremendous growth of the trade in the late nineteenth century, as production expanded in the exporting countries. The second era (1914-1945) emphasizes the ways in which governments increasingly exerted “official control” over the industry, including “enforcement mechanisms, in the form of new health and veterinary regulations, commercial marketing methods, the abandonment of free trade and the introductions of tariffs and quotas” (p. 130). For those who come to the volume from the agricultural production side of the industry, this section is potentially the most informative, summarizing as it does the origins and subsequent history of the public policies governing the meat industry. Part Three covers the period from the end of World War II to the present, and extends the themes in Part Two with the addition of a detailed account of changes on the demand side of the market, in particular the “relative changes in the consumption of different types of meat” (p. 188).

Readers looking for a detailed account of the actual production side of the trade — that is, taking the animal from birth to the processing plant, will not find this volume as useful as those interested in what happens to the carcass after the slaughter. Similarly, Perren works harder at explaining the impact of specific technologies, such as mechanical refrigeration, than he does at explaining the technologies themselves. However, there are plenty of good volumes on animal husbandry and technology; Perren’s contribution is synthesizing and summarizing the history of the trade. At this he succeeds.

Perren’s strength is his ability to unravel the mysteries and competing interests behind the scenes of negotiations concerning the meat trade and then concisely summarizing them for the reader. Scholars often find themselves in a situation in which we need a few pages on a particular topic, only to find either a paragraph or a several-hundred-page volume. With respect to the meat trade, however, Perren’s concise explanations of a subject like the New Zealand marketing board or the Ottawa Imperial Conference of 1932 are informative without being too detailed for the non-expert, and even readers who think New Zealand lamb is an overrated dish, will be edified by Perren’s summary of that dish’s political economy. Needless to say, in each case, the quest for profit, albeit with increasing help from the coercive powers of the state, is at the heart of the story.

That story concludes with the present in which the confined hog operations of eastern North Carolina represent the apogee of the industry’s evolution over the past two hundred years. With more hogs than people — ten million, at last count — the state is home to a pork industrial complex that concentrates production, with thousands of animals penned together, in sheds the size of football fields. Dealing with the concentrated waste from these operations, on a coastal plain only a few feet above sea level, is a monumental engineering feat — one that has yet to be solved in a cost-efficient manner. The open air lagoons in which the waste is processed emit an odor that can be detected miles away. A standard story about the local industry goes like this: A traveler from other parts, passing through on his way to some place else, pulls into a “down east” gas station to fill up. Upon emerging from his car, he detects the unfamiliar and oppressive odor. Sniffing, he turns to a local and asks: “What does that smell like to you?” The local pretends to sniff, and, as if recognizing the smell for the first time, responds: “Smells like money to me.” Indeed. As Richard Perren documents, the meat industry has smelled like money for a long time.


1. Alfred D. Chandler, Jr. The Visible Hand: The Managerial Revolution in American Business. Cambridge, MA: Harvard University Press, 1977, pp. 391-401. 2. Lee A. Craig and Matthew T. Holt. “Mechanical Refrigeration, Seasonality, and the Hog-Corn Cycle,” unpublished manuscript, North Carolina State University, 2006, p. 28.

Lee A. Craig is Alumni Distinguished Professor of Economics at North Carolina State University. His most recent published research on Sus scrofa domesticus includes, with Matthew T. Holt, “Nonlinear Dynamics and Structural Change in the U.S. Hog-Corn Cycle,” American Journal of Agricultural Economics, 88 (Feb. 2006): 215-33.

Subject(s):Transport and Distribution, Energy, and Other Services
Geographic Area(s):North America
Time Period(s):20th Century: WWII and post-WWII

A New Balance of Payments for the United States, 1790–1919: International Movement of Free and Enslaved People, Funds, Goods and Services

Author(s):Officer, Lawrence H.
Reviewer(s):Devereux, John

Published by EH.Net (May 2022).

Lawrence H. Officer. A New Balance of Payments for the United States, 1790–1919: International Movement of Free and Enslaved People, Funds, Goods and Services. New York: Palgrave Studies in American Economic History, Palgrave Macmillan, 2021. xxxiii + 415 pp. $150 (hardcover or paper), ISBN 978-3-030-66098-7.

Reviewed for EH.Net by John Devereux, Department of Economics, Queens College, City University of New York.


This book provides a definitive treatment of the U.S balance of payments from 1790 to 1919. There is rich U.S tradition in this area. The 1960 NBER volume Trends in the American Economy in the Nineteenth Century contained two seminal articles on U.S external transactions. Douglas North covered 1790 to 1840, while Matthew Simon covered 1840 to 1916. Three years later, Robert Lipsey produced his estimates of the U.S external terms of trade after 1879. North went on to win the Nobel Prize in Economics. Lipsey had a distinguished career at the NBER and Queens College. Simon, also of Queens College, died in 1968. For the last 60 years their magisterial work has formed the basis for what we know about U.S. external transactions over the eighteenth and early twentieth centuries.

Much has changed since the early 1960’s. So it is time for a fresh look at historical measures of the U.S balance of payments. Accordingly, Lawrence Officer set out to revise North and Simon. To accomplish this, he gathered the information, published and unpublished, that has appeared over the last six decades. He also revisited earlier sources – including sources missed by North and Simon. It has taken him ten years, but he has accomplished his task in this book.

Officer has two objectives. The first is to put the U.S balance of payments from 1790 to 1919, where the official series begin, on a consistent basis, as previous work joined together series which were often incomplete and which used different approaches and different measures. More importantly, Officer expands coverage and improves the quality of the estimates. It would take a much longer review to even list the improvements in existing series. But the creation of new measures of the U.S net asset position and better measures of service trade are particularly noteworthy. The effort required to accomplish all of this is immense.  Consider the estimates for tourism. This requires 82 series for ocean fares (p. 283). In addition, Officer has to construct a new U.S CPI, and he generates measures of domestic U.S passenger transportation for rail, stagecoaches, etc.

Officer’s thoroughness is shown by the fact that he revisits earlier work by going back to the original sources and correcting errors of transcription, etc. He accomplished all of this, it would appear, working on his own without an army of research assistants. North, Simon, and Lipsey benefitted greatly from the institutional support of the NBER. Alas, the NBER no longer fills this function and Officer works on his own. The resulting book is a model of scholarship – he presents all his results; he outlines his methods and assumptions; he is modest and thoughtful; and he is generous in his praise of earlier work. Indeed, he dedicates the book to North and Simon. North is, of course, a towering figure. But Simon is a forgotten scholar whose wonderful work deserves recognition. Officer’s criticisms, when he makes them, are measured and fair.

The book is a major contribution to U.S economic history. To be sure, it does not change the broad outlines of what we know about U.S trade and foreign indebtedness before 1919 – North and Simon did their work well. But Officer puts the estimates on a firmer basis. Take the external terms of trade. Officer covers commodity and service trade for the entire period where most work in economic history is for commodity trade. He improves deflators and replaces the fixed weight price indices with a more appropriate deflator. The result is that we now have an external terms of trade series for the U.S from 1790 to now that is superior to the estimates for other developed economies. Throughout, Officer either improves on previous work or he provides new series.

Overall, the book is a monumental effort and its mastery of disparate sources puts it on a par with classics such as Lebergott (1964). It will surely stimulate further research. Officer’s early work on the dollar-pound exchange rate is partly responsible for the literature on long run real exchange rates which rehabilitated purchasing power parity (see Lothian and Taylor, 1996). This book will have a similar impact. To provide one instance, the improved measures of U.S foreign assets/liabilities will facilitate work for economic history along the lines of Lane and Milesi-Ferretti (2007).

The book is not an easy read. Officer starts off with a review of previous estimates. Next, there is a long digression on the movement of people. Following this, he outlines how he constructs each series, chapter by chapter. Only at the end of the book does Officer draw the series together and talk about his overall results. I would prefer that he start with the big picture. Throughout, the writing is dense and assumes considerable knowledge. To understand the basic issues with historical measures of U.S external transactions, the reader is advised to consult North and Simon before starting Officer. There are other difficulties. Officer provides important new series, but the summary statistics do not indicate how they differ from the old. Given the extensive reliance on interpolation, it would also help if he gave some indication of possible error margins. All in all, these are minor quibbles. A more serious problem is that some of the most important series appear only as diagrams – including the external terms of trade and the various price series. This is due to space constraints, but it is unfortunate. The author, or the publisher, should consider making all the series available in spreadsheet form on their websites.



Lane, Philip R., and Gian Maria Milesi-Ferretti. (2007) “The External Wealth of Nations Mark II: Revised and Extended Estimates of Foreign Assets and Liabilities, 1970–2004.” Journal of International Economics 73: 223-250.

Lebergott, Stanley. (1964) Manpower in Economic Growth: The American Record Since 1800. New York: McGraw-Hill.

Lipsey, Robert E. (1963) Price and Quantity Trends in the Foreign Trade of the United States. Princeton: Princeton University Press for the National Bureau of Economic Research.

Lothian, James R., and Mark P. Taylor. (1996) “Real Exchange Rate Behavior: The Recent Float from the Perspective of the Past Two Centuries.” Journal of Political Economy 104: 488-509.

North, Douglass C. (1960) “The United States Balance of Payments, 1790-1860.” In NBER Conference on Research in Income and Wealth, Trends in the American Economy in the Nineteenth Century, Studies in Income and Wealth, Vol. 24. Princeton: Princeton University Press for the NBER.

Simon, Matthew. (1960) “The United States Balance of Payments, 1861- 1900.” In NBER Conference on Research in Income and Wealth, Trends in the American Economy in the Nineteenth Century, Studies in Income and Wealth, Vol. 24, Princeton: Princeton University Press for the NBER.


John Devereux is professor of economics at Queens College, City University of New York. His areas of research are International Economics and Economic History.

Copyright (c) 2022 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator ( Published by EH.Net (May 2022). All EH.Net reviews are archived at


Subject(s):Economywide Country Studies and Comparative History
International and Domestic Trade and Relations
Geographic Area(s):General, International, or Comparative
North America
Time Period(s):18th Century
19th Century
20th Century: Pre WWII

Promoting Global Monetary and Financial Stability: The Bank for International Settlements after Bretton Woods, 1973–2020

Editor(s):Borio, Claudio
Claessens, Stijn
Clement, Piet
McCauley, Robert N.
Shin, Hyun Song
Reviewer(s):Rockoff, Hugh

Published by EH.Net (March 2022).

Claudio Borio, Stijn Claessens, Piet Clement, Robert N. McCauley, and Hyun Song Shin, eds. Promoting Global Monetary and Financial Stability: The Bank for International Settlements after Bretton Woods, 1973–2020. Cambridge: Cambridge University Press, 2020. xviii + 268 pp. $110 (hardback), ISBN 9781108495981.

Reviewed for EH.Net by Hugh Rockoff, Department of Economics, Rutgers University.


This collection of six essays was created to celebrate the 90th birthday of the Bank for International Settlements (BIS). It covers the years 1973–2020. Toniolo and Clement (2005) covered 1930–1973 in a detailed and well-received volume.

The BIS was established in 1930. Its first home was in the former Savoy Hôtel Univers in Basel, Switzerland. It was part of the Young Plan to facilitate the payment of Germany’s World War I reparations. However, its raison d’être soon disappeared with the moratoria on German reparations. During the 1930s, moreover, the reputation of the BIS was tarnished when it accepted deposits of gold looted by the Nazis. At the Bretton Woods Conference, there were calls, including one from the top American negotiator Harry Dexter White, to liquidate the BIS. After all, two new international agencies, the International Monetary Fund and the World Bank, would govern the international financial system. This recommendation, however, failed to garner sufficient support.

Although the BIS provides some banking services for central banks, its main functions, to judge from these essays, are twofold: to provide a forum where central bankers can discuss common problems and form relationships and to provide research and analysis. It is difficult to place objective values on these services. The essays abound with phrases like “forum for information exchange and discussions,” “forum for central bank cooperation,” “ideal venue for cooperation” and so on, but how much this meant is difficult to say. The same is true of its role as supplier of information and ideas. The BIS has an active research department, but measuring its impact is difficult.

This book is a birthday present from and for the BIS. There are no naysayers here. Nevertheless, the six essays in this well-planned volume – the first five by distinguished academic students of central banking and international finance and the final essay by a distinguished practitioner – are to my mind, cautious and persuasive.

The first chapter, by Harold James, “The BIS and the European Monetary Experiment,” delivers what the title suggests: a clear and informative description of the road to the Euro emphasizing the role of the BIS.

The second chapter, by Caroline R. Shenk, “The Governance of the Bank for International Settlements, 1973–2020” takes the reader through the changing organizational structure of the BIS. The need to expand the membership of the BIS to reflect the changing structure of international finance while preserving its ability to serve as a forum for central bank cooperation was, it turns out, especially challenging.

The third chapter, by Chris Brummer, “A Theory of Everything: A Historically Grounded Understanding of Soft Law and the BIS,” describes the role of the BIS in promoting and developing the Basel capital standards. These standards are “soft law” because individual nations retain the right to place legally enforceable restrictions on its banks. However, as Brummer explains, the Basel standards have influenced the laws that nations adopt, and so have had an enormous influence.

The fourth chapter, by Andrew Baker, “Tower of Contrarian Thinking: How the BIS Helped Reframe Understandings of Financial Stability,” argues that the BIS played a crucial role in the development and promulgation of the concept of “macroprudential regulation.” This is the idea that, for example, capital requirements for banks should be changed over the course of the business cycle, ratcheting up during economic expansions and down during contractions, thus (hopefully) moderating the business cycle and preventing financial crises.

In the fifth chapter, Barry Eichengreen furthers the discussion of the evolution of the BIS’s thinking about international financial markets and regulation including macroprudential regulation. The chapter is based on a close reading of the annual reports of the BIS and other sources, providing a good example of what can be accomplished through meticulous scholarship.

The final chapter, “The Bank of International Settlements: If It Didn’t Exist, It Would Have to Be Invented (An Insider’s View),” was written by William C. Dudley, who has served as President of the Federal Reserve Bank of New York and on various committees of the BIS, making, he tell us, over 50 trips to Basel. Dudley provides some weighty examples drawn from his own experience of central bank cooperation that were facilitated by the forum provided by the BIS. For example, Dudley argues that in 2008 the rapid deployment of a system of central bank dollar auctions was made possible by personal relationships forged at the BIS.

When I began reading, I was skeptical that a case for the importance of the BIS could be based on its provision of a forum for central bank cooperation and of a center for research. These are both areas where, as I noted, measurement of impact is hard if not impossible. It is, moreover, easy to think of counterfactual substitutes. In the absence of the forum for discussions created by the BIS, would there have been more conferences like the famous conference at Jackson Hole hosted by the Federal Reserve Bank of Kansas City? More Zoom webinars? And in the absence of the BIS research department wouldn’t its researchers have found other places to ply their trade? However, in the end I found the book convincing. Like most economists, I think competition is a good thing, and this appears to be another example. Michael Bordo and Edward Prescott (2019) have argued that the system of competing research departments in Federal Reserve District Banks has proven its worth. It makes sense that the same is true when it comes to international financial agencies.

This clear, judicious, and persuasive volume is well worth reading by someone like myself:  interested in the recent history of international finance, but not an expert. I learned a lot. Moreover, I believe it will be required reading for scholars studying the evolution of the institutional structure of international banking, finance, and monetary policy.


Bordo, Michael D., and Edward S. Prescott. “Federal Reserve Structure, Economic Ideas, and Monetary and Financial Policy.” NBER Working Paper 26098, 2019.

Toniolo, Gianni, and Piet Clement. Central Bank Cooperation at the Bank for International Settlements, 1930-1973. New York: Cambridge University Press, 2005.


Hugh Rockoff is Distinguished Professor of Economics at Rutgers University. His primary research interests include the history of price controls, the U.S. economy in World War II, and U.S. monetary history.

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Subject(s):Economic Planning and Policy
Financial Markets, Financial Institutions, and Monetary History
Macroeconomics and Fluctuations
Geographic Area(s):General, International, or Comparative
Time Period(s):20th Century: Pre WWII
20th Century: WWII and post-WWII

Small and Medium Powers in Global History: Trade, Conflicts, and Neutrality from the Eighteenth to the Twentieth Centuries

Editor(s):Eloranta, Jari
Golson, Eric
Hedberg, Peter
Moreira, Maria Cristina
Reviewer(s):Straumann, Tobias

Published by EH.Net (April 2020)

Jari Eloranta, Eric Golson, Peter Hedberg, and Maria Cristina Moreira, editors, Small and Medium Powers in Global History: Trade, Conflicts, and Neutrality from the Eighteenth to the Twentieth Centuries. London: Routledge, 2018. x + 240 pp. $124 (hardcover), ISBN: 978-1-138-74454-7.

Reviewed for EH.Net by Tobias Straumann, Department of History, University of Zurich


History is usually written by the victors, and since military victory is often linked to troop size and economic capacity, the victors are usually great powers. As a result, our memory tends to be biased towards a narrow understanding of war and victory, leading us to underestimate the fact that even great powers need alliances with small and medium nations in order to succeed. This book, edited by Jari Eloranta, Eric Golson, Peter Hedberg, and Maria Cristina Moreira, aims at drawing a more realistic picture of the role played by weaker states during greater conflicts and thereby fostering new research. Weakness is defined by relatively low military capacity and relatively high trade openness. The ten contributions study crucial episodes of European countries, the United States, and Brazil from the eighteenth to the twentieth century. As the editors write in the introduction, the main argument of most chapters is that weak states were able to expand their trade and discover new markets, thus increasing their economic importance for belligerents.

Part I deals with the interplay of trade and conflict in the long run, with most contributions focusing on the Napoleonic Wars. Jeremy Land, Jari Eloranta, and Cristina Moreira investigate the evolution of American trade from 1783 to 1830 when the United States were not a great, but a medium power on the world stage. The authors show that the U.S. was able to expand its trade despite difficult circumstances. Silvia Marzagalli studies the U.S. case during the same period, but concentrates on the American shipping and trade in the Mediterranean, which increased enormously from 1793 to 1815. She highlights the crucial role of American neutrality, not as a clear-cut status, but as a negotiable and flexible stance towards war and the belligerent powers. Maria Cristina Moreira, Rita Martins de Sousa, and Werner Scheltjens analyze commercial relations between Portugal and Russia from 1750 to 1850 and show how conflicts, blockades, and institutional problems hampered direct trade. Rodrigo da Costa Dominguez and Angelo Alves Carrara study the effects on the Napoleonic Wars on the governance of Brazil as a part of the Portuguese empire. On the basis of fiscal sources, the authors show how the shift of the Portuguese Court from Lisbon to Rio de Janeiro in 1808 was conditioned by the introduction of the Continental Blockade in 1806 and the desire of the Portuguese authorities to maintain their neutrality during the Napoleonic Wars. Peter Hedberg and Henric Häggqvist explain the patterns of Swedish trade and tariffs from 1800 to 1920, with a special focus on the opportunities created by Swedish neutrality during the Napoleonic Wars, the Crimean War and World War I. Their data suggests that all three conflicts had a significant impact on Swedish trade and trade policy, positively as well as negatively, and that, overall, neutrality helped, but was not important enough to counteract the totality of war, especially during World War I.

Part II investigates the interaction between trade and neutrality in conflicts in the twentieth century. Eric Golson discusses the evolution of the concept of neutrality in wartime. He starts in the early 1600s, when Hugo Grotius came up with a first vague definition, explains how the Hague and Geneva Conventions in the late nineteenth and early twentieth centuries institutionalized the concept, and describes its collapse in World War I, giving way to a “new realism.” Consequently, in World War II small and medium neutrals (Portugal, Spain, Sweden, and Switzerland) were forced to make trade, labor, and capital concessions in order to preserve their territorial integrity. Knut Ola Naastad Strøm analyses how Norway coped with the western blockade of Germany during World War I. He shows how in the first half of the war neutrality and prosperity went hand in hand, while in the second half of the war the tightening of the western blockade drastically reduced Norwegian exports to Germany and imports from the UK and the U.S. Eric Golson and Jason Lennard investigate the impact of World War I on the Swedish economy by studying the history of the ball bearings manufacturer SKF. They find that World War I greatly benefited the company, as it increased its capital stock and provided a long-term dominating position in the international market for ball bearings in the 1920s. In a further chapter, both authors try to capture the macroeconomic effects of neutrality on the Nordic countries by calculating the long-term real output trend between 1900 and 1960 and measuring output gaps for the war periods. Their results suggest that the Nordic countries suffered only mildly from World War I, but significantly from World War II, while recovery was much swifter after 1945 than after 1918. Niklas Jensen-Eriksen deals with the role of neutrality in the 1950s, asking how successful the U.S. and its allies were in incorporating European neutrals (Austria, Switzerland, Sweden, Finland, Ireland) within their export control system. His survey shows that neutrals hardly resisted U.S. demands for cooperation, even if it ran against their principles of neutrality. In the early years of the Cold War, the U.S. was economically too dominant to be ignored.

Toshiaki Tamaki and Jari Ojala conclude the volume with an analytical summary and raise the question of how the historical experiences of small and medium-sized Western countries can be linked to a global history of neutrality and the contemporary reality in which larger units beyond the nation state have become increasingly more important.

Overall, the book succeeds in correcting the conventional picture of the role played by small and medium-sized states during major conflicts. The contributions which compare several countries and make analytical points provide especially valuable insights. The endorsement by Patrick O’Brien in the short foreword is highly deserved. On the other hand, as is often the case with edited volumes, the analytical level and the approaches adopted by the authors are quite diverse, and the unifying themes are not always as strongly visible as the reader would wish. Although the introduction and the concluding remarks go a long way towards bringing the contributions together, the main hypotheses remain general. Moreover, the title implying a global view overstates the range of the volume, as the focus clearly stays on the Western world with a particular emphasis on the experience of the Nordic countries. Nevertheless, the book makes a powerful contribution to a more nuanced understanding of war, trade, and neutrality, and deserves to be widely cited. Future research dealing with the economic history of the Napoleonic War and the world wars of the twentieth century should pay more attention to the importance of trade networks entertained by the great belligerent powers.


Tobias Straumann is Senior Lecturer of Economic History at the University of Zurich. He is the author of 1931: Debt, Crisis, and the Rise of Hitler (Oxford University Press, 2019) and Fixed Ideas of Money: Small States and Exchange Rate Regimes in Twentieth-Century Europe (Cambridge University Press, 2010).

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

Subject(s):Military and War
International and Domestic Trade and Relations
Geographic Area(s):General, International, or Comparative
Time Period(s):18th Century
19th Century
20th Century: Pre WWII
20th Century: WWII and post-WWII