Project 2000: Significant Works in Twentieth-Century Economic History

K. N. Chaudhuri, The Trading World of Asia and the English East India Company, 1660-1760. Cambridge: Cambridge University Press, 1978.

Review essay by Santhi Hejeebu, Department of Economics, University of Iowa.

Asia in the Making of the K. N. Chaudhuri’s East India Company, 1660-1760

The Trading World of Asia and the English East India Company reveals the monumental importance a single, long-lived organization can have on world history. Between 1600 and 1858 the East India Company operated mostly as a commercial enterprise, but in its last century it also became a territorial ruler. Chaudhuri’s book covers the long era of the Company’s commercial maturity, 1660-1760. The East India Company’s goals were simple: buy low in the East and sell high in the West. At its most basic level the Company was a great shipping concern that rented its fleets and owned its cargos of pepper, textiles, coffee, and tea. The Company straddled the major trading centers of Asia and the British capital, bringing together the talents of artisan-cultivators and the tastes of final consumers.

Mainstream economic history is still coming to grips with the importance of Asia and the history of economic growth outside of European frames of references. Through the lens of a single organization one sees the effects of monetary expansion (American silver) on trade flows and the development of bureaucratic multinational machinery. One also observes the unfolding of colonial conquest and the peculiar results that emerge when market power is wedded with political power. The Honourable Company has beguiled writers since the eighteenth century and the secondary literature alone would constitute a considerable library. But no future investigator of the East India Company or its complicated legacy will be able to progress far without engaging Chaudhuri’s “magisterial” (Raychaudhuri 1980, 433) Trading World of Asia.

Chaudhuri was the first to analyze the Company as a principally commercial enterprise. He first trained as a classicist and commands Sanskrit, Latin, and Greek, plus four European and at least two South Asian languages. His linguistic prowess made accessible to him the records of all the major European groups who traded with South Asia. In shifting to the early modern period, Chaudhuri displayed his distinct mathematical bent and brought a new formalism to the topic.

Trading World of Asia places Chaudhuri in the tradition of W.R. Scott (1910), the distinguished analyst of English chartered companies of the seventeenth century (1). It has been said that Chaudhuri did for the East India Company what Kristoff Glamann did for the Dutch East India Company (VOC), Ralph Davies for the Royal African Company, and E.E. Rich for the Hudson’s Bay Company — that he performed the role of Company historian, defender and critic. Chaudhuri’s authority, like those of the other Company historians, rests on his command of the source material. The sheer magnitude of the East India Company materials makes its comprehensive history extraordinarily difficult to achieve. Furthermore Chaudhuri brings to the subject an intimate knowledge of the regions in which the trade goods were acquired. He understood his Asian input markets — their language, history, and customs — better than historians of other chartered companies understood their overseas markets. His analytic approach, his enormous devotion to the sources, and his understanding of the very different societies joined by trade make the Trading World of Asia a most remarkable achievement.

The book’s objectives are threefold: 1. to reconstruct “the Company’s own history for the period from 1660-1760” 2. to analyze “the economic life of those countries in Asia where the Company had established trading relations” and 3. “to discover through the records and the activities of the East India Company the general problems of long-distance trade in pre-Industrial Revolution societies” (p. xv-xvi).

As Company history, Trading World of Asia provided a fresh perspective. In contrast to earlier treatments that emphasized the Company’s role as a vehicle for British imperial aims (2), Trading World of Asia gazed unflinchingly at the structure of the Company’s organization and its decision-making process — at home and abroad. Using a systems analysis approach, Chaudhuri tells how the firm worked. Tasks were divided among seven committees that reported to the Court of Directors. The Court was made up of 24 directors who were elected annually by the General Court of Proprietors. He explains the specialized duties of the committees in London and the Presidency-factory system in place across Asia.

For each institutional unit within the firm, Chaudhuri identifies its access to information and its generation of specific decision-variables. He also identifies the time lags involved between one “subsystem” of the Company and another. For example, to decide how much bullion was required to fill the current order lists, the Directors would need to know the amount of cash reserves on hand at the Presidencies. Delays in receiving such information would likely result in an over or under allocation of funds, implying less or more reliance on Indian capital markets. The Directors would face this problem year in and year out. The recurrent nature of the problem would over time encourage them to establish decision-rules for minimizing the discrepancy. Institutionally this would link transactions in the Treasure Committee with those in Asian Presidencies and ultimately with those in the Accountant General’s Department. In terms of Chaudhuri’s model, this would illustrate the interaction between subsystem I (London) and subsystem II (Asia) and then between subsystem II (Asia) and subsystem III (London). By mapping decision-variables and information flows to specific units, Chaudhuri formalizes the management structure into a “trading model.” The technique gives him a global view of the Company’s operations and leads him to conclude that “the economic success of the East India Company was in large measure the result of a systematic process of decision-making, communication, and control.” (p. 33).

The Company history extends through a description of the pattern of commercial settlements in Asia as Chaudhuri describes the various methods of acquiring goods. In Bengal a system of brokers and middlemen was used to contract textile production, while in China goods were purchased onboard ships commanded by supercargoes. He provides quantitative analysis on the long-term fluctuations in the volume of imports and exports and in the “terms-of-trade.” He describes the politics of foreign trade in Mughal India, the Company’s pursuit of trading privileges and the private trade of the Company’s servants. The shipping schedule, the export of treasure — nearly every aspect of trade with Asia is addressed. As Company history, the work is “detailed and definitive” (Prakash 1980, 139).

The second objective is more ambitious than the first. Chaudhuri hoped to analyze the economies of Asia that traded with the Company. This would include the “Arab world, the Persian Empire, the Mughal dominions, South East Asia, and China” (p. 55). Given the heterogeneity of these economies and the constraints of space, it is not surprising that his discussion is truncated to the specific markets in which the Company operated. His subsequent works Trade and Civilization in the Indian Ocean (1985) and Asia before Europe (1990) however are not Company-centric and greatly illuminate the study of comparative Asian history.

Still Trading World of Asia makes important contributions in specific areas of Asian economic history, namely in dispelling the van Leur thesis and in the study of the Indian textile industry in the seventeenth and eighteenth centuries. In his 1955 classic Indonesian Trade and Society, J.C. van Leur characterized the Asian merchants as peddlers and Asian trading ports as overburdened with a multiplicity of currency, weights, measures, and customs. The overall picture is one of small-scale traders eking out a living in the face of crippling transactions costs. Van Leur’s thesis went unchallenged for decades and was crucial to Niels Steensgaard’s 1973 study of the decline of the trans-Eurasian caravan trade.

Chaudhuri contextualizes van Leur’s argument. He shows how the peddler characterization depends on a selective use of Dutch sources, the diary of a single Armenian merchant, and a handful of travelers’ accounts. Chaudhuri counters that the type of Indian merchant most often discussed in Dutch and English company sources resembles “the Indian equivalent of the Medici family, or Fuggers, and the Tripps” (p. 138). As for the nature of Asian trade centers, Chaudhuri points out that a multiplicity of weights, measures, and regulations was common in European cities as well. More importantly, Chaudhuri argues that however large the European companies were relative to their Asian counterparts, they were never substantial enough to “command the market” (p. 139) without resort to violence. Later substantiated by empirical research, Chaudhuri’s argument did much to undermine the then prevalent misconceptions about the nature of Asian merchants communities (3).

A second major contribution to Asian economic history is the astute analysis of the Indian textile industry of the period. Chaudhuri describes the four major regions of India (Punjab, Gujarat, Coromandel Coast, and Bengal) that specialized in the production of cloth for export. He explores the organization of the industry, including the very high degree of specialization of labor and the role of merchants in financing the different stages of production and marketing the finished products. He also explains the juridical tradition that gave rise to the system of commercial advances common in the period. After exploring the cost structure of handicraft production he considers the impact of European purchases of textiles on the wages of weavers. The a priori expectation that wages would rise in the face of growing international demand is complicated by the fact the sources speak almost categorically of the impoverished state of the weaver. The discussion of Indian textile producers raises, if not fully answers, many important questions. Finally, he addresses the issue of technological stagnation. Indian textile output increased over the eighteenth century not by process innovation but by the expansion of the labor force (and implicitly the replication of specialized human capital). Chaudhuri argues that workmen in India lacked economic incentives to shift to capital-intensive techniques so long as the appropriation of producer surplus remained acute. He writes, “Specialization had gone so far that it would have required very great incentives to induce such men to change their production methods and habits drastically” (p. 275). Morris Morris described Chaudhuri’s “analysis of production and marketing activities in Asia,” as “by far the best available” (1980, 390).

The third objective of the book is to identify the “general problems of long-distance trade in pre-Industrial Revolution societies” (p. xvi). Chaudhuri does this by exploring the role of the monsoon winds and the techniques used to minimize shipping expenses (pp. 71-4, 193, 201-2, 330) and by examining the persistent communication and control problems within the Company (pp. 32-3, 74-7, 208-213, 298-9, 302). The problem of forecasting future demand and determining which commodities in what quantities should be ordered(pp. 278-81, 299-305, 331-2) would also fall under the rubric of “general problems of long-distance trade.” Unfortunately, Chaudhuri does not bring these and other recurrent challenges under a single heading. They jointly constitute one of the unifying themes of the book, yet the problems are scattered across many chapters, in many differing contexts. This is a weakness in the organization of the theme and not in the sophistication with which Chaudhuri handles it. A careful reader will find all the elements there.

As Chaudhuri admits, his method of analysis can be disorienting. “The methodology adopted was exceptionally complex, though not by itself but because of its combinations. It is easier to say what the book is not than to say what the book is. It is not true narrative history. It is not pure economic analysis, nor is it economic history in the conventional sense” (Chaudhuri 1983, 10). He uses neoclassical economic analysis and yet borrows insights from Polanyi and Marx. The influence of Braudel, quite marked in Chaudhuri’s later works, can be traced here. Trading World of Asia situates the Company primarily in terms of its economic activities (the markets which it engaged). It also emphasizes the physical or geographic space (the Asian littoral) and the cultural space (the language, customs, and mentalit? of the directors, their agents, Asian merchants, and even the Mughal aristocracy) the Company occupied. To this Chaudhuri reiterates the importance of time, investment cycles, monsoon season, harvest season, and the arrival and departure of ships. His ability to discern almost at once the many dimensions of cross-cultural, transcontinental exchange makes the Trading World of Asia a methodological hybrid.

Systems analysis receives prominent attention. He writes of the Company as a trading system, one in which the decision-rules employed by management can be mapped to a sequence of physical inputs and outputs, suggesting the Company operated like an engine. Systems analysis enables him to test statistically a series of hypotheses, such as “average costs are a decreasing function of the volume of trade, the cost price of goods, and of time, with an associated level of fixed costs” (p. 486).

The approach looks rather alien to those who learned industrial organization from Tirole (1989) or Stigler (1968) a generation earlier. It is not typically taught in economics or in history departments though it is widely used in information systems management and environmental engineering. System analysis requires the investigator to redefine structural and functional relationships on a firm-by-firm basis. What surprises (and annoys) the economist is the absence of a theory of the firm. The cost functions in Appendix 3 are hypotheses relating costs to accounting and physical variables. They do not imbibe the idea that costs functions arise from production functions and must include opportunity costs.

Can systems theory be useful to economic history? Certainly. It requires a much lower level of abstraction than conventional microeconomics and can be particularly useful when a researcher needs to make a detailed plan of a complex organization. This is precisely the sense in which computing professionals in the business world use the theory. The emphasis on information flows and functional relations across different subsystems can help organize data-gathering efforts. And this is precisely how the theory was useful to Chaudhuri. Chaudhuri (1983, 14) writes, “The historical material was collected and analysed with very strict adherence to the concept of the model. The exposition was then ‘translated’ into the idiom of historians.” The gargantuan task of synthesizing the thousands of volumes of records pertaining to the Company over the period indeed required a coherent approach embedded in a structural model of the Company’s various operations.

The drawback to systems theory is that it is a static model of the organization and it therefore offers no guidance on how to ask the deeper questions about efficiency or organizational change. Writes Chaudhuri, “For a model cannot without destroying itself take account of the passage of time which affects its structural boundaries and parameters” (p. 41). Theories of institutional change are of fundamental concern and those that are not amenable to changes over time appear to have little explanatory power. Thus while useful as an organizing heuristic, systems analysis seems rather unlikely to yield insights regarding organizational change.

Beyond systems analysis and econometric estimation, much of the book uses a traditional narrative approach. His presentation of the Company’s overall financial position, for example, is alive with illustrative examples, contextualized by contemporary opinion, and balanced by principles of modern accounting. One reviewer considered such treatment as “a model of how “Old” and “New” methods of economic history can be fruitfully combined” (Ambirajan 1981, 79). Chaudhuri’s six chapters on individual commodities also move smoothly between general and specific, between theory and evidence. One of the book’s “special virtues,” as Curtin (1980, 508) rightly says is “the way in which [Chaudhuri] maintains a counterpoint between central aggregates and the intimate detail.”

The most long-lasting contribution of the book is the stunning amount of quantitative data on commodities and specie flows between Britain and Asia. Appendix 5 provides the annual time series for nearly a dozen commodities originating from six locations — representing a fraction of the 400 tables originally produced. Chaudhuri’s research involved tracking more than 91 different textiles, 7 types of tea, and 30 other commodities imported into London. On the export side, he followed the course of 12 products plus treasure. By following the order lists and invoices of literally every Company ship between 1660 and 1760, he and his assistants made available data that had been scattered across hundreds of volumes of financial records and thousands of volumes of correspondence. Clive Dewey wrote that Trading World of Asia “represented the work of a lifetime, not only — or even mainly — in the sense that it took a significant proportion of [the author’s] working life to write, but in the sense that such a book is only likely to be written once in a lifetime” (Chaudhuri 1983, 11). Ten productive years of archival work (involving English, French, Dutch, Belgain sources) went in to the production of Trading World of Asia and that staggering effort alone will ensure its longevity.

The book influenced numerous literatures within economics and history. Chaudhuri’s emphasis on the efficiency of the East India Company resonates in the literature on the origins of the multinational organization and on the character of the English chartered companies. While Chaudhuri used systems theory, others (Anderson et. al. 1983 and Carlos and Nicholas, 1988) have employed transactions cost analysis, agency theory, and Chandlerian analysis of firm structure to argue that the East India Company was an organizational innovation on par with a modern multinational firm such as General Motors. They emphasize the efficacy of the firm’s internal operations as its main commercial legacy. They de-emphasize the firm’s imperial legacy. Other studies by contrast have highlighted the significance of “merchant empires” to European expansion. These works have also drawn on Chaudhuri’s insights.

The contribution of Trading World of Asia to the study of the foreign impact on the Indian economy has also been fruitful. Most notably, Chaudhuri’s argument that India’s, and in particular Bengal’s, textile production increased through an expansion of employment has resulted in several important monographs. Om Prakash (1985) builds directly on the claim by asking how much did Bengal’s employment rise as a result of European demand for textiles. His qualified answer: about 10%. Numerous studies have focused on the economic dislocation experienced by weavers and other groups connected with the Company’s trade. From the perspective of the Mughal ruling classes it was certainly difficult, if not impossible, to separate the Company’s commercial purposes from its political ones. For example, in dealing with Asian powers, the Company, Chaudhuri explains, had every incentive to present itself as having the delegated power of the British Crown. In the Indian economy, the East India Company employees insisted on special treatment and trading privileges.

This brings us back to indigenous commerce. Chaudhuri effectively utilizes European archival sources to discern the contours of Asian trades and traders. In this way Trading World of Asia contributed to the growth of Indian Ocean studies such as Das Gupta and Pearson (1987) in which the European chartered companies are viewed as one among many participants in the emporia trade. Chaudhuri’s later books (Trade and Civilization and Asia before Europe) take a long view of the structure of Indian Ocean commerce and the merchants involved. These works have helped replace Van Leur’s peddler paradigm with a fuller identification and appreciation of diasporic communities, about the ways community norms mitigate problems of long-distance trade, and about the comparative advantage of family firms (Levi, forthcoming). Rather than an ill-informed, itinerant peddler, the early Asian trader is now recognized as a “portfolio capitalist” (Subrahmanyam, 1990) enjoying political and social along with spatial mobility. By bringing to the foreground the Asian commercial milieu Chaudhuri helped initiate new literatures in Asian history.

For the range and importance of its findings, its unique method, and its empirical bounty, Trading World of Asia deserved the unanimous praise it received upon publication in 1978. For those same reasons and for its lasting impact on economic history, Trading World of Asia certainly deserves its present distinction — one of the most significant works of the twentieth century (4).

Notes:

1. Philip Curtin (1980, 507) remarked, “Chaudhuri intended from the beginning to present a case study of a large, bureaucratic, pre-industrial trading firm as a contribution to the history of European business institutions in general.”

2. See for example The Cambridge History of India, Volume V (1922), Bal Krishna, Commercial Relations between India and England (1924), and S. Bhattacharya, The East India Company and the Economy of Bengal (1954).

3. My “Market Power and the English East India Company in Bengal” presented at the 1995 SSHA Conference estimates the residual supply curves faced by the Company in the cotton textile, raw silk, and saltpeter markets. In the first two markets, the firm faced high elasticities of supply suggesting little price-setting ability. The findings are consistent with Chaudhuri’s position that the East India Company was not large enough to determine input prices.

4. Before his recent retirement, Chaudhuri was affiliated with the European University Institute. The bulk of his career, however, was at the School of Oriental and Asian Studies, University of London.

References:

Gary Anderson, Robert McCormick and Robert Tollison. 1983. “The Economic Organization of the English East India Company,” Journal of Economic Behavior and Organization. 4 (4): 221-238.

Ann Carlos and Nicholas, Stephen. 1988. “‘Giants of an Earlier Capitalism’: The Chartered Trading Companies as Modern Multinationals,” Business History Review. 62 (Autumn): 398-419.

K. N. Chaudhuri. 1978. The Trading World of Asia and the English East India Company, 1660-1760. Cambridge: Cambridge University Press. K. N. Chaudhuri. 1983. “The Trading World of Asia and the English East India Company, 1660-1760: A review of reviews.” South Asia Research (London) 3 (1) (May): 10-17.

K. N. Chaudhuri. 1985. Trade and Civilization in the Indian Ocean: An Economic History from the Rise of Islam to 1750. Cambridge: Cambridge University Press.

K. N. Chaudhuri. 1989/90. “Indian History and the Indian Ocean (Professor K. N. Chaudhuri Interviewed by Ranabir Chakrabarti).” Calcutta Historical Journal. 14 (1-2) (Jul 1989-Jun 1990): 78-83.

K. N. Chaudhuri. 1990. Asia before Europe: Economy and civilisation of the Indian Ocean from the Rise of Islam to 1750. Cambridge: Cambridge University Press.

Ashin Das Gupta and M. N. Pearson, editors. 1987. India and the Indian Ocean. Calcutta: Oxford University Press.

J. C. van Leur. 1955. Indonesian Trade and Society: Essays in Asian Social and Economic History. The Hague: W. Van Hoeve.

Scott Levi. Forthcoming. The Indian Diaspora in Central Asia and its Trade, 1550-1900. Leiden: E.J. Brill.

Om Prakash. 1985. Dutch East India Company and the Economy of Bengal, 1630-1720. Princeton: Princeton University Press.

W. R. Scott. 1910. Constitution and Finance of English, Scottish and Irish Joint-Stock Companies to 1720, 3 vols. Cambridge: Cambridge University Press.

Niels Steensgaard. 1973. Carracks, Caravans and Companies: the Structural Crisis in the European-Asian Trade in the Early Seventeenth Century. Lund: Studentlitteratur.

George Stigler. 1968. Organization of Industry. Chicago: University of Chicago Press.

Sanjay Subrahmanyam. 1990. Merchants, Markets, and the State in Early Modern India. Delhi: Oxford University Press.

Jean Tirole. 1989. Theory of Industrial Organization. Cambridge: MIT Press.

Reviews of The Trading World of Asia:

S. Ambirajan. 1981. Australian Economic History Review. XXI (1) (March): 77-79.

Philip D. Curtin. 1980. Journal of Modern History. 52 (3) (September): 506-508.

Morris D. Morris. 1980. Journal of Asian Studies. 39 (2) (February): 388-390.

Om Prakash. 1980. Indian Economic and Social History Review. XVII (I) (January-March):139-142.

T. Raychaudhuri. 1980. Economic Journal. 90 (358) (June): 433-435.

Henry G. Roseveare. 1980. “The East India Trade.” Journal of Imperial and Commonwealth History. VIII (2) (January): 131-134.

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Published by EH.Net (November 2015)

Lucia Coppolaro, The Making of a World Trading Power: The European Economic Community (EEC) in the GATT Kennedy Round Negotiations (1963-67). Farnham, UK: Ashgate, 2013. xvii + 237 pp. $135 (hardcover), ISBN: 978-1-4094-3375-0.

Reviewed for EH.Net by Andrea Maneschi, Department of Economics, Vanderbilt University.

This book is a valuable addition to the economic, political and historical literature on the evolution of the European Economic Community (EEC), and how it affected — and was affected by — the contentious Kennedy Round of negotiations that took place in Geneva under the aegis of the General Agreement on Tariffs and Trade (GATT) between 1963 and 1967. Lucia Coppolaro wrote it as part of a postdoctoral program at the Institute of Social Sciences of the University of Lisbon. Her painstaking research into an important episode of European economic history is based partly on the archives of GATT; the European Union and its institutions, particularly the Council of Ministers and the European Commission; American, British, French and German archives; and interviews with officials and politicians who participated in the Kennedy Round.

As Coppolaro notes, President John Kennedy proposed this GATT Round, later named after him, partly in response to the creation of the EEC. Its member countries were still learning how to interact with each other, and the world at large, in their decade-old customs union. The EEC then consisted of France, the Federal Republic of Germany, Italy, Belgium, Luxembourg, and the Netherlands, known as “the Six.” In addition to eliminating tariffs on each other and creating a Common External Tariff, their attention was focused on the difficult task of devising a Common Agricultural Policy (CAP), a vital component of their union. Hence two sets of negotiations took place concurrently: among the EEC member countries, and within the GATT itself. The other members of the GATT viewed the EEC with some suspicion because of the opportunities for trade diversion that their customs union might engender, when EEC countries shifted their import purchases from cheaper world suppliers to their EEC partner countries. The CAP gave the EEC a great bargaining advantage in the GATT, since its proposals (once reached after much arduous intra-EEC bargaining) could not be modified, and the U.S. did not wish to challenge the CAP.

Kennedy’s initiative forced the EEC to take the important steps of formulating a common commercial policy, and anticipating the creation of the CAP in order to participate from a position of strength in a possible liberalization of agricultural trade in the GATT. While learning to organize trade among themselves, the Six were under pressure to limit trade diversion from their trade partners in America, the Commonwealth countries, the European Free Trade Association, their former colonies, and other less developed countries (LDCs). In addition, they were faced with the United Kingdom’s application to join the EEC, which again complicated their task.

Coppolaro focuses on three main issues: the thorny bargaining among the Six, as they sought to establish a common position in the Geneva negotiations; the roles of the six member states and of the EEC institutions (primarily the European Commission and the Council of Ministers of the EEC) in formulating a common position in Brussels and conducting negotiations in Geneva with other GATT countries; and the impact that the evolving EEC played in the GATT negotiations and their final outcome.

The European Commission achieved an increasingly important role in the EEC’s trade policymaking. Coppolaro describes how the policies of the EEC member states interwove with those of the EEC’s Council of Ministers, which was subject to the interests of its member states, and of the supranational European Commission. Social scientists have debated whether the Council or the Commission was the more powerful of the two. The Commission was subject to a strict oversight by the six member states from 1963 to early 1967. Coppolaro convincingly argues that, in the concluding phase of the Kennedy Round, the Commission gained new capacities and much greater discretion, and ended up as a strong and independent agency.

The creation and evolution of the EEC and its CAP played important roles in the GATT negotiations and their final outcome. The dramatic events in the history of the EEC’s trade policy that Coppolaro describes include the “Chicken War,” a commercial war that broke out in 1962 between the EEC and the United States over American chicken exports. It was concluded in 1963 just as the Kennedy Round talks were starting, with the U.S. imposing retaliatory duties on EEC exports. This first test of the acceptability of the CAP by the EEC’s trade partners showed how seriously the EEC intended to defend its CAP. Another crisis became known as the “Empty Chair Crisis,” when France in 1965 withdrew from the Council of Ministers, causing the Kennedy Round negotiations to grind temporarily to a halt.

International trade economists have long debated whether preferential trade agreements such as the European Union or NAFTA are stepping stones or stumbling blocks toward the multilateral liberalization of global trade achieved in successive GATT negotiating rounds. Coppolaro argues that the EEC acted as a stepping stone to liberalization with regard to industrial products, where its industries could compete advantageously with those of its GATT partners. With regard to agriculture the EEC was instead a stumbling block, since it was so busy setting up its own CAP that it did not wish to explore the possibility of trade gains for its own farm exports in the GATT round, and instead favored protection.

Negotiations among GATT members, and among the EEC member states, during the Kennedy Round were motivated by neomercantilism, not by a free trade ideology based on the advantages of mutual specialization. Coppolaro repeatedly points out that the GATT, including the Six EEC countries, worked “like a bazaar.” To obtain trade concessions from other countries, member countries needed to grant them reciprocal favors on a pragmatic basis. An important exception to this self-serving behavior was that of the United States until the conclusion of the Kennedy Round. After the success of the Marshall Plan, the U.S. strongly supported the creation and further development of the EEC, first under the Eisenhower administration and then under Kennedy’s, despite the fact that the CAP ran counter to the interests of American farm exporters. As Coppolaro puts it, “The CAP was considered the price the United States had to pay for European integration.” She argues that the U.S. was the only true leader in promoting GATT rounds and upholding worldwide integration, a role that the EEC never wished to claim. However, the GATT acted like a “rich-man’s club” vis-a-vis the LDCs, since it failed to liberalize trade in the commodities (such as textiles and farm products) of greatest interest to them. To the LDCs’ dismay, the EEC became a major exporter of agricultural products thanks to its CAP.

The EEC turned out to be a primary beneficiary of the Kennedy Round, since the GATT negotiations forced it to make the compromises necessary to become a trading bloc with common commercial and agricultural policies, which converted it (as the “European Union”) into a trading power comparable to the United States in international economic clout and geopolitical importance.

Andrea Maneschi is the author of Comparative Advantage in International Trade: A Historical Perspective (1998) and of articles on David Ricardo’s trade theory.

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Published by EH.Net (August 2022).

Scott Reynolds Nelson. Oceans of Grain: How American Wheat Remade the World. New York: Basic Books, 2022. 368 pp. $32 (hardback), ISBN 978-1541646469.

Reviewed for EH.Net by Paul Sharp, University of Southern Denmark, CAGE, CEPR

The title of this book is somewhat misleading. When I received it for review, I expected another US-centric account of how America made the world what it is today. I was therefore somewhat surprised to begin reading, and found that a large part concerns Russia, Turkey, and Ukraine. In fact, reading this book while at the same time witnessing the horrors coming out of Ukraine made an impression, as I will come back to at the end of this review. The author, Scott Reynolds Nelson, is the UGA Athletics Association Professor of the Humanities at the University of Georgia. He has won both academic and literary awards for his writing. It is therefore no surprise that this book is an excellent read. Nelson has the historian’s enviable skill (which many of us from the more economics side of economic history could surely learn from) of making serious analysis come to life through vivid descriptions of people and places. You will most likely come out of reading this book far more knowledgeable than when you started, whether or not you believe the central hypothesis.

Nelson presents a bold theory of what made the modern world. Where Jared Diamond saw “Guns, Germs, and Steel”, Nelson sees the perhaps somewhat less sexy trinity of mold, futures contracts, and dynamite. The potato blight, phytophthora infestans, of the 1840s forced open European markets for grain. The American Civil War led to financial innovations in how grain was traded; and dynamite, invented in Germany in 1867, transformed geography as new deep-water ports were created, and canals and railroads connected continents. In other words, policy, finance, and technology created the globalized world. This is not really news to the economic historian, but Nelson puts it within a framework inspired by the Russian Marxist, activist, and grain trader, Alexander Lvovich Parvus (born Israel Lazarevich Gelfand or Helphand). He postulated the role that “invisible lines,” the “Black Paths” of grain trading routes, have played for the making and breaking of empires, which he argued exist to control and extract rents from them. Rosa Luxembourg was to take his “invisible lines” to create a new way of understanding trade which we now call world systems theory. But Parvus’ influence went far beyond theory. He was able to convince Lenin of the power of these lines and that revolution in Russia was possible.

The introduction provides a great summary of Nelson’s hypothesis. His 2012 book A Nation of Deadbeats: An Uncommon History of America’s Financial Disasters (Knopf) explained that financial panics had much to do with drastic changes in commodity prices. Accordingly, the story here starts in Odesa, Ukraine, which he visited in 2011 to research international financial crises. Nelson sees connections between booms and busts in the wheat market for everything from the French Revolution to the Arab Spring. He notes parallels between different settings based on connections to wheat. For example, Ukraine has some of the richest soil in the world, and it was captured by Russia in 1768 under Catherine II. At the same time, he notes, similar expansionism was going on in the Americas. Then, the French Revolution (over the price of bread, of course, as Nelson notes), and the French and Napoleonic Wars led to Odesa becoming a grain-exporting boomtown. European landlords in turn faced Ricardo’s paradox, as rents dropped as food became cheap. The initial response was protectionist barriers to trade, but then a water mold caused the potato harvest to fail, and European trade opened following 1846.

This, Nelson explains, led to century-long contest between Russia and America to feed Europe’s working class. In the 1860s both empires ended serfdom and slavery respectively. America then gained the upper hand, when the Union Army during the Civil War created futures contracts that allowed grain to be bought and sold without the costly and time intensive process of pricing based on samples. This, combined with the transatlantic telegraph, steam shipping, and the new opportunities brought by dynamite, led to what Kevin H. O’Rourke has termed the “Grain Invasion.” European prices fell, and the ships which brought grain returned with migrants to the New World. As European workers in cities became better off, Odesa, and other grain exporting regions, faced ruin, and the combination of the agrarian crisis and the bursting of estate bubbles ushered in what was known as the Great Depression until the 1930s. The powerful agricultural Austro-Hungarian and Ottoman Empires declined. Russia, for its part, responded in 1884 with state-supported railroads and a plan to plant grain in Siberia and Central Asia. This brought in capital from largely French investors, but Russia’s expansionary plans were checked when it lost in war to the Japanese Empire in 1905. Then, in 1914 Russia’s anxiety that Turkey might halt Russian grain shipments on the Black Seas helped start World War I: “a war over nothing less than foreign bread.” Thus, as Parvus, who grew up in Odesa during the 1873 crisis and coined the term “Agrarian Crisis” in 1895, claimed, the paths of grain made and destroyed empires.

Chapter 1 covers an impressive span of time, 10,000-800 BC and explains the origin of the “black paths” that so fascinated Parvus. Ancient oxen trails connected the Ukrainian plains with the Black Sea ports. Geographers and historians have claimed that these paths, and the trading cities known as emporia (themselves the source of the word “empire”) were created by empires, which in turn were defined by their control of trade lines. Folklore, backed up by new archaeological evidence suggests a far more ancient origin. The first wheat “farmers” might have been travelers or traders, who after decades of migration remained at way stations which formed the first settled communities. Empires then emerged based on establishing protection rackets along the pathways, and in a few generations imposed formal imperial rule. Thus, empires imposed a tax on the black paths, but so too did disease, and the rise and fall of both determined the volume of trade. Nelson explains that historically bread was extremely expensive, involving three stages: 1) planting and harvesting; 2) storing and shipping to the bread eaters, in the emporium; and 3) producing flour, mixing with yeast and water, and baking, which took place in the cities. For at least fifty centuries considerable human labor was devoted to the second stage, and empires emerged to engross and centralize it.

Chapter 2 covers 800 BC-AD 1758. Nelson explains how Byzantium enforced a monopoly control of the Bosporus Strait and the Dardanelles. Constantinople rose and fell as the black paths expanded and contracted, but grain emporia were nodes for infection, and the Plague of Justinian in 541 ended the ancient world. With depopulation, important knowledge about the storage of grain was lost, and its rediscovery centuries later was to play an important part for making long distance trade possible. Constantinople became increasingly dependent on Slavic peoples, and as the grain flowed in, Byzantian culture and the Orthodox religion flowed back. In medieval western Europe, which was often cut off from trade with the East after 542, serfdom arose to compensate for the loss of trade, and control of mill and bakery meant control of people. Nelson is brilliant at finding anecdotes to illustrate the centrality of grain for understanding the world. Thus, the word lord comes from an old word meaning loaf-ward, and the word lady from loaf-kneader, although one wonders if similar etymologies exist for the same words in different languages.

The years 541-1100 were the age of robber barons, for example the Hanseatic League. Absolutist states emerged to break their monopoly, and in 1453 the Byzantine Empire, increasingly starved of grain, collapsed and the Turks took over. A long struggle then emerged with Russia, which wanted to take Constantinople to monopolize the Bosporus themselves. Thus “… at its deepest level an empire may be a monopolizer of food along ancient grain pathways that it never fully understands. Empires survive only as long as they control the sources of food needed to feed soldiers and citizens; they fund themselves by taxing those who sell it.” This is further explored in Chapter 3, covering 1760-1844, where it is explained how Catherine II, inspired by the physiocrats, believed that grain exports properly managed could be the source of an empire’s wealth. To this end she transformed serfdom into something more akin to New World slavery, and enacted extensive military and fiscal reforms. She then set about seizing land where wheat could grow, although she never managed to capture Constantinople. But as the Ottoman Empire shrank, in part due to a less sophisticated grain-tax system, European princes tore grain-producing Poland to pieces to appease Catherine. Moreover, as with US expansion, thousands of native peoples were persuaded to ally with Russia in order to dispossess others. Having taken Ukraine, Catherine founded Odessa (renamed in Ukrainian as Odesa) as a free port, and invited in foreigners to farm land as she aimed to feed Europe and thus make Russia rich. Meanwhile the United States, before the Civil War, offered no real competition. The American port cities were not “visionary physiocratic cities” but “simple adjuncts to plantation slave regimes” where landowners blocked foreign imports. However, the French rediscovered Roman techniques of grain storage, allowing for silos and American “elevators”, thus making long-distance trade increasingly feasible. Trade remained protected, however, and to an extreme degree following the Napoleonic Wars.

Chapter 4 provides the first of Nelson’s trinity of explanations. Barriers to trade crumbled with the failure of the potato crop in the 1840s. As trade expanded, bread replaced potatoes and living standards surged, although health often suffered as Europeans preferred highly processed white bread. Thus emerged what Parvus described as the European consumption-accumulation city. Labor and capital accumulated where food was cheapest and the cities with the deepest docks thrived. Prosperity allowed workers to save, freeing up capital for industrialization. Nelson explains, “European industrialization and urbanization had little in the way of European roots. It was fueled by foreign food.” Chapter 5 demonstrates how the conflict between the Russian and Ottoman Empires came to a head with the Crimean War 1853-56 which saw Russia fail to capture Constantinople, in part because France and Britain feared a Russian monopoly on the Black Sea. This was a humiliating defeat, but also left the Ottoman Empire in heavy debt to Britain and France. Serfdom was abolished in Russia in order to expand grain production, leaving former serfs heavily indebted, but with land, and new political structures, the mir and the zemstvo, were implemented to govern these areas.

A different story played out in the United States, where slavery was abolished around the same time, but land was not redistributed, part of the origins of inequality in the US today. At the same time, the US expanded grain production into the interior using Black Sea varieties of wheat, and the Republican Party campaigned against slavery based on a belief in physiocratic expansion, and a desire for incentives to put family laborers onto wheat farms. Migrants purchased land along new railroads whose monopoly power they came to hate. Then in Chapter 6 Nelson gives the second part of his explanation. The Civil War created a necessity for breaking the power of merchants to supply food for the army, and this was done with a novel financial innovation. Bills of exchange were divided into hundreds of enforceable contracts, which would be called futures contracts, obviating the necessity for buying and selling based on a sample. Although in 1863 only the US Army was using this, with the introduction of the Transatlantic telegraph trade became completely reorganized. Ships could take the place of storage facilitates, redirected at port to wherever the grain was needed. America could now compete with Russia.

The final part of Nelson’s trinity is presented in Chapter 7, appropriately entitled “Boom.” Trade costs were again slashed with the invention of dynamite, which allowed railroads to run through mountains, canals, such as the Suez Canal, to link continents, and for the creation of new deep ports. The increased trade came with additional innovations such as grading, specialized insurance, and Hungarian milling techniques. As the price of food plummeted, workers found more time to educate and organize themselves, as Chapter 8 explains. New economic theories, including Marx’s, emerged to calculate the causes and limits of the new agricultural plenty. Much of the remainder of the book explains Parvus’ contribution to socialist theory and his direct influence on the course of events during his life, including the emergence of the Young Turks and the revolutions in Russia. He argued that although cheap grain benefited everyone, the main threat to the world was the alliance between capitalists and empire which would lead to imperialism, and pointless and costly wars. Agricultural empires such as the Ottoman and Austro-Hungarian empires suffered, while other empires gorged on cheap grain and became great powers. The US share of the grain trade declined as increasing shares of its production went to feed its own large cities. New conflicts emerged as others sought to capitalize on the demand from elsewhere, as Turkey again became a key battleground. World War I itself was “a World War over bread” with for example the closing of the Bosporus and Dardanelles Straits a key event. As Russia starved, revolutions eventually toppled the old Tsarist regime, and the Soviet Union, by quickly incorporating grain producing areas in Ukraine for example, took its place.

One is left with the feeling that we should be surprised about the importance of wheat for world history, which the layperson might indeed be. But from the perspective of an economic historian, one cannot really argue that wheat has been underappreciated. My own PhD thesis, from 2009, was entitled “Wheat, Globalization and Economic History,” and my career as a researcher began with reading the great works by Fairlie, Harley, Williamson, O’Rourke, Jacks, Brunt, and of course my own former supervisor, K.G. Persson (some references are given below). Certainly, there are many more I have forgotten to mention. One could argue that Russia’s role in this story is underexplored, with a few notable exceptions such as Goodwin and Grennes (1998), but more and more scholars are working on Russian economic history these days, so this will improve. Other large countries such as China and India take up relatively little space in Nelson’s account, while references to Parvus alone take up half a page in the index. One can of course argue against the somewhat physiocratic idea of the world where everything starts with the soil. In history this might have been truer, but Engel’s Law and technological progress have changed that, present concerns about food supplies notwithstanding. Regarding the first globalization, Nelson explains that economists and contemporaries have emphasized the importance of the elimination of tariffs, the introduction of the gold standard, and steamships. But, he believes, they have missed the ecological and political background: how the potato famine opened trade, dynamite opened ports, and futures markets increased liquidity. This is a powerful and convincing argument, but this is not a quantitative study. The only graph is of imports of wheat and flour into UK, but this only goes back to 1820. Before this, he explains in an appendix, there was a lot of smuggling and the data is underreported, meaning that historians have overstated the role of cotton and understate wheat.

Given my geographical location and research interests I am looking for Scandinavian connections everywhere, and I apologize for that! But it might be mentioned that, although Nelson dedicates the book to his maternal grandmother and explains that his grandparents left Sweden in 1887, the book somewhat neglects Europe outside Russia and Turkey (and indeed the world beyond), despite the obvious point that dynamite was invented in Germany by a Swede. Copenhagen’s role as a major Baltic trading hub is mentioned in passing, but the somewhat famous Danish exception during the backlash against the American grain invasion before the First World War deserves at least a sentence. Sticking to free trade, Denmark imported cheap grain, which helped feed a booming Danish industry in butter, bacon, and eggs, allowing this small country to feed the large industrializing cities of northern England. Danish exports were to play a crucial role in establishing industrialized dairying around the world, including the United States and Russia. Food is after all not only grain, particularly not as countries become richer. On a more trivial note, at one point the Danish ruler of England, King Canute, is described as a “legendary fool,” but as a historical figure he arguably was neither legendary (although the famous story about him might be) nor foolish for trying to demonstrate the limits of his power and in the process getting his feet wet.

Nelson is not afraid of using dramatic language to demonstrate the relevance of his work for the present, for example in chapter 14: “Now, just as ten thousand years ago, producers and consumers are bound together in a common world ecology that viruses, empires, and states have only ridden upon, bits of foam on a vast, invisible deep.” But sometimes he over-eggs the pudding, such as in the conclusion: “Whether to regard empires as symbiotes or parasites depends on one’s perspective. I tend to see empires as parasites, but one could make the argument that imperially sponsored universities… try to prevent starvation… in ways that promote ‘growth’ inside the empire. Physics, biology, chemistry, economics, and history are all, in their way, data-processing systems for empires hoping to keep their subjects – us – alive so that they can rule another day.” I like to believe that knowledge creation has value beyond allowing our present rulers to survive.

In sum, I would certainly recommend reading this book. I learned a great deal, and his thesis is fascinating and provocative. Moreover, it is a highly engaging read. But be prepared to feel somewhat unsettled as well. Nelson chillingly concludes that “modern Russia’s relative weakness as a great power now (in 2021) may still ultimately depend on its separation from Ukraine… Ukraine has always been the greatest prize, as Catherine the Great well knew.” Economists and economic historians are always being asked to provide policy implications of their work these days. Here is one that President Putin seems to have taken to heart.

References

Brunt, L. (2004). Nature or Nurture? Explaining English Wheat Yields in the Industrial Revolution, c. 1770. Journal of Economic History, 64(1), 193-225.

Fairlie, S. (1969). “The Corn Laws and British Wheat Production, 1829-76.” Economic History Review, 22(1), 88-116.

Goodwin, B. K., & Grennes, T. J. (1998). “Tsarist Russia and the World Wheat Market.” Explorations in Economic History, 35(4), 405-430.

Harley, C. K. (1978). “Western Settlement and the Price of Wheat, 1872–1913.” Journal of Economic History, 38(4), 865-878.

O’Rourke, K. H. (1997). The European Grain Invasion, 1870–1913.” Journal of Economic History, 57(4), 775-801.

O’Rourke, K. H., and Williamson, J. G. (2001). Globalization and History: The Evolution of a Nineteenth-Century Atlantic Economy. Cambridge, MA: MIT Press.

Olmstead, A. L., & Rhode, P. W. (2002). “The Red Queen and the Hard Reds: Productivity Growth in American Wheat, 1800–1940.” Journal of Economic History, 62(4), 929-966.

Persson, K. G. (1999). Grain Markets in Europe, 1500–1900: Integration and Deregulation. Cambridge, UK: Cambridge University Press.

Paul Sharp is professor of economics at the University of Southern Denmark, where he heads the Historical Economics and Development Group (HEDG). He is the author, with Karl Gunnar Persson, of An Economic History of Europe: Knowledge, Institutions and Growth, 600 to the Present (Cambridge University Press, 2015) and, with Markus Lampe, of A Land of Milk and Butter: How Elites Created the Modern Danish Dairy Industry (University of Chicago Press, 2018).

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

Published by EH.Net (January 2020)

William L. Silber, The Story of Silver: How the White Metal Shaped America and the Modern World. Princeton: Princeton University Press, 2019. xx + 340 pp. $30 (cloth), ISBN: 978-0-691-17538-6.

Reviewed for EH.Net by Gary Richardson, Department of Economics, University of California at Irvine.

Silver’s “power to provoke passion and fury in the American heartland” should have convinced the Warren Commission to investigate whether John F. Kennedy was assassinated “for downgrading the silver subsidy” (p. 104). This provocative point and a series of stories about the precious metal appear in William Silber’s The Story of Silver: How the White Metal Shaped America and the Modern World.

Silber’s book on silver is entertaining and enlightening. It is published by a university press and has the apparatus of a technical tome, including 64 pages of footnotes and nine pages of bibliography. It should, however, appeal to a wide audience, including anyone interested in American or financial history or who likes to read a well-written story. Silber is an amazing architect of palatable prose. He grabs readers’ attention and keeps them turning pages by incessantly inserting intriguing anecdotes and amusing asides.

Silver’s story is worth telling. The white metal serves as a store of value and means of payment. It has important uses in electronics, photography, housewares, and jewelry. Silver coins and bullion formed the monetary foundation for many regions of the world, including Europe from the fifteenth through eighteenth centuries and China and the Middle East well into the twentieth century. Debates about silver’s monetary use played a large role in the history of the United States, beginning before the founding of the republic and continuing through Great Depression. Silber’s book focuses on the U.S. experience.

The first tenth of the text takes the tale from Alexander Hamilton through William Jennings Bryan. As the first Secretary of Treasury, Hamilton took the lead among the Founding Fathers constructing the U.S. monetary system. He established a bimetallic standard, in which gold and silver served as legal tender. He hoped both gold and silver would circulate. The latter’s abundance would promote economic growth and price stability, in an era when scarcity of coins often generated deflation. Increases in the mint price of the yellow metal, Gresham’s law, the Coinage Act of 1873, and the Gold Standard Act of 1900, however, meant that gold served as the medium of exchange in America throughout the nineteenth century and twentieth centuries.

William Jennings Bryan was the most famous of the politicians who urged returning to a bimetallic standard. Byran represented the mass of Americans living west of the Mississippi, who believed that more circulating currency would bring higher prices for crops, livestock, and farmland, helping them to pay the mortgages on their farms and machinery. Bryan’s “Cross of Gold” speech at the Democratic convention in July 1896 asserted that free coinage of silver would promote prosperity for the common man and free the U.S. from subservience to the gold-standard nations in Europe.

Silber’s concise coverage of nineteenth-century American monetary history is fun to read. I have decided to assign these chapters to the undergraduates in my class on American monetary history, because many of them refuse to read boring books on the topic. Silber’s treatment covers key historical points, clearly explains the forces underlying the monetary system, and rivets readers’ attention. The material is not novel and requires some caveats that I will discuss later, but nothing this entertaining has been written on the topic since Frank Baum penned The Wizard of Oz as a monetary allegory.

The second storyline spans Chapters 4 through 8, or about one-fifth of the book. It involves China, Japan, and the Roosevelt administration’s monetary policies. The historical information in these chapters is novel. You will not find the story told completely, or at all, in books and articles about this era or in widely used textbooks on American history. The story is also important, because it illuminates a clear case where political institutions set up long ago profoundly influenced world events in ways which could not have been anticipated at the moment of creation.

Franklin Roosevelt became president during the depths of the Great Depression. The economy had collapsed because a shortage of money lowered prices, raised interest rates, bankrupted households and firms, and dislocated industry and trade. Roosevelt campaigned on a promise to raise prices back to the level they had been before the onset of the contraction. To fulfill his promise, Roosevelt needed to resuscitate the banking system and expand the money supply, which would, in turn, raise prices, lower interest rates, encourage consumption, and increase investment. Roosevelt’s efforts focused on the financial system, the Federal Reserve, and the gold standard. Silber’s depiction of these events resembles that in standard history textbooks, although he keeps his account lively by gossiping about the personal lives of the protagonists. Roosevelt, for example, after being stricken with polio in 1921 and withdrawing from public life to battle the disease, failed at “a number of business ventures during the 1920s, but the outcomes were as predictable as if a crown prince were running a flea market. FDR’s misadventures included investing in a fleet of blimps to fly passengers from New York to Chicago, introducing vending machines that dispensed premoistened postage stamps, trading in the German mark, and trying to corner the live lobster market. His losses in lobsters should have restrained his foray into manipulating the silver market after he was elected president in 1932, but he never made the connection” (p. 39). In my opinion, self-adhesive stamps were actually a good idea, although perhaps ahead of their time. Given the difficulties of devising glue with suitable properties, the United States Postal Service introduced the its first successful self-adhesive stamp in 1989.

During Roosevelt’s race to resuscitate the American economy, silver was a sideshow. Roosevelt signed the Silver Purchase Act, which authorized the Treasury to buy huge quantities of the metal at gradually increasing prices, and then to use that silver to back currency in circulation. These purchases may have marginally increased the money supply but were not necessary for resuscitating the monetary system. Reforming the gold standard and rescuing the banking system accomplished that task. Silver purchases were, however, necessary to convince senators from Western, silver-mining states to support Roosevelt’s political program. These senators had political influence in Washington, where they chaired key Congressional subcommittees and controlled votes needed to pass the New Deal through Congress.

High school and college history textbooks mention Roosevelt’s silver policies in passing, if at all. The same is true for most scholarship on the subject. Silber shows that this minor event in America played a central role in world affairs and had a huge impact on the lives of one-quarter of humanity. Silver was the foundation of China’s monetary system. China’s currency was backed by silver, not gold as in most of the rest of the world. America’s campaign of massive silver purchases raised the price of silver on the world market. Silver’s skyrocketing price deflated China’s economy. High silver prices encouraged investors to withdraw silver from Chinese banks and sell it in London. China’s money supply declined, as did prices and incomes. Rising silver prices also increased the value of China’s currency, the yuan, in foreign exchange markets, which reduced China’s exports to the rest of the world where currency was not based on a silver standard.

The silver shock put China in desperate straits. China’s economy could not bear the strain from the silver drain. China’s central bank and financial system lacked the skills and knowledge to alleviate the affliction. China’s economic depression deepened. Unrest spread. China’s central government was already fighting on several fronts. A communist insurrection festered in the hinterland. Regional warlords sought to increase their authority at the expense of the national government. Japanese armies, which already occupied north-eastern China, renewed their advances in coastal, central, and southern China.

The Roosevelt administration was warned that its silver policies, which were put in place to purchase the allegiance of a few senators from silver-mining states and to appeal to Democratic voters who still believed in the mythical powers of silver touted by turn of the century populists such as William Jennings Bryan, would weaken China and facilitate Japan’s expansion. Domestic politics, however, overrode international possibilities. China’s weakened condition encouraged Japanese aggression. To protect China, the Roosevelt administration eventually embargoed shipments of oil and other raw materials destined for Japan. To break the embargo, Japan attacked Pearl Harbor, the Philippines, and United States and Allied possessions throughout the Pacific. Japan’s offensive brought the United States into World War II and eventually brought the Communist Party to power in China. This important and insightful story is the heart of Silber’s book. It should be more widely known and taught. The book convinced me that I should include this information in courses that I teach on economic history.

The next chapter discusses silver’s use during World War II. The take-away point is that silver conducts electricity well. The United States had lots of silver stockpiled at the United States Military Academy at West Point, New York. The Treasury lent much of this metal to the Manhattan District of the Corps of Engineers to help produce atomic bombs. So, Roosevelt’s silver purchase policies, which induced silver to flow from Beijing to New York and London, weakened China, and facilitated Japan’s expansion in Asia, also helped the United States build Little Boy and Fat Man, the atomic bombs dropped on Hiroshima and Nagasaki, which convinced Japan to withdraw its troops from China and surrender to the Allied coalition.

After the book discusses the demonetization of silver during the Kennedy administration and the role this had in the Kennedy assassination, the tone changes. The book stops discussing silver’s use as a means of payment and begins discussing its use as a speculative asset. A lot of information is packed in this portion of the text, which spans about forty percent of the book. These chapters describe how commodity markets function and the strategies of famous men who speculated in silver. They also provide investment advice.

A focus is the Hunt brothers, some of the richest men in America, who tried and failed to get even richer by cornering the market for silver. Another notable character is the investment sage from Omaha, Warren Buffett. These chapters are entertaining mainly for their gossip about and character studies of famous and infamous investors. These chapters remind me of the novel Crazy Rich Asians, but the cast of characters is a bunch of rich white men with colorful backstories, profligate tastes, and more greed than good sense (with the exception of Warren Buffett, who just has good sense). Another apt comparison would be the television franchise Real Housewives, but with a focus on rich husbands, their over-the-top investment antics, and their conspicuous consumption.

Overall, the book is entertaining, contains novel insights, and is well researched. I will recommend it to friends and assign portions to my undergraduate students. My students may need guidance, however, on how to interpret portions of the text. The book is filled with metaphors, analogies, funny phrases, wry humor, and outlandish conjectures. Silber writes, for example, that the tension leading to the duel between Aaron Burr and Alexander Hamilton “probably” began because one studied at the College of New Jersey, now Princeton University, and the other studied at King’s College, now Columbia University, making them “natural Ivy League rival[s].” When I read this, I understood it was a joke. Respected biographies of Burr and Hamilton do not indicate that college rivalries played a role in their animosity. Silber’s version of events could not be true, literally, since the Ivy League’s existence (and the use of the term) began in the twentieth century. An undergraduate with less knowledge of American history, however, might miss the humor, believe the statement, and remember it, because readers tend to remember the provocative over the mundane.

A similar danger lies in the hook that reels readers into the Kennedy chapter. I mentioned it at the beginning of this review: “the theory that Kennedy was murdered because he demonetized silver.” The chapter begins and ends with the theory. The last two sentences are: “However, murder for the sake of silver dollars seems excessive, a primitive response to a commercial conflict, perhaps understandable in the more violent nineteenth century but inconsistent with the more civilized twentieth. Or not?” (p. 118). Or not what, I wonder. The only place in this universe where the silver-policies-killed-Kennedy conspiracy theory exists is in the eleventh chapter of this book. The book cites no historical evidence of the idea. A footnote indicates the Warren Commission did not mention the theory among its catalogue of rumors, contentions, claims about, and potential causes of Kennedy’s assassination. The purpose of this provocative claim is to raise eyebrows and increase readership. It serves that purpose well, because it is not just untrue but absurd.

I worry, however, that readers who do not get the humor might take this claim seriously, particularly given its prominence and repetition in an academic book written by a famous scholar. We live in a world where conspiracy theories flourish. Fiction spreads faster than fact. The book contains numerous claims like the Kennedy conspiracy theory that could be misconstrued. As a reviewer (and a professor who will assign part of this text to his students), I want to give readers simple rules that will help them separate fact from fiction. I derive the rules from two observations. One, the author knows what is true and what is not. He indicates spuriousness with adverbs expressing uncertainty, such as perhaps, probably, and possibly. So, readers should be skeptical of all claims in sentences with adverbs like that. These claims are often false. Two, the author keeps readers’ attention by constructing paragraphs whose last sentences are intriguing and provocative. So, readers should also be wary of claims in the last sentences of paragraphs. They are often hyperboles or embellishments open to misinterpretation. Overall, readers should realize that when the last or second-to-last sentence in a paragraph contains an adverb expressing uncertainty, then the conjectures or claims in those sentences have no basis in fact. Ignore these sentences, I will instruct my students. Cross them out.

With that minor caution in mind, Silber’s book is insightful and enjoyable. It deserves to be widely read, particularly the chapters on Roosevelt’s silver policies and their impact on China. These chapters raise questions about the nature of the United States and why our political system at times pursues policies that benefit small groups of our citizens at the expense of not just the rest of our nation but the rest of the world.

 
Gary Richardson is the author (with Mark Carlson and Kris Mitchener) of “Arresting Banking Panics: Federal Reserve Liquidity Provision and the Forgotten Panic of 1929,” Journal of Political Economy.

This review was originally published in Regulation, Summer 2019.

Published by EH.Net (November 2017)

Xing Hang, Conflict and Commerce in Maritime East Asia: The Zheng Family and the Shaping of the Modern World, c. 1620-1720. New York: Cambridge University Press, 2017. xii + 332 pp. $100 (hardback), ISBN: 978-1-107-12184-3.

Reviewed for EH.Net by François Gipouloux, CNRS, Ecole des Hautes Etudes en Sciences Sociales.

 
This book by Xing Hang (assistant professor of history at Brandeis University) follows the trends of recent scholarship on maritime history. (For example, Li Kangying on Ming maritime policy, Zhao Gang on Qing relations with the seas, David Dahpon Ho on the Qing maritime frontier and Tonio Andrade on Taiwan). It is also a brilliant addition to prior work by John Wills, Patrizia Carioti on Zheng Chenggong, as well as Paola Calanca on smugglers and pirates on the Fujian coast.

The book is a contribution to the economic history of an empire’s periphery (China’s south-eastern coast and Taiwan), but at the same time offers a thoughtful view of the diplomatic and military aspects of the Ming-Qing transition. The book also covers the background of the world’s first globalization: how China interacted with other polities, how the Zhengs were able to challenge the financial power of great actors like the Dutch East India Company (VOC), and how the East Asian region began to integrate into a nascent world system.

Conflict and Commerce in Maritime East Asia is an enjoyable read. It covers four generations of the Zheng family, roughly from the early sixteenth century through to the fall of Taiwan to the Qing, in 1683. The book is divided into eight chapters. Three appendixes provide a wide range of quantitative data regarding the volume of the overseas trade managed by the Zheng clan. Appendix 3, in particular, includes very detailed figures of Zheng trade at Nagasaki, which surpassed VOC trade during the 1650-1662 period.

Hang has tapped into a large number of sources, ranging from memoirs, Zheng documents from private collections and Qing archives, along with Dutch, English, Japanese, Korean and Spanish historical records, and inscriptions collected during field work in Fujian. The merit of Hang’s work is that he gathers together a large number of previously disconnected elements in Chinese and Western scholarship, including intra-Asiatic economic changes, military issues, ideological frameworks and business techniques, and he has thus drawn a very complete picture of an autonomous polity, at the periphery of the Chinese empire during the Ming-Qing transition. This was an exuberant periphery, which grew swiftly within the context of the conflict between Ming loyalists and Qing conquerors.

In seventeenth century East Asia, there occurred simultaneously a great, structured expansion of foreign powers and a transition in China’s role in international trade. Hang guides us through a changing geopolitical environment in which the collapse of the southern Ming imposed a complete redirection of economic flows with the emergence of the Indian subcontinent as a prominent silk producer. The Zheng trading organization proved well adapted to the change China underwent in the 1650s, moving from a producer of luxury goods to an importer and processor of raw materials and setting up of a circuit involving Indian textiles and Southeast Asian raw materials in exchange for Japanese silver and Chinese gold.

For a readership focusing on economic history, Chapter 3, “Between Trade and Legitimacy,” is certainly the most thought provoking. The Zheng family amassed huge amounts of wealth that were managed by several firms operating deep in Qing controlled territory, They were able to procure silk, porcelain and other luxury products for the Xiamen warehouse, and reported to their headquarters in Hangzhou from their branches in Suzhou, Nanjing and even Beijing. These firms also served as centers for gathering intelligence on Qing military operations. The “five mountains firms” were also able to supervise the construction of commercial and military seagoing junks. Their operating area was divided, as it was during the Ming Dynasty, into Eastern and Western oceans. Official merchants (guan shang) worked under the Zheng family according to a sophisticated hierarchy consisting of, on the one hand, adopted sons of the clan’s relatives and military commanders and, on the other hand, independent merchants linked to the clan by long-term debts contracted by borrowing capital or ships to trade on behalf of the Zheng organization.

Hang claims that in the 1650s, the Zheng trading network bore all the characteristics of a maritime empire, within the limits of an intra-Asiatic area, stretching from the markets in Japan (Nagasaki), Dutch Taiwan (VOC) and Manila, with extensions to Vietnam and Ayuttaya (Siam), where they dealt with Muslim traders from Bengal and the Coromandel Coast. Within the framework of the limited autonomy of cities or territories in Asia and the impossibility for patrician communities to formalize their own legal arrangements, the patron-client relationship was the cornerstone of any successful and long-lasting business operation in China. The Zheng were no exception. Until his death in 1662, Koxinga adhered to this pattern and reshaped the framework of international relationships and rudimentary bureaucracy of the Ming Dynasty.

The pervasive role that Confucian orthodoxy and filial piety played in this arduous attempt to restore Ming legitimacy is aptly emphasized in this book. What is also striking is the economic contribution of “ideological purity” combined with hard economic realities. However, outright loyalty to the Ming Dynasty did not prevent the Zhengs from protecting their own interests. Hang also carefully analyses the merchants’ double allegiance to the Zheng clan and to European traders and the way they served as channels for communication between them. In the late 1660s, rivalry with the Dutch over silk escalated in Japan and, although merchants could trade freely in the areas under his control, Zheng Jing maintained a strict monopoly on strategic goods (silk, deerskins and sugar).

How should we interpret the integration of the first global network of trade, which brought together the demand for China’s silk and high quality goods with an insatiable thirst for silver? From Zheng Zhilong to Zheng Chenggong, the activities of the trading network evolved from a centralized piratical organization to an informal state. At the time he was consolidating his power (1650), Koxinga possessed several hundred war junks and was able to mobilize 40,000 soldiers. At the same time, he envisioned the highest possible autonomy and sought to establish control over the three south-eastern provinces of Zhejiang, Fujian and Guangdong, as well as a 13,000 km long coastline in exchange for his support of Ming restoration. Xing Hang vividly describes the long process of negotiations between the Zheng clan and the Qing, which started as early as 1653 and continued, with interspersed episodes of war, diplomacy and neutrality, until the final conquest of Taiwan in 1683.

Xing Hang’s book documents in detail the extent of Zheng Chenggong’s power at sea. He was able to set up an efficient maritime blockade on Luzon and Dutch Taiwan until the Governor General of Manila gave in and submitted. The Dutch in Taiwan were pressured to soften their position. On the mainland, Koxinga was also able to launch a military expedition (although ultimately defeated), with over a thousand junks and 100,000 soldiers, into the Yangzi River delta. Even after his unsuccessful attack on Nanjing in 1659, Koxinga still maintained control over China’s coastline, from Zhejiang to Fujian.

On the diplomatic front, Zheng Chenggong made several attempts to convince the bakufu to support his military efforts against the Qing. Koxinga’s grand military strategy was two-fold. First of all, he sought to seize the resource rich Yangzi River delta in order to solve his organization’s needs for food and supplies and, at the same time, to take control of primary production of silk and other luxuries. Secondly, he planned an invasion of Dutch Taiwan and Spanish controlled Manila (in 1670 and 1672). The invasion of Taiwan was a consequence of Koxinga’s defeat at Nanking. The takeover of Manila, although poorly defended, never occurred. This overseas expansion, if it had been successful, would have led to the foundation of a maritime China encompassing a huge trading network stretching from Japan to Southeast Asia and able to defy the continental Qing Empire.

Another merit of this book is that it sheds new light on Koxinga’s son, Zheng Jing and on how he achieved, within two decades, the Zheng organization’s transformation into a viable territorial state, with the creation of a sophisticated administration, the rationalization of the kinship networks of southern Fujian and a greater economic diversification. This efficient policy attracted refugees reduced to starvation by the Qing coastal evacuation policy. Xing Hang meticulously describes the power game which led to the ascendancy of Zheng Jing and the diplomatic and military interaction between the VOC, Shi Lang (the former commander who defected to the Qing in 1651 and head of the Qing naval command), and Japan, whose neutral stance adopted in the 1660s complicated the consolidation of the position of Ming loyalists.

The final reason for the Zheng’s failure lies more in the growing competitiveness from the Bengal and Indonesian-based Dutch, a rising East India Company and Southeast Asian trading networks to which the Zheng organisation began to lose market shares, rather than in Qing military offensives and blockades against the island of Taiwan.

 
François Gipouloux, Emeritus Research Director, National Centre for Scientific Research (CNRS), China, Korea, Japan Research Centre, Ecole des Hautes Etudes en Sciences Sociales, Paris, is the coordinator of the International Research Network The Globalisation’s Origins and the Great Divergence: Trading Networks and the Trajectory of Economic Institutions — Europe-Asia, 1500-2000. He is the author of The Asian Mediterranean: Port Cities and Trading Networks in China, Japan and Southeast Asia, 13th-21st century, Edward Elgar, 2011.

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 (November 2017). All EH.Net reviews are archived at http://www.eh.net/BookReview.

Published by EH.Net (October 2016)

Douglas Southgate and Lois Roberts, Globalized Fruit, Local Entrepreneurs: How One Banana Exporting Country Achieved Worldwide Reach. Philadelphia: University of Pennsylvania Press, 2016. viii + 219 pp. $60 (hardcover), ISBN: 978-0-8122-4807-4.

Reviewed for EH.Net by James Wiley, Department of Global Studies and Geography, Hofstra University.

Douglas Southgate, an emeritus professor of agricultural, environmental, and developmental economics at Ohio State University, and Lois Roberts, a former instructor of Latin American history and culture at the Naval Postgraduate School in Monterrey, California, waste no time in defining the purpose of their volume. In its introduction, they criticize the many previous academic books on the western hemisphere’s banana industries for their failure to distinguish the Ecuadorean model from those practiced to its north, especially in Central America. Instead, they suggest, Ecuador’s experience with that very important fruit is usually casually lumped together with those of other countries whose industries were dominated by one or another of the major U.S.-based fruit multinationals. They argue that Ecuador does not fit that model — that its banana industry has focused primarily upon independent growers. In this, they immediately carve out a niche missing in the literature that they wish to fulfill.

Why so much concern over the banana, a question often asked of those who do research into this industry? The banana is the world’s most important traded fresh fruit and vegetable (FFV) commodity by volume and ranks fifth among all traded agricultural goods after wheat, corn, soybeans, and barley. In tropical zones around the globe, hundreds of thousands of people earn their living in the industry, with several million others indirectly employed in the various ancillary activities that serve the industry and its workers. It is an industry whose growth could not have occurred until the development of refrigeration technologies during the 1870s, making it possible to transport such a highly perishable fruit over great distances. The banana trade increased dramatically around the turn of the last century, particularly after the creation of the United Fruit Company (today’s Chiquita), referred to throughout the book as El Pulpo, the Octopus, the name commonly used in the region during the heyday of the Banana Empire.

With their goal clearly established, the authors begin by offering a very abbreviated history of the banana industry elsewhere in the western hemisphere. Perhaps most significant among the characteristics of the early years of the industry was the evolution of the system of vertical integration by El Pulpo and its competitors where they existed. This was necessary to coordinate the various stages of an industry in which the timing was of the utmost importance. Thus, the ability of one firm, through a variety of subsidiaries, to control production (usually in the form of monoculture plantations), the harvest, transport to local ports in the growing regions, shipping to consuming  countries (mostly in temperate regions), and internal transport there to reach widely dispersed retail outlets is absolutely essential to having the fruit arrive to its ultimate consumers in edible form. This array of activities lies beyond the capacity of small-to-medium banana growers to accomplish, creating openings for large multinational corporations.

After offering this basic understanding of the requirements of bananas, the authors proceed to develop an historical geographic profile of the industry in Ecuador from its origins, paying particular attention to those factors that distinguish it from those in neighboring countries. This effort covers multiple chapters and represents both the greatest strength of the book and its primary contribution to the body of literature on FFV commodities. Foremost among Ecuador’s distinctive characteristics is the prior existence of an important port city, Guayaquil (now the country’s largest city). Guayaquil has played a significant role from the colonial period on and, in the process, fostered the development of entrepreneurial skills of many of its residents. These were largely in place by the time bananas became a major export commodity for the country in the 1950s. The city spawned several entrepreneurs who would be instrumental in the development of the banana industry. The most notable among these was Luis Noboa. His story, recounted at length throughout the book, was a classic rags-to-riches tale of a driven man who became Ecuador’s wealthiest man and whose firm ultimately became its largest banana trading company (and the fourth largest in the world). The Central American exporting countries did not have anything or anyone to equal these advantages, rendering them much more dependent upon the major fruit transnationals than was necessary in Ecuador. The existence of such a city was also a critical factor behind the absence in Ecuador of the kind of banana monopolies that existed to its north. From its inception, the Ecuadorean banana industry was characterized by multiple firms and numerous growers, a situation that was advanced by proactive government policy, one of the few instances in the book when government activity was presented in a positive light. While foreign corporations including El Pulpo did operate there, they were never able to achieve the dominance than characterized their operations in Central America.

Ecuador’s many assets for having a successful industry are also identified. It has optimal soils for growing the fruit, an appropriate and relatively storm-free climate (bananas are easily damaged by strong winds), and an ample labor force already living in the lowland regions that would become the country’s banana zones. In addition, it had just experienced the failure of its prior primary export crop, cacao, adding some urgency to the interest in switching to bananas on the part of many farmers.

Another unique dimension of the Ecuadorean industry is its relatively late beginning. The country’s location on the west coast of South America had been the biggest deterrent to the successful export of the fruit prior to 1914 when the Panama Canal opened. While Colombia and Central American exporters all had Caribbean coasts through which their exports could pass, Ecuador’s trading links to Europe and most of North America involved an arduous voyage around the southern tip of the continent. The canal alleviated that necessity and, while adding on the expense of the canal toll, it allowed Ecuadorean bananas to be competitive in foreign markets. The country first attempted to develop a banana export industry in the 1930s but the Great Depression and the ensuing world war caused major reductions in global demand for the fruit. Instead, the industry got its real start in the late 1940s and took off during the first half of the following decade when Ecuador became the world’s leading exporter of the fruit, a position it continues to occupy. The late start actually worked to its benefit as it was able to learn from the problems confronted by its competitors in the region to its north. That helped both its entrepreneurs and its government make better choices, while also taking advantage of the U.S. Consent Decree of 1958, an anti-monopoly measure that required United Fruit to divest many of its landholdings in Latin America.

The volume has two, related, areas of weakness. Its analyses of government policies both in Ecuador and elsewhere were not balanced. A very clear bias exists, particularly in the latter chapters, in favor of neoliberal policies (a term that the authors unabashedly criticized as favored by “Latin American leftists” though its use extends beyond that) and against the efforts of any left-of-center governments. Related to this, the other weakness involve the unbalanced analyses of Latin America’s stages of economic nationalism (a term that does not even appear in the book) and the contemporary stage of globalization and neoliberalism. The former is criticized for its principal development strategy, Import Substitution Industrialization (ISI). While that strategy did certainly create several problems, it was also responsible for more positive results, including the first real industrialization of the region, the enhanced abilities of governments (especially in Central America) to confront the large multinational fruit companies, the sizeable expansion of what had been just a fledgling middle class, and the urbanization and modernization of many regions within each country. The treatment of the current stage is quite positive by comparison, with no mention of how Ecuador’s banana industry is often criticized abroad, including by many foreign governments, for having “won” the “race to the bottom” through achieving its competitive advantage by paying the lowest wages in the industry. A more balanced approach to these subjects would have enhanced the book significantly.

Overall, the volume represents a worthwhile contribution to the literature. It addresses the need for a comprehensive treatment of the world’s largest banana producer. As writers of books about individual commodities know, it is often impossible for authors to investigate all of the national industries, but it is surprising that Ecuador has not received greater attention. With this work, Southgate and Roberts have helped to fill this gap.

James Wiley has authored several articles and one book on the banana industry, focusing upon the so-called banana war of the 1990s and the early 2000s involving Latin America, the Caribbean, the European Union, and the United States. His book The Banana: Empires, Trade Wars, and Globalization was published by the University of Nebraska Press in 2008.

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Published by EH.Net (December 2015)

Lodewijk Petram, The World’s First Stock Exchange.  New York: Columbia University Press, 2014. vi + 296 pp. $30 (cloth), ISBN: 978-0-231-16378-1.

Reviewed for EH.Net by Ranald Michie, Department of History, Durham University.

The subject of this book is the world’s first stock exchange, which the author locates in Amsterdam in the seventeenth century. As becomes apparent in the text (pp. 181-82), no stock exchange was formed in Amsterdam at that time. The Amsterdam Stock Exchange Association was not established until 1876 and it did not occupy its own building until 1913. Both these events were long after stock exchanges had been founded in numerous other cities in the world, such as London and New York. What the author confuses is trading in corporate stocks and a stock exchange.  The former is a market whereas the latter is an institution. This difference matters because of the important contribution that rules and regulations make to reducing counterparty risk, eliminating price manipulation, addressing trading abuses and ensuring the permanence and continuity of opportunities to buy and sell.  That leads to a question that this book does not answer. Why was a stock exchange not formed in Amsterdam in the seventeenth century given the early start that was made there in establishing a market for stocks and the need to respond to all the problems it led to for those involved?  Clues are provided in the text to such a question but it remains unanswered because it is not asked.

The failure of the author to distinguish between a market and an exchange, and then discuss why the former did not lead to the latter in seventeenth century Amsterdam, is a pity because the book contains much of interest and relevance. The material that the author uses is largely that generated by disputes between those involved in this early stock market whether they were investors, brokers or dealers. Using this legal material provides a great deal of depth to an understanding of this early stock market but the overall result is rather episodic. Lacking the material produced by an institution such as a stock exchange, as there was none, there is no sense of development. Instead, there are a series of glimpses into a world in which the owning, buying and selling of corporate stocks gradually emerged from the shadows and took on a tangible form. The way this is presented is at variance with normal academic practice. Despite being based on a Ph.D. the focus is on telling a story based on the life and times of individuals, and extrapolating far beyond the evidence gleaned from the court records and business papers available. This makes the book very readable but at the expense of analysis and explanation.

Central to the narrative is the VOC (the Dutch East India Company), as it was the shares issued by it which provide the material out of which the early stock market in Amsterdam grew. As a trading company sending ships to Asia, its business prospects were highly uncertain, being exposed to the vagaries of weather and war as well as those of long-distance commerce, making its dividends a great unknown until formally declared by the directors.  At times large dividends were declared while at others none resulted, while payment could be in anything from commodities like cloves, government bonds, or actual money. It was this uncertainty that generated a great deal of market activity as it attracted speculative interest, driven by news and rumors, as well as those looking for a permanent investment, willing to accept both losses and profits over the long run.

In turn the very volatility associated with VOC stock gave it a liquidity that attracted another class of investor. These were people, such as the merchants, with temporarily idle funds who looked for a suitable investment while waiting better paying opportunities. The stock market that developed in seventeenth century delivered this. Increasingly it became possible to trade in VOC shares not only for immediate delivery but also forward, providing opportunities for those with spare funds to employ them in this market or those in need of such fund to access them. Contributing enormously to the operation of this market was the use of options and the appearance of a growing number of brokers and dealers, as these provided those trading in VOC shares with a continuous market and ways of either increasing or reducing the risks that they took. These developments are expertly documented in this book and the reader is provided with a wealth of evidence detailing the way the market operated in the seventeenth century. That makes the book an invaluable addition to the literature on the history of securities markets.

The conclusion reached by the author is a rather negative one as he says little of value about the developments that took place in share trading in Amsterdam in the eighteenth century. The stock market was confined to the shares of one company, the VOC, with only one other being formed, the Dutch West India Company (WIC), which was not a success. In addition, the interpretation presented here focuses on the speculative element of share trading, which is inevitable given the material that is relied on. Disputes were usually generated when one party to a deal looking for a way of reneging on it when the outcome meant a large loss for himself. What is lost in this approach is the connections between the market in VOC shares and the wider money market and the complex world of international payments. There are hints of these connections in the book but they are not taken up. Reflecting the weakness of this element of the book is the lack of understanding of the developments being made in the rival stock market in London from 1694 with the formation of the Bank of England, as its shares could provide the depth and breadth that those of the VOC lacked, as it was a proxy for the debt of the UK government.

Ranald Michie is author of The London Stock Exchange: A History (1999) and The Global Securities Market: A History (2006), both published by Oxford University Press. He is currently completing a book entitled British Banking: Continuity and Change since 1694, also for Oxford University Press.  He recently retired from Durham University as emeritus professor and is currently teaching at Newcastle University Business School.

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Published by EH.Net (October 2013)

Gwyn Campbell and Alessandro Stanziani, editors, Debt and Slavery in the Mediterranean and Atlantic Worlds. London: Pickering & Chatto, 2013. xiv + 185 pp. $99 (hardcover), ISBN: 978-1-84893-374-3.

Reviewed for EH.Net by Stanley L. Engerman, Department of Economics, University of Rochester.

Debt and Slavery in the Mediterranean and Atlantic Worlds contains nine essays plus a long introduction by the co-editors, dealing with topics related to the importance of debt in leading to enslavement in many places over a long period of time. The period covered ranges from about 300 B.C. (Early Rome) to 1956 (Anglo-Egyptian Sudan), and covers various nations of the world in Europe, Asia, and Africa.

The editors introduction discusses the various types of slavery and the meaning of enslavement. While they consider most slaves to be the result of wartime capture, they point to the relative importance (though few numerical estimates are given) of slavery resulting from the failure to pay debt in full, which permits the creditor to enslave the debtor, presumably for life. They note the occasional practice of self-enslavement for debt and sale of children (p. 13), but little attention is given to its major role in times of subsistence crises. They distinguish, as do several of the authors, between pawnship (the provision of collateral for loans) and debt slavery, although they indicate that these categories are often difficult to distinguish ? and while pawnship may lead to slavery in some times and places, at other times and places it does not.

Marc Kleijwegt’s chapter on early Rome focuses on Moses Finley’s contention that chattel slavery began in Rome only after 326 B.C., with the abolition of the nexum as a form of temporary bondage, requiring its replacement by a different form of coerced labor. Kleijwegt argues, against Finley, that chattel slavery in Rome had begun earlier, and that debt enslavement did not end in 326 B.C., so that while some aspects of the arguments made by Finley did take place, these changes were less dramatic and sharp than Finley argued, and that this complicates the belief in an abrupt transition from debt bondage to chattel slavery? (p. 37).

In the most wide-ranging essay in terms of time and location, Alessandro Stanziani deals with enslavement for debt and by war captivity in several Mediterranean and Central Asian states as well as in Russia, China, and India. In some cases these were suppliers of slaves, and in others users of slaves.? In most cases, although debt slavery was important, war captives played a dominant role (p. 48), reflecting the political instability and military operations that characterized these areas.

Michael Ferguson details the Ottoman Empire state-initiated emancipations, mainly of African slaves from the third quarter of the nineteenth century. These may have been a minority of emancipations, but state-initiated emancipation generally led to keeping ex-slaves under state protection, where they often served in the military, or performed agricultural work. Two essays on debt slavery and pawnship, by Paul Lovejoy in West Africa and Olatunji Ojo on the Yoruba, focus on the distinctions and similarities between pawnship and slavery. Pawnship, a form of providing an individual as security for debt, did not necessarily lead to slavery, although there were important legal changes over time and its conditions varied from place to place. In West Africa, as elsewhere, most slaves were the result of violence, including kidnapping, not debt. The same was apparently the case among the Yoruba, where many slaves were also the result of violence, not debt. Most pawns who were to become slaves were women and children, “whereas adult males” were more likely to be taken in combat? (p. 90).

In an update of his classic article of some forty years ago, in “The Africanization of the Work Force in English America,” Russell R. Menard analyzes the transition from the debts entered into by indentured labor, mainly from England, to the growth in the importance of African slaves in the colonial Chesapeake and in Barbados. Based on the detailed work of Lorena Walsh and John C. Coombs in pointing to the differences in the types of tobacco produced in different parts of the Chesapeake, Menard argues for a shift in chronology and explanation from his earlier arguments. In regard to Barbados, he argues that the transition to slavery had begun prior to the sugar revolution, based on other export crops, although sugar greatly accelerated the growth in slavery.

In an attempt to link the development of commerce and credit in various parts of Europe, the Americas, and Africa to the role of slavery and the slave trade, Joseph Miller describes the role of European states and merchants in obtaining and shifting specie and funds in trading with Africa and elsewhere.? While this commercialization did benefit the Europeans, he argues that its effect upon African societies and economies was negative, leading to more militarization and the need to provide slaves to pay for the debts accumulated.

Henrique Espada Lima presents a detailed examination of various forms of coerced labor in Brazil in the nineteenth century, including some labor based on voluntary immigration from Portugal and the Azores.? There were provisions made for self-purchase by slaves, making for a conversion of slavery into debt, and thus having slaves pay financial compensation to their former owners (p. 131). Slavery finally ended in Brazil in 1888, 17 years after passage of the so-called law of the free womb, with no compensation paid to either slaves or slave owners. According to Steven Serels, it was debt, not taxation, which led to the increased labor force participation in cotton production in the Anglo-Egyptian Sudan between 1898 and the coming of independence in 1956. This debt influenced both laborers and tenants, and bound these cultivators to the land and prevented them from regaining their lost independence? (p. 142) over the first half of the twentieth century.

All the essays are based upon extensive primary and secondary research, are clearly presented, and are quite useful additions to understanding the historical meaning of slavery, serfdom, pawnship, and different forms of coerced labor. As with such a diverse set of essays, there are differences in the caliber of the argument and in the authors? perceived importance of the role of debt slavery in different times and places. Nevertheless, the great value of this collection is to indicate the widespread frequency and social importance of this particular form of enslavement.

Stanley Engerman is co-author (with Kenneth Sokoloff) of Economic Development in the Americas since 1500: Endowments and Institutions, Cambridge University Press, 2012.

Copyright (c) 2013 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 2013). All EH.Net reviews are archived at http://www.eh.net/BookReview