Engines of Enterprise: An Economic History of New England

Published by EH.NET (August 2000)

Peter Temin, editor, Engines of Enterprise: An Economic History of New

England. Cambridge, MA: Harvard University Press, 2000. vii + 328 pp.

$24.95 (cloth), ISBN: 0-674-00099-4.

Reviewed for EH.NET by David R. Meyer, Department of Sociology, Brown

University.

New England has been subjected to more economic history studies than any other

region, except the South, but coherent explanations of long-term change remain

scarce. Breadth of colonial-period coverage contrasts with idiosyncratic case

studies of nineteenth-century towns, firms, and industries; and seemingly

obvious explanations of New England’s economic travails during the twentieth

century resting on false assumptions. This book helps rectify these gaps in our

knowledge and points to future research. The essays, a result of a conference

at the Federal Reserve Bank of Boston, intend to provide a survey of New

England’s economic history and an intellectual rationale for the Bank’s

creation of a New England economic history museum. Most contributors draw on

their previous New England research or on their expertise with themes that are

applicable to New England; thus, essays are reflective and synthetic, rather

than original.

Several themes — comparative advantage, agglomeration economies, technical

change, and culture — run through the essays, according to Temin’s

introductory chapter, but they serve mostly as reference points for subsequent

narratives. Margaret Newell explains the economic success of colonial New

England as an outcome of an imported culture that valued work, thrift, success,

and consumption. This culture combined with the use of government to support

the common good; the inheritance of Native Americans’ capital investments in

land; an aggressive shift into commercial services and supplying Caribbean

slave economy; and capital investment in agriculture and manufacturing. This

created numerous economic actors (wholesalers, retailers, farmers,

manufacturers) who were poised to contribute to post-colonial development.

Winifred Rothenberg covers the period up to the 1830s and argues that New

Englanders’ value system supported business enterprise. Farmers were swept into

a market economy as price signals increasingly governed decision-making; they

raised productivity, reduced fertility, accumulated capital that was

transferred to commerce and manufacturing, and created markets to efficiently

employ labor. Rural economic transformation set the stage for industrial

growth, especially in cotton textiles. Peter Temin traces rapid

industrialization of New England during 1830-1880, and he attributes it to the

protective tariff that allowed the cotton textile industry to grow and to the

large supply of women, not employed intensively in agriculture, who were

available for factory work. The American System of Manufactures, based on

interchangeable parts, emerged from government armories, which became leaders

in the machine tool industry. Firms with access to these innovations

capitalized on them to become leaders in machinery.

The standard view posits that New England drifted into decline during

1880-1940, because its top industrial sectors of textiles and shoes were not

leaders in the new industrial economy based on consumer and producer durables,

but Joshua Rosenbloom demonstrates errors in that interpretation. Relative,

followed by absolute, decline in New England’s old industries was compensated

by a shift into services and growth of machinery, machine tools, and

instruments, that were part of the emerging industrial economy. Consequently,

per-capita income levels remained 20 to 30 percent above the national level.

That success helps explain New England’s transformation from manufacturing to a

knowledge-based economy — as Lynn Browne and Steven Sass document. Labor

supplies adjusted to economic cycles through in- and out-migration, maintaining

wage levels, and industries shifted, coincident with national manufacturing

changes, from aircraft engines and electronics to minicomputers and instruments

to services (computer, financial, health care). New England’s leadership in

higher education supported this transition to a knowledge-based economy.

The last chapter, in the form of three vignettes, includes reflections on New

England’s economy. Bernard Bailyn highlights the critical boost that Caribbean

and southern slave economies gave to its growth during the colonial period;

Merritt Roe Smith reiterates his research theme that government armories were

critical to its industrialization; and Paul Krugman posits that the directions

of its future economy are indeterminate.

The essays link together sequentially, and, as importantly, thematically, and

major points provide building blocks for the next essay. This is a tribute to

Temin’s editorial skills and guidance. Therefore, readers can consider

questions that span longer time frames, such as the role of education, capital

investment, or industrial innovation. And, perplexing incongruities become

apparent, such as: how were new industries (instruments, aircraft engines)

funded and nurtured coincident with substantial decline in a large share of the

industrial base (textiles, shoes)?

Although the writers reflect on previous research and synthesize it, they

succeed in stimulating fascinating questions for future research. Newell’s

argument that New Englanders successfully built a prosperous economy on trade

services, finance, and production of high value-added products for exports

challenges standard views that regional economies are better off with an export

staple that is widely demanded in external markets. Rather than New Englanders

being forced to adapt to no staples, they grasped opportunities to move into

sophisticated services with high returns on investment, and they built skills

in trade and finance that were less susceptible to competition than staple

exporters, who always faced competition from new, better production areas.

The essays coverage of industry, especially in the nineteenth century, point to

the continuing conundrum of New England industrialization. Rothenberg has slain

the argument that poor agriculture left people with no alternative but to enter

manufacturing. Instead, prosperous farmers accumulated capital that was, in

part, transferred to industry. Nevertheless, we are left with few factors – a

large supply of women not employed intensively in agriculture and government

funding of armories — as reasons why New Englanders grasped industrial

leadership during the nineteenth century, especially before 1880. These are

thin reeds to explain industrialization. New England was not the only eastern

region with large supplies of women not employed intensively in agriculture;

New York and Pennsylvania had similar areas, but their textile and shoe

industries were dwarfed by New England’s. The American System of Manufactures

based on interchangeable parts was not important until late in the nineteenth

century, yet how does one explain widespread development of New England’s metal

manufactures outside the arms sector from 1840 to 1880? While armories were

important, it is not clear that they were pivotal — many private firms had

leading mechanics who did not serve in armories, and even if they went to

armories, they also brought their technical skills. Providence area machine

shops trained many of America’s leading mechanics, but their links to armories

were episodic at most. The large scale of textiles and shoes, and to lesser

extent, machine tools and machinery, obscure growth of other industries such as

jewelry, brass, hardware, clocks, and rubber. Explanation of New England

industrialization must account for them. That effort will broaden

identification of factors that contributed to industrial success. This approach

also provides a better base for explaining, as Rosenbloom argues, resiliency of

New England’s economy even with massive industrial decline during 1880-1940,

and the capacity to shift into new industries after 1940 that Browne and Sass

document, but only explain tentatively.

Many articles and books have covered the post-1945 decline of New England, and

often they have had the facts and explanations wrong. This collection

identifies some factors missing in previous studies, but it leaves important

questions unanswered. Tempting targets for research include tracing links among

machinery, instruments, telecommunications, and early computers. They had deep

roots in the late nineteenth century, but the threads that bind them up to the

1970s remain obscure. Financial services have emerged as a major part of the

New England economy, yet that sector has a rich heritage that continued to

build, not only standard banking and insurance, but also venture-capital firms

and investment management, some of whom go back decades. The essayists

highlight the importance of New England’s educated labor force and its capacity

to move into new economic sectors. Briefly touched on, but awaiting more

research, is the fact that New England contains the nation’s greatest

collection of leading liberal arts colleges and universities, providing

education that has been touted as core to the new knowledge-based economy. As

Krugman notes, change is not predictable. Nevertheless, these essays

demonstrate that the New England economy has maintained strong links to its

past, as well as idiosyncratically departing in new directions. Its

specialization in liberal arts education may suggest some predictability to the

future — precise economic specialization may be uncertain, but labor force

adaptability and the capacity to enter new, leading sectors may be predictable.

David R. Meyer is author of Hong Kong as a Global Metropolis, Cambridge

University Press, 2000. He is completing a book about the

agricultural-industrial transformation of the eastern United States during the

antebellum period.