Published by EH.Net (December 2015)

John Woodland, Money Pits: British Mining Companies in the Californian and Australian Gold Rushes of the 1850s. Farnham, UK: Ashgate, 2014. xiii + 282 pp. $125 (hardcover), ISBN: 978-1-4724-4279-6.

Reviewed for EH.Net by Mark Kanazawa, Department of Economics, Carleton College.

In this aptly-titled book, John Woodland examines the role played by British companies in the gold rushes of the 1850s in California and Australia.  As one who has studied the California gold rush for some time, I have long been struck by how little scholarship exists about the British presence in California during this period.  What little there is, as contained for example in the contemporary writings of Robert Allsop and Henry Vere Huntley, conveys that early on, there was a lot of British interest in financing mining, particularly quartz mining, ventures in California.  However, this interest quickly dissipated through the triumvirate of dry holes, problematic technology, and bad management, causing many companies to beat a hasty retreat.  In the early 1850s, the California quartz mines really did turn out to be money pits, sucking up the capital of many British firms and financiers and yielding little in return.  But this is all we seem to know and the question is: Is this really all there was to the story?

Enter John Woodland, who sets out to try to answer this question, and a similar one for the British presence in Australia, through painstaking archival research.  His strategy is to identify a bunch of British companies operating in both California and Australia and to find out everything he can about them, mostly from news accounts, but also from histories, company documents, and various government sources.  He manages to identify nearly one hundred and twenty such companies which were formed with the intent of carrying out mining in the two countries, though the vast majority of them failed.  The result is a story that is rich in detail, particularly regarding the circumstances of individual companies, each of which has its own unique story to tell.  But the narrative goes further than this by placing these stories within a larger institutional context, enabling Woodland to talk about politics, institutions, and other actors such as the hapless shareholders who lost their shirts by investing in these doomed companies.  Furthermore, the argument speaks to some institutional differences between Australia and California, with contrasting implications for the success with which mining was prosecuted.  The overall discussion is informative and pretty well-crafted.  In reading this book, I learned a lot of things about these two gold rushes that I did not know before.

There are numerous challenges to writing a book like this, which is about many individual companies in two different gold rushes.  Not the least of these challenges are the countless judgment calls that one has to make along the way in terms of what material to cover and what facts to emphasize.  Woodland chooses to place a lot of emphasis on the experiences of a key subset of mining companies, the discussion of which is contained in two chapters that comprise nearly half of the entire book, one chapter devoted to California and the other to Australia.  Given the impressive amount of archival research he has undertaken, Woodland must have found it well-nigh irresistible not to tell us everything he has discovered about these companies, which would account for the richly detailed accounts of so many of them.  This decision, however, comes at a cost: namely, less attention to other aspects of the story that might have shed additional light on the challenges faced by these companies and, therefore, the determinants of their success.  As it stands, Woodland’s ultimate explanation for why so many British companies failed largely comes down to … the triumvirate:  dry holes, problematic technology, and bad management.  In the end, the narrative largely confirms what we already knew about the troubles plaguing these companies.

The book’s narrative provides some tantalizing hints regarding paths forward that might shed additional light on the reasons for the failure of so many companies.  In the discussion of Australia, for example, we see glimpses of  internecine rent-seeking struggles between British companies, local miners, and pastoral interests over regulation of mining leases and mining on private lands.  I wonder if more could have been said, perhaps informed by public choice theory, about the systematic factors that determined who prevailed in the legislative arena and why this changed over time.  One reason this might be particularly illuminating is that the political situation in Australia seems to have stood in sharp contrast to its counterpart in California.   During the California gold rush, mining was by far the dominant industry and some existing evidence strongly suggests legislative capture by mining interests.  Possibly some insights might be gained by a closer examination of the politics surrounding the statutory changes that were given impetus by the playing out of the story of these companies and the challenges they faced.

An additional related issue concerns the contrasts between the institutional contexts in California and Australia, especially in terms of land laws, public/crown ownership of lands, and disposal policies.  My understanding of the California gold rush is heavily informed by the legal standing enjoyed by miners who were operating largely on the public domain, as well as the costs of enforcing both public and private property rights to available land, gold, and water.  It would have been instructive to more fully compare and contrast the situation in Australia.  Without knowing more about the official legal institutions, local organizational responses, and transaction costs than Woodland provides, it is difficult to fully understand the behavior of these companies and the reasons for their success or failure.

None of this is meant to denigrate the real contribution of this book, which is to go well beyond existing accounts in providing detailed information on the specific challenges faced by British mining companies in the mid-nineteenth century gold rushes.  This has been a real void in the scholarly literature and we now know considerably more than we did, thanks to Woodland’s extensive efforts.

Mark Kanazawa has written extensively on the California gold rush.  He is the author of Golden Rules: The Origins of California Water Law in the Gold Rush (University of Chicago Press, 2015).  He is Professor of Economics at Carleton College in Northfield, MN.

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