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Records of American Business

Author(s):O'Toole, James M.
Reviewer(s):Jimerson, Randall C.


Published by and EH.Net (May 1998)

James M. O’Toole, ed. The Records of American Business. Chicago: Society of American Archivists, 1997. xvii + 396 pp. Bibliographical references and index. $39.95 (cloth), ISBN 0-931828-45-7.

Reviewed for H-Business and EH.Net by Randall C. Jimerson , Western Washington University

The Challenges of Documenting Modern American Business

The challenges of documenting American business have led archivists to develop techniques for selection, appraisal, and use of a wide variety of records that provide essential information for depicting aspects of business history and corporate operations. Often working closely with business historians and corporate leaders, archivists have attempted to mine the rich resources worthy of preservation from vast mountains of modern business records. In order to understand past and present approaches taken by archivists to preserve documentation important both to company officials and to outside researchers, this book is essential reading. The Records of American Business provides a variety of perspectives on the current state of archival practice, both for in-house corporate archives and for repositories that collect records relating to American business and enterprise.

This volume is a tangible result of the Records of American Business Project (RAB), sponsored by the Minnesota Historical Society and the Hagley Museum and Library and funded in part by the National Endowment for the Humanities. This project brought together the two collecting repositories with the largest holdings of business records in North America in a joint effort “to refine and redefine the appraisal and use of corporate records” (p. vi). Many of the essays in this volume were first presented at the RAB symposium in April, 1996. By that time, the project had broadened its scope to include many of the most significant institutions and individuals actively engaged with American business records, including corporate archivists, archivists from universities and historical societies, and independent consultants. The variety of perspectives offered in this volume is impressive. The diversity of views indicates that there is no consensus concerning a particular approach to solving archival conundrums, but rather a healthy discourse representing different viewpoints.

The Records of American Business begins with a foreword by the editor, James M. O’Toole, who outlines some of the major themes that emerge from this collection of fourteen essays. One of the most basic issues is placement: should business firms establish in-house archival programs, or place their records at an external research institution? Other issues include the complex process of appraisal, by which archivists determine the long-term value of records. Changing technology has had a significant impact on archival operations, particularly in business firms, which often have confronted new technologies, such as the computer, before other institutions. Finally, O’Toole makes a strong case for the necessity of business archives to redefine their clientele and to build alliances of all kinds with other groups. “Only if alliance building comes to be seen as part of the core of archival services–equal in importance to appraisal, arrangement, description, preservation activities, and all the other familiar archival tasks–will archivists be able to meet the multifarious challenges of modern records,” he concludes (p. xvi). O’Toole insists that these essays have a wider applicability than American business records, since all archivists face similar challenges and problems. This is true, but in straining to make the point he overreaches, advising the reader to substitute the word “academic” or “religious” or whatever term applies to your own setting whenever the word “business” appears (p. vii). I tried this; it simply doesn’t work all the time. Many of the issues presented here apply only, or principally, to a business context. After all, that is the presumed rationale for a volume devoted to business records. That said, it is true that many of these techniques can be adapted to fit other types of institutional settings, and the volume will be useful for all archivists, and it should find a wide audience.

In his introduction, “Business and American Culture: The Archival Challenge,” Francis X. Blouin, Jr., director of the Bentley Historical Library at the University of Michigan, provides the context for the essays that follow. Quoting Calvin Coolidge’s famous dictum, “The chief business of the American people is business,” Blouin writes that, despite the enormous impact of business institutions on American life, relatively little is known about them. Blouin blames this in part on trends in academic history, which has not focused much attention on business institutions, and in part on the fact that, compared to political, religious and educational institutions, “there is very little documentation with which to work” (p. 1). Blouin discusses the narrow definition of business, as “a set of organizations that have structure and purpose focused on the delivery of goods and services,” and the broader sense of the term, as “an institution that defines culture and values” (p. 3). Both senses should be considered in reading the diverse articles in this volume, he says. Blouin then provides a succinct overview and interpretation of the essays to follow, showing how they relate to three major challenges facing archivists dealing with business records: appraisal, use, and technical issues. This volume presents a variety of perspectives, Blouin states, and this pluralistic approach appears necessary to meet the needs of a diverse group of users.

The fundamental divergence represented here is between corporations that establish their own internal archives and “external” repositories, such as universities, historical societies, and research libraries, which collect records from many different business firms. Although archivists generally encourage businesses to maintain their own archives, over the past decade there has been “a downward trend in the creation of business archives programs in corporations” (p. 351), and several major corporations have closed well-established and apparently successful archives programs, according to Winthrop Group consultant Karen Benedict. Benedict, formerly corporate archivist for Nationwide Insurance, provides an analysis of the choices facing company officials in deciding between maintaining an in-house archives program or placing company records in an outside repository. Although arguing strongly for the first option, Benedict acknowledges that many companies will prefer contracting out for archival services. This, at least, is preferable to destroying caches of significant historical documentation, which is all too common among corporations worried about disclosure of sensitive information.

Many of the reasons for this concern for corporate privacy are implicit in the essay by Philip F. Mooney of Coca-Cola, who is curiously the only contributor actively employed as an in-house business archivist. Mooney contrasts archival myths about business archives with the corporate reality he sees daily. He contends that corporations are “a historic by their very nature” (p. 60), and that in-house “archival professionals need to develop more precise tools to measure bottom-line contributions” (p. 61) and must “constantly seek new opportunities to market [the archives] resources and service to its constituents” (p. 63). Although a few business leaders might appreciate the value of history for institutional memory, decision-making or maintaining corporate culture, Mooney counters that they are rare exceptions. Corporate archivists will have a difficult time justifying their contributions to the financial well-being of the company.

Despite these difficulties, Marcy Golstein depicts in-house business archives moving from a narrow traditional focus to a more flexible approach emphasizing a variety of business uses for archival records. A former archivist for AT&T, now working as a consultant, Goldstein emphasizes corporate archives as “the repository of the corporate memory” (p. 41) and as “knowledge management centers and not historical warehouses” (p. 54). Such arguments sound persuasive, but the declining numbers of corporate archives suggest that fewer business executives are convinced that the costs and potential liabilities of in-house archives justify their continuation.

To demonstrate that some corporate executives have championed the establishment and development of in-house archives, the volume presents brief excerpts from oral history interviews with three such business leaders. These statements repeat some of the traditional arguments in support of in-house archives, but there is not much context or background with which to form a clear perspective on their comments. It would have been more interesting to hear comments from different viewpoints, such as an executive who opposes funding for archives or one who was converted from a skeptic to a true believer. This would help us understand the challenges faced by corporate archivists.

The other side of the debate, comprising most of the essays in this volume, is framed by archivists who do not have direct ties to in-house archives. While corporate archivists seem to be waging a battle for survival and attempting to adapt to ever-changing corporate climates, several major archival institutions have been developing significant research collections of business records. Many of these collections result from business closings or corporate takeovers, with surviving records often being spotty or coming to a repository without opportunity for the archivist to determine in advance which records should be saved. The challenges faced in such circumstances involve selection and acquisition, appraisal, and filling documentary gaps. These are the themes explored in the remaining essays.

The “complex relationship between historical scholarship and the keeping of archival records” is the theme of the lead essay, by Michael Nash of the Hagley Museum and Library. Writing more for archivists than for business historians, Nash provides an historiographic survey from the founding of the Business Historical Society in 1925 to recent studies that focus on trends in American economic, political, and social life, and the impact of gender, race, and workers on business. From a citation study of more than 67,000 footnotes in fifty major business history monographs and five leading journals, Nash concludes that “over time, there appears to be a declining reliance on archival sources” from business firms (p. 35). Nash offers only a few observations based on this finding, principally that archivists should make a more systematic effort to collect records from industry trade associations, lobbying groups, political action committees, and other entities that “can potentially provide the sources that scholars are seeking in order to document the relationship between business, culture, politics, and society” (p. 35). Unfortunately, this recommendation is the final sentence of his essay, so there are no specific suggestions for how this can be accomplished.

The most ambitious effort to answer the questions raised by Nash comes from Mark A. Greene and Todd J. Daniels-Howell, both archivists at Minnesota Historical Society (MHS), who first proposed the RAB Project. Their essay presents a lengthy case study of the MHS effort to develop a pragmatic approach to selecting modern business records for archival preservation. The “Minnesota Method” they developed is based on the assumption that “all archival appraisal is local and subjective” (p. 162), but that, through careful analysis of both records creators and the records themselves, archivists can establish appraisal and selection criteria that are “rational and efficient relative to a specific repository’s goals and resources” (p. 162). The strategy they propose includes: defining a collecting area; analyzing existing collections; determining the documentary universe, including relevant government records, printed and other sources; prioritizing industrial sectors, individual businesses, geographic regions, and time periods from which records will be sought; defining functions performed by businesses and the collecting levels needed to document major functions; connecting documentary levels to priority tiers; and updating this process every three to seven years. They outline priority factors used in making these decisions, documentation levels, and decision points to refine the priority levels. This Minnesota Method combines features of archival approaches to collection analysis, documentation strategy, appraisal, and functional analysis. Complete with eight flow charts, as well as other outlines and charts listing various procedural steps and criteria, the essay presents a detailed explanation of this strategy. Despite the authors’ statement that this “pragmatic method of selection … may seem a modest goal on paper” (p. 206), many archivists would find it a daunting task to adapt the Minnesota Method to their own repositories. The essay’s greatest value, however, is in outlining the complex issues that must be addressed in making appropriate and effective decisions regarding archival selection and acquisition. This is one essay that clearly suggests applicability to other types of historical records beyond the sphere of business.

Whereas Greene and Daniels-Howell focus on documentation for entire industries, Christopher T. Baer examines appraisal of records within a single firm. Baer draws on his extensive experience at the Hagley Museum and Library to explain four parameters that shape his approach to appraisal of business records. Baer’s approach reflects a number of influences, including Alfred D. Chandler’s seminal work and Michael E. Porter’s “Five Forces” of competitive strategy. The four parameters he posits for evaluating business records are function (actions required to achieve elemental purposes), structure (i.e., external structure), strategy (referring to both strategy and tactics), and detail (level of specificity and completeness for a particular record). In explaining the application of such criteria, Baer reviews much of the business management literature of recent decades and provides detailed analysis of factors affecting appraisal of business records. Ultimately, however, he concludes that the parameters he describes are “at best a kind of mental road map” and that the efficacy of appraisal decisions rests “in the archivist’s ability to use them in practice” (p. 120). The archivist is not a scientist searching for abstract truths but “a technologist who must occasionally work in the absence of or in advance of theory and who must use a variety of tools to produce a useful product in response to conflicting and often irreconcilable demands” (p. 121). Baer’s model, not quite as complex as the Minnesota Method, provides a useful starting point for any archivist facing the daunting task of analyzing and appraising voluminous records of a modern business firm. Following a detailed model may not make the work easier, but it should improve the quality and reliability of appraisal decisions.

Compared to the lengthy essays just considered, Bruce Bruemmer’s essay on functional analysis in the appraisal of business records will seem either a welcome relief for harried archivists or a simplistic solution to a complex problem. Bruemmer, archivist of the Charles Babbage Institute at the University of Minnesota, focuses on the documentation needs of individual companies. Borrowing from earlier work by Helen Samuels, Joan Krizack, and others, he applies the concept of functional analysis to business records. This appraisal method concentrates on documenting the most important functions of an organization, rather than its structural hierarchy. Instead of selecting records based on their relationship to the offices that generated them, functional analysis examines the underlying functions performed by the organization as a basis for records appraisal. Particularly as electronic records replace traditional means of communication, archivists must define the documentary needs of the organization at the middle or even the beginning of the records cycle. As Bruemmer argues, “Functional analysis is one of the few tools at the command of archivists to help guide archival practice in the electronic environment because it dictates documentary requirements before records are analyzed” (p. 155). In addition to the proximate goal of ensuring adequate documentation of business, he posits the further goal of strengthening the role of business archivists: “If we rise to the challenge, we may discover that the archive itself has become an essential business function” (p. 158). Although less sweeping in its purview and less complex in its design, functional analysis provides another useful model for documenting modern American business.

As historians well know, the history of business is not told entirely through the records generated by business firms. The forms of “external documentation” that supplement corporate records, according to Timothy L. Ericson, include a broad array of sources created by an individual or agency outside the company. Ericson, archivist at the University of Wisconsin-Milwaukee, examines the types of records that document businesses, including printed materials, newspapers, government records, personal papers of business founders or former employees, photographic and cartographic records, oral history, electronic data bases, and the World Wide Web. In some cases, these external sources may be the only records available for studying certain companies, either because official company records have been lost or destroyed or because of access restrictions placed on such records. In some situations, Ericson contends, such limited documentation might be all that is needed for companies that have limited national or even local impact. In other cases, external documentation may provide “a more appropriate level of information” (p. 319) than detailed records of every action taken within a corporation. This approach will be especially useful for small or defunct businesses, for businesses subject to extensive government regulation, to fill documentary gaps, or when only general or summary information is required.

Several essays in The Records of American Business examine specific types of records that are important for business archives. Richard J. Cox examines the impact of electronic records on corporate archives, emphasizing the internal value of business records as evidence and the role of archivists in protecting intellectual property, transaction security, integrity of data, and privacy. James E. Fogerty makes a strong case for the value of oral history in filling gaps in the documentation of business and in explicating corporate culture. Oral history “allows the creation of documents that cut through the formal record of organization to the internal and dynamic record of everyday operation” (p. 264). Ernest J. Dick, another former corporate archivist now working as a consultant, likewise argues for the importance of sound and visual records in providing a more complete documentation of corporate memory and a clearer understanding of corporate culture.

Most of the essays in this volume address the concerns and needs of archivists, scholars, and corporate officials. An important counterpoint is provided by John A. Fleckner, chief archivist at the National Museum of American History, Smithsonian Institution. Starting from the paradox of the public’s dislike of history as an academic subject despite its fascination with history outside the classroom, Fleckner discusses the popular presentation of business history. Drawing examples from history museums, historical sites, corporate depictions of history, and a variety of popular history publications, Fleckner distinguishes three distinct purposes served by popular history of business–to educate an audience; to contribute to business objectives; and to entertain. He urges archivists to look beyond their traditional audiences for business records–scholars and business executives–and to recognize the broader potential for some business records to become “the grist for journalists, public affairs staff, and other popular writers who unlock the history of business to much wider audiences” (p. 345). Given the public’s fascination with old products and advertisements, for example, and the boundless allure of nostalgia, this may well be a valuable approach for archivists to take. Many business advertisers have already discovered this.

The final essay in the volume, “Business Records: The Prospect from the Global Village,” by Michael S. Moss and Lesley M. Richmond, seeks to broaden the perspective beyond the United States. The title is a bit misleading, since the essay deals mainly with the United Kingdom and only tangentially with other European countries, and, after 368 pages of detailed discussion of American business records, this brief essay seems more an afterthought than an integral part of the discussion. Still, the essay does afford a few comparative insights. Reporting that throughout Europe use of business records for research “remains disappointingly low” (p. 381), the authors conclude, “Although a few family historians occasionally consult certain categories of business records … the majority of users seem to be enthusiasts seeking information about a product or service that has captured their imagination” (p. 382). The latter type of use is barely hinted at in other essays in the volume, though for many types of business records it holds true equally in the United States. For example, the majority of researchers in certain collections of railroad records consist of model railroaders and other hobbyists. Moss and Richmond also point out that public sector archives can earn revenue by providing research services for distant researchers, and by selling copies of items in their collections. Particularly significant are their comments about the relationship between historians and archivists. “Throughout Europe there is a complaint, echoing North America, that the archival community has lost contact with historians” (p. 386), they conclude, citing criticism of appraisal methods and demands that more records be preserved for research use. “The historians, for their part, need to understand the issues that confront the archivist and to be aware that they no longer (if they ever did) represent more than a mere fraction of the user community; the records they need for their research are very vulnerable to deaccessioning programmes,” they write (p. 387). Finally, due to the growth of a global economy, they argue that archivists from all countries need to exchange ideas about documentation, appraisal, and use of business records. This call for international collaboration and joint projects is, perhaps after all, a fitting conclusion to a volume of essays about American business records.

The Records of American Business will not be the last word on the subject. But it is a significant step forward in providing broad coverage of a wide range of issues, concerns, and perspectives regarding the selection, appraisal, and use of modern business records. It is essential reading for anyone interested in the process and outcome of archival efforts to ensure adequate documentation of American business in the coming decades.


Subject(s):Business History
Geographic Area(s):General, International, or Comparative
Time Period(s):General or Comparative

Four Books on Philanthropy

Author(s):Hopkins, Bruce R.
Blazek, Jody
Tesdahl, D. Benson
Salamon, Lester M.
Sealander, Judith
Reviewer(s):Goldin, Milton


Published by and EH.Net (May 1998)

Bruce R. Hopkins and Jody Blazek. Private Foundations: Tax Law and Compliance. New York: John Wiley & Sons, 1997. xxi + 498 pp. List of exhibits, appendices, tables, bibliographical references and index. $125.00 (cloth), ISBN 0-471-16892-0.

Bruce R. Hopkins and D. Benson Tesdahl. Intermediate Sanctions: Curbing Nonprofit Abuse. New York: John Wiley & Sons, 1997. xiii + 194 pp. Appendices, glossary, bibliography, index. $49.95 (paper), ISBN 0-471-17456-4.

Lester M. Salamon, with the assistance of Stefan Toepler and Associates. The International Guide to Nonprofit Law. New York: John Wiley & Sons, 1997. xxxii + 400 pp. Appendices, bibliography, index. $125.00 (cloth), ISBN 0-471-05518-2.

Judith Sealander. Private Wealth and Public Life: Foundation Philanthropy and the Reshaping of American Public Policy from the Progressive Era to the New Deal. Baltimore: Johns Hopkins University Press, 1997. xii + 245 pp. Notes, bibliography, index. $39.95 (cloth), ISBN 0-8018-5460-1.

Reviewed for H-Business and EH.Net by Milton Goldin , National Coalition of Independent Scholars

What ties together these four timely books is scrupulous research on subjects that require, but infrequently receive, thorough investigation: attempts (in the first three books listed) to offer lucid descriptions of complex legal frameworks, and perceptions in all four books that at the turn of the 21st century Congress may be no closer to defining coherent guidelines for grant-giving entities and other nonprofit organizations than it was at the turn of the 20th century, when American charity began its journey to “scientific philanthropy.” Hopkins and Blazek offer a survey of foundation law, Hopkins and Tesdahl discuss “intermediate sanctions” (a major new legal issue for nonprofits), and Lester M. Salamon and co-authors survey nonprofit law and issues in the United States and twenty-one other countries. Judith Sealander is the only writer in this group not to emphasize that our present understandings of what foundations can and cannot do are riddled with legalisms so convoluted that they severely test the understandings of highly-qualified lawyers, accountants, nonprofit executives, and fund raising professionals, not to mention the Internal Revenue Service. Sealander tells us that many historians, past and present, have not got quite right how seven pioneering foundations–four of them Rockefeller (the Rockefeller Foundation, the Laura Spelman Memorial, the General Education Board, and the Bureau of Social Hygiene), and the Commonwealth Fund, Rosenwald Fund, and Russell Sage Foundation–functioned during their early years and why these enterprises had problems deciding what foundations could and could not do.

One measure of the need for such books is the spectacular growth in the number of nonprofits, including foundations, especially during the past half century. As late as 1940, America had only 12,500 nonprofits. By 1967, there were 309,000, and by 1993, there were some 1.3 million–a 10,300 percent increase in just over fifty years. At the beginning of the 20th century, only eight foundations were in existence; today there are estimated to be some 50,000–a 624,900 percent increase.[1] Salamon further points out (p. 2) that as of 1990, in seven major industrial nations including the United States, “nonprofit organizations employed the equivalent of 11.8 million full-time employees….This was six times larger than the number of workers employed by the largest private corporation in each of these countries.”

In 1993, American nonprofits had total annual operating budgets of some $500 billion; foundations had assets of about $195.8 billion. Two years earlier, two adjoining hospitals in New York City–New York Hospital-Cornell Medical Center and Memorial Sloan-Kettering Cancer Center–had a combined annual budget of $1 billion, which more than equaled the budget of the entire United States government just prior to World War I.[2] Hopkins and Blazek, attorneys and legal authorities on tax- exempt organizations, remind us (p. 18) in Private Foundations that although Congress first concerned itself with foundations in 1912, no body of law governing such organizations existed prior to the Tax Reform Act of 1969. This legislation came into existence thanks mainly to Representative C. Wright Patman of Texas, a populist who deplored the existence of foundations to the same extent that he deplored the existence of Wall Street financial institutions, and for the same reason–wealthy Easterners served on the boards of both the banks and the foundations.

In theory, after the 1969 enactment, statutes and regulations would frame foundation law. But in practice, procedural details, which stemmed from IRS private determinations–meaning letter rulings, technical advice, and general counsel memoranda–that are technically not “law,” as Hopkins and Blazek also rightly remind us beginning on p. 8, actually defined foundation law. Such documents emerged from the IRS with bewildering frequency. The IRS initiated (and in some instances reversed) policy so rapidly that no one knew exactly what was happening at any specified moment.

Hopkins and Blazek add (p. 200) that the Tax Reform Act of 1981 in which Congress revised private foundation mandatory distribution rules, partly because of dramatically high interest rates paid on bonds and other debt instruments during the late 1970s, further complicated matters. But surprisingly, the authors do not touch on a new height of cynicism about foundation regulation inevitable with a discovery by donors and their financial advisors, in the early 1990s, that the IRS sometimes does not strictly enforce regulations governing tax-exempt organizations. (The Clinton administration has thus far cut by ten percent the budget of the IRS Exempt Organizations Division, which today has only 400 agents to oversee nonprofits, or one agent for every 3,250 such organizations. On the state level, attorneys general in 24 states have no designated person assigned to monitor nonprofits, and only 11 states have two or more people dealing with such matters full time, according to the National Association of Attorneys General.)[3]

Wisely, Hopkins and Blazek decided to limit Foundations to what could be of the most advantage to a market consisting mainly of attorneys, nonprofit board members, and professionals in the nonprofit field. Their work serves as a valuable handbook summarizing foundation law, and it can assist foundation officers and managers in understanding and completing such documents as IRS Form 990-PF, which must be filed annually to prove that a private foundation maintains an ongoing policy satisfying rules.

Completing Form 990-PF can be a daunting task. The authors tell us that “instructions are 26 pages long and exemplify the complexity of reporting and compliance requirements for a private foundation” (p. 331). Successful completion of the form does not guarantee immunity from IRS searches: “The manner in which the IRS chooses organizations to examine changes from year to year is always a matter of great speculation. In some years, the IRS looks at business leagues, some years at social clubs, and in other years it may examine hospitals, related clinics, and universities” (p. 71).

Readers will find a chart (pp. 331-356) outlining those Form 990-PF parts to prepare first and those parts that are dependent upon some other part for completion. An invaluable checklist of private foundation compliance issues (pp. 356-390) should be read by every person with more than a casual interest in the subject.

Hopkins and Blazek make admirable efforts to define terms as well as to deal with frameworks, optimistically writing (p. viii), “the myth has to be dispelled that private foundations are difficult if not impossible to manage.” Which, under the circumstances, might seem a hopeless task to some readers. Consider a problem that emerges as early as page 13, with the term “charitable.” Federal income tax regulations, which use the term in its English common law sense, note that it can also be used in a “generally accepted legal sense” (p. 13), which regulations fail to precisely define. This leads Hopkins and Blazek to note a court decision in which a judge found that “evolutions” in the definition of “charitable” are “wrought by changes in moral and ethical precepts generally held, or by changes in relative values assigned to different and sometimes competing and even conflicting interests of society” (p. 13). This may strike some readers as proof positive that the courts lean to a striking lack of clarity.

In Intermediate Sanctions, Hopkins, this time with D. Benson Tesdahl, an attorney and Adjunct Professor of Law at Georgetown University Law Center, deals with a new challenge for the nonprofit field, to grasp the essentials of “intermediate sanctions.” These new laws stem, in part, from IRS concerns about “self-dealing,” which it defines, in the “private foundation context,” as “inappropriate arrangements between a private foundation and those closely associated with it” (p. 180).

As an example (not cited in the book) of what had concerned the IRS, two Shubert Foundation attorneys and officers, Bernard B. Jacobs and Gerald Schoenfeld, benefited greatly from a highly-unusual and little-known tax ruling in 1979 that gave that foundation an exemption from federal tax laws that declare that private charities generally cannot own a controlling stake in a profit-making business.[4] It had developed that Jacobs and Schoenfeld received hundreds of thousands of dollars as paid advisers to the benefit funds of their own workers in the Shubert Theater chain,[5] who, like the attorneys, might possibly have been considered foundation employees by the IRS, given that the foundation controlled the theaters. “The only mystery–and that was scant,” write Hopkins and Tesdahl, “surrounding intermediate sanctions waswhenthey would be enacted” (p. x). Which is not quite accurate, because another mystery was whom, exactly, would the sanctions concern? No further newspaper articles suggested that they concerned Jacobs and Schoenfeld, and/or the Shubert Foundation, but the IRS had already been emphatic that penalties–structured as excise taxes–could be imposed on disqualified persons who improperly benefited from transactions and on an organization’s managers who participated in such transactions knowing that they were improper.

Would new definitions of “disqualified persons” be offered? In answer to this question, Hopkins and Tesdahl note as possible examples of wrong doers the executive officer of a tax-exempt charitable hospital, the director of a large museum, the president of a small private college, and the executive director of an advocacy group, all of whom could be theoretically caught in a legal net because in each instance an “excess benefit transaction” might have taken place in connection with their earnings or benefits (pp. 1-5).

And what is an “excess benefit transaction”? The authors define it as “Any transaction in which an economic benefit is provided by an applicable tax-exempt organization directly or indirectly to or for the use of the disqualified person, if the value of the economic benefit provided by the exempt organization exceeds the value of the consideration (including the performance of services) received for providing the benefit”(p. 8). Hopkins and Tesdahl predict, “the potential impact on operations of nonprofit organizations is enormous…(but) much of the actual outcome will depend on the vigor of the IRS and, ultimately, of the courts” (p. 8). Additionally, “Intermediate sanctions have the promise of transforming the private inurement and private benefit doctrines, and are likely to impact the composition and functioning of many boards of directors of nonprofit organizations,” given that they also “apply with respect to public charities and tax-exempt social welfare organizations.” (p. 8).

This is quite a large “promise,” and again, the Treasury Department would have performed a mighty service had it provided more guidance, in advance. The authors rightly argue (p. x) that what the IRS should have done was have an intermediate sanctions explanatory package available within a week of the enactment–say, by early August 1996. Had this happened, exempt organizations might not have floundered for months with little knowledge about compliance, definitions of key elements, and specifics on sanctions to be applied.

What the Treasury Department did not do, Hopkins and Tesdahl have concisely done in the pages of Intermediate Sanctions, which, likePrivate Foundations…, can be used as a handbook by those individuals who need reliable information quickly. On a larger scale, Lester Salamon’s purpose in The International Guide is to address legal particulars of a worldwide proliferation of American-style foundations and nonprofits. Salamon is a professor in the Schools of Arts and Sciences and Hygiene and Public Health at Johns Hopkins University, and director of the Johns Hopkins Institute for Policy Studies. Highly-informative books and articles on nonprofit issues have flowed from his pen over the years, and recently he has been particularly concerned with the issue of nonprofit for-profit activities.

Salamon’s The International Guide grew out of a series of “field guides” he tells us (p. xiii) were commissioned on the legal treatment of nonprofit organizations in thirteen countries. The process yielded far more material than could effectively be used in the monographs, and the idea emerged that an international guide should be produced. Salamon warns, however, that we must “understand the great difficulties attending the kind of task that was attempted here, particularly given the complex legal questions that were at issue. In such a context, no account, and certainly no account operating within the space constraints of this one, can aspire to definitiveness” (p. xiii).

Salamon’s caveat notwithstanding, his book, like Hopkins and Blazek’s, offers an excellent introduction not only to nonprofit law (foundations are understandably not covered as thoroughly as in Hopkins and Blazek) but to systemic issues in the nonprofit field. American readers should particularly note his concern that such issues go “largely invisible in both scholarly analysis and public debate, with the result that we know precious little about them in most places” (p. 7).

This state of affairs, he counsels, could one day present a serious problem: “For the nonprofit sector to remain able to secure contributions, it is imperative that public trust in the sector be protected” (p. 36).

Salamon is less confident than Hopkins and Blazek, however, that the nonprofit system can continue to exist as we know it. “The United States is a common law country that nevertheless has a written constitution. In addition, the country has a federal governmental structure that features a national government and 50 state governments with their own elected officials and their own authority to exercise sovereign powers. These circumstances make the legal position of the nonprofit sector far more amorphous and disjointed in the United States than the significant size and scope of this sector might suggest” (p. 342).

Finally, credit must be given Salamon for doing more than simply citing problems. His Appendix A, “Toward a Vital Voluntary Sector: An International Statement of Principles,” offers an “emerging consensus so that those involved in the development of the third sector around the world can take its contents into account when framing their own policies and practices” (pp. 369-374).

After attempting to grasp nonprofit law, reading Judith Sealander’s Private Wealth is almost like dipping into a novel. Her interests are not only the pros and cons of the late nineteenth- and early twentieth-century foundations noted above, but assessments of their founders. Among the people she favors are John D. Rockefeller, Sr., John D., Jr., Julius Rosenwald, and, notably, the remarkable John Campbell of the Russell Sage Foundation, who is seldom mentioned in the literature. She believes Andrew Carnegie’s influence on philanthropy to have been overrated by scholars (p. 16), and his appearance at the Walsh Committee Hearings, in 1912, to have been something of a farce (p. 229). (Rockefeller, who, with Carnegie, was a founder of modern American philanthropy, would not have shared her views on the Steel King. Rockefeller admiringly wrote Carnegie, after the publication of Carnegie’s two seminal essays on philanthropy in the North American Review, “I would that more men of wealth were doing as you are doing with your money.” Later, Rockefeller ruefully admitted, “I (had been) still following the haphazard fashion of giving here and there as appeals presented themselves.”)

Sealander makes clear, with respect to all seven foundations, that there were great differences between what these Progressive Era donors and their staffs hoped to accomplish and what they could realistically achieve. There was an additional gap, she suggests, between what “Americans, including public policy makers” knew about John D. Rockefeller, Sr., the most generous giver of all, and how political establishments and writers portrayed him: “The overwhelming majority of the country’s population never heard him, or saw him, or read a word he wrote” (p. 56). Yet the image conjured up by media and politicians led to a situation in which “Americans decided Rockefeller was a terrible man because leading politicians and journalists told them so” (p. 56).

Nor does Sealander approve of today’s “static” lack of interest (pp. 6, 9, 31) in studies of the emergence and history of foundations. She could have added that albeit bereft of critical information, one school of thought in academies condemns such agencies because they exist thanks to the benevolence of individuals who may not truly be benevolent, only interested in tax relief. Meanwhile, another school of thought, also based in academies, lauds them because from where else can money for experimental and non-governmental programs come, if non-benevolent as well as benevolent types do not create foundations and thus save on their taxes?

The truth, of course, lies somewhere between these extreme views. But the right question never seems to get asked: After a century of experience, have foundations done enough good to merit the loss of taxable funds their existence costs the public treasury?

Which returns us to issues raised earlier in this review. We do not currently know enough about the impact of foundations and nonprofits on economies to render informed judgements. And the price of not knowing, carried too far into the future, may one day be a sudden, angry public awakening to the fact that benevolence has a price in tax relief that societies cannot afford.

Sealander ends her study, “The small group of people who created the foundations this volume has examined possessed an intellectual gift lost to many in the late twentieth century. With a fierce kind of optimism we now find peculiar, they believed people could be better, that government could be better, that society could improve” (p. 245).

I couldn’t agree more. Put in the vernacular, whatever their personal flaws, men and women of the generation that included Rockefeller, Carnegie, Rosenwald, and Katherine Bement Davis (a student of Thorstein Veblen) put their time and/or their money where their mouths were.

[1]. The statistic, 50,000, is from Hopkins and Blazek, Op. cit., pp. 1, 10; Sealander, Op. cit., p. 10, writes that there were 22,000 foundations in 1990.

[2]. Milton Goldin, “At New York Hospital, Memorial, Consolidation Becoming Imperative.” The New York Observer 5 August-12 August, 1991, p. 18.

[3]. Thomas J. Billitteri. “Rethinking Who Can Sue a Charity.” The Chronicle of Philanthropy 12 March 1998, p. 35.

[4]. Mel Gussow. “Bernard B. Jacobs, a Pillar of American Theater as Shubert Executive, Dies at 80.” New York Times 28 Aug 1996, D: 18.

[5]. Ralph Blumenthal. “Shubert Leaders Got Fees from Workers’ Funds.” New York Times 6 June 1996, C:16.


Subject(s):Government, Law and Regulation, Public Finance
Geographic Area(s):North America
Time Period(s):20th Century: WWII and post-WWII

Enterprising Southerners: Black Economic Success in North Carolina, 1865-1915

Author(s):Kenzer, Robert C.
Reviewer(s):Butler, John Sibley


Published by (April 1998)

Robert C. Kenzer. Enterprising Southerners: Black Economic Success In North Carolina, 1865-1915. Carter G. Woodson Institute Series in Black Studies. Charlottesville: University Press of Virginia, 1997. xvi + 178 pp. Tables, bibliography, and index. $30.00 (cloth), ISBN 0-8139-1733-6.

Reviewed for H-Business by John Sibley Butler , University of Texas

Enterprising Southerners: Black Economic Success in North Carolina is an excellent work which details the life of black entrepreneurs and property owners from the dawn of freedom to 1865. In all historical periods there are blacks who think and act like free people. This book is a systematic documentation of the development of enterprise, property and the education of children in North Carolina’s black society during the period.

Kenzer starts his analysis by examining the source of landownership among the freedmen. Although most blacks acquired enough money to purchase land, some were also given land by their former masters. Some slave masters specified in their wills that, after their deaths, the land should be sold to their former slaves. In some cases, whites tried to block the deeding of land to former slaves by their masters. When this was done, there were cases where blacks took the issue to court and won judgments that granted them the land.

Kenzer has an excellent discussion about the relationship between landownership, free blacks prior to emancipation, and mulattos. He notes that free blacks had already started a tradition of land ownership, and thus owned most of the land right after the dawn of freedom. Mulattoes also play an important role in the analysis. It must be remembered that any black who was not ebony-black was a mulatto. It is a term which is therefore inclusive of blacks with mixed blood, as well as blacks who were clearly of African descent but who were of a lighter skin color. Thus, mulatto does not mean, at this point in history, blacks who simply “looked white.” Many blacks who were the offspring of a white slave owner and a black woman were granted freedom by their father.

The mulattoes’ ownership of land prior to emancipation creates significant differences in the data reported by Kenzer, and allows interesting studies “within race,” albeit the data are sometimes difficult to analyze. After examining data prior to and following emancipation, he notes, “Even with the nearly insurmountable problems of trying to link 1860 and 1870 manuscripts, it appears that at least half of the 1870 black landowners may have been antebellum freedmen. Furthermore, these antebellum freedmen owned a substantial share of all of the land owned by blacks in 1870” (p. 14).

Kenzer presents a unique view of black enterprises in North Carolina because he gives a strong consideration to credit ratings. What emerges is a picture of a community that understood the relationship between wealth creation, business enterprise, and living well in American under difficult circumstances. The reader is given a glimpse of management issues faced by black enterprises of that time period. Some enterprises advertised simply as enterprises, never mentioning that fact that they were black. Kenzer also concludes that, although the firms were rated by whites, there is not an indication of bias. Some firms were written up as being outstanding, while other ratings reflected the idea that the business person was not good. It is obvious that blacks were engaged in all types of enterprises during this time period. Partnerships with white enterprises, as expected, were not prevalent during this time period.

Perhaps the greatest contribution that Kenzer’s work makes is the impact of enterprise and landownership on the education of children and political participation. W.E.B. Dubois and August Gill, in their 1911 book The College Bred Negro, documented the fact that black business owners had developed a tradition of sending their children to college. This effect was also seen in Charles Johnson’s 1937 book, The Negro College Graduate. Kenzer presents vivid examples of this historical process and reminds us that, when the thousands of immigrant whites were being processed through Ellis Island in New York, black entrepreneurs had already developed a tradition of educating their children. Thus we are introduced to Henry Taylor’s younger son Robert, who was the first black to graduate from the Massachusetts Institute of Technology and was valedictorian of his 1892 class. His analysis also reminds us of the important role that historical black colleges, especially the private ones that existed before they were taken over by the state, played in setting the stage for success in America. Although those colleges and universities are still playing that role today, most of the emphasis is on black students at previously white colleges. But Kenzer’s analysis informs us of the historical success that these colleges and universities played in launching careers. The link between business enterprise and college success also reminds of the important historical link between the two. The book gives us a hint why today black southerners who are grounded in this self-help tradition continue to enjoy educational and property success, while those in northern cities, whose parents followed the factories, have tended to depend upon the larger society for their educational success.

Enterprising Southerners should be read by all interested in American history, enterprise, family, and overall racial and ethnic relations. Prior to the 1960s, research on black Americans reflected both success and failure. Since then, most of the research has been on failure. This is a welcome work which testifies to success during a difficult time in American society. It should also be read by all Americans who are interested in thinking and acting like free people during this historical period.


Subject(s):Social and Cultural History, including Race, Ethnicity and Gender
Geographic Area(s):North America
Time Period(s):19th Century

Competition and Growth: A Contemporary History of the Continental AG

Author(s):Erker, Paul
Reviewer(s):Blackford, Mansel G.


Published by (April 1998)

Paul Erker. Competition and Growth: A Contemporary History of the Continental AG. Trans. Frederick S. Gardiner. Dusseldorf: ECON, 1996. 320 pp. Tables, notes, bibliography, illustrations, and index. $40.00 (paper), ISBN 3-430-12548-0.

Reviewed for H-Business by Mansel G. Blackford , Ohio State University

In this very densely packed volume, Paul Erker presents a history of Continental AG, one the world’s largest makers of tires and industrial rubber products. Erker gives short shrift to the company’s earlier years, passing over developments–from the founding of the firm in 1871, through its recovery from the ravages of World War II by 1968–in just fifty pages of text. Instead, Erker focuses on the responses of Continental’s managers to a series of crises their company faced from the late 1960s into the mid-1990s. Well over half of the text deals with events since 1979. Erker’s history is primarily a study in the internal dynamics of Continental. Using corporate records to good account, Erker dissects the decisions and actions of its officers. As Erker states in his introduction, “the central focus” is on “the analysis of internal company processes–which can often be personalized whether they be R&D activities, marketing strategy, financial management or streamlining measures” (p. 10).

In his first three chapters, Erker sets the stage by looking at Continental’s first one hundred years of development. Established in 1871 in Germany, the firm moved ahead through a combination of entrepreneurship, technological expertise in making rubber products (Erker’s examination of the firm’s early research efforts will be of special interest to historians of technology), and good marketing in and beyond its native land. Recovering fairly quickly from Germany’s defeat in World War I, Continental took part in a rationalization movement that swept through parts of German industry during the 1920s and 1930s. Generally skeptical of the Nazi government–a topic about which I would liked to have learned more in this volume–Continental’s managers, nonetheless, led their firm into an intensified period of research, especially on synthetic rubber, lasting into 1944 and 1945. Erker concludes, however, that Continental’s promising growth in the 1920s and early 1930s was cut short by the Nazi regime; he states that “As a result of the developments under National Socialism and in WW II, however, they were so lastingly weakened and retarded in their development that even in the 1950s and 1960s it was no longer possible for them to regain lost momentum” (p. 44).

Next, Erker takes four chapters to examine how Continental’s officers perceived and dealt with crises their firm encountered between 1968 and 1978. The challenges were many: technological ones (especially how to switch to the production of radial tires pioneered by Michelin), marketing ones (most notably how to counteract a tremendous increase in competition from American firms), and ones in labor relations. (Anyone believing that codetermination worked smoothly in Germany should read Chapter Seven of this study.) Often stumbling, Continental’s managers led their firm into a bath of red ink (deepened by a failed merger attempt with Phoenix, another German rubber maker), but made some progress by the late 1970s, beginning a reorganization of Continental along divisional lines, a strategy that would continue with fits and starts into the 1990s. In another four chapters, Erker surveys Continental’s development in the 1980s. The continuing challenge of competition–especially from Michelin, but also from Japanese firms as they entered the European market–led Continental’s management to conclude that their company had to grow or die. They purchased Uniroyal’s European operations in 1979 (see p. 192 for a fascinating look at how the acquisition was decided on with almost no consideration given to its financing) and General Tire in the United States a few years later. As part of this “internationalizing strategy,” Continental also entered into various sorts of tie-ups with additional rubber- and tire-makers, such as Toyo in Japan. As they digested these additions, Continental’s officers tried hard, but with only partial success, to develop new technologies and to put in place new, more flexible production methods. Erker’s thorough discussion of the attempted shift to flexible manufacturing techniques and worker opposition to them shows well just how difficult it can be to alter established ways of running production lines.

Erker closes his account with an analysis of continuing challenges in the 1990s, placing his focus on how Continental fended off an unwanted takeover by Pirelli. Concluding that Continental had by the mid-1990s successfully weathered a series of potentially devastating challenges to its very existence, Erker paints a reasonably optimistic picture of the firm’s future.

Competition and Growth will be of considerable interest to scholars dealing with the history of business, labor, and technology. Specialists interested in German business history or in the history of the rubber industry will find this study especially rewarding. The great strength of this volume is Erker’s astute handling of inside corporate sources to reveal a great deal about business development since 1970. He analyzes well the complexity of business decision making, though there were places where I felt almost overwhelmed by the detailed descriptions. Erker’s focus is, however, also a weakness of this book. There simply is not enough information on the period before 1970 to allow readers to understand recent developments in any kind of full historical context. It is, thus, difficult to judge the significance of recent crises in shaping Continental’s evolution. Only a limited number of copies of this book are available in English; anyone interested in purchasing one should contact the author directly at the Free University of Berlin.


Subject(s):Business History
Geographic Area(s):Europe
Time Period(s):General or Comparative

Courts and Commerce: Gender, Law and the Market Economy in Colonial New York

Author(s):Rosen, Deborah A.
Reviewer(s):Boylan, Anne M.


Published by (April, 1998)

Deborah A. Rosen. Courts and Commerce: Gender, Law, and the Market Economy in Colonial New York. Historical Perspectives on Business Enterprise Series. Columbus: Ohio State University Press, 1997. xvi + 232 pp. Figures, tables, appendix, notes, bibliography, and index. $45.00 (cloth), ISBN 0-8142-0736-7; $17.95 (paper), ISBN 0-8142-0737-5.

Reviewed for H-Business by Anne M. Boylan , University of Delaware

Seeking the Market Revolution

In this study of colonial New York City and Dutchess County, Deborah Rosen analyzes the intersections between the law and the economy. Employing legal documents to study economic behavior, she focuses particularly on the rise of debt litigation and the decline of jury use in civil trials. Because both can be seen as measures of “a rational, impersonal market economy” (p. 72), she finds that legal change facilitated economic change. “It was the legal system that provided the foundation for economic integration,” Rosen writes; “law was one of the most important factors that permitted New Yorkers to become engaged in market relationships” (pp. 7-8). Moreover, because those legal changes took place in the eighteenth century, historians have seriously misstated the timing of the “transition to capitalism” in the post-Revolutionary North, and misunderstood the relative impact of that transition on men and women. When capitalism came to New York, Rosen states, “women were largely excluded” (p. 132), because they had little legal standing to perform as independent economic actors. These are large claims, and indeed throughout Courts and Commerce sweeping judgments coexist uneasily with detailed research. The result is an uneven book, one that makes its most useful contributions in carefully formed factual building blocks, not in the interpretive mortar that attempts to hold them together. Rosen is unlikely to convince scholars of economic transition and of gender relations that they have built their interpretive structures all wrong and will need to remake them according to her design. But her book includes enough interesting research to make it worth consulting.

The best sections of Courts and Commerce reflect Rosen’s familiarity with legal history and her immersion in primary documents. Her intensive study of probate inventories confirms what historians such as Carole Shammas, T. H. Breen, Gloria Main, and others have noted, that as eighteenth-century Americans became increasingly immersed in a “world of goods,” wealth stratification sharpened.[1] Rosen adds an extra dimension to that finding by comparing city and county, in the process demonstrating a narrowing gap between urban and rural areas in the consumption of luxury goods, and comparable degrees of wealth stratification in both. Rural New Yorkers experienced “a significant polarization of wealth” during the eighteenth century; it was “not just an urban phenomenon” (p. 33). Similarly, by studying merchants’ account ledgers and mortgage-lending practices, Rosen shows that eighteenth-century New Yorkers were increasingly willing to go into debt in order to finance their acquisitive and accumulative economic behavior. And by carefully scrutinizing extant minutebooks from the New York Mayor’s Court and the Dutchess County Court of Common Pleas, she chronicles a rapid upward rise in debt litigation in both town and country as well as a “drastic decrease in the percentage of (civil) cases resolved by jury trial” (p. 62). Finally, by tracing women’s declining involvement in formal legal actions, and their growing invisibility in the courtroom, Rosen provides data for New York that confirm Cornelia Hughes Dayton’s findings for Connecticut.[2]

Rosen’s effort to hitch these findings to that all-purpose interpretive wagon labeled “The Market Revolution” or “the transition to capitalism” is problematic on several planes. One is definitional. Although half-way through the book (p. 74) Rosen acknowledges that other historians define both “the market” and “capitalism” differently, much of her criticism of the existing historiography ignores that key point. Whereas most scholars see the Market Revolution as a complex set of new economic and social relationships revolving around capital accumulation, credit formation, the sale and purchase of labor-power, and new forms of inheritable wealth, Rosen sees market economies simply as those characterized by cash transactions, “the development of commodities markets and a capital market” (p. 76), and the charging of interest. By employing a definition that would fit seventeenth-century Amsterdam as well as New Amsterdam, Rosen does little to sharpen or clarify the historians’ debates.

Moreover, Rosen enters parts of those debates by fencing with straw figures. Especially on the question of how economic changes shaped gender relations, unnamed “historians” and “scholars” (pp. 11, 131, 132) take such untenable positions that Rosen ends up thrusting and parrying with ghosts. One such chimera is the assertion that some “historians, seeming eager to blame gender inequalities on capitalism, industrialization, and domesticity, have simply presumed that in the colonial world…men and women must have lived together as equals” (p. 11). Another is the suggestion that “scholars attribute women’s past and present economic and legal behavior to their natural qualities as women” (p. 131). A check of the footnotes reveals Rosen’s real adversaries: the psychologist Carol Gilligan and legal scholars such as Carrie Menkel-Meadow. Although both would reject the argument that their work naturalizes feminine or masculine qualities, it has been read (or mis-read) that way. But surely recent historians of women, who have worked so diligently to demonstrate that gender is a social and cultural category, deserve more nuanced renditions of their arguments.

In her discussion of economic history, Rosen is similarly prone to bleach out the vivid complexities of interpretive patterns in favor of monochromatic or dichotomous versions. Thus, after surveying a quarter-century of historical work on the colonial economy, she makes the rather astonishing claim that an “idealized image of a communal colonial society remains in, even dominates, current historiography” (p. 3). In Rosen’s universe, “economic relationships” are either “arm’s length business arrangements” or else “familial or communal in nature” (p. 8). There is no room for economic behaviors that are both businesslike and familial. The prevalence of such false oppositions in Courts and Commerce is likely to make readers skeptical of the book’s broader interpretations, especially the argument that legal changes predated and facilitated economic transformations. Without some discussion of Dutch legal precedent or the economic underpinnings of English common law, that position seems asserted more than demonstrated.

If the larger claims of Courts and Commerce remain unconvincing, the book nevertheless provides useful legal and economic data on consumption patterns and court practices in eighteenth-century New York. Students of business will find interesting and well-presented information on subjects such as mortgage-lending, debt litigation, and wealth distribution in both the city and Dutchess County. The appendix summarizes Rosen’s findings in these areas clearly and directly. Likewise, scholars of gender issues will be interested in Rosen’s conclusion that common law rules weighed heavily upon married women in colonial New York, and that, contrary to what Marylynn Salmon discovered, wives’ resort to equity courts was quite uncommon.[3] It is in specific findings like these, rather than in matters of general interpretation, that Courts and Commerce makes its contributions to historical understanding.


[1]. Carole Shammas, The Pre-Industrial Consumer in England and America (New York: Cambridge University Press, 1990); T. H. Breen, “‘Baubles of Britain’: The American and Consumer Revolutions of the Eighteenth Century,” Past and Present 119 (1988): 73-104; Gloria L. Main, “The Standard of Living in Southern New England, 1640-1773,” William and Mary Quarterly 45 (1988): 124-134; John Brewer and Roy Porter, eds., Consumption and the World of Goods (New York: Routledge, 1993).

[2]. Cornelia Hughes Dayton, Women Before the Bar: Gender, Law and Society in Connecticut, 1639-1789 (Chapel Hill: University of North Carolina Press, 1995).

[3]. Marylynn Salmon, Women and the Law of Property in Early America (Chapel Hill: University of North Carolina Press, 1986): 11, 28-30.


Subject(s):Markets and Institutions
Geographic Area(s):North America
Time Period(s):18th Century

The Wealth and Poverty of Nations: Why Are Some So Rich and Others So Poor

Author(s):Landes, David S.
Reviewer(s):De Long, J. Bradford


Published by EH.NET (April 1998)

David S. Landes, The Wealth and Poverty of Nations: Why Are Some So Rich and Others So Poor. New York: W.W. Norton, 1998. 544 pp. $30.00 (cloth) ISBN: 0393040178.

Reviewed for EH.NET by J. Bradford De Long, Department of Economics, University of California-Berkeley.

David Landes has studied the history of economic development for more than half a century. His look at economic imperialism and informal empire in nineteenth-century Egypt (Bankers and Pashas) tells the story of how small were the benefits (either for Egyptian economic development or for the long-run power and happiness of the ruling dynasty) bought at extremely high cost by borrowing from European bankers. His unsurpassed survey of technological change and its consequences in Europe since 1750 (The Unbound Prometheus) remains the most important must-read book for serious students of the industrial revolution. His study of clock-making as an instance of technological development (Revolution in Time) provides a detailed look at a small piece of the current of technological development. His works are critical points-of-reference for those who seek to understand the Industrial Revolution that has made our modern world.

Now David Landes turns to the grandest question of all: the causes of the (so far) divergent destinies and relative prosperity levels of different national economies. The title echoes Adam Smith, but Landes is interested in both the wealth and poverty of nations: Adam Smith lays out what went wrong as the background for his picture of how things can go right, while Landes is as interested in the roots of relative–and absolute–economic failure as of success.

He pulls no punches–of Columbus’s followers treatment of the inhabitants of the Caribbean, Landes writes that “nothing like this would be seen again until the Nazi Jew hunts and killer drives of World War II.” Landes makes no compromises with any current fashion. Readers will remember how columnist after columnist decried high-school history standards (which, truth be told, were not very good) that required students to learn about a fourteenth-century African prince, Mansa Musa, but not about Robert E. Lee; readers of Landes will find three pages on Mansa Musa, and none on Master Robert.

We are all multiculturalists now; or, rather, serious historians have long been multiculturalists.

Nevertheless, Landes’s economic history is a profoundly Eurocentric history. It is Europe-centered without apologies–rather with scorn for those who blind themselves to the fact that the history of the past 500 years is Europe-centered.

Now Landes does not think that all history should be Eurocentric. For example, he argues that a history of the world from 500 to 1500 should be primarily Islamocentric: the rise and spread of Islam was an “explosion of passion and commitment… the most important feature of Eurasian history in what we may call the middle centuries.”

But a history oriented toward understanding the wealth and poverty of nations today must be Eurocentric. Goings-on in Europe and goings-on as people in other parts of the world tried to figure out how to deal with suddenly-expansionist Europeans make up the heart of the story of how some–largely western Europe and northwest Europe’s settler ex-colonies–have grown very, very rich.

Moreover, relative poverty in the world today is the result of failure on the part of political, religious, and mercantile elites elsewhere to pass the test (rigged very heavily against them) of maintaining or regaining independence from and assimilating the technologies demonstrated by the people from Europe–merchants, priests, and thugs with guns in the old days, and multinationals, international agencies, and people armed with cruise missiles in these new days–who have regularly appeared offshore in boats, often with non-friendly intent. To try to tell the story of attempted assimilation and attempted rejection without placing Europe at the pivot is to tell it as it really did *not* happen.

Thus Landes wages intellectual thermonuclear war on all who deny his central premise: that the history of the wealth and poverty of nations over the past millennium is the history of the creation in Europe and diffusion of our technologies of industrial production and sociological organization, and of the attempts of people elsewhere in the world to play hands largely dealt to them by the technological and geographical expansions originating in Europe.

He wins his intellectual battles–and not just because as author he can set up straw figures as his opponents. He wins because in the large (and usually in the small) he has stronger arguments than his intellectual adversaries, who believe that Chinese technology was equal to British until 1800, that had the British not appeared the royal workshops of Mughal India would have turned into the nucleus of an industrialized textile industry, that equatorial climates are as well-suited as mid-latitude climates to the kind of agriculture that can support an Industrial Revolution, that Britain’s industrial lead over France was a mere matter of chance and contingency, or any of a host of other things with which Landes does not agree.

Landes’s analysis stresses a host of factors–some geographical but most cultural, having to do with the fine workings of production, power, and prestige in the pre-industrial past–that gave Eurasian civilizations an edge in the speed of technological advance over non-Eurasian ones, that gave European civilizations an edge over Chinese, Arabic, Indian, or Indonesian, that made it very likely that within Europe the breakthrough to industrialization would take place first in Britain.

And by and large it is these same factors that have made it so damn difficult since the Industrial Revolution for people elsewhere to acquire the modern machine technologies and modes of social and economic organization found in the world economy’s industrial core.

Landes’s account of why Eurasian civilizations like Europe, Islam, and China had an edge in technological development over non-Eurasian (and southern Eurasian) civilizations rests heavily on climate: that it is impossible for human beings to live in any numbers in “temperate” climates before the invention of fire, housing, tanning, and sewing (and in the case of northern Europe iron tools to cut down trees), but that once the technological capability to live where it snows has been gained, the “temperate” climates allowed a higher material standard of living.

I am not sure about this part of his argument. It always seemed to me that what a pre-industrial society’s standard of living was depended much more on at what level of material want culture had set its Malthusian thermostat at which the population no longer grew. I have always been impressed by accounts of high population densities in at least some “tropical” civilizations: if they were so poor because the climate made hard work so difficult, why the (relatively) dense populations?

It seems to me that the argument that industrial civilization was inherently unlikely to arise in the tropics hinges on an–implicit–argument that some features of tropical climates kept the Malthusian thermostat set at a low standard of living, and that this low median standard of living retarded development. But it is not clear to me how this is supposed to have worked.

By contrast, I find Landes’s account of why Europe–rather than India, Islam, or China–to be very well laid out, and very convincing. But I find it incomplete. I agree that it looks as if Chinese civilization had a clear half-millennium as the world’s leader in technological innovation from 500 to 1000. Thereafter innovation in China appears to flag. Little seems to be done in developing further the high technologies like textiles, communication, precision metalworking (clockmaking) that provided the technological base on which the Industrial Revolution rested.

It is far from clear to me why this was so. Appeals to an inward turn supported by confident cultural arrogance under the Ming and Ch’ing that led to stagnation leave me puzzled. Between 1400 and 1800 we think that the population of China grew from 80 million to 300 million. That doesn’t suggest an economy of malnourished peasants at the edge of biological subsistence. That doesn’t suggest a civilization in which nothing new can be attempted. It suggests a civilization in which colonization of internal frontiers and improvements in agricultural technology are avidly pursued, and in which living standards are a considerable margin above socio-cultural subsistence to support the strong growth in populations.

Yet somehow China’s technological lead–impressive in printing in the thirteenth century, impressive in shipbuilding in the fifteenth century, impressive in porcelain-making in the seventeenth century–turned into a significant technological deficit in those same centuries that China’s pre-industrial population quadrupled.

Landes’s handling of the story of England’s apprenticeship and England’s mastership–of why the Industrial Revolution took place in the northwest-most corner of Europe–is perhaps the best part of the book. He managed to weave all the varied strands from the Protestant Ethic to Magna Carta to the European love of mechanical mechanism for its own sake together in a way that many attempt, but few accomplish. Had I been Landes I would have placed more stress on politics: the peculiar tax system of Imperial Spain, the deleterious effect of rule by Habsburgs and Habsburg puppets on northern Italy since 1500 (and the deleterious effect of rule by Normans, Hohenstaufens, Valois, Aragonese, and Habsburgs on southern Italy since 1000), the flight of the mercantile population of Antwerp north into the swamp called Amsterdam once they were subjected to the tender mercies of the Duke of Alva, more on expulsions of Moriscos, Jews, and French Protestants (certainly the Revocation of the Edict of Nantes was an extraordinary shock to my seventeenth-century DeLong ancestors), the extraordinary tax burden levied on the Dutch mercantile economy by the cumulated debt of having had to spend from 1568 to 1714 fighting to achieve and preserve independence, and so forth.

I also would spend more time on Britain itself. I, at least, find myself wondering whether Britain’s Industrial Revolution was a near-run thing–whether (as Adam Smith feared) the enormous burden of the Hanoverian fiscal-military state might not have nearly crushed the British economy like an egg. Part of the answer is given by John Brewer’s Sinews of Power, a work of genius that lays out the incredible (for the time) efficiency of Britain’s eighteenth-century fiscal-military state. Most of the answer is the Industrial Revolution. And some of the answer is (as Jeffrey Williamson has argued) that the burden of the first British Empire did indeed significantly slow–but not stop–industrialization.

I don’t know what I think of all the issues in the interaction of the first British Empire, the British state, and British industrialization. Thus I find myself somewhat frustrated when Landes quotes Stanley Engerman and Barbara Solow that “It would be hard to claim that [Britain’s Caribbean Empire was] either necessary or sufficient for an Industrial Revolution, and equally hard to deny that [it] affected its magnitude and timing,” and then says “That’s about it.” I want to know Landes’s judgment about how much. Everything affects everything else, and when economic historians have an advantage over others it is because they know how to count things–and thus how to use arithmetic to make judgments of relative importance.

But the complaint that a book that tries to do world history in 600 pages leaves stuff out is the complaint of a true grinch.

So where does Landes’s narrative take us?

If there is a single key to success–relative wealth–in Landes’s narrative, it is openness. First, openness is a willingness to borrow whatever is useful from abroad whatever the price in terms of injured elite pride or harm to influential interests. One thinks of Francis Bacon writing around 1600 of how three inventions–the compass, gunpowder, and the printing press–had totally transformed everything, and that all three of these came to Europe from China. Second, openness is a willingness to trust your own eyes and the results of your own experiments, rather than relying primarily on old books or the pronouncements of powerful and established authorities.

European cultures had enough, but perhaps only barely enough. Suppose Philip II Habsburg “the Prudent King” of Spain and “Bloody” Mary I Tudor of England had together produced an heir to rule Spain, Italy, the Low Countries, and England: would Isaac Newton then have been burned at the stake like Giordano Bruno, and would the natural philosophers and mechanical innovators of seventeenth and eighteenth century England have found themselves under the scrutiny of the Inquisition? Neither Giordano Bruno, Jan Hus, nor Galileo Galilei found European culture in any sense “open.”

If there is a second key, it lies in politics: a government strong enough to keep its servants from confiscating whatever they please, limited enough for individuals to be confident that the state is unlikely to suddenly put all they have at hazard, and willing once in a while to sacrifice official splendor and martial glory in order to give merchants and manufacturers an easier time making money.

In short, economic success requires a government that is, as people used to say, an executive committee for managing the affairs of the bourgeoisie–a government that is responsive to and concerned for the well-being of a business class, a class who have a strong and conscious interest in rapid economic growth. A government not beholden to those who have an interest in economic growth is likely to soon turn into nothing more than a redistribution-oriented protection racket, usually with a very short time horizon.

Landes writes his book as his contribution to the project of building utopia–of building a much richer and more equal world, without the extraordinary divergences between standards of living in Belgium and Bangladesh, Mozambique and Mexico, Jordan and Japan that we have today. Yet at its conclusion Landes becomes uncharacteristically diffident and unusually modest, claiming that: “the one lesson that emerges is the need to keep trying. No miracles. No perfection. No millennium. No apocalypse. We must cultivate a skeptical faith, avoid dogma, listen and watch well…”

Such a change of tone sells the book short, for there are many additional lessons that emerge from Landes’s story of the wealth and poverty of nations. Here are five: (1) Try to make sure that your government is a government that enables innovation and production, rather than a government that maintains power by massive redistributions of wealth from its friends to its enemies. (2) Hang your priests from the nearest lamppost if they try to get in the way of assimilating industrial technologies or forms of social and political organization. (3) Recognize that the task of a less-productive economy is to imitate rather than innovate, for there will be ample time for innovation after catching-up to the production standards of the industrial core. (4) Recognize that things change and that we need to change with them, so that the mere fact that a set of practices has been successful or comfortable in the past is not an argument for its maintenance into the future. (5) There is no reason to think that what is in the interest of today’s elite–whether a political, religious, or economic elite–is in the public interest, or even in the interest of the elite’s grandchildren.

It is indeed very hard to think about problems of economic development and convergence without knowing the story that Landes tells of how we got where we are today. His book is short enough to be readable, long enough to be comprehensive, analytical enough to teach lessons, opinionated enough to stimulate thought–and to make everyone angry at least once.

I know of no better place to start thinking about the wealth and poverty of nations.

(This review is a longer draft of a review subsequently published (at 1/3 the length) by the Washington Post..)

J. Bradford De Long Department of Economics University of California- Berkeley

De Long is co-editor, Journal of Economic Perspectives; Research Associate with the National Bureau of Economic Research; visiting scholar, Federal Reserve Bank of San Francisco; and former (1993-1995) deputy assistant secretary (for economic policy), U.S. Treasury.


Subject(s):Economic Development, Growth, and Aggregate Productivity
Geographic Area(s):General, International, or Comparative
Time Period(s):General or Comparative

Peasants, Merchants, and Markets: Inland Trade in Medieval England, 1150-1350

Author(s):Masschaele, James
Reviewer(s):Clark, Gregory


Published by EH.NET (April 1998)

James Masschaele, Peasants, Merchants, and Markets: Inland Trade in Medieval England, 1150-1350. New York: St Martin’s Press, 1997. xii + 275 pp. $45.00 (cloth), ISBN: 0-312-16035-6.

Reviewed for EH.Net by Gregory Clark, Department of Economics, University of California, Davis.

Medieval Commerce: Too Much of a Good Thing

You have got to feel sorry for our colleagues in medieval economic history. This bright and energetic group – Richard Britnell, Bruce Campbell, Christopher Dyer, Derek Keene, Maryanne Kowaleski, John Langdon, Mavis Mate, Larry Poos, Ambrose Raftis, to name just a few – are model scholars. To practice their craft they master Latin and paleography, they learn the subtleties of the documents, they spend the time in the archives. And the archives themselves are glorious: a mine of economic information so much richer than even what we find for eighteenth century England. But what reward do they get for all this effort and all this erudition? The more we learn about medieval England, the more careful and reflective the scholarship gets, the more prosaic does medieval economic life seem. The story of the medieval economy in some ways seems to be that there is no story.

Back in the bad old days, when the scholarship was less careful, the medieval economy was mysterious and exciting. Marxists, neo-Malthusians, Chayanovians, and other exotics debated vigorously their pet theories of a pre-capitalist economic world in a wild speculative romp. But little by little, as the archives have been systematically explored, and the hypotheses subject to more rigorous examination, medieval economic historians have been retreating from their exotic Eden back to a mundane world alarmingly like our own.

This book, by James Masschaele, a historian at Rutgers University, is a nice piece of scholarship which constitutes a few more steps in this long retreat from paradise. His book is really a collection of essays exploring various aspects of the English medieval market before the Black Death. In successive chapters, through skilled and convincing use of tax records and other sources Masschaele shows that the medieval economy was thoroughly permeated by markets and market activities.

Thus the occupants of medieval towns engaged in a wide variety of specialized commodity production, of which the main were victualling, leather making, textiles, clothing, vending, metal working, and building. Those in towns were all engaged in the market. Some peasants were able to produce a substantial surplus of grain and animal products which must normally have been sold on the market. Many peasants were thus also in the market. Much, and perhaps even most, of the great cash crop of medieval England, wool, was produced on peasant holdings and not on the lay and clerical estates.

Those with the right to hold markets defended that right vigorously and tried to limit competition. But the English courts generally interpreted this right as excluding only other markets held on the same day within 6.7 miles. Thus in the East Midland counties of Northampton and Bedford we see even before 1250 many markets within 6.7 miles of their neighbors. Indeed it seems from the map given in the book that the average location in these counties would about 5 miles from a market by 1250. By 1690 I know from other sources that the average distance to market in these counties had shrunk to 3.3 miles. But this seems a very modest gain in the prevalence of markets over these years. If the monopoly right to hold a market exercised much restriction on the medieval economy, then markets should have generated significant incomes for their owners through market tolls. In fact toll rates were generally seldom more than 1% of the value of goods traded, and there were many who were by one custom or another exempted from toll. Thus goods bought for household consumption typically did not pay toll. Similarly small goods such as apples, or butter in earthen pots, produced by peasant households were also apparently often exempt.

Towns similarly seem to display an expected urban hierarchy, with a few major trade and manufacturing centers and a large array of smaller places with very little evidence of commercial or manufacturing activity. Using records of disputes over toll payments and toll exemptions Masschaele shows that there were significant trade relations between towns that could be quite distant from each other. Thus, for example, in 1315 the town of Sandwich seized the almonds, figs and raisins of a merchant refusing to pay toll, where the merchant was from London, 63 miles away.

Using again records of toll disputes Masschaele is also able to get some information about the marketing activities of rural producers. By the early thirteenth century English kings, as pious acts, had granted exemption from toll in all markets to most major ecclesiastical corporations. This exemption was held to apply to their manorial tenants also. The exemption was meant to apply to rural produce sold by the tenants to meet their rent payments to the houses. Tenants on the royal demesne had by custom a similar privilege. Tenants of both types, however, seem to have availed themselves of the exemption to further general trade activities. Thus even in the fourteenth century many court cases appear where rural tenants of religious orders or of the king are alleged to be buying goods with intent to resell, or selling goods they had bought.

In one of the later chapter Masschaele documents carrying costs by land and water per ton-mile in Cambridgeshire and Huntingdonshire between 1305 and 1346. These costs suggest, for example, that if wheat was transported by water is would cost about 1.4% of its final value per additional ten miles carried. These costs seem relatively modest.

The concluding chapter begins with the statement, “By the end of the thirteenth century, England had developed a sophisticated commercial economy that embraced all levels of society” (p. 227). There is no doubt that this statement is well supported by the evidence of the book. But if medieval England was just a low-tech version of Kansas, why would anyone be interested in its economy? The early economy had, I believe, some very interesting features. But focused as this tradition is on the existence and extent of the market, I fear that further excellent scholarship such as this can only provide more compelling evidence of the utter dullness of the medieval economy. For this erudition to be more interestingly employed, at least as far as economic historians are concerned, it needs to be directed at a richer set of issues than just the existence of the market.

Gregory Clark Department of Economics University of California- Davis

Among Gregory Clark’s recent publications are “The Political Foundations of Modern Economic Growth: England, 1540-1800,” Journal of Interdisciplinary History, 26 (Spring, 1996), “Commons Sense: Common Property Rights, Efficiency, and Institutional Change,” Journal of Economic History, 58 (March, 1998) and “Land Hunger: Land as a Commodity and as a Status Good in England, 1500-1914,” Explorations in Economic History, 35 (1), (Jan., 1998).


Subject(s):Markets and Institutions
Geographic Area(s):Europe
Time Period(s):Medieval

Losing Control? Sovereignty in an Age of Globalization

Author(s):Sassen, Saskia
Reviewer(s):Aaronson, Susan Ariel


Published for (April 1998)

Saskia Sassen. Losing Control? Sovereignty in an Age of Globalization. University Seminars/Leonard Hastings Schoff Memorial Lectures. New York: Columbia University Press, 1996. xvi + 148 pp. Bibliographic references and index. $24.95 (cloth), ISBN 0-231-10608-4.

Reviewed by for H-Business by Susan Ariel Aaronson , George Mason University

Reordering the World?

The spoken word is often easier to understand than the written word. That’s why I was eager to tackle a series of lectures on globalization by Columbia University Professor Sasskia Sassen. This collection however, is a tough hike. The language is like a jungle that the reader must cut through.

Although Sassen’s words are a thicket, it is a hike worth taking. Sassen’s turf has been well traveled by economists, business leaders, policy analysts, and historians, but Sassen brings a different perspective as a professor of Urban Planning who teaches at Columbia’s Graduate School of International and Public Affairs. She is interested in how a new economic system centered on cross border flows and global communication has affected “two distinct features of the modern state: sovereignty and exclusive territoriality”(p. xii). She wants the reader and listener to see how it will affect the institution of economic citizenship as a “strategic research site and nexus” (pp. xiii) (this is what I mean by a jungle of unnecessary words). Sassen alleges that “we must consider the possibility that there exists a form of economic citizenship that empowers and can demand accountability from governments.” But these economic citizens are not people; they are “firms and markets”: “The fact of being global gives these actions power over individual governments…I use the concept as a kind of theoretical provocation, outside the accepted lineage of the concept of citizenship” (p. xiv). Finally, Dr. Sassen is concerned about immigration and worries that we need to “deconstruct the state” in its role in the migration process. “It is in this sense,” she says, “that immigration is a strategic site to inquire about the limits of the new order…it is embedded in a larger dynamic of trasnationalization (sic) of economic spaces and human rights regimes” (p. xvi)

Sassen begins by tracing the evolution of the term sovereignty. Here her path is easy to follow. She describes how sovereignty has been affected by globalization and how globalization has been accompanied by the creation of new legal regimes and practices. To many observers that process has been U.S. driven. In many countries, international or transnational has become “a form of Americanization” (p. 18). Who can disagree as we listen to Madonna and type on our IBM computers while wearing our Levi’s jeans. Finally she notes that the “virtualization” (a new word?) “of economic activities is a challenge both to regulation and to business. “This,” she concludes, “may signal a control crisis in the making” (p. 21).

Sassen argues that this crisis is occurring at the same time that “global capital has made claims on national states, which have responded through the production of new forms of legality” (p. 25). These new legal regimes “negotiate between national sovereignty and the transnational practices of corporate economic actors” (p. 26). Thus, sovereignty is being transformed by economic globalization. The next two chapters compare how economics is undermining the role of states, while immigration in contrast is “renationalizing politics.” Chapter Two tries to relate these developments to the notion of citizenship and the rights associated with citizenship. Here Sassen has forged something new. She argues that our notions of citizenship will change as the global economy changes. Global forces challenge the authority of the nation states. “There are enormous problems,” she notes “of state membership for aboriginal communities, stateless people, and refugees” (p. 34). She believes the challenges of globalization and “virtualization” will have important implications for human rights, and who or what will enforce these rights: “Today’s welfare state crises, growing unemployment and growing earnings inequality…can certainly be read as signaling a change in all the highly developed countries in the entitlements of citizens.” Other analysts of globalization such as Dani Rodrik have taught us that globalization has undercut the social bargain that many democratic capitalist nations have adopted since the Great Depression (a welfare state, regulation, and capitalism). However, Sassen adds that international investments searching for global opportunities “do not favor the growth of a large middle class.” Thus, “economic globalization has hit at some of the major conditions that have hitherto supported the evolution of citizenship and particularly the formation of social rights” (pp. 37-38). All of us should worry if globalization undermines democracy. At the same time, however, Sassen notes that the powerful in the global economy, (global corporations, international financiers) have acquired new rights and that there is “a consensus among states to further the interests of economic globalization.” But Sassen shows no primary sources or evidence of government action over time to illustrate this allegation. She cites two articles in one book and her own forthcoming work to prove this point [1]. She then notes that fifteen agencies around the world (including the Justice Department) reviewed the merger of Gillette and Wilkenson in 1989 and acceded to it. But does this prove the consensus she alleges? I doubt it. The evidence she cites might also be used to make the opposite point. The fact that so many agencies reviewed this merger illuminates, I believe, elite and public concerns about the consequences of globalization and a desire to hamper and halt it. (We certainly hear this in the ongoing debates over refunding the IMF and in fast-track authority, how Congress grants authority to the President to negotiate trade agreements.) Moreover, globalization often pits one national champion against another. (We see this in the 1980 market competition between Japan’s Komatsu and America’s Caterpillar Corporations and even more recently the European Community’s response to the Boeing/McDonnell Douglas merger.) Governments weigh such mergers to ensure that some of their taxpayers, citizens, consumers, and shareholders benefit. Government actions can tilt the balance.

Sassen’s last chapter addresses how in the face of globalization, nations have retained sovereignty to control immigration. In fact, this week NPR noted that the largest police force in America was that of the Immigration and Naturalization Service. Sassen notes “a fundamental framework roots all the immigration policies of the developed countries in a common set of conceptions” (p. 64). She sees globalization behind many changes in immigration (“the international activities of the governments or firms of countries receiving immigrants may have contributed to the formation of economic links…that may invite the movement of people” [p. 84]). However, Sassen notes that human rights challenge immigration policies because “human rights are not dependent on nationality, unlike political, social, and civil rights” (p. 89). In recent years, court cases have shown that individuals and non-state actors brought claims based on the notion of international human rights codes as expanding international law. This lets the judiciary mediate “between these agents and the international legal order.” The result, she claims has been a shift to the rights of individuals “from an exclusive emphasis on the sovereignty of the people and right to self-determination” (p. 95). This has devalued the institution of citizenship, affecting “the configuration of the international order” (pp. 96-97). But perhaps the international defense of human rights may also make us better citizens because of our willingness to defend and attribute rights to individuals in states that do not honor or enforce human rights. I don’t see this phenomenon as a big negative but something positive.

This chapter ends with a summation of globalization’s impact upon sovereignty but no answers as to what to do about it. Moreover, the author has no suggestions for the public who surely should be worried about the effect on them as citizens in democratic regimes challenged by globalization. I will look forward to reading Sassen’s upcoming work on these issues. However, I wish she had not left us hanging.


[1]. James H. Mittelman, ed., Globalization: Critical Reflections International Political Economy Yearbook vol. 9 (Boulder, Co: Lynne Riener, 1996).


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

Calvinists Incorporated: Welsh Immigrants on Ohio’s Industrial Frontier

Author(s):Knowles, Anne Kelly
Reviewer(s):Cosgel, Metin


Published by EH.NET (March 1998)

Anne Kelly Knowles, Calvinists Incorporated: Welsh Immigrants on Ohio’s Industrial Frontier. Chicago: University of Chicago Press. 1997. xxiii + 330 pp. $24.95 (paper), ISBN: 0226448533.

Reviewed for EH.NET by Metin Cosgel, Department of Economics, University of Connecticut.

Nowhere is the relationship between religious culture and economic performance more complex than in the experiences of immigrants who strive to improve their economic position while trying to preserve deeply held religious values. In Calvinists Incorporated Anne Kelly Knowles tells the fascinating story of a community of Welsh immigrants who settled in Jackson and Gallia counties of Ohio during the first half of the nineteenth century. Although recent studies of European migration have revised the earlier belief that immigrants quickly lost their native culture, they have not fully explored the two-way interaction between the immigrants’ culture and their common desire for economic success. Knowles fills this gap by focusing on the key turning points in the history of this community and exploring the moral dilemmas faced by these strict Calvinists in their decisions to emigrate and to choose settlements and economic activities.

Focusing narrowly on a community of Welsh immigrants, Knowles addresses issues that have broader significance. One of the heavily debated issues in economic history has been about whether and how there has been a transition from moral to market economy. Against arguments that view the two types of economy as being distinct and incompatible, and consistent with the recent consensus that acknowledges their coexistence in any society, Knowles shows the plurality of economic behavior and motivations among the Welsh immigrants that she studies. She finds that they were both family-oriented yeomen farmers and competitive industrial entrepreneurs and that their religious values served both to constrain behavior and to facilitate economic success. Based on careful and detailed analysis of the decisions made by this community in various contexts, she provides an illuminating example of the complex interaction between economic change and cultural values and institutions.

The book consists of an introduction that discusses general themes and five chapters that focus on key decisions of this community by reconstructing their culture and economy in different contexts and scales. Chapter 1 studies the historical geography of Welsh emigration to the United States in the national context of the early nineteenth century in order to determine the representativeness of those who left for Jackson and Gallia. It also establishes spatial features of Welsh emigration, the relationship between emigration and internal migration, and the social characteristics of Welsh emigrants at the time. The next two chapters examine the range of migration possibilities for the rural people in the county of Cardiganshire in Wales in their search for greater economic opportunities. Chapter 2 focuses on internal migration. It examines the long-standing migration traditions within Britain and the moral concerns that explain why so few people from one part of Cardiganshire participated in these migrations. The localized cultural and economic reasons for why they instead chose to emigrate to Jackson and Gallia are explored in Chapter 3. Remaining on the scale of locality, Chapter 4 examines the relationship of Welsh settlers with the rapidly growing charcoal iron industry, their novel involvement in the industry through community corporations, and the way this involvement created new tensions within the community along with economic success. Moving between the national and local scales, the final chapter discusses the Welsh Calvinist immigrant experience in its moral context. Focusing on the major points of transition for the community, it shows the way confrontation between religious values and new opportunities created new social formations and the way culture and economy reinforced each other.

In reconstructing the history of Welsh migration, Knowles draws on an impressive range of sources and displays an admirably high level of scholarship. For example, because official records provide little specific information about Welsh migration flows before the end of the nineteenth century, she turns to obituaries printed in Welsh American religious magazines and other supplementary sources to painstakingly construct a database of individual immigrants that contains geographical and biographical information about 1,772 individuals (available in an appendix). Similarly, she uses interviews, British and U.S. census records, records of furnace companies, maps and atlases, and a variety of other primary and secondary sources (all listed in a 23 pages long bibliography) to incorporate the rich detail into the history in its different scales and contexts. Maintaining a close attention to the details of individual histories and geographies, she skillfully weaves together the details to reconstruct the history of the community and to analyze larger issues surrounding the relationship between economy and culture.

Calvinists Incorporated is an excellent work of historical geography that should also be of interest to economic historians, cultural anthropologists, and social science historians in general. Through a close study of a community’s history, it enriches our understanding of the relationship between religious culture and economic performance and introduces new methods for studying histories of immigrant groups. Knowles’s methods for constructing a database of individual biographies and biographical approach to community reconstruction will set new precedents.

(Knowles is lecturer in geography at the Institute of Earth Studies, University of Wales, Aberystwyth.)

Metin M. Cosgel Department of Economics University of Connecticut

Metin Cosgel’s paper, “Productivity of a Commune: The Shakers, 1850-1880,” with John E. Murray, is forthcoming in the June 1998 issue of The Journal of Economic History.


Subject(s):Historical Demography, including Migration
Geographic Area(s):North America
Time Period(s):19th Century

The Great Lobster War

Author(s):Formisano, Ron
Reviewer(s):Mullin, Debbie


Published by EH.NET (March 1998)

Ron Formisano, The Great Lobster War. Amherst: University of Massachusetts Press, 1997. vii + 150 pp. $35.00 (cloth), ISBN: 1558490523. $14.95 (paper), ISBN: 155849071X.

Reviewed for EH.Net by Debbie Mullin, Department of Economics, Oberlin College.

Ron Formisano tells us about a group of men who, dismayed by their economic prospects, band together to fight large commercial interests in the hopes of preserving their standard of living. At first glance, one would think that this is another story of a union’s struggle to negotiate for higher wages, but that is far from the case presented in The Great Lobster War. The men who banded together were not employees; they were independent businessmen, and their attempt at collective action resulted in legal charges against them under the Sherman Antitrust Act.

Faced with declining prices for their lobster catches over the summer of 1957, Maine’s lobstermen in their distress grumbled that they were certain that the wholesale dealers were in a collusive arrangement to depress prices at the dock. The price had fallen to 30 cents per pound, a level which the lobstermen claimed was insufficient to provide a decent living. Figuring that the dealers had fired the first shot, members of the Maine Lobstermen’s Association (MLA) held a July meeting to call for lobstermen to tie up their boats and stay on shore until a 35-cent minimum price was established.

The tie-up was short-lived (about three weeks), and almost as soon as lobster boats were back on the waters, federal antitrust charges were brought against the MLA and its president, Leslie Dyer. Government lawyers asserted that, by encouraging this fleet of perfectly-competitive firms to act collectively (or, more precisely, to collectively refuse to act) the MLA had created a combination in restraint of trade. The two-week trial took place the following May in Portland. I trust that I will not ruin any suspense by revealing that the jury found Dyer and the MLA guilty, and that the judge imposed suspended fines for each defendant. Formisano concludes that little changed in the industry as a result of these legal proceedings.

Events leading up to the tie-up occupy roughly the first half of the book; the remainder recounts the testimony of trial witnesses and legal strategies of government lawyers and attorneys for the defense. Regrettably, no part of the volume is devoted to careful analysis of the economics of this case. The reader is left to wonder about some key questions.

First, was there an initial collusion among the dealers? There is no convincing evidence presented one way or another as to whether the prevailing 30-cent price was inconsistent with what 1957 market conditions would have produced as an equilibrium price. Formisano seems to be of the opinion that dealers were up to something underhanded, as they were secretive about their pricing decisions. A dealer might sometimes be heard saying that the lobster price is moving up, or is moving down. Formisano suggest that this is evidence of conspiracy, as it shows that the dealer is trying to hide his own choice behind the disguise of market forces in order to absolve himself of the harmful effects of his pricing “decision”.

The author further suggests that there is evidence of a dealer conspiracy in the fact that the total lobster catch for 1957 increased over that of 1956 by four million pounds, but that the total revenue collected by the lobstermen fell by about two percent. Introductory economics students would take this as an illustration of the inelasticity of the demand for food, not as any proof of dealer collusion.

Another question left hanging is why it makes any difference economically that the tie-up was a collective action by firms, not by employees. MLA members expressed disbelief that they were being prosecuted under the Sherman Antitrust Act, a law intended in their minds to go after big business. We are just independent businessmen trying to make an honest living at a fair price for our product, they claimed. To these men, it seemed a technicality that they were in a classification which left them legally vulnerable, rather than providing them with the protection of the rights of organized labor. It’s true, presumably, that unions seek to establish a wage above the competitive level, just as a cartel of firms would hope to enforce a noncompetitive price. But the economic effect is different when there is a monopoly price for a product versus a monopoly price for the labor used to make the product. Readers who are looking for economic analysis will be disappointed by the lack of discussion of market outcomes; the only group whose welfare is discussed is that of the lobstercatchers.

In fact, it is the lack of economic analysis that ultimately classifies The Great Lobster War as a work of narrative reporting rather than of economic history. It is not just a technicality that the MLA was viewed as a trade association rather than as a union. Economic theory predicts that lobstercatchers would have no cohesion as a union. The very nature of lobster-catching is a zero-sum game. It revolves around a set of dynamic incentives very different from those that characterize an employment situation. An additional catch for one lobsterman reduces that of another. In a typical employment situation in a unionized industry, workers are not viewed as stealing work, and therefore revenue, from one another. Of course, the fact that union solidarity would be undermined also predicts that a cartel would be unsuccessful. But readers may be disappointed that this volume fails to address the relationship between market incentives and market outcomes.

Formisano presents us with a story of characters; he depicts the Maine lobstermen who testify at the trial as strong Americans and good-humored individualists who were unintimidated by government attempts to rob them of their way of life. The author seeks to have readers agree with him that they couldn’t possibly have been as evil and greedy as men who run Big Business. Formisano apparently does not recognize that monopoly prices have harmful effects, even when not charged by monopolies. His claim that the lobstermen were not greedy rings hollow. He supports the MLA’s claim that lobstermen only wanted to earn a “fair living”. But the full story of course, is that they wanted to earn that fair living without having to change their skills or their way of life. One might argue, as has James Fallows, that Americans are characterized by the good nature with which they re-learn, re-tool, and relocate when market forces change the relative fortunes of different sectors of the economy. When any group of workers claims that they are entitled to “fair” compensation even if they persist in an unproductive sector of the economy, we see the universal nature of the desire for “more” and are reminded that the wealth of our nation has been built by the strength and adaptability of those who embrace new opportunities.

Debbie Mullin is Vice President of Marketlion LLC and teaches economics at Oberlin College. Her article describing the wage effects of early AFL unions can be found in the January 1998 issue of the Industrial and Labor Relations Review.


Subject(s):Labor and Employment History
Geographic Area(s):North America
Time Period(s):20th Century: WWII and post-WWII