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Centrally Planned Economies: Theory and Practice in Socialist Czechoslovakia

Author(s):Židek, Libor
Reviewer(s):Swain, Nigel

Published by EH.Net (May 2022).

Libor Židek. Centrally Planned Economies: Theory and Practice in Socialist Czechoslovakia. London and New York: Routledge, 2019. xiii + 257 pp. £29:59 (paperback), ISBN 978-0-367-72862-5.

Reviewed for EH.NET by Nigel Swain, Department of History, University of Liverpool.

 

It is difficult to know how to react to this work. Books on central planning in Eastern Europe are a rarity, so it is to be welcomed on those grounds. Czechoslovak central planning does not figure greatly in the literature because, discounting the blip associated with the Prague Spring, it scarcely reformed its economy, so a book on Czechoslovak central planning is doubly welcome. The book is unique in including interviews with individuals involved in the planning process. Furthermore, a generation of students for whom Eastern European-style socialism is an unknown universe could potentially learn much from the sections of boxed text that provide concrete illustrations of more abstract discussions.

But Židek has been poorly served by his publishers. This is a book by Czechs, for Czechs, written in Czechish. Little thought has been given to adapting his manuscript to a western audience or to the basic editorial values of clarity and concision; and it screams out for native-English-speaker copy editing. It is a difficult read and, sadly, the Czechish is least comprehensible in its unique contribution: the interviews. The book makes little reference to the established western literature on central planning but is deeply indebted to Czech-language secondary sources with which most western readers (including myself) will be unfamiliar.

The first chapter is written by Lucie Coufalová and presents the context in which the planning system operated, the formal and informal institutions of the socialist system. There is a Czech contradiction in its framing: it adopts the now-orthodox theoretical perspective of totalitarianism, yet it is at its best presenting specificities and complexities which do not easily fit this theory: the multi-party political structure, the loyalty oaths that teachers had to swear, the elements of the Criminal Code most commonly used to prosecute dissidents, the rules for foreign travel, high levels of divorce and abortion, the relative insignificance of religion, the standard tropes of ‘those who do not steal from the state, steal from their families,’ and endemic, minor corruption.

The remainder of the book covers reasonable topics: the theoretical background of Marxism-Leninism, the formal structures of planning, the practice of planning, macroeconomic results, followed by a conclusion. But there is much repetition and circularity. Themes are constantly reprised for no clear reason. The chapter on theory reveals nothing new, but surprisingly there was almost nothing on the labour theory of value, which Hungarian economists certainly took seriously, even if pricing there, as in Czechoslovakia, was ultimately based on trial and error. The chapter on formal planning structures contains some interesting information about the specifics of the Czechoslovak model and the role of the ‘production economic units’ (VHJ). There is much that is new for the cognoscenti, but the significance of the detail is not made clear. Czech and Slovak readers will learn in much detail how their socialist economy functioned, but Anglo-Saxon readers will struggle to distinguish the general from the particular.

The fourth chapter, on the system in practice, is where the interviews come into their own, but the reader is distracted by sections recapitulating issues, such as ownership and nationalisation, which have been considered previously. There then follows a discussion of planned versus market in which Židek seems to accept that a market of a kind existed because negotiations took place at all levels in the planning hierarchy. Eventually, the standard features of centrally planned economies emerge: shortages and stockpiling of goods and workers generally and hiding reserves from planners in particular; pursuit of enterprise or, more accurately, managerial, rather than national interests; soft budget constraints; the influence of the party at both local and national levels; all-pervasive ignorance within an imaginary omniscient planning hierarchy, which could be mitigated to an extent if you had the right contacts. In the (slightly Czechish) words of one interviewee, ‘the whole system had only one goal and it was to win the bonus, not to meet the plan. It was just a technical means and it was manipulated with and cheated and revised, simply so that the bonus conditions were met.’ (p. 146) The discussion, in boxed text 4.3, of the role of the secret service is interesting and not usually included in studies of central planning. Box 4.5 gives a summary of methods of manipulating plans: when numbers did not fit, plans were adjusted. The text is unusual too in covering the ‘non-plan’: areas where economic activity took place entirely beyond the scope of the plan, the classic example being the Slušovice agricultural cooperative.

Chapter five addresses the macroeconomic results of central planning beginning with a graph showing declining rates of growth in GDP and net material product. A table showing how the plan for Škoda was revised constantly between 1976 and 1980 so that it gelled with actual production seems more relevant to the preceding chapter. There is discussion of half-hearted plans for economic reform, the extent of the informal economy (including that developed by Vietnamese guest-workers), and classic problems of socialist economies: failing to move from extensive to intensive growth or away from high energy consumption, reliance on undemanding Comecon markets, investment cycles, the bias towards heavy industry, outdated technology, the constant labour shortage, prices, and the problems of multiple exchange rates. There are interesting boxed texts on the Baťa shoe company, ‘Action Z’ (‘voluntary actions’ to make up for shortcomings of the plan), industrial espionage, Škoda cars, and, again, the Slušovice agricultural cooperative. The conclusion recapitulates the key findings in a characteristically Czech way: as a dialogue with an imaginary defender of central planning.

 

Nigel Swain is Honorary Senior Research Fellow in the Department of History, University of Liverpool. He has published extensively on the economic, social, and political history of socialist Eastern Europe.

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

Subject(s):Economic Planning and Policy
Economywide Country Studies and Comparative History
Geographic Area(s):Europe
Time Period(s):20th Century: WWII and post-WWII

The Age of Addiction: How Bad Habits Became Big Business

Author(s):Courtwright, David
Reviewer(s):Dufton, Emily

Published by EH.Net (April 2022).

David Courtwright. The Age of Addiction: How Bad Habits Became Big Business. Belknap Press, 2019. ix + 325 pp. $27.95 (hardcover), ISBN 978-0674737372.

Reviewed for EH.Net by Emily Dufton, author of Grass Roots: The Rise and Fall and Rise of Marijuana in America (2017).

 

As late as the 1960s, historian David Courtwright notes in his erudite and witty new book The Age of Addiction: How Bad Habits Become Big Business, “people swam in waters in which there were relatively few addictive hooks. Chief among them were cigarettes, alcohol, and drugs.” The first two hooks were powerful and widely used – half a trillion cigarettes were sold in 1962, and anyone who has seen Mad Men knows the culture of alcohol consumption at the time – while the use of licit and illicit drugs, though growing, was limited only because “the last were expensive, risky, and often hard to obtain” (p. 206).

But over the course of the next six decades, the waters were filled with many more hooks. New and even more enticing intoxicants took advantage of technological shifts: cocaine morphed into crack, caffeine and alcohol into Four Loko, heroin into fentanyl. Other temptations also appeared. The size of a typical American meal ballooned, and the sugar and salt levels of cheap and ubiquitous snack foods exploded. In the internet age, screens gave us instant access to gambling, porn and shopping, and to apps that delivered hits of dopamine with likes and retweets. By 2019, when Courtwright published his book, the waters were so thick with tempting hooks that there was rarely a place to swim without one.

It would be almost impossible to avoid these hooks anyway, since everything on them was purposefully designed to appeal to humanity’s greatest strength and flaw: our limbic system, “the part of the brain responsible for feeling and for quick reaction, as distinct from dispassionate thinking” (p. 6). The limbic system is a series of neural circuits that make possible the positive emotions that embed pleasure in our lives. Like Proust’s madeleine, our limbic system binds together pleasure, motivation, and long-term memory, so that when something feels good, the limbic system lets us remember it – and to seek it again.

But the limbic system also makes us sitting ducks for the mushrooming number of hook-holders, the entrepreneurs of pleasure who sell “engineered excess” to keep us coming back for more (p. 224). On these hooks hang everything that gives us good feelings (the burst of pleasure from chocolate, or a drug’s intoxicating high), or, more importantly, the substances that banish the blues (the opioids that delay withdrawal, or the drink that lets you forget). In a system Courtwright calls “limbic capitalism,” good feelings are for sale every day, everywhere, at all times, via a “technologically advanced but socially regressive business system in which global industries, often with the help of complicit governments and criminal organizations, encourage excessive consumption and addiction” (p. 6).

This places the average person in a perilous position. A powerful global industrial system views individuals as little more than consumers, and seeks to take as much of their money as possible by repeatedly selling them something, regardless of whether it’s good for them or not. “Every business wants to be the next Cinnabon, selling an irresistibly tempting product,” Courtwright writes. “The products can be legal, illegal, or a bit of both” (p. 229). But by continuously making pleasurable products widely available, Courtwright argues that limbic capitalism disrupts the biological process of hormesis, in which certain chemical compounds are beneficial in small doses but harmful or lethal in large amounts. “In brief, civilized inventiveness weaponized pleasurable products and pastimes,” Courtwright continues. The “age of addiction” is the inevitable result (p. 9).

This engenders one of Courtwright’s most valuable insights, which is that the concept of “addiction” goes far beyond the usual questions of criminal activity, moral relativism, or the disease model. Instead, addictions “begin as journeys, usually unplanned, toward a harmful endpoint on a spectrum of consumption.” In other words, in the realm of limbic capitalism we’re all consumers, and those struggling with addiction have been overwhelmed by their consumption. For Courtwright, “an addiction is a habit that has become a very bad habit, in the sense of being strong, preoccupying, and damaging, both to oneself and others” (p. 3). While this is bad for the individual, it’s very good for business, which is precisely why Courtwright fears limbic capitalism – and the dangerous levels of addiction it produces – is here to stay.

This is natural territory for Courtwright, who has been one of America’s most eloquent chroniclers of the history of drug and alcohol use for decades. But The Age of Addiction expands Courtwright’s focus into other areas – food, gambling, shopping, porn – to show how our desire for pleasure and intoxication has created an unprecedented commercial environment, where unrestrained free market capitalism actively and enthusiastically offers addictive substances and experiences, regardless of their inevitable social toll. For the millions of Americans currently struggling with substance use disorders or other addictions, “the heaviest costs are borne by those who lose control over their consumption, who also happen to be the most socially and genetically vulnerable. If capitalism is socially progressive, limbic capitalism is often socially regressive. Sometimes it is savagely so” (p. 227).

The Age of Addiction offers dire warnings about our society, but it does so in elegant and often witty language. Only someone like Courtwright, with his lengthy career and deep knowledge, could draw the line of addiction studies between the moment when Neanderthals and homo sapiens were first crossbreeding to Nora Volkow and the National Institute on Drug Abuse today. Courtwright also uses non-traditional rhetorical devices to make his points – two instances of dialogue between fictional combatants are particularly fun to read – to make it clear that this book, written as Courtwright retired from the University of North Florida, is the work of a master scholar who has dedicated his career to illuminating drug history and is now having fun as he expands his scope.

Courtwright was honest about the reactions his ideas first provoked. In one of the dialogues, he quotes a critic who complained, “I wrote on the title page of your manuscript, ‘NO SOLUTIONS’” (p. 225). In response to the threat of limbic capitalism, which clearly values profits over health, Courtwright offers few alternatives, though he agrees with the drug policy expert Mark A. R. Kleiman, who argued thirty years ago for Americans to take a stand “against excess” (p. 246). Still, limbic capitalism’s millenia-long path to offer us a constant smorgasbord of tempting, if dangerous, delights wouldn’t have happened if there weren’t buyers – supply exists because of demand – and I wished Courtwright had mentioned some of the people who have successfully found a way out of limbic capitalism’s grasp. For example, Physician Health Programs are immensely effective at helping individuals overcome drug addictions, and anti-consumerism organizations like Adbusters and Reverend Billy and the Church of Stop Shopping have denounced the dangers of unfettered capitalism for decades.

Nonetheless, the primary contribution of The Age of Addiction is a vastly important one. Courtwright has long been America’s leading voice on the history of drugs, and now he has shown how, in the world of limbic capitalism, addiction is promoted as a marketing tool for a wide variety of products, ones that guarantee customers, often for life. But there is a way out. If we can understand that we’re being used – by the companies, cartels and conglomerates who see us less as people and more like walking ATMs – the most radical action we can take is to stop buying what we’re being sold.

 

Emily Dufton holds a PhD in American Studies from George Washington University. She is the author of Grass Roots: The Rise and Fall and Rise of Marijuana in America (Basic Books, 2017), and is currently working on Addiction, Inc.: Medication-Assisted Treatment and the War on Drugs, which was awarded a J. Anthony Lukas Work-in-Progress Award in 2021.

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

Subject(s):Household, Family and Consumer History
Social and Cultural History, including Race, Ethnicity and Gender
Geographic Area(s):General, International, or Comparative
Time Period(s):20th Century: WWII and post-WWII

The Gypsy Economist: The Life and Times of Colin Clark

Author(s):Millmow, Alex
Reviewer(s):Darnell, Adrian

Published by EH.Net (April 2022).

Alex Millmow. The Gypsy Economist: The Life and Times of Colin Clark. Singapore: Palgrave Macmillan Press, 2021. xx + 396 pp. $119.99 (hardback), ISBN: 978-981-33-6945-0.

Reviewed for EH.Net by Adrian Darnell, Retired Professor of Economics, Durham University.

 

Colin Grant Clark was born in 1905; he was educated at Winchester College and Brasenose College, Oxford, from where he graduated in Chemistry in 1928. His interest in statistics and economics was born of studying statistics in his curriculum and having attended some of Lionel Robbins’ lectures extra curricula. Clark’s interest in economics was furthered at the Oxford Labour Club and then within the University Adam Smith Society, to which Clark’s greatest contributions were to illuminate theoretical discussions with voluminous statistics designed to bring the conversations ‘down to earth.’ Robbins introduced Clark to Hugh Dalton and later William Beveridge, for whom he worked as a research assistant at the London School of Economics in 1928–29; he then worked with Allyn Young and in 1929 left London for Liverpool, where he worked for Alexander Carr-Saunders. During this time he ran unsuccessful parliamentary campaigns as a Labour candidate in North Dorset (1929), and later at Liverpool Wavertree (1931) and South Norfolk (1935).

In 1930 he was (to his surprise, apparently) appointed as research assistant to the newly convened National Economic Advisory Council (NEAC). However, when Clark was invited by Ramsey MacDonald (an avowed protectionist) to write a case for protectionism Clark (who favoured devaluation and expansion of the domestic economy) chose to resign in 1931 rather than compromise his principles. Keynes, a member of the NEAC, having been impressed by Clark’s command of data, then secured him a lectureship in statistics at Cambridge.

In 1937 Clark accepted a position with the Queensland government and stayed in Australia in various government roles, all of which afforded him the opportunity to pursue his own research. In 1951 he took secondment to the Food and Agriculture Organization in Rome, and then to Chicago (1952), before taking the Directorship of the Agricultural Economics Research Institute at Oxford (1952–69). He returned to Australia in 1969 as the Director of the Institute of Economic Progress at Monash (1969–78) and finally he was a Research Consultant to the Department of Economics at the University of Queensland until his death in Brisbane in 1989. Today Clark is, perhaps, best known for his work on national income and development economics.

This biography is a most illuminating account of Clark and his work, the man and his times, and provides a comprehensive assessment of his many economic contributions. The picture painted is of a most stimulating and heterodox thinker, a man who had no formal training in economics or economic methodology, and a man who revelled in being annoying!

Clark was a prolific writer of books and academic and newspaper articles and a broadcaster whose work appears to have attracted both praise and criticism, not always in equal measure. The source of much criticism had two sources: his lack of training in the subject and a suspect methodology were often evident; and his later work, especially after his conversion to Roman Catholicism in 1940, seemed to some to rely (often implicitly) upon Catholic thought, as distinct from economic thought and evidence.

Clark’s methodological approach was clearly influenced by his chemistry studies, and his ‘scientific’ economics stressed ‘the careful systemisation of all observable facts, the framing of hypotheses from these facts, predictions of fresh conclusions on the basis of these hypotheses, and the testing of these conclusions against further observable facts’ (1940, p. vii). He expressly prioritised observation over theory: he praised Australian economists for their ‘respect for observed facts in preference to long chains of theoretical reasoning’ (1940, p. ix), but his lack of a theoretical framework and an overreliance on (not always robust) data was criticised. Clark believed ‘many of the laws of economics could be deduced from comparative observations rather than from an a priori position’ (p. 43), did not recognise that observations are always seen through a particular window of theory, and expressly relegated economic theory. His approach relied heavily on the quality of statistics, and his early work on national income sought, successfully, to provide good data. The National Income 1924-31 was a major work, developing the earlier work of Bowley and Stamp (1927); he brought quantitative flesh to Keynesian concepts and, for the first time, distinguished between national income and national product.

This work was well received but, like almost all his work it seems, it attracted criticism in at least equal measure. There is a recurring theme to the reception he generated: he was regularly criticised for sloppiness, poor methodology, and allowing unstated principles (notably Catholic principles) to influence his analysis. One example must suffice. Clark’s (1967) Population Growth and Land Use was described as ‘a source of pleasure, information and challenge’ (Spengler, 1968, p. 228, in Millmow p. 279) but the book’s controversy stemmed from the level of scholarship on the one hand and his views on birth control on the other. Davis (1968, p. 133) observed that ‘the tools of scholarship are casually handled with frequent omission of authors, dates or titles, occasional misspellings, ambiguous labelling of charts and tables, use of derived figures and unexplained inconsistencies, disregard of contrary arguments and evidence’ and concluded that ‘Clark’s reputation and his skill with words and numbers give his argument a halo of credibility that may mislead the untrained eye’ (in Millmow, p. 284). Davis further suggested that Clark had ‘massaged his data to fit his thesis.’

Clark was nominated several times for the Nobel prize yet was never successful (p. 7). Millmow, I think, has more than adequately answered the question ‘why not?’. Clark’s work lacked a firm theoretical foundation and he ‘took delight in entertaining perverse views’ (p. 4). He was never appointed a full professor of economics and chose not to pursue his pioneering early work on National Income Accounting, moving on to write in less prosaic areas of economics. That Clark was well known for holding and promulgating unorthodox views may also have been a factor, especially as Millmow’s biography leads the reader to conclude that he deliberately sought to annoy.

Two examples may suffice. First, in 1962, speaking to the theme of the problems of growth in the Australian economy he drew upon his ideas of the last 20 years and asserted that it took ‘Australia a long time to learn’, that Australia had foolishly ‘set out to manufacture everything’, ascribed Australia’s ‘mediocre growth’ to protectionism, low levels of education, low growth of the labour force, developing industry at the expense of agriculture, and especially an ‘aversion to competition’ and a dependency on ‘government to put things right’ (pp. 309-10). One discussant (Crawford, 1962, p. 30) observed ‘we have been given a typical Colin Clark production . . . bristling with comment calculated to irritate, very revealing of his own prejudices on many subjects, it is nonetheless full of shrewd insights and worthwhile provocations’ [my emphasis]. Not only were his comments designed to irritate, but this was typical.

As a second example, Clark spoke in a debate on abortion law reform in Sydney in 1972. On the other side of the debate was Germaine Greer. Clark remarked to Greer, “I don’t know what to call you: Miss Greer or Mrs?” to which she replied, “Call me Doctor” (cited in Wyndham, 2012, p. 359).

Here we have a splendid biography. Clark, the idiosyncratic polymath shines from every page, but the title is troubling. While Arnold’s The Scholar Gypsy may well have been Clark’s favourite poem (p. 11), since that poem’s subject is an Oxford scholar who gives up his academic life to join a band of Gypsies, absorbing their customs and seeking the source of their wisdom, the picture of Colin Clark painted by Millmow doesn’t quite fit. Clark never gave up academe and nor does he seem to have sought to absorb others’ customs nor seek their sources of wisdom: on the contrary, he comes across as more interested in having others absorb his ways of thinking and understand his wisdom.

References

Bowley, Arthur L., and Josiah Stamp. The National Income 1924. Oxford: Clarendon Press, 1927.

Clark, Colin G. The National Income 1924-31. London: Macmillan, 1932.

Clark, Colin G. The Conditions of Economic Progress. London: Macmillan, 1940.

Clark, Colin G. Population Growth and Land Use. London: Macmillan, 1967.

Crawford, John Grenfell. ‘Discussion.’ In John Wilkes (ed.), Economic Growth in Australia. Sydney: Angus & Robertson, 1962.

Davis, Kingsley. ‘Colin Clark and the benefits of an increase in population.’ Scientific American 218(4): 133-138 (1968).

Spengler, Joseph, J. ‘Review of Population Growth and Land Use by C. Clark.’ Annals of the American Academy of Political and Social Science 380: 228 (1968).

Wyndham, Diana. Norman Haire and the Study of Sex. Sydney: Sydney University Press, 2012.

 

Adrian Darnell is Retired Professor of Economics at Durham University. He has published extensively on econometrics and its history.

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

Subject(s):History of Economic Thought; Methodology
Geographic Area(s):General, International, or Comparative
Europe
Time Period(s):20th Century: Pre WWII
20th Century: WWII and post-WWII

Robert Triffin: A Life

Author(s):Maes, Ivo
Pasotti, Ilaria
Reviewer(s):Dyson, Kenneth

Published by EH.Net (April 2022).

Ivo Maes with Ilaria Pasotti. Robert Triffin: A Life. New York: Oxford University Press, 2021. xxvi + 230 pp. $74 (hardcover), ISBN 978-0190081096.

Reviewed for EH.NET by Kenneth Dyson, Visiting Research Professor, School of Law and Politics at Cardiff University.

 

Robert Triffin figures as one of the leading characters in the history of postwar international economic and monetary integration. This remark applies with even more force in the case of European integration. The ‘Triffin dilemma’ and the ‘European Reserve Fund’ are standard features in the indexes of scholarly volume and testify respectively to Triffin’s powers of diagnosis and creative prescription. He remains widely admired both as an economist and as a policy adviser. In short, he is one of the leading postwar statesmen-economists. Triffin continues to be a standard reference point in policy debates on what constitutes a sustainable, productive, and humane international and European economic and financial system.

And yet Triffin has had to await a biography that would do him and his various roles justice. Ivo Maes’s new book with Ilaria Pasotti succeeds admirably in filling this gap. Maes is ideally suited to the task, having researched relevant archives and interviewed key figures over several years. The result is an outstanding book that will stand as a standard reference in the scholarly literature and attract a wider readership. I will note my connection to this work, though it is tangential. Ivo Maes and I edited Architects of the Euro (Oxford University Press, 2016), and he took on the task of writing the chapter on Triffin. Like many others I encouraged him (though encouragement was not needed) to write this book. The result is a book that is a pleasure to read, clearly written and therefore very accessible. It rests on rigorous research, meticulously conducted. The lists of archives consulted and interviewees are very impressive. As is clear from the above remarks, the book is a significant contribution to the literature on postwar international and European economic and monetary integration.

In addition to its other merits, the book provides fascinating insights into the development of academic economics in Belgium: the roles of the Catholic University of Louvain, the National Bank of Belgium, and the close intertwining with American academic economics after 1918. As early as 1937 he was writing on the theory of currency overvaluation and more specifically the Belgian devaluation of 1935. Though very much a product of the Belgian system, Triffin became the archetypal Belgian-American economist. His early connections to Harvard, where he produced his influential doctoral dissertation, were followed by his wartime work with the Federal Reserve and his Latin American missions. This section of the book charts the transition from his early academic work on monopolistic competition theory to the policy advisory role that was to become such a defining feature of his career. It was with respect to Latin America that he first emerged as a ‘money doctor.’ Here we learn a great deal about the formative contributions of Triffin, much of which will be new to those whose knowledge of him is confined to the later period of European integration.

The chapters on the postwar period deal with Triffin as an architect of the European Payments Union, including its relations with the International Monetary Fund and the German payments crisis; as a Bretton Woods Cassandra, notably the Triffin dilemma and the eventual demise of the Bretton Woods system; and as the monetary expert on Jean Monnet’s Action Committee for the United States of Europe, with particular attention to the Rome Treaty and the campaign for a European Reserve Fund. Finally, Triffin emerges as a champion of a voluntarist approach to European monetary union, placing faith in the development of the private ECU market.

What emerges is an economist driven by a powerful moral conviction, with Maes characterizing him as a ‘monk in economist’s clothing.’ He believed passionately in the virtues of promoting interdependence and practicing multilateralism as essential to creating a more prosperous and peaceful world. This outlook fitted with a systemic perspective and the idea of equitable burden sharing between deficit and surplus states. Triffin looked with disquiet at claims of national sovereignty and at resort to bilateralism. Maes deserves great credit for having brought back to life – in a full, rounded manner – the character of Triffin. He has written an essential read.

 

Kenneth Dyson is Visiting Research Professor in the School of Law and Politics at Cardiff University and a Fellow of the British Academy. His two most recent books are States, Debt, and Power: ‘Saints’ and ‘Sinners’ in European History and Integration (2016) and Conservative Liberalism, Ordo-liberalism, and the State: Disciplining Democracy and the Market (2021), both published by Oxford University Press.

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

Subject(s):Economic Planning and Policy
Financial Markets, Financial Institutions, and Monetary History
History of Economic Thought; Methodology
International and Domestic Trade and Relations
Geographic Area(s):Europe
Latin America, incl. Mexico and the Caribbean
Time Period(s):20th Century: WWII and post-WWII

Leave Me Alone and I’ll Make You Rich: How the Bourgeois Deal Enriched the World

Author(s):McCloskey, Deirdre N.
Carden, Art
Reviewer(s):Mokyr, Joel

Published by EH.Net (April 2022).

Deirdre N. McCloskey and Art Carden. Leave Me Alone and I’ll Make You Rich: How the Bourgeois Deal Enriched the World. Chicago: University of Chicago Press, 2020. 232 pp. $25.00 (hardback), ISBN: 978-0226739663.

Reviewed for EH.Net by Joel Mokyr, Northwestern University.

 

For half a century Deirdre McCloskey has been a member of the starting lineup of economic history. The author of numerous books and hundreds of research papers and essays, her magnum opus is the monumental “Bourgeois Trilogy” that appeared between 2006 and 2016 and laid out her view of economic history and much else in about 2,000 pages. The slim volume here, co-authored with Art Carden, summarizes her views of what she has termed the “Great Enrichment” and makes it accessible to a wider public. In every way, this comparatively slim volume is vintage McCloskey: written in a rather informal conversational style, she states her views in her inimitable crystal-clear prose. She is relentless in her dismissal of other scholars she disagrees with and concepts she finds misleading, often with devastating bon mots. Thus the concept of capitalism is “a scientific mistake compressed in a single word” and the mistaken historians who elevated new-world slavery to a first-order cause of the Great Enrichment are told that “slavery was bad enough without ornamenting it with bad history and bad economics.” Indeed.

The book makes a powerful case for a classical liberal society: what accounts for economic success and growth is liberty. Other elements such as institutions, science, trade, resources and so on may have a mattered a bit, but the indispensable element that did it all was freedom from coercion, from regulation, and from oppression. That freedom was absent for most of human history, and it emerged only in Britain and the Low Countries in the seventeenth century. The Bourgeoisie, a group much maligned by the “left-wing clerisy,” are really the heroes of our prosperity and the “bourgeois deal” as they call it and as reflected in the well-chosen title of the book was the main driver that led to modern prosperity. The deal was simple: give us our freedom and we’ll make the economy grow. We’ll take the risks, but if we succeed, we’ll be rich and so will (almost) everyone else. The idea was so powerful and successful that it spread worldwide and has lifted up most economies on the planet. Hence, the majority of humanity is immensely richer than ever before and material life is better than ever before. That is the economic history of the modern world in a nutshell.

The explanandum, of course, is familiar to every undergraduate student of economic history. But the explanans may not be. The first sentence of the book’s preface is “The theme of our book is simple and true. But controversial.” Perhaps one might wonder, if this is all so self-evident, and the evidence so overwhelming, why is it still controversial? The message should be very attractive: freedom is obviously an attractive concept, something people are willing to die for. If an additional benefit is that it also makes us rich, what’s not to like? Why do not more people embrace the libertarian account that McCloskey and Carden tell here? Moreover, academics are also members of the bourgeoisie: why resist the idea that they are the heroes of the tale?

Much of the book — derived from Volume 2 of the McCloskey Trilogy — consists of the demolition of alternative explanations of the Great Enrichment. These interpretations are viewed not so much as completely wrong as inadequate: too small, too late, too early. Only the Bourgeois Deal, concluded in the centuries before the Industrial Revolution, will do. The logic is powerful: people are entrepreneurial, they are ingenious, they are acquisitive. Give them a chance, let them loose, and they find opportunities to enrich themselves, and in the positive sum of economic development they will make everyone richer as well (even if not as rich as they are — but that does not bother the authors).

McCloskey and Carden clearly have no sympathy for the idea that what drove the Great Enrichment was something called state capacity, the ability of nations to create governments that helped create law and order, provide public goods, and solve coordination problems. Its importance has been stressed by both economic historians such as the late Larry Epstein and economists such as Tim Besley and Torsten Persson. It is striking that the regions that the authors point to as the birthplace of the Bourgeois Deal were actually areas in which economic regulation was tight and taxation was heavy. To be sure, after 1825 many of the most onerous coercive measures in Britain were abolished (the Corn Laws only in 1846), but the first century of the Industrial Revolution took place in a rather oppressive political environment where “liberty” may not have been the best characterization of the state of society. The apex of the British laissez faire economy took place after, not before the Industrial Revolution. In later cases, industrialization and growth occurred in economies such as Russia and Japan in the first half of the twentieth century, where individual liberty was not a priority.

This book makes a strong argument for ideational history. The idea of unfettered economic activity, as expressed so powerfully by Locke and his followers (above all, of course, Adam Smith), is the “engine” that drove the economies of the West into the Great Enrichment. Yet there is something odd in the argument as presented here: while the authors, like all liberal writers, are firmly committed to the wisdom and power of the market, and while this book presents a strong case for the historical importance of ideas, it does not dwell on the market for ideas. There is little here that explains how the idea of freedom and unfettered markets actually caught on. After all, as the book notes, there was powerful resistance from many corners, and the victory of liberalism was by no means assured. It was driven, they say, by successful revolutions (in sixteenth century Netherlands and seventeenth century England), the printing press, and the reformation. Had these not taken place, the Enrichment may not have occurred. Europe was not better, it was lucky. But ideas do not just catch on because of their future benefits: they have to be debated and sold in a market for ideas, in which its proponents persuade their audience based on the evidence, the logic, or the ethics of the idea. Yet surprisingly the market for ideas makes no entry in a book devoted to the praise of markets and the power of ideas. Indeed, it could be argued that in their account liberalism’s success was precisely due to what happened in the market for ideas. Intellectuals from Locke and Smith down persuaded the people that mattered of ideas that led to economic growth.

The emphasis on ideas leads to the other question that the book raises. The period they describe as crucial to the emergence of the main elements of the Great Enrichment corresponds with the Age of Enlightenment. Yet the Enlightenment, arguably one of the most powerful cultural movements in history, plays no role in their account despite its commitment to ideas. Writing the economic history of modern economic progress without the Enlightenment is the ultimate prince-less Hamlet. Historians have recently rescued it from the dismissive attitudes of a misguided revisionist historiography, as exemplified by Ritchie Robertson’s recent tour de force (though it ignores economic history). Which precisely were the enlightenment ideas that mattered? A belief in liberty, free markets, and small government surely was part of it, although a disturbing number of philosophes felt that growth was too important to be left to the private sector and needed help from a friendly government. What the French called dirigisme was basically an attempt to recruit the government to help entrepreneurs in their endeavors. Britain was exceptional in its laissez faire approach to economic development — and even there the government was not altogether absent.

Above all, what is missing in this book is any serious acknowledgment of the role of what people at the time called “useful knowledge” — an understanding of natural phenomena and regularities. In many places of the book, the author invoke ingenuity as the force for progress. But how is ingenuity to lead to sustained growth without knowledge? Ingenuity and technological progress do not drop down from heaven as soon as liberty is declared. Skills, technical savoir faire, and dexterity have to be produced and created in the system. Increasingly it was realized that such skills needed to be augmented by an understanding of the natural regularities of mechanics, energy, and materials. The Enlightenment realized that natural philosophy could be harnessed to material needs, from fighting smallpox to finding longitude at sea to pumping water out of coal mines. McCloskey and Carden will have none of it. Science, they say, was unimportant as the driver of growth, because so many advances were made without it.

This assessment hinges on a somewhat narrow definition of what we mean by useful knowledge. The basic idea was one of progress, and progress was to be achieved because knowledge — both propositional and prescriptive — was cumulative. Progress occurred because in a well-functioning market for ideas, better insights about nature would beat out inferior opponents. Lavoisier’s chemistry replaced phlogiston and caloric, and vaccination pushed out the antiquated resignation that smallpox was a divine punishment for our sins. None of those triumphs, and countless others, were accepted without fierce resistance, and their victory was never assured. But this is why the story cannot be told without placing the Industrial Enlightenment on center stage. What the Industrial Revolution needed was knowledge: science, when appropriate, augmenting and supporting the often tacit knowledge of workmanship and materials, but also many other things: practical arithmetic (as shown in a brilliant forthcoming article by Kelly and Ó Gráda), the use of better tools and equipment, an understanding — often instinctive — of mechanics, heat, and chemical processes.

In short, a society that was free but ignorant would not grow. Unlike what Carden and McCloskey imply, ingenuity was not an automatic and passive link between freedom and prosperity. The sense that a systematic cataloguing and understanding of natural phenomena and regularities was needed to achieve progress permeated the thinking of the people who brought it about — including those who had no science themselves. As scientific knowledge expanded, people latched on to it and drew from it to come up with new ideas that made life better. Uneducated tinkerers, by themselves, could not have turned the Industrial Revolution into sustained growth. Inventions can be made serendipitously, without the faintest understanding of why and how they work; but such advances soon bog down. What we need now, then, is a serious discussion of how the elements of the Enlightenment interacted, that is, how personal freedom and the right incentives helped create the surge of practical knowledge and ingenuity that actually created the means for the Great Enrichment.

Liberalism, as it emerged in the West and as described in this book, was part and parcel of the European Enlightenment — though (like everything else in the writings of the eighteenth-century philosophes) it was disputed and doubted. Yet the Enlightenment was much more than liberalism, and if all that it had created was a belief in personal freedom and less restrictive government, its effects on the Great Enrichment may have been more modest. What counted was a belief in progress — material as well as social and political. Not all the prescriptions toward the perfection of society worked equally well — and perhaps that may be why the Enlightenment became something of a whipping boy for some writers influenced by the lamentable “Frankfurt School.” But on the matter of economic growth, the eighteenth-century intellectuals basically got it right. Material progress, the philosophes felt, was driven above all by knowledge and its accumulation, its testing in the market for ideas, and its application by engineers, mechanics, and entrepreneurs. These were the real causes of the Great Enrichment. Everything else — trade, politics, literacy, imperialism, and a host of other factors enumerated and dismissed by McCloskey and Carden — depended on that.

What, then, should we think of the role of “freedom” in economic growth? The question will be debated for generations and McCloskey has done our profession a great service by setting the terms of the debate. A large number of scholars would argue that rather than “laissez faire” policies, enlightened and competent governments could support and drive economic growth. As the late Alice Amsden has shown in her The Rise of the Rest, such governments existed. Without sufficient state capacity to guide and support development, many of the conditions for a Great Enrichment may not be there. Could there be such a thing as “too much liberty” just as there clearly was a thing such as too much coercion? In a forthcoming book, The Rise and Fall of Laissez Faire, Walker Hanlon shows how over the course of the nineteenth century Britain slowly retreated from a rather extreme form of laissez faire and introduced elements of regulation, coercion, and the welfare state to correct for some of the most undesirable consequences of the Industrial Revolution. So did every industrialized nation, some more, some less. Even the individualist and freedom-loving United States was dragged into a (partial) retreat from extreme liberalism, not just because most people demanded it, but because it was the right thing to do.

Perhaps the authors should consider this: liberalism depends on markets, and markets can fail. Part of liberty should therefore consist of society’s right to choose a certain amount of coercion and regulation by the state, to avoid such unacceptable outcomes as child labor, toxic chemical pollution, millions of people without medical insurance, and the poisoning of considerable portions of the population by pharmaceutical firms selling addictive substances. Somewhere between a libertarian free-for-all economy, and the horridly coercive worlds of Stalin and Mao, there is a goldilocks-like middle ground, far from optimal perhaps, but more livable than the alternatives. It is that middle ground that the Enlightenment strove for. In an imperfect world, that is the best we can do.

References

Amsden, Alice H. The Rise of “The Rest”: Challenges to the West from Late-Industrializing Economies. Oxford University Press, 2001.

Besley, Timothy, and Torsten Persson. Pillars of Prosperity: The Political Economics of Development Clusters. Princeton University Press, 2013.

Epstein, S.R. Freedom and Growth: The Rise of States and Markets in Europe, 1300–1750. Routledge, 2000.

Hanlon, Walker W. The Rise and Fall of Laissez Faire. Princeton University Press, forthcoming.

Kelly, Morgan, and Cormac Ó Gráda. “Connecting the Scientific and Industrial Revolutions: The Role of Practical Mathematics.” Journal of Economic History, forthcoming.

Robertson, Ritchie. The Enlightenment: The Pursuit of Happiness, 1680–1790. New York: Harper Collins, 2021.

 

Joel Mokyr is the Robert H. Strotz Professor of Arts and Sciences and Professor of Economics and History at Northwestern University, and Sackler Professor (by special appointment) at the Eitan Berglas School of Economics, Tel Aviv University. His most recent book is A Culture of Growth (Princeton University Press, 2017).

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

Subject(s):Economic Development, Growth, and Aggregate Productivity
Economic Planning and Policy
Living Standards, Anthropometric History, Economic Anthropology
Markets and Institutions
Geographic Area(s):General, International, or Comparative
Europe
North America
Time Period(s):General or Comparative
18th Century
19th Century
20th Century: Pre WWII
20th Century: WWII and post-WWII

Deindustrialisation and the Moral Economy in Scotland Since 1955

Author(s):Phillips, Jim
Wright, Valerie
Tomlinson, Jim
Reviewer(s):Wardle, William

Published by EH.Net (April 2022).

Jim Phillips, Valerie Wright and Jim Tomlinson. Deindustrialisation and the Moral Economy in Scotland Since 1955. Edinburgh: Edinburgh University Press, 2021. ix + 285 pp. $110 (hardback), ISBN 978-1474479240.

Reviewed for EH.Net by Professor William A Wardle, former Principal of York St. John University, and James Watt College of FE/HE.

 

This is a work of considerable merit and of significant interest to an academic audience within and beyond the boundaries of economic history. It is the product of a team at the Adam Smith Business School at Glasgow University, well-rehearsed in articles on this topic. Their intention to connect economic circumstances to the current, exaggerated nationalist mood in Scotland leads them to overemphasise a linear pattern and understate how the material presented could connect to wider, comparative debates.

With its economic focus and political innuendo, it is a work that fits well within the Scottish-branded field of political economy. At one level, we have a very informed narrative of the sequence of deindustrialisation, itself passing through three phases. The description of the openness and vulnerability of the Scottish economy at the outset is supplemented by a characterisation of a developing sense of futility: not only the failure to be competitive in the market but to even convince key investors and policymakers of the viability of continued investment, whether through commercial funds or government intervention. The other dimension of the book is as a contribution to the understanding of the economic antecedents of modern nationalism in Scotland. In both domains, the question of Scottish ‘exceptionalism’ is raised. Frustratingly, the work poses these exciting questions but without suggesting direct answers, and comparative analysis is left relatively undisturbed.

The work engages with political and societal causes and consequences of deindustrialisation as it proclaims its central interpretation: that deindustrialisation was a managed process in Scotland until malevolent external influences disturbed its progressive path. This intervention – sometimes indifference – created unanticipated closures and levels of unemployment, and disrupted permanently the political equilibrium. Collateral damage was inflicted on urban communities, setting in train a chain of local political reactions culminating in the nationalist surge of the early 20th century. Until the 1970s, the authors see deindustrialisation as a managed, collaborative process between government and workers.  The suggested substantivist narrative is that this Scottish experience was dislocated by the new Westminster politics and ideological determination of the late 1970s, transforming trust into confrontation and a new, nationalist surge. Devolution, intended as a solution but implemented as a compromise, could not check the vented political anger at what appeared to be externally imposed and repeated blows to the Scottish economy.

This hypothesis is presented by the authors on the basis of deep understanding of both wider processes and the relevant case studies: shipbuilding on the Clyde, car manufacturing at Linwood, and the history of Timex in Dundee. It is a balanced selection covering, respectively, an increasingly non-competitive traditional sector; an intermediate modern one; and a risk laden endeavour to introduce a new car manufacturing capacity into virgin industrial hinterland.  The range of source material is impressive in both the use of primary sources and interviews. Interestingly, the interviews are focussed on representatives of the labour force, which may contribute to a running accusation that employers and politicians failed to sustain their duty of care.

The distinctive narrative of deindustrialisation widens and deepens understanding of sequence and consequence in Scotland. It raises also interesting questions about connection to wider debates about the connection between global and local. The lens widens only as far as to embrace the political economy of Scotland’s Central Belt, where economic damage and disappointment were greatest, matched by the most severe political reaction to the established political order, dominated by the two unionist parties, Conservative and Labour. The authors make it clear that not only was deindustrialisation well in train before the breakdown of moral economy but that, in fact, the manner of deindustrialisation shattered the structure of this reciprocal moral bargain.

The coexistence of the terms ‘deindustrialisation’ and ‘moral economy’ in the title perhaps promises more than it delivers. The analysis presents a scenario where, before the 1970s, the moral economy underpinned the earlier transition to new industrial formats and outputs in Scotland. The consequence was political stability, preserving the established unionist choreography displayed by Conservative and Labour parties.

A counterfactual question emerges as to whether deindustrialisation could have been arrested or slowed down in Scotland if the protocols of the moral economy had been maintained. International influences and global competitiveness were undoubtedly predominant in affecting the performance in the three sectors identified. The unanswered question is about different employer reactions, alternative investment decisions, and government policies which would protect industries rather than throw them to market forces.

The headline combination of ‘deindustrialisation’ and ‘moral economy’ raises two points of comparison. First, how different, and for what reasons, was Scotland’s pattern of deindustrialisation? Second, how did a ‘moral economy’ in Scotland differ from such configuration elsewhere. On the first point, the book does not engage with extensive comparison.  Perhaps understandably, it is concerned with the distinctive Scottish narrative. Yet there is a sense in which the description of external policy shifts and exposure to market forces is underplayed, leading to over-statement of the importance of the breakdown of consensus. This selectivity overlooks longer-term and endemic performance failings in shipbuilding; fundamental design, process and costing faults in the rushed production of cars at Linwood; and over-expectation and around new investment in Timex in Dundee. In other words, had the traditional industries run out of road and the newer manufacturing sectors based on exceptional support and decisions that were political rather than accountable in business terms?

The core argument that ‘forced deindustrialisation’ from the 1970s challenged and ultimately destroyed a working and sustainable moral economy could be seen to gloss over a reality in which the mutual relationship actually inhibited necessary change. The moral economy was underwritten by a list of supportive centralised actions, including regional policies, government subsidy, biased and benevolent government measures and arm-twisted private investment. Moral economy was, in fact, a multi-layered rather than binary dialogue, more complex than a worker-employer/government dialogue. Its existence, in spirit as much as substance, provided artificial protection against the realities of modernising traditional industry or meeting the rigorous entry criteria of new industries.

On the second issue, the nature of Scotland’s moral economy, the nagging issue is one of stretched comparison, or credibility. The description and analysis of the dialogue and common ground between employers, government and workers are entirely convincing. Less so is the direct linkage to E P Thomson’s coinage of the term ‘moral economy’ as pertaining to a particular set of rural circumstances in the eighteenth century.

Presented with a failure of consensus, or reciprocity, the recourse of workers and citizens in Scotland’s central, deindustrialising belt was to embrace newer political perspectives, notably Scottish nationalism. These aspects of the book demonstrate a drift in its narrative to a form of economic anthropology. The overarching mood of moral economy is depicted initially as a relationship of trust between employers, including government, and labour. The pattern of the breakdown of moral economy, according to the authors, occurs over three phases, matched to the sequence of deindustrialisation. The loss of moral economy accelerates as the deindustrialisation reaches its latter phases. At the same time, the political momentum quickens.

The loss of moral economy worsens the effects of deindustrialisation, but did not cause it. In particular, from the 1970s, there had been a shift in government perspective on its obligations, engendering a militant, disruptive response on the part of organised labour. These events, in turn, began a political sequence weakening the strength of the unionist position and undermining the predominance of the Labour Party in Scotland’s Central Belt. Scottish nationalism had new energy, a new set of causes, and in the invigorated Scottish Nationalist Party, a new platform.

The detailed research on the three industrial sectors is not really connected to the wider set of global influences. Instead, the book emphasises the distinctive, pattern of events in Scotland and attributes accountability for industrial loss. With its focus on specific sectors and in a restricted geographical area, the work derives its central hypothesis from a given, and restricted, set of factors. As such, the work is argumentative rather than comprehensive, and not a panoramic account of Scotland’s economic performance.

It is a compelling account of the origins of Scotland’s new political direction. As the authors emphasise, deindustrialisation was well under way before the moral economy broke apart. Indeed, they assert that Scotland’s prior experience was one of accommodation and compromise rather than confrontation. This perspective leaves us with the question of its sustainability. Notwithstanding the shift in political direction from the 1970s, was the moral economic bond strong enough to withstand the external shocks generated in the international economy?

This tight, well-disciplined book promotes deeper understanding of Scottish deindustrialisation. Equally, it contributes not only to the generic debate on ‘moral economy’ but also to the understanding of the options available to participants in the economic drama. In Scotland, the workforce could select from the trilogy of economic actions identified by Albert Hirschman – Exit, Voice and Loyalty – but in reverse order. It is also a set of case studies around the interaction between local and global circumstances, affecting industries of different vintage and type.

 

Professor William Wardle is a former Principal of York St. John University, and James Watt College of FE/HE. He has been a member of the Scottish Higher Education Funding Council and his bespoke consultancy engages internationally with institutions, agencies and governments.

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

Subject(s):Economywide Country Studies and Comparative History
Government, Law and Regulation, Public Finance
Industry: Manufacturing and Construction
Labor and Employment History
Geographic Area(s):Europe
Time Period(s):20th Century: WWII and post-WWII

Changing Times: Economics, Policies and Resource Allocation in Britain since 1951

Author(s):Chick, Martin
Reviewer(s):Tomlinson, Jim

Published by EH.Net (April 2022).

Martin Chick. Changing Times: Economics, Policies and Resource Allocation in Britain since 1951. Oxford: Oxford University Press, 2020. xiii + 440 pp. £31.49 (paperback), ISBN 978019955277.

Reviewed for EH.Net by Jim Tomlinson, Professor of Economic and Social History, University of Glasgow.

 

This long-awaited addition to the Oxford University Press’s Economic and Social History of Britain series provides a powerful and intriguing account of British economic policy and performance since 1951. The author, Martin Chick, has long taught economic history at the University of Edinburgh and has published widely cited books on energy and industrial policy. This is in part a straightforward textbook, offering a comprehensive, thematic account with summaries of a wide variety of relevant literature, and a formidable array of statistics (including a statistical appendix that runs to 40 pages). But it is more than a textbook, drawing on a wide range of economic theory as well as substantial research in the National Archives to provide new arguments on often familiar topics.

The most distinctive feature of the approach taken is the focus on the temporal and, to a lesser degree, spatial dimensions of economic and economic policy change. In Chick’s view, ‘Many of the cited policy changes reflected a shift in the proportionate emphasis on different forms of time, between the present and the future, as well as a shift in the apportionment of benefits between the public and the private, and the collective and the individual’ (p. 17). This approach is linked to an evident fascination with certain types of economic theory, ranging from the highly abstract accounts of how time has been built into economic thinking in the works of theorists such as Ramsay, Allais, Hayek, Keynes and Meade to the more recent and focussed work of, for example, Kaldor, Phelps, Stern and Kay.

This attention to economic theory, much greater than is typical in general economic histories, is used to provide an account which is seen as complementary to those which emphasize neo-liberal ideas as the basis for key changes in post-war economic developments. The book does not contest the standard narrative of Britain since 1951 seeing ‘a shift to and then away from what may be crudely characterized as collective, provisionist, often monopolistic, non-market-based approaches by government to the financing, sourcing, and distribution of health, housing, education, electricity and other services’ (p. 16). But, it suggests, this needs to be supplemented by a recognition of the ‘different and changing uses made of time in the public and private allocation of resources’ (p. 17).

One area where the ‘retreat of the state’ has been unambiguous in recent decades has been that of public investment, with public sector net investment falling from a peak of 7.6 percent in the late 1960s down to close to zero by the turn of the century. The argument here links this change not only to the pressures for higher current spending on health, education and social security constrained by the political obstacles to raising taxation. This in itself has put great pressure on devoting public resources to investment, but Chick argues persuasively that this was accompanied by a shift away from emphasizing the ability of governments to fund public investment projects more cheaply than the private sector, to a focus on testing and discounting the potential benefits of such investment. This is one area where a whole new apparatus of calculation, Cost Benefit Analysis and its corollaries, grounded in particular notions of time, has profoundly shaped public policy.

Necessarily central to a book which pays so much attention to economic theory is assessing how far such theory can be seen as a prime mover in changing policy. In the case of public investment, that link seems demonstrably important, though operating, as suggested, within political constraints on the level of taxation. Environmental policy, which commendably gets a chapter to itself in this book, is another where economic arguments have been central in shaping the debate. As is discussed here in admirably lucid terms, the debate over how to respond to global warming raises profound questions about how to deal with time, echoing century-old debates within economics. In the climate change debate, how to think about the consequences of the time lag between actions taken now and the benefits accruing to future generations is central. But the issue is spatial as well as temporal, as many of the efforts aimed at containing carbon emissions will have to be taken by the rich countries, with much of the benefit accruing to the poor parts of the globe.

How far have shifts in economic theory been responsible for changes in the welfare state? One of the many illuminating (and amusing) vignettes provided by this book is of the Treasury responses to the early Institute of Economic Affairs’ attacks on the NHS in the name of consumer choice: ‘99% rubbish: however, we ought not as impartial critics to forget the 1%’ (cited, p. 193). Such ‘rubbish’ fed into the purchaser/provider split which in various institutional configurations has impacted heavily on the NHS. On the other hand, it is worth noting that the much more radical changes to healthcare (essentially, the transition to an insurance system) that the IEA advocated have made little progress.

While deploying a distinctive approach to many topics, this book is fully alert to the current concerns which aminate much of the historiography. In particular, it is very strong on inequality and poverty, which gets not only a dedicated chapter but much discussion elsewhere. Indeed, partly because of the concern with time, and its obvious links with questions of investment, there is considerable discussion about asset ownership and its profound inequalities—much greater than for income, large as the latter have become since the 1980s. And rightly there is a focus in this context on housing, where both the spread of ownership and the uneven accrual of the benefits of that ownership are arguably central to the recent political economy of inequality.

Highly innovative in many regards, the book also has features of an arguably problematic conservatism in its approach to the post-war British economy. The introduction to the book is framed by two tables on changes in GDP. These are accompanied by a footnote which tells us ‘How well such a measure captures the value of all the output in modern economy is a matter of current debate’. Some might regard that as a masterpiece of understatement! In fact, that debate has been taking place ever since the concept of GDP was invented in the inter-war years, with some of the most powerful criticism coming from the key formulators of the concept, Simon Kuznets. But the point is not just about the underplaying of the profound conceptual problems raised by using GDP to measure economic progress. Comparisons of British GDP growth underpin a whole ‘declinist’ account of modern British economic history, which suggests that Britain has suffered from profound economic debilities in the postwar period (especially in the 1950s and 1960s). Chick’s approach is not as declinist as many who write about post-war Britain (for example, Nick Crafts’ recent Forging Ahead and Falling Behind), but it does affect the argument at important points. For example, the welcome attention to Britain’s deindustrialisation is framed in declinist terms, where stereotypically the unfavourable contrast is with Germany—though the table of comparative GDP shows British GDP/head exceeding Germany’s in recent years despite this contrast.

Deindustrialisation has undoubtedly been very important in Britain’s recent economic history, but seeing its significance in terms of the possible impact on the growth of GDP may miss much of the point. As noted, though perhaps underemphasized, by this book, structural change in employment away from industry has had profound implications for poverty and income distribution, and its spatial distribution. In turn this has fed into significant changes in social security. Last but not least, the change summarised by the evocative and largely accurate phrase about what has happened to the typical job –‘from coal to care’ — is very much linked to changes in the gendered distribution of work.

 

Jim Tomlinson is Professor of Economic and Social History at the University of Glasgow, and currently has a Leverhulme Trust Major Fellowship to work on ‘Defeating Mr Churchill: The Local, the Global and the Imperial in the Decline of Liberal Political Economy, 1900-1929.’

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

Subject(s):Economic Planning and Policy
Economywide Country Studies and Comparative History
Government, Law and Regulation, Public Finance
Income and Wealth
Geographic Area(s):Europe
Time Period(s):20th Century: WWII and post-WWII

Leave Me Alone and I’ll Make You Rich: How the Bourgeois Deal Enriched the World

Author(s):McCloskey, Deirdre N.
Carden, Art
Reviewer(s):Mokyr, Joel

Published by EH.Net (April 2022).

Deirdre N. McCloskey and Art Carden. Leave Me Alone and I’ll Make You Rich: How the Bourgeois Deal Enriched the World. Chicago: University of Chicago Press, 2020. 232 pp. $25.00 (hardback), ISBN: 9780226739663.

Reviewed for EH.Net by Joel Mokyr, Northwestern University.

 

For half a century Deirdre McCloskey has been a member of the starting lineup of economic history. The author of numerous books and hundreds of research papers and essays, her magnum opus is the monumental “Bourgeois Trilogy” that appeared between 2006 and 2016 and laid out her view of economic history and much else in about 2,000 pages. The slim volume here, co-authored with Art Carden, summarizes her views of what she has termed the “Great Enrichment” and makes it accessible to a wider public. In every way, this comparatively slim volume is vintage McCloskey: written in a rather informal conversational style, she states her views in her inimitable crystal-clear prose. She is relentless in her dismissal of other scholars she disagrees with and concepts she finds misleading, often with devastating bon mots. Thus the concept of capitalism is “a scientific mistake compressed in a single word” and the mistaken historians who elevated new-world slavery to a first-order cause of the Great Enrichment are told that “slavery was bad enough without ornamenting it with bad history and bad economics.” Indeed.

The book makes a powerful case for a classical liberal society: what accounts for economic success and growth is liberty. Other elements such as institutions, science, trade, resources and so on may have a mattered a bit, but the indispensable element that did it all was freedom from coercion, from regulation, and from oppression. That freedom was absent for most of human history, and it emerged only in Britain and the Low Countries in the seventeenth century. The Bourgeoisie, a group much maligned by the “left-wing clerisy,” are really the heroes of our prosperity and the “bourgeois deal” as they call it and as reflected in the well-chosen title of the book was the main driver that led to modern prosperity. The deal was simple: give us our freedom and we’ll make the economy grow. We’ll take the risks, but if we succeed, we’ll be rich and so will (almost) everyone else. The idea was so powerful and successful that it spread worldwide and has lifted up most economies on the planet. Hence, the majority of humanity is immensely richer than ever before and material life is better than ever before. That is the economic history of the modern world in a nutshell.

The explanandum, of course, is familiar to every undergraduate student of economic history. But the explanans may not be. The first sentence of the book’s preface is “The theme of our book is simple and true. But controversial.” Perhaps one might wonder, if this is all so self-evident, and the evidence so overwhelming, why is it still controversial? The message should be very attractive: freedom is obviously an attractive concept, something people are willing to die for. If an additional benefit is that it also makes us rich, what’s not to like? Why do not more people embrace the libertarian account that McCloskey and Carden tell here? Moreover, academics are also members of the bourgeoisie: why resist the idea that they are the heroes of the tale?

Much of the book — derived from Vol. 2 of the McCloskey Trilogy — consists of the demolition of alternative explanations of the Great Enrichment. These interpretations are viewed not so much as completely wrong as inadequate: too small, too late, too early. Only the Bourgeois Deal, concluded in the centuries before the Industrial Revolution, will do. The logic is powerful: people are entrepreneurial, they are ingenious, they are acquisitive. Give them a chance, let them loose, and they find opportunities to enrich themselves, and in the positive sum of economic development they will make everyone richer as well (even if not as rich as they are — but that does not bother the authors).

McCloskey and Carden clearly have no sympathy for the idea that what drove the Great Enrichment was something called state capacity, the ability of nations to create governments that helped create law and order, provide public goods, and solve coordination problems. Its importance has been stressed by both economic historians such as the late Larry Epstein and economists such as Tim Besley and Torsten Persson. It is striking that the regions that the authors point to as the birthplace of the Bourgeois Deal were actually areas in which economic regulation was tight and taxation was heavy. To be sure, after 1825 many of the most onerous coercive measures in Britain were abolished (the Corn Laws only in 1846), but the first century of the Industrial Revolution took place in a rather oppressive political environment where “liberty” may not have been the best characterization of the state of society. The apex of the British laissez faire economy took place after, not before the Industrial Revolution. In later cases, industrialization and growth occurred in economies such as Russia and Japan in the first half of the twentieth century, where individual liberty was not a priority.

This book makes a strong argument for ideational history. The idea of unfettered economic activity, as expressed so powerfully by Locke and his followers (above all, of course, Adam Smith), is the “engine” that drove the economies of the West into the Great Enrichment. Yet there is something odd in the argument as presented here: while the authors, like all liberal writers, are firmly committed to the wisdom and power of the market, and while this book presents a strong case for the historical importance of ideas, it does not dwell on the market for ideas. There is little here that explains how the idea of freedom and unfettered markets actually caught on. After all, as the book notes, there was powerful resistance from many corners, and the victory of liberalism was by no means assured. It was driven, they say, by successful revolutions (in sixteenth century Netherlands and seventeenth century England), the printing press, and the reformation. Had these not taken place, the Enrichment may not have occurred. Europe was not better, it was lucky. But ideas do not just catch on because of their future benefits: they have to be debated and sold in a market for ideas, in which its proponents persuade their audience based on the evidence, the logic, or the ethics of the idea. Yet surprisingly the market for ideas makes no entry in a book devoted to the praise of markets and the power of ideas. Indeed, it could be argued that in their account liberalism’s success was precisely due to what happened in the market for ideas. Intellectuals from Locke and Smith down persuaded the people that mattered of ideas that led to economic growth.

The emphasis on ideas leads to the other question that the book raises. The period they describe as crucial to the emergence of the main elements of the Great Enrichment corresponds with the Age of Enlightenment. Yet the Enlightenment, arguably one of the most powerful cultural movements in history, plays no role in their account despite its commitment to ideas. Writing the economic history of modern economic progress without the Enlightenment is the ultimate prince-less Hamlet. Historians have recently rescued it from the dismissive attitudes of a misguided revisionist historiography, as exemplified by Ritchie Robertson’s recent tour de force (though it ignores economic history). Which precisely were the enlightenment ideas that mattered? A belief in liberty, free markets, and small government surely was part of it, although a disturbing number of philosophes felt that growth was too important to be left to the private sector and needed help from a friendly government. What the French called dirigisme was basically an attempt to recruit the government to help entrepreneurs in their endeavors. Britain was exceptional in its laissez faire approach to economic development — and even there the government was not altogether absent.

Above all, what is missing in this book is any serious acknowledgment of the role of what people at the time called “useful knowledge” — an understanding of natural phenomena and regularities. In many places of the book, the author invoke ingenuity as the force for progress. But how is ingenuity to lead to sustained growth without knowledge? Ingenuity and technological progress do not drop down from heaven as soon as liberty is declared. Skills, technical savoir faire, and dexterity have to be produced and created in the system. Increasingly it was realized that such skills needed to be augmented by an understanding of the natural regularities of mechanics, energy, and materials. The Enlightenment realized that natural philosophy could be harnessed to material needs, from fighting smallpox to finding longitude at sea to pumping water out of coal mines. McCloskey and Carden will have none of it. Science, they say, was unimportant as the driver of growth, because so many advances were made without it.

This assessment hinges on a somewhat narrow definition of what we mean by useful knowledge. The basic idea was one of progress, and progress was to be achieved because knowledge — both propositional and prescriptive — was cumulative. Progress occurred because in a well-functioning market for ideas, better insights about nature would beat out inferior opponents. Lavoisier’s chemistry replaced phlogiston and caloric, and vaccination pushed out the antiquated resignation that smallpox was a divine punishment for our sins. None of those triumphs, and countless others, were accepted without fierce resistance, and their victory was never assured. But this is why the story cannot be told without placing the Industrial Enlightenment on center stage. What the Industrial Revolution needed was knowledge: science, when appropriate, augmenting and supporting the often tacit knowledge of workmanship and materials, but also many other things: practical arithmetic (as shown in a brilliant forthcoming article by Kelly and Ó Gráda), the use of better tools and equipment, an understanding — often instinctive — of mechanics, heat, and chemical processes.

In short, a society that was free but ignorant would not grow. Unlike what Carden and McCloskey imply, ingenuity was not an automatic and passive link between freedom and prosperity. The sense that a systematic cataloguing and understanding of natural phenomena and regularities was needed to achieve progress permeated the thinking of the people who brought it about — including those who had no science themselves. As scientific knowledge expanded, people latched on to it and drew from it to come up with new ideas that made life better. Uneducated tinkerers, by themselves, could not have turned the Industrial Revolution into sustained growth. Inventions can be made serendipitously, without the faintest understanding of why and how they work; but such advances soon bog down. What we need now, then, is a serious discussion of how the elements of the Enlightenment interacted, that is, how personal freedom and the right incentives helped create the surge of practical knowledge and ingenuity that actually created the means for the Great Enrichment.

Liberalism, as it emerged in the West and as described in this book, was part and parcel of the European Enlightenment — though (like everything else in the writings of the eighteenth-century philosophes) it was disputed and doubted. Yet the Enlightenment was much more than liberalism, and if all that it had created was a belief in personal freedom and less restrictive government, its effects on the Great Enrichment may have been more modest. What counted was a belief in progress — material as well as social and political. Not all the prescriptions toward the perfection of society worked equally well — and perhaps that may be why the Enlightenment became something of a whipping boy for some writers influenced by the lamentable “Frankfurt School.” But on the matter of economic growth, the eighteenth-century intellectuals basically got it right. Material progress, the philosophes felt, was driven above all by knowledge and its accumulation, its testing in the market for ideas, and its application by engineers, mechanics, and entrepreneurs. These were the real causes of the Great Enrichment. Everything else — trade, politics, literacy, imperialism, and a host of other factors enumerated and dismissed by McCloskey and Carden — depended on that.

What, then, should we think of the role of “freedom” in economic growth? The question will be debated for generations and McCloskey has done our profession a great service by setting the terms of the debate. A large number of scholars would argue that rather than “laissez faire” policies, enlightened and competent governments could support and drive economic growth. As the late Alice Amsden has shown in her The Rise of the Rest, such governments existed. Without sufficient state capacity to guide and support development, many of the conditions for a Great Enrichment may not be there. Could there be such a thing as “too much liberty” just as there clearly was a thing such as too much coercion? In a forthcoming book, The Rise and Fall of Laissez Faire, Walker Hanlon shows how over the course of the nineteenth century Britain slowly retreated from a rather extreme form of laissez faire and introduced elements of regulation, coercion, and the welfare state to correct for some of the most undesirable consequences of the Industrial Revolution. So did every industrialized nation, some more, some less. Even the individualist and freedom-loving United States was dragged into a (partial) retreat from extreme liberalism, not just because most people demanded it, but because it was the right thing to do.

Perhaps the authors should consider this: liberalism depends on markets, and markets can fail. Part of liberty should therefore consist of society’s right to choose a certain amount of coercion and regulation by the state, to avoid such unacceptable outcomes as child labor, toxic chemical pollution, millions of people without medical insurance, and the poisoning of considerable portions of the population by pharmaceutical firms selling addictive substances. Somewhere between a libertarian free-for-all economy, and the horridly coercive worlds of Stalin and Mao, there is a goldilocks-like middle ground, far from optimal perhaps, but more livable than the alternatives. It is that middle ground that the Enlightenment strove for. In an imperfect world, that is the best we can do.

References

Amsden, Alice H. The Rise of “The Rest”: Challenges to the West from Late-Industrializing Economies. Oxford University Press, 2001.

Besley, Timothy, and Torsten Persson. Pillars of Prosperity: The Political Economics of Development Clusters. Princeton University Press, 2013.

Epstein, S.R. Freedom and Growth: The Rise of States and Markets in Europe, 1300–1750. Routledge, 2000.

Hanlon, Walker W. The Rise and Fall of Laissez Faire. Princeton University Press, forthcoming.

Kelly, Morgan, and Cormac Ó Gráda. “Connecting the Scientific and Industrial Revolutions: The Role of Practical Mathematics.” Journal of Economic History, forthcoming.

Robertson, Ritchie. The Enlightenment: The Pursuit of Happiness, 1680–1790. New York: Harper Collins, 2021.

 

Joel Mokyr is the Robert H. Strotz Professor of Arts and Sciences and Professor of Economics and History at Northwestern University, and Sackler Professor, (by special appointment) at the Eitan Berglas School of Economics, Tel Aviv University. His most recent book is A Culture of Growth (Princeton University Press, 2017).

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

Subject(s):Economic Development, Growth, and Aggregate Productivity
Economywide Country Studies and Comparative History
Markets and Institutions
Geographic Area(s):General, International, or Comparative
Europe
Time Period(s):General or Comparative

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

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

Published by EH.Net (March 2022).

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

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

 

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

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

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

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

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

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

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

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

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

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

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

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

References

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

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

 

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

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

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

Reluctant Cold War Warriors: Economists and National Security

Author(s):Kontorovich, Vladimir
Reviewer(s):Bollard, Alan

Published by EH.Net (March 2022).

Vladimir Kontorovich. Reluctant Cold War Warriors: Economists and National Security. Oxford: Oxford University Press, 2019. xiii + 266 pp. $78 (hardcover), ISBN: 9780190868123.

Reviewed for EH.Net by Alan Bollard, Professor of Economics, Victoria University of Wellington

Throughout the Cold War there was an intense focus on the Soviet Union – how big, how prosperous, and how aggressive it might be. The group of economists in universities, think tanks, and the US Administration especially its intelligence agencies, who studied this problem were called ‘Kremlinologists’ or ‘Sovietologists’. Winston’s Churchill’s quote about the Soviet Union being ‘a riddle wrapped in a mystery inside an enigma’ presented a challenge to these analysts – a huge economy, with a radically different economic system, apparently successful in its military production but less so in consumer economics, with much essential data and policy intentions cloaked in secrecy. Some of these analysts were émigré Russians or from émigré families, bringing inside knowledge about the economy, Russia’s language and institutions, and also intense personal experiences. Other analysts belonged to the Cold War Warrior schools, skilled in new mathematical techniques and raised in an environment of nuclear competition.

This book is an exercise in economic historiography – what did Sovietologists know about the Soviet economy, what were they ignorant of, and what biases did they bring? The author is well-positioned to answer these questions – Vladimir Kontorovich was educated in Novosibirsk, a Cold War ‘academic city’ in the Soviet Union, and is now a professor of economics in the US and has published widely on the Soviet economy. To him ‘the Soviet economy was the greatest economic experiment in history,’ and given its scale of ideological and institutional disruption and its radical allocation techniques, it represented a challenge to Western economic understanding. This book is a case study in economist adaptation.

The Soviet economic system was designed in the 1920s, and by the 1930s it was attracting wide interest for its central planning and high economic growth during a period of world depression. At this time most Western reporting was impressionistic and journalistic. The major academic debate sparked by Ludwig von Mises about the efficiency of socialist planning versus capitalist markets took place with little institutional reference to the Soviet economy.

Serious Western research started with World War II, and the concern of the OSS (the wartime forerunner of the CIA) over the capacity of the Soviet economy to sustain German invasion. Kontorovich cites US-based economists Abram Bergson and Alexander Gerschenkron as key founders of Western economic Sovietology. After the war, US Cold War concerns over Soviet nuclear capability led to more funding and more concerted work on the Soviet economy and its ability to compete. By the post-Sputnik era there were questions about possible Soviet economic leadership. By the later 1970s the country was seen as less of an economic threat and Sovietology went into decline.

Kontorovich surveys a large literature on the Soviet economy. There were big discrepancies in estimates of Soviet GNP. He concludes that many researchers underestimated the strength of the Soviet economy over the period 1960 to 1990; estimates from the CIA, considered at the time as being ideologically driven, were probably more accurate than those of many independent researchers.
He also argues that the Soviet military sector did not get the attention it deserved from Sovietologists. Admittedly it was hard to do this – Soviet official estimates of their military sector were suppressed or conflicting, there were different costing techniques, data quality was poor, and modelling techniques inconsistent. This brought unreliable estimates of what he calls the ‘burden of defence,’ i.e., military expenditure as a percentage of GDP, extremely high during World War Two but still high in later decades. The author provides considerable detail on the defence establishment, its supply industries, control systems, closed cities, and skilled workers.

To demonstrate the lack of attention to this key sector, he surveys several hundred books and over a thousand articles on the Soviet economy mainly by Westerners, even counting chapter numbers, page numbers and index references, to show the gap in focus. Kontorovich argues that the Soviets signalled the importance of military expenditure and its associated heavy industry production, but Sovietologists frequently failed to pick up on these transparent objectives, and data was not always as secret as claimed. He argues that ‘Sovietologists belonged to a small, low-prestige, precariously established field of economics.’

He makes these points convincingly, but at times the argument is pedestrian and unnecessarily long-winded. There are tables that cite the number of chapters, index references and page numbers relating to the military sector, drawn from several hundred books and over a thousand articles. His bibliography is 40 pages long. The arguments are heavy-handed, though convincing.

Nevertheless, this is an important book. The invasion of Ukraine by Russia at the time of this review opens up similar questions about the relative size of the Russian military sector – much smaller than in the Cold War Soviet Union, but much larger than most OECD countries. Do we still share the ignorance about Russia’s military effectiveness, geopolitical objectives, and political control systems that Kontorovich laments during the Cold War?

This book could also serve as a guide for the more recent profession of ‘Pekingologists,’ who study the rapidly growing economy of China, important for its trading implications, its financial reach and its potential military power. Kontorovich shows how academic herd behaviour, data gaps, policy secrecy, and lack of institutional understanding of a country’s characteristics, can lead to poor decision-making in the West, and US President Donald Trump has showed us the risks of that.

 

Dr. Alan Bollard is Professor of Economics at Victoria University of Wellington, New Zealand. He is the author of Economists at War: How a Handful of Economists Helped Win and Lose the World’s Wars (Oxford University Press, 2020) and is currently writing a book on economists during the Cold War.

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

Subject(s):Development of the Economic History Discipline: Historiography; Sources and Methods
Economic Planning and Policy
Economywide Country Studies and Comparative History
History of Economic Thought; Methodology
Military and War
Geographic Area(s):General, International, or Comparative
Europe
North America
Time Period(s):20th Century: WWII and post-WWII