Published by EH.NET (July 2007)
Paul W. Rhode and Gianni Toniolo, editors, The Global Economy in the 1990s: A Long-Run Perspective. New York: Cambridge University Press, 2006. xiv + 319 pp. $35 (paperback), ISBN: 0-521-85263-3.
Reviewed for EH.NET by Christopher Hanes, Department of Economics, State University of New York at Binghamton.
This excellent book collects papers presented at a Duke University conference in 2004, run by Rhode (now in the economics department at the University of Arizona) and Toniolo (University of Rome and Duke University economics department) ? and attended by this reviewer. Unlike many conference volumes, it is true to its title: each contribution compares economic developments of the 1990s with historical ones; and/or describes 1990s developments in the manner of economic history, weaving together statistics, narrative, and economic theory. The volume is also much more cohesive than most books of its type.
A number of themes pop up in paper after paper, so that it is actually easier to describe the book in terms of these themes than by listing individual chapters. Growth in economy-wide total factor productivity, capital investment and the effects of information technology (IT) improvements, in the U.S. and Europe, are covered by Nicholas Crafts, Riccardo Faini, Alexander J. Field, Gavin Wright and Robert J. Gordon. Faini and Crafts discuss European regulations on labor and product markets as factors hindering growth. The possible role of computers as a “general purpose technology” like steam engines and electricity is the subject for Peter L. Rousseau, and is also discussed by Peter Temin, Crafts, Faini, Field, Wright, and Gordon. The late 1990s U.S. stock market boom is compared with the late 1920s boom by Eugene N. White, Gordon and Temin. Increasing income inequality in the U.S. is discussed by Temin, Wright and Gordon.
Though these contributors’ topics overlap, each author has unique points to make. Gavin Wright argues that total factor productivity growth is not driven only by technological advance, but is the result of complicated interactions between technological opportunities, managerial innovations, unemployment rates and public policies with respect to education and wages. Gordon compares the 1990s with the 1920s, not to understand the later period but to identify “rotten apples” in the 1920s boom that would have caused subsequent problems even if post-1929 monetary policy had been better. (His list includes bad bank regulation, low margin requirements on stock purchases, inventory management, and “overinvestment” in fixed capital.) White draws the lesson that monetary policy should not attempt to prick asset-market bubbles. Field argues that IT advance may be credited with 1990s TFP growth, but not with the investment boom and capital deepening that took place at the same time.
Three contributors resist peer pressure and discuss independent topics. Barry Eichengreen gives a general history of 1990s developments in international trade and finance, including rising capital mobility, trade negotiations, the rise and fall of the “Washington consensus,” and the Asian crisis. Peter Lindert asks and answers some questions about social spending in the 1990s, focusing on public pensions and prospects for welfare-state programs in Eastern Europe and East Asia. Michael Bernstein discusses U.S. fiscal and regulatory policy, unfortunately edging into polemic and odd criticisms of academic economics. (Does Bernstein really think N. Gregory Mankiw is insufficiently Keynesian [p. 266]?)
Each paper is well-written ? with these authors, how could it be otherwise? ? and the book is flawlessly edited and produced, though I wish it had footnotes rather than chapter endnotes. The introductory chapter by Rhode and Toniolo is an appropriate mixture of swinging hyperbole (“The end of the so-called Cold War was undoubtedly the most important event in global history since 1945”) and careful summary of the papers.
Of course, any reader will have a list of topics that he considers central to the economic history of the 1990s, but which this book does not cover in any substantive way. I was disappointed to find very little discussion of vertical disintegration (Chandler in reverse) in industrial organization; the revival of Britain and the astounding rise of those two old laggard economies, Ireland and Spain; the various paths followed by the economies of the former Soviet Empire; and the rise of inflation targeting through interest-rate setting as the basis of monetary policy. To make room for these and other topics, I would have been willing to hear a bit less about general purpose technologies.
But that is not a real criticism of the book. The book is better because a few topics are covered so thoroughly, from different points of view. I found myself making my own connections across chapters and wanting the different contributors to get together and hash out their differences. Reading Field on 1930s TFP, alongside Faini’s discussion of different national income accounting techniques in the U.S. and Europe and how data details can affect apparent TFP growth, I wondered how much of the apparently high 1930s growth rates are a relic of the particular data and techniques used to construct those figures versus those for other decades. As Gavin Wright described the good effects of high-wage labor market policies in the postwar U.S., I wondered why apparently similar policies had bad effects in 1990s Europe. Reading Gordon on stock margin requirements in the 1920s, I wondered why White did not discuss them in his comparison of the equity premium in the 1920s and 1990s booms. It is a good sign when a conference volume makes a reader wish for another conference on the same topic.
Christopher Hanes is Professor of Economics in the State University of New York at Binghamton. He does research on macroeconomic and labor aspects of economic history.