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Bristol Historical Resource CD

Author(s):Wardley, Peter
Reviewer(s):Bud-Frierman, Lisa

Published by EH.NET (March 2003)


Peter Wardley, editor, Bristol Historical Resource CD. Bristol: University of the West of England, 2000, . Single user cost: ?45/$80; network license: ?200/$350, ISBN: 1-86043-308-1.

Reviewed for EH.NET by Lisa Bud-Frierman, Centre for International Business History, University of Reading, UK.

The editor, Peter Wardley, views this CD-ROM not as a “definitive” history of a city, but as a demonstration of the relevance of new technologies to historical practice. The vast array of historical case studies of Bristol which he has gathered are present as much for their novel research and presentation methods as for their intrinsic value in terms of content. He views this as a radical experimental departure from traditional publications.

Among British cities, Bristol was second only to London as a trading city, port, and population center. Only in the nineteenth century was it overtaken as a gateway to the west by Liverpool. Its history is therefore both distinctive and interesting.

This CD provides a history whose scale is appropriate to the significance of the city. Based at Bristol’s University of the West of England, the creation of the product under review was a substantial undertaking. A large group of authors contributed diverse resources, even though the technical staff available to install them was small, and the project had to be completed on a very tight budget.

The physical size of the single CD-ROM on which the Bristol Historical Resource is mounted provides no clue to the encyclopaedic scale of the content as measured in information terms (with 1,647 files adding up to 83.9 megabytes). Both design and navigation are conventional.

Some users may, however, be disheartened by the application of the technology. This is most apparent when one attempts to launch the program, which is cumbersome. Resources, including some datasets and HIST — a statistical toolkit — are not available for Mac users.

It is a particular challenge for a reviewer to assess such a team effort. Unlike the well-established norms of academic book reviews, which focus on content, an unusual degree of attention must also be a paid to design and technology.

Much of Wardley’s introduction is a paean to the utility of IT and electronic media for historians. He hopes this CD will serve as a forum from which professionals and amateurs, urban and local historians, established scholars and postgraduate students, can obtain useful information and enter into a lively debate. The price of appealing to such a broad audience, Wardley readily admits, “. . . is probably more unevenness in the nature and length of the various contributions than is customary.” The thirty-nine-page introduction itself exemplifies some of the difficulties associated with transferring standard academic formats from paper to VDUs. Long stretches of unbroken text are not well suited to on-screen viewing, so readers may opt to print the material. It would have been advantageous to provide “live” notes here and elsewhere in the CD, which is a convenient feature of most electronic resources.

Irrespective of the technology used, some aspects of the content also require comment. The introduction was not adequately edited and contains numerous typographical and spelling errors plus a page duplication. Wardley’s “Historical Sources and Methods” section presents information about archives and museums in the Bristol area, as well as generic issues raised by the use of written sources (printed and handwritten). His sections on “Visual Sources” and “Maps” are extended essays, which raise important issues about interpretation. They could, perhaps, have been better treated separately in the body of the CD. In the introduction itself a concise summary about the problems of understanding visual representations might have sufficed. Further sections include a useful synopsis of Bristol’s history, from Anglo-Saxon times to the present, and a consideration of local history, statistical and quantitative sources and tools, and public history.

Despite his long treatment, Wardley does not relate his analysis to the important work of Stephen Brier and Roy Rosensweig in the field of public history and multimedia. Wardley has also bypassed a major historiographic issue concerning narrative and interactive media. Edward L. Ayers has eloquently argued that conventional historical writing tends to camouflage rather than reveal the true complexity of the past. Hypertextual narrative in particular, has the potential to prompt historians to think anew about the association of ideas and the structure of knowledge:

Such a medium would offer new ways of making arguments and associations, of arraying evidence and documenting our assertions. It would offer layered or branching or interweaving narratives, or deep and dynamic annotation and indexing. It would permit us to embed narratives in shared networks of communication so that references, connections, and commentaries grow and change. It would hold out a new aesthetics of historical narrative.

Edward L. Ayers (1999) ‘The Pasts and Futures of Digital History’

The CD contains datasets, resources, a glossary, a bibliography, and articles about Bristol. The datasets are valuable and interesting. At the same time, one should note that their presentation on spreadsheets produced with sundry software, is slightly primitive and “clunky.” It would be a shame if less-than-smooth access defeated Wardley’s wish for his audience to readily adapt them for their own uses.

The resource section includes HIST, a statistical toolkit for history students. Pitched at a basic level, it features regression and correlation analysis, time series, growth rates, etc. If students were to lack a fundamental statistical knowledge, it would be important for them to gain guidance from their teachers. For instance, the selection of an inappropriate baseline for moving averages would produce spurious results. HIST is a useful device, but it has one irritating aspect: it does not seem to be possible to correct entries without recommencing the whole process.

A timeline based on the compilation of very detailed information, will be of interest to local historians of Bristol. Other features of this CD are a PowerPoint presentation on the 1774 election, about half a dozen moving images, and numerous visual images; there are however no sound files.

Over thirty authors including academics, students, and amateur historians have contributed a total of thirty-six articles covering the period from the Anglo-Saxons to the present, with a particular emphasis on the eighteenth, nineteenth, and twentieth centuries.

The papers are classified under the headings of methodology, buildings, places and people, economic history, health and social welfare, law and crime and politics. Each is broad in scope and quality but there are some outstanding pieces.

In the “methodology” category, Rob Petre and Richard Burley have written a fine article on the Bristol Record Office (BRO), which offers generic information about historical records and institutions based on exemplary material from the BRO. The electronic medium enables them to include a large array of images, including facsimiles of original documents with transcriptions. Moreover, this article takes advantage of the branching links that distinguish the technology from conventional print. For instance, they describe different types of information (historical, geographical, topographical, economic, and social) which may be found in an archive. If the user clicks on “geographical,” this leads to a choice of further information on “visual” and “documentary” details about landscape history. When the “visual” pathway is followed it points to a “maps” section, which subdivides into material on “estates,” “parishes,” and the “Ordnance Survey.” This facet of the CD is thus a resource of great depth, breadth, and flexibility.

Another article by Petre on handwriting in historic English documents from 1100 onwards contains interesting content for novices in cursive hand but ultimately disappoints because the technology was not properly deployed. Whilst pop-up windows displaying each style of writing are available, no magnification function is provided, nor could the user readily access further resources directly from within the confines of the article. The latter had to be inconveniently obtained by consulting files in a directory elsewhere on the CD, a navigation problem that is rife throughout the articles section.

In the “Buildings, Places, and People” section one can point to “Women and Property in Early Tudor Bristol” by Peter Fleming. This is a well-written article drawing on legal records from the Public Record Office in Kew. It concerns a legal dispute over the possession of a Bristol inn. This examination of a series of court cases in the 1520s and 1530s is an interesting account which clarifies much about the role of women as well as the legal system at the time. “Economic History: Commerce, Trade and Industry” is the longest section with fourteen papers. Madge Dresser leads with the “Atlantic Slave Trade in Bristol, England: Some Reflections on Sources and Approaches.” In the period 1730-1745, Bristol was the main slaving port in the country. After an interesting foray into the historiography of Bristol’s slave trade, 1698-1838, Dresser introduces new sources for scholars. These vary from inventories to poems. She makes excellent use of illustrations, which are at a good level of resolution, informative pop-ups, documents from the Public Record Office, and ample use of material from local libraries, museums and galleries. The bibliography is very complete.

Historians have traditionally focused on Bristol’s overseas and colonial trade in the early eighteenth century. Moving on to a later period, Charles Harvey and Jon Press contribute an article previously published in an edited volume. Entitled “Industrial Change in Bristol since 1800,” this is an extremely thorough survey of Bristol’s economic history covering the docks, staples, coal, textiles, non-ferrous metals, financial institutions, utilities, transport, engineering, automobiles, aerospace, chemicals, and zinc. It also offers broader perspectives such as corporate responses to economic growth and structural change, urban development, innovation and technical change. Harvey and Press argue that the diversified economy of Bristol has contributed to the city’s long-term prosperity.

Derek Braddon and Paul Dowdall deal with “The Historical Importance of Bristol’s Defence and Aerospace Sector.” They begin in 1910 and investigate companies like British Aerospace and Rolls-Royce. The theme of government expenditure in the twentieth century runs through this analysis: at the end of this period Bristol was more dependent on defense spending than anywhere else in the UK. The authors provide production tables, tables of defense expenditure, and some images.

The short and cohesive section on “Health and Social Welfare” includes an article by Archer et al on “Health Statistics, 1838-1995” which includes a good discussion of debates about public health, sanitation, living standards, and epidemiology.

John Hazlehurst, in “Inequalities in Health in Bristol between the Wars 1918-1939” has gathered a variety of statistical and other evidence relevant to public health in the period. He found that systemic barriers prevented those with the greatest need from receiving services and also that inefficiencies and lack of resources meant that clients suffered further deprivation. The government blamed the personal behavior of clients for their situation rather than focusing on social conditions of poverty and poor nutrition. This article includes pop-up tables and a glossary of mostly medical terms.

“Law and Crime” is a weaker section in which the bulk of articles, though concerned with the nineteenth century, seem to lack the purpose or context evident elsewhere. An exception is Steve Mills’ work, which considers whether juvenile crime increased in Bristol in the period 1810-20. He analyzes the effects of such factors as demobilization after the end of the Napoleonic war, poverty, urbanization, and alcohol abuse. Mills concludes that convictions increased and juveniles made up a large proportion of the total in the immediate post-war decade. The introduction explains the point and significance of the study, methods used, evidence, and the selection of spreadsheet fields. It contains useful biographical material.

The section on “Politics” is perhaps the least cohesive. Joseph Bettey considers “The Dissolution of Religious Houses in Bristol” in an engaging and well-illustrated piece, which explores the suppression of the monasteries after 1540, including the roles of Thomas Cromwell, Henry VIII and local agents. His work however is not in any obvious way connected to the other articles in the section.


The Bristol Historical Resource is a fruit bowl from which a reader must pick and choose. Of Wardley’s potential audience he probably offers the most to undergraduate history students. Although the datasets are hard to use, with guidance and motivation students could benefit from the otherwise inaccessible resources and diverse scholarship.

This CD demonstrates both the promise and pitfalls of the electronic medium for historical practitioners. Its significance goes well beyond Bristol to encompass broader questions about methodology and the nature of publication. The producers of this work have drawn on various genres, most notably, electronic editions, digital archives, databases, teaching tools, and books. Measured against the very best in each of these categories, it may be considered to be wanting. An electronic edition like the British Library’s stunning “Electronic Beowulf” has made far better use of the visual medium. It must be said that Wardley’s work does not display quite the historiographic sophistication or superb functionality, interactivity, or design of Timothy Lenoir’s website and electronic archive devoted to the history of human-computer interaction. ( While innovative in concept and exciting in its vision, the Bristol Historical Resource offers others opportunities to surpass it in execution.

(The CD can be ordered at

Lisa Bud-Frierman is currently developing a website on globalization and business history to support university teaching.

Subject(s):Social and Cultural History, including Race, Ethnicity and Gender
Geographic Area(s):Europe
Time Period(s):General or Comparative

Fort Union and the Upper Missouri Fur Trade

Author(s):Barbour, Barton H.
Reviewer(s):Fender, Ann Harper

Published by EH.NET (March 2003)

Barton H. Barbour, Fort Union and the Upper Missouri Fur Trade. Norman,

OK: University of Oklahoma Press, 2001. xvi + 304 pp. $34.95 (hardcover), ISBN:

0-8061-3295-7; $19.95 (paperback), ISBN: 0-8061-3498-4.

Reviewed for EH.NET by Ann Harper Fender, Department of Economics, Gettysburg


A visit to a reconstructed fur trade post usually takes today’s visitor off

frequently traveled major highways. Fort Union, reconstructed and opened in

1995, rises impressively above the upper Missouri River between Williston,

North Dakota and Culbertson, Montana, far from congested roads. Barton

Barbour’s engaging history reminds readers that such forts were sited along the

major transport routes of their time. The northwest to southeast flow of the

upper Missouri/Mississippi Rivers gave relatively cheap albeit seasonal access

from St. Louis to the upper plains region. Fort Union, near the confluence of

the Missouri and Yellowstone Rivers, dominated the fur trade of the upper

Missouri from 1830 until 1867.

Barbour begins with a history of the European-North American fur trade,

formally initiated by the1670 English charter to the Hudson’s Bay Company. Its

charter granted monopoly rights to trade in lands whose waters drained into

Hudson Bay. The Upper Missouri, draining southward to the Mississippi, is close

to the Red River that drains into Hudson Bay. The border between Canada and the

U.S. cuts across this drainage system leading to cross border excursions of

native trappers, European/American traders, and fur-bearing animals. By the end

of Fort Union’s life, Canadian traders increasingly used cart haulage routes

between modern Winnipeg and St.Paul, Minnesota in preference to Hudson Bay

routes. Inevitably, the fur trade became embroiled in international boundary

issues and its posts played military and diplomatic as well as commercial

roles. As Barbour makes clear, however, the fur trade was essentially a

business, with close attention paid to cutting costs, expanding sources of

supply, and maintaining market share. Barbour explains how John Jacob Astor’s

American Fur Company and the Columbia Fur Company, based in St. Louis,

Missouri, competed vigorously for the furs of the upper Missouri through the

1820s. Both companies realized that splitting the geographic market would yield

each higher profit, but agreement proved elusive. Merger solved the problem,

just as the 1821 merger of the Hudson’s Bay Company with the North West Company

solved similar competitive problems to the north. In 1827, the former Columbia

Fur Company became the St. Louis-based Upper Missouri Outfit within the

American Fur Company. Throughout Fort Union’s existence the UMO faced “petty”

competition and had to make strategic decisions about whether to buy out

competitors or to drive them from the field by vigorous trading.

Barbour includes a chapter on the business aspects of Fort Union trade, a story

resembling similar material on the Hudson’s Bay Company. After a quick but very

informative history of the North American fur trade, Barbour examines details

of Fort Union’s construction. He provides numerous sketches of the post, as

well as material from private diaries and from journals kept as part of

business records. Not often covered in such histories, this chapter attends to

both evidence and speculation about how, or if, the fort disposed of effluent

associated with housing and feeding approximately three hundred persons.

Larger fur trade posts welcomed a variety of noted visitors and Fort Union was

no exception with artists, scientists, explorers and missionaries making their

way up the Missouri. Using company records and the visitors’ diaries, Barbour

chronicles these visits. Barbour also uses these records to build a composite

picture of life within the fort. As the growing recent history of the fur trade

emphasizes, European/American traders and Native trappers were economically

interdependent. The typical post was rich in multiculturalism long before it

became academically chic. Survival in the demanding conditions of the upper

plains required adaptation. Marriages between traders and native women were

frequent and often long-term (and resembled marriages among the families of fur

trading firms). Barbour gives a particularly interesting description of how the

fort dealt with several smallpox outbreaks. The fort and the fur trade in

general had codes of conduct that could not be broken without consequences, as

Barbour’s account makes clear.

Despite depictions of the fur trade as a lawless venture or perhaps because of

this depiction, governmental agencies regulated the trade. American (and

English) sensitivity to monopoly led to frequent outcries against the large fur

trading firms. The use of alcohol in the trade generated calls for prohibition.

Fur trading firms were required to have licenses to do business in Indian

territory and political connections helped to determine who received the

licenses. Periodically the federal government set up its own “factories” to

conduct trade with the natives; invariably the Natives preferred to trade with

private firms. These governmental restrictions were not unique to the Upper

Missouri, but Barbour details their impact on Fort Union and how the Company’s

political relationships affected its prosperity. Barbour compares records of

alcohol use and abuse in the fur trade with its use and abuse by U.S. soldiers;

from this evidence, the fur traders and their customers do not look so bad.

Government-company relationships also included the UMO’s role in transporting

goods and soldiers for the U.S. government.

Even as the fur trade represents “pre-industrial” North America, industrial

technology was making inroads. Early in Fort Union’s history, steam power

overtook manpower as the preferred source of energy to move upstream on the

Missouri, evidenced by the large number of steamboat names that Barbour


The political changes wrought by the Civil War, the opening up of both wagon

and rail roads to the west, the discovery of gold in Montana, the incessant

resettlement of Indians, and the decline of the bison contributed to the

economic demise of Fort Union and its parent company. Because much of the

Indian trade involved buffalo robes, the diminishment of the large western

herds especially affected Fort Union. The fur trade interests of the Upper

Missouri Outfit were sold in 1865 and in 1867 Fort Union was demolished.

Barbour muses about the causes of the fort’s decline; he finds the American

drive for a uniform culture unable to tolerate the multicultural diversity of

the fur trade. This conclusion to a fine history strikes this reviewer as a

reach that weakens his story, a story that appropriately resurrects the fur

trade from villain to multicultural model. Attitudes might have hastened the

decline of the fur trade and amiable white/Indian relations, but the trade

disappeared because its economic usefulness had ended with new population

movements and new technology.

As an Assistant Professor of History at Boise State University, Barton Barbour

appropriately ends his fascinating story with a lengthy and helpful

bibliographic essay. The author provides more than enough detail for the

professional historian and writes a good story for the casual reader interested

in the American west.

Ann Harper Fender’s recent work has involved the economics of the Hudson’s Bay

Company and the Canadian fur trade.

Subject(s):Agriculture, Natural Resources, and Extractive Industries
Geographic Area(s):North America
Time Period(s):19th Century

Deutschlands Krise und Konjunktur, 1924-1934: Binnenkonjuktur, Auslandsverschuldung und Reparationsproblem zwischen Dawes-Plan und Transfersperre

Author(s):Ritschl, Albrecht
Reviewer(s):Voth, Hans-Joachim

Published by EH.NET (March 2003)

Albrecht Ritschl, Deutschlands Krise und Konjunktur, 1924-1934:

Binnenkonjuktur, Auslandsverschuldung und Reparationsproblem zwischen

Dawes-Plan und Transfersperre. Berlin: Akademie Verlag, 2002. 297 pp.

$79.80 (cloth), ISBN: 3-05-003650-8.

Reviewed for EH.NET by Hans-Joachim Voth. Department of Economics, Universitat

Pompeu Fabra, Barcelona.

Wrong tales last longer, or so it seems. An op-ed piece for the Wall Street

Journal on January 29, 2003 recounted the old Kindleberger/Landes story

about how the withdrawal of funds in the runup to the 1929 crash in the US led

to a downturn in Germany. Never mind that the timing is all wrong, or that

domestic reasons as well as changes in US monetary policy possibly played a

more important role — it’s a good story, and connected with one of the most

dramatic episodes in twentieth-century economic history. Of twenty-six European

democracies in 1920, thirteen had become dictatorships by 1938. Nowhere were

the consequences more catastrophic than in the case of Germany — and nowhere

did economic breakdown loom larger as a contributing factor in the demise of

democracy. A mere five years after the end of hyperinflation, the country’s

economy began to turn down once more. With the possible exception of the US, no

other nation experienced a more severe depression. Unemployment skyrocketed to

six million and industrial production fell by half; by 1932, communists and

Nazis together held a majority of seats in parliament. Ever since, debate has

raged about the inevitability or otherwise of the final outcome — Hitler’s

rise to power. Was economic misery crucial? Did the prosperity of the roaring

twenties demonstrate that Germany’s economy was in perfectly good shape? Or was

Weimar already living on borrowed time? Once the downturn began, could it have

been mitigated? Questions such as these are not just for the economic

historians, who have debated them for decades [Borchardt 1991, Kershaw 1990].

In Germany, where politicians can score an easy goal by claiming that the other

side is “emulating Br?ning” (the German chancellor during the early 1930s whose

austerity policy allegedly aggravated the slump), they are also deeply

political. Albrecht Ritschl’s Deutschlands Krise und Konjunktur attempts

to rethink many of these vexed and contentious issues. The book is primarily

addressed to a German audience, but its argument and the new data it contains

will be of interest to other scholars working on the Great Depression. It is

also an example of a peculiar art form, which needs some explaining before we

can turn to the book’s contents.

In the Anglo-Saxon world, the Ph.D. separates amateurs from professional

scholars. Uniquely, Germany has two doctorates for young and aspiring

researchers — the first is often not much of an academic affair at all, and

mainly serves to reinforce social distinctions (the delight of being called

“Herr Doktor!”, grovelling treatment from realtors, etc.). The second

dissertation, the Habilitation, on the other hand, is often only

completed in one’s late 30s or early 40s, after half a decade or so of

indentured servitude. What it lacks in originality it makes up for in length —

the second dissertation has to be an ?ber-dissertation, often exceeding 500

pages. As a result, creativity is stifled, manuscripts are basically

unreadable, and the transition to independent scholarship comes much too late

for most scholars; no other institution has contributed more to the decline of

German academia as the Habilitation.

In contrast to the mostly mindless outpourings generated by this peculiarity of

the German system, Albrecht Ritschl’s book is a contribution to scholarship. It

is actually two books between a single set of covers — one that tries to

rectify numerous problems with the national accounts for interwar Germany, and

the other an economic analysis of the slump’s causes and the policy

alternatives that could have been pursued. Aficionados of German economic

history will be grateful for having the final set of estimates for GDP and

especially for government borrowing in published form. For much too long, these

calculations were similar to an iceberg in the cold waters of German economic

history, with only a small percentage visible above the waterline, and the main

volume of work removed from the public’s eye, being only available as

unpublished working papers or in manuscript form. Ritschl has not just reworked

published figures, but made use of the extensive range of semi-official sources

published in Germany at the time. He also collected substantial amounts of

archival material, which reveal the full extent of Nazi (and pre-Nazi)

government borrowing. While some scholars may quibble with some of the

assumptions, most of the revisions are likely to supplant or augment earlier

estimates. As a result, we can now say with greater certainty than before that

during the brief halcyon days of the Weimar Republic, growth was possibly

slower than previously thought, and that deficit spending during the Nazi

recovery was nowhere near as rampant as popular mythology claims. While not as

wide-ranging as other revisions of national accounts nor as important in its

implications, this is a thorough and useful addition to the literature.

The second book contained in this volume sets itself an altogether more

ambitious aim — to provide a new explanation for the severity of the Great

Depression in Germany, and to bury alternative interpretations that have been

offered in the past. The “big idea” is that a change in the seniority of debt,

agreed as part of the renegotiation of Germany’s reparations debts, shut off

access to foreign funds when they were needed most — after 1929, when the

country had entered into a severe recession and was about to plunge even

further. Deemed the main culprit for the outbreak of World War I in the

Versailles treaty, Germany was saddled with paying reparations of an

unspecified value. Until 1932, the volume of claims and the form of payment was

being negotiated — mostly at the conference table, sometimes at gunpoint (such

as in 1923, when the French and Belgian armies invaded the Ruhr because a

shipment of telegraph poles was overdue). After the hyperinflation, in 1924,

the Dawes Plan gave Germany access to a big loan, some relief from reparations

payment, as well as “transfer protection” — money to satisfy the allies could

only be sent abroad when the conversion of marks into foreign currency did not

undermine the currency’s stability. Implicitly, this enabled the Germans to try

and “crowd out” reparations by other borrowing — since the ability to repay

foreign debt is not unlimited, and since transfer protection effectively made

reparations payments junior debt. The idea that Weimar’s borrowing/spending

spree (resulting in gleaming new spas, public swimming pools, rapid

electrification of the railways, generous public housing programmes etc.) is

partly to blame for the brutal downturn after 1929 is not particularly novel.

Also, numerous others have highlighted the importance of transfer protection

under the Dawes Plan. What makes this variation of the tale interesting is the

claim that a radical change under the Young Plan drastically undermined the

ability to borrow abroad — with reparations the senior debt, who would want to

lend? Ritschl presents a theoretical model that demonstrates exactly how the

change in seniority might have made a difference. This is a laudable exercise,

but it is somewhat uninspiring — the model adds little or nothing to the

simple verbal argument, generates no surprising implications or new ways of

testing the basic hypothesis.

The book’s main shortcomings are its unwillingness to confront the data and an

inability to show any evidence that would substantiate its key arguments. This

applies both to the borrowing binge and the debt hangover after 1929. There is

some archival evidence that suggests that Germany was keen to pile the

non-reparation debt high in order to leave the allies dry, such as an

incriminating internal document from the Foreign Office in Berlin. In effect,

the Germans deliberately tried to ensure that there were “American Reparations

to Germany” (as Stephen Schuker called them (see Schuker 1988)) — Germany

borrowed more from US investors than it ever paid in reparations, and then

defaulted on its debts. Yet those crafty Krauts clearly did not all get

together to crowd out the reparations — there were also drastic steps to

curtail foreign borrowing, not least by one of the chief conspirators in

Ritschl’s tale, the President of the Reichsbank, Hjalmar Schacht. Any borrowing

should have been good borrowing in his book if Ritschl’s main thesis is

correct. Instead, he repeatedly railed against the evils of foreign borrowing

in any shape, size or form, effectively seized control over access to foreign

funds, and succeeded in bringing inflows to a standstill for an extended

period. What is also missing is some assessment of the level of foreign

borrowing that should have been expected and that would have been “normal” in

an economy recovering from a major shock — for example, by comparing the

volume of debt issuance with Third World countries stabilizing after

hyperinflations since 1945 [for an instructive list of cases, see Fischer,

Sahay and V?gh 2002].

If the story of a deliberate crowding out of reparations appears questionable,

the central hypothesis has even less to recommend it. The well of international

credit ran dry for pretty much every borrower around the world after 1929 —

which is the origin of the Kindleberger story. Without compelling empirical

evidence to show that Germany suffered more than everyone else, it is hard to

see how the highly idiosyncratic explanation for its troubles could be

plausible at all. There are a number of obvious variables one could and should

have checked before basing so many claims on so little — did the spreads of

German bonds widen dramatically over those of other borrowers in the London and

New York markets? Was it even harder for Germany to get access to credit than

for everyone else? To this reviewer’s dismay, the book makes no attempt to

address these questions, despite the easy availability of data and the wealth

of information in the forms of charts and tables that the author assembles.

Also, inconvenient facts are largely ignored or belittled. In fact, Germany did

borrow — the famous Lee Higginson loan of 1930 — even after the change in

debt seniority rules. Ritschl notes that the conditions were not generous,

perhaps even humiliating. Yet he fails to resolve the conundrum: how could the

country obtain a loan at all if the prospect of repayment was nil? More

importantly, as recent work by Temin and Ferguson shows, political decisions —

and not the letter of the Young Plan — stood between Germany and further fresh

loans in 1931. Had the Reich not decided to build a pocket battleship and to

pursue a misguided tariff union with Austria (violating the spirit of the

Versailles treaty, and probably its letter), France would most likely have

extended fresh credit [Temin and Ferguson 2003]. Also, the author’s own data

show clearly that commercial paper issuance abroad revived in 1930, after a

brief downturn in late 1929, and that it only dried up for good towards the end

of the year (p. 120). If the seniority clause was as important as the author

claims, then it evidently took contemporaries at least eighteen months to

figure this out; and by the time they allegedly did, there were plenty of other

reasons not to lend. An externally imposed credit crunch may be the right

explanation for at least some of the German Slump’s severity; yet Ritschl’s

seniority-clause story cannot be squared with the available evidence.

True to the cliometric tradition, the book presents some counterfactuals of

German GDP during the 1920s and 1930s. Had the Reich paid up and transferred

the reparations instead of borrowing right, left and center, it could have

avoided most of the downturn, or so Ritschl argues. Between 1928 and 1931,

there would have been healthy growth, while the 1920s would have been more

subdued. Except for a small dip in 1932, the slump could have been avoided

almost entirely: Germany’s depression would have looked more like that of

France than the US experience. The underlying cause is that actual policy was

pro-cyclical twice — during the expansion and during the downturn. In

traditional accounts, the villain in the piece is Heinrich Br?ning, a dour and

ascetic Catholic whose austerity measures were designed to aggravate the slump

in a bid to show that Germany could not pay reparations. Ritschl substitutes

his story of externally imposed fiscal discipline due to credit constraints,

and turns Br?ning’s gratuitous hairshirt exercise into the just punishment for

the Republic’s debt-financed consumption mania during the 1920s. The story is

problematic on several counts. First of all, the counterfactuals are predicated

on using the Keynesian import multiplier. This is despite the fact that a good

part of the book is actually devoted to showing that Keynesian interpretations

do not apply to interwar Germany, that the fiscal multipliers are unstable,

etc. This reviewer was troubled to see the author return so happily to the same

analytical toolkit at the earliest convenience, having spent so much time

dismantling it just a few pages before. Also, it seems altogether unlikely that

Germany could have emulated the relatively good French performance, as Ritschl

argues. This was largely due to a unique set of circumstances that sheltered

the latter from the contractionary impulse that was being transmitted via the

gold standard [Eichengreen 1992, Eichengreen 2002]. Finally, how likely is it

that Germany could have borrowed much more in 1931 or 1932 if it had been more

restrained in the late 1920s, given the worldwide turmoil on financial markets

and the severe crisis in the US?

Given the unfortunate lack of compelling data analysis and the lack of cohesion

overall, it is to be feared that many of the interesting and challenging ideas

in this work may not find their way into peer-refereed journals. Yet it would

be useful if at least the data revisions could be presented and published in

English so that they may serve as a basis for future substantive work on the

many fascinating questions that Weimar’s economic history continues to raise.


Borchardt, Knut, Perspectives on Modern German Economic History and

Policy (Cambridge, New York: Cambridge University Press, 1991).

Eichengreen, Barry, Golden Fetters: The Gold Standard and the Great

Depression, 1919-1939 (New York: Oxford University Press, 1992).

Eichengreen, Barry, “Still Fettered after All These Years,” Macintosh Lecture,

delivered at Queen’s University, 2002.

Fischer, Stanley, Ratna Sahay and Carlos V?gh, “Modern Hyper- and High

Inflations,” Journal of Economic Literature, XL (2002), 837-80.

Kershaw, Ian (editor), Weimar: Why Did German Democracy Fail? (New York:

St. Martin’s Press, 1990).

Schuker, Stephen, “American “Reparations” to Germany,” Studies in

International Finance, 61 (1988).

Temin, Peter and Thomas Ferguson, “Made in Germany: The German Currency Crisis

of July 1931,” Research in Economic History, forthcoming (2003).

Hans-Joachim Voth is Associate Professor of Economics at Universitat Pompeu

Fabra, Barcelona, a Research Fellow in the International Macro Program at the

CEPR, London, and a Research Fellow at the Centre for History and Economics,

King’s College, Cambridge. His latest publications include “With a Bang, not a

Whimper: Pricking Germany’s Stockmarket Bubble in 1927 and the Slide into

Depression” (Journal of Economic History, 2003), “Factor Prices and

Productivity Growth during the British Industrial Revolution” (with Pol Antr?s,

Explorations in Economic History, 2003, forthcoming) and “The Longest

Years — New Estimates of Labor Input in Britain, 1760-1830″ (Journal of

Economic History, 2001).

Subject(s):Macroeconomics and Fluctuations
Geographic Area(s):Europe
Time Period(s):20th Century: Pre WWII

A Not-So-Dismal Science: A Broader View of Economies and Societies

Author(s):Olson, Mancur
Satu Kähkönen, Satu
Reviewer(s):Adams, John

Published by EH.NET (March 2003)


Mancur Olson and Satu K?hk?nen, editors, A Not-So-Dismal Science: A Broader View of Economies and Societies. Oxford, Oxford University Press, 2000. x + 274 pp. $75 (cloth), ISBN: 0-19-829369-0; $24.95 (paper), ISBN: 0-19-829490-5.

John Adams, Center for South Asian Studies, University of Virginia.

A dozen years after its founding, the IRIS Center at the University of Maryland, College Park, continues to flourish. IRIS is the acronym for Institutional Reform and the Informal Sector. IRIS began work in 1990 after representatives of USAID approached Mancur Olson about creating a research and policy institute that would actively apply his creative ideas about collective action, political economy, and economic growth to problems of Third World development. At that moment, the informal sector was briefly on the screen as a hot topic, but it was understood that IRIS had a wider ambit. On the immediate horizon, issues of economic reform were beginning to emerge as more East European and Central Asian economies confronted the task of making the transition from state-directed to market-based guidance. It appeared to some of the more alert minds at USAID that Olson’s The Rise and Decline of Nations (New Haven: Yale University Press, 1982), and his related papers, could bring fresh insights into the agency’s thinking. Not the least of the attractions was that institutional reforms could yield cheap, high-payoff effects on efficiency, productivity, and growth rates, when compared to the capital-intensive infrastructure or other investments favored by the donors.

The University of Maryland presented the advantage of its location in the Washington suburbs and, further, had a long tradition of institutional and policy-oriented faculty members in its Department of Economics, and the campus had strengths in related social sciences. The university administration, acting under the crusty directives of archaic state accounting and personnel practices, had no latitude to allow for the creation of a semi-autonomous unit that would enjoy flexibility in its financial management and personnel affairs. After tedious negotiations, Olson finally succeeded in establishing IRIS, thereby enabling his vision of a center devoted to rigorous, academically based economic policy advice, but with his own unmistakable twist. (The curious are directed to: The irony escaped no one, certainly not Olson, that the first IRIS victory for institutional reform had to be won in College Park and Annapolis, before advancing on to the new fronts in Moscow and Lusaka.

Over the years, IRIS has turned out many publications in all forms. This book grew out of a long-term project centered in India. Olson and the other authors gave talks that were designed to cover general issues, rather than focus only on Indian topics. The intention was to provide Indian audiences with an introduction to the IRIS approach to policymaking and reform, and then engage in give-and-take discussions. The ten contributions to Not-So-Dismal certainly cover the range of ideas for which Olson and IRIS have become known, although the high stature and personal vantage points of the other authors bring additional cachet and riches to the table. As the editors tell us in the introduction, their principal ambition was to demonstrate the effectiveness of pushing new institutional economics out into the “suburbs” of the discipline, there to interact with historians, political scientists, and lawyers. One has to say that they succeeded very nicely.

Olson contributed two essays to the compilation. The volume opens with his “Big Bills Left on the Sidewalk: Why Some Nations Are Rich and Other Poor.” This is vintage Olson stuff. Take a couple of simple observations and then play with them like a kitten with a mouse. He starts by calling attention to the striking variations in levels of productivity and income marked out by national boundaries. When an immigrant from, say, Bangladesh lands in the U.K., his earnings rise by a factor of fifty or more. Because the immigrant did not miraculously acquire either more human capital, or assume radically different cultural or religious values, during an 11-hour airplane flight, then the determining factors must lie in the institutional and policy differences between the two countries.

The logic of Olson’s dissection of this conundrum is as entertaining as it is intuitively plausible. Economists generally believe that people are rational and will seize opportunities for gains from innovation, allocational efficiencies, and contractual adjustments. These are the “Big Bills” of the title, and we see in poor countries that these often remain on the sidewalk or cow path. Olson considers as possible explanations for the persistence of national poverty the usual neoclassical variables: technology, capital, the quantity and quality of labor, and land and natural resources. He rejects each in turn: knowledge is widely available at low costs; human capital differences are insufficient; land/labor ratios and diminishing returns do not appear explanatory. What’s left? Policies and institutions, of course. His advice to the less-developed world: “Wise up.”

Olson’s second chapter in the volume is, “Dictatorship, Democracy, and Development.” A monarchist once said that a king afforded the best kind of government, because he is the “owner of the country,” and like a householder, when something is wrong “he fixes it” (p. 119). Claiming to have worried about this apparent conflict with his democratic inclination since he was a student, Olson asserts that he has finally resolved it. Societies “work satisfactorily” when they have peaceful orders and produce decent quantities of public goods. The problem is that the usual collective action contradictions intervene so that it is very hard for large societies to govern themselves well: any individual bears the costs of public good production, but is unlikely to recoup sufficient benefit to warrant the loss. Small bands or villages do not have this problem in like measure. Olson proceeds to argue that a “roving bandit” has a motive to become a “stationary bandit,” that is, a warlord or king, with a monopoly on violence because he has an “encompassing interest” that yields tax revenues from the gains from order and any economic expansion. Even with a tax rate of one-third, he has an incentive to produce public goods until the return on a unit of spending falls below three units of gain. Not optimal, but some public goods are better than none.

When dictatorships falter, it is likely because a short-term survival crisis leads to a reversion to plunder that robs subjects of incentives to remain productive and reduces spending on public goods. The leadership of a democracy is interested in securing the majority votes needed to hold power through adequate provision of public goods, but its willingness to tax is constrained by the majority’s encompassing interest in the gains its members get from higher output. Higher taxes not only take a larger share of a person’s income, but to the extent they depress incentives and product, impose an added loss. Democracies can also take the long view, which dictatorships can rarely do, plagued as they are with often deadly contests for the rulership and with crises of succession. Olson teases out of this contrast between dictatorship and democracy the further implication that governments that protect property rights and human liberties are likely to be those that do the best job of setting policies favorable to economic development. These themes are more fully developed, and applied to the problems of regime transitions, in his posthumously published Power and Prosperity: Outgrowing Communist and Capitalist Dictatorships (Basic Books, 2000)

The other eight chapters in the book rove around these classic Olson ideas, playing off them, augmenting them, or challenging them. As we all recognize, solid ideas are among the best of public goods. Joel Mokyr takes up the question, why technologies that are known to have economic and financial potential, are actively suppressed. Answering this poser should de-obfuscate the singular difficulty many poor nations have in absorbing new knowledge and techniques. Mokyr goes down a fairly well worn path in identifying winners and losers in the social balance, and pointing to the different outcomes of the market calculus versus the political geometry. Many innovations have religious and cultural facets, as well as technical and scientific ones, and this mixture frequently lends itself to a judicial or political sorting out, rather than a bare market test. Opposition to adoption can arise from those fearful of job loss, capital obsolescence, human capital erosion, or dreaded externalities, such as those from pesticides or nuclear disaster. Various political economy, Olson coalitional, and path dependence factors intrude. Summing up, no one does technological evolution better than Mokyr — but we knew that!

Oliver Williamson writes about economic institutions and development, with emphasis on the structure of corporate governance and the role of transaction costs in shaping that structure. The firm operates in a larger institutional framework but is inhabited by individuals who feature bounded rationality and opportunism in their contractual dealings. The main determinants of outcomes are the status of credible commitments, the nature of the operative bureaucratic organization, and remediableness, which is whether an admittedly deficient institution actually can be supplanted by a superior alternative, not including an idealized costless or frictionless arrangement. Political leadership and bureaucracies don’t have to be perfect, and generally successful societies can tolerate a fair number of institutional and policy stupidities.

Williamson makes an intriguing argument that in rich countries with more or less decent governance, it is hard to make a case against the odd examples of inefficiency or irrationality, such as the U.S. sugar policy, since they were derived in a system that most people support and over a long period of time their distributional quirks have been tolerated. When we have a developing country with governance above a threshold of adequacy, then reform and policy improvements can be nudged by external assistance conditionalities; in other words, remediableness is feasible when credible commitments are applied. Like Mokyr’s adroit essay on technology, Williamson’s is the gold standard on organizations. If there is a critique, one would have to say that in both cases it takes so much space to present their unique languages and grammars, there is very little room left over for applications to the developing world.

After bowing to the insights of the new institutional economics with respect to contracting, property rights, and the political economy of social choice, Pranab Bardhan reverts to a more traditional political economy approach, centered on distributional conflict. He opens by reassessing the relation-based kin and clan networks that have defined the channels of Asian commerce for many centuries down to the present. He emphasizes that the reduction in information, management, and contract-enforcement costs associated with these systems make them a clearly competitive alternative to Western business formations. The chief institutional lacunae are found in the absence of financial instruments and markets, which in turn is a consequence of the absence of governments, traditional or colonial, that could provide for “coordination in investment and risk-taking” (p. 253). Modern East Asian states nurtured economic success with managed capital markets, development banks, and infant-industry interventions. These governments could credibly commit, while many others in Asia, Africa, and Latin America have remained “soft” and are pretty much the captives of predatory special interests, as usually posited in the economists’ theories of the state.

Bardhan contrasts the close working relationships between state and private actors in East Asia with the disconnectedness of these players in South Asia. The diversity and inequalities of South Asian societies made it more difficult to build an encompassing coalition or to create a consensus in favor of a coherent, forward-looking economic strategy. Weak performance incentives for the bureaucracy in India, as one case, created a fertile ground for capture of key decision-makers by private interests, aka corruption. Bardhan offers the useful reminder that the neo-institutionalists are apt to overestimate the plasticity of institutions in adjusting to factor prices or market opportunities, in comparison to the neo-Marxists who continue to insist on the staying power of entrenched economic elites or broader class interests. In India, we see familiar failures of beneficent collective action in the villages, where social divisions bar cooperation in use of irrigation water or common property resources. What to say? Quite a lot of wisdom here and a reminder that theories require quite a lot of hammering and bending to be made to fit actual cases.

In “Overstrong Against Thyself,” J. Bradford De Long considers the difficulty states have balancing long-term prosperity goals against corrosive claims on the current product for such noble causes as conquest, spreading a religion, or exhibiting splendor. After the industrial revolution this conflict intensified because there was so much more to appropriate and states were much better organized to do it. How Great Britain resolved this dilemma is pretty much the story of this chapter. De Long observes that Europe’s cities and their mercantile leaders flourished in regions characterized by an absence of absolute rulers. He points out that “an oligarchy of merchant-burghers” had a “direct interest in economic prosperity” while the princes and kings were primarily interested in raising their military power (p. 146). A merchant-ruled city-state will tax at a lower rate than will an absolute prince, because of the burghers’ benefit in sustaining affluence. By 1600, new military organizations and technologies shifted the terms of armed conflict in favor of the princes and against the city-state militias.

First Spain and then other regimes, some autocratic and some not, became the great power(s) of an epoch, but then faltered when their military efforts, budgets, and manpower mobilization, sapped their economic capacities. Adam Smith and others were wise enough to see that Great Britain faced the identical dilemma. According to De Long, the Protestant character of the society raised the stakes for all its segments. A Catholic restoration would have been calamitous. Fear was ubiquitous: the king of losing his throne, the nobles of losing their estates, the people of losing “their souls.” Unlike their counterparts on the continent, all were happy to load themselves with taxes, with the result that the burdens of war were widely spread. Britain tended to win land engagements and naval battles, conquered new territories, and experienced rapid internal demographic expansion, all abetting wealth and military capacity. Meanings for today’s poor nations: be lucky; be realistic about growth expectations, remembering that for a long time Europe’s growth rates were well below those of today’s late starters; unite the nation, and have a fair tax code; try to elevate pro-growth, foresighted policies in the political pecking order.

I am going to shortchange the final four papers based on personal whim and a shortage of time and space. (If you think this is biased and iniquitous, go write your own review.)

Erik Moberg challenges Olson’s interpretation of Sweden’s economic slowdown after the halcyon 1960s, when a deft balancing act seemed to ensure long-term success based on heavy taxation, a plethora of social benefits, and comparatively rapid growth. Social homogeneity, economic equality, and the encompassing character of the major interest groups may have been facilitative, as Olson claimed. Moberg believes that Olson’s assertion, it can hardly be called an argument, that the retardation of growth stemmed from a fragmentation of the encompassing coalitions is not sustainable. Olson had stressed the benefits of free trade during the golden years, but Moberg observes that the oil shocks of the 1970s, high capital costs, and more rigid labor markets made it increasingly hard for Sweden to adapt to changed market conditions. This very conventional explanation may carry more water than coalitional rearrangements.

India and the United States have each put in place robust affirmative action programs, one based on caste and the other on color. Edward Montgomery undertakes a careful review of the political origins of affirmative action in these two democracies. He finds that theoretical and empirical work does not provide unambiguous answers to questions about the impact of quotas on the wages of covered or uncovered workers, or broader effects on their educational access and attainment. There is a tendency in both countries for coverage to expand over time. When adopted, India’s caste reservations of jobs and university seats, and the U.S.’s parallel doorways for minorities to enter workplaces and schools, were supposed to expire after a transition period. Although this end game had not materialized when Montgomery wrote a few years ago, it is interesting that strong moves are afoot in India and the United States to quash affirmative action, as a backlash from the upper castes and the white nobility cascades into a stream already swollen and muddied by religious, nationalistic, and militaristic currents.

Montgomery’s thematic is widened in the following chapter, by Russell Harding, who looks at the impact of India’s and the U.S.’s “socially autarkic groups” on economic policy and growth prospects. Harding distinguishes groups that define themselves socially, in terms of religion, practices, or origins, from economic groups, such as farmers. A problem arises when these groups seek state subventions to ensure their survival, predicated on some ethical or other normative principle. Linguistic diversity raises education costs and complicates government and business labor recruitment. This is all pretty much conventional sociology and has little to do, as far as I can see, with Olsonian issues. Robert Cooter contributes a chapter on law, written with an infusion of game theoretics, but the theory floats very airily above any Third World actuality. Nothing wrong with this, but one exits with a “so what” taste in one’s mouth.

What did Indian audiences make of all this? Hard to say without having been there. The theoretical contributions would be, by and large, novel in most Indian university or research circles. At the same time, I’d say that India’s policymakers are very much aware of most of the issues involved inside their own political economy mechanisms. Indian politicians are, I’ll just simply aver, the best in the world, qua politicians-committed-to-winning. If you want to triumph in an election, you’d better buy the votes of the landed castes with farm subsidies, free water, and free power. It’s pretty hard to miss hundreds of thousands of guys running around in orange gauzy pajamas waving tridents, or not be aware of festering tribal rebellions in much of the northeast, or not empathize with some 120,000,000 Muslims who find themselves being involuntarily detached from Nehru’s secularist social compact.

John Adams is an out-of-the-closet old, or original, institutional economist. To make a post-Enron disclosure, he reports that he was at the University of Maryland for 25 years, knew Mancur Olson well, and helped found IRIS.

(Dr. Adams graciously agreed to take on this review after the original reviewer proved unable to complete the assignment.)

Subject(s):Markets and Institutions
Geographic Area(s):General, International, or Comparative
Time Period(s):General or Comparative

Banking, the State and Industrial Promotion in Developing Japan, 1900-73

Author(s):Ogura, Shinji
Reviewer(s):Mak, James

Published by EH.NET (March 2003)


Shinji Ogura, Banking, the State and Industrial Promotion in Developing Japan, 1900-73. New York: Palgrave/Macmillan, 2002. xvii + 144 pp. $69.95 (hardcover), ISBN: 0-333-71139-4.

Reviewed for EH.NET by James Mak, Department of Economics, University of Hawaii at Manoa.

In this brief (120 pages of text) book, Professor Ogura recounts the evolution of commercial banking in Japan between 1900 and 1973 and the banking industry’s relationship with the state through the business history of Japan’s first (founded in 1876) private bank, the Mitsui Bank. The Mitsui Bank and a few others like it (e.g. Mitsubishi, Sumitomo, Yasuda, Dai-Ichi) were the in-house banks of the pre-WWII zaibatsu, which were large, family-owned business conglomerates. The Mitsui family owned the Mitsui Bank. Each of these zaibatsu-affiliated banks handled the banking affairs of all the firms that were affiliated with its family group. Japan’s major commercial banks today are descendants of these prewar zaibatsu-affiliated banks.

Trying to tell the story of commercial banking in Japan through the business history of one bank is a tricky endeavor. For readers like myself who are mainly interested in the big picture, too many company details can muddle the picture. Indeed, I found myself frequently turning back pages to reread paragraphs so I could reconnect the main themes in the book. I also found myself skipping over names and rushing through side-stories simply because I didn’t think they were essential to the story. Fortunately, the summaries at the end of each chapter and the preface (a must read!) do a very good job of bringing the reader back to the main arguments of the book.

Professor Ogura notes from the outset (preface) that the prewar zaibatsu-affiliated banks were quite different from the “main” banks of postwar corporate groups. Ogura defines a “main” bank as one that is not necessarily a company’s largest creditor but one that acts as its lender of last resort. He argues that the prewar family-owned zaibatsu-affiliated banks did not qualify as main banks because they were completely under the control of the zaibatsu families, and bank executives did not have independent discretion over the banks’ lending policies. For example, Ogura notes (p. 21) that some Mitsui Bank executives believed that the Mitsui family “damaged” the bank by forcing them to adopt an excessively conservative lending policy; sometimes the family also instructed bank executives to make loans to specific customers. Ogura notes that Mitsui Bank did not even act as the main bank to the Mitsui-affiliated companies (p. 28). Also, unlike the postwar main banks, the prewar zaibatsu-affiliated banks pretty much maintained an “arms length” relationship with their borrowers.

Until the 1930s, most of the zaibatsu-affiliated banks remained under the control of individual families. That began to change in the 1930s during the Showa depression and the outbreak of war with China in 1937. A rising volume of bad debts during the depression induced Mitsui Bank finally to act as the main bank — i.e. lender of last resort — to some of its major borrowers, among them Tokyo Electric Light Company, even though it was not a Mitsui affiliate. With the outbreak of war with China, the government directed the banks to provide long-term loans to (non-affiliated) munitions manufacturing companies and to purchase government bonds. This forced the banks to drastically change their lending policy and investment portfolios; among the zaibatsu-affiliated banks, Mitsui Bank, for example, had maintained the most conservative lending policy by focusing on short-term (i.e. working capital) rather than long-term loans. According to Ogura (here, the explanation gets a bit murky), faced with a serious shortage of loanable funds and concerns that loans to munitions companies would turn into bad debts after war, the bank saw that it could best address these problems by freeing itself from Mitsui family control. Ultimately, this led to a merger (approved by the Mitsui family) in 1943 between Mitsui and Dai-Ichi Bank, one of Japan’s five largest banks. The new bank — named Teikoku Bank — became Japan’s largest bank.

Japan was forced to break up the zaibatsu after the war. The idea was that breaking them up would reduce the concentration of economic and political power and reduce Japan’s ability to become once again a military threat. The Teikoku Bank became two separate banks — Mitsui and Dai-Ichi. The commercial banks were “back on their feet” by the autumn of 1948. Despite the dismantling of the zaibatsu (for example, in 1947 Mitsui and Company was broken up into more than two hundred separate companies) prewar business relationships persisted in Japan. By the late 1940s and early 1950s, the former zaibatsu-affiliated banks began to act as the main banks for major companies that were formerly members of the prewar zaibatsu. The six largest commercial banks competed vigorously to forge ties with major and promising companies. The relationship between firms belonging to large corporate groups (or keiretsu — a term not used by Ogura) became even more highly integrated than before the war. While prewar zaibatsu-affiliated banks tried to maintain a hands-off policy with companies with whom they did business, the postwar corporate groups scheduled regular meetings among the presidents of the affiliated companies and engaged in extensive ownership of each other’s stocks.

A recurring theme in Ogura’s book is the frequent tension between the state (i.e. the government) and the commercial banks in Japan both before and after the war. The conventional wisdom on the relationship between the state and industry in Japan is one of close co-operation. However, that does not mean that there was no friction between the two parties. While the banks may have desired to maintain a low portfolio risk by focusing on short-term lending, the government, by contrast, wanted to use the banks as instruments of state industrial policy, specifically, to promote economic growth. During and even some time after the war, the government directed the banks to make more loanable funds available and to allocate loans to targeted industries. The miraculous expansion of the Japanese economy in the postwar period resulted in huge demands by businesses for long-term credit. Main banks practiced credit rationing, allocating credit to the largest and most promising companies (not surprisingly bank services to consumers were slow to develop, even today). The banks co-operated amongst themselves to make loans available to each other’s customers when the main bank was unable to. During the 1970s, the large commercial banks and other financial institutions such as long-term credit banks and trust banks dramatically expanded their long term lending. Ogura argues (p. 120) that the competition among the financial institutions to increase their share of long-term capital lending “damaged the Japanese financial system and the economy as a whole as they led to excessive provision of long-term loans, particularly to real estate developers, and caused relatively weak players to over expand their international financing business,” and that this led to the “bubble economy” of the late 1980s. Others might argue that it was not so much “excessive competition” — to use a popular phrase in Japan — but weak bank rules and regulations and the unwillingness of the government subsequently to take the bitter pill of bank reform that produced the economic bubble of the late 1980s and the current banking crisis. Finally, in recounting the history of banking and its relationship with the state in Japan, Ogura curiously fails to mention the role of the postal savings bank, Japan’s largest “bank.”

James Mak is Professor of Economics, University of Hawaii at Manoa, Honolulu, Hawaii. Among his recent publications is (with S. La Croix), “Regulatory Reform in Japan: The Road Ahead,” in Japan’s New Economy: Continuity and Change in the Twenty-first Century, edited by Magnus Blomstrom, Byron Gangnes, and Sumner La Croix (London: Oxford University Press, 2001).

Subject(s):Financial Markets, Financial Institutions, and Monetary History
Geographic Area(s):Asia
Time Period(s):20th Century: WWII and post-WWII

The Business of Genocide: The SS, Slave Labor, and the Concentration Camps

Author(s):Allen, Michael Thad
Reviewer(s):Gispen, Kees

Published by EH.Net (March 2003)

Michael Thad Allen, The Business of Genocide: The SS, Slave Labor, and the

Concentration Camps. Chapel Hill and London: The University of North

Carolina Press, 2002. Pp. xii + 377, $39.95. ISBN: 0-8078-2677-4

Reviewed for EH.Net by Kees Gispen, Department of History, University of


In recent years historians of Nazi Germany and the Holocaust have begun to

emphasize once again the importance of ideology as one of the principal causes

of mass murder and genocide. Scholarship from the 1970s to the 1990s tended to

concentrate more on non-ideological factors, such as the internal dynamics of

modern bureaucracy, the division of labor, peer pressure, the “banality of

evil,” “polycracy,” “cumulative radicalization,” “modernization,” “working

towards the F?hrer,” or “doubling” to explain how the Holocaust could happen.

The publication in 1996 of both Ulrich Herbert’s superb biography of Werner

Best, a high-ranking SS/Gestapo official and influential Nazi ideologue, and

Daniel Goldhagen’s much criticized Hitler’s Willing Executioners

signaled a turning of the tide. Both studies, although they could hardly be

more different in other regards, put ideology center stage.

Growing numbers of historians have now embraced this same perspective, and

Michael Allen is one of them. His study of the SS’s business and administrative

operations brings ideology back in with a vengeance. Allen follows Herbert and

Goldhagen in two other regards as well. Like the former, he zeroes in on the

crucial problem of how rational bureaucratic management and fanatical Nazi

ideology intertwined and became two sides of the same coin. Like the latter, he

is an iconoclast hurling bolts at the ranks of preceding scholars who got it

wrong, heaping scorn on the SS engineers and administrators who are his

principal characters, and writing in a tone that is often sarcastic or


Allen, whose special expertise is the history of technology, focuses on the

managerial elite of the SS’s Business Administration Main Office (WVHA). A

hitherto neglected part of Heinrich Himmler’s SS empire, the WVHA was led by

relative obscurities such as the accountant Oswald Pohl, the civil engineer

Hans Kammler, and the office manager Gerhard Maurer. These were the men who

supervised the SS slave labor empire, ran its murderous construction brigades,

and operated its commercial and industrial enterprises, from furniture and

gloves to bricks and rockets. While some of them were incompetent and venal and

others talented and incorruptible, virtually all of them were fanatical

believers. Managers and bureaucrats with expertise in engineering, bookkeeping,

and statistics, the rational men of the WVHA, were also ideologically committed

Nazis who fervently believed in the larger mission of the organization they had

joined. Their tasks were often banal and mundane, but they invested those tasks

with great ideological meaning. In so doing, contends the author, they

constituted themselves as a crucial but insufficiently recognized sociological

and historical phenomenon — the type of the heroic bureaucrat.

This is the first and most important of three closely related theses that Allen

argues in this book. His SS’s managers and their allies in business and

industry were not apolitical and opportunistic technocratic experts doing their

jobs for the Nazi regime as they might have for any other political system.

They were not exponents of the “banality of evil,” which Hannah Arendt detected

in Eichmann in Jerusalem as one of the principal factors in the Holocaust. They

were not trapped in the kind of endogenous bureaucratic dynamism that,

according to historians such as Hans Mommsen, explains the “realization of the

unthinkable.” They were not agents of some inherent dynamic in modernity that

made possible the Holocaust, as scholars such as John Ralston Saul and Zygmunt

Bauman have argued. Nor were they trapped in Max Weber’s “iron cage” of

mindless subservience to bureaucratic rationality. Rather, they were men who

animated their offices with the spirit of their ideology; and it was this

combination of ideology and organization, this blend of heroic fanaticism and

the modern, quantitative mindset, which ultimately made them so deadly.

The author’s second argument concerns the substance of his subjects’ ideology.

As SS men they espoused, of course, the usual Nazi fare of “Aryan” racial

superiority, antisemitism, “people’s community,” and Lebensraum. What set the

managers of the WVHA apart from ordinary Nazis, however, was their belief in

the myth of “productivism.” Productivism, according to Allen, was “the belief

that industrial and economic activity should be bent to the service of national

identity rather than sordid profit gains.” For the SS, the highest purpose of

the factory was the “forging of spirit” rather than economic utility or

prosperity (both citations, p. 32). Anti-capitalism (mainly hostility to the

primacy of profits), celebration of the creative genius of the “Aryan”

inventor, fascination with modern technology, infatuation with production and

creation as moral qualities in their own right, and building a “New Order” in

the East were among the basic tenets of productivism.

Productivism caused the WVHA to pursue a variety of utopian schemes, all of

which relied on concentration camp inmates for labor input and most of which

had murderous consequences for the prisoners. There were ideological conflicts

between SS productivists and SS policemen, which transformed productive labor

into labor as “re-education,” punishment, and torture. There was a great deal

of amateurism and romantic infatuation with advanced-technology systems that

were high in symbolic value but unsuited for operation by concentration camp

labor; this made a mockery of rational production and reinforced the tendency

to blame the workers and punish them accordingly. There was — perhaps the most

devilish variation —conscious adaptation of technology to the kind of

indifferent output obtainable from concentration camp labor. This meant the

formation of low-tech systems that produced efficiently (sometimes even

profitably) by working its labor to death. Examples were the brutal sweatshops

at Ravensbr?ck camp for women and, most importantly, Hans Kammler’s

construction gangs, which built among other things the regime’s underground

rocket factories in the Harz Mountains. The Kammler gangs, argues the author

(not unlike the French sociologist of science, Bruno Latour) were therefore an

amalgam of “hard” technology and “soft” spirit, a technological system of death

that was also a marvel of construction efficiency and achievement, even as the

Third Reich disintegrated under the blows of Allied guns and bombers.

The author’s third and final point concerns the issue of how the business

managers of the SS related to the Third Reich’s various other offices and

agencies. Led astray by the seductive concept of “polycracy,” many scholars

have emphasized fragmentation, infighting, and internecine power struggles —

struggles in which the SS allegedly emerged victorious — as a way of

explaining Nazi Germany’s inability to develop consistent policies other than

its murderous and ultimately self-destructive dynamism. Allen turns this view

on its head. Polycracy, he argues, was not merely a recipe for bureaucratic

chaos and inefficiency, but also, and more importantly, a loose and informal

network of like-minded, heroic bureaucrats in different agencies. Fanatical SS

productivists and kindred apostles of efficiency could be found across the

regime’s multiple bureaucracies. They intuitively understood each other and

regardless of conflicting jurisdictions cooperated to realize their common

dream. Polycracy should therefore be viewed, not only as a factor in Nazi

Germany’s eventual downfall, but also as an explanation of why, almost to the

very end of the war, the regime could maintain such astonishingly high

industrial and military output.

All these are important insights, based on an inspired choice of topic,

anchored securely in the sources, and argued with lucidity and persuasiveness.

At the same time, not every one of the author’s main points is entirely new.

The SS has a longstanding association with the idea of fanatically driven,

ideologically motivated bureaucrats. Yehuda Bauer in his 1982 History of the

Holocaust reminds the reader that Adolf Eichmann, archetype of the

“banality of evil,” testified he found it “fascinating” to deport the Jews and

“carried it through with all the fanaticism that an old Nazi would expect of

himself.”2 Herbert’s study of SS general Werner Best develops the theme of the

rational heroic bureaucrat in great depth. Other studies, about the visionary

designers of the Generalplan Ost or the eugenic utopias worked up in various

Kaiser Wilhelm Institutes, also center on criminal schemes conceived and

executed by ideologically driven professionals or highly motivated bureaucrats.

The concept of SS anti-capitalist productivism, while certainly articulated

with great energy by the managers of the WVHA, was by no means unique to them.

Rather, it was representative of broad currents in Nazi (and non-Nazi)

socioeconomic thought in general, and as such has received attention from

historians such as Avraham Barkai, Karl-Heinz Ludwig, and others. To draw

attention to this broader historiographical context is not to deny the author’s

considerable scholarly contribution. Rather it is to suggest that, in some

instances, his analysis might have benefited more from building on existing

scholarship than from attacking or ignoring it. Even so, this is an important

book, which students of business history, the history of technology, and Nazi

Germany will read with great profit.

Notes: 1 Daniel Jonah Goldhagen, Hitler’s Willing Executioners: Ordinary

Germans and the Holocaust (New York: A. A. Knopf, 1996); Ulrich Herbert, Best:

Biographische Studien ?ber Radikalismus, Weltanschauung und Vernunft, 1903-1989

(Bonn: Verlag J. H. W. Dietz Nachfolger, 1996). 2 Yehuda Bauer, A History of

the Holocaust (New York: Franklin Watts, 1982), 207.

Professor Gispen publishes in the field of German history, especially the

social history of technology and the professions. His recent book is Poems

in Steel: National Socialism and the Politics of Inventing from Weimar to

Bonn (New York and Oxford: Berghahn Books, 2001).

Subject(s):Servitude and Slavery
Geographic Area(s):Europe
Time Period(s):20th Century: WWII and post-WWII

The Arabian Seas: The Indian Ocean World of the Seventeenth Century

Author(s):Barendse, Rene J.
Reviewer(s):Heston, Alan

Published by EH.NET (February 2003)

Rene J. Barendse, The Arabian Seas: The Indian Ocean World of the

Seventeenth Century. Armonk, NY: M.E. Sharpe, 2002. xvi + 589 pp. $85

(hardcover), ISBN: 0-7656-0728-x; $34.95 (paperback), ISBN: 0-7656-0729-8.

Reviewed for EH.NET by Alan Heston, Departments of Economics and South Asia

Regional Studies, University of Pennsylvania.

This is an extremely rewarding book to read, but not at one sitting. It is

quite long, focusing on one century of transport, finance, business practices

and commerce in the economic center of the world at the time, the seas from the

Ottoman to Mughal Empires. The command of detail that Barendse displays is

impressive. The extensive use of Dutch, Portuguese and French materials

provides a very rich base for his study, as these include many translations of

Arabic materials. Begun as a dissertation in 1985, published in Dutch in 1998,

and now in English, it is a mature study that continually tries to relate its

findings to other work in the field. The author, an Associate Research Fellow

at the International Institute for Asian Studies in Amsterdam, provides a

curious mixture of traditional scholarship combined with the vocabulary of

contemporary industrial organization.

In terms of the buzzword, globalization, The Arabian Seas is right

there. Kirti Chaudhury conceptualized trade in Asia at the time of European

incursions as involving three circles, joined at major ports that served to

assemble and disperse cargoes for shipment to other Asian ports with a small

percentage to Europe. In the East was Canton and Macao linked to Malacca, a

circle embracing at times Japan and of course, the Spice Islands. From Malacca

merchants went to Calicut or Cambay on the west coast of India, this circle

also embracing Bengal and Ceylon. Some ships covered more than one circle, such

as the Portuguese annual voyage from Goa to Macao, but the bulk of the shipping

in volume and value was within these circles and remained that way during the

seventeenth century, the focus of this book. The third circle and the major

focus of this book was from Cambay or Calicut to Hormuz and the overland route

through Alleppo and Damascus, and to Aden and the Red Sea. This third circle

also provided access to silk route goods at a number of points.

What Barendse does very nicely is document the fourth and fifth circles that

took in the trade on the East Coast of Africa and linked that to the West Coast

and the Caribbean and the Americas either directly or through Europe. The fifth

circle had its own independent relationships with Europe through the trade of

Spain with the Americas, with links to the fourth circle through several common

commodities including textiles, coffee and silver. Barendse does not attempt

any treatment of the world-closing circle from the Spanish Pacific ports to

Manila, Formosa and Macao; his story is full enough as is.

The book begins with a tour of the terrain providing some maps, though still

more would have been useful. The maps are informative though not well

reproduced. In Chapter 3 Barendse introduces the “European Natios in the

Arabian Seas,” intentionally rejecting diasporas as a term which he thinks does

not capture the nature of relationships in the seventeenth century. It is

doubtful his terminology will catch on, but Barendse does have a point in that

there was a grouping of all Europeans in many ports. Chapter 4 “Diplomacy and

the State,” deals with the very different relationships of merchants and rulers

prevailing in Europe compared to those in the Arabian Seas, which in turn

varied greatly among different states. In Chapter 3 and later in his treatment

of the Dutch, Barendse makes clear the tension between the perception of the

Atlantic Ocean as mare liberum where all vessels are free to trade in

times of peace and the perception in other seas. The Dutch East India Company

(VOC), though nominally under Dutch authority, was clearly a state in Asia and

asserted mare clausum not only around the Spice Islands but also in

parts of the Indian Ocean. This took the form of issuing, upon payment of a

fee, navicerts, which like the Portuguese cartaz was a safe

passage certificate.

Chapter 5 on the “Merchants’ World,” is one of the most interesting in the

book. A large section is devoted to information, and though Barendse does not

seem enamored by the concepts of agency or information asymmetry, they are very

much up front in the way he describes the world of trade. He tells us of

“bazaar walkers” who spent their days collecting price information in markets

like Surat, in order to know both whether there was a probable return on

trading an item, but also the risk as indicated by the extent of price

fluctuations in various markets. The price information was then conveyed back

to Europe or other relevant locations. And Barendse describes the attempts to

mail or courier this and other information overland through the Ottoman Empire

domains so as to avoid the cost in time by ship around the Cape. Needless to

say the opportunities for undermining the competition were immense as were the

temptations of agents to switch masters. Further, the very current notion of

dis-information was a common way to divert potential competitors from direct

access to suppliers or buyers, e.g., Egyptian traders embellishing the dangers

to Europeans of being eaten alive along the routes to interior markets in


The book includes separate chapters on the Portuguese, Dutch and British

experiences in the century; the Portuguese were in relative decline, the Dutch

reaching their peak, and the British finally getting their act together by

1700. Barendse sees little difference between the rent-seeking behavior of the

trading companies and the Portuguese; in the case of the companies, it was

centrally directed and the fruits were shared with employees, while for the

Portuguese, it was mostly private citizens who took advantage of their

situation. Holden Furber (1976) provided similar coverage in Rival Empires

of Trade in the Orient, 1600-1800, a book curiously absent from the

extensive bibliography, even though references are made to earlier research by

Furber. The two books are very complementary. Furber focuses much more on what

is going on in Europe and of course, includes East Asia in the discussion.

However, Furber treats trading, markets and the like in a very traditional

manner while Barendse’s illustrations and discussion are much more in touch

with recent microeconomic concepts. It should be mentioned that neither book is

very strong on the macro-world economy of money supply, prices, and currencies,

though both are good on forms of commercial paper and credit.

It is hard to read the Arabian Seas without learning something new about

old subjects. For example, Europeans had many ships built in Asia, often

because teak was more durable in warm seas. And often the ships were replicas

of ships built in Europe, but not necessarily because of design; rather pirates

were less likely to attack European appearing ships because retribution was

more likely. Interestingly, there often was no cost advantage to building ships

in Asia as opposed to Europe.

Barendse makes a good case against received views that the Dutch permitted much

less private trading than the British and this reduced their innovativeness in

developing new sources of supply and new markets. It is true that the British

explicitly permitted private trading by company servants and the Dutch did not

formally permit it. However, Barendse suggests the VOC employees carried on

substantial private trade. If there was anything inhibiting trade innovations

by the Dutch it is more likely due to the highly centralized administration of

Asian affairs at Batavia and the obsession with monopoly in Holland. And on

some matters the VOC was ahead of the times. Their armies were not composed of

mercenaries but were employees of the company, unusual practice for the time.

And the VOC introduced more merit into appointments than most institutions of

the time, and certainly their British counterpart.

In discussing issues of agency and corruption in the companies Barendse notes

that the Verenigde Oostindische Compagnie, or VOC, was often referred to as

“Vergaan Onder Corruptie” (sinking under corruption). Many of the VOC outposts

were so remote and removed from easy communication, that activities were hard

to monitor as suggested by this quote of a supervisor in Bandar Abbas about his

employee in Persia (p. 403), ” I do not know what the Hon. Mr. van de Heuvel is

doing at Isfahan. I believe he sleeps the whole day. Yet he has delicious

roasted game, good wine and beautiful girls there, as well as healthy air,

while we here, have to muddle through in such a miserable way.”

Other issues dealt with in an innovative way are overhead and piracy. The VOC

was a large multinational organization with 18,000 employees worldwide at its

peak. They faced formidable accounting problems not only between Europe and

Asia, but within Asia. How do you treat centers that primarily have a military

function of facilitating Dutch trade but produce little in revenue compared to

costs. The VOC simply did not have any satisfactory system to allocate overhead

among its various profit centers.

Throughout the book Barendse examines piracy in its various forms, including

interlopers, of whom Elihu Yale was considered the King in Madras (p. 443). A

principal center where the paths of traders sanctioned by the British, Dutch,

French and Portuguese crossed those of non-sanctioned traders was Madagascar.

In addition to plantations there developed in Madagascar by the middle and late

1600s a very active slave trade both to Asia and the Americas. Given its

strategic location Madagascar became a center for a large volume of trade of

trade and commercial activity.

Beyond a wealth of detail and insights, is there a big picture that emerges?

Barendse uses the term world system and clearly sees his study as contributing

to that literature, though not in its more grandiose forms. Rather he presents

the seventeenth century as a major period of expansion of trade between Asia

and Europe and especially Africa, Brazil, the Caribbean and eventually North

America. And he persuasively argues that the Arabian Seas are the crucial link

area for this trade expansion, not a new idea, but one which Barendse

impressively documents.

Subject(s):International and Domestic Trade and Relations
Geographic Area(s):Middle East
Time Period(s):17th Century

The Atlantic Economy: Britain, the US and Ireland

Author(s):O'Hearn, Denis
Reviewer(s):Gray, Jane
, Jane

Published by EH.NET (February 2003)

Denis O’Hearn, The Atlantic Economy: Britain, the US and Ireland.

Manchester and New York: Manchester University Press and Palgrave, 2001. xiii +

241 pp. ?45/$79.95 (hardcover), ISBN: 0-7190-5973-9.

Reviewed for EH.NET by Jane Gray, Department of Sociology, National University

of Ireland, Maynooth.

This book has two aims. First, it seeks to explain Irish economic development

within the theoretical framework of world-systems theory by locating Ireland in

the context of its history as an ‘intermediating zone’ within the Atlantic

economy dominated first by Britain and then by the United States. Second, the

book uses the Irish case to develop world-systems concepts and to transcend

some of the limitations of the paradigm. Denis O’Hearn (Reader in Sociology at

Queen’s University, Belfast) correctly points out that most definitions of

‘coreness’ and ‘perhipherality’ within the world-systems literature are

descriptive rather than analytical. For example coreness is often defined in

terms of the degree to which economic activities are capital-intensive, labor

is skilled and wages and profits high, in contrast to peripherality where the

opposite characteristics are true. The problem with these definitions is that

they cannot explain why historical core-periphery configurations are reproduced

over time, nor can they explain why some places change their position within

the hierarchy. O’Hearn argues that coreness should be defined in terms of the

ability to capture and localize innovative economic activities that have the

capacity to generate wider economic growth. Thus he argues that at key

‘switching points’ the hegemonic powers of the Atlantic economy prevented Irish

economic and political actors from industrializing in innovative economic

clusters, redirecting the Irish economy towards activities that served their

own strategic interests, and leaving Irish industrial firms and sectors to try

to compete on the basis of semi-peripheral ‘adaptive response’ — that is by

lowering wages and intensifying worker effort. In describing and explaining

this process O’Hearn seeks to transcend another shortcoming of world-systems

theory — its tendency towards teleological accounts of particular local and

regional economic histories that leave little room for contingency. He

understands the actions of Irish political and economic elites in terms of

‘iterative problem solving.’ Their attempts to industrialize were constrained

by the institutional consequences of Ireland’s initial incorporation to the

evolving world-economy, and by the paths taken at earlier ‘switch points,’ but

the outcomes of their efforts — and of those of core elites — were never


O’Hearn identifies three cycles of industrialization in Ireland associated with

three cycles of change within the Atlantic economy. In the first cycle, Britain

sought to challenge Dutch supremacy within the world economy by shifting its

center from the Baltic to the Atlantic. During this period, British interests

led to the suppression of the (potentially innovative) Irish woollen industry,

and to the promotion of linen manufacturing which, according to O’Hearn, was

clearly semi-peripheral in character. In the second cycle, efforts to

industrialize on the basis of the innovative cotton manufacture were frustrated

by British trade policies that ultimately led Irish factory entrepreneurs to

revert to the linen industry. The third cycle was associated with the rise of

U.S. hegemony within the Atlantic economy after the Second World War. The newly

independent Irish state had experienced a phase of ‘easy industrialization’

under import-substitution policies between the wars, but switched to a policy

of export-led industrialization by the late1950s, partly in response to the

structural limitations of ISI, but also under pressure from the United States,

which had made Ireland a beneficiary of Marshall Aid, despite its stance of

neutrality during the war. In an influential article published in 1989, O’Hearn

argued that export-led industrialization had created slow economic growth in

Ireland because trans-national corporations repatriated profits, failed to

establish linkages to the local economy, and because the policy of ‘radical’

free trade led to the collapse of indigenous industry. He elaborates on these

arguments and provides more detailed evidence in Chapter 6 of this book. At the

end of the 1980s, when Ireland was experiencing economic stagnation, and high

levels of unemployment and emigration, the thesis that export-led

industrialization simply created new forms of ‘dependency’ seemed highly

plausible. But the boom that began in Ireland in the mid-1990s has made the

dependency argument less fashionable. Has the ‘Celtic Tiger’ undermined

O’Hearn’s case? In Chapter 7 he argues that the extraordinary levels of growth

achieved after 1994 can be explained by the sheer size of the flow of

U.S.-based trans-national corporation (TNC) investments. This in turn was due

to: the resurgence of the United States in the world-economy; the new strategy

of ‘flexible specialisation’ that encouraged TNCs to agglomerate their

off-shore investments in foreign-investment complexes; the skill of the Irish

Industrial Development Authority in attracting inward investment; and the

‘pro-business’ environment created by Ireland’s ‘social partnership’ model of

industrial relations together with its low corporate tax regime. He suggests

that once investment flows slow down, Ireland remains at risk of slow economic

growth due to the scale of foreign investment stocks. TNCs continue to

repatriate profits and, according to O’Hearn, the extent to which they have

established linkages to domestic firms has been overstated, as has the

potential of the indigenous software industry. He emphasizes the extent to

which the ‘Celtic Tiger’ has increased social inequality due to labor-market

segmentation and a relative decline in state spending. In the absence of

articulated economic growth based on a national system of innovation, the Irish

state must attempt to sustain economic growth through the continued adoption of

liberal policies that impede social development.

This book makes an important contribution to the understanding of Irish

socio-economic change by placing it in a comparative and theoretical

perspective. This is in contrast to much of the sociological scholarship on

Ireland, which continues to be ahistorical, showing little understanding or

appreciation of social change before the twentieth century. More importantly,

perhaps, it makes a significant contribution to world-systems theory — indeed

it has recently won the ‘Distinguished Scholarship’ book award from the

Political Economy of the World-System Section of the American Sociological

Association. O’Hearn has created a dynamic model of socio-economic change

within the modern world-system that links the emergence and development of

historical regularities to the contingent ‘problem-solving’ of elite actors at

particular historical moments. In my view the model would be enhanced by more

attention to non-elite agency. For example, in his account of the ‘first cycle

of industrial transformation’ (Chapter 3), O’Hearn describes the shift from

woollens to linen as “a shift away from an industry with the potential to

develop core production relations to one that clearly induced the expansion of

semi-peripheral domestic production” (pp. 67-68). This was because woollens

(and later cottons) tended to be organized under putting-out systems, whereas

the Irish linen industry was organized under the ‘Kaufsystem’ whereby “cottage

producers supplied their own raw materials, which they processed and wove into

textiles in an integrated production system, until they sold the cloth to

merchants in the marketplace” (p. 68). It is true that linen was more likely to

be organized under the Kaufsystem because the nature of the raw material meant

that small-holders were able to supply enough from their own resources to

absorb the labor capacity of their households. However that in itself did not

prevent the development of more complex ways of organizing production in other

European linen manufacturing regions. In my view, in order to understand why

the Kaufsystem persisted in Ireland, it is necessary to take account of the

household strategies of the producers themselves, strategies that were not

entirely determined by the actions of British or Irish elites. Of course taking

account of non-elite strategies is not inconsistent with O’Hearn’s analysis.

For example, household decisions might be traced, in part, to some of the

institutional consequences of incorporation described in Chapter 2.

Nonetheless, including non-elite strategies would add another dimension of

contingency and variance to this sophisticated account of the relationships

between particular, local events and long-term patterns of global economic



O’Hearn, Denis. 1989. “The Irish Case of Dependency: An Exception to the

Exceptions?” American Sociological Review, 54, 4: 578-596.

Jane Gray is Lecturer in Sociology at the National University of Ireland,

Maynooth. Her chapter on “The Irish, Scottish and Flemish Linen Industries

during the Long Eighteenth Century” is forthcoming in B. Collins and P.

Ollerenshaw, editors, The European Linen Industry in Historical

Perspective (Oxford) and she has recently completed a book manuscript on

the Irish linen industry.

Subject(s):International and Domestic Trade and Relations
Geographic Area(s):North America
Time Period(s):20th Century: WWII and post-WWII

Investing for Middle America: John Elliot Tappan and the Origins of American Express Financial Advisors

Author(s):Lipartito, Kenneth
Peters, Carol Heher
Reviewer(s):Steeples, Douglas

Published by EH.Net (February 2003)

Kenneth Lipartito and Carol Heher Peters, Investing for Middle America: John

Elliot Tappan and the Origins of American Express Financial Advisors. (New

York: Palgrave for St. Martin’s Press, 2001) pp. X + 268.

Reviewed for EH.Net by Douglas Steeples, retired Dean of the College of Liberal

Arts and Professor of History, Mercer University.

The year 1894 was not an auspicious one for launching a new business in the

United States, let alone one that steered a course into uncharted financial

waters. The country was in the depths of its worst business depression of the

nineteenth century. Unemployment in many urban and industrial areas was 20,

even 25 percent. Farmers of wheat, corn, and cotton faced the lowest prices for

their crops in a generation. Workers with jobs averaged a bit more than a

dollar a day, working seven 10-hour days per week when they were fully

employed. Charities were strained to their limits and beyond. The jobless

picked over garbage hoping to find something edible. More than five hundred

banks had failed, and 20 percent of the nation’s railroad mileage was in

receivership. Revelations of mismanagement in finance, manufacturing, and

transportation; of outright fraud in securities trading of excessive reliance

of giant firms on credit in speculative overexpansion and attempts to achieve

monopolies; and of abuses of trust on the part of insurance companies struck

heavy blows at the confidence of many Americans in their business system. The

country’s deep-rooted ethic of self-reliance and manliness in personal affairs

and finance faced a withering challenge.

The United States was in fact passing through a great transition. Hitherto, the

country’s people pursued a dream of saving to achieve economic independence.

Hoping to rise from the ranks of employees to those of at least small business

owners or members of the professions, people viewed saving as the way to

accumulate the necessary capital. It was, too, a sign of virtue and thus a

measure of character. But with the increasing scale of enterprise, a shrinking

percentage of people could hope thus to climb the socioeconomic ladder. The

exhaustion of readily tillable western lands as an avenue of individual

opportunity played a role, too, as did increasing urbanization. To a constantly

growing degree, Americans faced the prospect of remaining employees lifelong.

Instead of adding to land holdings, if farmers, so that descendants could

support them in their old age, or if they dwelt in cities then accumulating

capital of other sorts for the same purposes, they faced a new prospect filled

with uncertainty. A young insurance industry, yet largely unregulated, was

often little more than a lottery. So, too, were investment schemes that

sustained themselves by drawing on money from new investors to pay returns to

their predecessors (pyramids) or that depended on high rates of lapsation and

forfeiture to generate income from which to pay returns (tontines).

John Elliott Tappan was born to parents of New England stock on a farm in

Vinland township, close to the junction of the Fox and Wolf Rivers at Lac Butte

des Morts near Oshkosh, Wisconsin, in 1870. His father died suddenly when

Tappan was but two years old, leaving his mother with three children and a

93-acre farm worth about $6,500. By 1877 his mother had sold the farm and

relocated to Minneapolis. Ten years later, in an extreme manifestation of the

prevalent belief that real men must confront the challenges of the world

outside of the home, seventeen-year old John Tappan began a three-year stint in

California and up the West Coast to Washington Territory. During the while he

tramped, hopped freight cars, worked in mining and lumber camps, and completed

college preparatory classes in Seattle. After a fire burned the city to the

ground in June, 1889, he returned to Minneapolis, hardened by life on the

fringes of civilization and imbued with a deep love for the out of doors and

nature but ambitious for a middle class career. After a month at home he

journeyed to Duluth and took an office job, a first step toward the middle

class career to which he aspired. Completion of a stenographic course added to

his business skills, and he later, while working, he finished legal studies at

the University of Minnesota and was admitted to the bar. In the interim, he

sold bonds and insurance, gaining knowledge of how independent sales agents

worked and of how to make actuarial calculations that would result in sound

business planning.

Tappan had as a boy experienced the depression of the 1870s. He grew up as the

nation passed through a generation of heated argument over monetary policy, as

proponents of gold, of silver, or a paper currency, and other schemes argued

over how best to assure prosperity. No radical, but surely an innovator, he

framed an idea that sought to marry western ideas of financial reform – those

that would make it easier for ordinary people to save and thereby advance in

the world – “with eastern financial orthodoxy” that sought to protect the

stability and soundness of money. His idea was for a new type of investment

instrument, to which he gave the name “face amount certificate.” This device

worked like zero coupon bonds. Purchased at a discount, they were to be held

until they matured to their face values of $1,000. The initial period to

maturity was twenty years. In order to make the investment more attractive,

Tappan in stages reduced it to twelve, then ten years. Tappan planned to sell

them for monthly installments. The actual return would vary depending on the

amount paid in and the certificates’ maturation period. As a rule, customers

received about a 6 percent return, double or triple what railroad bonds or

government bonds yielded. The monthly payment plan made these instruments

accessible to middle Americans, both wage earners and such professionals as

teachers, attorneys, and physicians who constituted the middle class in the

nation’s heartland. Unlike other instruments, these would rest on investments

in improved real estate. They thus were far less chancy than corporate bonds,

which in addition to higher risk typically sold in larger denominations and for

cash so that only well off individuals could buy them. Tappan’s Investors

Syndicate, incorporated in 1894, proposed to be something that would rest on

the ideals of thrift, honesty, and manly independence. It would be a mechanism

through which small investors’ monthly payments could be pooled. Customers

would benefit from expert management of their investments. They would be

protected against fluctuations in the country’s modernizing economy. They would

gain the advantages of working with a firm that was at once local (emphasizing

investments in real estate in and around Minneapolis and only gradually

expanding beyond) and then national, firmly controlled by management of

unquestioned integrity, and for many years small enough to be personal in

feeling even as it participated in the emergence of an economy in which giant

firms were predominant. In addition, the firm’s location in Minneapolis was

advantageous in that it could appeal to Midwesterners and Westerners suspicious

of eastern banking and financial centers.

The authors of Investing for Middle America are uniquely qualified to

write this book. Kenneth Lipartito is professor of history at Florida

International University and a specialist in the history of business. Earlier

works include The Bell System and Regional Business (1989) and

(coauthored with Joseph Pratt) Baker and Botts in the Development of Modern

Houston (1991). The excellence of his work has won recognition from the

Business History Conference, which awarded him the Williamson Prize in 2000,

and conferral of the Newcomen Award for Excellence in Business History Research

and Writing (1995). Carol Heher Peters is the great granddaughter of John

Elliott Tappan and is Communications Editor at the Princeton Environmental

Institute, Princeton University. This book grew out of genealogical research

begun by her grandmother, which led to her discovery of a collection of nearly

20,000 letters that Tappan wrote between 1894 and 1919. Six years of research

resulted in a draft manuscript that eventually reached Lipartito, who saw in it

a uniquely interesting point of entree into the daily conduct of finance during

a time of transition for which records are slender. Lipartito and descendants

of Tappan ultimately agreed that he would place Tappan’s life and business

career in a broader context that combined his personal life and story with

broader developments on the national business scene.

The Investors Syndicate, which Tappan founded and oversaw until he sold his

interest in it in 1925 after the other two principal stockholders conspired to

sell their majority holding, ultimately became Investors’ Diversified Services

(IDS), before its acquisition by American Express and renaming as American

Express Financial Advisers in 1984. The narrative becomes greatly compressed

for the years after Tappan sold his interest in his firm, leaving one with

relatively little information about the evolution of Investors Services into

Investors Diversified Services and then its present evolution under the

umbrella of American Express. Tappan lived until 1957 and continued to practice

law well into his later years. As an innovator, Lipartito and Peters do not

claim too much in comparing him to A.P. Giannini, father of “retail banking,”

Henry Ford, and Thomas Alva Edison. His contribution was to raise financial

intermediation to a new level. He took a simple idea – use expert and reliable

agents to solicit funds from investors, pool them, draw on expertise and

knowledge to place them where they would earn a higher rate of return than that

paid out to his investors, employ sound actuarial calculations to factor in

realistic lapsation rates, manage efficiently and prudently with clients’

interests in mind – and built a firm that in time became both a model and a

giant in the financial services industry. Integrity brought it through several

investigations prompted by the shady practices of others. It met the

competitive pressures of sales of government Liberty Bonds during World War I

(Tappan actually encouraged certificate holders to purchase war bonds with

their certificates). It grew enormously during the Great Depression of the

1930s when the stock market saw values fall by 90 percent. Tappan, meanwhile,

never wavered from his original aims. He could have become immensely wealthy,

but that was not his purpose. Instead, he reinvested the company’s profits for

many years while taking no salary and supporting himself with his law practice.

He remained true to the goal of making systematic and profitable savings

through conservatively managed, sound pooled investments possible to the mass

of middle Americans. He had, true, only one idea – but it evolved into the

mutual funds industry, and his firm remained a leader long after he had left

the scene.

Readers will find this book a lucid introduction to a fascinating subject.

Lipartito and Peters share a rare gift for lucid discussion of what in other

hands could be impenetrable subjects. Their narrative adeptly and seamlessly

interweaves the story of Tappan’s life with those of his company and of changes

in the nation’s economy. The research has been comprehensive (one might wish

only for references to Democracy in Desperation, by Steeples and

Whitten, 1998; Mary Ryan’s 1981 Cradle of the Middle Class; and Kim

Townsend’s 1997 Manhood at Harvard). Errors are few and trifling: Rotary

International originated in the twentieth, not the nineteenth century.

Investing for Middle America deserves to become a classic, and to win

for Lipartito yet another award. It should enjoy a wide readership among those

interested in American business and social history, 1870-1950.

Douglas Steeples is retired as dean of the College of Liberal Arts and

Professor of History from Mercer University. A specialist in nineteenth century

western and business history, he most recently published Advocate for

American Enterprise: William Buck Dana and the Commercial and Financial

Chronicle, 1865-1910 (2002).

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

The Spirit of Capitalism: Nationalism and Economic Growth

Author(s):Greenfeld, Liah
Reviewer(s):Lal, Deepak

Published by EH.NET (February 2003)

Liah Greenfeld, The Spirit of Capitalism: Nationalism and Economic

Growth. Cambridge, MA: Harvard University Press, 2001. xi + 541 pp. $45

(hardcover), ISBN: 0-674-00614-3.

Reviewed for EH.NET by Deepak Lal, Department of Economics, UCLA.

I found this prolix book by Liah Greenfeld, a Professor of Political Science

and Sociology at Boston University, both confused and confusing. She states

that her book attempts to answer two questions: “(1) What was the direct cause

of the emergence of modern economy; that is what explains the sustained

orientation of this economy, which distinguishes it from all others, to growth?

(2) What made the economic sphere so central in the modern, and in particular

American, consciousness that our civilization can in truth be called an

‘economic civilization’.” Her answer is “that the factor responsible for the

reorientation of economic activity toward growth is nationalism, and that the

unprecedented position of the economic sphere in the modern consciousness is a

product of the dynamics of American society, in turn shaped by the singular

characteristics of American nationalism” (p. 1).

She tries to establish these claims by extended excerpts from secondary sources

concerning economic thought and development in England, Holland, France,

Germany, Japan and the United States. In all these cases, she claims, except

for Holland, nationalism was the prime mover in creating capitalism, in

contradistinction to other sociologists and historians (Gellner and Hobsbawm)

who believed nationalism “to be caused by capitalism and

industrialization” (p. 4). As she explicitly eschews both the historian’s craft

as well as the economist’s, it makes it particularly difficult to review such a

book to an audience of economic historians. Even though many of the excerpts

she quotes are interesting in themselves — and I particularly enjoyed those

from Japan and the US — they do not in themselves provide a substantiation of

her thesis. In the circumstances the only recourse is to try and determine her

general argument and see how it matches up with the evidence from not only

economic history but also the economics of developing countries, which is

intimately linked to many of her preoccupations.

The trouble I had with the book starts with the first of the questions she has

set herself. She seeks the causes of the emergence of the modern economy, which

she sees as its sustained orientation to economic growth. But this definition

of modernity would only be applicable at best to the last 150 years. After all,

the nineteenth century classical economists were still preoccupied by the

stationary state! Moreover, this question is different from the one that Max

Weber asked and which is the title of her book, namely about the origins of

Western capitalism, which is linked to the question of the great divergence

between the ancient agrarian civilizations of Eurasia. This question in turn is

different from the subsidiary question: why within Western Europe, England

blazed the path to modern economic growth? Greenfeld’s book is largely about

this second question and not the first. This confusion is responsible for her

vacuous definition — for an economist — of modern economic growth.

Development economists and economic historians distinguish between

extensive growth — which has been ubiquitous through human history —

with output rising pari passu with population, and intensive growth,

which results in a sustained rise in per capita income. Moreover, two types of

intensive growth need to be distinguished which I like to call Smithian and

Promethean (see Lal 1998). The first can and has occurred even in agrarian

economies usually with the establishment or extension of empires, which by

bringing hitherto autarkic regions with differing resources into a common

economic space lead to the gains from trade and specialization emphasized by

Adam Smith. But as the primary factor of production in agrarian economies –

land — was ultimately fixed, diminishing returns would set in, which combined

with the Malthusian principle would end this spurt of Smithian intensive

growth. As E.A. Wrigley (1988) has rightly emphasized, it was the substitution

of mineral energy resources, which were in virtually perfectly elastic supply,

for the land-based sources of energy in the organic agrarian economy, which led

to unbounded intensive growth of the Promethean kind. It is the latter which is

the hallmark of modern economic growth.

The spirit of capitalism, which Hicks (1969) emphasized is embodied in the rise

of the merchant and a mercantile society, predates the emergence of Promethean

growth. The torch of this spirit passed from the Greek city states, the

mediaeval Italian city states, the Hanseatic league and Holland to the United

Kingdom. Greenfeld recognizes this. So clearly for her, the spirit of

capitalism, which she identifies as arising with nationalism in

sixteenth-century England, could not be merely the prevalence of this

mercantile economy. As regards Weber’s question about the date and origins of

the great divergence, I have argued (Lal 1998) that it is associated with two

Papal medieval revolutions, which generated a value unique to the West –

individualism — and all the legal infrastructure needed for a functioning

market economy (see Goody 1983 and Berman 1983). But, though perhaps

preconditions, these factors did not by themselves generate Promethean growth.

It was the spirit of capitalism allied to the switch from an organic to a

mineral energy based economy which did, in Holland and then in England — even

in their agrarian economies — from the fifteenth and sixteenth centuries and

then with the scientific revolution in England in the new industrial economy

from the eighteenth century that generated Promethean growth.

On this view, Greenfeld’s discussion of the rise and decline of the Dutch

mercantile economy will seem perverse. As she rightly notes, the Dutch grew

rich through adopting a truly mercantile capitalism (which generated Smithian

growth). What she does not emphasize (only noting it in passing) is that they

also saw Promethean growth based on using deposits of peat to convert their

organic into a mineral energy based economy (see Wrigley). Their relative

decline arose as, unlike the much more abundant mineral energy source in

England — coal — the stock of peat was soon exhausted and the Navigation Acts

impeded the importation of English coal. Greenfeld, however, attributes the

Dutch decline to a failure to foster nationalism. But here is what Angus

Maddison (2001) (whose 13 pages (pp. 75-88) provide a much more succinct and

accurate account of the rise and decline of Holland) has to say: After the

Dutch revolted against the Hapsburgs in 1580: “they created a modern nation

state, which protected property rights of merchants and entrepreneurs,

promoted secular education and practiced religious tolerance” (p. 20 emphasis

added). But this nation state did not practice economic nationalism — i.e.

mercantilism. And there’s the rub.

For Greenfeld asserts: “There was no national consciousness in the Dutch

republic, the identity of the Republican Dutch was not national, and the

republic was not a nation” (p. 96). By this she means they were not economic

nationalists, as becomes clear when she writes: “It is this difference in

perspective, in the nature of identity, that explains … why the Dutch rather

consistently … advocated free trade in the face of perfectly consistent

protectionist (or ‘mercantilist’), measures their neighbors directed against

them” (p. 101). That, in her view, the Dutch decline was due to their not being

economic nationalists (i.e. mercantilists) is made clear by the title of the

subheading that follows “The Costs of Economic Liberalism” (p. 101). This book

is thus ultimately a mercantilist tract.

Greenfeld rightly cites the great Eli Heckscher, who in his magisterial book

Mercantilism argued that mercantilism was used by the absolute

monarchies in Europe after the Renaissance to consolidate their power by

incorporating various feuding and seemingly disorderly groups, which

constituted the relatively weak states they inherited from the ruins of the

Roman empire into a nation. Its purpose, he argued, was to achieve “unification

and power,” making the “State’s purposes decisive in a uniform economic sphere

and to make all economic activity subservient to considerations corresponding

to the requirements of the State.” But, what Greenfeld fails to mention is that

Heckscher (1955) went on to show that, the unintended consequence of

mercantilism was that this attempt to use it to establish order bred disorder,

as the attendant dirigisme bred corruption, rent-seeking, tax evasion

and illegal activities in underground economies. The most serious consequence

for the State was an erosion of its fiscal base and the accompanying prospect

of the un-Marxian withering away of the state. Economic liberalization was then

undertaken to restore the fiscal base, and thence government control over what

had become ungovernable economies. In some cases — as in France — the change

only occurred with revolution (see Aftalion 1990). Paradoxically, as Heckscher

noted: “great power for the state, the perpetual and fruitless goal of

mercantilist endeavor, was translated into fact in the nineteenth century. In

many respects this was the work of laissez-faire. … The result was attained

primarily by limiting the functions of the State, which task laissez-faire

carried through radically. The maladjustment between ends and means was one of

the typical features of mercantilism, but it disappeared once the aims were

considerably limited. … Disobedience and arbitrariness, unpunished

infringements of the law, smuggling and embezzlement flourished particularly

under a very extensive state administration. … It was because the regime

de l’ordre bore this impress that disorder was one of its characteristic

features” (p. 325).

There is further evidence against the thrust of Greenfeld’s main argument that

mercantilism is needed for economic growth. We now have the experience of over

fifty years of neo-mercantilist policies in the Third World, motivated in large

part by the same desire for ‘nation-building’ — carried to even further

extremes in the former Communist countries. The outcomes have been much the

same as with the mercantilist countries of yore. The disorder bred by

dirigiste neo-mercantilist policies has led to the recent wave of

economic liberalization, which no doubt Greenfeld — judging from her epilogue

— would deplore. (See Lal and Myint 1996, and Lal 1985 and 2000.) Moreover,

nationalism was a common attribute of the ideology of most developing countries

after the Second World War. Hence, it in itself could not be an explanation for

the manifest differences in their growth outcomes. What differentiated their

performance was the extent to which they followed mercantilist policies. Though

none apart from Hong Kong followed the classical liberal policy of

laissez-faire and free trade (and its performance was perhaps the best (Lal and

Myint 1996), the closer they were to this prescription the better the outcome.

Thus neither the distant (as Greenfeld seems to claim) or more recent past (as

is implied in her epilogue) provides any justification for what it turns out is

really her main message: economic nationalism (a.k.a. ‘mercantilism’) fosters

modern growth. All the evidence is to the contrary. But, having eschewed both

history and economics, Greenfeld blithely ignores all this. Weber, the

sociologist who took account of both, would I am sure be appalled by this

travesty, which the publishers in their publicity leaflet advertise as “Moving

Beyond Max Weber”!


F. Aftalion (1990), The French Revolution: An Economic Interpretation.

Cambridge University Press, Cambridge.

H. J. Berman (1983), Law and Revolution: The Formation of the Western Legal

Tradition. Harvard University Press, Cambridge, MA.

J Goody (1983), The Development of the Family and Marriage in Europe.

Cambridge University Press, Cambridge.

E. Heckscher (1955), Mercantilism, 2 volumes, revised second edition.

Allen and Unwin, London.

J.R. Hicks (1969), A Theory of Economic History. Clarendon Press,


D. Lal (1985/2000), The Poverty of ‘Development Economics.’ Harvard

University Press, Cambridge Mass; revised second edition, MIT Press, Cambridge


D. Lal (1988), Unintended Consequences: The Impact of Factor Endowments,

Culture, and Politics on Long-Run Economic Performance. MIT Press,

Cambridge Mass.

D. Lal and H. Myint (1996), The Political Economy of Poverty, Equity, and

Growth: A Comparative Study. Clarendon Press, Oxford.

A. Maddison (2001), The World Economy: A Millennial Perspective. OECD.


E.A. Wrigley (1988), Continuity, Chance and Change: The Character of the

Industrial Revolution in England. Cambridge University Press, Cambridge.

Deepak Lal is the James S. Coleman Professor of International Development

Studies at the University of California — Los Angeles. His most recent book

was Unintended Consequences: The impact of Factor Endowments, Culture and

Politics on Long-Run Economic Performance (MIT, 1998). He is currently

working on a book on globalization and order.

Subject(s):Markets and Institutions
Geographic Area(s):General, International, or Comparative
Time Period(s):General or Comparative