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Economic Backwardness in Historical Perspective: A Book of Essays

Author(s):Gerschenkron, Alexander
Reviewer(s):Fishlow, Albert

Project 2001: Significant Works in Economic History

Alexander Gerschenkron, Economic Backwardness in Historical Perspective: A Book of Essays. Cambridge, MA: Belknap Press of Harvard University Press, 1962. 456 pp.

Review Essay by Albert Fishlow, International Affairs, Columbia University.

Alexander Gerschenkron: A Latecomer Who Emerged Victorious

Alexander Gerschenkron and his ideas have had, like excellent wine, a remarkable maturing in recent years. Rare is the sophisticated course in political economy that does not assign his model of relative backwardness as a required reading. Rarer still is the doctoral student in economic history who remains uninfluenced by his beguiling hypotheses about the process of historical change within Europe since the Industrial Revolution.

Gerschenkron’s Background and Early Career

Fortunately, as a consequence of a wonderful biography, The Fly Swatter, by Nicholas Dawidoff, (New York: Pantheon, 2002) his grandson, we know much more about his life than we had previously. Born in Odessa in 1904, he died in Cambridge, Massachusetts in 1978. His early life was eventful. He fled the Bolshevik Revolution with his father in 1920, apparently bound for Paris, but wound up in Vienna instead. The reason was his father’s immediate success in finding a position running a turbine factory. There he rapidly learned German, as well as Latin, enabling him to attempt to pass the entrance examination for secondary school within seven months. His failure, only in Latin and geometry, meant he was rejected. That challenge was overcome, months later when he easily gained admission. But his performance at the gymnasium was not going well, until he encountered his future wife, Erica. Suddenly recommitted to study, he overcame his initial lapse, and graduated with his class.

Thereafter he enrolled in the University of Vienna’s school of Nationalokonomie in 1924. His early professional career is not recorded in autobiography as was his first 20 years. Indeed, as Dawidoff summarizes it, “he didn’t much talk about the period from 1924 to 1938 because that was for him a period of growing frustration and disappointment that culminated in catastrophe.”

The University experience was the first of these disappointments. Whatever the strength in economics had been with Bohm-Bawerk, Menger and others who had pioneered in the Austrian school, it was not there in the 1920s. Gerschenkron graduated in 1928, his thesis focusing on Austria’s happy future as a Marxist democracy. He married, had a child and took a position representing a Belgian motorcycle firm in Vienna. That was successful, but inadequate. Three years later, he committed himself to politics and the Social Democrats. That ended in 1934 with the virtual civil war that terminated the party’s existence, and began the process of decline into Anschluss.

Gerschenkron’s parents left for England at that time. Four years later, he and his family would exit and join them, and hardly in easy circumstances. But the important novelty, and a decisive point in his career, was the invitation from Charles Gulick, a Berkeley professor whom he had earlier helped in his research in Austria, to come to the United States. His acceptance marked the real beginning of his academic career that subsequently was to flourish over the rest of his life.

But it began equivocally. The finished Gulick book, Austria from Habsburg to Hitler, a two-volume work, published in 1948 (Berkeley: University of California Press), was brilliant. There is good reason to credit Gerschenkron’s twelve months of continuous research and writing for that outcome. At least Berkeley provided a place for him to return, as he did in September 1939. There he was to stay for only five years before moving on to the Federal Reserve Board. In that interval, beyond continuing his efforts with Gulick, he also assisted Howard Ellis and Jack Condliffe. And he wrote, in long nights of private work, what proved to be his single piece of greatest length, Bread and Democracy in Germany, published in 1943 (Berkeley: University of California Press). That book attacked the Junkers for their exploitation of the rest of the German population, and earned him promotion to the rank of Instructor with the opportunity to teach courses. It did not earn him any greater special recognition at Berkeley — any more than Albert Hirschman’s simultaneous efforts there did — and he moved on to Washington in late 1944.

At the Federal Reserve, he established himself as an expert on the Soviet economy. This was a period when relationships with the Soviet Union became central to the United States, and when there were few others with his knowledge, interest and immense capacity to immerse himself in any and all information. He did well, advancing to head of the International Section, until the decisive moment came in 1948: Harvard offered him a position as a tenured professor, the successor to Abbot Payson Usher. He accepted, and his university career really began.

There were four parts of that career that are relevant. It all began, appropriately enough, with the Soviet Union. At Harvard, Gerschenkron established himself at the new Russian Research Center. In a notable Rand study in 1951, A Dollar Index of Soviet Machinery Output, 1927-28 to 1937, he showed that the remarkably high rates of growth of Soviet industrial production owed itself to the index number bias: a Laspeyres index calculated on the basis of 1926-27 weights significantly overstated real expansion. Rapid Soviet growth was not constructed on the basis of false statistics, but rather, inappropriate technique. The “Gerschenkron effect,” the difference between calculated Paasche and Laspeyres volume indexes, commemorates his contribution. Important as the work was at the time, deflating vastly superior Soviet growth, it was not to be the basis of his subsequent fame.

Gerschenkron’s Economic History: Understanding Economic Backwardness

His present reputation comes instead from his dedication to European economic history. He flourished as the doyen of economic history in the United States. He influenced a generation of Harvard economists through his required graduate course in economic history. His erudition and breadth of knowledge became legendary in its time. Gerschenkron defined an indelible, if unattainable, standard of scholarship for colleagues and students alike.

Backwardness was at the root of his model of late-comer economic development. His hypothesis first took form in a 1951 essay entitled “Economic Backwardness in Historical Perspective.” From that brief 25-page contribution to a conference held at Chicago, and later published in Economic Development and Cultural Change, were to emerge the central ideas that characterized his subsequent academic career. The essay gave its name to his volume of essays published by Harvard University Press in 1962. It is the opening chapter of that volume, and a significant reason that it was recently selected as one of the most influential works of economic history ever published.

The central notion is the positive role of relative economic backwardness in inducing systematic substitution for supposed prerequisites for industrial growth. State intervention could, and did, compensate for the inadequate supplies of capital, skilled labor, entrepreneurship and technological capacity encountered in follower countries seeking to modernize. England, the locus of the Industrial Revolution, could advance with free market guidance along the lines of Adam Smith. France, beginning later, would need greater intervention to compensate for its limitations. In Germany, the key innovation would be the formation of large banks to provide access to needed capital for industrialization, even as greater Russian backwardness required a larger and more direct state compensatory role.

Gerschenkron’s analysis is conspicuously anti-Marxian. It rejected the English Industrial Revolution as the normal pattern of industrial development and deprived the original accumulation of capital of its central force in determining subsequent expansion. It is likewise anti-Rostovian. There were no equivalent stages of economic growth in all participants. Elements of modernity and backwardness could survive side by side, and did, in a systematic fashion. Apparently disadvantageous initial conditions of access to capital could be overcome through new institutional arrangements. Success was indicated by proportionally more rapid growth in later developers, signaled by a decisive spurt in industrial expansion.

This model underlay Gerschenkron’s extraordinary research into the specific developmental experiences of Russia, Germany, France, Italy, Austria and Bulgaria. Those specific cases, in turn, bolstered his advocacy of a comparative, all-encompassing European structure. “In this fashion,” as he wrote in 1962, “the industrial history of Europe is conceived as a unified, and yet graduated pattern.”

Over time, and as he read prodigiously and modestly altered the theoretical foundation, the structure of his approach became ever more specific. I summarize it here in four hypotheses:

(1) Relative backwardness creates a tension between the promise of economic development, as achieved elsewhere, and the continuity of stagnation. Such a tension takes political form and motivates institutional innovation, whose product becomes appropriate substitution for the absent preconditions for growth.

(2) The greater the degree of backwardness, the more intervention is required in the market economy to channel capital and entrepreneurial leadership to nascent industries. Also, the more coercive and comprehensive were the measures required to reduce domestic consumption and allow national saving.

(3) The more backward the economy, the more likely were a series of additional characteristics: an emphasis upon domestic production of producers’ goods rather than consumers’ goods; the use of capital intensive rather than labor intensive methods of production; emergence of larger scale production units at the level both of the firm as well as the individual plant; and dependence upon borrowed, advanced technology rather than use of indigenous techniques.

(4) The more backward the country, the less likely was the agricultural sector to provide a growing market to industry, and the more dependent was industry upon growing productivity and inter-industrial sales, for its expansion. Such unbalanced growth was frequently made feasible through state participation.

The considerable appeal of the Gerschenkron model derives not only from its logical and consistent ordering of the nineteenth- and early-twentieth-century European experience. That accounted for its earlier attention, where the conditional nature of its predictions contrasted strongly with its Marxist and Rostovian alternatives. What has given it greater recent notice has been its broad scale generalization to the experience of the many late late-comers of the present Third World. His formulation dominates the stages of growth approach because of its emphasis upon differential development in response to different initial conditions. There is thus the irony of Walt Rostow’s demise at the hands of Gerschenkron – does anyone now assign The Stages of Economic Growth? — when Rostow had been the first choice of Harvard to succeed Usher in 1948.

In Gerschenkron’s own hands, his propositions afforded an opportunity to blend ideology, institutions and the historical experience of industrialization, especially in the case of his native Russia, in a dazzling fashion. For others, his approach has often proved a useful starting point for the historical discussion of other parts of the world, such as Henry Rosovsky did with Japan, and others, elsewhere. Always, application of the backwardness approach requires close attention to detail, as well as a quantitative emphasis.

Responses to Gerschenkron’s Thesis

The model is, of course, not without its limitations and its critics. History, even of Europe alone, does not in every detail bear easily the weight of such a grand design. In other parts of the world, and in a later time period, larger amendments are frequently required, and sometimes forgotten by current advocates. And somewhat surprisingly, in view of Gerschenkron’s own path-breaking essay in political economy, Bread and Democracy in Germany, there is too little special attention to the domestic classes and interests seeking to control the interventionist state. Backwardness can too easily become an alternative, technologically rooted explanation that distracts attention from the state and the politics surrounding it, rather than focusing upon its opportunities and constraints. Ultimately, as well, there are the many developmental failures — rather than only the successes — that now loom larger and attract attention. While he did explicitly treat Austria as a failed case, it was not a central part of his theoretical structure. Moreover, important current issues like globalization, the central role of international trade, and education are less significant through much of the nineteenth century in Europe.

Still, the concept of relative backwardness, and Gerschenkron’s always insightful and rich elaborations in so many national contexts, represent a brilliant and original approach to economic history that has been perhaps unequalled in the twentieth century. And more recently, with the rise of political economy as a field, his work is widely assigned as required reading. A quick measure of his current influence is the almost 2000 Google references that turn up with the entry of his name.

Gerschenkron’s Enduring Influence

His third great contribution came through his students. Dawidoff’s The Fly Swatter, provides a whole chapter, and more, focused on his role. First, in the 1950s came the students who worked upon the Soviet Union. Then, as his interests concentrated upon economic history, came his direction of the Ford Foundation supported Economic History Workshop at Harvard in the late 1950’s and 1960s. His seminar then, and the availability of fellowship support, attracted several Harvard students, and even some from neighboring MIT, to work in the field. Always, too, there were an impressive group of visitors to Cambridge who were invited to speak to the seminar, but never had permanence in its regular activities.

His recruitment techniques were subtle but effective. Economics 233, the course in economic history required of all graduate students, assigned a paper as well as a final examination. That provided a chance for him to assess each student early on through a brief visit to his office. Entry therein was a special occasion: filled as it was with books, journals, documents, maps, etc., it embodied scholarship with a capital S. Few who were recruited could desist, regardless of initial inclinations that were not directed to economic history.

The course was just the introduction. For those who went on in the field more seriously, the regular evening seminar became the focus. There ideas for dissertations were discussed and quantitative techniques evaluated. It was just as the computer was evolving and econometrics was undergoing rapid advance. Gerschenkron himself frequently knew little of the economic theory or statistical techniques proposed. He usually limited himself to a final evaluative comment, and one that either justified further research or implicitly suggested that another topic might be a better eventual choice. That judgment was informed by the previous discussion as well as his sense of the student’s intellectual capacity.

Gerschenkron had extremely good judgment or very good luck, or perhaps a combination of both. For the small crop of students who wrote with him over more than a decade went on to leadership as the field of economic history was just changing back from an historical emphasis to an economic one. Cliometrics was the new terminology. Leading universities absorbed his students, who almost always have had productive subsequent careers. Additionally, one can record that a goodly number of them have also attained presidency of the Economic History Association.

It was not his direct dissertation supervision that was responsible. He provided no topic, no suggestion of sources, no regular guidance, no timetable for conclusion. Most of the students chose subject matter far from continental Europe. What these persons gained was proximity to a stellar intellect, and close association with each other as they pursued their research. They also obtained a father figure whom they desperately sought to imitate in their own scholarship and subsequent teaching. Those who survived that complex relationship almost always emerged with deep affection and fond memories, even if the process was far from linear and continuous.

By the mid-1960s, ten of his students, both in Soviet economics and economic history, prepared a Festschrift in his honor. The book, Industrialization in Two Systems, was organized and edited by Henry Rosovsky, and published in 1966 (New York: Wiley). Many of the essays are still worth reading. But the dedication, from the Pirke Avot, states their strong feelings perhaps best of all: “The day is short, and the work is great, and the laborers are sluggish, and the reward is much, and the Master is urgent.”

A fourth and last relevant observation relates to his general intellect. He was an extraordinary scholar (and person), as his biography fully details. He was an exceptional reader, of good books and bad. In his own writings, his references were varied, and consciously intended to impress: “There was almost always a little Latin, unless there was a little Greek or a little German or a little Russian or a little French or a little Italian; …” Nor did he exclusively write on economic history. There were his book reviews and other essays, including the one joint work — with his wife — on the adequacy of the diverse translations of Hamlet’s quatrain to Ophelia in sixteen different languages. There were his regular lunchtime performances at the Faculty Club and Eliot House and his interactions with other Harvard scholars. His talents were notable and appreciated: what other economist would have been offered chairs in Italian literature and Slavic studies?

Not surprisingly, upon reaching the mandatory retirement age of 65 in 1969, he was offered a further five years. But those years were not a happy terminus to his long stay at Harvard. The war in Vietnam, and the student reaction, imposed a large cost, as it did to many others who had fled Europe in the 1930s. Long-standing friendships were broken, as with John Kenneth Galbraith. The end of the economic history requirement in 1973 was another major disappointment. Perhaps the greatest one, however, was his inability to publish the great work, the big book that would summarize his brilliant insights into the process of European industrial change, the book that could and would influence political scientists and economists for generations to come. Despite this lapse, Gerschenkron’s influence has subsequently blossomed. The collection of essays under review, which opens with the backwardness thesis and closes with appendices on industrial development in Italy and Bulgaria (with reflections on Soviet literature along the way) — has achieved a hallowed acceptance.

Recent Developments and Gerschenkron’s Ideas

The current surge of interest in political economy has brought a second wave of increasing interest in Gerschenkron’s insights. As the contemporary world continues to confront the problem of inadequate development, particularly over the last twenty years in Latin America and Africa, that special magic of nineteenth century backwardness stimulates greater appeal, and greater hope. So does the case of success in Asia.

The rapid pace of development in East Asia, for example, has inspired a whole set of major works over the last fifteen years, seeking to ascertain how a region, apparently condemned to continuing stagnation by religion, language and tradition, could spurt ahead in the 1970s and subsequent periods. Even the recent pause, requiring massive assistance from the IMF and extensive domestic restructuring, has come off with barely a temporary decline.

After all the discussion of major changes supposedly required in the system of international financial flows in the past few years, little has, in fact, happened. The market has continued to distribute something like $1 trillion, in both capital flows as well as foreign investment, throughout the world. Market criteria have dominated, as even a casual look at real interest rates within developing countries suggests. This has not much altered the pattern of development. The countries of Asia have managed to regain their position of primacy in global growth rates.

With AIDS spreading rapidly throughout Africa, with malaria and other diseases recurring, with environmental degradation threatening, with a demographic transition that will begin to exert the pressure of an aging population, there is no lack of additional new problems that are pressing. On the other side is the reality of declining international assistance from the already developed North.

Failure of economic development to become a global process, as it appeared to do in the 1960s, and for broad convergence in per capita income levels to occur, now constitutes a major intellectual and practical challenge. Should one opt against the pressures of increasing globalization, and return to the industrial protection and import substitution of the past? Should one seek to enhance the role of central direction and decision at the expense of decentralization and private determination? Should one attack the inequality of income and poverty by imposing greater burdens upon the domestic rich and foreign investors? Should one engage in significant land reform? Should one renationalize after the extraordinary privatization that has occurred over the last decade or so?

These new issues are not ones that Gerschenkron explicitly raised. But they are implicit in his efforts to pose the advantages of backwardness. What was an advantage in one historical setting can readily become a disadvantage in another. But the very effort to construct an explicit, and testable, model is what differentiates him from his contemporaries. Shura, as he was better known by those very close to him, is guaranteed a place in the pantheon of economic history.

Albert Fishlow is Professor of International Affairs and Director, Institute of Latin American Studies at Columbia University. He has served as Deputy Assistant Secretary of State for Inter-American Affairs; Dean of International and Area Studies at UC-Berkeley; Paul A. Volcker Senior Fellow for International Economics at the Council of Foreign Affairs; and coeditor of Journal of Development Economics, among numerous other positions.

Subject(s):Economywide Country Studies and Comparative History
Geographic Area(s):General, International, or Comparative
Time Period(s):20th Century: WWII and post-WWII

The History of Anglo-Japanese Relations, 1600-2000

Author(s):Hunter, Janet E.
Sugiyama, S.
Reviewer(s):Wilson, John

Published by EH.NET (February 2003)


Janet E. Hunter and S. Sugiyama, editors, The History of Anglo-Japanese Relations, 1600-2000, Volume 4, Economic and Business Relations. New York: Palgrave 2002. xiii + 355 pp. $78 (hardcover), ISBN: 0-333-79197-5.

Reviewed for EH.NET by John Wilson, University of Nottingham International Business History Institute (UNIBHI).

Building on the enormous success of its three predecessors, this fourth volume in the Palgrave series on Anglo-Japanese relations further enhances its reputation by providing nine essays of undoubted significance. Previous volumes in this series have examined political-diplomatic dimensions (both edited by Nish and Kibata) and military-naval issues (Gow and Hirama), while a fifth is planned for similar treatment of socio-cultural debates (Daniels and Tsuzuki). This volume covering economic and business relations demonstrates that there continues to be an extensive interest in this theme. Crucially, it brings together recognized authorities in their respective fields, offering fresh insights into the various aspects covered.

The first chapter (by Hunter and Sugiyama) represents a detailed introduction to what the editors regard as the key themes of the volume. Taking up almost one-third of the entire book, it is clear that Hunter and Sugiyama are concerned to ensure that readers are well-informed about these issues. Readers will also not be disappointed with the material they discover in this chapter, because it provides a wealth of information on how extensively Britain and 2Japan have traded over the course of the last four hundred years. For example, there is evidence on the number of British firms that in the nineteenth century traded out of Japanese ports, while for the more recent period there are graphs and analyses of the extent of Anglo-Japanese trade and investment. It is essential background for the chapters that follow, providing an invaluable reference point for those who teach any modules linked with Japan.

Just like the introduction, the case-study chapters are grounded in original research and reflect the latest work in their respective fields. Chapter two (written by Kanji Ishii), for example, provides a detailed analysis of British-Japanese rivalry in trading and banking up to the First World War. Ishii is especially concerned to highlight how by recruiting well-educated staff Japanese banks and trading operations were able to develop strong core competences that enabled them to compete with their British rivals. Norio Tamaki also develops this theme in chapter three, where he examines the influences on Fukuzawa Yukichi’s work in creating the first Japanese business elite. Further substantiating a common notion concerning Japan, Tamaki illustrates how human resource development was one of the key reasons why Japan proved capable of converting from an agricultural to an industrial economy, learning good lessons from more economically advanced nations like Britain.

The next chapter, by Bunki Nagura, is more concerned with financial and managerial issues. Nagura provides a case study of the Japan Steel Works, illustrating how the British firm Vickers-Armstrong provided both technical expertise and finance at the time of its creation. This also indicates the difficulties involved in this kind of relationship, because so many problems beset the firm that the advantages of this early form of joint venture were never wholly apparent. It is especially clear that the British partners never derived as much benefit from the arrangement as the Japanese. Christopher Madeley also brings out this theme, when examining the 1920s and 1950s collaborations between two British automobile manufacturers (Wolseley and Rootes) and their two Japanese partners (respectively, Ishikawajima and Isuzu). While it is not apparent from these two chapters whether there were any generic reasons behind this British failure to exploit the potential in their arrangements, one can conclude that respective managements approached the deals with significantly different attitudes and aims. In particular, the Japanese would appear to have been much more focused, while British management lacked precision.

In between these two chapters, Toshio Suzuki assesses the extent to which during the 1920s the City of London funded Japanese governments. This demonstrates how City institutions made substantial profits from this issue, illustrating how financiers could teach industrialists something about how best to exploit the Anglo-Japanese links. One of the classic examples of how British industry suffered at the hands of Japanese entrepreneurship, of course, was in cotton. As John Sharkey relates in chapter seven, even though accurate and reliable information was relayed back from Japan by British sources, the extent of the threat was significantly misconceived throughout the interwar years.

The last two chapters, respectively by John Weste and Marie Conte-Helm, are principally concerned with post-1950 developments. Weste assesses Britain’s attempts to influence Japan in the 1950s, emphasizing how significant opportunities were lost as a result of the adoption of a wary approach towards the potential Far Eastern partner. On the other hand, as Conte-Helm graphically illustrates, after 1980 Japanese corporations did not prove slow to invest in Britain, given the enormous superiority over indigenous firms. This brings the story full circle, because from a position of dependence and inferiority up to the 1930s, by the late-twentieth century Japan had grown so impressively that it was able to dominate ‘The First Industrial Nation.’

For anybody interested in long-term international developments, this is an invaluable collection of essays. Inevitably, the case study chapters reflect the specialized research of the authors chosen, limiting any claims that the book comprehensively covers the field of economic and business relations. For example, it would certainly have been useful to include a chapter on the pre-1868 era, while one might also have expected to see work on industrial relations, the introduction of total quality management and the impact of Japanese investment in the automobile and electronics industries. On the other hand, most notably in the introductory chapter, one can find not only plenty of detail, but also coverage of the key themes, indicating how the authors must be congratulated in bringing together this highly impressive collection. (Janet Hunter lectures at the London School of Economics; Shinya Sugiyama is professor of economics at Keio University, Tokyo.)

John Wilson is Research Director of the University of Nottingham International Business History Institute (UNIBHI). Apart from having published the only long-term study of British business, he has produced business histories of prominent operations like Ferranti, British Gas North Western, BP-Amoco and Manchester Business School. Ashgate is about to publish a book he has edited with Andrew Popp, Industrial Clusters and Regional Business Networks in England, 1750-1970.

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

Rethinking the Great Depression

Author(s):Smiley, Gene
Reviewer(s):Wheelock, David C.

Published by EH.NET (February 2003)

Gene Smiley, Rethinking the Great Depression. Chicago, IL: Ivan R. Dee,

2002. xii + 179 pp $24.95 (hardcover), ISBN: 1-56663-472-5.

Reviewed for EH.NET by David C. Wheelock, Federal Reserve Bank of St. Louis.

Despite being less than 200 pages, Gene Smiley’s Rethinking the Great

Depression is a fairly comprehensive, as well as highly readable, account

of the origins, depth and legacy of the Great Depression. The book is intended

for a non-specialist audience, and would be appropriate reading for

undergraduate courses in American economic history or macroeconomics.

The book’s first two chapters focus on the causes of the Great Depression and

why the Depression was especially severe in the United States. Smiley

attributes the world wide Depression to a breakdown of the international gold

standard. He describes how countries that had undervalued currencies, e.g., the

United States and France, prevented gold inflows from equilibrating national

money supplies and price levels during the 1920s. Tight monetary policy, Smiley

argues, largely explains the unusual severity of the Depression in the United

States. The Federal Reserve adopted a tight monetary policy in 1928 to stem

gold outflows and contain stock market speculation. The Fed remained tight

after the stock market crash in 1929 because of continued gold losses and

because Fed officials mistakenly interpreted low market interest rates and

little discount window borrowing as signaling that monetary policy was in fact


In addition to monetary forces, Smiley argues that rising real wage rates also

contributed to the severity of the Great Depression in the United States.

Previous economic downturns had been relatively short, he contends, because

nominal wage rates had declined when the price level fell to keep real wages

relatively constant. Consequently, output and employment fell less than during

the Great Depression, and recovery came sooner. Smiley attributes the changed

behavior of real wages during the Depression to President Hoover’s lobbying of

large corporations to not cut money wage rates in the hope of preventing large

declines in consumer spending.

The book’s next two chapters focus on the recovery phase of the Depression,

with emphasis on the New Deal. Smiley describes the slow, halting pace of

recovery, which he attributes to misguided government policies. He argues that

the principal policies of the “first” New Deal, including the Agricultural

Adjustment Act (AAA) and the National Industrial Recovery Act (NIRA), were

aimed as much or more at reform than at economic recovery. Roosevelt’s main

economic advisors had little confidence in capitalism or free markets, Smiley

contends, and favored industrial planning and cooperation between business,

labor and government. The spirit of both the AAA and NIRA reflected the view

that deflation was caused by excessive competition and too much production. The

AAA sought to raise farm prices by cutting output, permitting cooperative

marketing, and through government purchases of commodities at target prices.

The NIRA had a similar objective for the price of manufactured output, and led

to the creation of industrial codes that limited competition and production, as

well as instituting labor market reforms. Smiley explains that “the NRA was

attuned to discourage recovery, that is exactly what it did” (p. 100).

Next Smiley discusses the depression of 1937-38. National output grew strongly

in 1935-36, after the “shackles of the NRA” had been removed (p. 106). The

money stock grew rapidly during these years, primarily because of gold inflows

from abroad. The “golden avalanche” allowed banks to build up substantial

excess reserves, which caught the attention of the Federal Reserve Board. Fed

officials worried about the inflationary potential of excess reserves and

increased reserve requirements three times during 1936-37 to reduce them.

Although policymakers viewed excess reserves as being redundant, Smiley argues

that banks held excess reserves as precautionary balances and thus responded to

the Fed’s actions by reducing loans and selling securities, which increased

interest rates. The policy was thus contractionary. Higher taxes on business

associated with a new tax on undistributed corporate profits and the

introduction of Social Security, further contributed to the contraction,

according to Smiley.

The final chapter of the book focuses on the apparent return to full employment

and high output growth during World War II, and the legacy of the Great

Depression for postwar economic policy. Smiley first addresses the

macroeconomic effects of the war. He describes the return to full employment

and rapid output growth, but argues economic conditions (and data) were highly

distorted by the military build up, price controls and rationing. Nevertheless,

the war years were widely seen as providing evidence that fiscal policy could

maintain high employment, and helped bring Keynesian macroeconomics to the fore

among economists and policymakers.

Smiley traces the origins of major postwar government social programs,

regulations, and economic stabilization policies to the Great Depression and

World War II. He also describes how the Bretton Woods System, which

reconstituted the international gold standard after the war, was incompatible

with the Keynesian-influenced monetary and fiscal policies U.S. officials

pursued during the 1960s. In the quest for high employment, these policies

resulted in rising inflation that ultimately forced the breakdown of fixed

exchange rates and dollar convertibility.

Smiley’s interpretations of the origins and effects of the Great Depression are

orthodox. He largely ignores other explanations, such as the possibility that

rising income or wealth inequality, or financial speculation, helped bring

about the Depression. Although many economists would accept Smiley’s

explanations about the causes of the Great Depression, the alternative

explanations are widely believed, especially among non-economists. Hence, the

book might have been enhanced by a discussion of some alternative explanations

and their weaknesses. Similarly, Smiley’s interpretation of New Deal policies

on economic recovery are almost uniformly negative. Although he is careful to

identify how some policies benefited labor and other groups, the book could do

more to distinguish between the effects of New Deal policies on economic growth

and their other effects — for example, on infrastructure, rural

electrification, etc. Moreover, in arguing that New Deal policies retarded

economic recovery, Smiley focuses on disruptions to institutions that defined

property rights. It has been argued, however, that Roosevelt’s policies

stimulated recovery by giving consumers and firms confidence that recovery was

possible. Such effects are hard to quantify, but worth considering. Despite

these quibbles, I recommend this book as a widely accessible and clearly

written summary of the main causes of the Great Depression and its legacy for

economic policy.

David C. Wheelock is Assistant Vice President and Economist, Federal Reserve

Bank of St. Louis. He is author of The Strategy and Consistency of Federal

Reserve Monetary Policy, 1924-1933 (Cambridge, 1991) and numerous articles

on financial and monetary history.

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

Economies beyond Agriculture in the Classical World

Author(s):Mattingly, David J.
Salmon, John
Reviewer(s):Engen, Darel

Published by EH.NET (February 2003)


David J. Mattingly and John Salmon, editors, Economies beyond Agriculture in the Classical World. London and New York: Routledge, 2001. xii + 324 pp. $90 (cloth), ISBN: 0-415-21253-7.

Reviewed for EH.NET by Darel Engen, Department of History, California State University, San Marcos.

The economy of the ancient Greco-Roman world is an enigma. Despite over a century of debate, it has eluded all attempts at general characterization. The collection of articles edited by David Mattingly (University of Leicester) and John Salmon (University of Nottingham) entitled, Economies beyond Agriculture in the Classical World, may not resolve the debate, but it will help to propel it into new and fertile territory that at the very least will enhance our understanding of the ancient economy.

In the last quarter century a view most persuasively set out by the influential ancient historian, Moses Finley, has come to be the focal point around which the debate about the nature of the ancient economy has swirled.(1) Finley’s basic thesis is that the ancient economy was not only quantitatively small in scale, with low levels of capital investment, technological development, long-distance trade in non-luxury goods, and industrial specialization, but also qualitatively “primitive,” with social and political factors dominating “economic rationality” in motivating and organizing economic relationships and cities existing primarily as places of consumption, exploiting production carried out largely through agriculture in the countryside. Many recent studies, however, have argued at least for modifications of Finley’s view and Economies contains an excellent collection of several solid examples of this new scholarship.(2)

In particular, the collected articles in Economies examine the significance of the non-agrarian sector in the economies of ancient Greece and Rome and are the result of the Nottingham-Leicester Ancient History Seminar series from 1995 to 1997, entitled, “The Productive Past: Economies beyond Agriculture in the Ancient World.” The articles are grouped into sections concerning a variety of productive activity outside of agriculture and argue both against and in support of the Finley model and from both theoretical and empirical perspectives.

After a concise introduction by the editors that sets out the context of the collection within current scholarship on the ancient economy, the section entitled, “Modelling the ancient economy,” presents articles that discuss the key issue of economic growth. Paul Millet’s article critiques Keith Hopkins’ twenty-year-old arguments for growth in the Roman economy by offering alternative explanations to growth from the evidence cited by Hopkins.(3) Millet’s conclusion is that significant economic growth is likely to have occurred only during the early Roman Empire and was the product of exceptional circumstances, thus making it an aberration from the usual rule of little to no economic growth in the ancient world. On the other hand, the articles of Greg Woolf and David Mattingly et al. both attempt to test theoretical models against archaeological evidence from two specific places in the Roman Empire, Gaul and the city of Leptiminus in North Africa respectively, and conclude that the evidence of productive growth requires at least a modification of the Finley model of the “consumer city.” However, consistent with Millet’s article is the possibility that such a modification is specific to the era of the Roman Empire and is the result of political conditions created by the Empire, rather than free market economics. Jean-Jacques Aubert contributes an article on the management of non-agrarian production, but can conclude only that the indirect nature of the evidence (e.g. we know that management must have existed from the evidence of non-agrarian productive activity) is inadequate to study the economic ramifications of such management.

The section entitled, “Extraction,” concerns such non-agrarian pursuits as mining and quarrying. T.E. Rihll’s examination of the mining and processing of silver in Athens shows that the scale, complexity, and specialization of such activity must be said to constitute an industry. It should be noted, however, that the scale of Athenian mining operations was unique in the Greek world. Although the two articles by Valerie Maxfield and Colin Adams show that Roman stone quarrying in eastern Egypt was conducted on a tremendous scale, it would not and could not have been conducted by anything other than the Roman Imperial government, which alone had the power to conduct such an immense undertaking and did so primarily for political reasons (e.g. to build huge temples and arenas) that flew in the face of any economic rationalism.

Although much of the economic activity surrounding building in ancient Greece also defied economic rationalism, the section entitled, “Construction,” contains articles by John Salmon and J.K. Davies that take a closer look at the significance of building in the Greek economy. Davies’ article examines the epigraphic records containing the accounts for building temples at the sanctuary of Delphi. The records provide evidence for the development of administration, manufacturing skills, infrastructure, contracting, and regional interaction in economic partnerships and transportation of goods. It is especially refreshing that Davies examines the epigraphic evidence, which, in addition to archaeological evidence, may provide a path for us to explore beyond the limits of the old debate about the ancient economy, so bound as it was by theory and literary evidence. Salmon argues for a new method to detect economic growth through a comparison of labor costs for building projects in the Greek world over time. His approach requires some assumptions based on estimates to develop multipliers extrapolated from better to less well documented building projects. Such a method has its weaknesses (see the divergent figures obtained for estimates of the Athenian grain trade), but in the absence of more explicit evidence and given that the statistical sample of Greek public buildings is fairly complete, his method might at least give us a reasonable indication of the economic impact of the Greek building industry.(4) An article by Janet Delaine also attempts to quantify labor requirements for buildings, but this time in the Roman world. She wisely cautions that her methods require assumptions and estimates that really cannot provide us with figures for absolute costs, but argues that such an attempt at quantification can allow for useful comparisons of relative costs. Her study shows that building with concrete was much less labor intensive than doing so with dressed stone and that political factors often took precedent over cost effectiveness in the choice of materials for the monumental buildings of Rome.

The final section on “Textile production” includes articles by Andrew Wilson and J.F. Drinkwater that come to different conclusions for the significance of this activity in the Roman economy. The former argues on the basis of archaeological evidence that textile production in North Africa took place largely outside of its traditional locus in the private household and instead in numerous small workshops that existed together with well-organized cloth markets. Wilson thus suggests that the Finley model of the “consumer city” overgeneralizes what may be a more complex array of “city types,” some being net-consumers, others net-producers, others market centers, and so on. Drinkwater, however, downplays the existence of locally prominent wool manufacturers in northwestern Gaul by comparing them to their much more economically significant counterparts in the medieval era. His conclusion is that what Finley referred to as a “common psychological framework” of primitive economic thinking kept the people and government of Rome from exploiting the economic potential of wool manufacture, minimizing its growth and impact on the economy.

Overall, Economies is a useful collection of scholarship on the subject. It will appeal mostly to specialists in the history of the ancient Greek and Roman economies, but will also be valuable to any economic historians who have some knowledge of the historical context of the Greco-Roman world and the debate about its economy. The collection fits snugly into the growing body of scholarship that has attempted to move beyond the restricting confines of the old debate. The combination of theory and solid evidence, particularly archaeological, but also some epigraphic, is most welcome and several of the contributors are to be commended for their innovative approaches to the subject. It is also refreshing that the articles draw a clear distinction between the economies of the Greek and Roman worlds, something Finley failed to do when he lumped together an area stretching from Spain to Mesopotamia over the course of a millennium into one “ancient economy.” At the same time, however, this leads to one major shortcoming of Economies: those who wish to gain more knowledge of the Greek economy will have to look elsewhere, for the collection is heavily weighted toward analyses of the Roman economy, with only three of the twelve articles being devoted to Greece.

But despite being mostly about the Roman economy, the articles in Economies do reveal some important themes, the most significant of which in the opinion of this reviewer is that we must move beyond the parameters of debate about the nature of the ancient economy as it has been shaped over the last century. With the number of exceptions to the models of both Finley and his detractors growing with each new detailed study of specific aspects of the economy, it is clear that the economy was far too complex and dynamic to be characterized by such broad models. There is now ample evidence that can be drawn on to support either side in the debate. The choice of which side to support depends largely on which sector of the economy one wishes to examine, at what time period, and in what area. Agriculture, manufacturing, trade, and extraction were each unique in scale, organization, and potential for growth and cannot be easily lumped together into one simple picture of the economy overall. Moreover, the economies of Greece and Rome were as different as they were similar. The articles in Economies reveal time and again that early Imperial Rome created the kind of stability over a large area that was conducive to economic growth, but that this was unique in the ancient world. In Greece very different conditions prevailed and even within Greece, it is impossible to generalize about such divergent city-states as Athens, Sparta, Thebes, and Corinth.

Finley was right about one thing: the ancient economy was in many ways more different from ours than it was similar. But the increasing number of exceptions to his model, such as those put forth by several studies in Economies, show that Finley’s model, though useful in its general conception, grossly oversimplifies the complexity and dynamism of the economies of ancient Greece and Rome. Thus, with each new study of specific sectors of the Greek and Roman economies we will eventually obtain a much more nuanced and accurate picture. David Mattingly, John Salmon, and the authors of the articles in Economies beyond Agriculture in the Classical World have made a useful and important contribution to this effort.


1. Finley 1985.

2. Scheidel and Von Reden 2002 collect several key articles written over the last twenty years on the subject. See also Engen 2001, Parkins and Smith 1998, Morris 1994, Harris 1993, Cohen 1992, and Burke 1992.

3. Hopkins 1978 and 1980.

4. See Garnsey 1985 and 1988 and Whitby 1998 for two very different estimates for Athens’ grain production.

Works Cited:

Burke, Edmund M. 1992. “The Economy of Athens in the Classical Era: Some Adjustments to the Primitivist Model.” Transactions of the American Philological Association 122: 199-226.

Cohen, Edward E. 1992. Athenian Economy and Society: A Banking Perspective. Princeton: Princeton University Press.

Engen, Darel T. 2001. “Trade, Traders, and the Economy of Athens in the Fourth Century B.C.E.” In Prehistory and History: Ethnicity, Class, and Political Economy, ed. by David W. Tandy, 179-202. Montreal: Black Rose.

Finley, Moses I. 1985. The Ancient Economy. Second edition. Berkeley and Los Angeles: University of California. (Now available in an “Updated Edition” with a foreword by Ian Morris. Berkeley and Los Angeles 1999).

Garnsey, Peter. 1985. “Grain for Athens.” In Crux: Essays in Greek History Presented to G.E.M. de Ste. Croix on His 75th Birthday, ed. by Paul Cartledge and F.D. Harvey, 62-75. Exeter: Imprint Academic.

Garnsey, Peter. 1988. Famine and Food Supply in the Greco-Roman World. Cambridge: Cambridge University Press.

Harris, W.V., ed. 1993. The Inscribed Economy. Ann Arbor: Journal of Roman Archaeology, Supplementary Series 6.

Hopkins, Keith. 1978. “Economic Growth and Towns in Classical Antiquity.” In Towns in Societies: Essays in Economic History and Historical Sociology, ed. by P. Abrams and E.A. Wrigley, 35-77. Cambridge: Cambridge University Press.

Hopkins, Keith. 1980. “Taxes and Trade in the Roman Empire, 200 BC-AD 400.” Journal of Roman Studies 70: 101-125.

Morris, Ian. 1994. “The Ancient Economy Twenty Years after The Ancient Economy. Classical Philology 89: 351-366.

Parkins, Helen and Smith, Christopher. 1998. Trade, Traders, and the Ancient City. London and New York: Routledge.

Scheidel, Walter and Von Reden, Sitta. 2002. The Ancient Economy: Recent Approaches . London and New York: Routledge.

Whitby, Michael. 1998. “The Grain Trade of Athens in the Fourth Century.” In Trade, Traders, and the Ancient City, ed. by Helen Parkins and Christopher Smith, 102-128. London and New York: Routledge.

Darel Engen is an Assistant Professor at California State University, San Marcos. He has published articles on the ancient Greek economy, including “Trade, Traders, and the Economy of Athens in the Fourth Century B.C.E.,” in D.W. Tandy, ed., Prehistory and History: Ethnicity, Class, and Political Economy (Montreal 2001) 179-202 and “Ancient Greenbacks: Athenian Owls, the Law of Nikophon, and the Greek Economy” in J.R. Fears and E. Zarrow, eds., Coinage, Politics, and Ideology in the Ancient World (forthcoming). He is currently working on a book, tentatively entitled, Honor and Profit: Athenian Trade Policy and the Economy and Society of Greece, 415-307 B.C.E.

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

The Soul’s Economy: Market and Selfhood in American Thought, 1820-1920

Author(s):Sklansky, Jeffrey
Reviewer(s):Frey, Donald

Published by EH.NET (January 2003)

Jeffrey Sklansky, The Soul’s Economy: Market and Selfhood in American

Thought, 1820-1920. Chapel Hill: University of North Carolina Press, 2002.

xiii + 313 pp. $45 (cloth), ISBN: 0-8078-2725-8; $19.95 (paperback), ISBN:


Reviewed for EH.NET by Donald Frey, Department of Economics, Wake Forest


Jeffrey Sklansky traces the ideas of seventeen nineteenth-century American

intellectuals as they rethought the nature of society and of the individual in

society (see listing at end of review.) He argues that this rethinking was

prompted by nineteenth-century changes in the American economy. The

Revolutionary era’s “republican” thought had assumed an autonomous individual

as the locus of economic productivity, buttressed by a wide dispersion of

ownership of productive wealth. Such an individual pursued economic interests

through contracts; society was constructed on this model (p. 5). This, of

course, paralleled the axioms of classical economics, which became the implicit

target of the intellectuals Sklansky covers.

Sklansky pictures an ever-growing dissonance between nineteenth-century

economic reality and the republican model as “manufacturers and planters laid

claim to the mantle of the autonomous individual as they consolidated control

over land, labor and capital” (p.6). According to Sklansky, the intellectuals

he writes about restated the meaning of individuality and society to conform to

this new reality, and in some measure validate it, while preserving the

terminology of the old era. For example, they “championed free will. But they

redirected willpower away from controlling labor and property, toward

controlling belief and habit instead” (p. 8). Another element common to almost

all seventeen thinkers is the interpretation of concepts once taken as

objective reality (e.g., physical property, natural law, natural prices based

on labor input) in subjective directions (e.g., intellectual property,

internalized cultural mores, or prices reflecting marginal utility). This

reconceptualization, along with others, allowed the emerging concentrated

economy to proceed with an intellectual framework to validate it, a framework

not otherwise supplied by the thought of the Revolutionary era. Sklansky is

clear that this framework had its blind spots, that its fruits were not all

good, and that it may have simply postponed the facing of some issues.

Sklansky’s book is the result of many years’ acquaintance with his subjects’

writings. It is obvious that he is thoroughly familiar with their writings and

with the nuances of their thought. Nevertheless, this reviewer would suggest

that the reader keep four caveats in mind.

First, in order to sharpen the difference between the ideas of his

nineteenth-century subjects and the Revolutionary-Enlightenment era, Sklansky

may exaggerate differences. For instance, he speaks in one place of “the

momentous shift of the center of economic analysis [in the late Enlightenment]

from the realm of production to the realm of exchange [in his subjects’

thought]” (p. 123). However, one does not find such an exclusive emphasis on

production in Adam Smith, who essentially defines economic analysis of the

earlier period. Very early in The Wealth of Nations (Book I, Chapter

II), Smith famously argued that the full advantages of the division of labor

resulted from the human “propensity to truck, barter and exchange one thing for

another.” Thus, Smith hardly pushed exchange to the periphery of economics.

Second, having perhaps sharpened differences too much in order to create his

thesis, Sklansky tries too hard to make his thinkers fit the pattern he has

established. I am familiar enough with Henry George to be uncomfortable with

Sklansky’s conclusion on George. According to Sklansky, Henry George “defined

the bountiful social force of market society in the terms not of political

economy but of modern sociology and psychology … not in terms of ownership of

resources but in terms of participation in a mainstream of guiding desires and

compelling social norms” (p. 135).

This description hardly describes George’s core analysis, which relied on

statements more like the following: “the denser the population the more minute

the subdivision of labor, the greater the economies of production and

distribution” (Progress and Poverty, Book III, chapter I). This quote

does not sound like psychology or sociology, but traditional political economy.

As well, there is little about “guiding desires and compelling social norms”

when George writes of urban land (which is the crux of the matter for him). He

writes “[To] labor expended in the subdivided branches of production, which

require proximity to other producers … [urban land] will yield much larger

returns [than in agriculture]” (Progress and Poverty, Book IV, Chapter

II). Not only does this not sound like psychology or sociology, but it is

typical of the technical, economic analysis that is central to George’s answer

to the question: how does progress produce poverty? George’s emphasis was

strongly on the productive process (he contributed early notions of scale and

agglomeration economies); on factors of production and their ownership (which

the single tax was to remedy); and on the staples of classical political

economy such as rent theory and the division of labor. Sklansky mars an

otherwise insightful summary of George by extrapolating to a conclusion that

lands too far from the original Henry George.

Third, it is fair enough for Sklansky to define a loose school of thought and

to concentrate on members of that school. However, given that this school

presumably arose in response to an intellectual crisis, Sklansky probably owes

his readers some check on whether other American intellectuals were aware of

this crisis. For example, Francis Wayland (not one of Sklansky’s subjects) in

the 1830s authored major texts on moral philosophy and political economy that

were to become the standards in American colleges. In them, Wayland promulgated

an economics that showed no discomfort with Enlightenment individualism,

property rights based on natural law, laissez-faire, competitive markets and

minimalist government. And he did this while replacing Malthusian pessimism

with an American optimism based on belief in technological and scientific

progress in the realm of production. Judging from the popularity and durability

of Wayland’s writings in American colleges, nineteenth-century economic changes

produced no intellectual crisis in the minds of many.

Fourth, in the nature of his case, Sklansky presents his school of thought in

contrast to what went before. Yet, at least some of the ideas of his subjects

simply restated longstanding themes in American thought. For example, several

of the ideas of Congregationalist theologian Horace Bushnell, as summarized by

Sklansky, hardly were new; and because they were not new, they can hardly be

viewed as a response to the changing economics of America. Played against

Enlightenment rationalism, Bushnell’s emphasis on faith as subjective

experience rather than as assent to the objective truth of doctrines might seem

new. However, a good hundred years before Bushnell, the Methodist John Wesley

and Moravians in Europe and America emphasized religion of the heart.

Similarly, evangelical revivalism (from as early as Jonathan Edwards) surely

was an effort to reach the heart of the listener — if not in ways Bushnell

would have approved.

Sklansky concludes, accurately I think, that Bushnell’s emphasis on the

formation of a child’s character by its family surely was a “model of social

life in which proprietary autonomy had no place, in which indeed dependence

formed the organizing principle [contrary to the republican model]” (p. 59).

True enough; but as early as the beginning of the eighteenth century, Cotton

Mather implied a role for parents in shaping their children.

These caveats aside, I believe Sklansky has provided essays that catch much of

the character of the thought of these nineteenth-century American

intellectuals. I base this on familiarity with the writings of some of his

subjects — admittedly not all. Even when Sklansky goes beyond summarizing his

subjects’ ideas, his thesis — subject to the caveats above — has merit. I

draw that conclusion, in part, from my acquaintance with some of the writings

of Horace Mann, the pioneer in public education. Although Sklansky does not

include Mann among his seventeen, Mann reacted in much the way Sklansky’s

subjects reacted to the conflict between nineteenth-century realities and

Revolutionary era philosophy. In Mann’s terminology, the autonomous

individualists who resisted paying education taxes were essentially

irresponsible moral “hermits.” He had a clear vision of the socialization of

children by culture; he claimed that society collectively owed a debt to its

children. He defined producers as the beneficiaries of hundreds of generations’

worth of accumulation of capital and knowledge, not as autonomous

wealth-creators. A main focus of Mann’s educational scheme was to create

workers disciplined for the emerging industrial America; as others in

Sklansky’s book did, Mann had turned his back on the Revolutionary era’s model

of small, autonomous producers who owned their own productive capital. This is

to say that Sklansky’s thesis seems generally consistent with other things I

know about the thought of that era.

Sklansky’s book covers the following thinkers: R. W. Emerson, Horace Bushnell,

Margaret Fuller in chapter 2; Henry C. Carey, George Fitzhugh and Henry Hughes

in chapter 3; William Graham Sumner and Henry George in chapter 4; William

James, John Dewey, and G. Stanley Hall in chapter 5; Simon Pattten, Thorstein

Veblen, Lester Ward and Edward Ross in chapter 6; Thomas and Charles Cooley in

chapter 7.

Donald Frey is author of “Francis Wayland’s 1830s Textbooks: Evangelical Ethics

and Political Economy,” Journal of the History of Economic Thought, June


Subject(s):Social and Cultural History, including Race, Ethnicity and Gender
Geographic Area(s):North America
Time Period(s):20th Century: Pre WWII

God’s Capitalist: Asa Candler of Coca-Cola

Author(s):Kemp, Kathryn W.
Reviewer(s):Winpenny, Thomas R.

Published by EH.Net (January, 2003)

Kathryn W. Kemp, God’s Capitalist: Asa Candler of Coca-Cola. Macon:

Mercer University Press, 2002, Pp. 294. $35.00.

Reviewed for EH.NET by Thomas R. Winpenny

With little more than a 1950 biography written by a family member, an entry in

the Dictionary of Georgia Biography, and inclusion in some journalistic

histories of Coca-Cola, perhaps it is time for a full length biography of Asa

Candler, the prominant figure in the international cola colossus. To that end

Kathryn Kemp plunged into the Candler papers in the Woodruff Library at Emory

University and the Candler papers in the Coca-Cola Company Archives to generate

a 294 page story of Asa’s life. Three members of the Georgia State History

Department read the manuscript and offered comments and suggestions. It seems

likely that they started this project as dissertation advisors.

Asa was the eighth of eleven children born to Samuel and Martha Candler in 1851

in the hills of Carroll County, Georgia. This northwest region of the state was

famous as the site where gold was discovered in the 1830s. “Country boy” Asa

spent his youth in the Primitive Baptist Church, but later moved with his

family into the Methodist Church. At the risk of belaboring the obvious, the

Methodist Church of the late nineteenth century in rural Georgia was arguably

as conservative, straight-laced, and evangelical as the modern Methodist Church

is liberal and leaning in the direction of a host of radical causes. One should

not be mistaken for the other. This Methodist involvement meant church on

Sunday coupled with a strict dose of sabbatarianism and midweek services.

Furthermore, Asa’s older brother and closest advisor Warren became a Methodist

bishop. Not surprisingly, Kathryn Kemp contends that this stern religious

influence shaped Candler’s character, at least until the last decade of his

life when a few romantic flings generated chaos.

As a businessman, Asa was religiously entrepreneurial and apparently successful

in most things he tried. Operating a drugstore in Atlanta with Marcellus

Hallman in 1880, he bought out Hallman in 1881 and managed to survive a fire

that destroyed his inventory in 1883. Five years later he invested $500 in

Coca-Cola, a new drink invented by Atlanta druggist John Pemberton; and, to use

a trite phrase, the rest is history.

While it would be logical to imagine that the rest of Candler’s business career

was totally consumed with the rise of America’s first soft drink to enter the

national market, this is not the case. Kemp points out that as early as 1890

Asa invested in a street railway in Atlanta, and later established his own

commercial bank. Candler developed a great personal interest in skyscrapers and

thus urban real estate, and ultimately owned a number of these towering

structures in many of the leading cities of America. When Georgia cotton

growers were threatened with financial ruin, Asa was moved to guarantee loans

— and earn some interest. At the same time, the soda business did provide a

number of time-consuming challenges. For example, the appearance of endless

“look alike” and “sound alike” products required litigation to drive them from

the marketplace. A belief in the importance of advertising led to a promotional

budget that reached $1,000,000 annually by 1911. An aggressive application of

the new Food and Drug Act led to a battle with the federal government that

lasted from 1909 (when a shipment of syrup was seized) until 1918 when a

negotiated settlement led to Coca-Cola changing its manufacturing procedures.

(Endless rumors regarding the caffeine or cocaine contents of the soft drink

led to myriad allegations that the producers of Coke were “dope dealers”

creating a nation of addicts.)

Philanthropy for Asa meant giving generously to the Methodist Church. This

later translated into gifts to Emory University, amounting to a total of

roughly $7,000,000, so that Emory could serve as an antidote to the spiritual

waywardness of Vanderbilt University.

Politically, Asa was elected Mayor of Atlanta in 1916 at age 65. The citizens

seemed to believe that this industrial magnet would be the answer to the city’s

financial woes. Candler did cut the Atlanta payroll and balance the budget.

Predictably, perhaps, he threw the weight of his office behind sabbatarianism

and the W.C.T.U. Perhaps due to age, Asa’s appetite for politics

never extended beyond the Mayor’s office.

When Candler “got out of business” in 1916, and gave a lot of Coca-Cola stock

to his children, the firm had $27,000,000 in assets and ranked 212 out of the

500 largest industrials in America. (The great global reach of the business was

mostly a later development.) Toward the end of the decade his service to

Atlanta as mayor was also drawing to a close and he turned his attention to

Lucy, his wife for over forty years who was dying of breast cancer. She died in

February of 1919.

This enormously successful businessman and public paragon of virtue, who did

much to create the world’s best known product and trade mark, suffered through

a disastrous last decade (1919 – 1929) during which two failed romances led to

litigation and public scandal. Asa died March 12, 1929.

While it seems helpful to have this narrative account of Asa Candler’s life,

published by Mercer University Press, to add to the historiography of American

business, it would be hard to argue that there is no room for another to

undertake the same task. After almost 300 pages of text, the reader still wants

to know more about the man in question. Could Candler have been as wooden as

Kemp indirectly suggests? Perhaps he was. Was there more to this man than his

arid remarks on stewardship? Kemp concludes with the observation that Asa was

neither a “heartless capitalist” nor a “Christian Saint,” a remarkably safe

observation. The title God’s Capitalist strikes this reviewer as a crude

and crass designation fabricated to catch the eye of a potential buyer. Alas,

my copy was free!

Professor Winpenny publishes in the field of industrial history and the history

of technology. He has a forthcoming book on the history of the Manhattan


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

Studies in Economic and Social History: Essays in Honour of Derek H. Aldcroft

Author(s):Oliver, Michael J.
Reviewer(s):Ranieri, Ruggero

Published by EH.NET (January 2003)


Michael J. Oliver, editor, Studies in Economic and Social History. Essays in Honour of Derek H. Aldcroft. Aldershot, UK: Ashgate, 2002. xxvi + 275 pp. $84.95/?47.50 (hardcover), ISBN: 0-7546-0371-7.

Reviewed for EH.NET by Ruggero Ranieri, Department of History, University of Manchester.

As many other practitioners, I have made — and still make — excellent use of Derek Aldcroft’s textbooks in my economic history teaching. What is it that makes them so attractive? They have clarity, pace and breadth, while occasionally providing the reader with unexpected angles. They are written with enough intellectual tension and curiosity to produce two complementary results: for the teacher they offer a rewarding mine for lecture notes, and for the student they generate real interest for the subject.

This festschrift produced to commemorate professor Aldcroft’s retirement discusses his work and personality, and honors his highly prolific and respected academic career with chapters by some of his former students, associates and estimators, covering topics close to his interest. The book begins with a very frank and entertaining biographical sketch of Aldcroft’s life and career by Michael Oliver, the editor of the volume, currently professor of Economics at Bates College, Maine. Aldcroft’s academic life has been a pendulum between four universities: Manchester, where he graduated, wrote his doctoral thesis and then ended up as a Research Professor at the end of his career, Glasgow, Leicester and Sidney. In all these places he left a mark, his longest spell being in Leicester. Again as a more recent practitioner I was intrigued to look back at the youthful, hopeful days of Economic History of the 1950s and 1960s. Oliver’s piece is refreshingly frank in assessing professor Aldcroft’s contribution, addressing head on the question of the depth and originality of his work against the charge that it has been largely derivative, and it is also presents a humane and well-rounded portrait of Aldcroft, the man. On the whole he comes out as a hard-working professional with a broad, clever and inquisitive mind, a restless and at the same time withdrawn personality.

The chapters in this book are on very diverse topics, reflecting the range of Aldcroft’s interests. They are also different in their scope and range. Simon Ville offers a review of research in transport history and so does Peter Payne on the question of entrepreneurship in Britain during 1870-1914. Steve Morewood, on the other hand, writes a synthesis, in the Aldcroft mode, of twentieth century developments in the economies of Eastern Europe. James Foreman-Peck and Michael Oliver advance new views on British economic policy and performance respectively in the 1920s and in the 1980s and 1990s, while Derek Leslie attempts an econometric test of the feasibility of policies to discourage immigration — illegal and otherwise — in advanced western economies. Forrest Capie and Geoffrey Wood offer a critical reassessment of the post-1945 international monetary system, with a sharp indictment of the past and current role of the IMF. Finally Anthony Sutcliffe offers a piece of comparative cultural history, focusing on the social contents of movies in Britain and the United States between 1930 and 1950. Some authors engage in meticulous literature surveys (Ville and Payne) and attempt to draw firm conclusions (Payne); others open up new fields of enquiry (Oliver) or new interpretations (Foreman-Peck, Leslie, Capie and Wood).

I think it would be fair to characterize Aldcroft’s views as conservative over a wide range of economic and social issues. In some cases his conservatism reflected dissatisfaction with current orthodoxy and embodied a radical streak. Already in the 1960s he anticipated a strong interest on the economy’s supply side and a critique of current macro-economic neo-Keynesian orthodoxy. He challenged the negative perceptions of the 1920s as a period of stagnation and failure. He was also, however, critical of the performance of British entrepreneurs. Payne takes a new look at the debate on their alleged failure up to 1914, surveying a large body of recent literature. He resolutely concludes that no evidence of failure can be reasonably claimed: British entrepreneurs were knowledgeable, flexible and innovative and earned good profits. He dismisses claims by Chandler and others that they lagged behind in technological innovation or in vertical integration, and they would have been misguided to make the Chandlerian transition to managerial capitalism. Is this spirited defense the last word in this longstanding debate? The present reviewer remains a moderate ‘declinist.’ Comparative research in the steel industry, for example, such as the excellent one by Wengenroth, has revealed that while British steel firms retained technological excellence up to 1914 and beyond, they did not pursue the improvements in productivity that were common with German or US producers, and ultimately gave them an edge in cheaper, mass-produced goods. Explanations for German and US catch-up over a number of industrial sectors are therefore complex and multi-faceted, embracing diverse factors as choice of technology and industrial practice, attention to marketing, industrial relations. It was not simply that they profited from monopoly and protection.

Foreman-Peck places his skillful, econometrically based reassessment of UK economic policy in the 1920s in the same skeptical tradition with which Aldcroft approached the Keynesian interpretation of the shortcomings of the Gold Standard and its negative impact on economic growth and employment. Foreman-Peck looks at the causes of high unemployment and concludes that the problem was a supply-side failure to adjust to shifting patterns of demand on world markets. The overriding cause of this was not, however, the commitment to currency stability at the overvalued pre-war par level with gold. It was the need to maintain high interest rates to maintain a credible premium with US rates and fund the huge stock of national debt. The contraction would have happened therefore, irrespective of the adherence to the Gold Standard. It was essentially brought about by the huge financial effort sustained during World War I. Public debt and high interest rates had crowding out effects and discouraged investment. Foreman-Peck’s piece is ingenious and written with a touch of the magician’s zest — he now works for the Treasury. If followed through it would invite a radical reassessment of our understanding of the interwar years. However, it begs more questions than it answers and it would seem to require a large supplement of empirical work, both on the narrower issues (on UK debt and reserve management) and on the broader issues of comparative debt management under different monetary regimes. Would a closer look at debt/GDP ratios and macro-economic policies in post-1970 Italy help?

It would take a considerable amount of expertise, much beyond the present reviewer’s ability, to comment meaningfully on all the pieces in this volume. The unifying theme being their connection to Derek Aldcroft’s work, it is perhaps worth restating that his breadth of interests and methodological location at the borders between macroeconomics and economic history are well represented here, so is his intellectual restlessness. I am sure he will have also liked Anthony Sutcliffe’s richly detailed and entertaining revisitation of so many films and film stars of his youth, not devoid of a note of serious social endeavor. The working class and the masses made a brief appearance in popular movies, especially during the war and in Britain more than the United States (although don’t forget the Chicago gangsters!). They have since struggled to make a reappearance, as movies have become more and more enmeshed in the Hollywood discourse. For moviegoers and academics the latter part of the twentieth century has been about the rising middle class.

Professor Ranieri is co-editing The Development of the Wide Strip Mill in Europe to be published by Merton Priory Press.

Subject(s):Transport and Distribution, Energy, and Other Services
Geographic Area(s):North America
Time Period(s):20th Century: WWII and post-WWII

Rural Women Workers in Nineteenth-Century England: Gender, Work and Wages

Author(s):Verdon, Nicola
Reviewer(s):Burnette, Joyce

Published by EH.NET (January 2003)

Nicola Verdon, Rural Women Workers in Nineteenth-Century England: Gender,

Work and Wages. Woodbridge, Suffolk: Boydell Press, 2002. 240 pp. $75

(hardcover), ISBN: 0-85115-906-0.

Reviewed for EH.NET by Joyce Burnette, Department of Economics, Wabash College.

Most research on rural labor has focused on male workers, and women workers

have, until recently, been ignored. This book helps to redress the balance.

Nicola Verdon, a Research Fellow at the Rural History Center of Reading

University, gives us a thorough review of the literature plus new research

extending our knowledge of the subject. The introduction describes the book as

“an empirical investigation into the types of labour rural women were employed

to perform on a day-to-day basis” (p. 3), which is accurate if rural women are

taken to be working-class women (middle- and upper-class women are not

discussed). After a review of the historical sources, Verdon describes female

employment in agriculture, domestic industry, and the informal economy. The

main conclusion of the book seems to be that women made important economic

contributions throughout the nineteenth century, though their participation in

the formal labor market decreased at the end of the century. New researchers

will be grateful for Verdon’s careful description of the historical sources

available and their defects, as well as her balanced treatment of the

literature. Those already familiar with the field will be most interested in

the results of her work with farm accounts, found in Chapters 4 and 5.

Chapter 1 reviews the literature and discusses the main types of sources

available: the census, account books, autobiographies, parliamentary papers,

newspapers, and other contemporary publications. Unfortunately, the most

accessible of these sources, the census and parliamentary papers, are

fundamentally flawed. A few important printed sources are discussed in more

detail in Chapter 2. While many researchers have used these sources, Verdon is

still able to present new information from them. From the reports published by

the Board of Agriculture she extracts a table comparing male and female

agricultural wages in thirty-two different counties. Women’s wages range from

one-third to one-half of male wages, which is consistent with other studies.

The surprising result is the wage ratio for Buckinghamshire, where female

servants earned 91 percent as much as men in 1813. Verdon attributes the high

female wages to the prospering domestic industries, such as lace and straw,

which raised the demand for female labor. From the 1834 Poor Law report Verdon

extracts the regional patterns of domestic industry, women’s participation in

agricultural work, and women’s contribution to the family budget. For the

country as a whole women’s contribution to the family income, 12 percent, is

only slightly higher than their contribution in the 1790s, when it was about 9

percent. The parliamentary reports of 1843 and the 1860s provide descriptions

of the types of agricultural work done by women, as well as more comparisons of

female and male wages. Comparing the reports, Verdon finds a “fundamental shift

in the way women’s work was viewed and documented” between 1843 and the 1860s

(p. 67); in 1843 agricultural labor was seen as a healthy employment, but by

the 1860s female employment was seen as a problem.

Chapter 3 discusses agricultural workers hired as live-in servants and focuses

on the East Riding of Yorkshire, one of the few places where the practice

survived through the nineteenth century. This chapter includes a vivid

description of hiring fairs, and new data on servants’ wages gathered from

newspapers. Between 1870 and 1890 female servants earned about 60 percent as

much as male servants. During this same time Verdon finds evidence of young men

replacing women in the traditionally female task of milking. Rather than seeing

this as evidence of the flexibility of employment, Verdon suggests that

“farmers acted to push troublesome female servants out of the dairy (and other

outdoor work), thereby promoting a more segregated workforce on the farm, with

women servants increasingly confined to indoor, domestic labour and men

monopolizing outdoor, agricultural work” (p. 95).

The most important contributions of the book are in Chapters 4 and 5, which

contain the results of careful study of farm account books, a relatively

underutilized type of source. In Chapter 4 Verdon measures the relative

employment of men, women, and children at four farms in Norfolk and three in

East Yorkshire. For the first half of the nineteenth century, Verdon finds that

female employment declined in Norfolk, but not in Yorkshire. She also graphs

the seasonal patterns of employment for each type of labor, but these graphs

are of limited use because piece-work is not included, making employment during

harvest appear relatively low; as Verdon notes, “the days spent on such

[piece-work] tasks are not recorded separately in the accounts and therefore

the total days worked by men are seriously underestimated in the graph” (p.

103). After 1850 the farm records do seem to indicate a decline in female

employment, but female laborers do not completely disappear, and census returns

should not be trusted in this regard. Backing up Miller’s findings for

Gloucestershire, Verdon shows that many of the women employed by farmers were

not listed as employed in the censuses.

Verdon sees women’s low wages as at least partially set by custom. While she

admits that some of the wage gap between men and women may be attributed to

hours of work or productivity, she concludes that wages still contained a

customary element because of the “constancy of the female day wage over the

nineteenth century” (p. 127). However, her wage data does not consistently

support this claim. Female wages were constant only in Norfolk; in Yorkshire

women’s wage increased from 6d. per day in 1796 to 10d. in 1818 and 12d. in


Another valuable contribution in Chapter 4 is the short section on the family

status of women farm workers. Verdon finds that most of the female laborers in

her farm accounts were married, and that many had young children. This type of

information is valuable and is not available elsewhere; I would encourage the

author to continue her work on this topic.

Farm accounts are also used effectively in Chapter 5 where Verdon shows that,

in Bedfordshire, where there was ample employment for women in domestic

industries such as lace-making and straw-plaiting, women were virtually absent

from agriculture. She examines eleven Bedford farms; seven of these hired no

women day-laborers at all, and when women were hired they did not exceed three

percent of farm employment. The contrast with the Norfolk and Yorkshire farms

presented in Chapter 4 is striking; there women often provided a third of the

labor force, and their employment did not fall below five percent until the end

of the century. The evidence presented seems to indicate that the extent of

female as day-laborers was largely determined by the local availability of

alternative female employment.

Even when not formally employed, women made important economic contributions.

In the final chapter Verdon describes the many strategies women used to make

ends meet. This chapter relies heavily on autobiographies of working-class men

and women, which provide valuable information on activities not recorded in

wage records. These sources don’t provide information on crime because, as

Verdon notes, “acknowledgement of involvement in illegal pursuits is rare in

rural autobiographical literature” (p. 192). They do, however, provide accounts

of a wide variety of productive activities, and they are important because they

illuminate aspects of women’s lives ignored by other sources. Women earned

money by washing, sewing, and taking in lodgers. They gleaned and gathered

fuel, nuts, berries, mushrooms, and acorns. They kept gardens and pigs. They

maintained reciprocal ties with neighbors. They managed their family budgets

carefully to make sure that everyone was fed on their limited income. This

chapter shows that, even when they were not “employed,” women were crucial to

the economic survival of the family.

While I do not agree with all her conclusions, Verdon has an excellent grasp of

the literature and has done some fine archival work. This book is a valuable

contribution to the field.


C. Miller, 1984, “The Hidden Workforce: Female Fieldworkers in Gloucestershire,

1870-1901,” Southern History, 6:139-61.

Joyce Burnette is the author of “Labourers at the Oakes: Changes in the Demand

for Female Day-Labourers near Sheffield during the Agricultural Revolution,”

Journal of Economic History 1999.

Subject(s):Labor and Employment History
Geographic Area(s):Europe
Time Period(s):19th Century

The Gifts of Athena: Historical Origins of the Knowledge Economy

Author(s):Mokyr, Joel
Reviewer(s):Khan, B. Zorina

Published by EH.NET (January 2003)

Joel Mokyr, The Gifts of Athena: Historical Origins of the Knowledge

Economy. Princeton, NJ: Princeton University Press, 2002. xiii + 376 pp.

$35 (cloth), ISBN: 0-691-09483-7.

Review Essay by B. Zorina Khan, Department of Economics, Bowdoin College.

The Gifts of Athena begins with an epigraph from Robert Hooke, a

celebrated experimental scientist often regarded as “England’s Leonardo,” who

died exactly three hundred years ago. Hooke noted that truly productive

insights were only to be attained by a “Cortesian army, well-Disciplined and

regulated, though their numbers be but small.” Hooke would not have hesitated

to induct Joel Mokyr into his “Cortesian army,” in any one of his guises as the

Robert H. Strotz Professor of Arts and Sciences and Professor of Economics and

History at Northwestern; President Elect of the Economic History Association;

or author of The Lever of Riches (Oxford University Press, 1990).

The Lever of Riches is a standard reference for anyone who wishes an

eclectic and thought-provoking treatise on the economic history of technology.

The Gifts of Athena updates us on Mokyr’s thinking over the last decade

on the role of knowledge in generating economic growth. Lest we become

entangled in the fascinating but ultimately insoluble labyrinth of

epistemology, he immediately limits the scope of inquiry to “useful knowledge”

related to natural phenomena that can be manipulated to enhance economic

welfare. Useful knowledge comprises two categories: propositional

knowledge about natural regularities; and prescriptive knowledge or


Propositional knowledge (denoted by the symbol Omega) refers to generalized

principles such as natural laws and empirical observations obtained through

measurement and classification. The concept is not limited to science per se,

but also extends to mechanics, geography, engineering, and socially constructed

beliefs that might be incorrect, such as my grandmother’s conviction that

exposure to evening dew caused ague. Collective knowledge ranks more highly

than what any individual knows, and raises the key question of how individual

knowledge is diffused and aggregated into the public domain. Improvements in

Omega knowledge are due to discoveries of facts that had always existed but

were previously unknown, and provide the epistemic base for the set of

prescriptive knowledge. Prescriptive knowledge (denoted by the symbol Lambda)

consists of techniques, prescriptions, and instructions, which reside in human

memory, artifacts or storage devices. Indeed, the patent law makes just such a

distinction, and awards patents for net additions to the store of prescriptive

knowledge (inventions) but not for discoveries of the sort that would fall

within the primary Omega set.

Mokyr envisages the Omega set as a prior constraint, which limits the set of

feasible techniques: “The obvious notion that economies are limited in what

they can do by their useful knowledge bears some emphasizing simply because so

many scholars believe that if incentives and demand are right, somehow

technology will follow automatically” (p. 16). As of January 2003, we do not

have a cure for AIDS or the secret to cold fusion; such knowledge might or

might not exist, but effectively the only important fact is that we do not

currently have it and this constrains our current welfare. The components of

this set also influence the costs of acquiring or using techniques. If a

solution to an industrial problem is found through serendipity but the

underlying principles are unknown, the cost and riskiness of replication tend

to be high. The conceptual system is completed by pointing out that feedbacks

can occur when the body of prescriptive knowledge serves to increase the set of

propositional knowledge.

Mokyr then poses the question that the untutored reader undoubtedly will ask:

why do we need to know a theory of knowledge? The rest of the book provides an

answer: the advances in welfare that we enjoy today are the legacy of a

revolution in knowledge that occurred some three hundred years ago in Western

Europe. The credits for its intellectual origins are shared, but in terms of

its economic exploitation Britain led the way and other countries followed. The

role of useful knowledge in this process is illustrated in chapters that center

on the British Industrial Revolution, the factory system, health and the

household, political economy, and institutions in relation to technological


Growth episodes did occur before the first Industrial Revolution, but were

subject to negative feedback mechanisms that ensured the spurts were

short-lived. For instance, rent-seeking guilds raised monopoly barriers and

other coalitions suppressed the diffusion of vital technological knowledge.

However, the most important obstacle to self-sustaining growth was the narrow

base of propositional knowledge in such areas as agriculture, transportation,

power, and medicine. Thus, when the Industrial Revolution did occur, it was due

to what Mokyr calls an “Industrial Enlightenment.” Expansions in the base of

propositional knowledge, and a positive feedback mechanism between the two

types of knowledge, proved to be critical. Those who focus simply on pure

scientific discoveries miss much of the point, since valuable knowledge was

also drawn from a combination of tatonnement and conscious insight. In

the eighteenth century, exogenous discoveries about nature, changes in

artisanal knowledge, and greater access to information combined with new

inventions to create productivity advances.

Mokyr emphasizes the importance of access to knowledge, and argues that the

Industrial Revolution was accompanied by a revolution in information technology

throughout Britain, France, Germany and Scandinavia. Scholars communicated with

investigators in other countries; experts, consultants and other specialized

professionals cooperated and transmitted knowledge by varied means including

networks, job mobility and industrial espionage. The cost of access fell partly

due to innovations in postal services, improved transportation, greater

availability of cheap reading matter, and standardization of information such

as in the use of mathematics as a means of communication. Access to knowledge

also became more systematic, as in the spread of alphabetization, compilations

of technical material in encyclopedias, and the Linnaean method of classifying

and identifying botanical specimens. By the time of the second Industrial

Revolution factors that favored improved access included an institutional

environment that engendered positive interactions and the spread of free market


Knowledge and technology also caused changes in the organization and location

of production from the household to the factory. The competence levels required

of manufacturing increased and necessitated the application of more knowledge

than the ordinary household could efficiently generate, for “the division of

labor is limited by the size of the knowledge set necessary to execute and

operate best-practice techniques” (p. 140). Other explanations of the factory

system such as the role of economies of scale, transactions costs, and

increases in the intensity of work, are not regarded as alternatives, but as

complementary to this proposition. Apart from the efficiencies of specialized

knowledge, factory owners had a vested interest in adding to the skills and

knowledge of their workforce, if only to socialize their workers into

appropriate behavior. Thus, the factory system itself functioned as a conduit

through which knowledge was created, recorded, and transmitted. The mechanics

who worked for Boulton and Watt were coveted by competitors because they

embodied firm-specific techniques, insights and habits. Today, modern

innovations in communications and information technology decrease the

comparative advantage of the workplace relative to the household, and offer

some workers the prospect of a return to household production.

The fifth chapter deals with the household’s use of technologies, and its

“recipes” or additions to prescriptive knowledge. Unlike markets, households

are not entirely subject to competitive pressures, so we unfortunately cannot

count on a Darwinian process to ensure the elimination of inefficient

homemakers. Nevertheless, changes in propositional knowledge at the household

level can be credited with significant advances in human welfare, such as the

fall in infectious disease that favorably affected the morbidity and survival

rates of infants. The results of empirical studies regarding sanitation and

hygiene had a significant impact on household practices and beliefs. Mokyr

highlights the “war on dirt,” the germ theory of disease and the “war on

insects,” and advances in nutritional science. These discoveries diffused due

to the “paternalism of the educated classes and the greed of commercial

salesmen” (p. 188). The working class was persuaded by the weight of

statistical evidence (some of it incorrect), and the judicious example of their

social superiors such as the British Ladies’ National Association for the

Diffusion of Sanitary Knowledge to emulate the “culture of respectability” (p.

207). These developments shifted the onus of dealing with death and diseases

from a passive reliance on the (unknowable) vagaries of Providence to the

(knowable) responsibility of individual households. As a result of this change

in health-related household knowledge, homemakers spent more time in creating

nutritious meals, a hygienic environment, and caring for children. Indeed, it

is possible that factors such as “overenthusiastic rhetoric and brainwashing by

soap commercials” (p. 212) may have led to a suboptimal and excessive level of

devotion to cleaning and housework. Moreover, this exaggerated commitment may

have delayed the entrance of some married women to the labor force.

The next chapter deals with the political economy of knowledge, and centers on

two propositions: first, the progress of useful knowledge is far more

influenced by political economic forces than we realize; and second,

technological inertia does not indicate that individuals are irrational, but

may be the outcome of rational choice. Entrenched elites may manipulate

cultural standards and religious principles to avoid innovations that threaten

their position. The existence of democratic free market processes is no

safeguard, and indeed under some circumstances may serve to enshrine

inefficient technologies to a greater degree than other less desirable

political systems. The final chapter concludes that “useful knowledge

mattered.” Expansions in the set of useful knowledge can be induced to some

extent by social agenda, appropriate institutions and relative prices.

Nevertheless, fundamentally its growth is a function of the dea ex

machina, for there is “a great deal of autonomy to it, which cannot be

explained in terms of demand or factor endowments” (p. 293).

Starvingmind.Net refers to the “peerless scholarship” of The Gifts of

Athena, for good reason. One is impressed by the plethora of allusions

drawn from science, economics, history, Greek mythology, studies of the effects

of fluoride on the tooth decay of Colorado children, household hints from

The Woman’s Book (1911), and some thirty nine pages of references. The

description it offers of the European experience is superb, and a fair reviewer

would not fault a work for achieving its aims admirably. An editor of my

acquaintance insists that what really matters is the subtitle, which suggests

that this book is about the historical origins of the knowledge economy. I

cheerfully admit to my biases, but I have strong doubts about the relevance of

the European experience to understanding either the information economy or

global technology and culture today.

Britain restricted useful knowledge to an elite (“whose numbers be but small”),

and its institutions functioned in such a way as to prohibitively increase the

costs of access to the working class. Had the United States crafted its own

institutions in the image of Britain my counterfactual suggests that I would

not be typing this review on my own computer, but instead would be sharpening a

formidable array of pencils. (Indeed, I acquired a PC before the British Patent

Office did.) Based on comparative economic history, I am more sanguine about

the effectiveness of efforts directed towards inducing increases in useful

knowledge unaided by Athena; I am less sanguine about the welfare gains from

improved access, in the absence of institutions deliberately designed to ensure

a process of democratization.

What does the book have to tell us about the information economy in 2003 and

beyond? As a careful economic historian, Mokyr is reluctant to engage in

futuristic predictions. He speculates that such large gains in useful knowledge

were experienced in the 1990s that they possibly amounted to another industrial

revolution. He highlights the fact that marginal access costs have been

“reduced practically to zero” (p. 77). However, contemporary applications are

admittedly not a major focus of the book. So perhaps it is once again Robert

Hooke who offers us the best insight into the ambiguities of the so-called

knowledge economy: his classic treatise, Micrographia (“humbly” placed

at Charles II’s “Royal feet ? [despite] the meanness of the Author, and

of the Subject”) was printed in 1665 to great acclaim; today anyone can have

access to the digital edition at Octavo.Com — for a price of $30, or $550 for

the “research edition.”

Zorina Khan is Associate Professor of Economics at Bowdoin College, Faculty

Research Fellow at the NBER, and a member of the editorial board of the

Journal of Economic History. She has published on the history of patents

and copyrights, as well as economic history and the law.

Subject(s):History of Technology, including Technological Change
Geographic Area(s):General, International, or Comparative
Time Period(s):20th Century: WWII and post-WWII

Technological Revolutions and Financial Capital: The Dynamics of Bubbles and Golden Ages

Author(s):Perez, Carlota
Reviewer(s):Roehner, Bertrand M.

Published by EH.NET (January 2003)

Carlota Perez, Technological Revolutions and Financial Capital: The Dynamics

of Bubbles and Golden Ages. Cheltenham, UK and Northampton, MA: Edward

Elgar Publishing, 2002. xix + 198 pp. $65 (hardcover), ISBN: 1-84064-922-4.

Reviewed for EH.NET by Bertrand M. Roehner, University of Paris 7.

I tremendously enjoyed reading this book both because of the topic that

Carlota Perez investigates, and because the way the investigation is carried

out. Let me first explain these two points in more detail.

There is a fundamental difference between Technological Revolutions and

most (perhaps seventy-five percent of) other books (or papers) that are

currently published in economic history. Perhaps the simplest way to explain

that difference is to cite two titles chosen almost at random (the reviews of

these books were published on EH.NET in the same week that I got the copy of

Technological Revolutions): (i) Big Steel: The First Century of the

United States Steel Corporation, 1901-2001 and (ii) Culture and

Inflation in Weimar Germany. As is obvious from the titles these two books

describe one country during a specific time period. However, knowledge and

understanding can hardly develop in a cumulative way from such a segmented

perspective. That this is one of the main challenges faced by the social

sciences has been recognized by various social scientists, for instance by

Harvard sociology professor Stanley Lieberson. A possible way out of this trap

is precisely the one tried by the present author, namely to focus on a given

mechanism (here the occurrence of technological revolutions) and to track that

mechanism across as many historical episodes as can be discovered, identified

and documented. It is because I read the book with that perspective in mind

that I found it so gratifying; when I came across some salient connections, I

thought: “Well, this is excellent and will become an essential building block

in the theory of technological revolutions to be developed subsequently.” At

other times, when some arguments were less compelling, I told myself: “There is

room here for other studies either by Carlota Perez herself or by other

researchers in order to better bring the point into focus.” In short, Perez

paints the outline of a big fresco, which will be refined and made more precise

through subsequent studies. This stands in sharp contrast with one-country,

one-period studies.

Let me now discuss more closely the author’s objectives and how they are

carried out. Needless to say, there are innumerable studies about business

cycles; among many others one might mention those by Tintner, Schumpeter, Burns

and Mitchell. As a matter of fact, in the 1930s and 1940s the National Bureau

of Economic Research developed a research program entitled “Studies in Business

Cycles” which led to the publication of dozens of books and papers. But the

present study is not about the general issue of business cycles; it is much

more focused. Whereas many technological revolutions lead to periods of rapid

growth, not all business fluctuations can be accounted for by technological

changes. For instance, we are currently experiencing an economic slowdown, in

spite of the fact that the revolution in information technology is still in

progress as attested by the fact that the price of electronic chips is

decreasing at a rate that is even faster than in previous decades. In the

author’s terminology we are now in the synergy phase, the third and

next-to-last stage.

Perez focuses on well-defined issues, for instance the emergence of new

technologies, how they bring about an infectious frenzy, how they reshape the

channels through which flows investment capital. Why is it so important to

focus on sharply defined mechanisms? Altogether, the author considers five

technological revolutions (see below my comment on this point), which means

that this is what sociologists call a small-N phenomenon. If the mechanism

under consideration is defined by more than five parameters, it will become

very hazardous to draw any firm conclusion because the number of free

parameters will exceed the number of observations. In short, in order to make

real progress it is essential to focus on very simple mechanisms and at the

same time to extend as much as possible the number of observations.

There are many enlightening findings in this book. Let me just mention one,

namely the distinction between the four phases in the process of technological

revolutions (p. 74): the irruption of financial capital into a new technology,

the frenzy phase marked by a decoupling between capital and technological

capabilities, the synergy phase characterized by a process of selection, and

finally the maturity phase, when technological progress more and more tends to

level off.

The author is well aware of the fact that this study needs to be supplemented

by further research. She explains that point as follows (p. 159): “In essence

the job was one of conducting genuine experiments in regularity. After

identifying a phenomenon that could be part of the recurrent sequence, it was

possible to test for its appearance again and again in each similar historical

phase […] The job is far from complete and further research is likely to help

modify and strengthen these tentative results.”

In which directions can we look for further progress? Here are two suggestions.

(i) In most parts of the book the author uses what she calls a stylized

narrative by which one should understand that it is a qualitative (rather than

quantitative) description. However, it might be desirable to strengthen the

narrative with a number of tables containing real data (the book contains six

tables, but most of them are purely qualitative). (ii) It is my guess that the

number of technological revolutions could be hugely increased by considering

sectoral revolutions. Did the introduction of nylon, plastics or jet-liners not

bring about revolutions in those respective industries? Probably there are many

similar examples. What one needs in that connection are good sectoral data.

In conclusion, I heartily subscribe to the assessment made by Chris Freeman,

the author of the preface, that this is indeed a “thought-provoking and

stimulating book which should be widely read.” (Perez is Honorary Research

Fellow at the Science and Technology Policy Research (SPRU) of the University

of Essex; Visiting Scholar 2002 at Cambridge University; and Lecturer on Change

Strategies and Technology Policy in Caracas, Venezuela.)

Bertrand M. Roehner is a professor at the University of Paris 7. He is the

author (or co-author) of Theory of Markets (Springer 1995), Hidden

Collective Factors in Speculative Trading (Springer 2001), Patterns of

Speculation (Cambridge University Press 2002) [a book which contains some

qualitative and quantitative illustrations of technological revolutions],

Pattern and Repertoire in History (Harvard University Press 2002) [a

scientific approach to history], and Separatism and Integration (Rowman

and Littlefield 2002).

Subject(s):History of Technology, including Technological Change
Geographic Area(s):General, International, or Comparative
Time Period(s):General or Comparative