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The Great Divergence: China, Europe and the Making of the Modern World Economy

Author(s):Pomeranz, Kenneth
Reviewer(s):Lal, Deepak

Published by EH.NET (October 2000)

Kenneth Pomeranz, The Great Divergence: China, Europe and the Making of the

Modern World Economy. Princeton, NJ: Princeton University Press, 2000. x

+382 pp. $39.95 (cloth); ISBN: 0-691-00543-5.

Reviewed for EH.NET by Deepak Lal, Department of Economics, University of

California, Los Angeles.

Kenneth Pomeranz (Professor of History at the University of California,

Irvine) has written an important and scholarly book. Yet, despite his

scholarship, at the end of the day I was not convinced by his basic thesis.

The question he asks is one that has tantalized scholars for over a century:

Why did Europe alone of the great Eurasian civilizations escape the binding

land constraint and initiate that process of unbounded Promethean intensive

growth which has transformed humankind’s economic prospects, so that, mass

structural poverty need no longer be the universal scourge it has been for

millennia? As a scholar of China he uses the comparative method to see if any

advantages can be discerned which led core areas in Europe to diverge so

markedly from the core areas primarily in southern China, but also in Japan and

India. In this task, he brilliantly deconstructs the various materialist

explanations that have been advanced by economic historians to explain this

great divergence.

He shows quite convincingly that, until the turn of the eighteenth century,

there was no marked divergence in living standards between the Chinese and

European cores. He then painstakingly shows with an impressive command of the

Chinese literature (much of it recent) that various purported differences in

demography, ecology, accumulation and the pervasiveness of markets which have

been claimed to have given the Europeans an inherent advantage do not stand up

to scrutiny. As late as 1750, the similarities between the Yangtze Delta and

England were greater than the differences. So why did England and subsequently

Europe not follow the labor-intensive path of the “industrious revolution” of

their Far Eastern cousins, and instead take the capital-intensive path of the

industrial revolution?

His answer is in two parts. The first is that coal, which fueled the English

industrial revolution, was geographically not as readily available to the

eighteenth-century core in southern China, since it was concentrated in the

Northwest. The spectacular development of the coal and iron complex in the

northwestern China in the eleventh century, documented by Hartwell, was

dismantled and depopulated by the invaders of the twelfth century, and by the

fifteenth century when the region was stabilized China’s economic and

demographic center of gravity had shifted to the South. He notes that,

retrospectively, the returns to linking the Yangtze delta with the northwestern

coal deposits were huge, but that these returns were invisible ex ante, and it

is not clear what could have been done to realize them. But this explanation

surely will not do, for the Chinese state had acted under the Sung to

disseminate the new wet rice technology to southern China. If the coal-steam

technology had been available to China — as it was in principle but not

developed for reasons to be taken up below — could the powerful bureaucratic

authoritarian state that has ruled China not have taken the necessary action to

link these two geographical regions under its sway?

Nor does the relative geographical distribution of coal reserves in the various

Eurasian civilizations bear up as the decisive factor in the European

divergence, if we consider their location in another Eurasian civilization —

India. Its core lay in the eastern Gangetic plain — in modern Bihar — because

it was here that they found the iron deposits they needed for the iron

implements needed to clear the forests and the iron ploughshares for deep

ploughing. We now know that this area also contains India’s coal reserves. But

despite this, no one has claimed that the Indians could have developed the

coal-steam industrial revolution. By contrast, we know China had nearly all the

ingredients of this revolution in place by the eleventh century, and it still

did not take place. It is highly dubious that the geographical distribution of

its coal reserves had anything to with this lapse.

The second part of Pomeranz’s answer about the causes of the great divergence

is Europe’s discovery and exploitation — partly through trade — of the New

World. There can be no doubt that this extended Europe’s land frontier. But how

decisive was it and why could China not do something similar?

Pomeranz, himself in his last chapter in a section called “Comparisons and

Calculations: What Do the Numbers Mean?” admits the increment to the supply of

land- intensive products from the New World to Europe could not have been

large, but then uses various forms of handwaving including an appeal to chaos

theory to justify his thesis that they were the basis of the great divergence!

But it is the larger question — why did China not seek to exploit areas where

free land was available overseas to overcome its growing land constraint —

which points to the basic flaw in Pomeranz’s and other purely materialist

explanations for the great divergence. As Pomeranz shows, there were empty

lands in South East Asia which “like the post-contact New World, was sparsely

populated and capable of supplying vast quantities of land-intensive resources

that were in demand ‘back home.’ Chinese went there in significant numbers, but

South East Asia never became for coastal China what the New World was for

western Europe” (p. 200). Why? Because unlike Europe’s New World empires, “the

Chinese merchants . . . established themselves in South East Asia without state

backing” (p.200). This is the crucial point. To see why, it is important to

note two important points not even taken into account by Pomeranz.

First, under Kublai Khan the Chinese had created a powerful navy. The famous

admiral Cheng Ho took his “treasure ships” on expeditions to the India Ocean in

the fifteenth century, and William McNeill (The Pursuit of Power:

Technology, Armed Force, and Society since A.D. 1000, University of Chicago

Press, 1982) notes that these expeditions eclipsed anything that the later

Portuguese explorers could muster. Nor did Cheng Ho desist from coercion. He

sealed Chinese suzerainty everywhere he went if necessary by force. McNeill

argues that if the Chinese had continued to expand their overseas empire “a

Chinese Columbus might well have discovered the west coast of America half a

century before the real Columbus blundered into Hispaniola in his vain search

for Cathay. Assuredly Chinese ships were seaworthy enough to sail across the

Pacific and back. Indeed, if the like of Cheng Ho’s expeditions had been

renewed, Chinese navigators might well have rounded Africa and discovered

Europe before Prince Henry the Navigator died (1460)” (p.45).

But instead — the second point — after 1433 the Chinese abandoned their navy

and began to restrict foreign trade and contacts. The shipbuilding and

sea-going skills thereafter degenerated, and China continued in relative

isolation until the “new barbarians” came knocking at its doors in the

nineteenth century.

To understand this shift in policy and the accompanying closing of the Chinese

mind — and the comparable one in Japan following its adoption of the policy

sakoku under the Tokugawa — one has to look at what I have elsewhere (in

Unintended Consequences) called the “cosmological beliefs” of the

various Eurasian civilizations. As these cosmological beliefs are also related

to the different polities, they also help to explain the divergences in state

policy. It would take me too far afield to outline this story here. But without

bringing the mind back in, there is no way to explain China’s failure to

generate the coal-steam industrial revolution and the overseas empire, which

Pomeranz with so many other economic historians rightly see as the proximate

causes of the European miracle.

The great historian of Chinese science, Joseph Needham, used to maintain that

the rise of the West could not be explained in terms of a single or a few

factors but was due to a “package.” Pomeranz’s greatest service is to show that

the material differences in this “package” cannot account for the great

divergence — particularly once one discounts his own materialist differences

as being unconvincing. So as both Weber, and more recently Landes have

maintained, we are back to culture. Both, however, in my judgment got the date

of this cultural divergence wrong. I have argued in Unintended

Consequences that it goes back to at least the sixth century. But that is

another story.

One indication of this cultural divergence is provided by a visit to the great

archeological museum in Xian. The first few rooms of the collection show the

great cultural and scientific efflorescence in China from neolithic times to

the middle ages, and then in room after room there are the same shapes, the

same forms continuing in unending repetition — at least to this untrained eye.

It is to see a civilization that seemed to have seen itself as reaching

perfection and then being frozen in aspic from about the sixteenth century. By

contrast in England this was to be the age of Shakespeare, followed by those of

Locke, Newton, Hume and Smith. The sheer intellectual curiosity and

creativeness of these centuries preceding the industrial revolution are in

stark contrast to what was happening in the other great Eurasian civilizations.

If we are to understand the modern world it is this great divergence which

needs to be explained, and which Pomeranz’s book does not even touch upon.

Deepak Lal is James S. Coleman Professor of International Development Studies,

University of California, Los Angeles, and the author of Unintended

Consequences: The Impact of Factor-Endowments, Culture and Politics on Long Run

Economic Performance (MIT Press, 1998). A third collection of his essays

entitled Unfinished Business, was published by Oxford University Press

in 1999.

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

Evolution and Institutions: On Evolutionary Economics and the Evolution of Economics

Author(s):Hodgson, Geoffrey M.
Reviewer(s):Mayhew, Anne

Published by EH.NET (September 2000)

Geoffrey M. Hodgson, Evolution and Institutions: On Evolutionary Economics

and the Evolution of Economics. Cheltenham, UK and Northhampton, MA: Edward

Elgar, 2000. x + 345 pp. $30.00 (cloth), ISBN: 1-85898-813-6.

Reviewed for EH.NET by Anne Mayhew, Department of Economics, University of


This has been a frustrating book to read and to review. There are passages of

great insight and importance intermixed with long passages that are little more

than an annotated bibliography of works that have interested Hodgson. A basic

source of the problem is revealed by Hodgson when he tells the reader that the

book “. . . synthesizes several essays drafted in the years 1991-95. . . [but]

is not essentially a second installment of collected works. An aim has been to

recast the essays so that they form a relatively integrated narrative and

reveal a common set of motifs.” (p. ix)

The reader who is familiar with Hodgson’s work over the years since the

publication of his very good Economics and Institutions will be able to

find that loosely integrated narrative and common set of motifs by remembering

three ideas that have driven all of Hodgson’s work: (1) the importance of

biology and the idea of evolution for an understanding of human society; (2)

the need for a revitalized and reformed evolutionary/institutional economics

that would be built upon the salient features of biological evolutionary

theory; and (3) the importance and the difficulty of achieving this goal in a

discipline that does not prize pluralism in thought, and in which status and

prestige often override logic and good sense in determining the acceptance of


It helps in reading the book to begin with proposition (3), and indeed this is

where Hodgson begins as he identifies the loss of pluralism that has

characterized economic thought in the twentieth century as dangerous to the

future of the discipline. However, what will also help the reader is to

recognize that the sense of reading a somewhat randomly constructed annotated

bibliography derives from Hodgson’s own pluralistic approach and from

his recognition that acceptance for his own heterodox views requires attention

to status that can be achieved by association with more acceptable ideas.

Consider, for example, Chapter 3, “A Case Study: The Fate of the Cambridge

Capital Controversy.” It is not immediately clear why this chapter sits between

one (“False Antagonisms and Doomed Reconciliations”) in which the effort is to

isolate the characteristics of neoclassical economics that are fundamentally

antagonistic to an evolutionary approach, and another (“Metaphor and Pluralism

in Economics” in which the importance of competing metaphors is described. Nor

would it be at all clear to the casual reader why the article about the

Cambridge Capital Controversy has as a central focus the frequency of citations

to Piero Sraffa’s Production of Commodities by Means of Commodities ,

nor why the chapter on metaphor and pluralism is followed by an appendix in

which a paid advertisement drafted by Hodgson, Uskali Maki and Deirdre

McCloskey and signed by 44 economists is reproduced. All does become clear,

however, when it is recognized that Hodgson is, in the case of the Cambridge

Capital Controversy, identifying (correctly or not is another question) reasons

why Sraffa’s argument that there can be no independent measure of capital

abstracted from distribution and prices faded from importance and consideration

by economists after a flurry of attention from the mid-1970s to the 1980s.

Though he finds part of the explanation in the failure of the “constructivist

Sraffians” to develop ideas that would have made their approach a more

attractive alternative to neoclassical theory, he also finds it in the

political climate (radical approaches had appeal in the late 60s and early

70s), and in the citation game. When Sraffa’s ideas were taken seriously in a

leading US journal, the Quarterly Journal of Economics, by high status

economists such as Paul Samuelson, the number of citations to Sraffa’s work

rose rapidly. When the high-status economists lost interest, the citations fell

and Sraffa ceased to matter to most.

This is Hodgson’s dilemma and the dilemma for the reader. Hodgson has a very

clear understanding of the shortcomings of modern economic analysis, and he

sees clearly the importance of evolutionary ideas. Yet, it is only by careful

mixing of evolutionary ideas with the dominant and high-status, but thoroughly

non-evolutionary, neoclassical core that evolution can be incorporated into

economics without loss of status. Hodgson understands with great clarity that

incorporation of the idea of evolution into economics means that the whole of

economic systems must be understood to be subject to change (as is true in

phylogenetic evolutionary theory). Nonetheless, and in confusing manner, he

focuses in the last part of the book on work that is, in his own terms,

“asymptotic to an ontogenetic form” (Hodgson, 1993, p. 45). That is, Hodgson

focuses (and with approval on evolutionary theory that is seriously watered

down by being understood to take place within a relatively rigid set of

constraints on change) where those rigid constraints are dictated by the need

for congruence with neoclassical theory.

The work of Ronald Coase, Oliver Williamson, Edith Penrose, and even in its

more phylogenetic and critical manifestations, that of Sydney Winter and

Richard Nelson is surely “asymptotic” to an ontogenetic form of evolutionary

analysis. By that I mean that “the firm” which is at the center of their

analyses is implicitly assumed to be unchanging in many respects, and

especially in its place and connections within the larger economic system. This

assumption is convenient for analysis but it also avoids the necessity of

asking questions that might threaten the status of the investigator in a

discipline that, as Hodgson has persuaded us, is anti-pluralistic.

Hodgson’s intellectual commitment is to the more radical phylogenetic

approaches of such as Thorstein Veblen; his sense of the discipline is that the

only way to make such an approach acceptable is by citation and discussion of

far less radical ways of offering partially evolutionary analysis. This

strategy, never spelled out, makes this collection of essays seem less than

cohesive, but if you realize that Hodgson is using a strategy that he has

derived from his own study of the evolution of economics, it makes a certain


Because there is a semi-hidden agenda, the book is hard to follow, and readers

who are historians of economic thought are also likely to be irritated by

assertions that do not seem adequately supported. To pick a fairly minor

example: in the chapter on Sraffa, Hodgson asserts that a low level of

citations to Production of Commodities for ten years after its

publication, was an unusually long lag “given the theoretical significance of

the work” (p. 49). Is this a long lag as compared to other works? A more

important example to me was Hodgson’s treatment of the decline of the “Old

Institutionalism” in the interwar period. This is a complicated topic and

Hodgson’s assertions about a shift in “the prevailing conception of scientific

methodology (p. 105),” and the secondary sources that he cites to support his

conclusions do not seem adequate to the task.

In spite of my reservations about this work, I do recommend that those who have

not read Hodgson’s work do so. Start with Economics and Institutions and

then read more. There is much there that is brilliant, and those who have

already read that fine work will find much to enjoy here as well.


Hodgson, G.M. Economics and Institutions: A Manifesto for a Modern

Institutional Economics. Cambridge, UK: Polity Press and Philadelphia:

University of Pennsylvania Press, 1988.

Hodgson, G.M. Economics and Evolution: Bringing Life Back into

Economics. Ann Arbor, MI: University of Michigan Press, 1993.

Anne Mayhew has written extensively on the history of institutional economic

theory and the history of institutional thought. Recent publications include

“On the Difficulty of Evolutionary Analysis,” in a special issue on Veblenian

Evolutionary Economics in the Cambridge Journal of Economics (Vol. 22,

no. 4, July 1998) and “How Economists Came to Love the Sherman Antitrust Act,”

in Mary S. Morgan and Malcolm Rutherford, editors, From Interwar Pluralism

to Postwar Formalism, Annual Supplemented to History of Political

Economy (Durham and London: Duke University Press, 1999).

Subject(s):History of Economic Thought; Methodology
Geographic Area(s):North America
Time Period(s):20th Century: WWII and post-WWII

The Silk Industry of Renaissance Venice

Author(s):Molà, Luca M
Reviewer(s):Federico, Giovanni

Published by EH.NET (September 2000)

Luca Mol?, The Silk Industry of Renaissance Venice. Baltimore: John

Hopkins University Press, 2000. xix + 457, $48 (cloth), ISBN: 0-8018-6189-6.

Reviewed for EH.NET by Giovanni Federico, Department of Modern History,

University of Pisa.

Renaissance (Central and Northern) Italy was arguably the richest country in

Europe, if not in the world. A sizable part of its wealth came from

manufacturing, and silk was one of the most important industries in Italy.

Malanima estimates that, around 1570, the production of silk accounted for

about 2% of the GNP, and industrial processing was responsible for a further 3%

(Paolo Melanoma, La fine del primato, Milano, 1998, pp.170 and 174). Yet

this industry is strangely under-researched. Until the publication of this

massive volume, there was hardly a single modern work on the silk industry in

any major Italian city. Thus, Mol?’s book is especially welcome.

The first chapter describes the diffusion of silk processing in Italy. In the

Middle Ages it had settled in Lucca, and from there it spread in the fourteenth

and fifteenth centuries to all major Italian cities and to some minor ones. The

second chapter describes this process, focusing on the key role of the

migration of entrepreneurs and skilled workers. Their human capital was

precious, and all city governments tried to control its flow. Cities that

desired to participate in the silk business enticed the workers with prizes,

tax exemptions and privileges; conversely the established production centers

tried to prevent emigration, sometimes with very drastic measures (up to the

death penalty). The very spread of the industry illustrates that the obstacles

to migration were more impressive than effective. The mobility was high, and

there was an almost free market for workers, at least among the major centers.

The second part of the book deals with the business in the city of Venice.

Chapter three describes the supply of raw material — the raw silk from

overseas (the production on the mainland is dealt with later) and the spinning

of it in the city. Venice imported silk from four main areas: Persia, the

Balkans, Southern Italy and Spain. The city then re-exported it to other

Italian cities and abroad. Re-export was a highly lucrative trade, but it

supplied Venice’ competitors. Thus, the official policy oscillated between free

trade (which suited merchants but allegedly harmed the local industry) and

regulation (which was difficult to enforce, and entailed the risk of diverting

trade towards other routes).

Chapter four deals with the demand for silk clothes. Of course, they were a

luxury item, but their use was more widespread than one might suppose, thanks

also to a flourishing trade in second-hand material. The supply was divided

according to the ultimate use and to the quality of cloth in five classes:

panni domestici (for local consumption), da navegar (for export overseas), da

fontego (for export to Central Europe), mezzani (medium-quality cloths) and da

parangon (for comparison). The production was subject to increasingly strict

regulation as the quality improved. The panni domestici could be made as the

(local) customer wished, while the panni da parangon — the best ones — had to

be produced only with the best silk in prescribed quantities and sizes. The

guild officials assumed that only a strict control of the output could maintain

the Venetian industry’s reputation for excellence. Of course, these rules were

not easy to enforce.

Chapter five deals with dyeing. As in the previous chapter, the focus is on the

tension between the desire to prevent fraud by keeping a high quality via a

strict regulation and the need to innovate and satisfy the consumers’ desire

for cheaper cloths. The main innovation was the introduction of new, cheaper

pigments from South America, which was bitterly fought by some members of the

guilds. In the end, however, their use was allowed. The same pattern prevailed

in weaving, the subject of chapter six. The consumers wanted cheaper and

lighter fabrics. Producers were ready to provide them, sometimes by fraudulent

means (e.g. by increasing the weight of cloths by adding some “paste”).

Meanwhile the guilds tried to regulate and control the process, alternating

periods of liberalization and re-regulation.

Chapter seven also follows the same thread, addressing the use of other

materials, such as cotton, wool and waste silk (a by-product of silk reeling),

which could reduce the cost of the cloths. Mixed fabrics had been the norm in

the Middle Ages, to be — at least in theory — outlawed later in the quest for

quality. In the sixteenth century the use of other fibers was cautiously

allowed in the production of low-quality cloths but strictly forbidden for

high-quality ones.

The last chapter of this part focuses on innovations, using a database of the

some forty silk patents granted between 1474 and 1600 according to a 1474 law.

The author stresses, as he does in the previous discussion, that the Venetian

industry was not impervious to change.

The third part of Mol?’s book deals with the expansion of the silk industry on

the mainland. Chapter nine describes the diffusion of the production of raw

silk (sericulture) in the Northern Italian countryside. Vicenza (near Venice)

was one of the oldest sericultural areas in the North, but in the sixteenth

century sericiculture spread throughout the whole Veneto. The author reports

some estimates of total output: at the beginning of the seventeenth century the

Terraferma (mainland state) produced some 150 tons of raw silk, being the third

largest producer in Italy after Calabria and Sicily.

Chapter ten deals with the uses of this silk. Part of it was indeed used in

Venice, but most of the silk was exported after being spun (thrown) and after

having paid a duty. This duty was meant to increase the production costs of

foreign competitors and to increase the revenues of the Venetian state.

However, the duty itself was not crushingly high, as silk was extremely easy to

smuggle. The remaining silk was woven in the mainland cities such as Vicenza,

Bassano, Verona and others. Actually, the development of their industries had

been long hampered by the hostility of Venetian guilds. Weaving had been

forbidden in the fifteenth and early sixteenth centuries. However, the

prohibition was officially lifted, after years of insistence, for some types of

fabrics only — notably the black velvets. Later, the Mainland cities were to

specialize in light fabrics and especially in mixed cloths.

At the beginning of the book the author quite accurately states his purpose:

“filling the gap in Venetian historiography about the silk industry with an

appraisal of the entire body of laws on the silk industry of the Venetian

state” (p. xviii). He accomplishes his task very well, providing a lot of

useful, interesting and sometimes entertaining information from a variety of

sources (including textbooks and judiciary sources) while providing some

insightful discussion. Especially important is the stress on the innovation in

product and, to some extent, in process (especially for dyeing). The author

questions the conventional wisdom about the negative effects of guilds’

regulation on innovation, and thus on the competitiveness of the Venetian

industry. However, the present reviewer would have appreciated a bolder

approach. The author follows his sources skillfully but sometimes too closely.

He discusses dozens of regulating decisions by several bodies on different

issues, and this might be confusing. Inclusion of a table with the dates of

main laws and decrees would have been useful. Above all, the author does not

dare to go beyond his sources, and this has two drawbacks. First, by their very

nature, the laws and decrees do not reveal much about the interests involved in

the decision-making process, while the petitions and judiciary acts are

one-sided. The author could have used some simple economic reasoning to debunk

self-interested claims and to assess the likely effect of different policies.

Secondly, he does not tackle some key questions that might be of interest to

economic historians outside the circle of specialists on the economy of

Renaissance Venice. How much did the policies he so carefully describes

contribute to (or harm) the development of the silk industry? Was the location

of the silk industry determined by supply-side or demand-side factors? How much

did the Venetian economy benefit from the silk industry?

Giovanni Federico is a life fellow in the department of history of the

University of Pisa. He has written a comparative book (An Economic History

of Silk Industry, 1830-1930, Cambridge University Press 1997) and several

other articles on the silk industry (including “An Econometric Model of World

Silk Production, 1870-1914,” in Explorations in Economic History, 1996).

Subject(s):Industry: Manufacturing and Construction
Geographic Area(s):Europe
Time Period(s):16th Century

No Ordinary Academics: Economics and Political Science at the University of Saskatchewan, 1910-1960

Author(s):Spafford, Shirley
Reviewer(s):Neill, Robin F.

Published by EH.NET (September 2000)

Shirley Spafford, No Ordinary Academics: Economics and Political Science at

the University of Saskatchewan, 1910-1960. Toronto: University of Toronto

Press, 2000. ix + 272 pp. $45 (cloth), ISBN: 0-8020-4437-9.

Reviewed for EH.NET by Robin F. Neill, Department of Economics, University of

Prince Edward Island and Carleton University.

In the words of W. C. Murray, President of the University of Saskatchewan from

its founding in 1910 until his retirement in 1937, his economists were to be

“no ordinary academics” because, following practice at the University of

Wisconsin (as Murray saw it), they were to serve the economic and political

interests of the farmers who, ultimately, paid the university’s bills. There

was little, if any, institutional and personnel difference between economics

and political science at the university, in part because political science had

yet to identify itself as a separate social science, and in part because the

mission of economics at Saskatchewan was to shape national and provincial

policy in the interests of Western Canada.

No Ordinary Academics is well written in the tradition of Canadian

academic biography. Shirley Spafford is to be congratulated on a contribution

to the field of Canadian Intellectual History. Still, some caveats for the

would-be reader are in order.

The book is not a work in the history of ideas. Its approach is personal and

institutional. With the exception of a few pages describing a strong element in

the historiographical stance of Vernon Fowke, the reader is left with just a

suggestion of what the content of Economics and Political Science was on the

Saskatoon campus. Classroom economics was what it was elsewhere, but what it

was elsewhere is not revealed. It seems to have been unimportant to the people

involved. Having the correct policy stance, one consistent with the views of

the agrarian community to be served, was more important. Political science was

constitutional history and a smattering of the classics in political

philosophy. Competence in advanced neoclassical theory, or, later, in Keynesian

theory, in mathematical economics, or econometrics was not a requirement,

though it was increasingly present in the department. Of course, there were

courses in introductory economics, money and banking, international trade, and

public finance.

It was important for the faculty to be adequately schooled in economics. Until

Murray resigned in 1937, to be Scots was also important. To be Scots and

Presbyterian was to be among the chosen.

Murray, in the course of a long interview, showed only lukewarm interest in

hiring him until it came out that [R. McG.] Dawson was Nova Scotian, and proud

of it, at which point Murray, whose fondness for Nova Scotia had never

diminished, was completely won over (p. 115).

The book has some tantalizing interest for the historian of economic thought in

Canada. For example, we all know that H. A. Innis, at Toronto in the 1930s, was

less than accepting of the socialist historian, Frank Underhill. What I expect

few of us knew, and Spafford has revealed, is that Underhill, while a member of

the Department of Economics and Political Science at Saskatchewan, “published a

searing criticism of Innis’s book on the fur trade.” But here we experience the

shortcoming of Spafford’s book. She offers not a clue as to the views expressed

by Innis or Underhill in this matter, and she does not provide detailed

bibliographical references to the literature in question. Indeed, the book has

thirty-nine pages of endnotes, citing mostly other biographies, personal

papers, and letters, and it has an excellent nineteen-page index, but it has no

bibliography or list of references. The present reviewer would have benefited

from the in-text, general references to the works of Fowke and Timlin in the

chapter dealing with their contributions, but considerable additional digging

would have been necessary before the newly revealed items could have been added

to attempted definitive lists of their publications. Spafford recounts in some

detail the personal conflicts and power struggles in the department, but, some

intriguing clues aside, she throws no light on their doctrinal dimensions.

Weak with respect to ideas and bibliography, No Ordinary Academics is

strong with respect to personal, social, and institutional history. Economics

at Saskatchewan was heavily influenced by the preferences of the self-selecting

elite that shaped Canadian universities, especially between 1910 and 1940. The

account presents an impressive list of outstanding Canadian social scientists

(which is not to say economists, as that term is now understood) whose early

careers included a stay in the department at Saskatchewan. In the end, however,

given the financial constraints on the university in the 1930s, it was

home-grown scholars, influenced by conditions on the Prairies, that made a

distinctively western contribution to economic analysis of the Canadian case.

(For the intellectual substance of their contribution see R. F. Neill,

“Economic Historiography in the 1950s: the Saskatchewan School,” Journal of

Canadian Studies, Vol. 34, 1999, pp. 243-260.)

No Ordinary Academics is an account of selected external factors shaping

economics at the University of Saskatchewan between 1910 and 1960. The

principal members of what elsewhere has been called the Saskatchewan School —

Vernon Fowke, George Britnell, Mabel Timlin, and Ken Buckley — were no

ordinary academics. From Spafford’s history we know that they were idealists,

even romantics, who put economics at the service of their altogether honorable

social goals. Their rewards were largely non-monetary; working as they did for

their students, their associations, and their governments, provincial and

national, frequently at their own expense, and despite appallingly low


Subject(s):History of Economic Thought; Methodology
Geographic Area(s):North America
Time Period(s):20th Century: WWII and post-WWII

The Bank of the United States and the American Economy

Author(s):Kaplan, Edward S.
Reviewer(s):Morris, Clair E.

Published by EH.NET (September 2000)

Edward S. Kaplan, The Bank of the United States and the American

Economy. Westport, CT and London: Greenwood Press, 1999. x + 172 pp. $57.95

(cloth), ISBN: 0-313-30866-7.

Reviewed for EH.NET by Clair E. Morris, Department of Economics, United States

Naval Academy.

This book, by a professor in the Department of Social Science at New York

Technical College of the City University of New York, will not excite much

interest among economic historians. It adds very little to what is already

known about the First and Second Banks of the United States and in some areas

may be more confusing than enlightening. First, almost all the research sources

are well known secondary sources by noted scholars, e.g., Merrill Jensen, Davis

R. Dewey, Bray Hammond, Broadus Mitchell, Richard Timberlake, Ralph Catterall,

Margaret Myers, Arthur Schlesinger, Jr., Gilbert Fite and Jim Reese, and Gary

Walton and Hugh Rockoff. You can not argue with the credibility of those

researchers. On the other hand, hardly an original source is cited in the

entire work. The bibliography lists four U.S. Congress publications, one

newspaper (National Intelligencer, 1814), eleven journal articles, and two

pages of book titles. Sadly, this is term paper work, not serious research.

One is struck by the fact that almost every paragraph of every chapter ends in

a footnote, and a random check of citations shows considerable paraphrasing

that would invariably earn a student no more than a C grade. Even the proof

reading and editing become suspect when one sees the frequent misuse and

absence of articles (pp. 7, 74, 84, 86, 125), failure to show the possessive or

plural where needed (p.136), misuse of “effected” and “affected” (p.157), and

the use of “payed” (p.89). Most of these errors are quite inexcusable either by

the author or the publisher.

A contribution might have been made by applying some contemporary economic

theory to the policies of the Banks at the time, particularly in the case of

Chapter Six which focuses on Nicholas Biddle and the Second Bank. Generally,

what we get is a restatement of the facts surrounding the events without much

analysis. One senses that the author’s understanding of economics is quite

shallow. He mines his sources and reports what they say, but without any real

understanding of banking. Indeed, one wonders at times if he grasps the meaning

of terms like assets, liabilities, capital, fractional reserve banking, and the

distinction between debt and equity, stocks and bonds (pp. 44, 53, 56, 92).

If one is familiar with the existing sources pertaining to the First and Second

Banks of the United States, there will be nothing to gain by consulting this

book. On the other hand, a person starting from scratch might find this an

adequate summary and sufficient information about what is known to this time.

It is certainly true that the published literature on the subject is well


Clair Morris is a professor of economics at the United States Naval Academy.

His research interests are in the areas of economic history and economic


Subject(s):Financial Markets, Financial Institutions, and Monetary History
Geographic Area(s):North America
Time Period(s):19th Century

Monetary Standards in the Periphery: Paper, Silver and Gold, 1854-1933

Author(s):Acena, Pablo Martin
Reis, Jaime
Reviewer(s):Redish, Angela

Published by EH.NET (September 2000)

Pablo Martin Acena and Jaime Reis, editors, Monetary Standards in the

Periphery: Paper, Silver and Gold, 1854-1933. New York: St. Martin’s Press,

2000. x + 264 pp. $75 (cloth), ISBN: 0-312-22677-2.

Reviewed for EH.NET by Angela Redish, Department of Economics, University of

British Columbia and Bank of Canada.

The classical gold standard of the late nineteenth and early twentieth

centuries remains a touchstone for evaluating alternative international

monetary regimes. Therefore the operation of that standard has both

contemporary and historical implications. With some notable exceptions,

analyses have focused on the operation and costs and benefits of that regime in

a few “core” economies — predominantly the United Kingdom, the United States

and France. Thus, this book, in which leading monetary historians in six

“peripheral” economies present case-studies of the operation of the gold

standard, is particularly welcome.

The book begins with a brief chapter by Pablo Martin Acena, Jaime Reis and

Agustin Llona Rodriguez that summarizes the literature on two related themes

pursued (to varying degrees) in the case studies: the possibility that

adherence to the gold standard was more difficult in peripheral economies and

the possibility that the benefits of gold standard adherence were different for

the periphery. The article then suggests what can be learned from these six

economies. In a nutshell, the authors believe that adherence to the gold

standard was more difficult for peripheral countries (especially in Latin

America) because they faced volatile export prices, were sensitive to the

international capital market and had an underdeveloped financial system,

particularly no lender of last resort.

The six economies discussed in the book are Italy, Portugal and Spain (within

Europe) and Brazil, Chile and Columbia (within Latin America). The overall

picture presented is a diverse one, which is a little disheartening for those

wishing to take away general lessons. Was the gold standard an appropriate

monetary regime for peripheral countries? Jose Antonio Ocampo, writing on

Columbia, argues that it “worked” (perhaps not the strongest endorsement!) even

in the face of sharp external cycles. Rodriguez, writing on Chile, carefully

shows how the appropriate exchange rate regime might depend on the level of

development of the banking system. He argues that, in Chile, the paper standard

in the late nineteenth century had been a good fit. Did countries benefit from

a “Good Housekeeping seal of approval” if they joined the gold standard? Reis,

writing on Portugal, argues that this did not happen. Portugal did not enjoy

low interest rates as a member of the gold standard club, but, on the other

hand, it did not behave according to the rules either. In Italy and Spain, for

much of the period, exchange rates were stable even without formal adherence to

the gold standard. But if being on the gold standard assured easier/cheaper

access to international capital markets, why pay the price of acting like a

convertible currency without getting the benefit of the “seal”? (This is an

issue that has similarities with the current debate about the advantages of

explicit targets for the implementation of monetary policy.)

This book may find its principal use as a source for those studying the

monetary systems of individual countries, but let me turn to what I took away

from the whole. Firstly, economies on paper money standards experienced a wide

range of macro-economic outcomes. As Tolstoy might have put it, “All metallic

standards resemble one another; every paper standard is a standard in its own

way.” Fiat money standards provide the scope for everything from high inflation

to stable prices. Given that today most economies are searching for the optimal

paper standard it is this diverse experience off the gold standard that may

have the most useful lessons for understanding the international monetary


Secondly, while the introductory chapter emphasizes that these six economies

spent more time off than on a metallic standard, there is an interesting common

chronology underlying that statistic. For virtually all of the first thirty

years of the period covered, Chile, Columbia, Portugal, and Spain were on

metallic standards; from 1880 to the mid-1920s most regimes were paper based;

and, in the mid-1920s, there was a return to metallism in Latin American and

Italy. Were there common factors in the suspension and return to

convertibility? Again there is more diversity than uniformity. Chile suspended

convertibility after enduring balance of payments problems from 1875-78 as the

price of wheat and copper fell, and these problems were then exacerbated by the

War of the Pacific (1879-83). Columbia’s civil war began in 1885 leading to the

issue of inconvertible paper. Portugal suspended the gold standard as a result

of fallout from the dramatic depreciation in Brazil after the 1889 Republican

revolution there, and also from the cessation of lending by the Barings.

Finally, Spain’s suspension appears to have been caused by the dramatic fall in

the price of silver in the early 1880s. (The discussion of the return to

metallism in the 1920s is told only for Columbia where the influence of the

renowned Dr. Kemmerer was (pro)found.)

Finally, the summary chapter stresses the need for greater emphasis on

political economy analyses of the monetary standard issue, and I strongly

concur. While economic factors, such as the dependence on a few exports whose

prices are volatile, were important vulnerabilities for the peripheral

countries, perhaps the most significant threats to metallism were war and

unstable political processes. This of course was equally true in the core: the

Franco-Prussian War, the US Civil War and the First World War all led to

suspensions of convertibility, and Barry Eichengreen and others have argued for

the importance of changing political systems in the collapse of the gold

standard in the core countries during the interwar period. A monetary system is

a social contract, and its strength will reflect the degree of social cohesion.

Before wholeheartedly recommending this book, let me just add a brief wish

list. The book would have profited from a concluding chapter that pulled the

material together even more than in the introductory chapter, focusing on

whether or not mistakes were made and whether or not there are lessons that can

be learned. The book might have also benefited had the authors of the case

studies presented comparable material and coverage. For example, the time

periods differed quite starkly, with the chapter on Brazil focusing only on the

ten gold standard years, while other chapters covered only subsets of the

period–to 1891 (Portugal) and to 1914 (Spain and Italy). My last request would

be for a common set of data tables, which would have enhanced the usefulness of

the book as a source for comparative financial history. That said, however,

there are a vast number of data tables and plenty of references for those who

want to go further.

Let me then end as I began: there is not sufficient knowledge about the

experience of peripheral economies during the heyday of the international gold

standard, and this book goes a long way toward filling gaps in our information.

Angela Redish is the author of Bimetallism: An Economic and Historical

Analysis recently published by Cambridge University Press. She is currently

Special Advisor at the Bank of Canada, on leave from the Economics Department

at the University of British Columbia.

Subject(s):Financial Markets, Financial Institutions, and Monetary History
Geographic Area(s):Latin America, incl. Mexico and the Caribbean
Time Period(s):20th Century: Pre WWII

Modernising Lenin’s Russia: Economic Reconstruction, Foreign Trade, and the Railways, 1917-1924

Author(s):Heywood, Anthony
Reviewer(s):Hayward, Oliver

Published by EH.NET (September 2000)

Anthony Heywood, Modernising Lenin’s Russia: Economic Reconstruction,

Foreign Trade, and the Railways, 1917-1924. New York: Cambridge University

Press, 1999. xviii + 328 pp. $69.95 (cloth), ISBN: 0-521-62178-X.

Reviewed for EH.NET by Oliver Hayward, Department of History, University of

Wisconsin-Parkside, Kenosha WI.

“Railroads of the World, Unite.” This slogan, enjoying some support in Russian

official circles in 1919-20, advocated changing Russia’s railway track gauge of

1524 mm. to make it compatible with the standard European gauge of 1435 mm.

Strongly opposed by the Red Army and Cheka leadership on security grounds, the

change was never implemented. But the controversy illustrates the extremely

fluid situation of Russia’s railroads during the critical post-revolutionary

period, the subject of Anthony Heywood’s very useful monograph, Modernising

Lenin’s Russia.

In the course of preparing his 1991 University of Leeds Department of Russian

Studies dissertation under the direction of David Collins and Richard Davies,

Heywood gained access in the Leeds Russian Archive to the papers of Professor

Iurii Vladimirovich Lomonosov. Lomonosov becomes the primary player in the

dramatic events Heywood recounts, and appropriately so.

Born in 1876 to a Smolensk landowner of modest means, Lomonsov studied with

distinction the somewhat esoteric subject of design and operation of steam

locomotives, applying rigorous scientific standards to his research. During

World War I Lomonosov also demonstrated command of the practical aspects of his

subject, reorganizing railway traffic in Moscow (and Romania!), and

representing the Directorate of Railways on the Imperial Special Council for

Defense. By 1917 he was acknowledged as a leading Russian authority on


Yet there was another important dimension to Lomonosov the official: his

radical politics. In 1905-6 he helped Leonard Krasin prepare and distribute

bombs for the Bolshevik Central Committee. Krasin would become the Bolshevik’s

leading authority in foreign trade matters after they took power. In addition

to this close friend and political ally, Lomonosov enjoyed the support of other

important patrons close to Lenin, notably Lev Kamenev and Felix Dzerzhinski

(one of the rare errors of fact in this work is spelling Dzerzhinski’s last

name as though he were Russian rather than Polish). Dzerzhinski’s support was

particularly important after he left the Cheka to assume the post of People’s

Commissar of Transport, a post he held until he became head of VSNKh after

Lenin’s death in January 1924.

Lomonosov also had considerable though varying support from both Trotsky and

Stalin, although their increasingly bitter rivalry by the mid-1920’s would

complicate his efforts to continue government support for an aggressive

expansion of Russia’s railroads. By January 1927, Lomonosov perceived that his

position in Stalin’s Soviet Russia had become untenable. He defied a recall to

Moscow and became an emigre in the West. At first, he deliberately

disassociated himself from White emigre circles, and proudly maintained his

Soviet citizenship. But Stalin’s execution of his friend and patron Lev Kamenev

led Lomonosov to take British citizenship shortly before the outbreak of World

War II. He died in 1952 in Montreal at the age of seventy-six.

Lomonosov’s most enduring accomplishments included expanding Soviet Russia’s

railroad capacity under the extremely difficult, sometimes treacherous

conditions Heywood describes. His efforts brought into Russia some 1200 new

foreign steam locomotives plus 70 reconditioned locomotives, 1500 tankers, and

80,000 tons of rails and fittings, as well as numerous other items. This was

accomplished at the considerable cost of over 220 million gold rubles,

approximately 30 percent of Russia’s gold reserves during the years immediately

after the civil war.

With gradually increased production of railroad stock in Russia’s own factories

(a source increasingly favored by the Soviet government, especially as Stalin

took firmer control over the country), plus a substantial one-time windfall of

railroad equipment seized from the collapsing White forces toward the end of

Russia’s civil war, the new Soviet government managed to survive what some

called “supercatastrophic” conditions in the economy from 1918 to 1920. In

turn, the rapid expansion of the Soviet economy under the Five Year Plans owed

a great deal to the dramatic improvement in the country’s transportation

infrastructure, for which Lomonsov deserves considerable credit.

Exploring in some depth this hitherto neglected subject, Heywood throws light

on a variety of related topics. Although the reader needs a rather substantial

grasp of the international diplomatic background, Russia’s relations with a

variety of nations are directly related to Lomonosov’s success or failure in

negotiating contracts with various foreign companies for production of rolling

stock and supplies and rehabilitating existing equipment. Of particular

importance were his efforts with considerable success to finalize contracts

with Germany, Great Britain, Sweden, and later Estonia.

The United States could have been the largest beneficiary of Russia’s attempts

to purchase rolling stock and supplies abroad, for the tsarist and Provisional

government had both entered into significant contracts with American companies,

and the Soviets attempted to reach additional contracts after they took power.

But after the US government prohibited further shipments to Bolshevik Russia in

early 1918, most American-built railroad equipment originally intended for

Russia were either sent to the White forces by way of Vladivostok or remained

in the US, as property of the US War Department. US railroads took over much of

that equipment after World War I.

Various struggles within Soviet Russia seriously complicated Lomonosov’s

efforts. Heywood’s analysis throws light on a number of the controversies

Bolshevik leaders confronted in their efforts to rebuild Russia’s feeble and

trouble-plagued economy during and after the civil war. They had to seriously


1. Under conditions of serious financial weakness on the part of the Soviet

government combined with considerable hostility toward the new regime on the

part of most western governments, to what extent could (and should) Russia rely

on imports from the capitalist countries to prime its economy, especially its

industries; or should priority be placed on placing orders only in Russian

factories, even if they were short on capacity and often were less efficient

than their western counterparts? and

2. What branches of Russia’s industry were in most desperate disarray and

which branch or branches were most likely to be of greatest value in improving

the rest of the country’s troubled economy as well?

Initially the Soviet leadership leaned toward the approach Lomonosov favored:

extensive reliance on foreign factories in support of an all-out drive to bring

Russia’s railroad system back to its earlier pre-eminent role as a springboard

to the rebuilding of the entire national economy, as had been earlier advocated

by tsarist Finance Ministers Reutern and Witte. But, with a certain degree of

irony, that policy peaked in support and effectiveness in late 1920 and early

1921, just as the Soviet government was about to promulgate the New Economic

Policy ostensibly designed to expand, albeit reluctantly, Russia’s economic

ties with the capitalist world. Thus, despite the expressed goals of NEP, in

the area of transportation policy, political, economic, and diplomatic

realities brought the government to seek relief domestically. And with the

promulgation, in late autumn 1920, of a new program drawn up by the Goelro

Commission, calling for primary emphasis on electrification of the country as

the driving force behind expanding the national economy, Russia’s railroads

lost their primacy in the struggle for scarce resources in the country.

Heywood’s study brings well-deserved attention to the role of important

individuals in the unfolding of the events described above. Lomonosov’s

administrative competence and sound grasp of the technical aspects of the

complex subject of railroad management initially served him well in winning the

support of Lenin and his inner circle. But Heywood vividly illustrates that in

his personal relations Lomonosov was often arrogant and unsympathetic to

alternative points of view. His shortcomings in interpersonal relations were

exacerbated at times by the involvement of his even less diplomatic spouse,

Raisa, whom he installed as his personal secretary. He involved her in some

delicate negotiations that went seriously awry, hastening his rather rapid fall

from his position of influence. Raisa appears, although Heywood’s evidence here

is admittedly somewhat sketchy, to have engaged in some rather questionable

financial maneuvers which, when they began to come to light, considerably

weakened Lomonosov’s bargaining position in a setting of serious, often

cutthroat political infighting.

Surprisingly absent, in the supposedly highly ideology-driven period in Soviet

history often labeled “War Communism,” is evidence of significant ideological

influence on decisions in this matter. References to Marxist-Leninist thought

are conspicuous by their absence in the debate on the importance of

strengthening Russia’s railroads in the immediate post-revolutionary years.

Perhaps the desperate situation and the high stakes involved made ideology a

luxury the Bolsheviks felt under the circumstances they could ill afford.

Oliver Hayward is completing a study of the life and policies of M.Kh.

Reutern, Minister of Finance under Alexander II. He is currently researching

the periodic flooding of the city of St.Petersburg/Leningrad and efforts to

control that flooding.

Subject(s):Transport and Distribution, Energy, and Other Services
Geographic Area(s):Europe
Time Period(s):20th Century: Pre WWII

The Abandoned Ocean: A History of United States Maritime Policy

Author(s):Gibson, Andrew
Donovan, Arthur
Reviewer(s):Boyce, Gordon

Published by EH.NET (September 2000)

Andrew Gibson and Arthur Donovan, The Abandoned Ocean: A History of United

States Maritime Policy. Columbia, South Carolina: University of South

Carolina Press, 2000. xiv + 362 pp. $39.95 (hardback), ISBN: 1-57003-319-6.

Reviewed for EH.NET by Gordon Boyce, School of Economics and Finance, Victoria

University of Wellington, New Zealand.

In this well-written volume, Gibson and Donovan provide a concise analysis of

American maritime policy from the early republic to the present. Their aim is

to explain why since about 1860 the United States failed to achieve “its stated

goal of promoting a commercially viable merchant marine engaged in foreign

trade” even though a strong merchant navy was considered essential in times of

national emergency. In so doing, Gibson and Donovan endeavour to furnish the

historical background needed to guide future policy. Their advice is

unequivocal: the government should eliminate restrictions and subsidies in

order to let the industry operate freely on the same basis as its international


Yet, the argument does not come across as ideologically motivated or

doctrinaire. Indeed, Gibson and Donovan carefully explain that America made a

critical mistake by continuing to pursue protectionist practices. Specifically,

the authorities required U.S. flagged vessels to be U.S.-owned and -built and

reserved coastal trades for U.S. registered ships. Between 1830 and 1860, when

America had an international comparative advantage in shipbuilding and

formidable ship operating capabilities, these restrictions were unnecessary.

After the Civil War, which caused the destruction of a large part of the

national fleet, American shipbuilding lost its prowess as the shift from sail

to steam and from wood to iron and later steel conferred advantages upon

Britain’s shipyards. Yet, U.S. flag restrictions compelled domestic operators

to remain bound to an inefficient shipbuilding industry. The chosen solution

was to provide subsidies, but these were inadequate to prevent a continued

decline, especially as land ward opportunities offered greater returns. After

1880, the U.S. navy expanded as the country sought to enhance its international

position, but the merchant marine withered to the extent that by 1900, American

ships carried just eight percent of their country’s foreign trade. During World

War I, the consequences of this dangerous state of affairs finally revealed

themselves, and the government responded by building and operating a huge

fleet. It also passed the famous Shipping Act of 1916 which ignored

international practices and compelled domestic and foreign ship owners

servicing U.S. trades to operate within “open” conferences (rate-setting

cartel-like organizations) that were subject to federal regulation.

America’s policy settings were reinforced by subsequent legislation, which

offered the industry more support in the form of postal, construction, and

operating subsidies. The Shipping Act of 1920 committed the government to

preserving a merchant marine capable of supporting the nation’s trade and

acting as a naval reserve and the Act of 1936 compelled ship operators to offer

seafarers remuneration at levels above international standards. A divided union

movement created chronically unstable labour relations to which ship owners

responded by making generous concessions. Moreover, because the U.S.

shipbuilding industry failed to exploit fully innovations (including modular

construction) vessel costs were much higher than overseas. Subsidies, which

were especially wasteful and corrupt in the 1930s, propped up the edifice.

Political leaders were unwilling to make fundamental changes in the face of

opposition from politically powerful interest groups. The fire sales of vessels

that followed massive war-induced shipbuilding programmes gave the industry

temporary fillips that could not compensate in the long-term for a lack of

international comparative advantage.

By the 1980s, the link between commercial shipping and military support had

been all but broken by changes in sealift requirements. (The army required

Roll-on Roll-off vessels to carry heavy vehicles, but U.S. shipowners possessed

few of these craft with the result that the world had a very close call when

Saddam Hussein invaded Kuwait.) Moreover, subsidies were becoming increasingly

politically unpalatable. Currently, U.S. policies are completely out of touch

with international conventions that allow the use of flags of convenience and

support open registers.

Gibson and Donovan argue that the solution is to leave shipping free to meet

foreign competition. By eliminating onerous registry rules and allowing

American ship owners to buy vessels from foreign yards, to employ lower cost

labour, and permit the same type of tax advantages enjoyed by international

competitors, the U.S. might prevent the complete disappearance of its merchant

marine. In so doing, the nation could preserve the industry’s formidable

innovative capabilities, while securing commercial and perhaps strategic


The Abandoned Ocean is not a typical “policy” book; it is written in a

lively and compelling style, provides a broad context, and presents a clear

analysis. This splendid volume will attract government officials, business

historians, maritime historians, and economists. By highlighting the difficulty

of regulating an international industry this volume indirectly offers guidance

to those who might consider imposing restrictions on businesses like those

conducted over the internet. It also draws attention to the way in which

political factors that shape regulatory traditions can create enduring path

dependency. The chapters on recent developments are particularly valuable.

The Abandoned Ocean should be included in the reading lists of a variety

of courses, including the economics of regulation, policy formulation and

execution, and business and maritime history, as well. Individual chapters can

be used as required reading for historical survey courses to develop

maritime/international themes. Maritime historians will be anxious to see

Gibson and Donovan’s next work which examines the history of the container


Gordon Boyce’s publications include Information, Mediation and

Institutional Development: The Rise of Large-scale Enterprise in British

Shipping, 1879-1914, Manchester University Press, 1995.

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

American Sugar Kingdom: The Plantation Economy of the Spanish Caribbean 1898-1934

Author(s):Ayala, César A
Reviewer(s):Dye, Alan

Published by EH.NET (October 2000)


C?sar Ayala, American Sugar Kingdom: The Plantation Economy of the Spanish Caribbean 1898-1934. Chapel Hill, NC: University of North Carolina Press, 1999. xii + 321 pp. $49.95 (cloth), ISBN: 0-8078-2506-9; $19.95 (paper), ISBN: 0-8078-4788-7.

Reviewed for EH.NET by Alan Dye, Department of Economics, Barnard College.

Surprisingly, there has been little comparative historical work published that focuses on the sugar industries of the three Spanish Caribbean countries, Cuba, Puerto Rico, and Santo Domingo. C?sar Ayala’s book, therefore, bridges an important gap in the literature. Ayala has constructed a narrative of substantial breadth, combining a critical reading of the secondary literatures on each country’s sugar industry with primary evidence and an emphasis on their links to their major twentieth-century market, the United States.

Working within the tradition of world systems theory (of Immanuel Wallerstein), he places each of these three countries within its world context. The book is motivated as a challenge to the neo-Marxist “Plantation School,” which as he describes it, emphasizes the continuity of the plantation as a fundamental unit of analysis by which plantation economies occupy a common, peripheral position in the world system. Ayala challenges the generality of such claims, arguing that the plantation systems in the Spanish Caribbean were comparatively different, conditioned by different historical contexts and different institutional linkages to the United States.

He opens his analysis emphasizing the coincidence of the invasion of Cuba and Puerto Rico in 1898 (the Spanish-American War) with a reorganization of the sugar trust in the United States, towards a more oligopolistic structure. Some of the key personalities in the sugar-refining rivalry in the United States were major investors in raw sugar companies in Cuba and Puerto Rico after 1898. He argues that the “mechanisms” of the holding company and interlocking directorates vertically integrated each of the local industries to the U.S. sugar refining sector. Unified ownership of vertically related segments of sugar processing and refining are demonstrated with great clarity and detail. Differences in the character of vertical ownership in each of the three countries are identified. Variations in patterns of ownership are illustrated using case studies of the Cuba Cane Sugar Corporation, the Cuban American Sugar Company, the Punta Alegre Sugar Company, the South Porto Rico Sugar Company and a number of other companies within the American Sugar Refining or National Sugar Refining groups. This portion of the book extends and contributes substantively to the work of Oscar Pino Santos and others.

Most engaging in this broad narrative are Chapters 3 and 4, which focus on the significance of the customs area and the vertical ownership, and Chapter 8, which has put together a description of the three countries’ reactions to the stresses of the Great Depression, the increased U.S. sugar tariff (Hawley-Smoot) and the subsequent adoption of the U.S. Sugar Program. Each country responded to the sugar crisis of 1930 in remarkably different ways. With a few key insights, Ayala tells an interesting story about the contrast in policy responses of each of the three. He gives some insight into the political economic causes of each of these policy responses, but as the last chapter of the book, it obviously is intended to raise questions and point the way forward.

The central empirical theme of the book is “vertical integration,” which is not precisely defined; but clearly of interest to the author is its transcendence of national borders. Evidence of vertical ownership is presented to argue that foreigners controlled the sugar companies in the Spanish Caribbean. Despite the reference to vertical integration, the author approaches the subject as a sociologist; and he is influenced little by the economics or business history literature on the subject. The functional differences, in his case studies, between shareholder representation on the boards of directors and managerial control are not examined. The reader interested in the governance structures or contracting issues will not find them addressed here. This seems to matter for the validity of his conclusions, since it leaves some alternative views unaddressed. The vertical ownership structures might have developed to assist in organization innovations or to underpin relational contracts, to reduce transaction costs. If so, rather than unambiguously disempowering the national industries, as he claims, they may also have brought material benefit.

Ayala’s prognosis is that the vertical relationships headquartered in the United States are evidence of U.S. imperial power. He argues that three determinants of the U.S. system prostrated the Spanish Caribbean into a state of dependent underdevelopment after the invasion of 1898. First, the vertical ownership structure extending across the border to the north subdued local interests or prevented them from surfacing. Second, the containment of these sugar industries within a U.S. sugar customs area tied them to the United States economy. And third, local class relations were transformed and the workforce proletarianized by large-scale investments in sugar centrals. He makes a strong case for the heterogeneity of the institutional make-up and economic development of each of the three countries, and that the influence of the United States was strong and differentiated. The analysis, however, falls short of realistically considering the welfare consequences of the plausible, proximate alternatives-a challenging but nonetheless important exercise. For one thing, by 1898, Spanish Caribbean sugar planters had dealt with the sugar trust for many years, selling most of their sugar to it. Why then, at the turn of the century, was the C’rculo de Hacendados (sugar planters’ association) in Cuba eager to solidify its relationship with this near monopoly? If they knew what they were getting into, they must have preferred it to the alternatives. It would not be right to presume them powerless or incapable of pursuing their own best interest. Without that massive injection of capital and the preferential tariff treatment, where would those economies have gone? One should not be blind to the possibility of a worse outcome.

Alan Dye is Assistant Professor of Economics at Barnard College and author of Cuban Sugar in the Age of Mass Production: Technology and the Economics of the Sugar Central: 1898-1929 (Stanford University Press, 1998).


Subject(s):Economywide Country Studies and Comparative History
Geographic Area(s):Latin America, incl. Mexico and the Caribbean
Time Period(s):20th Century: Pre WWII

Of Cabbages and Kings County: Agriculture and the Formation of Modern Brooklyn

Author(s):Linder, Marc
Zacharias, Lawrence S.
Reviewer(s):Danbom, David B.

Published by EH.NET (August 2000)

Marc Linder and Lawrence S. Zacharias, Of Cabbages and Kings County:

Agriculture and the Formation of Modern Brooklyn. Iowa City: University of

Iowa Press, 1999. x + 478 pp. $21.95 (paper), ISBN: 0-87745-714-X; $32.95

(cloth), ISBN: 0-87745-670-4.

Reviewed for EH.NET by David B. Danbom, Department of History, North Dakota

State University.

I need to begin with a disclaimer. This year I was chair of the Agricultural

History Society committee that choose Of Cabbages and Kings County for

the Saloutos Prize, given annually to the best new book on agricultural and/or

rural history. Be advised that I am favorably disposed toward this book.

In Of Cabbages and Kings County, Marc Linder, a law professor at the

University of Iowa, and Lawrence Zacharias, who teaches management at the

University of Massachusetts at Amherst, attempt to show how rural Kings County,

New York villages such as Flatbush, New Utrecht, Bushwick, Flatlands, and

Gravesend were transformed from agricultural places to suburban or urban

components of Brooklyn and later New York City, why that transformation took

place, and whether there was an alternative to the result. They are not

satisfied with the simple answer that market forces determined Kings County’s

fate, noting that the market is a human creation vulnerable to the vagaries of

human nature. Not all of their alternative answers are definitive or even

necessarily satisfactory, but in the process of formulating them, Linder and

Zacharias provide us with the fullest examination of the urbanization — or

de-agriculturalization — process I have seen.

Linder and Zacharias devote the first section of their book to a discussion of

Kings County agriculture, with special reference to the nineteenth century. The

dominant farmers in the county were the descendants of the original Dutch

settlers, and in some ways their agriculture had not evolved very much since

the seventeenth century. The authors do not romanticize these folks, whose

narrow social conservatism was symbolized by the tenacity with which they clung

to the institution of slavery. Linder and Zacharias tend to downplay the

significance of the market in these farmers’ decisions, but one could argue

that the major change in farm operations during the 1860s and 1870s — the

shift from small grain to vegetable production — was dictated by the expanding

metropolitan market for potatoes, cabbages, and so forth. In any event, Kings

County quickly became one of the leading truck farming counties in the nation,

producing vegetables on fields fertilized with urban waste. The authors’

discussion of Kings County farming is fascinating, but at times Linder’s legal

background is betrayed by a tendency to over-argue, in the style of a legal

brief, and by instances of special pleading.

The heart of the book is devoted to a discussion of the process whereby this

agricultural area became suburbanized and then urbanized. The authors’ analysis

is impressively subtle and thoroughgoing, and they succeed in exploding a

number of simplistic popular myths. For example, they refute the notion that

property taxes are a device for driving farmers out of urbanizing and

suburbanizing areas by showing that agriculture enjoyed favorable tax rates. In

addition, they cast doubt on the notion that farmers were either grasping land

barons, or, alternatively, bucolic simpletons, by noting divisions among

farmers themselves over such issues as annexation, land-use restrictions, and

the extension of streets, streetcar lines, water systems, and other


As Linder and Zacharias elaborate it, the process of de-agriculturization is a

complex and subtle one. On the one side, real estate developers offer

increasingly attractive incentives for farmers to sell, and they are always

able to find some who are willing. On the other side, the Dutch patriarchs die

out or retire from farming, leaving the land in the hands of tenants or

children less committed to an agricultural life. As urban development slowly

unfolds, the agricultural infrastructure decays, labor become more expensive,

and farmers find themselves encroached upon by people with little sympathy for

farming, who steal or vandalize crops, and who complain of the noise of farm

wagons or the pungent smell of agriculture. As this process advances, a sense

of the inevitability of suburbanization takes hold, and farmers decide not to

reinvest in agriculture, looking to sell out to developers instead. As

individuals sell out, the implicit pressure on their neighbors to do the same

increases. Linder and Zacharias detail the push-pull process in an admirable

fashion, providing a sophisticated and convincing explanation of a complex


Linder and Zacharias conclude with a rather unsatisfactory discussion of

whether the de-agriculturization of Kings County was inevitable. They argue

that it was not, citing farm-preservation programs in nineteenth-century

European cities and in such selected areas of the modern United States as

Oregon and Long Island. I find this conclusion unsatisfactory in part because

it ignores the strong traditional American bias in favor of individual control

of private property — a bias that has hardly disappeared — and because it

seems to suggest, ahistorically, that nineteenth-century Americans could have

behaved in a way in which they almost never behaved.

The conclusion to Of Cabbages and Kings County is one of the few

unsatisfactory portions in what is overall an attractively produced, abundantly

illustrated, and impressively argued book. Marc Linder and Lawrence Zacharias

have made a major contribution to the sub-fields of urban, rural, and economic

history, and the American history as a whole.

David Danbom’s recent works include “Born in the Country”: A History of

Rural America (Johns Hopkins University Press, 1995).

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