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Daimler-Benz in the Third Reich

Author(s):Gregor, Neil
Reviewer(s):Mierzejewski, Alfred C.

Published by H-Business@eh.net and EH.Net (May 1999)

Neil Gregor. Daimler-Benz in the Third Reich. New Haven: Yale, 1998.

xii + 276 pp. Bibliography, and index. $30.00 (cloth), ISBN 0

-300-07243-0.

Reviewed for H-Business@eh.net and EH.NET by Alfred C. Mierzejewski,

Athens State University.

ACMierzeje@aol.com

Neil Gregor has written the best history to date of Daimler-Benz (DBAG)

under the Nazi regime. It is an interesting work with

much informative detail. Gregor did extensive research in the Mercedes-Benz

archive and public repositories such as the Federal Archives (Bundesarchiv) in

Koblenz and the Central Office of the State Justice Administrations (Zentrale

Stelle der Landesjust izverwaltungen) in Ludwigsburg. He consulted the right

sources and bases his work overwhelmingly on the personal papers of Wilhelm

Kissel and Wilhelm Haspel, the men who lead the management board of the company

during the Nazi years. The conclusions that

Gregor reaches are credible. However, his analysis is not without weaknesses.

Gregor’s major finding is that Daimler-Benz pursued its own corporate

self-interest throughout the period of Nazi rule. He shows clearly that,

except for the period from the failure of Operation Barbarossa (the Nazi

invasion of the Soviet Union) in December 1941, to the defeat at Stalingrad in

February 1943, the company consistently anticipated a short war.

Consequently, it attempted to retain a core of consumer products to facilitate

the transition to a peacetime economy. It struggled to continue production of

passenger automobiles even after the war began so as to maintain the production

lines devoted to them. It especially fought to protect its cadre of skilled

workers who were needed to produce cars at the level of quality that

management thought necessary to preserve the aura of the Mercedes-Benz name.

When the company consented to build the three liter Opel Blitz truck in 1944,

it did so to position itself for the post-war market. Already, the management

of DBAG expected that the war would be over in the foreseeable future and that

Germany would lose. It anticipated a large market for trucks due to the need to

rebuild Germany’s heavily bombed cities. It also agreed to build the product

of one of its competitors in order to learn about Opel’s manufacturing

procedures.

Gregor demonstrates that DBAG was reluctant to invest in additional plant to

fill military contracts due to its fear of being left with excess capacity

after the end of the war. He contends that the company used labor,

including slave labor, as a substitute for capital investment. This reduced the

burden on its balance sheet and lead to the barbaric exploitation of its

employees, especially those from Eastern Europe who worked for the company

against their will. Put differently, Daimler-Benz used slave labor only to

survive in the short-term. It could rid itself of these laborers easily after

the war and it could use them to produce military aircraft engines

and other war related products while conserving its skilled German workforce,

concentrated in its plants in western Germany, for the resumption of peacetime

production. Gregor demonstrates that the failure of the German armed forces

before Moscow in December 1941 marked an increase in the brutalization of

DBAG’s workers. At this point, the company concluded that a long war was in the

offing and resolved to increase military output, without, however, burdening

itself with capital that would be superfluous

to peacetime needs. It increased output by driving its employees harder and

demanding more foreigners and slaves from the government. Gregor is careful to

point out that the influx of foreigners did not alter the company’s basic

reliance on skilled labor

. As a corollary to this, Gregor shows that Daimler-Benz never developed a

strategy for seizing factories in the areas conquered by the Wehrmacht. Rather,

it was interested in the skilled labor available from its competitors in

occupied France and took responsibility for factories in Austria and the East,

in large measure, to keep them out of the hands of competitors like BMW. In

short, the DBAG was not a co-conspirator in a grand imperialist enterprise.

In his introduction, Gregor raises a number of issues that he hopes to

illuminate by looking at Daimler-Benz during the war. He attempts to shed light

on why the West German economy recovered so strongly after the war.

He deprecates the Zero Hour (Stunde Null) myth, contending that the same

companies that dominated German manufacturing before the war dominated it

afterwards. He claims that Daimler-Benz came out of the war with comparatively

little damage. Consequently, it was well positioned to resume operations in the

peacetime market. Based on his description of the rationalization of

production processes during the 1920’s and again during the 1930’s, combined

with the additional changes required by the war, he concludes that the rapid

post-war recovery was due to these earlier advances, not to a post-

war miracle. The key, for Gregor, was continuity.

As far as he goes, Gregor is correct. Yet, the recovery of the post-war West

German economy was the result of other factors as well, some of them much more

important than the improvements that he discusses

. Shortly after the war, Ludwig Erhard realized that the obstacle confronting

the west German economy was not so much a lack of goods or the means to produce

them, as an excess of government regulation and the threat of the destruction

of the surviving production apparatus by the Allies seeking reparations. It

can be argued that the single most important factor in the West German

recovery, and the factor that distinguished events in the west from what

happened in the east, was Erhard’s almost complete abolition of state

restrictions (Zwangswirtschaft) on domestic economic activity in June 1948.

Without this step, no managerial or technological advances would have sufficed

to restore West Germany to prosperity.

Gregor also addresses the modernization debate triggered by Rainer Zittelmann.

Zittelmann contends that modernization is a value free concept.

Therefore, it is conceivable that even the Nazis, however loathsome their

policies may have been, contributed to the modernization of German society.

Gregor

rejects this claim. He demonstrates that Nazi policies did not assist the

modernization of German industry with a detailed discussion of DBAG’s

introduction of new machines and new management techniques. He correctly points

out that these changes conformed to pan-European trends.

He especially emphasizes how the war accelerated the change in the way that

Daimler-Benz compensated its employees. The company shifted from a socially

oriented system that took into account the worker’s family status and age to

one based on pay for production. While Gregor implicitly criticizes this trend

on moral grounds, he does show that management sought to conform more closely

to market signals in valuing the output of its workforce. In the opinion of

this reviewer, the en tire discussion of the modernization debate could have

been omitted. Clearly, Zittelmann and the other German scholars who have

followed him have missed the point. Modernization is a culture bound concept

with no universal meaning. From an economic standpoint, what produces the

largest volume of goods demanded by consumers at the least cost is the best.

The machines that equip factories, contrary to the fantasies of many German

engineers, need not be the newest. The standard of measurement is the

satisfaction of consumer wants, not an arbitrary definition of modernity.

Gregor also discusses the issue of Blitzkrieg economics. This concept,

developed by the United States Strategic Bombing Survey, Nicholas Kaldor,

one of its members, and Alan Milward, holds

that low German armaments production before February 1942 was due to a lack of

demand on the part of the Wehrmacht. According to this interpretation, Hitler

planned a series of short, sharp wars that would conquer economically valuable

areas in Europe while placing little burden on the German population. Hitler

allegedly based this strategy on the mistaken belief that Germany had lost

World War I due to a failure of morale among the German civilian population,

the

“stab in the back.” Gregor rejects the Blitzkrieg economics interpretation and

the notion that the economic history of Germany during World War II can be

conveniently divided into two halves: one before and one after Albert Speer.

Instead he agrees with Rolf-Dieter Mueller, that the low product ion of the

early war years was the result of bureaucratic confusion on the part of the

German military. He notes that the expansion of armaments production began

before Speer was appointed minister of armaments and munitions. He also

contends that overall

economic reform, the elimination of confusion caused by the military, was more

important in increasing production than changes on the shop floor. He agrees

with Richard Overy that Hitler planned for a big long war.

Why Gregor addressed this problem is not clear. The Blitzkrieg economics

debate was settled over a decade ago. Milward has abandoned his earlier

position and, ironically, Mueller and other authors, including this reviewer,

have shown the serious flaws in Overy’s alternative explanation.

It is

clear from an examination of the relevant German documents that Hitler planned

a big short war, fully in the tradition of Frederick the Great, Moltke the

Elder and Schlieffen. In addition, Gregor presents no evidence to show that

reform of the government

economic administration was more important than changes to production

processes in improving efficiency. Here Overy and this reviewer, using evidence

from the United States Strategic Bombing Survey and other sources, demonstrate

that efficiency gains on

the factory floor were very significant. Gregor is on safer ground when he

contends that bureaucratic political competition replaced the market in

steering the Nazi economy. This reviewer’s own research concerning the German

National Railway confirms his

finding.

Indeed, if one takes a market oriented approach, rather than Gregor’s Marxist

one, one would not be surprised that Daimler-Benz pursued its own interests

even in this changed environment. This is precisely what both neoclassical and

Austrian theory would have us anticipate.

Gregor also makes a series of claims concerning the company’s policies towards

its workers that are equally difficult to accept. He contends that DBAG’s

rationalization of production methods was primarily a social control effort

intended to prevent conflict during the 1920’s, when, as he puts it,

“capitalism was becoming increasingly crisis-prone.” However, if viewed from a

different perspective, the Depression in Germany, to which he alludes, could

just as easily be seen as

the crisis of a heavily regulated,

partially socialized economy in which the market already played a limited role.

Daimler-Benz’s rationalization measures could be seen simply as efforts to

reduce operating costs in the face of government mandated pay increases and

serious competition in the automobile market. Gregor bemoans the fact that the

company took advantage of the Depression to reduce wages.

Yet, if viewed from a market perspective, it could also be contended that this

was precisely what management should have done since the workers’

remuneration was excessive in comparison to the value that they added to the

company’s products. Gregor goes further and contends that all of the

productivity gains registered both between the wars and during the war

came at the expense of the worker. He offers no detailed economic analysis to

support this claim. At the same time, he ignores the very serious argument made

by Knut Borchardt that industrial wages in Germany were too high during the

1920’s, hurting German competitiveness and weakening corporate finances.

Unintentionally, by showing how Daimler-Benz reacted to the challenge of the

Depression and the war, Gregor provides evidence that Ludwig von Mises’s theory

of how companies react to market signals is correct. The analysis provided by

Gregor also lends credence to the argument that the Third Reich was not the

product of a capitalist conspiracy.

Surprisingly, in light of his discussion of historiographical issues in his

introduction, Gregor overlooks literature that is directly relevant to his

thesis. In the latter part of his book, he repeatedly discusses the effects of

Allied bombing on Daimler-Benz and the more general effects of the air

offensive. He concludes that the impact of Allied bombing was limited.

However, he states that it did have an important effect on the attitudes of the

DBAG’s management and that production was hampered by transportation

difficulties. He makes the latter statements without having consulted the

relevant literature, most

especially the report on the transportation bombing produced by the US

Strategic Bombing Survey and this reviewer’s 1988 study. Had he consulted these

works, Gregor would have gained a clearer picture of how production could have

declined so dramatically

without the loss of many machine tools. The dispersal that he discusses in

great detail actually made Daimler-Benz and German industry in general much

more vulnerable to the disruption of transportation by bombing.

More importantly, Gregor does not discuss adequately three books that directly

address his subject. He mentions Bernard Bellon’s Mercedes-Benz in Peace and

War briefly in just two footnotes. Bellon’s last chapter in particular

provides information on DBAG’s use of slave and forced labor that is a very

useful supplement to Gregor’s discussion. Gregor also makes only a brief

comment in a note on Hans Pohl’s official history of the company during the

war. Pohl’s work suffers from very serious flaws and Gregor would have done

well to have exposed them and to have shown how his own work is superior.

Finally, Gregor only mentions briefly in a note Das Daimler-Benz Buch

published by a Marxist collective in Hamburg. While this book offers a

distorted interpretation, it does provide valuable detail concerning labor

conditions in the company’s plants.

Finally, this reader at least would have welcomed a few tables summarizing the

output of selected products, corporate operating results and the corporate

balance sheet. If Daimler-Benz actually pursued its self-interest, as Gregor

indeed shows, and since it was a private company,

having the latter two in particular would have been very helpful.

Neil Gregor has written an interesting book that can be read with profit while

ignoring its theoretical underpinnings. Ironically, Daimler-Benz comes off

surprisingly well in his account. He shows that DBAG was not a Nazi company, it

merely pursued its narrow corporate interest. Gregor’s most serious criticism

of the company, which he never states explicitly,

is that it did indeed protected its own interests when it should have

displayed more civil courage and served the common good. Yet, this implied

criticism is itself the product of a misunderstanding of how private enterprise

functions, of how self-interest can prevent the excesses of regimes which,

like the Nazis, pursue the common good (Gemeinwohl) with monstrous results.

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

Oil and the Arab-Israeli Conflict, 1948-63

Author(s):Bialer, Uri
Reviewer(s):Gross, Nachum

Published by EH.NET (May 1999)

Uri Bialer, Oil and the Arab-Israeli Conflict, 1948-63. New York:

St.

Martin’s Press and Oxford: Macmillan Press, 1999. vii + 282 pp. $69.95

(hardback), 0-312-21284-4.

Reviewed for EH.NET by Nachum Gross, Department of Economics, The Hebrew

University of Jerusalem.

This fascinating and intriguing book rightly claims to contribute to the field

of international political economy. It describes and analyzes in considerable

detail Israel’s oil diplomacy during the first fifteen years of statehood, and

the extremely adverse circumstances under which the country’s energy supplies

were procured. At the time, petroleum was the only practical source of energy

for Israel’s rapidly growing population and its expanding and modernizing

economy. As such, it was no less a basic existential problem than the

supply of armaments. However, despite almost crippling financial limitations,

the chief constraints in obtaining crude oil and its refined products were

political. Governments and the major oil companies, primarily British and

American (and later the Soviets and the Iranians, too) viewed the issue

predominantly from the perspective of the Arab-Israeli conflict. In view of the

Arab countries’ role as the Western world’s major oil suppliers, their

strategic location, and their potential as developing markets for manufactures

and other goods (in contrast to Israel’s negligible weight as a market), it is

in a sense surprising that Britain and its oil companies did not abandon Israel

entirely–as they almost did in the mid-1950s.

Nevertheless, Israel pursued

an ambitious oil policy, whose aims extended well beyond the supply of minimal

civilian and military requirements. It sought to reestablish the Haifa oil

refinery (a British enterprise, in operation since 1939) as a supplier of

domestic demand (to include

a newly-established petrochemical industry) and of export-earned foreign

exchange. For these purposes the pipeline from Iraq to Haifa was expected to be

reactivated and/or the Suez Canal opened for tankers serving Haifa.

Moreover, the Israeli government

repeatedly tried to break the monopolistic price structure imposed on the

domestic oil market during the British Mandate regime, and to abolish the

tax-exempt status of the foreign oil companies. Only few of these goals were

achieved. The long-run policy

aim was to rid Israel of its dependence on a small number of leading British

and American oil companies and to diversify its sources of supplies.

The present study traces the successes and failures of these endeavors. It is

based on recently declassified

records from Israeli, British and US archives. In this case especially,

contemporary sources were almost silent on the painful limits of Israel’s

capability to translate political sovereignty into independence from the

international oil companies, whose interests coincided with their respective

countries’ dominant strategic interests. Moreover, from its earliest days

Israel was handicapped by “an almost total lack of familiarity with the

international oil business and the world of oil diplomacy” (p. 31),

and even twenty years later such experience and expertise were the province of

a mere handful of

“initiates.” It was thus relatively easy to preserve the desired secrecy

regarding oil supplies, since secrecy was also an integral part of the modus

operandi

of the oil companies. This book is therefore more revealing

(and at times surprising) than most other contemporary history works.

Regrettably, this feature also tempts the author to relate parts of the story

in excessive detail.

In mid-1950 Israel seemed to have finally circumvented the Arab oil blockade.

The British companies agreed to operate the Haifa refinery at partial capacity,

using Middle Eastern oil from non- member countries of the Arab League to

satisfy Israeli demand, despite doubts with respect to the enterprise’s

profitability. All that had been achieved, however, relied on temporary

arrangements, without redress of Israel’s grievances regarding prices, taxes

and foreign exchange earnings or guaranteed supplies for the petrochemical

industry. Subsequently, the foreign companies marketing in Israel even agreed

to the establishment of an Israeli-owned corporation which would gradually be

allocated up to 30% of the domestic market. But the British owners of the

refinery adamantly refused to invest in its modernization and diversification.

Gradually Israel also managed to acquire oil business know-how and connections,

to diversify its supplies by closing independent deals with Russia and Iran,

and to somewhat improve its relations with the foreign companies operating

domestically. However, the Israeli market became commercially less and less

attractive, and outside developments–chiefly the 1956 Suez-Sinai

campaign–weakened the political will to stay in it.

Thus, during 1954-1957 the oil companies decided one by one to sell off their

interests in Israel and leave the country. This process culminated in the 1959

agreement to sell the Haifa refinery to the Israeli government.

While this process must be viewed as an Arab League success, it did

not result in blocking Israel’s oil supplies.

The crucial new factor was a series of oil supply agreements with Iran,

made possible once the Anglo- Iranian dispute following the nationalization of

Iran’s oil industry was settled. The chapters describing

the formation of Israel’s “petroleum link” with Iran, which analyze its

procedures,

complications, and the varied political interests involved, are the most

fascinating and innovative in this volume. This link was related to developing

the Red Sea port of

Eilat into an oil depot, constructing pipelines from there northward,

eventually to Haifa, and thus opening a new oil supply route (of Iranian crude

and of Haifa-refined products) to Europe. Iran was even willing to underwrite

part of the cost of the Eilat-Haifa sixteen-inch pipeline. The US in effect

guaranteed secure shipping in the Gulf of Aqaba, and Iranian war ships

discreetly escorted Israeli tankers in the Persian Gulf.

The book ends with the very favorable agreement with Iran in May 1963.

Although its almost total dependence on a single oil supplier was a drawback,

Israel’s position in the international oil business had apparently been

secured, and was even strengthened after the 1967 closure of the Suez Canal. As

the Epilogue points out, however, subsequent events,

chiefly the 1973 war, reopening of the Suez Canal and the fall of the Shah of

Iran in 1978 virtually wiped out these achievements. The Sisyphean labor of

securing Israel’s energy supplies had to start all over again. The next

installment of the story awaits the declassification of the relevant archives,

and

will hopefully be addressed again in Bialer’s exemplary manner.

Nachum T. Gross is professor emeritus of economics (economic history) at The

Hebrew University of Jerusalem, and for the past 30 years has studied the

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

Making the Nonprofit Sector in the United States: A Reader

Author(s):Hammack, David C.
Reviewer(s):Goldin, Milton

EH.NET REVIEW (April 1999)

Making the Nonprofit Sector in the United States: A Reader. Edited with

Introductions by David C. Hammack. Bloomington, Indiana: Indiana University

Press, 1998. xix, 504 pages. $39.95 (cloth), ISBN 0-253-33489-6.

Reviewed for H-Business by Milton Goldin, National Coalition of Independent

Scholars (NCIS).

Since World War II, the nonprofit sector’s growth has been astonishing, by any

measure. At the beginning of the 20th century, America had just eight

foundations; in 1999, there are over 41,000, with the overwhelming majority

created after 1945. Even the Internal Revenue Service cannot provide the exact

number of today’s nonprofits. Possibly it exceeds two million, including

churches, synagogues, and local chapters of national organizations.

Sorting out how and why all this happened, whose interests these developments

served, and the outlooks of the great American philanthropists attracts the

attention of more and more scholars. They have no easy task because the

nonprofit world is enormously varied and complex. To a large extent, the

scholars’ own el eemosynary experiences are with foundation program officers,

in connection with grant applications for research projects. But most

philanthropic transactions still take place the way they did at the beginning

of the 20th century, with someone personally asking someone else for a

donation to finance a cause for communal betterment.

During my own forty years plus as a development professional, I have often

wondered how it is that pronouncements about charitable giving made at

institutions of higher learning so seldom seem applicable to what we actually

do. The reason, of course, is that what is pronounced is only infrequently

applicable to such places as Borough Park in Brooklyn, Ivy League universities,

and suburban Scarsdale, in New York’s Westchester County.

According to the publicity release accompanying the review copy of Making

the Nonprofit Sector, Hammack, who is currently on the staff of

Case-Western Reserve University, has had a long and distinguished teaching

career. Evidently, however, he ne ver worked at a nonprofit. What is

surprising, given the book’s title, is how much more it tells us about how the

system worked and currently works than about the theories that undergird it.

Hammack includes forty-one documents and essays by “men and women who have

taken part in the effort to define America and the American dream. . . .”

But his book tells us little about the philosophies of the two men who defined

modern philanthropy, Andrew Carnegie and John D. Rockefeller. Both had earlier

created the

modern corporation, and neither thought that charity, like industry, could

function on a piecemeal basis in an advanced industrial society.

Clearly, their thinking is of critical importance to “Making the Nonprofit

Sector.” But in this connection, neither of two seminal articles, nor sections

thereof, by Carnegie (“Wealth” [1] and “The Best Fields for Philanthropy” [2])

are included. Arguably, these are the most literate and powerful attempts ever

written to explain relationships between laissez-faire capitalism, charity,

and Social Darwinism, of which Carnegie was an exponent. Despite his unwavering

dedication to the proposition that the fittest survive, Carnegie could never be

certain that fit societies survive. He argues that capitalists must spend their

fortunes for the public good. If they fail to do so, consequences may include

serious social unrest. And such unrest could lead to the loss of fortunes.

Carnegie’s articles inspired a torrent of angry responses from clerics and

social activists, which is why it is impossible to understand the Social

Gospel and opposition by Progressives to benefactions by the very rich

without taking into account the polemics of such clerics as the Reverend

William Jewett Tucker. For Tucker, the problem posed by great wealth was the

fact of its accumulation in the hands of a few, not of how to dispose of it

after it was accumulated.[3] Charitable organizations, financed and organized

by men whose wealth was unimaginable before the Civil War, could be, to

thinkers

like Tucker, nothing more than a means of social control through which the rich

hoodwinked the poor.

Unfortunately, not only is there nothing by Tucker included in the book,

but on Rockefeller giving, Hammack offers only Frederick T. Gates’s

“Address on

the Tenth Anniversary of the Rockefeller Institute, 1911″ (pp.

320-328). This selection helps us understand rationales that led to the

founding of the Institute, a forerunner of Rockefeller University. But it does

not suggest another subject of even greater importance than health care in

Rockefeller thinking, around 1911.

Rockefeller and his son, John D., Jr., were deeply concerned about the same

reaction that had troubled Carnegie — growing public sentiment against the

very rich. The resentment would shortly spill over into Congress. In 1912,

a Presidential Commission on Industrial Relations, headed by Frank P.

Walsh, opened hearings on the “general conditions of labor in the United

States.” The Commission’s more immediate mandate would soon become exploring

possible connections between Rockefeller holdings in the Colorado Fuel and Iron

Company, the Rockefeller Foundation, and a confrontation between members of the

National Guard armed with machine guns, and strikers, at one of the company’s

sites, in

Ludlow, Colorado.

The running battle that then developed between foundations and Congress came to

a head in 1969, when the redoubtable Representative Wright Patman

(D-Texas), simultaneously chairman of both the House Subcommittee on Small

Business and the House Banking and Currency Committee, launched what turned

out to be the most exhaustive Congressional probe of foundations ever

undertaken.[4] At once, and rightly, foundations feared the havoc Patman might

wreak [5], based on his clearly negative feelings toward trustees of

foundations and directors of Eastern banks: “You can’t tell Brand X from

Brand Y, they’re the same people,” he declared.[6]

Patman might have ended the development of foundations as tax shelters. He

asked, “How can the Treasury

Department possibly justify continuing to wring heavy taxes out of the farmer,

the worker, and the small businessman,

knowing that people of large means are building one foundation after another. .

. ?”[7] As it developed, however, foundations had the political power to

withstand Patman’s mighty assault. The Reform Act of 1969, mainly his doing,

came nowhere near accomplishing what he wanted, which was for the Secretary of

the Treasury “to declare an immediate moratorium on granting exemptions to

foundat ions and charitable trusts. . . .”[8]

Hammack devotes little space to the Patman episode and includes none of

Patman’s statements. Nor does he include responses to Patman by foundation

spokesmen. Yet, such items relate philanthropy to Progressivism, to what

Carnegie and Rockefeller feared, and, not least, to the “American dream.” On

the plus side, the book provides useful information on many individuals and

institutions. It lacks an index, however, making it difficult to easily locate

that information.

[1]. North American Review, v. 141 (June 1889), pp. 653-664.

[2]. North American Review, v. 141 (December 1889), pp. 682-698.

[3]. See especially, Tucker, William Jewett, “The Gospel of Wealth,”

Andover Review, v.15 (June, 1891), 631-645.

[4]. See “Tax-Exempt Foundations and Charitable Trusts: Their Impact on the

Economy,” Subcommittee Chairman’s Report to Subcommittee No. 1, Select

Committee on Small Business, House of Representatives. The items included

are dated December 31, 1962; October 16

, 1963; March 20, 1964, December 21,

1966; April 28, 1967, March 26, 1968, June 30, 1969, and August 1972.

Hereafter referred to as Patman Reports.

[5]. See Andrews, F. Emerson, Patman and Foundations: Review and

Assessment. Occasional Papers: Number T hree. New York: Foundation Center,

1968.

[6]. Joseph C. Goulden, The Money Givers. New York: Random House, 1971,

p. 229.

[7]. Patman Reports, December 31, 1962, p. 2.

[8]. Patman Reports, December 31, 1962, p. 2.

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

Incorporating Women: A History of Women and Business in the United States

Author(s):Kwolek-Folland, Angel
Reviewer(s):Yeager, Mary A.

Published by H-Business@eh.net and EH.Net (April 1999)

Angel Kwolek-Folland. Incorporating Women: A History of Women and Business

in the United States Twayne’s Evolution of Modern Business Series. New

York: Twayne Publishers, Simon &

Schuster Macmillan, 1998. ix + pp. 275.

Bibliography and index. (cloth), ISBN 0-8057-4519-X.

Reviewed for H-Business by Mary A. Yeager, Department of History, University of

California, Los Angeles, California.

MAKING A DIFFERENCE: WOMEN AND BUSINESS HISTORY

Angel Kwolek-Folland’s Incorporating Women is the first survey to

synthesize the history of women and business anywhere in the world. Its

pioneering status raises a series of significant questions for the scholarly

and business communities and the public at large. Why have businesswomen in

America been the first women to have their history surveyed and synthesized?

And why now? In view of the fact that there is still a great deal that we do

not know about women in business, is the synthesis premature? What does the

synthesis offer historians of women and business and what is its significance

for future research? And finally, where do we go from here? [1]

ACCOUNTING FOR LEADERS

The practice of business and women’s history

in the United States has reached a historiographical cross-roads just when

demographic and economic changes are interacting to compel a dramatic

restructuring of American business. As we approach the millennium, old

certainties about the superior competitiveness of American business have given

way to the uncertainties of global capitalism run amok. Women, including those

with children, have become fifty-one percent of the labor force. They have

started more new businesses at a faster rate than men. T hey have earned more

baccalaureate and graduate degrees than have men across an increasing number of

professions. More women have climbed into the ranks of middle management,

while the small number of women at the very top has held its own.

For the first time in the history of American business, women who work have

begun to be perceived as a partial solution to the problems of competitiveness

rather than as a major social problem. No longer is the question whether single

or married women should work but

rather, how long women will work at a particular occupation and pay scale?

Will married women and men be able to juggle the kids and career demands to

suit personal and familial lifestyles?

The appearance of a historical synthesis of American women and

business at this time is significant because it has been pieced together from

two radically different historiographical traditions before a great deal of

substantive or systematic research on women in business has been completed.

Until relatively recently

, historians have used gender more often to exclude rather than to include the

opposite sex. American business history was generally written by and about men

in growth-oriented manufacturing firms.

American women’s history was written by and about women

who lived compartmentalized lives in private or public spheres.

More is known about women as workers than as businesspeople. Evidence on

women’s labor force-participation is abundant, quantifiable and relatively

accessible, embedded in government labor and occupational censuses, and

company records. As an activity, business confounds with multiple meanings and

definitions. It sweeps in production and trade, manufacturing,

agriculture and service, as well as producers, entrepreneurs, professionals,

workers and managers. As an occupation, it is notoriously ambiguous, often

swept into other occupational groupings, such as proprietors or administrators.

As a career or profession, it offers numerous choices, from clerks to

middle-level managers and corporate

executives.

Businesswomen have been hard to see and difficult to track. They have been

misfits in the male world of business and a privileged minority among women.

Their names have been erased in law and custom by those of husbands, fathers

and brothers.

Their economic activities have spilled across boundaries demarcating

households, families, firms and markets. Their multifaceted roles as wives and

mothers, daughters and widows have blurred their business identities. Most

female business activities have occurred in smaller corners and invisible

niches of the service sector rather than in growth-oriented manufacturing

industries, in family-oriented businesses and retail shops,

and in educational, philanthropic, and health-care and reform-oriented

institutions. The motives of businesswomen have involved a complex and changing

mixture of economic and non-economic factors. Their stories have tended to be

communal and familial, muffling individual decision-making strategies and the

competitive noises of

firms and industries.

Kwolek-Folland has learned from her subjects how to transform problems into

opportunities. She uses debates about working women as scaffolding for the

synthesis. Chapter titles evoke a succession of images about working women:

“Fem ale Economies,” “Mills and More,” “Difference at Work,” “Personal Work,”

“Crisis Management” and “Difference at Work.” Work offers women a way to gain

greater economic visibility. It expands opportunities to undertake business.

Indeed, women’s movement into white collar work in the late nineteenth and

earlier twentieth centuries marks, for her, one of the most important changes

for women in business in the past 300 years. Data on occupations and women’s

labor force participation are correlated generally with women’s increasing

involvement in business activities. Business activities are based on a gendered

division of labor. Women participate in business like workers participating in

the economy, as part of a proletariat, more often in feminized, sex-segregated

dead-end jobs and slower-growing niches of service-oriented industries.

Women’s status at work serves as a lightning rod for the debate over women’s

roles more generally. Debates about working women grow out of debates about

women’s place.

Businesswomen across the centuries have often adopted a work-oriented view of

business. Business has been a way to make a living and survive. So integral

has business been to women’s lives, that some women have steadfastly refused to

distinguish business from life. “You can never think of me as a business

woman,” one woman cautioned her daughter in 1910.

“That is because I make a business of life and living my business.”

“Business is just life,” American real estate entrepreneur Edith Mae Cummings

wrote in 1929, “and we had life long before we had business.”[2]

KWOLEK-FOLLAND, BRIDGE-BUILDER

Kwolek-Folland knows how to listen to women’s voices. She has designed the

synthesis to disrupt disciplinary boundaries that have kept women in separate

spheres a nd men the only players in a male-dominated business game.

Given that “Women have always been in business in America (p.1),”

Kwolek-Folland has defined her central challenge as one of “incorporation”:

how to bring “others,” particularly women of different

classes, races and ethnicities into American business history and how to bring

business into American women’s history.

Incorporation has the ring of a conservative project of integration. Cynical

feminists well-versed in the history of British legal traditions might well

hesitate. After all, English civil law recognized the man and wife as one,

but came to define the “one” as “male.” Who is incorporated into what? Who are

the “gatekeepers” of the incorporation process? What are the terms of

incorporation? And what are the results of the incorporation process, both

for those incorporated and for the incorporating body as a whole?

Kwolek-Folland does not ally with feminist theorists determined to tear down

business institutions in order to clear the playing field of businessmen.

Nor is she a neo-progressive reformer nipping at the heels of Charles and Mary

Beard. She is an artist in tone, style, and temperament, using conservative

colors to cover radical aims.

Double entendres bedevil the incorporation process. Incorporation is testily

political, both a form and process, interacting to constrain and liberate women

unevenly and unequally over time. Power is interpreted as direct authority and

indirect influence. Both the terms and outcome of the incorporation process

are contingent, dependent in part upon how societies regard and value “others”,

as reflected by women’s changing legal status and business activities.

Incorporation involves struggles over the meaning and significance of business

and its associated concepts of profit, risk,

entrepreneurship, and success. Kwolek-Folland defines business expansively as:

“engaging in economic activity in a market to seek profit and assuming the

financial responsibility for that activity.” (p.5). Profit is

often embedded in non-economic goals; risk is defined as much in personal and

familial as in monetary terms; entrepreneurship is defined broadly as “new”

areas of economic activity; success is linked to women’s emancipation and

autonomy.

To incorporate

women into the history of business Kwolek-Folland uses analytical tools derived

from political and women’s history. Social categories of race, gender,

ethnicity and class order human experiences along a continuum of differences

that reveal the dynamics of

power embedded in business activities and institutions. Kwolek-Folland regards

these social categories as a “force,” and more than occasionally, as an

“irrational force” which shapes “how businesses approach markets, make hiring

choices,

and create organizational forms.” (p.8). Women’s political struggles both

spearhead and reflect changes in business activities and structures,

shifting the meaning and influence of business in women’s lives.

Business is incorporated into women’s history through inequities and

asymmetries of power associated with different business structures and economic

activities and roles. Business organizations reinforce differences between men

and women and other women. Business imparts new meaning and significance to

these categories by serving as fickle emancipator of women’s roles and

conscious conservator of woman’s place. It bridges the divide that has

separated women’s private and public lives.

Underlying Kwolek-Folland’s assumptions about the importance of social

categories to the understanding and meaning of business is a reformer’s vision

of a

more equitable and just business system, one where gender differences are not

unequally valued, where social condition does not constrain business

opportunity, where a male standard is not synonymous with

a universal standard, and where men and women have equal chances to exploit

business opportunities. To liberate business from the shackles of a

male-dominated business history and to emancipate women from a private world of

love and ritual, she crafts a single, all-encompassing narrative to bestow

public and historical legitimacy on businesswomen.

SURVEYING THE SURVEY

The survey situates women within a chronological framework that evolves

primarily out of economic and business history. Except for the middle of the

twentieth century, when government policies take center stage, the

periodization scheme is based upon major changes in the nature and dynamics of

liberal, market-oriented capitalism, beginning with a pre-industrial period

and advancing jerkily with successive industrial revolutions across the

nineteenth and twentieth centuries. Women enter economic and business history

indirectly by way of their business activities and relationships with other

women and men in business and the larger society, as members of families, of

social-reform, educational, and political networks. Business enters women’s

history indirectly by way of opportunities and legal status,

through economic roles and activities that women assume as

producers,

entrepreneurs, managers and professionals.

Women jump start the business of colonization in the 1550s as dependent sexual

objects of colonizers’ imaginations. They end their business journeys in 1997,

still unevenly and unequally incorporated

into the business system as legal independents, on unequal terms relative to

men and to each other,

with laws that promise justice without protection. After four and a half

centuries of ever-diversifying business activities and at least three decades

of

debate and litigation about equal pay, businesswomen stand stalled in their

tracks. Women’s revolutionary breakthrough into the top tiers of management has

fizzled.

For Kwolek-Folland, the setbacks are more telling than the advances. As if to

underscore

how much and how little had changed with regard to women and their

relationship to business, she places powerful corporate tycoon Estee Lauder —

named “Outstanding Mother of the Year” in 1984,– atop the shoulders of Ojibwa

fur traders, market women, butter makers bankers, and factory girls. Gender

stereotypes have continued to dog women’s advance in the business world,

constructing their public personas even as women reconstruct the businessworld.

EVALUATING THE RESULTS

Kwolek-Folland’s survey and

synthesis have alerted us to power differentials embedded in difference.

Society’s unequal valuation of “others” nurtured a system of laws regarding

property rights, citizenship, suffrage, marriage and divorce that disadvantaged

women more than men and so me women more than others. Women’s status, as

reflected both in formal laws and informal customs, interacted with economic

conditions to shape women’s business opportunities and the manner of engaging

in business.

The framework enables us to see more clearly different women’s varying

experiences in the business world over time. Some businesswomen mimic the

monotonous and routine male shopkeepers and businessmen the world over, like

Rose Stolowy of Kansas City, Missouri, or Catherine Ferguson, a confectioner

shop-owner. Famous women, such as Rebecca Lukens, Amelia Earhart, and Oprah

Winfrey share brief appearances with their not-so famous contemporary

counterparts, like Phebe Cills, an African-American toy store owner, and the

infamous sisters Aida and

Minna Everleigh. Good businesswomen, like caterer Edith McConnell, coexist with

the less successful, such as Christina Barnes, who “negotiated the business

world with difficulty.” And then there are some who are larger than life, such

as the six-foot,

200 pound Sarah Bowman, who made money from prostitution AND the United States

Army,

only to die ungloriously of a tarantula bite in 1866.

Race opened opportunities for black businesswomen and professionals in

segregated niches of the economy and closed

them in areas dominated by whites. It imposed special social and economic

burdens upon black businesspeople as community builders and as economic

role-models. Black women undertook a variety of business roles even as slaves

and engaged in a range of business activities even though they gained both

property, voting and civil rights later than white women. Their work histories

were longer and more continuous than either white women or black men. Black

women boasted one of the nation’s first and most successful brothel-keepers,

the first female bank president, the first female self-made millionaire in

America, and one of the wealthiest celebrity queens in the entertainment

business.

Ethnicity affected whether women went into business at all. It proved

important to women’s control of property, as in the case of the early female

Dutch

settlers, and formative of entrepreneurial cultures, as in the case of Jewish

women, whom Kwolek-Folland celebrates as the most entrepreneurial of American

businesswomen. Len a Himmelstein Bryant (Lane Bryant Company),

Fanny Goldberg Stahl, Esther Mentzer (Estee Lauder) stand tall in the female

hall of business fame.

Class functioned as a marker of legal and economic status as well as a

gate-keeper of the incorporation process, promoting gender rules that

distinguished women from men and income bars that distanced lower from upper

income groups. It gave wealthier women an easier entree into politics and

educational institutions, which positioned them more strategically as leaders

in social reform and philanthropic institutions.

Business played a mixed role in the lives of women. On the one hand,

business structures operated to reinforce rather than undermine differences.

In the early 1800s textile owners hired young, single

white women because the skills associated with textile production were already

categorized as women’s work. Later, with the coming of managerial capitalism,

the gender coding of managerial and job rules kept women out of the

highest-paying highest status

jobs and paved the way for the feminization of clerical and personnel work. On

the other hand, business expanded women’s opportunities and control, empowering

women as owners and managers even as it reinforced differences between men and

women. Indeed, for some women in social-reform and political networks in the

late nineteenth century, business activities became a proto-feminist political

act.

Successive market-expanding industrial revolutions improved more than they

undermined business women’s economic well-being, generating more income and

greater autonomy and independence for businesswomen than was the case for women

who worked as employees of others. Only when the scope of government’s

involvement in women’s issues broadened across the 20th century

, did business assume a more threatening and ominous role as a major antagonist

in a series of sexual discrimination and affirmative actions cases. With regard

to some issues, such as paid family-leave, big business jumped ahead of the

government, offering its own assistance packages, while small business owners,

many of whom were women, protested on grounds that such legislation would

disadvantage them relative to larger rivals.

For Kwolek-Folland and the women whose experiences she surveys, business

activities generally were growth-enhancing and value-creating activities.

The historical purpose of business, after all, she concludes, has been “to

make people’s lives better or to raise the standard of living for as many as

possible.”(p.216).

Sighs of relief among business historians are likely to be matched by

discomfiting growls from feminists who have always seen more of the meanness

than the magic in the market and in business activities. Inevitably,

scholars in both camps will single out different

aspects of the survey and synthesis for praise and criticism. However, as a

business historian and free-farming feminist, with one eye on men and business

institutions, and the other on businesswomen and the world, I want to focus my

remarks on this unresolved paradox: Why has a study so steeped in the rhetoric

of power and difference not revealed more about how power and difference

actually operate in the business world? About what power means, how it is

expressed and used,

by whom for what ends? Why does a study about women and business so closely

resemble the histories of women at work?

A PARADOX and SOME PUZZLES

Social categories may well hide as much as they reveal about how power really

works in the world of business. Businesswomen have been swept into the history

of business armed with only one set of tools to differentiate them. Race,

ethnicity, class and gender have masked differences arising from women’s

individual capabilities and skills; they have made differences between and

among women of the same social categories difficult to see and to understand;

they have imposed an unnecessary uniformity upon women as a group.

The transformation of categories from inert, disembodied experiences into

causal forces, stalls early on. Business practices are overwhelmed by

cultural forces. Modern business tycoons stand atop the shoulders of Ojibwa

traders, but it is difficult to differentiate one businesswoman and business

from another or to account for differences in the performance and profitability

of business activities over time. Despite the fact that Indians held

dramatically different conceptions of gender roles, of property, autonomy and

responsibility, Indian women emerge as American history’s earliest

businesswomen and consumers.

Women as a group appear to share more similarities than differences but the

business experiences of men and women are allegedly more different than

similar. These hypotheses remain to be tested.

Women are described as having been more continuously and often

circumscribed in their choices and activities by the “family claim” then men

have been.

Yet, histories of businessmen in the pre-industrial period have suggested that

the family claim also structured the economic activity of men. We need to know

whether

women and men interpreted the claim differently and how their interpretations

influenced economic outcomes.

Kwolek-Folland’s definition of business is at war with business realities.

Why has business as “activity” been yoked to the claim of “financial

responsibility” rather than to market-and profit-oriented decisions, as has

been

customary in business history? The choice carries definite ethical and moral

connotations. It broadens the population of businesswomen and businesses but

pinches interpretive

possibilities. The price is operational imprecision and ambiguity.

Activities are different from decisions. Activities indicate little more than

a kind of busyness, industry or work; they are described by their properties.

Decisions are associated with

choices that businesspeople make in the course of doing business, in order to

remain in business. Financial responsibility literally refers to “a charge, a

trust, or duty for which one is responsible.” [3] If a reasonable understanding

of responsible

is that it has to be within the power of the one who is responsible, then how

is that determination to be made? What is meant by the assumption of financial

responsibility, and how is “responsibility” to be determined?

Kwolek-Folland does not consistently

or systematically apply the definition.

Instead, she offers an expansive interpretation whose meanings have to be

squeezed from an ever changing business context.

Kwolek-Folland regards “independence” to be the core of the legal definition of

business.

The ability to negotiate contracts and to acquire, use and dispose of

property is severely impaired without legal recognition and protection of those

rights. Without legal status as “independents,” women could do business as

dependents of others, but they could not profit from their own business

activities. Only as women gained legal recognition and protection as

“independents” and autonomous individuals with the right to their own bodies,

earnings and profits in the late nineteenth century, could they

exploit the same opportunities available to men who had those privileges and

rights.

The definition seems to deny that men and women have long strategized about the

ways in which they could shift, avoid or elide financial responsibility.

They have devised marriages and designed partnerships and firms with precisely

these goals in mind. The definition may be appropriately applied to women who

act as business proprietors, but how is it to be operationalized in a dynamic

world full of business activities undertaken by many individuals and groups

engaged in cooperative ventures, as members of family businesses,

partnerships or teams associated with single firms or corporate enterprise?

What if businesswomen assume financial responsibility but are not held

accountable?

By identifying women in business by their activities and roles as producers,

entrepreneurs, professional and managers, Kwolek-Folland constrains women’s

choices and robs them of the opportunity to exercise control or to assume

financial responsibility. Without interrogating activities or roles, it is

difficult to distinguish one businesswoman or type of business activity from

another, except insofar as production differs from trade and sales and service.

Managerial roles are gender coded but we need to know why and when the codes

took the form they did with respect to different businesses over time. To what

extent did individual women construct and re-construct managerial roles to suit

their own talents and capabilities?

In the 1950s entrepreneurial historians tried but generally failed in their

efforts to use role theory to link men in business to society. Roles represent

problematic psychological categories. Individuals and groups fulfill, perform

and create roles. Activities do not necessarily conform to prescribed roles.

Roles straight-jacket behavior but people also deviate from socially prescribed

roles. How is the historian to determine when women are performing roles

prescribed by society or crafting them as they proceed?

How have women conceived of their roles in business and how have they actually

behaved?

Racial and ethnic differences have also mattered to people’s conceptions of

business roles, activities and results. The survey builds upon studies of black

businesspeople to

suggest that their business strategies often were community-building strategies

as well. But not all of these interrelated strategies worked from the

standpoint of business longevity and profitability. What happened, for

example, when and if black businesswomen deviated from social expectations of

them as community builders?

Social categories need to be more systematically related to women’s

decision-making and organizational capabilities in particular businesses.

Kwolek-Folland surveys how some women

used skills developed in household and family or reform contexts to transform

socially-oriented businesses or non-profit institutions into profitable

businesses. However, we also need to know what kinds of decisions they made,

and which family or household decisions informed their business decisions.

Businesses differ according to operating rules and the short and long run goals

with respect to other institutions and society. Decisions and risks which

women undertake as owners or managers of hospitals

are likely to be different than the kinds of decisions made by women as family

partners, heads of families, or by businesswomen involved in the intensely

competitive cosmetic and restaurant businesses. Why were some women able to

transform household skills into effective business practices, when others

could not? Household production and consumption decisions of nineteenth century

middle-class women and twentieth century farm women gather social significance

primarily as gender dividing strategies. But

we also need to know how these decisions structured economic behavior and

outcomes.

The study suppresses the competitive forces that are at the heart of the

American business system. Although it argues from difference, it homogenizes

women as a group who seldom compete on the same playing field, either with men

or with other women in the same industry. Except in rare instances,

outcomes are seldom revealed nor evaluated. Individual female rodeo riders

compete with men, but we do not know whether they competed effectively or not.

We learn of Ellen Demorest’s pattern business but not of the competition she

experienced from Ebenezer Butterick, who eventually dominated the industry.

“Status” is another concept that creates problems for the survey and synthesis.

Kwolek-Folland employs status as a legal concept, as signifier of

reputation, of income and class, of women’s visibility and relative

equality/inequality in regard to men and other women. Yet indicators of status

do not always mesh with economic

realities. Given that social attitudes about women’s place have remained

stubbornly resistant to change,

Kwolek-Folland’s assertion that by the end of the nineteenth century, women had

achieved a legal status equal to that of men in business, is problematic.

Women could now do business and profit from their own endeavors but to what

extent did they? Data on female labor force participation and occupations pose

interpretive difficulties here. What are the causal lines of influence between

changes in legal

status and business activities?

The survey recognizes the difficulty of positioning irrational and rational

forces on the same economic stage. The problem is not simply a disagreement

about matters of meaning and definition. It also relates to the interpretive

tools that are used to analyze the evidence. To demonstrate how irrational

notions about race undermined the “myth of rationality” in business,

Kwolek-Folland offers a singular notable example, drawn from the history of

financial industries.

White providers of life insurance in the late nineteenth century refused to

sell insurance policies to black customers on the basis of actuarial

information which suggested that blacks had higher mortality rates than whites.

Citing evidence which linked higher mortality rates to environmental

conditions rather than to stereotypical notions about blacks as a group, she

concludes that white managers acted irrationally.

However, by allowing culture to subsume gender and race, and economic

rationalism to

define business practice, Kwolek-Folland misses an opportunity to examine how

and why notions of rationality, with respect to culture and economics,

sometimes complement rather than clash. If managers did not know what evidence

demonstrated, they are more

likely to make unilateral decisions on the basis of cultural predisposition

and habit. As long as other white competitors refused to market to blacks and

social attitudes condoned discrimination, then these actions may well have

produced economically efficient outcomes. Managers would have behaved

irrationally,

from an economic standpoint, only if they refused to sell to blacks when other

rivals were busily cashing in.

Determining why businesspeople do what they do has never been easy. But

economic tools of principal-agent theory are available to determine more

precisely when and why some individuals, rather than behaving act more like the

utility-maximizing automatons of neo-classical economics, act opportunistically

and with guile.

Kwolek-Folland’s

discourse about power is more tantalizing than effective.

Instead of directly confronting issues of power in the market, as business

historians have done when they analyze why some firms or businessmen wield

greater market power than others, she assumes that power adheres primarily in

social categories and institutional structures. Power floats ambiguously on the

surface of business life, seeping from institutional structures and emanating

from unequal relationships between people and things. What kind of

power is at issue is unclear. Kwolek-Folland defines power as direct authority

and indirect influence, yet it is unclear how power and influence operate with

regard to women in business. Is it the power and control that derives from

ownership status, from position, from skill, from unique talents in a

competitive market? Is it the power that comes from having more money and using

it to buy more capital to invest? Is it the competitive power that comes from

being in a technologically cutting-edge industry

at the right time? Is it he power that is embedded in women’s networks and

political activities, in the battle for suffrage and property rights? Is it the

power that derives from impotence and image, from gender and race, as the case

of government policies suggest?

Some businesswomen, like Oprah Winfrey, clearly have power. The survey suggests

that Oprah’s power derives from ownership of Harpo Entertainment Group.

“Winfrey’s control over this conglomerate,” reports Kwolek-Folland,

“gave her the ability

– rare in the business world – to shape the concern according to her personal

vision.”(p.196).

Mere ownership does not necessarily give control nor does it create an ability

to control. Businesspeople who own assets must also be skilled enough and

willing and able to use power to exert the kind of control that is necessary in

order to make money in an a high-stakes, intensely competitive game. Business

historians will want to know more about how Oprah acquired control and secured

the assets necessary to build and grow Harpo Productions. Why and when did

she choose the conglomerate form? Was this organizational form particularly

suited to the entertainment business and Oprah’s managerial style? The ability

to shape business according to one’s own vision may well be important to some

women and men in business, but some visions are likely to be more effective

than others in generating and sustaining returns.

The survey suggests several reasons why power is important in business.

Power seems to be important because women don’t have enough of it relative to

men, or because men have more of it than women and use it to keep women from

getting it and because more businessmen seem ready to wield it than

businesswomen. Power is also important with respect to

the ability to control business and influence government policy and legal

outcomes.

Yet, power is notable by its absence from legislative debates over economic

rights, suffrage, property and citizenship, from debates about regulatory

policies regarding

small and big businesses. The survey suggests that more women battled for

economic rights than for suffrage, but given that the nineteenth century

suffrage campaign proved more effective than the campaigns for economic rights,

we need to know why. Feminists and other leaders of women’s organizations put

in only brief appearances in the book,

and when they do, the survey reduces the infighting among feminist leaders

regarding different strategies to common goals. Business historians will want

to know more

about business’ roles in coalition building strategies. Which businesses and

businesspeople allied with female protagonists or antagonists in these

struggles?

In the twentieth century women’s leaders appear to have garnered more

legislative victories de spite the persistence of traditional attitudes

regarding women’s roles. Why? Kwolek-Folland attributes the results to a

massive social revolution. Other scholars have suggested that business may well

have had a hand in the “conquest of cool” that fueled

a cultural counter-revolution.[4] What was business’ role in these 20th century

revolutions compared to its role in nineteenth century women’s rights

campaigns?

The problem and the opportunity with the survey and synthesis at this stage is

that historians of women and business have focused upon a different set of

differences. Whereas business historians have studied the differences that

emanate from the structure, behavior, conduct and performance of businesspeople

and firms, historians of women have stressed the agency of individuals and

groups and the politics of liberation. Business historians have investigated a

different power dynamic, one associated with price and product competition,

with cost-saving technologies, and with decision-making strategies instead of

that associated with meaning and understanding.

Business historians have concerned themselves primarily with market power,

with the ability of firms to dominate industries and throw their weight around

without being held publicly accountable. They have studied regulatory

patterns to determine the extent to which government policies,

such as anti-trust, have clipped or augmented the market power of particular

firms in particular industries.

Kwolek-Folland expects other approaches and perspectives to increase the

scholarly returns from efforts to understand women and business. She

underscores how the American business system came to be built upon the notion

of difference while simultaneously revealing the dangers of arguments based on

difference. Beliefs about women’s differences from men in the late-nineteenth

century opened some doors for some women but closed others and barred women’s

continuous advance in the business world. Arguments on the basis of gender

differences kept women outsiders in the business world even as women made a

place for themselves in the businessworld.

Just as a business system built on gender difference is likely to crumble when

difference is no longer valued, so too is a synthesis built upon difference

likely

to unravel as women and men occupy the same historical stage. Kwolek-Folland’s

survey necessarily homogenizes women in order to emphasize the differences

between their experiences and those of men, in terms of business opportunities,

ownership and managerial rights, and access to credit, among other things.

Just how different those experiences were in fact remains to be determined by

more systematic comparison of their roles and activities with respect to a

variety of sectors and industries. Business historians are likely to see more

of the differences between iron-manufacturer Rebecca Lukens and prostitute

Sarah Bowman and more similarities between Rebecca Lukens and her male

competitor in Delaware.

Nevertheless,

only by constructing numerous bridges with a variety of tools are we likely to

understand precisely what difference men and women and business institutions

have made to the growth and development of various economic sectors over time.

If we are to turn problems of difference into exciting new

research opportunities, I caution against traveling alone down a separate but

equal road. Women and men in business have interacted throughout history inside

and outside of markets and firms, as family members, as marriage and business

partners, and as competitors, in different industries over time.

They have suffered asymmetries of power and inequities of income. Their

occupations as businesspeople have been jointly shaped by a structure of sexual

inequality. But they have both been engaged in a joint

enterprise that has as its ultimate objective, the generation of a higher

standard of living for everyone. Regardless of gender, race, ethnicity or

class,

business is still business and only survives in the long run if it generates

some income above its

costs. As a market-oriented activity and institution,

the study of business forces a focus on the interaction between men and women,

on the interconnections between families and firms, on the transgressing of

private and public boundaries. Bringing women into business raises new

questions about how business institutions deal with ideas of “masculinity” and

“femininity” and about how women deal with and view the business world. [5]

Kwolek-Folland has done more than grasp the possibilities. She has constructed

one bridge over troubled waters. It is up to others to undertake the

painstaking empirical research needed to build additional bridges. Only then

are women likely to undergo the transformation from workers in business to

businesspeople with different personalities, skills, competitive and

organizational abilities, business experiences, and institutional means of

support.

Mary Yeager Associate Professor of History Bunche Hall UCLA 405 Hilgard Avenue

Los Angeles, CA 90095-1473 310-273-6328 (h)

310

-825-3489 (0)

END NOTES

[1] For an illuminating discussion of the pros and cons of synthesis, see Eric

Monkonnen, “The Dangers of Synthesis,” in Notes and Comment, American

Historical Review, vol. 91, no.5 (December, 1986), 1146-1157.

[2] Zora Putn am Wilkins, Letters of a Business Woman to Her Daughter and

Letters of a Business Girl to Her Mother (Boston: Marshall Jones Company,

1923), p.4, and Edith Mae Cummings, Pots, Pans and Millions: A Study of

Woman’s Right to Be in Business, Her Proclivities and Capacity for Success

(National School of Business Science for Women: Washington, D.C.,

1929), p.100.

[3] The Compact Edition of the Oxford English Dictionary(New York:

Oxford University Press, 1971), r.v. “responsibility,” p. 2514.

[4] Thom as Frank, The Conquest of Cool: Business Culture, Counterculture,

And the Rise of Hip Consumerism (Chicago and London: University of Chicago

Press, 1997).

[5] See Mary A. Yeager, “General Introduction,” Vol. I, Women in

Business, 3 vols., The International Library of Critical Writings in

Business History (Aldershot, UK and Brookfield, US: Elgar Reference

Collection, forthcoming March 1999).

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

Pushing the Envelope: The American Aircraft Industry

Author(s):Pattillo, Donald M.
Reviewer(s):Dawson, Virginia P.

Published by EH.NET (March 1999)

Donald M. Pattillo, Pushing the Envelope: The American Aircraft

Industry.

Ann Arbor, Michigan: University of Michigan Press, 1998. 459 pp. $45.00

(hardcover), ISBN: 0-472-10869-7.

Reviewed for EH.NET by Virginia P. Dawson, History Enterprises, Inc.,

Cleveland, OH.

Pushing the Envelope by Donald Pattillo is the

first comprehensive history of an industry not quite one hundred years old. Dr.

Pattillo is an educational consultant in Acworth, Georgia, who has spent many

years delving into primary sources and piecing together this intriguing,

convoluted and sometimes

unheroic story. To Pattillo, the “aviation men”

who built this industry were not short-sighted financiers, but risk-takers

willing to invest in innovation. Unlike the automobile industry it is often

compared to, the dependence of the aerospace industry on government

contracting, especially during the Cold War, left it insulated from market

forces and vulnerable to abuses triggered by human greed.

One of the main themes of the Pattillo’s book is how government support

influenced aircraft development during various periods of aviation history.

Pattillo discusses how in the industry’s early years, while European

governments seemed to understand the military significance to the Wright

brothers’ invention, their efforts were viewed with skepticism and indifference

in America. Capital was hard to come by for all the early pioneers of

flight. Glenn L. Martin, for example, used a flair for showmanship to build a

public following and sell aircraft to wealthy sportsmen. Even friendship with

Billy Mitchell could not assure him of military orders. Nevertheless,

government procurement and airmail contracts kept the fledgling industry alive

until Charles Lindbergh’s historic trans-Atlantic flight in 1927. The aviation

boom carried the industry through the Great Depression giving rise to new

firms and the emergence of the modern all-metal airliner. Up to 1938, however,

the aircraft industry as a whole was still small, with barely enough domestic

orders to stay viable.

All that would change with the coming of World War II when rapid expansion

made aircraft among the nation’s largest manufacturing industries.

Thereafter it remained an essential element of the defense establishment.

Pattillo regards the decade of the 1950s as among the most “exciting and

fruitful” for the industry–a decade when new models, the transition to jet

propulsion, and missile development reflected a “pace of progress” unequalled

in the history of the industry (p. 199).

The final chapters of the book are in many ways the most enlightening because

they break new historical ground. Pattillo discusses the difficulties and

abuses of defense procurement in the new aerospace industry during the Cold

War. “The inherent dilemma,” he writes, “was that contractors were financially

dependent upon government, while the government remained technologically

dependent upon a concentrated industry”

(p. 247). By the late 1960s the aerospace industry was the nation’s largest

employer, with 834,000 people directly involved in building aircraft.

However, it remained a highly competitive oligopoly, always dependent on the

government for survival. Profits were never high, the financial risks daunting,

and the opportunities for graft and corruption often irresistible.

The value of Pattillo’s work for historians of business is the synthesis that

he has produced. He provides the reader with the sweep of the development of

the industry from its beginning to the present. He has avoided technical

language while paying attention to technology, treated the financial aspects

without excessive detail, and has produced a balanced and critical commentary

on some of the more unsavory aspects of the industry. In addition to Pattillo’s

fine research and strong writing style,

the numerous tables throughout the book, along with a detailed chronology of

the aircraft industry make the book a valuable resource tool. It should be

required reading for all students of aerospace industry.

(Virginia P. Dawson is the founder of History Enterprises, Inc. She is author

of Engines and Innovation: Lewis Laboratory and American Propulsion

Technology and “E.G. Bailey and the Invention and Marketing of the Bailey

Boiler Meter,” in Technology and Culture (1996). She is currently

working on a book on a history of the Centaur program for NASA with co-author

and colleague, Mark D. Bowles.)

Subject(s):Industry: Manufacturing and Construction
Geographic Area(s):North America
Time Period(s):20th Century: WWII and post-WWII

Market Dominance: How Firms Gain, Hold, or Lose It and the Impact on Economic Performance

Author(s):Rosenbaum, David I
Reviewer(s):Castaneda, Christopher J.

Published by EH.NET (March 1999)

?

David I. Rosenbaum, editor. Market Dominance: How Firms Gain, Hold, or Lose It and the Impact on Economic Performance. Westport, CT: Praeger, 1998. viii + 274 pp. $69.50 (hardcover) , ISBN: 0-275-95604-0.

Reviewed for EH.NET by Christopher J. Castaneda, Department of History, California State University, Sacramento.

Dominating Markets

Powerful firms can force the inefficient allocation of resources. If the mark et fails to discipline such firms, should government policy do so? In this collection of essays edited by David I. Rosenbaum, Professor of Economics at the University of Nebraska-Lincoln, fourteen authors study this issue by analyzing eleven dominant firms operating in ten industries. Each essay is essentially a case study that examines an industry dominated for varying time periods by a particular firm. In the case of automobiles, both Ford and General Motors are scrutinized in a single essay; the chapter on the tobacco industry probes several firms that comprise the Tobacco Trust. Altogether, the authors query issues related to corporate dominance in the oil, tobacco, aluminum, magnesium, film, automobile, computer, software, health insurance, and long- distance telephone industries. Some of the subjects, such as the rise of Standard Oil between 1865 and 1911, the early histories of Ford and GM, and AT&T’s long-term monopoly are familiar to students of big business. Other essays scrutinize less well known examples of firm dominance such as Blue Cross’s role in health insurance and Dow Chemical’s involvement in the magnesium industry.

The essays are expectedly complementary. They elucidate common factors that thematically link each story of dominance. Six traits generally characterize these firms in their rise to dominance, maintenance of monopoly, and (in most cases) loss of control. The common traits that facilitated the development of dominance in these examples are: being a first mover; strong leader ship; cost advantages often through economies of scale; effective product promotion to stimulate demand; strategic use of patents and technology; and general dominance through size. While these characteristics suggest that a generally efficient firm is most likely to attain a commanding position in its industry, efficiency provided only one path towards dominance; AT&T, Standard Oil, and the tobacco trust also achieved market control by preying on competitors and engaging in price wars.

The rise to dominance in these cases typically followed implementation of cost advantages. Dow and Alcoa had lower costs in certain stages of production; Ford pioneered cost efficient assembly line manufacture; GM lowered its costs through massive sales volume; and Kodak created cost advantages for itself by exploiting the complementary camera and film markets. Vertical integration, the authors contend, was not always an effective strategy for dominance; at GM integration facilitated lower cost production in the firm’s early years yet brought high costs later.

These cases also suggest common strategies for maintaining market control. Innovating and implementing new technology, and protecting it through patents, contributed to sustained dominance and generally empowered these firms; in other instances new technologies allowed businesses to challenge existing industry leaders. Strong and progressive management also characterized firms in control of their markets. Chief executives who understood their markets and were able to make insightful strategic decisions based on changing market conditions “led the evolution of their industries” (p. 234). Dominating firms controlled by dominating leaders are hallmarks of corporate America, yet all have finite life spans. Today we ponder the future of a Microsoft without Bill Gates. Indeed, a chief manager can also lead a firm to dominance and then take it to the house of problems. Henry Ford became “autocratic . . . . and unable to respond to changing market conditions” (p. 247). At Kodak and IBM, a variety of factors contributed to the decline of management’s sagacity and these firms’ loss of market control.

Microsoft and the Tobacco Trust are the only organizations in this study which remain dominant. The other firms lost their market control for a variety of reasons generally defined as a loss of advantage: management became arrogant and inflexible, market conditions changed, and the government flexed its own muscle. In the case of Standard Oil, a combination of new supply areas in the mid-continent and California along with a proliferation of Gulf Coast refineries changed the oil industry’s market structure as well as Standard’s position in that market. Federal anti-trust policy also contributed to the demise of many firms’ hold on their markets. The U.S. Supreme Court dissolved Standard Oil in 1911, AT&T’s monopoly ended with the Modified Final Judgment of 1982, anti-trust action directed at IBM changed its corporate strategy, and Microsoft is fighting a similar battle today.

These concise and brief case studies provide cogent summaries of the rise and fall of very big business within a market context. In the case of tobacco, the topic is not monopoly but oligopoly and the Tobacco Trust. The authors of this essay note that during the twentieth century, three to four firms consistently controlled from 80 to 98% of the cigarette sales market. For comparative purposes, the editor/authors might have included another essay on an industry dominated by oligopoly. For example, recent congressional debate about the efficacy of the Public Utility Holding Company Act (1935) suggests another industrial study which most likely contains similar lessons.

Ultimately, this collection of essays concludes that government intervention in markets is justifiable in certain instances. While dominant firms often bring technological innovation and more efficient production methods to their industries, they sometimes stifle competition and misuse the power that their very size creates. Since some “[d]ominant firms can become inefficient, yet remain dominant for many years” and others “can price inefficiently without attracting successful entry,” a government policy toward dominance is required (p. 253).

Not only should antitrust policy be used to prevent dominant firms from quashing competition, government should consider its antitrust policy within broader trade policy. Rosenbaum concludes that since in some industries only foreign competitors were able to overcome a U.S. dominant firm’s advantages, “a fairly open trade policy may be one tool to limit the power of dominant firms” (p. 254). It is not only market forces which determine the destiny of powerful firms, it is often price wars, strategic acquisitions, pricing schemes, and other management strategies intended to stifle competition that need to be controlled if not by the market then by policy. The call for reasonable domestic policy is somewhat muted in the sense that policy is described generically. Altogether, this is an interesting collection of essays which suggest that dominant firms should be responsive to reasonable rules of competition which, left unenforced by the “invisible hand” of the domestic market, should be exacted by foreign competitors or promulgated by government policy and law.

Christopher J. Castaneda is Associate Professor of History. His most recent work is Invisible Fuel: Manufactured and Natural Gas in American History, 1800-2000 (New York: Twayne Publishers, forthcoming 1999).

?

Subject(s):Markets and Institutions
Geographic Area(s):North America
Time Period(s):General or Comparative

The Great Wave: Price Revolutions and the Rhythm of History

Author(s):Fischer, David Hackett
Reviewer(s):Munro, John H.

Published by EH.NET (February 1999)

David Hackett Fischer, The Great Wave: Price Revolutions and the Rhythm of

History. Oxford and New York: Oxford University Press, 1996. xvi + 536.

$35 (hardcover), ISBN: 019505377X. $16.95 (paperback), ISBN: 019512121X.

Reviewed for EH.NET by John H. Munro, Department of Economics, University of

Toronto.

Let me begin on a positive note. This is indeed a most impressive work: a

vigorous, sweeping, grandiose, and contentious, though highly entertaining,

portrayal of European and North American economic history, from the High Middle

Ages to the present, viewed through the lens of “long-wave” secular price-

trends. Indeed its chief value may well lie in the controversies that it is

bound to provoke, particularly from economists, to inspire new avenues of

research in economic history

, especially in price history. The author contends that, over the past eight

centuries, the European economy has experienced four major “price-

revolutions,” whose inflationary forces ultimately became economically and

socially destructive, with adverse consequences that provoked various complex

reactions whose “resolutions” in turn led to more harmonious, prosperous, and

“equitable” economic and social conditions during intervening eras of “price

equilibria”. These four price-revolutions are rather too neatly set out as the

following: (1) the later- medieval, from c.1180-c.1350; (2) the far better

known 16th-Century Price-Revolution, atypically dated from c.1470 to c.1650,

(3) the inflation of the Industrial Revolution era, from c.1730 to 1815; and

(4) the 20th century price-revolution, conveniently dated from 1896 to 1996

(when he published the book).

Though I am probably more sympathetic

to the historical concept of

“long-waves” than the majority of economists, I do agree with many opponents of

this concept that such long-waves are exceptionally difficult to define and

explain in any mathematically convincing models, which are certainly not

supplied here. For reasons to be explored in the course of this review, I

cannot accept his depictions, analysis

, and explanations for any of them. This will not surprise Prof. Fischer, who

is evidently not an admirer of the economics profession. He is particularly

hostile to those of us deemed to be “monetarists,” evidently used as a

pejorative term. After rejecting not only the “monetarist” but also the

“Malthusian,

neo-Classical, agrarian, environmental, and historicist” models, for their

perceived deficiencies in explaining inflations, and after condemning

economists and historians alike for imposing rigid models in attempting to

unravel the mysteries of European and North American economic history,

Fischer himself imposes an exceptionally rigid and untenable model for all four

of his so-called price-revolutions, containing in fact selected Malthusian and

monetarist elements from these supposedly rejected models.

In essence, the Fischer model contends that all of his four long-wave

inflations manifested the following six-part consecutive chain of causal and

consequential factors, inducing new causes, etc., into the next part of the

chain. First, each inflationary long-wave began with a prosperity created from

the preceding era of price-equilibrium, one promoting a population growth that

inevitably led to an expansion in aggregate demand that in turn outstripped

aggregate supply, thus — according to his model

— causing virtually ALL prices to rise. Evidently his model presupposes that

all sectors of the economy, in all historical periods under examination, came

to suffer from Malthusian-Ricardian diminishing

returns and rising marginal costs, etc. Second, in each and every such era,

after some indefinite lapse of time, and after the general population had

become convinced that rising prices constituted a persistent and genuine trend,

the “people” demanded and

received from their governments an increase in the money supply to

“accommodate” the price rises. As Fischer specifically comments on p. 83: “in

every price-revolution, one finds evidence of frantic efforts to expand the

money supply, after people have discovered that prices are rising in a secular

way.” Third, and invariably, in his view, that subsequent and continuous growth

in the money supply served only to fuel and thus aggravate the already existing

inflation. He never explains, however, for any of

the four long-waves, why those increases in money stocks were always in excess

of the amount required “to accommodate inflation”. Fourth, with such

money-stock increases, the now accelerating inflation ultimately produced a

steadily worsening impoverishment of the masses, aggravated malnutrition,

generally deteriorating biological conditions, and a breakdown of family

structures and the social order, with increasing incidences of crime and social

violence: i.e., with a rise in consumer prices that outstripped generally

sticky wages in each and every era, and with a general transfer of wealth from

the poorer to richer strata of society. Fifth, ultimately all these negative

forces produced economic and social crises that finally brought the

inflationary forces to a halt,

producing a fall in population and thus (by his model) in prices, declines that

subsequently led to a new era of “price-equilibrium,” along with concomitant

re-transfers of wealth and income from the richer to the poorer strata of

society

(where such wealth presumably belonged). Sixth, after some period of economic

prosperity and social harmony, this vicious cycle would recommence, i.e., when

these favorable conditions succeeded in promoting a new round of incessant

population growth, which inevitably sparked those same inflationary forces to

produce yet another era of price-revolution, continuing until it too had run

its course.

While many economic historians, using more structured Malthusian-Ricardian type

models, have also provided a similarly bleak portrayal of

demographically-related upswings and downswings of the European economy,

most have argued that this bleak cycle was broken with the economic forces of

the modern Industrial Revolution era. Fischer evidently does not. Are we the

reforecondemned, according to his view, to suffer these never-ending bleak

cycles– economic history according to the Myth of Sisyphus, as it were?

Perhaps not, if government leaders were to listen to the various nostrums set

forth in the final chapter,

political recommendations on which I do not feel qualified to comment.

Having engaged in considerable research, over the past 35 years, on European

monetary, price, and wage histories from the 13th to 19th centuries, I am,

however, rather more qualified

to comment on Fischer’s four supposed long-waves. Out of respect for the

author’s prodigious labors in producing this magnum opus, one that is bound to

have a major impact on the historical profession, especially in covering such a

vast temporal and spatial range, I feel duty-bound to provide detailed

criticisms of his analyses of these secular price trends, with as much

statistical evidence as I can readily muster. Problematic in each is defining

their time span,

i.e., the onset and termination of inflations. If many medievalists may concur

that his first long- wave did begin in the 1180s, few would now agree that it

ended as late as the Black Death of 1348-50. On the contrary,

the preceding quarter-century (1324-49) was one of very severe deflation,

certainly in both Tuscany (Herlihy 1966) and England. In the latter, the

Phelps Brown and Hopkins “basket of consumables” price index (1451-75 =

100) fell 47%: from 165 in 1323 (having been as high as 216 in 1316, with the

Great Famine) to just 88 in 1346. Conversely, while most early-modern

historians would agree that the 16th-Century Price Revolution generally ended

in the 1650s (certainly in England), few if any would date its commencement so

early as the 1470s. To be sure, in both the Low Countries and England, a

combination of coinage debasements, civil wars, bad harvests, and other

supply-shocks did produce a short-term rise in prices from the later 1470s to

the early 1490s; but thereafter their basket-of-consumables price-indices

resumed their deflationary downward trend for another three decades (Munro

1981, 1983). In both of these regions and in Spain as well (Hamilton 1934), the

sustained rise in the general price level, lasting over a century, did not

commence until c.1520.

For Fischer’s third inflationary long-wave, of the Industrial Revolution era,

his periodization is much less contentious, though one might mark its

commencement in the late 1740s rather than the early 1730s.

The last and most recent wave is, however, by far more the most controversial

in its character. Certainly a long upswing in world prices did begin in 1896,

and lasted until the 1920s; but can we really pretend that this so neatly

defined century of 1896 to 1996 truly encompasses any form of long wave when we

consider the behavior of prices from the 1920s?

Are we to pretend that the horrendous deflation of the ensuing Great Depression

era was just a temporary if unusual aberration that deviated from this

particular century long (saeclum) secular tend? Fischer, in fact,

very

rarely ever discusses deflation, ignoring those of the 14th century and most

of the rest. Instead, he views the three periods intervening between his price-

revolutions as much more harmonious eras of price-equilibria: i.e. 1350-1470;

1650 – 1730; 1820 –

1896; and he suggests that we are now entering a fourth such era. In my own

investigations of price and monetary history from the 12th century, prices rise

and fall,

with varying degrees of amplitude; but they rarely if ever remain stable,

“in equilibrium”.

Certainly “equilibrium” is not a word that I would apply to the first of these

eras, from 1350 to 1470: not with the previously noted, very stark deflation of

c.1325 – 48, followed by an equally drastic inflation that ensued from the

Black Death over

the next three decades, well documented for England, Flanders (Munro 1983,

1984), France, Tuscany (Herlihy 1966),

and Aragon-Navarre (Hamilton 1936). Thus, in England, the mean quinquennial PB

& H index rose 64%: from 88 in 1340-44 to 145 in 1370-74, fal ling sharply

thereafter, by 29%, to 103 in 1405-09; after subsequent oscillations, it fell

even further to a final nadir of 87 in 1475-79 (when,

according to Fischer, the next price-revolution was now under way). For

Flanders, a similarly constructed price index of quinquennial means

(1450-74 = 100: Munro 1984), commencing only in 1350, thereafter rose 170%:

from 59 in 1350-4 to 126 in 1380-84, reflecting an inflation aggravated by

coinage debasements that England had not experienced, indeed none at all since

1351. Thereafter, the Flemish price index plunged 32%, reaching a temporary

nadir of 88 in 1400-04; but after a series of often severe price oscillations,

aggravated by warfare and more coin debasements, it rose to a peak of 138 in

1435-9; subsequent ly it fell another 31%, reaching its 15th century nadir of

95 in 1465-9 (before rising and then falling again, as noted earlier).

Implicit in these observations is the quite pertinent criticism that Fischer

has failed to use, or use properly, these and many other price

indices–especially the well-constructed Vander Wee index (1975), for the

Antwerp region, from 1400 to 1700, so important in his study; and the Rousseaux

and Gayer-Rostow-Schwarz indices for the 19th century (Mitchell &

Deane 1962). On the other hand, he has relied far too much on the dangerously

faulty d’Avenel price index (1894-1926) for medieval and early-modern France.

Space limitations, and presumably the reader’s patience, prevent me from

engaging in similar analyses of price trends

over the ensuing centuries, to indicate further disagreements with Fischer’s

analyses, except to note one more quarter-century of deflation during a

supposed era of price equilibrium: that of the so-called Great Depression era

of 1873 to 1896, at least within England, when the PB&H price index fell from

1437 to 947, a decline of 34% that was unmatched, for quarter-century periods

in English economic history, since the two stark deflations of the second and

fourth quarters of the 14th century. (The Rousseaux index fell from 42.5% from

127 in 1873 to 73 in 1893).

My criticisms of Fischer’s temporal depictions of both inflationary long-waves

and intervening eras of supposed price equilibria are central to my objections

to his anti-monetarist explanations for them, or rather to his

misrepresentation of the monetarist case, a viewpoint he admittedly shares with

a great number of other historians, especially those who have found

Malthusian-Ricardian type models to be more seductively plausible explanations

of

inflation. Certainly, too many of my students, in reading the economic history

literature on Europe before the Industrial Revolution era, share that beguiling

view, turning a deaf ear to the following arguments: namely, that (1) a growth

in population cannot by itself,

without complementary monetary factors, cause a rise in all prices, though

certainly it often did lead to a rise in the relative prices of grain,

timber, and other natural-resource based commodities subject to diminishing

return and supply

inelasticities; and thus (2) that these simplistic demographic models involve

a fatal confusion between a change in the relative prices of individual

commodities and a rise in the overall price-level. Some clever students have

challenged that admonition,

however,

with graphs that seek to demonstrate, with intersecting sets of aggregate

demand and supply curves, that a rise in population is sufficient to explain

inflation. My response is the following. First, all of the historical prices

with which Fischer and my students are dealing

(1180-1750) are in terms of silver-based moneys-of-account, in the traditional

pounds, shillings, and pence, tied to the region’s currently circulating silver

penny, or similar such coin, while prices expressed in terms of the gold-based

Florentine florin behaved quite differently over the long periods of time

covered in this study. Indeed we should expect such a difference in price

behavior with a change in the bimetallic ratio from about 10:1 in 1400 to about

16:1 in 1650,

which obviously reflects the fall in the relative value or purchasing power of

silver — an issue virtually ignored in Fischer’s book. Second, the shift, in

this student graph, from the conjunction of the Aggregate Demand and Supply

schedules,

from P1.Q1

and P2.Q2, requires a compensatory monetary expansion in order to achieve the

transaction values indicated for the two price levels: from 17,220,000 pounds

and 122,960,000 pounds, which increase in the volume of payments had to come

from either increased

money stocks and/or flows. Even if changes in demographic and other real

variables, shared responsibility for inflation by inducing changes in those

monetary variables, we are not permitted to ignore those variables in

explaining historical inflations.

Admittedly, from the 12th to the 18th centuries, to the modern Industrial

Revolution era, correlations between demographic and price movements are often

apparent. But why do so few historians consider the alternative proposition

that much more profound, deeper economic forces might have induced a complex

combination of general economic growth, monetary expansion, and a rise in

population, together (so that such apparent statistical relationships would

have adverse Durbin-Watson statistics to indicate significant serial

correlation)? Furthermore, if population growth is the inevitable root cause of

inflation, and population decline the purported cause of deflation, how do such

models explain why the drastic depopulations of the 14th-century Black Death

were

followed by three decades of severe inflation in most of western Europe?

Conversely, why did late 19th-century England experience the above-noted

deflation while its population grew from 23.41 million in 1873 (PB&H at 1437)

to 30.80 million in 1896 (PB&H

at 947)?

Nor is Fischer correct in asserting that, in each and every one of his four

price-revolutions, an increase in money supplies followed rather than preceded

or accompanied the rises in the price-level. For an individual country or

region, however

, one might argue that a rise in its own price level, as a consequence of a

transmitted rise in world or at least continental prices would have quickly —

and not after the long-time lags projected in Fischer’s analysis — produced an

increase in money supplies to satisfy the economic requirements for that rise

in national/regional prices. Fischer, however, fails to offer any theoretical

analysis of this phenomenon, and makes no reference to any of the well-known

publications on the Monetary Approach to the Balance of Payments [by Frenkel

and Johnson (1976), McCloskey and Zecher (1976), Dick and Floyd (1985, 1992);

Flynn (1978) and D. Fisher (1989), for the Price Revolution era itself]. In

essence,

and with some necessary repetition, this thesis contends:

(1) that a rise in world price levels, initially arising from increases in

world monetary stocks, is transmitted to most countries through the mechanisms

of international commerce (in commodities, services, labor) and finance

(capital flows); and (2) that monetized metallic (coin) stocks and other

elements constituting M1 will be endogenously distributed among all countries

and/or regions in order to accommodate the consequent rise in the domestic

price levels, (3) without involving those international bullion flows that the

famous Hume “price- specie flow” mechanism postulates to be the consequences of

inflation-induced changes in national trade balances.

In any event, the historical evidence clearly demonstrates that, for each of

Fischer’s European-based price-revolutions, an increase in European monetary

stocks and flows always preceded the inflations. For the first,

the price-revolution of the “long-13th century” (c.1180-c.1325), Ian Blanchard

(1996) has recently demonstrated that within England its elf,

specifically in Cumberland-Northumberland, a very major silver mining boom had

commenced much earlier, c.1135-7, peaking in the 1170s, with annual silver

outputs that were “ten times more than had been produced in the whole of

Europe” for any year in

the past seven centuries. By the 1170s,

and thus still before evident signs of general inflation or a marked

demographic upswing, an even greater silver mining boom had begun in the Harz

Mountains region of Saxony, which continued to pour out vast quantities of

silver until the early 14th century. For this same

“Commercial Revolution” era, we must also consider the accompanying financial

revolution, also evident by the 1180s, in Genoa and Lombardy; and though one

may debate the impact that their deposit-

and-transfer banking and foreign-exchange banking had upon aggregate European

money supplies,

these institutional innovations undoubtedly did at least increase the volume of

monetary flows, and near the beginning, not the middle, of this first

documented

long-wave.

For the far better known 16th-Century Price Revolution, Fischer seems to pose a

much greater threat to traditional monetary explanations, especially in so

quixotically dating its commencement in the 1470s, rather than in the 1520s.

Certainly Fischer and many other critics are on solid grounds in challenging

what had been, from the time of Jean Bodin (1566-78) to Earl Hamilton

(1928-35), the traditional monetary explanation for the origins of the Price

Revolution: namely, the influx of Spanish

American treasure. But not until after European inflation was well underway,

not until the mid-1530s, were any significant amounts of gold or silver being

imported

(via Seville); and no truly large imports of silver are recorded before the

early 1560s (a

mean of 83,374 kg in 1561-55: TePaske 1983), when the mercury amalgamation

process was just beginning to effect a revolution in Spanish-American mining.

Those undisputed facts, however, in no way undermine the so-called

“monetarist” case; for Fischer, and far too many other economic historians,

have ignored the multitude of other monetary forces in play since the 1460s.

The first and least important factor was the Portuguese export of gold from

West Africa (Sao Jorge) beginning as a trickle in the 1460s;

rising to 170 kg per annum by 1480, and peaking at 680 kg p.a. in the late

1490s (Wilks 1993). Far more important was the Central European silver mining

boom, which began in the 1460s, at the very nadir of the West European

deflation, which had thus raised the purchasing power of silver and so

increased the profit incentive to seek out new silver sources: as a

technological revolution in both mechanical and chemical engineering.

According to John Nef (1941, 1952), when this German-based mining boom reached

its peak in the mid 1530s, it had augmented Europe’s silver outputs more than

five-fold, with an annual production that ranged from a minimum of 84,200 kg

fine silver to a maximum of 91,200 kg — and thus well in excess of any amounts

pouring into Seville before the mid-1560s. My own statistical compilations,

limited to just the major mines, indicate a rise in quinquennial mean

fine-silver outputs from 12,356 kg in 1470-74 to 55,025 kg in 1534-39 (Munro

1991). In England, 25-year mean mint outputs rose

from 18,932 kg silver in 1400-24 to 33,655 kg in 1475-99 to 59,090 kg in

1500-24; and then to 305,288 kg in 1550-74 (i.e., after Henry VIII’s

“Great Debasement”); in the southern Low Countries, those means go from 54,444

kg in 1450-74 to 280,958 kg in 15 50-74 (Challis 1992; Munro 1983,

1991).

In my view, however, equally important and probably even more important was the

financial revolution that had begun in or by the 1520s with legal sanctions for

and then legislation on full negotiability, and the contemporary establishment

of effective secondary markets (especially the Antwerp Bourse) in fully

negotiable bills and rentes, i.e., heritable government annuities; and the

latter owed their universal and growing popularity, compared with other forms

of public debt, to papal bulls (1425,

1455) that had exonerated them from any taint of usury. To give just one

example of a veritable explosion in this form of public credit (which thus

reduced the relative demand for gold and silver coins), an issue that Fischer

almost completely ignores: the annual volume of transactions in Spanish

heritable juros rose from 5 million ducats (of 375 maravedis) in 1515 to 83

million ducats in the 1590s (Vander Wee 1977). Thus we need not call upon

Spanish-American bullion imp orts to explain the monetary origins of the

European Price Revolution, though their importance in aggravating and

accelerating the extent of inflation from the 1550s need hardly be questioned,

especially, as Frank Spooner (1972) has so aptly demonstrated,

even anticipated arrivals of Spanish treasure fleets would induce German and

Genoese bankers to expand credit issues by some multiples of the perceived

bullion values. Fischer, by the way, comments (p. 82) that: “the largest

proportionate increases in Spanish prices occurred during the first half of

the sixteenth century — not the second half, when American treasure had its

greatest impact.” This is simply untrue: from 1500-49, the Spanish composite

price index rose 78.5%; from 1550-99, it rose by another 92.1% (Hamilton

1934).

Changes in money stocks or other monetary variables do not, however,

provide the complete explanation for the actual extent of inflation in this or

in any other era. Even if every inflationary price trend that I have

investigate d, from the 12th to 20th centuries, has been preceded or

accompanied by some form of monetary expansion, in none was the degree of

inflation directly proportional to the observed rate of monetary expansion,

with the possible exception of the post World War I hyperinflations.

Consider this proposition in terms of the oft-maligned, conceptually limited,

but still heuristically useful monetary equation MV = Py [in which real y = Y/P

= C + I + G+ (X-M)]; or, better, in terms of the Cambridge “real cash

balances” approach: M = kPy [in which k = the proportion of real NNI (Py) that

the public chooses to hold in real cash balances, reflecting the constituent

elements of Keynesian liquidity preference]. Some Keynesian economists would

contend that an increase in M, or in the rate of growth of money stocks, would

be accompanied by some

offsetting rise in y (i.e. real NNI), whether exogenously created or

endogenously induced by related forces of monetary expansion, and also by some

decline in the income velocity of money, with a reduced need to economize on

the use of money. Since mathematically V = 1/k, they would similarly posit

that an expansion in M,

or its rate of growth, would have led, ceteris paribus — without any change in

liquidity preference, to a fall

in (nominal) interest rates, and thus, by the consequent reduction in the

opportunity costs of holding cash balances, to the necessarily corresponding

rise in k (i.e., an increase in the demand for real cash balances; see Keynes

1936, pp. 306-07). Sometimes, but only very rarely, have changes in these two

latter variables y and V (1/k) fully offset an increase in M; and thus such

increases in money stocks have also resulted, in most historical instances, in

some non-proportional degree of inflation: a rising P, as measured by some

suitable price index, such as the Phelps Brown and Hopkins

basket-of-consumables. [Other economists,

it must be noted, would contend that, in any event, the traditional Keynesian

model is really not applicable to such long-term

phenomena as Fischer’s price-revolutions.

Keynes himself, in considering “how changes in the quantity of money affect

prices… in the long run,” said, in the General Theory (1936, p. 306):

“This is a question for historical generalisation rather than for

pure theory.”]

For the 16th-century Price Revolution, therefore, the interesting question now

becomes: not why did it occur so early (i.e., before significant influxes of

Spanish American bullion); but rather why so late — so many decades after the

onset of the Central European silver-copper mining boom?

Since that boom had commenced in the 1460s, precisely when late-medieval

Europe’s population was at its nadir, perhaps 50% below the 1300 peak, and just

after the Hundred Years’ War had ended, and just

after the complex network of overland continental trade routes between Italy

and NW Europe had been successfully restored, one might contend that in such an

economy with so much “slack” in under-utilized resources, especially land, and

with elastic supplies for so many commodities, both the monetary expansion and

economic recovery of the later 15th century , preceding any dramatic

demographic recovery, permitted an increase in y proportional to the growth of

M, without the onset of diminishing returns an d without significant inflation,

before the 1520s By that decade, however, the monetary expansion had become

all the more powerful: with the peak of the Central European silver-mining

boom and with the rapid increase in the use of negotiable, transferable

credit instruments; and, furthermore, with the Ottoman conquest of the Mamluk

Sultanate (1517), which evidently diverted some considerable amounts of

Venetian silver exports from the Levant to the Antwerp market.

The role of the income-velocity of money

is far more problematic. According to Keynesian expectations, velocity should

have fallen with such increases in money stocks. Yet three eminent economic

historians — Harry Miskimin

(1975), Jack Goldstone (1984), and Peter Lindert (1985) — have sought

to explain England’s16th-century Price Revolution by a very contrary thesis:

of increased money flows (or reductions in k) that were induced by demographic

and structural economic changes, involving interalia(according to their

various models) disproportionate changes in urbanization, greater

commercialization of the rural sectors, far more complex commercial and

financial networks, changes in dependency ratios, etc. The specific

circumstances so portrayed, however, apart from the demographic, are largely

peculiar to 16th- century England and thus do not so convincingly explain the

very similar patterns of inflation in the 16th-century Low Countries, which had

undergone most of these structural economic changes far earlier. Certainly

these velocity model s cannot logically be applied to Fischer’s three other

inflationary long-waves. Indeed, in an article implicitly validating Keynesian

views, Nicholas Mayhew (1995) has contended that the income-velocity of money

has always fallen with an expansion in money stocks, from the medieval to

modern eras, with this one anomalous exception of the 16th-century Price

Revolution. Perhaps, for this one era,

we have misspecified V (or k) by misspecifiying M: i.e., by not properly

including increased issues of negotiable credit; or perhaps institutional

changes in credit (as Goldstone and Miskimin both suggest) did have as dramatic

an effect on V as on M. Furthermore, an equally radical change in the coined

money supply (certainly in England), from one that had been principally gold

to one which, precisely from the 1520s, became largely and then almost entirely

silver, may provide the solution to the velocity paradox: in that the

transactions velocity attached to small value silver coins, of 1d., is

obviously far higher

velocity than that for gold coins valued at 80d and 120d. Except for a brief

reference to Mayhew’s article in the lengthy bibliography, Fischer virtually

ignores such velocity issues

(and thus changes in the demand for real cash balances) throughout his

eight-century survey of secular price trends.

Finally, Fischer’s thesis that population growth was responsible for this the

most famous Price Revolution (and all other inflationary long waves) is hardly

credible, especially if he insists on dating its inception the 1470s. For most

economic historians (Vander Wee 1963; Blanchard 1970;

Hatcher 1977, 1986; Campbell 1981; Harvey 1993) contend that, in NW Europe,

late-medieval demographic decline continued into the early 16th-century;

and that England’s population in 1520 was no more than 2.25 million,

compared to estimates ranging from a minimum of 4.0 to a maximum of 6.0 or even

7.0 million around 1300, the upper bounds being favored by most historians. How

— even if the demographic model were to be theoretically acceptable — could

a modest population growth from such a very low level in the 1520s, reaching

perhaps 2.83 million in 1541, and peaking at 5.39 million in 1656, have been

the fundamental cause of persistent, European wide-inflation, already underway

in the 1520s?

According to Fischer, the ensuing, intervening price-equilibrium

(c.1650-c.1730) involved no discernible monetary contraction, and similarly,

his next inflationary long-wave (c.1730-1815) began well before any monetary

expansion became — in his view — manifestly evident. The monetary and price

data, suggest otherwise, however, incomplete though they may be. Thus, the data

complied by Bakewell, Cross, TePaske, and many others on silver mining at

Potosi (Peru) and Zacatecas (Mexico) indicate that their combined outputs fell

from a mean of 178,692 kg in 1636-40 to one of 101,534 kg in 1661-5, rising to

a mean of 156,497 kg in 1681-5

[partially corresponding to guesstimates of European bullion imports, which

Morineau (1985) extracted fr om Dutch gazettes]; but then sharply falling once

more, and even further, to a more meager mean of 95,842 kg in 1696-1700. During

this same era, the Viceroyalty of Peru’s domestically-

retained share of silver-based public revenues rose from 54% to 96%

(T ePaske 1981); the combined silver exports of the Dutch and English East

India Companies to Asia (Chaudhuri 1968; Gaastra 1983) increased from a

decennial mean of 17,293 kg in 1660-69 to 73,687 kg in 1700-09, while English

mint outputs in terms of fine sil ver (Challis 1992) fell from a mean of 19,400

kg in 1660-64 (but 23,781 kg in 1675-79) to one of just 430.4 kg in 1690-94,

i.e., preceding the Great Recoinage of 1696-98. From the early 18th century,

however, European silver exports to Asia were well more

than offset by a dramatic rise in Spanish-American, and especially Mexican

silver production: for the latter (with evidence from new or previously

unrecorded mines: assembled by Bakewell 1975, 1984; Garner 1980,

1987; Coatsworth 1986, and others), aggregate production more than doubled

from a mean of 129,878 kg in 1700-04 to one of 305,861 kg in 1745-49.

Possibly even more important, especially with England’s currency shift from a

silver to a gold standard, was a veritable explosion in aggregate

Latin-American gold production: from a decennial mean of just 863.90 kg in

1691-1700

zooming to 16,917.4 kg in 1741-50 (TePaske 1998). Within Europe itself, as

Blanchard (1989) has demonstrated, Russian silver mining outputs, ultimately

responsible for perhaps 7%

of Europe’s total stocks,

rose from virtually nothing in the late 1720s to peak at 33,000 kg per annum in

the late 1770s, falling to 18,000 kg in the early 1790s then rising to 21,000

kg per year in the later 1790s.

Finally, even though changes in annual mint outputs are not valid indicators

of changes in coined money supplies, let alone of changes in M1,

the fifty-year means of aggregate values of English mint outputs (silver and

gold: Challis 1992) do provide interesting signals of longer-term monetary

changes: a fall from an annual mean of 348,829 pounds in 1596-1645 to one of

275,403 pounds in 1646-95, followed by a rise, with more than a full recovery,

to an annual mean of 369,644 pounds in 1700-49 (thus excluding the Great

Recoinage of 1696-98). Meanwhile, if the earlier Price Revolution had indeed

peaked in 1645-49, with the quinquennial mean PB&H index at 680, falling to a

nadir of 579 in 1690-94, the fluctuations in the first half of the 18th-century

do not demonstrate any clear inflationary trend, with the mean PB&H index

(briefly peaking at 635 in 1725-9) stalled at virtually the same former level,

581, in 1745-49. Thereafter, of course,

for the second half of the 18th century, the trend is very strongly and

incessantly upward, with almost a

doubling in PB&H index, to 1093 in 1795-9.

Whatever one may wish to deduce from all these diverse data sets, we are

certainly not permitted to conclude, as does Fischer, that inflation preceded

monetary expansion, and did so consistently. Such a view becomes all the more

untenable when the radical changes in English and banking and credit

institutions, following the establishment of the Bank of England in 1694-97,

are taken into account: the consequent introduction and rapid expansion in

legal-tender paper bank note issues (with prior informal issues by London’s

Goldsmith banks), and more especially fully negotiable,

transferable, and discountable Exchequer bills, government annuities,

inland bills and promissory notes, whose veritable explosion in circulation

from the 1760s, with the proliferation of English country-banks, hardly

requires any further elaboration, even if these issues are given short shrift

in Fischer’s book. In view of such complex changes in Britain’s financial and

monetary structures,

subsequent data on coinage outputs have even more limited utility in

estimating money stocks. But we may note that aggregate mined outputs of

Mexican silver more than doubled, from a quinquennial mean of 305,861 kg in

1745-49 to 619,495 kg in 1795-99, while those of Peru more than tripled, from

34,318 kg in 1735-39 (no data for the 1740s) to 126,354 kg in 1795-99 (Garner

1980, 1987; Bakewell 1975, 1984; J.

Fisher, 1975).

Having earlier considered the so-called and misconstrued

“price-equilibrium” of 182 0-1896, let us now finally examine the inception of

the fourth and final long-wave commencing in 1896. Fischer again contends that

population growth was the “prime mover,” despite the fact that Britain’s own

intrinsic growth rate had been falling from its

1821 peak [from 1.75 to 1.31 in 1865, the last year given in Wrigley-Davies-

Oppen-Schofield (1997)]. For evidence he cites an assertion in Colin McEvedy

and Richard Jones, Atlas of World Population History (1978) to the effect that

world population, having increased by 35% from 1850 to 1900,

increased a further 53% by 1950. Are we therefore to believe that such growth

was itself responsible for a 45.2% rise in, for this era, the better structured

Rousseaux price-index [base 100 = (1865cp +1885cp)/2]: from 73 in 1896 to 106

[while the PB&H index rose from 947 in 1896 to 1021 in 1913]?

As for the role of monetary factors in the commencement of this fourth long

wave, Fischer observes (p. 184) that “the rate of growth in gold production

throughout the world was roughly the same before and after 1896.” This

undocumented assertion, about an international economy whose commerce and

finance was now based upon the gold standard, is not quite accurate.

According to assiduously calculated estimates in Eichengreen

and McLean

(1994), decennial mean world gold outputs, having fallen from 185,900 kg in

1850-9 to 135,000 kg in 1880-9 (largely accompanying the aforementioned 44%

fall in the Rousseaux composite index from 128 in 1872 to 72 in 1895),

thereafter soared to

a mean of 255,600 kg in 1890-9 — their graph of annualized data shows that

the bulk of this increased output occurred after 1896 — virtually doubling to

an annual mean of 513,900 kg in 1900-14.

World War I, of course, effectively ended the international gold-standard era,

since the Gold- Exchange Standard of 1925-6 was rather different from the older

system; and the post-war era ushered in a radically new monetary world of fiat

paper currencies, whose initial horrendous manifestation came in the hyper

inflations of Weimar Germany, Russia, and most Central European countries, in

the early 1920s. For this post-war economy, Fischer does admit that monetary

factors often had some considerable importance in influencing price trends; but

his analyses, even of the post-war radical, paper-fuelled hyperinflations, are

not likely to satisfy most economists, either for the inter-war or Post World

War II eras, up to the present day.

This review, long as it is, cannot possibly do full justice to an eight-century

study of this scope and magnitude. So far I have neglected to consider his

often fascinating analyses of the social consequences of inflation over these

many centuries, except for brief allusions in the introduction, where I

indicated his deeply hostile views to persistent inflation for its inevitably

insidious consequences: the impoverishment of the masses, growing malnutrition,

the spread of killer-diseases, increased crime and violence in general, and a

breakdown of the social order, etc.

While some of

the evidence for the latter seems plausible, I do have some concluding quarrels

with his use of real wage indices. Much of our available nominal money-wage

evidence comes from institutional sources on daily wages, which, by their very

nature, tend to be fixed over long periods of time [as Adam Smith noted in the

Wealth of Nations (Cannan ed.

1937, p. 74), “sometimes for half a century together”). Therefore, for such

wage series, real wages rose and fell with the consumer price index, as

measured by, for example, our Phelps Brown and Hopkins basket-of-consumables

index. Its chief problem (as opposed to the better constructed Vander Wee

index for Brabant) is that its components, for long periods, constitute fixed

percentages of the total composite index,

irrespective of changes in relative prices for, say, grains; and they thus do

not reflect the consumers’ ability to make cost-saving substitutions.

Secondly, they are necessarily based on daily wage rates, without any

indication of total annual money incomes; thirdly, the great majority of

money-wage earners in pre-modern Europe earned not day rates but piece-work

wages, for which evidence is extremely scant.

But more important, before the 18th century (or even later), a majority of the

European population did not live by money wages; and most wage-earners had

supplementary forms of income, especially agricultural, that helped insulate

them to some degree from sharp rises in food prices. If rising food prices hurt

many wage-earners, they also benefited ma ny peasants,

especially those with customary tenures and fixed rentals who could thereby

capture some of the economic rent accruing on their lands with such price

increases. It may be simplistic to note that there are always gainers and

losers with both inflation and deflation — but even more simplistic to focus

only on the latter in times of inflation, and especially simplistic to focus on

a real wage index based on the PB&H index. And if deflation is so beneficial

for the masses, why, during the deflationary period in later 17th and early

18th century England, do we find, along with a rise in this real-wage index, a

rise in the death rate from 23.68/1000 in 1626 to 32.14/1000 in 1681,

thereafter falling slightly but rising again to an ultimate peak of

37.00/1000 in 1725 (admittedly an era of anomalous disease-related

mortalities), when the PB&H real-wage index stood at 60 —

some 24% higher than the RWI of 36 for 1626? One of the many imponderables yet

to be considered, though one might ponder that sometimes high real wages

reflect labor shortages from dire conditions, rather than general prosperity

and more equitable wealth and income distributions, as Fischer suggests.

Finally, Fischer’s argument that inflationary price-revolutions were always

especially harmful to the lower classes by leading to rising interest rates is

sometimes but not universally true, even if rational creditors should have

raised rates to protect themselves from inflation. Thus, for the Antwerp money

market in the 16th century,

the meticulous evidence compiled by Vander Wee (1964, 1977) shows that

nominal interest rates fell over this entire period [from 20% in 1515 to 9% in

1549 to 5% in 1561; and on the riskier short term loans to the Habsburg

government, from a mean of 19.5

% in 1506-10 to one of 12.3% in 1541-45 to 9.63% in 1561-55]. In the next

price-revolution, during the later 18th century, nominal interest rates did

rise during periods of costly warfare, i.e., with an increasing risk premium;

but real interest rates actually fell because of the increasing tempo of

inflation (Turner 1984), more so than did real wages for most industrial

workers.

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Political Economy, 49 (1941), 575-91.

John Nef, “Mining

and Metallurgy,” in M.M. Postan, ed., Cambridge Economic History, Vol. II:

Trade and Industry in the Middle Ages (Cambridge, 1952),

pp. 456-93. Reprinted without changes, in the 2nd revised edn. of The Cambridge

Economic History of Europe, Vol. II, edited by M.M. Postan and Edward Miller

(Cambridge, 1987), pp. 691-761.

E.H. Phelps Brown and Sheila V. Hopkins, “Seven Centuries of en Centuries of

the Prices of Consumables Compared with B Building Wages,” Economica, 22

(August 1955), and “Sevuilders” Wage-

Rates,” Economica, 23 (Nov. 1956),

reprinted E.H. Phelps Brown and Sheila V. Hopkins, A Perspective of Wages and

Prices (London, 1981), containing additional statistical appendices not

provided in the original publication.

Frank Spooner, The International Economy and Monetary Movements in France,

1493-1725 (Cambridge, Mass., 1972)

John TePaske, “New World Silver, Castile, and the Philippines, 1590-1800 A.D.,”

in John F. Richards, ed., Precious Metals in the Medieval and Early Modern

Worlds (Durham, N.C.

, 1983), pp. 424-446.

John TePaske, “New World Gold Production in Hemispheric and Global Perspective,

1492 – 1810,” in Clara Nunez, ed., Monetary History in Global Perspective, 1500

– 1808, Papers presented to Session B-6 of the Twelfth International Eco nomic

History Congress (Seville, 1998), pp. 21-32.

Michael Turner, Enclosures in Britain, 1750 – 1830, Studies in Economic History

Series (London, 1984).

Herman Vander Wee, Growth of the Antwerp Market and the European Economy,

14th to 16th Centuries,

3 Vols. (The Hague, 1963). Vol. I: Statistics; Vol.

II: Interpretation, 374-427; and Vol. III: Graphs.

Herman Vander Wee, “Monetary, Credit, and Banking Systems,” in E.E. Rich and

Charles Wilson, eds., The Cambridge Economic History of Europe, Vol. V:

T he Economic Organization of Early Modern Europe(Cambridge, 1977), chapter V,

pp. 290-393.

Herman Vander Wee, “Prijzen en lonen als ontwikkelingsvariabelen: Een

vergelijkend onderzoek tussen Engeland en de Zuidelijke Nederlanden,

1400-1700,” in Album aan geboden aan Charles Verlinden ter gelegenheid van zijn

dertig jaar professoraat (Gent, 1975), pp. 413-47; reissued in English

translation (without the tables) as “Prices and Wages as Development Variables:

A Comparison Between England and the Southern Net herlands,

1400-1700,” Acta Historiae Neerlandicae, 10 (1978), 58-78.

Ivor Wilks, “Wangara, Akan, and the Portuguese in the Fifteenth and Sixteenth

Centuries,” in Ivor Wilks, ed., Forests of Gold: Essays on the Akan and the

Kingdom of Asante (Athens, Ohio

, 1993), pp. 1-39.

E.A. Wrigley, R.S. Davies, J.E. Oeppen, and R.S. Schofield, English Population

History from Family Reconstitution, 1580- 1837 (Cambridge and New York:

Cambridge University Press, 1997).

Subject(s):Macroeconomics and Fluctuations
Geographic Area(s):General, International, or Comparative
Time Period(s):General or Comparative

State-Making and Labor Movements: France and the Unite dStates, 1876-1914

Author(s):Friedman, Gerald
Reviewer(s):Dubofsky, Melvyn

Published by EH.NET (January 2000)

Gerald Friedman, State-Making and Labor Movements: France and the United

States, 1876-1914. Ithaca, NY: Cornell University Press, 1998. xiv + 317

pp. $55 (cloth), ISBN: 0-8014-2325-2.

Reviewed for EH.NET by Melvyn Dubofsky, Departments of History and Sociology,

Binghamton University, SUNY.<

dubof@mailbox.cc.binghamton.edu>

Gerald Friedman, an associate professor of economics at the University of

Massachusetts-Amherst, has written a book that resonates with the spirit of the

last decade of the twentieth century. Although his subject is the growth,

character, and composition of the French and U.S. labor movements in the era of

the Second International, the apogee of Marxism, Friedman views the past

through the lens of the present, a time when labor retreats,

Marxism has been declared dead, and “there is no alternative (TINA)” in sight

to a voracious global capitalism. Based on his comparison of the U.S. and

French labor movements between the 1870s and World War I, Friedman concludes

first, that workers cannot advance their interests without non-working-class

allies and a sympathetic state, and, second, that “orthodox” Marxists, then

and later, were wrong in their economic determinism (historical materialism)

and revolutionary teleology.

Friedman uses the comparative history of U.S. and French labor movements to

make his case. Not only that; he also attempts to reverse the conventional

portrait of the two national labor movements. He suggests that an increasingly

radical and militant French labor movement led by revolutionary syndicalists

grew more rapidly than its U.S. counterpart;

better served the material interests of its members; and succeeded in

organizing the “towering heights” of the French economy, its mass-production

enterprises. By way of contrast, after 1904, a

“conservative” “pure and simple” U.S. labor movement failed to advance; did

little or nothing for the great mass of workers; and failed absolutely to

penetrate the dominant “Fordist” sector of the economy. How does Friedman

explain the relative success of French labor and failure of U.S. labor?

Simply put, he argues that trade unions and the labor movements in both

countries were too weak alone to counteract the greater power of capitalists.

In France, however, Republicans could not defend the Third Republic against

Monarchists and reactionaries (with whom businesspeople allied) without the

support of labor. Hence the French state protected unions against attacks by

capital and encouraged public mediation in place of private or public

repression. In the U.S., however, a liberal state faced no challenge from

anti-Republican reactionaries, hence had no need to build alliances with labor,

and thus enabled employers to crush unions and,

on occasion, used public power to the same end. Put another way, as Friedman

does, the dynamics of French politics and state-making enabled labor to drift

left and remain rhetorically revolutionary while the political process in the

U.S. left labor no choice but to practice

“prudential unionism” and the principle of sauve qui peut.

Does Friedman establish his case? Here I remain less convinced. As an

economist trained in the use of statistics and quantification, Friedman deploys

a variety of data bases, tables, graphs, standard deviations, and regression

analyses to prove his points. A review of this length is not the place to

engage in a debate over the validity of such quantifiable evidence. Suffice it

to say that the meaning of Friedman’s numbers can be interpreted in more than

one way. I prefer to focus on more substantial shortcomings. Are

France and the U.S. actually a good comparison, and is it true, as Friedman

claims (p. 12), that the economic and political differences between the two

nations “were relatively small.” Yes, the U.S.

and France were both capitalist economies and republican polities. Beyond

that, however, it seems to me that enormous differences loomed. One nation was

a centralized, unitary state administered by a trained bureaucracy and governed

by codified legal principles under Roman law. The other was a decentralized,

federal state lacking a trained cadre of administrators and governed by a

common law regime that gave judges enormous autonomy and authority. One nation

had a relatively, large and stable agricultural sector characterized by

small-scale peasant farming and a manufacturing sector dominated in the main

by relatively small enterprises dependent on skilled craftsmen adept at

small-batch production. The other had an agricultural sector that declined

quite rapidly relative to the non-agricultural sector and in

which large holdings increasingly characterized the dynamic staple-producing,

export-driven side of farming;

it also had an industrial sector increasingly characterized by gargantuan

enterprises employing armies of machine operators to mass produce capital and

consumer goods. Should one expect comparable trajectories for labor movements

in Fordist and pre-Fordist economic regimes?

And what of Friedman’s portrait of the histories of the French and U.S.

labor movements? Was the French movement relatively successful as compared to

the one in the U.S.? Did French unions really succeed before World War I in

unionizing among employees in large-scale, mass-production enterprises?

Were U.S. unions as loath to organize the less skilled and as disdainful of

workers in the mass-production sector as Friedman claims? Friedman’s own

statistical and written data fail to answer those questions. If typical French

locals were as small as Friedman’s data indicate, indeed on average far smaller

than U.S. union locals, how could they be characterized as examples of

successful industrial unionism? For an economist trained in quantification,

Friedman provides precious little data in the way of comparative wage rates,

annual earnings, hours of work, working conditions,

and consumption standards, to judge the relative impact of French and U.S.

unions on the lives of their members. Did U.S. unions fail to organize less

skilled mass-production workers because their leaders were narrow-minded,

selfish, chauvinistic, and sexist individuals or because their adversaries

were too powerful, as Friedman’s own evidence suggests?

Does Friedman’s explication of comparative business history and politics in the

two nations work any better? His businesspeople on both sides of the Atlantic

proved equally anti-union but were French entrepreneurs more reactionary, even

Monarchist, hierarchical paternalists than their U.S.

republican, individualistic brothers in capitalism? Did French employers seek

to keep their employees out of unions by playing the “good father” to

obedient, deferential workers, while U.S. employers designed welfare capitalism

to encourage competitive individualism among their more skilled employees? I

suggest that Friedman read carefully the testimony of leading

“welfare capitalists” before the U.S. Commission on Industrial Relations

(1913-15) to see how they perceived their loyal workers as children who

preferred not to think or to act on their own. Or that he visit Binghamton,

New York, the home of one of the most notable practitioners of welfare

capitalism, the Endicott-Johnson Shoe Company (mistakenly called

Endicott-Peabody in the text, p. 197, and index) and view the statue of George

F. Johnson erected in George F. Johnson Recreation Park which features the

patron patronizing two adorable children, or the two arches erected by local

shoe workers to honor their patron. Finally, what of politics? Was the French

state and its republican majority more dependent on working-class votes and

more solicitous of working-class interests than its U.S. counterparts? Again I

find Friedman’s evidence problematic. One of French labor’s friends in power,

Georges Clemenceau, as described by Friedman, in 1906 sent troops to the Nord

and the Pas de Calais to break a coal miner’s strike and

repress riotous behavior by the strikers. Yet in Friedman’s words, Clemenceau

“restrained labor militancy…to preserve republican order, to protect the

Republic. But he never acted merely to bolster capitalist authority, never

acceded to the demands of

employers and the right that he crush organized labor or reject the right of

workers to form unions and to strike. Instead he continued to support labor

organization and to promote collective bargaining as the basis for social peace

and a new republican order (p. 202).” How did this differ from Theodore

Roosevelt’s logic four years earlier during the strike of anthracite coal

miners in northeastern Pennsylvania, when he threatened to send troops not to

repress labor but to seize the mines? Or from the lab or policies of Woodrow

Wilson on the eve of World War I or Herbert Hoover in the 1920s? Workers voted

in the U.S. as well as in France; their leaders also sought to practice

coalition politics; and some, if not all,

office-holders sought labor’s votes.

Friedman also might have done well to temper his criticism of Karl Marx and

“orthodox Marxism.” After all, Marx’s voluminous writings are like scripture,

subject to multiple interpretations and open to the principle that “seek and ye

shall find.” Moreover,

in his haste to make a case for historical contingency and human agency,

Friedman might have done well to recall Marx’s sage words from the

Eighteenth Brumaire, that man indeed makes his own history, but only

“under circumstances directly encountered, given and transmitted from the past.

The tradition of all the dead generations weighs like a nightmare on the brain

of the living.” In his neglect of that astute advice, Friedman misconstrues

Marx’s faith in human agency as well as his “third thesis on Feuerbach.” In

that thesis Marx did not write declaratively, as Friedman cites him (p. 297)

“that it is men who change circumstances and that it is essential to educate

the educator himself.” Rather, Marx asked in response to those who believed

that education could alter society, “Who educates the educator?”

Lest I appear too critical of Friedman’s effort to make us think more

critically about the past and also to remind us about paths not taken as a

result of human volition, let me close by suggesting that this is a book well

worth reading and pondering. Whether its author is right or wrong in many of

his claims, he does make readers consider carefully significant historical and

contemporary issues. And he is certainly right that labor cannot advance its

material and moral interests without non-working-class allies in state and

society, a truth perhaps more to the point today than ever in the past.

Melvyn Dubofsky is Distinguished Professor of History and Sociology at

Binghamton University, SUNY. This spring the University of Illinois Press will

publish a collection of his essays titled Hard Work: The Making of Labor

History. It will also publish a new abridged paperback version of his

history, We Shall Be All: A History of the Industrial Workers of

the World.

Subject(s):Labor and Employment History
Geographic Area(s):General, International, or Comparative
Time Period(s):20th Century: Pre WWII

NASA and the Space Industry

Author(s):Bromberg, Joan Lisa
Reviewer(s):Handberg, Roger

Published by EH.NET (February 2000)

Joan Lisa Bromberg. NASA and the Space Industry. New Series in NASA

History. Baltimore, MD: Johns Hopkins Press, 1999. X + 247 pp. Preface,

Tables, Figures, Notes, Bibliography, and Index. $38.00 (cloth), ISBN

0-8018-6050-4.

Reviewed for H-Business and EH.NET by Roger Handberg,

handberg@pegasus.cc.ucf.edu, Department of Political Science, University of

Central Florida.

Dealing with NASA’s Most Important But Least Valued Activities

Readers interested in space policy and especially the workings of NASA will be

very interested in this well conceptualized volume. NASA conducts a number of

activities in the

space realm spanning human space flight, space science, and commercial

activities. Most accounts of NASA’s work focus upon the first two to the

neglect of the third. Joan Bromberg provides an overview of the travails of

NASA in fostering the commercial development of outer space. Until Sputnik

flew in October 1957, no space industry by definition could exist. NASA,

through its programs and initiatives, started the development process, drawing

defense contractors in different directions than their early exclusive focus

upon the Department of Defense.

Her analysis focuses upon the broad contours of that effort, using case studies

as examples of NASA interactions with the commercial sector and the fruits of

those efforts.

NASA in her judgment has encountered great difficulties in remaining a

significant player for a diverse set of reasons. First, the commercial sector

as it matures moves in pursuit of its specific needs, ones that NASA does not

necessarily encourage or desire. Second, NASA, for reasons of its self-image

and agenda, has lost leverage because the commercial sector perceives with some

justification the agency as attempting to pursue its agenda of human

space flight using their fiscal resources. Third, NASA’s self image and

behavior

tracks that

of an R&D organization with an engrained disdain for merely applied activities.

In NASA’s value hierarchy,

commercialization ranks low always subject to the more critical needs of R&D.

This can be seen most clearly in the struggles over commercializing the

technologies that NASA has developed. The agency and its personnel have

essentially been uninterested or insufficiently interested to make

commercialization work systematically. This disinterest could be seen in the

recurring reorganizations that have occurred, effectively reshuffling the deck

chairs but not changing the agency’s culture. Fourth, the agency’s budget

continues to recede so that the contractors (the core constituency of the space

industry) seek other avenues especially the growing internationalized

commercial sector. This means the agency is losing its ability to influence

behavior.

The result, according to Bromberg, is an agency losing the ability to influence

its environment; critical players are too disaffected to accept NASA’s leader

ship. The agency is not ineffectual just perceived as too excessively self

interested to be trusted. Both Congress and the commercial sector hold this

distrust. For example, the agency is perceived as attempting to entice the

commercial sector to pay for

the space shuttle’s replacement, an option resisted by outsiders who are more

focused upon economic viability questions than flying humans into orbit.

Consequently,

the X-33 program becomes more fragile technologically since the focus from

NASA’s perspective is not economics but continued assured access to space.

This translates into pushing the envelope developmentally since operating costs

are not central to NASA’s concerns. Industrial views are ultimately and

intimately driven by cost factors since at

some point they must make a return to justify continuing. Bromberg in her

analysis reinforces the perception of a government agency struggling to remain

relevant in an era in which government is often thought irrelevant or

counterproductive. In the space

industry context, this struggle is sharpened by the recent boom in space-based

communications applications. Entrepreneurs now perceive NASA as hindering

progress rather than a technology enabler.

The larger insight provided by this volume is the role NAS A played in

formulating and directing the creation of a space industry. The agency along

with the Department of Defense was central to that effort but the agency by the

1970s was losing control, a situation reinforced by the Space Shuttle

Challenger accident in January 1986. The shuttle’s failure forced commercial

players to look elsewhere for space lift and, by extension,

opened the door for competing views of how the field should be organized and

operated. Since the Reagan administration, NASA has been

under heavy pressure to be economically relevant in its activities. The

difficulty was and is that there exists no clearly defined mechanism by which

development and later commercialization or privatization of space technologies

occurs.

NASA perceives such transfers as someone else’s problem or else an attack upon

the agency viability (remember in 1981, the rhetoric was abolishing the agency

by eliminating its programs) while the private sector sees the agency as a

hindrance and defender of the status quo

. Joan Bromberg describes and analyzes these and other problems succinctly in a

well-organized work.

The book is well researched, being supported by a NASA history grant, with

access to archival materials not normally available or cited. The author does

a fine job of bridging the problem of detail versus a larger sweep of events.

Her thrust is to stay with the larger picture since that is the story rather

than the obsessive focus upon individual events. The work amply illustrates the

interesting fact that the space age is moving toward the half-century mark,

meaning that some perspective is now being obtained.

That will be especially critical over the next decade as NASA struggles to

define itself in a world in which commercial space applications grow in

sophistication, number and usefulness. Readers will come away with a firm grasp

of the difficulties inherent in directing economic and technological change

given the unknowns that exist in predicting the future.

That future includes an expanding internationalization which further

undermines NASA’s efforts at directing the future of the American space

industry. When NASA began in 1958, the goal was American dominance over

commercial space, those days are now numbered, meaning the field is in flux

with multiple players pursuing separate agendas. NASA’s focus now becomes

carving out a niche that facilitates the opportunity to pursue the human

exploration and exploitation of outer space. That quest permeates all its

activities as this volume amply documents.

Subject(s):History of Technology, including Technological Change
Geographic Area(s):North America
Time Period(s):20th Century: WWII and post-WWII

Education and Economic Decline in Britain, 1870 to the 1990s

Author(s):Sanderson, Michael
Reviewer(s):Mitch, David

Published by EH.NET (January 2000)

Michael Sanderson, Education

and Economic Decline in Britain, 1870 to the 1990s. New York: Cambridge

University Press, 1999. viii + 124 pp. $39.95

(cloth), ISBN: 0-521-58170-2; $11.95 (paper), ISBN: 0-521-58842-1.

Reviewed for EH.NET by David Mitch, Department of Economics, University of

Maryland-Baltimore County.

The education of an economy’s workforce can influence its performance in

diverse ways ranging from the productivity of its farm and factory workers to

the ability of its scientists and engineers to develop and diffuse new

technologies to the entrepreneurial and managerial capabilities of its business

leadership. While the protean nature of education makes it an attractive

candidate for explaining economic performance it also makes it problematic for

the

historian to pin down its actual role in specific situations. The problems

involved can range from controlling for unobservable native ability factors at

the individual level to deciding how to enter education in an aggregate

production function at the macro level.

In the case of the British economy’s relative fall from its Victorian zenith

over the last century, deficiencies in the British educational system have

often been invoked as contributing factors. From Alfred Marshall to David

Landes, critics

of late Victorian economic performance have noted the failure of Britain to

develop a system of formal technical training on the same scale of Germany.

However, defenders of British education such as Sydney Pollard and Roderick

Floud have maintained that the British use of on-the-job training to develop

technical skills was rational given the alternatives.

Michael Sanderson undertakes in the volume under review to survey the debates

that have occurred among “those who would emphasize or deny education’s

contribution or culpability for Britain’s diminished economic state.” (p.2).

The

volume itself is one in the series New Studies in Social and Economic History

published by Cambridge and of which Sanderson himself is the general editor.

Sanderson is a prominent authority on the history of the relation between

education and the economy in Britain since the industrial revolution. He has

written important work on the role (or lack thereof) of literacy in textile

workforce of Lancashire during the industrial revolution, on the growing

involvement of British universities in industrially relevant scientific and

engineering work in the late nineteenth and early twentieth centuries, and on

the failure of Britain to develop extensive secondary level technical training

in the twentieth century.

Sanderson begins with a very brief introduction surveying in just over a page

the evidence for sustained British relative decline in performance over the

past century while acknowledging a parallel rise in absolute levels of

prosperity. At the outset, he explicitly avoids a survey of general

explanations of Britain’s decline, choosing instead to focus specifically on

what role education may have played in decline. He then turns in the first full

chapter of the book to the advent of universal mass schooling and literacy

that occurred in Britain between 1870 and 1914.

While this can generally be seen as a positive aspect of Britain’s educational

performance during this period, Sanderson notes signs of future problems in

subsequent educational development with the reluctance of educational

authorities to support either training in technical courses or higher grade

education more generally as follow-ups to the provision of universal primary

education during this period.

Of the remaining six chapters, four focus primarily on technical and

vocational education, and this primarily at the secondary level. One persistent

theme Sanderson notes in British educational policy, whether in the Victorian

and Edwardian periods covered in chapter 2, the inter-war period covered in

chapter 5, or the postwar period covered in chapter 6, is the reluctance both

of government educational policy makers to support the expansion of secondary

technical training and of employers to hire technical graduates.

Sanderson’s other central theme is the failure of the British educational

system to provide adequately for upward mobility of abler children of

working-class parents. In chapter 4 on Victorian and Edwardian elite education

and in Chapter 7 on higher and public school education in recent decades,

Sanderson argues that despite increasing efforts of universities and elite

schools to develop more relevance for the requirements of industry such as

engineering and business education, too little was done

in either period to recruit able people of humble origins. He argues that this

exclusion has entailed a great waste of talent insofar as mediocre individuals

of privileged background have been able to buy their way into the superior

segments of the British educational system.

Another theme sounded throughout is the excessive emphasis in British education

on self-evidently “useless” knowledge as “mind-trainingly liberal” at the

expense of practical technical and vocational training.

Thus, Sanderson clearly assigns culpability to the British educational system

over the past century for contributing to economic decline. He does so in an

articulate way while generally acknowledging and stating fairly and accurately

the arguments of those whom defend the economic performance of Britain’s

educational system.

However, in a few passages, treatment is not as even handed as it could have

been. In the first chapter on elementary education, Sanderson takes a negative,

dismissive view of the Revised Code of 1861, which based parliamentary grants

to elementary schools on student examination results.

In doing so, he makes no mention of respected, mainstream educational

historians such as John Hurt and David Sylvester who have argued that the

Revised Code made a positive contribution by sustaining ongoing increases in

parliamentary funding for education. In the penultimate sentence of the book,

he cites approvingly the statement of Simon Szreter that education is

“fundamental and essential for the promotion of economic

growth” (p.107),

giving no mention to those, such as the present reviewer, who have questioned

the underlying premise of indispensability in such statements

(see Mitch 1990). But these are exceptions to Sanderson’s generally balanced

coverage.

Some would probably question Sanderson’s assessment of the importance and

magnitude of education’s contribution to British economic decline. A good deal

of Sanderson’s case is based on the virtues he espouses of technical education

and implicitly of the importance

for on-going economic vitality of the manufacturing sector. He provides no

direct support for these views and makes no mention of opposing perspectives

such as that of Philip Foster in his important piece, “The Vocational School

Fallacy in Development Planning.” In making his case, Sanderson relies heavily

on Germany as a benchmark, noting its much more extensive provision of formal

technical and vocational training, its much greater absolute numbers of

scientists and engineers than Britain, and in the later twentieth century, its

higher scores on internationally comparable math tests. There is an element of

circularity to Sanderson’s argument here. He ultimately seeks to explain how

much of England’s loss of economic superiority to Germany can be explained by

educational deficiencies. Yet he ends up making the case for Britain’s

educational deficiencies based on the fact that its educational system was

different from and by some measures behind Germany’s. However,

as Sanderson at points acknowledges (and this returns to the issue of

indispensability noted above), an economy may face a wide continuum of

economically viable educational strategies and the most appropriate one may

vary according to a country’s particular circumstances. One can note here the

contrast between the emphasis on formal education during the late nineteenth

and early twentieth centuries in the U.S. educational system compared with

Germany’s emphasis on vocational training during a period when by many accounts

the U.S., as well as Germany, was overtaking Britain in economic performance

(see Hansen 1998).

In accounting for Britain’s failure to provide a sufficient total level of

education and under-investment in technical and vocational education,

Sanderson assigns part of the blame

to inadequate government support,

noting the failure of any coherent national policy to develop. Barnett

(1999) in his recent review of Sanderson’s book observes a similar feature.

However, one might argue that in regard to higher education, Britain has

suffered from too much centralization of authority with a resultant stifling of

entrepreneurial responses to emerging training opportunities. A more

pluralistic institutional structure in British higher education might have

produced more responsiveness to

economic demands, arguably a strength of U.S. higher education.

Sanderson reserves his harshest criticism for British employers both for their

apathy about developing a system of technical education and for failing to

provide job openings suitable for the training received by the relatively few

technical graduates who were produced. Critics will reply,

as Sanderson himself acknowledges, that complaints of deficiencies in working

training in the absence of employer demands for such training raise the

question of what Sanderson and other advocates of providing such training know

that

private employers at the time did not-the McCloskey “if you’re so smart” issue.

Indeed, in chapter 3, Sanderson notes that those who have defended Britain’s

provision of technical training, have pointed to the lack of demand by

employers for same. (pp. 32, 36). The problem Sanderson perceives is that

employers, because of their business culture,

were accustomed both to a system of on-the-job acquisition of skills via

apprenticeship or related methods and to an over-emphasis on “useless

mind-extending” liberal education with a resultant apathy over “useful”

technical qualifications.

But the claim that employers have been making misjudgments about the

educational qualifications

of their workers raises the question of whether employers making bad decisions

about educational qualifications are not likely to have been making further

misjudgments regarding other aspects of their businesses at least as critical.

In other words, the

root problem here would seem to be that of entrepreneurial failure or even a

more deeply rooted conservative business culture unable to adapt to changing

technological circumstances.

This brings one back to Sanderson’s stated intention at the outset of his book

to avoid any general consideration of sources of economic decline but to focus

only on the role of educational factors. A basic problem here is whether the

protean nature of education fundamentally precludes Sanderson’s understandable

desire to de limit the scope of his study. A wide variety of explanations of

economic decline can be seen as involving education in some respect. And it

would seem difficult to establish the role of education in decline without

specifying the more general explanations

of economic decline that are to be considered. Thus both static problems of

resource misallocation and more dynamic ones of developing undesirable

comparative advantage patterns in an increasingly integrated world economy

could be seen as stemming from under-investment in overall levels of education

and from investing in inappropriate types of education. And problems of

entrepreneurial failure have often been blamed on a complacency and stodginess

inculcated by English Public Schools and Oxbridge.

To be

fair, Sanderson touches on a number of the aspects involved in possible

general explanations of decline, whether they be comparative advantage patterns

or entrepreneurial drive. But at a number of points, his discussion could

benefit from more reference

to the relevant general explanation of decline involved. Indeed, his discussion

of the Matthews et al (1982) findings on the contribution of education to

British economic growth based on growth accounting analysis is misleading.

Sanderson interprets the positive contribution of education to growth from

1855 onwards that Matthews et al report as supporting defenders of British

education. As long as there was some expansion of British education, which no

one disputes, it has to be the case that the contribution of education in a

growth accounting analysis would be positive. But the issue for assessing

possible educational failure is how much higher growth rates could have been if

more suitable levels or direction of educational investments had been made, or

to use Sanderson’s phrase, if Britain had actually pursued “missed

opportunities” regarding education. These missed opportunities are not examined

in the Matthews et al analysis of British education.

During the 120 years covered in Sanderson’s survey, the role education played

in particular occupations and sectors of the economy probably changed

considerably. And further changes occurred in how young people initially

entered the labor market, in the role of the school in this transition, and in

how care ers developed. Yet the book only briefly hints at such changes,

noting, for example, that an increase in educational qualifications became

manifest during both the First and Second World Wars.

To a large extent, the issues raised here really lie in the literature that is

being surveyed and in the complexity of the topic that Sanderson has undertaken

to examine. Although he leaves much unanswered about the contribution of

education to British economic decline, Sanderson has still written a very

worthwhile

and helpful little volume. Britain’s educational system has been subject to

major changes at all levels during the 120 years this work considers. The

existing literature on educational developments in Britain during this period

is very fragmented. Previous works have tended to focus on only one specific

aspect of education and for at most a few decades. It is very useful indeed to

have these developments for the educational sector as a whole surveyed so

concisely and in so authoritative and lucid a fashion for the entire 120 years

under consideration.

Sanderson’s book provides an excellent overview of educational developments as

they relate to the economy in Britain between 1870 and the present.

David Mitch is the author of The Rise of Popular Literacy in Victorian

England (University of Pennsylvania Press, 1992).

References:

Barnett, Corelli. 1999. Review of Michael Sanderson, Education and Economic

Decline in Britain, 1870 to the 1990s in The Times Literary

Supplement August 6, 1999, pp.4-5.

Foster, Philip J. 1965. “The Vocational School Fallacy in Development Planning”

in C. Arnold Anderson and Mary Jean Bowman eds., Education and Economic

Development (Chicago: Aldine), pp.142-166.

Hansen, Hal E. 1998. “Caps and Gowns: Historical Reflections on the

Institutions that Shaped Learning for and Work in Germany and the United

States, 1800-1945.” Ph.D. Dissertation. University of Wisconsin.

Hurt, John S.1971. Education in Evolution. Church, State, Society and

Popular Education 1800-1870. London: Rupert Hart-Davis.

Matthews, R.C.O., C.H.Feinstein, and J.C. Odling-Smee. 1982. British

Economic Growth 1856-1973. Stanford: Stanford University Press.

Mitch, David. 1990. “Education and Economic Growth: Another Axiom of

Indispensability?” in Gabriel Tortella ed., Education and Economic

Development since the Industrial Revolution. Valencia: Generalitat

Valencia.

Sylvester, David. 1974. Robert Lowe and Education. London: Cambridge

University Press.

Subject(s):Education and Human Resource Development
Geographic Area(s):Europe
Time Period(s):General or Comparative