Published by EH.NET (April 2000)

Elizabeth Sanders, Roots of Reform: Farmers, Workers, and the American

State, 1877-1917. Chicago, University of Chicago Press, 1999. x + 532 pp.

$16.00 (paper), ISBN: 0-226-73477-3; $48.00 (cloth), 0-226-73476-5.

Reviewed for EH.NET by Gerald Friedman, Department of Economics, University of

Massachusetts,

Since the publication in 1963 of Gabriel Kolko’s The Triumph of

Conservatism, scholars have been highly suspicious of American

progressivism. Working from a ‘corporate liberalism’ perspective, Kolko,

James Weinstein, Martin Sklar, James Livingston, and others have interpreted

Progressive Era reforms, such as railroad regulation,

anti-trust, the Federal Reserve system, and workers’ compensation, as products

of nefarious capitalist campaigns. In this story, the new, giant corporations

used ‘reform’ programs to control markets, reduce competition,

and replace worker militancy with complacency. This puts studies of the early

American welfare state in sharp contrast with comparable studies for Canada

and Europe. There, a social democratic coalition linking militant labor with

agrarian radicals is credited with pushing state programs regulating labor and

product markets over the objections of capitalists.

Such grass-roots radical

groups disappear from corporate liberal studies of the American Progressive

Era, replaced by ingenious and scheming corporate capitalists. Early

welfare-state programs in Canada and Europe, are signs of the growth in power

of a nascent working class. In

the United States, by contrast, they are viewed as signs of the emergence of a

modern ruling capitalist class.

It may be that the welfare state began to look more attractive to American

scholars after it began to be dismantled. Or perhaps its undoing in

an era of weak unions and triumphant corporate capitalism encouraged scholars

to reexamine labor and capital’s role in the creation of the welfare state.

Discounting the impact of corporate capitalists, Theda Skocpol, for example,

uses state-centered and

maternalist models to attribute early welfare-state initiatives in the United

States to a coalition uniting women’s groups with professional reformers.

Others have applied society-centered and social-democratic models to the United

States,

including political scientist Richard Valelly, and labor historians Julie

Greene and Richard Schneirov. They have shown the extent of political action by

Progressive Era labor and radical farmers, and the impact of their militancy on

both the national and local politics

.

Enter Elizabeth Sanders. Rejecting corporate liberalism, she argues that

Progressive-era reforms were championed by a reform coalition uniting organized

labor, middle-class reformers, and radical farmers. More, Sanders rejects both

the state-centered approach associated with Skocpol and labor historians’

social-democratic approach to argue that the real driving force behind the

early welfare state in the United States came from the country side, from

politically mobilized farmers in the South and West.

Dismissing progressive intellectuals as too isolated and organized labor as

too weak and disorganized, Sanders argues “that agrarian movements constituted

the most important political force driving the development of the American

national state in the first half century before World War I. And by shaping

the form of early regulatory legislation and establishing the centrality of the

farmer-labor alliance to progressive reform and the Democratic Party,

the agrarian influence was felt for years thereafter”

(p. 1).

Sanders supports this strong statement by examining roll-call votes in Congress

on several major Progressive-Era laws. Using county-level data on manufacturing

value added per capita in 1919, she divides the United States into three

regional blocks. These include a “core” of highly industrialized localities,

mostly in the Northeast, a “periphery” in the South and West,

and “diverse” localities mostly in the Midwest and along the border of the

other two. Examining votes on such measures as extending ICC jurisdiction,

the Clayton Act, the Underwood Tariff, the income tax, the Federal Reserve Act,

and vocational training, she shows how congressmen from the periphery,

favored an ‘agrarian statist agenda’ of state regulation and intervention meant

to

redistribute wealth and power towards farmers, wage laborers, and residents of

the periphery. Their agenda was enacted when senators and representatives from

the periphery joined with allies from diverse localities, generally progressive

Republican insurgents, and a few core Democrats closely allied with labor

unions. By contrast, this reform agenda was vigorously opposed by core

Republicans associated with major corporations and industrial and financial

capital. In this way, Sanders argues, the alliance

of farmers and organized labor in the American Progressive Era resembled the

farmer-labor alliances behind social democratic reforms and the early welfare

state in Scandinavia and elsewhere described in the works of Gosta

Esping-Andersen, Leo Loubere and

Seymour Martin Lipset.

Sanders’s work is a major contribution to our understanding of politics in the

Progressive Era. By restoring ‘farmer’ to the ‘farmer-labor’ coalition,

she moves scholarship back to an earlier appreciation of the role of agrarians

in American radicalism, providing background, for example, to the role agrarian

radicals like Iowa’s Henry Wallace and Minnesota’s Floyd Olson played in

building the New Deal coalition of the 1930s. Showing how,

even before the New Deal, Democrats united

northern labor with peripheral agrarians to advance economic reforms, she

broadens our understanding of the role of the Democratic Party in American

politics. United by more than racism, the Democrats were a party of reform

committed to advancing an agrarian statist agenda.

Thus Sanders provides new insight into the regional and industrial sources of

political parties’ economic programs. But the parties themselves are a weak

link in her argument. Slavery, the Civil War, and segregation made regions

almost synonymous with political party in the United States. In the

Progressive Era, almost all southern congressmen were Democrats, but

Republicans controlled most congressional seats from the Northeast.

Sanders’s regional division between ‘core’ and ‘periphery,’ therefore,

confounds party and region, separating ‘core’ Republicans and ‘peripheral’

Democrats. Sanders supports her argument with two-way tables showing support

for various progressive reforms by representatives or senators by region. But

she rarely distinguishes between voting by party in each region and never

performs the statistical tests needed to determine the relative importance of

party and region in congressional voting. But it is clear in her tables that

there is a strong partisan component to congressional voting. In the final

vote on the Payne-Aldrich Tariff of 1909, for example,

80% of representatives from the core supported passage compared with only 33%

of those from the periphery (p. 225). However, the vote was even more partisan

than it was regional: 98% of Democrats opposed the tariff bill against 99% of

Republicans. Did peripheral representatives oppose the bill because they were

from the periphery or because they were Democrats? The same question can be

asked for other partisan measures. The Federal Reserve Act, for example, was

supported by 100% of Senate Democrats against 90% of Republicans (p. 252). A

measure in 1910 forbidding the use of Justice Department funds to prosecute

unions under the antitrust laws was supported by 98

% of House Democrats but was opposed by 74% of Republicans (p. 343).

Sanders chooses to emphasize the strong regional alignment in all of these

votes; she may as well have seen them as partisan votes driven by the

imperatives of political coalition building in an era of strong parties.

In addition, there may also be problems in Sanders’s regional classification by

manufacturing output per capita in 1919. Are all manufacturing regions the

same? Is it appropriate to place declining New England textile counties in the

same category as Pennsylvania steel towns and Washington State canning

communities? And is it appropriate to put Southern cotton regions dominated by

racism and sharecropping in the same peripheral category as western mining

communities, Minnesota dairy towns,

and wheat farmers on the Great Plains? Sanders could do a finer breakdown and

then provide statistical tests for using a higher level of aggregation.

This would be a great deal of work; but that may explain why God made graduate

students

.

Elizabeth Sanders is well aware of the partisanship and regional subtleties

behind the progressive era legislation she discusses. Beyond the statistical

analysis, she shows a firm understanding of the qualitative literature, the

congressional debates and the maneuvering among the leadership of Congress and

the Executive Branch. Roots of Reform is a work of the highest

scholarship, providing an insightful account of the origins of the American

welfare state. Whether one agrees or disagrees with her findings, Sanders’s

work marks a new beginning in the study of twentieth-century American politics.

Gerald Friedman is an Associate Professor of Economics at the University of

Massachusetts at Amherst. He is the author of State-Making and Labor

Movements

: France and the United States, 1876-1914 (Cornell University Press, 1999)

as well as numerous articles on the history of organized labor in the United

States and Europe.

Published by EH.NET (April 2000)

Byron W. Daynes, William D. Pederson and Michael P. Riccards, editors, The

New Deal and Public Policy. New York, St. Martin’s Press, 1998. 293 pp.

$49.95 (cloth), ISBN 0-312-17540-X.

Reviewed for EH.NET by Michael V. Namorato, Department of History,

University of Mississippi.

This volume grew out of the American Studies program at Louisiana State

University-Shreveport and its sponsorship of a presidential conference series

originally be ginning in 1983. In 1992, LSU-Shreveport sponsored a conference

on Abraham Lincoln which, in turn, led to a summer institute for teachers.

Three years later, in 1995, the university sponsored “Franklin D.

Roosevelt after Fifty Years.”

According to the editors, this 1995 conference had nearly one hundred scholar

participants and was “the largest ever held” on FDR, even winning awards from

the Louisiana Endowment for the Humanities (which apparently assisted in

funding it) and the Olympic Games Cultural Olympiad. The published result is

this volume on public policy.

The edited book is divided into four parts: agriculture; environment;

housing, welfare, and economics; and industry regulation. A brief

historiographical article concludes the work along with a

select bibliography and list of contributors. The authors are individuals who

have master’s degrees, or are doctoral students, or are academics in

disciplines such as political science, or are university administrators.

Evaluating this book is not an easy

task. In general, the work is disappointing. There are no notable New Deal

historians who contributed any articles, except for Roger Biles who has done

work on the New Deal on the local and regional level. In the articles

themselves, a good number of the

authors rely heavily on outdated secondary source materials. The articles offer

little or no originality whether it be in the problems studied, the approaches

used, or the conclusions drawn. And, at least one of the articles is simply a

jargon-filled social science tract of little value.

Fortunately, there are a few bright spots. June Hopkins, granddaughter of Harry

Hopkins, presents a substantive (although biased) study on Harry Hopkins’

attitude towards relief. Roger Biles offers a good piece on public housing,

demonstrating FDR’s dislike for such governmental interference.

Jim Codling writes a solid paper on the economic impact of Roosevelt’s programs

in Oktibbeha county, Mississippi and on Mississippi State University. And,

finally, Erik Carlson offers a good, yet tedious to read,

piece on the Civil Aeronautics Authority, showing how the federal government’s

role in this blossoming industry had particularly significant long-term

effects.

Nevertheless, other than these four articles, The New Deal and Public

Policy has little to offer. New Deal scholars or anyone interested in

Franklin D. Roosevelt and his era will not find anything in this work that adds

significantly to what is already known about this presidential era.

Michael V. Namorato is a

Professor of History at the University of Mississippi. He has published a

biography of Rexford Tugwell, edited the Tugwell diary, and edited a volume on

the New Deal and the South. He is also currently the editor of Essays in

Economic and Business History, the journal of the Economic and Business

Historical Society.

David S. Landes, The Unbound Prometheus: Technological Change and Industrial Development in Western Europe from 1750 to the Present. Cambridge: Cambridge University Press, 1969. ix + 566 pp.

Review Essay by Paul M. Hohenberg, Department of Economics, Rensselaer Polytechnic Institute. hohenp@rpi.edu

Economic History’s Greatest Story, Never Told Better

Let me put my cards on the table at the outset: this is the book I would like to have written. From its basic argument to its style, from the broad range of its scholarship to the tenacity with which Landes pursues the story in the details of production techniques, I admire almost everything in the book. Most of all, it is a model of argument, clear yet subtle, strong without being dogmatic. Little wonder The Unbound Prometheus has been in print continuously since 1969.

It is worth recalling the genesis of the book. The core of it appeared in 1965 as an extended (390 pages in total!) chapter in Volume VI of the Cambridge Economic History of Europe (CEHE), probably responsible by itself for making this a double volume. Yet even this earlier version was much delayed, first by the editors’ request that Landes bring the story at least as far as 1914, length be damned, and then by the bug-a-boo of collective volumes, that the slowest ship (chapter) in the convoy sets the pace for all. The 1969 book made the material accessible to students, among others (it appeared as a paperback from the start), and allowed Landes to bring the story forward to the then present. The Preface includes the author’s intention to revise the old material fully, notably devoting more attention to neglected countries, but that hope has not been fulfilled (yet!). Of course, Landes’s recent Wealth and Poverty of Nations (New York: W.W. Norton, 1998) will be judged by many readers to offer more than full compensation.

The 1969 book gave the reader a good deal beyond what was in the CEHE “chapter,” but not without some cost. The magnificent bibliography appended to the end of Volume VI is now scattered in the many footnotes and correspondingly harder to use. (These footnotes, by the way, are often masterful little essays and should by no means be glossed over.) On the other hand, the added Introduction is hardly dated at all in its discussion of how development has historically begun. One finds prefigured many of the themes and concepts that have made the name of other economic historians since then. Joel Mokyr’s macro-inventions and micro-innovations, Franklin Mendels’ proto-industrialization, Jan de Vries’ industrious revolution, E. A. Wrigley’s organic versus mineral economy, E. L. Jones’ European miracle – these come easily to mind. At the other end, Landes added almost 180 pages – and a Landes page is always full – on the twentieth century (ca.1914-1965), as well as a (revised) Conclusion that matches the Introduction in strength and thoughtfulness.

Given the original task Landes had taken on, the core chapters, those that appeared in 1965, are closely circumscribed in their coverage. Many aspects of development – the book’s preface mentions agriculture, demography, and transport – would be assigned to other authors. Here the concern was with industrialization as such and with technology in particular, though not to the exclusion of the finance, organization, and regulation of production. The wealth of detail and the tenacity with which Landes digs into the story, using statistics but always looking under and behind them, and unafraid of technical and scientific specifics, make the book sometimes heavy going, despite the superb clarity of the presentation. Similarly, although the writing is masterful, many students – and not just they – have found their command of language(s) stretched to and past the breaking point.

When one gets to the interwar and postwar chapters of the book, the emphasis changes. It is not quite clear why Landes undertook to cover broader issues of development, macroeconomic stability, and policy here. Perhaps a part of the reason is that the technological story became less compelling, indeed often depressing, especially in the interwar years. There were some high spots to be sure, such as radio and motor cars, but most industries saw only limited progress. Whereas productivity grew in the nineteenth century largely through the addition of more productive capacity to the existing stock, after the Great War overall efficiency was more often boosted when excess capacity forced the closing of the most obsolete plants. Even postwar recovery and growth up to the mid-60s mainly called for renewing the damaged or worn-out capital stock and catching up with American best practice. As we now know, the impact of microelectronics and other Third (?) Industrial Revolution technologies would take a long time to make themselves felt in the productivity statistics. It remains true, however, that extended discussions of financial instability in the interwar, and of aid, trade liberalization, and planning after 1945, do not quite fit in with the rest of the book, well done as they undoubtedly are.

For Landes, development as experienced in Europe owed its principal thrust to the development and adoption of new technology, a view that puts him pretty squarely with the New Growth Theorists and their emphasis on knowledge and human capital. Landes did not neglect natural resources, but put entrepreneurs at the heart of the analysis, whether looking at Britain’s initial industrialization, at emulation in continental countries, or at the later comparative performance of the various national economies. Rationality may well have prevailed everywhere, but some rational styles of enterprise, notably bets on new technology, worked better than others most of the time. Knowledge itself being portable and ultimately public, the critical factor was willingness on the part of business decision makers to devote resources to acquiring it and to accept inherently risky change. This thesis is pursued in industry after industry, with arguments and counterarguments pitilessly confronted with available evidence, itself always probed and cut down to size. But Landes also looks at the whole, at industrial structure. Thus, British retardation in the later nineteenth century involved both lagging performance in such industries as steel making and a reluctance to shift resources out of mature industries and into faster-growing sectors (which happened to be more knowledge-intensive).

Landes’s thesis and method, to whose subtlety I cannot do justice here, bring up the issue of the book’s influence, since a principal criterion of selection for the Project 2000 set of review essays is the work’s “significance.” Surely, no EH.NET subscriber can have gotten very far in the study of economic history without engaging with Prometheus. Yet the work appeared even as the cliometric revolution was gathering strength. Is it far-fetched to argue that a good deal of the New Economic History, at least that devoted to Europe, can be seen as a critique of Landes, both his thesis and his method, on the part of economists? [I do not suggest that Landes stood alone, of course; his book was part of a large conversation that included many he cited or who cited him or wrote concurrently.] To be specific, much of the New Economic History fell in with the economists’ tendency to set as their goal “explaining” whatever happened as the working of rational actors in well-behaved markets. It was thus impatient with social or non-market determinants of performance, to which Landes gave considerable weight.

For all the work and ingenuity lavished on the period since Landes published, I wonder how many scholars truly feel that our best understanding of European industrialization today owes more to the work of the “new” scholars than to Landes and his fellow “old” practitioners. Landes himself insisted (p. 535) that his hesitation in ascribing single causes or quantifying explanations placed him on the historians’ side of the disciplinary divide. Nonetheless, it seems to this reader, at least, that the economics in Prometheus generally holds up no less well for being discreet and non-technical. The argument, as I see it, has few if any gaping holes for the critic to shoot technical arrows through. On the other hand, thirty years of hindsight allow us to ask how well Landes’s technical emphases have held up. (Let me stress that he himself did not extrapolate from the past record to forecasts or predictions.) He did not, apparently, fully sense the coming crisis in the old heavy industries, based on coal, and thus in the regions where they flourished. By the same token, there is scarcely an inkling of the new industrial landscape of Europe, including the revival and renewal of some pre- and proto-industrial regions overshadowed in the great paleotechnic wave.

The teacher of “modern” European economic history can choose whether or not to assign students The Unbound Prometheus as a text. There are both newer treatments and easier books to read. Also, many important topics are barely touched on or omitted entirely. Perhaps the best argument for not choosing Landes is that one can then take parts of it, for example from the Introduction and Conclusion, and use them to give smashingly clever lectures without the students’ realizing that their instructor is just an inspired borrower.

(Paul Hohenberg is Professor of Economics Emeritus and currently Acting Chair of the Department of Economics at Rensselaer Polytechnic Institute. He has served as editor of the Journal of Economic History and is the author, inter alia, of A Primer in the Economic History of Europe, obscurely in print since 1968. He chairs the Project 2000 committee responsible for soliciting, selecting, and assigning for review books on the list of “Significant Works in Twentieth-Century Economic History.” He thanks his colleagues and particularly Robert Whaples for their efforts.)

Published by EH.NET (March 2000)

Melvin W. Reder, Economics: The Culture of a Controversial Science

.

Chicago: University of Chicago Press, 1999. xii + 384 pp., $35.00 (cloth),

ISBN: 0-226-70609-5.

Reviewed for EH.Net by Ross B. Emmett, Department of Economics, Augustana

University College, Canada.

In the 1980s, it became common among management types to speak of

“corporate culture” and its importance in understanding the work of an

organization. Business analysts began to examine the institutional framework

and practices of an organization in order to understand the way its

underlying values were carried out. While “the bottom line” obviously remained

important, the corporate culture gurus showed that every organization pursues

profitability through different practices and institutional structures.

“Successful” cultures were

those which were able to create institutional structures which brought the

practices of the organization’s members in line with the organization’s overall

goals,

including profitability.

Melvin Reder has applied the same insight to the discipline of economics in

this engaging book. For the scientist, “predictive accuracy” could serve as a

proxy for the bottom line. Traditionally, the potential for prediction and

control was the hallmark of a “true” science, and economics was either praised

or vilified for its ability/failure to live up to that potential. Reder shows

that the economics discipline, as an organization, has a set of

institutionalized structures that shape the practices of its members. While

these structures are possibly intended to assist the predictive accuracy of

outcomes, they also create a “culture” in which adherence to a paradigm or the

pursuit of status may be more important than prediction and control. Near the

end of the book, Reder addresses the question of economics’

“success.” If its culture includes structures that impede prediction and

control, what good is it to society? The tone of much of the book is carried in

his answer, which is a paraphrase of Bob Solow: “I know the wheel is crooked,

but economics is still the best game

in town” (p. 362).

The notion of “corporate culture” had another important role in the management

literature: it suggested that the student of organizational behavior needed to

act like the student of culture. The management specialist, in other words,

needed to become an ethnographer. To understand the success of an organization,

one needed to get “inside” it, to see how it functioned by its own rules and

standards, rather than judge it solely by external criteria (even

profitability). Here, too, Reder

follows the organizational behaviorist. Part I explores the notion of culture

in science, and several of the chapters in other parts of the book provide an

inside guide to the practices of economists. Those who operate within the

structures and practices

of academia will find Reder’s exploration familiar: editorial prescriptions,

the quest for status among the elite of a profession, the role of prizes and

honors, and the requirements of tenure and promotion. In fact, Reder’s analysis

of the culture of economics sounds suspiciously like the culture of American

universities: a fact he recognizes near the beginning of the book, but focuses

little attention on

(we will return to this in a moment).

The use of the term “controversial” in the sub-title of the

book reveals another of Reder’s themes. Some would argue, he claims, that the

institutional structures and practices of economics render it unscientific.

In Reder’s view, they should instead simply remind us of the limitations of

economic science (Reder’s

argument here is very similar to that developed by one of his predecessors at

the University of Chicago, Frank Knight). The notion that economics’ scientific

reach is limited makes its claim to be a science controversial, giving Reder

his title. But Reder’s argument about the scientific status of economics seems

to falter here. One could say that the focus on organizational culture was

intended to remind us that organizations are artifices, and that looking at the

culture of economics reminds us that it,

too, is a human creation. But “science” is not supposed to be a human

creation. Instead, it is created by adherence to a particular method, or by

observation of reality (in other words, science’s creator —

or at least its judge — lies outside human artifice).

The tension between his emphasis on economics as a form of human activity and

the claim that economics is still a science permeates Reder’s book.

Recognizing this tension helps to explain a number of unusual features to the

book. For example, the

majority of the book (chapters 3 to 10) is an account of the scientific

paradigms of economics (yes, Kuhn plays a prominent role in the book) for

non-economists. And there is the obligatory chapter on the relation of the

dominant scientific paradigm (Rat ional Allocation Paradigm – RAP for short –

or what is commonly called neoclassical economics) to the ideology of laissez

faire. Investigation of the “culture” of economics is surprisingly slim

compared to the amount of space devoted to exposition of the

scientific side of economics. As already indicated, most of the discussion of

the culture of the economics disciplines depends upon the reader’s prior

appreciation for American academic life. There is no ethnographic examination

of economists at work,

no

attempt to explain the human drama of RAP’s rise to dominance, and only a

glance at the roles of graduate education, foundation funding and non-North

American economists in the discipline.

In other words, Reder’s book is a long way from a “science studies”

approach to economics, and despite his use of “culture,” is still rooted in the

philosophy of science approaches common to the 1970s and 1980s.

Nevertheless, in a discipline that still pursues the mantle of Science,

Reder has provided an account that may help readers admit that economic

science is fundamentally a human activity.

Ross B. Emmett is editor of The Selected Essays of Frank H. Knight (two

volumes), recently published by the University of Chicago Press.

Published by EH.NET (March 2000)

Salamon, Lester M., Helmut K. Anheier, Regina List, Stefan Toepler, S.

Wojciech Sokolowski and Associates. Global Civil Society: Dimensions of the

Nonprofit Sector. Baltimore, MD: Johns Hopkins Comparative Nonprofit Sector

Project, 1999. Price (paper) $34.95. ISBN 1-886333-42-4.

Reviewed for H-Business and EH.NET by Milton Goldin

National Coalition of Independent Scholars (NCIS)

The Global Associational Revolution

“…a veritable ‘global associational revolution’ appears to be underway, a

massive upsurge of organized private, voluntary activity in literally every

corner of the world. Prompted in part by growing doubts about the capability of

the state to cope on its own with the social welfare,

developmental, and environmental problems that face nations today, this growth

of civil society organizations has been stimulated as well by the

communications revolution….” (p. 4)

If these statements appear to be exaggerations–after all, how often do you

think of nonprofits in connection with revolutions?–brace yourself before

reading this book. Dr. Salamon and his co-authors will positively jolt you with

their conclusions based on data from 22 nations including Israel,

Japan, the United States, five countries in Eastern Europe, and five countries

in Latin America. All data relate to 1995.

Consider the following:

– “Even excluding religious congregations, the nonprofit sector…is a $1.1

trillion industry that employs close to 19 million full-time equivalent paid

workers. Nonprofit expenditures in these [22] countries…average 4.6 percent

of the gross domestic product, and nonprofit employment is nearly 5 percent of

all nonagricultural employment,” (p. 8)

– “… if the nonprofit sector in these countries were a separate national

economy, it would be the eighth largest economy in the world, ahead of Brazil,

Russia, Canada, and Spain.” (p. 9)

– “Nonprofit employment in the eight countries for which time-series data were

available grew by an average of 24 percent, or more than 4 percent a year,

between 1990 and 1995

. By comparison, overall employment in these same countries grew during this

same period by a considerably slower 8 percent, or less than 2 percent a year,”

(p. 29)

– “…the growth in nonprofit employment evident in these figures has been made

possible

not chiefly by a surge in private philanthropy or public-sector support, but by

a substantial increase in fee income,” (p. 31)

– “…the relative size of the nonprofit sector varies greatly among countries,

from a high of 12.6 percent of total nonagricultural employment in the

Netherlands to a low of less than 1 percent of total employment in Mexico. The

overall 22-country average, however, was close to 5 percent.

This means that the U.S., at 7.8 percent without religious worship, lies

substantially above the global average. However, it falls below three Western

European countries the Netherlands (12.6 percent), Ireland (11.5 percent), and

Belgium (10.5 percent), as well as Israel (9.2 percent). (pp.

265-266)

Despite the awesome data, Salamon writes in

his Preface that we are nowhere near having enough information to fully grasp

what is happening in America or elsewhere vis-a-vis nonprofits. For those of us

who closely follow the philanthropic literature, this is surely no

exaggeration: The IRS isn’t even certain how many private foundations or

nonprofits exist. Nor is lack of data the extent of the problem. Salamon and

his associates at the Johns Hopkins Comparative Nonprofit Sector Project which

manages the research rightly seek in the long term not only to describe the

“basic scale,

structure, and revenue bases” of nonprofits around the world but hope, in later

volumes, to account “for the differences that exist” between nonprofits in

various countries, “the factors [that] seem to encourage or retard

their development,” and, finally (and perhaps most important of all), to

answer the questions, “what difference…these entities seem to make? What are

their special contributions?” (p. xvii)

The more philosophical among us might have preferred that Salamon and his

associates begin with a volume responding to the questions about economic

benefits that justify nonprofits and what expectations we should entertain for

their future. The purpose would be not only to provide intellectual

satisfaction but because of the gigantic transfer of wealth currently

underway, in America, from the World War II generation and baby boomers to

foundations and other tax shelters.

But to return to the present volume, someone somewhere once said there are no

specialists, only vested interests. When Salamon writes, “Traditionally,

the United States has been considered the seedbed of nonprofit activity,”

and then proceeds to write that Alexis de Tocqueville, “a keen 19th century

observer of American institutional life, aptly considered voluntary

associations a uniquely democratic response to solving social problems. . .”

(p. 261), you have to wonder exactly which vested interests de Tocqueville

thought were being served. But had de Tocqueville attempted to address this, he

would have come across immediate, knotty problems, including how,

exactly, to define “nonprofit” or “charity” or “philanthropy” in an American

context.

Definition is no easier 150 years after de Tocqueville’s visit. Annual salaries

of some nonprofit executives now exceed $1 million; this suggests that

nonprofit is not non- profit for them. Benjamin Franklin, the patron saint of

American philanthropy, thought charity (meaning welfare) should be the business

of churches and never of government. To him, philanthropy meant community

advancement, and community advancement must be the business of all citizens. To

put the matter bluntly, successful entrepreneurs could only do well if they did

some local good, but finding shelter for the homeless was not the kind of good

in which they should be involved.

As Global Civil Society

makes clear, one of the most remarkable aspects

of post-industrial philanthropy is the degree to which systems in various

countries throughout the world have come to resemble each other.

In Western Europe, “On average, three-fourths of all nonprofit employees…work

in education, health or social service organizations. This reflects the

historic role that the Catholic and Protestant churches have long played in the

education and social service field.” (p. 16). In America, “…almost half of

all nonprofit employment…is in the health field. This is more than twice as

high as the global average of 19.6%….” (p. 269) (On the other hand, it should

be pointed out, as Salamon does, that “one

out of every five nonprofit employees in the United States works in the

educational field. This is proportionally well below the all-country average

and also falls below the developed country average. The principal reason for

this is that the tradition of

separation of church and state in the U.S. has limited the growth of public

funding of religiously affiliated education institutions in the country….”)

(p. 270)

But in America, as in the other 22 countries during the past two decades,

financing nonprofits has had less and less to do with philanthropic giving and

more and more to do with fees paid for services by governments. In this

connection, Catholic Charities of America receives some 62 percent of its

annual $1.9 billion operating income from eight national agencies as well as

local and state governments, to provide home care for the elderly,

battered-women’s shelters, foster care, and other essential services.[1]

Global Civil Society was published at a time when the American economy

flourished

as no one had ever imagined it could. But not in Washington or in any other

world capital were those officials concerned with welfare policy over- curious

about what might happen if the global economy falters and a depression

threatens. Hopefully, a succeeding volume in this series will include a “What

If” chapter. We badly need thinking in this area.

[1] David Van Bema, “Can Charity Fill the Gap?” Time (December 4, 1995),

pp. 44-46, 53.

Published by EH.NET (March 2000)

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Frank Neal, Black ’47: Britain and the Famine Irish. London: Macmillan Press and New York: St Martin’s Press, 1998. xv + 292 pp. $69.95 (cloth), ISBN: 0-333-66595-3.

Reviewed for EH.NET by Ron Weir, Department of Economics, University of York.

During the 1980s there appeared to be developing a minor academic industry popularly known as ‘The Irish in ….’ It was concerned with describing the experiences of Irish immigrants in nineteenth century Britain and seemed destined to embrace every British city. In fact this research was never quite so all inclusive as its critics suggested and focussed pre dominantly on Dundee, Glasgow, Leeds, Liverpool, London, Manchester, Salford, and York. It could also be justified in terms of the quantitative dimensions of Irish immigration, particularly during the decade of the Great Famine. Between 1841 and 1851 the Irish-born percentage of the population of England and Wales rose from 1.8% to 2.9%, or from 291,000 to 520,000. In Scotland the proportionate increase was even greater, from 4.8% to 7.2%, or from 126,000 to 207,000. Nevertheless, the sheer volume of such single city studies did pose the question whether further research was likely to yield more than marginal gains to our existing knowledge of the Irish in Britain.

In Black ’47 Frank Neal, Professor of Economic and Social History at the University of Salford, proves conclusively that there is still a lot to be learned. That this is so, owes much to five features of his research. First, he adopts a very narrow time horizon, essentially the events of a single year, 1847. Secondly, he concentrates on a tightly focussed area, Lancashire, the county that exceeded all others in the number of Irish-born residents, and in particular on Liverpool, the main port of entry for famine refugees. Outside London, Liverpool had the greatest number of Irish-born within its boundaries and the greatest proportion of its population who were Irish-born. By comparing Liverpool with Glasgow, Manchester, and Salford, the four towns which accounted for 27% of all Irish-born in Britain in 1851, the sheer concentration of Irish immigration and the resulting problems are starkly revealed. Thirdly, he is aware that much previous research has been ‘going over old ground’ and responds by utilizing a wider range of primary source material, including county and church archives, newspaper reports, and personal testimony. Fourthly, he regards what might be described as the mechanisms of migration, that is the behavior of the shipping companies and the nature of the passage, as vital to understanding the condition of the refugees when they arrived in Britain. Finally, he has two clear objectives: to employ statistical evidence to establish ‘the parameters of sensible discussion’ and to evaluate the nature of individual experiences. The resulting analysis never loses sight of the individual yet offers a clear explanation of public policy and its consequences.

The book is also carefully structured. After an introductory review of recent work on the Famine, eight chapters take us through the nature of Irish settlement in urban Britain before the famine, the escape from Ireland, the arrival in Britain, the Irish fever (the typhus epidemic of 1847) – this is examined in separate chapters on Liverpool, and Glasgow and South Wales – survival and dispersal, removal, and the cost of famine immigration. Well before the influx of famine refugees, living conditions for the immigrant Irish were extraordinarily bad. At the bottom of the housing market with low incomes and intermittent employment, the Irish endured a wretched lifestyle and their presence was increasingly subject to unfavorable press comment. Yet at the same time their importance to the regional economy was recognized, not least because they were more mobile than English laborers subject to the laws of settlement. Whilst the volume of immigration swelled with the Famine, Neal argues convincingly that the ordinary workings of the labor market continued throughout 1845 to 1851. A perceptive analysis of the economics of shipping explains why. Human cargoes had always taken second place to goods and livestock, but as food exports from Ireland fell, competition between shipping companies intensified and fares were varied to suit whatever level the traffic would bear. The destitute found the fare either by selling their remaining assets or by assistance from ratepayers and landlords. In an unregulated market, terrible conditions were tolerated because ‘Irish paupers had no friends in high places’ and, unlike livestock, had no market value. On arrival the Irish had no legal claim to long term poor relief and were subject to the laws of removal. On the other hand, the poor law unions had a legal obligation to ensure that nobody died of starvation, malnutrition, or ‘the want of the necessaries of life.’ It is the resolution of this essential paradox which forms Neal’s core theme and he displays great skill in interpreting it at several different levels: ratepayers, Boards of Guardians, clergy, medical officials, and individual paupers. He also makes the first attempt to estimate the cost of famine immigration: for Liverpool in 1847 this amounted to #33,159 on a tax base of #929,645; for England and Wales as a whole perhaps #155,000 or 2% of all expenditure on the poor. Whilst coping with famine refugees did exert pressure on ratepayers, in what was a disastrous year for the economy, it was not a disaster for wealthier or business ratepayers, nor did the working class finance the payment of poor relief to the Irish. The extra rates burden amounted to 9s7d, roughly the equivalent of half a wee k’s wages for a laborer. However, as so often with refugees, it was perceptions rather than facts that counted; the belief that the Irish were diverting funds from Britain’s own poor damaged inter-communal relations.

Despite the harrowing nature of individual testimonies, Neal’s overall judgement of the performance of the poor law authorities during 1847 is that they fulfilled their responsibilities to the welfare of Irish famine refugees. They increased spending in proportion to the numbers seeking relief, they kept deaths from starvation to low levels (a maximum of 22 in Liverpool in 1847), they acted swiftly to deal with the much more serious problem of famine related diseases and, by doing so, averted a much greater crisis. Above all, they shouldered a burden whose ultimate duration was unknown – in Liverpool it was not till 1854 that Irish immigration dropped dramatically – and which ought properly to have been borne by national government rather than local ratepayers. Generous they were not, but the poor law was not generous to the British poor. Neal’s conclusion is that social class rather than ethnicity determined the response to the crisis.

Ron Weir, Provost of Derwent College, University of York, is on the editorial panel of the journal Irish Economic and Social History. His recent publications include The History of the Distillers Company 1877-1939 (Oxford University Press, 1995) and “The Scottish and Irish Unions: The Victorian View in Perspective,” in S. J. Connolly, editor, Kingdoms United? Great Britain and Ireland since 1500 (Dublin, Four Courts Press, 1999).

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Max Weber, The Protestant Ethic and the Spirit of Capitalism

Review Essay by Stanley Engerman, Departments of Economics and History, University of Rochester

Capitalism, Protestantism, and Economic Development:

Max Weber’s The Protestant Ethic and the Spirit of Capitalism after Almost One Century

Max Weber’s The Protestant Ethic and the Spirit of Capitalism has had an enduring impact on the field of economic history. Ironically, Weber’s contemporary, Joseph Schumpeter (1991, 220-229) argued that, althoughWeber’s academic career began with chairs in economics, “he was not really an economist at all,” but rather a sociologist. Schumpeter (1954, 21 and 819) distinguished between economic analysis, which “deals with the questions of how people behave at any time and what the economic effects are they produce by so behaving,” and economic sociology, which “deals with the question how they came to behave as they do.” This concern with the latter question is reflected in Weber’s still important work on the development of capitalism.

Weber’s concerns within economic history, particularly in The Protestant Ethic and the Spirit of Capitalism, fit well into the general interests of the turn-of-the-century historical schools in Germany and in England. These scholars were concerned with explaining the rise of modern economies, as well as with the explanation of the institutions and conditions that influenced the development and operation of economies and societies. Weber, unlike others in the German School, spent little time describing the role played by economic policies of governments in economic change. He focused, as did Werner Sombart, more on the study of modern capitalism, its natureand the causes of its rise. As the interest in this topic waned, the interest in Weber’s work was lessened, a pattern that persisted for several decades.

Weber’s major contribution to the study of economic history no doubt remains his classic study The Protestant Ethic and the Spirit of Capitalism, first published in 1904-1905, and republished with some revision in 1920, with the addition of extensive footnotes. Weber did not originate the thesis linking Protestantism and capitalism, as he himself pointed out. Jacob Viner (1978, 151-189), among others, has indicated thatthis idea of linking religion to the onset of capitalism had a long history in regard to Protestantism and to other religions prior to Weber’s writings. Earlier writers, including the English economist William Petty, made some of these links. What Weber did was to provide the specifics for the argument, with the details of the mechanism by which the belief in a”calling” and in worldly asceticism developed, leading to modern capitalism. Nevertheless, Weber argues that these behavioral changes alone could not bring about modern capitalism as it required the appropriate set of conditions in the economic sphere.

To clarify his contention on the uniqueness of the west, Weber undertook several major studies in the sociology of religions in different areas, particularly Asia, in order to understand why other religions did not generate the emergence of a modern capitalism. These comparative religious studies have yielded insights into the impact of these different religious systems in China, India, and elsewhere, and their impacts on behavior. To some scholars, however, it was the political nature and openness to new beliefs and innovations in those countries in northwest Europe that lead to developments in science, business, and political freedom that permitted economic and scientific progress to take place.

The issue of the relation of Protestantism and capitalism remains a historic perennial, frequently cited and necessarily discussed and evaluated in all works dealing with its general time period. Weber clearly had raised a central issue for historic studies. The general question and Weber’s approach have remained important to recent works by economic historians for several reasons. First, they have made central the question of the uniqueness of western civilization and the nature of its economicand social development. Whatever might have been the relative incomes of different parts of the world before 1700, it is clear that since then economic growth has been much more rapid in Western Europe and its overseas off shoots than in other parts of the world.

Modern economic growth has taken place with a quite different economic and social structure from that which had existed earlier. Economic growth occurred at roughly the same time, or soon after, these areas experienced the rise of Protestant religions. Some may hold this similarity to be of completely different occurrences, but for many such a non-relationship would seem difficult to understand and accept. Second, Weber has pointed to the significance of non-pecuniary (or what some would call non-economic) factors in influencing economic change, at least in conjunction with some appropriate set of conditions. For Weber, the key non-pecuniary factor wasbased on a particular religion and set of religious codes; to others it was a religious influence, but from a different religion, such as Catholicism or Judaism; while to other scholars it has been some different factorleading to behavior changes, such as rationalism, individualism, or the development of an economic ethic. Some, such as R. H. Tawney (1926), invertWeber’s argument, making the economic change a basic contribution to the religious changes. To still other scholars, the major factor has been the nature of a minority group of penalized outsiders in society. These scholars include William Petty (1899, 260-264), who looked at several different areas in the seventeenth century, Sombart (1969) and Thorstein Veblen (1958) who wrote on the Jews, and Alexander Gerschenkron (1970) who examined the Russian Old Believers. Each of these explanations has been advanced in the attempt to describe the primary cause of those changes in economic behavior that have lead to the distinction between the modern and pre-modern worlds.

In explaining the rise of capitalism in the Western World, Weber makes it clear that “the impulse to acquisition, pursuit of gain, of money, of the greatest possible amount of money, has in itself nothing to do with capitalism”; and “unlimited greed for gain is not in the least identical with capitalism, and is still less its spirit.” The desire for gain has been seen in “all sorts of conditions of men at all times and in all countries of the earth.” Rather what developed in the West was “the rational capitalistic organization of formally free labor,” which was based on “the separation of business from the household” and “rational book keeping,” although the basic factor was the presence of free labor. The ability to calculate, the development of technical capabilities, the creation of systems of law and administration – all have been important to Western culture but, according to Weber, their economic usefulness is “determined by the ability and disposition of men to adopt certain types of practical rational conduct,” unobstructed by spiritual and magical beliefs.

Since religion has always had a major impact upon conduct, the particular development of the West is attributed by Weber to “the influence of certain religious ideas on the development of the economic system,” which, in the case “of the spirit of modern economic life [is] the rational ethics of ascetic Protestantism.” That the impact of the actual teachings of the church was limited is suggested by Weber’s contention that his concerns were with “predominately unforeseen and even unwished-for results.” Hedenies that he believes that the spirit of capitalism could only have derived from the Reformation, and claims that he only wishes “to as certain whether and to what extent religious forces have taken part in the qualitative formation and of quantitative expansion of that spirit over the world.” Nevertheless, he often does suggest that is was Christianasceticism and Calvinism that provided the orientation that led to the development of such ideas as the “necessity of proving one’s faith in worldly activity,” “the preaching of hard, continuous bodily or mentallabor,” and “rational conduct on the basis of the idea of the calling” that were to provide “the fundamental elements of the spirit of modern capitalism.”The recent literature by economic historians, dealing with “How the West Grew Rich,” “The Rise of the Western World,” “The European Miracle,” “The Lever of Riches,” “The Unbound Prometheus,” and related titles, has begun, as did Weber, with the perceived uniqueness of the Western European economy. These studies, by such leading economic historians as Nathan Rosenberg ((1986) with L.E. Birdzell, Jr.), Douglass North (alone (1990),and with Robert Paul Thomas (1973)), Eric Jones (1981), Joel Mokyr (1990),and David Landes (1969, 1998), with the related writings by Fernand Braudel(1981, 1982 and 1984), Immanuel Wallerstein (1974, 1980 and 1989), John R.Hicks (1969), and Deepak Lal (1998), focus on somewhat different explanatory factors from Weber’s, but the problem to be analyzed isidentical. Posited answers include the role of political freedom, the development of property rights, changes in technology and organization of workers, the changing ratio of land to labor, the reactions to different environmental conditions, the emergence of markets, the rise of rational thought, the inflow of specie and various others. Some focus more on what might be regarded as economic factors, while others are more in theWeberian tradition, even if there is no unanimity concerning specific causal factors. Rather curious, however, is that several of these recent works by economic historians do not refer to Weber’s work on the Protestantethic, and in those that do not completely ignore him, his work is not seen as central to explaining the rise of the West, either because the role of religion is seen as more endogenous, or because other religions have been consistent with economic development during the growth of the West. Nevertheless, it is clear that as long as there is a belief that the economic performance of Western Europe has been unique, Weber has presentedan argument that must be confronted. Early in the second half of the twentieth century a non-western nation, Japan, as well as, somewhat later, several East Asian nations, came to experience some of the characteristics of modern economic and social change, with the development of a pattern of thrift and of a work ethic (even if cooperative not individualist), but with a different form of religion. This seems, however, to have done more to reawaken interest in Weber’s arguments than to lead to their dismissal.

Despite the frequency of the criticism, of the specific hypothesis in the past, the Weber thesis remains central to posing questions about the onset of modern economic growth and social and religious change in seventeenth-and eighteenth-century Western Europe. Its importance as a spiritual and ideological counter to a concentration on material conditions, as in the works of Karl Marx, provides an alternative approach to understanding economic change. In addition to the debates on economic growth there are subsidiary questions about related aspects of western development, which might be regarded as either substitutes for or complements to the Weber Thesis. These include debates on the rise of individualism, the causes ofthe development of a more deliberate and rational approach to economic and other behavior, and the link between the emergence of modern capitalism and modern science. Weber discussed the role of those climate and geographic factors that have interested such present-day economic historians as Eric Jones, arguing that the development of firstly cities, and then nation-states, left Europe, unlike Asia, with rational states and rational law. This set of developments reflected, according to Weber, initial differences in natural forces.

As with all “big theories,” there are several different types of criticisms that have been made, posing some rather different questions. First, it is often unclear what the proponent had really said, particularly crucial since we usually look only at the briefest summary of what was presented, without paying as much attention to the various qualifications and boundary conditions that the author was intelligent enough to have added. Second, there are these complications in defining precisely what are regarded ascauses, and what are the effects. In terms of the Weber Thesis, we need to be clearer both on what was to be considered the nature of religion and religious beliefs, and also what exactly we are trying to explain when we discuss capitalism. Third, is the manner by which the cause and effect can be linked, whether we believe they can be related by other than a pattern involving direct causation, and whether the same cause will yield a different effect or, alternatively, the same effects can be achieved with a broader range of causes. Variants of all these types of criticisms have been applied to The Protestant Ethic, and much more space than that available here would be needed to provide a complete examination of this debate.

Many of the disagreements about Weber’s linking of Protestantism and capitalism contain a distinct moral flavor. To those who find capitalism and the modern world morally distasteful, linking capitalism’s rise to religious beliefs places an unfortunate and unfair burden upon the religion, which can lead to a denial of any relationship between the two. Presumably those more sympathetic to modernism and capitalism would find a relationship more acceptable. Weber, himself, believed that capitalism generated important problems, and he did not believe that capitalist growth could continue indefinitely. The decline of capitalism was anticipated because of the development of rigid institutions and the rise of a bureaucratic state, posing a threat to political freedom as well as causing economic stagnation. Weber’s use of the image of the “iron cage” to describe modern society reflected his belief that certain cultural problems emerged because of capitalist development. And while Weber did not describe the same scenario for capitalism’s demise as that later presented by Schumpeter, it was similarly based upon the impact of increasing bureaucracy and rationalism on the belief system in society. Many of Weber’s works dealt with topics in the area of economic history, and even his more sociological writings were concerned with economic comparisons. Particularly rich in presenting his later views was his book devoted exclusively to the study of world economic history, GeneralEconomic History (1981), based on the transcripts of lectures in1919-1920, taken from students’ notes. A look at this work is useful inputting Weber’s economic history in a broad perspective.

General Economic History is an overall survey of economic developments,from ancient times to the modern world. It provides summary statements (insome cases, revisions) of key arguments found in earlier writings, useful descriptions of the pattern of western economic development, and insightful brief views of major economic changes that are sometimes detailed in other writings. Its major contributions include the claim that forms of what could be considered capitalism had long existed, leading to earlier accumulations of wealth, but it was only with the development of capital accounting and rational commerce, and with the need for rules and trust that arise when there are continued transactions among individuals, that the modern form of capitalism emerged in Western Europe. This development was unique to that particular geographic region. In describing this evolution Weber also provides discussions of the changing organization of the manor, the stages in the rise of industry, the impacts of slavery and other forms of labor organization upon the economy as well as the reasons for their transformation over time, and numerous other topics that are still covered, often in a quite similar manner, in today’s textbooks in European economic history.

Weber gave some attention to the importance of non-pecuniary tastes in actions within the economy. Following a strand of argument raised by a member of the Older German Historical School, Karl Knies, he argued that people did not necessarily profit-maximize at all times. Non-economic factors play a role in human behavior. Weber believed that it was certainly possible that there may be less extensive attempts at the maximum degree of maximization within a market economy, at least as a short term goal, than in other forms of social organization. Weber argued that “the notion that our rationalistic and capitalistic age is characterized by a stronger economic interest than other periods is childish,” and claims that while Cortez and Pizarro had strong economic interests, they certainly did not have “an idea of a rationalistic economic life.” Weber distinguished between economic interests, found in many past societies, and arationalistic, capitalistic channeling of those interests. To Weber, the market system was not an idealized means of solving social problems. He recognized the conflicts that existed within the market system, suggesting that price and market outcomes should be seen as the result of conflict, since people disagreed over the use of the economic surpluses that could exist. But to Weber the market, with its various difficulties, seemed to provide a reasonable way to resolve conflicts and to allocate resources with some limitations on destruction and loss of freedom.

While attention was given to the cultural problems due to capitalism, in Weber’s view the rise of capitalism was related to favorable changes in the distribution of economic resources within society. It was what Weber called the “democratization of luxuries” that was the key source of early market demand, rather than “Army, Luxury, or Court Demands.” None of these factors, important as they may have seemed at the time or to subsequent scholars (for example, Sombart), based on demand from a limited segment of the population, had led to prolonged economic growth anywhere. Prolonged growth, rather, was the result of growth of the mass market which arose with capitalism, and which lowered prices permitting the broad masses to imitate the consumption patterns of the rich. Weber argued that “first the prices fell relatively and then came capitalism,” the price declines being due to preceding shifts in technology and economic relations.

One of the major substantive legacies of Weber is his description of the characteristics of modern capitalism. Weber regarded capitalism as an evolving system, so that present-day capitalism has some features rather different from those at the onset of modern capitalism. He did not, however, regard commercial and capitalist activity as something new in the modern era, since such behavior had existed in most societies in earliertimes, as well as in other societies considered non-capitalist at the present time. Under modern capitalism, however, activities of a somewhat different pattern and nature occurred from those in the other forms of capitalism.

The principal characteristics of modern capitalism that Weber points to are the centrality of rationality and those measures that help to implementrational behavior. The emergence of a rationally organized formally free labor market to replace the various forms of labor institutions that had characterized earlier forms of capitalism, the development of rational law and administration in large firms and governments, the evolution of forms of rational bookkeeping and capital accounting, and the growth of bureaucracies in the public and private sectors to order the behavior of the larger-scale units in economic society – all these represent those factors developed out of Protestantism which permit continued capitalist accounting procedures to separate business and household capital in the interests of determining growth. Other accounting procedures of the modern capitalist economy include the use of interests of rational decisionmaking, and the increased number of business leaders whose leadership is based upon their personal charisma, not on either traditional or legal influences. Weber’s argument that charisma weakens the growth of bureaucracy resembles Schumpeter’s contention of the decline of the entrepreneurial function in modern capitalism, leading to a declining social appeal of capitalism. Recent studies in leadership of management, however, have focused upon so-called “change agents” and shapers of corporate culture, leading to attempts to determine what are the crucial characteristics of successful business leaders and what they have done to achieve their success.

Weber’s contribution to the study of economic history includes both methodological approaches and substantive conclusions. His general questions on the role of changing institutions and human behavior have again come into vogue, as has his interest in the law, legal rationality, and the process of historical development. Thus, in a number of ways, Weber reads very much like a present-day economic historian, a development that has taken place after a long period in which Weber was relatively ignored by economic historians. In part his loss of influence was due to a shift in questions, to those mainly dealing with only a relatively short, recent period in the history of the west, based, in the 1930’s, on a primary focuson the relatively short-run set of economic cycles, and, in the 1940’s, ona belief that with the right economic conditions all societies could achieve economic growth. As it became clear that the process of economic growth was rather more complex than believed in the mid-twentieth century, and that its understanding was based on happenings over a much longer timespan than was being examined, Weber’s analysis, with its broad chronological, spatial, and intellectual sweep, again became more central.

Bibliographical Note:

There have been several publications of The Protestant Ethic and The Spirit of Capitalism since the first English-language translation in 1930. All use the original translation by Talcott Parsons, differing only in their introductions. Among them are: – New York: Scribner, 1930, 1948, and 1958 (foreword by R. H. Tawney). – London: Allen & Unwin, 1976; London: Routledge, 1992 (introduction by Anthony Gidden)- Los Angeles: Roxbury Publishing Company, 1996 and 1998 (introduction by Randall Collins) and- Los Angeles: Roxbury Publishing Company, 2000 (introduction by Stephen Kalberg). A recent analysis of the work of Weber is in Stephen P. Turner, editor,Cambridge Companion to Weber (Cambridge: Cambridge University Press,2000). This includes my essay on “Max Weber as Economist and Economic Historian,” parts of which have been drawn upon here.

References:

Braudel, Fernand. 1981, 1982, and 1984. Civilization and Capitalism, 15th-18th Century. New York: Harper and Row (French edition published in 1979).

Gerschenkron, Alexander. 1970. Europe in the Russian Mirror: Four Lecturesin Economic History. Cambridge: Cambridge University Press.

Hicks, John R. 1969. A Theory of Economic History. New York: Oxford University Press.

Jones, Eric L. 1981. The European Miracle: Environments, Economies, and Geopolitics in the History of Europe and Asia. Cambridge: Cambridge University Press.

Lal, Deepak. 1998. Unintended Consequences: The Impact of Factor Endowments, Culture, and Politics on Long-Run Economic Performance.Cambridge, MA: MIT Press.

Landes, David S. 1969. The Unbound Prometheus: Technological Change and Industrial Development in Western Europe from 1750 to the Present.Cambridge: Cambridge University Press.

Landes, David S. 1998. The Wealth and Poverty of Nations: Why Some Are SoRich and Some So Poor. New York: W. W. Norton.

Mokyr, Joel. 1990. The Lever of Riches: Technological Creativity and Economic Progress. New York: Oxford University Press.

North, Douglass C. 1990. Institutions, Institutional Change and Economic Performance. Cambridge: Cambridge University Press.

North, Douglass C. and Robert Paul Thomas. 1973. The Rise of the Western World: A New Economic History. Cambridge: Cambridge University Press.

Petty, William. 1899. The Economic Writings of Sir William Petty. Cambridge: Cambridge University Press.

Rosenberg, Nathan and L. E. Birdzell, Jr. 1986. How the West Grew Rich: The Economic Transformation of the Industrial World. New York: Basic Books.

Sombart, Werner. 1969. The Jews and Modern Capitalism, New York: BurtFranklin (originally published 1913).

Schumpeter, Joseph A. 1954. History of Economic Analysis. New York:Oxford University Press.

Schumpeter, Joseph A. 1991. “Max Weber’s Work,” in Richard Swedberg,editor, Joseph A. Schumpeter: The Economics and Sociology of Capitalism.Princeton: Princeton University Press.

Tawney, R. H. 1926. Religion and the Rise of Capitalism. New York: Harcourt, Brace & World.

Veblen, Thorstein. 1958. “The Intellectual Pre-eminence of Jews in Modern Europe,” in Max Lerner, editor, The Portable Veblen. New York: Viking Press (originally published 1919).

Viner, Jacob. 1978. Religious Thought and Economic Society. Durham: Duke University Press.

Wallerstein, Immanuel. 1974, 1980, and 1989. The Modern World- System,New York: Academic Press.

Weber, Max. 1981. General Economic History. New Brunswick, NJ: Transaction Books (originally published in English in 1927).

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Published by EH.NET (February 2000)

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Deutsche Bundesbank, editor, Fifty Years of the Deutsche Mark. Central Bank and the Currency in Germany since 1948, translated. New York: Oxford University Press, 1999. xxv i + 836 pp. $90.00 (hardback), ISBN: 0-19-829254-6.

Reviewed for EH.NET by Albrecht Ritschl, Department of Economics, University of Zurich, Switzerland. .

This volume was written in commemoration of West Germany4s post-war currency reform. In June, 1948, the Allied military administration in the Western occupation zones of Germany distributed a new currency which had been printed in the U.S. and brought into Germany in a secret operation of the U.S. Army. The bank notes carried no signatures and made no mention of an issuing authority. But they did carry the name of Deutsche Mark. Seldom has a peacetime operation of the Army created a more successful brand name, but that is not the theme of the book.

Actually, this is not the first festschrift issued by the Bundesbank. Two previous ones appeared in 1976 and 1988. The former intended to commemorate the establishment of the Reichsbank in 1876 and consisted of a collection of very carefully edited essays plus a statistical companion volume [1,2]. The 1988 volume, celebrating forty years – why just forty? – of the deutschmark, was an updated data collection for post-war Germany [3].

So, this is the third such festschrift, and in fact it is an obituary. It comes at a time when the deutschmark has already disappeared from official quotations and is scheduled to be withdrawn from circulation in the near future. As the text inside the book jacket asserts, the purpose of the book is an eminently political one: “On June 20th, 1998, the Deutsche Mark was 50 years old: this book will ensure that its legacy lives on.” We have some doubts that it will be sufficient to do that, but the volume is actually a collection of interesting and sometimes very good essays.

Harold James leads with a historical retrospective on the Bundesbank4s predecessor from 1876 to 1945, the Reichsbank, commenting also on the role of notorious Dr. Schacht in financing Hitler4s preparation for war. James argues quite convincingly that except for the interlude of the inter-war gold standard, the general theme of German central banking was a religious belief in a radical version of the banking doctrine. Engineering the credit expansion of the early 1930s was thus not just an invention of Schacht but followed a firmly established intellectual tradition within the bank (of which, lest it be forgotten, the hyperinflation formed an integral part).

After all this, the saving grace of the new currency was that it was originally not German. After World War II, Germany remained under the military administration of the four Allied powers, and attempts to establish joint administrative bodies soon fell victim to the upcoming Cold War. Attempts by the U.S. in 1947 to overcome the deadlock and establish separate structures in the Western zones included preparations for currency reform, which was seen as the only viable way to cope with the monetary overhang created by the Nazi war debt. For this, a separate central bank (called “Bank deutscher Laender”) was created, an act which both manifested and deepened the political division of the country between East and West. Christoph Buchheim has a chapter on the institutional background of the currency reform of 1948, which provides a meticulous review of the scattered literature on the reorganization of central banking prior to that date. It also details the various technical aspects of the project and highlights the principal distributional conflict that underlay the reform process. It is notable that currency reform and a unified central bank preceded political reform in the late 1940s; the Federal Republic was established only a year after the deutschmark had been introduced.

Carl-Ludwig Holtfrerich reviews monetary policies during the Bretton Woods era. He identifies the target of German monetary policy in the 1950s to have consisted of traditional credit-expansion doctrines, which he argues clashed with the needs for monetary stabilization after the middle of the decade. This appears to be a minority view, though. Recent research [4] has argued that German monetary policies in the 1950s just reacted to increasing capital mobility and did so in a roughly consistent way. But clearly, if there were lessons to be learnt for what later became the Mundell-Fleming model, West Germany provided a case in point. Since the mid-1950s, the country experienced growing capital inflows, and whatever monetary sterilization measures were attempted proved to be counter-productive. Several contributors to the book mention also the failures of fiscal policy at the time. These were largely due to an inept attempt at public saving for a future German military contribution to the NATO. The funds were ultimately spent in the run-up for a general election, heating up the economy even further at a time when external stability would have called for budget cuts and tax increases. A nice institutional detail in this context is the foundation of the Bundesbank, which came as late as 1957. Much of the delay was caused by unsuccessful attempts of the government to get a bill approved that would have created a far less independent central bank.

Among the many other contributions in this book that cover everything from the juridical aspects of Bundesbank independence to the policies of monetary unification in 1 990, one that this reviewer liked in particular is a thoughtful essay by Juergen von Hagen on the Bundesbank after the collapse of Bretton Woods. Writing as a monetary economist who has worked on Bundesbank target functions, decision-making coalitions in the board of directors and the like, von Hagen sets out in this paper to find supporting evidence from the minutes of the board meetings of the 1970s. This is really an interesting experiment, and the result is actually a very nice piece in monetary history. Contrary to his original intention, von Hagen dismantles one myth after another, ranging from money-base targeting to whatever way of consistent decision making altogether. In two of the more impressive graphs of this richly documented book, he shows how in mid-1973, M1 growth collapsed from an annualized 15% to zero and how short-term interest rates exploded from 2% to 16% (pp. 406, 410). That is indeed the kind of evidence that Friedman and Schwartz would have liked to find for the Great Depression of the 1930s. As if this were not enough, the essay by Ernst Baltensperger on monetary policies from 1979 on has a chart showing another spectacular rise in interest rates (from 3% to 12%) during 1979-81 (p. 447). Any oil shock out there?

The picture that emerges of the Bundesbank in the critical 1970s is that of a battered institution, trying to recover from the Bretton Woods disaster and to overcome its internal divisions by creating a new public image of itself. It was only in this era that the Bundes bank established its reputation as a committed inflation fighter. In retrospect, it is noteworthy that large parts of Germany4s monetary history since around 1980 consisted in the Bundesbank4s attempts to punish finance ministers for their budget laxity by tightening its monetary stance. Given that German national debt has tripled or so since 1980, the ultimate success of these policies in the wake of the Euro amounts to closing the barn door after the horses have escaped, but that is another matter.

Actually, a notable part of the contributions to the volume come from monetary economists and academic policy advisors. As thus, they often reflect primarily their different views on present-day issues in German monetary policy. As the chapters were original ly contributed to a German edition directed to the domestic market, some of the material will be less interesting to the outside reader. Beginners will find large parts of the book to be excessive on institutional details, and more than one reader will be puzzled by the results of trying to translate those typical, lengthy clauses of written German style into halfway readable English (yes, these lines are also an example of that 🙂 ). But clearly, the volume is a must for any student of German monetary policies, and it will probably become a standard reference for all work related to the field.

References:

[1] Deutsche Bundesbank (ed.) (1976a), Waehrung und Wirtschaft in Deutschland 1876-1975, Frankfurt: Knapp.

[2] Deutsche Bundesbank (ed.) (1976b), Deutsches Geldund Bankwesen in Zahlen, Frankfurt: Knapp.

[3] Deutsche Bundesbank (ed.) (1988), 40 Jahre Deutsche Mark. Monetaere Statistiken 1948 bis 1987, Frankfurt: Knapp.

[4] Berger, Helge (1997), Konjunkturpolitik im Wirtschaftswunder. Handlu ngsspielraeume und Verhaltensmuster von Bundesbank und Regierung in den 1950er Jahren, Tuebingen: Mohr.

Albert Ritschl is author of numerous articles on German economic history including “Germany and the Political Economy of the Marshall Plan, 1947-52:A Re-revisionist View,” (with Helge Berger) in Barry Eichengreen, editor Europe’s Post-war Recovery. Studies in Monetary and Financial History, (Cambridge University Press, 1995); “An Exercise in Futility: East German Economic Growth and Decline, 1945-89 ,” in Nicholas Crafts and Gianni Toniolo, editors, Economic Growth in Europe since 1945, (Cambridge University Press, 1996) and “Reparation Transfers, the Borchardt Hypothesis and the Great Depression in Germany, 1929-32: A Guided Tour for Hard-Headed Keynesians,” European Review of Economic History; 2(1), April 1998.

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Published by EH.NET (February 2000)

Steven P. Reti, Silver and Gold: The Political Economy of International

Monetary Conferences, 1867-1892. Westport, CT: Greenwood Press, 1998. x +

214 pp. $59.95 (cloth), ISBN: 0-313-30409-2.

Reviewed for EH. NET by

John H. Wood, Department of Economics, Wake Forest University.

Two important sets of economic and political data lay behind and condition the

meetings described in this book: after falling from 15.93 to 15.19 between 1843

and 1859, the market ratio of silver to gold rose to 15.57 in 1867, 23.72 in

1892, and 39.15 in 1902 (Table. 1); and the western world discontinued the

coinage of silver and followed Britain onto the gold standard.

The book is an interesting account of the international monetary conferences

of 1867, 1878, 1881, and 1892, and is recommended to anyone who wishes to

become informed of diplomatic efforts to resist the dominant market and

political forces reflected in the above data. The first conference, of

representatives of twenty leading commercial nations,

convened in Paris at the invitation of Emperor Louis Napoleon and agreed to

recommend to their governments formal negotiations toward a common gold

coinage. The Conference of 1867 “marked the pinnacle of success

for international coinage advocates” (p. 45), but its recommendations received

little support at home. Governments were reluctant to be seen to tinker with

the contents of their coins, and significant bimetallic sentiment of the silver

interests undermined support for a universal gold coinage.

The other

three conferences were convened at the invitation of United States government

under pressure from domestic silver interests to arrest the decline

of silver, primarily by adopting a bimetallic standard with a fixed

silver/gold ratio that greatly overvalued the former. The Bland-Allison Act of

1878 directed the Treasury to buy and coin $2 million to $4 million of silver

per month and the President to invite such “nations as he may deem advisable to

join the

United States in a conference to adopt a common ratio between gold and silver

for the purposes of establishing,

internationally, the use of bimetallic money and securing fixity of relative

value between those metals.” None of the conferences rallied material support

for this goal, although there was some brief European sentiment in that

direction after the large gold flow to the United States in 1879-80.

The story is well told, but the author’s efforts to increase its importance by

tying it to various theories of how gold came to dominate world finance are

unconvincing. His purpose is to correct the impressions that the gold standard

regime arose “spontaneously as states responded to silver depreciation in an

uncoordinated but similar fashion” and was ”

a case of international cooperation arising without international negotiation”

(p.

33). He “examines spontaneous [market?] and [British] hegemonic explanations 

and argues that a coordination-game explanation of the classical gold standard

possesses greater validity.” Cooperation in the latter setting “is by no means

assured” because the parties may “disagree about the appropriate conventions,

or focal point, to coordinate policies.

The challenge of developing and maintaining a focal point is the central

concern of this book. The monetary conferences under investigation were

concerned about the appropriate point to fix exchange rates” (p. 5).

An alternative approach seems both simpler and more fruitful. Ask the following

questions: Did any of the last three conferences have a chance?

What would have become of the international monetary system if the American

silver interests had gotten their way? The first must be answered in the

negative because important economic and political interests saw chaos in the

second.

Agents desire predictability in the settlement of contracts

and are averse to

accepting payment in a depreciating currency. The aversion was not limited to

British lenders. Those wanting credit needed to promise repayment in sound

money. That

is as true today as in the nineteenth century.

The supporters of so-called “bimetallism” were not interested in a workable

bimetallic system with a market-responsive ratio (as in Arthur J. Rolnick and

Warren E. Weber, “Gresham’s Law or Gresham’s Fallacy?

” Journal of Political Economy, Feb. 1986). They wanted support for

silver, a redistribution of wealth to silver producers and to borrowers wanting

to repay gold debts in a depreciating currency. A freely convertible bimetallic

system with a market-violating ratio is bound to fail (as the United States

was reminded in 1893, when President Cleveland called Congress to repeal the

Sherman Silver Purchase Act of 1890). Furthermore,

complaints of a shortage of money were senseless because more money generate

sits own demand through higher prices. The Asian crisis of a hundred years

later was a reminder that there may even be a shortage of money in a fiat

paper system when borrowers have promised more than they can deliver.

All this was known in contemporary

private and government circles. The impression of a system formed by market

forces without the benefit of conferences called to mollify silver interests

might be the best one after all.

John H. Wood is author (with Jac Heckelman) of “Federal Reserve Membership and

the Banking Act of 1935: An Application to the Theory of Clubs,” in Jac

Heckelman, John Moorhouse and Robert Whaples, editors, Public Choice

Interpretations of American Economic History (Kluwer, 1999). His

forthcoming book is titled “A Company of Merchants:” A History of the

Theories and Ideas That Have Shaped Monetary Policy.

Published by EH.NET (February 2000)

John Komlos and Jvrg Baten, editors, The Biological Standard of Living in

Comparative Perspective. Stuttgart: Franz Steiner Verlag, 1998. 528 pp.,

ISBN 3-515-07220-9.

Reviewed for EH.NET by John E. Murray, Department of Economics, University of

Toledo.

This book is a collection of conference proceedings, or rather pre-conference

proceedings, since it gathers together papers that would have been presented at

an A session of the ill-fated Seville/Madrid IEHA meetings in 1998. The

session (which was organized by John Komlos and Sebastian Coll) and book are

devoted to reporting a variety of studies in anthropometric history, that is,

the analysis primarily of human height as measured in large samples, but also

weight in those rare cases when it is available. The essays number twenty-eight

in total, followed by a brief summary by the editors who were also the session

organizers.

Geographical coverage is positively sprawling, with notable papers on

heights in China (by Stephen Morgan), Argentina (by Ricardo Salvatore and Jvrg

Baten) and Korea (by Insong Gill). Individual studies appear on nearly every

European country. Height and body mass index (weight adjusted for height) in

Australia are examined by Stephen Nicholas, Robert Gregory, and Sue Kimberley;

and there are no fewer than five essays on heights of Federal soldiers in the

American Civil War. Two papers combine height data from several different

countries to synthesize a broader yet coherent story, Henk-Jan Brinkman and

J.W. Drukker on developing countries today and Sebastian Coll on four European

nations of the nineteenth and twentieth centuries.

Modes of analysis are catholic. Most papers are by economic historians who

generally employ tried and true techniques of statistical regression analysis

on data recovered from written manuscripts. They dutifully report the results

of regressions with those tiny R-squareds that vex the non-cognoscenti. But not

only that: nearly every paper in this

style presents data in pictorial format, for example, distribution frequencies

of heights, growth by age curves, and time trends in final adult height. One

need not be able to read a table of regression results to learn plenty about

the state of the anthropometric art from this volume. In addition,

two essays present findings of physical anthropologists. Jesper Boldsen and Jes

Sxgaard estimate Danish heights from bones that date from as far back as 1100

A.D. Barry Bogin and Ryan Keep consider bones that

are some eight millennia old in Mesoamerica. In short, the range of

contributions reflects how international and interdisciplinary the

anthropometric history research project has become.

In general, as might be expected, the authors are optimistic that the study of

height and other anthropometric data can illuminate issues of human welfare in

the past. To the editors’ credit, they include two papers that might be

described as anthropo-skeptical. One, by Robert McGuire and Philip Coelho,

urges the disease

factor in the height = gross nutrition – disease

– workload equation be given more emphasis. The other by Sally Horrocks and

David Smith is a postmodern take on the “social processes of science” which

despite the now-standard use of “privilege” as a verb

offers constructive suggestions for linking more data-driven anthropometric

history with the institutional histories of the data generating sources.

As is common among volumes of conference proceedings, the virtues of the genre

are its vices. The organizers have edited the volume lightly, leading to an

odd combination of intense concentration on a few issues and a collection of

other papers that almost seem to have walked in from a different conference.

For example, in two separate and most intriguing papers Michael Haines (in

one) and Lee Craig and Thomas Weiss (in the other) examine the relationship

between local agricultural output and stature among American Civil War

soldiers. The results do not exactly coincide as Craig and Weiss find a much

stronger relationship than does Haines. The interested reader would like to

see these papers in dialog. At the same time, the geographic and chronological

coverage is mind-boggling.

It is hard to imagine many other concepts that can be fruitfully applied to

humans from so many different times and places.

The book may not be easy to find; for example, I could not locate it on

Amazon.com’s website. You may need to order it directly from the publisher.

(Their email address is service@steiner-verlag.de. Their URL

is www.steiner-verlag.de.) This volume would make a very good addition to

academic libraries, where students and scholars of economic history, world

history, physical anthropology, and economic development can see where this

particular research strategy stands at present. The freshness of this volume

embodies the current state of the anthropometric research project,

which might make it an optimal venue to inform the scholarly reading public of

its findings. Scholars of many periods, regions, and disciplines are analyzing

and reporting anthropometrica. Let a hundred flowers bloom.

John E. Murray’s articles on anthopometric history have appeared in

Journal of Economic History, Journal of Interdisciplinary

History, and

Annals of Human Biology.