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The Evolution of Retirement: An American Economic History, 1880-1990

Author(s):Costa, Dora L.
Reviewer(s):Gratton, Brian

EH.NET BOOK REVIEW Published by EH.NET (December 1998)

Dora L. Costa, The Evolution

of Retirement: An American Economic History,
1880-1990. Chicago:

University of Chicago Press, 1998. Xiii + 234 pp. $40.00
(cloth), ISBN:

0-226-11608-5.

Reviewed for EH.NET by Brian Gratton, Department of History, Arizona State

University.

“In the words of King Macbeth, let us die in harness.” Sigmund Freud

(1910)

As historians drift off into a postmodernist Land of Oz, social

scientists have emerged as the only scholars treating a number

of

critical issues. The academy’s tragicomedy has its good points, and

Dora Costa’s analysis of declining labor force participation among the

elderly displays several of these. First, Costa restates an axiom that,

however obvious on the face of it, needs reemphasis: free money from the

state encourages able-bodied persons to exit the labor force. This

reminder cautions us against giving too much credit to ageism and other

cultural forces in the history of older persons. Attitudinal factors

were all the rage, not only among the first historians of old age, but

also among the reformers who eventually built the Social Security

system. Whether such factors were decisive in causing change is another

matter.

Second, Costa presents a strong case for pure income effects in

reducing labor force participation during the twentieth century.

Indeed, income effects can be observed in household and family

arrangements

as well, since pension income raised the probability that

the elderly lived separately from their children. Third, she provides a

very useful critique of other explanations, including a novel and

insightful argument that health problems cannot be used to explain

secular declines in labor force activity.

All this is built upon a marvelous and still emerging data set that

links Civil War pension records to those in the United States Census and

other sources. The

data set permits Costa to carry out analyses that

are much better specified than those heretofore used and represent an

important advance in the quality of evidence available to scholars (as

one presumes they soon will be). The rich body

of evidence nonetheless

also constitutes a problem. The central analytic difficulty in the book

is that the bulk of the analysis of a 110 year period (1880-1990) rests

upon data drawn from a very peculiar pension system for a very

particular set of men in 1900 and 1910. The evidence is doubly

difficult to interpret since it pertains largely to individuals already

receiving pensions, many of whom qualified by age, and perhaps by lack

of labor force participation. Costa treats this problem in an ingenious

way for 1900 and 1910 regressions, but relying on these findings to

contemplate such themes as current leisure activities among the elderly

is a stretch. Chapters still more remote from the lab or force decision,

like that on the political economy of pensions, are largely derivative.

Still, the core chapters represent really important work, and the

strong findings for pension effects add to our understanding of the

importance not just of income, but of pension income, in changing human

behavior. Like many other economists, Costa argues that Social Security

itself was of minor importance. However, Old Age Insurance effects are

notoriously difficult to mea ure. The denigration of Social Security

effects also rises from a failure to take other literatures seriously.

Costa is more sensitive than most historical economists to those outside

the fraternity, but still fails to recognize certain

very useful

findings in social history. Imprecise as they may be about the details,

historians like William Graebner convey an essential truth when they fix

upon the Social Security Act as a turning moment in our society, and one

which encouraged an utterly new view of the life cycle. The problem

begins with historical economists’ insistence on using the term

retirement for changes in labor force participation, a habit that has

cost them many an intelligent reader

. (Costa’s rendition is especially

convoluted [7].).

Two last points: 1) there was no decline in earnings with age

among employed workers in the industrial period (12,16,33); 2) the

author exhibits wonderful taste in the epigrams at the beginning of each

chapter. Her book demonstrates that the elderly have paid no attention

to Freud or to Shakespeare.

(Costa is currently Associate Professor of Economics at the

Massachusetts Institute of Technology and a faculty research fellow of

the National Bureau of Economic Research.)

Brian Gratton

Department of History

Arizona State University

Brian Gratton is the author of “The Poverty of Impoverishment Theory:

The Economic Well-Being of the American Elderly, 1890-1950,” Journal of

Economic History, (March 1996), 56(1):39-61.

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

Advertising Progress: American Business and the Rise of Consumer Marketing

Author(s):Laird, Pamela Walker
Reviewer(s):Silva, Jonathan

Published by H-Business@eh.net and EH.Net (December 1998)

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Pamela Walker Laird. Advertising Progress: American Business and the Rise of Consumer Marketing. Baltimore: Johns Hopkins University Press, 1998. xiv + 479 pp. Notes, bibliographic essay, and index. $35.95 (cloth), ISBN 0-8018-5841-0.

Reviewed for H-Business and EH.Net by Jonathan Silva , Department of History, The Ohio State University

In Advertising Progress Pamela Laird tells the story of advertising from the Civil War to 1920 and explores how advertising became an essential tool for business success. During the period under investigation Laird clearly illustrates how advertising changed from a rather simple instrument with a less-than-admirable reputation acquired from snake-oil salesmen and the likes of P.T. Barnum, to a business tool regarded by an increasing number of businesspeople as necessary and legitimate. Linked with this change in attitude towards advertising by businesspeople was the professionalization of advertising by advertising agencies.

Connected directly with the professionalization of advertising, is that the form and function of advertising evolved during the period from notifying customers to creating consumers. The increasing ranks of professional advertising creators, employing new communications technologies and an ever-increasing number of publications, redefined advertising copy and art to persuade people that they needed things which they otherwise would not have purchased–thereby creating consumers out of customers. The author argues that professional advertising people redefined advertising in this way for two reasons. First, the intense competition for markets in an expanding national market required manufacturers to rely more on advertising, and therefore, advertising had to accomplish more of the selling job than before. Second, as advertising professionals sought legitimacy for themselves and their product, they did so by linking “progress” to material acquisition, and hence, had to convince traditional customers to become consumers. This transformation, according to Laird, brought to the advertising professionals “cultural authority.” The transformation of America to a consumer-oriented society in the early twentieth century, therefore, can be traced to the transformation of advertising messages directed by a new cultural elite–the professional advertising agent.

In presenting this story, Laird clearly outlined how advertising changed from its earlier form of hucksterism to a powerful new business tool. Laird’s work shines as she explains how and why professional advertising people removed the stain of earlier advertising excesses and sought legitimacy for their craft. There are a few problems, however, and one exists in the subtitle of the book. Laird asserts that Advertising Progress leads to the Rise of Consumer Marketing. As one reads through Laird’s work “marketing” becomes more difficult to understand. In some instances marketing seems to mean sales, while in others she equates marketing with advertising. Very often, the author simply notes the existence of some firm’s “marketing problems” with little explanation of what they are. In her struggle with marketing, Laird is not alone. The work on marketing history is extremely thin, and therefore, Laird had very little to rely on as a guide.

A second difficulty comes from Laird’s assertion that professional advertising people sought “cultural authority.” Laird argues that the rise of the consumer culture is a “top-down” phenomenon by which professionals, seeking cultural authority, endeavored to change the behavior of the American population. Advertising professionals, as well as other businesspeople, were surely part of the transformation of consumer America. In Laird’s analysis these people all have the same goal in mind–cultural authority. This argument dovetails quite nicely with the work on the consumer culture by such historians as Jackson Lears and Stuart Ewen, both of whom suggest a hegemonic role for American businesspeople–particularly the creators of advertising. This theme in Laird’s work, however, challenges what Roland Marchand had argued in his book Advertising the American Dream–that businesses and advertising agents took advantage of the changes they recognized occurring in American society. Businesspeople boosted the transformation, but did not initiate it or guide it.

While the book has some weaknesses according to this reviewer, those weaknesses point directly to the important role this book serves for those interested in advertising history. Until Laird’s book, historians relied almost completely on Marchand’s work to understand advertising history. Laird offers us the other side of Marchand, where advertising agents direct American customers toward consumption, as opposed to Marchand’s earlier interpretation which suggests a secondary role for businesspeople. In addition to offering those interested in advertising history a chance to explore a new interpretation, Laird’s work would be useful to people looking for an introduction to the history of advertising.

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Subject(s):Business History
Geographic Area(s):General, International, or Comparative
Time Period(s):20th Century: Pre WWII

Laboring for Freedom: A New Look at the History of Labor in America

Author(s):Jacoby, Daniel
Reviewer(s):Friedman, Gerald

Published by EH.NET (November 1998)

Daniel Jacoby, Laboring for Freedom: A New Look at the History of Labor in

America. Armonk, NY: M.E. Sharpe, 1998. 224 pp.

$61.95 (hardcover); $22.95 (paperback), ISBN: 0765602512 (hardcover);

0765602520 (paperback).

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

University of

Massachusetts at Amherst.

Not so long ago, Labor History was a simple field chronicling the growth of

labor unions and labor-oriented political parties on the assumption that the

organized working class was to be the cutting

edge of social change. Upholding the banner of the organized working class,

labor historians from John R. Commons through Philip Foner and David Montgomery

shaped our conception of American industrial history from the 1920s through the

1980s.

In recent

years this simple vision of labor history has collapsed along with its Marxist

social theory. Critical of white,

male-dominated unions advancing a narrow, anti-Communist, and sometimes

politically conservative agenda, radicals rejected the old institutional

history. They sought to substitute a new labor history celebrating the

rank-and-file and focused on the radical opponents of the established union

leadership. Some rejected unions altogether to chronicle the history of groups

traditionally outside the unions, including household workers and racial

minorities. Speaking a new language of culture, gender, and race, some have

replaced the labor union with the community and transposed the locus of

struggle from the state and the workplace

to the social

group and the family.

Instead of strikes and elections, social struggles have become more abstract

and universal, contests over the definitions of words and the social

constructions of our realities.

From a different perspective, many neoclassical economists have joined

historians and anthropologists in rejecting the old labor history’s focus on

working-class institutions. Past labor historians,

they charge, have underestimated the ability of individual workers to better

their circumstances by using competitive markets. They have shown how free

workers have improved their circumstances, forcing up wages at undesirable jobs

by leaving them for alternative employment. Unions and cultural constructs,

they argue, are epiphenomena. The underlying reality

is the economic circumstances of society shaped by relative factor supplies

and technological change.

No longer is there a shared consensus about what labor history is or how to

place new works in a clear, ongoing chronicle.

Into this confusion comes Daniel Jacoby with a new vision of labor history as

the history of freedom. An economic historian at the University of Washington

at Bothell, Jacoby has written on public education and labor relations in the

Progressive Era. Here, he interprets American labor history as a struggle by

individual workers to gain ‘freedom,’ to win more power and more opportunity to

act without constraint. Jacoby interprets the struggle historically. It

changes over time because technology, social constructions, and institutions

shape the possible scope for opportunity and freedom in each period.

Behind this historical circumstance lies a still-greater contradiction, that

between ‘positive’ and ‘negative’ freedom,

between ‘freedom from’ constraint and ‘freedom to’ act. Jacoby makes this

traditional dichotomy a useful tool by showing how in the United States the

distinction between ‘positive’ and ‘negative’

freedom has been manifested as a struggle over “independence or contract.” The

American Revolution, Jacoby argues, made

“republican independence” the nation’s creed, linking freedom to the ownership

of productive property. In 1776 this left little for blacks or women, largely

excluded from property ownership. But the American Revolution provided the

language with which Americans pragmatically dismantled “remaining bastions of

traditional authority” (page 33) including slavery and gender inequality.

Republicanism, Jacoby shows, was an expansive doctrine; its logic demanded that

America push freedom forward to encompass others,

to free the slave and to make blacks and women the legal equals of white men.

But at the same time that American society was conducting this republican

struggle for freedom from caste privilege,

it experienced growing division between capitalists and a growing class of

proletarian wage earners. For women and for ex-slaves,

extending the right to sell their wage labor power and to make contracts in the

wage-labor market was an extraordinary burst of freedom. (This was true as

well, although Jacoby says little about them, for the former European and

Asian serfs and small peasants who came to America and comprised much of our

wage labor force.) But the situation was very different for white male

laborers who became proletarian wage laborers instead of independent

producers. For them, the right to contract marked a loss of control over their

work, a loss of freedom, compared to some earlier, or anticipated, status as

free producers, managing their work independently. As proletarians, they

discovered, as Jacoby notes,

that in the traditional creed of republican independence “only property, not

merely the freedom to contract it, yielded an adequate basis for real

independence” (page 55). No longer able to achieve autonomy on their own,

these workers were forced to look towards social institutions and collective

action to gain freedom.

Having established the parameters of the controversy over freedom and contract,

Jacoby proceeds to interpret American history as the struggle between

‘freedom-from-constraints-on-labor-

contracts’ and ‘freedom-as-opportunity-to-regulate-work-

collectively.’ In the late-nineteenth century, Supreme Court Justice Stephen

J. Field extended the Fourteenth Amendment prohibition of legislation denying

individuals of any fundamental rights to an absolute protection of the right

of individuals and corporations to make contracts. Under the legal doctrine of

“Substantive Due Process,” courts between the 1880s and 1930s disallowed a

broad range of collective legislation and worker action regulating wages,

hours of work, and the conditions of employment. Substantive due process

protected individuals’ freedom from social and political constraints, by

assuring them their opportunity to make contracts.

But it ignored the basic inequality in opportunity between wealthy employers

and their workers. Jacoby shows how Progressive-era reformers sought to

reconcile contractual equality with capitalist property relations by extending

public education. Education was to assure equality of opportunity, to be “the

last countervailing force”

to economic tendencies undermining “labor freedom in the United States” (page

99). But an effective balance to powerful employers came only in the 1930s

when state support for labor unions allowed effective collective bargaining and

New-Deal era legislation and court decisions restricted the right to contact.

Expanding positive freedom came at the expense of negative freedom from

constraint.

The old labor history often ended with the New Deal,

vie wing it as the final achievement of the American labor movement.

Jacoby goes further. Although gender disappears from America’s struggle for

freedom in his later chapters, he carries his discussion of freedom into the

1990s, writing about Civil Rights and union struggles in the post-World War II

era. In the concluding chapters, Jacoby warns against the impact of free

markets on worker standards in the era of the “global piano.” He fears a

“race to the bottom” driving working

conditions and wages in advanced economies down to the level of the poorest.

Jacoby notes how Germany, Japan, and some other advanced countries have avoided

this threat from globalization through regulatory policy and advanced education

and suggests that the United States might learn from their experience. Thus

his work ends on a salutary note, recognizing past progress and warning

against future threats.

Laboring for Freedom provides a survey of American history that might be

useful for students in courses in economic history and history generally as

well in courses in labor history as such. The book provides little new

research. Instead, its merit is in the reinterpretation of older material,

placing an existing literature into a provocative new framework. Jacoby’s book

is deceptively thin. It has fewer than 170 pages of text but Jacoby packs into

this limited text a new synthesis of American history built around labor. This

is a significant achievement in a work that should be read widely by historians

and all social

scientists.

Gerald Friedman Department of Economics University of Massachusetts at Amherst

Gerald Friedman is the author of State-Making and Labor Movements:

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

1998) as well as numerous

articles on the history of organized labor in the United States and Europe.

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

Burgundy to Champagne: The Wine Trade in Early Modern France

Author(s):Brennan, Thomas
Reviewer(s):Rosenthal, Jean-Laurent

Published by EH.NET (October 1998)

Thomas Brennan, Burgundy to Champagne; The Wine Trade

in Early Modern France. Baltimore: Johns Hopkins University Press, 1997.

376 pp. $39.95

(cloth), ISBN: 0801855675.

Reviewed for EH.NET by Jean-Laurent Rosenthal, Department of Economics,

UCLA.

In a country that prides it self on its wine tradition, one often easily

forgets how many revolutions have occurred in the wine economy. Thomas

Brennan’s monograph takes up the transformations of the commerce of Northern

French wine in the century before the Revolution. Based on an elegant mix of

secondary histories of particular wine traders (negociants) and wine growers

and of archival sources, the book offers a careful description of the

transformation of the wine trade between 1700 and 1789. More

importantly, Brennan avoids the pitfalls of localism by taking in both

Burgundy (a high quality but distant producer) and Champagne (a producer of

varying appeal but more proximate) and by careful reference to the other major

vineyards of the area (Paris and the Loire Valley). Because these two regions

had significantly different experiences, generalizations are not easy to come

by.

The book is a dialogue between the history of Burgundy and Champagne, with

occasional forays into the wider world of Parisian and French wine brokerage.

In the chapters on Burgundy and Champagne,

Brennan bring into sharp relief the importance of information and credit in the

commerce of wine. Brennan’s focus is on expensive wines for which price is much

more a reflection of quality than of quantity.

Yet quality is elusive because urban buyers (whether rich consumers or wine

merchants) simply cannot take the time to comb the countryside for a particular

wine. Hence, there was a great need for brokers. The monarchy had, at first,

regulated brokerage

by forbidding individuals who took this occupation from selling wines on their

own account. The hope, one presumes, was that brokers would, therefore,

put all their efforts into satisfying their clients. Furthermore, by limiting

themselves to strict broke rage, these intermediaries left the buyers and

sellers to bear the risks involved in the market.

Yet, other developments in the wine industry made such distinctions impossible.

Two elements in particular made them more active. First,

because of their privileged “expertise,” the brokers could hardly resist the

jump from negotiating deals to speculating on their own accounts.

Second, because of their information, they were the ideal financial

intermediaries for the wine economy that included both wine retailers and wine

makers.

As brokers they purchased wine on credit and sold wine on credit, for they

were paid neither when they received nor when they delivered an order, but when

the buyer could pay. They, in turn, attempted to delay payments to vine

growers as much as possible. Because the trade was on a credit basis, brokers

had to bear risk–the jump from the risk associated with lending to buyers, to

the risk of buying wine on ones own account was small. It was also virtually

impossible to detect

.

What official could tell whether a broker sending wine from Epernay to Paris to

a wine merchant was acting at the direction of the merchant or on his account?

There were other more local reasons for the growth of the role of brokers.

Distant markets

required high quality wines which, in turn,

required increased investments in an activity that was already capital

intensive. Yet those investments were not without risk. Brokers,

because of their knowledge of demand and because of their keen knowledge of

local conditions, were ideally placed to bear those risks. As Brennan

describes, the development of sparkling Champagne was the result of a

“redevelopment” of a region whose previous product

(red wine) had fallen out of favor. Despite the legend of Dom

Perignom single-handedly inventing the bubbly, the reality is that its growth

into a marketable product was fraught with obstacles that the brokers slowly

removed. First, wine was typically transported in barrels (which were cheaper

and more robust) rather than bottles, but Champagne had to be bottled quickly,

so as to capture the second fermentation that leads to the sparkles. Second,

the bottles had to be strong enough to resist the increased pressure–no small

feat in a period of blown glass–and losses due to exploding bottles could be

devastating at times.

Hence from simple retailers, brokers took on an important role in shaping the

market’s product at the local level. Because the demand for high quality wine

in Paris was, after all, limited and because the Northeast faced competition

from the Loire and the Bordelais, brokers took on the task of developing or

regaining markets in Northwest Europe.

Though we learn an enormous amount from Brennan’s monograph, the economic

historian may be a bit

chagrined with the analytical structure.

Central to the volume are two distinctions: first, between a transparent market

where buyer and seller meet in public and pay cash, and that of an opaque or

private market where buyers and sellers need not meet, where transactions are

hidden from the public and where credit greases the wheels of commerce; second

between competition and power. Here Brennan is less clear about the dichotomy,

but individuals who are attributed economic power have informational and/or

financial advantages over other protagonists. This reviewer wonders about the

value of either opposition.

As Brennan himself recognizes, transparent markets only allow a very limited

number of transactions. Further opacity need not imply a lack of competition

if all parties are accustomed to the process. Similarly, to call informational

advantages “power” hardly helps our understanding.

One can, however, read the volume with an eye to the different gains that

the expansion of markets could offer. Some were temporary, for instance when

a sudden increase in demand for a particular type of wine was not met by an

immediate increase in supply. This short-run gain would be captured by

brokers, but would rather quickly translate into higher prices in the

countryside. Then there would be the traditional response of planting more

vines which would drive prices down again.

After a while the only change in the countryside would be higher employment.

There is an alternative long-term scenario. This one had more complex effects

on the local economy, because it involved the development of wines whose

qualities could not be easily reproduced (that was the case for both Champagne

and Burgundy). Here brokers enjoyed some

early profits from finding the demand for

that wine,

but in time much of the final value of that wine would be transferred to the

owners of the land. For the past several hundred years at least, France has

been a battlefield between the efforts of quality wine producers to limit

imitation and the

efforts of others to make more of what is desired. Brokers, whatever their

information and their power, contributed to this battle by first selling high

quality wine and then seeking out new sources of such wine. Further

consideration of the nature of land and information rents in the wine industry

might lead us to a better understanding of why the commerce of wine failed to

be centralized in Paris and rather remained the domain of a plethora of local

brokers. Those scholars who will take up this task

will be grateful for the existence of

Burgundy to Champagne.

Jean-Laurent Rosenthal Department of Economics UCLA

Jean-Laurent Rosenthal is author of The Fruits of Revolution:

Property Rights, Litigation, and French Agriculture, 1700-1860

(Cambridge

University Press, 1992).

Subject(s):Industry: Manufacturing and Construction
Geographic Area(s):Europe
Time Period(s):18th Century

The Best of Intentions: The Triumph and Failure of the Great Society Under Kennedy, Johnson and Nixon

Author(s):Unger, Irwin
Reviewer(s):Ziliak, Stephen

Published by EH.NET (October 1998)

Irwin Unger, The Best of Intentions: The Triumph and Failure of the Great

Society Under Kennedy, Johnson and Nixon New York: Doubleday, 1996. 366

pp. $27.95 (cloth), ISBN: 0-385-46833-4

Reviewed for EH.NE T by Stephen Ziliak, Department of Economics, Bowling Green

State University.

The middle class reader is disarmed here by a gentle story about the

Great Society, a story which attempts to fill the reader with the quiet

satisfaction, however mellow, that something worked. The middle class reader

merges easily with a traffic of words, traveling in a pathos fit for the first

day of Spring in the opening pages of Irwin Unger’s The Best of Intentions:

The Triumph and Failure of the Great Society Under Kennedy,

Johnson and Nixon. The Great Society, Unger says plainly, made life more

“pleasant” (p. 9). The legacy of the Great Society is good for middle class

Americans. Unger has designs on easy listening, but the subtext is more

Springsteen than Kenny G.

Since the early 1980s, the typical way to begin a book about the

Great Society is to exhort with fists pounding that Americans have been

“losing ground” since Johnson waged a War on Poverty. Another way to begin a

book on the Great Society (less typical, though increasingly common) is to

emphasize with feminist and racial concerns–a la Frances Fox Piven,

Richard Cloward, and Linda Gordon–the post-Reagan attack on whatever gains the

War on Poverty made for welfare rights and the amelioration of poverty.

But Unger chooses the road less traveled. Unger’s book about the Great Society

begins by naming the good effects the Great Society had on the lives of the

educated middle classes.

The Best of Intention s opens with Unger and his wife driving

cross-country on a clean highway in a car fit with mandatory seat belts and

collapsible steering columns, listening to classical music and “intelligent

interviews” on National Public Radio (even from rural location s), stopping at

“well-equipped public rest stops” (p. 9), and taking in some nature,

such as they did at Assateague Island, in Virginia, a seashore preserve.

“The Great Society of the 1960s has left its mark on the land,” says Unger.

But Unger’s idea of “mark” is not what readers in the 1990s have come to

expect. Says Unger: “The Great Society . . . made our trip pleasanter and

safer” (p. 9). In other

words, by contrast with Charles Murray’s metaphor

“losing ground,” The Best of Intentions is positively cheery about the

ground that America has gained with the Great Society. Unger is cheery not

about the effects of welfare on the markets and morals of the poor (indeed,

on this judgment Unger is relatively quiet). Instead, Unger celebrates the

achievements of the Great Society which were designed with intent for the

middle classes. It’s not his only point.

Unger’s emphasis on the worth of human beings who find themselves

middle class is refreshing. The middle class, now that it has come in to the

view of historians after a hundred-year eclipse, is still ignored catholicity

in positive assessments of American culture. It’s all

“spectacle” and “gaze” at the fin-de-siecle. Thus it is notable, too, that

Unger includes the values and the practices of the middle classes in the

social welfare function when he evaluates the many programs of the Great

Society–including the War on Poverty. Unfortunately, The Best of

Intentions devotes little space to an articulation of the author’s chief

and boldest argument: that the programs of the Great Society which “worked

best” were in fact the programs designed for the benefit of the educated middle

classes (pp. 10, 366).

Unger devotes most of his formidable energies documenting the policy

processes which gave rise to the big budget items of the Great Society:

Medicare, federal aid to education, and the War on Poverty. Here,

Unger is particularly strong in archival detail and in administrative scope,

chasing Presidential and Congressional paper trails across the nation’s

depositories of oral history. Unger is also a patient teacher of the sometimes

painful formulation and design of the Great Society programs–from VISTA to

Head Start to the National Endowment for the Humanities.

The main problem with the book as policy history is that Unger

engages in an unarticulated rhetoric of economic and policy performance. It is

difficult to discern what standards are being used by Unger to evaluate the

programs that “work best.” For example

, Unger seems to write without irony: “The Economic Opportunity Act was sound,

[Sargent] Shriver told the legislators; the country would get a dollar’s value

for a dollar spent” (p.

86). That expected rate-of-return, it seems to Shriver and to Unger,

re presented what Shriver called “the best thinking in the nation on this

subject” (p. 86). According to Unger, the Economic Opportunity Act “sought to

change the poor . . . The proposed bill provided modest amounts of seed money

to enable the poor to acquire the skills, motivation, and attitudes they

needed to better cope with the existing economic rules of the game”

(p. 86). Unger’s main criticism of the bill is for its failure to promise a

massive transfer of income to the nation’s poor. The point here

is that Unger does not consider his own standards for how any policy could

“work best:” Sargent Shriver’s standard for investment, the textbook government

rule of TR=TC, does not–despite the intention to build skills among the

poor–promise growth in GD P. It is not clear in this chapter or in others for

what purposes a simple, massive transfer of income to the poor–if politically

feasible–would “work” well for both taxpayers and recipients.

Unger is not alone, of course, in being ambiguous

about performance standards in economic policy. The work is not cliometric: it

is an older style of policy history, pre-cliometric, pre-critical theory.

But a stated commitment to quantification or theory would not alone be

sufficient for improving Unger

‘s policy analysis. (Witness the abuse of tests of statistical significance,

even in the top journals of economics.)

What Unger is reaching for but not attaining is a language for valuing

improvements in the “quality,” not merely the “quantity,” of life.

Unger credits Johnson’s speech-writer, the Harvard-educated Richard Goodwin,

for putting a quality-of-life agenda in the mind of Johnson (p. 17). But Unger

himself has not decided how to evaluate quality of life as a policy variable or

as a way of bein g. Unger’s use of the term “quality of life”

is reserved for the middle classes–for Johnson’s middle class intellectuals,

who seem to inspire Unger, the quality-of-life agenda was about getting more

“Athens” and “Florence” and less sprawl of kitsch and

spiritless suburbia (p. 17). In The Best of Intentions, “quality of

life” does not seem to be an object of concern when evaluating policy directed

at those who lack severely in the quantity” of life. In fact in the epilogue

Unger leans against the project of making quality distinctions altogether,

yielding ground to the neoclassical economic (or philosophical emotivist) idea

that there is no arguing about tastes. Here, Unger suggests that if Americans

want to buy more Heater Meals and less health car e–and GDP is growing–

so be it (p. 364). Yet Unger’s main point is that Americans ought to

discriminate quality from quantity, and that was the good of the Great Society.

Americans should want less Kenny G in the elevators and more symphony in the

city parks, so be it.

Historians of social welfare divide over the perceived need to say

that some reform movement came mostly “from above” or mostly “from below.” In

some arenas the division is hardly perceptible. It is widely agreed, for

example, that the Charity Organization Movement of the late nineteenth

century– the first widespread attempt to privatize and organize

“welfare” in America–came from the enterprise of the white and Protestant

middle classes. Historians of the War on Poverty

are not in agreement, and the division–in a world in which the simple binary

top/down is toggled obsessively–has important consequences for how one goes

about policy and reform. The thesis of reform-from-below is found mostly on

the political left. “T he disagreement is not merely an academic squabble,”

says Unger.

“It is an issue that separates two models of America’s social essence” (p.

49). Yes, historically speaking, as perceived. But it might be better to

think of the division this way: The disagreement is not merely an academic

squabble. It is an issue that separates two models of America’s social

science.

Says Unger, “[on] the whole I believe the top-down view more

persuasive” (p. 50). “The top-down perspective identifies antipoverty

initiatives as the work of liberal technocrats in the Kennedy-Johnson White

House” and of other “top layer” bureaucrats and academics (p. 50). In Unger’s

story of movements for reform in the 1960s, the credit goes to the likes of

Daniel Patrick Moynih an, the economists Walter Heller and Robert Lampman, the

speech-writer Richard Goodwin, the HEW’s Alice Rivlin. There can be no doubt

that these and many other “liberal technocrats” did the thinking and the

policy-writing for the War on Poverty. But Unger, using his own words, seems

to force the conclusion that “America’s social essence” in the 1960s was one in

which reform could have only come from the top; or, perhaps, though less

likely, Unger is concluding that the top is simply the proper location

for reform.

Yet it is plausible to think that Unger’s conclusion has been forced

not by his preferred model of America’s social essence. Unger’s conclusion

that the reforms of the 1960s were top-down may be forced by his preferred

model of American social science. The way Unger views the material of history

is itself top-down. Unger is not a builder of rational-choice models but he

borrows its top-down, policy-driven, and behaviorist rhetorics. Unger is an

empiricist but he examines the movements of the Sixties–community action

programs, “ghetto unrest,” the theater of Baraka–through the lens of

journalists, top-layer bureaucrats,

and liberal technocrats. In other words, Unger does not examine the rise of

anti-poverty initiatives by examining first-person stories and micro-level

practices of the nation’s welfare recipients, welfare rights activists, local

bureaucrats, and so forth. Unger does not examine the ways in which local

inspirations–even neighborhood events–might have gathered

steam from other localities, shaping from the bottom-up what look to be a

passing storm of “federal initiatives.” The top-down model of America’s social

science is shaping the top-down understanding of America’s social essence.

The general weak ness or absence of an explicit theoretical or

critical posture is what will turn many readers away from The Best of

Intentions. The Great Society made its mark on the land, but there were

apparently no women involved. (The author is explicit in his omission of race

and of civil rights [p. 10].) For this reader, Unger’s archival treasures are

material for testing important critical work on economic policy, such as that

which is to be found in Albert Hirschman’s The Rhetoric of Reaction

(Cambridge: Belknap Press, 1991) and in Robert Higgs’ Crisis and

Leviathan (New York: Oxford University Press,

1987). Hirshman’s “jeopardy thesis” needs Higgs’ “ratchet effect,” and the

fusion would surely illuminate The Best of Intentions. Unger is at his

best when his verbal analysis of post-program achievements is tightly woven

with a narrative of program intentions: this is easily witnessed in Unger’s

excellent summary of the Job Corps (p. 178).

The Best of Intentions is at its worst when it attempts to characterize

the behind-the-scenes lives of Presidents Kennedy, Johnson, and Nixon,

sounding at times more like an Arts and Entertainment column than a history

with an ear to morals and manners.

But if Unger has not opened the conversation he has

surely–in his emphasis on the middle class–made an important contribution to

the way in which historians will view the triumphs and the failures of the

Great Society. The middle class matters. Thanks to Unger’s work, observers of

the Great Society will be challenged to add to the balance sheet a Sesame

Street and a theater and a well-equipped rest area for each ill-conceived

community action program and long-term welfare case.

Stephen Ziliak Department of Economics Bowling Green State University

Stephen Ziliak authored, with Deirdre McCloskey, “The Standard Error of

Regressions” (Journal of Economic Literature, March 1996). Ziliak’s

current research is on the economic history of welfare and charity in the

United States. His work on the privatization of welfare has appeared in

The Independent Review and Quarterly Review of Economics and

Finance.

Ziliak is guest editor of a forthcoming issue of Social Science History

on voluntarism and the welfare state, and he is a co-editor of the millennial

edition of Historical Statistics of the United States: Colonial Times to the

Present (Cambridge University Press).

Subject(s):Economic Planning and Policy
Geographic Area(s):North America
Time Period(s):20th Century: WWII and post-WWII

Opening the West: Federal Internal Improvements Before 1860

Author(s):Malone, Laurence J.
Reviewer(s):Wallis, John Joseph

Published by EH.NET (October 1998)

Laurence J. Malone, Opening the West: Federal Internal Improvements Before

1860. Westport, CT: Greenwood Press, 1998, xvi + 155 pp.

$59.95 (cloth), ISBN: 0-313-30671-0.

Reviewed for EH.NET by John Wallis, Department of Economics,

University of Maryland.

In principle, I’ve got to love this book. Malone finds a little known

Congressional report that details federal expenditures on roads, canals,

rivers, harbors, aids to navigation, and federal support for state

transportation projects. The “Statement of the Appropriations and Expenditures

f or Public buildings, Rivers and Harbors, Forts, Arsenals,

Armories, and other Public Works from 1789 to 1882, Serial Set 1992,”

47th Congress, 1st Session, 1882 is a treasure trove of information.

Malone mines it to examine the patterns of federal expenditures for internal

improvements. The results are illuminating.

Malone goes after big game: Carter Goodrich. In Government Promotion of

American Canals and Railroads, Goodrich argues that state governments

dominated investment in transportation improvements in the early nineteenth

century, investing over $300 million in railroads and canals.1 On the basis of

Charles Holt’s study of nineteenth-century state governments,

Malone concludes that state governments only spent $85 million from 1820 to

1860.2

Carter Goodrich is the biggest fish in the pond when it comes to early

nineteenth century transportation investment,. An error of this magnitude on

his part would raise serious questions about our understanding of early

nineteenth century development.

Malone develops his theme and evidence in a series of chapters that present and

analyze the federal data; look specifically at federal policies in Iowa,

Minnesota, Wisconsin, Michigan, and Arkansas; and conclude with a detailed

study of three counties.

So much for principle, where does this leave us in practice? On page 42,

Malone compares federal and state expenditures in several regions of the

country. He draws his state data from Holt. The South Atlantic region, which

includes Maryland, Virginia, and North Carolina in this table, has exactly

zero expenditures between 1820 and 1829, zero between 1830 and 1839, and less

than $50,000 between 1840 and 1849, and between 1850 and 1859. The state of

Maryland would be surprised to find that its investments in the Chesapeake and

Ohio canal and the Baltimore Ohio railroad, which totaled over $10 million

before 1840 did not make it into Malone’s calculations. The state of Virginia

would be surprised to learn that its very active Board of Public Works which

made substantial investments through this entire period were likewise ignored.

Malone’s hypothesis is based on the assumption that Holt’s data capture all

state government activity, when Holt doesn’t.

There is a good deal of corollary evidence to suggest that Goodrich’s

$300 million figure is in the right ballpark for state investment, with local

governments spending another $125 million. Malone shows that the federal

government spent $54 million on internal improvements, but about

$37 million of this

was for coastal and river navigation and harbors. No one has ever disputed

that the federal government played an important role in this area. In short,

the main thrust of Malone’s hypothesis is not supported by the data.

Malone does do a convincing job

of demonstrating that the federal government played an important role in

making basic road investments in the territorial period in each state. This is

an important contribution.

However, it tells us little or nothing about the relative importance of federal

and state investments, since territories are, by definition,

geographic areas without state governments under the direct administration of

the federal government. One might have found the argument more convincing if

there were some comparisons of federal road construction before statehood and

state construction after statehood.

I liked this book and will refer to it as a good source on federal internal

improvement spending. Unfortunately, I can’t recommend that we accept Malone’s

revisions of Carter Goodrich.

John Wallis Department of Economics University of Maryland

Malone is Department Chair and Associate Professor of Economics at Hartwick

College.

Wallis is Associate Professor of Economics at the University of Maryland, who

works on state a nd local public finance in the 19th and 20th centuries.

Recent publications include “Railroads and Property Taxes,” with Jac Heckelman,

in Explorations in Economic History, Jan.

1997, and “The Political Economy of New Deal Spending Revisited, Again:

With and Without Nevada,” also in Explorations, March 1998.

1. Carter Goodrich, Government Promotion of Canals and Railroads,

1860-1890 (New York: 1960).

2. Charles Holt, The Role of State Governments in the Nineteenth Century

American Economy, 1820-

1902 (New York, 1977).

Subject(s):Transport and Distribution, Energy, and Other Services
Geographic Area(s):North America
Time Period(s):19th Century

The Promise of Private Pensions: The First Hundred Years

Author(s):Sass, Steven A.
Reviewer(s):Williamson, Samuel H.

Published by EH.NET (October 1998)

Steven A Sass, The Promise of Private Pensions: The First Hundred Year

s.

Cambridge: Harvard University Press, 1997. ix + 332 pp. $39.95 (cloth),

ISBN: 0-674-94520-4;

Reviewed for EH.NET by Samuel H. Williamson, Department of Economics, Miami

University.

The rise and fall of private pensions in the United States is very much a

twentieth-century story. Thus, publication of this book by Steve Sass is well

timed. It tells the story of how the institution takes off with the creation of

the Pennsylvania Railroad Pension in 1900, peaks in the postwar period, and

slides into decline in the last two decades. In chapter one,

Sass explains that during the first half of the 19th century most men worked in

handicrafts or farming, and support in old age was provided by their offspring

who had taken over the family

business or farm. The last third of that century saw manufacturing employment

increase at twice the rate of population growth, and these new workers needed

to find a different way to provide for their old age. This was also a period

when banks,

insurance companies and the stock and bond markets were developing many new

financial capital instruments for retirement saving. While there is some debate

on the adequacy of these new methods of “life-cycle”

saving practices, it is clear that for many older workers “retirement was not

an option they could afford.”

This was also a period of widespread labor unrest, with violent strikes and the

rise of labor unions. As the nineteenth century ended, employers faced an aging

workforce with potentially diminished capacity. In response, some of the more

enlightened employers started providing a variety of benefits for their

workers–a response that has been called “welfare capitalism.”

The railroads were the nation’s first large business and the first to develop a

hierarchical labor structure. Sass lays out how the industry started the first

pensions, basing them on three different rationales:

career, welfare and efficiency. In 1874, the Grand Trunk, a Canadian line,

created a pension only for their management. The

plan required employees to join by age 37 and remain at work until at least age

55. The pension deferred part of their wages until retirement, thus “buying”

loyalty in what labor economists call a “wage-tilt” contract. Ten years later,

the Baltimore and

Ohio added pensions to a relief program that already included death, accident

and sickness benefits. Such relief plans required membership contributions, but

worker membership was voluntary. In 1900 the Pennsylvania Railroad, the largest

private employer

in the country,

established the first modern pension. After much study and deliberation, it

created a plan that was equal to one percent of the average wage in the last

ten years of employment times the number of years worked. The plan,

including a mandatory retirement age of 70 and covering all workers, was

justified as a “payroll” saving since older workers could be replaced with less

expensive and more productive younger workers. In order for the company to

have complete control, the plan was noncontributory and the pension board did

not include labor representation. (Sass is in error when he states that

“Because of the thirty-year service requirement, the original cohort of

retirees in 1900 had all been hired prior to 1870″ (p.

58). The 35-year service requirement was needed only to qualify for disability

at age 65 to 69; all workers who reached age 70 were pensioned regardless of

length of service. The new maximum age of hiring at 35 was designed to make a

minimum tenure of 25 years the rule, but this rule applied only to new hires.)

The Pennsylvania plan established a model that was soon followed by

other railroads and large corporations in other industries during the next

twenty

years. At first pension plans were justified as a tool to increase

workers’

loyalty, and to reduce strikes and turnover. As employers found that pensions

were not very successful meeting these objectives, they became more interested

in the value of mandatory retirement. This was the period of scientific

management, when

it was thought that older workers (over 45)

could not keep up.

In chapter 4, Sass explains that private pension providers at first had little

understanding of the actuarial realities of the pension plans they were

creating. During the first two decades of this century, most large

corporations financed their pensions from operating funds and had no reserves.

After the well-publicized failure of the Morris Packing Company pension in

1923, suggestions for reform came from government, consultants and insurance

companies, specifically, that pension cost should be accrued,

funds should be held with an independent fiduciary, and workers should be

vested. Reforms were resisted on all three counts. From the beginning, most

plans were non-contributory so that employers could terminate them at any

time. Actuarial costs were difficult to estimate with most plans because

benefits were based on final salaries. Building trust funds was expensive and

these might be seen as employee assets. Corporations did not want to turn over

funds to another institution when they felt they could better use the funds

themselves. Finally, vesting was the least desirable idea, since employers

wanted to give pensions to reward only long-serving employees. In general,

there was a conflict

between the reformers’ view of pensions as deferred wages and the

corporations’ views of pensions as tools for controlling their workforce.

In chapter 5, Sass discusses how the Depression and the New Deal affected

private pensions. In the early ’30s, railroad workers succeeded in pressuring

Congress to nationalize all railroad pensions. At first,

carriers resisted for fear they would lose the control and loyalty a pension

engendered, but finally agreed to a revised plan in 1937 (after the original

1935

plan was declared unconstitutional). The Railroad Retirement Act was the first

step in the process of creating Social Security. One interesting aspect of the

debate on this program was the Clark Amendment,

which proposed to allow “corporations with plans

no less advantageous to their employees to opt out of the federal program.”

In the end, however,

corporations were happy to have the government take over. They hoped that

Social Security would be mostly a welfare program for the poor, so corporations

could influence workers by augmenting the government program with their own.

After the Act went into effect, most private pensions, new and old, became

“integrated” with Social Security; private pension benefits were reduced by

what the retiree was receiving from Social Security.

The tax increases of the New Deal also created an incentive to use pensions for

tax relief. Several changes in the tax code were made to tighten control of

pension plans. The most important was the 1942 Revenue Act,

which imposed

a variety of rules on pension plan tax exempt status. Under normal

circumstances this would have discouraged the creation of new plans,

but during World War II, tax rates became very high and at the same time there

were wage controls. Thus by increasing

the promised pension, firms could give raises in the form of deferred wages

and get a tax deduction by putting more funds in the pension reserves.

Chapter 6 examines the postwar period and the importance of union bargaining

after the 1948 NLRB declaration that pensions “lie within the statuary scope

of collective bargaining.” First the United Mine Workers and then the CIO began

pushing for industry-wide standards for pensions. Their success is measured by

the fact that between 1945 and 1960 almost entirely due to union initiatives,

pension coverage increased from 19 to 40 percent of the workforce.

In chapter 7, Sass discusses how the pension industry reorganized.

Insurance companies continued their efforts to convince employers to turn the

functions of

their pensions over to them. Results were mixed: most companies preferred to

self-insure but actuarial consulting firms competed successfully to provide

other services.

In chapter 8, Sass explains how, after over a decade of political debate, a

massive

new set of federal regulations of private pensions– the Employment Retirement

Income Security Act (ERISA)–was signed into law in 1974. Issues addressed in

the debate over reform were vesting, faster funding of past services, employer

liability and federal pension insurance. Jimmy Hoffa’s misuse of the

Teamsters’ pension fund and the failure in 1964 of the UAW Studebaker pension

were important impetuses. Employers continued to resist the possible loss of

freedom in setting pension rules and the expected increased costs from vesting

and past service funding requirements. Over the period of debate, however,

voters learned of more cases in which pensions failed and workers lost, and

pressured Congress to act. When Gerald Ford sought to deflect national

attention from his pardoning Nixon,

Congress gave him the ERISA bill to sign on Labor Day, 1974.

In the epilogue, Sass neatly summarizes what he sees as the factors

contributing to the post-ERISA decline in pension coverage. His theme is that

the private

pension system was a creature of big labor, big government and big business.

During the last quarter of the century, “all three either grew weaker or became

less interested in pensions.” In the 1960s and 70s,

unions negotiated increases in benefits and earlier retirement with full

benefits. This added expense prompted employers to reduce their pension

obligations, while the ability of unions to resist this reduction eroded;

by 1994, union membership as a percent of the workforce had fallen by over 50

per cent. Insufficient terminations greatly increased claims on the Pension

Benefit Guaranty Corporation, so Congress raised the premium that sponsors had

to pay and narrowed the discretion they had in selecting actuarial assumptions

such as the discount rate. At the same time, net wages were reduced as Social

Security contribution

rates were raised out of concern for the program’s viability. Finally, since

the maximum federal tax rate fell from 70 to 34 percent in the 1980s, the tax

deferment advantage of a

pension became less important.

Sass contends that, in the corporate sector, the market for labor was changing.

Human capital was becoming less firm-specific, and productivity was more

important than long and loyal service. When mandatory retirement was abolished

in 1986, using a pension to encourage early retirement became potentially more

expensive. New pension plans were overwhelmingly defined contribution or

401(k), where there was no uncertain future burden. As the end of the century

approaches, Sass

sees a return to individual households needing to assume more direct

responsibility for their retirement incomes.

With the rise in life expectancy and the desire for earlier retirement, he is

not sure if they are prepared.

Samuel Williamson Department of Economics Miami University of Ohio

Sam Williamson is director of EH.Net and the author of articles on pension

history including “Pensions in the United States and Canada before 1930: A

Historical Perspective,” in Trends in Pensions 1992 and “The History

of Industrial Pensions in the United States” in Reforming Financial Systems:

Historical Implications for Policy, 1997 (Cambridge University Press).

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

The Indonesian Economy in the Nineteenth and Twentieth Centuries: A History of Missed Opportunities

Author(s):Booth, Anne
Reviewer(s):Touwen, Jeroen

EH-NET BOOK REVIEW

Published by EH.NET (October 1998)

Anne Booth, The Indonesian Economy in the Nineteenth and Twentieth

Centuries: A History of Missed Opportunities. Basingstoke: Macmillan

and New York: St. Martin’s Press, 1998. xvi + 377 pp. Includes

bibliographical references and index. $19.95 (paperback), ISBN

0-333-55310-1 (Macmillan). $79.95 (hardcover), ISBN 0-333-55309-8

(Macmillan) and 0-312-17749-6 (St. Martin’s Press)

Reviewed for EH-NET by Jeroen Touwen, Historical Institute, Leiden

University, The Netherlands.

BAD LUCK IN A VERY RESOURCEFUL ECONOMY

Which Lessons Can Indonesia Learn from its Past?

This is a volume in a new and ambitious series named A Modern Economic

History of Southeast Asia, edited by Anthony Reid, Anne Booth, Malcom

Falkus and Graeme Snooks, initiated by the Australian National University

in Canberra, and published by Macmillan. Of the eighteen volumes

planned (dealing either with themes or with countries), three have be

en published so far, of which this is one.

Professor Anne Booth of the School of Oriental and Asian Studies (SOAS) in

London has a long experience in the scholarship of the Indonesian economy.

She is known for her monograph Agricultural Development in Indonesia

(Sydney: Allen and Unwin, 1988) and for two influential edited volumes: A.

Booth, W.J. O’Malley and A. Weidemann (eds), Indonesian Economic History

in the Dutch Colonial Era, (New Haven: Yale Center for International Area

Studies, 1990), which is generally regarded as the first survey of modern

economic history of Indonesia), and A. Booth (ed.) The Oil Boom and After;

Indonesian Economic Policy and Performance in the Suharto Era

(Singapore: Oxford University Press, 1992). In addition, she ha

s published a long list of contributions in journals and edited volumes. In her

work,

she has consistently applied systematic quantitative macroeconomic

analysis in combination with a more qualitative evaluation of government

policy and growth theory. But what is also quite significant in her work

(including the present book under review) is her attention for a

combination of the colonial and the independent eras of Indonesian

history. Booth is one of the few historians who easily jumps back and

forth between these two periods, drawing parallels and making comparisons.

Thus, she is able to conceive a long-term view on economic development,

an approach which has often been ignored by economists and historians.

At first sight, the reader of The Indonesian Economy in the Nineteenth and

Twentieth Centuries is confronted with a provocative subtitle: A

History

of Missed Opportunities . To this subtitle a streak of irony is added by

the picture on the cover of the book: a photograph of the Indonesian

government aeroplane factory in Bandung. The Indonesian airplane industry

IPTN (Industri Pesawat Terbang Nasional), in which present-day president

Habibie played a leading role, has often been viewed as a symbol of

irresponsibly large expenditure on prestigious high-tech projects,

significant for the 1980s and 1990s Suharto-era. Does Booth criticize such

projects and imply that the Indonesian economy would have been better off

with investments in different sectors, or a different (more balanced)

economic policy? And which other opportunities have been missed by

Indonesia? Indonesia is one of the poorest countries of Southeast Asia and

has been lagging behind several of its neighbors for many decades. Only

during the recent period of export-oriented growth (ca. 1980-1997) did it

began receiving international praise for its economic performance – praise

that has melted away since the monetary crisis (and subsequent political

unrest) brought the Indonesian economy to a virtual stand-still and scared

off most foreign investors.

In the following, I will first review the contents of the book and outline

some of its characteristics. In conclusion, I will return to the question

of which opportunities were missed and how this affected Indonesian economic

development.

An extensive introduction (Chapter 1) describes the formation of an

‘Indonesian’ economy, highlights the current debates in the historiography,

and states the aims of the book, which consists of six chapters (excluding

the introduction and conclusion) dealing with thematic aspects of the

Indonesian economy.

Chapter 2 is called ‘Output Growth and Structural Change between

1820-1990′, and places the important political events in a chronological

survey of economic performance. This chapter has an essential function

in providing a chronological framework and evaluating the different

indicators and measurements of long-term economic development. Within

each sub-period, the trends in output growth are linked to changes in

domestic economic policies (reflecting changes in political priorities) and

to world market trends (p. 16). Particularly the phases of growth (p. 15,

85-87) should be mentioned here. In combining political events and

economic situation, Booth identifies the following 10 phases:

  • 1) 1830-1870 rapid export growth, slowing down after 1840
  • 2) 1870-1900 policy reforms but sluggish growth
  • 3) 1900-1930 ethical policy and export expansion
  • 4) 1930-1942 world depression leading to contraction of export volume
  • 5) 1942-1950 Japanese occupation and independence struggle (harming

    economic performance)

  • 6) 1950-1958 rehabilitation of the economy, output growth
  • 7) 1958-1966 declining per capita GDP, structural retrogression
  • 8) 1966-1973 economic recovery
  • 9) 1973-1981 the oil boom period
  • 10) 1981-1990 non-oil exports production leading to output growth

economic performance)

Chapter 3 is called ‘Living Standards and Distribution of Income’ and sets

out to investigate why the relative rapid growth of GDP, almost certainly

faster than population for much of the last two centuries, did not result

in broadly based improvement in living standards. Booth argues that,

in fact, we should examine the growth of the part of GDP that is devoted

to household consumption, after subtracting government expenditures

and expenditures on capital formation, of which the returns are not

shared by all classes of society. Of course, also foreign remittances

should be disregarded in this context. The chapter argues that ‘the

growing expenditure on both government consumption and capital

formation, together with the high level of remittances abroad, meant

that, for much of the colonial era, private consumption expenditures

grew less rapidly on average than GDP’. Booth continues: ‘But, in

addition, there is evidence that such growth as occurred in average

consumption expenditures did not benefit all classes of society

equally. There were gainers and losers, and the gainers were often

concentrated in particular ethnic groups and regional locations’ (p. 89).

This development is typical for both the colonial and the independent

period, and also forms an essential element of today’s problems in

Indonesia. To quote Booth again: ‘As in other colonial societies, economic

stratification along ethnic lines was pronounced in Indonesia in the early

twentieth century, and in spite of the egalitarian rhetoric of the

independence struggle, this stratification persisted in the post-1950

period. The growth which has occurred since the 1950s has in turn produced

new patterns of differentiation by ethnic group, social class and region’

(p. 89).

In Chapter 4, ‘Government and the Economy in Indonesia in the Nineteenth

and Twentieth Centuries’, the economic role of the government in Indonesia

is studied. Conforming to the central argument of the book (which can be

rephrased as: to develop a long-term view on economic development and

economic policy in Indonesia), it is argued that for a deeper understanding

of Indonesian economic performance, we must also develop a better

understanding of the domestic factors which promoted or inhibited economic

growth. The actions of the successive governments, in both the colonial

and the post-colonial periods, are crucial in such an understanding (p. 135).

Strangely, a different set of phases is applied in this chapter (p. 137),

distinguishing six phases in the role of government which almost, but not

completely, cover (combinations of) the ten phases of growth distinguished

in Chapter 2 (p. 85-87). Although the six phases make sense and clearly

order the main policy tendencies, some more explicit comment could have

been made on their coinciding or not coinciding with phases of economic

growth (linking the effects of government intervention to the world

economic situation). I must add that in the further elaboration on the

individual phases, the context of economic performance is of course

often included, since government policy is usually designed in reaction to

economic conditions.

It is emphasized that ‘colonial Indonesia, at least in the twentieth

century, was far more than just a nightwatchman state, concerned purely

with law and order and the collection of taxes’ (p. 155). There was a

lot of reform and general enthusiasm for modernization, as

characterized by the Ethical Policy but also by the large number of

projects that were constructed in the physical infrastructure. This is

reflected in the large share of government in GDP. It is remarkable that

in the early independent period, from 1950 to 1965, real growth in public

expenditure was much lower than in the first three decades of the twentieth

century. Increase of the share of public expenditure relative to GDP

occurred not earlier than the latter part of the 1970s (p. 201).

Chapter 5 is entitled ‘The Impact of International Trade’, and deals with

the (important) role of trade in the Indonesian economy, the terms of

trade, the changes in the trade regime (“Rise and decline of free trade

liberalism in the colonial era”), the regulated trade regime since 1950,

and the post-colonial experience in trade. On the whole, Booth’s view

on the “colonial drain” seems to be pessimistic. This is obvious from

her evaluation of the oil boom period (1973-1981), where Booth writes:

‘Certainly, there is plenty of evidence that government investment over the

oil boom years was far from optimal. But at least the rents were retained

in the domestic economy. Had budgetary policy been used for investment

in human and physical capital at earlier periods in Indonesia’s economic

history, per capita output and living standards could have gr

own faster than in fact was the case’ (p. 243).

Further elaborating on the record of investment in the colonial economy,

Chapter 6 treats ‘Investment and Technological Change’, while Chapter 7

focuses on ‘Markets and Entrepreneurs’. The latter chapter

deals with the indigenous sector of the colonial economy, the development of

the labor

market, and the economic role of the Chinese, but also evaluates the role

of socialism and government planning in the period 1950-1965, and the

role of the state and the market during the New Order. This chapter

particularly should attract the attention of economists who will plan the

economic course of Indonesia after 2000. These themes clearly connect with

the problems of present-day Indonesia, concerning the powerful

conglomerates and the ethnic division of affluence. Booth explicitly states

that the rise of powerful conglomerates who were able to exploit political

connections preceded the deregulation and liberalization if the economy

over the 1980s. The rise of these conglomerates was a symptom of the

limitations of the deregulation process and not, as is sometimes argued,

a consequence of this process (p. 322).

A text book for advanced learners and a challenging monograph

As a textbook, this study has an interpretative character. In each chapter,

individual data and events are treated in the context of the theme of the

chapter. For example, if I want to know something about the Sugar Law of

1870, the index refers to pages 30 and 253. On page 30, the S

ugar Law is mentioned in the context of structural change in the economy.

Together with

the so-called Agrarian Law, the Sugar Law signaled the demise of the

Cultivation System in Java, but some scholars have argued that this

legislation did not produce a dramatic change in Java’s economy (it did

not form a watershed), even though it had an impact on export growth over

the longer term. On page 253 the Sugar Law is mentioned in the context of

investment and technological change, since it allowed for private

investment in the sugar sector, permitting free contracts between sugar

refineries and peasant cultivators, which allowed the government to

withdraw from the sugar cultivation (because the high failure rate of sugar

companies had caused the government substantial losses). The Agrarian

Law, closely connected with the Sugar Law, is also mentioned on page

298 in the context of land shortage in Java. There is no introductory

explanation in a chronological context of what the Sugar Law and the

Agrarian Law actually stated or implied.

This example shows that the book is not so much a beginners’ textbook, but

rather an interpretative study based on an exhaustive survey of the recent

literature and extensive analysis of quantitative data. In an elegant andc

ompact style, Booth manages to inform the reader continuously of the

debates on issues mentioned, on the various views held in the

historiography, or the need for further exploration on some themes. Of

course, as a macro-economist, she relies heavily on the (rich) Dutch

colonial source data for the colonial period (since there are no other

quantitative data for the colonial period). But by studying the long-term

development of a first colonized, then independent country, she avoids

placing too much emphasis on the colonizer’s presence and manages to

analyze the economy as such, integrating the domestic or indigenous

economy and the internationally oriented ‘predatory’ economy, and

developing a fairly ‘autonomous’ (non-eurocentric) view.

One criticism that could be made is that the thematic, non-chronological

structure of the contents of this book may not be very helpful in a survey

that covers two centuries. The various chapters, in their dealing with

structural change, distribution of income, government policy, the role of

international trade, investment, and entrepreneurship, each attempt to

cover the entire period 1800-1990. An introductory scholar will

continuously feel the need to browse back and forth, in order to piece

together a complete picture of each historical sub-period. On the other

hand, one may argue, this organisational structure allows for reading

one chapter at a time and puts an explicit emphasis on the long-term

continuity within each aspect of Indonesian history. This is indeed one of the

aims of the book. For example, Booth states that she wants to

‘highlight the underlying continuities in policy-making and the

implications of these continuities for Indonesian economic

development in the longer term’ (p. 12). She also argues that ‘

there were, and continue to be, more similarities in the economic goals of the

Dutch colonialists and the Indonesian nationalists than has yet been

acknowledged. These similarities are due to the persistence of many

underlying problems’ (p. 12). Thus, a thematic organization of the

contents of the book forces the reader to observe chronological

continuities within each theme. This is indeed one of the strong

arguments of the book.

Applying a long-term perspective, Booth distinguishes clearly between thep

eriods of expansion and stagnation. It is very instructive that these are

placed in the context of government economic policy and the world economic

situation. In an accessible style, she provides a balanced picture of

growth and decline, giving thoughtfully phrased judgements in matters

which have raised a lot of discussion. On the whole she meticulously

reviews and quotes the recent historiography, including many Indonesian

scholars.

Missed chances?

Now, which are the missed opportunities referred to in the title? Such

counterfactual meditation is, of course, a hazardous exercise, but it may

be able to throw light on the long-term lessons that can be drawn from

the past two centuries. As Booth says, it is ‘useful to ask if a different

type of colonialism could have produced better economic results’

(p. 329-330).

First, one can think of the effects of the Cultivation System, which

thwarted the development of market institutions in rural Java (p. 334), and

on the whole was merely oriented towards remitting a large annual sum to

the Dutch budget (p. 327).

Secondly, the late colonial Dutch regime was busy ‘developing’ the colony

in the material sense, but it largely ignored the need for higher education

or developing a skilled Indonesian work force. The colonizers constructed

a lot of infrastructure and social overhead capital. But the economic gains

from these efforts were largely lost after independence, mainly because

the educational system had failed to train a higher or middle class of

officials who could take over the economy after independence. Booth even

states that the ‘failure to accelerate access to education was probably the

greatest of sins of omission of Dutch colonialism’ (p. 328).

To perceive this as a missed chance for the Indonesian economy is feasible

from the point of view of the Indonesian society itself, which was hindered

by this imbalance. But it makes little sense when analyzing colonial

policy: the Dutch simply did not plan to leave very soon, and therefore did not

integrate the formation of an indigenous elite into their official

policies. Of course, the colonizer can always be blamed for colonizing

the country, but should it also be blamed for consistency within its own

system? I think it is more important that there was a system of ethnic

inequality or racial prejudice at the core of this Dutch colonial

consistency. It is this legacy of colonial rule which certainly can be

viewed as a “missed chance,” because it shows us, amongst others,

the roots of the strong economic position of Chinese entrepreneurs,

and the relatively weak indigenous entrepreneurial class. It also, in

part, explains the discontinuity in economic development after

independence. Booth draws attention to these matters and points at

the crucial fact that the Indonesian nationalist leaders were essentially

isolated from the economy or from specific economic ideas of how

to rule the country: ‘the weakness of the indigenous business

class in the late colonial era, together with the very small numbers of

indigenous Indonesians in the upper echelons of the administrative

service, or in the professions, meant that these groups had far less

influence on the leaders of the independence struggle than in, for

example, British India.’ (p. 330).

These reflections show that the historiography has progressed from making

simple-minded or emotional accusations to the colonial regime, and now

attempts to adopt a more objective perspective which allows for lessons to

be drawn. There have been many crossroads at which another direction could

have been taken, leading to different outcomes of economic development.

Needless to say that there were also favourable effects of certain

important events of Indonesia’s past.

Do the parallels drawn between Suharto’s new order and the late colonial

government policies also imply the suggestion that other roads could and

should have been taken by post-independence governments, or in other words

opportunities were missed? In Chapter 4, we find a positive evaluation oft

he progress made by the Suharto government during 1983-1990, making the

non-oil sectors (agriculture, manufacturing, tourism) more internationally

competitive and the economy less reliant on the exports of oil and gas

(p. 199). At the same time, it is stressed that the role of the government

in the economy was not in any way significantly reduced in the 1980s,

and that very little attempt was made to privatise the state-owned

enterprises, which had a very low rate of return. ‘Regulatory control over

parts of the state-owned enterprise sector remains weak: the so-called

“strategic enterprises,” controlled by the influential Minister of

Research, Dr. Habibie, enjoy access to extra-budgetory sources of

finance which are outside the control of the Ministry of

Finance, or any other government regulatory agency …. This recurrence of the

“Pertamina syndrome” indicates that the problem of controlling the state

enterprise sector is far from resolved in New Order Indonesia’

(pp. 200-201). Recalling the airplane factory on the cover, probably

Booth does view the Suharto/Habibie emphasis on prestigious,

high-tech state enterprises such as an airplane industry as a missed

chance. . .

As already mentioned, Booth is fairly positive about the investments of the

government using the oil boom rents, at the same time warning that the

economic reforms of the 1980s did not recreate the type of open trading

regime that prevailed in the colonial economy from the 1870s to the early

1930s (p. 242). She also states that investment in education and human

capital has, as it was in colonial times, in fact been neglected by the

Indonesian government since 1950.

In the last pages of Chapter 8, ‘Conclusions’, Booth describes the role and

the shape of the type of “market capitalism” that is encountered in

Indonesia (p. 334-336). Without referring to slogan type phrases such as

‘Asian values,’ she explains why free market capitalism is looked at with

ambivalence in Indonesia. This deep ambivalence about liberal market

capitalism persists in contemporary Indonesia at many different levels of

society and this ambivalence has not exactly strengthened Indonesia’s

economic performance. In part, the hesitation to accept free market

capitalism is rooted in nationalist, anti-imperialist views of the

pernicious colonial past. (This might have been different had the Dutch not

been in Indonesia, but without the colonial state formation process there

probably would not have been an Indonesian state as we know it today at

all.) Senior policy-makers, including Suharto himself, saw free market

capitalism as a good opportunity to favor their immediate families and

close business associates. But more broadly, economic growth was viewed as

necessary because the neighbouring countries around Indones

ia realized rapid economic growth. Should Indonesia fall behind, then this

would

make it vulnerable to external threats and internal insurrections.

Recent events in the spring and summer of 1998, after this book had been

published, confirm these suspicions. But Anne Booth goes one step further

and compares the authoritarian growth-oriented state with other

autoritarian developmental states such as Meiji Japan, Franco’s Spain,

and South Korea under Park Chung Hee. The history of these three

countries ‘would suggest that the forces of economic growth, once

unleashed, will inevitably lead to demands for a stronger legal and

constitutional framework which guarantees a broad range of civil liberties,

including a stronger regime of property rights. In Indonesia, too, it is

inevitable that economic growth will create such demands, which the

political system will then have to accomodate.’ … How the government

responds to these challenges will determine not just Indonesia’s

economic future in the new millenium, but its very survival as a

nation’ (p. 336).

These ominous words aptly describe a process that has been underway,

gaining speed after the KRISMON (monetary crisis in its Indonesian

acronym) and Suharto’s stepping down, and which will draw the world’s

attention to Indonesia for the next few years. It seems that a new

‘decolonization’ has just begun, and anyone who wants to put it in

perspective is recommended to read this book.

Jeroen Touwen

L. Jeroen Touwen is post-doc research fellow at the Historical Institute of

Leiden University. He is the author of Extremes in the Archipelago. Trade

and Economic Development in the Outer Islands of Indonesia, 1900-1942

(Leiden: KITLV Press, forthcoming in 1999).

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

Taxing Ourselves: A Citizen’s Guide to the Great Debate Over Tax Reform

Author(s):Selmrod, Joel
Bakija, Jon
Reviewer(s):Self, James K.

Published by H-Business and EH.Net (October, 1998)

Joel Slemrod and Jon Bakija. Taxing Ourselves: A Citizen’s Guide to the

Great Debate Over Tax Reform. Cambridge, Mass.:

MIT Press, 1996. ix + 299 pp. Tables, notes, bibliography, and index. $27.50

(cloth), 0-262-193 75-2; $17.50 (paper), ISBN 0-262-69208-2.

Reviewed for H-Business and EH.Net by James K. Self

, Southern Illinois University (Carbondale)

This book is written as an overview and at times a detailed survey of the

United States income

tax system, and its proposed alternatives. The authors use concepts primarily

from economics and supported by references, and statistics consistent with the

intended depth of the subject matter. Statistical information is presented in

a basic and non-rigorous manner.

It is necessary to add a note of caution on the authors’

interpretations of the literature and of statistical data. The resulting

conclusions are somewhat biased due to their selective use of data and

references. For example, the authors

demonstrate a negative relationship between savings and the rate of return for

a period of time adjusted for certain conditions

(pp. 109-12). However, they selected a time series showing the relationship

between net private saving as a percentage of disposable income, and interest

rates on Baa corporate bonds,

adjusted for expected inflation, and the average marginal tax rate on personal

interest income, plus a fixed equity premium.

The main statistical problem is that interest rates on Baa corporate bonds are

not necessarily representative of the rates on different savings options nor is

there any consideration given to the other factors that lead to savings

decisions that may have directional offsetting magnitudes–for example,

performance of other major financial instruments, fluctuations in the economy

and its impact on the economic variables etc.

The target audience is given the impression that the studies presented are the

generally accepted ones amongst the experts which is not necessarily the case.

Some mention of the differences of opinions and conflicting studies were made

but there was little explanation of the bias the authors brought to the

discussion by their econometric selections.

Chapters one, and two give a brief general history of

the personal, and business income tax, and identify the perceived problems with

each; the exclusions and deductions from the tax base resulting in higher

percentage of tax on remaining revenue;

tax incidence, and the implications of resource allocation.

The earlier history is comparatively brief and used only to justify the

introduction of statistical data. The authors then proceed to discuss the

historical tax assessment in terms of which group pays and a discussion of what

percentage of Gross Domestic

Product these taxes represent. They highlight the shift in tax incidence over

the years and the relative stability of aggregated percent of tax paid to the

federal government for personal income taxes since the second world war. The

reader is made to appreciate how today’s tax system is the product of politics

and how tax legislation has changed continuously through the years, primarily

in response to questions of perceived fairness by the voting public.

Chapters three through five discuss the criteria commonly used to compare tax

systems. The elements of comparison are fairness, economic prosperity,

simplicity, and enforceability.

The authors neglect to acknowledge that these are the same requirements set

forth in Adam Smith’s The Wealth of Nations

(1776). Smith called them his four maxims on taxation. These maxims are

widely accepted and basing the criteria on them ensures that the comparison is

made on a sound theoretical foundation. Slemrod and Bakija then relate the

maxims to practical examples, with a useful discussion of the controversies

surrounding tax reform.

Chapters six through eight discuss proposals to replace the current tax system.

In these chapters, the authors incorporate historical international

experiences with various tax

systems.

They identify the proposed system and how it stands with reference to the four

maxims. Slemrod and Bakija identify two categories of tax reform proposals:

“those that accept the current income tax structure; and those that want to

abandon the income tax entirely for something quite different” (p. 161).

They look closely at the flat tax and identify three distinct dimensions of

flat taxes: a single rate, consumption base, and clean tax base. Single rate

refers to one tax rate for all taxpayers

. Consumption base refers to taxing the value of what people consume. Clean

tax base refers to removing exempt items

>from the tax code. Using these three dimensions, they discuss each reform

proposal, to what degree it applies the three flatness dimensions of

fundamental reform, and how it would expect to rate with the earlier developed

tax criteria. Slemrod and Bakija raise the issue of transition from one system

to another and describe the likely winners and losers. They also discuss

consumption tax plans such as the retail sales tax, Value Added Tax (VAT), and

Personal Consumption Tax. They do a very good job of discussing how VAT is

implemented in different nations. Lastly, they examine the income tax for

possible improvements and discuss hybrid systems

combining both income and consumption taxes. Chapter nine gives a checklist

for the concerned taxpayer interested in deciphering how he or she would fare

under each system.

This book is accessible to the general public and it offers a starting point

for those interested in the current debate over income tax reform in the United

States. For the tax historian,

it is useful as a collection of concepts related to the development of the

United States income tax system, and to a lesser degree, the

various alternatives to the income tax. Due to the scope of the book it will

not be of much use to those well-versed in taxation or for an in-depth

historical perspective. It does accomplish what the book’s stated goal is,

to be A Citizen’s Guide to the Great Debate Over Tax Reform. I enjoyed

the reading.

Subject(s):Economic Planning and Policy
Geographic Area(s):North America
Time Period(s):General or Comparative

How America Got On-Line: Politics, Markets, and the Revolution in Telecommunications

Author(s):Stone, Alan
Reviewer(s):Tympas, Aristotle

Published by H-Business@eh.net and EH.Net (September, 1998)

Alan Stone. How America Got On-Line: Politics, Markets, and the Revolution

in Telecommunications. Armonk, N.Y.: M.E.

Sharpe, 1997. xiii + 241 pp. Bibliographical references and index. $62.95

(cloth), ISBN 1-56324-576

-0; $23.95 (paper), ISBN 1-56324-577-9.

Reviewed for H-Business and EH.Net by Aristotle Tympas, Georgia Institute of

Technology Gt9896a@prism.gatech.edu

Accommodating more than a century of telecommunications history in a little

over two hundred pages represents a formidable challenge. Aware of the fact

that an adequate response to this challenge involves more than one historical

subdiscipline, Alan Stone introduces his work as an interdisciplinary account,

one that seeks to incorporate technological,

social, business,

legal, and political history. For the author of How America Got

On-Line, the Archimedean point of social interpretation in this

interdisciplinary endeavor is to be retrieved by considering the state of

technology at any time. Yet, as

he himself acknowledges, the technological and the social are

“intermixed,” shaping each other through their interaction (p.

12). Perhaps in order to break this interpretative circle, the author relies

so heavily on the concept of “public philosophy,”

a concept borrowed by Walter Lippman in order to represent the most central

features of a society. A public philosophy is for society what a Kuhnian

paradigm is for science: normally invisible in politics, it becomes visible

when it is “frontally challenged” (p. 11). Changes in telecommunications came

along with changes in public philosophy. Accordingly, as explained in the

introductory chapter, the book follows a historical scheme formed by three

events: the placement of a natural monopoly in U.S. telecommunications, the

displacement of this monopoly through a gradual challenge to the public

philosophy that supported it, and, finally, the replacement of this natural

monopoly on the grounds of a new public philosophy, one that emphasizes

regulated com petition.

A great part of the book follows this placement/displacement/replacement scheme

by considering changes in the configuration of two interacting institutional

fronts.

Standing on the one front of this institutional configuration,

representing the private, the market, and the business firm, was the

telecommunications firm AT&T. The book includes chapters about AT&T’s

placement in the position of a natural monopoly through the absorption of most

other telephony firms, its gradual displacement from this position, and its

replacement by a number of telecommunications firms which are now frantically

engaged in forming international institutional alliances. On the other front

of this institutional configuration,

representing the public, the state, and the government, stands the regulatory,

the judicial, and the legislative apparatuses of the state. In this part of

his book, Stone focuses on telephony. Other telecommunications technologies,

most notably radio and television, are discussed only from

the perspective of how they challenged telephony to defend its boundaries, thus

presenting telephony with what Stone calls “boundary issues.”

The rest of the book portrays a more complicated historical scheme. Radios and

televisions, and, more recently,

the networks of massively produced personal computers linked to form the

Internet) are no longer treated as merely presenting us with boundary issues.

In Stone’s view, the previously fragmented telecommunications markets, formed

as they were around distinguishable telecommunications technologies, have

recently converged. He moves on to endorse the term “hypercommunication”

in order to grasp what he perceives to be the disappearance of boundaries

between telecommunication technologies and, in addition, between national

telecommunications markets. The concluding chapter reads more like a

historically informed policy analysis than history. The author here

concentrates on two policy prescriptions. First, given the added complexity

brought about by hypercommunication, any generalization is even riskier.

Second, there is no good reason to find that the transition from communication

to hypercommunication means that the intervening role of the state is now

dispensable.

Alan Stone seems to be at his best when

he retrieves and interprets the crucial conceptions contained in the

regulatory,

judicial, and legislative decisions that shaped the course of U.S.

telecommunications. He convinces you that in the context of telecommunications

policy, private or public,

“niceties of definitional hairsplitting” were indeed “potentionally worth

billion of dollars” (p. 157). How America Got On-Line could be of

specific educational value to telecommunications policy makers, regardless of

whether they come from a public or from a private perspective. Alan Stone has

given us an insightful historical account of the state-market and

government-firm interactions that were indispensable for capitalist success in

American telecommunications. As such, it could also be of considerable

educational value to those generally interested in knowing the specific

institutional configurations that sustained capitalism as the dominant social

relationship of organizing private interests into a public interest.

Perhaps the professional historian would have liked the author to be clearer

as to what is the revolution in telecommunications under consideration. Was

there a revolution in the transition from some unnamed telecommunications

technique to telephony? Was there a revolution in the

transition from natural monopoly in telephony to regulated competition? Was

there a revolution in the transition from communication to hypercommunication?

This points to the more general issue of proper historical periodization, a

prerequisite for historical specificity. Even if we follow Stone in ignoring

the issue of the distinction between ancient and modern telecommunications, we

cannot assume that modern telecommunications starts with telephony. Stone

documents well how radio and television broad casting accounted for a

conception of telecommunications that contrasted to the point-to-point

conception of telecommunications by telephone.

Necessary as it is to retrieve this contrast, it is hardly sufficient to

interpret it in isolation from other, antecedent and more lasting, similar

contrasts in telecommunications.

Historians of technology have pointed out that the telegraph and the telephone

are not the first technology of modern telecommunications (See, e.g., Steven

Lubar, Infoculture: The Smithsonian Book of Information Age Inventions,

Houghton Mifflin Company, New York, 1993). For example, we can observe that

the radio-television vs. telephone contrast in telecommunications was

structurally similar to the contrast between telecommunications as provided by

the newspaper and telecommunications by a letter which was carried by the

post-office from one point to another. Intellectual historians have suggested

that the various technologies of transportation,

from the canal to the railway were also

perceived as bringing about revolutions in telecommunication (Armand

Mattelart, The Invention of Communication, University of Minnesota

Press,

Minneapolis, Minnesota, 1996). Stone neglects them, even though he mentions in

passim that in its battle against AT&T, MCI employed conceptions of

telecommunications that were reminiscent of arguments employed in the context

of the regulation of the railways. Finally, one is unclear as to whether the

history of telecommunications was the historical rule or the

historical exception. Could it be that the transition from a natural

telecommunications monopoly to regulated telecommunications competition (from

communication to hypercommunication) was one particular instance of the more

general transition from fordism to post-fordism (from mass production to

flexible production as a mode of capitalist accumulation)?

The professional political theorist would perhaps be more pleased with some

additional emphasis on conceptual precision.

Stone assumes that the terms

public, state, and government can be employed interchangeably. He assumes the

same for the terms private, market, and business firm. On the grounds of these

assumptions, he frequently feels entitled to contrast any of the terms of the

first set with any

of the concepts of the second set. His argument could be clearer by

respecting the hierarchy of concepts: the public, the state, and the government

(or the private, the market, and the business firm) refer to three different

orders of abstraction (from

the social). By disrespecting this hierarchy, Stone risks contradicting his

major argument by misrepresenting antagonistic private perspectives on what

constitutes a public perspective (a private vs. public issue) as if they had to

do with an a priori antagonism between the state and the private (a private

vs.

state issue).

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