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Sick, Not Dead: The Health of British Workingmen During the Mortality Decline

Author(s):Riley, James C.
Reviewer(s):Emery, J. C. Herbert

EH.NET BOOK REVIEW

Published by EH.NET (July 1998)

James C. Riley, Sick, Not Dead: The Health of British Workingmen during the Mortality Decline. Baltimore: Johns Hopkins University Press, 1997. xvii +342 pp. $58.00 (cloth), ISBN: 0-8018-5411-3.

Reviewed for EH.Net by Herb Emery, Department of Economics, University of Calgary.

With Sick, Not Dead, James Riley has written an ambitious book on the important subject of trends in the health status of nineteenth-century British workingmen. The first part of Riley’s book provides an extensive description of friendly societies in England, the primary sources of sickness and health insurance for British Workingmen in the nineteenth and early twentieth centuries. Riley also examines the extent to which friendly society members had access to medical services at a relatively low cost due to the control friendly societies had over the medical marketplace. The more important contribution of this book, however, is that suggested by its title and the subject of the second part of the book. Riley challenges the belief of many scholars that the documented decline in British mortality in the nineteenth century reflected that British workingmen were also healthier. Living longer and healthier clearly indicates a rising standard of living. In contrast, Riley’s examinations of sickness benefit claim statistics compiled by the Ancient Order of Foresters (AOF) demonstrate that the decline in mortality was not necessarily an indicator of improved health. Foresters it seems, lived longer, were sick less often, but were sicker for longer periods of time. Riley also uses the Forester claims statistics to show clear regional patterns of sickness in Britain which were stable over the period 1870 to 1910. Thus, Riley shows that it is difficult to make conclusions about health status of workingmen on a national level. If the AOF sick benefit claims statistics are representative of the health status of the British working class, then Riley has contributed an important insight into the health and standard of living of nineteenth century British workingmen.

Riley’s primary finding of a surviving but sicker British population after 1870 requires that the observed increase in sickness time in AOF Courts was due to changing health conditions of workingmen, all else equal, and was not merely an artifact of compositional changes in AOF Court memberships. Observed sickness time in AOF Courts could have increased over time because the health of workingmen was changing, or because more of the membership was older with higher sickness risk, or because members with higher sickness and injury risk occupations represented more of the membership. Other potential explanations for changing observed sickness patterns could be changes in the AOF’s rules for claiming benefits, or changing attitudes of members towards claiming sick benefits. Riley addresses, and dismisses, each of these possibilities for the observed increase in AOF sickness time claimed with the exception of changes in workingmen’s health. Essentially, the conclusion that patterns of health were changing is the explanation attached to an otherwise unexplained increase in sick time claimed over time. The reader must decide if Riley has adequately explained away (or, in his regressions, controlled for) alternative explanations for the increase in the length of time per year that Foresters claimed sick benefits.

Riley is extremely careful in letting the reader know the importance of purging the sickness benefit claim statistics of effects due to aging members to identify the underlying trend in health status of British workingmen. Riley shows that as an individual aged, his length of sickness spell increased exponentially. He does not observe each individual member’s age, but he does observe the average age of the members who are generating the claim statistics. As Riley points out, while the average age of the members is a good measure of central tendency in the claims statistics, he still needs to control for the dispersion of ages in a given membership. To see why this is the case, consider two Courts each with memberships with an average age of 30 years. All members of both Courts face identical age-specific sickness risks. In membership A, all members are 30 years old. In membership B, one-third of the members are age 20, one-third of the members are age 30 and one-third are age 40. Even with the same average age, membership B with more “older” members will generate higher observed sick claims since the increase in claims from a 40-year-old member compared to a 30-year-old member is larger than reduction in claims from a 20-year-old member compared to a 30-year-old member. Riley identifies the rate of initiations into court membership and the number of years a court had been operating as key factors influencing age clustering (or conversely, age dispersion) in the membership. Initiations brought younger members into AOF Courts and tended to slow down the aging of the membership. He includes the initiation rate (new members to existing members) and the years since the AOF Court was formed in his regressions. Riley regresses the sickness time variable on these controls and still finds an increase in sickness time claimed over time.

The question remains whether the increase in sickness time that Riley identifies is a true trend in unobserved health status or just a biased residual effect resulting from the imperfect proxy variables for controlling for the increases in sickness due to an aging membership. There is good reason to suspect it is the latter since Riley is silent on quits/secessions from Court memberships in his discussions on controlling for age in his sickness time regressions. Riley points out that when quits/secessions occurred, they “typically occurred within a few years of joining” when members were in their 20s or 30s. Thus, where initiations reduced the average age of the membership by bringing in younger members, quits or secessions accelerated the aging of the Court membership. In other words, the net of initiations and secessions is the relevant factor for controlling for the aging of Court memberships since both influence the number of members at younger ages in the membership. In the absence of controls for secessions, Riley’s maintained assumption for interpreting the trend increase in AOF sickness time claimed is that membership was a lifetime status for joiners. Unfortunately, Riley does not convey much information about the extent to which membership in a friendly society was a lifetime status for initiates. The reader will learn that Forester secession rates were higher than those of the Oddfellows in Britain but Riley does not tell the reader what Oddfellow secession rates were. Readers will not get a sense from this book how big an omission from the analysis this potentially is. While not directly comparable to the British orders, in the Independent Order of Odd Fellows in North America, the average length of membership was only around 5 years and only one quarter of members remained in the membership for 25 years. Only a minority of members did not secede from membership. Thus, one explanation for Riley’s measured trend in sickness time after 1870 is that as the number of initiations into AOF Courts slowed, the aging effect of secessions became important. Riley’s controls for aging, which only account for the rate of initiation, understate the true extent of aging in the membership. This bias arising from the exclusion of secession rates would appear as an otherwise unexplained, or residual, trend increase in sickness time claimed over time.

A frustrating element of this book is that the reader does not really know who belonged to the AOF. Riley asserts that the members were drawn from the working class, and that the AOF membership was similar to the Oddfellows membership which he shows was representative of the British population in terms of occupational distribution. Riley provides no direct evidence in support of this assertion. This shortcoming of the book is important for understanding whose health patterns we are learning about. It is critical for interpreting Riley’s analysis of regional sickness patterns since the analysis requires that the Foresters shared the circumstances and characteristics of the communities in which they lived. Riley operationalizes this point in Chapter 9 asserting that “earlier parts of this book show that AOF members as a whole closely resembled the central ranks of the working population in Britain, which implies that they did so also in most local communities” (p. 243). On the next page, however, Riley notes that for Britain as a whole, the Foresters represented 7.3 percent the male population in 1891 but for individual counties, this proportion varied from a low of 0.7 percent of the male population to a high of 20 percent. This variation seems hard to reconcile with the assumption that AOF memberships were everywhere equally representative of the local population. That AOF memberships were not always representative of the county population may explain Riley’s finding that coal mining and mining trades, occupations known to have high sickness and accident risks, were not statistically significant factors for explaining AOF sickness time or mortality. Riley’s does not entertain the possibility that the AOF dealt with high-risk occupations like coal mining by discouraging the participation of miners in the organization. If that was the case, miners were not in the AOF Courts, hence the claims statistics are not affected by the amount of mining employment in the county in which the AOF Court is located. The presence of miners would have affected the ratio of AOF members to the county population. Riley could have examined this possibility with his data by examining the correlations between the ratio of AOF members to county population and the importance of mining employment in the county.

Finally, a large focus of the early chapters of the book concerns the relationship between friendly societies and doctors. Riley documents the extent of access to doctors enjoyed by friendly society members and the extent of control over the medical market place enjoyed by the consumers. Riley has done an excellent job synthesizing various sources on this issue and providing original evidence from Forester Court minute books. Readers should be cautious however, in how they interpret sickness risks faced by workingmen from this discussion and in how they interpret what friendly societies were doing. Riley’s focus on access to direct medical care through friendly society membership obscures the more important cost of sickness and injury in the nineteenth century, lost earnings. Friendly societies like the AOF may have provided access to physicians for members and have discussed the nature of care, but the income replacement benefit was clearly more important in terms Court finances. The nineteenth-century actuarial investigations of sickness were motivated by concerns about the sustainability of the income replacement sick benefit, not concerns over revenues to finance medical care. While it is interesting to know how the fraternal medical economy worked in the nineteenth century, it is a puzzling focus for an analysis of friendly societies that were more concerned with insuring men against the loss of income due to illness or accident.

In the end, Riley has provided a book that is a substantial improvement over many of the books written on British friendly societies. He provides fresh information and updates a literature that has not seen a great deal of activity for some time. Even though I have my doubts about the usefulness of friendly society sickness claim statistics for studying the health of workingmen, it is interesting to see the patterns that emerge from the data. For any scholars considering a project similar to this one, Riley’s book should be considered the point of departure.

Herb Emery Department of Economics University of Calgary

Herb Emery has co-authored (with George Emery) the forthcoming book (1999) A Young Man’s Benefit: The Independent Order of Odd Fellows and Sickness Insurance in the United States and Canada (McGill-Queen’s University Press ).

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Subject(s):Living Standards, Anthropometric History, Economic Anthropology
Geographic Area(s):Europe
Time Period(s):19th Century

The Female Economy: The Millinery and Dressmaking Trades, 1860-1930

Author(s):Gamber, Wendy
Reviewer(s):Nickless, Pamela

EH.NET BOOK REVIEW

Published by EH.NET (July 1998)

Wendy Gamber, The Female Economy: The Millinery and Dressmaking Trades, 1860-1930. Urbana: University of Illinois Press, 1997. 320 pp. $39.95 (cloth); $16.95 (paper), ISBN: 0-252-02298-X (cloth); 0-252-06601-4 (paper).

Reviewed for EH.NET by Pamela Nickless, Department of Economics, University of North Carolina- Asheville.

This is an important work about a portion of the nineteenth century economy that was dominated by skilled, relatively well-paid women workers and entrepreneurs. If this description doesn’t fit your image of the work world for women a hundred years ago, may I suggest this book? Professor Gamber in this careful and subtly nuanced study makes a strong case for the importance of the millinery and dressmaking trades in the work world of nineteenth-century women. She also clearly describes the impact of the mass-production of hats and women’s clothing on women’s employment and business opportunities.

The Female Economy is divided into two sections: Part One describes the “female economy” of proprietors, workers and consumers from 1860 to 1910 while Part Two analyzes the transformation in production from 1860 to 1930. In 1860, women of almost all social classes purchased clothing from milliners and dressmakers: goods were made to order usually in a small shop with a female entrepreneur. By 1930, women of almost all social classes purchased factory-made clothing from a department store; both factory and store usually owned and operated by men. The 1930s garment workers were largely unskilled while the milliners and dressmakers of the 1860s were semi-skilled and highly skilled workers. While historians have explored the impact of this “democratization” of fashion on American culture, little work has been done on the women who made the custom goods that were replaced by the off-the-rack garment.

Although the dress-making and millinery trades have been richly represented in American and English literature, the non-fiction voices of these workers are hard to find. In Part One, Professor Gamber presents the results of her painstaking gathering of data from business directories, city directories, the manuscript census, the R.G. Dun and Co. records and a myriad of other sources including the letters and diaries of middle and upper class customers, Progressive Era consumer and workers-aid organizations and the few extant memoirs of milliners and dressmakers. Most of the data are from Boston and the study never ventures far from the Northeast. The intensive study of Boston and the rich data set that Gamber has collected is one of the finest aspects of this work. She is able to flesh out the portraits of some female entrepreneurs by locating them in more than one source. The Dun and Co. records are a particularly rich source of personal information (closely resembling gossip) on the business women and their families. One of the most fascinating portions of the book uses the records of Boston’s Protective Committee; this committee intervened on behalf of women workers in the larger dress-making establishments. Here in one fell swoop, we have workers, female employers and their customers (members of the committee) all involved. Gamber relates the ironic plight of the woman entrepreneur with a poor Dun and Co. credit rating whose customers conspire to “trustee” their own orders until she pays her workers with money she doesn’t have because her customers won’t pay their bills in a timely manner.

It is difficult to summarize Gamber’s portrait of this female economy. A few tidbits may surprise the reader: millinery and dressmaking were “…the fourth most important occupational category for women in 1870; only domestic servants, agricultural laborers, and seamstresses were more numerous.” In 1900, dressmaking still ranked third while millinery was fourteenth (p. 7). Most proprietors of retail establishments were single women (“man milliner” was an epithet) and in Boston, a quarter were over thirty years old. Gamber also finds strong evidence of the working class origins of many of the “Madams” and, she argues, dressmaking and millinery was one of the few paths to independence for the working class daughter. Although this seems a very female world, men controlled access to credit and in the case of customers, husbands often decided when and which bills would be honored. Millinery and dressmaking was a risky business and few women became wealthy but many did manage to maintain a “precarious independence.”

In Part Two, Gamber explains in more detail the millinery and dressmaking shop; how work was done, how skills were acquired and how a worker might rise from apprentice to shop owner. She describes the transmission of skills and how a young woman, with hard work and luck, might learn a craft and own her own small shop. In the late nineteenth century, the development of systems of drafting and eventually pre-printed patterns sought to eliminate the importance of training and trade secrets and “..challenge the dressmaker’s most precious skill: her monopoly over cutting” (p. 138). This development would not only convince many would-be dressmakers that they had no need for training, it also paved the way for standardized sizes. (Fashion would, of course, also play a role as fitted bodices fell out of favor in the early twentieth century.) The proponents of “scientific” dress-cutting techniques were scathing in their denigration of the standard practices of dressmakers which usually involved numerous fittings. Now a simple machine (usually the work of a masculine mind) could eliminate the need for tiresome fittings and the work could be done, it was claimed, by any housewife with some skill at sewing. While these machines and drafting methods no doubt did not deliver all they promised, they mark the beginning of the erosion of the necessity of a dressmaker for the well-dressed woman. The development of the department store and the availability of factory-made dresses (altered in the store for the up-scale customer) in the early twentieth century completed the transformation of dressmaking. The product had, of course, been subtly altered: no one today would expect their clothing to fit as well as clothing made by a dressmaker or tailor.

A similar process takes place in the early twentieth century in the millinery trade. Milliners had, unlike dressmakers, generally kept stock on hand and thus had to deal with wholesalers. The largely male world of wholesaling had accommodated women entrepreneurs of “small means,” but beginning around 1900, wholesalers began to “rationalize” their business. Business practices which had emphasized a personal relationship between retailer and wholesaler now gave way to more business-like behavior. This emphasis on what we would probably call the bottom line made the wholesalers generally impatient with small shops that were often late to pay or returned unsold goods–most of these small shops were of course run by women. These women were now seen as “unbusiness-like,” undesirable customers. This combined with the development of factory-made hat forms (also sold by the wholesalers) spelled the end to the custom-made hat.

I would be remiss if I neglected to mention the final consumer’s role in this process: all of this ready-made stuff was cheaper. Instead of having one or two good dresses and one new hat a year, a woman of modest means could afford more if the dresses and hats were either entirely or mostly factory-made. Gamber is careful to note the complex interaction among consumers, retailers, wholesalers and producers in this process of transforming an industry.

In this portion of the work Gamber does a superb job using millinery trade journals and the publications of the proponents of “scientific” dress-cutting techniques to substantiate her story of de-skilling and de-feminizing millinery and dressmaking. Indeed her use of multiple sources makes her story a rich and complex one. This book is must reading for any student of nineteenth and early twentieth century labor history. The only minor criticism I would make is that Professor Gamber has a tendency to push her sources a little too far. Can we really know that the dressmakers and milliners took pride in their work, that they considered themselves artisans? I want to believe that the impoverished milliner with one employee and a business that lasted only two or three years had hopes and aspirations of grander things and that for a brief time she was able to create and live an independent life that she valued but I’m not convinced. This is a minor quibble about a truly outstanding piece of scholarship. We should be grateful to Professor Gamber for uncovering this female economy and suggesting so many other tantalizing avenues for future research.

Pamela J. Nickless Department of Economics University of North Carolina at Asheville

Professor Nickless is Professor of Economics and Director of Women’s Studies at the University of North Carolina at Asheville. She is currently involved in a study of nineteenth-century Southern business women, many of whom were dressmakers and milliners. She has recently published on the role of women in the Shaker communities and on pedagogy, including an article published on EH.NET with Akira Motomura.

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Subject(s):Social and Cultural History, including Race, Ethnicity and Gender
Geographic Area(s):North America
Time Period(s):19th Century

Titan: The Life of John D. Rockefeller, Sr.

Author(s):Chernow, Ron
Reviewer(s):Goldin, Milton

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

Ron Chernow. Titan: The Life of John D. Rockefeller, Sr. New York: Random House, 1998. xxii + 749 pp. Photographs, notes, bibliography, and index. $30.00 (cloth), ISBN 0-679-43808-4. Reviewed for H-Business and EH.Net by Milton Goldin , National Coalition of Independent Scholars (NCIS)

Ron Chernow did much of his research for Titan at the Rockefeller Archive Center in Pocantico Hills, Sleepy Hollow, New York, earlier the home of John D. Rockefeller, Jr. and his second wife, Martha Baird. Just beyond the elegant staircase in the entrance hall is a portrait of John D. seated before his rolltop desk. The richest man in the world (he pulled ahead of Andrew Carnegie sometime during the early 1900s) gazes not so much at you as through you. And the symbolism of the rolltop desk, with its dozens of drawers into which papers can be filed, hidden, quickly retrieved, quickly refilled, and quickly rehidden, should not go unnoticed. The overall impression is of a man without illusions, organized and purposeful, a man fully in control of himself and events.

The problem is that, like almost everything else about John D.’s extraordinary life, this impression is simultaneously accurate and inaccurate. As Chernow makes clear, John D. was a titan with remarkable needs and equally remarkable abilities to mask his real self. For nearly every characteristic of his that we know to be true, there is another, countervailing characteristic that we also know to be true.

Chernow tells us that John D.’s philanthropic gifts financed theoretical (and many practical) bases of modern health care in America. Yet, when he became ill, Rockefeller frequently relied on folk remedies, such as smoking mullein leaves in a pipe. He insisted that “the best men must be had” as faculty members for the University of Chicago, which came into existence thanks largely to his munificence. But Chernow notes that “To some extent, Rockefeller sent out conflicting messages and was partly to blame for [President William Rainey] Harper’s profligacy. It was Rockefeller, after all, who urged Harper to pay top dollar for America’s best academic minds.” And it was also Rockefeller, a true believer in capitalist enterprise, who fumed because Harper sought to earn as much as he could from other assignments while he headed the university. “It was an odd situation,” comments Chernow, with “the world’s richest man chastising a biblical scholar for unseemly materialism”(p. 318).

John D., Jr. had to dissuade his father from ringing the family compound in (then) Tarrytown, New York, with barbed wire. Yet, throughout his life, John D. happily joined fellow Baptists–black or white, it made little difference to him–to prepare for Judgement Day. And, like the ordinary true believer he claimed to be, he swept Cleveland’s Erie Street Baptist Mission (which became the Euclid Avenue Baptist Church) without complaint. “Even in later years, when huge swarms of people congregated at the church door to glimpse the world’s richest man, he would still clasp people’s hands and bask in the glow of familial warmth,” writes Chernow (p. 53).

But John D.’s humility never prevented him from driving competitors into poverty or caused him to worry about the fates of their wives and children. Chernow describes 1872, two years after Standard Oil was incorporated, as the “annus mirabilis” of the titan’s life: “The year revealed both his finest and most problematic qualities as a businessman: his visionary leadership, his courageous persistence, his capacity to think in strategic terms, but also his lust for domination, his messianic self-righteousness, and his contempt for those shortsighted mortals who made the mistake of standing in his way” (p. 133).

In his search for the essential John D.–that is, to identify the characteristics that took precedence over other characteristics–Chernow acknowledges his intellectual debt to Allan Nevins, the first writer to attempt a biography of the titan reasonably free of the categorical judgements of muckrakers, who were determined that the evil John D. must predominate in the public mind. Nevins’s two-volume Study in Power: John D. Rockefeller: Industrialist and Philanthropist was published in 1953. Dozens of books about the Rockefeller family, with sections on John D., appeared after Nevin’s; but Chernow notes that no full biographies followed, except for David Freeman Hawke’s monograph-length John D.: The Founding Father of the Rockefellers (1980).

A major reason for this situation was that the Rockefeller family would not permit files to be opened. Given John D.’s appalling reputation during his lifetime (made worse by writers during the Great Depression) and Chernow’s access to the closed files, Titan was awaited with great anticipation. What would the author tell us that was new, how would he reinterpret what was already known, and, most important, to what extent could he reveal the essential John D. Rockefeller?

Briefly put, Titan is more a filling out of a portrait than it is revelations on the nature of John D. We have long known, for example, about the convoluted relationship between John D.’s father, William, “Big Bill,” and his mother, Eliza Davison. But the full extent of Big Bill’s unsavory behavior–he was a mountebank hustler of “cancer cures” and a womanizer and bigamist who literally brought a mistress into his home and sequentially impregnated both his wife and his mistress–has never been drawn more clearly. Eliza, a devoutly religious woman, accepted the burdens of their life together without complaint. Chernow concludes, “Bill had been her sole chance, her crazily squandered bid to escape from rural tedium, and the misbegotten marriage left both her and her eldest son [John D.] with a lifelong suspicion of volatile people and rash actions” (p. 59).

Chernow leaves no doubt, however, it was from his father that John D. inherited his sheer love of money. (“After he had made his gargantuan fortune, he said admiringly of his father, `He made a practice of never carrying less than $1000, and he kept it in his pocket'”[p. 24].) From his mother came not only his deep religious beliefs but his sincere reverence for women. (To his great credit, John D. endowed a college for black women in Georgia, when neither blacks nor women were generally considered worthy of receiving any education, let alone a higher education. Chernow describes the creation of Spelman College with praiseworthy conciseness and comprehension on pages 240-42.)

“Of all the lessons John absorbed from his father, perhaps none surpassed in importance that of keeping meticulous accounts,” Chernow adds (p. 25). But from neither parent did he evidently inherit his incredible determination not only to always know exactly what was happening in his business but to plan strategically on the basis of state-of-the-art information. The titan had to know to the last pipe, to the last oil storage tank at each of his refineries, to the last Standard Oil tanker at sea, to the last penny in Standard Oil’s Accounts Receivable, and to the last of whatever else he could think of in his business, where everything was, how the item or person served his purposes, and their exact value. Chernow tells us that John D. even calculated the exact number of chews it took–ten–to properly masticate food; family and dinner guests who allocated fewer chews when taking nourishment simply had to await his completion of the task.

From the beginning of his career, when he worked as a bookkeeper, John D. liked everything about business (he originally took on the job because Big Bill would not provide money for him to attend college: “About to enter into his second [and bigamous] marriage, Bill must have been drastically scaling back on first-family expenditures, albeit without disclosing the reason for the sudden urgency,”[43]). He liked making entries in ledgers, he liked “all the method and system of the office,” he delighted in negotiating secret rebate agreements, and he positively reveled in consolidating control over the oil business. His mother had taught him that “willful waste makes woeful want,” and he could not bear to waste a minute on any task, no matter how much he might have enjoyed it. Blotting his signature took valuable time and energy, so he hired a man to blot for him.

Such super-activity led to nervous disorders. Chernow writes, “Starting in early 1889, Rockefeller had complained continually of fatigue and depression. For several decades, he had expended superhuman energy in the creation of Standard Oil, mastering myriad details; all the while, pressure had built steadily beneath the surface repose…” (p. 319). And yet he died just two years short of a hundred.

Chernow deals at length with the “myriad details” of how and why Standard Oil came into existence and how John D. managed the corporation. In broad outline, his observations do not tell us a great deal more than does Daniel Yergin’s The Prize, published in 1991. But how Chernow’s particulars not only fill out the picture but disprove Nevins’s claim that Rockefeller’s fortune was an “historical accident!”

To illustrate how Rockefeller would make informed gambles–but gambles, nonetheless–Chernow describes the way John D. used the disastrous June 1893 stock market crash to finally consolidate his empire: “As the [Pittsburgh] Mellons emerged as a worrisome threat in the export market, Rockefeller feared they might strike an alliance with the French Rothschilds. In August 1895, having borrowed heavily against Pittsburgh real estate to build their budding oil empire, the Mellons were forced to sell their Crescent Pipe Line Company and other properties to Standard–a huge windfall that yielded 14,000 acres and 135 producing wells. It now seemed that Standard Oil owned the entire industry, lock, stock, and barrel” (p. 335). But had the market recovered earlier or had the Mellons held out longer, John D., along with his competitors, might have found themselves overextended.

Chernow makes clear that John D.’s philanthropic giving was as strategic as his business activities. As a lowly-paid bookkeeper, he had purchased an inexpensive ledger to record how every cent of his salary was spent, including a regular dime to charity. For the most part, before he moved his family to the Tarrytown compound, he gave as he earned, secretly. He liked to sit in church, scan the congregation for needy but deserving brethren, and place cash in deserving hands.

But whether the gift was a dime or in the millions, he had to be persuaded that his charity would do some good. He wanted results, not just to give handouts, and he sought the best counsel he could obtain on giving money from Frederick Taylor Gates, a former Baptist minister who became a member of his staff. Gates had to convince him in detail of the advisability of what would come to be called “scientific philanthropy.” And what sold John D. was that this systematic approach to giving would accomplish a nationwide and even worldwide reordering of mankind’s current status.

At Gates’s urging, Rockefeller’s first major gift went to establish a Baptist institution of higher learning, the University of Chicago. Grateful students celebrated his generosity by singing, “John D. Rockefeller, wonderful man is he/Gives all his spare change to the U. of C.” But the University did not receive the bulk of his gifts; the bulk went to a startling variety of causes ranging from Spelman College to public-private partnerships in the South, to massive health care initiatives.

Meanwhile, Congress, like the majority of newspaper editors and reporters, distrusted him. In 1890, the Sherman Antitrust Act became law, and for five years, until the Standard Oil trust was dissolved, Washington hounded him. What Washington and the editors clearly missed, however, was that “Rockefeller was a unique hybrid in American business: both the instinctive, first-generation entrepreneur who founds a company and the analytic second-generation manager who extends and develops it. He wasn’t the sort of rugged, self-made mogul who quickly becomes irrelevant to his own organization. For that reason, his career anticipates the managerial capitalism of the twentieth century” (pp. 227-8).

John D. spent his last days worshiping among blacks (he was the only white congregant) of the Union Baptist Church in Ormond Beach, Florida. The day before he died, he paid off the mortgage of the Euclid Avenue Baptist Church. His body was interred in Cleveland, where he began his career and where even a glimpse of the building in which he began as a bookkeeper moved him deeply.

At the family compound, John D. had had a flag unfurled to mark various anniversaries in his life. Today, no one remembers the anniversaries, and nearly all his great-grandchildren and great-great-grandchildren have moved away. Chernow notes that “Although Junior moved into Kykuit [John D.’s home at the compound] after Rockefeller’s death, he knew that his father was inimitable, and so he decided to retain the Jr. after his name. As he was often heard to say in later years, ‘There was only one John D. Rockefeller'” (p. 676).

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

The Blues: A History of the Blue Cross and Blue Shield System

Author(s):Cunningham III, Robert
Cunningham Jr., Robert M.
Reviewer(s):Gordon, Colin

EH.NET BOOK REVIEW Published by H-Business@eh.net and EH.Net (June 1998)

Robert Cunningham III and Robert M. Cunningham Jr. The Blues: A History of the Blue Cross and Blue Shield System. Dekalb: Northern Illinois University Press, 1997. xii + 311 pp. Tables, illustrations, notes, bibliography, and index. $36.00 (cloth), ISBN 0-87580-224-9.

Reviewed for H-Business by Colin Gordon , University of Iowa

The American health care system is an elaborate and chaotic and shifting compromise among doctors, employers, and insurers. As the providers of care, doctors have historically guarded their terrain, alternately portraying themselves as embattled entrepreneurs or selfless professionals, against the onslaught of “third parties,” especially insurers, organized patients, and the state. As the principal consumers of health care in the private welfare state of the postwar era, some employers have juggled their responsibility for employment-based benefits with the increasingly expansive (and expensive) scope of collectively-bargained health provision, the inflationary bias of third party billing, the periodic threat of state intervention, and the determination of other employers to avoid such burdens altogether. As the fiscal and actuarial intermediary between providers and consumers, commercial insurers have played both sides–sometimes (in their negotiations with providers and hospitals) the cost-conscious consumer, sometimes (in their role as HMOs) the parsimonious provider.

In all of this, a number of interests play (or have played) lesser roles. Between the early 1940s and the late 1960s, organized labor bargained a meager policy of wage replacement into an expansive package of service benefits for workers and dependents alike. Over the same era, the state mopped up around the failures of private provision, mostly by financing hospital construction and picking up some of the bad risks with Medicare and Medicaid. And hospitals, increasingly dependent on insurers and the state, played an increasingly passive political role. Perhaps most interestingly and importantly, two massive and intertwined nonprofit institutions–the Blue Cross (hospital insurance) and Blue Shield (physician insurance) Plans–straddled all of these interests to emerge as the principal intermediary between federal health programs and their clients, the nation=92s largest managed care network, and an important insurer in their own right.

For this reason alone, scholars should welcome the publication of The Blues, which pulls together a number of studies of local plans, the valuable but dated scholarship of Louis Reed (1947) and Odin Anderson (1975), and proprietary access to the Plans=92 archives. The early chapters are not terribly original and recount (somewhat woodenly) the early history of prepayment plans and the ways in which the Blues emerged as a middle ground between fee-for-service individualism and state regulation. Through these chapters, the authors persistently celebrate the innovations of the Blues=92 “pioneers,” while casting thinly-veiled aspersions at the extremists to the left (advocating national health insurance) and right (opposing all prepayment and contract practice).

While the middle chapters on the 1940s and 1950s continue to wander and wonder in the footsteps of leading Blues executives, they are valuable for the ways in which they connect the often arcane details of actuarial projection and hospital remuneration to the piecemeal construction of a private welfare state. In their largely futile effort to hold to the principal of “community rating,” the Blues underscored the persistent irony of private health insurance–that it was ultimately an exercise in avoiding risk rather than spreading it. In their increasingly elaborate brokering of the demands of hospitals, employers, and patients, the Blues underscored the limits of private health insurance–which quickly became obsessed with shuffling costs among the covered population and their employers and indifferent to the goal of expanding coverage.

Both the Blues, and this account, hit their stride with the consideration, passage, and administration of Medicare and Medicaid. Through these years, the Blues reacted in much the same way that leading managed care concerns would react during the debate over the Clinton Plan three decades later: vested interests in the private health care market by the 1950s, the Blues were leery that state intervention “would let the camel=92s nose [national health insurance] a little further into the tent” but also poised to administer any new federal program. In the ensuing debate, the Blues juggled the concerns of their various allies–the doctors, the hospitals, and organized labor–and traded politically on their unique experience with insuring the elderly. Indeed the Blues quickly took the administrative lead after 1965, effectively “capturing” a program they had resisted, questioned, and shaped in the decade preceding its passage. For the Part “A” hospitalization program, Blue Cross emerged as the designated intermediary in thirty-one states representing almost 90 percent of participating hospital beds; under the Part “B” medical insurance program, thirty-three of forty-nine designated carriers (covering about 60 percent of beneficiaries) were Blue Shield Plans.

The Blues closes with three chapters covering, in turn, the 1970s, the 1980s, and the early 1990s. The script for these decades is relatively familiar, and the authors place Blue Cross and Blue Shield at the center of a maelstrom of health care inflation, rapid technological change, fiscally-anxious federal programs, cost-conscious employers, and increasingly beleaguered consumers and workers. At times, this vantage point is quite valuable, given the close attention which the Blues necessarily paid to the deepening actuarial and inflationary crisis. At times, the Blues seem more like the Rosencrantz and Guildenstern of a much larger drama, and of which we only get the occasional glimpse.

This is a valuable book, although it is also something of a disappointment. The chronological sweep (virtually all of the twentieth century) is important, but each important episode has been recounted more effectively elsewhere. The relentless (and often celebratory) focus on the Blues lacks the critical consideration of a wider array of interests woven so well by Paul Starr and the leading historians (Rashi Fein, Theodore Marmor, Anne and Herman Somers) of Medicare. And, even on its own terms, The Blues often misses the ambiguities and contradictions of a system (captured nicely by David Rothman[1] and by Rosemary Stevens=92 fine introduction to this volume) which was both a pointedly private alternative to national health insurance and a quasi-public surrogate for the state. More broadly, this is a narrowly institutional account which never broaches the “big” questions about the peculiar trajectory of the American welfare state. Why did national health insurance falter in the United States while a national pension and unemployment system succeeded? What was the logic and implication of organizing private and public social provision around the “family wage” assumptions of social insurance? How did race and racism shape both the formative years of private and public health policies and the backlash against public programs which began in the late 1960s? In what ways did a shifting compromise of private interests–insurers, labor, employers, doctors, hospitals–shape private and public patterns of health provision? And why–in this account and in the larger logic of the American welfare state–are those on the receiving end considered beneficiaries or clients or dependents or consumers, but never citizens?

Note

[1]. David Rothman, “The Public Presentation of Blue Cross, 1935-1965,” Journal of Health Politics, Policy, and Law 16:4 (Winter 1991), 671-693.

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Subject(s):Education and Human Resource Development
Geographic Area(s):North America
Time Period(s):General or Comparative

Guns, Germs and Steel: The Fates of Human Societies

Author(s):Diamond, Jared
Reviewer(s):Mokyr, Joel

EH.NET BOOK REVIEW

Published by EH.NET (May 1998)

Jared Diamond, Guns, Germs and Steel: The Fates of Human Societies. New York: W. W. Norton, 1997. 480 pp. $27.50 (cloth), ISBN: 0-393-31755-2.

Reviewed for EH.NET by Joel Mokyr, Departments of Economics and History, Northwestern University.

Jared Diamond is a physiologist and evolutionary biologist with a passion for archaeology and linguistics. That, by itself, should seem to make him irrelevant to economic history. Yet his widely read and admired recent book, honored last month with a Pulitzer Prize, is one of the more important contributions to long-term economic history and is simply mandatory to anyone who purports to engage Big Questions in the area of long-term global history. He starts off his account with what he calls “Yali’s question.” Yali is a New Guinea notable, who one day poses to the author the question why white people have so much ‘cargo’ (western manufactured goods desired by New Guineans), but New Guinea produces no cargo that Westerners are interested in.

Indeed, the question of questions. Diamond joins such heavyweights in economic history as Eric Jones, Douglass North, Nathan Rosenberg, and recently David Landes in asking why “we” are so rich and “they” are so poor. Is it institutions? Culture? Technology? Religion? Diamond does not reject any of these answers altogether, but instead formulates models in which they become endogenous variables. The real exogenous variable, when all is said and done, is geography. Diamond, to put it bluntly, is a geographical determinist. The shape and location of continents, flora, fauna, microbes, water, climate, topography, all are truly exogenous to history. The rest is endogenous.

Geography has of course a terrible reputation. David Landes, in Wealth and Poverty of Nations (New York, 1998) starts off by recounting how geography departments were closed around the country without a tear, and notes that “no other discipline has been so depreciated and disparaged.” Simple models that submit that “Britain had an Industrial Revolution because it had coal” have long been abandoned. Yet before we dismiss this as another simplistic model, we have to face the fact that Diamond knows his stuff inside out, to the point where any thought of using the adjective “crude” (traditionally preceding “determinist”) evaporates as we turn the pages. Diamond fires off a barrage of facts and observations based on half a dozen disciplines most economic historians this side of Eric Jones are unschooled in: archaeology, botany, linguistics, anthropology among them. The story he tells is one of a trajectory in which the world’s population bifurcated for geographical reasons. Once on different paths, Africa, America, and “Eurasia” diverged more and more through positive feedback effects, in which geography fed into technology, technology fed into power structures and culture, feeding back into technology and growth until we got a world of Western economic hegemony. Such “autocatalytic” models which view economic history as a disequilibrium process once were shunned by the neoclassical cliometric orthodoxy. Today, thanks to the efforts of scholars as diverse as Douglass North and Paul David, we are getting used to them, and the intellectual gains are substantial.

What, then, are the geographical factors that Diamond thinks determined the course of economic history? Above all, it is that human wealth and success depends on interaction with the environment. Economic history in his view is a game against nature, not primarily a social process. Production– especially in agriculture– depends on the geographical hand we have been dealt. Yet Diamond’s emphasis is not on soil fertility and minerals as in the writings of most geographers, but on the ability of homo sapiens to domesticate plants and animals. His view is that all societies and cultures have approximately similar abilities to manipulate nature, but the raw materials with which they had to work were different. Diamond points out in his witty prose that domestic animals are much like Tolstoy’s view of happy marriages: all happy marriages are the same, each unhappy marriage is different in its own way. Domesticable animals are all domesticable in the same way, but recalcitrant animals are all different. To exploit large animals for food, energy, or other services, domesticable wild animals need to exist, a condition that did not obtain in Precolumbian America (where the arrival of homo sapiens 13,000 years ago had led apparently to their extinction). But even if they existed, they needed to satisfy some conditions such as being able to breed in captivity, safe for children and other living beings, and so on. He argues, with great conviction, that the hippos and giraffes of Africa, the jaguars of the Amazon, and the kangaroos of Australia did not meet those conditions. The domesticated llamas, turkeys, and dogs of America could not pull it off either. Eurasia, on the other hand, was lucky enough to have had the wild animals from which our cows, sheep, horses and chickens could be bred. This gave the Europeans huge advantages, not only in terms of the development of technology (e.g. mixed farming and wheeled transport) but also in providing them eventually with immunity against infectious diseases caused by the proximity of these animals. When they then established sudden contact with non-Europeans, the “Plagues and Peoples” effect simply overwhelmed the unprepared victims.

A similar and perhaps less well-known effect occurred with respect to domesticable plants. Eurasia was simply lucky in that its environment provided a much larger stock of plants that lent themselves to domestication, and plants that had better quality in terms of the nutrients supplied, resistance to disease, ease of cultivation and so on. Botanical wealth, constrained by the local flora, determined agriculture, agriculture determined everything else, says Diamond. Eurasia won because the supply of wild plants that provided the gene pool for domesticated crops was larger, richer, and better. If you feel that this is a bit simplistic, read his chapters on “How to Make an Almond” and “Apples and Indians.” It is a serious, informed, and well-thought out argument, and if in the end we are not wholly convinced, thinking of how to refute Diamond will make us wiser and better informed.

Diamond’s argument makes serious use of counterfactuals, to the point of wondering in the last chapter what would have happened if a German truck driver in 1930 would have hit his brakes a second later and killed Hitler in a head-on collision. But in the chapters on agriculture his imagination abandons him. How much of the performance of non-Europeans was really constrained by their environment and how much their own making? In Diamond’s view, the answer is “all and nothing.” Yet one can imagine crops that were manipulated and selected to produce crops that are as unimaginable to us as poodles and sweet corn would have seemed 10,000 years ago. Take one example: among the disadvantages that the indigenous plants of what is now the Eastern U.S. suffered from is a lack of founder crops. Yet he does concede that some of them on the surface could have done nicely, such as a flower named sumpweed, “a nutritionist’s ultimate dream” with 32 percent protein. Sumpweed, Diamond explains, did not make it to the rank of corn, potatoes, and rye because it causes hayfever, does not smell good, and handling it can cause skin irritation (p. 151). Are we really sure that these vices could not have been bred out of them? After all, all domesticated plants had originally undesirable characteristics, but through deliberate and lucky selection mechanisms they eventually got over them. Wheat, rye, and maize, which feed much of the world’s population, all had humble beginnings. Diamond points out that much of our ability to improve plants depended on whether certain characteristics were the result of epistatic effects, that is, caused by more than one gene. People could select for a particular trait as long as it was caused by one of very few genes; if it was controlled by many genes, breeding specimens that displayed the traits would be unlikely to fix it in the population. But apart from a few examples, Diamond does not persuade us that this lay at the heart of the geographically challenged societies.

A somewhat similar problem exists with Diamond’s view of technology. In a chapter cleverly named “Necessity’s Mother” he notes the many links between geographical constraints and technical options. Why would a society produce wheels if it had no horses or oxen to pull them? Wheelbarrows and rickshaws might have been an option, but maybe draft animals came first. Not all questions can be answered that way: some indigenous populations in America might have built seaworthy ships, or managed to develop some technology we cannot imagine today. If they did not, is this because they tried but failed, or because they never tried?

Yet Diamond points out two elements that suggest that links between geography and technological progress may be significant. One is that geography constrains mobility of knowledge. Assume, somewhat implausibly, that the idea of a wheelbarrow only occurred to one person in history, but that it spread to people seeing their neighbors use. If this happened in Central Asia, it may well have reached China, France and Yemen in a few centuries, but before 1500 it would never get to America or Australia. Agricultural technology, he notes, also diffuses easier from East to West than from North to South, as changing longitude has a stronger effect on climate and seasonality than changing latitude– giving Eurasia an advantage over America and Africa. Furthermore, Diamond resurrects the late Julian Simon’s argument that technological success depends on population density and the ability of a society to produce a surplus beyond subsistence, so that there are resources available for thinking and experimenting. Maximum population density was largely a function of the ability of the environment to feed the population. Writing, for instance, required large and dense settlements with complex hierarchical institutions, much different from hunting and gathering tribes.

The notion that much economic history is a game against nature, in which people form certain views about its regularities and use these to manipulate them to improve material conditions is a powerful one. Diamond’s insight is that nature differs from place to place and that certain environments are easier to manipulate than others. The economic historian must add two qualifications to this. One is that environments can be manipulated or abandoned. While Diamond describes in detail pre-historic population movements (which he deduces from linguistic evidence), he does not realize that he tells the story of regions, not necessarily of people who always had the option to move to a more generous and flexible area. Secondly, it could be argued that much technology emerges precisely because the environment is not generous and requires hard work and ingenuity. What is the partial derivative of technological creativity with respect to initial geographical endowment? In the final analysis, this is still unknown.

The book is full of other clever arguments about writing, language, path dependence and so on. It is brimming with wisdom and knowledge, and it is the kind of knowledge economic historian have always loved and admired. If you teach economic history, any kind of economic history, go read this book. Or else you are taking a serious risk that a clever undergraduate who has read it will ask you a question you don’t know the answer to. Nothing worse is imaginable, short of organizing a world conference and canceling at the last moment.

Joel Mokyr Departments of Economics and History Northwestern University

Joel Mokyr is author of The Lever of Riches: Technological Creativity and Economic Progress (Oxford University Press, 1990).

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

The Gold Crusades: A Social History of Gold Rushes, 1849-1929

Author(s):Fetherling, Douglas
Reviewer(s):Mann, Ralph

EH.NET BOOK REVIEW

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

Douglas Fetherling. The Gold Crusades: A Social History of Gold Rushes, 1849-1929. Revised Edition. Toronto: Toronto University Press, 1997. 222 pp. Notes, essay on sources, and index. $24.95 (paper), ISBN 0-8020-8046-4.

Reviewed for H-Business and EH.Net by , University of Colorado, Boulder

Crusading for Canada

This work endeavors to put gold rushes into an international context by stressing the commonalities that make them–like the crusades–part of a single discontinuous event. Studies that consider rushes merely in a national context, it argues, miss or contort their real social meaning. For, according to Fetherling, all gold rushes share certain characteristics. Even though the presence of gold at a certain site may be known, before a rush can occur certain conditions have to be met. There has to be an expansive capitalistic economy, there has to be a frontier, and there has to be enough technology to spread the word of discovery, but not enough to make the mines accessible to everyone. The frontier adds remoteness and the possibility for adventure; historically, he says, gold rushers, like crusaders, were rootless men, more interested in the journey than the destination, ultimately not concerned with the practical opportunities to find gold. Gold rushes, in sum, were part of the experience of the British empire, a product of Manchester liberalism and industrialization. Self-deluded argonauts, while fleeing this society to pursue an impossible Arcadia, were inescapably bound to its values, its technology, and its authority. The international context, then, is British–there is no room in this model for non-English-speaking, pre-industrial peoples who do not accept classic liberalism. The national context Fetherling regards as misleading is American. Even though the rush of forty-nine came first, its products–greed, fraud, racism, a violent vigilantism–were precisely what later, more British, gold rushes had to overcome.

A basic starting point for this study is the fact that in the nineteenth-century United States, gold belonged to whoever found it; in the British possessions, all precious metals belonged to the crown. In America, miners, at least briefly, set up their own local governments. In the Empire, government officials sold licenses giving the right to dig gold, and governments gave prizes to men discovering valuable new deposits. Authority came first. If obedience failed to follow–as in Australia, where miners rebelled against the licensing system–the fault lay with inept colonial officials, anti-liberal English Chartists, and trouble-making Americans. (Wherever Americans went, sins against order, not to mention morality and good taste, were sure to follow.) In South Africa, Fetherling claims, the oppression and oligarchy that dominated the mines could be traced to the Boer influence. Actually, Australia, New Zealand, and South Africa failed to live up completely to Fetherling’s British Empire model; Canada best exemplified it. And in the Klondike, where he most starkly contrasts an “ennobling” British colonial paternalism with a “leveling” American “corn pone” democracy, a particularly Canadian moral superiority reinforced British-style institutions. While he is vague on just what constituted these “distinctly Canadian values” (pp. 62, 125), Fetherling is clear on one point. America represents a degraded British society; Canada an improved one. American argonauts might have been startled to learn that the ability to move freely and the desire to better oneself were products of British liberalism; English and Spanish-speaking Americans had been seeking gold and greener pastures long before Manchester blighted the surrounding countryside. American scholars also would be surprised to learn that escapist, antisocial beliefs dominated American gold rushes; J. S. Holliday, The World Rushed In (1981), and Malcolm J. Rohrbaugh, Days of Gold (1997), demonstrate that American gold rushers maintained the closest links possible with home; often dreamed of self-improvement in practical, limited, traditional terms; and feared social disruption both in the mines and back home. Comparative studies of American and British colonial attitudes toward gold and those who sought it can be very valuable; David Goodman, Gold Seeking: Victoria and California in the 1850s (1994) brilliantly analyzes differing cultural attitudes in the two countries, especially toward the moral impact of gold-driven wealth and social fluidity. But Douglas Fetherling has not delved very deeply into gold rush society or its historiography; he operates at the level of stereotype and spectacular events and characters. He has written on gold in Victoria and California without reference to Geoffrey Serle or Rodman Paul. The book is very well written, and, where the argument does not overwhelm all else, it contains interesting narratives. But as a synthetic history of gold rushes, it fails. The reader learns more about Fetherling’s particular brand of British Canadian nationalism than about why people stampeded for gold.

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Subject(s):Social and Cultural History, including Race, Ethnicity and Gender
Geographic Area(s):General, International, or Comparative
Time Period(s):19th Century

Political Economy and Statesmanship: Smith, Hamilton, and the Foundation of the Commercial Republic

Author(s):McNamara, Peter
Reviewer(s):Sylla, Richard

EH.NET BOOK REVIEW

Published by EH.NET (May 1998)

Peter McNamara, Political Economy and Statesmanship: Smith, Hamilton, and the Foundation of the Commercial Republic. DeKalb: Northern Illinois University Press, 1998. xi + 191 pp. $35.00 (cloth) ISBN 0-87580-228-1.

Reviewed for EH.NET by Richard Sylla, Department of Economics, Stern School of Business, New York University.

TWO FOUNDING FATHERS

Peter McNamara, a political scientist at Utah State University, compares and contrasts the political economies of Adam Smith (1723-1790), founding father of Economics, and Alexander Hamilton (1757-1804), the founding father of the United States most involved in shaping the country’s financial and economic systems. From a thorough study of the writings of the two– and in Hamilton’s case, from his activities in the public arena– McNamara draws out a number of implications and conclusions. His bottom line may surprise you, although it did not surprise me: “The chief conclusion…is that the example of Hamilton’s words and deeds provides a more useful guide for a liberal statesman than does the economic model yielded by Smith’s science of political economy” (McNamara’s emphasis). This conclusion is related to McNamara’s own agenda, to which I shall return.

The careers of Smith and Hamilton intersected in the great events of the last quarter of the 18th century. The Wealth of Nations appeared just before the Declaration of Independence, and in it Smith devoted some attention to the “colonial disturbances.” He gave little credence to American protests over taxes and mercantilist regulations. Taxation of the colonies was justified by Britain’s costs of defending them, and regulation– while bad in principle– had done little actual harm. For Smith, the Americans’ real economic advantage was, and long would remain, agriculture. Smith thought the Americans were fortunate in this, because his theories had persuaded him that the productivity of agriculture was superior to that of either manufacturing or commerce. He also thought that rural life was less degrading of the human spirit than life in cities.

Smith’s preferred solution to the colonial disturbances was peaceful separation. By saving on the costs of defense, this was in Britain’s interest. But he realized that peaceful separation was “visionary” because it conflicted with the “pride” of the British nation and its ruling classes. His fall-back position was therefore to grant the colonies free trade and representation in Parliament. That would likely satisfy the ambitions of colonial politicians. Given the superior productivity of agriculture and therefore America’s economic and demographic prospects, America’s leading men could look forward to the day when the seat of empire would move there. Had George III and Lord North followed Smith’s advice, Parliament might now meet in Chicago, Toronto, or Kansas City, with Tony Blair, Jean Chretien, or Bill Clinton as Prime Minister, and the British Isles as somewhat more populated constituencies than Hawaii, Bermuda, Puerto Rico, and the Falklands.

Smith’s work was well known to the U.S. founding fathers. His political economy extolling reason, enlightened self-interest, free trade, agriculture and rural life, and America’s long-term prospects appealed to the likes of Jefferson, the idealist, and Madison, the realist, both members of Virginia’s planter aristocracy. Much of it also appealed to Hamilton, like Madison a realist, but one with a more commercial and industrial outlook. But parts of Smith did not. Hamilton’s 1791 Report on Manufactures, as has often been noted, is an extended and critical commentary on Smith’s views. These views, given their appeal to many U.S. leaders, had to be addressed and in some cases refuted if Hamilton was to achieve his goals.

Because he dared to disagree with Smith and because of Smith’s icon-like status amongst Jeffersonians, libertarians, and mainstream and public-choice economists, Hamilton’s detractors have tended to dismiss him as a mercantilist, a regulator, and a statist. His admirers, in contrast, have viewed him as a modernizer, an advocate of economic growth and development with advanced insights into the roles technology and finance would play in them. Hamilton was not encumbered with the baggage of Smith’s labor theory of value, his quaint theoretical notions of agriculture’s superior productivity, his inadequate appreciation of new industrial technologies, his primitive ideas on money and finance, his laissez-faire ideology regarding government, or his undeveloped concepts of the threats nation-states might pose to one another in pursuing their real or imagined self-interests.

McNamara’s contribution, it seems to me, is to move to the side these common characterizations and caricatures of Smith and Hamilton, and to raise to a higher plane the analysis of their agreements and differences. Simply put, McNamara says that the key difference between Smith and Hamilton is over method. Smith developed political economy as a deductive system, the conclusions of which should be the main guides to economic policy. Hamilton, on the other hand, distrusted the conclusions of deductive systems as practical guides to policy, preferring instead to rely on experience and history.

Smith launched a tradition that would revolutionize political economy. He began with broad, seemingly self-evident assumptions, such as that every person had a natural and rational interest in bettering his or her condition. He then deduced from the assumptions conclusions as to the optimality of free trade and the folly of governmental interferences with it. While still a revolutionary soldier and apparently before reading Smith, Hamilton in 1779 pronounced his judgment on deriving policy from such grand deductive systems: “A great source of error in disquisitions of this nature,” Hamilton wrote in a long letter, “is the judging of events by abstract calculations, which though ‘geometrically true’ are ‘practically false’ as they relate to the concerns of beings governed more by passion and prejudice than by an enlightened sense of their interests.”

McNamara shows that a recurring theme of Hamilton’s thought, and of his statecraft, was the notion that passions and prejudices were at least as powerful in human affairs as rational self-interest. In his view, trade in history expanded not so much because the traders pursued their self-interest– other traders had just as much of an interest in stopping them– but because the enlightened statesmen of the Dutch Republic, England, and France established policies that overcame parochial passions and prejudices. Two centuries later, I would note, the economic historian Eli Heckscher said much the same thing in his great study, Mercantilism.

The problem as Hamilton saw it was that not all statesmen were enlightened. The pride of British leaders overcame their and their country’s interest when they rejected Adam Smith’s suggestions for preventing the American Revolution. As a result of British pride and prejudice, Hamilton had to spend six years of his life fighting the redcoats and the Hessians. In war, he learned to distrust the practicality of deductions based on assumptions of rational self-interest. When the war was over, Hamilton saw American proponents of state sovereignty and weak confederation, again for reasons of passion and prejudice, condemning the country for which he had fought to an early breakup and the endless commercial and political warfare that plagued the states of Europe.

Hamilton’s solution, formulated in the 1780s with Madison and other nationalists, was a strong federal government to defend the United States against external threats and to subject the states to a higher sovereignty that would avoid European-like strife in North America. The federal government would have to have strong finances– public credit, a national bank, a common currency. Establishing these would also promote a financial system for the country that would give rise to “a general spirit of improvement,” or economic development. The passions and prejudices of foreign nations also suggested to Hamilton that the U.S. government would be wise to take measures promoting manufactures, to diversify the American economy, put idle resources to work, and capture advantages of new technologies. This in essence is McNamara’s interpretation of Hamilton’s tenure as the new nation’s Secretary of the Treasury from 1789 to 1795.

To keep the federal government itself from becoming a threat to liberty, Hamilton worked with other nationalists to create the Constitution’s elaborate system of checks and balances. A strong executive (president) and an independent judiciary would counterbalance the legislative supremacy favored by many Americans. In Hamilton’s conception, McNamara argues, constitutional government, not Smith’s deductive science of political economy, set the parameters for economic statesmanship.

McNamara’s skillful and thorough development of Smith’s and Hamilton’s contrasting approaches to political economy is the main contribution of his book. Each approach proved influential in U.S. history. Comparing and contrasting the Scottish theorist and system builder with the American applied economist and statesman helps us to understand the achievements and continuing appeal of each man’s thought, and also Hamilton’s deeds. In practice, America’s political economy has been mainly Hamiltonian, and with Hamiltonian results– a nation that is more powerful, better governed, and richer than just about any other. Yet its dominant theory of political economy is still pretty much Adam Smith.

McNamara’s study is provocative. He makes a strong case– which no doubt will be contested– for Hamilton as the more insightful and relevant thinker on political economy. But I think he may go too far in suggesting that Hamiltonian precepts of constitutional government could– and maybe should– replace the insights of Smith and mainstream economics in guiding statesmen. Smith, like Hamilton, recognized that there were exceptions to the general presumption for free trade. And Hamilton understood– even developed– insights of deductive economic theory. In the Report on Manufactures, for example, he held that subsidies were better than tariffs as a method of promoting desired activities because they achieved the intended results without making the consumer pay a higher price. Economics, wise economists instruct us, is a bag of tools, and there is room under the big tent of political economy for Smithian and Hamiltonian insights.

McNamara doesn’t like mainstream, deductive economics. His agenda calls or getting away from it, at least in political economy, and emphasizing instead the concept of statesmanship. I doubt he will persuade economists, though. If they can’t fit entrepreneurship into their models, and therefore ignore it, how likely are they to find a place for statesmanship? Political scientists and historians will have to carry that torch.

I also wonder if McNamara is right in suggesting that Hamilton’s example of economic statesmanship has much to offer new and developing nations, although I agree with him that it is relevant to current U.S. political economy, and also relevant in studying U.S. economic history. The lesson from Hamilton would seem to be to ground political economy in constitutional government and the rule of law. But using that as policy advice to leaders of new and developing nations strikes me as about as promising as telling aspiring musicians to study and follow Mozart’s example if they want to become great composers.

I have spent a lot of time studying Hamilton. He was, I think, altogether exceptional in his ability to define a problem, think it through, come up with a good solution, persuade others that it was the right thing to do, and then see to it that the solution was implemented. As the British writer Paul Johnson says in his recent A History of the American People, “The truth is, Hamilton was a genius– the only one of the Founding Fathers fully entitled to that accolade– and he had the elusive, indefinable characteristics of genius.” Europeans– Talleyrand and Lord Bryce are additional examples– have recognized that genius for two centuries. Without a Hamilton, they are still trying to implement Hamiltonian political economy. So when McNamara recommends following Hamilton’s example as a guide to political economy elsewhere, he comes perilously close to adopting the sort of mainstream, “can-opener” economics he so dislikes: Assume we have a genius.

Richard Sylla Department of Economics Stern School of Business New York University

The Federal Reserve Bank of St. Louis REVIEW (May/June 1998) is scheduled to publish Sylla’s paper, “U.S. Securities Markets and the Banking System, 1790-1840,” along with a comment on it by Kenneth Snowden. Sylla’s latest research is on the early U.S. financial system, particularly the development of securities markets.

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Subject(s):History of Economic Thought; Methodology
Geographic Area(s):General, International, or Comparative
Time Period(s):18th Century

Enterprising Southerners: Black Economic Success in North Carolina, 1865-1915

Author(s):Kenzer, Robert C.
Reviewer(s):Butler, John Sibley

EH-NET BOOK REVIEW

Published by H-Business@eh.net (April 1998)

Robert C. Kenzer. Enterprising Southerners: Black Economic Success In North Carolina, 1865-1915. Carter G. Woodson Institute Series in Black Studies. Charlottesville: University Press of Virginia, 1997. xvi + 178 pp. Tables, bibliography, and index. $30.00 (cloth), ISBN 0-8139-1733-6.

Reviewed for H-Business by John Sibley Butler , University of Texas

Enterprising Southerners: Black Economic Success in North Carolina is an excellent work which details the life of black entrepreneurs and property owners from the dawn of freedom to 1865. In all historical periods there are blacks who think and act like free people. This book is a systematic documentation of the development of enterprise, property and the education of children in North Carolina’s black society during the period.

Kenzer starts his analysis by examining the source of landownership among the freedmen. Although most blacks acquired enough money to purchase land, some were also given land by their former masters. Some slave masters specified in their wills that, after their deaths, the land should be sold to their former slaves. In some cases, whites tried to block the deeding of land to former slaves by their masters. When this was done, there were cases where blacks took the issue to court and won judgments that granted them the land.

Kenzer has an excellent discussion about the relationship between landownership, free blacks prior to emancipation, and mulattos. He notes that free blacks had already started a tradition of land ownership, and thus owned most of the land right after the dawn of freedom. Mulattoes also play an important role in the analysis. It must be remembered that any black who was not ebony-black was a mulatto. It is a term which is therefore inclusive of blacks with mixed blood, as well as blacks who were clearly of African descent but who were of a lighter skin color. Thus, mulatto does not mean, at this point in history, blacks who simply “looked white.” Many blacks who were the offspring of a white slave owner and a black woman were granted freedom by their father.

The mulattoes’ ownership of land prior to emancipation creates significant differences in the data reported by Kenzer, and allows interesting studies “within race,” albeit the data are sometimes difficult to analyze. After examining data prior to and following emancipation, he notes, “Even with the nearly insurmountable problems of trying to link 1860 and 1870 manuscripts, it appears that at least half of the 1870 black landowners may have been antebellum freedmen. Furthermore, these antebellum freedmen owned a substantial share of all of the land owned by blacks in 1870” (p. 14).

Kenzer presents a unique view of black enterprises in North Carolina because he gives a strong consideration to credit ratings. What emerges is a picture of a community that understood the relationship between wealth creation, business enterprise, and living well in American under difficult circumstances. The reader is given a glimpse of management issues faced by black enterprises of that time period. Some enterprises advertised simply as enterprises, never mentioning that fact that they were black. Kenzer also concludes that, although the firms were rated by whites, there is not an indication of bias. Some firms were written up as being outstanding, while other ratings reflected the idea that the business person was not good. It is obvious that blacks were engaged in all types of enterprises during this time period. Partnerships with white enterprises, as expected, were not prevalent during this time period.

Perhaps the greatest contribution that Kenzer’s work makes is the impact of enterprise and landownership on the education of children and political participation. W.E.B. Dubois and August Gill, in their 1911 book The College Bred Negro, documented the fact that black business owners had developed a tradition of sending their children to college. This effect was also seen in Charles Johnson’s 1937 book, The Negro College Graduate. Kenzer presents vivid examples of this historical process and reminds us that, when the thousands of immigrant whites were being processed through Ellis Island in New York, black entrepreneurs had already developed a tradition of educating their children. Thus we are introduced to Henry Taylor’s younger son Robert, who was the first black to graduate from the Massachusetts Institute of Technology and was valedictorian of his 1892 class. His analysis also reminds us of the important role that historical black colleges, especially the private ones that existed before they were taken over by the state, played in setting the stage for success in America. Although those colleges and universities are still playing that role today, most of the emphasis is on black students at previously white colleges. But Kenzer’s analysis informs us of the historical success that these colleges and universities played in launching careers. The link between business enterprise and college success also reminds of the important historical link between the two. The book gives us a hint why today black southerners who are grounded in this self-help tradition continue to enjoy educational and property success, while those in northern cities, whose parents followed the factories, have tended to depend upon the larger society for their educational success.

Enterprising Southerners should be read by all interested in American history, enterprise, family, and overall racial and ethnic relations. Prior to the 1960s, research on black Americans reflected both success and failure. Since then, most of the research has been on failure. This is a welcome work which testifies to success during a difficult time in American society. It should also be read by all Americans who are interested in thinking and acting like free people during this historical period.

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Subject(s):Social and Cultural History, including Race, Ethnicity and Gender
Geographic Area(s):North America
Time Period(s):19th Century

Competition and Growth: A Contemporary History of the Continental AG

Author(s):Erker, Paul
Reviewer(s):Blackford, Mansel G.

EH-NET BOOK REVIEW

Published by H-Business@h-net.msu.edu (April 1998)

Paul Erker. Competition and Growth: A Contemporary History of the Continental AG. Trans. Frederick S. Gardiner. Dusseldorf: ECON, 1996. 320 pp. Tables, notes, bibliography, illustrations, and index. $40.00 (paper), ISBN 3-430-12548-0.

Reviewed for H-Business by Mansel G. Blackford , Ohio State University

In this very densely packed volume, Paul Erker presents a history of Continental AG, one the world’s largest makers of tires and industrial rubber products. Erker gives short shrift to the company’s earlier years, passing over developments–from the founding of the firm in 1871, through its recovery from the ravages of World War II by 1968–in just fifty pages of text. Instead, Erker focuses on the responses of Continental’s managers to a series of crises their company faced from the late 1960s into the mid-1990s. Well over half of the text deals with events since 1979. Erker’s history is primarily a study in the internal dynamics of Continental. Using corporate records to good account, Erker dissects the decisions and actions of its officers. As Erker states in his introduction, “the central focus” is on “the analysis of internal company processes–which can often be personalized whether they be R&D activities, marketing strategy, financial management or streamlining measures” (p. 10).

In his first three chapters, Erker sets the stage by looking at Continental’s first one hundred years of development. Established in 1871 in Germany, the firm moved ahead through a combination of entrepreneurship, technological expertise in making rubber products (Erker’s examination of the firm’s early research efforts will be of special interest to historians of technology), and good marketing in and beyond its native land. Recovering fairly quickly from Germany’s defeat in World War I, Continental took part in a rationalization movement that swept through parts of German industry during the 1920s and 1930s. Generally skeptical of the Nazi government–a topic about which I would liked to have learned more in this volume–Continental’s managers, nonetheless, led their firm into an intensified period of research, especially on synthetic rubber, lasting into 1944 and 1945. Erker concludes, however, that Continental’s promising growth in the 1920s and early 1930s was cut short by the Nazi regime; he states that “As a result of the developments under National Socialism and in WW II, however, they were so lastingly weakened and retarded in their development that even in the 1950s and 1960s it was no longer possible for them to regain lost momentum” (p. 44).

Next, Erker takes four chapters to examine how Continental’s officers perceived and dealt with crises their firm encountered between 1968 and 1978. The challenges were many: technological ones (especially how to switch to the production of radial tires pioneered by Michelin), marketing ones (most notably how to counteract a tremendous increase in competition from American firms), and ones in labor relations. (Anyone believing that codetermination worked smoothly in Germany should read Chapter Seven of this study.) Often stumbling, Continental’s managers led their firm into a bath of red ink (deepened by a failed merger attempt with Phoenix, another German rubber maker), but made some progress by the late 1970s, beginning a reorganization of Continental along divisional lines, a strategy that would continue with fits and starts into the 1990s. In another four chapters, Erker surveys Continental’s development in the 1980s. The continuing challenge of competition–especially from Michelin, but also from Japanese firms as they entered the European market–led Continental’s management to conclude that their company had to grow or die. They purchased Uniroyal’s European operations in 1979 (see p. 192 for a fascinating look at how the acquisition was decided on with almost no consideration given to its financing) and General Tire in the United States a few years later. As part of this “internationalizing strategy,” Continental also entered into various sorts of tie-ups with additional rubber- and tire-makers, such as Toyo in Japan. As they digested these additions, Continental’s officers tried hard, but with only partial success, to develop new technologies and to put in place new, more flexible production methods. Erker’s thorough discussion of the attempted shift to flexible manufacturing techniques and worker opposition to them shows well just how difficult it can be to alter established ways of running production lines.

Erker closes his account with an analysis of continuing challenges in the 1990s, placing his focus on how Continental fended off an unwanted takeover by Pirelli. Concluding that Continental had by the mid-1990s successfully weathered a series of potentially devastating challenges to its very existence, Erker paints a reasonably optimistic picture of the firm’s future.

Competition and Growth will be of considerable interest to scholars dealing with the history of business, labor, and technology. Specialists interested in German business history or in the history of the rubber industry will find this study especially rewarding. The great strength of this volume is Erker’s astute handling of inside corporate sources to reveal a great deal about business development since 1970. He analyzes well the complexity of business decision making, though there were places where I felt almost overwhelmed by the detailed descriptions. Erker’s focus is, however, also a weakness of this book. There simply is not enough information on the period before 1970 to allow readers to understand recent developments in any kind of full historical context. It is, thus, difficult to judge the significance of recent crises in shaping Continental’s evolution. Only a limited number of copies of this book are available in English; anyone interested in purchasing one should contact the author directly at the Free University of Berlin.

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Subject(s):Business History
Geographic Area(s):Europe
Time Period(s):General or Comparative

Courts and Commerce: Gender, Law and the Market Economy in Colonial New York

Author(s):Rosen, Deborah A.
Reviewer(s):Boylan, Anne M.

EH-NET BOOK REVIEW

Published by H-Business@eh.net (April, 1998)

Deborah A. Rosen. Courts and Commerce: Gender, Law, and the Market Economy in Colonial New York. Historical Perspectives on Business Enterprise Series. Columbus: Ohio State University Press, 1997. xvi + 232 pp. Figures, tables, appendix, notes, bibliography, and index. $45.00 (cloth), ISBN 0-8142-0736-7; $17.95 (paper), ISBN 0-8142-0737-5.

Reviewed for H-Business by Anne M. Boylan , University of Delaware

Seeking the Market Revolution

In this study of colonial New York City and Dutchess County, Deborah Rosen analyzes the intersections between the law and the economy. Employing legal documents to study economic behavior, she focuses particularly on the rise of debt litigation and the decline of jury use in civil trials. Because both can be seen as measures of “a rational, impersonal market economy” (p. 72), she finds that legal change facilitated economic change. “It was the legal system that provided the foundation for economic integration,” Rosen writes; “law was one of the most important factors that permitted New Yorkers to become engaged in market relationships” (pp. 7-8). Moreover, because those legal changes took place in the eighteenth century, historians have seriously misstated the timing of the “transition to capitalism” in the post-Revolutionary North, and misunderstood the relative impact of that transition on men and women. When capitalism came to New York, Rosen states, “women were largely excluded” (p. 132), because they had little legal standing to perform as independent economic actors. These are large claims, and indeed throughout Courts and Commerce sweeping judgments coexist uneasily with detailed research. The result is an uneven book, one that makes its most useful contributions in carefully formed factual building blocks, not in the interpretive mortar that attempts to hold them together. Rosen is unlikely to convince scholars of economic transition and of gender relations that they have built their interpretive structures all wrong and will need to remake them according to her design. But her book includes enough interesting research to make it worth consulting.

The best sections of Courts and Commerce reflect Rosen’s familiarity with legal history and her immersion in primary documents. Her intensive study of probate inventories confirms what historians such as Carole Shammas, T. H. Breen, Gloria Main, and others have noted, that as eighteenth-century Americans became increasingly immersed in a “world of goods,” wealth stratification sharpened.[1] Rosen adds an extra dimension to that finding by comparing city and county, in the process demonstrating a narrowing gap between urban and rural areas in the consumption of luxury goods, and comparable degrees of wealth stratification in both. Rural New Yorkers experienced “a significant polarization of wealth” during the eighteenth century; it was “not just an urban phenomenon” (p. 33). Similarly, by studying merchants’ account ledgers and mortgage-lending practices, Rosen shows that eighteenth-century New Yorkers were increasingly willing to go into debt in order to finance their acquisitive and accumulative economic behavior. And by carefully scrutinizing extant minutebooks from the New York Mayor’s Court and the Dutchess County Court of Common Pleas, she chronicles a rapid upward rise in debt litigation in both town and country as well as a “drastic decrease in the percentage of (civil) cases resolved by jury trial” (p. 62). Finally, by tracing women’s declining involvement in formal legal actions, and their growing invisibility in the courtroom, Rosen provides data for New York that confirm Cornelia Hughes Dayton’s findings for Connecticut.[2]

Rosen’s effort to hitch these findings to that all-purpose interpretive wagon labeled “The Market Revolution” or “the transition to capitalism” is problematic on several planes. One is definitional. Although half-way through the book (p. 74) Rosen acknowledges that other historians define both “the market” and “capitalism” differently, much of her criticism of the existing historiography ignores that key point. Whereas most scholars see the Market Revolution as a complex set of new economic and social relationships revolving around capital accumulation, credit formation, the sale and purchase of labor-power, and new forms of inheritable wealth, Rosen sees market economies simply as those characterized by cash transactions, “the development of commodities markets and a capital market” (p. 76), and the charging of interest. By employing a definition that would fit seventeenth-century Amsterdam as well as New Amsterdam, Rosen does little to sharpen or clarify the historians’ debates.

Moreover, Rosen enters parts of those debates by fencing with straw figures. Especially on the question of how economic changes shaped gender relations, unnamed “historians” and “scholars” (pp. 11, 131, 132) take such untenable positions that Rosen ends up thrusting and parrying with ghosts. One such chimera is the assertion that some “historians, seeming eager to blame gender inequalities on capitalism, industrialization, and domesticity, have simply presumed that in the colonial world…men and women must have lived together as equals” (p. 11). Another is the suggestion that “scholars attribute women’s past and present economic and legal behavior to their natural qualities as women” (p. 131). A check of the footnotes reveals Rosen’s real adversaries: the psychologist Carol Gilligan and legal scholars such as Carrie Menkel-Meadow. Although both would reject the argument that their work naturalizes feminine or masculine qualities, it has been read (or mis-read) that way. But surely recent historians of women, who have worked so diligently to demonstrate that gender is a social and cultural category, deserve more nuanced renditions of their arguments.

In her discussion of economic history, Rosen is similarly prone to bleach out the vivid complexities of interpretive patterns in favor of monochromatic or dichotomous versions. Thus, after surveying a quarter-century of historical work on the colonial economy, she makes the rather astonishing claim that an “idealized image of a communal colonial society remains in, even dominates, current historiography” (p. 3). In Rosen’s universe, “economic relationships” are either “arm’s length business arrangements” or else “familial or communal in nature” (p. 8). There is no room for economic behaviors that are both businesslike and familial. The prevalence of such false oppositions in Courts and Commerce is likely to make readers skeptical of the book’s broader interpretations, especially the argument that legal changes predated and facilitated economic transformations. Without some discussion of Dutch legal precedent or the economic underpinnings of English common law, that position seems asserted more than demonstrated.

If the larger claims of Courts and Commerce remain unconvincing, the book nevertheless provides useful legal and economic data on consumption patterns and court practices in eighteenth-century New York. Students of business will find interesting and well-presented information on subjects such as mortgage-lending, debt litigation, and wealth distribution in both the city and Dutchess County. The appendix summarizes Rosen’s findings in these areas clearly and directly. Likewise, scholars of gender issues will be interested in Rosen’s conclusion that common law rules weighed heavily upon married women in colonial New York, and that, contrary to what Marylynn Salmon discovered, wives’ resort to equity courts was quite uncommon.[3] It is in specific findings like these, rather than in matters of general interpretation, that Courts and Commerce makes its contributions to historical understanding.

Notes

[1]. Carole Shammas, The Pre-Industrial Consumer in England and America (New York: Cambridge University Press, 1990); T. H. Breen, “‘Baubles of Britain’: The American and Consumer Revolutions of the Eighteenth Century,” Past and Present 119 (1988): 73-104; Gloria L. Main, “The Standard of Living in Southern New England, 1640-1773,” William and Mary Quarterly 45 (1988): 124-134; John Brewer and Roy Porter, eds., Consumption and the World of Goods (New York: Routledge, 1993).

[2]. Cornelia Hughes Dayton, Women Before the Bar: Gender, Law and Society in Connecticut, 1639-1789 (Chapel Hill: University of North Carolina Press, 1995).

[3]. Marylynn Salmon, Women and the Law of Property in Early America (Chapel Hill: University of North Carolina Press, 1986): 11, 28-30.

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Subject(s):Markets and Institutions
Geographic Area(s):North America
Time Period(s):18th Century