is owned and operated by the Economic History Association
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Hollywood Party: How Communism Seduced the American Film Industry in the 1930s and 1940s

Author(s):Billingsley, Kenneth Lloyd
Reviewer(s):Snyder, D. Jonathan

Published by EH.NET (February 1999)

Kenneth Lloyd Billingsley, Hollywood Party: How Communism Seduced the

American Film Industry in the 1930s and 1940s, Forum: Rocklin, Cal., 1998.

xviii + 365 pp. Illustrations, appendices, notes, and index. $25.00 (cloth


ISBN 0-7615-1376-0.

Reviewed for H-Business by D. Jonathan Snyder, Department of History,

Southern Illinois University (Carbondale).

1997 saw a surge of articles and op-ed pieces commemorating, rehashing and

otherwise dissecting the fiftieth anniversary of the “Hollywood Ten” and the

blacklist in the film industry. Predictably, Hollywood itself staged a gala

event, a memorial and tribute to itself, complete with the glitz, star power

and dramatic pyrotechnics routinely available to

the movie capital. Through vignettes, clips, reenactments and the ineffable

luster of stardom, the production, Hollywood Remembers the Blacklist,

reminded its audience of an old story, of the days when dark forces of

political repression came for a time to dominate the film industry, despite

the heroic non-cooperation of a few idealistic martyrs.

For Kenneth Lloyd Billingsley, Hollywood Remembers the Blacklist, like

most of Hollywood’s product, was slanted history that substituted glamour for

facts and dressed political self-righteousness in the vapid solemnity of

liberal celebrity; it was a “stage play, with easily identifiable victims and

heroes in a simple to follow plot” (p. 7). In Hollywood Party: How Communism

Seduced the American Film Industry in the 1930s and 1940s,

Billingsley, Editorial Director for the libertarian think-tank Pacific Research

Institute, proposes that there is more here than the persecution of innocents

by reactionary politicians. He aims to expose the dirty secret that

Hollywood Remembers the Blacklist failed to stage: that Hollywood’s

political nescience permitted the Communist Party to manipulate screen content,

whitewash the truth about Communism through decades of commiserating films, and

thereby warp the popular memory of Communism. By leaving out actual

Communists, avers Billingsley, Hollywood has failed to tell “how the central

conflict of this century affected the American movie industry, and ultimately,

decisions about who controlled Hollywood” (p. 10).

Promising a “political and cultural thriller” (p. 10), Billingsley even

provides us with a handy “Partial Cast of Characters” to help separate the good

guys from the bad. Unfortunately, Billingsley too eagerly chases narrative

pacing at the expense of historical accuracy. Thus his book is filled with

errors and distortion, such as the details surrounding Charlie Chaplin’s

political reclamation. Billingsley correctly dates Chaplin’s honorary Oscar

three years prior to his knighthood, but he is three years off in the

chronology: Chaplin’s Oscar was in 1972, not 1975; his knighthood came in 1975,

not 1978, by which time the Little Tramp was one year dead. Likewise

Billingsley lists the birth date of John Howard Lawson, doyen of

Hollywood Communists, as 189 3, rather than the correct 1894. Such errors by

themselves amount to little more than annoyances, but in a book with

aggravatingly few footnotes and sparse (and shopworn) references, one begins to

doubt whether this author has done his homework.

Billingsley claims that his narrative will finally tell “the entire story of

why the Communist Party came to Hollywood, and what it accomplished there”

(p. 10). Rather, we get truncated historical causation reminiscent of

Hollywood’s liberties with adapted novels.

For example, purporting to argue that the Communist Party had expropriated the

radical New York theater for propaganda purposes, Billingsley describes the

aforementioned Lawson’s play,

Processional: A Jazz Symphony of American Life, as a “slugfest of

fevered rhetoric that became the pattern on the radical stage.” (p. 48). Two

sentences previously he had quoted Lawson (accurately) writing, “it is my aim

to present the Communist position…in the most specific manner,” thus seeming

to indicate that Processional was an example of Communist propaganda.

Unfortunately for Billingsley, Lawson uttered those words some nine years after

Processional (1925) and still more than a year before he actually joined

the Communist Party. Processional’s inchoate

(and burlesqued) politics was incidental to its avowedly radical aesthetic;

the play is more properly compared to the avant-gardism of Eugene O’Neill in

the 1920s than the didacticism of Clifford Odets’ Waiting for Lefty. By

no standard, least of all

historical, can Processional be considered agit-prop. Billingsley then

proceeds to claim that “by 1936…the Party had enjoyed virtual domination of

the radical theater scene in New York [i.e.,

the radicals controlled the radical theater], and that control became the

model for what they sought in Hollywood, when John Howard Lawson and many

others headed west” (p. 50) Again, he gets the facts wrong: Lawson went to

Hollywood in 1928 as one of the first writers for the new talkies. By the time

he formally joined the Party in 1935, Lawson was already a studio veteran, one

of the highest paid screenwriters, and the first president of the Screen

Writers Guild.

Such narrative compression surfaces throughout Hollywood Party as

Billingsley labors to cram

a complicated history into the confines of his predetermined narrative

structure. For it is the story that is most important to Billingsley, a

Manichean narrative of sinister Communists

(whose villainy is always unmotivated save that the label ? Communis t? makes

them direct conduits for Stalin) on the one hand and the reluctant

anti-Communists in the white hats on the other. It is the structure of a

Hollywood Western, one notices, reminiscent of Whitaker Chambers’

self-portrayal as a reluctant sod-tiller martyring himself to save

civilization, and echoed in Billingsley’s portrayal of anti-Communist union

boss, Roy Brewer, as “the hick projectionist from Nebraska” (p. 286).

Readers are treated to the cloak-and-dagger escapades of union spies, secret

investigators, unwary producers, Communist provocateurs and the sinister

Comintern overlords. At times, the story borders on melodrama, with clandestine

documents establishing Communist subterfuge, and farce, as when nearly fifty

characters, some accessorized

with aliases, romp through the sixteen pages of Chapter Three; a screenwriter

should be so proud. This is such a blinkered narrative that, with no trace of

irony, Billingsley refers to the anti-Communist Walt Disney as “avuncular” (p.

38). Disney, of course,

was as ruthless an empire builder as any robber baron, the affable mouse

notwithstanding. Needless to say, Lawson and the rest of the Hollywood

Communists are held accountable for Soviet terror in repeated recitations of

Stalin’s gruesome bloodletting.

Despite Billingsley’s claim that this is a new telling, it is not. It is the

same story that the House Committee on Un-American Activities, the Motion

Picture Alliance for the Preservation of American Ideals, and Joseph McCarthy

told. It is the story

of Communists poisoning Hollywood with foreign ideology. And it is still wrong.

Billingsley provides no linkage between the Kremlin and Hollywood to prove that

“in the area of film content, the Party won” (p. 282), other than to recite a

list of anti-anti

-Communist pictures. Billingsley is so intent on Red-baiting Hollywood (one

suspects that the film colony itself, rather than simply

Hollywood Remembers the Blacklist, is his real target) that he wholly

ignores actual influences on screen content such

as commercial appeal, the Production Code, the Legion of Decency, local

censorship, the Supreme Court,

and the requirements of national ideology.[1] The standard history on Communism

and politics in the film industry is still Larry Ceplair and Steven Englund’s

The Inquisition in Hollywood: Politics in the Film Community, 1930-1960

(1980), a meticulously researched and reasoned assessment that never forgets

the larger economic and social contexts and which Billingsley unwisely

dismisses as “revisionist” (p. 279).

For Billingsley, the Red legacy continues to influence Hollywood, which

habitually peddles movies sympathetic to Communism; pictures like The

Front and Guilty by Suspicion, prove the success of the conspiracy.

This is patent nonsense. During the height of the Cold War, dozens of overtly

anti-Communist movies, like My Son John and Big Jim McLain

were produced, most big money losers. Though he desperately tries to argue that

“the legacy of Hollywood Stalinism explains the dear th of movies about

Communism,” (p. 282; Jane Fonda is gratuitously mentioned in this context)

films like Ninotchka, The Manchurian Candidate, most science

fiction of the 1950s, Dr. Zhivago, the James Bond series, Red

Dawn, White Nights

and countless others suggests that Billingsley’s own politics has occluded his


The historical truth about American Communism is difficult to write, but not

because either the Party or the McCarthyites have succeeded in suppressing


voices. Despite the persistent underdoggism of authors writing about Communism,

the more pressing impediment to understanding American Communism is the

straitened narratives into which authors have poured their political morality

tales. If nothing else, Billingsley reminds that we need new narratives for

American Communism. Recently, a few authors have begun to break away from this

trap. For instance, Ronald Radosh, no friend of the Communist Party, insists

that we discern between the cynical McCarthyites

and the sincere anti-Communists, a useful distinction Billingsley refrains

from making. Likewise, Ellen Schrecker urges us to recognize the fact that

whatever the indisputable errors of the American Communist Party, there existed

a broader Communist movement that spearheaded legitimate social reforms, such

as fighting race prejudice and organizing labor. This is a start, but we must

go farther. Radosh still insists that the chicanery of the official Communist

Party U.S.A. more or less describes the historical totality of American

Communism, while Schrecker seems content to tar all anti-Communists with the

black legacy of McCarthy.[2] We need a new narrative, one that allows for

sincere anti-Communists and sincere Communists, each untainted by the excesses

of their putative leadership.

Hollywood Party is not good history, it is the collapse of history into

political propaganda. It is the calcification of character and motivation to

simple moral determinants certified by an omniscient narrator. It confuses

individuals with the labels their political opponents stuck to them. By blowing

out of all proportion the meaning and role of Communism in Hollywood,

Billingsley perpetuates, finally, the same old story. It’s a two-for-one thesis

that bashes American Communism, then bloodies an imagined liberal Hollywood

for once loudly (but never exclusively) sticking up for some of its own. In the

end, I submit, these narratives are not about the follies of a small sect of

radical dreamers, nor even so much about

the reactionaries who briefly convinced a large segment of the population to

table the First Amendment. They are, after all, political broadsides, used by

partisans to thrash the moderates on the other side of the aisle. They attempt

to capture the vital

center not through wise and able leadership,

but through recrimination and gamesmanship. That is why Billingsley got so

worked up by those pesky showbiz liberals who staged Hollywood Remembers the


[1] On this last point, see Robert B. Ray’s

excellent A Certain Tendency of the Hollywood Cinema, 1930-1980,

Princeton: Princeton University Press,


[2] Ronald Radosh, “The Two Evils: Communism, McCarthyism, and the truth,”

The New Republic, 11 May 1998, pp. 38-49. Radosh conflates the

Party with what Schrecker understands as the broader Communist movement,

thereby discrediting the latter through association with the former; Ellen

Schrecker, Many Are The Crimes: McCarthyism in America, Boston: Little,

Brown and Co., 1998.

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

Universal Service: Competition, Interconnection and Monopoly in the Making of the American Telephone System

Author(s):Mueller, Milton L.
Reviewer(s):Kraft, Jeff

Published by EH.NET (February 1999)

Milton L. Mueller, Universal Service: Competition, Interconnection and

Monopoly in the Making of the American Telephone System. Washington, D.C:

AEI Press, 1997, 13 + 213 pp. $40.00 (cloth), IS BN: 0-8447-4063-2.

Reviewed by Jeff Kraft for H-business, LECG, Emeryville, California.

Milton L. Mueller’s thoughtful, extensively-researched and at times

controversial book should be required reading for public policy makers

(regulators, legislators and judges) and consultants (this author is one)

who are grappling with the implementation of the Telecommunications Act of 1996

because it provides an unconventional analysis of the question at the heart the

debate surrounding the Act’s local competition provisions: What are the

appropriate interconnection and unbundling rules for promoting efficient

competition and maintaining universal telephone service?

Mueller makes a strong argument that the current meaning of “universal service”

is different from the original meaning of the term. Today, it means that

regulators should implement public policies which provide all households with

access to an affordable set of basic telecommunications services. As proposed

by AT&T’s Bell System

in the early 1900s, universal service originally meant that competing local

telephone providers should be consolidated into local monopolies. Between the

end of the nineteenth and the first third of the twentieth centuries, a

substantial proportion of the nation’s population lived in areas where two

competing local exchange companies (the Bell system and independents) offered

local exchange service, a condition known as “dual service.” In almost all

instances the competitors did not interconnect their

networks. Universal service would allow all local subscribers in a given

geographic area to call all other subscribers with a single subscription and

was thus an antidote to the inefficiencies of dual service.

The book’s chapters progress chronologically and weave together economic

theory and the competitive, regulatory, and legal history of local telephone

service in the United States. Mueller’s narrative moves from the early days of

the Bell monopoly through the years of dual service competition between the

Bell system and independents, the Kingsbury Commitment and the advent of state

monopoly franchise regulation, and the consolidation of the Bell System, to the

Telecommunications Act of 1996.

Mueller does a good job of clearly and concisely explaining economic concepts

like demand side economies of scope and scale, network externalities and

natural monopoly, in the process making a strong case that local telephone

service has never been a natural monopoly. Mueller traces the historical and


roots of key regulatory debates such as the argument that mandatory

interconnection requirements are unconstitutional because they amount to an

appropriation of private property. This dispute remains at the heart of modern

regulatory policy-making from the overturning of the FCC’s initial expanded

interconnection and physical collocation ruling (See Bell Atlantic Telephone

Companies v. FCC., 306 U.S. App. D.C. 333; 24 F.3d 1441; 1994) to the current

legal challenges by incumbent

local exchange carriers to the FCC’s attempt to implement the local

competition provisions of the Telecommunications Act of 1996.


book builds on the work of Gerald Brock and others (see for example Gerald

Brock, The Telecommunications Industry: The Dynamics of Market

Structure, Harvard University Press, 1981), providing one of the most


early histories of telecommunications competition and regulation.

The explanation and analysis of the Kingsbury Commitment, the 1913 compact

between the Bell System and the federal

government which called on Bell to slow down the acquisition of independent

telecos and offer limited interconnection to competitors, is the most

fully-documented interpretation of this seminal event I have seen.

Throughout the book Mueller provides fascinating bits of economic history

about local telephone service. For example, with early hand-operated and

mechanical switches, average per unit costs actually increased with the number

of subscribers served, meaning there were dis-economies of scale in large

urban exchanges. Each additional subscriber led to a geometric increase in the

physical complexity of the switching function. When these dis-economies of

scale were combined with the fact that local political forces tended to favor

the incumbent Bell companies, competitive local entry by independents became

difficult in the largest urban areas.

Mid-sized mid-western cites and more rural areas frequently had more

competitive entry than the large cities on the East Coast. This is, of course,

precisely the opposite of the situation today where economies of density and

scale have made large urban business corridors the most lucrative places for

competitive local exchange carriers to build competing fiber facilities. The

economics of today’s digital switching technologies make per unit costs

unambiguously lower for larger urban exchanges.

One of Mueller’s

central ideas is that the period of dual service competition

played a key role in the geographic expansion of local telephone infrastructure

to near-ubiquitous coverage because competitors raced to acquire additional

customers to increase the size of their subscriber bases and the scope of their

service offerings. This massive geographic expansion would not have occurred

if there was a single monopoly provider or if competitors were required to

interconnect their networks in what would be called today “non-discriminatory

and cost-based terms.”

Thus, the current conventional wisdom that a failure to interconnect is

inherently anticompetitive is misguided. Mueller correctly points out that

there are inherent contradictions within the Telecommunications Act of 1996,

which on the one hand requires cost-based interconnection and extensive

unbundling of incumbent’s local networks that will ultimately lead to “radical

deaveraging of rates,” while on the other hand calls for the continuation of

universal service subsidies and geographic rate averaging.

Like any truly original scholarship, Mueller’s work raises many important

questions. Although having

separate non-interconnected competitors clearly contributed to the development

of the telecommunications industry during its start up years, it leads to

serious inefficiencies in a mature industry because customers would be required

to subscribe to multiple networks in order reach all other local telephone

users. Today, ubiquitous reachability is an implicit, yet paramount, goal for

all communications networks. The whole concept of the Internet is based on

the value of world wide reachability. When competition authorities at the

European Union and the U.S. Department of Justice required either MCI or

WorldCom to sell off their Internet assets in order to gain approval for their


it was because they were concerned that the combined company’s backbone would

carry such a large share of traffic that it might have incentives to bifurcate

the Internet by reducing the quality of interconnection with other backbones.

Thus, key but unanswered questions arising from Mueller’s scholarship involve

quest ions surrounding interconnection policy:

When are mandatory interconnection rules an optimal public policy solution?

At what stage in the development of a network industry do the benefits of

ubiquitous reachability dominate the incentives for network expansion which

come from having competing, non-interconnected networks? Should regulators

require non-discriminatory and/or cost-based interconnection terms? These

questions are relevant for public policy makers examining a wide range of

digital-age products and services from basic local telephone service, to broad

band services such as cable-modems and ADSL, to PC operating systems and

applications software.

(Jeffrey Kraft is a Senior Consultant at LECG, an economics, finance and public

policy consulting

company in Emeryville, California. He has consulted with private companies,

law firms, regulatory bodies and other government agencies on a wide range of

public policy, litigation and antitrust issues affecting the telecommunications

and other communications-related industries. He co-authored an article in the

Fall 1997 Journal of Economic Perspectives on the history of local

telephone regulation titled: “Meddling Through: Regulating Local Telephone

Competition in the United States.” Mr. Kraft has

recently spoken at conferences in Osaka, London, and Brussels on the impact the

MCI-WorldCom merger would have had on the Internet, absent intervention by

competition authorities in Europe and the United States. Kraft has a Master

of Public Policy degree from the Richard and Rhoda Goldman Graduate School of

Public Policy at the University of California at Berkeley.)

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

Creating the Corporate Soul: The Rise of Public Relations and Corporate Imagery in American Big Business

Author(s):Marchand, Roland
Reviewer(s):Fones-Wolf, Elizabeth

Published by H-Business and EH.Net (January, 1999)

Roland Marchand. Creating the Corporate Soul: The Rise of Public Relations

and Corporate Imagery in American Big Business. Berkeley: University of

California Press, 1998. xi + 461 pp. Acknowledgments, illustrations, notes and

index. $39.95 (cloth), ISBN 0-520-08719-4.

Reviewed for H-Business and EH.Net by Elizabeth Fones-Wolf, West Virginia


On January 11, 1999 Time Magazine devoted a special edition to the

future of medicine. This issue featured a series of striking full and double

page advertisements sponsored by the pharmaceutical firm, Pfizer. While some

of the company’s 39 pages of advertising promoted Pfizer’s products, ma ny of

the others were designed to create a favorable public image of the firm.

Through this institutional advertising, readers learned about Pfizer’s history,

its concern for women’s health, its innovative research programs and its

longstanding commitment

to service. Pfizer presented itself as a friend of the family and as an

institution dedicated to improving the life of each American. In each

institutional ad, the firm proclaimed that life not profits “is our life’s

work.” Having established its concern for the public, Pfizer shifted from

image-shaping institutional advertising to advocacy advertising, using one of

the issues’ back pages to editorialize against government-led reform of the

healthcare system. Only the free market, CEO William Steere

sermonized, could provide quality healthcare.

Pfizer’s efforts to associate its firm with technological progress and service

and its attack on government regulation have deep historical roots.

Roland Marchand’s study of the creation of the corporate image uncovers the

origins of many of the themes and images still used today by corporations like

Pfizer in their institutional and advocacy advertising campaigns. It is a

major contribution to the growing literature on the history of public

relations, consumer culture, and advertising. This meticulously researched

work draws upon the records of major corporations, advertising agencies and

public relations counselors to analyze the strategies big business used to

attain legitimacy by creating a favorable public image during the first half

of the twentieth century. It combines a survey of the activities of a broad

cross section of firms with in-depth case studies of major companies such as

AT&T, the Pennsylvania Railroad, General Motors, General Electric, Du Pont and

Metropolitan Life Insurance.

In the early twentieth century, large

corporations faced a “crisis of

legitimacy” (p. 3). Appalled at the growing power and corruption associated

with newly emergent big businesses and by increasing industrial strife,

elements of the public began calling for greater state regulation. Some even

demanded the dismantling of the “soulless” giants who seemed to endanger

democracy and the traditional American way of life. This threat to corporate

freedom helped give birth to a host of public relations initiatives, ranging

from welfare capitalism and institutional advertising,

to factory tours and elaborate exhibits at the great world’s fairs, all

designed to create a positive image of the corporation. Like Andrea To ne,

The Business of Benevolence: Industrial Paternalism in Progressive

America, Cornell University Press, 1997), Marchand argues that welfare

capitalism, which provided services such as medical care, recreation,

pensions, and housing, was more than just a mechanism to undercut unionism and

promote worker productivity. By publicly demonstrating compassion for

employees and presenting the human face of American capitalism, welfare

programs served as a “safeguard against perceptions of soullessness” (p.1 5).

Welfarism also helped address corporate concern over the growing distance

between management and the rank and file, which Marchand labels

“the Lament.” The employee magazine, radio broadcasts, company films and

employee representation reunited “the family at one great dining table” (p.


Much of the book is devoted to analyzing the evolution of institutional

advertising. Marchand used corporate records to reveal companies’ multiple

goals and multiple audiences. Metropolitan Life’s 1922 institutional

campaign, for instance, was aimed at both employees and the public. It sought

to shape political opinion, promote employee morale and corporate

consciousness, and develop for the insurance company a reputation for community

service. Similarly, General Motor’s 1920s advertising campaign aspired both to

create public goodwill by portraying GM as an agency of public service and to

stimulate a corporate consciousness among the often hostile divisions of the

firm. Marchand pays close attention to the language and visual imagery of the

ads themselves. This book lavishly reproduced almost two hundred of these

advertisements, both color and black-and-white. While some of the advertising

seems archaic, many of the themes and metaphors that Marchand identified have

become ubiquitous in modern-day institutional advertising. Early ads projected

the corporate image through architecture, using pictures of the factory or

corporate headquarters to symbolize qualities like stability, efficiency, and


More familiar, however, are the AT&T ads from the early part of the century.

A trailblazer in corporate public relations, AT&T advertisements identified the

telephone with economic progress, featured women, sought to humanize the

company, and emphasized

the firm’s commitment to public service.

In the midst of the depression of the thirties, corporations worried less about

their soulless image and more about the future of capitalism.

Competing with the New Deal for public favor, business attempted to se ll

itself and the capitalist system. It looked to new mediums, especially radio

and movies, and reached out to insurgent workers with a common-folk style. New

converts, like Du Pont and U.S. Steel became committed to the mission of

carrying their “corporate message directly to the American

public” (p. 223). Other firms, like General Motors, longtime advocates of

public relations, expanded their image building activities. GM’s striking 1939

World’s Fair exhibit, Futurama, helped convey “the corporation’

s optimism about the capacity of private industry to promote prosperity and

create new jobs,” and suggested the “modernity, benevolence, and

forward-looking social vision of the corporation” (p. 303). World War II saw

yet a further expansion of corporate

public relations as companies connected their images to the war effort and

fought to offset growing wartime regulation of the economy.

In the early part of Creating the Corporate Soul, Marchand offers an

intriguing analysis of the roles of gender and

shifting boundaries in the development of corporate imagery. As he explains,

public relations and welfare capitalism, which were distant from production and

catered to public opinion, were initially viewed as feminine and potentially



considerations shaped the content of ads. Uncomfortable with too

“feminine” an appeal, AT&T’s early institutional advertising shied away from

depicting the social role of the telephone. Welfare capitalism also pushed the

boundaries of conventional business behavior, creating expectations of

stewardship that firms were often hesitant to assume. The themes of gender and

boundaries appear, however, only in the first part of the book. One might have

wished for an extension of this promising analysis through the entire work.

Throughout, Marchand makes realistic appraisals of the corporate image building

campaigns. Many of the corporate assertions were hypocritical,

contradictory and down right false. Firms, for instance, commonly employed the

metaphor of

corporation as family. But, as Marchand observes, “what family would ‘fire’

its children when expediency so dictated?” (p. 107). AT

&T’s depiction of itself as an investment democracy was deceptive.

Similarly, the sit-down strikes made GM’s 1930s portrayals of employees happily

rushing to work hardly credible. Marchand acknowledges that the

“precise effect of institutional advertising campaigns was difficult to

estimate” (p. 201). Companies with political goals at times found the payoff

in favorable

legislation. In the 1930s professional polling services began surveying

popular attitudes toward large firms. They helped provide business the

necessary evidence of the effectiveness of corporate image building. By the

end of World War II, big business

had gained acceptance as a legitimate social institution and corporate

ideology was well on its way to becoming a dominate force in political


Roland Marchand died before Creating Corporate Soul was published. It

is an important work and a

beautiful book that will stand as a fitting tribute to his distinguished career

as a historian.

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

The Other Side of the Frontier: Economic Explorations into Native American History

Author(s):Barrington, Linda
Reviewer(s):Weiss, Thomas


by EH.NET (January 1999)

Linda Barrington, editor, The Other Side of the Frontier: Economic

Explorations into Native American History. Boulder, CO; Westview Press,

1998. xiii + 301 pp. $65.00 (cloth), ISBN: 0813333954; $25.00 (paper),

ISBN: 0813333 962.

Reviewed for EH.NET by Thomas Weiss, Department of Economics, University of


This is a welcome and useful collection of articles, even though the articles

are not new and original pieces and are not focused on any one the me of Native

American history. Although most of the essays were published previously, their

concentration in one place helps to get across the key idea that Native

Americans responded to economic signals in much the same way that economic

theory would pr edict for any rational economic agent. The essays cover a wide

swath of time, space and issues, and this diversity helps underscore the

universality of their responses to economic forces.

The collection appears to have been motivated in part to provide

material for those interested in providing a more “diversity-friendly”

economics curriculum, in part to disseminate more widely recent literature that

examines Native American history from an economics perspective, and in part to

stimulate further research along these same lines.

I doubt that the essays will be much used to diversify the economics

curriculum. With the exception of the articles by Ann Carlos and Frank Lewis,

“Property Rights and Competition in the Depletion of the Beaver,”

Leonard Carlso n, “The Economics and Politics of Irrigation Projects on Indian

Reservations, 1900-1940,” and by Terry Anderson and Fred McChesney,

“The Political Economy of Indian Wars,” the analysis is not developed in ways

that would make it suitable to teach some particular economic concept or

behavior. And the latter article, although a nice example of the application

of political economic models, is not likely to be the sort of topic covered in

many introductory economic courses. If the idea is to diversify the curriculum

in economic history courses, then the collection fares much better.

In addition to these three, several other articles would be useful as well.

The book should serve to stimulate further research on the economic behavior of

Native Americans wi thin institutional constraints rather than that of an

exploited people decimated by the advance of western civilization. The latter

is a well known story. It is now time to better understand how Native

Americans behaved under those pressures and how those developments and their

reactions have bearing on current issues facing Native Americans and U.S.

society. Most of the articles make clear where some further research is

called for, and the totality of the collection provides a sense that all this


a line of inquiry well worth pursuing.

The authors are, of course, careful to point out that any research will be

hampered by a lack of evidence, especially evidence about how the Native

Americans saw these events. An overriding difficulty with any such research is

the great diversity within the Native American population. It is one thing to

imagine that economic principles can be used to explain behavior, it is quite

another to see how it actually worked out in specific cases across a long time


a wide spectrum of events, and involving diverse tribes and cultures.

Given the great diversity and long time period, the book attempts to focus on

key episodes of Native American economic history and salient issues of the

different time periods. The long history is compartmentalized into four

periods: Pre-Colonial Civilizations, Trade and Colonial Economies,

Westward Expansion, and Twentieth Century Federalism. Each section has a short

introduction and two or three articles. Barrington provides a useful overview

of Native American history and its relation to U.S. economic history more

generally, out of which comes the rationale for the four-part categorization.

Vernon Smith’s article covers the entire pre-colonial period, with a sweeping

analysis of the role of economic forces and institutions throughout mankind’s

history. If he is to be believed, economic forces,

such as changes in relative costs and accumulation of human capital,

explain just about everything, including not only inventions, but

also language and bipedalism. To be fair he eventually allows that bipedalism

was a bioeconomic response (p. 72). Much of his story will strike many readers

as nothing more than a relabeling of causes. After all, if we do not know what

brought about certain changes 5 or 10 million years ago, we might just as well

say it was changes in relative costs rather than some biological mutation or

climactic disaster. He does, however, make a plausible case for many of the

developments that took place, and perhaps we should rightly think of it as

economic behavior. At least this will get people to start looking at these

sorts of things from a different perspective, with perhaps fruitful results.

As much as I might laud his efforts to recast these long evolutionary

developments in economic terms, it is easy to see why many non-economists will

be skeptical. Some of the responses, such as the inventions of weapons for

big-game hunting or the shift from hunting to agriculture for example, took a

very long time to evolve. Along the way not all developments were obviously

conscious decisions being made by rational economic agents; they just happened.

Indeed, they would not seem to be the sort of calculating economic actions

described by Demsetz in which

“Property rights develop to internalize externalities when the gains of

internalization become larger than the cost of internalization” (p. 104).

It is hard to imagine early Cro-Magnon people working these things out in their

heads. And, Smith admits that some responses were unconscious (p.

68). As valuable as it might be to now try to describe those unconscious

decisions, most non-economists will prefer to think of some of these things as

the result of biological evolution, the survival of the fittest,


factors, or simply chance.

The main thrust of Smith’s argument, however, is extremely pertinent and he

presents a plausible case for reconsidering enormous and far-distant

developments in economic terms. He argues neatly that “culture and


can be interpreted as providing the information system for transmitting the

learning embodied in the unconscious response to opportunity cost.” (p. 68).

Although his article has little to do with Native Americans, its value is to

set the tone. If way back when economic forces were at work shaping language,

culture, and mankind–indeed man–then a fortiori these forces must have

influenced Native American behavior. Subsequent essays develop these ideas

more fully.

Barrington in “The Mississippians and

Economic Development Before European Colonization,” argues that in the

precolonial period the existence of Indian towns, such as Cahokia, is part of

the evidence that not all indigenous societies were hunters and gatherers prior

to European contact.


practiced a sedentary agriculture, and there was long-distance trade,

specialization of labor, taxation and social hierarchy. The latter may have

had some influence on the subsequent development of the southeastern United

States, although the link with

slavery seems rather tenuous.

Anderson and LaCombe’s piece, “Institutional Change in the Indian Horse

Culture,” delineates carefully how economic behavior must have been manifest in

the hunting techniques and how they changed with the introduction of the

horse. They also argue that much of this change occurred before there was

extensive contact with Europeans.

The essays on the colonial period are both concerned with trade–the fur trade

in the North and the skin trade in South Carolina. Carlos and Lew is try to

show that Indian behavior that led to the depletion of the beaver stock was not

irrational or culturally-determined, but rather was the outcome of a very

predictable response to changes in the prices received for beaver, and those

changes reflected differences in the competition faced by the Hudson’s Bay

Company. Murphy puts forth a similar sort of economic argument in “The

Eighteenth-Century Southeastern American Indian Economy.” To be sure there

were political influences at work, but he argues that Indians were clearly

motivated by market forces. They were involved in a large commercial hunting

market and their production rose and fell as the real price of skins rose and

fell. At its peak, the deerskin trade provided export earnings that

rivaled those of the Middle colonies,

and as prices fell Indians shifted into alternative economic activities.

David Wishart provides compelling evidence that the Cherokee were responding

well to economic forces; they were successful farmers and heavily

involved in commercial agriculture. In “Could the Cherokee Have Survived in

the Southeast?” he uses evidence from a special census of 1835 to show that at

least half, and perhaps three-fourths, of Cherokee households were producing

substantial agricultural surpluses. From an economic perspective there is

little doubt that they could have survived and thus the argument that they were

to be removed to Oklahoma for humanitarian reasons seems dubious. For

political reasons, however, they might not have be en able to survive and for

that reason the Removal may have been in their interest. James Oberly presents

an interesting and succinct analysis of the demographic history of the Lake

Superior Ojibwa in

“Land, Population, Prices and the Regulation of Natur al Resources.” Unlike

the other authors he does not stress how this tribe responded to economic

forces, but does show that until the late nineteenth century they performed

well economically. He also makes the point that in their treaty negotiations


exhibited astute economic thinking, and had estimated quite accurately the

time it would have taken whites to cut the timber on their lands and thus

probably had a good idea of the present value of their assets (p. 198). The

final essay in the Westward

Expansion section is that by Anderson and McChesney, in which they lay out

nicely how political economy models can explain the increase in conflict

between Indians and whites between 1790 and 1897, much of which can be traced

to the acquisition of the horse which turned otherwise sedentary tribes into

nomads. As Smith put it, “For a century and a half the history of the American

West was a history of fear and terror of the Comanche, who, prior to the

arrival of the mustang, had picked berries and dug roots” (p. 75).

The twentieth century economic history of Indians is primarily that of

Federalism. Leonard Carlson provides a succinct history of the key elements of

the Indian-government relations and then analyzes more thoroughly the allotment

program and irrigation policies that were in place between the passage of the

Dawes Act (1887) and the Indian Reorganization Act of 1934. He uses a public

choice approach to show that these programs and policies did not work

primarily for the benefit of the Indians.

Although some Indians did benefit, there was also a waste of resources, and

perhaps more noteworthy, a transfer of resources to bureaucrats in the Bureau

of Indian Affairs and to non-Indian ranchers and farmers. LaCroix and Rose

come to similar conclusions regarding the Hawaiian Home Lands Program. Both

of these papers raise the specter of some counterfactual analysis, but do not

pursue such inquiries in these papers. Carlson notes how difficult it would be

to imagine what alternative organizational scheme might have worked better

than relying on newly formed tribal councils (p.

254). LaCroix and Rose elsewhere propose some reforms of the HHL program,

implying they have in mind some counterfactual that might work better, but they

are skeptical that any such reforms will be adopted soon.

In all this is a useful book, setting out pertinent issues and showing the

sorts of analysis that can be applied. It also makes clear that careful

economic analysis of Native American issues is in its infancy, with much room

to grow. All of these pieces have been written within the last five years, and

they are among the best there is.

Thomas Weiss Department of Economics University of Kansas

Weiss is currently engaged in a joint research project to estimate

GDP for the colonial period. His co-investigators are Joshua Rosenbloom and

Peter Mancall, both of the University of Kansas. A related article “Was

Economic Growth Likely in Colonial British North America” by Mancall and Weiss

is forthcoming in the Journal of Economic History.

Subject(s):Social and Cultural History, including Race, Ethnicity and Gender
Geographic Area(s):North America
Time Period(s):General or Comparative

A Future of Capitalism: The Economic Vision of Robert Heilbroner

Author(s):Carroll, Michael C.
Reviewer(s):Emmett, Ross B.

Published by EH.NET (January 1999)


Michael C. Carroll. A Future of Capitalism: The Economic Vision of Robert Heilbroner. New York: St. Martin’s Press, 1998. ix + 117 pp. $59.95 (cloth). ISBN: 0-312-17754-2.

Reviewed for EH.NET by Ross B. Emmett, Department of Economics, Augustana University College.

A Unified Vision for the Future?

Let me begin with two admissions. First, I would not be a historian of economics today if it were not for Robert Heilbroner. Encountering The Worldly Philosophers in my first-year “history of western civ ” course, and then again (with the same professor!) in my fourth-year “modern intellectual history” course, convinced me that the “economic mind” was central to modernity. I avidly consumed some of his other books as an undergraduate student: The Future as History, The Great Ascent, An Inquiry into the Human Prospect, Beyond Boom and Bust, and Marxism: For and Against. Questions regarding the relation between modernity and economics have dominated my career since. I thought it somehow fitting that my first opportunity to hear Heilbroner speak in person came only hours after I defended my dissertation.

Second, the more I reflect on the questions regarding modernity and economics that Heilbroner first raised for me, the less my reflections look like those Heilbroner himself offers. Reading A Future of Capitalism, by Michael Carroll (now teaching at West Virginia State College), confirmed my suspicions regarding the central differences. We will get to those differences in due course, but first, comments about Carroll’s treatment of Heilbroner.

The key to understanding Heilbroner’s work, Carroll tells us, is to construct out of his various works a systematic presentation of his ideas. This is what Carroll sets out to do. After a basic intellectual biography, he uses Heilbroner’s criticism of standard economics to set up the key components of Heilbroner’s “system”: a hermeneutic, multi-dimensional approach aimed at uncovering the hidden unifying structure of capitalist society. Carroll argues that Heilbroner combines Marx’s socioanalysis with a psychoanalytic perspective on human behavior and an economics focused on how power and social organization intersect in the material provisioning of humankind (informed by the work of Adolph Lowe, Heilbroner’s friend and colleague at the New School), in order to reveal the internalized institutions and values which comprise the capitalist system. Carroll moves freely among Heilbroner’s writings spanning several decades to show how his analysis focuses on the interlocking nature of, and tensions among, three central internalized institutions and values in capitalism: the drive to accumulate capital, the market, and division between private and public realms.

Once we appreciate Heilbroner’s understanding of the underlying structure of capitalism, Carroll then asks what Heilbroner’s view to the future would be: uncovering the central contradictions of capitalism allows some tentative conclusions about its further development. Can the system sustain the drive to accumulate? Probably not, but capitalism has proven remarkably resilient; it has the capacity to transform itself even though changes may also create constraints for the system. The system’s real enemies, therefore, are the disruptions which reveal its endemic self- contradictions: structural unemployment, for example, which emerges from the drive to accumulate and the market’s organizing features, yet undermines future productivity, aggregate demand, and people’s hopes for their future. Or globalization, which by extending the market’s organization around the world in the absence of a global institutional base, jeopardizes the system’s separation of the public and private worlds in the drive to “accumulate, accumulate, accumulate.” In these, and other disruptions, Heilbroner sees the evolution of capitalism continuing. The role of an economist like Heilbroner, Carroll argues, is not to sketch out the particular features of the future, but to trace “future visions”: potential outcomes of the evolution of the relations among capitalism’s central elements.

As you may perhaps see from the previous paragraphs, Carroll’s attempt to uncover the unifying structure of Heilbroner’s ideas parallels Heilbroner’s own hermeneutics of capitalism. For the hermeneuticist, interpreting texts and interpreting societies are similar problems. Unlike Heilbroner, however, Carroll’s stance toward Heilbroner’s system is not critical. He is in fact enamored with Heilbroner’s ideas; and not the kind of affection Marx had for capitalism! The net result is a book remarkably like those that appear all too frequently in the history of economic thought — studies of little-known or long-forgotten economists which seek to convince us of their place in the pantheon. Far more interesting would be a serious effort to seek out the reasons why Heilbroner’s ideas have had such little impact on the modern economics profession, or to examine the way his work has been shaped by, and has itself shaped, modernism in the social sciences.

And make no mistake, Heilbroner is a modernist, despite his criticism of the type of modernism inherent in 20th century economics. Heilbroner’s modernism appears in the search for the underlying unity of capitalism, the effort to give it a singular meaning, and the quest to identify its future. Like Marx before him, and numerous other hermeneutic scholars of the mid-twentieth century, Heilbroner searches for unity beneath the fragmentation, even if only to reveal the nature of the fragmentation.

The hermeneuticist’s approach to unity and fragmentation has been at the center of my attention over the past couple of years, as I have been engaged in a series of discussions on hermeneutic theory with a number of my colleagues in other disciplines. One of the key issues we have identified as a source of division among us is the difference between those who believe that hermeneutic theory provides the capacity for creating meaning and unity in the midst of a fragmented social system, and those who believe that hermeneutics provides a means of uncovering meaning, unified or fragmented. The former group identifies the difference between hermeneutics and science with the distinction between the unity and the fragmentation of knowledge–despite epistemological claims for science’s unique role in creating knowledge, science fragments, while hermeneutics unites. (Carroll makes much the same claim in his chapter on Heilbroner’s critique of modern economics.) The latter group, myself included, identified hermeneutics with the uncovering of meaning/s, and sees the quest for unity (in either hermeneutic theory or science) as a peculiar attribute of modernism. In this latter way of thinking, texts such as Heilbroner’s are the sites of multiple meanings, and their interpretation may gain more from trying to locate those different meanings (contextually, or in terms of various interpretive communities) rather than the quest to render them coherent and consistent. In a similar fashion, capitalism is over-determined: a social framework being pulled in various directions by a host of competing self-contradictions and tensions; generating multiple meanings and an array of present realities and future possibilities.

I appreciate hermeneutic theory because it reminds me of things my training in economics attempted to make me forget, and urges upon me a humility in regard to the appreciation of the work of others that modernity encouraged me to ignore. Reading Heilbroner provided much the same experience. In the end, however, I see no more reason to look for a unified account of the future of capitalism than I do a systematic treatment of such a wonderful writer’s lifetime of work.

Ross B. Emmett John P. Tandberg Associate Professor of Economics Augustana University College, Camrose , Alberta, Canada

A scholar of American economics during the interwar years, Ross Emmett has focused on Frank H. Knight and Chicago economics. Two articles will appear shortly: “The Economist and the Entrepreneur: Modernist Impulses in Frank H. Knight’s Risk, Uncertainty and Profit,” forthcoming in History of Political Economy (Spring 1999); and “Entrenching Disciplinary Competence: The Role of General Education and Graduate Study in Chicago Economics,” forthcoming in The Transformation of American Economics: From Interwar Pluralism to Postwar Neoclassicism, edited by Malcolm Rutherford and Mary Morgan. A two-volume selection of essays by Frank H. Knight will appear from The University of Chicago Press in the next year


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

The Second Bank of the United States and Ohio (1803-1860): A Collision of Interests

Author(s):Brown, Marion A.
Reviewer(s):Schweikart, Larry

Published by EH.NET (January 1999)

Marion A. Brown, The Second Bank of the United States and Ohio

(1803-1860): A Collision of Interests. Lewiston, NY. Edwin Mellen Press,

1998. ix + 286 pp. $89.95 (cloth), ISBN: 0-7734-8352-3.

Reviewed for EH.NET by Larry Schweikart, Department of History, University of


Although controversy about the Second Bank of the United States–and Andrew

Jackson’s “war” on it (predating James Carville’s “war” on Ken Starr)–has

quieted down recently, there is still much work to be done,

especially at the local/state level. Marion Brown’s Second Bank of the

United States and Ohio helps fill some of that void.

Brown, who is a professor of history at the University of Cincinnati’s College

of Applied Science, traces the local reaction and responses in Ohio to the

First and Second Banks of the United States (BUS). She provides evidence,

mostly from local and regional newspapers, but also from manuscript sources, on

the citizenry’s view of events surrounding the “monster

.” While she supplies a great deal of evidence that Ohioans felt the impact of

the Banks, she does not make clear what the political and/or economic

perspective of the writers was. For example, one is often left wondering if the

editorialists and writers

in the newspapers were city fathers? respected leaders? “hotheads?” Were they

pro- or anti-bank people? And why?

In short, we have a book with considerable research that often does not provide

the underlying political or economic structure to determine what that research

means. One thing is clear: Brown has read many studies,

but does not necessarily understand them, or, at least, recapitulate them

accurately. For example, she refers to studies done by Charles Calormiris

(which she misspells both times)

and myself that showed that Ohio’s banks were relatively better off than those

of other northern states after the Panic of 1857 not because of the state

systems or the safety fund, but because of the widespread branch network.

Indeed, there is little discussion throughout of branching in the private


However, Brown adequately discusses the implications of the BUS’s branches and

their impact.

Throughout, however, in addition to the absence of context for many of the

statements by editorialists and

writers of the day, there is a complete lack of economic context, particularly

monetary and banking theory. For example, Brown cites Fenstermaker’s 1965 study

on Biddle and the BUS’s ability to influence the U.S. economy, but Peter Temin

and Richard Timberlake, writing more recently, have shown that the BUS’s

operations were too small to affect the economy. Now she may be right that

locals perceived things differently, but that is not her argument.

By attempting to portray the struggle as “vigilant Ohioans guard[ing] against

any incursions upon their independence and liberty,” she simplifies the

political debates that occurred not only in Ohio but throughout the nation.

The book would have benefited greatly from a solid discussion of monetary and


principles of the day. There is nothing to explain what specie reserves meant

to local customers. Was a high reserve good?

How did people know that the bank was issuing too much money? What did people

expect out of banks? What was the difference between

note issue and loans? Why were branches opposed? Why was free banking not

considered a more enticing alternative to the BUS? Brown’s discussions of the

Second BUS would have benefited from a thorough reading of Timberlake and David

Martin, not to mention

writers of the day, such as William Gouge and William Leggett. In other words,

too often it is unclear what fundamental principles–what “mindset,” in modern

slang–the various actors worked from.

Her study is, however, exceptionally valuable when it comes to detailing the

interactions between the BUS and its branches, pointing out the critical value

of honesty in branch managers. Brown’s careful discussion of several scandals

shows that trust was a “symbol of safety” in antebellum banking. She also does

a fine job of showing the difficulty of evaluating talent–aside from

honesty–of the BUS administrators,

who had to deal with distant employees in an era when communications were, by

our standards, primitive. On the other hand, there is little appreciation for

how the politicization of the banking system, like the postal system, was

primarily a function of the Jacksonian Democrats and not the Whigs; or of how

the creation of mass parties by the Jacksonians made the BUS “evil” only when

it was controlled

by political opponents.

While Brown concludes that Ohioans were hostile to the BUS, it is ultimately

not clear if this is because they (mistakenly) blamed the BUS for problems in

the state economy that could have been mitigated by better state banking la ws

allowing private banks to branch, or because the critics were more effective

than the defenders.

The Second Bank of the United States and Ohio, in short, is a

contribution–and in some places an excellent contribution–but it fails to

explain how, and why, there was a “collision of interests” and whether both,

or either, or those “interests” were justified in their positions.

Larry Schweikart Department of History University of Dayton

Larry Schweikart specializes in financial and banking history. His forthcoming

book, The Entrepreneurial Adventure, from Harcourt Brace, is a study of

American business and the American economy from the 1600s to the present.

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

From Steam to Diesel: Managerial Customs and Organizational Capabilities in the Twentieth-Century American Locomotive Industry

Author(s):Churella, Albert J.
Reviewer(s):Scranton, Philip

Published by EH.NET (January 1999)

Albert Churella, From Steam to Diesel: Managerial Customs and Organizational

Capabilities in the Twentieth-Century American Locomotive Industry.

Princeton: Princeton University Press, 1998. viii + 215 pp.

$45 (cloth), ISBN: 0-691-02776-5.

Reviewed for EH.NET by Philip Scranton, School of History, Technology, and

Society, Georgia Institute of Technology.

It is a commonplace of twentieth century industrial and railway history

that the steam locomotive (and the firms producing it) fell before the diesel

challenge, which delivered a technologically and economically more efficient

form of motive power, promoted by two of America’s leading corporations,


Motors and later General Electric, enterprises which dominate locomotive

provision to this day. The great virtue of Albert Churella’s slender, but

satisfying study is his sustained effort to probe beneath this truism to

expose the complex and contingent interactions which underlay diesel’s triumph

and the business cultures which sustained steam traction’s construction and

utilization. Churella (Ohio State University)

also makes appealing arguments for individual agency and interpersonal

relations within/between giant firms as key elements in framing the transition,

notes the role of legislation and government contracts at critical moments, and

documents innovators’ persistent stumbling as they sought to design and market

standardized diesel locomotives. Thus From Steam to Diesel represents a

welcome achievement in business and technological history, valuably

complementing John Brown’s recent Baldwin Locomotive Works (Johns

Hopkins, 1995), which analyzes the nation’s leading nineteenth century railway

engine builders, closing at just about the point (c. 1910) at which Churella

takes up the story’s threads.

Constructing locomotives long necessitated that enterprise

owners and managers have the steely resolve to take the long view of markets

and as well, a generous flexibility in meeting their clients’ diverse needs for

equipment. Demand for producers’ goods fluctuated wildly, then as now,

seeming perennially to be

either overheated or “dead.” Railways routinely clustered their orders,

creating backlogs and delays, or deferred upgrades and replacements, thus

forcing workforce and financial retrenchments.

Moreover, the roads’ superintendents of motive power held quite definite

notions about the design characteristics of the locomotives necessary for

different terrains, climates, or levels of use intensity. Building engines in

response to these variations made Baldwin, American Locomotive (ALCo,

the outcome of a tur n-of-the-century merger) and Lima (a perennial trailer,

focused on market niches) virtuosos in the custom and small batch fabrication

of complex mechanical goods. In tandem they developed a sectoral culture of

steam propulsion shared by generations of railway managers and employees,

batteries of product-specific workplace skills, and commitments to particular

“ways of seeing” and addressing technical problems and evaluating locomotives’

adequacy. Each of these assets became a liability as dieselization

gained a foothold.

In theory, diesel engines had powerful advantages over steam, not least

their ability to achieve “thermal efficiencies” vastly higher

(yielding lower fuel costs) than the older technology. Diesels needed no water

supplies, had lower repair expenses, generated more startup force per

horsepower and could, through dynamic braking, ease trains’ passage on long

downgrades. In practice, however, into the 1920s, diesels were far too heavy

for railway use, achieving early success chiefly

in “marine applications” (14-17). Moreover, no experimental design could

reliably transmit the engine’s power directly to traction wheels, an obstacle

resolved by using the diesel to drive electric motors of the sort GE and

Westinghouse had created for

streetcars and interurbans. Freed of the need for electrical power line

contacts (and hence of the huge costs for erecting and maintaining these) and

encouraged by legislation banning steam locomotives from New York and

Baltimore, both companies ventured

into diesel-electric production, GE in alliance with ALCo (using diesels from

Ingersoll Rand) and Westinghouse with Baldwin. Yet it was Harold Hamilton’s

new-start, Electro- Motive, that forged ahead. For years, EM,

clearly an early virtual corporation,

“did not manufacture anything” (32).

Rather Hamilton created a design boutique for self-propelled railcars,

commissioning components and subcontracting their assembly. Rather than

incrementally shifting designs to include “learning by using” improvements


EM froze its designs, reaped “substantial production efficiencies,” then

consolidated accumulated feedback insights periodically into new models.

When the Big Two sidelined their diesel efforts, EM picked up a roster of their

able engineers and made some 500 railcars by 1930, but the Depression emptied

order books, threatening a collapse.

Here Churella turns to the contingent sequence of interactions which

brought EM into General Motors’ orbit and set it on a rocky path to challenge

steam traction

. In the late 20s, Charles Kettering, GM’s research director, promoted

experiments in using diesels for highway vehicles, quickly finding that

“metallurgy had not yet caught up with diesel engine technology” (38). Once

the economy slumped, Alfred Sloan pressed “Ket” to save on R&D costs by buying

an experienced diesel engine maker. The Winton company, acquired in 1930, had

worked with EM extensively; and Hamilton soon befriended Kettering, turning his

attention to the potential of locomotive diesels and

to aiding EM’s stalled engine-development plans. As an effort to promote GM

diesels by having models designed for Navy contracts power the company’s 1933

Chicago World’s Fair display was flopping badly (“the only part of that engine

that worked well was

the dipstick”), Hamilton and his ally Ralph Budd (head of the Chicago,

Burlington and Quincy) persuaded Sloan and Kettering to install diesels as

drivers for the CB&Q’s new streamlined “train-set” for the Chicago-Denver run.

A second failure would have be en disastrous, but in 1934 the “Zephyr” stunned

everyone, accelerating so rapidly on a test run that its tail lights fell off.

Cheap to operate, fast and reliable, this luxury passenger train created a

national sensation which surely helped Kettering extract a half-million from

Sloan late that year for expanding diesel engine research, then vastly more in

1935 for what became a huge locomotive production plant at LaGrange, IL. In

all this, the key players’

interpersonal networks of trust and confidence

and their uninvolvement with the “steam culture” proved crucial.

If this sounds like the run-up to rapid success, Churella supplies a

cautionary “Not so fast.” Motive power men at most railways derided diesels,

even resisting their use as yard-switchers, where their facility in starting

and stopping could be valuable. EM salesmen thus approached railroad financial

officers with reams of data showing diesels’

cost-savings and began landing orders. Second, the Zephyr-style three or four

car passenger

train-sets were a dead end, as cars could not be added.

Instead, EM had to design independent passenger diesels to supplement the

smaller switchers, then proceed to the big stuff, freight-hauling locomotives.

Third, railroad workers knew nothing about diesel maintenance and repair,

hence, the makers had to develop extensive training programs,

after-sale service linkages, and inventories of replacement parts for rapid

delivery. GM’s deep pockets were crucial here, for absent system investments


estimates totaling between $17 and $25 million, the diesel campaign may well

have floundered, even in the face of a vast locomotive replacement market

(40,000 engines, perhaps $4 billion over the long term). One further

competitive advantage was that EM,

which became a General Motors division, could mobilize the GM Acceptance

Corporation’s resources to arrange monthly payment plans for railroads, just as

GMAC did for citizens buying Chevrolets. Last, even into recent years, design

failures in new models

of these immensely complex machines (ca. 50-60,000 parts) occurred repeatedly.

Yet it is clear that transferring elements of GM’s auto manufacturing approach

to locomotive building, even if full mass production remained elusive, was a

winning strategy, especially when contrasted with the stumbling efforts of the

steam engine makers.

The three steam locomotive leaders at first

denied the relevance of

diesels to railway needs, then squandered opportunities to adapt their

facilities, engineering practices, and work routines to producing them.

All eventually fashioned diesel locomotives that ranged from dreadful to barely

adequate when put in use by railroads that had long cherished their

steam-powered drivers. Each attempted to use product diversification

strategies (making all sorts of specialized capital goods), but failed to

thrive for reasons that another research project might explore. ALCo, the

least awful diesel builder, remained in the postwar engine market in large part

because railways were

anxious about EMD’s monopoly potential. Once General Electric, which had

supplied ALCo its electrical components,

entered the diesel trade in the 1960s with better models, ALCo quickly faded

from sight. Churella rapidly surveys GE’s challenge to EMD in

closing passages; by 1993 the “newcomer” (which had traction experience from

before 1900) was outselling EMD two engines to one and GM

“contemplated exiting [the] industry.” In response, EMD “allowed its customers

greater control over the design and manufacturing process,” (139)

a step back toward the specialty production format which its standard models

had helped erase in the century’s middle decades. Whether this move indicates

desperation or represents tactical ingenuity lies outside the author’s

boundaries, of course.

In sum, this is an engaging study of the transformation of a specialty

production trade into a standard-product industry, though one which remains

vulnerable to the vicissitudes all capital goods sectors face. Churella’s


to be sure, does not neatly conform to “organizational synthesis”

templates, which he regards as “giv[ing] too little weight to historical

actors” (151). Rather, he urges readers to consider the interplay between

enterprise structure/strategy considerations and those anchored in shared

industrial cultures, technological and personal networks, and state activities,

which, together with far broader phenomena (depressions, wars),

deploy the challenges enterprises must face and create those shifts and

surprises that inspire both the managerial and the historical imagination.

(I know convention mandates that I offer something critical about this work

– OK, the index is inadequate…) This book is well worth the attention of

economic/business historians and their students.

Phil Scranton is the Kranzberg Professor of the History of Technology at

Georgia Tech in Atlanta. His Endless Novelty: Specialty Production and

American Industrialization, 1865-1925 rolled out of Princeton University Press

in December 1997

. He is presently contemplating the horrors of researching the depression-era

decay of specialty manufacturing and its restructuring (in some trades) during

the Cold War decades.

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

Black Diamonds! Black Gold!: The Saga of Texas Pacific Coal and Oil Company

Author(s):Woodard, Don
Reviewer(s):Manning, Jason

Published by and EH.Net (January, 1999)


Don Woodard. Black Diamonds! Black Gold!: The Saga of Texas Pacific Coal and Oil Company. Lubbock: Texas Tech University Press, 1998. xii + 322 pp. Illustrations, notes, bibliography, and index. $29.95 (cloth), ISBN 0-89672-379-8.

Reviewed for H-Business and EH.Net by Jason Manning , Department of History, Southern Illinois University.

The Wheels of Progress

In Black Diamonds! Black Gold!, author Don Woodard tells the story of the Texas Pacific Coal & Oil Company (TP) from its modest beginnings in 1888 as a coal-mining concern through its extraordinary expansion into one of the most influential corporations in Texas. Using a blend of archival sources, newspaper accounts, and oral history, Woodard has produced something more than a company history. This work provides insights into the volatile disputes between management and early organized labor and addresses the influence of industry captains on Texas politics during the first half of the twentieth century. In addition, this book offers an interesting glimpse into the role of companies like TP in the economic growth of Texas.

Written in a style amenable to the layman, Black Diamonds! Black Gold! is interspersed with frequent diversions from the principal topic–the sage of Texas Pacific–in order to give the reader tantalizing glimpses into the private lives of company presidents and immigrant miners. Woodard tells his tale against the backdrop of national events, pausing the main narrative to insert such historical highlights as the flight of The Spirit of St. Louis and the Japanese attack on Pearl Harbor. While the author usually makes some connection between such landmark events and the fate of Texas Pacific, they are sometimes rather tenuous ones. For example, the reader is left with the impression (largely unsubstantiated) that TP president Edgar J. Marston was inspired by Charles Lindbergh’s visit to Fort Worth to launch the company’s excursion into gasoline marketing, resulting in a proliferation of TP Aero filling stations in North Texas and Oklahoma. Scholars may find some of these detours of little practical value and perhaps even disconcerting on occasion. The last thirty-five pages of the book are, in fact, a biographical sketch of TP’s last chairman, H. B. Fuqua, recounting his activities following the acquisition of the company by the liquor distilling firm of Joseph E. Seagram & Sons.

In the opinion of this reviewer, Woodard’s work is of particular interest when it addresses labor disputes. In its early days T P–then the Texas & Pacific Coal Company–clashed several times with the Knights of Labor. Reaching the zenith of its power in the mid-1880s, the union sought to repeat in Texas the success it had enjoyed elsewhere, but it found this goal elusive in right -to-work Texas where well-connected companies like TP could summon steely-eyed Texas Rangers to keep the peace while scabs were imported to work the idle mines. TP remained non-union until the United Mine Workers (UMW) came to Texas in 1903 and infiltrated union organizers into the ranks of the TP mineworkers. Every miner in the company payroll walked off the job. When TP attempted to bring in scabs, UMW men met the trains and dissuaded the new workers from proceeding to the mines. Texas Pacific eventually capitulated to union demands. Woodard’s handling of this topic is balanced and fair, and those interested in American labor history are likely to cull useful information from the pages of his book.

Of equal interest is the focus on Thurber, TP’s comp any town in north central Texas. Woodard describes Thurber as a melting pot that, by the turn of the century, was composed of about two thousand native-born Americans and eight thousand of other nationalities, chiefly Italians, Poles, and Mexicans. The company “owned” Thurber in every sense of the word. It built homes and schools and churches for its workers. The town boasted its own opera house and the first public library in the region. It was also the first community in the state to have AC and DC electrical wiring in every residence. TP’s attempt to prevent Thurberites from shopping anywhere besides in company stores was ultimately foiled by the advent of mail order catalogs. The author paints an absorbing word portrait of life in a company town that , by 1913, was the largest community between Fort Worth and El Paso. And yet by the mid-1930s Thurber was a ghost town; TP had closed the last of its coal mines, having turned its attention to oil production.

In 1917 the first gusher at TP’s Ranger Field blew in, a watershed event not only for the company but also Fort Worth, a sleepy town that blossomed virtually overnight into a booming oil capital thanks to its Texas & Pacific Railway connection with the highly productive TP oil leases. With its own fields, pipelines, and refining, the company reaped huge profits when the automotive industry came into its own in the 1920s. Though it suffered hard times during the Great Depression, the company survived thanks in large part to astute management, and continued to play a prominent role in Texas postwar politics, using its connections to fend off a 1956 buyout bid by Sinclair Oil Corporation. But, as oil become more expensive to produce, corporate consolidations continued apace, and in 1963 Texas Pacific was absorbed into the Frankfort Oil Company subsidiary of Seagram.

Woodard’s study illustrates the crucial role that companies like Texas Pacific played in the social and economic development of Texas. Clearly the author believes that role was a vital one, as well he should. But one must look elsewhere in order to put the TP saga into perspective. The petrochemical industry–the largest industry in the state by the mid-twentieth century–enriched Texas by bringing in a torrent of outside money and providing a major new source of tax revenue. As historian T. R. Fehrenbach points out, oil concentrated money in the hands of developers and landowners and contributed to the conservative tradition of Texas politics. It was the engine that turned the wheels of progress in the state. Certainly, by importing workers of many nationalities, TP is due some credit for contributing to the rich diversity of Texas society. But the extent to which its activities benefited the working class is an issue well worth debating–and one that arises when reading between the lines of Black Diamond! Black Gold!.


Subject(s):Agriculture, Natural Resources, and Extractive Industries
Geographic Area(s):North America
Time Period(s):20th Century: WWII and post-WWII

Unlikely Partners: Philanthropic Foundations and the Labor Movement

Author(s):Magat, Richard
Reviewer(s):Goldin, Milton

Published by and EH.Net (December, 1998)

Richard Magat. Unlikely

Partners: Philanthropic Foundations and the Labor Movement. Ithaca and

London: Cornell University Press, 1999. x + 242 pp. Photographs, notes,

bibliography, and index. $39.95 (cloth), ISBN 0-8014-3552-8.

Reviewed for H-Business and EH.Net by Milt on Goldin ,

National Coalition of Independent Scholars (NCIS)

In this first, well-written assessment of past and present relationships

between foundations and labor unions, Richard Magat tells us that within a

hundred years after the

Republic’s founding, workers came to a belief that captains of industry might

not be trustworthy. A Gilded Age expression of this understanding appeared in

the National Labor Tribune: “Oh, most adorable [Andrew] Carnegie, we love

thee, because thou are

the almighty iron and steel king of the world…. We thank thee…for all the

free gifts you have given the public at the expense of your [wage] slaves” (p.


A hundred years after the Gilded Age, not much has changed in how workers

regard the rich bearing philanthropic gifts, or, for that matter, how the rich

regard union chiefs bearing demands.

An “academic friend” advised Magat, “There’s no research because there’s no

there there. Organized labor relations with foundations? An oxymoron” (p. vii


Magat nonetheless persisted in a search for “there there,”

despite the handicap that being an initial investigator necessitates much time

spent simply locating and evaluating sources. On the other hand, such

exercises, besides delivering information on what evidence exists, almost

mandate evaluations of conventional wisdom. Among Magat’s most useful

observations is that labor’s distrust has had much to recommend it. Another

useful observation is that labor chiefs have frequently hurt their own ca use

with depressing examples of corruption. On the bright side, however, late

twentieth century concerns about societal rifts may finally persuade

foundations and unions that cooperation could be useful.

Not that the road ahead can possibly be easy to travel, given what Magat tells

us about the past. Academics as well as capitalists have seen workers less as

people than as disposable commodities. Charles W. Eliot of Harvard, a

confidant of John D. Rockefeller, hailed scabs as “19th-century heroes” (p.


and announced himself unalterably opposed to the closed shop–as did Nicholas

Murray Butler of Columbia. Rockefeller was “so bitter against the way the

unions had acted he would not have a union man on his estate” (p. 33), and he

lamented that

“professors” favored “socialism and even some forms of Bolshevism” above

capitalism (p. 34).

It irked the titan that “professors” would “not have had their opportunities

for education but for the funds contributed gratuitously [sic] by the people

whom they se em so readily to assail” (p. 34). Ungrateful academics had, in

effect, used grant money from his foundations to prepare attacks on him and

possibly to excite the masses to misgivings about capitalism.

Rockefeller even considered ringing his Pocantico Hills, New York, estate with

barbed wire.

Nor are enlightened views widely prevalent, today. The Heritage Foundation,

which favors “caring conservatism” over the welfare state, argues against

legislation requiring businesses to notify workers, unions, and state

governments of intentions to close plants. Marvin Olasky has come out flatly

for churches, synagogues, and local nonprofits to disburse funds to the poor,

which is what they have been doing since Lyndon B. Johnson began a Great

Society, in the mid-1960s.

And, as if the foundation-union historical record doesn’t offer enough

discouragements, there remains the question of how to interpret the purposes

and results of Congressional investigations of both foundations and unions.

Looking into foundations, in 1913, Congress suspected that robber barons

intended such agencies as nothing but devices to bamboozle the public into

thinking that men such as Rockefeller were plain charitable folk, just

extraordinarily rich. During the next forty years, Congressmen suspected that

communists had infiltrated foundations and unions; in the 1950s, Washington

could hardly decide which was worse, the Ford Foundation or the American

Federation of Labor-Congress of Industrial Organizations.

Magat includes in his opening pages descriptions of the few foundations

operative during the early years of the twentieth century interested in social

issues and of a remarkable woman named Mary Van Kleek, who headed the Russell

Sage Foundation.

(In this context, it is useful to note that 82 percent of foundations

currently operative came into being after World War II.) The Sage Foundation,

created by the financier’s widow, Margaret Olivia Sage, was the first

foundation to address labor conditions and

call for “scientific philanthropy.”

Sage had been a convicted felon, who found his true genius in gouging the stock

market and leaving behind windrows of ruined investors. Still, he was

optimistic about future relations between capital and labor, declaring, “I fail

to see the dangers arising from wealth that the demagogues make such a hue and

cry about. If such danger does exit…there never was a day when capital and

labor were so near together as now” (p. 12).

Unlike Sage, Van Kleek had a firm grounding in the Social Gospel

–her father had been a minister–and a more realistic view of conditions in

the everyday world. She accepted that “It is true that all Foundations must

meet the criticism that, as they represent the benefactions of the rich, they

are expected to be defenders of the present order….” (pp. 13-14). But when

she went on to champion the labor movement, conservatives accused her of

communist sympathies.

Van Kleek did not have long to wait after her appointment for an issue that

would bring her interests to

public attention.

During the infamous Ludlow massacre in April 1914, state militia killed

strikers at the Colorado Fuel and Iron Company, along with eleven children and

two women who suffocated to death when one of the tents in which strikers lived

caught fire. The company was part of the Rockefeller industrial empire, and

John D., Jr., genuinely shocked by events, mounted a public relations campaign

to solve the problem of labor strife.

The best idea that he could deliver, company unions, turned out not to appeal

to workers. After this, Rockefeller family interests shifted back to areas in

which the family felt more comfortable, such as health care. During the

remainder of the twentieth century, the Ford Foundation would take the lead in

“social issues,” especially during McGeorge Bundy’s tenure as president,

between 1966 and 1979. Magat served that organization as a staff member, he

knew key players, and his comments are valuable guides to outlooks that

determined thinking on memorable development s, including the foundation’s

conflicts with the New York City teachers’ union over school decentralization,

an evaluation of a coal-mine shift reorganization involving a mining company

and the United Mine Workers, and voter registration in Cleveland, whi ch

especially irritated a Texas populist with an ingrained distrust of the rich,

Representative C. Wright Patman of Texas.

What the book does not provide (hopefully, Magat will address the subject in

future writings) is a full account of what impelled this particular

foundation’s board and senior officers to approve huge investments of time and

money in “social issues”

to begin with. Henry Ford’s response to the United Auto Workers had been

thugs; grandson Henry II, whose management saved the Ford family his

grandfather’s estate taxes through the donation of Ford Motor Company Class A

non-voting stock to the foundation

(the family retained voting shares), settled with workers and required no

special public relations campaigns to bring peace to the auto


But what to do with a foundation that began its life with assets of $417

million and no clear mission?[1] Education and behavioral science grants were

stylish in the 1950s; on the face of it, these early areas of Ford Foundation

concentration appeared safe from Congressional attack. That is, until

right-wing members suspected that Henry II, a congenial sort but no heavyweight

thinker, had been duped into supporting Robert Hutchins, whose liberalism very

nearly caused collective cardiac arrest

among conservatives whenever they gathered to think of him.

The furor did not amuse Henry II, who is said to have wondered

(accounts differ), “Why can’t we be a nice foundation, like Rockefeller?” In

the 1960s, the foundation shifted its focus to the arts, in which Henry II had

scant interest, but to which he is also said not to have had any objections.

Henry II was in no way prepared for the advent of Bundy, who came fresh from

advising Lyndon B. Johnson how to deal with the Vietnam War, and brought with

him absolute, limitless confidence that the best and brightest (including him)

would set the world right–if not in a former French colony, then in an America

beset by problems.

Bundy developed a liberal agenda that accomplished, among other things,

driving Henry II to resign as the foundation’s chairman,

in 1976.

In his book’s penultimate page, Magat quotes a 1996 statement by a foundation

staff member that suggests the extent to which Bundy’s philosophy survives his


For we [that is,

grantmakers] are blessed with the rare

ability to invest resources that can make a difference in how

problems are understood and solved; how the debate is framed

and undertaken; and how communities respond (p. 192).

The question is this: In the past hundred years, the number of philanthropic

foundations has gone from eight to something over 42,000. American society is

increasingly characterized by captains of industry who annually earn more than

entire communities, and who, bluntly put, appear chintzy in their charitable

outlooks. Labor union corruption occurs so often it often goes unremarked in

the media. Given these realities, to what can we look forward in

foundation-union relationships during the next hundred years?


[1]. For a

brief discussion of the dilemma, see Sutton, Francis X. “The Ford Foundation:

The Early Years,” Daedalus 116

(1987): 41-91.

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

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

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

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

Dora L. Costa, The Evolution

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

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


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


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


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

scientists have emerged as the only scholars treating a number


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

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

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

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

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

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

cultural forces in the history of older persons. Attitudinal factors

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

also among the reformers who eventually built the Social Security

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


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

reducing labor force participation during the twentieth century.

Indeed, income effects can be observed in household and family


as well, since pension income raised the probability that

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

very useful critique of other explanations, including a novel and

insightful argument that health problems cannot be used to explain

secular declines in labor force activity.

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

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

other sources. The

data set permits Costa to carry out analyses that

are much better specified than those heretofore used and represent an

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

one presumes they soon will be). The rich body

of evidence nonetheless

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

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

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

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

difficult to interpret since it pertains largely to individuals already

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

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

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

contemplate such themes as current leisure activities among the elderly

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

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

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

strong findings for pension effects add to our understanding of the

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

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

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

notoriously difficult to mea ure. The denigration of Social Security

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

Costa is more sensitive than most historical economists to those outside

the fraternity, but still fails to recognize certain

very useful

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

historians like William Graebner convey an essential truth when they fix

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

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

begins with historical economists’ insistence on using the term

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

cost them many an intelligent reader

. (Costa’s rendition is especially

convoluted [7].).

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

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

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

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

to Freud or to Shakespeare.

(Costa is currently Associate Professor of Economics at the

Massachusetts Institute of Technology and a faculty research fellow of

the National Bureau of Economic Research.)

Brian Gratton

Department of History

Arizona State University

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

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

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

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