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The Wealth and Poverty of Nations: Why Are Some So Rich and Others So Poor

Author(s):Landes, David S.
Reviewer(s):De Long, J. Bradford

EH.NET BOOK REVIEW

Published by EH.NET (April 1998)

David S. Landes, The Wealth and Poverty of Nations: Why Are Some So Rich and Others So Poor. New York: W.W. Norton, 1998. 544 pp. $30.00 (cloth) ISBN: 0393040178.

Reviewed for EH.NET by J. Bradford De Long, Department of Economics, University of California-Berkeley.

David Landes has studied the history of economic development for more than half a century. His look at economic imperialism and informal empire in nineteenth-century Egypt (Bankers and Pashas) tells the story of how small were the benefits (either for Egyptian economic development or for the long-run power and happiness of the ruling dynasty) bought at extremely high cost by borrowing from European bankers. His unsurpassed survey of technological change and its consequences in Europe since 1750 (The Unbound Prometheus) remains the most important must-read book for serious students of the industrial revolution. His study of clock-making as an instance of technological development (Revolution in Time) provides a detailed look at a small piece of the current of technological development. His works are critical points-of-reference for those who seek to understand the Industrial Revolution that has made our modern world.

Now David Landes turns to the grandest question of all: the causes of the (so far) divergent destinies and relative prosperity levels of different national economies. The title echoes Adam Smith, but Landes is interested in both the wealth and poverty of nations: Adam Smith lays out what went wrong as the background for his picture of how things can go right, while Landes is as interested in the roots of relative–and absolute–economic failure as of success.

He pulls no punches–of Columbus’s followers treatment of the inhabitants of the Caribbean, Landes writes that “nothing like this would be seen again until the Nazi Jew hunts and killer drives of World War II.” Landes makes no compromises with any current fashion. Readers will remember how columnist after columnist decried high-school history standards (which, truth be told, were not very good) that required students to learn about a fourteenth-century African prince, Mansa Musa, but not about Robert E. Lee; readers of Landes will find three pages on Mansa Musa, and none on Master Robert.

We are all multiculturalists now; or, rather, serious historians have long been multiculturalists.

Nevertheless, Landes’s economic history is a profoundly Eurocentric history. It is Europe-centered without apologies–rather with scorn for those who blind themselves to the fact that the history of the past 500 years is Europe-centered.

Now Landes does not think that all history should be Eurocentric. For example, he argues that a history of the world from 500 to 1500 should be primarily Islamocentric: the rise and spread of Islam was an “explosion of passion and commitment… the most important feature of Eurasian history in what we may call the middle centuries.”

But a history oriented toward understanding the wealth and poverty of nations today must be Eurocentric. Goings-on in Europe and goings-on as people in other parts of the world tried to figure out how to deal with suddenly-expansionist Europeans make up the heart of the story of how some–largely western Europe and northwest Europe’s settler ex-colonies–have grown very, very rich.

Moreover, relative poverty in the world today is the result of failure on the part of political, religious, and mercantile elites elsewhere to pass the test (rigged very heavily against them) of maintaining or regaining independence from and assimilating the technologies demonstrated by the people from Europe–merchants, priests, and thugs with guns in the old days, and multinationals, international agencies, and people armed with cruise missiles in these new days–who have regularly appeared offshore in boats, often with non-friendly intent. To try to tell the story of attempted assimilation and attempted rejection without placing Europe at the pivot is to tell it as it really did *not* happen.

Thus Landes wages intellectual thermonuclear war on all who deny his central premise: that the history of the wealth and poverty of nations over the past millennium is the history of the creation in Europe and diffusion of our technologies of industrial production and sociological organization, and of the attempts of people elsewhere in the world to play hands largely dealt to them by the technological and geographical expansions originating in Europe.

He wins his intellectual battles–and not just because as author he can set up straw figures as his opponents. He wins because in the large (and usually in the small) he has stronger arguments than his intellectual adversaries, who believe that Chinese technology was equal to British until 1800, that had the British not appeared the royal workshops of Mughal India would have turned into the nucleus of an industrialized textile industry, that equatorial climates are as well-suited as mid-latitude climates to the kind of agriculture that can support an Industrial Revolution, that Britain’s industrial lead over France was a mere matter of chance and contingency, or any of a host of other things with which Landes does not agree.

Landes’s analysis stresses a host of factors–some geographical but most cultural, having to do with the fine workings of production, power, and prestige in the pre-industrial past–that gave Eurasian civilizations an edge in the speed of technological advance over non-Eurasian ones, that gave European civilizations an edge over Chinese, Arabic, Indian, or Indonesian, that made it very likely that within Europe the breakthrough to industrialization would take place first in Britain.

And by and large it is these same factors that have made it so damn difficult since the Industrial Revolution for people elsewhere to acquire the modern machine technologies and modes of social and economic organization found in the world economy’s industrial core.

Landes’s account of why Eurasian civilizations like Europe, Islam, and China had an edge in technological development over non-Eurasian (and southern Eurasian) civilizations rests heavily on climate: that it is impossible for human beings to live in any numbers in “temperate” climates before the invention of fire, housing, tanning, and sewing (and in the case of northern Europe iron tools to cut down trees), but that once the technological capability to live where it snows has been gained, the “temperate” climates allowed a higher material standard of living.

I am not sure about this part of his argument. It always seemed to me that what a pre-industrial society’s standard of living was depended much more on at what level of material want culture had set its Malthusian thermostat at which the population no longer grew. I have always been impressed by accounts of high population densities in at least some “tropical” civilizations: if they were so poor because the climate made hard work so difficult, why the (relatively) dense populations?

It seems to me that the argument that industrial civilization was inherently unlikely to arise in the tropics hinges on an–implicit–argument that some features of tropical climates kept the Malthusian thermostat set at a low standard of living, and that this low median standard of living retarded development. But it is not clear to me how this is supposed to have worked.

By contrast, I find Landes’s account of why Europe–rather than India, Islam, or China–to be very well laid out, and very convincing. But I find it incomplete. I agree that it looks as if Chinese civilization had a clear half-millennium as the world’s leader in technological innovation from 500 to 1000. Thereafter innovation in China appears to flag. Little seems to be done in developing further the high technologies like textiles, communication, precision metalworking (clockmaking) that provided the technological base on which the Industrial Revolution rested.

It is far from clear to me why this was so. Appeals to an inward turn supported by confident cultural arrogance under the Ming and Ch’ing that led to stagnation leave me puzzled. Between 1400 and 1800 we think that the population of China grew from 80 million to 300 million. That doesn’t suggest an economy of malnourished peasants at the edge of biological subsistence. That doesn’t suggest a civilization in which nothing new can be attempted. It suggests a civilization in which colonization of internal frontiers and improvements in agricultural technology are avidly pursued, and in which living standards are a considerable margin above socio-cultural subsistence to support the strong growth in populations.

Yet somehow China’s technological lead–impressive in printing in the thirteenth century, impressive in shipbuilding in the fifteenth century, impressive in porcelain-making in the seventeenth century–turned into a significant technological deficit in those same centuries that China’s pre-industrial population quadrupled.

Landes’s handling of the story of England’s apprenticeship and England’s mastership–of why the Industrial Revolution took place in the northwest-most corner of Europe–is perhaps the best part of the book. He managed to weave all the varied strands from the Protestant Ethic to Magna Carta to the European love of mechanical mechanism for its own sake together in a way that many attempt, but few accomplish. Had I been Landes I would have placed more stress on politics: the peculiar tax system of Imperial Spain, the deleterious effect of rule by Habsburgs and Habsburg puppets on northern Italy since 1500 (and the deleterious effect of rule by Normans, Hohenstaufens, Valois, Aragonese, and Habsburgs on southern Italy since 1000), the flight of the mercantile population of Antwerp north into the swamp called Amsterdam once they were subjected to the tender mercies of the Duke of Alva, more on expulsions of Moriscos, Jews, and French Protestants (certainly the Revocation of the Edict of Nantes was an extraordinary shock to my seventeenth-century DeLong ancestors), the extraordinary tax burden levied on the Dutch mercantile economy by the cumulated debt of having had to spend from 1568 to 1714 fighting to achieve and preserve independence, and so forth.

I also would spend more time on Britain itself. I, at least, find myself wondering whether Britain’s Industrial Revolution was a near-run thing–whether (as Adam Smith feared) the enormous burden of the Hanoverian fiscal-military state might not have nearly crushed the British economy like an egg. Part of the answer is given by John Brewer’s Sinews of Power, a work of genius that lays out the incredible (for the time) efficiency of Britain’s eighteenth-century fiscal-military state. Most of the answer is the Industrial Revolution. And some of the answer is (as Jeffrey Williamson has argued) that the burden of the first British Empire did indeed significantly slow–but not stop–industrialization.

I don’t know what I think of all the issues in the interaction of the first British Empire, the British state, and British industrialization. Thus I find myself somewhat frustrated when Landes quotes Stanley Engerman and Barbara Solow that “It would be hard to claim that [Britain’s Caribbean Empire was] either necessary or sufficient for an Industrial Revolution, and equally hard to deny that [it] affected its magnitude and timing,” and then says “That’s about it.” I want to know Landes’s judgment about how much. Everything affects everything else, and when economic historians have an advantage over others it is because they know how to count things–and thus how to use arithmetic to make judgments of relative importance.

But the complaint that a book that tries to do world history in 600 pages leaves stuff out is the complaint of a true grinch.

So where does Landes’s narrative take us?

If there is a single key to success–relative wealth–in Landes’s narrative, it is openness. First, openness is a willingness to borrow whatever is useful from abroad whatever the price in terms of injured elite pride or harm to influential interests. One thinks of Francis Bacon writing around 1600 of how three inventions–the compass, gunpowder, and the printing press–had totally transformed everything, and that all three of these came to Europe from China. Second, openness is a willingness to trust your own eyes and the results of your own experiments, rather than relying primarily on old books or the pronouncements of powerful and established authorities.

European cultures had enough, but perhaps only barely enough. Suppose Philip II Habsburg “the Prudent King” of Spain and “Bloody” Mary I Tudor of England had together produced an heir to rule Spain, Italy, the Low Countries, and England: would Isaac Newton then have been burned at the stake like Giordano Bruno, and would the natural philosophers and mechanical innovators of seventeenth and eighteenth century England have found themselves under the scrutiny of the Inquisition? Neither Giordano Bruno, Jan Hus, nor Galileo Galilei found European culture in any sense “open.”

If there is a second key, it lies in politics: a government strong enough to keep its servants from confiscating whatever they please, limited enough for individuals to be confident that the state is unlikely to suddenly put all they have at hazard, and willing once in a while to sacrifice official splendor and martial glory in order to give merchants and manufacturers an easier time making money.

In short, economic success requires a government that is, as people used to say, an executive committee for managing the affairs of the bourgeoisie–a government that is responsive to and concerned for the well-being of a business class, a class who have a strong and conscious interest in rapid economic growth. A government not beholden to those who have an interest in economic growth is likely to soon turn into nothing more than a redistribution-oriented protection racket, usually with a very short time horizon.

Landes writes his book as his contribution to the project of building utopia–of building a much richer and more equal world, without the extraordinary divergences between standards of living in Belgium and Bangladesh, Mozambique and Mexico, Jordan and Japan that we have today. Yet at its conclusion Landes becomes uncharacteristically diffident and unusually modest, claiming that: “the one lesson that emerges is the need to keep trying. No miracles. No perfection. No millennium. No apocalypse. We must cultivate a skeptical faith, avoid dogma, listen and watch well…”

Such a change of tone sells the book short, for there are many additional lessons that emerge from Landes’s story of the wealth and poverty of nations. Here are five: (1) Try to make sure that your government is a government that enables innovation and production, rather than a government that maintains power by massive redistributions of wealth from its friends to its enemies. (2) Hang your priests from the nearest lamppost if they try to get in the way of assimilating industrial technologies or forms of social and political organization. (3) Recognize that the task of a less-productive economy is to imitate rather than innovate, for there will be ample time for innovation after catching-up to the production standards of the industrial core. (4) Recognize that things change and that we need to change with them, so that the mere fact that a set of practices has been successful or comfortable in the past is not an argument for its maintenance into the future. (5) There is no reason to think that what is in the interest of today’s elite–whether a political, religious, or economic elite–is in the public interest, or even in the interest of the elite’s grandchildren.

It is indeed very hard to think about problems of economic development and convergence without knowing the story that Landes tells of how we got where we are today. His book is short enough to be readable, long enough to be comprehensive, analytical enough to teach lessons, opinionated enough to stimulate thought–and to make everyone angry at least once.

I know of no better place to start thinking about the wealth and poverty of nations.

(This review is a longer draft of a review subsequently published (at 1/3 the length) by the Washington Post..)

J. Bradford De Long Department of Economics University of California- Berkeley

De Long is co-editor, Journal of Economic Perspectives; Research Associate with the National Bureau of Economic Research; visiting scholar, Federal Reserve Bank of San Francisco; and former (1993-1995) deputy assistant secretary (for economic policy), U.S. Treasury.

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Subject(s):Economic Development, Growth, and Aggregate Productivity
Geographic Area(s):General, International, or Comparative
Time Period(s):General or Comparative

The Great Lobster War

Author(s):Formisano, Ron
Reviewer(s):Mullin, Debbie

EH.NET BOOK REVIEW

Published by EH.NET (March 1998)

Ron Formisano, The Great Lobster War. Amherst: University of Massachusetts Press, 1997. vii + 150 pp. $35.00 (cloth), ISBN: 1558490523. $14.95 (paper), ISBN: 155849071X.

Reviewed for EH.Net by Debbie Mullin, Department of Economics, Oberlin College.

Ron Formisano tells us about a group of men who, dismayed by their economic prospects, band together to fight large commercial interests in the hopes of preserving their standard of living. At first glance, one would think that this is another story of a union’s struggle to negotiate for higher wages, but that is far from the case presented in The Great Lobster War. The men who banded together were not employees; they were independent businessmen, and their attempt at collective action resulted in legal charges against them under the Sherman Antitrust Act.

Faced with declining prices for their lobster catches over the summer of 1957, Maine’s lobstermen in their distress grumbled that they were certain that the wholesale dealers were in a collusive arrangement to depress prices at the dock. The price had fallen to 30 cents per pound, a level which the lobstermen claimed was insufficient to provide a decent living. Figuring that the dealers had fired the first shot, members of the Maine Lobstermen’s Association (MLA) held a July meeting to call for lobstermen to tie up their boats and stay on shore until a 35-cent minimum price was established.

The tie-up was short-lived (about three weeks), and almost as soon as lobster boats were back on the waters, federal antitrust charges were brought against the MLA and its president, Leslie Dyer. Government lawyers asserted that, by encouraging this fleet of perfectly-competitive firms to act collectively (or, more precisely, to collectively refuse to act) the MLA had created a combination in restraint of trade. The two-week trial took place the following May in Portland. I trust that I will not ruin any suspense by revealing that the jury found Dyer and the MLA guilty, and that the judge imposed suspended fines for each defendant. Formisano concludes that little changed in the industry as a result of these legal proceedings.

Events leading up to the tie-up occupy roughly the first half of the book; the remainder recounts the testimony of trial witnesses and legal strategies of government lawyers and attorneys for the defense. Regrettably, no part of the volume is devoted to careful analysis of the economics of this case. The reader is left to wonder about some key questions.

First, was there an initial collusion among the dealers? There is no convincing evidence presented one way or another as to whether the prevailing 30-cent price was inconsistent with what 1957 market conditions would have produced as an equilibrium price. Formisano seems to be of the opinion that dealers were up to something underhanded, as they were secretive about their pricing decisions. A dealer might sometimes be heard saying that the lobster price is moving up, or is moving down. Formisano suggest that this is evidence of conspiracy, as it shows that the dealer is trying to hide his own choice behind the disguise of market forces in order to absolve himself of the harmful effects of his pricing “decision”.

The author further suggests that there is evidence of a dealer conspiracy in the fact that the total lobster catch for 1957 increased over that of 1956 by four million pounds, but that the total revenue collected by the lobstermen fell by about two percent. Introductory economics students would take this as an illustration of the inelasticity of the demand for food, not as any proof of dealer collusion.

Another question left hanging is why it makes any difference economically that the tie-up was a collective action by firms, not by employees. MLA members expressed disbelief that they were being prosecuted under the Sherman Antitrust Act, a law intended in their minds to go after big business. We are just independent businessmen trying to make an honest living at a fair price for our product, they claimed. To these men, it seemed a technicality that they were in a classification which left them legally vulnerable, rather than providing them with the protection of the rights of organized labor. It’s true, presumably, that unions seek to establish a wage above the competitive level, just as a cartel of firms would hope to enforce a noncompetitive price. But the economic effect is different when there is a monopoly price for a product versus a monopoly price for the labor used to make the product. Readers who are looking for economic analysis will be disappointed by the lack of discussion of market outcomes; the only group whose welfare is discussed is that of the lobstercatchers.

In fact, it is the lack of economic analysis that ultimately classifies The Great Lobster War as a work of narrative reporting rather than of economic history. It is not just a technicality that the MLA was viewed as a trade association rather than as a union. Economic theory predicts that lobstercatchers would have no cohesion as a union. The very nature of lobster-catching is a zero-sum game. It revolves around a set of dynamic incentives very different from those that characterize an employment situation. An additional catch for one lobsterman reduces that of another. In a typical employment situation in a unionized industry, workers are not viewed as stealing work, and therefore revenue, from one another. Of course, the fact that union solidarity would be undermined also predicts that a cartel would be unsuccessful. But readers may be disappointed that this volume fails to address the relationship between market incentives and market outcomes.

Formisano presents us with a story of characters; he depicts the Maine lobstermen who testify at the trial as strong Americans and good-humored individualists who were unintimidated by government attempts to rob them of their way of life. The author seeks to have readers agree with him that they couldn’t possibly have been as evil and greedy as men who run Big Business. Formisano apparently does not recognize that monopoly prices have harmful effects, even when not charged by monopolies. His claim that the lobstermen were not greedy rings hollow. He supports the MLA’s claim that lobstermen only wanted to earn a “fair living”. But the full story of course, is that they wanted to earn that fair living without having to change their skills or their way of life. One might argue, as has James Fallows, that Americans are characterized by the good nature with which they re-learn, re-tool, and relocate when market forces change the relative fortunes of different sectors of the economy. When any group of workers claims that they are entitled to “fair” compensation even if they persist in an unproductive sector of the economy, we see the universal nature of the desire for “more” and are reminded that the wealth of our nation has been built by the strength and adaptability of those who embrace new opportunities.

Debbie Mullin is Vice President of Marketlion LLC and teaches economics at Oberlin College. Her article describing the wage effects of early AFL unions can be found in the January 1998 issue of the Industrial and Labor Relations Review.

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

Between the Dollar-Sterling Gold Points: Exchange Rates, Parity, and Market Behavior

Author(s):Officer, Lawrence H.
Reviewer(s):Taylor, Alan M.

Published by EH.NET (March 1998)

Lawrence H. Officer, Between the Dollar-Sterling Gold Points: Exchange Rates, Parity, and Market Behavior. Cambridge: Cambridge University Press, 1996. xxi, 342 pp. $59.95 (cloth), ISBN: 0521365384.

Reviewed for EH.NET by Alan M. Taylor, Department of Economics, Northwestern University.

Lawrence Officer has been making influential contributions to international and monetary economics and history for many years. He is perhaps best known to economic historians for his work on exchange market arbitrage under gold (or read, metallic) standards. In a series of tightly-argued journal articles he challenged the widely accepted revisionist scholarship that had sought to depict the gold standard as inefficient and unstable, building his case on a monumental collection of primary data, careful statistical inference, and elegant theory. The present book extends and buttresses these arguments, sustaining a well-documented analysis of this monetary regime for over three hundred pages. The work focuses on the U.K.-U.S. foreign exchange market and leaves us with probably the most comprehensive and informative single treatise on this centuries-old institution. The work will be invaluable to macroeconomic historians interested in Britain and the U.S. in the late nineteenth and early twentieth centuries, and it should provide a good model for others wishing to understand similar monetary regimes at other times and places.

The introduction itself lays out the plan of the book. Officer makes his key point here that the subject is not just about whether gold points were violated, but that a complete analysis must examine the position of the exchange rate as an object of study, at all points inside and outside the gold-point boundaries. To this end, the author makes the case for getting the best possible data, at the highest frequency, for the longest time span. Finally, the key questions of market integration and efficiency (of the market and of the regime) are to be considered.

Part One of the book lays down the key historical and institutional features of the landscape from the beginning of the dollar-sterling gold standard in 1791 (when the U.S. went to a formal metallic standard) to its demise in 1931 (when Britain suspended convertibility). The laws and mechanics of coinage, minting, convertibility of paper to metal, dealings in the market and at banks, and so forth are all carefully described. The text and tables note significant legislative acts forcing regime changes for both countries in this entire time span, including changes in the metal of the standard for the U.S., and changes in parities for both countries (i.e., the metal content of the unit of account). Periods of convertibility and inconvertibility are shown.

Part Two comprises an exhaustively constructed data set to permit the study of this institution. First, the relatively simple job of computing implied parities is achieved using the information on metallic content in Part One, plus data on market prices of gold and silver (in U.S. bimetallic episodes). We find that from 1837, until 1931, after its initial wavering, the dollar-pound parity rate settled at the famous 4.8665635 point for well nigh a century. The market exchange rate was not so stable, and a long chapter discusses the sources and their quality, usefulness, and representativeness. Officer is eventually able to present data on the dollar-pound exchange rate for the entire period at quarterly frequency. In addition, monthly series are constructed for some periods: 1890-1906; 1925-1931; and, for a Bretton-Woods era comparison, 1950-66. Pre-1879 great care is taken (following Perkins, not Davis and Hughes) to adjust the bills of exchange to a uniform zero (“sight”) maturity. This ensures temporal consistency with the later cable rates; it also reflects the ultimate dominance of the sight bill as an instrument in the 1879-1914 heyday of the gold standard. An implicit sight rate is derived from the price of non-demand bills and the British interest rate. Care is also taken to find a mid-point of the buy-sell rates, using information on brokers’ commissions; and further care to correct the exchange rate for devaluations of paper during paper standard periods. This level of care exceeds previous studies, and survives testing for the consistency and homogeneity of the series. This is probably the best quality data for the dollar-sterling exchange rate we now have for the entire period; it will be an essential series for future scholars. Some interesting patterns appear just from a quick look at this series (Figure 7.1, p. 102): the volatility of the exchange rate declined dramatically in the early nineteenth century; the standard deviation in 1791-1820 was about 4-6%, but had fallen to less than 0.5% after 1871, and less than 0.2% in 1901-14.

Part Three makes the next logical step: comparing the above exchange rate series with the level of known arbitrage costs; i.e., the question is whether the exchange rate remained within the gold points. This is a point of departure for another exhaustive data-building effort. To construct gold points requires information on costs of freight, insurance, brassage, knowledge of any gold devices used by the monetary authorities, and interest costs due to the time delay of shipment across the Atlantic Ocean. All of these are put together with the same thoroughness as the exchange rate data. The care taken places these estimates on a far firmer footing than earlier estimates which had typically cut corners (cf. Clark, who had assumed ad hoc constant transaction costs). And the method is clearly far superior to any of the simpler techniques offered in other sources: taking a consensus estimate of brokers; using the terribly flawed gold flow data in a revealed preference method; using a pure max-and-min spread (violations impossible!); or using piecemeal aggregate arbitrage cost data from temporally disjoint sources. Essentially Officer proceeds with a laborious first-principles approach: each and every arbitrage cost component is individually estimated, then summed up, at each point in time. This consumes 62 pages; it is hard to imagine any improvement on these series for gold import and export points in this market, and this is the model for similar work on any other market.

The data are valuable and inform two integration tests in Part IV. The decline of gold point spreads mirrors that of the decline of exchange rate volatility, as expected. After 1880, this spread was at an all-time low level (even looking forward to 1925-1931 and Bretton Woods) of just above 1.0% for gold arbitrage. (Compare with around 5% in 1780, falling to about 2% in the 1840s). Officer sees this as improved “external” integration (external to the gold points) over time. Officer then studies whether even within the band, the exchange rate can reveal improved “internal” integration over time. Econometrically this section is less fully developed. For example, the relevant time series properties of the exchange rate series are not fully spelled out, making for some problems of inference. It is not clear whether we expect, say, a random walk between the gold points. (And what about beyond?) In a complicated nonlinear model such as this, the unconditional (raw) distribution of the exchange rate can have peculiar shapes. Officer, however, considers that a uniform distribution is “natural” (p. 189) in this zone. For the criterion of “internal integration” as Officer terms it, the focus is on whether “on average” the deviation of the exchange rate from parity is less than half the gold point spread, looking at absolute deviations. Again, by this measure, integration rapidly increases prior to the 1870s, then holds steady. A big jump is seen in the 1820s. Econometrics aside, this chapter places greater emphasis on explaining long-run tightening in the exchange rate distribution, and, especially within the band. As an explanation, Officer considers the role of the Second Bank of the United States critical in reducing dispersion in the 1820s. This trend was assisted by private agents such as the House of Brown, and, later in the nineteenth century, the New York private banks.

Part V conducts various tests for violations of market efficiency. The first test looks at gold-point violations: they are few– only four months during 1890-1906, and none in 1925-1931, for example. Far fewer than in previous studies, we should note. Thus Officer’s findings are very favorable to an efficient gold standard. Earlier work is faulted for using the wrong data (e.g., cable rates) or poor measures of arbitrage costs (bad gold point estimates). Correspondingly, Officer tests for failures of uncovered interest arbitrage (following Morgenstern), covered interest arbitrage and forward speculation for the 1925-31 period. Here there are substantial failings, with unexploited profit opportunities. These are seen as following from episodic losses of confidence in the regime. It would be interesting to see similar work on the classical gold standard regime pre-1914. However, in Part VI some comparisons are drawn and, under auxiliary assumptions about the exchange rate distribution (once more) it is shown that the interwar standard was not markedly worse than its prewar cousin. Part VII concludes.

Overall, this book offers an exhaustingly comprehensive analysis of the dollar-sterling market from the 1790s to the early post-WWII period. The data work cannot be faulted, and pushes our knowledge to a much higher plane than ever before. The empirical analysis confirms our priors concerning the convergence of this market on a high level of integration by 1880. The work leaves open some interesting doors for more sophisticated econometric analysis that could engage future scholars, but in many other respects this is the final word.

(Lawrence H. Officer is Professor of Economics at the University of Illinois, Chicago.)

Alan M. Taylor is an Assistant Professor of Economics at Northwestern University, a Faculty Research Fellow of the National Bureau of Economic Research, and a 1997-98 National Fellow at the Hoover Institution, Stanford University. His current research is in two main areas: the evolution of global capital markets, and the economic history of Argentina. He serves as co-editor of the EH.Net discussion list EH.Res.

Subject(s):Financial Markets, Financial Institutions, and Monetary History
Geographic Area(s):General, International, or Comparative
Time Period(s):19th Century

A Terrible Anger: The 1934 Waterfront and General Strikes in San Francisco

Author(s):Selvin, David F.
Reviewer(s):Boyd, Lawrence W.

David F. Selvin, A Terrible Anger: The 1934 Waterfront and General Strikes in San Francisco. Detroit: Wayne State University Press, 1996. 272 pp. $26.95 (paper), ISBN: 0814326102.

Reviewed for EH Net by Lawrence W. Boyd, Center for Labor Education and Research, University of Hawaii.

A Terrible Anger is a narrative history of one of three massive strikes which occurred in 1934 which led to independent trade unions, organized on an industrial basis, becoming fully legal organizations in the United States. The other strikes, the Minneapolis Teamster’s strike and the Toledo Autolite strike shared similar characteristics. In each case militant trade union members, led by radicals, launched strikes for union recognition against intransigent employers who were members of bitterly antiunion employers’ organizations and who were in turn supported by political allies, police forces, and ultimately national guard troops. This is not an unusual story in American history, what was different was the unions involved emerged as clear winners in these often bloody confrontations. The end result was a massive restructuring of the United States’ labor market which has only recently begun to be re-restructured. Thus this book comes at a time when it might be useful to revisit the origins of legal labor unions in the United States.

What is useful about A Terrible Anger is that it retells a somewhat familiar story from a somewhat different perspective. Previous histories of the San Francisco strikes have focused on the leadership of the strikes and the role of communists or socialists in the strikes. Thus, this story can also be found in Labor’s Untold Story by Richard Boyer and Herbert Morais (Pittsburgh, 1955, 1980) or in Harry Bridges: The Rise and Fall of Radical Labor in the United States by Charles P. Larrowe (Chicago, 1977). Selvin seeks to “record the impulses that led to organization and conflict, to see those developments in relations to their roots in the labor movement, and to review whole the tactics and strategies, the policies and programs that undergirded the real and enduring significance of the strikes” (p. 10).

What evolved in San Francisco was a series of conditions in which longshoremen and sailors had no voice in their job conditions. The work by its very nature was transitory and “casual.” When a ship was loaded, or unloaded, the work was done and the employees were let go and then rehired when another ship docked. Although casual laborers, they were paid more than those with steady jobs. The way work was distributed, however, became a major grievance.

Some workers worked extremely long hours for short intense periods while others got very little work. Larger shipping companies with steady operations offered some employees “almost steady” labor in what were called “star gangs.” Harry Bridges, who eventually became the central leader of the strike and the International Longshoremen’s and Warehousemen’s Union (ILWU) was a member of a star gang. These gangs got most of the work, “the best jobs, the best hatches, and the longest shifts.” Fear of losing their jobs kept them quiet about work conditions.

As one longshoremen recalled, he left San Francisco at 7:00 a.m., worked all day, and returned home at 3:30 a.m. with orders to report to Alameda again at seven the next morning. As he said “So I never showed up. It was just too much . . . you work up a terrible anger against the employers.” (p.39) The people who determined which employees would work were called walking or gang bosses. Given the surplus of employees relative to jobs it was almost inevitable that they could on occasion demand kickbacks or commissions for hiring individuals. Naturally, these conditions led to the central demand of the strikes; union hiring halls where work was awarded based on seniority. This was also the major sticking point in the negotiations and was ultimately the central issue which needed to be resolved during the general strike.

A central part of this story is the violence which occurred during the strike. Several workers were killed during the strike. When two longshoremen were killed and a third wounded in what could be described as a police riot, a mass funeral set the stage for the San Francisco general strike. Basically the city was shut down for four days as a result of this strike. Unions voted to walk out in sympathy with the longshoremen and they were joined by large numbers of workers not affiliated with any unions.. This elevated what had been a serious, but local strike, to national and international attention.

In tracing the roots of the violence which erupted in the course of the strike Sevlin asserts the following, “Strike violence is almost invariably the product of a clash between two, sharply conflicting powerfully asserted rights.” (p. 92) This strike pitted the employers’ right to “unfettered use of his property” against the strikers’ assertion of “a proprietary interest” in their jobs. They did not quit their jobs but withheld their labor in order to “concentrate attention on their grievances and to negotiate some amelioration.” (pp. 92-93) This is one of the more interesting points raised by this history; that underlying these massive labor struggles were two conflicting property rights regimes.

Selvin is the only historian of this period whom I have been able to find who makes this assertion. (Others approach this as an issue of management’s right to direct the workforce following union recognition). Selvin’s point is a logical one in that the legal doctrine underlying most employment law in the United States is “employment at will.” Employers have the right to hire and fire without explaining why they make their decisions. One exception to this doctrine is workers covered under union contracts. Under these contracts employers must demonstrate “just cause” for terminating an employee. (Another exception, of course, is tenured faculty). Unfortunately this statement is not footnoted and is simply asserted. Was this the view of the strikers? Or are there other sources for this statement?

A second question is why these strikers, and the others during this year, were largely successful while historically most, if not all strikes which reached this level had previously failed. Sevlin cites two interesting points. One, as might be expected, is that the Roosevelt administration was unwilling to intervene on the side of the employers to the same extent previous administrations had. As Sevlin points out this does not appear to have been a foregone conclusion.

Roosevelt was on vacation during the general strike and the “acting president,” Secretary of State Cordell Hull, along with Attorney General Homer S. Cummings thought the National Guard and the U. S. Army should have be used to put down the strike. The Secretary of Labor, Frances Perkins, told them that she felt it was, “unwise to begin the Roosevelt administration by shooting it out with working people .” (p. 179). She also suggested that the President be consulted. Roosevelt, fishing in the Pacific, suggested that an offer to arbitrate be made in his name- an offer which was eventually never made. In any case what can be said is that the federal government did not effectively intervene on the side of employers.

Second, Sevlin points to the tactics employed by the leaders of the general strike. The strikers involved never resorted to out and out violent resistance during the strike. They met attempts to move strikebreakers or cargo with mass demonstrations and stones, but they did not riot. Their cause, especially in the aftermath of the shootings and the funeral for the dead strikers, was taken up by other unions and employees in a general strike. The general strike itself was a protest against the intransigence of the employers and the violence directed against the strikers. It was of limited duration and had the clear and limited aim of bringing the waterfront employers to accept arbitration of unresolved issues such as the union hiring hall. Unlike European general strikes, launched in efforts to achieve political power, this general strike was a mass protest aimed at changing the violent direction of the waterfront strikes. In this it was brilliantly successful.

A word should be said about the style of the book. Those who like their narrative histories to have a beginning, a middle and an end will be disappointed by this book. Sevlin’s first chapter begins with the funeral of the strikers and then moves on to beginning, middle and end. I found this to be somewhat irritating. A second problem, at least for those of us used to reading scholarly works, is the purple prose he at times uses. As an example of this in describing the funeral of the striking workers he writes, “Above the clamor of that strike-turbulent summer of 1934, the silence was a wrenching cry of pain and anger.”(p. 11) I found some of the prose and the structure of the book to be difficult to wade through in order to get to the relevant story.

Perhaps the primary value of this book is that it gives one an insight into the turbulence of the period and that this turbulence was not simply the result of socialist and communist leadership. Rather it reflected a mass radicalization of large numbers of people who came to believe in the necessity of workplace reforms that gave them a greater voice in their employment. Further, they believed that these reforms could ameliorate the harsh conditions of the Great Depression and extend democracy into another sphere of American life.

As to the overall value of this book, I quite naturally found myself referring back to Colin Gordon’s, New Deals (New York, 1994), and found that A Terrible Anger gave me a deeper understanding of many of the points Gordon makes. Examples of these include the administration of Section 7A) of the National Recovery Act (NRA) Codes; the role of NRA director, General Forest Johnson; the chaos within the Roosevelt administration during the National Recovery Act period; and the increasingly narrow options management faced concerning labor relations during this period.

(David F. Selvin was the editor of Northern California Labor and author of A Place in the Sun: History of California Labor, The Other San Francisco, and The Thundering Voice of John L. Lewis.)

Lawrence W. Boyd Center for Labor Education and Research University of Hawaii

Lawrence W. Boyd is the author of “The End of Hawaii’s Plantations: Back to the Future?” in the Annals of the American Academy of Political and Social Science, March 1996.

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

Hazards of the Job: From Industrial Disease to Environmental Health Science

Author(s):Sellers, Christopher
Reviewer(s):Aldrich, Mark

Christopher Sellers, Hazards of the Job: From Industrial Disease to Environmental Health Science. Chapel Hill: University of North Carolina Press, 1997. 331 pp. $45.00 (cloth), ISBN 0-8078-2314-7.

Reviewed for EH.NET by Mark Aldrich, Department of Economics, Smith College.

This is a complex, thoughtful, and meticulously researched history of thought about occupational disease in the first half of this century that is based upon a wide reading of the archival, primary printed, and secondary literature. Although not an economic history, the work will interest economists and anyone else anyone concerned with the evolution of the American workplace during these years.

Sellers begins with a prologue informing us that he intends to recover “this biological dimension to the workplace’s past” (4), and then goes on to ground postwar environmentalism in the earlier industrial hygiene movement. There follows a chapter on the discovery of lead and other industrial poisoning in Europe and its comparative neglect in the United States until the early years of this century. Sellers occasionally provides glimpses of how nineteenth century labor markets dealt with well-known toxins – fewer than 15 percent of workers at one lead-using firm stayed more than forty-eight weeks, and the foreman would encourage those showing poisoning symptoms to leave. Managers, he argues, were largely unaware of the extent of such disease – a rational result, perhaps, of the low payoff to such information. Two chapters then trace the rising concern with occupational health to the rise of militant labor and to legal changes such as Holden vs Hardy- which seems implausible as states had been regulating health and safety for decades. The industrial hygiene movement begins with the revelations of phosphorous and lead poisoning by the American Association for Labor Legislation and Alice Hamilton, and the more formal investigations by the Public Health Service (PHS). Themes include the development and meaning of expertise and the ability of researchers such as Hamilton to wield “disciplinary power” to encourage business compliance with researchers’ prescriptions.

Chapters four and five continue these themes, tracing the complex relations between scientists and the business community, the problems with identifying occupational diseases, and the origins of a laboratory-based study of occupational disease at such institutions as Harvard’s School of Public Health. Here again Sellers argues that while company concerns often shaped research agendas and publications, researchers were still able to exploit the need of corporations for disinterested expertise to carve out both independence and disciplinary power. Chapter six briefly discusses some of the occupational health studies of the 1930s and notes the increasing interest in toxicology of large companies such as DuPont and GM but says little on what stimulated this interest or what results it had. In the remainder of that chapter, the focus turns to the non-work environment. Sellers recounts a PHS study of environmental lead exposures to apple workers and consumers that revealed the difficulties of applying outside the workplace those techniques that relied on clinical findings of disease. The conclusion links modern environmentalism to the earlier hygiene studies. The author claims that the modern overemphasis on synthetic industrial chemicals is a legacy of the industrial hygiene movement, and he unfavorably contrasts EPA-OSHA regulation with the earlier, more flexible approach, which he compares to right-to-know laws.

I want to raise two issues that relate to coverage and evidence. This is a history of the development of scientific thought about occupational disease. It is not, as the title suggests, a history of hazards of the job if by that is meant a reasonably comprehensive assessment of the extent of industrial disease, nor, as the author makes clear in the preface, is it a comprehensive history of industrial hygiene. This emphasis on scientific thought means we learn much less about business and labor leaders’ motives than about those of scientists. Similarly, the coverage of hazards and regulatory efforts is spotty – there is little on silicosis, byssinosis, black lung, and asbestos-related disease, perhaps because their study did little to advance the science of occupational medicine. The increasing coverage of occupational disease by workers’ compensation laws is noted but not discussed in any depth. Nor do we come away with any sense of what worked: Sellers informs us that in 1910-1911 Illinois tightened regulations on lead, arsenic, and brass industries, but the book does not discuss whether or not the new rules had any effect.

No one should be criticized for failing to write a different book, and the above is not intended as criticism, but merely to clarify the book’s scope. But one aspect of coverage does affect the author’s argument. Of the broad themes Sellers advances, perhaps the most interesting to economists is the power he ascribes to informal, expert-based authority in shaping employer behavior. Early company efforts to reduce lead exposures were probably not cost-effective, Sellers argues, but were done for moral reasons or public relations, and he claims that “for [Alice] Hamilton, the investigative enterprise became a regulatory act” (73). Later he asserts the “surprising effectiveness of this new professional form of authority”, and claims that it “exerted a new discipline over a growing number of employers” (180). Yet three pages later we are told “preventive measures [urged by Harvard’s School of Public Health] had little impact on industrial processes.” (183). In fact the evidence on these issues is exceedingly weak. Thus, there is little about the prevalence of even such a well-studied disease as lead poisoning, or about whether occupational diseases were reduced by the industrial hygienists’ efforts. Occasionally there are generalizations about the extent of occupational disease such as “Barnes shared this kind of dilemma [the need to accept an unhealthy job during the Depression] with tens if not hundreds of thousands of others” (189). But the source for this claim turns out to be four letters written by workers, two of which date from the 1940s.

While it is easy to nit-pick any book, there are number of places in addition to the above where the author’s interpretation outruns his evidence. Occasionally causation is either obliquely asserted or presented without much evidence. For example, Sellers asserts (133) that “By raising his wariness of patient testimony to such an extreme, Schereschewsky forestalled the employer and professional criticisms endured by Hamilton: no one could accuse him of falling prey to garment workers’ exaggeration of their ills.” It is not clear whether this is simply a statement of behavior or an attempt to imply motive as well. Or consider the following problematic attempt to infer motive. Apparently the author found few photographs of physicians with workers and so a picture of a doctor reading physical examinations is captioned “Hardly ever did industrial hygiene researchers allow themselves [my emphasis] to be photographed with worker subjects; they preferred to be seen at their desks, with emblems of their science . . ..” Of course the absence of photographs reveals nothing about the cause of that absence.

Finally, although it may seem inappropriate for an economist to comment on anyone else’s prose, Sellers’ book is not an easy read. There are too many sentences such as: “To tell this tale is thus to foreground the centrality and importance to twentieth-century workplace history of knowledge claims themselves – in this case, the conflicting representations of environmental biology” (p. 8). Or consider this assessment of middle-class reformers: “We may understand their discipline as a major symbolic achievement: like the Protestant ethic whose Weberian reading Jean-Christophe Agnew has lately recast, ‘not simply an economic strategy’ for controlling both workers and employers, but a ‘cultural strategy for ordering a mass of meanings’ incited by market-driven workplace change” (p. 230).

Despite such difficulties this remains a valuable book. It reveals a role for science in shaping production technologies that economists have largely overlooked and a linkage between industrial hygiene and environmentalism that has gone largely unnoticed. It will be the definitive treatment of the early evolution of industrial medicine and an invaluable source on the origins of health and safety regulation.

Mark Aldrich Department of Economics Smith College

Mark Aldrich is author of Safety First: Technology, Labor, and Business in the Building of American Work Safety, 1870-1939 (Johns Hopkins University Press, 1997).

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

The Rise, Fall, and Replacement of Industrywide Bargaining in the Basic Steel Industry

Author(s):Magnum, Garth L.
McNabb, R. Scott
Reviewer(s):Stanger, Howard R.

EH-NET BOOK REVIEW

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

Garth L. Mangum and R. Scott McNabb. The Rise, Fall, and Replacement of Industrywide Bargaining in the Basic Steel Industry. Labor and Human Resources Series. New York: M. E. Sharpe, 1997. xvii + 209 pp. Tables, figures, notes, bibliography, and index. $62.95 (cloth), ISBN 1-56324-982-0; $21.95 (paper), ISBN 1-56324-983-9.

Reviewed for H-Business by Howard Stanger , Buffalo State College

Economists Garth Mangum and R. Scott McNabb have written a very good overview of collective bargaining in basic steel since the historic 1937 agreement between the leader of the industry’s oligopoly–U.S. Steel–and the Steel Workers’ Organizing Committee (SWOC), later the United Steelworkers of America (USWA). Their emphasis is on the interaction of both product and labor markets on collective bargaining structure and outcomes (most notably wages), benefits and industry viability. They also pay careful attention to managerial choices pertaining to technology and labor relations.

Since the birth of the U.S. Steel Company in 1901, oligopoly defined the structure of the American basic steel industry. But unlike most oligopolies, steel was characterized by product and technological homogeneity and regional fragmentation. The relevant labor market required identical skills in each mill, little labor pool competition as a result of geographic separation in the product market, and formal internal labor market structures offering workers a high degree of job security and long-term attachment. Given the cyclical nature of the industry, layoffs occurred periodically. This structure enabled the USWA to bargain for above-average wages. One problem was that market fragmentation had spawned wage inequities within single plants and companies and across firms and regions. The union’s drive to remedy wage inequities, along with the peculiarities of the industry, created favorable conditions for industrywide collective bargaining.

Both labor and management found this centralized form of bargaining in their best interests. According to the authors, the union had pursued industrywide bargaining in the 1950s in order to take wages out of competition, to assure that every steelworker doing the same job got the same pay throughout the industry, to put industry competition on the basis of managerial competence rather than the ability to obtain cheap help, and to ensure wage differences among firms did not force a race to the bottom. Company concerns were parallel: to assure that no competitor was able to gain the advantage of cheaper labor rates and to prevent the union from whipsawing wages upward by shutting down one firm while the others supplied the homogeneous product, then forcing the pattern one by one on the rest (p. 93).

Labor cost uniformity was not expected; in fact, the parties accepted a narrow range of wages so long as all competitors were part of the collective agreement. Within the broad parameters of economic laws, the authors discuss other factors which contributed industrywide bargaining. For example, between 1942 and 1947, the steelworkers and a number of large firms jointly established the Cooperative Wage Study (CWS) which, through extensive job evaluation, sought to remove wage inequities in northern states. By 1954, with the eradication of the southern wage differential, “the steel industry had virtually a single wage scale for almost all of the steelmaking operations under contract with the USWA, irrespective of size, relative profitability, or geographical location. Given an industrywide wage structure and job evaluation format, it then requires no great intellectual leap to see that formalization of industrywide collective bargaining was the next logical step” (p. 40).

Other factors had to fall in to place, however. In 1955, the USWA announced that union president David J. McDonald would head all negotiation committees to ensure contract uniformity. Second, in 1956, management and labor respectively, created the Coordinated Committee Steel Companies (CCSC) and the USWA’s Basic Steel Industry Conference (BSIC) to conduct negotiations. Finally, federal government gave its imprimatur to industrywide bargaining during World War II and the Korean conflict. In 1956, industrywide bargaining was officially born.

During the 1959 negotiations, the first industrywide bargaining round, a 116-day strike occurred, which, according to the authors, planted the “seeds of dissolution” of the bargaining structure. During this time, steel imports became a competitive concern for steel management. Exacerbating the industry’s woes was management’s hesitance–based upon inaccurate industry forecasts– to modernize facilities. When they did invest, they implemented quickly outmoded processes. These missteps created opportunities for foreign steel firms and, by the 1970s, leaner nonunion minimills. The results were devastating: falling industry profit rates, the shuttering of obsolete plants, divestment out of steel, and zero net investment between 1955 and 1980. The book’s institutional and economic framework prevents a discussion of the human and social costs of dislocation which, in this reviewer’s opinion, is an important consequence of bargaining and a serious omission.

To deal with frequent strikes in the post war period which forced steel users to seek other suppliers, primarily foreign producers, the parties established the Experimental Negotiations Agreement (ENA) in 1973. In exchange for lucrative compensation gains, the USWA gave up its right to strike. This potential solution to the industry’s plight was nullified by the inflationary economy of the 1970s, which made the ENA a very costly pact as compensation costs drastically cut into firm profits. In 1980, reeling from the ENA’s deleterious effects, the CCSC unilaterally ended it and girded itself for the 1983 round of negotiations which began early in 1982.

The 1983 agreement was the first concessionary contract for the USWA. Contemporaneously, the union experienced a change of leadership with the untimely death of Lloyd McBride and the ascendancy of the visionary Lynn Williams. With the industry and the union in flux, the oligopolistic wage structure and industrywide bargaining were vulnerable. By 1985, the CCSC abandoned industrywide bargaining after some firms withdrew immediately after the 1983 round. Diminishing “commonality of interests” based upon different financial positions was a major reason for its demise. The authors argue that developments affecting both product markets and technology between 1986 and 1995 rendered industrywide bargaining as obsolete as the many plants that closed in the preceding decades. However, the industry outlook became much brighter. American firms were now more competitive in international markets, with many engaging in joint ventures with foreign concerns to speed up modernization, raise productivity, and ensure survival. With help from union wage, benefit and work-rule concessions during the 1983 and 1986 rounds, output per employee rose a phenomenal 40 percent between 1986 and 1993. Profits also turned up.

The search for a new bargaining structure began in 1986 with the return of single company agreements. The authors go into detail regarding individual contract settlements in this and subsequent rounds of negotiations. By the 1990 round, wage and benefit cuts had been restored. One major difference between this era of single company pacts was the end of U. S. Steel’s leadership. With its corporate name changed to USX to reflect its diversification strategy into oil and gas, U. S. Steel was no longer the chief labor policymaker and lead agreement. The bitter six-month strike there in 1986 created an even stronger adversarial labor relationship, just as anachronistic as industrywide bargaining. This would become meaningful during the 1993-94 round, when the USWA unveiled its “New Directions” strategy of labor-management cooperation. It is in this area that the authors make new contributions to the literature on steel labor relations. Promoted by Lynn Williams, New Directions has at its core two key principles: 1) that no group has a greater stake in a company than employees, and 2) the best path to ensure business success was to involve employees in business decisions. For its part, the union “would agree to long-term contracts, some relaxation of restrictive work rules, and cooperation in reducing steel company workforces, as long as that was accomplished by attrition. In return, the union would require a high degree of job security for its membership, adequate funding arrangements for the company’s ‘legacy costs, and a greater say in how the steel companies were run” (p. 134). Inland Steel was the first to agree to this approach when it signed a six-year deal. The union won decision-making authority at all levels of the company. By the end of the round, all major firms signed similar deals, with slight firm-specific deviations, including the level of union involvement. Overall, a general pattern re-emerged. Mangum and McNabb explore New Directions and other innovations such as the jointly-established, industrywide Career Development Program (1989) through a handful of interviews and McNabb’s personal experience as a program counselor at the Institute for Career Development in Indiana. While the generalizability of a very limited number of persons interviewed can be questioned, the are careful not to draw firm conclusions. Progress at certain facilities of National Steel and Bethlehem Steel has been offset by initial failures at certain U.S. Steel and LTV plants. The authors are correct to note that high trust relationships and commitment are necessary to make innovative workplace programs succeed. The reverse also holds. They also contend that the USWA’s new program could have only come about by a “thoroughly chastened management–and only in the absence of the dominant industry leadership that had prevailed prior to 1985” (p. 169).

At present, even with basic steel doing quite well for a mature industry, the future of labor relations and bargaining structure are indeterminate. Still, the authors return to their conviction that there is a strong link between product and labor markets. They argue that New Directions tightens this link: “Instead of merely reacting to the product market within labor-market negotiations, the New Directions model, when fully utilized, would have the union participating as a partner in product-market decisions that affect the entire industry” (p. 192).

Mangum and McNabb do a nice job of reviewing the literature on the history of collective bargaining in the steel industry from institutional and economic perspectives. They also provide their audience with a heavy dose of industry economics–perhaps too much in places. The book is loaded with easy-to-read tables of relevant industry and employment cost data. For a single source, written in a straight-forward manner, this book has a lot to offer. However, it is not without some weaknesses. First, steel bargaining relations are rarely compared with other industries, particularly as it pertains to changes in the bargaining structure. The breakup of centralized bargaining structures has been going on in a number of industries since the 1970s. Industrial relations scholars have been examining the decentralization of bargaining in the United States and Europe. This growing literature was omitted by the authors. Second, the authors missed an opportunity to provide a theoretical or conceptual framework on the antecedents and consequences of bargaining structures. Here the literature is not as rich, but could still be useful for comparison. Finally, there is no discussion on the implications of decentralized bargaining on bargaining power and outcomes. In general, unions are disadvantaged by decentralized bargaining, although it can be argued whether the bargaining structure is either a cause or consequence of union weakness.

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

Mass Production, the Stock Market Crash, and the Great Depression: The Macroeconomics of Electrification

Author(s):Beaudreau, Bernard C.
Reviewer(s):Hausman, William J.

EH.NET BOOK REVIEW

Published by EH.NET (February 1998)

Bernard C. Beaudreau, Mass Production, the Stock Market Crash, and the Great Depression: The Macroeconomics of Electrification. Westport: Greenwood Press, 1996. xx + 182 pp. $59.95 (cloth), ISBN: 031329920X.

Reviewed for EH.NET by William J. Hausman, Department of Economics, College of William and Mary.

Beaudreau asserts boldly on the first page of his book that his purpose is to “provide a definitive account of the Great Depression and the events leading up to this cataclysmic event” (p. xv). At least he didn’t claim to have written “the” definitive account. In fact, this is a highly idiosyncratic treatment that explores a number of events of the ‘teens, 20s, and 30s. There is much that is outrageous, along with occasional insights that warrant further study. The fundamental argument is that productivity-enhancing structural changes in industry in the 1920s set the stage for the events that were to follow. The treatment of the period thus fits within the basic approach economic historians such as Michael Bernstein (The Great Depression: Delayed Recovery and Economic Change, 1929-1939, Cambridge University Press, 1987) and, more recently, Rick Szostak (Technological Innovation and the Great Depression, Westview Press, 1995) have taken.

The chain of logic is clearly defined but long. The electrification of industry (“the most important process innovation in this century”), because it set the process in motion, is actually the villain of the piece. The electrification of the assembly line in the 1920s (a process led by the Ford Motor Company) substantially raised productivity and led to an era of mass production. This brought conditions of “oversupply,” initially hidden by labor hoarding. Eventually, aggregate income failed to keep pace with productivity, not because profits rose substantially, but because wages failed to rise. By 1928 Senator Reed Smoot, with the support of Hoover, proposed restricting access to the U.S. market by raising tariffs. The prospect of passage of the tariff bill in 1928 set off the speculative stock market boom. The failure of the bill in the Senate the following year precipitated the stock market crash. Planned investment then was cut drastically, setting off the decline in income and the Great Depression. The National Industrial Recovery Act was the only policy response that had a chance of reversing the process, but this experiment in cooperative behavior aided by government was cut short by the Supreme Court. This is all laid out in the introduction. Twelve chapters, each of them short, then attempt to either flesh out the bare bones of the logic, or offer asides on some aspect of the historical process.

Because the chain of logic is long, it can be attacked at numerous points. Take, for example, the monocausal view of the course of the stock market. In two chapters and an appendix, Beaudreau links the prospects of the tariff bill as reported in the press to stock market activity. A correlation can be established, but the causality is obscure, relying heavily on an indirect link to planned business investment. One important aspect of the event that is not mentioned is the fact that industrial stocks actually rose much less than public utility stocks, especially stocks of public utility holding companies, a sector not much affected by the prospective tariff. In the end the correlation is not sufficient to prove the point.

The book contains some interesting chapters. In one, a game-theoretic model is used to show how an economy may get stuck in a low-growth equilibrium in the presence of a productivity-enhancing technological shock. It carries some heavy assumptions, the critical one being that firms will not raise wages in response to the shock (without some third-party intervention). It is conceivable that such a process had a role to play in bringing on the depression.

This book is not a definitive account of the events surrounding the Great Depression. The basic approach of exploring structural changes as the root cause of the depression is, however, a worthy endeavor. Perhaps if the author had been more modest in his claims, my reaction would not have been as critical.

William J. Hausman Department of Economics College of William and Mary

Will Hausman is the author of “Long-term Trends in Energy Prices,” in Julian L. Simon, ed., The State of Humanity, Oxford: Blackwell Publishers, 1995, and other papers on the history of the U.S. electric utility industry.

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Subject(s):Macroeconomics and Fluctuations
Geographic Area(s):North America
Time Period(s):20th Century: Pre WWII

Modern Manors: Welfare Capitalism Since the New Deal

Author(s):Jacoby, Sanford M.
Reviewer(s):Berkowitz, Edward

Sanford M. Jacoby. Modern Manors: Welfare Capitalism Since the New Deal. Princeton: Princeton University Press, 1997. xii + 345 pp. Notes and index. $35.00 (cloth), ISBN 0-691-01570-8.

Reviewed for H-Business by Edward Berkowitz , George Washington University

Welfare capitalism represents one of those marginal academic side-shows that nonetheless has surprising staying power. At various times historians have shown interest in ways that firms have distinguished themselves by being model employers. The heads of these firms, unlike their stereotypical colleagues, do not believe in the classical theory of labor supply in which workers present themselves in an infinite supply at the market price. Instead, they understand that workers are valuable commodities who become even more valuable once they receive some form of on- the-job training. Hence, these employers, either out of a sense of paternalistic benevolence or, more likely, a dollars-and-cents understanding of the labor market, have tried to reduce turnover by linking pay to the company’s productivity and by improving the conditions of work beyond those of their competitors. In the conventional historiography, the hey-day of this form of welfare capitalism comes in the 1920s, when businessmen held a sort of moral sway over the nation.

Then, in the 1930s, welfare capitalism breaks down in the face of the collapse of the labor market that we call the depression. As the price of labor falls and the demand for products declines, benevolence no longer pays substantial dividends. Government steps in to offer a sort of alternative form of welfare capitalism. Through legislation the government mandates that workers have the right to bargain through representatives of their own choosing and workers also have the right to pensions and unemployment compensation that are supplied by the government, rather than the company. Historians have argued about the role of welfare capitalists or corporate liberals in the creation of the twin peaks of New Deal regulation: the Wagner Act and the Social Security Act. Whatever the results of this argument, the outcome remains the same. In the 1930s, the torch gets passed from welfare capitalism to a new world in which both unions and the government, often acting in tandem, have a substantial presence. Welfare capitalism is a subject for the first third of the twentieth century and not more recent times.

Of course, that conventional view is just plain wrong. We know, for example, that there was a corporate welfare revival in the postwar era and that welfare capitalism remains alive and well today. In the latest round of health reform, for example, the Clinton administration, just like the Nixon administration before it, tried to create a plan that would mandate health insurance coverage. Clinton had no intention of having the government become the primary supplier of health care. Instead, he wanted to make sure that all employers supplied it their employees. He wanted to enforce a welfare capitalist norm, in other words.

That suggests the need for a comprehensive history of welfare capitalism since the New Deal, and, within the constraints of the evidence, Sanford Jacoby has provided it. His book is a scholarly and thoughtful look at the welfare capitalist practices of three companies in the era from the 1930s to the 1960s. His basic argument is that welfare capitalism did not die in the 1930s. To be sure, not all firms followed its course. As we know, many large nationally based industrial firms succumbed to pressures from the CIO and entered into collective bargaining agreements with unions. Jacoby’s three firms, each for its own reason, escaped from the union movement. Each developed an alternative management structure that bound employees to the company.

In the case of Kodak, executives could build on the paternalist traditions of George Eastman who, for example, offered periodic bonuses to his employees. In creating welfare capitalist practices, Kodak also took advantage of its location in Rochester New York, a location that allowed it to hire ethnically homogeneous workers–plain white bread Wasps–who were perhaps less susceptible to union influences than members of other ethnic groups. Even more important, Kodak had a virtual monopoly on photographic film and suffered less from the depression than did those companies in more competitive markets where the cross elasticities of substitution (if I remember my economics right) were greater. Protected from some of the forces that gave rise to unions in other firms, Kodak invested a great deal in keeping the unions out, offering its employees profit sharing plans and a wide array of recreational programs and other amenities. Above all, Kodak worked hard to minimize lay-offs by planning ahead for the seasonal variations in the photography business and, if necessary, by moving workers from one job to another. As a result of all these practices, Kodak kept unions away and practiced an alternative form of labor relations that might be called welfare capitalism.

Sears Roebuck, the Chicago company that began as a mail order house and emerged as the nation’s largest retailer in the postwar era, produced a different style of welfare capitalism. It existed in a much more competitive product market, and it operated stores in locations from coast to coast. Like Kodak, Sears experimented with a form of profit-sharing but, unlike Kodak, Sears could not fight unions through overt means. Sears had to do business in places like Gary, Indiana or Lansing, Michigan where it probably would have been a bad practice to bad mouth unions in the late 1930s and early 1940s. As a means of controlling its work force, Sears did more than offer good wages and working conditions. It also initiated an attitude survey program which, as Jacoby notes, “became one the largest and most sophisticated applications of behavioral and social science research to personnel problems in industry” (p. 111). Sears used the data from the survey to identify sources of employee grievances and correct personnel problems. In a more manipulative sense, Sears also used the surveys to identify potential union organizers and to keep them from proselytizing other employees.

Thompson Products, the third of Jacoby’s companies, was a much more traditional industrial manufacturer. Located in Cleveland, a highly unionized, ethnically heterogeneous town, Thompson products made parts for automobiles and later for airplanes. Unlike Kodak and Sears Roebuck (whose leader in its early days was Julius Rosenwald, an important figure in Chicago and national philanthropic circles), Thompson did not have much of a welfare capitalist tradition before the New Deal. In 1933 Frederick C. Crawford took over the company and, among other things, started a personnel department and new welfare programs. His main contribution, however, was in the creation and maintenance of a series of what Jacoby describes as “semiautonomous company unions and a bevy of human relations programs” (p. 142). In Cleveland, unlike in Rochester, some semblance of a union was necessary. At Thompson Products, at least in its Cleveland plants, that union took the form of a company union that was resilient enough to withstand challenges from the United Auto Workers.

Why did Jacoby choose these three companies? I think it is because the records of these companies were available to him and, as he notes and business historians can certainly appreciate, the records of private companies, particularly the labor relations aspects of those companies, are not easy to obtain. Because of his choice, he has to strain a bit to establish these companies as ideal types of welfare capitalist employers, yet his analysis suggests that particular factors account for developments in each of the companies. It matters, for example, that Frederick Crawford took over Thompson Products, that Marion Folsom, an extraordinary welfare capitalist statesman, worked for Kodak, and that Robert E. Wood followed Julius Rosenwald as head of Sears. Other companies, no doubt, have their singular individuals and their particular factors that might have changed Jacoby’s story if he had chosen them.

Still, what is here is more than enough to establish Jacoby’s point that, by the 1950s, there was a non-union alternative in the world of industrial relations. Most of the nation’s attention was focused on labor unions and on collectively bargained wage agreements. It was an era when labor relations was still an important journalistic beat and writers like Abe Raskin of The New York Times wrote about labor relations in the auto and steel industries. A small academic cottage industry in labor relations developed, led by professors such as California’s Clark Kerr, Princeton’s Fritz Harbison and Richard Lester and Harvard’s John Dunlop. These people tended to write about unions as institutions and about the “mature” form of collective bargaining. In their spare time, many acted as arbitrators or mediators and thus took a formal role in the labor relations process. Intellectuals with a wide audience, such as John Kenneth Galbraith, viewed union-management relations as an important manifestation of American pluralism. With all the attention on unions, the commentators overlooked the robust nature of welfare capitalism. As the appeal of unions faded in the face of global competition and the general stagnation of the economy in the 1970s, welfare capitalism once more became visible. It meshed with the Japanese style of teamwork that came into vogue; it seemed to offer more flexibility than did the rule-bound style of industrial relations common to unionized workplaces. More recently, however, as the workforce has become more educated, the times seem to have once again bypassed welfare capitalism. Modern workers, particularly educated and advantaged workers, as Jacoby notes, often appear to be like nineteenth-century craftsmen. They drift from company to company, adding lines to their resumes and providing their own form of security through pensions and health insurance that they maintain on their own. As if to underscore the importance of these independent workers, the Clinton administration may soon convert the Social Security system so that part of it becomes a private savings account.

One of Jacoby’s main contributions in this very impressive book is to illustrate how modern welfare capitalists have come to grips with the Wagner Act and the Social Security Act. Executives from all three of his companies became involved in national politics. General Wood of the Sears Roebuck Company was a traditional conservative, involved in things like the America First Committee. Frederick Crawford became the head of the National Association of Manufacturers and played a key role in the modifications of the Wagner Act that led to the Taft-Hartley law. In particular, Thompson Products fought to preserve the right to appeal to its workers on behalf of its company-controlled union, despite warnings from the National Labor Relations Board that such appeals represented tampering with representation elections. Marion Folsom of Kodak became the leading business expert on social insurance and fought to preserve Social Security and unemployment compensations in forms that blended seamlessly into welfare capitalist practices. These companies, then, did not run away from the New Deal so much as they learned to adapt its regulatory structure to their purposes.

Without a doubt, this book is an important one that will be read both for the data it provides on the three companies and for its more general points about the persistence of welfare capitalism beyond the New Deal. The research is almost overwhelming as is the general degree of erudition in the book. It is, to be sure, an academic book in which the author occasionally takes excursions into trendy academic topics to the detriment of establishing a clear line of argument. Hence, there are digressions on such topics as the gender composition of the labor force during World War II, the nature of industrial psychology, and the organizing tactics of the United Auto Workers. Some of the writing is a little over-elaborate and demands close attention from the reader, as in this sentence (p. 74): “In theory, Kodak wage dividends plans should have been a factor in the company’s performance during the early 1930s, since profit sharing makes wages more sensitive to economic conditions, which, in turn, shields employment levels during hard times.” I could have used more help with the implicit economic theory in that sentence and would have preferred that it contain fewer clauses. Still, an academic monograph is an appropriate place to display one’s learning and it is clear that Sanford Jacoby has much to teach. One can predict with confidence that this book will exercise an important influence over modern American historiography; it represents an extremely impressive achievement.

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

The Conquest of Cool: Business Culture, Counterculture, and the Rise of Hip Consumerism

Author(s):Frank, Thomas
Reviewer(s):Cochran, David

Thomas Frank. The Conquest of Cool: Business Culture, Counterculture, and the Rise of Hip Consumerism. Chicago: University of Chicago Press, 1997. xii + 287 pages. Appendix, tables, notes, and index. $22.95 (cloth), ISBN 0-226-25991-9.

Reviewed for H-Net by David Cochran, Southern Illinois University-Carbondale

In 1968, Petrocelli sport coats adopted the advertising slogan “Tune in. Turn on. Step out.” This gloss on one of the most famous slogans of the counterculture–Timothy Leary’s “Tune in. Turn on. Drop out.”–symbolizes the paradoxical relationship between American consumer capitalism and the counterculture of the sixties. As Thomas Frank argues in this fine book, American business underwent its own cultural revolution in the sixties, a process that paralleled, and in many ways even anticipated, the broader cultural upheavals of the decade. Focusing on developments in advertising and mens fashion, Frank complicates standard notions of hippie innocence and corporate venality to offer a complex and compelling study of the dynamic nature of capitalism and the ways it foresees, deflects, eviscerates and absorbs alternative value systems.

The sixties, of course, is still very much a contested decade in the national memory. For conservatives, like Robert Bork and Newt Gingrich, it symbolizes a period in which traditional standards of decency were overwhelmed by an ethic of hedonism. For those more sympathetic to the political and cultural changes of the period, the sixties witnessed a welcome challenge to the rigidity and repression of the gray-flannel fifties. But as Frank indicates, out of these diametrically opposite readings emerges a consensus that business represents order, stability and tradition while the counterculture represents freedom, anarchy and liberation. Thus is posited a simplistic vision of capitalism as a static entity. In fact, though, capitalism is extremely dynamic and consumer capitalism in particular demands not repression, but self fulfillment and immediate gratification.

Many histories of the sixties describe the relationship between business and the counterculture as a process of gradual co-optation as capitalism cynically created an ersatz version of the authentically rebellious youth movement. Abe Peck, for instance, has defined the era as “from counterculture to over-the-counter culture,” citing Columbia Records’ infamous advertising campaign, “But the Man can’t bust our music.”[1] As Frank shows, though, the story is not so one-directional. Instead, key elements within American business, notably advertising, had begun formulating their own critique of the staid post-World War II business culture several years before the development of the counterculture. In significant ways this emergent business culture articulated the same anxieties that would motivate the counterculture: fear of conformity and alienation and, ironically, revulsion at the manipulation of consumerism.

Advertising in the fifties emphasized images of conformity and complacency. As articulated by such influential figures as David Ogilvy and Rosser Reeves, the philosophy of advertising aimed at a mass audience which was to be reached through constant repetition of a single, simple message. Images focused on happy families living in suburban bliss. Underlying this attitude was a fundamental lack of respect for the intelligence of the consumer. As Frank says of the fifties, “Never has advertising been so unwilling to acknowledge the myriad petty frustrations, the anger, the fear that make up so much of daily existence , consuming and otherwise. Never has it insisted so dogmatically on such an abstractly glowing vision of American life. And never has it been so vulnerable to mockery” (p. 48).

The mass society of the fifties, of which advertising was only one example, did not go unchallenged. A number of critics, such as David Riesman, William Whyte, John Kenneth Galbraith and Vance Packard, expressed dissatisfaction with the sterility of American culture and the manipulative nature of consumerism. And, as Frank argues, these criticisms found sympathizers within the advertising industry itself, where some were chafing at the restrictions of the dominant Ogilvy-Reeves philosophy. Fueled by people like Bill Bernbach, Howard Gossage, Jerry Della Femina and George Lois, a creative rebellion in advertising developed in the early sixties challenging the vision preferred by advertisers in the previous decade. “But the ads of the creative revolution not only differed from those of the gray flannel past,” Frank argues, “they were openly at war with their predecessors. What distinguished the advertising of the 1960s was its acknowledgment of and even sympathy with the mass society critique…. It deftly punctured advertisings too-rosy picture of American life and openly admitted that consuming was not the wonder-world it was cracked up to be…. (I)n the sixties, advertising actively compared a new, hip consumerism to an older capitalist ideology and left the latter permanently discredited” (p. 54). The philosophy of the creative revolution stressed the consumers intelligence, the fact that both advertiser and consumer realized the manipulative and depersonalizing nature of mass society. Thus was created what Frank labels “hip consumerism.” Ads for Volkswagen, for example, deliberately flaunted its lack of style change as an attack on the auto industrys policy of planned obsolescence.

Beginning in the early sixties, the creative revolution increasingly identified itself with youth. As Frank says, this focus only partly derived from an attempt to capture the youth market. More importantly, he argues, “youth” symbolized an attitude, a break with the old patterns of conformity, an emphasis on the new and exciting. Therefore the image of youth could be applied to a variety of products not necessarily aimed at young people. Consumers were invited to join the Pepsi Generation, for instance, if they were willing to “think young.”

Stressing youth as a form of rebellion against the conservatism of the old order, advertisers of the creative revolution viewed the counterculture that began to emerge in the second half of the decade with sympathy. They adopted many of the trappings of the counterculture: psychedelic graphics, rock music and hip fashions. And if this vision of the counterculture remained superficial and unconvincing to those actually involved in the youth culture (as it did), that was all right with the advertisers because young people were not necessarily the primary intended audience. After all, they did not have to be told to “think young.”

A similar process also occurred in the men’s clothing industry with the “Peacock Revolution.” Men’s fashion, which had remained virtually unchanged for decades, began to change profoundly in the early sixties. As Frank says, “The garment industry threw itself headlong into revolution for reasons of its own: the counterculture merely happened along at precisely the right time with what the industry believed to be the right attitudes toward clothing and the right palate of looks” (p. 186). By 1967, these tendencies had coalesced into an archetypal character, “The Rebel,” whose sartorial choices symbolized his resistance to conformity. Once again, images of youth and counterculture were used to target an audience that was neither youthful nor countercultural.

As Frank recognizes, in many ways this work is marked by an old-fashioned sensibility. Recent scholarship has tended to focus (perhaps too much) on resistance to capitalist culture industries, showing how people appropriate the messages of these institutions to serve their individual or group needs. By focusing on culture producers rather than consumers, Frank not only restores a needed emphasis on the role of power in cultural discourse, but provides a fascinating look at “the creators of mass culture, a group as playful and even as subversive in their own way as the heroic consumers who are the focus of so much of cultural studies today” (p. x).

The development of hip consumerism, then, is the story of the adaptability of consumer capitalism. Recognizing the validity of critiques of fifties mass society, representatives of the advertising and fashion industries sought to speak to those who felt alienated, who craved authenticity. Industry representatives, particularly younger people dissatisfied with the bureaucratic and creative strictures on their work, articulated their own variation on the frustrations of living in a consumer society. But in this view, the solution to such problems lay in increased consumption. And, as Frank argues, in the period since the sixties, hip consumerism has become the dominant ethos for “transform(ing) alienation and despair into consent” (p. 235).

In Franks view, both defenders and detractors of the counterculture are mistaken in portraying the sixties as a period of “fundamental cultural confrontation…. (I)nstead…the counterculture may be more accurately understood as a stage in the development of the values of the American middle class, a colorful installment in the twentieth century drama of consumer subjectivity” (p. 29). With its emphasis on self-fulfillment and immediate gratification, on the new and revolutionary as opposed to the stodgy and conformist, the counterculture did not need to be co-opted. It was already firmly within the value system of consumer capitalism. While this argument is not necessarily new–it has been variously made by such critics as Michael Harrington and Christopher Lasch–it serves as a useful corrective to more recent scholarship which has tended to minimize the role of power in cultural discourse. For one of the most significant forms of hegemony wielded by the dominant culture is the power to determine the nature of its own countercultures. As Peter Fonda said in Easy Rider, “We blew it.”

[1]. Abe Peck, Uncovering the Sixties: The Life and Times of the Underground Press (New York: Pantheon, 1985), pp. 164-165.

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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

American Work Values: Their Origin and Development

Author(s):Bernstein, Paul
Reviewer(s):Frey, Donald

EH.NET BOOK REVIEW

Published by EH.NET (February 1998)

Paul Bernstein, American Work Values: Their Origin and Development. Albany: SUNY Press, 1997. 368 pp. $59.50 (cloth), ISBN: 079143257.

Reviewed for EH.NET by Donald Frey, Department of Economics, Wake Forest University.

Bernstein surveys a massive literature about work values and attitudes, including a wide array of primary sources. The bibliography alone is some 66 pages and runs the gamut from original Puritan expositions of the “Protestant ethic” through some of the most recent opinion surveys on work attitudes. Someone interested in this field should check this book if for the bibliography alone.

As the bibliography makes clear, this is a book with a wide sweep. Bernstein documents the development of American work values, attitudes, and practices from the earliest colonial years through the 1990s. He organizes his material around four “continuities” or themes: 1) the search for job security; 2) the belief in work as opportunity; 3) the evolving work ethic (starting with the religious view of work as “calling” and ending with the contemporary “worth ethic”); 4) the debate over the community’s obligation to those without work.

Perhaps as interesting are the “discontinuities” that mark the transitions between the several stages of development that Bernstein delimits. The era of the Puritan ethic, Bernstein says, lasted into the first part of the eighteenth century; this was when work was understood as a divine calling. The second era, work as opportunity, began with Benjamin Franklin and lasted through much of the nineteenth century; one worked for utilitarian goals, and virtues became means to an end. As Bernstein surveys the present century, he discovers at least three distinct eras: the era of efficiency (Taylorism), the “human relations” era, and a new “human resources” era.

Common to all the eras are the four “continuities,” which play out in ways unique to each era. For example, the Puritan notion of the “deserving and undeserving poor” shares much with the welfare-reform concepts of the 1990s, including similar perceptions of the motives of the poor.

For each of his eras, Bernstein describes both the work values articulated by the dominant members of society (whether Puritan clergymen or top business managers) as well as the counter values of the economically weak members of society. This is an intriguing approach, but it has its weaknesses. The articulate members of society leave a rich lode of writings to be mined. The poor, unemployed, or enslaved, leave far less of a record, and Bernstein often is forced to infer their values. This problem gets worse the further one goes back in time. In the present era, Bernstein can rely on opinion surveys and the like to get a reading of the values of the otherwise inarticulate; however, in the colonial era it is much more difficult to infer the values of those without a voice. Would the economically weak have held the counter values Bernstein has inferred, or might they have internalized the dominant values after all?

Value systems are important in understanding human behavior (probably as much as maximization models), and Bernstein makes a meaningful contribution in expositing them. However, his work suffers from some weaknesses. It is ironic that Bernstein writes more clearly and is more convincing in his analysis of earlier centuries than the present one. In dealing with values in the twentieth century, Bernstein becomes unclear and much less convincing. He tends to equate changing management practices (Taylorism, welfare capitalism, etc.) with changes in values. Surely value systems are more fundamental than passing management practices and are rooted more deeply in the society at large; consequently values should have more staying power than management strategies. Does management’s adoption of, or giving up of, say, time-and-motion studies really represent a change in a whole society’s values? Or are management practices merely an adaptation at the margins of more enduring societal values? It is difficult to believe that there have been at least three different major values eras in the twentieth century; surely values have more staying power than that. The management practices and philosophies that Bernstein equates with twentieth-century American work values seem to be far less deeply rooted in the culture than, say, the utilitarian values of a Benjamin Franklin, which some commentators argue are with us still.

Another weakness of the book is that Bernstein allows the abundant data of the twentieth century to drown his ideas. He writes more convincingly of the dominant values of earlier centuries, it seems to me, precisely because he sticks to values clearly articulated by good representatives of their times. In his discussion of recent years Bernstein seems to get bogged down citing almost any court case, election result, opinion-survey result, or researcher’s observation that has any relation to work. The result is somewhat disjointed and unconvincing.

Bernstein’ treatment of Affirmative Action in the workplace provides a good example of the weakness of his treatment of the present century. After pages of details about Affirmative Action’s genesis and evolution, Bernstein ends with a seven-line paragraph that concludes that Affirmative Action simultaneously affirms and denies key American work values; hence, presumably, the mixed response to Affirmative Action and its mixed prospects. This reader would have expected the emphasis to be reversed: Bernstein should have given a short explanation of Affirmative Action, then have given a detailed analysis of why the program both taps into and simultaneously rejects central American values.

In sum, this book provides a solid overview of the development of American work values, attitudes, and practices over several centuries. Bernstein does a very good job until he reaches the twentieth century. In fact, his chapter on the Puritan work ethic is superior. The unstated thesis of the book, that fundamental values are central to understanding economic behavior, is indisputable. Therefore, works like this one enhance our understanding of economic behavior, and complement other, more abstract, methods of analysis. Finally, the bibliography alone makes the book worthwhile.

(Paul Bernstein is currently adjunct professor of management at Rochester Institute of Technology. He is former dean of graduate studies and former dean of liberal arts there, too.)

Donald E. Frey Department of Economics Wake Forest University

Donald Frey is professor of economics and has taught courses on ethics and economics in both the Master of Arts in Liberal Studies program and the economics department at Wake Forest University. He is author of “The Good Samaritan as Bad Economist: Self-Interest in Economics and Theology,” in Cross Currents: Journal of the Association for Religion and Intellectual Life (Fall 1996).

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