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The Rise of Big Government in the United States

Author(s):Walker, John F.
Vatter, Harold G.
Reviewer(s):Troesken, Werner

EH.NET BOOK REVIEW

Published by EH.NET (January 1998)

John F. Walker and Harold G. Vatter, The Rise of Big Government in the United States. Armonk, NY: M.E. Sharpe, 1997. 256 pp. $64.95 (cloth), ISBN: 0765600668 . $24.95 (paper), ISBN 0765600676.

Reviewed for EH.NET by Werner Troesken, Department of History, University of Pittsburgh,

In The Rise of Big Government in the United States, John F. Walker and Harold G. Vatter argue that government growth is response to the evolution of the market, shifts in ideology, and changes in international relations. Although Walker and Vatter document the growth of local and state governments, they focus mainly on the growth of the federal government. Their story begins in 1890 and extends through the present. Walker and Vatter take issue with two common explanations for the rise big government. First, they claim that economic and political crises have not caused the size of government to ratchet upward, as Robert Higgs argued in Crisis and Leviathan: Critical Episodes in the Growth of American Government (New York, 1987). Second, they claim that government bureaucrats seeking to maximize their own power and wealth have not prompted the rise of big government, as William Niskanen argued in Bureaucracy and Representative Government (Chicago, 1971).

For Walker and Vatter, government growth is primarily a response to the vagaries and failures of the market. In a nutshell, when the market generates outcomes that society does not like, society demands that the government intervene and make things better. The government’s ability to solve the problems wrought by the market depends critically on the larger culture’s ideological make-up. In eras dominated by a laissez-faire ideology, the government grows less, and is less successful in dealing with the problems generated by the market.

Although Walker and Vatter are both economic historians, they chose not to consider much recent work in economic history. Consider two examples. The authors argue that federal deposit insurance has stabilized the banking industry and protected small depositors. In making this argument, Walker and Vatter do not refer to numerous articles by Charles Calomiris, David Wheelock, and Eugene White. The works of Calomiris, Wheelock, White, and others, highlight the moral hazard and adverse selection problems that have plagued deposit insurance schemes throughout history. Walker and Vatter also argue that since World War II, fiscal policy has stabilized the macroeconomy and prevented severe downturns. Their discussion would have been better had they addressed Christina Romer’s work on pre- and post-war business cycles.

Overall, Walker and Vatter tell a plausible story, though I would have preferred a more balanced analysis, one that identified the costs, as well as the benefits, of big government. Readers wanting an introduction to the rise of big government, or those wanting an account that emphasizes the benefits of big government, will probably find this a useful book. Those wanting a more thorough or balanced account should look elsewhere.

Werner Troesken Department of History University of Pittsburgh

Werner Troesken is author of Why Regulate Utilities? The New Institutional Economics and the Chicago Gas Industry, 1849-1924 (University of Michigan Press, 1996).

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Subject(s):Government, Law and Regulation, Public Finance
Geographic Area(s):North America
Time Period(s):20th Century: WWII and post-WWII

Black Business in the Black Metropolis: The Chicago Metropolitan Assurance Company, 1925-1985

Author(s):Weems Jr., Robert E.
Reviewer(s):Adkins, Brian

EH.NET BOOK REVIEW

Published by EH.NET (December 1997)

Robert E. Weems, Jr., Black Business in the Black Metropolis: The Chicago Metropolitan Assurance Company, 1925-1985. Bloomington, IN: Indiana University Press, 1996. xvii + 158 pp. Includes preface, tables, biographical references, photos, and general index. $35.00 (cloth), ISBN: 0-253-33025-4.

Reviewed for EH.Net by Brian Adkins, Department of History, Rutgers University.

For more than half a century, researchers have chronicled the ascendancy and decline of African-American insurance companies. Most studies focused on the racial, social, and economic climate which necessitated black enterprises of this nature, or examined the internal operations of the firms themselves. Robert L. Weems, Jr’s Black Business in the Black Metropolis: The Chicago Metropolitan Assurance Company, 1925-1985 attempts to combine the conceptual framework of previous black insurance studies while chronicling changes occurring in Chicago’s African-American community during the twentieth century. This volume is part of Indiana University Press’s lauded “Blacks in the Diaspora” series; featuring more than forty titles examining race, gender, class, and broader issues in Atlantic history.

The core research and organizational synthesis for Black Business is gleaned from Weems’s doctoral dissertation written at the University at Wisconsin. The numerous acknowledgments Weems (an Assistant Professor in the Department of History at the University of Missouri-Columbia) gives to mentors, fellow scholars, helpful archivists, and many others is indicative of how he approached his subject. Weems’s inquiry is written from a personal analytical perspective. He conducted more than fifty oral interviews with people affiliated with the Chicago Metropolitan Assurance Company during its long history, and was granted access to the firm’s financial and meeting records. Not surprisingly, because of the wide preponderance of available resources, Weems’s chronicle of Chicago Met’s corporate history is his book’s major strength. However, instead of closely integrating twentieth-century socio-political, economic, and cultural forces within his strong business narrative; Weems’s compartmentalization of these events, and other structural problems prevent him from achieving his larger objectives.

Weaknesses aside, Weems’s first three chapters serve as the benchmark of his work. Chapter One chronicles the embryonic history of the Metropolitan Funeral Home Association (MFSA). Begun in 1925 as the precursor to what eventually became Chicago Met, the firm dedicated its efforts to serving the burial needs of working-class black Chicagoans. Although providing a necessary societal function, MFSA struggled to survive during its early years. Similar to many early African-American business ventures, MFSA was unable to obtain capital from white lending institutions. However, the unusual external activities of the firm’s first two patriarchs provided the financial catalyst for the fledgling enterprise to eventually become profitable.

Daniel Jackson and Robert A. Cole supervised MFSA and Chicago Met’s operations for more than three decades. Besides being a prominent black businessman, Jackson also had close ties to Chicago’s Republican political machine. However, his major source of power stemmed from controlling gambling activities in the city’s racially-segregated African-American community (nicknamed “Bronzeville” by its black residents). Evidence suggests that Jackson underwrote MFSA’s initial capitalization and subsidized its operating losses until Cole, his gambling lieutenant and protege, purchased the firm from him in 1927. While MFSA was only a side activity for Jackson, it became an important part of Cole’s professional identity for the rest of his life. Born in Kentucky, Cole migrated to Chicago in 1905 after finding his prospects limited in the South. Soon after arriving in the city, he obtained employment as a Pullman porter. It was during his fruitful twenty year tenure with Pullman, where Cole mastered the interpersonal skills he deftly used later in his business career.

Under Cole’s vigorous leadership, MFSA professionalized its insurance sales force and reorganized company operations. The firm earned praise from policy holders because it paid claims promptly, and permitted burial within a 1,000 mile radius of Chicago. Since many black Chicagoans were recent southern migrants, the aforementioned option was an attractive sales tool. However, despite gaining the confidence of its working-class customers and African-American city leaders, the operation continued to lose money. Between 1927 and 1931 alone, Cole personally loaned MFSA more than $18,000 to help stem the tide. Nevertheless, even with Cole’s gambling subsidies, the firm survived the Great Depression largely because of its ambitious sales force. Throughout the 1930’s, MFSA salesmen were paid strictly by commission, and the necessity of securing new clients prevented a full-scale erosion of its customer base. Having weathered a difficult storm, by the end of the World War Two, the firm’s financial problems became a distant memory as MFSA gained new customers and significantly increased its revenue.

Chapters Two and Three examine the firm’s most prosperous period. The early postwar era brought renewed hopes for African-American social and economic advancement, and MFSA’s leaders were not immune. Implementing expansion plans conceived shortly after the war, MFSA management decided to enter the life insurance business, expand its sales territory outside of Bronzeville, and provide additional benefits and dividends for their burial customers. The firm also changed its name to the Metropolitan Mutual Assurance Company of Chicago (finally becoming the Chicago Metropolitan Assurance Company in 1952). Not surprisingly, because of the prosperous temper of the times, Chicago Met increased its policy base, weekly premium income, and total admitted assets between 1947 and 1957.

However, Cole’s death in 1956 served as a demarcation point for Chicago Met’s postwar ascendancy and decline. Although he distanced himself from day-to-day management in his later years, the firm’s long-time patriarch still influenced its operational philosophy. The real impact of his death became apparent as Cole’s successors were unable to maintain friendly relations with its vaunted salesforce, culminating in a divisive agents strike during the summer of 1957. The origins of the labor dispute stemmed from an initiative to increase policy sales in downstate Illinois, Indiana, and Missouri. As a financial incentive, company officials paid salespeople in the target markets a higher commission rate than agents servicing Chicago-area customers (more than four-fifths of Chicago Met policies were sold in Bronzeville). Although the labor-management conflict was eventually settled, company morale never returned to its previous level, and exacerbated other looming problems.

Flaws in Weems’s organizational focus become readily apparent in Chapters Four and Five. Moving out of chronological sequence, the scholar examines Chicago Met’s impact as an community institution and the legacy of Cole’s paternalistic management style. While offering some important insights, these chapters often repeat material interspersed throughout his narrative. A prime example is Weems’s discussion of the socio-cultural impact of opening the firm’s new corporate headquarters. Completed in 1940, the complex also boasted a formal ballroom, (an eating facility was added in 1948) and became an important Bronzeville social center. While the genesis and overall impact of the firm’s headquarters is prescient earlier, the author’s continued discussion of it undermines its significance.

Weems’s work is further hampered by an unbalanced historical and chronological focus. Eighty percent of Black Business records the first half of Chicago Met’s history. The final two chapters (examining a period from 1958 to the early 1990’s) span only twenty-four pages, and don’t have the same analytical depth as earlier material. Furthermore, while ably chronicling Chicago Met’s losing battle to remain viable and independent, Weems misses a golden opportunity to tie the firm’s postwar woes to changes in black consumer and socio-economic fortunes.

Noted labor scholar Lizabeth Cohen in Making A New Deal, (New York, 1990), her prize-winning social history of post-World War One Chicago industrial workers, suggests that African-Americans were more likely than any other racial group to embrace brand-identified consumer products and services. Besides failing to refute or defend monolithic theories such as Cohen’s, Weems only provides a cursory examination of Chicago Met’s postwar marketing and advertising strategy in reaction to increased competition from white-owned insurance firms and aggressive black-controlled companies. The management style of the Atlanta Life Insurance Company (the African-American firm which purchased Chicago Met in 1991) represented a marked contrast to initiatives undertaken by the central figures in Weems’s narrative. While Chicago Met foundered during the 1980’s, Atlanta Life merged with, or purchased several struggling (but still valuable) black insurance companies in an effort to keep pace with overall industry consolidation.

The recent closing and liquidation of the once-hallowed Woolworth variety chain, underscores the harsh realities of American consumer society. Throughout its history, Chicago Met’s fortunes mirrored those of the community it valiantly served for more than six decades. While the forces of integration and post-industrialization wreaked havoc on the lives of their loyal working-class customers; Chicago Met ultimately lost its autonomy because unlike firms such as Atlanta Life, the organization could not effectively expand beyond its Bronzeville base. Unfortunately, Weems’s reluctance to delve further into larger structural issues such as this, mars what could have been an important and path-breaking inquiry. Nevertheless, because of Chicago Met’s unusual origins and history, Black Business is still a durable treatise for scholars and researchers of African-American entrepreneurship.

Brian Adkins Department of History Rutgers University

Brian Adkins is a doctoral candidate and Ford Foundation Fellow. He is currently completing his dissertation examining race, gender, and class relations in post-World War Two Chicago.

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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

Funding American State, 1941-1995: The Rise and Fall of the Era of Easy Finance

Author(s):Brownlee, W. Elliot
Reviewer(s):Vedder, Richard K.

EH.NET BOOK REVIEW

Published by EH.NET (December 1997)

W. Elliot Brownlee, Editor. Funding the Modern American State, 1941-1995: The Rise and Fall of the Era of Easy Finance. Cambridge: Woodrow Wilson International Center for Scholars and Cambridge University Press, 1996. ix + 467 pp. $59.95 (cloth), ISBN: 0521552400.

Reviewed for EH.NET by Richard Vedder, Department of Economics, Ohio University.

The good news is that seven scholars from a variety of disciplines (economics, history, political science, law) have given us an engaging narrative on various aspects of the contemporary history of American federal taxation in a volume that should be oft-cited. The bad news is, as is typically the case in edited volumes, the quality of the analysis is uneven and in a few places even historically inaccurate.

The book was probably largely written in 1994 or at the beginning of 1995. I was a little turned off by the very first sentence of text in the book, in a promotional blurb preceding the title page: “The fiscal crisis faced by the American federal government represents the end of a fiscal regime that began with the financing of World War II.” My reaction was: what fiscal crisis? At the time I read the book, President Clinton had just announced that the 1997 fiscal year budget deficit was about $22 billion, the smallest deficit in relation to total output in a generation. Moreover, the tax changes implemented in the 1997 budget deal merely extended the fiscal regime arising out of World War II.

Yet the claim is probably not so wrong after all. Americans are extremely unhappy with the administration of the tax system, and with its complexity. The public mood is ripe for reform, perhaps radical change that involves the replacement or profound modification of the progressive marginal rate income tax. The booming economy has given some temporary respite in dealing with the entitlement problem, but in the long run the existing fiscal equilibrium is clearly untenable given what C. Eugene Steuerle appropriately calls (p. 428) “the yoke of prior commitments.” It looks increasingly likely that major fiscal changes will occur at some time in the next decade.

Two of the essays (totaling more than one hundred pages) are by Elliot Brownlee. One summarizes the volume and the second provides a historical overview of the tax system since the beginning of the Republic. Brownlee correctly notes that new tax regimes implemented during four national emergencies (Civil War, World War I, the Great Depression, and World War II) facilitated the enormous growth of the federal government. High wartime taxes were only modestly lowered after those conflicts, which, combined with reduced defense spending, allowed for expanded social programs without incurring large political costs.

Brownlee emphasizes the tensions between the Republican emphasis on consumption and tariff taxation and the Democratic yearning for progressive income taxation in the late nineteenth century. Indeed, one can argue that the entire fiscal history of the country since 1860 is one of the changing political importance of two impulses: the progressive impulse to use the tax system to bring about income redistribution, and the conservative impulse to reduce the inefficiencies, resource distortions, and growth drag associated with high rates, particularly with regards to income.

A point that gets occasional mention but little emphasis in the book (possibly excepting Steuerle) is that progressive taxation gave political incentives to encourage price inflation, as bracket creep provided a politically clever way to raise taxes in a stealth fashion to finance social programs. I do not think it is entirely an accident that inflation in the United States was low or non-existent in the era before sharply progressive taxation, was high in the era of high progressive rates, and has moderated since tax indexation reduced (although not eliminated) the bracket creep dimensions of the progressive income tax. Did fiscal policy drive monetary policy?

Brownlee makes its abundantly clear that progressives in both the Wilson and Roosevelt administrations used war emergencies as an opportunity to impose their redistributionist ideas. As he hints, a case can be made that the notion of progressive income taxation was saved, by all people, Secretary of the Treasury Andrew Mellon, who in the 1920s defused Republican efforts to replace the progressive income tax with a national sales tax, an effort that has had a renaissance of sorts today.

Brownlee’s account of tax history emphasizes the progressive impulses at redistribution, and pays little attention to the efficiency difficulties that extremely high marginal rates pose. Few economists today would claim that sharply raising marginal tax rates in 1932 was an intelligent move from either a demand or supply side perspective, yet Brownlee does not discuss whether this viewpoint was articulated at the time. Had equity concerns completely silenced the traditional efficiency arguments that arise in tax debates? The emphasis throughout the Brownlee article is on tax changes that provided fiscal support for an increased state: he gives very little attention to the important Kennedy and Reagan tax cuts, and completely ignores several moderately important changes in the tax system, such as in 1954, 1990, and 1993.

Turning from the general to the specific, Carolyn C. Jones competently explores how the government used public relations techniques to convince Americans to comply with high income taxation in the 1940s, when most Americans first became payers of the tax. Edward D. Berkowitz nicely summarizes the history of social security taxation, showing how liberals associated with the administration of the program (such as Wilbur Cohen) played an influential role in crafting Social Security expansion. They convinced legislators that large increases in benefits were possible with only moderate tax increases. In time, of course, political leaders learned this lesson too well, increasing benefits in the 1970s in an actuarially untenable fashion. The modern troubles of Social Security are less extensively explored than the program expansion, although Berkowitz perceptively notes that “Americans have historically tolerated taxes reflecting shared social purpose but that even these taxes can reach a threshold that threatens to undermine the enterprise the tax supports” (p. 183).

In a long and important essay, Herbert Stein updates his Fiscal Revolution in America (Chicago: University of Chicago Press, 1969). The era before the 1960s was dominated by tensions between three alternative budget philosophies (old-fashioned Keynesian “functional finance”, a more conservative or “domesticated” Keynesianism advocated by Stein, and a traditional Republican balanced budget rule). By contrast, Stein correctly tells us that fiscal policy in the post-1964 era was not governed by any specific budget philosophy. The problem was “the unwillingness of policy-makers to subordinate their desires for specific tax and expenditure programs to any aggregate goal” ( p. 200).

Stein then goes into a long discussion of the specifics of fiscal policy, emphasizing the era when he was a player, namely the Nixon Administration. The fact is that, for all the policy angst and debate, federal taxation absorbed about 20 percent of the national output throughout the period. Whenever taxes started to rise above that amount from bracket creep, a tax revolt would ensue, culminating in what Stein (p. 266) terms the “Big Budget Bang” of 1981. Whenever taxes fell much lower than one-fifth of the nation’s output, tax increases ensued (1982, 1990 and 1993 come especially to mind). The increasing contempt for aggregate fiscal rules of any kind reflected growing tensions posed by the growth of entitlement programs and, on occasion, other spending needs. The marginal political benefits to politicians of spending money exceeded the marginal political costs. The “automatic” nature of entitlement spending increases was aggravated by new programs in the 1960s and 1970s. Deficits were a politically less painful way to finance government constrained by a tax threshold imposed by popular sentiment. Like inflation- induced tax increases, deficits are a stealth form of taxation. As Stein concludes, in the early 1960s it was true that “economic science had provided commands that politics would and should obey. That belief has now disappeared.” (p. 286)

Julian E. Zelizer’s account of Wilbur Mill’s role in the fiscal policy changes is well crafted. Mills shrewdly used experts to help him make important changes in the fiscal system, and to stand up to Administration and congressional pressures. At the same time, he was a creature of Congress and knew how to win votes and maintain power. In a less successful essay, Cathie Jo Martin looks at the role that business played in the tax changes of the postwar era. The paper is marred with significant factual errors. Speaking of the Reagan era, we learn (p. 382) that “neoclassical economists concentrated in the CEA under Murray Weidenbaum and then Alan Greenspan.” Alan Greenspan did serve as Chairman of the Council of Economic Advisers – but in the Ford administration several years earlier. I read (p. 394) that administration official Richard Darman was a “supply-side economist.” First of all, Darman was (and is) not an economist (his most recent Who’s Who in America bio refers to him as a “former investment banker” and “former educator” and earlier biographies as “business consultant.”). Secondly, most of the prominent supply siders I know from that era viewed Darman as their enemy, the very antithesis of a “supply side economist.” The essay makes several assertions based on interviews with anonymous committee staffers. As a congressional staffer myself in this era, I would suggest that staff interpretations of major congressional events varied widely, and too many assertions are made that at the very least should be qualified.

The book ends on a more solid scholarly note. Steuerle nicely uses fact and logic to suggest that the era of “easy finance” ended in 1981. Up to that date, economic growth, defense cuts, social security tax increases and the impact of inflation in raising taxes and lowering the real burden of the debt made it possible to expand social programs without dire budgetary consequences. After 1981, “the yoke of prior commitments”, the productivity growth slowdown, tax indexation and other factors brought about “the fiscal straitjacket era.” On the spending side, the growth in entitlements set the stage for a future fiscal crisis that will force some change in the nation’s fiscal (and probably tax) regime.

Taken as a whole, this volume advances our understanding of the historical trends in tax policy in important ways. While not pretending to be a balanced or comprehensive survey of history of modern taxation, it is a nonetheless a welcomed addition to the literature that scholars will utilize for years to come.

Richard Vedder Department of Economics Ohio University

Richard Vedder is Distinguished Professor of Economics at Ohio University, where he does research on labor and fiscal policy issues. His latest book, with Lowell Gallaway, is Out of Work: Unemployment and Government in Twentieth-Century America, updated edition (New York: New York University Press, 1997).

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Subject(s):Government, Law and Regulation, Public Finance
Geographic Area(s):North America
Time Period(s):20th Century: WWII and post-WWII

If I Were Boss, The Early Business Stories of Sinclair Lewis

Author(s):Lewis, Sinclair
Reviewer(s):Baida, Peter

EH-NET BOOK REVIEW Published by H-Business@eh.net (December 1997)

Sinclair Lewis. If I Were Boss: The Early Business Stories of Sinclair Lewis. Edited and with an introduction by Anthony Di Renzo. Carbondale Southern Illinois University Press, 1997. xxxvii + 363 pp. Bibliography $39.95 (cloth), ISBN 0809321386; $19.95 (paper), ISBN 0809321394.

Reviewed for H-Business by Peter Baida , Memorial Sloan-Kettering Cancer Center

Sinclair Lewis Before Babbitt

In the twentieth century, as in the nineteenth, the voices that celebrate business values in the United States have been challenged by voices of doubt and dissent. No one denies that business has shaped American life in vital ways. The questions that interest the critics are questions of value. How does the United States measure up as a culture? What kind of people does it produce? What quality of life does it offer? Has business exercised not merely a shaping but a warping influence?

These questions were addressed with special fervor in the work of a tall, skinny redhead who became, in 1930, the first American to win the Nobel Prize for Literature. Sinclair Lewis was born in Sauk Centre, Minnesota, in 1885, the son of a country doctor. In the twelve years after he graduated from Yale in 1907, Lewis traveled restlessly around the United States; worked briefly in a number of editorial, advertising, and public relations positions; and published four novels, none of them now remembered. Then, in 1920, he published Main Street, followed in 1922 by Babbitt. These books remain essential reading for anyone who wants to understand the cultural history of the United States in the twentieth century.

To mark the seventy-fifth anniversary of the publication of Babbitt, the Southern Illinois University Press has rescued fifteen of the over sixty short stories that Lewis published in American popular magazines between October 1915 and May 1921. No one would claim that these stories add to the world’s supply of great literature, yet Lewis’s early work contains much that will interest the literary or cultural historian. In these stories, as Lewis’s biographer Mark Schorer observes, Lewis “investigates the world of George F. Babbitt and Elmer Gantry, the world of high pressure salesmanship, and he exploits his knowledge of New Thought, Chautauqua, quack religion, the dressmaking business, the automobile industry, patent medicine, trade publications, poetry for businessmen, the whole world of boosting and commercial razzmatazz and the fast buck, all presented in a raucous tone of satiric exposure.”[1]

The stories collected in If I Were Boss throw light not only on Lewis’s development as an artist but also on the cultural scene that welcomed his work. Lewis’s business stories appeared not in obscure literary quarterlies but in hugely popular periodicals such as the Saturday Evening Post, American Magazine, and Metropolitan Magazine. The Post, especially, under its legendary editor George H. Lorimer, encouraged the work of the young man who eventually produced some of the most scathing satire ever to take aim at American business.

As Anthony Di Renzo, a teacher of professional writing and American business history at Ithaca College, notes in his useful introduction, Lorimer had revitalized the Post partly through successful serializations of business novels such as Harold Frederic’s The Market-Place (1899), Frank Norris’s The Octopus (1900) and The Pit (1901), and Lorimer’s own Letters of a Self-Made Merchant to His Son (1902). Business, Lorimer felt, dominated the lives of most Americans, yet the nation’s novelists rarely dealt with it. Most writers preferred romance, whereas Lorimer felt that in fiction “the struggle for existence is the loaf, love or sex is the frosting on the cake.”[2]

Lorimer liked Lewis’s early business stories, encouraged him to submit frequently to the Post, and paid him well. Lewis responded with stories that smoothly blended satire, sentiment, and business instruction. The satire is pointed, but not savage. A reader who knows the novels that made Lewis famous will wonder to what extent Lewis pulled his punches in deference to the requirements of writing for a magazine that sought to celebrate Main Street, not to bury it. Mr. Di Renzo reports that after Lewis published Main Street, “rumors circulated that Lorimer had refused to serialize the novel, had privately advised Harcourt to shelve the manuscript, and had recommended that the Pulitzer Committee deny Lewis the prize. These charges proved insubstantial, but they point to an actual rift–a rift that became a chasm with the publication of Babbitt” (p. xxxi).

Of special interest in this collection are four stories that involve a dazzling con man named Lancelot Todd, whom Lewis introduces, in a story titled “Snappy Display,” with words that show the writer hitting his stride as a satirist: “Lancelot is an artist of advertising; a compound of punch, power, pep, and purest rot serene. You have doubtless heard his addresses, Upward and Pupward,’ and The Smash and Lash that put the Zing! in Advertising,’… You have noticed in editorials in syndicated house-organs, and his signed advertisements of everything from cocaine to arts-and-grafts coffins. You may even own one of his books; perhaps Fishin’ for Effishincy’ or Are You Toting Old Man Sloth on Your Shoulders?’… [Lancelot] joined every possible organization, from the Jolly Bowlers to The Young Men’s Wesleyan Circle, and made a business of being familiar and agreeable with every member who had an income of more than four thousand dollars a year. He was so successful that he was no longer dishonest in money matters…. Scarcely at all” (pp. 168-70).

Lewis wrote eight stories in which Todd figures as the central character These stories appeared not in the Saturday Evening Post but in Metropolitan Magazine (seven of the eight) and in Popular Magazine. Mr. Di Renzo feels that the move from the Post allowed Lewis to sharpen his satire. “Sophisticated and irrelevant, Metropolitan targeted the urban smart set and displayed a Menckenian contempt for the entrepreneurial middle-class values of the Post. Lewis had gone over the enemy, who relished his jugular humor and wicked caricature” (pp. xxvi-vii). Even so, the stories involving Todd that appear in this collection show signs of commercial pressure. In no story is the trickster allowed to triumph; every story ends with a comeuppance.

None of the fifteen stories collected in If I Were Boss have appeared in print since their original publication. This volume makes possible a better understanding of Lewis’s development as an artist and demonstrates the ambivalent feelings aroused by American business in the early years of the twentieth century. Mr. Di Renzo’s Introduction shows a firm grasp of the commercial culture that inspired the stories and the literary culture in which the stories appeared.

[1]. Schorer, Mark. Sinclair Lewis: An American Life (New York: McGraw, 1961), p. 239.

[2]. Quoted in Baida, Peter. Poor Richard’s Legacy: American Business Values from Benjamin Franklin to Donald Trump (New York: William Morrow, 1990), p. 242.

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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: Pre WWII

An Economic History of the Silk Industry, 1830-1930

Author(s):Federico, Giovanni
Reviewer(s):Scranton, Philip

EH.NET BOOK REVIEW

Published by EH.NET (December 1997)

Giovanni Federico, An Economic History of the Silk Industry, 1830-1930. Cambridge: Cambridge University Press, 1997. xv +257 pp. Tables, maps, bibliography, index. $59.95 (cloth), ISBN: 0521581982.

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

Dr. Federico (University of Pisa) originally published this monograph’s Italian version in 1994. This translation, which the author accomplished, represents the fifth title in the Press’s Cambridge Studies in Modern Economic History, edited by Charles Feinstein (Oxford), Patrick O’Brien (Institute for Historical Research, London), Barry Supple (Leverhulme Trust), Peter Temin (MIT) and Gianni Toniolo (University of Venice). These studies are presented as “a major new initiative in economic history publishing and a flagship series for Cambridge University Press.” This may be the intention, but neither the editors nor the Press have served their author well in this case. Through stunning inattention to editing Federico’s translated text, they jointly blunt the presentation of his research work and frustrate any but the most dedicated reader’s attempt to assess its significance. I will return to this issue after sketching the book’s methods and themes.

The purpose of this work is to offer a global history of a basic industrial commodity, silk, in order to set the performance of individual countries in the context of worldwide export competition. The Italian experience here represents the hub around which comparative analysis of Japan and China is mounted. This approach is slightly at odds with the title, for on inspection the reader discovers that “silk industry” in this instance excludes all silk fabrics, and most silk yarn, referencing instead the production of reeled silk, the first intermediate good in the trade’s production sequence. Reeling involves soaking cocoons in warm water, then unwinding the long single strand which composes each one, and assembling sets of strands on reels, from which they are removed and packaged as raw silk. This labor-intensive, low-value-added process was concentrated in the nations where silk was “grown” and harvested. As users scattered across the industrialized world, with the U.S. the largest purchaser by the late 19th century, raw silk represented a substantial focal point for international trade. Silk yarn, by contrast, was rarely exported from those nations which spun it (the trade term is “thrown”), as local weavers and knitters took up the products (tram and organized) for immediate use. There was a modest transnational trade in silk fabrics during this century, particularly at the upper end of the fashion/price range, but it did not displace the dominance of raw silk exports until after World War Two. Those who now purchase silk apparel in the U.S. can register this transition by searching for clothing items not made in China, suggesting that nation’s movement up several rungs of the production ladder from commodity exporter to manufacturer of both staple and stylish silkwear.

At the outset, the author notes that a profusion of single country commodity studies already exists, arguing that collectively they “miss a basic preliminary question: what caused exports?” (p. 2). In his conclusion, this query is phrased more concretely as “two main questions: why did world consumption increase in the long run, and what determined the competitiveness on the silk market (as represented by changes in market shares)?” (p. 191). Regrettably, Federico cannot resolve either of these matters firmly, “as the data are not sufficient.” Despite his ragged data (particularly for China), he mounts an “econometric model” which indicates that “the total growth is evenly shared between the demand and the supply side” which in turn suggests that raw silk producers “achieved very high rates of technical progress, expanding the production in spite of falling relative prices of cocoons.” (191) As for silk’s role in overall economic development, Federico appears to confirm the “conventional wisdom” that “Silk exports are deemed at best ineffectual to start development…”, noting that “Probably the causation [runs] from development to silk exports instead of the other way round.” (193). (I say “appears” because the prose in this section is unusually convoluted.) He adds: “This conclusion may be appealing but is a bit vague. Unfortunately, it is difficult to be more precise.” In the final paragraph, Federico suggests that the silk trade does not confirm perspectives on “long-run performance” which stress “institutions (in a broad sense) in of [sic] international competition” and an “active role for the state” as key to augmenting country-level competitiveness. Instead, silk’s trajectory “depended on the input endowment and, to a lesser extent, on entrepreneurship, [for the] very survival of the industry depended on the supply of low cost labor.” This of course, is a bit underwhelming as a final judgment, given that it largely reinforces received understandings of the spatial division of labor in silk’s process segments. Indeed, it’s not clear why Federico needed to fashion an econometric model to confirm this analysis, or how much the fragmented data sets impair such a formal confirmation.

The route between the problem statement and its uncertain resolution involves a thematic tour of the silk-reeling sector, rather than a three-nation chronological narrative. This makes sense, given that Federico is concerned to present both the supply and the demand sides of the growth process. For this study, chronology would have generated a good deal more repetition than does thematic ordering. Thus we commence with industry characteristics, and “The growth in the long run,” then move to chapters on consumption and demand, agricultural supply, technological change, and finally, market and state institutions. In considering whether differences among institutions mattered to the three nation’s outcomes by 1930, Federico wanders through various indicators, beset by data problems and generating mismatched conclusions (e.g., “The quantitative evidence on the transaction costs in the cocoons markets is rather scarce.” (167) “All in all, transaction costs were probably lower in Italy [than China or Japan] by a few percentage points. The benefits of the modernization of institutions were therefore relevant but not really great.” (169) “In other words, institutions were important but hardly decisive.” (170) And, given insufficient evidence on market imperfections, “one cannot rule out the presence of imperfections in the Far Eastern marketplaces. In this case, Italy’s advantage [having modern market relations] would have been substantially greater and institutions would have mattered greatly to competitiveness.” (173)). Not to put too fine a point on it, this could well have benefited from some editorial refining.

Similar problems plague other sections of the text. There are at least ten copyediting errors on page 5 alone; at p. 27, the reader encounters a statement that: “the innovation on product was non-existent, and those on process was entrusted to the producers.” On p. 51, we learn that despite chemical weighting of silk fabrics (to stretch supplies and lower costs), “there was not mass flee from silkwares,” and on the following page: “The total silk content per square yard of broadcloth in the USA fluctuated from 1899 to 1914 between 3.3 and 3.9 pounds.” (ounces!) There are, sadly, many more such blunders.

What went wrong with this effort to provide English-language readers with a comparative analysis of a commodity’s trajectory across a century crucial both for industrial development and for the dramatic increase in long distance trade in raw materials? It seems that the series editors were asleep, out of touch with one another, or indifferent to “product quality.” Yet that Cambridge University Press failed to copyedit the manuscript translation before setting it for publication is equally shocking. It would be a courtesy to Dr. Federico were the Press to withdraw and pulp the available stock of this monograph, have its editors do a properly professional job of preparing the study for an international audience, and re-release An Economic History of the Silk Industry a year or two hence. (Note, that this volume was released by CUP-UK and not by the American division.)

Philip Scranton School of History, Technology, and Society Georgia Institute of Technology and Hagley Museum and Library

Philip Scranton is the author of Endless Novelty: Specialty Production and American Industrialization, 1865-1925 (1997) and the editor of (and a contributor to) Silk City: Studies on the Patterson Silk Industry, 1860-1940 (1985).

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Subject(s):Industry: Manufacturing and Construction
Geographic Area(s):General, International, or Comparative
Time Period(s):19th Century

Escape from the Market: Negotiating Work in Lancashire

Author(s):Huberman, Michael
Reviewer(s):Wolcott, Susan

EH.NET BOOK REVIEW Published by EH.NET (December 1997)

Michael Huberman. Escape from the Market: Negotiating Work in Lancashire. New York: Cambridge University Press, 1996. xviii + 222 pp. $54.95 (cloth), ISBN: 0-521-56151-5.

Reviewed for EH.Net by Susan Wolcott, Department of Economics, Temple University and American University.

In Escape From the Market, Michael Huberman argues that even in the years before 1850 the textile labor market of Lancashire was not a spot market, but instead was characterized by a measure of worker autonomy. He brings together a great deal of the recent economic literature on labor markets and combines it with recent work on the social history of the Lancashire textile industry, much of it his own. The book is a useful summary of Huberman’s articles in this area.

Huberman has made many important contributions. The first is new data. These include output figures for one of the largest fine spinning firms in Lancashire, M’Connell and Kennedy; disaggregated British yarn production data; and refined and more complete measures of short-time working in the 1840s which illustrate that this practice was widespread at an earlier point in time than is commonly believed. What I found most intriguing about his analysis is the distinctions he draws between the labor markets in the coarse and fine spinning sections of the industry, and the somewhat overlapping categories of rural and urban. The “negotiating work” of the subtitle and the labor empowerment it implies refer primarily to the fine spinning sections, or what he calls the “primary sector”. He argues that in the coarse or “secondary” sector wages remained low and flexible because skill levels and management’s capital investments were low (at least until 1850, when the self-mover was more widely adopted). Labor’s disadvantageous bargaining position in the sector was further eroded because coarse spinning was predominantly located in the rural areas where the family was the work unit and management had an essentially captive labor market, thus harking back to the work of Gavin Wright on Southern US textile labor markets. Huberman also discusses the origins of the Lancashire lists- documents drawn up by labor and management which specified the payments required by yarn, machine and cotton type. These lists have an infamous history as an impediment to technological change. But this literature treats the lists as an exogenous factor. To my knowledge no one before Huberman has tried to consider the reasons for their creation.

Though the book touches on many issues affecting the Lancashire labor market in the first half of the 19th century, Huberman’s main theme appears to be that because of collective action by the male workers in fine spinning, management was forced to adopt a “fair management” strategy in the 1830s. The actions which brought management to their knees were the 1829 strike in the fine spinning sections, and the ability of workers to retaliate for “unfair” management actions by slowing down production. According to Huberman, such slowdowns were possible in the fine spinning sections because of the introduction of new technology (e.g. longer mules) with unknown maximum capabilities. To elicit maximum effort, management adopted a strategy of “fairness”. As described by Huberman, this strategy involved high and stable wages, and stable employment. To keep employment stable, management adjusted labor input through the use of short- time rather than layoffs, and when layoffs were necessary, applied seniority rules.

Huberman, however, goes further than the data support in ascribing market control to labor. Alternative explanations are dismissed or ignored. This is less of a problem when he is considering overt labor strategies of control. The power labor exhibited in the strike of 1829 is unambiguous, and labor’s role in the adoption of the lists marks another strong element in Huberman’s analysis. The problems lie more in Huberman’s attempts to infer evidence of labor’s day-to-day workplace control from the data.

One example of such a problem is Huberman’s attempt to show that management adopted stable wages in response to demand shocks after 1830. His theoretical analysis of this issue is sound. He argues that if managers have undertaken some type of implicit contract with workers then management would try to mitigate the variance of the wage over the course of the business cycle. Because they were not lowering wages, and consequently prices, in response to negative demand shocks, output would fall. Thus, in downturns, quantity would tend to vary more and prices less in the presence of such contracts than in their absence. In the empirical section, I expected him to stress differences in relative price and quantity variation in the fine spinning section- where he believes these contracts were adopted in the 1830s- and the coarse spinning sections- where he argues they did not exist until the end of his period (the sample stretches from 1822 to 1852). Indeed, the (1991) Explorations in Economic History article from which this section is drawn sets out a formal model contrasting wage and output variations in the fine and coarse sectors. But he does not find cross-sectoral differences. The relative price and quantity variations in the two sectors were virtually identical. In all sectors, throughout the time period, prices vary less than quantity in the “bad”, or below trend growth years, and in “good”, or above trend years, prices vary more than quantity. This Huberman takes as evidence of wage smoothing and so of “the fair wage policy”. Why? This result is not implied by the model he relies on. Further, it is a pattern seen across all periods, and all sectors, when his analysis would suggest that the “fair wage policy” was only extant in fine spinning, and then only in the post-1830 period.

On the whole, I did not find Huberman’s arguments concerning the adoption of “fair” wages and “fair management practices” convincing. But anyone must be convinced by his work that labor had at least some bargaining power over employers if for no other reason than workers could present a credible strike threat. Huberman also demonstrates that management was reluctant to layoff workers if for no other reason than a fear of losing trained labor. Huberman is successful in showing that the neoclassical paradigm of perfectly flexible labor markets was as inappropriate to early 19th century labor markets as it is to those of the late 20th century. Susan Wolcott Department of Economics Temple University and Department of Economics American University Susan Wolcott is author of “The Perils of Lifetime Employment Systems,” Journal of Economic History, June 1994 and “Did Imperial Policies Doom the Indian Textile Industry,” Research in Economic History (forthcoming).

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Subject(s):Labor and Employment History
Geographic Area(s):Europe
Time Period(s):19th Century

Trade and the American Dream: A Social History of Postwar Trade Policy

Author(s):Aaronson, Susan Ariel
Reviewer(s):Wilkins, Mira

EH-NET BOOK REVIEW Published by H-Business (Lists@cs.muohio.edu) (November, 1997)

Susan Ariel Aaronson. Trade and the American Dream: A Social History of Postwar Trade Policy. Lexington: University Press of Kentucky, 1996. xvii + 262 pp. Tables, figures, notes, bibliography, and index. $62.50 (cloth) ISBN 0-8131-1955-3; $15.95 (paper) ISBN 0-8131-0874-8.

Reviewed for H-Business by Mira Wilkins , Florida International University

Susan Aaronson’s monograph is based on her Johns Hopkins University Ph.D. dissertation. For many years, she has been studying the International Trade Organization (ITO), and in the last few years her subject has become more topical than when she initially embarked on it. Research on what happened to the ITO had an almost antiquarian interest, that is, until January 1995, when the World Trade Organization (WTO) came into being; finally, the 1940s plans for an international trade organization came to fruition, although Aaronson insists the WTO is not a “reincarnation of the ITO” (p. 4). The subtitle of Aaronson’s book, “a social history of postwar trade policy,” misrepresents its contents; much more than half this volume is a blow-by-blow account of the deliberations on the ITO. The material on the WTO is an afterthought to make the book more current. Trade policy discussions, 1950-1990, are virtually ignored.

In the closing years of the Second World War, American policy makers envisaged three specialized international economic organizations: The International Monetary Fund, the International Bank for Reconstruction and Development (now known as the World Bank), and the ITO. Congress approved U.S. membership in the IMF and the World Bank, but never voted on the third organization. Instead, the United States would participate in the General Agreement on Tariffs and Trade (GATT), originally established as an interim arrangement, pending approval of the ITO.

The original ITO “charter” was formulated by the planners at the U.S. State Department in 1944. The documents were redrafted three times before the final charter was signed by 54 nations in Havana in March 1948. By then, Congress had approved U.S. involvement in the IMF and World Bank (in 1945). Aaronson claims “ITO missed the flurry of support for internationalism that accompanied the end of the war” (p. 4). Worse still, in her view, unlike the advocates for the United Nations, the IMF, and the World Bank, proponents of the ITO never mounted an effective appeal for public support (p. 42). Secretary of State Cordell Hull (1933-1944), she suggests, lost his one-time enthusiasm for an international trade organization before he left office and none of his successors–Edward Stettinius, James Byrnes, and George Marshall–gave the idea priority. By the time Dean Acheson, who had been involved in the initial planning for the ITO, became Secretary of State in 1949, he had put the ITO on a back burner.

After a short introduction, Aaronson tells a chronological story, covering briefly pre-World War II U.S. trade policy and then turning to U.S. planning for peace and freer trade that began even before Pearl Harbor. I found of particular interest her discussion of the differences between John Maynard Keynes and U.S. State Department officials on trade policy. In a footnote Aaronson quotes a lovely passage she found in a letter from Keynes to Dean Acheson (July 29, 1941): “Forgive my vehemence. This is my subject. I know, or partly know, what I want. I know, and clearly know, what I fear” (p. 190 n. 48). Regrettably, Aaronson does not link Keynes’s role in relationship to the ITO with his role on the IMF, nor does she put this important quotation in the context of subsequent debates on the ITO.

Aaronson is excellent on commercial policy planning in the State Department during 1943-1945. Not until December 1945 did the U.S. public learn of its government’s plans to support the formation of an international trade organization. She is also excellent on the delays and competing matters that arose during 1946. Finally, in October-November 1946, in London the first international negotiations on the ITO began. U.S. policy makers presented a “suggested charter,” a code on international trade rules aimed at facilitating freer global commerce. The proposal was revised, based on the London discussions; the modifications covered issues related to domestic employment, restrictive business practices, intergovernmental commodity agreements, and economic development. The resulting “London draft” of the ITO charter was–in Aaronson’s words–“riddled with exceptions and escape clauses,” codifying the exceptions to the rules of trade rather than codifying the actual rules of trade that would open up world markets (p. 68). In addition, the London Conference opened the way for a general agreement on trade, independent of the charter for the ITO. For the United States, this proved an “easy out”: the United States could negotiate a general agreement on tariffs and trade under the authority of the existing U.S. Reciprocal Trade Agreements Act (in 1945, Congress had again extended the RTAA of 1934 for an added three years); policy makers did not have to go to Congress for new authorization.

Thus, in 1946, U.S. planners adopted a two-track approach to global cooperation in international commerce. One track was to develop the temporary general agreement on tariffs and trade (GATT), in line with the US RTAA; the ITO was now the second track (once it was approved, it was assumed it would replace GATT). The next step in the process occurred in Geneva in April 1947, where international negotiations were launched on both GATT and the ITO. The GATT arrangements were understood as provisional.

By the autumn of 1947, the first round of GATT discussions was successfully concluded in Geneva, where 23 nations engaged in bilateral bargaining–product by product–seeking reductions in duties. Concessions made were then generalized, through the endorsement of the most-favored nation principle (i.e. concessions made to one country would be extended to all most-favored nations). This conformed to the existing U.S. Reciprocal Trade Agreements Act (the RTAA). In all, 123 sets of negotiations were concluded and incorporated into the GATT, signed on October 30, 1947. The US, under the RTAA authority, was a signatory.

In November 1947, international negotiations started in Havana to finish the ITO charter–the second track in U.S. policy makers’ plans. Yet, as the talks went forward and persisted into 1948, U.S. State Department officials vacillated over whether to push for Congressional support for the ITO, or alternatively, for the RTAA (due to expire in June 1948), or for both. And, as they weighed the options, the European Recovery Program and the Cold War captured their attention. Early in 1948, the State Department resolved to concentrate its efforts on renewing the RTAA and to postpone temporarily submitting the ITO to Congress. The latter seemed to have little strong support and GATT became the “fall back” position (p. 94). In March 1948, the Havana Charter for the ITO–the final charter–was signed by 54 nations. In June 1948, Congress agreed to extend the RTAA, but only for a single year. There was a presidential election in 1948 and senior policy makers in the State Department deferred ITO considerations, and then in 1949, once more focused on the RTAA.

It came to pass that the State Department never pursued the “second track.” While the 1949 Senate hearings on the RTAA extension did touch on the ITO, while President Harry Truman did submit the Havana Charter for the ITO to Congress in April 1949, and while in 1950, the House of Representatives did conduct hearings on the charter, for all practical purposes the ITO was “dead on arrival” at the Congress. America failed to join the ITO, and that organization (for which there had been so much preparation) never materialized. At the end of 1950, the United States officially abandoned all efforts to create the ITO. The United States did remain part of GATT, participating in the sequence of rounds of international trade negotiations.

I had always believed (based on earlier studies) that U.S. membership in the ITO had ultimately failed because large U.S. businesses lost interest in it, fearing it would be used not to open trade but to regulate cartels and cartels might be defined in terms of big business. This is an explanation Aaronson does not even note. Cartels are not in her index, although they are mentioned several times in passing. “Antitrust” is also not in her index and in documenting business responses, she never discusses the international concerns of business on this issue. She does note that the most internationalist of business groups, the National Foreign Trade “Committee” (I think she means the National Foreign Trade Council) had by 1948 decided to oppose U.S. participation in the ITO; she never explains why.

Her argument is that Congress failed to vote for (or even on) the ITO because U.S. State Department policy makers had been secretive, been unable to prepare the ground, and neglected public relations. She documents hesitation, compromises, and confusion. Unlike the United Nations where the support of the public was wooed and unlike the Bretton Woods institutions (the IMF and the World Bank)–where the subject was remote and even so there was good public relations–tariffs were important domestically; tariffs on individual products had their strong advocates; and U.S. entry into an international organization was not acceptable given the absence of a strongly favorable public response. Her text demonstrates clearly that policy makers dealing with these trade issues lacked clear direction. There appears to have been a vacuum in effective leadership, such as Harry Dexter White and John Maynard Keynes provided for the IMF and World Bank arrangements. Moreover, Aaronson’s argues that when America joined the UN, the IMF, and the World Bank, the Cold War had not yet begun. When the Havana Conference occurred in 1948, times had changed. European and Japanese recovery were top priority, as the early phases of the Cold War shaped policy makers’ perceptions. Americans’ outlook in 1949 and 1950 was entirely different from 1944 and 1945. I think Aaronson is on sound grounds in her stress on “timing” as critical to U.S. membership in the United Nations and the Bretton Woods institutions and its not joining the ITO. This makes good sense as does her narrative on what occurred. She is also right in her emphasis on how Congressmen had strong views on tariffs and trade and the State Department’s policy makers–from 1945 onward–seemed unable to understand this. Her story-line makes apparent that by 1950, while there remained many who supported U.S. involvement in the ITO (see p. 129), the opposition to ITO membership within the United States had become highly diverse–with a wide range of objections and most important, no vigorous senior-level U.S. endorsement.

Accordingly, the provisional GATT continued to serve as the forum for international trade negotiations–until the World Trade Organization came into being in January 1995. The United States–through GATT–endorsed trade liberalization. Aaronson does not seem to recognize the importance of the 1962 U.S. Trade Expansion Act. She does not document the history of the “fast-track” provision in American trade legislation. A chapter on U.S. public policies and public opinion on trade covering the years 1950 to 1994 has only ten pages, of which eight are devoted to 1992-1994. This chapter is followed by a short one on the U.S. approval of entry into the WTO.

Aaronson’s book gives her reader a detailed study of a failed policy initiative (U.S. membership in the ITO) and how an unanticipated alternative (GATT) was established. GATT did achieve the national goal of more open world trade. When WTO came into existence, many Americans feared their country would be at the “mercy” of an international organization or international forces (an echo of earlier isolationism). Some of the concerns over WTO resembled those of past times; others were new, in particular the discussions of international labor and environmental standards. The U.S. participation in the WTO was, however, symbolic of a policy consistency during the entire post-war era, that of U.S. advocacy of freer trade and of keeping the frequently-surfacing and ever-present-calls for protectionism at bay.

Subject(s):International and Domestic Trade and Relations
Geographic Area(s):North America
Time Period(s):20th Century: WWII and post-WWII

The One Best Way: Frederick Winslow Taylor and the Enigma of Efficiency

Author(s):Kanigel, Robert
Reviewer(s):Schachter, Hindy Lauer

EH-NET BOOK REVIEW Published by H-Business@eh.net (November, 1997)

Robert Kanigel. The One Best Way: Frederick Winslow Taylor and the Enigma of Efficiency. The Sloan Technology Series. New York: Viking Books, 1997. 676 pp. Bibliography and index. $34.95 (cloth), ISBN 0-670-86402-1.

Reviewed for H-Business by Hindy Lauer Schachter , New Jersey Institute of Technology

The Controversy Continues

This book is the most important trade biography of Taylor since Frank Copley’s 1923 book, Frederick W. Taylor: Father of Scientific Management. The volume is a welcome addition to the literature. It offers many vignettes from Taylor’s childhood, school life and professional career.

Widely known as the father of scientific management, Frederick Taylor (1856-1915) was a controversial figure in his own time. Old-line business managers and labor leaders castigated his approach to creating a work science. More innovative managers and Progressive political figures embraced his attempts to use experimentation and planning to create more efficient workplaces.

Were Taylor and Taylorism good for workers? The controversy continues in current business and public-administration literatures. Scholars debate whether Taylor was an authoritarian or one who elevated knowledge above hierarchy. They argue whether he fostered the use of money as sole motivator or whether he pioneered the use of noneconomic rewards such as feedback. A good discussion of these issues appears in the first essay of Daniel Nelson’s collection, A Mental Revolution: Scientific Management since Taylor, published by Ohio State University Press in 1992.

A biography could offer further evidence of where the man stood on these issues–although a person as active and prolific as Taylor left ample evidence to support multiple views. Kanigel, however, offers statements that are inappropriate for readers familiar with the existence of controversy in interpreting Taylor. On page two he speaks of Taylor and says that “In workplaces run in obedience to his design, authority flowed implacably down from the top.” But that is not a point that can be simply asserted! In actuality, scholars argue whether this was so or whether Taylor privileged knowledge over hierarchy.

Kanigel also talks down to his readers. On page 189, he relates how a young Taylor performed a piece with the line “A warrior bold, with spurs of gold, Sang merrily his lay…” Kanigel then explains that a lay is “just a poem or song.” Does he think his audience needs to be told that? He assumes his audience knows less about many things than they actually do.

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

The Ironies of Affirmative Action: Politics, Culture and Justice in America

Author(s):Skretny, John David
Reviewer(s):Moreno, Paul

EH-NET BOOK REVIEW Published by H-Business@eh.net (October, 1997)

John David Skrentny. The Ironies of Affirmative Action: Politics, Culture and Justice in America. Morality and Society Series. Chicago: University of Chicago Press, 1996. xiii + 312 pp. Notes, bibliography, and index. $48.00 (cloth), ISBN 0-226-76177-0; $16.95 (paper), ISBN 0-226-76178-9.

Reviewed for H-Business by Paul Moreno, St. Thomas Aquinas College

Inverted Ironies

In the debate over affirmative action, irony is usually the device favored by opponents. It does not require great perception to recognize the irony of Justice Blackmun’s statement, “in order to get beyond racism, we must first take account of race.” It takes no greater acuity to see the irony of Title VII of the Civil Rights Act of 1964, whose text clearly outlaws preferential treatment and racial quotas, being used by judges to impose preferential treatment and racial quotas. Similary, it is easy to chuckle at Hubert Humphrey’s promise to eat the statute if it were ever so interpreted. Opponents of affirmative action regard using discrimination to end discrimination as an example of “the disease as cure,” as Justice Scalia put it. But John David Skrentny in The Ironies of Affirmative Action attempts to use a deeper irony in defense of affirmative action. It is a lively, original, and provocative effort, but ultimately unconvincing.

The common starting point for most discussions of American civil rights policy is Gunnar Myrdal’s American Dilemma. Myrdal called attention to the irony that Americans professed equality of opportunity but made an exception for black Americans. Myrdal was confident that sooner or later the principle of “the American Creed” would prevail, and this is what the Civil Rights Act of 1964 is thought to have accomplished. In employment, Title VII of the Act established an individual right to equal treatment without regard to race or color. The fact that it has been used to erect a system of preferential treatment on the basis of racial group identity is the irony. A great puzzle for historians is to explain how we went from the color-blind aspiration of the civil rights movement to the color-consciousness of affirmative action in such a short time.

Skrentny proposes a deeper irony in that “the seeds of affirmative action were contained in the color-blind model” (p. 15). Affirmative action came about because it was the only means of assuring that equal racial group outcomes resulted from equality of opportunity–an expectation, he argues, which was present in fair employment thinking from the outset. “[T]his color-blind model,” he writes, “was seen as legitimate and in the interests of blacks because at this time [1964] it was unreflectively attached to a causal principle: it was believed to result in black equality, understood in terms of near equal participation in society” (p. 34). Likewise, “while civil rights legislation was being called for in the name of equality, morality, and Americanism, equality was consistently being understood as both an equality of treatment and an equality of economic results” (p. 151).

Much hinges on this argument. If it holds, the stab-in-the-back conservative case against affirmative action–that the American people’s consent to a color-blind standard was betrayed by arrogant federal bureaucrats and judges–falls apart. (Room remains for the alternative, Trojan Horse view, that proponents of Title VII deceitfully promised a color-blind statute knowing full well that a racial spoils system would result.) However, the argument that racial proportionalism was assumed to result from equal treatment is untenable. The evidence that Skrentny presents is defective, and he ignores the mountains of evidence on the other side. He refers to proponents of Title VII who made the argument in Congress that the statute would address the black-white unemployment gap (the black unemployment rate being about double the white rate). But the report to which he refers (on S. 1937) was not the bill which became Title VII, but a discarded proposal that included too many tendencies toward preferential treatment for the Senate to consider. Realistic commentators recognized that Title VII would not bring about perfect group equality, because it applied the same equal-treatment standard that several states had been using since 1945. Those who wanted the federal government to go beyond equal treatment and ensure proportionalism were uniformly disappointed in Title VII.

From this premise, Skrentny explains a further irony, that “affirmative action became a political possibility without the benefit of any organized lobby for the policy” (in fact, he notes that “affirmative action had almost no organized support or opposition”) (p. 4). Administrators and judges simply followed the implicit equal-treatment-produces-equal-outcomes logic of color-blindness. “Civil rights groups,” he writes, “were not pushing any ideology and were in no position for any sustained takeover activities, and in fact we do not need an ideological takeover theory to explain what happened” (p. 112). Again, it is clear that there were many militants in the civil rights community who favored a compensatory system, and were disappointed when Congress did not provide it. Their ideology was that of racial proportionalism–i.e., the assumption that a statistically significant deviation between the proportion of minority group members in an employer’s work force and the proportion of minority group members in the population constitutes proof of discrimination, because, absent discrimination, we would expect racial and ethnic groups naturally to distribute themselves in proportional representation. Alfred W. Blumrosen, perhaps the most important of them, had abandoned the old, equal treatment standard long before 1964, and was able to move Title VII to an equal-outcomes position regardless of congressional intent. Blumrosen called this feat “administrative creativity,” and when the Supreme Court ratified the feat in the Griggs case, he noted that the fulfillment made these ideologues feel like “Strangers in Paradise.”

Skrentny does make forays into the period between 1945 and 1964, the era of the equal treatment, color-blind, fair employment standard. As Skrentny notes, there were precursors to affirmative action in the states and the presidential antidiscrimination committees. Fair employment officers were aware of the equal-treatment and proportionalist approaches to the problem of employment discrimination; they made a choice to stick to the equal-treatment standard (though the presidential committees, acting without the legislative authority of the state commissioners, began to experiment with proportionalist schemes by the late 1950s, and some New Deal agencies had done so in the 1930s). “In the early 1950s,” Skrentny notes, “administrative pragmatism led to a simple conclusion: Choose race consciousness and effectiveness, or choose color-blindness and failure” (p. 117). If this was the dilemma that fair employment advocates faced, they were not aware of it. They remained convinced that fair employment could be enforced without resort to statistical proof of or remedies against discrimination. They did not understand “success” to mean racial proportionalism, and so the color-blind policies that they pursued, which clearly did not result in immediate equal outcomes, were not regarded as “failure.” Many of them believed (and opponents of preferential treatment continue to believe) that black Americans were making significant economic progress under an equal-treatment standard–perhaps as much progress as could be expected while remaining faithful to that standard. It is remarkable how much discussion of the tension between color-conscious and color-blind approaches took place before 1964, but the evidence shows that antidiscrimination officials always deliberately rejected color-consciousness, and were almost always supported by mainstream civil rights groups. When civil rights groups opposed them, they did so in couched terms.

Skrentny then addresses the deeper irony that white Americans accept all sorts of preferences, but not preferences for blacks. Skrentny details two significant exceptions Americans have made to the equal-treatment, meritocratic standard–veterans preferences and nepotism–arguing by analogy that acceptance of these and rejection of race-based affirmative action is inconsistent. These analogies, however, are inapt. Most opponents of affirmative action object to the principle of racial classification. Any other preference is a preference of a different kind. Veterans are made, not born–such status is acquired, not ascribed. Serving one’s country is easily regarded as an indication of merit. As for nepotism, Skrentny notes that “if a lack of discussion about an issue indicates its unproblematic acceptance, then we can conclude that Americans are quite comfortable with nepotism in the job market” (p. 50). Nepotism is universally a term of opprobrium or derision. Though it is not always illegal, as it is in government civil service, most Americans regard nepotism as unpraiseworthy. Insofar as familial relation usually (given low rates of interracial marriage) correlates very strongly with race, nepotism has been a tough antidiscrimination issue. If performance on a certain kind of test is a qualification for a job, and racial groups do not perform equally well on that test, one could argue that, notwithstanding the racial disparity, performance on a test is an indication of some kind of merit. Familial relationship may be valuable for some businesses, but it is a much harder argument to make that it reflects merit. As a result, nepotism has been attacked when it shows racially adverse impact.

It is notable that Skrentny does not address the issue of nepotism as it was taken up in the 1960s and 1970s in labor union discrimination cases. He pays no attention to the economics of discrimination overall, and is strangely silent about this matter. Labor unions had been among the most egregious and defiant offenders against fair employment policy, going back to the 1930s. After World War II the national leadership of the AFL and CIO was committed to fair employment, but the locals often did not abide by that sentiment. Skrentny begins his discussion of labor unions by way of explaining the oft-noted irony of Richard Nixon doing more than perhaps anyone else to promote racial hiring quotas. The explanation Skrentny makes is that Nixon was using race to belabor the AFL-CIO, to drive a wedge between the civil rights and organized labor constituencies in the Democratic party. But he ignores the extent to which Nixon was, however unintentionally, calling attention to the fact that labor unions have an interest in exclusionary practices. They inherently discriminate against non-members, and, if someone is going to be excluded, it is likely going to be someone from the out-group. Nixon did not invent this issue–many labor unions had been scrutinized by state and federal fair employment advocates for decades before the Philadelphia Plan.

Explaining why so unpopular a policy as affirmative action got started in the first place, Skrentny attributes most of the development to “crisis management” and “administrative pragmatism,” terms he defines at length with the theoretical help of Jurgen Habermas and William James. But “crisis management” can also be understood in lay terms as taking action with reference to the rapidly-changing circumstances of the moment–substituting expediency for principled action. Likewise, “administrative pragmatism” is ordinarily understood as administrators compromising principles, putting short-term political gain ahead of the long-term goals or mission of an institution. The idea that the people who made affirmative action were not acting in defiance of the principles of the civil rights movement, the text of the Civil Rights Act, and not following a new ideology would turn the usual ironic tale of the origins of affirmative action on its head. But, however much historians love irony, the history of affirmative action cannot sustain this much of it.

Myrdal’s American Dilemma, and the ironies that arose out of it, is not Skrentny’s. Rather, he falls on the side of those who argue that Myrdal missed the point: Racism is inherent in the “American Creed,” which has never been one of equality of opportunity and meritocracy, but has accepted all sorts of preferential treatment, but now refuses to accept preferential treatment for blacks: “Americans who resist affirmative action are simply articulating the American model of justice as it relates to race and employment preferences. Affirmative action is objected to because of its racial beneficiary” (p. 63). Likewise, Skrentny argues that “The resistance to or uncomfortable acceptance of racial preferences does not result from the simple application of the rule of color/difference blindness, but from the rejection of an African-American claim for moral worthiness, for the status of being deserving” (p. 236). According to Skrentny, opposition to affirmative action ultimately cannot be thought of as anything less than racism.

Skrentny’s thesi–that a person’s view of a particular policy question involving blacks depends entirely on that person’s feeling about blacks–is what Paul Sniderman and Thomas Piazza call the consensus view of the 1950-60s. A great deal has changed since then, they point out: “A quarter-century ago, what counted was who a policy would benefit, blacks or whites; now, what counts as much, or more, is what the policy aims to accomplish and how it proposed to go about accomplishing it” (The Scar of Race [Cambridge, 1993], p. 5.). But for Skrentny, race remains the key concept. His view is based on the philosophical (or anti-philosophical) premise that morality is socially constructed, and that American morality is constructed on the bedrock of racism. Skrentny tells us that “the disjunction between the celebrated American abstract individualism and the actual understandings and expectation was apparent from the beginning” (p. 58). The phrase “all men are created equal” was meant only in terms of competing groups of Britons and, “By couching their legitimating documents in universalist language, the Founding Fathers supplied a powerful discourse for two centuries of struggles with various marginalized groups” (p. 61). Far from a “charter of freedom,” the Declaration of Independence was a device by which the clever founding racists frustrate efforts toward real equality–efforts like affirmative action.

Though Skrentny does not offer this as an explanation for his question of why so unpopular a policy as affirmative action has continued for so long, his own conclusion that opposition to affirmative action is based on racism provides a plausible one. A further commonly cited reason is that affirmative action is sustained by a tissue of lies, obfuscations, double-talk, underhandedness, and resolute ignorance. Skrentny does a laudable job of taking on the relevant issues and trying to devise new angles of defense for affirmative action. It is most promising that he recognized the history of affirmative action as a source for revisionism. But in the end the evidence simply does not sustain the argument.

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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

Goldbugs and Greenbacks: The Antimonopoly Tradition and the Politics of Finance in America

Author(s):Ritter, Gretchen
Reviewer(s):Schweikart, Larry

EH.NET BOOK REVIEW

Published by EH.NET (October 1997)

Gretchen Ritter, Goldbugs and Greenbacks: The Antimonopoly Tradition and the Politics of Finance in America, 1865-1896. Cambridge: Cambridge University Press, 1997. xii + 303 pp. $54.95 (cloth), ISBN: 0-521-56167-1.

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

Following in the footsteps of other professors of government who have employed historical methodology to examine political questions, such as Richard Bensel, Gretchen Ritter (University of Texas, Austin) examines the “money question” in American politics from the perspective of antimonopolists. In particular, she looks at farm and Populist movements, finally narrowing down her examples to Illinois, North Carolina, and Massachusetts.

She has done a creditable job with the historical sources, especially the “classics,” like Hicks and Hammond, although tending to omit some of the fairly large and growing literature on market mechanisms as integrators of markets, especially the work by Calomiris, Gorton, and a few others. Ritter correctly observes that the debates over money and banking in late nineteenth-century America involved far broader economic issues, although she does not emphasize the conflict between contracts-based approaches and those of the “antimonopolists,” who supported contracts until they no longer worked to their own advantage. The difficulties that “both liberal and conservative scholars have in acknowledging the programmatic content” (p. 33) of party politics really is a result of the deification of Andrew Jackson as a free marketeer, both by “democrats” supportive of an activist state and Libertarians who oppose such a government. On the contrary, Jackson was a “big government” guy who opposed the BUS because it wasn’t HIS bank.

From such a starting point, it is easy—but wrong—to conclude as Ritter does that the “antimonopolist program was both coherent and potentially plausible” (p. 61). Fortunately, Ritter does not completely fall into the trap, noting that the “reasons for this failure [of the antimonopolist vision] are complex,” (ibid.) including historical timing, structural constraints, and other factors. She therefore attempts to construct an alternative to what happened, grounding it solidly in what did happen. Ultimately, the parties embraced governmental reforms of money and banking precisely because both parties had, to one degree or another, abandoned better market reforms such as branch banking. (The discussions of branching, particularly in the West and California, are some of the weakest parts of Ritter’s otherwise cogent analysis.)

Ritter also unfortunately subscribes to the oft-repeated allegation that the national banking system created hardships on the South and West. But a difference existed between an absence of money and a shortage of capital, and some economic historians, including Charles Calomiris, contend that the shortage of physical money did not equate with a shortage of working capital. Indeed, Ritter somewhat ignores the fact that state banks, S&Ls and B&Ls existed and provided a strong alternative to the national banking system, or that the rise in demand deposits more than offset changes in physical money. The concentration of assets that Ritter finds in the East was not at all mirrored in the West, as Lynne Doti and I have shown in our Banking in the American West (1991). Indeed, if anything, competition expanded in the West until the 1950s, even with branch banking. Ritter digresses with a discussion of how things “might have worked” with a brief look at Denmark—hardly a model of anything the much larger and more diverse U.S. might have to address—and concludes by noting that under different circumstances, the antimonopolists may have succeeded in instituting their system.

She seems to miss the irony that so-called anti-monopolists favored invoking a government monopoly more powerful than any corporation; and ignores a growing body of research strongly critical of the entire antitrust movement as unproductive and ineffective in yielding greater competition. Likewise, by ignoring the competitive money theories proposed by a substantial number of free-market writers (stemming from Hayek), she misses the REAL alternative reform program, which would have been based on Scotland, not Denmark. Finally, when employing counterfactuals, it is worthwhile to keep in mind that the antimonopolists of the nineteenth century had never really experienced the ravages of inflation (produced by governments) that destroyed their wages. Thus, deflation consumed their attention.

This is a provocative book, and a good contribution to the debate, but hardly the last word. Historians, however, should be flattered by the excellent approach and methodology.

Larry Schweikart Department of History University of Dayton

Larry Schweikart is author of Banking in the American South from the Age of Jackson to Reconstruction (1987) and (with Lynne Pierson Doti), Banking in the American West from the Gold Rush to Deregulation (1991).

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Subject(s):Government, Law and Regulation, Public Finance
Geographic Area(s):North America
Time Period(s):19th Century