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

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


Published by and EH.Net (May 1998)

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

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

Crusading for Canada

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

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


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

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

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


Published by EH.NET (May 1998)

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

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


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


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

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

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


Published by (April 1998)

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

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

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

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

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

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

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

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

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


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

Competition and Growth: A Contemporary History of the Continental AG

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


Published by (April 1998)

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

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

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

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

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

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

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


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

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

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


Published by (April, 1998)

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

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

Seeking the Market Revolution

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

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

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

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

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

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


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

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

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


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

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


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.


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


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.


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.


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).


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