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Escape from the Market: Negotiating Work in Lancashire

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The Controversy Continues

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

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

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

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

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

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

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

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

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

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

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

Inverted Ironies

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

EH.NET BOOK REVIEW

Published by EH.NET (October 1997)

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

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

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

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

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

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

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

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

Larry Schweikart Department of History University of Dayton

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

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

Globalizing Capital: A History of the International Monetary System

Author(s):Eichengreen, Barry J.
Reviewer(s):Selgin, George

Published by EH.NET (October 1997)

Barry J. Eichengreen, Globalizing Capital: A History of the International Monetary System. Princeton: Princeton University Press, 1996. viii + 223 pp. $24.95 (cloth), ISBN: 0-691-02880-X.

Reviewed for EH.NET by George Selgin, Department of Economics, University of Georgia.

In 1892 the English economist Robert Giffen published an article entitled “Fancy Monetary Standards.” Objecting to a recent proposal for a new monetary standard aimed at stabilizing the purchasing power of money, Giffen observed that “Governments, when they meddle with money, are so apt to make blunders…that a nation which has a good money should beware of its being tampered with.” If we mess with the gold standard, in other words, “we can never tell…what confusion and mischief we may be introducing.” (1)

A generation later, the gold standard was not only tampered with, but largely dismantled. The international monetary system has been witness to a great deal of “confusion and mischief” ever since, including such “fancy” payments arrangements as the IMF, the EPU, the BIS and the EMS, elaborate multinational structures designed by international committees, and regularly shorn-up by exchange controls, stand-by arrangements, SDR’s, gold-pools, and other ad-hoc devices aimed at forestalling major devaluations.

The ultimate failure of all such arrangements, as well as the abandonment of the international gold standard itself, has led Berkeley economist Barry Eichengreen to wonder whether any system of fixed, or at least relatively stable, exchange rates can survive in a world of democratic governments. His book, Globalizing Capital: A History of the International Monetary System, supplies a negative answer. Elaborating a thesis put forth by Karl Polanyi in 1944, Eichengreen argues that modern democratic governments are bound to yield to pressures to pursue goals, such as the avoidance of cyclical unemployment, that conflict with the maintenance of fixed or pegged exchange rates. The history of the international monetary system, according to Eichengreen, is largely a history of major governments’ gradual, grudging acknowledgment of a conflict between internal and external monetary stability, and their generally unsuccessful efforts to overcome the conflict by means of international cooperation. Eichengreen’s book tells the story in four meaty but easily digested chapters (plus an introduction and conclusion, both very brief), covering the gold standard, the interwar period, the Bretton Woods System, and post-Bretton Woods developments.

Eichengreen’s general thesis offers a useful starting point for understanding the often Byzantine political economy of international monetary relations, and he is at his best when offering pithy public-choice explanations for major international monetary developments. For example, Eichengreen accounts for Germany’s seemingly self-destructive support for monetary union by noting that “Germany desired not just an integrated European market, but also deeper political integration in the context of which [it] might gain a foreign policy role. Monetary union was the quid pro quo.” Not the last word, perhaps, but as good and succinct an explanation as I’ve read so far.

Some of Eichengreen’s explanations are perhaps a little too simple, as when he attributes the dollar’s decline after the mid-1980s to the fact that an overvalued currency “imposes high costs on concentrated interests,” whereas an undervalued currency “imposes only modest costs on diffuse interests.” (Just how does America’s involvement in the Louvre Accord of 1987–a failed attempt to restrain the fall of the dollar–square with this public-choice insight? Could it be that the dollar’s decline was simply unavoidable?)

I also wonder whether Eichengreen’s main point concerning the incompatibility of democracy with stable exchange rates really gets to the root cause of the move to floating exchange rates. In some loose sense, of course, democratic pressures fueled the abandonment of the international gold standard and of later schemes for pegging exchange rates. But we should not forget the context: previous changes in domestic monetary arrangements that subjected money to government control. Of particular importance was the establishment of central banks, which removed the enforcement of the gold- standard mechanism from the hands of private, competing bankers, increasing the risk of both a suspension of payments and subsequent yielding to inflationary pressures. Twentieth-century voters might never have developed a taste for accommodative monetary policies had non-democratic governments of previous centuries not set a precedent for such policies by reshaping monetary arrangements to serve their own fiscal ends. After all, the survival of the prewar regime was not so much a reflection of governments’ “single minded pursuit of exchange rate stability” (as Eichengreen claims) as it was a largely unintentional byproduct of private financial firms’ contractual obligations to their customers.

Eichengreen also tends, in my view, to overstate the extent to which democratic nations must rely upon accommodative central bank policies, unhindered by fixed exchange rates, to avoid financial and macroeconomic turmoil. For example, in discussing the success of recent currency board-like arrangements, he argues that they have worked best where banking systems have been heavily internationalized, treating the openness of a nation’s banking system as a given. But that openness is itself to some extent at least a matter of policy. The voters may well favor demand-management approaches to structural alternatives for avoiding financial instability; but this preference has more to do with special-interest politics standing in the way of desirable structural reforms than with sound economic theory.

Nor is it altogether obvious that the international gold standard promoted internal macroeconomic instability. Although the standard proved deflationary until the mid-1890s, this deflation does not seem to have stifled economic growth. (Even Marshall, whom Eichengreen cites as a critic of gold, suggested that the deflation might actually have been beneficial.) This isn’t to deny that the nineteenth century was marked by numerous financial crises in some countries; but those crises and later ones as well had more to do with faulty financial legislation than with any shortage of gold. Thus Scotland, with its relatively free banking system, was largely untouched by the banking crises that forced English banks to seek last-resort aid while also forcing the Bank of England to increase its fiduciary issue; and during the 1907 “credit squeeze” in the United States, private Canadian banks helped make up for a shortage of U.S. currency due in large part to legal restrictions on U.S. banks. (The Canadian banks ran into legal limits themselves, which were then loosened.)

The restored gold standard of the 20s and 30s was another matter entirely. Here central banks played an active role, mainly by trying to run the gold standard on the cheap, supplementing gold reserves with holdings of foreign exchange (instead of further devaluing their currencies or enduring more deflation so as to achieve a higher, sustainable relative price of gold). This cartel-like arrangement could only work so long as creditor central banks resisted the temptation to cash in their foreign exchange holdings. It was, consequently, far more vulnerable to speculative collapse than its prewar counterpart.

In short, while Eichengreen credits “collaboration among central banks and governments” with the maintenance of the gold standard, I am inclined to think that government and central bank involvement tended to undermine the gold standard’s success. The Canadian case is again relevant here, for Canada had little difficulty maintaining its gold standard until 1914 while avoiding financial crises without the help of a central bank, even while experiencing massive capital inflows. The point is of fundamental importance, because it suggests that, notwithstanding what Keynes argued in 1941, a stable exchange rate regime might be just as “automatic” and unreliant upon the chimera of “international cooperation” as one based upon free-floating rates.

On the whole, though, I highly recommend Eichengreen’s book. It is largely compelling, thought-provoking, highly informative, and a pleasure to read.

1. Robert Giffen, “Fancy Monetary Standards,” in Economic Inquiries and Studies (London: George Bell and Sons, 1904), pp. 168-9.

George Selgin Department of Economics University of Georgia

George Selgin is an Associate Professor of Economics at the University of Georgia. His recent publications include Less Than Zero: The Case for a Falling Price Level in a Growing Economy (London: Institute of Economic Affairs, 1997) and Bank Deregulation and Monetary Order (London: Routledge, 1996).

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

Taking the Risk out of Democracy: Corporate Propaganda Versus Freedom and Liberty

Author(s):Carey, Alex
Reviewer(s):Miller, Karen S.

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

Alex Carey. Taking the Risk Out of Democracy: Corporate Propaganda Versus Freedom and Liberty. History of Communication Series; introduction by Noam Chomsky. Urbana: University of Illinois Press, 1997. Introduction and notes. $15.95 (paper), ISBN 0-252-06616-2.

Reviewed for H-Business by Karen S. Miller , Henry W. Grady College of Journalism and Mass Communication, University of Georgia

Taking the Risk Out of Democracy opens with a discussion of Henry Wallace’s notion of “the century of the common man,” a twentieth century American society ruled not by individual power or class privilege but by common consent. It is the “failure to move significantly” toward Wallace’s vision that concerns Carey, a failure he attributes “in important measure to the power of propaganda.” Propaganda, he asserts, especially corporate propaganda, has been used to “control or deflect the purposes of the domestic electorate in a democratic country in the interests of privileged segments of that society” (p. 11).

In Carey’s view, U.S. corporate propaganda emerged because of the growth of democracy (specifically, increased popular franchise and the union movement) and the growth of corporate power, which clashed to create a climate where business leaders perceived a need to protect corporate power against democracy. Thus they developed both internal and external programs that identified free enterprise with cherished values, and government and unions with tyranny and oppression–a Manichean juxtaposition he refers to as the Sacred and the Satanic. Business leaders also coopted social science to aid their cause, and they exported their free enterprise campaigns to other countries, including Carey’s home, Australia. By taking corporate power out of the range of public discussion, Carey argues, propaganda has closed minds and society.

The book, a collection of essays ably edited after Carey’s death by Andrew Lohrey, contains three sections. The first includes five chapters on “Closing the American Mind.” Carey discusses in detail the Americanization movement and the post-World War I red scare, McCarthyism, and the credibility gap of the Vietnam and Watergate eras, arguing that “by 1947 the war for control over the American mind had all but been won,” for “[o]bjection to democratic propaganda on ethical grounds had almost completely disappeared by this time” (p. 81). He makes a strong case that corporations have been tremendously active propagandists, noting time and again the huge amounts of money devoted to free enterprise–anti-union, anti-government-campaigns. He also presents an engaging discussion of the relationship between the American philosophical tradition of pragmatism and the public relations community, focusing especially on the elastic meaning of “truth” within both spheres.

The second section consists of three chapters that deal with the export of American corporate public relations to Australia. Carey’s discussion on Enterprise Australia, an organization similar to the United States’s National Association of Manufacturers, includes an interesting distinction between grassroots propaganda, aimed at the masses, and what he calls “treetops” propaganda, aimed at the elite, particularly intellectuals who are recruited by corporations to work in think tanks in both Australia and the United States. “There should be no doubt,” Carey concludes, “that the objective of corporate grassroots and treetops propaganda is an expansion of neo-conservative doctrine” directed at dominating the electoral process (p. 105).

The final section, “Propaganda in the Social Sciences,” includes three essays in which Carey analyzes the fields of human relations and industrial psychology. A particularly compelling chapter dissects the Hawthorne Studies, a series of projects conducted from 1927 to 1935 under the direction of Harvard professor and native Australian Elton Mayo. The Hawthorne studies concluded that economic incentives were of relatively little importance to workers, but Carey finds serious flaws in the research. However, he argues, this series and other studies “which are claimed to have substantiated these conclusions… have commonly become ‘classics’ and gained fame and influence in industry and in academia” (p. 143). This indicates to Carey that industry and social scientists have the common objective of helping to “take the risk out of political democracy” (p. 144). He worries that Australians have not learned from American mistakes in these fields, having adopted American research and theory rather than developing it indigenously.

Carey’s emphasis on corporate propaganda leads him to ignore other forms of propaganda that have been used to combat corporate power. Unions have conducted public relations campaigns of their own, for example. And while Carey praises the growth of popular franchise, he ignores the campaigns conducted by the woman suffrage and civil rights movements which helped to extend the vote to women and African-Americans. This is relevant because, as Carey himself notes, “business hegemony over American society was re-established” (p. 95) at least three times, after each World War and during the 1970s, but he does not explain why it had to be reestablished. Moreover, Carey overlooks the fact that no campaign–corporate or otherwise–takes place in a vacuum. Not only does he fail to prove that anyone read all of these admittedly widely available corporate materials (how many of us read everything our own universities publish?), Carey cannot and does not try to show that exposure led to changes in opinions or behaviors of individual citizens. Nor does he identify the mechanism by which changes in individuals, if they occurred, created public opinion or the “closing of the American mind” at the national level. In assuming that materials simply by being published are persuasive, Carey disregards many moderating factors, such as family beliefs or community culture, that must also have contributed to individuals’ opinions. For example, in a discussion of the post-World War I red scare, he argues that Europe turned left after the war and the United States turned right, the only difference being “a propaganda assault on public opinion” in the United States (p. 23); this ignores problems associated with immigration and racism that plagued Americans long before any company conducted a free enterprise campaign. The postwar swing right could as easily be attributed to Wilson’s political misjudgment as to propaganda, but such ideas are left unexplored.

The book is more successful when Carey focuses on the motivation and thinking of the propagandists themselves, as in the chapters on pragmatism and public relations, treetops and grassroots propaganda, and human relations. Carey also raises important questions about the role of corporate public relations in American society. The corporate campaigns were highly visible and probably did influence the labor movement and the culture in ways that certainly merit further research, even if Carey overstates the case. One might wish Carey had lived long enough to develop his position more thoroughly, but perhaps raising the issue is contribution enough.

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

Store Wars: Shopkeepers and the Culture of Mass Marketing, 1890-1939

Author(s):Monod, David
Reviewer(s):Horowitz, David A.

EH.NET Book Review

Published by H-Business (September 1997)

Store Wars: Shopkeepers and the Culture of Mass Marketing, 1890-1939, by David Monod. University of Toronto Press, Toronto, 1996. Introduction. Tables. Notes. Index. 438 pp. $55 (clothback); $22.95 (paperback).

Reviewed for EH.Net by David A. Horowitz, Department of History, Portland State University (Oregon)

More than thirty years ago, Ellis W. Hawley’s New Deal and the Problem of Monopoly(1966) depicted contradictory efforts to strengthen retail competition and consolidate the market position of independent merchants. David Monod’s Store Wars: Shopkeepers and the Culture of Mass Marketing, 1890-1939, goes a long way toward explaining this anomaly. Monod’s provocative study also offers fresh conceptual tools for dealing with much-maligned subjects such as small business, traditional economic values, the consumer revolution, and the lower middle class.

Using individual business records, bankruptcy court proceedings, and trade journals, David Monod has compiled a rich account of small business’ adjustment to the emerging mass market in early 20th century Canada. Monod acknowledges that “main street” retailers unified behind a “folkloric rhetoric” that portrayed shopkeepers as small, independent, competitive, ethical, community-based, service-oriented, and content with fair and honest profits. Yet the mercantile “collective memory” excluded poorer, “backstreet” competitors, ethnic traders, and female merchants, who remained outside normal credit and commercial ties.

Monod demonstrates how the mass merchandising of the department and chain stores was first perceived as a threat to the perpetuation of traditional shopkeeper virtues. By providing public access to stock, for example, department stores threatened the moral authority and autonomy of the old-fashioned merchant. In turn, advertising eliminated the selling functions of individual dealers. The new economy also compelled suppliers to tighten credit, forcing merchants to abandon consumer credit services and concentrate on lower prices. As early 20th century manufacturers turned to mass-produced, prepackaged goods and brand-name advertising to meet the demand for cheaper products of uniform quality, independent retailers found themselves increasingly dependent on producers, suppliers, and consumers.

Groups like Canada’s Retail Merchants’ Association (RMA) responded to the chains and departmentals with predictable criticism. Yet survival in the modern economy depended upon adjustment to big business norms. Store Wars blazes conceptual territory by outlining the complex and contradictory response of retailers to the increased competition of the consumer revolution and mass merchandising. Adopting a professional ethic of “progressive retailing,” mid-sized and larger enterprises in the RMA pushed for licensing, trade, health, and safety regulations to discourage “illegitimate” competition by backstreet traders. Conflicts between advocates of inflationary price-fixing and deflationary mass production, however, divided the independent retail lobby.

The heart of Monod’s story concerns the 1920s and 1930s, when shopkeepers were more motivated by the desire for economic security and increased profits than by fears of modernization. As department and chain stores faced mounting rental, maintenance, and advertising costs, trade associations like the RMA sought competitive advantages for members by promoting cooperative purchasing and the elimination of credit services. Grocery trade groups and some wholesalers embraced modernization through resale price maintenance (rpm) agreements, which the author equates with the systematization of retail-manufacturing relations. Meanwhile, independent Canadian pharmacists organized against traditional jobbers and the smallest retailers, portrayed as the agents of “backwardness” in distribution.

During the economic depression of the 1930s, independent trade activists pictured the crusade against chain stores as “a struggle for the soul of humanity.” Yet Monod points out that modernizing shopkeepers focused their ire on perceived distribution abuses such as bulk buying discounts and advertising allowances, not mass merchandising itself. Although Depression populists such as Reconstruction Party leader H. H. Stevens promised a social order based on small property and decentralized authority, the impact of retail activism on Canadian politics was mainly symbolic. Dismissing Stevens’s rhetoric as “retail folklore purged of its content,” Monod suggests that shopkeepers embraced dissident politics as a means of addressing the emotional agony of the economic disaster. Meanwhile, independent merchants joined trade groups to gain access to politicians. Once legislators enacted minor reforms such as the prohibition of secret rebates, retailer organizations outlived their usefulness. Predictably, almost all the decade’s discriminatory legislation had been repealed or seriously amended by 1939.

Store Wars’s account of independent merchants and the consumer economy provides a model for integrating business history with the study of social structure and political movements. Monod reminds us that economic modernization was a plastic process in which independent retailers and consumers actively participated. The author’s clever use of semitics explains how shopkeepers “vitalized the folkloric structures” of traditional values while embracing modernization. Casting aside conventional notions of “small business” unity and the “reactionary” character of the “lower middle class,” Store Wars deserves scrutiny by social and business historians.

David A. Horowitz, Professor of History, Portland State University (Oregon)

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

The Growth of American Government: Governance from the Cleveland Era to the Present

Author(s):Campbell, Ballard C.
Reviewer(s):Menes, Rebecca

EH.NET BOOK REVIEW

Published by EH.NET (September 1997)

Ballard C. Campbell, The Growth of American Government: Governance from the Cleveland Era to the Present. Bloomington, IN: Indiana University Press, 1995. x + 289 pp. $35.00 (cloth), ISBN: 0-253-32871-3.

Reviewed for EH.NET by Rebecca Menes, Department of Political Science, UCLA.

Ballard Campbell has written a solid and yet fundamentally disappointing history of American government since 1887. We need a critical synthesis of our current understanding of the history of American government during the last hundred years. The size and role of the government, traditionally a source of controversy in the U.S., has been brought to the forefront of debate both by developments within our own polity and by the divergent fortunes of the different former socialist economies. The difficulties faced by former communist countries as they build the institutions of a free society have brought a new appreciation for the historical process that created a government able to oversee the capitalist economy and the distribution of both opportunity and wealth within the market framework.

In the U.S. all sides in the numerous partisan controversies over the role of government in economic, social, and private life turn to the “lessons” of the history of our government, including the phenomenal expansion of government in the twentieth century. The popular interest in government is reflected in recent interest among economists and political scientists on the history of government and the historical role of government in the U.S. However the field remains fragmented, cut both by divisions between ideologies and by divisions between disciplines. A volume that provided a critical and synthetic introduction to the current understanding of and debates in the history of American government in the twentieth century would be a book few economists, historians, or political scientists could afford to ignore. Ballard Campbell’s book, although a solid effort, is not the book we need.

The Growth of American Government leaves out or touches only lightly on many of the most interesting aspects of the growth of government, especially from the point of view of an economist. The discussion of the rise of Federal regulation is cursory, as is the discussion of the role of the courts. The discussion of macro-economic policy, fiscal or monetary, is non-existent. The discussion of local government is limited, although this is perhaps due more to the state of the literature on local government than it is to the desires of the author. There are also few international comparisons between growth of U.S. government and government in other industrialized nations. Nevertheless, the primary focus of the work- the growth of Federal spending, the concomitant changes in taxation, and the rise of the Federal government as defender of the civil rights of citizens against the depredations of State governments and fellow citizens- provides more than enough material for a book.

Unfortunately, Campbell saddles himself with two stylistic constraints that undermine the presentation of the subjects he does address. First, he adopts an “omniscient” voice. Second, he eschews any statement that might smack of partisanship. Copious footnotes and a thorough, annotated bibliography (the best part of the book) make it clear that the author is aware of debates and controversies in the historical literature, but the text is written as if all facts and conclusions were indisputable. To avoid taking sides, the author limits himself to statements that are basically indisputable. The result is a narrative description of the gradual increase in government responsibility, with no satisfactory discussion of either causes or consequences of the changes.

The rhetorical choices make it hard for the book to draw on more than the historical literature. A productive discussion of the political science and economic history literature on American government depends on the ability to present hypotheses and propose empirical tests. Neither are possible within the rhetorical constraints Campbell has imposed on himself. As a result, although the author promises to present “The course and causes of growth” (chapter 2,) his explications are limited to presenting a list of the less controversial potential causes for each change in American government. The usual suspects are collected, not evaluated.

But in the end it is the decision to avoid any suggestion of partiality that fatally undermines the book. There would be a place for a readable history of the what and when of the growth of government, even if it were necessary to go elsewhere for the causes. Campbell’s book does cover a lot of information. However, by avoiding discussion of the consequences of the growth of government, good or bad, Campbell has written a boring book. When an author, in his desire to avoid partiality, not only avoids taking sides but also refuses to acknowledge that differences of opinion are possible, the result is a text drained of any enthusiasm for its subject. To argue that the growth of government mattered means, at least temporarily, taking a side or openly acknowledging the depth of the controversies inherent in the topic. Ignoring the chasms in the field produces a text as flat and banal as a high school civics course. The reader is left, at the end of the volume, with the odd sense that government did not and does not matter.

Rebecca Menes Department of Political Science University of California- Los Angeles

Rebecca Menes is the Charles Grove Haines Visiting Assistant Professor at the UCLA Department of Political Science. Her area of studies are local government and machine politics in American cities during the Progressive Era.

(Ballard C. Campbell is a Professor of History at Northeastern University, author of Representative Democracy: Public Policy and Midwestern Legislatures in the Late Nineteenth Century and Associate Editor of American National Biography.)

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

John Stewart Kennedy: The Man Who Found the Money

Author(s):Engelbourg, Saul
Bushkoff, Leonard
Reviewer(s):Churella, Albert J.

EH.NET Book Review

Published by H-Business (August 1997)

John Stewart Kennedy: A Transitional Financier

Reviewed by Albert Churella, Department of History, The Ohio State University, for H-Business

Saul Engelbourg and Leonard Bushkoff. The Man Who Found the Money: John Stewart Kennedy and the Financing of the Western Railroads. East Lansing: Michigan State University Press, 1996. xiv+257pp. Maps, notes, bibliography, and index. ISBN 0-87013-414-0 (cloth).

During the second half of the nineteenth century, financial intermediaries became more specialized and more professionalized in response to the vastly increased capital requirements of the rapidly growing railroad network, and of other industries as well. The Man Who Found the Money describes the personal journey of one mid-level financier who played an important role in the American economy, although he was never so powerful or well known as Jay Gould, Jay Cooke, or J. P. Morgan. During his career, John Stewart Kennedy (1830-1909) moved from early efforts as a commission agent to later involvement in railroad finance, and finally to a retirement devoted to carefully tailored philanthropy. As his professional abilities matured in tandem with American financial markets, Kennedy became both more successful and more focused on specific types of financing. In the process, Kennedy–like contemporary J. P. Morgan–was always acutely aware that trust was far more important than adherence to any rigidly defined code of professional conduct. Still, despite Kennedy’s almost paranoiac efforts to maintain the trust of his business associates, he often engaged in financial transactions that, in the eyes of later financial professionals, seemed to indicate serious conflicts of interest. Kennedy, like most transitional financiers, would have been puzzled by this notion, believing that so long as the relatively informal financial arrangements of the time worked in the best interest of all concerned, then investors could earn profits, financiers could maintain public trust, and “conflict of interest” was a matter of no great consequence.

Kennedy spent much of his childhood in Glasgow, Scotland, and received there a solid education that enabled him to rise quickly from a shipping clerk to a salesman of rails and other iron products. In 1856, he became a junior partner in M. K. Jesup & Co. and subsequently spent most of his time in the United States. Kennedy served primarily as a commission merchant for various U.S. railroads, performing a wide variety of financial transactions that ranged from procuring rails and other supplies to paying interest on bonded debt to arranging for additional capital. These activities were hardly routine or specialized–instead, Kennedy relied on personal knowledge and on a carefully cultivated network of contacts in Europe and the United States, all of whom were bound together by mutual trust.

In 1868, Kennedy became a private commercial banker when he established J. S. Kennedy and Co. in New York City. (His growing financial independence may well have been influenced by the American Civil War, which had provided countless business and financial opportunities, but the authors do not mention this pivotal event in their book). Like most such banks, Kennedy’s was a small operation, with only a few partners and clerks to assist him. Kennedy still served as a commission merchant, often representing both railroad buyers and equipment sellers–hence concern over the issue of conflict of interest. Increasingly, however, Kennedy became more involved in the management of new or financially weak railroads. As a representative of the Scottish-American Investment Company, for example, Kennedy not only helped funnel Scottish capital into the U.S., he also helped rescue Scottish investors from some of their unwise investments. During the late 1870s, Kennedy helped to restore the City of Glasgow Bank to financial solvency; an activity that brought him scant financial reward, but that increased greatly the respect and trust accorded him by his financial contemporaries.

During the 1870s and 1880s, Kennedy helped to arrange financing for components of what later became the Great Northern Railway, bringing him into close association with “Empire Builder” James Jerome Hill. Kennedy’s new role as “James Hill’s emissary to the world of high finance” (p. 104) caused him to dissolve J. S. Kennedy and Co. in 1883, although he still continued to serve as a commission merchant for the procurement of two specialized items–steam locomotives and rails– for Hill. As a director and officer of the Minneapolis and Manitoba (the chief precursor to the Great Northern), Kennedy helped to shape that railroad’s policies. Kennedy and Hill had very different visions for the road’s future, however, since the former favored a conservative financial strategy that emphasized slow long-term growth as the territory served by the railroad became more developed, while the latter favored operational cost savings and frequent short-term financial offerings that would provide the railroad with just enough capital to make a rapid push to the Pacific.

Disagreements with Hill, while never terribly acrimonious, nonetheless helped to persuade Kennedy to retire. Other issues contributed to this decision. These included growing conflicts with other railroads in the Northwest (including the Chicago, Burlington & Quincy, the Chicago, Milwaukee & St. Paul, and the Northern Pacific) and stress-related illnesses stemming from involvement in several lawsuits over the course of his career and from continual efforts to defend his reputation against charges that conflicts of interest had undermined his trustworthiness. Even after his 1888 resignation from his position as vice president of the Minneapolis and Manitoba, Kennedy remained active in railroad finance. He moved gradually from professional activities to philanthropy during the 1890s, giving away a large portion of his $67 million fortune to museums, libraries, hospitals, and other charitable institutions.

The life and career of John Stewart Kennedy is certainly a fitting choice for a book. His financial dealings spanned two continents and encompassed a period that began with the first tentative railroad consolidations and ended with the Northern Securities Case of 1904. He helped to finance one of the most important railroads to be built in the United States, and served as a close adviser to railroad magnate J. J. Hill. His career reflected the broad nineteenth-century transition from the diversified activities of general commission merchants to the emergence of private commercial banks to the development of specialized financiers.

One of the most frustrating aspects of this work, however, is that Kennedy has not been effectively integrated into these larger developments. The brief segments at the beginning and end of each chapter do provide a broad overview (occasionally too broad, giving information that is almost self-evident), but these passages are often poorly integrated with the body of the text–possibly an artifact of the dual authorship of the book. The book is also somewhat disjointed, with an abundance of short chapters, one-sentence paragraphs, and awkward transitions; all indicative of a merited condensation of a much longer work–a condensation that was not, unfortunately, accompanied by a thorough rewriting. More specifically, sharper editing would have helped to reduce the frequency of cliches, jargon, and (often mixed) metaphors; for example: “In effect, events were in the saddle, and men could only ride.” (p. 142)

Without question, this is a thoroughly researched and highly detailed work. The authors (primarily Engelbourg) have marshaled an impressive array of information from a wide variety of manuscript collections and published secondary sources. While earlier works, such as Dolores Greenberg’s pioneering study of Morton, Bliss & Company, offer a more comprehensive and better-integrated overview of mid-level finance during the nineteenth century, The Man Who Found the Money is still of value to historians of nineteenth-century railroad finance for its encyclopedic coverage of an important individual financier of that era.

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Subject(s):History of Economic Thought; Methodology
Geographic Area(s):Europe
Time Period(s):19th Century