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Growth Triumphant: The Twenty-first Century in Historical Perspective

Author(s):Easterlin, Richard A.
Reviewer(s):Costa, Dora L.

EH.NET BOOK REVIEW

Published by EH.NET (August 1997)

Richard A. Easterlin, Growth Triumphant: The Twenty-first Century in Historical Perspective. Ann Arbor, MI: The University of Michigan Press, 1996. Pp. xiv + 200. $37.50 (cloth), ISBN: 0472106945.

Reviewed for EH.NET by Dora Costa, Department of Economics, MIT.

In this masterful synthesis, Richard Easterlin (Department of Economics, University of Southern California) draws on the disciplines of economic history, demography, sociology, political science, psychology, and the history of science to present an integrated explanation of the origins of modern economic growth and of the mortality revolution. His emphasis is on long-term factors and on similarities across nations. His book should be easily accessible to non-specialists and will give them a sense of why economic history can inform our understanding of the future.

Richard Easterlin convincingly argues that technological change underlies both modern economic growth and the morality revolution. Underlying this technological change is a set of procedures and attitudes that include reliance on experiments and observed facts. In the case of modern economic growth, this technological change should not necessarily be equated with industrialization, but rather is simply the introduction of new technology, including agricultural, in the economy. This technological change has produced certain commonalities in development, including the gradual acceleration in real per capita income growth, urbanization, and the growth of a white collar work force.

According to Easterlin, modern economic growth began before the modern rise in life expectancy because technological change in the physical sciences preceded technological change in health and medicine, simply because the conceptual state of the physical sciences was far more advanced. Easterlin argues that although modern economic growth may have increased resistance to disease (for example, by increasing food intake), it also increased exposure to disease. In contrast, in developing nations the mortality revolution has often preceded economic growth both because we know how to control disease (e.g. sewage and clean water) and because the necessary public health investments are inexpensive. Because urbanization created demand for public municipal services, he views the rise of government as a direct consequence of technological change.

Once mortality, particularly childhood mortality, fell, Easterlin argues that we moved from a society of high to low fertility. At first the increase in the number of surviving children caused fertility to fall after families realized that they could achieve their target number of children with fewer births, then the target number of children fell as children became more expensive thanks to advances in education, urbanization, and the introduction of new goods. The population explosion of developing countries should, therefore, slowly reverse.

Easterlin presents a very optimistic picture of the future, arguing that modern economic growth will spread to all countries of the world and neither declining population growth nor an aging population will lead to economic stagnation. We have the technology and many of the preconditions for economic growth, such as institutions for the accumulation of physical and human capital and the mobility of labor and capital, are already present in developing countries. In an example of the sort of long-run perspective that the book is best at, Easterlin shows that even the aging of the baby boomers will not produce a dependency burden that is high by historic standards.

Within this optimistic scenario, he sees two causes for concern. One is that the spread of economic growth shifts the balance of power to newer, more populous developing countries that do not share our commitment to democracy and human rights and this may produce political as well as military clashes. The other is that income cannot buy happiness and that despite previously unimaginable levels of affluence, material concerns are as pressing as ever. According to Easterlin technology will always produce new goods that we will want and, because people measure happiness in relative terms, they will forever be stuck on a hedonic treadmill.

It is this last point, “the triumph of material wants over humanity” that I found controversial and whenever there is controversy, the drawbacks of a synthesis become readily apparent. The reader wants to know more, wants further breakdowns of the data. Easterlin cites surveys that show that people in both the United States and abroad are no happier than they were twenty years ago despite increases in per capita income. He also cites surveys that show that personal income, family, and health are individuals’ primary concerns in all countries surveyed. But, what about recent polls showing that 48 percent of U.S. workers had either cut back on hours of work, declined a promotion, reduced their commitments, lowered their material expectations, or moved to a place with a quieter life during the preceding five years? What about the tremendous decline in market hours of work, whether measured in terms of weekly hours, increased vacation time or sick leave, or increasing number of years spent in retirement? As wages have risen so has the opportunity cost of these hours. The history of modern economic growth is not just one of increasing numbers of consumer goods, but also one of increasing hours of leisure. These hours of leisure have enabled more and more individuals to achieve some kind of self-realization. There will always be individuals who will not know what to do with their free time or spend it in ways we disapprove of, such as watching television. But, what of the individuals who work in order to be rock climbers or who teach classes in order to do research? I am not surprised that when surveyed individuals state that they would like more money (more is always better than less), but the question that we must ask is whether they are willing to trade off time that could be spent with family members or in enjoyable pursuits for more material goods and how this trade-off has changed over time.

Dora L. Costa Department of Economics Massachusetts Institute of Technology

Dora Costa is author of a forthcoming (1998) book, The Evolution of Retirement: An American Economic History, 1880-1990.

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

The End of Economics

Author(s):Perelman, Michael
Reviewer(s):O'Brien, Anthony P.

EH.NET BOOK REVIEW

Published by EH.NET (August 1997)

Michael Perelman, The End of Economics. London and New York: Routledge, 1996. $59.95 (cloth), ISBN: 0415137373.

Reviewed for EH.NET by Anthony O’Brien, Department of Economics, Lehigh University.

Michael Perelman’s new book argues that there is a flaw in the working of the market system; a flaw that has caused problems in the past and that is likely to cause disaster in the future. The result will be the inevitable end of economics and the beginning of a new system in which competition and the market system as we know it will no longer prevail. There are some good things in the book: Perelman tells his story clearly and directly, he has some interesting things to say about the last hundred years of macroeconomic history in the United States, and it is certainly easy to be sympathetic with his argument that neoclassical economics is sometimes disconnected from the workings of the real world. But, overall the book is rather a disappointment. It could easily have been much better. Perelman’s thesis will strike most economists as implausible, but it is not indefensible. Unfortunately, Perelman (Department of Economics, California State University, Chico) has allowed some avoidable roughness in his presentation to make his arguments appear even weaker than they are. This is Perelman’s fifth book in fifteen years. This book lacks a preface or acknowledgments, which makes me wonder how much feedback he received before it was published. My guess is this would have been a better book if he had taken more time with it.

Perelman’s basic idea is that economists have by and large failed to understand the enormous negative consequences for the workings of the market system of the increasing importance of fixed costs. He believes that since the Civil War fixed costs have been a large fraction of all costs in many U.S. industries and that the importance of fixed costs continues to increase (although neither point is well documented). In an industry with high fixed costs, what Perelman refers to as “unbridled competition” will result in disaster, because firms will find their prices will be driven to the level of marginal cost. The substantial losses resulting from these low prices will eventually lead to widespread bankruptcy. He believes that at least since the experiences of the railroads in the 1890s some non-mainstream economists and many businessmen have realized that competition has to be constrained in order for the market system to function. Such constraints are all that has stood between the economy and disaster. So, while essentially all mainstream economists act as if our economy is highly competitive -and build ever more elaborate models that assume the existence of competition- in fact, the economy is not very competitive and moves to make it more so run the risk of unleashing the consequences of increasing fixed costs.

There are several problems with Perelman’s discussion of this thesis. He presents it in a rather off-putting polemical style, he commits a number of avoidable blunders with respect to theory and history, and, perhaps most disappointingly, he never deals with — and gives the impression of perhaps not even being aware of — the conventional responses to his main argument.

Perelman’s style is a mixture of debatable obiter dicta and remarks that leave the unfortunate impression that he believes those who disagree with him are either stupid or sellouts. The tenor of Perelman’s style is indicated by a few excerpts:

[The government] creates a legal structure that gives business the upper hand relative to labor. When the economy falters, it increases spending, often discovering imaginary threats that require more military spending (p. 5).

Economics provides an ideological justification for atavistic methods of providing for our economic and social needs. It leads to economic practices that create great harm to both people and the environment (p. 8).

Graduates [of Ph.D. programs in economics] soon develop a professional persona with a vested interest in not rocking the boat, recognizing that, to launch a significant challenge to orthodox beliefs can lead to professional ostracism…. Finding an academic job does not free the young economist from the clutches of the corporate sector, since winning grants is often an important consideration in the promotion process…. [E]conomics is not a science, but an ideology designed to defend existing practices (pp. 23, 26, 29).

We live in an economy in which many corporations are large enough to make decisions that threaten our welfare in obvious ways- spreading toxic substances, selling dangerous products, or putting the health of their workers at risk. Those public agencies, which are supposed to protect us from corporate misconduct, seem thoroughly beholden to those whom they are supposed to regulate (p. 111).

This kind of thing is pretty tiresome. I don’t believe the people at the EPA and OSHA are “thoroughly beholden” to those they regulate, there may be academic economists defend the market system only so as to be able to make their next mortgage payment, but I’ve never met one, and so on. Writing in this way is counterproductive. By about page 10 anyone who doesn’t already believe the market system is bad is likely to stop reading, leaving Perelman to preach to the choir.

Perelman makes a number of statements that indicate there are significant gaps in his knowledge of the economic history and history of economic thought literatures. For instance, how many economic historians still believe the old chestnut that the Civil War was an important watershed in the development of U.S. manufacturing?

During the war, the military created levels of demand that were previously unknown, setting off an unprecedented economic boom. Because the war drained off so much labor and grain prices were so high, farmers invested heavily in labor saving devices, such as reapers. No doubt, other businesses followed a similar course. Certainly, the railroad boom was part and parcel of this process (p. 54).

How many economic historians believe the price deflation of the late nineteenth century was due to excessive competition, as Perelman apparently does (p. 59)? How many historians of economic thought would buy the notion that marginal productivity theory was developed in an attempt “to cool the radical ardor of farmers and workers by crafting an abstract theory based on mathematical theorems that supposedly demonstrate that labor could do no better than to trust its fate to the market” (p. 77)?

How many observers of the controversies in macroeconomics of the last forty years would call Milton Friedman a disciple of Leon Walras (p. 78)? A key reason why Friedman has not been taken entirely seriously either by his Keynesian critics of the 1960s and 1970s or by his latter-day putative followers like Robert Lucas and Thomas Sargent is that he has declined to reduce his story to a neo-Walrasian model- the sine qua non of modern theoretical work. These sorts of slips significantly undercut the authority of Perelman’s presentation.

The biggest problem with the book is Perelman’s failure to deal with or, in many cases, even to mention the arguments of the critics of the notion that high fixed costs lead to destructive competition. Perelman discusses approvingly and at length the ideas of a group of late nineteenth century economists who became convinced that large fixed costs and excess capacity in the railroad industry meant that unbridled competition would be ruinous both there and in other industries with similar cost structures. The writings of these economists brought forth a number of critiques — almost entirely unmentioned by Perelman — that, for mainstream economists at any rate, were quite telling. Perhaps the best known was Eliot Jones’s 1920 Quarterly Journal of Economics article, “Is Competition in Industry Ruinous?” Many latter articles- and, for that matter, most industrial organization textbooks- have discussed the supposed evils of cutthroat competition and, by and large, have come to the conclusion that they are greatly exaggerated. Now, these conventional arguments may be correct or incorrect, but surely Perelman needs to deal with them.

Finally, if the market system does not work well and can’t be made to work well, what would Perelman replace it with? He doesn’t really say:

I do not pretend to offer some simple crackpot reform that will magically solve all economic problems. Instead, I intend to expose economics as a pseudo-science that stands in the way of human betterment in the hopes that we can develop new practices and better institutions that will allow us to manage our lives in a more satisfactory manner (p. 7).

Unfortunately, the history of the twentieth century doesn’t inspire much confidence that replacing market practices and institutions with non-market ones will lead to human betterment.

Anthony O’Brien Department of Economics Lehigh University

Anthony O’Brien is author of a number of articles– all of which are entirely above criticism ;-). These include “The Importance of Adjusting Production to Sales in the Early Automobile Industry,” recently published in Explorations in Economic History and (with Judy McDonald and Colleen Callahan) “Trade Wars: The Canadian Reaction to the Smoot-Hawley Tariff” forthcoming in the Journal of Economic History.

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Subject(s):History of Economic Thought; Methodology
Geographic Area(s):General, International, or Comparative
Time Period(s):20th Century: WWII and post-WWII

Farm and Factory: Workers in the Midwest, 1880-1990

Author(s):Nelson, Daniel
Reviewer(s):Sundstrom, William A.

EH.NET BOOK REVIEW

Published by EH.NET (August 1997)

Daniel Nelson, Farm and Factory: Workers in the Midwest, 1880-1990. Bloomington, IN: Indiana University Press, 1995. 258 pp. Includes tables, bibliographical references, and index. $29.95 (cloth), ISBN: 0-253-32883-7.

Reviewed for EH.Net by William A. Sundstrom, Department of Economics, Santa Clara University.

Daniel Nelson’s latest book delivers both more and less than it promises. On the plus side, the book is actually more general than the title would suggest, providing a useful survey of much of the literature on twentieth-century American labor history. Although many of the book’s examples are drawn from midwestern industries and cities, much of the literature cited is not geographically specific. In this sense, the book is a worthy sequel to the author’s Managers and Workers (University of Wisconsin Press, 1975), updating, extending, and broadening that book’s coverage. The greatest virtue of Nelson’s work in the past has been his attention to both the management and labor sides of the employment relationship, as well as the political context of industrial relations. Farm and Factory shares these virtues, synthesizing a wide range of secondary sources from labor, social, and economic history. The book contains less original historical research than many of Nelson’s previous efforts, although it makes extensive use of his own work on such topics as company unions and rubber workers.

On the minus side, Nelson (Department of History, University of Akron) never makes a compelling case for the distinctiveness of the Midwest’s labor history, which would justify the book’s regional focus. Admittedly the region’s industrial composition was unlike that of other regions, with its unusual mix of agriculture and heavy industry. But Nelson claims that these quintessential midwestern sectors had relatively little influence on each others’ labor history. Thus it might be argued that the evolution of the institutions and politics of labor in the Midwest was largely shaped by industry rather than location. Contrast this implication of Nelson’s book with Gavin Wright’s Old South, New South, (Basic Books, 1986) another book about a regional labor market during the twentieth century. In it, Wright depicts a southern labor market that was truly unique in its institutions and development, in large part because of its isolation.

This is not to deny that Nelson has identified some aspects of the midwestern labor experience that had a unique regional character. The socialist and farm-labor political coalitions associated with such names as Robert LaFollette, for example, appear to have been a homegrown midwestern phenomenon; but at the same time, Nelson notes that such coalitions were short-lived and had little lasting influence. Nelson also notes that union density was higher than average in the Midwest, which became the crucible of the twentieth-century industrial union movement. Again, however, it is not clear whether this was the product of some peculiarly midwestern predisposition toward unionism or merely an accidental consequence of the region’s industrial structure. Such a question could be sorted out with careful comparative analysis, contrasting the industrial union movements in the Midwest and, say, the Middle Atlantic regions for similar industries. But Nelson’s book provides very little in the way of comparative research.

Farm and Factory is arranged in sections chronologically. The first period covered, 1880-1900, sets the stage. In 1880, about half of midwestern workers were engaged in farming, and farm employment increased in numbers over the next two decades. At the same time, the period witnessed a dramatic increase in the relative importance of industry. Because the demand for agricultural labor continued to grow, the industrial labor market depended largely on immigrant workers for its supply, rather than rural-urban migrants. The immigrant character of industrial employment was not, of course, unique to the Midwest at this time.

The book’s first chapter, on farming, includes the first installment of what was for me one of the book’s most fascinating recurring themes: the nature and evolution of women’s work. Nelson’s book demonstrates how much scholarship over the past two decades has been devoted to the area of women’s labor history. In the case of farming, Nelson describes the gender division of labor, how it differed across different farm products, and how by the second half of the century the increased complexity of the farming business (and perhaps the increased educational attainment of farm women) resulted in many farm wives assuming the role of business manager. Later in the book he examines the feminization of clerical work, and the postwar growth of women’s labor- force participation.

Nelson’s attention to clerical and service-sector labor is welcome, given the traditional emphasis of labor history on industrial work, but after a promising discussion of office work near the turn of the century in Chapter 3, the remainder of the book devotes only a handful of pages to the service sector and clerical or white-collar employment. No doubt this lacuna reflects shortcomings in the secondary literature that Nelson draws upon, as well as Nelson’s view that the character of office work was subject to less dramatic technological and institutional changes over the course of the century. Be that as it may, “farms and factories” are indeed the book’s central focus; the rest of the midwestern labor market is treated as a residual category that soaked up a growing share of the work force as employment in agriculture and industry shrank relatively and, eventually, absolutely.

Nelson’s history of labor and labor management in the mass production industries of the Midwest is fairly conventional. He highlights the role of the federal government in creating a political and legal environment that facilitated the rise of industrial unionism: the protective legislation of the NRA and NLRA and the subsequent wartime boost given to unionism by war production demand and government intervention. Nelson’s narrative of the sit-down strikes, the escalation of hostility between labor and capital during the thirties, and the rivalry between the AFL and CIO also suggests the importance of historical contingency in creating the system of labor relations that would persist over the decades that followed.

The book’s final chapters describe the brief postwar “golden age” of economic prosperity and relatively stable industrial relations between Big Business and Big Labor. Nelson provides a multifaceted picture of the demise of this golden age. Economic change was clearly one challenge: competition from lower-cost regions and foreign producers placed pressure on the region’s bread-and-butter manufacturing industries. To this conventional deindustrialization story Nelson adds another critical factor in the demise of union influence in the Midwest: rising racial tensions as the Great Migration brought large numbers of black workers into northern cities. The generally progressive stance on racial issues of the CIO unions alienated a large portion of the rank and file during the tumultuous sixties, with the consequence that “[r]ace, more than any other issue, undermined the unions’ carefully nurtured influence outside the workplace” (p. 187).

In his concluding chapter, Nelson traces the roots of the Midwest’s woes during the 1970s and 80s to various “institutional constraints” put into place beginning in the 1930s, which served to reduce the regional economy’s flexibility and innovativeness. “By the 1970s midwestern workers faced the worst of both worlds: some producers had become obsolete, while others continued to innovate in traditional ways (mechanizing operations, for example) that limited employment opportunities” (p. 203). This claim is provocative, and echoes some of the criticisms of U.S. institutional rigidities to be found in the work of authors like Sabel and Piore or Lazonick. But Nelson provides only the sketchiest defense of this view. Is it not possible that the Midwest was just a victim of bad luck, its economy more dependent on Rust Belt industries than other regional economies for largely unavoidable historical reasons? To shore up his claim of institutional failure, Nelson would have to show what other regions did differently to avoid the Midwest’s difficulties. Again, the absence of a comparative approach precludes his doing this.

In sum, Farm and Factory would serve as a solid textbook in twentieth century U.S. labor history, in spite of its regional focus. The coverage of union and nonunion developments, the evolution of personnel management, the role of politics and government, and nontraditional sectors and workers (including women and minorities) is, to my knowledge, unavailable anywhere else. This breadth of coverage, of course, comes at the cost of diminished depth. One particularly misses a compelling account of how the Midwest’s sad economic fate at the end of the century was the product of the region-specific historical evolution of its labor institutions and politics.

William A. Sundstrom Department of Economics Santa Clara University

William A. Sundstrom is Associate Professor of Economics at Santa Clara University. He is the author of numerous articles on the history of U.S. labor markets, including, most recently, “The Racial Unemployment Gap in Long-Run Perspective” (with Robert W. Fairlie), American Economic Review Papers and Proceedings (May 1997).

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

Ships for the Seven Seas: Philadelphia Shipbuilding in the Age of Industrial Capitalism

Author(s):Heinrich, Thomas R.
Reviewer(s):Brown, John K.

Thomas R. Heinrich. Ships for the Seven Seas: Philadelphia Shipbuilding in the Age of Industrial Capitalism. Baltimore: The Johns Hopkins University Press, 1997. x + 290 pp. Illustrations, tables, notes, essay on sources, and index. $39.95 (cloth), ISBN 0-8018-5387-7.

Reviewed by John K. Brown, University of Virginia, for H-Business <

Forty or more years ago, business, economic, and technological historians took a great interest in ships, maritime trade, and shipbuilding, topics of seminal works by Robert G. Albion, Howard I. Chapelle, Louis C. Hunter, John G. B. Hutchins, Samuel Eliot Morison, David B. Tyler, and others. After the fertile work of this World War Two generation of scholars, academic historians turned away from the sea just as earlier Americans did following the War of 1812. But the popular interest in maritime history remains strong on many levels, as evidenced by: the present craze over the Titanic, resurgent interest in maritime museums, Jack Aubrey’s continuing chain of victories over Napoleon’s naval might, and the improbable success of a twelve-volume maritime history encyclopedia. Little wonder. So much of maritime history consists of those transforming events that offer dramatic narratives: humans’ epic struggles with the sea, the rise of successive maritime powers, voyages from old worlds to the New, and technological transformations from wood to iron and steel ships and from sail to engine-driven vessels.

So popular interest in maritime history continues, despite the waning of academic studies. Analysis has dethroned narrative in the work of professional historians, perhaps one reason for their apparently declining interest in maritime topics. But the moment is ripe for a new cadre of Morisons who combine the two approaches. A good story always interests general audiences — indeed a powerful tale can even sway the most rarefied intellectual. Furthermore, many of the analytical approaches and insights of the past forty years of land-based scholarship should travel well. In going to sea they offer new departures for maritime history.

Thomas Heinrich demonstrates this potential for a new maritime history in his Ships for the Seven Seas. Written for a broad range of readers, the book provides a “history of iron and steel shipbuilding in metropolitan Philadelphia . . . from the Civil War to the 1920s” (pp. 2-3). Heinrich takes the stance of an industrial historian — combining threads from political, labor, business, economic, and technological history. This multi-faceted approach is one of the book’s major strengths. For instance cogent summaries of merchant and naval history in each shipbuilding epoch provide admirable technological and economic context about the markets in which the shipbuilders operated. The book is well-designed, nicely illustrated, and free of most proofing errors (although misspelled proper nouns crop up too often). Heinrich tells a good story, and the book deserves the broad readership that its publisher wisely targeted.

Academic historians will find many rewards here too. Throughout the book Heinrich leavens his narrative with analysis, applying to his study of maritime industry the insights offered by labor process studies, Chandlerian business history, and accounts of batch production by Scranton and Zeitlin. On balance, however, Heinrich favors narrative over analysis — a wise choice given the limitations and problems of the original sources available to him. In sum, this is a finely-crafted book on a fascinating period when technical transformations, political compromises, broad economic changes, and world power aspirations reconfigured American shipbuilding. With its skillful blending of narrative and analysis, it is far more comprehensive and insightful than David Tyler’s The American Clyde, written forty years ago, which covered the same period and firms.

Philadelphia-area builders created the American metal shipbuilding industry, they dominated the trade until 1900 or so, and some of the city’s firms remained major players until after World War Two. So Heinrich has ample justification for his geographic focus. The book’s organization places a thematic approach within a chronological narrative. Chapter One provides an overview of wooden shipbuilding. The wooden builders enjoyed notable success for a century-and-a-half, but sank after the 1850s under combined weight of rising British iron shipping (sail and steam), trade disruptions during the Civil War (when Northern shippers registered their vessels under neutral foreign flags), and the broad shifts in investment capital from shipping to railroads, commerce to manufacturing.

In Chapter Two, Heinrich lays out the Civil-War-era foundations for Philadelphia shipbuilders in shifting from sail to steam and wood to iron. In a well-cast and original analysis, he argues that Philadelphia firms’ wartime success in building steam-driven ironclads established embryonic but valuable skills that later served in building iron steamers for the civilian merchant marine. Philadelphia’s strengths in mechanical engineering and metalworking and its proximity to the iron regions provided further advantages to the city’s early iron steamer industry.

Chapter Three focuses on the business history of the leading Philadelphia shipbuilders following the war. Here Heinrich contrasts proprietary capitalism (dominating at the shipyards) with the new corporate managerial capitalism introduced by the railroads. As he observes, the two forms of business organization became mutually dependent when the shipping subsidiaries of major railways became major customers for the shipyards’ iron steamers. Perhaps more insightful are this chapter’s discussions of the integration of marine engineering (design and construction of power plants for vessels) with shipbuilding — a unique attribute of the Philadelphia firms — as well as their disintegrative strategy of relying on extensive sub-contracting.

In his fourth chapter, Heinrich sketches the growing scale of iron shipbuilding firms circa 1875-1885. The American industry never approached the size, specialized capacities, efficiency, or sophistication of its counterpart in Britain. As a result, “American steamship operators paid 25-35 percent more for iron tonnage than their British rivals” circa 1880 (p. 78). But such U.S. builders as Roach, Cramp, and Harlan and Hollingsworth nonetheless achieved growth in this period. Naval construction did not yet amount to much, but Congress gave US shipbuilders a protected market, requiring American-built ships in the coastwise trade (i.e.: all marine freight and passenger traffic within U.S. borders). Although wooden sailing vessels carried most domestic marine commerce, Philadelphia-built iron steamers had few viable competitors in niche markets: oil tankers on routes from Texas to the East coast, overnight passenger steamers on Long Island Sound and Chesapeake Bay, coastwise towboats in the coal trade, and ocean freighters laden with passengers and Hawaiian sugar. On international routes, some American-owned shipping lines chose to buy U.S. vessels, notwithstanding their higher price. Having sketched the “anatomy of a shipbuilding boom” circa 1880 in this chapter, Heinrich then gives an able description of the labor processes involved in iron shipbuilding and marine engineering. From this he briefly considers labor-management relations and class formation in the industry.

By 1885 or so, American iron shipbuilders had established themselves, yet cheap wooden sailing vessels from Maine limited their ability to penetrate the domestic carrying trade, while cheap iron steamers from British yards took most international commerce. So builders like Cramp and Roach turned to the United States Navy after 1885 — the subject of Chapter Five. Here Heinrich ably describes naval procurement policies and the shipbuilders’ lobbying efforts to create a military-industrial complex that would finance plant expansions and the acquisition of subsidiaries while sustaining their yards when the civilian market evaporated, as it often did. Heinrich takes a critical view of naval shipbuilding and its effect on the yards, arguing that builders “preferred private contracts because they involved fewer organizational problems and were usually more profitable.” The yards had little choice — naval work was better than none — but the “potpourri of high-technology naval construction and low-quality commercial shipbuilding was not terribly efficient” for yard managers, workers, or systems (p. 120).

The history of commercial shipping, naval procurement, and steel shipbuilding from 1898 to 1914 occupies Chapter Six. Here themes of earlier chapters are largely reprised: a growing scale of operations despite boom and bust markets, enhanced skill requirements among the workers needed to operate technically-sophisticated production machinery, further innovations in the yards’ products, the challenges of complex and ever-evolving naval work, and the inefficiencies of generalist production in American yards. New issues in the industry circa 1900 included: the rise of competitors (in Philadelphia and elsewhere) seeking to capitalize on America’s new aspirations as a naval power, labor activism and management’s vehement counter thrusts, and a new corporate model of shipyard management. Narrative dominates in the chapter, leaving this reader wishing for a bit more analysis. For instance, Heinrich details a number of problems with the new managerial capitalism adopted at the Cramp shipyard after 1900. Yet he never really offers a verdict on the suitability of corporate management practices in this industry with its vast sales fluctuations, high skill requirements, and circumscribed influence over markets.

World War I occupies Chapter Seven. Beyond the predictable expansions in wartime, here the story centers on Philadelphia’s massive Hog Island Yard. This wartime emergency plant represented a government-funded experiment in standardized ship construction. With its fifty building ways, Hog Island was the world’s largest shipyard. But intractable problems discredited this attempt to produce ships in volume: inadequate transportation from inland fabricating shops to the yard, coordination difficulties once materials did arrive, and an overburdened market for shipbuilding labor in the Philadelphia area. Heinrich has sifted through a multitude of government reports, and he tells this story well.

The book closes out with an eighth chapter on the 1920s depression. The yards came on hard times when the predictable postwar glut in merchant shipping was matched by the novel Washington Naval Disarmament Treaty of 1922 that closed off naval work for a number of years. The shipbuilding depression reached around the world; in Philadelphia the yards responded by further diversifying into non-marine work (the Cramp yard pioneered this strategy circa 1900). Heinrich uses Cramp as a anchor throughout the book, so when that old-line firm dies in 1927, he conducts a detailed autopsy. His verdict: Cramp lost its viability after Averell Harriman merged the builder into his ocean shipping empire. When the Harriman shipping lines foundered, they dragged down Cramp as well. Heinrich also points to excessive competition in the industry and “the lack of an intelligent [federal] merchant marine policy” (p. 212).

A short Epilogue ends the book, wherein Heinrich summarizes his three main analytical points: 1. Naval demand laid foundations for metal steamship construction; thereafter it provided a useful but problematic market, 2. The American merchant marine and its supporting shipbuilders suffered because the federal government failed to pass maritime policies that offered “incentives for investment” for private American firms engaged in international shipping (p. 221), 3. In the absence of those policies, U.S. metal shipbuilders pursued a generalist policy, building whatever tugs, sand barges, passenger liners, or battleships that their markets demanded. This century’s slow withering of America’s merchant marine and the Philadelphia yards closes out the story.

In ways that may not be immediately apparent in this sketch of its contents, Heinrich has pulled off something of a gamble in this book. Despite the fact that essentially no business papers survive from Philadelphia’s metal shipyards, the author has produced a comprehensive history. He builds his portrait from exhaustive searches of periodical records, newspapers, trade and professional society journals, union periodicals, government documents, insurance surveys, and all relevant secondary sources. It is a monumental effort. Still the lack of internal business papers leaves the book with only scattered insights into profits or losses, work force fluctuations and pay rates, capital/labor ratios, the bidding process, cost accounting controls, the quality and severity of price competition, etc.

If the archives had been more forthcoming, it is possible to project a different explanation of American shipbuilders’ inefficiencies. Heinrich explains their shortcomings by pointing to the lack of federal support for U.S. firms in international shipping. This in turn limited the overall market and forced shipyards into an inefficient generalist approach in production. Charles Cramp and other builders made a similar argument in calling for subsidies during the Gilded Age.

While this view has merit, one could advance an argument that I think is equally plausible: namely that the yards’ inefficiencies arose from those federal policies that protected shipbuilders by targeting their chief customers, the shipping lines engaged in domestic commerce. The statutory requirement for American-built ships in coastwise and inland navigation chiefly benefited New England’s wooden yards since their cheap wooden sailing vessels took most of the business. But such slow schooners were simply unsuited to many trades: passenger service, high-value freight traffic, transport of bulk oil, the Hawaiian sugar trade, etc. Through 1900 or so, ship owners seeking metal steamers for these trades had little choice but to deal with the Philadelphia yards. Without protection, these American pioneers in metal shipbuilding would never have begun; with it they never approached the performance of the world’s leading yards in Britain.

Testing this alternate argument would require the sort of internal business papers that simply do not survive. Equally, this perspective and Heinrich’s argument may both be valid. I only raise the point to underscore how the lack of hard data and extensive sources renders any authoritative analysis problematic. Notwithstanding these difficulties, Heinrich has written a detailed, compelling account of iron and steel shipbuilding — an industry vital to America’s economic growth and its rise to world-power status.

Jack Brown

Division of Technology, Culture and Communication School of Engineering and Applied Science Thornton A-216 University of Virginia Charlottesville, VA 22903 jkb6d@virginia.edu (804) 924-6177

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

Everyday Things in Premodern Japan: The Hidden Legacy of Material Culture

Author(s):Hanley, Susan B.
Reviewer(s):Honda, Gail

EH.NET BOOK REVIEW

Published by EH.NET (July 1997)

Susan B. Hanley. Everyday Things in Premodern Japan: The Hidden Legacy of Material Culture. Berkeley: University of California Press, 1997. xiv + 213 pp. $35.00 (cloth), ISBN: 0-520-20470-0.

Reviewed for EH.Net by Gail Honda, Department of Sociology, University of Chicago.

What do the objects which surround us–the food we eat, the clothes we wear, the homes we live in–tell us about how well we are living? How are they indicative of our health and physical well-being? Can we gauge our progress as a society by observing and analyzing the material world around us?

Susan B. Hanley, in her latest book on Tokugawa (1600-1868) Japan, culls a dazzling array of material evidence to argue that the level of physical well-being of the Japanese rose throughout the Tokugawa period, and that life in Tokugawa Japan was healthful relative to that in industrialized Europe. This high level of physical well-being, which existed on the eve of Japan’s industrial revolution (1868-1945), gave rise to a robust and literate labor force which enabled the Japanese to build a powerful industrial nation. Moreover, she argues, what we have come to know as everyday “traditional” Japanese material life, which was cultivated during the 250 years of the Tokugawa period, persisted through the middle of the twentieth century, and provided a foundation of stability which eased the often turbulent transition in government, the economy, and social structure.

With the discerning eye of a master novelist, and an equally engaging literary style, Hanley, Professor of Japanese Studies and History at the University of Washington, takes the reader on a tour of everyday life in Tokugawa Japan, all the while analyzing the objects of consideration and carefully piecing them together in her cogently honed argument. One can almost smell the rough-hewn walls and bare earthen floors of the early Tokugawa one-room commoner homes as she describes their cool, dark interiors and central gathering area for cooking and heating. By the end of the Tokugawa period, she writes, the typical commoner home had several rooms, raised foundations, wooden or tatami (rush mat) floors, and sliding paper doors which enabled the residents to open the interior to the sunshine and warm breezes of the outdoors. All of these changes, Hanley argues, led to a more healthful living environment which raised the level of physical well-being of the Japanese.

She defines the level of physical well-being as “the standard of living [defined as per capita income] plus ‘quality factors’ that can be positive or negative. . .Examples of quality factors are the quality and level of nutrition, incidence of disease, level of general health, number of children per family, the percentage of dependent persons, the size and quality of housing, the kind of heat available, and the many other aspects of life that affect our physical well being” (pp. 10-11). Hanley then analyzes the quality factors by examining what she calls material culture, or “physical objects that people use or consume in their everyday lives, most of which are either made or else natural objects put to specific use by people. . . [She] concentrate[s] on what are considered the basics: food, clothing, and shelter, and concomitant aspects such as hygiene and sanitation. The artifacts of daily life reveal use of resources, the level of technology, how people cooked, what kind of houses they lived in, and levels of comfort, sanitation, and health–in short, how people lived” (p. 12).

Specifically, Hanley finds that Tokugawa Japan’s material culture gave rise to many positive quality factors which elevated the the Japanese people’s physical well-being to a level higher than the standard of living alone would indicate. To cite a few examples of quality factors from the many intriguing ones she presents: the daily 1900-calorie Tokugawa diet of grains, vegetables, and soybean products was probably not only adequate for the body stature of people at the time (army recruits had an average height of 5’4″ in the late-nineteenth century), but was comparable to the late-nineteenth century English commoner diet of bread, porridge, biscuits, vegetables, milk, cheese, and lard. With regard to personal hygiene, Hanley points out that regular bathing was not an important part of Western culture until the nineteenth century, whereas in Japan accounts of public baths and references to bathing regulations indicate that bathing was a widespread custom by the eighteenth century. The Tokugawa water supply and sewage system were also quite healthful relative to systems in Europe because of the custom of collecting urine and night soil for fertilizer. Rather than allow human waste to collect in cesspools where excrement could seep into the subsoil, or to be flushed into rivers which fed into the drinking water supply, as was commonly done in the West, the Japanese assiduously collected, then bought and sold human waste and thereby avoided the problem of water supply contamination. As a result of many of these positive quality factors, life expectancy in Tokugawa Japan, Hanley demonstrates, was similar to that of nineteenth century Europe.

Thus, Hanley’s book is a valuable contribution to the literature in economic history, Japanese history, and historical demography in four primary ways: first, it offers plausible reasons and solid evidence for Japan’s success in industrializing beginning in the late nineteenth century; second, it stimulates cross-cultural comparisons by presenting evidence which can be reasonably compared across countries; third, it provides insight into and information on the everyday life of Japanese commoners during the Tokugawa period; and fourth, it discusses life expectancy, fertility control, and family structure, all important gauges of the level of physical well-being in Tokugawa Japan. Thoroughly researched and highly readable, Everyday Things in Premodern Japan will not only be widely used as a reference book, but will surely be savored by many whose interest will be held from cover to cover.

Gail Honda Department of Sociology University of Chicago

Gail Honda is author of “Differential Structure, Differential Health: Industrialization in Japan 1868-1940,” in the forthcoming book, Health and Welfare during Industrialization (University of Chicago Press), edited by Richard Steckel and Roderick Floud. In August 1997, she will move to the Department of History at the University of Hawaii where she will teach Japanese history and continue her research on economic development and health.

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

The Artificial River: The Erie Canal and the Paradox of Progress, 1817-1862

Author(s):Sheriff, Carol
Reviewer(s):Laurent, Jerome K.

EH.NET BOOK REVIEW

Published by EH.NET (July 1997)

Carol Sheriff, The Artificial River: The Erie Canal and the Paradox of Progress, 1817-1862. New York: Hill and Wang, 1996. xvii + 251 pp. $19.95 (cloth), ISBN 0 8090 2753 4.

Reviewed for EH.NET by Jerome K. Laurent, Department of Economics, University of Wisconsin-Whitewater.

This slender volume of 177 pages of text covers the story of the Erie Canal during the antebellum period in a different manner than have prior works on the subject. Carol Sheriff, an historian at the College of William and Mary, differs in her treatment from standard accounts in that she is concerned primarily with the human dimensions of the development and evolution of this medium of transportation in upstate New York. In the words of Sheriff, her study “uses the Erie Canal region as a microcosm in which to explore the relationships between some of the antebellum era’s important transformations: widespread geographic mobility; rapid environmental change; government intervention in economic development; market expansion; the reorganization of work; and moral reform” (p.5). These changes are discussed and evaluated in the context of what the middle classes of the 1817-1862 period would consider to be signs of “progress” or “improvement.” The transformation of this region as a result of the Erie Canal is organized around six topics, each of which is covered by a chapter. They include the “visions of progress,” the “triumph of art over nature,” “reducing distance and time,” the “politics of land and water,” the “politics of business,” and the “perils of progress.” What does the author include under the forgoing headings?

The first details the visions of leading New Yorkers (most prominently Governor DeWitt Clinton) to get the project underway and thereby “represented a growing commitment in the North to the culture of improvement” (p.25). These individuals were what Sheriff calls “adherents to the practical republicanism” who believed that “the nation’s common good depended on prosperity, individual opportunity and an equal emphasis on rural and urban growth” (p.24). A project of the size of the Erie Canal would further their visions of progress, according to Sheriff.

The second chapter details problems in the construction process of the Canal, a project of immense size and complexity for that era. According to the author the Canal was “a tribute to republicanism” and a great “American achievement,” especially for the middle classes.

In chapter 3, the subject of “reducing distance and time” is discussed in terms of the various types of users of Canal services, whether they be tourists, immigrants, business persons or settlers of the region. The Canal had set forth a commercial revolution, encouraged individuals to travel to new areas of the nation and provided a link to those left behind. The hardships of the Canal traveler are detailed. These hardships often made travel an unpleasant experience. Eventually, these problems encouraged travelers and commerce to seek an alternative — the railroad.

Chapter 4, on the “Politics of Land and Water,” is basically a discussion of the state of property rights as found in American society during the period. Professor Sheriff’s example of the Erie Canal region offers insight into how ordinary citizens felt about property, particularly as expressed in their contacts with the Canal Board, the state agency set up to handle various matters relating to the Canal. The Board faced issues relating to compensation for land taken for the Canal route (and changes in the route over time), the use of water resources, and the placement of commercial structures near the Canal. At times the average citizen considered only the negative side of having a canal and neglected the benefits which accrued in having an expanded market. According to Sheriff, many citizens felt that the State had come to serve the special interests of the commercial elite.

The subsequent and related chapter, “The Politics of Business,” also deals with the commercial side of life as relating to the Canal. Many citizens made their living because of the presence of the Canal which brought about issues and problems to be dealt with by the Canal Board. For examples, the State was asked continually to expand the canal system to include connecting canals to the main route; towns had developed along the original route, but some lost out when improvements to the Canal necessitated a shifting of the route to a new location; the level of tolls charged on products and passengers had to be settled upon; and the need to raise enough revenues to pay interest and principal on the Canal debt were topics of concern. Not surprisingly, the business classes claimed to be contributing to the general welfare, whether it was the case or not. In the words of the author, “progress, in their view, did not mean an egalitarian society but rather one in which anyone would have the opportunity to improve in all senses” (p.137).

The final chapter tells us whether the preceding statement was true. In “Perils of Progress,” there were “perils” in having the Canal and this disturbed the middle classes of the region. Many of the Canal workers were children who were taken advantage of every possible way. Wages were low and working and living conditions were poor. Some workers were considered to be a threat to civilized society. As correctly pointed out by Professor Sheriff, the expansion of internal improvements was one of the great changes occurring in the development of a more market-based economy. These changes brought about for many in the middle classes a revivalist fervor in the religious sense. They wished “to convert their sinning brothers and sisters” from undesirable behavior. These reformers sought to bring these workers into the mainstream religious community and some workers had “hopes of elevating their status in a fluid class system” (p.158). Some reformers laid blame for the bad conditions on the business class itself. Thus, some reform groups “reminded the commercial classes that prosperity and progress had their costs,” which needed to be paid (p.170).

By the end of the period (1862, which was the date of the completion of the Erie Canal enlargement project), what Americans had considered to be progress had changed, the Civil War had begun, and the Erie Canal itself had become, in the words of the author, “second nature”. I would agree with this assessment.

Overall, the book is well researched and well written with a light-hearted touch. There is little that I can quibble about. I especially enjoyed reading it as an economist. Nowadays economists leave out many of the topics considered here in researching transportation history. As Peter Temin indicated recently in his presidential address to the Economic History Association, “historians are occupied today with various questions of culture. They are well suited to give us a thick description that can inform economic history. The trick for historians is to tie their investigations of culture into some economic activity” (“Is it Kosher to Talk about Culture?” Journal of Economic History, Vol. 57, No. 2 (June 1997), p. 282). That has been accomplished here. The result is that this slender volume has provided us with a “thick” description and analysis of the culture in a regional setting which has contributed much to transportation history.

Of special note is the exhaustive, but valuable, section on Notes and Sources located at the end of the text material. Professor Sheriff has located and utilized the major available sources for this research effort. In particular, the newly available Canal Board Papers provide an invaluable source of insights into what New Yorkers of the antebellum years thought about their Canal. In addition, other manuscript collections at seventeen different locations in New York and New England were examined.

In short, I would highly recommend The Artificial River to students and scholars alike. Students in American economic history courses should gain by reading this volume; transportation scholars should gain by examining the cultural history of the period as shown in this regional study. Good writing and good research are always appreciated by this economist!

Jerome K. Laurent Department of Economics University of Wisconsin-Whitewater

Jerome Laurent is the author of several articles and papers on Great Lakes transportation history including: “Trade, Transport and Technology: The American Great Lakes, 1866-1910,” Journal of Transport History, Third Series, Vol. 4, No. 1 (March 1983), pp. 1 – 24, and “Trade Associations and Competition in Great Lakes Shipping: The Pre-World War I Years,” International Journal of Maritime History, Vol. 4, No. 2 (December 1992), pp. 117-153.

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Subject(s):Transport and Distribution, Energy, and Other Services
Geographic Area(s):North America
Time Period(s):19th Century

Small Firms in the Japanese Economy

Author(s):Whittaker, D. H.
Reviewer(s):Blackford, Mansel G.

EH.NET BOOK REVIEW

Published by H-BUSINESS (July 1997)

D. H. Whittaker, Small firms in the Japanese Economy. Cambridge and New York: Cambridge University Press, 1997. xii + 238 pp. ISBN: 0-521-58152-4

Reviewed for EH.Net by Mansel G. Blackford, Department of History, The Ohio State University. (blackford.1@osu.edu)

This densely packed volume is a very valuable contribution to our growing, but still limited, knowledge of small manufacturing firms in Japan. Whittaker examines the historical evolution and recent operations of small manufacturers in the Ota Ward of Tokyo, one of Japan’s leading industrial districts. Throughout his account Whittaker compares the companies of Ota Ward to the development of small manufacturers elsewhere in Japan; and in his penultimate chapter Whittaker, a Lecturer in Japanese Studies and Senior Tutor at the University of Cambridge, offers a revealing comparison of what has taken place in the Ota Ward to the development of small manufacturers in Birmingham, the United Kingdom.

In his first three chapters Whittaker presents a broad overview of how Japanese policymakers have looked upon small manufacturers, the formation of industrial districts in Japan, and the historical contribution of small industrial firms to Japan’s economic ascent. Whittaker succinctly relates the development of small industrial firms from the time of the Meiji Restoration of 1868 into the post-World-War-II period, carefully delineating fluctuations in that development to the growth of larger manufacturing firms. His balanced account calls into question facile assumptions sometimes made about the development of a dual economy in Japan. Small industrialists, Whittaker observes, have remained very important in recent decades. The world of small and medium-sized firms or SMEs (those employing no more than 300 workers), he asserts, is “every bit as representative of modern Japan as that of large firms” (p. 3). SMEs, Whittaker points out, accounted for just under three-quarters of Japan’s manufacturing employment and over half of its industrial output in 1993. Nor are most SMEs simply subcontractors for larger firms; in fact, over 40 percent do not subcontract at all. Instead, most SMEs have been, and remain, Whittaker shows, independent enterprises horizontally linked in industrial districts (Whittaker looks especially at the historical evolution of such districts in Gunma and Nagano Prefectures). Even so, governmental officials, Whittaker notes, long denigrated SMEs as archaic holdovers from feudal times, only very recently coming to see them as possible engines of economic growth.

Following his overview, Whittaker turns to a close examination of small firms (those with fewer than seventy employees, and usually with no more than twenty) and medium-sized companies (those with seventy to eighty employees) in machine industries (metal products, machinery making and equipment, transportation equipment, electrical machinery, and precision equipment) in Tokyo’s Ota Ward. Whittaker derived information about the firms from a wide variety of surveys, reports, articles, and his own interviews with the owners and workers in twenty of the businesses (he conducted the interviews between 1989 and 1995, visiting most of the businesses at least twice, once at the height of Japan’s “bubble” boom and once during the recession following its collapse). What emerges is a compelling picture of small manufacturing companies in present-day Japan and, in addition, useful insights into fundamental changes occurring in Japan’s economy. Whittaker takes a topical approach to his subject, devoting separate chapters to discrete issues.

Chapter 4 surveys the industrial development of Ota Ward, an area of fifty-four square kilometers in which 40,000 businesses employed 350,000 people in the early 1990s. From modest beginnings in the Meiji era, Ota Ward became one of Japan’s leading industrial districts during the interwar years and then especially after World War II. As large firms moved out of the ward in search of more land and workers in the 1970s and 1980s, small firms became even more important than they had earlier been. The number of factories in the ward peaked at 9,190 in 1983, declining to 7,160 a decade later. Most of these were small: only one-tenth had more than twenty employees in 1990, down from one-third thirty years earlier. Despite recent problems (dealt with in a later chapter), Ota Ward remains, Whittaker concludes, a viable entity: “The combination of flexibility and specialization within individual firms (as well as across firms) has in turn endowed the district with a flexibility, durability, and adaptability, as well as an upgrading dynamic” (p. 74).

Chapters 5 and 6 look at ties linking Ota Ward’s small industrialists with larger manufacturers in vertical subcontracting arrangements and, even more importantly, varied horizontal webs connecting the ward’s small companies to each other. Subcontracting, Whittaker shows, entails more than the exploitation of small firms by large ones. To be sure, elements of exploitation exist, but in many cases “the line between cooperation and coercion may be a fine one” (p. 90). Becoming increasing significant in the 1990s are horizontal ties–often very informal connections–of all sorts between Ota Ward’s small industrialists, creating some sense of community among them. One of the great strengths of this book is how Whittaker carefully explores those ties, a major contribution to an understanding of how work flows from firm to firm in industrial districts. Chapters 5 and 6 will be of special value for scholars interested in the dynamics of industrial district development. Upon reading them, I was struck by some similarities to the development of industrial districts in the United States, as described by Philip Scranton.

Chapters 7 and 8, by contrast, peer inside the small industrial firms to understand their internal dynamics. Whittaker is able to uncover the motivations of the founders of the small manufacturing firms, finding “a type of individualism at odds with the normal groupist image of Japanese society and industry” and a type of entrepreneurship that “is not of a swashbuckling, high-risk-high-return nature” but, is, rather, “craft or productionist” oriented (p. 127). Here, I was reminded very much of James Soltow’s findings about machinery makers and metal workers in New England. Innovative and skilled, the founders of Ota’s small industrial firms and their workers–many of whom went on to start their own firms–are, Whittaker finds, a dying breed. As these founders retire, few members of the current generation are taking over the helms of the small manufacturers. Disliking the long hours and hard work, the sons and daughters are turning to other pursuits, (as are the offspring of employees in the firms for similar reasons), leading to more small business closures than start-ups, and bringing into question the future of small industrial firms in Ota Ward and elsewhere in Japan.

In Chapter 9 Whittaker discusses the impacts of national and regional governmental policies upon Ota’s businesses and the involvement of the businesses in formulating those policies. He concludes that on balance “government support for SMEs is significant,” especially in the realm of financing, but that “the primary reason for the survival and upgrading of small firms in Ota and in Japan has been their own efforts” (p. 165).

Chapter 10 presents a comparative look at the development and present-day activities of small industrial firms in Birmingham. While small businesses in Birmingham and Ota Ward were similar in some ways, they shared different fates, with Birmingham’s “fall being spectacular” (p. 182). Misguided government policies, an unwillingness of workers to change their ways, mergers creating inefficient big businesses, and excessive competition among small firms are the salient factors cited by Whittaker for Birmingham’s industrial decline.

In Chapter 11 Whittaker directly addresses the issue of whether or not small industrial firms can be a prime source of economic revival in present-day Japan. Whittaker is no cheer leader for small business. In a balanced analysis, he concludes that both large and small companies will continue to play important roles in the future: “For better or for worse, large companies and their offspring will remain key players in Japan’s economy in the foreseeable future, even if their contribution to economic growth is muted. Rather than wishing them away, an important question will be what types of relationships can small, entrepreneurial firms forge with them” (p. 212).

Both scholars and policymakers can profit from reading this book. Historians, political scientists, and economists will benefit from this detailed look at the evolution and present-day operations of one of Japan’s leading industrial districts. Whittaker’s account is the most valuable analysis of small business in Japan currently available in English, complementing and going beyond David Friedman’s analysis of Sakaki and providing both more depth and breadth than Penelope Franck’s survey of small business development across the nation. Policymakers will learn a great deal about the effectiveness and lack of effectiveness of the Japanese government’s efforts to nurture small business development. In short, Small firms in the Japanese Economy is a sophisticated account which I hope will find a large audience.

Mansel G. Blackford Department of History The Ohio State University

Mansel Blackford is the author of A History of Small Business in America (New York: Twayne Publishers, 1991); and The Rise of Modern Business in Great Britain, the United States and Japan (Chapel Hill: University of North Carolina Press, 1988, second edition in preparation).

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

Designs Within Disorder: Franklin D. Roosevelt, the Economists, and the Shaping of American Economic Policy, 1933-1945

Author(s):Barber, William J.
Reviewer(s):Namorato, Michael V.

EH.NET BOOK REVIEW

Published by EH.NET (July 1997)

William J. Barber, Designs Within Disorder: Franklin D. Roosevelt, the Economists, and the Shaping of American Economic Policy, 1933-1945. New York: Cambridge University Press, 1996. ix + 178 pp. $44.95 (cloth), ISBN: 0-051-56078-0.

Reviewed for EH.Net by Michael V. Namorato, Department of History, University of Mississippi.

Designs Within Disorder is William Barber’s sequel to his earlier work on economic thinking in the 1920s, entitled From New Era to New Deal: Herbert Hoover, the Economists, and American Economic Policy, 1921-1933 (New York, 1985). Similar to his earlier study, Designs Within Disorder concentrates on what economists were saying during the New Deal, how Franklin D. Roosevelt listened to and responded to their suggestions, and the ultimate impact these economic thinkers had on long-term federal economic policy. In the case of Franklin Roosevelt, Barber believes that professional economists had a president who was willing to listen to them and who was a “consumer” of what they had to offer. Although not a great economic thinker, Roosevelt himself, in Barber’s opinion, was “an uncompromising champion of consumer sovereignty” (p. 1). He provided those with more learning and understanding of economic matters an opportunity to develop their ideas. Roosevelt’s Washington, in short, was a “laboratory affording economists an opportunity to make hands-on contact with the world of events” (p. 2). After much experimentation, the end result was an “Americanized version of Keynesian macroeconomics” which became part and parcel of governmental policy by the end of the 1930s. In this sense, the Rooseveltian years were “a watershed in economic policy and in economic thinking” (p. 3).

To make his case, Barber details how economists affected Franklin Roosevelt throughout his years in office. Beginning with the 1932 campaign, Barber argues that Roosevelt’s Brains Trust would not have received the endorsement of the American Economic Association. What Adolf Berle, Rexford Tugwell, and Raymond Moley had in common besides “geographical proximity” was their commitment to using the federal government to address the economic crisis caused by the Great Depression. Providing rather traditional and highly questionable critiques of what Berle and Tugwell particularly were saying, Barber makes it clear that these individuals were anti-Brandesians in their approach and thinking. Perhaps more significantly, the author spends a considerable amount of time examining what the Cornell group (George Warren and F.A. Pearson) were calling for in regards to inflationary policies and what Irving Fisher wanted to accomplish with his theories of reflation. Fisher, in fact, not only did not approve of the Brains Trust and their recommendations but he also was quite happy with Roosevelt’s bombshell message to the London Economic Conference. Instead, as Barber details, Fisher called for a managed currency, breaking away from the gold standard, and implementation of the Thomas amendment to the Agricultural Adjustment Act. As for Franklin Roosevelt in the midst of these divergent economic theories, Barber believes that the president showed “antipathy towards the respectable economic thinking throughout 1933” and supported structural interventions in industry and agriculture and in his monetary experimentation.

Barber next turns his attention to the ideas of individuals like Leon Henderson (National Recovery Administration), Leverett Lyon, Isador Lubin (Commissioner of Labor Statistics), and Gardiner Means. His analysis of the National Recovery Administration and Agricultural Adjustment Administration is fairly traditional and his conclusion that Roosevelt wanted to find a way to sustain governmental interventionism in the economy with judicial approval is far from original in theory or conception. The author does much better in explaining the differences between the theoretical ideas of John M. Keynes and Irving Fisher, although their impact on Roosevelt is lost in the argument itself. Barber feels that the president was and remained “a fiscal conservative at heart” anyway (p. 88). Barber argues that with the recession of 1937-1938 the debate between the structuralists (a la Berle/Tugwell) and the monetarists (a la Fisher and the Cornell Group) re-appeared. Despite Fisher’s strong case for 100 percent reserves, Roosevelt was more concerned with adding an income orientation to macroeconomic policy with fiscal activism as a key ingredient (p. 115).

Finally, in his last chapters, Barber takes his argument through the later 1930s, World War II, and the immediate post-war era. Seeing Harry Hopkins’ appointment as Secretary of Commerce as a turning point towards official acceptance of Keynesianism, Barber details how Hopkins brought in young academics sympathetic to this approach, how the president barely tolerated Thurman Arnold and his anti-trust movement, and how people like John K. Galbraith in the Office of Price Administration helped to mobilize America’s wartime economy. In the end, however, individuals like Galbraith left the New Deal. In fact, Barber concluded that the Full Employment Act was more of a victory for the opponents of the Keynesian approach than one would have suspected. Still, Keynesianism took hold after 1945 only after it had infiltrated the universities (p. 171).

How does one assess Designs Within Disorder? On the positive side, Barber has provided a very interesting perspective on the importance of economic ideas and their champions/proponents at a critical moment in American history. His coverage of the period, 1929-1947, is also very thorough. He shows clearly how some economists perceived the General Theory of Keynes and what reaction it received within and outside of the New Deal. And, most importantly, Barber provides a very detailed and lucid exposition of Irving Fisher’s ideas. Yet, just as there are strong points in the study, there are some serious shortcomings. Barber’s use of primary sources is limited at best. He tends to take too many ideas and quotes out of secondary works, some of which are rather dated. He also has a tendency to reiterate traditional interpretations almost without question. This is particularly true in his characterization of New Dealers such as Rexford Tugwell. However, the more serious problems deal with the individuals on whom he concentrates. Barber spends almost all of his time on individuals who were either on the outside of the New Deal looking in or who were on the inside of the New Deal but not very influential. The best example here is Irving Fisher. While the author’s analysis of Fisher is quite good, the fact remains that Fisher never had a role or position within the New Deal nor did any New Dealer in a position of authority even listen to him. Barber, moreover, fails to recognize the changing political environment within the New Deal itself. He never even mentions individuals like Ben Cohen or Thomas Corcoran and the impact they had on the president, especially in the way they filtered people and ideas that they wanted Roosevelt to meet or hear about. Finally, Barber credits Roosevelt with so much in terms of providing economists with an opportunity to influence policy, but the president himself is seldom even mentioned, no less analyzed in terms of his own thinking on what these economists were telling him and his close advisors. Somehow, Roosevelt is lost amidst the intellectual environment that Barber has created.

Nevertheless, although these shortcomings are serious, they do not negate the overall contributions that Designs Within Disorder make. William Barber has written an interesting work on the importance of economic thinking during the Great Depression years. In so doing, his efforts remain worthwhile.

Michael V. Namorato Department of History University of Mississippi

Michael V. Namorato is author of Rexford G. Tugwell: A Biography (1988).

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Subject(s):Economic Planning and Policy
Geographic Area(s):North America
Time Period(s):20th Century: Pre WWII

The Worst Tax? A History of the Property Tax in America

Author(s):Fisher, Glenn
Reviewer(s):Wallis, John Joseph

EH.NET BOOK REVIEW

Published by EH.NET (June 1997)

Glenn W. Fisher, The Worst Tax? A History of the Property Tax in America. Lawrence, KS: University Press of Kansas, 1996. x + 244 pp. $35.00 (cloth), ISBN: 0700607536

Reviewed for EH.NET by John Joseph Wallis, Department of Economics, University of Maryland.

From the question mark in the title one might expect that this book would try to answer the question: is the property tax a good or a bad tax? And from the remainder of the title one might expect a general history of the property tax throughout the nation and throughout the nation’s history. This very interesting book does not deliver on either of the implicit promises in its title, but it is worth a closer look in any event.

Fisher begins with a general discussion of the property tax and fiscal policy in late 18th and early 19th century America. The focus then shifts to Kansas. An intensive study of the property tax in Kansas makes up the bulk of the book. In the last chapter and conclusion, the discussion shifts back to more general questions and a wider focus.

It is hard to fault the approach, however, since there is no “American property tax,” there are only property taxes in the individual states and, as Fisher makes clear, there are really thousands of local property taxes administered under an umbrella of state supervision. The nature of state administration varies widely from state to state and over time. Making generalizations is, as a result, a hazardous business.

Fisher focuses on the implication of two common changes in the property tax structure in the middle part of the 19th century, and, by example, how those changes played out in Kansas. These are constitutional or legislative provisions mandating uniformity and universality in property taxation. Uniformity means that all property that is liable to the tax is taxed at a uniform rate. Universality means that all valuable property in the state is subject to taxation. Uniformity combined with universality implies that all property in a state, tangible and intangible, land, buildings, inventories, animals, equipment, etc. must be assessed and taxed at the same rate.

Uniformity and universality are important both as a reflection of the political climate of the mid-19th century, and for the confusion and difficulties they ultimately created in the administration of the property tax. After the debt crisis of the early 1840s, when state governments began moving toward rather than away from the property tax as their main source of revenue, the property tax became the fiscal mainstay of both state and local governments. It was at that point that uniformity and universality provisions were widely enacted as reform measures. The essential idea behind them was that the wealthy and the privileged escaped property taxation through unfair assessment (uniformity) and their ability to transform their wealth into untaxed assets (universality).

The reforms opened up another can of worms, perhaps one bigger than the universe. For uniformity and universality to work, there had to be a system of state-wide assessment on all property. In most states, assessment was a function of local governments with some state cooperation and supervision. Full implementation of the reforms would have required complete centralization of the revenue system at the state level, which nobody wanted. This federalism issue was further complicated by the intractable difficulties in assessing many types of intangible property.

Ultimately, the general uniform and universal property tax was replaced by a more specific and well defined property tax, which in most states became a tax on real estate. The real estate tax was easier to define and administer and easier to equalize across local governments, although it is still plagued with problems of assessment. The change occurred in the 20th century at the same time that state governments were moving away from property taxes towards sales and income taxes. The shift was underway before the 1930s, picked up speed during the depression, and was complete by the middle years of the 20th century. Today, state governments collect a very small share of property taxes and property taxes are a very small share of total state revenues.

Fisher’s study illuminates clearly how these forces were at work in Kansas. Whether Kansas accurately mirrors what happened in other states it unclear. This book makes an important step in the right direction. It awaits another 40 or so similar studies on property taxation in other states.

John Joseph Wallis Department of Economics University of Maryland

John Wallis is a student of the history of America. Recent publications include (with Jac Heckelman) “Railroads and Property Taxes,” Explorations in Economic History, 34 (1), January 1997; “The Impact of the New Deal on American Federalism,” (with Wallace Oates), forthcoming in The Defining Moment, Michael Bordo, Claudia Goldin, and Eugene White, editors, NBER, University of Chicago Press; “Early American Federalism and Economic Development, 1790-1840,” Public Finance and Environmental Economics: Essays in Honor of Wallace E. Oates, Robert Schwab, editor, forthcoming, Edward Elgar.

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

The Banking Panics of the Great Depression

Author(s):Wicker, Elmus
Reviewer(s):Wood, John H.

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

Elmus Wicker, The Banking Panics of the Great Depression. New York: Cambridge University Press, 1996. xvii + 174 pp. ISBN: 0 521 56261 9.

Reviewed for EH.NET by John H. Wood, Department of Economics, Wake Forest University.

The number of commercial banks in the United States nearly tripled during the first two decades of the 20th century, reaching 30,000 in 1920. The vast majority of these were unit banks as required by their national and many state charters. Illinois had nearly 2,000, and Nebraska, with a population of 1.3 million, had a bank for every 1,000 residents. Failures averaged about 70 banks per annum, or one of every 300 existing banks, during those two decades. The agricultural depression of the 1920s raised the failure rate to more than 600 banks per annum, or one of 50. Failures showed few signs of abating as the decade drew to a close, and the banking system, especially in rural America, entered the Great Depression in a fragile state.

In A Monetary History of the United States, 1867-1960 (1963), Milton Friedman and Anna Schwartz attributed much of the depression’s severity to four banking crises, or panics. They argued that the crisis of late 1930 and early 1931, in particular, converted a mild recession into a major depression as “a contagion of fear” initiated by crop failures swept the country. Friedman and Schwartz reported the significant increase in the failure rate (761 banks during November 1930 to January 1931, compared with 744 during the first ten months of 1930), led by New York City’s Bank of the United States, then the largest failure in American history (pp. 308-311). They found the Federal Reserve guilty of neglect for failing to deal with these panics, a failure that was particularly culpable because correct, “lender-of-last resort,” actions would simply have required “the policies outlined by the System itself in the 1920s, or for that matter by Bagehot in 1873” (p.407).

Professor Wicker’s major contribution in this important book is to examine the geographical incidence of bank failures during Friedman and Schwartz’s four “crises,” or “contagions.” His basic unit of observation is the Federal Reserve District, and he finds that in the first three crises, at least, failures were geographically concentrated. None became national in scope or involved significant pressure on, not to say panic, in the New York money market. The three crises of 1930-31 accounted for only forty percent (about 2,100 of 5,100) of failures during 1930-32. A high proportion of failures during the first crisis occurred in the St. Louis district and were caused by the collapse of the Caldwell investment banking firm of Nashville, Tennessee, which controlled the largest chain of banks in the South and had invested heavily in real estate in the 1920s. There is no evidence of contagion in the form of runs on other banks. The experience of the Bank of the United States was similar. It was also heavily involved in real estate, and its failure did not instigate a liquidity crisis among other New York banks.

The second crisis (April-August 1931) was concentrated in the Chicago and Cleveland districts (nearly half the failures and two-thirds of the deposits of failed banks), and in the case of Chicago resulted from the large increase in the number of unit banks during the real estate boom of the 1920s in Chicago and its suburbs. The crisis of September-October 1931 following Britain’s departure from gold more nearly approached national proportions, but even it was concentrated in three cities: Chicago, Pittsburgh, and Philadelphia.

The panic of 1933 is a special case, and was caused by the unprecedented resort of state banking officials to the declaration of bank holidays and the resulting uncertainty for depositors, who rushed to withdraw funds before their own banks were closed. Bank failures, although still at a high level, had declined and there was reason to hope for a return to stability when the Governor of Michigan declared a bank holiday on February 14 to protect the Guardian Group (Ford family) of Banks. This led to holidays in other states as Michigan (then Indiana and Ohio, then Illinois and Pennsylvania, etc.) depositors sought cash elsewhere until by the time Franklin Roosevelt was inaugurated on March 4 banks in all forty-eight states had either been closed or restrictions had been placed on their deposits. Although national in scope, the panic of 1933 was due less to depositors’ fears of bank insolvency than to the actions of public officials.

The banking crises of the Great Depression do not appear to correspond to those of popular banking history or the academic literature in which irrational or even rational responses to information asymmetries generate widening circles of panic that ultimately reach the central money market and in the absence of a lender of last resort force the collapse of the monetary system. Wicker finds them to be region specific without perceptible nationwide effects. They were more consequences (especially of falling real estate prices) than causes of the depression.

What should the Federal Reserve have done? The traditional role of the central bank, forged in England in the 19th century, was not called for because there was little or no pressure on the money market. On the other hand, might we not blame the Fed for failing to provide “an elastic currency” in accordance with the Federal Reserve Act, which might have meant actions to ensure a growing stock of money? However, this would be holding it accountable for concepts concerning the control of money and its influence of which it could not have been aware at the time, and which remain unclear today.

This book is an important contribution to our understanding of the interactions between the banking system and the course of the Great Depression, and it should inspire more detailed investigations of other banking crises to determine whether the lack of contagion was peculiar to the 1930s.

John H. Wood Department of Economics Wake Forest University

John Wood is co-author (with Michael Lawlor and Allin Cottrell) of “What Are the Connections between Deposit Insurance and Bank Failures,” in Cottrell et al, eds., The Causes and Costs of Depository Institution Failures, Kluwer Academic Publishers, Norwell, MA, 1995.

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Subject(s):Financial Markets, Financial Institutions, and Monetary History
Geographic Area(s):North America
Time Period(s):20th Century: Pre WWII