Published by EH.NET (February 1999)

David Hackett Fischer, The Great Wave: Price Revolutions and the Rhythm of

History. Oxford and New York: Oxford University Press, 1996. xvi + 536.

$35 (hardcover), ISBN: 019505377X. $16.95 (paperback), ISBN: 019512121X.

Reviewed for EH.NET by John H. Munro, Department of Economics, University of

Toronto.

Let me begin on a positive note. This is indeed a most impressive work: a

vigorous, sweeping, grandiose, and contentious, though highly entertaining,

portrayal of European and North American economic history, from the High Middle

Ages to the present, viewed through the lens of “long-wave” secular price-

trends. Indeed its chief value may well lie in the controversies that it is

bound to provoke, particularly from economists, to inspire new avenues of

research in economic history

, especially in price history. The author contends that, over the past eight

centuries, the European economy has experienced four major “price-

revolutions,” whose inflationary forces ultimately became economically and

socially destructive, with adverse consequences that provoked various complex

reactions whose “resolutions” in turn led to more harmonious, prosperous, and

“equitable” economic and social conditions during intervening eras of “price

equilibria”. These four price-revolutions are rather too neatly set out as the

following: (1) the later- medieval, from c.1180-c.1350; (2) the far better

known 16th-Century Price-Revolution, atypically dated from c.1470 to c.1650,

(3) the inflation of the Industrial Revolution era, from c.1730 to 1815; and

(4) the 20th century price-revolution, conveniently dated from 1896 to 1996

(when he published the book).

Though I am probably more sympathetic

to the historical concept of

“long-waves” than the majority of economists, I do agree with many opponents of

this concept that such long-waves are exceptionally difficult to define and

explain in any mathematically convincing models, which are certainly not

supplied here. For reasons to be explored in the course of this review, I

cannot accept his depictions, analysis

, and explanations for any of them. This will not surprise Prof. Fischer, who

is evidently not an admirer of the economics profession. He is particularly

hostile to those of us deemed to be “monetarists,” evidently used as a

pejorative term. After rejecting not only the “monetarist” but also the

“Malthusian,

neo-Classical, agrarian, environmental, and historicist” models, for their

perceived deficiencies in explaining inflations, and after condemning

economists and historians alike for imposing rigid models in attempting to

unravel the mysteries of European and North American economic history,

Fischer himself imposes an exceptionally rigid and untenable model for all four

of his so-called price-revolutions, containing in fact selected Malthusian and

monetarist elements from these supposedly rejected models.

In essence, the Fischer model contends that all of his four long-wave

inflations manifested the following six-part consecutive chain of causal and

consequential factors, inducing new causes, etc., into the next part of the

chain. First, each inflationary long-wave began with a prosperity created from

the preceding era of price-equilibrium, one promoting a population growth that

inevitably led to an expansion in aggregate demand that in turn outstripped

aggregate supply, thus — according to his model

— causing virtually ALL prices to rise. Evidently his model presupposes that

all sectors of the economy, in all historical periods under examination, came

to suffer from Malthusian-Ricardian diminishing

returns and rising marginal costs, etc. Second, in each and every such era,

after some indefinite lapse of time, and after the general population had

become convinced that rising prices constituted a persistent and genuine trend,

the “people” demanded and

received from their governments an increase in the money supply to

“accommodate” the price rises. As Fischer specifically comments on p. 83: “in

every price-revolution, one finds evidence of frantic efforts to expand the

money supply, after people have discovered that prices are rising in a secular

way.” Third, and invariably, in his view, that subsequent and continuous growth

in the money supply served only to fuel and thus aggravate the already existing

inflation. He never explains, however, for any of

the four long-waves, why those increases in money stocks were always in excess

of the amount required “to accommodate inflation”. Fourth, with such

money-stock increases, the now accelerating inflation ultimately produced a

steadily worsening impoverishment of the masses, aggravated malnutrition,

generally deteriorating biological conditions, and a breakdown of family

structures and the social order, with increasing incidences of crime and social

violence: i.e., with a rise in consumer prices that outstripped generally

sticky wages in each and every era, and with a general transfer of wealth from

the poorer to richer strata of society. Fifth, ultimately all these negative

forces produced economic and social crises that finally brought the

inflationary forces to a halt,

producing a fall in population and thus (by his model) in prices, declines that

subsequently led to a new era of “price-equilibrium,” along with concomitant

re-transfers of wealth and income from the richer to the poorer strata of

society

(where such wealth presumably belonged). Sixth, after some period of economic

prosperity and social harmony, this vicious cycle would recommence, i.e., when

these favorable conditions succeeded in promoting a new round of incessant

population growth, which inevitably sparked those same inflationary forces to

produce yet another era of price-revolution, continuing until it too had run

its course.

While many economic historians, using more structured Malthusian-Ricardian type

models, have also provided a similarly bleak portrayal of

demographically-related upswings and downswings of the European economy,

most have argued that this bleak cycle was broken with the economic forces of

the modern Industrial Revolution era. Fischer evidently does not. Are we the

reforecondemned, according to his view, to suffer these never-ending bleak

cycles– economic history according to the Myth of Sisyphus, as it were?

Perhaps not, if government leaders were to listen to the various nostrums set

forth in the final chapter,

political recommendations on which I do not feel qualified to comment.

Having engaged in considerable research, over the past 35 years, on European

monetary, price, and wage histories from the 13th to 19th centuries, I am,

however, rather more qualified

to comment on Fischer’s four supposed long-waves. Out of respect for the

author’s prodigious labors in producing this magnum opus, one that is bound to

have a major impact on the historical profession, especially in covering such a

vast temporal and spatial range, I feel duty-bound to provide detailed

criticisms of his analyses of these secular price trends, with as much

statistical evidence as I can readily muster. Problematic in each is defining

their time span,

i.e., the onset and termination of inflations. If many medievalists may concur

that his first long- wave did begin in the 1180s, few would now agree that it

ended as late as the Black Death of 1348-50. On the contrary,

the preceding quarter-century (1324-49) was one of very severe deflation,

certainly in both Tuscany (Herlihy 1966) and England. In the latter, the

Phelps Brown and Hopkins “basket of consumables” price index (1451-75 =

100) fell 47%: from 165 in 1323 (having been as high as 216 in 1316, with the

Great Famine) to just 88 in 1346. Conversely, while most early-modern

historians would agree that the 16th-Century Price Revolution generally ended

in the 1650s (certainly in England), few if any would date its commencement so

early as the 1470s. To be sure, in both the Low Countries and England, a

combination of coinage debasements, civil wars, bad harvests, and other

supply-shocks did produce a short-term rise in prices from the later 1470s to

the early 1490s; but thereafter their basket-of-consumables price-indices

resumed their deflationary downward trend for another three decades (Munro

1981, 1983). In both of these regions and in Spain as well (Hamilton 1934), the

sustained rise in the general price level, lasting over a century, did not

commence until c.1520.

For Fischer’s third inflationary long-wave, of the Industrial Revolution era,

his periodization is much less contentious, though one might mark its

commencement in the late 1740s rather than the early 1730s.

The last and most recent wave is, however, by far more the most controversial

in its character. Certainly a long upswing in world prices did begin in 1896,

and lasted until the 1920s; but can we really pretend that this so neatly

defined century of 1896 to 1996 truly encompasses any form of long wave when we

consider the behavior of prices from the 1920s?

Are we to pretend that the horrendous deflation of the ensuing Great Depression

era was just a temporary if unusual aberration that deviated from this

particular century long (saeclum) secular tend? Fischer, in fact,

very

rarely ever discusses deflation, ignoring those of the 14th century and most

of the rest. Instead, he views the three periods intervening between his price-

revolutions as much more harmonious eras of price-equilibria: i.e. 1350-1470;

1650 – 1730; 1820 –

1896; and he suggests that we are now entering a fourth such era. In my own

investigations of price and monetary history from the 12th century, prices rise

and fall,

with varying degrees of amplitude; but they rarely if ever remain stable,

“in equilibrium”.

Certainly “equilibrium” is not a word that I would apply to the first of these

eras, from 1350 to 1470: not with the previously noted, very stark deflation of

c.1325 – 48, followed by an equally drastic inflation that ensued from the

Black Death over

the next three decades, well documented for England, Flanders (Munro 1983,

1984), France, Tuscany (Herlihy 1966),

and Aragon-Navarre (Hamilton 1936). Thus, in England, the mean quinquennial PB

& H index rose 64%: from 88 in 1340-44 to 145 in 1370-74, fal ling sharply

thereafter, by 29%, to 103 in 1405-09; after subsequent oscillations, it fell

even further to a final nadir of 87 in 1475-79 (when,

according to Fischer, the next price-revolution was now under way). For

Flanders, a similarly constructed price index of quinquennial means

(1450-74 = 100: Munro 1984), commencing only in 1350, thereafter rose 170%:

from 59 in 1350-4 to 126 in 1380-84, reflecting an inflation aggravated by

coinage debasements that England had not experienced, indeed none at all since

1351. Thereafter, the Flemish price index plunged 32%, reaching a temporary

nadir of 88 in 1400-04; but after a series of often severe price oscillations,

aggravated by warfare and more coin debasements, it rose to a peak of 138 in

1435-9; subsequent ly it fell another 31%, reaching its 15th century nadir of

95 in 1465-9 (before rising and then falling again, as noted earlier).

Implicit in these observations is the quite pertinent criticism that Fischer

has failed to use, or use properly, these and many other price

indices–especially the well-constructed Vander Wee index (1975), for the

Antwerp region, from 1400 to 1700, so important in his study; and the Rousseaux

and Gayer-Rostow-Schwarz indices for the 19th century (Mitchell &

Deane 1962). On the other hand, he has relied far too much on the dangerously

faulty d’Avenel price index (1894-1926) for medieval and early-modern France.

Space limitations, and presumably the reader’s patience, prevent me from

engaging in similar analyses of price trends

over the ensuing centuries, to indicate further disagreements with Fischer’s

analyses, except to note one more quarter-century of deflation during a

supposed era of price equilibrium: that of the so-called Great Depression era

of 1873 to 1896, at least within England, when the PB&H price index fell from

1437 to 947, a decline of 34% that was unmatched, for quarter-century periods

in English economic history, since the two stark deflations of the second and

fourth quarters of the 14th century. (The Rousseaux index fell from 42.5% from

127 in 1873 to 73 in 1893).

My criticisms of Fischer’s temporal depictions of both inflationary long-waves

and intervening eras of supposed price equilibria are central to my objections

to his anti-monetarist explanations for them, or rather to his

misrepresentation of the monetarist case, a viewpoint he admittedly shares with

a great number of other historians, especially those who have found

Malthusian-Ricardian type models to be more seductively plausible explanations

of

inflation. Certainly, too many of my students, in reading the economic history

literature on Europe before the Industrial Revolution era, share that beguiling

view, turning a deaf ear to the following arguments: namely, that (1) a growth

in population cannot by itself,

without complementary monetary factors, cause a rise in all prices, though

certainly it often did lead to a rise in the relative prices of grain,

timber, and other natural-resource based commodities subject to diminishing

return and supply

inelasticities; and thus (2) that these simplistic demographic models involve

a fatal confusion between a change in the relative prices of individual

commodities and a rise in the overall price-level. Some clever students have

challenged that admonition,

however,

with graphs that seek to demonstrate, with intersecting sets of aggregate

demand and supply curves, that a rise in population is sufficient to explain

inflation. My response is the following. First, all of the historical prices

with which Fischer and my students are dealing

(1180-1750) are in terms of silver-based moneys-of-account, in the traditional

pounds, shillings, and pence, tied to the region’s currently circulating silver

penny, or similar such coin, while prices expressed in terms of the gold-based

Florentine florin behaved quite differently over the long periods of time

covered in this study. Indeed we should expect such a difference in price

behavior with a change in the bimetallic ratio from about 10:1 in 1400 to about

16:1 in 1650,

which obviously reflects the fall in the relative value or purchasing power of

silver — an issue virtually ignored in Fischer’s book. Second, the shift, in

this student graph, from the conjunction of the Aggregate Demand and Supply

schedules,

from P1.Q1

and P2.Q2, requires a compensatory monetary expansion in order to achieve the

transaction values indicated for the two price levels: from 17,220,000 pounds

and 122,960,000 pounds, which increase in the volume of payments had to come

from either increased

money stocks and/or flows. Even if changes in demographic and other real

variables, shared responsibility for inflation by inducing changes in those

monetary variables, we are not permitted to ignore those variables in

explaining historical inflations.

Admittedly, from the 12th to the 18th centuries, to the modern Industrial

Revolution era, correlations between demographic and price movements are often

apparent. But why do so few historians consider the alternative proposition

that much more profound, deeper economic forces might have induced a complex

combination of general economic growth, monetary expansion, and a rise in

population, together (so that such apparent statistical relationships would

have adverse Durbin-Watson statistics to indicate significant serial

correlation)? Furthermore, if population growth is the inevitable root cause of

inflation, and population decline the purported cause of deflation, how do such

models explain why the drastic depopulations of the 14th-century Black Death

were

followed by three decades of severe inflation in most of western Europe?

Conversely, why did late 19th-century England experience the above-noted

deflation while its population grew from 23.41 million in 1873 (PB&H at 1437)

to 30.80 million in 1896 (PB&H

at 947)?

Nor is Fischer correct in asserting that, in each and every one of his four

price-revolutions, an increase in money supplies followed rather than preceded

or accompanied the rises in the price-level. For an individual country or

region, however

, one might argue that a rise in its own price level, as a consequence of a

transmitted rise in world or at least continental prices would have quickly —

and not after the long-time lags projected in Fischer’s analysis — produced an

increase in money supplies to satisfy the economic requirements for that rise

in national/regional prices. Fischer, however, fails to offer any theoretical

analysis of this phenomenon, and makes no reference to any of the well-known

publications on the Monetary Approach to the Balance of Payments [by Frenkel

and Johnson (1976), McCloskey and Zecher (1976), Dick and Floyd (1985, 1992);

Flynn (1978) and D. Fisher (1989), for the Price Revolution era itself]. In

essence,

and with some necessary repetition, this thesis contends:

(1) that a rise in world price levels, initially arising from increases in

world monetary stocks, is transmitted to most countries through the mechanisms

of international commerce (in commodities, services, labor) and finance

(capital flows); and (2) that monetized metallic (coin) stocks and other

elements constituting M1 will be endogenously distributed among all countries

and/or regions in order to accommodate the consequent rise in the domestic

price levels, (3) without involving those international bullion flows that the

famous Hume “price- specie flow” mechanism postulates to be the consequences of

inflation-induced changes in national trade balances.

In any event, the historical evidence clearly demonstrates that, for each of

Fischer’s European-based price-revolutions, an increase in European monetary

stocks and flows always preceded the inflations. For the first,

the price-revolution of the “long-13th century” (c.1180-c.1325), Ian Blanchard

(1996) has recently demonstrated that within England its elf,

specifically in Cumberland-Northumberland, a very major silver mining boom had

commenced much earlier, c.1135-7, peaking in the 1170s, with annual silver

outputs that were “ten times more than had been produced in the whole of

Europe” for any year in

the past seven centuries. By the 1170s,

and thus still before evident signs of general inflation or a marked

demographic upswing, an even greater silver mining boom had begun in the Harz

Mountains region of Saxony, which continued to pour out vast quantities of

silver until the early 14th century. For this same

“Commercial Revolution” era, we must also consider the accompanying financial

revolution, also evident by the 1180s, in Genoa and Lombardy; and though one

may debate the impact that their deposit-

and-transfer banking and foreign-exchange banking had upon aggregate European

money supplies,

these institutional innovations undoubtedly did at least increase the volume of

monetary flows, and near the beginning, not the middle, of this first

documented

long-wave.

For the far better known 16th-Century Price Revolution, Fischer seems to pose a

much greater threat to traditional monetary explanations, especially in so

quixotically dating its commencement in the 1470s, rather than in the 1520s.

Certainly Fischer and many other critics are on solid grounds in challenging

what had been, from the time of Jean Bodin (1566-78) to Earl Hamilton

(1928-35), the traditional monetary explanation for the origins of the Price

Revolution: namely, the influx of Spanish

American treasure. But not until after European inflation was well underway,

not until the mid-1530s, were any significant amounts of gold or silver being

imported

(via Seville); and no truly large imports of silver are recorded before the

early 1560s (a

mean of 83,374 kg in 1561-55: TePaske 1983), when the mercury amalgamation

process was just beginning to effect a revolution in Spanish-American mining.

Those undisputed facts, however, in no way undermine the so-called

“monetarist” case; for Fischer, and far too many other economic historians,

have ignored the multitude of other monetary forces in play since the 1460s.

The first and least important factor was the Portuguese export of gold from

West Africa (Sao Jorge) beginning as a trickle in the 1460s;

rising to 170 kg per annum by 1480, and peaking at 680 kg p.a. in the late

1490s (Wilks 1993). Far more important was the Central European silver mining

boom, which began in the 1460s, at the very nadir of the West European

deflation, which had thus raised the purchasing power of silver and so

increased the profit incentive to seek out new silver sources: as a

technological revolution in both mechanical and chemical engineering.

According to John Nef (1941, 1952), when this German-based mining boom reached

its peak in the mid 1530s, it had augmented Europe’s silver outputs more than

five-fold, with an annual production that ranged from a minimum of 84,200 kg

fine silver to a maximum of 91,200 kg — and thus well in excess of any amounts

pouring into Seville before the mid-1560s. My own statistical compilations,

limited to just the major mines, indicate a rise in quinquennial mean

fine-silver outputs from 12,356 kg in 1470-74 to 55,025 kg in 1534-39 (Munro

1991). In England, 25-year mean mint outputs rose

from 18,932 kg silver in 1400-24 to 33,655 kg in 1475-99 to 59,090 kg in

1500-24; and then to 305,288 kg in 1550-74 (i.e., after Henry VIII’s

“Great Debasement”); in the southern Low Countries, those means go from 54,444

kg in 1450-74 to 280,958 kg in 15 50-74 (Challis 1992; Munro 1983,

1991).

In my view, however, equally important and probably even more important was the

financial revolution that had begun in or by the 1520s with legal sanctions for

and then legislation on full negotiability, and the contemporary establishment

of effective secondary markets (especially the Antwerp Bourse) in fully

negotiable bills and rentes, i.e., heritable government annuities; and the

latter owed their universal and growing popularity, compared with other forms

of public debt, to papal bulls (1425,

1455) that had exonerated them from any taint of usury. To give just one

example of a veritable explosion in this form of public credit (which thus

reduced the relative demand for gold and silver coins), an issue that Fischer

almost completely ignores: the annual volume of transactions in Spanish

heritable juros rose from 5 million ducats (of 375 maravedis) in 1515 to 83

million ducats in the 1590s (Vander Wee 1977). Thus we need not call upon

Spanish-American bullion imp orts to explain the monetary origins of the

European Price Revolution, though their importance in aggravating and

accelerating the extent of inflation from the 1550s need hardly be questioned,

especially, as Frank Spooner (1972) has so aptly demonstrated,

even anticipated arrivals of Spanish treasure fleets would induce German and

Genoese bankers to expand credit issues by some multiples of the perceived

bullion values. Fischer, by the way, comments (p. 82) that: “the largest

proportionate increases in Spanish prices occurred during the first half of

the sixteenth century — not the second half, when American treasure had its

greatest impact.” This is simply untrue: from 1500-49, the Spanish composite

price index rose 78.5%; from 1550-99, it rose by another 92.1% (Hamilton

1934).

Changes in money stocks or other monetary variables do not, however,

provide the complete explanation for the actual extent of inflation in this or

in any other era. Even if every inflationary price trend that I have

investigate d, from the 12th to 20th centuries, has been preceded or

accompanied by some form of monetary expansion, in none was the degree of

inflation directly proportional to the observed rate of monetary expansion,

with the possible exception of the post World War I hyperinflations.

Consider this proposition in terms of the oft-maligned, conceptually limited,

but still heuristically useful monetary equation MV = Py [in which real y = Y/P

= C + I + G+ (X-M)]; or, better, in terms of the Cambridge “real cash

balances” approach: M = kPy [in which k = the proportion of real NNI (Py) that

the public chooses to hold in real cash balances, reflecting the constituent

elements of Keynesian liquidity preference]. Some Keynesian economists would

contend that an increase in M, or in the rate of growth of money stocks, would

be accompanied by some

offsetting rise in y (i.e. real NNI), whether exogenously created or

endogenously induced by related forces of monetary expansion, and also by some

decline in the income velocity of money, with a reduced need to economize on

the use of money. Since mathematically V = 1/k, they would similarly posit

that an expansion in M,

or its rate of growth, would have led, ceteris paribus — without any change in

liquidity preference, to a fall

in (nominal) interest rates, and thus, by the consequent reduction in the

opportunity costs of holding cash balances, to the necessarily corresponding

rise in k (i.e., an increase in the demand for real cash balances; see Keynes

1936, pp. 306-07). Sometimes, but only very rarely, have changes in these two

latter variables y and V (1/k) fully offset an increase in M; and thus such

increases in money stocks have also resulted, in most historical instances, in

some non-proportional degree of inflation: a rising P, as measured by some

suitable price index, such as the Phelps Brown and Hopkins

basket-of-consumables. [Other economists,

it must be noted, would contend that, in any event, the traditional Keynesian

model is really not applicable to such long-term

phenomena as Fischer’s price-revolutions.

Keynes himself, in considering “how changes in the quantity of money affect

prices… in the long run,” said, in the General Theory (1936, p. 306):

“This is a question for historical generalisation rather than for

pure theory.”]

For the 16th-century Price Revolution, therefore, the interesting question now

becomes: not why did it occur so early (i.e., before significant influxes of

Spanish American bullion); but rather why so late — so many decades after the

onset of the Central European silver-copper mining boom?

Since that boom had commenced in the 1460s, precisely when late-medieval

Europe’s population was at its nadir, perhaps 50% below the 1300 peak, and just

after the Hundred Years’ War had ended, and just

after the complex network of overland continental trade routes between Italy

and NW Europe had been successfully restored, one might contend that in such an

economy with so much “slack” in under-utilized resources, especially land, and

with elastic supplies for so many commodities, both the monetary expansion and

economic recovery of the later 15th century , preceding any dramatic

demographic recovery, permitted an increase in y proportional to the growth of

M, without the onset of diminishing returns an d without significant inflation,

before the 1520s By that decade, however, the monetary expansion had become

all the more powerful: with the peak of the Central European silver-mining

boom and with the rapid increase in the use of negotiable, transferable

credit instruments; and, furthermore, with the Ottoman conquest of the Mamluk

Sultanate (1517), which evidently diverted some considerable amounts of

Venetian silver exports from the Levant to the Antwerp market.

The role of the income-velocity of money

is far more problematic. According to Keynesian expectations, velocity should

have fallen with such increases in money stocks. Yet three eminent economic

historians — Harry Miskimin

(1975), Jack Goldstone (1984), and Peter Lindert (1985) — have sought

to explain England’s16th-century Price Revolution by a very contrary thesis:

of increased money flows (or reductions in k) that were induced by demographic

and structural economic changes, involving interalia(according to their

various models) disproportionate changes in urbanization, greater

commercialization of the rural sectors, far more complex commercial and

financial networks, changes in dependency ratios, etc. The specific

circumstances so portrayed, however, apart from the demographic, are largely

peculiar to 16th- century England and thus do not so convincingly explain the

very similar patterns of inflation in the 16th-century Low Countries, which had

undergone most of these structural economic changes far earlier. Certainly

these velocity model s cannot logically be applied to Fischer’s three other

inflationary long-waves. Indeed, in an article implicitly validating Keynesian

views, Nicholas Mayhew (1995) has contended that the income-velocity of money

has always fallen with an expansion in money stocks, from the medieval to

modern eras, with this one anomalous exception of the 16th-century Price

Revolution. Perhaps, for this one era,

we have misspecified V (or k) by misspecifiying M: i.e., by not properly

including increased issues of negotiable credit; or perhaps institutional

changes in credit (as Goldstone and Miskimin both suggest) did have as dramatic

an effect on V as on M. Furthermore, an equally radical change in the coined

money supply (certainly in England), from one that had been principally gold

to one which, precisely from the 1520s, became largely and then almost entirely

silver, may provide the solution to the velocity paradox: in that the

transactions velocity attached to small value silver coins, of 1d., is

obviously far higher

velocity than that for gold coins valued at 80d and 120d. Except for a brief

reference to Mayhew’s article in the lengthy bibliography, Fischer virtually

ignores such velocity issues

(and thus changes in the demand for real cash balances) throughout his

eight-century survey of secular price trends.

Finally, Fischer’s thesis that population growth was responsible for this the

most famous Price Revolution (and all other inflationary long waves) is hardly

credible, especially if he insists on dating its inception the 1470s. For most

economic historians (Vander Wee 1963; Blanchard 1970;

Hatcher 1977, 1986; Campbell 1981; Harvey 1993) contend that, in NW Europe,

late-medieval demographic decline continued into the early 16th-century;

and that England’s population in 1520 was no more than 2.25 million,

compared to estimates ranging from a minimum of 4.0 to a maximum of 6.0 or even

7.0 million around 1300, the upper bounds being favored by most historians. How

— even if the demographic model were to be theoretically acceptable — could

a modest population growth from such a very low level in the 1520s, reaching

perhaps 2.83 million in 1541, and peaking at 5.39 million in 1656, have been

the fundamental cause of persistent, European wide-inflation, already underway

in the 1520s?

According to Fischer, the ensuing, intervening price-equilibrium

(c.1650-c.1730) involved no discernible monetary contraction, and similarly,

his next inflationary long-wave (c.1730-1815) began well before any monetary

expansion became — in his view — manifestly evident. The monetary and price

data, suggest otherwise, however, incomplete though they may be. Thus, the data

complied by Bakewell, Cross, TePaske, and many others on silver mining at

Potosi (Peru) and Zacatecas (Mexico) indicate that their combined outputs fell

from a mean of 178,692 kg in 1636-40 to one of 101,534 kg in 1661-5, rising to

a mean of 156,497 kg in 1681-5

[partially corresponding to guesstimates of European bullion imports, which

Morineau (1985) extracted fr om Dutch gazettes]; but then sharply falling once

more, and even further, to a more meager mean of 95,842 kg in 1696-1700. During

this same era, the Viceroyalty of Peru’s domestically-

retained share of silver-based public revenues rose from 54% to 96%

(T ePaske 1981); the combined silver exports of the Dutch and English East

India Companies to Asia (Chaudhuri 1968; Gaastra 1983) increased from a

decennial mean of 17,293 kg in 1660-69 to 73,687 kg in 1700-09, while English

mint outputs in terms of fine sil ver (Challis 1992) fell from a mean of 19,400

kg in 1660-64 (but 23,781 kg in 1675-79) to one of just 430.4 kg in 1690-94,

i.e., preceding the Great Recoinage of 1696-98. From the early 18th century,

however, European silver exports to Asia were well more

than offset by a dramatic rise in Spanish-American, and especially Mexican

silver production: for the latter (with evidence from new or previously

unrecorded mines: assembled by Bakewell 1975, 1984; Garner 1980,

1987; Coatsworth 1986, and others), aggregate production more than doubled

from a mean of 129,878 kg in 1700-04 to one of 305,861 kg in 1745-49.

Possibly even more important, especially with England’s currency shift from a

silver to a gold standard, was a veritable explosion in aggregate

Latin-American gold production: from a decennial mean of just 863.90 kg in

1691-1700

zooming to 16,917.4 kg in 1741-50 (TePaske 1998). Within Europe itself, as

Blanchard (1989) has demonstrated, Russian silver mining outputs, ultimately

responsible for perhaps 7%

of Europe’s total stocks,

rose from virtually nothing in the late 1720s to peak at 33,000 kg per annum in

the late 1770s, falling to 18,000 kg in the early 1790s then rising to 21,000

kg per year in the later 1790s.

Finally, even though changes in annual mint outputs are not valid indicators

of changes in coined money supplies, let alone of changes in M1,

the fifty-year means of aggregate values of English mint outputs (silver and

gold: Challis 1992) do provide interesting signals of longer-term monetary

changes: a fall from an annual mean of 348,829 pounds in 1596-1645 to one of

275,403 pounds in 1646-95, followed by a rise, with more than a full recovery,

to an annual mean of 369,644 pounds in 1700-49 (thus excluding the Great

Recoinage of 1696-98). Meanwhile, if the earlier Price Revolution had indeed

peaked in 1645-49, with the quinquennial mean PB&H index at 680, falling to a

nadir of 579 in 1690-94, the fluctuations in the first half of the 18th-century

do not demonstrate any clear inflationary trend, with the mean PB&H index

(briefly peaking at 635 in 1725-9) stalled at virtually the same former level,

581, in 1745-49. Thereafter, of course,

for the second half of the 18th century, the trend is very strongly and

incessantly upward, with almost a

doubling in PB&H index, to 1093 in 1795-9.

Whatever one may wish to deduce from all these diverse data sets, we are

certainly not permitted to conclude, as does Fischer, that inflation preceded

monetary expansion, and did so consistently. Such a view becomes all the more

untenable when the radical changes in English and banking and credit

institutions, following the establishment of the Bank of England in 1694-97,

are taken into account: the consequent introduction and rapid expansion in

legal-tender paper bank note issues (with prior informal issues by London’s

Goldsmith banks), and more especially fully negotiable,

transferable, and discountable Exchequer bills, government annuities,

inland bills and promissory notes, whose veritable explosion in circulation

from the 1760s, with the proliferation of English country-banks, hardly

requires any further elaboration, even if these issues are given short shrift

in Fischer’s book. In view of such complex changes in Britain’s financial and

monetary structures,

subsequent data on coinage outputs have even more limited utility in

estimating money stocks. But we may note that aggregate mined outputs of

Mexican silver more than doubled, from a quinquennial mean of 305,861 kg in

1745-49 to 619,495 kg in 1795-99, while those of Peru more than tripled, from

34,318 kg in 1735-39 (no data for the 1740s) to 126,354 kg in 1795-99 (Garner

1980, 1987; Bakewell 1975, 1984; J.

Fisher, 1975).

Having earlier considered the so-called and misconstrued

“price-equilibrium” of 182 0-1896, let us now finally examine the inception of

the fourth and final long-wave commencing in 1896. Fischer again contends that

population growth was the “prime mover,” despite the fact that Britain’s own

intrinsic growth rate had been falling from its

1821 peak [from 1.75 to 1.31 in 1865, the last year given in Wrigley-Davies-

Oppen-Schofield (1997)]. For evidence he cites an assertion in Colin McEvedy

and Richard Jones, Atlas of World Population History (1978) to the effect that

world population, having increased by 35% from 1850 to 1900,

increased a further 53% by 1950. Are we therefore to believe that such growth

was itself responsible for a 45.2% rise in, for this era, the better structured

Rousseaux price-index [base 100 = (1865cp +1885cp)/2]: from 73 in 1896 to 106

[while the PB&H index rose from 947 in 1896 to 1021 in 1913]?

As for the role of monetary factors in the commencement of this fourth long

wave, Fischer observes (p. 184) that “the rate of growth in gold production

throughout the world was roughly the same before and after 1896.” This

undocumented assertion, about an international economy whose commerce and

finance was now based upon the gold standard, is not quite accurate.

According to assiduously calculated estimates in Eichengreen

and McLean

(1994), decennial mean world gold outputs, having fallen from 185,900 kg in

1850-9 to 135,000 kg in 1880-9 (largely accompanying the aforementioned 44%

fall in the Rousseaux composite index from 128 in 1872 to 72 in 1895),

thereafter soared to

a mean of 255,600 kg in 1890-9 — their graph of annualized data shows that

the bulk of this increased output occurred after 1896 — virtually doubling to

an annual mean of 513,900 kg in 1900-14.

World War I, of course, effectively ended the international gold-standard era,

since the Gold- Exchange Standard of 1925-6 was rather different from the older

system; and the post-war era ushered in a radically new monetary world of fiat

paper currencies, whose initial horrendous manifestation came in the hyper

inflations of Weimar Germany, Russia, and most Central European countries, in

the early 1920s. For this post-war economy, Fischer does admit that monetary

factors often had some considerable importance in influencing price trends; but

his analyses, even of the post-war radical, paper-fuelled hyperinflations, are

not likely to satisfy most economists, either for the inter-war or Post World

War II eras, up to the present day.

This review, long as it is, cannot possibly do full justice to an eight-century

study of this scope and magnitude. So far I have neglected to consider his

often fascinating analyses of the social consequences of inflation over these

many centuries, except for brief allusions in the introduction, where I

indicated his deeply hostile views to persistent inflation for its inevitably

insidious consequences: the impoverishment of the masses, growing malnutrition,

the spread of killer-diseases, increased crime and violence in general, and a

breakdown of the social order, etc.

While some of

the evidence for the latter seems plausible, I do have some concluding quarrels

with his use of real wage indices. Much of our available nominal money-wage

evidence comes from institutional sources on daily wages, which, by their very

nature, tend to be fixed over long periods of time [as Adam Smith noted in the

Wealth of Nations (Cannan ed.

1937, p. 74), “sometimes for half a century together”). Therefore, for such

wage series, real wages rose and fell with the consumer price index, as

measured by, for example, our Phelps Brown and Hopkins basket-of-consumables

index. Its chief problem (as opposed to the better constructed Vander Wee

index for Brabant) is that its components, for long periods, constitute fixed

percentages of the total composite index,

irrespective of changes in relative prices for, say, grains; and they thus do

not reflect the consumers’ ability to make cost-saving substitutions.

Secondly, they are necessarily based on daily wage rates, without any

indication of total annual money incomes; thirdly, the great majority of

money-wage earners in pre-modern Europe earned not day rates but piece-work

wages, for which evidence is extremely scant.

But more important, before the 18th century (or even later), a majority of the

European population did not live by money wages; and most wage-earners had

supplementary forms of income, especially agricultural, that helped insulate

them to some degree from sharp rises in food prices. If rising food prices hurt

many wage-earners, they also benefited ma ny peasants,

especially those with customary tenures and fixed rentals who could thereby

capture some of the economic rent accruing on their lands with such price

increases. It may be simplistic to note that there are always gainers and

losers with both inflation and deflation — but even more simplistic to focus

only on the latter in times of inflation, and especially simplistic to focus on

a real wage index based on the PB&H index. And if deflation is so beneficial

for the masses, why, during the deflationary period in later 17th and early

18th century England, do we find, along with a rise in this real-wage index, a

rise in the death rate from 23.68/1000 in 1626 to 32.14/1000 in 1681,

thereafter falling slightly but rising again to an ultimate peak of

37.00/1000 in 1725 (admittedly an era of anomalous disease-related

mortalities), when the PB&H real-wage index stood at 60 —

some 24% higher than the RWI of 36 for 1626? One of the many imponderables yet

to be considered, though one might ponder that sometimes high real wages

reflect labor shortages from dire conditions, rather than general prosperity

and more equitable wealth and income distributions, as Fischer suggests.

Finally, Fischer’s argument that inflationary price-revolutions were always

especially harmful to the lower classes by leading to rising interest rates is

sometimes but not universally true, even if rational creditors should have

raised rates to protect themselves from inflation. Thus, for the Antwerp money

market in the 16th century,

the meticulous evidence compiled by Vander Wee (1964, 1977) shows that

nominal interest rates fell over this entire period [from 20% in 1515 to 9% in

1549 to 5% in 1561; and on the riskier short term loans to the Habsburg

government, from a mean of 19.5

% in 1506-10 to one of 12.3% in 1541-45 to 9.63% in 1561-55]. In the next

price-revolution, during the later 18th century, nominal interest rates did

rise during periods of costly warfare, i.e., with an increasing risk premium;

but real interest rates actually fell because of the increasing tempo of

inflation (Turner 1984), more so than did real wages for most industrial

workers.

LIST OF REFERENCES CITED:

Georges d’Avenel, Histoire economique de la propriete, des salaires, des

denrees, et tous les prix

en general, depuis l’an 1200 jusqu’en l’an 1800,

7 vols. (Paris, 1894-1926).

Peter Bakewell, Silver Mining and Society in Colonial Mexico: Zacatecas,

1546-1700 (Cambridge, 1972).

Peter Bakewell, “Registered Silver Production in the Potosi District, 1550

– 1735,” Jahrbuch fur Geschichte von Staat, Wirtschaft und Gesellschaft

Lateinamerikas, 12 (1975), 67-103.

Peter Bakewell, “Mining in Colonial Spanish America,” in Leslie Bethell,

ed., The Cambridge History of Latin America, Vol. II: Colonial Latin Amer ica

(Cambridge and New York: Cambridge University Press, 1984), 105-51.

Peter Bakewell, ed., Mines of Silver and Gold in the Americas, Variorum Series:

An Expanding World: The European Impact on World History, 1450 –

1800 (London, 1997):

Ian Blanchard,

Russia’s ‘Age of Silver’: Precious-Metal Production and Economic Growth in the

Eighteenth Century (Routledge: London and New York,

1989).

Ian Blanchard, “Population Change, Enclosure, and the Early Tudor Economy,”

Economic History Review, 2nd ser. 23 (19 70), 427-45.

Ian Blanchard, “Lothian and Beyond: The Economy of the ‘English Empire’ of

David I,” in Richard Britnell and John Hatcher, eds., Progress and Problems in

Medieval England (Cambridge and New York: Cambridge University Press,

1996), pp. 23-45.

Michael Bordo, “Explorations in Monetary History: A Survey of the

Literature,” Explorations in Economic History, 23 (1986), 339-415.

Bruce Campbell, “The Population of Early Tudor England: A Re-evaluation of the

1522 Muster Returns and the 1524 and 1 525 Lay Subsidies,” Journal of

Historical Geography, 7 (1981), 145-54.

Christopher Challis, “Lord Hastings to the Great Silver Recoinage, 1464 –

1699,” in Christopher E. Challis, ed., A New History of the Royal Mint

(Cambridge: Cambridge University Press

, 1992), pp. 179-397; C.E. Challis,

“Appendix 1. Mint Output, 1220-1985,” pp. 673-698.

John Coatsworth, “The Mexican Mining Industry in the Eighteenth Century,”

in Nils Jacobsen and Hans- Jurgen Puhle, eds., The Economies of Mexico and Peru

during the La te Colonial Period, 1760 – 1810 (Berlin 1986), pp. 26-45.

Harry Cross, “South American Bullion Production and Export, 1550-1750,” in John

Richards, ed., Precious Metals in the Later Medieval and Early Modern Worlds

(Durham, 1983), Appendix II, p. 422.

T revor Dick and John Floyd, Canada and the Gold Standard: Balance of Payments

Adjustment under Fixed Exchange Rates, 1871 – 1913 (Cambridge and New York:

Cambridge University Press, 1992).

Barry Eichengreen and Ian W. McLean, “The Supply of Gold Under the

pre-1914 Gold Standard,” The Economic History Review, 2nd ser., 47:2 (May

1994),

288-309.

John Fisher, “Silver Production in the Viceroyalty of Peru, 1776-1824,”

Hispanic American Historical Review, 55:1 (1975), 25-43.

Douglas Fisher, “The Price Revolution: A Monetary Interpretation,” Journal of

Economic History, 49 (December 1989), 883 – 902.

John Floyd, World Monetary Equilibrium: International Monetary Theory in an

Historical-Institutional Context (Philadelphia, 1985).

Dennis Flynn, “A New Perspective on the Spanish Price Revolution: The Monetary

Approach to the Balance of Payments,” Explorations in Economic History, 15

(1978), 388-406.

Jacob Frenkel and Harry G. Johnson, eds., The Monetary Approach to the Balance

of Payments (Toronto: University of Toronto Press, 1976),

especially Jacob Frenkel and Harry Johnson, “The Monetary Approach to the

Balance of Payments: Essential Concepts and Historical Origins,” pp. 21-45;

Harry Johnson, “The Monetary Approach to Balance-of-Payments Theory,” pp.

147-

67; Donald N. McCloskey and J. Richard Zecher, “How the Gold Standard Worked,

1880-1913,” pp. 357-85.

FS. Gaastra, “The Exports of Precious Metal from Europe to Asia by the Dutch

East India Company, 1602-1795 A.D.,” in John F. Richards, ed.,

Precious Metals in the Medieval and Early Modern Worlds(Durham, N.C.,

1983), pp. 447-76.

Richard Garner, “Long-term Silver Mining Trends in Spanish America: A

Comparative Analysis of Peru and Mexico,” American Historical Review, 67:3

(1987), 405-30.

Richard Garner,

“Silver Production and Entrepreneurial Structure in 18th-Century Mexico,”

Jahrbuch fur Geschichte von Staat, Wirtschaft und Gesellschaft

Lateinamerikas,17 (1980), 157-85.

Jack Goldstone, “Urbanization and Inflation: Lessons from the English Price

Revolution of the Sixteenth and Seventeenth Centuries,” American Journal of

Sociology, 89 (1984), 1122 – 60.

Earl Hamilton, American Treasure and the Price Revolution in Spain,

1501-1650 (Cambridge, Mass., 1934; reissued 1965).

Earl Hamilton, Money, Prices, and Wages in Valencia, Aragon, and Navarre,

1351 – 1500 (Cambridge, Massachusetts: Harvard University Press, 1936).

Barbara Harvey, Living and Dying in England, 1100 – 1540 (Oxford: Oxford

University Press, 1993).

John Hatcher, Plague, Population, and the English Economy, 1348-1530

(Studies in Economic History series, London, 1977).

John Hatcher, “Mortality in the Fifteenth Century: Some New Evidence,”

Economic History Review, 39 (Feb. 1986), 19-38.

David Herlihy, Medieval and Renaissance Pistoia: The

Social History of an Italian Town, 1200-1430 (New Haven and London, 1966).

John Maynard Keynes, The General Theory of Employment, Interest and Money

(London, 1936).

Peter Lindert, “English Population, Wages, and Prices: 1541 – 1913,” The

Journal of Interdisciplinary History, 15 (Spring 1985), 609 – 34.

Nicholas Mayhew, “Population, Money Supply, and the Velocity of Circulation in

England, 1300 – 1700,” Economic History Review, 2nd ser.,

48:2 (May 1995), 238-57.

Harry Miskimin, “Population Growth and

the Price Revolution in England,”

Journal of European Economic History, 4 (1975), 179-85. Reprinted in his Cash,

Credit and Crisis in Europe, 1300 – 1600 (London: Variorum Reprints,

1989), no. xiv.

B.R. Mitchell and Phyllis Deane, eds. Abstract of British Historical

Statistics (Cambridge, 1962)

John Munro, “Mint Outputs, Money, and Prices in late-Medieval England and the

Low Countries,” in Eddy Van Cauwenberghe and Franz Irsigler, ed.,

Munzpragung, Geldumlauf und Wechselkurse / Minting, Monetary Circulation and

Exchange Rates, (Trierer Historische Forschungen, Vol. VIII, Trier,

1984), pp. 31-122.

John Munro, “Bullion Flows and Monetary Contraction in Late-Medieval England

and the Low Countries,” in John F. Richards, ed., Precious Metals in the

Medieval and Early Modern Worlds (Durham, N.C., 1983), pp. 97-158.

John Munro, “The Central European Mining Boom, Mint Outputs, and Prices in the

Low Countries and England, 1450 – 1550,” in Eddy H.G. Van Cauwenberghe,

ed., Money, Coins, and Commerce: Essays in

the Monetary History of Asia and Europe (From Antiquity to Modern Times)

(Leuven: Leuven University Press,

1991), pp. 119-83.

John Nef, “Silver Production in Central Europe, 1450-1618,” Journal of

Political Economy, 49 (1941), 575-91.

John Nef, “Mining

and Metallurgy,” in M.M. Postan, ed., Cambridge Economic History, Vol. II:

Trade and Industry in the Middle Ages (Cambridge, 1952),

pp. 456-93. Reprinted without changes, in the 2nd revised edn. of The Cambridge

Economic History of Europe, Vol. II, edited by M.M. Postan and Edward Miller

(Cambridge, 1987), pp. 691-761.

E.H. Phelps Brown and Sheila V. Hopkins, “Seven Centuries of en Centuries of

the Prices of Consumables Compared with B Building Wages,” Economica, 22

(August 1955), and “Sevuilders” Wage-

Rates,” Economica, 23 (Nov. 1956),

reprinted E.H. Phelps Brown and Sheila V. Hopkins, A Perspective of Wages and

Prices (London, 1981), containing additional statistical appendices not

provided in the original publication.

Frank Spooner, The International Economy and Monetary Movements in France,

1493-1725 (Cambridge, Mass., 1972)

John TePaske, “New World Silver, Castile, and the Philippines, 1590-1800 A.D.,”

in John F. Richards, ed., Precious Metals in the Medieval and Early Modern

Worlds (Durham, N.C.

, 1983), pp. 424-446.

John TePaske, “New World Gold Production in Hemispheric and Global Perspective,

1492 – 1810,” in Clara Nunez, ed., Monetary History in Global Perspective, 1500

– 1808, Papers presented to Session B-6 of the Twelfth International Eco nomic

History Congress (Seville, 1998), pp. 21-32.

Michael Turner, Enclosures in Britain, 1750 – 1830, Studies in Economic History

Series (London, 1984).

Herman Vander Wee, Growth of the Antwerp Market and the European Economy,

14th to 16th Centuries,

3 Vols. (The Hague, 1963). Vol. I: Statistics; Vol.

II: Interpretation, 374-427; and Vol. III: Graphs.

Herman Vander Wee, “Monetary, Credit, and Banking Systems,” in E.E. Rich and

Charles Wilson, eds., The Cambridge Economic History of Europe, Vol. V:

T he Economic Organization of Early Modern Europe(Cambridge, 1977), chapter V,

pp. 290-393.

Herman Vander Wee, “Prijzen en lonen als ontwikkelingsvariabelen: Een

vergelijkend onderzoek tussen Engeland en de Zuidelijke Nederlanden,

1400-1700,” in Album aan geboden aan Charles Verlinden ter gelegenheid van zijn

dertig jaar professoraat (Gent, 1975), pp. 413-47; reissued in English

translation (without the tables) as “Prices and Wages as Development Variables:

A Comparison Between England and the Southern Net herlands,

1400-1700,” Acta Historiae Neerlandicae, 10 (1978), 58-78.

Ivor Wilks, “Wangara, Akan, and the Portuguese in the Fifteenth and Sixteenth

Centuries,” in Ivor Wilks, ed., Forests of Gold: Essays on the Akan and the

Kingdom of Asante (Athens, Ohio

, 1993), pp. 1-39.

E.A. Wrigley, R.S. Davies, J.E. Oeppen, and R.S. Schofield, English Population

History from Family Reconstitution, 1580- 1837 (Cambridge and New York:

Cambridge University Press, 1997).

Published by EH.NET (January 2000)

Gerald Friedman, State-Making and Labor Movements: France and the United

States, 1876-1914. Ithaca, NY: Cornell University Press, 1998. xiv + 317

pp. $55 (cloth), ISBN: 0-8014-2325-2.

Reviewed for EH.NET by Melvyn Dubofsky, Departments of History and Sociology,

Binghamton University, SUNY.<

dubof@mailbox.cc.binghamton.edu>

Gerald Friedman, an associate professor of economics at the University of

Massachusetts-Amherst, has written a book that resonates with the spirit of the

last decade of the twentieth century. Although his subject is the growth,

character, and composition of the French and U.S. labor movements in the era of

the Second International, the apogee of Marxism, Friedman views the past

through the lens of the present, a time when labor retreats,

Marxism has been declared dead, and “there is no alternative (TINA)” in sight

to a voracious global capitalism. Based on his comparison of the U.S. and

French labor movements between the 1870s and World War I, Friedman concludes

first, that workers cannot advance their interests without non-working-class

allies and a sympathetic state, and, second, that “orthodox” Marxists, then

and later, were wrong in their economic determinism (historical materialism)

and revolutionary teleology.

Friedman uses the comparative history of U.S. and French labor movements to

make his case. Not only that; he also attempts to reverse the conventional

portrait of the two national labor movements. He suggests that an increasingly

radical and militant French labor movement led by revolutionary syndicalists

grew more rapidly than its U.S. counterpart;

better served the material interests of its members; and succeeded in

organizing the “towering heights” of the French economy, its mass-production

enterprises. By way of contrast, after 1904, a

“conservative” “pure and simple” U.S. labor movement failed to advance; did

little or nothing for the great mass of workers; and failed absolutely to

penetrate the dominant “Fordist” sector of the economy. How does Friedman

explain the relative success of French labor and failure of U.S. labor?

Simply put, he argues that trade unions and the labor movements in both

countries were too weak alone to counteract the greater power of capitalists.

In France, however, Republicans could not defend the Third Republic against

Monarchists and reactionaries (with whom businesspeople allied) without the

support of labor. Hence the French state protected unions against attacks by

capital and encouraged public mediation in place of private or public

repression. In the U.S., however, a liberal state faced no challenge from

anti-Republican reactionaries, hence had no need to build alliances with labor,

and thus enabled employers to crush unions and,

on occasion, used public power to the same end. Put another way, as Friedman

does, the dynamics of French politics and state-making enabled labor to drift

left and remain rhetorically revolutionary while the political process in the

U.S. left labor no choice but to practice

“prudential unionism” and the principle of sauve qui peut.

Does Friedman establish his case? Here I remain less convinced. As an

economist trained in the use of statistics and quantification, Friedman deploys

a variety of data bases, tables, graphs, standard deviations, and regression

analyses to prove his points. A review of this length is not the place to

engage in a debate over the validity of such quantifiable evidence. Suffice it

to say that the meaning of Friedman’s numbers can be interpreted in more than

one way. I prefer to focus on more substantial shortcomings. Are

France and the U.S. actually a good comparison, and is it true, as Friedman

claims (p. 12), that the economic and political differences between the two

nations “were relatively small.” Yes, the U.S.

and France were both capitalist economies and republican polities. Beyond

that, however, it seems to me that enormous differences loomed. One nation was

a centralized, unitary state administered by a trained bureaucracy and governed

by codified legal principles under Roman law. The other was a decentralized,

federal state lacking a trained cadre of administrators and governed by a

common law regime that gave judges enormous autonomy and authority. One nation

had a relatively, large and stable agricultural sector characterized by

small-scale peasant farming and a manufacturing sector dominated in the main

by relatively small enterprises dependent on skilled craftsmen adept at

small-batch production. The other had an agricultural sector that declined

quite rapidly relative to the non-agricultural sector and in

which large holdings increasingly characterized the dynamic staple-producing,

export-driven side of farming;

it also had an industrial sector increasingly characterized by gargantuan

enterprises employing armies of machine operators to mass produce capital and

consumer goods. Should one expect comparable trajectories for labor movements

in Fordist and pre-Fordist economic regimes?

And what of Friedman’s portrait of the histories of the French and U.S.

labor movements? Was the French movement relatively successful as compared to

the one in the U.S.? Did French unions really succeed before World War I in

unionizing among employees in large-scale, mass-production enterprises?

Were U.S. unions as loath to organize the less skilled and as disdainful of

workers in the mass-production sector as Friedman claims? Friedman’s own

statistical and written data fail to answer those questions. If typical French

locals were as small as Friedman’s data indicate, indeed on average far smaller

than U.S. union locals, how could they be characterized as examples of

successful industrial unionism? For an economist trained in quantification,

Friedman provides precious little data in the way of comparative wage rates,

annual earnings, hours of work, working conditions,

and consumption standards, to judge the relative impact of French and U.S.

unions on the lives of their members. Did U.S. unions fail to organize less

skilled mass-production workers because their leaders were narrow-minded,

selfish, chauvinistic, and sexist individuals or because their adversaries

were too powerful, as Friedman’s own evidence suggests?

Does Friedman’s explication of comparative business history and politics in the

two nations work any better? His businesspeople on both sides of the Atlantic

proved equally anti-union but were French entrepreneurs more reactionary, even

Monarchist, hierarchical paternalists than their U.S.

republican, individualistic brothers in capitalism? Did French employers seek

to keep their employees out of unions by playing the “good father” to

obedient, deferential workers, while U.S. employers designed welfare capitalism

to encourage competitive individualism among their more skilled employees? I

suggest that Friedman read carefully the testimony of leading

“welfare capitalists” before the U.S. Commission on Industrial Relations

(1913-15) to see how they perceived their loyal workers as children who

preferred not to think or to act on their own. Or that he visit Binghamton,

New York, the home of one of the most notable practitioners of welfare

capitalism, the Endicott-Johnson Shoe Company (mistakenly called

Endicott-Peabody in the text, p. 197, and index) and view the statue of George

F. Johnson erected in George F. Johnson Recreation Park which features the

patron patronizing two adorable children, or the two arches erected by local

shoe workers to honor their patron. Finally, what of politics? Was the French

state and its republican majority more dependent on working-class votes and

more solicitous of working-class interests than its U.S. counterparts? Again I

find Friedman’s evidence problematic. One of French labor’s friends in power,

Georges Clemenceau, as described by Friedman, in 1906 sent troops to the Nord

and the Pas de Calais to break a coal miner’s strike and

repress riotous behavior by the strikers. Yet in Friedman’s words, Clemenceau

“restrained labor militancy…to preserve republican order, to protect the

Republic. But he never acted merely to bolster capitalist authority, never

acceded to the demands of

employers and the right that he crush organized labor or reject the right of

workers to form unions and to strike. Instead he continued to support labor

organization and to promote collective bargaining as the basis for social peace

and a new republican order (p. 202).” How did this differ from Theodore

Roosevelt’s logic four years earlier during the strike of anthracite coal

miners in northeastern Pennsylvania, when he threatened to send troops not to

repress labor but to seize the mines? Or from the lab or policies of Woodrow

Wilson on the eve of World War I or Herbert Hoover in the 1920s? Workers voted

in the U.S. as well as in France; their leaders also sought to practice

coalition politics; and some, if not all,

office-holders sought labor’s votes.

Friedman also might have done well to temper his criticism of Karl Marx and

“orthodox Marxism.” After all, Marx’s voluminous writings are like scripture,

subject to multiple interpretations and open to the principle that “seek and ye

shall find.” Moreover,

in his haste to make a case for historical contingency and human agency,

Friedman might have done well to recall Marx’s sage words from the

Eighteenth Brumaire, that man indeed makes his own history, but only

“under circumstances directly encountered, given and transmitted from the past.

The tradition of all the dead generations weighs like a nightmare on the brain

of the living.” In his neglect of that astute advice, Friedman misconstrues

Marx’s faith in human agency as well as his “third thesis on Feuerbach.” In

that thesis Marx did not write declaratively, as Friedman cites him (p. 297)

“that it is men who change circumstances and that it is essential to educate

the educator himself.” Rather, Marx asked in response to those who believed

that education could alter society, “Who educates the educator?”

Lest I appear too critical of Friedman’s effort to make us think more

critically about the past and also to remind us about paths not taken as a

result of human volition, let me close by suggesting that this is a book well

worth reading and pondering. Whether its author is right or wrong in many of

his claims, he does make readers consider carefully significant historical and

contemporary issues. And he is certainly right that labor cannot advance its

material and moral interests without non-working-class allies in state and

society, a truth perhaps more to the point today than ever in the past.

Melvyn Dubofsky is Distinguished Professor of History and Sociology at

Binghamton University, SUNY. This spring the University of Illinois Press will

publish a collection of his essays titled Hard Work: The Making of Labor

History. It will also publish a new abridged paperback version of his

history, We Shall Be All: A History of the Industrial Workers of

the World.

Published by EH.NET (February 2000)

Joan Lisa Bromberg. NASA and the Space Industry. New Series in NASA

History. Baltimore, MD: Johns Hopkins Press, 1999. X + 247 pp. Preface,

Tables, Figures, Notes, Bibliography, and Index. $38.00 (cloth), ISBN

0-8018-6050-4.

Reviewed for H-Business and EH.NET by Roger Handberg,

handberg@pegasus.cc.ucf.edu, Department of Political Science, University of

Central Florida.

Dealing with NASA’s Most Important But Least Valued Activities

Readers interested in space policy and especially the workings of NASA will be

very interested in this well conceptualized volume. NASA conducts a number of

activities in the

space realm spanning human space flight, space science, and commercial

activities. Most accounts of NASA’s work focus upon the first two to the

neglect of the third. Joan Bromberg provides an overview of the travails of

NASA in fostering the commercial development of outer space. Until Sputnik

flew in October 1957, no space industry by definition could exist. NASA,

through its programs and initiatives, started the development process, drawing

defense contractors in different directions than their early exclusive focus

upon the Department of Defense.

Her analysis focuses upon the broad contours of that effort, using case studies

as examples of NASA interactions with the commercial sector and the fruits of

those efforts.

NASA in her judgment has encountered great difficulties in remaining a

significant player for a diverse set of reasons. First, the commercial sector

as it matures moves in pursuit of its specific needs, ones that NASA does not

necessarily encourage or desire. Second, NASA, for reasons of its self-image

and agenda, has lost leverage because the commercial sector perceives with some

justification the agency as attempting to pursue its agenda of human

space flight using their fiscal resources. Third, NASA’s self image and

behavior

tracks that

of an R&D organization with an engrained disdain for merely applied activities.

In NASA’s value hierarchy,

commercialization ranks low always subject to the more critical needs of R&D.

This can be seen most clearly in the struggles over commercializing the

technologies that NASA has developed. The agency and its personnel have

essentially been uninterested or insufficiently interested to make

commercialization work systematically. This disinterest could be seen in the

recurring reorganizations that have occurred, effectively reshuffling the deck

chairs but not changing the agency’s culture. Fourth, the agency’s budget

continues to recede so that the contractors (the core constituency of the space

industry) seek other avenues especially the growing internationalized

commercial sector. This means the agency is losing its ability to influence

behavior.

The result, according to Bromberg, is an agency losing the ability to influence

its environment; critical players are too disaffected to accept NASA’s leader

ship. The agency is not ineffectual just perceived as too excessively self

interested to be trusted. Both Congress and the commercial sector hold this

distrust. For example, the agency is perceived as attempting to entice the

commercial sector to pay for

the space shuttle’s replacement, an option resisted by outsiders who are more

focused upon economic viability questions than flying humans into orbit.

Consequently,

the X-33 program becomes more fragile technologically since the focus from

NASA’s perspective is not economics but continued assured access to space.

This translates into pushing the envelope developmentally since operating costs

are not central to NASA’s concerns. Industrial views are ultimately and

intimately driven by cost factors since at

some point they must make a return to justify continuing. Bromberg in her

analysis reinforces the perception of a government agency struggling to remain

relevant in an era in which government is often thought irrelevant or

counterproductive. In the space

industry context, this struggle is sharpened by the recent boom in space-based

communications applications. Entrepreneurs now perceive NASA as hindering

progress rather than a technology enabler.

The larger insight provided by this volume is the role NAS A played in

formulating and directing the creation of a space industry. The agency along

with the Department of Defense was central to that effort but the agency by the

1970s was losing control, a situation reinforced by the Space Shuttle

Challenger accident in January 1986. The shuttle’s failure forced commercial

players to look elsewhere for space lift and, by extension,

opened the door for competing views of how the field should be organized and

operated. Since the Reagan administration, NASA has been

under heavy pressure to be economically relevant in its activities. The

difficulty was and is that there exists no clearly defined mechanism by which

development and later commercialization or privatization of space technologies

occurs.

NASA perceives such transfers as someone else’s problem or else an attack upon

the agency viability (remember in 1981, the rhetoric was abolishing the agency

by eliminating its programs) while the private sector sees the agency as a

hindrance and defender of the status quo

. Joan Bromberg describes and analyzes these and other problems succinctly in a

well-organized work.

The book is well researched, being supported by a NASA history grant, with

access to archival materials not normally available or cited. The author does

a fine job of bridging the problem of detail versus a larger sweep of events.

Her thrust is to stay with the larger picture since that is the story rather

than the obsessive focus upon individual events. The work amply illustrates the

interesting fact that the space age is moving toward the half-century mark,

meaning that some perspective is now being obtained.

That will be especially critical over the next decade as NASA struggles to

define itself in a world in which commercial space applications grow in

sophistication, number and usefulness. Readers will come away with a firm grasp

of the difficulties inherent in directing economic and technological change

given the unknowns that exist in predicting the future.

That future includes an expanding internationalization which further

undermines NASA’s efforts at directing the future of the American space

industry. When NASA began in 1958, the goal was American dominance over

commercial space, those days are now numbered, meaning the field is in flux

with multiple players pursuing separate agendas. NASA’s focus now becomes

carving out a niche that facilitates the opportunity to pursue the human

exploration and exploitation of outer space. That quest permeates all its

activities as this volume amply documents.

Published by EH.NET (January 2000)

Michael Sanderson, Education

and Economic Decline in Britain, 1870 to the 1990s. New York: Cambridge

University Press, 1999. viii + 124 pp. $39.95

(cloth), ISBN: 0-521-58170-2; $11.95 (paper), ISBN: 0-521-58842-1.

Reviewed for EH.NET by David Mitch, Department of Economics, University of

Maryland-Baltimore County.

The education of an economy’s workforce can influence its performance in

diverse ways ranging from the productivity of its farm and factory workers to

the ability of its scientists and engineers to develop and diffuse new

technologies to the entrepreneurial and managerial capabilities of its business

leadership. While the protean nature of education makes it an attractive

candidate for explaining economic performance it also makes it problematic for

the

historian to pin down its actual role in specific situations. The problems

involved can range from controlling for unobservable native ability factors at

the individual level to deciding how to enter education in an aggregate

production function at the macro level.

In the case of the British economy’s relative fall from its Victorian zenith

over the last century, deficiencies in the British educational system have

often been invoked as contributing factors. From Alfred Marshall to David

Landes, critics

of late Victorian economic performance have noted the failure of Britain to

develop a system of formal technical training on the same scale of Germany.

However, defenders of British education such as Sydney Pollard and Roderick

Floud have maintained that the British use of on-the-job training to develop

technical skills was rational given the alternatives.

Michael Sanderson undertakes in the volume under review to survey the debates

that have occurred among “those who would emphasize or deny education’s

contribution or culpability for Britain’s diminished economic state.” (p.2).

The

volume itself is one in the series New Studies in Social and Economic History

published by Cambridge and of which Sanderson himself is the general editor.

Sanderson is a prominent authority on the history of the relation between

education and the economy in Britain since the industrial revolution. He has

written important work on the role (or lack thereof) of literacy in textile

workforce of Lancashire during the industrial revolution, on the growing

involvement of British universities in industrially relevant scientific and

engineering work in the late nineteenth and early twentieth centuries, and on

the failure of Britain to develop extensive secondary level technical training

in the twentieth century.

Sanderson begins with a very brief introduction surveying in just over a page

the evidence for sustained British relative decline in performance over the

past century while acknowledging a parallel rise in absolute levels of

prosperity. At the outset, he explicitly avoids a survey of general

explanations of Britain’s decline, choosing instead to focus specifically on

what role education may have played in decline. He then turns in the first full

chapter of the book to the advent of universal mass schooling and literacy

that occurred in Britain between 1870 and 1914.

While this can generally be seen as a positive aspect of Britain’s educational

performance during this period, Sanderson notes signs of future problems in

subsequent educational development with the reluctance of educational

authorities to support either training in technical courses or higher grade

education more generally as follow-ups to the provision of universal primary

education during this period.

Of the remaining six chapters, four focus primarily on technical and

vocational education, and this primarily at the secondary level. One persistent

theme Sanderson notes in British educational policy, whether in the Victorian

and Edwardian periods covered in chapter 2, the inter-war period covered in

chapter 5, or the postwar period covered in chapter 6, is the reluctance both

of government educational policy makers to support the expansion of secondary

technical training and of employers to hire technical graduates.

Sanderson’s other central theme is the failure of the British educational

system to provide adequately for upward mobility of abler children of

working-class parents. In chapter 4 on Victorian and Edwardian elite education

and in Chapter 7 on higher and public school education in recent decades,

Sanderson argues that despite increasing efforts of universities and elite

schools to develop more relevance for the requirements of industry such as

engineering and business education, too little was done

in either period to recruit able people of humble origins. He argues that this

exclusion has entailed a great waste of talent insofar as mediocre individuals

of privileged background have been able to buy their way into the superior

segments of the British educational system.

Another theme sounded throughout is the excessive emphasis in British education

on self-evidently “useless” knowledge as “mind-trainingly liberal” at the

expense of practical technical and vocational training.

Thus, Sanderson clearly assigns culpability to the British educational system

over the past century for contributing to economic decline. He does so in an

articulate way while generally acknowledging and stating fairly and accurately

the arguments of those whom defend the economic performance of Britain’s

educational system.

However, in a few passages, treatment is not as even handed as it could have

been. In the first chapter on elementary education, Sanderson takes a negative,

dismissive view of the Revised Code of 1861, which based parliamentary grants

to elementary schools on student examination results.

In doing so, he makes no mention of respected, mainstream educational

historians such as John Hurt and David Sylvester who have argued that the

Revised Code made a positive contribution by sustaining ongoing increases in

parliamentary funding for education. In the penultimate sentence of the book,

he cites approvingly the statement of Simon Szreter that education is

“fundamental and essential for the promotion of economic

growth” (p.107),

giving no mention to those, such as the present reviewer, who have questioned

the underlying premise of indispensability in such statements

(see Mitch 1990). But these are exceptions to Sanderson’s generally balanced

coverage.

Some would probably question Sanderson’s assessment of the importance and

magnitude of education’s contribution to British economic decline. A good deal

of Sanderson’s case is based on the virtues he espouses of technical education

and implicitly of the importance

for on-going economic vitality of the manufacturing sector. He provides no

direct support for these views and makes no mention of opposing perspectives

such as that of Philip Foster in his important piece, “The Vocational School

Fallacy in Development Planning.” In making his case, Sanderson relies heavily

on Germany as a benchmark, noting its much more extensive provision of formal

technical and vocational training, its much greater absolute numbers of

scientists and engineers than Britain, and in the later twentieth century, its

higher scores on internationally comparable math tests. There is an element of

circularity to Sanderson’s argument here. He ultimately seeks to explain how

much of England’s loss of economic superiority to Germany can be explained by

educational deficiencies. Yet he ends up making the case for Britain’s

educational deficiencies based on the fact that its educational system was

different from and by some measures behind Germany’s. However,

as Sanderson at points acknowledges (and this returns to the issue of

indispensability noted above), an economy may face a wide continuum of

economically viable educational strategies and the most appropriate one may

vary according to a country’s particular circumstances. One can note here the

contrast between the emphasis on formal education during the late nineteenth

and early twentieth centuries in the U.S. educational system compared with

Germany’s emphasis on vocational training during a period when by many accounts

the U.S., as well as Germany, was overtaking Britain in economic performance

(see Hansen 1998).

In accounting for Britain’s failure to provide a sufficient total level of

education and under-investment in technical and vocational education,

Sanderson assigns part of the blame

to inadequate government support,

noting the failure of any coherent national policy to develop. Barnett

(1999) in his recent review of Sanderson’s book observes a similar feature.

However, one might argue that in regard to higher education, Britain has

suffered from too much centralization of authority with a resultant stifling of

entrepreneurial responses to emerging training opportunities. A more

pluralistic institutional structure in British higher education might have

produced more responsiveness to

economic demands, arguably a strength of U.S. higher education.

Sanderson reserves his harshest criticism for British employers both for their

apathy about developing a system of technical education and for failing to

provide job openings suitable for the training received by the relatively few

technical graduates who were produced. Critics will reply,

as Sanderson himself acknowledges, that complaints of deficiencies in working

training in the absence of employer demands for such training raise the

question of what Sanderson and other advocates of providing such training know

that

private employers at the time did not-the McCloskey “if you’re so smart” issue.

Indeed, in chapter 3, Sanderson notes that those who have defended Britain’s

provision of technical training, have pointed to the lack of demand by

employers for same. (pp. 32, 36). The problem Sanderson perceives is that

employers, because of their business culture,

were accustomed both to a system of on-the-job acquisition of skills via

apprenticeship or related methods and to an over-emphasis on “useless

mind-extending” liberal education with a resultant apathy over “useful”

technical qualifications.

But the claim that employers have been making misjudgments about the

educational qualifications

of their workers raises the question of whether employers making bad decisions

about educational qualifications are not likely to have been making further

misjudgments regarding other aspects of their businesses at least as critical.

In other words, the

root problem here would seem to be that of entrepreneurial failure or even a

more deeply rooted conservative business culture unable to adapt to changing

technological circumstances.

This brings one back to Sanderson’s stated intention at the outset of his book

to avoid any general consideration of sources of economic decline but to focus

only on the role of educational factors. A basic problem here is whether the

protean nature of education fundamentally precludes Sanderson’s understandable

desire to de limit the scope of his study. A wide variety of explanations of

economic decline can be seen as involving education in some respect. And it

would seem difficult to establish the role of education in decline without

specifying the more general explanations

of economic decline that are to be considered. Thus both static problems of

resource misallocation and more dynamic ones of developing undesirable

comparative advantage patterns in an increasingly integrated world economy

could be seen as stemming from under-investment in overall levels of education

and from investing in inappropriate types of education. And problems of

entrepreneurial failure have often been blamed on a complacency and stodginess

inculcated by English Public Schools and Oxbridge.

To be

fair, Sanderson touches on a number of the aspects involved in possible

general explanations of decline, whether they be comparative advantage patterns

or entrepreneurial drive. But at a number of points, his discussion could

benefit from more reference

to the relevant general explanation of decline involved. Indeed, his discussion

of the Matthews et al (1982) findings on the contribution of education to

British economic growth based on growth accounting analysis is misleading.

Sanderson interprets the positive contribution of education to growth from

1855 onwards that Matthews et al report as supporting defenders of British

education. As long as there was some expansion of British education, which no

one disputes, it has to be the case that the contribution of education in a

growth accounting analysis would be positive. But the issue for assessing

possible educational failure is how much higher growth rates could have been if

more suitable levels or direction of educational investments had been made, or

to use Sanderson’s phrase, if Britain had actually pursued “missed

opportunities” regarding education. These missed opportunities are not examined

in the Matthews et al analysis of British education.

During the 120 years covered in Sanderson’s survey, the role education played

in particular occupations and sectors of the economy probably changed

considerably. And further changes occurred in how young people initially

entered the labor market, in the role of the school in this transition, and in

how care ers developed. Yet the book only briefly hints at such changes,

noting, for example, that an increase in educational qualifications became

manifest during both the First and Second World Wars.

To a large extent, the issues raised here really lie in the literature that is

being surveyed and in the complexity of the topic that Sanderson has undertaken

to examine. Although he leaves much unanswered about the contribution of

education to British economic decline, Sanderson has still written a very

worthwhile

and helpful little volume. Britain’s educational system has been subject to

major changes at all levels during the 120 years this work considers. The

existing literature on educational developments in Britain during this period

is very fragmented. Previous works have tended to focus on only one specific

aspect of education and for at most a few decades. It is very useful indeed to

have these developments for the educational sector as a whole surveyed so

concisely and in so authoritative and lucid a fashion for the entire 120 years

under consideration.

Sanderson’s book provides an excellent overview of educational developments as

they relate to the economy in Britain between 1870 and the present.

David Mitch is the author of The Rise of Popular Literacy in Victorian

England (University of Pennsylvania Press, 1992).

References:

Barnett, Corelli. 1999. Review of Michael Sanderson, Education and Economic

Decline in Britain, 1870 to the 1990s in The Times Literary

Supplement August 6, 1999, pp.4-5.

Foster, Philip J. 1965. “The Vocational School Fallacy in Development Planning”

in C. Arnold Anderson and Mary Jean Bowman eds., Education and Economic

Development (Chicago: Aldine), pp.142-166.

Hansen, Hal E. 1998. “Caps and Gowns: Historical Reflections on the

Institutions that Shaped Learning for and Work in Germany and the United

States, 1800-1945.” Ph.D. Dissertation. University of Wisconsin.

Hurt, John S.1971. Education in Evolution. Church, State, Society and

Popular Education 1800-1870. London: Rupert Hart-Davis.

Matthews, R.C.O., C.H.Feinstein, and J.C. Odling-Smee. 1982. British

Economic Growth 1856-1973. Stanford: Stanford University Press.

Mitch, David. 1990. “Education and Economic Growth: Another Axiom of

Indispensability?” in Gabriel Tortella ed., Education and Economic

Development since the Industrial Revolution. Valencia: Generalitat

Valencia.

Sylvester, David. 1974. Robert Lowe and Education. London: Cambridge

University Press.

Published by EH.NET (February 1999)

Gary Bryan Magee, Productivity and Performance in the Paper Industry:

Labour, Capital, and Technology in Britain and America, 1860-1914,

Cambridge Studies in Modern Economic History 4, Cambridge and New York:

Cambridge University Press, 1997. xvi + 293 pp. $59.95 (hardback), ISBN 0 521

58197 4.

Reviewed for EH.Net by Andrew Godley, Department of Economics, University of

Reading, UK.

Gary Bryan Magee (recently returned from his native Australia to a lectureship

in History at Queen Mary and Westfield College, London) has performed something

of a rescue operation. The long debate on British entrepreneurial failure has

recently faltered.

Like some endangered animal in an arid wasteland, the reputation of the late

Victorian entrepreneur has been threatened with partial redemption from

explanations emphasising relative factor endowments and productivity

differentials. In the best heroic tradition, Gary Magee uses these very

techniques and arguments to demonstrate that, at least in papermaking, the late

Victorian British entrepreneur really, genuinely and truly deserves to

castigated once again;

that, at least from the 1890s onwards, there was “an incipient conservatism

developing in the heart of British papermaking…. [coming] from the complacent

and conservative business culture that earlier success had bred…” (p.268).

Well, is this just Pommie-bashing in disguise, or do we have a genuinely new

contribution to this long debate?

First, the story. In 1860 British papermakers were among the most advanced in

the world. Demand rocketed in the second half of the nineteenth century and the

most significant problem facing suppliers was a declining supply of rag – the

key raw material. Paper making involved processing rag to produce a semi-liquid

raw paper (called “stuff”), which was then laid out, shaken dry and rolled-up

(or cut and packaged) ready for use. It was, therefore,

at least on the

face of it, a fairly simple process. Nevertheless, by the 1890s the size and

speed of machinery increased substantially. More importantly supplies of rag

had more or less given out and British entrepreneurs had invested much time and

energy in using espar to grass as the best alternative. However, new chemical

treatments of wood enabled the necessary cellulose to be extracted economically

from the relatively abundant forests of Scandinavia, Central Europe and North

America. The combination of new raw materials and American-developed new

technology saw British firms placed at an undoubted disadvantage, but rather

than pursuing high margin niches or developing process technology, British

papermaking entrepreneurs put their heads in the sand. It is for this they

stand accused.

If the book contained this crudely summarized

narrative alone we would be less

welcoming. Its real contribution is not so much the admittedly neglected case

of papermaking, but the attempt to integrate the perceived entrepreneurial

failure into a credible economic analysis. Thus, an information cost approach

is

used to model entrepreneurial decision-making and so evaluate outcomes. The

broad economic context is framed from industry-wide data which are used to

estimate revealed comparative advantage, comparative productivity and their

proximate sources. While Habakkuk-type factor-returns help to explain some

differences in practices,

Magee concludes that from the 1890s British entrepreneurs simply made poor

decisions given the information available.

The key information for British papermakers concerned supply-side innovations

in raw materials and technology. The British papermakers quickly shifted from

esparto to wood when the latter’s advantages were plain – this is cited as good

entrepreneurship – but they proved woefully deficient in developing the

papermaking technology. The interesting fact here is that the core papermaking

technology was the same in both Britain and the US. However, what varied was

the adaptations made to the machines by the papermakers. In the US,

papermakers were able to extract vital improvements in speed and paper-width

from essentially the same machines used as the British. This was the bad

entrepreneurship. Magee cites various contributory institutional factors but

his is a more refined (and hence more credible) version of the Lazonick thesis

of entrepreneurial failure.

Of course, questions remain. American adaptation of the papermaking machine was

crucial to success. This must have been an incremental process and so

technological advantages and disadvantages were perhaps cumulative and so

possibly locked-in to a greater or lesser degree. If so, the evaluation of the

British papermakers’ performance presented here therefore depends upon Magee’s

interpretation of the extent of potential lock-in. He suggests that British

papermakers were exposed to the latest advances and techniques through the

trade press, visitors’ reports, and other conduits, and that they could not but

have been aware of the adaptations

made by American producers. Magee no doubt now knows more about late-nineteenth

century paper making than practically anyone alive, but the implication that

lock-in effects were relatively minor and that the diffusion of new adaptation

of machinery was rapid may need to be considered in more detail.

Magee, given his expertise, has to be given the benefit of the doubt here.

Indeed, I hope he is right. After all, we Brits are far too modest to want

anyone thinking that we might have ever been successful at

anything!

(Andrew Godley is the author of Enterprise and Culture: Jewish Immigrant

Entrepreneurship in New York and London, 1880-1914 (forthcoming).)

Published by EH.NET (February 1999)

Kenneth Lloyd Billingsley, Hollywood Party: How Communism Seduced the

American Film Industry in the 1930s and 1940s, Forum: Rocklin, Cal., 1998.

xviii + 365 pp. Illustrations, appendices, notes, and index. $25.00 (cloth

),

ISBN 0-7615-1376-0.

Reviewed for H-Business by D. Jonathan Snyder, Department of History,

Southern Illinois University (Carbondale).

1997 saw a surge of articles and op-ed pieces commemorating, rehashing and

otherwise dissecting the fiftieth anniversary of the “Hollywood Ten” and the

blacklist in the film industry. Predictably, Hollywood itself staged a gala

event, a memorial and tribute to itself, complete with the glitz, star power

and dramatic pyrotechnics routinely available to

the movie capital. Through vignettes, clips, reenactments and the ineffable

luster of stardom, the production, Hollywood Remembers the Blacklist,

reminded its audience of an old story, of the days when dark forces of

political repression came for a time to dominate the film industry, despite

the heroic non-cooperation of a few idealistic martyrs.

For Kenneth Lloyd Billingsley, Hollywood Remembers the Blacklist, like

most of Hollywood’s product, was slanted history that substituted glamour for

facts and dressed political self-righteousness in the vapid solemnity of

liberal celebrity; it was a “stage play, with easily identifiable victims and

heroes in a simple to follow plot” (p. 7). In Hollywood Party: How Communism

Seduced the American Film Industry in the 1930s and 1940s,

Billingsley, Editorial Director for the libertarian think-tank Pacific Research

Institute, proposes that there is more here than the persecution of innocents

by reactionary politicians. He aims to expose the dirty secret that

Hollywood Remembers the Blacklist failed to stage: that Hollywood’s

political nescience permitted the Communist Party to manipulate screen content,

whitewash the truth about Communism through decades of commiserating films, and

thereby warp the popular memory of Communism. By leaving out actual

Communists, avers Billingsley, Hollywood has failed to tell “how the central

conflict of this century affected the American movie industry, and ultimately,

decisions about who controlled Hollywood” (p. 10).

Promising a “political and cultural thriller” (p. 10), Billingsley even

provides us with a handy “Partial Cast of Characters” to help separate the good

guys from the bad. Unfortunately, Billingsley too eagerly chases narrative

pacing at the expense of historical accuracy. Thus his book is filled with

errors and distortion, such as the details surrounding Charlie Chaplin’s

political reclamation. Billingsley correctly dates Chaplin’s honorary Oscar

three years prior to his knighthood, but he is three years off in the

chronology: Chaplin’s Oscar was in 1972, not 1975; his knighthood came in 1975,

not 1978, by which time the Little Tramp was one year dead. Likewise

Billingsley lists the birth date of John Howard Lawson, doyen of

Hollywood Communists, as 189 3, rather than the correct 1894. Such errors by

themselves amount to little more than annoyances, but in a book with

aggravatingly few footnotes and sparse (and shopworn) references, one begins to

doubt whether this author has done his homework.

Billingsley claims that his narrative will finally tell “the entire story of

why the Communist Party came to Hollywood, and what it accomplished there”

(p. 10). Rather, we get truncated historical causation reminiscent of

Hollywood’s liberties with adapted novels.

For example, purporting to argue that the Communist Party had expropriated the

radical New York theater for propaganda purposes, Billingsley describes the

aforementioned Lawson’s play,

Processional: A Jazz Symphony of American Life, as a “slugfest of

fevered rhetoric that became the pattern on the radical stage.” (p. 48). Two

sentences previously he had quoted Lawson (accurately) writing, “it is my aim

to present the Communist position…in the most specific manner,” thus seeming

to indicate that Processional was an example of Communist propaganda.

Unfortunately for Billingsley, Lawson uttered those words some nine years after

Processional (1925) and still more than a year before he actually joined

the Communist Party. Processional’s inchoate

(and burlesqued) politics was incidental to its avowedly radical aesthetic;

the play is more properly compared to the avant-gardism of Eugene O’Neill in

the 1920s than the didacticism of Clifford Odets’ Waiting for Lefty. By

no standard, least of all

historical, can Processional be considered agit-prop. Billingsley then

proceeds to claim that “by 1936…the Party had enjoyed virtual domination of

the radical theater scene in New York [i.e.,

the radicals controlled the radical theater], and that control became the

model for what they sought in Hollywood, when John Howard Lawson and many

others headed west” (p. 50) Again, he gets the facts wrong: Lawson went to

Hollywood in 1928 as one of the first writers for the new talkies. By the time

he formally joined the Party in 1935, Lawson was already a studio veteran, one

of the highest paid screenwriters, and the first president of the Screen

Writers Guild.

Such narrative compression surfaces throughout Hollywood Party as

Billingsley labors to cram

a complicated history into the confines of his predetermined narrative

structure. For it is the story that is most important to Billingsley, a

Manichean narrative of sinister Communists

(whose villainy is always unmotivated save that the label ? Communis t? makes

them direct conduits for Stalin) on the one hand and the reluctant

anti-Communists in the white hats on the other. It is the structure of a

Hollywood Western, one notices, reminiscent of Whitaker Chambers’

self-portrayal as a reluctant sod-tiller martyring himself to save

civilization, and echoed in Billingsley’s portrayal of anti-Communist union

boss, Roy Brewer, as “the hick projectionist from Nebraska” (p. 286).

Readers are treated to the cloak-and-dagger escapades of union spies, secret

investigators, unwary producers, Communist provocateurs and the sinister

Comintern overlords. At times, the story borders on melodrama, with clandestine

documents establishing Communist subterfuge, and farce, as when nearly fifty

characters, some accessorized

with aliases, romp through the sixteen pages of Chapter Three; a screenwriter

should be so proud. This is such a blinkered narrative that, with no trace of

irony, Billingsley refers to the anti-Communist Walt Disney as “avuncular” (p.

38). Disney, of course,

was as ruthless an empire builder as any robber baron, the affable mouse

notwithstanding. Needless to say, Lawson and the rest of the Hollywood

Communists are held accountable for Soviet terror in repeated recitations of

Stalin’s gruesome bloodletting.

Despite Billingsley’s claim that this is a new telling, it is not. It is the

same story that the House Committee on Un-American Activities, the Motion

Picture Alliance for the Preservation of American Ideals, and Joseph McCarthy

told. It is the story

of Communists poisoning Hollywood with foreign ideology. And it is still wrong.

Billingsley provides no linkage between the Kremlin and Hollywood to prove that

“in the area of film content, the Party won” (p. 282), other than to recite a

list of anti-anti

-Communist pictures. Billingsley is so intent on Red-baiting Hollywood (one

suspects that the film colony itself, rather than simply

Hollywood Remembers the Blacklist, is his real target) that he wholly

ignores actual influences on screen content such

as commercial appeal, the Production Code, the Legion of Decency, local

censorship, the Supreme Court,

and the requirements of national ideology.[1] The standard history on Communism

and politics in the film industry is still Larry Ceplair and Steven Englund’s

The Inquisition in Hollywood: Politics in the Film Community, 1930-1960

(1980), a meticulously researched and reasoned assessment that never forgets

the larger economic and social contexts and which Billingsley unwisely

dismisses as “revisionist” (p. 279).

For Billingsley, the Red legacy continues to influence Hollywood, which

habitually peddles movies sympathetic to Communism; pictures like The

Front and Guilty by Suspicion, prove the success of the conspiracy.

This is patent nonsense. During the height of the Cold War, dozens of overtly

anti-Communist movies, like My Son John and Big Jim McLain

were produced, most big money losers. Though he desperately tries to argue that

“the legacy of Hollywood Stalinism explains the dear th of movies about

Communism,” (p. 282; Jane Fonda is gratuitously mentioned in this context)

films like Ninotchka, The Manchurian Candidate, most science

fiction of the 1950s, Dr. Zhivago, the James Bond series, Red

Dawn, White Nights

and countless others suggests that Billingsley’s own politics has occluded his

judgment.

The historical truth about American Communism is difficult to write, but not

because either the Party or the McCarthyites have succeeded in suppressing

adversarial

voices. Despite the persistent underdoggism of authors writing about Communism,

the more pressing impediment to understanding American Communism is the

straitened narratives into which authors have poured their political morality

tales. If nothing else, Billingsley reminds that we need new narratives for

American Communism. Recently, a few authors have begun to break away from this

trap. For instance, Ronald Radosh, no friend of the Communist Party, insists

that we discern between the cynical McCarthyites

and the sincere anti-Communists, a useful distinction Billingsley refrains

from making. Likewise, Ellen Schrecker urges us to recognize the fact that

whatever the indisputable errors of the American Communist Party, there existed

a broader Communist movement that spearheaded legitimate social reforms, such

as fighting race prejudice and organizing labor. This is a start, but we must

go farther. Radosh still insists that the chicanery of the official Communist

Party U.S.A. more or less describes the historical totality of American

Communism, while Schrecker seems content to tar all anti-Communists with the

black legacy of McCarthy.[2] We need a new narrative, one that allows for

sincere anti-Communists and sincere Communists, each untainted by the excesses

of their putative leadership.

Hollywood Party is not good history, it is the collapse of history into

political propaganda. It is the calcification of character and motivation to

simple moral determinants certified by an omniscient narrator. It confuses

individuals with the labels their political opponents stuck to them. By blowing

out of all proportion the meaning and role of Communism in Hollywood,

Billingsley perpetuates, finally, the same old story. It’s a two-for-one thesis

that bashes American Communism, then bloodies an imagined liberal Hollywood

for once loudly (but never exclusively) sticking up for some of its own. In the

end, I submit, these narratives are not about the follies of a small sect of

radical dreamers, nor even so much about

the reactionaries who briefly convinced a large segment of the population to

table the First Amendment. They are, after all, political broadsides, used by

partisans to thrash the moderates on the other side of the aisle. They attempt

to capture the vital

center not through wise and able leadership,

but through recrimination and gamesmanship. That is why Billingsley got so

worked up by those pesky showbiz liberals who staged Hollywood Remembers the

Blacklist.

[1] On this last point, see Robert B. Ray’s

excellent A Certain Tendency of the Hollywood Cinema, 1930-1980,

Princeton: Princeton University Press,

1985.

[2] Ronald Radosh, “The Two Evils: Communism, McCarthyism, and the truth,”

The New Republic, 11 May 1998, pp. 38-49. Radosh conflates the

Party with what Schrecker understands as the broader Communist movement,

thereby discrediting the latter through association with the former; Ellen

Schrecker, Many Are The Crimes: McCarthyism in America, Boston: Little,

Brown and Co., 1998.

Published by EH.NET (February 1999)

Milton L. Mueller, Universal Service: Competition, Interconnection and

Monopoly in the Making of the American Telephone System. Washington, D.C:

AEI Press, 1997, 13 + 213 pp. $40.00 (cloth), IS BN: 0-8447-4063-2.

Reviewed by Jeff Kraft for H-business, LECG, Emeryville, California.

jeff_kraft@lecg.com

Milton L. Mueller’s thoughtful, extensively-researched and at times

controversial book should be required reading for public policy makers

(regulators, legislators and judges) and consultants (this author is one)

who are grappling with the implementation of the Telecommunications Act of 1996

because it provides an unconventional analysis of the question at the heart the

debate surrounding the Act’s local competition provisions: What are the

appropriate interconnection and unbundling rules for promoting efficient

competition and maintaining universal telephone service?

Mueller makes a strong argument that the current meaning of “universal service”

is different from the original meaning of the term. Today, it means that

regulators should implement public policies which provide all households with

access to an affordable set of basic telecommunications services. As proposed

by AT&T’s Bell System

in the early 1900s, universal service originally meant that competing local

telephone providers should be consolidated into local monopolies. Between the

end of the nineteenth and the first third of the twentieth centuries, a

substantial proportion of the nation’s population lived in areas where two

competing local exchange companies (the Bell system and independents) offered

local exchange service, a condition known as “dual service.” In almost all

instances the competitors did not interconnect their

networks. Universal service would allow all local subscribers in a given

geographic area to call all other subscribers with a single subscription and

was thus an antidote to the inefficiencies of dual service.

The book’s chapters progress chronologically and weave together economic

theory and the competitive, regulatory, and legal history of local telephone

service in the United States. Mueller’s narrative moves from the early days of

the Bell monopoly through the years of dual service competition between the

Bell system and independents, the Kingsbury Commitment and the advent of state

monopoly franchise regulation, and the consolidation of the Bell System, to the

Telecommunications Act of 1996.

Mueller does a good job of clearly and concisely explaining economic concepts

like demand side economies of scope and scale, network externalities and

natural monopoly, in the process making a strong case that local telephone

service has never been a natural monopoly. Mueller traces the historical and

legal

roots of key regulatory debates such as the argument that mandatory

interconnection requirements are unconstitutional because they amount to an

appropriation of private property. This dispute remains at the heart of modern

regulatory policy-making from the overturning of the FCC’s initial expanded

interconnection and physical collocation ruling (See Bell Atlantic Telephone

Companies v. FCC., 306 U.S. App. D.C. 333; 24 F.3d 1441; 1994) to the current

legal challenges by incumbent

local exchange carriers to the FCC’s attempt to implement the local

competition provisions of the Telecommunications Act of 1996.

The

book builds on the work of Gerald Brock and others (see for example Gerald

Brock, The Telecommunications Industry: The Dynamics of Market

Structure, Harvard University Press, 1981), providing one of the most

detailed

early histories of telecommunications competition and regulation.

The explanation and analysis of the Kingsbury Commitment, the 1913 compact

between the Bell System and the federal

government which called on Bell to slow down the acquisition of independent

telecos and offer limited interconnection to competitors, is the most

fully-documented interpretation of this seminal event I have seen.

Throughout the book Mueller provides fascinating bits of economic history

about local telephone service. For example, with early hand-operated and

mechanical switches, average per unit costs actually increased with the number

of subscribers served, meaning there were dis-economies of scale in large

urban exchanges. Each additional subscriber led to a geometric increase in the

physical complexity of the switching function. When these dis-economies of

scale were combined with the fact that local political forces tended to favor

the incumbent Bell companies, competitive local entry by independents became

difficult in the largest urban areas.

Mid-sized mid-western cites and more rural areas frequently had more

competitive entry than the large cities on the East Coast. This is, of course,

precisely the opposite of the situation today where economies of density and

scale have made large urban business corridors the most lucrative places for

competitive local exchange carriers to build competing fiber facilities. The

economics of today’s digital switching technologies make per unit costs

unambiguously lower for larger urban exchanges.

One of Mueller’s

central ideas is that the period of dual service competition

played a key role in the geographic expansion of local telephone infrastructure

to near-ubiquitous coverage because competitors raced to acquire additional

customers to increase the size of their subscriber bases and the scope of their

service offerings. This massive geographic expansion would not have occurred

if there was a single monopoly provider or if competitors were required to

interconnect their networks in what would be called today “non-discriminatory

and cost-based terms.”

Thus, the current conventional wisdom that a failure to interconnect is

inherently anticompetitive is misguided. Mueller correctly points out that

there are inherent contradictions within the Telecommunications Act of 1996,

which on the one hand requires cost-based interconnection and extensive

unbundling of incumbent’s local networks that will ultimately lead to “radical

deaveraging of rates,” while on the other hand calls for the continuation of

universal service subsidies and geographic rate averaging.

Like any truly original scholarship, Mueller’s work raises many important

questions. Although having

separate non-interconnected competitors clearly contributed to the development

of the telecommunications industry during its start up years, it leads to

serious inefficiencies in a mature industry because customers would be required

to subscribe to multiple networks in order reach all other local telephone

users. Today, ubiquitous reachability is an implicit, yet paramount, goal for

all communications networks. The whole concept of the Internet is based on

the value of world wide reachability. When competition authorities at the

European Union and the U.S. Department of Justice required either MCI or

WorldCom to sell off their Internet assets in order to gain approval for their

merger,

it was because they were concerned that the combined company’s backbone would

carry such a large share of traffic that it might have incentives to bifurcate

the Internet by reducing the quality of interconnection with other backbones.

Thus, key but unanswered questions arising from Mueller’s scholarship involve

quest ions surrounding interconnection policy:

When are mandatory interconnection rules an optimal public policy solution?

At what stage in the development of a network industry do the benefits of

ubiquitous reachability dominate the incentives for network expansion which

come from having competing, non-interconnected networks? Should regulators

require non-discriminatory and/or cost-based interconnection terms? These

questions are relevant for public policy makers examining a wide range of

digital-age products and services from basic local telephone service, to broad

band services such as cable-modems and ADSL, to PC operating systems and

applications software.

(Jeffrey Kraft is a Senior Consultant at LECG, an economics, finance and public

policy consulting

company in Emeryville, California. He has consulted with private companies,

law firms, regulatory bodies and other government agencies on a wide range of

public policy, litigation and antitrust issues affecting the telecommunications

and other communications-related industries. He co-authored an article in the

Fall 1997 Journal of Economic Perspectives on the history of local

telephone regulation titled: “Meddling Through: Regulating Local Telephone

Competition in the United States.” Mr. Kraft has

recently spoken at conferences in Osaka, London, and Brussels on the impact the

MCI-WorldCom merger would have had on the Internet, absent intervention by

competition authorities in Europe and the United States. Kraft has a Master

of Public Policy degree from the Richard and Rhoda Goldman Graduate School of

Public Policy at the University of California at Berkeley.)

Published by H-Business and EH.Net (January, 1999)

Roland Marchand. Creating the Corporate Soul: The Rise of Public Relations

and Corporate Imagery in American Big Business. Berkeley: University of

California Press, 1998. xi + 461 pp. Acknowledgments, illustrations, notes and

index. $39.95 (cloth), ISBN 0-520-08719-4.

Reviewed for H-Business and EH.Net by Elizabeth Fones-Wolf, West Virginia

University

On January 11, 1999 Time Magazine devoted a special edition to the

future of medicine. This issue featured a series of striking full and double

page advertisements sponsored by the pharmaceutical firm, Pfizer. While some

of the company’s 39 pages of advertising promoted Pfizer’s products, ma ny of

the others were designed to create a favorable public image of the firm.

Through this institutional advertising, readers learned about Pfizer’s history,

its concern for women’s health, its innovative research programs and its

longstanding commitment

to service. Pfizer presented itself as a friend of the family and as an

institution dedicated to improving the life of each American. In each

institutional ad, the firm proclaimed that life not profits “is our life’s

work.” Having established its concern for the public, Pfizer shifted from

image-shaping institutional advertising to advocacy advertising, using one of

the issues’ back pages to editorialize against government-led reform of the

healthcare system. Only the free market, CEO William Steere

sermonized, could provide quality healthcare.

Pfizer’s efforts to associate its firm with technological progress and service

and its attack on government regulation have deep historical roots.

Roland Marchand’s study of the creation of the corporate image uncovers the

origins of many of the themes and images still used today by corporations like

Pfizer in their institutional and advocacy advertising campaigns. It is a

major contribution to the growing literature on the history of public

relations, consumer culture, and advertising. This meticulously researched

work draws upon the records of major corporations, advertising agencies and

public relations counselors to analyze the strategies big business used to

attain legitimacy by creating a favorable public image during the first half

of the twentieth century. It combines a survey of the activities of a broad

cross section of firms with in-depth case studies of major companies such as

AT&T, the Pennsylvania Railroad, General Motors, General Electric, Du Pont and

Metropolitan Life Insurance.

In the early twentieth century, large

corporations faced a “crisis of

legitimacy” (p. 3). Appalled at the growing power and corruption associated

with newly emergent big businesses and by increasing industrial strife,

elements of the public began calling for greater state regulation. Some even

demanded the dismantling of the “soulless” giants who seemed to endanger

democracy and the traditional American way of life. This threat to corporate

freedom helped give birth to a host of public relations initiatives, ranging

from welfare capitalism and institutional advertising,

to factory tours and elaborate exhibits at the great world’s fairs, all

designed to create a positive image of the corporation. Like Andrea To ne,

The Business of Benevolence: Industrial Paternalism in Progressive

America, Cornell University Press, 1997), Marchand argues that welfare

capitalism, which provided services such as medical care, recreation,

pensions, and housing, was more than just a mechanism to undercut unionism and

promote worker productivity. By publicly demonstrating compassion for

employees and presenting the human face of American capitalism, welfare

programs served as a “safeguard against perceptions of soullessness” (p.1 5).

Welfarism also helped address corporate concern over the growing distance

between management and the rank and file, which Marchand labels

“the Lament.” The employee magazine, radio broadcasts, company films and

employee representation reunited “the family at one great dining table” (p.

113).

Much of the book is devoted to analyzing the evolution of institutional

advertising. Marchand used corporate records to reveal companies’ multiple

goals and multiple audiences. Metropolitan Life’s 1922 institutional

campaign, for instance, was aimed at both employees and the public. It sought

to shape political opinion, promote employee morale and corporate

consciousness, and develop for the insurance company a reputation for community

service. Similarly, General Motor’s 1920s advertising campaign aspired both to

create public goodwill by portraying GM as an agency of public service and to

stimulate a corporate consciousness among the often hostile divisions of the

firm. Marchand pays close attention to the language and visual imagery of the

ads themselves. This book lavishly reproduced almost two hundred of these

advertisements, both color and black-and-white. While some of the advertising

seems archaic, many of the themes and metaphors that Marchand identified have

become ubiquitous in modern-day institutional advertising. Early ads projected

the corporate image through architecture, using pictures of the factory or

corporate headquarters to symbolize qualities like stability, efficiency, and

security.

More familiar, however, are the AT&T ads from the early part of the century.

A trailblazer in corporate public relations, AT&T advertisements identified the

telephone with economic progress, featured women, sought to humanize the

company, and emphasized

the firm’s commitment to public service.

In the midst of the depression of the thirties, corporations worried less about

their soulless image and more about the future of capitalism.

Competing with the New Deal for public favor, business attempted to se ll

itself and the capitalist system. It looked to new mediums, especially radio

and movies, and reached out to insurgent workers with a common-folk style. New

converts, like Du Pont and U.S. Steel became committed to the mission of

carrying their “corporate message directly to the American

public” (p. 223). Other firms, like General Motors, longtime advocates of

public relations, expanded their image building activities. GM’s striking 1939

World’s Fair exhibit, Futurama, helped convey “the corporation’

s optimism about the capacity of private industry to promote prosperity and

create new jobs,” and suggested the “modernity, benevolence, and

forward-looking social vision of the corporation” (p. 303). World War II saw

yet a further expansion of corporate

public relations as companies connected their images to the war effort and

fought to offset growing wartime regulation of the economy.

In the early part of Creating the Corporate Soul, Marchand offers an

intriguing analysis of the roles of gender and

shifting boundaries in the development of corporate imagery. As he explains,

public relations and welfare capitalism, which were distant from production and

catered to public opinion, were initially viewed as feminine and potentially

subversive.

Gender

considerations shaped the content of ads. Uncomfortable with too

“feminine” an appeal, AT&T’s early institutional advertising shied away from

depicting the social role of the telephone. Welfare capitalism also pushed the

boundaries of conventional business behavior, creating expectations of

stewardship that firms were often hesitant to assume. The themes of gender and

boundaries appear, however, only in the first part of the book. One might have

wished for an extension of this promising analysis through the entire work.

Throughout, Marchand makes realistic appraisals of the corporate image building

campaigns. Many of the corporate assertions were hypocritical,

contradictory and down right false. Firms, for instance, commonly employed the

metaphor of

corporation as family. But, as Marchand observes, “what family would ‘fire’

its children when expediency so dictated?” (p. 107). AT

&T’s depiction of itself as an investment democracy was deceptive.

Similarly, the sit-down strikes made GM’s 1930s portrayals of employees happily

rushing to work hardly credible. Marchand acknowledges that the

“precise effect of institutional advertising campaigns was difficult to

estimate” (p. 201). Companies with political goals at times found the payoff

in favorable

legislation. In the 1930s professional polling services began surveying

popular attitudes toward large firms. They helped provide business the

necessary evidence of the effectiveness of corporate image building. By the

end of World War II, big business

had gained acceptance as a legitimate social institution and corporate

ideology was well on its way to becoming a dominate force in political

discourse.

Roland Marchand died before Creating Corporate Soul was published. It

is an important work and a

beautiful book that will stand as a fitting tribute to his distinguished career

as a historian.

Published

by EH.NET (January 1999)

Linda Barrington, editor, The Other Side of the Frontier: Economic

Explorations into Native American History. Boulder, CO; Westview Press,

1998. xiii + 301 pp. $65.00 (cloth), ISBN: 0813333954; $25.00 (paper),

ISBN: 0813333 962.

Reviewed for EH.NET by Thomas Weiss, Department of Economics, University of

Kansas

This is a welcome and useful collection of articles, even though the articles

are not new and original pieces and are not focused on any one the me of Native

American history. Although most of the essays were published previously, their

concentration in one place helps to get across the key idea that Native

Americans responded to economic signals in much the same way that economic

theory would pr edict for any rational economic agent. The essays cover a wide

swath of time, space and issues, and this diversity helps underscore the

universality of their responses to economic forces.

The collection appears to have been motivated in part to provide

material for those interested in providing a more “diversity-friendly”

economics curriculum, in part to disseminate more widely recent literature that

examines Native American history from an economics perspective, and in part to

stimulate further research along these same lines.

I doubt that the essays will be much used to diversify the economics

curriculum. With the exception of the articles by Ann Carlos and Frank Lewis,

“Property Rights and Competition in the Depletion of the Beaver,”

Leonard Carlso n, “The Economics and Politics of Irrigation Projects on Indian

Reservations, 1900-1940,” and by Terry Anderson and Fred McChesney,

“The Political Economy of Indian Wars,” the analysis is not developed in ways

that would make it suitable to teach some particular economic concept or

behavior. And the latter article, although a nice example of the application

of political economic models, is not likely to be the sort of topic covered in

many introductory economic courses. If the idea is to diversify the curriculum

in economic history courses, then the collection fares much better.

In addition to these three, several other articles would be useful as well.

The book should serve to stimulate further research on the economic behavior of

Native Americans wi thin institutional constraints rather than that of an

exploited people decimated by the advance of western civilization. The latter

is a well known story. It is now time to better understand how Native

Americans behaved under those pressures and how those developments and their

reactions have bearing on current issues facing Native Americans and U.S.

society. Most of the articles make clear where some further research is

called for, and the totality of the collection provides a sense that all this

is

a line of inquiry well worth pursuing.

The authors are, of course, careful to point out that any research will be

hampered by a lack of evidence, especially evidence about how the Native

Americans saw these events. An overriding difficulty with any such research is

the great diversity within the Native American population. It is one thing to

imagine that economic principles can be used to explain behavior, it is quite

another to see how it actually worked out in specific cases across a long time

period,

a wide spectrum of events, and involving diverse tribes and cultures.

Given the great diversity and long time period, the book attempts to focus on

key episodes of Native American economic history and salient issues of the

different time periods. The long history is compartmentalized into four

periods: Pre-Colonial Civilizations, Trade and Colonial Economies,

Westward Expansion, and Twentieth Century Federalism. Each section has a short

introduction and two or three articles. Barrington provides a useful overview

of Native American history and its relation to U.S. economic history more

generally, out of which comes the rationale for the four-part categorization.

Vernon Smith’s article covers the entire pre-colonial period, with a sweeping

analysis of the role of economic forces and institutions throughout mankind’s

history. If he is to be believed, economic forces,

such as changes in relative costs and accumulation of human capital,

explain just about everything, including not only inventions, but

also language and bipedalism. To be fair he eventually allows that bipedalism

was a bioeconomic response (p. 72). Much of his story will strike many readers

as nothing more than a relabeling of causes. After all, if we do not know what

brought about certain changes 5 or 10 million years ago, we might just as well

say it was changes in relative costs rather than some biological mutation or

climactic disaster. He does, however, make a plausible case for many of the

developments that took place, and perhaps we should rightly think of it as

economic behavior. At least this will get people to start looking at these

sorts of things from a different perspective, with perhaps fruitful results.

As much as I might laud his efforts to recast these long evolutionary

developments in economic terms, it is easy to see why many non-economists will

be skeptical. Some of the responses, such as the inventions of weapons for

big-game hunting or the shift from hunting to agriculture for example, took a

very long time to evolve. Along the way not all developments were obviously

conscious decisions being made by rational economic agents; they just happened.

Indeed, they would not seem to be the sort of calculating economic actions

described by Demsetz in which

“Property rights develop to internalize externalities when the gains of

internalization become larger than the cost of internalization” (p. 104).

It is hard to imagine early Cro-Magnon people working these things out in their

heads. And, Smith admits that some responses were unconscious (p.

68). As valuable as it might be to now try to describe those unconscious

decisions, most non-economists will prefer to think of some of these things as

the result of biological evolution, the survival of the fittest,

culture

factors, or simply chance.

The main thrust of Smith’s argument, however, is extremely pertinent and he

presents a plausible case for reconsidering enormous and far-distant

developments in economic terms. He argues neatly that “culture and

institutions

can be interpreted as providing the information system for transmitting the

learning embodied in the unconscious response to opportunity cost.” (p. 68).

Although his article has little to do with Native Americans, its value is to

set the tone. If way back when economic forces were at work shaping language,

culture, and mankind–indeed man–then a fortiori these forces must have

influenced Native American behavior. Subsequent essays develop these ideas

more fully.

Barrington in “The Mississippians and

Economic Development Before European Colonization,” argues that in the

precolonial period the existence of Indian towns, such as Cahokia, is part of

the evidence that not all indigenous societies were hunters and gatherers prior

to European contact.

Some

practiced a sedentary agriculture, and there was long-distance trade,

specialization of labor, taxation and social hierarchy. The latter may have

had some influence on the subsequent development of the southeastern United

States, although the link with

slavery seems rather tenuous.

Anderson and LaCombe’s piece, “Institutional Change in the Indian Horse

Culture,” delineates carefully how economic behavior must have been manifest in

the hunting techniques and how they changed with the introduction of the

horse. They also argue that much of this change occurred before there was

extensive contact with Europeans.

The essays on the colonial period are both concerned with trade–the fur trade

in the North and the skin trade in South Carolina. Carlos and Lew is try to

show that Indian behavior that led to the depletion of the beaver stock was not

irrational or culturally-determined, but rather was the outcome of a very

predictable response to changes in the prices received for beaver, and those

changes reflected differences in the competition faced by the Hudson’s Bay

Company. Murphy puts forth a similar sort of economic argument in “The

Eighteenth-Century Southeastern American Indian Economy.” To be sure there

were political influences at work, but he argues that Indians were clearly

motivated by market forces. They were involved in a large commercial hunting

market and their production rose and fell as the real price of skins rose and

fell. At its peak, the deerskin trade provided export earnings that

rivaled those of the Middle colonies,

and as prices fell Indians shifted into alternative economic activities.

David Wishart provides compelling evidence that the Cherokee were responding

well to economic forces; they were successful farmers and heavily

involved in commercial agriculture. In “Could the Cherokee Have Survived in

the Southeast?” he uses evidence from a special census of 1835 to show that at

least half, and perhaps three-fourths, of Cherokee households were producing

substantial agricultural surpluses. From an economic perspective there is

little doubt that they could have survived and thus the argument that they were

to be removed to Oklahoma for humanitarian reasons seems dubious. For

political reasons, however, they might not have be en able to survive and for

that reason the Removal may have been in their interest. James Oberly presents

an interesting and succinct analysis of the demographic history of the Lake

Superior Ojibwa in

“Land, Population, Prices and the Regulation of Natur al Resources.” Unlike

the other authors he does not stress how this tribe responded to economic

forces, but does show that until the late nineteenth century they performed

well economically. He also makes the point that in their treaty negotiations

they

exhibited astute economic thinking, and had estimated quite accurately the

time it would have taken whites to cut the timber on their lands and thus

probably had a good idea of the present value of their assets (p. 198). The

final essay in the Westward

Expansion section is that by Anderson and McChesney, in which they lay out

nicely how political economy models can explain the increase in conflict

between Indians and whites between 1790 and 1897, much of which can be traced

to the acquisition of the horse which turned otherwise sedentary tribes into

nomads. As Smith put it, “For a century and a half the history of the American

West was a history of fear and terror of the Comanche, who, prior to the

arrival of the mustang, had picked berries and dug roots” (p. 75).

The twentieth century economic history of Indians is primarily that of

Federalism. Leonard Carlson provides a succinct history of the key elements of

the Indian-government relations and then analyzes more thoroughly the allotment

program and irrigation policies that were in place between the passage of the

Dawes Act (1887) and the Indian Reorganization Act of 1934. He uses a public

choice approach to show that these programs and policies did not work

primarily for the benefit of the Indians.

Although some Indians did benefit, there was also a waste of resources, and

perhaps more noteworthy, a transfer of resources to bureaucrats in the Bureau

of Indian Affairs and to non-Indian ranchers and farmers. LaCroix and Rose

come to similar conclusions regarding the Hawaiian Home Lands Program. Both

of these papers raise the specter of some counterfactual analysis, but do not

pursue such inquiries in these papers. Carlson notes how difficult it would be

to imagine what alternative organizational scheme might have worked better

than relying on newly formed tribal councils (p.

254). LaCroix and Rose elsewhere propose some reforms of the HHL program,

implying they have in mind some counterfactual that might work better, but they

are skeptical that any such reforms will be adopted soon.

In all this is a useful book, setting out pertinent issues and showing the

sorts of analysis that can be applied. It also makes clear that careful

economic analysis of Native American issues is in its infancy, with much room

to grow. All of these pieces have been written within the last five years, and

they are among the best there is.

Thomas Weiss Department of Economics University of Kansas

Weiss is currently engaged in a joint research project to estimate

GDP for the colonial period. His co-investigators are Joshua Rosenbloom and

Peter Mancall, both of the University of Kansas. A related article “Was

Economic Growth Likely in Colonial British North America” by Mancall and Weiss

is forthcoming in the Journal of Economic History.

Published by EH.NET (January 1999)

?

Michael C. Carroll. A Future of Capitalism: The Economic Vision of Robert Heilbroner. New York: St. Martin’s Press, 1998. ix + 117 pp. $59.95 (cloth). ISBN: 0-312-17754-2.

Reviewed for EH.NET by Ross B. Emmett, Department of Economics, Augustana University College.

A Unified Vision for the Future?

Let me begin with two admissions. First, I would not be a historian of economics today if it were not for Robert Heilbroner. Encountering The Worldly Philosophers in my first-year “history of western civ ” course, and then again (with the same professor!) in my fourth-year “modern intellectual history” course, convinced me that the “economic mind” was central to modernity. I avidly consumed some of his other books as an undergraduate student: The Future as History, The Great Ascent, An Inquiry into the Human Prospect, Beyond Boom and Bust, and Marxism: For and Against. Questions regarding the relation between modernity and economics have dominated my career since. I thought it somehow fitting that my first opportunity to hear Heilbroner speak in person came only hours after I defended my dissertation.

Second, the more I reflect on the questions regarding modernity and economics that Heilbroner first raised for me, the less my reflections look like those Heilbroner himself offers. Reading A Future of Capitalism, by Michael Carroll (now teaching at West Virginia State College), confirmed my suspicions regarding the central differences. We will get to those differences in due course, but first, comments about Carroll’s treatment of Heilbroner.

The key to understanding Heilbroner’s work, Carroll tells us, is to construct out of his various works a systematic presentation of his ideas. This is what Carroll sets out to do. After a basic intellectual biography, he uses Heilbroner’s criticism of standard economics to set up the key components of Heilbroner’s “system”: a hermeneutic, multi-dimensional approach aimed at uncovering the hidden unifying structure of capitalist society. Carroll argues that Heilbroner combines Marx’s socioanalysis with a psychoanalytic perspective on human behavior and an economics focused on how power and social organization intersect in the material provisioning of humankind (informed by the work of Adolph Lowe, Heilbroner’s friend and colleague at the New School), in order to reveal the internalized institutions and values which comprise the capitalist system. Carroll moves freely among Heilbroner’s writings spanning several decades to show how his analysis focuses on the interlocking nature of, and tensions among, three central internalized institutions and values in capitalism: the drive to accumulate capital, the market, and division between private and public realms.

Once we appreciate Heilbroner’s understanding of the underlying structure of capitalism, Carroll then asks what Heilbroner’s view to the future would be: uncovering the central contradictions of capitalism allows some tentative conclusions about its further development. Can the system sustain the drive to accumulate? Probably not, but capitalism has proven remarkably resilient; it has the capacity to transform itself even though changes may also create constraints for the system. The system’s real enemies, therefore, are the disruptions which reveal its endemic self- contradictions: structural unemployment, for example, which emerges from the drive to accumulate and the market’s organizing features, yet undermines future productivity, aggregate demand, and people’s hopes for their future. Or globalization, which by extending the market’s organization around the world in the absence of a global institutional base, jeopardizes the system’s separation of the public and private worlds in the drive to “accumulate, accumulate, accumulate.” In these, and other disruptions, Heilbroner sees the evolution of capitalism continuing. The role of an economist like Heilbroner, Carroll argues, is not to sketch out the particular features of the future, but to trace “future visions”: potential outcomes of the evolution of the relations among capitalism’s central elements.

As you may perhaps see from the previous paragraphs, Carroll’s attempt to uncover the unifying structure of Heilbroner’s ideas parallels Heilbroner’s own hermeneutics of capitalism. For the hermeneuticist, interpreting texts and interpreting societies are similar problems. Unlike Heilbroner, however, Carroll’s stance toward Heilbroner’s system is not critical. He is in fact enamored with Heilbroner’s ideas; and not the kind of affection Marx had for capitalism! The net result is a book remarkably like those that appear all too frequently in the history of economic thought — studies of little-known or long-forgotten economists which seek to convince us of their place in the pantheon. Far more interesting would be a serious effort to seek out the reasons why Heilbroner’s ideas have had such little impact on the modern economics profession, or to examine the way his work has been shaped by, and has itself shaped, modernism in the social sciences.

And make no mistake, Heilbroner is a modernist, despite his criticism of the type of modernism inherent in 20th century economics. Heilbroner’s modernism appears in the search for the underlying unity of capitalism, the effort to give it a singular meaning, and the quest to identify its future. Like Marx before him, and numerous other hermeneutic scholars of the mid-twentieth century, Heilbroner searches for unity beneath the fragmentation, even if only to reveal the nature of the fragmentation.

The hermeneuticist’s approach to unity and fragmentation has been at the center of my attention over the past couple of years, as I have been engaged in a series of discussions on hermeneutic theory with a number of my colleagues in other disciplines. One of the key issues we have identified as a source of division among us is the difference between those who believe that hermeneutic theory provides the capacity for creating meaning and unity in the midst of a fragmented social system, and those who believe that hermeneutics provides a means of uncovering meaning, unified or fragmented. The former group identifies the difference between hermeneutics and science with the distinction between the unity and the fragmentation of knowledge–despite epistemological claims for science’s unique role in creating knowledge, science fragments, while hermeneutics unites. (Carroll makes much the same claim in his chapter on Heilbroner’s critique of modern economics.) The latter group, myself included, identified hermeneutics with the uncovering of meaning/s, and sees the quest for unity (in either hermeneutic theory or science) as a peculiar attribute of modernism. In this latter way of thinking, texts such as Heilbroner’s are the sites of multiple meanings, and their interpretation may gain more from trying to locate those different meanings (contextually, or in terms of various interpretive communities) rather than the quest to render them coherent and consistent. In a similar fashion, capitalism is over-determined: a social framework being pulled in various directions by a host of competing self-contradictions and tensions; generating multiple meanings and an array of present realities and future possibilities.

I appreciate hermeneutic theory because it reminds me of things my training in economics attempted to make me forget, and urges upon me a humility in regard to the appreciation of the work of others that modernity encouraged me to ignore. Reading Heilbroner provided much the same experience. In the end, however, I see no more reason to look for a unified account of the future of capitalism than I do a systematic treatment of such a wonderful writer’s lifetime of work.

Ross B. Emmett John P. Tandberg Associate Professor of Economics Augustana University College, Camrose , Alberta, Canada

A scholar of American economics during the interwar years, Ross Emmett has focused on Frank H. Knight and Chicago economics. Two articles will appear shortly: “The Economist and the Entrepreneur: Modernist Impulses in Frank H. Knight’s Risk, Uncertainty and Profit,” forthcoming in History of Political Economy (Spring 1999); and “Entrenching Disciplinary Competence: The Role of General Education and Graduate Study in Chicago Economics,” forthcoming in The Transformation of American Economics: From Interwar Pluralism to Postwar Neoclassicism, edited by Malcolm Rutherford and Mary Morgan. A two-volume selection of essays by Frank H. Knight will appear from The University of Chicago Press in the next year

?