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Economics and the Historian

Author(s):Rawski, Thomas G.
Reviewer(s):Kiesling, Lynne

Thomas G. Rawski, ed., Economics and the Historian. Berkeley: University of California Press, 1996. xiv + 297 pp. Bibliography and index. $45.00 (cloth), ISBN 0-520-07268-5; $17.00 (paper), ISBN 0-520-07269-3.

Reviewed for EH.Net by Lynne Kiesling, College of William and Mary

Economic historians fill a peculiar, and sometimes uncomfortable, intellectual gap in the social sciences. In an ever-fracturing and increasingly compartmentalized scholarly environment, the economic historian may not find a welcoming, collegial home with either historians or economists; the notion of a truly interdisciplinary analysis is more rhetoric than reality for many scholars.

This volume of essays seeks to bridge the gap in the direction of historians. Arguing that economic analysis contributes a useful set of tools to historical scholarship, the eight economic historians writing these essays attempt to negate the stereotype of economic analysis as false quantification and so much mathematical esoterica. These chapters are well written, tightly argued, and should be of value both to the historian looking to learn more about the economic approach to history and to the economist looking for a clear presentation of the general methodological foundations of “historical economics.”

In his introductory chapter Thomas Rawski starts by observing how pervasive economic factors are, and were, in everyday situations, and that economists and historians ignoring each other is a two-way street:

“Even if man does not live by bread alone, economics lurks beneath the surface of any historical inquiry. The economist who hesitates to peek outside the confines of his models can overlook cultural influences on markets. Likewise the historian of labor, of agriculture, of trade policy, of elite politics, of the church, of international conflict, of the arts, of migration, ideas, industrialization, universities, technology, demography, or crime ignores the economic approach at the risk of losing important lines of explanation” (p. 1).

After noting the apparent enthusiasm of economists for the benefits of history, Rawski goes on to discuss briefly the ideas underlying basic economic models; by doing so he lays a foundation of understanding in the reader for the more sophisticated analyses presented in the subsequent chapters.

Rawski also wrote the second chapter, in which he discusses the analysis of economic trends. Historical analysis is especially suited to studying long-term changes in factors such as “economic welfare, distribution of income and wealth, degree of commercialization, patterns of cropping, organization of economic activity, [and] significance and functioning of various economic institutions” (p. 15). Getting to the heart of a common misperception that historians often hold concerning economic modeling, Rawski clearly points out that examining long-term changes in such factors is meaningless without putting the trend in its relevant economic context. Rawski then refers to the most common way to explore aggregate trends across time and across countries, national income accounts, and briefly explores the three areas of economic activity that national income accounts miss: household production, underground activity, and unrecorded costs. However, when we look at broad trends we are looking for general tendencies across time, and national income accounts give us an imperfect, but rather consistent, indication of these tendencies or trends. After a useful explanation of how national income accounts are derived, on both the expenditure and the output sides, Rawski also examines economic cycles and trends within them.

Jon Cohen then provides an interesting discussion of the role of institutions in economic analysis, a currently fruitful area of research in some fields of economics. Cohen defines institutions as “efficient ways of organizing human activity where markets alone will not suffice” (p. 60), such as the firm or the family. In the most basic, most restricted economic model of human behavior, all resources in the economy find their highest value use through the market, without any need for relationships beyond those stemming from market activity. Clearly, this simplistic model abstracts too far from the real relationships of life, all of which do have some economic component (even friendship does–when we spend time with friends and do things for and with them, we forego opportunities to do other things that might also be of value to us). Cohen focuses on the family, the farm, and the firm as institutions that work in conjunction with the market, in a more realistic model of human behavior. In the course of discussing why such institutions exist and what benefits they provide, Cohen highlights the property rights literature building on Coase’s work analyzing the existence of the firm.

Exploring labor economics and labor history, Susan Carter and Stephen Cullenberg creatively construct a dialogue between “Clio” and “Hades,” two professors of history and economics, respectively, on the relative merits of their methodologies. They first discuss social norms and market forces as determinants of female labor-force participation, subsequently covering the individual choice between work and leisure as the basis for most economic models of labor. Carter and Cullenberg reinforce what I perceive as the essential elements of this book: economic models are tools, nothing more, but they are useful tools because they may highlight relationships that might otherwise not have been obvious; these tools, as well as the tools of historical analysis, need to be used in context.

The fourth chapter, written by Donald McCloskey, focuses on the basic model of neoclassical economics and its emphasis on choice. Because economists emphasize resource scarcity, they look at human behavior in the context of individuals making choices facing a set of alternatives. McCloskey argues that (neoclassical, but I would argue all) economists “would urge the historian not to jump hastily to a diagnosis that peasants follow their plows by custom alone or that traders trust each other on grounds of solidarity alone…. Neoclassical economics, in other words, completes sociology and anthropology, because it studies a motivation unattractive to those fields: choice under constraint” (p. 123). Choice transcends markets and permeates nonmarket institutions, as Cohen’s chapter suggested. McCloskey’s articulation of the choice basis of economics also enables him to address a common misperception of economics–economics is not about money alone. Choices made and profits garnered need not be pecuniary. This focus on choice complements other historical approaches emphasizing, for example, culture.

Richard Sutch’s chapter provides a concise survey of macroeconomics, peppered with historical examples that highlight some benefits of aggregate economic analysis. He concludes that thinking in terms of a macroeconomic approach could be useful to the historian, even if he or she is not using aggregate economic data. Sutch clears up another problem area for non-economists–what exactly are inflation and unemployment, and how can we tell if they are present in our historical situation? Sutch also addresses the potential pitfalls of aggregation, fruitfully discussing the benefits of, for example, micro studies of real wages in 1830s Britain by region and by occupation, but reminding the reader not to commit the fallacy of composition. Just because handloom weavers in Lancashire suffered large declines in their incomes does not mean that all British workers fared poorly during the 1830s. Sutch also uses the tools of macroeconomic analysis to understand wartime destruction and postwar economic activity after the Civil War and World War II.

Next Hugh Rockoff tackles the thorny topic of money, banking and inflation. He structures his discussion as the tale of the development of money in a hypothetical economy, using examples from history to illustrate issues that arise as an economy becomes more commercial. He starts in medieval times with a gold-based money, moving on to explain how new discoveries of gold caused inflation. His subsequent explanation of the quantity theory of money and Hume’s price-specie flow mechanism is valuable to non-monetary economists as well as to historians interested in monetary history. Rockoff then discusses the rise of banking, usually starting with individuals “depositing” gold coins with their local goldsmith for safekeeping. As goldsmiths discovered that not everyone wanted all of their money back at the same time, they found that they could make money by lending out some of the deposits they held: thus the birth of fractional reserve banking. This development also meant that the goldsmith had an incentive to pay the depositor interest on his deposit, thereby creating a dimension on which goldsmiths compete for business. Rockoff also explores banking panics, fiat money and central banking, which require more sophisticated economic models and some attention to institutional detail.

The final chapter, by Peter Lindert, highlights the role of international economics in understanding the evolution of trade relationships through history. In the context of discussing international relations, Lindert emphasizes one of the basic tenets of economics–trade creates value, and both parties benefit. But that value is not distributed equally among the trading partners, and Lindert addresses the implications of that fact in terms of the development of trade restrictions (tariffs and quotas) and the evolution of trading relationships. In the final section of his chapter Lindert provides a discussion of the determination of exchange rates that I found extremely valuable, and much clearer than any other I’ve seen on the subject.

Every chapter in this collection provides valuable insights on the use of economic logic and modeling in explaining historical phenomena. I sensed no condescension from the authors toward the methodology of the historians among their readers; I sensed only respect and appreciation for good economic methodology, and an interest in sharing that enthusiasm with historian colleagues.

Lynne Kiesling Department of Economics College of William and Mary


Subject(s):Development of the Economic History Discipline: Historiography; Sources and Methods
Geographic Area(s):General, International, or Comparative
Time Period(s):General or Comparative

The Evolution of International Business: An Introduction

Author(s):Jones, Geoffrey
Reviewer(s):Taylor, Graham D.

H-NET BOOK REVIEW Published by (July 1996)

Geoffrey Jones, The Evolution of International Business: An Introduction . London and New York: Routledge, 1996. xii + 360 pp. Bibliographical references and index. Cloth, ISBN 0-415-10775-X; paper, ISBN 0-415-09371-6.

Reviewed for H-Business by Graham D. Taylor, Professor of History/Dean of Arts and Social Sciences, Dalhousie University, Halifax, Nova Scotia

During the 1960s multinational enterprises emerged as a focus of interest (and much controversy) both for economists and for the general public. Much of the literature of that era (leaving aside the important pioneering works of Raymond Vernon, Charles Kindleberger, and John Dunning) provided a very time-bound perspective on this phenomenon. Economists tended to treat multinationals as byproducts of post-World War II international financial integration and improvements in communications and transport technologies. To the broader public, in the United States and elsewhere, they were associated with U.S. economic expansion and indeed were perceived as reflecting a particularly “American” form of business organization.

Since that era, the international economy has changed dramatically: multinational enterprises became truly “multinational” as East Asian and European firms expanded (or, perhaps more properly in many instances, reappeared) in global markets and new cross-national “strategic partnerships” of firms emerged. During the same period, the historiography of multinational enterprise was vastly enriched by scholars such as Mira Wilkins, D. K. Fieldhouse, Peter Hertner, Shin’ichiYonekawa, and many others, who not only probed well into the pre-twentieth-century origins of multinational activities, but also linked their work with broader reinterpretations of the dynamics of business evolution and organization.

Geoffrey Jones has been very much a part of that international community of scholarship on multinationals, and in this book he has undertaken to synthesize that literature. Jones far too modestly designates the study as a “text book” or “introductory survey.” It is in fact a substantial contribution to our understanding of the historical significance of multinational business, broadly defined to encompass more than the conventional category of “foreign direct investment” (FDI). His book provides a needed overview of the global dimensions of this phenomenon and a coherent framework for analysis of major historical trends and central issues emerging from the literature.

Jones’s study opens with a review of the major interpretive approaches to analyzing multinationals, including concepts of ownership advantage, internalization/transaction cost, and Dunning’s “eclectic model,” all of which are well integrated into the historical chapters that follow. He also links the study of multinational evolution to the themes of organizational development associated with Alfred Chandler and the literature on the firm and national competitiveness.

This section is followed by a general overview of the major trends in multinational operations since the mid-nineteenth century, highlighting the distinctiveness of different periods in that evolution (1880-1914; the interwar period; the 1940s to 1960s; and the period since 1971). This periodization indicates both the continuities of growth of international business and the volatility of that history, reflecting shifts in external factors (“the business environment,” encompassing the impact of wars, shifts in global trade and monetary arrangements, nationalizations and other governmental regulatory measures) and consequent changes in the strategies of firms.

The next chapters review the role of multinationals in specific industrial sectors: natural resources, manufacturing and services. There is a certain degree of repetition in these sections, as Jones works through each period for the different sectors. But it is also clear that very different patterns can be discerned in the forms and motivations underlying international direct investment in each sector, as well as in the internal dynamics of firm organization, relations among firms, and between multinationals and governments.

The final chapters focus on particular issues that have emerged in the literature. These include: the variations among nations and cultures in the propensity of their business enterprises to engage in foreign investment; the relationship between foreign direct investment and economic development, in terms of both home economies (of the multinationals) and host economies; and the relationships of multinationals and governments.

Despite its relative brevity, this is a dense book that covers a wide range of topics relating to the history and theory of multinational business, each in a balanced but succinct manner. Consequently, it would be an oversimplification to suggest that it embraces a particular set of themes or line of argument. But there are certain general characteristics of the history that emerge from the study.

From the late nineteenth to well into the twentieth century, most foreign direct investment was focused on the development of natural resources, with some spinoff growth of ancillary services. Latin America and Asia were particularly notable recipients of this investment. FDI in manufacturing expanded slowly through the early twentieth century and more dramatically in the period after World War II, and the geographic center for such investment shifted to Western Europe. This trend in turn was overtaken by developments in the service sector (particularly in finance) in the past two decades, with East Asia and Western Europe, along with the United States, as major areas of investment activity.

Although there have been periods of single-country dominance in outward investment (the United Kingdom between the 1880s and 1914, and the United States in the 1950s and 1960s), perhaps more significant has been the consistent growth of multinational operations over the past century. As noted earlier, Jones’s approach embraces a range of international business activities. During the pre-World War I era, investment flows were tied to some extent to the “imperial” territories of various European nations (with regions such as Latin America becoming a battleground for European and American investors), and occurred through a peculiar (and primarily British) form called “free-standing companies” (local enterprises owned by foreign syndicates) as well as the more familiar home-and-branch operations.

In the interwar period, as national governments imposed a variety of constraints on international trade and capital flows, international cartels flourished, in part as a means of circumventing them. In the period since the 1970s, a new form of “strategic partnership” among firms of different nationalities has emerged, reflecting both the diverse origins of enterprises in global markets and the effects of financial integration coupled with the growth of regional trade blocs. In each era multinational businesses have altered their forms of operation to suit contemporary conditions, while sustaining a general trend toward growth and integration.

The strength of the book lies in its coherence, its ability to provide a clear framework for a complex process of development over a fairly long time-span. Some of this coherence might have been lost had Jones extended his analysis even further back in time, but it might have been a useful exercise to provide a broader historical perspective on the evolution of international business (as opposed to the evolution of multinational enterprise). Jones does devote a section of his chapter on “Multinationals and Services” to a discussion of the large international trading companies of the seventeenth and eighteenth centuries; but generally he focuses on the period after 1880, with an emphasis on improvements in technology (enhancing the internal management of firms in international markets) and financial integration, accompanied by nationalistic trade policies, in shaping a business environment congenial to multinationals.

But, as studies by Larry Neal (on international capital markets), James Tracy and Jonathan Israel (on the Dutch and British “merchant empires”), and Ann Carlos and Steve Nicholas (on the internal organization of trade companies) indicate, by the eighteenth century the international economy had developed strong financial and logistical links, and businesses such as the Hudson’s Bay Company and the East India companies were developing mechanisms for internal communication and management.

Jones’s chapter on multinationals and natural resources understandably gives pride of place to the “nonrenewable” resource sector (mining and petroleum) and does not ignore the “renewable” area. But a review of multinationals in the forest products industry could reinforce some of the points he makes in other contexts. As a capital-intensive industry, forest products (especially pulp and paper) has been a field with a number of multinational actors, such as the British firm Bowater, the Swedish Stora, the U.S. Weyerhaeuser, and Canada’s MacMillian-Bloedel. The intricate links between publishing companies and paper manufacturers in international markets provide another interesting feature of this industry, ranging from direct-investment ventures (such as the Chicago Tribune‘s Canadian pulpmills) to Bowater’s “strategic partnerships” in the 1920s-1940s (not without endless friction) with the British newspaper barons, Rothermere and Beaverbrook, to exploit the forestry resources of North America.

These are minor caveats, however, and do not detract from the general quality and significance of Jones’s study. As noted earlier, the book represents a well-organized synthesis of the state of the historiography of international business today, which at the same time can provide a basis for future research in the field, by identifying major lines of argument and the areas of uncertainty and controversy that still must be addressed.

Graham D. Taylor Dalhousie University


Subject(s):Business History
Geographic Area(s):General, International, or Comparative
Time Period(s):20th Century: WWII and post-WWII

The Baldwin Locomotive Works, 1831-1915

Author(s):Brown, John
Reviewer(s):Churella, Albert J.

John K. Brown. _The Baldwin Locomotive Works, 1831-1915. Baltimore, Md.: The Johns Hopkins University Press, 1995. xxxii + 328 pp. Illustrations, tables, appendices, notes, bibliography, and index. $35.95 (cloth). ISBN 0-8018-5047-9.

Reviewed by Albert Churella, Department of History, The Ohio State University, for H-Business (April 1996)

Any company that did not implement the standardization and bureaucratic centralization characteristic of American System manufacturing would appear doomed to failure in the highly competitive Gilded Age business environment, yet the Baldwin Locomotive Works thrived by deliberately avoiding standardized mass-production techniques. In advancing this argument, John Brown asserts that Baldwin’s customized building techniques forced the company to develop systematic managerial controls earlier than companies that were able to standardize production. The author organizes his work topically, exploring such issues as innovation, management, labor relations, and production methods.

As a leading producer in the nineteenth-century capital goods industry, Baldwin experienced periodic peaks and troughs in locomotive orders. By the 1850s, furthermore, railroad motive power officials were demanding significant control over the development of locomotive technology. The egotism of many railroad master mechanics, combined with varied railroad operating conditions, resulted in demands for a plethora of locomotive designs. The size, complexity, and, above all, this multiplicity of designs rendered standardized mass production impossible in the steam locomotive industry.

Baldwin not only survived on this diet of customized small-batch production; it positively thrived. Much of this success resulted from the entrepreneurial abilities of the company’s founder, Matthias Baldwin, as well as from its lack of a centralized bureaucratic management–for Baldwin, despite its size, remained a partnership until 1909. The Baldwin partners understood that locomotive building was a risky business, and they diluted this risk by relying on outside suppliers for capital, by forming financial allegiances with banking houses and with the railroads themselves, by making extensive use of the inside contracting system, and by relying on collusion and price-fixing.

Baldwin exploited economies of scope, far more than scale economies. Particularly during slack periods, the company solicited foreign business and orders for non-traditional railroad products, ranging from mine locomotives to elevated railway equipment–all of which contributed to its non-standard production. More important, Baldwin sought to use as many common parts as possible on its custom-built locomotives. As a result, despite offering hundreds of locomotive designs, Baldwin drew from a vast reservoir of established designs. By the 1860s, Baldwin employed a system of jigs, fixtures, and gauges to ensure standardized production–methods commonly referred to as Armory Practice, although Brown indicates that Baldwin “seems to have developed its own variant of these techniques without any direct transmission from the Armories or other American System manufactures” (p. 174). Baldwin also improved production efficiency by implementing piecework, which, Brown states, caused little dissent within the ranks of skilled workers. By standardizing and systematizing the production of locomotive components, Baldwin’s partners “created new organizational controls ten to thirty years before their American System consumer product cousins took up such concerns” (p. 93).

The “labor question” troubled Baldwin’s managers, as it did their counterparts elsewhere in industrial America. Baldwin exhibited a particularly strong sensitivity to this issue, because varying business cycles called for hiring binges followed by massive layoffs; yet the technical complexity of steam locomotives required the company to maintain a cadre of skilled and loyal workers. Baldwin succeeded in maintaining peace in an age of industrial violence through cooperative relations, Brown argues, and not by coercive threats or regimented Taylorism. The company paid consistently high wages and instilled worker loyalty through a system of apprenticeships. Of the highly skilled long-time employees, a select few would become partners, since Baldwin rarely recruited outside managerial talent. Since most of the primary source material that Brown uses in his discussion of labor issues consists of company statistical data and managerial correspondence, it is of course difficult to determine the true degree of worker loyalty; and it is equally difficult to test the assertion that management saw piece rates as a path to cooperative, rather than coercive, efficiency.

Baldwin’s skills in responding to varied customer demands ultimately caused great hardship for the company. Locomotive orders peaked in 1906 and, after this date, Baldwin’s producer culture was ill-equipped to respond to a combination of a hostile regulatory climate and an increasing pace of technological innovation. Still, as Brown forcefully argues, for more than half a century Baldwin’s production and managerial innovations enabled the company to respond effectively to a market that would not accept mass production.

This book leaves several tantalizing questions unanswered. It is largely beyond the scope of Brown’s work, but an exploration of technological diffusion in relation to the locomotive industry seems to offer an important topic for future research. In a footnote (p. 252), Brown notes that several employees in the locomotive industry later assumed leadership roles in the development of other manufacturing industries. Aside from this reference, and the thorough discussion of links between railroad master mechanics and technological innovation at Baldwin, there is little material relating to the impact of emerging manufacturing technologies on the company and, in turn, the relationship of Baldwin’s technological innovations to other firms and industries. Such linkages merit additional consideration, since Baldwin seems to illustrate a bridge between the emergence of Armory Practice in the early nineteenth century and the development of bureaucratized managerial controls over manufacturing and distribution in high-volume industries during the 1880s and 1890s. Also, given the limited managerial structure at Baldwin, it would be helpful to have more information regarding the disparate backgrounds and entrepreneurial outlooks of individual Baldwin partners.

These minor omissions in no way detract from the excellence of Brown’s work, which adds to the growing number of valuable correctives to well-known studies of bureaucratically managed mass-production and -distribution firms. This study provides a thorough and well-balanced analysis of the contributions of an important, although largely neglected, firm and industry to the development of nineteenth-century technological and managerial systems.

Reviewed by Albert Churella Department of History The Ohio State University


Subject(s):Business History
Geographic Area(s):North America
Time Period(s):19th Century

Who’s In Charge? Workers and Managers in the United States

Author(s):Liebhold, Peter
Rubenstein, Harry
Reviewer(s):Lichtenstein, Nelson

An Exhibit Review

WHO’S IN CHARGE?: WORKERS AND MANAGERS IN THE UNITED STATES February 10, 1996 – April 7, 1996 An Exhibit at the National Museum of American History Washington, D.C.

Reviewed by Nelson Lichtenstein for H-BUSINESS, March 1996 University of Virginia

Smithsonian curators Harry Rubenstein and Peter Liebhold have braved the chilly ideological winds blowing across the Mall to mount this timely and provocative traveling exhibition in the National Museum of American History. The space devoted to the exhibition is relatively small, but the subject is huge: nothing less than a class analysis of the labor process from the nineteenth century industrial era to the contemporary world of computer consoles and just-in-time production techniques.

Rubenstein and Liebhold have assembled some striking artifacts: an ominous set of nineteenth-century iron gates from the Bobson Textile Mills of Philadelphia, which guards the exhibit entrance; a set of the wooden tobacco molds that did so much to deskill turn-of-the-century cigar workers; an early set of time and motion sheets, with stopwatch, used by Frank and Lillian Gilbreth; and a contemporary keyboard from a McDonalds cash register, upon which the dollars and cents numbers have been replaced by “words” like FUDG SUND.

This traveling exhibit, on display at the NMAH through April 7, is well grounded in the spirit of Harry Braverman, perhaps far too much so. Indeed, its first third is an unrelenting exposition of the ideology and praxis of nineteenth-century industrial management, whose quest for industrial hegemony through workplace regimentation and deskilling is starkly explicated. Given the calculated ignorance of the rest of the museum world on this subject, the creators of “Who’s In Charge?” deserve our considerable gratitude, but there is a heavy-handed didacticism here that is most off-putting. No panel invokes the resources upon which the working class itself mobilized a turn-of-the-century resistance: there’s no hint of the communal, republican world first celebrated by Herbert Gutman, or even of the craftsman’s fierce pride and autonomy so well evoked by David Montgomery and the generation of labor historians who followed his lead. No artifacts from either the Knights of Labor or the Industrial Workers of the World are shown.

Historians of technology will find this early section of the exhibit flat-footed as well: a quotation from Karl Marx–who is identified only as an “economist”–encapsulates both the admirable political boldness and the reductionism of the exhibit: “It would be possible to write a history of inventions … made for the sole purpose of supplying capital with weapons against the revolts of the working class.” Driving home the point is an epigram from Frederick Taylor: “In the past workers have been first. In the future the system must be first.”

A short section on the New Deal and the classic era of mid-century collective bargaining stands at the exhibit’s midpoint. Here the focus shifts rather abruptly to discussions of trade unionism, strikes, and the new labor legislation. All this is important, of course, but the resolute focus on the relationship between workers and their immediate bosses, which was the signal virtue of the exhibit’s first section, is missing. A union contract book, a shop steward’s badge, or an actual seniority list posted on a factory bulletin board might well have exemplified the shift in shop-floor power relations so notable in the New Deal era.

The exhibit’s dramatic final section is dominated by an Andon Board taken right out of the jointly operated Toyota-General Motors assembly plant in Fremont, California. With its blinking red, yellow, and green lights revealing the status of each work station, the Andon Board is the physical embodiment of Japanese just-in-time production techniques. Workers have the formal right to stop the line by pulling a cord–in which case their green light turns first to yellow and then, after a pause, to red–but management has quickly learned to process this worker-generated information on labor intensity to “stress” the line in order to achieve relentlessly higher levels of individual productivity.

This exhibition room also displays a series of wonderful posters and advertisements, touting everything from foreman training and employer-employee unity to the virtues of cheap labor in Haiti and the rest of the Caribbean. Although the advocates of the new “team production” schemes are given their due, this final exhibit space is undoubtedly one of the most forthright critiques of contemporary capitalism to appear at taxpayer expense. The glowing set of tributes to the exhibition that appear in the comment notebooks at the exit demonstrate that, whatever the project’s limitations, Liebhold and Rubenstein have tapped an exposed nerve in the way Americans feel about the contemporary world of work.

Nelson Lichtenstein



Subject(s):Labor and Employment History
Geographic Area(s):North America
Time Period(s):General or Comparative

Opening America’s Market: U.S. Foreign Trade Policy Since 1776

Author(s):Eckes, Alfred E. Jr.
Reviewer(s):Khula, Bruce A.

Alfred E. Eckes, Jr. OPENING AMERICA’S MARKET: U.S. FOREIGN TRADE POLICY SINCE 1776. Chapel Hill: University of North Carolina Press, 1995. xi + 402 pp. Illustrations, tables, bibliography, and index. $34.95 (cloth); ISBN 0-8078-2213-2.

Reviewed by Bruce A. Khula, The Ohio State University, for H-BUSINESS November, 1995.

Historians of American business and foreign policy will benefit from a careful reading of Alfred E. Eckes’s newest book, OPENING AMERICA’S MARKET. As an historian at Ohio University and a former commissioner for the U.S. International Trade Commission, Eckes provides an insider’s knowledge coupled with the nuance and analysis that one expects of a seasoned historian. Although Eckes is clearly not the first to examine the economic dimensions of American foreign policy, his contribution nevertheless stands out. Much of the history written on American foreign economic policy has focused on the efforts of policymakers to open foreign markets for American goods. Eckes’s book is concerned instead with policymakers’ efforts to open the American market to foreign imports. The story Eckes tells is a fascinating one, and his conclusions necessitate a reexamination of America’s current obsession with the doctrine of free trade.

In OPENING AMERICA’S MARKET, Eckes has three principal arguments. First, he claims that American trade policy was explicitly and consciously protectionist from the early days of the Republic until the New Deal, when it underwent a dramatic shift toward free trade. Second, Eckes argues that before the New Deal, U.S. trade policy was designed to achieve domestic objectives but that, over the course of the 1930s, trade policy was ordered to fit the needs of American diplomacy. Eckes’s final, implicit argument is an observation and a warning that free trade may not be the only, or even the best, route to economic growth and national prosperity. As Eckes forcefully contends, a great deal of American economic growth came during years of high tariff barriers.

Eckes hopes his book will benefit policymakers as well as scholars. Having served on the International Trade Commission from 1981 to 1990, from 1982 to 1984 as chairman, Eckes laments the paucity of historical knowledge that American officials bring to trade negotiations. Policymakers and historians alike would do well to read this book. Eckes’s writing is smooth, his arguments are compelling, and the subject is both timely and important.

Eckes begins his analysis of American trade policy by examining its origins in the years following 1776. Early American leaders like Benjamin Franklin and Thomas Jefferson were strong proponents of free trade. Influenced by the writings of Adam Smith, these leaders believed that the peace and prosperity of the young nation depended on unrestricted access to foreign markets. If the United States was willing to offer reciprocal and open access to all nations, policymakers reasoned, American consumers would gain access to desired manufactured goods even as foreign consumers were enjoying American agricultural products. Accordingly, when the Tariff Act of 1789 was passed, it embraced universal nondiscrimination by utilizing a single-schedule tariff. Eckes notes that, although this act emphasized the American commitment to equality among nations, it also handicapped the president by depriving the executive branch of the ability to bargain during trade negotiations.

The initial free trade goals of Franklin and Jefferson fell into disrepute as the United States entered the nineteenth century. Alexander Hamilton had questioned them from the beginning. His “Report on Manufactures” was openly protectionist, endorsing a comprehensive system of tariffs and subsidies designed to enhance and protect American manufacturing. Hamilton took issue with Adam Smith’s free trade doctrine, claiming that it failed to promote the long-term interests of the nation. The strengths of Hamilton’s critique were underscored by the experiences of the War of 1812, which Eckes credits with generating “a major shift away from the idealistic policy of promoting equality and reciprocal access” (p. 18). Repeated European violations of American shipping demonstrated the economic vulnerability of the nation. Swelling nationalism provided figures like Henry Clay with a political foundation to promote a strong domestic manufacturing base. Clay’s “American System” consciously put the interests of the nation and its producers before the interests of its consumers. According to Eckes, Clay’s protectionism became the clear consensus of American policymakers until the Great Depression. They realized that free trade did not serve the interests of the young nation, and they were not afraid to erect high tariff barriers. After all, before the Civil War, American diplomats were not terribly concerned with winning access to foreign markets, and until the 1930s, “diplomacy remained an instrument of commerce” (p. 27).

In the years between the Civil War and the New Deal, the Republican Party emerged as the champion of protectionism. As pre-Civil War policymakers had, Republicans considered the short-term consumer gains promised by free trade less important than the long- term gains of increasing employment, industrial maturation, and economic diversification. Republicans dismissed State Department claims that reciprocity served American interests. If a nation lacked a consumption-oriented society, Republican politicians argued, offering that nation reciprocal access to the American market in no way secured the interests of the United States. Therefore, under Republican guidance, American trade policy established low tariffs on necessary raw materials but kept tariffs high on value-added manufactured goods.

According to Eckes, this selective tariff policy had several impressive results. It provided the national government with a steady and substantial source of revenue. In addition, American consumers were not seriously harmed by high tariff barriers; as a result of competition and the rise of big business, prices actually declined. Finally, contrary to the expectations of modern-day economists, economic growth was not retarded by protectionism but expanded during this period. Eckes asserts that his research uncovered “no significant negative relationship between high tariffs and real economic growth” (p. 55).

Clearly, the most contentious argument in this book is Eckes’s claim that the 1930 Smoot-Hawley Tariff was not the disaster that most historians consider it to have been. In a spirited attack on the conventional wisdom, Eckes attempts to prove that politicians and ideologues have “transformed a molehill into a mountain” (p. 139). Eckes dismisses claims that Smoot-Hawley raised tariffs to unprecedented levels. The highest rate on ad valorem goods applied to only about one-third of American imports, and even then it was actually lower than the rate of the 1828 “Tariff of Abominations.” Furthermore, Eckes argues that the impending tariffs of Smoot-Hawley had little to do with the 1929 Stock Market Crash, and he insists that the act was not as singularly damaging to world trade as critics suggest. Finally, Eckes demonstrates that few formal protests by foreign nations were filed against Smoot-Hawley: foreign retaliation was more mythical than real. Concluding his effort to revise the history of Smoot-Hawley, Eckes writes that Congress was looking out for American interests and in passing the tariff act was in fact acting “prudently” (p. 137)

The single most important individual in Eckes’s book is unquestionably Cordell Hull. Devoted to free trade, Hull took advantage of the Democratic Congress and used his influence as Secretary of State to engineer a “revolution in U.S. trade policy” (p. 98). Abandoning its 120-year old protectionist legacy, the United States embraced free trade. Under the auspices of the Reciprocal Trade Agreements Program (RTAP), the United States unilaterally slashed its high tariff barriers to encourage foreign nations to do the same. Hull promised to reverse the worsening pattern of global trade without injuring American producers. This “no-injury” pledge was to be policed by the State Department, which the RTAP empowered with negotiating authority. By minimizing congressional interference with tariff-making and packing the U.S. Tariff Commission with free traders, Hull advanced a series of policies that provided virtually unimpeded access to the American market for all nations. Eckes points out that U.S. officials had the power to enforce American commercial rights, but that they consciously avoided doing so. Not only did these steps fail to promote American exports, but they also demonstrated that trade policy had finally been subordinated to foreign policy. Hoping to promote peace and stability through international economic cooperation, American diplomats ignored domestic interests. The long-term negative consequences of such a policy were not immediately apparent, however, for the artificial economic environment of World War II kept both employment and production high.

As the Second World War came to a close, Hull’s vision received a new lease on life with the coming of the Cold War. Trade policy became a key component of containment. Once again subordinating domestic needs to foreign policy, American officials promoted free trade to reconstruct and integrate Western Europe while isolating the Soviet Union and its satellite states. As the Republican Party began to emerge from the political wilderness, its membership initially moved toward a traditional pro-tariff position. The Republicans were soon co-opted by President Harry Truman’s strident anti-communism, however, and they reluctantly accepted Hull’s trade revolution. One result of foreign policy preoccupation and Republican acquiescence was an emerging “pattern of tolerance for discrimination against American exports” (p. 164). Not only did the government encourage American companies to invest abroad, but it also used taxpayers’ dollars to promote importation of foreign manufactured goods. President Dwight Eisenhower contributed to the trade revolution by concluding an excessively-generous trade agreement with Japan in 1955, and his successors, presidents John Kennedy and Lyndon Johnson, made even more radical changes.

Focusing on the Kennedy Round of the General Agreements on Tariffs and Trade and the Trade Expansion Act of 1962, Eckes illustrates the shortcomings of American trade policy in the 1960s. The executive branch was granted unprecedented levels of discretionary authority, yet it failed to obtain significant foreign tariff concessions, abandoned the “no-injury” pledge, exacerbated balance-of-payments problems, and created the first American trade deficit since 1893. As Eckes sees it, Japan was the “real winner” of 1960s American trade policy. Providing minimal concessions and receiving maximum access to the American market, the Japanese received a “phenomenal deal” (p. 200). Responding to growing public suspicion of trade liberalization, President Richard Nixon and Congress initiated a shift toward protectionism in the 1970s by adopting rigorous enforcement of trade laws and congressional oversight of trade negotiations. Yet this reaction was too little, too late. Focusing on the loss of American industrial employment and the trade deficit, Eckes writes that “the Kennedy and Johnson administrations unwittingly made a series of policy decisions that contributed to the domestic economic dislocations of the 1980s and 1990s” (p. 218).

Eckes is sharply critical of American trade policy following Cordell Hull’s revolution. Not only did American officials fail to promote exports, but they also made no effort to enforce the terms of trade negotiations. Theoretically, the existence of “escape clauses” allowed the United States to absolve itself of treaty obligations if it were being treated unfairly, but in practice such clauses were empty concessions on the part of foreign governments; to minimize international conflict, the State Department refused to invoke them even in the face of blatant discrimination. Escape clauses were not actually used until the mid-1970s, but by 1985, however, they had once again fallen into disuse, victim of the Ronald Reagan administration’s zeal for free trade.

By the 1930s, American trade negotiators were also failing to prevent “dumping” and to enact effective countervailing duties. Antidumping legislation in the United States was limited in nature and provided broad executive discretion. The result, not surprisingly, was its subordination to larger foreign policy goals. Prior to the 1930s, the U.S. government employed countervailing duties to protect domestic industry against products made from industries subsidized by foreign governments. Like antidumping and the escape clause, the strategy of applying countervailing duties was set aside for foreign policy goals.

OPENING AMERICA’S MARKET is an ambitious book. In attempting to explain trade policy since 1776, Eckes has made a major contribution to the existing scholarship on American foreign economic policy. His treatment of trade policy during the Cold War suggests that historians who accuse the United States of self-aggrandizement have ignored a key piece of the puzzle. Eckes is, however, by no means uncritical of American Cold War trade policy, which he argues “imposed unnecessary burdens on U.S. producers and workers, severely harmed long-term U.S. economic performance, and circumvented the authority and will of Congress” (p.177).

For all its merits, the book is not without a few problems. As a former trade commissioner, Eckes occasionally attributes excessive importance to trade officials or tariff acts. Although Eckes explicitly backs away from asserting that trade policy was the primary stimulus for American economic growth, there are places in the text that seem to belie this distancing. One section of the book finds Eckes comparing a period of high tariffs (1890-1910) to a period with dramatically reduced barriers (1972-1992). He finds that the growth rate of Gross National Product (GNP) and per capita GNP during the high-tariff period was actually greater than that of the low-tariff period. This comparison seems fraught with problems. The second industrial revolution, the rise of big business, and the 1895-1905 merger wave make the period from 1890 to 1910 a tough act to follow. Whatever the trade policy had been during this period, these other factors would clearly have generated dynamic and substantial growth. From 1972-1992, on the other hand, American business buckled under the pressures of major corporate restructuring, an aging industrial base, and the reemergence of foreign competition. Regardless of existing trade policy, the economic growth of this period would likely have been stifled.

It would be wrong to belabor this point further, however. Eckes has not demonstrated the primacy of trade policy (and indeed he has not attempted to), but he has provided a needed corrective to historians who fixate on the firm as the source of economic growth. Along with politicians and trade negotiators, business and diplomatic historians must take Eckes’s arguments into account: his research is thorough, his knowledge of the issues impressive, and the questions he raises cannot be ignored.

Bruce A. Khula, The Ohio State University

118 Robinson Hall Harvard University Cambridge, MA 02138 –>


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

Cities of Heat and Light: Domesticating Gas and Electricity in Urban America

Author(s):Rose, Mark
Reviewer(s):Castaneda, Christopher J.

CITIES OF LIGHT AND HEAT: DOMESTICATING GAS AND ELECTRICITY IN URBAN AMERICA. By Mark H. Rose. (University Park, PA: The Pennsylvania State University Press, 1995). 201 pp. + xviii, bib. essay, and index. $34.50. Reviewed by Christopher J. Castaneda, California State University, Sacramento.

By relating the development of household gas and electric utilization to theories of technology and society, Mark Rose tests a long-standing debate. Simply put, does technology shape society or does society shape technology? Rose provides a careful analysis of the gas and electric business to show that a complex interplay of social, political, and economic contexts shapes technological development.

Rose focuses his study on the urban spaces of Denver and Kansas City through the year 1940. After 1940, he generalizes on a nationwide basis although he presents much more material relating to the earlier period in the two cities. Rose’s involvement with this topic began in the mid-1970s, when he, in collaboration with John G. Clark, initiated research on the topic of energy choices in these cities while teaching at the University of Kansas. He noted the many differences between Denver and Kansas City, but the author was struck by the triumph of “urban politics, middle-class tastes, and the social-spatial composition” in both. (p. 11) In some respects, the similarities between these cities may limit our ability to extend their specific experiences to those of east and west coast locations; Rose’s observations are particularly cogent for the midwestern experience.

Certainly, in these cities as well as others in the U.S., early gas and electric firms promoted their services through a variety of methods in order to develop a customer base. It gradually became clear that electricity and gas were simply cleaner and easier to use than other domestic fuels such as coal. But what exactly was the larger social process through which the gas and electric business developed? This is the question Rose seeks to answer.

Rose tells us that “agents of diffusion” were responsible for distributing both the ideas about the new technology and the appliances themselves. These agents included teachers, architects, homebuilders, and salesmen. The most important of these were salesmen who worked for the utility entrepreneur, Henry L. Doherty. Doherty rose to prominence in his industry as an innovator in devising rates and promotional activities. His three part flexible rate structure encouraged gas consumption while his well-trained, clean, polite, and prompt salesmen sought to represent those same qualities in the electric or gas service they were selling. Rose’s account of the Doherty System is interesting and important for it brings forth the sales techniques of an early industry which offers new material for inquiry.

Doherty, later the head of Cities Service Company, was in many ways like Samuel Insull; both men controlled vast public utility holding company empires. Insull is more well known – in part because of the work of Harold Platt and Forrest McDonald – and also because of the infamous collapse of his empire. But Insull operated in Chicago, and Doherty was strong in the central United States including Kansas City and Denver. Thus, Rose has provided a valuable contribution by examining a part of the career of another public utility captain who controlled the gas and electric business in a large part of the United States.

Rose examines other less prominent though effective agents of diffusion including J. C. Nichols and Roy G. Munroe. Munroe never advanced beyond a mid-level salesmen, albeit a successful one, while Nichols became a prominent developer. Both promoted gas and electric technologies from different perspectives but to the same end. Other players in the scheme included teachers. In vocational schools, students studied the gas and/or electric facilities used to light and heat their own buildings. Many of these students would later find employment with the local utility firm. Public schools served indirectly as models for the ideal of gas and electric technology. Codes required a high level of illumination and ventilation in classrooms in order to provide a healthful and supportive learning environment for teachers and students.

In the home, appliances relieved the drudgery and heavier labor involved in domestic housekeeping, though they often created new chores, while other new technologies provided benefits to men in their work places. Ideally, irons, refrigerators, stoves, air conditioners, and heaters provided people with the ability to begin to regulate their own built environments. Rose shows how these appliances, which tended to benefit women and housekeepers, were marketed to increase the more feminine qualities of “comfort, convenience, and cleanliness” of the home. (p. xv)

The very brief analysis of the post-1940 era is not as convincing as that of the earlier one. It is essentially a cursory review of the continuing growth and promotion of gas and electric power utilization through the mid-1980s. The complex regulatory, marketing, and technological developments of the last fifty years, though, would provide fertile ground for an in-depth analysis of the social history of the light and power business during that period.

This work does elevate the scholarship of the U.S. gas and electric business. In this regard, Rose jousts with Alfred D. Chandler’s statement in The Visible Hand that electric, gas, and trolley systems of the 1920s “remained smaller and less complex than the older railroad systems.” (p. 204) Certainly, the hundreds of thousands of diverse customers dealt with on a regular basis by gas and electric employees, varying rate schedules, and a multi- level public policy suggests a higher level of complexity in those newer urban technologies than Chandler suggests.

There are integral parts of this story that deserve additional attention. The author effectively shows how coal stoves, for example, were displaced by cleaner and more easily maintained gas stoves. While Rose does distinguish between natural gas and manufactured coal gas, he might have delved further into the transition from manufactured gas to natural gas; the natural variety was significantly cleaner and more hygienic than the coal and oil based variety. How did gas companies promote this intra- industry fuel shift to their customers? In addition, did utilities market gas and electric service directly to other groups besides upper-income white families.

The author accurately describes Henry L. Doherty as a master of promotion, public relations, sales techniques, and rate structures. But Doherty may not have consciously sought to adapt the gas industry to the urban environment as much as he simply desired to find the best way to gain control over the markets which he claimed. Although this book is not about the process of bringing fuel to the cities (as opposed to how it is used in the city), Doherty was a ruthless competitor who sought to destroy and/or acquire those who tried to supply fuel to the markets he called his own. Thus, Doherty’s insight into marketing was probably influenced less by a desire to adapt his business to the consumer than a drive to show the consumer how to benefit from his product. Although the book tends to downplay the capitalistic tendencies of men like Doherty, it does describe well the social outcome of their work.

This book cuts across the disciplines of urban history, energy history, and the history of technology. It draws upon a wide variety of sources including corporate records and trade journals. The mix of biography, technical data, and descriptions of urban development make for a well composed and well written book which provides a very useful foray into the technological evolution of the 20th century home. Rose has succeeded in showing how social, political, and economic forces shaped the gas and electric business in Kansas City and Denver, and how these forces worked to domesticate energy nationwide.

Christopher J. Castaneda California State University, Sacramento

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

Rowntree and the Marketing Revolution, 1862-1969

Author(s):Fitzgerald, Robert
Reviewer(s):Wilson, John F.

Book review by JOHN F. WILSON ( of Manchester) of:

ROWNTREE AND THE MARKETING REVOLUTION, 1862-1969 by Robert Fitzgerald Cambridge University Press, 1995, pp.xix + 737 (Illus.) ISBN 0 521 43512 9 (hardback); Price stlg75 (US$150).

A book replete with mentions of childhood favourites as `Kit Kat’, `Aero’ and `Smarties’ is bound to raise some interest within even the most cynical of business historians who regard commissioned case- studies with great suspicion, but to be fair to Dr. Fitzgerald this is much more than a broad survey of a famous company history laced with fancy illustrations of old publicity material. Indeed, the analysis is well-founded on a series of key themes which are amply addressed through the use of extensive primary records, detailed references to other secondary sources, and even economic theory (in particular transaction cost theory).

The main theme, evident from the book’s title, is how the famous York confectionary firm of Rowntree developed its marketing techniques, and it is interesting to note that only after the family manager- owners had been replaced in 1931 that professional executives were able to introduce new ideas about the Rowntrees had been sceptical. Marketing weaknesses had actually been one of the main reasons why since its foundation in 1862 Joseph Rowntree’s firm had remained a relatively small-scale producer compared with its major rival, Cadbury, but under George Harris from 1931 major progress was made as the firm woke up to the possibilities in the techniques so successfully employed by other chocolate makers. This supports the criticisms of family management made by A.D. Chandler, although in tackling the issue Dr. Fitzgerald is more concerned with emphasising how up to 1931 Rowntree was actually a well-managed firm with an adequate organization.

In addressing the general debate about British business organization, Dr. Fitzgerald pays particular attention to another theme of the book, he existence of a `chocolate’ corporate culture which extended to the other two large firms, Cadbury and Fry. This culture had two principal characteristics, efficient production and management, and service to the community, and building on his previous publications Dr. Fitzgerald provides illuminating evidence of how from the 1890s Seebohm Rowntree (as the country’s first labour director) was able to create and nurture an internal labour market using welfarist strategies. Of course, Rowntree and Cadbury were well known as paternalistic employers, but as Dr. Fitzgerlad explains such labels are misleading, and greater concern ought to be paid to how firms matched the needs of efficient production and management with labour market vagaries and trade union influence. The sections on how Rowntree introduced scientific management deserve careful reading but anybody interested in such issues, because they provide incisive material for a frank assessment of labour management trends in the pre-1939 era.

A third prominent theme of this history is the development of multinational strategies, particularly under the chairmanship of Lloyd Owen after 1957, but in fact originating in the interwar years. The termination of price-fixing agreements by government action and intensifying competition spurred Rowntree into the creation of many `little Yorks’ in the 1950s and 1960s, and separate chapters are provided to study the ventures in the USA, Europe and South Africa. This reveals how Rowntree evolved from a family firm into a major global player, and for this reason by 1969 a merger with another British rival, Mackintosh, had been arranged in order to strengthen its base.

There is consequently much to be gained from reading this commissioned history, and clearly Dr. Fitzgerald has not suffered unduly from company or family interference in his research. At the same time, it is only fair to mention several weaknesses which might detract from the book, in particular the failure to provide an extensive analysis of the abundant financial material to which he has evidently had access. For example, vital indicators like the return on capital employed have not been calculated, and the reader is left to work out the full implications of the long statistical appendices. This would have been particularly helpful when analyzing the success of multinational strategies, when after 1948 consolidated balance sheets had to be produced. The 1969 merger is also inadequately assessed, and one might have expected a more detailed analysis of the general business scene as another reason why the two firms merged. Likewise, the company’s final decades, as well as its demise, when acquired in a `dawn raid’ by Nestle in April 1988, could have been more thoroughly examined, but then after over 600 pages Dr. Fitzgerald might have been exhausted. Finally, while reference to such techniques as transaction cost analysis has been made, no quantitative work is conducted to explain whether Rowntree achieved its aims in reducing any of its costs as a result of multinationalisation.

Having noted these relatively minor quibbles, it is important to reiterate the general view, that this is a most impressive business history which deserves a wide audience. Dr. Fitzgerald must be credited with a significant achievement in harmonizing the case-study treatment with a range of other issues, and reading lists would be the poorer if they did not include references to the book under any of its major themes.


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

Elusive Union: The Process of Economic and Monetary Union in Europe

Author(s):Dyson, Kenneth
Reviewer(s):Fuller, Elaine


Review of ELUSIVE UNION THE PROCESS OF ECONOMIC AND MONETARY UNION IN EUROPE by Kenneth Dyson (Longman, London and New York, 1994) 370 pages

Reviewed by Elaine Fuller Ph.D. student in Economics and Historical Studies New School for Social Research Center for Studies of Social Change 64 University Place New York City 10003 tel: 212/533-9341 fax: 212/477-5409 e-mail:

This review has three sections: Argument of Book, Organization of Book, A Critique

I. Argument of Book

In this important book on the political move towards monetary union by which a number of European nations would use one circulating and reserve currency, Professor Dyson takes on a difficult task; his subject matter is a complex long-term political process concerning economic and monetary issues, yet these issues themselves are not his focus. It is, rather, with questions about how the policy process has been shaped and guided: who are the actors with agenda-setting and veto power; what kinds of bargaining relations exist among them; who establishes the `rules of the game’; how do we explain the emergence and development of the policy process. He wants to restore political reasons to their proper place in his explanatory story, something that is all-too-often completely ignored in studies of economic and financial issues.

Dyson centers his analysis in an institutional and game theory approach which seems quite suitable to the subject matter. His central argument is that the policy process establishing the existing European Monetary System and the goal of creating a full-fledged European Monetary Union is best understood as composed of a distinct set of interdependent bargaining relations and institutional rules of the game, embedded in a framework of structures that they have a limited, and fluctuating, capacity to influence. There is a complex interaction between the structural dynamics of the international political economy and the internal dynamics of the EMS and EMU policy process.

Furthermore, the nature of the European integration process is shaped by the will and the capability of the central actors involved, which can be fully appreciated only as a set of interlocking bargaining relations that, in turn, interact with certain key rules of the game. All of these — actors, bargaining relations and rules — are embedded in five general sources of structural power — world currency relations, `fundamentals’ of each country, and trade interdependence. (This statement of the central argument is distilled from various pages in the introductory Chapter 1.)

Interaction among these sources of structural power generates a lack of consistent control by any one actor. There is no hegemon, to use an older term. This is the essence of Dyson’s argument of the hollow core in the EMU policy process. Furthermore, EMU remains a fragile prospect because it rests on decisions to pursue monetary union prior to having in place a strong unified political union to give it necessary support and establish the rules of the game. In this `two-level’ policy process (the separation of activities toward political union and toward monetary union) monetary union is being pursued in a highly elitist fashion by financial technicians, central bankers and their international political cohorts. Thus, it generates resistance among people in various countries who cannot see it as part of a known political process. Money, Dyson tells us, has not only an economic and technical face, but a cultural and political face. (p. 3 – 5) It symbolizes national identity and sovereignty.

II. Organization of Book

Dyson introduces the theme of monetary union requiring prior political authority in his introductory chapter (Ch.2) on five historical monetary unions. Two of them, the Federal Reserve System of the United States and the German centralized system are strong and successful national monetary unions; that is, political union preceded monetary union. The other three were international — the Latin Monetary Union of 1865, the international gold standard and the Bretton Woods System — which fell apart when the hegemonic nation at their center began to lose control.

The second history chapter takes us through the activities around monetary coordination in Europe after the Second World War. It briefly summarizes the European Payments Union of the 1950s, the institutions and programs of the European Economic Community of the 1960s, responses to the disintegration of the Bretton Woods system (the `snake’ by which EEC country currencies were to float together, or rather, float with the D-Mark; the `snake in the tunnel’ by which they were to float together around a dollar parity with fluctuations kept within a narrower band than that allowed other currencies in the IMF) and finally to the dollar crisis of the late 1970s which fostered the birth of the Exchange Rate System in which outlines of the original `snake’ could still be discerned.

It is only at Chapter 4 that we arrive at the heart of the book’s subject: an historical narrative, thick with detail, which takes us through the bargaining relations and configurations of power in two periods of major change — 1978-79 and 1988-91. The first period saw creation of the European Monetary System in 1979 ,rapid implementation of a European Monetary Union with a single currency, which would replace the Exchange Rate Mechanism in which member countries must try to maintain set exchange rate parities but also negotiate changes in them as frequently as necessary. (Ch.5)

We get a good sense of the importance of central banks; of Britain’s loss of power; of the relevance of the right people at the right place at the right time (and the wrong time); of the centrality of Franco-German bargaining; and, most of all, of the centrality of Germany. Even that is more complex because one of the most central bargaining fronts is between the German government and the independent Bundesbank. The Bundesbank always thinks in terms of what is good for Germany according to its convervative banking philosophy. In this sense, it is not an international player but a national player thrust onto the international stage with a lead role it does not want.

The German government, on the other hand, is led by men who experienced the Second World War and must carry with them their country’s horrible past in the mid-twentieth century. Taking a lead in forming the European Monetary System as a response to American `abdication’ of international responsibility (with the 1978 dollar crisis and, indeed, earlier with the demise of Bretton Woods) would bring some redemption in the role of a constructive and good international partner.

Underlying these political considerations, however, is the economic reality that the postwar German economy has been the engine of growth for Europe. This has been the primary asymmetry in the `economic fundamentals’ which spawned asymmetries in currency strength and bargaining power. The German government and the Bundesbank could not always have things their own way but nothing could happen without their cooperation. As Dyson puts it “the one veto position that really mattered” and “the pivot around which a balance had to be found.” (p.155)

Yet because of its past, Germany must express its power through international cooperation rather than acting openly as the hegemon of Europe, while other countries, particularly France, are concerned to curtail German power without destroying that international cooperation.

Dyson follows Part I on historical perspectives with Part II on theoretical perspectives which focuses on the sources of structural power: the `two-level’ policy process; the D-Mark as anchor currency; the ascendance of monetarism over the kind of expansionary policies known as Keynesianism; changes in financial markets, in production and distribution and employment (the economic fundamentals), in trade patterns.

III. A Critique

It is these mostly economic issues in Part II that this book; a reader with economist’s eyes who kept feeling there was something crucial missing from the historical narrative of the first 175 pages. Admittedly, Elusive Unionis about a political process and as such, it highlights a general failing of economists who take specific political configurations as givens when, in fact, contingent policy processes concerning economic activity need to become variables. Yet, at the same time, the book is about political processes concerning economic organization and activity and, therefore, cannot help but deal with economics if it is to be comprehensive. But then, how to model such a complexity or even to incorporate the political and economic in the same narrative? It is not easy; Dyson’s not unreasonable solution is a book with two parts, but this tends, I think, to weaken his project by muting the economic debates and questions he rightly considers the key ones. They are in there but they tend to get lost; they don’t stand out clearly as they should.

It would have been better, I think, to have tried to integrate political process and economic structure and to have presented at the beginning a clear schema of various relevant historical economic debates: the economic and political defferences between fixed vs. flexible vs. freely floating exchange rates and why the latter has rarely been supported by anyone but economic theorists; who generally does and does not benefit by exchange controls and capital controls; how exchange rates and particular adjustment mechanisms for curing balance-of-payments deficits (but not surpluses) are connected to questions of sufficient liquidity for full employment economic growth and inflation; what it would mean to different sectors of society in each country to force convergence among them of money supply changes, interest rates, inflation rates, current-account balances, and especially fiscal policies and deficit spending decisions. Then tracing such issues through the political narrative would give it clearer economic meaning.

Although almost all these economic questions are historic issues, they don’t directly appear in the initial narrative on historic monetary unions because of its focus on the necessity of prior political union. This important but narrow focus leaves this introductory chapter seeming both rather superficial and yet too much at the same time.

For example, on p.32 Dyson refers to obstacles “all the more apparent when one considers the difficulties of moving from political to monetary union in relatively homogeneous cultural areas like Germany and the United States.” But was cultural homogeneity the dominant dynamic involved in struggles around establishing central control over monetary activity? Which were the economic forces in late 19th and early 20th century USA that supported and that opposed a central bank? Who would benefit from decentralized and unregulated currency? What about the argument that money creation based on decentralized banking may have been unstable but nevertheless supplied the necessary liquidity for economic growth?

Yet, on the other hand, Germany had a high level of growth in the late 19th and early 20th century with a highly centralized banking system, yet how independent was the Reichsbank from government control? This question of the independence of central banks from government directives geared to particular political interests could have used a more systematic historical presentation, especially given the Bundesbank’s importance in the process toward a European Monetary Union. This should have included the history leading up to the Bundesbank Act of 1957 in which it is explicitly stated that the central bank shall be independent of instructions from the federal government, a history which included loss of independence under the Nazis.

Nevertheless, Elusive Union is necessary reading for anyone seriously interested in the prospects of European Union and a basis for further discussion and debate. I found myself imagining how interesting a debate between Kenneth Dyson and Alan Milward might be. Milward argued in The Rescue of the European Nation (1992) that participation in the European Community was often a means for nation-states to reinforce national interests rather than subsuming them into common interests of a more unified Europe. On several occasions, Dyson makes reference to some process that might fit this interpretation — France, for instance, coming around to supporting the idea of EMU in the late 1980s because of learning the political lesson “that the EMS involved an asymmetry of power that imposed undue costs on some countries and that could be corrected only by shifting authority to the EC level.” (p.113) But, he makes only one reference to Milward’s book and implies that a stage in the EC when “traditional patterns of contending states whose interests were defined by domestic political and economic constituencies” (p.92) may now have been superceded by the renewed launch toward an European Moneatry Union as part of European Union — unless it turns out to be forever elusive.