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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Jack Brown

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

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

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

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

EH.NET BOOK REVIEW

Published by EH.NET (July 1997)

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

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

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

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

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

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

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

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

Gail Honda Department of Sociology University of Chicago

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

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

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

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

EH.NET BOOK REVIEW

Published by EH.NET (July 1997)

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Small Firms in the Japanese Economy

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

EH.NET BOOK REVIEW

Published by H-BUSINESS (July 1997)

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

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

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

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

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

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

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

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

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

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

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

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

Mansel G. Blackford Department of History The Ohio State University

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

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

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

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

EH.NET BOOK REVIEW

Published by EH.NET (July 1997)

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

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

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

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

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

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

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

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

Michael V. Namorato Department of History University of Mississippi

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

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

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

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

EH.NET BOOK REVIEW

Published by EH.NET (June 1997)

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

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

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

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

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

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

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

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

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

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

John Joseph Wallis Department of Economics University of Maryland

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

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

The Banking Panics of the Great Depression

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

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

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

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

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

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

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

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

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

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

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

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

John H. Wood Department of Economics Wake Forest University

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

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

Where Is Our Responsibility? Unions and Economic Change in the New England Textile Industry, 1870-1960

Author(s):Hartford, William F.
Reviewer(s):Mullin, Debbie

William F. Hartford, Where Is Our Responsibility? Unions and Economic Change in the New England Textile Industry, 1870-1960. Amherst: University of Massachusetts Press, 1996. x + 256 pp. $35.00 (cloth). ISBN: 1-55849-022-1.

Reviewed for EH.NET by Debbie Mullin, Research Associate in Economics, Oberlin College .

Like the textile workers whose history he writes, William Hartford practices the weaver’s art in Where is Our Responsibility? Themes of culture, technology, and enterprise braid together in this descriptive account of organized labor’s role in New England’s textile industry. Hartford’s scholarship as an historian is evident in the way he assembles evidence from Congressional testimony and reports, union documents, statistical studies, and other archival resources to write an engaging, informative narrative chronology. He captures the important historical landmarks of the textile unionists’ experience and introduces us to labor leaders, industrialists, and social activists who played a role.

Hartford documents many of labor’s troubles and triumphs during these years, but three struggles dominate. The first of these is the series of conflicts within the union, sometimes simply personality differences, at other times harsh conflicts over strategy. In the nineteenth century, textile unions were organized on a craft basis under the United Textile Workers, with boundaries drawn so that all operatives within one union had the same job skills. This gave way to the industrial unionism of the Textile Workers Union of America (TWUA), in which the bargaining unit encompassed an entire mill. But as Hartford makes clear, there were always some craft-oriented pockets of resistance to industrial unionism. Interestingly, some employers preferred the industrial orientation of the TWUA, because they felt that craft-based unions would be more resistant to the implementation of labor-saving technologies.

A second of these persistent struggles was the problem of the interregional wage differential. Lower wages in the South were an initial attraction for the relocation of some textile manufacturing, and Hartford describes how inertia developed for even more of a concentration of the industry in southern states during the 1950’s. At its lowest, the north-south wage gap in cottons was twelve percent, and New England union leaders were vigilant with regard to this figure, as they realized there could be no long-term equilibrium with two different geographic centers of the same industry paying different scales. Although the anti-union stance of large southern firms prevented nationwide unionization, TWUA leaders pursued alternative strategies. Agitation campaigns that threatened to organize nonunion firms led managers at these southern enterprises to boost compensation levels. Some New England mill owners who hoped to maintain their operations in New England cheered for the union in its efforts to bring southern and northern wage standards into convergence.

And thirdly, labor never escaped its struggle against labor-saving machinery. Naturally, union leaders wanted to deliver generous wages but also to preserve, if not expand, employment levels. The only way to sustain high compensation levels is to ensure that workers are productive, which is best achieved with a capital-intensive production process. The inherent conflict between wage-related productivity boosts and employment levels remained unresolved throughout the history of textiles. In the 1940’s, detailed job descriptions were instituted along with restrictions on how tasks within classifications could be modified. Workloads and machine assignments were an issue of labor-management negotiation. The result was, in effect, that firms had to acquire permission from workers before implementing new technologies.

The early chapters provide richly detailed descriptions of the lives of the nineteenth-century textile workers and the communities in which they lived. The text in these sections is vivid- one can almost feel the hum of fibers and machinery at work in reading about the tasks performed by spinners, weavers, and loom fixers. These descriptions are valuable to economic historians in that they explain why each craft faced a different set of economic incentives.

Like any book with an interrogative title, Where is Our Responsibility? promises to address the question it poses. In this regard, Hartford disappoints. One problem is that the question itself is not well defined until it is found among the social concerns dominating the last chapter. From this context, I gather that the question asks what unions should do to protect their members when the industry in which they work is declining. Even after getting this far, the reader is no more equipped to answer this question than before starting the book. The preceding chapters discuss none of the broad principles, either philosophical or economic, that would help one grapple with such a broad issue. What those chapters do, however, is provide the reader with the history of organized labor in one industry. Consequently, one is prepared to deal with a question considered as a cousin to the one posed in the title: Where is the blame to be placed for the decline of this industry? Hartford informs us of the interdependence of the many players in this story, so we can judge contributions and faults of each. For example, with regard to technology, it is true that firm owners were slow to modernize, but the cumbersome job description system put in place by unions increased the costs of introducing new machinery. Yet, much of the story lies beyond either greedy workers or complacent management. Plastics and paper had intruded on the turf of the textile industry by the 1960’s, and other factors ensured that what remained of the textile industry would likely be in the Carolinas and Georgia.

In interpreting the events he chronicles, Hartford talks a lot about the responsibility of capital. Given the frequency with which this theme arises, it is unfortunate that he doesn’t define the term capital as he intends the reader to use it. In some instances, it appears that he views capital simply as shares of financial ownership, and in other cases as the actual managers of the firm. Most readers will likely resort to doing as I did, trying to interpret the meaning in each case from its context. But even so, one will be puzzled by Hartford’s sense as to what capital is responsible for, especially because he expects more from capital than from labor. He is critical of firm owners who closed New England operations to pursue more profitable opportunities elsewhere, yet he does not criticize textile workers who migrated to better-paying jobs after World War II.

In addition to enslaving itself to one location, what else would Hartford have “responsible capital” do? We get some idea of an answer by seeing the high esteem in which he holds Seabury Stanton, head of Hathaway Manufacturing (later Berkshire-Hathaway) in New Bedford, Massachusetts. Stanton outdid other mill owners in his determination to keep the mill running in its original location. In fact, co-workers observed that Stanton ignored financial statistics, such as profit and return on investment, that indicated the health of the company. But he considered the firm successful as long as it sustained operations in New England. Hartford speaks of Stanton in glowing terms, and suggests that workers would benefit if all managers were like he (p. 199).

But this means that there is an interesting unwritten chapter of the book, the one that would follow the 1960 end point of Hartford’s volume. By 1962, Berkshire-Hathaway was in financial distress, having suffered a $2 million loss. With regard to management of society’s scarce resources, Stanton was irresponsible. Under his leadership, the firm’s stock price fell to less than half of its per-share working capital. This situation left Berkshire-Hathaway vulnerable to takeover, and it was Warren Buffett who made the acquisition in 1965 and who sustained the textile operations for another two decades. His cost-conscious management team rescued the firm from the disastrous course to which Stanton had committed it. Though Buffett did shut down the looms of Berkshire-Hathaway in 1985, it seems likely that bankruptcy would have forced a closing earlier had Stanton continued in charge.

The events related in Where is Our Responsibility? illustrate the notion that workers’ lives are broadly affected by the fate of the industry in which they choose to work. But it is easier to agree with Hartford’s interpretation of these events if one feels that the purpose of industry is to provide jobs, rather than to produce goods. Consequently, most economists will shake their heads in disagreement with the economic commentary in the volume. I was touched by the sentiment Hartford expresses for the men and women who spent their lives in the cotton and woolen mills of New England. Yet, ultimately I was left wondering whether he realized how technology and the profit motive might be considered allies of the worker. It is an ironic footnote to the history of the textile industry that the name Berkshire-Hathaway now at the end of the twentieth century is associated not with the mills that Seabury Stanton sought to keep in perpetual motion, but rather with the Buffett financial empire built on the principle of mobile capital.

Debbie Mullin Department of Economics Oberlin College

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

Smith and Nephew in the Health Care Industry

Author(s):Foreman-Peck, James
Reviewer(s):Fischbaum, Marvin

James Foreman-Peck, Smith and Nephew in the Health Care Industry. Aldershott, England: Edward Elgar, 1995. xiii + 269 pp. Illustrations, bibliography, index. $71.95 (cloth). ISBN: 1-85898-085-2.

Reviewed for EH.Net by Marvin Fischbaum, Department of Economics, Indiana State University.

Though essentially an authorized company history, and one where the company holds the copyright, this book written by an economic historian of some distinction, rises above its genre. Foreman-Peck places the development of Smith & Nephew and its antecedent firms firmly within the context of time and place. Both through details and through pace, Foreman-Peck succeeds in demonstrating business evolution from “personal capitalism” in Victorian England, where being in Hull as opposed to Birmingham as opposed to Lancashire really mattered, to late twentieth century professionalized management of a multi-national enterprise. As chronology advances, the pace quickens, and emphasis shifts from personal connections, social standing, and leisure interests, to research endeavors, management techniques, efficiency, markets, …and lawsuits.

The company studied, Smith and Nephew, plc., is something of an odd duck; it resembles a smaller, British, version of Johnson and Johnson. For much of its history the firm depended on five major product groups: 1.) bandages for surgical use, 2.) plaster of paris and coverings for casts, 3.) bandages for home use, 4.) sanitary napkins and tampons, and 5.) face cream. Smith and Nephew became the market leader in these product groups at home, and enjoyed some success elsewhere in the Commonwealth, particularly in ex-colonies of settlement. None of these products required a major research effort, and any requisite technology was acquired for the most part through merger and licensure. Starting in the 1980’s the firm purchased several technologically complex health related businesses in the U.S, expanded research capability in Britain, exited non-medical textile production, and made itself over into a multinational, rapidly evolving, high growth enterprise.

Foreman-Peck carefully chronicles Smith and Nephew, and antecedent British firms, especially Southalls. T.J. Smith differentiated his pharmacy from dozens of others in Hull, and entered the national market, when he discovered, aided possibly by his city’s standing as the principal port for trade with Scandinavia, that Norwegian cod liver oil tasted less obnoxious, and was less expensive than that brought in from Newfoundland. When the nephew, H.N. Smith entered the business in 1896, staff numbered three. Employees rose to 54 by 1914, and 1500 by 1918. The nephew, having worked in Lancashire, shifted the business to surgical dressings, and World War I proved a bonanza. Southalls in Birmingham evolved in a similar fashion. Southalls was founded somewhat earlier; 1820, as opposed to 1856. Situated in a larger city, Southalls became a substantial enterprise. It followed Smith and Nephew into Norwegian cod liver oil, but gained advantage through backward integration, employing a factory in Norway. Southalls, too, switched emphasis to health related textile products. Its breakthrough product was the first commercial version of sanitary napkins. In the interwar period, and through the acquisition of Southalls in 1958, the increasingly professional management at Smith and Nephew, is contrasted to the persistence of family control at Southalls.

The author attempts much more, however, than a simple corporate chronology. Critical decisions are identified and evaluated. Management techniques are compared and contrasted with prevalent practice and with best contemporary practice in Britain and globally.

Some bits provide brilliant insight. With simple but plausible back of the envelope calculations, Foreman-Peck demonstrates a huge social saving from a not very glamorous innovation that utilized few resources. Varicose ulcers, a fairly common condition, had been treated with hospital bed rest- -typically requiring a stay of one year. A Smith and Nephew innovation, the application of an elasticized bandage lined with plaster, enabled patients to be on their feet and back at work in two weeks. Peck-Foreman calculates the social saving to be 1.67% of 1931 British national income! The health economics literature is replete with examples of “flat of the curve” treatment–cases where expensive, technologically sophisticated procedures yield little or no measurable benefit. This counter-example may be suggestive of new directions for research.

Other forays from the central theme do not come off as well. Two chapters are devoted to the evolution of health care and health care markets from 1850. While Foreman-Peck demonstrates a fine command of the literature, he necessarily must limit the narration to a highly abbreviated, almost shorthand, summary. Moreover, the summary does not tie in well to the central narrative, as Smith and Nephew operated on and beyond the periphery of core health care endeavors.

In the years following World War II, Smith and Nephew invested heavily in the Lancashire textile industry. Investment to assure quality for specialty cloths with medical applications might have been justified, but the firm expanded capacity to produce cloth used for sanitary napkins, and even to produce denim. Foreman-Peck presents a detailed but somewhat strained justification of that decision. He notes that modernization investments quickly brought productivity levels up to those of best practice as found in the United States and Japan. He fails to note that in textiles productivity differences are swamped by pay rate differences, and that the American industry, even with its best practice, was in trouble. The author notes that returns from textile operations were lower than other branches in the company, but adds that intracompany pricing made those returns somewhat arbitrary. If prices were set low, profits were understated. Intrafirm prices could have just as easily been set too high to consciously or sub-consciously cover a mistake.

Smith and Nephew has achieved considerable success since World War II, and especially since 1980. This book explains the roots of success very well, and provides some insight into occasional failures.

Marvin Fischbaum Department of Economics Indiana State University

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

The Dynamic Society: Exploring the Sources of Global Change

Author(s):Snooks, Graeme Donald
Reviewer(s):Clark, Gregory

Graeme Donald Snooks, The Dynamic Society: Exploring the Sources of Global Change. New York and London: Routledge, 1996. xvii + 491 pp. $84.95 (cloth), ISBN: 0415137306. $24.95 (paper), ISBN: 0415137314.

Reviewed for EH.Net by Gregory Clark, Department of Economics, University of California- Davis .

For most of the time in any discipline the mundane dominates, and the subject seems to advance at a glacial pace. Old disputes are chewed over, small concessions gained and conceded. There are no sweeping visions, no sustained programs of discovery. The subject is maintained almost as much by institutional inertia as by intellectual passion. Economic history in the eyes of many is firmly stuck on just such hard and unyielding terrain. No one has published a paper yet entitled “The Heights of Norwegians Inferred from a Sample of 23 File Clerks, 1906-1908: A Quantile Bend Estimate,” but given enough time they will.

There is thus always an incipient demand for bolder conjectures, for the big idea that can inject excitement and remake the subject. But pursuing the big idea, seductive as it is, has its dangers. The big idea is inevitably at the beginning ill-formed, and weakly supported. Thus those who venture the big idea need strong egos and selective blindness – they have to withstand the carping of the Lilliputians, and the rejection of the journal referees. But at the same time the ego cannot be too strong, the vision too selective. Therein lies a kind of madness. The innovator has to be able to respond to criticism, but not be overwhelmed by it, to connect with the audience yet not become its servant. The pursuer of the big idea has to walk the thin line between hearing too well and being deaf to reason.

It was thus with some trepidation that I read early in Graeme Snooks’ new book “we need a simple but robust model that can explain the emergence and development of life over the last 4 billion years” (p. 7). It was with even more fear that I noted at the end of the book on page 431 a ten page glossary of “Snookspeak,” including “great linear waves of economic change,” “existential models,” “funnel of transformation,” “strategic- crisis hypothesis” – the new language we need to express the “simple but robust” theory. There was going to be no middle ground for the reviewer of this book – no “a solid contribution to the literature on developments in animal husbandry, which perhaps focuses a little too much on sheep.” Snooks has reached for the big prize. He is either an innovative visionary, or he has crossed over the line into self delusion. For what Snooks attempts in this book, aided only by pen, paper and frequent trips to the glossary, is to produce a theory of life that encompasses and surpasses all of economics, biology, history, psychology, and sociology. To raise the stakes even further this improbable concoction is emblazoned with warm commendations from no less than Douglass North, Nobel Laureate, Baron Herman van der Wee, and Stanley Engerman.

What is Snooks’ new post-Darwinian theory of life and everything? There is at maximum one person who knows, and if he does know, he is unable to communicate it. This is not a case where I can outline the theory, and then ask how well it corresponds to what we know. What the theory is is the central mystery. For example, the theory, Snooks states, employs existential as opposed to deductive models.

“Existential models are empirical models of reality – or models of existence – and can be contrasted with the logical or deductive models of physics and economics, which are merely constructs of the mind….As existential models are based upon dynamic timescapes, they can liberate us from the limitations of deductive thought. They set free the imagination to range over the actual patterns of existence. And in these patterns we can see the dynamic processes of reality” (pp. 433-4).

In California we have many examples of people liberated from the limitations of deductive thought, and often they too have important ideas they need to tell us. So it turns out that Snooks not only wants to rewrite the history of the last 4 billion years, he also, en passant, is introducing entirely new modes of thought, which should, maybe after some refinement, be able to effect a substantial reformation of the physical sciences.

The above example is the book at maximum wackiness. There are many parts, even whole pages, where the exposition is clear: the discussions of crustal formation (yes, the crust of the earth), Hitler’s aims (irrational), the oxygen content of the atmosphere, aggression in men and women (as evidenced by auto accidents), the walls of Jericho, blue-green algae, Henry Thomas Buckle (1821-1862), sea level changes, the Holy Roman Empire, post Keynesians, the ice age, linear time, volcanic eruptions, the nuclear family, Frederick Nietzsche, Joel Mokyr, dinosaurs, dolphins, and the Domesday Book, to name a few examples. The only problem is what the connection of the episode at issue is to the big idea. I know the theory is dynamic, which is why the front cover has charging horses on it, whereas Darwin was static. Dynamism is everywhere – more than one page of the index alone is devoted to dynamism in all its varieties, including “dynamics of the earth: formation of crust.” Change we learn occurs because of dynamism. I also learned that the theory is “economic,” and that it involves “paradigm shifts,” but the theory itself remains hidden from the view of a reviewer trapped in the prison of deductive logic.

To take a specific example, Snooks argues, with some persuasion to someone whose knowledge of the subject is limited to the New York Times, that the attempt by many scientists to explain the extinction of dinosaurs by natural catastrophes is unconvincing. But what is Snooks’ alternative explanation? Dinosaurs were doomed, he assures us, by “having exhausted their dynamic strategies” and further dinosaurs “suffered from over-expansion owing to the exhaustion of their dynamic opportunities” (pp. 77-78). And that’s it. With those trenchant observations, Snooks having dispatched the dinosaur issue between pages 76 and 78 as rapidly as an asteroid impact, marches quickly on to tackle the bigger problems. The survival of some organisms, largely unchanged, from long before the era of the dinosaurs is, I presume, because they did not exhaust their dynamic opportunities to not change. Aristotle, who claimed that objects fell towards the earth because it was in their nature to fall, looks like a model of positivist science compared to Snooks.

Another example, closer to the workaday concerns of economic historians, is “technology as a dominant dynamic strategy.”

“The technological paradigm shift is a widespread human response – occurring in both the Old and New Worlds – to critical episodes in the relationship between population and natural resources owing to the exhaustion of the prevailing technological paradigm. A paradigm shift involves a technological transformation that provides, in a relatively short space of time – when looking forwards rather than backwards – a quantum leap in access to the resources of a niggardly natural world” (pp. 239-240).

Leaving aside the interesting metaphysical claims about time, what is the content of this view? Snooks claims there have been only three technological paradigm shifts: the shift from scavenging to hunting in the Paleolithic, the shift from hunting to agriculture in the Neolithic, and the shift from agriculture to industry in eighteenth century England. He argues that each shift is created by changes in relative factor prices. Now of course, for the first two shifts we know nothing of factor prices. Indeed, again based only on the authority of the New York Times, it has just been discovered that the shift from scavenging to hunting occurred about 100,000 years ago, much earlier than previously thought. Does this matter to Snook’s theory? Not as far as I can tell. When the shift occurred it was undoubtedly the result of population pressure and a stagnant scavenging technological paradigm.

So the only paradigm shift for which we have any evidence on relative scarcities is the Industrial Revolution, the cause of which was “with the growing pressure of population on natural resources, as the old technological paradigm was progressively exhausted, came a rise in prices: of natural resources relative to labour; of labour relative to capital; and of organic relative to inorganic natural resource” (p. 265). This claim is at least clear, but is both theoretically and empirically implausible. Why should population pressure raise the price of labor relative to capital? Why didn’t population pressure in the high middle ages spark an Industrial Revolution? Why wasn’t the Industrial Revolution in China? And empirically the substitution of inorganic for organic resources in Britain before 1850 was a trivial element of the Industrial Revolution, as the work of von Tunzelman, McCloskey, and Crafts clearly shows. But as with the demise of the dinosaurs, Snooks can only allocate about three pages of the book to his discoveries about the Industrial Revolution paradigm shift before he has to rush on to bigger things.

I could go on, but this is enough to convey the point. As we go about the mundane tasks of economic history, trying to prise the occasional nugget of knowledge from hard and stony ground, I am sure we will hear periodically from Graeme Snooks. He will come zooming past, gesticulating wildly and shouting excitedly about new marvelous discoveries made from the comfort of his armchair: discoveries that only he, and possibly Doug North, Herman van der Wee and Stan Engerman, can see and share.

Gregory Clark Department of Economics University of California- Davis

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Subject(s):History of Technology, including Technological Change
Geographic Area(s):General, International, or Comparative
Time Period(s):General or Comparative