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Monitoring the World Economy: 1820-1992

Author(s):Maddison, Angus
Reviewer(s):Hanson II, John R.

Angus Maddison, Monitoring the World Economy, 1820-1992. Washington, DC: Organization for Economic Cooperation and Development, 1995. 255 pp. $30.00 (paper). ISBN 9264145494. (http://www.oecdwash.org)

Reviewed for EH.Net by John R. Hanson II, Department of Economics, Texas A&M University, ;

The heightened interest in economic globalism in recent times makes this a timely book. At the behest of the OECD Angus Maddison, arguably the dean of scholars on the history of the world economy, summarizes the available data and research on trends in the global economy during most of the modern era, defined as the period since the Industrial Revolution. The OECD’s offer also affords Maddison an opportunity to synthesize and summarize his views on world economic integration after a long career studying the subject. This volume, therefore, will be widely welcomed and perhaps accepted in some quarters as a definitive treatment, especially since a standard of’ “Maddison reliability” for historical international economic data seems to have replaced the former “Kuznets standard” among academics. Currently only Alan Heston and Robert Summers, leaders of the International Comparison Project, have similar stature. Yet their work, which Maddison utilizes extensively, lacks Maddison’s breadth.

The book’s main contribution consists of consistent estimates of GDP, population, and GDP per capita for the period 1820 to 1992 for 56 countries accounting in 1992 for over 90 per cent of world product. Other, less complete series are presented for related magnitudes, including employment, exports, capital stocks, and several measures of productivity. Maddison relies on a wide range of sources, corrects for discontinuities in series, and makes adjustments in data provided in the various sources to achieve comparability and continuity. The appendices contain most of this information and are the heart and soul of the volume. The data are accompanied by a concise, general analysis of the major forces accounting for the long-run economic growth and development of countries within the framework of a growing world economy. The analysis is non-Marxist.

Maddison’s prestige as an economist and the OECD’s imprimatur make the new data set a seductive one. It should be labor-saving, thereby raising scholarly productivity in both teaching and research. It will stimulate research in world economic history, which, though growing, remains peripheral to the larger academic agenda. It is informative about the thoughts, conjectures, and conclusions of a distinguished senior scholar in the later stages of a remarkable career, Still, several words of caution are in order.

The book’s title, first of all, is misleading. There is little useful content for the years before roughly 1870, especially with respect to the non-Western world. Some income estimates and other economic data going as far back as 1820 are offered, but Maddison’s tone in presenting these is insufficiently tentative. Early per capita income estimates sometimes are preferred only for it to be revealed in other tables that important concomitant or supporting data are not available, raising many obvious questions. Maddison’s determined and persistent efforts to push income estimates for poor countries back in time are laudable, but the results still must be taken with many grains of salt.

Maddison’s presuppositions in this area, incidentally, were formed during the mid-twentieth century, when Western scholars habitually underestimated Third World incomes, Until recently Maddison has been a critic of the Heston-Summers upward revisions, although this volume suggests that he has finally joined the mainstream. Nonetheless, it is well to remember that Maddison long has lowballed historical income estimates for the less developed world. One of his students, Pierre Van der Eng, recently raised Maddison’s historical estimates for Indonesia. Although Maddison himself deserves great credit for his adaptability and intellectual integrity, many of his historical estimates for poor countries must be regarded as provisional and his judgments tentative even when, as is common, he omits caveats.

Finally, users of this volume should be aware that during his long career Maddison has been fortunate in escaping the minute scrutiny and evaluation to which Heston and Summers and other scholars in this general area have been subjected. Maddison’s enviable reputation is well deserved, yet as Van der Eng and some of my own work has shown the natural tendency to accept Maddison uncritically must be resisted. His historical income estimates for LDCs, for example, are less consistent with general trends in the world economy than some I derived from the work of other scholars. These are arcane matters, to be sure, but users of this volume should understand that much more work will be required before historical income estimates for most of the world can be confidently accepted. With respect to developed countries, however, historical estimates, especially after 1900, are more reliable. On these, Maddison stands on firmer ground.

John R. Hanson II Department of Economics Texas A and M University

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Subject(s):International and Domestic Trade and Relations
Geographic Area(s):General, International, or Comparative
Time Period(s):General or Comparative

Against the Tide

Author(s):Irwin, Douglas
Reviewer(s):De Long, J. Bradford

Douglas Irwin, Against the Tide: An Intellectual History of Free Trade. Princeton, NJ: Princeton University Press, 1996. 274 pp. Bibliography and index. $29.95 (cloth). ISBN 0691011389

Reviewed for EH.Net by Brad De Long, Department of Economics, University of California- Berkeley

Douglas Irwin has written the history of “free trade”–as an idea and as an economic policy–for our generation. His dominant organizing principle is that the move toward freer trade in economic policy has been “against the tide”- that there have been lots of reasons over the ages why free trade should not have triumphed as economic policy, and that its triumph to date is somewhat miraculous: akin to a river running uphill.

Mercantilism and Free Trade

Free trade as an idea was born in the shadow of mercantilism in early modern Britain. It is not the case that before Adam Smith’s Wealth of Nations thinkers rejected the idea of trade: the notion that countries, like individuals, stand to gain from specialization (producing what they make best and most efficiently) and exchange is powerful, fundamental, and obviously true. But before Adam Smith thinkers overwhelmingly believed that imposing delicately-calculated restrictions on international commerce could boost an economy’s resources and achieve important non-economic goals as well. For example, even Adam Smith wrote that “defense is more important than opulence.”

It is hard from our current perspective to make much sense of the mercantilist writers. They were aggressively pro-export–sharply critical of restrictions that limited export. Irwin sees their doctrines as having four components:

A moral argument that foreign-produced luxuries were not worth consuming, and that the state should (for the good of those who would buy French fripperies if unrestrained) restrict imports of foreign-produced luxuries.

An unemployment-equilibrium argument that allowing imports to increase would throw people out of work.

A belief that manufacturing should be promoted to enhance economic development–perhaps with some recognition that this argument required that the benefits to society from expanding manufacturing be greater than the profits to the manufacturer.

Non-economic goals: “defense more important than opulence.”

Against mercantilism, Adam Smith established a strong presumption in favor of the economic benefits of free trade. David Ricardo nailed the case down with his exposition of “comparative advantage.” Ever since trying to construct a coherent intellectual case for trade protection has been like trying to roll Sisyphus’s stone up the hill.

This is not to say that people have not tried. The case for free trade is not absolute. It is limited by:

Worries about the distributional effects of trade–in which case free trade can boost real national product but erode social welfare if it shifts the distribution of income and wealth in an unfavorable direction.

Worries about the effect of free trade on the terms-of-trade–in which case finely-tuned protectionist measures that erode the total surplus from trade can nevertheless garner a larger surplus for the home country (under the assumption that foreign governments do not retaliate).

Worries about the effect of free trade on high-externality industries–in which case policies that restrict trade might boost external benefits by more than enough to offset the lost gains from trade.

But as Irwin eloquently argues, all these limitations of the case for free trade are fragile. In many cases trade protection is a poor second-best policy, to be avoided because there are other more direct and less costly alternative policies that will produce higher economic welfare. In other cases, close scrutiny reveals that the reasons for rejecting free trade “have foundered under the weight of the manifold qualifications that narrow the range of circumstances under which the argument is valid…. [For example] the strategic use of trade policy to shift rents between countries… hinges critically upon numerous assumptions about competitive behavior and market structure.”

Irwin thus concludes–I believe correctly–that arguments for protection are fragile and frail compared with the presumption that free trade is a good thing. To do better than free trade requires an enormous amount of knowledge and policy-making skill on the part of the government, skill that can only make things a little bit better if protectionist policies are properly applied–but could make things a lot worse if misapplied.

The Rent-Seeking Society

However strong the intellectual case for free trade, the victory of free trade as an economic policy is still quite surprising. We can run through–Irwin runs through–the standard rent-seeking society arguments:

Beneficiaries from protection know who they are.

Each beneficiary from protection gains a lot more than each consumer loses.

Beneficiaries from protection can organize easily.

The logic of politics is not the logic of market exchange–but the logic of power exercised, and identifiable favors done for those who can someday return them.

For all these reasons, governments seeking to assemble coalitions of politically powerful elites should be powerfully attracted by individual protectionist proposals. There is a principle that the set of economists is dense in the space of possible policies: for every small number epsilon, for every policy theta, there is someone who can wear a tie, speak with authority on television, and make semi-coherent arguments that some policy that is within epsilon of theta is in fact optimal. When the stakes are large the returns to being a tame politician or a tame intellectual for protectionist interests are large too, and the labor market works well enough that demand calls forth supply–and we have Pat Choate claiming with an apparently straight face that five million American manufacturing jobs are “at risk” if the United States lowers its tariffs on Mexican imports from an average level of 3% to zero.

And it was here that I found myself wishing that Douglas Irwin had written a slightly different book. For I do not believe that the production and reproduction of intellectual arguments proceeds independently of the rest of social life, and I think the links between the strength of protectionist ideas and the potential benefits to those with the wherewithal to fund the creation and distribution of protectionist ideas are very strong and very interesting. But Irwin remains at the level of the intellect. He does not descend to the sociology of ideology at all–and I think that what is a very good book is less than the Platonic Ideal of a history of free trade because of its limited scope.

In addition, there is powerful feedback from the political economy back to the case for free trade. The very strength of the political-economic pressures toward protection generated in a rent-seeking society serves to powerfully reinforce the case for free trade. Douglas Irwin quotes Paul Krugman that the most powerful case for free trade today “‘is not the old argument that free trade is optimal because markets are efficient’ but rather ‘it is a sadder-but-wiser argument for free trade as a rule-of-thumb in a world whose politics are as imperfect as its markets…. to abandon the free-trade principle in pursuit of the gains from sophisticated intervention could therefore open the door to adverse political consequences that would outweigh the potential gains.'”

The Future

Irwin concludes his book with a resounding triumphalist sentence: “Yet if the historical experiences described here continue, free trade will remain one of the most durable and robust propositions that economic analysis has to offer for the conduct of economic policy.”

I find myself much more pessimistic–not that I think that free trade does not deserve to flourish, but that I doubt that it will flourish. There are two reasons to be skeptical of the future of free trade:

The first reason is that the East Asian economies that have grown so impressively in the past two generations have not been committed to free trade. There are arguments that they have been committed to free trade in what matters most for production (if not for consumer welfare): “a free-trade regime for exports and for imports for exporting industries” is the phrase often used. There are arguments that they have been lucky not to have been badly hurt by their deviations from free trade. There are arguments that they have managed to find a set of trade restrictions that actually does promote high-externality activities and rapid growth.

Which is true is unclear.

What is clear is that for the next generation opponents of free trade will say: “Japan, Korea, Taiwan, etc. did not adopt free trade–and look how fast they grew.” And at the level of economic policymaking and public ideology, this statement has the potential to erode a lot of support for free trade.

The second reason is that arguments for protection today hinge much more on the duties that first world consumers owe third world workers than on the links between protection and first world prosperity. Does the restriction of imports that violate fair labor standards give employers in developing countries the right incentives to improve working conditions and boost social welfare? Or does it just destroy jobs in developing countries–making the life chances of the poor even worse? It is not clear. But consumers in the first world do have moral obligations toward workers in developing countries, and the economic theory of free trade sheds little light on what policies are best in light of these moral obligations.

Brad De Long Department of Economics University of California- Berkeley

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Subject(s):International and Domestic Trade and Relations
Geographic Area(s):General, International, or Comparative
Time Period(s):General or Comparative

Printers and Men of Capital: Philadelphia Book Publishers in the New Republic

Author(s):Remer, Rosalind
Reviewer(s):Scranton, Philip

Rosalind Remer, Printers and Men of Capital: Philadelphia Book Publishers in the New Republic. Philadelphia: University of Pennsylvania Press, 1996. xiv + 210 pp. Illustrations, map, bibliography. $34.95 (cloth), ISBN 0812233379.

Reviewed for EH.Net by Philip Scranton, Rutgers University .

This slender monograph, which originated as a UCLA dissertation, works toward filling a temporal and analytical gap in the history of American printing and publishing. Rosalind Remer rightly notes that previous, often antiquarian, research has focused on colonial printer/publishers, often heroizing them as masters of a complex and increasingly-politicized trade. More recent studies, particularly John Tebbel’s many volumes, examined book publishers from the mid-19th century through the 1960s – an age of national marketing initiated by railway networks and confirmed through extensive advertising to consumers, book retailers, department stores, et al. Remer asks, appropriately: how did the American book trade accomplish the double transition from local to national distribution and from printing/publishing generalists to a division of labor between publishing specialists and printers, with whom they contracted for book production? Philadelphia, which with Boston and New York constituted the early republic’s centers for book making, draws her close attention.

At its opening, this study reprises colonial printers’ multi-faceted activities as job work operators, newspaper editors, importers and publishers of books and pamphlets, and retailers of same. After 1783, Philadelphia printers moved aggressively into the new republic’s early political battles, creating a series of mostly-ephemeral newspapers supporting one or another of the emerging factions (while drawing revenues from patrons to sustain their vigorous prose). The shifting tides of political advantage boosted or destroyed these printers’ ambitions, for, in business terms, “the most practical patronage came directly from government printing jobs,” available only to those backing winners (34). Though newspaper controversies raged throughout the 1790s, once the federal seat (and its revenue stream) shifted from Philadelphia to Washington in 1800, area printer/publishers paid appreciably more attention to state and local government custom and to the commercial possibilities of books. For the latter, federal influence remained relevant. Under the nation’s first copyright regulations, works published by American authors or any foreign books revised by Americans for domestic use could be defended at law against infringers. As indiscriminate reproduction of English texts had long been both part of the printer/publisher’s repertory and a competitive problem, this provision shifted the terrain. Those making books hastened to adapt, rather than duplicate, “foreign” works of history and geography, school texts, dictionaries, etc. for American audiences, thereby securing copyright protection.

Yet multiple problems remained. Printing books meant little unless they could be distributed and sold, bringing in funds to cover costs and, with luck, generating profits. Moreover, there was clearly a learning curve in mastering book production and marketing. In the two decades after 1800, a cluster of Philadelphia printing masters gradually dropped job work and newspaper ambitions to specialize in creating and vending books, in time abandoning the mechanics of printing to become contracting publishers. By 1820, this core group negotiated with authors, commissioned printing and binding, ran city book shops (some with branches) and developed national networks for distribution, thereby defining publishing as an independent vocation. Key to this process of differentiation were a series of trade organizations and gradually-refined trade practices. Although a few journeymen tried to strike out on their own as publishing entrepreneurs and others formed a short-lived labor association (the Philadelphia Typographical Society), veteran master printers had far better chances for success. Following up on a mid-1790s effort, a group of nascent publishers created the Philadelphia Company of Booksellers in 1802, which encouraged cooperation among producers to limit duplication of reprinted titles, sponsored collective promotional literature, and sought “to bring growth to the trade by encouraging… risk-sharing” (61). Thus Company members co-published a series of schoolbooks, each contributing to the expenses and subscribing for a portion of print runs. Though, like the journeymen’s Society, the Company lasted only a few years, it did bring members of this emerging network into close and fraternal contact, both with one another and with more distant printer/publishers, the latter through a series of book fairs held alternately in New York and Philadelphia. At these twice-yearly sessions, booksellers arranged “exchanges” (trading at list price copies of their imprints for those of colleagues, thus broadening their stores’ stocks), debated distribution dilemmas, and solidified wider credit relationships. The fairs, too, foundered in a few years, but the business links and trade consciousness they fostered would endure, widening the gap between publishers and ” mere” printers.

As Philadelphia’s most prominent bookman, Matthew Carey addressed the distribution obstacle by dramatically expanding an older trade practice. To get books on store shelves beyond the coastal cities, publishers had at times used commission sales, acting as quasi-wholesalers who selected and shipped parcels of books to shops in interior towns, though retaining ownership. Frequent correspondence with hundreds of vendors enabled Carey to develop an information base about what moved and what didn’t, thus identifying local and regional reading tastes. Early on, Carey also employed “a full-time book peddler” to travel the back country, in this case the celebrated Parson Weems, who sold religious tracts and took orders throughout Maryland and Virginia (130). The city’s Woodward house ultimately engaged 47 such minister-salesmen, whereas McCarty and Davis hired “professional” travelers “who derived their whole living from selling books” (136). Carey and others also collaborated on extensive co-publishing ventures with up to a dozen colleagues along the Atlantic coast, in order to finance multi-volume sets (e.g., Shakespeare, the Waverly novels), often soliciting advance subscriptions and again sharing risks and rewards.

Collectively, these marketing tactics swelled the circulation of books throughout the early republic. However, the trade’s expansion depended upon “an extraordinarily delicate business structure,” centered on credit relationships (116). Publishers rarely had cash in hand to fund printing costs, hence printers often took payment in books or discountable notes, rather than wait for publishers to amass income from sales. At the other end of the pipeline, rural shops and peddlers were notorious slow-pays and, laterally, publishers usually had elaborate interfirm credits and debts, carried on their accounts. In this regard, Remer elegantly explicates publishers’ accounting practices and demonstrates that their complex credit networks reinforced a workable sense of community. Publishers routinely endorsed notes for printers and one another, and just as routinely, extended them, for protesting a default, much less instituting a lawsuit over a debt, could set off widening ripples of credit collapse. Indeed, when Carey refused to extend an endorsement for C. and A. Conrad, forcing their bankruptcy, the outcome haunted him for years, not least because his fellow creditors stripped the firm’s principal assets while Carey was out of town, leaving “not… a single dollar’s worth for me” (119). He lost $22,000 in the affair. Though Remer does not press the point, I’d consider this sequence a trade community’s exemplary revenge on a member who had broken unwritten compacts and threatened its fragile foundations of trust and credit.

Overall, Remer’s study provides a corrective to earlier scholars who dated the divorce of publishing and printing to the mid-nineteenth century and regarded publishers’ marketing efforts before the railroad age as minimal. Equally valuable is her reconstruction of the extensive interactions among publishers, of their business practices and networked credit relations, and of their growing self-awareness as a community promoting both entrepreneurship and “a national society and culture” (152). Though the writing is at times wooden (passive voice abounds), this work should be welcomed as a substantive contribution to understanding a crucial economic sector’s transformation in the early decades of the republic.

Philip Scranton Department of History Rutgers University at Camden

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

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

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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 H-Business@cs.muohio.edu (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

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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

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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 nnl3w@darwin.clas.virginia.edu

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 nnl3w@darwin.clas.virginia.edu

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

Rowntree and the Marketing Revolution, 1862-1969

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

Book review by JOHN F. WILSON (MFSSTJW@fs1.art.man.ac.uk)(University 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.

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

The Gas Station in America

Author(s):Jakle, John A.
Sculle, Kieth A.
Reviewer(s):Dicke, Tom

THE GAS STATION IN AMERICA. By John A. Jakle & Kieth A. Sculle. (Baltimore: Johns Hopkins University Press, 1994. 272 pp. $32.95, ISBN 0-8018-4723-0). Reviewed by Tom Dicke, Southwest Missouri State University. tsd870f@nic.smsu.edu

This is a unique study of the gas station in popular culture because Jakle, a geographer, and Sculle, a historian, focus on the typical rather than the unusual. The authors have no unifying thesis or theme; their goal is to look at the gas station from a variety of perspectives. Many of these views, and the insights that come from them, will probably be new to historians. Readers with an interest in the interplay between popular culture, corporate image, and architectural form will find parts of this study useful and fascinating. The book does, however, have two noticeable weaknesses: the authors do not adequately consider the impact of economic factors in station design and location, and they only partially integrate the material they present. Most of the chapters could stand alone, and in fact, four of the book’s nine chapters are based on previously published articles.

The book is overly compartmentalized but its overall organization is logical. Jakle and Sculle first argue the importance of the gas station as a cultural icon, discuss the relevant literature, and define the “place-produce-packaging” scheme they believe has been the driving force in station design since the 1920s.

They justify the gas station as an important cultural symbol partly because of Americans’ fascination with the automobile and partly as a matter of sheer numbers. Roughly 200,000 gasoline stations were scattered over the landscape during the thirty years prior to the oil shocks of 1970s. Well over 100,000 still operate.

The most unique feature of this section is the fairly extensive biographies, written in the third person, that chronicle the authors’ long standing interest in gasoline stations and their professional training and influences.

Jakle and Sculle’s description of the concept of “place- produce-packaging,” is valid. Essentially they argue that the push for uniformity came from roadside sellers’ desire to use everything on the lot from the buildings and their contents to the employees to create a distinctive corporate image. Their discussion of the literature is enlightening, particularly for business historians, because they focus on how these three- dimensional advertisements were perceived by the motoring public. They discuss ideas on the social meaning of the roadside as interpreted in the fields of architectural studies, cultural geography and popular culture.

The authors also trace major trends in gasoline retailing from the 1920s to the early 1990s including brief biographies of the major retailers and the fluctuations of their market areas. Readers already familiar with the oil industry will find little new here. Those in other disciplines should find this section very helpful.

The real heart of the book comes in the three chapters dealing with gas station design. The first is an overview of dominant types of station design from the 1910s through the 1990s. Popularity was determined by examining the NATIONAL PETROLEUM NEWS for illustrations and advertisements of various station types. Gasoline was originally vended most commonly through curbside pumps, often operated as a sideline to an exiting business. By 1920 the true gasoline station, usually disguised as a house to better fit residential environments, dominated. During the 1930s the trend shifted more to the utilitarian box with bays, a move that continued until the 1980s when the booth style and then the convenience store began to dominate new construction. As with the section on gasoline retailing, many readers of this list will be on familiar ground here. The authors use secondary sources or periodicals exclusively. You get a clear description of what happened but little insight into why. Was, for example, station location shifting from residential to commercial zones, thus making the utilitarian box a better fit with its environment? Did changes in housing styles such as the fading of the bungalow and ascendancy of the mass produced ranch increase the popularity of the oblong box by making it appear more houselike? What role did the “place-product-package” concept play in the shift in styles?

The answers to some of these questions are suggested in the detailed case studies of the design process at a large corporation and two regional marketers. Here the collaboration between disciplines works best. The description of the origins and evolution of Pure Oil’s famous “English cottage” design from the mid-1920s through the end of World War Two is absorbing. The authors’ use of primary materials, including interviews with C.A. Petersen, the originator of the design, is first-rate. Readers see clearly Pure’s intent to use the gas station to create a distinctive and calculated corporate image. To explain how and why people were so taken with the little cottage-like stations Jakle and Sculle enter the realms of cultural geography, popular culture, and psychology.

The authors then shift their attentions to two regional marketers, Barkhausen Oil Company of Green Bay, Wisconsin during the 1920s and Quality Oil Company of Winston-Salem during the 1930s to see how local independents attempted to create a distinctive identity for and through their stations. Again the reader sees the gas station from both sides of the pumps. Although less extensive than their treatment of Pure Oil, this is still a detailed look at an overlooked aspect of gasoline marketing.

The last view Jakle and Sculle offer is of the shift from horses to automobiles in Champaign-Urbana, Illinois and the evolution of a commercial strip on one of the streets connecting the two towns. Here, as throughout the book, the authors’ observations are detailed and informative. The extensive use of maps makes it easy to visualize the changes brought by the automobile. The downtowns and connecting strip were in a continual process of re-creation and it is intriguing to see ninety years of change condensed into 20 some pages. As with most of the other chapters, material is presented from the vantage point of the motorist. The ebb and flow of gas stations and other businesses across the landscape is clearly shown but only partly explained. The authors, for example, ignore the oil shocks of the 1970s, the decline of the routine maintenance and repair business, and the rise of self-service when discussing the decline in the number of service stations and the rise of the convenience store.

Overall, the book is lavishly illustrated with over 150 photographs, maps, floor plans, or drawings. The prose is generally in the somewhat clumsy style that may someday be known as “late twentieth century academic,” but Jakle and Sculle resist the temptation to become bogged down in jargon. This book is a true interdisciplinary study that could be profitable read and understood by those in several disciplines.

Reviewed by Tom Dicke tsd870f@nic.smsu.edu

Subject(s):Transport and Distribution, Energy, and Other Services
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

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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: fuller@cssc.newschool.edu

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.