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The Economic History of Australia from 1788: An Introduction

Bernard Attard, University of Leicester

Introduction

The economic benefits of establishing a British colony in Australia in 1788 were not immediately obvious. The Government’s motives have been debated but the settlement’s early character and prospects were dominated by its original function as a jail. Colonization nevertheless began a radical change in the pattern of human activity and resource use in that part of the world, and by the 1890s a highly successful settler economy had been established on the basis of a favorable climate in large parts of the southeast (including Tasmania ) and the southwest corner; the suitability of land for European pastoralism and agriculture; an abundance of mineral wealth; and the ease with which these resources were appropriated from the indigenous population. This article will focus on the creation of a colonial economy from 1788 and its structural change during the twentieth century. To simplify, it will divide Australian economic history into four periods, two of which overlap. These are defined by the foundation of the ‘bridgehead economy’ before 1820; the growth of a colonial economy between 1820 and 1930; the rise of manufacturing and the protectionist state between 1891 and 1973; and the experience of liberalization and structural change since 1973. The article will conclude by suggesting briefly some of the similarities between Australia and other comparable settler economies, as well as the ways in which it has differed from them.

The Bridgehead Economy, 1788-1820

The description ‘bridgehead economy’ was used by one of Australia’s foremost economic historians, N. G. Butlin to refer to the earliest decades of British occupation when the colony was essentially a penal institution. The main settlements were at Port Jackson (modern Sydney, 1788) in New South Wales and Hobart (1804) in what was then Van Diemen’s Land (modern Tasmania). The colony barely survived its first years and was largely neglected for much of the following quarter-century while the British government was preoccupied by the war with France. An important beginning was nevertheless made in the creation of a private economy to support the penal regime. Above all, agriculture was established on the basis of land grants to senior officials and emancipated convicts, and limited freedoms were allowed to convicts to supply a range of goods and services. Although economic life depended heavily on the government Commissariat as a supplier of goods, money and foreign exchange, individual rights in property and labor were recognized, and private markets for both started to function. In 1808, the recall of the New South Wales Corps, whose officers had benefited most from access to land and imported goods (thus hopelessly entangling public and private interests), coupled with the appointment of a new governor, Lachlan Macquarie, in the following year, brought about a greater separation of the private economy from the activities and interests of the colonial government. With a significant increase in the numbers transported after 1810, New South Wales’ future became more secure. As laborers, craftsmen, clerks and tradesmen, many convicts possessed the skills required in the new settlements. As their terms expired, they also added permanently to the free population. Over time, this would inevitably change the colony’s character.

Natural Resources and the Colonial Economy, 1820-1930

Pastoral and Rural Expansion

For Butlin, the developments around 1810 were a turning point in the creation of a ‘colonial’ economy. Many historians have preferred to view those during the 1820s as more significant. From that decade, economic growth was based increasingly upon the production of fine wool and other rural commodities for markets in Britain and the industrializing economies of northwestern Europe. This growth was interrupted by two major depressions during the 1840s and 1890s and stimulated in complex ways by the rich gold discoveries in Victoria in 1851, but the underlying dynamics were essentially unchanged. At different times, the extraction of natural resources, whether maritime before the 1840s or later gold and other minerals, was also important. Agriculture, local manufacturing and construction industries expanded to meet the immediate needs of growing populations, which concentrated increasingly in the main urban centers. The colonial economy’s structure, growth of population and significance of urbanization are illustrated in tables 1 and 2. The opportunities for large profits in pastoralism and mining attracted considerable amounts of British capital, while expansion generally was supported by enormous government outlays for transport, communication and urban infrastructures, which also depended heavily on British finance. As the economy expanded, large-scale immigration became necessary to satisfy the growing demand for workers, especially after the end of convict transportation to the eastern mainland in 1840. The costs of immigration were subsidized by colonial governments, with settlers coming predominantly from the United Kingdom and bringing skills that contributed enormously to the economy’s growth. All this provided the foundation for the establishment of free colonial societies. In turn, the institutions associated with these — including the rule of law, secure property rights, and stable and democratic political systems — created conditions that, on balance, fostered growth. In addition to New South Wales, four other British colonies were established on the mainland: Western Australia (1829), South Australia (1836), Victoria (1851) and Queensland (1859). Van Diemen’s Land (Tasmania after 1856) became a separate colony in 1825. From the 1850s, these colonies acquired responsible government. In 1901, they federated, creating the Commonwealth of Australia.

Table 1
The Colonial Economy: Percentage Shares of GDP, 1891 Prices, 1861-1911

Pastoral Other rural Mining Manuf. Building Services Rent
1861 9.3 13.0 17.5 14.2 8.4 28.8 8.6
1891 16.1 12.4 6.7 16.6 8.5 29.2 10.3
1911 14.8 16.7 9.0 17.1 5.3 28.7 8.3

Source: Haig (2001), Table A1. Totals do not sum to 100 because of rounding.

Table 2
Colonial Populations (thousands), 1851-1911

Australia Colonies Cities
NSW Victoria Sydney Melbourne
1851 257 100 46 54 29
1861 669 198 328 96 125
1891 1,704 608 598 400 473
1911 2,313 858 656 648 593

Source: McCarty (1974), p. 21; Vamplew (1987), POP 26-34.

The process of colonial growth began with two related developments. First, in 1820, Macquarie responded to land pressure in the districts immediately surrounding Sydney by relaxing restrictions on settlement. Soon the outward movement of herdsmen seeking new pastures became uncontrollable. From the 1820s, the British authorities also encouraged private enterprise by the wholesale assignment of convicts to private employers and easy access to land. In 1831, the principles of systematic colonization popularized by Edward Gibbon Wakefield (1796-1862) were put into practice in New South Wales with the substitution of land sales for grants in order to finance immigration. This, however, did not affect the continued outward movement of pastoralists who simply occupied land where could find it beyond the official limits of settlement. By 1840, they had claimed a vast swathe of territory two hundred miles in depth running from Moreton Bay in the north (the site of modern Brisbane) through the Port Phillip District (the future colony of Victoria, whose capital Melbourne was marked out in 1837) to Adelaide in South Australia. The absence of any legal title meant that these intruders became known as ‘squatters’ and the terms of their tenure were not finally settled until 1846 after a prolonged political struggle with the Governor of New South Wales, Sir George Gipps.

The impact of the original penal settlements on the indigenous population had been enormous. The consequences of squatting after 1820 were equally devastating as the land and natural resources upon which indigenous hunter-gathering activities and environmental management depended were appropriated on a massive scale. Aboriginal populations collapsed in the face of disease, violence and forced removal until they survived only on the margins of the new pastoral economy, on government reserves, or in the arid parts of the continent least touched by white settlement. The process would be repeated again in northern Australia during the second half of the century.

For the colonists this could happen because Australia was considered terra nullius, vacant land freely available for occupation and exploitation. The encouragement of private enterprise, the reception of Wakefieldian ideas, and the wholesale spread of white settlement were all part of a profound transformation in official and private perceptions of Australia’s prospects and economic value as a British colony. Millennia of fire-stick management to assist hunter-gathering had created inland grasslands in the southeast that were ideally suited to the production of fine wool. Both the physical environment and the official incentives just described raised expectations of considerable profits to be made in pastoral enterprise and attracted a growing stream of British capital in the form of organizations like the Australian Agricultural Company (1824); new corporate settlements in Western Australia (1829) and South Australia (1836); and, from the 1830s, British banks and mortgage companies formed to operate in the colonies. By the 1830s, wool had overtaken whale oil as the colony’s most important export, and by 1850 New South Wales had displaced Germany as the main overseas supplier to British industry (see table 3). Allowing for the colonial economy’s growing complexity, the cycle of growth based upon land settlement, exports and British capital would be repeated twice. The first pastoral boom ended in a depression which was at its worst during 1842-43. Although output continued to grow during the 1840s, the best land had been occupied in the absence of substantial investment in fencing and water supplies. Without further geographical expansion, opportunities for high profits were reduced and the flow of British capital dried up, contributing to a wider downturn caused by drought and mercantile failure.

Table 3
Imports of Wool into Britain (thousands of bales), 1830-50

German Australian
1830 74.5 8.0
1840 63.3 41.0
1850 30.5 137.2

Source: Sinclair (1976), p. 46

When pastoral growth revived during the 1860s, borrowed funds were used to fence properties and secure access to water. This in turn allowed a further extension of pastoral production into the more environmentally fragile semi-arid interior districts of New South Wales, particularly during the 1880s. As the mobs of sheep moved further inland, colonial governments increased the scale of their railway construction programs, some competing to capture the freight to ports. Technical innovation and government sponsorship of land settlement brought greater diversity to the rural economy (see table 4). Exports of South Australian wheat started in the 1870s. The development of drought resistant grain varieties from the turn of the century led to an enormous expansion of sown acreage in both the southeast and southwest. From the 1880s, sugar production increased in Queensland, although mainly for the domestic market. From the 1890s, refrigeration made it possible to export meat, dairy products and fruit.

Table 4
Australian Exports (percentages of total value of exports), 1881-1928/29

Wool Minerals Wheat,flour Butter Meat Fruit
1881-90 54.1 27.2 5.3 0.1 1.2 0.2
1891-1900 43.5 33.1 2.9 2.4 4.1 0.3
1901-13 34.3 35.4 9.7 4.1 5.1 0.5
1920/21-1928/29 42.9 8.8 20.5 5.6 4.6 2.2

Source: Sinclair (1976), p. 166

Gold and Its Consequences

Alongside rural growth and diversification, the remarkable gold discoveries in central Victoria in 1851 brought increased complexity to the process of economic development. The news sparked an immediate surge of gold seekers into the colony, which was soon reinforced by a flood of overseas migrants. Until the 1870s, gold displaced wool as Australia’s most valuable export. Rural industries either expanded output (wheat in South Australia) or, in the case of pastoralists, switched production to meat and tallow, to supply a much larger domestic market. Minerals had been extracted since earliest settlement and, while yields on the Victorian gold fields soon declined, rich mineral deposits continued to be found. During the 1880s alone these included silver, lead and zinc at Broken Hill in New South Wales; copper at Mount Lyell in Tasmania; and gold at Charters Towers and Mount Morgan in Queensland. From 1893, what eventually became the richest goldfields in Australia were discovered at Coolgardie in Western Australia. The mining industry’s overall contribution to output and exports is illustrated in tables 1 and 4.

In Victoria, the deposits of easily extracted alluvial gold were soon exhausted and mining was taken over by companies that could command the financial and organizational resources needed to work the deep lodes. But the enormous permanent addition to the colonial population caused by the gold rush had profound effects throughout eastern Australia, dramatically accelerating the growth of the local market and workforce, and deeply disturbing the social balance that had emerged during the decade before. Between 1851 and 1861, the Australian population more than doubled. In Victoria it increased sevenfold; Melbourne outgrew Sydney, Chicago and San Francisco (see table 2). Significantly enlarged populations required social infrastructure, political representation, employment and land; and the new colonial legislatures were compelled to respond. The way this was played out varied between colonies but the common outcomes were the introduction of manhood suffrage, access to land through ‘free selection’ of small holdings, and, in the Victorian case, the introduction of a protectionist tariff in 1865. The particular age structure of the migrants of the 1850s also had long-term effects on the building cycle, notably in Victoria. The demand for housing accelerated during the 1880s, as the children of the gold generation matured and established their own households. With pastoral expansion and public investment also nearing their peaks, the colony experienced a speculative boom which added to the imbalances already being caused by falling export prices and rising overseas debt. The boom ended with the wholesale collapse of building companies, mortgage banks and other financial institutions during 1891-92 and the stoppage of much of the banking system during 1893.

The depression of the 1890s was worst in Victoria. Its impact on employment was softened by the Western Australian gold discoveries, which drew population away, but the colonial economy had grown to such an extent since the 1850s that the stimulus provided by the earlier gold finds could not be repeated. Severe drought in eastern Australia from the mid-1890s until 1903 caused the pastoral industry to contract. Yet, as we have seen, technological innovation also created opportunities for other rural producers, who were now heavily supported by government with little direct involvement by foreign investors. The final phase of rural expansion, with its associated public investment in rural (and increasingly urban) infrastructure continued until the end of the 1920s. Yields declined, however, as farmers moved onto the most marginal land. The terms of trade also deteriorated with the oversupply of several commodities in world markets after the First World War. As a result, the burden of servicing foreign debt rose once again. Australia’s position as a capital importer and exporter of natural resources meant that the Great Depression arrived early. From late 1929, the closure of overseas capital markets and collapse of export prices forced the Federal Government to take drastic measures to protect the balance of payments. The falls in investment and income transmitted the contraction to the rest of the economy. By 1932, average monthly unemployment amongst trade union members was over 22 percent. Although natural resource industries continued to have enduring importance as earners of foreign exchange, the Depression finally ended the long period in which land settlement and technical innovation had together provided a secure foundation for economic growth.

Manufacturing and the Protected Economy, 1891-1973

The ‘Australian Settlement’

There is a considerable chronological overlap between the previous section, which surveyed the growth of a colonial economy during the nineteenth century based on the exploitation of natural resources, and this one because it is a convenient way of approaching the two most important developments in Australian economic history between Federation and the 1970s: the enormous increase in government regulation after 1901 and, closely linked to this, the expansion of domestic manufacturing, which from the Second World War became the most dynamic part of the Australian economy.

The creation of the Commonwealth of Australia on 1 January 1901 broadened the opportunities for public intervention in private markets. The new Federal Government was given clearly-defined but limited powers over obviously ‘national’ matters like customs duties. The rest, including many affecting economic development and social welfare, remained with the states. The most immediate economic consequence was the abolition of inter-colonial tariffs and the establishment of a single Australian market. But the Commonwealth also soon set about transferring to the national level several institutions that different the colonies had experimented with during the 1890s. These included arrangements for the compulsory arbitration of industrial disputes by government tribunals, which also had the power to fix wages, and a discriminatory ‘white Australia’ immigration policy designed to exclude non-Europeans from the labor market. Both were partly responses to organized labor’s electoral success during the 1890s. Urban business and professional interests had always been represented in colonial legislatures; during the 1910s, rural producers also formed their own political parties. Subsequently, state and federal governments were typically formed by the either Australian Labor Party or coalitions of urban conservatives and the Country Party. The constituencies they each represented were thus able to influence the regulatory structure to protect themselves against the full impact of market outcomes, whether in the form of import competition, volatile commodity prices or uncertain employment conditions. The institutional arrangements they created have been described as the ‘Australian settlement’ because they balanced competing producer interests and arguably provided a stable framework for economic development until the 1970s, despite the inevitable costs.

The Growth of Manufacturing

An important part of the ‘Australian settlement’ was the imposition of a uniform federal tariff and its eventual elaboration into a system of ‘protection all round’. The original intended beneficiaries were manufacturers and their employees; indeed, when the first protectionist tariff was introduced in 1907, its operation was linked to the requirement that employers pay their workers ‘fair and reasonable wages’. Manufacturing’s actual contribution to economic growth before Federation has been controversial. The population influx of the 1850s widened opportunities for import-substitution but the best evidence suggests that manufacturing grew slowly as the industrial workforce increased (see table 1). Production was small-scale and confined largely to the processing of rural products and raw materials; assembly and repair-work; or the manufacture of goods for immediate consumption (e.g. soap and candle-making, brewing and distilling). Clothing and textile output was limited to a few lines. For all manufacturing, growth was restrained by the market’s small size and the limited opportunities for technical change it afforded.

After Federation, production was stimulated by several factors: rural expansion, the increasing use of agricultural machinery and refrigeration equipment, and the growing propensity of farm incomes to be spent locally. The removal of inter-colonial tariffs may also have helped. The statistical evidence indicates that between 1901 and the outbreak of the First World War manufacturing grew faster than the economy as a whole, while output per worker increased. But manufacturers also aspired mainly to supply the domestic market and expended increasing energy on retaining privileged access. Tariffs rose considerably between the two world wars. Some sectors became more capital intensive, particularly with the establishment of a local steel industry, the beginnings of automobile manufacture, and the greater use of electricity. But, except during the first half of the 1920s, there was little increase in labor productivity and the inter-war expansion of textile manufacturing reflected the heavy bias towards import substitution. Not until the Second World War and after did manufacturing growth accelerate and extend to those sectors most characteristic of an advance industrial economy (table 5). Amongst these were automobiles, chemicals, electrical and electronic equipment, and iron-and-steel. Growth was sustained during 1950s by similar factors to those operating in other countries during the ‘long boom’, including a growing stream of American direct investment, access to new and better technology, and stable conditions of full employment.

Table 5
Manufacturing and the Australian Economy, 1913-1949

1938-39 prices
Manufacturing share of GDP % Manufacturing annual rate of growth % GDP, annual rate of growth %
1913/14 21.9
1928/29 23.6 2.6 2.1
1948/49 29.8 3.4 2.2

Calculated from Haig (2001), Table A2. Rates of change are average annual changes since the previous year in the first column.

Manufacturing peaked in the mid-1960s at about 28 percent of national output (measured in 1968-69 prices) but natural resource industries remained the most important suppliers of exports. Since the 1920s, over-supply in world markets and the need to compensate farmers for manufacturing protection, had meant that virtually all rural industries, with the exception of wool, had been drawn into a complicated system of subsidies, price controls and market interventions at both federal and state levels. The post-war boom in the world economy increased demand for commodities, benefiting rural producers but also creating new opportunities for Australian miners. Most important of all, the first surge of breakneck growth in East Asia opened a vast new market for iron ore, coal and other mining products. Britain’s significance as a trading partner had declined markedly since the 1950s. By the end of the 1960s, Japan overtook it as Australia’s largest customer, while the United States was now the main provider of imports.

The mining bonanza contributed to the boom conditions experienced generally after 1950. The Federal Government played its part by using the full range of macroeconomic policies that were also increasingly familiar in similar western countries to secure stability and full employment. It encouraged high immigration, relaxing the entry criteria to allow in large numbers of southern Europeans, who added directly to the workforce, but also brought knowledge and experience. With state governments, the Commonwealth increased expenditure on education significantly, effectively entering the field for the first time after 1945. Access to secondary education was widened with the abandonment of fees in government schools and federal finance secured an enormous expansion of university places, especially after 1960. Some weaknesses remained. Enrolment rates after primary school were below those in many industrial countries and funding for technical education was poor. Despite this, the Australian population’s rising levels of education and skill continued to be important additional sources of growth. Finally, although government advisers expressed misgivings, industry policy remained determinedly interventionist. While state governments competed to attract manufacturing investment with tax and other incentives, by the 1960s protection had reached its highest level, with Australia playing virtually no part in the General Agreement on Tariffs and Trade (GATT), despite being an original signatory. The effects of rising tariffs since 1900 were evident in the considerable decline in Australia’s openness to trade (Table 6). Yet, as the post-war boom approached its end, the country still relied upon commodity exports and foreign investment to purchase the manufactures it was unable to produce itself. The impossibility of sustaining growth in this way was already becoming clear, even though the full implications would only be felt during the decades to come.

Table 6
Trade (Exports Plus Imports)
as a Share of GDP, Current Prices, %

1900/1 44.9
1928/29 36.9
1938/38 32.7
1964/65 33.3
1972/73 29.5

Calculated from Vamplew (1987), ANA 119-129.

Liberalization and Structural Change, 1973-2005

From the beginning of the 1970s, instability in the world economy and weakness at home ended Australia’s experience of the post-war boom. During the following decades, manufacturing’s share in output (table 7) and employment fell, while the long-term relative decline of commodity prices meant that natural resources could no longer be relied on to cover the cost of imports, let alone the long-standing deficits in payments for services, migrant remittances and interest on foreign debt. Until the early 1990s, Australia also suffered from persistent inflation and rising unemployment (which remained permanently higher, see chart 1). As a consequence, per capita incomes fluctuated during the 1970s, and the economy contracted in absolute terms during 1982-83 and 1990-91.

Even before the 1970s, new sources of growth and rising living standards had been needed, but the opportunities for economic change were restricted by the elaborate regulatory structure that had evolved since Federation. During that decade itself, policy and outlook were essentially defensive and backward looking, despite calls for reform and some willingness to alter the tariff. Governments sought to protect employment in established industries, while dependence on mineral exports actually increased as a result of the commodity booms at the decade’s beginning and end. By the 1980s, however, it was clear that the country’s existing institutions were failing and fundamental reform was required.

Table 7
The Australian Economy, 1974-2004

A. Percentage shares of value-added, constant prices

1974 1984 1994 2002
Agriculture 4.4 4.3 3.0 2.7
Manufacturing 18.1 15.2 13.3 11.8
Other industry, inc. mining 14.2 14.0 14.6 14.4
Services 63.4 66.4 69.1 71.1

B. Per capita GDP, annual average rate of growth %, constant prices

1973-84 1.2
1984-94 1.7
1994-2004 2.5

Calculated from World Bank, World Development Indicators (Sept. 2005).

Figure 1
Unemployment, 1971-2005, percent

Unemployment, 1971-2005, percent

Source: Reserve Bank of Australia (1988); Reserve Bank of Australia, G07Hist.xls. Survey data at August. The method of data collection changed in 1978.

The catalyst was the resumption of the relative fall of commodity prices since the Second World War which meant that the cost of purchasing manufactured goods inexorably rose for primary producers. The decline had been temporarily reversed by the oil shocks of the 1970s but, from the 1980/81 financial year until the decade’s end, the value of Australia’s merchandise imports exceeded that of merchandise exports in every year but two. The overall deficit on current account measured as a proportion of GDP also moved became permanently higher, averaging around 4.7 percent. During the 1930s, deflation had been followed by the further closing of the Australian economy. There was no longer much scope for this. Manufacturing had stagnated since the 1960s, suffering especially from the inflation of wage and other costs during the 1970s. It was particularly badly affected by the recession of 1982-83, when unemployment rose to almost ten percent, its highest level since the Great Depression. In 1983, a new federal Labor Government led by Bob Hawke sought to engineer a recovery through an ‘Accord’ with the trade union movement which aimed at creating employment by holding down real wages. But under Hawke and his Treasurer, Paul Keating — who warned colorfully that otherwise the country risked becoming a ‘banana republic’ — Labor also started to introduce broader reforms to increase the efficiency of Australian firms by improving their access to foreign finance and exposing them to greater competition. Costs would fall and exports of more profitable manufactures increase, reducing the economy’s dependence on commodities. During the 1980s and 1990s, the reforms deepened and widened, extending to state governments and continuing with the election of a conservative Liberal-National Party government under John Howard in 1996, as each act of deregulation invited further measures to consolidate them and increase their effectiveness. Key reforms included the floating of the Australian dollar and the deregulation of the financial system; the progressive removal of protection of most manufacturing and agriculture; the dismantling of the centralized system of wage-fixing; taxation reform; and the promotion of greater competition and better resource use through privatization and the restructuring of publicly-owned corporations, the elimination of government monopolies, and the deregulation of sectors like transport and telecommunications. In contrast with the 1930s, the prospects of further domestic reform were improved by an increasingly favorable international climate. Australia contributed by joining other nations in the Cairns Group to negotiate reductions of agricultural protection during the Uruguay round of GATT negotiations and by promoting regional liberalization through the Asia Pacific Economic Cooperation (APEC) forum.

Table 8
Exports and Openness, 1983-2004

Shares of total exports, % Shares of GDP: exports + imports, %
Goods Services
Rural Resource Manuf. Other
1983 30 34 9 3 24 26
1989 23 37 11 5 24 27
1999 20 34 17 4 24 37
2004 18 33 19 6 23 39

Calculated from: Reserve Bank of Australia, G10Hist.xls and H03Hist.xls; World Bank, World Development Indicators (Sept. 2005). Chain volume measures, except shares of GDP, 1983, which are at current prices.

The extent to which institutional reform had successfully brought about long-term structural change was still not clear at the end of the century. Recovery from the 1982-83 recession was based upon a strong revival of employment. By contrast, the uninterrupted growth experienced since 1992 arose from increases in the combined productivity of workers and capital. If this persisted, it was a historic change in the sources of growth from reliance on the accumulation of capital and the increase of the workforce to improvements in the efficiency of both. From the 1990s, the Australian economy also became more open (table 8). Manufactured goods increased their share of exports, while rural products continued to decline. Yet, although growth was more broadly-based, rapid and sustained (table 7), the country continued to experience large trade and current account deficits, which were augmented by the considerable increase of foreign debt after financial deregulation during the 1980s. Unemployment also failed to return to its pre-1974 level of around 2 percent, although much of the permanent rise occurred during the mid to late 1970s. In 2005, it remained 5 percent (Figure 1). Institutional reform clearly contributed to these changes in economic structure and performance but they were also influenced by other factors, including falling transport costs, the communications and information revolutions, the greater openness of the international economy, and the remarkable burst of economic growth during the century’s final decades in southeast and east Asia, above all China. Reform was also complemented by policies to provide the skills needed in a technologically-sophisticated, increasingly service-oriented economy. Retention rates in the last years of secondary education doubled during the 1980s, followed by a sharp increase of enrolments in technical colleges and universities. By 2002, total expenditure on education as a proportion of national income had caught up with the average of member countries of the OECD (Table 9). Shortages were nevertheless beginning to be experienced in the engineering and other skilled trades, raising questions about some priorities and the diminishing relative financial contribution of government to tertiary education.

Table 9
Tertiary Enrolments and Education Expenditure, 2002

Tertiary enrolments, gross percent Education expenditure as a proportion of GDP, percent
Australia 63.22 6.0
OECD 61.68 5.8
United States 70.67 7.2

Source: World Bank, World Development Indicators (Sept. 2005); OECD (2005). Gross enrolments are total enrolments, regardless of age, as a proportion of the population in the relevant official age group. OECD enrolments are for fifteen high-income members only.

Summing Up: The Australian Economy in a Wider Context

Virtually since the beginning of European occupation, the Australian economy had provided the original British colonizers, generations of migrants, and the descendants of both with a remarkably high standard of living. Towards the end of the nineteenth century, this was by all measures the highest in the world (see table 10). After 1900, national income per member of the population slipped behind that of several countries, but continued to compare favorably with most. In 2004, Australia was ranked behind only Norway and Sweden in the United Nation’s Human Development Index. Economic historians have differed over the sources of growth that made this possible. Butlin emphasized the significance of local factors like the unusually high rate of urbanization and the expansion of domestic manufacturing. In important respects, however, Australia was subject to the same forces as other European settler societies in New Zealand and Latin America, and its development bore striking similarities to theirs. From the 1820s, its economy grew as one frontier of an expanding western capitalism. With its close institutional ties to, and complementarities with, the most dynamic parts of the world economy, it drew capital and migrants from them, supplied them with commodities, and shared the benefits of their growth. Like other settler societies, it sought population growth as an end in itself and, from the turn of the nineteenth century, aspired to the creation of a national manufacturing base. Finally, when openness to the world economy appeared to threaten growth and living standards, governments intervened to regulate and protect with broader social objectives in mind. But there were also striking contrasts with other settler economies, notably those in Latin America like Argentina, with which it has been frequently compared. In particular, Australia responded to successive challenges to growth by finding new opportunities for wealth creation with a minimum of political disturbance, social conflict or economic instability, while sharing a rising national income as widely as possible.

Table 10
Per capita GDP in Australia, United States and Argentina
(1990 international dollars)

Australia United States Argentina
1870 3,641 2,457 1,311
1890 4,433 3,396 2,152
1950 7,493 9,561 4,987
1998 20,390 27,331 9,219

Sources: Australia: GDP, Haig (2001) as converted in Maddison (2003); all other data Maddison (1995) and (2001)

From the mid-twentieth century, Australia’s experience also resembled that of many advanced western countries. This included the post-war willingness to use macroeconomic policy to maintain growth and full employment; and, after the 1970s, the abandonment of much government intervention in private markets while at the same time retaining strong social services and seeking to improve education and training. Australia also experienced a similar relative decline of manufacturing, permanent rise of unemployment, and transition to a more service-based economy typical of high income countries. By the beginning of the new millennium, services accounted for over 70 percent of national income (table 7). Australia remained vulnerable as an exporter of commodities and importer of capital but its endowment of natural resources and the skills of its population were also creating opportunities. The country was again favorably positioned to take advantage of growth in the most dynamic parts of the world economy, particularly China. With the final abandonment of the White Australia policy during the 1970s, it had also started to integrate more closely with its region. This was further evidence of the capacity to change that allowed Australians to face the future with confidence.

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Citation: Attard, Bernard. “The Economic History of Australia from 1788: An Introduction”. EH.Net Encyclopedia, edited by Robert Whaples. March 16, 2008. URL
http://eh.net/encyclopedia/the-economic-history-of-australia-from-1788-an-introduction/

Economic History of Tractors in the United States

William J. White, Research Triangle Institute

The farm tractor is one of the most important and easily recognizable technological components of modern agriculture in the United States. Its development in the first half of the twentieth century fundamentally changed the nature of farm work, significantly altered the structure of rural America, and freed up millions of workers to be absorbed into the rapidly growing manufacturing and service sectors of the country. The tractor represents an important application of the internal combustion engine, rivaling the automobile and the truck in its economic impact.

A tractor is basically a machine that provides machine power for performing agricultural tasks. Tractors can be used to pull a variety of farm implements for plowing, planting, cultivating, fertilizing, and harvesting crops, and can also be used for hauling materials and personal transportation. In the provision of motive power, tractors were a replacement for human effort and that of draft animals, both of which are still used extensively in other parts of the world.

Technical Description

The heart of a farm tractor is a powerful internal combustion engine that drives the wheels to provide forward motion. Direct ignition (diesel) and spark-driven engines are both found on tractors, just as with cars and light trucks. Power from the engine can be transmitted to the implement being used through a power take-off (PTO) shaft or belt pulley. The engine also provides energy for the electrical system, including the ignition system and lights, and for the most recent models, air conditioner, stereo system, and other creature comforts.

The drawing below, taken from an undated John Deere operating manual, shows a typical general-purpose tractor from the period around 1940. The machine is little more than an engine on wheels, with a seat for the operator and a hitch for pulling implements centered in the rear. Later models would feature an enclosed cab to keep the operator out of the weather, but this model features only simple controls and the metal seat. The drawing shows a wheel-tractor, which comprised more than 95% of machines sold for farm use. Tracked units, also called crawler tractors, were common in California, and of course, dominated construction and other non-farm uses for tractors.

Background and Technological History

Farmers in 1900, whether engaged in growing wheat, corn, or cotton, raising livestock, producing dairy products, or combining a variety of these or other products, had only two sources of power aside from their own strength: steam engines and draft animals. Steam boilers provided motive power for threshing small grains, and a very small number of farmers were using recently-developed steam traction engines for plowing and other arduous tasks. Draft animals provided most of the power on all types of farms, however. As of 1910, there were more than 24 million horses and mules on American farms, about three or four animals for the average farm. In addition to supplying farm power, the horses were also relied upon for transportation, of both goods and people.

Horses and mules pulled an impressive variety of farm implements at the turn of the century, including plows, disks, harrows, planters, cultivators, mowers, and reapers. Several important farm tasks were typically done by hand at this time, including picking of corn and cotton. The greatest amount of power was needed for plowing, often forcing farmers to keep one or two extra horses above the number needed for the remainder of the year. As an example, power requirements during plowing have been estimated at 60% of the annual total needs for growing wheat at that time. A new source of power, then, would be valuable to the farmer if it could replace the horsepower requirements of plowing, as long as the cost was less than that of maintaining one to two extra horses. It would be even more valuable if it could economically replace all of the functions currently performed by draft animals, and further if it could facilitate automation of the cotton and corn picking operations.

As early as the 1870s, engineers had succeeded in producing steam traction engines, referred to today as steam tractors. These monsters, weighing in excess of 30,000 pounds (excluding water), could move under their own power, and had impressive horsepower capacity. Unfortunately, their size, mechanical complexity, and constant danger of explosion made these traction engines unusable for most farms in North America. In all but the driest soils, steam traction engines tended to become mired in the mud and refuse to move. Because of these handicaps, the use of steam tractors increased slowly in the United States during the last two decades of the nineteenth century. Annual production of less than 2000 units per year in the 1890s had increased to around 4000 in the ten years after 1900. Nonetheless, the rate of growth of steam horsepower was far smaller than the growth in animal horsepower. For the reasons mentioned above, adoption of steam power was clearly not a candidate to replace the horse.

The First Gasoline Tractors

With the commercialization of the internal combustion engine, a more practical alternative emerged. Farmers bought large numbers of stationary gasoline engines in the first decade of the twentieth century, and quickly became familiar with their operation. A wide variety of household chores were simplified by the use of stationary engines, including pumping water, washing clothes, and churning butter. Companies began developing gasoline-powered traction engines during the same period; the first commercial machines were sold in 1902, and quickly became known as ‘tractors’.

The first tractors shared similar traits to the steam traction engines. Weighing between 20,000 and 30,000 pounds, with huge steel wheels or tracks, these models were large and expensive. Fairly quickly, the large manufacturers, including Hart-Parr, International Harvester, Case, and Rumely had reduced the size and cost. By the time Ford introduced its Fordson model, the first successful small tractor, average weights were down to 2000-6000 pounds, and prices were under $1000. These tractors proved to be excellent at plowing, and were quite capable of driving mowers and reapers. The large steel wheels, low clearance, and substantial weight made them unsuitable for cultivating growing crops like corn and cotton, however.

Technological Improvements

Henry Ford, who had tinkered with steam and gasoline tractors prior to achieving his success with automobile production, introduced a small, inexpensive model which he called the Fordson during the World War I. This model sold well for several years, aided considerably by a war-caused shortage of horses. After a post-war crash in farm prices drastically reduced sales in 1920-21, Ford initiated a price war in 1922 by cutting the price of its Fordson from $625 to $395. Alone of the large competitors, International Harvester matched Ford’s price, and sales boomed for those two firms throughout the rest of the 1920s. Ford’s production of tractors were always a sidelight to his main business of manufacturing automobiles, however, and when the Fordson production lines were needed for the critical Model-A launch in 1928, Ford decided to leave the tractor business.

The competition with Ford drove International Harvester to make significant improvements in its tractors. The first innovation to appear was the power take-off, offered after 1922. This device, a metal shaft turned by the rotation of the tractor motor, allowed implements to be driven directly by the tractor engine, as opposed to obtaining power from a wheel rolling along the ground. The power take-off quickly became a standard feature on all tractors, and implement makers began the process of re-designing their equipment to take advantage of this innovation.

An even more important improvement by International Harvester was the introduction of a general-purpose tractor, the Farmall, in 1925. This model, with high ground clearance, small front wheels, and minimal weight, was designed for cultivating, as well as for plowing and cutting. It was tested in Texas in 1923, and was released for broad scale distribution in 1925. Competitors, such as Deere, Massey-Harris, and Case rushed to develop a general-purpose tractor (a ‘GP’) of their own, and by the mid-1930s, GPs had replaced the standard Fordson-type tractor. In addition, these same firms began the process of modifying their implements for these tractors, and the wholesale replacement of the horse began in earnest.

A Dominant Design Emerges

Three other improvements were critical in completing the technology base for the tractor. Deere released a power lift for its models beginning in 1927. This device allowed the implement to be raised before every turn by pulling a lever. Prior to this, the farmer had to lift the implement by hand at each turn, which was a time-consuming and enervating task. As with the power takeoff, the power lift was rapidly adopted by other tractor makers. Rubber tires first became available for tractors in 1932, and by 1938 had largely replaced steel wheels. The low-pressure tires not only did less damage to fields, but also allowed a higher forward speed, due to reduced friction. Finally, the development of diesel engines in the mid-1930s gave farmers access to a lower-cost fuel for their machines. Many tractors from that time forward had a small gasoline tank for cold starts, and a large diesel tank for the majority of the operation.

International Harvester pioneered a ‘one plow’ tractor at about this time, and began selling it in 1934. This tractor was smaller and less expensive than the original Farmall, but had the same general-purpose capabilities. Its introduction offered operators on small farms the chance to replace their one horse or mule with a tractor, and was responsible for the beginnings of the tractor’s diffusion in the South. These small tractors often featured adjustable front wheels and high ground clearance, which made them considerably more flexible than the larger models. Within a few more years, manufacturers were offering their larger models in ‘high-clearance’ versions as well.

A final innovation was responsible for bringing Ford back into the tractor business in 1937. In that year, the firm agreed to enter into a joint venture with Irish inventor Harry Ferguson. Ferguson had worked for almost 20 years to perfect a ‘three-point hitch,’ a device that produced superior plowing by continuously leveling the implement as it traveled over uneven terrain. The Ford-Ferguson tractors quickly amassed a significant market share (14% by 1940), and the hitch design was rapidly imitated.

By about 1938, the technology of tractor development had achieved what is known as a ‘dominant design.’ The Farmall-type general-purpose tractors, both large and small, would change little, except for increasing in size and horsepower, over the next 30 years. Beginning in the mid-1930s, and despite the ongoing depression in the United States, tractor sales increased rapidly. Figure 1 shows the number of tractors on farms from 1910 through 1960. By the latter date, the process of technological diffusion was essentially complete. With the exception of the deep South, the increase in percent of farms with tractors from year to year had stopped.

Development of Related Equipment

The general-purpose tractor proved to be an excellent replacement for the horse in plowing, soil preparation, planting, and cultivating tasks for a wide variety of field crops. In addition, the tractor was fully capable of providing power for mowing hay and for harvesting of wheat and other small grains. In the latter application, it facilitated the practice known as ‘combining,’ the simultaneous reaping and threshing of wheat. Horse-drawn combines had been available since the 1880s, and had found limited acceptance on the larger farms of the arid West. However, a large team of horses was required to drag the heavy, complex machine through the fields. The tractors of the 1930s and 1940s had no trouble pulling a re-designed combine, and they began a process of rapid adoption in the Midwest. Eventually, a self-propelled combine was produced, with the tractor engine and cab subsumed into the combine apparatus.

The general-purpose tractor was not capable of bringing mechanization to the corn and cotton harvest until separate, but related innovations produced a corn picker in the 1920s and a mechanical cotton picker after the Second World War. Prior to the development and adoption of the corn picker, corn was often cut with a binder, followed by manual shelling. One of the more important uses of stationary gas engines early in the twentieth century was for the shelling of corn. The picker combined the operations of cutting and shelling, and also distributed the stalks back onto the field, eliminating an additional step.

Mechanical cotton pickers fundamentally altered not only the harvesting of cotton, but the very nature of cotton growing in the United States. The mechanical picker, even after extensive development, produced higher crop losses than hand picking in the hot, humid areas where most cotton was grown — Mississippi, Alabama, and east Texas. In the dry areas of west Texas, however, the picker was very efficient, both in terms of labor effort and crop yields. The mechanical cotton picker thus precipitated a relocation of cotton production westward, resulting in large-scale migration out of the deep South in the years after World War II.

As with the combine, self-propelled corn and cotton pickers were soon developed, combining the power train and cab of the tractor within the implement’s apparatus. For this reason, pickers and combines are often considered as separate machines, and their development and diffusion are not included in discussions of the impact of the tractor. It should be pointed out, however, that none of these devices could have been powered efficiently by horses or steam; the gasoline-powered tractor was necessary for their development. As such, I will include combines and mechanical pickers in assessing the impact of the tractor on inputs to agriculture.

Recent Developments

The recent history of tractor development is less dramatic than the first 50 years. The peak year of tractor production was 1951, during which 564,000 units were made. From that time, the approaching saturation of the market produced a steady fall in production and sales. As one might expect, manufacturers responded by developing ever-larger tractors to supply farms that were growing in size. Interestingly enough, this pursuit of size left the small end of the market open to foreign competition, and, as in the case of the U.S. automobile industry, imports grew to dominate the small-tractor market.

Creature comforts have been improved markedly since the 1950s as well. Enclosed cabs soon had heating and air conditioning, and are now likely to be supplied with a television and stereo-CD. As a result, modern tractors are quite comfortable in comparison with the machines of 40 years ago, let alone versus the monsters of the early tractor era.

Production and Corporate History

From a slow start in the 1920s and 1930s, tractor production grew through the late Depression years, as farmers increasingly parted with their horses and mules. Figure 2 shows the annual output of farm tractors from 1909 to 1970, including the peak years of the early 1950s. It is likely that this peak would have been reached much sooner, had it not been for the disruption of the Second World War. Not only were raw materials such as steel, copper, and rubber severely limited due to wartime production needs, but the government actually limited the total number of machines that could be built each year, and allocated only the raw materials needed for that production. Many of the tractor factories were converted over to production of tanks, airplanes, vehicles, and other military goods.

Despite the presence of corporate giants such as International Harvester and Ford in the early development of the farm tractor, there were hundreds of firms that began producing or selling machines in the first two decades of the twentieth century. As is the case with many emerging industries, inventors, entrepreneurs, and promoters were attracted to this important and rapidly-growing field. The agricultural depressions of 1920-21 and 1930-32 drove many of these firms into mergers or out of business, and by the early 1930s seven companies dominated the industry. These firms, along with Ford, would make almost all of the wheel-tractors sold in the United States from 1930 through 1955.

The dominance of the seven firms is shown in Table 1, which presents market share data by decade for the key years of tractor industry growth. As discussed above, Ford dominated the market in the 1920s, then left the business to create production capacity for the Model A; upon returning to tractors in the 1940s, Ford once again became an important presence. International Harvester was the largest consistent seller, as well as being the technological leader, while Deere would grow into the most significant challenger. By 1963, Deere overtook International Harvester in a declining market, and remains the largest presence in agricultural equipment today.

Table 1. Market Share of Leading Wheel Tractor Manufacturers by Decade
1910s 1920s 1930s 1940s 1950-55 Overall

Deere

4.0% 6.4% 21.7% 17.0% 14.5% 14.5%
International Harvester 21.4% 28.6% 44.3% 32.7% 30.6% 32.5%
Ford 20.1% 44.2% 0.0% 7.9% 19.3% 16.7%
Massey-Ferguson 2.9% 1.9% 2.9% 14.7% 10.8% 9.1%
Case 7.2% 3.6% 7.4% 7.6% 5.1% 6.2%
Allis Chalmers 6.2% 3.5% 12.6% 9.7% 10.3% 9.1%
Oliver 2.1% 2.2% 5.0% 4.8% 5.4% 4.4%
Minneapolis Moline 8.0% 0.7% 2.9% 3.2% 3.6% 3.1%
All Others 28.0% 9.0% 3.2% 2.5% 0.2% 4.4%
Source: White (2000)
Note: Totals include production of predecessor companies

Social and Economic Significance

The farm tractor had made a major impact on the social and economic fabric of the United States. By increasing the productivity of agricultural labor, mechanization freed up millions of farm operators, unpaid family workers, and farm hands. After the Second World War, many of these people relocated to the growing cities across the country and provided technically-skilled, hard-working labor to the manufacturing and service industries. Millions of others remained in rural areas, working off-farm either part-time or full-time in a variety of professions.

The landscape of the country has changed as a result. Farms have grown larger as one proprietor can manage to cultivate the land that several families would have worked in 1900. Small market towns, especially in the Plains states, have almost ceased to exist as the customer base for local businesses has dwindled. Land formerly devoted to raising and feeding horses has been converted to alternate uses or reverted to grassland or forest. Several generations of agricultural families have experienced the sadness of giving up the farm and the rural way of life.

On balance, however, the tractor has had a markedly positive economic impact. Horses and mules, while providing farm power, ate up more than twenty percent of the food they helped farmers grow! By replacing them with machines that consumed much less expensive quantities of fuel, oil, and hydraulic fluid, farmers were able to reduce their costs and pass these social savings along to food buyers. More importantly, the millions of farm workers freed up by the technology were able to contribute their labor elsewhere in the economy, creating large economic benefits. According to a recent estimate by the author, the U.S. would have been almost ten percent poorer in 1955 in the absence of the farm tractor. Along with the revolution in yields generated by the advances in biological and chemical research, the farm tractor has helped agriculture make a significant contribution to economic growth in the United States.

References for Further Study

Ankli, Robert E. “Horses vs. Tractors on the Corn Belt” Agricultural History 54 (1980): 134-148.

Berardi, Gigi M., and Charles C. Geisler, editors. Social Consequences and Challenges of New Agricultural Technology. Boulder, CO: Westview Press, 1984.

Broehl, Wayne G., Jr. John Deere’s Company. New York: Doubleday, 1984.

Clarke, Sally H. Regulation and the Revolution in United States Farm Productivity. Cambridge: Cambridge University Press, 1994.

Danbom, David B. Born in the Country: A History of Rural America. Baltimore: Johns Hopkins University Press, 1995.

Gray, R. B. The Agricultural Tractor: 1855 – 1950. St. Joseph, Michigan: American Society of Agricultural Engineers, 1954 (revised, 1975).

Griliches, Zvi. “The Demand for a Durable Input: Farm Tractors in the United States, 1921-57.” In The Demand for Durable Goods, edited by Arnold C. Harberger. Chicago: University of Chicago Press, 1960.

Hayami, Yujiro, and Vernon W. Ruttan. Agricultural Development: An International Perspective. Baltimore: Johns Hopkins Press, 1971.

Jasny, Naum. Research Methods on Farm Use of Tractors. New York: Columbia University Press, 1938.

Jones, Fred R. Farm Gas Engines and Tractors, fourth edition. New York: McGraw-Hill, 1966.

McCormick, Cyrus. The Century of the Reaper. Boston: Houghton Mifflin, 1931.

Rogin, Leo. The Introduction of Farm Machinery in Its Relation to the Productivity of Labor in the Agriculture of the United States during the Nineteenth Century. University of California Publications in Economics: Volume 9. Berkeley: University of California Press, 1931.

Sargen, Nicholas Peter. “Tractorizationin the United States and Its Relevance for the Developing Countries. New York: Garland Publishing, 1979.

Schultz, Theodore W. “Reflections on Agricultural Production, Output, and Supply.” Journal of Farm Economics 38 (1956): 748-62.

Whatley, Warren C. “Institutional Change and Mechanization in the Cotton South.” Ph.D. dissertation, Stanford University, 1983.

White, William J. “An Unsung Hero: The Farm Tractor’s Contribution to Twentieth-century United States Economic Growth.” Ph.D. dissertation, Ohio State University, 2000.

Wik, Reynold M. Steam Power on the American Farm. Philadelphia: University of Pennsylvania Press, 1953.

Wik, Reynold M. Benjamin Holt & Caterpillar: Tracks & Combines. St. Joseph, Michigan: American Society of Agricultural Engineers, 1984.

Williams, Robert C. Fordson, Farmall, and Poppin’ Johnny. Urbana, Illinois: University of Illinois Press, 1987.

Citation: White, William. “Economic History of Tractors in the United States”. EH.Net Encyclopedia, edited by Robert Whaples. March 26, 2008. URL
http://eh.net/encyclopedia/economic-history-of-tractors-in-the-united-states/

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The Charleston Orphan House: Children?s Lives in the First Public Orphan House in America

Author(s):Murray, John E.
Reviewer(s):Rothenberg, Winifred B.

Published by EH.Net (July 2013)
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John E. Murray, The Charleston Orphan House: Children?s Lives in the First Public Orphan House in America. Chicago: University of Chicago Press, 2013.? xx + 268 pp. (hardcover), $30 (hardcover), ISBN: 978-0-226-92409-0.

Reviewed for EH.Net by Winifred B. Rothenberg, Department of Economics, Tufts University.

The first public orphanage in America was founded not in Boston, citadel of civic virtue, but in Charleston, South Carolina. Because it was the first, it is not unreasonable to assume that it became the blueprint after which all other municipal orphanages were modeled ? which is to say, it set the dimensions of the ?great confinement? within which forsaken children would live for generations to come. Sufficient reason, then, for the Charleston Orphan House to have attracted the attention of John E. Murray, whose previous publications on orphans, paupers, child labor, charity, literacy, epidemic disease, a Shaker community, and the history of health insurance in America testify to a tender and enduring concern for ?the least of these.? Scholars less tender-hearted than Murray may wonder why a book on one southern orphanage should be of interest to economic historians, to which Murray can reply that charity ? or, more accurately, altruism ? has engaged the likes of Arrow, Debreu, Sen, Kahneman, and innumerable others in arcane conversations around rational expectations, decision theory, social welfare functions, intergenerational wealth transfers, the theory of the firm, and the specification of a Happiness GNP measure.

The narrative density of Murray?s book comes from his exhaustive research in the Orphan House archives. He has managed to link at least 500 children by name to their life-cycle events, allowing him to track at least a quarter of the 2,000 children who passed through the orphanage. Beyond that, it appears that he has found every donor, every Commissioners? report, every repair bill, contract, bill of sale, loan application, housekeeping account, public health inspection, doctor?s order, teacher?s diary, minister?s sermon, church attendance record, and the testimony of every impoverished and widowed parent on behalf of his child at risk. Murray calls this archive ?the single greatest collection of first-person reports on work and family lives of the [white, that?s important] poor anywhere in the United States? (p. 4).

First in the course of his ten chapters are the conditions in the House. They are Dickensian. Visitors found it ?miserable,? ?extremely comfortless,? ?appalling,? ?swathed in darkness,? ?beds drenched with water when it rained,? without light, without sheets, without beds or bedsteads, waste water leaking into the drinking wells, one toilet for 100 children, privies in the vegetable garden. ?Yet many children hoped to enter the institution? (p. 66). It improved over time, and Murray moves on to devote a chapter each to the financing, management, diet, discipline, education, training, and medical care offered to the children. In chapters 8 and 9 where Murray follows the young people into apprenticeships and beyond, he opens the orphanage up and out to the urban, industrial, and export-driven economy of the Charleston that will have to absorb them. The book ends with an Epilogue, and it is there, as I read him, that Murray relaxes the courtesies that have constrained him thus far, and ?tells it like it is.? It is there that he undertakes to answer the question: what really motivated the Commissioners to fund a public orphanage in Charleston? But more about that later.
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For this reviewer, the gold standard for a project like Murray?s is Civic Charity in a Golden Age by Anne E.C. McCants (1997), a magisterial study of the Municipal Orphanage of Amsterdam from its founding in 1578 to its demise in 1815. I have adapted from that book and applied to Murray?s a list of six large questions which project these two institutions onto a wide and consequential canvas. I want to use these questions as a heuristic device upon which to hang the balance of this review.

1. What impulse motivated the founding of the public orphanage?
2. In what sense was the public orphanage ?public??
3. What role did state, county, and city government play?
4. Why did the charitable impulse take institutional form? In the case of abandoned children, was there no other solution?
5. Or was the choice of an institutional solution dictated in some way by the consilience (E.O.Wilson?s term: ?accordance of two or more lines of induction drawn from different sets of phenomena?) of capitalism, urbanization, secularism, and the nuclear family that emerged in America at the end of the eighteenth century?
6. Did the orphanage effect genuine redistribution, or was it rather ?an elaborate ploy? to perpetuate the inequality that had motivated it? This last will not be discussed in this review, which is already too long, but will remain as a question ? if only to tease the righteous.

McCants?s book does not appear in Murray?s bibliography, but these questions are the nuts and bolts, the What, When, Who, Where, and Why of his story no less than of hers. And while some are dealt with implicitly in his text, until the Epilogue none of them is discussed explicitly, and I wish they had been.

When the orphanage was founded in 1790, there were 8,089 white persons in Charleston, and 8,270 black persons, and of the blacks 7,684 were slaves, and 586 were freed blacks. Complicating things was the revolution in Haiti the following year. The uneasy equilibrium in Charleston was overwhelmed by a wave Haitian ?migr?s, of the white elite, yes, but mostly by a new population of slaves, free blacks, and mulatto refugees. Complicating things further was that as the number of freed blacks in the city increased, so did the share that were mulatto. White anxiety about mulattoes would reach such a level by 1848 that Charleston would require by law that all freed people wear a tag identifying them as black, and carry proof of manumission, at risk being re-enslaved.

In this climate it will come as no surprise to learn that the Charleston Orphan House and the Free School associated with it admitted only white children; not just white but who, while certifiably poor, were not very poor, in fact whose homes were decent enough to pass an inspection.? Thus defended, the orphanage played an important part in forging a race-based ?alliance of whites? against blacks that cut across, was orthogonal to and subversive of the class-based alliance that a new industrial working class was trying to build against capital. ?It is this link between civic society and racial unity that helps explain the puzzling question, why the first (and for many years the only) large-scale public orphanage in America should have been built in Charleston? (p. 199). ?Charleston was unique in the early republic in creating the charitable orphan house because in no other city did the elite need to make common cause with the white poor and working class against the potential common black enemy? (p. 201). ?Webs of white cooperation reached across class lines, as if the other half of Charleston?s population weren?t there at all? (p. 204).

Amsterdam?s public orphanage was also restricted: open only to citizens of Amsterdam, tax payers, members of the Dutch Reform (Calvinist) church, wealth-holders, of the ?middling classes.? If the Charleston orphanage was an oasis of white unity, and the Amsterdam orphanage was an oasis of middling unity, then in what sense were they ?public??

To answer that, begin with the meaning of “private”: how do we understand “private”? Sir William Blackstone, the great eighteenth century jurist, defined private property for the ages. It is, he wrote, ?that despotic dominion which one man claims and exercises over the things of this world in total exclusion of the rights of any other individual in the universe.?

If ?private? is the right to exclude, then is ?public? the obligation to include?? It doesn?t appear so. Public swimming pools, public housing, public schools, public water fountains, public transportation, public lands, public access to the Internet … all of these masquerade as forms of Commons but they have all, at one time or another, been ?restricted? against some portion of the public: against unmarried couples, single women, families with children, families with pets, against smokers, blacks, Asians, Jews, Latinos, and on and on ? that sorry history is too well known. We are no closer to discovering the meaning of ?public.?

The Oxford English Dictionary makes short shrift of a definition: “of or provided by the state rather than an independent, commercial company”; “ordinary people in general”; “done, perceived or existing in open view.” Of these the only relevant definition for our purposes is the first: “of or provided by the State.” The Charleston orphanage, even if not of the State, was provided by the State.? Then how can it assert a privacy right to exclude?

There were three sources of funds for the orphanage: donations, income from the institution?s own assets, support from all levels of government. Accounting for (in the sense of keeping account of) the donations will always be problematical to the extent that it is a non-market transaction. Gift-giving is driven not by reciprocity but ?by the pursuit of ?regard?: the approbation of others? (Avner Offer, ?Between the Gift and the Market,? Economic History Review, 1997).? To keep account of a gift is a small desecration of a private benevolence. But inevitably the charitable impulse would have waned as the increasing pace of commercial development both of the port and of the city would have lured private wealth into emerging capital markets and land speculation.

Market sources of income, however, were built into the endowment of the institution by design. The orphanage earned income on its holdings of B.U.S. bonds; and by law the value of all escheated estates in South Carolina (the estates of those who died intestate and without heirs) automatically reverted to the orphanage, along with ?small bits of wealth belonging to the children? (p. 24).

But eventually the institution needed to depend ?heavily? for its ongoing expenses on contributions from what we now call the public sector. To the extent that the ?public? orphanage was supported by the public, where did the city, county, or state get the money?? Were these pay-outs opportunistic, or were they funded? And if funded, was it supported from taxes or bond issues? If taxes, what kind: property taxes? A poor tax? Port duties? Excise taxes? If so, on what? I found this discussion to be the thinnest in the book, but on the answers to these sorts of questions depends the question we asked above, by what right does a public institution assert a privacy right to exclude?

What was left unsaid about the sources of government funding in the Charleston book is sharpened by the contrast with how much it is possible to say about it in the Amsterdam book. Unlike every level of government in the U.S., the city of Amsterdam appears to have faced no inhibitions on its power to tax income and spending directly. Every ?foreigner? applying for citizenship of the city was obliged to pay a fee in support of the orphanage. Additional support came from taxes levied on burials and marriages; real property was taxed; taxes were levied on all who worked for wages; and excise taxes were levied on all consumption. In addition, graduates of the orphanage were expected to ?give back? to support its upkeep; revenue was earned from the sale of the girls? needlework. Most significant were the assets bequeathed to the children and held in fiduciary trust for them until their maturity, which assets were prudently invested by the orphanage in real estate, commercial property, commercial paper, and annuities, such that by 1790, private donations accounted for only 8% of the income of the Amsterdam Burgerweeshuis.

Institutionalizing orphaned children is so bad an idea that one wonders if some other solution could not have been found. Why did institutional care prevail over alternatives like foster care, adoption, and government support to extended families?
a) Was institutionalization motivated by a rational calculation of its relative efficiency? Were there in fact economies of scale in warehousing children as there are in warehousing, say, Amazon?s inventory of CDs?
b) Or should we look to a moment in time, say 1780-1810 ? the consilience of the Four Modernizations: capitalism, urbanization, secularism, and the nuclear family ? to provide the clue? There are American historians (I among them) who see the decade of the 1780s as an ?Axial Moment? in American history ? ?the most critical moment in the entire history of America,? wrote Gordon Wood in The New York Review of Books (1994) ? in which, in the midst of ?Deep Change? in almost everything else, family responsibility for the intimate care of the aged, the young, the crippled, the alcoholic, the violent, the developmentally challenged, the homeless, the (oops!) pregnant, and the insane were professionalized and transferred to institutions.
c) Or was institutionalization motivated by the nature of institutions themselves which, in the language of the New Institutional Economics, ?provide incentives to agents to work through formal and informal rules and their enforcement? (John Nye, 2003). In the case of the Orphan House ? ?a white island in a sea of blacks? (p. 199) ? what Nye calls ?the institutions-rules nexus? must have provided a measure of security to the increasingly anxious people of Charleston in whom, says Murray, was lurking always the fear of a slave rebellion in the city at large. An ?institutions-rules nexus? to suppress any disorder in the orphan house would have been projected outward to repress any disorder in the society at large.

??The Orphan House was an integral part of the city?s collection of institutions that maintained the prevailing social order the foundation of which was white unity… [It] was at once an integral part of the most repressive social order in America and the most humane and progressive child-care institution in America, and it remained both for decades? (p. 12).
?
John Murray?s book has turned out to be provocative and utterly absorbing.

Winifred B. Rothenberg?s publications include From Market Places to a Market Economy: The Transformation of Rural Massachusetts, 1750-1850 (University of Chicago Press, 1992).?
???
Copyright (c) 2013 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator (administrator@eh.net). Published by EH.Net (July 2013). All EH.Net reviews are archived at http://www.eh.net/BookReview

Subject(s):Social and Cultural History, including Race, Ethnicity and Gender
Geographic Area(s):North America
Time Period(s):18th Century
19th Century

A Nation of Small Shareholders: Marketing Wall Street after World War II

Author(s):Traflet, Janice M.
Reviewer(s):Doti, Lynne Pierson

Published by EH.Net (July 2013)
?
Janice M. Traflet, A Nation of Small Shareholders: Marketing Wall Street after World War II. Baltimore: Johns Hopkins University Press, 2013. xi + 242 pp. $45 (hardcover), ISBN: 978-1-4214-0902-3.

Reviewed for EH.Net by Lynne Pierson Doti, School of Business and Economics, Chapman University

Don?t let the frivolous dust jacket fool you. While A Nation of Small Shareholders is very readable, it represents some very serious scholarship. Janice Traflet is a bona fide historian and an excellent writer. Moreover, as an associate professor in the School of Management at Bucknell University, she has a strong understanding about how a financial business operates. With this perspective, she has produced a unique history of how the New York Stock Exchange marketed equities to the consumer, especially in the 1950s and 1960s.

After World War II, the New York Stock Exchange (NYSE) and the average household had ambivalent attitudes about each other.? The NYSE watched covetously as consumer income rose and households invested heavily in bonds, life insurance and homes.? However, a JP Morgan partner Thomas Lamont represented the attitudes of many market experts when he blamed the 1929 crash on these investors of moderate means (as he put it, ?every Tom, Dick and Harry?) and hoped these people would not be in the market in the future. It was also true that the average household remembered the shadow of 1929 and preferred safer, more accessible and better marketed investments to shares of stock.

After the 1930s though, tightened regulations, particularly by the Securities and Exchange Commission (SEC), a reorganization of the NYSE board, and the rising number and reputation of companies listed on the NYSE made even average-income consumers feel that stocks could be a safe investment.? About that time, a few brokerage houses began marketing stocks to the ?small investor.? Those brokerage firms who were members of the NYSE were mildly encouraged to make these appeals ?as long as advertisements were truthful and in good taste? (p. 41).

Charles Merrill was a leader in marketing stocks and had a conservative reputation stemming from his 1928 warnings to clients to reduce their risk. In 1940, his brokerage firm began an advertising campaign directed toward potential clients with modest amounts of investment funds. The firm would become a leader in this type of marketing in the 1950s, not only advertising in print, but also offering investment seminars and information booths to educate their customers.

Some of the earlier Merrill ads explained how a stock exchange encouraged the operation of a free market. The NYSE discussed starting a similar campaign, but found the members would not financially support it. However, when G. Keith Funston became the new president of the NYSE in 1951, he made it clear that the board would be engaged in marketing. Serving the NYSE until 1967, he established the advertising theme as soon as he decorated his office with a picture of Independence Hall. Buying stocks listed on the NYSE was investing in America. He said the NYSE was the ?epitome of free enterprise? (p. 73). A few years later, Funston started a department to coordinate the marketing efforts of industry and trade associations, companies listed on the NYSE and institutions that invested in those companies. The NYSE?s own slogan became ?Own Your Share of American Business.? The campaign to make stock ownership synonymous with patriotism and anti-communism was soon prevalent in many advertisements. A rising stock market in 1953 and 1954 also helped boost stock ownership.

There was still a problem attracting investors with limited funds. Commissions were dependent on the size of the order. The NYSE and some brokerage firms developed a monthly investment plan (MIP) to allow customers to commit to paying a monthly sum for a set period. Rather than saving up for a ?round lot? of 100 shares, the customer would gain ownership of the shares as they paid for them. As the price of the stock fluctuated, each monthly payment earned more or less shares. This was a solid plan for investors who only wanted to buy stock in one or a few companies, but mutual funds offered greater portfolio diversification and experienced very strong growth in the 1950s. ?In 1940, less than 300,000 mutual fund accounts existed. By 1955, the number of mutual fund accounts had ballooned to more than two million? (p. 105). This was in spite of the fact that mutual funds were still not allowed to advertise (but did sell door-to-door!).

In the mid-1950s, the NYSE established a department for public education. The department coordinated free speakers and produced brochures for consumers. By the 1960s the exchange provided thousands of lectures a year in libraries, service clubs and other venues that would attract the smaller investments.

The NYSE would be substantially changed in the 1960s and 1970s. An increase in the importance of institutional trading of securities resulted from consumers investments in mutual funds, pension funds and life insurance. For the exchange, the focus turned from marketing to operating efficiency.

The 1980s saw the beginning of the long bull market and the end of fixed commissions. With the end of fixed commissions and the internet came e-trading by small investors. The story comes full circle, from overcoming consumer fear of the equity market in the post war period to the 2001-2002 declines in the market, which once again created fear among small investors.

The focus of this book is on the NYSE and its experiences attracting the average consumer into stock investment, in the post-war period. However, as such it adds an important piece to the literature on the history of the American equity market. Financial historians like Robert Sobel (The Big Board: A History of the New York Stock Market) or Charles Geisst (100 Years of Wall Street) will benefit greatly by this meticulous research. The book will also be interesting to general business historians and to marketing students, academics and business professionals.

Lynne Pierson Doti is the David and Sandra Stone Professor of Economics at the Argyros School of Business and Economics, Chapman University. She is currently working on a book on the history of real estate financing in California. ldoti@chapman.edu.

Copyright (c) 2013 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator (administrator@eh.net). Published by EH.Net (July 2013). All EH.Net reviews are archived at http://www.eh.net/BookReview

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

Female Economic Strategies in the Modern World

Reviewer(s):Arthi, Vellore

Published by EH.Net (April 2013)

Beatrice Moring, editor, Female Economic Strategies in the Modern World. London: Pickering and Chatto, 2012. xiii + 201 pp. ?60/$99 (hardcover), ISBN: 978-1-84893-350-7.

Reviewed for EH.Net by Vellore Arthi, Faculty of History, University of Oxford.

In Female Economic Strategies in the Modern World, Beatrice Moring and her contributors add to ongoing debates on women?s work and wellbeing, compiling varied but thematically linked historical accounts of female survival.

Moring, in her introduction, argues that women were more resilient and had greater access to diverse survival strategies than is traditionally assumed. The eight cases presented in the chapters that follow suggest, perhaps less optimistically, that women faced grim realities fraught with uncertainty. Indeed, even where they found the means to get by, women rarely enjoyed stability, comfort, and upward mobility.

While these studies hang together rather loosely, and examine women?s lives through broad-ranging sources and contexts, they reveal striking similarities in female economic strategies. The thematic patterns that emerge ? for instance, reliance on interpersonal networks or the importance of housing-sharing ? emphasize women?s creativity and self-sacrifice as engines of survival, and patriarchal ideology, gender-segregated labor markets, and institutional barriers to women?s autonomy as impediments to their wellbeing. Below, I provide a brief look at some of these patterns in the contexts of propertied women, working-class women, and women in today?s developing world.

Unique among the contributions to this volume, and indeed, rare in studies of women?s welfare,
Marie-Pierre Arrizabalaga and Margareth Lanzinger examine the fates of women of means.

Arrizabalaga shows how unusual, gender-equitable inheritance patterns in French Basqueland provided sisters and brothers fairer footing than in many contemporary European societies, but nevertheless resulted in gender-distinct migration patterns for non-inheriting siblings ? patterns which reflected customary norms, gender segregation in occupations, and persistent gender gaps in returns to human capital. Non-inheriting men frequently moved abroad, with the American West a popular destination. Women, on the other hand, preferred to move to cities near their family home, so as to capitalize on plentiful employment and possible marriage opportunities there, to be nearer to their kinship and social support networks, and to avoid the hardships of American frontier life. While overseas migration represented a high-return option for women, they were less prepared than their brothers to accept the concomitant risks, and chose instead to have lower-status but more stable lives closer to home.

Lanzinger, too, examines the consequences of eighteenth-century Austrian women?s institutionally-determined relationship to property. Notably, she spotlights marital property law, a little-studied corner of property law. Using marriage contracts to contrast the rights and options afforded women under varying property and inheritance systems ? including those that pooled and those that separated the property brought into and amassed during marriage ? Lanzinger finds that women?s outcomes were highly context-dependent, shaped overwhelmingly by gender and relative wealth at marriage. While Lanzinger does not comment on the larger implications for marriage-market and intra-household bargaining, given the unique variation in property regimes described in her sources, such topics would make particularly promising avenues for future research.

Other contributors focus on more familiar topics in working-class households.

The sharing of housing recurs in these accounts as both a means of earning income and cutting costs. Lola Valverde Lamfus, studying nineteenth- and twentieth-century Guipuzcoa, Spain, notes that when the tourism industry in San Sebastian drove up housing prices, living with extended family and taking in lodgers became attractive strategies for women. Susannah Ottaway finds that in eighteenth-century England, vulnerable women coped with isolation and high living costs by sharing housing, whether with their grown children or with strangers, and by drawing on their social networks for support. Indeed, among these poor groups, for whom cohabitation offered a measure of freedom and was thus preferable to the workhouse, unrelated women were often found living together in the same houses, and, more intriguingly, nearby each other in ?widow-spinster clusters.? Similarly, Moring finds that both lodger-taking and cohabitation in bargain housing were popular in the twentieth-century Finnish context. Such findings are fascinating not only because they suggest female-headed households were often too poor to afford independent housing, but also because they imply a disconnect between the supply and demand for housing, between rents and incomes, between dwelling sizes as constructed and household sizes as they naturally occurred.

Contributors agree less on questions of poor relief. Richard Wall, for instance, finds that poor English widows secured reasonable diets and living standards equivalent to those of young laboring households, due not only to these women?s freedom from male consumption dictates, but also to Poor Law assistance. While he and Ottaway present a more benign view of poor relief in England, legal and institutional barriers loom large in Anne-Lise Head-K?nig?s story of twentieth-century Swiss widows. Restrictions on internal migration, in combination with laws mandating both self-reliance through work and financial support from unfamiliar and distantly-related kin, evoke a draconian state that provided limited social support. Furthermore, unsympathetic policies ? such as those that sent female poor relief-seekers to ancestral cantons in which they had few social networks ? often complicated women?s circumstances. Over time, however, laws became more attuned to the realities confronting single, widowed, and elderly women, with particular improvement in the situation of older widows following the implementation of post-World War II pension programs.

In contrast to the post-war policy success discussed above, Ver?nica Villarespe Reyes and Ana Patricia Sosa Ferreira describe the failure of policy in modern Mexico to disrupt systemic gender barriers. As emerges frequently throughout the book, in Mexico, too, male breadwinner ideology constrained women, revealing cultural and labor market resistance to female financial independence. In such a society, the authors argue, Progresa-Oportunidades, a conditional cash transfer program designed to raise schooling levels and predicated on patriarchal notions of motherhood and housekeeping, served to exacerbate gender gaps in the labor market and entrench the very factors (e.g. rigid gender roles, lack of support for working mothers) keeping women ? and indeed entire families?poor.

This chapter presents one of the more provocative arguments in the book. The authors? critique of Progresa-Oportunidades as conceptually flawed, on the grounds that its conditions reinforce regressive gender divisions, is strong. However, they do not address or investigate the policy?s actual impacts as these align with its stated goals. This oversight is of special concern since many evaluations of the program, such as those conducted by the International Food Policy Research Institute, have hailed its effectiveness in improving child health, nutrition, and schooling outcomes.[1] By examining program results in terms of educational outcomes, the authors could counter the claim that Progresa-Oportunidades merely accomplishes the right things (i.e., boosting education, especially that of girls) in the wrong ways (i.e., by intensifying gender roles). Despite this omission, the authors propose an alternative and possibly more effective policy: one which would disrupt structural and ideological barriers to women?s work, and provide practical support for working women ? for instance, greater childcare provision and reductions in salary discrimination. Indeed, since the authors find gender gaps in wages at all levels of schooling, such policies could prove more successful in reducing gender inequalities and poverty than those, such as Progresa-Oportunidades, targeting human capital investment.

The studies in this volume make persuasive use of rich qualitative evidence, but in many instances could benefit from greater quantitative rigor and more cautious interpretation. For example, Chapter 6 could be strengthened by controlling for (or subdividing tabular data by) variables such as income, region, or education levels; ensuring the gender gaps in incomes reported are adjusted to reflect only unexplained residuals between male and female earnings ? that is, true ?wage discrimination,? to borrow Claudia Goldin?s terminology[2]; or distinguishing between diminishing returns, negative returns, and gender gradients in returns to schooling. Similarly, in some cases, such as those in Chapters 1 and 4, small or selected samples limit the authors? ability to generalize about women?s economic conditions and their strategies, successes, and failures in shaping their destinies. Crucially, with the book?s focus on Western Christian societies, it misses out on opportunities to comment on a more diverse range of institutions, family forms, and patterns in marriage, inheritance, and motherhood, as might be found with the inclusion of cases on Asia or Africa. However, the cases the volume explores in the modern Western world suggest remarkable continuity and universality in women?s experiences across space and time: disheartening in the suggestion of how little women?s most fundamental struggles have changed over a half-millennium, but inspiring in its demonstration of women?s resourcefulness in the face of persistent and systemic adversity. As such, Moring and her contributors offer evidence with present-day academic and policy relevance, and suggest ways in which we might better support women in their pursuit of brighter futures.

References:

1. Emmanuel Skoufias and Bonnie McClafferty, ?Is Progresa Working? Summary of the Results of an Evaluation by IFPRI,? International Food Policy Research Institute Food Consumption and Nutrition Division Discussion Paper No. 118 (2001).

2. Chapter 4 in Claudia Goldin, Understanding the Gender Gap: An Economic History of American Women, New York: Oxford University Press, 1990.

Vellore Arthi is a doctoral student in Economic and Social History at the University of Oxford. Her work focuses on gender, intra-household allocation, and human capital formation across diverse periods and global contexts. (vellore.arthi@merton.ox.ac.uk)

Copyright (c) 2013 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator (administrator@eh.net). Published by EH.Net (April 2013). All EH.Net reviews are archived at http://www.eh.net/BookReview

Subject(s):Household, Family and Consumer History
Social and Cultural History, including Race, Ethnicity and Gender
Geographic Area(s):General, International, or Comparative
Time Period(s):18th Century
19th Century
20th Century: Pre WWII
20th Century: WWII and post-WWII

Lionel Robbins

Author(s):Howson, Susan
Reviewer(s):Hands, D. Wade

Published by EH.Net (December 2012)

Susan Howson, Lionel Robbins. Cambridge: Cambridge University Press, 2011. xiii + 1161 pp. $135 (hardcover), ISBN: 978-1-107-00244-9.

Reviewed for EH.Net by D. Wade Hands, Department of Economics, University of Puget Sound.

Susan Howson’s biography is, and I suggest will remain, the definitive work on the life of Lionel Robbins. At over 1,100 pages it is obviously an extremely detailed biography, but the word “detailed” seriously understates the close-focus character of Howson’s investigation. It is a committee meeting by committee meeting, white paper by white paper, and trip by trip, documentation of Robbins’s public and professional life. It is an overwhelming research and writing project, and the author who undertook it, saw it through, and ultimately produced such a biography, deserves our greatest respect.

The book generally proceeds chronologically, beginning with Robbins’s childhood and ending with his death in 1984. Howson traces Robbins’s lifetime involvement with the London School of Economics (LSE) from his entrance as a student after World War I, to his acceptance of a permanent position in 1929, through his leadership during the following decades, and on to his retirement (all three of his retirements: 1961, 1966, and 1973). It is very clear that for much of the period from the mid-1930s to the mid-1950s LSE economics and Lionel Robbins’s vision of economics were effectively inseparable. This said, he was also surrounded by a host of bright lights. Friedrich Hayek of course, but there were many others including John R. Hicks who was developing the ideas that would become Value and Capital (1939) and collaborating with his colleague R. G. D. Allen on what is now considered to be the key paper in the ordinal revolution (Hicks and Allen 1934), as well as a number of later-to-be-influential students such as Abba Lerner and Nicholas Kaldor. As Paul Samuelson often said, the 1930s were a great time to be an economist, and Howson makes it clear that was as much the case in London as it was in Cambridge, England or in Cambridge, Massachusetts.

Two aspects of Robbins’s professional life that are consistently highlighted throughout the book are his extraordinary public service during and immediately after World War II (service both to Britain and to the Western political-economic system in general), and his close relationship with John Maynard Keynes. These two things are related of course since much of Robbins’s contact with Keynes occurred within the context of their war-related service. Robbins first met Keynes in 1928 and they were both involved in the 1930 Committee of Economists report on the economic slump. This was followed by a number of close collaborations during the war years as a result of Robbins’s duties in the economics section of the Office of the War Cabinet and later at the Bretton Woods conference in 1944 and the negotiations over the Anglo-American loan agreements at the end of 1945 (during which Keynes’s health was rapidly deteriorating). Throughout this service Robbins was in the heart of the fight ? the fight for victory as well as the fight for the construction of fair, efficient, and robust economic institutions to help the world economy recover from the war ? with the same energy and commitment as Keynes. In the conclusion Howson notes that “Robbins was one of Keynes’s most powerful allies within the government machine” (p. 1084) and quotes from Robbins’s autobiography on the question of his adoption of Keynesian ideas: “But if all that is involved by that description is a conviction that, in a free society, the fluctuations of aggregate demand must not be left to look after themselves and that it is an important function of government, national and international, to pay attention to such matters, then indeed that was now my position” (p. 1085).

Of course Lionel Robbins was also involved in a substantial amount of public service independently of his war time service, Bretton Woods, and all that. He also played a key role in British educational policy as the influential chair of the Committee on Higher Education (1961-1965), served for over a decade on the Trustees of the National Gallery (1954-1967), as well as serving in a number of other capacities. Robbins was an important academic economist, but he had a profound influence on mid-twentieth century British social and cultural life independently of his academic research or the students he taught.

Anyone reading 1,100 pages of detailed biographical narrative is bound to have many moments where they suddenly see interesting new connections between certain events or ideas. I would just like to note two of many such cases for me. The first is that in the early years of World War II Robbins was involved with a number of other economists in promoting the federation of Britain and France that “would form a nucleus for the postwar federation of Europe” (p. 346), a federation that would “have full taxing and borrowing powers and also the power to carry out public works” (p. 350). Given this, one really wonders what he would have to say about the current European situation (or alternatively, one wonders whether we would be in the current predicament if economists like Robbins and Keynes had been around during the 1990s). The second issue is Howson’s discussion of Robbins’s involvement with the Mount Pelerin Society and in particular the impact that his relationship with Hayek had on his association with that society (pp. 661-664, 703-705, 845-848). The bottom line is that even though Robbins was the primary author of the Mount Pelerin founding statement, he attended the first meeting in 1947 but resigned soon after and did not attend again until 1979 and his relationship with Hayek had much to do with it. Interesting indeed.

Even though Howson’s book is painstakingly researched, extremely detailed, and clearly written, no reviewer is ever entirely satisfied. In my case, there was one topic where I found both the quantity and the quality of the discussion to be quite disappointing; the topic is economic methodology and related philosophical ideas. Other than his definition of economics and the impossibility of interpersonal utility comparisons, contemporary economics students are unlikely to know anything about Lionel Robbins. But this is not the case in economic methodology where An Essay on the Nature and Significance of Economic Science (1932, 1935) is one of the field’s most important texts and its arguments continue to be hotly debated. So I expected to find a discussion of the origins of, and how Robbins’s thinking evolved on, many of these methodological and philosophical questions. How exactly was Robbins influenced by logical positivism (many claim it had a great impact, but others cite an Austrian influence at odds with positivist empiricism)? Connected with this, he was obviously critical of American Institutionalism and of the popular psychological ideas of the day ? How did he come to have these views? How about behaviorism (he seemed quite critical of it in the second edition, but not in the first)? And later in his life ? What exactly did he think of the relationship between Karl Popper’s philosophical ideas and economics, in particular the tensions between some of the things Popper wrote about economics and his general falsificationist philosophy of science? And on the subject of Popper, how did Robbins feel about the claims of the young Turks such as Richard Lipsey and Chris Archibald who argued in the LSE M2T seminar that Popper’s philosophy of science was a better approach than Robbins’s methodology? And on and on ?

And what does one find that might help us understand Robbins’s thinking on such questions? Very little. Robbins’s philosophical ideas are seldom discussed ? either the origins of his ideas or how he considered revising them in light of criticism ? and what discussion there is, seldom sheds much light on these matters. We are told that his 1930s lectures included “a spirited attack on American Institutionalism” (p. 175). Okay, so what were his criticisms and how were they related to his arguments in Nature and Significance? Howson quotes at length from a first draft of the preface to the second edition where he argues that the critics of the normative-positive dichotomy are the manifestation “of that wave of revolt against the rational which in the shape of Hitlerism Fascism ? etc is sweeping over the civilized world today” (p. 273). Perhaps this was true for some critics, but there were many ? including associates like Frank Knight, Terence Hutchison, and Hayek ? who raised substantive issues unrelated to his use of the normative-positive dichotomy. What of these? Nothing is said.? There are various mentions of Popper speckled around in the book ? his visit to LSE in 1936 (p. 290), his criticism of historicism (pp. 496-497), a mention of the Latsis conference in 1974 (p. 1080), and even a brief note on some of Popper’s comments on the rationality principle (p. 849) ? but nothing sustained, or systematic, and nor is there any serious attempt to fit these ideas into the evolution of Robbins’s thinking about the character of economic science. Similarly for the T2M seminar. Howson tells us that the criticisms were “somewhat unfair to Robbins” because his “methodological viewpoint in the 1950s was not identical with his in the 1930s” (p. 820). Okay, but how exactly did it change and why? Finally, and perhaps most exasperatingly, we are told early on that Robbins was a “provisional utilitarian” (p. 96) and then reminded again at the very end that he was “a utilitarian in his political philosophy” (p. 1087), but there is essentially nothing on the subject in the one thousand intervening pages (in particular there is nothing that might be considered to be a defense of these claims or even any effort to explain what type of utilitarianism Robbins ostensibly supported). What could one mean by saying that Robbins was a utilitarian when his most well-known contribution to economics effectively snapped the back of applied utilitarian-based welfare economics? Perhaps he was a utilitarian of some kind, but exactly what kind, and why, needs to be explained. These are only a few of many such cases ? sins of both omission and commission ? that jumped out as me as I read through the book.

Now, I am willing to admit that my disappointment is based in part on my personal interest in methodological questions and my desire to gain some additional insight into Robbins’s views on a number of long-standing philosophical issues. Perhaps my expectations were unrealistic. I suppose it is also possible that Robbins himself just never thought about such topics (or at least never wrote about, or corresponded about, such topics in a way that would leave a record for the historian) but that seems unlikely since such issues were at the heart of his most influential work, they were the topic of the most heated discussion about his work during his lifetime, and he continued to address them in print in later life. It seems more likely that the reader’s attention is deflected away from such methodological questions and toward Robbins’s contribution to important policy debates because of the author’s own interest in British economic policy and the desire to give Robbins proper credit for his under-appreciated policy work. There is of course nothing wrong with the author of a biography emphasizing one particular aspect of the relevant individual’s life and helping Robbins get proper credit is a reasonable goal, but this emphasis should be made clear to the reader from the beginning. Perhaps the title should have been “Lionel Robbins: Economist in the Public Service.” In any case ? and for whatever reason ? I found the discussion of economic methodology and related philosophical ideas to be the most disappointing part of the book.

So to summarize, Lionel Robbins is generally an extraordinarily well-researched and well-written biography. As I said in the first paragraph, it not only is, but will remain, the definitive work on Robbins’s life. It is much more of a facts-of-his-life history than an intellectual history ? what he did, what he said, what he wrote, at particular times ? rather than the evolution of his ideas, but it is a beautiful example of the type of biography that it is. It is long, but it is worth it, and one comes away with a much greater appreciation of the man, the economist, and in a sense the hero, Lionel Robbins. I close with the suggestion that since Howson has already done such a vast amount of research, perhaps she should now write a short, 150 pages or so, biography that paints Robbins’s life with a much wider, faster moving, and more interpretative brush. There would certainly be benefits associated with reaching a wider audience.

References

Hicks, John R. (1939) Value and Capital. Oxford: Clarendon Press.

Hicks, John R. and Allen, R. G. D. (1934), “A Reconsideration of the Theory of Value, Parts I and II,” Economica, 2, 52-76, 196-219.

Robbins, Lionel. (1932). An Essay on the Nature and Significance of Economic Science. London: Macmillan & Co.

Robbins, Lionel. (1939). An Essay on the Nature and Significance of Economic Science. 2nd Edition, London: Macmillan & Co.

D. Wade Hands is Distinguished Professor of Economics at the University of Puget Sound in Washington state and has taught history of economic thought for over thirty years. He has written on a wide range of topics in the history of economic thought and economic methodology. He is co-editor of the Journal of Economic Methodology and the author of Reflection Without Rules: Economic Methodology and Contemporary Science Theory, Cambridge University Press, 2001. His Agreement on Demand: Consumer Choice Theory in the Twentieth Century, edited with Philip Mirowski, was published in 2006 by Duke University Press and The Elgar Companion to Recent Economic Methodology, edited with John B. Davis, was published in 2011. hands@pudgetsound.edu

Copyright (c) 2012 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator (administrator@eh.net). Published by EH.Net (December 2012). All EH.Net reviews are archived at http://www.eh.net/BookReview.

Subject(s):History of Economic Thought; Methodology
Geographic Area(s):Europe
Time Period(s):20th Century: Pre WWII
20th Century: WWII and post-WWII

Trade Policy Disaster: Lessons from the 1930s

Author(s):Irwin, Douglas A.
Reviewer(s):Ploeckl, Florian

Published by EH.Net (June 2012)

Douglas A. Irwin, Trade Policy Disaster: Lessons from the 1930s.? Cambridge, MA: MIT Press, 2011. xv + 195 pp. $25 (cloth), ISBN: 978-0-262-01671-1.

Reviewed for EH.Net by Florian Ploeckl, Department of Economics, University of Oxford

Occasionally we face a trilemma, a situation where we can only get two out of three choices and are forced to sacrifice one of them. The international finance literature has recently popularized the notion of an international finance trilemma, which describes a country?s choice between capital mobility, fixed exchange rates, and independent monetary policy and demonstrates that states have to sacrifice one — they can`t have their cake and eat it too (Obstfeld and Taylor 1998). The simplicity of its structure has made it, or slightly different formulations, also a popular teaching tool. But as Doug Irwin points out in his new book, Trade Policy Disaster, there is actually a closely related open economy trilemma, featuring the choice between independent monetary policy, gold standard parity (or fixed exchange rates) and open trade, which was recognized already decades ago by economists like Graham, Friedman and Meade.

Irwin?s central thesis argues that this trilemma became stark during the years leading into the Great Depression and that many states chose to sacrifice open trade and subordinate their trade policy to support their respective monetary systems, usually the gold standard.? His book is a tour de force explaining trade policy throughout the Great Depression on a global scale.? It utilizes the outlined trilemma framework to illuminate the existing institutional and economic structures, the major policy options available and the reasons behind the actual observed choices. The first chapter sets up the analysis by looking at the emergence of protectionism during the Great Depression, the monetary arrangements at the time and how the trilemma links them together. Chapter 2 then provides a narrative focusing on the decisions by the major powers, the UK, the U.S., Germany and France and respective smaller states in the related economic blocs. This is followed in chapter 3 by a closer look at quantitative and qualitative evidence for the causes and consequences of the trilemma. Chapter 4 concludes with a summarizing discussion of trade policy and exchange rate regimes during the decades following the Great Depression and a final comparison between the situation in the 1930?s and the current economic circumstances.

The issue of trade policy during the Great Depression has obviously been the focus of intense scrutiny ever since the interwar period. The author of the book himself has made contributions to this debate and those are important pieces of the puzzle he presents. The book isn?t intended to present a new argument, but to combine what we know already into one coherent explanation. The central part of this story is the impact of monetary arrangements. The international financial system recovered from the shock of the First World War, but states were not able to return it to the balance and stability of the pre-war arrangements. When international and domestic imbalances required adjustments, states initially rejected the use of exchange rate mechanisms and many turned to various forms of trade restrictions. Irwin demonstrates the respective logic of this preference for trade policy adjustments as well as that of the chosen trade restriction mechanism for the major international powers and a number of smaller states. The discussion doesn?t attempt to rehabilitate contemporary policy makers but does show how their reactions were shaped by economic constraints like the trilemma, political ideology, public opinion and the arguments and advice of economists. Shifting towards a more technical analysis the author in chapter 3 brings together academic results to show the economic consequence of protectionism, trade restrictions and the emergence of trade blocs. Irwin lays out in direct comparison to these why adjustments to the monetary system, in particular the abandonment of gold, would have been the better option to mitigate the economic problems arising during the interwar period.

The book is clearly targeted at a wider audience. Its relatively short length, under 200 pages in a small format, and a fluid, clear writing style make it very accessible and suitable for interested readers from a wide variety of backgrounds, including those? outside of academia.? The description and evidence marshaled to support its arguments rely predominantly on narrative evidence, eschewing extensive quantitative and technical details.? Some points are clarified with a number of simple graphs, like the iconic contracting spiral of trade volume during the Great Depression, and contemporary cartoons. A particular strength is Irwin?s ability to seamlessly weave the views of contemporary economists into the story, providing an illustrative link between policy making and the academic world.

In conclusion the book provides an accessible, yet comprehensive and convincing explanation of trade policy in the 1930?s, in particular the constraints governments faced in their decision making and the origins and reasons behind the rise of protectionism during the Great Depression.

References:

Maurice Obstfeld and Alan M. Taylor (1998) ?The Great Depression as a Watershed: International Capital Mobility over the Long Run,? in The Defining Moment: The Great Depression and the American Economy in the Twentieth Century, edited by Michael D. Bordo, Claudia Goldin and Eugene N. White, Chicago: University of Chicago Press

Florian Ploeckl is currently a Marie Curie Fellow in the economics department at the University of Oxford and a Research Fellow at Nuffield College. His work focuses on the role of geography for the development of trade institutions, urban systems and information services.?

Copyright (c) 2012 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator (administrator@eh.net). Published by EH.Net (June 2012). All EH.Net reviews are archived at http://www.eh.net/BookReview.

Subject(s):Industry: Manufacturing and Construction
Geographic Area(s):General, International, or Comparative
Europe
North America
Time Period(s):20th Century: Pre WWII

Pay for Play: A History of Big-Time College Athletic Reform

Author(s):Smith, Ronald A.
Reviewer(s):Depken, Craig A.

Published by EH.NET (July 2011)

Ronald A. Smith, Pay for Play: A History of Big-Time College Athletic Reform. Champaign, IL: University of Illinois Press, 2011. xii + 344 pp. $30 (paperback), ISBN: 978-0-252-07783-8.

Reviewed for EH.Net by Craig A. Depken II, Department of Economics, University of North Carolina ? Charlotte.

It seems every academic year numerous big-time athletic programs are added to the long list of programs investigated or penalized by the NCAA over the past several decades. In these cases, individual athletes, coaches, boosters, alumni or faculty are often found to have violated one or more of the rules pertaining to amateurism, recruitment, eligibility, or academic preparedness. Why do people continue to violate the NCAA membership agreement when the costs to their affiliated program, if caught and penalized, seem to be increasing over time? In his book Pay for Play: A History of Big Time College Athletic Reform, Ronald A. Smith provides a partial answer to the question: a lack of serious reform. Smith?s extensively researched and well-documented text shows that throughout the history of college athletics there have been only a handful of true champions of reform and they have universally lost to the pressures of professionalization.

The problem of professionalization arose at the very inception of inter-collegiate sport in 1855 as Yale and Harvard wrangled over eligibility of former students in the sport of rowing. Since then amateurism, recruitment, eligibility and academic preparedness have all been the focus of various levels of oversight even while individuals find new ways to circumvent the rules. How best to reform college athletics in order to mitigate the incentives to cheat?

As Smith points out, early in the history of intercollegiate sports, students and faculty provided primary oversight at the institutional level. This period was characterized by so-called ?Home Rule? ? that is, individual institutions dealt with amateurism, recruitment, eligibility and academic preparedness, as well as the professionalization of the coaching ranks. However, systemic reform under Home Rule was nearly impossible because each institution found itself in a prisoners? dilemma: if one institution implemented a reform it might find itself at a competitive disadvantage to those schools that chose not to participate. This coordination problem was somewhat solved by the creation of (what would eventually become) the National Collegiate Athletic Association (NCAA) in 1905. Smith points to the NCAA as a positive development in reform efforts, although it was not created to address recruitment or eligibility issues, per se, but in response to the increasing violence in American football.

However, early in its history the NCAA had no enforcement powers and thus the interwar period was characterized by ever-increasing professionalization. Smith provides in-depth discussions of specific university presidents, such as Frank Graham of the University of North Carolina, and groups of presidents, such as those of the Ivy League schools, who took up the mantle of reform with various levels of success. However, as Smith points out in convincing detail, university presidents find themselves caught in the pincer of advocating reform while often finding it necessary to cheerlead for their school?s athletic programs and turning a blind eye to those who bend the rules.

Despite the solution to the coordination problem the NCAA represented, true reforms to big-time college athletics were sporadic at best through World War II. Smith provides a fascinating read of how fast-and-loose college athletics became during the interwar period leading up to the Sanity Code of the early 1950?s. The story surrounding the failure of the Sanity Code and its implications is one of the more interesting portions of the book. The narrative continues through the NCAA?s evolving enforcement efforts, changes to academic requirements, failures in curbing excesses on the part of a number of schools until the ?Death Penalty? was imposed on Southern Methodist University in 1987, culminating in a discussion of the most recent struggles in dealing with professionalism in college sports.

While Smith?s contribution in terms of a historical text is commendable, he offers suggestions about how long-lasting reform might take place in the future. As mentioned, he is not optimistic that university presidents will provide desired reform because of their inherent conflicts of interest. It is equally unlikely that coaches, students, alumni or boosters will step up to provide credible reform efforts. Smith points to two possible sources of future reform, both of which have made contributions in the past. First is the long-lost faculty oversight. As Smith asserts, the faculty are the only body that is inherently interested in the student athlete qua student and therefore are in the best position to balance athletics and academics. Unfortunately twin problems of free-riding and self-selection would plague this model of reform: those faculty members who are agnostic about sport are unlikely to incur the personal costs required to participate in quality oversight; if the only faculty members willing to incur the personal costs are anti-sport then oversight could become overly ideological.

Smith?s discussion of integration and Title IX highlights one of the major themes of the book: efforts for internal reform of college athletics are rare and half-hearted whereas reforms from the outside, whether from the legislature or the courts, have had substantial and permanent impacts on college athletics. Smith suggests that long-lasting reform might be possible if the broader viewpoint of Congress or the courts is employed. There are substantial reasons for an economist to question whether reform from these sources would be first-best, but Smith?s contribution should be welcomed to the debate by all who are interested and concerned with intercollegiate sports.

Craig A. Depken II is author of over 45 peer-reviewed articles in sports economics, real state, applied microeconomics and industrial organization. He is a regular contributor to collected works, is author of the book Microeconomics Demystified and is a co-editor of Contemporary Economic Policy.

Copyright (c) 2011 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator (administrator@eh.net). Published by EH.Net (July 2011). All EH.Net reviews are archived at http://www.eh.net/BookReview.

Subject(s):Markets and Institutions
Social and Cultural History, including Race, Ethnicity and Gender
Geographic Area(s):North America
Time Period(s):19th Century
20th Century: Pre WWII
20th Century: WWII and post-WWII

The Invention of Enterprise: Entrepreneurship from Ancient Mesopotamia to Modern Times

Author(s):Landes, David S.
Mokyr, Joel
Baumol, William J.
Reviewer(s):Blackford, Mansel G.

Published by EH.NET (May 2010)

David S. Landes, Joel Mokyr and William J. Baumol , editors, The Invention of Enterprise: Entrepreneurship from Ancient Mesopotamia to Modern Times. Princeton: Princeton University Press, 2010. xv + 566 pp. $49.50 (hardcover), ISBN: 978-0-691-14370-5.

Reviewed for EH.NET by Mansel G. Blackford, Department of History, Ohio State University.

?

The second volume published in the Ewing Marion Kauffman Foundation?s Series on Innovation and Entrepreneurship, this collection of eighteen essays explores entrepreneurship, innovation, and economic development in parts of the world from ancient times to the present.? This work, states William J. Baumol, an economist at New York University and one of the study?s editors, was designed to test three basic hypotheses: 1) ?that the practical utilization of inventions? and accompanying economic growth would be lower without the work of entrepreneurs; 2) that ?entrepreneurial activities are not always productive?;? and 3) that ?the direction taken by entrepreneurial activity depends heavily, at any particular time and in any particular society, on the prevailing institutional arrangements? (p. ix).? David Landes, another editor and an economic historian at Harvard University, argues further that ?the countries and regions that have done best are precisely those that have taken advantage of the opportunities offered by active trade and entrepreneurial freedom.?? Those areas, Landes claims, have been mainly in the West, with ?China and the Arabic Middle East? offering ?pungent case studies? of ?resistance to innovation?(p. 2) — surely an outdated assertion.? The essays comprising this volume bear out Baumol?s hypotheses, but not the statements made by Landes.[1]

Six essays investigate preindustrial entrepreneurship and innovation.? Michael Hudson explores the development of entrepreneurship and business enterprises in ancient Mesopotamia (3500-1200 BC), where the association of businesses with public temples and palaces led to a commercial take off.? Many of the business practices first created in Mesopotamia — the use of money, uniform weights and measures, price systems, interest charges, and profit-sharing — Hudson shows, then spread to the Mediterranean world, only to collapse in Roman times.? In an essay on the Neo-Babylonian Empire (626-539 BC), Cornelia Welch looks at family entrepreneurship in agriculture and trade.? Particularly valuable is her case study of the Egibi family, which left an archive of 2,000 cuneiform tablets spanning five generations.? ?The Egibi family represents,? she concludes, ?an outstanding example of Schumpeter?s idea that the main entrepreneurial opportunities for profit or quasi-rent lie in creating new business opportunities.?? The Egibi family had ?far-flung operations? based on a ?marketing plan that integrated agricultural production, tax payments, and the shipment of crops to cities along Babylon?s canal system? (p. 53).? Timur Kuran claims that Islam first spurred entrepreneurship and economic development in the Middle East by creating ?institutions well suited to personal exchange,? but later ?became a source of retardation with the transition to impersonal exchange.?? Islamic institutions, Kuran finds, ?supported small-scale entrepreneurship,? but ?inhibited larger-scale entrepreneurship? (p. 63).? James Murray suggests that the European Middle Ages ?deserve a special place in the history of entrepreneurship,? for by 1500 merchants ?came to direct many of society?s ?productive forces?? (p. 88).? John Munro then examines the ideas of Max Weber and Richard Tawney, about economic development.? He finds that the alterations in mindsets and institutions that Tawney claimed were needed as precursors to industrialization in Great Britain occurred in 1640-1740, not, as Tawney posited, a century earlier.? Oscar Gelderblom defines entrepreneurs broadly as ?not just merchants involved in long-distance trade, but also shipmasters, fishermen, millwrights, farmers, artisans, and shopkeepers,? in arguing for the importance of entrepreneurial actions as the sources of economic development in the Dutch Republic between 1580 and 1650 (p. 156).

Eight essays probe entrepreneurship in Western Europe and the United States during industrial and post-industrial times.? Joel Mokyr, the third editor of this volume and a faculty member in history and economics at Northwestern University and Tel Aviv University, argues for the importance of institutions, especially informal ones such as codes of conduct, as stimuli for entrepreneurship in industrializing Great Britain.? In two jointly authored essays, Mark Casson and Andrew Godley debunk the idea that entrepreneurial failure retarded British economic development in the late-nineteenth and twentieth centuries — a well-worn topic.? They find that entrepreneurs rationally shifted their attentions from manufacturing to infrastructural projects and other undertakings (such as finance) in Great Britain and abroad, in which they were very successful.? Ulrich Wengenroth surveys the ?tortured? history of entrepreneurship in Germany from the early 1800s to the present, emphasizing the roles institutions (including educational ones) played in creating opportunities for innovation.? Pulling no punches, he also looks at anti-Semitism and the unbalanced nature of Germany?s economy, which he concludes became over-industrialized and lacking in service businesses.? Turning to France, Michael Hau presents a picture of varying regional developments and changing roles taken by the national government, concluding that after declining in importance for several decades after World War II ?entrepreneurs have greatly gained in power? in the present day (p. 323).? Louis Cain examines entrepreneurship in the antebellum United States, first exploring innovations in law, finance, and transportation that allowed entrepreneurship to flourish and then describing the processes of industrialization and the diffusion of products to American markets.? Discussing the United States between 1865 and 1920, Naomi Lamoreaux stresses the importance of institutions, including federal and state governments, and big businesses, which encouraged entrepreneurship.? In a particularly wide-ranging essay, Margaret Graham offers a nuanced picture of American entrepreneurship after 1920, looking at the varied roles played by people in companies of all sizes and in many sectors of the economy.

Three essays and a short conclusion complete the volume.? Susan Wolcott examines supplies of financial credit, especially ?informal? types, available to entrepreneurs in Colonial India.? She addresses issues about economic growth in India from the 1700s to the present, emphasizing the importance of family and ethnic networks defined, in part, by caste distinctions.? Wolcott concludes that, while such networks and the informal credit they commanded initially aided economic development, they ultimately limited business development — a finding similar to Kuran?s conclusions about the Islamic Middle East.? Wellington Chan looks at entrepreneurship and innovation in China from the late 1800s, emphasizing continuities in stressing the roles personal relationships and networks have played for business people throughout Chinese history.? ?Chinese entrepreneurship,? Chan concludes, ?has always been an inherent part of Chinese history and tradition? (p. 495).? Seiichiro Yonekura and Hiroshi Shimazu find entrepreneurship at the core of the development of zaibatsu in Japan before World War II and present accounts of the development of Mitsui and Mitsubishi, unfortunately ignoring the significant roles small and medium size business played in Japan?s economic development.? Finally, Baumol and Robert Strom (a director of the Kauffman Foundation) offer short concluding remarks underlining the importance of cultural developments and institutions for the evolution of entrepreneurship and innovation over time.

Anyone interested in entrepreneurship, innovation, and economic development will find much to ponder in this work, and extensive multilingual notes and bibliographies at the end of each essay will lead readers to additional sources.? However, even such an extensive volume as this one has limitations.? The focus is clearly on Western Europe and the United States.? Only a few essays examine developments in Asia and the Middle East, and none look at entrepreneurship in Latin America or Africa.? Then too, most of the essays approach entrepreneurship and innovation from the vantage points of economics and economic history.? The substantial contributions of business historians — Harold Livesay, Thomas McCraw, and William Lazonick, among many others, come to mind — are largely ignored.[2]? Moreover, the authors of the essays follow no commonly agreed-upon definition of entrepreneurship, making cross-national comparisons difficult.? Most of the authors bow in the direction of Joseph Schumpeter, but essentially fail to adopt a common approach.? I was disappointed that little effort was expended by the editors or authors to reach comparisons across boundaries of time or space.? For the most part, this study consists of fairly traditional national studies. ?Ironically for a book about innovation, this volume contains little in the way of conceptual breakthroughs.? The authors might well have explored more fully innovative business networks and industrial districts that often spread across national lines, especially in modern times.[3].? Even with these caveats, however, I think these essays deserve close consideration, as much for the questions they raise as for the answers they give about innovation and entrepreneurship.

Notes:

1. On innovation in China, see for example, William T. Rowe, China?s Last Empire: The Great Qing (Cambridge, 2009); and Peter Zarrow, China in War and Revolution, 1895-1949 (London, 2005).? Landes? main source on Islamic developments is Bernard Lewis, _What Went Wrong? The Clash between Islam and Modernity in the Middle East_ (Oxford, 2002), a one-sided study.

2. Harold Livesay, American Made: Shapers of the American Economy (New York, 2007); William Lazonick, ?Business History and Economic Development,? in Geoffrey Jones and Jonathan Zeitlin, eds., The Oxford Handbook of Business History (Oxford, 2007), 67-95; and Thomas K. McCraw, Prophet of Innovation: Joseph Schumpeter and Creative Destruction (Cambridge, MA, 2007).

3. See, for example, Louis Galambos and Jane Eliot Sewell, Networks of Innovation: Vaccine Development at Merck, Sharpe & Dohme, and Mulford, 1895-1995 (Cambridge, 1995); and Charles Sabel and Jonathan Zeitlin, eds., World of Possibilities: Flexibility and Mass Production in Western Industrialization (Cambridge, 1995).

?

Mansel G. Blackford is a business historian at Ohio State University and, most recently, is the author of The Rise of Modern Business: Great Britain, the United States, Germany, Japan, and China Chapel Hill, 2008 (third edition).

Subject(s):Business History
Economywide Country Studies and Comparative History
Markets and Institutions
Geographic Area(s):General, International, or Comparative
Time Period(s):General or Comparative
Ancient
Medieval
16th Century
17th Century
18th Century
19th Century
20th Century: Pre WWII
20th Century: WWII and post-WWII