Published by EH.NET (July 1, 2000)

Virginia P. Dawson, Lincoln Electric: A History. Cleveland: The Lincoln

Electric Company, 1999. 162 pp. $12.50 (hardback), ISBN: 0-937392-00-6; $8.50

(paperback), 0-9937392-01-4.

Reviewed for EH.NET by Daniel Nelson, Department of History, Emeritus,

University of Akron.

In the history of corporate resource management, small liberal firms have

played a role disproportionate to their size and economic influence. Not

surprisingly, their histories have many similarities. Typically a

strong-willed, ideologically committed owner or chief executive imposed his

values on the firm; a highly profitable product or service permitted the

company to be generous to its employees; and company managers were active in

public affairs. The Dennison Manufacturing Company was probably the most famous

example, but a half dozen others, such as Leeds & Northrup and Columbia

Conserve, were almost as well known during their heyday, the first half of the

twentieth century. Lincoln Electric of Cleveland, an innovative manufacturer of

electric motors and arc-welding equipment, has until now received less

attention. Virginia P. Dawson’s illuminating company history pinpoints the

sources of Lincoln’s pioneering policies as well as one major reason why the

Lincoln story has remained obscure. Whereas Henry S. Dennison and most

like-minded executives of his era were liberals outside as well as inside the

plant, James Finney Lincoln, the dominant figure at Lincoln Electric from the

1910’s to the 1960’s, was as deeply reactionary in his public life as his

wealthy Cleveland contemporaries were.

Dawson’s account, which was subsidized by the company, is ostensibly a company

biography, a story of executive leadership in a successful enterprise

illustrated with attractive photos from the company’s archives. Yet Dawson

manages to transcend her genre. She provides welcome context for both her major

themes–Lincoln’s role in the emerging arc-welding industry and the company’s

commitment to “incentive management” and innovative personnel policies. Her

task was not easy. She found few internal records and had to piece together

most of the story from a variety of fugitive sources. As a result she is unable

to provide adequate documentation for many critical points, including the

company’s enviable record of low-cost, high quality production.

Lincoln Electric was the product of two remarkable brothers, John C. and James

F. Lincoln. John, the company founder, was an inventor and visionary who had

little interest in day-to-day management. John was also initially attracted to

social uplift and the single tax in particular. Inspired by Cleveland’s great

mayor and single-taxer, Tom Johnson, John resolved to devote his life to

reform, turning Lincoln Electric over to his younger brother in 1913. Though he

had little impact as an agitator, his new calling was not without consolations.

In the 1920’s and 1930’s, John became fabulously wealthy as–of all things–a

real estate speculator, with ever-greater holdings in Cleveland and Arizona.

Besides noting the irony of John’s strange career, Dawson does not pursue this

chapter of the Lincoln story.

In the meantime, James was building Lincoln Electric into a successful

manufacturing firm. A former Ohio State football star who viewed his company as

an extension of his college team, with himself as coach, cheerleader, and

chaplain, James continued to excel. Surrounding himself with creative engineers

and handpicked workers, he kept the organization focused on two overriding

goals: the promotion of the Lincoln approach to arc welding and the efficient

production of arc-welding machinery and supplies. To motivate employees, he

introduced an Advisory Board in 1914, a series of benefit programs

characteristic of welfare capitalism in the following years, and most

importantly, a generous bonus program in 1934. Together these measures became

the foundation of “incentive management.”

The Advisory Board was an early company union with elected employee

representatives. Its function was to appraise James of real or potential

grievances and to provide links between him and rank-and-file employees–both

important functions of successful company unions. But the Board was not to be

confused with participatory or democratic management. Employees were encouraged

to speak their minds, but, as Dawson notes, “Lincoln’s formidable presence

alone seemed to discourage brash questions” (p. 36). Employees who worked hard,

followed orders, and identified with the company and its goals could expect

substantial–sometimes enormous- bonuses. In the 1950’s, Lincoln added a

guarantee against layoffs. Together, at least as far as Dawson has been able to

discern, these policies were highly effective. Incentive management permitted

Lincoln to take full advantage of the growing acceptance of arc welding in

construction and manufacturing.

James was also a devout Presbyterian who saw his management system as an

expression of his obligation to other human beings. But unlike most liberal

employers of his era–and this is the most perplexing feature of his

behavior–he was unable to generalize from his experiences to society at large.

Thus, in the 1930’s he succumbed to the influence of fellow employers and

became a vigorous critic of New Deal labor and social policies, though those

policies could be interpreted as extensions of his efforts at Lincoln. His

first foreign investments grew out of his conviction that government had

destroyed the American economy. (At precisely this time, of course, John

Lincoln was making millions from the recovery in land prices.) James became

active in reactionary business groups and generally made a fool of himself with

intemperate attacks on the Roosevelt administration.

In the 1950’s and 1960’s, Lincoln became increasingly rigid and doctrinaire,

hostile to innovation and change, though no less influential. His refusal to

consider new products or spend money on R & D drove out his most ambitious and

enterprising associates, and his unwillingness to retire frustrated others. At

his death in l965 he was succeeded by William Irrgang, his right-hand man, who

was equally hostile to change. Irrgang’s retirement in l985 finally brought new

perspectives to the company. A poorly managed effort to catch up with

competitors through overseas expansion precipitated a major crisis in the early

1990’s and led to the introduction of the first outside managers and more

conventional corporate policies. Wary of stepping on too many corporate toes,

Dawson deals only briefly with these events.

Despite its brevity and gaps, Lincoln Electric: A History is a valuable

company biography. Apart from its fascinating treatment of the rise of arc

welding, it helps to document the activities of the minority of employers who

emphasized the carrot over the stick in enlisting employee dedication and

energy. Lincoln Electric must be included in the top echelon of small, socially

innovative industrial firms.

Daniel Nelson is Professor Emeritus of History at the University of Akron. He

is the author of Managers and Workers: Origins of the New Factory System in

the United States, 1880-1920 (1995), Farm and Factory: Workers in the

Midwest, 1880-1990 (1995), and Shifting Fortunes: The Rise and Decline of

American Labor, from the 1820s to the Present (1997).

Published by EH.NET (July 1, 2000)

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Thomas K, McCraw, American Business, 1920-2000: How It Worked. Wheeling, Illinois: Harlan Davidson, 2000. 270 pp. $13.95 (paperback), ISBN: 0-88295-985-9.

Reviewed for EH.NET by Larry Schweikart, Department of History, University of Dayton.

Writing any history of American business over a long span of time is difficult, mainly due to problems of organization. While enterprise generally lends itself to topical groupings, this format, of course, does not yield easily to discussions of trends. Thomas McCraw’s American Business takes a somewhat unique approach, melding topical analysis of specific companies as the symbols of an era with the overall economic and commercial developments. Interspersed with his more focused chapters on RCA, McDonalds, Procter & Gamble, and others are general topical treatments of the financial system, pharmaceuticals, women in business, and so on. The approach works reasonably well, and McCraw certainly stuffs each section full of (usually) relevant statistics and interesting company details, all sewn within the fabric of other developments in American history. He summarizes seven themes of the 1920-2000 period, including rising consumer power, intensified competition, the U.S. support system, deregulation, a heavy human toll, growing productivity, expanding leisure time among consumers, and a warm, general embrace of capitalism in America. While one may differ with McCraw in some specifics of each of these, he has nevertheless accurately captured several key characteristics of the U.S. economic and business system in the twentieth century.

Let me be the first to congratulate McCraw on his heresy, though: he has, without mentioning Alfred Chandler, joined me (in my textbook Entrepreneurial Adventure) in pointing out that the trends in modern business are bringing about the death of the “visible hand” (or, at least, are amputating it at the wrist). McCraw points out that the surge in information systems has brought about decentralization of the American management structure in unprecedented ways. Hallelujah! At times, I wondered if I was destined to be the lone voice crying this in the wilderness.

McCraw adds little new to the case studies of the companies, nor is that his point. Rather, he applies fresh analysis to how each fits into its competitive era. For example, he sees the “cooperative model” of Alfred P. Sloan with General Motors as a more effective management strategy than Henry Ford’s “independence” approach; he notes that the financial markets of the 1920s operated in gray areas of the law because they were breaking new ground, not because they were inherently lawless; and he wrestles with the question of how a democratic government in World War II could mobilize effectively without destroying the economic system needed to win the war. (He answers the last question, insightfully, by noting that the organizational structure of Ferdinand Eberstadt’s “Controlled Materials Plan” allowed the armed forces to prioritize their needs, then allowed the private sector to prioritize is production to fill those needs.)

McCraw, who teaches at Harvard, reveals a pro-enterprise bent that is a refreshing break from the Harvard Business School stream of historians who endlessly harp on managerial hierarchies. But every once in a while, he seems to take on the persona of one of those morphing alien creatures, changing in mid-stream into John Kenneth Galbraith. The worst examples come in his discussions of the 1980s and 1990s, where we are treated to a standard liberal/Democratic interpretation of the growing wealth gap and the tax cuts that caused the number of rich people in America to increase (as if that were bad). The wealth of Bill Gates is compared to the 60 million poorest American households . . . whoops! Too late! Microsoft’s price crash of 1999-2000 just chopped that number in half! This, of course, is the point: the wealth gap was made on investment, innovation, and most of all, the potential of technology for earning. If anything happens to that potential at any time, the “wealth gap” shrinks faster than Rick Moranis’s kids.

For an analyst who is otherwise well-reasoned and even brilliant at times, suddenly McGraw seems like George McClellan, bewildered by armies of Confederates marching through an open clearing, convinced he was seeing different troops, when in fact he was looking at the same old faces. The so-called “wealth gap” is the same gap that developed in the late 1800s as new technologies, with their vast earnings potential, made millionaires out of Carnegie, Rockefeller, and others. Lost in the focus on what they made versus what someone else made is the fact that in the case of Carnegie, Rockefeller, Gates, and Steve Jobs, their products improved daily lives in quantum proportions. More importantly, discussions of “wealth gaps” become meaningless when viewed in another context, namely, “Have you served your fellow man?”-which is the ultimate question of capitalism. In Gates’s case, he serves his fellow man millions of times a day-perhaps billions. If a tiny cost were affixed to each time someone turns on a Windows operating system, and multiplied to the number of users, Bill Gates is probably getting robbed!

McCraw also falters in his (again Galbraithian) analysis of Americans’ savings rates, which he bemoans as low. But the savings rate is low only because those things people save for are handled with other financial arrangements. For better or worse, currently a large chunk of retirement is “withheld” by Social Security; and VA/FHA mortgages (along with the interest deduction from income taxes for home payments) subsidize home ownership through lending rather than saving. A recent study in the Milken Institute Review concluded that Americans’ real savings rates are far higher when these “forced” savings are taken into account, and probably are on a par with anyone in the world, except for the Japanese, whose living conditions leave them fewer options. Likewise, McCraw laments the “money gap” in business CEO salaries, but offers no real analysis of why boards would pay such huge salaries. In contrast, one major trend that McCraw ignores is that of the overwhelming burden placed on American companies by the tort lawyers. Not only does the legal system extort tribute from companies on a routine basis, but it has changed the internal structure of the corporation so as to give the legal divisions far more power and prestige than the research and development divisions. Nor does McCraw delve into the recent trend of federal and state government lawsuits against “legal” products-a pure sham designed to keep funding in the public trough at a time that taxpayers have all but revolted over any further tax increases, and one which threatens the existence of the free market itself. Certainly this bears some discussion in “how American business worked.”

All in all, McCraw has written a good book, and a provocative book. Its small size makes it a natural for the classroom, if one enjoys the topical approach, and his insights generally seem well grounded.

Larry Schweikart, published The Entrepreneurial Adventure: A History of Business in the United States (Harcourt) earlier this year. He is the author of numerous books on American banking and finance, and the military/defense industry. He also published a history of the National Aerospace Plane for the United States Air Force entitled The National Aerospace Plane and the Quest for the Orbital Jets (USAF History Division, 1999).

Published by EH.NET (July 1, 2000)

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Howard Bodenhorn, A History of Banking in Antebellum America: Financial Markets and Economic Development in an Era of Nation-Building. New York: Cambridge University Press, 2000. xxi + 260 pp. $59.95 (cloth), ISBN: 0-521-66285-0; $22.95 (paper), ISBN: 0-521-66999-5.

Reviewed for EH.NET by Jon Moen, Department of Economics and Finance, University of Mississippi.

Almost all economic historians have read the classic articles by Lance Davis (1965) and Richard Sylla (1969) on the integration and efficiency of postbellum US capital markets. In them we learn that it took quite a while for interest rates to converge and that the National Bank Acts may have introduced some monopolistic elements into banking. If capital market weren’t always efficient after the Civil War, it is tempting to believe that they must have been even worse during antebellum times. Howard Bodenhorn attempts to erase such beliefs with A History of Banking in Antebellum America. I think he is successful, for the most part.

Bodenhorn focuses on how effective the antebellum banking system was at creating credit, linking borrowers and lenders, and moving capital to its most valuable use. He also attempts to address the issue of how critical banks were to economic growth. He finds that banks provided credit to a broad range of businesses, not just to the wealthy. Banks also encouraged capital formation (and saving), capital market deepening and integration, and regional interest rate convergence. He does not try to analyze money creation, the effectiveness of the antebellum system of private banknotes, or the stability of the free-banking system. These issues have been analyzed by Hugh Rockoff (1975) and later by Arthur Rolnick and Warren Weber (1983). They find that things worked pretty well.

In Chapter 2, Bodenhorn provides a survey of regional banking structure, showing, for example, how New England banking differed from banking in the South, where branching was common. Next, he examines the links between economic growth and financial development. Several tables calculate money or credit per capita and provide correlations between these monetary variables and per capita income growth, suggesting that the correlation is not strong. However, regression analysis of the determinants of growth (in the spirit of Robert Barro) shows that the initial level of financial depth was positively related to subsequent economic growth.

The third chapter examines who was supplied with credit by antebellum banks. With an admittedly small sample (n = 4) of banks from New York, Tennessee, Virginia, and South Carolina, Bodenhorn suggests that antebellum banks were willing to lend to small borrowers as well as large ones and that they were motivated to a great extent by the search for profit. They didn’t just lend to their friends.

The next chapter builds on Bodenhorn’s earlier research dealing with the integration of short-term capital markets and the convergence of regional interest rates. The main conclusion is that even if there were regional differences, interest rates moved in close enough harmony to suggest that capital markets had been integrated for much of the antebellum period.

Chapter 5 is useful for the questions it raises in addition to the conclusions it presents. This chapter analyzes how banks developed correspondent relationships to move capital across a large but developing nation. It then presents a brief outline of how legal developments proceeded to make the bill of exchange a more liquid and widely accepted financial instrument. Perhaps the most interesting item in this chapter is Bodenhorn’s discussion of how, after the demise of the Second Bank of the United States in 1836, state banks, private banks, and exchange brokers stepped in to keep the markets for bills of exchange and interbank payments functioning. I got the impression that its demise really did not affect markets much and that the private sector responded quite effectively. This is an issue that could be examined in more detail, as it raises the question of just how important a central bank is.

The Epilogue returns to the role of banks in the growth of the antebellum American economy. The type of evidence presented by Bodenhorn doesn’t really allow for much more than the suggestive answer that banks certainly helped things along, and it also points out that Americans were resourceful in creating a banking system. The discussion prompted me to wonder how large were the social savings from having banks — were they “indispensable?” Were substitutes for banks conceivable or possible, given the legal frameworks in the various states? In other words, would moneylenders that were not banks have appeared? The postbellum South as described in the Epilogue shows what happened when a banking system was decimated, but it also reveals that new institutions — efficient or not — would spring up to take the place of banks. A History of Banking in Antebellum America is an important work and sets the stage for more research on antebellum capital markets.

Jon R. Moen is author of “Clearinghouse Membership and Deposit Contraction during the Panic of 1907,” Journal of Economic History, Vol. 60, no. 1 (March 2000), pp. 145-63.

References:

Lance Davis, “The Investment Market, 1870-1914: The Evolution of a National Market,” Journal of Economic History, Vol. 25, no. 3 (September 1965), pp. 355-99.

Hugh Rockoff, The Free Banking Era: A Re-Examination. New York: Arno Press, 1975.

Arthur Rolnick and Warren Weber, “New Evidence on the Free Banking Era,” American Economic Review, Vol. 73, no. 5 (December 1983), pp. 1080-91.

Richard Sylla, “Federal Policy, Banking Market Structure, and Capital Mobilization in the United States, 1863-1913,” Journal of Economic History, Vol. 39, no. 4 (Dec. 1969), pp. 657-86.

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Ina Zweiniger-Bargielowska, Austerity in Britain: Rationing, Controls, and Consumption 1939-1955. Oxford and New York: Oxford University Press, 2000. xiii + 286 pp. $65.00 (cloth), ISBN 0-19-820453-1

Reviewed for EH.NET by John Singleton, School of Economics and Finance, Victoria University of Wellington, New Zealand.

Zweiniger-Bargielowska’s readable study of rationing and austerity in mid-twentieth century Britain is a mixture of economic, social, and political history. Her principal conclusion is political rather than economic. British housewives’ disgust after 1945 at the continuation, and indeed intensification, of certain aspects of rationing was successfully exploited by the Conservative Party, and contributed materially to Labour’s defeat at the 1951 general election. In stressing the deep division between Labour and the Conservatives over austerity, Zweiniger-Bargielowska strengthens the case against the popular thesis that postwar British political life was marked by cross-party consensus. Along the way, she provides a thorough account of the rationing mechanism, the intricacies of the black market, and the effects of rationing on the health, welfare, and morale of different groups of the British population.

Rationing, price controls, and subsidies were introduced during World War Two to ensure that supplies of food, clothing, and certain other consumer products were distributed on an equitable basis at fair prices. To a large extent, this policy was successful. Although people grumbled at the monotonous wartime diet of bread, potatoes, and vegetable pies, it was both nutritious and adequate in terms of bulk. In fact, the poor were better fed during the war than they had been in the 1930s. The war and early postwar years witnessed significant improvements in physical health, especially among children in poor urban areas. The consequences, if any, of austerity for mental health are not mentioned.

After the war, most people could not understand why rationing could not at least be relaxed. The world food crisis, balance of payments difficulties, and the need to feed the starving Germans were used by ministers as justifications not only for the retention of controls, but for the introduction of bread rationing which had not been considered necessary during the war itself. Housewives generally bore the brunt of austerity, giving up some of their rations for the sake of their husbands and children. Pets also suffered disproportionately. It was an offence to feed wild birds with breadcrumbs, as well as to give pets food that was fit for human consumption. Men were more tolerant than women of rationing, perhaps because they had more opportunities to buy non-rationed meals at works canteens, and did not have to do the family queuing, shopping, and cooking.

Throughout the 1940s there was a thriving black market. One of the simplest scams was to claim to have lost one’s ration book. Officials suspected that 90 per cent of claims for new ration books were fraudulent but, as it was difficult to prove dishonesty, the authorities usually provided a replacement. Forgers took full advantage of the fact that ration coupons were easier to copy than bank notes. However, the black market in Britain, unlike that in the USA, was not dominated by organized crime. Zweiniger-Bargielowska suggests that administrative procedures were tighter in Britain than in the USA. Britain also lacked the American tradition of organized crime.

Public attitudes towards the black market were ambivalent. People condemned others who engaged in illicit dealing, but saw no reason why they should not occasionally indulge in ‘under the counter’ transactions themselves. My grandfather, who was a stonemason in Lancashire, used to receive fresh meat in partial payment for supplying headstones to farmers. The activities of farmers, who often held food back from official channels, were among the main concerns of the rationing authorities. As Zweiniger-Bargielowska points out, the black market undermined, but did not negate, the egalitarian purpose of rationing.

Zweiniger-Bargielowska does not go into the microeconomics of rationing, although contemporary economists had plenty to say on this theme. Nor, more importantly, does she really tackle the question of whether the austerity of the late 1940s was unavoidable. Would the British economy have collapsed in the late 1940s if meat or butter rations had been increased? Paraphrasing the title of Roy Harrod’s tract on austerity, were these hardships really necessary? On the face of it, it seems unlikely that a few extra rashers of bacon would have led to national disaster, whatever ministers may have said. A more searching analysis of the extensive literature on the economic policies, both internal and external, of the 1945-51 Labour government would have helped Zweiniger-Bargielowska to find an answer to Harrod’s question.

Draconian food rationing was not absolutely essential after the war. Savings could have been made in other areas of the external accounts. For instance, tobacco was prominent in Britain’s imports from the USA at the height of the dollar crisis. This poison was not rationed, apparently because of its morale boosting and revenue raising qualities. Clearly, if less had been spent on importing tobacco, the British would have been able to enjoy a slightly more appetizing diet. There were other highly questionable drains on the balance of payments after 1945, such as the cost of occupying Palestine, Greece, Germany, and those parts of the empire that did not produce a dollar surplus. Certain uncontrolled outward capital flows, for instance to South Africa and Australia in 1947, also put strain on Britain’s capacity to import basic foodstuffs. In other words, rationing was necessary because the government and its supporters preferred to allocate resources to the maintenance of tobacco supplies and Britain’s status as a world power than to the provision of a wider choice of food. Whether or not this ordering of priorities was in the best interests of ordinary people is a matter of opinion.

While comparatively weak on the rationale for the persistence of austerity after 1945, Zweiniger-Bargielowska supplies a wealth of information on the administration of rationing, the struggle against the black market, the effects of rationing on morale, and Churchill’s manipulation of housewives’ frustration with austerity. I strongly recommend this book to anyone interested in British history of the mid-twentieth century.

John Singleton is currently working with Paul Robertson, University of Wollongong, on a study of postwar trade and development policy in Australia and New Zealand, which will be published by Macmillan.

Robert W. Fogel, Railroads and American Economic Growth: Essays in Econometric History. Baltimore: Johns Hopkins Press, 1964. xv + 296 pp.

Review Essay by Lance Davis, Division of Humanities and Social Sciences, California Institute of Technology. led@hss.caltech.edu

For those of us who lived through the exciting days of the “cliometric revolution,” the publication of Robert Fogel’s Railroads and American Economic Growth represented a very major milestone – it was as if we now had proof that we had left the bumpy and unpaved dirt road of the first few years and could see ahead a straight and well-paved highway into the future. (See note 1.) The roots of “clio” clearly lay in the 1956 publication of Cary Brown’s “Fiscal Policy in the Thirties: A Reappraisal” and, a few months later, in Alfred Conrad and John Meyer’s initial presentation of “The Economics of Slavery in the Ante-Bellum South.” Brown showed that, unlike the findings of the then-current historiography, government economic policy during the 1930’s was not an example of President Roosevelt’s imaginative application of the modern tools of Keynesian fiscal policy; and Conrad and Meyer demonstrated that, despite nearly a century of traditional historiography, ante-bellum slavery was profitable and, at least by implication, that, if the goal was to eliminate slavery before the 1940’s, the Civil War was not an extremely costly and totally unnecessary enterprise. However, these findings – findings that have been well substantiated by later research – while convincing to the small cadre of “converted,” were still not generally accepted by the historical profession. Thus, cliometrics did not really begin to flower until the publication of Robert Fogel’s study of the impact of railroads on American growth in the nineteenth century. Not only did it generate a spate of parallel studies (of Russia, Mexico, Brazil, England, and Scotland, to cite only five), but much more importantly, it provided a methodological foundation for the systematic study of economic history and long-term economic growth.

Despite the attention that had been paid to the construction of the Erie Canal, given the role of the national market in underwriting this country’s rise to become, economically at least, the richest nation in the world, and, given the speed with which rails came to dominate the transport network that provided the basis for that national market, it is not surprising that historians had concluded that railroads were the indispensable and driving force behind American growth in the nineteenth century. To the best of my knowledge, before the first annual Cliometric Conference (a conference held at Purdue University in 1960), few economic historians, neither those traditionally nor those cliometrically inclined doubted this fundamental tenant of American development. (See note 2.) Moreover, although some cliometricians may have been aware of the concept of social savings – a concept that was closely related to the economic literature on cost/benefit analysis – none had attempted to measure the savings attached to any specific legal or technical innovation. (Fogel had touched on a similar concept in The Union Pacific Railroad (1960), but his first published paper dealing specifically with social savings was still almost two years in the future – “A Quantitative Approach to the Study of Railroads in American Economic Growth” (1962).)

With its publication, Railroads proved once and for all that economic history, while still depending on the product of scholars “slugging it out in the archives,” could benefit mightily from the careful application of economic theory and econometrics. On the one hand, although the work immediately generated substantial controversy, and even today one might quibble about a few days or a few months, in the long run, there has been little question about the book’s major conclusion – that the level of per capita income achieved by January 1, 1890 would have been reached by March 31, 1890, if railroads had never been invented. Moreover, Fogel’s work also indicated that there was no other industry that was likely to have been more important than the railroads; and, thus, if not railroads, no other industry could have played the role that historiography attributed to the rails. On the other hand, the evidence is overwhelming that, since the publication and subsequent debate over Railroads, almost all economic history has been written by scholars who have either been trained in economics or who have found it necessary to acquire (either formally or informally) those basic economic and econometric skills. What, then, in addition to the central importance of the subject, made this such a path-breaking work? As the title suggests, the book is actually a collection of four interrelated, but really distinct, substantive essays: “The Interregional Distribution of Agricultural Products,” “The Intraregional Distribution of Agricultural Products,” “Railroads and the ‘Take-off’ Thesis: The American Case” and “The Position of Rails in the Market for American Iron, 1840-1860: A Reconstruction.” Any attempt at evaluating the contribution of the book rests on the evaluation of the methods and findings of the four.

If Fogel had limited his work to the last two essays – the two that in many ways were the most central to the then intense discussions of the “Axiom of Indispensability,” the work would have been important; but it would never have had anywhere near the impact that it actually did. In the third essay, “The Takeoff,” Fogel, although not addressing the question of whether or not there was in fact a “takeoff” between 1843 and 1860, in order to operationalize his argument, chooses the first of W.W. Rostow’s criteria for a “leading industry”: in this case, what impact did the railroads have on the “change in the percentage distribution of output among the various industries?” Then, drawing on the best available data – data reported by Robert Gallman in his seminal (1960) study of commodity output – Fogel finds that the impact of the railroads on that percentage distribution was minimal. In the case of iron, railroads, except at the end of the period, accounted for only a minor fraction of the output change (overall, including the later period, it was still only 17 percent); for coal, it was less than 5 percent; for lumber, barely 5 percent; in the case of transport equipment only 25 percent (only half of the change accounted for by vehicles drawn by animals); and for machinery it was less than 1 percent. Thus, for all manufacturing, the railroads accounted for less than 3 percent of the change – hardly a ringing endorsement for what was purported to be a “leading industry.”

In his more detailed examination of the impact of railroads on the development of the iron industry (an attempt to assess the importance of railroads to industrialization because of their alleged “backward linkages”), Fogel found it necessary to produce a new series on pig iron output between 1840 and 1860 and to revise the estimates of the consumption of railroads to account for imports and recycled rails as well as changes in the weight of rails. These new estimates represented a major contribution to our understanding of the industrial history of the period. Fogel’s primary interest, however, was not on the production of the new series, but on estimating the importance of the railroads in the development of the iron industry. His results, again, indicate that railroads did not dominate the development of the iron industry in the two decades before the Civil War. In fact, his conclusions strongly support Douglass North’s conclusion that, from the point of view of backward linkages, it would be as sensible to talk about an iron stove theory of the development of the iron industry as a railroad theory.

In these two essays Fogel demonstrates a command of what had heretofore been the best of traditional economic history, but in neither chapter are there any major methodological breakthroughs – merely a carefully constructed series of new estimates and the demonstration of an ability to bring those estimates to bear on important issues. In the first and second of the four substantive chapters – the estimate of the social savings from the interregional and from the intraregional distribution of agricultural products – Fogel’s methodological innovations do, however, play a central role. First, in both essays, he attempts to explicate and to provide estimates of the appropriate counterfactual – what the world would have been like had there been no railroads. Although historians have long employed counterfactual arguments – sometimes it seems without realizing it – to most historians the idea of an explicit counterfactual was still a very foreign notion in the early 1960s. Second, in both chapters Fogel employs the concept of social savings (the difference in social costs between the real and the counterfactual worlds) to provide a measure of the value of the introduction of the railroad. The concept of social savings is itself an important research tool; but, from a methodological point of view, it is equally important that the measure was defined operationally, so that Fogel’s calculations could be tested against alternative estimates and against possible alternative definitions. As an aside, however, it is interesting to note that, although the two studies are very very important from the view point of methodological innovation, from the point of view of traditional economic history, they are not as strong as the third and fourth substantive essays. In the second substantive essay – the social savings arising from the intraregional distribution of agricultural commodities – Fogel begins by noting that the substitution of rail for water was more rapid in the intraregional than in the interregional distribution of agricultural commodities, and, that, since the distances to be shipped in the intraregional case were only a third as great for rail as for water transport, one would expect that the social savings from the innovation would be greater. To estimate those savings he proposes two measures: alpha (a direct measure of the cost differences with and without the railroads) and beta (an indirect measure based on the difference in the value of the land that would have been economically productive with railroads and the lesser number of acres and, thus, the lesser value of land that would have been economically productive in the absence of those railroads).

Fogel then estimates alpha for a sample of counties in the North Atlantic region and concludes that the direct costs (alpha) would amount to a loss of 2.5% of GNP, and that adjustment for excluded indirect costs (alpha-2) would have increased that figure to 2.8% of GNP. Neither estimate, however, includes the potential savings that would have resulted from the construction of additional canals and better roads. He admits that the North Atlantic region may not provide an adequate representation of the entire country, but he argues that it would be too expensive and difficult to extend this direct measure of savings to the rest of the country.

As an alternative, Fogel suggests that, since water transport was available for about 76% of the land value in the U.S., since, in the absence of railroads, 75% of the loss of land value would be in the four states of Illinois, Iowa, Nebraska, and Kansas, and since all of the lost land could be brought into production with only a small extension of the canal network, a measure based on the difference in the value of arable land provides an equally good measure of social savings. He concludes that the cost of the direct loss of arable land from the absence of railroads (beta) would amount to 1.8% of GNP, and that the total loss – the sum of direct and indirect costs (beta-2) – would amount to 2.1% of GNP. Again, however, beta-2 does include the potential savings that would result from additional canals and better roads. Making further adjustments for the unbuilt canals and better roads, Fogel provides two estimates for the social savings from intraregional trade: alpha-3 equal to 1.2% of GNP and beta-3 equal to 1.0% It was, however, Fogel’s estimates of the social savings generated by railroads in interregional shipping (the first substantive essay), that really touched off the methodological revolution. As in the second essay, the use of explicit counterfactuals and the innovation of the concept (as well as his estimates) of the social savings broke new ground. In this case, however, there were also other very important methodological innovations.

Fogel begins with an operational definition of interregional distribution: “the process of shipping commodities from the primary markets of the Midwest to the secondary markets of the East and South.” While there were good estimates of agricultural production and agricultural exports, there were no data on the method and routes of shipment that were used to move agricultural commodities from producing areas to the points of domestic and foreign consumption; and it is here that Fogel introduces his single most significant innovation. He focuses of four commodities (wheat, corn, beef, and pork) – commodities that together represented 42 percent of agricultural income. He, first, estimates the export surplus at ten primary markets in the west and the consumption in the almost 200 deficit trading areas in the East and South (exports are attributed to the port from which they were shipped). The potential rail and water shipping routes from West to East were easily identified, and the costs of rail and water shipment were well known. To simplify the problem, Fogel focuses on a sample of 30 of the 825 potential routes between pairs of cities in the West and the East. Since the actual choice of routes is unknown, he very imaginatively suggests a linear programming model to estimate the routes – with and without railroads – that would have been selected had the shippers been guided by cost minimization. He then estimates the costs of the inferred shipments, costs estimated both with and without rails. Since there were also additional costs of water transport (lost cargoes, transshipment expenses, extra wagon haulage, time lost because of slower speed and because the canals and rivers froze, and the capital costs of the canals that were not included in the water rates), Fogel adjusts his original cost differentials to account for these additional expenses. His result is an estimate of the social savings in interregional shipment resulting from the innovation of railroads of six-tenths of one percent of GNP, a figure that would have increased to only 1.3%, had he assumed that rail rates were zero.

In this chapter Fogel made four important innovations that were to have a major impact of the nature of research in economic history: (1) the operational definition of social savings; (2) the use of an explicit counterfactual; (3) the use of a formal economic model to estimate what costs would have been had the decisions been made by economic man; and (4) his choice, when it was necessary to make assumptions about the actual world, of assumptions that were biased against his central findings. (See note 3.) Even more than his estimates of interregional social savings, the work in this essay completely changed the way economic historians would do business in the future. There is, however, one blemish in the story. Professor Fogel never actually solved the linear programming problem; his choice of routes was based on what he assumed the solution would have been.

Notes:

1. To give you some feeling about that first decade, one might note that the term “cliometrics” was coined by my then colleague at Purdue, Stanley Reiter – he had been toying around with questions raised by a new discipline that he called “theometrics” (for example, “how many angels can dance on the head of a pin?); and, in his joking way, he suggested that the work in quantitative history seemed to be drawn from similar academic stream.

2. Bob Fogel and, perhaps, Douglass North and Al Fishlow, were the major exceptions. Fogel, himself, has said that he began his investigation fully believing that it would confirm the importance of the railroads. Fishlow (1965) reached conclusions for the antebellum period very similar to those Fogel reached about the latter part of the nineteenth century. Not long before this, North (1961, p. 164) wrote, “While the value added of rails was approximately $6.5 million in 1860 and roughly equals to the value added of bar iron, it was dwarfed by the value added of the polyglot classification of iron castings, which was $21 million in 1860. Indeed, the value added in stove making alone was equal to that of iron rails.”

3. For example, Fogel made no adjustment for changes in non-rail transport that might have been made had there been no railroads: he holds both origins and destinations fixed despite the fact that there would almost certainly have been some such adjustments in the absence of railroads; and he assumes that, in the absence of railroads, water rates would be constant rather than declining as might have been the case had canal builders exploited potential economies of scale.

References:

E. Cary Brown. 1956. “Fiscal Policy in the Thirties: A Reappraisal,” American Economic Review, 46 (December).

Alfred Conrad and John Meyer. 1958. “The Economics of Slavery in the Ante-Bellum South” Journal of Political Economy, 66 (April). This paper was first presented at the meeting of the Economic History Association in 1956.

Albert Fishlow. 1965. American Railroads and the Transformation of the American Economy. Cambridge, MA: Harvard University Press.

Robert Fogel. 1960. The Union Pacific Railroad: A Case Study of Premature Enterprise. Baltimore: Johns Hopkins Press.

Robert Fogel. 1962. “A Quantitative Approach to the Study of Railroads in American Economic Growth: A Report of Some Preliminary Findings,” Journal of Economic History, 22 (June).

Robert E. Gallman. 1960. “Commodity Output in the United States,” in Conference on Income and Wealth, Trends in the American Economy in the Nineteenth Century, 24, Studies in Income and Wealth. Princeton: Princeton University Press.

Douglass North. 1961. The Economic Growth of the United States 1790 to 1860 Englewood Cliffs, NJ: Prentice-Hall.

Published by EH.NET (July 1, 2000)

Kyle D. Kauffman, editor, Advances in Agricultural Economic History, Vol. 1, New Frontiers in Agricultural History. Stamford, CT: JAI Press, 2000. xiv + 252 pp. $78.50 (cloth), ISBN 0-7623-0612-2.

Reviewed for EH.Net by Allan G. Bogue, Department of History, University of Wisconsin, Madison.

This book is the first volume in an annual series that is designed, Kyle D. Kauffman explains, to “provide the center stage” for one of the numerous subdisciplines in the “overarching tent of economic history”–the “hybrid field” of agricultural economic history. This, he argues, is a “dynamic field” in which there is a “growing research output” (pp. xiii-xiv).

Eight authors or author teams have contributed to this volume. Each of the chapters relates or overlaps in subject matter or method with at least one other essay. In their lead chapter, Lee A. Craig and Thomas Weiss reconsider “Hours at Work and Total Factor Productivity Growth in Nineteenth-Century U. S. Agriculture,” a subject that is of considerable interest to all those interested in the historical development of American agriculture. Craig and Weiss present new estimates of hours worked by agriculturalists in the nineteenth century United States and evaluate their implications for the calculation of total factor productivity in agriculture. They conclude that “a view of the mid-to late nineteenth century as an era of technological revolution probably cannot be sustained” (p. 23). Rather, they suggest, agricultural development during that period primarily reflected an increase in inputs, particularly of labor. In answering the question “Did the Black-White Income Gap Close during the Late Nineteenth Century?” Anthony Patrick O’Brien confronts analogous analytical problems in estimating the income of black workers during the second half of the nineteenth century. After developing new estimates, primarily for 1860, O’Brien suggests that the improvement in black income between that date and 1860 was substantially less than Robert Higgs argued in his monograph Competition and Coercion: Blacks in the American Economy, 1865-1914. O’Brien’s contribution is also somewhat related to Jay R. Mandle’s concluding chapter of the collection in which he describes “The Social Prologue to the Civil Rights Movements.” Surveying the place of the Afro-American population in the American economy from the slavery era to the 1960s, he maintains that by the latter date, the Afro-American population of the United States, “for the first time … found itself in an environment in which successful political mobilization … had become feasible” (p. 249).

Three authors investigate the Hawaiian sugar industry: Sumner J. La Croix and Price Fishback examined the place of “Migration, Labor Market Dynamics, and Wage Differentials in Hawaii’s Sugar Industry, 1901-1915” in a long and impressively documented analysis of the efforts of sugar planters to attract workers and the wage rates paid to various ethnic groups. Despite the divergent goals of employers and workers, planters succeeded in maintaining ethnic wage gaps among their workers because they “constantly found new low-wage immigrants to work in the Hawaii market”(p. 66). Allan Dye introduces cross-national comparisons in his chapter “Factor Endowments and Contract Choice: Why Were Sugar Cane Supply Contracts Different in Cuba and Hawaii, 1900-1929?” In the latter country the production units were for the most part plantations drawing most of their cane for processing from fields under their own management whereas outside contractors produced most of the cane processed in the Cuban sugar industry. The contrast between the two national industries, Dye concludes, was explained by the considerable differences in the transaction costs involved in producing and harvesting cane in the two countries and he suggests as well that this cost factor was a universal element in accounting for global variations “in the use of the plantation or contracting out [system] in the twentieth-century cane sugar industry” (p. 167).

Two authors consider aspects of the European wine industry. In his essay, entitled, “Cooperation and Cooperatives in Southern European Wine Production, The Nature of Successful Institutional Innovation 1880-1950,” James Simpson explains that the development of cooperatives in the wine industries of France, Spain and Italy assisted landowners in obtaining labor in an era of declining prices, helped small and medium sized wine producers obtain access to scientific knowledge and expensive technology, and improved growers’ bargaining power in the wine market. Over time the French government came to use the cooperatives in its efforts to regulate the wine industry. Simpson credits the cooperative movement with slowing the exodus of workers from the wine regions and also with enhancing prices without unduly restricting competition.

Francesco L. Galassi entitles the second of these chapters, “Moral Hazard and Asset Specificity in the Renaissance: The Economics of Sharecropping in 1427 Florence,” and asks, why share contracts came to predominate in the tenure and administration of land in Tuscany during the Renaissance era and remained a major institutional arrangement until mass urbanization after World War II “emptied out the countryside” (p. 199)? In answer he argues that demographic growth at the end of the medieval period “intensified cultivation and brought about a redefinition of property rights in land” as the manorial system broke down and urban businessmen increasingly controlled the countryside (p. 178). Intensified agriculture and increased investment in agricultural processes, the potential costs of supervision, enhanced risk, and the need to tie the tenant’s remuneration to the success of the husbandry made share-cropping arrangements attractive to land owners in that era. Although the Black Death reduced population pressures significantly, continuing emphasis on the wheat crop and especially vine culture sustained these tendencies. Galassi successfully tests the hypothesis that “share tenancy was a way of controlling some dimensions of opportunistic behavior [by tenants] with high monitoring costs” by applying logit analysis to wage and rental contract data from the property registration and population census of Florence taken in 1427. He prefers the latter conclusion to the suggestion that the processes described here illustrate path dependency.

Karen Clay and Werner Troesken also discuss land tenure arrangements in their chapter dealing with “Squatting and the Settlement of the United States: New Evidence from Post-Gold Rush California.” Asserting that we are less well informed about the motivation and activities of squatters in California than in the Midwestern region of the United States, these economic historians have assembled data relating to squatting activity on the Spanish and Mexican land grants upon whose validity the American judiciary ruled. Using logit regression the authors conclude that the squatters “were acting in a way that is consistent with profit-maximization” (p. 208).

The contributors to this volume are economists and their work for the most part illustrates tools and approaches current in quantitative economic history. With perhaps only one exception they shed new light on important historical issues. From the standpoint of the discipline, it is particularly encouraging that several of the authors chose to pursue research that involved cross-national comparisons of agricultural development. One hopes that this trend will become increasingly evident in agricultural history because it promises to enhance greatly our understanding of agricultural history both in the United States and abroad.

In sum the essays in this volume promise that the series that it introduces will make an extremely useful contribution to our understanding of agricultural history. Economic historians have already used their special skills to make invaluable contributions to this field and the Advances in Agricultural Economic History series will be a factor in insuring that this trend continues. As a devoted fan of the genre, however, this reviewer hopes that this breed of researcher will always remember that many historians, including some who are interested in agricultural history, do not fully understand econometric methods and that an additional two or three sentences or a short appendix explaining the analytical methods in use or careful definition of terms may considerably increase the potential audience of a piece of research. For example, Thomas Weiss’s publications in his major field of research have been exemplary and the Craig and Weiss essay in this collection is an important one. However, the uninitiated reader will find no clear definition of total factor productivity until that person penetrates the explanatory material of Table 3 on the seventeenth page of the chapter. Care also is required in providing background in text and bibliography. Picking again upon Craig and Weiss, we find that they list among their references Paul David’s elegant and justly famous essay, “The Mechanization of Agriculture in the Antebellum Midwest.” Standing by itself, however, that paper leaves a reader with a much-distorted understanding of the way in which the reaper entered Midwestern grain technology. Alan L. Olmstead’s essential corrective does not appear in the Craig and Weiss bibliography.

In their interesting and ingenious chapter dealing with squatting in California, Clay and Troesken focus upon the economic motivation of California squatters citing various sources in support of their contention that scholars are still uncertain about the motivation of this type of individual, the “new themes” having failed to “tarnish the original vision of the squatter as a valiant yeoman farmer.” Although frequently used by historians the term, yeoman, is less often defined and definition in this case would have been appropriate. Surprisingly too these authors ignore a rather obvious tentative hypothesis. Since it has been shown rather convincingly that Midwestern squatters were profit maximizers and many Californian settlers were Midwesterners or Oregonians with Midwestern roots would it not be reasonable to assume that they carried this same cultural trait to California? In this research also we find the results of logit regression described so parsimoniously as to bewilder the uninitiated.

This plea for an econometric history that makes a better case for itself in the eyes of historians generally should not be viewed as disparagement of the quality or importance of the contributions to this volume. They promise a long and useful life for the new series of which it is a part.

Allan Bogue is the former president of the Economic History Association and the author of books on U.S. frontier money lending, land settlement, and legislative behavior, and, most recently a biography of Frederick Jackson Turner. The University of Nebraska Press is currently publishing his book on dairying in Ontario during the 1920s and 1930s.

Published by EH.NET (June 1, 2000)

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David Ludden, An Agrarian History of South Asia. Cambridge: Cambridge University Press, 1999. xiii + 261 pp. $64.95 (cloth), ISBN 0-521-36424-8

Reviewed for EH.NET by Marcia Frost.

David Ludden’s An Agrarian History of South Asia is the fourth volume in The New Cambridge History of India, Part IV: The Evolution of Contemporary South Asia. Ludden is Professor of History and member of the graduate group in South Asia Regional Studies at the University of Pennsylvania, and perhaps the foremost contemporary authority on the historical development of agrarian institutions of the South Asian subcontinent. While his primary inscriptional and documentary research has focused on the southern Indian region of the Tamils, his publications range widely across time, the sub-continent and disciplines to explore the development of societies that have been and largely remain intimately tied to the land.

In this volume Ludden brings together research from historians, economists, anthropologists, geographers, political scientist and, rural sociologists to create “a comprehensive framework” for an understanding of the forces which have created the contemporary “patchwork of agrarian regions” which extend from Afghanistan to Myanmar, and Nepal to Sri Lanka. Although agrarian life in this large geographic area connecting arid west Asia to wet southeast Asia was in the past and continues today to be hugely diverse, Ludden seeks the common experiences that make South Asia a distinct region in world history and agrarian development.

There is little in this volume to satisfy a lust for numerical facts — beyond a few estimates of the expansion of the area under cultivation in the 16th, 19th and 20th centuries there are none. What is here, however, is a rich, dense and wonderfully multi-disciplinary exploration of the evolution of agrarian society from the 3rd millennium BC to the present, and the way in which agrarian history has been perceived by historians, politicians and social reformers. Throughout there is an emphasis on the cultural context of agrarian life. Farming and agricultural institutions have a cultural context that cannot be ignored, and Ludden observes, “Modern mentalities may assign prayer, worship, myth, marriage and pilgrimage to the realm of religion; genetics, hydrology, engineering, medicine, meteorology, astrology, and alchemy to the realm of science; metal working, carpentry, spinning, weaving, and pot making to the realm of manufacturing; and trade, banking, war, herding, migration, politics, poetry, drama, adjudication, administration, and policing each to their separate realms of social activity. But all these are parts of agriculture. They contain essential agricultural activity” [p. 31].

Although the development of the text does in fact follow the historical periodicity to which we are accustomed, the chapter titles do not reveal this, but rather reinforce the importance of words, concepts and territoriality that Ludden explores. Chapter 1, “Agriculture,” begins with a discussion of the historiography of the agrarian experience, and emphasizes that “rulers and farmers, state power and agrarian social forces interact historically and shape one another” [p. 6]. This is a common theme that runs throughout the text, as Ludden traces the increasing role the state, its power and rules exerted on agrarian institutions and development. In the subsection entitled “Seasons,” the fundamental environmental resources and constraints of the subcontinent are described, and themes (which continue throughout the text) of conflict and competition, negotiation and exchange are introduced. In the final two sections of this chapter, “Maps and Landscape,” we read of “interlaced trajectories, networks, circuits, zones and regions of mobility,” and of territories — all repeatedly reappearing throughout the text. Ludden’s agrarian landscape is like a multi-layered GIS map with variables, institutions, peoples, etc. overlapping boundaries in both time and space.

Chapter 2, “Territory,” explores the evolution of agriculture and agrarian institutions from the first evidence of farming ca. 7500 BC through the 13th century AD. These millennia saw the expansion of social — not state — power over the agro-pastoral peoples who spread east and south from the Indus River (in modern day Pakistan) across the Gangetic plains to Bengal/Bangladesh and down the peninsula to its very tip at Kanya Kumari. These centuries were (as were those that followed) ones in which i) cultures met, mixed and competed, ii) land use intensified with new methods of metalworking and assuring water supplies, and new seeds and farming techniques, iii) pastoralists, nomads and forest cultivators were pushed to the margins, up the mountains and into the jungles, away from the routes of trade and conquest that linked more sedentary agrarian territories, and iv) both ritual and war played central roles in the negotiation and exchange that mediated conflict and competition. From the middle of the 1st millennium AD Brahmanical influence increased, kings enforced their religious duty (dharma) by upholding the right of first possession to those who cleared the land, patriarchal authority and social rankings into caste were extended and formed the basis of alliances and transaction networks, and conquest colonization began. In Ludden’s view ca. 550-1250 was the formative period of South Asia’s agrarian history and its agrarian regions. To the north, west and in the high mountains, warrior lineages joined local leaders, pastoralists and hunters “by imitation, alliance, genealogical invention [and] intermarriage” [p. 89] to form Rajput clans whose power was based on martial might and whose dharma did not include the act of farming. In contrast south of the Vindhya Mountains down the peninsula warrior lineages joined with agricultural communities and new castes of dominant warrior-cultivators arose. These broad divisions were reflected in kinship practices, women’s land rights and agrarian alliances that continue to the present.

Chapter 3, “Regions,” focuses on the late medieval, early modern centuries (14th-19th) as agrarian institutions and landscapes evolved towards those we recognize today. As world trade across Eurasia by land and sea became more closely integrated from the 14th century onwards, “new technology, ideas, habits, language, people and needs came into farming communities” [p. 113], agriculture further intensified, and states through their institutions of money and taxation encouraged the cultivation of crops for sale and penetrated more intimately than before into agrarian life. Across the subcontinent i) transportation networks expanded, ii) urbanization (measured by both number and size of towns and cities) speeded up, iii) new and more intrusive accounts of people, production and trade evolved, iv) agrarian taxation was systematized and its burden increased, and v) entitlements to land use and power shifted from social to financial obligations. Under the East India Company discontinuities were introduced: land was no longer the property of its clearer and user, but of the state; hereditary property rights to cultivated land were converted into use rights subject to payment of land taxes; bureaucratic regulation replaced negotiation, exchange and dharma; and caste rank, status, entitlements and income were both codified and threatened. The final chapter, “Modernity,” explores the role of the state in agrarian life and struggles against the state and its interruption of old patterns of agrarian intercourse. The armed rebellions of 1857, the partitions of British India in 1947 and of Pakistan in 1971, the post-independence struggles for regional sovereignty, the social movements for the rights of the marginalized, and the political power of warrior-cultivator descendants are all shown to have historic roots in the agrarian structures and identities formed over the previous centuries.

The rhetoric of historical knowledge, the evolution of agrarian social, political and economic institutions, the interplay of sedentary peoples and those on the move, the tension of conflict and negotiation are all themes which run throughout this book. There are, as the secondary literature allows, discussions of particular regions and regimes, of the intellectual tradition of discourse and policy debates, and of the organization of agrarian life — its farming, manufactures and trade. This is, however, a book that focuses on the forest, not its individual trees; its purpose is to describe and analyze the whole of the agrarian experience of South Asia, not to focus on the particulars of any one or few specific regions. For those wishing to use this text as a reference for specific events or regimes, the index is detailed and exhaustive.

The “Bibliographical Essay” runs 18 pages of citations organized into five sections: intellectual history, approaches to agriculture, long-term history, early modern themes and modern issues. An updated bibliography can be found at Ludden’s homepage http://www.sas.upenn.edu/~dludden. The bibliography includes only English language books, monographs, articles and a few Ph.D. dissertations, and excludes work that has been superseded by more recent scholarship; a number of citations appear as footnotes but not in the bibliographic essay.

This is a fine source for anyone interested in the evolution of South Asia’s agrarian systems and institutions. Its multi-disciplinary approach should be familiar to anyone with knowledge of other predominately agrarian societies, particularly those where religious ideas and practices are intimately interwoven with all aspects of human activity. For those without a knowledge of South Asian geography or political history, however, an historical atlas will be a useful supplement; there are no maps in this volume and little background information on many of the referenced pre-modern regimes.

Marcia Frost, recently returned from a Fulbright research grant in India, is currently working on a project “Coping with Scarcity: Kheda District (Gujarat, India), 1824/5,” and will resume teaching economics in the fall at Grinnell College.

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Published by EH.NET (June 1, 2000)

Philip Richardson, Economic Change in China, c. 1800-1950. Cambridge:

Cambridge University Press, 1999. xii + 111 pp. $39.95 (hardback), $12.95

(paper), ISBN 0-521-58396-9 (hardback), 0-521-63571-3 (paper).

Reviewed for EH.NET by Debin Ma, Institute of Economic Research, Hitotsubashi

University, Tokyo, Japan and Department of Economics, University of Missouri,

St. Louis.

In a little over a hundred pages, Philip Richardson’s Economic Change in

China c. 1800-1950 provides a concise and excellent survey of current and

major English language scholarship. The book is part of a publication series

called the New Studies in Economic and Social History by Cambridge University

Press which is “designed to introduce (students and teachers) to fresh topics

and to enable them to keep abreast of recent writing and debates” (p. ii).

Measured by that objective, Richardson’s book fares very well.

The book has set a clear focus: “without seeking to deny the influence of

social, cultural and institutional factors, the focus of the inquiry here lies

with an exploration of economic variables. The concern is with the dynamics of

interplay between continuity and change which facilitated, inhibited and

determined not just the process of change but the emergence of modern features

within the Chinese economy and, perhaps, the development of a modern Chinese

economy” (p. 4).

Organized around this theme, the book first lays out the analytic frameworks

(chapter 1), then supplies a background picture on China’s eighteenth-century

legacy and the early nineteenth-century crisis (chapter 2). The third chapter

presents China’s growth and structural change within a national account

framework for the period between the 1890s and 1933. In the next three

chapters, Richardson individually examines China’s external, industrial and

agricultural sectors from the second half of nineteenth century to the 1950s.

The seventh chapter examines the relationship between the state and the

economy.

Overall, Richardson’s presentation of major hypotheses, theories, and debates

are comprehensive, balanced, lucid and largely accurate. Sources are very well

indicated. The bibliography, organized by topics, carefully numbered and

cross-referenced, is particularly useful. But the most commendable feature of

the book is Richardson’s consistent and able presentation and discussion of

quantitative evidence and economic statistics for almost all the major issues

on national income, agriculture, industry and international trade. This is no

easy task as Chinese statistics are a source of controversy.

As Richardson shows, there are relatively firm statistics indicating that

foreign trade and investment grew enormously in the nineteenth and twentieth

centuries. Industrial output, particularly the modern sector, also exhibited an

impressive growth record during the twentieth century. But these elements were

far from altering the basic structure of the economy dominated by the giant

agricultural sector where traditional technology prevailed and estimates of

per-capita output growth are dubious due to the lack of consistent aggregate

time series data.

Richardson’s final assessment on the nature and magnitude of economic changes

in China in the nineteenth and twentieth centuries being characteristically

well-balanced, remains also somewhat non-conclusive. “The major long-term

influences on the process and extent of economic change were the pressure of

population on the land, the intensification of commercialized market

mechanisms, contact with the outside world and the role of state. By the middle

of the twentieth century those factors had combined and interrelated to produce

an economy which contained significant elements of modernization but not an

economy which can be confirmed with certainty as having achieved the onset of

sustained growth. It was also, in the short term, an economy suffering the

effects of more than a decade of war and economic mismanagement” (p.101).

I believe there is still room for Richardson to push his assessment a little

bit. If modern economic growth may or may not have taken hold in China as whole

(p.99), it had clearly taken root in regions where modern industrial sectors

clustered and agriculture was most commercialized. The regional characteristics

of modern economic growth would give us new insights into the nature of

economic change in China. Furthermore, if we are willing to look beyond the

macroeconomic variables, we also find in the twentieth century the spread of

primary education, the growth of a modern scientific community, the beginning

of agricultural experimental station, and the rise of new industrial and

commercial organizations, as well as monetary and fiscal reform of the 1930s.

(Richardson mentions some of these factors in chapter 7.) These all meant that

China was farther along on the path toward modern economic growth in the 1930s

or 1950 than in 1890 or 1850.

I do have some reservations about Richardson’s assessment of Chinese

agricultural conditions in the 1930s. After giving a fairly objective summary

of the optimists’ and pessimists’ cases in the debate on Chinese rural income

and productivity in the nineteenth and early twentieth centuries, Richardson

leans towards the conclusion: “it is clear that the agrarian economy was in a

state of crisis” and this did not seem like a short-term problem brought on by

the world Great Depression (p. 81-82). This view of the 1930s “agrarian crisis”

(beyond the short term) comes about partly due the lack of historical

comparison in the China field — not necessarily comparing China with Europe,

as was most often done, but rather comparing China in the nineteenth and

twentieth centuries with other East Asian countries such as Japan, Taiwan and

Korea. The relatively reliable data on rice yield per acre in the 1930s shows

that the Chinese level was still about 60-70% of the contemporaneous Japanese

level. This level was also equivalent to the rice yield level prevailing in

early Meiji Japan. Meanwhile, the average farm size in China was comparable to,

if not larger than that in Japan, Taiwan and Korea. Various sources also

clearly indicate that per-capita gross value added of farm output in the 1930s

represented one of the peak levels compared with most of the years in 1952-78

in China. The 1930s per-capita level was only surpassed after

de-collectivization and the diffusion of the household responsibility system in

the 1980s China.

Chinese farmers may have been poor in the 1930s, but they were not much poorer

than those in Japan, Taiwan and Korea in their early stages of development.

Very likely, they were just as well-off as the Chinese farmers in the late

1970s before the launching of the successful agricultural reform. Recognition

of these facts not only puts Richardson’s use of “agrarian crisis” (beyond the

short term) to describe the 1930s Chinese agriculture in serious doubt, but

also motivates us to reevaluate the connection between modern economic growth

and the state of Chinese economy in the pre-Communist era.

Debin Ma is the author of “Modern Silk Road: Global Raw Silk Market:

1850-1930″ Journal of Economic History (1996) and “Chinese Agricultural

Production in the Republican Period” (co-authored with Makino and Luo), in

Chinese Economic Statistics in the Republic Period (in Japanese and

Chinese), published by the Institute of Economic Research, Hitotsubashi

University, Feb. 2000.

Published by EH.NET (May 2000)

Yanni Kotsonis, Making Peasants Backward: Managing Populations in Russian

Agricultural Cooperatives, 1861-1914. New York: St. Martin’s Press, 1999.

x + 245 pp. $65 (cloth), ISBN: 0-312-22099-5.

Reviewed for EH.NET by Oliver Hayward, Department of History, University of

Wisconsin-Parkside.

This study presents succinctly (188 pages of text) the clearest and most

thorough explanation yet available in the West of the failure of those

ostensibly responsible for the welfare of Russia’s peasantry to assist them

toward the progress enjoyed by many of their contemporaries in Western and

Central Europe.

In developing his analysis, Yanni Kotsonis (Assistant Professor of History,

NYU) has made effective use of extensive archival materials in Moscow and St.

Petersburg, as well as archives in the Archangel section of the Imperial State

Bank and the Agricultural Society of Vologda. He consulted newspapers,

periodicals, and serial publications of several Imperial government and private

agencies operating in the decades up to 1914. Also utilized are many published

monographs and articles on the subject, often by persons involved with

formulating and executing policies ostensibly designed to assist Russia’s

peasantry out of its backwardness.

Following an introductory statement of the theoretical framework within which

he explores various aspects of the peasant situation following the promulgation

of the “Great Reforms,” Kotsonis analyzes the subject in more depth through

chapters utilizing the following periodization: 1. 1861-1895,

during which the “Great Reforms” were set in motion; 2. 1895-1904,as Witte

attempted to strengthen Russia’s peasantry as part of his overall program for

modernizing the economy; and 3. 1906-1914, as first Stolypin and later

Krivoshein made further attempts to enhance the position of Russia’s peasantry.

Chapter 4 (“Citizens: Backwardness and Legitimacy in Agronomy and Economics,

1900-1914″) introduces the new set of forces which descended upon the Russian

countryside: agronomists, economists, and “cooperators,”

the professionals charged with assisting the peasants in establishing

agricultural cooperatives.

The final chapter (“Making Peasants Backward, 1900-1914”), utilizes the various

themes from the first four chapters to explain more precisely why the promising

programs ostensibly designed to assist Russia’s peasants in fact for the most

part conspired to “make peasants backward.” No element in Russian society–the

zemstvo nobility, government ministers and other leaders, the agronomists, and

other professionals sent out presumably to assist the peasants – seems to have

been able to escape the blinders created by their own prejudices and

preconceptions in order to further the peasants’ true interests.

Kotsonis’ brief Epilogue suggests some of the implications of all this for

rural Russia during World War I, especially its impact on the tumultuous years

of 1917-1918.

Permeating the entire book is the overwhelmingly pernicious attitude toward the

peasantry held by almost every group bearing some responsibility to assist the

peasantry. Through extensive quotations from the writings and speeches of

representative individuals, Kotsonis demonstrates this attitude to be a melange

of the following specific assumptions: that Russia’s peasantry were

overwhelmingly illiterate; that they were particularly ignorant in financial

matters; that they were therefore in unceasing danger of being exploited and

misled by unscrupulous and predatory middlemen, and that they therefore must

not be exposed to an impersonal credit market that could only be deleterious to

their interests.

Based on these assumptions, the cooperative movement generally focused on

bringing professionals down to the peasants in order to guide and protect them,

rather than seeking to educate the peasantry and showing them how to more

effectively manage their own agricultural activities. Many in the cooperative

movement viewed capitalism as a form of predatory power that should not be

practiced on or by the peasants except under the close supervision (nadzor) of

agronomists and other professionals.

State officials, zemstvo noblemen, and agronomists and other professionals all

vied to see which among them should conduct the peasants’ affairs for them.

Rarely were the peasants involved in the process even consulted on the chance

that they might have some useful insights regarding how to improve their lot.

Struggles for influence and bureaucratic control took precedence over the

interests of the peasants.

Perhaps most ominous of all, Kotsonis suggests, was the attitude with which the

various groups responsible for overseeing the peasantry in Russia did so, with

attitudes vastly different than those of their counterparts in other parts of

Europe. While there were the familiar references to the backwardness and

barbarism of peasants in European countries as well, there it was often in a

context of the need to mobilize the peasantry into the broader population as a

political nation. In Russia, in contrast, the presumption that peasants could

not measure up to the requisite standards of citizenship, self-reliance,

progress, and rationality produced not only a failure to recognize the

possibility of “dynamic transformation of peasants, but often a caste-like

reification of them and a justification of permanent administration over them,

‘as if by a foreigner'” (p. 134).

In his footnote to this assertion (p. 218, footnote #117), Kotsonis notes that

even in Poland, in stark contrast to Russia, “the integration of peasants into

a national idea was the central issue in political movements from the early

nineteenth century.”

That a mass cooperative movement encompassing by 1914 one-quarter of all

peasant households in Russia could nevertheless achieve so little in mobilizing

the peasantry into a broader political nation is a situation fraught with

ominous implications for post-1917 Russia. Kotsonis has made a significant

contribution to our understanding of how, despite often benevolent intentions

toward the peasantry on the part of many officials,

professionals, and “cooperators,” this dangerous situation was actually

deteriorating still further in the last decades of the Russian Empire.

I would make but one suggestion for improving this study. The specific data on

the extent and distribution of the cooperative movement in Russia that Kotsonis

presents in chapter 5 could have been more helpful if presented much earlier,

for it helps better assess the merits of various proposals to make credit more

readily available to the peasantry and thereby modernize Russian agriculture.

This work is, in any event, a major contribution to augmenting our

understanding of a crucial failure plaguing the troubled history of late

Imperial Russia. Those who might have been able to help formulate a

constructive response to the “Cursed Question” instead compounded and

perpetuated the curse.

Oliver Hayward is completing a study of the life and policies of M.Kh.

Reutern, Minister of Finance under Alexander II. He is currently researching

the periodic flooding of the city of St.Petersburg/Leningrad and efforts to

control that flooding.

Subject: A Geographical Area: 4 Country: Russia Time period: 7, 8

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Published by EH.NET (May 2000)

John Adams and Francesco Pigliaru, editors, Economic Growth and Change: National and Regional Patterns of Convergence and Divergence. Cheltenham, UK and Northampton, MA: Edward Elgar Publishing, 1999. xxvii + 483 pp. $100 (cloth), ISBN: 1-85898-683-4.

Reviewed for EH.NET by Stephen L. Parente, Department of Economics, University of Illinois at Urbana-Champaign.

Economic Growth and Change represents the proceedings from a conference held at the University of Cagliari intended to elucidate the problem of economic development. As is the case with most conference volumes the subject matter is rather diverse. However, unlike most conference volumes, this book maintains a natural and steady flow of ideas. The editors, John Adams (Visiting Scholar, Center for South Asian Studies, University of Virginia) and Francesco Pigliaru (University of Cagliari), accomplish this by organizing the essays around three levels of analysis: The first level examines differences in incomes across regions of the globe. The second examines differences in incomes across regions of the industrialized countries. The third examines differences in incomes across regions within a country.

With the conference being held in Sardinia, Italy, it is understandable that several essays are devoted to the postwar development experience of Italy. Taken together, these chapters provide an informative picture of economic growth in Italy. Raffaele Paci and Francesco Pigliaru begin by reporting the changes in the distribution of income across Italian regions over the last 30 years making use of a new data set. Most notably, they document the lack of convergence in income between the south and the north after 1975. Two essays that follow, one by Andrea Boltho, Wendy Carlin and Pasquale Scaramozzino and the other by Luca Dedola, Stefano Usai and Marco Vanini, provide some insight for this failure. Boltho, Carlin, and Scaramozzino compare policy and institutions in Italy and Germany in order to determine whether regional income differences in a united Germany are likely to resemble those of northern versus southern Italy. In addressing this question, they document a change in Italian policy starting in the early 1970s from one that emphasized public investment in the south to one that emphasized income maintenance and recruitment of civil servants. These changes were accompanied by a decentralization of spending authority that gave rise to greater rent-seeking behavior. Dedola, Usai, and Vannini attempt to assess the amount of risk sharing among Italian regions, and compare this to the amount of risk sharing among United Kingdom regions. They find that the government in Italy plays an important role in smoothing consumption, again suggesting the role of policy in Italy as a redistribution mechanism rather than a growth catalyst.

While the book is somewhat successful in illuminating the reasons for the different growth experiences of regions within Italy, it is far less successful in illuminating the reasons for the different development experiences of regions around the globe. Still, there are some interesting and provocative ideas to be found in the book, several of which are worthy of future research. One such idea has long been emphasized by traditional development economists, but mainly ignored by growth economists. This idea is that structural change is fundamental to the development process. There are two essays in this volume that show how changes in sectoral composition are critical for understanding local and national performances. Raffaele Paci and Franceso Pigliaru in a second essay document structural change within European regions while Teresa Garcia-Mila and Ramon Marimon undertake a similar exercise for Spanish regions. Both essays provide strong support for traditional development economists’ view that understanding structural differences is important to understanding international income differences.

Two other essays dealing with the issue of international income disparity are particularly provocative. The first is Dennis Mueller’s essay in which he draws an analogy between the rise and fall of firms and the rise and fall of countries, and the second is Shahid Alam’s essay on the role of colonization in the poverty of nations. Although both authors raise some interesting questions, neither offers much support for his ideas. Alam, in fact, seems more interested in expressing his disdain for mainstream economics and the IMF than providing a formalization and rigorous test of his ideas. Despite their shortcomings, these essays point to some questions that merit serious thought and scholarship.

Economic Growth and Change is a book that certainly deserves a look. It contains some interesting ideas and illuminates some interesting trends. Much of the book is devoted to the European postwar experience, which makes it rather unique among books on economic growth. For this reason, it may be particularly appealing to European researchers and policy makers. The methodologies employed within the book’s chapters are diverse, ranging from Irma Adelman’s factor analysis of growth rates to Jeroen van Bergh and Peter Nijkamp’s simulated model of growth and the environment. However, the majority of chapters employ some form of growth rate regression of the variety made popular by Robert Barro and Xavier Sala-i-Martin. For this reason, the book is likely to be of greater interest to those researchers who follow this empirical approach.

Stephen L. Parente is an assistant professor of economics at the University of Illinois at Urbana-Champaign. His research is mainly concerned with understanding international income differences. His book on this subject, Barriers to Riches, coauthored with Edward C. Prescott, is due out in July 2000 from MIT Press.

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