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Bonds of Enterprise: John Murray Forbes and Western Development in America’s Railway Age

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

Published by EH.Net and H-Business (June 2002)

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John Lauritz Larson, Bonds of Enterprise: John Murray Forbes and Western Development in America’s Railway Age. Iowa City: University of Iowa Press, 2001. xxiii + 257 pp. $17.95 (paper), ISBN: 0-87745-764-6.

Reviewed for H-BUSINESS and EH.NET by Albert J. Churella, Social and International Studies Program, Southern Polytechnic State University.

Perhaps no other economic change has so consumed Americans than the emergence of big business in the 19th century. As the invisible hand of the marketplace gave way to the visible hand of management, output rose, prices fell, and the United States became an economic powerhouse. This process also fundamentally changed the nature of the relationship between business, businessmen, individual citizens, and their democratic system of governance. Big business concentrated wealth and power, and manipulated the streams of commerce in ways that seemed antithetical to the political rhetoric of Jacksonian Democracy. Technical discussions associated with the management of large, vertically integrated enterprises were thus matched with a passionate debate regarding the equitable relationship between capitalism and democracy. Railroads, the nation’s first big business, were at the center of these debates since they embodied massive concentrations of capital and constituted the lifeblood of many communities. While many scholars have studied parts of the railroad revolution, few have attempted to integrate all of the multifaceted effects of this process.

John Lauritz Larson, an associate professor of history at Purdue University, provides just such an integrated account in Bonds of Enterprise. Larson examines the career of John Murray Forbes (1813-1898), whose life spanned the very different worlds of personal, market capitalism and “visible-hand” big-business management. Like a spider at the center of a web (although Larson would probably eschew such a malevolent analogy) Forbes touched all of the varied aspects of the “railroad question.” As Larson points out, this book is not so much a biography as it is a selective depiction of Forbes’ role in developing the “bonds of enterprise” that linked both cities and competing interest groups to each other. Thomas McCraw used a similar approach in Prophets of Regulation, linking four notable individuals to the regulatory mechanisms that they hoped to create. While Bonds of Enterprise may not garner the same degree of notoriety, it is still a fascinating and important work. While still a young man, John Murray Forbes earned his fortune in the China trade. He relied heavily on the standard pillars of long-distance capitalism in the early 1800s; family connections and trust backed by an impeccable reputation. By the 1840s, Forbes settled into what he believed would be a respectable semi-retirement and he invested heavily in railroad securities.

Perhaps the pivotal moment in Forbes’ career occurred in 1846 when he acquired control of the moribund Michigan Central Railroad, a state-owned project that typified the internal improvement mania that had arisen before the Panic of 1837. Like most such rail and canal projects, the state initially envisioned the Michigan Central to be solely a trunk line designed to encourage general commercial development. Private entrepreneurs would then construct feeders to the mainline, allowing, in a very Jacksonian fashion, all of the common men equal access to the economic potential of the railway.

Forbes increasingly saw the economic function of the railroad in quite a different light. He realized that only a combined branch-and-trunkline railroad could earn a satisfactory profit, and he felt that railroad development should proceed gradually and sequentially, allowing each region of the frontier to develop before proceeding to the next. In the process, the railroad must inevitably change transportation patterns in the region that it served causing some regions-and some individuals-to prosper, and others to fail. Like many 19th century entrepreneurs, Forbes had only the haziest idea of the competitive forces that America’s first big business had unleashed. He was, however, deeply troubled by his role in this process. He had grown up in, and attained wealth by, a system of personal capitalism. He professed a life-long belief in the limitless potential of a virtuous citizen in a democratic society. Yet, like Henry Ford nearly a century later, he helped to bring about massive economic and social transformations that, within his lifetime, helped to shatter the moral principles that he held dear.

Forbes and his associates plunged into the “system-building” phase of railroading during the 1850s. No longer advocating a sequential approach to railroad expansion, Forbes increasingly saw railroads as essential to the economic development of the West. As he pieced together the Chicago, Burlington, and Quincy system, Forbes preferred to maintain the fiction of local control as long as possible, relying heavily on home-grown investors and managers. While this method allowed local entrepreneurs to assume many of the risks and enabling the Boston capitalists to expropriate all of the rewards, Larson does not see this as a stain on Forbes’ exemplary business ethics. Nor does he blame Forbes for any of the relatively mild financial machinations associated with the Burlington; these he lays at the feet of James F. Joy and other unscrupulous financiers who abused Forbes’ trust.

As farm prices fell after the Civil War, farmers in Iowa protested rate differentials and other types of “unfair” competition. They believed that a lack of competition had caused these problems, while Forbes and other system-builders increasingly understood that overbuilding and excess competition were to blame. Forbes believed that he was advancing the cause of progress by opening up the West and by increasing the general welfare through his business enterprises. He seemed genuinely astonished that the seemingly ungrateful beneficiaries of his efforts depicted him as a profit-hungry robber baron. Perhaps because Forbes’ “style of business was paternalistic, and his patient efforts to develop the Iowa country had been met with hostility,” (p. 142) he responded with a stubbornness that seemed to veer between puzzlement and outrage. For example, the Burlington deliberately inflamed the passions of westerners by raising long-haul rates to conform to Iowa rate-equalization-legislation. Forbes thought that grandstanding populist politicians like Iowa governor William Larrabee were ignorant of the fundamentals of railroad economics; Larrabee was determined to fight “a war against the arrogance of ‘experts’ who scorned the authority of popular government.” (p. 187) Forbes believed that, in the end, only railroad officials could adequately understand the complexities of rate-making, and could thus capture, or at least reduce, the deleterious effects of state and federal regulation.

Ultimately, Larson’s biographical approach strikes very near his target, but it is not quite a bullseye. The reader is left with a thorough knowledge of Forbes’ career, of the railroads that Forbes controlled, and of the regulatory problems that affected those railroads. Clearly, Forbes brought together many of the disparate threads that connected all of the institutions and all of the historical actors associated with the transformative effects of railroads on American life. But there were also many currents that swirled and eddied far from the gaze of that Boston-based Midwestern railroader. There is no doubt that Forbes was a pioneer; whether or not he was typical is another matter.

Portions of Larson’s analysis seem rather quaint and outdated. Bonds of Enterprise originally appeared in 1984, and has now been reprinted with a short additional introduction and amended bibliography. Still, this book employs scholarship that is nearly two decades old. Scholars such as Gabriel Kolko figure prominently in the original bibliography, even though their findings have been superseded by more balanced research efforts. Larson seems needlessly stereotypical in his descriptions of “the squalid poverty of the Chinese” (p. 11) and “that exquisite pride of Oriental leisure.” (p. 17-18) Nor can we be positive that “Forbes seemed to thrive on tension.” (p. 23) And, it may be giving Forbes too much credit to suggest that, “He generated a model for developing the vast interior of the United States, and he adapted or invented many of those instruments of corporate enterprise with which industrialists and financiers revolutionized American life.” (p. 169)

Larson’s obvious enthusiasm for his subject does not detract from the value of this book, however. On the contrary, Bonds of Enterprise is a beautifully written and superbly organized account of a pivotal time, and a pivotal person, in the history of American business. Historians of the 19th-century railroad industry, of business-government relations, and of entrepreneurship will not discover any startling revelations here. Certainly the work of scholars such as Naomi Lamoreaux and Colleen Dunlavy has done more to advance our knowledge of these issues. What the reader will find is an excellent overview of these issues in a form that is readily accessible to people lacking expertise in these areas, as well as to students in graduate-level, or even advanced undergraduate classes. At a time when the history profession seems inevitably destined for fragmentation, compartmentalization, and the study of minutiae, Larson is to be commended for this synthetic work.

Albert J. Churella is an assistant professor in the Social and International Studies Program at Southern Polytechnic State University in Marietta, Georgia. He is the author of From Steam to Diesel: Managerial Customs and Organizational Capabilities in the Twentieth-Century American Locomotive Industry (Princeton: The Princeton University Press, 1998).

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Christopher J. Castaneda California State University, Sacramento cjc@saclink1.csus.edu

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

Adam Smith’s America: How a Scottish Philosopher Became an Icon of American Capitalism

Author(s):Liu, Glory M.
Reviewer(s):Ebenstein, Lanny

Published by EH.Net (September 2023).

Glory M. Liu. Adam Smith’s America: How a Scottish Philosopher Became an Icon of American Capitalism. Princeton: Princeton University Press, 2022. xxxii + 346 pp. $35 (hardback), ISBN 978-0691203812.

Reviewed for EH.Net by Lanny Ebenstein, University of California, Santa Barbara.

 

Glory Liu’s Adam Smith’s America has been decidedly praised, and appropriately so. It is a work of scholarly depth and wide scope. Notwithstanding that so much has been written on the Scottish savant for centuries, this is an invaluable book. Upon reading it, even longtime Smith scholars will have a much better idea of development of the interpretations of Smith’s work and thus of his work itself.

Like many, perhaps most, great thinkers and philosophers, Smith was a protean figure whose work is subject to diverse perspectives. Almost from the start, there has been a progressive as well as a conservative Smith. Liu’s work accurately situates him in the former camp. He was far from an advocate of the status quo. He did not live in a libertarian but a mercantilist era. Active government was the practice when he wrote An Inquiry into the Nature and Causes of the Wealth of Nations (1776), and, indeed, that book was directed against mercantilism.

But Smith was not thereby an advocate of very little or no government. Indeed, as his best recent biographer, Nicholas Phillipson, presents, Smith sought a science of humankind which would allow the maximization of human happiness through appropriate government laws and policies. Smith was no philosophical opponent of government. Rather, he saw the secular salvation of humankind through government. He was a humanist and utilitarian in the tradition of his close friend and fellow key figure in the Scottish Enlightenment, David Hume.

Liu’s work chronologically presents the reaction to Smith’s work. She correctly states the French Revolution had the “greatest immediate impact on Smith’s reception” (p. xxvi). Smith was considered a forerunner of the French Revolution: “After 1789, figures like the Marquis de Condorcet turned Smith’s ideas into the ‘voice of revolution’ … Smith’s association with French revolutionary zeal, sedition, and dissenting public opinion travelled back to England. After Smith’s death in 1790, obituaries noted that his ideas had drawn attention to ‘subjects that unfortunately have become too popular in most countries of Europe’” (pp. xxvi-xxvii). Samuel Fleischacker, among the leading modern Smith scholars, also emphasizes Smith’s influence on French revolutionary figures and their supporters in England and elsewhere.

In America, too, Smith was originally perceived as a progressive, largely because America’s founders were themselves progressive. Like Smith, America’s founders sought active but not all-encompassing government together with a broadly middle-class society without extremes of wealth and poverty. There is not a word in Smith, as there is not a word in the founders, about encouraging an elite of wealth-producers who will create prosperity for everyone else—not a word. This would have been inconsistent with the largely egalitarian view of the nature of at least European men that Smith and the founders had. For Smith, according to a student’s 1763 lecture notes in a remark that appeared in a slightly modified form in The Wealth of Nations: “No two persons can be more different in their genius as a philosopher and a porter, but there does not seem to have been original difference betwixt them. For the five or six first years of their lives there was hardly any apparent difference … Their manner of life began then to affect them, and without doubt had it not been for this they would have continued the same. The difference of employment occasions the difference of genius.” [1] This view of natural and intrinsic human equality is very different than that possessed by most present interpreters of Smith, yet it is basic to understanding and appreciating his thought.

Liu also correctly states that “[m]aking sense of Smith’s figurative arrival and reception in the decades leading up to and following American independence requires removing many of the contemporary blinders that often lead to overstatements of Smith’s importance—for instance, the idea that The Wealth of Nations was ‘an intellectual shot heard round the world in 1776’” (p. 15). Again, Smith’s influence has been protean and many-sided with different interpretations of him at different times and in different places. According to Liu: “For the American founders, the works of Adam Smith were guidebooks for enlightened statesmanship” (p. 17). James Madison, Alexander Hamilton, and John Adams read and were influenced practically and philosophically by Smith—Adams “used ideas from Smith’s The Theory of Moral Sentiments to grapple with what Adams saw as a troubling socio-psychological influence of wealth in society” (p. 17). In sum: “The eclecticism of … interpretations and uses evokes the embryonic state of political economic thinking during the late eighteenth century and reinforces the notion of political economy as a branch of statecraft” (p. 17). Showing the diversity of early views on Smith, Hamilton quoted extensively from The Wealth of Nations in arguing for government encouragement of manufacturing and high tariffs. Both George Washington and Thomas Jefferson owned copies of The Wealth of Nations, and Jefferson publicly praised it.

Only after the Civil War did the interpretation of Smith as an apostle, or the apostle, of capitalism really develop. Capitalism had to emerge before Smith could be identified as its initiator. Much like the incorrect interpretation of America’s founders as basically opposed to democracy and preeminently private property advocates put forward by progressive historians in the late nineteenth and early twentieth centuries, contemporaneous political economists incorrectly interpreted Smith as much more opposed to government in the abstract than he in fact had been. Smith was not an advocate of socialism (understood as direct state management of economic activity), of course. But there is a great difference between what may be termed “democratic capitalism”—basically free markets in the production and exchange of goods, combined with democratic governance and a significant but not all-encompassing role for government—and libertarianism as it is now practiced (extreme rhetorical opposition to government combined with little effective opposition to it and advocacy of the lowest top income and estate tax rates possible). Smith was in these senses a democratic capitalist, not a libertarian.

Smith favored some progressive taxation and nascent government welfare state activities. The great historian of economic thought Jacob Viner remarked Smith was “not a doctrinaire advocate of laissez-faire. He saw a wide and elastic range of activity for government, and he was prepared to extend it even farther.” [2] According to Thomas Sowell: “Egalitarianism is pervasive in Smith.” [3] James Buchanan said a “returned Adam Smith would be a long distance from the modern libertarian anarchists.” [4] John Maynard Keynes observed the “phrase laissez-faire is not to be found in the works of Adam Smith … Even the idea is not present in a dogmatic form.” [5]

As industrial capitalism unprecedentedly expanded in the final decades of the nineteenth century, the progressive Smith was lost. From the standpoint of technical and popular economics, he had, to some extent, already been supplanted in the United States, first by Jean-Baptiste Say and then by John Stuart Mill. However, especially with the hundredth anniversary of The Wealth of Nations in 1876, he experienced a revitalization, ably furthered by the great British Smith scholar Edwin Cannan, who emphasized Smith’s support for distributive economic justice.

The great issue of the day for England was to promote free trade, and Smith’s work admirably fit the bill. As Friedrich Hayek recognized, Smith’s most significant contribution was to emphasize the importance and benefits of free trade, not of very little or no government. There is a considerable difference between the doctrines of free trade (economic exchange, particularly of imports and exports, should be unrestricted)—which Smith enthusiastically endorsed—and laissez-faire (government should play a very small role)—which he did not favor with nearly the same enthusiasm. Hayek clarified this in The Road to Serfdom (1944): “The question whether the state should or should not ‘act’ or ‘interfere’ poses an altogether false alternative, and the term laissez-faire is a highly ambiguous and misleading description of the principles on which a liberal policy is based”; “To create conditions in which competition will be as effective as possible, to supplement it where it cannot be made effective, to provide the services which, in the words of Adam Smith, ‘though they may be in the highest degree advantageous to a great society, are, however, of such a nature, that the profit could never repay the expense to any individual or small number of individuals,’ these tasks provide a wide and unquestioned field for state activity. In no system that could be rationally defended would the state just do nothing.” [6] Smith’s crucial commitment was to free trade abroad and at home, not to laissez-faire in the sense of very little or no government.

During the Great Depression, Smith’s work was downgraded and disparaged as simplistic and irrelevant. Keynes’s ideas calling for more discretionary government economic activity were dominant. Liu appropriately calls attention to the fact that, surprising as it may be, the “invisible hand” metaphor was little used to characterize Smith’s work before the twentieth century: “The image [of the ‘invisible hand’] was hardly noticed by his [Smith’s] immediate successors … and virtually absent in debates on free trade in the nineteenth century … By the mid-twentieth century though, economists had begun assigning a level of significance to this idea of Smith’s that exceeded past interpretations” (p. 241).

Liu gives a central role to Paul Samuelson’s hugely influential Economics textbook in initiating greater use of the phrase “invisible hand” when discussing Smith. Samuelson depicted the “invisible hand as a precursor of foundational theories in modern economics such as perfect competition and general equilibrium” (p. 242). She also emphasizes Milton Friedman and George Stigler in propagating this view: Friedman and Stigler “streamlined their image of Smith to be more in line with the ascendancy of rational choice theory and strident market advocacy” (pp. 192-193). Actually, Smith meant the hand of God by “invisible hand,” not a hand of the market. He believed that when individuals pursue their own self-interest within a broad and enlightened concept of self-good, they are led by a utility-maximizing deity to promote the general happiness. Adam Smith certainly did not recommend greed or selfishness, that markets require no regulation or organization, that there should be little to no role for government, and that government should be unconcerned with preventing economic gaps in a society from becoming or remaining too large.

As Hayek held, Smith’s greatest contribution was to explain that economic activity is generally most effective when government allows individuals to transact freely, plays little role in managing details of economic decision-making, and limits its economic role to for the most part establishing a larger institutional framework. Glory Liu reminds us that past generations have considered Smith differently than our own and that for this reason future generations are likely to do so as well. In tracing the evolution of interpretations of his thought, she has made a substantial and lasting contribution to the Smith literature.

References

[1] Adam Smith (R. L. Meek, D. D. Raphael, and P. G. Stein, eds.), Lectures on Jurisprudence (Oxford: Oxford University Press, 1976), p. 348.

[2] Jacob Viner, The Long View and the Short: Studies in Economic Theory and Practice (Glencoe, IL: Free Press, 1958), p. 244.

[3] Thomas Sowell in Gerald P. O’Driscoll (ed.), Adam Smith and Modern Political Economy (Ames, IA: Iowa State University Press, 1979), p. 5.

[4] James Buchanan in ibid., p. 117.

[5] John Maynard Keynes in William Ebenstein, Great Political Thinkers: Plato to the Present, 4th ed. (New York: Holt, Rinehart and Winston, 1969), p. 674.

[6] Friedrich Hayek, The Road to Serfdom (London: Routledge & Kegan Paul, 1986 [1944]), pp. 29, 60.

 

Lanny Ebenstein is a Continuing Lecturer in the Department of Economics at the University of California, Santa Barbara. He is the author of many books and articles, including the first biographies of Milton Friedman and Friedrich Hayek, and is currently at work on books on taxation and “The Progressive Adam Smith.”

Copyright (c) 2023 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 (September 2023). All EH.Net reviews are archived at http://www.eh.net/book-reviews.

Subject(s):Economic Planning and Policy
History of Economic Thought; Methodology
Geographic Area(s):Europe
North America
Time Period(s):18th Century
19th Century
20th Century: Pre WWII
20th Century: WWII and post-WWII
21st Century

Oceans of Grain: How American Wheat Remade the World

Author(s):Nelson, Scott Reynolds
Reviewer(s):Sharp, Paul

Published by EH.Net (August 2022).

Scott Reynolds Nelson. Oceans of Grain: How American Wheat Remade the World. New York: Basic Books, 2022. 368 pp. $32 (hardback), ISBN 978-1541646469.

Reviewed for EH.Net by Paul Sharp, University of Southern Denmark, CAGE, CEPR

 

The title of this book is somewhat misleading. When I received it for review, I expected another US-centric account of how America made the world what it is today. I was therefore somewhat surprised to begin reading, and found that a large part concerns Russia, Turkey, and Ukraine. In fact, reading this book while at the same time witnessing the horrors coming out of Ukraine made an impression, as I will come back to at the end of this review. The author, Scott Reynolds Nelson, is the UGA Athletics Association Professor of the Humanities at the University of Georgia. He has won both academic and literary awards for his writing. It is therefore no surprise that this book is an excellent read. Nelson has the historian’s enviable skill (which many of us from the more economics side of economic history could surely learn from) of making serious analysis come to life through vivid descriptions of people and places. You will most likely come out of reading this book far more knowledgeable than when you started, whether or not you believe the central hypothesis.

Nelson presents a bold theory of what made the modern world. Where Jared Diamond saw “Guns, Germs, and Steel”, Nelson sees the perhaps somewhat less sexy trinity of mold, futures contracts, and dynamite. The potato blight, phytophthora infestans, of the 1840s forced open European markets for grain. The American Civil War led to financial innovations in how grain was traded; and dynamite, invented in Germany in 1867, transformed geography as new deep-water ports were created, and canals and railroads connected continents. In other words, policy, finance, and technology created the globalized world. This is not really news to the economic historian, but Nelson puts it within a framework inspired by the Russian Marxist, activist, and grain trader, Alexander Lvovich Parvus (born Israel Lazarevich Gelfand or Helphand). He postulated the role that “invisible lines,” the “Black Paths” of grain trading routes, have played for the making and breaking of empires, which he argued exist to control and extract rents from them. Rosa Luxembourg was to take his “invisible lines” to create a new way of understanding trade which we now call world systems theory. But Parvus’ influence went far beyond theory. He was able to convince Lenin of the power of these lines and that revolution in Russia was possible.

The introduction provides a great summary of Nelson’s hypothesis. His 2012 book A Nation of Deadbeats: An Uncommon History of America’s Financial Disasters (Knopf) explained that financial panics had much to do with drastic changes in commodity prices. Accordingly, the story here starts in Odesa, Ukraine, which he visited in 2011 to research international financial crises. Nelson sees connections between booms and busts in the wheat market for everything from the French Revolution to the Arab Spring. He notes parallels between different settings based on connections to wheat. For example, Ukraine has some of the richest soil in the world, and it was captured by Russia in 1768 under Catherine II. At the same time, he notes, similar expansionism was going on in the Americas. Then, the French Revolution (over the price of bread, of course, as Nelson notes), and the French and Napoleonic Wars led to Odesa becoming a grain-exporting boomtown. European landlords in turn faced Ricardo’s paradox, as rents dropped as food became cheap. The initial response was protectionist barriers to trade, but then a water mold caused the potato harvest to fail, and European trade opened following 1846.

This, Nelson explains, led to century-long contest between Russia and America to feed Europe’s working class. In the 1860s both empires ended serfdom and slavery respectively. America then gained the upper hand, when the Union Army during the Civil War created futures contracts that allowed grain to be bought and sold without the costly and time intensive process of pricing based on samples. This, combined with the transatlantic telegraph, steam shipping, and the new opportunities brought by dynamite, led to what Kevin H. O’Rourke has termed the “Grain Invasion.” European prices fell, and the ships which brought grain returned with migrants to the New World. As European workers in cities became better off, Odesa, and other grain exporting regions, faced ruin, and the combination of the agrarian crisis and the bursting of estate bubbles ushered in what was known as the Great Depression until the 1930s. The powerful agricultural Austro-Hungarian and Ottoman Empires declined. Russia, for its part, responded in 1884 with state-supported railroads and a plan to plant grain in Siberia and Central Asia. This brought in capital from largely French investors, but Russia’s expansionary plans were checked when it lost in war to the Japanese Empire in 1905. Then, in 1914 Russia’s anxiety that Turkey might halt Russian grain shipments on the Black Seas helped start World War I: “a war over nothing less than foreign bread.” Thus, as Parvus, who grew up in Odesa during the 1873 crisis and coined the term “Agrarian Crisis” in 1895, claimed, the paths of grain made and destroyed empires.

Chapter 1 covers an impressive span of time, 10,000-800 BC and explains the origin of the “black paths” that so fascinated Parvus. Ancient oxen trails connected the Ukrainian plains with the Black Sea ports. Geographers and historians have claimed that these paths, and the trading cities known as emporia (themselves the source of the word “empire”) were created by empires, which in turn were defined by their control of trade lines. Folklore, backed up by new archaeological evidence suggests a far more ancient origin. The first wheat “farmers” might have been travelers or traders, who after decades of migration remained at way stations which formed the first settled communities. Empires then emerged based on establishing protection rackets along the pathways, and in a few generations imposed formal imperial rule. Thus, empires imposed a tax on the black paths, but so too did disease, and the rise and fall of both determined the volume of trade. Nelson explains that historically bread was extremely expensive, involving three stages: 1) planting and harvesting; 2) storing and shipping to the bread eaters, in the emporium; and 3) producing flour, mixing with yeast and water, and baking, which took place in the cities. For at least fifty centuries considerable human labor was devoted to the second stage, and empires emerged to engross and centralize it.

Chapter 2 covers 800 BC-AD 1758. Nelson explains how Byzantium enforced a monopoly control of the Bosporus Strait and the Dardanelles. Constantinople rose and fell as the black paths expanded and contracted, but grain emporia were nodes for infection, and the Plague of Justinian in 541 ended the ancient world. With depopulation, important knowledge about the storage of grain was lost, and its rediscovery centuries later was to play an important part for making long distance trade possible. Constantinople became increasingly dependent on Slavic peoples, and as the grain flowed in, Byzantian culture and the Orthodox religion flowed back. In medieval western Europe, which was often cut off from trade with the East after 542, serfdom arose to compensate for the loss of trade, and control of mill and bakery meant control of people. Nelson is brilliant at finding anecdotes to illustrate the centrality of grain for understanding the world. Thus, the word lord comes from an old word meaning loaf-ward, and the word lady from loaf-kneader, although one wonders if similar etymologies exist for the same words in different languages.

The years 541-1100 were the age of robber barons, for example the Hanseatic League. Absolutist states emerged to break their monopoly, and in 1453 the Byzantine Empire, increasingly starved of grain, collapsed and the Turks took over. A long struggle then emerged with Russia, which wanted to take Constantinople to monopolize the Bosporus themselves. Thus “… at its deepest level an empire may be a monopolizer of food along ancient grain pathways that it never fully understands. Empires survive only as long as they control the sources of food needed to feed soldiers and citizens; they fund themselves by taxing those who sell it.” This is further explored in Chapter 3, covering 1760-1844, where it is explained how Catherine II, inspired by the physiocrats, believed that grain exports properly managed could be the source of an empire’s wealth. To this end she transformed serfdom into something more akin to New World slavery, and enacted extensive military and fiscal reforms. She then set about seizing land where wheat could grow, although she never managed to capture Constantinople. But as the Ottoman Empire shrank, in part due to a less sophisticated grain-tax system, European princes tore grain-producing Poland to pieces to appease Catherine. Moreover, as with US expansion, thousands of native peoples were persuaded to ally with Russia in order to dispossess others. Having taken Ukraine, Catherine founded Odessa (renamed in Ukrainian as Odesa) as a free port, and invited in foreigners to farm land as she aimed to feed Europe and thus make Russia rich. Meanwhile the United States, before the Civil War, offered no real competition. The American port cities were not “visionary physiocratic cities” but “simple adjuncts to plantation slave regimes” where landowners blocked foreign imports. However, the French rediscovered Roman techniques of grain storage, allowing for silos and American “elevators”, thus making long-distance trade increasingly feasible. Trade remained protected, however, and to an extreme degree following the Napoleonic Wars.

Chapter 4 provides the first of Nelson’s trinity of explanations. Barriers to trade crumbled with the failure of the potato crop in the 1840s. As trade expanded, bread replaced potatoes and living standards surged, although health often suffered as Europeans preferred highly processed white bread. Thus emerged what Parvus described as the European consumption-accumulation city. Labor and capital accumulated where food was cheapest and the cities with the deepest docks thrived. Prosperity allowed workers to save, freeing up capital for industrialization. Nelson explains, “European industrialization and urbanization had little in the way of European roots. It was fueled by foreign food.” Chapter 5 demonstrates how the conflict between the Russian and Ottoman Empires came to a head with the Crimean War 1853-56 which saw Russia fail to capture Constantinople, in part because France and Britain feared a Russian monopoly on the Black Sea. This was a humiliating defeat, but also left the Ottoman Empire in heavy debt to Britain and France. Serfdom was abolished in Russia in order to expand grain production, leaving former serfs heavily indebted, but with land, and new political structures, the mir and the zemstvo, were implemented to govern these areas.

A different story played out in the United States, where slavery was abolished around the same time, but land was not redistributed, part of the origins of inequality in the US today. At the same time, the US expanded grain production into the interior using Black Sea varieties of wheat, and the Republican Party campaigned against slavery based on a belief in physiocratic expansion, and a desire for incentives to put family laborers onto wheat farms. Migrants purchased land along new railroads whose monopoly power they came to hate. Then in Chapter 6 Nelson gives the second part of his explanation. The Civil War created a necessity for breaking the power of merchants to supply food for the army, and this was done with a novel financial innovation. Bills of exchange were divided into hundreds of enforceable contracts, which would be called futures contracts, obviating the necessity for buying and selling based on a sample. Although in 1863 only the US Army was using this, with the introduction of the Transatlantic telegraph trade became completely reorganized. Ships could take the place of storage facilitates, redirected at port to wherever the grain was needed. America could now compete with Russia.

The final part of Nelson’s trinity is presented in Chapter 7, appropriately entitled “Boom.” Trade costs were again slashed with the invention of dynamite, which allowed railroads to run through mountains, canals, such as the Suez Canal, to link continents, and for the creation of new deep ports. The increased trade came with additional innovations such as grading, specialized insurance, and Hungarian milling techniques. As the price of food plummeted, workers found more time to educate and organize themselves, as Chapter 8 explains. New economic theories, including Marx’s, emerged to calculate the causes and limits of the new agricultural plenty. Much of the remainder of the book explains Parvus’ contribution to socialist theory and his direct influence on the course of events during his life, including the emergence of the Young Turks and the revolutions in Russia. He argued that although cheap grain benefited everyone, the main threat to the world was the alliance between capitalists and empire which would lead to imperialism, and pointless and costly wars. Agricultural empires such as the Ottoman and Austro-Hungarian empires suffered, while other empires gorged on cheap grain and became great powers. The US share of the grain trade declined as increasing shares of its production went to feed its own large cities. New conflicts emerged as others sought to capitalize on the demand from elsewhere, as Turkey again became a key battleground. World War I itself was “a World War over bread” with for example the closing of the Bosporus and Dardanelles Straits a key event. As Russia starved, revolutions eventually toppled the old Tsarist regime, and the Soviet Union, by quickly incorporating grain producing areas in Ukraine for example, took its place.

One is left with the feeling that we should be surprised about the importance of wheat for world history, which the layperson might indeed be. But from the perspective of an economic historian, one cannot really argue that wheat has been underappreciated. My own PhD thesis, from 2009, was entitled “Wheat, Globalization and Economic History,” and my career as a researcher began with reading the great works by Fairlie, Harley, Williamson, O’Rourke, Jacks, Brunt, and of course my own former supervisor, K.G. Persson (some references are given below). Certainly, there are many more I have forgotten to mention. One could argue that Russia’s role in this story is underexplored, with a few notable exceptions such as Goodwin and Grennes (1998), but more and more scholars are working on Russian economic history these days, so this will improve. Other large countries such as China and India take up relatively little space in Nelson’s account, while references to Parvus alone take up half a page in the index. One can of course argue against the somewhat physiocratic idea of the world where everything starts with the soil. In history this might have been truer, but Engel’s Law and technological progress have changed that, present concerns about food supplies notwithstanding. Regarding the first globalization, Nelson explains that economists and contemporaries have emphasized the importance of the elimination of tariffs, the introduction of the gold standard, and steamships. But, he believes, they have missed the ecological and political background: how the potato famine opened trade, dynamite opened ports, and futures markets increased liquidity. This is a powerful and convincing argument, but this is not a quantitative study. The only graph is of imports of wheat and flour into UK, but this only goes back to 1820. Before this, he explains in an appendix, there was a lot of smuggling and the data is underreported, meaning that historians have overstated the role of cotton and understate wheat.

Given my geographical location and research interests I am looking for Scandinavian connections everywhere, and I apologize for that! But it might be mentioned that, although Nelson dedicates the book to his maternal grandmother and explains that his grandparents left Sweden in 1887, the book somewhat neglects Europe outside Russia and Turkey (and indeed the world beyond), despite the obvious point that dynamite was invented in Germany by a Swede. Copenhagen’s role as a major Baltic trading hub is mentioned in passing, but the somewhat famous Danish exception during the backlash against the American grain invasion before the First World War deserves at least a sentence. Sticking to free trade, Denmark imported cheap grain, which helped feed a booming Danish industry in butter, bacon, and eggs, allowing this small country to feed the large industrializing cities of northern England. Danish exports were to play a crucial role in establishing industrialized dairying around the world, including the United States and Russia. Food is after all not only grain, particularly not as countries become richer. On a more trivial note, at one point the Danish ruler of England, King Canute, is described as a “legendary fool,” but as a historical figure he arguably was neither legendary (although the famous story about him might be) nor foolish for trying to demonstrate the limits of his power and in the process getting his feet wet.

Nelson is not afraid of using dramatic language to demonstrate the relevance of his work for the present, for example in chapter 14: “Now, just as ten thousand years ago, producers and consumers are bound together in a common world ecology that viruses, empires, and states have only ridden upon, bits of foam on a vast, invisible deep.” But sometimes he over-eggs the pudding, such as in the conclusion: “Whether to regard empires as symbiotes or parasites depends on one’s perspective. I tend to see empires as parasites, but one could make the argument that imperially sponsored universities… try to prevent starvation… in ways that promote ‘growth’ inside the empire. Physics, biology, chemistry, economics, and history are all, in their way, data-processing systems for empires hoping to keep their subjects – us – alive so that they can rule another day.” I like to believe that knowledge creation has value beyond allowing our present rulers to survive.

In sum, I would certainly recommend reading this book. I learned a great deal, and his thesis is fascinating and provocative. Moreover, it is a highly engaging read. But be prepared to feel somewhat unsettled as well. Nelson chillingly concludes that “modern Russia’s relative weakness as a great power now (in 2021) may still ultimately depend on its separation from Ukraine… Ukraine has always been the greatest prize, as Catherine the Great well knew.” Economists and economic historians are always being asked to provide policy implications of their work these days. Here is one that President Putin seems to have taken to heart.

References

Brunt, L. (2004). Nature or Nurture? Explaining English Wheat Yields in the Industrial Revolution, c. 1770. Journal of Economic History, 64(1), 193-225.

Fairlie, S. (1969). “The Corn Laws and British Wheat Production, 1829-76.” Economic History Review, 22(1), 88-116.

Goodwin, B. K., & Grennes, T. J. (1998). “Tsarist Russia and the World Wheat Market.” Explorations in Economic History, 35(4), 405-430.

Harley, C. K. (1978). “Western Settlement and the Price of Wheat, 1872–1913.” Journal of Economic History, 38(4), 865-878.

O’Rourke, K. H. (1997). The European Grain Invasion, 1870–1913.” Journal of Economic History, 57(4), 775-801.

O’Rourke, K. H., and Williamson, J. G. (2001). Globalization and History: The Evolution of a Nineteenth-Century Atlantic Economy. Cambridge, MA: MIT Press.

Olmstead, A. L., & Rhode, P. W. (2002). “The Red Queen and the Hard Reds: Productivity Growth in American Wheat, 1800–1940.” Journal of Economic History, 62(4), 929-966.

Persson, K. G. (1999). Grain Markets in Europe, 1500–1900: Integration and Deregulation. Cambridge, UK: Cambridge University Press.

 

Paul Sharp is professor of economics at the University of Southern Denmark, where he heads the Historical Economics and Development Group (HEDG). He is the author, with Karl Gunnar Persson, of An Economic History of Europe: Knowledge, Institutions and Growth, 600 to the Present (Cambridge University Press, 2015) and, with Markus Lampe, of A Land of Milk and Butter: How Elites Created the Modern Danish Dairy Industry (University of Chicago Press, 2018).

Copyright (c) 2022 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 (August 2022). All EH.Net reviews are archived at https://www.eh.net/book-reviews.

Subject(s):Agriculture, Natural Resources, and Extractive Industries
Economywide Country Studies and Comparative History
International and Domestic Trade and Relations
Geographic Area(s):General, International, or Comparative
Europe
North America
Time Period(s):General or Comparative

The Promise and Peril of Credit: What a Forgotten Legend about Jews and Finance Tells us about the Making of European Commercial Society

Author(s):Trivellato, Francesca
Reviewer(s):Wilson, Arthur

Published by EH.Net (July 2022).

Francesca Trivellato. The Promise and Peril of Credit: What a Forgotten Legend about Jews and Finance Tells us about the Making of European Commercial Society. Princeton: Princeton University Press, 2019. xiv + 405 pp. $32.95 (paper), ISBN 978-0691217383.

Reviewed for EH.Net by Arthur Wilson, Finance Department, School of Business, George Washington University.

 

This book is a gem. Francesca Trivellato has produced a multifaceted exploration of the complex relation between evolving Christian ideas about Jews and the development of modern commercial society.

The book begins with an obscure reference in a once popular but long forgotten compilation of maritime laws, by Etienne Cleirac of Bordeaux. Even so, the author then broadens the discussion to address some of the most foundational debates in the history of economic thought.

“The first (debate) is the question of what constitutes ‘the economy’ as a field of inquiry and what is included in the canon we use to access this field, a concern that has become particularly relevant in light of the impact that the digital revolution on the study of Europe’s past. The second is the relationship between what we might call “practices” and “representations” and the tendency some scholars have had to pit the two against each other. Finally, the third is the perennial question of periodization, which Jewish history and Christian prejudice toward Jews bring into sharp relief, especially when, as I do, we examine a singular but mutable figure, the Jewish usurer, across several historical periods.” (p. 7)

After introducing the bill of exchange in chapter 1, Trivellato returns in the next chapter to that 16th-century merchant manual that recounts the legend that Jews originated Marine Insurance and the Bill of Exchange. Both parts of the legend are false, but the Bill of Exchange side of the story persisted for hundreds of years, evolving over that time to fit the anti-Semitic or philo-Semitic agendas of various commentators. Like facets of a diamond, this evolution provides a panoramic view of European attitudes toward commerce and Jews and what were sometimes thought to be Jewish characteristics.

Emblematic of the second debate, Trivellato shows there was a wide gulf between what was said about Jews and actual documentation of what Jews were or were not doing. Indeed, Christian merchants accused of using questionable practices were accused of Judaizing. No Jews need be present. In the hands of some critics, to be called “a Jew” became shorthand for engaging in devious or dishonest commerce.

Along these lines, Trivellato notes that Cleirac cited an earlier source that makes no mention of Jews. Accordingly, in that source, and in a draft version of his manuscript, he initially attributed the invention of Bills of Exchange to Florentines – Guelfs and Ghibellines. In the published volume, Cleirac attributed the invention to Jews. The change, possibly due to the publisher, is unexplained. (p. 41)

The Bill of Exchange was near the heart of European private finance from as early as the 13th century to well into the early 20th century. It served at least three functions: as a device for remittance, as a device to obtain or extend credit profitably despite usury restrictions, and as a device to speculate on foreign exchange. It was widely used and very controversial.

Part of the controversy was in the many ways bills could be used. Another part of the controversy was in the meaning and scope of usury per se.

Some features of the Bill of Exchange lent themselves to diverse interpretations. Unlike gold or silver coins, Bills were generally created by merchants for merchants, rather than by or for governments. Their utility hinged completely on the trustworthiness of the parties involved. Also, Bills could be used in transactions involving two, three, or four parties, depending on how they were intended to be used. To the uninitiated, Bills of Exchange were mysterious.

If a medieval banker were to openly offer interest on deposits, that would be considered usury. Explicitly charging interest on loans would again be considered usury. The Bill of Exchange allowed a work-around. Medieval merchant bankers could buy bills in one place (shifting purchasing power from A to B), sell them in another (shifting purchasing power from B to A), and make a profit – like making a loan with interest, albeit with exchange rate risk in the mix. Was this usury? While some bill combinations were problematic, individual bills were generally acceptable to the Church.

In fact, usury was not always well defined, as the author discusses in chapter 3. There were at least two difficulties. On the one hand, as Catholic theologians tried to define good and bad finance, it became apparent that subtle distinctions were needed. Depending on the context and author, usury referred to either a suite of bad financial practices, or specifically to charging interest on loans. On the other hand, it was sometimes easier to say that usury was what the Jews were thought to have done.

Current thinking is that the Bill of Exchange evolved gradually from diverse Mediterranean, perhaps Arab origins. For a time, some Italian writers conjectured that it originated in Florence. For authors hostile to Jews, like our Bordeaux-based merchant manual author, Etienne Cleirac, writing in 1647, in “Us et coustumes de la mer…” the notion that the Bill of Exchange was a Jewish invention played into the conceit that it was a device to separate naive Christians from their money. For more sympathetic authors, like Montesquieu nearly a century later, the notion that the Bill of Exchange was a Jewish invention indicated a special genius of Jews for commerce which allowed them to link Europe to the Americas, Asia, and Africa in trade.

Of course, anti-Semitism was not new in Bordeaux in 1647, as discussed in chapter 4. Consider Iberia in 1391. Egged on by a rabble-rousing priest, pogroms in multiple Iberian cities killed many Jews and induced others to run to the nearest church to get baptized to fend off the murderous mobs. Afterwards, despite the obvious duress, the church chose to accept such baptisms of these “New Christians”, sometimes called conversos, expecting them to live life just as the “Old Christians” did, changing much more than just their religion. Within a few years, New Christians were being told to change much of their distinct culture – diet, dress, language, and more, as if Old Christians could not distinguish between liking bagels and being Jewish.

Old Christian concerns that the New Christians were secretly Jewish, and would revert, were widespread. With these forced conversions, many of the earlier restrictions on Jewish commercial activity were no longer binding on New Christians. The blurring of boundaries must have been palpable. One response by Old Christians were the “Purity of Blood” statutes – promulgated in the mid- 15th century to exclude New Christians from certain roles based on their lineage – to restrain this blurring. Later in the 15th century, inquisitions in Spain, and then Portugal were begun – to ferret out relapses among the New Christians. Many such New Christians left Iberia if they could. By 1492 the remaining Jews in Spain were expelled, scattering in all directions, with many fleeing to Portugal. In 1497 the Jews who had fled to Portugal were forcibly baptized.

Perhaps, over time, this scattering may also have facilitated trans-national Sephardic trading networks. In any case, in the mid-16th century the King of France welcomed many of these Portuguese New Christians to southwestern France, where the King promised safety if the New Christians kept up (Christian) appearances. The royal hope was that these New Christians would quicken the merchant activity of Bordeaux, which they presumably did, to the profit of the King. Meanwhile, Calvinist Protestantism in the form of the Huguenots also spread across France, taking root in Bordeaux as well.

Writing in Bordeaux, Catholic Etienne Cleirac would have had a front row seat to the complex religious and political interplay of 16th-century Bordeaux. This was a time of political unrest in France associated with the Huguenots and eventually civil war. This was also a time when old status hierarchies based on nobility or religion were breaking down. Merchants no longer had to be members of guilds. Central government court reforms meant that cases involving nobles acting as merchants would increasingly be considered in merchant courts. Bills of Exchange were equally legally enforceable regardless of the status of plaintiffs or defendants. Finally, after more than a century of living as Christians due to forced conversions, the New Christians were increasingly assimilated – hard to distinguish from Old Christians. Old Christians like Cleirac might have felt increasingly uneasy. How could one avoid trading with those seemingly “devious” Jews if they appear to be Christian? As Trivellato notes:

“Fears that Jews and Christians could become indistinguishable permeated European Christian culture at large during this period. The regime of toleration that prevailed in seventeenth-century Bordeaux heightened rather than quelled fears about the porousness of the boundaries between Jews and Christians. There, more than in any other city of the kingdom, a small but proactive group of New Christian merchants was at once visible and invisible. Whether valued or condemned, their economic activities were not confined to a separate corporate body, with its own place in the hierarchical society of the time. They walked the same docks as other merchants and sat in the same church pews as other Catholics. For Cleirac and his readers, the lack of precise boundaries between Jews and non-Jews mirrored the erosion of age-old divisions between merchants and noblemen at a time when a major restructuring of the legal and social order, and the place of commerce within it, was underway in France.” (p. 84)

Cleirac’s legend of the invention of the Bill of Exchange by Jews was taken up and repeated in the subsequent merchant literature, as documented in chapter 5, until a century later when the hostility (if not the legend) was deflected by a different interpretation, by the philosophe Montesquieu. He accepted the idea that Jews invented the Bill of Exchange but celebrated that invention as a watershed event for commerce as a modernizing and civilizing force in Europe.

Montesquieu was writing at a time when status-based hierarchies were breaking down further. While commerce might be a modernizing force, it did not liberate the Jews. Nor did Montesquieu call for full equality. “Montesquieu never pursued these questions because, as even an admirer of his views on Jews admitted, he was fundamentally not interested in Jews as such, but only to the extent that they provided him startling examples of the relationship between intolerance and proselytism.” (p. 138)

In the period leading up to the French Revolution (chapter 6), both views of commerce and the role of Jews were expressed, with multiple variations. Christian views were often more favorable toward the Sephardic community in Southwestern France and less favorable toward the Ashkenazi in Northeastern France, who were generally less assimilated. While supporters of Montesquieu argued for “doux commerce” to drive tolerance, others continued to focus on usury broadly construed and indeed seemed to blur the distinction between usury (associated with the Ashkenazim) and commerce (associated with the Sephardim).

Trivellato also disputes the conventional wisdom that the “commercial utility” of the French Sephardic community drove or supported emancipation, noting that even supporters generally did not make that argument, arguing instead for removing restrictions that limited Jews’ economic activity, encouraging Jews to participate more in other areas, such as agriculture, and less in commerce. Trivellato notes: “Amid the ‘cacophony of arguments’ marshaled in favor of emancipation, the virtues of commerce were never used as weapons by pro-Jewish advocates.” (p. 157) Indeed, it would seem that the relative assimilation by Sephardim, and the continued hostility toward the Ashkenazim even after the French revolution, as indicated by the “infamous decree” resulting from the Napoleonic “Assembly of Jewish Notables” better explained the path of emancipation.

The legend of the Jewish invention of the Bill of Exchange is most frequently explored in French literature. In chapter 7, Trivellato explores the spread of the legend outside of France, where the legend seemed to have had less purchase. In Britain and the Low Countries, hostility toward Jewish participation in commerce seemed to revolve around financial markets rather than Bills of Exchange. “Overall, the legend met with considerable scepticism in England.” (p. 171) In Central Europe, similar hostility and scepticism were combined even without comparable financial markets. In Italy, writers seemed more inclined to credit Florentines with inventing Bills of Exchange.

In the final chapter, the author explores how the legend and the history influenced some major 19th-century writers on commerce and “modern capitalism” – Sombart, Weber, and Marx. For differing reasons, all three appear to have accepted the 16th century as a decisive turning point in the beginning of modern capitalism. All three were aware of the legend. Marx seemed to see Christians thoroughly adopting supposedly Jewish commercial practices: “The practical Jewish spirit has become the practical spirit of the Christian people,” he wrote – or in other words, all ‘Christians have become Jews,’ not only some of them.” (p. 202) Sombart evidently saw Jews as a driving force of Western capitalism during the Medieval period, only to be superseded by Christian merchants and enterprises. Whereas Sombart overstated the Jewish role in modern capitalism, Weber seemed to minimize it. Medieval historians pointed out that many of the new commercial developments pointed to by Marx, Sombart, and Weber were already seen in the high Middle Ages.

So what can we say about the canon we might use to access “the economy” as a field of study? Certainly, the canon shifts as the focus shifts. Cleirac’s compilation of maritime law and recounting of what became a legend were once foundational. Nowadays, few economic historians who have not read this book would have heard of him. The Bill of Exchange was once central to Western commercial practices. Now it and its history are much less important. Conversely, the so-called digital revolution, which allows access to many more types of documents, calls forth more of an interdisciplinary approach to economic history and the history of economic thought.

Concerning the gulf between “practices” and “representations” of Jewish commercial activity, the practice of defining usury as what Jews were thought to be doing, with little empirical support for what they were actually doing, nor even a clear definition of usury, is a shameful part of history. We can and should do better.

Concerning the issue of periodization, in this context, it seems clear that those who see sharp boundaries over time are overstating the changes as they occur. Medieval attitudes toward Jews and toward commerce persisted well into the “modern” era.

Still, I have a few quibbles. Although the book’s appendices include excellent bibliographies of some other sources, and the endnotes are extensive and generous, a standard bibliography would make that content easier to access. Second, it would be fascinating to learn more about the Franciscan friars who seem to have had an outsized role in defining Christian commerce and Jewish usury (p. 16). Finally, a more extended discussion of how 17th-century Bordeaux fit among the other commercial centers of the era, like Amsterdam or London, would more firmly anchor that setting. Even so, these quibbles are minor.

As I noted above, this book is a gem. I learned a great deal from it. Economic historians, intellectual historians, and cultural historians would all find it valuable, both for general knowledge, and especially for sub-fields like Early Modern Economic History and Religious and Jewish Studies. I recommend it highly.

 

Arthur Wilson is Associate Professor in the School of Business, George Washington University. His publications include “Put-Call Parity, the Triple Contract, and Approaches to Usury in Medieval Contracting,” with Geetae Kim (Financial History Review, 2015).He thanks Joel Blecher of the George Washington History Department for helpful suggestions.

Copyright (c) 2022 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 2022). All EH.Net reviews are archived at https://www.eh.net/book-reviews.

Subject(s):Financial Markets, Financial Institutions, and Monetary History
Social and Cultural History, including Race, Ethnicity and Gender
Geographic Area(s):Europe
Time Period(s):16th Century
17th Century
18th Century

How Innovation Works: And Why It Flourishes in Freedom

Author(s):Ridley, Matt
Reviewer(s):Coelho, Philip

Published by EH.Net (August 2020)

Matt Ridley, How Innovation Works: And Why It Flourishes in Freedom. New York: Harper Collins, 2020. 406 pp. $30 (cloth), ISBN: 978-0-06-291659-4.

Reviewed for EH.Net by Philip Coelho, Department of Economics, Ball State University.

 

 

Matt Ridley, the author of The Rational Optimist, has written another excellent book; he is an imaginative thinker and a writer of clarity. This book is very worthwhile reading; still (like any project) it is not perfect. In this review, I will try to convey what he has done and point out where I have difficulties. The book’s 12 chapters explain the histories of innovation in various economic sectors. Chapter one is devoted to energy, Two to public health, et cetera. In the Introduction, Ridley explains why and what he is doing, and what he expects to accomplish; he defines innovation as: “like evolution … a process of … discovering ways of rearranging the world … that happen to be useful. The resulting entities are the opposite of entropy: they are more ordered, less random, than their ingredients were before” (p. 2). This is a very useful, non-didactic definition; it avoids semantic arguments (whether a person was or was not an entrepreneur, and what do entrepreneurs do) that bedevil business histories. The author is borrowing from his training as an evolutionary biologist by incorporating its analytics into a history of innovation. Ridley forthrightly states that he is not attempting to explain why, when or where innovation occurred, but “telling stories” about people turning inventions into “useful innovations [that] teach us, by the examples of their successes and failures, how it happened” (p. 7).

Chapter 1, “Energy” is illustrative of his methodology. Starting in the eighteenth century Ridley examines innovations in the production of energy from non-animal sources. The basic theme, reiterated throughout the book, is that innovation is an evolutionary process; it is accretive, not the product of lonely geniuses huddled and isolated in workshops. He puts forth three candidates (Denis Papin, Thomas Savery and Thomas Newcomen) as putative innovators (“Notice I do not call him an inventor; the difference is crucial” (p.15)) of the first successful steam engine. Ridley’s distinction is crucial; it identifies an inventor as a person who first conceptualizes a process and defines innovators as the people who make the invention economically useful. In the case of steam power, Hero of Alexandria employed rudimentary steam powered devices in the first century AD; still there were people using steam power centuries before Hero, so the case for identifying the person who first conceptualized steam power is, at best, quixotic. Still steam power was not economically useful before the developments that occurred in the eighteenth century. Then a series of innovators made steam power economic; it could be employed to produce goods and services in less costly ways than had been available previously. In 1698 Thomas Savery was granted a patent for an invention for the “raising of water by the impellent force of fire” (p. 18). This introduces another theme that Ridley returns to throughout his book: that patents are more than somewhat arbitrarily rewarded and they, more often than not, impede innovation. People who used the Newcomen engine had to pay royalties to the holders of the Savery patent no matter how much they had modified it. Similarly, Ridley argues that the Watt patents were obstacles in the way of improving the efficiency of the Watt steam engine.

There is a tension between the effects that patent protection laws have in stimulating innovation and the rent-seeking obstacles to innovations that patents provide. Ridley is firmly in the camp that argues that current patent laws discourage more innovations than they promote. If you throw in copyright laws — which in theory and in practice, (e.g. the film Bambi) can be almost perpetually protected — then I am in complete agreement with Ridley. This is an economic issue: as they are currently structured, do patent protection and copyright laws promote or impede innovation? The economic basis for granting “intellectual property” a favored place in the law and in public debate should be reconsidered.

In the “Energy” chapter, Ridley reprints a plea from an 1819 edition of the magazine The Chemist asking for funds to build a monument to Watt: “He is distinguished from other public benefactors, by never having made, or pretended to make it his object to benefit the public . . . This unpretending man in reality conferred more benefit on the world than all those who for centuries have made it their especial business to look after the public welfare” (p. 26). This is a great quote and it echoes the famous “invisible hand” passage from Adam Smith’s The Wealth of Nations, yet I have not been able to track down Ridley’s source. This is typical; he is rather cavalier about sourcing. There are no footnotes, nor page citations. Each chapter has its own section in “Sources and further reading section” (pp. 375-388). But if you are trying to find a particular reference be prepared to spend some time and be frustrated. After spending 40 minutes with various search engines, I failed to find either Ridley’s source for the quotation from The Chemist or the original. In another great passage in chapter 3 (“Transport”) — where he questions the wisdom of the (self-anointed?) scientific establishment — Ridley quotes an article in the Scientific American from 1906 doubting the veracity of the Wright brothers’ claim to heavier than air flight: “If such sensational and tremendously important experiments are being conducted … is it possible to believe that the enterprising American reporter … would not have ascertained all about them … long ago?” (pp. 100-01). Well the answer to that question is yes, it is possible to believe the high Pooh-bahs of the American scientific establishment were ignorant of what the Wright brothers were doing in 1906, let alone in 1903 at Kitty Hawk. I was successful in tracking down that quotation (Scientific American 1906, vol. 94: 40), it only took 20 minutes and access to a major university’s library and search engines.

Yet Ridley does not fare so well in chapter 6 (“Communication and Computing”) where he quotes Thomas Watson of IBM in 1943 as saying that “there is a world market for maybe five computers” (p. 203). It is a nice story, but it is either totally or heavily fabricated. The only quote from Watson in the public record (appropriately from Geek History: https://geekhistory.com/content/urban-legend-i-think-there-world-market-maybe-five-computers) that mentions five computers is from an IBM’s stockholders meeting, which says: “We believe the statement that you attribute to Thomas Watson is a misunderstanding of remarks made at IBM’s annual stockholders meeting on April 28, 1953. In referring specifically and only to the IBM 701 Electronic Data Processing Machine — which had been introduced the year before as the company’s first production computer designed for scientific calculations — Thomas Watson, Jr., told stockholders that ‘IBM had developed a paper plan for such a machine and took this paper plan across the country to some 20 concerns that we thought could use such a machine. I would like to tell you that the machine rents for between $12,000 and $18,000 a month, so it was not the type of thing that could be sold from place to place. But, as a result of our trip, on which we expected to get orders for five machines, we came home with orders for 18.’” The problem is that Ridley’s work is replete with wonderful anecdotes. I have no doubt that the vast majority are accurate, but detailed citations are valuable in both verifying and falsifying historical interpretations.

Another deficiency is that Ridley’s knowledge of the literature in economic history is incomplete; he attributes the growth of the American automobile industry to Henry Ford who “revolutionized the industry after 1908” (p. 92). This statement is both incorrect and contradictory to his hypothesis that innovations and economic changes are evolutionary, not revolutionary. Robert Thomas (1969) explains just what Ford did in the era of the Model T Ford. In 1908 both: “Buick and Ford introduced into the $1,000 price class for the first time automobiles of standard design [engines in the front, French type body work, steering wheel, etc.]. These designs, the Buick Model 10 and the Ford Model T, were similar to cars being sold in the $1,500-$2,000 price class” (Thomas p. 150). What Henry Ford did that made him different from competing producers is to make virtually identical cars year after year while simultaneously lowering prices. The automobile was changing rapidly during those years (selective transmissions replacing planetary transmissions, self-starters, increased horsepower, etc.) yet the Model T remained unchanged. By 1914 the Model T was selling approximately 45% of new cars sold in the U.S., yet it was receiving only 25% of the revenue from new car sales (Thomas, p. 153). What Ford did was to produce outdated cars whose primary competitors were used cars, not new cars. Essentially Henry Ford made a fortune by producing technologically obsolete vehicles at attractive prices. As the technology of the automobile advanced, Ford could not maintain his price/marketing strategy because many (most?) of the used cars for sale in 1920 had more desirable features than the 1920 Model T. At prices that Ford could profitably sell cars, consumers preferred the typical used vehicle to the 1920 Model T. The growth of the used car market forced Ford to change strategies; subsequently the Ford company followed the industry practice of annual model changes and improvements with constant or increasing prices.

Ridley’s deficiencies aside, the insights he provides in the various chapters ((2) Public Health, (3) Transport, (4) Food, (5) Low-Technology Innovation, (6) Communications and Computing, (7) Prehistoric Innovation, (8) Innovation’s Essentials, (9) The Economics of Innovation, (10) Fakes, Frauds, Fads, and Failures, (11) Resistance to Innovation, and (12) An Innovation Famine) are very perceptive and an educational delight. Ridley frustrates any who wish to replicate his analysis without undo effort, still every chapter has multiple non-obvious insights. Focusing on a few insights does not do justice to the book, yet it must be done otherwise the review would be too burdensome to read.

A theme that Ridley repeatedly emphasizes is the conservatism of government and the establishment in reaction to innovation. Patent and copyright law as obstacles to innovation have already been mentioned, but we should not forget our own sacred cows, the intelligentsia and academia. As a graduate student in the 1960s, I remember the future Nobel Prize winner, Douglass C. North, echoing the received wisdom of the time that no more aid or development projects should be directed towards countries (particularly India and Pakistan) because they were “basket cases,” that were too overpopulated and whose only fate was starvation and death for the many. Ridley (p. 134) suggests that this opinion had its genesis in the foreign services and development agencies. If that is the case, Paul Ehrlich’s Population Bomb (1968) is not entirely his responsibility. Nevertheless, it is risible that so many academics could have been so wrong about the near-term future of food production in the late 1960s through the mid-70s. In the same vein, government agencies in India tried to suppress the introduction of the hybrid wheats that were among the first products of the Green Revolution: “Indian bureaucrats were adamant that Mexican wheats should not even be allowed in the country, let alone encouraged. The biologists warned of devastation and disease if the wheats failed. The social scientists warned of ‘irreversible social tensions’ and riots if the wheats succeeded — and caused some farmers to make more money than others” (p. 133)

Ridley devotes an entire chapter to a history of the suppression of novelty. Things that were suppressed include coffee, margarine, genetically modified organisms, herbicides, and cellular telephony. Methods of suppression include diktats, regulations, patents, copyrights, legislation, commissions, and litigation. Every change affects someone negatively; if a change can be halted or delayed the costs of the change can be eliminated or reduced. Ridley relates how “land-use” (zoning) planning has reduced the population of San Jose during the Silicon Valley boom. Another, more completely examined example is that of the European Commission, which in 2014 mandated that energy efficiency (a “good” thing to the Commissioners, not so good for energy producers) of vacuum cleaners be tested in the absence of dust or debris. It so happens that the Dyson Cyclone vacuum cleaner is much more energy efficient than vacuum cleaners with bags because the bag cleaners operated less efficiently as the bags got filled with dust and debris. The (German) manufacturers of bagged cleaners had lobbied the Commission effectively. Dyson appealed the regulations through the courts and in November of 2018 he was vindicated. Still the delay cost Dyson sales and increased those of the makers of bagged cleaners. We may not have much reason to lament a billionaire’s decreased sales, but we should deplore the erroneous information produced by public agencies that deluded consumers.

There are many cases of innovations that Ridley examines that are worthy of full-scale economic analyses. Two that particularly intrigue me are the examples of corrugated roofing and bed-nets with insecticide embedded in them. We see corrugated roofing throughout in poor, tropical countries; I typically had given them no thought other than this is how the poor live in the tropics until this book. Corrugated roofs were a substantial improvement over other types of roofing for warehouses and industrial spaces in nineteenth century Britain. In poor countries today in the tropics they are symptomatic of improved living conditions; the alternatives to tin roofs are organic (straw, mud, and wood) that are more costly (including upkeep), less effective, a haven for insects and rodents, and not very useful for channeling rain for storage or irrigation. It would be nice to know the cost/benefit analysis comparing corrugated roofing to the alternatives and what something as innocuous as roofing does.

Bed-netting infused with insecticide is an interesting story. The bed nets were treated with insecticides to see how prophylactic they were in preventing malaria carrying mosquitoes from infecting people. Since the bed nets rarely escaped holes and tears, the people conducting the study kept it going even when the bed-nets were severely damaged. The researchers found that torn bed-nets retain a substantial amount of efficacy and are still effective in reducing the mosquito-borne transmission of malaria with bed-nets accounting for approximately “70 per cent of the six million lives saved worldwide [from death by malaria]” (p. 75).

There are other examples galore; if you have an interest in innovation, how it evolves, and how and why it is obstructed, then you should read this book. I recommend it highly. True it has difficulties — the lack of adequate citations and an index that is somewhat haphazard. Still I urge you to read it; I would recommend buying the e-copy for two reasons: 1) on most e-books you can do a word search and that reduces the importance of an index; and 2) the hard-bound (cloth) copy that I purchased is nearly falling apart after one (close) reading. The binding of this book does no credit to its publisher.

Reference:

Robert Paul Thomas, “The Automobile Industry and Its Tycoon,” Explorations in Entrepreneurial History, ser.2:6:2 (1969: Winter).

 

Copyright (c) 2020 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 (August 2020). All EH.Net reviews are archived at http://www.eh.net/BookReview.

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

Small and Medium Powers in Global History: Trade, Conflicts, and Neutrality from the Eighteenth to the Twentieth Centuries

Editor(s):Eloranta, Jari
Golson, Eric
Hedberg, Peter
Moreira, Maria Cristina
Reviewer(s):Straumann, Tobias

Published by EH.Net (April 2020)

Jari Eloranta, Eric Golson, Peter Hedberg, and Maria Cristina Moreira, editors, Small and Medium Powers in Global History: Trade, Conflicts, and Neutrality from the Eighteenth to the Twentieth Centuries. London: Routledge, 2018. x + 240 pp. $124 (hardcover), ISBN: 978-1-138-74454-7.

Reviewed for EH.Net by Tobias Straumann, Department of History, University of Zurich

 

History is usually written by the victors, and since military victory is often linked to troop size and economic capacity, the victors are usually great powers. As a result, our memory tends to be biased towards a narrow understanding of war and victory, leading us to underestimate the fact that even great powers need alliances with small and medium nations in order to succeed. This book, edited by Jari Eloranta, Eric Golson, Peter Hedberg, and Maria Cristina Moreira, aims at drawing a more realistic picture of the role played by weaker states during greater conflicts and thereby fostering new research. Weakness is defined by relatively low military capacity and relatively high trade openness. The ten contributions study crucial episodes of European countries, the United States, and Brazil from the eighteenth to the twentieth century. As the editors write in the introduction, the main argument of most chapters is that weak states were able to expand their trade and discover new markets, thus increasing their economic importance for belligerents.

Part I deals with the interplay of trade and conflict in the long run, with most contributions focusing on the Napoleonic Wars. Jeremy Land, Jari Eloranta, and Cristina Moreira investigate the evolution of American trade from 1783 to 1830 when the United States were not a great, but a medium power on the world stage. The authors show that the U.S. was able to expand its trade despite difficult circumstances. Silvia Marzagalli studies the U.S. case during the same period, but concentrates on the American shipping and trade in the Mediterranean, which increased enormously from 1793 to 1815. She highlights the crucial role of American neutrality, not as a clear-cut status, but as a negotiable and flexible stance towards war and the belligerent powers. Maria Cristina Moreira, Rita Martins de Sousa, and Werner Scheltjens analyze commercial relations between Portugal and Russia from 1750 to 1850 and show how conflicts, blockades, and institutional problems hampered direct trade. Rodrigo da Costa Dominguez and Angelo Alves Carrara study the effects on the Napoleonic Wars on the governance of Brazil as a part of the Portuguese empire. On the basis of fiscal sources, the authors show how the shift of the Portuguese Court from Lisbon to Rio de Janeiro in 1808 was conditioned by the introduction of the Continental Blockade in 1806 and the desire of the Portuguese authorities to maintain their neutrality during the Napoleonic Wars. Peter Hedberg and Henric Häggqvist explain the patterns of Swedish trade and tariffs from 1800 to 1920, with a special focus on the opportunities created by Swedish neutrality during the Napoleonic Wars, the Crimean War and World War I. Their data suggests that all three conflicts had a significant impact on Swedish trade and trade policy, positively as well as negatively, and that, overall, neutrality helped, but was not important enough to counteract the totality of war, especially during World War I.

Part II investigates the interaction between trade and neutrality in conflicts in the twentieth century. Eric Golson discusses the evolution of the concept of neutrality in wartime. He starts in the early 1600s, when Hugo Grotius came up with a first vague definition, explains how the Hague and Geneva Conventions in the late nineteenth and early twentieth centuries institutionalized the concept, and describes its collapse in World War I, giving way to a “new realism.” Consequently, in World War II small and medium neutrals (Portugal, Spain, Sweden, and Switzerland) were forced to make trade, labor, and capital concessions in order to preserve their territorial integrity. Knut Ola Naastad Strøm analyses how Norway coped with the western blockade of Germany during World War I. He shows how in the first half of the war neutrality and prosperity went hand in hand, while in the second half of the war the tightening of the western blockade drastically reduced Norwegian exports to Germany and imports from the UK and the U.S. Eric Golson and Jason Lennard investigate the impact of World War I on the Swedish economy by studying the history of the ball bearings manufacturer SKF. They find that World War I greatly benefited the company, as it increased its capital stock and provided a long-term dominating position in the international market for ball bearings in the 1920s. In a further chapter, both authors try to capture the macroeconomic effects of neutrality on the Nordic countries by calculating the long-term real output trend between 1900 and 1960 and measuring output gaps for the war periods. Their results suggest that the Nordic countries suffered only mildly from World War I, but significantly from World War II, while recovery was much swifter after 1945 than after 1918. Niklas Jensen-Eriksen deals with the role of neutrality in the 1950s, asking how successful the U.S. and its allies were in incorporating European neutrals (Austria, Switzerland, Sweden, Finland, Ireland) within their export control system. His survey shows that neutrals hardly resisted U.S. demands for cooperation, even if it ran against their principles of neutrality. In the early years of the Cold War, the U.S. was economically too dominant to be ignored.

Toshiaki Tamaki and Jari Ojala conclude the volume with an analytical summary and raise the question of how the historical experiences of small and medium-sized Western countries can be linked to a global history of neutrality and the contemporary reality in which larger units beyond the nation state have become increasingly more important.

Overall, the book succeeds in correcting the conventional picture of the role played by small and medium-sized states during major conflicts. The contributions which compare several countries and make analytical points provide especially valuable insights. The endorsement by Patrick O’Brien in the short foreword is highly deserved. On the other hand, as is often the case with edited volumes, the analytical level and the approaches adopted by the authors are quite diverse, and the unifying themes are not always as strongly visible as the reader would wish. Although the introduction and the concluding remarks go a long way towards bringing the contributions together, the main hypotheses remain general. Moreover, the title implying a global view overstates the range of the volume, as the focus clearly stays on the Western world with a particular emphasis on the experience of the Nordic countries. Nevertheless, the book makes a powerful contribution to a more nuanced understanding of war, trade, and neutrality, and deserves to be widely cited. Future research dealing with the economic history of the Napoleonic War and the world wars of the twentieth century should pay more attention to the importance of trade networks entertained by the great belligerent powers.

 

Tobias Straumann is Senior Lecturer of Economic History at the University of Zurich. He is the author of 1931: Debt, Crisis, and the Rise of Hitler (Oxford University Press, 2019) and Fixed Ideas of Money: Small States and Exchange Rate Regimes in Twentieth-Century Europe (Cambridge University Press, 2010).

Copyright (c) 2020 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 2020). All EH.Net reviews are archived at http://www.eh.net/BookReview.

Subject(s):Military and War
International and Domestic Trade and Relations
Geographic Area(s):General, International, or Comparative
Europe
Time Period(s):18th Century
19th Century
20th Century: Pre WWII
20th Century: WWII and post-WWII

California Greenin’: How the Golden State Became an Environmental Leader

Author(s):Vogel, David
Reviewer(s):Kanazawa, Mark

Published by EH.Net (November 2018)

David Vogel, California Greenin’: How the Golden State Became an Environmental Leader. Princeton: Princeton University Press, 2018. xi + 280 pp. $30 (hardcover), ISBN: 978-0-691-17955-1.

Reviewed for EH.Net by Mark Kanazawa, Department of Economics, Carleton College.

 
This is a highly readable broad-sweep account of California environmental history in a nutshell. But it goes way beyond mere description to advance a thesis that explains how California has attained a position of leadership among U.S. states in environmental policy, while still managing to support a vibrant economy. The argument is essentially a series of stories of how environmental policy has been shaped by competing political and economic interests. The basic thesis, stripped to its bare bones, is that three factors have made California’s enviable position possible: citizen mobilization, selective support from businesses, and a steady growth in regulatory capacity over time.

The argument progresses in a nicely-structured series of chapters that literally span the history of the state. The first substantive chapter is about gold mining, which was the main environmental issue of nineteenth century California, especially after use of the environmentally destructive process of hydraulic mining became widespread. It then proceeds to devote a chapter to each of the main environmental issues — land protection, coastal protection, water management, clean air policy, and energy policy — that the state has experienced, in a series of overlapping phases, over time. It turns out that each issue has presented a different set of challenges because of differences in factors that fostered citizen mobilization and in the economic stakes of different segments of the business community. The contrasting ways in which the politics and economics of each issue played out is used to illustrate the roles played by citizen mobilization and business stakes. The overall explanation is compelling and nuanced.

A key recurring theme is the active support for environmental protection by some businesses, not out of any sort of humanitarian concerns but rather, when it was in their own best interests. In cases where the business community was unified in opposition, it was typically difficult to enact effective environmental protection. However, when business was divided, we often observed unholy alliances between some set of businesses on the one hand, and citizens and environmental groups on the other, to enact environmental policy. This “bootleggers and baptists” coalition idea has been around since at least the early 1990s but has made surprisingly modest headway in penetrating popular debates over environmental policy, which all-too-often portray businesses as staunchly and unreservedly anti-environmental. In contrast, Vogel shows how commonly such unholy alliances have appeared in California environmental history.

Another recurring theme is the importance of the visibility and salience of environmental problems in mobilizing citizen support for environmental protection. What has often mattered in California history in rousing citizens to action has been direct experience with environmental degradation. For example, offshore oil drilling that sometimes caused damaging oil spills led irate coastal communities to effectively push for coastal protection. On the other hand, environmental problems that were out of sight — such as the famous flooding of the Hetch-Hetchy Valley to provide San Francisco with drinking water — were often out of mind and failed to provoke the necessary citizen ire to bring out sufficient support for environmental protection. On a number of occasions, physical topography was a key factor that increased the salience of a particular environmental problem. For example, the fact that the Central Valley was basically a floodplain exacerbated the environmental damages of hydraulic mining. And later on, the peculiar topography of the Los Angeles basin trapped smog at a very early date, leading to early demands for policies to control air pollution.

Much of the argument of this book will resonate with many public choice scholars, who may interpret the episodes as reflecting the imperatives of political coalition building, conditioned by perceived stakes and transaction costs of political organization. Relatively large and concentrated stakes in policy outcomes have mattered a great deal. Divisions across different business sectors have increased the political transaction costs of the business community. Citizen and environmental groups have been galvanized by environmental problems that posed clear and present dangers. Droughts, smog events, and oil spills all served to provoke demands for changes in environmental policy.

Perhaps the biggest question I have concerns the broader lessons of the California experience for environmental policy more generally, in other contexts and looking forward into the future. On one level, it is hard to argue against the ideas that direct personal experience with environmental problems galvanize popular support for policy and that ‘bootleggers and Baptists” coalitions may arise. Both of these seem clearly correct. However, given the present state of extreme political polarization and ideology-based opposition to policy actions on issues like climate change, one wonders about the explanatory limitations of a narrative that focuses on relative special interests while largely ignoring the role of ideology.

It is striking to me, for example, that except perhaps for the concluding substantive chapter on energy use and climate change, political parties are largely invisible in Vogel’s story. This is counter to a number of narratives that highlight the importance of political parties, such as Robert Kelley’s scholarship on nineteenth century hydraulic mining, and my own reading of the early historical development of California state water policy. As an economist, I would not be inclined to go on the record as arguing that ideological factors swamp economic pressures: I do not believe that they do. Indeed, there is something ironic in an economist criticizing a political scientist for not paying more attention to party politics. However, lessons from these areas and others lead me to believe that models based solely on relative economic interests, though powerful in many respects, may be too simple and perhaps misleading in enabling us to draw lessons regarding effective environmental policy for the future. Especially now in our present political climate where too many people are calling climate change a “hoax” and science is sometimes demonized by a significant portion of the population.

These concerns aside, however, this book is well worth reading for its careful, detailed, judicious, and sensible interpretation of the historical record. On the whole, this may be the best single brief overview of California environmental history that I have read. In this book, David Vogel continues to cement his well-deserved reputation as one of our leading scholars in the academic study of environmental regulation and policy.

 
Mark Kanazawa is Wadsworth A. Williams Professor of Economics at Carleton College. His recent book Golden Rules: The Origins of California Water Law in the Gold Rush was published in 2015 by University of Chicago Press.

Copyright (c) 2018 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 (November 2018). All EH.Net reviews are archived at http://www.eh.net/BookReview.

Subject(s):Agriculture, Natural Resources, and Extractive Industries
Government, Law and Regulation, Public Finance
Geographic Area(s):North America
Time Period(s):19th Century
20th Century: Pre WWII
20th Century: WWII and post-WWII

A Culture of Growth: The Origins of the Modern Economy

Author(s):Mokyr, Joel
Reviewer(s):Diebolt, Claude

Published by EH.Net (November 2017)

Joel Mokyr, A Culture of Growth: The Origins of the Modern Economy. Princeton, NJ: Princeton University Press, 2017. xiv + 403 pp. $35 (cloth), ISBN: 978-0-691-16888-3.

Reviewed for EH.Net by Claude Diebolt, Department of Economics, University of Strasbourg.

 
I enjoyed this new book by Joel Mokyr, which is praiseworthy for its elegance and erudition. It tells the story of economic growth with “culture” — a mushy word for most of us — as the invisible hand. However, I regret the lack of in-depth consideration of the German language literature. Significantly more attention could also have been given to economic cycles. Werner Sombart, for example (Der moderne Kapitalismus and Der Bourgeois. Zur Geistesgeschichte des modernen Wirtschaftsmenschen), was the first to come to mind while reading this fantastic book. It also reminds me of George Akerlof and Robert Schiller’s Animal Spirits, where confidence, fear, a propensity to gamble, and follow-the-leader effect stories are presented as central to explain the decision making process. The Bourgeois Trilogy by Deirdre McCloskey is another seminal work in that spirit: ideas, not capital or institutions enriched the world. A growth theorist would probably also see strong connections between Mokyr’s latest effort and the unified growth theory initiated by Oded Galor.

The book is about the roots of the Industrial Revolution, the Great Enrichment, and radical changes in values, beliefs, and preferences. It is not about a mass movement. It is a phenomenon related to an elite: philosophers and scientists of course, but also engineers, instrument makers, and even industrialists who spawned the process. In any case, it is a minority of the population. Mokyr’s ambition is to understand and to explain how these beliefs and values emerged — why some people developed new ideas and why these ideas replaced the ones in place.

According to Mokyr, we know pretty much what happened, how it happened and where it happened, but we still do not know why it happened. Why, after thousands of years of stagnation, have a number of countries and regions of the world experienced an unprecedented increase in both the scale and speed of their economic growth? Why Europe and not China? Why England? Is it the result of happenstance? The Black Death perhaps? What about the influence of religion (Max Weber and the Protestant ethic?), of major intellectual and scientific personalities who changed the game (Martin Luther, Francis Bacon, Isaac Newton, Adam Smith, Charles Darwin)? What role should be given to natural resource saturation, innovation (the compass, gunpowder, printing) and capital accumulation, trade networks, market institutions and organizations, ideas, violence (battles, dynastic arrangements, power struggles…), women, etc.? For Mokyr, the Gordian knot is a Culture of Growth — a “Useful knowledge,” scientific and technological knowledge, the meeting of motivations and incentives, of attitudes and aptitudes toward Nature and the ability to persuade others. These are the key elements of the puzzle.

“No theory-no history! Theory is the pre-requisite to any scientific writing of history,” wrote Werner Sombart (1929) in the Economic History Review. I urge you to carefully read Joel Mokyr’s evolutionary approach to culture in the spirit of Schumpeter’s theory on Unternehmergeist. It will give you a fresh insight into one of the most fascinating questions in our field: the origins of the Great Enrichment. It will invite everyone to visit economic history with an optimistic vision for the future of the World!

 
Claude Diebolt is CNRS Research Professor of Economics at the University of Strasbourg and editor of the journal Cliometrica.

Copyright (c) 2017 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 (November 2017). All EH.Net reviews are archived at http://www.eh.net/BookReview.

Subject(s):Economic Development, Growth, and Aggregate Productivity
Social and Cultural History, including Race, Ethnicity and Gender
Geographic Area(s):General, International, or Comparative
Europe
Time Period(s):Medieval
16th Century
17th Century
18th Century
19th Century
20th Century: Pre WWII
20th Century: WWII and post-WWII

The Gunpowder Age: China, Military Innovation, and the Rise of the West in World History

Author(s):Andrade, Tonio
Reviewer(s):Eloranta, Jari

Published by EH.Net (February 2017)

Tonio Andrade, The Gunpowder Age: China, Military Innovation, and the Rise of the West in World History.  Princeton: Princeton University Press, 2016. ix + 432 pp. $40 (cloth), ISBN: 978-0-691-13597-7.

Reviewed for EH.Net by Jari Eloranta, Department of History, Appalachian State University.

The Gunpowder Age is a new elaborate volume on some of the key questions in world and economic history debates, namely the development of China, and to some degree Europe, in the long run, especially in the last five hundred years. Tonio Andrade, who is a professor of history at Emory University, has written a volume that cannot be overlooked in, for example, the so-called Great Divergence debate, which began with Kenneth Pomeranz’s work almost twenty years ago. Since then, economic historians have paid increasing attention to China, producing a lot of welcome scholarship on its long-run economic and social development, as well as tons of new data. Regardless, the debate over the timing and extent of China’s decline, vis-à-vis various parts of Europe, is still going strong. Scholars like Pomeranz, R. Bin Wong, Stephen Broadberry, Robert Allen, and others have weighed in, and the picture emerging from these debates is that China’s decline was probably apparent by the eighteenth century, at least in comparisons with the more affluent parts of Europe. Of course, there was also a great deal of divergence within Europe at the time, which complicates these comparisons.

Yet, Andrade’s work not only contributes to these debates, but also another huge issue in world (and economic) history, i.e. the introduction and use of gunpowder and the development of military supremacy in the early modern period. Andrade highlights the introduction of gunpowder and the technological advances made in both China and Europe, and he argues that China in fact continued to develop gunpowder technologies throughout this period of (relative) economic decline, even as late as the eighteenth century. Why then did China fail so spectacularly during the Opium Wars of the nineteenth century? His answer is that certain conditions failed to materialize in the Chinese case, for example the lack of continuous warfare and competition, which of course Europe experienced almost annually (as shown by Charles Tilly). In some ways, Andrade argues that some of China’s decline was not as noticeable or steep as we have assumed in the past. And it is here that he makes his greatest contribution to our understanding of long-run world history: China’s military development was simply on a different trajectory than in Europe. Europeans went further in developing cannons and handheld weapons, whereas the Chinese often favored rockets and alternative types of gunpowder weapons. In Europe, this manifested itself in “tournaments,” as Philip Hoffman has recently argued in Why Did Europe Conquer the World? (Princeton: Princeton University Press, 2015). Andrade also emphasizes other historical continuities in China’s recovery of superpower status at the end of the twentieth century, pointing to this past of military experimentation and deep understanding of military strategy. (One only needs to recall Sun Tzu to appreciate the long history.)

Andrade’s book is divided into four parts, plus the appendices and other extra material. Part I provides an introduction to the early history of Chinese warfare and military development. This section is mostly deep background to the main arguments of the book, and useful as a reminder of the conflicts that built and destroyed dynasties. Part II sets up the comparison between Europe and China in the early gunpowder age, and gives us a somewhat familiar story of the technological developments in weaponry, similar to Hoffman’s work. However, Chapter 6 is particularly interesting for economic historians in revealing some of the differences between European and Chinese priorities in warfare, in particular the use of cannons. Part III is more explicitly comparative and highlights how Europeans gained dominance in naval and other military weaponry. Part IV then discusses the nineteenth century superiority of the Europeans and how China attempted (actually quite successfully) to modernize their military after the defeats. Andrade then concludes with some broader ideas of China’s military, economic, and political development on the basis of these comparisons.

In general, this book is quite well researched and written, and it is a welcome addition to the new literature on China’s history, the Great Divergence, and the military development of the last 500 years. However, I have some reservations and modest criticisms of this volume. First, the Great Divergence debate is not covered very thoroughly in this book, especially the recent contributions made by many economic historians. I find this curious, but also somewhat predictable. World historians and economic historians still do not have enough common debates and discussions, and thus we often do not experience truly inter- or even intradisciplinary debates. Discussion of the timing and extent of China’s economic decline would have enriched the comparisons in the book. Second, on the same theme, Andrade does not reference some of the more interesting work done on conflicts and the role of governments in this period, for example by Mark Dincecco or David Stasavage. Military technologies are not only the outcome of conflicts, but also the changing role of the central government as well as revenue and spending patterns. Third, while Chapter 14 does discuss European navies, the role and cost of naval warfare, which is intricately linked to the European empire building projects, should have been discussed in a wider context — after all, many world historians ascribe the destruction of the Great Fleet in 1433 and the subsequent prohibition of trade as key moment in the Great Divergence. Andrade also fails to discuss enough the importance of the extensive training received by English seamen in the use of cannons and other gunpowder weapons, which gave them an advantage in the naval battles.

Finally, I would also like to mention that while the book does not make much use of quantitative data, there is an appendix of interesting new data, collected by the author, on the numbers of conflicts in China, in comparison with Europe. Andrade also compiles a data set on instances that warfare was referenced in Ming and Qing records.  This is a clever way of making some inroads into the mindset of the rulers of those dynasties. As we already know, for example the attitudes of Song and Ming rulers on the value of military service were very different — the former saw it as a dishonorable profession, which of course reflected on the quality of recruits and ultimately performance in the battlefield. This type of data is something that will surely also interest economic historians who are interested in broad comparisons between Europe and China in the early modern period.

In general, this is a well-written and careful analysis of an important topic, and the focus is explicitly comparative. While some of the chapters do not go deep enough into the comparisons, and some of the contributions made recently by economic historians are not always referenced here, this book is a welcome and worthwhile addition to the current literature on China, Europe, the Great Divergence, and the early modern military revolution. It should yield to interesting debates among world and economic historians in the near future — hopefully such debates will be visible enough in both fields, so we can have fruitful interactions similar to what followed Pomeranz’s early work in this area.

Jari Eloranta is Editor of monograph series Perspectives in Economic and Social History (Routledge).  He has written extensively on the history of military and government spending as well as conflicts, including a recent volume Economic History of Warfare and State Formation (Jari Eloranta, Eric Golson, Andrei Markevich, and Nikolaus Wolf editors, Springer: Tokyo, 2016).

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Subject(s):Military and War
Geographic Area(s):Asia
Europe
Time Period(s):Medieval
16th Century
17th Century
18th Century
19th Century
20th Century: Pre WWII
20th Century: WWII and post-WWII