is owned and operated by the Economic History Association
with the support of other sponsoring organizations.

Corn and Capitalism: How a Botanical Bastard Grew to Global Dominance

Author(s):Warman, Arturo
Reviewer(s):Bogue, Allan G.

Published by EH.NET (August 2003)

Arturo Warman. Corn and Capitalism: How a Botanical Bastard Grew to Global Dominance. (Translated by Nancy L. Westrate). Chapel Hill: University of North Carolina Press, 2003 (originally published in Spanish in 1988). xiii + 270 pp. $49.95 (cloth,) ISBN 0-8078-2766-5; $24.95 (paper), ISBN 0-8078-5437-9.

Reviewed for EH.NET by Allan G. Bogue, Professor Emeritus, University of Wisconsin, Madison.

The distinguished Mexican anthropologist, Arturo Warman, published the Spanish language edition of this sweeping survey of the place of corn in world history since the sixteenth century in 1988. The colorful subtitle refers to corn’s disputed parentage and the fact that through history the crop has stayed outside “the system of accepted norms” (p. xiii). As a Mexican social scientist Warman became deeply interested in the social and economic significance of corn and planned a history of the crop’s place in Mexican life. Various scholarly projects prepared him for that work but he ultimately deferred it in favor of the current volume.

Several preliminary chapters lay a foundation for the book. Warman begins by describing the many useful American plants that have had major “repercussions” in “the development of the world economy, and the world market place.” At the heart of corn’s story, he writes, “lies the history of capitalism” (p. 11). The corn plant (Zea mays), Warman explains, has various amazing characteristics. Evolved from the grass teosinte, it does not propagate itself in nature, is self-pollenizing, is remarkably responsive to hybridization, is adaptable to a wide range of environments, has outstripped other food plants in its yields, is accommodative to complementary crops, is easily converted to edible form, and is capable of conversion into a myriad of derivative products ranging from bourbon to adhesives and automotive fuel, as well as providing livestock feed that enters the human diet as animal protein. Debate has raged as to whether the birthplace of corn was the Americas or Asia. Sketching the archeological evidence, Warman accepts Mexico as the place of origin.

Warman devotes most of the remainder of the book to tracing the history of corn in major areas of the world, dealing first with Asiatic locales. First introduced there in the early sixteenth century by the Portuguese, corn became a crop of the mountains and frontier regions and particularly a food of the poor. He links its history to the complex land tenures and labor intensive systems of cropping in that great region and the relation of this crop to other major crops including a number of other western immigrants. Corn, he explains, was an important part of the second great agricultural revolution that occurred in China during the nineteenth and twentieth centuries.

He follows with an account of the place of corn in the Atlantic slave trade. Slaves endured their passage to the new world on a diet consisting almost solely of corn meal paste, the grain’s high vitamin content warding off scurvy. Introduced primarily by the Portuguese, corn became a major crop in the African slave shipping areas and their hinterlands to meet the provisioning needs of the slavers. The crop adapted well to slash and burn agriculture. By the seventeenth century, corn was well established on the Atlantic coast of Africa and probably in much of the interior. With the decline of the slave trade in Africa, European nations developed colonial relations with its peoples. Corn now became increasingly important as a subsistence crop grown by peasants. Colonial administrators and white settlers emerged as a ruling class in the colonial dependencies and a native worker class emerged to provide labor for extractive ventures and settler agriculture. Corn products also sustained this labor sector but corn’s resistance to disease, short growth cycle, versatility, low requirements of capital and labor, and high yields also commended it to white farmers. Colonial land policies, Warman explains, benefited white interests and confined native populations in restricted areas, thus limiting native livestock operations. Hampered by natural hazards and colonial policies, peasants used corn both as sustenance and to provide agricultural surplus. Corn became, Warman concludes “one of the secret weapons in peasant resistance to colonial rule” (p. 81). In the era of national independence that followed the colonial era in Africa growth in the volume of commercial export crops — coffee, tobacco, cacao, and cotton — far outstripped growth in domestic food crops; a condition of dietary dependence prevailed. Corn flour was one of the cheapest foods per thousand calories available in urban African markets. The hope for future growth in food production in Tropical Africa lies, Warman suggests, in land reform.

Turning to Europe, Warman reviews the treatment of corn in European publications from the sixteenth century to the modern era. First grown as a curiosity in Andalusia and later as an agricultural crop, by the eighteenth century it had displaced long established cereals both in irrigated areas and in the subsistence peasant economy of northern Spain. By the end of that century corn was planted from the Black Sea to Gibraltar and, it was said, south of a line from the mouth of the Garonne to the Rhine above Strasbourg. It was often planted on land that formerly had been fallowed. Ripening at a time that had typically been one of food scarcity, it reduced the threat of famine and became the food of those who lived in “poverty, rural deprivation, and primitive … conditions.” Corn contributed vitally to the ongoing, “intellectual, political, industrial, and agricultural revolutions” then underway (p. 111). Finding no “ubiquitous and precise cultural agent” that accounted for the diffusion of corn growing through much of early Modern Europe, Warman identifies four “natural and social factors”: “growing conditions and the agricultural systems or their associated methods: population dynamics; trade, prices, and markets; and landownership and the relations of domination existing between landowners and direct producers” (p. 112). Their interaction, sometimes affected by more subtle influences, made corn “the bread of southern Europe’s poor.” But it also “generated wealth for landowners, shopkeepers and money lenders, overlords, and the new middle class,” who, ironically, ate wheat bread (p. 131). This occurred as an agricultural revolution took place between the sixteenth and eighteenth centuries involving more intensive cultivation of the land and dwindling use of fallow.

Two American agricultural exports had tragic consequences — the potato famines of the mid nineteenth century and the widespread incidence of pellagra in southern Europe and later in the southern United States. Those highly dependent on corn as a food might develop pellagra and this chronic disease, causing dermatitis, diarrhea, and ultimately dementia, battered the population of European corn growing regions during the nineteenth century. Warman describes the various efforts to explain the disease and the developing conviction that diets heavily dependent on corn were responsible. Such dependence was usually associated with poverty and such onerous rents that peasants could not eat a balanced diet. Pellagra was “a symptom of a process of fierce modernization in peripheral areas” (p. 150).

In telling the story of corn in the United States, Warman stresses the importance of Native American tutelage. “Once the settlers had fully grasped the secrets and potential of corn, they no longer needed the Native Americans. Indigenous peoples were wiped out, scattered or relocated as settlers penetrated even further inland” (p. 155). Warman’s discussion of American economic development sketches many of the familiar facts of that story. Corn was a basic crop in the long continuing American frontier experience but played “its most important and long-lasting role,” he writes, ” in the predominantly rural world of the American South” (p. 159). It was a staple of slave diets but these were apparently sufficiently varied that the slaves did not suffer from nutrition deficiency diseases. Corn cultivation was far more extensive than cotton in the South but the latter produced the wealth and contributed most to the development of class differences. Sharecroppers became so hard pressed that pellagra was endemic by the early twentieth century. U.S. Public Health Service researchers discovered that a diet rich in milk, meat, and beans countered the disease. In the 1930s the University of Wisconsin’s Conrad A. Elvehjem showed that nicotinic acid deficiency was the specific cause. The human digestive process failed to unlock corn’s content of this vitamin when it was prepared as food in certain ways. Warman here comments that “pellagra was a disease born of development, a product of a type of progress that was imposed, unjust, and unequal”(p. 173).

Prior to the nineteenth century corn’s history was “tied directly to human nutrition.” In the expanding, industrializing, railroad-building United States, however it also became “the raw material for the production of meat and dairy products” and in the first half of twentieth century the U.S. crop accounted for half of the world’s production. It was the “very backbone” of American agriculture (pp. 181, 183). During that era U.S. corn production was more or less stable. The successful development of hybrids, however, along with improvements in mechanization, and fertilizer and herbicide use resulted in unprecedented yields of the crop after World War II. Now American corn became a significant factor in the world trade in cereals. By the beginning of the twentieth century U.S. pioneer subsistence agriculture had been replaced by commercial farming but farmers still continued “to supply the largest part of the means of production”– “labor, motive power, seeds, organic fertilizers.” Now the farmer became increasingly dependent on the market for these things. A massive institutional framework developed to sustain and direct agriculture and agribusiness became the “dominant force” in American agriculture (pp. 186, 188). In 1954 the Agricultural Trade Development and Assistance Act of 1954 was designed “to use U.S. agricultural surpluses abroad in the effort to eradicate world hunger” (p. 190). Related programs followed and corn was a major element in the U.S. contribution. Because “corn entered the world market … as a food stuff for the poor and as forage for the rich it surmounted the inelasticity of demand typically associated with cereals” (p. 192).

In a final substantive chapter Warman describes the world market for food as it developed between the 1950s and the mid 1980s. Prior to World War II, Western Europe was the only major agricultural region that did not meet its own needs and also provide some export grains. By the 1960s only the United States, New Zealand, Australia, and Canada were independent producers. U.S. aid programs exacerbated this trend and “food dependence became a chronic and widespread phenomenon in many Third World countries” as did population explosions (p. 203). Wheat dominated in U.S. exports until the 1970s and then corn became increasingly important. American aid had generated “an entirely new market, whether by introducing the consumption of wheat or by displacing existing domestic production” (p. 205). The U.S., charges Warman, distributed aid with a view to its strategic political impact. The political considerations of the United States and its allies dictated the magnitudes of supply and demand, prices and the conditions of sale, that defined the world cereal market and interacted with domestic tariffs, subsidies, and other production controls (p. 209). By the 1970s five great multinational grain handling companies dominated world trade in cereals. After a food production crisis in Russia and a failure of the hybrid corn crop in the U.S. during the early 1970s, however, food production outpaced population growth. Although “corn’s incredible growth as a commodity for reexport was the most outstanding phenomenon.” most third world countries had entered a condition of dietary dependence (p. 212). Despite adequate world supplies of food at the time of writing, Warman identifies a major problem of distribution and future vulnerability to shortages.

In two concluding chapters Warman discusses the recent phenomenal expansion of food production in which corn has been an important part and the possible ways in which growth in food production may be sustained. He sees two available agricultural modes — “capitalized intensive agriculture, also known as scientific agriculture or production by the wealthy.” The other is traditional peasant agriculture, utilizing few resources beyond those readily available and controlled by the production unit. This is farming by the poor” (p. 218). The first of these, he argues, has not improved world diets in the past nor solved the problem of distribution. Advocates of the Green Revolution tried to increase production in peasant agriculture by the use of hybrid crop varieties but had very limited success because of the high costs involved. Warman identifies less expensive ways of increasing peasant production — reduction of fallowing, bringing marginal lands into production and land reform. “The only way to confront the problem of world hunger,” he argues, “is to increase peasant production, using the many and at times unimaginable means to achieve that goal” (p. 231).

In the final chapter “New Reflections on Utopia and the New Millennium,” Warman explains that he has attempted “to analyze some social processes in which corn has played an important role” (p. 232). From one perspective his book is a sweeping historical survey of the adoption of corn as a major food and feed crop in much of the world. In this respect it is a fascinating compendium of thought-provoking facts and illustrative statistics. The volume is also a somewhat sour Marxist critique of modernization and, one may argue, a defense of peasant agriculture. A few passages illustrate Warman’s perspective. Concluding his discussion of the Chinese case, he writes “Growing rural surpluses did not remain in the rural countryside or even in China itself. … They were transferred to foreign powers’ spheres of economic influence and accumulated there. Peasants were the source of agricultural know-how and labor, yet they were increasingly threatened … settling marginal lands on the nation’s domestic frontier. For many decades they accepted the destiny of peasants everywhere, unable to eat what they produced because it was prohibitively expensive. Thus they transformed corn and other American plants, previously foods for the poor, into essential resources for their very survival. They did even more, they carried out a [social] revolution” (p. 50). He summarizes the slave trade this way: “the slave trade was not destiny or fate, but a series of opportunities and limitations.” Those “opposed to slavery … were social groups with the emerging power and will to confront that circumstance. The slave trade was an aberration, but neither was it the result of a general law of historical development. Rather, it was history; something that happened, but that just as easily could not have taken place at all” (p. 65). In considering the European agricultural revolution of 1600 to 1800, Warman rejects the common assumption that it was “the result of the application of scientific knowledge to production, diffused by elites and intellectual vanguards,” preferring instead “the idea of revolution as a result of collective knowledge and collective action” (p. 119). Leaving discussion of pellagra, he argues, “Change was promoted in the periphery from above and from abroad in order to recreate society in accordance with an ideological model; the industrial millennium that sought to establish a homogenous world. … Pellagra was not simply a disease of poverty and deficiencies, but one of the many diseases of modernization, of development, of prodevelopment capitalism” (p. 150). And finally, the history of U.S. agriculture is a process of accumulation with very different and increasingly accelerated rhythms. It is also a history of inequality, of exclusion, and of subjugation. Each process created its own marginal groups” — Native Americans, rural poor, urban poor, migratory workers, food stampers (p. 193). “Marginalization threatens the American farmer, the most outstanding product of the U.S. democratic ideal” (p. 194). He contrasts these developments with the diversity, stability, community reinforcement, and population controls found in peasant societies.

Although the principle of comparative advantage was at work in the spread of corn, it was conditioned by relations of power and dominance, argues Warman; accumulated wealth put less powerful groups at severe disadvantage. He was apparently unaware of ongoing cliometric research on the profits of imperial enterprise. He does not offer a rigid formula of class differentiation; to him the process was one of diverse conditions and forces but invariably involved exploitation. In considering the sections dealing with corn’s history in the United States, Americanists will consider some of his judgments to be overstated. The achievements of American plant scientists are brushed aside in a sentence, and the mechanics of diffusion are described in terms more general than modern scholarship has achieved. Warman emphasizes the need for increasing the effectiveness of peasant agriculture’s national or regional dietary independence but he gives much less attention to the issue of population control. Warman’s translator has produced a lucid, stimulating, and informative narrative but the reviewer remains happy that he is not one of Warman’s peasants nor sentenced to relive the existence that he, himself, experienced as a farm boy, living the democratic ideal.

Allan G. Bogue is Professor Emeritus of History at the University of Wisconsin, Madison and has published widely in American agricultural and political history. His most recent book is The Farm on the North Talbot Road (University of Nebraska Press). His next article, “Oxen to Organs: Chattel Credit in Springdale Town, 1849-1900,” will appear in the forthcoming summer number of Agricultural History.

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

The Rise of the Western World: A New Economic History

Author(s):North, Douglass C.
Thomas, Robert Paul
Reviewer(s):Coelho, Philip R. P.

Project 2001: Significant Works in Economic History

North, Douglass C. and Robert Paul Thomas, The Rise of the Western World: A New Economic History. New York: Cambridge University Press, 1973. viii + 171 pp. ISBN: 0-521-29099-6.

Review Essay by Philip R. P. Coelho, Department of Economics, Ball State University. <>

New or Old Economic History? Incentives and Development

This is a landmark book on the impact of property rights on European economic development. Published over a quarter of a century ago, its stated goal is “… to suggest new paths for the study of European economic history rather than … either [a detailed and exhaustive study or a precise empirical test that are the] … standard formats” (p. vii). North and Thomas attempt to identify the elements that allowed the Western European economy to rise to affluence. Their argument is made transparent in Chapter One (Theory and Overview): the key to growth was and is an efficient economic system. Efficient in the sense that the system of property rights gives individuals incentives to innovate and produce, and, conversely inhibits those activities (rent-seeking, theft, arbitrary confiscation and/or excessive taxation) that reduce individual incentives. They argue that property rights are classic public goods because: (1) once a more efficient set of property rights is discovered the marginal cost of copying it is low (compared to the cost of discovering and developing it); (2) it is prohibitively expensive to prevent other political jurisdictions from emulating a more efficient set of property rights regardless of whether they contributed to their construction; (3) and finally, the idea of a set of property rights, like all ideas, is non-rival — we can all consume the same idea and the “stock” of the idea is not diminished. These public good aspects lead them to conclude that there may be under investment in the attempts to create more efficient sets of property rights because the jurisdiction that invests in the development of property rights pays the entire cost of their development but receives only benefits that accrue to its jurisdiction, while other jurisdictions can get the benefits without any of the developmental costs. Thus, the problems of public goods and the “free riders.”

Chapter Two (“An Overview”) sets the historical stage for their analysis. North and Thomas begin with tenth-century Europe and an examination of the classic feudal system. They contend that relatively low population densities and the absence of security (both economic and personal) led to a retreat from market exchange to one of self-sufficiency and to the development of feudalism. Protection was valuable and had to be paid for, but in the absence of markets it was paid for in kind rather than money. Since agricultural output could not be exchanged in the market (land) lords demanded labor services (dues) rather than output shares. Labor dues could be used to produce a more desirable set of consumables than output shares. Lacking market exchange, manorial labor was more fungible than agricultural output. The authors argue that from kings down to peasants, the absence of markets was the mid-wife to feudalism. The second prong of their thesis is that in feudalism, as in any societal arrangement, there existed a myriad of details, known as the custom of the manor that allowed the system to function. Once established, these customs became the set of property rights that molded the economic and personal relationships of feudalism.

As the centuries progressed populations grew and manorial economies replicated themselves. North and Thomas contend that land was available at the constant marginal cost (the cost of clearing land) up to the thirteenth century. At the end of this period diminishing returns to labor employed in agriculture manifested itself. The growth of population densities and the establishment of political order allowed markets to emerge. Diminishing returns and emergent markets gave feudal lords incentives to convert their serfs’ labor dues into fixed money payments. The lords were better off receiving a fixed payment rather than labor dues because the market price for labor was falling due to Malthusian diminishing returns to labor in agriculture. The commutation of labor services into money payments could not be reversed when labor became more valuable during the plagues of the fourteenth century. Amending the custom of the manor was subject to severe transactions costs, consequently by the sixteenth century servile labor in Western Europe was not viable.

Part Two (Chapters 3-7) presents evidence to buttress this thesis. Chapter 3 explores property rights in humans and land, Chapters 4 and 5 develop the frontier movement and the settling of land. Chapter 6 explores diminishing returns to agriculture in the thirteenth century, and Chapter 7 the devastation associated with the fourteenth century. Part Three of the book deals with the period 1500 to 1700 and covers the “unsuccessful” national economies of Spain and France and the successful ones of Holland and England. North and Thomas argue that inefficient sets of property rights hindered economic growth in Spain and France, while more efficient sets promoted the economic growth of England and Holland.

The paragraphs above are a rough sketch of the North-Thomas thesis on the growth of Western Europe. How well have the last 25 years of the twentieth century treated it, and how much consideration should it be given? The first question is relatively easy to answer. Texts and books in European economic development and history generally cite The Rise of the Western World, with the notable exceptions of David Landes and Rondo Cameron. In the academic literature it is frequently cited: The Social Science Citation Index for the years 1986-1990 gives the book about fifteen citations per year (68 total citations in the entire five year period), and for the last decade of the twentieth century (and subsequent to North winning the Nobel Prize in economics) citations rose to about twenty per year.1 But how big is that? It is larger than most, but not in the league of scholarship that alters the way a subject is considered. A relevant example is Ester Boserup’s The Conditions of Agricultural Growth that, for the same period (1986-90), was cited 158 times, or more than twice as frequently as North and Thomas. I believe the citation count assessment of the significance of this book is relatively accurate. The Rise of the Western World is an addition to the historiography of property rights, but it does not accomplish its stated goal: to explain the rise of the West. Furthermore there are significant gaps in its argument.

First, its reliance on Malthusian population theory may be misplaced. In 1966 the aforementioned Ester Boserup published her work The Conditions of Agricultural Growth (not cited in North and Thomas). From empirical evidence she argued that increasing populations led to the intensification of economic activities: From hunting and gathering, to a long-cycle agricultural rotation mixed in with hunting and gathering, to settled agriculture. In Boserup’s analysis output per man-year rises in agricultural societies relative to hunting and gathering societies, but output per hour devoted to the acquisition of food may have fallen. Boserup’s thesis is much more sophisticated than (and contradictory to) the simple Malthusian framework that North and Thomas rely upon. She points out that it is extraordinarily difficult to compare outputs in societies with different levels of production intensity. Population densities lead to different modes of production and entirely different societies. An increase in population density increases the range of productive activities that can be produced for market exchange, and as Adam Smith explains increased specialization leads to increased output and the size of the market limits specialization. North and Thomas recognize this interdependency explicitly. They state that increasing specialization due to increasing population densities may have partially offset Malthusian diminishing returns. How do they know it was a partial offset? The evidence they offer on diminishing returns and a Malthusian crisis in medieval England is primarily derived from the works of James E. Thorold Rogers, who investigated six centuries of wages and prices in England.2

As a source, Rogers is an excellent compilation of manorial roles and other data sources, however he is not a transparent writer and he is difficult to interpret. In volume one of A History of Agriculture and Prices in England (1866) he states, “… we may… conclude that the price of the service [wage labor], in so far as it was affected by competition, represents fully the economical conditions of supply and demand, and is interpreted by the evidence of prices” (p. 253). This may be interpreted to mean that wages are an accurate representation of the laborers’ incomes, but that does not seem to be what Rogers meant. Two pages later he writes that: “In many cases the labourer or artisan was fed. In this case, of course, he received lower wages. … At Southampton, the various artisans are almost invariably fed, … [In 1385] we read … of an allowance instead of food. As a rule, however, the wages paid are irrespective of any other arrangement. Sometimes, but very rarely, and only in the earlier part of the period, the labourer is paid in kind.” And in Six Centuries of Work and Wages (1884), Rogers indicates that feeding workers was considered routine (pp. 170, 328, 354-55, 510, 540-541, etc.).

I interpret Rogers to mean that in the early centuries of his study day laborers did not normally receive family food allowances, but that they were typically fed on the job. Given the nature of work (agricultural labor from shortly after sunrise to sunset) and medieval food preservation and preparation technology, not feeding workers would have forced them to devote significant amounts of time away from working to food preparation and to feeding themselves (just getting bread would be a formidable task given their work hours and the work hours of bakers). Besides being fed on the job laborers frequently had other perquisites such as gleaning, allotments of beer, and small amounts of land for individual agricultural activities (kitchen gardens). All these in-kind payments are mentioned in Rogers (1866) and are considered normal. North and Thomas base their work not only on the wage data from Rogers, but also on his price data for agricultural products.3 In order to determine real wages, money wages are divided by an index of agricultural prices.4 Notice that the numerator typically ignores payments in kind and the denominator is exclusively a food index. Medieval workers’ consumption bundles had a heavy food component, but if one is being partially paid in food and resources devoted to food (kitchen gardens), then real wage indexes that focus solely on the costs of food may be seriously distorted unless the income (both in money and in kind) elasticity for food is one and the overwhelming preponderance of the budget is devoted to food. Mildly put, the data that North and Thomas rely upon to show Malthusian diminishing returns are not entirely adequate to the task.

Other sources question the use of the Malthusian paradigm. James Z. Lee and Wang Feng unequivocally deny that Chinese agriculture from 1300 to 1800 experienced Malthusian crises. Similarly, Julian L. Simon disputed the empirical validity of the Malthusian model. Others question the North and Thomas view of medieval English agriculture. Gregory Clark questions the view of a primitive English agriculture running into diminishing returns in the early fourteenth century.5 Certainly the fourteenth-century plague was a disaster to the European economy, but it does not follow that the plagues that devastated it were direct consequences of Malthusian diminishing returns. More likely it was, as William McNeill hypothesized, a result of an integrated Old World economy that led to the introduction of a “new” pathogen to a dense, flea-ridden European population.6

So there are difficulties with North and Thomas’s belief that the diseases of the fourteenth and fifteenth centuries are a manifestation of declining living standards (Malthusianism). They do not consider that the plague may have been exogenous, that pathogens are subject to their own dynamics and evolution and not necessarily a result of human intervention.7 North and Thomas simply assert that the plague was a result of over population, diminishing returns, and declining living standards. But if that is so, why did the plague reoccur after population had declined and (according to the data they rely upon) wages had increased? And why did plague occur earlier — in the mid-sixth century? North and Thomas do not have answers.

There is a straightforward explanation to these questions that is grounded in epidemiology: It is that the plague was a “new” disease to fourteenth-century Europe and its relatively dense population resulted in high rates of infection and mortality. These rates decreased as immunities (both acquired and genetic) became more predominant in the populations of Europe. What has this to do with Malthus and diminishing returns? Nothing: The simple Malthusian doctrine correlating high death rates with low living standards is suspect. It assumes that diseases are a function of poverty while there is evidence that the causation runs from diseases to poverty, and it is contradicted by data which show areas with high money incomes (cities) having higher death rates than those areas with low money incomes (rural areas). Consequently any line of reasoning that relies upon the Malthusian doctrine, as does The Rise of the Western World, is suspect.

There are other flaws in their thesis, some minor, some major. A minor omission is that they do not specify why the servile labor force accepted the original commutation of labor services to money payments. According to their high transactions cost model, “the custom of the manor” would have made the initial negotiations prohibitively costly. A simple observation that personal freedom to the individual was worth more than the value of the money payments would correct this omission. And, such an observation would reinforce their claim that when the purchasing power of a unit of money fell (inflation) the lords were unable to switch back to servile labor.

A more significant difficulty with their thesis is their claim that while diminishing returns to labor existed in the countryside, urban areas had constant returns. These are inconsistent with declining real wages, because migration from village to town will prevent agricultural wages from falling.8 Another difficulty is their lack of knowledge of antiquity: They seem to believe that institutional innovations such as insurance and bills of exchange were medieval innovations, but these were known and used at least by the Hellenistic era, and the ancients developed many contractual forms that were resurrected and used again during the European Renaissance.9

So North and Thomas’s book is not without its flaws, but blemishes and all it still makes significant contributions in its emphasis on an efficient set of property rights as a necessary condition for economic development to take place. In this emphasis North and Thomas returned to the fundamentals of economics and its founding father, Adam Smith, who said: “Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism, but peace, easy taxes and a tolerable administration of justice; all the rest being brought by the natural course of things.”

The Rise of the Western World is right to echo these sentiments. Since its publication in 1973 the modest increases in economic and personal freedom that the Chinese have experienced have led its population to a degree of affluence entirely unanticipated a quarter of a century ago. Similarly, the decline in law and order has bought economic and personal disasters to many in parts of Asia and Africa. The lesson seems a hard one to learn: the protection of the liberties of people to both their persons and properties is the most effective way to promote the general welfare in the long run. Short-run policies that restrict these liberties inevitably reduce welfare in both the short and long run. By focusing on this lesson in The Rise of the Western World, North and Thomas have done the profession and humanity a meritorious service.


1. Counting citations is a tricky business because a slight change in the citation can result in an entry separate from the main one. Thus D.C. North and R.P. Thomas may be counted differently from D. North and R. Thomas.

2. North and Thomas cite other evidence, but much of this is ultimately derived from Rogers’s work. For example E.H. Phelps Brown and Shelia Hopkins’s works on wages and prices are based on data gathered from Rogers.

3. North and Thomas rely on the Phelps Brown and Hopkins works (1955, 1956, 1957) on real wages whose data are derived from the wage and price data of Rogers.

4. “Index” may not be a completely accurate term because the index frequently contains only one commodity; then, to be specific, it is a wage series expressed in wheat units.

5. Clark (1991) using labor inputs in harvesting as a proxy for wheat yields finds little change in output per acre over the medieval era. He observes that: “Interestingly the labour input on reaping wheat from 1250 to 1450 seems to have risen little, implying a constancy of yields over this period. This is consistent with the work of Titow and of Farmer on the Winchester and Westminster estates over the medieval period. … Wheat yields were fairly constant over the medieval period, the population losses of the Black Death having little impact on yields” (p. 454, footnotes omitted).

In another article, Clark (1988) observes that relatively low yields per acre in medieval England could be attributed to the relatively high interest rates. Taken together these observations do not lend support to the thesis that medieval Europe was in a Malthusian crisis because, if it were so, we would expect to see declining mean output per unit of labor and increasing mean output per unit of land as diminishing returns makes labor relatively abundant and land relatively scarce. The opposite would occur if, as a result of the Black Death, labor became relatively scarce.

6. North and Thomas do not recognize that the plague may have been the result of increasing living standards. As incomes rose trade increased and disease pools in different regions became integrated. Mortal diseases newly introduced to an area frequently have a devastating impact on the native population. For more on this see McNeill.

7. Exogenous in the sense that the plague was not a disease endemic to fourteenth-century Europe, although, most likely, it had appeared in Europe in the first millennium CE; see J. C. Russell for further information.

8. For a complete specification of this model see Chambers and Gordon.

9. Edward F. Cohen argues and presents persuasive evidence that these institutional forms were abundant in fourth-century BC Athens.


Boserup, Ester. The Conditions of Agricultural Growth: The Economics of Agrarian Change under Population Pressure. Chicago: Aldine, 1965.

Cameron, Rondo. A Concise Economic History of the World. New York: Oxford University Press, 1989.

Clark, Gregory. “Yields per Acre in English Agriculture, 1250-1860: Evidence from Labour Inputs,” Economic History Review 44 (1991): 445-60.

Clark, Gregory. “The Costs of Capital and Medieval Agricultural Technique,” Explorations in Economic History 25 (1988): 265-94.

Chambers, Edward J. and Donald F. Gordon. “Primary Products and Economic Growth: An Empirical Measurement,” Journal of Political Economy 74 (1966): 315-32.

Cohen, Edward E. Athenian Economy and Society: A Banking Perspective. Princeton: Princeton University Press, 1992.

Lee, James Z. and Wang Feng. One Quarter of Humanity: Malthusian Mythology and Chinese Realities, 1700-2000. Cambridge, MA: Harvard University Press, 1999.

Landes, David S. The Wealth and Poverty of Nations: Why Some Are So Rich and Some So Poor. New York: Norton, 1998.

McNeill, William H. Plagues and Peoples. New York: Anchor Books, 1976.

Phelps Brown, E. H. and Shelia V. Hopkins. “Seven Centuries of Building Wages,” Economica 22 (1955): 195-206.

Phelps Brown, E. H. and Shelia V. Hopkins. “Seven Centuries of the Prices of Consumables, Compared with Builders’ Wage-Rates,” Economica 23 (1956): 296-314.

Phelps Brown, E. H. and Shelia V. Hopkins. “Wage-Rates and Prices: Evidence for Population Pressure in the Sixteenth Century,” Economica 24 (1957): 289-306.

Rogers, James E. Thorold. Six Centuries of Work and Wages. New York: G.P. Putnam’s Sons, 1884.

Rogers, James E. Thorold. A History of Agriculture and Prices in England. Oxford: Clarendon Press, 1866.

Russell, Josiah C. “That Earlier Plague,” Demography 5 (1968): 174-84.

Simon, Julian L. The Economics of Population Growth. Princeton: Princeton University Press, 1977.

Simon, Julian L. Population and Development in Poor Countries: Selected Essays. Princeton: Princeton University Press, 1992.

Simon, Julian L. The Ultimate Resource 2. Princeton: Princeton University Press, 1998.

Simon, Julian L. and Herman Kahn (editors). The Resourceful Earth: A Response to Global 2000. New York: Oxford, 1984.

Philip R. P. Coelho has written on long-run economic growth (“An Examination into the Causes of Economic Growth,” Research in Law and Economics 1985) and is currently working on the impact of morbid diseases on economic history and growth (see: “Biology Disease and Economics: An Alternative History of Slavery in the American South,” with Robert A. McGuire, Journal of Bioeconomics Vol. 1, 1999; “Epidemiology and the Demographic Transition in the New World,” Health Transition Review, Vol. 7, 1997; and “African and European Bound Labor in the British New World: The Biological Consequences of Economic Choices” with Robert A. McGuire, The Journal of Economic History, Vol. 57, 1997.)


Subject(s):Servitude and Slavery
Geographic Area(s):Europe
Time Period(s):Medieval

After the Galleons: Foreign Trade, Economic Change and Entrepreneurship in the Nineteenth-Century Philippines

Author(s):Legarda, Benito J.
Reviewer(s):Giraldez, Arturo

Published by EH.NET (November 2001)


Benito J. Legarda, After the Galleons: Foreign Trade, Economic Change and Entrepreneurship in the Nineteenth-Century Philippines. Madison WI: University of Wisconsin Center for Southeast Asian Studies, 1999. x + 401 pp. $22.95 (paperback), ISBN: 1-881261-28-x.

Reviewed for EH.NET by Arturo Giraldez, Department of Modern Languages and Literatures, University of the Pacific.

The title of Benito Legarda’s book is somewhat misleading because the time span covered in the work begins well before the nineteenth century. In fact, After the Galleons is an economic history of the Phillippine Islands from the time of the arrival of Miguel Gomez de Legazpi’s expedition in 1565 to the independence from the metropolis in 1898. Legarda studies the Philippines’ evolution from an archipelago inhabited by almost self-sufficient communities to the era when it became an agricultural export economy dependent on external trade to meet domestic needs. But, as the author remarks: “The nineteenth-century Philippine economy did not start from scratch. The preceding Age of Transshipment dated back to pre-Hispanic times, and, during the centuries when it was in effect, a process of administrative unification and geographic consolidation took place that laid the groundwork for the rise of national consciousness” (p. 5).

These sentences outline the plan of the book. Part 1 studies Philippine trade from before the Spaniards’ arrival until 1815. Part 2 focuses on the domestic exports and economic changes in the Islands. Part 3, “Entrepreneurial Aspects,” studies the establishment of merchant houses, their activities and innovations. Legarda follows Joseph A. Schumpeter’s ideas on entrepreneurial activity, paying detailed attention to the agents responsible for the “creative responses” in the economy. Businessmen and firms are introduced in relation to new technologies, activities and financial institutions.

Fifteenth-century Chinese and Muslim (Persian and Arab) merchants frequented the archipelago’s coastal areas, attracting a population that established settlements dependent on sedentary agriculture and craft production. These communities, called “barangays,” traded among themselves and with the rest of Southeast Asia and China. Slaves, beeswax and gold were exchanged for porcelain, iron, lead, tin, silks, etc. The early connection with China was going to have a crucial role in Philippine history. The presence of the Spaniards dramatically changed the position of the Philippines with respect to the Asian continent and placed the Islands as one of the crucial points in the global economy created by the galleon trade. From 1565 to 1815 the ships came and went from Manila to Acapulco — “it was the longest shipping line in history” (p. 32). American silver and predominantly Chinese silks were the commodities exchanged between Mexico and the Philippines. A Ricardian model explains the trade. The bimetallic ratio of silver and gold in 1560 was 13 to 1 in Mexico, 11 to 1 in Europe and in China was 4 to 1. “China was long the suction pump that absorbed silver from the whole world” (p. 31). Obviously there were periods of convergence of bimetallic ratios, but until the end of the nineteenth century China continued to be the main receiver of the world’s silver. Considering the price differential in silver prices: “The opportunities for arbitrage profits were staggering” (p. 31). And indeed, they were. Net profits oscillated between 100 and 300 percent. The Chinese brought the wares for the galleons but they also provided supplies for shipbuilding, materials to the military garrisons and foodstuffs to Manila’s citizenry. Also the junks brought artisans and tradespeople to the Islands. The Chinese have played a crucial role in the Filipino economy since the sixteenth century up to the present.

The eighteenth century witnessed plans and proposals to change the monopolistic framework of the galleon trade. After the British occupation of 1762-64, war frigates sailed between Cadiz in Spain and Manila carrying European merchandise. The Royal Philippine Company founded in Madrid (1785) was “encouraged to try Asian ventures,” (p. 58) and the port of San Blas on the Pacific coast was established in 1766 to trade with the Philippines, challenging Acapulco’s position as the only Mexican port in the galleon route. The regulation of libre comercio in 1778 allowed several Spanish ports besides Seville and Cadiz to trade with the colonies, which provided Mexico with new sources of merchandise.

Revolutionary changes did not happen in the eighteenth century — Philippine commerce was still a transshipping operation — but they sowed the seeds of future developments: foreign merchants arrived in Manila; local merchants could travel to other Asian ports; export trade of native products was stimulated and local textile manufactures were encouraged. “And the combined effect of the tobacco monopoly and the domestic operations of export producers, including the company, was the start of agricultural specialization in the Philippines” (p. 90). The tobacco monopoly was established by Governor Jose Basco y Vargas by decree in 1781, was implemented in 1783 and was the main source of fiscal revenue for Spain in the Philippines. There was also a “tentative use of bills of exchange in transferring funds through Canton” (p. 89).

The decades from 1820 to 1870 were crucial in the economic history of the world and produced significant changes in the economy of the country. An increase in trade and navigation in Asia accompanied the opening of the Suez Canal. Goods like sugar, fibers, coffee, etc. became the main export commodities. The Spanish government granted shipping subsidies. As a result of all of this, in the Philippines there was “a saltatory rise in the level of foreign trade” (p. 179). These events and trends were common to the Southeast Asian transformations from subsistence to export economies. However, the trajectory followed by the Islands was different from the Southeast Asian path. The economies of the region’s colonial powers tried to increase agricultural output pressuring the peasants to produce more goods for export and to develop plantation agriculture. According to Legarda in the period between 1820 and 1870: “Neither pressure on the peasantry nor the development of large-scale plantation agriculture was primarily responsible for transforming the Philippines from a subsistence to an export economy” (p. 186). Such a role was played by foreign businesses — “they formed the main nexus between the Philippine economy and the currents of world trade” (p. 211). The foreign merchants introduced agricultural machinery, advanced money on crops which stimulated the opening of new agricultural areas and consequently exports grew. There was an increasing commodity concentration of exports (sugar, abaca, tobacco and coffee) to the United Kingdom, China, British East Indies, United States and Spain [Tables 1 to 5]. Textiles dominated imports accompanied by a decline of local manufacturing and in 1870 rice became an import commodity. “Both trends had significant social and demographic repercussions” (p. 178) [Tables 6 to 13].

British and Americans were predominant in the foreign trade. The Chinese occupied the position of intermediaries between foreign western merchants and the domestic market. In spite of the dominant presence of foreigners in the Philippine economy “a native middle class was rising” (p. 213).

In order to raise funds the merchant houses issued notes taking deposits in local currencies from people of different economic backgrounds. This capital was given as an advance to finance agricultural operations. “Liquid wealth” reached Filipinos in the countryside, at the same time the merchants’ exercised control over the supply of export commodities (p. 256).

The Philippines’ economic landscape was different from Southeast Asia, i.e. Malaya and Indonesia. Western foreigners, public entities, and the Chinese joined rising domestic entrepreneurs. The Spanish government participated financially in the origination of utility companies (steam navigation, telegraphy); western investors entered some joint ventures with local capital (rice, sugar mills, textile industry, railroads and electricity), and domestic businessmen invested in the tranways and created the brewing industry. “But the crucial dichotomy between economic initiative and political authority stamped the Philippine case as being more in the East Asian tradition than the Southeast Asian mold” (p. 289).

This processes of economic integration in the world market had its drawbacks. Income disparities between regions and occupations became more marked. The domestic textile industry could not compete with foreign imports. During the 1880s, ‘the decade of death,’ the lower income groups became more susceptible to diseases due to an imbalance between commercial and subsistence agriculture and due to the arrival of epidemics (p. 335). The upside of these transformations was improvement in communications (telegraphy, mail, cable, steamship lines, electricity, railroads), in finance (foreign banks arrived to Manila), and in infrastructure. The funds of the Obras Pias, a church institution employed in the past to finance the galleon trade, were used to establish the Banco Espanol-Filipino in 1851 and the Monte de Piedad (a savings bank and a pawn shop) in 1882. In the same year with Obras Pias monies coming from the cargo of the galleon Filipino, a municipal water system was built in Manila (pp. 337-38).

Benito Legarda quotes Victor Clark who wrote: “A period of industrial development and expansion immediately preceded the insurrection that marked the beginning of the end of Spanish rule in the Philippines” (p. 339). The United States’ occupation of the country after the war produced increases in exports, innovations in technology, and much higher standards of living. The Philippines’ economy now would resemble more closely the Southeast Asian model. “The price of twentieth-century progress would be economic dependence” (p. 340).

Historians of the Philippines have produced excellent work. Benito Legarda’s economic history of the archipelago is an important addition to this body of literature. For historians of Asia and of the Spanish Empire After the Galleons is essential, but Legarda’s care in placing the Philippines in the context of with global economic trends makes the book an excellent addition to the field of “World History.” For economic historians and development experts, Legarda has written an important book. With clarity, rigor and avoiding unnecessary jargon, After the Galleons addresses questions and processes that are still affecting our times. Scholars, graduate students and advanced undergraduates in economics, history and other social sciences should read Legarda’s work. It is an indispensable book.

Arturo Giraldez, along with his colleague Dennis O. Flynn, is the editor of The Pacific World: Lands, Peoples and History of the Pacific, 1500-1900 an 18-volume series published by Ashgate/Variorum. With Dennis O. Flynn and James Sobredo, he has edited in 2001 European Entry into the Pacific, the fourth volume of the series.


Subject(s):International and Domestic Trade and Relations
Geographic Area(s):Asia
Time Period(s):19th Century

New Spain’s Century of Depression

Author(s):Borah, Woodrow Wilson
Reviewer(s):Salvucci, Richard

Project 2001: Significant Works in Economic History
Woodrow Wilson Borah, New Spain’s Century of Depression. Berkeley: University of California Press, 1951. 58 pp.
Review Essay by Richard Salvucci, Department of Economics, Trinity University.

An Obscure Century in a Backward Country: Woodrow Borah and New Spain’s Century of Depression

In 1938, the English novelist Graham Greene traveled to Mexico to investigate the condition of the Catholic Church under the regime of President Plutarco El?as Calles. While there, Greene interviewed the strongman of San Luis Potos?, General Saturnino Cedillo. In the most memorable terms, Greene called Cedillo “an Indian general in an obscure state of a backward country.” So my title, I fear, is a plagiarism, but an appropriate one. For certainly some who read this essay will wonder why a brief (58 pages) book about seventeenth?century New Spain (as Mexico was then known) counts as influential at all, let alone very influential? After all, Lesley Simpson, an authority on Mexico, famously labeled the seventeenth as Mexico’s “forgotten” century, and everyone from Adam Smith to Thomas Jefferson thought the Spanish empire both backward and obscure.

Influence, of course, is a matter of audience. There must be few economic historians of Latin America and fewer still of Mexico who are unfamiliar with the work of Woodrow Borah and the so-called “Berkeley School” of historical demography. Even with prevailing intellectual fashions, it is hard to believe that most English?speaking historians of Latin America have not heard of Borah, although whether or not they read his work in graduate school or after is much less certain. So I might best define my task as to explain why New Spain’s Century of Depression, published in 1951 as number 35 of the University of California Press’s celebrated Ibero?Americana series, should be counted one of the truly important works of twentieth?century economic history, especially for those who have yet to make its acquaintance. I take it for granted that colleagues in my field would agree. But it is a small field, and I am under no illusion that even its best work is widely known, much less regarded as a crucial contribution to economic historiography.

Woodrow Borah, who died in 1999, was one of the outstanding members of the postwar generation of Latin Americanists that included Howard Cline, Charles Gibson, John Lynch and Stanley Stein. At Berkeley, Borah, who was Abraham D. Shepard Professor of History, was one of a stellar cast of scholars drawn from a wide range of disciplines — Sherburne Cook, George Foster, James Parsons, John Rowe, Carl Sauer, and Lesley Simpson come immediately to mind. They exercised a profound influence on each other, sometimes as collaborators, but more often as valuable colleagues. What emerged from their work was a distinctive scholarship that brought together striking research and insights drawn from the natural and social sciences, precocious social science history, you might say. And Borah, his prodigious reading, meticulous scholarship and personal austerity notwithstanding, was one of this group’s more daring and imaginative members. Indeed, in a rueful aside, Borah once told me that his critics (there were a few) had accused him of “inventing Indians,” and this he meant quite literally, not in the now prosaic historicist sense of the term.

The burden of New Spain’s Century of Depression was to suggest the impact of the massive decline of the aboriginal population of Central Mexico (whom we can simply, if incorrectly, call Indians) on the material prospects of the Iberian conquerors (whom we can simply, and equally incorrectly, call Spaniards) and their descendants. As Borah understood it, the intent of the Spaniards was to live off the labor of the dense Indian population they had encountered in Central Mexico, a population accustomed to the rule of a privileged upper stratum by generations of Mesoamerican conquerors of whom the Aztec were simply the most recent. The Spaniards’ intention was no mystery. They announced they had come to the “Indies” (wrong again, but who’s counting?) to get rich, and that they had no intention of tilling the soil “like peasants” in order to do so. To accomplish their goal, the Spaniards, victorious in the wake of Cort?s’ historic expedition, rewarded themselves with the famous encomienda, the right to extract labor from the Indians. For some, like Cort?s himself, the encomienda was the source of great personal wealth and social prestige, although others, including some of Cort?s’ outspoken critics, were less richly rewarded.

For the encomienda to function as an avenue of accumulation, evidently, there had to be Indians to be distributed. At the time of the arrival of the Spaniards, Central Mexico perhaps supported an Indian population as large as 25 million. Within a century, shockingly, the same Indian population had fallen to less than a million, the victims of European disease, massive economic disruption, and the destruction of a coherent civilization that the Spaniards willingly exploited but never really understood. It was one thing for the encomienda to yield a comfortable existence for the Spaniards when Indian labor was abundant. But, obviously, such a system could hardly be expected to function when the people who supported it had disappeared. And here, then, is the gist of the argument of New Spain’s Century of Depression. What happens to a system of colonial expropriation when the society on to which it is fixed essentially disappears?

A bald summary can hardly begin to capture the twists and turns of the research agenda that New Spain’s Century of Depression ultimately entailed. When Borah published it in 1951, Sherburne Cook and Lesley Simpson had produced the population figures for New Spain on which he relied. It would require fully another quarter century, down to 1976, for what are now the standard estimates of early colonial population to emerge. There was considerable controversy along the way, and to an extent, there still is. Yet it is important to keep several things in mind. Much of the controversy regarding the population of New Spain involves the pre?contact population. About the course of events after the Spanish invasion there is far less doubt. The Indian population fell, and it fell sharply within a century, on the order of 90 percent. From an economic standpoint, only one thing really matters: factor endowments. Before the Conquest, labor was the abundant factor in Mexico. By 1620, land had become the abundant factor. No amount of scholastic contention about how many Indians there “really” were can alter that.

The other point is that even if Borah used imperfect population figures or made arbitrary assumptions, his scholarship was sound. He knew the sources and was particularly well versed in the documents associated with the relaciones geogr?ficas, the reports prepared to give Philip II of Spain an idea of what his Mexican dominions contained. While these documents are widely available today due to the efforts of the Instituto de Investigaciones Antropol?gicas in Mexico, it must have required considerably greater difficulty to master them fifty years ago. The impression from reading Borah’s notes is of a reasonably extensive investigation of the archival and printed materials available in the 1940s. In other words, you need to know something about the history of colonial scholarship to appreciate what Borah and his colleagues at Berkeley accomplished and some of the critics simply did not.

The conclusion to which Borah came was straightforward. Beginning sometime in the 1570s, an “economic depression besetting the Spanish cities because of the shrinkage of the Indian base [would last] more than a century,” and a “large number of white families must have found themselves reduced from comparative wealth to straitened circumstances as the drag in the Indian population forced a downward spiral in the economy of the European stratum”(p. 27). Although Borah presented his findings as a “hypothesis of a century?long depression” or “a hypothesis which needs much additional investigation,” the hypothesis is generally accepted as settled fact. It was not until the early 1970s that the work of the English historian Peter Bakewell raised questions about the impact of population decline on the fortunes of silver mining, but Borah’s view of the economic circumstances of the settlers went largely unchallenged. Even John Lynch, whose brilliant synthesis, Spain under the Hapsburgs (1981), called into question the entire notion of a Mexican depression in the seventeenth century, did not address the crucial issue that Borah raised. How did the elite of Mexican society — in effect the advocates, bearers, beneficiaries and putative defenders of colonialism — adjust when deprived of the Indian population on which it depended? My suspicion is that New Spain’s Century of Depression seemed logically unassailable. Borah’s citation (p. 23) of Viceroy Velasco the Younger’s report to Philip II in 1595 was especially acute: “those who consume are many and the Indians who produce are few.” What more could be said?

If you have persisted this far, you may, perhaps, think otherwise or wonder at the peculiar way in which Borah shaped his investigation. Borah did not discuss the fate of the Indians, other than to note that they “seemed doomed to relentless extinction” (p. 28). And even so, life did not come to an end in Mexico in 1576, or 1626, or 1676. Emigration from Spain continued, a fact of which Borah was quite aware. Moreover, if Cook and Borah’s later research indicated that the Indian population reached its nadir around 1620 — Borah puts its size at 750,000 — it began to recover thereafter and probably continued to do so until the 1730s, when severe epidemic disease made is reappearance. A century of population growth in a preindustrial society, however slow, does not square easily with falling living standards. And other developments, particularly the growth of colonial textile production in the middle decades of the seventeenth century, give pause as well. If a “depression” had taken hold, and more people were producing more goods, what sort of a depression was it?

To the extent that there was much data available to answer the question — and by and large, there was not — Borah made some attempt to address the objections, postulating, for instance, the existence of not one, but two economies, one Spanish, the other Indian. But there was not much he could make of the distinction, although there was a hint as to where research might lead. A dramatic change in the land-labor ratio, with the Indian population falling by 90 percent, surely affected the marginal productivity of Indian labor.

However, as Borah pointed out (p. 21), it was inconceivable that rising productivity could have offset the sheer decline in the Indians’ numbers, but the upward drift in real wages of Indian workers in cloth manufactories toward the end of the sixteenth century suggests the horrible irony of a decimated Indian population now better able to sustain itself in the face of Spanish demands. Here was one reason for the subsequent recovery in the Indians’ numbers, along with greater resistance to European disease, more aggressive defense of the Indians’ interests by the Spanish Crown, and even changes in diet — the Spaniards brought chickens with them, which came to be a ubiquitous presence in rural villages. While Borah never said as much in New Spain’s Century of Depression, Borah and Sherburne Cook would go on to argue years later that the material conditions of a reconstituted Indian society may well have been higher than they were before the Conquest. So, in a sense, Borah’s argument about “depression” was potentially revolutionary even if, in some sense, it proved a trap to the unwary who did not think its implications through. The historical intuition was of a very high order, but it was exercised by a scholar who turned twenty in 1932; who hailed from Utica, Mississippi; and for whom the term “depression” was less a technical one than a shorthand for widespread impoverishment.

Another feature of New Spain’s Century of Depression should be attractive to economic historians. It concerns the nature of institutional change that occurred under the pressure of population decline in the sixteenth century. One is sometimes struck by the fact that much (but by no means, all) of the economic historiography that relies on institutions for explanation often does a poor job of explaining why a country has a given set of institutions to begin with. In Latin America, some mix of Divine Providence, Indians, bizarre political culture, difficult geography and dumb luck often seem to be the reasons for the existence of Mexican institutions. This, for all practical purposes, means that institutions are treated as exogenously given. Well, they aren’t, or at least, not always. While Borah, of course, never wrote in these terms, he carefully links the emergence of a Mexican regime of labor and land institutions to the shifting factor endowments with which the colonists had to work. For Borah, the ultimate significance of the dramatic decline of the Indian population was the emergence of the hacienda (which reflected increasingly abundant land) and debt peonage (which reflected increasingly scarce labor). Indeed, this was another central message of New Spain’s Century of Depression. The institutions that had given rise to the Mexican Revolution of 1910 — the hacienda and debt peonage — were a product of the seventeenth century and of the demographic disaster that had destroyed the Indians. This was a remarkably clear statement of what had long been the liberal view of the causes of the Mexican Revolution. Anyone who doubts its durability need do little more than read Alan Knight’s monumental history of the Revolution (The Mexican Revolution, 1986), which largely restates the old verities.

For an historian from Mississippi, an account of “debt peonage” as the defining characteristic of rural labor may not have been untoward. But what exactly one means by “debt peonage” is another matter. Borah’s position was a moderate one. This was not slavery, open or disguised (the enslavement of Indians was forbidden under most circumstances), but an Indian peon who owed a landlord, or, indeed, any employer money was legally required to work for that employer (and for him or her alone) until the debt was discharged. The notion that debt created a form of chattel slavery in rural Mexico does not seem to have entered the vocabulary until well into the regime of President Porfirio D?az (1876-1880, 1884-1910) and provided one explanation for the Revolution in a place like Yucat?n. For a time, colonial historians went to another extreme, intent on showing the agency of free peasants as makers of their own world. They forgot that seventeenth-century Mexico was an unlikely venue for the emergence of a smoothly functioning labor market in which buyers and sellers of labor had no recourse to force or fraud. Indeed, conquest is precisely about force and fraud, depriving the conquered of their possessions, and making them do things they otherwise would never do.

A more fruitful way of viewing the phenomenon of debt peonage — or simply workers’ indebtedness, for debt did not invariably impede their mobility — is to understand how it allowed employers to determine the rate of discount at which workers in a shifting, unstable, and terribly uncertain world valued future income. There is no point in beating around the bush. Life expectancy at birth for a Mexican in the colonial period was about twenty years, and in view of the catastrophic changes that had visited the Indian world since 1519, we can only conclude that Hobbes was right, and that Mexicans knew it. Their lives were short enough, and nasty and brutish as well. In a world in which only God (and whose God was up for grabs too) knew what the future would bring, it made sense for ordinary people to get as much as they could up front, which, after all, is all the “debt” part of debt peonage meant. This was just an extreme form of live for today, for tomorrow, literally, who knew? Workers bargained for better advances and often sought to enlarge them and employers understood this. The wide variance of debts reported by farms and factories for which we have records shows that their owners struck quite different bargains with different workers, a form of price discrimination that allowed them to “pay” no more than they had to, certainly less than raising wages to market-clearing levels. In fact, in the disorganized and fluid circumstances of the late sixteenth and early seventeenth centuries, when Indian villages were forming and reforming under the pressure of Castillian administration, it would have been impossible to gauge the overall willingness of Indians to leave their communities to work for wages, or even the willingness of their communities to allow individuals to leave, a point to which Borah was quite sensitive (pp. 41-42).

Besides, the point of indebtedness was not necessarily to reduce mobility. The Spaniards had other ways of doing so, which is another aspect of the system of land tenure they devised. As Evsey Domar once wrote, it is impossible to have free labor, free land and a nonworking landlord class simultaneously. One of the three must disappear. In Mexico, the Church prevailed in the 1540s in the struggle against the frank coercion of Indian labor. For most purposes, the labor of enslaved Africans was simply too expensive, even though there was a sizeable black population in seventeenth?century Mexico. No, the Spaniards made another choice, to deprive the Indians of access to free land, for free land they very well may have had. The dramatic decline in the Indian population left vast expanses of Central Mexico essentially empty, so what was to prevent the Indians from moving on to the land as a subsistence peasantry, to the lasting dismay of the Spaniards? The answer is that the Spaniards consciously set about driving the Indians into villages over which they could exercise some level of control, as Bernardo Garc?a Mart?nez demonstrated in Los pueblos de la Sierra (1987). At the same time, they sanctioned land?grabbing by the settlers, usually in amounts far in excess of anything the settlers could reasonably cultivate. At a stroke, the Spaniards accomplished two things. First, they shifted to a system of agriculture that reflected the abundance of land, a regime vastly different from the preconquest one based on the intensive use of labor, of which the famous raised?ridged fields (chinampas) of the Valley of Mexico were but one example. Second, they regularized the settlers’ land titles at the beginning of the seventeenth century, effectively transferring much land to Spanish control, whether or not it was cultivated. The hacienda thus circumscribed the ability of the Indian communities to survive independently of the Spanish economy, and in so doing, obviated the need for a draconian regime of forced labor, at least in Mexico.

This dramatic transition, from an economy based on intensive agriculture and the exploitation of a dense indigenous population, to one that relied on extensive agriculture and scarce Indian labor could not be accomplished rapidly. Moreover, the shift from an economy with relatively high levels of personal wealth in the form of Indians held in encomienda to a poorer one with fewer Indians and no encomiendas reduced New Spain’s capacity to import. It was now necessary to produce at home many goods that were, in the early years of the colony, imported through Spain. A reduction in consumption and a reorientation of expenditure toward investment was required to accommodate such a change. Borah, for instance, noted that the construction of churches tended to slow dramatically in the 1570s (p. 31), attributing this primarily to a redeployment of scarcer labor. (The demand for churches sadly fell as well, for there were far fewer souls to fill them.) For Borah, presumably, all this was a depression. To a later generation of historians, however, notably the British school headed by John Lynch, Borah’s “depression” was more a case of deferred consumption, the redirection of productive effort toward mining, manufacturing and farming that a colony living on its own required. None of this could have come easily or cheaply — the mining and irrigation works, the granaries, fences, sugar mills, ranches and textile manufactories absorbed resources. Hence, for Lynch and his followers, the apparent stagnation of the Mexican economy in the seventeenth century was just that, an apparent stagnation that marked the reorientation underway, one that would result in the visible renewal of economic growth under the Bourbon monarchs of the eighteenth century. It was not so much that Borah was wrong about what he had seen, but that he had, instead, seen wrongly.

Viewed fifty years after its publication, New Spain’s Century of Depression reads much like the pioneering work it was, full of insight, largely intuitive, sometimes wrong in detail and premature in judgment, but, all the same, arresting and audacious. It was, above all, a great work of history, for it sought to explain the present through the past, and to explain in simple but persuasive terms how what was distinctively Mexican, the play of institutions, political economy and an emerging social structure, came together out of the shock of the Conquest in the sixteenth and seventeenth centuries. If there is anything disappointing about New Spain’s Century of Depression, it is that the response to it has been admiration or assent from most students of Latin American history, but few studies in which appropriately trained scholars have undertaken the work necessary to establish Borah’s hypothesis fully, or to revise and extend it in ways consistent with contemporary population studies. That is the problem with writing a classic about an obscure century in a backward country: it is hard to get people to notice. Those of us who spend our time studying the history of Mexico know full well how important Borah’s elegant “hypothesis” was. It is time for mainstream economic historians, and, one hopes, their students, to develop an interest in replying to Woodrow Borah’s pioneering work as well.

Richard Salvucci teaches economics at Trinity University in San Antonio, Texas. He was a colleague of Woodrow Borah’s at the University of California, Berkeley, from 1980 through 1989. He works on the economic and financial history of Mexico between 1823 and 1884.


Subject(s):Historical Demography, including Migration
Geographic Area(s):Latin America, incl. Mexico and the Caribbean
Time Period(s):17th Century

The Conditions of Agricultural Growth: The Economics of Agrarian Change under Population Pressure

Author(s):Boserup, Ester
Reviewer(s):Federico, Giovanni

Project 2001: Significant Works in Economic History

Ester Boserup, The Conditions of Agricultural Growth: The Economics of Agrarian Change under Population Pressure. London, G. Allen and Unwin, 1965; Chicago: Aldine, 1965. 124 pp.

Review Essay by Giovanni Federico, Department of Modern History, University of Pisa.

Population, Agricultural Growth and Institutions: The Real Long-Run View

This may be an unusual review for the series. In fact, Ester Boserup was not a professional economic historian and this is not properly speaking a work of history. Boserup was part of the staff at the United Nations and she wrote the book out of her experience as a consultant in developing countries. The book does not discuss in depth any specific historical event, and quotations of historical works are rather rare. It nevertheless is one of the most widely quoted works in economic history. Usually, it is labeled as “anti-Malthusian” and encapsulated with a sentence such as “population growth causes agricultural growth.” This is undoubtedly an implication of her model and comes in handy to scholars who do not believe that the (human) carrying capacity of a given area is set, and cannot be exceeded. From this point of view, one can draw a parallel between The Conditions of Agricultural Growth and another highly influential book, Amartya Sen’s Poverty and Famines: An Essay on Entitlement and Deprivation (Oxford 1981), which dismantled another tenet of Malthusian theory — i.e. that famines were always (or mainly) caused by absolute deficiency of food.

However, Boserup’s book is much more than a simple rejection of Malthus. It aims at explaining all the characteristics of agriculture in any specific area and time according to the resource endowment — the land/labor ratio. The more dense population is, the more intensive cultivation becomes. Agrarian economists in the 1950s focused on the Western world, and thus they could appreciate only a relatively narrow range of techniques. Looking at less developed countries, Boserup could list five different agricultural systems, according to the length of fallow between periods of cultivation (pp.15-16): 1) forest-fallow or slash and burn (15-20 years of fallow), 2) bush-fallow (6-10 years); 3) short-fallow (1-2 years); 4) annual cropping (a few months); 5) multi-cropping (no fallow). Even if the original evidence comes from the observation of primitive societies in the 1940s, the leap from changes in space to changes in time is short. Thus the rest of the book explores the consequences of intensification — i.e. of the move from one stage to another caused by population growth. Each of them entails more labor per unit of (total) land, and thus the intensification increases the productivity of land and reduces that of labor. A household has to work more to keep the same level of income. The intensification brings about an improvement in tools (from the digging stick, to the hoe, to the plough) and in the long run also brings some investments in land improvement (e.g. irrigation schemes). With pre-industrial technology, land improvements had to be done manually by peasants. Thus, they are typical of the last stages of the process, when there is enough work-force and enough demand for food to justify them. Total factor productivity may increase in the long run, but surely most of the increase in total output is achieved with a massive growth of work effort by the agricultural population. Finally, the intensification also shapes institutions, and this is the most innovative aspect of Boserup’s model. The forest-fallow system is inconsistent with household property of any given plot of land. The land belongs to (or more precisely is exploited by) the tribe as a whole. Property rights have to be created only when the cultivation cycle is shorter, and the quality of each single piece of land begins to matter. In the later stages of development some people could cease to work, and be entitled to rights to a part of the product (a “two-tier” society). However, Boserup is not nostalgic about primitive societies. She makes it crystal clear that the “two-tier” societies are better, even if in these latter some men did not work as hard as others.

Some years later, Boserup extended her model from agriculture to the whole of society (Population and Technological Change: A Study of Long-term Trends, Chicago, 1981). She added the concept of economies of scale. Many technologies can be properly exploited only if the population is dense enough. Population growth makes urban civilization possible. The second book is highly interesting, and has many insightful passages. Yet it fails to reach the simple elegance of The Conditions of Agricultural Growth — that quality which makes this book really deserving of being added to this list of masterpieces.

Of course, one could quibble endlessly about the “details” of Boserup’s model such the number and the exact features of the “stages.” The overall view provides a short, but powerful, history of the world, from prehistory to the nineteenth century arranged around one of the basic principles of economic theory — that techniques (and much else) depend on resource endowments. As you would expect from a seminal work, The Conditions of Agricultural Growth launched and refocused many modern debates. Let me give two examples. When Boserup was writing, the British agricultural revolution (i.e. the change in rotations with the substitution of fodder crops for fallow) was considered an epochal change with far-reaching implications for the entirety of world history. This view is still diffused, if no longer dominant. In Boserup’s model, the change is only part of the long-run process of world-wide intensification, and Europe was trailing behind the two other major civilizations, India and China. In fact, the most advanced areas of Europe reached Stage 4 while China was already at Stage 5. Another, and perhaps less obvious, example may be Greg Clark’s thesis on the differences in work intensity between Eastern Europe and the West (including the US). He argues that in the early nineteenth century Eastern Europeans were less productive than Westerners, because they worked less hard, and that they worked less hard because “they were different” (Clark, “Productivity Growth without Technical Change in European Agriculture before 1850,” Journal of Economic History, Vol. 47, 1987, p. 431). The thesis is very controversial (see the subsequent debate with John Komlos in the Journal of Economic History, in 1988 and 1989), but let’s assume it is true. Is it not possible that the “different” work ethic had been shaped over the centuries by different land/labor ratios? Other examples could follow, but the main point is clear: Boserup’s book is a treasure-trove of ideas. Unfortunately, it is more often quoted than used in actual research. As far as I know, there are very few really “Boserupian” works — i.e., long-term analyses of agricultural change as driven by changes in factor endowments. The most ambitious is Kang Chao’s book on Man and Land in Chinese Economic History: An Economic Analysis (Stanford 1986).

Why this (relative) neglect in spite of the so frequent quotations? One can put forward three causes, which are not mutually exclusive. The first is academic specialization. Intensification lasted for centuries, even for millennia, and few scholars would feel at ease in discussing both pre-historical agriculture and nineteenth century techniques. This fate is common to all interpretations of long-term change (cf. J. L. Anderson, Explaining Long-term Economic Change, Basingstoke, 1991). Second, the evidence on early-stage societies is very scarce, and by its nature it is often unfamiliar to historians. “Real” historical sources exist for Western Europe, China and India in the last three stages.

Last, but not least, the model has its own weaknesses. It is surely convincing as an account of long-term growth. It is less convincing as an explanation of short-term trends, and in this case the “short” term can last for decades. Boserup speaks as if all the techniques were known since the beginning, so that the population had only to choose the one best suited to its resource endowment and adjust its institutions if necessary. On the contrary, new techniques had to be learned, and sometimes discovered or re-discovered. In backward economies, information travels very slowly or not at all, and thus a people may not know that another one, maybe hundreds or thousands of miles away, has successful managed to overcome a specific problem. And, even if it gets to know the right technique, plant, or implement, the population still may need time and effort to master it and to adapt it to its own environment. Thus a success in the long run may conceal several short-term crises. Outright failure cannot be ruled out entirely.

Second, Boserup assumes that population growth is exogenous, following a standard practice among economists in pre-Beckerian time. Today, however, most consider population growth to be endogenous, and largely affected by economic calculations. People could reduce population increase by delaying marriages, controlling births, migrating and the like. Slower population growth would, ceteris paribus, reduce the drive to agricultural intensification. This is, of course, an empirical issue.

Finally, Boserup seems to neglect the different nature of modern technology or, if you want, the new role of capital. Her world is a two-factor world — labor and land. As said, capital does exist either as simple tools or as labor-intensive investment projects — but not as labor-saving machinery and above all land-saving fertilizers. In her world, intensification is possible up to a point, but sooner or later it has to reach a limit. It is unclear whether in real history this limit had ever been reached, even if China in the eighteenth and nineteenth centuries may be a good candidate. Aside from China, even in, say, 1800 there was a lot of “free” land on the Earth and thus a “Malthusian” crisis was still far away for the world as a whole. But sooner or later, a limit had to be reached, and further population increase beyond it was bound to cause a Malthusian crisis (even if smart people may prevent it with birth control). As everyone knows, the solution was technical progress, which has increased the productivity of both land and labor. (One wonders whether there are ecological or maybe ethical limits to technical progress). Boserup should have added a Stage 6 to her intensification model. Of course, she was very well aware of the technical progress, but she did not. One may speculate that she was more interested in less developed countries than in advanced countries, or simply she did not want to add a stage which could not fit easily in a model based on the length of fallow.

It is too easy to criticize ex post with the hindsight of decades of research. In spite of all its shortcomings, The Conditions of Agricultural Growth remains a small masterpiece which economic historians should read — and not simply quote.

Giovanni Federico is the author of An Economic History of the Silk Industry, 1830-1930 (Cambridge University Press, 1997) and (with Jon Cohen) The Economic Development of Italy, 1820-1930 (Cambridge University Press, forthcoming for the Economic History Society).


Subject(s):Economic Development, Growth, and Aggregate Productivity
Geographic Area(s):General, International, or Comparative
Time Period(s):General or Comparative

Asian Merchants and Businessmen in the Indian Ocean and the China Sea

Author(s):Lombard, Denys
Aubin, Jean
Reviewer(s):Giraldez, Arturo

Published by EH.NET (November 2000)

Denys Lombard and Jean Aubin, editors, Asian Merchants and Businessmen in the Indian Ocean and the China Sea. New Delhi: Oxford University Press, 2000. iii + 375 pp. $35.00 (cloth), ISBN: 0195641094.

Reviewed for EH.NET by Arturo Giraldez, Modern Languages and Literatures Department, University of the Pacific.


This collection of essays was edited in 1988 by two professors of the L’Ecole des Hautes Etudes en Sciences Sociales in Paris and was published originally in French by the institution’s publishing house. The volume was produced after a conference on the same topic organized by these two eminent historians some years before. As Sanjay Subrahmanyam points out in the “Foreword,” it was a response to the perspective taken by Dutch historians of the Early Modern Period who considered the trading world of Asia in terms of the European Companies and the reaction of ‘non-Western’ societies. The economic dynamism was perceived as coming from Europe and acting upon backward economies. Denys Lombard and Jean Aubin tried to promote a contrary view of an Asian history “that was largely controlled by its internal rhythms, even if related in complex ways after 1500 to various forms of European commercial and political presence” (Subrahmanyam, p. i). This historical debate is not new; it follows controversies involving specialists in Indian, Chinese and African histories. Despite the twelve-year lapse between the French version and the current translation, these essays come at a time when the debate between Eurocentric paradigms and new historiographic perspectives is taking on a new life. The work of Andre Gunder Frank, Ken Pomeranz and R. Bin Wong, among others, place China and the ‘rise of the West’ in a different light, showing the importance of China in world history before the beginnings in Britain of the so called ‘Industrial Revolution.’ (See Andre Gunder Frank (1998) ReORIENT: Global Economy in the Asian Age, Berkeley: University of California Press; Kenneth Pomeranz (2000) The Great Divergence: China, Europe, and the Making of the Modern World Economy, Princeton: Princeton University Press; and R. Bin Wong (1997) China Transformed. Historical Change and the Limits of European Experience, Ithaca and London: Cornell University Press. A recent exposition of the ‘Eurocentric’ paradigm is David Landes (1998) The Wealth and Poverty of Nations: Why Some Are So Rich and Some So Poor, New York: Norton. For a criticism of these ideas, see James M. Blaut (2000) Eight Eurocentric Historians, New York and London: Guilford Press.)

Despite inherent theoretical problems related to the meaning of the term ‘Europe,’ with even greater confusion in the case of the term ‘West,’ those intellectual constructs form the basis of historical interpretations of wide acceptance. This set of ideas considers past developments in the “European West” as essentially endogenous processes that produced economic and social institutions whose rationality and efficiency renders them the paradigm of economic modernization. Eurocentric views have the common trait of creating an intellectual template to be applied to the transformations of other societies and ranking them accordingly to the similarities and differences from an ideal historical development. To counteract this view, Denys Lombard and Jean Aubin have collected a vast array of articles dealing with the dense network of exchanges from the Persian Gulf, the Red Sea and the African East Coast to the shores of China and Japan. The Europeans — Portuguese, Spaniards, English and Dutch — took advantage of pre-existing dense economic networks but their disruptions did not essentially upset their control by Asian powers until the nineteenth century.

Four main themes structure the authors’ historiographical perspective: 1) “Harbor Towns” as centers of economic stimulation; 2) The role of Islam in developing merchant networks since the ninth century; 3) The study of merchant ‘diasporas’; and 4) The ‘Continuity’ of business in Asia.

Chronologically, the collection begins with Chen Dasheng and D. Lombard’s “Foreign Merchants in Maritime Trade in ‘Quanzhou’ (‘Zaitun’): Thirteenth and Fourteenth Centuries” and ends with “The Major Japanese Groups of Enterprises (Kigyoshudan), Heirs to the Zaibatsus” by Bertrand Cheng. This time span was chosen to avoid an Asian economic history “in which all exchanges are seen through the prism of a periodization, whose pulse is to be found in Lisbon, London or Amsterdam” (Lombard, p.3).

Cities were crucial to trade in Asian waters. Denys Lombard distinguishes between the ‘hydraulic’ city connected to an agricultural space and merchant cities, which depended, in fact, on the maritime nexus and its links with foreign land (p.114). An early case was Quanzhou in China: “a precursor of the merchant cities that we shall later see at different points of the Indian Ocean.” (Dasheng and Lombard, p.20). Luis Filipi F.R. Thomaz studies Melaka in the sixteenth century. Genevieve Bouchon places Calicut in relationship with the Arab world, Ceylon, the Moluccas and the trade with China. Studying the city-port of Surat, Ashin Das Gupta discovers how the arrival of the Dutch and English and the Portuguese departure opened a window of opportunity for Indian merchants to became ship-owners (pp.105-112). This is a good example of how Asian entrepreneurs were able to take advantage of changes produced by the European presence.

Islam played a great role in merchant networks after the ninth century. We find Muslim communities in Quanzhou in the eleventh century; by the sixteenth century they were present in Hurmuz, Malacca, Mindanao and Manila. “As late as the 19th and 20th centuries, Islam continued to animate a whole series of intermediate networks from one end to the Indian Ocean to the other” (Lombard, pp. 5-6). Several authors study these Muslim merchants: Hadramis, Gujaratis, Ismailis, Bohras, Kashmiris, Panthay, and so on.

One of the most intriguing aspects illustrated by these essays is the “continuity” of merchant family networks and how they took advantage of the opportunities provided by different social contexts. When “Saudi Arabia developed into a petro-economy state, it attracted a flood of Hadrami emigrants; two Hadrami multi-millionaires were known everywhere, Bin Mahfuz and Bin Laden” (R.B. Serjeant, p.149). Hadrami origins come from Yemen. Claude Markovits studies other industrial groups in India like the Kasturbhais family of Gujarati merchants whose ancestor, Shantidas Zaveri, was ‘jeweler’ to the Mughal Imperial Court. The family owned textile factories but during the 1960s the group expanded into the chemical industry in collaboration with European companies, ICI and CIBA. They passed from traditional merchants to modern industrialists: “This adaptation has been achieved without any basic modification in the working methods or in the forms of organization” (Markovits, p.318). Similar cases can be found among the Chinese Hakka studied by Claudine Salmon. In 1862 Aw Chi Ching, a Hakka doctor from Fujien settled in Rangoon where he practiced traditional medicine and sold medicinal herbs. His descendents marketed a remedy called “Tiger Balm” of great mass appeal. They began advertising in Chinese newspapers in Hong-Kong, Macao and Northern China. To fight competitors in the balm business they bought newspapers in Guandong, Amoy, Singapore, Hong-Kong and Penang. Despite losing their properties in China after the Revolution, the family overcame the post World War crisis. A successor, Sally Aw, bought newspapers in Hong-Kong and Australia and also invested in a variety of businesses. The Hakka network was a great contributor to family success. After World War II one family member founded the first Hakka Bank in Singapore, the Chong Qiao Yinhang.

The vicissitudes of business development in Japan are well exemplified by one prominent conglomerate of the country: “The Iwasaki family had created the Mitsubishi company, which was the result of a commercial enterprise installed in Nagasaki and financed by the Tosa fief. It had closely collaborated with the earlier Meiji administrations” (Akamatsu, p.365). Before World War II Mitsubishi was one of the ‘Big Four’ Zaibatsus — the others being Mitsui, Sumitomo, and Yasuda. “However, as early as the 1950s, a new type of structure called kigyoshudan emerged to regroup the erstwhile zaibatsus” (Chung, p.367). Mitsubishi is one of them. The previous cases go beyond mere anecdote, implying large theoretical issues. In the words of Lombard (p. 7): “The question still remains whether the recent development of Asian capitalism is a reproduction of Western capitalist systems or an outgrowth of an independent stand taken with regard to them.”

Asian merchants were not always able to develop into industrialists. Another completely different role was the symbiotic relationships between Chettiars and Kalangs with European powers. The Chettiar studied by Hans-Dieter Evers were a Tamil caste of South India. Initially they were moneylenders whose activities expanded to South Africa, Mauritius, Ceylon, Burma, Malaya, South Vietnam and Indochina at the end of the late nineteenth century. The Chettiar expansion coincided with development in South-East Asia of the corporate plantation system and the mining and logging industries. “The Chettiar money-lenders played a major role in the transformation of the remaining peasant subsistence economy and connecting it with the export crop-producing sectors” (Evers, p. 206). They also provided capital to Chinese, Burmese, Pathan and Sinhalese moneylenders, but at the same time were connected with European banking institutions. “Chettiar agents had turned peasants into ‘capillaries of a network of financial arteries leading to the banks of London and Paris'” (Evers, p. 208). The Kalangs are a group of Javanese merchants studied by Claude Guillot. Fatimah, a Kalang woman, involved herself in money lending, like her mother, and in buying and selling gold. The gold was melted down and made “into pure gold ingots that Fatimah personally took to sell to the Javasche Bank in Batavia.” After World War I, this bank “introduced Fatimah to diamond merchants from Antwerp.” The family became the most prominent diamond merchants of the Dutch East Indies (Envers, pp. 272-73).

One might criticize the editors’ decision to “set aside all that we know of the European networks” (Lombard, p.4). Ignoring the presence of the Europeans in Asian waters implies ignoring the substantial links developed between Asian economies, America and other colonial powers. For instance, the Chinese tributary system used Japanese and American silver as one of its main monetary substances; and in the nineteenth century the Atlantic economy, Australian gold, Chinese tea and Indian opium formed a network of exchanges with the British playing a pivotal role. This observation does not detract from the quality of the collection. The essays are full of information and their findings should be carefully incorporated into current historical narratives.

Denys Lombard and Jean Aubin were much aware of the difficulties of studying Asian economies. Whereas European companies and countries contain rich sources amenable to statistical treatment, that is not the case for many economies in the Indian Ocean and China Sea. That explains why many of the essays’ authors use biographical sources and anthropological research to fortify their cases. However, to dismiss their findings because of lack of statistical information would be a serious mistake. In so-called western societies many economic activities are not reported in a reliable numerical form, such as the drug trade that forms part of the, non-reported, “submerged economy.”

Sanjay Subrahmanym’s “Foreword” finishes with the following thoughts that express very well the book’s theoretical relevance. “It is a timely reminder, at the end of the twentieth century, that the family firm, the merchant community, and the networks of capital-raising and investment based on kinship, affinity, and sociability, are still a reality that one needs to contend with, in Asia, but also perhaps in Europe and even in America” (p.ix).

Overall, this is an excellent collection that is tremendously useful for the historian and social scientist willing to get acquainted with aspects of economic and social history usually known only to specialists. It is a deep loss that both Jean Aubin and Denys Lombard are no longer with us. Both were great examples of an excellent French tradition in social sciences. Also two other contributors to the volume, Ashin Das Gupta and R.B.Serjeant died in the last decade of the twentieth century. The book is a great occasion to get acquainted with their work.

Arturo Giraldez has published several articles (in collaboration with D. O. Flynn) on precious metals in the modern era and has edited Metals and Monies in a Global Economy (Aldershot: Varioum, 1997). Also he is a general co-editor of the Variorum collection The Pacific World: Lands, Peoples and History of the Pacific, 1500-1900.


Subject(s):Business History
Geographic Area(s):Asia
Time Period(s):General or Comparative

The Great Wave: Price Revolutions and the Rhythm of History

Author(s):Fischer, David Hackett
Reviewer(s):Munro, John H.

Published by EH.NET (February 1999)

David Hackett Fischer, The Great Wave: Price Revolutions and the Rhythm of

History. Oxford and New York: Oxford University Press, 1996. xvi + 536.

$35 (hardcover), ISBN: 019505377X. $16.95 (paperback), ISBN: 019512121X.

Reviewed for EH.NET by John H. Munro, Department of Economics, University of


Let me begin on a positive note. This is indeed a most impressive work: a

vigorous, sweeping, grandiose, and contentious, though highly entertaining,

portrayal of European and North American economic history, from the High Middle

Ages to the present, viewed through the lens of “long-wave” secular price-

trends. Indeed its chief value may well lie in the controversies that it is

bound to provoke, particularly from economists, to inspire new avenues of

research in economic history

, especially in price history. The author contends that, over the past eight

centuries, the European economy has experienced four major “price-

revolutions,” whose inflationary forces ultimately became economically and

socially destructive, with adverse consequences that provoked various complex

reactions whose “resolutions” in turn led to more harmonious, prosperous, and

“equitable” economic and social conditions during intervening eras of “price

equilibria”. These four price-revolutions are rather too neatly set out as the

following: (1) the later- medieval, from c.1180-c.1350; (2) the far better

known 16th-Century Price-Revolution, atypically dated from c.1470 to c.1650,

(3) the inflation of the Industrial Revolution era, from c.1730 to 1815; and

(4) the 20th century price-revolution, conveniently dated from 1896 to 1996

(when he published the book).

Though I am probably more sympathetic

to the historical concept of

“long-waves” than the majority of economists, I do agree with many opponents of

this concept that such long-waves are exceptionally difficult to define and

explain in any mathematically convincing models, which are certainly not

supplied here. For reasons to be explored in the course of this review, I

cannot accept his depictions, analysis

, and explanations for any of them. This will not surprise Prof. Fischer, who

is evidently not an admirer of the economics profession. He is particularly

hostile to those of us deemed to be “monetarists,” evidently used as a

pejorative term. After rejecting not only the “monetarist” but also the


neo-Classical, agrarian, environmental, and historicist” models, for their

perceived deficiencies in explaining inflations, and after condemning

economists and historians alike for imposing rigid models in attempting to

unravel the mysteries of European and North American economic history,

Fischer himself imposes an exceptionally rigid and untenable model for all four

of his so-called price-revolutions, containing in fact selected Malthusian and

monetarist elements from these supposedly rejected models.

In essence, the Fischer model contends that all of his four long-wave

inflations manifested the following six-part consecutive chain of causal and

consequential factors, inducing new causes, etc., into the next part of the

chain. First, each inflationary long-wave began with a prosperity created from

the preceding era of price-equilibrium, one promoting a population growth that

inevitably led to an expansion in aggregate demand that in turn outstripped

aggregate supply, thus — according to his model

— causing virtually ALL prices to rise. Evidently his model presupposes that

all sectors of the economy, in all historical periods under examination, came

to suffer from Malthusian-Ricardian diminishing

returns and rising marginal costs, etc. Second, in each and every such era,

after some indefinite lapse of time, and after the general population had

become convinced that rising prices constituted a persistent and genuine trend,

the “people” demanded and

received from their governments an increase in the money supply to

“accommodate” the price rises. As Fischer specifically comments on p. 83: “in

every price-revolution, one finds evidence of frantic efforts to expand the

money supply, after people have discovered that prices are rising in a secular

way.” Third, and invariably, in his view, that subsequent and continuous growth

in the money supply served only to fuel and thus aggravate the already existing

inflation. He never explains, however, for any of

the four long-waves, why those increases in money stocks were always in excess

of the amount required “to accommodate inflation”. Fourth, with such

money-stock increases, the now accelerating inflation ultimately produced a

steadily worsening impoverishment of the masses, aggravated malnutrition,

generally deteriorating biological conditions, and a breakdown of family

structures and the social order, with increasing incidences of crime and social

violence: i.e., with a rise in consumer prices that outstripped generally

sticky wages in each and every era, and with a general transfer of wealth from

the poorer to richer strata of society. Fifth, ultimately all these negative

forces produced economic and social crises that finally brought the

inflationary forces to a halt,

producing a fall in population and thus (by his model) in prices, declines that

subsequently led to a new era of “price-equilibrium,” along with concomitant

re-transfers of wealth and income from the richer to the poorer strata of


(where such wealth presumably belonged). Sixth, after some period of economic

prosperity and social harmony, this vicious cycle would recommence, i.e., when

these favorable conditions succeeded in promoting a new round of incessant

population growth, which inevitably sparked those same inflationary forces to

produce yet another era of price-revolution, continuing until it too had run

its course.

While many economic historians, using more structured Malthusian-Ricardian type

models, have also provided a similarly bleak portrayal of

demographically-related upswings and downswings of the European economy,

most have argued that this bleak cycle was broken with the economic forces of

the modern Industrial Revolution era. Fischer evidently does not. Are we the

reforecondemned, according to his view, to suffer these never-ending bleak

cycles– economic history according to the Myth of Sisyphus, as it were?

Perhaps not, if government leaders were to listen to the various nostrums set

forth in the final chapter,

political recommendations on which I do not feel qualified to comment.

Having engaged in considerable research, over the past 35 years, on European

monetary, price, and wage histories from the 13th to 19th centuries, I am,

however, rather more qualified

to comment on Fischer’s four supposed long-waves. Out of respect for the

author’s prodigious labors in producing this magnum opus, one that is bound to

have a major impact on the historical profession, especially in covering such a

vast temporal and spatial range, I feel duty-bound to provide detailed

criticisms of his analyses of these secular price trends, with as much

statistical evidence as I can readily muster. Problematic in each is defining

their time span,

i.e., the onset and termination of inflations. If many medievalists may concur

that his first long- wave did begin in the 1180s, few would now agree that it

ended as late as the Black Death of 1348-50. On the contrary,

the preceding quarter-century (1324-49) was one of very severe deflation,

certainly in both Tuscany (Herlihy 1966) and England. In the latter, the

Phelps Brown and Hopkins “basket of consumables” price index (1451-75 =

100) fell 47%: from 165 in 1323 (having been as high as 216 in 1316, with the

Great Famine) to just 88 in 1346. Conversely, while most early-modern

historians would agree that the 16th-Century Price Revolution generally ended

in the 1650s (certainly in England), few if any would date its commencement so

early as the 1470s. To be sure, in both the Low Countries and England, a

combination of coinage debasements, civil wars, bad harvests, and other

supply-shocks did produce a short-term rise in prices from the later 1470s to

the early 1490s; but thereafter their basket-of-consumables price-indices

resumed their deflationary downward trend for another three decades (Munro

1981, 1983). In both of these regions and in Spain as well (Hamilton 1934), the

sustained rise in the general price level, lasting over a century, did not

commence until c.1520.

For Fischer’s third inflationary long-wave, of the Industrial Revolution era,

his periodization is much less contentious, though one might mark its

commencement in the late 1740s rather than the early 1730s.

The last and most recent wave is, however, by far more the most controversial

in its character. Certainly a long upswing in world prices did begin in 1896,

and lasted until the 1920s; but can we really pretend that this so neatly

defined century of 1896 to 1996 truly encompasses any form of long wave when we

consider the behavior of prices from the 1920s?

Are we to pretend that the horrendous deflation of the ensuing Great Depression

era was just a temporary if unusual aberration that deviated from this

particular century long (saeclum) secular tend? Fischer, in fact,


rarely ever discusses deflation, ignoring those of the 14th century and most

of the rest. Instead, he views the three periods intervening between his price-

revolutions as much more harmonious eras of price-equilibria: i.e. 1350-1470;

1650 – 1730; 1820 –

1896; and he suggests that we are now entering a fourth such era. In my own

investigations of price and monetary history from the 12th century, prices rise

and fall,

with varying degrees of amplitude; but they rarely if ever remain stable,

“in equilibrium”.

Certainly “equilibrium” is not a word that I would apply to the first of these

eras, from 1350 to 1470: not with the previously noted, very stark deflation of

c.1325 – 48, followed by an equally drastic inflation that ensued from the

Black Death over

the next three decades, well documented for England, Flanders (Munro 1983,

1984), France, Tuscany (Herlihy 1966),

and Aragon-Navarre (Hamilton 1936). Thus, in England, the mean quinquennial PB

& H index rose 64%: from 88 in 1340-44 to 145 in 1370-74, fal ling sharply

thereafter, by 29%, to 103 in 1405-09; after subsequent oscillations, it fell

even further to a final nadir of 87 in 1475-79 (when,

according to Fischer, the next price-revolution was now under way). For

Flanders, a similarly constructed price index of quinquennial means

(1450-74 = 100: Munro 1984), commencing only in 1350, thereafter rose 170%:

from 59 in 1350-4 to 126 in 1380-84, reflecting an inflation aggravated by

coinage debasements that England had not experienced, indeed none at all since

1351. Thereafter, the Flemish price index plunged 32%, reaching a temporary

nadir of 88 in 1400-04; but after a series of often severe price oscillations,

aggravated by warfare and more coin debasements, it rose to a peak of 138 in

1435-9; subsequent ly it fell another 31%, reaching its 15th century nadir of

95 in 1465-9 (before rising and then falling again, as noted earlier).

Implicit in these observations is the quite pertinent criticism that Fischer

has failed to use, or use properly, these and many other price

indices–especially the well-constructed Vander Wee index (1975), for the

Antwerp region, from 1400 to 1700, so important in his study; and the Rousseaux

and Gayer-Rostow-Schwarz indices for the 19th century (Mitchell &

Deane 1962). On the other hand, he has relied far too much on the dangerously

faulty d’Avenel price index (1894-1926) for medieval and early-modern France.

Space limitations, and presumably the reader’s patience, prevent me from

engaging in similar analyses of price trends

over the ensuing centuries, to indicate further disagreements with Fischer’s

analyses, except to note one more quarter-century of deflation during a

supposed era of price equilibrium: that of the so-called Great Depression era

of 1873 to 1896, at least within England, when the PB&H price index fell from

1437 to 947, a decline of 34% that was unmatched, for quarter-century periods

in English economic history, since the two stark deflations of the second and

fourth quarters of the 14th century. (The Rousseaux index fell from 42.5% from

127 in 1873 to 73 in 1893).

My criticisms of Fischer’s temporal depictions of both inflationary long-waves

and intervening eras of supposed price equilibria are central to my objections

to his anti-monetarist explanations for them, or rather to his

misrepresentation of the monetarist case, a viewpoint he admittedly shares with

a great number of other historians, especially those who have found

Malthusian-Ricardian type models to be more seductively plausible explanations


inflation. Certainly, too many of my students, in reading the economic history

literature on Europe before the Industrial Revolution era, share that beguiling

view, turning a deaf ear to the following arguments: namely, that (1) a growth

in population cannot by itself,

without complementary monetary factors, cause a rise in all prices, though

certainly it often did lead to a rise in the relative prices of grain,

timber, and other natural-resource based commodities subject to diminishing

return and supply

inelasticities; and thus (2) that these simplistic demographic models involve

a fatal confusion between a change in the relative prices of individual

commodities and a rise in the overall price-level. Some clever students have

challenged that admonition,


with graphs that seek to demonstrate, with intersecting sets of aggregate

demand and supply curves, that a rise in population is sufficient to explain

inflation. My response is the following. First, all of the historical prices

with which Fischer and my students are dealing

(1180-1750) are in terms of silver-based moneys-of-account, in the traditional

pounds, shillings, and pence, tied to the region’s currently circulating silver

penny, or similar such coin, while prices expressed in terms of the gold-based

Florentine florin behaved quite differently over the long periods of time

covered in this study. Indeed we should expect such a difference in price

behavior with a change in the bimetallic ratio from about 10:1 in 1400 to about

16:1 in 1650,

which obviously reflects the fall in the relative value or purchasing power of

silver — an issue virtually ignored in Fischer’s book. Second, the shift, in

this student graph, from the conjunction of the Aggregate Demand and Supply


from P1.Q1

and P2.Q2, requires a compensatory monetary expansion in order to achieve the

transaction values indicated for the two price levels: from 17,220,000 pounds

and 122,960,000 pounds, which increase in the volume of payments had to come

from either increased

money stocks and/or flows. Even if changes in demographic and other real

variables, shared responsibility for inflation by inducing changes in those

monetary variables, we are not permitted to ignore those variables in

explaining historical inflations.

Admittedly, from the 12th to the 18th centuries, to the modern Industrial

Revolution era, correlations between demographic and price movements are often

apparent. But why do so few historians consider the alternative proposition

that much more profound, deeper economic forces might have induced a complex

combination of general economic growth, monetary expansion, and a rise in

population, together (so that such apparent statistical relationships would

have adverse Durbin-Watson statistics to indicate significant serial

correlation)? Furthermore, if population growth is the inevitable root cause of

inflation, and population decline the purported cause of deflation, how do such

models explain why the drastic depopulations of the 14th-century Black Death


followed by three decades of severe inflation in most of western Europe?

Conversely, why did late 19th-century England experience the above-noted

deflation while its population grew from 23.41 million in 1873 (PB&H at 1437)

to 30.80 million in 1896 (PB&H

at 947)?

Nor is Fischer correct in asserting that, in each and every one of his four

price-revolutions, an increase in money supplies followed rather than preceded

or accompanied the rises in the price-level. For an individual country or

region, however

, one might argue that a rise in its own price level, as a consequence of a

transmitted rise in world or at least continental prices would have quickly —

and not after the long-time lags projected in Fischer’s analysis — produced an

increase in money supplies to satisfy the economic requirements for that rise

in national/regional prices. Fischer, however, fails to offer any theoretical

analysis of this phenomenon, and makes no reference to any of the well-known

publications on the Monetary Approach to the Balance of Payments [by Frenkel

and Johnson (1976), McCloskey and Zecher (1976), Dick and Floyd (1985, 1992);

Flynn (1978) and D. Fisher (1989), for the Price Revolution era itself]. In


and with some necessary repetition, this thesis contends:

(1) that a rise in world price levels, initially arising from increases in

world monetary stocks, is transmitted to most countries through the mechanisms

of international commerce (in commodities, services, labor) and finance

(capital flows); and (2) that monetized metallic (coin) stocks and other

elements constituting M1 will be endogenously distributed among all countries

and/or regions in order to accommodate the consequent rise in the domestic

price levels, (3) without involving those international bullion flows that the

famous Hume “price- specie flow” mechanism postulates to be the consequences of

inflation-induced changes in national trade balances.

In any event, the historical evidence clearly demonstrates that, for each of

Fischer’s European-based price-revolutions, an increase in European monetary

stocks and flows always preceded the inflations. For the first,

the price-revolution of the “long-13th century” (c.1180-c.1325), Ian Blanchard

(1996) has recently demonstrated that within England its elf,

specifically in Cumberland-Northumberland, a very major silver mining boom had

commenced much earlier, c.1135-7, peaking in the 1170s, with annual silver

outputs that were “ten times more than had been produced in the whole of

Europe” for any year in

the past seven centuries. By the 1170s,

and thus still before evident signs of general inflation or a marked

demographic upswing, an even greater silver mining boom had begun in the Harz

Mountains region of Saxony, which continued to pour out vast quantities of

silver until the early 14th century. For this same

“Commercial Revolution” era, we must also consider the accompanying financial

revolution, also evident by the 1180s, in Genoa and Lombardy; and though one

may debate the impact that their deposit-

and-transfer banking and foreign-exchange banking had upon aggregate European

money supplies,

these institutional innovations undoubtedly did at least increase the volume of

monetary flows, and near the beginning, not the middle, of this first



For the far better known 16th-Century Price Revolution, Fischer seems to pose a

much greater threat to traditional monetary explanations, especially in so

quixotically dating its commencement in the 1470s, rather than in the 1520s.

Certainly Fischer and many other critics are on solid grounds in challenging

what had been, from the time of Jean Bodin (1566-78) to Earl Hamilton

(1928-35), the traditional monetary explanation for the origins of the Price

Revolution: namely, the influx of Spanish

American treasure. But not until after European inflation was well underway,

not until the mid-1530s, were any significant amounts of gold or silver being


(via Seville); and no truly large imports of silver are recorded before the

early 1560s (a

mean of 83,374 kg in 1561-55: TePaske 1983), when the mercury amalgamation

process was just beginning to effect a revolution in Spanish-American mining.

Those undisputed facts, however, in no way undermine the so-called

“monetarist” case; for Fischer, and far too many other economic historians,

have ignored the multitude of other monetary forces in play since the 1460s.

The first and least important factor was the Portuguese export of gold from

West Africa (Sao Jorge) beginning as a trickle in the 1460s;

rising to 170 kg per annum by 1480, and peaking at 680 kg p.a. in the late

1490s (Wilks 1993). Far more important was the Central European silver mining

boom, which began in the 1460s, at the very nadir of the West European

deflation, which had thus raised the purchasing power of silver and so

increased the profit incentive to seek out new silver sources: as a

technological revolution in both mechanical and chemical engineering.

According to John Nef (1941, 1952), when this German-based mining boom reached

its peak in the mid 1530s, it had augmented Europe’s silver outputs more than

five-fold, with an annual production that ranged from a minimum of 84,200 kg

fine silver to a maximum of 91,200 kg — and thus well in excess of any amounts

pouring into Seville before the mid-1560s. My own statistical compilations,

limited to just the major mines, indicate a rise in quinquennial mean

fine-silver outputs from 12,356 kg in 1470-74 to 55,025 kg in 1534-39 (Munro

1991). In England, 25-year mean mint outputs rose

from 18,932 kg silver in 1400-24 to 33,655 kg in 1475-99 to 59,090 kg in

1500-24; and then to 305,288 kg in 1550-74 (i.e., after Henry VIII’s

“Great Debasement”); in the southern Low Countries, those means go from 54,444

kg in 1450-74 to 280,958 kg in 15 50-74 (Challis 1992; Munro 1983,


In my view, however, equally important and probably even more important was the

financial revolution that had begun in or by the 1520s with legal sanctions for

and then legislation on full negotiability, and the contemporary establishment

of effective secondary markets (especially the Antwerp Bourse) in fully

negotiable bills and rentes, i.e., heritable government annuities; and the

latter owed their universal and growing popularity, compared with other forms

of public debt, to papal bulls (1425,

1455) that had exonerated them from any taint of usury. To give just one

example of a veritable explosion in this form of public credit (which thus

reduced the relative demand for gold and silver coins), an issue that Fischer

almost completely ignores: the annual volume of transactions in Spanish

heritable juros rose from 5 million ducats (of 375 maravedis) in 1515 to 83

million ducats in the 1590s (Vander Wee 1977). Thus we need not call upon

Spanish-American bullion imp orts to explain the monetary origins of the

European Price Revolution, though their importance in aggravating and

accelerating the extent of inflation from the 1550s need hardly be questioned,

especially, as Frank Spooner (1972) has so aptly demonstrated,

even anticipated arrivals of Spanish treasure fleets would induce German and

Genoese bankers to expand credit issues by some multiples of the perceived

bullion values. Fischer, by the way, comments (p. 82) that: “the largest

proportionate increases in Spanish prices occurred during the first half of

the sixteenth century — not the second half, when American treasure had its

greatest impact.” This is simply untrue: from 1500-49, the Spanish composite

price index rose 78.5%; from 1550-99, it rose by another 92.1% (Hamilton


Changes in money stocks or other monetary variables do not, however,

provide the complete explanation for the actual extent of inflation in this or

in any other era. Even if every inflationary price trend that I have

investigate d, from the 12th to 20th centuries, has been preceded or

accompanied by some form of monetary expansion, in none was the degree of

inflation directly proportional to the observed rate of monetary expansion,

with the possible exception of the post World War I hyperinflations.

Consider this proposition in terms of the oft-maligned, conceptually limited,

but still heuristically useful monetary equation MV = Py [in which real y = Y/P

= C + I + G+ (X-M)]; or, better, in terms of the Cambridge “real cash

balances” approach: M = kPy [in which k = the proportion of real NNI (Py) that

the public chooses to hold in real cash balances, reflecting the constituent

elements of Keynesian liquidity preference]. Some Keynesian economists would

contend that an increase in M, or in the rate of growth of money stocks, would

be accompanied by some

offsetting rise in y (i.e. real NNI), whether exogenously created or

endogenously induced by related forces of monetary expansion, and also by some

decline in the income velocity of money, with a reduced need to economize on

the use of money. Since mathematically V = 1/k, they would similarly posit

that an expansion in M,

or its rate of growth, would have led, ceteris paribus — without any change in

liquidity preference, to a fall

in (nominal) interest rates, and thus, by the consequent reduction in the

opportunity costs of holding cash balances, to the necessarily corresponding

rise in k (i.e., an increase in the demand for real cash balances; see Keynes

1936, pp. 306-07). Sometimes, but only very rarely, have changes in these two

latter variables y and V (1/k) fully offset an increase in M; and thus such

increases in money stocks have also resulted, in most historical instances, in

some non-proportional degree of inflation: a rising P, as measured by some

suitable price index, such as the Phelps Brown and Hopkins

basket-of-consumables. [Other economists,

it must be noted, would contend that, in any event, the traditional Keynesian

model is really not applicable to such long-term

phenomena as Fischer’s price-revolutions.

Keynes himself, in considering “how changes in the quantity of money affect

prices… in the long run,” said, in the General Theory (1936, p. 306):

“This is a question for historical generalisation rather than for

pure theory.”]

For the 16th-century Price Revolution, therefore, the interesting question now

becomes: not why did it occur so early (i.e., before significant influxes of

Spanish American bullion); but rather why so late — so many decades after the

onset of the Central European silver-copper mining boom?

Since that boom had commenced in the 1460s, precisely when late-medieval

Europe’s population was at its nadir, perhaps 50% below the 1300 peak, and just

after the Hundred Years’ War had ended, and just

after the complex network of overland continental trade routes between Italy

and NW Europe had been successfully restored, one might contend that in such an

economy with so much “slack” in under-utilized resources, especially land, and

with elastic supplies for so many commodities, both the monetary expansion and

economic recovery of the later 15th century , preceding any dramatic

demographic recovery, permitted an increase in y proportional to the growth of

M, without the onset of diminishing returns an d without significant inflation,

before the 1520s By that decade, however, the monetary expansion had become

all the more powerful: with the peak of the Central European silver-mining

boom and with the rapid increase in the use of negotiable, transferable

credit instruments; and, furthermore, with the Ottoman conquest of the Mamluk

Sultanate (1517), which evidently diverted some considerable amounts of

Venetian silver exports from the Levant to the Antwerp market.

The role of the income-velocity of money

is far more problematic. According to Keynesian expectations, velocity should

have fallen with such increases in money stocks. Yet three eminent economic

historians — Harry Miskimin

(1975), Jack Goldstone (1984), and Peter Lindert (1985) — have sought

to explain England’s16th-century Price Revolution by a very contrary thesis:

of increased money flows (or reductions in k) that were induced by demographic

and structural economic changes, involving interalia(according to their

various models) disproportionate changes in urbanization, greater

commercialization of the rural sectors, far more complex commercial and

financial networks, changes in dependency ratios, etc. The specific

circumstances so portrayed, however, apart from the demographic, are largely

peculiar to 16th- century England and thus do not so convincingly explain the

very similar patterns of inflation in the 16th-century Low Countries, which had

undergone most of these structural economic changes far earlier. Certainly

these velocity model s cannot logically be applied to Fischer’s three other

inflationary long-waves. Indeed, in an article implicitly validating Keynesian

views, Nicholas Mayhew (1995) has contended that the income-velocity of money

has always fallen with an expansion in money stocks, from the medieval to

modern eras, with this one anomalous exception of the 16th-century Price

Revolution. Perhaps, for this one era,

we have misspecified V (or k) by misspecifiying M: i.e., by not properly

including increased issues of negotiable credit; or perhaps institutional

changes in credit (as Goldstone and Miskimin both suggest) did have as dramatic

an effect on V as on M. Furthermore, an equally radical change in the coined

money supply (certainly in England), from one that had been principally gold

to one which, precisely from the 1520s, became largely and then almost entirely

silver, may provide the solution to the velocity paradox: in that the

transactions velocity attached to small value silver coins, of 1d., is

obviously far higher

velocity than that for gold coins valued at 80d and 120d. Except for a brief

reference to Mayhew’s article in the lengthy bibliography, Fischer virtually

ignores such velocity issues

(and thus changes in the demand for real cash balances) throughout his

eight-century survey of secular price trends.

Finally, Fischer’s thesis that population growth was responsible for this the

most famous Price Revolution (and all other inflationary long waves) is hardly

credible, especially if he insists on dating its inception the 1470s. For most

economic historians (Vander Wee 1963; Blanchard 1970;

Hatcher 1977, 1986; Campbell 1981; Harvey 1993) contend that, in NW Europe,

late-medieval demographic decline continued into the early 16th-century;

and that England’s population in 1520 was no more than 2.25 million,

compared to estimates ranging from a minimum of 4.0 to a maximum of 6.0 or even

7.0 million around 1300, the upper bounds being favored by most historians. How

— even if the demographic model were to be theoretically acceptable — could

a modest population growth from such a very low level in the 1520s, reaching

perhaps 2.83 million in 1541, and peaking at 5.39 million in 1656, have been

the fundamental cause of persistent, European wide-inflation, already underway

in the 1520s?

According to Fischer, the ensuing, intervening price-equilibrium

(c.1650-c.1730) involved no discernible monetary contraction, and similarly,

his next inflationary long-wave (c.1730-1815) began well before any monetary

expansion became — in his view — manifestly evident. The monetary and price

data, suggest otherwise, however, incomplete though they may be. Thus, the data

complied by Bakewell, Cross, TePaske, and many others on silver mining at

Potosi (Peru) and Zacatecas (Mexico) indicate that their combined outputs fell

from a mean of 178,692 kg in 1636-40 to one of 101,534 kg in 1661-5, rising to

a mean of 156,497 kg in 1681-5

[partially corresponding to guesstimates of European bullion imports, which

Morineau (1985) extracted fr om Dutch gazettes]; but then sharply falling once

more, and even further, to a more meager mean of 95,842 kg in 1696-1700. During

this same era, the Viceroyalty of Peru’s domestically-

retained share of silver-based public revenues rose from 54% to 96%

(T ePaske 1981); the combined silver exports of the Dutch and English East

India Companies to Asia (Chaudhuri 1968; Gaastra 1983) increased from a

decennial mean of 17,293 kg in 1660-69 to 73,687 kg in 1700-09, while English

mint outputs in terms of fine sil ver (Challis 1992) fell from a mean of 19,400

kg in 1660-64 (but 23,781 kg in 1675-79) to one of just 430.4 kg in 1690-94,

i.e., preceding the Great Recoinage of 1696-98. From the early 18th century,

however, European silver exports to Asia were well more

than offset by a dramatic rise in Spanish-American, and especially Mexican

silver production: for the latter (with evidence from new or previously

unrecorded mines: assembled by Bakewell 1975, 1984; Garner 1980,

1987; Coatsworth 1986, and others), aggregate production more than doubled

from a mean of 129,878 kg in 1700-04 to one of 305,861 kg in 1745-49.

Possibly even more important, especially with England’s currency shift from a

silver to a gold standard, was a veritable explosion in aggregate

Latin-American gold production: from a decennial mean of just 863.90 kg in


zooming to 16,917.4 kg in 1741-50 (TePaske 1998). Within Europe itself, as

Blanchard (1989) has demonstrated, Russian silver mining outputs, ultimately

responsible for perhaps 7%

of Europe’s total stocks,

rose from virtually nothing in the late 1720s to peak at 33,000 kg per annum in

the late 1770s, falling to 18,000 kg in the early 1790s then rising to 21,000

kg per year in the later 1790s.

Finally, even though changes in annual mint outputs are not valid indicators

of changes in coined money supplies, let alone of changes in M1,

the fifty-year means of aggregate values of English mint outputs (silver and

gold: Challis 1992) do provide interesting signals of longer-term monetary

changes: a fall from an annual mean of 348,829 pounds in 1596-1645 to one of

275,403 pounds in 1646-95, followed by a rise, with more than a full recovery,

to an annual mean of 369,644 pounds in 1700-49 (thus excluding the Great

Recoinage of 1696-98). Meanwhile, if the earlier Price Revolution had indeed

peaked in 1645-49, with the quinquennial mean PB&H index at 680, falling to a

nadir of 579 in 1690-94, the fluctuations in the first half of the 18th-century

do not demonstrate any clear inflationary trend, with the mean PB&H index

(briefly peaking at 635 in 1725-9) stalled at virtually the same former level,

581, in 1745-49. Thereafter, of course,

for the second half of the 18th century, the trend is very strongly and

incessantly upward, with almost a

doubling in PB&H index, to 1093 in 1795-9.

Whatever one may wish to deduce from all these diverse data sets, we are

certainly not permitted to conclude, as does Fischer, that inflation preceded

monetary expansion, and did so consistently. Such a view becomes all the more

untenable when the radical changes in English and banking and credit

institutions, following the establishment of the Bank of England in 1694-97,

are taken into account: the consequent introduction and rapid expansion in

legal-tender paper bank note issues (with prior informal issues by London’s

Goldsmith banks), and more especially fully negotiable,

transferable, and discountable Exchequer bills, government annuities,

inland bills and promissory notes, whose veritable explosion in circulation

from the 1760s, with the proliferation of English country-banks, hardly

requires any further elaboration, even if these issues are given short shrift

in Fischer’s book. In view of such complex changes in Britain’s financial and

monetary structures,

subsequent data on coinage outputs have even more limited utility in

estimating money stocks. But we may note that aggregate mined outputs of

Mexican silver more than doubled, from a quinquennial mean of 305,861 kg in

1745-49 to 619,495 kg in 1795-99, while those of Peru more than tripled, from

34,318 kg in 1735-39 (no data for the 1740s) to 126,354 kg in 1795-99 (Garner

1980, 1987; Bakewell 1975, 1984; J.

Fisher, 1975).

Having earlier considered the so-called and misconstrued

“price-equilibrium” of 182 0-1896, let us now finally examine the inception of

the fourth and final long-wave commencing in 1896. Fischer again contends that

population growth was the “prime mover,” despite the fact that Britain’s own

intrinsic growth rate had been falling from its

1821 peak [from 1.75 to 1.31 in 1865, the last year given in Wrigley-Davies-

Oppen-Schofield (1997)]. For evidence he cites an assertion in Colin McEvedy

and Richard Jones, Atlas of World Population History (1978) to the effect that

world population, having increased by 35% from 1850 to 1900,

increased a further 53% by 1950. Are we therefore to believe that such growth

was itself responsible for a 45.2% rise in, for this era, the better structured

Rousseaux price-index [base 100 = (1865cp +1885cp)/2]: from 73 in 1896 to 106

[while the PB&H index rose from 947 in 1896 to 1021 in 1913]?

As for the role of monetary factors in the commencement of this fourth long

wave, Fischer observes (p. 184) that “the rate of growth in gold production

throughout the world was roughly the same before and after 1896.” This

undocumented assertion, about an international economy whose commerce and

finance was now based upon the gold standard, is not quite accurate.

According to assiduously calculated estimates in Eichengreen

and McLean

(1994), decennial mean world gold outputs, having fallen from 185,900 kg in

1850-9 to 135,000 kg in 1880-9 (largely accompanying the aforementioned 44%

fall in the Rousseaux composite index from 128 in 1872 to 72 in 1895),

thereafter soared to

a mean of 255,600 kg in 1890-9 — their graph of annualized data shows that

the bulk of this increased output occurred after 1896 — virtually doubling to

an annual mean of 513,900 kg in 1900-14.

World War I, of course, effectively ended the international gold-standard era,

since the Gold- Exchange Standard of 1925-6 was rather different from the older

system; and the post-war era ushered in a radically new monetary world of fiat

paper currencies, whose initial horrendous manifestation came in the hyper

inflations of Weimar Germany, Russia, and most Central European countries, in

the early 1920s. For this post-war economy, Fischer does admit that monetary

factors often had some considerable importance in influencing price trends; but

his analyses, even of the post-war radical, paper-fuelled hyperinflations, are

not likely to satisfy most economists, either for the inter-war or Post World

War II eras, up to the present day.

This review, long as it is, cannot possibly do full justice to an eight-century

study of this scope and magnitude. So far I have neglected to consider his

often fascinating analyses of the social consequences of inflation over these

many centuries, except for brief allusions in the introduction, where I

indicated his deeply hostile views to persistent inflation for its inevitably

insidious consequences: the impoverishment of the masses, growing malnutrition,

the spread of killer-diseases, increased crime and violence in general, and a

breakdown of the social order, etc.

While some of

the evidence for the latter seems plausible, I do have some concluding quarrels

with his use of real wage indices. Much of our available nominal money-wage

evidence comes from institutional sources on daily wages, which, by their very

nature, tend to be fixed over long periods of time [as Adam Smith noted in the

Wealth of Nations (Cannan ed.

1937, p. 74), “sometimes for half a century together”). Therefore, for such

wage series, real wages rose and fell with the consumer price index, as

measured by, for example, our Phelps Brown and Hopkins basket-of-consumables

index. Its chief problem (as opposed to the better constructed Vander Wee

index for Brabant) is that its components, for long periods, constitute fixed

percentages of the total composite index,

irrespective of changes in relative prices for, say, grains; and they thus do

not reflect the consumers’ ability to make cost-saving substitutions.

Secondly, they are necessarily based on daily wage rates, without any

indication of total annual money incomes; thirdly, the great majority of

money-wage earners in pre-modern Europe earned not day rates but piece-work

wages, for which evidence is extremely scant.

But more important, before the 18th century (or even later), a majority of the

European population did not live by money wages; and most wage-earners had

supplementary forms of income, especially agricultural, that helped insulate

them to some degree from sharp rises in food prices. If rising food prices hurt

many wage-earners, they also benefited ma ny peasants,

especially those with customary tenures and fixed rentals who could thereby

capture some of the economic rent accruing on their lands with such price

increases. It may be simplistic to note that there are always gainers and

losers with both inflation and deflation — but even more simplistic to focus

only on the latter in times of inflation, and especially simplistic to focus on

a real wage index based on the PB&H index. And if deflation is so beneficial

for the masses, why, during the deflationary period in later 17th and early

18th century England, do we find, along with a rise in this real-wage index, a

rise in the death rate from 23.68/1000 in 1626 to 32.14/1000 in 1681,

thereafter falling slightly but rising again to an ultimate peak of

37.00/1000 in 1725 (admittedly an era of anomalous disease-related

mortalities), when the PB&H real-wage index stood at 60 —

some 24% higher than the RWI of 36 for 1626? One of the many imponderables yet

to be considered, though one might ponder that sometimes high real wages

reflect labor shortages from dire conditions, rather than general prosperity

and more equitable wealth and income distributions, as Fischer suggests.

Finally, Fischer’s argument that inflationary price-revolutions were always

especially harmful to the lower classes by leading to rising interest rates is

sometimes but not universally true, even if rational creditors should have

raised rates to protect themselves from inflation. Thus, for the Antwerp money

market in the 16th century,

the meticulous evidence compiled by Vander Wee (1964, 1977) shows that

nominal interest rates fell over this entire period [from 20% in 1515 to 9% in

1549 to 5% in 1561; and on the riskier short term loans to the Habsburg

government, from a mean of 19.5

% in 1506-10 to one of 12.3% in 1541-45 to 9.63% in 1561-55]. In the next

price-revolution, during the later 18th century, nominal interest rates did

rise during periods of costly warfare, i.e., with an increasing risk premium;

but real interest rates actually fell because of the increasing tempo of

inflation (Turner 1984), more so than did real wages for most industrial



Georges d’Avenel, Histoire economique de la propriete, des salaires, des

denrees, et tous les prix

en general, depuis l’an 1200 jusqu’en l’an 1800,

7 vols. (Paris, 1894-1926).

Peter Bakewell, Silver Mining and Society in Colonial Mexico: Zacatecas,

1546-1700 (Cambridge, 1972).

Peter Bakewell, “Registered Silver Production in the Potosi District, 1550

– 1735,” Jahrbuch fur Geschichte von Staat, Wirtschaft und Gesellschaft

Lateinamerikas, 12 (1975), 67-103.

Peter Bakewell, “Mining in Colonial Spanish America,” in Leslie Bethell,

ed., The Cambridge History of Latin America, Vol. II: Colonial Latin Amer ica

(Cambridge and New York: Cambridge University Press, 1984), 105-51.

Peter Bakewell, ed., Mines of Silver and Gold in the Americas, Variorum Series:

An Expanding World: The European Impact on World History, 1450 –

1800 (London, 1997):

Ian Blanchard,

Russia’s ‘Age of Silver’: Precious-Metal Production and Economic Growth in the

Eighteenth Century (Routledge: London and New York,


Ian Blanchard, “Population Change, Enclosure, and the Early Tudor Economy,”

Economic History Review, 2nd ser. 23 (19 70), 427-45.

Ian Blanchard, “Lothian and Beyond: The Economy of the ‘English Empire’ of

David I,” in Richard Britnell and John Hatcher, eds., Progress and Problems in

Medieval England (Cambridge and New York: Cambridge University Press,

1996), pp. 23-45.

Michael Bordo, “Explorations in Monetary History: A Survey of the

Literature,” Explorations in Economic History, 23 (1986), 339-415.

Bruce Campbell, “The Population of Early Tudor England: A Re-evaluation of the

1522 Muster Returns and the 1524 and 1 525 Lay Subsidies,” Journal of

Historical Geography, 7 (1981), 145-54.

Christopher Challis, “Lord Hastings to the Great Silver Recoinage, 1464 –

1699,” in Christopher E. Challis, ed., A New History of the Royal Mint

(Cambridge: Cambridge University Press

, 1992), pp. 179-397; C.E. Challis,

“Appendix 1. Mint Output, 1220-1985,” pp. 673-698.

John Coatsworth, “The Mexican Mining Industry in the Eighteenth Century,”

in Nils Jacobsen and Hans- Jurgen Puhle, eds., The Economies of Mexico and Peru

during the La te Colonial Period, 1760 – 1810 (Berlin 1986), pp. 26-45.

Harry Cross, “South American Bullion Production and Export, 1550-1750,” in John

Richards, ed., Precious Metals in the Later Medieval and Early Modern Worlds

(Durham, 1983), Appendix II, p. 422.

T revor Dick and John Floyd, Canada and the Gold Standard: Balance of Payments

Adjustment under Fixed Exchange Rates, 1871 – 1913 (Cambridge and New York:

Cambridge University Press, 1992).

Barry Eichengreen and Ian W. McLean, “The Supply of Gold Under the

pre-1914 Gold Standard,” The Economic History Review, 2nd ser., 47:2 (May



John Fisher, “Silver Production in the Viceroyalty of Peru, 1776-1824,”

Hispanic American Historical Review, 55:1 (1975), 25-43.

Douglas Fisher, “The Price Revolution: A Monetary Interpretation,” Journal of

Economic History, 49 (December 1989), 883 – 902.

John Floyd, World Monetary Equilibrium: International Monetary Theory in an

Historical-Institutional Context (Philadelphia, 1985).

Dennis Flynn, “A New Perspective on the Spanish Price Revolution: The Monetary

Approach to the Balance of Payments,” Explorations in Economic History, 15

(1978), 388-406.

Jacob Frenkel and Harry G. Johnson, eds., The Monetary Approach to the Balance

of Payments (Toronto: University of Toronto Press, 1976),

especially Jacob Frenkel and Harry Johnson, “The Monetary Approach to the

Balance of Payments: Essential Concepts and Historical Origins,” pp. 21-45;

Harry Johnson, “The Monetary Approach to Balance-of-Payments Theory,” pp.


67; Donald N. McCloskey and J. Richard Zecher, “How the Gold Standard Worked,

1880-1913,” pp. 357-85.

FS. Gaastra, “The Exports of Precious Metal from Europe to Asia by the Dutch

East India Company, 1602-1795 A.D.,” in John F. Richards, ed.,

Precious Metals in the Medieval and Early Modern Worlds(Durham, N.C.,

1983), pp. 447-76.

Richard Garner, “Long-term Silver Mining Trends in Spanish America: A

Comparative Analysis of Peru and Mexico,” American Historical Review, 67:3

(1987), 405-30.

Richard Garner,

“Silver Production and Entrepreneurial Structure in 18th-Century Mexico,”

Jahrbuch fur Geschichte von Staat, Wirtschaft und Gesellschaft

Lateinamerikas,17 (1980), 157-85.

Jack Goldstone, “Urbanization and Inflation: Lessons from the English Price

Revolution of the Sixteenth and Seventeenth Centuries,” American Journal of

Sociology, 89 (1984), 1122 – 60.

Earl Hamilton, American Treasure and the Price Revolution in Spain,

1501-1650 (Cambridge, Mass., 1934; reissued 1965).

Earl Hamilton, Money, Prices, and Wages in Valencia, Aragon, and Navarre,

1351 – 1500 (Cambridge, Massachusetts: Harvard University Press, 1936).

Barbara Harvey, Living and Dying in England, 1100 – 1540 (Oxford: Oxford

University Press, 1993).

John Hatcher, Plague, Population, and the English Economy, 1348-1530

(Studies in Economic History series, London, 1977).

John Hatcher, “Mortality in the Fifteenth Century: Some New Evidence,”

Economic History Review, 39 (Feb. 1986), 19-38.

David Herlihy, Medieval and Renaissance Pistoia: The

Social History of an Italian Town, 1200-1430 (New Haven and London, 1966).

John Maynard Keynes, The General Theory of Employment, Interest and Money

(London, 1936).

Peter Lindert, “English Population, Wages, and Prices: 1541 – 1913,” The

Journal of Interdisciplinary History, 15 (Spring 1985), 609 – 34.

Nicholas Mayhew, “Population, Money Supply, and the Velocity of Circulation in

England, 1300 – 1700,” Economic History Review, 2nd ser.,

48:2 (May 1995), 238-57.

Harry Miskimin, “Population Growth and

the Price Revolution in England,”

Journal of European Economic History, 4 (1975), 179-85. Reprinted in his Cash,

Credit and Crisis in Europe, 1300 – 1600 (London: Variorum Reprints,

1989), no. xiv.

B.R. Mitchell and Phyllis Deane, eds. Abstract of British Historical

Statistics (Cambridge, 1962)

John Munro, “Mint Outputs, Money, and Prices in late-Medieval England and the

Low Countries,” in Eddy Van Cauwenberghe and Franz Irsigler, ed.,

Munzpragung, Geldumlauf und Wechselkurse / Minting, Monetary Circulation and

Exchange Rates, (Trierer Historische Forschungen, Vol. VIII, Trier,

1984), pp. 31-122.

John Munro, “Bullion Flows and Monetary Contraction in Late-Medieval England

and the Low Countries,” in John F. Richards, ed., Precious Metals in the

Medieval and Early Modern Worlds (Durham, N.C., 1983), pp. 97-158.

John Munro, “The Central European Mining Boom, Mint Outputs, and Prices in the

Low Countries and England, 1450 – 1550,” in Eddy H.G. Van Cauwenberghe,

ed., Money, Coins, and Commerce: Essays in

the Monetary History of Asia and Europe (From Antiquity to Modern Times)

(Leuven: Leuven University Press,

1991), pp. 119-83.

John Nef, “Silver Production in Central Europe, 1450-1618,” Journal of

Political Economy, 49 (1941), 575-91.

John Nef, “Mining

and Metallurgy,” in M.M. Postan, ed., Cambridge Economic History, Vol. II:

Trade and Industry in the Middle Ages (Cambridge, 1952),

pp. 456-93. Reprinted without changes, in the 2nd revised edn. of The Cambridge

Economic History of Europe, Vol. II, edited by M.M. Postan and Edward Miller

(Cambridge, 1987), pp. 691-761.

E.H. Phelps Brown and Sheila V. Hopkins, “Seven Centuries of en Centuries of

the Prices of Consumables Compared with B Building Wages,” Economica, 22

(August 1955), and “Sevuilders” Wage-

Rates,” Economica, 23 (Nov. 1956),

reprinted E.H. Phelps Brown and Sheila V. Hopkins, A Perspective of Wages and

Prices (London, 1981), containing additional statistical appendices not

provided in the original publication.

Frank Spooner, The International Economy and Monetary Movements in France,

1493-1725 (Cambridge, Mass., 1972)

John TePaske, “New World Silver, Castile, and the Philippines, 1590-1800 A.D.,”

in John F. Richards, ed., Precious Metals in the Medieval and Early Modern

Worlds (Durham, N.C.

, 1983), pp. 424-446.

John TePaske, “New World Gold Production in Hemispheric and Global Perspective,

1492 – 1810,” in Clara Nunez, ed., Monetary History in Global Perspective, 1500

– 1808, Papers presented to Session B-6 of the Twelfth International Eco nomic

History Congress (Seville, 1998), pp. 21-32.

Michael Turner, Enclosures in Britain, 1750 – 1830, Studies in Economic History

Series (London, 1984).

Herman Vander Wee, Growth of the Antwerp Market and the European Economy,

14th to 16th Centuries,

3 Vols. (The Hague, 1963). Vol. I: Statistics; Vol.

II: Interpretation, 374-427; and Vol. III: Graphs.

Herman Vander Wee, “Monetary, Credit, and Banking Systems,” in E.E. Rich and

Charles Wilson, eds., The Cambridge Economic History of Europe, Vol. V:

T he Economic Organization of Early Modern Europe(Cambridge, 1977), chapter V,

pp. 290-393.

Herman Vander Wee, “Prijzen en lonen als ontwikkelingsvariabelen: Een

vergelijkend onderzoek tussen Engeland en de Zuidelijke Nederlanden,

1400-1700,” in Album aan geboden aan Charles Verlinden ter gelegenheid van zijn

dertig jaar professoraat (Gent, 1975), pp. 413-47; reissued in English

translation (without the tables) as “Prices and Wages as Development Variables:

A Comparison Between England and the Southern Net herlands,

1400-1700,” Acta Historiae Neerlandicae, 10 (1978), 58-78.

Ivor Wilks, “Wangara, Akan, and the Portuguese in the Fifteenth and Sixteenth

Centuries,” in Ivor Wilks, ed., Forests of Gold: Essays on the Akan and the

Kingdom of Asante (Athens, Ohio

, 1993), pp. 1-39.

E.A. Wrigley, R.S. Davies, J.E. Oeppen, and R.S. Schofield, English Population

History from Family Reconstitution, 1580- 1837 (Cambridge and New York:

Cambridge University Press, 1997).

Subject(s):Macroeconomics and Fluctuations
Geographic Area(s):General, International, or Comparative
Time Period(s):General or Comparative

Merchants and Markets in Revolutionary Russia, 1917-1930

Author(s):Banerji, Arup
Reviewer(s):Ball, Alan


Published by H-Business (January 1998)

Arup Banerji. Merchants and Markets in Revolutionary Russia, 1917-30. New York: St. Martin’s Press, Inc., 1997. xxiv + 237 pp. Tables, appendix, notes, bibliography, and index. $69.95 (Cloth), ISBN 0-312-16293-6.

Reviewed for H-Business by Alan Ball, Marquette University

Private Trade in Early Soviet Russia

I agreed eagerly to review Arup Banerji’s study of private entrepreneurs in early Soviet Russia, assuming that it would extend (or challenge) the findings of earlier works. Soviet/Russian archives have been open for a decade, now, and should be able to support a fresh exploration of private business during the New Economic Policy (NEP) of the 1920s. For example, such a book might offer brief biographies of individual private traders or devote itself primarily to private trade in non-Slavic republics. It might provide more extensive coverage of the “Roaring Twenties” atmosphere in principal Soviet cities–especially the nightclubs, bars, casinos, restaurants and so forth frequented by (among other people) newly-wealthy entrepreneurs, as in Russia today. A separate chapter would also be welcome on public opinion(s) regarding these merchants, as would new (and more abundant) material on their fate in the 1930s, when laws banned most of their former activities.

In short, numerous topics and questions remain that would benefit from archival documents inaccessible when I worked on the subject fifteen years ago. Not only would historians welcome sources permitting a deeper exploration of major aspects of Soviet society in the 1920s, the findings of such work might be revealing to those studying private enterprise in post-Soviet Russia. Short of that, a new book on NEP would still be valuable if it offered a thoughtful challenge of important conclusions prevalent in the scholarly community.

Unfortunately, professor Banerji’s book attempts none of these things. It covers ground well known to other specialists and does not modify or reject basic assumptions among contemporary scholars. Most disappointing of all, the volume relies exclusively on familiar sources, with nothing at all from Rossiiskii Gosudarstvennyi Arkhiv Ekonomiki (the Russian State Archive of the Economy) or any other Russian archive. Late in the 1990s, it is difficult to imagine a work of this sort published without Russian archival documentation.

That said, the book itself is a reliable guide to private trade in the early Soviet period to the extent that it competently reviews many of the basic conclusions already published elsewhere. An introductory chapter covers private trade before NEP, including the unsuccessful efforts to ban such commerce during the Civil War. In this period (1918-1920) the state proved unable to take on the task of distributing essential goods itself, and thus private trade continued, furtively, in various itinerant, petty guises–nothing like the more settled and substantial network of merchants that had existed before the Revolution. So essential was private trade during the Civil War that many officials tolerated it, regardless of its illegality.

Next, professor Banerji presents an overview of state policy: the crises that convinced Lenin to legalize private trade in 1921; sterner measures taken against private entrepreneurs in 1923/24; a relaxation of pressure under the New Trade Practice in 1925/26; followed by ever harsher actions in the last years of the decade. Against this background, he then focuses on taxation of private enterprise and the sources of credit available to it (with taxation a much more important concern for most vendors than the availability of credit). As one would expect, the tax burden varied with the state’s general line on private trade, noted above.

Part II begins with a statistical look at private trade: the changing number of participants over the decade; their placement in various categories depending on the size and nature of their operations; the value of their sales; products commonly sold; and so forth. Then come two chapters devoted to private trade of specific products–certain manufactured goods and grain, respectively. In the case of grain, for instance, professor Banerji notes the government’s difficulty in obtaining the volume it desired from the peasants, which led late in the decade to “emergency measures” incompatible with free grain trading and thus with NEP. He adds that he does not share the view, common among Bolsheviks of the day, that private traders were a principal cause of the government’s grain collection difficulties.

The final chapter opens with its thesis, namely that the liquidation of legal private trade occurred prematurely, before the state had devised a distribution system to replace it. Private trade was not a threat to socialist construction, professor Banerji concludes, and should not have been crushed as Stalin and his associates assumed control of the Party at the end of the decade. Yet the crackdown commenced and drove private trade back to the surreptitious or petty forms it had assumed during the Civil War. Meanwhile, in the “socialist sector,” alternatives for consumers included rationing and “trade deserts” (no stores or no goods at all). Not until the rise of Mikhail Gorbachev did the Soviet Union again acquire a leader convinced of the need to legalize private trade to a degree equaling (and eventually surpassing) the opportunities permitted during NEP.

No specialist in the period will find any of this a revelation. The book’s main themes are as familiar as its sources. However, the volume is distinguished by the large serving of tables and other statistics packed into its pages. Authors of other recent works, while aware of the data (mostly from Soviet sources published during NEP), have not chosen to include so much of it in their books and articles. If the statistical emphasis makes Merchants and Markets slow-going for the general reader, it may prove of use to a future researcher scrutinizing the figures for details on a specific point or for a fuller sense of the contents of the original Soviet sources. This, along with professor Banerji’s confirmation of colleagues’ findings, are the book’s principal services to the historical profession.


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