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Why Europe Grew Rich and Asia Did Not: Global Economic Divergence, 1600-1850

Author(s):Parthasarathi, Prasannan
Reviewer(s):Mokyr, Joel

Published by EH.Net (January 2012)

Prasannan Parthasarathi, Why Europe Grew Rich and Asia Did Not: Global Economic Divergence, 1600-1850. Cambridge: Cambridge University Press, 2011. 365 pp. $30 (paperback), ISBN: 978-0-521-16824-3.

Reviewed for EH.Net by Joel Mokyr, Departments of Economics and History, Northwestern University.

The year 2011 was? a banner year for ambitious books that explain what is becoming known as the ?Great Divergence? of the West and the Rest. In addition to the book under review here, two other books by major scholars have appeared: Jean-Laurent Rosenthal and Bin Wong?s Before and Beyond Divergence and Ian Morris?s Why the West Rules for Now. One would have hoped that the proliferation of this literature would perhaps start to converge toward a consensus, but alas, so far discord and confusion reign in this debate. One could call it perhaps ?the small divergence.?

Parthasarathi?s book, its title notwithstanding, is not about ?Asia? and ?Europe? but really about India and Britain. While there are some pages that deal with China and the European Continent, the author clearly is most at ease when writing about the former two countries. Japan makes only an occasional appearance, and the rest of Asia does not figure much. Above all, this book is an argument that the ?California hypothesis? applies to India as well. The California School, most notably embodied in Kenneth Pomeranz?s Great Divergence and Andre Gunder Frank?s Re-Orient, argue that the Chinese economy rather than falling behind from Ming times actually performed admirably until the end of the eighteenth century, and that it was only the Industrial Revolution in Western Europe that (temporarily) gave Europe a big advantage. Parthasarathi?s book makes a similar argument for India. Moghul India, he argues, was not backward, primitive, ignorant, poorly organized, or anything of the kind. As late as 1800 it was technologically sophisticated, scientifically progressive, commercialized with well-working institutions and efficient markets that allowed the Indian economy to work well. Its cottons were in high demand world-wide, and its abilities in a host of other industries were more than respectable.

If everything in India was so good, why was everything so bad? Parthasarathi?s argument depends heavily on his interpretation of the British Industrial Revolution. For him the Industrial Revolution was above all policy-driven. In his interpretation, the Industrial Revolution was the result of deliberate industrial policies by its governments, protecting domestic industry and encouraging import-substitution. What was true for Britain, Parthasarathi continues, was even more true for the Continental countries. Industrial policies shaped the speed and form of economic development. The one country that had as much potential as Belgium or Germany was India. But the British Raj mercilessly pressed their advantage against the hapless Indians, denied them access to the British market, and forced them to buy the cheap cotton products with which Lancashire after 1820 increasingly flooded the Indian market. India was ruled by the British, and they not only did nothing to encourage the development of manufacturing there; they did all they could to obstruct it. The power of states could determine successful economic development and prevent it elsewhere.

The argument is, of course, not new, and much of the evidence that Parthasarathi relies on has been used by other scholars. A notable example of an important essay published more than three decades ago (not cited by Parthasarathi) is Subramanian Swamy?s ?The Response to Economic Challenge: A Comparative Economic History of China and India, 1870-1952? (Quarterly Journal of Economics, 1979). Swamy fully anticipates Parthasarathi?s argument: ?The slow industrialization, or at least the lack of rapid industrial growth in India … can, be ascribed to the unwillingness of foreign capital to enter into the basic industries, and to the British Indian Government for placing obstacles in the path of indigenous investment … It was the combination of ?British interests? and the underlying social ethos of the Government of India that they were there ?to govern, to stabilize, and to administer,? but not to transform that proved to be the main cause of India?s slow development? (pp. 37?38).

Yet it is far from clear whether we have fully disposed of ?deep? cultural differences between Asia and Europe. Eight years after Swamy?s paper, Gregory Clark published a famous paper with a disturbing finding, comparing the Indian cotton mills in Bombay to those in Lancashire. He found that although Indian wages were only a sixth of British wages and they were using essentially the same equipment, the Indians had no major cost advantage over their British competitors, because Indian labor?s efficiency was only a fraction of their counterparts in Manchester. Clark left the reasons for this open, but subsequently in A Farewell to Alms he returns to the issue and argues that labor quality was remarkably low in poor countries, because of high absenteeism, poor discipline and similar matters. Whether Clark is right or not, Parthasarathi pays no heed to his work. Perhaps he can show us that low labor productivity can somehow be chalked up to the Raj as well, but until he does, his case is simply unpersuasive.

By blaming the Raj squarely for everything that went wrong with India?s nineteenth century development, Parthasarathi offers us a warmed-up old nationalist chestnut, and his waving at the post-colonial literature does not add much credibility to his case. While he is surely right that one can easily overstate the weaknesses of the Indian economy on the eve of the Industrial Revolution, his cherry-picking of examples (there are only a few tables in the book and only one of them pertains to India) simply does not persuade. Had Britain and India been at the same level of economic and institutional development in 1750, why was there no ?Western Europe Company? set up in Delhi that would have exploited the political divisions within Europe, established an Indian ?Raj? based in London and forced Europe to accept Indian calicoes without tariffs? Moreover, there were Asian nations, from Persia to Siam, which were never controlled by European Imperialists, yet they never seem to have developed much modern industry either. Neither, for that matter, did Imperial China, which poses a logical problem for anyone trying to blame imperialism for economic backwardness in Asia. The case of China is brushed off by Parthasarathi as the result of an ecological disaster due to deforestation and the feckless policies of the Q?ing government which did nothing to encourage the exploitation of Chinese coal deposits. But why would we believe that a counterfactual Indian independent government would have performed like Belgians or Prussians and not more like the Q?ing? To make his case stick, Parthasarathi ought perhaps have argued that India?s society was much like Japan?s, and that in the absence of colonial domination it would have made its own rules work for it. But such arguments are never made, and I suspect for good reason.

Parthasarathi is a learned and well-read historian, and he is no-doubt correct in pointing out that scholars have underrated the vitality and strength of the Indian economy in the eighteenth century. There were enclaves of highly skilled craftsmen and craftswomen in India, and it is easy to overrate the advantage that Britain and Europe enjoyed over Asian countries such as India and China. But in his justifiable indignation over the disrespect shown by ?Eurocentric? scholars to Indian civilization, he lets his rhetoric get the better of him and so hopelessly overstates his case as to undermine the credibility of those corrective elements he provides to the standard story that are most valuable.

First, he exaggerates the role of the British government in the first Industrial Revolution. There was no real industrial policy except for letting the new industrialists do their thing. With a few exceptions such as the Longitude Board, the demand for military hardware and royal dockyards, and running a patent office, the government played a remarkably modest role in fostering the Industrial Revolution. On the Continent this role was clearly larger, but even in Belgium and Prussia, the fact that the government supported and abetted the process does not prove that the government was a ?critical factor? as Parthasarathi repeatedly asserts. What these governments did (far more than Westminster) was to invest in infrastructure or encourage and subsidize others to do so. But this is precisely what the British did in India: they invested in its infrastructure. Lord Dalhousie, governor general of India 1848?56 (never mentioned by Parthasarathi) famously said that he introduced three ?great engines of social improvements?: railways, electric telegraph, and uniform postage (Suresh Chandra Gosh, ?The Utilitarianism of Dalhousie and the Material Improvement of India? in Modern Asian Studies, 1978, p. 97). One might add the Ganges irrigation canal, the brainchild of a single-minded Briton, Colonel Proby Cautley, was a huge success.

The exact dimensions of the impact of the Raj on the Indian economy will remain in dispute. Did the British extinguish an intellectual community comparable in quality and achievements to the one in eighteenth century Europe? We are told (p. 266) that the British colonial order led to a lossof patronage for institutions that produced and diffused knowledge, and that this, presumably, contributed to the decline of science and technology in the entire subcontinent. It is true that some of the libraries collected by Maharajas were dispersed and looted, but it seems implausible that a handful of British officials and soldiers could have wiped out the human capital of a population of close to 200 million people and reduced them from a vibrant intellectual community to a largely illiterate mass. The Indian society that emerged in the nineteenth century, Parthasarathi maintains, was radically different from what was there before. There is no question that there is truth to this argument, and that for much of the nineteenth century the British discouraged the formation of human capital and local centers of technology.

But it is frustrating that so little is known about Indian progress in the pre-Raj era and that the experts differ so much. Indian science and technology was surely not as primitive as contemporary Western observers described, but was it really at a par with Europe as we are told in this book? The complexity of the matter is wholly reflected in the writings of the Indian scholar Dharampal (not cited by Parthasarathi) who conceded that ?It is possible that the various sciences and technologies were on a decline in India around 1750 and, perhaps, had been on a similar course for several centuries previously? but that it was hard to know because of the ?general incommunicativeness of eighteenth century Indian scholars and specialists in the various fields? which may have been due to ?the usual secretiveness of such persons? (, p. 5, accessed on Dec. 31, 2011). The difference between that kind of insider science and the growth of public science in eighteenth-century Western Europe, which was at the very core of the Industrial Enlightenment, is symptomatic of the weakness of the argument made in this book. At the very least, Parthasarathi seems to fall into the trap of what Deepak Kumar has called ?a naive (perhaps revivalist) appreciation of pre-colonial science and technology.?

Part of the book?s weakness is the author?s very limited and minimalist concept of the Industrial Revolution, which he sees as purely a revolution in cotton and coal. He closely examines one key industry, cotton, and points out that British consumers were exposed to the high-quality, brilliantly colored calicoes coming from India. The Act of 1721 prohibited the importation and wearing of these textiles and thus stimulated British manufacturers to make their own, thus creating powerful incentives for the invention of machinery in the cotton industry. In this way, the British Industrial Revolution was indebted to India. Perhaps, but the Calico Act had quite a few exemptions, and its enforcement was far from water tight. But more to the point, the Industrial Revolution consisted of improvement on a much broader front than India?s example can account for. Thus in the woolen textiles ? never mentioned by Parthasarathi ? the introduction of shearing frames in the finishing stages was completely novel. In many other industries there were critical innovations, some of them the result of unscientific serendipity, but at least in some cases they were related to scientific advances. In cotton, the most famous example is of course chlorine bleaching, but Parthasarathi may also find a new book on the British gaslighting industry instructive (Leslie Tomory, Progressive Enlightenment: The Origins of the Gaslight Industry, 1780-1820, MIT Press, 2012). Such examples can be multiplied at will.

In Parthasarathi?s opinion, British coal developed in large part because of the wise policies of the Hanoverian government which regulated prices and protected coastal shipping. They also taxed coal quite heavily, which may not have been such an advantage. But more to the point, British coalmining, from the surveying and viewing stage all the way to the market, was in private hands. So were education, turnpikes, canals, healthcare, railroads, and most law enforcement. There was a fair amount of state regulation, but it is not clear how much of it was actually enforced and what effect it had. The same is true a fortiori for protectionism. The argument that Britain succeeded because of and not despite of the mercantilist policies of the eighteenth century is repeated over and over but never supported with much evidence. The one area in which British government may get some credit (but oddly never mentioned by Parthasarathi) is the Old Poor Law, a unique English institution which may have helped bring about social stability and raised the material quality of life for the bottom third of the income distribution.

This is a polemical book. Parthasarathi criticizes much of the literature on the British Industrial Revolution and its effect on the rest of the world, and often his critiques are well-aimed and deserved. There is no question that the initial differences between Asia and Europe on the eve of the Industrial Revolution have been overdrawn, and that Europe?s success was not quite as predetermined and inexorable as it was made out to be by scholars from Max Weber to David Landes. Yet there is an equal risk to exaggerate in the other direction and to argue that there was no difference whatsoever. More often, Parthasarathi succumbs to the unfortunate habit to take nuanced and subtle arguments of his opponents, oversimplify them into a cartoon, and then energetically proceed to take these strawmen apart; this is a time-honored custom in all rhetoric, but if applied too thickly it can be counterproductive. All in all, this is a provocative and eloquent book that will modify our views of the Great Divergence, if not nearly as much as its author would hope for.

Joel Mokyr is the author of The Enlightened Economy: An Economic History of Britain, 1700-1850, Yale University Press, (2009).

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

Subject(s):Economic Development, Growth, and Aggregate Productivity
Economic Planning and Policy
Economywide Country Studies and Comparative History
Industry: Manufacturing and Construction
Markets and Institutions
Geographic Area(s):Asia
Time Period(s):17th Century
18th Century
19th Century

Institutions and European Trade: Merchant Guilds, 1000-1800

Author(s):Ogilvie, Sheilagh
Reviewer(s):Harreld, Donald J.

Published by EH.NET (December 2011)

Sheilagh Ogilvie, Institutions and European Trade: Merchant Guilds, 1000-1800. Cambridge: Cambridge University Press, 2011. vi + 493 pp. $38 (paperback), ISBN: 978-0-521-74792-9.

Reviewed for EH.NET by Donald J. Harreld, Department of History, Brigham Young University.

Why did merchant guilds exist for such a long time in Europe? This is an obvious question to ask of an institution that persisted for hundreds of years, but one for which it turns out there is not an easy answer. Most scholars who have studied merchant guilds have insisted that merchant guilds must have existed, and persisted, because they were efficient institutions; inefficient institutions, on the other hand, are doomed to be short lived.

Ogilvie begins her book by asking one overriding and very penetrating question: were merchant guilds efficient institutions that benefitted the entire economy? For Ogilvie, this is the heart of the matter. Because merchant guilds do not exhibit all of the characteristics of efficient institutions, she asks us to consider why they arose, why they survived for such a long time, and why they ultimately declined. Merchant guilds regulated trade, they operated as monopolies, they distorted markets, fixed prices, and restricted entrance into the guild. Does this, she wonders, sound like an efficient institution? For Ogilvie, the only way to answer these questions is to look at everything merchant guilds did — both positive and negative — in order to understand how and if they were beneficial to economic development. She is asking us to back away from the assumption that merchant guilds were efficient institutions. This will not be easy for the many scholars of merchant guilds who have hitched their wagon to the efficiency theory. This book presents us with a ?radical reassessment of both merchant guilds in economic history and institutions in economic theory? (p. 5).

What was a merchant guild? This is, indeed, the title of the book?s second chapter as well as a very good question. Scholars well versed in the history of merchant guilds could skim this chapter, but it provides a foundation for those newer to the topic. Merchant guilds were associations of wholesale traders. They could be either an association of local merchants, or an association of merchants from one geographical area who formed colonies abroad for long-distance trade (what Ogilvie calls, alien merchant guilds). These merchant guilds obtained certain privileges from a ruler that gave its members ?exclusive rights to practice certain commercial activities? (p. 20). Merchant guilds were institutions that enjoyed monopoly rights (the exclusive right to trade, right to decide membership, and a right to regulate their trade). Although of ancient origin, they experienced a hey-day in the high and late Middle Ages. Alien merchant guilds date to the early twelfth century, appearing first in the eastern Mediterranean and later in the Italian cities. By the end of the thirteenth century, alien merchant guilds had spread to all of Europe?s major trading centers. Merchant guilds began to decline in the sixteenth century, first in the Low Countries and England, but persisted elsewhere in Europe until the eighteenth century. Ogilvie points out that the merchant companies of the early modern period shared characteristics with earlier merchant guilds.

But Ogilvie is not presenting a simple narrative history of the merchant guild in this book. She is actively engaging — and challenging — the literature, the bulk of which she suggests has only unconvincingly argued that while monopolistic in theory, merchant guilds were in practice non-monopolistic. Ogilvie?s reading of the evidence suggests that merchant guilds, both local and alien, not only negotiated monopoly privileges from rulers, they actively and enthusiastically sought to enforce these monopoly privileges. Indeed, for Ogilvie, merchant guilds were not at all the efficient institutions many scholars have made them out to be.

But, again, if they were not efficient, why did merchant guilds persist? Ogilvie suggests that the answer is found not in questions of efficiency, but in distribution. According to her, ?an institution that keeps the economic pie small but distributes large slices to powerful groups can be sustained for centuries by its powerful beneficiaries? (p. 160). So merchant guilds did not necessarily increase the size of the economic pie, but they did allow merchants and rulers to take the biggest slices themselves. Of course, benefits were not uniform across merchant guilds because each guild negotiated individually with rulers so that both would obtain the best ?bundle? of benefits. Although merchants and rulers benefitted from these arrangements, the wider economy was actually affected negatively. According to Ogilvie, ?commercial monopolies reduced the volume of exchange and diminished gains from trade? (p. 163).

The book includes chapters that examine a variety of propositions scholars have put forward about why merchants guilds existed and what functions they performed that prompted scholars to characterize them as efficient: commercial security, contract enforcement, principal-agent problems, information exchange, and price volatility. In all cases, Ogilvie rehearses the ?standard? interpretations and systematically challenges them all, showing that merchant guilds were only one of many mechanisms (and probably the least efficient) in place that could potentially solve these problems for medieval and early modern merchants.

So if merchant guilds were not the efficient institutions they have so often been made out to be, how can we explain their longevity? Of course, Ogilvie has already provided an answer. It is found ?in the distributional services guilds offered to two powerful groups? (p. 417). They affected the ruler?s ability to ?extract extra revenues? from the population, and, for merchants, the ability to ?extract profit from trade? (p. 417-18). Ogilvie clearly rejects throughout this book the notion that merchant guilds were able to solve commercial problems in a way that benefitted the entire economy. Indeed, merchant guilds, according to Ogilvie, benefitted their own members at the expense of the wider economy.

Ogilvie?s conclusion has profound implications for the study of economic institutions, and that is what makes this an important book — one might even call it a game-changer. For Ogilvie, institutions cannot be adequately explained in terms of efficiency; indeed, the entirety of an institution?s actions as well as all of its economic effects needs to be considered. She admits that taking such an all-encompassing approach will make our analyses more complicated, but the result will be a much better understanding of the ways institutions ?behave and develop? (p. 426).?

Donald J. Harreld is Associate Professor and Chair of the History Department at Brigham Young University. Harreld is the author of High Germans in the Low Countries: German Merchants and Commerce in Golden Age Antwerp (Leiden, 2004), and several articles that examine social and economic history including: ?Foreign Merchants and International Trade Networks in the Sixteenth-Century Low Countries,? Journal of European Economic History, Vol. 39/1 (2010) and ?An Education in Commerce: Transmitting Business Information in Early Modern Europe? in Information Flows: New Approaches in the Historical Study of Business Information (Helsinki, 2007). His current research projects include a book-length study of early seventeenth-century Dutch commercial voyages, and broader research into early modern commercial networks.

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

Subject(s):International and Domestic Trade and Relations
Markets and Institutions
Geographic Area(s):Europe
Time Period(s):Medieval
16th Century
17th Century
18th Century
19th Century

The Israeli Economy from the Foundation of the State through the 21st Century

Author(s):Rivlin, Paul
Reviewer(s):Halevi, Nadav

Published by EH.NET (June 2011)

Paul Rivlin, The Israeli Economy from the Foundation of the State through the 21st Century.? New York: Cambridge University Press, 2011. xviii + 288 pp. $32 (paperback), ISBN: 978-0-521-15020-0.

Reviewed for EH.Net by Nadav Halevi, Department of Economics, Hebrew University of Jerusalem (emeritus).

For the author, who has written several books on various Arab economies, this is a second economic history of the Israeli economy.[1]? However, the present volume is not just an updating of the material in the first book, which covered developments through 1991, but presents? a much wider and deeper analysis of many aspects and problems, including political and social, some unique to Israel.[2]

After an introduction, the book presents a brief discussion of the pre-State period, mainly the development during the British Mandate, justified by the fact that the new state inherited an economic base, what had been a Jewish government-within-government apparatus, and strong ideology, all of which affected future economic developments. This is followed by two chapters covering economic developments, with emphasis on macroeconomic policy, first for 1948-1985, and second from 1985. A chapter is devoted to the opening of the economy to globalization and the development of high technology industries. Another chapter deals with the costs and benefits of defense expenditures. The author correctly points out that the real defense costs include many not included in the defense budget, and estimates a major one, the loss of income from the army reserves system; however, this is only a partial correction, and one major item — the costs connected to settlement activity in the occupied territories — is deferred to a later chapter. After a chapter on economic relations with the Palestinians, come three chapters on major specific aspects of the Israeli economy: the problem of religion, focusing on the role of the large ultra-orthodox Jewish community; the Arab minority; and one on demographic and social divisions, stressing the growth of poverty and the widening of income inequality. A concluding chapter summarizes the previous material and focuses on what the author sees as the main problems facing Israel in the (at least) near future and necessary economic reforms: ending the Israeli-Arab conflict, dismantling settlements in territories which may be given over to a Palestinian State, and how to integrate the ultra-orthodox and Israel-Arab communities into the productive labor force.

The introduction states that the main theme of the book is what is contained in the phrase ?As Israel?s economy has strengthened, its society has weakened.? The book describes this effectively, though the issue of growing income inequality, thoroughly discussed in Chapter 10, does not get detailed treatment in the suggested reforms. Nor does the book discuss, except for one paragraph, the implications of the growing economic dominance of a small group, and how the process of privatization has resulted in monopolistic competition and lack of internal competition in many sectors, such as communications, banking and others, including foods, not subject to effective competition from imports.

The book gives references to a very large body of literature in English but rather little reference to the large Hebrew literature on the subjects covered. There are also some surprising omissions even in the English literature. For example, the discussion of monetary policy and inflation would have been richer by reference to an important Bank of Israel study,[3] and the analysis of capital liberalization could have benefited by reference to an article in volume II of that publication.[4]? In places, reliance on particular references leads the author to state as fact points that are not exact. For example in the discussion of economic relations with the Palestinians the author states the Paris Protocol provided for free movement of Palestinian labor into Israel, except for limitations due to security considerations. This point is made by some Israeli economists and many Palestinian ones (most even ignore the security element), but it is not accurate: Though restrictions on entry of Palestinian workers into Israel were indeed generally placed for security reasons, a reading of the Protocol itself would reveal that the correct wording gives both parties the right ?to determine the extent and conditions of the labor movement into its area.?[5] ???

Though the choice, the order, and the attention devoted to particular subjects are obviously a matter of personal preference, the book may be criticized for a lack of balance, in two ways. First, if it is to be regarded as an economic history, then the earlier periods are treated in a cursory way, sometimes giving data for a decade or more, implying much more homogeneity than actually existed, whereas in later periods detailed attention is given to one or two year periods. For example, the role of linkage of capital to a price index is discussed as a contributor to inflation in the later period, but there is no discussion of the widespread use of linkages of almost everything — a particular Israeli experience — and its role in inflation, a subject of major debate in the first thirty years. It appears that the author is mainly concerned with pointing out the more recent developments, germane to more immediate problems and the reforms he believes are needed. There is a danger in this, because books focusing on economic changes and problems can never be up-to-date. For example, though some data are presented for 2009, it is clear that most of the book was written earlier, as there is no mention of the implications for Israel of the 2008 world financial crisis, and the effective way that Israel handed them.? A second lack of balance is between technical material, that economists can appreciate but non-economists would find difficult, and interesting and important chapters from which all can learn.

The author is sometime careless with figures and choice of words. Just two of many possible examples: In the first, mass immigration years, a majority of immigrants was not from the Middle East, as stated on p. 2; in fact, through 1951 half were displaced persons from Europe. The table on p.42 would puzzle anyone who knows balance of payments accounting, until examination of the data source shows that the author neglected to include trade in services in his export and import figures.

More problematic are true, or partially true statements, which may be misleading. Again, just two examples: On p.153 it is stated that imports of the Palestinian economy were almost exclusively from Israel. Twenty percent were imports destined directly to it, and of the rest it is not known exactly how much was merely through Israel — since the Arabs had no port of their own — or had minimal Israeli value added. The discussion of settlements notes Jewish building in East Jerusalem, and beyond the previous borders, but the political issue of Jerusalem would be more clearly understood had the author mentioned that after 1967 Israel annexed previously Arab areas to Jerusalem which virtually tripled the municipal area. This carries over into the discussion of ethnic minorities, since fully three of the twenty percent of Israel?s population which is Arab consists of Jerusalem Arabs.

Despite the above criticisms, this book is a welcome addition to the literature on its subject. In fact, even the less technically interested reader would gain much knowledge and important insights from many chapters, and simply by reading only the introduction and concluding chapter.

1. The first book was The Israeli Economy, 1992, Boulder, CO: Westview Press.
2. The wording of the book?s title would be better as ?into? rather than ?through? the twenty-first century.
3. H. Barkai and N. Liviatan, The Monetary History of Israel, Vol. 1. The Bank of Israel: Fifty Years of Striving for Monetary Control, Hebrew edition, 2004, Bank of Israel, Jerusalem.? English edition, 2007, Oxford University Press.
4. M. Michaely, ?The Liberalization of Israel?s Foreign Exchange Markets, 1960-2002,? pp. 67-97, Volume II of the study cited above.
5. Article VII of the Paris Protocol, signed 29 April, 1994.? See also, E. Kleiman, ?The Economic Provisions of the Agreement between Israel and the PLO,? Israel Law Review, No. 2-3, 1994.

Nadav Halevi is Chilowich Professor (emeritus) of International Trade at The Hebrew University of Jerusalem. He has published extensively on the Israeli economy and on empirical subjects of international trade, and is currently working on trade in services.

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

Subject(s):Economywide Country Studies and Comparative History
Geographic Area(s):Middle East
Time Period(s):20th Century: WWII and post-WWII

Manors and Markets: Economy and Society in the Low Countries, 500-1600

Author(s):van Bavel, Bas
Reviewer(s):McCants, Anne E.C.

Published by EH.NET (June 2011)

Bas van Bavel, Manors and Markets: Economy and Society in the Low Countries, 500-1600.? New York: Oxford University Press, 2010.? xiv + 492 pp. $140 (hardcover), ISBN: 978-0-19-927866-4.

Reviewed for EH.Net by Anne E.C. McCants, Department of History, Massachusetts Institute of Technology.

The search for the medieval origins of European economic growth over the long run has become something of a growth industry in recent years.? For example, since 2008 the field of economic history has witnessed the publication of major book-length contributions from Jack Goldstone, Jan Luiten van Zanden, Paolo Palanima, and Timur Kuran, all of which argue strongly that there are readily identifiable causal linkages that extend in a meaningful way from at least the High Middle Ages (or even earlier) to present realities.[1]? For anyone familiar with an earlier instantiation of medieval economic history this trend may be unexpected.? It wasn?t long ago that the medieval economy was interesting only in so far as it was quaint (serfs and their lords eking out a living in the autarkic wilderness of the manorial economy); or worse, as it was brutal (the Middle Ages as the quintessential locus of the Four Horsemen of the Apocalypse: Conquest, War, Famine and Death).? Or if one?s tastes were not quite so dramatic there was always the longue duree of the Annales School, in which a relatively stable world of European peasants ran more or less seamlessly from late antiquity to the eighteenth century.? Admittedly, the greatest spokespersons of this view were Early Modernists, but the Medievalists were never far behind.? Indeed, it wasn?t always easy to tell them apart, given that they depicted a world of little change other than the cyclical fluctuations in the climate and the ebb and flow of population within its fairly narrow neo-Malthusian bounds.? None of this suggested the likely emergence of a historiography in which modern economic growth (of the kind defined by Simon Kuznets in the middle of the twentieth century and countless followers since) could be attributed back to conditions that prevailed in the years around or even before 1000.

This is not to say that the modern, industrial world as something sui generis has disappeared from recent scholarship; not at all.? Yet another group of important books of recent vintage seeking to explain the extraordinary economic achievement of Western Europe in the last two and a half centuries either passes over the question of medieval origins,[2] or in one prominent case counters it explicitly.[3]?? Jan de Vries finds his explanation for the modern transformation rooted in the new, consumerist, decision making strategies of households in the sixteenth and later centuries, while Deirdre McCloskey turns instead to the new ethical attachments, and the rhetoric by which they were expressed, of a commercial and middle class culture, more or less about the same time period.? Joel Mokyr turns his attention just a bit later to the eighteenth century proper when Enlightenment ideas loom large for both the development of new methods for organizing economic activities and in the tools and techniques employed in production, that is to say technological change in the broadest sense of that term.? For all of these arguments, newness is the important point; what may or may not have happened in the Middle Ages is hardly decisive.? In Greg Clark?s analysis, it is completely irrelevant.? Any economic breakthrough that may have occurred prior to 1800 would have been so quickly dissipated in a Malthusian population response that according to Clark there is no discernible change in living standards prior to the end of the eighteenth century.? Indeed, this position requires what this reader sees as the ironic claim that the only way to increase welfare before the advent of the modern world was for human suffering to increase; i.e. when other people die, you could then benefit.? In any event, all trends break at 1800, much as they did in the older historiography that separated the medieval economy from what came later in every fundamental way.

This is a long introductory discussion that references a lot of books other than the one under review, for which I crave the reader?s indulgence.? In fact, Bas van Bavel?s Manors and Markets: Economy and Society in the Low Countries, 500-1600, is at least as important for what it contributes to the emerging literature on the medieval origins of modern European economic growth, as it is for its direct contribution to the more narrowly circumscribed economic history of the Low Countries.? I should add, however, that it does indeed offer a significant contribution to the latter.? It is rich in detail, documenting the substantial regional variation that existed there (shockingly so given the relatively small area overall), and the shifting locus of the most advanced areas across the thousand years covered by his survey.? The Meuse Valley figures prominently in the Carolingian period, followed by the flowering of urban and industrial inland Flanders during the High Middle Ages, and finally by mercantile and maritime Holland, and its coastal cities in particular, in a sixteenth century he still characterizes as the Late Middle Ages.? Van Bavel?s range of topics includes everything from soil types, hydrological projects, choice of grains between spelt, wheat, and rye, forms of lordship, technological innovations in agriculture and industry, labor contracting arrangements, the standard of living, biometric and material evidence from the archeological record, legal rights to land, the power of political authorities, the emergence of communes and guilds, processes of urbanization, the minting of coins, the location of trade routes and the products traded along them, disease, social unrest, household structure, and of course, the making of cloth.? This list is even so not comprehensive, but it conveys the right idea.? For any economic activity that took place in the medieval Low Countries, van Bavel?s book will be the go-to source for a long time to come.? This is especially helpful as much of the monographic work on which he relies for his own source material is written in languages not readily accessible to a global scholarly audience.?

As wonderfully rich as all this is, most readers of this review are likely to find the broader argument about the powerful continuities between the distant past and the present the most provocative aspect of van Bavel?s work.? Broadly speaking, his argument rests on three components.? First, he postulates that what he calls the ?socio-institutional organization of the economy,? more specifically ?the rules that govern exchange,? is the most productive explanation for economic development (p. 4).? Second, he argues that these factors can vary considerably across even relatively small areas.? Finally, he asserts that the socio-institutional characteristics of a community demonstrate remarkable persistence over the very long run.? Despite the seemingly logical intuition that beneficial institutions ought to be readily adopted by at least close neighbors, this seems not to have been in fact the case.? Instead, van Bavel finds evidence of substantial variation in the response of even micro-regions to similar economic opportunities and changes in climate or population, depending on the socio-institutional framework with which they began.? The attentive reader will of course worry about the problem of origins, but in this case much of the land in question was reclaimed from the sea or swamp over the long Middle Ages, so van Bavel can often build his case from the moment of the original period of settlement.? In the final analysis he finds in the medieval history of the Low Countries ?a clear demonstration of how great the degree of socio-institutional path dependency and long-term continuity in regional structures was? (p. 396).

It is his close attention to the remarkable complexity of regional variation that leads him to reject many of the other commonly proffered explanations for long term economic fluctuations found in the broader economic history literature.? So while he acknowledges the importance of technological change, climate shifts, and population movements for the specific experiences of economic actors, he is not willing to grant them explanatory power for economic development.? He argues that they are too blunt an instrument for parsing the remarkable geographic variation in outcome already witnessed in the Middle Ages.? For example he says of climate and demography that ?these factors often vary little over wide areas, whereas economic and social developments within these areas may differ widely? (p. 3).? Likewise with arguments about commercialization, which he admits seem especially attractive in discussing the history of the Low Countries, characterized as it was from an early date by large cities and unusually intensive trade networks.? All of these factors, ?climatic, geographical, demographic, and political,? had their impact of course, but those effects were ?directed? by the differing socio-institutional factors ?in divergent directions? (p. 387).? Not surprisingly, given this perspective, he also upends the more typical narrative about urbanization as a factor in economic development.? Instead of seeing urbanization as a cause of economic growth, he argues it was more likely the other way around.? Economic growth, especially as it concerned the agricultural sector, was the necessary precursor of rapid urban growth (p. 384).

What then were the critical socio-institutional factors to which we can attribute the largely successful economic development of the Low Countries, at least as measured by the standards of a wider medieval Europe?? The answer to this question is not always entirely clear.? But it seems safe to say that van Bavel gives particular pride of place to two factors:? ?a relatively efficient system of exchange combined with social balance? (p. 405).? His definition of an efficient system of exchange is straightforward enough.? It includes unhindered regional interaction, the presence of open and flexible markets, and the early disappearance of non-economic coercion (p. 11).?? But his understanding of what might constitute social balance is more elusive.? The closest he comes to a concrete definition is to say that social balance occurs directly when ?independent actors and their associations played an important social and economic role,? and indirectly when those actors have ?influence on the authorities? (p. 408).? The Low Countries were blessed with this ?social balance? on account of ?the large degree of freedom for ordinary people? that occurred quite early in their history (p. 409).?

In the final analysis then, we have a story about the medieval period that resonates closely with our understanding of what makes a modern economy work best: relatively unrestricted and autonomous individuals, with access to efficient and well integrated markets, whose worst instincts are held in check by social institutions that promote balance.? No wonder their world proved to be such a good predictor of ours — their world was essentially ours, just on a smaller scale.? Some readers might be daunted by the level of detail that van Bavel dives into in order to substantiate his most important fact: the incredible complexity and variety of micro-regional differences in social institutions in the medieval Low Countries.? But for those who persevere to the end of this long book, his is a happy, and persuasive, tale indeed.

1. Jack Goldstone, Why Europe? The Rise of the West in World History 1500-1850, McGraw-Hill: 2008; Jan Luiten van Zanden, The Long Road to the Industrial Revolution: The European Economy in a Global Perspective, 1000-1800, Brill: 2009; Paolo Malanima, Pre-Modern European Economy: One Thousand Years (10th-19th Centuries), Brill: 2009; and Timur Kuran, The Long Divergence: How Islamic Law Held Back the Middle East, Princeton University Press: 2010.
2. See for example, Deirdre McCloskey, Bourgeois Dignity: Why Economics Can’t Explain the Modern World, University of Chicago Press: 2010; Jan de Vries, The Industrious Revolution: Consumer Behavior and the Household Economy, 1650 to the Present, Cambridge University Press: 2008; or Joel Mokyr, The Enlightened Economy: An Economic History of Britain, 1700-1850, Yale University Press: 2010.
3. Gregory Clark, A Farewell to Alms: A Brief Economic History of the World, Princeton University Press: 2008.

Anne E.C. McCants teaches medieval and early modern economic history at the Massachusetts Institute of Technology.? Her research interests in the Low Countries have ranged from historical demography to the role of social welfare institutions and the rise of consumer culture.? She is currently working on a project to explore the financial underpinnings of Gothic cathedral construction in the High Middle Ages.

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Subject(s):Economic Development, Growth, and Aggregate Productivity
Economywide Country Studies and Comparative History
Markets and Institutions
Geographic Area(s):Europe
Time Period(s):Medieval
16th Century
17th Century

Modernizing a Slave Economy: The Economic Vision of the Confederate Nation

Author(s):Majewski, John
Reviewer(s):Delfino, Susanna

Published by EH.Net (March 2011)

John Majewski, Modernizing a Slave Economy: The Economic Vision of the Confederate Nation. Chapel Hill: University of North Carolina Press, 2009. xiii + 240 pp. $40 (hardcover), ISBN: 978-0-8078-3251-6.

Reviewed for EH.Net by Susanna Delfino, Department of European Research, University of Genoa, Italy.

?A Modern Economy without Modernization? — A Southern Paradox

Scholarship of the past few decades has amply documented that, from the late 1700s, capitalist-oriented entrepreneurial and business forces were at work in the southern states, and that their strength and visibility increased during the first half of the following century. Defining the contours of a univocal southern economic vision in the antebellum era has, however, proved extremely challenging, exposing all the ambiguities and inconsistencies immanent in the thinking of elite southerners, from political economists to politicians, from planters to manufacturers, and to businessmen in general. Even the staunchest agrarians, in fact, did not fail to appreciate the desirability of an albeit moderate industrial development. The seeming contradictions, which stemmed from their effort to reconcile economic development — including industrialization — with the preservation and protection of the institution of slavery, resulted in the shaping of a distinctively southern idea of economic modernity which rejected the tenets of modernization as commonly understood in the North and Europe as well by the mid-nineteenth century.[1]??? ??? ????????

John Majewski?s Modernizing a Slave Economy focuses on Virginia and South Carolina to explore the implications of such inconsistencies in the shaping of the secessionists ideology and, ultimately, in accounting for the failure of the Confederate experiment. Whereas a traditional historiography had identified the principles inspiring secession in the defense of thoroughly agrarian values, minimal government, and laissez-faire, Majewski shows that the secessionist ideology comprised instead visions of industrial expansion and economic independence that ought to be achieved largely through government activism. As a result, Majewski argues, the experience of a centralized and highly bureaucratic Confederate nation was not ?a radical disjuncture but a natural outgrowth of southern attitudes established during the antebellum period? (p. 7).

To demonstrate his thesis, Majewski adopts multiple and intertwined perspectives: from the environmental, to the economic, and to the political. Such an approach provides him with a broad compass of sensibilities that make the analysis well articulated and sophisticated at every turn.
The environmental argument constitutes the core around which Majewski?s analysis unfolds. Through it, he illustrates the distance separating reality from imagination in the economic vision of white southerners, as well as in northern perceptions and representations of the South?s economy. By showing that the extremely widespread use of shifting — as opposed to continuous — cultivation was determined by the highly acidic composition of much of the South?s soil, he both refutes the cultural explanation upheld by northerners to account for the seemingly backward state of southern agriculture and pinpoints the objective limits to regional economic development. In fact, by leaving vast stretches of land unimproved, shifting cultivation resulted in low population density. This, in turn, generated negative effects on the extent and depth of markets and on transportation costs: two essential factors for the development and expansion of the manufacturing sector. Slavery, of course, aggravated the situation but, as the case of Maryland well illustrates, was not the primary cause for either shifting cultivation or the South?s difficulties in triggering a self-sustaining process of industrial development. While only a relatively small number of enlightened southerners fully understood the real nature of the problem with southern agriculture, most believed that it could be solved through a vast reform program. However, because of the complexity and scope of the actions needed, this could only be pursued through the support of state governments. Investment was needed in the fields of research and education, and in the funding of local agricultural societies that might introduce farmers to a correct use of fertilizers and to the advantages of crop rotation. Steps forward were made during the last few antebellum decades, but the results obtained did not match the efforts lavished by agricultural reformers. Majewski rightly ascribes those meager results to the relatively low short-term return that the southern state governments anticipated from massive investment in agriculture as opposed to more ?visible? undertakings, such as railroad building, in the face of both intrastate and interstate rivalries.

The connection Majewski identifies between agricultural reformism, pleas for state intervention in the economy, and secessionism is crucial to his thesis that social conservatism and economic development coexisted in the secessionists? vision of an independent southern nation. Political independence, in fact, was only an empty word if not accompanied by certain economic requisites — a manufacturing base to free themselves from northern dependence, and the establishment of direct trade links with Europe. Toward the achievement of these goals, the modernization of agriculture was central. As Majewski effectively contends, the strong focus secessionists placed on agriculture has been wrongly understood as revealing their adhesion to a traditional, outmoded vision of the South?s future. Quite the contrary, it conveyed their awareness that the quest for southern political independence implied economic diversification, including industrialization. In their envisioning of an independent southern Confederacy, secessionists were, however, caught in the straits of a number of more or less apparent inconsistencies. For example, they criticized the activist government and the gospel of modernization embraced by northerners while at the same time placing these very assumptions at the core of their southern nationalism.

As Majewski points out, the advocacy of state-promoted economic policies dated back to the antebellum era. The example of railroads is revealing in this regard. Heavy spending in railroad construction by the southern state governments — and eminently by those of Virginia and South Carolina — stemmed from the belief that this sort of intervention could make up for the structural problems impairing a ?natural? development of the South?s economy. Due to the sparseness and scantiness of the population, the building of railroads could not be sustained — as in the North — by local communities; but if the lines were built thanks to massive public investment, their beneficial effects would reverberate on the economy as a whole, stimulating the growth of commerce and manufacturing, opening new prospects for international trade, and uniting the several parts of the South. Such a course of action, however, ?produced a boom in railroad construction without revolutionizing the southern economy,? thus failing ?to correct the region?s fundamental economic problems? (p. 104).

In their desire to reconcile the creation of a modern economy with the protection of slavery, secessionists made gross mistakes in evaluation. Their quite simplistic understanding of economic interest, for example, led them to believe that the Confederacy would have won both international and internal support, even from the slaves themselves. Reality would prove completely different. This is not, however, the only paradox that Majewski identifies in his analysis of the political economy embraced by secessionists in their envisioning of the future of an independent southern nation, vis-?-vis the region?s economic and social conditions. Advocacy of free trade had traditionally been one of the mainstays of southern economic thought within the national fold. However, an independent South required both a free trade international policy and an albeit moderate protectionist one, to shield its infant industry from northern and foreign competition. Confederate nationalism was therefore based on mixed ideas of economic liberalism and state regulation. Ultimately, the vast array of either domestic and international issues the Confederate government had to cope with often required measures of opposite sign, resulting in the adoption of contradictory and therefore largely ineffective policies that contributed to the collapse of the Confederate nation.

Secessionists emerge from the pages of Modernizing a Slave Economy in a completely new light as opposed to previous interpretations: modern men with a vision, rather than backward-looking traditionalists. Throughout the book, slavery comes forward as the core problem in determining the ambivalence and incongruities steeped in southern economic thought. Majewski?s work demonstrates, once and for all, that the defense of slavery was not deemed incompatible with the quest for economic modernity by even the most conservative members of the southern elites. More generally, it reiterates the need to definitely abandon rigid, dichotomous understandings of the economic, cultural, and political assumptions underlying unionism and secessionism, respectively. Modernizing a Slave Economy confirms that love for the Union and secessionism; unionism and the defense of slavery; secessionism and the envisioning of an economically modern South could and did coexist in the minds of antebellum and Civil War white southerners.?

This book is absolutely original in its placing the consequences of shifting cultivation at the basis of the South?s failure to achieve higher standards of economic modernization in the late antebellum decades. Through this example, and in contrast with previous interpretations, it effectively downplays the pre-eminence of the cultural factor in accounting for the South?s relative failure in catching up with the North in terms of industrial development before the Civil War.[2] Culture did matter, of course, but its impact was most revealed by the inconsistencies immanent in southern thought, which concurred to define the traits of a southern paradox still difficult to grasp in its complexity and entirety. By suggesting a different kind of continuity between antebellum and Civil War southern political economy as compared with traditional interpretations, John Majewski opens important directions in historical investigation and sets a new standard in the scholarly debate. The scope and complexity of the subject indeed deserve further research toward an increasingly sophisticated understanding of southern history in the slave era.

1. In his monumental work on the South?s intellectual life, Michael O?Brien discusses the economic thought of southerners, illustrating its traits of ambivalence and modernity as well. He shows that not even the most conservative among them failed to acknowledge that the encouragement of manufacturing was central to the South?s future. Michael O?Brien, Conjectures of Order: Intellectual Life and the American South, 1810-1860, 2 vols. (Chapel Hill, NC: University of North Carolina Press, 2004).? I have also argued for a fundamental convergence of opinion among southern political economists and political thinkers on the subject of manufacturing. Susanna Delfino, La fabbrica dei sogni: dilemmi economici nel sud degli Stati Uniti tra l?et? della Rivoluzione e la crisi di met? Ottocento (Milano: Selene Edizioni, 2008).

2. The argument that the cultural factor was the main constraint to southern industrial development is set forth by Fred Bateman and Thomas Weiss, A Deplorable Scarcity: The Failure of Industrialization in the Slave Economy (Chapel Hill, NC: University of North Carolina Press, 1981).

Susanna Delfino is the author of La fabbrica dei sogni: dilemmi economici nel sud degli Stati Uniti tra l?et? della Rivoluzione e la crisi di met? Ottocento (Milano: Selene Edizioni, 2008).

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Subject(s):Agriculture, Natural Resources, and Extractive Industries
Economic Development, Growth, and Aggregate Productivity
Economic Planning and Policy
Geographic Area(s):North America
Time Period(s):19th Century

The Capital and the Colonies: London and the Atlantic Economy, 1660-1700

Author(s):Zahedieh, Nuala
Reviewer(s):Walsh, Lorena S.

Published by EH.Net (February 2011)

Nuala Zahedieh, The Capital and the Colonies: London and the Atlantic Economy, 1660-1700. Cambridge: Cambridge University Press, 2010. xvii + 329 pp. $95 (hardcover), ISBN: 978-0-521-51423-1.

Reviewed for EH.Net by Lorena S. Walsh, Colonial Williamsburg Foundation (retired).

Several recent investigations of early modern economic growth have emphasized the critical importance of overseas expansion — especially the rise of Atlantic commerce — in encouraging economic development and in inducing institutional changes initiated by new mercantile groups operating outside of royal circles (e.g., Robert C. Brenner, Merchants and Revolution: Commercial Change, Political Conflict, and London?s Overseas Traders, 1550-1653 [Cambridge, 1993]; Kenneth Pomeranz, The Great Divergence: China, Europe, and the Making of the Modern World Economy [Princeton, 2000], and Daron Acemoglu, Simon Johnson, and James Robinson, ?The Rise of Europe: Atlantic Trade, Institutional Change, and Economic Growth,? American Economic Review, 95 (2005), 546-579).? Some have also stressed the dynamic role of Atlantic port cities, London in particular, in bringing together strategically favorable combinations of financial and commercial expertise; skilled, well-paid workforces; and high levels of demand for food, fuel, manufactured goods, and new tropical products (e.g., Robert C. Allen, The British Industrial Revolution in Global Perspective [Cambridge, 2009]; and Acemoglu, et al, ?Rise of Europe?).

Nuala Zahedieh, a senior lecturer in economic and social history at the University of Edinburgh, provides a masterful account of Londoners? central role in facilitating economic development in the later seventeenth century that integrates literatures on colonial empire, commerce, the consumer revolution, and the Industrial Revolution.? A main focus of research is how merchants ?responded to the opportunities and challenges? offered by Britain?s early overseas expansion ?and set in place a durable mercantile system which underpinned both extensive and intensive growth and made the Industrial Revolution more likely?(p. 3).? She sees the later seventeenth century as a critical period when ?the rules of the game were established and the incentive structure that shaped investment and the accumulation of financial and human capital took lasting form?(p. 7).? Readers will find her discussion of the mercantilist system familiar, but less so her argument (developed from long years of research on colonial, especially West Indies, trade) that the seventeenth-century state ?did not have the resources to enforce commercial legislation which seriously raised private costs,? leading her to take evidence of general compliance with the Navigation Acts by the 1680s as ?a measure of increasing convergence between English and Dutch commercial capabilities and costs rather than as a forced shift towards inefficient providers?(pp. 6-7).?

Scholars? relative neglect of London?s later seventeenth-century commerce is understandable given the scarcity of aggregated commercial statistics, the loss of many London portbooks, and the daunting volume of those that have survived.? The Capital and the Colonies employs a systematic analysis of portbooks for 1686 (a peacetime year for which the records survive in full) and more limited samples of data from the 1660s and c. 1700 to provide a detailed statistical portrait of London?s Atlantic trade.? In addition to data on exports and imports, Zahedieh compiled a biographical database of colonial merchants identified in the 1686 portbooks which she uses to trace their careers and trading networks.? Less systematic research in mercantile papers and court records, promotional tracts, and economic literature supplements the portbook materials.? Extensive period illustrations of metropolitan and colonial cityscapes, public and commercial buildings, mercantile publications, ships, manufactories, and plantations lend visual concreteness to the text.

London was unique among European cities in the size of its population and manufacturing sector, its concentration of national political and legal institutions, and in its possession of three quarters of the nation?s merchant fleet, including most shipping devoted to lucrative West Indian and African commerce.? Atlantic trade not only constituted a growing proportion of overall trade, but, Zahedieh argues, had a qualitative significance beyond its actual volume and value in that it encouraged diversification in manufacturing and provided a high proportion of commodities traded in the new re-export sector, enabling London to challenge Amsterdam as Europe?s main redistribution center.

Colonial commerce was distinctive in its competitiveness, in its high transactions costs, and in its requirements for long credits and a high volume of shipping.? These characteristics all encouraged efficiency gains from take-up of best practices and from innovation. The trade was open, unregulated, and conducted by individuals rather than corporations.? As a result it stimulated modernized mercantile education, new associational activities, strenuous efforts to reduce transactions costs (including improvements in sorting, marketing, processing, and distribution of colonial products), and more effective solutions to risk mitigation and problems of trust and poor information (e.g., partnerships, marine insurance, bills of exchange, published price-currents, and multilateral settlements).?

Zahedieh finds increasing concentration of plantation commerce among large merchants specializing in particular commodities and regions in the 1680s, when falling commodity prices and increased taxes eroded profit margins and drove out small traders.? Colonial merchants seldom invested in overseas property, but made a massive contribution to expansion of empire in the form of short-term credit extended to settlers. The larger operators accumulated enough capital to diversify investment into shipbuilding, slave-trading, joint-stocks, insurance, wharves, industry, landed property, loans, and public credit. This decade was a turning point, as merchant concentration and specialization led to improved productivity, economies of scale, and reduced costs.? Zahedieh portrays the attempts of the later Stuarts to corner the profits of empire by restricting free trade among Englishmen as having limited success.? On the other hand, she sees the effect of the Glorious Revolution, not as leading to an economically optimal political arrangement, but as consolidating the capacity of the transatlantic trading elite to enforce regulation in its own interests and enhance ?the value and scale of rent-seeking enterprises at the expense of competition and efficiency? (p. 127), leading to a period of slower growth in colonial trade and shipping at the end of the century.

Unlike trade with Europe, colonial commerce required an unusually large fixed capital investment in the greater tonnage needed to transport large volumes of bulky goods over long distances.? Zahedieh argues that English- and plantation-built ships were better suited to most colonial commerce than were Dutch prototypes, and that it was long-distance commerce, rather than the protection of the Navigation Acts, that revived the English shipbuilding industry.? By 1700 plantation shipping accounted for 40% of London?s overseas trading capacity. Atlantic trade led as well to increased education among mariners in mathematical, mechanical and managerial skills, and expanded the market for navigational instruments.? It also contributed to London?s prosperity by stimulating the construction of wharfs and warehouses, and increasing the scale of naval refitting, repair, and provisioning trades.? Although technology and unit input costs were fairly stable across the period, increased volumes and growing experience with colonial conditions led to organizational improvements which made more efficient use of inputs. Greater awareness of seasonality and the accompanying need for careful timing, along with standardized containers, greater use of marine insurance, and the development of multilateral voyages all led to fuller use of shipping capacity and to reduced costs.

The volume of colonial imports more than trebled between the 1660s and 1700, when they accounted for a fifth of London?s inward trade and a third of its re-export trade to Europe.? And, as Zahedieh?s discussions of the fish, fur, timber, tobacco, sugar, cotton, and dye-stuffs trades demonstrate, merchants achieved efficiency gains in both production and distribution. Plantation products provided incentives to invest in improving skills, techniques, commercial infrastructure, and organization of industry, intensifying use of resources and strengthening manufacturing capacities.? Colonial imports proved a catalyst in changing domestic consumption patterns.? Innovations in retailing expanded aggregate demand, while availability of alternative beverages to beer, such as tea and coffee, along with increased use of sugar in alcoholic drinks and as a food preservative, reduced pressure on the nation?s grain supply.? Colonial imports also supplied industrial raw materials and provided a surplus of exotic commodities that were re-exported to pay for European goods.? Their prominence in domestic trade induced investment in an improved national transport network that reduced not just the cost of plantation products for British consumers, but also the cost of bringing goods to the metropolis.? Processing of colonial products, reserved by the Navigation Acts for the mother country and aided by access to skilled workers and cheap fuels in the metropolis, promoted diversification of the capital?s manufacturing sector.?

Zahedieh considers London?s export trade with colonies — which, fueled by colonists? voracious appetite for English goods and services, grew faster between 1660 and 1700 than did imports — to be equally influential as imports in driving expansion and change.? Included and valued in Zahedieh?s survey are the trades in servants and slaves and freight earnings, exports not listed in the portbooks.? Due to limited markets, high labor costs and skills shortage — rather than mercantilist regulations — colonists remained dependent on the mother country for most manufactures.? The high profits merchants could earn in this most profitable branch of colonial commerce ?focused entrepreneurial attention on different problems from those facing the high-fashion, high-cost, craft industries catering for the London elites? (p. 276).?? Making goods for distant American and African markets encouraged restructuring of industries around bulk production at low unit cost, while the growing re-export trade encouraged investment in new processing industries.? A surge in colonial demand in the late seventeenth century had a radical impact of the volume and character of the English export trade away from traditional wool fabrics to a wider array of textiles and ready-to-wear clothes, as well as metalwares, miscellaneous manufactures, and foods.

This sophisticated study in Atlantic economic history will interest metropolitan and colonial as well as Atlantic scholars, challenging them to take more account of the feedback effects and linkages for economic growth generated by overseas expansion, and the potential role of competitive long-distance trade in a wide array of ostensibly mundane commodities in helping to precipitate the Industrial Revolution.

??? ?
Lorena S. Walsh is the author of Motives of Honor, Pleasure and Profit: Plantation Management in the Colonial Chesapeake, 1607-1763 (Chapel Hill: University of North Carolina Press, 2010).

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

Subject(s):International and Domestic Trade and Relations
Markets and Institutions
Geographic Area(s):Europe
North America
Time Period(s):17th Century

The Politics of Provisions: Food Riots, Moral Economy, and Market Transition in England, c. 1500-1850

Author(s):Bohstedt, John
Reviewer(s):Ó Gráda, Cormac

Published by EH.Net (February 2011)

John Bohstedt, The Politics of Provisions: Food Riots, Moral Economy, and Market Transition in England, c. 1500-1850. Farnham, Surrey: Ashgate Books, 2010.? x + 312 pp. $100 (hardcover), ISBN: 978-0-7546-6581-6.

Reviewed for EH.Net by Cormac ? Gr?da, Department of Economics, University College Dublin.?

One of the classic set pieces in Alessandro Manzoni?s I Promessi Sposi is a famine scene set in seventeenth-century Milan, in which the hapless hero, Renzo, barely escapes with his life during a food riot.? Manzoni was a fan of the Enlightenment and of Adam Smith, so his account of Renzo?s folly is implicitly critical of those who would interfere with market forces, even during a famine.? Many economists would instinctively agree with him.? Some might change their minds, however, after reading John Bohstedt?s The Politics of Provisions, a masterly history of food riots in England.

Food riots were typically the product of commercialization and its handmaiden, the division of labor.? They were most likely in towns where the impact of sudden rises in food prices was most acutely felt, and where resistance was more easily organized.?? They were less likely in contexts of agricultural productivity growth and competitive, rapidly-adjusting markets.? Food riots thus became widespread in England during the Tudor-Stuart period, reached a peak on the eve of the Industrial Revolution, and petered out in the early Victorian era.

Politics of Provisions is built around the meticulous analysis of over seven hundred food riots occurring over a period of three centuries or so.? Riots are defined as collective action involving a dozen or more individuals.? Episodes might be over in a day or might last a week or two; they were more likely in areas with a tradition of collective action on other issues.?? Bohstedt?s census, which is available online [], is not a continuous three-century time-series; it focuses instead on episodes of peaks in rioting.? Thus Bohstedt identifies and documents in detail forty-five riots in 1740-41, but more than a hundred in 1756-57 and in 1766, and a further forty or so in 1772-73.? These are periods of extreme hardship well-known to scholars of subsistence crises in England and further afield.? Bohstedt contrasts the Tudor-Stuart period (c. 1550-1650) of rising population pressure and declining real wages with the following period (1650-1739) characterized by increasing market integration, an agricultural productivity growth that outstripped population, and (as a result) a decline in the number of scarcity crises (p. 266).? Then his third period (1740-1820) was what he calls the ?golden age of food riots.?

Bohstedt?s study is not an exercise in crude economistic determinism.? Although the riots were always caused by hunger, those who took part in them were not necessarily the most vulnerable or the poorest.?? They were more likely to be independent artisans and craftsmen, what Bohstedt calls ?masterless men? (p. 264).? The number of food riots grew as the growth in the number of ?masterless men.?? The rioters sought neither a return to bucolic self-sufficiency ? la Karl Polanyi nor social revolution ? la Karl Marx; according to Bohstedt they simply operated out of a deep conviction that the rich were bound to help in times of need.? Although their protests sometimes turned violent, the rioters were on the whole disciplined.? Moreover their actions, be they blocking exports, seizing food directly, and forcing prices down, succeeded in extracting concessions from the better-off.? Predicated on the ?moral economy? conviction that ?necessity knows no law,? the transfers of resources they that extracted saved lives.? Rioting worked.

The concessions gained by the rioters were by no means ad hoc only; some had lasting institutional consequences.? Thus, in January 1587 rioting led to the first book of ?dearth orders,? which directed local officials to regulate food supplies.? In the 1590s widespread rioting produced the codification in 1598 of the Elizabethan ?old? poor law, which would have an enduring impact on welfare and, some would argue, economic development; in 1756 widespread unrest prompted the creation of municipal food banks by the gentry; and in 1795 food riots in the south of England prompted magistrates in Berkshire to introduce their much maligned Speenhamland system of outdoor relief.? Bohstedt surmises that food riots were partly responsible for the elimination of famine in England after the 1620s, citing with evident glee E.P. Thompson?s panacea for famine: send cadres of food-riot instructors to countries at risk (pp. 33-34, 89).? The claim is plausible, although it must be qualified, given the evidence for excess famine mortality in England as late as the late 1720s and the early 1740s (Kelly and ? Gr?da, 2011).?

The correlation between rioting intensity, high food prices, and the threat of famine is striking.? The main outlier in this respect seems to be 1726-29, a period of famine which produced only twenty-one food riots (p. 97).? But did rioters succeed in reducing food prices?? While Bohstedt provides evidence on price controls, only micro-studies using high quality, high frequency data can really answer this question.? In order to be effective, did the riots have to reduce food prices?? One answer, set out by Malthus in An Investigation of the Cause of the Present High Cost of Provisions (1800) — prompted, incidentally, by the serious outbreak of food rioting in 1799-1800 (pp. 206-09) — is ?not necessarily.?? Malthus pointed out, rather mischievously, that riot-induced transfers of purchasing power from the rich to the poor might increase the price of staple food items.? Yet he also conceded, atypically, that the operation of the poor laws had ?been advantageous to the country? in averting famine in 1799-1800.

Although Bohstedt does not cite Karl-Gunnar Persson?s Grain Markets in Europe, the very different approaches taken by him and Persson nicely complement one another.? One of Persson?s key points is that for as long as food markets responded sluggishly to disequilibria, both spatial and intertemporal, governing elites actively sought to preempt shortages by storing food and controlling interregional trade.? They did so partly out of noblesse oblige, but also out of fear.? The increasing integration of markets reduced the likelihood of those local food shortages and price peaks which led to food riots.

Politics of Provisions is well-produced but, as is the rule with Ashgate, pricey.? It deserves to be widely read and known.? It will be of particular interest to historians interested in the evolution of markets and the role of institutions and in the social and economic history of industrializing England.

Morgan Kelly and C. ? Gr?da. ?The Poor Law of Old England: Institutional Innovation and Demographic Regimes,? Journal of Interdisciplinary History, XLI[3] (Winter, 2011), 339?366.

Karl Gunnar Persson, Grain Markets in Europe, 1500-1900: Integration and Deregulation, Cambridge: Cambridge University Press, 1999.

Cormac ? Gr?da is Professor of Economics, University College Dublin.? Recent publications include Famine: A Short History (Princeton, 2009) and Jewish Ireland in the Age of Joyce: A Socioeconomic History (Princeton, 2006).

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

Subject(s):Government, Law and Regulation, Public Finance
Household, Family and Consumer History
Markets and Institutions
Social and Cultural History, including Race, Ethnicity and Gender
Geographic Area(s):Europe
Time Period(s):16th Century
17th Century
18th Century
19th Century

Commerce before Capitalism in Europe, 1300-1600

Author(s):Howell, Martha C.
Reviewer(s):Trivellato, Francesca

Published by EH.NET (December 2010)

Martha C. Howell, Commerce before Capitalism in Europe, 1300-1600. New York: Cambridge University Press, 2010. xv + 365 pp. $30 (paperback), ISBN: 978-0-521-14850-4.

Reviewed for EH.Net by Francesca Trivellato, Department of History, Yale University.

Martha Howell opens her latest book with the assertion that ?Between 1300 and 1600, commerce left the margins of the European economy where it had been confined for centuries? (p. 1). But she is quick to warn readers that ?the commercial economy of those days was not a capitalist market economy, if by that term we mean the modern western economic system? (p. 8). It follows that we ought to understand the period between 1300 and 1600 as a transformative but distinctive epoch in the economic history of Europe, rather than as a forerunner of changes that matured in the seventeenth and eighteenth centuries.

Through a richly documented and lucid narrative, Howell illustrates the profound transformation that occurred in the ways in which men and women practiced and understood commercial transactions in the most urbanized regions of northern Europe. The geographical focus of the book is on the greater Low Countries (most of the primary sources are from the archives of Ghent, in modern-day Belgium), but the author also uses abundant secondary literature in order to draw several informed comparisons with the rest of the continent. The protagonists are ?ordinary householders, artisans, and shopkeepers, as well as … merchants and the financiers who worked between the courts or town halls and the commercial economy of the day? (p. 158).

Each chapter analyzes a meaningful facet of the rising commercialization of society. Chapter 1 illustrates the legal and economic process through which virtually any good became exchangeable on the market, including and especially land holdings. Changes in the legal classification of ?moveable? and ?immoveable? goods accompanied changes in the transfer of property at marriage and, more generally, conferred new meanings on notions of patrimony. Chapter 2 teases out the implications of the commercialization of society for conjugal love. Contrary to prevailing interpretations that attribute the rise in voluntary, romantic unions to an increased sexual division of labor and the domestication of family life, Howell argues that true companionship between husband and wife was necessary to weather the challenges of commercial life. In her words, ?love was by no means the antithesis of the market. It was the market?s helpmate? (p. 141). Chapter 3 continues to draw information from legal, administrative, and financial records to assess changes and continuities in the customs of gift-giving, and the concomitant rise of the concept of bribes. Chapter 4 revisits a well-known literature on sumptuary laws across Europe to show that clothing was the principal target of this legislation. As the power of money to shape social hierarchies grew, wardrobes ceased to be stable signifiers of one?s rank and anxieties about people?s ability to dress above their station intensified (this argument resembles one presented in Daniel Roche, The Culture of Clothing: Dress and Fashion in the Ancien R?gime, trans. Jean Birrell [Cambridge: Cambridge University Press, 1994]). The fifth and final chapter of the book expands the lens of analysis further to embrace all of Europe and new types of sources — the many texts written by jurists, moralists, theologians, and learned observers about the vices and virtues of commerce. Here Howell retraces the story of the attacks launched against trade and merchants with increased intensity after the commercial revolution of the twelfth century but also recaps the gradual process through which commerce was accepted as an honorable activity toward the end of her period. The novelty of her interpretation derives from a reading of well-known texts from the perspective of gender. She demonstrates that several authors made ?gathering and spending wealth ethical … by turning women into virtuous consumers and men into responsible providers? (p. 289). She adds, ?The narrative that excluded proper women from active participation in market production simultaneously gave men exclusive control of it? (p. 295).

As in her earlier work, Howell adopts a periodization that we rarely encounter in recent scholarship: 1300-1600. The advantage of this chronology is twofold. It provides a bridge between two classic chronologies and geographies of the birth of European capitalism: one centered on the medieval commercial revolution of southern Europe and one hinging on the seventeenth-century financial revolution of northern Europe. It also shifts the focus away both from the sixteenth century — which for Fernand Braudel and his followers was the fulcrum of nascent commercial capitalism — and from the seventeenth and eighteenth centuries, the rise of transoceanic trade, and the industrial revolution, which are arguably the periods and topics most investigated in the economic history of early modern Europe (particularly in the Anglophone literature). The drawback of embracing three centuries in one single study is most visible in the first three chapters, which are based on archival research and which draw most of the evidence from the earlier part of the period under consideration (in contrast to the last two chapters in which a process of change over time is most easily discernible through recourse to secondary sources). As a result, it is not always clear whether Howell believes that specific turning points existed in the period between 1300 and 1600 or whether we should consider it a fairly homogenous historical epoch.

At the crossroads of a monograph and a synthesis, this book is highly recommended to those EH.Net readers who wish to keep up with (and expose their graduate students to) an approach to the economic history of pre-industrial Europe that is prevalent among historians rather than economists. Echoing Karl Polanyi but also numerous historians of medieval and early modern Europe, Howell affirms that ?the commercialization of society was not just an economic history as we understand the term but a social, legal, and cultural story, and it is incomprehensible if told from the perspective of one of these modern conceptual categories alone. In fact, the social and cultural were the roots of the economic, not footnotes to it? (p. 263). Her effort to expose those roots is both erudite and sophisticated.

Francesca Trivellato is Professor of History at Yale University and the author of The Familiarity of Strangers: The Sephardic Diaspora, Livorno, and Cross-Cultural Trade in the Early Modern Period (New Haven: Yale University Press, 2009). Email:?

Copyright (c) 2010 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator ( Published by EH.Net (December 2010). All EH.Net reviews are archived at

Subject(s):Business History
Economywide Country Studies and Comparative History
Markets and Institutions
Geographic Area(s):Europe
Time Period(s):Medieval
16th Century

Fixed Ideas of Money: Small States and Exchange Rate Regimes in Twentieth-Century Europe

Author(s):Straumann, Tobias
Reviewer(s):Hansen, Per H.

Published by EH.NET (November 2010)

Tobias Straumann, Fixed Ideas of Money: Small States and Exchange Rate Regimes in Twentieth-Century Europe. New York: Cambridge University Press, 2010. xix + 392 pp. $90 (hardcover), ISBN: 978-0-521-11271-0.

Reviewed for EH.Net by Per H. Hansen, Center for Business History, Copenhagen Business School.

Tobias Straumann is lecturer in history at the University of Z?rich and in economics at the University of Basel, and in his first book, Fixed Ideas of Money, he demonstrates his command of both disciplines while also drawing on international political economy (IPE) literature. As the title suggests Straumann?s point of departure is that states and central banks do not always make rational choices with respect to exchange policy, and that they have, therefore, ?fixed ideas of money.? This idea is not new, of course, since it has been put forward by Barry Eichengreen and Peter Temin, among others, who have argued that the gold standard was carried by a mindset that made it almost impossible for decision makers not to believe in it. What is new in Straumann?s book, however, is the shift in focus from the Great Powers to small states in Europe and the expansion of the time period to include the decades after Bretton Woods broke down in the early 1970s.

In focus is on three Scandinavian countries, Sweden, Norway and Denmark, as well as Belgium, the Netherlands, and Switzerland and — to a lesser degree — Austria. The author leaves Austria out of the analysis of the interwar period because of its tumultuous monetary history, but it is not entirely clear why the Austrian case would not be both interesting and relevant. The fact that the international financial crisis of 1931 began with the Credit Anstalt crisis and was an important immediate cause of Britain?s and the Scandinavian countries? decision to leave the gold standard in September 1931 seems to support this.

It is a difficult genre that Straumann has entered. Comparative economic history is often quantitative and cliometric in its approach, but Straumann actually delivers a few ?blows? to such approaches and to research that has stressed the importance of private interests and institutional variables in determining the exchange rate policy of small states. For instance, Straumann finds Beth Simmons? analysis of the interwar monetary problems insufficient and problematic. Instead he uses qualitative analysis based on what he calls ?narrative evidence.? This does not mean that the analysis lacks rigor, however. It could be argued that this approach may lose some strength — depth, thick description, search for meaning, and understanding rather than explanation — when applied across seven countries, but Straumann avoids this and does an impressive job. The book is not only based on a huge secondary literature but also on unpublished archival material mostly from the respective central banks, on published government material and national newspapers and so on. In order to master this literature, Straumann had to learn the Scandinavian languages along the way.

The book is organized in two main parts. The first part is structured chronologically and deals with the interwar period, while the second part, which analyses the post-Bretton Woods era, is thematically structured. In the first part, Straumann sets the record straight in four chapters that analyze the divergence of inflation and exchange rates during and after World War One, the return to prewar parity, monetary policy after September 1931, and the small Gold Bloc countries? insistence on staying the course until 1935 and 1936. In each chapter, Straumann places his analysis in the context of existing research and debates, and he concludes that the divergence during and after the war was not caused by monetary factors but by variations in trade deficits, and that the timing of the return to prewar parity was related to these imbalances as well. At the same time the heavy emphasis on returning to the old parity was a result of a wish to restore the old economic order, or as it was said in Denmark to restore the ?honest krone.? Straumann finds that policymakers did not change the focus of monetary policy after they left gold, and he disputes the idea that Sweden shifted to price targeting in the early 1930s or that the Danish central bank changed its monetary policy during the banking crisis of the 1920s. The debate on these issues is likely to continue, but Straumann?s comparative focus is a great strength.

In the last chapter of part one, Straumann discuss the Gold Bloc?s stubborn and problematic allegiance to gold into the mid-1930s, and he agrees with Eichengreen and Temin?s point that it was ideas rather than interests that determined this policy. Country size was also important, in that small states in general followed large states. Here, it would have been interesting to add a more detailed discussion of the differences between the Scandinavian and the small gold bloc countries with respect to what determined the different timing for leaving gold. The author argues that gold reserves, trade structure and the banking system explain the timing better than institutional frameworks, but how did the ?fixed ideas? matter for timing?

In the second part, size is again demonstrated to be an important variable. As before, small states preferred fixed exchange to floating regimes and this was mostly due to a sense of vulnerability, as also discussed in the IPE literature. Notably, some large countries, including the United States introduced a flexible exchange rate regime while the European Community set up the snake and then the European Monetary system with less rigid rules than the gold standard, and with some restrictions on capital mobility. As Straumann notes, the ?idea that exchange rates should be fixed proved to be remarkably persistent? (p. 172). It was only with the crisis of 1992 that Sweden — and later Norway — introduced a flexible exchange rate regime based on inflation targeting. As is well known, other small Western European states joined the Euro, while Denmark, apparently still suffering from ?Fixed Ideas,? pegged the krone to the Euro.

This process is discussed in four chapters, with chapters five and six focusing on the divergence of the 1970s and 1990s respectively, while chapters seven and eight look into the experience of Switzerland, Sweden and Norway with floating exchange rates. Straumann draws on economic theory in order to raise the relevant questions, and he finds, again, that ideas or perception was important. Policymakers in small open economies believed in pegged exchange rates, and it was only when Sweden and Norway broke with this ideal that ?Fixed Ideas? began to lose their power. And it was not accidental that it was these countries (and Switzerland from the 1970s) that first let go of the idea. They were financially open but not members of the EU, and therefore they were exposed to international markets. Straumann concludes that the shift to flexible exchange rates by Sweden and Norway was a watershed, and that it has served these countries well. Whether Denmark?s decision to peg the krone to the Euro is a good idea is not discussed.

Overall, ?Fixed Ideas? is a very welcome and important contribution to comparative economic and monetary history. The scale of the empirical material — quantitative as well as qualitative — is impressive, and the analysis is solidly grounded in the research literature. It seems that by now there is more or less consensus that ideas or even discourses and narratives mattered (and matters) a great deal for understanding financial and economic matters. In order to take this understanding to the next level, economic historians will have to draw on concepts and ideas (such as embeddedness, sense making and meaning) from sociology and cultural studies. Despite the few small problems I have raised, Fixed Ideas contributes in an important way to our understanding of small European states? exchange rate policy in the twentieth century, and in combination with other research it provides a good starting point for entering the next level.

Per H. Hansen is professor at the Center for Business History at Copenhagen Business School. He has published books and articles on Danish financial history, the business history of Danish design, organizational culture and change, among other things. He is currently working on an analysis of central bank cooperation during the 1931 international financial crisis.

Copyright (c) 2010 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator ( Published by EH.Net (November 2010). All EH.Net reviews are archived at

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

When Sugar Ruled: Economy and Society in Northwestern Argentina, Tucum?n, 1876-1916

Author(s):Juarez-Dappe, Patricia
Reviewer(s):Johnson, Lyman L.

Published by EH.NET (October 2010)

Patricia Juarez-Dappe, When Sugar Ruled: Economy and Society in Northwestern Argentina, Tucum?n, 1876-1916. Athens: Ohio University Press, 2010. xiii + 233 pp. $32 (paperback), ISBN: 978-0-89680-274-2.

Reviewed for EH.Net by Lyman L. Johnson, Professor of History, University of North Carolina — Charlotte.

This book is a useful contribution to the history of Argentina during the era of economic? expansion that had been initiated by national integration and institution building in the decades following 1861. Patricia Juarez-Dappe, Associate Professor of History at California State University, Northridge, provides a well-researched survey of four decades of growth in Tucum?n driven by the rapid expansion of its sugar industry. Historians and economists with limited knowledge of Argentine history might wonder why this case deserves focused attention given the already-large literature devoted to the impressive expansion of the national economy in this period. Juarez-Dappe shows that while Tucum?n tracked the fast-rising arc of Argentine economic growth, imitating in many details the national experience, the character and legacy of the province’s expansion diverged in crucial ways from national experience.

Once potential profits from sugar production were demonstrated by early innovators, landowners moved from tobacco and other long-established crops to sugar and investors provided the capital to develop large and efficient refineries. Profits rose dramatically as new technologies, especially railroads and steam engines, increased efficiency and contributed to economies of scale in Tucum?n. As the industry expanded, estate managers and refinery owners attracted laborers from surrounding provinces and then enforced the discipline required by the rhythms of the sugar cycle with the support of a pliant provincial government. The prodigious wealth produced in the countryside as this process matured allowed the province’s modernizing government to transform its tax regime and harvest revenues that paid for the delivery of expanded and improved education, medical services and hygiene as well as to remake San Miguel, the provincial capital, as a modern city.?

While Argentina’s remarkable economic growth in this period was driven by profits from a rapidly expanding agricultural sector, Tucum?n’s prosperity during the sugar era was fundamentally unlike that of the still more profitable provinces of the Argentine littoral. Those regions grew rich from the profitable export of wheat, beef, mutton and other products to Europe. Tucum?n’s sugar producers, on the other hand, depended almost entirely on the national market. Given Argentina’s fast-rising population and accumulating wealth, price equilibrium and profitability could be sustained during the first stages of the modernization of sugar production in Tucum?n despite dramatically increased production. As a result, the province’s planters and refiners enjoyed many advantages relative to those in other Western Hemisphere sugar-producing nations who were forced to accept ever-lower prices in the increasingly competitive export markets of the Atlantic Basin.

Over time falling international prices and increased Atlantic market integration meant that this advantage could not be sustained permanently. Ultimately, the prosperity of Tucum?n’s sugar sector would come to depend on the willingness of the Argentine national government to protect it from foreign competition. Wealth transfers from the households of Buenos Aires and other littoral cities to the farmers, agricultural laborers and refiners of Tucum?n and other provinces were managed by national political leaders to service their own electoral ambitions. Once profits and market stability came to depend on political deals and electoral alliances, rather than price competitiveness, Tucuman’s sugar sector entered a dark cul-de-sac that offered little potential for continued modernization or for the stimulation of other sectors of the provincial economy. While the sugar industry’s growing reliance on protection is acknowledged by the author, she does not engage this topic in depth. If the story had been pursued beyond 1916, these issues would have been forced to the center of the discussion.

The author is more interested in the process of modernization and consolidation of the provincial sugar industry and describes this process in a thorough and convincing way, providing the reader with a rich array of detail drawn from her intensive excavation of archival resources. In addition to samples drawn from national censuses, the records of the provincial statistical office, and civil and criminal records, Juarez-Dappe uses notary records to great effect. These rich sources are seldom consulted by national era economic historians, although they are routinely used in systematic ways by colonial historians with excellent results. In addition, to these archival sources, Juarez-Dappe has thoroughly surveyed the secondary literature, supplanting earlier works of synthesis with her fresh account.?

The result is a dense descriptive narrative of Tucum?n’s sugar industry that ranges widely to include changing patterns of land use, the introduction of new technologies, and the fast-changing relations between sugar growers and the owners of refineries. The author also provides a very useful examination of the provincial labor regime, examining in turn migration, work, housing, and labor discipline. This broad survey is organized topically, allowing the reader to follow changes in, say, land use or technology across time. This same organization limits the author’s ability to analyze the specific effects of changing market conditions or altered political and fiscal policies on the allocation of land, labor, technology, and capital across the period. Despite this limitation, Juarez-Dappe has provided a comprehensive and highly readable introduction to this topic.

Lyman L. Johnson is Professor of History at the University of North Carolina at Charlotte. His recent books include Workshop of Revolution: Plebeian Buenos Aires and the Atlantic World, 1776-1810 (forthcoming Duke University Press); Aftershocks: Earthquakes and Popular Politics in Latin America (edited with J?rgen Buchenau); and Death, Dismemberment, and Memory. He has served as president of the Conference on Latin American History. ??? ??????????

Copyright (c) 2010 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator ( Published by EH.Net (October 2010). All EH.Net reviews are archived at

Subject(s):Agriculture, Natural Resources, and Extractive Industries
Economywide Country Studies and Comparative History
Geographic Area(s):Latin America, incl. Mexico and the Caribbean
Time Period(s):19th Century
20th Century: Pre WWII