Classic Reviews in Economic History

Earl J. Hamilton, American Treasure and the Price Revolution in Spain, 1501-1650. Cambridge, MA: Harvard University Press, 1934. xii + 428 pp.

Review Essay by John Munro, Department of Economics, University of Toronto.

Hamilton and the Price Revolution: A Revindication of His Tarnished Reputation and of a Modified Quantity Theory

Hamilton and the Quantity Theory Explanation of Inflation

As Duke University’s website for the “Earl J. Hamilton Papers on the Economic History of Spain, 1351-1830” so aptly states: Hamilton “helped to pioneer the field of quantitative economic history during a career that spanned 50 years.”[1]   Certainly his most important publication in this field is the 1934 monograph that is the subject of this “classic review.”  It provided the first set of concrete, reliable annual data on both the imports of gold and silver bullion from Spain’s American colonies — principally from what is now Bolivia (Vice Royalty of Peru) and Mexico (New Spain) — from 1503 to 1660 (when bullion registration and thus the accounts cease); and on prices (including wages) in Spain (Old and New Castile, Andalusia, Valencia), for the 150 year period from 1501 to 1650.[2]  His object was to validate the Quantity Theory of Money: in seeking to demonstrate that the influx of American silver was chiefly, if not entirely, responsible for the inflation of much of the Price Revolution era, from ca.  1520 to ca. 1650: but, principally only for the specific period of ca. 1540 to ca. 1600.  Many economic historians (myself included, regrettably) have misunderstood Hamilton on this point, concerning both the origins and conclusion of the Price Revolution.  Of course the Quantity Theory of Money, even in its more refined modern guise, is no longer a fashionable tool in economic history; and thus only a minority of us today espouse a basically monetary explanation for the European Price Revolution (ca. 1515/20-1650) — though no such explanation can be purely monetary.[3]

If inflations had been frequent in European economic history, from the twelfth century to the present, the Price Revolution was unique in the persistence and duration of inflation over a period of at least 130 years.[4]  Furthermore, if commodity money — i.e., gold and especially silver specie — was not the sole monetary factor that explains the Price Revolution that commodity money certainly played a relatively much greater role than it did in the subsequent inflations (of much shorter duration) from the mid-eighteenth century to the present.  The role of specie, and specifically Spanish-American silver, in “causing” the Price Revolution was a commonplace in Classical Economics and Hamilton cites Adam Smith’s statement in _The Wealth of Nations_ (p. 191) that “the discovery of abundant mines of America seems to have been the sole cause of this diminution in the value of silver in proportion to that of corn [grain].”[5]

 The Comparative Roles of Spanish-American Silver and Coinage Debasements: The Bodin Thesis

According to Hamilton (p. 283) — and indeed to most authorities to this very day — the very first scholar to make this quantity-theory link between the influx of American “treasure” and the Price Revolution was the renowned French philosopher Jean Bodin, in his 1568 response to a 1566 treatise by the royal councilor Jean Cherruyt de Malestroit on the explanations for the then quite evident rise in French prices over the previous several decades.  Malestroit had contended that coinage debasements were the chief culprit — as indeed they most certainly had been in the periodic inflations of the fourteenth and fifteenth centuries.[6] Bodin responded by dismissing those arguments and by contending that the growing influx of silver from the Spanish Americas was the primary cause of that inflation.[7]

Hamilton (in chapter 13) was therefore astounded to find, after voluminous and meticulous research in many Spanish treatises, letters, and other relevant documents, that no Spanish writer of the sixteenth century had voiced similar opinions, all evidently ignorant of Bodin’s views.  Hamilton, however, had neglected to find (as Marjorie Grice-Hutchinson did, much later) one such Spanish treatise, produced in 1556 — i.e., twelve years before Bodin — in which Azpilcueta Navarra, a cleric of the Salamanca School, noted that:  “even in Spain, in times when money was scarcer, saleable goods and labor were given for very much less than after the discovery of the Indies, which flooded the country with gold and silver.”[8]

Hamilton also erred, if forgivably so, in two other respects.  First, in utilizing what were then, and in many cases still are, imperfect price indexes for many countries — France, England, Germany, Italy (but not for the Low Countries) — Hamilton (1934, pp. 205-10) concluded that the rise in the general level of prices during the Price Revolution was the greatest in Spain.  In fact, more recent research, based on the Phelps Brown and Hopkins (1956) Composite Price Index for England and the Van der Wee (1975) Composite Price Index (hereafter: CPI) for Brabant, in the southern Low Countries,  reveals the opposite to be true.  If we adopt a common base of 1501-10 = 100, in comparing the behavior of the price levels in Spain, England, and Brabant, for the period 1511-1650, we find that the Hamilton’s CPI for Spain rose from a quinquennial mean of 98.98 in 1511-15 to one of 343.36 in 1646-50 (for silver-based prices only: a 3.47 fold rise); in southern England, the CPI rose from a quinquennial mean of 103.08 in 1511-15 to one of 697.54 (a 6.77 fold rise); and in Brabant, the CPI rose from a quinquennial mean of 114.80 in 1511-15 to one of 845.07 (a 7.36 fold rise).[9] Both the Phelps Brown and Hopkins and the Van der Wee price indexes are, it must be noted, weighted, with roughly the same weights (80 percent foodstuffs in the former and 74 percent in the latter).  Hamilton, while fully admitting that “only index numbers weighted according to the expenditures of the average family accurately measure changes in the cost of living,” was forced to use a simple unweighted arithmetic mean (or equally weighted for all commodities), for he was unable to find any household expenditure budgets or any other reliable guides to produce such a weighted index.[10]

Undoubtedly, however, the principal if not the only explanation for the differences between the three sets of price indexes — to explain why the Spanish rose the least and the Brabantine the most — is the one offered by Malestroit: namely, coinage debasements.  Spain, unlike almost all other European countries of this era, underwent no debasements of the gold and silver coinages (none from 1497 to 1686),[11] but in 1599 the new Spanish king Philip III (1598-1621) did introduce a purely copper “vellon” coinage, a topic that requires a separate and very necessary analysis.  The England of Henry VIII (1509-1547) is famous — or infamous — for his “Great Debasement.”  He had begun modestly in 1526, by debasing Edward IV’s silver coinage by 11.11% (reducing its weight and silver contents from 0.719 to 0.639 grams of fine silver); but in 1542, he debased the silver by another 23.14% (to 0.491 grams of fine silver).  When the Great Debasement had reached its nadir under his successor (Northumberland, regent for Edward VI), in June 1553, the fine silver contents of the penny had been reduced (in both weight and fineness) to just 0.108 grams of fine silver: an overall reduction in the silver content of 83.1% from the 1526 coinage.  In November 1560, Elizabeth restored the silver coinage to traditional sterling fineness (92.5% fine silver) and much of the weight: so that the penny now contained 0.480 grams of fine silver (i.e., 75.1% of the silver in the 1526 coinage).  The English silver coinage remained untouched until July 1601, when its weight and fine silver contents were reduced by a modest 3.23%.  Thereafter the English silver coinage remained untouched until 1817 (when the silver contents were reduced by another 6.06%).  Thus for the entire period of the Price Revolution, from ca. 1520 to 1650, the English silver coinage lost 35.5% of its silver contents.[12] In the southern Low Countries (including Brabant), the silver coinage was debased — in both fineness and weight — a total of twelve times from 1521 to 1644: from 0.33 grams to 0.17 grams of fine silver in the penny, for an overall loss of 48.5%.[13]

 A New Form of Debasement: The New “Fractional” Copper or _Vellon_ Coinages in Spain and Elsewhere

In terms of the general theme of coinage debasement, a very major difference between Spain and these other two countries, from 1599, was the issue of a purely copper coinage called _vellon_, to which Hamilton devotes two major chapters.[14]  Virtually all countries in late medieval and early modern Europe issued a series of petty or low-denomination “fractional” coins — in various fractions of the penny, chiefly to enable the populace to buy such low-priced commodities as bread and beer (or wine).  But in all later-medieval countries the issues of the petty, fractional coinage almost always accounted for a very small proportion of total mint outputs (well under 5% of the aggregate value in Flanders).[15] They were commonly known as _monnaie noire_ (_zwart geld_ in Flemish): i.e., black money, because they contained so much copper, a base metal.  Indeed all coins– both silver and gold — always required at least some copper content as a hardening agent, so that the coins did not suffer too much erosion or breakage in circulation.

The term “debasement” is in fact derived from the fact that the most common mechanism for reducing the silver contents of a coin had been to replace it with more and more copper, a great temptation for so many princes who often derived substantial seigniorage revenues from the increased mint outputs that debasements induced (in both reminting current coin and in attracting bullion from abroad).  In this respect, England was an exception — apart from the era of the Great Debasement (1542-1553) — for its government virtually always maintained sterling silver fineness (92.5% silver, 7.5% copper), and reduced the silver contents for all denominations equally, by reducing the size and weight of the coin.  In continental Europe, the extent of the debasement, whether by fineness or by weight, or by both together, did vary by the denomination (to compensate for the greater labor costs in minting the greater number of lower-valued coins); but the petty “black money” coins — also known (in French) as _billon_, linguistically related to _vellon_, always contained some silver, and always suffered the same or roughly similar proportional reduction of silver as other denominations during debasements until 1543.  In that year, the government of the Habsburg Netherlands was the first to break that link: in issuing Europe’s first all-copper coin.  France followed suit with an all copper _denier_ (1 d tournois) in 1577; but England did not do so until 1672.[16]

Hamilton gives the erroneous impression that Spain (i.e., Castile) was the first to do so, in issuing an all copper _vellon_ coin in 1599.  Previously, Spanish kings (at least from 1471) had issued a largely copper fractional coinage called _blancas_ , with a nominal money-of-account value of 0.5 maravedí, but with a very small amount of silver — to convince the public that it was indeed precious-metal “money.”  The _blanca_ issued in 1471 had a silver fineness of 10 grains or 3.47% (weighing 1.107g).[17] In 1497, that fineness was reduced to 7 grains (2.43% fine); in 1552, to 5.5 grains (1.909% fine); in 1566, to 4 grains (1.39% fine).  In 1597, Philip II (1556-1598) had agreed to the issue of a maravedí coin itself, with, however, only 1 grain of silver (0.34% fine), weighing 1.576g.; but whether any were issued is not clear.[18]

Hamilton commends Philip II on his resolute stance on the issue _vellon_ coinages: for, in “believing that it could be maintained at parity only by limitation of its quantity to that required for change and petty transactions, he was exceedingly careful to restrict the supply.”[19] That is a very prescient comment, in almost exactly stating the principle of maintaining a sound system of fractional or petty coinage that Carlo Cipolla (1956) later enunciated,[20] in turn inspiring the recent monograph on this subject by Sargent and Velde (2002).[21] But neither of them gave Hamilton (1934) any credit for this fundamentally important observation, one whose great importance Hamilton deduced from the subsequent, seventeenth-century history of copper coinages in Spain.

Thus, as indicated earlier, in the year following the accession of the aforementioned Philip III, 1599, the government issued Spain’s first purely copper coin (minted at 140 per copper _marc_ of 230.047 g), and from 1602 at 280 per marc: i.e., reducing the weight by half from 1.643 g to 0.8216 g).[22] Certainly some of the ensuing inflation in seventeenth-century Spain, with a widening gap between nominal and silver-based prices, ranging from 4.0 percent in 1620 to 104.2 percent in 1650, has to be explained by such issues of a purely copper coinage.  Indeed, in Hamilton’s very pronounced view, the principal cause of inflation in the first half of the seventeenth century lay in such _vellon_ issues — more of a culprit than the continuing influx of Spanish American silver.[23]

If, however, we use Hamilton’s own CPI based on the actual nominal prices produced with the circulation of the _vellon_ copper coinage, from 1599-1600, we find that this index rose only 4.61 fold from the quinquennial mean of 1511-15 (98.98) to the mean of 1646-50 (457.07) — again well less than the overall rise of the English and Brabant composite price indexes.  Nevertheless, the differences between the silver-based and vellon-based price indexes in Spain for the first half of the seventeenth century are significant.  For the former (silver), the CPI rose from a mean of 320.98 in 1596-1600 to one of 343.36 in 1646-50, an overall rise of just 6.97%.  For the latter (vellon-based) index, the CPI rose to 457.09 in 1646-50, for a very substantial overall rise of 41.41%.  What certainly did now differentiate Spain from the other two, and indeed almost all other European countries in this period, is that in all the latter countries the purely copper petty coinage formed such a very much smaller, indeed minuscule, proportion of the total coined money supply.[24]

 The Evidence on Spanish-American Silver Mining and Silver Imports into Seville to 1600

What this discussion of the _vellon_ coinage makes crystal clear is that Hamilton did not attribute all of the inflation of the Price Revolution era to the “abundant mines of the Americas.”  Nevertheless many economic historians, after carefully examining Hamilton’s data on prices and imports of Spanish American bullion, noted — as Hamilton himself clearly demonstrated — that the Price Revolution had begun as early as the quinquennium 1516-20, long before, decades before, any significant amounts of Spanish American silver had reached Seville.  Virtually none was imported in the 1520s; and an annual mean of only 5,090.8 kg in 1531-35.[25]   The really substantial imports took place only after by far the two most important silver mines were brought into production: those of Potosi in “Peru” (modern-day Bolivia) in 1545, and Zacatecas, in Mexico, the following year, 1546.  From that quinquennium of 1546-50, mean annual silver imports into Seville rose from 18,698.8 kg to 273,704.5 kg in the quinquennium of 1591-95, marking the peak of the silver imports.  Between these two quinquennia, the total mined silver outputs of Potosi and Zacatecas (unknown to Hamilton) rose from an annual mean of 64,848.9 kg to one of 219,457.4 kg (indicating that silver was coming from other sources than just these two mines).[26] Even then, their production began to boom only with the application of the mercury amalgamation process (which Hamilton barely mentioned — only on p. 16), greatly aided by abundant local supplies of mercury — at Zacatecas, from about 1554-57, and at Potosi, from 1572.[27]

 The Alternative Explanation for the Price Revolution: Population Growth

If all this evidence does indeed prove that the influx of Spanish silver was certainly not the initial cause of the European Price Revolution, surely the data should indicate that the subsequent influx of that silver, especially from the 1550s, very likely did play a significant role in fueling an ongoing inflation. But so many of the anti-monetarist historians leapt to an alternative — and in my view — false conclusion that population growth was the initial and the prime-mover in “causing” the Price Revolution.[28] My objections to this demographic-oriented thesis are two-fold.

In the first place, the now available evidence on demographic recovery and growth in England and the southern Low Countries (Brabant) does not at all correspond to the statistical evidence on inflation during the early phase of the Price Revolution — in the early sixteenth century. For England the best estimate of population in the early 1520s, when the Price Revolution was already underway, is 2.25 or 2.30 million, about half of the most conservative estimate for England’s population in 1300: about 4.5 million — an estimate still rejected by the majority of medieval economic historians, who prefer the more traditional estimate of 6.0 million.[29] If England in the early 1520s was obviously still very unpopulated, compared to its late-medieval peak, and if its population had just begun to recover, how could any such renewed growth, from such a very low level, have so immediately sparked inflation: how could it have caused a rise in the CPI (Phelps Brown and Hopkins) from a quinquennial mean of 96.70 (1451-75 = 100) in 1496-1500 to one of 146.05 in 1521-25?

We find a similar demographic situation in Brabant.  From the 1437 census to the 1496 census, the number of registered households fell from 92,738 to just 75,343: a fall of 18.76 percent.[30] If we further assume that a fall in population also involved a decline in the average family or household size, the demographic decline would have been much greater than these data indicate.  According to Herman Van der Wee (1963), Brabant, like England, did not commence its demographic recovery until the early sixteenth century; and his estimated average annual rate of population growth from 1496 to 1526 was 0.96%.[31]  For this same period, Van der Wee’s CPI for Brabant shows a rise from 115.35 in 1496-1500 (again 1451-75 = 100) to one of 179.94 in 1521-25.  How can any such renewed population growth explain that inflation?

In the second place, the arguments and analyses supplied involve faulty economics: an erroneous transfer of micro-economic analysis to macro-economics.  One can well argue, for early-modern western Europe, that the effect of sustained population growth for the agrarian sector, with necessary additions of “marginal lands” that were generally inferior in fertility and more distant from markets, and without a widespread diffusion of technological changes to offset diminishing returns in this sector, inevitably led to sharply rising marginal costs.  That in turn resulted in price increases for grains and other agricultural commodities (including timber) that were greater than those for non-agrarian and especially industrial commodities, certainly in both England and the southern Low Countries during the course of the sixteenth and first half of the seventeenth century.[32]  But that basically micro-economic model concerning individual, relative commodity prices is, however, very different from a macro-economic model contending that population growth by itself led to an overall increase in the level of prices — i.e., in the CPI.

We should remember that, almost 35 years ago, Donald McCloskey (1972), in a review of Ramsey (1971), responded to these demographic-oriented explanations of the Price Revolution by contending that, if both monetary variables (M and V) were held constant, then population growth (if translated into an increased T or y, in MV = Py) should have led to a fall in P, in the CPI.  Nevertheless, there is some validity to the argument that population growth and changes in the demographic structures may have influenced the role of another monetary factor in the Price Revolution: namely changes in the income velocity of money, to be discussed as a separate topic later in this review.

 Hamilton’s Explanations for the Origins of the Price Revolution before the Influx of Spanish Treasure: The Roles of Gold, South German Silver Mining, and Changes in Credit

How then did Hamilton — and how do we — explain the origins of the Spanish and indeed European-wide Price Revolution,  in the early sixteenth century, i.e., for the period well before any significant influxes of American silver, and also before there was any significant population growth (at least in England and the Low Countries).  Was Hamilton that ignorant of the implications of his own data?  Certainly not.  On p. 299, in his chapter XIII entitled “Why Prices Rose,” he stated that: “the gold imports from the Antilles significantly influenced Andalusian and New Castilian prices even in the first two decades of the sixteenth century,” without, however, elaborating that point any further.[33]  More important are his observations on p. 301, where he explicitly moderates his emphasis on the role of Spanish-American treasure imports, in stating that:  “Only at the beginning of  the sixteenth century, when, as has been shown, colonial demand, credit expansion, and the increased output of German silver made themselves felt, and at the end of the century, when a devastating epidemic, and an over issue of vellon coinage took place, did other factors play important roles in the price upheaval [i.e., the Price Revolution].”  Indeed, in his own view, the paramount role of the influxes of Spanish-American bullion apply to only, at most, 65 years of the 130 years of the Price Revolution era, i.e., to just half the era — from ca. 1535 to 1600, though the evidence for that role seems to be more clear for just the half-century 1550-1600.

It is most regrettable that Hamilton himself failed to elaborate the role of any these factors, principally monetary, in producing inflation in early-sixteenth century Spain.  Had he done so, surely he would have been spared the subsequent and really unfair criticism that he was offering a simplistic monocausal explanation of the Price Revolution, and one in the form of a very crude Quantity Theory of Money.  The most important of “initial causes” that Hamilton lists was surely the question of “German silver,” or more specifically, the South-German and Central European silver-copper mining boom from about the 1460s to the 1540s.  Where he derived his information is not clear, but from other footnotes it was presumably from the publications of two much earlier German economic historians, Adolf Soetbeer and Georg Wiebe.  The latter was, in fact, the first to write a major monograph on the Price Revolution (_Geschichte der Preisrevolution des XVI.  und XVII.  Jahrhunderts_), and he seems to have coined (so to speak) the term.[34]  The former, though a pioneer in trying to quantity both European and world supplies of precious metals, providing a significant influence on Wiebe,  produced seriously defective data on German mining outputs in the later fifteenth and sixteenth centuries, greatly underestimating total outputs, as  John Nef demonstrated in a seminal article published in 1941, subsequently elaborated in Nef (1952).[35] In Nef’s view, this South German mining boom may have quintupled Europe’s supply of silver by the 1530s, and thus before any major influx of Spanish-American silver.[36]

Since then a number of economic historians, me included, have published their research on this South German-Central European silver-copper mining boom.[37] These mountainous regions contained immensely rich ores bearing these two metals, which, however were largely inaccessible for two reasons: first, there was no known method of separating the two metals in smelting the argentiferous-cupric ores; and second, the ever-present danger of flooding in the regions containing these ore bodies made mined extraction very difficult and costly.  In my view, the very serious deflation that Europe experienced during the second of the so-called “bullion famines,” from the 1440s to the 1460s, provided the profit incentive for the necessary technological changes to resolve these two problems.  Consider that since virtually all of Europe’s money-of-account pricing system was based on, tied to, the silver coinage, deflation (low prices) _ipso facto_ meant a corresponding rise in the real value of silver, gram per gram (just as inflation means a fall in the real value of silver, per gram).  The solutions lay in innovations in both mechanical engineering and chemical engineering.  The first was the development of water-powered or horse-powered piston vacuum pumps (along with slanted drainage adits in the mountain sides) to resolve the water-flooding problem.  The second was the so-called _Saigerhütten_ process by which lead was added to the ore-bodies in smelting (also using hydraulic machinery and the new blast furnaces) — during the smelting process the lead combined with the silver to precipitate the copper, and the silver-lead amalgam was then resmelted to remove the lead.

Both processes were certainly in operation by the 1460s; and by my very conservative estimates, certainly incomplete, the combined outputs of mines in Saxony, Thuringia, Bohemia, Slovakia, Hungary, and the Tyrol rose from a quinquennial mean of 12,973.4 kg in 1471-75 (when adequate output data can first be utilized) to a peak production in 1536-40 (thus later than Nef’s estimates), with a quinquennial mean output of 55,703.8 kg — a  4.29-fold increase overall (i.e.. 329.36% increase) — close enough to Nef’s five-fold estimate, given the likely lacunae in the data.[38]  Consider that this output, for the late 1530s, was not exceeded by Spanish-American silver influxes until a quarter of a century later, in 1561-65, when, thanks to the recently applied mercury amalgamation process, a quinquennial mean import of 83,373.92 kg reached Seville (compared to a mean import of just 27,145.03 in 1556-60).[39]

But where did all this Central European silver go?  Historically, from the mid-fourteenth century, most of the German silver-mining outputs had been sent to Venice, whose merchants re-exported most of that silver to the Levant, in exchange for Syrian cotton and Asian spices and other luxury goods.  Two separate factors helped to reverse the direction of that flow, down the Rhine, to Antwerp and the Brabant Fairs.  The first was Burgundian monetary policy: debasements in 1466-67, which, besides attracting silver in itself, reversed a half-century long pro-gold mint policy to a pro-silver policy, offering a relative value for silver (in gold and in goods) higher than anywhere else in Europe.[40] Thus the combined Flemish and Brabantine mint outputs, measured in kilograms of fine silver rose from nil (0) in 1461-65 to 9,341.50 kg in 1476-80 — though much of that was recycled silver coin and bullion in quite severe debasements.  But in 1496-1500, after the debasements had ceased, the mean annual output in that quinquennium was 4,872.96 kg; and in 1536-40, at the peak of the mining boom (and, again, before any substantial Spanish-American imports) the mean output was 5,364.99 kg.[41]

The second factor in altering the silver flows was increasingly severe disruptions in Venice’s Levant trade with the now major Ottoman conquests in the Balkans and the eastern Mediterranean, from the 1460s (and especially from the mid-1480s) culminating (if not ending) with the Turkish conquest of the Mamluk Levant (i.e., Egypt, Palestine, Syria) itself in 1517 (along with conquests in Arabia and the western Indian Ocean). While we have no data on silver flows, we do have data for the joint-product of the Central European mining boom — copper, a very important export as well to the Levant.  In 1491-95, 32.13% of the Central European mined copper outputs went to Venice, but only 5.22% went to Antwerp; by 1511-15, the situation was almost totally reversed: only 3.64% of the mined copper went to Venice, while 58.36% was sent to Antwerp.  May we conjecture that there was a related shift in the flows of silver?  By the 1530s, the copper flows to Venice, which now had more peaceful relations with the Turks, had risen to 11.07%, but 53.88% of the copper was still being sent to the Antwerp Fairs.[42]  Of course, by this time the Portuguese, having made Antwerp the European staple for their recently acquired Indian Ocean spice trade (1501), were shipping significant (if unmeasurable) quantities of both copper and silver to the East Indies.  Then in 1549, the Portuguese moved their staple to Seville, to gain access to the now growing imports of Spanish-American silver.

 The Early Sixteenth-century “Financial Revolutions”: In Private and Public Credit

The other monetary factor that Hamilton mentioned — but never discussed — to help explain the rise of prices in early sixteenth-century Spain was the role of credit.  Indeed, as Herman Van der Wee (1963, 1967, 1977, 2000) and others have now demonstrated, the Spanish Habsburg Netherlands experienced a veritable financial revolution involving both negotiability and organized markets for public debt instruments.  As for the first, the lack of legal and institutional mechanisms to make medieval credit instruments fully negotiable had hindered their ability to counteract frequent deflationary forces; and at best, such credit instruments (such as the bill of exchange) could act only to increase — or decrease — the income velocity of money.[43] The first of two major institutional barriers was the refusal of courts to recognize the legal rights of the “bearer” to collect the full proceeds of a commercial bill on its stipulated redemption date: i.e., the financial and legally enforceable rights of those who had purchased or otherwise licitly acquired a commercial bill from the designated payee before that redemption date.  Indeed, most medieval courts were reluctant to recognize the validity of any “holograph” bill: those that not been officially notarized and registered with civic authorities.  The second barrier was the Church’s usury doctrine: for, any sale and transfer  of a credit instrument to a third party before the stipulated redemption date would obviously have had to be at some rate of discount — and that would have revealed an implicit interest payment in the transaction. Thus this financial revolution, in the realm of private credit, in the Low Countries involved the role of urban law courts (law-merchant courts), beginning with Antwerp in 1507, then most of other Netherlander towns, in guaranteeing such rights of third parties to whom these bills were sold or transferred.  Finally, in the years 1539-1543, the Estates General of the Habsburg Netherlands firmly established, with national legislation, all of the legal requirements for full-fledged negotiability (as opposed to mere transferability) of all credit instruments: to protect the rights of third parties in transferable bills, so that bills obligatory and bills of exchange could circulate from hand to hand, amongst merchants, in commercial and financial transactions.  One of the important acts of the Estates-General, in 1543 — possibly reflecting the growing influence of Calvinism — boldly rejected the long-held usury doctrine by legalizing the payment of interest, up to a maximum of 12% (so that anything above that was now “usury”).[44]  England’s Protestant Parliament, under Henry VIII, followed suit two years later, in 1545, though with a legal maximum interest of 10%.[45] That provision thereby permitted the openly public discounting of commercial credit instruments, though this financial innovation was slow to spread, until accompanied, by the end of the sixteenth century, with the much more common device of written endorsements.[46]

The other major component of the early-sixteenth century “financial revolution” lay in public finance, principally in the Spanish Habsburg Netherlands, France, much of Imperial Germany, and Spain itself — in the now growing shift from interest-bearing government loans to the sale of annuities, generally known as _rentes_ or _renten_ or (in Spain) _juros_, especially after several fifteenth-century papal bulls had firmly established, once and for all, that they were not loans (a _mutuum_, in both Roman and canon law), and thus not subject to the usury ban.[47] Those who bought such _rentes_ or annuities from local, territorial, or national governments purchased an annual stream of income, either for a lifetime, or in perpetuity; and the purchaser could reclaim his capital only by finding some third party to purchase from him the _rente_ and the attached annuity income.  That, therefore, also required both the full legal and institutional establishment of negotiability, with now organized financial markets.

In 1531, Antwerp, now indisputably the commercial and financial capital of at least northern Europe, provided such an institution with the establishment of its financial exchange, commonly known as the _beurse_ (the “purse” — copied by Amsterdam in 1608, and London in 1695, in its Stock Exchange).  Thanks to the role of the South German merchant-bankers — the Fuggers, Welsers, Höchstetters, Herwarts, Imhofs, and Tuchers — the Antwerp _beurse_ played a major role in the international marketing of such government securities, during the rest of the sixteenth century, in particular the Spanish _juros_, whose issue expanded from 3.586 million ducats (_escudos_ of 375 maravedís) in 1516 to 80.040 million ducats in 1598, at the death of Philip II — a 22.4-fold increase.  Most these perpetual and fully negotiable _juros_ were held abroad.[48] According to Herman Van der Wee (1977), this sixteenth-century “age of the Fuggers and [then] of the Genoese [merchant-bankers, who replaced the Germans] was one of spectacular growth in public finances.”[49] Finally, it is important to note the relationship between changes in money stocks and issues of credit.  For, as Frank Spooner (1972) observed (and documented in his study of European money and prices in the sixteenth century), even anticipated arrivals of Spanish treasure fleets would induce these South German and Genoese merchant-bankers to expand credit issues by some multiples of the perceived bullion values.[50]

 The Debate about Changes in the Income Velocity of Money (or Cambridge “k”)

The combined effect of this “revolution” in both private and public finance was to increase both the effective supply of money — in so far as these negotiable credit instruments circulated widely,  as though they were paper money — and also, and even more so, the income velocity of money.  This latter concept brings up two very important issues, one involving Hamilton’s book itself, in particular his interpretation of the causes of the Price Revolution.  Most postwar (World War II) economic historians, myself included (up to now, in writing this review), have unfairly regarded Hamilton’s thesis as a very crude, simplistic version of the Quantity Theory of Money.  That was based on a careless reading (mea culpa!) of pp. 301-03 in his Chapter XIII on “Why Prices Rose,” wherein he stated, first, in explaining the purpose his Chart 20,[51] that:

The extremely close correlation between the increase in the volume of [Spanish-American] treasure imports and the advance of commodity prices throughout the sixteenth century, particularly from 1535 on, demonstrates beyond question that the “abundant mines of America” [i.e., Adam Smith’s description] were the principal cause of the Price Revolution in Spain.

We should note, first, that the “close correlation” is only a visual image from the graph, for he never computed any mathematical correlations (few did in that prewar era).  Second, Ingrid Hammarström was perfectly correct in noting that Hamilton’s correlation between the _annual_ values of treasure imports (gold and silver in pesos of 450 marevedis) and the composite price index is not in accordance with the quantity theory, which seeks to establish a relationship between aggregates: i.e., the total accumulated stock of money (M) and the price level (P).[52]  But that would have been an impossible task for Hamilton.  For, if he had added up the annual increments from bullion exports in order to arrive at some estimate of accumulated bullion stocks, he would have had to deduct from that estimate the annual outflows of bullion, for which there are absolutely no data.  Furthermore, estimates of net (remaining) bullion stocks are not the same as estimates of the coined money stock; and the coined money stock does not represent the total supply of money.[53]

Third, concerning Hamilton’s views on the Quantity Theory itself, his important monetary qualifications concerning the early sixteenth century and first half of the seventeenth century have already been noted.  We should now note his further and very important qualification (p. 301), as follows: “The reader should bear in mind that a graphic verification of that crude form of the quantity theory of money which takes no account of the velocity of circulation is not the purpose of Chart 20.”  He did not, however, discuss this issue any further; and it is notable that his bibliography does not list Irving Fisher’s classic 1911 monograph, which had thoroughly analyzed his own concepts of the Transactions Velocity of Money.[54]

Most economics students are familiar with Fisher’s Equation of Exchange, to explain the Quantity Theory of Money in a much better fashion than nineteenth-century Classical Economists had done: namely, MV = PT.   If many continue to debate the definition of M, as high-powered money, and of P — i.e., on how to construct a valid weighted CPI — the most troublesome aspect is the completely amorphous and unmeasurable “T” — as the aggregate volume of total transactions in the economy in a given year.  Many have replaced T with Q: the total volume of goods and services produced each year.  But the best substitute for T is “y” (lower case Y: a version attributed to Milton Friedman) — i.e., a deflated measure of Keynesian Y, as the Net National Product = Net National Income (by definition).[55]

The variable “V” thus becomes the income velocity of money (rather than Fisher’s Transactions Velocity) — of the unit of money in the creation of the net national income in the course of a year.   It is obviously derived mathematically by this equation: V = Py/M (and Py of course equals the current nominal value of NNI).  Almost entirely eschewed by students (my students, at least), but much preferred by most economists, is the Cambridge Cash Balances equation: whose modernized form would similarly be M = kPy, in which Cambridge “k” represents that share of the value of Net National Income that the public chooses to hold in real cash balances, i.e., in high-powered money (a straight tautology, as is the Fisher Equation).  We should be reminded that both V and k are mathematically linked reciprocals in that: V = 1/k and thus k = 1/V.  Keynesian economists would logically (and I think, rightly) contend that _ceteris paribus_ an increase in the supply of money should lead to a reduction in V and thus to an increase in Cambridge “k.”  If V represents the extent to which society collectively seeks to economize on the use of money, the necessity to do so would diminish if the money supply rises (indeed, to create an “excess”).  But this result and concept is all the more clear in the Cambridge Cash Balances approach.  For the opportunity cost of “k” — of holding cash balances — is to forgo the potential income from its alternative use, i.e., by investing those funds.  If we assume that the Liquidity Preference Schedule is (in the short run) fixed — in terms of the transactions, precautionary, and speculative motives for holding money — then a rightward shift of the Money Supply schedule along the fixed or stationary LP schedule should have led to a fall in the real rate of interest, and thus in the opportunity cost of holding cash balances.  And if that were so, then “k” should rise (exactly reflecting the fall in V).

 What makes this theory so interesting for the interpretation of the causes of at least  the subsequent inflations of the Price Revolution — say from the 1550s or 1560s — is that several very prominent economic historians have argued that  an equally or even more powerful force for inflation was a continuing rise in V, the income velocity of money (i.e., and thus to a fall in “k”): in particular, Harry Miskimin (1975), Jack Goldstone (1984, 1991a, 1991b), and Peter Lindert (1985).  Furthermore, all three have related this role of “V” to structural changes in the economy brought about by population growth.  Their theories are too complex to be discussed here, but the most intriguing, in summary, is Goldstone’s thesis.  He contended, in referring to sixteenth-century England, that its population growth was accompanied by a highly disproportionate growth in urbanization, a rapid and extensive development of commercialized agriculture, urban markets, and an explosive growth in the use of credit instruments.  In such a situation, with a rapid growth “in occupationally specialized linked networks, the potential velocity of circulation of coins grows as the square of the size of the network.”  Lindert’s somewhat simpler view is that demographic growth was also accompanied by a two-fold set of changes: (1) changes in relative prices — in the aforementioned steep rise in agricultural prices, rising not only above industrial prices, but above nominal wages, thus creating severe household budget constraints; and (2) in pyramidal age structures, and thus with changes in dependency ratios (between adult producers and dependent children) that necessitated both dishoarding and a rapid reduction in Cambridge “k” ( = rise in V).

Those arguments and the apparent contradiction with traditional Keynesian theory on the relationships between M and V (or Cambridge “k”) intrigued and inspired Nicholas Mayhew (1995), a renowned British medieval and early-modern monetary historian, to investigate these propositions over a much longer period of time: from 1300 to 1700.[56]  He found that in all periods of monetary expansion during these four centuries, the Keynesian interpretation of changes in V or “k” held true, with one singular anomalous exception: the sixteenth and early seventeenth-century Price Revolution.  That anomaly may (or may not) be explained by the various arguments set forth by Miskimin, Goldstone, and Lindert.

The Debates about the Spanish and European Distributions of Spanish American “Treasure” and the Monetary Approach to the Balance of Payments Theorem

We may now return to Hamilton’s own considerations about the complex relationships between the influx of Spanish-American silver and its distribution in terms of various factors influencing (at least implicitly) the “V” and “y” variables, in turn influencing changes in P (the CPI).  He contends first (pp. 301-02) that “the increase in the world stock of precious metals during the sixteenth century was probably more than twice — possibly as much as four times — as great as the advance of prices” in Spain.  He speculates, first, that some proportion of this influx was hoarded or converted, not just by the Church, in ecclesiastical artifacts, but also by the Spanish nobility (thus leading to a rise in “k”), while a significantly increasing proportion was exported in trade with Asia, though mentioning only the role of the English East India Company (from 1600), surprisingly ignoring the even more prominent contemporary role of the Dutch, and the much earlier role of the Portuguese (from 1501, though the latter used  principally South German silver).  We now estimate that of the total value of European purchases made in Asia in late-medieval and early modern eras, about 65-70 percent were paid for in bullion and thus only 25-30 percent from the sale of European merchandise in Asia.[57]  Finally, Hamilton also fairly speculated that “the enhanced production and exchange of goods which accompanied the growth of population, the substitution of monetary payments for produce rents [in kind] … and the shift from wages wholly or partially in kind to monetary remunerations for services, and the decrease of barter tended to counteract the rapid augmentation of gold and silver money:”  i.e., a combination of interacting factors that affected both Cambridge “k” and Friedman’s “y.”  Clearly Hamilton was no simplistic proponent of a crude Quantity Theory of Money.

From my own studies of monetary and price history over the past four decades, I offer these observations, in terms of the modernized version of Fisher’s Equation of Exchange, for the history of European prices from ca. 1100 to 1914.   An increase in M virtually always resulted in some degree of inflation, but one that was usually offset by some reduction in V (increase in “ k”) and by some increase in y, especially if and when lower interest rates promoted increased investment.[58]  Thus the inflationary consequences of increasing the money supply are historically indeterminate, though usually the price rise was, for these reasons, less than proportional to the increase in the monetary stock, except when excessively severe debasements created a veritable “flight from coinage,” when coined money was exchanged for durable goods (i.e., another instance in which an increase in M was accompanied by an increase in V).[59]

One of the major issues related to this debate about the Price Revolution is the extent to which the Spanish-American silver that flowed into Spain soon flowed out to other parts of Europe (i.e., apart from the aggregate European bullion exports to Asia and Russia).  There is little mystery in explaining how that outflow took place.  Spain, under both Charles V (I of Spain) and Philip II, ruled a vast, far-flung empire: including not only the American colonies and the Philippines, but also the entire Low Countries, and major parts of Germany and Italy, and then Portugal and its colonies from 1580 to 1640.  Maintaining and defending such a vast empire inevitably led to war, almost continuous war, with Spain’s neighbors, especially France.  Then, in 1568, most of  the Low Countries (Habsburg Netherlands) revolted against Spanish rule, a revolt that (despite a truce from 1609 to 1621) merged into the Thirty Years War (1618-48), finally resolved by the Treaty of Westphalia.  As Hamilton himself suggests (but without offering any corroborative evidence — nor can I), vast quantities of silver (and gold) thus undoubtedly flowed from Spain into the various military theaters, in payment for wages, munitions, supplies, and diplomacy, while the German and then Genoese bankers presumably received considerable quantities of bullion (or goods so purchased) in repayment of loans.[60]  Other factors that Hamilton suggested were: adverse trade balances, or simply expanding imports, especially from Italy and the Low Countries (with an increased marginal propensity to import); and operations of divergent bimetallic mint ratios.  What role piracy and smuggling actually played in this international diffusion of precious metals cannot be ascertained.[61]

But Outhwaite (1969, 1982), in analyzing the monetary factors that might explain the Price Revolution in Tudor and early Stuart England, asserted (again with no evidence) that: “Spanish silver … appears to have played little or no part before 1630 and a very limited one thereafter.”[62]  That statement, however, is simply untrue.  For, as Challis (1975) has demonstrated, four of the five extant “Melting Books,” tabulating the sources of bullion for London’s Tower Mint, between 1561 and 1599, indicate that Spanish silver accounted for proportions of total bullion coined that ranged from a low of 75.0% (1561-62) to a high of 86.3% (1584-85).  The “melting books” also indicate that almost all of the remaining foreign silver bullion brought to the Tower Mint came from the Spanish Habsburg Low Counties (the southern Netherlands, which the Spanish had quickly reconquered).[63]  Furthermore, if we ignore the mint outputs during the Great Debasement (1542-1553) and during the Elizabethan Recoinage (1561-63), we find that the quantity of silver bullion coined in the English mints rose from a quinquennial mean of 1,089.012 kg in 1511-15 (at the onset of the Price Revolution) to a peak of 18,653.36 kg in 1591-95, after almost four decades of stable money: a 17.13 fold increase.  Over this same period, the proportion of the total value of the aggregate mint outputs accounted for by silver rose from 12.32% to 90.35% — and (apart from the Great Debasement era) without any significant change in the official bimetallic ratio.[64]

Those economists who favor the Monetary Approach to the Balance of Payments Theorem in explaining inflation as an international phenomenon would contend that we do not have to explain any specific bullion flows between individual countries, and certainly not in terms of a Hume-Turgot price-specie flow mechanism.[65]  In essence, this theorem states that world bullion stocks (up to 1914, with a wholesale shift to fiat money) determine the overall world price level; and that individual countries, through international arbitrage and  the “law of one price,” undergo the necessary adjustments in establishing a commensurate domestic price level and the requisite money supply (in part determined by changes in private and public credit) — not just through international trade in goods and services, but especially in capital flows (exchanging assets for money) at existing exchange rates, without specifically related bullion flows.

Nevertheless, in the specific case of sixteenth century England, we are naturally led to ask:  where did all this silver come from; and why did England shift from a gold-based to a silver-based economy during this century?   More specifically, if Nicholas Mayhew (1995) is reasonably close in his estimates of England’s Y = Gross National Income (Table I, p. 244), from 1300 to 1700, as measured in the silver-based sterling money-of-account, that it rose from about  £3.5 million pounds sterling in 1470 (with a population of 2.3 million) to £40.88 million pound sterling in 1670 (a population of 5.0 million) — an 11.68-fold increase — then we again may ask this fundamental question.   Where did all these extra pounds sterling come from in maintaining that latter level of national income?   Did they come from an increase in the stock of silver coinages, and/or from a vast increase in the income velocity of money?  Indeed that monetary shift from gold to silver may have had some influence on the presumed increase in the income velocity of money since the lower-valued silver coins had a far greater turnover in circulation than did the very high-valued gold coins.[66]

 Statistical Measurements of the Impact of Increased Silver Supplies: Bimetallic Ratios and Inflation

There are two other statistical measures to indicate the economic impact within Europe itself of the  influx of South German and then Spanish American silver during the Price Revolution era, i.e., until the 1650s.  The first is the bimetallic ratio.  In England, despite the previously cited evidence on its relative stability in the sixteenth-century, by 1660, the official mint ratio had risen to 14.485:1 (from the low of 10.333:1 in 1464).[67]  In Spain, the official bimetallic ratio had risen from 10.11:1 in 1497 to 15.45:1 in 1650; and in Amsterdam, the gold:silver mint ratio had risen from 11.21 in 1600 to 13.93:1 in 1640 to 14.56:1 in 1650.[68]  These ratios indicate that silver had become relatively that much cheaper than gold from the early sixteenth to mid-seventeenth century; and also that, despite very significant European exports of silver to the Levant and to South Asia and Indonesia in the seventeenth century, Europe still remained awash with silver.[69]  At the same time, it is also a valid conjecture that the greatest impact of the influx of Spanish American silver (and gold) in this era was to permit a very great expansion in European trade with Asia, indeed inaugurating a new era of globalization.

The second important indicator of the change in the relative value of silver is the rise in the price level:  i.e., of inflation itself.  As noted earlier, the English CPI experienced a 6.77-fold from 1511-15 to 1646-50, at the very peak of the Price Revolution; and the Brabant CPI experienced a 7.36-fold rise over the very same period (expressed in annual means per quinquennium).[70] Since these price indexes are expressed in terms of silver-based moneys-of-account, that necessarily meant that silver, gram per gram, had become that much cheaper in relation to tradable goods (as represented in the CPI) — though, as noted earlier, the variations in the rates of change in these CPI are partly explained by differences in their respective coinage debasements.

A Comparison of the Data on Spanish-American Mining Outputs and Bullion Imports (into Seville)

Finally, how accurate are Hamilton’s data on the Spanish-American bullion imports?   We can best gauge that accuracy by comparing the aggregate amount of fine silver bullion entering Seville with the now known data on the Spanish-American silver-mining outputs, for the years for which we have data for both of these variables: from 1551 to 1660.[71]  One will recall that the Potosi mines were opened only in 1545; and those of Zacatecas in 1546; and recall, furthermore, that production at both began to boom only with the subsequent application of the mercury amalgamation process (not fully applied until the 1570s).  The comparative results are surprisingly close.  In that 110-year period permitting this comparison, total imports of fine silver, according to Hamilton, amounted to 16,886,815.3 kg; and the combined outputs from the Potosi and Zacatecas mines was very close to that figure: 17,057,938.2 kg.[72]  It is also worth noting that the outputs from the Spanish-American mines and the silver imports both peak in the same quinquennium: 1591-95, when the annual mean mined silver output was 219,457.4 kg and the annual mean silver import was 272,704.5 kg.  By 1626-30, the mean annual mined output had fallen 18.7% to 178,490.0 kg and the mean annual import had fallen even further, by 24.7%, to 206,045.26 kg (both sets of data indicate that the silver imports for these years were not based just on these two mines).  Thereafter, the fall in imports is much more precipitous: declining by 86.4%, to an annual mean import of just 27,965.33 kg in the final quinquennium of recorded import data, in 1656-60.  The combined mined output of the Potosi and Zacatecas mines also fell during this very same period, but not by as much: declining by 27.1%, with a mean output of 130,084.23 kg in 1656-60: i.e., a mean output that was 4.65 times more than the mean silver imports into Seville in that quinquennium.

The decline in the Spanish-American mining outputs of silver can be largely attributed to the expected rate of diminishing returns in a natural-resource industry without further technological changes.  The differences between the two sets of data, on output and imports, were actually suggested by Hamilton himself (even though he lacked any knowledge of the Spanish-American production figures for this era): a higher proportion of the silver was being retained in the Spanish Americas for colonial economic development, and also for export (from Acapulco, in Mexico) across the Pacific to the Philippines and China, principally for the silk trades.  Indeed, as TePaske (1983) subsequently demonstrated, the share of pubic revenues of the Viceroyalty of Peru retained for domestic development rose from 40.8% in 1591-1600 to a peak of 98.9% in 1681-90.  We have no comparable statistics for the much less wealthy Mexico (in New Spain); but TePaske also supplies data on its silver exports to the Philippines. Those exports rose from an annual mean of 1,191.2 kg in 1591-1600 (4.8% of Mexican total silver outputs) to a peak of 9,388.2 kg in 1631-40 (29.6% of the total silver outputs).  Though declining somewhat thereafter, such exports then recovered to 4,990.0 kg in 1681-90 (29.0% of the total silver outputs).[73]

 The Morineau Challenge to Hamilton’s Data: Speculations on Post-1660 Bullion Imports and Deflation

Hamilton’s research on Spanish-American bullion imports into Seville ceased with the year, 1660, because that latter date marked “the termination of compulsory registration of treasure” at Seville.[74] Subsequently, the French economic historian Michel Morineau (1968, 1985) sought to remedy the post-1660 lacuna of bullion import data by extrapolating statistics from Dutch gazettes and newspapers.  In doing so, contended that Spanish-American bullion imports strongly revived after the 1660s, a view that most historians have uncritically accepted.[75]  But his two publications on this issue present a number of serious problems.  First, there is the problem of comparing Spanish apples (actual data on bullion imports) with Dutch oranges (newspaper reports, many being speculations).  Second, the statistics in the two publications differ strongly from each other.  Third, except for one difficult-to-decipher semi-logarithmic graph, they do not provide specific data that allow us to distinguish clearly between gold and silver imports, either by weight or value.[76]  Fourth, the statistics on bullion imports are vastly larger in kilograms of metal than those recorded for Spanish American mining outputs, and also differ radically in the trends recorded for the Spanish-American mining output data.[77]

Nevertheless, these Spanish American mining output data do indicate some considerable recovery in production in the later seventeenth century.  Thus,  while the output of the Potosi mines continued to fall in the later seventeenth century (to a mean of 56,884.9 kg in 1696-1700, and to one of just 30,990.86 kg in 1711-15), those at Zacatecas recovered from the low of 26,373.4 kg in 1656-60 to more than double, reaching an unprecedented peak of 64,139.87 kg in 1676-80.  Then, shortly after, a new and very important Mexican silver mine was developed at Sombrerete, producing an annual mean output of 30,492.83 kg in 1681-85.  Thus the aggregate (known) Spanish-American mining output rose from a low 101,533.96 kg in 1661-65 (mean annual output) to a high of 143,212.93 kg in 1686-90: a 1.41-fold increase.[78]

Whatever are the actual figures for the imports of Spanish-American silver between the 1660s and the 1690s, we are in fact better informed about the export of precious metals, primarily silver, by the two East India Companies: in those four decades, the two companies exported a total of 1,3345,342.0 kg of fine silver to Asia.[79]  An indication of some relative West European scarcity of coined silver money, from the 1660s to the 1690s, can be found in the Consumer Price Indexes for both England and Brabant.  In England, the quinquennial mean CPI (1451-75=100) fell from the Price Revolution peak of 734.39 in 1646-50 to a low of 547.58 in 1686-90: a fairly dramatic fall of 25.43%.  By that time, however, the London Goldsmiths’ development of deposit and transfer banking, with fully negotiable promissory notes and rudimentary paper bank notes, was providing a financial remedy for any such monetary scarcity — as did the subsequent vast imports of gold from Brazil.[80] Similarly, in Brabant, the quinquennial mean CPI (1451-75=100) fell from the aforementioned peak of 1015.138 in 1646-50 to a low of 652.217 — an even greater fall of 35.8% — similarly in 1686-90.  In Spain (New Castile), the deflation commenced somewhat later, according to Hamilton (1947), who, for this period, used a CPI whose base is 1671-80=100.  From a quinquennial mean peak of 103.5 in 1676-80 (perhaps reflecting the ongoing vellon inflation), the CPI fell to a low 59.0 in 1686-90 (an even more drastic fall of 43.0%): i.e., the very same period for deflationary nadir experienced in both England and Brabant.

These data are presented in Hamilton’s third major monograph (1947), which appeared thirteen years later, shortly after World War II, covering the period 1651-1800: in Table 5, p. 119.  In between these two, Hamilton (1936), published his second monograph: covering the period 1351-1500 (but excluding Castile)  One might thus be encouraged to believe that, thanks to Hamilton, we should possess a continuous “Spanish” price index from 1351-1800.  Alas, that is not the case, for Hamilton kept shifting his price-index base for each half century over this period, without providing any overlapping price indexes or even similar sets of prices (in the maravedís money-of-account) to permit (without exhaustive labor) the compilation of such a continuous price index.[81]  That, perhaps, is my most serious criticism of Hamilton’s scholarship in these three volumes (though not of his journal articles), even if he has provided an enormous wealth of price data for a large number of commodities over these four and one-half centuries (and also voluminous wage data).[82]

 Supplementary Criticisms of Hamilton’s Data on Gold and Silver Imports

One of the criticisms leveled against Morineau’s monetary data — that they do not allow us to distinguish between the influxes of gold and silver — can also be made, in part, against Hamilton’s 1934 monograph. The actual registrations of Spanish American bullion imports into Seville, from 1503 to 1660, were by the aggregate value of both gold and silver, in money-of-account pesos that were worth 450 marevedis, each of which represented 42.29 grams pure silver (for the entire period concerned, in which, as noted earlier, no silver debasements took place).  Those amounts, for both public and private bullion imports, are recorded in Table 1 (p. 34), in quinquennial means.  His Table 2 (p. 40) provides his estimates — or speculations — of the percentage distribution of gold and silver imports, by decade, but by weight alone: indicating that from the 1530s to the 1550s, about 86% was in silver, and thereafter, to 1660, from 97% to 99% of the total was consistently always in silver.[83]  His table 3 (p. 42) provides his estimate of total decennial imports of silver and gold in grams.  What is lacking, however, is the distribution by value, in money-of-account terms, whether in maravedís, pesos, or ducats (worth 375 maravedís).  Since these money-of-account values remained unchanged from 1497 to 1598, and with only a few changes in gold thereafter (to 1686), Hamilton should have calculated these values as well, utilizing as well his Table 4 gold:silver bimetallic ratios (p. 71).  Perhaps this is a task that I should undertake — but not now, for this review.  A more challenging task to be explored is to analyze the impact of gold inflows, especially of Brazilian gold from the 1690s, on prices that are expressed almost everywhere in Europe in terms of a silver-based money of account (e.g., the pound sterling).  Obviously one important consequence of increased gold inflows was the liberation of silver to be employed elsewhere in the economy: i.e., effectively to increase the supply of silver for the economy.

At the same time, we should realize that the typical dichotomy of the role of the two metals, so often given in economic history literature — that gold was the medium of international trade while silver was the medium of domestic trade — is historically false, especially when we view Europe’s commercial relations with the Baltic, Russia, the Levant, and most of Asia.[84]

Conclusions

EH.Net’s Classic Reviews Selection Committee was certainly justified in selecting Hamilton’s _American Treasure and the Price Revolution in Spain, 1501-1650_ as one of the “classics” of economic history produced in the twentieth century; and Duke University’s website (see note 1) was also fully justified in declaring that Hamilton was one of the pioneers of quantitative economy history.  In his preface, Hamilton noted (p. xii) that he and his wife spent 30,750 hours in collecting and processing this vast amount of quantitative data on Spanish bullion imports and prices and wages, “entirely from manuscript material,” with another 12,500 hours of labor rendered by hired research assistants — all of this work, about three million computations, done without electronic calculators, let alone computers.  Who today would even contemplate undertaking such an enormous task without powerful modern computers and a bevy or research assistants?  For this task, this truly pioneering task, Hamilton deserves full praise.

How much praise does he deserve for the goals that he pursued?  In his introduction he expressed his hope that all these data “may afford a partial verification of the quantity theory and also throw new light upon the related question of the connection between prices and the supply of precious metals;” but he also stated (pp. 4-5) that “the last lesson concerning the quantity theory has not been drawn from this phenomenon; nor is the final word likely to be spoken before greater knowledge of the history of banking and the contemporary influence of credit on prices becomes available.”

As I have sought to demonstrate in this review, necessarily with very detailed evidence, Hamilton did achieve this more modestly defined goal, certainly as well as any pioneering economic historian could have been expected to achieve in the 1930s.  Of course, a contemporary economic historian, utilizing the vast amount of research conducted on these questions in the past seventy years, and using much more sophisticated techniques of economic analysis and econometrics would have produced a very different book — but possibly one lacking Hamilton’s own insights.  Given the current disfavor into which even the more refined, modern version of the Quantity Theory has fallen, the major goal of this review has been to demonstrate at least a qualified validity of this approach to understanding inflations and deflations, and the Price Revolution in particular.  Thus the complementary goal has been to rescue Hamilton’s reputation, given in particular his frequent use of infelicitous phrases, such as the statement that “American gold and silver precipitated the Price Revolution,” which Hamilton himself demonstrated was clearly not the truth.  Finally, given the enormous importance of the Price Revolution — a truly unique historical experience — in shaping the economy and society of early-modern Europe, and in establishing a more truly global economy, I have also sought to supply data unavailable to Hamilton in demonstrating how and why the behavior of prices during the Price Revolution era was related to the complex combination of changes in the money supplies (including credit), changes in the income velocity of money, and changes in national incomes; and also to explain why (as Hamilton did not) inflation in the Price Revolution era was an international (or at least a European-wide) phenomenon.

 A Biographical Note on Hamilton:[85]

Earl Jefferson Hamilton (1899-1989), born in Houlka, Mississippi, received his B.S. (Honors) from Mississippi State University in 1920; his M.A., from the University of Texas in 1924; and his Ph.D., from Harvard University in 1929.  He was an Assistant Professor of Economics at Duke University from 1927 to 1929, and then Professor of Economics there until 1944, when he became Professor of Economics at Northwestern (to 1947), and finally Professor Economics at the University of Chicago, until retiring in 1967.  He was also the editor of the _Journal of Political Economy_ from 1948 to 1954; and he served as President of the Economic History Association in 1951-52.

Notes:

1. URL: http://www.scriptorium.lib.duke.edu/economists/hamilton/hama.htm. See also the University of Chicago Library, Special Collections Research Center, Guide to the Earl J. Hamilton Papers:

http://marklogic.lib.uchicago.edu:8002/view.xqy?id=ICU.SPCL.HAMILTON&c=h.

And also on EH.Net: http://www.eh.net/pipermail/hes/1996-October/005291.html

2. The prices for individual commodities for each year, from 1501 to 1650, are given in Hamilton (1934), Appendices III-V, pp. 319-58; wages, in Appendix VII, pp. 393-402.

3. For my publications on the Price Revolution, see Munro (1991, 1994a, 1998, 2003a, 2003b, 2004, and 2007 forthcoming). The non-monetary variable is “y,” in the modernized version of the Fisher Identity: MV. = Py; and in the Cambridge Cash Balances equation: M = kPy. It is also the deflated or “real” Keynesian Y = NNI = NNP.

4. See my online review online review: http://eh.net/bookreviews/library/0146.shtml, 24 February 1999, of Fischer (1996).

5. Smith (1776/1937), pp. 191-92. Hamilton might have better cited Smith’s passage on p. 34: “The discovery of the mines of American diminished the value of gold and silver in Europe” (i.e. as expressed in silver-based money-of-account prices); and also other similar passage on pp. 198, 236, 241, and 415-16.

6. See Spufford (1988), chapter 13, “The Scourge of Debasement,” pp. 289-318; Munro (1973); and the various studies in Munro (1992).

7. Both published in Le Branchu (1934) and Moore (1946).

8. Grice-Hutchinson (1952), Appendix III, p. 95.

9. For Spain: Hamilton (1934), Appendix VIII, p. 403; for Brabant, Van der Wee (1975), pp. 413-47; for southern England: Phelps Brown and Hopkins (1956, 1981). Using the Phelps Brown worksheets, now housed in the Archives of the British Library for Political and Economic Sciences (LSE), I have corrected many of their statistical data.

10. By constructing various hypothetical “trial” budgets, Hamilton (1934, pp. 273-79) hypothesized that his unweighted index numbers may have underestimated rises in the cost of living by perhaps as much as ten percent in the later sixteenth century, but by perhaps only two percent in the first half of the seventeenth century. See also Hamilton (1947), pp. 113-14, where he more explicitly states: “The contemporaneous account books have failed to yield an inductive basis for weighting the index numbers of commodity prices, and it seemed unlikely that any system of arbitrary weights would give me more accurate results than simple indices. A detailed comparison of unweighted and crudely-weighted index numbers for New Castile in 1651-1700 tended to confirm this hypothesis.”

11. From 1497 to 1686, the Spanish crown consistently minted (with one exceptional, minor deviation in 1642-43) two silver coins at 93.06 percent fineness: the _Real_, with 3.195g pure silver (67 cut from an alloyed marc of 230.0465 g., with a silver fineness of 11 _dineros_ and 4 grains = 93.056%) and a nominal money-of-account value of 34 maravedís (375 to the ducat money of account; 350 to the peso money of account). In fact, it differed from the earlier _Real_ , struck from 1471, only in its money-account-value, having been raised from 31 to 34 maravedís. Also struck from 1497 was the heavy-weight Real known as the “piece of eight” (real de a ocho), with just over eight times as much fine silver, 25.997 g, and a value of 272 maravedís. In 1686, it was subjected to a very minor weight reduction that reduced its fine silver content to 25.919 g.  The American dollar can trace its descent from this Spanish coin.  Hamilton (1934), chapter III, pp. 46-72; Hamilton (1947), chapter II, pp. 9-35; Ulloa (1975); Motomura (1994, 1997); Munro (2004a), Vol. 4, pp. 174-84.

12. See Challis (1971, 1978, 1989, 1992a, 1992b); Gould (1970).

13. Van der Wee (1963), Vol. I, pp. 126-29.

14. Hamilton (1934): Chapter IV: “Vellon Inflation in Castile, 1598-1650,” pp. 73-103; and Chapter X: “Prices under Vellon Inflation, 1601-1650,” pp. 211-21.

15. Munro (1988), pp. 387-423: especially for the debasement formula. In medieval and early-modern Flanders the silver penny _groot_ was divided into 24 _mijten_ or _mites_, almost entirely copper in composition.

16. Spooner (1972), Appendix A, p. 332; Challis (1992a), pp. 365-78; Challis (1992b), p. 689.

17. The silver fineness was based on theoretical purity of 12 _dineros_, with 24 grains each, and thus a total of 288 grains. The weight was defined as the number cut from an alloyed marc of 230.0465 grams. See n. 11 above.

18. Hamilton (1934), pp. 49-64.

19. Hamilton (1934), p. 74.

20. Cipolla (1956). He states (p. 27): “Every elementary textbook of economics gives the standard formula for maintaining a sound system of fractional money: [1] to issue on government account small coins having a commodity value lower than their monetary value; [2] to limit the quantity of these small coins in circulation; [3] to provide convertibility with unit money. … Simple as this formula may seem, it took centuries to work out.  In England, it was not applied until 1816, and in the United States it was not accepted before 1853.” Cipolla (p. 29) cites a seventeenth-century Italian treatise, by Geminiano Montanari (a mathematics professor at Padua), who had stated that: “it is not necessary for a prince to strike petty coins having a metallic content equal to their face value, provided [that] he does not strike more of them than is sufficient for the use of his people, sooner striking too few than striking too many.”

21. Sargent and Velde (2002). The title of their book is adapted from the title of chapter 3 in Carlo Cipolla’s book (cited in the previous note): “The Big Problems of the Petty Coins,” pp. 27-37. Sargent and Velde do cite my article on “Deflation and the Petty Coinage Problem” (in n. 15 above), in which I supplied statistical evidence from the Flemish mint accounts, from 1334 to 1484 that the Flemish counts and the Burgundian dukes who succeeded them were always careful to restrict the supply of the petty, copper-based coinages, which rarely accounted for more than 2% of mint outputs by value, during this entire era.

22. Hamilton (1934), p. 75. A marc of copper was worth 34 maravedís.

23. On the _vellon_ based inflation in seventeenth-century Spain, see Sargent and Velde (2002), chapter 14, pp. 230-53; Motomura (1994), pp. 104-27; Motomura (1997), pp. 331-67; Spooner (1972), pp. 41-53 (and for western Europe in general).

24. See n. 15 above.

25. See Munro (2003a): Table 1.2, pp. 4-5: extrapolated from data in Hamilton (1934), Table 1, p. 34, Table 2, p. 40, Table 3, p. 42; and Hamilton (1929a), pp. 436-72.

26. These mining output data do not come from Hamilton, but rather from these following sources: Bakewell (1975), pp. 68-103; Bakewell (1984), pp. 105-51; Garner (1987), pp. 405-30; and Cross (1983), pp. 397-422. The only Spanish-American mining data available to Hamilton was Haring (1915), pp. 433-79, which he cited, but did not use.

27. Spooner (1972), p. 36.

28. See in particular Outhwaite (1982), especially pp. 39-57; and also the introduction and many of the essays in Ramsay (1971), in particular Hammarström (1957) and Brenner (1961). See also the rather hostile review of this collection by McCloskey (1972), pp. 1332-35. Brenner makes the fundamental error in not treating the Fisher Identity in aggregate terms, and thus talking about a relative (i.e., per capita) diminution in Q (= T, or “y”) that presumably resulted from population growth.  Many of the authors engage in another error, one scorned by Anna Jacobson Schwartz (1974), who, in a review of Spooner (1972), p.  253, comments that: “the author subscribes to a familiar fallacy, namely that a monetary explanation to be valid requires that all prices move in unison.”  On this very common error, see Munro (2003c); and n. 58 below.

29. For those favoring the lower bound estimate for 1300 (4.0 to 4.5 million), see Campbell, Galloway, Keene and Murphy (1993); Campbell (2005); Nightingale (1996); Nightingale (1997); Nightingale (2005); Russell (1966); and Harvey (1966). For those favoring the upper-bound estimate (6.0 to 7.0 million), see Postan (1950); Hatcher (1977); Hallam (1988); Mayhew (1995); and Dyer (1989). For population estimates in the early sixteenth century, see Cornwall (1970); and Campbell (1981).

30.Cuvelier (1912), vol. I, 432-33, 446-47, 462-77, 484-87; and also pp. cxxxv, clxxvii-viii, and ccxxiii-xviii.

31. Van der Wee (1963), Vol. I: Appendix 49/1, p. 546. In comparison, the average annual rate of population decline from 1480 to 1496 was -0.81%.

32. There is yet another explanation why agrarian prices rose more than did most industrial prices: a household budget constraint, when agricultural prices and the CPI rose more than did money wages, as was almost always the case in the sixteenth century. Thus the share of disposable income spent on foodstuffs (and fuels) would have necessarily reduced the share of such income to be spent on other commodities, and thus the relative demand for most other industrial products. At the same time, most labor-intensive industries, with elastic supply schedules, could have readily hired more labor to expand output without experiencing significant rises in marginal costs, when wages were rising so much less than most commodity prices.  See my online 2006 Working Paper: “Real Wages and the ‘Malthusian Problem’ in Antwerp and South-Eastern England, 1400-1700: A Regional Comparison of Levels and Trends in Real Wages for Building Craftsmen.”

http://repec.economics.utoronto.ca/repec_show_paper.php?handle=tecipa-225

33. Mean annual imports of fine gold rose from 517.24 kg in 1503-05 to 865.93 kg in 1526-30. See n. 25 above, and also Hamilton (1934), p. 45, on the role of gold. For somewhat different figures, but in decennial means, see TePaske (1998).  His estimates of decennial mean New World gold outputs (per year) are 1,209.8 kg in 1501-10 and 1,071.1 kg in 1511-20.  Hamilton, however, made no mention of the much more important Portuguese imports of West African gold: about 17 metric tons, from Sao Jorge da Mina, from about 1460 to 1520 (when other sources of gold, in Africa and Brazil, became more important.  See Wilks (1993).

34. Adolf Soetbeer (1879); and Wiebe (1995), especially pp. 253-321. See the tables on German silver production from 1493 to 1700, on pp. 265 and 267, based on Soetbeer.

35. Nef (1941, 1952).

36. Nef (1941) estimates that aggregate European silver mining outputs in the peak decade 1526-1535 (in his view) ranged between 84,200 kg to 91,200 kg per year.

37. See my own publications in n. 3, above; and also Munro (2007b). See also Hatcher (1996) and Nightingale (1997).

38. See Munro (2003a), Table 1.3, p. 8; and Munro (2007b). By far the most important of the new mines was Joachimsthal in Bohemia (from 1516), which reached its peak production in 1531-35, with a quinquennial mean production of 16,554.81 kg of fine silver.

39. See Munro (2003a), Table 1.2, pp. 4-5, based in part on Hamilton (1934).

40. The ratio was altered from 11.98:1 to 10.83:1 (June 1466), while in England, it was altered in the opposite direction, to become pro-gold: from 10.33:1 to 11.16:1. See Munro (1973), pp. 155-80, 198-211, Tables C-K; and Munro (1983), Table 10, pp. 150-52; Van der Wee (1963), Vol. I, pp. 126-28, Table XV; Vol. II, pp. 80-101.

41. See Munro (2003a), Table 1.4, pp. 12-13.

42. See Munro (2003a), Table 1.7, p. 26, based on Van der Wee (1963), Vol. I, Appendix 44, pp. 522-23.

43. See Munro (1979, 1992); Spufford (1988), pp. 240-66.

44. See Van der Wee (1967, 1977, 2000); Munro (1979, 1991b, 2000, 2003d).

45. See Statutes 37 Henrici VIII, c. 9 of 1545, permitting interest up to 10%; repealed by 5-6 Edwardi VI, c. 20 in 1552, which was in turn repealed in 1571 by 13 Elizabeth I, c. 8, which thus restored 37 Hen. VIII, c. 9, in _Statutes of the Realm_, vol. III, p. 996; and IV.i, pp. 155 and 542, respectively.

46. See Van der Wee (1967, 1977, 2000), and other sources cited in notes 43 and 44.

47. See Munro (2003d); Tracy (1985, 1994, 2003).

48. Van der Wee (1977), pp. 373-76, Table 28. See also Usher (1943), Table 7, p. 169, using older data, which shows a rise in the Spanish funded debt from 4.320 million ducats in 1515 to one of 76.540 million ducats in 1598; and also Spooner (1972), pp. 56-57: “Wherever data [on public borrowing] are available they show that the expansion was certainly spectacular”: in Rome, France, the Low Countries, Germany. In Antwerp, Charles V’s loans rose from about £1.0 million groot Flemish in the 1520s to about £7.0 million in 1557 (on the eve of the Spanish royal bankruptcy). In Genoa, the issue of civic bonds rose from 193,185 _luoghi_ in 1509 to about 500,000 _luoghi_ in 1560 (p.  66).

49. Van der Wee (1977), pp. 375-76; and see the other sources cited in n. 44 above.

50. Spooner (1972), pp. 4, 54-55, stating that: “The structure of credit was, in effect, supported by progressive increases in the stocks of precious metals.” Very similar observations have been made in Nightingale (1990), Mueller (1984), Spufford (1988), p. 347: commenting that “when money [coined specie] is freely available, credit is also; when money is scarce, so is credit.”

51. The title of Hamilton’s Chart 20 (p. 301) is “Total Quinquennial Treasure Imports and Composite Index Numbers of Commodity Prices.”

52. Hammarström (1957). Her other criticisms of Hamilton’s scholarship strike me as being unfounded and thus unfair.

53. Many, many years ago, one of my graduate students did run regressions involving both annual values of treasure imports and estimates of residual Spanish stocks of bullion, and achieved better results (high R-squared and better t-statistics) with the latter regressions.

54. See I. Fisher (1911). The only reference in Hamilton (1934, p. 5, n.6) or in his other publications, to this famous economist is I. Fisher (1927), on index numbers.

55. For various reasons, too complex to discuss here, I prefer to use the Gross National Product – as many economic historians, in fact do, in the absence of reliable figures for Net National Product.

56. Mayhew (1995), p. 240, states that: “My own investigation of velocity in the medieval period up to 1300 also suggests that in periods of growth in terms of money, prices, and economic activity, velocity may be expected to fall rather than rise. … It will be argued here [in this article] that velocity does not rise with increasing urbanization and monetization. Indeed, the increasing use of money usually seems to require an enlarged money supply which will actually permit a reduction in velocity rather than an increase.” His intriguing and exceptionally important article makes some very heroic assumptions about the levels of NNI and of M (the money supply) over this long period, not all of which will earn general consent.

57. See n. 79 below, and also Munro (2007b).

58. See Gould (1964): who contended that inflation itself promoted capital investment during the Price Revolution era by cheapening the cost of previously borrowed capital: i.e., the relative cost of annual interest payments and repayment of the principal. Gould, however, was one of the critics of the Hamilton thesis; and also one of those who promoted the fallacy that the validity of a monetary interpretation would require that all prices move in unison (p. 251). See Schwartz (1974) in n. 28 above.

59. The period of England’s “Great Debasement,” 1542 – 1553, was however, surprisingly, not one such example — nor can any be cited in English monetary history (in contrast to medieval French monetary history). As noted earlier, during the “Great Debasement,” the English penny lost 83.1% of it silver content. The formula for relating a debasement to the potential rise in prices (or the rise in the money-of-account price of silver) is: [ (1 / (1 – x) ] – 1, in which x represents the percentage reduction of fine silver in the penny coin and in the linked money-of-account (sterling). By this formula, prices should have risen by 491.72%; but they did not.  The Phelps Brown and Hopkins (1956) CPI rose from a quinquennial mean of 152.33 in 1536-40 to one of 315.85 in 1556-60: an increase of only 107.34%. See also Gould (1970) and Challis (1971, 1978, 1989, 1992a, 1992b).

60. For shipments of Spanish silver to pay Charles V’s bankers in Antwerp and Genoa, see Spooner (1972), pp. 22-24.

61. See Hamilton, pp. 44-45: but the analysis and evidence is very thin. On p. 19, he states more explicitly that “In view of the popular misconceptions concerning the amounts of treasure taken by the English, French, and Dutch, one who works with the records is impressed by the paucity rather than the plethora of the specie that fell prey to foreign powers.” See also Hamilton (1929a), pp. 436-72.

62. Outhwaite (1982), pp. 31, 36. He is referring to the Anglo-Spanish trade treaty of 1630.

63. Challis (1975). One other account, for June to December 1567 is incomplete, and does not provide the amount of bullion coined, though indicating that Spanish silver may have accounted for only 7.4% of such bullion. Surprisingly, this seminal article is not mentioned in Outhwaite’s second edition of 1982, referring only to Challis (1978).  See also Challis (1984).

64. The bimetallic ratio in 1526-42 was 11.16:1, as it had been from 1465; in 1600, the bimetallic ratio was 11.10:1. For the mint data, see Challis (1978, 1989, 1992a, 1992b).

65. See Flynn (1978), D. Fisher (1989), Frenkel and Johnson (1976), McCloskey and Zecher (1976), and Floyd (1985).

66. In the sixteenth century, apart from the Great Debasement period (1542-1553), gold coins varied in official value from the sovereign worth 20s or £1 (=240d) to the half crown, worth 2s 6 (=30d). The silver coins varied from the farthing (0.25d) to the groat (4d). On this very point about varying circulation velocities on the coinages, see Spooner (1972), p. 74.

67. My own calculations of the official bimetallic mint ratios indicate a rise from 12.109 in 1604 to 13.363 in 1612 to 13.348 in 1623 to 14.485 in 1660 to 15.210 in 1718 (remaining at this level until 1815). Based on data supplied in Challis (1992b), pp. 673-98.

68. Hamilton (1934), Table 4, p. 71.

69. The Dutch East India Company’s exports of fine silver rose from an annual mean 6,959.7 kg in 1600-09 to a mean of 11,563.7 kg in 1660-69. Gaastra (1983), pp. 447-76, especially Appendix 5, p. 475. Spooner (1972), pp. 76-77 and Chart 11, has estimated that Venetian silver exports to the Levant in 1610-14 amounted to 6% of the total Spanish-American silver bullion imports into Seville during those years.

70. See note 9 above for the statistics (for a base of 1501-10), and the sources used to compute the three sets of CPI. If we use the Phelps Brown and Hopkins base (1451-75=100), instead of the earlier base for 1501-10 (to include Spanish prices), we find that the English weighted CPI rose from an annual mean of 108.52 in 1511-15 to one of 734.19, at the peak of the Price Revolution, in 1646-50: an overall rise of 6.77 fold. Similarly, in Brabant, the Van der Wee CPI rose from an annual mean of 137.904 in 1511-15 to one of 1015.14 in 1646-50, also the peak of the Price Revolution in Brabant: an overall rise of 7.36 fold.

71. See note 74, below, for the termination date.

72. See Munro (2003a), Table 1.2, pp. 4-5: and the sources cited in notes 24 and 25 above. In the period 1521 to 1550, total silver imports into Seville amounted to just 263,915.8 kg. During the period from 1551 to 1660, a total of 122,902.24 kg of gold was also imported.

73. TePaske (1983), Tables 2-5, pp. 442-45.

74. Hamilton (1934), p. 11, note 1. Most economic historians have wrongly assumed that Hamilton was forced to end his research on bullion imports with the outbreak of the Spanish Civil War in 1936 — an argument obviously refuted his earlier articles of 1928, 1929a, in which bullion import data cease in 1660.

75. Morineau (1968), p. 196; Morineau (1985), especially Table 83, p. 578; Figure 38, p. 579; Table 84, pp. 580-83; Figure 39, p. 585.

76. Morineau (1985): except for the semi-logarithmic graph, Figure 39, on silver imports and exports, which is very difficult to decipher; and it certainly does not allow to attribute actual values to the small-scale bar chart lines. His Figure 37, p. 563, with imports in millions of pesos, also has estimations for the period 1630-56, not indicated as such in the other tables and graphs.

77.The title of his 1986 monograph, _Incroyables gazettes et fabuleux métaux_ seems, in retrospect, to be ironic.  In Morineau (1968), the data presented on p. 196, evidently for the total value of bullion imports in each quinquennium, even when divided by 5, to produce annual means, exceed the data on mined outputs from a minimum of 12.12-fold  to a maximum of 41.07-fold.  In Morineau (1984), Table 83, p. 578, presents decennial means of bullion imports, expressed as equivalent amounts of silver, that, for the period from 1660 to 1700, range from being 3.653 times to 18.684 times greater than the recorded aggregate mined outputs of Spanish-American silver.  (See also his bar-graph, Figure 37, on p. 563, displaying in five-year periods — totals or annual means? — the values of “treasure” imports, expressed in millions of piastres or pesos: those of 272 maravedís or 450 maravedís?)  Hamilton (1929a, 1934) indicated that, in the seventeenth century, up to the cessation of recorded data, in 1660, almost all the imports were in the form of silver.  The great boom in Brazilian gold exports did not really begin until 1700.  See TePaske (1998), pp. 21-32.

78. See the sources in notes 25 and 26 above. The Sombrerete mining outputs, however, began to fall sharply from the 1680s, reaching a low (quinquennial mean) of 3,957.14 kg in 1716-20. Subsequently, by the mid eighteenth century, Mexico experienced another and very major silver-mining boom: See Brading (1970), Garner (1987).

79. Gaastra (1983), Appendix 5, p. 475; Chaudhuri (1968), pp. 497-98. We have no data on the Dutch Company’s exports of merchandise, but we do for the English East India Company. Between 1660 and 1700, it exported a total of 645,486.0 kg of silver (worth £5,795.793.65) and 21,552.0 kg of gold (worth £2,788.035.34), and a total value of £2,593.114.00 in merchandise.   Thus gold and silver “treasure” accounted for 76.80% of total exports to Asia, and merchandise for 23.20%.  Of the total value of bullion exports, silver accounted for 67.52% and gold for 32.48% of the total value.  (For the long period of 1660-1720, silver accounted from 81.35% and gold for 18.65% of the total values of bullion exports).  In the English East India Company’s early history, however, from 1601 to 1624, it exported a total of £753,336 in precious metals (‘treasure’) and £351,236 in merchandise, for an aggregate export value of £1,104,572, so that precious metals then accounted for a somewhat lower percentage of the total value: 68.20%.  Chaudhuri 1963), p. 24.

80. See TePaske (1998), tables, pp. 21-32.

81. Fortunately, for the book under review (Hamilton 1934), he did provide an Appendix (number VIII, pp. 403-04) for “The Composite Index Numbers of Silver Prices, 1501-1650.”

82. My most serious criticism — and one voiced by many other economic historians — is the one concerning his concept of “profit-inflation,” in Hamilton (1929b). His thesis was warmly endorsed by John Maynard Keynes (1930), the following year, Vol. II, pp. 152–63, especially pp. 154-55: “But it is the teaching of this Treatise that the wealth of nations is enriched, not during Income Inflations but during Profit Inflations — at times, that is to say, when prices are running away from costs.” Keynes in fact really coined this term (so to speak).  Subsequently Hamilton published two more articles on this theme — in 1942, and 1952.  The latter was his Presidential Address to the Twelfth Annual Meeting of the Economic History Association.  Since this concept does not appear in the book under review, it would be unfair to criticize this thesis, here, even if space did permit it.  But I have posted on my web site an unpublished Working Paper, entitled “Prices, Wages, and Prospects for ‘Profit Inflation’ in England, Brabant, and Spain, 1501-1670:  A Comparative Analysis”:

http://www.economics.utoronto.ca/ecipa/archive/UT-ECIPA-MUNRO-02-02.html.  It should be noted, however, that Hamilton (1934) did devote his chapter XII, pp. 262-82, to “Wages: Money and Real” and his Appendix VII (pp.  393-402) is devoted to “Money Wages.”  But space limitations have prevented me from discussing this aspect of his monograph.

83. He warns the reader (p. 40) “that these are estimates based on partial information, into which the determination of arbitrary assumptions of correlations have entered, not exact compilations of complete data.”

84. See notes 79 and 80 above.

85. See note 1.

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Munro (1998), John, “Precious Metals and the Origins of the Price Revolution Reconsidered: The Conjuncture  of Monetary and Real Forces in the European Inflation of the Early to Mid-Sixteenth Century,” in  Clara Eugenia Núñez, ed., _Monetary History in Global Perspective, 1500-1808_, Proceedings of the Twelfth International Economic History Congress at Madrid, August 1998 (Seville, 1998), 35-50.

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Munro (2003c), John, “Wage Stickiness, Monetary Changes, and Real Incomes in Late-Medieval England and the Low Countries, 1300 – 1500:  Did Money Matter?” _Research in Economic History_, 21 (2003), 185-297.

Munro (2003d), John, “The Medieval Origins of the Financial Revolution: Usury, Rentes, and Negotiability,” _The International History Review_, 25:3 (September 2003), 505-62.

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Munro (2007a), John, “The Price Revolution,”  in Steven N. Durlauf and Lawrence  E. Blume, eds., _The New Palgrave Dictionary of Economics_, 2nd edition, 6 vols. (London and New York:  Palgrave Macmillan, forthcoming).

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John Munro is Professor Emeritus of Economics at the University of Toronto, where he has taught since 1968, and where, despite mandatory retirement, he continues to teach a full course load in European economic history, both medieval and modern (to 1914).  His publications, in medieval and early modern economic history, are in two fields: (1) money, prices, and wages; and (2) textiles (including labor history and thus wages), which have predominated in his recent years of published output.  In the first field, his recent publications include “Wage Stickiness, Monetary Changes, and Real Incomes in Late-Medieval England and the Low Countries, 1300-1500: Did Money Matter?” _Research in Economic History_, 21 (2003) and “The Medieval Origins of the Financial Revolution: Usury, Rentes, and Negotiability,” _The International History Review_, 25:3 (September 2003). Forthcoming is the entry on “The Price Revolution,” in Steven N. Durlauf and Lawrence  E. Blume, eds., _The New Palgrave Dictionary of Economics_, second edition.

Copyright (c) 2007 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator (administrator@eh.net; Telephone: 513-529-2229). Published by EH.Net (January 2007). All EH.Net reviews are archived at http://www.eh.net/BookReview.

Published by EH.NET (November 2006)

Leslie Berlin, The Man behind the Microchip: Robert Noyce and the Invention of Silicon Valley. New York: Oxford University Press, 2005. ix + 402 pp. $30 (hardcover), ISBN: 0-19-516343-8.

Reviewed for EH.NET by Rasigan Maharajh, Institute for Economic Research on Innovation, Tshwane University of Technology.

Imagining a world without the advances and advantages offered by the combination of microelectronics, semiconductors and microprocessors into the digitally enhanced space we currently occupy is difficult, if not impossible. While we would readily subscribe to the view that our contemporary ‘brave new world’ is a virtual product of convergent information and communication technologies, very little published research has sought to convey an integrated picture of the evolution of this field.

Leslie Berlin, a Visiting Scholar at the History and Philosophy of Science and Technology Program of Stanford University, has written a compelling and detail-rich study of the famous inventor, entrepreneur and innovator: Robert Noyce. Primarily dependent on interviews with key players in the transistor, microelectronics and semiconductor sectors, this biography has already received positive responses from people familiar with Noyce, as well as academic, industrial and investment stakeholders and role-players.

Berlin’s attempts to portray Robert Noyce through elaborating upon a complex tapestry of anecdotes and primary recollections of actors of the period. The argument that emerges from her assembly of information is that Noyce is “one the most important innovators and entrepreneurs” of the high technology sector in contemporary times. The story that is therefore presented is actually three tales, which combine into an elegant single narrative.

The first story is a biography of Robert Noyce. His family history and early education tells us about growing up in the United States of America during the mid twentieth century. As such the influences of economic, political and social history are well reflected in describing Noyce’s youth and the choices available to him. The strong impact of organized religion is also reflected upon. While it is suggested that this waned towards secularity, insistence by Noyce upon rituals of marriage, his difficulties in contemplating divorce and other cultural norms seem to indicate an enduring influence. Berlin also provides us with insight into Noyce’s early childhood, academic training, the friendships he established with peers across his lifespan, his first and second marriages, and his relationships with his children.

The second story told is one of entrepreneurialism told as business history. Berlin provides us with an integrated and a somewhat linear description of the multiple business interests of Noyce. The latter comment is not intended as criticism, but is reflective of the value of hindsight in most historical writing. Included are the work he did with Philco, Shockley Semiconductor Laboratories, Fairchild Semiconductor, NM Electronics, Integrated Electronics (INTEL) and SEMATECH. Berlin also covers some of the other businesses that Noyce contributed to through venture capital and advice.

The third story is a history of technology. Specifically the book covers the technical artefact: the integrated circuit, the microelectronics and semiconductor industry and their contextual location: Silicon Valley. The first part is captured through technical reviews, patents and laboratory notebooks. Through this survey we are able to recognize the evolution of the various components (sic) which we eventually witness transforming into the fundamental constituents of our current digital world. We are taken through research into technical aspects of this technology cluster ranging from the transistor to the integrated circuit through to the creation of the microprocessor. Again, with the value of retrospection one can discern the increasing levels of complexity and challenges these products generate in the process of producing them. From a technology management perspective, the role of serendipity and plain engineering prowess is also highlighted. The latter is of special interest as Berlin continuously emphasizes this aspect as a critical part of how Noyce invented, innovated and acted entrepreneurially: learning by doing and solving practical problems. With seventeen patents awarded to him and in collaboration with others, Noyce is clearly the poster-person of the technology, the industry and its geographic location.

This method of recognizing constraints, introducing novel materials, and transforming production processes is now well documented through various and multiple studies conducted by the community of scholars concerned with the study of innovation. Leslie Berlin augments and makes a tremendous contribution to this domain by her astute and abundant archival research. This is clearly evidenced in her nearly 130 author interviews, a bibliography including 115 published articles, 9 theses, newspaper reports, articles published by and about Noyce and his patents, videos, oral histories, memoirs and associated histories, congressional testimony and government documents and various websites now collected in a single volume. This collation, therefore, is also the most significant contribution to scholarship.

While this book maintains a quality and flow of narrative that is capable of weaving together the three discrete (and possible stand-alone) stories, it does not engage much into integrating how the subject of the study was himself influenced and affected by what was going on both in the U.S. and globally. The Cold War and Sputnik’s role in catalysing the research enterprise of the military-industrial complex are fleetingly referred to without a distinct feedback loop into how Robert Noyce himself made sense of the world around him. At the personal, the institutional and societal levels the reader may be forced to at best infer the correlation between events and how these shaped the personality of Noyce. The dramatic shift from a form of libertinism displayed early on in his management and organisational styles is contradicted by the lobbying role he would play for the Semiconductor Industrial Association and even at SEMATECH. Similar questions require further attention into the co-evolution of industry, academia and public sector funding that would sustain the phenomenon of Silicon Valley.

The scope of success for any further research into the evolution of this sectoral system of innovation is greatly enhanced by the primary archival collection of Leslie Berlin’s excellent book. This should encourage further research, especially with a more critical eye on the crucial questions of political economy and sociology which are not elaborated upon in this work.

Rasigan Maharajh is Chief Director of the Institute for Economic Research on Innovation (ieri) at Tshwane University of Technology in South Africa and an active member of the Global Network for the Economics of Learning, Innovation and Competence-building Systems (GLOBELICS).

Published by EH.NET (November 2006)

Spencer Weber Waller, Thurman Arnold: A Biography. New York: New York University Press, 2005. xi + 271 pp. $40 (cloth), ISBN: 0-8147-9392-4.

Richard E. Holl, From Boardroom to the War Room: America’s Corporate Liberals and FDR’s Preparedness Program. Rochester, NY: University of Rochester Press, 2005. x + 191 pp. $75 (cloth), ISBN: 1-58046-192-1.

Reviewed for EH.NET by Michael V. Namorato, Department of History, University of Mississippi.

These studies by Spencer Waller and Richard Holl have a number of interesting commonalities: both discuss American business, both address the importance of the New Deal and Franklin D. Roosevelt’s policies, and both analyze how business and the New Deal interacted. They differ primarily in their approaches to these distinct areas of concern. Where Waller writes a biography of Thurman Arnold who was a member of the Department of Justice in the late 1930s, Holl looks at how American corporate businessmen (or liberals, as he calls them) worked with the Roosevelt Administration. Even more interesting is how these very corporate liberals and Thurman Arnold perceived each other.

Waller argues very forcefully that Thurman Arnold was a unique individual in so many ways. He was “in essence the decathlon champion of American law” (p. 2). He was a practitioner, a law school dean, a legal realist, author, New Dealer, creator and enforcer of modern anti-trust laws, a federal judge, a defender of free speech during the McCarthy era, and the founder of one of the most prominent law firms in Washington today. As a person, moreover, Waller paints a picture of this icon as one who liked to be funny, was not much of a father (but made up for it by being a better grandfather), and whose loyalty to his friends, such as Abe Fortas, never wavered.

In reaching these conclusions, Waller meticulously studies Arnold’s life — beginning with his parents, childhood in Wyoming, education at Princeton, and law school at Harvard. An average student, Arnold developed his interests in writing and partying, although, by law school, he focused more and more on the work at hand. As a young lawyer, Arnold went to Chicago where he took on cases that seemed to be routine and not very challenging. When World War I broke out, he served in France after which he and his wife returned to Laramie to set up home and a law practice.

Waller recounts details about Arnold’s life as a small town politician and later dean of the West Virginia College of Law, which helped him to survive the Great Depression. From there, he went to the Yale Law School as a teacher. Waller spends a considerable amount of time discussing how Arnold became a “legal realist” at Yale. He also summarizes in detail Arnold’s writings in such works as The Symbols of Government and The Folklore of Capitalism. Undoubtedly, these exercises in teaching and writing helped prepare him for the later work he would do in the New Deal in the Anti-Trust Division of the Department of Justice.

In Chapter 6, Waller recounts how Arnold got into the New Deal and worked on the enforcement of anti-trust laws, and how Franklin D. Roosevelt responded to what he had done. The author gives long, in-depth explanations of the cases that Arnold pursued — which were won, lost, or had a long-term impact on American jurisprudence. Probably the most significant discussion in these sections recounts how Arnold perceived anti-trust as a means of preventing abuse of power in the business world. Relentless in promoting himself and his causes, Arnold continually lobbied for more staff, resources, and funds. Several cases would go on to become quite important in legal history such as the Alcoa, American Medical Association, and oil industry cases. Nevertheless, with his usefulness diminishing, Arnold left the New Deal to start a new life as a federal judge.

His judgeship was quite unhappy and Arnold was relieved to get out of it and into opening a private practice, at first with Reed Miller. Later, of course, Arnold joined forces with Abe Fortas and Paul Porter. Together, they established one of the most prominent law firms in Washington. The remainder of the book studies how the firm grew, how it got involved in the McCarthy era witch hunt cases, and Arnold’s work with Coca Cola and Fortas’ relationship with Lyndon Johnson. By the 1960s, Arnold was an icon among lawyers in Washington, despite his outspoken views on Vietnam and other issues. On November 7, 1969, after telling his wife Frances that he was not sure he wanted to live any longer, he died peacefully.

Richard Holl, unlike Waller, takes a different approach in his study of American business and the New Deal. Essentially, Holl looks at what he calls the “corporate liberals” of the American business world. These were visionary businessmen who sought to work with Franklin Roosevelt’s New Deal instead of fighting against it. They saw cooperation with the government as a means of avoiding a stronger central state and as a way of re-creating industrial self-government.

Holl makes the case that these corporate liberals were those businessmen in the 1920s who were very much in favor of welfare capitalism and trade associationism. They wanted to help workers, improve business’s position in American society, and collaborate with the federal government. Specifically, Holl focuses on Henry Dennison, Gerard Swope, Marion Folsom, Edward Stettinius, William Knudsen, Donald Nelson, Averell Harriman, Owen Young, and a few others.

Starting with the 1920s, Holl details how these corporate liberals tried to develop their own welfare capitalist plan in his their own companies and how the Great Depression forced them to retract their promises. However, Holl goes on to show that these corporate liberals, especially people like Stettinius, Knudsen, and Nelson, worked with Franklin Roosevelt in his New Deal, beginning with the National Recovery Administration, Social Security, and the Wagner Act. Holl argues forcefully that the BAC (Business Advisory Council) of the Department of Commerce sustained the corporate liberals’ presence within the Roosevelt Administration. Even though most historians talk about the anti-Roosevelt business position by 1937-38, Holl points out that there were still a number of corporate liberals who supported the president. With Harry Hopkins in the Commerce Department, these corporate liberals like Willard Thorp, Edward Noble, and Robert Wood worked with the secretary to see how businessmen could foster New Deal objectives as, for example, with the Bureau of Industrial Economics.

But, it was really in the preparedness area that the corporate liberals made their mark. Holl meticulously relates how the United States was unprepared for World War II. Roosevelt and the corporate liberals knew it and realized that something had to be done to rectify this dangerous situation. Neither Roosevelt nor the corporate liberals wanted a state-centered answer like the “all-outers” New Dealers, such as Harold Ickes. Instead, the president and his business supporters called for and got cooperation.

This is where Holl contributes his most original ideas. Using Stettinius, Knudsen, and Nelson as backdrops, Holl studies how the War Resources Board, the National Defense Advisory Commission, and the Office of Production Management went about helping the United States prepare itself for war by bringing the military and business together, by having “educational orders” filled out by companies that would have to produce military supplies, by having these influential businessmen direct the military and civilian authorities along workable paths for meeting wartime demands, and by giving the president leeway to develop and foster cooperation between business and government. In the end, it all worked in the sense that the corporate liberals kept the extreme radical New Dealers and extreme anti-New Deal businessmen from dominating war preparations.

How does one assess these two works on the New Deal? In many ways Waller’s book is a biography about a lawyer which is written by a lawyer. This is not meant in any way to demean or detract from the study. Waller has written a good work on an individual who has not received as much attention as he deserves. It should also be pointed out, however, that there are a few shortcomings in this work. The author spends too much time summarizing Arnold’s briefs and his writings. He also tends to give Arnold more importance than he might have had. And, his portrayal of Arnold as an individual is sometimes lost in the maze of all the “legalese” that the reader has to confront.

On the other hand, it is clear that Holl has done an extensive amount of research on the corporate liberals and wartime agencies. His research is solid, his ideas are definitely interesting, and his writing style is fine. But, again as in the case of Waller, Holl has a couple of shortcomings. The most important weakness is that he tends to re-iterate much of what others have said about businessmen, especially Ellis Hawley. What makes Holl’s work original, though, is that he focuses more on the individual corporate executives. Here, his contribution is, indeed, significant.

In closing, both Waller’s biography of Thurman Arnold and Holl’s study of America’s corporate liberals are solid examples of old-fashioned, good historical research and analysis. Both have offered interesting perspectives on their subjects and both have given us some original ideas to look at and consider when it comes to American business, the New Deal, and the anti-trust laws.

Michael V. Namorato, Professor of History at the University of Mississippi, specializes in the Great Depression-New Deal era. He is currently working with two co-authors on a political, economic study of child welfare in Mississippi.

Published by EH.NET (November 2006)

Spencer Weber Waller, Thurman Arnold: A Biography. New York: New York University Press, 2005. xi + 271 pp. $40 (cloth), ISBN: 0-8147-9392-4.

Richard E. Holl, From Boardroom to the War Room: America’s Corporate Liberals and FDR’s Preparedness Program. Rochester, NY: University of Rochester Press, 2005. x + 191 pp. $75 (cloth), ISBN: 1-58046-192-1.

Reviewed for EH.NET by Michael V. Namorato, Department of History, University of Mississippi.

These studies by Spencer Waller and Richard Holl have a number of interesting commonalities: both discuss American business, both address the importance of the New Deal and Franklin D. Roosevelt’s policies, and both analyze how business and the New Deal interacted. They differ primarily in their approaches to these distinct areas of concern. Where Waller writes a biography of Thurman Arnold who was a member of the Department of Justice in the late 1930s, Holl looks at how American corporate businessmen (or liberals, as he calls them) worked with the Roosevelt Administration. Even more interesting is how these very corporate liberals and Thurman Arnold perceived each other.

Waller argues very forcefully that Thurman Arnold was a unique individual in so many ways. He was “in essence the decathlon champion of American law” (p. 2). He was a practitioner, a law school dean, a legal realist, author, New Dealer, creator and enforcer of modern anti-trust laws, a federal judge, a defender of free speech during the McCarthy era, and the founder of one of the most prominent law firms in Washington today. As a person, moreover, Waller paints a picture of this icon as one who liked to be funny, was not much of a father (but made up for it by being a better grandfather), and whose loyalty to his friends, such as Abe Fortas, never wavered.

In reaching these conclusions, Waller meticulously studies Arnold’s life — beginning with his parents, childhood in Wyoming, education at Princeton, and law school at Harvard. An average student, Arnold developed his interests in writing and partying, although, by law school, he focused more and more on the work at hand. As a young lawyer, Arnold went to Chicago where he took on cases that seemed to be routine and not very challenging. When World War I broke out, he served in France after which he and his wife returned to Laramie to set up home and a law practice.

Waller recounts details about Arnold’s life as a small town politician and later dean of the West Virginia College of Law, which helped him to survive the Great Depression. From there, he went to the Yale Law School as a teacher. Waller spends a considerable amount of time discussing how Arnold became a “legal realist” at Yale. He also summarizes in detail Arnold’s writings in such works as The Symbols of Government and The Folklore of Capitalism. Undoubtedly, these exercises in teaching and writing helped prepare him for the later work he would do in the New Deal in the Anti-Trust Division of the Department of Justice.

In Chapter 6, Waller recounts how Arnold got into the New Deal and worked on the enforcement of anti-trust laws, and how Franklin D. Roosevelt responded to what he had done. The author gives long, in-depth explanations of the cases that Arnold pursued — which were won, lost, or had a long-term impact on American jurisprudence. Probably the most significant discussion in these sections recounts how Arnold perceived anti-trust as a means of preventing abuse of power in the business world. Relentless in promoting himself and his causes, Arnold continually lobbied for more staff, resources, and funds. Several cases would go on to become quite important in legal history such as the Alcoa, American Medical Association, and oil industry cases. Nevertheless, with his usefulness diminishing, Arnold left the New Deal to start a new life as a federal judge.

His judgeship was quite unhappy and Arnold was relieved to get out of it and into opening a private practice, at first with Reed Miller. Later, of course, Arnold joined forces with Abe Fortas and Paul Porter. Together, they established one of the most prominent law firms in Washington. The remainder of the book studies how the firm grew, how it got involved in the McCarthy era witch hunt cases, and Arnold’s work with Coca Cola and Fortas’ relationship with Lyndon Johnson. By the 1960s, Arnold was an icon among lawyers in Washington, despite his outspoken views on Vietnam and other issues. On November 7, 1969, after telling his wife Frances that he was not sure he wanted to live any longer, he died peacefully.

Richard Holl, unlike Waller, takes a different approach in his study of American business and the New Deal. Essentially, Holl looks at what he calls the “corporate liberals” of the American business world. These were visionary businessmen who sought to work with Franklin Roosevelt’s New Deal instead of fighting against it. They saw cooperation with the government as a means of avoiding a stronger central state and as a way of re-creating industrial self-government.

Holl makes the case that these corporate liberals were those businessmen in the 1920s who were very much in favor of welfare capitalism and trade associationism. They wanted to help workers, improve business’s position in American society, and collaborate with the federal government. Specifically, Holl focuses on Henry Dennison, Gerard Swope, Marion Folsom, Edward Stettinius, William Knudsen, Donald Nelson, Averell Harriman, Owen Young, and a few others.

Starting with the 1920s, Holl details how these corporate liberals tried to develop their own welfare capitalist plan in his their own companies and how the Great Depression forced them to retract their promises. However, Holl goes on to show that these corporate liberals, especially people like Stettinius, Knudsen, and Nelson, worked with Franklin Roosevelt in his New Deal, beginning with the National Recovery Administration, Social Security, and the Wagner Act. Holl argues forcefully that the BAC (Business Advisory Council) of the Department of Commerce sustained the corporate liberals’ presence within the Roosevelt Administration. Even though most historians talk about the anti-Roosevelt business position by 1937-38, Holl points out that there were still a number of corporate liberals who supported the president. With Harry Hopkins in the Commerce Department, these corporate liberals like Willard Thorp, Edward Noble, and Robert Wood worked with the secretary to see how businessmen could foster New Deal objectives as, for example, with the Bureau of Industrial Economics.

But, it was really in the preparedness area that the corporate liberals made their mark. Holl meticulously relates how the United States was unprepared for World War II. Roosevelt and the corporate liberals knew it and realized that something had to be done to rectify this dangerous situation. Neither Roosevelt nor the corporate liberals wanted a state-centered answer like the “all-outers” New Dealers, such as Harold Ickes. Instead, the president and his business supporters called for and got cooperation.

This is where Holl contributes his most original ideas. Using Stettinius, Knudsen, and Nelson as backdrops, Holl studies how the War Resources Board, the National Defense Advisory Commission, and the Office of Production Management went about helping the United States prepare itself for war by bringing the military and business together, by having “educational orders” filled out by companies that would have to produce military supplies, by having these influential businessmen direct the military and civilian authorities along workable paths for meeting wartime demands, and by giving the president leeway to develop and foster cooperation between business and government. In the end, it all worked in the sense that the corporate liberals kept the extreme radical New Dealers and extreme anti-New Deal businessmen from dominating war preparations.

How does one assess these two works on the New Deal? In many ways Waller’s book is a biography about a lawyer which is written by a lawyer. This is not meant in any way to demean or detract from the study. Waller has written a good work on an individual who has not received as much attention as he deserves. It should also be pointed out, however, that there are a few shortcomings in this work. The author spends too much time summarizing Arnold’s briefs and his writings. He also tends to give Arnold more importance than he might have had. And, his portrayal of Arnold as an individual is sometimes lost in the maze of all the “legalese” that the reader has to confront.

On the other hand, it is clear that Holl has done an extensive amount of research on the corporate liberals and wartime agencies. His research is solid, his ideas are definitely interesting, and his writing style is fine. But, again as in the case of Waller, Holl has a couple of shortcomings. The most important weakness is that he tends to re-iterate much of what others have said about businessmen, especially Ellis Hawley. What makes Holl’s work original, though, is that he focuses more on the individual corporate executives. Here, his contribution is, indeed, significant.

In closing, both Waller’s biography of Thurman Arnold and Holl’s study of America’s corporate liberals are solid examples of old-fashioned, good historical research and analysis. Both have offered interesting perspectives on their subjects and both have given us some original ideas to look at and consider when it comes to American business, the New Deal, and the anti-trust laws.

Michael V. Namorato, Professor of History at the University of Mississippi, specializes in the Great Depression-New Deal era. He is currently working with two co-authors on a political, economic study of child welfare in Mississippi.

Published by EH.NET (August 2006)

Lisa M. Fine, The Story of Reo Joe: Work, Kin and Community in Autotown, U.S.A.. Philadelphia: Temple University Press, 2004. xii + 239 pp. $23 (paperback), ISBN: 1-59213-258-8.

Reviewed for EH.NET by Lawrence W. Boyd Jr., Center for Labor Education and Research, University of Hawaii at West Oahu.

Lisa M. Fine (Associate Professor of History at Michigan State University) has done something both unusual and difficult. She has written a social history of a small-to-medium-sized factory in a small-to-medium-sized Midwestern city. The factory was operated by various incarnations of the Reo Motor Car Company in Lansing, Michigan between 1904 and 1975. Reo was an acronym for Ransom E. Olds and was the second automobile company this entrepreneur founded. The first company he founded, Oldsmobile, also operated in Lansing in one form or another for over one hundred years. Reo Joe is the name of a sort of “everyman” who worked in the automobile industry in Lansing. As the author states, “This book is about Reo Joe and his world: a city, an industry, and ideas about work, manhood, race and family” (p. 3). Fine includes gender as a category of analysis and emphasizes men and male identity in this work.

A simple thumbnail sketch of the story of the plant would go something like this: After experiencing labor problems in Detroit, Ransom E. Olds moved the plant to Lansing where he found a rural, largely white, Protestant workforce. The plant and community prospered for more than two decades. It struggled through the Depression; in 1937 a union was recognized following a sit-down strike and what amounted to a general strike in Lansing. Following these events the company declared bankruptcy. During 1939 it was rescued by a Reconstruction Finance Corporation loan and a government contract to produce trucks. Following World War II, it continued to produce trucks for the military during the Korean and Vietnam conflicts. In addition to producing civilian trucks, following World War II the factory diversified into lawnmowers. The plant struggled throughout the last twenty-five years of its existence, never really recapturing the position it had held in the twenties. Finally, urban renewal in 1973 closed the plant and the entrepreneur who had bought the plant, seems to have stolen the workers’ pension fund.

This would not be an unusual story in that it duplicates the experience of a large number of factories in the Midwest. Yet, few historians have attempted a plant-sized view and then tried to produce a broader social history of the people connected to the plant. Fine finds that the Reo plant consistently employed a relatively homogeneous workforce, with the proportion of foreign-born and African-American workers well below industry averages. Partly because of this, at least from its founding to the Great Depression, management and owners found workers receptive to an emphasis on the “factory family” and various aspects of welfare capitalism.

Within this broad context one learns, for example, that the Ku Klux Klan was active in Lansing, and that, possibly, Reo employees were part of this movement. The Klan in Lansing organized Labor Day parades, with an anti-immigrant theme. The Klan also campaigned for a state constitutional amendment that would require all school-age children to attend public schools. They also had candidates in the Republican primary for governor who ran on the basis of opposition to parochial schools and the Catholic Church. One of these was a Lansing area minister, Frederick Perry, who was also a field organizer for the Klan. The author finds some evidence that Ransom Olds supported Perry’s ministry in 1910. At the time of these activities (1924) Perry spoke to about 1,500 workers at the Reo plant. In addition a local Klan leader was presented a Reo automobile by “men of the KKK” (p. 67). In an oral history interview, a former Reo worker, Layton Aves, states, “that in order to join the union you had to be a member of the KKK.” Fine suggests, “The popularity of the Klan in Lansing during the 1920’s challenges us to rethink how Reo Joe responded to the events of the 1930’s and made a union and New Deal of his own” (p. 64).

This raises some questions about this work. In a micro history of one plant and its neighborhood how does one assess the influences of a broader society and culture? How does one also assess the channels by which these influences come through to the employees of the plant? And how does one assess claims likes Aves’? That someone closely associated with the Klan, like Perry, was able to speak at the plant indicates upper-level management support, probably that of R. E. Olds himself. Internal evidence, however, does not support Aves’ statement. Lester Washburn, who worked at the plant from 1927 on, and who joined the union during 1933 and functioned as a local and international union leader does not mention joining the Klan or associating with the Klan. This example illustrates both the strengths and weaknesses of this work. On the one hand, one gets a really interesting snapshot of the times and society at the plant and in Lansing. On the other hand, one would like more weighing of evidence and more of a broader context as to what Fine is reporting.

By context I mean that ideas and social attitudes tend to be widespread and interact with members of the “factory family.” To put it more succinctly who was Reo Joe? Did he change his mind about things? Or was he the sort of elderly guy who at seventy-five still had the same views he had in the 1920’s. He probably was a bit more of a metrosexual during World War II, as the work force included far more women, and a bit more nonwhite, and “hip” during the sixties. The author’s metaphor tends to obscure these changes, and tends to stress continuity more than change.

This is the sort of labor history that economic historians will find useful, and interesting. One suspects that an economic history of the plant would find that it failed largely because it could not take advantage of the economies of scale that other automakers enjoyed. Its reliance on piece rates into the 1950’s would tend to indicate it did not develop the sort of mass production assembly that other auto manufacturers did. One would also like to have seen more about wages and incomes at the plant, and thereby some idea of the standards of living of employees. It would have been even more useful had the publisher included a bibliography as well as the very detailed and exhaustive endnotes. These are all relatively mild blemishes, however, on a fine work.

Lawrence W. Boyd Jr. is an Associate Specialist at the Center for Labor Education and Research at the University of Hawaii at West Oahu. He is currently working on an analysis of wages and prices between 1920 and 1940 in the United States.

Published by EH.NET (May 2006)

Francisco Vidal Luna and Herbert S. Klein, Slavery and the Economy of Sao Paolo, 1750-1850. Stanford, CA: Stanford University Press, 2003. xii + 273 pp. $26 (paperback), ISBN: 0-8047-4859-4.

Reviewed for EH.NET by James Oakes, Department of History, CUNY Graduate Center.

Sao Paulo is doing well these days, and it’s all because of sugar. It seems that sugar cane produces ethanol at least eight, and possibly ten, times more efficiently than corn. With some well placed incentives from the government, plus Volkswagen’s introduction of dual fuel automobiles a few years back, Brazilians have developed a flourishing market in home-grown energy. The once depressed sugar fields around Sao Paolo have come back to life, with an efficiency that puts the U.S. ethanol industry to shame. But we should not be surprised. As Francisco Vidal Luna and Herbert Klein show in Slavery and the Economy of Sao Paolo, 1750-1850, ever since the eighteenth century the region has prospered as a savvy producer of commercial crops.

For U.S. historians, the history of slavery in Brazil continues to shake loose one preconception after another about the nature of new world slave economies. As youngsters we were assured that slavery was incompatible with urban life, only to discover that at the height of the slave trade Rio de Janeiro was a bustling metropolis with a diversified economy with slavery at its core. We were told that slavery encouraged a stifling monoculture, only to learn that Brazilian slaves produced not only sugar and coffee, but corn, grains, and livestock; they dug the gold from inland mines and manned the docks of Brazilian ports. In large numbers Brazilian slaves were sailors, soldiers, and factory workers. Not since the fall of Rome were slaves put to such varied uses in such large numbers. Moreover, they worked efficiently and their work set in motion a pattern of sustained economic growth that survived the downfall of slavery.

Luna and Klein follow right along this revisionist pathway, demolishing yet another generalization that has long hovered over the historiography of slavery in the New World: that sugar plantations did not produce the food they needed to sustain themselves. That may have been true in the Caribbean, and even in northern Brazil. But it was not true in the Sao Paulo region. Perhaps because the region grew slowly, in the shadow of the sugar producers of Rio de Janeiro to the north and the gold mines of neighboring Minas Gerais, Sao Paolo’s commercial agriculture took root as a producer of food supplies for the bigger, more heavily enslaved economies nearby. Once sugar plantations did develop, particularly in the rich inland soils of the West Paulista region, the production of food crops was a well established habit that the sugar planters never abandoned.

Based on the extensive use of recently discovered censuses of population and production, Luna and Klein trace with meticulous care the origins and growth of sugar plantations in the Sao Paolo region. They distinguish between the Valley of Paraiba — closer to the coast, more influenced by Rio, and in the end less prosperous — and the interior West Paulista — far from the market centers with poor roads, it began as a region of subsistence farms and Indian slaves but went on to become a rich center of diversified commercial agriculture based first on sugar and later, in the nineteenth century, on coffee.

The turning points for Sao Paolo were the relative decline of Brazilian sugar with the growth of the Caribbean plantations, the discovery of gold in Minas Gerais, and the frontier wars with Spain. Gold brought slaves in large numbers to the region, providing Sao Paolo farmers with a market for their food crops. War led the Portuguese to invest in Sao Paolo’s infrastructure, giving its farmers better access to regional, national and then international markets.

With commercial agriculture and access to markets well established, Sao Paolo transformed itself between 1750 and 1800 into one of the major sugar plantation economies of the world. The censuses make it possible to track this development in various ways: the increasing size of the plantations, the growing number and proportion of slaves, as well as the rising sex ratio of the slave population, and the rising output per slave.

But the thing that strikes the authors above all is the fact that the paulista economy never abandoned the production of foodstuffs, for both subsistence and sale. Rice and beans, corn and pork, and a host of lesser items, were produced for sale by small farmers and large planters, by those owning only one or two slaves and by those owning dozens, by those who produced nothing but foodstuffs and by those who produced mostly sugar and coffee. And this remained true even as the growth of sugar and coffee plantations increased the concentration of land and slaveholdings. “Thus, the bedrock of paulista agriculture remained food-crop production,” the authors conclude, “which expanded along with the export crops during the first part of the nineteenth century” (p. 106).

There was a time when U.S. historians imagined that the antebellum South stood alone among New World slave societies in its ability to feed itself. No more. In both Brazil and the South, slaves provided some but not all of their subsistence, and small farmers could prosper by producing food crops for sale in local and regional markets. Even the distribution of slaves was roughly comparable: Luna and Klein find slaves in perhaps 20 to 25 percent of Sao Paolo households; most owners had only a few slaves; and plantations with more than a hundred slaves were rare.

Not so the slave population. Except for a blip in the first decade of the nineteenth century, the proportion of Africans in the slave population steadily declined in the United States from the middle of the eighteenth century onward, until by 1860 native Africans were a tiny fraction among the slaves. The reverse was true in Sao Paolo, where the rise of sugar and coffee depended on a steadily rising proportion of Africans among the slaves, until by the mid-nineteenth century they were “the dominant element in the slave labor force” (p. 133). The massive importation of African men skewed the slave population, depriving it of women of childbearing age and thus depressing the ability of the slave population to reproduce itself. In addition, Luna and Klein cite recent scholarship suggesting that the disproportionate manumission of women in Brazil also helped prevent the slave population from achieving robust reproduction rates. (This contrasts sharply with the U.S. experience, where the near absence of manumission, combined with the relative insignificance of lethal sugar plantations, allowed southern slaves to reproduce themselves rapidly without any further imports from Africa.) Paradoxically, the rising dominance of males in the slave population did not alter the fact that a majority of paulista slave children — like their counterparts in the American South — grew up in fatherless households.

In the American South there was no large slave sector of the southern economy outside of plantation agriculture, nothing comparable to the mining sector of Brazil — which provided the first important market for paulista food producers. Nor was there anything in the South remotely comparable to the huge proportion of free blacks in Brazil. Of the 91,000 Africans and their descendants in Sao Paulo in 1803, more than half (47,000) were free colored. Besides being disproportionately young women, freed slaves were disproportionately mulattoes, with the result that the free colored class had the largest concentration of pardos (browns) in the population. These differences showed up as well in the distribution of wealth. Free colored households were less likely to have slaves, and those that did were likely to have fewer slaves. As Luna and Klein note, this may be less the result of racial bias against free coloreds than of their original impoverishment as slaves.

In a final chapter the authors explore one other element in Sao Paulo’s economic diversity — the high proportion (40%) of paulista households employed outside of agriculture altogether. By U.S. standards, this is quite high for a region whose economy was based in plantation agriculture. These households ranged all the way from impoverished day laborers, to craftsmen, to professionals, to wealthy merchants. These merchants, with strong ties to the planters and the export economy, were the wealthiest and most powerful group in the region. By the time readers finish the book the enduring success of Sao Paolo’s economy is easy to understand — which is precisely what the authors hoped to accomplish.

There is not one thing wrong with this book. Luna and Klein have done impressive research in previously unused sources. They present their findings in clear, unpretentious prose. They have a firm sense of the historical as well as historiographical significance of their material. They make apt comparisons along the way. All in all, Slavery and the Economy of Sao Paolo is a model monograph, nothing less than we have come to expect from its distinguished authors.

James Oakes is the author of two books and numerous articles on the subject of slavery in the antebellum South.

Published by EH.NET (April 2006)

Thomas Dublin and Walter Licht, The Face of Decline: The Pennsylvania Anthracite Region in the Twentieth Century. Ithaca, NY: Cornell University Press, 2005. viii + 277 pp. $65 (cloth), ISBN: 0-8014-3469-6; $25 (paperback), ISBN: 0-8014-8473-1.

Reviewed for EH.NET by William Boal, College of Business and Public Administration, Drake University.

Perhaps no economic issue generates more public anxiety today than economic dislocation, as whole industries and regions are threatened by technical change, international trade, or sometimes natural or environmental disaster. The decline of a large industry is often frightening and difficult for participants and even policymakers to understand. To cope, we badly need the perspective of history. What happens to a region when its principal industry dies? What happens to individual workers and their families?

This wonderful book answers these questions with a case history of the anthracite coal industry. Anthracite is “hard” coal, formed under greater heat and pressure than bituminous or “soft” coal. Anthracite gives off less smoke when it burns than most bituminous coals, making it better for use in urban areas. Anthracite coal fields in the United States are geographically compact, confined largely to three counties of northeastern Pennsylvania. A century ago, when transport costs were high and alternative fuels scarce, anthracite was the preferred fuel for home heating throughout the northeast U.S. The book begins with the early discovery and development of anthracite coal in the eighteenth century, continues through the coal boom of the early twentieth century when the industry employed about 180,000 workers, and ends with the death of the industry in the late twentieth century. As the title suggests, most of the book is devoted to the industry’s gradual decline, which began after World War I. The fundamental causes of that decline are well-known: falling prices of competing fuels and difficulties in mechanization due to adverse geological conditions. This book tells the story of how coal companies, the union, governments, and especially individual workers and their families responded to that decline.

Historians Thomas Dublin and Walter Licht, of Binghamton University (State University of New York) and the University of Pennsylvania, respectively, present the story from many perspectives, drawing on an impressive range of sources. In addition to the usual newspapers, secondary sources, and prior research, the authors dig into coal company personnel records, government investigative reports, and files of the Pennsylvania Power and Light Company’s Industrial Development Department. Census data are used to measure broad trends. Over one hundred personal interviews and a survey of residents and former residents tell us how those trends were experienced by miners, their spouses, and their children. The authors’ main thesis is that institutions — coal companies, the union, and governments — failed to help the people of the anthracite region when the coal industry collapsed. Yet miners and their families were surprisingly resilient and resourceful, pulling through against the odds and sometimes at great cost.

The first chapter describes the beginnings of the anthracite industry. Hilly northeastern Pennsylvania was sparsely populated until coal was discovered sometime in the eighteenth century. Commercial production of coal required simultaneous development of transportation — first canals and then railroads. The late nineteenth century in the anthracite region saw increasing concentration in anthracite railroads and coal, and increasing vertical integration between the industries. Immigrants were recruited to work the mines. As in bituminous coal, many early mineworkers were from England, Wales and Ireland, but they were gradually replaced by immigrants from Central and Eastern Europe and from Italy. Mining was, of course, extremely dangerous, but beginning in 1889, Pennsylvania law required miners (workers at the coal face) to pass a safety examination and have two years’ prior experience as mine laborers — a law that probably enhanced safety and incidentally made it more difficult for coal operators to replace strikers. Most mineworkers were paid on piece — since about 1869, on a sliding scale tied to coal prices — but work was unsteady. Children and wives supplemented mineworkers’ incomes by working in silk mills. Unions had little influence until a surprisingly successful strike called by the United Mine Workers of America (UMWA) in 1900. The strike won higher wages for mineworkers and elimination of the sliding scale.

The second chapter describes the era of prosperity from 1900 to 1920, and the subsequent labor conflict of the 1920s. Improving coal demand through the First World War supported slightly increased wages and much increased working time. Child labor declined because of new legislation and rising earnings of parents. Ethnically-based churches and lodges provided support to families when workers were killed or injured on the job. The fortunes of the anthracite industry began to turn in the 1920s as demand for coal declined. Frequent long labor strikes focused national attention on coal and resulted in appointment of official commissions of investigation and arbitration, but the authors criticize federal officials for their slow and reluctant responses. The authors also criticize the anthracite coal operators for refusing to recognize the union and grant the dues checkoff, arguing that recognition would have reduced the frequency and duration of strikes (obviously the anthracite operators had a different opinion). Interestingly, the authors do not question the wisdom of the union’s rigid wage policy in the face of falling coal prices and consumer prices in the 1920s.

The third chapter, which describes anthracite mineworkers’ response to the Great Depression, is especially interesting to an economist. The authors contrast the failure of coal operators, the union, and government to respond to the crisis, with the determined responses of ordinary mineworkers supported by their communities. Three responses by mineworkers are emphasized. The first response was a campaign for equalization of work. As coal prices fell, coal companies selectively shut down less productive mines, leaving some workers with no work at all, while others were unaffected. The destitution of unemployed mineworkers prompted local citizens to campaign for rotation of work among mines. After a spontaneous strike, the major coal operator in the Panther Valley section agreed to a rotating schedule for its five mines. However, equalization campaigns in other sections of anthracite region were unsuccessful. The second response was a revolt within the UMWA, prompted by initial lack of union support for equalization campaigns. Suppression of dissent within the UMWA drove dissidents briefly to form a dual union, the United Anthracite Miners of Pennsylvania, from 1932 to 1935. The third response was “coal bootlegging,” illegal and surreptitious working of closed coal mines by unemployed miners. Operators whose land was mined illegally were unable to shut down the bootleggers because of popular sympathy for unemployed miners. To the authors, these three represent effective individual and community responses to an economic crisis, in the face of which institutions seemed powerless. To an economist, however, these responses represent more. They suggest a struggle of unemployed “outsiders'” against employed “insiders” at a time when wages were too high to clear the labor market. The profitability and popularity of coal bootlegging in particular suggests that formal employment could have been increased substantially if union wages had been reduced. One wonders whether the anthracite region would have better withstood the Great Depression had the sliding-scale wage system not been eliminated three decades earlier by the UMWA.

The fourth chapter describes the final collapse of the anthracite industry. The Second World War temporarily increased the demand for coal and decreased the supply of labor as mineworkers were drafted into the armed forces or took advantage of new job opportunities in defense industries outside the region. Employment in coal continued to fall during the war, but output increased and working time for remaining mineworkers rose. After the war, demand for anthracite fell sharply, as did productivity as veterans were given their jobs back. Financial pressures on coal companies became intense and they began to close. Employment in anthracite fell to 17,000 by 1961 and to 2,000 by 1974. Describing the histories of three coal companies in detail, the authors argue that “financial machinations” such as leasing, bankruptcy, and buyouts accelerated anthracite’s decline, yet it seems clear that coal mines would have been forced to close with or without financial reorganization. Selective leasing of the most productive mines, in particular, seems like a predictable response to falling coal prices and “equalization of work” rules, which were by now written into union contracts. Amidst anthracite’s general decline, the creation of the Anthracite Health and Welfare Fund seemed at first a heartening success. The UMWA in the late 1940s got the coal operators to agree to this fund, financed through per-ton royalties on coal output, to pay death benefits and pensions for miners. Unfortunately, as coal output fell in the 1950s and 1960s, royalty payments declined and the Fund was forced to cut benefits sharply. The authors fault the union for diverting Fund assets into a UMWA-owned bank paying low interest, but surely the Fund’s main problem was the decline of coal output subject to royalties. A more genuine success resulted from a campaign by mineworkers and community activists (curiously without union support) for state and federal aid to black lung victims, enacted in 1965 and 1969 respectively. Though the union was not responsible for all the mineworkers’ problems, there is no question that autocratic rule and corruption in the UMWA did as much harm to anthracite workers as it did to bituminous mineworkers during this period.

The fifth chapter describes the efforts of communities in the anthracite region to attract new industry to replace anthracite, with mixed success. The authors focus on relatively successful efforts by the cities of Scranton, Wilkes-Barre, and Hazleton. All three cities solicited contributions from private citizens — including working-class people — to develop new plant sites and subsidize relocation of employers. The state government, through its Pennsylvania Industrial Development Authority (PIDA), also helped attract new industry, but according to the state’s own evaluation, PIDA funds tended to go to counties that were already well-developed. Pennsylvania Power & Light, the region’s electric utility, also helped recruit new industry, and kept records which the authors exploit for this book. It is unclear how effective these redevelopment efforts were. On the positive side, PP&L records show that incoming firms receiving assistance were larger and survived longer than incoming firms not receiving assistance. On the negative side, most incoming firms paid low wages and some left as soon as their tax breaks expired. Working-class people interviewed by the authors expressed resentment at the sacrifices they were asked to make to attract these firms. In any case, the anthracite region “bottomed out” in employment in 1960. Employment since then has grown, mostly in services. Employment in manufacturing, the target sector of these early redevelopment efforts, has ironically continued to decline.

The sixth chapter, based mostly on interviews, chronicles the responses of mineworkers who lost their jobs when anthracite collapsed in the late 1940s and 1950s, and of their wives. Individuals’ stories are told with sympathy and sensitivity. Some former mineworkers found jobs outside the region, mostly in New Jersey and the Philadelphia area, and eventually moved their families (the authors call them “migrants”). Some former mineworkers commuted weekly to jobs outside the region, at least for a while (“commuters”). And some stayed in the anthracite region (“persisters”). Of the three groups, migrants eventually enjoyed the highest standard of living. Commuters endured grueling travel or weekly separation from their families, and many eventually moved their families closer to their jobs or found work closer to home. Persisters fared the worst economically, often suffering long-term unemployment, but kept their old social ties intact. Among all groups, wives generally continued to work, although non-mining jobs in the region did not pay well. As might be expected, mineworkers who were disabled — for example, by black lung disease — or who were eligible for retirement had little incentive to move, and most chose to be persisters.

The seventh and most optimistic chapter describes the lives of children of mineworkers who lost their jobs in the late 1940s and 1950s. This chapter is based mostly on interviews and a mail survey of high school graduates from the Panther Valley section. On average, these children fared much better economically than their parents. With the encouragement of their parents, nearly all of these children completed high school and a substantial number went on to college or nursing school. Although their parents could offer only limited financial support for higher education, a substantial number of children served in the military and thereafter enjoyed support from the GI Bill. After finishing their education, again with the encouragement of their parents, many children left the anthracite region permanently for opportunities elsewhere. It is noteworthy that the most mobile and successful members of the younger generation were those with post-high school education.

The final chapter summarizes the current condition of the anthracite region. In a number of respects, the region still bears the scars of the coal industry. Abandoned coal mines remain as eyesores and environmental hazards. Declining population has left empty houses, boarded-up storefronts, and even abandoned towns. Landfills and prisons have appeared throughout the region, welcomed by communities desperate for employment. The picture is not pretty. Nevertheless, unemployment has receded in recent decades as younger workers have left the region and older workers have retired.

The book’s great strength is description, as the above summary only begins to suggest. The authors show us the decline of anthracite from many perspectives: employment and population statistics, national politics, labor struggles, intra-union conflict, community activism, and especially the struggles of individual mineworkers and their families. The description is thorough, nuanced, and careful, yet highly readable. The text is even supplemented with almost fifty photographs.

The book is weaker on causal analysis and prescription. The appendix tables include production and detailed demographics, but not coal prices or wage rates. Of all the “forces” that the authors identify as driving the rise and fall of anthracite, market forces are viewed as secondary. The authors criticize coal companies, the UMWA, and state and federal governments for doing too little to halt the decline of the coal industry or to help the region diversify by attracting new industry, but their arguments are not always convincing.

Should coal companies have kept operating at a loss? Such a proposal is obviously unrealistic for the long term.

Should the UMWA have fought more aggressively to keep the mines open? The authors point to European countries where mineworkers’ unions were able to negotiate much better terms. But those countries nationalized their coal industries after the Second World War so their mineworkers were effectively government employees. Public-sector workers can use the ballot box to pressure their employers into subsidizing their workplaces. By contrast, private-sector unions in declining industries have little leverage. Strikes only accelerate a private-sector industry’s decline, as this book shows. While there is no excuse for union corruption and autocracy, it is not likely the UMWA could have kept mines open much longer except possibly by making wage concessions.

Should governments have done more to prop up employment in anthracite coal? Romance and nostalgia aside, coal mining is still a dangerous and frequently disabling occupation. It seems wrong-headed to send workers down into mines for coal that is not needed. Moreover, subsidizing coal mines could have been quite costly.

Should governments have done more to recruit new industry to the anthracite region? Perhaps. Yet the authors’ evidence, while not definitive, does suggest that such efforts did not usually bring a high return. The region was settled in the nineteenth century mostly for its coal, and had little else to offer new industry except an extensive railroad network, a large unemployed workforce, and a colorful past.

Should governments have prepared workers for economic dislocation through job retraining or higher-education subsidies? Here, the authors’ own evidence is much more favorable. Mineworkers themselves encouraged their children to get more education and those children that did so found economic security their parents lacked. But these children also left the region, in many cases. One senses that affection for place — so evident throughout this lovely book — has partially blinded the authors to the obvious value of education and out-migration for relieving hardship in a region dependent on a dying industry.

William M. Boal is Associate Professor of Economics at Drake University, Des Moines, Iowa. He is currently working on an econometric study of the effects of unionism on accidents in U.S. coal mining (including anthracite) in the early twentieth century.

Published by EH.NET (March 2006)

William R. Childs, The Texas Railroad Commission: Understanding Regulation in America to the Mid-Twentieth Century. College Station, TX: Texas A&M University Press, 2005. x + 323 pp. $35 (cloth), ISBN: 1-58544-452-9.

Reviewed for EH.NET by Gary Libecap, Department of Economics, University of Arizona.

In a time of deregulation and globalization, it is easy to forget that local bureaucratic agencies have often had enormous power in affecting how resources were used, in determining which companies could participate, in authorizing when production could take place and how much could occur, and in fixing the prices that could be charged. The early-to-mid twentieth century United States was a time when state and local regulatory bodies had unparalleled influence in the market. Foreign trade was a small portion of the overall economy and the reach of federal institutions was relatively limited. In many cases, state regulations held supreme, and in no case is this more apparent than in the history of the Texas Railroad Commission (TRC).

The TRC is the ultimate regulatory agency. In its heyday, from the 1940s through the 1960s, the TRC controlled Texas oil production, the largest in the nation, and coordinated its production with that of the other major producing states in order to fix U.S. prices, in conjunction with restrictions on the import of cheaper foreign oil. Under the regulatory regime of the TRC, monthly individual firm output was restricted to limit the losses of common-pool extraction; production quotas were allocated across producing firms in ways that benefited influential, small, high-cost producers; and Texas output was constrained in cooperation with other states through the Interstate Oil Compact Commission (IOCC) to maintain high oil prices. Until superseded by OPEC in 1972, the TRC and the structure of state regulation under the IOCC was a domestic oil cartel. The Commissioners of the Texas Railroad Commission were the most important local government officials in the world.

How did an obscure state agency set up to regulate railroad rates get to be this way? In this well-written, carefully-researched, and very useful book, William R. Childs outlines the development of the TRC. He emphasizes personalities, politics, regional culture, and wariness of federal intrusion, along with an understanding of basic economic forces to provide a nuanced description of the rise of the agency and its important regulatory role.

Childs begins with a description of the rise of the TRC in the 1880s as a commission to regulate railroad rates (as its names suggests). The first four chapters of the book place the TRC into the broader context of a national movement both at the state and local level to regulate the power of one of the country’s first big industries, railroads. Because of their ability to link remote, local markets to national ones, railroads were tremendously important. At the same time, because of their huge size and capitalization, (often) near-monopoly position in the supply of transportation services, and vulnerability in holding fixed, non-deployable assets in railroad tracks, yards, and support facilities, railroads were the center of the development of commission regulation of prices. States and the federal government competed for preeminence within the U.S. federal structure, and Childs describes this early tension. He also outlines the growth of the Texas economy in the post-Civil War period and the interest groups that lobbied for regulation of railroad rates. Personalities played key roles in determining the details of how regulation was written, its exact timing of adoption, and how Texas institutions were linked to those of the federal and other state governments. James Stephen Hogg, Attorney General and Governor of Texas molded the structure of the TRC which was established in 1891. Childs discusses the genesis of the agency in its early years. The National Association of Railroad and Utilities Commissioners coordinated state agencies in their sometimes contentious relationships with the federal government in general and the Interstate Commerce Commission in particular over regulations and rates. One area of conflict was whether intrastate shippers could receive preferential regulation as compared to interstate shippers in order to protect local producers. This led to the well-known 1914 U.S. Supreme Court Shreveport case that strengthened the federal role, but also provided for clearer state regulatory mandates.

Part II of the book moves from the early years of the TRC to expansion of its activities in the post-World War I period, especially into the new area of oil production regulation. The next four chapters describe the TRC and its regulation of oil. Beginning at the turn of the century and accelerating after 1920, new oil discoveries in Texas changed the history of the state and the country forever. With low capital and labor requirements for entry and the prospect for fabulous new riches, individuals rushed to the Texas oil fields during the “gusher” period. Excessive output and capitalization followed. The tragedy of the commons was everywhere and the TRC was called to step in not only to limit these losses, but also to bolster oil prices which cycled from boom to bust. This regulatory intervention made the TRC famous. Childs describes the colorful local characters who became Commissioners, such as Ernest O. Thompson (who served from 1932 to 1965), and who in many ways determined the profits of the country’s most spectacular new industry, petroleum. He outlines the nature of the agency’s price and conservation regulations; its interaction with the New Deal in the 1930s to control “hot oil;” and its maturity as a regulatory agency in the 1950s and 1960s when it was at the height of its power. He also discusses the addition of other regulatory mandates, including control over motor carriers within the state of Texas in 1927 and the molding of the agency’s rulings by powerful constituent groups and federal agencies, as well as by state politicians. Even so, oil regulation and Texas’s huge contribution to it were what made the TRC distinctive. Childs points to the challenges presented by the huge East Texas oil field where small producers ignored commission regulations and produced wildly. Only martial law in 1931-32 brought some stability.

The latter part of the book describes the role of the TRC as part of the IOCC in cartelizing U.S. oil production. As Childs notes, these actions stabilized prices, but they did not effectively conserve U.S. oil stocks. Indeed, by limiting the import of cheap foreign oil, the structure of U.S. regulation, with the TRC at its head, helped to “drain America first,” and insure the dependence of the country on foreign sources of supply today. The conclusion to the volume summarizes key aspects of the development of state regulation as illustrated by the TRC and its impact on the structure of rates, industry development, and the wary collaboration and competition between state and federal regulatory agencies. This is a superb history of the details of regulation and how they fit into the broader macro development of the American economy.

Gary D. Libecap is Anheuser Busch Professor of Economics and Law at the University of Arizona. He currently is completing a book on the Owens Valley water transfer to Los Angeles, 1905-35 and its implications for western water re-allocation today.

Classic Reviews in Economic History

Stanley Lebergott, Manpower in Economic Growth: The American Record since 1800. New York: McGraw-Hill, 1964. xii + 561 pp.

Review Essay by Robert A. Margo, Department of Economics, Boston University.

Manpower after Forty Years

During the first half of the twentieth century classical musicians routinely incorporated their personalities into their performances. One recognizes immediately Schnabel in Beethoven, Fisher in Bach, Cortot in Chopin, or Segovia in just about anything written for guitar. As the century progressed performance practice evolved to where the “text” — the music — became paramount. The ideal was to reveal the composer’s intent rather than putting one’s own stamp on the notes — the performer as conduit per se rather than co-composer.

Personal style played a major role in the early years of the cliometrics revolution. Hand a cliometrician an unpublished essay by Robert Fogel or Stanley Engerman, and I am quite sure she could identify the author after reading the first couple of paragraphs (if not the first couple of sentences). No one can possibly mistake a book by Doug North for a book by Peter Temin or an essay by Paul David for one by Lance Davis or Jeffrey Williamson. To some extent this is because personal style mattered at the time in economics generally — think Milton Friedman or Robert Solow. But mostly it mattered, I think, because these cliometricians were on a mission. Men and women on a mission put their personalities up front, because they are trying to shake up the status quo.

So it is with Stanley Lebergott. Indeed, of all the personalities who figured in the transformation of economic history from a sub-field of economics (I am tempted to write “intellectual backwater”) that eschewed advances in economic theory and econometrics to one that embraced them (I am tempted to write “for better and for worse”), Lebergott’s style was perhaps the most personal. In re-reading Lebergott’s most famous book — his Manpower in Economic Growth: The American Record since 1800 (1964) — one sees that style front and center on nearly every page, as well as the conflicting emotions as its author tried, not always successfully, to marry the anecdotal and archival snippets beloved by historians with the methods of economics. Manpower was (and is) substantively important for two reasons. First, prior to Manpower, the “economic history of labor” meant unions and labor legislation. By contrast, Lebergott made the labor market — the demand and supply of labor — his central focus and in doing so elevated markets and market forces to a central tendency in the writing of economic history. Second, Lebergott produced absolutely fundamental data — estimates of the labor force, industrial composition, unemployment, real wages, self-employment, and the like — that economic historians have relied on (or embellished) ever since.

These two accomplishments aside, I emphasize style not because, in Manpower‘s case, it is light years from the average article that I accept for publication in Explorations in Economic History. Economic history, like all economics, is vastly more technical than it was in the early 1960s. Burrowing into the style of Manpower reveals an author transfixed with what he perceived to be the grandness of the American experiment, the transformation of a second-rate colony into the greatest economy the world had yet seen. The core of Manpower would always be its 33 appendix tables and 252 (!) pages of accompanying explanatory text lovingly produced and so relentlessly documented as to drive any reader to distraction (or tears). So much the line in the sand, daring — indeed, taunting — the reader to do better. Lebergott knew that, in principle, one could do better, because he did not have ready access to all the relevant archival materials. I would conjecture, however, that he would always be surprised if anyone did, in fact, do better. Tom Weiss, himself one of the great compilers of American economic statistics, spent several years redoing Lebergott’s labor force estimates using census micro data rather than the published volumes that Lebergott relied on (Weiss 1986). In commenting on Weiss’s work, Lebergott (1986) characterized the differences between his original figures and the revisions as “very small beer” and then took Weiss to task for failing (in Lebergott’s) view to fully justify the revisions. “One awaits with interest,” he concluded, “further work by the National Bureau of Economic Research project of which this is a part.” When Georgia Villaflor and I (Margo and Villaflor 1987) produced a series of real wage estimates for the antebellum period drawing on archival sources that Lebergott did not use, I received a polite letter congratulating me but requesting more details and admonishing me to think harder about certain estimates that Lebergott felt did not mesh fully with his priors. There are thousands of numbers in those 33 appendix tables and one’s sense is that each number received the undivided attention of its creator for many, many, many hours.

But numbers do not a narrative make. Chapter One, “The Matrix,” has little in common with the archetypal introduction that gives the reader a roadmap and a flavor of the findings. It begins rather with an 1802 quote from “The Reverend Stanley Griswold” about the frontier that lay before the good minister. “This good land, which stretches around us to such a vast extent … large like the munificence of heaven … [s]uch a noble present never before was given to any people.” (Reviewer’s note: any people? Which people?) The first sentence goes on to describe an incongruous scene from Kentucky in 1832, “a petit bon homme” and his wife and their “little pile of trunks” sitting in a restaurant in the middle of (literally) nowhere. We then learn of a “great theme” of American history, that which motivated those who wrested the land from the “wilderness” — a belief in an open society, of which there were three elements. First, “hope” — an unabashed belief that things will always get better, and were better in America than in Europe. Second, “ignorance” — Americans were always willing to try something new, no matter how crazy. Third, America had a huge amount of space for people to spread out in. OK, the reader says, but where’s the economics? Ca. page 13 Lebergott emphasizes that the three elements made Americans unusually restless people, willing to move all the time. Ordinarily, Lebergott opines, it is the smaller (geographically-speaking) countries that have higher labor productivity because, ordinarily, people do not like to move. But Americans liked to move, he claims, and they did so on the slightest provocation. Excessive optimism, misinformation, and folly are core attributes of the American spirit and key factors in the American success story. In the end, the errors didn’t matter anyway (“small beer” indeed) because the land was so rich. More people moved to California in 1850 than could be rationally justified by the expected returns to gold mining but, as a result, California entered the aggregate production function sooner than otherwise. Labor mobility per se was a Good Thing, and American had it in abundance.

Chapter Two asks where all the workers would come from. Lebergott notes that certain labor supplies were highly predictable — slaves, for example. But once the slave trade was abolished the supply of slave labor grew at whatever the natural rate of increase. If the riches of America were to be tapped, free labor would have to be found — all the more difficult if the required number of workers to be assembled in any given spot was very large.

Another element of the Lebergott style is a dry wit, as evidenced in his exchange with Weiss. In a section on “[t]he Labor Force: Definition” we are told that ‘[t]he baby has contributed more to the gaiety of nations than have all the nightclub comics in history. We include the comic in the labor force … as we include [his] wages in the national income but set no value on the endearing talents provided by the baby.” In discussing the then-fashionable notion that the aggregate labor force participation rate (like other Great Ratios) was “invariant to economic conditions” Lebergott notes that small changes can nevertheless have great import. “The United States Calvary,” he observes, “was sent to the State of Utah because of the difference between 1.0 wives per husband and a slightly greater number.” The remainder of the chapter considers segments of the labor force whose labor was, indeed, “responsive to economic conditions” — European immigrants, internal migrants, (some) women and children as well as the impact of social and political factors on labor supply; it demonstrates the extraordinary flexibility of the American labor force and its responsiveness to incentives. While this conclusion would not surprise anyone today it was, I think, quite revolutionary at the time. It is as good an example of any I know of the power of historical thinking to debunk conventional wisdom derived from today’s numbers.

By now the reader is accustomed to Lebergott’s modus operandi — the opening paragraph that sometimes seems to be beside the point but really isn’t; quotations in the text from travelogues, diaries, plays, literature and what-not; obscure (to say the least) references in the footnotes; all interspersed with economic reasoning that has more than a tinge of what would be called today “behavioral” economics. In Chapter Three Lebergott talks about the “process” of labor mobility, which is really one extended probing into the relationship between mobility of various sorts and wage differentials. We get to see some univariate regression lines, superimposed in scatter-plots of decade-by-decade changes in the labor force at, say, the state level, against initial wage rates. Generally, labor flows were directed at states with higher initial wage rates, although Lebergott is quick to assert that “[m]igrants suboptimized” because the cross-state pattern was far less apparent at the level of regions. Next, Lebergott takes on the notion that economic development is an inexorable process of labor shifting out of agriculture. The American case, Lebergott claimed, challenges this notion. American workers shifted out of agriculture when the economic incentives were right; that is, when the value of the marginal product of labor was higher outside of agriculture.

The remainder of Chapter 3 is divided into two brief sections, both of which contain some of the most interesting writing in the book. In “Social Mobility and the Division of Labor,” Lebergott examines the relationship between occupational specialization and growth. In the nineteenth century most workers possessed a myriad of skills, farmers especially. They were jacks of all trades, masters of none. Lebergott speculates that this was a good thing because the master of none was more inclined to try something new, rather than assume he was, well, the master and therefore knew everything. If some fraction of novel techniques were successful, this could (under strong assumptions) lead to a higher rate of technical progress. “Origins of the Factory System” considers the problem posed earlier in the book of assembling large numbers of workers at a given location. Rather than pay higher wages, manufacturers turned to an under-utilized source of labor, women and children. Some years later, the ideas presented in this section would develop in full bloom in a celebrated article by Claudia Goldin and Kenneth Sokoloff (Goldin and Sokoloff 1982) on the role of female and child labor in early industrialization.

At 89 pages, Chapter Four, “Some Consequences,” is the longest chapter in the book. The first few pages, highly influential, are given to the formation of a national labor market, revealed by changes over time in the coefficient of variation of wages across locations. We are then given an extended tour of the history of American real wages, back and forth between the relevant tables in the appendix, quotations from contemporaries and other anecdotal evidence. The “Determinants of Real Wage Trends” comes next. The first, productivity, is no surprise. The second, “Slavery,” isn’t really either, but here Lebergott’s contrarian instincts, I think, get the better of him. Lebergott would have the reader believe that, first, free and slave labor were close to perfect substitutes; and, second, slave rental rates contained a premium above what the slave would have commanded in a free labor market. Consequently, when slavery ended, wages fell and there was downward pressure on real wage growth for a time. No question that wages fell in the South after the Civil War but Lebergott’s analysis is incomplete at best. Slave labor was highly productive before the Civil War because of the gang system, and when the gang system ended, the demand for labor fell in the South. Because labor supplies were not perfectly elastic, wages fell too. “Immigration,” the third purported influence, had negative short run effects on wages but positive long run effects via productivity growth.

What follows next is a 25-page section that years later produced two high-profile controversies in macroeconomics. This is the (celebrated) section where Lebergott presents his long-term estimates of unemployment. In thinking today about his work, we would do well to remember that, at the time he prepared his estimates, the United States had only a relatively brief experience with the direct and regular measurement of unemployment, courtesy of the 1940 Census and the subsequent Current Population Survey (CPS). (By “direct” I mean answers to questions about a worker’s time allocation during a specific period of time — if you did not have a job during the survey week, were you looking for one?)

Like all the estimates in the book, Lebergott’s unemployment figures were the product of detailed, painstaking work that, inevitably, required strong assumptions. The fundamental problem was that, if one wanted annual estimates of unemployment, there was no way to obtain these directly from survey evidence prior to the CPS. For some benchmark dates one could produce tolerable direct estimates from the federal census, but the federal census was useless if one wanted to generate an estimate, say, for 1893 or, for that matter, 1933.

Lebergott’s solution was to rely on an identity. By definition, the labor force was the sum of employed and unemployed workers. One might not know the number of unemployed workers but perhaps one could extrapolate between benchmark dates the number of workers in the labor force and employment, one could estimate unemployment levels via subtraction.

The first high profile controversy involved Lebergott’s estimates for the 1930s, which included in the count of unemployed workers persons on work relief. After 1933 there were many such workers, and so, by historical standards, unemployment looks, of course, rather high. This generated a lot of theoretical work for macroeconomists who thought they had to explain how unemployment rates could remain above 10 percent while real wages were rising (after 1933).

Michael Darby (1976) suggested that this effort was misplaced because Lebergott “should” have included the persons on work relief in the count of employed workers. Darby showed that doing so made the recovery after 1933 look much more normal. I’ve written a few papers on this issue, and my view is somewhere in-between Darby and Lebergott (Margo 1991; Finegan and Margo 1994; see also Kesselman and Savin 1978). Ideally, in constructing labor force statistics we should be consistent over time, so if persons on work relief were “employed” in the 1930s we should consider adding, say, “workfare” recipients to the labor force (or, possibly, prisoners making license plates) today, but this ideal may not be achievable in practice. The real issue with New Deal work relief is not the resolution of a crusty debate between competing macroeconomic theories but whether the program affected individual behavior. Here I think the answer is a resounding yes — unemployed individuals in the 1930s did respond to incentives built into New Deal policies. Wives were far more likely to be “added workers” if their unemployed spouses had no work whatsoever, than if the spouse held a work relief job, so much so that, in the aggregate, the added work effect disappeared entirely in the late 1930s, because so many unemployed men were on work relief.

The second high-profile debate involved Christina Romer’s important work on the long-term properties of the American business cycle. Prior to her work it was (and in some quarters still is) a “stylized fact” that the business cycle today is less volatile than it was in the past. Lebergott’s original unemployment series combined with standard post-war series were often used to buttress claims that the macroeconomy become much more stable over time. Statistical measures of volatility estimated from the combined series clearly suggest this, whether volatility is measured by the average “distance” (in percentage points) between peaks and troughs or standard deviations.

Romer (1986) argued that, to a large degree, this apparent decline in volatility was a figment of the way the original data were constructed. In particular, in constructing his annual series, Lebergott assumed (among other things) that deviations in employment followed one-for-one deviations in output. Romer invoked Okun’s law, arguing that the true relationship was more like 1:3. Constructing post-war series by replicating (as close as possible) Lebergott’s procedures produced a new series that was not less volatile than the pre-war series, thereby contradicting the stylized fact that the macroeconomy became more stable over time. This was, needless to say, a controversial conclusion, with many subsequently weighing in. Now that the dust is settled, my own view — a view I think that many share, although I could be wrong — is that there is definitely something to Romer’s argument; at the very least, she demonstrated (as she claimed in her original article) that before one draws conclusions from historical time series, one should be very familiar with how the series are constructed. Chapter Four ends with another of Lebergott’s meditations on the alleged constancy of aggregate parameters — in this case, factor shares.

Chapter Five (“Some Inferences”) concludes the narrative portion of the book. It repeats the book’s earlier mantra that “Yankee ingenuity” and initiative, especially that embodied in immigrants, were central to American success as opposed, say, to “factor endowments.” It ruminates on how highly mobile labor influenced the choice of technique, in ways familiar to the first generation of cliometricians, especially those who found H.J. Habakkuk a source of (repeated) inspiration. It notes how “thickening markets” made finding continuous work easier over time, reducing the wage premium associated with unemployment risk. Today’s economic historians, infatuated with “institutions” v. “geography” would probably disagree with the emphases in the chapter but I think there is much to admire in Lebergott’s “inferences.”

Some economic historians make their mark as much through their graduate students as their writings. Lebergott spent his academic career in a liberal arts college and did not, therefore, directly produce graduate students like a William Parker, Robert Fogel or (more recently) Joel Mokyr. In certain ways he was an outsider to economic history, an economist with a vast and deep appreciation for history in all of its flavors, who saw the past for what it can say about the present, not as an end in itself like a more “traditional” historian would. Compared with other classic works of cliometrics such as Fogel’s Railroads and American Economic Growth or North and Thomas’s The Rise of the Western World, Manpower‘s quirkiness can be a frustrating, more suitable for dabbling than a sustained read. By today’s standards the book falls short in its treatment of racial and ethnic differences (gender is more balanced) although this would hardly distinguish it from most other work in economics and economic history at the time. Yet Lebergott’s influence on economic history has been profound. There are few activities that economic historians can engage in of greater consequence than reconstructing the hard numbers. In this line of work Lebergott had few peers. Manpower put the labor force — people — at the center of economic history, not the bloodless “agents” of economic models but real people. As if to underscore this, the style asserts, like a triple fff in music: a real person not a (bloodless) “social scientist” wrote this book, one in deep and abiding awe of the economic accomplishment of his forbearers.

References:

Darby, Michael. 1976. “Three and a Half Million US Employees Have Been Mislaid: Or, An Explanation of Unemployment, 1934-1941,” Journal of Political Economy 84 (February): 1-16.

Finegan, T. Aldrich and Robert A. Margo. 1994. “Work Relief and the Labor Force Participation of Married Women in 1940,” Journal of Economic History 54 (March): 64-84.

Goldin, Claudia and Kenneth Sokoloff. 1982. “Women, Children, and Industrialization in the Early Republic: Evidence from the Manufacturing Censuses,” Journal of Economic History 42 (December): 741-774.

Kesselman, Jonathan R. and N. E. Savin. 1978. “Three and a Half Million Workers Were Never Lost,” Economic Inquiry 16 (April): 186-191.

Lebergott, Stanley. 1964. Manpower in Economic Growth: The American Record since 1800. New York: McGraw-Hill.

Lebergott, Stanley. 1986. “Comment,” in Stanley Engerman and Robert Gallman, eds., Long Term Factors in American Economic Growth, pp. 671-673. Chicago: University of Chicago Press.

Margo, Robert A. 1991 “The Microeconomics of Depression Unemployment,” Journal of Economic History 51 (June): 333-341.

Margo, Robert A. and Georgia Villaflor. 1987. “The Growth of Wages in Antebellum America: New Evidence,” Journal of Economic History 47 (December): 873-895.

Romer, Christina. 1986. “Spurious Volatility in Historical Unemployment Data,” Journal of Political Economy 94 (February): 1-37.

Weiss, Thomas. 1986. “Revised Estimates of the United States Workforce, 1880-1860,” in Stanley Engerman and Robert Gallman, eds., Long Term Factors in American Economic Growth, pp.641-671. Chicago: University of Chicago Press.

Robert A. Margo is Professor of Economics and African-American Studies, Boston University, and Research Associate, National Bureau of Economic Research. He is also the editor of Explorations in Economic History.

Published by EH.NET (February 2006)

Robert William Fogel, The Slavery Debates, 1952-1990: A Retrospective. Baton Rouge: Louisiana State University Press, 2003. ix + 106 pp. $23 (cloth), ISBN: 0-8071-2881-3.

Reviewed for EH.NET by Leonard Carlson, Department of Economics, Emory University.

This short book by Nobel Prize winner Robert Fogel gives a survey of the historical literature published before 1990 about the economics of slavery, the economy of the South before 1860, and the origins of the emancipation movement. This book is a tour de force that gives Fogel’s judgments about which issues are settled and his view of a new consensus about southern economic history.[1] I can only mention a few highlights in what follows. The book has a bibliography but no footnotes and a reader seeking citations for some of the points made in the book will need to search the bibliography or look at the earlier Without Consent or Contract. There are three main chapters: “Breaking Away from the Phillips Tradition,” “Coming to Terms with the Economic Viability of Slavery” and “Toward a New Synthesis on the Shaping of American Civilization.”

Fogel sees the debate about the nature of slavery in the South as part of a larger intellectual debate between the “old” anthropology (which saw races as being innately superior or inferior) and the “new” anthropology of Franz Boas (which saw human beings as innately equal but shaped by different cultural circumstances). To Fogel World War II was in part a struggle between the “old” anthropology (championed by the Nazis) and the “new” anthropology (championed by the allies, including the United States). This gives a new twist to Keynes’ observation that madmen in authority distill their ideas from “academic” scribblers. The paradox for the U.S. was that it fought the Nazis at the same time that it practiced segregation in its own army and at home, a contradiction that had be resolved after World War II.

Chapter one begins with a discussion of U.B. Phillips, whose work published in the early twentieth century dominated the scholarly work on slavery for many years. Fogel condemns the racism in Phillips’ research (the old anthropology), but praises him for setting forth a number of interesting hypotheses, many of which have held up to recent research. Phillips concluded that masters in the South treated slave relatively well and that slavery itself was an unprofitable relic that lead masters to pursue status rather than profit. The view that slavery was unprofitable and a burden on the economic development of the both South and the U.S. became embedded in the work of progressive historians such as Charles and Mary Beard. This view was also embraced by historians with a Marxist emphasis. Kenneth Stamp in a 1952 article (hence the date in the title) and his 1956 book, the Peculiar Institution, launched a major challenge to the dominant interpretation. Unlike Phillips, Stamp argued that slaves were treated in a harsh and more dehumanizing manner. In 1957 Conrad and Meyer added a new dimension to the historical debate by using theory and data to address the old question of whether slavery was profitable. Scholars also pursued other lines of inquiry that have helped shape a revised view of slavery and the anti-slavery movement. For example, John Blassingame, John Hope Franklin, and Eugene Genovese explored the development of a separate black culture under slavery. Other scholars began to explore the impact of evangelical religion on American life.

The second lecture deals with debates about the economics of the slave system and the treatment received by slaves in the South. Much of the discussion was generated by challenges to conclusions reached either by Conrad and Meyer or Fogel and Stanley Engerman in Time on the Cross. Conrad and Meyer concluded that an investment in a slave could have earned a master a normal rate of return — that is, slavery was profitable. This result was very controversial to many scholars in the 1950s and 1960s and their results were challenged in a variety of ways. The conclusion that in static terms slavery was profitable is now generally accepted by economists, however, as is the conclusion that per capita incomes were growing in the South up to the Civil War. In Time on the Cross, Fogel and Engerman went further and concluded that slavery in the South was a viable, flexible form of capitalism. They also found that slaves had a standard of living and level of treatment by masters that were not as harsh as Stamp had claimed. This set loose a torrent of criticism, much of it very hostile. Fogel concludes that in the end there were no losers from all the controversy. Fogel does, however, cite a letter to him from John Meyer that asks rhetorically “… how would you react to listening to one hour of fairly substantive implications that you lacked sensitivity to the race issue?” I don’t think that it is too big a leap to conclude that Fogel himself relates very well to Meyer’s rhetorical question in light of some critiques of Time on the Cross.

Fogel and Engerman were the first to argue that farms in the South in general, and slave plantations in particular, were an average more efficient than northern free farms, based on a sample of farms drawn from the census. Their conclusion was hotly debated in scholarly journals. Over time the argument was refined into a claim that there were economies of scale in gang labor on plantations. Some recent empirical studies support that conclusion and Fogel sees the issue as settled. I expect that we have not seen the end of research on this topic, however.

One particularly controversial set of issues raised in Time on the Cross concerned the argument that slaves had won for themselves a better standard of living than Stamp had claimed. In discussing these issues, Fogel gives special attention to the work of Stephen Crawford and Richard Steckel, two of his former graduate students. Using evidence from interviews with former slaves recorded in the 1930s, Crawford found that there was more stability in the typical slave family than earlier research had concluded. Slaves on large plantations fared better than those on small plantations, which might explain some differences with earlier research. Data on slave heights analyzed by Steckel show that slaves were well fed and lived long lives, once they were old enough to work in the fields. Slaves were not well-fed as children, however, (there was apparently little protein in the diet) and slave mothers were often required to work hard during the first and third trimesters of pregnancy, which had adverse effects on both mother and child.

In Fogel’s opinion from the Civil War to present the traditional condemnation of slavery, the “Republican indictment of slavery,” rested on the assumption that slavery was inefficient. However, the fact that slavery was profitable does not make it a just or moral system. In place of the older view, Fogel argues that slavery was immoral because it: 1) gave one group of people legal rights to exercise personal domination over another; 2) denied slaves economic opportunity; 3) denied slaves citizenship; and 4) denied slaves cultural identification.

The third section, “Toward a New Synthesis on the Shaping of American Civilization,” addresses the abolition movement and the end of slavery. Progressive historians had downplayed morality as a cause of the Civil War. In this view, the South blocked needed changes and a northern victory was essential for America’s rise as an industrial power in the later part of the nineteenth century. But if slavery wasn’t dying out and the North was not held down by the South, why did the anti-slavery movement ultimately succeed and why did the North fight to keep the South in the union? In contrast to the economic origins emphasized by the progressive historians, Fogel argues that the slavery issue became an important issue because many people saw slavery as against the wishes of God. This view grew out of the moral sensibility that arose out of the evangelicalism that resulted from the “second great awakening” in the 1830’s. This religiously-based condemnation of slavery led to heated political debate about whether slavery should be allowed in new territories in the West. The Whig party split into northern and southern branches over the issue and faded from national importance.

The 1850s also saw increased hostility toward immigrants, especially Catholic immigrants, by native workers who feared that they would lose their jobs to new workers willing to take lower wages. This tension was further fueled by economic recession in the mid 1850’s. One result was the growth of the nativist Know Nothing Party which was opposed to immigrants and Catholics. Fogel argues that enterprising politicians in the 1850’s blended the anti-slavery movement, anti-immigrant fears and remnants of the Whig Party to form the ultimately successful Republican Party. The Republicans rallied around the cause of keeping slavery out of western territories. Southerners responded to these attacks on slavery in the territories by trying ever harder to allow slavery to spread. Fogel’s nuanced view is sure to stimulate interesting new research — as will his emphasis on the impact of religious movements on political reform.

Undoubtedly this short book will be widely cited and should be read by anyone interested in the economic history of slavery or, indeed, the economic history of the United States.

Note: 1. This is the fourth major review of the literature on slavery and the South by Fogel. A reader new to this literature would benefit by looking at all of them, since each covers somewhat different topics and a reader can see the evolution of Fogel’s thinking. These are found in Reinterpretation of American Economic History (1971), Time on the Cross (1974), and Without Consent or Contract (1989).

Leonard Carlson teaches a course on the political economy of the U.S. South. His research interests are in the economic history of the United States, the economics of federal Indian policy, applied microeconomics, and labor economics.