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

A Free Nation Deep in Debt: The Financial Roots of Democracy

Author(s):Macdonald, James
Reviewer(s):Wright, Robert E.

Published by EH.NET (May 2006)

James Macdonald, A Free Nation Deep in Debt: The Financial Roots of Democracy. Princeton: Princeton University Press, 2006. ix + 564 pp. $20 (paperback), ISBN: 0-691-12632-1.

Reviewed for EH.NET by Robert E. Wright, Stern School of Business, New York University.

Storied trade publishing house Farrar, Straus and Giroux (FSG) published A Free Nation Deep in Debt in cloth in 2003 but did not see fit to send a copy to EH.Net for review. Princeton University Press, the publisher of the new paperback edition technically reviewed here, is taking closer aim at the scholarly market. That is likely a good call. Though ably written, this book is closer in tone, density, and substance to a scholarly tome than a bookstore blockbuster. Likely, FSG was attracted to the book’s Niall Ferguson-esque Big Thesis: Democracies eventually defeat autocracies because “countries with representative institutions are able to borrow more cheaply than those with autocratic governments” (p. 4). Bond markets also strengthen democracies internally by giving citizens some of the proverbial power of the purse and by aligning their interests with those of their governments. Heady, important stuff.

To prove his thesis, James Macdonald, a British investment banker and independent scholar, has written a wide-ranging survey of the co-evolution of representative governments and public debt markets. He starts with the Old Testament, which he uses as a primary source to explicate the transition of societies from a Lockean state of nature to autocracy. Small family groups that highly valued leisure were subsumed or slaughtered by larger and more powerfully organized autocracies that forced their subjects through taxation to create economic surpluses. Autocracies soon came to control much of the ancient world but found it impossible to control the vast expanses of Asia, the forests and fjords of Northern Europe, or the jungles of Africa. A few small city states, often strengthened by alliances with other nearby cities, also managed to hold off the imperial advance for a time.

The ancient autocracies financed wars from savings, their legendary “treasure troves,” and equity contracts that divided the spoils of war. The democratic city states, by contrast, borrowed to fund resistance to imperial encroachments. “The picture that emerges,” however, was “not of a regular system of public finance, but of a series of improvised reactions to fiscal emergencies” (p. 36). The ancient Greeks, for example, moved toward modern public credit but never explicitly connected “the principle of voluntary contribution to the public funds and the principle of distribution of surplus assets” (p. 36). The result was a dizzying array of debt instruments, some forced and some voluntary, some paying interest and others not, most short-term but some in the form of life annuities. The Greeks sometimes found it difficult to honor their obligations but the extant documentation is too sparse to say anything more definitive about their creditworthiness.

Modern public finance had to await the emergence of a different group of city states some 1,500 years later in the northern Italian peninsula. There emerged, for the first time since the fall of Carthage, a group of states run by merchants instead of soldiers. Desperate to maintain their freedom from regional despots, the representative governments of Venice, Florence, and Genoa hit upon the notion of repayable taxes, levies upon which interest would be paid if the government’s finances allowed. To evade the Church’s then stringent usury prohibition, repayment of the principal sum was left at the pleasure of the government. The Venetians circumvented that inconvenience by making the right to receive the tax repayments transferable to third parties, which quickly led to the creation of a secondary market. “They had invented the bond market” (p. 77) as Macdonald writes, but the Italian city states did not regularly pay interest on their repayable taxes, the market prices of which spiraled downward. City states in northern Europe eventually improved upon the Italian model by avoiding forced loans and repayable taxes and religiously servicing their debts. The Dutch Republic was the major innovator here.

Medieval and Early Modern European autocrats also borrowed but almost invariably eventually defaulted. Unsurprisingly, they could not borrow as much or as cheaply as the Dutch, who won their independence by wearing down the once mighty Hapsburg Empire. By the end of the 80-year struggle, a majority of Dutch households were creditors to their government. Default, rebellion, or large scale tax evasion became unthinkable because the interests of the government and the citizenry were thoroughly intertwined.

After revolutions of their own in 1688 and 1776, the British and the Americans adopted Dutch-style finance, funding their wars in large measure by selling bonds to citizen creditors rather than resorting to punitive levels of taxation, ruinous inflation, or physical coercion. The democracies thrived, while autocracies in France, Germany, Russia, and elsewhere lost wars and rebellions. By World War II, however, government wartime financial techniques, including financial repression, rationing, and payroll deduction, had become so powerful that the great patriotic bond drives of earlier wars lost much of their importance. The wartime financial system of that greatest of autocrats, Adolf Hitler, looked eerily similar to that of the United States.

If Macdonald is right — and there is more than a little truth in this book — then adherents of the English “Country” and American Jeffersonian Republican traditions exaggerated the negative aspects of national debts. Far from endangering democracies, national debts bolstered them by enabling them to defeat powerful external and internal foes. Eternal interest was as much the price of liberty as eternal vigilance.

Authors who dare proffer such a Big Thesis confront numerous tradeoffs, the most important of which is that between depth and breadth. A twenty-page bibliography is always impressive, but less so for a book that covers several millennia of finance, government, and politics. Specialists will likely be disappointed with the treatment of their areas of expertise. (I cringed at several points in his discussion of the early U.S. monetary and financial systems.) But readers should concentrate on the forest rather than the trees and judge this ambitious and important book on its panoramic vision.

Robert E. Wright teaches business, economic, and financial history at the Stern School of Business, New York University. His most recent books include The First Wall Street: Chestnut Street, Philadelphia, and the Birth of American Finance (Chicago, 2005) and Financial Founding Fathers: The Men Who Made America Rich (Chicago, 2006, with David J. Cowen). He is currently working on a book tentatively titled Financing Freedom that will describe how the entire financial system, not just the government securities market, enabled America to vanquish its most dangerous enemies at home and abroad.

Subject(s):Military and War
Geographic Area(s):General, International, or Comparative
Time Period(s):General or Comparative

Old Masters and Young Geniuses: The Two Life Cycles of Artistic Creativity

Author(s):Galenson, David W.
Reviewer(s):Ekelund Jr., Robert B.

Published by EH.NET (May 2006)

David W. Galenson, Old Masters and Young Geniuses: The Two Life Cycles of Artistic Creativity. Princeton, NJ: Princeton University Press, 2006. xv + 233 pp. $30 (cloth), ISBN: 0-691-12109-5.

Reviewed for EH.NET by Robert B. Ekelund, Jr., Department of Economics, Auburn University.

David Galenson has repeated the hypothesis he examined in Painting Outside the Lines: Patterns of Creativity in Modern Art (2001) — that some great artists did path-breaking work at early ages while others created seminal art only later in life. This time, however, sculptors, poets, novelists and movie directors are said to be included in these two cohorts.

At base, Galenson believes that he has found a “new understanding of the life cycle of human creativity.” The basis of this new understanding is set out in Chapter 1 of his book. Again, as in virtually all of his previous and contemporaneous work, Galenson bifurcates art and other creative endeavors into two types — the “experimental” and the “conceptual.” According to the author, experimental innovators “repeat themselves, painting the same subject many times, and gradually changing its treatment in an experimental process of trial and error.” The epitome in the world of art, according to Galenson, is Paul Cezanne. In contrast, the conceptual artist makes “innovations motivated by the desire to communicate specific ideas or emotions,” with goals stated precisely before an image or “process” is produced. After this, their role is essentially finished. Lots of advance planning goes into this esthetic and Pablo Picasso is offered up as an exemplar of this type of artist. Galenson then argues that experimentalists produce their “most important ideas” late in their careers, while conceptual artists get to the same point much younger in their careers.

In Chapter 2, Galenson presents what he calls “evidence” for the above proposition(s). He examines auction prices and age-price profiles, textbook illustrations, museum collections and retrospective exhibitions for Cezanne and Picasso. Galenson then maintains (with good reason) that a binary division of the theory above will not do because there are “continuous” variations in art practitioners — “extreme and moderate.” With admittedly interesting and carefully selected anecdotes, the author further amends his initial proposition. Now, Galenson conjectures, “it might be hypothesized that extreme conceptual artists will tend to achieve their major contributions earlier in their careers than any other type of innovator” (p. 55, emphasis added) and, further, that “it may be possible for conceptual artists to evolve gradually into experimental ones, [but that] it is not likely that experimental artists can change into conceptual ones” (p. 60). There are, as Galenson tacitly admits, many exceptions to his theory.

Chapters 4 and 5 tackle, respectively, the implications of his theory (or theories) and its application to Old Master works. The globalization of modern art is caused, he argues, by the increasing dominance of conceptual art in the post-World War II era. The era of “isms” and experimental art was a product of the increasingly abstract art developing in Europe and America in the era of Abstract Expressionism and European modernism. The author concludes that “the dominance of conceptual approaches to fine art in the recent past has clearly served to accelerate the spread of new artistic ideas” (p. 93). Old Master painters, however, do not escape Galenson’s attention. Here he purports to show (given reproductions of their works in textbooks on art history to show “peak value”) that in three out of the ten of the most reproduced paintings the artists were “conceptual” and were below 30 years of age (one, Vermeer, was 29). For the remainder, alleged to be “experimental,” however, only three were 46 or over and three were in their thirties. One artist, Frans Hals, skews the data with age given at 79/84. The issues are “How old is old” and how can a sample of 9 artists tell us anything about the distinction Galenson is attempting to draw?

Chapter 6, the unique part of the book, pushes the distinction between conceptual and experimental innovators into other realms. Using highly selected individuals, quotations and interpretations, Galenson examines seven sculptors and eight poets, authors and film directors. Consider some of Galenson’s observations. With respect to writers: “Conceptual writers are more likely to base their works on library research and to strive for precise factual accuracy, whereas experimental writers typically rely on their own perceptions and intuition” (p. 134). Conceptual film directors, using the same logic, “often avoid linear narrative and conventional story lines” (p. 150), while experimental directors stress the importance of telling a story with a clear narrative. Distinctions such as these are so fuzzy and the samples used to produce credence for them so small that almost any close and selected biographical synopsis could produce any desired result.

Galenson reveals a certain depth of erudition and research in all this. Unfortunately there is no theoretical or empirical foundation to the main argument. There is no clearly demonstrable distinction between conceptual and experimental thought processes in art, music or any other kind of creative activity. Cherry-picked quotations and exhibitions aside, Galenson has not clarified the argument that creative thinkers can be dichotomized into seekers and finders. Anyone who has known a working artist (or poet) would recognize that these two processes are not divisible and, indeed, are often inextricably intertwined within the same work.

Measurement, if one can call it that, consists of anecdotes that Galenson selected to support the dichotomy. For example, age distributions of artists clearly matter if one is to use ex post rationalizing of peak valued work. Some artists die young, others do not. Most Old Masters had far more limited life spans, making peak value productivity a logical impossibility at older ages. Highly selected samples of artistic works do not help his argument either. There are many “great film” lists. Virtually all put The Godfather and Raging Bull on or near the top of the list. But Francis Ford Coppola and Martin Scorcese, clearly experimental directors in Galenson’s scenario, were only 33 and 38 at their executions. Consider another example. Was W. A. Mozart “conceptual” or “experimental” and would he have produced “peak valued” work had he composed to seventy years old? The point is that Galenson’s samples are simply inadequate. These and many other factors have an effect on outcomes. Plentiful exceptions to the experimentalist/older-conceptual/younger theory make the theory unbelievable. An added complexity to the theory of “extreme” and “moderate” does nothing to untangle this false dichotomy.

It may well be that there are different forms of creativity and that, in general, some genre of conceptual — often coupled with a “con” — art has replaced earlier forms. But in the art world there are other and likely better explanations than an artificially divided creative impulse. Post-World War II demand factors with lightening-fast taste changes is one reason and the use of “art as an investment” is another. These factors clearly have had an impact on auction prices, museum exhibitions and the “story” of art. The new seventh edition of the best-selling Jansen’s History of Art: The Western Tradition illustrates how the story of art history can be retold and retold in multiple ways and with different illustrations and emphases. The increased pace of conceptual artistic endeavor may also have much to do with the incentives of abstract artists in particular and the vastly lowered transactions cost in artistic “communications” of all types.

Galenson’s book, to be fair, is entertaining and informative in its own way and the study of factors affecting creativity is interesting. Unfortunately his study of bifurcated creativity will require a well-executed theoretical and empirical study to make any of his conclusions believable.

Robert B. Ekelund, Jr. is Edward and Catherine Lowder Eminent Scholar (Emeritus) in the Department of Economics at Auburn University and Acting Director, Jule Collins Smith Museum of Fine Art at Auburn University. He is the author of numerous papers on political economy, including studies in the Journal of Cultural Economics. He is the author of fourteen books, including The Marketplace of Christianity (MIT Press, forthcoming 2006) and is an amateur artist.

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

The Agrarian Origins of Modern Japan

Author(s):Smith, Thomas C.
Reviewer(s):Saito, Osamu

Classic Reviews in Economic History

Thomas C. Smith, The Agrarian Origins of Modern Japan. Stanford: Stanford University Press, 1959. xi + 250 pp.

Review Essay by Osamu Saito, Institute of Economic Research, Hitotsubashi University.

A Peasant Economy and the Growth of the Market

In the 1950s, when the late Professor Thomas Smith wrote this book, peasant farming was portrayed as a mode of production and livelihood incompatible with the market economy. Japan before Meiji was regarded as a typical example of such peasant economies. As Smith notes in the opening sentence of the book, this was to some extent true because “In the course of its long history, Japanese agriculture has in some respects changed remarkably little”: farming was a family enterprise, holdings tiny and fragmented, and cultivation methods simple — all features of a typical peasant society. Of course, there were some changes but they were never as dramatic as the agrarian changes the West experienced, so that for many scholars “it is tempting to dismiss as unimportant such changes as in fact have taken place.” Against this historiographical background, Smith argues in the book that the changes that actually took place in Japanese history, especially in the Tokugawa period (1603-1868), were in fact of great importance. His argument is that “their central feature was a shift from cooperative to individual farming” and that “if one of its causes may be singled out as especially important, it must be the growth of the market” (pp. ix-x; emphasis added).

The book is about these changes and, based largely on a body of evidence uncovered by Japanese historians, traces their social and economic consequences. It begins with a model of the traditional village society in the seventeenth century, which is set out in Part I. At the core of village society, according to that model, was a large landholder’s domestic group. It was composed of three concentric circles with the inner one being the family of the holder, the main household. The second circle consisted of a group of relatives outside the direct line of descent, and the third circle of hereditary servants and similar subordinate persons who were related to the holder by neither blood nor marriage but were nonetheless registered as part of his family group. In every village such large holder households were not many; only a few took this form of “extended family.” Other villagers were all small holders whose family form was, according to Smith, in most cases “nuclear”; and they were in all likelihood households created by partitioning. Since the partition of family land, even when practiced, was never made on an equal footing, those “new” groups of branch-family households were bound to be small holders who had to rely on resources provided by the main household as well as the village itself. Thus the structure of the traditional village was both cooperative and hierarchical, with “clusters of interdependent interests that clung together with great force and were broken up only when competitive inducements of trade began, much later, to dissolve the internal ties” (p. 54).

Such “competitive inducements” came from market growth in the countryside, which, it is suggested, was concomitant with urban growth. Thus, Smith begins Part II with a survey of the extent of commercial farming (cultivation of cotton, indigo, mulberries, oilseeds, tobacco, and other cash crops) and farm family by-employment (spinning, reeling, weaving, straw plaiting, etc.), both of which are supposed to have spread in the rural provinces during the eighteenth and nineteenth centuries. Then in the subsequent chapters Smith traces the consequent changes: how agricultural technology changed, how labor was transformed, how wealthy landlords emerged within the village society, and how the traditional ties between households dissolved. The underlying tendency in the eighteenth and nineteenth centuries was for some branch families and hereditary servants to become separate from the main household. They formed their own households. Their landholding was sometimes too small to feed themselves on the farm, but thanks to the expanding market economy, they were in all likelihood able to find either by-employment opportunities or wage jobs, or both, as former labor service was increasingly replaced by live-in servants on yearly contract, who were eventually substituted by workers employed by the day. Sometimes, especially in crisis years, they had to borrow money from large holders in the village with a parcel of land placed in pawn, which in many cases ended up with the loss of its holding right: they became tenants of the large holders. The latter half of the Tokugawa period saw their numbers increasing, but at the same time it is not unlikely that increased tenancy in turn allowed them to stay on the land. With these significant, if not revolutionary, tendencies established, Smith devotes the final chapter to relating them to the making of modern Japan, placing particular emphasis on what commercial farming and expanding labor markets taught peasants in relation to the forthcoming age of the factory.

The book’s major points, such as the supposition that the weight of non-agricultural income in the rural economy had become substantial by the early nineteenth century, have subsequently been confirmed by his own and other historians’ works (Smith 1969/88, Nishikawa 1987, Shimbo and Saito 2004). From an early twenty-first century vantage point, however, it is not surprising that the progress of research since then has made some of the other propositions no longer tenable. One such example is his description of a shift from “extended” to “nuclear” family. Each of the cooperative groups in seventeenth-century documents that he regarded as one large and complex family household was probably nothing but an estate organization accommodating several separate domestic groups together, most of which were family households in a much simpler form and possessed their own hearth and living space. As a unit of production, however, the structure of the seventeenth-century estate organization may have been not much different from what he described in the book: it was hierarchical and there were extra-economic ties between those households. On the other hand, the family form that he considered “nuclear” should now be taken to mean “stem family,” since by the term “nuclear” Smith meant a small family that had no lateral extension but tended to extend vertically. As far as the family system is concerned, therefore, there seems to have been little change throughout the Tokugawa period. What actually changed was the way in which farming was organized and its tasks carried out, which was not associated with a transformation in the system of family formation. Another point I have to make concerns the extent of urbanization and the role given to it as an engine of market growth. In the chapter on “The Growth of the Market,” Smith noted that “in the two centuries after 1600, urban population grew with astonishing speed” (p. 67). Probably it did as far as the seventeenth century is concerned, but we now know, from Smith’s own research work published later, that urban population did not grow in the one and a half centuries after 1700: Edo, Osaka and some of the castle towns even recorded a population decline. Market-led output growth — “Smithian growth” in recent terminology (named after Adam Smith) — that took place in the latter half of the Tokugawa period should now be considered “rural-centered” (Smith 1973/88; see also Shimbo and Saito 2004).

Such necessary revisions notwithstanding, The Agrarian Origins of Modern Japan remains a landmark achievement in Tokugawa economic history. It is not just because the book is still very informative and makes lucid reading, but chiefly because what Smith delineated with respect to “what changed” and “what remained unchanged” is largely accurate. Given the intellectual milieu of the 1950s and the 60s, however, this publication may have been considered a book about “what changed” only — a work fitting very nicely in the framework of modernization theses such as the rise of individualism and the transition from status to contract, since the “growth of the market,” the guiding concept of the book, has long been regarded as an important component of the modernization process.

However, Smith makes several important points that do not necessarily fit with the modernization scenarios. First, he makes it clear that Tokugawa Japan’s path of agricultural progress was distinctly different from the Western one, suggesting that they would never converge on a single model. As he describes in the chapter on “Agricultural Technology,” farm output rose with the expansion of commercial farming, which was closely associated with the more intensive use of fertilizers, widening plant varieties, proliferation of farming tools, and the extension of irrigation. The irrigation work, i.e. construction of dikes, ponds, ditches, devices for lifting water into paddy fields and for other purposes, required a substantial amount of capital, much of which was provided by overlords and wealthy merchants. At the same time, however, the construction work itself required a substantial input of labor. And all the other improvements in farming methods were also labor intensive. Some individual innovations may have reduced labor requirements per unit of cultivated land, but the overall effect was to intensify the use of labor. All this made farming even more labor intensive and the unit of farming even smaller, the characteristics that remained unchanged throughout the period from Tokugawa to Meiji. To put it differently, “the character of agrarian change [in Tokugawa and Meiji Japan] … was determined as much by what did not change about farming as by what did” (p. 208; see also Ishikawa 1978, Francks 1983).

Secondly, while Smith examines in detail the rise of landlord-tenant relations and its accompanying phenomenon of increasing differentiation of landholdings within the agrarian society, and also the processes of hereditary subordinates evolving into servants for yearly wages and of service agreements becoming from long-term to short-term contracts, thus describing a long-run transition to wage labor, he never speaks of the emergence of a wage earning class of landless agricultural labors. This may be interpreted as suggesting that those tendencies, together with the above-mentioned move towards the intensification in farming and the spread of non-agricultural by-employments in the rural districts, resulted in keeping the peasantry from disintegrating itself (Saito 1986).

Thirdly, therefore, all this “kept the agricultural population a relatively homogeneous class of small peasant farmers despite the presence of landlords and obvious differences in wealth; [and] it preserved the organic unity of the village community despite the growth of a nonfarming population within it” (p. 107). In other words, the coming of commercial farming and the associated growth of labor markets in the Tokugawa period did not signal the end of a peasant economy. Rather, in the Japanese past peasant farming evolved towards more uniformity as the market grew.

Thus, this 1959 book suggested that the Tokugawa peasant household, as an integral unit of production and reproduction, had a modus operandi distinctly different from those found for other early modern agricultural populations, and also that it emerged in the process of interactions with the growth of the market. Smith addressed this research question later when he worked on demography and on the history of time discipline (Smith 1977, 1986/88). In the first, he demonstrated how the Tokugawa peasant families tried, with a dim idea of family planning, to adjust their size and composition to alternating life-cycle stages and also changing economic circumstances, and in the second, how they developed a stringent sense of time discipline within the household in order to cope with the increased intensity of labor in farming and by-employment activities and, hence, an increased need for planning over the whole farming year. This latter point implies that Meiji Japanese workers did not need to be taught time discipline in the factory, which strongly suggests that there was continuity from Tokugawa to Meiji. In the former demographic study, Smith made a strong argument that Tokugawa peasants adjusted their family size and composition by means of sex selective infanticide. This provoked a debate, but as I have commented elsewhere (Saito 1989), the gist of his entire argument was that the Tokugawa peasant family household tried hard to balance its numbers with farm size and to secure the right composition in the family workforce, for which purpose infanticide was only one of the options accessible to the family. There were some other means of demographic adjustments such as abortion and the timing of marriage-out of non-inheriting children, as well as economic ones such as sending children, both male and female, into service in the village and in cities and towns, or getting them to take up an industrial by-employment at home. Those economic opportunities increased with the growth of the market, and with changes that accelerated after the Meiji reforms. This consideration, therefore, points to another element of continuity from the early modern to the modern period, the theme already explicit in the writing of The Agrarian Origins of Modern Japan.

Smith noted, retrospectively in the preface to a collection of essays he had published since the 1950s, that while writing on “how Japan became a modern society … with a generalized notion drawn from Western history of how much transformations occur,” he had “paid particular attention to factors that contributed to making modern Japanese society similar to but profoundly different from Western counterparts” (Smith 1988, p. 1; emphasis added). As such, therefore, his work collectively made a pioneering contribution to the on-going debates in global economic history.


Francks, P. (1983), Technology and Agricultural Development in Pre-war Japan, New Haven: Yale University Press.

Ishikawa, S. (1978), Labour Absorption in Asian Agriculture: An Issues Paper, Bangkok: Asian Regional Programme for Employment Promotion of the International Labour Office; reprinted in S. Ishikawa (1981), Essays on Technology, Employment and Institutions in Economic Development, Tokyo: Kinokuniya, 1-149.

Nishikawa, S. (1987), “The Economy of Choshu on the Eve of Industrialization,” Economics Studies Quarterly 38 (December), 323-37.

Saito, O. (1986), “The Rural Economy: Commercial Agriculture, By-employment and Wage Work,” in M.B. Jansen and G. Rozman, eds., Japan in Transition: From Tokugawa to Meiji, Princeton: Princeton University Press, 400-420.

Saito, O. (1989), “Bringing the Covert Structure of the Past to Light: Review Article of T.C. Smith, Native Sources of Japanese Industrialization, 1750-1920,” Journal of Economic History 49 (December), 992-999.

Shimbo, H. and O. Saito (2004), “The Economy on the Eve of Industrialization,” in A. Hayami, O. Saito and R.P. Toby, eds., The Economic History of Japan, 1600-1990. I: Emergence of Economic Society in Japan, 1600-1859, Oxford: Oxford University Press, 337-68.

Smith, T.C. (1969), “Farm Family By-employments in Preindustrial Japan,” Journal of Economic History 29 (December), 687-715; reprinted in Smith (1988), 71-102.

Smith, T.C. (1973), “Pre-modern Economic Growth: Japan and the West,” Past and Present 60 (August), 127-160; reprinted in Smith (1988), 15-49.

Smith, T.C. (1977), Nakahara: Family Farming and Population in a Japanese Village, 1717-1830, Stanford: Stanford University Press.

Smith, T.C. (1986), “Peasant Time and Factory Time in Japan,” Past and Present 111 (May), 165-197; reprinted in Smith (1988), 199-235.

Smith, T.C. (1988), Native Sources of Japanese Industrialization, 1750-1920, Berkeley: University of California Press.

Subject(s):Markets and Institutions
Geographic Area(s):Asia
Time Period(s):19th Century

The Emergence of Modern Business Enterprise in France, 1800-1930

Author(s):Smith, Michael Stephen
Reviewer(s):Hautcoeur, Pierre-Cyrille

Published by EH.NET (May 2006)

Michael Stephen Smith, The Emergence of Modern Business Enterprise in France, 1800-1930 . Cambridge, MA: Harvard University Press, 2005. x + 575 pp. $60 (hardcover), ISBN: 0-674-01939-3.

Reviewed for EH.NET by Pierre-Cyrille Hautcoeur, Ecole des Hautes Etudes en Sciences Sociales.

Michael S. Smith, associate professor of history at the University of North Carolina, proposes a synthesis on the emergence of big business in France in the tradition of Alfred Chandler. The book “seeks to explain how and why France acquired the roster of large corporate enterprises that would come to dominate France’s domestic economy and project French economic influence throughout Europe and the world over the course of the twentieth century” (p. 1). It “argues that the same forces that were giving rise to a new kind of very large, very complex business organization in the United States, Germany, and Great Britain between 1880 and 1930 were also at work in France” (p. 2), contrary to the idea of a special or a backward path for French economic development.

The book is well written and structured, revealing an exceptional knowledge of a large historiography and a capacity to organize it in a simple and mostly convincing narrative. It is also well presented, with minor typographical errors (usually in references to French names or publications, e.g. note 6, p. 501). The index includes all personal and firms names mentioned in the main text (not including the notes), as well as some analytical categories.

The book is divided into three parts and sixteen chapters, plus an introduction and a conclusion. Part one deals in less than one hundred pages with commerce, banking and transportation, in three chronological chapters (1800-1840s; 1850s-1870s; 1870s-1900s), with no discussion of the twentieth century.

Part two deals in two hundred pages with “the flowering of industrial capitalism.” It starts with seven chapters on particular industries (textiles, coal, iron and steel, “hardware, machinery and construction,” consumer goods, chemicals, “glass, paper and print”). It ends with a transversal chapter on “the new world of industrial capitalism” that deals with problems common to many industries and not dealt with elsewhere.

Part three analyzes in 160 pages the second industrial revolution and the beginnings of managerial capitalism, from 1880 onward. It includes four “industry based” chapters on the steel, electrical, automobile and “chemicals and materials” industries, and ends with a transversal chapter on “the new world of managerial capitalism.”

In order to make visible the method followed by the author, I will discuss a few chapters in more detail.

After an introduction in which the author presents a well-balanced (although not always up-to-date) synthesis on the “foundations for modern capitalism” before 1800, the first chapter centers on merchant capitalism, which it studies on a local basis and on an individual basis more than in terms of formal organization. It then follows the traditional historiography, sometimes missing the most recent works (even if it would be more consistent with its overall thesis, e.g., J.P. Hirsch, C. Lemercier). The role of the Haute-banque is presented in the conventional way.

Chapter two describes the interrelated revolutions in banking and transportation, which were grounded in Saint-Simonian ideas and networks during the Second Empire. The chapter clearly shows the role of the relationship between the government and these networks in these changes. It does not discuss the conventional wisdom, nor look at the organizational consequences of these relationships (government administrations were structured, not only business ones). The organization of the railroads is not really discussed, except for its “grande politique” dimensions. The internal organization of the banks is not discussed either, and the concept of a financial system is not introduced.

Chapter eight presents the chemical industry. Like most industry-based chapters, it is mostly organized as a succession of firms’ histories in relation with the invention of new products and processes, but says almost nothing of firm or market organization. Technological innovation seems the only important way to success, and its origins are not much discussed.

The transversal chapter 11 discusses three major themes: how industrial enterprises were financed, how they recruited and managed their labor force, and how they managed their external environment, especially the state. Finance and accounting practices are briefly described, but they are not analyzed as strategic choices and/or major explanations with responsibility for the varying success of firms or industries. The main conclusion is “the normality of the French industrial experience — that is, its similarity to the British experience” (p. 303) in finance, accounting and labor relations. As concerns the management of the external environment, the author concentrates on three subjects: tariff policy, competition policy and railroad policy (network subsidies and rate regulation). The precise organization of business and the instruments of its intervention in policymaking or in policy application (industry-level or local-level organizations, such as the chambers of commerce) is not examined (except, briefly, for the iron and steel, chemical and textiles industries, mostly in terms of restriction to competition). In the view of this reviewer, this chapter is too brief and comes too late in comparison with its strategic importance in understanding the rise of big business as a major economic phenomenon.

The third part focuses on those few industries in which French firms underwent a true Chandlerian revolution from the point of view of the author. Chapters on iron and steel, the electrical, automobile and chemical industries show how concentration, both through vertical and horizontal integration, allowed for the creation of important and complex organizations (although the internal organization is always treated only briefly).

One important question is whether the factors behind the smaller size of French firms had an impact on their efficiency and their ability to develop all the economies of scale and scope favored by Chandlerian business historians. These factors certainly included market sharing (in iron and steel), interlocking directorates and participation, and family firms’ preoccupation with secrecy and family control, all elements mentioned by the author but without providing a satisfactory answer to the above question.

Like chapter 11, chapter 16 has a crucial role and could well have been extended beyond its twenty pages. It discusses the creation of complex organizational structures, the growing role of professional managers and the new challenges in corporate policies that made them necessary. After a rapid presentation of the railroad’s pioneering role in organization, it presents the changes in management in industrial firms. It describes examples of divisional organization as early as the late nineteenth century, and emphasizes rightly the importance of holding structures from the 1920s onwards. It mostly insists on the rise of engineers as the main managers of French industrial firms, but discusses little their education, their efficiency, or the importance for their management style or their links with public administration. Overall, it suggests that new techniques of management or organization (including assembly lines) were already well developed in France prior to World War II.

The conclusion describes briefly the evolution of French big business in the second half of the twentieth century.

As a whole, the book gives a quite complete picture of French big (mostly manufacturing) firms in the nineteenth and early twentieth centuries. It reflects the many and important developments in the recent historiography of French business, and also its shortcomings, which explain most of the quibbles mentioned above.

Nevertheless, the reader (especially if he is an economic and not a business historian) could have expected something more. Although in the prologue, the author presents a short survey of (English-speaking) macroeconomic interpretations of French development, he is not really in a position to discuss the views expressed at the macroeconomic level. Some assertions such as “firm-level research demonstrated that French industry was more expansive and technologically advanced … than once thought” (p. 4), or “by the end of the nineteenth century, the activities [of the big firms] had become the focal point of economic life in France” (p. 324), suffer from a methodological bias, since the overall importance of big business in the economy is neither discussed nor compared to that in other countries. The book focuses on firms, not economic development, with an ambiguity since the only reason to discuss French firms separately is their link with French economic development. Bringing in more data comparing big firms with macroeconomic data (which exist at the industry level at least for the period after 1890) could have helped solve that problem. A short discussion of industries where big firms did not develop — and why — would also have been useful.

A second, related quibble: the international position of French firms is mentioned but little discussed, even though some of them had major international operations. If “it is with an eye to France’s eventual success in the late twentieth century that this book tells the story of the modernization of French business” (p. 5), one cannot but point out to the author that today’s big firms make most of their business abroad (not only by exports, but also by producing abroad), so much so that their impact on the French economy is sometimes questioned.

A third point, related to the two previous ones: the book is not very quantitative. It deals with a great number of firms, but provides little quantified comparisons among them (which could give way to typologies, for example) or between them and the rest of the economy or their foreign equivalents. The few tables (eight for the entire book, no figures) list the biggest firms in a given industry at a particular date; only the last two give some international comparison, and they provide few elements of comparison (total assets in general).

Fourth point: the relationship between French firms and the state is discussed in the very first chapters for the early nineteenth century, and somewhat in chapter 11, but almost never thereafter, although discussions of nationalization are widespread in the interwar period. The relationships between government and big business people or organizational practices are worth more discussion. The role of governments regulations (major in the 1930s), but also of semi-public bodies such as the chambers of commerce (important during the all period), is under-appreciated. (Actually neither the Code de commerce, nor the chambers of commerce, the commercial courts, nor the commerce minister appear in the index, even if some of them occasionally appear in the text.)

In conclusion, the book is a very useful synthesis for American students or scholars (French readers will find it strange that the discussion centers only on English-language historiographical debates, even if they are mostly based on French scholarship), more than an original contribution to our knowledge.

Pierre-Cyrille Hautcoeur is Professor of Economic History, Ecole des Hautes Etudes en Sciences Sociales and Research Fellow, Paris Jourdan Sciences Economiques (PSE) (joint research unit, CNRS-EHESS-ENPC-ENS). He specializes in monetary and financial history. His recent publications include “Efficiency, Competition and the Development of Life Insurance in France (1870-1939); or: Why Some People Don’t Trust Pension Funds,” Explorations in Economic History 41 (2004): 205-32; “Was the Great War a Watershed? The Economics of World War One in France,” in S. Broadberry and M. Harrisson, editors, The Economics of World War One (2005); and “Why Didn’t France Follow the British Stabilization after World War One?” (with M. Bordo), NBER Working Paper 9860, forthcoming in the European Review of Economic History.

Subject(s):Business History
Geographic Area(s):Europe
Time Period(s):20th Century: Pre WWII

Slavery and the Economy of Sao Paolo, 1750-1850

Author(s):Luna, Francisco Vidal
Klein, Herbert S.
Reviewer(s):Oakes, James

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.

Subject(s):Servitude and Slavery
Geographic Area(s):Latin America, incl. Mexico and the Caribbean
Time Period(s):19th Century

Russia’s Foreign Trade and Economic Expansion in the Seventeenth Century: Windows on the World

Author(s):Kotilaine, J. T.
Reviewer(s):Lazarev, Valéry L

Published by EH.NET (April 2006)

J.T. Kotilaine, Russia’s Foreign Trade and Economic Expansion in the Seventeenth Century: Windows on the World. Leiden: Brill Academic Publishers, 2005. xvii + 611 pp. $198 (hardback), ISBN: 90-04-13896-X.

Reviewed for EH.NET by Val?ry Lazarev, School of Business, University of Houston, Clear Lake.

This book by Jarmo Kotilaine offers a comprehensive study of the development of Russian foreign trade in the seventeenth century. The 600-page volume has absorbed an immense amount of material from both primary sources and non-English language research literature, often completely inaccessible in the West. The author worked through numerous archives in fourteen countries — from England to Russia — and hundreds of titles in eight (or more? — I lost count) languages to create a study that expands the literature on seventeenth-century Russia tremendously — not only its trade but also its government, diplomacy, and economic development in general.

The economic history of pre-Petrine Russia is largely unexplored territory (the work of Richard Hellie is a notable exception), in part due to the perception of the “old” Russia-Muscovy as a stagnant and autarkic entity that was passively waiting for the great czar-westernizer Peter I (1689-1725) to come and — as the famous Pushkin’s verse puts it — “cut the window into Europe.” The book’s title suggests immediately that Kotilaine is going to assail this stereotype: it was international trade that created Russia’s “windows” — and not only on Europe but on Asia as well — in the seventeenth century. In fact, points out the author, “the Petrine transformation was only possible after some of the key developments described here” (p. vii). Seventeenth-century Russia appears in an unusual perspective in this book: as a vibrant proto-industrial economy increasingly integrated into the European economy.

The “Windows on the World” metaphor organizes the heterogeneous information collected by the author in an efficient and reader-friendly manner. After a brief introduction, Chapter 2, “Russia’s Outlets to the World Markets,” takes us on a tour along the Russian border starting with the North — the sea routes originating in Arkhangelsk — and going counterclockwise all the way to Eastern Siberia — the overland routes between the expanding Russian frontier and China. While the purpose of this chapter is primarily to present the geographical background of the study, Chapters 5 through 8 repeat the same movement describing the evolution of trade in the North (Ch. 5), the Baltic trade (Ch. 6), the cross-border trade with Poland-Lithuania (Ch. 7), and growing commercial interactions with the Ottoman Empire, Persia, Central Asian khanates, and Qing China (Ch. 8). In addition to foreign trade per se, we learn about the growth of the nationwide domestic trade network that connected the key producing regions with Arkhangelsk in the North, Baltic ports in the West, and with Astrakhan in the South. The author aptly connects the dots to make far-reaching conclusions. The patterns of trade, he argues, suggest that the North-South axis (Arkhangelsk-Astrakhan) was critically important for Russia’s integration into the world economy. This is to a large extent due to the importance of Russia’s role as intermediary in trade between Asia and Europe, which arguably lies behind its Siberian expansion. At the same time, it was the growing importance of Western (Baltic) trade routes in the later decades of the seventeenth century that prompted Peter I to attack Sweden in 1700 and eventually defeat it, ending the Swedish domination in Northern and North Central Europe — not the other way around as the traditional view holds. Merchants therefore “can claim a great deal of the credit typically attributed to Peter I for opening Russia’s window on Europe” (p. 354).

Chapters 3 and 4, as well as the concluding Chapter 9, which largely elaborates on the themes of the former two chapters, fall out of the “windows” structure and present the evidence to support the major interpretative statement of the study, reiterated throughout the book in various contexts: Russia’s trade was driven by the growing international (primarily West European) demand for certain commodities that were or could be produced in Russia; this demand fueled the economic expansion in Russia in the seventeenth century, causing the domestic “supply response”; the engine of change was the entrepreneurship of foreign merchants. In the last chapter, the latter are nominated as the “midwives of an empire” for their decisive role in the integration of “the Muscovite economy in a global system of commerce” (p. 504), stimulating Russian manufacturing, supplying the Russian government with specie and arms, and helping to monetize the Russian economy on the whole. The instrumental role of Western merchants (primarily Dutch, thanks to their weaker attachment to silver than that of their mercantilist English competitors) is demonstrated convincingly in the book. However the inferred explanation of Russia’s economic expansion as driven by the growing world demand is deficient in a number of ways.

The author provides data on the growing volume of trade in certain commodities. But how can we tell whether this quantity growth was due to a shift in demand or supply? By looking at prices: the rising prices of Russian exports would support the thesis of the “demand-driven trade,” while the opposite dynamic would suggest that a positive supply shock underlies the expansion of trade. However discussion of prices is practically absent from the book. If reliable price data are unavailable, indirect evidence of the growing world demand for Russian products would support the author’s thesis. Chapter 3, “Demand-driven Trade,” is the place where we would expect to find it. It provides, indeed, a lot of valuable information on the parties involved in Russian trade with the rest of the world, trade-related diplomacy, and the policies of Russian government, but it turns out that the main indicator of the “growing demand” is the increasing volume of goods shipped by foreign merchants. From the standpoint of economic theory, this is irrelevant. If foreign merchants chose to naturalize in Russia — that is what increasing numbers of them were doing starting in the late seventeenth century — or if Russian-born merchants took over from the foreigners, would that automatically make Russian foreign trade “supply-driven”? Of course not. It was probably the government’s demand for revenue that resulted in pro-trade policies, no matter who the agents were. In some cases, the government found it convenient to sell licenses to foreign merchants; in others, it resorted to the tax farming services of domestic agents. The only instance of growing world demand discussed at length in the book is the demand for Russian grain resulting from the rising grain prices in Europe in the 1620-30s, but it does not yield support to the demand-side hypothesis: the author shows that Russia did not become a significant grain exporter. Production and exports of some commodities such as tar and potash was stimulated indeed by the demand of West European manufacturing, but the data provided by the author show that these goods did not account for a large share of Russian exports.

The lack of price data is probably the major shortcoming of the study, and this is very unfortunate since such data should be present in or at least could be estimated from the sources used by the author or may be available elsewhere. The author mentions in passing “extensive price data collected by R. Hellie” (p. 507; no citation is provided), which show that the “expansion of export trade resulted in virtually no inflationary pressures, suggesting that supply managed to keep up with demand.” This is certainly a possibility but other explanations are possible as well. First, the extent of foreign trade may have remained too low to affect domestic prices substantially. The author emphasizes the cases when export-oriented enterprises were launched, but there is no evidence that exports claimed a substantial share of output in many industries. Even in what seems to be the quintessential Russian exports — furs — the author estimates that only about one-third of the total was exported. Second, and more importantly, a supply shift is as likely to drive a constant-price economic expansion as a demand shift. Clearly, Russia was not the land of innovation, and foreign investment remained very limited throughout the century, and yet positive supply shifts could be realized in seventeenth-century Russia.

The seventeenth century was a period of sweeping political-economic change in Russia. A group of related institutional factors could have contributed substantially to cost reduction in many industries and the national economy on the whole. First, the enthronement of Mikhail, the first Romanov, in 1613 ended the turbulent decade of Smuta (“Times of Troubles”). In fact, the country rapidly reached the level of stability it had not seen for half a century since Ivan IV (“the Terrible”) had engaged in disastrous military adventures and domestic policies. The author shows that the costs of doing business in Russia had been almost prohibitively high for foreign merchants during Smuta due to robbery and government defaults, while the situation improved significantly afterwards. The stabilization, beneficial overall, could have had a profound impact on “high-tech” domestic industries such as the manufacturing of quality leather, iuft, which is shown to be the single largest export item (in value terms) in Russia’s Baltic trade. The author describes the iuft production as a success story that resulted from the increase in export demand. There is no obvious reason, however, why the European demand for this peculiar Russian product should have increased in the seventeenth century. At the same time, it easy to observe that a production process that takes weeks to complete is associated with high risk, and therefore political and macroeconomic stabilization in seventeenth-century Russia might have been the primary factor responsible for the expansion in this industry. Second, the seventeenth century was the time when serfdom was consolidated in Russia. Unlike the slave-like condition in which Russian serfs found themselves by the late eighteenth century, the milder seventeenth-century serfdom, by reducing transaction costs in agriculture without immobilizing labor completely, could have resulted in a growing supply of Russian export staples — flax and hemp. Finally, possible changes in Russian supply conditions should be considered against the backdrop of production possibilities that existed elsewhere. In other words, a discussion of Russia’s comparative advantage is needed. The author touches upon this matter, for example, when mentioning that the relative deforestation of Western Europe was adding to Russia’s comparative advantage in forestry-related products but a systematic discussion of this important issue is lacking. In fact, I never came across the term “comparative advantage” in the pages of the book.

It is impossible, therefore, to substantiate one of the central conjectures of the book without a more rigorous analysis of Russian markets, complemented by a discussion of contemporaneous market conditions in Western Europe. It is noteworthy, however, that despite the apparent strong belief in the demand-side interpretation, the author takes care to delineate historical evidence and the interpretation. Kotilaine supplies us with an enormous amount of information, which we are free to process ourselves and agree or disagree with the author. In two respects, the author leaves probably too much for the reader to accomplish: literature and data presentation. Readers of the book, especially students, would certainly benefit from a literature review in the beginning. Some sort of aggregation of trade statistics for the whole country — rather than just raw data by “window” (port or customs) — would clearly help the reader to see the big picture.

Summing up, this book by Jarmo Kotilaine is an outstanding piece of scholarship that has no analogs. Certain problematic positions notwithstanding, it is a great contribution to the economic history of Russia and has a broader relevance as a study of the role of international trade in modernization. This is a must-read for anyone interested in the history of trade, economic history of early modern times, and, of course, Russian history.

Val?ry Lazarev is Assistant Professor of Economics in the School of Business at the University of Houston, Clear Lake. His recent publications include The Economics of Forced Labor: The Soviet Gulag (co-editor and contributor) and articles in the Economic History Review, the Journal of Comparative Economics, and Comparative Economic Studies.

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

On the Great Plains: Agriculture and Environment

Author(s):Cunfer, Geoff
Reviewer(s):Gregg, Matthew T.

Published by EH.NET (April 2006)

Geoff Cunfer, On the Great Plains: Agriculture and Environment. College Station, TX: Texas A&M University Press, 2005. xii + 292 pp. $28 (paperback), ISBN: 1-58544-401-4.

Reviewed by Matthew T. Gregg, Gabelli School of Business, Roger Williams University.

How have farmers in the Great Plains from the early settlement period (roughly 1870) to the present interacted with the natural world? Considering all the economic upheaval and environmental crises that have occurred over this time, can one feasibly characterize their agricultural practices as sustainable? If Great Plains agriculture can in fact be considered sustainable, has land use varied substantially over these 130 years? These evocative questions are tackled by Geoff Cunfer, associate professor at the Center for Rural and Regional Studies at Southwest Minnesota State University, in On the Great Plains. Though it may seem inconceivable to characterize the history of Great Plains land use as stable, Cunfer uncovers a persistent theme in his research: Great Plains farmers surprisingly found an optimal mix between agricultural uses (in particular, plowing vs. pasture) quickly and maintained this mix within the limits of the natural environment for a surprisingly long period of time. Only occasionally, in particular during the mid 1930s, did farmers push the boundaries of this regional environment; however, they quickly returned to a “steady-state” land-use equilibrium. Cunfer forms this thesis through the adoption of primary sources such as personal diaries and newspaper articles, but the bulk of his analysis relies on decennial county-level census data from 1870-2000 for the area spanning from North Dakota to the northern tip of Texas.

In terms of the historical literature on Great Plains agriculture, Cunfer provides a middle ground between the progressive and the declensionist approaches. Webb (1931) asserted the popular Turnerian claim that the physical endowments of the Great Plains forced farmers to adapt, which eventually led to the formation of a distinct and puissant regional culture. This view has been challenged by social historians like Worster (1979) whose declensionist narrative described Great Plains agriculture as an ecological failure with profit maximization as the leading culprit of over-cultivation. As discussed in the Introduction, Cunfer suggests a more suitable historical narrative should assimilate Malin’s (1944, 1946, 1961, 1984) work on Kansas agriculture which stressed farmers’ general ability to adapt and create innovative solutions to resource scarcity over time. In particular, Cunfer blends together these two extreme approaches and summarizes Great Plains agricultural history in three components: (1) the rapid build-up of farm settlements from 1870-1920, which substantially altered the surrounding environment; (2) relative land-use stability from 1920 to 2000; and (3) the occasional transition in agricultural techniques which resulted in a quick shift away from this land-use equilibrium.

One of Cunfer’s innovations to this literature is the use of publicly-available county-level census data for roughly 450 counties contained in ten states (MT, ND, SD, NE, WY, CO, KS, MN, OK, and TX) from 1870 to 2000. From these data, Cunfer finds some interesting statistical trends. For example, over 70 percent of this total area has never been plowed, as the peak occurred in 1978 when only 28 percent of available land was used for crops. In fact, this equilibrium (20 to 25 percent of the total area for cropland) between pasture and plowing was remarkable stable from 1925-1997 (see Table 2.2, p. 26). How was this possible? Despite the economic incentives built into federal government schemes such as the Homestead Act and farm subsidies, Cunfer concludes that environmental variables, in particular rainfall and to a weaker extent temperature and soil quality, were the driving force behind land-use decisions.

Along similar lines, Cunfer incorporates personal diaries from farmers in Rooks County, Kansas and Floyd County, Texas with a large-scale analysis of all 450 Great Plains counties to prove that crop diversity has changed little over the last one hundred years. By segmenting these farm data into acreage devoted to food, fiber, feed, forage, and pasture, Cunfer creates a crop diversity index with 1 representing the most diverse county to show that a crop diversity equilibrium (between 0.8 and 0.9) was reached in 1920s and persisted to the present. This stability in crop mixes was also consistent within this large region as the eastern boundary always maintained a higher degree of crop diversity than the sandier western counties. Given the diminishing farm population and increased governmental assistance programs, the lack of any regional trend towards monoculture is a surprising result. Perhaps more surprising is that no crop ever reached 5 percent of the total acreage in any county at any time (p. 111).

Besides crop diversity and land use, Cunfer addresses other land-use issues such as grazing, the substitution of tractors for horses, the Dust Bowl, and environmental problems like water scarcity and soil erosion. In short, Cunfer finds that water chiefly influenced the distribution of cattle across the grassland. Cunfer also finds that while initial tractor adoption was slow, tractor adoption became rapid after World War I and its adoption only marginally altered crop mixes across all these counties. However, unlike other land-use measures, the depletion of the Ogallala Aquifer and the resulting soil erosion does not fit in neatly with his stability thesis. However, Cunfer provides the classic optimistic assertion over the water scarcity problem: “Farmers will eventually use up their underground water supply and will then be pulled back within natural limits imposed by climate” (p. 200).

Yet, of these remaining chapters, economic historians will probably be most interested in Cunfer’s discussion of the Dust Bowl. The Dust Bowl still remains an important environmental crisis and it is often a rallying point for federal government conservation programs. Cunfer adds to this literature by applying GIS maps to the entire Great Plains and interpreting comparative sand, rainfall, and temperature differential data to conclude that “human land-use choices were less prominent in creating dust storms than was the weather” (p. 163).[1] The localized portion of the Great Plains where dust storms were magnified contained substantially more sandy soil, only a small percentage of land devoted for crops, and the greatest degree of rainfall deficits from past trends. This non-exploitative argument contradicts the conventional wisdom which maintains that a massive plow-up followed the trail of increasing wheat prices and low cost of farming.[2]

With any narrative that makes such sweeping conclusions, it is easy to find issue with certain points. Given Cunfer’s surprising results regarding land-use stability, one may question if county-level data are the best way to analyze land-use trends in Great Plains agriculture. It is commonly known that farm subsidies disproportionately benefit large farms and given the recent increase in regional poverty, an analysis that incorporates farm-level data may lead to a more behavioristic approach to changes in Great Plains agriculture. For example, Hansen and Libecap (2004) provide an alternative explanation for the Dust Bowl which is based on the inability of the great number of small-scaled farmers to coordinate and invest in soil erosion controls. Unfortunately, this conclusion can not be directly tested using Cunfer’s approach. Also, by looking at trends in county-level land use, this may in fact be a “back of the envelope” approach of assessing the sustainability of Great Plains agriculture. Land use was stable because the supply of fertile land was inelastic, yet is this evidence of sustainable farming practices? Maybe analyzing changes in farm sizes or better yet, changes in total factor productivity (a statistical measure not estimated by the author) at the farm-level can provide more direct evidence on the types of agricultural practices that are more sustainable.

Without the rigor of most cliometric analyses, economic historians may not be initially convinced of these conclusions; however, Cunfer does raise many important issues especially given the current emphasis on sustainability. This narrative is well-written and each topic is supported with statistical analyses and collaborative primary source documents. Certainly, for an overview of the history of land use in the Great Plains, this book is well-suited for both economic and social historians.

Notes: 1. This general result is consistent with recent work by NASA scientists (see Schubert et al. (2004)) who stimulated the impact of radical changes in sea surface temperatures on rainfall and wind levels on specific regions of the Great Plains. 2. This view is contained in Egan’s (2005) popular new book on the social history of the Dust Bowl.


Timothy Egan (2005). The Worst Hard Time: The Untold Story of Those Who Survived the Great American Dust Bowl. Boston: Houghton Mifflin

Zeynep K. Hansen and Gary D. Libecap (2004). “Small Farms, Externalities, and the Dust Bowl of the 1930s,” Journal of Political Economy 112: 665-94.

James C. Malin (1944). Winter Wheat in the Golden Belt of Kansas: A Study in Adaptation to Subhumid Geographical Environment. Lawrence: University of Kansas Press.

James C. Malin (1946). “Dust Storms, 1850-1900,” Kansas Historical Quarterly 14: 129-44, 265-96, 391-413.

James C. Malin (1946). Essays on Historiography. Ann Arbor: Edwards Brothers.

James C. Malin (1984). History and Ecology: Studies of the Grassland, edited by Robert P. Swieranga. Lincoln: University of Nebraska Press.

Siegried D. Schubert, Max J. Suarez, Philip J. Pegion, Randal D. Koster, and Julio T. Bacmeister, (2004) “On the Cause of the 1930s Dust Bowl,” Science 303: 1855-59.

Walter Prescott Webb (1933). The Great Plains. New York: Grosset and Dunlap.

Donald Worster (1979). Dust Bowl: The Southern Plains in the 1930s. Oxford: Oxford University Press.

Matthew Gregg researches all aspects of the Cherokee Indian economy during the nineteenth century. He is currently writing an article titled “The Economic Costs and Consequences of Cherokee Removal” (joint with David Wishart). Recent publications of this research include “Market-Orientation and Cherokee Multi-Factor Productivity” in Essays in Economic and Business History. He teaches several courses in applied microeconomics, such as U.S. economic history and environmental economics.

Subject(s):Historical Geography
Geographic Area(s):North America
Time Period(s):20th Century: WWII and post-WWII

The Face of Decline: The Pennsylvania Anthracite Region in the Twentieth Century

Author(s):Dublin, Thomas
Licht, Walter
Reviewer(s):Boal, William

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.

Subject(s):Urban and Regional History
Geographic Area(s):North America
Time Period(s):20th Century: WWII and post-WWII

Historical Statistics of the United States, Volume Five: Governance and International Relations

Author(s):Carter, Susan B.
Gartner, Scott Sigmund
Haines, Michael R.
Olmstead, Alan L.
Sutch, Richard
Wright, Gavin
Reviewer(s):Libecap, Gary

Published by EH.NET (April 2006)


Susan B. Carter, Scott Sigmund Gartner, Michael R. Haines, Alan L. Olmstead, Richard Sutch, and Gavin Wright, editors, Historical Statistics of the United States, Volume Five: Governance and International Relations. New York: Cambridge University Press, 2006. xiv + 856 pp. $825 (for the five-volume set), ISBN: 0-521-85390-7.

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

When my daughter was young and used to go with me to the Government Documents section of the University of Arizona Library, she always thought of the place as “boring.” This volume of the new Historical Statistics of the United States is any thing but. It is for those who love and depend on government data and documents. It is loaded with all that a researcher might need, and then some. It is an essential research and reference tool. The editors are to be commended, as well as the contributors to the individual chapters in this volume. They have provided a public good that will advance the profession. Moreover, the narratives that precede the tables in each of the chapters are themselves wonderful with overviews of the data, bibliographic information, and interpretations of some of the key material. John Wallis’s discussion of “Government Finance and Employment” is especially useful because of the way in which he brings together the subsequent data, but all of the narratives in the volume are of similar quality. These narratives make this volume more than a reference work because it also provides interpretation and guidance. There are eight chapters, plus an appendix.

The first is “Government Finance and Employment,” edited by John Wallis. It includes federal, state, and local government expenditures, revenues, employment, expenditures by function, tax revenues of various types, and the federal debt. Chapter two, “Elections and Politics” is edited by John McIver. It has an excellent overview of U.S. politics, plus over two pages of references from political science that will be of use to economists and economic historians not familiar with that literature. The tables include the apportionment of the House of Representatives since 1787, voting participation, electoral votes cast by state in various presidential elections, party votes, presidential vetoes, and the make up of Congress by party since 1789. Chapter three, “Crime, Law Enforcement, and Justice,” is by Douglas Eckberg and Richard Sutch. The data tables cover crime rates and numbers by offense, arrests by ethnicity and race, suicide, homicides, prison population, drug and alcohol abuse, criminal justice expenditures, Supreme Court cases, as well as case loads of the federal and state courts. Chapter four, “National Defense, Wars, Armed Forces, and Veterans,” edited by Scott Sigmund Gartner and Hugh Rockoff, provides a bibliographic narrative and tables on military personnel by branch, casualties, selective service registrations, government defense expenditures, major battles, plus major conflicts with American Indians in the nineteenth century, number of veterans, and Veterans Administration expenditures. Many will find Chapter Five, “International Trade and Exchange Rates,” edited by Michael Edelstein, Douglas Irwin, and Lawrence Officer very helpful. There is an overview of trade patterns along with a definition of terms followed by data on the balance of payments, overseas investments in the U.S., foreign direct investments by Americans, export and import data by type, destination, and origin, and exchange rates. Chapter 6 provided by Sumner La Croix presents data on “Outlying Areas” — Alaska, Hawaii, Samoa, Guam, the Canal Zone and the Philippines. Population data as well as information on education levels, infant mortality, GDP, price indices, tourism, exports and imports are part of this chapter. Chapter 7, “Colonial Statistics,” is edited by John McCusker. His narrative is another favorite, with overviews of colonial history and over five pages of bibliographic references. Information on colonial population by age, sex, race, and servant status is provided, along with data on slave importation, wealth, wholesale prices, exchange rates, agricultural and fishery output, and international trade. Roger Ransom’s Chapter 8 on the Confederate States of America presents data on population, agricultural output, the money supply, prices, and bond issues of the Confederacy. The volume ends with one Appendix edited by Alan Olmstead and Richard Sutch on “Weights, Measures, and Monetary Values” for conversions; another appendix on “States and Census Regions” by Monty Hindman, and a final appendix, “Origin of Historical Statistics of the United States” by Carmel Ullman Chiswick. There also is an index to help guide the researcher through the data. This is a fantastic volume to an equally fantastic new edition of Historical Statistics.

Gary D. Libecap has just completed a book manuscript, Chinatown: Owens Valley and Its Meaning for Western Water, forthcoming from Stanford University Press. In July he will become Professor of Corporate Environmental Management in the Department of Economics and School of Environmental Science and Management at the University of California, Santa Barbara.

Subject(s):Urban and Regional History
Geographic Area(s):North America
Time Period(s):20th Century: WWII and post-WWII

The United States National Debt, 1787-1900

Author(s):Wright, Robert E.
Reviewer(s):Noll, Franklin

Published by EH.NET (March 2006)


Robert E. Wright, editor, The United States National Debt, 1787-1900. London: Pickering and Chatto, 2005. xlv + 1578 pp. (four volumes) $670 (cloth), ISBN: 1-85196-816-4.

Reviewed for EH.NET by Franklin Noll, Consulting Historian to the Bureau of Engraving and Printing.

The United States national debt is not an easy subject to study as there are probably less than a dozen worthwhile books on the subject, while the primary sources are legion and widely scattered. That is why back in April 2005, at the Economic History Society conference in Leicester, I was excited to come across an advertisement for an upcoming set of documents entitled, The United States National Debt, 1787-1900. At last, I thought, someone was taking the bull by the horns and attempting an in-depth look at this complicated and under-studied topic. I was consequently disappointed. The work does not live up to its broad, encompassing title. Instead of giving a comprehensive look at the history of the national debt, the collection presents a view that is limited in both scope and depth.

The United States National Debt, 1787-1900, edited by Robert Wright, is a four-volume set of texts (all facsimile reprints) bearing on the United States public debt that includes a general introduction, brief introductions to each text, and an index. The selections are arranged chronologically. Volume 1 contains the editor’s introduction and works on “The First National Debt,” covering the period between 1785 and 1801 and the establishment of the national debt. The next volume contains two documents: a review of European and United States economic history (1820) and the first half of a review of international finance by banker Bernard Cohen (1822). Cohen’s work, which is 544 pages long (around 60 pages of which pertain to the United States), continues in Volume 3. This volume also includes three works under the heading of “Antebellum Debt” that reflect contemporary concerns over defaults by some of the states. The last volume is subtitled “The Civil War Debt,” covering the latter half of the nineteenth century and such matters as inflation, the international market for bonds, and the complicated structure of the post-war public debt.

Wright’s view of the United States national debt is not clearly presented in his introduction, but it becomes apparent that Wright approaches the history of the national debt from a market perspective. Accordingly, the texts he has presented tend to focus on the varying state of the market, possible changes in the public debt’s structure, and the milieu of forces that affect bond market performance. Thus, we see works addressing market confidence, confusion over the structure of the public debt, arguments over bond rates at issuance, and the state of overseas markets. No doubt this reflects Wright’s interest in pursuing Richard Sylla’s argument that economic growth in the early national period was finance-led with the spark for growth coming from the creation of the national debt and a government securities market.

Viewed from this perspective, Wright’s collection has real merit. It opens a window onto the complexity of bond markets in the past. This is a service to not only public debt scholars but also to financial historians. Of special note is Wright’s inclusion of texts dealing with the overseas market for Treasury securities. At least five of the twenty-five texts in the collection deal with the foreign market for United States debt instruments or put the public debt in international perspective. Such views of the public debt are rarely seen. This is mostly because, as Wright points out, the overseas market was so small for most of the period covered in the collection (4: 439). However, the collection is entitled The United States National Debt, 1787-1900, not Readings in the United States Bond Market, 1787-1900; and much of what is the national debt is left unexamined.

Now, “national debt” is a fuzzy term. It has been used in the past to refer to everything from the public debt (Hamilton’s usage) to the total debt owed by all individuals, corporations, and governments in the United States. Prudently, Wright supplies his own definition of national debt (one which I agree with): “the acknowledged liabilities (things owed) of a sovereign government” (1: ix). However, Wright does not stick to this definition, but restricts his analysis to only one group of liabilities — those for which the government was wholly liable — the public debt. Wright does not appear aware that by the end of the nineteenth century “the acknowledged liabilities” of the United States included the public debt, railroad debt, and District of Columbia debt as well as liabilities to various Indian tribes, money and securities held in trust, National Bank redemption funds, and any number of odd funding adventures listed in the Treasury’s annual reports. As a result, a great range of important topics is left untouched. For example, can one really talk about nineteenth-century government financing without discussing railroads?

This focus on the public debt is only one way that the collection falls short of a full review of the national debt. Wright’s market perspective also works against any systematic look at the structure of the national debt, its larger role in the United States economy, and its political nature. Do not get me wrong; all these topics do get touched upon in the four volumes Wright has assembled. Given the inherent complexity of the national or even the public debt, it would be hard to create such a large collection and not bring up these items. My criticism is that these topics are not dealt with in a way that provides sufficient understanding and a more complete picture of either the national or public debt to the reader.

In terms of the national debt’s structure, somewhere the basics need to be discussed. The differences between the public debt and other forms of debt issued by the United States government need to be defined as well as the differences between a bond, a note, and the other securities used by the Treasury. Further, many fundamental questions have to be answered either through introductory material or selected texts to help make sense of the national debt and the market for bonds. These would include: Why are some securities denominated in foreign currency? Is United States currency debt? What is the circulation privilege? How were Treasury securities actually sold?

Briefly touched upon in Wright’s texts is the public debt’s interconnectedness with the rest of the economy. In various ways and to varying extents currency, banking, tariffs, taxes, and popular investing in bonds were influenced by the size and structure of the debt. The most conspicuous absence in the collection is a reference to the public debt’s relationship with the money supply after the Civil War. Though it is occasionally alluded to in the documents, the relationship between budget surpluses, the retirement of the public debt, resumption, and the money supply is never fully explained. Especially surprising is the lack of any real discussion of how National Bank circulation depended upon the existence of certain government bonds, a situation that put an upward pressure on bond prices. The only mention in the 1,600 pages of the collection is a one and a half-page section in a pro-government pamphlet put out by Jay Cooke in 1865 (4: 117-18).

There is also a relative neglect of political matters in the collection. The national debt has always been an ideological battleground or a club with which to bludgeon the opposition. Wright recognizes this to a point but some odd gaps exist in the collection. For example, while Wright presents texts that comment on the Federalist/Anti-Federalist debate over the role of the national debt in the future of the nation, I found it odd that there is no entry from Jefferson or Hamilton. There is also no entry on the elimination of the public debt under Jackson or the swirl of ideological forces manipulated and invoked during the episode. Further, almost no mention is made of the impact on the public debt of the silver controversy, especially since it spawned an awkward form of debt currency, the Treasury Notes of 1890.

However, Wright does touch upon the politics of debt management, an under-studied aspect of the national debt, when he presents the testimony of Secretary of the Treasury John Sherman before a House committee over the terms of the Funded Loan of 1881 (4: 353-74). Before the Second Liberty Loan Act of 1917 the responsibility for debt management lay with the Congress and not the Treasury. Thus the terms of all Treasury securities (interest, maturity, etc.) were matters of political argument. I wish that Wright had explained the Congressional role in security issuance and explored the topic further.

Lastly, something also needs to be said about the quality of Pickering and Chatto’s four volumes. The use of facsimile reprints comes with certain advantages and problems. Readers get a real feel for the text but have at times to deal with out-dated spellings and meanings (the latter often elucidated by Wright), which can be problematic for students. The publisher also has to face the problem of expanding or reducing the original text to fit the printed page. While a larger font is a relief to us of advancing age, the fonts of some texts are extremely small, making reading at times uncomfortable. This headache was aggravated at times when, at least in my copy, the reproduction was faint and blurry.

In sum, the editorial view of The United States National Debt, 1787-1900 is too narrow and too shallow to be of use to a wide audience. It is too narrow in scope for many scholars of the national debt or public finance; while it is too shallow in explanation and context to make sense to students or novices to the subject. Of course any collection of documents that one can have on a topic of interest and not have to track down oneself is of value. But, at $670 a copy this is a costly luxury (though Pickering and Chatto have announced that scholars can get the work for half price if they can convince their library to buy a copy). I am afraid I will still have to wait for that comprehensive study on the history of the national debt.

Franklin Noll, Consulting Historian to the Bureau of Engraving and Printing, specializes in the history of Treasury securities, the national debt, the Treasury, and the Bureau of Engraving and Printing. Some of his work on the public debt is available at the EH.Net Encyclopedia and EH.Net Databases pages.


Subject(s):Government, Law and Regulation, Public Finance
Geographic Area(s):North America
Time Period(s):19th Century