Business History: Time for Debate

28 06 2011

The current issue of the Business History Review contains a state-of-the-field type of essay by Walter A. Friedman and Geoffrey Jones called “Business History: Time for Debate” Business History Review 85 (Spring 2011): 1-8. See here.

I was struck by several passages in the piece.

Business historians have been noticeably absent from the current vigorous debates concerning the Industrial Revolution and the Great Divergence, leaving it to economists and economic historians to propel the research agendas, despite the evident role of entrepreneurs and firms in these events.

This is a very good point. The Great Divergence is increasingly recognized as a key turning point in world history: indeed, the GD is now probably the most important meta-narrative in the historical profession. In the coming academic year, I will be teaching a lecture course called the History of Globalisation. The course will look at the evolution of the international economy over the last 300 or so years and introduce students to the key debates and themes about divergence and convergence. Needless to say, the Great Divergence is a major theme of the course.  The term “Great Divergence” was coined by the late Samuel Huntington and was then adopted by the UC Davis economic historian Ken Pomeranz in his 2000 book The Great Divergence: China, Europe, and the Making of the Modern World Economy.  In the 11 years since this seminal book was published, the Great Divergence has become a subject of lively scholar debate. The same phenomenon was discussed by Eric Jones in The European Miracle: Environments, Economies and Geopolitics in the History of Europe and Asia, although Jones called it the “European Miracle”.

All of these scholars are interested in the reasons why early-modern Western countries were able to advance ahead of their non-Western peers and become, by the nineteenth century, the most powerful and wealthy world civilization of the time, eclipsing Qing China, Mughal India, and Tokugawa Japan. In the Middle Ages, Europe was relatively backward, not relatively advanced.  Knowing how Europe was able to overtake other regions of the world is a trillion-dollar question.

Anyway, the my goal of my course is to get history students who know little about economics or statistics to understand the scholarly debates on why the Industrial Revolution took place in Britain, rather than in France or coastal China or some part of the Islamic world that had lots of coal.  In writing my lecture notes and preparing the reading list for the weekly seminars, I have been struck by how few works by business historians there are: there are few if any scholarly works that use the experience of specific firms or entrepreneurs to test the generalized theories have about the Great Divergence.

There are lots of wonderful aggregate data about national incomes and per capita wealth. The students will be exposed to all of that in the lectures. In terms of seminar readings that the students can debate and discuss,  there are lots of great journals articles that look at the Great Divergence from a variety of perspectives: environmental, history of science, or political-historical. Here are the works on the great divergence with the students will be reading over the course of the year:

Landes, David S. 2006. “Why Europe and the West? Why Not China?” The Journal of Economic Perspectives. 20, no. 2: 3-22; Horesh, Niv. “What Time Is the “Great Divergence”? And Why Economic Historians Think It Matters.” China Review International 16, no. 1 (March 2009): 18-32; Top of Form Vries, P. H. H. “Are Coal and Colonies Really Crucial? Kenneth Pomeranz and the Great Divergence(*).” Journal of World History 12, no. 2 (2001): 407; O’Brien, Patrick K. 2009. “The Needham Question Updated: A Historiographical Survey and Elaboration”. History of Technology. 29: 7; Kuran, Timur. 2004. “Why the Middle East Is Economically Underdeveloped: Historical Mechanisms of Institutional Stagnation”. Journal of Economic Perspectives. 18, no. 3: 71-90.

The interesting thing is that none of these excellent sources are really works of business history. I’ve searched for business history articles that speak to the Great Divergence and they are rather scarce. Obviously there are lots of great secondary soures on the role of business in the various waves of globalisation. For instance, the students will be reading Ann M. Carlos and Stephen Nicholas, “Giants of an Earlier Capitalism”: The Chartered Trading Companies as Modern Multinationals The Business History Review Vol. 62, No. 3 (Autumn, 1988), pp. 398-419.  This article was published in 1988, before the debate about the Great Divergence really got started, so it would be unfair to expect it to connect the stories of specific firms to the debates about the GD/European Miracle. However, I have been unable to find more recent articles that do this.

Friedman and Jones also point out that few business historians have engaged with environmental history, which is one of the fastest growing sub-disciplines in history. Friedman and Jones write that: “business historians have largely abnegated the job of framing the field, leaving this task to the specialized subset of environmental historians. It is odd that business historians have not devoted more attention to sustainability, given that, arguably, the actions of companies have been the primary causes of environmental damage and climate change over the last two centuries. The time has come for mainstream business history to incorporate the environmental impact of business in its agenda. The editors welcome and encourage submissions that focus on how firms have impacted the environment worldwide and attempt to develop frameworks for assessing the nature of this impact. It is equally important to identify the entrepreneurs and firms that have been ahead of governments and regulators in championing more sustainable practices and have pursued green strategies as solutions to environmental problems.”

This is a very good point. Friedman and Jones also suggest that business historians need to play a greater role in debates about entrepreneurship and how to encourage it. 

Entrepreneurship is an area in which business historians have made important contributions, but in which most of the recent conceptual work has been done by economists and management scholars. Their theories provide a more powerful set of tools for examining the history of entrepreneurship than any that were available to the pioneering business historians in the 1940s and 1950s. Historians are now seizing the opportunity to engage with and test such theories. Huge areas of uncertainty regarding the causal links between entrepreneurship, innovation, and economic growth still call for explanation. It remains unclear, for instance, whether William Baumol’s neat distinction between productive and unproductive entrepreneurship is borne out by historical experience.

Personally, I think that Baumol’s distinction is plausible. Tony Soprano and Bill Gates are both pretty entrepreneurial, but in one case the entrepreneurial activity benefits society as a whole. I know, however, that most business historians reject the Baumol’s typology of “good” and “bad” entrepreneurs, perhaps because it seems moralistic rather than social-scientific. I recently sent a co-authored piece about entrepreneurship in Canadian history out for peer review. One of the anonymous peer reviewers objected to our use of Baumol’s distinction, so we were forced to delete it from the paper.




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