How to bury the lede: Nick Crafts on the postwar British productivity failure

27 11 2017

Nick Crafts (born 1948), who is a very senior and respected economic historian at the University of Warwick, has published a new paper on the postwar British productivity failure. It examines why productive grew at a slower rate in the UK than in similar Western European countries in the three decades after 1945, which were, of course, a period when the UK remained, for various reasons, outside of the EEC.

Abstract: British productivity growth disappointed during the early postwar period. This reflected inadequate investment in equipment and skills but also entailed inefficient use of inputs. Weak management, dysfunctional industrial relations, and badly-designed economic policy were all implicated. The policy framework was partly the result of seeking low unemployment through wage restraint by appeasement of organized labour. A key aspect was weak competition. This exacerbated corporategovernance
and industrial-relations problems in the British ‘variety of capitalism’ which sustained
low effort bargains and managerial incompetence. Other varieties of capitalism were better placed to achieve fast growth but were infeasible for Britain given its history.
Keywords: competition; productivity; relative economic decline; varieties of capitalism

In my view, the most interesting and policy-relevant part of this paper appears at the very end. Prof. Crafts has effectively “buried the lede” by tucking this information down near the end, where he writes that the main features of the postwar period of British economic history were


ineffective competition policy, nationalization, and protectionism including remaining outside the EEC. This exacerbated problems of corporate governance and industrial relations inherent in the British ‘variety of capitalism’ as the economic rents that were generated helped to sustain low effort bargains and managerial incompetence.

(Bolding added by AS)

This paper builds on Craft’s earlier estimate (2016) that joining the EEC raised the level of UK GDP by about 8 to 10 per cent through increasing the volume of trade and strengthening competition. You can also read his short piece on what history says about Brexit here.




How Does Davos Man Use History to Make Sense of New Technologies?

22 01 2016

The World Economic Forum is currently underway in Davos. The great and the good are gathered there to discuss the future of the world economy. The term Davos Man is often applied to the elites who gather there. I’ve used that moniker in the title of this blog post, even though I know it is somewhat misleading because it suggests a degree of cognitive uniformity among the very heterogeneous group of individuals at Davos. There does appear to be a herd mentality and an element of group think at this event.

The theme of this year’s WEF is technology, specifically, the “Fourth Industrial Revolution.” This label is being applied to a grab bag of technologies that includes Big Data, 3D printers, advances in biotechnology, and self-driving cars. Whether the term Fourth Industrial Revolution makes any sense is an issue I will leave to another blog post. The crucial thing for our purposes it that the concept has caught on life wildfire.  It is interesting that Professor Klaus Schwab and the other Davos organizers have chosen a title for this year’s gathering that is so rich in historical significance: the term Fourth Industrial Revolution evokes previous Industrial Revolutions which, as every schoolchild knows, has massive economic, social, and political consequences.


Professor Schwab develops this historical analogy in his new book, where he writes:

Previous industrial revolutions liberated humankind from animal power, made mass production possible and brought digital capabilities to billions of people. This Fourth Industrial Revolution is, however, fundamentally different. It is characterized by a range of new technologies that are fusing the physical, digital and biological worlds, impacting all disciplines, economies and industries, and even challenging ideas about what it means to be human.



In the last few days, the term Fourth Industrial Revolution has been thrown around in the press and the blogosphere. The meme has gone global: see here, here, and here. Two days ago, Hewlett Packard Labs posted some ideas about strategies for the Fourth Industrial Revolution.  The blog  post included this image:


Larry Hatheway, the Chief Economist of GAM Holding, developed this historical analogy in his syndicated column about the WEF2016 theme. He wrote:

The First Industrial Revolution was based on the steam engine. James Watt’s invention, introduced around 1775, powered the nineteenth-century expansion of industry from its origins in England to Europe and the United States. The Second Industrial Revolution, from the last third of the nineteenth century to the outbreak of World War I, was powered by developments in electricity, transportation, chemicals, steel, and (especially) mass production and consumption. Industrialization spread even further – to Japan after the Meiji Restoration and deep into Russia, which was booming at the outset of World War I…

James Watt is getting a lot of publicity this week. Why have so many people picked up on this concept of the Fourth Industrial Revolution? Why are so many journalists, policymakers, and businesspeople trying to use analogies with past Industrial Revolutions to try to predict the future?  We are all familiar with the fact that investment prospectuses say, past performance is no guarantee of future results. We all know that history doesn’t repeat itself although sometimes it rhymes.  However, in moments of radical uncertainty, we tend to gravitate to the past as a sensemaking tool. Whether it is a good analytical device is a separate issue.

Individuals frequently employ historical-analogic reasoning and historical periodization to make sense of the unfamiliar.  The trajectory of change in industries characterized by incremental innovation is relatively easy to predict.  In contrast, radically disruptive technologies are an important source of uncertainty for economic actors ( see the academic research by Sainio, Ritala, & Hurmelinna-Laukkanen, 2012; Petrakis, Kostis, & Kafka, 2015). It is not, therefore, surprising to see observers, particularly journalists, economists, and CEOs who necessarily lack detailed specialist knowledge of the specifics of the “Fourth Industrial Revolution” technologies, gravitate towards historical analogies as a sensemaking tool.

If you are interested in the more general issue of how ideas about history shape the strategies of economic actors, my recent article, which was co-authored with Jason Russell, can serve as a gateway in the literature.


Update: To date, none of the economic historians in the academic blogosphere have ventured any comments about whether the concept of the Fourth Industrial Revolution is valid or simply a marketing gimmick. Seems like a wasted opportunity/teachable moment.




Petrakis, P. E., Kostis, P. C., & Kafka, K. I. (2015). Secular stagnation, faltering innovation, and high uncertainty: New-era entrepreneurship appraisal using knowledge-based thinking. Journal of Business Research.

Hill, R. C., & Levenhagen, M. (1995). Metaphors and mental models: Sensemaking and sensegiving in innovative and entrepreneurial activities.Journal of Management21(6), 1057-1074.

Sainio, L. M., Ritala, P., & Hurmelinna-Laukkanen, P. (2012). Constituents of radical innovation—exploring the role of strategic orientations and market uncertainty. Technovation32(11), 591-599.



Is Economic History Making a Come Back?

13 04 2015

The Economist has used the recent Economic History Society conference as an excuse to publish a thoughtful piece on the current state of economic history. Back in 2013, Peter Temin published a working paper charting the rise and fall of economic history in the economics department at MIT, which is now probably the world’s most important econ department. The global financial crisis led to a chorus of demands for more research and teaching about economic history. The piece in the Economist asking for more economic history is one such example.

In order to investigate these, as well as the historical claims of economists over issues as varied as the impact of high public debt and the causes of inequality, the contribution of historians—who have in fact mostly stayed away from these debates—is desperately needed. Economic history may well be dead as a subject studied in independent academic departments, as it was at universities in the 1970s. But as a subject that is needed as part of the study of economics and the making of public policy, economic history is—and should be—very much alive.

I strongly agree with the normative statements in this Economist piece. However,  I am slightly annoyed that the author didn’t distinguish economic history from business history, which is indeed thriving in management schools and which is methodologically quite different from economic history.

More importantly, there is little evidence of an actual renaissance of economic history taking place in history departments.  It certainly remains to be seen whether all of this pent-up demand calls forth an increased supply of economic history, at least in economics departments. [Management schools are different kettle of fish and there is abundant evidence of a historical turn in management research and education]. Personally, I wouldn’t bet on a revival of economic history in econ departments, as young economists, or at least those who post in EconJobRumors, still appear to believe that treating a historical topic in a job market paper is career suicide. Two years ago, at about the time Professor Temin was publishing his paper, a prospective grad student posted the following query on EconJobRumors under the alias ca2F. I’m reposting it below because it gives a sense of how young economists talk about their career strategies.

Hey bros,

Prospective grad student here. I’m interested in Economic History (specifically economic history of developing countries). Is there any room for me in the discipline? Which universities could I apply to? should i go to history departments? I know this field is in decline but I want to revive it and take it to the next level. peace out.

Here is a sample of the replies:

Sup bro. Are you any good with clits and metrics? If so you’re gonna rock the cliometrics. Aight bro peace out.


Just want to point out this is douchey and makes it pretty clear you suffer from undergrad hubris and have very little understanding of the dynamics of the profession.

Four years ago, there was a discussion of the rankings of economic history journals on the same website. Here is a sample of the comments.

are you desperately trying to get tenured??? you the **** cares about economic history review???

which generated the following reply in the thread

I am already tenured in a top 50, thank you; hence, my ability and willingness to dabble in economic history. I asked about EHR because I am not sure where to send my paper if it is rejected by JEH and EER.

Here is a representative sample of some of the other comments:

Economic history belongs in the history department.


Good economic history work will not get labeled as such. Market yourself as growth/development or labor or whatever fits your particular research. Problem solved.


i highly doubt it is easy to find a job in econ history. Most depts cannot justify having more than one economic historian, but they can usually justify having multiple people in almost any other field.


Acemoglu shits on economic historians [The implication is that you want to defer to the wisdom of Daron Acemoglu, who is some sort of living god].


Historians, who look at economic history, suck ( e.g. Nial “asshole” Ferguson)

Economists, who care about history, rule (e.g. Barry “next Nobel” Eichengreen)

[AS: I would agree that Eichengreen’s books are superb on many levels. Enjoyable to read.]


My analysis of the Econ History field as that it’s very club-ish. That is, it’s a hard field to enter if you didn’t have a Fishback-like adviser.


Econ history journals don’t tend to rank as highly as other top field journals (e.g. macro) so that’s something to keep in mind if you are sending something there.

For the record, the journals the economists considered worthy of some respect were the Journal of Economic History, Explorations in Economic History, European Review of Economic History, and Cliometrica. Cliometrica was considered the fastest-rising journal in the field. Somewhat tellingly, the economists on EconJobRumors do not appear to think much about the Economic History Review, the journal of the Economic History Society.

Similarly, economic history is basically dead in history departments for a variety of demand-side and supply-side reasons. Historians who work on economic-historical and business-historical topics tend to migrate out to more lucrative fields. Moreover, demographic renewal in history departments means that the level of interest/literacy in economic historical topics in the historical profession is now quite low, which means that it may be difficult to get hired, rapidly promoted, etc.

If it were a stock, I would try to find some way of shorting economic history.

Is Business History Now Sexy?

7 04 2013

For the longest while, business history was deeply unfashionable in North American history departments. Indeed, many of the people doing research on business history migrated to other disciplines. That’s changing, as the New York Times reports on page A1 of today’s city edition. See here.

After decades of “history from below,” focusing on women, minorities and other marginalized people seizing their destiny, a new generation of scholars is increasingly turning to what, strangely, risked becoming the most marginalized group of all: the bosses, bankers and brokers who run the economy.

Even before 2008, classes dealing with the history of capitalism were starting to make their way back into the curriculum. The GFC accelerated this trend for a number of reasons, the most important of which, I think, the frequency with which journalists and policymakers compared the crisis to the 1929 stock market crash.

The article discusses the growing community of scholars who teach history majors about the history of business. Photographs of Julia Ott, Stephen Mihm, and Bethany Moreton are included.  These historians are members of the Business History Conference. Many scholars today identify with the label “history of capitalism” rather than “business history” and approach the study of the past with a set of assumptions very different from that of traditional  business history associated with Alfred Chandler. Fairly typical of the new type of business history is Bethany Moreton’s fascinating book To Serve God and Wal-Mart: The Making of Christian Free Enterprise (Harvard University Press, 2009).This book is a cultural history of Wal-Mart that shows how evangelical Protestantism was used to justify the free market and to attack the cultural and political foundations of the New Deal. It’s about an alliance of Deep South entrepreneurs, largely female evangelical employees, and free-market ideologues. Moreton’s research combines an interest in business history with the study of gender and religion. It is also decidedly non-celebratory, in sharp contrast to some earlier works in the field.  Indeed, the book’s page on the HUP website notes that “The author has assigned her royalties and subsidiary earnings to Interfaith Worker Justice and its local affiliate in Athens, GA, the Economic Justice Coalition.” 

Business history, which has the company as its basic unit of analysis, should not be confused with econometric history, which is both far more quantitative and interested in macro developments. (I’m currently at the Economic History Society Conference and have been listening to presentations by both econometric historians as well as narrative business historians. It is fascinating watching the two groups in dialogue). However, my impression is that economic history is increasingly important in economics departments.   Business history of a type is also being re-integrated into the curriculum of many management schools. The Rotman School of Business in Toronto has committed to nurturing Canadian business history.

New Editorial Board: Essays in Economic & Business History (EEBH)

20 07 2012

Essays in Economic & Business History (EEBH), which is in its 31st year of publication, has made some major changes in the last few months. The most of important of these is the journal’s decision to shift to the Open Access model of publishing. There is also a new Editorial Board, which includes 28 well respected economic and business historians. Some the heavy-hitters in these disciplines are now on the board, including Joel Mokyr, Stephen Broadberry,  Youssef Cassis, and Doug Irwin, among others. 

Essays in Economic & Business History Editorial Board

Jeremy Atack, Vanderbilt University

Martha Bailey, University of Michigan

Gerben Bakker, London School of Economics

Bernardo Batiz-Lazo, Bangor University

Dan Bogart, University of California, Irvine

Stephen Broadberry, London School of Economics

Ann Carlos, University of Colorado-Boulder

Youssef Cassis, European University Institute

Colleen A. Dunlavy, University of Wisconsin-Madison

Robert B. Ekelund, Auburn University

Jeffrey Fear, University of Redlands

Price Fishback, University of Arizona

Robert K. Fleck, Clemson University

Juan Flores, University of Geneva

Sheryllynne Haggerty, University of Nottingham

William J. Hausman, William and Mary

Douglas Irwin, Dartmouth College

Naomi Lamoreaux, Yale University

Manuel Llorca-Jaña, University of Chile & Universitat Pompeu Fabra

Joel Mokyr, Northwestern University

Aldo Musacchio, Harvard Business School

Jari Ojala, University of Jyväskylä

Jared Rubin, Chapman University

Peter Scott, University of Reading

Raymond Stokes, University of Glasgow

Janice Traflet, Bucknell University

Patrick Vanhorn, New College of Florida

John Wallis, University of Maryland

Mark Wilson, University of North Carolina-Charlotte

Celebratory Narratives and the Fortune 500 of 1812

12 04 2012

Since 1995, Fortune magazine has been  publishing annual rankings of U.S. corporations by size. Observers analyse changes in the Fortune 500 to track the evolution of the economy. Remember how the top of the list used to be dominated by industrial behemoths such as United States Steel?

Recently, two business historians, Dick Sylla and Robert E. Wright, have tried to create a retrospective Fortune 500-type list for the US in 1812. They posted it recently on Bloomberg’s business history blog, Echoes.

Sylla and Wright show that the list of large US corporations in 1812 was dominated by banks rather than manufacturing firms.

This is a very interesting intellectual exercise and I enjoyed their post. However, I think Sylla and Wright have fallen into the trap of writing a celebratory narrative of US business history that goes something like this: Americans have been world leaders in business from the earliest days of their republic and their precocious modernity of early American business owed much to the excellence of the political and legal institutions of the United States.

Consider this part of their blog post:

The larger significance of being able to come up with a Fortune 500 for 1812 demands some reflection. The country’s population then was about 7.5 million, less than that of New York City today, and far less than the populations of leading European nations. Yet international comparisons, to the extent we can make them, indicate that the U.S. already had more business corporations than any other country, and possibly more than all other countries put together.

France had chartered 13 corporations by 1812, and Prussia had chartered eight. An old source indicates that England had only 156 joint-stock companies before 1824, and so the entire U.K. probably had no more than 200 to 300. In contrast, our U.S. data show more than a thousand charters by 1812.

The U.S. was the world’s first “corporation nation,” and the ease of incorporating businesses released a lot of entrepreneurial energy that helped to build an ever-expanding economy. By the end of the 19th century, the U.S. would be the world’s largest national economy with tens of thousands of corporations.

Americans continue to have mixed feelings about corporations, just as they did in 1812 and throughout our history. But there’s no denying that the corporation played a large role in making Americans who they were — and are.

In other words, the US in 1812 was more sophisticated, capitalist, and quintessentially modern than other Western nations.

I suppose this fits with historian Alfred Chandler’s view that it was the United States that took the lead in making the transition from family firms and other allegedly archaic structures to managerial capitalism and the modern corporation. However, as Leslie Hannah, a distinguished business historian based at the LSE and the University of Tokyo, has argued, there is evidence to suggest that modern corporate governance and forms of industrial was pioneered in Britain and was adopted only later adopted by the United States, which was a relatively primitive economy as late as 1900.

Dick Sylla and Bob Wright are great historians, but I think that the international comparison they are making in these paragraphs is a bit problematic.

North America’s Early Lead Over Latin America

22 07 2011

North Americans have been wealthier than Latin Americans for many centuries, at least since the 17th century. At least, this is the argument of a new paper by Robert C. Allen, Tommy E. Murphy and Eric B. Schneider.


Summary: We begin by measuring real wages in North and South America between colonization and independence, and comparing them to Europe and Asia. We find that for much of the seventeenth and eighteenth centuries, North America was the most prosperous region of the world, offering living standards at least as high as those in the booming parts of North-Western Europe. Latin America, on the other hand, was much poorer and offered a standard of living like that in Spain and less prosperous parts of the world in general.

My thoughts: Latin America and North America were and are big places with huge disparities of culture, natural resources, and per capita income. Is any category that includes both the Amazonian jungle and downtown Buenos Aires really useful? 

 This study is based on just six locations: “Boston, Philadelphia, and the Chesapeake Bay region in North America and Bogotá, Mexico, and Potosí in Latin America”. Well the three locales in North America studied were all on the coast and relatively close to each other. Wouldn’t it be fair to include, say, Newfoundland, New France, Rupert’s Land, and Detroit as well? I know that there are always problems with getting sources, but a sample size of three is just too small, IMHO. 

So my verdict is that this paper is an interesting starting point for research, but the authors need to increase their sample size.


Hat tip to Tyler Cowen.

What were the Cultural Causes of the Industrial Revolution?

9 04 2010

That is the theme of a course for PhD students being held in Sweden in October. If I were still a grad student, I would definitely apply to attend.  Since I’m not, I’m going to content myself with reading Joel Mokyr’s new book The enlightened economy: an economic history of Britain, 1700-1850. It’s on my summer reading list.

Anyway, PhD students and supervisors should check out this announcement.


The Department of Economic History,
School of Business, Economics and Law, University of Gothenburg,
invites you to the Ph.D.-course

Ideologies, Ideas, and Values during the Industrial Revolution
(11-15 October 2010)

The course will be taught by Deirdre Nansen McCloskey, Distinguished Profes
sor of Economics, History, English, and Communication, University of Illinois at Chicago, and Guest Professor, School of Business, Economics and Law, University of Gothenburg.


Why was Europe the first region to develop economically and why did Britain lead among the European nations?  Recent years have seen a number of important contributions to the field of economic history trying to deal with the issue from new perspectives, using new empirical evidence. The course will study some of scholarly contributions. The issue of ideologies, ideas, and bourgeois values will be an important theme. That is, can the modern world
be explained in merely material terms?  Or do ideas matter!

Participants are expected to write short reviews of the books on the reading list, to be discussed in class in the morning of each day of the course.
Participants will also present a paper on their own research in afternoon seminars, and get feedback from other participants of the course and from Professor McCloskey.

Practical information

The course is open for Ph.D. students in history, economic history, and economics and similar disciplines within social science and the humanities.  The course will take place at the School of Business, Economics and Law in
Gothenburg, Sweden.

There is no fee for participating in the course. The Department will furthermore arrange (and pay for) lodging and lunches during the course, and provide a travel grant to, participating Ph.D. students. The Department will also host an opening reception, and a dinner the last night of the course. Participants are expected to attend during the whole week.

Applications for participation in the course should be sent latest 15 May 2010 by mail to Klas Ronnback, Dept. of economic history, University of Gothenburg: Applicants should give a short description of the research field of their doctoral thesis. Since the number of participants will be limited, a selection may be necessary. The result from such selection will be sent to the applicants by the end of May.

Reading list

Robert Allen (2009): The British industrial revolution in global perspective. Cambridge: Cambridge UP.
Jack Goldstone (2009): Why Europe? The rise of the West in world history, 1500-1850. Boston: McGraw-Hill.
Deirdre McCloskey (2010): Bourgeois Dignity: Why economics can’t explain
the modern world. Forthcoming, October.
Joel Mokyr (2009): The enlightened economy: an economic history of Britain,
1700-1850. New Haven: Yale UP.
Jan Luiten van Zanden (2009): The long road to the industrial revolution: the European economy in a global perspective, 1000-1800. Leiden: Brill.
Joyce Appleby (2010): The relentless revolution: A history of capitalism (New York, New York: W. W. Norton & Company, 2010)

Professor Christer Lundh
Klas Ronnback
Department of Economic history
University of Gothenburg
Box 720, SE- 405 30 Göteborg
Phone: + 46 31-7734520

New Book From John Majewski

12 12 2009

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

This looks like a book that every historian interested in North America in the 1860s should read. I’ve ordered it and shall share some thoughts once I’ve read it.

Here is the blurb from the publisher:

“What would separate Union and Confederate countries look like if the South had won the Civil War? In fact, this was something that southern secessionists actively debated. Imagining themselves as nation-builders, they understood the importance of a plan for the economic structure of the Confederacy.

The traditional view assumes that Confederate slave-based agrarianism went hand in hand with a natural hostility toward industry and commerce. Turning conventional wisdom on its head, John Majewski’s analysis finds that secessionists strongly believed in industrial development and state-led modernization. They blamed the South’s lack of development on Union policies of discriminatory taxes on southern commerce and unfair subsidies for northern industry.

Majewski argues that Confederates’ opposition to a strong central government was politically tied to their struggle against northern legislative dominance. Once the Confederacy was formed, those who had advocated states’ rights in the national legislature in order to defend against northern political dominance quickly came to support centralized power and a strong executive for war making and nation building.”

This might be read alongside my study of the political economy of the Canadian constitution of 1867.

Review of Peter E. Austin, _Baring Brothers and the Birth of Modern Finance_.

10 11 2009

EH.Net published this review today. I was very excited to see it since Baring Brothers & Company played a crucial role in Canadian Confederation. (See my book British Businessmen and Canadian Confederation).

Peter E. Austin, _Baring Brothers and the Birth of Modern Finance_. London: Pickering and Chatto, 2007. xiii + 265 pp. $99 (hardcover), ISBN: 978-1-85196-922-7.

Reviewed for EH.NET by Peter L. Rousseau, Department of Economics, Vanderbilt University.

The complexity of the confluence of events that led up to the U.S. financial panic in the spring of 1837 has long been appreciated by economic and financial historians. The traditional story advanced by McGrane (1924) and expanded upon by Hammond (1953) points to failed policies of the Jackson administration as the primary cause. And it is certainly plausible that President Jackson’s refusal to renew the charter of the Second Bank of the United States and a removal of the deposits therein to “pet” banks scattered throughout the country led to a sharp increase in bank liabilities that in turn prompted a disruptive executive order (i.e., the “Specie Circular”) aimed at slowing the rapid advance of public land prices, and that all of this together led to panic. But if the traditional story is not adequately convincing, one could always turn to Temin (1969) for an international account in which increases in the Bank of England’s discount rate short-circuited trade and led to declines in cotton prices, failures of cotton factors in the United States, and ultimately a loss of public confidence in bank notes.


Andrew Jackson

My own account (Rousseau, 2002) finds merit in both views but, like the traditional one, sees domestic events as central. In particular, I find that Jackson’s policies in 1836 dislocated the nation’s monetary base and left the banks in New York City short of reserves, and that with the stage thus set, any additional small shock, domestic or international, could have caused the runs that forced banks to suspend specie payments on May 10.

In his recent book, Peter E. Austin fills in many supporting details that the international story has heretofore lacked, albeit through an analysis of one British merchant bank. But an important one it was! Baring Brothers & Company was the premier “American House” in the 1820s and early 1830s. It achieved this status by exploiting an international reputation and first-mover advantage in the American market, and for many years its operations were able to reap substantial profits without taking excessive risks.


Bishopsgate Street, Former Home of the House of Baring

Austin’s engaging narrative makes it quite apparent that Barings saw early on that price inflation, deposit dislocations, and speculations in cotton would lead to a spectacular conclusion. In anticipation of this, a gradual withdrawal of Barings from discounting in the U.S. market commenced in 1834-35. In hindsight this was early given the profits taken at the height of the boom by competitors such as Brown Brothers, yet a conservative stance allowed Barings to avoid the fate of the infamous three “W”s (Wilson, Wildes, and Wiggin) that play such an important role in Ralph Hidy’s (1949) account of the panic and its international roots.

It is exactly on this point, however, that Austin’s monograph seems to take on two somewhat independent objectives. The first is to shed light on the personalities and policies that shaped decision-making at Barings over its early history, and how these policies helped the firm to survive the tumultuous 1830s. The other is an attempt to re-tell the classic tale of 1837 from a British perspective. In my view, the book succeeds in meeting the first objective but is less convincing on the second.

The early history of Barings is certainly impressive if not a bit monochromatic. As the first English merchant house to make strong headway in the young United States, it was well-known in the merchant community and trusted by its patrons. Austin describes vividly how Barings provided credit to only the most upstanding of commercial interests, always placing safety above expected return in deciding whether to begin or continue customer relationships. Joshua Bates, who led the company from the London office in the 1820s and 1830s, apparently placed great confidence in his American colleague Thomas Ward, who in turn evaluated potential accounts very effectively to ensure that Barings was not exposed to extraordinary risks. A wide and impressive range of primary sources, including voluminous correspondence between Ward and Bates, are brought to bear in making this case.

One company policy was to insist that those with trade accounts do business exclusively with Barings, thereby avoiding conflicts of interest or commitment with major competitors. Barings also acted conservatively in deciding how much credit would be extended even to its most desirable accounts. These precautions were not taken as seriously at Brown Brothers, which was more likely to extend credit to customers with multiple accounts or upon only tenuous security.  As a result, Barings began to lose business to competitors, suggesting that its withdrawal from the American trade may have had as much to do with a shift in the competitive landscape than with a well-reasoned decision to back away.  To this reader it seemed likely that both factors were at play.

With respect to the Panic of 1837, it is not always clear where Austin stands on the causes. At times the book seems to embrace the traditional story, seeing the withdrawal of Barings from the U.S. market as a symptom of the domestic problems that were about to take the U.S. economy over the brink. At other times the narrative seems more reminiscent of Hidy in describing the disruption in the American trade caused by changes in discounting policies at the Bank of England in the autumn of 1836 that we now know to have been short-lived.


Note Issued by the Second Bank of the United States

These inconsistencies lead me to view Austin’s story of Barings in the 1830s as better suited for explaining the second suspension of specie payments in 1839 and the ensuing recession than for explaining the events of 1837. And though Wallis (2001) makes a strong case that domestic factors also stood front and center in 1839, the supply of foreign capital did indeed dry up as Temin suggests. If this drying up was a response to the inherent weakness of the U.S. economy, Barings’ move away from the market was perhaps a leading indicator of what was to come. To the extent that its actions changed public expectations about how the inflation of the 1830s would come to a conclusion, it may have also played a causal role in the events of 1837. But more likely the new Barings policy provided a model that other foreign investors would follow as public projects and the state bonds issued to finance them began to go bust at the end of the decade and into the 1840s.

To sum up, Peter Austin makes a strong and lasting contribution to our understanding of Baring Brothers and its operations, especially in the 1830s. I believe that his strong scholarship will help to keep alive the recently renewed interest in this most fascinating period of U.S. economic history and encourage its continued reexamination.

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