An Economic History of Europe: Knowledge, Institutions and Growth, 600 to the Present – 2nd Edition Cambridge University Press, 2015

by Paul Sharp (University of Southern Denmark)

The purchase price of this book is discounted by 20 per cent until the 7th of June if bought online here

p5An Economic History of Europe by Karl Gunnar Persson and Paul Sharp is a textbook on European economic history, designed to be taught over one semester, and aimed mostly at economics undergraduates. The second edition is a substantial revision of the first from 2010 with updates to reflect changes since the global financial crisis as well as the latest research. Although it is primarily aimed at students, it is also accessible to wider audiences looking for an easy introduction to the story of European economic development.

Economic history is first defined as the study of how mankind has used resources to create goods and services to meet human needs over time. As the subtitle suggests, the efficiency with which this is done depends on knowledge, i.e. the ability to produce more efficiently based on education and experience and embodied in technology, and institutions, which can both promote and obstruct the efficient use of resources. Thirteen propositions are laid out in the introductory chapter, the first of which sets the scene, proposing that economies that are richly endowed with resources are not necessarily rich but that economies which use resources efficiently are almost always rich irrespective of their resource endowment. Persson and Sharp then give a definition of Europe, noting (as illustrated in maps 1.1-1.3) that there has been a surprising continuity of the economic region of Europe from Roman times, through the Carolingian Empire of the ninth century, and to the present day European Union. It is argued that this is due to trade.

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The subsequent chapters argue that the slow record of economic growth which lasted for some centuries after the collapse of the Roman Empire and until the Industrial Revolution was based on a conflict between rival ‘Smithian’ and ‘Malthusian’ forces, as illustrated in figure 4.1. The latter describes the tendency of increases in economic productivity to be eaten away by population growth due to the constraints of an approximately fixed supply of land in a largely agricultural economy. However, as important institutions such as political order, money and markets re-established themselves in medieval Europe, increased population and urbanization led to division of labour, or specialization, promoting a slow growth of welfare based on skill perfection and learning by doing, giving slow technological progress. It was only with the birth of science that the pace of innovation speeded up sufficiently to allow for the demographic transition.

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Some countries moved to modern economic growth faster than others, however, and much of the reason for this is attributed to differences between institutions. Among copious examples of both ‘good’ and ‘bad’ institutions, it is emphasized that the length of time an institution has been present is not necessarily related to its benefits for economic performance more generally: bad institutions can linger due to the interests of a small, powerful minority. Money and banks get a chapter of their own. Their importance for a well-functioning economy is explored, although the risk involved with the use of fractional reserves (by which banks only have in reserve a fraction of their liabilities in terms of deposits) is also acknowledged, with periodic banking crises, such as during the recent Global Financial Crisis thus somewhat inevitable.

A major theme, with considerable relevance given the climate of today, is the importance of openness. This might be in terms of trade or ideas, although the two are often interrelated. It was fast technology transfer with the opening of world economies after 1850 that led to a process of economic convergence between countries which continues until today, although with setbacks during periods of protectionism and ‘globalization backlash’ in the 1930s in particular. The possibility of such catch up relies, however, on having an appropriate educational and institutional infrastructure. Moreover, it is also acknowledged that although trade will bring net gains, there will be winners and losers, and often during bad times, small groups lobby successfully for protectionist policies.

The remainder of the book examines such diverse themes as the choice of monetary policy regime (fixed versus flexible exchange rates) from the nineteenth century until today, arguing that widespread democracy seems to be difficult to reconcile with a fixed exchange rate policy because such a policy constrains domestic economic policy options. There is a discussion of the recent troubles within the Eurozone. The emergence and working of the Welfare State and the ultimate failure of the Eastern European planned economies are also touched on in the context of the death of the nineteenth century liberal economy after the Great Depression. It is speculated that world income inequality has probably peaked, and (with the rise of large developing countries such as China and India) will most likely now begin to decline, as more nations get the institutional infrastructure needed for technology transfer. Finally, the challenges of globalization are taken up.

 

Karl Gunnar Persson sadly passed away in 2016, but his former PhD student Paul Sharp is working on a third edition of the textbook.

To contact the author: pauls@sam.sdu.dk

The Deindustrialized World

by Andrew Perchard (University of Stirling), Lachlan MacKinnon (St Mary’s University – Nova Scotia), and Steven High (Concordia University – Montreal)

 

9780774834957fc-71269-800x600Deindustrialisation has ruptured the lives of tens of millions of working class lives in the latter half of the twentieth century and into the twenty first from the Rustbelt of North America to the coal and steel towns of north eastern China. Between 1969 and 1976, an estimated 22.3m jobs were lost in the US alone, with some 100,000 manufacturing plants closed between 1963 and 1982 (Bluestone and Harrison, 1982: 7; High, 2003: 93). In the 1990s, an estimated 30m workers were left unemployed by the collapse of industry in north eastern China, with the country’s steel province, Hebei, expected to lose 60 per cent of its steel companies by 2020 (Financial Times, 28 March 2016). These job losses represent a significant disruption in the lives of workers and in the fabric of communities from which capital vacates, but they are not the whole story. Industrial work, the social relationships to which it has contributed, and the cultures that emerge alongside are profoundly world-making. Plant closures, and the associated lost jobs, shatter all of these types of connections – not simply the economical.

These, arguably more intangible legacies of industrial closures, are often lost in layoff numbers or within a literature that talks about the transformation of economies or Schumpeterian waves of creative destruction. In the globalized world, with corporations shifting production to non-union, low-paying areas of the global South, displaced workers are sometimes framed as greedy or uncompetitive. What right do workers in Canada, the United States, or Western Europe have to these jobs or their spin-offs, especially when they contribute to the development of deeply impoverished areas goes the neoliberal line. In this progressive economic narrative, these casualities are a necessary corollary of growth; as the authors of an International Monetary Fund paper put in 1997 (Rowthorn and Ramaswamy): “Deindustrialization is not a negative phenomenon, but a natural consequence of further growth in advanced economies.” It is commonly supported by reified figures on employment transitions.  Besides, industries are polluting and dehumanizing and so have no place in our post-industrial and gentrifying cities. Those areas that have failed to make the transition have frequently been  peripherialised, with residents then demonised in the media and subjected to further punitive policy measures.

Most recently this anger, after decades of neglect, has been manipulated and misrepresented in debates around the election of Donald Trump to the US presidency and the Brexit vote, with the irony that both movements have been dominated by elite populists. In all of this, complacency to the plight of post-industrial working class communities has been marked. The Deindustrialized World (eds. High, MacKinnon and Perchard, UBC Press, 2017) responds to this historical moment by excavating the profound impact of deindustrialization on the lives of working people but also the wider ramifications of these structural economic, political, and cultural changes. Many will argue that total manufacturing numbers do not bear out the thesis of precipitous decline; but, for all of the increases in productive capacity, the types of jobs that are now available are oftentimes more precarious and require less skill than did those of yesteryear. In the words of one Scottish steelworker coming to terms with his redundancy:  ‘How do you tell fifty year old steelworkers to sell tartan scarves to Americans?’ Such arguments also miss the often-profound regional, local, and personal impact of these changes. The book demands that we go beyond national aggregation. In some cases, it has been accompanied by further capital flight and the collapse of civic infrastructure, leaving communities to deal with the legacies of multiple deprivation, ill-health and contaminated air and water, such as in Flint, Michigan.

Arising out of the ‘Deindustrialization and Its Aftermath’ conference in Montreal in 2014, this collection – scaling up our analysis from deindustrializing bodies to concerns of political economy – seeks to capture the complex cultural, environmental and social legacy of deindustrialisation (and industrialisation) for communities and individuals in Australia, Canada, France, the UK and US.  The fifteen essays demonstrate the different experiences and responses of those affected by industrial closures.  Chapters by Jackie Clarke and Sylvie Contrepois (France), Cathy Stanton (US), and Lucy Taksa (Australia) explore questions over the contested memory of industrial identities, places and spaces.   While Arthur McIvor (UK), Lachlan MacKinnon and Robert Storey (Canada) consider the environmental and health legacies of such industries.  In their urban studies of Australia, Canada and the US, Tracy Neumann, Andrew Hurley and Seamus O’ Hanlon discuss the tensions around regeneration and gentrification with urban studies.  While chapters by Steven High (Canada) and Andrew Perchard (Scotland), include discussions around deindustrialisation in association with geographical peripheralization, racial exclusion, and regional policy failures.  Andy Clark (Scotland), and Jackie Clarke (France), explore the role of female workers in resisting closures and maintaining an industrial legacy.  There is a confluence between many of these issues and discussions across the collection. The editors and Jim Phillips (Scotland) consider these questions within the context of the notion of ‘moral economy’ and the viewing of plants as collective resources.  Crucially, in amongst these voices seeking to make sense of what has happened to their lives and communities, are those of children living with the aftermath of deindustrialisation, alongside those of the adults shaped by an industrial culture and now left without it.

 

To contact the authors:

Andrew Perchard:  a.c.perchard@stir.ac.uk, @Aluminiumville

Lachlan MacKinnon: lachlan.f.mackinnon@gmail.com, @LachlanMacKinn

Steven High: Steven.High@concordia.ca

Review: Avner Offer and Gabriel Soderberg, The Nobel Factor: The Prize in Economics, Social Democracy and the Market Turn (Princeton University Press, 2016)

The Nobel Factor: On the eve of the announcement of the Nobel prize in economics we review Offer and Soderberg’s new book and ask “What relationship should economic historians have to economics? ” 

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What relationship should economic historians have to economics? For those who see economic history as essentially applied economics, the answer is perhaps obvious. But for those of us who see ourselves as ‘historians who are interested in the economy’, the question is fundamental – and difficult to answer. EHS co-founder R. H. Tawney, rejecting the Marshallian economics of his day, asserted that ‘There is no such thing as a science of economics, nor ever will be. It is just cant…’

Tempting as such a wholehearted rejection might sometimes be, it plainly won’t do. Whatever one’s ultimate judgment about its knowledge claims, economics is the most powerful, influential social science. For good or ill, economic historians are fated to spend our lives grappling with the discipline.

In an ideal world, economic historians would be equipped with a profound knowledge of economics, coupled with a profound scepticism about its capacity to help us understand how things work. This book demonstrates that its authors possess both these virtues. They use the Nobel prize in economics, awarded since 1969, as a means of examining the nature and role of economics in a book whose depth and breadth of vision make it a hugely important contribution to our understanding of the ‘market turn’ in economic policy over the last 40 years.

The Nobel prize in economics arose from an initiative of the Swedish central bank to raise the prestige of both itself and the discipline of economics, in the context of the bank’s struggle with Sweden’s governing Social Democrats. Like most central banks, the Riksbank prioritised low inflation and limited government; and it was hostile to the stabilising and equalising policies pursued by Sweden’s dominant political party.

Offer and Soderberg offer a sustained analysis of the pattern of winners of the prize. Over its whole history, there has been a careful attempt to award the prize to a balance of economists, with the most famous case being the 1974 joint prize awarded to Friedrich Hayek and the Swedish social democratic theorist, Gunnar Myrdal.

This balancing act has helped to maintain the high prestige of the prize, while also acting to undermine the ‘scientific’ pretensions of the discipline. Not only have the prize-winners come from a wide range of positions in economics, but several have also been acknowledged for contributions that directly or indirectly contradict the work of other recipients.

Much of the most detailed analysis of economics here concentrates on undermining the claims of the ‘market liberals’, a term embracing proponents of the new classical macroeconomics, rational expectations and public choice. The book is scathing about the claims made for these (and other) theories, arguing that they ultimately rest on ethical presuppositions, while showing little capacity to explain empirical changes in the economy.

The failure of the awarders of the Nobel prize to be concerned with empirical validity is seen as their biggest failing in how they have made their judgments. As the authors suggest, while Hayek opposed the scientistic pretensions of many economists, his own work, most notably his Road to Serfdom, has been ‘grotesquely falsified’ (p.9). The expansion of the state in post-war Western Europe, far from leading to a slippery slope of ‘serfdom’ has been combined with an enlargement of freedom, however that capacious term is defined. (While Hayek, Milton Friedman and other Nobel prize-winners were keen supporters of the Chilean dictator and murderer Pinochet in the name of ‘economic freedom’).

Despite their aversion to the ‘theoretical mumbo jumbo’ (p.212) of some economics and their dismissal of the scientific claims of many of the practitioners of the discipline, the authors by no means share Tawney’s dismissive attitude. Economics they proclaim, in one of the books many bon mots, ‘is not easy to master, but it is easy to believe.’ (p.2).

Their response is to undermine such ready belief, by showing that the effort at mastery is not wasted, as it allows us to exercise informed discrimination. Some economics is extremely useful. They are particularly enthusiastic about national accounting: ‘The best empirical programme in twentieth-century economics… an empirical, pragmatic and practical model of general equilibrium, based on a deep understanding and knowledge of the economy.’ (p.153)

This book is hugely persuasive about economics, where the knowledge displayed is extraordinary and the judgments highly persuasive. On social democracy, it is perhaps not so strong. There is some fascinating discussion of the development of Swedish social democracy and its relationship to key Swedish economists.

Most attention is given to Assar Lindbeck, a long-term member of the Nobel prize committee and its chair from 1980 to 1994. His work and role is subject to a blistering attack, coupled with a persuasive defence of the benefits of his country’s version of social democracy, which he renounced and then bitterly attacked.

But social democracy comes in many different forms, whereas in this book, the ‘Swedish model’ is used to define a singular form, characterised, we are told, by a collective provision response to insecurity over the lifecycle. Thus, ‘The difference between Social Democracy and economic market doctrine is easy to draw. It is about how to deal with uncertainty.’ (p.5)

While this stark, one-dimensional, definition is somewhat qualified elsewhere, the persistent assertion of its foundational status raises two problems. First, there is a question about how far such positioning is exclusive to social democracy. Most obviously, perhaps, would not Beveridge-style social insurance fit this definition? The Liberal William Beveridge proclaimed ‘social insurance for all and for every contingency’; with all its mid-twentieth century trappings, surely a clear advocacy of a collective response to security over the lifestyle?

Conversely, social democrats outside Sweden have focused less on redistribution of income over the lifecycle and more, for example, on more direct ‘vertical’ redistribution or on collective control of the means of production or on economic planning. They may have been strategically mistaken, but that is surely no reason to deny them the ‘social democrat’ label?

Jim Tomlinson

University of Glasgow

2016 Olympics reading list: Brazilian politics, history and culture — LSE Business Review

[With the paralympics games just closing, we would like to propose again this interesting reading list from the LSE Business Review, waiting for Tokyo 2020]

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The 2016 Rio Olympics officially opened on Friday and runs from 5 August – 21 August 2016. To mark the occasion, LSE Review of Books recommends seven reads that explore the culture, politics, history and economics of Brazil. We also offer a bookshop guide to Rio and São Paulo and showcase three award-winning podcasts from the…

via 2016 Olympics reading list: Brazilian politics, history and culture — LSE Business Review