John Turner, Professor of Finance and Financial History at Queen’s University Belfast, tells about what History can teach us about the effects of Covid-19 on the financial system
This piece is the result of a collaboration between the Economic History Review, the Journal of Economic History, Explorations in Economic History and the European Review of Economic History. More details and special thanks below. Part A is available at this link
As the world grapples with a pandemic, informed views based on facts and evidence have become all the more important. Economic history is a uniquely well-suited discipline to provide insights into the costs and consequences of rare events, such as pandemics, as it combines the tools of an economist with the long perspective and attention to context of historians. The editors of the main journals in economic history have thus gathered a selection of the recently-published articles on epidemics, disease and public health, generously made available by publishers to the public, free of access, so that we may continue to learn from the decisions of humans and policy makers confronting earlier episodes of widespread disease and pandemics.
Generations of economic historians have studied disease and its impact on societies across history. However, as the discipline has continued to evolve with improvements in both data and methods, researchers have uncovered new evidence about episodes from the distant past, such as the Black Death, as well as more recent global pandemics, such as the Spanish Influenza of 1918. In this second instalment of The Long View on Epidemics, Disease and Public Health: Research from Economic History, the editors present a review of two major themes that have featured in the analysis of disease. The first includes articles that discuss the economic impacts of historical epidemics and the official responses they prompted. The second turns to the more optimistic story of the impact of public health regulation and interventions, and the benefits thereby generated.
Epidemics and the Economy
The ways in which societies and economies are affected by repeated epidemics is a question that historians have struggled to understand. Paolo Malanima provides a detailed analysis of how Renaissance Italy was shaped by the impact of plague: ‘Italy in the Renaissance: A Leading Economy in the European Context, 1350–1550’. Economic History Review 71, no. 1 (2018): 3-30. The consequences of plague for Italy are explored in even more detail by Guido Alfani who demonstrates that the peninsula struggled to recover after experiencing pervasive mortality during the seventeenth century: ‘Plague in Seventeenth-century Europe and the Decline of Italy: An Epidemiological Hypothesis’. European Review of Economic History 17, no. 4 (2013): 408-30. Epidemics cause multiple changes to the economic environment which necessitates a multifaceted response by government. Samuel Cohn examines the oppressive nature of these reactions in his luminous study of the way European governments sought to prevent workers benefiting from the increased demand for their labour following the Black Death: ‘After the Black Death: Labour Legislation and Attitudes Towards Labour in Late-Medieval Western Europe’. The Economic History Review, 60, no. 3 (2007): 457-85.
Richard Easterlin’s panoramic overview of mortality shows that government policy was critical in reducing levels of mortality from the early nineteenth century. Economic growth by itself did not lift life expectancy. This major paper illuminates the essential contribution of public intervention to health in modern societies: “How Beneficent Is the Market? A Look at the Modern History of Mortality.” European Review of Economic History 3, no. 3 (1999): 257-94. . Does strict health regulation save lives? Alan Olmstead and Paul Rhode respond to this question in the affirmative by explaining how the US federal government succeeded in lowering the spread of tuberculosis by establishing controls on cattle in the early part of the twentieth century. Their analysis has considerable contemporary relevance: only robust and universal controls saved lives: ‘The ‘Tuberculous Cattle Trust’: Disease Contagion in an Era of Regulatory Uncertainty’. The Journal of Economic History 64, no. 4 (2004): 929–63.
Human society has achieved enormous gains in life expectancy over the last two centuries. Part of the explanation for this improvement was improvements in key infrastructure. However, as Daniel Gallardo‐Albarrán demonstrates, this was not simply a question of ‘dig and save lives’, because it was the combination of types of structure — water and sewers – that mattered: ‘Sanitary infrastructures and the decline of mortality in Germany, 1877–1913’, The Economic History Review (2020). One of the big goals of economic historians has been to measure the multiple benefits of public health interventions. Brian Beach, Joseph Ferrie, Martin Saavedra, and Werner Troesken, provide a brilliant example of how novel statistical techniques allow us to determine the gains from one such intervention – water purification. They demonstrate that the long-term impacts of reducing levels of disease by improving water quality were large when measured in education and income, and not just lives saved: ‘Typhoid Fever, Water Quality, and Human Capital Formation’. The Journal of Economic History 76, no. 1 (2016): 41–75. What was it that allowed European societies to largely defeat tuberculosis (TB) in the second half of the twentieth century? In an ambitious paper, Sue Bowden, João Tovar Jalles, Álvaro Santos Pereira, and Alex Sadler, show that a mix of factors explains the decline in TB: nutrition, living conditions, and the supply of healthcare: ‘Respiratory Tuberculosis and Standards of Living in Postwar Europe’. European Review of Economic History 18, no. 1 (2014): 57-81.
This article was compiled by:
- Patrick Wallis, Giovanni Federico, and John Turner, for the Economic History Review;
- Dan Bogart, Karen Clay, and William Collins, for the Journal of Economic History;
- Kris James Mitchener, Carola Frydman, and Marianne Wanamaker, for Explorations in Economic History;
- Joan Roses, Kerstin Enflo, and Christopher Meissner, for European Review of Economic History
If you wish to read further, other papers on this topic are available on the journal websites:
* Special thanks to Leigh Shaw-Taylor, Cambridge University Press, Elsevier, Oxford University Press, and Wiley for their advice and support.
by John E. Murray (Rhodes College) and Javier Silvestre (University of Zaragoza, Instituto Agroalimentario de Aragón, and Grupo de Estudios ‘Población y Sociedad’)
The availability of coal is central to debates about the causes of the Industrial Revolution and modern economic growth in Europe. To overcome regional limitations in supply, it has been argued that coal could have been transported. However, despite references to the import option and transport costs, the evolution of coal markets in nineteenth-century Europe has received limited attention. Interest in the extent of markets is motivated by their effects on economic growth and welfare ( Federico 2019; Lampe and Sharp 2019).
The literature on market integration in nineteenth-century Europe mostly refers to grain prices, usually wheat. Our paper extends the research to coal, a key commodity. The historical literature of coal market integration is scant—in contrast to the literature for more recent times (Wårell 2006; Li et al. 2010; Papież and Śmiech 2015). Previous historical studies usually report some price differences between- and within countries, while a few provide statistical analyses, often applied to a narrow geographical scope.
We examine intra- and international market integration in the principal coal producing countries, Britain, Germany, France and Belgium. Our analysis includes three, largely non-producing, Southern European countries, Italy, Spain and Portugal—for which necessary data are available. (Other countries were considered but ultimately not included). We have created a database of (annual) European coal prices at different spatial levels.
Based on our price data, we consider prices in the main consumer cities and producing regions and estimate specific price differentials between areas in which the coal trade was well established. As a robustness check, we estimate trends in the coefficient of variation for a large number of markets. For the international market, we estimate price differentials between proven trading markets. Given available data, focus on Europe’ main exporter, Britain, and the main import countries – France, Germany, and Southern Europe. To confirm findings, we estimate the coefficient of variation of prices throughout coal producing Europe.
To estimate market integration within coal producing countries, we utilise Federico’s (2012) proposal for testing both price convergence and efficiency—the latter referring to a quick return to equilibrium after a shock. For the international market, we again estimate convergence equations. For selected international routes, and according to the available information, we complete the analysis with an econometric model on the determinants of integration—which includes the ‘second wave’ of research in market integration (Federico 2019). Finally, to verify our findings, we apply a variance analysis to prices for the producing countries.
Our results, based on quantitative and qualitative evidence, may be summarized as follows. First, within coal-producing countries, we find evidence of price convergence. Second, markets became more ‘efficient’ over time – suggesting reductions in information costs. Nevertheless, coal prices were subject to strong fluctuations and shocks, in relation to ‘coal famines’. Compared to agricultural produce, the process of integration in coal appears to have taken longer. However, price convergence in coal tended to stabilize at the end of our period, suggesting insignificant further reduction in transports costs and the existence of product heterogeneity. Finally, our evidence indicates that cartelization in Continental Europe from the late nineteenth century had limited impact on price convergence.
Turning to the international coal market, our econometric results confirm price convergence between Britain and importing countries. Like domestic markets, the speed with which price differentials between Britain and Continental Europe were eroded declined from the 1900s. Further, market integration between Britain and Continental Europe appears to have been largely influenced by changes in transportation costs, information costs and protectionism. Extending our analysis to other countries, (with, admittedly, limited data) suggests that price convergence started later in our period. Finally, our results indicate the limited ability of cartels to restrict competition beyond their most immediate area of influence.
Overall, we observe integration in both the domestic and international coal market. Future research might consider expanding the focus to other cross-country, Continental, markets to acquire a deeper comprehension of the causes and effects of market integration.
To contact the authors:
Javier Silvestre, firstname.lastname@example.org
Federico, G., ‘How much do we know about market integration in Europe?’, Economic History Review, 65 (2012), pp. 470-97.
Federico, G., ‘Market integration’, in C. Diebolt, and M. Haupert, editors, Handbook of Cliometrics (Berlin, 2019).
Lampe, M. and Sharp, P., ‘Cliometric approaches to international trade’, in C. Diebolt, and M. Haupert, editors, Handbook of Cliometrics (Berlin, 2019).
Li, R., Joyeux, R., and Ripple, R. D., ‘International steam coal market integration’, The Energy Journal 31 (2010), pp. 181-202.
Papież, M. and Śmiech, S., ‘Dynamic steam coal market integration: Evidence from rolling cointegration analysis’, Energy Economics 51 (2015), pp. 510-20.
Wårell, L., ‘Market integration in the international coal industry: A cointegration approach’, The Energy Journal 27 (2006), pp. 99-118.
by Elizaveta Blagodeteleva (National Research University Higher School of Economics)
This research will be presented during the EHS Annual Conference in Belfast, April 5th – 7th 2019. Conference registration can be found on the EHS website.
In autumn of 1916, a big scandal roiled the Moscow public: local landlords petitioned the municipal government for the permission to raise rents, which was prohibited by the military administration a year before amid the escalating refugee crisis. Newspapers fumed at the selfishness of the rich, who not only avoided serving their country at the battlefield but exploited wartime hardships to get even richer. Health inspectors, lessees and workers of the largest industrial plants publicly raised their objections to the proposal.
Although the concerted effort of the city landlords to increase revenue eventually failed, the public outrage persisted. The occasional evidence of huge war profits and rumours about the luxurious life of industrialists and rentiers stoked anger among the urbanites, who struggled to make ends meet under the increasing pressure of galloping inflation and food shortages. The rent scandal highlighted the growing animosity towards the rich that the Bolsheviks would later channel into fully-fledged class warfare.
In 1916, Moscow residents sincerely believed that the gap between the wealthy and the rest of the population was enormous and it kept widening at an alarming pace. But did their beliefs match reality? In other words, how unequal was urban society in Russia in the last year of the old regime? To answer this question, a student of social and economic inequality would usually refer to income tax records. Unfortunately, there are very few of them in case of imperial Russia.
The Russian authorities had been extremely wary of income taxation up until the beginning of the Great War, when the national political mobilisation elevated the issue of the personal responsibility of each and every subject of the tsar. As a result, the state legislature passed an income tax in the spring of 1916. Its political objectives overwhelmed fiscal practicalities as lawmakers wanted it to bring the state closer to the ‘pockets’ and ‘hearts’ of the people. The progressivity of the new tax was supposed to ensure the levelling of the great fortunes and make the body politic more cohesive.
Since tax collection began in March 1917 and continued through the period of an intense power struggle and regime change, surviving records are patchy. Neither the tsar’s local treasures nor early Soviet fiscal authorities left comprehensive accounts of the sums collected in 1917. Nevertheless, Moscow archives have preserved some tax rolls that document the personal incomes for the year 1916, reported by taxpayers and then ascertained by tax collectors in the first half of 1917.
The records allow a tentative reconstruction of the level of income inequality in the city. Given that the adult population of Moscow amounted to 1.1 million in the spring of 1917, the estimates show that the wealthiest 1% and 5% must have received and then reported about 45.9% and 58.8% of their total income. With the Gini coefficient standing at 0.75, those shares display an extremely high level of income inequality among the city residents in 1916. A huge gap between the rich and the others not only felt real but was real.
by John Turner (Queen’s University Centre for Economic History)
Liquidity is the ease with which an asset such as a share or a bond can be converted into cash. It is important for financial systems because it enables investors to liquidate and diversify their assets at a low cost. Without liquid markets, portfolio diversification becomes very costly for the investor. As a result, firms and governments must pay a premium to induce investors to buy their bonds and shares. Liquid capital markets also spur firms and entrepreneurs to invest in long-run projects, which increases productivity and economic growth.
From an historical perspective, share liquidity in the UK played a major role in the widespread adoption of the company form in the second half of the nineteenth century. Famously, as I discuss in a recent book chapter published in the Research Handbook on the History of Corporate and Company Law, political and legal opposition to share liquidity held up the development of the company form in the UK.
However, given the economic and historical importance of liquidity, very little has been written on the liquidity of UK capital markets before 1913. Ron Alquist (2010) and Matthieu Chavaz and Marc Flandreau (2017) examine the liquidity risk and premia of various sovereign bonds which were traded on the London Stock Exchange during the late Victorian and early Edwardian eras. Along with Graeme Acheson (2008), I document the thinness of the market for bank shares in the nineteenth century, using the share trading records of a small number of banks.
In a major study, Gareth Campbell (Queen’s University Belfast), Qing Ye (Xi’an Jiaotong-Liverpool University) and I have recently attempted to understand more about the liquidity of the Victorian capital market. To this end, we have just published a paper in the Economic History Review which looks at the liquidity of the London share and bond markets from 1825 to 1870. The London capital market experienced considerable growth in this era. The liberalisation of incorporation law and Parliament’s liberalism in granting company status to railways and other public-good providers, resulted in the growth of the number of business enterprises having their shares and bonds traded on stock exchanges. In addition, from the 1850s onwards, there was an increase in the number of foreign countries and companies raising bond finance on the London market.
How do we measure the liquidity of the market for bonds and stocks in the 1825-70 era? Using end-of-month stock price data from a stockbroker list called the Course of the Exchange and end-of-month bond prices from newspaper sources, we calculate for each security, the number of months in the year where it had a zero return and divide that by the number of months it was listed in the year. Because zero returns are indicative of illiquidity (i.e., that a security has not been traded), one minus our illiquidity ratio gives us a liquidity measure for each security in our sample. We calculate the overall market liquidity for shares and bonds by taking averages. Figure 1 displays market liquidity for bonds and stocks for the period 1825-70.
Figure 1 reveals that bond market liquidity was relatively high throughout this period but shows no strong trend over time. By way of contrast, there was a strong secular increase in stock liquidity from 1830 to 1870. This increase may have stimulated greater participation in the stock market by ordinary citizens. It may also have affected the growth and deepening of the overall stock market and resulted in higher economic growth.
We examine the cross-sectional differences in liquidity between stocks in order to understand the main determinants of stock liquidity in this era. Our main finding in this regard is that firm size and the number of issued shares were major correlates of liquidity, which suggests that larger firms and firms with a greater number of shares were more frequently traded. Our study also reveals that unusual features which were believed to impede liquidity, such as extended liability, uncalled capital or high share denominations, had little effect on stock liquidity.
We also examine whether asset illiquidity was priced by investors, resulting in higher costs of capital for firms and governments. We find little evidence that the illiquidity of stock or bonds was priced, suggesting that investors at the time did not put much emphasis on liquidity in their valuations. Indeed, this is consistent with J. B. Jefferys (1938), who argued that what mattered to investors during this era was not share liquidity, but the dividend or coupon they received.
In conclusion, the vast majority of stocks and bonds in this early capital market were illiquid. It is remarkable, however, that despite this illiquidity, the UK capital market grew substantially between 1825 and 1870. There was also an increase in investor participation, with investing becoming progressively democratised in this era.
Acheson, G.G., and Turner, J.D. “The Secondary Market for Bank Shares in Nineteenth-Century Britain.” Financial History Review 15, no. 2 (October 2008): 123–51. doi:10.1017/S0968565008000139.
Alquist, R. “How Important Is Liquidity Risk for Sovereign Bond Risk Premia? Evidence from the London Stock Exchange.” Journal of International Economics 82, no. 2 (November 1, 2010): 219–29. doi:10.1016/j.jinteco.2010.07.007.
Campbell, G., Turner, J.D., and Ye, Q. “The Liquidity of the London Capital Markets, 1825–70†.” The Economic History Review 71, no. 3 (August 1, 2018): 823–52. doi:10.1111/ehr.12530.
Chavaz, M., and Flandreau, M. “‘High & Dry’: The Liquidity and Credit of Colonial and Foreign Government Debt and the London Stock Exchange (1880–1910).” The Journal of Economic History 77, no. 3 (September 2017): 653–91. doi:10.1017/S0022050717000730.
Jefferys, J.B. Trends in Business Organisation in Great Britain Since 1856: With Special Reference to the Financial Structure of Companies, the Mechanism of Investment and the Relations Between the Shareholder and the Company. University of London, 1938.
by Andy Cook (University of Huddersfield)
Some media commentators have identified the decimalisation of the UK’s currency in 1971 as the start of a submerging of British identity. For example, writing in the Daily Mail, Dominic Sandbrook characterises it as ‘marking the end of a proud history of defiant insularity and the beginning of the creeping Europeanisation of Britain’s institutions.’
This research, based on Cabinet papers, Bank of England archives, Parliamentary records and other sources, reveals that this interpretation is spurious and reflects more modern preoccupations with the arguments that dominated much of the Brexit debate, rather than the actual motivation of key players at the time.
The research examines arguments made by the proponents of alternative systems based on either decimalising the pound, or creating a new unit worth the equivalent of 10 shillings. South Africa, Australia and New Zealand had all recently adopted a 10-shilling unit, and this system was favoured by a wide range of interest groups in the UK, representing consumers, retailers, small and large businesses, and media commentators.
Virtually a lone voice in lobbying for retention of the pound was the City of London, and its arguments, articulated by the Bank of England, were based on a traditional attachment to the international status of sterling. These arguments were accepted, both by the Committee of Enquiry on Decimal currency, which reported in 1963, and, in 1966, by a Labour government headed by Harold Wilson, who shared the City’s emotional attachment to the pound.
Yet by 1960, the UK had faced the imminent prospect of being virtually the only country retaining non-decimal coinage. Most key economic players agreed that decimalisation was necessary and the only significant bone of contention was the choice of system.
Most informed opinion favoured a new major unit equivalent to 10 shillings, as reflected in evidence given by retailers and other businesses to the Committee of Enquiry on Decimal Coinage, and the formation of a Decimal Action Committee by the Consumers Association to press for such a system.
The City, represented by the Bank of England, was implacably opposed to such a system, arguing that the pound’s international prestige was crucial to underpinning the position of the City as a leading financial centre. This assertion was not evidence-based, and internal Bank documents acknowledge that their argument was ‘to some extent based on sentiment’.
This sentiment was shared by Harold Wilson, whose government announced the decision to introduce decimal currency based on the pound in 1966. Five years earlier, he had made an emotional plea to keep the pound arguing that ‘the world will lose something if the pound disappears from the markets of the world’.
Far from being the end of ‘defiant insularity’, the decision to retain a higher-value basic currency unit of any major economy, rather than adopting one closer in value either to the US dollar or the even lower-value European currencies, reflected the desire of the City and government to maintain a distinctive symbol of Britishness, the pound, overcoming opposition from interests with more practical concerns.
Robert Blackmore (University of Southampton)
Episodes of major market volatility are rarely out of the headlines today. Their ramifications, though considerable, are discussed as if these were somehow new, and that they are the result of how economies are structured in our globalised world. Yet prices in international markets in the late middle ages could be just as volatile and have just as far-reaching consequences.
The wine trade between Gascony and England is one key example. Gascony, in modern southwestern France, was part of the medieval duchy of Aquitaine: a territory ruled by the English crown almost without interruption from 1154 to 1453.
Geography and geology permitted the production of just one commodity, wine, and as a result the region was dependent, like so many modern states specialised in fossil fuels or mining, on export earnings to pay for the purchase and import of food and all other goods from distant markets.
My research provides a better understanding of the possible factors that influenced fluctuations in prices, and their knock-on effects. To achieve this, I use wholesale prices in Bordeaux and Libourne from between 1337 and 1466, largely sourced from surviving original documents stored both in the Archives départementales de la Gironde in Bordeaux and the National Archives in London.
As today, extreme climactic events, as well as disruption by war, or demographic catastrophes such as disease or famines, can be understood to cause sudden shifts in supply. Likewise there were abrupt changes in local demand, for example, in 1356 the arrival of a victorious Edward, the Black Prince, with his army laden with ransoms and plunder after the battle of Poitiers, can be observed in the data.
Volatility was exacerbated by government intervention: particularly a 1353 English law that had constrained certain merchants from buying up stock in advance at pre-agreed prices, as would be done in modern markets. Likewise, ill-considered price controls at retail in England probably caused suppressed trade.
Critically, wine was a luxury in northern European ale-drinking societies, where only the rich would tolerate high prices, so any brief disruptions in supply or local demand disproportionately affected the level of exports.
Such characteristics also meant that wine prices were responsive to wider economic shocks in ways that would be well understood today. Monetary policy mattered. England and Gascony used different currencies with a changing exchange rate. As the Gascon livre appreciated against sterling in the two decades after the Black Death (1348-9), prices rose for foreign buyers, then later devaluations, such as in c.1370, 1413-4 and c.1440, made purchases suddenly cheaper, and triggered noticeable increases in English wine imports.
Yet, for Gascony, as in Venezuela today, an over-dependence on foreign imports meant such surges or falls in the value of one single exported commodity resulted in sudden strong trade surpluses or deficits. Foreign currency, then in the form of precious metals, poured in and out of the economy with fluctuations in the wine trade.
This made prices, and by extension, the duchy of Aquitaine’s whole economy, even more unstable. In the end inflation set in as production declined and later years of English Gascony were mired in an economic depression that contributed to the region’s loss to the French crown in 1453 at the end of the Hundred Years’ War.
Max Weber’s well-known conception of the ‘Protestant ethic’ was not uniquely Protestant: according to this research published in the September 2017 issue of the Economic Journal, Protestant beliefs in the virtues of hard work and thrift have pre-Reformation roots.
The Order of Cistercians – a Catholic order that spread across Europe 900 years ago – did exactly what the Protestant Reformation is supposed to have done four centuries later: the Order stimulated economic growth by instigating an improved work ethic in local populations.
What’s more, the impact of this work ethic survives today: people living in parts of Europe that were home to Cistercian monasteries more than 500 years ago tend to regard hard work and thrift as more important compared with people living in regions that were not home to Cistercians in the past.
The researchers begin their analysis with an event that has recently been commemorated in several countries across Europe. Exactly 500 years ago, Martin Luther allegedly nailed 95 theses to the door of the Castle Church in Wittenberg, and thereby established Protestantism.
Whether the emergence of Protestantism had enduring consequences has long been debated by social scientists. One of the most influential sociologists, Max Weber, famously argued that the Protestant Reformation was instrumental in facilitating the rise of capitalism in Western Europe.
In contrast to Catholicism, Weber said, Protestantism commends the virtues of hard work and thrift. These values, which he referred to as the Protestant ethic, laid the foundation for the eventual rise of modern capitalism.
But was Weber right? The new study suggests that Weber was right in stressing the importance of a cultural appreciation of hard work and thrift, but quite likely wrong in tracing the origins of these values to the Protestant Reformation.
The researchers use a theoretical model to demonstrate how a small group of people with a relatively strong work ethic – the Cistercians – could plausibly have improved the average work ethic of an entire population within the span of 500 years.
The researchers then test the theory statistically using historical county data from England, where the Cistercians arrived in the twelfth century. England is of particular interest as it has high quality historical data and because, centuries later, it became the epicentre of the Industrial Revolution.
The researchers document that English counties with more Cistercian monasteries experienced faster population growth – a leading measure of economic growth in pre-modern times. The data reveal that this is not simply because the monks were good at choosing locations that would have prospered regardless.
The researchers even detect an impact on economic growth centuries after the king closed down all the monasteries and seized their wealth on the eve of the Protestant Reformation. Thus, the legacy of the monks cannot simply be the wealth that they left behind.
Instead, the monks seem to have left an imprint on the cultural values of the population. To document this, the researchers combine historical data on the location of Cistercian monasteries with a contemporary dataset on the cultural values of individuals across Europe.
They find that people living in regions in Europe that were home to Cistercian monasteries more than 500 years ago reveal different cultural values than those living in other regions. In particular, these individuals tend to regard hard work and thrift as more important compared with people living in regions that were not home to Cistercians in the past.
This study is not the first to question Max Weber’s influential hypothesis. While the majority of statistical analyses show that Protestant regions are more prosperous than others, the reason for this may not be the Protestant ethic as emphasised by Weber.
For example, a study by the economists Sascha Becker and Ludger Woessman demonstrates that Protestant regions of Prussia prospered more than others because of the improved schooling that followed from the instructions of Martin Luther, who encouraged Christians to learn to read so that they could study the Bible.
‘Pre-Reformation Roots of the Protestant Ethic’ by Thomas Barnebeck Andersen, Jeanet Bentzen, Carl-Johan Dalgaard and Paul Sharp is published in the September 2017 issue of the Economic Journal.
Thomas Barnebeck Andersen and Paul Richard Sharp are at the University of Southern Denmark. Jeanet Sinding Bentzen and Carl-Johan Dalgaard are at the University of Copenhagen.
by Peter Scott and James T. Walker (Henley Business School at the University of Reading)
‘Stop-go’ aggregate demand management policy represents one of the most distinctive, and controversial, aspects of British macroeconomic policy during the post-war ‘long boom’. This was, in turn, linked to an over-riding priority among an influential section of policy-makers in the Treasury and the Bank of England to restore sterling as a ‘strong’ currency (second only to the dollar) and to re-establish the City of London as a major financial and trading centre, despite heavy war-time debts and low currency reserves.
This policy is often viewed as having had damaging impacts on major sectors of the British economy – especially the manufacture of cars, white goods and other consumer durables, which were deliberately depressed in order to support sterling and thereby facilitate the growth of Britain’s financial sector.
This research explores an important but neglected impact of ‘stop-go’ policy: restrictions on house-building. This has been overlooked in the general stop-go literature, largely because the policy was mainly undertaken covertly, without public announcement or parliamentary discussion.
In addition to publicly announced restrictions on public sector house-building – by restricting local authority borrowing and raising interest rates on that borrowing – the government covertly depressed private house purchases and mortgage lending by restricting house mortgage funds to well below market clearing levels.
The Treasury used a combination of informal pressure and, less frequently, formal requests, to get the building societies’ cartel (the Building Societies Association) to set their interest rates at levels that forced them to ration mortgage lending in order to maintain acceptable reserves. Officials particularly valued this instrument of stop-go policy owing to its effectiveness and its ‘invisibility’ (mortgage lending restriction was not publicly announced and was not generally even subject to cabinet discussion).
Meanwhile political pressure for action to increase house-building and home ownership (especially in the run-up to national elections) led to a perverse situation whereby government was sometimes simultaneously boosting demand for house purchases and covertly restricting the supply of mortgages – feeding into a growing house price spiral that has become an enduring characteristic of the British housing market.
This study shows that the application of stop-go policy to mortgage lending for most of the period between the mid-1950s and the late 1970s had a major cumulative impact on the British economy: depressing the long-term rate of capital formation in housing; creating inflationary expectations for house purchasers; having negative impacts on living standards (especially for lower-income families); and damaging the growth, productivity, and capacity of the house-building sector and the building society movement.
by Adrian Bell, Chris Brooks and Helen Killick (ICMA Centre, University of Reading)
While we might imagine the medieval English property market to have been predominantly ‘feudal’ in nature and therefore relatively static, this research reveals that in the fourteenth and fifteenth centuries, it demonstrated increasing signs of commercialisation.
The study, funded by the Leverhulme Trust, finds that a series of demographic crises in the fourteenth century caused an increase in market activity, as opportunities for property ownership were opened up to new sections of society.
Chief among these was the Black Death of 1348-50, which wiped out over a third of the population. In contrast with previous research, this research shows that after a brief downturn in the immediate aftermath of the plague, the English market in freehold property experienced a surge in activity; between 1353 and 1370, the number of transactions per year almost doubled in number.
The Black Death prompted aristocratic landowners to dispose of their estates, as the high death toll meant that they no longer had access to the labour with which to cultivate them. At the same time, the gentry and professional classes sought to buy up land as a means of social advancement, resulting in a widespread downward redistribution of land.
In light of the fact that during this period labour shortages made land much less profitable in terms of agricultural production, we might expect property prices to have fallen.
Instead, this research demonstrates that this was not the case: the price of freehold land remained robust and certain types of property (such as manors and residential buildings) even rose in value. This is attributed to the fact that increasing geographical and social mobility during this period allowed for greater opportunities for property acquisition, and thus the development of property as a commercial asset.
This is indicated by changes in patterns of behaviour among buyers. The data suggest that an increasing number of people from the late fourteenth century onwards engaged in property speculation – in other words, purchase for the purposes of investment rather than consumption.
These investors purchased multiple properties, often at a considerable distance from their place of residence, and sometimes clubbed together with other buyers to form syndicates. They were often wealthy London merchants, who had acquired large amounts of disposable capital through their commercial activities.
The commodification of housing is a subject that has been much debated in recent years. By exploring the origins of property as an ‘asset class’ in the pre-modern economy, this research draws inevitable comparisons with the modern context: in medieval times, much as now, ‘bricks and mortar’ were viewed as a secure financial investment.