ORIGINS OF BRITAIN’S HOUSING CRISIS: ‘Stop-go’ policy and the covert restriction of private residential house-building

by Peter Scott and James T. Walker (Henley Business School at the University of Reading)

University of the West of England, The History of Council Housing. Copyright of Bristol Record Office

‘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.

Business before industrialization: Are there lessons to learn?

by Judy Stephenson (Wadham College, University of Oxford) and Oscar Gelderblom (University of Utrecht)


Screen Shot 2017-09-06 at 21.48.21
Bruegel the Elder (1565), Corn Harvest (August)

Business organization is mostly absent from economic history debate about the rise of economic growth, but it was not always so  

As a new protectionist era in political economy dawns, it would be fair to ask what scholarship business and policy can draw on to understand how trade flourished before twentieth century institutions promoted globalization. Yet, pre-industrial business organization, once a central concern in scholarly debates about the rise of capitalism, and the West, currently plays only a marginal role in research on long-run economic development. Once a central pillar of economic history, the subject is almost absent from the recent global meta-narratives of divergence and growth in economic history. Since 2013 Oscar Gelderblom (Utrecht) and Francesca Trivellato (Yale) have been reviving interest, exploring finance and organization in early modern business thanks to a grant from the Netherlands Organization of Scientif Research (NWO).

“our survey suggests that a strong theoretical foundation and rich empirical data exist on the basis of which we can develop a comparative business history of the preindustrial world.”

In May they convened the last in a series of workshops ‘the Funding of Early Modern Business’, in Utrecht, bringing together speakers from around the globe to look specifically at means and methods of funding and finance in a comparative sense.

The old literature on western business focused, for the largest part, on the large chartered and state backed organizations of colonialism, possibly to the detriment of our understanding of domestic and regional business practice. The cases under discussion at the workshop were geographically and methodologically varied – but mostly they stressed the latter. Susanna Martinez Rodriguez (Murcia) examined the cases of Spain’s Sociedad de Responsibiliadad Limitata in the early twentieth century, highlighting the attractiveness of the hybrid legal form for small business. Claire Lemercier (CNRS Paris) showed the use of courts and the legal system by trading businesses in 19th century Paris were a last recourse for the complex credit arrangements of urban trading. A large number of trading women used the courts and this raises the question of whether this represents a larger number of women in business than expected, or whether other means were less accessible to them. Siyuan Zhao (Shanghai) showed the vast records available to the researcher of Chinese business forms in the 19 century. His case showed that production households operated with advanced subcontracting networks of finance. As the first day ended conversation among participants and discussants – including Phillip Hoffman, Craig Muldrew, Heidi Deneweth and Joost Jonker focused on contracts, enforcement, and the varied ways in which early modern businesses responded to costs and risk.

Meng Zhang (UCLA) delighted participants with meticulous research showing that small farmers and plot owners in 18th-century Southwestern China securitised timber production and land shareholdings with complex contracts risk mitigation among small agricultural operators that allocated future output and allowed division of land and produce. Her work challenges current narratives of China in the 18th century. Judy Stephenson described the significant credit networks of seventeenth century building contractors in London. The structure and process of the contract for works enabled the crown and city to finance major infrastructure development after the Great Fire. Pierre Gervaise showed that French merchants in the southwest were opportunist in using their de facto monopolies on supply of goods to Bordeaux to price gouge. His amusing and detailed archival sources give the opportunity for new analysis of French supply chains and transaction costs.

Thomas Safley needed no introduction to this audience. His work on fifteenth and sixteenth century Southern German family networks is well established, but here he demonstrated that norms and collective action institutions in southern Germany were distinctive. Mauro Carboni traced the development of the limited partnership to 15th century Bologna and described the contract stipulations made as the time of partnership formation.

One of the key areas that Gelderblom & Trivellato highlighted as of particular interest was that of women in business in the early modern period. Hannah Barker used her wide research in women and family business to discuss the high number of trading businesses in mid-19th century Manchester run by women, and make the point that existing accounts of welfare and output do not take women’s businesses into account. The area is one with active research.

The overall picture gained from the workshop was of the remarkable organization flexibility of early modern business co-ordination, most particularly y in relation to credit. Almost all cases showed businesses moderating and contracting the rights and involvement of creditors in varied ways non-financial ways. Almost all cases indicated that contracts entered into determined outcomes to the same or greater degree as the structure of the enterprise.

Gelderblom & Trivellato have come to the end of the project but will continue to forge research links and networks on early modern business. Their work so far shows clearly that research into domestic and regional businesses before 1870 will bear fruit for historians, and very probably business leaders too.

Learning for life? Comparing miners’ education and career paths in Chile and Norway 1860-1940

by Kristin Ranestad (University of Oslo)


Is formal education relevant and useful for industry? Do trained workers acquire relevant knowledge outside the school setting, and if so, where and how?

Much research has been done on technical education, industrial performance and economic growth. But we still lack knowledge of the content of teaching, and the direct use of formal education in daily work tasks and innovation processes. Moreover, our knowledge of the limitations of formal education is scarce.

This research seeks to complement previous work with a detailed investigation of the connections between formal education, ‘learning by doing’, networking and innovation in mining from around 1860 to 1940. Analysing the connection between education, learning and innovation in mining is particularly interesting because mining education was one of the first technical training programmes aimed at a specific industry.

The reason it is possible to study this subject in detail is because of unique source material for the period. Student yearbooks from Norway for the years between 1855 and 1943, and for some years for Chile, provide exclusive information about the life and work of secondary school graduates after they completed their formal education.

This allows to follow the graduates from school into their practices, work and travels, and it is possible to make in-depth analyses of the functions of formal education and of knowledge and skills learned outside school settings.

The student yearbooks for Norway were published each year by the university and are collections of reports made by the graduates themselves about scholarships, continuing education in Norway and abroad (technical and higher), study travels, trainee positions, companies they worked at in Norway and abroad, working positions and personal experiences.

From these yearbooks and additional sources, we find that the formal mining education was relevant and useful for positions in a broad spectrum of mining organisations. Moreover, the radical technological changes that were happening in mining at the time were supported by increased diversification in workers’ educational background and an increase in the proportion of trained workers.

Workers with formal education were increasingly used by the industry. At the same time, we find that practice, work experience and especially study travels abroad, are key examples of essential supplementary knowledge to the formal and theoretical mining instruction, which was acquired outside a school setting.

Workers, technicians and engineers from Norway had a long tradition of travelling abroad. Out of 341 Norwegian mining engineers, 256 (75%) went abroad between 1787 and 1940, normally to Germany, Sweden, France, England, and the United States from the turn of the twentieth century – all countries with important mining industries. They went to study at a foreign universities or schools, to do geological surveys or acquire information about specific techniques, or to work for a longer period at a foreign company.

During these trips abroad, the engineers created networks, acquired knowledge about up-to-date mining technology and contacts and took specialised courses at universities. To understand all dimensions of technology, and especially how to select, transfer, adopt and modify techniques, hands-on experience and learning by doing on-site was key.

The trips abroad were vital to learn how to use, repair and maintain new mining machinery, tools and techniques and enabled knowledge transfer. They functioned as a form of networking and sometimes led to new investments and business opportunities in Chile and Norway. The knowledge acquired during these trips was different than the knowledge learned in school, but not less important.



Industrialisation and the origins of modern prosperity: evidence from the United States in the 19th century

by Ori Katz (Tel Aviv University)

Wiki Commons. Market scene by Pieter Aertsen, c.1550


The largest economic mystery is the modern prosperity of humankind. For thousands of years since the Neolithic revolution, most humans lived in small communities, working as farmers, and their average standard of living did not change much.

But in the nineteenth century, things changed: large parts of the world become industrialised. In those parts, people moved to live in huge cities, where they worked in manufacturing and commerce, had fewer children, invested more in schooling, and their standard of living began to rise, and then to rise dramatically, and it has never stopped since. Whether you look at life expectancy, birth fatality, income per person or any other measure, the trend is the same. And we don’t really know why.

We have a lot of theories. Some believe that this dramatic change has something to do with a geopolitical environment that encouraged competition and maintained stability in property rights. Others talk about a change in human preferences, maybe even in human biology. But in every theory, two of the main ingredients are the dramatic reduction in fertility and the increasing investment in human capital during the late nineteenth century.

This research examines the effect of industrialisation on human capital and fertility in the United States during the period from 1850 to 1900. This effect is hard to identify, for example because human capital also affects industrialisation, or because other variables such as ‘culture’ may affect both.

To deal with those problems, the study uses the westward expansion of the country as a ‘natural experiment’. The appearance of new large cities such as Chicago and Buffalo led to the development of new transport routes, and the study looks at counties that happened to be close to those new routes.

Those counties experienced industrialisation only because of their geographical location, and not because of the human capital of the local population or other variables. This means that analysing them is similar to a laboratory experiment, where it is possible to change only one parameter and leave the others intact.

Results show a very large effect of industrialisation on both fertility and human capital. These results are in contrast with an old theory according to which industrialisation was a ‘de-skilling’ process that increased the demand for unskilled labour. It seems that industrialisation was conducive to human capital.

They also find that the effects of industrialisation on both fertility and human capital were larger in counties that were already more developed in the first place. This led to a divergence between them and less developed counties. Indeed, when we look at the country level, we see increasing gaps between the industrialised countries and the rest of the world, starting in the nineteenth century, just like the gaps shown at the county level.

The modern period of growth is still a mystery, but these research results tell us that the effects of industrialisation on fertility and human capital are an important piece of the puzzle. These effects might be the reason for the great divergence between nineteenth century economies that created the modern wealth gaps between nations.

Employment, retirement and pensions: the Victorian era as a golden age for the elderly

by Tom Heritage (University of Southampton)

Irish spinning wheel – around 1900
Library of Congress collection

For far too long, our elderly ancestors have been viewed through the prism of the National Health Service and the modern welfare state: old people are regarded as a burden, taking out of society rather than contributing. In contrast, this study of census data for five counties across England and Wales from 1851 to 1911 reveals a reciprocal relationship between those living in old age and wider society.

First, across the whole period, 86-93% of men aged 60 and over were in employment. Even if we exclude those in workhouses, the figure is 80-85%.

Most old men worked in agricultural and general labouring, although an increase was evident by 1911 in the mining industry in Glamorgan and metal manufacturing in Sheffield. Bricklaying, house painting, dock labouring and commercial sales were also pursued in urban areas. Labour force participation rates were higher among men in their sixties than among men in their seventies and eighties.

Second, from 1851 to 1911, between a sixth and a third of women aged over 60 were in employment. Although their occupations were less diverse than those of men, the majority were based in domestic service.

Old women were also involved in cotton and silk textiles and in the manufacture of straw hats. Over time, though, the employment rates of old women did not increase like those of men, owing partly to foreign competition in Asian straw imports and French silks.

Third, retirement was not an innovation brought about by the creation of old age pensions. As early as 1891, over 13% of old men were described in the census as ‘retired’, with high rates in the areas favoured by today’s retirees: the coastal areas of Christchurch and Portsmouth in southern England. More old people retired than went into the workhouse.

But retirement was only an option for those who had inherited or managed to accumulate wealth, such as former smallholders, grocers, innkeepers, civil servants or military officers. Others who lacked land or capital, for example agricultural labourers, or boot and shoe makers were forced to resort to the Poor Law.

Even then, this did not always, or usually, mean the workhouse. Welfare assistance to old people in their own homes was common, especially for women. ‘Outdoor relief’, usually around 2s 6d per week, was issued as a weekly ‘pension’.

Moreover, the women who received it were not always as old as those entitled to a pension in the modern era: in Yorkshire in 1891, over 10% of old women described as ‘on relief’ were under 66, which will be the minimum pension age for women by 2020.

So is it really true to say that nowadays, ‘the elderly have never had it so good’? In a sense it is, as old people lead healthier and longer lives today than they have ever done.

But it would be wrong to conclude that old people in Victorian times were largely condemned to lives of pain and poverty. They had a wide range of experiences, and many had access to employment opportunities and sources of assistance that are no longer offered.

In terms of present day policy, we might learn something from our Victorian forebears about ways to integrate the general population in their sixties into the workforce, so that they can contribute to society as well as receive welfare.

The making of New World individualism and Old World collectivism: international migrants as carriers of cultural values

by Anne Sofie Beck Knudsen (University of Copenhagen)



The Sunday magazine of the New York World appealed to Immigrants with this 1906 cover page celebrating their arrival at Ellis Island.

Although a hotly debated topic, we know surprisingly little of the long-term cultural impact of international migration. Does it boil down to the risk of clashes between different cultures; or do we see cultural changes in migrant-sending and migrant-receiving countries along other dimensions as well?

Using novel empirical data, this research documents how past mass migration flows carried values of individualism across the Atlantic ocean from the mid-nineteenth to early twentieth century. This inter-cultural exchange was so significant that its impact is still observed today.

When talking about individualism versus collectivism, this study refers to the emphasis on independence from society that is prevalent in these cultures. With this in mind, it becomes clear why it has a role to play. The act of migration involves leaving familiar surroundings to embark on a journey where you are bound to rely on yourself. An individual with strong ties to the surroundings will be less likely to undergo this act. Collectivists are thus less likely migrate, while the opposite is true for individualists.

To test the idea of individualistic migration and its long-term impact empirically, this research constructs novel indicators of culture, which allow to go back and study the past. It looks at two everyday cultural manifestations: how we name our children; and how we speak our language.

Giving a child commonplace names like ‘John’ reflects parents of a more conformist motivation as they, perhaps unconsciously, are more concerned about their child fitting in rather than standing out. Likewise, the relative use of singular (‘I’, ‘mine’, ‘me’) over plural (‘we’, ‘ours’, us) personal pronouns tells us something about the focus on the individual over the collective.

The study constructs historical indicators of culture from the distribution of names in historical birth registers and from the written language of local newspapers at the time.

With new data in hand, the research can document the prevalence of individualistic migration during the settlement of the United States around the turn of the twentieth century. Among inhabitants of major migrant-sending countries like Norway and Sweden, only those with more uncommon names were more likely actually migrate to. This cultural effect remains even when considering a host of other potential explanations related to economic prospects and family background.

If more individualistic types are more likely to migrate, we would expect to observe an impact on the overall culture of a given location. That is exactly what this research finds. Districts in Sweden and Norway that experienced high emigration flows of people with an individualistic spirit did indeed become more collectivistic – both in terms of child naming trends and in written language pronoun use.

This leaves with the question of whether an impact from this historical event is still visible today. Does international migration have long-term cultural consequences other than the risk of producing cultural clashes?

In this study, this seems to be the case. Scandinavian districts that experience more emigration are still relatively more collectivist today than those that experienced less. Moreover, it is widely agreed that New World countries like the United States are the most individualistic in the world today – a fact that seems to be explained by the type of migrants they once received.

From The NEP-HIS Blog: Fifty Years of Growth in American Consumption, Income, and Wages

Fifty Years of Growth in American Consumption, Income, and Wages By Bruce Sacerdote (Darmouth) Abstract: Despite the large increase in U.S. income inequality, consumption for families at the 25th and 50th percentiles of income has grown steadily over the time period 1960-2015. The number of cars per household with below median income has doubled since […]

via Is the Glass Half Full?: Positivist Views on American Consumption — The NEP-HIS Blog

From History&Policy – What does British imperial economic history tell us about the future of UK-EU trading relations?

by David Clayton, originally published on 25 April 2017 on History & Policy



Post-Brexit UK-European Union (EU) trading relations will take one of three forms:

(1) The UK will remain part of the EU customs union

(2) UK-EU trade will be governed by World Trade Organisation (WTO) rules

(3) The UK and EU will enter a free trade pact.

Option (1) is economically optimal but has been declared politically unfeasible because it requires the UK to commit to the free movement of labour between the EU and the UK. Such conditionality is essential because economies grow unevenly and, in the absence of independent currencies across Europe and/or a central European state to pool the risk of unemployment, free movement of labour is the mechanism for redistributing the gains from EU growth.

Economics (not history) is the best guide here.

Most parties agree that option (2) is the solution of last resort. Much has been made of its impact on complex cross-border trade in manufactured goods, but trade in services may be more problematic. The General Agreement on Trade in Services governs international trade, but can these rules handle disputes regarding trade in services across highly integrated economies subject to disintegration post-Brexit?

The law (not history) is the best guide here.

Britain’s economic history however is key to analysis of option (3).

Full article here:


Brexit, Globalisation and De-Industrialisation

by Jim Tomlinson (Glasgow University)

brexit downloadIn seeking to understand the economic basis of the Brexit vote, we should concentrate not on globalisation but on the long-term impact of de-industrialisation.

The evidence is certainly strong that economic disadvantage played a significant part in the patterns of voting in the referendum (though age and educational qualifications seem to have played a large, independent role). But this disadvantage seems best linked to de-industrialisation, which has left a legacy of a much more polarised service sector labour market, with large numbers of people condemned to poorly paid and insecure jobs.

Globalisation has contributed to de-industrialisation, but it is only one contributor, and historically not the most important. De-industrialisation began in Britain in the 1950s. It was driven by shifts in patterns of demand and technological change, most strikingly in increasing the growth of productivity (and lowering the relative price) of manufactured goods. (Total industrial output has not fallen, but grown slowly on trend.)

These broad trends have affected all industrial countries, so that industrial employment has fallen substantially even in successful industrial countries with a manufacturing trade surplus, such as Germany. Industrial employment as a share of the total has more than halved in that country since its peak in 1970.

The long-run nature of these trends is illustrated by the fact that many more coal-mining jobs were lost in Britain under Harold Wilson’s government of the 1960s than under Margaret Thatcher’s government of the 1980s.

Similarly, the big collapse of industrial jobs in Lancashire began in the 1950s and accelerated in the 1960s; across the country, textiles and clothing lost 123,000 jobs between 1964 and 1969.

Proportion of workers in industrial employment in the UK

1957               48%

1979               38%

1998               27%

2016               15%

Serious errors of policy have undoubtedly accelerated this process, and compressed it into short time periods (most obviously, the extraordinary appreciation of the pound in 1979-81 as a result of the Thatcher government’s policies). But overall the process has not mainly been policy-driven.

In responding to the economic problems that underpinned the Brexit vote, it is important to be clear that globalisation is only one part of the story. To put it crudely, if globalisation were somehow reversed, it would not return Britain to having anything like the number of industrial jobs that existed in the 1950s.

While there are certainly powerful arguments for seeking to offset the impact that globalisation has had on particular groups of workers, the biggest challenge is how to make a service-dominated economy deliver much better outcomes for those who currently occupy the lousy jobs in the service sector.

The impact of new universities on regional growth: evidence from the United States 1930-80

by Alexandra López Cermeño, Lund University / Universidad Carlos III de Madrid

From ODU  Twitter account

Universities generate growth spillovers beyond simply the local market. Analysing data on the universities founded in the United States between 1930 and 1980, my research shows that these drove growth of GDP and population not only in the counties that hosted them, but also in their neighbouring regions. But analysis of their longer-term impact suggests that although there are growth spillovers, the positive effect wears out if it is not periodically renewed.

The role of universities in generating growth is rarely contested. But most research tend to associate the presence of a university with long-term path dependency. In the era of knowledge and information, the role of universities as producers of new ideas and technologies is crucial to productivity. New light on this subject is required not only to understand the role of cultural amenities but also to explore the spatial dynamics around them.

Long-term analysis that compares recipient counties of their first universities between 1930 and 1980 with statistically similar counties that never got an institution shows that the effect of these new universities implies 20% more growth in terms of GDP. Moreover, the analysis shows that the new amenities eventually had an impact neighbouring counties. These dynamics seem to be related to population migration.

This sizeable increase of GDP in these counties is corresponded by a similar size increase in population: new universities generate migratory movements of workers, which eventually lead to higher housing prices and costs to use other infrastructures. Higher costs motivate many workers to relocate to nearby areas where housing and infrastructures are less expensive and access to the amenity is still feasible.

The positive effect of new universities is therefore neutralised in the longer term unless further investments reduce congestion costs. Indeed, the role of infrastructures such as roads seems to explain a large share of the effect of universities.

But the interaction of universities and infrastructure seems to be defined by the decreasing importance of the latter: whereas physical access to infrastructure seemed to constrain the impact of new amenities before the 1950s, more recently established institutions seem no longer dependent on face-to-face contact.

There is further evidence on the role of knowledge dynamics in my study: in the earlier half of the period 1930-80, all that mattered was getting a new university in the county, whereas in the latter half of the period, the quality of the institution seems to have become much more relevant. Counties where research-intensive institutions were established during the period 1950-80 grew almost 40% more.

My analysis shows that the effect of new academic institutions during the twentieth century induced regional spatial dynamics in terms of migration and GDP. But it indicates that the impact of these new amenities was seriously constrained by the congestion of utilities, which limited the extent of growth to the short run.

Thus, it questions the extent of the impact generated by these institutions that is so praised in recent literature since it suggests that their growth dynamics are not self-sustaining: further investments are needed to keep up with the agglomeration forces that attract population and firms to these counties.