Folks, I’m still plugging away at RealClearHistory. This week’s focus was on Iraq. Here’s the link to my Tuesday column. And here’s the link to my weekend column. I’m not going to spoil anything. Just read ’em already!
History
RCH: Calvin Coolidge
I took on Calvin Coolidge this week. My Tuesday column dealt with Coolidge and his use of the radio, while this weekend’s column argues why you should love him:
2. Immigration. At odds with the rest of his anti-racist administration, Coolidge’s immigration policy was his weakest link. Although he was not opposed to immigration personally, and although he used the bully pulpit to speak out in favor of treating immigrants with respect and dignity, Coolidge was a party man, and the GOP was the party of immigration quotas in the 1920s. Reluctantly, and with public reservations, Coolidge signed the Immigration Act of 1924, which significantly limited immigration into the United States up until the mid-1960s, when new legislation overturned the law.
Please, read the rest.
Monetary Progression and the Bitcoiner’s History of Money
In the world of cryptocurrencies there’s a hype for a certain kind of monetary history that inevitably leads to bitcoin, thereby informing its users and zealots about the immense value of their endeavor. Don’t get me wrong – I laud most of what they do, and I’m much looking forward to see where it’s all going. But their (mis)use of monetary history is quite appalling for somebody who studies these things, especially since this particular story is so crucial and fundamental to what bitcoiners see themselves advancing.
Let me sketch out some problems. Their history of money (see also Nick Szabo’s lengthy piece for a more eloquent example) goes something like this:
- In the beginning, there was self-sufficiency and the little trade that occurred place took place through barter.
- In a Mengerian process of increased saleability (Menger’s word is generally translated as ‘saleableness’, rather than ‘saleability’), some objects became better and more convenient for trade than others, and those objects emerged as early primative money. Normally cherry-pick some of the most salient examples here, like hide, cowrie shells, wampum or Rai stones.
- Throughout time, precious metals won out as the best objects to use as money, initially silver and gradually, as economies grew richer, large-scale payments using gold overtook silver.
- In the early twentieth century, evil governments monopolized the production of money and through increasingly global schemes eventually cut the ties to hard money and put the world on a paper money fiat standard, ensuring steady (and sometimes not-so-steady) inflation.
- Rising up against this modern Goliath are the technologically savvy bitcoiners, thwarting the evil money producing empires and launching their own revolutionary and unstoppable money; the only thing that stands in its way to worldwide success are crooked bankers backed by their evil governments and propaganda as to how useless and inapt bitcoin is.
This progressively upward story is pretty compelling: better money overtake worse money until one major player unfairly took over gold – the then-best money – replacing it with something inferior that the Davids of the crypto world now intents to reverse. I’m sure it’ll make a good movie one day. Too bad that it’s not true.
Virtually every step of this monetary account is mistaken.
First, governments have almost always defined – or at least seriously impacted – decisions over what money individuals have chosen to use. From the early Mesopotamian civilizations to the late-19th century Gold Standard that bitcoin is often compared to, various rulers were pretty much always involved. Angela Redish writes in her 1993 article ‘Anchors Aweigh’ that
under commodity standards – in practice – the [monetary] anchor was put in place not by fundamental natural forces but by decisions of human monetary authorities. (p. 778)
Governments ensured the push to gold in the 18th and 19th centuries, not a spontaneous order-decentralized Mengerian process: Newton’s infamous underpricing of silver in 1717, initiating what’s known as the silver shortage; Gold standard laws passed by states; large-scale network effects in play in trading with merchants in those countries.
Secondly, Bills of Exchange – ie privately issued debt – rather than precious metals were the dominant international money, say 1500-1900. Aha! says the bitcoiner, but they were denominated in gold or at least backed by gold and so the precious metal were in fact the real outside money. Nope. Most bills of exchange were denominated in the major unit of account of the dominant financial centre at the time (from the 15th to the 20th century progressively Bruges, Antwerp, Amsterdam and London), quite often using a ghost money, in reference to the purchasing power of a centuries-old coins or social convention.
Thirdly, monetary history is, contrary to what bitcoiners might believe, not a steady upward race towards harder and harder money. Monetary functions such as the medium of exchange and the unit of account were seldomly even united into one asset such as we tend to think about money today (one asset, serving 2, 3 or 4 functions). Rather, many different currencies and units of accounts co-emerged, evolved, overtook one another in response to shifting market prices or government interventions, declined, disappeared or re-appeared as ghost money. My favorite – albeit biased – example is early modern Sweden with its copper-based trimetallism (copper, silver, gold), varying units of account, seven strictly separated coins and notes (for instance, both Stockholms Banco and what would later develop into Sveriges Riksbank, had to keep accounts in all seven currencies, repaying deposits in the same currency as deposited), as well as governmental price controls for exports of copper, partly counteracting effects of Gresham’s Law.
The two major mistakes I believe bitcoiners make in their selective reading of monetary theory and history are:
1) they don’t seem to understand that money supply is not the only dimension that money users value. The hardness of money – ie, the difficulty to increase supply – as an anchoring of price levels or stability in purchasing power is one dimension of money’s quality – far from the only. Reliability, user experience (not you tech nerds, but normal people), storage and transaction costs, default-risk as well as network effects might be valued higher from the consumers’ point of view.
2) Network effects: paradoxically, bitcoiners in quibbling with proponents of other coins (Ethereum, ripple, dash etc) seem very well aware of the network effects operating in money (see ‘winner-takes-it-all’ arguments). Unfortunately, they seem to opportunistically ignore the switching costs involved for both individuals and the monetary system as a whole. Even if bitcoin were a better money that could service one or more of the function of money better than our current monetary system, that would not be enough in the presence of pretty large switching costs. Bitcoin as money has to be sufficiently superior to warrant a switch.
Bitcoiners love to invoke history of money and its progression from inferior to superior money – a story in which bitcoin seems like the natural next progression. Unfortunately, most of their accounts are lacking in theory, and definitely in history. The monetary economist and early Nobel Laureate John Hicks used to say that monetary theory “belongs to monetary history, in a way that economic theory does not always belong to economic history.”
Current disputes over bitcoin and central banking epitomize that completely.
RCH: MacArthur’s battles
That’s the subject of my weekend column over at RealClearHistory. There’s not a whole lot of information out there about Douglas MacArthur’s battle history, so it’s gotten a lot of attention. I think most people avoid writing about MacArthur because he’s such a polarizing figure. At any rate, here’s an excerpt:
8. Battle of Chosin Reservoir (Nov.-Dec. 1950). Fought on the Korean Peninsula, take a quick moment to reflect on the rapid, violent change that catapulted the United States from regional hegemon in 1914 to world power less than half a century later. And MacArthur served in the military throughout the whole change. The Battle of Chosin Reservoir decisively ended MacArthur’s plans for reuniting Korea under one banner and established the two-country situation of the Korean Peninsula found today. One hundred and twenty thousand Chinese troops pushed 30,000 American, Korean, and British troops out of what is now North Korea and changed the trajectory of the Korean War once and for all. It also led to MacArthur’s political downfall, as his increasingly public calls to attack China’s coastline (with atomic bombs) angered Washington and eventually led Truman to dismiss MacArthur.
Please, read the rest…
RCH: MacArthur’s rule over Japan
That’s the subject of my latest over at RealClearHistory. An excerpt:
The relative graciousness of the American occupation of Japan led to the most peaceful and prosperous era in Japanese history. MacArthur’s governing strategy for a conquered people was so successful that it was aped by Washington in 2001 and 2003 when the United States invaded and occupied Afghanistan and Iraq. What went wrong? You could write a dissertation trying to answer that question, but the most straightforward answer is that Iraq and Afghanistan were not conquered. The governments of Kabul and Baghdad never officially surrendered to Washington, and they never really had the capacity to wage war the way that Japan was able to wage war on the United States.
As always, I appreciate the clicks…
RCH: Annexation of the Hawaiian islands
That’s the topic of my latest over at RealClearHistory. An excerpt:
That is to say, there are theoretical lessons we can draw from the American annexation of Hawaii and apply them to today’s world. The old Anglo-Dutch playbook turned out to serve American imperial interests well, especially when contrasted with the disastrous Spanish-American War of 1898, when the United States seized the Philippines, Cuba, Guam, and Puerto Rico from Spain in an unwarranted act of aggression. Hawaii, now an American state, has one of the highest standards of living in the world (including for its indigenous and Japanese citizens), while the territories seized by the U.S. from Spain continue to wallow in relative poverty and autocratic governance.
Please, read the rest.
Semiotics in national dialogue: an observation
One thing the Notes on Liberty community may not know about me is that I worked for a while as a research (and writing) extern for the Victims of Communism Memorial Foundation. Because of my academic background in history and the arts, most of my work focused on historical communism, especially as related to propagandist representations from inside communist countries. The experience provided me with an opportunity to immerse myself in the documentation and wording of communism.
Most people know how the Soviet and Maoist propagandists portrayed their own people: the moral, brave underdogs who are hated and despised by rich, corrupt weaklings. Any of the sufferings connected to communism – famines, shortages, economic instability – these were all the fault of external forces. Except in the case of the Chinese, to whom Mao refused to offer explanation and simply told the people that their sufferings were glorious and were sacrifices to the revolution. Hua Yu in his memoir China in Ten Words conveys quite poetically exactly how “glorious” everyone’s sufferings were. Even today, we are still treated to a modern iteration in the form of Nicolás Maduro and his wild accusations regarding the cause of Venezuela’s collapse. Most of the time, the perpetrators are the White House and CIA, though in August 2018 he blamed Colombia and some unidentified Floridians and in December 2018 he threw in Brazil, along with the traditional “White House did it” trope.
What is less commonly known – outside of film and literature aficionados – about Cold War era portrayals is their representation of those who live on the other side of the divide, i.e. in capitalism. Across the board, the portrayals were fairly simplistic – the rich were evil, the poor were good. The premise was always that the former were useless and the latter were meritorious, belonging in a socialist workers’ paradise, instead of in a system that metaphorically chewed them up and spat them out. The propagandists were masters of imposing this interpretive paradigm universally, from traditional Western literature (or even their own traditional literature in the case of China) to news items. For example, the failed yachtsman and minor-league conman Donald Crowhurst became a proletariat hero in the Soviet film Race of the Century in which he is driven to his death by a greedy, capitalist sponsor (in real life, Crowhurst’s angel investor). The propaganda point being that in capitalism human life is expendable. One has only to read Alexander Solzhenitsyn’s Gulag Archipelago to see under which system an indifference to human life was, and still is, ingrained.
There is a reason that Marxist and post-structuralist theory and criticism focus on the concept of “the other.” It is because communism can only arise from chaos and conflict. In order to justify its existence and explain its ills and failures, there must be an “other” which opposes it. The other can be the White House, foreign intelligence services, or foreign bankers. “Othering” can be imposed on practically any person or group of people, and the dynamic can be read into any relationship. If one wants to find an “other” in Solzhenitsyn, a very good candidate is Fetyukov from One Day in the Life of Ivan Denisovich. For a literary criticism standpoint, Ivan Denisovich Shukov’s contempt for Fetyukov is a case of the former “othering” the latter. “Othering,” while a development of Marxist thought, is not a domain exclusive to communist writing. Ian Fleming used the paradigm, consciously or unconsciously, in his James Bond series, with their black-and-white portrayals of who was the good and who was the bad party.
Study of the language and structures of Marxist thought and propaganda is both lacking and overwhelming today. Yes, on the one hand, our universities have been overtaken with grievance studies and criticism classes. But on the other, the tropes and thought processes of Marxism have subtly appeared in contemporary American dialogue. More insidiously, they are not coming necessarily from the overt socialists, such as Alexandria Ocasio-Cortez, but from figures that identify as center and right. Ocasio-Cortez and her idol Bernie Sanders might be pardoned for regurgitating Marxist tropes, given that at least these politicians have had the decency to acknowledge their ideological leanings, but for “Conservative” [note the big “C”] intellectuals to do so is indicative of either ignorance or manipulation, both of which are unforgivable.
Consider what Michael Lind, a prominent neo-conservative, wrote in an article titled “Classless utopia versus class compromise,”published in American Affairs in summer 2018,
Democracy, then, requires strategically strengthening institutions that working-class people can control or at least influence. That means, among other things, defending the institutional independence of diverse religious communities, while sometimes favoring pragmatic municipal socialism. Whatever form an authentic grassroots working-class movement might take in the twenty-first-century United States, it is likely to look like historic precedents, including old-fashioned Milwaukee-style “sewer socialism” (municipal ownership of public utilities) and the Salvation Army. It will not look like the campus-based social justice and climate-change NGOs of progressive upper-middle-class professionals or, for that matter, free-market agitprop groups funded by the libertarian rich.
Lind has had a decades-old, well-publicized bugbear with libertarian thought, and to some extent his language reflects this. What is concerning about his words is the justification of localized socialism (history shows that this would not remain local for long) using the language of agency. The entire argument is built upon the fundamental Marxist assumption that the proletariat has no agency, wants it, and must collectivize to have it. In Marxist speak, Lind’s acceptance of the laborer-has-only-his-labor paradigm effectively “others” everyone on the other side of an indeterminate class line – upper-middle-class professionals (progressive or not), college students, free-marketeers, oh, and rich libertarians (one wonders where poor student classical liberals and middle-class libertarians fall in this equation).
In old fairy tales, a common theme is a beloved plant, usually a tree, that begins to wither away. The tree is externally healthy, and no one can discern a logical reason for it to be dying. After a long search, consulting of necromancers, and other typical fairy tale activities, the hero digs around the tree’s roots and discovers that there is a repulsive, venomous animal, usually a snake or a toad, living there, and it is the cause of the plant’s slow decline. Marxist thought and paradigms, not Marxism as an ideology, have become that snake for American Conservatism and center-right politics. Its poison is exacerbated by the fact that its acolytes and proselytizers appear to be unconscious of its presence as they argue that their only desire is to preserve the American Republic through preventing class conflict. But if they are doing is to hurl us faster and faster, more inexorably toward this very breakdown, as their ideas begin to overlap with those of the acknowledged far-left.
RCH: Cassius Clay as the “greatest American” of the 20th century
My latest at RealClearHistory:
It was also the heyday of the Cold War, a nearly 50-year struggle for power between the liberal-capitalist United States and the socialist Soviet Union. The struggle was real (as the kids say today). The United States and its allies were losing, too, at least in the realm of ideas. The Soviet Union was funding groups that would today be considered progressive — anti-racist and anti-capitalist — around the world. One of the sticks that Moscow used to beat the West with was racism in the United States, especially in the officially segregated South.
It is doubtful that most of the African-American groups who took part in the struggle for liberty were funded, or even indirectly influenced by Soviet propaganda. The clear, powerful contrast between black and white in the United States was enough for most African-Americans to take part in the Civil Rights revolution. Yet Soviet propaganda still pestered Washington, and Moscow wasn’t wrong.
Please, read the rest.
RCH: Five facts about Emancipation Proclamation
That’s the subject of my weekend column over at RealClearHistory. An excerpt:
4. The Confederacy was, for all intents and purposes, an independent country. When Lincoln issued the Emancipation Proclamation, the Confederacy had long since declared independence from the United States and set up a federal government of its own. Montgomery, Ala. acted as its capital city until 1861, when the Confederacy’s government moved to Richmond, Va. Lincoln viewed Richmond’s diplomacy with the British and French as the most dangerous element of the Confederacy’s secession. If Richmond could somehow manage to get a world power on its side, the consequences for the future of the republic would be dire. For London and Paris, the calculations were a bit different. If either one joined the side of the Confederacy, the other would officially join the north and a global war could ensue. The Confederacy lobbied especially hard for the British to fight on their side, but there was one issue London’s hawks, the factions that wanted a war with Washington, couldn’t get past.
Please, read the rest.
My son is being born right about now (I scheduled this post). I hope everything goes well (it’s a c-section). Wish me luck!
In the Spirit of Socialist Realism: Sampling American Multikulti Cinema
On the new year day, searching on Youtube for something to watch, by chance, I stumbled upon a low budget and poorly made Western Yellow Rock (2012). By now, I watched enough of Hollywood products that were tailored to current “diversity” ideology and PC tastes. At least, some of them (e.g. Django Unchained, Black Panther, Dances with Wolves) were well crafted . But this Yellow Rock really “rocks.” It totally “overwhelmed” me.
An official plot description is rather innocent:
“A man searching for his missing son hires a group of rugged cowboys to take him into territory controlled by the Black Paw Indians. When they come upon an ancient burial ground, their own greed tears them apart, as the posse turns on itself.”
Yet, in reality, from the first scenes, you are literally plunged into the “diversity pulp fiction”: caricature whisky-drinking and swearing white male rednecks (the posse) approach a camp of no less caricature noble American Indians who are taken care of by an all-female team of noble physicians and nurses. The head of the posse claims that he is looking for his missing son. Yet, in reality, they need to secure a permission from the tribe to cross Indian lands to reach an abandoned gold mine to get hold of some sacks with gold dust. Through their wooden characters, from the very beginning, producers defined clearly ideological sides: noble victims (Native Americans), allies (white women), and oppressors (white males). Not a single shade of grey. The only exception is a white male alcoholic scout who takes the posse into the wild. As a victim of his addiction, he is also somewhat qualified to be noble, and, in fact, he acts as an ally too.
The cliche plot is painfully predictable: the posse of the “whitey” wants to cross straight across Indian burial grounds, although the “Injuns” warn them not to do it. Of course, by violating the sacred land, the “whitey” offend local spirits, who send against the rednecks a pack of wolves who appear as grotesque caricature shiny silver wolves resembling their brethren from New Age postcards and posters. Finally, the evil posse, which en route harasses an accompanying female physician and a male Indian, finds the gold. Yet, driven by an expected greed, the members of the posse take on each other. The rest of them are finished by the physician who is able to snatch a gun and by Black Paw Indians who arrive just in time to commit the act of justice. The movie ends with a scene of a slow motion collective execution of the last greedy redneck by a group of the Black Paws who repeatedly shoot the guy holding tightly a sack of gold. When the justice warriors lean over the dead corpse, they find out that gold dust somehow miraculously turned into regular dust; elements of paranormal and New Age mystique are rather common in latter day Westerns.
I would not have ventured into the description of this “movie” unless it had not provoked me to jump to an obvious conclusion: at times a trashy cultural product might serve as a good learning tool. Trashy stuff highlights dominant ideological cliches and sentiments more than any other more or less well crafted movie. Like an imbecile who mimics the behavior of surrounding people, such “masterpieces” clone the mainstream ideology that is superimposed on people in public schools and colleges. To me, Yellow Rocks demonstrated how deeply the educational system (film studies along with the rest of humanities) and print media has ingrained in the minds of movie makes the pillars of what people on the right label Cultural Marxism and that people on the left call Critical Theory. In its turn, this elusive theoretical “beast” served as a major fountainhead of the Multiculturalism ideology.
Watching that particular movie, I suddenly felt catapulted to the “good old” Soviet Union. Replace noble Indians+female do-gooders with noble workers (proletarians) and greedy white evil males with greedy capitalists and you will get a solid Soviet movie tailored according to the cliches of Socialist Realism. For those who do not know what Socialist Realism is, I want to note that it was a Stalinist doctrine that required from movie makers, poets, writers, and the rest of the intellectual gang to depict the surrounding life not as it was but as should be in the ideal future. I have also realized that comparing old Soviet and communist Chinese movies with current multikulti products in European and American realms might have a pedagogical value. It will allow us to trace the genetic links between the Marxism of old that had been obsessed with political economy and class warfare and the current Cultural Marxism that is obsessed with racial and gender identity wars. In the 1920s and the 1930s, both in the Soviet Union and Western progressive subculture the ultimate noble savage was a metaphysical muscular male proletarian.
Since the 1960s, “noble savages” of old Marxism became replaced by the new cultural left with new “noble savages”: third world, people of “color,” females, gays….The list of victims who are simultaneously to act as redeemers from the evil Western civilization is not yet complete.
In a typical Soviet heroic movie a people-friendly misfit character without a stable class-based moral compass chaotically fought against oppression. He or she needed a solid back up form a wise muscular industrial proletarian who, with his working class salt of the earth wisdom, was to take this character to the highest level of consciousness. In Yellow Rock, the alcoholic scout similarly was upgraded by female and Indian wisdom. Incidentally, the same trope one can observe in the third part of the famous (and well made) Hunger Games trilogy that I watched again last night. The major character, Katniss Everdeen, a noble female warrior, was not complete without receiving an endorsement (in the final scene of that trilogy) from the victim/redeemer of a “higher caliber.” After Everdeen defeats dictator Snow, an aged cunning white male, a black female elder approaches Everdeen and gently leads her to the center of the new power, where masters of the multikulti paradise gathered to usher the new world.
RCH: Crazy Horse’s last battle
I’m back at it over at RealClearHistory. An excerpt:
When the Indian wars were underway, the battles were characterized as two very different peoples fighting against each other. Today, this view is still espoused, but the logic underneath has changed. Today, the American Indian fighting the American soldier has come to be viewed as more of a civil war than a clash of civilizations. The Native Americans are deeply intertwined in our culture, our history. As historical research gets better, thanks in part to the fact that our society continues to get wealthier and wealthier, the indigenous actors who helped shape American history receive more attention, empirically and theoretically.
Crazy Horse’s last battle in Montana against the U.S. Army highlights this civil war better than most. The Sioux and Cheyenne were not being pursued to be eliminated, but to be domesticated and transformed, by a benevolent government with the best of intentions, into American citizens.
Please, read the rest.
RCH: the Christmas Battles in Latvia
That’s the subject of this weekend’s column over at RealClearHistory. An excerpt:
9. The battles didn’t actually take place on Christmas Day. They actually occurred in early January. However, under the old czarist Julian calendar, the battles occurred over the Christmas season, from Dec. 23-29. The Germans were caught by surprise because even though it was January in the West, it was Christmas season in Russia and the Germans believed the Russians would be celebrating their Christmas rather launching a major counter-offensive.
And
3. The Siberians were eventually slaughtered. The Siberians who refused to fight were not necessarily betraying their Latvian brothers-in-imperium. They knew they were cannon fodder. And, indeed, when the Siberians finally went to reinforce the Russian gains made, they were greeted with a massive German counter-offensive. The Siberians (and others) were left for dead. They received no food, no weapons, and no good tidings of comfort and joy.
Please, read the rest (and tell your friends about it). It’s my last post at RCH for the year, so there’s lots of links to other World War I-themed articles I wrote throughout 2018.
RCH: Playing catch-up (Churchill, Rosa Parks, and Christmas in the New World)
I hope y’all have been enjoying my “nightcaps.” I have a wife, a toddler, and another little one due next month so life is too hectic to write much, but I have been plugging away at RealClearHistory and here are a few of the ones I’ve done over the past 14 days or so:
- This isn’t Rosa Parks’ bus anymore
- 10 reasons Churchill was more man than myth*
- The American women who shaped Churchill, and Great Britain
- Wars and the evolution of Christmas in America
We’re still here. We still love blogging. Thanks for stickin’ around. The year ain’t over yet, and 2019 at NOL figures to be the best one ever. I’ll be back soon with my end of the year posts, one for most popular notes and one highlighting my personal favorites.
*for copyright reasons RCH had to use a different photo for the piece, but I submitted this one. It’s waaaaay cooler.
Forging ahead, falling behind and fighting back: British economic growth from the industrial revolution to the financial crisis
Nick Crafts can be viewed as the doyen of British economic history. His major publications date back to the 1970s – a favorite of mine is this piece from 1977 on the role played by chance in determining whether the Industrial Revolution would occur in England or France. He is also the joint author of the Crafts-Harley interpretation of the Industrial Revolution. But, perhaps because the majority of his research focuses on British economic history, he remains highly underrated outside of the UK. His new book Forging ahead, falling behind and fighting back: British economic growth from the industrial revolution to the financial crisis summarizes much of his research.
I’ve reviewed it for the Economic History Review. But given the whims of academic publishing, it may be a long time until my review appears in print so I’ve decided to post a preview of my draft below.
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Why was Britain the first industrial nation and the workshop of the world? Why was it eventually caught up and overtaken? Why once it had fallen behind the United States, did it fall further behind its European rivals in the Post-War period? And how did it recover its relative position in the 1980s and 1990s? All these questions are addressed in Nicholas Crafts’s slim new book.
In Forging ahead, falling behind and fighting back, Crafts provides a macroeconomic perspective on the British economy from 1750 to today. The word macro is advisory. Crafts surveys the British economy from 1000 feet, through the lens of growth theory and growth accounting. The upside of this approach is that he delivers a lot of insight in a small number of pages. Readers looking for discussions of individual inventors, innovations, politicians, or discussion of specific policy decisions can look elsewhere.
The first part of the book provides an overview of the Crafts-Harley view of the British Industrial Revolution. This view emphasizes the limited scope of economic change in the early 19th century. On the eve of the Industrial Revolution, the British economy already had a comparatively modern structure, with many individuals working outside agriculture. Growth between 1770 and 1850 was highly reliant on a few key sectors and TFP growth was modest (0.4% a year). Most workers remained employed in traditional sectors of the economy. It took until the second half of the 19th century for the benefits of steam, the general purpose technology of the age, to fully diffuse through the economy. Nonetheless, from a long-run perspective, the achievements of this period, a small but sustained increases in per capita GDP despite rapid population growth, were indeed revolutionary.
An important theme of the book is institutional path dependency. Characteristics of Britain’s early position as an industrial leader continued to shape its political economy down to the end of the 20th century. Crafts mentions two interesting instances of this. First, Britain’s precocious reliance on food imports from the early 19th century onwards left a legacy that was favorable of free trade. Elsewhere in the world democratization in the late 19th century often led to protectionism, but in Britain, it solidified support for free trade because, after the expansion of the franchise, the median voter was an urban worker dependent on cheap imported bread. Second, industrial relationships were shaped the nature of the economy in the 19th century. Britain thus inherited a strong tradition of craft unions that would have consequences in conflicts between labor and capital in the 20th century.
The second part of the book considers the late Victorian, Edwardian, and inter-war periods. It was in the late 19th century that the United States overtook Britain. A venerable scholarship has identified this period as one of economic failure. Crafts, however, largely follows McCloskey in exonerating Edwardian Britain from the charge of economic failure. The presence of fierce competition limited managerial inefficiencies in most areas of the economy; though there were notable failures in sectors where competition was limited such as the railways. The main policies errors in this area were thus ones of omission rather than commission: more could have been done to invest in R&D and support basic science – an area where the US certainly invested in more than the UK.
The seeds of failure, for Crafts, were sown in the interwar period. Traditionally these years have been viewed relatively favorably by economic historians, as the 1930s saw a shift away from Industrial Revolution patterns of economic activity and investment in new sectors. However, in a comparative light, TFP growth in the interwar period was significantly slower than in the US. The new industries did not establish a strong export position. This period also saw the establishment of a managed economy, in which policymakers acceded to a marked decline in market competition. Protectionism and cartelization kept profits high but at a cost of long-run productivity growth that would only be fully revealed in the post-war period.
Most economic historians view the postwar period through the lens of Les Trente Glorieuses. But in Britain, it has long been recognized that this was an era of missed opportunities. Simple growth accounting suggests that Britain underperformed relative to its European peers. Thus though the British economy grew faster in these years than in any other period; it is in this period that Britain’s relative failure should be located.
Crafts examines this failure using insights from the literature on “varieties of capitalism” which contrasts coordinated market economies like West Germany with liberal market economies like the United States or Britain. In the favorable conditions of postwar recovery and growth, coordinated market economies saw labor cooperate with capital enabling both high investment and wage restraint. Britain, however, lacked the corporatist trade unions of France or West Germany. As a legacy of the Industrial Revolution, it inherited a diverse set of overlapping craft unions which could not internalize the benefits of wage restraint and often opposed new technologies or managerial techniques. Britain functioned as a dysfunctional liberal market economy, one that became increasingly sclerotic as the 1960s passed into the 1970s.
An important insight I got from this book is that government failure and market failure are not independent. Examples of government failure from the postwar period are plentiful. Industrial policy was meant to “pick winners.” But “it was losers like Ross Royce, British Leyland ad Alfred Herbert who picked Minsters” (p. 91). Market power became increasingly concentrated. Approximately 1/3 of the British economy in the 1950s was cartelized and 3/4 saw some level of price fixing. Britain’s exclusion from the EEC until the 1970s meant that protective barriers were high, enabling inefficient firms and managerial practices to survive. High marginal rates of taxation and weak corporate governance encouraged managers to take their salary in the form of in-kind benefits, and deterred innovation. Labor relations became increasingly hostile as the external economic environment worsened following the end of Bretton Woods.
Britain recovered its relative economic position after 1979 through radical economic reforms and a dramatic shift in policy objectives. Though of course, the Thatcher period saw numerous missteps and policy blunders, what Crafts argues was most important was that there was an increase in product market competition, a reduction in market distortions, and a reduction of trade union power, factors provided the space that enabled the British economy to benefit from the ICT revolution in the 1990s.
Rarely does one wish a book to be longer. But this is the case with Forging Ahead, Falling Behind, and Fighting Back. In particular, while a short and sharp overview of the Industrial Revolution is entirely appropriate, given the number of pages written on this topic in recent years, the last part of the book does need extra pages; the argument here is too brief and requires more evidence and substantive argumentation. One wishes, for instance, that the theme of institutional path dependency was developed in more detail. Despite this, Forging Ahead, Falling Behind, and Fighting Back is a notable achievement. It provides a masterly survey of British economy history tied together by insights from economic theory.
Eye Candy: The HDI of BRICS
Phew, that’s a lot of acronyms. But this is a great map:
Orange and yellow is bad, green and blue is good. HDI stands for “Human Development Index,” which is a measurement that’s not nearly as good, in my opinion, for understanding how wealthy and happy a population is. Nevertheless, HDI is still one of the better measurements (Top 5, again in my opinion) out there. Here’s the wiki on HDI.
The maps are colored according to “subunits,” or provinces (which are like American states, such as Nebraska).
Brazil, India, and South Africa are multi-party democracies, while the other two are not. So what do all five have in common?
