Opportunity knocks equality

The Cambridge Economic History of the United States, Volume II
January 25, 2002

This is a scholarly survey of US economic history from the American revolution to the first world war, which forms the middle part of the three-volume Cambridge Economic History of the United States . Volume two is organised around a set of conventional themes in economic history, with the focus very much on economic growth. This includes the growth of population and the labour force, followed by an analysis of the major sectors of the economy: agriculture, industry and services. Chapters on inequality, slavery and social consequences express concern about the distribution of the fruits of growth.

The basic narrative charts the transformation of a group of small, well-endowed but relatively under-developed British colonies into the world's leading economic power. Despite the title of the book, the editors have expanded the North American coverage to include a chapter on the Canadian economy.

The first chapter, by Robert Gallman, provides a useful overview of economic growth and structural change in the long 19th century between 1776 and 1914. He shows that gross national product grew rapidly, largely as a result of factor inputs, with both labour and capital crossing the Atlantic and bringing more land into use. Hence, in contrast to the situation in the 20th century, total factor productivity growth was relatively modest during the 19th century. Nevertheless, since population growth slowed rapidly after the civil war, per capita income growth shows a tendency to accelerate. This transformed the US from a situation where living standards were somewhat lower than in Britain just after independence to a position of world leadership by the beginning of the 20th century. The acceleration of per capita income growth was accompanied by growing industrialisation, an increase in the share of income saved and invested, and a westward movement of population and economic activity.

Michael Haines provides an excellent overview of population, backed up by an effective use of descriptive statistics. He shows that the demographic transition of the US was highly unusual, with the decline in fertility preceding the decline in mortality, but with rapid population growth continuing as a result of large immigration flows from Europe. In the mid-19th century, about one-third of the rate of total increase can be accounted for by immigration. The growth of the population explains a good part of the growth of the labour force, but as Robert Margo points out in his chapter, there was also an increase in the participation rate.

In the sectoral studies, Jeremy Atack, Fred Bateman and William Parker track the growing commercialisation of agriculture, demonstrating growing regional specialisation and price convergence. Total factor productivity growth was modest, although labour productivity grew faster, largely as a result of mechanisation and the westward movement. Despite falling prices from the 1870s, rates of return were positive but modest, as we might expect in a sector characterised by relatively free entry and exit. A separate chapter by the same team of authors looks in more detail at the westward movement, covering themes including federal land policy, farm size and land speculation.

Three chapters offer a range of perspectives on industry. Stanley Engerman and Kenneth Sokoloff cover technology and industrialisation, incorporating Sokoloff's important work on manufacturing before the civil war and demonstrating sustained labour productivity growth before the dramatic rise in capital investment during the post-bellum period. This really fills out the American side of the work on Anglo-American technological differences in the 19th century, associated with the work of H. J. Habakkuk, and demonstrates convincingly the importance of the "American system of manufactures" before the era of mass production. Engerman and Sokoloff emphasise the development of appropriate institutions to encourage investment and innovation, including a broad educational system and the patent system.

Naomi Lamoreaux conveys a generally positive interpretation of the shift to large-scale business. Although she also notes the monopoly power that this shift conferred on the leading firms, it is clear that there can be no resurrection of the negative "robber barons" interpretation of big business following the work of Alfred D. Chandler Jr.

Given the structure of the rest of the book, it might be expected that the chapter on business law and American history would be based on the new institutional economics, one of the most dynamic strands of historical economics. Disappointingly, however, Tony Freyer adopts a sociological framework, emphasising conflict and social structures rather than transactions costs.

Agriculture and industry have traditionally received a lot of attention from economic historians, while the treatment of services has been much less systematic. Here, we have five chapters covering services, but in a very uneven way. Albert Fishlow's on internal transport was undoubtedly one of the highlights of Lance Davis et al's American Economic Growth (1972), but reprinting it here largely in its original form means that recent literature receives little attention.

Banking and finance are covered by Hugh Rockoff, but macroeconomic aspects, such as the money supply and the price level, are covered more thoroughly than microeconomic ones such as the growing sophistication of the major financial institutions.

There is more detail on domestic capital markets in the chapter by Lance Davis and Robert Cull, but this has already been published in expanded form as International Capital Markets and American Economic Growth, 1820-1914 . Distribution, the other major market service, is not covered, although there is a separate chapter on foreign trade, one of the activities of wholesalers. As with Rockoff's chapter on banking and finance, however, the focus of Robert Lipsey's chapter is macroeconomic, concentrating on the balance of payments. Non-market services are dealt with in a single chapter on government by Richard Sylla. As well as charting the growth of government and its breakdown by activity, this chapter fills some of the gaps left by Freyer's chapter, reviewing the impact of government on growth via its effects on incentives.

Turning finally to distribution issues, Clayne Pope sets out to answer the "three great questions" posed by Tocqueville, Turner and Kuznets. Tocqueville's question, posed in 1835, was whether the US should be seen as a land of unique opportunity, where people were not held back by the absence of privilege through birth. Turner asked in 1893 whether the frontier with its free land provided increased opportunity and created more egalitarian communities. And Kuznets in 1955 asked whether inequality first increased before decreasing with economic development. Given the measurement problems that exist, it is impossible to give unqualified answers, but Pope tentatively suggests that all three great authors were probably right: that the US was a land of opportunity for the poor as well as for the wealthy; the frontier was a generator of opportunity, although not a creator of an egalitarian society, and inequality increased in the early stages of industrialisation before falling back.

Engerman's chapter on slavery is a masterful summary of a topic that has been a minefield. He covers the origins of slavery in the Americas outside the US, the ante-bellum period in the US, the civil war and the post-bellum South. The controversies surrounding Robert Fogel and Engerman's Time on the Cross and Roger Ransom and Richard Sutch's One Kind of Freedom are dealt with very effectively, emphasising the key issues without getting drawn into the kind of detailed argument that would make it difficult to retain a balance. Stuart Blumin's chapter on the social consequences of US economic development, like Freyer's chapter on business law, is based on sociological analysis and sits uneasily with the rest of the volume.

This book is a welcome addition to the literature, and the authors and Cambridge University Press are to be congratulated. The chapters are written by acknowledged experts, and are balanced and accessible to non-specialists. But as seems to be standard with these large multi-author projects there have been extensive delays so that the volume is not quite as up-to-date as it might have been. Sadly, one of the editors, Gallman, did not live to see volumes two and three appear in print, although volume one, covering the colonial era, was published in 1996.

Stephen Broadberry is professor of economic history, University of Warwick.

The Cambridge Economic History of the United States, Volume II: The Long Nineteenth Century

Editor - Stanley L. Engerman and Robert E. Gallman
ISBN - 0 521 55307 5
Publisher - Cambridge University Press
Price - £65.00
Pages - 1,021

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