Fiscal capacity in ‘responsible government’ colonies: the Cape Colony in comparative perspective, 1865-1910

 by Abel Gwaindepi, Lund University 

It has been accepted that colonists in settler colonies were willing to shoulder unusually high tax burdens to assert their self-rule and autonomy. Was this willingness to shoulder high tax burdens by the colonists generalized through the British Empire? To explore this question, I study and compare the Cape Colony’s fiscal path to the experiences of Australia, New Zealand, and Canada.

 

A divergent fiscal path?

How did the tax to GDP shares evolve in each colony? Figure 2 shows the Tax to GDP ratios of the four colonies. What is clear is the divergent trend for the Cape, especially from the second half of the 1880s. Australia, Canada and New Zealand managed to maintain modest increases, but the Cape’s ratio fell from around two to one per cent. Despite economic growth which surpassed some Australian colonies in some years (Magee, Greyling, & Verhoef, 2016) there was less progress being made on the fiscal front.

Figure 1: Tax/GDP ratios (%): The Cape’s divergent path

The phase from 1876 to 1885 shows a possible catch-up trajectory, but this was not sustained. The patterns in the Cape belie earlier generic conclusions, arguing that colonies with responsible governments benefited from unoccupied lands and turned the "free resources into funds to support public expenditures" (Davis & Huttenback, 1986, p. 224). Figure 2 below shows the plot of recursive estimates of the tax capacity regression on the Cape dummy when tax per capita is estimated using the total population (left-hand) and the settler population only for the Cape (right-hand). The estimate considers the differences between the Cape as a whole, and the ‘Cape-settler’, which only looks at the European settler population.

Figure 2: The Cape Colony’s tax per capita relative to other colonies

The logic behind this separation is two-folded. Firstly, the number of indigenous people in the Cape Colony represents a much larger proportion than in the other colonies, and the second reason lies in the (deliberate) exclusionary policies and practises that existed in the Cape.

The clear picture is that the Cape Colony’s per capita taxes were systematically lower than the other colonies. Controlling for racial structure by excluding the indigenous population shows that the settler enclave might have experienced higher taxes per capita than settlers in other colonies. This is so with the caveat that the tax per capita for only the settlers does inflate tax capacity given a lack of basis of accurately measuring what the indigenous people contributed (Feinstein, 2005). What is clear is that on average the Cape Colony’s per capita taxes did show signs of converging to the trends of the other settler colonies when diamonds were discovered in 1867. Settlers preferred indigenous people to be taxed but they also organised public goods delivery to exclusively towards the settler enclave, with minimal ‘leakages’ to the indigenous people. Mkandawire (2010, p. 1651) aptly refers to this as a ‘racist’ welfare state. Given that land and mining taxes were important surrogates of income taxes in other colonies (McLean, 2012; Sanders, Sandvik, & Storli, 2019), the loss at the Cape had long term fiscal ramifications.

Was the Cape Colony “recklessly extravagant” on borrowing?

The Economist reported in 1883 that the “Every year since 1875 has found the Cape government a fresh borrower in the London market…she has been recklessly extravagant” (The Economist 1883, p.1576). The study uses debt to GDP, bond yileds and the spreads over the British consolidated annuities (consols)to trace levels of indebtedness. This is inline the ‘empire effect’ litreature which argues that British colonies had low intrests rates and tended to enjoyed investor good will despite poor economic fundamentals (Ferguson & Schularick, 2006; Gardner, 2017). Potentially, this could be misused since the hard work of building fiscal capacity could be reneged on and be replaced by borrowing (Accominotti, Flandreau, Rezzik, & Zumer, 2010, p. 49). Figure 3 below shows that the Cape was at the higher end with high levels of debt and risk of default shown by the highest level of yields and debt/GDP, which in light of poor fiscal capacity made vulnerable to default.

 

Figure 3: Debt/GDP ratios and bond yields

Both taxation and debt patterns demonstrate a unique path for the Cape with comparatively low per capita taxes, high deficits, and the highest level of indebtedness. Had the colonists in New Zealand, Australia and Canada met similar conditions as those at the Cape, were their policies going to be different? For instance, McLean (2012) argues that if an institution was harmful to Australia’s prosperity, "it was either abolished or modified to make it growth-promoting". This is at times referred to as ‘institutional flexibility’ (McLean, 2012, p. 29). What held back the Cape colonists? One aspect is worth pointing out. The share of indigenous population which was fundamental to the question of who could access and have rights to the natural resources, mainly land and minerals. The Cape’s ‘moral economy’ restricted potential revenues by narrowing rights to a few, even amongst the Europeans themselves.

Similar to what Frankema & van Waijenburg (2014) argue for French vs British colonies in Africa, I question the ‘purchase’ or instrumentality of labels such as ‘responsible government’ since the endogenization of these imported institutions in the Cape produced outcomes leaning towards what research has shown for fiscal systems in Spanish colonies in Latin America. I also argue that it is also important to bring balance to the analysis by questioning the assumed superiority of institutions of the other settler colonies. The ease with which the institutions of ‘responsible government’ benefited the other colonies should be measured and assessed relative to the lighter challenges they faced relative to the Cape. This allows the appraisals to be balanced in terms of how the Cape settlers are judged compared to those in other settler colonies.

Was the Cape settler colonialism exceptional? Recent research has shown that both on the African continent and in the world, South Africa was much less of an exception up to 1920s than it became in the 1970s (Ross, Mager, & Nasson, 2011, p. 15). The share of indigenous population which was fundamental to the question of who could access and have rights to the natural resources, mainly land and minerals, impinged on the development and consolidation of the fiscal system. Hence the ‘moral economy’ which sought to cater for the settler enclave reduced the taxable capacity amongst the indigenous majority, ultimately shrinking the taxable capacity of the entire economy.

 

Accominotti, O., Flandreau, M., Rezzik, R., & Zumer, F. (2010). Black man’s burden, white man’s welfare: control, devolution and development in the British Empire, 1880–1914. European Review of Economic History, 14(1), 47–70.

Davis, L., & Huttenback, R. (1986). Mammon and the pursuit of Empire: The political economy of British imperialism, 1860-1912. Cambridge: Cambridge University Press.

Feinstein, C. (2005). An Economic History of South Africa: Conquest, Discrimination, and Development. New York: Cambridge University Press.

Ferguson, N., & Schularick, M. (2006). The Empire Effect: The Determinants of Country Risk in the First Age of Globalization, 1880–1913. The Journal of Economic History, 66(2), 283–312.

Frankema, E., & van Waijenburg, M. (2014). Metropolitan blueprints of colonial taxation ? Lessons from fiscal capacity building in British and French Africa, 1880-1940. Journal of African History, 55(3), 371–400.

Gardner, L. (2017). Colonialism or supersanctions: sovereignty and debt in West Africa, 1871-1914. European Review of Economic History, 21(1), 215–252.

Magee, G., Greyling, L., & Verhoef, G. (2016). South Africa in the Australian mirror: per capita real GDP in the Cape Colony, Natal, Victoria, and New South Wales, 1861–1909. Economic History Review, 69(3), 260–290.

McLean, I. (2012). Why Australia prospered: The shifting sources of economic growth. Princeton University Press.

Mkandawire, T. (2010). On Tax Efforts and Colonial Heritage in Africa. Journal of Development Studies, 46(10), 1647–1669.

Ross, R., Mager, A. K., & Nasson, B. (2011). The Cambridge history of South Africa volume 2: 1885-1994. The Cambridge History of South Africa Volume 2: 1885-1994 (Vol. 2). https://doi.org/10.1017/CHOL9780521869836

Sanders, A., Sandvik, P., & Storli, E. (2019). The political economy of resource regulation: An international and comparativehistory, 1850-2015. Vancouver: UBC Press.

 

Reconstructing income inequality in a colonial cash crop economy: five social tables for Uganda, 1925–1965

Michiel de Haas (Wageningen University)

Few doubt that colonialism generated new economic cleavages in African societies (Van de Walle 2009). At the same time, we know very little about the extent of such economic inequality in different African colonies and across time. In this article, I measure income inequality in Uganda, located in central-East Africa and colonized by Britain, in five benchmark years between 1925 (mid-colonial period) and 1965 (just after independence). I find that overall income inequality was low compared to other African colonies, but also find that sharp fault lines existed, especially along racial lines.

Based on what we know about Uganda’s pre-colonial and colonial history (Reid 2017), how much inequality should we expect? Uganda’s economy was predicated on smallholder production of export crops – cotton and coffee most importantly (De Haas 2017). In a land-abundant context, this economic structure fostered broad-based access to self-provisioning and cash income, which may have suppressed income inequality. On the other hand, we have reasons to hypothesize that colonial Uganda was unequal.  First, pre-colonial Uganda was far from egalitarian. For example there were sharp inequalities within the centralized Great Lakes Kingdoms, some of which came to make up a large portion of colonial Uganda, as well as between these Kingdoms and other parts of the territory. Second, the agricultural trading and processing sector in colonial Uganda was in the hands of South Asian expatriates, while the higher rungs of the colonial government were filled with Europeans. To what extent were these inequality-suppressing and -inducing factors visible in the country’s income distribution?

Attuning social tables to the context of colonial Africa

To reconstruct Uganda’s colonial inequality landscape, I use the ‘social table approach’, which simplifies the full income distribution of a given population into a smaller number of ‘social classes’. I distinguish eleven such classes for 15 districts each: three mutually exclusive income classes of African wage workers, five mutually exclusive income classes of self-employed earners, two classes of Europeans, and one class of Asians. Social tables have been employed by others in research on colonial Africa as well: Botswana (Bolt and Hillbom 2016), Ghana (Aboagye and Bolt, 2021), Kenya (Bigsten 1987) and Ivory Coast and Senegal (Alfani and Tadei 2019). This literature is synthesized in a recent paper by Hillbom, Bolt, De Haas and Tadei (2021).

My aim is not just to provide in-depth analysis of the Ugandan case, but also to make progress in finetuning the use of social tables in an African colonial context. Most importantly, in the latter respect, I show that it matters a lot what population we use to rank incomes – households or individuals – and how we think of income distribution within households. I demonstrate that households with higher incomes also tended to have more members. This means that such households come out as relatively ‘high income’ when we compare them on an aggregate level, but not when we break down the distribution to their constituent individual members. However, when we allow for intra-household inequality, a household head still benefit from adding more members to the household, as long as he (typically a polygamous man) is able to extract at least some income from additional household members. Thus, in an African, context, where people accumulate ‘wealth in people’ (Guyer and Belinga 1987) and households differ considerably in size, it is important to consider these dynamics explicitly when thinking about and measuring inequality. The results below are robust to using these different assumptions about the ranking population.

How unequal was colonial Uganda?

I answer this question along four lines: in comparison to other African colonies, and in terms of space (regional inequality), race (Africans versus expatriates) and class (income differentiation among African wage earners and the self-employed). I find that in comparative perspective, Uganda was fairly equal and did not see overall inequality rise during the period studied (Figure 1). I attribute this to Uganda’s land abundance and favourable agricultural conditions, which enabled the far majority of households to provision their own food. Moreover, Uganda’s main crop – cotton – was labour intensive and did not favour the rate of unequal accumulation that, for example, livestock did in colonial Botswana (Bolt and Hillbom 2016).

Figure 1: Gini coefficients for Uganda (1925-1965) under different assumptions

Using the Theil coefficient, we can zoom in on how different cleavages contributed to overall inequality (Figure 2). Here, I find that race dominated as the most important fault line in Uganda, especially before the 1950s. The 1930s were most extreme in this respect, as European households earned, on average, some 60 times as much as the average African household, and Asians close to 30 times as much. Regional differences, in the meanwhile were certainly present but contributed only moderately to overall inequality – especially when self-provisioning is taken into account. Inequality among African classes rose in the late-colonial period, as some farmers specialized in coffee and livestock, while the number and average incomes of salaried professionals rose as well.

 

Figure 2: decomposition of inequality in Uganda along lines of race, class and region.

Note - a similar text also appears on the African Economic History Network homepage

References

Aboagye, P. Y., & Bolt, J. (2021). Long-Term Trends in Income Inequality: Winners and Losers of Economic Change in Ghana, 1891-1960. Explorations in Economic History, forthcoming.

Alfani, G. & Tadei, F. (2019). Income Inequality in French West Africa: Building Social Tables for Pre-Independence Senegal and Ivory Coast. UB Economics Working Papers, 396.

Bigsten, A. (1987). Income distribution and growth in a dual economy: Kenya, 1914-1976. (Unpublished doctoral dissertation, Gothenburg University, Gothenburg)

Bolt, J., & Hillbom, E. (2016). Long‐term trends in economic inequality: lessons from colonial Botswana, 1921–74. The Economic History Review, 69(4), 1255-1284.

De Haas, M. (2017). Measuring rural welfare in colonial Africa: did Uganda's smallholders thrive? The Economic History Review, 70(2), 605-631.

De Haas, M. (2021). Reconstructing income inequality in a colonial cash crop economy: five social tables for  Uganda, 1925–1965. European Review of Economic History, forthcoming.

Guyer, J. I., & Belinga, S. M. E. (1995). Wealth in people as wealth in knowledge: Accumulation and composition in Equatorial Africa. Journal of African History, 36(1), 91-120.

Hillbom, E., Bolt, J., De Haas, M. & Tadei, F. (2021). Measuring historical inequality in Africa: What can we learn from social tables? African Economic History Network Working Paper, No. 63

Reid, R. J. (2017). A history of modern Uganda. Cambridge: Cambridge University Press.

Van de Walle, N. (2009). The institutional origins of inequality in Sub-Saharan Africa. Annual Review of Political Science, 12, 307-327.

 

 

 

 

 

L’Histoire Immobile? A Reappraisal of French Economic Growth using the Demand-Side Approach, 1280-1850.

Leonardo Ridolfi (University of Siena) and Alessandro Nuvolari (Sant’Anna School of Advanced Studies)

Historians interested in the study of economic performance of preindustrial societies owe a major intellectual debt to Angus Maddison. Even if by means of somewhat speculative methods, Maddison (2001) produced the first comprehensive set of estimates of GDP per capita for a large group of countries which resulted in an intriguing account of the dynamics of economic growth since the end of the Middle Ages (Maddison 2007).

This preliminary global quantitative assessment has prompted historians to later embark in more refined statistical reconstructions of the long-term evolution of output per capita and to develop new ways to integrate these different country-specific estimates over time and across space (Bolt and Van Zanden 2014, Bolt and Van Zanden 2020).

Notwithstanding the riches of source materials dealing with prices and wages, France has been left at the margins of the ongoing efforts of reconstruction of these “second generation” estimates of GDP per capita.

In this paper, we tackle this issue, by providing new estimates of output per capita for France over the period 1280–1850 using the demand-side approach.

The French case is interesting for two main reasons.

The first reason is that an important historiographical tradition, made popular by the French historian Emmanuel Le Roy Ladurie with a famous article first appeared in the Annales in 1974 (see picture below), has depicted France as a paradigmatic case of an inherently stagnant economy dominated by Malthusian checks and other institutional and cultural constraints. Hence, in this perspective, the French case may perhaps provide new materials for assessing the overall plausibility of the Malthusian model as a suitable empirical characterization of the long run evolution of living standards in Europe before the Industrial Revolution.

The second reason relates to the very origins of modern economic growth in pre-industrial Europe and, more specifically, to the analysis of the so-called “Little Divergence”, the process whereby the North Sea Area became the most prosperous and dynamic part of the continent.

Much discussion surrounds the timing and causes of why, between the Middle Ages and the modern period, the frontier of Europe’s economic development moved from the Mediterranean space and particularly Italy -which so far had been the world economic leader- to the countries of the North Sea region (Allen 2001, Broadberry 2020, De Pleijt and Van Zanden 2016). Despite that, there is still a general lack of consensus on the evolution of living standards and the main determinants of this process. In this context, a fresh assessment of French economic performance, a neighbouring country with multiple political, economic, and military interactions with the North Sea area could contribute to shed new light on the drivers of this initial phase of modern economic growth.

 

 

Results

Our analysis highlights three main results (see Figure 6 of the article, reproduced below).

First, French output per capita fluctuated with no trend over the long term, with perhaps the exception of a modest “efflorescence” of economic growth during the seventeenth century. Until the seventeenth century, this pattern of growth chimes with Le Roy Ladurie’s (1974, p.688) notion of “motionless history” according to which ‘malgré immenses changements parmi les superstructures celui-ci tel en lui-même se retrouve finalement très proche la veille des famines de la Fronde et de celles de 1693 ou de 1709 de ce il était trois siècles et demi ou quatre siècles auparavant la veille de la famine de 1315 (despite the immense changes of the superstructures, the system finally finds itself very close, on the eve of the famines of the Fronde and those of 1693 or 1709, to what it was three and a half or four centuries before the eve of the famine of 1315).’

In this respect, Italy, the Netherlands and England appear as the main exceptions to this broad European pattern of relative stagnation.

The second result speaks more closely to the debate about the level of comparative development of England and France over the long run which a long historiographic tradition has seen as a useful vantage point for studying the origins of the Industrial Revolution (Crouzet 1985).

Our new series of GDP per capita challenges the notion of an early modern “Little Divergence” between England and France (Allen 2001) and points instead to a later divergence taking place by about the second half of the seventeenth century.

Finally, in our reappraisal of French economic performance, the French growth experience appears to be as an ‘intermediate case’ between the sustained growth pattern of the North Sea region countries and the stagnating or declining trend of the rest of Europe.

 

 

Figure 6. French economic performance in international comparative perspective, 1276–1850

Sources: France: our estimates; England: Broadberry et al. (2015); Holland: Van Zanden and Van Leeuwen (2012); Italy (Centre-North): Malanima (2011); Poland: Malinowski and Van Zanden (2017); Portugal: Palma and Reis (2019); Spain: Alvarez-Nogal and Prados de la Escosura (2013); Sweden: 1300–1560, Krantz (2017); 1560–1850, Schön and Krantz (2012).

Notes: the values in 1990 GK$ dollars are those reported by the authors except for Italy (Centre-North), Poland, Spain, and Sweden because the authors did not report annual series in 1990 GK$ dollars. In these cases, we made the conversions using the following benchmarks: Italy (Centre-North), 1,486$ in 1861 (Malanima 2011, p.218); Poland, 946$ in 1870 (2013 Maddison project); Spain, 1,079$ in 1850 (2013 Maddison project), and Sweden 1,076$ in 1850 (2013 Maddison project). All series are 11-year moving averages.

 

References

Allen, R. C. (2001). The great divergence in European wages and prices from the Middle Ages to the First World War. Explorations in Economic History 38, pp. 411–447.

Álvarez-Nogal, C. and Prados De La Escosura, L. (2013). The rise and fall of Spain (1270–1850). Economic History Review 66, pp. 1–37.

Bolt, J. and Van Zanden, J. L. (2014). The Maddison Project: collaborative research on historical national accounts. Economic History Review 67, pp. 627–51.

Bolt, J. and Van Zanden, J. L. (2020). Maddison style estimates of the evolution of the world economy. A new 2020 update. Maddion Project Working Paper n. 15.

Broadberry, S. (2020). The Industrial Revolution and the Great Divergence: Recent Findings from Historical National Accounting. CEPR Discussion Paper n. 15207.

Broadberry, S. Campbell, B. M. Klein, A. Overton, M. and Van Leeuwen, B. (2015). British economic growth, 1270–1870. Cambridge: Cambridge University Press.

Crouzet, F. (1985). De la supériorité de l’Angleterre sur la France: l'économique et l'imaginaire, XVIIe–XXe siècles. Paris: Libr. Académique Perrin.

De Pleijt, A. and van Zanden, J. L. (2016). Accounting for the “Little Divergence”: What drove economic growth in pre-industrial Europe? European Review of Economic History 20, pp. 387-409.

Krantz, O. (2017). Swedish GDP 1300–1560: A Tentative Estimate. Lund Papers in Economic History 152.

Le Roy Ladurie, E. (1974). L’histoire immobile. Annales. Histoire, Sciences Sociales 29, pp. 673–692.

Maddison, A. (2001), The World Economy: a Millennial Perspective. Paris: OECD.

Maddison, A. (2007), Contours of the World Economy, 1–2030 AD. Oxford: Oxford University Press.

Malanima, P. (2011). The long decline of a leading economy: GDP in central and northern Italy, 1300–1913. European Review of Economic History 15, pp. 169–219.

Malinowski, M. and Van Zanden, J. L. (2017). Income and its distribution in preindustrial Poland. Cliometrica 11, pp. 375–404.

Palma, N. and Reis, J. (2019). From Convergence to Divergence: Portuguese Economic Growth, 1527–1850. Journal of Economic History 79, pp. 477–506.

Schön, L. and Krantz, O. (2012). The Swedish economy in the early modern period: constructing historical national accounts. European Review of Economic History 16, pp. 529–49.

Van Zanden, J. L. and Van Leeuwen, B. (2012). Persistent but not consistent: The growth of national income in Holland 1347–1807. Explorations in economic history 49, pp. 119–30.

 

The Empire Marketing Board and the Failure of ‘Soft’ Trade Policy, 1926-33

By David M. Higgins and Brian Varian

Can a country with a free-trade policy also pursue a preferential trade policy? In the 1920s, Britain tried. Britain's Empire Marketing Board (EMB) was created in 1926 to extend a non-tariff preference to imports from the empire by means a widespread publicity campaign. As we find, the EMB's campaign failed, and we offer several explanations why.

Between 1926 and 1933, the Empire Marketing Board (EMB) sought to influence the purchasing habits of British consumers.  This initiative was ambitious because British consumers had long been accustomed to purchasing produce from non-empire sources, for example, Argentine beef, Chinese tea, as well as Danish butter and Dutch cheese.  The campaign was also unprecedented: public money was expended on a marketing campaign intended to provide a ‘soft’ trade barrier to favour empire producers.

As an instrument of trade policy during the interwar period, the EMB appears unusual in the economic history literature which has been dominated by analyses of ‘hard’ policies involving tariffs.  The creation of the EMB was an attempt by the British government to reciprocate the formal tariff preferences that the Dominions extended to British exports.  The establishment of the EMB was necessary precisely because Britain maintained an essentially free trade policy until 1932.  Indeed, prior to that date, tariff reform, which sought to abolish Britain’s commitment to free trade, was responsible for the Conservative government losing its overall majority in the General Election of 1923.

 

Evaluating the effectiveness of the EMB

The fundamental objective of the EMB was to ensure that the British empire accounted for a growing proportion of Britain’s produce imports.  Consequently, the Board pursued three major policies: it financed research into the problems affecting empire food production; provided market intelligence to British trade organisations; and launched a major, national, publicity campaign involving ‘empire shopping weeks’ and the commissioning and distribution of iconic posters which appeared on billboards in major cities and towns.  Each policy was interrelated. For example, improvements in the quality and regularity of the supply of empire produce would help make the Board’s publicity more effective (Figure 1).

 

Figure 1.      Example of an EMB poster

In our study we assess the impact of the EMB’s publicity campaign on Britain’s empire imports.  Posters were a key component of the EMB’s total publicity, accounting, on average, for 35 per cent of the Board’s total publicity expenditure between 1926 and 1932.  We selected posters issued in 1927 that advertised a particular commodity and Dominion, for example, Australian frozen beef.  Our total sample includes advertised and non-advertised commodities originating from other parts of the empire and from non-empire countries.

The econometric results indicate that the EMB’s poster campaign did not affect the empire’s share of British imports for any of the advertised commodities in our sample: Australian frozen beef, Canadian grain, Ceylon tea, Indian rice, Mauritian sugar, New Zealand butter, and New Zealand cheese.  We advance three explanations for the failure of the EMB.

 

Explanations for failure

First, our re-examination of the EMB’s publicity expenditure indicates that it was small when compared with the advertising expenditures of the official Dominion organisations responsible for exports -- the Australian Dairy Produce Control Board, the New Zealand Dairy Produce Control Board, and the New Zealand Meat Producers Board.  On a standardised basis, the publicity expenditure of the EMB was considerably smaller than that of the Control Boards.  Moreover, the EMB’s expenditure was much less focused: not only did the EMB advertise a diverse range of empire produce, from Cyprus brandy to Malayan pineapples, but much of its advertising did not indicate an association between a Dominion and a commodity or, indeed, feature either a specific Dominion or commodity at all.

Second, it is remarkable that so much effort was devoted to persuading consumers to ‘buy Empire’, when many empire commodities were retailed without an indication of geographical origin.  Landmark legislation was introduced by the Merchandise Marks Act, 1926.  This Act stipulated that producers could make an application for a Marking Order to ensure that specific foodstuffs indicated country of origin.  However, this Act was never applied to cheese, grain, rice, or sugar.  Attempts were made to secure the marking of tea, but this was vociferously rejected by tea distributors and retailers, and famous British tea-blending companies for whom company brands were incomparable marketing assets.  A Marking Order for butter was secured in 1931, but even this Order left considerable leeway to grocers on the precise indications of origin they applied to pats of butter.

Beef (including frozen beef) was subject to a Marking Order from 1933, but by then there had been a pronounced change in the preferences of British consumers toward chilled beef, which was largely supplied by Argentina and the River Plate.  In fact, technological factors meant it was not possible for Australia to supply chilled beef to Britain during the interwar period. By the late 1920s, British consumers’ views of frozen beef were so disapproving that sales of this  commodity were restricted to asylums, other public institutions, and the British army!

The key conclusion to emerge from our study is that soft policies were not an effective substitute for tariffs and other types of quantitative trade restrictions. The introduction of hard barriers to trade had to await changes in the political and economic environment which occurred in the early 1930s.  

 

David M. Higgins
david.higgins@ncl.ac.uk

Brian Varian
b.varian@newcastle.ac.uk

 

YSI Economic History Graduate Webinar, Spring 2021

 

Dear all,

We are launching a third YSI Economic History Graduate Webinar this Spring. In previous editions we provided a platform for young researchers to present their ongoing work and get feedback from senior scholars. The online format made exchanges from people from different regions and research areas possible, offering early stage researchers an important venue in these times of disconnection. As social distancing remains a reality, so does connecting online to reach out to the community.

For these reasons we want to invite all young scholars working in Economic History to submit a paper for our 2021 Spring series. We welcome all sorts of contributions, regardless of time period or geographic area, as well as qualitative or quantitative approaches. You do not need to be registered with YSI to apply but we encourage all young scholars to join the community.

Send us a full paper version and an updated CV to: eh@youngscholarsinitiative.org

The deadline for papers is March 26th, and we’re planning on starting the sessions in April.

If you are interested in attending the webinar and receive the programme, please register using this form. The seminars will be held on Zoom and last 60 minutes on Tuesdays afternoon (Western Europe time). 

See you online!  

The YSI graduate seminar in Economic history is a joint collaboration between Ester Treccani, Jordi Caum Julio, Maylis Avaro and Xabier Garcia Fuente, with support from the Institute for New Economic Thinking and the European Historical Economics Society. 

Optimism or pessimism? A composite view on English living standards during the Industrial Revolution

By Daniel Gallardo Albarrán (Wageningen University, @DanielGalAlb) and Herman de Jong (Groningen University)

blog post based on the article, "Optimism or pessimism? A composite view on English living standards during the Industrial Revolution ", available on EHER here. 

Introduction

The consequences of industrialization for the living standards of the mass of the population have been intensively debated ever since the days of William Blake, Karl Marx, and Charles Dickens. Over a period of roughly 100 years after ca. 1750, Great Britain set the basis for a dynamic and self-sustained process of economic development that eventually would improve the lives of millions of people. Although the positive outcomes of this process for human well-being since the 19^th century are not disputed, the same does not apply to the years between 1750 and 1850. New methods of production and labor organization brought economic benefits, but they had a deep impact on citizens’ lives and the environment, as illustrated by the picture below.

On one side, a branch of the literature, represented by the so-called optimists, has argued that the benefits of improved methods of production trickled down in the form of substantial real wage increases after the Napoleonic wars (Clark, 2005; Lindert & Williamson, 1983). On the other side, the so-called pessimists have found that the increase in real wages was much less pronounced than what the optimists claim (Allen, 2009; Feinstein, 1998). Also, further supporting the pessimists’ case, health levels stagnated after the 1820s, annual working time reached new heights in the 1830s, and inequality remained at high levels (Allen, 2019; Broadberry, Campbell, Klein, Overton, & van Leeuwen, 2015; Voth, 2001; Wrigley, Davies, Oeppen, & Schofield, 1997).

The lack of consensus on the evolution of living standards during the classical years of the industrial revolution partially stems from the study of a large number of indicators individually. This can be problematic because these variables often exhibit opposite trends, thus having disparate implications for the analysis of well-being. One way to deal with this is by building a  composite index of welfare combining information on a number of key aspects of people’s lives into a single metric.

We take this approach and build a new indicator to study workers’ living standards during the early phase of industrialization that combines four dimensions of well-being: income, health, working time, and inequality. We draw on Jones and Klenow (2016) to construct a metric that aggregates the utility flows that an average British worker could expect from them those four aspects of living standards. By using utility theory, this article provides a novel and interesting perspective to the literature, which has mostly relied on other methodologies to construct similar indicators.

Results

Our analysis of the evolution of workers’ well-being during the traditional period of early industrialization (i.e., 1760–1850) presents three main findings. First, unlike earlier composite indices or income per capita, our broad welfare series points to worsening living standards until 1800 (see column II in Table 2 of the article, reproduced below). This is the result of a steep rise in both working time and income inequality after 1760 that is not accounted for by other traditional indicators. Welfare growth rates could have been highly negative if life expectancy had not increased by 5 years between 1760 and 1800.

 

Second, we find that well-being improved after 1800 when real wages started rising and the negative effect of longer working time and higher inequality reached a plateau. Although well-being grew by almost 0.7 percentage points annually during these years (column III, last row), the resulting average level of welfare by the mid-nineteenth century does not support an optimistic interpretation of the evolution of workers’ living standards. According to our results, welfare was only 22 percent higher in 1850 than in 1760.

Our third main finding is that welfare exhibits much lower growth than our widely-used measures of overall living standards. If we consider GDP per capita, our calculations suggest that national income tends to overestimate welfare growth for the average citizen during the period by 20 percent. On the other hand, if we consider the well-known Human Development Index or the Dasgupta and Weale index, we find that they show a clear improving pattern between benchmarks, whereas our metric shows a much more pessimistic pattern, especially before 1800. 

Discussion

The last decades of research into the consequences of the industrial revolution have brought a large amount of evidence on a number of economic, demographic, and social aspects of English workers’ lives in the 18th and 19th centuries. An important part of this new evidence is characterized by painting a more complex picture of what earlier generations of scholars initially brought forward and by adding new indicators that revealed opposite movements of well-being for sub-periods.

This article uses an encompassing framework of living standards to put together information about four key aspects of the lives of citizens at that time: material living standards, health, working time, and inequality.  We find that earlier studies drawing on composite indices of well-being are probably too optimistic about trends before 1800, since they do not fully take into account rising annual working time and increasing inequality. By 1850, our calculations show that welfare was 22 percent higher than in 1760 (20 percent less than the improvement in living standards suggested by GDP per capita). Therefore, welfare gains from health and material living standards slightly compensated for the negative effects of increasing levels of working time and inequality.

While encompassing, our indicator does not measure other important aspects of England’s welfare at the time, such as access to knowledge through education, environmental damage, or the social costs of the factory system. Their study in the future may reinforce our view that workers’ lives would not change substantially until the post-1850 period when the productivity benefits of the new forms of production trickled down to the working classes and public health regulation tackled the poor health conditions of the population.

References

Allen, R. C. (2009). Engels' pause: Technical change, capital accumulation, and inequality in the British industrial revolution. Explorations in Economic History, 46(4), 418-435.

Allen, R. C. (2019). Class structure and inequality during the industrial revolution: lessons from England's social tables, 1688-1867. The Economic History Review, 72(1), 88-125.

Broadberry, S., Campbell, B. M. S., Klein, A., Overton, M., & van Leeuwen, B. (2015). British Economic Growth, 1270-1870. Cambridge: Cambridge University Press.

Clark, G. (2005). The Condition of the Working Class in England, 1209-2004. Journal of Political Economy, 113(6), 1307-1340.

Feinstein, C. H. (1998). Pessimism Perpetuated: Real Wages and the Standard of Living. The Journal of Economic History, 58(3), 625-658.

Jones, C. I., & Klenow, P. J. (2016). Beyond GDP? Welfare across Countries and Time. American Economic Review, 106(9), 2426-2457.

Lindert, P. H., & Williamson, J. G. (1983). English Workers' Living Standards during the Industrial Revolution: A New Look. The Economic History Review, 36(1), 1-25.

Voth, H.-J. (2001). The longest years - new estimates of labor input in England, 1760-1830. The Journal of Economic History, 61(4), 1065-1082.

Wrigley, E. A., Davies, R. S., Oeppen, J. E., & Schofield, R. S. (1997). English Population History from Family Reconstitution 1580-1837. Cambridge: Cambridge University Press.

 

Changing Places: The Spatial Dispersion of U.S. Manufacturing during the 20th Century

Nicholas Crafts and Alexander Klein

We provide new estimates of changes in the spatial concentration of U.S. manufacturing from 1880 to 2007.  The average level across all industries fell by more than half over the period.  Creative destruction has had a strong spatial component which eroded the manufacturing belt and when compounded by globalization left a legacy of left-behind voters.  Even so, almost all industries can be described as significantly spatially concentrated at all times. 

See the full paper, now on early view at the European Review of Economic History, here

Everybody knows that the geography of industrial production changed dramatically during the 20^th century both across and within countries.  There was clearly a strong spatial aspect to the forces of creative destruction.  The ‘left-behind’ victims of these geographic trends have become an important constituency in contemporary politics.

The long run move of manufacturing employment out of the manufacturing belt which is reported in Table 1.  Whereas 87.2 per cent of manufacturing employment in the U. S. economy was in the manufacturing belt in 1880 by 1940 this had fallen to 73.6 per cent and in 2007 to 42.9 per cent.  Within this, the East North Central (mid-west) region has a different chronology with a rising share from 1880 to 1947 and then a steady decline during subsequent decades.

Measuring Spatial Concentration

It is important to control for differences in the size distribution of plants when measuring spatial concentration and also to take account of the geographical position of regions through allowing for ‘neighbourhood effects’.  The spatially weighted version of the Ellison and Glaeser index has these desirable features and provides a better measure of spatial concentration than traditional indices such as Hoover’s localization coefficient but has not previously been used by economic historians.  In our new paper (Crafts and Klein, forthcoming) we present estimates of this index for manufacturing industries in the United States for selected years between 1880 and 2007.  We find as follows.

First, there was a big decline over the long run in the average spatial concentration index.  This occurred in two phases - gradual prior to 1940 and rapid after 1940.  The mean across all industries was 0.223 in 1880 which fell to 0.183 in 1940 and 0.096 in 1997 (Figure 1).  Greater spatial dispersion was characteristic of the vast majority of manufacturing industries by the second half of the 20^th century.

Second, the measured decline in spatial concentration before 1940 confirms the views of economic geographers writing around this time who stressed the de-centralization of economic activity but has been overlooked in more recent literature.

Third, nevertheless almost all industries are spatially concentrated in the sense that the index score is always positive and significantly different from zero.  Indeed, the vast majority of scores throughout the period are above 0.05, the level which is conventionally described as ‘highly concentrated’ and indicative of the existence of significant local cost advantages.  This was still true at the end of the period in 2007 when the mean was 0.098.

Decline of the Manufacturing Belt

The context for long-run changes in the location of manufacturing has strong similarities with the stylized core-periphery model associated with Paul Krugman which places transport costs centre stage.  The model envisages a move from very high to intermediate to very low transport costs driving a move from dispersed to spatially concentrated then back to dispersed locations for manufacturing.  In the spatially concentrated (manufacturing belt) phase the core benefits from economies of scale and proximity to markets and suppliers which raises productivity but also tends to raise wages; subsequently, however, in the context of much lower transport costs, the wage gap becomes too high and moves to the periphery promote a convergence of wage rates.

The costs of moving manufactured goods declined by over 90 per cent in real terms between 1890 and 2000 from 18.5 cents per ton-mile to 2.3 cents (at 2001 prices).  In fact, much of this decrease occurred by 1967 when the cost was only 5.6 cents (at 2001 prices) while by 1891 the railroad revolution had already cut transport costs to about 10 per cent of the 1820s’ level and the manufacturing belt had been born.   We calculate that the ratio of the average wage in manufacturing in East North Central and Mid-Atlantic states relative to East and West South Central states rose from 1.22 in 1890 to 1.52 in 1940 before falling to 1.15 in 1987.

An excellent example of this process is Motor Vehicles and Equipment (SIC 371) where overall geographic concentration fell in the second half of the 20^th century but where significant localization persisted in a new configuration.  The index for SIC 371 was 0.191 in 1940, 0.120 in 1958, 0.106 in 1977 and 0.094 in 1997.  This is reflected in maps 1 to 4 which show an evolving pattern of spatial concentration over time such that by 1997 the move away from the 1940 situation of a dominant position for Michigan and an east-west corridor in the southern Great Lakes region has been superseded by one in which Michigan is still a major centre but clusters within ‘Auto Alley’ extend as far south as Alabama.

Blue to Red 

Clearly, industrial geography changed greatly during the 20^th century.  Spatial adjustment can be seen as an integral part of the creative destruction which was instrumental in promoting this change.  The relative decline of traditional manufacturing areas was driven by domestic cost factors and not simply attributable to globalization.

It might be argued that with a relatively flexible economy and mobile society the United States has coped with these pressures quite well.  Even so, some workers have been left behind and addressing their grievances has become a big political issue.  While cities like Boston have regenerated with knowledge-intensive business services and a highly educated workforce others such as Detroit have not been so well-placed.  Of the six states which were red in 2016 but had been blue in 2012, four (Michigan, Pennsylvania, Ohio and Wisconsin) were in the manufacturing belt – their electoral college votes won it for Trump.

 

Reference

Crafts, N. and Klein, A., “Spatial Concentration of Manufacturing Industries in the United States: Re-Examination of Long-Run Trends”, European Review of Economic History, forthcoming.