6. Review of Douglass C. North, The Economic Growth of the United States, 1790-1860

6. Review of Douglass C. North, The Economic Growth of the United States, 1790–1860

May 1, 1961

Dr. Ivan R. Bierly

William Volker Fund

Dear Ivan:

Douglass C. North’s The Economic Growth of the United States, 1790–1860 is an almost totally unfortunate work.21 It combines all the worst aspects of the currently fashionable “science” of economic history, as contrasted to the older and sounder disciplines of sound economic theory applied to the fabric of history.

In short, North takes as his “analytic framework” a series of absurd and erroneous hypotheses, all of which are incorrect or, at best, highly one-sided. Some of these hypotheses are “laws” of history, one or two similar historical observations elevated without justification to the status of a scientific law of history. Others are based on highly faulty economic theorizing. Filling in this analytic framework is a book that consists almost completely of a mass of absurdly overstressed and ill-digested statistics. The statistics are hurled at the reader with little or no attempt to explain their significance. The statistics are often irrelevant to the “analytic framework,” and almost always irrelevant to any coherent principles of selection.

Furthermore, there is almost no qualitative analysis in the book, no sense of any economic growth processes or legislative effects not incorporated in some chart or table. But actually, such non-strictly-quantifiable material is vitally important in such an economic history. This is especially true in this earlier period of American life, where the statistics, no matter what diligence went into them, were highly inadequate and fragmentary.

Many of the statistics are processed with “moving averages” and other refinements that remove them one more plane from the reality they are striving to describe. Furthermore, despite the vast array of statistics that reduces the actual text to negligible size, there is grave deficiency of even statistical—let alone “literary”—discussion of crucial economic concerns such as wage rates and unemployment. Undoubtedly, the reason is that wage rates and unemployment series are too fragmentary to be organized in large tables and detailed graphs. But they are, nevertheless, too important to be so overlooked.

And so, all the trappings of the scientistic economic historian are there: the faulty theoretical hypotheses; the enormous overweighting of statistics and underweighting of the qualitative, the searching for “laws of history,” etc. Obviously heavily concerned with keeping up with the last-minute scholarly fashion, North goes overboard in trying to confine his references largely to 1960 material. As a result, his references are incomplete and weighted far too much on the side of the most recent material. In his discussion of the 1819 Panic, for example, North relies heavily on Schur’s 1960 journal article, and also on Folz’s earlier, unpublished dissertation, both of which are very poor sources. Actually, North rises above this material, but the fact remains that this is the material that he is apt to confine his footnotes to.

In addition to ignoring wage rates and unemployment, North also virtually overlooks the important field of money and banking, and presents no statistics in this vital field either—probably, again, because they cannot be presented in an imposing table. Thus whatever cannot be quantified at length does not, for North, exist.

Having indicated the poor and completely unsatisfactory quality of North’s history, let us turn tohis equally poor, if not worse, theoretic framework, which he uses as a Procrustean bed for the history. North has seen the obvious fact that, generally, the most advanced industry, especially in an “undeveloped” country, is aleading export industry. But he concludes from this that there is something uniquely powerful and spurring to development of an export industry per se. In short, instead of realizing that an industry that is particularly efficient and advanced will then become a leading export industry, he tends to reverse the proper causation and attribute almost mystic powers of initiating development, etc., to export industries per se. From this he leaps to far more erroneous conclusions and non sequiturs. He claims, for example, that an export industry, the receipts of which are then used largely for imports, leaks away and hinders development of the country; whereas, export industries where the spending “stays at home” build up the country, because they retain within the country the “multiplier-accelerator” effect of such spending. This is Keynesian nonsense applied even beyond where Keynes would apply it—i.e., to all situations and not just depressions.

Critical ideas for North are such statements as, “Regions or nations which remain tied to a single export commodity almost inevitably fail to achieve sustained expansion.” Now this is nonsense on many levels. First, this is merely a historical generalization elevated into a “law.” Second, the causation is once again placed backwards by North: historically, obviously a country that develops only one leading export industry is usually a reflection of a limited development. But North implies that the export industries are the causal keys to the problem of development, and therefore all that would be needed to ignite development would be another couple of export industries. Third, even historically, North is incorrect. Australia, for example, was able to prosper and develop with essentially one leading export industry: wool. Fourth, if we pursue the statement fully we see what utter absurdity it is; for North (who realizes that regions are as important an economic unit as the political, artificial “nation”) talks of “regions” tied to one export. And yet how big or how small is a “region”? “Region” is an economically meaningless term, as we can make the “region” small enough so that it could never have more than one export commodity. And yet this does not make such a region poor or undeveloped.

The logic of North’s position, which apparently he does not carry through, is basically protectionist; industry is weighted more highly than other goods, exports more highly than other industries, etc. North does pursue his logic, however, to proclaim his bias for egalitarianism. Unequal distribution of income he associates with a “plantation” economy, where the planters have the ill grace to spend their money on imported luxuries; this is contrasted to the noble, more egalitarian economy where more people develop home industry and home activities.

Once again, North’s position is compounded of both historical and economic errors; the fact that, historically, some plantation systems had unequal incomes does not mean that either the plantation system or the inequality inhibited economic development. Certainly neither did. So protectionist minded is North that he actually says that an export commodity that requires more investment in capital facilities, etc. is better and more conducive to growth than one requiring less, because there will be more spending on home-port facilities, etc. This again is protectionistic nonsense (i.e., the thinking of protectionism—I do not know whether North actually advocates high tariffs) for it claims that a less efficient and less productive industry is better than a more efficient and more productive one because more money is spent by the former on costs, resources, etc. Isn’t the money that is saved ever used? Once again, the important desideratum is freedom of the market; a country or region will often best develop, depending on conditions of resources or the market, by concentrating on one or two items and then exchanging them for other items produced elsewhere. If this comes in a free market, it is far more productive and economic than forcing a hothouse steel or textile mill in the name of “economic growth.”

Furthermore, Professor North takes the occasion to propagandize, throughout the book, on behalf of the public school system. The noble North and West, since it benefited the people, “invested in human beings” via a free public school system; the plantation-ridden South declined to do so until much later.

North, like all scientistic-minded economic historians, has, at bottom, a highly mechanical and deterministic view of economic growth. There are resources, there are export industries (which he overstresses greatly—thus he virtually makes cotton, in this period, to be the only industry worth discussing, since it was the leading export); and there are various “multiplier-accelerator” models of impact of these various export industries. The role of individuals acting, of entrepreneurs and innovators, North deliberately and frankly deprecates; the role of capital investment—so crucial to development—receives similar slighting treatment (here, too, there are no detailed statistics of capital for this period, so presumably this topic is not worth discussing).

The role of money and banking is also slighted, except that North indicates adoption of the erroneous Leon Schur thesis that the Bank of the United States was an excellent institution not to be blamed for the inflation of 1817–18, which is the reverse of the fact.

In addition, North revives the hoary myth of “long cycles” of economic activity, which he thinks prevailed during this period and are comparable to the well-known, shorter, business cycle. Actually, there is no such “cycle”; if there are long swings in wholesale prices or in particular industries, this has nothing to do with the business cycle as we know it; the important point is that there is no such cycle in production or business activity, i.e., production does not fall for twenty or thirty years, etc. (The fact that rates of increase change is not the same thing, and is only a “cycle” produced by statistical refinement, not in the real world.) His explanation for these so-called long cycles is lengthy “periods of gestation” of investments; this is the erroneous Schumpeter explanation.

Finally, there is another vast omission: there is virtually nothing on government policies and their positive or negative impact on America’s economic development during this era.

To set off against this long and important roster of flaws and failures, I can think of no particular merit in the North book—except for the reflection of recent National Bureau findings that the United States began developing rapidly before the Civil War and that this development was interrupted by the Civil War, in contrast to previous views that the Civil War sparked American development. But this hardly begins to compensate for the defects and fallacies in the book. Needless to say, I would recommend strongly against any National Book Foundation distribution of this unfortunate book.22

7. Review of William Appleman Williams, The Tragedy of American Diplomacy

August 29, 1962

Dr. Ivan R. Bierly

William Volker Fund

Dear Ivan:

William Appleman Williams’s, The Tragedy of American Diplomacy is an essay on the history of twentieth-century American foreign policy, filled with penetrating and suggestive insights.23 Williams is one of the foremost young socialist historians in the country; in contrast to the bulk of “Establishment historians,” Williams is refreshingly frank in his dedication to the socialist perspective. This frankness places him outside of the “Establishment” and thereby permits him to levy penetrating criticisms at what has been going on. There is sufficient to criticize, and Williams is particularly concerned with the rise and maintenance of American imperialism. Williams’s central thesis is that the policy of the “Open Door”—generally dismissed by historians as vaguely moralistic and of only ephemeral importance—holds the key to virtually the entire foreign policy of America in the twentieth century, which he refers to as “open-door empire.”

The gist of “open-door imperialism” is the shrewdness to refrain from imperial conquest of backward nations, in the style of Western Europe, and instead to exercise such control indirectly and quasi-covertly, masked by an elaborate camouflage of moralizing, Wilsonian idealism to remake the globe, etc. This covert American imperialism—backed up by coercive diplomatic pressures—includes economic pressure (for markets, monopolistic concessions to favored American firms, control of resources, etc.) and the manipulation of foreign governments and political parties. The upshot of all this, as Williams indicates, is that residents of foreign countries are not fooled for very long by the moralizing, but that the American people are—with the accelerating result that the foreign natives and the American people find it almost impossible to understand each other’s positions: “What does he mean, ‘American imperialism’?”

There is no need to look very hard for defects in the Williams book. They abound. In the first place, this is in no sense a definitive or highly scholarly work. Presumably, Williams himself would not claim this. There are no footnotes, even to direct quotations, and the material is centered on fruitful insights rather than on detailed scholarship. Furthermore, the insights are often the reverse of fruitful. Williams doesn’t seem to understand the period before the turn of the twentieth century at all; in particular, he grievously confuses territorial American expansion over unused land areas on the American continent with American imperialism in the rest of the world. Here he fails to learn from his mentor Charles Beard and “continentalism” (or rather, the mentor of his own mentor, Merrill Jensen).

He also makes egregious mistakes, such as trying to force William Graham Sumner into the mold of “expansionist”—presumably to fit Williams’s preconceived notion that, to be “saved,” American capitalism required imperialism to acquire foreign markets, even though he admits that Sumner was strongly opposed to the imperialist advent of the Spanish-American War. Also, Williams makes little mistakes showing poor proofreading, such as that Samuel Gompers was a “corporate leader.” (Although, Williams might well classify the AFL as part of the corporativist structure.) And, his research being skimpy, Williams is content to take a few scattered statements by senators and the like at face value, and also fails to track down the specific economic interests underlying foreign policy, in addition to the person’s general economic views.

It is, indeed, in the economic area that Williams, ridden by socialist ignorance, makes the greatest blunders. He persists in confusing legitimate private foreign investment as equally “imperialist” as subsidized or coerced foreign investment by government. He believes that both are equally injurious to the backward countries. He believes with Marx—and, as he shows, with all the Marxist-in-reverse advocates of American imperialism such as Brooks Adams, Theodore Roosevelt, etc.—that the vast productive machine of American capitalism requires foreign investment and foreign markets for survival, due to the falling rates of profit at home.

This fallacy, however, has one especial advantage: that Williams is alive to the numerous people who have held this fallacy; one of his important contributions is to show that not only Brooks Adams used this argument for the Spanish-American War, but such supposedly “enlightened” folk from various shades of the political spectrum, such as Dean Acheson, Marquis Childs, and William Henry Chamberlin, have used the exact same arguments to justify the Cold War, foreign aid, the Marshall Plan, etc.—the latter two even quoting Brooks Adams himself!

Despite the above defects, the Williams book abounds in penetrating insights and leads for further research. He has a searching critique, for example, of Wilson and his “imperialist idealism”; of William Jennings Bryan’s phony “anti-imperialism”; a brilliant refutation of the common “legend” that the Republican administration of the 1920s was “isolationist”; and a detailed showing of how it was the reverse; an illuminating discussion of the nature and origins of the Cold War with the Soviet Union: from the Allied intervention in the civil war, through the nonrecognition policy of the 1920s, to World War II and after.

Of particular interest here is Professor Williams’s contention that Franklin D. Roosevelt’s administration was not notably less anti-imperialist, nor even much less anti-Soviet, than the other administrations. Williams maintains the nonsensical view that Roosevelt’s New Deal “saved capitalism” from socialism; but he makes out a stronger case for Roosevelt’s “Good Neighbor Policy” being (1) not much different from Hoover’s, and (2) a milder but persistent continuation of “open-door imperialism.” In addition, Williams takes issue with the standard “left-wing” view of the Cold War and FDR by contending that Franklin Roosevelt, too, pursued a Cold War policy as early as 1942, and he points out quite a few interesting instances.

As in the case of other views of Williams’s, these cannot simply be taken whole; they require much more thorough investigations of the historical record. Certainly, the Williams book would not be suitable, for example, for National Book Foundation distribution. But it is books with truly independent points of view that do a great deal for the furthering of historical knowledge.

8. Review of Edgar Eugene Robinson, The Hoover Leadership

August 19, 1961

Mr. Kenneth S. Templeton

Dear Ken:

Edgar Eugene Robinson’s The Hoover Leadership (unpublished ms.) is yet another exercise in Hoover hagiography. It is, therefore, doubly worthless; for not only is it a simple apologia for all the works of Hoover as president—and is therefore on the wrong side of almost every issue it takes up—but also it follows in the well-worn paths of the previous Hoover hagiographers.

Robinson adds nothing new to his predecessors, who have set “the Hoover line”: William Starr Meyers and Walter H. Newton, The Hoover Administration; Ray Lyman Wilbur and Arthur M. Hyde, The Hoover Policies; Hoover’s own Memoirs; the State Papers of Hoover, edited by Meyers; and a few subsidiary works, such as Wilbur’s recent Memoirs (edited by Robinson), Eugene Lyons’s biography, etc.

Even as a hagiographer, Robinson contributes astonishingly little. For supposedly he had access to the unpublished Hoover papers, which contain the bulk of the record of his term, and yet almost every reference in Robinson’s book is to the published accounts in Meyers and Newton, the State Papers, etc. In fact, the book is far inferior to the previous accounts: incomplete, sparse, and evidently totally lacking in understanding of the issues involved in the economic crisis, much less a sound view of the correct policies.

Once again, the hagiologic image of Hoover emerges out of the legendary mist: Hoover, possessor of every conceivable Christian and human virtue, “savior” of his people, engineer, humanitarian, whose statist and interventionist and inflationist policies to combat the Depression were not only right and proper and truly American but which worked; yes, they worked, except that circumstances beyond the Great Hero’s control (foreign intrigue and foreign financial troubles; a public propensity toward hoarding; and obstruction by Republican politicians and Democratic politicians) somehow perpetuated and deepened the Depression.

There are many gross inaccuracies here. Thus, Robinson persistently points to the obstructions placed in Hoover’s path by the Republican Senate, and yet I can find no important measure proposed by Hoover that the Congress did not pass. Hoover had his way, and no amount of juggling of the issues can obscure his patent failure.

Committed to the view that Hoover was always right, Robinson does some of his own fancy evading in trying to present Hoover’s evasive and self-contradictory views on Prohibition as being really the best position obtainable. Robinson’s assertion that, without the annoying prohibition issue, Hoover would have won reelection on his outstanding economic record seems pretty farfetched.

Every one of Hoover’s socialistic innovations is hailed by Robinson without criticism: the White House conferences, the Farm Board program (which, to Robinson, of course, “succeeded”), the Reconstruction Finance Corporation, the refusal to recognize Russia or Japan’s conquest of Manchuria, the public works program, the higher taxes, et al., each is praised in turn. Not only that, but, even within this biased ideological framework, the factual discussion is hopelessly inadequate: there is virtually no mention of Hoover’s inflation program, no mention of the rise of business collectivist opinion (Swope Plan, etc.), no follow-through on the consequences of, or even details on the nature of, Hoover’s economic program, etc.

Here are some passages typifying Robinson’s hagiography and ideological bias:

Hoover was a “scholar, statesman, prophet... savior.”
Hoover believed in “private enterprise—fostered, aided and at all times regulated by a powerful government.”
Hoover’s sponsoring of federal radio, merchant marine, and aviation regulation “brought cooperation” between government and business.
Hoover’s “New Day” brought a “new epoch in conservation.”
Hoover was a “strong executive.”
Hoover believed in big government as an “indirect agent of economic arbitration and economic stimulation.”
Hoover’s White House conferences (which disastrously kept up wage rates for several years) “promoted cooperation” for the “welfare... of the whole people.”
Hoover, champion of all mankind, believed in “strengthening the economic structure of all nations.”
There is also the usual Hooverite complaining at FDR’s lack of “cooperation” in the interregnum, and blaming the remainder of the Depression on that; actually, it is rarely pointed out that the “cooperation” would have meant cooperation in New Deal inflationist measures.

Throughout the book, Robinson, as in the case of his fellow hagiographers, virtually ignores any alternatives or criticism of the Hoover policies, except the extreme New Deal or socialist one. The fact that there were numerous and trenchant laissez-faire or quasi-laissez-faire critics of the Hoover position is almost totally ignored. In this way, Robinson and the others are permitted to obscure the fact that, in virtually every sense, Hoover, not FDR, was the true founder of the New Deal; FDR, of course, took the New Deal much further down the collectivist road, but Hoover laid all of the groundwork.

There are, in sum, no discernible merits to this manuscript whatever; neither in ideological position, nor in new factual material. An inadequate rehash of the Myers-Newton-Wilbur-Hoover line is hardly needed. It is an unfortunate commentary on this work that, while I read it eagerly looking for additional notes for my 1929 work24 (since Robinson presumably had access to the Hoover papers), I found almost nothing to note.

9. Review of Paul W. Schroeder, The Axis Alliance and Japanese-American Relations, 1941

April 6, 1959

Mr. Kenneth S. Templeton

William Volker Fund

Dear Ken:

Paul W. Schroeder’s The Axis Alliance and Japanese-American Relations, 1941 is remarkable as a measure of the extent to which the American Historical Association—which gave its official imprimatur to this work—has traveled in the tolerance for revisionism since the end of World War II.25 A decade ago, this book would undoubtedly have been branded as “profascist” and a “follower of the Goebbels line” by the same people who are endorsing it today.

Schroeder’s is a highly interesting, scholarly, well-written essay on American-Japanese negotiations during 1941, with the particular reference to the Tripartite Pact. It is a highly useful contribution to revisionist literature, all the more remarkable, as I have said, for bearing an official seal, as it were. Schroeder tells the facts of the case, showing that Japan, far from being an irrational, hell-bent aggressor, was actually pushed into war by the United States, which insisted on forcibly cutting off Japanese access to oil and other important goods, freezing Japanese assets in America, while delivering insufferable, virtual ultimatums to Japan to get out of China, which it had been occupying for several years.

The sincere desire for peace on the part of all Japanese—including the “war party”—the almost minuscule tie-up with the Nazis in the Tripartite Pact, the making of concession after concession by the Japanese to the United States only to find the U.S. always increasing its demands are depicted very well in this book. Schroeder is particularly bitter, and deservedly so, about the extremist unrealism and fanatical aggressiveness of Cordell Hull and such advisers as Stanley Hornbeck. It is also refreshing to see Schroeder couple his attacks on Hull’s moralizing with the recognition that a propeace policy toward Japan in 1941 would not only have been the wisest and only realistic course, but would also have been a more moral one.

The chief weakness of the Schroeder volume is that the author shrinks from the clear interpretations of the excellent data that he has organized and presented. For example, he shows that the United States, before mid-1941, took an anti-Japanese posture, to be sure, but one that was essentially “defensive”—really aggressive, as far as I am concerned, but more a policy of “containment” than “liberation,” to use fashionably current phrases. Then, suddenly, in July 1941, just as the Japanese became significantly more conciliatory and anxious for peace, the Americans suddenly increased their belligerence to almost fanatical lengths, practically calling for war. Why the change? Schroeder has no answer; he mentions the overwhelming anti-Japanese state of public opinion in the United States, and has a very good, if brief, section on the fanatical anti-Japanese opinion molding of American liberals, but he still does not explain the shift, except in terms of sudden irrationality.

There are two important strands of interpretation that are spurned by Schroeder, one in direct attack, another by sheer omission. For one basic explanation of the shift was that earlier, the main emphasis was to keep Japan from further aggression and to concentrate on fighting Nazi Germany. But by summer of 1941, it became clear to FDR and his advisors that Germany would not fight the Americans, despite the extreme provocations in the Atlantic, so the United States turned to the aggressive provocation of Japan as the “back door to war.” Schroeder simply scoffs at this Tansill-Morgenstern ur-revisionist thesis as being absurd, looking for bogeys, etc., and simply claims honest mistakes or irrationalities. And yet this thesis is the only one that explains the shift, on other grounds so absurd. Schroeder only scoffs at the thesis without refuting it; indeed his data tend to lend support, as I have said, to the theory.

The second point, which Schroeder unaccountably omits altogether, is the influence of domestic Communists on U.S. foreign policy, as well as of the [Richard] Sorge spy ring on Japanese foreign policy. My contention is that much of the almost fantastic devotion to China was due not only to missionary sentimentality but to Communist policy advisors who wished to see the United States kill off Japan—Russia’s and Communist China’s great foe in the Far East. Communist policy was therefore to embroil the United States in a war with Japan—although not of course Russia, which would move in at the end of the war for the spoils. Schroeder does not even mention the fact that Germany attacked Russia in July 1941, and that this accounts for the sudden increase in American belligerency after that date. For, with Russia endangered, it became imperative to divert Japan from any possible foray into Russia by going southward and bringing the United States in at the “back door” to war—a double objective.

This thesis of Communist influence in America is also the only one that accounts for a fact that Schroeder puzzles over but cannot explain: after months of bellowing about how fighting for China was practically the highest absolute value an American could achieve, when we finally were in a war in Asia, America promptly forgot about China, and gave it much lower priority than the German conflict. Again, once the United States was in the war, the Communists were interested primarily in killing off Germany—the prime threat to Soviet Russia.

It is probably that Schroeder understands this, for in his citations from liberal anti-Japanese fanaticism in 1941, he quotes liberally from [Thomas A.] Bisson, [Nathaniel] Peffer, and other leftist writers in Amerasia and mentions the advice of Owen Lattimore and even Alger Hiss at one point (all anti-Japanese) without pointing out to the reader that Amerasia was a center for Soviet party-line and even espionage. (All the articles he cites from Amerasia and similar sources were after July 1941.)

All this is to say that Schroeder has not written the definitive book on this period and has not been bold enough in his conclusions. And yet, with that caveat, this is an important addition to revisionist literature. Japan is considered sympathetically; Hull is put in his true perspective; and the author ends with a good, hard-hitting attack on the Tokyo “war crimes” trials of the Japanese leaders.

10. Review of J. Fred Rippy, Globe and Hemisphere

February 21, 1959

Mr. Kenneth S. Templeton

William Volker Fund

Dear Ken:

J. Fred Rippy’s Globe and Hemisphere26 is not only a superb book, it is “doubly” superb on many levels; for above and beyond its subject matter, it indirectly raises questions about historiography that are vital to all of us.

After a slow start—where Rippy wanders around among lengthy hortatory quotations about Hemisphericsolidarity, and then shifts to statistics of American investment in Latin America—he builds up his story in an excellent and controlled manner, ending in a hard-hitting crescendo. Building up his case carefully out of highly illuminating and well-researched examples, Rippy leads up to his general principles, which are clearly and very strongly opposed to economic foreign aid (indeed, all except clear military-security aid).

Rippy attacks the support of foreign socialist governments (e.g., Bolivia) via foreign aid, the wastes and boondoggling in government “investments” (extremely enlightening chapters on the Inter-American Highway, on the Rama Road boondoggle in Nicaragua, and on the Rubber fiasco—and here, as elsewhere, Rippy displays high courage in exposing the phony alibis of “national defense” and military secrecy—the highway robbery of Latin American governments in exacting tribute from, and regulating, our tuna-fishing fleets, etc.) all at the expense of the long-suffering American taxpayer. Rippy continually shows his complete awareness of the plight of the American taxpayer and ridicules the idea that compulsory “charity” can fulfill the ideals of benevolence implied by voluntary charity.

Rippy also explodes the myth, and beautifully so, that Latin America has in some way been shortchanged by American aid—actually, it has been proportionally perhaps more heavily aided. Rippy bitterly exposes—in a fine combination of scholarship and a willingness to call a spade a spade—the mooching attitude of the Latin American countries out to milk the American taxpayer for every cent they can get.

He also shows, in a thoughtful chapter on the Galindez-Trujillo case, that foreign aid in itself is interventionist and, therefore, clashes with the ideal of nonintervention in Latin America. For if an American government gives aid to a Latin dictator, it is really propping him up, whereas if it shifts aid from him to a “democratic” country, it is intervening on the other side. Thus, and in other ways (as when he deals with pressure groups demanding foreign aid), Rippy shows how the intervention of the State creates insoluble conflicts between different groups, each of which wants to replace the other on the gravy train. His excellent chapter on U.S. sugar policy is good evidence of this, with various groups warring over sugar quotas. On sugar, and implicitly other tariff questions, Rippy indicates his sympathy with the American consumer, and therefore his opposition to these special-privilege schemes.

Again and again, Rippy defends free enterprise and opposes the growth of statism and governmental subsidy and aid, and presents specific cases where these apply. And he ends by reminding us that opposition to socialism is just as important as anti-Communism, and that foreign aid will really have the effect of promoting rather than hampering Communism, increasing as it does the role and importance of government in the economic life of the aided countries.

Further, Rippy advocates pulling out of expensive overseas bases where countries can blackmail us for further aid, and retiring to a continental missile defense at home; and he opposes policies of inflation, farm price support, etc.

There are jewels on almost every page and even in the footnotes. A few examples: the shocking spectacle of American politicians applauding the Marxist-Trotskyite confiscation of the Patino and other tin mines in Bolivia, with Senator Humphrey constantly calling for “jail” for the Patinos. There is the deflating of the pretenses of the “Voice of America,” the mendacious propaganda of bureaucrats calling for “just a little more” aid from Congress year after year, the attack on our aid to the Marxist Bolivian government, the exposure of the Somoza “holdup” of American aid, etc., etc.

If this were all, this would still be a fine book, an excellent example of history as sound principle illustrated in a group of important, neglected, illuminating concrete cases. But there is more; for there is one reason why I regard J. Fred Rippy as one of the best of present-day historians, and this raises a basic problem in current thought. For some reason, almost all other “right-wing” historians, economists, or observers of the current scene have considered it somehow “Marxist” or anticapitalist or perhaps just plain impolite and bad mannered, to point out the probable true motivations for government actions and for the pressures for those actions. Now this, I have maintained for a long time, abdicates the responsibility of the historian to weigh and estimate, as best he can, the motivations for different actions. But because of this abdication, the field for this realistic investigation has been left to the distortions of the “muckrakers” and the far greater distortions of the Marxists. As a result, the common charge against sound, free-enterprise economists that they are “apologists for business interests” is invested with a good deal of truth.

Here is what I mean: let us take the case, for example, of an import quota on zinc. The historian who simply records the fact that the government put a quota on zinc, and who gives only the reason enunciated in the canned press releases of the government, would be abdicating his responsibility to the truth and distorting the true picture of what occurred. He is required to add that the pressure for this measure came from the zinc manufacturers. Now in the case of tariffs, this is universally recognized. But, for some reason, other historians and especially “right-wingers” stop there, and refuse to pursue the more indirect and subtle, if just as important, forms of subsidy.

For example, take the Marshall Plan (or foreign aid in general). In addition to the humanitarian and Marxist influences for the plan, there was also the economic interest of export firms who benefit from such government aid. In fact, foreign aid is, in good part, a subsidy extracted from American taxpayers and handed over to favored, selected export firms. Yet, how many historians have mentioned, for example, that the chief author of the Marshall Plan was Undersecretary of State Will Clayton, whose cotton broker firm of Anderson, Clayton and Co. received the lion’s share of the cotton orders from the Marshall Plan after it was adopted? Now, perhaps such uncovering of economic interests is impolite, but it is necessary if the reader is to be told the truth of what really happened.

The great thing about J. Fred Rippy—and one that sets him, as far as I know, above all other current historians—is that he is not afraid to dig for the camouflaged economic motive. No other historian has pinpointed this so exactly. Thus, Rippy shows in this book how foreign aid has been promoted by the export industries, under the guise of altruism, national interest, etc., thus to mulct the American taxpayer.

In short, Rippy really believes in free enterprise, enterprise that is free, and not aided or subsidized by government—and he is willing and courageous enough to dig for the subsidy and to name the men who are engaged in it. Thus, he shows the economic interests behind the American propaganda drive for the boondoggling Inter-American Highway, promoted in large part by American automobile manufacturers, and by American construction companies, all of which stand to benefit by this subsidy. And, furthermore, Rippy recognizes that the bureaucracy itself (which he clearly despises in large part) has its own economic and power interests to promote, and that joined in this bureaucratic interest is the interest of the kept intellectuals who work and propagandize for the various programs. Rippy thus shows that joined with these auto and construction interests were the bureaucrats of the Public Road Department, etc.

Rippy also has the high courage to investigate who the bureaucrats actually are, and to see if they have any personal ties with the economic interests that they are engaged in subsidizing. This is another very important phase of historical inquiry that is completely neglected by almost all historians (Will Clayton is an example.)

Thus, Rippy cites the case of Henry Holland, Assistant Secretary of State, who led the government in urging aid to the Marxist government of Bolivia. Recently, this government has mysteriously veered from its socialist course to the extent of giving concessions to oil companies, and Rippy adds that Holland is an attorney for oil interests and that he might be investigated by Congress for improper influence. These are the things that historians must ferret out, and particularly right-wingers, if they would prove their devotion to their own professed cause.

After all, the sound, free-enterprise economist is not simply in favor of business, or big business; he only favors them insofar as their actions are made on the free market. Insofar as they lobby for subsidies (direct and indirect) for themselves at the expense of raids on the taxpayer and crippling of their competitors, the sound economist must oppose them, and the sound historian exposes them.

Other examples of Rippy’s magnificent and courageous tough-mindedness: his explanation of much pro-Trujillo sentiment by Catholic congressmen as motivated by common Catholicism; of Rep. Multer’s pro-Trujillo views as motivated by approval of Trujillo’s pro-Jewish, pro-Zionist policy; of the lead taken in favoring special foreign aid to Latin America by Florida’s Senators Holland and Smathers as motivated by the large number of votes of Latin American naturalized citizens in Florida; of Senator Saltonstall’s eagerness for foreign aid to Latin America as reflecting the heavy investments in these countries by Boston bankers.

One point should be cleared up: it is wrong to think that such historiography is demeaning because it imputes “low” motives to human actors. In the first place, the “high” motives are trumpeted far and wide by the actors themselves; the “low” motives are precisely the ones that need to be uncovered. Furthermore, the historian cannot penetrate into the mind and heart of every single individual; no one can. It is possible that the zinc manufacturer urging a quota has really no interest in the quota as a subsidy, that he is only concerned for the “public welfare”; it is possible that Will Clayton had no idea that Marshall Plan funds would be funneled into his own company, and had no interest if he did know. Possible, but highly improbable.

If we assume that people are rational, in any degree, we must assume that they will not be ignorant of their economic interest; if we assume that religion is important in men’s lives, then we will entertain the hypothesis that mutual Catholicism or Judaism will affect political actions. At least we will look further on these hypotheses, and uncover evidence, as Rippy does.

It is because of Rippy’s tough-mindedness, his realism and courageous devotion to truth, his failure to be intimidated by the rarity of his realism among free-enterprisers, that this book reaches an especially high rank and is such a great achievement.

11. Review of the Veritas Foundation, Keynes at Harvard

April 6, 1961

Dr. Ivan R. Bierly

William Volker Fund

Dear Ivan:

The Veritas Foundation’s Keynes at Harvard27 is an absolute, unmitigated, and unbounded disgrace, an affront to the principles of scholarship or research, and deserving of the severest condemnation. It is also an unfortunate symptom, a symptom of what has been happening to a large element of “right-wing” and conservative opinion in recent years.

Increasingly, the “Right” has tended to substitute for discussion of the merits or demerits of the issues, attacks on the people who sponsor or advocate these issues. Increasingly, the syllogism being adopted is this: the Communists approve (or disapprove) of Policy X; Mr. Jones approves (or disapproves) of Policy X; therefore, Mr. Jones is a Communist, a “dedicated and conscious agent of the Communist conspiracy,” and/or a “Communist dupe.”

The result of this mischievous logic is not only to make wild and absurd charges of Communism, but also to decide issues solely on the ground of whether or not the Communists approve or disapprove: in short, to abandon one’s own thought in favor of the Communists’ (in reverse). “Anti-Communism” then seems to require taking a position diametrically opposed to that of the Communists at all times, anyone not doing so then becoming a “Communist dupe,” etc. Then, if the Communists are opposed to nuclear war, or war between the United States and Russia, or opposed to protective tariffs, then “anti-Communists” are duty bound to favor nuclear war, support protective tariffs, etc.

Buttressing this view is the wildest forms of “guilt by association”; thus, if Mr. X wrote a book favorably noticed in a Fabian magazine, then X is a Fabian, anyone connected with X is a Fabian, etc.

Keynes at Harvard is an exemplar of the worst of this tendency, with the addition of a special absurdity coined in recent years by Sister Margaret Patricia McCarran, in her fantastic, fortunately “suppressed” manuscript, “Fabianism in America” (a striking contrast to the sober, judicious Fabianism in the Political Life of Britain). This addition is what we may call “Fabian-baiting,” which applies the same anti-Communist logic and guilt by association to Fabians, adding these “Fabians” in as a separate link to the Communists in what the Veritas people, who offer a condensed version of Sister McCarran’s manuscript, like to refer to as the “Communist-Fabian-Keynesist political underworld.” The operating principle is that, since Keynes was a member of the Fabian Society at one time, every Keynesian becomes a “Fabian”; since the Webbs were pro-Soviet, every Fabian (or “Fabian” by extension) becomes pro-Soviet; since the Fabians set up the London School of Economics, anyone teaching there becomes a Fabian, therefore a pro-Communist, etc., in virtually endless ramifications.

Using the McCarran-Veritas logic, it is possible to construct a view, for example, making you or me members of the “Communist-Fabian” underworld, and this can be done very readily. (Note: this is not a caricature, since it exemplifies precisely the methods used by these authors.) For example: F.A. Hayek taught for many years at the Fabian-founded London School of Economics. Therefore Hayek is a Fabian. The William Volker Fund gives scholarships for students of Hayek at Chicago; therefore the Volker Fund is part of the Fabian “transmission belt.” Ivan R. Bierly works for the Volker Fund, etc.

(As far as I know, the modern founder of this sort of approach was Mrs. Elizabeth Dilling, whose book The Red Network proved, in similar ways, that Henry Hazlitt and H.L. Mencken were part of the “Red network.” Adding “Fabianism” to the stew, of course, permits the inclusion of virtually everyone.)

The major difference between Sister McCarran and the Veritas authors is that, while the plan and purport of her work are absurd, her factual details are generally accurate. But the Veritas authors are overwhelmingly ignorant and slipshod about even the details of their own material.28

Let us turn now to some details of Keynes at Harvard. The authors purport to be undertaking a study of “Keynesism” in the Harvard economics department.29 Yet the most striking fact about this “study” is that there is almost nothing here about the Harvard economics department. Instead, nine-tenths of the booklet is devoted to a Sister McCarran-style “history” of the Fabian movement and its alleged American wing, with emphasis heavily laid on the Harvard connections of Felix Frankfurter, the Harvard alumni status of Walter Lippman, etc., all of which are of course irrelevant to the Harvard economics department.

There is, furthermore, no discussion of Keynesian thought whatsoever—the authors loftily refusing to discuss it. The authors, not knowing anything of Keynesian theory, therefore persist in attributing “Keynesist” views to Keynes all of his life. Politically, of course, Keynes was always an interventionist, and with socialistic tendencies, but this hardly makes him always a “Keynesian” in the proper sense. As a result, there are numerous ludicrous references to someone, in 1914, say, spreading “Keynesist” ideas at Harvard or in the United States, when of course there was no Keynesianism in existence until the General Theory was published in 1936.

There are only very scant references to the Harvard economics department. Harris and Hansen are mentioned as leading Keynesians, but they are treated only cursorily, the authors preferring lengthy quotations from “Fabians” (i.e., socialists) like George Soule and Stuart Chase, who the authors like to believe are leading Keynesian thinkers. Of course they are not, but they are much easier targets for demolition than Hansen and Harris.

Galbraith is barely mentioned at all, simply being referred to one or two times as a “leading Keynesian economist”—which he most certainly is not. (Leading economist yes, and Keynesian yes, but he is not known for his Keynesianism and has made no contributions at all to Keynesian thinking.)

The only other Harvard economist mentioned, and he is dealt with in some detail, is Joseph Schumpeter, who is incredibly designated many times as “lifelong old socialist,” “leading neo-Marxist socialist,” etc. This is a ludicrous desecration of Schumpeter’s views and stature. Schumpeter, insofar as he had definite political views, was procapitalist and conservative, aristocratic and skeptical. Far from being a top Keynesian, Fabian, et al., Schumpeter was a distinguished anti-Keynesian, and, for all his eccentricities, a truly distinguished economist. Veritas’s mudslinging at Schumpeter is truly disgraceful. One reason that Veritas treats Schumpeter as a “leading socialist” is because, in the Schumpeter memorial volume, all of his Harvard colleagues joined in essays in his honor. Granted that many of these men were left-wingers. But the Veritas authors are clearly incapable of believing that friends and admirers of differing political persuasions might want to get together to honor someone whom they believed to be a great man.

Another fantastic point is the Veritas’s treatment of Alfred Marshall as a well-known Fabian socialist. This Marshall was most emphatically not, even though he was hardly a partisan of laissez-faire. To bolster their absurd claim (even Sister McCarran did not claim that Marshall was a Fabian member), they cite a passage in Sister McCarran’s book, which they completely misinterpret in their typically ignorant fashion. The passage refers to the Fabians, in their economics, using Marshall as the economist whose theories they followed. But this was simply the Fabians adopting the economic theory that was regnant at the time; they never cared about economic theory as such.

For some reason, the Veritas authors miss the story about Shaw being converted from Marxism to Austrian-Jevonsism by Wicksteed. If they had known this, they undoubtedly would have accused Menger and Böhm-Bawerk as being “well-known Fabians,” and of course Mises as their disciple.... Their other “proof” on Marshall is the citation of the fact that Marshall didn’t believe in laissez-faire. I am hardly the one to criticize laissez-faire, but it is ludicrous to call anyone who doesn’t believe in laissez-faire a “Fabian socialist.” (A methodology similar to calling a non-laissez-faire person a “Communist.”) It is indeed no wonder that the Veritas authors see virtually everyone as part of the Communist-Fabian-Keynesist political underworld. (Query: if virtually everyone is a part of this network, how can it be called an “underworld”? It would be more accurate, if impolite, to call the Veritas-McCarran group the “underworld.”)

But now for some details, to convey some of the flavor of this incredible performance. Perhaps the essence of the Veritas thesis encapsulated on page 39, as follows:

Hansen, Harris and Galbraith, besides being Fabian type socialists, are considered the leaders of American Keynesism. The pattern is the same although the names and labels keep shifting. Fabian socialism uses Keynesism as a political weapon. The Kremlin followers use the Fabian organizations as a cover for their operations. Keynesism is used to snare the unwary and bring them by degrees into a socialistic turn of mind. The communists then work hard to propel such socialistic converts along the road to Soviet socialism.

Some further statements:

“You find clerics like Reinhold Niebuhr supporting the worst of the communists.” (A gross distortion, of course.)
“That is why you will find Hitler, Mussolini, and Stalin all enthusiastically embracing the Keynes system of economics.” (Stalin was of course, fervently anti-Keynesian.)
Seymour Harris’s simple and correct statement that detailed economic problems are “intricate and cannot be fully understood even by the intelligent minority,” is taken, by itself, as a call for rule by a totalitarian elite.
“Keynesism is not an economic theory. It is a weapon of political conspiracy.” (It is about time that the whole “conspiracy” terminology be dropped. If you and I agree on something, or on some objective, it is sound and proper agreement. If someone whom we dislike and his friend agree on something, then this is defined as a “conspiracy.”)
“Taussig took Joseph Schumpeter, an old time socialist of the Austro-German socialist school, into his own home and used his influence to build up Schumpeter as an international authority in the field of economics.” (Since Schumpeter was a far greater economist than Taussig, this was not difficult to do.)
“Harry F. Ward acquired his socialism in Harvard before 1898. There were many such instances of individual indoctrination...” (But from whom, since the first discussion of socialist activity at Harvard, by any faculty, refers to considerably after 1900?)
Theodore Roosevelt’s hotheaded letter to Felix Frankfurter linking the latter with the “Bolsheviki” is taken by the authors as authoritative evidence of the correctness of the charge.
“Thus forty years ago Harvard spawned left-wing bureaucrats, socialist-Marxists and socialist-Fabians (Keynesians) who acted as ‘transmission belts’ for communist penetration of the nation.”
Havelock Ellis, famous sexologist, is mentioned as having achieved “notoriety” in a book “frequently banned on charges of obscenity.”
“The Labor Party policies have since been continuously determined by the Fabian Society.” (Absurd exaggeration.)
“Lange, with his background as graduate of the London School of Economics, had no difficulty in passing himself off as a Fabian socialist. The London School of Economics was founded by Sidney Webb, head of the Fabian Society.”
Aid toward conscientious objectors in World War I is called “extremist,” “Fabian,” etc.
Keynes’s fine work, The Economic Consequences of the Peace, is considered a product of the Fabian conspiracy, to preserve “German socialism” from reparations.
“The New School for Social Research, which operates as an accredited educational institution,” (as do all schools) “has been sold to the general public as an independent and politically neutral institution. Actually the New School was established by men who belong to the ranks of near-Bolshevik Intelligentsia.” Here the authors quote from the Lusk Committee Report. They then add, slyly, “Keynes lectured there.” (So did Alfred Schutz, late sociologist and friend of Mises, and A. Wilfred May of the Commercial and Financial Chronicle.)
The League for Industrial Democracy is termed “the parent movement connecting the various Fabian ‘fronts’ in America to this day,” which seems to me a lot of nonsense; no evidence is offered.
Galbraith “aids communism.”
“In Britain the Keynesian theories... became a standby of Fabianism throughout the world as early as 1919.” (They originated in 1936.)

This covers the more egregious statements in the first half of the book. There is no need to pursue the matter further.

12. Review of Alexander Gray, The Socialist Tradition

August 24, 1961

Dr. Ivan R. Bierly

William Volker Fund

Dear Ivan:

The besetting problem among all historians is that they tend, inherently and naturally, to favor the institutions or people whom they choose to study—or, rather, that they choose to study that which they favor. This law has applied fully to histories of socialist thought. The unique merit of Alexander Gray’s, The Socialist Tradition30 is that it is the one book in the field that is written from an anti-socialist, rather than a pro-socialist, perspective, and thus provides a healthy and even indispensable offset to the works of [Max] Beer, [G.D.H.] Cole, [Carl] Landauer, et al. Furthermore, many of Gray’s criticisms are trenchant and cogent, and his distinct lack of awe for these socialist thinkers—exhibited by almost all the other writers in the field—is refreshing and proper, because many of the socialist arguments deserve caustic ridicule rather than sober and earnest respect.

Having said this, I must also note disquieting features of the book. While Gray is a good critic, he is hardly a great or very profound one, and he misses many of the important criticisms or aspects of these criticisms. Thus, in writing of the inefficiency of government in business, he unfortunately limits his discussion to the problem of ministerial responsibility or keeping the nationalized industry “out of politics”; there is no mention of the far more important problems of the impossibility of calculation, the loss of profit-and-loss incentive or calculability, etc. Devoting a lot of space to the anarchists, Gray never grasps the vital distinction between the individualist and the collectivist anarchists, and their contrasting attitudes on property, and thus, his discussion, while valuable in many ways, is in an impossible muddle.

But the most unfortunate aspect of Gray’s work is his use of personal ridicule against the socialist and anarchist thinkers discussed. Ridicule against a nonsensical argument is one thing; ridicule against the person, then intertwined with criticism of the argument, is much different and most unfortunate. The personal sneers, to which Gray—a man of obvious wit—is addicted detract, in a scholarly audience, more from the author than the recipient, and properly so.

One glaring example: Karl Marx, a man whom Gray openly dislikes, is savagely attacked for living off Engels all of his life, and, as Gray reiterates, thereby using Engels as his pipeline to reality. Gray berates Marx unmercifully for this “for Reality is precisely the thing that none of us can see through the eyes of another. Marx spent much of his life chewing his intellectual cud, with his back firmly planted towards the window.”

After this unfortunate vulgarity, Gray goes on to attack Marx’s British intellectual followers with the same taint: “In this country at least, Marx has tended to become in the main the cult of a somewhat anaemic intelligentsia, who, like Marx himself, prefer to see reality through the eyes of another.”

If this means anything beyond vulgar bombast, it is dangerously close to the caricature of the conservative American businessman who dismisses all intellectuals or their ideas as people who “have never met a payroll.” In addition to this, the argument is totally irrelevant: for, on Gray’s terms, if Marx hid from reality, Engels most emphatically did not, in fact quite the contrary. (Engels even met a payroll!) So if Marx is to be condemned, then Engels is, in proportion, to be praised; and yet, Engels and Marx had identical views on all questions. The “reality” argument, then, in addition to being ad hominem, is self-contradictory, since it cannot be used against the joint Marx-Engels theory.

This sort of personal assault is by no means the whole of Gray, and, as I have indicated, there is much cogent stuff in the book, and the book is important reading as the only work of its kind in the field. And yet this is a grave limitation on the book. Gray does similar injustice to poor Godwin, whose troubled personal life is held up as an example of the deficiency of rationalism and the life of reason, after which Godwin’s own rationalistic and altruistic anarchism is used, improperly, to describe anarchist theory as a whole. (Contrary to Gray, most anarchists have been irrationalist rather than rationalist in orientation.) Later on, Gray attacks the syndicalists for being irrationalists.

Gray’s own ideological position, which is indicated here and there, in part accounts for the deficiencies of the book. It may be described as very moderately liberal (in the old-fashioned sense), so that at times one wonders whether he dislikes his socialist authors more for their socialism or for their “extreme” devotion to principles. His final paragraphs reveal him gently critical of the British “Road to Serfdom,” but more inclined to try to modify its excesses than to oppose it root and branch.

He also, and peculiarly, seems to believe that the British population is entering upon a decline in number, and that this for some reason calls for rigid statism and central planning. Says Gray: “If we are to get through the years of shrinkage, we shall need a State professing an obligation to exercise a guiding and controlling influence in every sphere of the national life, and prepared to act accordingly.”

When all the deficiencies have been noted, however, it still remains that Gray’s book is the only scholarly history (though it does not claim to be a comprehensive history) of socialist thought from a critical point of view, and this places the book in an important niche for those interested in social philosophy—at least until it is replaced someday by a better book.

13. Review of T.S. Ashton, An Economic History of England: The Eighteenth Century

May 31, 1959

Mr. Kenneth Templeton

Dear Ken:

Economic history is almost worthless unless the historian has a knowledge of sound economics as well as of his historical period, and until recently, such knowledge was rare indeed. T.S. Ashton’s, An Economic History of England: The Eighteenth Century31 becomes a doubly gratifying work because of its rarity, in addition to its own excellent intrinsic qualities.

Ashton’s book is a superb example of what can be done in an economic history volume: combining intimate knowledge of the latest historical research with sound economics enables Ashton to give a sound interpretation of the historical events. As a result, all the processes of the free market are soundly interpreted, as well as all the unfortunate consequences of government regulations and privileges. This fine work is eminently worthy of a National Book Foundation award, or anything else that would widen its scholarly distribution.

The following are some of the gems of insight provided by this work:

The movement of workers over England as stimulated by wage differentials
The absence of State and guild restrictions and regulations in the newer industrial areas, stimulating the movement and growth of industry
The importance of graded inequalities of wealth in stimulating economic development and encouraging worker mobility
The excellence of the network of private turnpikes, private canals, private river development, and private harbor development, in developing the British transport system in the eighteenth century after governmental bodies had made a botch of these fields
The role of usury laws and government borrowing in greatly restricting economic progress and the development of capitalist industry
The fact that war and inflation were generally a baleful rather than a beneficial influence on the English economy, refutation of the Hamilton-Keynes thesis that inflation and forced saving were responsible for the Industrial Revolution (On the contrary, there was little inflation in the eighteenth century—until the wars at the end, and then it was largely agricultural prices that rose.)

Ashton also settles the enclosure question at last, demonstrating that:

The enclosures were often by voluntary agreement and by voluntary purchase of rights
The parliamentary enclosures were largely of common land, commonly owned, thus implying that these acts were not robbery but the beneficial transforming of communal into individual property
That the result was a vast increase in agricultural productivity, due to the larger farms, the end of the vicious open-field system, and the fact that the land was owned by an individual leading to its conserving rather than to overgrazing, as in the past (the same point made by Scott for conservation of natural resources)
The enclosed forests were conserved properly by the private landlords (again the same point)

As a result, the agricultural population grew instead of diminished—in many cases, small as well as large farms expanded in number. Those farmers who did leave for the cities left in a stream typical of civilization, in response to higher wages and greater job opportunities; they were not “driven” off the land, as earlier historians thought.

Further: there is a refutation of the idea that luxury demand was responsible for the growth of capitalism or that war demand was responsible; there is an excellent discussion of banking matters showing that the inefficiencies of government minting, the absurdities of bimetallic ratios enforced by government, etc. led to nationwide shortages of small change and coins, thus hampering daily economic transactions. But Ashton shows that private businesses rushed in to remedy the gap very well, putting forth private coins.

He also distinguishes in superb fashion between note-issue banks, which were inflationary and subject to panics, and the type of banking that grew up particularly in the progressive area of Lancashire, where banks loaned bills of exchange or discounted them for cash, and these were not subject to panic. He fails to point out that the latter is the proper, hard-money type of noninflationary banking, and it is heartwarming that this type of banking flourished in precisely the fastest-growing, industrializing areas, thus refuting the orthodox claims that business would be stifled without bank credit inflation.

Ashton also shows the great economic value of smuggling, praising it for expanding trade despite high tariffs and other regulations.

Unions, too, are shown as organizations that could only raise their own wages at the expense of unemployment, restrictions on labor entry (such as apprentice regulations), and lower wages elsewhere; and they are shown as organizations living by violence, rioting, destruction of employer property, etc.

Ashton shows also that the industrial revolution raised wages of labor, provided for growing population and for poverty-stricken immigrants, competed for labor not so much with skilled craftsmen (as in the old mythos) but with miserable, underemployed paupers and squatters, who now became fully employed for the first time.

There is also a masterful description and analysis of the growth of the enterprise economy in manufactures, trade, shipping, agriculture, etc.

Ashton also shows the absurdity of the complaint that the factory system “depersonalized” the workers, by demonstrating that the old “domestic” system was far less personal than the factory.

One interesting tidbit: Ashton shows that the English traders did not, in the main, carry on actual slave-hunting in Africa (it is the hunting of slaves that tends to yield the great profits), but that the original hunting was done by the Africans themselves in tribal war or the slaves were sold by the African chiefs to the English.

And one heartwarming note: so much did private insurance flourish, that Lloyd’s and other companies even insured enemy ships from English assault during wartimes! Some of the professional patriots grumbled at this, but it went on; can you imagine anything like that today?

Once in a while Ashton nods, as when he excessively defends counterfeiting (thinking that inflation is all right during times of unemployment) or when he defends the tyrannical acts that deprived the English poor of their great solace: cheap gin. However, these slips are hardly noticeable in the superb tapestry of economic history that Professor Ashton has woven in this book.

P.S. Another not-to-be-neglected merit of the Ashton work is that he scorns the excessive use of statistics and knows their limitations; his is a fine blend of qualitative and quantitative history.

Strictly Confidential