Anyone who follows the news in Britain, will have heard a lot about ‘growth’. Britain’s former Chancellor, Rachel Reeves, promised to turn the country into the fastest-growing economy in the developed world, while the last Prime Minister but three, Liz Truss, promised to take on the ‘anti-growth coalition’, even if she very quickly found that it was a lot more resilient than she could have imagined. Now that growth has largely disappeared, we spend more time discussing it than ever. And yet, in this timely and ambitious new book, Daniel Susskind, steps back from the debate, and asks some deeper questions. What is ‘growth’ anyway? Do we still need it? And if we do, how can we get it back on track?
At the start of his history of how output gradually started to expand, Susskind notes that ‘for most of the 300,000 years that human beings have been around, economic life was stagnant.’ Indeed, the standard of living of a Stone Age hunter-gathered and an 18th century labourer were remarkably similar. Over the last 200 years, something remarkable happened. Growth started to accelerate, and, once it started, it never really slowed down, even if there were inevitable bumps along the way. The result? We live in a world which, compared to any of our forebears, is marked by a material abundance that would have even relatively recently been unimaginable. There are lots of reasons for that, and in a comprehensive survey, Susskind identifies most of the factors that drove the sudden burst of prosperity. But what it really boils down to is this. It was driven by what he terms the ‘first industrial enlightenment – the first time that humankind engaged in the pursuit of useful ideas with a sustained intensity and moral seriousness.’
His conclusion is that it is basically knowledge and creativity that drives growth, and, as we embark on what may turn into the era of Artificial Intelligence, it is hard to dispute that. And yet, over the last few years, growth has been more contested than ever. In June, for example, the Global Justice Report led by the French economist Thomas Piketty proposed reducing the annual rise in GDP in the west to between zero percent to 0.5 percent to help create a fairer, more sustainable society, and that was just one example among many. In reality, the ‘degrowth’ movement is more powerful than ever. Championed by green activists such as Greta Thunberg, the ‘degrowthers’’ core point is that infinite growth is impossible on a finite planet. To Susskind, however, the argument is little more than failure of economic imagination. The ‘degrowthers’ treat the economy as a purely physical entity, ignoring the simple fact that growth is increasingly driven by intangible products. More seriously, ‘degrowth’ will quickly turn into a romantic euphemism for a deep global recession, and one that would permanently trap hundreds of millions of people in absolute poverty and require an authoritarian dismantling of western democracy to enforce. ‘There is no economic law which says growth promoting technologies must also ruin the environment, hollow out local communities, and rely on technologies we cannot properly control,’ he writes.
That is very true. Instead of condemning growth, the author is more interested in how we can revive it and give it greater moral purpose. There are, he argues, continual trade-offs that have to be made in any kind of economic policy, whether it is over the environment or the level of inequality we are willing to accept. Those decisions, he believes, are basically moral judgements, and can’t be left to the number crunchers calculating the quarterly GDP data, or technocratic officials. At one point, he suggests that discussion of the essential trade-offs could be made through ‘mini-publics’ or citizens’ assemblies, bodies where ordinary people work alongside the existing political system to make decisions that genuinely reflect broader society’s views about trade-offs. Well, perhaps. As it happens we already have a ‘citizens assembly’ – it is called a parliament – and we hardly need another one, especially as it could very easily be hijacked by special interest groups or hardcore activists. It would be far better if more politicians were willing to make a clear argument for growth, and why we need it, and what can be done to make sure it benefits everyone.
Those are minor quibbles, however. Susskind is writing for a global audience, and so, quite rightly does not trap himself in parochial arguments. A debate about ‘growth’ will be very different in Britain, or indeed most of the rest of Europe, where it has all but disappeared, than in the United States, or China, where economies are still expanding at a rapid rate. In the end, Susskind is a pro-growth optimist, firmly on the side of expansion and rising living standards. ‘For three hundred thousand years, humankind looked out on the future and saw what must have seemed inescapably bleak: a relentless, unforgiving struggle for subsistence,’ he concludes. ‘Modern economic growth has changed that.’ That is very true. We might be struggling to grow again, and many people have been questioning whether it is even worth trying. But as this excellent short guide makes clear, ‘growth’ is well worth having – and we will certainly miss it if it is gone for good.
In this impressive work, Geoffrey Hodgson, a leading scholar in evolutionary and institutional economics, presents an interdisciplinary approach, including anthropology and neuropsychology, to demonstrate the fundamental importance of legal and financial institutions in the development of capitalism in England between 1300 and 1820. Determining the foundations of the ‘First Industrial Nation’ has long been a staple of economic history, often laden with a tendency to focus on quantifiable factors of production and resources, what Hodgson terms the ‘physicalist perspective in economics’ (page 182).
The notion of English exceptionalism has often informed historical accounts in this area, from self-congratulatory and often chauvinistic narratives of earlier centuries, which stressed nationalistic and religious attributes of ‘free-born Englishmen’, anti-Catholicism, and the virtuous worldliness of Protestantism, to those documenting the carefully-crafted application of hegemonic domestic and imperial economic policies. More recently, the cultural and intellectual dimensions of Enlightenment culture have been identified, especially by Joel Mokyr, as components of emergent capitalism.
While promoting a ‘legal institutionalist’ interpretation, Hodgson concedes that ‘multiple dimensions’ informed capitalist development (page 228). Yet, he seeks to revise an outlook whereby the apparatus of property rights, legal structures, and financial institutions have been understated in the historical literature. Thus, a ‘hidden wiring’ metaphor is appropriate, with the primacy of institutions representing a less fashionable, less heroic, and less visible element than the content of pre-existing interpretations.
The book is divided into three parts. Part I examines explanatory frameworks of capitalist development, including Marxist historical theory, as well as the role of technology, religion, and ideology. Part II, comprising over 50% of the book’s content, explains England’s economic development by reference to land, law, war, and finance. Part III narrows the focus by assessing institutions as drivers of economic transformation, while providing international comparative analysis.
The introduction presents the conceptual approach of ‘legal institutionalism’ with Thorstein Veblen and Joseph Schumpeter referred to as core influences. In Schumpeterian fashion, finance is held to have preceded enterprise, with rules-based institutions and organisations projected as the foundations and facilitators of transformation. A welcome semantic precision is employed in defining terms like ‘capital’ and in attempting to establish a sequential timeline of causal factors. Resisting Whiggish conceptions of linear progress, Hodgson argues for uneven development, especially of financial institutions and instruments, instancing that mortgaging rules were not established in England before 1670, and debt markets fully emerged only in the later eighteenth century (page 12 note 24).
Unpicking Marxist historical theory is a significant element of Part I. For Marx, law was not part of the economic base but rather the superstructure, yet Marx had to reference property since the social classes of capitalism were defined according to ‘specific institutional relations of property and power’ (page 47). Indeed, the very claim for an English bourgeois revolution is problematic, as the aristocracy retained enormous political and economic power, status, wealth, and privilege well into the twentieth century. With law considered constitutive of social relations, rather than simply an epiphenomenon, Hodgson allows himself the aphorism: ‘The history of all existing society is the history of institutional change’ (page 48).
Similarly, technology, religion, ideology, and culture are framed as limited explanations. China’s institutional failures in sustaining its earlier technological advances are taken as indicative of why technology alone is an insufficient explanation for capitalist development. Equally, while Calvinism, famously termed the parent of capitalism by Max Weber, ‘impelled a capitalist mentality’ of hard work, diligence, and literacy, it cannot explain the capitalist structures and institutions of non-Calvinist territories such as the Italian city-states (pages 55-56). Nonetheless, adjudging the different contours and outcomes might have been worth pursuing further.
Similarly, the presence of liberal ideas did not necessarily translate into policies or a particular policy agenda. The impact of Enlightenment networks, the ‘Republic of Letters’, and transmission of ‘Useful Knowledge’, even the influence of the great ‘Cultural Entrepreneurs’, Newton and Bacon, is taken as overstated, with too much weight ‘placed on too few extraordinary people’ (page 65). In sum, property rights, the rule of law, and financial institutions were more vital foundational factors, with transmission and circulation of knowledge depending on ‘higher-level evolution of organized authority’ (page 67). Hodgson viably suggests that the covert nature of evidence surrounding institutions, rules, and regulations often leads to historical understatement or neglect of these factors. The persistence of instincts and habits are also intriguingly referenced in the same sense.
Part II contains extended, and at times breathless, historical analysis. Thematically, the focus is on the transformative effects of landownership and warfare. The survival of feudal property laws are considered in terms of the limitations of capital formation and investment, with Entails and Strict Settlements reducing availability of marketable land, while also buttressing Primogeniture, meaning estates couldn’t be sold, divided, or collateralised (page 81). Land was an intergenerational trust rather than a marketable, collateralised asset, and across the centuries, landowners successfully prevented freer trade in land, while extensive enclosures facilitated greater concentration of landownership (pages 96-101). Not for nothing have historians adopted the term ‘Territorial Constitution’.
Socially, these events are correctly identified as misaligned with the Marxian ‘rise of the bourgeoisie’ with ‘capitalist’ landowners dismantling feudalism. Such a tidy pattern of development in social relations and economic policy seems too reductionist. An economic mosaic appears more accurate, with the Aristotelian legacy via Aquinas, natural law ideas of ‘just price’, and residual anti-usury sentiment vying uneasily with foreign trade monopolies and restrictive customary practices, into a period of supposed economic modernity and individual freedom. In fact, as Anthony Howe, Miles Taylor and others have described, many bourgeois were willingly coopted by the aristocracy, to the fury of Radicals like Cobden and Bright. Conversely, aristocratic attitudes towards commerce remained ambiguous. Despite the presence of many landowners in commercial ventures, it could take generations before, as Sir Lewis Namier famously related, ‘the stain of trade’ was eradicated.
In England, no government department was exclusively concerned with land, nor was there a Land Registry. The absence of the latter meant land sales and mortgaging were further inhibited (page 108). Moreover, with no English equivalent to the French Notaires, mortgaging was mostly conducted on an ad hoc basis by attorneys and scriveners acting as financial intermediaries. As transactions were likely widely-dispersed and with many as yet undiscovered in private archives, the importance of mortgaging may be understated. Nonetheless, the book intermittently details the vibrancy of local credit mechanisms and networks, with the Manchester cotton merchant Samuel Greg mortgaging land, and mortgaging also applied to lenders receiving toll revenues generated by investment in canal, river, and turnpike infrastructure. Country banks were also important to development, with Adam Smith arguing that the ‘most judicious operations of banking can increase the industry of the country’, but even by 1776 this remained as much an aspiration as a reality.
The orthodox view of early industrial finance was that it was largely self-generated (pages 158-159). Family firms and partnerships were based on trust and honesty in periods where limited liability was not yet legislated, and joint-stock status was reserved for highly-capitalised ventures, like Chartered Companies. Though start-up costs varied, capital formation was not always easy, and even Boulton and Watt had difficulties securing reliable sources of capital (pages 175-180). Nonetheless, England found a way.
Warfare in the form of the ‘Military Revolution’, consisting of more powerful firearms, stronger fortifications, and larger standing armies, features as a vital catalyst for State-based institutional development. The author adopts a traditional interpretation of the emergent Fiscal-Military State, with war the forcing-house for the creation of financial institutions, as previously noted by John Brewer, Werner Sombart, and Francis Fukuyama (page 155). Though not purely an English phenomenon, England was the primus inter pares whose State-building and institutional development advanced after the 1688 Glorious Revolution, aided by the sophisticated apparatus of ‘Dutch finance’ which ultimately created a pathway to industrial growth (pages 164-165). Despite indications that the process began earlier, under the Protectorate, the paradigm shift whereby England, as a Dutch ally, engaged in European and colonial conflict throughout the ‘long’ eighteenth century is fairly established. The contrast with Japan, South Korea, and Taiwan demonstrates similarities and differences in path dependency, but the notion that there exists a template for understanding economic development remains elusive.
Ultimately, Hodgson presents an interpretation of the imperatives of war finance overcoming the structural limitations of using collateralisable assets, especially land, for capital investment. Yet, despite any perceived shortcomings, perhaps Entails, Strict Settlements, and Primogeniture actually promoted the essential systemic stability for economic growth. The ‘Territorial Constitution’ was the institutional articulation of the permanence of land, and the political authority of the landed classes, and capitalism could only evolve and thrive if widespread confidence existed in the legitimacy of financial and political authorities and institutions. Additionally, the role of the State as a more interventionist economic actor is perhaps understated. The expansive protectionism of earlier centuries, including Navigation Acts and sector-specific tariff schedules, were influential in industrial growth, with the cotton industry a notable beneficiary of a deliberate ‘infant industry’ tariff strategy. Equally, the institutional maturity of England can be questioned. A considerable raft of commercial legislation, providing codification and legitimacy, had to wait until the nineteenth century, with repeal of the Bubble Act (1825), Bank Act (1844), Joint Stock Act and Limited Liability Acts of the 1850s and 1860s creating a more identifiable and self-conscious commercial society.
Hodgson has produced an interesting and thoughtful book which, perhaps inevitably in such a wide-ranging and ambitious work, underplays some features. Occasionally, the prose is a little staccato, but mostly it is measured and even, and the pace neither leisurely nor hurried. The book is recommended as a valuable addition to the fields of legal institutionalism, economic history, and development studies.
There is a sense that histories which ‘discover’ new features or relate understated factors often meet a receptive audience, as they can appear to validate historical study, and by extension, the historical profession. Hodgson’s book fits that category but more granular research needs to be conducted before the institutionalist theory can be more fully validated and readily accepted.
Christopher J. Coyne (George Mason University) and Abigail R. Hall (University of Tampa) have published an elegant book introducing readers to Austrian economics.
I propose a brief – though far from comprehensive – list of Weberian ideal types who would benefit from reading it. Anyone who:
(Note: Any resemblance to actual people is completely intentional).
How Austrian economics found itself in need of expositors to dispel such notions is a story for another time. But after this book, no one has an excuse for clinging to these caricatures. In Austrian Economics: An Introduction, readers will learn quickly that Austrian economics studies how people cooperate to improve their lives. They will also learn what stymies such cooperation and how government efforts to override peaceful choices often produce unintended consequences.
Chapter one describes the main themes of Austrian economics and how those emphases distinguish the tradition from prevailing frameworks today. It does so by weaving these ideas through the biographies of key Austrian figures, beginning with founder Carl Menger and extending through Böhm-Bawerk, Wieser, Mises, Hayek, Lachmann, Rothbard, and Kirzner. The authors place Austrian economics within the broader marginalist tradition. At the same time, strong commitments to methodological individualism, subjectivism, time, institutions, and resource heterogeneity differentiate Austrian economists from their neoclassical cousins.
The payoff of these Austrian hallmarks is a distinctive approach to prices, capital, money, business cycles, and social order more broadly. Austrian theory is more concerned with realism than most standard neoclassical models, but realism is not valuable for its own sake. Coyne and Hall show that Austrian theorizing aims at something deeper: insight into social processes, the kind that enables ‘pattern predictions’ – directional claims about the tendencies of an economic system (chapter two).
Chapter eight puts this pattern prediction capacity on the fullest display. Here, Coyne and Hall walk through the Austrian business cycle theory (ABCT), the Mises-Hayek account of why modern economies exhibit economic booms followed by busts. In the ABCT, the Austrian tradition’s signature insights converge. By integrating the Austrian analysis of prices (chapter four), entrepreneurship (chapter five), interventionism (chapter six), money (chapter seven), and capital theory (chapters one and eight) into a single framework, the ABCT illuminates social phenomena other approaches struggle to explain. Why, for example, do economic booms see entrepreneurs pouring resources into ‘higher-order goods’ (say, mining) even as final buyers go on a consumption spree? ABCT explains.
Much of the core Austrian material will be familiar to readers already steeped in classic Austrian works. But seasoned lay readers of Austrian economics, and even professional Austrian economists, will benefit from two chapters that set Coyne and Hall’s book apart from the competition. Chapter three – ‘Catallaxy: The Study of Coordination and Exchange’ – situates Austrian economics within a broader intellectual tradition Coyne and Hall call ‘the exchange paradigm.’ The term, borrowed from Dartmouth economist Meir Kohn, refers to a broad umbrella that includes several fellow-traveler traditions in public choice, law and economics, and the new institutional economics. Unlike the Hicks-Samuelson ‘allocation paradigm,’ the ‘exchange paradigm’ emphasizes price formation (rather than optimization against exogenously given prices), imperfect information, constant change, open-ended choice, and the specific knowledge of time and place. Because such knowledge is tacit and thus inarticulable, it resists the dominant ‘measure-and-model’ approach.
As with chapter three, seasoned scholars will find much to learn from chapter nine: ‘Austrian Economics: Yesterday, Today, and Tomorrow.’ In it, Coyne and Hall survey contemporary Austrian research – much of it from the last decade – spanning a host of domains: political economy, macroeconomics and monetary theory, entrepreneurship, development, behavioral economics, self-governance, culture and civil society, and the economics of disasters, diseases, and war. This chapter highlights the profoundly empirical nature of modern Austrian scholarship. Austrian economists want to understand how the world works and why things are the way they are.
The book repeatedly revisits economic calculation and the coordinating role of market prices. This repetition is a feature rather than a bug. Consider interventionism. The Austrians note that intervention alters prices, the distorted prices change behavior, and the new behavior often undermines the very goals the intervener pursued. Coyne and Hall rightly highlight how the rest of Austrian economics builds on the central contribution of economic calculation.
Given their mastery of the literature, I’d hoped Coyne and Hall would include chapters on other areas of economics where Austrians have been pioneers. The book might have explored Austrians’ substantial contributions to law and economics beginning with Menger’s discussion of property rights and followed by Hayek’s distinction between ‘law’ and ‘legislation.’ It could have also fruitfully featured an industrial organization chapter to highlight how Austrian market process insights (chapter four) provide a distinct lens on public policies such as antitrust. Though these chapters do not appear, I hope that means Coyne and Hall have a sequel in the works.
The quality of the book’s prose is a credit to the important ideas it contains. If Austrian economics has been on the cutting edge of many important intellectual contests – the 19th century Methodenstreit (the ‘battle of methods’), the 19th century Marginal Revolution, the 20th century socialist calculation debate, the 20th century contests over business fluctuations, and contemporary debates about everything from foreign aid to reinvigorated industrial planning – it deserves an accessible treatment that simplifies these Big Ideas without being simplistic. Chris Coyne and Abby Hall have delivered. Faculty now have a great option for courses on Austrian economics, public policy, political economy, economic history, and the history of economic thought.
One final note. Coyne and Hall’s endnotes and bibliography are worth the price of admission. Anyone hungry to learn more – and many will be after this appetizer – will find an intellectual feast awaiting them in the References. When it comes to the human sciences, there is enough here to occupy one’s mind for a lifetime. With so much to read and too little time, it’s good we have prices to guide us. At least when it comes to this new book, I think readers will conclude the marginal benefit exceeds the marginal cost.
‘Austrian Economics: An Introduction’ by Christopher J. Coyne and Abigail R. Hall was published in 2026 by Polity (978-1-509-54706-7). 222pp.
This fascinating book is well worth a read by anyone interested in economic history or contemporary policy debates. In it, Gramm (a former senator well-known as the moving force behind a number of important policies) and Boudreaux (an economist) take us through seven of what they call ‘myths’ about capitalism. These are five historical myths: that the industrial revolution impoverished workers; that in the decades after the American industrial revolution there was a strong tendency towards monopoly, only eventually limited and disciplined by regulation; that the Great Depression was a failure of Capitalism; that trade hollowed out American manufacturing; that deregulation caused the Global Financial Crisis; plus two myths about modern American inequality and poverty.
For each myth, the authors start off by setting out the case for the myth, drawing on certain key supporting statistics, academic commentary in favour and broader literature (frequently finding highly evocative quotes painting grim pictures embodying or expressing the myth). The authors state that their intention is to give each myth as fair and complete an airing as they can. And in most cases they have a decent shot at this, allowing the reader to understand what the myth is, why people believe it, and why it seems emotionally as well as intellectually attractive. I wasn’t wholly convinced they had summarised all the most important reasons to support the idea of the early industrial period’s tendency towards monopoly or the Great Depression’s natural resulting from Capitalism. But that is largely a matter of taste, for in all cases (including these) their painting of the case was vivid and should be seen as fair if not always complete.
With the myth and its basis painted, they move on to consider the facts in more detail, explaining why the idea in question is a myth. To a high degree, their case would have been made simply by the splendid additional facts they set out. But they go on to explain in detail why the facts that appear to the support the myth are as they are and to explain (frequently very interestingly and compellingly) the political context or motivations for the literature and commentary references that support the myth as well. At the end of each section, the myths lie in intellectual tatters, so savaged by Gramm and Boudreaux’s polite but forceful prose that one almost feels sorry for the battered victim.
Our courteous pitbulls begin with the industrial revolution and the notion that workers initially lost out because of it. Here perhaps the most decisive arguments offered were simply that purveyors of the myth had totally failed to understand the lot of the rural poor prior to industrialization, imagining that they lived a pleasant and comfortable life of high leisure in bounteous rural idylls. By contrast, Gramm and Boudreaux tell us a much more convincing tale of disease and accidents, early mortality, poor infrastructure, few if any available and accessible services, hunger or bland and monotonous diet, and living together in multi-family long-houses where a dozen slept together on a lice-ridden straw mattress and sexual relations were watched by skin-sores-ridden bedmates and rodents alike. In one fascinating section, the authors take us through nineteenth century interviews and autobiographical statements of the urban poor mocking and dismissing the ignorance and naivete of rich people expressing outrage at the lot of low-income urban living, whose only knowledge of the countryside came from their own or their rich friends’ stately homes.
Another interesting section in this opening myth concerned the motivation and timing of some of the key literature and commentary on bad conditions in factories. In the run-up to the abolition of the Corn Laws in 1846, opponents of free trade sought to paint manufacturers, who wanted tariffs taken off imported raw materials, as wicked bosses who harmed their workers by contrast with the pleasant lot workers had in the agricultural communities that food tariffs supposedly protected.
The chapter on the early industrial tendency towards monopoly told us of Standard Oil, as one would expect, but its longest section was about the Chicago meat-packers. Some of the most interesting material here was about how the key objections to alleged monopoly in this era were not, as one might suppose, that it resulted in prices that were too high – the authors offer extensive statistical evidence against that idea – but it appears that was not even claimed as a key concern at the time. Rather, opponents of monopoly worried that the power of large ‘trusts’ enabled them to secure prices that were too low, from their own suppliers (particularly of transport services) – and then pass these on to consumers.
This is also where we first encounter a recurring bipartisan theme – perhaps not unrelated to the fact that Gramm himself was first elected as a Democrat and then switched to the Republican Party. Time after time, through the economic history they set out, we see Republicans first to pursue foolish anti-market policies and rhetoric, followed by Democrats who push the anti-market agenda even further, before other Democrats finally see the light and set things in motion back along a pro-market line, in due course followed by the Republicans. As regards anti-trust rules, we are told that it is under President Carter that the key reversals of ‘Progressive era’ regulation start to be reversed, and Reagan carries forward Carter’s agenda. This pattern is repeated in other sections: Hoover starts the epic spending rises and deficits of the 1930s, and Hoover forbids firms from reducing wages despite 25 percent unemployment. Roosevelt carries that agenda forwards. Clinton enacts key (beneficial) financial deregulation measures and the most successful anti-poverty programmes (based on encouraging work). Trump impedes free trade and harms the WTO’s enforcement system, with Biden carrying forward Trump’s agenda. The authors clearly want readers to get the message that being pro-market is not a naturally Republican position and being anti-market not naturally Democrat.
Much of the material relating to the Great Depression will be familiar to students of the topic – the role of Britain’s rejoining of the Gold Standard leading to excessive US monetary growth in the 1920s and the failures of the Federal Reserve to prevent contraction of the money supply from the late 1920s onwards have been well-known since at least the work of Milton Friedman. Perhaps more novel is Gramm and Boudreaux’s analysis of the 1937-38 recession, along with their discussion of Roosevelt’s quasi-fascist anti-business rhetoric and how that was seen by investors aware of the international political context at the time. They present some interesting indicative statistics on how much more short-termist investment became as financiers worried that they might need to liquidate investments rapidly if the political situation turned further against them.
The section on trade and manufacturing is robust and persuasive, covering most of the bases one could want, explaining how US manufacturing dominated in the post-war period because much of the rest of the industrialised world lay in the ruins of war, but that that could not last indefinitely as other countries recovered. The authors cover the interesting question of whether software programming (which today constitutes up to half the value added of significant manufactured products such as cars) should be classified as ‘manufacturing’ in employment statistics. There was also a good discussion of the relationship between capital account inflows, as investors put money into America and then later invested into the rest of the world, and their natural counterpart in current account outflows (via trade deficits). The one thing I though could have been covered better here was the deeply erroneous arguments of Trump that the presence of a US trade deficit with a country shows that that countries must have been placing non-tariff barriers in the way of US exports.
The two final sections, on inequality and poverty, included material familiar to readers of Gramm’s 2022 book (along with Ekelund and Early) on The Myth of American Inequality (which I have reviewed here previously). These sections once again appeal extensively to the very strange situation created by US statistical authorities not deeming two thirds of the transfer payments made to lower-income American households as income (because they take non-cash forms such as food stamps) and how, once one corrects for this anomaly, the US actually has one of the highest proportions of GDP in the world transferred between income groups, very low poverty and very typical inequality by developed economy standards.
The one ‘myth’ topic about which I might claim to know more than the authors was the Global Financial Crisis. Here I found their discussion interesting and familiar, but incomplete in important ways that, though it did not threaten their key conclusion that the crisis was not a result of deregulation, it did mean their own alternative narrative was much less supported than they claimed. I found their discussion of financial diversification instruments (such as CDOs) a little too shallow, not really exploring whether these diversified away or added to systematic risk. I didn’t think they considered enough the role of an innovation boom-bust cycle in financial markets as a contributor to either the Great Depression or Global Financial Crisis. I also regretted their failure to discuss the way government bailouts of major banks since the mid-1980s had created implicit expectations of future bailouts, and how that encouraged banks to expand their balance sheets in multiple developed countries. I don’t dispute their criticisms of Clinton-era housing policies or of the failings of Fannie Mae and Freddy Mac. But I found their suggestion that flawed US housing policies by themselves caused a financial and sovereign debt crisis spanning the globe to be incomplete at best.
This is a small cavil regarding a book I enjoyed reading, found highly informative and whose overall message I both strongly endorse and believe this to be a robust ally in promoting. I liked it, and if this is your thing then you’ll like it too.
There are few figures who more directly challenge modern assumptions about the moral ambiguity of commerce than St. Omobono of Cremona. A merchant, husband, and citizen of a rising medieval city, he was also the first layman formally canonised by the Church. Paul Voss and Donald Prudlo’s Merchant Saint brings this largely forgotten figure back into view, and in doing so offers a striking meditation on whether economic life can itself be a genuine sphere of Christian virtue.
At first glance, the very idea of a ‘merchant saint’ appears paradoxical. The Christian tradition – especially in its early centuries – was often deeply suspicious of wealth, trade, and accumulation. The authors begin by carefully reconstructing this tension. Scriptural warnings against riches, patristic critiques of avarice, and the moral dangers of commerce form a powerful background against which Omobono’s life must be understood (pages 15–32). Wealth was not neutral; it was spiritually perilous. Yet, as the authors show, the tradition also developed a more nuanced account: riches could be redeemed through right use, particularly through almsgiving, which was increasingly understood in almost transactional terms – as a way of ‘storing treasure in heaven’ (pages 33–40).
It is precisely at this point of tension that Omobono emerges. Far from renouncing economic life, he inhabits it fully. A cloth merchant and artisan in the bustling commune of Cremona, he is neither monk nor ascetic outsider, but a man embedded in contracts, trade, and civic responsibility (pages 63–70). His sanctity does not consist in withdrawal from the market, but in a transformation of intention and practice within it. Prudlo and Voss are careful to stress that Omobono’s conversion did not abolish his economic activity; rather, it reoriented it. Property became the means of charity, profit the occasion for generosity, and work itself a field of moral discipline.
This is where the book makes its most significant contribution for contemporary readers. Omobono’s life suggests that commerce need not be morally neutral at best or corrupting at worst. Instead, it can become a site of virtue – provided it is governed by justice, honesty, and a recognition of the common good. The authors’ analysis of the early hagiographical sources is especially illuminating here. The evolution of Omobono’s vitae shows a gradual but decisive shift: from a model of piety centred on prayer and almsgiving to one that explicitly affirms the integrity of lay, economic life (pp. 120–135). The merchant is no longer merely tolerated; he is held up as exemplary.
The broader historical context reinforces this point. The twelfth and thirteenth centuries witnessed the rapid expansion of urban life, trade networks, and commercial practices. The Church could not simply condemn these developments without alienating the very fabric of emerging European society. Prudlo and Voss argue convincingly that figures like Omobono represent a kind of ‘medieval synthesis’ in which economic activity is neither sacralised nor rejected, but integrated into a wider moral and theological vision (pages 180–195). The market, as they memorably put it, begins to find its place on the ‘Christian map’ (pages 192).
For an audience concerned with the ethical foundations of markets, this is a crucial insight. Omobono does not anticipate modern capitalism, nor does he provide a blueprint for economic systems. But he does offer something arguably more fundamental: an account of the moral agent within economic life. The emphasis falls not on structures alone, but on character – on the virtues that shape how individuals engage in exchange, accumulation, and distribution.
The later chapters of the book extend this reflection by examining literary and cultural representations of merchants. Here the authors show that suspicion of commerce never fully disappears; the merchant often remains a morally ambiguous figure, associated with calculation, worldliness, and spiritual risk (pages 220–230). Against this backdrop, Omobono stands out all the more sharply. He embodies a counter-image: not the calculating trader, but the just and generous one; not the manipulator of value, but its steward.
If the book has a limitation, it lies in the fact that it stops just short of its own most important question. The authors offer a rich historical reconstruction and a compelling theological intuition – that economic life can be integrated into sanctity – but remains largely descriptive where a more explicitly normative account would be most fruitful. They show convincingly that such a reconciliation took place; they are less explicit about how it ought to guide economic life today. The internal norms of commerce – what distinguishes just profit from unjust gain, where the limits of accumulation lie, or how practices such as pricing, risk, and exchange are to be morally evaluated – are present only in outline. The reader is thus given a powerful figure, but not a fully articulated theory. One might say that Voss and Prudlo recover the merchant saint without quite developing a theology of the market adequate to his example. For a readership concerned with the moral foundations of economic life, this feels like a missed opportunity, especially since the material for such a development is clearly at hand.
Nevertheless, this is a minor reservation. The Merchant Saint succeeds admirably in recovering a figure who deserves far greater attention. More importantly, it reframes a question that remains urgent: whether economic life is merely a technical domain governed by efficiency and utility, or whether it can be ordered toward higher goods.
Omobono’s answer is quietly radical. Commerce, he suggests, need not be opposed to sanctity. Properly understood, it may even become one of its forms.
‘Merchant Saint: The Church, the Market, and the First Lay Canonization’ by Paul Voss and Donald Prudlo was published in 2025 by St. Augustine’s Press (ISBN 978-1-587-31513-8). 315 pp.
In one of the many mansions of today’s obsession with ‘neoliberalism’ resides a long-running debate about the nature and role of the corporation. Those arrayed on one side of the debate argue that stockholders do not own the corporation – all they own are their own shares – and that corporations should (perhaps consequently) be managed in the interests of a wide variety of ‘stakeholders’. At the other table sit those who believe that, as possessors of the residual rights of control, shareholders are indeed the owners of the corporation and that corporations ought (perhaps consequently) to be managed so as to create the most value for the shareholders. In Company Men, Sean Thomas Delehanty promises to illuminate this debate through an intellectual history of the shareholder-value idea. Unhappily, he is more successful at throwing shade than at throwing light.
On the plus side, the book is well written, and it covers a lot of the right ground. Emerging from Delehanty’s dissertation at Johns Hopkins, it is an attempt to craft the kind of intellectual history of free-market thinking that his advisor Angus Burgin achieved in his important study of the Mont Pèlerin Society. But unlike his mentor, Delehanty is unable to sublimate his own strongly felt ideological position. The result is not only ideological bias – which is common enough, and fair enough with a good argument – but also, in this case, an overall shallowness.
The shareholder-value debate has deep roots, but Delehanty focuses on the modern-day fons et origo of the idea that corporations should be run in the interests of shareholders, a wildly influential 1976 paper by Michael Jensen and William Meckling. Delehanty rightly sees this paper as an attempt, by two free-market-oriented, Chicago-trained economists, to develop the ideas in a famous article by Milton Friedman: that the only ‘social responsibility’ of business is for employees to pursue the goals of the firm’s owners within the constraints of legal and ethical norms. (That would usually, but not always, mean making as much money as possible.) Jensen and Meckling recognized that this implied what economists were coming to call a principal-agent problem. Employees would very likely arrive at work with their own goals, which they could typically pursue at the expense of the goals of the owners.
Jensen and Meckling made this agency problem the centerpiece of their theory of the firm – an attempt, as they saw it, to open up the black box of the firm as portrayed in conventional price theory. On the one hand, the separation of ownership from control in the modern public corporation had untethered the provision of capital from personal supervision, thus unleashing the massive real capital flows that underpinned economic growth. But on the other hand, the agency relationship had its own costs, in response to which firms had generated organizational responses that economists could study. The 1976 paper would become a landmark – though by no means the last word – in the economics of organization, a subfield that was beginning to gain traction in the 1970s.
Delehanty chooses to read the Jensen and Meckling paper, and indeed all of their (mostly Jensen’s) work, as nothing more than ideological weaponry, ‘part of their broader political project of protecting capitalism from democracy. A commitment to shareholder value maximization insulated businesses from the kinds of democratic pressures Jensen and Meckling warned about in their political work, which in turn had a profound effect on the nation’s political economy’ (page 61). As a result, Delehanty never engages with Jensen’s intellectual contributions in any substantive way.
Did the ideas of Jensen and Meckling have ‘a profound effect on the nation’s political economy’? The economic historian Deirdre McCloskey has warned against conflating what she calls think-history with do-history. Good intellectual history must surely engage with the events of the world in order to understand the evolution of thought. Similarly – but with far more difficulty – good economic history must confront ideas as it chronicles events and unearths the economic forces that operate behind events. But it is all too easy to depict a think-history as if it were causative of do-history. Although he occasionally backs off and portrays Jensen’s work as merely ‘justifying’ the movement for shareholder value, Delehanty sometimes seems, especially in an impassioned conclusion, to want us to believe that Jensen’s ideas are largely at fault for the increasing ‘financialization’ of the economy in the late 20th century, which is in turn largely at fault for a litany of what the author believes to be society’s ills.
The U.S. economy was already on the road to financialization early in the twentieth century. But, as I have argued, wars, depression, and the New Deal effectively de-marketized the economy for much of the middle of the century, giving comparative advantage to the large corporations as a locus of economic institutions and to their managers as arbiters of capital allocation. Managerialism continued after World War II, which had bolstered the capabilities of American corporations while destroying their foreign competitors. This was a stable era that saw the slow consolidation of the innovations of the second industrial revolution. Many now look back on the post-war period with nostalgia, even though most segments of American society are far better off today in material terms – and even though critics once complained about the depredations of managerialism in the same loud tones they now use to complain about financialization.
By the 1960s, large American firms were earning economic rents, which appeared to managers in the form of what Jensen famously called free cash flow. Rather than returning those rents to stockholders in the form of dividends, managers acquired firms in wholly unrelated lines of business, creating the conglomerate. (Significantly, conglomerates are in a sense a manifestation of both managerialism and financialization: managerialism because the managers not the market were making decisions about capital allocation; financialization because managers acquired assets in financial transactions rather than developing them internally.) This turned out to be as inefficient in practice as it is in theory, and entrepreneurs arose to unbundle the conglomerate by buying up stock and attempting to unseat the incumbent management, often forcing the selloff of the unrelated divisions. Thus was born the era of the takeover, both hostile and otherwise, which picked up pace over the next decades with the emergence of strong foreign competition and a dramatically changing macroeconomic environment. The assault on the conglomerate both initiated and benefited from the rapid development of external financial markets, which had been a sleepy, clubby sector in the middle of the century.
Delehanty tells much of this story, often in the same terms I have used. But in his account the events of economic history fly by like Burma Shave signs, leaving little real effect. All that seems to matter are the ideas of Jensen, who did indeed provide an intellectual framework for understanding how the market for corporate control created value in the economy. It shouldn’t be surprising that financialization created value, even despite the dramatic (and by no means waste-free) forms it took at the height of hostile takeovers. Handing the task of capital allocation off to a specialized industrial sector brings to bear many more perspectives and much more knowledge than is available to managers for internal decisions, and this is true even if one believes in only the weakest forms of the efficient-markets hypothesis.
What about the terrible effects of financialization? Jensen and others marshaled empirical evidence that takeovers did not reduce overall employment, investment, or R&D but had significantly increased productivity. Delehanty sees these as merely ideological efforts to ‘fully leverage the argumentative power he could gain from claiming the mantle of “scientific” research’ (scare quotes original). Like Nicholas Lemann, whose marvelous if often problematic Transaction Man covers much of the same ground as this book, Delehanty lays the blame for late-century deindustrialization and job loss on financialization while actually using as examples industries – like steel and automobiles – populated by the most managerial and least financialized firms in the economy.
So how important to the events of economic history were the ideas of Jensen and fellow proponents of the shareholder-value theory of the firm? It is certainly true that these ideas were influential. Raiders like T. Boone Pickens could be heard talking about the problem of free cash flow. But would events have moved along much the same path if these ideas had never been uttered? Company Men doesn’t take us much closer to an answer.
Richard N. Langlois is Professor of Economics and Head of the Department of Economics at the University of Connecticut. He is the author of The Corporation and the Twentieth Century: The History of American Business Enterprise (Princeton University Press 2023).
In this historical study with a contemporary perspective, Tehila Sasson details the efforts of the charitable and nonprofit sectors to promote economic development in the ‘Third World’ after 1945. Despite pejorative connotations, ‘Third World’ is appropriate terminology given the historical context. The book is based on copious research, evident from a 30-page bibliography, with six chapters ambitiously traversing a range of issues from international development, corporate social responsibility, fair trade, environmentalism, and neoliberalism. In recounting a typology of global activism linking environmental, economic, and social issues, thematically the book oscillates between development theory, organisational history, and microeconomic business models.
Sasson considers post-imperial Britain from the perspective of the nonprofit sector rather than elitist high politics or the industrial struggles of trade unions. She aims to demonstrate the ethical dimensions of Britain’s post-imperial role after 1945, a role predicated on the assumption that global underdevelopment and inequality owed something to imperial authority, with resource control and allocation serving the metropolitan core rather than the colonial periphery.
Sasson demonstrates how a moralistic view of capitalism drew on cross-currents in British socialism such as Christian Socialism, the anti-modernity of William Morris, and craft-based Guild Socialism. It was not mere antiquarianism, though revival of interest in these ideas after 1945 was undoubtedly eclipsed by the big battalions of trade unionism, State socialism, and Keynesian demand management.
The development theorist E. F. Schumacher is a prominent figure throughout. Through his experiences in Burma and India, Schumacher was converted to Gandhian ‘Village Economics’, encompassing promotion of cottage industries, indigenous manufacturing, and small-scale farming. Rejecting an expansive Statist, Keynesian path to economic growth, Schumacher, in his most famous work Small is Beautiful (1973), envisaged an incremental, environmental development strategy using intermediate technologies and close control of resources (pages 37-38).
The popularity of these ideas within the British Left was not readily apparent, with a reimagined capitalism based on humanised production and responsible consumption slow to emerge. While a general dissatisfaction with industrial capitalism was evident, the idea that ‘small is beautiful’ was influential is problematic. It is easy to mistake the shadow for the substance, for despite an ideological vibrancy spanning a spectrum from Gandhi to the Angry Brigade, such ideas were variable in their impact and influence. The Left, broadly defined, remained predominantly Statist in its economic thought and direction at least up until the 1970s, though the ‘New Left’ in the following decades absorbed some of these ideas.
Ethical socialism was also largely extra-parliamentary, sourced from intellectuals like R. H. Tawney and Richard Titmuss. Tony Crosland was one of the few leading politicians to advance the idea that foreign aid was vital to the internationalist conscience of the Wilson/Callaghan Labour Government of 1974-79. However, by the mid-1970s he faced a formidable alliance of a gatekeeping Treasury and a Chancellor and Prime Minister fully prepared to jettison Keynesian orthodoxy and high government spending. Domestically, business-minded ideas of industrial democracy, going beyond nationalisation to co-ownership and corporatism, were largely unsuccessful. The charitable sector enjoyed more success in lobbying for and achieving tax exemptions, and resisting the imposition of VAT arising from EEC membership in 1973.
While changing notions of foreign aid by respective governments would have been a fruitful line of inquiry, the focus of the book leans more towards charting the growth of consumer activism, through organisations such as War on Want and Oxfam. The counter-culture of the 1960s, notably incorporating women and the family, distinct from masculine trade unionism, created notions of the ‘Citizen-Consumer’. It was a concept that gained traction with the development of charity shops, where a closer connectivity between donors and recipients represented a departure from the rather disheveled and informal antecedents of jumble sales and church bazaars.
At least initially, there was something of a middle-class character to shop locations, volunteers, and clientele. Campaigns to raise awareness were complimented by a new vocabulary of ‘Consumer Sovereignty’ and ‘Global Citizenship’, with emotional appeal heightened by sophisticated marketing, branding, and advertising tools. Oxfam ‘Slimming Clubs’ offered a lifestyle focus, of dieting and fundraising, though global food scarcity and famine make this appear, in hindsight, an awkward, even crass, juxtaposition. The first Oxfam (Oxford Committee for Famine Relief) shop aimed at tackling domestic poverty, and incentivising Third World production and development. This was a business model which required work. Sasson recounts how Oxfam couldn’t locate native-made handicrafts, and ‘resorted to buying foreign goods from wholesalers’ in Britain, which were then designated as handicraft goods (page 78). These morally questionable actions appear to violate consumer transparency and trading standards, but more seriously, this strategy was vulnerable to the criticism of entrenching inequality and stifling development.
Sasson concedes that the business model of the charitable sector became more calibrated towards satisfying British consumers (page 84). The lines between means and ends, between business operations and ethical objectives, became somewhat blurred. Criticism of Oxfam’s Bridge Programme, connecting Third World producers with British consumers, anticipated later critiques of multinationals with accusations of low wages, piece-rates, child labour, and poor working conditions (page 107). With an emphasis on product quality and competitive pricing, the Bridge Programme was touted as an entrepreneurial training-ground but success in less-developed ‘informal’ economies often proved elusive (pages 104-105).
Indeed, the extent to which development could be achieved by a ‘bootstrap’ approach is debatable. Handicraft manufacturing and micro-financial projects were often difficult to scale, resulting in entrenched underdevelopment and solidified relative poverty and lower living standards. Development strategies that shunned national macroeconomic planning always ran the risk of an outcome whereby infant industries would remain infants!
Some might argue for a flaw in the development model, with sustained growth not merely a matter of possessing capital, knowledge, and resources, but also dependent on a myriad of financial, political, and cultural factors. It all seems a long way from Walt Rostow’s claims for an inexorable modernisation model in The Stages of Economic Growth: A Non-Communist Manifesto (1960). In a politically-charged Cold War text, Rostow had argued for the transformative power of Western capitalism, whereby aspirational countries could capture the magic formula of modernity by emulating Western economic development, innovation, and entrepreneurship. As traditional societies were not so easily transformed, by Keynesian or more incremental means, such a view was overly optimistic and simplistic. In any case, many Third World governments and charitable organisations were hostile to the imposition of Western patterns of development or economic thought, often viewing it in neocolonial terms. Hence, by the 1970s, development was conflated with the less ideologically-charged term ‘modernisation’ rather than Westernisation.
In that sense, it is unfortunate that Sasson doesn’t tackle the issue of the governance of less-developed countries. We don’t have to take the position of Peter Bauer (that foreign aid is money taken from poor people in wealthy countries and given to wealthy people in poor countries) to acknowledge the diversity of political and financial arrangements in less-developed countries. Examining political culture and financial incentives and initiatives would have provided an evidential acknowledgment of the ethical complexity of trade, aid, and development issues. Equally, while recounting widespread failures, the author might have considered post-1945 economic successes using market-based solutions.
Regrettably, there are a number of avoidable errors within the text. Some are typos: ‘Tori’ for ‘Tory’ (page 49), while Chris Patten, Minister for Overseas Development, 1986-1989 is misidentified as ‘Chris Patterson, Minister for Overseas Aid’ (page 187). Similarly, Ken Livingstone was not an MP and Mayor of London simultaneously, as implied by the text ‘London Labour MP mayor Ken Livingstone’ (page 174). The 1984 Band Aid record was not the ‘very first charity song’. George Harrison’s ‘Bangla Desh’ in 1971 claims that honour (page 141). More substantively, it is questionable whether Britain in the 1970s can accurately be described as ‘deindustrialized’ (page 80), or whether the Conservative Party can be described as ‘neoliberal’ given the struggles Margaret Thatcher faced throughout her leadership with the noblesse oblige section of the Party (page 187).
While unfortunate, these errors don’t undermine the positive attributes of the book. While at times the arguments are somewhat diffuse, Sasson presents a thought-provoking account of ideas coopted or diverted from their original high-minded, idealistic objectives. Her assertion that nonprofit activity has often provided a respectable imprimatur for continuing global inequality, poverty, and hunger is the leitmotif of the book. Hence, we’ve come full circle, with the continuing relevance of the term ‘Third World’ testimony to the relative absence of transformative change.
‘The Solidarity Economy: Nonprofits and the Making of Neoliberalism after Empire’ by Tehila Sasson was published in 2024 by Princeton University Press (ISBN: 978-0-691-25038-0). 289pp.
Gordon Bannerman is a professor teaching Business History at Wilfrid Laurier University, Canada. His primary research interests focus on modern British political and economic history.
If markets are to function effectively, prices need to be agreed and respected. However, confidence in the ability of free markets to allocate resources efficiently through the price mechanism is in decline. Minimum wages are accepted despite evidence that they price the unskilled out of work. The manifesto of the newly elected mayor of New York, Zohran Mamdani, includes a $30 minimum wage, rent freezes and city-run grocery shops.
For those from a Common Law background, price is generally, in the absence of fraud, as agreed between buyer and seller. However, not only is there a long tradition of thinking about whether a price is ‘just’, and if not, how to remedy it, those principles survive in contemporary legal systems.
The idea of a just price, while owing something to Aristotle and Roman law, was developed by Scholastic theologians who believed that commutative justice required that the items being exchanged should be of equal value. For Thomas Aquinas, justice required that in an exchange one should be concerned to ensure that the counterparty receives what is due to them. While for Hayek this was a ‘futile medieval search’, the concept allowed, by the application of the Roman law principle of laesio enormis, land transactions at less than half their ‘true’ value to be void so that the seller recovered their property. In common law systems that concept has been dismissed as contrary to the principle of the autonomy of the contracting parties, while elements of this thinking survive, for example in Germany and France.
While Just Price Theory and Just Price in the Markets cover similar ground, with the latter, by Charles R. Geisst, focussed on the history of the idea and Joaquin Reyes using it in the former as the basis for a reassessment, they make a stark contrast. Though Reyes is markedly less accessible, he seeks to explain the ideas behind a ‘just price’ and argues that it deserves renewed attention. By contrast, Geisst writes at greater length, but to less effect. His previous work on usury may not be unconnected to significant material on that subject being included here which is only, at best, tangentially relevant. He includes material on well understood subjects from monetary theory in the seventeenth century, to the development and problems of mercantilism and public markets in the eighteenth and the gold standard and anti-trust legislation in the twentieth, although the connection to the concept of a just price is far from clear. Much of his material is not only largely irrelevant but underlines the lack of originality. Neither Hayek nor Collingwood feature in the bibliography or index. Errors – including on the nature of feudalism – add to the impression of existing material being recycled without anything new to say.
Reyes sets out the various ways that the idea of a just price have been regarded as misleading. In the view of free market critics, it is impossible in a free market to sell an item for more than its worth, as its value is that which someone is willing to pay for it. The idea of a just price undermines the ability of an individual to make a contract. The sovereignty of the individual requires that he is able to exercise autonomy in agreeing a price. It may transpire to have been a mistake to agree that price, but the individual had the freedom to make that decision. For others, the concept of a just price fails to recognise the efficiency with which market prices provide signals to buyers and sellers which ensure demand is met efficiently.
While recognising these counterarguments, Reyes suggests that the concept deserves to be reconsidered on the understanding that the price agreed reflects an imbalance of power between buyer and seller. He explores the tension between the autonomy of the individual and the risk of injustice. His purpose is to demonstrate that market economics are unjust by favouring the rich. While confused by a style which prefers complexity over clarity, at its heart his view is that ‘prices are the product of choice and power’, tending to reinforce inequalities of power. There are arguments to be made for more equal distribution of resources, but Reyes’ attempt to argue that disparities of wealth mean that market pricing is unfair is undermined by a lack of credible analysis. His examples tend to the extreme; the person obliged to sell their organs or markets characterised by extortion.
He quotes R.G. Collingwood who described a just price as a ‘contradiction in terms’. Collingwood also noted that it is reasonable to demand a higher wage if it is lower than it should be due to circumstances which ‘ought not to exist’. Collingwood makes the point that this is not an argument for legislation controlling wages, but for it to prevent exploitation of workers. For Collingwood ‘a wage fixed by any but economic considerations ceases to be a wage’. Reyes misrepresents the argument by suggesting that Collingwood’s characterisation of a just price is contradicted by his support for a freely organised labour market. He claims that Collingwood ‘did not really believe that the idea of the just price was contradictory, although he believed that he did’. Reyes’ argument in support of this contention is obscure and does not deal with Collingwood’s analysis.
While noting that people will not work as hard without wage differentials, he suggests that a virtue based approach ‘allows us to challenge this assumption by noting that this is merely a contingent feature of our current society’. No detail is given of the alternative arrangements, ‘shaped by a more egalitarian ethos’ which would avoid this problem. Animal Farm is not referred to.
While his work is characterised by the repetition of chains of logic, this does not prevent Reyes from making suggestions with no obvious support. Having quoted Adam Smith suggesting that wealth is power, he moves without comment to suggest that that the rich impose prices on the poor. He gives no examples of public markets that function in this way but argues that market economics can only operate efficiently ‘if equality of wealth obtains.’ This leads to the conclusion that ‘in societies in which wealth is unequally distributed, … very few (if any) of the prices that we pay and receive are just’. His purpose is to suggest that, to use a much favoured word, ‘normative’ pricing, dependent on ‘virtue’, should replace prices set by free well-functioning markets. In making this argument he suggests that contract law should recognise ‘distributive justice’ by setting prices which lead to greater equality of wealth. The autonomy of the individual to make a contract is only partially accepted.
A book reviewed by Richard Turnbull illustrates the sustained interest in this area. Richard’s comment that the content was ‘shrouded in a mystical academic language of a rather obscure discipline’ can equally be applied to Reyes. That review provides case studies where attempts to replace market prices were resisted by those with less resources than the counterparty.
One might dismiss this line of thought as ignoring generations of experience. From attempts to limit wages after the Black Death to the wages and prices policies of the 1970s or the experience of eastern Europe after 1945, the attempt to replace a market by prices controlled by executive action has been both damaging and ultimately unsuccessful. However, the interest in the idea of a ‘just price’ demonstrated by these two books underlines the fact that for many this is an attractive idea. If the voters of New York elect a mayor who thinks that state controlled grocery shops will reduce prices, it would be a mistake to dismiss this line of thought as redundant. Many simply do not trust market economics. Academics like Reyes seek to provide credibility for distributive justice as a replacement for the operation of the market and they have a receptive audience. Making the argument for the central importance of market economies in generating the wealth needed to provide prosperity and reduce poverty is a priority for a generation attracted by the idea that ‘justice’ can be achieved by replacing the freedom of individuals with direction by the state.
‘Just Price Theory: A Reassessment’ by Joaquin Reyes was published in 2025 by Bloomsbury (978-1-509-96354-6). 256pp.
‘Just Price in the Markets: A History’ by Charles R. Geisst was published in 2023 by Yale University Press (978-0-300-26833-1). 280pp.
Andrew spent his career with PricewaterhouseCoopers where he was a partner for more than 25 years. He led a variety of the firm’s businesses both in the UK and globally, with a focus on the pharmaceutical industry. He also led the firm’s work on explaining corporate taxation to civil society and the public. Since retiring from PwC he has completed a master’s in history at Oxford and is hoping to undertake further research. He is also a trustee at the London Handel Society and the Open Spaces Society.
This is a spectacular book whose title only hints at its true ambition. Economist Richard Langlois brings depth to both the overarching framework and to finely crafted historical details. The book’s broad scope and rigorous analysis across 816 pages (a mere 550 pages of main text with extensive endnotes) can only be hinted at in a review.
At heart, Langlois offers a retelling of the conventional view of the rise of the managerial corporation that Alfred Chandler wrote on nearly fifty years ago in The Visible Hand. Chandler’s triumphalist account of the large, multidivisional, vertically integrated corporation was published in 1977, ironically just as the shifting economic sands and corporate raiders were already beginning to transform corporate life. Until that decade, the story seemed one of linear progress away from personal, entrepreneurial capitalism and toward managerial experts. This theme of a competent managerial elite replacing the messiness of the invisible hand of the market extended beyond the business world to policy and politics more broadly. This context is not lost in the book, and Langlois evokes the broader zeitgeist, drawing on the words of figures such as Herbert Croly and John Kenneth Galbraith.
Langlois’s core task is to explain the rise of managerial corporations in the late 19th and early 20th centuries in light of the fact that market forces later dismantled these same large corporations in the late 20th and early 21st centuries. He does this with a deceptively simple theoretical argument and detailed economic history to substantiate his claims. I’ll examine these dimensions in turn.
The theoretical argument is straightforward. Building on the foundational work of Ronald Coase, we know that economic activities are organized within firms when the cost of achieving them via market transactions would be higher than organizing within the firm. That is, the visible hand of an integrated firm replaces the invisible hand of market relations when it is profitable for it to do so.
Langlois argues that large corporations proliferated in the late nineteenth and early twentieth centuries not because they were a permanently superior institutional form, but because they filled a temporary institutional gap. Rapid technological change outpaced the development of market-supporting institutions—the legal frameworks, financial markets, and infrastructure that enable decentralized coordination. In this environment, integrated firms could organize complex production more efficiently than fragmented markets could. These corporations weren’t naturally better at resource allocation; they were simply the best available solution given the institutional constraints of their era. By the late twentieth century, as market-supporting institutions matured, the advantage of large integrated firms diminished, and many were dismantled or reorganized.
After an introductory chapter introducing the main concepts and the nuanced argument of the book in précis, the eight additional chapters and the long epilogue are arranged chronologically. The author deftly weaves a narrative that combines corporate, intellectual, and political history all analyzed through the mind of an economist who has read the empirical economic literature on relevant topics. At various stages, Langlois explains the role of these different forces on the organizational form of the corporation. The result is a synthesis—patchwork in parts—of the various threads needed for this multifaceted undertaking. Readers may get mired in the detail at times, but the amazing thing about Langlois’ enterprise is that he pulls it off and the result is a magisterial book that deserves to be read widely.
These varied threads are necessary because Langlois argues for the role of contingent history in the rise of the Chandlerian corporation. The role of government misapprehensions about business practices played a serious part in the tendency towards certain types of structures. Technological change and economies of scale can explain some industries, but the phenomenon was much broader. Furthermore, the continued dominance of the Chandlerian corporations is explained by the absence of sophisticated decentralized markets the development of which was hampered by antitrust efforts and shocks. There was a reason the market forces which rose at the end of the 20th century did not emerge in midcentury: the chaos of economic turbulence, world war and cold war. The space for an efficient make-or-buy decision was necessarily closed down when, as was often the case, the courts decided that contracts necessary for external contracting decisions are anticompetitive, or the empowered regulator like the Interstate Commerce Commission or Federal Communications Commission intervenes.
In the nineteenth century, commentators increasingly distinguished between closely held businesses and large businesses. Any history stresses the role of the railroad in the rise of professional management, but Langlois brings to life the economics of the business and the politics surrounding it. Through antitrust and regulations like those on the railroads, government changed the optimal institutional structure. Work in economic theory and history has helped explain the practices of businesses that contemporary legislators and regulators dismissed as anti-competitive.
Langlois’s argument is in summary that the business practices which led to government intervention were often efficiency-enhancing and the policy response was often harmful. When this included things like banning contracting practices this led to more business being done within the firm. This rather bold argument is aided by copious references to work in economics on 19th and 20th century business practices and the implications of government policy, making scholarship on this available to the general readers for the first time.
Perhaps most important for understanding the middle of the 20th century is the string of shocks, namely the two wars with unprecedented levels of war planning and the Great Depression that happened in the first half of the century. In general, these contingencies shifted the decision to bring elements within the firm instead of purchasing on the market. The years between 1914 and 1973 can in fact be viewed as the high watermark of state planning. As more time separates this period from the present, a conception of the degree of state planning and the worldview of the managerial elite in politics, economics, and business is lost.
Among the many terrible events, Langlois calls the Great Depression, the signal catastrophe and ‘a worldwide cataclysm that would alter the history of the century in the US more fundamentally and profoundly than even its two brutal wars’ (page 186). He argues, with supporting evidence, that for the United States the century’s worst year was 1933—the second dip in the Great Depression. Between the peak in 1929 and the low point in 1933 the Dow Jones dropped some 86 percent. Over this same time unemployment rose from 4 percent to 25 percent and estimates suggest that real per capita output dropped by 29 percent to a level not seen since 1901.
Drawing on the consensus in the literature, Langlois argues that this catastrophe was not caused by inherent features of capitalism that make it prone to break down or particular features of the 1929 crash itself but was the fallout from bad policy ideas which he dissects in detail. The crucial set of facts is that the Federal Reserve failed to act appropriately when it allowed the money supply to shrink and thereby unleashed the horrors of debt deflation. Beyond this central problem, the government attempted (among other things) to keep wages from falling in a delusional idea that high wages would allow the surplus of goods to clear. Many of the most egregious attempts of the New Deal were stopped by the courts, but there was a more general attempt to control markets.
In a key summarizing passage Langlois says of the Depression and war years:
The Second World War placed resource allocation even more firmly in the hands of the government and ushered in far more comprehensive nonmarket controls. Between fall 1929 and the end of World War II, prices in the United States often transmitted either false information or no information at all about relative scarcities, and many of the institutions upon which market exchange depended were hampered or destroyed. It is against this background, and not against a counterfactual backdrop of thick and well-functioning markets, that we must explain and appraise the rise of the large American corporation in the middle years of the twentieth century.
In a very interesting chapter, Langlois shows how dynamic market forces similar to those of the 1970s and beyond were already emerging in the 1920s but were diminished by the crisis. Across different industries innovative entrepreneurs were able to access capital and generate complex contracting networks solving assorted economic issues. General Motors and other companies (unlike Ford which because of its eccentric founder was steadfast in remaining optimized for the previous environment) would take advantage of responsive, modular supply chains. Even companies like DuPont sourced their patents not in the famous research labs of the midcentury but from acquisition. Much of this energy would become concentrated in the large corporations not because of their superiority as Chandler claimed, but because they were the only ones to survive the Depression. New restrictions on banking and forms of contracting limited new entrants and startups. Furthermore, the capacity of large firms to internally finance led to the growth of R&D departments at DuPont, GM, GE and others.
As Langlois writes:
The Depression and the policy responses to it had decisive consequences for the American corporation…. The dramatic monetary contraction, along with the failure of the Fed to act as an adequate lender of last resort, led to an amplifying cascade of bankruptcies and bank failures… this had the effect of destroying much of the capacity of the banking system, and of the financial system more generally, to supply financial intermediation. Small firms, which needed to rely on external capital markets, felt the effects far more than large firms, which could rely on internal financing and had close ties to large banks. Thus the Depression initiated or accelerated shakeouts in many industries. In some industries the process was Darwinian, with the most productive firms surviving; in others, survival depended simply on access to capital. At the same time, the New Deal instituted an unprecedented regime of price supports and entry restriction in financial, labor, and product markets. (187-88)
Absent these events one wonders how different the corporate world would have looked in the 1950s and 1960s.
Another merit of the book is the way it reflects on the way antitrust regulation, industrial policy and scientific and technological progress interacted and on the ideological and political context for them. Odd Progressive ideas underlay aspects of antitrust legislation and decisions of the FTC; odd monetary ideas underlay the decisions of the Fed. The science of industrial practices, whether in steel production or electronics, developed rapidly. Government and industry were closely intertwined in both world wars, and he discusses industrial policy at length in an even-handed but negative way. Another component of many chapters is Langlois’s focus on the role of finance, whether J.P. Morgan through the House of Morgan in earlier chapters or leveraged buyouts in the later chapters. Langlois also examines the form of pyramidal holding companies which was viewed as suspect by Progressives and partially banned in the New Deal. The demise of that form (unlike in the rest of the world) plays some role in explaining the American integrated firm and later conglomerates.
This level of historical detail and context makes the past come alive. Its coverage of the more recent past stands out as well. While the first 400 pages of the main text take readers from Standard Oil to Mad Men, the last 150 pages cover deregulation, disintermediation, and the rise of VC-backed startups. In the past decades, numerous books have been written about the revival of liberal thinking in the 1970s. Until that decade, for a variety of reasons, the story seemed one of linear progress away from personal, entrepreneurial capitalism and toward managerial experts. Many of these works suffer from depicting the changes as merely the actions of a few choice actors rather than a more widespread and diverse set of changes rooted in a disillusionment with the status quo. One illustrative example that Langlois discusses is the role of Ted Kennedy, no market fundamentalist, in the deregulation of trucking, rail, and air travel.
One of many dimensions to the book is that Langlois is seeking to undermine what he sees as a broader Progressive vision of society (he explains American Progressivism in detail and contrasts different varieties) that runs up to the present. The introduction and epilogue contain some understandably pointed remarks about the contemporary efforts by those on the right and left who have sought a more muscular state to regulate businesses. Many of these figures make explicit historical claims and hearken back to Progressive efforts to restrain the dominance of big business via antitrust and regulations banning practices like self-preferencing by Amazon. Building on the work of others, Langlois shows many ways in which past attempts failed to understand the efficiency of practices they villainized and how state regulation often empowered big business against markets and consumers. In doing so, he illuminates both past failures and the risks of repeating them. General readers may disagree with the broader view and specialists might have issues with one of the many episodes he covers, but The Corporation and the Twentieth Century is a tour de force.
‘The Corporation and the Twentieth Century: The History of American Business Enterprise’ by Richard N. Langlois was published by Princeton University Press in 2023 and came out in paperback in 2025 (978-0-691-24753-3). 816pp.
John Kroencke is a Senior Research Fellow at the Centre for Enterprise, Markets and Ethics. For more information about John please click here.
Economic historians have a growth preoccupation. The Industrial Revolution and its causes play the leading role in most prominent books in the field. And there are many other works that seek to explain the absence of an industrial revolution elsewhere in the world.
It is refreshing therefore to read a book that is not about the causes of industrialization but its consequences. If we reach back to the past, say, 200 or more years ago, two dramatic transformations are visible: one is the abundance of material goods and transformative technologies due to industrialization; the second transformation is the rise of large, modern, welfare states.
Walker Hanlon’s book The Laissez-Faire Experiment addresses this second transformation. He asks two fundamental questions: ‘First, how well did limited government in mid-19th century Britain work? Second, why was limited government abandoned in favor of the more interventionist government found in the U.K., and essentially all other developed countries, today?’
Hanlon’s argument is elegant and simple and it is grounded in standard economic theory.
The main problem facing the British economy in the early 19th century was dismantling the inefficient policies of the pre-Napoleonic war era, i.e., the fiscal-military state of the 18th century which protected large land-owners and relied on local and ad hoc institutions. Hanlon suggests that laissez-faire was an appropriate economic philosophy in this context: ‘across the first half of the nineteenth century, Britain’s laissez-faire system was successful. Economic growth was booming, and the benefits were accruing not only for the rich but also for average workers. Technological progress continued at a rapid pace. As a global power, Britain was unmatched.’
But, as the Industrial Revolution unfolded, the costs associated with this policy of non-interference mounted. For example, rapid urbanization brought new problems of overcrowding, sanitation, disease control, and pollution. There was a large health penalty to urban living in the 19th century.
Hanlon provides a compelling empirical assessment of the economic problems that led British policymakers to adopt a more interventionist series of policies. Increasingly severe market failures in the form of externalities from pollution, or asymmetric information in a range of markets, made government intervention potentially welfare enhancing.
The book is admirably clearly written. First, Hanlon presents the relevant economic analysis, which will be familiar to those who have taken Intermediate Micro or Public Economics, outlining the main explanations for market failure: information problems, monopolies, credit constraints, public goods, and coordination problems. Each chapter then considers different applications of the general principles, and provides a survey of relevant literatures in economic history, for example the literature on child labor regulations or urban public health.
The chapter on unemployment insurance, for example, condenses a tremendous amount of information and evidence into just a few pages. One charge that classical liberals have made against the modern state is that unemployment benefits and insurance crowded out the many forms of charity and private insurance that were commonplace prior to the welfare state.
Indeed, Hanlon discusses the wide array of traditional and occupation-based non-government forms of insurance available prior to 1850. He then, however, explains how the rise of large, geographically concentrated industrial agglomerations based on a single industry, such as cotton textiles in Lancashire, changed the problem of insuring workers. Neither family, locality-based, nor occupation-based forms of unemployment insurance, could deal with a general downturn in cotton textiles.
Overall, the book offers an exemplar of how to write a modern work of economic history. I wouldn’t hesitate in recommending this book. Beyond an economic history audience, it is an important book for anyone interested in understanding the rise of the modern state in the 19th and 20th centuries.
Nonetheless, as I discuss below, I want to push the implications of the book’s arguments a little further and explore some aspects of the debate which Hanlon perhaps neglects.
Having lavishly praised The Laissez-Faire Experiment as a work of economic history, my more critical comments will focus on the implicit political economy of the book and its treatment of economic ideas.
First, and I think intentionally, Hanlon’s treatment of what he calls ‘a laissez-faire philosophy’ is remarkably flat. I say intentionally as Hanlon clearly wants to focus on the economic history. From this perspective, too much engagement with the literature on the history of ideas would be distracting. So, he uses laissez-faire as a short-hand to refer to what is often called classical liberalism, essentially the idea of limited government and a general presumption of liberty.
This is entirely understandable and indeed defensible. Nonetheless, there is a price to taking this approach, which I will attempt to cash out below.
First, there is the use of the term laissez-faire as a shorthand. Classical liberalism has never been identical to laissez-faire because classical liberal thinkers have always recognized areas where government intervention is required.
Hanlon doesn’t really defend his use of laissez-faire as shorthand. But this approach overstates the degree of elite consensus and underestimates the extent to which there were competing intellectual traditions in 19th century Britain.
It is true that many of these positions came together in favoring a limited state in the mid-19th century, but it is precisely by recognizing that they were not a coherent ‘philosophy’ that we can appreciate why some of the leading figures also came to push for more technocratic interventions in society. A case in point would be Edward Chadwick. Chadwick was both a utilitarian follower of John Stuart Mill and a founder of modern public health and policing and he was more than willing to abrogate private property rights to achieve an improved societal outcome.
Hanlon’s narrative is of liberal, laissez-faire inclined policymakers and thinkers confronting the reality of widespread market failure and externalities and gradually adapting their policies and intellectual principles. He writes that ‘government intervention during the nineteenth century was not the work of a group of ideological collectivists. Rather, many interventions were the work of laissez-faire adherents who nevertheless believed that intolerable or inefficient conditions exist and were open to the possibility of experimenting with various forms of government intervention’. My feeling is that a deeper investigation of the ideas and writings of the classical economists and associates like Chadwick will reveal a more forthright commitment to policies of amelioration and improvement, rather than what is conventionally meant by the term laissez-faire.
Moreover, as Colin Holmes documented more than 50 years ago, something recognizable as a doctrine of laissez-faire did exist in the mid-19th century but it was never the animating principle of the British elite or government. Opposition to great government involvement in society could be animated by traditional ‘small c’ conservative principles. We don’t get a sense of this opposition (no John Ruskin or Thomas Carlyle, for example) in The Laissez-Faire Experiment.
Acknowledging this does not weaken Hanlon’s argument, but it would strengthen our understanding of the issues at hand in 19th century Britain.
My second comment concerns the treatment of political economy in the rise and fall of laissez-faire.
In general, Hanlon’s treatment is broadminded. He doesn’t assume that the existence of widespread market failures automatically translated into policies that could by assumption correct for those failures. Aware of the role played by both ideology and interests, he rather argues that the market failures that were exacerbated by industrialization ‘created opportunities for efficiency-enhancing government intervention’. Many factors would be critical in determining the extent to which these opportunities were realized.
Hanlon provides a similarly nuanced discussion of the shift towards more government activism at the end of the 19th century. He draws on recent historical scholarship to discuss the extent to which the example of the German welfare reforms and the pressures of war and imperial competition pushed policymakers away from laissez-faire.
Nonetheless, this part of the argument was less compelling than the first part of the book where Hanlon provides a systematic account how the new industrial economy generated all kinds of new externalities.
There is a reason for this. The type of evidence that Hanlon does a great job of assembling is very convincing in demonstrating the existence of market failures. He combines rigorous evidence with economic theory. But he doesn’t have an equivalently powerful framework for discussing how and why certain policy decisions were made.
In his conclusion, Hanlon tackles some of the big questions raised by his account: ‘is there evidence that the expansion of British government intervention . . . was misguided?’. Hanlon provides evidence that this was not so. He contends that policymakers followed experience and were not led by public opinion.
There is a risk here that the political economy of the 19th century does not get the full attention it deserves. Political economy is about heterogenous preferences and Hanlon’s framing in terms of an unmet nascent demand for education or for regulations abstracts from these conflicting preferences. Hanlon appreciates that government policies do not always achieve their aims. But political economy considerations are only occasionally mentioned, for example in explaining the failure to tackle coal pollution.
In contrast, conflicting political interest groups were prominent in earlier accounts of the rise of the state in late 19th century England. Holmes noted that what was traditionally seen as the high-point of laissez-faire ideology, the mid-19th century, was in fact a period of centralization and increased regulation, a point that Hanlon’s narrative and data in fact substantiate. But the role of conflict between different interest groups is not a major theme in The Laissez-Faire Experiment. And this also limits the ability of Hanlon to speak to developments in the 20th century, when much larger and more interventionist states emerged.
None of these comments take away from the fact that The Laissez-Faire Experiment is a great work of economic history and a major achievement. All subsequent scholarship will have to engage with it and will no doubt build upon its findings.
‘The Laissez-Faire Experiment: Why Britain Embraced and Then Abandoned Small Government, 1800-1914’ by W. Walker Hanlon was published in 2024 by Princeton University Press (978-0-691-21341-5). 504 pp.
Mark Koyama is Professor of Economics at George Mason University. He writes extensively about economic growth and institutions.
Magnuson, a professor of corporate law, has compiled a detailed and entertaining narrative of the key episodes in corporate history that documents how the corporation has been deployed by society’s problem-solvers. The corporation is a distinct form of human organisation that pre-dates many of those we take most for granted, such as the democratic nation state and even the Church. In Magnuson’s prosaic account, rich in surprising details, corporations are not seen as individual agents that pursue goals we can easily evaluate as simply good or evil. Rather, they are an organisational tool that enable human beings to cooperate at scale to do things that human beings might want to do, for better or worse. In their success, they transform the world around them, and often create new problems to solve. They are always impressive, but never morally pure.
The legal privilege that constitutes the corporation is what makes them useful both to society in general and to particular people’s purposes. Corporations survive the death of their members, and therefore, so do their fiduciary obligations. When undertaking large-scale and long-term projects, it makes one more attractive to creditors if the project is known to continue even if its individual members might come and go, have a career change, go bankrupt, or even die. With the reach of human agency transcending the life time and changeable circumstances of any individual, corporations can achieve what would otherwise be impossible.
For most of recorded human history, the main source of organisational capacity in society has been the state. It is the state, therefore that originally created the corporation through granting, at its discretion, this peculiar form of legal privilege. From the first corporations of Rome to the early 19th century in England, those who wanted to avail themselves of incorporation would need to be granted such a privilege by the state. For the state to agree to creating this impersonal legal agent for your purposes, it generally needed to be shown that it was also in the state’s interests to do so, and not just the entrepreneur’s. At its very conception, then, there was the possibility of divergent or even conflicting interests between the agent who controls the corporation and the agent that grants it its status.
A fascinating aspect of this history of the corporation is that they are shown to be in one sense distinctively ‘private’ entities in that they are definitionally not states. But on the other hand, they are explicitly creatures of the state. In earlier epochs the way in which corporations served state interests was much clearer – they collected taxes, lent capital, subdued foreign lands to the glory of their sovereign, etc. A corporation could only be created if it did in fact serve the interests of its state (for better or for worse – the interests of the state have not very neatly converged with the interests of the general public for much of human history). Magnuson makes this tension vivid. However, it does leave us confused as to why he sometimes refers to the corporations of the ancient and pre-modern world as ‘capitalists.’
Over the course of the 18th to early 19th centuries (in Western Europe) incorporation went from being a discretionary legal privilege to being an impersonal, general right. One now has to fill out the forms and pay the taxes, but one does not need to persuade the sovereign of the virtues of one’s intentions. The discipline of the market is what now regulates which corporations get to exist or not, rather than the discretion of the sovereign. What this means, which is well shown in the second half of the book, is that profitability takes the place of perceived service to the realm. Magnuson impresses upon the reader that profitability is a good, but imperfect, measure of a corporations’ contribution to society. What he somewhat elides, however, is that its imperfections are so much less serious than those of premodern corporations. Serving Rome meant imposing arbitrary taxes that often left people literally starving; bringing glory to England often meant war and slaughter. Whilst the difference in the way corporations functioned before and after this revolution in corporate law took place is made vividly clear in the book, Magnuson does not explicitly mention the legal changes themselves. Analysis of this change would, I think, help him to ground the normative conclusions he lays out at the end.
The book is divided into seven periods of corporate history, told through the story of a particular corporation or industry that defined its era. In the beginning was the corpus economicus of the Roman Republic, first created to raise private funds for the overstretched military ambitions of Rome, and then to collect taxes on behalf of the later territorially stretched Republic. Such ‘tax-farming’ was the standard way states raised revenue. It was not until the dawn of early modernity that states had the bureaucratic capacity to do it themselves and thereby cut out the middle man. Such middle men were essentially local gangsters who extorted as much as they could from the population because a fixed sum was owed to Rome, and they got to keep any surplus they could squeeze out (hence the New Testament’s constant equation of tax-collectors and sinners). Rome could never have ascended to the power it did without them. But, inevitably, they became a source of political and economic interests unto themselves, separate from the Republic. Next comes the first bank, started by the Medicis, which made available huge amounts of wealth for European princes and merchants, as well as the Church, and were able to manipulate their debtors in the interests of their own long-term profits. Then we come to the joint-stock companies of England, created for seafaring trade to generate revenue for the Crown and bring glory to the realm. The most famous among them, the East India Company, would become so rich and powerful, with its own armies, currency, and slaves, that it was a de facto state in India. Eventually it became such a rival to England herself that the Crown would, bit-by-bit, take it over. Next, we turn to the American railroad companies that were granted monopolies for the purposes of connecting and thereby modernising a vast and internally conflicted country. The particular way in which they were granted privileges over land and the trade that would take place on their rails presented various opportunities for them to exploit, which would inform a whole era of American anti-trust legislation. The next episode occurs firmly within a legal and economic context in which corporations no longer had any special privileges but rather had to compete with one another on legal terms that tended to favour value-creation and efficiency over government favour. Henry Ford’s ambitious and successful plan to make a high-quality vehicle every working American family could afford required no special monopoly privileges but rather an innovative technology (the petrol-powered engine) and production method (the assembly line). Then the narrative moves onto multinational oil companies, which, on the one hand were able to coordinate oil supply far better than separate nations were, and on the other used their wealth and influence to suppress climate change science. The final two chapters are on private equity, and then Facebook as the archetypal tech start-up. In both cases, head-spinning profitability was reached at lightning speed. While there is no doubt they provide value to society, it is also clear they found ways to make profits without creating value, in the former case through arbitrage of the tax code, and in the latter case by purposefully drawing on compulsive human behaviour.
Magnuson says from time to time that profit-maximisation is what often leads to corporate abuse. However, by his own account Ford was driven by keeping his profits low so as to keep quality and volume as high as possible, and prices as low as possible so that all Americans could afford one of his cars. From time-to-time Magnuson invokes various cliches about corporations being short-termist. But this is in tension with the general idea that what corporations do is enable longer-term planning and risk-bearing investment than individuals are otherwise capable of. Nonetheless, the driving normative lesson from this fantastic account Magnuson has compiled is that corporations are a tool of human ingenuity, and human ingenuity is not always benign. He gives many examples of how well societies tend to respond to the new problems introduced by corporations – typically in the form of adaptive regulation – but this should in no way give corporations or the entrepreneurs that wield them moral permission to disregard their consciences, and tell themselves that whatever is good for them must be good for the public. This is a fascinating book and one of which there is very much more to speak about!
‘For Profit: A History of Corporations’ by William Magnuson was published in 2023 by Basic Books (ISBN: 978-1-541-60157-4). 368pp.
Billy Christmas is Associate Professor at West Virginia University, in the John Chambers College of Business and Economics, affiliated with the Kendrick Center for an Ethical Economy.
Prior to joining WVU he was Senior Lecturer in Political Philosophy at King’s College London, in the Department of Political Economy.
