26 March 2007
Economic History Society Annual Conference 2007: Press Briefings
Economic History Society Annual Conference 2007: Press Briefings
‘STATISTICAL FOG’: THE RECURRING CHALLENGES OF BRITISH ECONOMIC POLICY MAKERS
Contemporary anxieties among British policy-makers about the performance of other ‘rival’ economies and the value of economic data – what Bank of England governor Mervyn King calls ‘statistical fog’ – are nothing new, according to research by Dr Glen O’Hara.
Prime Ministers Harold Macmillan and Harold Wilson were both appalled at the lack of information they could call on in exactly the areas that concern the Bank and the Treasury today: the balance of payments, immigration, productivity and economic growth.
And the 1950s and 1960s saw Britons urged to be more like other people: to have industrial relations like Swedes, training like the French, public services like the Germans and even science on a Soviet model.
HOW THE CRISIS YEARS OF THE 1970s FINALLY TRANSFORMED BRITAIN’S FAILING ECONOMIC POLICY
Senior British politicians, the Treasury and the Bank of England found it very difficult to learn from past mistakes until a major crisis across both domestic and international financial policy from the mid-1970s forced them to think and act outside their traditional 'comfort zones' and to begin to reinvent policy from the ground up. That is the conclusion of new research by Michael Oliver and Hugh Pemberton.
From the 1940s to the 1970s Britain’s balance of payments problem dominated economic news year after year. But in the last two decades, the problem has been relegated to, at best, the financial pages. Strangely, this downgrading of the problem in public debate has coincided with far worse balance of payments figures!
Whereas in the 1950s and 1960s, Britain normally ran a current account surplus, since then the position has normally been one of deficit – and by 2006, the deficit was the largest ever (even bigger than in the crisis years of the mid-1970s). How is this paradox to be explained?
New research by Jim Tomlinson shows that a large part of the explanation is that in the earlier period Britain was pursuing the aim of having a very large current account surplus in order to finance very high levels of foreign investment and very high levels of military and other government spending overseas.
REFORMING THE WELFARE STATE: LESSONS FROM ITS ORIGINS IN BRITAIN AND GERMANY
Decisions taken before 1914 have been crucial to the long-term differences between the welfare state in Britain and Germany. And according to a new book by Professor Peter Hennock, there is much for British policy-makers to learn from the basic durability of the German model. In particular, he notes that the latest British proposals for pensions reform have recognised the futility of our traditional approach to pensions – though unlike Germans, we are still free to refuse to save.
As aging baby boomers place growing strains on the welfare state, British politicians continue to edge their way around a huge and uncomfortable dilemma. Any reform of NHS funding or pension provision is sure to be unpopular, while their continuing failure to tackle the gap between rising public expectations and over stretched funds is deeply corrosive.
This book offers policy-makers new insights by contrasting the experiences of Britain and Germany. It focuses on an often-forgotten slice of history, the days when Germany's healthcare insurance and pensions plans were much admired in Britain.
Peter Hennock, Emeritus Professor of History at the University of Liverpool and a refugee from Nazi Germany, investigates how the foundations of the welfare state were laid in Britain and Germany from the mid-nineteenth century to the First World War.
UK BIODIVERSITY IN DECLINE? NOT ACCORDING TO EVIDENCE FROM THE PAST 400 YEARS
Contrary to popular belief, there is no evidence of a continual and long-term decline in UK biodiversity as a result of agricultural practices. According to new research by Nick Hanley and colleagues, which has looked at the effects of agriculture on biodiversity from 1600 to the present, the number of plant species rises, falls and rises again over time.
The research also finds that there is a very strong influence of agricultural prices on biodiversity: as prices rise (and so farmers choose to keep more stock), biodiversity falls. What’s more, abandoning farmland appears to reduce biodiversity, a finding that has implications for modern policy on biodiversity conservation and farming.
‘War is much too important to be left to the military historians; it needs to be studied as a domestic economic activity in its own right.’ That was the conclusion of Professor Nicholas Rodger, speaking at the Economic History Society’s annual conference.
He argued that government revenue-raising and spending (overwhelmingly on war), together with agriculture and foreign trade, must be regarded as the three principal economic activities of eighteenth-century Britain – the time of the country’s rise to economic greatness.
NEW EVIDENCE ON THE CAUSES OF THE BIG FAMINES OF THE TWENTIETH CENTURY
The twentieth century saw the virtual elimination of famine across most of the globe – but it also witnessed the greatest famine in world history: the Chinese famine of 1959-61. Delivering the Tawney Lecture at the Economic History Society’s annual conference, Professor Cormac Ó Gráda presented new evidence on the causes of this famine as well as the Bengal famine of 1943-44. In particular, he argued that:
While the post-1949 Chinese regime was culpable for turning a blind eye to the problem and failing to seek foreign aid, it had to deal with an economy that contained some of the poorest regions in the world and that faced harvest shocks like everywhere else.
Bengal’s two million famine deaths were in the main civilian victims of World War 2.
ECONOMICS, NOT SCIENCE, DROVE BRITAIN’S INDUSTRIAL REVOLUTION
The industrial revolution was an economic rather than a scientific phenomenon, according to new research by Professor Robert Allen of the University of Oxford.
He argues that the inventions of the industrial revolution cannot be understood apart from the economic incentives that induced them – and the price structure that generated those incentives links the industrial revolution back to the commercial expansion of the early modern economy.
GREAT INVENTORS: THEIR IMPACT ON BRITISH ECONOMIC DEVELOPMENT
Analysis of the lives of over 400 British 'great inventors' sheds light on British economic development. The study by Zorina Khan and Kenneth Sokoloff finds that prior to the 1870s, formal scientific training was not associated with superior productivity at invention. What's more, Britain's relative loss of technological competitiveness in the late nineteenth century resulted in part from educational and patent systems biased towards individuals from wealthy or privileged backgrounds.
GREATER PRIVATE OWNERSHIP MEANT BETTER TRANSPORT INFRASTRUCTURE IN THE NINETEENTH CENTURY
Railroads were the leading infrastructure investment of the nineteenth century – and according to new research by Dan Bogart – countries with greater private ownership had more railroad miles per capita.
He also finds that private ownership of railroads was more common in countries with greater constraints on the executive. This suggests that companies were more likely to promote new railway projects if they believed their investments were safe from expropriation by the government.
SOCIAL MOBILITY IN NINETEENTH-CENTURY BRITAIN
Social mobility across generations was surprisingly high in nineteenth-century Britain. According to new research by Jason Long, which looks at more than 50,000 men across three generations, a half of sons ended up in a different occupational class than their father, and 27% moved up.
Nevertheless, social mobility in Britain was significantly lower than in 1970 and lower than in the United States in the nineteenth century. From the nineteenth century, however, Britain and the United States moved in opposite directions, with mobility increasing in Britain and dramatically decreasing in the United States.
The economics of monetary unions are always the same – but the reasons why countries joined monetary unions in the late nineteenth century were radically different from current monetary unions such as the European Monetary Union. That is the conclusion of new research by Dr Matthias Morys.
No one saw monetary unions as a first step towards political unification then – and nineteenth-century economists were not even aware of the loss of macroeconomic flexibility that comes with monetary unions. What really mattered was the stability of the currency, and that, contemporaries realised, could only be guaranteed by tying their currencies to gold – hence the emergence of the gold standard, which spanned almost the entire world at the onset of World War I.
THE BIG PROBLEM OF SMALL CHANGE: WHY COINAGE SHOULD BE LEFT TO THE PRIVATE SECTOR
Government monopoly of producing coins has been the root of British coinage problems in the past, according to Professor George Selgin. His research leads him to suggest that, ancient practice notwithstanding, coinage might be better left to the private sector.
The production of coins is among the most ancient of government ‘prerogatives’, and one that economists seldom question. This remains true despite frequent failures of government coinage arrangements, ranging from severe debasements in medieval times to the recent official undervaluation (and consequent melting) of large amounts of British copper money.
George Selgin questions the conventional wisdom concerning coinage, building his case on British experience during the eighteenth and early-nineteenth centuries, when Great Britain was plagued by severe shortages of official small coins as well as by aggressive counterfeiting of those coins.
THE EMERGENCE OF AN EQUITY CULTURE: NEW ISSUES, NEW INDUSTRIES AND FIRM SURVIVAL IN INTERWAR BRITAIN
In the early 1930s, the London capital markets were rocked by the Royal Mail scandal, the Enron of its day. Investors were equally appalled at the poor survival record of those firms going public in 1928, approximately half of which had gone out of business by the early 1930s. In contrast, such blue chip firms as Boots, Morris Motors and Marks and Spencer chose to go public on the London Stock Exchange in the same period.
So which picture is correct? Was the Stock Exchange little more than a casino? Or did it make a contribution to industrial development in interwar Britain?
Drawing on a new database, a study by David Chambers analyses over 1,000 firms going public on the London Stock Exchange between 1919 and 1938. This period has great importance in laying the foundations for the development of the post-World War II equity culture in British capital markets.
FINANCIAL OPTIONS EXISTED AND COULD BE PRICED LONG BEFORE BLACK-SCHOLES
Most people think that the development of exotic derivatives was permitted thanks to the groundbreaking contributions of Fischer Black and Myron Scholes, who invented a mathematical formula for pricing options. But new research by Camila Vam Malle and Pilar Nogués Marco show that call and put options existed well before Black and Scholes, as they were already common at the beginning of the eighteenth century.
The researchers also show that investors already knew how to price these options, well before the development of modern financial mathematics. This financial innovation was not due to market liberalisation, as most innovations, but on the contrary, it was the paradoxically beneficial consequence of a Parliamentary regulation.
Since the very beginning of the eighteenth century, the East India Company issued ‘India bonds’ on the London Stock Exchange, to fund the loans it made to the government. These debentures were nominally short-term, but the research shows that in practice, they were kept in circulation after maturity date, which made them equivalent to long-term debentures with a call and put embedded option.
New research by an economic historian suggests that we should not be surprised at the rise of China and India in recent years. Paul Sharp has examined the rise of America as a global trading power in the nineteenth century, and suggests that this has little to do with globalisation, and was mostly the product of phenomenal population growth.
Indeed, it turns out that the increase in wheat trade between the UK and the United States in the nineteenth century had little to do with falling barriers to trade, but was in fact simply linked to a rise in production in the United States. This in turn was almost certainly the result of large-scale population growth as immigrants flocked to America and became farmers.
The statistical analysis shows that a 1% increase in US production led to a 3% increase in UK imports. US production increased well over 1,000% in the course of the nineteenth century.
