New Economics Papers
on Business, Economic and Financial History
Issue of 2008‒12‒14
fourteen papers chosen by

  1. Shattered on the Rock? British financial stability from 1866 to 2007 By Milne , Alistair; Wood, Geoffrey
  2. Did Economics Cause World War II? By Robert J. Gordon
  3. The sources of long-term economic growth in Indonesia, 1880-2007 By Pierre van der Eng
  4. Forest History and the Great Divergence: China, Japan and the West By Osamu Saito
  5. Great Fortunes of the Gilded Age By Hugh Rockoff
  6. The Supply-Shock Explanation of the Great Stagflation Revisited By Alan S. Blinder; Jeremy B. Rudd
  7. The Suspension of the Gold Standard as Sustainable Monetary Policy By Newby, E.
  8. An Historical Perspective on the Crisis of 2007-2008 By Michael D. Bordo
  9. La Fábrica de Tejidos Obregón de Barranquilla,1910-1957 By Adolfo Meisel Roca
  10. Bretton Woods and the Great Inflation By Michael D. Bordo; Barry Eichengreen
  11. The Frequency of Wars By Harrison, Mark
  13. Northern Rock: The anatomy of a crisis – the prudential lessons By Sonia Ondo-Ndong; Laurence Scialom
  14. Mecanización y distribución del ingreso en la crisis de rentabilidad de la economía mexicana By Juan Pablo Mateo Tomé

  1. By: Milne , Alistair (Cass Business School); Wood, Geoffrey (Cass Business School)
    Abstract: In autumn of 2007 Britain experienced its first bank run of any significance since the reign of Queen Victoria. The run was on a bank called Northern Rock. This was extraordinary, for Britain had been free of such episodes because by early in the third quarter of the 19th century the Bank of England had developed techniques to prevent them. A second extraordinary aspect of the affair was that it was the decision to provide support for the troubled institution that triggered the run. And thirdly, unlike most runs in banking history, it was a run only on that one institution. This paper considers why the traditional techniques for the maintenance of banking stability failed – if they did fail – and then considers how these techniques may need to be changed or supplemented to prevent such problems in the future. The paper starts with a narrative of the events, then turns to banking policy before the event and to the policy responses after it. We suggest both why the decision to provide support triggered the run and why the run was confined to a single institution. That prepares the way for our consideration of what should be done to help prevent the recurrence of such episodes in the future.
    Keywords: bank failure; lender of last resort; money markets; bank regulation
    JEL: E42 E58 N24
    Date: 2008–12–10
  2. By: Robert J. Gordon
    Abstract: Historians have long recognized the role of economic resources and organization in determining the outcome of World War II: the Nazi economy lacked the economic resources and organization to oppose the combined might of the U.S., U.K., and U.S.S.R. A minority view is that the Germans were defeated not by economics, but by Hitler's many strategic and tactical mistakes, of which the most important was the invasion of the Soviet Union. Compared to this debate about the outcome of the war, there has been less attention to economics as the cause of World War II. This is a review article of a new economic history of the Nazi economy by Adam Tooze which cuts through the debate between economics and Hitler's mistakes as fundamental causes of the outcome. Instead, Tooze argues that the invasion of the Soviet Union was the inevitable result of Hitler's paranoia about the land-starved backwardness of German agriculture as contrasted with the raw material and land resources of America's continent and Britain's empire. The American frontier expansion that obliterated the native Indians provided Hitler with a explicit precedent, which he often cited, for pushing aside the native populations in the east to provide land for German Aryan farmers. Germany's agricultural weakness is summarized by its low land-labor ratio, but Poland and the Ukraine had even less land per person. Thus simply acquiring the land to the east could not solve Germany's problem of low agricultural productivity without removing the native farming populations. Far better than other histories of the Third Reich, Tooze reveals the shocking details of General Plan Ost, the uber-holocaust which would have removed, largely through murder, as many as 45 million people from eastern agricultural land. Tooze, like the Nazis before him, fails to emphasize that the solution to Germany's agricultural problem was not acquiring more land for the existing German farm population, but rather by raising the land-labor ratio by making the existing German land more efficient, mechanizing agriculture and encouraging rural-to-urban migration within Germany.
    JEL: H56 N14 N24 N54 N64 N70 N74 N80 N84
    Date: 2008–12
  3. By: Pierre van der Eng
    Abstract: This paper initiates discussion about the contribution of Total Factor Productivity (TFP) growth to Indonesia’s long-term economic growth. It presents new time series estimates of GDP, capital stock and education-adjusted employment, and offers a growth accounting approach that estimates the contribution of conventional factor inputs to GDP growth during 1880-2007. For most of the period, the growth of employment, educational attainment and particularly capital stock explained almost all of long-term output growth, and TFP growth was marginal. During the key growth periods 1900-29 and 1967-97, TFP growth was on balance negative, respectively marginally positive. However, the contribution of TFP growth was substantial during some sub-periods, particularly 1933-41, 1951-61, 1967-73 and 2000-07. Each of these followed a major economic downturn that slowed capital stock growth and required a more efficient use of productive resources, assisted by changes in economic policy and institutions that enhanced productivity and efficiency.
    JEL: N15 O11 O47 O53
    Date: 2008–12
  4. By: Osamu Saito
    Abstract: This paper surveys changing interrelationships between man and the earth's forest cover over the past several centuries. The focus is on the interplay between population increase, deforestation and afforestation at both ends of Eurasia. By looking at three numerical indicators-percentage forested, per capita forest resources and the population elasticity of deforestation, Japan is compared with Lingnan, south China, and the East Asians with two European countries, England and France. Based on the East-West comparisons and on somewhat more detailed intra-Asian comparisons between China and Japan with respect to market linkages and the role of the state, the paper examines the proposition made by Ken Pomeranz that although both ends of Eurasia were ecologically constrained at the end of the early modern period, East Asia's pressure on forest resources was eprobably not much worsef than in the West.
    Date: 2008–10
  5. By: Hugh Rockoff
    Abstract: This paper explores the origins of the great fortunes of the Gilded Age. It relies mainly on two lists of millionaires published in 1892 and 1902, similar to the Forbes magazine list of the 400 richest Americans. Manufacturing, as might be expected, was the most important source of Gilded Age fortunes. Many of the millionaires, moreover, won their fortunes by exploiting the latest technology: Alfred D. Chandler's "continuous-flow production." A more surprising finding is that wholesale and retail trade, real estate, and finance together produced more millionaires than manufacturing. Real estate and finance, moreover, were by far the most important secondary and tertiary sources of Gilded Age fortunes: entrepreneurs started in many sectors, but then expanded their fortunes mainly through investments in real estate and financial assets. Inheritance was also important, especially in older regions
    JEL: N11 N2
    Date: 2008–12
  6. By: Alan S. Blinder; Jeremy B. Rudd
    Abstract: U.S. inflation data exhibit two notable spikes into the double-digit range in 1973-1974 and again in 1978-1980. The well-known "supply-shock" explanation attributes both spikes to large food and energy shocks plus, in the case of 1973-1974, the removal of price controls. Yet critics of this explanation have (a) attributed the surges in inflation to monetary policy and (b) pointed to the far smaller impacts of more recent oil shocks as evidence against the supply-shock explanation. This paper reexamines the impacts of the supply shocks of the 1970s in the light of the new data, new events, new theories, and new econometric studies that have accumulated over the past quarter century. We find that the classic supply-shock explanation holds up very well; in particular, neither data revisions nor updated econometric estimates substantially change the evaluations of the 1972-1983 period that were made 25 years (or more) ago. We also rebut several variants of the claim that monetary policy, rather than supply shocks, was really to blame for the inflation spikes. Finally, we examine several changes in the economy that may explain why the impacts of oil shocks are so much smaller now than they were in the 1970s.
    JEL: E3 N1
    Date: 2008–12
  7. By: Newby, E.
    Abstract: This paper models the gold standard as a state contingent commitment rule that is only feasible during peace. It shows that monetary policy during war, when the gold convertibility rule is suspended, can still be credible, if the policy maker's plan is to resume the gold standard at the old par value in the future. The DGE model developed in this paper suggests that the resumption of the gold standard was a sustainable plan, which replaced the gold standard as a commitment rule and made monetrary policy time consistent. The equilibrium is supported by trigger strategies, where private agents retaliate if a policy maker defaults its policy plan to resume the gold standard rule.
    Keywords: Gold standard, Time consistency, Monetary policy, Monetary regimes.
    JEL: C61 E31 E4 E5 N13
    Date: 2008–11
  8. By: Michael D. Bordo
    Abstract: This paper provides an historical perspective on the crisis of 2007-2008. The crisis is part of a perennial pattern. It has echoes in earlier big international financial crises which were triggered by events in the U.S. financial system. Examples include the crises of 1857, 1893 1907 and 1929-33. This crisis has many similarities to those of the past but also some important modern twists.
    JEL: N10
    Date: 2008–12
  9. By: Adolfo Meisel Roca
    Abstract: En este trabajo se estudia la historia de la Fábrica de Textiles Obregón de Barranquilla, a lo largo de sus 47 años de vida (1910-1957). A comienzos del siglo XX, Barranquilla era la ciudad colombiana con mayor crecimiento demográfico y tenía una economía muy dinámica. Era el principal puerto colombiano, la tercera ciudad del país en población y su ingreso per cápita era uno de los más altos de Colombia. Ello permitió que se empezara a desarrollar un sector industrial local, que vendía sus productos por toda la Costa Caribe y el interior del país. La empresa más representativa del éxito industrial barranquillero fue la Fábrica de Tejidos Obregón que inició operaciones en 1910. Hasta 1934 la empresa de los Obregón fue la textilera más grande del país. Sin embargo, desde mediados de la década de 1930 la Fábrica de Tejidos Obregón entró en un proceso de estancamiento relativo, lo cual también la hace paradigmática de la perdida de dinamismo de la industria barranquillera desde fines de la década de 1930. Es decir, que el estudio en detalle de la evolución de esta empresa es de gran importancia para la historia empresarial regional y para el análisis del desarrollo económico costeño en la primera mitad del siglo XX. Por lo tanto, también lo es para entender los orígenes del rezago económico del Caribe colombiano durante ese sigl
    Date: 2008–12–03
  10. By: Michael D. Bordo; Barry Eichengreen
    Abstract: In this paper we show that the acceleration of inflation in the United States after 1965 reflected a shift in perceived responsibility for managing the country's international financial position. Prior to 1965 this responsibility was lodged primarily with the Fed, whose policies resembled those of a central bank playing by the gold standard rules of the game. Over time, however, this responsibility was increasingly assumed by the Treasury, while the Federal Reserve acquired increasing room for maneuver as a result of the adoption of the Interest Equalization Tax and other policies with effects analogous to capital controls. Once the external constraint shaped policy less powerfully, the Fed pursued other goals more aggressively, resulting in more inflationary pressure. We document these points with a quantitative and qualitative analysis of the minutes of the Federal Open Market Committee.
    JEL: N1 N2
    Date: 2008–12
  11. By: Harrison, Mark (Department of Economics, University of Warwick)
    Abstract: Wars are increasingly frequent, and the trend has been steadily upward since 1870. The main tradition of Western political and philosophical thought suggests that extensive economic globalization and democratization over this period should have reduced appetites for war far below their current level. This view is clearly incomplete : at best, confounding factors are at work. Trade and democracy are traditionally thought of as goods, both in themselves, and because they reduce the willingness to go to war, conditional on the national capacity to do so. The same factors may also have been increasing the capacity to wage war, and so its frequency.We need better understanding of how to promote these goods without incurring adverse side-effects on world peace.
    Keywords: wars ; state capacity ; democracy ; trade
    JEL: H56 N40
    Date: 2008
  12. By: Adolfo Meisel Roca
    Abstract: En los primeros años del siglo XIX, Cartagena de Indias era uno de los puertos fortificados más importantes del Caribe hispánico. Su economía estaba en clara expansión, así como su población, que era la segunda del Virreinato de la Nueva Granada. Cuando se creó el virreinato, a comienzos del siglo XVIII, incluso se consideró en hacerla la capital del mismo. La idea se descartó, pues se argumentó que podía ser vulnerable a los ataques navales. Sin embargo, en ese siglo hubo virreyes que nunca llegaron a Santa Fe y se establecieron en el puerto durante todo su mandato. Cuando se iniciaron los sucesos que llevarían a la independencia, Cartagena estuvo siempre muy decidida por la causa patriota. Esto, a pesar de que dependía de los dineros que, vía el situado, le enviaban las otras provincias para cubrir sus enormes gastos militares, que eran la base de su prosperidad. En este trabajo estudiamos las finanzas públicas de Cartagena, entre 1808 y 1821, para entender cómo se afectaron por la lucha por la independencia y, así mismo, cómo estas afectaron esa lucha. Buena parte de la información que se utiliza, y que proviene del Archivo de Indias en Sevilla, España, no había sido publicada hasta la fecha. Por esa razón, y por que la historiografía tradicional no le dio la importancia debida a los aspectos económicos de la independencia, creemos que se abre una perspectiva sobre este período, que permite entender mejor algunos debates y sucesos que hasta ahora no eran muy claros. En la segunda sección, se analiza de manera sucinta como eran los ingresos y egresos de la Caja Real de Cartagena antes 1811, así como algunos aspectos del comercio exterior. En la tercera parte, se discute la crisis fiscal que se vivió en el periodo 1811-1815 y las diferentes medidas que tomaron los patriotas para mitigarla. Luego, se trata la difícil coyuntura fiscal de los años de la Reconquista, cuando la economia local, y por tanto sus finanzas públicas, se habían empobrecido debido a la guerra de independencia. Finalmente, se presentan unas conclusiones.
    Date: 2007–10–30
  13. By: Sonia Ondo-Ndong; Laurence Scialom
    Abstract: This paper attempts to analyse the main characteristics of the Northern Rock crisis and the responses of the Bank of England as lender of last resort. On the basis of the diagnosis about the causes and the handling of this banking crisis we detect the shortcomings prevailing in the UK prudential device. We therefore try to draw the prudential lessons of this experience. As we cannot claim to present an exhaustive picture of the crisis’s implications from a prudential point of view, we chose to focus instead on the points with practical significance far beyond the UK’s case.
    Keywords: bank bankruptcy, deposit insurance, liquidity regulation
    JEL: G38 G33 G32 G28
    Date: 2008
  14. By: Juan Pablo Mateo Tomé
    Abstract: Resumen Este artículo ofrece una propuesta para el análisis del descenso de la rentabilidad, que se erige como el fundamento de la crisis económica mexicana a partir del proceso de acumulación de capital. Se muestra que la producción capitalista, orientada hacia la maximización de la ganancia, implica un cambio técnico ahorrador de trabajo vivo, es decir, hacia la mecanización del proceso productivo. Tal tendencia tiene como consecuencia el aumento de la participación de la ganancia en el valor nuevo, pero contradictoriamente socava en términos relativos la fuente del excedente, la fuerza de trabajo. Este análisis integrado permite caracterizar y ubicar los ámbitos de la mecanización y la distribución del ingreso con el fin de demostrar los determinantes de la crisis de rentabilidad. Además, se lleva a cabo una medida de las categorías propias de la economía marxista en México con el propósito de estudiar la dinámica de la crisis económica y así mostrar sus factores explicativos y las peculiaridades, que, como es necesario en todo estudio en una formación dada, surgen esencialmente del carácter no desarrollado de la economía mexicana. Abstract This article offers a proposal for the analysis of the fall of profitability, that set up as the foundation of the mexican economic crisis from the process of accumulation of capital. It shows that the capitalist production, oriented to the maximization of the profit, implies a living labour saving technical change, e.g., to the mecanizaton of the productive process. Such tendency has as a consecuence the rise of the share of profit in the new value, but contradictory it undermines in relative terms the source of the surplus, the labour force. This integrated analysis let to characterize and to place the fields of mecanization and the income distribution with the goal of demonstrating the determinants of the profitability crisis. Moreover, it is made a measure of the marxist economy categories in Mexico with the purpose of studying the dynamics of the economic crisis and by that to show its explaining factors and peculiarities, that, as necessary in every study of a certain formation, essencially arise from the no-developed character of the mexican economy.
    Date: 2008–01–27

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