William L. Silber on The Story of Silver

SilberThis is the story of silver’s transformation from soft money during the nineteenth century to hard asset today, and how manipulations of the white metal by American president Franklin D. Roosevelt during the 1930s and by the richest man in the world, Texas oil baron Nelson Bunker Hunt, during the 1970s altered the course of American and world history. The Story of Silver explains how powerful figures, up to and including Warren Buffett, have come under silver’s thrall, and how its history guides economic and political decisions in the twenty-first century.

Why did you write this book?

In 2014 Bunker Hunt died and when I told my children – who had worked in finance all their lives—they thought Bunker was one of the guys who kept hitting the ball into the sand in my Sunday golf group. Right then I knew that I had to write this book to at least tell the story of the greatest commodities market manipulation of the 20th century – one that was perpetrated by the larger than life Nelson Bunker Hunt – the richest man in the world who ultimately went bankrupt trying to corner the silver market with his brothers, Herbert and Lamar, in the 1970s. The Hunts drove the price of silver to a record $50 an ounce in January 1980 and nearly brought down the financial markets in the process. But the Hunt brothers were not the first nor the last to be seduced by the white metal. In 1997 Warren Buffett, perhaps the most successful investor of the past fifty years, bought more than 100 million ounces, almost as much as the Hunts, and pushed the price of silver to a ten-year peak. In 1933 Franklin Delano Roosevelt raised the price for silver at the U.S. Treasury to mollify senators from western mining states while ignoring the help it gave Japan in subjugating China. Was FDR’s price manipulation in the 1930s less criminal than Nelson Bunker Hunt’s in the 1970s? Reading this book will let you make an informed judgment and it will also show that the white metal has been part of the country’s political system since the founding of the Republic. Perhaps the most famous speech in American electoral politics, Nebraska Congressman William Jennings Bryan’s “Cross of Gold” sermon at the 1896 Democratic convention, was all about silver. Bryan’s cause, the resurrection of silver as a monetary metal, aimed to rectify the injustice perpetrated by Congress in the Crime of 1873, which discontinued the coinage of silver dollars that Alexander Hamilton had recommended in 1791. Thus, the Story of Silver spans two centuries and is woven into the fabric of history like the stars and stripes.   

Why did Bunker Hunt become obsessed with silver in the 1970s?    

A member of the right-wing John Birch Society, Bunker became the richest man in the world at age forty in 1966 when oil was discovered in Libya where he owned the drilling rights. His ultraconservative politics made him distrust government and its paper currency and favor real investments, such as oil, land, and racehorses. The Arab oil embargo in 1973 provoked an outburst of inflation and Libya’s Muammar Qaddafi nationalized Bunker’s oil fields, forcing the Texan into precious metals to protect against the declining value of the dollar. He bought silver, rather than gold, because he thought the yellow metal was “too political” and “too easily manipulated” by outside forces. Bunker worried that central bankers could sell their massive gold reserves and depress its price. Silver, on the other hand, benefited from favorable fundamentals: the demand for the white metal by industry, for use in electronics, photography, and medicine, exceeded mine production by nearly 200 million ounces a year (Warren Buffett invested in silver in 1997 for the same reason). Moreover, in 1973 the price of silver was cheap relative to gold. The price ratio of gold to silver had been about 16 to 1 for a century before the Crime of 1873, meaning that it took 16 ounces of silver to buy an ounce of gold. In 1973, before Bunker began his accumulation, the price ratio was almost 40 to 1. Bunker thought silver’s industrial uses should have boosted its price to where only 5 ounces of silver were needed to get an ounce of gold. Bunker picked 5 to 1 because it was lower than 16 to 1 but he could have gone further. In ancient Egypt silver’s scarcity and medicinal uses had made it more valuable than gold.   

Did the Hunt Brothers really manipulate the price of silver?

The Commodity Futures Trading Commission (CFTC) argued that during the second half of 1979, the Hunt brothers and their Arab collaborators coordinated a scheme to drive up silver prices in the futures markets by purchasing over 200 million ounces of the white metal, more than the combined annual output of Canada, Mexico, Peru, and the United States, the four largest noncommunist producing countries. They pressured the market by controlling more than 40% of silver in exchange warehouses and by taking delivery of almost 50 million ounces of bullion. But the alleged manipulation was not the classic corner of futures markets, where the longs prevented the shorts from delivering. As silver prices accelerated in December 1979, for example, even the CFTC said that the shorts “anticipated no difficulties in making delivery on their positions.” Moreover, the Hunts denied manipulative intent, dismissed any coordination, even among themselves, and justified their demand for silver as a hard asset to protect against global risks in the second half of 1979, when inflation reached double digit levels, Iranian terrorists invaded the United States embassy in Teheran and seized American hostages, and when the Russians invaded Afghanistan.  Disentangling the impact of the alleged manipulators from legitimate speculation took extensive litigation in this case. In a civil trial in 1988 a jury easily concluded that the Hunts conspired with others to manipulate but disagreed about the impact on prices. The jury had to distinguish between the defendants’ accumulation and the unsettling news of 1979. The CFTC argued that gold prices reflect political and economic turmoil and silver increased twice as much during 1979, providing a benchmark for damage calculation for the jury. But that ignores the historical evidence that the white metal is normally twice as volatile as the yellow. For example, during the European debt crisis following Lehman’s bankruptcy in 2008, silver rose 400% and gold increased by 250% and none of that disparity came from manipulation. That evidence came too late to exonerate the Hunts.  

How did FDR’s silver subsidy help Japan subjugate China in the 1930s?

During the Great Depression, after the price of silver hit a record low of 24¢ an ounce, Democratic Senator Key Pittman of Nevada, the powerful chairman of the Senate Foreign Relations Committee, urged President Roosevelt to reverse the Crime of 1873 and restore the white metal’s full monetary status. In exchange, Pittman promised the support of fourteen senators from western mining states for Roosevelt’s controversial New Deal legislation. FDR agreed and responded with a series of purchase programs for silver by the U.S. Treasury that ultimately doubled the price of the white metal. The higher price attracted silver from the rest of the world, especially from China, whose currency was backed by the precious metal, and ultimately forced China to abandon the silver standard when that country was most vulnerable. It was 1935 and China, led by American ally Chiang Kai-shek, faced an internal threat from Mao Tse-tung’s communist insurgents and an external threat from Imperial Japan. Roosevelt’s Treasury secretary, Henry Morgenthau, worried that China’s insecure government, weak economy, and susceptibility to Japanese aggression made her especially vulnerable to the dislocations arising from American silver policy. Morgenthau was right to worry. Roosevelt’s pro-silver program to please western senators helped the Japanese military subjugate a weakened China and boosted Japan’s march towards World War II, demonstrating the danger of formulating domestic policy without considering international consequences.  It is a cautionary lesson for putting America First today, especially since the fallout from such narrow-minded policymaking may not materialize until it is too late, just like in the 1930s.

Was the Crime of 1873 really a crime?

The Crime of 1873 refers to legislation passed by Congress on February 12, 1873, negating Alexander Hamilton’s favorite law, that both gold and silver be monetary standards in the United States, and establishing gold as sole legal tender for all obligations. The new law omitted the free and unlimited coinage of silver dollars at the mint, an option since 1792, and restricted the legal tender status of subsidiary silver coins, such as dimes, quarters, and half-dollars, to five dollars or less. The U.S. Constitution allows Congress to “coin money” and “regulate the value thereof,” so no legislator voting for the act technically committed a crime. The allegations of impropriety arose because few people realized the full consequences of the shift to gold when the law was passed. Moreover, Senate Finance Committee Chairman John Sherman, who introduced the legislation, not only failed to sound the warning bell but also soft-pedaled the bill despite knowing its importance. Sherman’s removal of the silver dollar from the Coinage Act of 1873 eroded the value of the white metal, cutting its price in half by the mid-1890s, and altering the course of American history. Twenty-five years of price deflation during the last quarter of the 19th century increased the burden of debts like mortgages which remained fixed in dollar terms even though home prices declined. The drop in wages and agricultural prices launched a generation of social combat, pitting “silverites” against “goldbugs,” debtors versus creditors, and midwestern farmers against East Coast bankers, all combining to darken the political landscape like a dust storm. Many consider L. Frank Baum’s children’s story, The Wonderful Wizard of Oz, which has entertained millions since it was published in 1900, an allegory of the contemporary class warfare. William Jennings Bryan capitalized on the social upheaval, captured the Democratic nomination for the presidency in the 1896 election with his Cross of Gold speech promoting the monetary status of silver and easier credit. Bryan lost to William McKinley, leaving silver a second class monetary metal until Key Pittman and Franklin Roosevelt joined forces to rescue the white metal in the 1930s.  

Should investors own silver today?

The worldwide experiment in fiat currency, pure paper money, that began on August 15, 1971, when President Nixon suspended the right of foreign central banks to convert dollars into gold, almost failed at the start. The newly designed freedom from precious metals allowed America’s central bank, the Federal Reserve System, to deliver easy credit in response to political pressure, spawning the Great Inflation of the 1970s and nearly destroying the U.S. dollar. But the chaos unleashed popular support for making price stability the primary objective of an independent central bank. Since then, central bank independence throughout the world has replaced gold and silver as guardian of the currency. And if central bankers do their job that arrangement will continue, but public support can evaporate, undermining banker resolve. The U.S. Congress, for example, can abolish the Federal Reserve with a simple majority vote, suggesting that America’s central bank might run a printing press when rising interest rates bring an avalanche of protest to Capitol Hill. The Federal Reserve has survived the fifty-year trial of fiat currency, but that period is less than a heartbeat in world history. The Soviet Union’s experiment with communism challenged America for world domination for the better part of the twentieth century before expiring like the worthless paper currency of Germany’s Weimer Republic. Central bankers remain on trial, and the uncertain verdict sustains the ancient role of gold and silver as storehouses of value in the new millennium.

William L. Silber is the Marcus Nadler Professor of Finance and Economics at New York University’s Stern School of Business. His many books include When Washington Shut Down Wall Street (Princeton) and Volcker (Bloomsbury). He lives in Teaneck, New Jersey.

Hassan Malik on Bankers and Bolsheviks

In a year that has seen emerging markets, including Argentina and Turkey, experience major market crashes, Hassan Malik’s Bankers and Bolsheviks is a timely reminder of the long history of emerging market booms and busts. Bankers and Bolsheviks charts the story of the foreign investment surge that made Russia the largest net international borrower in the global bond market, and the collapse which culminated in the largest default in history in the aftermath of the Bolshevik Revolution. Based on research in government and banking archives in four countries and three languages, the story is truly global. It focuses on the leading gatekeepers of international finance in Europe and the United States, showing their thinking about the most significant emerging market of the age through some of the most important events in world history.

Many scholars, writers and filmmakers have engaged with the period you chose to write about. What in particular attracted you to it?

I was always struck by how frequently financial history surveys focus on a few set stories and episodes – the Dutch Tulipmania of the seventeenth century, the hyperinflation in Weimar Germany, or the 1929 stock market crash – but how rarely they mention Russia, especially given the scale of the Russian borrowing binge in the late nineteenth and early twentieth centuries. As a banker living and working in Moscow during mid 2000s, I was constantly walking by pre-revolutionary buildings that had once housed banks. These vestiges of a previous Russian boom piqued my interest in the role of finance during the revolutionary period and inspired me to approach the subject through the archives and writings of key individual players in this drama. The Russian case was particularly interesting given that all the major players in global finance were able to participate in Russian markets. Unlike other emerging markets that were dominated by a single country or bank, the Russian story featured a diverse group of actors, and so provided an ideal vantage point from which to write about global finance during the first modern age of globalization.

What are the parallels with today’s standoff between Ukraine and Russia over sovereign debt?

Central to the book is the notion of “odious debt” – the idea that a population cannot be held liable for the debts contracted on its behalf but without its consent by an illegitimate regime. The Bolshevik default of 1918 was remarkable for reasons other than sheer magnitude. Unlike Argentina in 2001 or Greece in 2012, the Bolsheviks not only defaulted but repudiated the debts contracted by pre-revolutionary governments. It is notable that the Bolsheviks were not outliers in this respect – moderate liberals in Russia also objected to debts the Tsarist government in particular raised in international bond markets.

Fully 100 years on, the Ukrainian government is fighting Russian claims on a similar basis with respect to a bilateral loan structured as a $3bn Eurobond contracted by the government of Viktor Yanukovych in December 2013, shortly before it was overthrown in the 2014 uprising. The Ukrainian government ultimately defaulted on the loan in 2015. Like the Bolsheviks in 1918, the current Ukrainian government claims that Yanukovych was a dictator ruling without the consent of his people, and that therefore, they should not be held accountable for debts contracted by his government. Like the Bolsheviks and liberal opponents to the Tsarist regime in the early twentieth century, the present Ukrainian government is also claiming that the creditor in question actively sought to undermine and control the debtor country.

What lessons does the book hold for investors in emerging market bonds today?

Another of the book’s central messages is that investment in emerging markets does not happen in a vacuum. Politics matter, on several levels. Most obviously, managing and hedging against geopolitical risk remains very important. Global politics also influenced thinking about Russia, even amongst ostensibly clear-eyed investors. Fears of an ascendant Germany during the time period discussed in the book are mirrored in present-day apprehension about the rise of China and relative decline of “the West.” More specifically, such fears can generate biases and influence investment decisions. The strategic decisions of the first National City Bank of New York – one of the largest in the world at the time, and a forerunner to Citigroup – were heavily influenced, for example, by the wartime context, and led to a remarkable expansion of the bank’s operations in Russia on the eve of the Bolshevik revolution.

Politics also operate on a subtler level. The case of Russia, for example, demonstrates how the act of investing itself became a political act–when investors enter an emerging market, they often are aligning themselves with a particular set of political forces. Bankers in Russia at the time failed to appreciate the degree to which they were becoming entwined in domestic politics – and with the Tsarist regime in particular. Today, a similar theme is evident along the New Silk Road that China is developing across Eurasia, Africa, and the Indian Ocean as part of President Xi Jingping’s Belt and Road Initiative.

What are the implications for China’s Belt and Road Initiative?

The investment wave Russia witnessed during the first modern age of globalization was inextricably intertwined with contemporary geopolitics. While notionally private French, British, and American banks were key gatekeepers channeling capital into Russia, they did so in a particular geopolitical context. The French and Russian authorities in particular cooperated to a significant degree in channeling French savings to Russian markets. The French, however, frequently failed to persuade Russia to direct industrial orders to French firms, which often lost out to their German rivals.

In this respect, China’s Belt and Road Initiative is markedly different from the Franco-Russian financial ties of the Belle Époque. Under the BRI, China extends loans largely to developing countries for infrastructure projects built primarily by Chinese workers employed by Chinese engineering firms, using mainly Chinese equipment and materials. At a time when Chinese economic growth is slowing and there are signs of excess capacity in areas such as the construction industry, the BRI holds significant promise for China, not least since it diversifies the country’s trade routes away from contested territory such as the South China Sea. The benefit to countries receiving BRI funds is less clear. While there is little doubt that infrastructure is being built, the utility of some projects is arguable; and crucially, there is little transparency with regard to the commercial terms of the deals, to say nothing of contracting processes.

Several cases of questionable China-related deals are already evident. Before the formal launch of the BRI in 2013, Sri Lanka infamously signed a deal for a Chinese port of dubious feasibility and under terms that saw Sri Lanka’s debt balloon. When a new government faced difficulties in making payments, the Chinese ultimately took control of the strategic asset via a 99-year lease. More recently, erstwhile Malaysian premier Najib Razak signed major Chinese investment deals under the BRI. His successor has attacked the deals as shady and wasteful, and has already announced their cancellation in the amount of at least $22bn.

As the Malaysian case shows, the Chinese government – like foreign investors in Tsarist Russia – is willing to sign deals with leaders of contested legitimacy. The latter, in turn, are incentivized to seek BRI funding given the relatively higher degree of scrutiny and conditionality imposed by more traditional lenders such as the World Bank or individual developed countries. As both the Malaysian and Russian cases show, however, such an approach carries the risk that new regimes – whether they arrive through revolution or the ballot box – can question, push to renegotiate, or outright repudiate debts contracted by their predecessors.

Have emerging markets evolved, or have they repeated cycles of boom and bust that are fundamentally the same, with only superficial changes in context? Are the mistakes of the past vis-à-vis emerging markets destined to be repeated?

It would be simplistic to say that history repeats itself in emerging markets, but at the same time, financial history can be useful in thinking about historical analogs to current market conditions and potential future scenarios. Of course, government and businesses in emerging markets have evolved both over the centuries, as well as in the last several decades that witnessed the growth of “emerging markets” as a specific institutional asset class. For instance, macroeconomic management has shifted dramatically over the last 20 years in markets from Argentina to Russia, not least through the abandonment of fixed exchange rate regimes that contributed to past crises. At the same time, macroeconomic prescriptions directed at emerging markets from institutions such as the IMF, academia, and the investment community have themselves changed as investors and economists learn and re-learn lessons from the major EM crises of recent years.

Emerging markets have changed in other respects, too. Tsarist Russia attracted investors in part due to its relatively large population and resource base. Today, Russia’s demographics are seen as a handicap by investors, as is the economy’s dependence on commodity exports. Of course, even high-growth Asian economies have become victims of their success, with improvements in living standards and life expectancies contributing to ageing populations in major emerging markets such as China and India.

Nevertheless, there are strong continuities. The political dimension in particular remains very real in emerging markets, as seen in the major market moves surrounding regime changes in places such as Argentina, Brazil, India, and Malaysia in recent years. In this respect, there are strong parallels between emerging markets today and in the past.

Hassan Malik is an investment strategist and financial historian. He earned a PhD at Harvard University and was a postdoctoral fellow at the European University Institute in Florence and the Institute for Advanced Study in Toulouse. He lives and works in London.



Şevket Pamuk discusses the first comprehensive history of the Turkish economy

The population and economy of the area within the present-day borders of Turkey has consistently been among the largest in the developing world, yet there has been no authoritative economic history of Turkey until now. In Uneven Centuries, Şevket Pamuk examines the economic growth and human development of Turkey over the past two hundred years.

Taking a comparative global perspective, Pamuk investigates Turkey’s economic history through four periods: the open economy during the nineteenth-century Ottoman era, the transition from empire to nation-state that spanned the two world wars and the Great Depression, the continued protectionism and import-substituting industrialization after World War II, and the neoliberal policies and the opening of the economy after 1980. Making use of indices of GDP per capita, trade, wages, health, and education, Pamuk argues that Turkey’s long-term economic trends cannot be explained only by immediate causes such as economic policies, rates of investment, productivity growth, and structural change.

What did you try to do in this book ? / What does this book try to do?

This book examines economic growth and human development in Turkey during the last two centuries from a comparative global perspective. It establishes in both absolute and relative terms Turkey’s record in economic growth and human development and evaluates both the proximate and deeper causes of this record.

Why did you choose to focus on the last two centuries?

The Industrial Revolution that began in Great Britain in the second half of the eighteenth century had far reaching consequences not only for Western Europe but also for the rest of the world. During the next two centuries, along with industrial capitalism, modern economic growth spread unevenly across the globe. Most of the patterns of development as well as the disparities we observe around the world today have emerged during the last two centuries.

What is your main argument?

After studying the case of Turkey, I came to the conclusion that economic variables are necessary for understanding long term economic development but they do not tell the whole story. Long term economic development cannot be fully understood without taking into account the social and political environment as well as the historical causes.

What relevance does the book have for those interested in the developing countries and the economic history of developing countries?

Turkey is one of the larger developing countries. Like other developing countries, Turkey’s institutions and economy have received their share of influences from the outside. In each of the four historical periods I examine in the book, governments in Turkey pursued economic policies similar to those of other developing countries. Moreover, Turkey’s long term economic performance has been close to both the world and developing country averages during the last two centuries. For these reasons and in contrast to the more successful developing countries, Turkey is a more representative case and offers more insights into the experiences of other developing countries. Yet, in contrast to the more successful cases, Turkey’s long term economic development has not been studied well. An economic history of Turkey during the last two centuries has not previously been available in any language.

What are Turkey’s special features, in your opinion?

As is the case of other developing countries, Turkey’s institutions and economy have certainly been influenced by global forces and institutions. One of the special features of Turkey is that it has not experienced colonial rule in history. The area within the present borders of Turkey was part of a large multi-ethnic empire until the end of World War I and modern Turkey emerged as one of the successor states after the end of the Ottoman Empire. As a result, Turkey’s institutions during the last two centuries were shaped, in addition to the global influences, by the interaction between the new institutions shaped by the elites of the new nation state and those that existed, including the Islamic-Ottoman institutions of the earlier era.

Şevket Pamuk is professor of economics and economics history at Bogaziçi University in Istanbul. His books include A Monetary History of the Ottoman Empire and The Ottoman Empire and European Capitalism, 1820–1913.









Joel Mokyr: How the modern economy was born

MokyrBefore 1800, the majority of people lived on the verge of subsistence. In A Culture of Growth: The Origins of the Modern Economy, esteemed historian Joel Mokyr explains why in the industrialized world such a standard of living has grown increasingly uncommon. Mokyr offers a groundbreaking view on a culture of growth specific to early modern Europe, showing how the European Enlightenment laid the foundations for the scientific advances and pioneering inventions that would instigate explosive technological and economic development. Recently, Mokyr took some time to answer questions about the book.

How would you sum up the book’s main points?

JM: Before 1800 the overwhelming majority of humankind was poor; today in the industrialized world, almost nobody lives at the verge of subsistence, and a majority of people in the world enjoy living standards that would have been unimaginable a few centuries ago. My book asks how and why that happened. The question of the Great Enlightenment is central to economic history; a Nobel prize winning economist, Robert Lucas, once wrote that once we start thinking about it, it is hard to think of anything else.

Do we know how and where this started? 

JM: Yes, it started in Western Europe (primarily in Britain) in the last third of the eighteenth century through a set of technological innovations we now call the Industrial Revolution. From there it spread to the four corners of the world, although the success rate varied from place to place, and often the new techniques had to be adapted to local circumstances.

How is this book different from other work looking at this event? 

JM: The literature looking at the question of why this happened has advanced three types of explanations: geographical (looking at resources and natural endowments), political-institutional (focusing on the State and economic policies), or purely economic, through prices and incomes. My book examines culture: what did people believe, value, and how did they learn to understand natural phenomena and regularities they could harness to their material improvement.

Whose culture mattered most here? 

JM: Good question! Technological progress and the growth of modern science were driven first and foremost by a small educated elite of literate people who had been trained in medicine, mathematics and what they called “natural philosophy.” The culture of the large majority of people, who were as yet uneducated and mostly illiterate, mattered less in the early stages, but became increasingly important at a later stage when mass education became the norm.

So what was it about these intellectuals that mattered most? 

JM: In my earlier work, especially my The Enlightened Economy (2009), I pointed to what I called “the Industrial Enlightenment” as the central change that prepared the ground for modern economic growth. In the new book, I explain the origins of the Industrial Enlightenment. At some point, say around 1700, the consensus of intellectuals in Europe had become that material progress (what we were later to call “economic growth”) was not only desirable but possible, and that increasing what they called “useful knowledge” (science and technology) was the way to bring it about. These intellectuals then carried out that program through continuous advances in science that eventually found a myriad of economic applications.

How and why did this change happen? 

JM: That is the main question this book is focusing on and tries to answer. It describes and analyzes the cultural changes in the decades between Columbus and Newton, during what is sometimes known as “early modern Europe.” It was an age of tremendous cultural changes, above all of course the Reformation and the Scientific Revolution. Equally important was the emergence of what is known as “the Baconian Program,” in which Francis Bacon and his followers formulated the principles of what later became the Industrial Enlightenment. The success of these thinkers to persuade others of the validity of their notions of progress and the importance of a research agenda that reflected real economic needs is at the heart of the story of how the Industrial Enlightenment emerged.

So why did this take place in this period and in Europe, and not somewhere else? 

JM: Europe in this age enjoyed an unusual structure that allowed new and fresh ideas to flourish as never before. On the one hand, it was politically and religiously fragmented into units that fiercely competed with one another. This created a competitive market both for and among intellectuals that stimulated intellectual innovation. It was a market for ideas that worked well and in it the Baconian Program was an idea that succeeded, in part because it was attractive to many actors, but also because it was marketed effectively by cultural entrepreneurs. At the same time, political fragmentation coexisted with a unified and transnational institution (known at the time as the Republic of Letters) that connected European intellectuals through networks of correspondence and publications and created a pan-European competitive market in which new ideas circulated all over the Continent. In this sense, early modern Europe had the “best of all possible worlds” in having all the advantages of diversity and fragmentation and yet have a unified intellectual community.

Of all the new ideas, which ones were the most important? 

JM: Many new ideas played a role in the intellectual transformations that eventually led to the waves of technological progress we associate with modern growth. One of the most important was the decline in the blind veneration of ancient learning that was the hallmark of many other cultures. Shaking off the paralyzing grip of past learning is one of the central developments that counted in the cultural evolution in this period. The “classical canon” of Ptolemy and Aristotle was overthrown by rebels such as Copernicus and Galileo, and over time the intellectuals of this age became more assertive in their belief that they could outdo classical learning and that many of the conventional beliefs that had ruled the world of intellectuals in astronomy, medicine, and other fields were demonstrably wrong. Evidence and logic replaced ancient authority.

Was the success of the new ideas a foregone conclusion? 

JM: Not at all: there was fierce resistance to intellectual innovation by a variety of conservative powers, both religious and political. Many of the most original and creative people were persecuted. But in the end resistance failed, in large part because both people and books — and hence ideas — could move around in Europe and move to more liberal areas where their reception was more welcomed.

Could an Industrial Enlightenment not have happened elsewhere, for example in China? 

JM: The book deals at length with the intellectual development of China. In many ways, China’s economy in 1500 was as advanced and sophisticated as Europe. But in China the kind of competitive pluralism and diversity that were the hallmark of Europe were absent, and even though we see attempts to introduce more progressive thinking in China, it never succeeded to overthrow the conservative vested interests that controlled the world of intellectuals, above all the Mandarine bureaucracy. Instead of explosive growth as in Europe, Chinese science and technology stagnated.

Does the book have any implications for our own time? 

JM: By focusing on the social and economic mechanisms that stimulated and encouraged technological innovation in the past, my book points to the kind of factors that will ensure future technological creativity. First and foremost, innovation requires the correct incentives. Intellectuals on the whole do not require vast riches, but they will struggle for some measure of economic security and the opportunity to do their research in an environment of intellectual freedom in which successful innovation is respected and rewarded. Second, the freedom to innovate thrives in environments that are internationally competitive: just as much of innovation in earlier times emerged from the rivalry between England, France, Spain and the United Provinces, in the modern era the global competition between the United States, the EU, China, and so on will ensure continuous innovation. International competition and mobility ensure the intellectual freedom needed to propose new ideas. Finally, global institutions that share and distribute knowledge, as well as coordinate and govern intellectual communities of scientists and innovators across national boundaries and cultural divides, are critical for continued technological progress.

Joel Mokyr  is the Robert H. Strotz Professor of Arts and Sciences and professor of economics and history at Northwestern University, and Sackler Professor at the Eitan Berglas School of Economics at the University of Tel Aviv, Israel. He is the recipient of of the Heineken Prize for History and the International Balzan Prize for Economic History. Mokyr’s other works include The Enlightened Economy and the Gifts of Athena: Historical Origins of the Knowledge of Economy. His most recent book is a Culture of Growth: The Origins of the Modern Economy.

A Q&A with Cormac Ó Gráda, author of Eating People is Wrong

Cormac Ó Gráda’s new collection of essays on famine—which range in focus from from the economic history to the psychological toll—begins with a taboo topic. Ó Gráda argues that cannibalism, while by no means a universal feature of these calamities, has probably occurred more frequently than previously recognized. Recently he answered some questions on his book, Eating People is Wrong, and Other Essays on Famine, Its Past, and Its Future, its somber title, and his early interest in The Great Irish Famine.

O'Grada jacketWhy did you write this book?

CÓG: When Famine: A Short History (Princeton, 2009) came out, I wanted it to be my last book on the subject. So Eating People is Wrong was not a question of ‘what will I do next?’ I just realized a few years later that I had still had ideas to contribute on topics that would make for a new, different kind of book on famine. These topics ranged from famine cannibalism to the Great Leap Forward, and from market failure to famine in the 21st century; the challenge was to merge the different perspectives that they offered into what would become this new book.  The idyllic résidence I spent in the south of France courtesy of the Fondation des Treilles in the autumn of 2013 was when the different parts came together. By the end of that stay, I had a book draft ready.

What inspired you to get into your field?

CÓG: It is so long ago that I am bound to invent the answer… But I have always had an amateur interest in history—as lots of Irish people tend to have—whereas my academic training was in economics. Economic history seemed a good way of marrying the two, and that has been my chosen field since my time as a graduate student in the 1970s. I began as a kind of jack-of-all-trades economic historian of Ireland, focusing on topics as different as inheritance patterns and famine, or migration and banking. This work culminated in a big economic history of Ireland in 1994. My interest in the Great Irish Famine of the 1840s goes back to my teens, but that interest was sharpened after getting to know Joel Mokyr (also a PUP author) in the late 1970s. Economics taught me to think of the Irish in comparative terms, and that led eventually to the study of famines elsewhere. My books have all been solo efforts, but I have very lucky and privileged to write papers with some great co-authors, and some of these papers influenced the books.

How did you come up with the title or jacket?

CÓG: The title is an ironic nod to Malcolm Bradbury’s eponymous novel (which most people seem ignorant of). A friend suggested it to me over a pint in a Dublin bar. One of the themes of the chapter on famine cannibalism, to which the title refers, is the need to realize that famines not only do terrible things to people, but that people do terrible things to one other in times of famine. Peter Dougherty and his team at PUP came up with jacket. The image is graphic and somber without being sensationalist, which is what I had hoped for.

What is your next project?

CÓG: There is no single all-consuming project. A lot of my research in recent years has been collaborative work on British economic history with UCD colleague Morgan Kelly. So far the results of that work have appeared—when we are lucky—in academic journals rather than in books. We have plans to continue on this basis, but we are also involved in an interesting piece of research with Joel Mokyr on the origins of the Industrial Revolution, and that may eventually yield a monograph by the three of us. I also want to revise several unpublished papers in Irish economic history and to get them published singly or, perhaps, as a monograph. Finally, Guido Alfani of Bocconi University in Milan and I are editing a book on the history of famine in Europe. This is coming along well. The end product will consist of nine specialist country chapters, a cross-country analysis of the famines of World War II, and an overview by Alfani and me.

What are you currently reading?

CÓG: I am at page 630 (so another hundred or so pages to go) of Stephen Kotkin’s Stalin, vol. 1 (Penguin, 2014), which brings the story of Iosif Vissarionovich only as far as 1928. I have been interested in Soviet economic history since the late Alexander Erlich introduced me to the topic in Columbia in the 1970s, and this is what attracted me to Kotkin’s riveting tome—which, however, turns out to rather uninterested in the economic issues! I am also reading Maureen Murphy’s Compassionate Stranger: Asenath Nicholson and the Great Irish Famine (Syracuse, 2015), an account of an eccentric but appealing American evangelist who toured Ireland, mostly on foot, in the years leading up to and during the Great Hunger. I was familiar with Nicholson’s own published accounts of her travels, but knew very little about her otherwise, so Murphy’s book is a revelation.   My current bedtime reading is Henning Mankell’s The Man from Beijing (2010).

Cormac Ó Gráda is professor emeritus of economics at University College Dublin. His books include Famine: A Short History and Black ’47 and Beyond: The Great Irish Famine in History, Economy, and Memory (both Princeton).

Butting Heads (and iPhones): Economists Robert Gordon and Joel Mokyr Duke it Out in the Wall Street Journal

Photo Credit: WSJ.comNorthwestern Professors of Economics Robert Gordon and Joel Mokyr just can’t seem to get along.

In this past weekend’s edition of The Wall Street Journal, the two voice some distinctly adverse ideas about technological innovation in the twenty-first century – on the one hand, its success, and on the other, its stagnation.

Professor Mokyr, author of The Gifts of Athena: Historical Origins of the Knowledge Economy and co-author of The Invention of Enterprise: Entrepreneurship from Ancient Mesopotamia to Modern Times is an economic historian who’s altogether positive about the economic direction of the world-at-large. But this isn’t just blind optimism; in fact, it’s due in large part to the rapid rate of technological innovation. Mokyr notes that “new tools have led to economic breakthroughs,” and that since the field of technology is vast and unremitting, we’re hardly in danger of economic collapse.

“The divergent views are more than academic. For many Americans, the recession left behind the scars of lost jobs, lower wages and depressed home prices. The question is whether tough times are here for good. The answer depends on who you ask.”

But Professor Gordon, a macroeconomist and author of the forthcoming book Beyond the Rainbow: The American Standard of Living Since the Civil War (Princeton), and of the best-selling textbook, Macroeconomics, is hugely skeptical of such theories. He asks us to compare useful and revolutionary objects, like the flushing toilet, to the newest iPad; the former, already invented, is indispensable. Everything created thereafter is simply excess – the cherry on top, if you will. And, as new developments become only incrementally more advanced than their predecessors, technological progress will slowly grind to an anticlimactic halt.

The op-ed also gives some interesting background on both Gordon and Mokyr and tries to posit the origins of their respective beliefs, whether positive or negative. Despite their conflicts, the two can concede to one point: that the twenty-first century is unarguably the best time to be born, and the revelation is certainly an encouraging one.

Zoltan Acs on “Why Philanthropy Matters”

…For wealth to invigorate the capitalist system it needs to be “kept in rotation” like the planets around the sun, and for this task American philanthropy is very well suited. Examining the dynamics of American-style capitalism since the eighteenth century, philanthropy achieves three critical outcomes. It deals with the question of what to do with wealth–keep it, tax it, or give it away. It complements government in creating public goods. And, by focusing on education, science, and medicine, philanthropy has a positive effect on economic growth and productivity. Individuals such as Benjamin Franklin, Andrew Carnegie, Bill Gates, Michael Bloomberg and Oprah Winfrey have used their wealth to establish institutions and promote knowledge, and philanthropy has given an edge to American-style capitalism by promoting vital forces–like university research–necessary for technological innovation, economic equality, and economic security.

Philanthropy is therefore an invisible, underappreciated force for progress in American-style capitalism–the secret ingredient that fails to get mentioned in economic accounts of capitalism…

Source: “Why Philanthropy Matters” at History News Network


Zoltan Acs has a great article on the themes of his forthcoming book Why Philanthropy Matters over at History News Network.


Why Philanthropy Matters
How the Wealthy Give, and What It Means for Our Economic Well-Being
Zoltan J. Acs


New and Forthcoming Titles in Economics and Finance

catalog coverAre you at the annual Allied Social Science Associations meeting in Denver this week?  We invite you to check out our new line-up of titles.  You can now find our new 2011 Economics and Finance catalog online at:


You will find books by Raghuram G. Rajan, Max H. Bazerman & Ann E. Tenbrunsel, John Quiggin, Kaushik Basu and Diane Coyle, just to name a few.  And if you’re at ASSA on Saturday, we hope to see you at the Popular Economics panel discussion moderated by Princeton University Press’s Director, Peter J. Dougherty.

Popular Economics Panel with:

Robert Shiller (Yale University)
Robert Frank (Cornell University)
Diane Coyle (Manchester University)
Steve Levitt (University of Chicago)
Panel Moderator: Peter Dougherty (Princeton University Press)

Jan 08, 2011 8:00 a.m., Sheraton, Governor’s Square 15

Stop by and visit booth no. 311 to say hello and browse the books.  We look forward to seeing you there. For a free e-mail notification about new titles in Economics and Finance, sign up at:

New and Forthcoming Titles in History

history catalog coverIntroducing our new 2011 History catalog:
We invite you to browse and download the catalog.

There are many new titles this year to check out.  Our catalog cover image features The Whites of Their Eyes: The Tea Party’s Revolution and the Battle over American History by Jill Lepore.  This book tells the story of the centuries-long struggle over the meaning of the nation’s founding, including the battle waged by the Tea Party, Glenn Beck, Sarah Palin, and evangelical Christians to “take back America.”

You will also enjoy checking out Mumbai Fables by Gyan Prakash.  It is a sweeping cultural history of India’s largest city.  Other highlights in the catalog include titles by Louis Hyman and Margot Canaday in the Politics & Society in Twentieth-Century America series.  You can find titles by Thomas J. Sugrue, James T. Kloppenberg, Julian E. Zelizer, Emma Rothschild and many more in the history catalog.  From U.S. history to Asian history, the catalog covers the globe.

If you’re attending #AHA2011 in Boston this week, please make sure to stop by our booth no. 420 to say hello and browse the books.

You can also learn about new books by signing up for our e-mail notification service at:

Your e-mail address will remain strictly confidential.