Did British Capitalism Breed Inequality? by Jeffrey G. WilliamsonReview by: Mary MackinnonThe Canadian Journal of Economics / Revue canadienne d'Economique, Vol. 18, No. 4 (Nov.,1985), pp. 923-926Published by: Wiley on behalf of the Canadian Economics AssociationStable URL: http://www.jstor.org/stable/135103 .

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Reviews of books Comptes rendus 923

Policy' and the annual growth rates of various sectors. He notes that over the past two decades, Austrian industrial output has almost tripled, with only a small increase in the labour force. More than 50 per cent of Austria's industrial production is exported. Government-owned firms employ 110,000 workers out of the total industrial labour force of 630,000. A variety of industrial policies are briefly described, with the suggestion that general investment incentives and stimuli for backward regions have received most of the government funds, while sectoral industrial policy has aroused controversy.

Karl Vak compares Austrian economic experience with that of other OECD

countries in order to evaluate 'The Competitiveness of the Austrian Economy.' Austria's relative price stability rests on elements already discussed in the volume and, together with rapid productivity increases and a high propensity to save and invest, gives Austria an enviable international trade position. Vak seems optimistic about a continuation of this situation, particularly in view of specific policies to assist exporters.

Helmut Haschek extends Vak's analysis in a broader discussion of 'Trade, Trade Finance, and Capital Movements,' indicating the interdependencies between these three variables. Even direct foreign investment is linked with trade, and has reached a substantial level, with 3,000 foreign-owned companies employing 420,000 workers. Tourism, he notes, should not be ignored, since income from tourism amounts to one-third of that from the export of goods.

Throughout the volume, discussants' comments cast critical light on these papers and also add some interesting analysis. William Branson, for example, examines the rationale for export subsidies, while Jan Tumlir questions the value of industrial policy in general. The editor, Sven Arndt, has provided introductions to the two sections which assist in placing the nine major papers in an appropriate perspective. The structure of the volume still, however, remains somewhat disjointed. A reader can find other books on the Austrian economy that proceed in a more logical and consistent manner. The special value of the book lies in the variety of views it contains - including those of Austrian policy-makers as well as those of foreigners -- all focusing on the special problems and choices faced by a small, open economy that has close economic linkages with a much larger neighbour.

DAVID CONKLIN

Did British Capitalism Breed Inequality? by Jeffrey G. Williamson. Allen & Unwin, Inc., 1985. Index Pp. ix, 270. $28.50 U.S. ISBN 0-04-942186-7

For the past five years, readers of economic history journals have enjoyed a series of articles by Professor Williamson which challenge some widely accepted views and enter into longstanding and heated controversies about the effects of the British industrial revolution on wage and income levels and

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inequality from the mid-eighteenth to the early twentieth centuries. In this book Williamson integrates the diverse strands of his recent research. It is thus an extremely useful supplement and extension to his already published work on the subject, and serves as a comprehensive exposition for the general reader.

Williamson's aims in this book are to document and then provide explanations for marked changes in inequality over time. At the very simplest level his main conclusions can be summarized as follows. Inequality rose sharply from the end of the Napoleonic wars to 1870 and declined thereafter, tracing out a Kuznets curve. Rates of population growth were of little importance in explaining changing patterns of inequality, because the capital/labour ratio rose at a roughly constant rate throughout the period. Rather, the driving forces behind the upswing in the Kuznets curve were unbalanced productivity growth, which put a high premium on skills in the manufacturing sector, and the inelastic supply of skilled labour to the rapidly growing sectors. Late in the nineteenth century more balanced growth occurred, the supply elasticity of skills increased, and a more equal distribution of incomes and earnings is observed. World market conditions and British commercial policy tended to dampen fluctuations in the Kuznets curve. The Corn Laws benefited unskilled labour-intensive agriculture. Falling prices of imported foodstuffs late in the century bolstered the real wages of skilled workers, while for agricultural labourers, the effects of lower food prices were largely cancelled out by the decline in the demand for their labour. The frequent, large-scale, wars of 1760-1815 are held responsible for the slow growth of the British economy during the classic industrial revolution period. Crowding out, Williamson argues, sharply reduced rates of capital deepening and industrialization. Wartime conditions led both to minimal improvements in living standards, and the absence of increasing inequality until after Waterloo. Without the wars, Williamson asserts, the first industrial revolution would have borne many more similarities to the patterns of development observed in other countries.

Williamson's hypotheses should stimulate discussion in several branches of both economics and history. Non-specialist readers, however, may accept his statistical evidence too readily. The most serious reservations I have about this book relate to the ways in which the underlying data are presented and used to demonstrate the existence of a Kuznets curve. Economic historians are always plagued by gaps in our data sets. Williamson shows great ingenuity in finding sources, but it is far from clear how relevant some of this new information is. Without considerably more discussion of his data, it is impossible to accept his conclusions about observed trends in earnings and incomes.

Two sources which may be inappropriate are pauperism returns and public pay records. When re-estimating social tables to derive measures of income inequality, Williamson uses pauperism statistics to provide information about those at the bottom of the income distribution. In principle, this is a promising source, but extreme care must be taken in comparing eighteenth and early

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Reviews of books Comptes rendus 925

nineteenth century levels of pauperism to those of the later nineteenth century. Williamson's explanation of the ambiguities and inconsistencies of pauperism statistics is inadequate. Readers should consult Williams (1981) Chap. 4.

Estimates of wage earnings (and therefore pay ratios and skill stocks) are derived from nominal wage series for eighteen adult male occupations. The public pay records used as the source for several of these series may not be indicative of wage trends in the occupational categories they are applied to. In particular, the earnings of messengers and porters (5-10 per cent of the unskilled workers in this sample) are very high. They are above the seventieth percentile in earnings distributions, with wages comparable to those of skilled workers such as printers and cotton spinners. Their wages are usually well above any other unskilled category, including coal miners working under- ground - a group known to have been relatively well paid (Hunt 1973, 79). Messengers and porters are classed as 'white collar employees' (11), and perhaps those in public employment were. However, for 1851-1911 males aged 10+ with such occupations as coalheaver, porter, and labourer and coke, charcoal and peat cutter or burner are included in the messenger and porter category (Williamson, 1982, 27, 31). Imputing adult wages to the many boys hired as messengers must be misleading, and it is hard to believe that charcoal burners (etc.) were paid up to twice as much as non-farm common labour. Perhaps readjustment of his data to remove these obvious anomalies would be of no importance. It is advisable, however, to at least explore the possibility. Williamson acknowledges that his earnings data relate only to a subset - and perhaps an unrepresentative subset - of the occupied population. Excluding agricultural labourers, the other seventeen occupations represent 15-25 per cent of the total occupied population outside of agriculture (234). He does not, however, report the effects of imputing wage trends to various unrepresented occupations. Is it necessary to employ highly improbable assumptions for the observed Kuznets curves to vanish? If so, Williamson's arguments are greatly strengthened. Given that the rest of the book presumes Kuznets curves do exist, it is vital that a full explanation of the construction of statistics be provided.

Although Williamson points out many of the weaknesses in his data, very few of his tables indicate any range of estimates. Often, several different point estimates (e.g., different inequality measures) are provided. If all, or most, show a similar trend the trend is asserted to exist. Given the large margin of error underlying all historical data, checking to see whether results still hold after allowing for a standard error of 10-20 per cent is usually a sensible rule of thumb. Applying such a 'test' to the tables in the first four chapters of this book casts some doubt about the timing and shape of Kuznets curves for Britain. For example, (40, table 3.2), the economy wide earnings share of the top 5 per cent of males was 20.46 per cent in 1827, 27.4 per cent in 1851, 25.34 per cent in 1881 and 22.65 per cent in 1901. If two of these estimates are incorrect by 3 percentage points - for example, 20.46 per cent, 24.4 per cent, 25.34 per cent, 25.65 per cent - inequality trends appear very different.

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It is unfortunate that it was not possible to provide an extra twenty to thirty pages of appendices explaining the sources, construction, and robustness of the series used. The forty-four pages of appendices provided are useful for any serious student, and there are some attempts to explore the implications of the means used to construct data, but far more of this is needed. While many series are discussed at length in published sources, Williamson regularly refers to further material in unpublished discussion papers. Within a few years, these 1978-80 discussion papers will be virtually unobtainable.

The general equilibrium model Williamson develops is appealing, and it may explain the phenomena he believes occurred. As with the data section, however, there is little emphasis on testing his model. Considerable space is devoted to a discussion of simulations of the model, and readers are repeatedly assured that predicted values are 'close' to actual values. To evaluate these statements, other models, incorporating different hypotheses about the behaviour of economic agents and the structure of the economy, must be simulated so as to provide some basis for comparison.

This book deserves to be widely and critically read, and it will undoubtedly generate considerable further research and debate on the nature of inequality in Britain.

REFERENCES

Hunt, E.H. (1973) Regional Wage Variations in Britain, 1850-1914 (Oxford: Claren- don Press)

Williams, Karel (1981) From Pauperism to Poverty (London: Routledge & Kegan Paul)

Williamson, J.G. (1982) 'The structure of pay in Britain, 1719-191 1.' In P. Uselding, ed., Research in Economic History, Vol. 7. (Greenwich, CT: Johnson Associates)

MARY MACKINNON Queen's University

International Monetary Economics by Jiirg Niehans. Baltimore, MD: Johns Hopkins University Press, 1984. P. XII, 340. Index. ISBN 0-8018-3021-4

Niehans' objective in writing this volume is to provide a comprehensive, balanced and integrated survey of developments in international monetary economics over the past fifteen years. I. think he has succeeded admirably. The lucidity, rigour, and conciseness which characterized The Theory of Money (1978) can be found here as well. However, less emphasis is placed on the micro-economics of the demand for money in order to provide a detailed treatment of money and relative prices. Upon reading this book I was struck by the judiciousness which Niehans displays in his choice of material. In fact, I think this text comes as close as possible to offering a self-contained, first-year graduate course in international money, and I suspect it will become the

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