H-France Review Vol. 1 (February 2001), No. 1
Karl Gunnar Persson, Grain Markets in Europe, 1500-1900: Integration
and Deregulation. Cambridge: Cambridge University Press, 1999. xx
+ 173 pp. Sources, bibliography, index. $59.95 U.S. ISBN 0 521 65096 8
Reviewed by Jonathan J. Liebowitz, University of Massachusetts Lowell.
Recently economic historians have turned their scholarly attention to
answering persistent questions about the creation and expansion of markets.
When were markets invented or have they always existed? How can a market
economy be defined? Do markets come about naturally or are they created?
Are certain institutions necessary for markets to function efficiently?
Do markets make people better off? Some of those who have been answering
those questions include Jeffrey Williamson, who, with several collaborators,
has explored the creation of global markets. Winifred Rothenberg has studied
the creation of a market economy in New England between 1750 and 1850.
Closest to the concerns of the book under review, Judith Miller has written
about the officials who slowly developed a practical understanding of
the French and international grain markets and brought a functioning free
market into existence by the late nineteenth century.[1] These scholars
examine the technological, institutional and ideological causes for the
expansion and integration of markets and consequences of that integration.
They all conclude that by the late nineteenth century, if not earlier,
markets in the Atlantic world were integrated.
Karl Gunnar Persson adds his corroboration as he ranges over much of
Europe, from Scandinavia to Italy, to demonstrate the processes and explain
the causes of market integration over the course of four centuries. In
addition to the remarkable geographical scope, the author manages to cram
into 155 pages of closely-reasoned text a myriad of approaches ranging
from Amartya Sen’s idea of "compatibility to function" to the ideas of
Enlightenment economists and modern statistical tests for cointegration.
Many varieties of historians and economists will appreciate the concepts
and information they find here, even if they may not grasp fully all the
parts of the book. Readers may find the text a bit jumpy and the separate
chapters not always arranged so that the progression from one to the other
flows smoothly. Yet perseverance will be rewarded because the author’s
judicious conclusions have a lot to tell us about the development of French
and European society. Probably too specialized and difficult for an undergraduate
audience, Grain Markets in Europe is highly recommended for graduate students
and scholars.
Persson begins with a discussion of how those he calls les economistes
argued in eighteenth-century France against centralized government control
of food provisioning. They believed that only free trade could produce
price stability. Instability was damaging to agriculture because it discouraged
farmers from improvements by reducing their returns. Price declines in
years of good harvest would not be balanced by increases in years of crop
shortage because demand would then decline. Persson then translates these
ideas into modern economics and uses graphs and numerical examples to
show that for the majority of peasants “the decisive advantages of integrated
markets were that they could benefit from a good harvest” (p. 17).
If it is true that integrated markets produce greater price stability
because abundant harvests and shortfalls in different locations cancel
each other out, then the question is how different segments of society
would be affected by price stability. Persson continues his theoretical
discussion by arguing that with the possible exception of large landowners,
all would benefit from integration. Small holders in a segmented market,
notably “faced the worst of both worlds” (p. 28). They received less for
their surplus in times of abundance and could not benefit from a rise
in price by selling their scarce crops during a bad harvest because substitute
goods would rise in price too. Persson concludes that, as Cormac O Grada
shows for the Irish Famine, because “a poor harvest is a real output decline”
(p. 31) no one benefited; even landlords found they couldn't collect their
rent.[2] On the most basic level of health and survival, stability was
superior to fluctuation around the mean.
After his analysis of theory, Persson looks at what actually happened.
By how much did quantities fall short to produce the recorded price increases?
Is it true, as often alleged, that demand was highly inelastic and that
a small drop in the amount produced would yield a large rise in price
(and thus markets exacerbated price instability)? Using yield data (Aside
from broad contemporary estimates of shortfalls, output data are not available),
Persson concludes that “price variations were responses to large, rather
than small, variations in supply” (pp. 62-63). For technological and other
reasons, neither space nor time constraints to market integration could
be overcome. In simpler terms, transporting grain from one place to another
was expensive and storing it from one harvest year to another was rare.
So the market rules and price management adopted by early modern governments
were rational responses to market failures. Persson agrees with Miller
that by the eighteenth century market regulators had become sophisticated
enough to know that limited intervention would produce the best results.
The next element in Persson’s tightly reasoned argument is that “changes
in transport and information technology increased opportunities for trade
and arbitrage and stimulated integration of markets” (p. 91). To establish
the truth of this hypothesis, there must be a way of measuring the extent
of market integration. While at first glance it would seem that the obvious
indication of integration would be identical prices for the same commodity
in two places, transport costs and quality differences make the “constant-price
ratio” (p. 93) the more useful measure. The rapidity with which prices
in different markets returned to this ratio is the measure that Persson
uses to determine the extent of market integration. He finds that between
the seventeenth and nineteenth century the speed of adjustment fell from
years to two to three months. A decline in price volatility over the same
period may also be taken as a sign of increasing market integration. Rothenberg
and O’Rourke and Williamson use the simpler measure of price convergence
in different markets.[3]
In his conclusion, Persson returns to political questions: How did governments
remove themselves from grain market regulation between 1760 and 1860?
He believes that the inertia favoring regulation was overcome first by
the authoritarianism of enlightened despotism and then by a change in
public sentiment “from grain market regulation to entitlement protection”
(p. 135), that is, income support for those hurt by bad times. Examples
of different approaches may be found in the hesitations of Swedish policy,
the more radical reforms by the Tuscan Habsburgs (helped by good market
performance), and the latecomers in the Austrian Empire and Prussia.
In France the ideological shift appears in a comparison of policies toward
the food crises of 1812 and 1816-17. Whereas in the first the Napoleonic
government resorted to controls--though the prefects were often hostile
to this return to the old order[4]--by the time of Louis XVIII the government
had adopted the ideology of “the primacy of the market” (p. 149) and would
not tolerate deviations on the part of local officials.
Markets were deregulated but only after the junction of a diverse set
of causes ranging from liberal ideology to improvement in living standards
and transportation and communication technology and “new ways for governments
to rectify market outcomes” (p. 155). The strengths of Grain Markets in
Europe lie in its introduction of these many elements and explanation
of the connections between them. If it is true that globalization in the
twenty-first century is a return to the integration of markets for goods,
labor, and capital that peaked in the late nineteenth century, then Persson
may have something to tell us about current globalization and its discontents.
NOTES
[1] Kevin H. O’Rourke and Jeffrey G. Williamson, “When Did Globalization
Begin?” Working Paper 7632, National Bureau of Economic Research, 2000;
O’Rourke and Williamson, Globalization and History (Cambridge, MA,
1999); Winifred Rothenberg, From Market-Places to a Market Economy
(Chicago, 1992); Judith A. Miller, Mastering the Market: The State and
the Grain Trade in Northern France, 1700-1860 (Cambridge, U.K., 1999).
[2] I have arrived at the same conclusion for French landlords during the
agricultural crisis of the 1880s. Despite leases providing for fixed rents,
they had to accept less during the crisis.
[3] O’Rourke and Williamson, “When Did Globalization,” Table 1; Rothenberg,
95-101.
[4] Miller (pp. 198-235) believes that Napoleon’s policy was a reversion
to one that was already being discarded. Its failure was the last nail in
the coffin of government control of markets.
Jonathan J. Liebowitz,
University of Massachusetts
Lowell, Massachusetts
Jonathan_Liebowitz@uml.edu
Copyright © 2001 by the Society for French Historical Studies, all rights reserved. The Society for French Historical Studies permits the electronic distribution for nonprofit educational purposes, provided that full and accurate credit is given to the author, the date of publication, and its location on the H-France website. No republication or distribution by print media will be permitted without permission. For any other proposed uses, contact the Editor-in-Chief of H-France.
H-France Review Vol. 1 (February 2001), No. 1
ISSN 1553-9172
