Economic and historical studies have long focused on trans-Atlantic expansion as one decisive explanatory variable for the success and failure of European economies' performance in the early modern period. This is particularly true for Spain. However, more recently internal economic developments, most notably the very distinct economic paths of Spain's regions in the sixteenth and seventeenth centuries, have been emphasised as a major reason for Spain's poor economic development. Surprisingly, few systematic attempts have been made to discuss the links between the external and internal factors in Spanish economic history.

This article discusses agency problems in a period of market boom. It takes Portuguese trade with Brazil as a case study to discuss the impact of colonial market expansion on social capital. The hypothesis is that social capital depletion prompted an uneven distribution of information and a limited access to honest individuals, who might afford a premium to certain forms of agency. Given the states' inability to provide legal sanctioning in colonial regions, this article focuses on private-order mechanisms which were effective for selecting reputable individuals. The exploration of network analysis identifies the mechanism that responds to such an adverse environment and supports the argument that business organizations which counted on the geographical mobility of agents had comparative advantages. The approach followed in this article brings new insights on informal institutional arrangements and on itinerancy in contexts of low levels of social capital.

Canada has perhaps the longest track record of adhering to a floating exchange rate regime, but it may well also have been the first country to adopt a managed float during the 1950s. In spite of criticisms levelled at the Canadian government's decision to float the dollar, the remarkable feature of the behaviour of the exchange rate during the so-called float is the relative stability of the nominal exchange rate, and the small volatility in its movements. This article stresses the impact of foreign exchange intervention in limiting exchange rate appreciations and in moderating exchange rate volatility, using newly found, and heretofore unused, intervention data. Until now, all studies of Canada's experience with the float have relied on official foreign exchange reserves data. A counterfactual experiment also suggests that nominal exchange rate levels, and variability, would have been different had there been no foreign exchange market intervention.

For many years, Greg Clark was mainly known amongst economic historians for two things – his devasting book reviews are as witty as they are insightful. He also invented a signature recipe for academic articles. Start with a fresh puzzle. Chop some theory and carefully knead into puzzle. Gently squeeze some data and mix well. Garnish with a racy dressing of Cambridge-honed essay-writing skills, while stirring the pot. Then, turn up the heat and watch how the puzzle slowly mushrooms into an ever larger paradox. Wrap into some mystery and serve as is.

Traditional explanations for Western Europe's demographic growth in the High Middle Ages are unable to explain the rise in per capita income that accompanied observed population changes. Here, we examine the hypothesis that an innovation in information technology changed the optimal structure of contracts and raised the productivity of human capital. We present historical evidence for this thesis, offer a theoretical explanation based on transaction costs, and test the theory's predictions with data on urban demographic growth. We find that the information-technology hypothesis significantly increases the capacity of the neoclassical growth model to explain European economic expansion between 1000 and 1300.

This article presents a model of the transformation of the Central European economy between the years 1000 and 1800. On the basis of assumptions about the social environment, the actors, and the relations between them, deductions are made that are compared to actual historical developments. The model explains why competitive markets emerged in the high Middle Ages, why anti-competitive corporations and states developed in the period up to the seventeenth century, and why institutions safeguarding market exchange began to be introduced in the course of the eighteenth century.

This article revisits the German system of fiscal federalism between unification in 1871 and hyper-inflation in 1923. I argue that the ill designed fiscal system led to systematically excessive debt for the Reich. The system was the outcome of overlapping distributional conflicts between centre and states, and between capital and labour. It was also responsible for the debt problems arising in World War I and the unsuccessful attempts at fiscal reforms during and after the war. Ultimately, these distributional conflicts contributed to the hyper-inflation in Germany. The German example also has implications for the debate about fiscal federalism in the European Union.

In this article we investigate the relationship between structural change – defined as the distribution of value added between the industrial branches – and transformation pressure in Swedish industry 1870–1993. The objective is to investigate signs of a change in this relationship during the 1970s. Quite surprisingly, the investigation showed the change occurred in the early 1950s. The rate of structural change is estimated by using an angle measure and is then compared with the dispersion of gross profit shares (GPS) between nine branches of Swedish industry. The dispersion of GPS is used as an indicator of the transformation pressure. A good correlation was present until the early 1950s, when a change in the relationship between GPS dispersion and actual structural change was observed. Furthermore, we suggest that the change in the relationship may be understood either as the result of institutional factors affecting the resource allocation or as an outcome of growth itself, supported by the hypothesis that a higher capital intensity led to market concentration and natural barriers to entry, possibly reinforced by a higher degree of specialisation

This article examines important aspects of the interaction between the fiscal history and political events of tsarist Russia's final years in the light of macroeconomic theories of government budget constraints. Using econometric tests of intertemporal stability and techniques of intervention analysis, I find that tsarist Russia had achieved a sustainable peacetime balance in its fiscal relations by the eve of World War I, but that this balance was lost under the strain of wartime financial difficulty.

The history of public finances in Portugal from the middle of the nineteenth century to World War I is distinguished by the pursuit of an ambitious programme of public investment in infrastructure, and by the negative financial consequences this elicited, culminating in the 1892 default. In this article we approach the Portuguese financial history of this period with a relatively new methodology for evaluating financial sustainability, which emphasises the inter-temporal nature of government budgeting. The results obtained allow us to quantify the distance that separated Portuguese finances from a sustainable path throughout the period. Although the generational imbalance of Portuguese finances at the time seems massive in the context of today's benchmarks, its economic and financial impact should have been more limited, given the government's relatively low weight in the economy and the favourable demographic pattern.

Recent research on the Great Depression has concluded that a worldwide decline in aggregate demand, emanating from the United States, was propagated into a fall in real activity through sticky nominal wages. The question remains: Why were nominal wages so sticky? Based on a wide range of evidence for Sweden, I argue that the 1930s depression is compatible with a coordination failure in wage setting, as first suggested by Keynes.

The evolution of the welfare state in the twentieth century has changed local public finance considerably. This article investigates determinants of local public spending in Norway since the 1930s with an emphasis on the fiscal year 1934–35. We document huge variation in local government spending in 1934–35. The disparities initiated several reforms in the 1930s with the aim of reducing the inequality. The changes in regional policy over time are illustrated by correlation coefficients between municipal spending and private income. The correlation is strongly positive in 1934–35, but is reduced over time, and has been negative since the 1970s. We find that the variation in spending between local governments is reduced over time mainly for two reasons. First, while the elasticity of municipal spending with respect to private income is fairly constant over time, the variation in private income has become smaller. Second, grants from the central government have become a larger part of the local governments' budgets and are to an increasing degree used for redistributional purposes.

Germany's historical national accounts are controversially discussed in a series of recent papers by Fremdling and Stäglin (2004, 2005), Ritschl (2004) and Burhop and Wolff (2005). The growth of the German economy during the nineteenth century, the level of economic development reached in 1913 and the depth of the interwar slump are the major points of concern. This short article contributes to this debate by providing a benchmark estimate of labour productivity in mining, crafts and industry in 1913 using official input–output data. We confirm earlier results by Burhop and Wolff (2005) that the level of labour productivity in 1913 was much higher than the classical work by Hoffmann (1965) suggests.

The article examines the behaviour of two leading English clearing banks, the Midland and Westminster, during periods of financial distress suffered by a sample of business clients during the early postwar decades. Such periods provide valuable insight into the nature of bank–business relationships at that time for, in a sense, bank reaction during periods of financial difficulty for client firms helps define the limits to bank support and commitment to such firms. The article examines the banks' behaviour within the context of a transaction bank model (as opposed to what might be termed a relationship bank model) and the results are compared with those of an earlier study by the authors of pre-First World War bank practice. The results show that the banks did operate many of the control mechanisms associated with transaction banking and that the proficiency of such controls ensured that the banks' interests remained reasonably secure even for the high risk loans under study. Importantly, however, the evidence also shows that the banks did not exercise a stark choice between, on the one hand, supporting clients while relying upon traditional control mechanisms, and, on the other, withdrawing support. In a significant number of cases, the banks were prepared to invest in gathering more information on a client's business, and in trying to influence the direction of that business. This suggests a more informed and interventionist approach by the banks in these cases compared to the findings in the pre-1914 study. For the sample of cases examined, it seems that while much of the behaviour of the two banks remained consistent with the transaction bank model, compared to our pre-1914 findings there was also a greater tendency towards a more flexible, ‘hands-on’ approach in extremis. In these cases, English bank behaviour was similar in some respects to that of the more interventionist European banks, and less like that predicted by the transaction bank model.

This article examines private Austrian investment in the Hungarian economy as an example of private financial investment in a backward foreign economy in the late nineteenth century. The main finding is the dominant role of Austrian investment in institutional securities such as Hungarian state bonds and bank securities, which comprised a steadily rising proportion in the portfolios of investors. The only other important sector of the Hungarian economy that was invested in directly was the transport system, which depended on the fluctuations in the development of the Hungarian economy rather than on long-term trends. Securities of the manufacturing sector did not attract the interest of most Austrian investors. Banks and the state thus constituted an element of stability in the Hungarian economy and helped it to acquire funds that could not be provided by the domestic market.

During World War II the Allies controlled Spain's oil supply in order to limit Spain's support for the Axis. This experiment with sanctions is unusually informative because a wide range of policies was tried over a long period. Three episodes are of special interest: (1) a total embargo on oil for Spain in August 1940 that was surprisingly successful in dissuading Spain from joining the Axis; (2) a period of reduced supplies in 1941–42, which we call ‘the Squeeze’, that was only partially successful in reversing Spanish policies favouring the Axis; and (3) a second total embargo early in 1944, which proved a disappointment for the Allies, and that produced a rift between Churchill and Roosevelt. Our analysis is based on new monthly estimates of Spain's imports of gasoline and other petroleum products that we describe in the text and report in the Appendix. These estimates allow us to draw a clearer picture of the oil sanctions than has been possible in the past.

This article presents the results of an extensive inquiry into urban consumption of foodstuffs in Flanders between 1800 and 1860. The octroi tax, an indirect tax levied on various consumer items, formed the principal source. During the initial phase of Belgian industrialisation the inhabitants of the eight cities under study (Antwerp, Bruges, Brussels, Courtrai, Ghent, Lokeren, Leuven and Mechelen) experienced a sharp decrease in the consumption of bread grains, meat, fish, beer, wine and gin. A number of other indicators suggest at the same time an accelerated widening of the gap between rich and poor. This process of impoverishment and pauperisation, which occurred in all cities (small or large, industrial or merchant centre), is explained as a result of Malthusian tensions. The rapid population growth, which started around 1750, generated the division of arable land and a sharp increase in land prices. The growing demand for food, stagnating agricultural output, and the trade and agricultural policy of the government led to a significant increase in the price level of foodstuffs. The capitalism hypothesis of Lis and Soly, elaborated for Antwerp, is rejected.

The secular process of convergence in income and product per capita among industrial countries has attracted much well-deserved attention. In Western Europe especially, the cradle of modern industry, this attention has focused on the ways in which ‘follower countries’ have caught up with (or fallen behind) the long-time ‘regional’ technological leader, Great Britain. In this context, a long tradition considers France as offering the standard alternative to modern British economic institutions and development (Kindleberger 1964). With regard to economic performance, however, it is only recently that claims have been backed by systematic quantitative evidence. Despite sometimes conflicting interpretations, a consensus view has gradually emerged (Crouzet 2003) which concludes that the Anglo-French gap in income and productive capacity slowly closed from the mid-nineteenth to the mid-twentieth century, reconciling ex post calculations with some of the conclusions of enlightened contemporaries and later historians (Bairoch 1982, Crafts 1984). After World War II and the introduction of standardised national accounts, the course of productivity and real income per head in both countries is much better documented and suggests the completion of the secular catching-up process by the 1960s (Van Ark 1990). However, between the ‘controlled conjectures’ of the pre-World War I era and the quasi-certainties of post-1945, the interwar years still remain a grey zone. During the 1920s, Britain's industry, marred by industrial unrest, mass unemployment and loss of competitiveness, is supposed to have fared especially poorly compared with its competitors, Germany and the US. In a book published in 1931, a French scholar, André Siegfried, claimed that Britain was descending along the path of industrial decline (Siegfried 1931). By this time, France had completed its postwar reconstruction, the value of the franc had been stabilised, and the French economy was in full swing: in 1930 French public opinion basked complacently in the belief that the country would be spared the devastating effects of the depression sparked by the Wall Street crash.

This paper challenges the widely held view that tariff protection was the major factor in explaining the poor performance of Spanish agriculture in the half century prior to the 1936 Civil War. After examining the general level of tariffs, it is argued that these were not sufficient in themselves to explain either the poor diets or weak demand for manufactured goods. Secondly, farmers were slow to switch resources out of cereals, not so much because of the tariffs, but rather because of the limited export opportunities for alternative crops, especially olive oil and wine. Finally, the evidence suggests that those areas which saw a significant increase in the area of cereals were just as likely to see a decline in the agricultural population as those that did not, suggesting that the rural exodus was determined by factors other than the tariff.

For fifteen years economic historians have discussed whether the German economy suffered from a ‘crisis before the crisis’ during 1925–29, and if so, why. Apart from wages, the most widely debated issue is Weimar's investment record. The contributions so far have relied on the database of Walther Hoffmann which allows a comparison of Weimar's net investment and net product with the pre-World War I period. In this paper, alternative time series for gross fixed investment and gross national product are compiled for the period 1901–32. These data confirm Weimar's poor overall economic growth. However, it appears that Weimar's aggregate investment ratio was quite ‘normal’, if compared both intertemporally with the late Empire and internationally with other major economies in the 1920s. It is argued that further discussion of Weimar's investment record should focus on the productivity of private and especially of public investment rather than on its aggregate level.