Digging into the Market Transition

From Market-Places to a Market Economy Winifred Barr Rothenberg, 1992

Two things to note: First, WBR is a professor of economics at Tufts University.  Second, this book is substantially a compilation of a series of articles that appeared (partly) in Agricultural History and (mostly in) The Journal of Economic History.  Some of Rothenberg’s opinions about the “moral economy” model appear in a review of Hahn and Prude’s Countryside in the Dec. 1987 Reviews in American History, titled “Bound Prometheus.”

Through extensive primary research and mathematical modeling, Winifred Barr Rothenberg came to the conclusion that the “capitalist transition” began around 1750, and was substantially underway in rural Massachusetts by 1800. While she performs a little sleight of hand navigating between a tight, economist’s definition of capital and markets, and the expansive, politically charged language used in the historians’ market transition debate, Rothenberg uncovers some really valuable data which helps advance our understanding of events, wherever we stand on the “social vs. market” historiographical spectrum.

Economically, Rothenberg rests her evaluation of whether markets are operating on a combination of two related ideas. “Synchronicity and convergence in the behavior of prices,” she says, “is an acknowledged diagnostic of the role of market forces in their determination” (xiv). As transportation and communication improvements allowed farmers to participate in distant markets and to use price cues from those markets as guides in their local exchange relationships, Rothenberg says “markets embedded within and constrained by values antithetical to them within the culture” evolved into “the 'disembedded' market whose values penetrated and reinvented that culture” (3).

Rothenberg is drawing from and commenting on a long lineage of sociological, economic, and cultural critique, in a way that seems unnecessary and overly polemical. She borrows the word “disembedded” from Karl Polanyi, with all its political baggage. The idea that price synchronicity defines a market economy is Braudel’s, while the concept of convergence Rothenberg adds to it comes from Alfred Marshall (20-1). As she’s pulling these two ideas together, Rothenberg considers and rejects Marc Bloch’s suggestion that a market exists when people don’t simply buy and sell, but “live by buying and selling” (20). How would you measure that? she asks. A good question, but difficulty measuring the effects of an idea doesn't disprove it. And her assumption that price convergence led to a radical change in the culture's understanding of markets has a long lineage -- but that fact doesn't prove its validity, either. So the question is, does Rothenberg prove this point with her data?

I’m less interested in the general question of when “market-place economies” become “market economies,” than with how the market expanded into rural Massachusetts. The breakdown of Puritan strictures against usury seems likely to be a part of this change, as Rothenberg suggests. But if this is caused by the introduction of “the fundamental assumption of modernity...that the social unit of society is not the group, the guild, the tribe, or the city, but the person,” how did that work?  (quoting Daniel Bell,
The Cultural Conditions of Capitalism, which maybe I should look at for an answer. 15) It’s all well and good to observe that “the market (for better or worse) objectifies some of the culture’s most cherished values,” but Rothenberg seems to say it also created these values, without resorting to cultural or intellectual history or mentalités.  This is important, because if we can agree on the values (for example, “the sovereignty of the individual,” 16), we can then begin examining what happened and asking if events and actions were consistent with these ideals?  Did “market” ideas matter?  Did they direct change?  Or did they just serve as rhetorical cover for other processes and other goals?

In any case, Rothenberg finds some great material! Here’s George Washington to Arthur Young, Dec. 5 1791: “The aim of farmers in this country is, not to make the most from the land, which is or has been cheap, but the most from labour, which is dear: the consequence of which has been, much of the ground has been scratched over, and none cultivated or improved as it ought to have been” (25). Throughout the book, Rothenberg shows that farmers’ actions can be understood as economic decisions (and often sophisticated and reasonable ones) reflecting more knowledge and understanding of their environment and options than they are normally credited with having. This is extremely helpful, even if I don’t go as far as she does in rejecting the influence of other sources of information and values on farmers’ decisions.

The moral economy model, as Rothenberg sees it, involves four basic features. Its members, being risk averse (because the whole point of the moral economy is the extremely tenuous nature of early modern existence) prefer “minimizing expected losses over maximizing expected gains” (reminds me of Cronon's application of Liebig's Law in
Changes in the Land. 29). Individualism is “subordinated to community norms,” and “The two institutional pillars of the market system--the rule of contract and private property--are conspicuously absent” (quoting Platteau regarding third world villages, which I think raises a question about the relevance of this type of atemporal sociological comparison. 29). There may, she says, be a “two-tier system in which exchanges within the village...are insulated from exchanges with the outside world...The ‘prices’ at which goods exchange within the village are mere ‘cultural constructs,’” Rothenberg concludes, as if prices arrived at by “market outcomes” were not.

“Indexes of individuation” are linked to the 1740-45 religious upheavals of the Great Awakening, Rothenberg says, because both are caused by “the breakdown of community solidarity [that] in turn can be traced to rapid population growth” (38). Even if she misses the influence of irreligion and anti-religion in the early nineteenth century, it's nice to see an appraisal of the Awakenings that doesn’t treat religious motivations as free-standing, causeless causes. Similarly, she not only lists the many difficulties of studying persistence (for example, varied and changing town dimensions that make it difficult to compare two towns or to compare the same town in different time periods), she also asks the important question, “what in fact does persistence measure?” (40) Is it a measure of community harmony? Or of the expense and difficulty of leaving?

“The capacity to produce surpluses,” Rothenberg says, “is often treated as so necessary a condition to trade that the moral economists infer the absence of marketing solely from calculations that the local resource base would have been insufficient to produce surpluses” (46). This is the “principal misconception in the historical literature on markets,” because it implies that households and communities evolve from self-sufficiency to market involvement, which in many cases (illustrated by the cobbler’s bare-foot children) is untrue. Based on her data, Rothenberg argues “that ‘time’s arrow’ may very well have gone from marketing to self-sufficiency” in rural Massachusetts (49).

Rothenberg’s specific arguments about market activity and productivity gains in Massachusetts seem reasonable, for the most part. But there are some lapses. She spends several pages relating hog slaughter weights to corn prices, for example, before admitting that in this period “Corn is not in fact the basic feed of hogs” (106). However, through most of the economic analysis I didn’t feel that she was going wildly off the tracks.  But I also didn’t feel particularly compelled to abandon a “social” perspective that could accept this data and integrate it with other, non-market factors Rothenberg believes she is refuting.

“Local markets relayed the shocks [of the national and world economies] as changing relative prices,” Rothenberg says, “and resilient farmers responded by shifting from grains to hay, from hay to dairying, and finally from agriculture to commerce and industry” (113). The interesting thing is, the increases in agricultural productivity and the  diversification of rural capital investment that made these changes possible seem to date from the years between the end of the Revolution and Jefferson’s election. This doesn’t necessarily contradict Joyce Appleby’s claim that the Jeffersonians were pro-commerce, but it suggests they were riding a wave not of their own making.

“Central to such a [rural capital] transformation must have been the development of an effective mechanism for increasing the liquidity of the regional economy,” so that the gains farmers were accumulating were free to move within (and to leave) the local agricultural economy. I think my own Upstate New York data suggests that one may have led to the other. The requirements for this change, Rothenberg says, were “institutional elements” allowing “credit instruments [to] become more fully negotiable,” an “increasing size and widening geographic spread of individual credit networks,” and sufficient “liquidity of financial instruments and therefore the propensity of rural wealthholders to substitute them for physical assets” (114). I think this is exactly the role played by my miller/storekeepers in the 1840s, aided by the New York State Banking system. Ironic that the R.G. Dun reporters considered one of them a complete deadbeat. Does that suggest the Dun guys were a little conservative? Their clients were urban creditors, after all. I wonder if anyone has written about this?

Rothenberg’s discussion of negotiability picks up right where Morton Horwitz left off, so it’s lucky I read them back to back. It doesn’t seem unreasonable to accept both Rothenberg’s conclusions on when and how credit and negotiable notes penetrated rural markets, and Horwitz’s suggestion that legal changes were producing a “capitalist” political/economic regime for the benefit of the rich. In fact, Rothenberg’s data shows “The very rich appear to have been borrowing in order to lend, using their acreage...to underwrite their borrowing while at the same time shifting the composition of their assets out of farming and into commercial paper. The very rich were coming into the capital market on both sides. And they alone were emerging as net creditors” (143). In other words, a widening of the gap between the wealthy and their neighbors preceded the industrial transformation often blamed for it.

The final chapter on productivity is surprising because Rothenberg finds evidence that “Massachusetts farmers were moving away from cereals to specialize in hay...in advance of significant western competition;” in fact “by 1801” (221). This would seem to support the view that
demand from what Bidwell (1921) calls a “home market” may have driven productivity growth, but may have begun much earlier than previously supposed.  The earlier beginning of significant demand, increases in productivity, and the resulting returns to rural farmers could have financed the New England industrial revolution, just as Rothenberg suggests. But New England farmers would have been agents of this change rather than victims of it. Additionally, rural demand for “outside” goods may have been encouraged by the increased reach of storekeepers and peddlers into previously remote hinterlands. The Revolution seems like the second major mobility-enhancing event in the eighteenth century; the Seven Year War may have been the real beginning. And the story of Shays’s Rebellion is enhanced (but not completely rewritten, since Leonard Richards has already improved on David Szatmary’s account) if an increasing upland/lowland disparity of farm prosperity adds to the other social and financial factors already cited as causes of that conflict.