Historians in general are rather suspicious of theories—and who is to blame them? The temptation to do violence to historical reality is strong, and must be resisted with might and main. However, bad company will sooner or later corrupt even the best of manners; and the economic historian, owing to his long and intimate association with that bold and reckless crowd, the theorists, has finally learned to overcome his scruples and inhibitions. Like the children of Israel, he goes a whoring after Baalim: he tries to develop a general theory of economic growth.

The gold money of the Byzantine Empire “is accepted everywhere from end to end of the earth. It is admired by all men and in all kingdoms, because no kingdom has a currency that can be compared to it.” These boastful words of Cosmas Indicopleustes, a contemporary of Justinian die Great, are a typical expression of die pride of die Greek nation. Cosmas was a monk who tried to demonstrate from the Scriptures that the earth was flat, but in his youth he had been an adventurous merchant and traveler, and well he knew where the true primacy of his nation lay. While die armies of Justinian had not marched as far as those of Trajan, and his law was not enforced in all die countries which had obeyed Theodosius, the monetary empire of New Rome was even greater than that of Old Rome. The gold nomisma (or bezant, as die Westerners later called it) was as peerless as die sovereign whose effigy it bore. Procopius, another contemporary of Justinian die Great, stated: “It is not right for die Persian king or for any odier sovereign in die whole barbarian world to imprint his own likeness on a gold stater, and that, too, though he has gold in his own kingdom; for they are unable to tender such a coin to those widi whom they transact business.”

The astute reader even of detective stories makes a practice of looking at the end of the book because the ending reveals the basic values of the book more quickly than any other single part of the whole. An audience is at a disadvantage unless the speaker furnishes some preliminary sketch of the problems to be explored and some brief answers to the questions to be examined. It is therefore appropriate to state the purpose of the paper in a few words. It is proposed to show that his torical analysis affords no support for the uncritical faith in progress that characterized most of the nineteenth century. The development of the power economy has not brought the abundance for all nor the general recognition of the advantages of world-wide freedom of trade that was confidently anticipated by idealists like Cobden.

Few present-day historians of English society use the phrase “the landed gentry” with the same easy confidence that Lecky could muster. They hesitate to draw too hard and fast a line between the landed and commercial classes, for they see in the society of the gentry something more than fox-hunting squires and Church of England parsons. The works of Miss Scott Thomson and of A. S. Turberville, for example, have revealed a class more elusive in its activities and outlook, a class that was becoming increasingly amphibious: at home in two elements, the city and the countryside and engaged in economic enterprise that was by no means exclusively agrarian. In other words, the life of the country house may be as broad as English life itself; and it may come as no surprise, therefore, to discover that the growth of industrialism between 1830 and 1880 impinged on the society of the gentry, diversifying the nature of both its economic activities and its income.

American historians have commonly given attention to the manner in which the Federal Government stimulated the early growth of railroads by the remission of tariff duties on railway iron and particularly by land grants after 1850. They have said little about government promotion of railroads before the Civil War through the provision of engineering services. But this engineering aid was a major element in the initial progress of railroading and is an important aspect of the history of government economic policy toward transportation and science. This government aid is here discussed in terms of (1) the technical assistance given to railroads directly by the Army engineers and (2) the indirect stimulus given to railroads by government promotion of engineering science.

The building of the Deseret Telegraph line by the Mormons in early Utah is one of the most interesting chapters in the history of the intermountain West. It is the only known instance in which a major regional telegraph line was constructed and operated by a church. It is also the only case in which a major line was, from the beginning, a completely public enterprise. It is a remarkable example of the agency of the Church of Jesus Christ of Latter-day Saints (Mormon) in promoting the economic welfare and cultural unity of its membership in the last third of the nineteenth century.

I was asked to illustrate the effects of the economic leadership of adAvanced nations by an example drawn from English economic history in the Middle Ages. I have accordingly chosen the subject of Italian contribution to the economic development of medieval England. What prompted this choice was not only the contribution that the Italians in fact made but also the contribution that they are reputed to have made. Indeed their reputation for economic leadership interests me as much as their achievement. For if their reputation and their achievement are collated, something more interesting than a mere illustration of economic leadership may emerge. The illustration may well turn into a cautionary example. I hope I shall not appear immodest or perverse if I suggest that the Italian example may help to circumscribe the historical and the logical validity of the entire concept of economic leadership. For the concept that appears to mean something in historical accounts of economic forms is apt to dissolve as soon as we reach out to the fundamental forces and processes of economic growth.

The process of technical change from the economist's viewpoint may be broken down into three phases: invention, innovation, and diffusion. Invention, or the increase in technological possibilities, is the discovery or perception of new configurations of technical processes or principles that alter the array of possible production functions. An innovation consists of using any given production function for the “first” time. Diffusion is basically imitative and involves the gradual replacement of old methods by the new. One example will suffice to illustrate these distinctions. The invention of the automatic bottle machine consisted of the conception, experimentation, and model-building activities of Michael J. Owens; the pioneering efforts of the entrepreneurs at Toledo, Ohio, to demonstrate that the new production function was both practical and economically feasible constituted the innovational phase; and the gradual replacement of hand-blown and semiautomatic machine methods by the new process in both American and foreign markets involved diffusion.

The problem of the distribution of the agrarian product in feudalism is not at all new. It has been raised frequently by European historians and at the beginning of the 1930's led to a scientific controversy in Poland. The following article sets itself two tasks: first, to acquaint the American reader with contributions to the subject that may not be known in this country; second, to suggest an economic theory applicable to the problem. Not being an economist by profession, I will not attempt a theoretical analysis at length, but I hope, by a discussion of various approaches to the problem, to bring us closer to a solution.

There is a widespread impression among students of American financial history that, in the period immediately following the panic of 1837, American financiers engaged in sharp practices amounting to the wholesale deception of British bankers and European investors. This impression has been fostered especially in connection with the well-known episode of the partial or complete repudiation of state bonds by Arkansas, Illinois, Indiana, Mississippi, Louisiana, Michigan, and Florida in the 1840's. According to the charge, the large British bankers originally transacted business in the United States only through old and established bankers and agents. This enabled them to avoid the more speculative securities. Much of the distribution of bonds in England was done through three British firms, which were prominent in the merchant-banking business for the American trade: Thomas Wilson & Co., Timothy Wiggin & Co., and Geo. Wildes & Co.—popularly known as the 3 W's. A change for the worse occurred—so the charge runs—when these firms were forced to suspend payments because of the financial strain in England and the United States in 1837. After the resumption of specie payments in the United States the following year, a more speculative type of American banker, assisted by high-pressure salesmen who were sent to England, was prominent in financiering. These agents were so persuasive that they involved the British bankers in the wildest of schemes, and these bankers, in turn, disposed of American securities to equally innocent investors.

Empirical study of a process of change requires a definition of characteristics of change to be measured, and of units for which the measurable characteristics are to be observed. The choice of characteristics was discussed in “Measurement of Economic Growth,” and in that discussion the state was assumed to be the unit of observation. The purpose here is to explore the implications of that assumption, thus in a sense providing a lengthy footnote to the earlier paper.

From the days when John Hawkins peddled slaves at the cannon's mouth along the Spanish Main, the economic potentialities of Latin America have been a perennial lure to the mariners and merchants of northern Europe in general and to the English in particular. To them it seemed almost immoral that opportunities were being wasted there that could have been exploited to the advantage of both sides of the Atlantic. As long as those monopolistic colonial systems of Spain and Portugal lasted, contacts with the British had to remain spasmodic and often outside the law. The crop of revolutions that freed Latin America shortly after 1800 at last created a maritime and commercial vacuum. The English had done much to bring this about, and they were to do even more to exploit it. The economic development of Latin America during its first century of independence was thus greatly accelerated by the efforts of the British to secure new markets for their manufactures and new cargoes for the merchantmen flying their red ensign.

When Clapham began to teach economic history at Leeds in 1902 Schmoller had just finished his Foundations of Political Economy, and the first edition of Sombart's Modern Capitalism had just appeared. In the early editions of J. A. Hobson's Evolution of Modern Capitalism many aspects of the Marxian interpretation of history were effectively expressed and afforded a clear measure of the stimulus that economic history was to receive from this general approach. But these influences were not the dominant factor in Clapham's thought at the beginning of his career or at any later period. His interests in history came from Lord Acton and from Alfred Marshall. Marshall was anxious to draw him into the field of economic history, “he was eager to get historical work done.” Clapham says in the Inaugural Lecture, “… he pointed out to me tracts of economic history which needed someone's work. Then he pointed at me and said—‘Thou art the man.’ I hesitated then, for Acton's power was on me, as I hope it still is. But Marshall has prevailed.”

Leland H. Jenks and Thomas C. Cochran have suggested that the actions and motivations of modern businessmen be studied through the examination of “sanctions,” the latter defining “social sanction” as “a label for certain types of opinion or attitudes” involving judgments on what is worthy of praise and blame and of social penalties and rewards. When speaking of sanctions, we deal, he says, with a “general concept that stresses the stabilizing function of adages, admonitions, social ceremonies, traditional practices, and other such devices for protecting society from unpredictable behavior.” I believe this concept is a good tool for comparing two cultures of the same period or the same culture at two different periods, for showing the possibilities of, say, the Point Four Program, or for explaining otherwise inexplicable differences in the rate of capitalistic development. But considerable theoretical deliberation and many empirical studies are needed before it can be forged into a tool that can be widely used for research in entrepreneurship. This discussion is concerned with some considerations in connection with the application of the concept to the study of American businessmen and the freedom of enterprise in the nineteenth century.

Our task here is to inquire into the relations between two familiar sets of phenomena—the economic development of the Western Hemisphere and the involvement of British investors, financiers, engineers, contractors, and financial groups in railways in that area. As a matter of convenience we shall look chiefly at the United States and Argentina, and at the time span of three quarters of a century preceding the First World War. It is no secret that during that period both countries underwent rapid development, whose contours included such matters as the effective occupation of new areas of vast extent; the growth of population, partly fed by immigration; the effective application of technological improvements to the exploitation of natural resources; an increasing complexity of the division of labor; and a rise in productivity and real income per capita, participated in by large segments of the population. During the same period, the Western Hemisphere was normally the outlet for from 40 to 60 per cent of British foreign investment, the United States and the Argentine being two of the countries chiefly affected. We are familiar with estimates that British investments in the United States, on the eve of the First World War, amounted to over 4 billion dollars, approximately 3 billion of which were in railway securities, and that something like half as much was invested in Argentina, with a somewhat smaller percentage directly in rails.

Joseph Schumpeter had more influence on professional economic thinking than any other economist of his generation with the one exception of Keynes. His influence was exerted through numerous articles and books written and published in many languages; it was exerted even more through his teaching; his world-wide fame attracted students from everywhere and through them his influence spread to all the corners of the world in which economics is taken seriously.

The agitation in mid-nineteenth-century Russia for the abolition of serfdom gave the first great stimulus to Russian scholarly interest in the history of the peasantry. The persistence of the land problem down to the Revolution and since then the Soviet preoccupation with the primary producer have kept alive this interest. As a result, a large number of studies of the agrarian history of their country, many of them works of high value, have been written by Russian scholars both before and since 1917. One of the most recent and most important contributions to the literature of this subject has been made by B. D. Grekov in his history of the peasantry from earliest times to the seventeenth century. Although its author remains carefully within the doctrinal limits imposed by the current standards of orthodoxy in Soviet historiography, his work is indispensable for the study not only of agrarian history but of all phases of early Russian history.