Up until the mid-nineteenth century Russia had an enserfed peasantry, a mere 1,000 or so miles of railways, and a small, almost insignificant market sector. When serfdom was abolished (1861) and the expansion of railroads started to occupy a prominent place in development policy toward the end of the nineteenth century, Russia was launched on a transformation from a state of preindustrial and pre-capitalistic backwardness into a path of modernization and industrialization.

The purpose of this paper is to examine cost-of-living differences among the various regions of the United States during a thirty-year interval of the nineteenth century. We do this by constructing regional price indexes for the years 1851–1880 using two different base years for pur calculations, 1860 and 1880. The results indicate that the cost of living differed substantially among regions, and specifically that it was lower in the American Midwest than in the East. Although one might have expected these differences among regions to narrow as regional and national markets developed and improved, we find no evidence that they did during this thirty-year period.

From the end of the Civil War down to 1900, the American agricultural sector was subject to continuous political and social upheaval. While the South and Far West were a part of this movement, the heartland of protest remained in the Midwest. The traditional view has been that this unrest and protest was at least partially based on the worsening economic position of the farmer. Farmers complained of being exploited by moneylenders, victimized by railroads and other middlemen, cheated by speculators and faced with prices received falling faster than prices paid, thus reducing real purchasing power. This last view is put forth by Faulkner: “While the prices of farm commodities declined, those of manufactured products, dominated by monopoly practices, remained high or did not decline proportionally.”

As evidence has accumulated on the prosperity of the American South under slavery prior to the Civil War, attention has turned to a search for explanations for the apparent stagnation of the southern economy after the Civil War. One class of explanations involves the argument that the South experienced special difficulties in recovering her place in the international cotton market during the late 1860's and 1870's. In one version of this hypothesis, the presence of “new” sources of supply, stimulated by the cotton famine of 1861–65, acted to displace American cotton in world markets during this period. A second version, recently proposed by Mark Aldrich, argues that appreciation of the dollar resulting from capital imports and northern economic expansion forced American cotton to compete with the rest of the world on unfavorable terms prior to the resumption of specie payments in 1879.

What accounts for the “epochal” changes in capital formation shares and capital goods' prices during the 1860's? The pages following document an epochal rise in American gross saving rates centered on the Civil War decade. They also establish a symmetrical episodic shift in the relative price of manufactured durable investment goods. Not only did the American investment share in GNP rise dramatically (and permanently) between the 1850's and 1870's, but the relative price of capital goods declined sharply over the same period. This relative price change was pronounced and it was never again repeated in a subsequent century of development.

In the literature on India's economic history, there has been a long debate on the influence of railroad development on the welfare of Indian farmers. Some economists and historians have argued that rail development increased welfare by providing new markets for agricultural products and permitting rising rural incomes. Others have argued that railroads had detrimental effects on welfare because, by encouraging cultivation of non-food crops (like cotton) and export crops (like wheat), they reduced the domestic food supply. Those who have stressed the adverse effects of railroads have seen these effects as a consequence of imperialist economic relations between Britain and India. In this view, the combination of British land revenue policy and rail construction transformed the rural economy. The need to pay the land revenue in cash forced fanners to grow some crop for sale; the railroads permitted non-local (or even non-Indian) demand to influence the prices at which different crops could be sold.

“Mr. Jay Gould doth at this hour bestride the narrow Wall Street like a colossus. He is indeed the Autolycus of the western world. No pickpocket, either ancient or modern, has been more successful.” Such florid mixing of metaphors, even in the late Victorian era of railroad chaos, was rare for the financial editor of the staid London Railway Times. He had just read the plan by which the arch “robber baron” proposed to reorganize the wobbly, poorly integrated and ill-financed Wabash, St. Louis and Pacific Railway that Gould had sought to build out of at least two dozen railroads between Kansas City and Detroit. The editor's indignation a few weeks earlier is not recorded, but it was doubtless monumental, for on May 28, 1884 Gould had successfully sent his lieutenants into a United States District Court in St. Louis with a brazen request for appointment of receivers for the Wabash, under a concept of receivership which broke nearly every important precept of this old branch of equity law.

Almost without exception interpretations of the remarkable growth of the German economy before the First World War stress the role of the German banking system, in general, and that of the universal or Kreditbank, in particular. The most subtle and penetrating view of this question is that developed in Alexander Gerschenkron's essays, “Economic Backwardness in Historical Perspective” and “Prerequisites of Modern Industrialization.” According to this view, “backward” countries which experience successful industrializations do so by making institutional “substitutions” which enable them to compensate for or even to turn to their advantage their initial deficiencies of productive factors. The institution which is “substituted” in Germany to perform this function is the Kreditbank. This interpretation places special emphasis on the growth-inducing character of these banks, but is also open to the possibility that an industrialization led by such institutions might have entailed certain costs. In fact, Professor Gerschenkron explicitly invites help in assessing these costs in commenting: “it would be a fruitful undertaking in research to explore and perhaps to measure and compare the difficulties, the strains, and the cost which were involved in the various processes of substitution ….” Thanks to the work of Ekkehard Eistert, who has constructed a reliable set of statistics on the German banking system in this era, it is now possible to attempt such a “fruitful undertaking.” Making use of these data, an econometric model has been constructed to test the hypothesis that the manner in which the Kreditbanken allocated credit contributed to the growth of German non-agricultural output. Our findings strongly suggest that the credit allocation policy of these banks was inhibiting rather than stimulating the German economy in the period for which data are available and that previous interpretations are in need of serious revision. It appears that, in Gerschenkron's terms, the “cost” of bank-led industrialization was far greater than anyone has previously suggested.

Recent work by Reid, Higgs, Sutch and Ransom and others is an indication that increasing scholarly attention is being addressed to the post-bellum southern economy. The object of this note is to raise a word of caution with respect to work done on the South in which the latter is taken to mean a more or less homogeneous section of the nation. In particular I would suggest that (a) substantial and important variations exist within this region, differences which may even be obscured when the South is divided along the usual Bureau of the Census sub-regional borders, and (b) a disaggregation of the South into more functional units than that of the Census Bureau may provide insights into the relative poverty experienced in the region, particularly of the black population in this area in the years before 1910.