The years between 1870 and 1914 constituted a first episode of globalization, characterized by rising levels of international trade and robust economic growth. They were also, at least in Europe, the time when important elements of the welfare state—insurance against the risks of unemployment, sickness, industrial accidents, and old age—as well as labor protections—such as factory inspection and limits on the hours of work of women and children—were first introduced.

At first blush, the coincidence of increased international openness and the adoption of these protections, which Michael Huberman terms the “labor compact,” is puzzling. More recently, the international competition to which globalization gives rise has come to be seen as a potent force eroding labor standards and the quality of life. In this volume, Huberman offers a largely convincing explanation of the simultaneous expansion of trade and adoption of the labor compact while providing a rich and intriguing account of the operation of labor markets in the late nineteenth and early twentieth centuries.

After an introductory chapter that lays out the basic argument and previews the rest of the book, the core of the volume is organized in two parts: the first (Chapters 2–4) traces the linkages from globalization to the labor compact, while the second (Chapters 5–7) examines the channels through which adoption of the labor compact promoted increased openness and trade. In a final chapter the author extends the discussion to draw out parallels and differences between pre-World War I and post-World War II episodes of globalization.

Huberman argues that, for workers, industrialization and globalization greatly increased uncertainty relative to an earlier more agrarian era, and that these changes created a demand for social insurance and other protections. This argument is not new, but Huberman couples it with the more novel observation that within Europe bilateral trading partners pressured each other in ways that encouraged regulatory convergence upward. Countries that had adopted protective legislation pressured laggard trade partners to follow suit and adopt similar laws. Although social insurance and limits on hours raised labor costs, European countries that concentrated on the export of differentiated, manufactured goods could pass much of the increased labor cost on to consumers in other countries. As a result, employers’ opposition was muted, and the labor compact spread.

In North and South America, however, a different logic operated. Here, the primary exports were undifferentiated agricultural commodities and natural resources, which were traded in competitive markets. Facing highly elastic demand producers could not easily raise prices to pass on increased labor costs. Consequently, the labor compact made far less progress in the New World than in the Old World.

At the same time that globalization encouraged the spread of the labor compact, Huberman argues that the labor compact also helped to encourage globalization. Within Europe, increased labor costs associated with the labor compact encouraged employers to substitute capital for labor, and to invest in other improvements in the production process. Thus rising labor costs gave rise to a virtuous circle that supported the emergence of a high wage economy. These same forces also operated to reduce inequality within Old World countries. In the labor-scarce and resource-abundant New World, however, globalization produced very different results. Labor protections were limited and inequality tended to rise. One implication is that differences in hours of work and labor market institutions between Europe and the Americas that have attracted attention in recent decades are actually of much longer standing, though the economic distortions of the Great Depression have obscured their historical roots.

This is a wide-ranging and ambitious book. The complex nature of economic regulation makes comparisons across time and space difficult; to conduct this analysis for a large sample of countries is especially challenging. Huberman marshals a broad range of evidence, both qualitative and quantitative, often in novel and creative to make his points. While I found the argument overall persuasive, the statistical evidence is frequently more suggestive than conclusive. The skeptical reader will find a number of points where the conclusions drawn from a particular set of results seem to overreach. Yet the combined effect of all the evidence is more compelling than any single statistical analysis. What emerges is a nuanced and enlightening account of an important period in the emergence of modern labor market institutions.