Yet More Sunny-Afternoon-Lying-in-Bed-with-Bronchitis-Trade-and-Power Blogging
Finally digging deep into Ron Findlay and Kevin O'Rourke, Power and Plenty: Trade, War, and the World Economy in the Second Millennium:
Ron Findlay and Kevin O'Rourke, Power and Plenty: Trade, War, and the World Economy in the Second Millennium (Princeton: Princeton University Press): A feature of the book that may strike some economists as odd or surprising, but will seem entirely commonplace to historians, is its sustained emphasis on conflict, violence, and geopolitics. When economics students are first exposed to the study of international trade, they are asked to contemplate two countries, A and B, who have each been endowed with a certain amount of the various factors of production—land, labor, capital, and so on—as well as with a given technology which translates those endowments into consumption goods, together with a set of preferences over these goods. The two countries then trade with each other, or not as the case may be, and the consequences of trade are derived for consumers and producers alike.... The summit of unpleasantness attainable in such models is the use of tariffs, quotas, and other trade policy instruments that will benefit some individuals or groups (and possibly nations) but lower the utility of other domestic or foreign residents.
If only life were like this. As we point out below, the greatest expansions of world trade have tended to come not from the bloodless tâtonnement of some fictional Walrasian auctioneer but from the barrel of a Maxim gun, the edge of a scimitar, or the ferocity of nomadic horsemen. When trade required more workers, parental choices regarding quality/quantity trade-offs could often safely be ignored, since workers could always be enslaved. When trade required more profits, these could be earned via plunder or violently imposed monopolies. For much of our period the pattern of trade can only be understood as being the outcome of some military or political equilibrium between contending powers. The dependence of trade on war and peace eventually became so obvious to us that it is reflected in the title of this volume.
Politics thus determined trade, but trade also helped to determine politics, by influencing the capacities and the incentives facing states. The mutual dependence of “Power” and “Plenty,” so well evoked by Jacob Viner (1948), will thus be a key feature of this book. The phrase itself comes from the first lines of Michael Drayton’s Poly-Olbion, first published in 1612... the frontispiece to that volume... Albion, or Britannia, here appears to be “prosperous and triumphant and for the only time in her long career, notably young and beautiful.” Bedecked in pearls, secure on her island stronghold, and holding both a cornucopia and a scepter, she appears to be serenely contemplating not just her enjoyment of Plenty, but her exercise of Power as well.
As we shall see, this nymph-like creature would soon become the battle-hardened ruler not just of the English Channel but of the oceans of the world, and no history of international trade can ignore the causes or the implications of military exploits such as these... the use of force involves the allocation of scarce resources as well, and imposes costs and benefits both on those who use it and on those against whom it is used, as well as on third parties....
If all this may appear to have been less true over the course of the last two centuries, this is because of the overwhelming influence of the Industrial Revolution on all subsequent economic history. The nineteenth-century globalization that followed this breakthrough was unprecedented in many ways, and as we will see perhaps its most clearly distinguishing feature was its largely technological underpinnings (although even in this period imperialism still had an important role to play, and was itself facilitated in many ways by the new technology). The new technologies not only brought markets closer together than ever before, but opened up enormous income gaps between regions that remain with us today, and produced a stark division of labor between a manufacturing core and a primary-producing periphery. The big questions ever since then have been: How can developing countries catch up with the core? Should they do so by exploiting their natural resource advantages, as was successfully tried in the nineteenth century, or does this leave them excessively vulnerable to fickle international markets, as the interwar experience might suggest? Should they decouple themselves from international markets, as many did after 1945, or reintegrate with them, as they have done over the past two decades? These questions, and related ones such as how the West should adapt to the rise of India and China, have only arisen because of the asymmetries created by the Industrial Revolution, and are thus fundamentally historical in nature...
And:
Ron Findlay and Kevin O'Rourke, Power and Plenty: Trade, War, and the World Economy in the Second Millennium (Princeton: Princeton University Press): The Industrial Revolution... can only be understood as the outcome of a historical process with multiple causes stretching well back into the medieval period, and in which international movements of commodities, warriors, microbes, and technologies all played a leading role. Purely domestic accounts of the “Rise of the West,” emphasizing Western institutions, cultural attributes, or endowments, are hopelessly inadequate, since they ignore the vast web of interrelationships between Western Europe and the rest of the world that had been spun over the course of many centuries, and was crucially important for the breakthrough to modern economic growth....
Like most mainstream economists, we view inventiveness and incentives, rather than sheer accumulation, “primitive” or otherwise, as being at the heart of growth, but this does not imply that European overseas expansion should be written off as irrelevant. Plunder may not have directly fueled the Industrial Revolution, but mercantilism and imperialism were an important part of the global context within which it originated.... Violence thus undoubtedly mattered in shaping the environment within which the conventional economic forces of supply and demand operated....
When we say geography, we mean geography: mountains, rivers, and all. If Genghis Khan had been born in New Zealand, he would have left no traces on world history. The Irish might have enjoyed holding the rest of Europe to ransom by controlling access to Southeast Asian spices, but never had the opportunities which geography afforded the rulers of Egypt. A European seeking direct access to India might well head westward and stumble across the Americas, but no Chinese sailor would have been foolish enough to seek an eastern passage to Arabia....
The three great world-historical events of the second millennium, in our account, are the Black Death of the fourteenth century and the differing responses to it, the “discovery” and incorporation of the New World into that of the Old at the turn of the sixteenth century, and the Industrial Revolution at the turn of the nineteenth... no single region was solely responsible for any one of these three transformational episodes, let alone all three. The first resulted from the Pax Mongolica, established by the nomads of Central Asia but consolidated and actively participated in by all of the other six regions. Western Europeans were the first Eurasians to sail to the New World, but it was Africans, against their will, who produced many of the commodities that it exported to the Old. The Industrial Revolution occurred within Western Europe, and more specifically in Britain, but the essential raw material that its leading sector required was produced by Africans in the Americas, and the final products were sold in markets around the entire world....
Before asking the reader to plunge into one thousand years of history, it behooves us to provide a brief guide to the terrain that lies ahead. We begin in the first chapter with a consideration of basic methodological issues, and the delineation of the seven “world regions”... Western Europe, Eastern Europe, the Islamic World of the Middle East and North Africa, Central Asia, South Asia, Southeast Asia, and East Asia.... The second chapter analyzes the trading and other relationships between these seven regions and an eighth, sub-Saharan Africa, at the turn of the second millennium... the only region in sustained direct contact with all the others at this time was the Islamic World, then undergoing its “Golden Age” under the Abbasid, Fatimid, and Umayyad caliphates based in Baghdad, Cairo, and Cordoba, while the one with the least contact with the others was Western Europe. The third chapter is a broad analytical survey of the evolution of the world economy from 1000 to 1500... the forging of the Pax Mongolica... stimulated long-distance trade from the Atlantic to the Sea of Japan; the devastating consequences of the Black Death... the subsequent expansion of population, output, and prices across the world, particularly in Western Europe and Southeast Asia.
This sets the stage for the launching of the Iberian voyages of discovery... the worldwide trade in silver... the long struggle for hegemony in the emerging world economy between the Dutch Republic, Great Britain, and France... the hardly less momentous overland expansions, from opposite ends of Central Asia, of the Czarist empire of the Romanovs and the Chinese empire of the Manchu Qing dynasty. One major theme of this chapter is the extent to which Asians were not just passive actors during this period, but adopted new military technologies, with similar political effects to those experienced in Europe; another is the mercantilist economic policies pursued by the leading states of the day.
The sixth chapter... the breakthrough to modern economic growth... Great Britain, at the turn of the nineteenth century. The Industrial Revolution... is the fulcrum around which the rest of the book turns.... [W]e do not see the Industrial Revolution as springing up suddenly, like “Athena fully armed from the brow of Zeus,” purely as a result of the creative imaginations of a group of inventors... we see it instead as the culmination of a long historical process involving the interaction of all the world’s regions.... This is not to deny the vital contribution of Great Britain, and more broadly Western Europe, but to provide a consistent and coherent explanation of why this event was so transformational in nature, rather than evanescent, as had been all the earlier “efflorescences” (Goldstone 2002) in the history of the world economy that we describe.
On one level, the economic history of the past two centuries can, as already noted, be viewed as the working out of the consequences of the Industrial Revolution: a “Great Divergence” in income levels between regions, as the new technologies diffused only gradually across the globe; a “Great Specialization” between an industrial core and a primary-producing periphery; consequent pressures to protect agriculture in the core, and manufacturing in the periphery; and, finally, a gradual unwinding of these trends as the Industrial Revolution spread to encompass an ever-increasing proportion of the globe... the evolution of these trends was not smooth, but was profoundly marked by the political consequences of three major world wars: the French and Napoleonic Wars that ended the age of mercantilism, World War I, and World War II....
Chapter 7... focuses on the “nineteenth century” from 1815 to 1914... Pax Britannica and European imperialism... the railroad and the steamship... a new sort of globalization, manifested by a significant narrowing of intercontinental price gaps for bulk commodities... the “Great Specialization”... the industrialized countries of Western Europe, eventually to be joined by the United States and Japan, exported manufactured goods to Asia, Africa, Australasia, and Latin America in exchange for primary foodstuffs and raw materials, with Europe also exporting capital to all these regions, and people to the Americas and Australasia. The end of this period was marked by the beginnings of a “backlash” against globalization.... This first “golden age of globalization” was of course brought to a tragic and abrupt end by the outbreak of World War I.
The interwar years from 1918 to 1939, covered in chapter 8, were dominated politically and economically by the aftermath of this catastrophe....
World War II and its aftermath are the subject of chapter 9... the Pax Americana and the associated framework of multilateral international institutions... the spread of Communism and then by its collapse... decolonization of areas in the Third World that had become imperial possessions of the European powers. We stress that the combined effect of these trends was to further disintegrate the world economy, with OECD liberalization constituting a regional exception to this general rule, until some time in the 1970s or 1980s. It was only then that Latin America, Asia, and Africa, where the bulk of humanity reside, started to open up to trade and investment with the rest of the world.
Economically, the late twentieth century was to a large extent dominated by the attempt of newly independent countries to industrialize through policies of “import substitution.” However, the period also saw the unprecedented expansion of world output and trade as a result of trade liberalization and growth in the industrial countries, and technological diffusion to “newly industrializing countries.” This eventually led to the rapid growth of manufactured exports from these countries, particularly China and India, and to the beginnings of a narrowing of the huge per capita income gaps that have separated these once prosperous regions from Western Europe since the Industrial Revolution....
The reader will have noticed that our successive eras... have been demarcated mostly by the outbreaks of major wars or imperial expansions. Each era can be seen as one in which trade is conducted within a geopolitical framework established by the previous major war or conflict...
Next up: Woytinsky and Woytinsky...
