The Second Coming of Norman Angell
Washington Post Death Spiral Watch (Alec MacGillis Edition)

Notes for PEIS 101 Guest Lecture: August 15, 2008


What was traded: 1500 and before:

  • Silks, gems
  • Spices
  • Slaves
  • Knowledge (but very slowly: 500 years from China to Europe): spaghetti, compass, printing, gunpowder

What was traded: 1500 to 1800: add:

  • Textiles
  • Sugar
  • Intoxicants (coffee, tea, chocolate, tobacco, opium)
  • Slaves (industrial plantation slavery: middle passage)

All due to the ocean-going caravel; digression on Zheng He

What was traded: 1800-1870: add:

  • Cotton
    • Consequence: U.S. Civl War (300K dead of 1.2M white southerners; 300K dead of 6M white northerners and Blacks; same number maimed)

What was traded: 1870-today: add:

  • All staple commodities that don't spoil
  • the iron-hulled ocean going steamship
  • the submarine telegraph cable

How cheap is trade today?:

  • A standard container, 5500 cubic feet
  • An iPhone, worth $200, in a box 1/32 of a cubic foot
  • One container can carry $35M in iPhones
  • Costs $8000 to ship a container across the Pacific (used to be $3000)

Economic Growth:

  • Current U.S.: $25/hr ($2008)
  • U.S. 1900: $3/hr ($2008)
  • U.S. 1800: $1/hr ($2008)

Today: You can buy 80,000 calories of potatoes from a day's wages at $1 an hour

  • 1700 Beijing: 2000 calories purchased with a day's wage
  • 1700 Leipzig: 3000 calories purchased with a day's wage
  • 1700 London: 8000 oat calories, but only 3500 wheat calories

International income differentials on the order of 2-1


  • U.S.: $25
  • Coastal China: $6
  • Interior China: $3
  • India: $2
  • Ethiopia, etc.: $1

Post-WWII Development Strategies:

  • Soviet (seems a good idea because no Great Depression in the Soviet Union, and Soviet victory over the Nazis in WWII)
  • "Commanding Heights"
  • Import substitution
  • Independence as a magic bullet

All failures

The Washington Consensus:

  • Maximize economic contact--eliminate trade barriers
  • Minimize regulation--an excuse for bureaucracy and bribery
  • Shrink the state--outside of East Asia and maybe western Europe, emerging market economies can establish property rights and enforce contracts, and that is pretty much all they should dare try to do...


  • Regulatory arbitrage on health and safety--race to the bottom
  • Capital mobility: is the constraint savings, or investment demand?
  • Perverse savings flows
  • Needed: global scale institutions (like the EU, only more so)



  • 300M people
  • 150M workers


  • 100M people
  • 35M workers
  • Of whom, 9M in U.S.

Winners from immigration:

  • Mexican migrants bigtime
  • Mexican stay-at-homes (remittances, larger farms)
  • American businesses
  • American consumers
  • American workers who become straw bosses


  • Past legal immigrants
  • African-American males with little education