C  Cambridge University Press
European Review of Economic History , –. Printed in the United Kingdom Path dependence, time lags and the
birth of globalisation: A critique of
O’Rourke and Williamson
D E N N I S O. F LY N N A N D A RT U R O G I R Á L D E Z ∗
Economics Department, University of the Pacific,  Pacific Avenue,
Stockton, California , USA
In a recent issue of the European Review of Economic History (vol. , ,
pp. –), Kevin O’Rourke and Jeffrey Williamson dismiss claims by ‘World
historians . . . [who] argue that globalisation is a phenomenon which stretches
back several centuries, or even several millennia’ (p. ). Rather, O’Rourke
and Williamson insist that ‘[g]lobalisation did not begin , years ago, or
even  years ago. It began in the early nineteenth century. In that sense,
it is a very modern phenomenon’ (p. ). O’Rourke and Williamson offer
an explicit model of world trade that predicts specific outcomes; and they
marshal empirical evidence to support their contention that there was no
global economy until the early decades of the nineteenth century.
If we are correct in our assertion that sustained globalisation only began in the early
nineteenth century, then the autarkic model should fit the pre-nineteenth century facts,
while the open economy model should fit the post-eighteenth century facts . . . Can
we show with econometrics that while the closed economy model is the relevant one
before the s, the open economy model is the relevant one thereafter? . . . If the world
historian is looking for a globalisation big bang, she will find it in the s, not in the
s (pp. –, ).
O’Rourke and Williamson define the key term ‘globalisation [as] . . . the
integration of international commodity markets’ (p. ); and they conclude
that ‘the only irrefutable evidence that globalisation is taking place is a decline in
the international dispersion of commodity prices or what might be called commodity
price convergence’ (p. ; italics in original).
We see no evidence documenting significant pre-nineteenth century global price convergence for the (competing) commodities that really mattered to the economic lives of
the vast majority. Nor do we see any evidence of significant commodity price convergence
even for those (non-competing) commodities that mattered little to the vast majority. The
implications for world history are, we think, revisionist and profound (p. ).
∗
Anonymous referees offered useful suggestions on earlier versions of this essay, as did
Leandro Prados de la Escosura and his colleagues at the Universidad de Carlos III de
Madrid. Special thanks to George Souza, who suggested literatures and connections that
had eluded us earlier. Helpful comments by James Flynn, Robert Marks, Sucheta
Mazumdar, and John Wills must be acknowledged. The authors alone are responsible for
remaining errors.

European Review of Economic History
We are unconvinced by the authors’ argument and propose to discuss our
disagreement in five sections. Generally speaking, evolutionary thinking
based upon Path Dependence tells us that seemingly unimportant events
can sometimes cause transformations of epic proportions. We maintain that
econometric analyses, such as that proposed by O’Rourke and Williamson,
are unable to account for the global transformations described in this essay.
A more complete discussion of Path Dependence appears in the concluding
section of this essay.
The nature and sources of the economic forces that led to globalisation
will be discussed in Section . Section  outlines the role of silver and argues
against the O’Rourke and Williamson claim that monetary flows can be
excluded from discussion of globalisation. The role of luxury goods in longdistance trade – as opposed to everyday items – is analysed in Section .
Section  integrates broad ecological and demographic components with
the history of trade. Concluding remarks comprise Section .
. Conceptualising globalisation’s dynamic origins
.. Competing definitions and globalisation’s birth date
The discovery of America, and that of the passage to the East Indies by the Cape of
Good Hope, are the two greatest and most important events recorded in the history of
mankind . . . Two new worlds have been opened to their [European] industry, each of
them much greater and more extensive than the old one, and the market for one of them
growing still greater and greater every day (Smith  [], pp. –).
Adam Smith insisted that contemporary economic conditions of his time
(the late eighteenth century) must be viewed within the context of unique
events that had emerged since the age of new European discoveries.
The Palgrave Dictionary of Economics (Eatwell et al. ) contains no
definition for ‘globalisation’ at all, and other sources offer cultural and
political definitions that cannot be made operational in terms of dating the
origin of globalisation (Flynn and Giráldez a, p. ). ‘Globalisation’ is
a ubiquitous and ‘imprecise term, its sources, direction, antiquity, and inevitability all subject to dispute’ (Grew , p. ).
We propose that globalisation began when the Old World became
directly connected with the Americas in  via Manila. The Pacific
Ocean comprises one-third of the surface area of the earth. The American
landmasses and the Atlantic Ocean together account for approximately
another one-third of the globe, and the Afro-Eurasian complex – ‘the Old
World’ – comprises the remaining one-third of the surface area of the earth. It
is inappropriate to label connections limited to sub-regions of the Old World

See Resnick and Wolff (, p. ) for criticism of econometric approaches to sweeping
economic change.
The birth of globalisation: a critique

as ‘global’. Global trade emerged when all heavily populated continents
began to exchange products continuously – both with each other directly
and indirectly via other continents – and on a scale that generated deep and
lasting impacts on all trading partners. Intercontinental trade existed prior
to the sixteenth century, but there was no direct trade link between America
and Asia before the founding of Manila as a Spanish entrepôt in .
After more than , years of isolation, continuous contacts between
the Old World and the New World altered the trajectory of human
evolution in profound ways. For example, Old World diseases decimated
the indigenous population of the Americas because New World inhabitants
lacked immunity to Afro-Eurasian germs, which helps to explain why
importation of African slaves became a necessity for exploitation of the vast
resources of the New World. Europeans also introduced large domestic
animals (such as horses and cattle) and numerous plants (such as wheat,
sugarcane, and oranges) previously unknown in the Americas, permanently
altering New World landscapes in the process. It is difficult to imagine
the economies of Argentina, Brazil, Mexico and the United States in the
absence of horses, cattle, sugar, coffee, and wheat, yet these building
blocks of agrarian production were entirely absent prior to contact with
Europeans. Environments throughout the Americas were redirected along
entirely different trajectories as a result of new linkages with the Old World.
Many powerful forces which led to globalisation were established soon after
the Europeans arrived in the Americas. But the New World was not merely
an importer of plants, animals and people. On the contrary, the export
of American plants and seeds altered Old World landscapes fundamentally
and permanently. Something ‘like one third of the plant food raised to feed
man and his animals in the world today comes from plants of American



Note that the birth of ‘global trade’ coincided with the birth of ‘globalisation’ generally.
For more extensive treatment of the interrelationships among economic, ecological,
demographic, and other non-economic factors, see Flynn and Giráldez (b).
There is debate about the extent of indigenous depopulation in the Americas. For
example, Borah (, p. ) placed aboriginal shrinkage at – per cent, and asserts
that it has taken around four centuries for the tropical American population to recover to
its pre-European stock. Another author offers the more conservative estimate of a  per
cent loss of American population (in some regions) within a century of the European
intrusion (Nabhan , p. ).
Nor should we gloss over the loss of biodiversity as a result of new contacts: ‘Seed
conservationist John Carr hazarded the first guess more than a decade ago, estimating that
 per cent of the crop varieties grown in the Americas prior to Columbus are now
extinct. In the US Southwest, my own comparisons of native crop varieties cultivated by
prehistoric farmers with those now grown by their descendants suggest that  to  per
cent of the region’s diversity has been extirpated . . . Columbus, Cortes, and the
conquistadors ushered in the first major decline in New World agricultural diversity.’
(Nabhan , pp. , ).

European Review of Economic History
origin’ (Crosby , pp. –), including corn, potatoes, sweet potatoes,
the peanut, many beans, and scores of other plants, including tobacco.
. The global market for silver
After they explored the west coast of Africa, Europeans crossed the Atlantic
to the Americas (), sailed around the Cape of Good Hope (),
and crossed the Pacific (), all within thirty years. These events have
been depicted by historians as products of European causation, and that
representation has been applied to the history of a global market for precious
metals as well. Specifically, sixteenth-, seventeenth-, and eighteenth-century
monetary relations between Europe and Asia have been couched in
terms of European dynamism vis-à-vis the rest of the world. Traditional
interpretations can be summarised as follows. There was strong European
demand for certain indigenous Asian products, including spices, ceramics,
silks, cottons, and tea. Asian imports of European wares were paltry by
comparison, partly because the propensity of Asian consumers to purchase
European goods was low. Europeans responded to their persistent balanceof-payments deficit by exporting precious metals to Asia as ‘balancing items’.
We question the assertion that monetary metals flowed from Europe to
Asia as a passive item used for balancing trade between the continents. For
if that had been the case, then various monies would have been expected
to flow from Europe to Asia. Several monetary substances served as monies
at that time, including silver, gold, copper, and cowry shells. Thus, Asian
merchants should have been indifferent about the particular mix of monies
sent as payments by European purchasers. Gold monies should have been
as welcome as silver monies. What actually happened is that American silver
flowed through (not ‘from’) Europe and mainly to China (not to ‘Asia’ as
a whole), while substantial volumes of gold flowed in the opposite direction
simultaneously – from China to Europe – between the s and s.


Scholars have documented the history of these global linkages, making clear that
ecological and demographic consequences reverberated in multiple directions across the
planet once the Americas were brought into the mix. See the path-breaking books of
Alfred Crosby (, ), as well as his website [www.nhc.rtp. nc.us:/tserve/
nattrans/ntecoindian/essays/columbian.htm] for updated information on these topics.
See Flynn (). In terms of gold flows, Supple (, pp. –) devotes an entire
chapter to discussion of whether England’s silver exports (–) were equal in value
to its imports of gold, focusing on the question of whether England’s money supply may
thereby have been stable. In a detailed study of the English East India Company, K. N.
Chaudhuri (, p. ) concludes: ‘The East India Company was aware of the true
reason for the export of English silver coins and the Deputy Governor’s reference to the
import of gold for East India commodities sold in Europe is another example which bears
out Dr. Supple’s conclusion that the outflow of silver was matched by an inflow of gold’.
Another example of gold flowing in the opposite direction of silver, for instance, involves
Asian gold flowing via the Acapulco-Manila galleons to America: ‘Cavendish found the
The birth of globalisation: a critique

Furthermore, this exchange of silver for gold was not a uniquely Europe–
China transaction. Japan produced perhaps half as much silver as did all of
Spanish America during the sixteenth and seventeenth centuries. Virtually
all Japanese output was exported to the Chinese marketplace, and Japan (like
Europe) simultaneously imported gold from China. Moreover, throughout
the seventeenth century the Acapulco-Manila galleons carried  tons of
American silver to China annually via the Pacific Ocean, while gold flowed
out of China and back to the Americas simultaneously. These historical
facts contradict the dominant trade-deficit hypothesis found in the historical
literature today. Europeans operated as intermediaries in the trans-shipment
of American (and Japanese) silver to China.
Historical evidence also contradicts trade-imbalance reasoning when we
look at the other two main monetary substances in the world during this
time period, copper and cowry shells. Sweden was the most important
source of copper within Europe, but Japan produced perhaps twice as much
copper as Sweden by the late-seventeenth century. Again, China presented
the largest end-market for Japanese copper, but substantial shipments of
Japanese copper also found their way to Europe. That is, Japanese copper
flowed from Asian mines during a time when American silver continued to
flow through Europe to Chinese markets. Copper and silver monies never
flowed systematically together. The world’s leading producer of cowries was
the Maldive Islands in the Indian Ocean. Maldivian cowries were exported
to Asian markets, but European merchants also imported up to a million
pounds weight in cowry shells (as ballast) for the purpose of re-exporting
them to end-markets in West Africa at huge profit. Our central conclusion
with respect to the world’s four leading monies is that monetary substances
never flowed in tandem anywhere in the world during these centuries.
Modern economic theory, which teaches us all to aggregate together
various monetary substances (including silver coins, gold coins, copper
coins, and cowry shells), has inadvertently precluded understanding of global
monetary events during our time period. On the contrary, historical evidence
forces us to conceptually disaggregate individual monies; each monetary
substance must be treated separately, including silver. Doing so at a global
level reveals immediately that it is a mistake to couch things in ‘EastWest’ terms. There was no imbalance of trade – East-West, North-South,
Europe-Asia, or otherwise – for which monetary resources had to flow in
compensation. There was just trade. Monetary substances were commodities



value of , livres of it [gold] upon the galleon that was sailing toward Mexico’
(Raynal [], p. ).
See Chuan () and Flynn and Giráldez ().
See Flynn and Giráldez () for discussion of the most important monetary substances –
silver, gold, copper, and cowries – in a global context.
See Doherty and Flynn () for a microeconomic theory of money that permits this
level of disaggregation.

European Review of Economic History
traded for the same reasons that explain trade in non-monetary items. The
single market most responsible for the birth of globalisation was the silver
trade. The most dynamic end-markets for silver in the world resided in
China. Many contemporary Europeans were aware of this fact, including
Pedro de Baeza (), a Portuguese merchant with  years of business
experience in Asia:
Commonly a peso of gold is worth five and a half silver pesos, and if there is a shortage
of silver [in China], it is brought from the other parts and the price rises to six or six
and a half silver pesos for one peso of gold; and the most expensive that I have seen and
bought gold in the city of Canton was seven pesos of silver for one of gold, and I never
saw it go beyond this price, and here in Spain a peso of gold is commonly worth twelve
of silver; therefore it is easy to see that bringing gold from China means a gain of more
than seventy-five or eighty per cent (Quoted in Boxer , p. ).
During the eighteenth century, Adam Smith ( [], p. ) recognised
both the importance of silver in stimulating world trade, as well as the central
role of China:
The silver of the new continent seems in this manner to be one of the principal
commodities by which the commerce between the two extremities of the old one [Europe
and China] is carried on, and it is by means of it, in great measure, that those distant
parts of the world are connected to one another.
Nor have these facts been forgotten by eminent historians of the twentieth
century. According to Herman Van der Wee (, p. ):
In the Far East, silver was valued much more highly than gold in comparison with western
Europe, so the western merchant had everything to gain from paying for his purchases
in the east in silver.
K. N. Chaudhuri echoed similar sentiments in his classic The Trading World


K. N. Chaudhuri has long recognised the need to conceptually separate intercontinental
movements of gold from intercontinental movements of silver. Chaudhuri urged return to
the reasoning of Classical economists like David Ricardo. See, for example, Chaudhuri
(, pp. –). Ricardo argued essentially that each precious metal must be analysed
independently, focusing on the cost of producing each metal and the price of each one
separately. When one of the metals – say, silver – experienced a drastic drop in production
costs, its price would gradually fall in the region surrounding production. The resulting
low price of silver (in the West and Japan, during our period) relative to its price elsewhere
(China) would lead to opportunities for profit from arbitrage; this was a driving force
behind intercontinental trade. This type of Ricardian logic has guided Chaudhuri (,
) and Flynn (), both of whom view disequilibrium in the silver market as a
primary cause – rather than effect – of East-West trade in the early-modern period.
China’s paper-money system fell apart in the mid-fifteenth century, whereupon
private-sector forces led to a protracted ‘silverisation’ of the Chinese monetary system.
The ‘single-whip’ tax reform of the s consolidated many taxes throughout the empire
into silver payments, so China’s fiscal system also ‘silverised’. These are the forces that
raised Chinese silver prices vis-à-vis the rest of the world. The definitive work on Chinese
monetary history from  to  is von Glahn (). Flynn and Giráldez ()
attempt to locate China’s silverisation within a global context.
The birth of globalisation: a critique

of Asia:
With the deepening experience of Asian trade, both the Dutch and English learnt that
the American silver was indispensable for its full development, and in contemporaneous
economic literature Spain appeared as the universal fountain-head through which the
precious metals of the New World were distributed throughout Asia (Chaudhuri ,
p. ).
It is important to draw attention to O’Rourke and Williamson’s (b,
p. ) explicit avoidance of discussion of monetary aspects of intercontinental trade:
The focus is on commodities other than silver and gold, since these precious metals
played a monetary role as well as a more standard commodity role, and different factors
thus explain their large and growing importance in international trade during the period.
We are interested solely in the growth of non-monetary commodity trade, and the large
literature on the impact of intercontinental silver flows on aggregate price levels, while
fascinating and important, is not relevant here.
But the outline we provided immediately above is inconsistent with
their claims. One simply cannot understand the growth of non-monetary
commodity trade without recognising that non-monetary trade was directly
connected to monetary-commodity exchange at a global level.
One reason why the global silver market cannot be left out of the debate is
the fact that silver prices did in fact converge worldwide, not once but twice
prior to the nineteenth century – by , then again around . (Recall
that O’Rourke and Williamson argue that there was no price convergence
prior to the s; thus, their conclusion that globalisation must not have
existed previously.) That is, price convergence was a central characteristic of
the most significant commodity traded at a global level – silver. In the early
sixteenth century, for example, the gold/silver ratio hovered around : in
Europe, : in Persia, and : in India (Von Glahn , p. ). Later in
the s, the gold/silver ratio was :. or : in Canton, while in Spain
at that time the exchange ratio was :. or :, ‘thus indicating that the
value of silver was twice as high in China as in Spain’ (Chuan , p. ).
Bimetallic ratios were about : in Japan and : in Moghul India at that
time (Boxer , p. ). The point is that silver was valued more highly the
closer one approached end-market China. We refer to this as an ‘arbitrage
phase’ in the global silver market, since merchants simply purchased silver
where it was cheap (for example, near production centres in Japan and
Spanish America) and trans-shipped it to where silver was dear (especially in
China). Spectacular profits existed throughout the worldwide supply chain,
in other words, which resulted in the unprecedented shipment of thousands
of tons of silver to the Chinese marketplace. Even the massive Chinese
marketplace could be glutted after a century of relentless imports of silver,
however, and by  bimetallic ratios around the world had converged.

For example, see Yamamura and Kamiki (, p. ). Atwell (, p. ) also indicates
that bimetallic ratios in China, Japan, and Spain converged by .

European Review of Economic History
Silver continued to flow to China during much of the remainder of the
seventeenth century, but this trade yielded only normal profits during what
we call a ‘non-arbitrage’ phase in the global silver market (Flynn ).
As will be shown in Section , global exchanges contributed to dramatic
Chinese population growth by the beginning of the eighteenth century, which
in turn caused another upswing in Chinese demand for silver. Silver in
China once again became more valuable than elsewhere, eliciting a second
‘arbitrage phase’ in the global marketplace. According to Richard von Glahn:
‘In the first half of the eighteenth century the gold:silver ratio in China
remained fairly constant at :–, in contrast to a ratio of : in Europe,
but from  onward the gold:silver ratio in China leapt above :, while
in Europe it declined to :.–.’ (Von Glahn , p. ). Von Glahn’s
figures are consistent with those reported in the classic work of Dermigny
(, vol. I, p. ). Contemporary observers were well aware of these
bimetallic trends. In Representation to the Lords of the Treasury in , Sir
Isaac Newton stated that ‘in China . . . the (silver:gold) ratio is  or  to
 and in India  to , and this carries away the silver from all Europe’;
Magens’ notations to Newton’s passage states that ‘such quantities of silver
went to China to fetch back gold that the price of gold in China rose and
it became no longer profitable to send silver there’. Indeed, between 
and  bimetallic ratios indicate that silver eventually came to be valued
lower in China than in Europe (Carriere , p. ). In sum, a follow-up
eighteenth-century arbitrage phase in the silver market lasted from around
 until . Or to rephrase: global silver prices had converged a second
time by .
Leaving aside Japanese production of silver (which some scholars claim
totalled half as much as Spanish American silver production in the sixteenth
and seventeenth centuries), American mines produced more than four billion
pesos worth of silver (over  thousand tons of silver) during the sixteenth,
seventeenth, and eighteenth centuries (Garner ; Barrett ). It is
likely that two-thirds or more of the  billion pesos in silver ultimately settled
in the Chinese marketplace. The salient point is that it was overwhelmingly



Both statements can be found in Edwin Cannan’s note  in Adam Smith ( [],
p. ).
As the price of silver fell toward its cost of production by around , profits from
trading silver long-distance slumped: ‘over the long run, the trend was unmistakable:
profits as recorded in the Netherlands fell steadily from a peak of nearly  million guilders
per year in the s to a loss of , guilders per year in the s. The same
downward course of profits characterized the EIC . . . The return to invested capital, by
Chaudhuri’s reckoning, fell from . per cent per annum in the s to . per cent in
the decade –’ (De Vries, , p. ).
For the most up-to-date estimates for Latin American silver production, see Richard
Garner’s website at www.laceh.com, which currently lists total New World silver
production at about . bn pesos up to .
The birth of globalisation: a critique

silver that was swapped for Chinese exports (silks, ceramics, tea, and so on).
It is as simple as this: Chinese exports were exchanged for silver from America
and from Japan. That is, commodities were exchanged for commodities.
Textbook international financial accounting instructs us that a current
account deficit (a trade deficit) necessarily implies a capital account surplus
(that is, international borrowing). But there was no systematic Chinese
‘capital account surplus’ during the early-modern period. That is, the
Chinese did not sustain Chinese exports from the sixteenth through to the
eighteenth century by providing loans to Europeans. Since there was no
lending pattern that can justify description of EurAsian trade in terms of
a ‘capital account imbalance’, there could not have been EurAsian ‘current
account imbalances’ either. In other words, Europeans did not ‘have to’ send
silver to China as a (trade-deficit) balancing item any more than Chinese
‘had to’ export silks, porcelains, and tea as (trade-deficit) balancing items
to the outside world in order to compensate for the importation of nonChinese silver. Trade was balanced, since international lending did not
finance China’s trade with the rest of the world. Systematic sixteentheighteenth century intercontinental trade imbalances between Europe and
‘Asia’ are imagined constructs that result from confusion of monetary flows
with international debt. But intercontinental monetary flows need not (and
in this case, did not) imply intercontinental credit arrangements. Monetary
flows and credit purchases are distinct phenomena. Monetary commodities
were systematically exchanged for non-monetary commodities throughout
the early-modern world, but this has nothing to do with trade imbalances.
Misunderstandings surrounding global monetary flows underlie our
unwillingness to accept the O’Rourke and Williamson claim that silver flows
can be excluded from analysis of non-monetary markets at the global level.
Silver was unquestionably the most significant trade item in the world from
the sixteenth through to the eighteenth century. And we believe historians are
justified in emphasising the central role of end-market China, aptly described
by Magalhaes Godinho (, p. ) as a ‘suction pump’ (bomba aspirante),
a ‘vacuum cleaner’ attracting silver globally for centuries. Historians are well
aware of the global nature of the silver market and the place occupied by
China in it. As early as , Antonio Dominguez Ortiz wrote:
Asia as ever was the sponge which soaked up the precious metals of the West: only
now it was not Roman denarii but Potosı́ silver which streamed into Turkey, Persia and


There were Chinese commercial loans, of course, just as there were European commercial
loans, but this is not the issue we are addressing. Our point is that China exported goods
in exchange for American and Japanese silver; the Chinese did not systematically lend to
Europeans for centuries in order to finance a purported Chinese trade surplus. There was
no trade surplus in need of financing, although loans were involved in the (balanced)
trade along the way.
For further discussion of theoretical issues in this literature, see Flynn and Giráldez
(c).

European Review of Economic History
Sumatra – ‘the Spanish dollars are everywhere current’, remarked a traveler there – and
finished its long odyssey in China, where the king of Spain was known as the ‘Silver King’
and Spanish duros circulated until the last century. In this way American silver created a
sort of economic unity in the world (Dominguez Ortiz , p. ).
Carlo Cipolla also recognised the global character of the American trade
with Europe:
With the exception of the exchanges between Acapulco and the Philippines, international
commerce in the sixteenth and seventeenth centuries could be described summarily in
this way: A mass of silver in coins or ingots moved from Mexico and Peru to Spain,
from where it spread to all European countries. From Europe a big part of this silver
moved toward the Orient to finish in India and China. In the opposite direction a mass
of European products moved toward America (Cipolla, , p. ).
In the absence of silver supplies from the Americas and Japan, Europeans
would not (and could not) have bought such vast quantities of Asian products
throughout the sixteenth to eighteenth centuries; likewise, vast Chinese
exports would have been impossible in the absence of unprecedented silver
discoveries in Japan and the Americas. In short, the history of silver cannot
be divorced from discussion of international trade, nor from the birth of a
global economy.
In their Journal of Economic History article, an explicit O’Rourke and
Williamson (b, pp. –) model restricts ‘import demand’ to the
European side of the equation, while ‘export supply’ rests exclusively on the
Asian side of the ledger. As stated above, however, demand-side forces emanating from within China were a sine qua non in terms of the birth of global
trade. Chinese exports were impossible without the simultaneous Chinese
importation of non-Chinese silver, so we cannot accept any characterisation


Richards (, p. ) elucidates the role of the Dutch East India Company in global
perspective: ‘From one perspective at least, the Dutch East India simply acted as a
European way station for the flow of New World silver and pumped this out to its trading
stations in the east as a commodity. More often than not reales valued by weight remained
in their original boxes packed at the Mexican or Peruvian mints set up adjacent to the
mines. Only after arrival at Batavia or any of the other Dutch trading stations did the
reales pass into circulation or bullion enter the local mints. In other words, at least part of
the copious New World treasure flow was a direct transfer from the point of production
and working to its eventual, far distant, point of monetary circulation in Asia.’ Robert
Marks stresses the crucial role of New World silver in stimulating trade between Europe
and Asia, as well as Africa and the Americas: ‘Even Columbus’s “discovery” of the
Americas and Vasco da Gama’s sailing around Africa to get to the Indian Ocean would
not have done much for European fortunes had they not found both vast quantities of
silver in the New World with which to buy Asian goods and a supply of African slaves to
work the New World plantations after European diseases killed off most of the Native
American population’ (Marks , p. ).
See Marks (, p. ) for similar sentiments. Incidentally, most of the silver sent to
India during the first silver cycle (s–) was forwarded to China: ‘There is ample
evidence that American silver flowing into India was re-exported to China and Southeast
Asia in exchange for exports from these regions’ (Chaudhuri , p. ). For extensive
discussion of the Chinese marketplace, see Deng ().
The birth of globalisation: a critique

of China (or ‘Asia’) or America exclusively in supply-side terms. It is essential
to recognise that all trading parties participated simultaneously as export
suppliers and import demanders. Similarly, we object to characterisation of
European markets exclusively in demand-side terms. The swap of products
requires both import demand and export supply, but the O’Rourke and
Williamson model assigns nations, regions, and continents to either the
demand or supply side of the equation exclusively.
. Luxuries versus non-luxuries in long-distance trade
O’Rourke and Williamson state that long-distance trade was dominated by
luxury goods, a commonplace claim in the economic history literature:
Long-distance trade in the pre-eighteenth century period was largely limited to what
might be called non-competing goods . . . By definition, these non-competing goods were
very expensive luxuries in importing markets, and thus could bear the high cost of
transportation from their (cheap) sources. Also by definition, their presence or absence in
Europe had little impact on domestic production since they were largely non-competing.
Again, by definition, their presence or absence in Europe had an impact on the living
standards of the very rich who could afford these expensive luxuries (O’Rourke and
Williamson a, pp. –).
We find two problems with this statement. First, pre-eighteenth century
global trade was not restricted to luxury items. It is misleading to label
cowries, copper, low-quality silks, teas, sugar, rhubarb, and many other
Asian exports as luxury items throughout the period. In addition to wealthy
customers, Chinese exports were destined for consumers of modest means.
A case in point is China’s sugar industry. China’s immense domestic
market absorbed the bulk of Chinese sugar production, but the small percentage exported was significant in absolute terms: ‘A conservative estimate,
based upon the scattered figures we have, suggest that China produced
approximately –m pounds of sugar for export annually in the s.
By way of comparison, the total output of Brazilian sugar in , when
the Portuguese supplied nearly all of Europe with sugar from Brazil, was
around m pounds’ (Mazumdar , p. ). Indeed, when events in Brazil
disrupted European supplies beginning in the s, this led to European
imports of Chinese sugar: ‘Six English ships carried back a total of  tons
of Chinese sugar in ’ (Mazumdar , p. ).


‘China’s major imports in the late Ming were divided into three categories: precious
metals, textiles, and ballast goods. Gold bullion . . . was exported in significant quantities
to Japan, India and the Philippines. Textiles, especially raw silk . . . were in increasing
demand for export within Asia and to Europe. Ballast cargoes were supplied primarily
from expanding export-oriented agricultural production, sugar in particular, and other
commodities, such as alum, porcelain and zinc’ (Souza , p. ). Also see Souza (,
pp. , , and ) for discussion of the role of Chinese sugar exports.
Pre-s trade in seemingly minor products sometimes involved serious economic
implications. Rhubarb, with supposed medicinal properties, was exported from Tibet to

European Review of Economic History
Sugar was a crucial import for areas that initiated industrialisation; the
English, for example, consumed  pounds of sugar per person annually by
, an amount that increased to  pounds/person per year by the s
(Walvin , p. ). According to Pomeranz (, p. ), replacement
of calories from American sugar in England would have required up to
.m acres of average-yielding English farmland annually in , and as
many as .m acres by . Much of that slave-produced sugar was used
to sweeten tea, of course, an import from China that began as a luxury
item, but evolved over the decades into a mass-consumption beverage for
commoners:
The spread of the tea-drinking habit in Europe during the early years of the eighteenth
century was an astonishingly rapid process in the assimilation of a new economic
product . . . The greater availability of sugar supplies from the West Indian plantations
and the decline in its cost provided the context in which the mass consumption of tea
could become a reality. For people in the lower income groups, tea as a beverage was
appealing not only for its intrinsic taste and quality but also as a means of taking sugar
(Chaudhuri , p. ).
Some , Africans were imported into the British West Indies during
the seventeenth century, but millions of plantation workers were to follow:
In the broad history of the Atlantic slave trade, the British carried some three million
Africans into the New World. And all for what? The sole purpose of that African presence
in the Americas was to produce crops to satisfy the tastes and needs of the western world
(Walvin , pp. –).


China (among other places): ‘By the late s profits from the rhubarb trade had grown
so huge that in , not long after the Qing dynasty formed, tsarist Russia established a
monopoly supervised by its ministry of war. By the end of the seventeenth century Russia
had secured most of the rhubarb market. As a result, trade between Russia and China
expanded tenfold, from , rubles in  to ,, rubles in ’ (Feigon ,
p. ).
‘The East India Company papers show that tea “took off” as a major commodity in
England in the years  to . Thereafter the Company’s imports from China
registered extraordinary growth. The bare figures tell the remarkable story. In the s
almost  million pounds of tea were landed. The following decade it grew to . million,
rising to more than  million in the s. By the s more than  million pounds of
tea came to Britain. Over that -year period, importations of tea had increased fivefold’.
Impressive as official figures may seem, however, they underestimate the flows of Chinese
teas into Europe: ‘The smugglers sometimes provided better qualities and wider
assortment than the legal sales of the [English] East India Company, and contributed to
the development of a genuinely national market by distributing their imports from all
coasts of England and Scotland rather than just from London. The tea destined to be
smuggled into Great Britain was bought in China by the agents of various European East
India Companies, and found its way into smuggling channels from their home ports, most
importantly Copenhagen, Amsterdam, Ostend and the ports of Normandy and Brittany’
(Wills , p. ).
And Africans were end-market customers as well. Europeans imported a third of a million
pieces of Asian and European textiles into Africa by the early nineteenth century (Walvin
, p. ).
The birth of globalisation: a critique

Necessary for brewing and drinking tea, porcelain wares were imported
on the tea-carrying ships themselves. Much of the blue-and-white porcelain
sold in Canton came from the great ceramic centre Ching-te-Chen (near
Nanking), a city of nearly one million people and , kilns in the early
eighteenth century (Chaudhuri , p. ). Ceramics were ideal ballast
goods because they furnished protection from condensation and rain for
valuable cargo such as tea and silk (in the middle of the ship) (Hobhouse
, p. ). Perhaps , tons of ceramics (that is,  million pieces
of Chinese porcelain) were imported by the British East India Company
between  and :
[Importation of Chinese porcelain] only amounts to about five pieces for every Briton
who lived beyond the age of ten in the same period. The vast majority would not have
used ceramics at the time, but of people who used china at all in the eighteenth century,
most would have used Chinese porcelain, because before about  it was cheaper than
ordinary pottery (Hobhouse , p. ).
The point is that luxury goods often evolved into everyday necessities over
time:
Before , the new items of tableware were unusual among lower income groups.
Perhaps only one person in ten owned the crockery needed to make and serve the exotic
drinks so fashionable in upper reaches of English life. By mid-eighteenth century, all
this had changed (on both sides of the Atlantic), as ever more people were able to buy
the new tableware and more and more people made tea in their homes (Walvin ,
p. ).
Our point is that distinctions between luxury and non-luxury products are
time-sensitive; luxury imports frequently became commonplace imports over
time.
The world monetary system was silver-based prior to the nineteenth
century; and even poor peasants in China were required to pay taxes in
silver. In addition, hundreds of thousands of people worked in silver mines,
and even these large numbers were but a fraction of the ordinary individuals
who participated in silver commerce worldwide. Moreover, China’s main
export – silk – was not exclusively a luxury. Perhaps a Spanish official in
Lima exaggerated in his letter to King Philip II when asserting that Spanish
silks were eight times more expensive than comparable Chinese silks (Borah
, p. ), but imports from China did indeed ruin the American market
for finished Spanish silks. Mexican silk guilds benefited, on the other hand,
due to large supplies of Chinese silk yarn that arrived via the Philippines:
‘With the expansion that resulted from this new supply, silk manufacturers
in Mexico City, Puebla, and Oaxaca gave work to more than , people’
(Borah , p. ). Native Americans wore Chinese silks:
According to the report of the Viceroy of New Spain in , in Peru ‘the silks of China
are much used also in the churches of the Indians, which are thus adorned and made
decent, while before, the churches were very bare. As long as goods come in greater
abundance, the kingdom will fear less anxiety, and the cheaper will be the goods.’ The

European Review of Economic History
Indians in other tropical areas of America also all welcomed the cheap Chinese silk cloths,
because Spanish law made them wear clothes (Chuan , p. ).
So robust was the Pacific trade that as late as  the government of Mexico
City built permanent facilities in its central plaza for a market named the
‘Parian’, after the famous Chinese parians in Manila: ‘It contained many
stores selling all kinds of oriental goods which came from Manila. From
these stores, the city government obtained substantial income in the form
of rentals which the store owners paid to the city treasury’ (Zaide ,
p. ). In  two Spanish naval officers, Jorge Juan y Santacilla and
Antonio de Ulloa, visited Central and South America and secretly reported
on the prevalence of illicit Pacific trade: ‘Juan and Ulloa saw Chinese
porcelain for sale in shops of Lima and Chinese silks were sold and worn
quite openly from Chile to Panama, where Oriental stuffs predominated on
the garb of the Spanish population, from the vestments of the priests to the
mantos and silk stockings of the Limenas’ (Schurz , p. ). And we
should not forget that monetary ballast items played a central role in the preIndustrial Revolution global trade matrix. For example, millions of poundsweight in monetary substances – specifically, copper from Japan and cowry
shells from the Maldive Islands in the Indian Ocean – were shipped as ballast
from Asian waters into European ports. Before dismissing the significance
of such shipments, consider that the one million pounds of ballast-cowries
shipped from Asian waters, through European ports, and on to West Africa
annually equalled approximately one-third the value of the , slaves
exported from Africa during the peak year  (Johnson , p. ).
China and India were the early-modern world’s dominant textile
producers. The exportation of raw and finished silks was the main vehicle
through which China accumulated silver from the rest of the world. Low
and medium quality Indian cotton exports flooded Indonesia and were also
exported for sale to slave-owners in West Africa and the Caribbean. The
purchase price of English Company imports of Asian textiles occasionally
rose to , pounds sterling in the s, then sustained ,+ levels
between – (quantities matched by Dutch Company cargoes). By the
s, English imports from India reached , pounds sterling per year
(Wills , p. ).
Jan de Vries has investigated the magnitude of direct Europe-Asia trade
by all of the European trading companies combined. He calculates that the
European companies sent , European ships to Asia between  and
, but only , ships ever returned to Europe. Perhaps two million
Europeans ventured to Asian waters during this period, probably fewer than
half of whom ever returned to Europe: ‘Throughout three centuries, the
European companies were prepared to lose one life for every . tons of
Asian cargo’ (De Vries , p. ). Considering the fact that Portugal and
Spain only contained perhaps one million and seven million inhabitants
respectively in the sixteenth century, two million sailors seems to us a
The birth of globalisation: a critique

significant number. While De Vries (, p. ) emphasises the point that
Cape shipping comprised only  or  per cent of all European shipping
capacity, we argue in Section  below that intercontinental trade can wield
impacts far greater than suggested by such percentages.
. Trade, ecology, and demography: China’s second
agricultural revolution
One reason globalisation could not have resulted from pre-s European
trade with Asia, according O’Rourke and Williamson, is that East–West trade
simply comprised an insignificant percentage of any European country’s
Gross Domestic Product: ‘As far as trade booms are concerned, Ralph
Davis (, p. ) points out that even by  only a tiny  per cent of
the total tonnage of ships engaged in English external trade was involved
with east Asia’ (O’Rourke and Williamson a, p. ). A number of
scholars maintain that foreign trade was such a small percentage of England’s
GDP that the foreign sector was incapable of exerting much influence on
British economic development. American plants and seeds comprised a
miniscule percentage of any country’s GDP. We are unconvinced by antiearly-globalisation arguments that are based upon trade- and/or GDP-ratio
evidence alone. Evaluation of trade’s impact requires consideration of the
broad environmental and demographic context in which trade is conducted.
Direct, continuous trade linkages between the Americas and Asia date
from the foundation of the city of Manila as a Spanish entrepôt in .
Trans-Pacific trade was dominated by the highly-profitable swap of American
silver for Chinese silks. In addition to silver cargoes, Manila-bound galleons
also carried items that were of little trade value, but were of immense global
significance – namely, American plants. New World crops spread throughout
the Old World beginning in the sixteenth century, of course, yet nowhere did
New World plants have a greater impact than within China. And Manila Bay
provided one of the main vectors through which American crops were spread
throughout China. Consequences resulting from this ‘Magellan Exchange’
of American biota into Asia were immense.
No large group of the human race in the Old World was quicker to adopt American food
plants than the Chinese. While men who stormed Tenochtitlan with Cortes still lived,
peanuts were swelling in the sandy loams near Shanghai; maize was turning fields green



Among notable contributions on this issue, see O’Brien (, ), O’Brien and Prados
de la Escosura (), and O’Brien ().
‘The Spanish and Portuguese were the more important sources for bringing the plants
into southeastern coastal Mainland China via the Philippines, while the Portuguese and
Dutch made most of the introductions to India’ (Mazumdar , p. ).
See McNeill (, p. ) for application of the term ‘Magellan Exchange’ to
biological/ecological transfers across the Pacific Ocean, a complement to Crosby’s
‘Columbian Exchange’ terminology in reference to biological/ecological transfers across
the Atlantic Ocean.

European Review of Economic History
in south China and the sweet potato was on its way to becoming the poor man’s staple
in Fukien (Crosby , p. ).
In terms of American crops generally, most were initially introduced to
China’s eastern provinces by Chinese intermediaries in the Philippines and
other Pacific islands during the sixteenth century; another route was overland
through Burma (Bray , pp. –). The full effects of the American
plants involved ‘time lags’ that lasted centuries from the time of their initial
introduction.
New World crops played a central role in eighteenth-century China’s
population explosion and doubling of land area, yet these facts alone fail
to do justice to the extent to which Chinese society was reorganised in the
process. Introduction of maize, the sweet potato, and peanut became what
Mazumdar (, p. ) calls ‘China’s second agricultural revolution’ of
the seventeenth and eighteenth centuries (the first agricultural revolution,
involving cultivation of rice, having occurred between the tenth and twelfth
centuries). Not only could an additional  million mouths be fed as a
result, but production of new American foods also required far less labour
than did cultivation of traditional Chinese crops. Consequently, freed-up
labour and land led to massive increases in Chinese exports:
The intensification of non-food crop agriculture in the Qing and the expanded production
of silk, tea, and sugar for the world market that began expanding with the seventeenth
century in China was thus based on a subsistence food [i.e. the sweet potato] which
required much less labor than rice and other cereals (Mazumdar , p. ).
Awareness of the spread of American crops centuries ago also provides historical perspective for conceptualising tensions in seemingly remote regions
such as Tibet today:
Another point of contention is that of Chinese settlement on the Tibetan plateau.
Originally the Chinese immigrated due to changes in trade, not because of deliberate



Similarly, Fairbank (, p. ) states: ‘Three changes occurred in the eighteenth
century that set the course of China’s subsequent history. The change that has received
the most scholarly attention is the solid establishment of Europe’s presence. But two other
changes may prove to have been of greater significance in the long run. One of these was a
doubling of the territorial size of the Chinese empire. The other was a doubling of the Han
Chinese population. The interplay of these three factors has set the direction of Chinese
history in modern times.’ According to Spence (, p. ), much of China’s ‘population
growth in the eighteenth century was speeded up by a massive ecological change: the
introduction of new crops into China from the New World’ (sweet potatoes, peanuts, and
maize). Bray (, p. ) stresses the ‘rapidity with which the sweet potato spread
throughout China in the seventeenth and eighteenth centuries . . . By the eighteenth
century it was grown in all the Yangzi provinces, and Sichuan had become the leading
producer; by  it accounted for almost half the year’s food supply of poor Shantung.’
American crops had a huge impact on agriculture in India too, but later on in the
nineteenth and twentieth centuries (Mazumdar , p. ).
Feigon (, p. ) helps us place Tibet into geographical perspective: ‘Tibet is . . . vast,
about the size as the whole of Western Europe. All told, the Tibetan highlands occupy
approximately one-fifth of the total land mass of China, extending over , square
miles through the Asian heartland.’
The birth of globalisation: a critique

government policy (which actually discouraged it). The introduction into China of New
World crops such as corn, sweet potatoes, and peanuts created a population explosion
that propelled the Chinese into Kham and especially Amdo (Feigon , p. ).
So it is known that American crops – at least partly introduced through the
Philippines trade vector – helped create a demographic boom in eighteenthcentury China. This population surge involved inter-regional migration
on a grand scale, spurred by cultivation of new regions like Sichuan, the
Yangzi highlands, the Han River region, and elsewhere (Ho , p. ).
Population dynamics were also related to increased commercialisation
of China’s economy and large-scale ecological changes within Chinese
society.
It is widely recognised, of course, that introduction of New World plants
generated consequences beyond Chinese borders. The white potato alone
generated huge impacts throughout Europe, including Ireland, Poland,
and Russia. American plants also fundamentally transformed agricultural
systems in numerous locations throughout the globe including New Guinea
and Africa:
The importance of American foods in Africa is more obvious than in any other continent
of the Old World, for in no other continent, except the Americas themselves, is so great
a proportion of the population so dependent on American foods (Crosby , p. ).
And cultivation of American plants in Japan, among other places,
reverberated well beyond the economic sphere alone:
A number of new foods were introduced into Japan in the sixteenth century and
throughout the Tokugawa period . . . , most of which originated in the Americas, including
potatoes, green beans, corn, red peppers, pumpkins, watermelon, spinach and very late
in the Tokugawa period peanuts. For the Japanese, the most important of the new food
was the potato, which arrived in both Asia and Europe from South America in the
sixteenth century . . . It is the sweet potato that is credited with reducing the deathrate
from famine in Japan . . . Sweet potatoes may well be an important factor not only in
the maintenance of a dense population in the eighteenth and nineteenth centuries, but
also in explaining why the population in western Japan grew faster than that of the rest
of the country, particularly in the four domains most instrumental in overthrowing the
Bakufu-Satsuma, Choshu, Tosa, and Hizen (Hanley , p. ).



For discussion of population in China during the Late Ming and eighteenth century, see
Mote (, pp. – and pp. –). Mote compares figures and trends provided by
Heijdra () with the work of Bielenstein () and the classic study of Ping-ti Ho
().
For discussion of reorganisation of production by region within China in response to
long-distance trade – including environmental consequences – see Marks ( and ).
‘Many centuries ago, however, a new root crop of ultimately South American origin, the
sweet potato, reached New Guinea, probably by way of the Philippines, where it had been
introduced by the Spaniards. Compared with taro and other presumably New Guinea
root crops, the sweet potato can be grown up to higher elevations, grew more quickly, and
gives higher yields per acre cultivated and per hour of labor. The result of the sweet
potato’s arrival was a highland population explosion’ (Diamond , p. ).

European Review of Economic History
We tend to emphasise the role of China, as opposed to other areas fundamentally impacted by New World plants, simply because China contained
the world’s dominant economy throughout the early-modern period, and because Chinese demand for silver played a pivotal role in the birth of globalisation.
Examples of complex global linkages – interactions among trade, ecology,
demography, and back to trade again – existed throughout the early modern
world. The market value of the horses and cattle shipped from Europe into
the New World was an infinitesimal percentage of anyone’s GDP, to cite
another example, yet introduction of these beasts transformed American
economies. Our point is that we must recognise linkages among trade,
ecology, epidemiology, demography, and other aspects of the global system
as an organic whole.
. Conclusion
This essay offers three propositions. First, globalisation was born in the year
. Second, a Path Dependent process – one originating with the overissue of paper money causing hyperinflation in fifteenth-century China (see
fn. ) – led to the birth of globalisation. Third, the shape of globalisation
today has been influenced by processes that have evolved for centuries. Paul
David (, pp. , ) links path dependence and history as follows:
[T]he expression that ‘history matters’ does carry a quite precise set of connotations,
namely those associated with the concept of path dependence. The latter refers to a property
of contingent, non-reversible dynamic process, including a wide array of processes that
can properly be described as ‘evolutionary’ . . . The core content of the concept of path
dependency as a dynamic property refers to the idea of history as an irreversible branching
process.
Hakansson and Lundgren (, p. ) connect history with path dependence in a manner consistent with the work of David:
The dynamics of a system are not only governed by where it is, but also by where it
is coming from. In path dependent dynamics, history is transmitted through a series of
positive feedbacks through which the system gains momentum: pushing us forward in a
direction set by the past, thus carrying the past into the future . . . The issue most often
addressed is how change travels through time. The initial change is often random and
what is shown is how a certain process is reinforced through different types of positive
feedbacks. What then are the carriers of history? Paul David (, pp. –) identifies
two major classes of variables carrying history, institutions and technology.
In addition to institutions and technology, this essay suggests that ecological
factors and consumption patterns can also be viewed as classes of
variables that have carried history at the global level. The body of this
essay alluded to four categories of historical effects – () economic,

See Jolink and Vromen (, p. ) for additional discussion of the relationship between
path dependence and history.
The birth of globalisation: a critique

() ecological/environmental, () demographic, and () alteration of
consumer preferences – that interacted over time with noteworthy pathdependent consequences. It is perhaps worth discussing how these economic,
environmental, demographic, and consumer preference categories relate to
the three historical cycles highlighted in this essay – (a) the first cycle of
silver (s–), (b) the second cycle of silver (–), and (c) the
post-s tea and opium cycle.
Globalisation was born in  with establishment of direct and
permanent linkages between the Americas and East Asia. Since profits
from the American silver and Chinese silk industries motivated trans-Pacific
commerce, globalisation’s birth is best conceptualised within the context of
the First Cycle of Silver (s–), itself a product of extraordinarilyhigh silver prices within China. And elevated silver prices in China stemmed
from a mid-fifteenth century collapse of China’s prior monetary system. In
other words, centuries of global trends were set in motion by monetary/fiscal
events occurring within fifteenth-century China. Indeed, vestiges of this
fifteenth-century phenomenon have maintained visibility into recent times. A
few examples illustrate the point. The nineteenth-century US Trade Dollar
(denied legal tender status domestically) was unable to displace Mexican
Peso dominance in the Chinese marketplace, for example, despite American
efforts to do so.
More than half of the silver exported from San Francisco during this period [–]
was re-exported Mexican silver dollars. Nevada mines provided the United States with
a supply of silver, but Comstock silver did not automatically displace Mexican silver
dollars in America’s trade with China. Efforts to increase the circulation of American
silver coins in Chinese commerce led to the creation of the American Trade Dollar in
. However, these efforts were soon abandoned with the passage of the Allison-Brand
Act and the Sherman Purchase Act that promoted domestic silver coinage. The large
number of Mexican silver coins in San Francisco exports during this period is testament
to their importance in American trade with China (St. Clair , p. ).
Supporters of Mao Zedong in the s also confronted centuries of Chinese
silverisation history. The communists in Shanxi avoided Japanese units
in ; instead, they engaged Guomindang troops ‘where they raised
, silver dollars by expropriating landlords . . . ’ (Short , p. ).
Twentieth-century Tibetan history also contains numerous references to
silver’s multi-century legacy. When the new Dalai Lama was chosen in
the late s, the area’s dominant Chinese Muslim warlord and Tibetan
monks both demanded payoffs: ‘After more than a year of negotiations,
officials from Lhasa had to dole out , silver coins to the warlord Ma
Bufeng . . . [indicating] the huge amount of bullion once stored in the central
treasury [of the Tibetan government]’ (Feigon , p. ). In  over
twenty thousand Chinese troops entered central Tibet, creating a temporary

It is worth noting that China finally came off the silver standard in the s, when China
commenced printing paper money once again. See McMaster (, p. ).

European Review of Economic History
food shortage: ‘The Chinese exacerbated the situation by distributing silver
dollars to the monasteries and the old elite to win them over to their
side. The resulting inflationary spiral led to both popular and governmental
protests . . . (Feigon , p. ). This sample of nineteenth and twentieth
century examples could be multiplied indefinitely, but it illustrates that
important socioeconomic phenomena are traceable to fifteenth-century
origins. Nor is this essay’s tale of path dependency confined to the economic
sphere alone, since important ecological and demographic effects also
reverberated across several centuries.
We confined discussion of ecological impacts to the revolutionary spread
of New World plants as a sort of ‘single jolt’ felt worldwide during the
sixteenth century, but environmental factors played out over subsequent
centuries. Economic profit motivated initial oceanic connections, to be
sure, but ships simultaneously carried American plants and seeds of little
immediate commercial importance. These foodstuffs nonetheless generated
unintended and profound ecological consequences at a global level over time.
Even our restriction of attention to environmental impacts within China
illustrates a considerable time lag between introduction of the American
sweet potato, corn, and peanut during the sixteenth century and initiation of
full countrywide ecological and demographic consequences in the eighteenth
century. The spread of crops originating in the Americas facilitated a more
than doubling of population and geographic area in eighteenth-century
China. China’s eighteenth-century population surge, in turn, stimulated
demand for countless commercial products, including silver (coming mainly
from Mexican mines this time around). When ecological and demographic
consequences are taken into account, the global story of path dependence
becomes more complicated indeed! Fifteenth-century events within China
are connected to a complex series of global economic, ecological, and
demographic interactions that were unforeseeable in advance. Yet we
contend that path-dependent evolutionary views of world history permit
more complete understanding of events today.


‘The actual economic world is one of constant transformation and change. It is a messy,
organic, complicated world. If I have had a constant purpose it is to show that
transformation, change, and messiness are natural in the economy. These are not at odds
with theory; they can be upheld by theory. The increasing-returns world in economics is a
world where dynamics, not statics, are natural; a world of evolution rather than
equilibrium; a world of probability and chance events. Above all, it is a world of process
and pattern change. It is not an anomalous world, nor a miniscule one – a set of measure
zero in the landscape of economics. It is a vast and exciting territory of its own’ (Arthur
, p. xx).
The silverisation of China – and the course of world history – would have taken a far
different trajectory, of course, without the discovery of the prodigious silver mines of
Peru, Mexico, and Japan. Our emphasis on the importance of end-market China is not
intended to distract attention from the global system (including supply-side dynamics)
with which all regions of the world were intimately interconnected.
The birth of globalisation: a critique

We can identify a post-s Tea and Opium era as a third global
cycle that followed the silver cycles of s– and –. An
inevitable worldwide commercial crisis arose by  (similar to its 
predecessor) when profits associated with the silver trade dwindled once
again. British response in Asia included seizure of control of the opium and
tea trades centred in India and China. A noteworthy aspect of the Tea and
Opium cycle, however, is the degree to which long-distance trade patterns
depended upon changing European tastes and preferences this time around.
There were interlocking demand-side surges for tea, sugar, and ceramics
(all complementary goods) within Europe. European producers were able
to pursue import-substitution policies during the eighteenth century due
to mastery of ceramic production techniques, a matter of considerable
cultural/artistic importance. Geographic and climatic conditions precluded
European production of sugar and tea, on the other hand, so European
powers had to depend upon military power to gain control (or at least access)
to these commodities. Sugar production involved slave societies and China
eventually lost its tea monopoly, but these consequences also depended upon
historical paths best conceptualised in a global context.
We label the s– period the ‘Potosı́-Japan silver cycle’ because
unprecedented silver mining in Spanish America (especially Upper Peru) and
Japan erupted at this time, contributing powerfully to the rise of the Spanish
Empire and to the unification of Japan. The bulk of the Japanese and
American silver gravitated toward Chinese markets, where extraordinarily
high silver prices implied global arbitrage opportunities. The crucial role of
monetary and fiscal developments within China as causal factors leading
to the birth of global trade in  cannot be overemphasised. China’s
paper money system (partly backed by silver) dates back to at least the
eleventh century, and fell apart during the middle of the fifteenth century.
Forces emanating from the private sector subsequently increased the demand
for silver, leading to a protracted ‘silverisation’ of Chinese society. As the
silverisation movement picked up speed, the price of silver in China rose to
double its price in the rest of the world. Profits associated with the global
trade in silver are what prompted European settlements in maritime Asian
locations (and persuaded Asian powers to tolerate the European intrusion).
The global production and spread of tens of thousands of tons of silver
eventually caused global silver prices to converge by , by which date the
price of silver had also finally descended to its cost of production.
Between  and , or about , the effect of the discovery of the mines of America
in reducing the value of silver, appears to have been completed, and the value of that
metal seems never to have sunk lower in proportion to that of corn than it was about that
time (Smith  [], p. ).

See Flynn () for a comparison of Hapsburg Spain and Tokugawa Japan, two
silver-based powers in a global setting.

European Review of Economic History
It was during this first silver cycle that a global economy was born.
During this s– cycle the ‘Columbian Exchange’ and the ‘Magellan
Exchange’ led to staggering ecological consequences that unfolded over
multiple generations. The intense profit motive – centred on the global trade
in silver and manufactured items – had unleashed unintended ecological
consequences throughout planet earth. In turn, ecological and demographic
time lags impacted back upon international trade via fundamental alteration
of both factor markets and end-markets throughout the world.
A central feature of the interactive feedback mechanisms described above
is Path Dependence. Thousands of tons of silver flowed relentlessly
through traditional trade routes such as the silk roads, for example, while
transforming the routes themselves in the process. We focus upon pathdependent characteristics of the – ‘Mexican Silver Cycle’. Mexico
yielded more silver during the eighteenth century than did all of Spanish
America during the sixteenth and seventeenth centuries combined. The
early-eighteenth century boom market subsided when world silver prices
converged globally around , by which time the world price of silver itself
had (again) descended to its cost of production (yielding a worldwide commercial crisis). British forces subsequently conquered Bengal in the late
s, during a ‘tea and opium cycle’ within a third phase in globalisation
history.
Connection of the Americas to the rest of the world yielded ecological
and social transformations of sufficient profundity that Alfred Crosby (,
p. ) has depicted the post-fifteenth century global exchange of flora, fauna
and diseases as ‘a revolution more extreme than any seen on this planet since
the extinction at the end of the Pleistocene’. In sharp contrast, O’Rourke
and Williamson (a, p. ) maintain that extra-European forces failed to
affect domestic fundamentals prior to the s:
For globalisation to have an independent influence on an economy, two conditions must
be fulfilled. First, trade-creating forces must change domestic commodity prices before
anything else can happen. Second, the changes in domestic commodity prices must
induce a reshuffling of resources in order for trade to influence things that really matter,
like the scale of output, the distribution of income, absolute living standards or the quality
of life.
Our analysis of the world silver market utilises the insights of Alfred Crosby
and other world historians who focus on environmental and demographic


‘The spatial economy is, self-evidently, a self-organizing system characterized by path
dependence; it is a domain in which the interaction of individual decisions produces
unexpected emergent behavior at the aggregate level; its dynamic landscapes are typically
rugged, and the evolution of the spatial economy typically involves “punctuated
equilibria”, in which gradual change in the driving variables leads to occasional
discontinuous change in the resulting behavior’ (Krugman , p. ).
Copious quantities of silver flowed through traditional Islamic trade routes that spanned
Asia. For discussion of the Ottoman Empire’s role as transit route for American silver’s
journey toward East Asia, see Flynn and Giráldez (c).
The birth of globalisation: a critique

connections at the global level. Adoption of a global perspective – one that
sees the worldwide trade in goods as one (crucial) aspect of an interactive
global environment – reveals powerful seminal forces, where non-global
points of view perceive insignificant events. We remain unconvinced by
arguments based upon the fact that long-distance trade may have comprised
a small percentage of this or that country’s GDP (or that Asia-Europe trade
was relatively small in comparison with intra-European or intra-Asian trade).
The import of petroleum products into the United States in  comprised
a fraction of  per cent of US GDP (. per cent), yet who is prepared to
argue that oil imports are insignificant to the health of the US economy?
Some products have special properties, and others can be linked to largescale epidemiological, environmental, and/or demographic ramifications. In
other words, restricting inquiry to trade as a ‘ratio to GDP’ (or to some other
specific variable) can obscure perception of critical, systemic interactions.
Our emphasis upon silver’s role in initiating globalisation, and upon
demand-side forces emanating from China, is consistent with the notion
that evolving tastes within Europe played critical roles as well. Our goal is to
place European demand-side considerations into global perspective, and to
acknowledge their crucial significance. Our inability to accept O’Rourke and
Williamson’s claim of an s birth date for globalisation does not diminish
the importance of their work. Their focus on a unique early nineteenthcentury period of international price convergence is sensible. They identify
an important phase in globalisation history that coincides with the Industrial
Revolution, itself a turning point in world history that is undergoing vigorous
debate in recent years. Perhaps the work of O’Rourke and Williamson can
contribute to a synthesis of literatures on price history and the Industrial
Revolution. Our intent is to insert their important contribution into a broad
globalisation history context with a  birth date (itself dependent upon
fifteenth-century events within China).
This essay set three goals. First, to define globalisation in a manner that
permits identification of precise historical origins. Second, to discuss interactive, path-dependent linkages among economic, ecological, demographic,
epidemiological, and other facets of history that are normally examined
independently. Third, to explain how our views on the birth of globalisation



US crude petroleum imports in  were valued at $. bn (http://www.census.gov/
foreign-trade/statistics/historical/pet-.pdf), while  US GDP was $. trillion
(http://www.bea.gov/bea/dn/gdplev.xls).
See, for example, Pomeranz (), Mokyr (), and Goldstone (forthcoming).
As W. Brian Arthur et al. (, p. ) put it: ‘The argument of this paper suggests that
the interpretation of economic history should be different in the three regimes. Under
constant and diminishing returns, the evolution of the market is ergotic – ultimate market
shares are built in a priori to the endowments, preferences, and transformation
possibilities that describe the economy and small events cannot sway the outcome. Here
the dynamics of the market reveal the superior choice. But while this is comforting, it

European Review of Economic History
differ from those of O’Rourke and Williamson, and to attempt to conceptualise their research in the context of the multi-century foundations from
which today’s global system has evolved.
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