Copyright © 1999. MIT Press. All rights reserved.
1
Globalization and History
At the start of the nineteenth century, economic globalization was distant from the minds of politicians, businessmen, and voters in the Atlantic economy. And it was even more distant from the minds of those
in Latin America, Africa, Asia, and even most of the Mediterranean
basin. A long and expensive war between Britain and France had engaged almost all Europeans for at least thirty-six of the sixty years between 1760 and 1820. Like most other international conflicts, it had
made a shambles of normal channels of trade, technological transfer,
labor migration, and financial capital movements. Even without the
French Wars (as the British called them), the transport costs associated
with staple foods and industrial intermediates were enormous, thus
choking off trade; in addition, mercantilism and protection were the
preferred policies of the day, suppressing trade still further; longdistance migration was even more expensive in terms of both time and
money—so much so that it did not influence local labor markets much;
and financial markets had led segmented wartime lives for some time.
When it was clear that a durable peace had finally arrived in the early
1820s, the world was hostile to globalization forces and globalization
policies.
It took a while for members of the Atlantic economy to start moving
away from their insular commodity and factor markets, and toward
more integrated world markets. We are sometimes presented with the
image of a heroic era of regime switch in the late 1840s and early 1850s,
at roughly midcentury. Those years included Britain’s move toward
free trade with the repeal of the Corn Laws in 1846, the first voluntary
mass migration triggered by the Irish famine, which started in 1845,
and the laying of the first successful submarine telegraph cable under
the English Channel in 1851, linking financial markets in London, Paris,
and other European capitals. Those dates are convenient and their
Williamson, J. G., & O'Rourke, K. H. (1999). Globalization and history : The evolution of a nineteenth-century atlantic
economy. MIT Press.
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Copyright © 1999. MIT Press. All rights reserved.
2
Chapter 1
stories are colorful, but the history is incomplete and misleading. The
first half of the century had undergone a spectacular decline in transport costs on sea-lanes and on routes to the interior, British tariffs had
drifted down from almost embargo heights, migrations across the Irish
Sea and on the Continent had quickened, and European capital, freed
from wartime finance, was starting to look for promising returns in
distant New Orleans, Chicago, Sydney, and Bombay.
Yet the really big leap to more globally integrated commodity and
factor markets took place in the second half of the century. By 1914,
there was hardly a village or town anywhere on the globe whose prices
were not influenced by distant foreign markets, whose infrastructure
was not financed by foreign capital, whose engineering, manufacturing, and even business skills were not imported from abroad, or whose
labor markets were not influenced by the absence of those who had
emigrated or by the presence of strangers who had immigrated. The
economic connections were intimate, poor regions had enjoyed significant convergence gains by erasing part of the gap between themselves and rich regions, and flourishing export sectors enjoyed the
benefits associated with the global trade boom. Not everyone was
happy with the new global economy. Farmers voiced populist complaints about railroads and bankers. Rich landowners demanded
protection from cheap farm products. Workers pointed to unfair competition from imports made with cheap foreign labor and claimed that
their jobs were being robbed by immigrants. Capitalists in declining
import-competing industries argued that it was only fair that they get
compensation for the losses they suffered on sunk investments. And
domestic policymakers began to feel that they were losing their ability
to manage prices, interest rates, and markets; they felt increasingly vulnerable to financial panic, industrial crisis, and unfavorable price
shocks generated in distant corners of the globe.
This characterization should sound familiar since the same language
has been used often enough to describe the evolution of the world
economy over the past half-century. Globalization seemed remote in
1945 too, although it was all policy alone, rather than the combination
of policy and transport costs, that accounted for the segmentation of
world commodity and factor markets at the end of World War II. The
world economy had lost all of its globalization achievements in three
decades, between 1914 and 1945. In the half-century since then, it has
won them all back in every market but one; world migration is no
longer ‘‘mass.’’
Williamson, J. G., & O'Rourke, K. H. (1999). Globalization and history : The evolution of a nineteenth-century atlantic
economy. MIT Press.
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Copyright © 1999. MIT Press. All rights reserved.
Globalization and History
3
What form did the globalization boom take from the mid-nineteenth
century to the Great War? Did poor countries start to catch up on rich
countries, and did globalization help contribute to the convergence?
Which part of the globalization process had the biggest impact on factor markets and gross domestic product (GDP) convergence? Capital
flows? Labor migration? Trade? Technology transfer? Did all the Atlantic economies participate equally? Who gained? Who lost? Did the losers complain loud enough to generate a political reaction?
These are the questions for which this book offers answers. It also
serves up the answers while looking explicitly and constantly at modern experience and modern debate. We want this book to speak to today’s debates about the growth of trade, the impact of immigration on
local labor markets, the sources of inequality, why more capital does
not flow to poor countries, whether trade liberalization can lessen immigration pressures in rich countries, why globalization backlash arose
in the past, and whether we can expect it again as we enter the next
century.
The book begins with Atlantic economy convergence experience
over the century or so from 1830 to 1940. Like all other economists
worried about convergence, we pay attention to GDP per capita and
GDP per worker-hour, but we pay far more attention to real wages.
This focus on real wages and other factor prices pervades the whole
book since we feel that economists cannot possibly answer the questions raised in the previous paragraph by dealing solely with macroeconomic aggregates. Chapter 3 identifies and measures the
spectacular transport revolution that took place across the nineteenth
century and generated an equally spectacular convergence in commodity prices. Most of the huge gap in commodity prices quoted between
distant markets in 1820 had been erased by 1914, even though rising
protection tried hard to mute these globalization forces. Chapter 4 then
asks whether Eli Heckscher and Bertil Ohlin were right in predicting
that the convergence in world commodity prices would induce a convergence in world factor prices. The next two chapters explore the political economy of tariffs in accounting for the move to ‘‘openness’’ in
the middle of the century and then for the subsequent retreat from that
short brush with liberalism. Chapter 7 asks why the migrants moved.
To be more precise, Was there self-selection? Why were those who had
the most to gain so often the last to leave? Would the mass migrations
have subsided in the 1920s and 1930s in the absence of the quotas and
a great depression? The next chapter assesses the impact of the mass
Williamson, J. G., & O'Rourke, K. H. (1999). Globalization and history : The evolution of a nineteenth-century atlantic
economy. MIT Press.
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4
Chapter 1
Copyright © 1999. MIT Press. All rights reserved.
migrations on countries sending the emigrants and those receiving
them. The impact was very big: most of the Atlantic economy convergence observed can be attributed to the mass migrations. Chapters 9
and 10 deal with the political economy of globalization. First we establish who lost from these globalization forces by documenting movements in relative factor prices and inequality everywhere around the
Atlantic economy. Globalization predictions are confirmed: inequality
was on the rise in labor-scarce New World economies, inequality was
on the decline in European agrarian economies, and inequality was
relatively stable in the European industrial economies. Chapter 6 deals
with tariff responses to these distributional events, and chapter 10 completes the globalization backlash story by exploring the fall in immigrant subsidies and the rise in immigrant restrictions in the New
World, which occurred long before the quotas of the interwar period.
Chapters 11 and 12 turn to financial capital markets. The first establishes that world capital markets were almost certainly as well integrated in the 1890s as they are in the 1990s. The second explores the
impact of the capital flows and dwells on two questions: Why didn’t
more capital flow to poor, labor-abundant countries? When it did flow
to the periphery, what was its contribution there? Chapter 13 explores
a question that is central to debates about policy: Were trade and factor
flows substitutes or complements? The book concludes with a summary of the lessons from history.
This, then, is the agenda. As economists today debate globalization
issues, they treat the phenomenon as if it is unique to our time, seemingly unaware of how directly the first great globalization boom speaks
to the second. A conversation between the two is long overdue. What
follows is a start.
Williamson, J. G., & O'Rourke, K. H. (1999). Globalization and history : The evolution of a nineteenth-century atlantic
economy. MIT Press.
Created from bibliotecaie-ebooks on 2022-07-01 13:47:22.