Introduction Empire in the west Encroachment in the east When did globalization begin?
Lecture 3: The early history of globalization, 1500 to 1800 AD
To paraphrase Marx and Engels paraphrasing Adam Smith, the two critical events of the modern world were: “the discovery of America, [and] the rounding of the Cape [of Good Hope]” in 1492 and 1488, respectively.
The early history of globalization
This is traditionally the starting point for historians dating globalization: "The European discoveries made the oceans of the earth into highways for their commerce." (McNeil, 1999)
The early history of globalization
This Eurocentric view of the core and periphery has been challenged. But the fact remains that 1500 marks a key date in history. Our question for the week: did globalization begin in 1500?
The early history of globalization
But what were the historical developments of this period? With the “discovery” of the Americas, we see the extension of European empire in the Western hemisphere.
With the rounding of the Cape, we see the encroachment of European interests in the Eastern hemisphere.
The early history of globalization
The period starting from 1500, thus, corresponds with the rise of European overseas empires.
This was to have a tremendous impact on the course of history and globalization. And probably no more so than in the Americas.
Empire in the West
Empire in the West
The extension of overseas empire was a much more prominent feature in the Western hemisphere.
Empire in the West
„Though African slaves had been in the Americas from 1510, their numbers were limited until the late 1500s.
Empire in the West
Empire in the West
The transatlantic shipment of slaves: 1500s: 70,000 1600s: 1.4 million 1700s: 7.15 million
Empire in the West
At the other end, Europe was also reaping the benefits of immense mineral wealth from the Americas.
Empire in the West
B u llion flow s: an n u al averages (m etric ton n es)
700
600
500
400
300
200
100
0 15001525 15251550 15501575 15751600 16001625 16251650 16501675 16751700 17001725 B alanc e 17251750 17501775 17751800
Eur ope an impor ts
Eur ope an e xpor ts
Empire in the West
Both of these flows are parts of what is known as the “Columbian Exchange”.
Empire in the West
At the same time, we see the halting encroachment of Europeans in the rest of the Eastern Hemisphere.
Encroachment in the East
However, much of the overseas trade in the Indian Rim was seized by Europeans.
Encroachment in the East
One of the most important developments in this trade was the establishment of chartered trading companies.
Encroachment in the East
These developments have led some to date the period as the beginning of globalization.
When did globalization begin?
But when do economists date globalization?
Obviously, it all depends on definitions. In O‟Rourke and Williamson, “When did Globalization Begin?”, their criteria is that of price convergence and not volumes of trade.
When did globalization begin?
MM=home import demand SS=foreign export supply t=trade costs
(Shifts in MM & SS versus t)
When did globalization begin?
An example of price convergence:
P rices in A m sterdam an d L on don
1 0 .0 9 .0
8 .0 7 .0
6 .0
5 .0
4 .0
3 .0 2 .0
1 .0
0 .0 1500 1525 1550 1575 1600 1625 1650 1675 1700 1725 1750 1775
A ms te rdam
London
When did globalization begin?
An example of price convergence:
1 .0
P rice differen tials (% )
0 .8
0 .6
0 .4
0 .2
0 .0
-0 .2
-0 .4 1500 1525 1550 1575 1600 1625 1650 1675 1700 1725 1750 1775
When did globalization begin?
In the world of O‟Rourke and Williamson, there seems to be little evidence for price convergence between Europe and the rest of the world up to 1800.
Therefore, there was no evidence of globalization in this period (counter to Flynn and Gilradez).
When did globalization begin?
When did globalization begin?
What this implies is that although there were big profits to be made from this luxury trade it didn‟t fundamentally alter patterns of production in the global economy.
When did globalization begin?
So these trading partners experienced limited efficiency gains in production as relative prices changed by only one to two percent.
When did globalization begin?
A gricu ltu re
M an u factu res
When did globalization begin?
A gricu ltu re
M an u factu res
When did globalization begin?
Also, the commodity price evidence that O‟Rourke and Williamson consider are for non-competing goods.
That is, because of geography, Europe could not produce them.
When did globalization begin?
But what of the goods produced and consumed by the vast majority of the population?
When did globalization begin?
O‟Rourke and Williamson again argue no.
The basis for their claim is English data from 1565 to 1936 on:
When did globalization begin?
Assuming a two sector economy (ag & man)
The intuition is when a country is not globalized WR and PAPM should be determined by domestic endowments.
When did globalization begin?
But when a country is globalized its commodity prices (PAPM) should be set on world markets.
When did globalization begin?
When did globalization begin?
On the other hand, there is evidence of price convergence within Europe, dating from at least 1500.
When did globalization begin?
By the 1600s, distinct regional economies had formed within Europe along the major waterways:
When did globalization begin?
When did globalization begin?
This trade allowed for productivity gains in:
• agriculture • manufacturing • and the processing of raw materials
When did globalization begin?
These were especially significant in a world of purely Smithian growth.
When did globalization begin?
There is also evidence of such intracontinental (or imperial) integration in: • the early Ottoman empire (from 1453 to 1600), • the Mughal empire (from 1526 to 1700), • and above all, the Chinese empire.
When did globalization begin?
Recent research indicates that Chinese commodity markets were at least as well integrated as those of Europe.
When did globalization begin?
But whereas this expansion petered out at the end of this period for the rest of the world, it took off in Europe.
When did globalization begin?
We know that the expansion of the market is not enough alone to explain the rise of modern economic growth… Yet maybe trade plays a decisive, but indirect role in economic growth.
When did globalization begin?
Trade (globalization) as exploitation:
Much of what was called trade, was not conducted on the purely voluntary grounds generally assumed by economists.
When did globalization begin?
Trade (globalization) as exploitation:
Massive individual fortunes won this way, but long-run effects on “exploiter” nations hard to decipher (Spain).
When did globalization begin?
Trade (globalization) as a stimulus to technological change:
The flow of new items, new people, new ideas—heightened technological creativity.
When did globalization begin?
Trade (globalization) as a stimulus to technological change:
Embodied technological improvement— imports of capital goods from a technologically advanced country can lead to one-off productivity gains.
When did globalization begin?
Trade (globalization) as a stimulus to technological change:
Potentially ongoing gains as the technology is adapted to the local environment and endowments.
When did globalization begin?
Trade (globalization) as a stimulus for institutional change:
The profits from trade accrue to the merchants themselves.
When did globalization begin?
Trade (globalization) as a stimulus for institutional change:
They can demand less predatory actions by the rulers, gain more representation in government, maybe even revolt.
When did globalization begin?
Trade (globalization) as a stimulus for institutional change:
The expansion of trade allows for economies of scale to be achieved.
When did globalization begin?
Trade (globalization) as a stimulus for institutional change:
The transaction sector is all that stuff in between production and consumption.
When did globalization begin?