Economic history: When did globalisation start? | The Economist - 0 views
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economic historians reckon the question of whether the benefits of globalisation outweigh the downsides is more complicated than this. For them, the answer depends on when you say the process of globalisation started.
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it is impossible to say how much of a “good thing” a process is in history without first defining for how long it has been going on.
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Although Adam Smith himself never used the word, globalisation is a key theme in the Wealth of Nations. His description of economic development has as its underlying principle the integration of markets over time. As the division of labour enables output to expand, the search for specialisation expands trade, and gradually, brings communities from disparate parts of the world together
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Smith had a particular example in mind when he talked about market integration between continents: Europe and America.
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Kevin O’Rourke and Jeffrey Williamson argued in a 2002 paper that globalisation only really began in the nineteenth century when a sudden drop in transport costs allowed the prices of commodities in Europe and Asia to converge
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But there is one important market that Mssrs O’Rourke and Williamson ignore in their analysis: that for silver. As European currencies were generally based on the value of silver, any change in its value would have had big effects on the European price level.
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The impact of what historians have called the resulting “price revolution” dramatically changed the face of Europe. Historians attribute everything from the dominance of the Spanish Empire in Europe to the sudden increase in witch hunts around the sixteenth century to the destabilising effects of inflation on European society. And if it were not for the sudden increase of silver imports from Europe to China and India during this period, European inflation would have been much worse than it was. Price rises only stopped in about 1650 when the price of silver coinage in Europe fell to such a low level that it was no longer profitable to import it from the Americas.
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The German historical economist, Andre Gunder Frank, has argued that the start of globalisation can be traced back to the growth of trade and market integration between the Sumer and Indus civilisations of the third millennium BC. Trade links between China and Europe first grew during the Hellenistic Age, with further increases in global market convergence occuring when transport costs dropped in the sixteenth century and more rapidly in the modern era of globalisation, which Mssrs O’Rourke and Williamson describe as after 1750.
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it is clear that globalisation is not simply a process that started in the last two decades or even the last two centuries. It has a history that stretches thousands of years, starting with Smith’s primitive hunter-gatherers trading with the next village, and eventually developing into the globally interconnected societies of today. Whether you think globalisation is a “good thing” or not, it appears to be an essential element of the economic history of mankind.