EC120 week 16, topic 11, slide 1

Globalization, 1815−1914: trade and development

Topics:

•World economy in the long 19th century

•Industrialisation, mid-19th century to 1914

•Transport & communications in 19th century

•Long distance trade, 1815−1914

•Commodity market integration and convergence

•Britain’s move to Free Trade

•Liberal interlude in commercial policy, c1860−c1880

•Retreat from Free Trade: rise of Neo-Mercantilism

•Free Trade Imperialism

EC120 week 16, topic 11, slide 2

The World Economy in the long 19th century

• Move towards international Free Trade, 1840s−60s

– Retreat from late 1870s with rise of neo-mercantilism

• Industrialisation: western Europe caught up, 1850s−60s

• Industrialisation: a “second” Industrial Revolution?

• Globalisation: the first(?) phase 1860s−1914

EC120 week 16, topic 11, slide 3

Industrialisation, mid-19th century to 1914

• Technological advance in broad range of industries

• Landes’s classification:

I. “New materials and new ways of preparing old materials”

II. “New sources of energy and power”

III. “Mechanisation and division of labour”

EC120 week 16, topic 11, slide 4

Transport & Communications in the 19th cent.

• Canals: linked oceans, inland waterways expanded

• Ocean: improved ship design and refrigeration

• Railroads: expanded across the world after 1840s

• Telegraph: networks widespread from late 1840s

EC120 week 16, topic 11, slide 5

Long distance trade, 1815−1914

• Growth of trade faster than GDP; brief cyclical interruptions

• Growth dominated by Europe and the New World

• Shift from high-value/weight to bulk commodities

• Changing trade patterns affected composition of domestic output and distribution of income

• What determined of the changing patterns of trade?

EC120 week 16, topic 11, slide 6

Commodity market integration & convergence

• International commodity markets became more integrated, 1815-1914– Compare commodity prices at the origin

(production) with those at the destination (consumption)

• Commodity market integration and income distribution– Commodity prices

-> trade patterns -> production patterns -> income distribution

EC120 week 16, topic 11, slide 7

Britain’s move to Free Trade• In 1815, Britain remained highly protectionist

• Agricultural protection reinforced: Corn Law of 1815

• Corn Law repeal in 1846 signalled onset of Free Trade

• Free Trade Imperialism: enforced foreign openness

Sir Robert Peel

EC120 week 16, topic 11, slide 8

Liberal interlude in trade policy, c1860−c1880

• In 1815 most European nations were highly protectionist

• Gradually less protectionist policies were adopted

• Cobden-Chevalier Treaty between Britain & France, 1860

• Despite Free Trade Imperialism, much of the world remained protectionist

EC120 week 16, topic 11, slide 9

Retreat from Free Trade: rise of Neo-Mercantilism

• From c1880, most nations retreated from trade liberalisation

• Variety of causes: preservation of existing living standards and/or promotion of new industries

• Varying national responses: some countries upheld free trade, others became more-or-less protectionist

Free Trade Imperialism• European overseas empires expanded during the

19C:– Mainly to impose trade “openness”– Greater autonomy for European offshoots

• USA and Russia pursue continental expansion

• A North-South divide?– Europe (`north’) versus the rest (mostly

`south’)

EC120 week 16, topic 11, slide 10

EC120 week 16, topic 11, slide 11

Summing up• In 19C, international trade expanded faster than

output

• Globalisation: reflected in commodity price convergence

• Convergence of incomes (returns to factors of production) – Partly from trade flows (goods and services)– Partly from factor flows (migration)