Wednesday, March 12, 2008


I never explicitly blog about work, but global trade is an interest of mine, as well as what I do for a living. Thus, I do sometimes blog about bigger picture issues. This is one of those times. In a short essay entitled Lessons from the History of Trade and War, Ronald Findlay and Kevin O'Rourke discuss not only the nature of globalization, but what the last 1,000 years of world trade tell us about the future. Very interesting stuff.

While the global economy seems like it is driven by technology and transportation, neither of which is likely to go away in the foreseeable future, Findlay and O'Rourke argue that globalization is actually as much political as technological. Thus, in the 19th Century, with new technology (the Industrial Revolution) and transportation (steamships and railroads) creating a wave of globalization, it looked as if the world was on an irreversible track of closer economic relations. What happened?

Well, arguably, politics happened. First, the major trading countries in Europe imposed high agricultural tariffs to ensure that their farmers were not overwhelmed by Russian and New World agriculture. Ensuring your food supply is, of course, a vital political act. Economics would tell you to maximize efficiency by buying more cheaply that food that you could and grow what you are better suited to grow. Possible parallels today? How about the hostility of many Americans to free trade, as well as the end of the Washington Consensus (with regard to trade policy in particular), and the French rejection of the European constitution in 2005.

Next, keep in mind that Africa and big parts of Asia were "globalized" by being colonized. Once pressure toward decolonization began, these markets were effectively decoupled from the globalized economy. Later communism (and autarky in some places) further separated parts of the formerly globalized world from the world trade system. Now we are trying to reintegrate these places, as well as manage the entry of China and India into the group of major players. However, that "management" is likely to be as much a political act as an economic act, since China, in particular, is already integrated as a major power economically.

Anyway, it is interesting stuff and definitely merits reading the actual essay.


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