Eighteenth century globalisation

For the economic historians among us, there is an article on VoxEU.org which argues that there was a potential for globalisation as early as the 18th century. Economic globalisation is a political phenomenon. The column presents new evidence on the Anglo-American wheat trade in the eighteenth century and explains how politics, war, and natural disasters thwarted economic integration.

In his article Why globalisation might have started in the eighteenth century, Paul Sharp explains that

Economists say there is globalisation when prices influence each other across continents over relatively short periods of time. Much of the evidence for globalisation at the end of the nineteenth century has come from the impressive growth in trade in foodstuffs – especially grain – in these years. The most important trade was between the United States and Britain, and price evidence demonstrates the integration of these two markets as, for example, a poor harvest in the United States resulted not only in increased prices at home, but also in Britain.

New evidence shows, however, that the grain trade – and specifically trade in wheat – was important as far back as the eighteenth century. Given that this was the case, it follows that it might be possible to find earlier periods of market integration – that is ‘proto-globalisation’.

Sharp goes on to say

The evidence for the early importance of the transatlantic wheat trade comes from two sources. First, statistics survive for the wheat trade between the American colonies and the early years of the United States and Britain. These show the beginnings of intercontinental trade in a bulky product, which at the time was a leading component of consumption in Britain.

Second, lending support to the trade statistics is primary evidence, ranging from presentations, to Parliamentary select committees to the correspondence of individual farmers, which all suggests that contemporaries were aware of the significance of this trade. Indeed, by 1800, the British Board of Trade wrote that ‘America be, or is hereafter to be the granary of Europe’, a role which it only fulfilled at the end of the century.

In fact, when the United States did finally emerge as the major supplier of wheat in the 1860s and 1870s, it appears that contemporaries considered this to be a new development, seemingly unaware of the events of the previous century. Their reason for this mirrors the belief that many hold today that globalisation is a modern phenomenon: the early growth in trade was continuously being knocked off course by ‘extraordinary’ events, such as war, politics and even plagues of insects.

Moreover, the trade was finally closed down altogether by the imposition of prohibitive new Corn Laws after the Napoleonic Wars in 1815. That observers had forgotten the importance of this trade after half a century is similar to commentators now often being unaware of the level of globalisation prior to the First World War.

Sharp continues his story by arguing that

The ultimate proof for eighteenth-century proto-globalisation is that prices of grain in the United States and Britain influenced each other. As far back as the 1770s, when Britain became a net importer of wheat and large volumes started to be imported from the United States, there is evidence that prices on both sides of the Atlantic were moving together.

Later he notes

The co-movement of American and British wheat prices in the eighteenth century suggests a potential for globalisation one hundred years before the so-called “first globalisation.“ What happened?

The reason why globalisation did not take hold in the eighteenth century was that it was continuously being disrupted. It was not the improvements in transportation technology of the nineteenth century that made globalisation possible. It was rather wars, politics and natural disaster that made globalisation impossible prior to this.

The moral of the story seems to be that history has shown that globalisation can reach impressive levels, but the institutional framework supporting it is important and if it collapses, or if natural disaster strikes, then the disintegration of important markets can, and does, occur within a short period of time.