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Outline

Globalization, Past, now and FutureThe first and second wave of globalization

Tsechien Hsu

Department of EconomicsNational Taiwan University

Presentation for Program of Globalization Studies, April,

2009

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Outline

Part I: The First Wave of Globalization

Part II: Interlude: World War and the Deglobalization

Part III: Reglobalization and its Future

Outline of the Lecture

1 OutlinePart I: The First Wave of Globalization



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Outline




Outline of Part I

2 Prelude: Commercial Policies and Their Consequences

During Napoleon War

3 Political Consequences of War and Technological Progress

that Promote Trade

4 Evidences Support Theories

5 Distributional Effect and Protectionists Backlash

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Outline




Outline of Part II

6 The Consequence of the Exogenous Shock, the Great War

7 Evidences

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Outline




Outline of Part III

8 Recovering of World Trade since 80s

9 Variations in Openness Across countries and Time

10 Great Convergence and Divergence in Some Cases

11 The Prediction of Future Path

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P l d


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Prelude

Political and Economic Effects on Trade

Evidences Support Theories

Distributional Effect and Protectionists Backlash

Part I

First Wave of Globalization

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P l d


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Prelude




Blockade

Oct. 1793 French banned all British manufactures andBritish blockaded the French coast.

1801 LAN dissolved by British

1806 Berlin Decree

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Prelude


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Prelude




Blockade



1806 Berlin Decree

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Prelude


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Prelude




Blockade



1806 Berlin Decree

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Prelude


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Prelude




Blockade

1807 Orders of Council and Napoleons counterresponse1807 Russia and Prussia joined the Berlin Decree

1807 "Embargo Act"

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Prelude


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Prelude




Blockade


1807 "Embargo Act"

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Prelude


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Prelude




Blockade


1807 "Embargo Act"

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Prelude


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Blockade

1809 "Non-Intercourse Act"1810 Sweden joined Berlin Decree

1814 Continental blockade ended with Napoleons

abdication

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Prelude


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Blockade



abdication

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Prelude


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Blockade



abdication

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Prelude


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Effects of the Blockade on Trade

1780 1790 1800 1810 1820 1830

Britain

1780 1790 1800 1810 1820 1830

France

1780 1790 1800 1810 1820 1830

United States

1780 1790 1800 1810 1820 1830

Sweden

0

40

80

120

160

200

240

0

40

80

120

160

200

240

0

40

80

120

160

200

240

0

40

80

120

160

200

240

1820

=1

00

1820

=1

00

1820

=1

00

1

820

=1

00

Figure 7.1. Price of imports relative to exports, 17801830 (1820 = 100). Thelines refer to 1793 and 1815, and the shaded areas refer to 180714. Source:Imlah (1958), Schn (1984), Cuenca Esteban (2004), and North (1966).

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Prelude

P li i l d E i Eff T d


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Collapse of Iberian Colonization

Dissolve of VOC (Vereenigde Oost-Indische Compagnie)

Congress of Vienna

Imperialism

Road, canal and steam engine

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Prelude

P liti l d E i Eff t T d


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Freight Factors 1820-1910

Table 7.2. Freight factors, 18201910 (percent).

Commodity From To Basis

(1) Wheat Baltic Britain Import(2) Wheat Black Sea Britain Import(3) Wheat East Coast U.S. Britain Import(4) Wheat New York Britain Export(5) Wheat New York Britain Import(6) Wheat Chicago Britain Export(7) Wheat South America Britain Import(8) Wheat Rio de la Plata U.K. Import(9) Wheat Australia Britain Import

(10) Coal Britain Genoa Export(11) Coal Nagasaki Shanghai Export

(12) Copper ore West coast, South America U.K. Import(13) Guano West coast, South America U.K. or European Continent Import(14) Nitrate West coast, South America U.K. or European Continent Import(15) Coffee Brazil U.K. or European Continent Import(16) Salted hides Rio de la Plata U.K. Import(17) Wool Rio de la Plata U.K. Import(18) Rice Rangoon Europe Export

1820 1830 1840 1850 1860 1870 1880 1890 1900 1910

(1) 8.0 7.1 7.2 6.8 9.6 4.5 3.5 5.9 3.4(2) 15.5 16.3 15.0 17.3 9.2 9.7 10.8 6.8(3) 10.3 7.5 10.9 8.1 8.6 5.0 8.2 3.2(4) 10.5 6.9(5) 9.4 6.2(6) 33.0 21.7 13.3 15.9 7.4(7) 15.6 18.5 7.4(8) 15.4 6.9(9) 22.3 26.7 15.4

(10) 213.1 224.5 246.1 194.0 163.1 69.7 64.5 53.8(11) 84.0 57.0 35.0 20.0

(12) 21.3 7.8(13) 24.9 18.5(14) 34.1 23.0 9.7(15) 5.2 2.0 1.5(16) 3.1 3.8(17) 1.3 1.3(18) 73.8 18.1

Source: Rows (1)(3), (7), (9): North (1958, pp. 55052). Rows (4)(5): Persson (2004,p. 141). Row (6): see footnote 6. Rows (8), (12)(17): Stemmer (1989, p. 31). Row (10):

Harley(1989,pp. 33436), Mediterraneanroute;British export price fromMitchell(1988,pp. 74849). Row (11): Yasuba (1978, p. 29). Row (18): Williamson (2002, p. 60) (data for1882 and 1914).

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Prelude



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Tropical Trade Growth

0 200 400 600 800 1000 1200

French West IndiesBritish West Indies

VenezuelaOther Africa

British East AfricaPhilippines

IndiaOther Carribbean

Dutch West IndiesEgypt

MalayaTotalCentral America

PeruPortuguese Africa

IndonesiaColombia

MexicoPacific Islands

BrazilEcuador

British Central AfricaIndochina

BoliviaCeylon

British West Africa

ThailandParaguayBelgian Congo

French West AfricaFrench Equatorial Africa

Figure 7.6. Tropical trade growth, 18831913 (1913 exports,1883 = 100, current dollars). Source: Lewis (1969, p. 48).

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PreludePolitical and Economic Effects on Trade


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World Patterns of Settlements 1910

United KingdomCanada 25 m

U.S.A.

24 m

?

Turkey

?

Continental Europe

25 m?

1 m

50 m

10 m45 m

15 m

7 m

Australia

India

Japan

7 m

60 m

13 m

13 m

4.5 m

4 m30 m

Figure 7.5. World pattern of settlements, 1910. Source:Saul (1960, p. 58).

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Trade Structure

Table 7.4. World trade, 187680 and 1913 (millions of dollars).

Primary products

187680 1913

Re gi on Expo rts Impo rt s Ba lan ce Expor ts Impo rts Bal anc e

U.S.A. and Canada 600 330 +270 2,101 1,542 +559U.K. 117 1,362 1,245 760 2,596 1,836NW Europe 840 1,800 960 3,064 5,894 2,830

Other Europe 750 515 +235 1,793 1,689 +104 Australasia 1,413 575 +838 455 129 +326Latin America 1,531 595 +936

Africa 680 307 +373 Asia 1,792 949 +843

Total 3,720 4,582 862 12,176 13,701 1,525

Manufactures

187680 1913

Re gi on Expo rts Impo rt s Ba lan ce Expor ts Impo rts Bal anc e

U.S.A. and Canada 100 190 90 734 891 157U.K. 865 225 +640 1 ,751 601 +1,150NW Europe 1,080 450 +630 3,318 1,795 +1,523Other Europe 210 330 120 578 1,133 555

Australasia 35 1,285 1,250 9 370 361Latin America 51 879 828

Africa 26 451 425 Asia 461 1,247 786

Total 2,290 2,480 190 6,928 7,367 439

Source: P. Lamartine Yates (1959, pp. 22632). Note that world trade does not balance

due to unrecorded trade.

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Great Divergence

Table 7.5. Income and regional inequality, 18201913(GDP per capita in 1990 international GearyKhamis dollars).

Region 1820 1870 1913

Western Europe 1,204 1,960 3,458Eastern Europe 683 937 1,695British offshoots 1,202 2,419 5,233Latin America 692 681 1,481Japan 669 737 1,387 Asia, excl. Japan 577 550 658 Africa 420 500 637 World 667 875 1,525

Theil inequality coefficient 0.061 0.188 0.299a

Source:Maddison(2003, p. 262)and Bourguignon and Morrisson (2002, p.734).aData

for 1910.

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Theoretical Predictions

Land abundance implies lower rent.

Labor abundance implies higher wage.Convergence in commodity price induces convergence in

factor prices.

Domestic distribution causes political conflicts within a

nation.

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Evidences

1500 1600 1700 1800

Landlabor ratio Wagerental ratio Relative price of food

1850 1875 1900 1925 1850 1875 1900 1925 1850 1875 1900 1925

1900

=1

00

(logscale)

200

400

600

10001400

80

120

160200240

50100

200300500

1000

50

100

150200

300

1500 1600 1700 1800 1500 1600 1700 18001020

4060

100

200

80

90

100

110

120130

(a)

(b)

Figure 7.3. Endowments and relative prices, Britain 15001936 (1900 = 100):(a) 15001840; (b) 18401936. Source: ORourke and Williamson (2005).

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European Grain Tariff

1870 1880 1890 1900 1910

France Germany Sweden

1870 1880 1890 1900 1910

(d)(c)

(a) (b)

Percent

0

10

20

30

40

50

60

70

0

1020

30

40

50

60

70

Percent

Figure 7.4. European grain tariffs 18701913 (ad valorem equivalent, per-cent): (a) wheat, (b) rye, (c) oats, (d) barley. Source:data underlying ORourke(1997).

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Average Tariffs on Manufactured Imports 1875-1913

Table 7.3. Average tariffs on manufactured imports, 1875 and 1913(ad valorem equivalents, percent).

1875 (1) 1913 (2)

U.K. 0 0

Asia

China 45India 4Iran 34Japan 2530Thailand 23Turkey 510

Europe

AustriaHungary 1520 18Belgium 910 9Denmark 1520 14France 1215 20Germany 46 13Italy 810 18Netherlands 35 4Norway 24Spain 1520 41Sweden 35 20Switzerland 46 9

Dominions

Australia 16

Canada 26New Zealand 1520U.S.A. 44

LatinAmerica

Argentina 28Brazil 5070Colombia 4060Mexico 4050

Source: (1) Bairoch (1989, table 5, p. 42); (2) League of Nations (1927, p. 15); except for

Brazil, China, Colombia, Iran, Japan, Mexico, New Zealand, Thailand, Turkey (Bairoch1989, table 16, p. 139).

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Consequence of War on Trade

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Evidences

Legacy of War

Directly exogenous effect, surge of transportation costs.

War strengthen the protectionism, Japan and U.S.A. as an

example.

Geopolitical changes caused by war.

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E id


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Evidences

Tariffs 1913-31

Table 8.2. Tariffs, 191331 (ad valorem equivalents, percent).

(a) League of Nations indices

Manufacturedgoods All goods

1913 1925 1913 1925

Argentina 28 29 26 26Australia 16 27 17 25 Austria 18 16 18 12

Belgium 9 15 6 8Canada 26 23 18 16Czechoslovakia 18 27 18 19Denmark 14 10 9 6France 20 21 18 12Germany 13 20 12 12Hungary 18 27 18 23India 4 16 4 14Italy 18 22 17 17Netherlands 4 6 3 4Poland N.a. 32 N.a. 23

Spain 41 41 33 44Sweden 20 16 16 13Switzerland 9 14 7 11

Yugoslavia N.a. 23 N.a. 23United Kingdom N.a. 5 N.a. 4United States 44 (25) 37 33 (17) 29

Source:(a)League of Nations (1927, p.15, Method B1). Notes: 1913 figures forAustria,

Czechoslovakia, and Hungary refer to AustriaHungary. The figures in parentheses for

the United States in (a) refer to 1914. N.a. = not available.

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Evidences


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Evidences

Trade Divergence

Table 8.5. The share of formal and informal empire trade, 192938 (percent).

In imports In exports

Trade of Share of 1929 1932 1938 1929 1932 1938

U.K. British Commonwealth, colonies,protectorates, etc. 30.2 36.4 41.9 44.4 45.4 49.9

U.S. Philippines 2.9 6.1 4.8 1.6 2.8 2.8France French colonies, protectorates,

and mandated territories 12 20.9 25.8 18.8 31.5 27.5Belgium Belgian Congo 3.9 3.8 8.3 2.6 1.3 1.9Netherlands Netherlands overseas

territories 5.5 5 8.8 9.4 5.9 10.7Italy Italian colonies and

Ethiopia 1.5 1.1 1.8 2.1 3.6 23.3Portugal Portuguese overseas

territories 7.9 10.4 10.2 12.7 13.9 12.2Japan Korea and Formosa 12.3 26.2 30 16.8 21.6 32.9

Kwantung 6 4 1.6 4.8 6.8 13.7Manchuria 1.9 2.7 9 2.5 1.5 8.1Rest of China 5.8 4 4.4 10.9 7.38

Total Japanese sphereof influence 26 36.9 45 35 37.2 62.7

Germany Bulgaria, Greece,Hungary,Romania, Turkey, Yugoslavia 4.5 5.5 12 5 3.9 13.2LatinAmerica 12.2 11.2 15.6 7.8 4.3 11.5Total German sphere

of influence 16.7 16.7 27.6 12.8 8.2 24.7

Source:League of Nations (1939, pp. 3435).

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Evidences


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Evidences

Freight Rates

1880 1900 1920 1940 1960 1980 2000

Year

Nominal

Real1870

74

=1

00

0

50

100

150

200

250

300

350

Figure 9.2. Tramp freight rates, 18701997 (187074 = 100). The two shadedareas represent the two world wars.Source:Shah Mohammed and Williamson(2004).

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Evidences


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Evidences

World Export

1875 1900 1925 1950 1975 2000

ActualPre-1913 trend

Millionsof1913dollars(logscale)

2,000

4,0006,000

10,000

20,000

40,00060,000

100,000

200,000

400,000600,000

Figure 9.3. World exports, 18552000 (millions of 1913 dollars).Source:Lewis (1981), UN (1962), and World Trade Organization.

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Evidences


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Evidences

Price Divergence

1870 1890 1910 1930 1950 1870 1890 1910 1930 195020

0

20

40

60

80

20

0

20

40

60

80

100

120

0

40

80

120160

200

240

20

0

20

40

60

80

100

120

0

100

200

300

400

500

40

0

40

80120

160

200

1870 1890 1910 1930 1950 1870 1890 1910 1930 1950

1870 1890 1910 1930 1950 1870 1890 1910 1930 1950

LondonCalcuttaLondonBombay

LondonCalcutta

LondonKarachi

RapeseedLinseed

Rice (LondonRangoon)Jute (LondonCalcutta)

Wheat (no. 2 winter, LiverpoolChicago) Cotton (LiverpoolBombay)

Percentage

price

gaps

Percentage

price

gaps

Percentage

price

gaps

Figure 8.3. Percentage price gaps, 18701938.Source: Hynes and ORourke (ongoing).

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Recovering of World Trade since 80sVariations in Openness Across countries and Time

Great Convergence and Divergence in Some Cases


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g g

The Prediction of Future Path

Reasons why trade recovers

Breakdown of the trilemma caused by Bretton Woods

system.Trilemma: fixed exchange rate, international capital

mobility and independent monetary policy are mutually

incompatible.

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g g


Freight Rates

1880 1900 1920 1940 1960 1980 2000

Year

Nominal

Real1870

74

=1

00

0

50

100

150

200

250

300

350

Figure 9.2. Tramp freight rates, 18701997 (187074 = 100). The two shadedareas represent the two world wars.Source:Shah Mohammed and Williamson(2004).

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World Export

1875 1900 1925 1950 1975 2000

ActualPre-1913 trend

Millionsof1913dollars(logscale)

2,000

4,0006,000

10,000

20,000

40,00060,000

100,000

200,000

400,000600,000

Figure 9.3. World exports, 18552000 (millions of 1913 dollars).Source:Lewis (1981), UN (1962), and World Trade Organization.

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Trade Ratios in Rich Countries

1950 1960 1970 1980 1990 2000 1950 1960 1970 1980 1990 2000

1950 1960 1970 1980 1990 2000 1950 1960 1970 1980 1990 2000

0

20

40

60

80

020

40

60

80

100

120

Trade/GDP(percent)

(a) (b)

(d)(c)

CanadaUnited States

20

40

60

80

100

120

140

160

2030

40

50

60

70

80JapanKoreaTaiwan

AustraliaNew Zealand

Simple averagePopulation weightedGDP weighted

Figure 9.4. Trade ratios in rich countries, 19502000 (exports plus importsas a percentage of GDP): (a) North America; (b) Western Europe (eighteencountries); (c) East Asia; (d) Australasia. Source:Heston et al. (2002).

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Trade Ratios in Other Regions

30

40

50

60

70

80

1950 1960 1970 1980 1990 2000 1950 1960 1970 1980 1990 2000

10

20

30

40

50

60

70

1950 1960 1970 1980 1990 2000 1950 1960 1970 1980 1990 2000

1950 1960 1970 1980 1990 2000

20

30

40

50

60

70

20

40

60

80

100

0

40

80

120

160

200

Trade/GDP(percent)

(a) (b)

(d)(c)

Simple averagePopulation weightedGDP weighted

Trade/GDP(percen

t)

Trade/GDP(percent)

(e)

Figure9.5. Trade ratios, regional averages, 19502000 (exports plus imports asa percentage of GDP): (a) sub-Saharan Africa (forty-one countries); (b) North

Africa and the Middle East (four countries, seven from 1960); (c) Latin Amer-ica (eleven countries); (d) Central America and Caribbean (nine countries);(e) Southeast Asia (five countries). Source: Heston et al. (2002).

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Th P di ti f F t P th


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Manufactured Products Share of Exports

1960 1970 1980 1990 2000

0

10

20

30

40

50

60

70

80

90

0

1020

30

40

50

60

70

80

90

Percent

(a)

(b)

East blocDeveloped countriesDeveloping countries

Percent

North to SouthSouth to North

Figure 9.6. Manufactured products share of exports, 19552000 (percent):(a) manufactured products share of exports by region; (b) manufacturedproducts share of NorthSouth trade.Source:UNCTAD Handbook of StatisticsOn-line.

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Convergence or Divergence in GDP

1950 1960 1970 1980 1990 2000

10

20

30

40

50

60

70

80

90

12

16

20

24

28

32

36

40

4

5

6

7

8

910

11

12

13

Percent

Percent

Percent

JapanWestern EuropeTigersLatin America

Eastern EuropeU.S.S.R.Southwest Asia

AfricaChinaIndia

Figure 9.7. Regional GDP per capita, 19452000 (percent of U.S.A.).Source: Maddison (2003).

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Effects on distribution still matter.

Stability of geopolitical is still important.

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Appendix For Further Reading


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For Further Reading I

Ronald Findlay and Kevin H. ORouke.

Power and Plenty: Trade, War, and the World Economy in

the Second Millennium.

Princeton University Press, 2007.

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