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March 31, 2008

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I Romem

I will begin by clarifying what is meant by globalization, because I believe it is the trickiest term among those in the question. In words, globalization is the degree to which different parts of the world are economically, culturally and socially interconnected. Now let us break this down: interconnectivity may take on many forms, of which two of the most important with respect to the period 1870-1914 are trade and migration, as is highlighted in this week's readings. Different parts of the world are most easily defined by national boundaries, and the term globalization implies that interconnectivity spans the globe. One intuitive measure of globalization is the ratio of worldwide international trade to worldwide GDP. An additional, complementary measure of globalization is the ratio of worldwide migration to world population, although I have not seen it used.

I believe it is clear what imperialism means, whereas colonialism refers to the particular form of imperialism that was prevalent throughout the period we are dealing with. It is ironic that the word colonialism is used because it is precisely those foreign lands that were colonized by European immigration that were the first to gain independence, typically before 1870. Those that remained as so-called colonies later on were generally populated by indigenous peoples subjected to foreign rule rather than colonized, so strictly speaking the term colony is inappropriate.

The globalization described in this week's readings consists of unprecedented levels of international trade and migration. The stylized picture that arises from the readings, however, is one of four flows: 1) A bi-directional flow of goods between European countries and newly independent countries; 2) A flow of raw materials from colonies to their respective colonial power; 3) An immigration flow from Europe to newly independent countries; 4) An immigration flow from China and India to colonies.

In terms of the definition of globalization given above and its possible measures, the flows just described comprise a globalized economy. Nevertheless, there are various potential flows that could have occurred but did not, indicating a gap between the actual world economy and what would intuitively be called a model of perfect globalization. Perhaps the most bluntly unrealized flow was that of immigration from India and China to the Europe and to the newly independent countries (in the US this flow, at least from China, began to materialize but was actively restricted). This flow was very much called for by the real income gap between India and China and the potential destinations. The fact that this flow did not occur could only be the consequence of it being actively curbed, in what is a limitation on globalization, hence falling short of perfect globalization. Had this flow taken place, the argument brought forth in Lewis' text falls apart. Moreover, had this flow taken place it is possible that Williamson would not have needed to limit his observation of convergence-due-to-globalization to the small set of countries where he did, but rather he would have spotted a truly globalized globe.

Omar Nayeem

There is no reason why colonialism and imperialism should be inconsistent with globalization. We can define colonialism as the expropriation of labor and resources from foreign lands, with the important feature that inhabitants of these foreign lands are not given the same rights and protections as citizens of the colonizing nation. Imperialism can be thought of as colonialism on a large scale: an imperialist nation uses its powerful military to acquire many colonies in an effort to extend its power and influence relative to its rivals. From the historical record it is clear that our period of interest, the years 1870 to 1914, was one of colonialism and imperialism.

The readings indicate that this period was also one of globalization. The term “globalization” is somewhat broad, because globalization can take different forms. All of its forms, however, share at least one important feature: increased mobility. The increased mobility could be in goods (which would be evident in higher volumes of international trade), labor (which would be reflected in higher rates of migration between countries), or capital (which would be indicated by greater amounts of foreign investment). Of course, increased mobility of goods, labor, or capital across national boundaries requires the removal, or at least the relaxation, of relevant barriers (for example, high transport costs, restrictive tariffs, or immigration quotas), so the relaxation or removal of barriers is necessary for globalization. It is not, however, a defining feature of globalization.

Williamson writes about convergence in real wages and GDP per worker hour (both of which are measures of living standards) between 1850 and 1914. From the data he uses (in particular, from Figure 1) it is evident that convergence in real wages (especially when the United States, Canada, Spain, and Portugal are removed from the sample) became especially pronounced between 1870 and 1914. He offers two main explanations for the convergence: one is the Heckscher-Ohlin factor price theorem, which implies that increased trade in commodities would have raised real wages in poor countries relative to real wages in rich countries. The other explanation (which he presents as the more important one) is the effect of migration to rich countries, which, by affecting the labor supply curves of both rich countries and poor countries, would promote convergence in real wages. (Chiswick and Hatton, in section 2.2.3 of their paper, explore the migration of this period in much greater detail.) Williamson’s paper is focused on convergence, not on globalization, but we can see from these two explanations of convergence (increased trade and increased migration) that globalization was occurring.

So globalization coexisted with colonialism and imperialism during the period 1870 to 1914. Rather than conflicting with globalization, however, colonialism and imperialism promoted globalization. Indeed, as Chiswick and Hatton note on page 71, “The increased globalization of the political system through the spread of European colonization in the nineteenth century … resulted in increased intercontinental trade.” The increased trade and flows of labor and capital that are all signs of globalization were made possible by the (often forceful) entry of European colonial powers into Asia, Africa, and the New World. Of course, as Lewis explains in his Evolution of the International Economic Order, many of the colonized regions (for a number of reasons that he outlines, some of which are connected, though not necessarily caused by, colonialism and imperialism) failed to industrialize and develop as quickly as other nations, but that is not relevant to our discussion here. Globalization was certainly taking place in the late nineteenth and early twentieth centuries, largely because of – and not in spite of – the colonialism and imperialism of the time.

K. Powers

The period 1870-1914 certainly appears to be a period of imperialism, colonialism, and globalization. To be clear, I define imperialism as the degree to which one country is involved in another country’s affairs without attempting to directly control portions of the latter country’s government. Colonialism, then, is the extension of imperialism that includes partial or total control of the occupied country’s government. I prefer the economic definition of globalization identified by Jan de Vries in “The Limits of Globalization in the Early Modern World,” in which the convergence of commodity prices is a defining characteristic (6). I would also like to include, however, evidence of real wage convergence in my definition of globalization; though it is also a determinant of commodity prices, real wage convergence can capture elements of factor globalization that could be overshadowed by transportation costs or other determinants of commodity price convergence in analyses at the composite level.

Globalization in the late 1800s and early 1900s mostly appeared in two forms: migration and trade. On the migration end, Barry Chiswick and Timothy Hatton assert in “International Migration and the Integration of Labor Markets” that, “It was not really until after the middle of the nineteenth century that mass migration can really be said to have taken hold” (69). In “Globalization, Convergence, and History,” Jeffrey Williamson describes the late nineteenth century as a period in which, “capital and labor flowed across national frontiers in unprecedented quantities, and commodity trade boomed as transport costs declined sharply” (277). Williamson also notes a convergence in real wages from the 1890s to 1914 “due to the open economy forces of trade and mass migration” whereby “living standards in the poor emigrating countries tended to catch up with living standards in rich immigrating countries (278, 289, 292).

In “The Evolution of the International Economic Order,” Arthur Lewis illuminates the small amount of borrowing in London by the “Third World” prior to 1860 (6). This condition, Lewis asserts, was responsible for a relatively low amount of trade between what are now developed and less developed countries prior to the late nineteenth century (5, 7). Pre-1870 trade was also more restricted in some areas; for instance, Britain made a moderate attempt to restrict machinery exports before 1850. Lewis also notes that colonizers discouraged the industrialization of their colonies. Britain taxed the Indian cotton industry in an unsuccessful attempt to destroy it, though Britain was more successful in hindering the iron and steel industries as late as 1912 (8). On the other hand, Lewis describes “two vast streams of international migration” in the second half of the nineteenth century that contributed to the development of agricultural countries (14). Such globalization led to the settlement of temperate countries by fifty million Europeans and the settlement of tropical countries by fifty million Indian and Chinese people. In addition to the globalization of labor, trade in globally common commodities—and especially commodities with differential factoral terms of trade—impacted temperate countries by endowing them with high income per head. Despite the presence of imperial powers, the temperate countries’ engagement in global commerce would result in the creation of “their own power centers, with money, education, and managerial capacity, independent of and somewhat hostile to the imperial power” (18-19). Yet another element of globalization in the period 1870-1914 identified by Lewis is the degree to which participation in trade “whets the appetite for foreign goods, in the process destroying local industry” (23). In the nineteenth century, Lewis says, cotton was the primary good destroyed by British imports, although it is difficult to estimate quantitatively this impact (23). In conclusion, this week’s readings make a decent case for price and wage convergence as evidence of the globalization of labor and commodities.

Ernie Tedeschi

One might not have expected the age of Imperialism and Colonialism
to lead to greater globalization. The empires of the late-19th & early-
20th centuries were ones of vast overseas territories controlled by a central
power, usually for the purpose of obtaining key resources (Haiti) or exploit-
ing strategically-advantageous geography (Gibraltar). Though these holdings
were spread across the world, they existed — at least in the minds of their
masters — to serve their masters, not to trade with each other. Thinking of
“globalization” then as input/output factor price convergence across geogra-
phy, it is not immediately obvious why a hierarchical system of a handful of
master economies controlling a wide array of specialized colonies would pro-
duce globalization as a by-product or even see globalization as a uncorrelated
parallel.
Part of this story is technological. Ships were faster as they transitioned
to steam and later diesel engines. Colonial masters invested in transporta-
tion infrastructure in their colonies as well, such as the railroads of India and
Canada. From these capital inflows, colonial economies more diverse than
before emerged. Thus, there is already a plausible rationale for intraimperial
price convergence in the standard economic history narrative. It is not clear
from our readings how much, say, the Dutch East Indies directly traded
with India. But 19th century price convergence between the Dutch East
Indies and the Netherlands itself, ceteris paribus, makes sense given the di-
rection of technological progress. Since many master economies were located
in continental Europe, there may have been a “trickle-down” convergence ef-
fect where as input/output barriers on the Continent weakened, the master
economies themselves first converged, then gradually brought their colonies
with them as the price effects reverberated. This parallel top-down global-
1ization may explain the convergence phenomena identified before World War
I.
The barriers themselves are also a central part of the story. Williamson
and Chiswick & Hatton write at length about the effects of migration on
wages. For example, Williamson cites a study he did with Hatton conclud-
ing that mass immigration into the United States between 1870 and 1913
depressed real wages by as much as 6%. What is most fascinating about
the migration part of the convergence story is the extent to which it was
an interimperial draw for labor. That is, while the effects of technology
were primarily (but not exclusively) constrained within the purview of the
master’s holdings, Chiswick & Hatton point out that the mass migration of
this time period was mostly between OECD countries, or, projecting back to
the early-20th century, between imperial masters. North American immigra-
tion at this time, for example, drew extensively from souther- and eastern-
Europe, after waves earlier in the 19th century from northern-Europe and
Ireland. Obviously, as migration became faster and safer, the economic needs
of these immigrant populations outweighed the attraction of their national
homelands, and so a significant barrier to labor price convergence fell, and
did so for several different imperial populations, leading to sizeable wage ef-
fects in nations like Germany, Italy, and Sweden. The implication is that
migration contributed significantly to globalization — in wages, at least — if
globalization is ultimately understood to have effects not just within empires
but across them.

M Larrain

Imperialism is most commonly understood in relation to Empire building, as the forceful extension of a nation's authority by territorial conquest establishing economic and political domination of other nations. Colonialism can be thought of the extension of a nation's sovereignty over territory beyond its borders. Though the word colonialism is often used interchangeably with imperialism, the latter is sometimes used more broadly as it covers control exercised informally as well as formal military control or economic leverage.

Globalization is a more general concept. We can broadly think of it as integration of markets. These markets can refer to labor, goods and assets. For the purpose of this memo, I will focus specifically on the integration of labor markets. It is important to notice that, as pointed by Chiswick and Hatton, globalization in the labor market is qualitatively different from globalization of goods or asset markets. With international migration labor services crosses national boundaries embodied in individuals. As a result, trading in goods and services and capital flows are fundamentally different than trading in labor services.

Chiswick and Hatton document that there was a mass migration from Europe to the New World and from parts of Asia to other areas around the globe in the late nineteenth and early twentieth centuries. In the first three decades after 1846 the numbers averaged around 300,000 per annum, doubling in the following two decades and exceeding a million per annum by the turn of the century. In the first half of the 19th century the dominant source of migrants was the British Isles. These were joined from the 1840’s by a stream of emigrants from Germany followed, after 1870, by a rising tide from Scandinavia and elsewhere in Northwestern Europe. Emigration surged from southern and eastern Europe from the 1880s. It came first from Italy and parts of the Austro-Hungarian empire, and then from Poland, Russia, Spain and Portugal.

My main argument is that many of these European countries promoted migration to some of its colonies. Take, for example, the British Empire, which is a main paradigm of imperialism and colonialism. Between 1815 and 1914, a period referred to as Britain's "imperial century", around 10 million square miles of territory and roughly 400 million people were added to the British Empire. Historians have documented the fact that Britain actively promoted emigration to at least some of its colonies, and certainly did little to heed the migration of British people wherever they wished to go. Thus we can think that, at least in part, the mass migration documented by Chiswick and Hatton is a result of imperialism and colonialism policies. If globalization is related to the integration of labor markets, and the integration of labor markets is in turn related to migration, we can see that there is no contradiction in the fact that the 1870-1914 period was simultaneously a time of imperialism and colonialism, and an era of globalization.

M Borgschulte

I will take globalization as the convergence of prices in factor markets as a result of increased economic links, usually spurred by lower transport costs. Imperialism/colonialism has a more obvious meaning- the establishment of political hegemony over a distant territory, usually on another continent from the home country. I believe these are standard definitions.

I would like to raise a point which seems relevant for the direction to consider carefully the definition of globalization. The era from 1870-1914 saw a major expansion in both globalization and imperialism/colonialism, stimulated by the second industrial revolution in Western Europe and North America. However, this was not globalization as we think of it today. During this earlier era, globalization was driven far more by migration than trade. As well, this period saw a division of countries into industrial and agricultural specialization, rather than the exporting of industrial production we see today.

As Williamson points out, (though we are left to trust his CGE models a little more than I feel comfortable with) trade accounted for less than a third of the convergence in prices between countries. The rest was accounted for by migration. This stands in sharp contrast to how we think of globalization today- as driven by almost entirely by trade. Legal immigration to both the US and EU is strictly controlled, specifically to maintain high wages. It seems likely that this policy is driving an increases in international trade that would not be seen, were migration relatively easier.

In this earlier period, Lewis argues that the division of countries into industrial and agricultural was driven by different productivity in the agricultural sectors. We can think of this as driving migration- people follow productivity. However, in the absence of free migration, it seems likely that there are significant losses to world GDP, as workers are forced to stay in low productivity countries. This is likely the case today. An interesting project would look at shocks to migration policy as an instrument to measure these losses.

One commonality between industrialization then and now is the requirement that countries adhere to international financial standards in order to gain access to the credit needed in the process of industrialization. In the earlier era, adherence to the gold standard served as a signal that countries were credible borrowers, first domestically, and later, in international credit markets. Both then and today, a generally stable political and markets free from expropriation were important determinants of growth. In the 1870-1914 era, perhaps due to greater information costs and a lack of enforcement mechanisms, the gold standard was a measure of a countries ability to credibly commit to full repayment of its loan obligations.


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