19th Century – The First "Golden Age of Globalization"

Over the last couple of decades, “globalization” has become a buzzword positioned on the center stage of international relations, principally due to the creation and dispersal of innovative modern technologies that have accelerated the exchange of knowledge, trade and capital around the globe. And although many people attribute the inception of globalization as a relatively recent occurrence set forth by the advent of technologies developed over the last two decades (such as the Internet), others attach globalization significance back to 1492 and 1498 with Columbus’ sighting of the New World and Vasco de Gama’s discovery of the sea route stretching from Portugal to India, respectively. However, according to O’Rourke and Williamson, there is evidence galore to demonstrate that globalization, as we know it today, truly commenced in the “long” 19th century when the world saw unprecedented gains in international economic integration due to key innovations in the political institutions of the era and most importantly, tremendous advances in technology during this time. Accordingly, it makes sense that the 19th century was one of countless “firsts” — it was during this time our world saw the creation of the first global NGO (ICRC) and regulatory agency (Foundation of the International Telegraph Union); the first trans-border telephone call (between London and Paris); the publication of the first international novel (Around the World in Eighty Days); the first Olympic Games; and the first international award (Nobel Prizes) to recognize achievements in a diverse range of fields. It was also during this period the effects of the Industrial Revolution increased interregional trade flows at a rate never before seen in the past, and as a result of the striking international division of labor, the world was split into the “North” and “South” we still erroneously refer to today. What many scholars have referred to as the first “golden age of globalization” can be better understood by exploring the political and technological records of its time; by analyzing the relevant underpinnings that marked the transformation of the international order during the 19th century, this paper will shine a light on the impressive gains in international economic integration during that era.

The international economy of the 19th century as referred to in this paper will typically include the period from around the time of the end of the French and Napoleonic Wars, 1815, to the start of the First World War, 1914. This time is politically remembered as the Pax Brittanica, a period of relative peace between Europe and the rest of the world in which Britain found herself in the favorable climate to become the dominant global power; it was ushered in by the momentous Congress of Vienna. To better understand the globalization of the 19th century, it is important to analyze how, preceding the Pax Brittanica, the French and Napoleonic Wars of late 18th and early 19th centuries, marked by a series of blockades and embargos, had a resolutely disruptive effect on trade within and outside of Europe.

The restrictive measures that were prescribed as a result of the wars had penetrating impacts on prices, trade volume and economic policy, with import-substitution practices being both encouraged and stimulated. O’Rourke affirms that these wars had both negative and positive effects on 19th century globalization and sets out to answer the important question: Would Britain have adopted free trade policies significantly sooner had the French and Napoleonic Wars not ensued? Some scholars support this posture by arguing that industrialization took place at a slower rate because of the vast debt issues used to finance the French wars; in other words, they reason that in the absence of war, industrialization would have progressed more speedily. Per O’Rourke, while it’s virtually impossible to offer concrete answers to the aforementioned question, there exist insinuations that the French wars did postpone the liberalization of free trade in Britain. One such insinuation can be revealed with the ratification of Eden Treaty in 1786, which marked the end of a key phase of commercial relations between France and Britain and gave rise to a more liberal economic outlook that would replace mercantilist policies. However, escalating tensions between Britain and France in the early 1790s, with the latter claiming that she was apportioned the short end of the deal, led to French denunciation of the treaty soon before war broke out.

Moreover, because the blockades that came with the wars had hard-hitting distributional effects, in France and elsewhere, protectionist lobby groups successfully mobilized in Northern hemisphere countries. Interestingly, while the example of the Eden Treaty can be used to argue that the French and Napoleonic wars did indeed drastically delay liberalization of free trade in Britain, some scholars provide the counterargument that British defeat of the French in the wars was a necessary requirement for the extensive liberalization of Europe in the 19th century. The wars, by seeing the close of several mercantilist restrictions linked to European colonialism, catalyzed several geopolitical transformations that, according to O’Rourke, would help expedite 19th century globalization. In some cases, the newfound independence of Iberian colonies in the Americas directly resulted in an increase of British manufactured exports to Latin America as mercantilist constraints on trade with such colonies now failed. Similarly, wars had a negative impact for the Dutch; after losing ground in the late 1790s, the Dutch East India Company was suspended and in 1806, the Dutch government made a historic move to authorize free trade with Asia. In practice and as a result of war, trade in Europe was rather unstable at this time, however, Southeast Asian exports flourished after the termination of the VOC monopoly, strengthening the claim that VOC controls were a cause for Southeast Asian decay in the mid 17th century (O’Rourke).

To understand the uniqueness of international economic integration in the 19th century, it helps to look at data on price gaps. According to O’Rourke, there is no solid proof of inter-continental price convergence before the 19th century. He utilizes data on price gaps between Amsterdam and Southeast Asia for three commodities (cloves, coffee and black pepper) to demonstrate from the mid-17th to the mid-18th century price convergence was either non-existent or paltry; however, in the latter half of the 18th century through the 19th century price convergence is markedly ample. Indeed the price convergence in the latter half of the 19th century can be explained by the decline in transport costs and this will be discussed more in depth later. Nonetheless, the price convergences beginning in the second half of the 18th century can paint a picture of how the effects of worldwide military conflict prior to 1814 spurred the abandonment of mercantilist policies.

As a result, the 19th century saw a different way of steering international trade, moving away from a system of protection to a more multilateral approach. The wars of 1792 to 1814 culminated with an extraordinary meeting of statesmen at the Congress of Vienna — a historic settlement that led to “a dramatic decline of the incidence, scope, length and violence of wars” and helped maintain peace between European powers for almost half a decade. The Congress served as a fundamental “institutional innovation” of the 19th century that allowed for an advantageous political environment in which Europe could dominate the rest of the world. This in turn, according to O’Rourke, “helped make the 19th century the canonical period of globalization” by providing “a framework within which the new transportation technologies unleashed by the Industrial Revolution could permanently transform the nature of international trade”. O’Rourke supports that while former globalizations had mainly geopolitical roots, the globalization of the 19th century was spurred by the impetus of technology.

The Industrial Revolution and the transportation and communication technologies to which it gave birth totally transformed the fabric of domestic economies and in turn, the international trading system. According to the European Commission, today inland waterway transport plays a huge role in the transport of goods within the region: “More than 37, 000 kilometers of waterways connect hundreds of cities […] characterized by its reliability, energy efficiency and major capacity for increased exploitation”. These nifty waterways were constructed as a more efficient and cost-effective alternative to turnpikes in the mid 18th century and onwards — and they significantly cut both transport costs and time. As an example O’Rourke demonstrates the case of the Erie Canal in the U.S — its construction slashed the cost of transport between Buffalo and New York by 85%, and travel time from 21 to 8 days.