A Splendid Exchange
posted by Nate Oman
I just finished reading William Bernstein’s A Splendid Exchange: How Trade Shaped the World. The goal of the book is to provide a global history of international trade from ancient times to the present. The book doesn’t quite deliver on this promise. For example, trade within Africa and the Americas prior to the age of discovery is almost completely ignored. Likewise, for those who know their international economic history, the book isn’t likely to contain anything new. Still it’s a good read, and there is something to be said for seeing huge swaths of history in a single view.
The bulk of Bernstein’s discussion focuses on the history of long distance trade between Europe and the Far East from Roman times through the nineteenth century. He tells how this trade was dominated successively by Greeks, Arabs, Portuguese, Dutch, and finally the English. One of the striking themes is how little there was in the West that the Chinese or Indians actually wanted. Another theme is the often symbiotic relationship between trade and violence, most dramatically illustrated by the Opium Wars between Britain and China in the nineteenth century.
After recounting the Opium Wars, Bernstein’s focus shifts to the politics of free trade and protectionism. Bernstein clearly believes that the free traders have the better of this argument (which, of course, is true) but he is sensitive to the way in which trade can hurt particular groups even if its benefits ultimately outweigh its costs. He also has a good nose for stories of how protectionism has backfired in the past. For example, in the first part of the eighteenth century English weavers rioted repeatedly, placing pressure on Parliament to exclude cheaper (and higher quality) cotton textiles from India. Shielded from low wage Indian labor, English weavers claimed victory. The tariff, however, also gave manufacturers and incentive to find some other way of avoiding high-wage English weavers. The result was the mechanization of cloth production in the late eighteenth century, which ultimately displaced more high-wage weavers than the India trade ever did.
Perhaps my favorite story from the book has to do with the rise of containerization. Over the course of the nineteenth century the cost of shipping fell dramatically. Indeed, it fell so dramatically that prices for internationally traded goods continued to fall even after the onset of protectionist politics in the 1880s. Technological innovation simply swamped the effects of legal policy. By the early twentieth century, shipping costs were so low that the vast majority of the cost of moving goods around the world was incurred in the short trip from ship to wharf. The solution to this problem is containerization, an idea that had been around since the first half of the nineteenth century. It didn’t catch on, however. The Interstate Commerce Commission early on took jurisdiction over the matter and at the behest of longshoremen’s unions squelched containerization, insuring that goods had to be unpacked and then repacked at the water’s edge. The racket was finally brought to an end in the 1950s when a federal court declared that the regulation of shipping containers was beyond the jurisdiction of the ICC.
UPDATE: William Bernstein has also twice been a guest on Russ Roberts’s excellent EconTalk podcast. You can check out the interviews here and here.
January 20, 2010 at 8:14 am
Posted in: Book Reviews, Contract Law & Beyond, History of Law, International & Comparative Law
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Responses (4)
Matt - January 20, 2010 at 9:31 am
On containerization, let me recommend Marc Levinson’s terrific book The Box. It’s highly readable but sufficiently scholarly and does not just explain the rise of container shipping but does a lot to explain how this had huge impacts on places like New York and London (that lost out on shipping, for various reasons) and on the communities that formerly worked on ships and docs. Very interesting stuff.
(Amusingly, the anti-sp*m word here is “ikea”.)
Nate Oman - January 20, 2010 at 9:47 am
Matt: Thanks for the heads up on the Levinson’s book. I found Bernstein’s discussion of shifts in shipping technology fascinating.
Daniel S. Goldberg - January 20, 2010 at 11:39 pm
Nate,
Your discussion of this book reminded me of Hal Cook’s masterful A Matter of Exchange, which links some of the key developments in the early modern era in terms of the history of medicine and science in the Western world to the political economy of the Dutch Republic. It has won a bunch of awards and is a truly remarkable book.
Lawrence Solum - January 21, 2010 at 5:26 am
Very interesting. I did not know about the ICC part of the story–that explains a lot!
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