As we continue to mull over the role played by NAFTA in Hillary Clinton's popular vote victories in Ohio and Texas, a refresher course in transport logistics and the Industrial Revolution may add some perspective.
I have been slowly working my way through Ronald Findlay and Kevin O'Rourke's magisterial "Power and Plenty: Trade, War, and the World Economy in the Second Millennium," a mighty tome that delivers exactly what it promises, a history of world trade over the last 1,000 years. This morning, over breakfast, I reached the Industrial Revolution, where things start to heat up.
The debut of steamships and railways onto the world scene had a profound effect on world trade, but not just because transport times were shortened, freight costs fell, and the quantity of goods traded exploded. There was also a qualitative difference in the kind of goods traded. When transport was expensive, it was only economical to ship goods that had high value-to-weight ratios, such as spices and tobacco. These were goods that O'Rourke and Findlay classify as "noncompeting." England did not produce its own tobacco or pepper, so trade in such goods had little effect on the local economy.
But when trade became cheap, a whole new array of goods joined the party -- grains, metals, textiles. These were goods that many nations produced. Price competition became the order of the day and commodity prices started their long global fall.
One implication was that long-distance trade now began to displace domestic producers in large numbers, be they Indian textile producers or European farmers. European land found itself in direct competition with the vast and fertile land endowments of the New World, while Indian weavers found themselves outcompeted by European technology and capital. The result was that long distance trade began to have economy-wide effects on the allocation of resources, and hence on factor prices, and the distribution of income... (Italics mine.)
If you happened to be a resident of London, your food and clothing cost less. But if you were an English farmer, the price you could command for your turnips fell.
In the run-up to the Industrial Revolution, argue O'Rourke and Findlay, international trade was characterized by "international competition between overseas trading companies, and frequent warfare in the age of mercantilism."
But post-steamship and railway, the dynamic shifted.
Cheaper transportation and intercontinental trade in competing goods implied that the politics of trade would now also involve intranational conflict, between those groups in society who gained as a result of international trade and those who lost.
Substitute container shipping and the Internet for steamships and railways, and you get a pretty good description of what's been going on in the global economy for the last 20 years. The loss of manufacturing jobs in Ohio, one could then argue, is the fault of the Industrial Revolution. And the first attempt to roll back that tide, with a global rush toward protectionist tariffs, led to war and economic depression, many economists argue.
There's got to be a better way.
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