Why globalisation might have started in the eighteenth century

It is well known that the world was impressively economically integrated by the end of the nineteenth century. In fact, some economic historians refer to this period as “the first globalisation.” The traditional explanation for this integration focuses on technological improvements that removed barriers to trade, as steam replaced sail and railroads began to ease long distance transportation. New evidence suggests, however, that there was a potential for globalisation a century earlier.

Economists say there is globalisation when prices influence each other across continents over relatively short periods of time. Much of the evidence for globalisation at the end of the nineteenth century has come from the impressive growth in trade in foodstuffs – especially grain – in these years. The most important trade was between the United States and Britain, and price evidence demonstrates the integration of these two markets as, for example, a poor harvest in the United States resulted not only in increased prices at home, but also in Britain.

New evidence shows, however, that the grain trade – and specifically trade in wheat – was important as far back as the eighteenth century. Given that this was the case, it follows that it might be possible to find earlier periods of market integration – that is ‘proto-globalisation’.

Eighteenth-century globalisation

The evidence for the early importance of the transatlantic wheat trade comes from two sources.1 First, statistics survive for the wheat trade between the American colonies and the early years of the United States and Britain. These show the beginnings of intercontinental trade in a bulky product, which at the time was a leading component of consumption in Britain.

Second, lending support to the trade statistics is primary evidence, ranging from presentations, to Parliamentary select committees to the correspondence of individual farmers, which all suggests that contemporaries were aware of the significance of this trade. Indeed, by 1800, the British Board of Trade wrote that ‘America be, or is hereafter to be the granary of Europe’, a role which it only fulfilled at the end of the century.

In fact, when the United States did finally emerge as the major supplier of wheat in the 1860s and 1870s, it appears that contemporaries considered this to be a new development, seemingly unaware of the events of the previous century. Their reason for this mirrors the belief that many hold today that globalisation is a modern phenomenon: the early growth in trade was continuously being knocked off course by ‘extraordinary’ events, such as war, politics and even plagues of insects.

Moreover, the trade was finally closed down altogether by the imposition of prohibitive new Corn Laws after the Napoleonic Wars in 1815. That observers had forgotten the importance of this trade after half a century is similar to commentators now often being unaware of the level of globalisation prior to the First World War.

The rise and fall of the Anglo-American wheat trade

The story of the development of the early transatlantic trade, never previously told, makes for fascinating reading in its own right. Britain was a net exporter of wheat until the late eighteenth century, but even for these years a bad harvest meant that the American colonies were looked to in order to make up the shortfall.

The onset of the Industrial Revolution, however, combined with the associated population explosion, meant that domestic production was no longer sufficient. From this point on, the United States was considered an important source for wheat imports.

The ultimate proof for eighteenth-century proto-globalisation is that prices of grain in the United States and Britain influenced each other. As far back as the 1770s, when Britain became a net importer of wheat and large volumes started to be imported from the United States, there is evidence that prices on both sides of the Atlantic were moving together.

A relaxation of the Corn Laws in 1773 ushered in a period of almost free trade in grain, and American wheat began to flood into British ports. But if globalisation might have started at this time, it was soon knocked off course – perhaps not so much by the American War of Independence, but rather by a plague of insects: the Hessian fly (so called because it was commonly supposed to have been introduced to the country in the straw bedding of the hated British Hessian mercenary troops).

These insects devastated the American wheat crop, and it was many years until the wheat export trade began to recover. Even when it did, the Corn Laws turned protectionist again, and it was not until Prime Minister Robert Peel’s famous ”repeal” in the 1840s, that the trade again resumed major importance.

Knocking globalisation off course

The co-movement of American and British wheat prices in the eighteenth century suggests a potential for globalisation one hundred years before the so-called “first globalisation.“ What happened?

The reason why globalisation did not take hold in the eighteenth century was that it was continuously being disrupted. It was not the improvements in transportation technology of the nineteenth century that made globalisation possible. It was rather wars, politics and natural disaster that made globalisation impossible prior to this.

The lesson for today is the one that economic historians are always at pains to stress. The usual story is of how the nineteenth century first era of globalisation came to an end with the First World War, the Great Depression and the Second World War, and of how comparable levels of globalisation only returned in the late twentieth century.

My research shows that earlier episodes of emerging globalisation were similarly knocked off course and on a frequent basis. We must therefore not be complacent about the current international order. History shows that globalisation can reach impressive levels, but if the institutional framework disintegrates, or if natural disaster strikes, then important markets can disintegrate in a very short space of time.

Moreover, the focus of economic historians on the integration of international grain markets has added resonance in these days, when we are again witnessing strains in these markets with booming global demand. Some of the old tensions are emerging, particularly in developing countries in the wake of soaring prices. History tells us how important it is to react in the right way to these challenges, because a failure to do so can have a catastrophic impact on the world economy.

Footnotes

1 Paul Sharp, ”The Long American Grain Invasion of Britain: Market Integration and the Wheat Trade between North America and Britain from the Eighteenth Century,” presented at the Economic History Society's 2008 annual conference at the University of Nottingham.