The Global Economy

A Concise History

Franco Amatori, Andrea Colli, Franco Amatori, Andrea Colli

• Publisher: Routledge
• Year: 2019
• ISBN:
  9781000606515
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

The Global Economy: A Concise History traces the history of the global economy over the past thousand years. In doing so, it explores all the main waves of globalization, from the trade revolution of the Middle Ages, to the Great and Little Divergence between the West and the East, as well as the North and the South of the world.

This book examines the Industrial Revolution and the World Wars, and their respective consequences, as well as the interaction between technological shifts and the transition in geopolitical equilibria. The last chapters are dedicated to an in-depth examination of the transformation which occurred in the global economy after 1989. The chronological structure of the book is designed to help students memorize and understand key events. This book also discusses broader themes, such as convergence–divergence, growth and decline, development, and industrial revolutions.

This will make it of interest not only to students and academics, but to all readers wishing to gain a deeper understanding of the history and current state of the global economy.

Chapter 1
THE STRUCTURAL CHARACTERISTICS OF PREINDUSTRIAL ECONOMIES

SUMMARY: 1.1. From the Neolithic Revolution to the Bronze Age urban revolution. – 1.2. The structural features of agrarian economies. – 1.3. Latemediaeval economies and the impact of the Black Death. – Bibliography.

In order to understand pre-industrial economies, we must imagine a radically different world from the one we know today. To paraphrase economic historian Carlo M. Cipolla, an Englishman in the mid-18th century had more in common with a Roman contemporary of Julius Caesar than with one of his own great-grandchildren (who had, however, no idea about personal computers or mobile telephones).¹ Cipolla intended to illustrate the rates of growth and the pace of change in economic and social structures: not completely static, but certainly very slow before the Industrial Revolution, and increasingly rapid, at times even frenetic, thereafter. To a great extent, the change of pace derives from the transformation of prevalently agrarian economies into industrial economies. And yet, the Industrial Revolution did not arise from a void: some areas (it is a matter of debate as to how many), mainly in Europe, had already begun to accelerate centuries before this, differentiating themselves from the rest of the world and launching what is now commonly known as the “Great Divergence”. This chapter aims to briefly describe the structural characteristics of pre-industrial agrarian economies and their semi-immobility, which only a wide-ranging trauma could shake (the Black Death of the 14th century is the best example). The two following chapters will tackle the timing and development of this divergence: firstly between continents, and then between northern and southern Europe.

1.1. From the Neolithic Revolution to the Bronze Age urban revolution

Until 10–12,000 years ago, agrarian societies simply did not exist. People lived in groups of hunter-gatherers, finding food provided spontaneously by nature. The groups were limited in size and not very numerous, given that the global population is estimated at no more than six million. Then the situation changed: in different parts of the world (Near East, China, Central South America) and independently of each other, some of these groups settled down, built villages and began to cultivate the land. In other areas (Northeast America, perhaps the Sahel, equatorial Africa and New Guinea) this transition took place “autonomously”, but later. In even more areas of the world, agriculture was imported along with the seeds of plant species that had been domesticated elsewhere. This is the case of Central and Western Europe, where wheat from the Near East was introduced between 6000 and 3500 BCE. In general, the autonomous transition to agriculture occurred in areas where there was a relative abundance of wild species of both plants and animals suitable for domestication.

This was the first “agricultural revolution” in history, and also marks the first acceleration in population growth. At the start of the Common Era, the world population had increased by over 40 times and stood at 250 million. The growth rate was very slow by contemporary standards (less than 0.04% per year), although much higher than was typical in pre-agrarian societies. But what about the per capita availability of resources, or living conditions? There is more doubt about this kind of improvement, since the classical idea – that human beings “discovered” agriculture and became farmers following a crucial invention – has largely been replaced by the idea that people started to cultivate the land and to create permanent settlements when forced to do so by demographic pressure. The assumption is that they already possessed some key skills derived from simply observing nature; for example, how to propagate plants by placing seeds in the ground. Therefore, agriculture was not such a momentous discovery, and living conditions actually worsened in many ways. The human diet became increasingly dependent on cereals and hence impoverished, as appears from the reduced stature of skeletal remains. Diseases became more numerous and more frequent due to increased population density and close proximity with domesticated animals and their parasites. Lastly, peasants were obliged to work longer and harder than their hunter-gatherer ancestors to produce what they needed for survival.

However, the appearance of agrarian societies also brought some definite benefits. For example, they were more complex, and could coordinate labour and the use of resources in ways unimaginable in a society of hunters and gatherers. On the other hand, this involved a greater degree of social-economic inequality. Diversification of tasks and the development of a more complex social structure allowed the accumulation of skills and knowledge, whose transmission from one generation to the next was facilitated by the invention of writing (circa 3200 BCE in Mesopotamia). These advantages developed fully only after another major historic development: the urban revolution of the Bronze Age. The first cities began to appear in different parts of Europe and Asia from approximately 3000 BCE. This is associated with a sharp increase in economic and social complexity, also because the cities were able to organise activities across a vast surrounding area. At the same time, the first states began to form, with characteristics – according to authoritative social anthropologist Jack Goody – not generally observable in other parts of the world.² In particular, the Eurasian states soon developed the ability to impose systematic forms of taxation on their own citizens, enabling them to channel resources towards new and increasingly complex uses. There was also a remarkable growth of social stratification, which meant the emergence of new aspirations, providing an impetus to consumption, technological innovation and the general advancement of knowledge.

In comparison with the Neolithic Revolution, the urban revolution was much more local, and initially limited to Europe and Asia. This was essentially the start of a sort of proto-divergence between Eurasia (not surprisingly the area with the most advanced pre-industrial economies) and the rest of the world. Much of traditional historiography has underlined the differences between West (Europe) and East (especially East Asia) in order to explain the emergence of European supremacy, forgetting that essentially all contenders for the leading position in pre-industrial economic development are in Eurasia. Therefore, before tackling the issue of the Great Divergence, it must be explained why other parts of the world had no chance of achieving supremacy. Jared Diamond has recently provided an environmental answer.³ According to this theory, the Asian species of domesticated plants and animals (subsequently exported to Europe) were superior to those found in the Americas and Oceania. For example, wheat and barley are more nutritious than maize, while cows and horses have a greater capacity for work and are more versatile than llamas (the llama is the only large domesticated mammal native to the Americas, while Eurasia has 13), and so on. In addition, the Eurasian landmass has an east-west axis, unlike the north-south axis of the American landmass, which is also extremely narrow at the Isthmus of Panama. Humans and their domesticated animals could expand much more easily along latitude than longitude, for the simple reason that this did not involve changing climate zone. People on the move also take ideas with them, and there is evidence that innovations spread much more rapidly in ancient Eurasia than in the Americas, where even the more advanced cultures were separated from each other by daunting natural and environmental barriers.

These factors were already present well before the first Europeans “discovered” the Americas and could exploit Europe’s other technological and bacteriological advantages. These derived mainly from the original environmental advantages, enabling more efficient and productive agriculture together with a higher population density and states with a more complex form of organisation. Lastly, American societies suffered (in comparison with Eurasia) the effects of a delayed start: as they moved outwards from Africa and migrated to other continents, humans reached the American continent approximately 14,000 years ago, and took a further 2,000 years to complete the journey from their entry point in the north (Alaska) down as far as Patagonia in the south.

At the arrival of Columbus (1492), there were only two American empires (Inca and Aztec) capable of mobilising resources on a large scale, whereas Eurasia had many states in more or less advanced conditions, including the world’s most developed states. As observed by Goody, we must highlight the organisational, institutional and cultural analogies within the vast expanse of Eurasia before indicating the differences. Organisational and structural analogies are naturally connected with the emergence of complex state structures; for example, the Roman Empire at its height encircled the Mediterranean, including much of Europe, the Middle East and North Africa, and the Chinese Empire was even larger. However, the analogies are also related to essential economic and family institutions, ranging from private property, to inheritance systems, educational structures, and the family. For example, in Eurasia (but not elsewhere) all children received a share of the paternal inheritance, including daughters (through their dowry). This required the pursuit of complex and often endogamous matrimonial strategies to avoid excessive dispersion of inherited assets. These strategies were inherent in intensive exploitation of the land. The following chapters will take up some of these themes, highlighting that although differences between the institutions in different parts of Eurasia have been at various times evoked as possible factors of divergence, on this wider chronological and geographical scale it is actually the fundamental elements of analogy which are striking and which differentiate the two continents from all others.

Sub-Saharan Africa, where the first hominids appeared and thence migrated worldwide, is separated from Eurasia by the desert and by the Red Sea, but is nevertheless still much easier to reach than the American continent. Africa’s urban revolution took place much later, and its cities were never as large, numerous and capable of organising ample territories as their Eurasian counterparts (here again, environmental factors seem to have been an important obstacle). The prevailing methods of cultivation, typical of an itinerant and less productive agriculture, were accompanied by a less diversified society, in which the inheritance of land rights had nothing like the central importance it had in the agrarian societies of Europe and Asia. Consequently, even the family structures were very different from those of Eurasia, and placed much less emphasis on the pursuit of complex matrimonial strategies.

1.2. The structural features of agrarian economies

Eurasian agrarian societies were much more complex than their predecessors based on hunting and gathering, but were also much less complex and stratified than contemporary industrial or post-industrial societies. This was also because the vast majority of the population lived in small villages. Even in a highly urbanised region like Italy, no more than 20–25% of the total population lived in cities at the start of the 14th century (before the Black Death). On average, the urban population of Western Europe was about 6–8% of the total. Therefore, one reason for paying particular attention to the rural population is that it was much more numerous.

Another reason why agrarian societies were less complex is due to the limited division of labour, based (at least in the countryside) less on differences in ability than on the age and gender of the members of each family group. The fundamentally important skills and knowledge were common among all or almost all of the population, engaged in different activities according to the seasons. The lower level of complexity was associated with a more limited range of needs, and most of what was needed for consumption and production was made or reproduced on a local basis: seed, livestock, implements and simple clothing. Only a few types of goods were imported from outside by acquiring supplies marketed in the nearest city: most metal tools and goods, salt and higher quality textiles.

Productivity was generally low, and the traditional agrarian societies were capable of producing only a limited surplus above what was needed for immediate subsistence and to constitute reserves of seed to sow the next crops (this also placed a great constraint on the growth potential of the urban population). In addition to limiting economic development, this meant that the population was very much at the mercy of harvest fluctuations due to climatic and meteorological factors. In particular, long and intense spring rains could cause considerable damage to cereal harvests, causing them to fall well below the minimum subsistence level. In general, agrarian societies were able to tolerate a year of “normal” hardship by using their available reserves (according to one estimate, an average of one in four years saw poor harvests in the pre-industrial era). However, two or more consecutive years of poor harvests were usually enough to cause a famine, always associated with a net reduction in births and, especially in the worst cases, a notable increase in death rates. The fragility of agrarian economies could be aggravated by a population increase, given the limited possibilities of achieving a rapid increase in output. This “Malthusian” ⁴ interpretative model should not be rigidly applied, since it is known that Eurasian agrarian societies did not always survive merely at subsistence level, but were able to enjoy lasting and progressive improvements in living conditions, at least in certain periods and areas. Nevertheless, it remains an extremely useful means of understanding the dynamics of the pre-industrial era.

The vulnerability of agrarian societies to crop failure poses the question of their resilience, meaning their capacity to deal with these crises. One fundamental aspect to underline is the capillary solidarity system in villages, based on a dense fabric of various degrees of family ties. Matrimonial strategies were central to this system. European and Asian inheritance mechanisms assigned daughters an important share of the patrimony, thus necessitating “rational” management of marriages. The choice of marriage partner was usually ...