After Columbus: Explaining the Global Trade Boom 1500-1800

A superb paperon history of global trade by Kevin H. O’Rourke and Jeffrey Williamson.

It looks at reasons why trade expanded post Columbus. Was it rise in technology or declining trade barriers or better transportation or demand/supply?

This paper documents the size and timing of the world inter-continental trade boom following the great voyages in the 1490s of Columbus, da Gama and their followers. Indeed, a trade boom followed over the subsequent three centuries. But what was its cause? The conventional wisdom in the world history literature offers globalization as the answer: it alleges that declining trade barriers, falling transport costs and overseas “discovery” explains the boom. In contrast, this paper reports the evidence that confirms unambiguously that there was no commodity price convergence between continents, something that would have emerged had globalization been a force that mattered.

Thus, the trade boom must have been caused by some combination of European import demand and foreign export supply from Asia and the Americas. Furthermore, the behavior of the relative price of foreign importables in European cities should tell us which mattered most and when. We offer detailed evidence on the relative prices of such importables in European markets over the five centuries1350- 1850. We then offer a model which is used to decompose the sources of the trade boom 1500-1800.

Interesting. It shows how rising demand from Europe and supply from Asia (perhaps China) were perhaps the major reasons for rising trade volumes during that phase.

European income growth explained none of the 16th century trade boom: income actually fell during this period, as did the domestic relative price of these imported goods. The 16th century trade boom can therefore be explained either by rising Asian supply, falling Asian demand, or by some combination of the two. We will have more to say about this in Section VI. In contrast, the more modest 17th century trade boom can be explained entirely by European income growth, as evidenced by the rising relative prices of non-competing  imports during the period.

The 18th century trade boom must be explained by a mixture of demand and supply: between 59 and 75 percent of the trade boom can be explained by European income growth; it follows that between 25 and 41 percent of the trade boom can be explained by changing Asian supply. Over the three centuries as a whole, European income growth explained between 50 and 65 percent of the inter-continental trade boom.

It has lots of tables and graphs to show which is amazing to note. Having so much data on international trade of that era is quite interesting. Super account on trade history…

 

 

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