Lecture 17: The Economic Rise of the West

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Lecture 17 The Economic Rise of the West
1. Introduction 2. The Medieval Economy 3.
Population Changes 4. The Rise of Trade 5.
Mercantilism 6. The Industrial Revolution 7. Why
Europe? 8. Trade in the Modern Era
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Fall of the Western Roman Empire

• Specialize
• Interdependent
• Politically Unified
• Economically Integrated

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Village of Shilbottle, Northumberland
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The Agricultural Revolution
Rapid Population Growth
Improved Plow
Improvement in Productivity
3-Field Rotation
Warmer Weather
Surplus Production
Rise of Markets and Cities
Horse Harness
Rise in Trade
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Population Change and Expansion
Regional Expansion
Local Expansion
Regional Expansion
Regional Expansion
External Expansion
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The Rise of Trade
Four Phases of Trade Expansion
1. Local Trade 2. Regional Trade 3.
Inter-Regional Trade 4. Global Trade
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Mercantilism

• Goal Amass Precious Metals
• If No Domestic Sources, Trade For Metals
• Exports Must Exceed Imports
• If Everyone is a Mercantilist, Trade Evaporates
• Evaporation Leads to Colonialism and Empire
• Heavy Government Intervention in Economy

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Limitations on Tradein the Early Modern Period
1. Trade Is Limited By Idea Mercantilism 2.
Colonial And Trading Outposts Are Private 3.
Trade Is Limited By Naval Technology 4. Trade Is
Inhibited By Disease Summary -- A Global
Trading System Established -- But Trade Volumes
And Values Relatively Low
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Industrial Revolution
Demand For Products
(-) Agriculture () Manufacturing/Services (-)
Artisan Production () Unskilled
Labor/Machines (-) Human/Animal Energy () Water,
Steam, Electricity, Internal Combustion ()
Migration to the Cities () Urbanization ()
Communication (-) Transportation Costs ()
Application of Science
Incentive To Innovate
Specialization Interdependence
Flow of Ideas Information
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Why Europe?
Was the Industrial Revolution Inevitable? Why
Does it Begin In Western Europe? Why Not
China? Or the Ottoman Empire?
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Impact of Industrial Revolution On Trade
Industrial Revolution
Specialization -- Domestic -- International
Lower Transport Costs -- Railroad 85-95
Reduction -- Shipping 50 Reduction
Trade Explodes 5 Per Year From 1840-1870
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Impact of Industrial Revolution On Ideas

• Mercantilism Dominant 1500-1800
• Adam Smith (1723-1790)
• An Inquiry Into The Nature And
• Causes Of The Wealth Of
  Nations (1776)
• -- Markets Not Commands
• -- Laissez Faire Not Mercantilism
• Liberal or Manchester School Dominant In 1850s

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Trade In The Modern Period
1. Trade Limited During French Revolutionary
And Napoleonic Wars (1792-1815) 2. Trade Grows
Slowly 1815-40 Due To Mercantilism 3. The Rise Of
Free Trade In Britain Repeal Of Corn Laws (1846)
And The Navigation Acts (1849 1854) 4. The
Rise Of Free Trade In Europe 1860
Cobden-Chevalier Treaty First Of A Series 5.
British Led System Includes France, Germany,
Italy, Netherlands, Belgium, Sweden, Denmark,
Norway, Spain, And Portugal
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Trade In The Modern Period
1. The Depression Of 1873 The Period Of
Conflict a) Power Shift UK GE US FR RU
1870 32 13 23 10 4 1900 20 17 30 7 5 b)
Structural Adjustment -- Growth But Declining
Prices And Wages c) Rising Tariffs -- But
Trade Grows Due To Lower Transportation Costs 2.
Interdependence Efficient But Creates
Vulnerabilities
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Trade In The 20th Century
1. 1896-1913 Growth And Interdependence 2. World
War I a) Sell Assets And Borrow From The US b)
Hastens Decline Of UK c) Inflation In Germany 3.
The Interwar Period Depression And
Protectionism a) Money Cycle US To Germany
To France/Britain To US b) The Great
Depression c) Smoot Hawley The Collapse Global
Trade d) The Reciprocal Trade Agreement Act
(RTAA)
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The Rise Of The Post War System
1. World War II Rise Of The Super Powers 2.
Post-World War II Period a) Rapid Growth In
Trade And International Investment b)
Unprecedented Economic Cooperation c) Tremendous
Economic Growth 3. US Hegemony Shift From
Isolationist To Internationalist 4. The New
International Order a) International Monetary
Fund b) International Bank For Reconstruction
Development (Commonly Called The World
Bank) c) General Agreement On Tariffs And Trade
(GATT) (Now The World Trade Organization (WTO))
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The Decline In Tariffs UnderU.S. Hegemony
Average Average US Tariff World Year Rate Tariff
-------- --------- ---------- 1940 36 40 1946 2
5 -- 1950 13 25 1960 12 17 1970 10 13 1975
6 -- 1984 5 5
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The Rise of Conflict

• Stability in the 1950s
• Rising Conflict in the 1960s
• Partial Collapse in the 1970s
• a) Bretton Woods Monetary System
• b) Oil Production And Distribution System
• Multilateral Cooperation 1980s and 1990s

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Practical Information Where Do I Get Trade And
Economic Data?
1. Walt Rostow The World Economy History
Prospect 2. United Nations 3. World Bank 4.
International Monetary Fund 5. Organization For
Economic Development And Cooperation 6. B.R.
Mitchell Volumes International Historical
Statistics -------- 7. World Military
Expenditures And Arms Transfers Or At
Http//www.Acda.Gov On The Internet 8. The
International Institute For Strategic
Studies The Military Balance 1994-1995