Dynamic models suggest that international trade made a considerable contribution to European economic development after 1500, especially in Britain, Portugal, and the Netherlands. Gains from this activity helped offset the tendency for real incomes to decline in response to population growth. Britain arguably benefited the most: I return to this near the end of chapter 12.5
In the early modern period, most intercontinental trade was maritime and increasingly controlled by Europeans. By the eighteenth century, the total value of Dutch trade was broadly comparable to GDP, and equivalent to up to a quarter of GDP in Britain. Processing of raw materials and reexports caused more and more value to be added and retained in Europe. In a process dubbed the “Industrious Revolution,” imports of tropical goods incentivized people to work harder to participate in a growing consumer culture.6
As transatlantic commerce increased massively between the early sixteenth and the late eighteenth centuries, Britain captured a large share of it both directly and indirectly: naval power secured colonies and shipments, and British exports to the Iberian peninsula, sustained by the latter’s colonial bullion imports, added to the overall volume of Atlantic-driven exchange.7
Trade and colonial empire contributed significantly to British domestic income and investment. Trade profits were distinctive: even though the volume of overseas trade remained modest relative to the size of the domestic market, its impact was concentrated among innovative sectors of the economy and therefore disproportionately important. Thus, overseas sales accounted for more than half of the growth in British industrial output in the late eighteenth century. The growth of an entrepôt trade fueled by the reexport of foreign manufactures helped create a larger overseas market. This expansion in turn boosted the development of financial institutions, such as the insurance industry, banking, and stock-trading. Growth in the shipping industry was driven in the first instance by Atlantic trade with the Americas and West Africa.8
Technological and organizational innovation and the industrial application of inventions were sensitive to persistent demand stimuli. It is telling that the fastest growth occurred in the cotton textile and metal industries, which were the most exposed to Asian imports and American demand. Increases in overseas sales were concentrated in those sectors and in just a few regions, such as Lancashire and West Riding for textiles and the West Midlands for metal products—the crucible of the First Industrial Revolution that substituted machinery and steam power for human labor. By 1815, 60 percent of the British cotton textile industry produced for export. British innovators thus depended on overseas markets to expand their businesses. And in the eighteenth century, the principal market for British manufactures—first metal and then textiles—was the Atlantic complex consisting of the British Caribbean, North America, and West Africa, much more so than continental Europe or South Asia.9
As Joseph Inikori in particular has emphasized, Africans played a crucial role in these processes. From the sixteenth to the mid-nineteenth centuries, with the sole exception of Andean silver, African slaves produced the bulk of all export commodities in the Americas. Under conditions of land abundance, settlers and free labor could not have sustained the large-scale production of gold, sugar, coffee, and cotton in Brazil, the Caribbean, and North America. Economies of scale and low wages contained costs, helping to create mass markets in Europe.
Around 10 million Africans were shipped to the New World as slaves. Britain dominated this business in the eighteenth century, which generated both private wealth and demand for sophisticated credit institutions to deal with the unprecedented complexities of the international slave trade. West Africa provided not only slaves but also palm oil and dyes that were vital to the British textile and machine industry. In exchange, the region was the principal destination of British cotton and linen exports in the late eighteenth and early nineteenth centuries, when industrialization began to take off. All of this required massive transfers of people and goods across the Atlantic Ocean.10
Kenneth Pomeranz has drawn attention to the favorable characteristics of the New World as a new periphery for Atlantic Europe. Real resources were produced on its islands and coastal areas, which benefited from low transport coasts and access to the slave trade. In the Caribbean, the slave economy critically relied on imports. This made the periphery’s dependence structural and permanent, turning it into a major source of land-intensive exports and a destination for imports of capital, slaves, and manufactures.11
For Pomeranz, the “ghost acreages” of the New World were key. This concept refers to land that a country would have had to commit from its domestic resources to obtain the goods that were actually produced elsewhere and imported. Such transfers increased effective carrying capacity and the amount of resources available per capita. In 1815, Britain’s ghost acreage for imported cotton alone stood at 3.5 million hectares, defined as the surface area required to raise enough sheep to generate an equivalent amount of wool. At the time, British arable land may not have exceeded 4.5 million hectares. By 1830, the cotton ghost acreage had risen to 9 million hectares, far in excess of domestic capacity.
Timber imports from the New World translated to another million ghost acres, in addition to 650,000 from the Baltic. Caribbean sugar provided calories that would have required around 0.6 million extra hectares of British grain fields in 1815 to produce. By 1830, combined imports of cotton, timber, and sugar equaled 10 million–12 million ghost hectares, roughly comparable to the total amount of both arable land and pastureland in Britain. Coal provided additional ghost acreages from domestic sources, but on a smaller scale than New World croplands. The implication is that British economic takeoff critically relied on these contributions.12
Britain emerged as the chief beneficiary of this system of peripheral slave labor and land. To sustain the Lancashire textile industry, raw cotton imports rose fiftyfold between the 1780s and the 1850s, first from the Caribbean and then from the United States. From the 1820s until the American Civil War, the United States provided between 60 percent and more than 80 percent of British cotton imports. It was the combination of an abundance of land in America and an abundance of labor from Africa, developed and exploited by European actors, that made this growth possible.13
Limits of Globalism: Criticism and Response
There can be no doubt that the Atlantic world outside Europe provided ample supply and demand that boosted the most innovative sectors of the British economy. Yet this globalist approach, which seeks causally to tie the First Industrial Revolution and thus the maturation of the (Second) Great Divergence to external inputs, has increasingly faced criticism, not in terms of the facticity of the described developments, which are reliably documented, but more specifically with regard to their relevance in explaining precisely this takeoff.
The developmental contributions of coercive relationships, which form the basis of popular global history narratives, are contested. Primitive accumulation was not very large relative to the size of the European economies: even the 150,000 tons of silver extracted from the New World from the sixteenth through the eighteenth centuries remained a relatively modest windfall overall. Only some of this bullion was transferred to Asia, and in any case imports of Asian goods did not make Europeans substantively richer, let alone making their economies more developed. The fact that interest rates were lower in parts of Europe than elsewhere—a vital precondition for capitalist credit creation—had nothing to do with bullion inflows.14
Claims of supernormal and rent-like profits from coercion or colonialist interventions by Europeans are more difficult to address. The question of what exactly slavery contributed to the British economy may be too complex to be settled conclusively.15
Much the same can be said about the results of European overseas expansion more generally. The picture was mixed at best. Owing to the political allocation of resources and competition by free-riding challengers, imperialism did not redound to Portugal’s or Spain’s long-term benefit. In France it a
ccounted only for a modest share of a larger economy, and while the opposite was true of the smaller and more mercantile Netherlands, even there it remains unclear whether or not it made a decisive contribution to growth over the long run.
Britain is an outlier: as we have seen, its industrialization was meaningfully linked to mercantilist protections and the economic incentives it created. Overseas trade encouraged the growth of manufacture and urban services. Britain exported perhaps a third of its increase in industrial output that occurred from the mid-seventeenth to the early nineteenth centuries. Profits from servicing global commerce—from transport and financial intermediation—helped London grow, and made merchants wealthier and more influential in politics. Whether empire paid overall is a moot point as long as it benefited the entrepreneurial class.16
Yet even such profits from trade were modest compared to British GDP—a few percent at best in the late eighteenth century—even if they made some monopolists very rich. These gains could surely have supplied enough capital to finance the First Industrial Revolution. But so did other sectors, given that the overall investments required were not that large.17
Finally, ghost acreages did not by themselves generate development: other European countries also had access to them, as did China, which imported huge quantities of cotton from India and could at least in theory have turned internal peripheries over to commodified staple crop production. Most important, ghost acreages did not just spring into existence: they emerged in response to technological change that created demand for their output. European investment in creating them was enormous, first by means of acquiring slaves and then by the transfer of free settlers and the buildup of extensive infrastructure on a continent that had been dominated by indigenous Stone- and Copper Age societies.18
It was European institutions that made these commitments possible. This alone suffices to reject Pomeranz’s claim that ghost acreages—from New World resources to coal—“did more to differentiate western Europe from other Old World cores than any of the supposed advantages over these regions generated by the operation of markets, family systems, or other institutions within Europe.” Yet it is also true that even the most powerful institutions could not simply cause these additional assets to appear: there had to be an ecological basis for them. British machinery may have made it profitable to import them, but these imports had to come from somewhere.19
Could they readily have been supplied from elsewhere? When the American Civil War interrupted cotton exports, India and Egypt could not fully fill the gap despite increases in production and exports. Up to that point, plentiful and predictable access to American cotton had ensured Britain’s early lead in industrialization. American cotton had longer fibers and was easier to clean than Indian cotton. It would have been a challenge to replace American slave labor and the formidable output of New World ghost acreages, at least at comparable cost and with the technology available at the time. No part of the Old World offered similarly favorable endowments. Eastern Europe’s failure to export more food and timber to the richer northwest is a case in point: the physical potential existed, but the same local institutions that did not mobilize it for domestic growth also constrained the volume of production.20
Even if substitution had been feasible, we need to recall that intercontinental shipping was run by European powers: without this infrastructure, how would substitution (for instance, in the form of imports from India, the most important alternative source of cotton) have worked in practice? We simply cannot change one part of the equation—the commercial development of the New World—without altering others. Pomeranz is right to insist that ghost acreages sustained divergence as and when it occurred. Even though they cannot explain Europe’s breakthrough, as he avers, they made it possible: another necessary though not a sufficient precondition of the (Second) Great Divergence.21
The question is not so much whether the First Industrial Revolution could have happened under different circumstances—whether New World resources were indispensable, which is by no means a given. It is whether this breakthrough, as and when and where it took place, was significantly indebted to these resources and linkages. Empirically, there is “no gainsaying the positive connexions between imperialism, trade and long term economic growth” up to the mid-nineteenth century. Continuous expansion of demand was a driver of rising productivity at the core, and much potential demand was located overseas. Imports supported Britain’s specialization and exports, and the latter were only viable if they were competitive in terms of pricing. Without growing trade, the resultant incentives for and the payoff of innovation would have been lower.22
In view of all this, the claim that “the Industrial Revolution in England was a product of overseas trade” could be seriously contested only if it were taken to mean that trade and global commercial expansion on their own were responsible for this breakthrough—a position that nobody advocates. By itself, trade could not sustain transformative development unless it coincided with technological and organizational change.23
Industrialization occurred in a specific environment that mobilized resources and innovation by a number of means: protectionism, which compelled manufacturers to chase higher productivity; naval supremacy, which guarded imports and exports, effectively subsidizing trade profits by making taxpayers bear the social cost of protection; exploitation, which provided a horrifically violent shortcut for developing New World resources; and advances in financial institutions, which were driven by both war and trade. All of these elements arose from the combination of competition within Europe and access to overseas resources and markets.
GETTING THERE
Marginals
If external supplies and global connections are an integral part of any realistic account of divergence and modernization, we must ask how these assets became available to begin with. Societies that were much larger and wealthier than those of late medieval Europe had shown no interest in pursuing these opportunities. I argue that Europe’s competitive fragmentation created powerful incentives for overseas exploration and development, whereas hegemonic empire did not. For this reason, the different paths taken by Latin Europe on the one hand and China and other imperialized regions on the other were not primarily a function of geography, except insofar as geography had helped shape the political landscape in the manner described in chapter 8. Even if Europe had faced the Pacific and China the Atlantic, outcomes would not greatly have differed: macro-political dynamics, not winds or maritime distances, were the key to global expansion.
For Europeans to benefit from overseas trade and colonies, they had to get out there first. In their eagerness to do just that, the coastal polities of Western Europe conformed to a much broader historical pattern. From a world-historical perspective, maritime exploration had long been a domain of peripheral and small-scale polities. Large agrarian empires, by contrast, barely became involved.24
This pattern dates back to the Phoenicians, who, setting sail from their city-states on the Lebanese coast, not only traversed the full length of the Mediterranean (about 3,700 kilometers as the crow flies) but also ventured out into the Atlantic Ocean. Around 600 BCE, an Egyptian pharaoh (or perhaps a Persian king of kings a century later) was said to have commissioned a Phoenician circumnavigation of the African continent proceeding clockwise from the Red Sea. After three years, this expedition was supposedly brought to a successful conclusion—a tale that already elicited suspicion at the time but receives some support from anecdotal detail that suggests penetration of the southern hemisphere.
Several subsequent expeditions or attempts are dimly reflected in confused ancient traditions. Sailors from Carthage, a Phoenician city-state colony in what is now Tunisia, followed the African coast in the other direction down the Bay of Biafra. Others visited the British Isles or ventured out into the mid-Atlantic, perhaps (though probably not) even as far the Azores and the Sargasso Sea, which begins about 3,000 kilometers east of the Straits of Gibraltar, halfway to the America
n East Coast.25
Greeks, hailing from city-states in the Aegean, followed suit. From their base in Marseille they established trade connections with Britain to obtain metal. By the fourth century BCE, Greek sailors had mapped routes to the Shetlands and into the Baltic. Pytheas sailed in the waters surrounding Britain and Ireland and advanced northward to (probably) the Faroes and finally “Thule,” just possibly Iceland. Famous Greek scholars such as Aristotle and Eratosthenes raised—though did not endorse—the possibility of crossing the Atlantic in order to reach India.26
A similar degree of engagement can be observed in other parts of the Old World. Around the beginning of the Common Era, Madagascar was settled by people from Indonesia, more than 6,000 kilometers away. By then, Polynesian explorations of the Pacific out of Tonga and Samoa were already well under way. In the course of the first millennium CE, riding their outrigger canoes, these Polynesians reached and populated New Zealand, Easter Island (2,600 kilometers east of the closest staging post, Mangareva, and 6,700 kilometers from Samoa), and Hawai’i (3,500 kilometers north of the Marquesas). Their zone of transfers eventually spanned some 9,000 kilometers from Hawai’i in the north to the Auckland Islands south of New Zealand. East to west, dispersal extended across 25,000 kilometers from Madagascar to Easter Island.27
Back in Europe, meanwhile, the Norse of the ninth and tenth centuries advanced from Scandinavia to Iceland, Greenland, and Newfoundland in the New World. In late medieval Europe, it was once again city-states such as Venice and Genoa and the small island kingdom of Majorca that invested in naval assets, opening up routes to the Canaries and Madeira. The coastal kingdom of Portugal embarked on a similar course in the fourteenth century, when its people numbered not more than about a million. In the fifteenth century, intensifying efforts took its sailors to the Azores and along the African coast to equatorial Africa. The Cape of Good Hope was rounded in 1488.28
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