Foreign Trade Was Not an Engine of Growth
AbstractTrade reshuffles. No wonder, then, that it doesn’t work as an engine of growth—not for explaining the scale of growth that overcame the West and then the Rest 1800 to the present. Yet many historians, such as Walt Rostow or Robert Allen or Joseph Inikori, have put foreign trade at the center of their accounts. Yet the Rest had been vigorously trading in the Indian Ocean long before the Europeans got there—indeed, that’s why the West wanted to get there. Trade certainly set the prices that British industrialists faced, such as the price of wheat or the interest rate. But new trade does not put people to work, unless they start unemployed. If they are, then any source of demand, such as the demand for domestic service, would be as important as the India trade. Foreign trade is not a net gain, but a way of producing importables at the sacrifice of exportables. The Harberger point implies that static gains from trade are small beside the 1500% of growth to be explained, or even the 100% in the first century in Britain. Trade is anyway too old and too widespread to explain a uniquely European—even British—event. One can appeal to “dynamic” effects, but these too can be shown to be small, even in the case of the gigantic British cotton textile industry. And if small causes lead to large consequences, the model is instable, and any old thing can cause it to tip. Ronald Findlay and Kevin O’Rourke favor foreign trade on the argument that power led to plenty. But domination is not the same thing as innovation. In short, the production possibility curve did not move out just a little, as could be explained by trade or investment or reshuffling. It exploded, and requires an economics of discovery, not an economics of routine exchanges of cotton textiles for tea.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 19723.
Date of creation: 07 Jul 2009
Date of revision:
foreign trade; engines of growth; industrial revolution; economic growth; Britain;
Find related papers by JEL classification:
- B10 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - General
- N10 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - General, International, or Comparative
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-01-16 (All new papers)
- NEP-HIS-2010-01-16 (Business, Economic & Financial History)
- NEP-HPE-2010-01-16 (History & Philosophy of Economics)
- NEP-PKE-2010-01-16 (Post Keynesian Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Ronald Findlay & Kevin H. O'Rourke, 2007.
"Power and Plenty: Trade, War and the World Economy in the Second Millennium (Preface),"
The Institute for International Integration Studies Discussion Paper Series, IIIS
- Ronald Findlay & Kevin H. O'Rourke, 2007. "Power and Plenty: Trade, War and the World Economy in the Second Millennium (Preface)," Trinity Economics Papers, Trinity College Dublin, Department of Economics tep0107, Trinity College Dublin, Department of Economics.
- Nicholas Crafts & C. Knick Harley, 2002.
"Precocious British industrialization: a general equilibrium perspective,"
Economic History Working Papers, London School of Economics and Political Science, Department of Economic History
22368, London School of Economics and Political Science, Department of Economic History.
- N. F. R. Crafts & C. Knick Harley, 2002. "Precocious British Industrialization: A General Equilibrium Perspective," UWO Department of Economics Working Papers, University of Western Ontario, Department of Economics 200213, University of Western Ontario, Department of Economics.
- Maxine Berg & Pat Hudson, 1994. "Growth and change: a comment on the Crafts-Harley view of the industrial revolution," Economic History Review, Economic History Society, Economic History Society, vol. 47(1), pages 147-149, 02.
- Temin, Peter, 1997. "Two Views of the British Industrial Revolution," The Journal of Economic History, Cambridge University Press, Cambridge University Press, vol. 57(01), pages 63-82, March.
- Guillaume Daudin, 2007.
"Domestic trade and market size in late eighteenth century France,"
Sciences Po publications
nÂ°2007-35, Sciences Po.
- Daudin, Guillaume, 2010. "Domestic Trade and Market Size in Late-Eighteenth-Century France," The Journal of Economic History, Cambridge University Press, Cambridge University Press, vol. 70(03), pages 716-743, September.
- Guillaume Daudin, 2008. "Domestic Trade and Market Size in Late Eighteenth-Century France," Oxford University Economic and Social History Series, Economics Group, Nuffield College, University of Oxford _069, Economics Group, Nuffield College, University of Oxford.
- Guillaume Daudin, 2007. "Domestic Trade and Market Size in Late Eighteen Century France," Documents de Travail de l'OFCE, Observatoire Francais des Conjonctures Economiques (OFCE) 2007-35, Observatoire Francais des Conjonctures Economiques (OFCE).
- Philip Richardson, 1989. "The structure of capital during the industrial revolution revisited: two case studies from the cotton textile industry," Economic History Review, Economic History Society, Economic History Society, vol. 42(4), pages 484-503, November.
- Williamson, Jeffrey G, 1987. "Did English Factor Markets Fail during the Industrial Revolution?," Oxford Economic Papers, Oxford University Press, vol. 39(4), pages 641-78, December.
- Guillaume Daudin, 2008. "Domestic Trade and Market Size in Late Eighteenth-Century France," Economics Series Working Papers 69, University of Oxford, Department of Economics.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht).
If references are entirely missing, you can add them using this form.