Colossus (35 page)

No doubt each of the “failed states” of the world has failed in its own distinctive way. But they also have much in common. Among the very poorest countries in the world are the Central African Republic, Uganda, Rwanda, Chad, Tajikistan, Niger, Eritrea, Guinea-Bissau, Liberia, Sierra
Leone, Burundi, Ethiopia, the Democratic Republic of Congo, Afghanistan and Somalia. Besides extreme poverty and (in nearly every case) average life expectancy of little more than forty years, all these countries fall far short of being liberal democracies, and all have experienced in the recent past, or continue to experience, some form of war.
⁴⁴
In most cases, their only hope for the future would seem to be intervention by a foreign power capable of constructing the basic institutional foundations that are indispensable for economic development.

TABLE 7. POVERTY, UNFREEDOM AND CIVIL WAR

Source: World Bank,
World Development Indicators
database; United Nations Human Development Report, 2003; Freedom House; International Peace Research Institute, Oslo (PRIO), Department of Peace and Conflict Research, Uppsala University.

GLOBALIZATION

Think, then, of liberal empire as the political counterpart to economic globalization. If economic openness—free trade, free labor movement and
free capital flows—helps growth, and if capital is more likely to be formed where the rule of law exists and government is not corrupt, then it is important to establish not only how economic activity becomes globalized but also how—by what mechanism—economically benign institutions can be spread around the world.

TABLE 8: GLOBALIZATION: AN OVERVIEW

The fact that globalization applies to politics as well as economics is one of the messages of table 8. The first column lists what can be regarded as givens about the globe we inhabit; the second, those things that can flow around it; the third, the mechanisms that facilitate such flows; the fourth, the agencies operating these mechanisms; the fifth, the policies that allow those mechanisms to operate and the sixth, the possible international regimes.

Economists and economic historians alike tend to focus their attention on flows of commodities, capital and labor when talking about the history of globalization. However, there are other flows that can also occur on a global scale, not only flows of technology and services but also flows of institutions, knowledge and culture. A particular event like a revolution or a bank failure can also be transmitted by a kind of mimesis around the world.
⁴⁵
And disease was globalized before any of these. The history of the fourteenth century would be incomprehensible without some knowledge of the bubonic plague, just as the conquest of the Americas by Europeans from the late fifteenth century until the mid-nineteenth would not have happened so easily without the export of infectious diseases, which more than decimated native populations. As well as infections, the conquistadors and colonists brought technology, institutions and ideas: gunpowder and the horse, Christianity and its various churches, West European notions of property, law and governance. Slow and erratic though it has been, the process of global democratization since the 1770s illustrates the way both institutions and ideas can be spread internationally as readily as goods can be traded across borders or money invested abroad. And the phenomenon of contagion, familiar to students of international financial markets, has its political counterpart in the international revolutionary epidemics after 1789, 1848, 1917 and 1989.

If one leaves aside the mechanisms of the natural world, which can only really transmit infectious diseases (and not very far without man-made assistance), all these different things have been able to traverse the world only because of advances in the technology of transport and communications. It was above all improvements in the design of oceangoing
ships, and increases in their number, that globalized the world economy in the nineteenth century, though the foundations of this revolution were laid earlier by advances in navigation, medicine and propulsion. Yet continued advances in the technology of transport and communications—the advent of aircraft, wireless transmission and satellites in space—were by themselves no guarantee of continued economic globalization. Much depended, and still depends, on the private and public agencies that control the means of communication. In the mid-twentieth century the encroachments of governments into economic life did much to reverse the economic integration of the pre-1914 period as more and more regimes adopted policies inimical to free international exchange.

Economic historians tend to pay more attention to the ways governments can facilitate globalization by various kinds of deregulation (the first four items in the fifth column of the table) than to the ways they can promote globalization more actively. Yet the history of the integration of international commodity markets in the seventeenth and eighteenth centuries is inseparable from the process of imperial competition among Portugal, Spain, Holland, France and Britain. The creation of global markets for spices, textiles, coffee, tea and sugar were the work of monopoly companies like the Dutch and English East Indian companies, simultaneously engaged in a commercial and a naval contest for market shares. In the same way, the spread of free trade and the internationalization of capital markets in the nineteenth century were intimately linked to the expansion of British imperial power. On the other hand, the eclipse of globalization in the middle of the twentieth century was in large measure a consequence of the immensely costly and destructive challenges to British hegemony mounted by Germany and its allies in 1914 and 1939. Nothing did more than the world wars to promote alternative models of economic organization to that of the international free market. War was actively waged against seaborne trade, while it was the various wartime experiments with the control of trade and foreign exchange, the centralized allocation of raw materials and the rationing of consumption that provided the inspiration for theories of peacetime economic planning in the Soviet Union and elsewhere. The globalization of warfare in the twentieth century must bear a large share of the responsibility for the midcentury breakdown of international trade, capital flows and migration.

It is certainly far from self-evident that an international order based on a multiplicity of notionally equal independent nation-states is the one best designed to maximize economic integration and to spread the institutions conducive to the success of free markets.
⁴⁶
In an ideal world, of course, free trade would be naturally occurring. But history and political economy tell us that it is not. The period after the Second World War saw great strides to reduce the tariff barriers that had arisen in the beggar-my-neighbor mood of the Depression, but under the Bretton Woods system, international capital movements were tightly regulated and indeed stayed that way even after the system of fixed exchange rates had broken down, until the 1980s. Nor has the resistance to liberal economic policies wholly disappeared even in our own era of globalization; there still remain formidable barriers to the movement of workers and agricultural products. No matter how persuasive the arguments for economic openness, it seems, nation-states cling to their tariffs, quotas and subsidies. By contrast, in the first era of globalization, from the mid-nineteenth century until the First World War, economic openness was imposed by colonial powers not only on Asian and African colonies but also on South America and even Japan.
⁴⁷
To be more precise, free trade spread because of Britain’s power and Britain’s example. It is to that first age of “Anglobalization” that we now turn, in order to assess both its costs and its benefits.

ANGLOBALIZATION

From the 1840s until the 1930s the British political elite and electorate remained wedded to the principle of laissez-faire, laissez-passer—and the practice of “cheap bread.” That meant that certainly from the 1870s, Britain’s tariffs were significantly lower than those of its European neighbors;
⁴⁸
it also meant that tariffs in much of the British Empire were kept low. Abandoning formal control over Britain’s colonies would almost certainly have led to higher tariffs being erected against British exports in their markets and perhaps other forms of trade discrimination; witness the protectionist policies adopted by the United States and India after they secured independence, as well as the tariff regimes adopted by Britain’s imperial rivals
from the late 1870s onward. Whether one looks at the duties on primary products or those on manufactures, Britain was the least protectionist of the imperial powers. In 1913 average tariff rates on imported manufactures were 13 percent in Germany, over 20 percent in France, 44 percent in the United States and 84 percent in Russia. In Britain they were zero.
⁴⁹

According to one estimate, the economic benefit
to Britain
of enforcing free trade could have been anywhere between 1.8 and 6.5 percent of GNP.
⁵⁰
But what about the benefit to the rest of the world? In the words of the Whig free trader Sir John Graham, Britain was “the great Emporium of he commerce of the World.”
⁵¹
Its domestic market and much of its empire were more or less open to all comers to sell their wares as best they could. The evidence that, in an increasingly protectionist world, Britain’s continued policy of free trade was beneficial to its colonies seems unequivocal. Between the 1870s and the 1920s the colonies’ share of Britain’s imports rose from a quarter to a third.
⁵²
More generally, British colonial authorities resisted protectionist backlashes to the dramatic falls in factor prices caused by late-nineteenth-century globalization.
⁵³
That said, a distinction needs to be made between the majority of colonies, which had free trade thrust upon them, and the elite few that secured, through the granting of “responsible government,” the right to set their own tariffs. Canada did so in 1879, an example soon followed by Australia and New Zealand.
⁵⁴
Moreover, there appears to have been a positive correlation between the imposition of these tariffs and the economic growth of what became the Dominions—an apparently awkward finding for the proponents of unconditional economic “opennes.”
⁵⁵
This has important implications for any economic history of the British Empire. If Canada and the other Dominions benefited from protection, then the question becomes: would India have done better with tariffs? Happily for economic liberals, there is a difficulty with this line of argument. First, the tariffs imposed by Canada and others were designed to raise revenue, not to exclude imports. Canadian growth came from exports of agricultural products, not import substitution by domestic manufacturers.
⁵⁶
Secondly, the argument ignores the far more damaging effects of unfree trade on primary producers during the 1930s. The Depression was hard on everyone, but significantly harder on primary producers outside the system of imperial preference than those inside it.

The evidence looks incontrovertible, then, that the British Empire fostered the integration of global markets for commodities and manufactures. Nor would there have been so much international mobility of labor without the British Empire. True, the independent United States was the most attractive destination for nineteenth-century emigrants. But as American restrictions on immigration increased, the significance of the white Dominions as a destination for British emigrants grew markedly, attracting around 59 percent of all British emigrants between 1900 and 1914, 75 percent between 1915 and 1949 and 82 percent between 1949 and 1963.
⁵⁷
This had important distributional consequences. It is often argued that the lion’s share of the returns on empire flowed to a tiny group of politically influential investors. But the effect of mass migration to land-rich, labor-poor colonies like Canada, Australia and New Zealand was to reduce global inequality.
⁵⁸
Nor should we lose sight of the vast numbers of Asians who left India and China to work as indentured laborers, many of them on British plantations and mines in the course of the nineteenth century. Perhaps as many as 1.6 million Indians emigrated under this system, which lay somewhere between free and unfree labor.
⁵⁹
There is no question that the majority of them suffered great hardship; some indeed might have been better off staying at home.
⁶⁰
But once again we cannot pretend that this mobilization of cheap and probably underemployed Asians to harvest gum or dig gold had no economic significance.