International Economy

The period between 1820 and 1913 was characterized by the gradual liberalization of controls over the flows of capital, labour and trade that were to link the countries of the world more closely together as the nineteenth century progressed.

The gradual removal of restrictions on the movement of people, both within and between countries, while encouraging international migration, also gave to these movements of population their distinctive feature, namely, their quality as a free movement of individuals, almost entirely without control from either the receiving or sending countries and undertaken almost entirely by single individual or family units.

Controls over financial transactions were also minimal. Short- and long-term capital could move unsupervised in any direction and these movements could take any form. Direct foreign investment was undertaken, and was often encouraged by the governments of the receiving countries. Foreign securities were freely traded on most stock exchanges. Repatriation of profits was unhampered, and the fear of confiscation of foreign investment almost completely absent.

In the form of gold coins, foreign currencies mixed freely with the domestic currencies of many countries. Moreover, like migration, individuals (and enterprises) dominated international financial and commercial transactions before 1914, and only rarely were dealings conducted among countries acting as a whole. Finally, whereas international trade had to overcome tariffs during the latter part of the nineteenth century, these were exceedingly low by comparison with those introduced during the interwar years.

Furthermore, quotas, import prohibitions and other quantitative restrictions on trade hardly existed before 1913, nor did ideas of economic self-sufficiency, towards the furtherance of which these restrictions on trade were often introduced. Before turning to a consideration of the forging of the international links of capital, men and trade that constituted the growth of the international economy in the period since 1820, it is necessary to say something about the growth of foreign trade itself as a major cause of the economic growth of nations.

In most countries export growth was a very powerful promoter of domestic economic growth and development. What is also clear from Table 4, which describes the long-run growth of the greater part of the world export trade over the period 1820 to 1989, is that the pace of world economic growth is very closely tied to the rate at which world trade grew during these years.

The evolution of the international economy during the period 1820 to 1998 has been largely a response to the changes that have occurred in the political, economic and technological environment within which economic relations between countries are conducted. The record demonstrates the slow but inexorable movement among the regions of the world economy towards greater integration. As a result of a number of developments, international trade increased dramatically in the second half of the nineteenth century, outstripping the growth of world output.

Particularly important was the movement towards free trade up to the 1870s, even though it had faltered by the 1880s and was kept alive only by the United Kingdom and a few Continental countries, and the vast strides in steam transport technology which rapidly increased the flows of people and commodities across continents and from one continent to another by sea. This expansion of the international economy provided the mechanism for widespread economic growth in Western Europe and its 'offshoots' abroad.

Bibliography/References

Ashworth, W. , A Short History of the International Economy since 1850, (London, 1962). Chapters 1-6 Habbakuk, H. J. , and Postan, M. (eds. ), The Cambridge Economic History of Europe, Vol. VI, 'The Industrial Revolutions and After, Part 1' (Cambridge, 1965). Chapters 1-4. Harley, C. K. , 'Ocean Freight Rates and Productivity 1740-1913. The Primacy of Mechanical Inventions Reaffirmed', Journal of Economic History (December, 1988). Pages 851-876. Headrick, D. R. , The Tentacles of Progress. Technology Transfer in the Age of Imperialism, 1850-1940 (Oxford, 1988). Headrick, D. R. , The Tools of Empire. Technology and European Imperialism in the Nineteenth Century (Oxford, 1981).