The More Things Change. ..: Learning from Other Eras of Unprecedented Globalization

Globalization and History: The Evolution of the Nineteenth Century Atlantic Economy, by Kevin H. O'Rourke and Jeffrey G. Williamson. Cambridge, MA: MIT Press, 1999. 343 pp. $45.

Historians, economists, and policymakers often regard each other with disdain. Historians bemoan economists' lack of historical perspective. Conversely, economists become frustrated with historians' hesitancy to structure their thinking in ways economists find so helpful, namely to generate hypotheses using structured models and to test them using data. Perhaps because of these disciplinary biases and blinders, the policy community pays little attention to the academic literature of either history or economics. History's lessons are too specific to their subjects' times and places to inform today's actions. And economics leans so heavily on simplifying assumptions and formal modeling that its conclusions cannot easily be related to policymaker's concerns.

In Globalization and History: The Evolution of the Nineteenth Century Atlantic Economy, Kevin O'Rourke and Jeffrey Williamson construct helpful bridges between economists, historians, and the policy community. Using economists' analytic tools, they explore similarities between economic openness at the ends of the nineteenth and twentieth centuries. While many scholars have examined these similarities, the reinforcement is worthwhile, for the policy community repeatedly ignores them when discussing "unprecedented" current globalization. This book caps a ten-year research project, bringing together the findings of numerous articles that the noted economic historians have published in the academic literature. Their most noteworthy contribution to the literature is to have collected and analyzed copious historical data about the economic relations of the "Atlantic economy." They use this data to describe the open economic linkages that existed between the "old world" of Europe and the "new world" of the Americas and Oceania from the mid-nineteenth century until the First World War.

True to their discipline, the authors analyze that data through the framework of international economic theory, testing whether history acted according to central findings of international trade, growth, and open-economy macroeconomics. Their analysis yields insights about the lessons both of history and of economics that should influence current policy discussions about globalization. When looking at the dynamics of the Atlantic economy and peoples' responses to its outcomes, they weave a cautionary tale of history repeating itself: when nineteenth-century integration caused economic hardship for some, those suffering argued successfully for protectionist barriers that exacerbated economic difficulties and soured earlier gains. O'Rourke and Williamson warn of similar dynamics currently taking hold, dynamics recognized during the failed World Trade Organization (WTO) negotiations in Seattle or the bruising congressional debate over whether or not to grant permanent normal trade relations status to China. While the details of their data might prove too much for all but the most ravenous consumer of empirical economics, they craft a convincing and relevant argument for the general reader.

To those in the policy community who consider current economic openness and interconnectedness unprecedented, the history of the nineteenth century seemingly offers few lessons for twenty-first-century international economic policy. Surely our current circumstances of free trade and capital flows differ fundamentally from all past international economic activity? O'Rourke and Williamson join historians to debunk this ahistorical conceit. Focusing on trade and capital flows, they compare economic indicators of globalization across time. Following Maddison, ¹ they measure interdependence by the percentage of total output accounted for by exports. Export/GDP ratios for today's OECD countries are not overwhelmingly higher than in 1913; a weighted average of this indicator shows that exports accounted for 8.2 percent of total GDP in 1913 and 12.8 percent in 1987. The authors rely on Obstfeld and Taylor to measure capital market integration by the absolute value of a country's current account as a percentage of GDP. ² Deficits reflect a country's ability to borrow capital internationally and surpluses the ability to lend, so either will indicate international financial integration...