Commodity market integration from 1500  How do we measure market integration?  Two phases: ; driven by European demand (too high transport and transaction costs). 2. driven by decreasing transport costs (Transport revolution) and free-trade

The initial trigger  the starting point: a self-sufficiency economy  per capita income increase driven by mid 14th century Black Death  and a change in the demand pattern  why pepper? bourgeoisie rise and the need for status-symbols

The new matrix of international trade  what does the increase in pepper prices shows? 1. European demand shifts are crucial 2. slow changes determined by explorations  explorations establish new networks among economy-worlds  an important change: Americas are included in the frame-work

The new matrix of international trade  the “basket” of imported commodities slowly changes  diversification of imports  from demand for luxury goods: high price/weight ratio  to more complex demand: including lower price/weight ratio commodities

Keeping demand high  what about American silver?  and... what about the Japanese one?  plantation economy support  the cumulative effect of core-periphery relation  it all allows European demand to continue to grow

Do we see market integration?  from 1500 a break with the past in long- distance trade  but what about market integration?  using price convergence as a prove of integration among different markets  yet, no evidence of before 1800  income growth is the main driver of long distance trade increase (about 50-60%)

Monopolies and long distance trade  state control over long distance trade, chartered companies  Vereenigde Oostindische Compagnie  East India Company  irreplaceable commodities as a key for state revenue  military power in support of international trade

A stylized picture of income led international trade increase  the trigger of Black death  new trade patterns  the role of silver  growing military power  colonial revenues

The Napoleonic interlude  20 years of war policies aiming at blocking international trade  the result is a period of disintegration of previous trade networks  plus a lasting heritage of protectionism

world trade,  the second phase ( ), from commodity market integration to world trade  declining transport costs are the main driver of integration  free-trade also provide a relevant push

Nineteenth-century Trade Policy  Europe 1860, a huge step toward liberalization , protection once again  Americas different patterns between North and Latin America  Asia a forced liberalization

Nineteenth-century Commodity Market Integration  19th century, the real “break with the past” in market integration  the astonishing growth of trade compared to production (GDP) increase  price convergence is visible across the planet:  wheat spread Liverpool-Chicago, from 58% to 16% ( )  cotton spread Liverpool-Bombay, from 57% to 20% ( )

Nineteenth-century Commodity Market Integration  when world commerce combines with industrialization processes...  division of labor is visible on the global scale  W. Europe exports manufactured goods  N. America is in balance  the rest of the World exports primary goods  a clear distinction between industrial and agricultural/natural resources producers

The interwar years, market dis-integration  “war economy” impact on trade  new core-periphery balances and the problem of oversupply  quotas and tariffs: the spread of restrictions to international commerce  the echo effect of the Great Depression: market dis-integration

Post WW II commodity market integration  declining transport costs are no longer the main driver of integration  free-trade policies (openness), suspect number one for market integration  manufactured goods, a dual trend  Europe and the Americas  Asia  a protected niche: agriculture

Post WW II commodity market integration  is 20th century’s degree of integration higher or lower than 19th century’s?  a complex puzzle, including: - volumes and freedom of trade - increase in per capita income - a presumed price convergence - a change in the “basket” of traded commodities

Concluding remarks  an expansion in range and volumes of goods traded since 16th century  market integration in the long run  the process however is not straight-line, and there have been steps back  the main drivers (transports and policy) at times combine together, at times clash on