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in west Paris was higher, sellers of
carrots would move from the east to
the west and prices would equalize.
The price of carrots in Paris and in
Lisbon might be different, though,
and high transport costs and other
kinds of expenses might mean
that it would be uneconomical for
Portuguese sellers to move their
stocks to France if prices were
higher there. In distinct markets
the price of the same good can be
different for long periods of time.
Global market integration
means that price differences
between countries are eliminated
as all markets become one. One
way to track the progress of
globalization is to look at trends
in how prices converge (become
similar) across countries. When the
costs of trading across borders fall,
there is more potential for firms to
take advantage of price differences,
for Portuguese carrot sellers to
enter the French market, for
example. Trading costs fall
when new forms of transport are
invented, or when existing ones
become faster and cheaper. Also,
some costs are man-made: states
erect barriers to trade, such as
tariffs and quotas on imports.
When these are reduced, the cost
of international trading falls.
The rise of global trade
Long-distance trade has existed for
centuries, at least since the trade
missions of the Phoenicians in the
first millennium BCE. Such trade
was driven by growing populations
and incomes, which created a
demand for new products. But the
underlying barriers to trade that
divided up markets, such as
transport costs, did not change
that much. Globalization only really
took off in the 1820s, when price
differences started to close up.
This was caused by a transport
revolution—the advent of
steamships and railroads, the
invention of refrigeration, and the
opening of the Suez Canal, which
slashed the journey time between
Europe and Asia. By the eve of
World War I the global economy
was highly integrated, even by
late 20th-century standards, with
unprecedented flows of capital,
goods, and labor across borders.
From the 19th century onward,
technological change helped to
integrate markets. It is this that
makes globalization seem
irreversible—once technology such
as steam-powered transport is
invented, it is not then uninvented
but tends to become economically
viable in more countries. Much of
this development is outside the
direct control of governments.
However, at a stroke, governmentscan put up tariffs and other types
of barriers to trade that choke off
imports and stymie trade.
The most dramatic policy-
related reversal of globalization in
modern times occured during the
Great Depression of the 1930s. As
countries headed into recession,
governments imposed tariffs.
These were intended to switch the
demand of their consumers toward
domestically produced goods. In
1930, the US enacted the ❯❯POST-WAR ECONOMICS
By the mid-19th century Britain
had new technology such as these
mechanized looms in cotton mills,
which allowed it to export and compete
in multiple markets around the world.
... ‘deep’ economic
integration is unattainable
in a context where
nation states and
democratic politics still
exert considerable force.
Dani RodrikSee also: Protectionism and trade 34–35 ■ Comparative advantage 80–85 ■ International trade and Bretton Woods 186–87 ■
Dependency theory 242–43 ■ Asian Tiger economies 282–87 ■ Global savings imbalances 322–25