A Short History Of The Global Economy Since 1800 By M Shahid

A Short History of the Global Economy Since 1800

June 2003

M. Shahid Alam Professor of Economics Northeastern University Boston, MA 02760 m.alam@neu.edu

© M. Shahid Alam

This is a short history of the global economy since 1800. It is about the system of global capitalism that took shape once the British economy went ‘underground’ and began to draw its energy and, increasingly, itsraw materials from mineral resources. The progressive substitution of minerals for plants, as the economy’s source of energy and raw materials, transformed the dynamics of capitalism. It opened up vast new sources of energy and raw materials, freeing the economy from the narrow resource constraints of an organic, plantbased economy. The new cheaper, more abundant energy produced dramatic reductionsin the costs of transportation; a growing volume and range of goods could now enter into long-distance and international trade; and this rapidly created the basis for an international division of labor. But the resource substitution also deepened the logic of uneven development. On the one hand, the mineral-based economy created several positive feedbacks that strengthened the already existingtendency towards the division of trading areas into Core and Periphery, or concentrations of high and low value-added activities. In addition, it augmented the military power of the states that pioneered these new technolgies. Together, these tendencies—markets, energy substitution, and force—created the modern global economy, increasingly integrated but also deeply divided into a Core andPeriphery.1 The history of the new mineral-based global economy falls into three phases, defined with reference to the degree of global centralization of power. The first phase, lasting from 1800 to 1913, concentrated power— and, with it, capital, technology, science and manufactures—in a small number of Core areas, notably Britain, France, United States, and Germany. Conversely, the greater part of thePeriphery—nearly all of Asia and Africa—lost its sovereignty to a few Core countries, was forced to open their economies to Core capital, specialized in primary goods, and scarcely experienced any improvements in the living standards of the indigenous population. The global economy slowly entered into a second
The terms, organic and mineral-based economy, are borrowed from Wrigley (1988: 12).
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phase in the late 1940s, although this process was initiated earlier with the Russian Revolution of 1917, when power was decentralized from the Core to the Periphery. On the level of the economy, this decentralization reversed the earlier concentration of manufactures in the Core countries, and produced dramatic acceleration of growth in the dependent Periphery. Startingin the 1980s, however, power was again re-centralized in the Core countries. Already, by the mid-1990s, this re-centralization had exceeded the previous peak in the global centralization of power attained during the late nineteenth century. This paper will examine these three movements of the global economy, though the emphasis will be on analyzing the dynamics of the third movement.

TwoEconomic Logics
It is important to begin by laying out, if only briefly, the different logics underlying the organic, land-based economy that held center stage before 1800 and the inorganic, mineral-based economy that has been developing since that date. In the old agrarian system, two factors perennially constrained its capacity for economic growth. This system drew nearly all its energy from plants,the source of our food, fuel, fiber and other raw materials; this constrained the supply of energy since the land necessary for growing plants was available only in finite quantities. In addition, this system only used organic instruments, men and animals, for converting the energy captured by plants into mechanical energy. These organic instruments did not favor growth since their upkeep...