Monday, January 14, 2008

Power and Plenty: A Long View of International Trade

Ronald Findlay & Kevin H. O'Rourke, Power and Plenty: Trade, War and the World Economy in the Second Millennium. Princeton University Press, 2007.

I like books that make me reconsider what I think I know. Since I spend a good deal of my time thinking and teaching about international trade and finance, books that make me stop and think about these topics are especially valuable. Douglas A. Irwin's fascinating study of the intellectual history of the theory of comparative advantage is an example of the kind of book I mean. (Irwin, Against the Tide: An Intellectual History of Free Trade, Princeton University Press, 1996). I used this book as a supplement to a course on trade theory that I taught in Bologna a few years ago and one of my best students nearly failed her oral exam because, having studied Irwin, she had a different view of comparative advantage than her faculty examiner (who, to be fair, was probably looking for simple answers so that he could pass everyone). Irwin had made her, like me, rethink what she knew about international trade theory.

Findlay and O'Rourke's Power and Plenty is challenging me to rethink international trade in a different way. The book is very ambitious: a global history of 1000 years of international trade, explicitly taking into account economics, politics and technological change. There are probably two ways to write a book like this: simplistically, using metaphors and big themes, or rigorously, with lots of detail and data. P&P is rigorous -- a book to study rather than browse. But even browsing can pay dividends.

Most studies of international trade are relatively narrow both in terms of the actors (one nation's trade policy or regional trade patterns) and time period (the 1990s, the postwar period, etc.). The thesis of this book is that there is something to be learned be looking at global trade patterns and by taking a long view of history. The risk, of course, is that you can get so involved with the details that you miss the importance of the big picture, but it is a risk worth taking and Findlay and O'Rourke are effective guides.

Here are two examples. I thought I knew quite a bit about the mercantilist period of trade history, but I find that taking the global view -- which means giving greater attention to the slave trade with Africa -- changes the picture in important ways. And taking the long view of trade history helps me understand what is happening today more fully. P&P characterizes trade during the Industrial Revolution as The Great Specialization, with manufacturing concentrated in the global North and trade patterns developing based upon a global division of labor. The current era of globalization is therefore a period of "unraveling" of the great specialization, with manufacturing being diffused globally bringing about dramatic changes both in Malaysia (a new center of manufacturing) and Michigan (an old center), for example.

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