A Splendid Exchange

William J. Bernstein, A Splendid Exchange: How Trade Shaped the World. Atlantic Monthly Press, 2008.

I thought Findlay and O'Rourke were ambitious for writing a history of international trade over the last 1000 years (see below), but William J. Bernstein goes them one better: a history of trade from Sumer (3000 BC) to Seattle (the 1999 WTO protests). The books couldn't be more different in style and yet they have many important similarities.

First, however, a disclaimer. I am predisposed to like William Bernstein's books. His daughter was a student of mine a few years ago and I was introduced to his work through her. Bernstein holds a Ph.D. in Chemistry and an M.D. in neurology and he treats everything he studies as like brain surgery -- his research is thorough and critical and his insights are often stunning. These days he writes about finance and economic history. You can read about his work at his website, efficientfrontier.com.

Bernstein knows how to tell a story, which makes this book very readable, and he has chosen his stories very well to capture the many forces, political, economic, intellectual and technological, that drove trade forward, held it back throughout its violent history. Violent? Yes, one thing that Bernstein's book shares with Findlay and O'Rourke is the strong sense that trade relations were often associated with violence and deadly force. Wealth and power are potent motivations and many lives have been sacrificed to achieve them. This will come as news to students brought up on Thomas Friedman and his theory of trade as an element of the Golden Arches theory of conflict prevention.

I found almost every part of this book utterly fascinating. Students in my International Economics and IPE Theory classes should read this book if only for Chapter 13 "Collapse," which tells the story of trade in the 20th century through the theories of Wolfgang Stopler, Paul Samuelson and Ronald Rogowski.

The books ends appropriately with analysis of the current trade debate. Bernstein notes that trade is inevitably disruptive, with losers as well as winners, in rich countries as well as poor ones. Economists may take comfort in the fact trade is positive sum -- the winners gain more than the losers lose -- but that is cold comfort for those who bear the burden. Government policies that promote increased trade but decreased social spending are doubly dangerous, therefore, since the losers may lash out against trade if their social safety net fails. It is not necessarily an accident that many of the most open economies have the strongest nets to catch those who fall.

A good lesson to keep in mind as the 2008 presidential campaign moves to the next level.