Pamuk on Williamson, _Globalization and the Poor Periphery before 1950_

[eh.net-review at eh.net]

Published by EH.NET (June 2007)

Jeffrey G. Williamson, _Globalization and the Poor Periphery before 
1950_. Cambridge, MA: MIT Press, 2006. xii + 189 pp. $28 (cloth), 
ISBN: 0-262-23250-2.

Reviewed for EH.NET by S¸evket Pamuk, Department of Economics, 
Bogaziçi University.


In the last decade Jeffrey Williamson (Harvard University) has been 
studying the history of globalization and drawing some important 
lessons for the current era. This volume can be seen as another 
project belonging to that broader agenda. It is a revision of the 
Ohlin lectures he gave at the Stockholm School of Economics in 2004 
based on a series of studies undertaken with different collaborators. 
Williamson examines the impact of globalization on the Third World in 
two sub-periods, rapid market integration and globalization from 1820 
until 1914 and the emergence of inward-looking policies and economies 
from 1914 until World War II..

A large part of the story Williamson tells so masterfully is 
presented in terms of the analysis of price changes caused by the 
industrial and transport revolutions. Williamson pursues the global 
trends and their implications for growth and distribution in the 
periphery with some of the best examples of analysis using the 
economic historian's toolbox. He is always theoretically well 
informed and brings in a wealth of new evidence, often creating new 
series, new data bases as he goes along.

The book begins with an overview of the impact of the transport 
revolution. Williamson emphasizes that even though the term "global 
economy" is often used for the earlier period, prices had not 
converged in the world markets between 1492 and 1820. In contrast, 
the transport revolution of the nineteenth century created commodity 
price convergence between all world markets and facilitated the rapid 
expansion of the trade between the core and the periphery. The result 
of rapid productivity increases in manufacturing in the core and the 
transport revolution was sharp improvements of the terms of trade for 
the periphery which Williamson documents in Chapters 3 and 6 better 
than anyone else to date.

For Williamson the relative price changes also hold the key to 
understanding changes in income distribution in the periphery during 
this period. Through a series of regressions based on the 
Heckscher-Ohlin hypothesis, he shows in Chapter 4 that rapid 
expansion in trade and the convergence of relative factor prices 
benefited the abundant factor, raising the wage-rental ratio in 
labor-abundant and land-scarce countries and lowering it in the 
land-abundant and labor-scarce countries of the periphery during the 
century until World War I.

In Chapter 5 Williamson emphasizes that the consequences of improving 
terms of trade for the periphery were not all positive. Improving 
terms of trade encouraged the shift towards export-oriented 
agriculture and accelerated the decline of manufacturing activities 
or de-industrialization. For countries whose terms of trade improved 
more strongly, de-industrialization was especially strong, as was the 
case in India. Technological improvements and productivity increases 
in agriculture remained weak, however. In fact, technological 
advances and human capital accumulation occurred mostly in the core 
during this period. As a result, rates of growth of per capita 
incomes in the periphery lagged far behind those of the center, 
substantially increasing the disparities in income around the globe 
until after World War II.

These global trends were reversed after 1914, however. The revolution 
in transport slowed down, demand for primary products fell and the 
terms of trade turned sharply against the primary producers of the 
periphery. What Prebisch, Singer and many others observed after World 
War II as a secular trend was in fact the second leg of what 
Williamson calls the boom-and-bust cycle of global trade and relative 
prices.

Rising disparities in incomes between the core and the periphery and 
the reversal of the terms of trade after World War I thus shifted the 
focus to the glaring asymmetry in the benefits from globalization and 
intensified the backlash against it. Williamson shows in Chapter 7 
that tariffs in the periphery, especially in the politically 
independent countries of the periphery, rose sharply in the interwar 
years signaling the beginning of the shift towards ISI policies. He 
argues, however, that the most important single reason for the rising 
tariffs in the periphery was strategic, a response to the same trend 
in the core countries.

At the end of the volume, Williamson asks whether the anti-global 
backlash of the interwar period can be repeated during the current 
era of globalization. Once again, his answer remains close to the 
Heckscher-Ohlin-based political economy framework that he employs so 
fruitfully throughout the volume. In the first era of globalization, 
he argues, trade and politics were dominated by immobile, 
sector-specific factors such as land and unskilled labor. In 
contrast, labor is a lot more mobile between the manufacturing 
sectors today and any global backlash is unlikely to be equally 
strong, he insists.

It may be worth pursing the theme of labor mobility further. In an 
earlier study undertaken with O'Rourke and Hatton, Williamson had 
shown that a large part of the wage convergence involving the two 
sides of the Atlantic during the half century before World War I was 
due to migration. Labor mobility is mostly absent in this book 
probably because it was not as important for the poor periphery, but 
I wonder whether it should have been included for the sake of the 
contrast. After all, the degree of labor mobility is one big 
difference between the last century and the current era of 
globalizaton. Labor may be more mobile between sectors within a 
country but international migration is mostly illegal today. With 
greater international mobility of labor, the benefits from 
globalization in the present era would have been much more evenly 
distributed and the potential of political opposition to 
globalization probably much less significant.

Perhaps the key questions that the volume leaves with the reader are 
why technological progress and human capital deepening rates remained 
so different between the core and the periphery, and ultimately, why 
the benefits were so unevenly distributed during the first century of 
globalization. Were these asymmetries due to the inherent nature of 
agriculture vs. industry or should we (also) look elsewhere for the 
answer? For example, how important was the role of institutional 
differences between the core and the periphery in this outcome? 
Williamson does not offer answers but he is well aware of the 
significance of the questions he is raising not only for the last era 
of globalization but also for the present one.

This highly original volume by a leading economic historian provides 
an excellent analysis of global trends and the impact of 
globalization on the periphery until 1950. The questions it raises 
can provide an attractive research agenda in years to come. It is 
strongly recommended reading for economic historians and can be 
easily used as a supplementary text in more advanced courses.


S¸evket Pamuk is Professor of Economics and Economic History at 
Bogaziçi (Bosphorus) University in Istanbul. He is the author of _A 
Monetary History of the Ottoman Empire_ (Cambridge University Press, 
2000, also reviewed at this website). Recently, he has been working 
on economic growth in southeastern Europe and the Middle East since 
1800.

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