Few historical enquiries tell us as much about the world we live in today as the search for the origins of world trade. As Adam Smith wrote in The Wealth of Nations, man has an intrinsic ‘propensity to truck, barter and exchange one thing for another’.
A Splendid Exchange tells the epic story of global commerce from its prehistoric origins to the myriad controversies surrounding it today. It transports readers from the sugar rush that brought the British to Jamaica in 1655 to the firestorm over globalization today, moving from the silk route between China and Rome in the second century to the rise and fall of the Portuguese monopoly in spices in the sixteenth. Along the way, William Bernstein examines how our age-old dependency on trade has contributed to our planet’s agricultural bounty, stimulated intellectual and industrial progress and made us both prosperous and vulnerable.
Lively, authoritative, and astonishing in scope, A Splendid Exchange is a riveting narrative that views trade and globalization not in political terms, but rather as an evolutionary process that will continue to foster the growth of intellectual capital, shrink the world and propel the trajectory of the human species.
Jul 17th 2008
>From The Economist print edition
Bridgeman Art Library
WORLD trade gets a bad press: to many people globalisation seems more of a menace than an opportunity. Whether it is the threat to the environment posed by the phenomenal growth of Chinese manufacturing exports, the outsourcing of jobs by footloose corporations or the re-emergence of inflation as oil heads for $150 a barrel and food prices soar, trade is cast as the villain. As this year’s American presidential election campaign heads for the final straight, the candidates, especially Barack Obama, will face ever more strident demands to protect workers from “unfair” foreign competition.
By contrast, too little is heard about the positive effects of world exports that reached $14 trillion in 2006. The boost to Western living standards from all those cheap Chinese goods is taken for granted, while the astonishing increase in the sum of human happiness that has been wrought by lifting hundreds of millions of Asians from the misery of subsistence farming into comfortable prosperity is conveniently forgotten.
William Bernstein’s “A Splendid Exchange” is a timely and readable reminder that the desire to trade is not only one of the oldest human instincts but also the cause of many of the most important developments in our shared history. As Adam Smith observed: “The propensity to truck, barter and exchange one thing for another is common to all men, and to be found in no other race of animals.”
Mr Bernstein’s purpose is to show how that trait evolved and shaped the world. His story begins with Sumerian farmers who realised, some time in the third millennium BC, that the surpluses of grain generated within Mesopotamia’s fertile crescent could be used as barter for things they did not have. Among these was copper, obtained from Sinai several hundred miles to the west, that could be used to make weapons to repel the nomadic raiders who were otherwise helping themselves to the fruits of Sumerian labour.
Mr Bernstein eschews a rigidly chronological narrative in favour of a more thematic approach. His discussion of the disastrous Peloponnesian war between Athens and Sparta serves to make a wider point about the importance (and vulnerability) of sea-lanes. The Athenians were driven by the dictates of trade to create first a powerful navy and then an empire.
Though Greek agriculture was rich in highly exportable wine and olive oil, thin soil, low rainfall and a mountainous topography made it impossible for farmers to produce enough grain for a growing and increasingly city-based population. The Spartans and their allies looked west to Sicily but the Athenians increasingly relied on access to the breadbasket of Pontus (modern Ukraine). This, in turn, meant keeping open those narrowest of choke points: the Dardanelles (to the Greeks, the Hellespont) and the Bosphorus.
Other states in the region were just as dependent on the trade with Pontus and were therefore prepared to contribute to the costs of Athenian naval operations. Before long, this “coalition of the willing” evolved into the Athenian empire. However, with two rival power blocks competing for resources within a relatively confined space, conflict was inevitable and when it came, it was Athens, always more exposed than Sparta, that was eventually starved to defeat. Today, it is the Straits of Hormuz, through which much of the world’s oil is carried, that has acquired the same strategic importance as the Hellespont had for the Athenians.
With an ability to switch gracefully from the macro to the micro, Mr Bernstein whisks his reader on a tumultuous journey. Along the way, it takes in the Pax Islamica established in the Mediterranean by the heirs of the Prophet Muhammad (a trader by profession himself); the rise and decline of Venice and Genoa; the devastation caused by the Black Death; the Portuguese-led age of discovery; the establishment of the great Dutch and British East India trading companies; the horrors of the transatlantic slave trade; the campaign (that led, among other things, to the founding of this newspaper) to abolish the Corn Laws; the golden period of the late 19th century in which trade flourished under the benign wing of the British empire; and the 20th century’s descent into beggar-my-neighbour protectionism.
The strength of Mr Bernstein’s book is the analytical rigour that overlays the rollicking history and the way in which he seamlessly weaves in the theoretical with the practical. For anyone wanting a painless primer in the ideas of Adam Smith, David Ricardo or more recent economists, such as Paul Samuelson, this is the place to find it. At the same time, Mr Bernstein never neglects the vital role of technology as a driver of trade, above all perhaps the coming of steam and reliable refrigeration.
The author also deserves credit for his willingness to take seriously the plight of the victims of trade, the workers and farmers displaced by the iron rule of comparative advantage. He argues, persuasively, that it is far better to help workers affected by disruptive change than it is to shield industries with efficiency-destroying tariffs.