A Splendid Exchange
William J Bernstein's A Splendid Exchange: How Trade Shaped the World (Atlantic Monthly, 2008) is a new kind of book: a history of the world told in terms of international trade, a less glorious topic perhaps, but certainly a more cheering one, than international hostility. Instead of following the rise and fall of various sovereignties — city states, kingdoms, empires — since the beginning of recorded history, Mr Bernstein considers the movements of a constant: for trade never stops. It may slow down, and regions that once bustled may be shoved to the margins of global intercourse. But the urge, as Adam Smith put it, to truck and barter is perhaps more widespread than the urge to pick up weapons.
Until rather recently, history was pretty much all about picking up weapons (war) and putting them down (diplomacy). Modern history in the West, certainly since the Fourteenth Century, has been a matter of reporting on the doings of princes and, more latterly, their successors, the leaders of modern states. For a long time, the glorification of leaders was one of the naked purposes of history-writing. That this gave way to praising nations and "races" changes very little. Scholarly work aside, histories are still intended for the edification of the people who speak the language in which they are written, and they are written in terms of the states that currently exist. For roughly a century (comprising the better part of the 1400s), the Duchy of Burgundy was a big noise, and its dukes sought a royal crown from the Holy Roman Emperor. But you will not find many general histories of short-lived Burgundy or the much longer-lived Empire, because neither exists anymore. Burgundy is now no more than a wine-producing region of France, and the Empire no more than a memory, shared by only a few.
With nations and their relationships constituting the bulk of modern history-writing, it is only natural for the historian to focus on a nation (say, France) or, at most, a region (say, Europe). Historical work, therefore, necessarily begins with the distortions that ensue when the world is divided into "my subject" and "everything else." Coherence is to be found in the historian's point of view, which is nothing other than that of the chosen nation or region. "Events elsewhere are beyond the scope of this work." When Marc Bloch wrote his two-history of feudalism, he was broadminded enough to address certain feudal-seeming institutions in Asia, notably Japan, but his conclusion was that feudalism was exlusively a European phenomenon.
Trade, however, is like water: it is the same everywhere, and it wears down any and all resistance in its search for a common level. If trade is your subject, as it is Mr Bernstein's, then the whole world of mankind is your subject, including everything that has happened in that world since the first accounts were etched in mud. The traditional historian will argue that, again like water, trade has no history: barter and exchange are profoundly routine affairs, always the same no matter what is being traded. But this in this the historian betrays the contempt of his traditional subjects for merchants who, with nothing nobler than pecuniary gain on their minds, have pestered regents and councils through the ages about taxes and tariffs. Money is money is money, but conquest of Wales or the settlement of Pomerania are unique events! And yet warfare, in the event, turns out to be even more soddenly routine than trade, and distinctly less productive. And trade is not so unvarying after all. It follows patterns and currents. It is a commonplace to map the flow of trade as if it were the path of the monsoons that carried ships to and from India. Unlike the monsoons (or perhaps simply far more rapidly), the patterns of trade change, and that, of course, is what gives Mr Bernstein a story to tell.
A book that blandly gave equal time to all eras and areas of world trade would make for dull reading, and no kind of introduction to the subject. It is no fault, then, that Mr Bernstein's interests coalesce in two clusters. The first, comprising the third, fourth, and fifth chapters, concerns the inception and spread of Islam. Because Mr Bernstein takes takes pains to present Islam as a religion whose dignity is not challenged by its having been founded by traders, most readers will find him very enlightening on the subject. He has rewritten a very important chapter of world history without making the suggestion, so tempting to Western historians, that Islam's commercial origins — embraced rather than, as in Christianity, professedly rejected — mark down its spiritual value.
Even if one was not moved by religious fervor, embracing Islam at least did wonders for one's credit rating. Only later would the general population, impressed with the wealth and piety of their Muslim merchant neighbors, follow their path. The conversion of much of Southeast Asia was accomplished not by conquerers roaring out of Arabia and Persia, but rather by cloth and spice merchants from Cambay and Calicut, who often married native women. Their mixed-race offspring, regardless of their mother's religion, were almost always raised as Muslims and served to spread the word of the Prophet among their peers and their mothers' friends and families.
The apogee of Islamic trade, stretching from Gibraltar to Sumatra, was arrested by the Black Death in the middle of the Fourteenth Century. We Westerners are so used to being horrified by the impact of the plague in Europe that it may come as a surprise to learn that there is much more to the story; that, in fact, the Black Death was deadlier by far almost everywhere else on the Eurasian landmass. The Mongols, significantly, sank back into provinciality, leaving the Silk Road unprotected once more, while their Ming successors, perhaps even more significantly, aborted China's burgeoning Indian-Ocean trade in the 1430s. The field was thus left open to Europeans, who were not slow to rally from their relatively slighter devastation. This brings us to Mr Bernstein's second cluster of interests, the aftermath of Vasco da Gama's exploration of the Indian Ocean.
The outlines of the Age of Exploration — tracing the growth of the great trading corporations and the shifting of Europe's financial hub from Genoa to Amsterdam and then London — will be familiar to any educated reader, but Mr Bernstein's perspective guarantees a freshness of detail that makes for stimulating reading. I have written elsewhere of the mild shock of cognitive dissonance conveyed by his account of the Boston Tea Party given in A Splendid Exchange; that is only the most striking of several jolts that the reader who fancies that he or she already "knew that" is in for.
By my estimation, at least five books might have been spun from Mr Bernstein's survey, and I hope that they will be; but the author is to be commended for aiming his book at the general reader. He does not attempt a justification of "globalization." He merely argues, persuasively, that the tendency toward persistently enlarged trading networks is profoundly human. He is nearly as convincing at demonstrating that protectionist measures are quite useless in all but the most budding economies. Nearly, I say, because this argument involves tangents that it is not altogether beyond the scope of A Splendid Exchange to explore. Surely the most troublesome aspect of world trade today — aside from the arms trade, of course — is the stubbornness with which food production is subsidized wherever states can afford to support it. Agriculture is a densely complex activity that cannot be analyzed in terms of "trade" alone; in the developed West particularly, farming is a "land use," rather than a purely economic, activity. No one has figured out how to take farming out of the equations of global trade, but Mr Bernstein's book suggests that clearer thinking on this and other subjects can realistically be anticipated.
Because he believes that world trade will flourish wherever it is given half a chance, Mr Bernstein is not a globalization booster, and his last two chapters take an increasingly critical look at the bromides of enthusiasts. He faults Jagdish Bhagwati, an economist whose influence is magnified by the fact that he has educated a generation of successors, for giving no more than grudging lip service to the problems of workers displaced by migrant jobs. Refusing to protect industries — investors, really — does not necessarily entail refusing to protect workers.
The Free Trade Act of 1989 between the United States and Canada gave researchers a nearly ideal lens through which to observe the globalization trade-off. The act slashed tariffs from about 8 percent to 1 percent on goods moving north, and from 4 percent to 1 percent on goods moving south. Both nations have stable legal, banking, and political institutions, and since the United States dominates the Canadian economy, the most dramatic effects of the act occurred north of the border.
The economist Daniel Trefler calculated that although the actd produced a significant net benefit to Canada as a whole, with long-term productivity in some industries increasing by up to 15 percent, it also vaporized about 5 percent of Canadian jobs, up to 12 percent of existing positions in some industries. These job losses, however, lasted less than a decade; overall, unemployment in Canada has fallen since the passage of the act. Commenting on this trade-off, Trefler wrote that the critical question in trade policy is to understand "how freer trade can be implemented in an industrialized economy in a way that recognizes both the long-run gains and the short-term adjustment costs borne by workers and others."
Which is another way of saying that, if globalization forces a small body of older workers out of work, there can be no moral harm — and no permanent liability — in cushioning the blow with subsidies and other transitory supports. Mr Bernstein clearly does not believe that free markets will solve all economic problems, and he even embraces the idea that free trade may substantially impoverish some nations overall, and his example is none other than the United States. Clearly there is much to be learned about international trade, and I hope that William J Bernstein will continue to study his rich study. The book that lies implicit in "The Battle of Seattle," the last chapter of A Splendid Exchange, is the one that I most look forward to reading. (June 2008)
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