Sunday, June 9, 2013

A Splendid Exchange



William Bernstein's book A Splendid Exchange: How Trade Shaped the World (www.amzn.com/B006NZ9XTU) is a wonderful follow up to his previous economic history The Birth of Plenty.  Bernstein has written a fascinating history of the phenomenon of trade.  His wit and sharp eye for detail make the "dismal science" more joyful and less dismal.

We tend to be too jaded about the enormous impact that trade has had on all of our lives.  We really need to rediscover the wonder of modern commerce.  As Bernstein writes, "televisions from Taiwan, lettuce from Mexico, shirts from China, and tools from India are so ubiquitous that it is easy to forget how recent such miracles of commerce are."  Trade has immeasurably enriched the lives of contemporary man, but how did this come to be?

Every nation faces what Bernstein calls "the basic 'trilemma' of trade -- to trade, to raid, or to protect.  Then, as now, how each government, form that of the humblest city state to that of the grandest empire, approached these three choices dictated the shape of the trading environment and, indeed, the fate of nations."

Colosseum, Rome
Built 70-80AD
The poet Juvenal, writing around 110 AD, complained of the luxury-loving women of ancient Rome  "who find that the thinnest of thin robes too hot for them; whose delicate flesh is chafed by the finest of silk tissue."  Wealthy Romans preferred to wear Chinese silk.  Roman roads and Roman armies created the Pax Romana which allowed trade to flourish throughout the Mare Nostrum -- the Mediterranean.

Outside of the Roman world, in areas such as Arabia, life could be much tougher.  Bernstein writes, "the harsh and lawless environment of the desert shaped both economic and religious life on the Arabian Peninsula and has to this day left its mark on the culture of the Muslim world  Survival in Arabia, with its lack of central authority, was, and remains utterly dependent on the good efforts of the family and the tribe.  Western notions of individual autonomy and rule of law simply do not apply in the desert.  An attack on one tribesman is an attack on all, and in a landscape where a murderer can quickly and quietly slip away, it matters little whether the accused is guilty or innocent.  His entire clan is held accountable for that -- retribution.  The resulting skein of honour and revenge, so familiar in the modern middle east, seemingly without beginning and without end."

Mohammad was a trader
Bernstein points out that "Alone among the world's religion's Islam was founded by a trader.  This extraordinary fact suffuses the soul of this faith and guides the historical events that ricocheted over the land routes of Asia and the sea-lanes of the Indian Ocean through the next nine centuries."

Bernstein surveys the expedition of the Venetian Marco Polo to China and back.  He chronicles the age of exploration and the vital role of the Portugese seafarers in charting new trading routes to Asia.  The expeditions of Columbus to the New World were designed to facilitate trade with the spice islands of the east.  This book is jammed full of fascinating historical tidbits such as this one about pigs -- "The Spaniards soon found the tossing a breeding pair of the animals onto a promising uninhabited island guaranteed abundance of pork there within a few years."

Bernstein's credo is that, "The instinct to truck and barter is part of human nature; any effort to stifle it is doomed to fail in the long run.  Ever since men first challenged the world's seas and deserts with ships and cables, they have carried with them tradable commodities.  At the dawn of the Common era, the extremities of civilised Europe an Asia new and coveted each other;'s luxury goods.  By the end of the nineteenth century, most of the features we consider peculiar to modern global commerce  -- instantaneous communication, long distance trade in bulk commodities  and perishable, and an intercontinental manufacturing cycle -- were well established.  Today's debates over globalisation repeat, nearly word for word in some cases, those of earlier eras.  Whenever trade arrives, resentment, protectionism, and their constant companions -- smuggling, disrespect for authority, and occasionally war -- will follow."


Commander K. under the Cutty Sark
Fastest Tea Clipper of its day
Trade is always a competitive endeavor in which winners and losers are both certain to emerge.  The inevitable minority of losers in our global economic competition have sometimes turned violent in the expression of their frustration; thus we witness the Luddites destroying manufacturing equipment in 19th century England and anarchists protesting the WTO (World Trade Organization) at the Battle of Seattle in 1999.  In our age of rapid technological change, the winners of today become the losers of tomorrow -- the fastest ship of its day, the Cutty Sark, is made redundant by the introduction of the Suez channel (see earlier post http://americanconservativeinlondon.blogspot.co.uk/2012/05/cutty-sark.html).

Trade has had a complex relationship with armed conflict over time.  Socrates, an old soldier himself, said, "All wars are fought for money." A sea-trading nation must, of necessity, become a naval power if only to police and protect the flow of commerce.  The raiding option in Bernstein's 'tri-lemma' continues to tempt the pirates of Somalia to this day.

Protectionist policies that seek to restrict free trade played a role in creating the conditions that led to the devastating wars of the twentieth century including the Second World War.  The French economist Frédéric Bastiat reportedly said, "When goods are not allowed to cross borders soldiers will."

Bernstein concludes his book with some surprising optimism about the relationship between trade and warfare.

"Life on earth is slowly becoming less violent, mainly owing to the increasing realization that neighbors are more useful alive than dead.  Those who doubt this rosy assessment should consider some data from the World Health Organization.  Their statistics show that in 2004, violence accounted for just 1.3 percent of the world's deaths, an all-time low, and that at the beginning of the twenty-first century the number of battle deaths per year has decreased to one-thirtieth of what it was in the 1950s.  This seems to be part of a longer-term historical trend; archaeological data suggest that upward of 20 percent of Stone age populations met violent deaths, a finding that is supported by research on modern hunter-gatherer societies."

Commander Kelly concludes, "Make trade, not war!"


Special thanks to Ken Curtis for bringing this book to my attention.


William Bernstein wrote that America Invades is "Simultaneously readable and reference material, destined to become the go-to for those who want to understand America's place--literally anywhere-- in the world.


You can now purchase Commander Kelly's 
first book, America Invades here...www.americainvades.com or on Amazon...www.amzn.com/1940598427




And now Italy Invades: How Italians Conquered the World...
or on Amazon...

3 comments:

Bill Funk (USMC ret.) said...

Great post Chris! Very interesting. Does the book deal with the ominous issue
of natural resources and the lack and/or exploitation that evolves. The
interesting modern phenomena is that the beneficiaries of trade for the most
part in the last several decades have been countries without much in terms of
natural resources who have exploited, in a lot, if not most, of the cases, the
Third World. The sad thing is the beneficiary of the exploitation at the source
of resources is dictators and tyrants, e.g. Africa

Christopher Kelly said...

Bernstein does not deal specifically in this book with resource trade though he does point out the world's trading "choke" points such as the straits of Hormuz, Suez Canal and Bosphorus. He suggests that all of these are likely places for future conflicts. Your point about Africa is well taken.

Thomas Abraham said...

Your associates on the conservative side should take your sentiments to heart. Open trade, open borders, reduced protectionism. I will check out this book, thanks.