It is common to hear in public discourse that the world has never been as interconnected and interdependent as it is today. Technological progress in the fields of communication and transport has promoted giant leaps in the last 100 years in terms of the internationalisation of the economy. The term globalisation, in fact, has become of common use, and national economies can no longer be studied without facing their embeddedness in the world economy. The series of articles Global Political Economy 101 strives to address the complexity of the global economy by historicising the process that led to the present situation, providing an overview of the different academic approaches, and finally coming up with critical interpretations of the global economy and globalisation. The study of global political economy as a coherent subject of inquiry provides valuable insights into the big issues of our days, such as poverty, inequality, development, and sustainability. The pieces will maintain a humanities-based approach. Therefore, the economy will be seen as the intertwining between several factors like politics, society, culture, and human agency rather than the result of mathematical calculations. The set of articles will be divided into three blocks, each one composed of three articles. The first block will analyse the world economy from a historical perspective. The second one will provide an overview of the main theoretical interpretations of the world economy. The third one will address some of the main questions of today’s global political economy with the analytical tools previously provided.
Global Political Economy 101 is divided as follows:
Global Political Economy 101: From the Discovery of the Americas to Imperialism
Global Political Economy 101: Decolonisation, World Capitalism and Neoimperialism
Global Political Economy 101: Neoliberalism and Globalisation
Global Political Economy 101: Liberal and Neoclassical Interpretations
Global Political Economy 101: State-centric & Developmentalist Interpretations
Global Political Economy 101: Critical Approaches and Dependency Theory
Global Political Economy 101: Why Few Have Much, and Many Have Little - Inequality
Global political Economy 101: The Wretched of the Earth - Development and Poverty
Global Political Economy 101: The Mantra of Our Times - Sustainability
The expressions ’globalisation’ and ’world market’ are nowadays part of the commonly used language. However, those two concepts are relatively recent make and are the product of a long-standing historical process starting in the late Middle Ages, that led from feudalism to the global market. Understanding the development of the global economy is crucial to better comprehend the problems of today, and the examination of its historical trajectory helps make sense of the structure it has assumed in our time. The aim of this first article of the Global Political Economy 101 series is to address the beginning of what is commonly referred to as the global economy, which is found in the economic activity of the Italian city-states Florence, Venice, and Genoa (Frieden, 2012), up until the age of empires and its crisis. The piece will be divided into three parts. Firstly, the preconditions of the discovery of the Americas will be addressed. Secondly, the mercantilist era will be examined. Lastly, imperialism will be analysed.
Italian City-states and the Discovery of the Americas
In the late Middle Ages, the Italian city-states Genoa, Venice, and Florence had acquired paramount economic importance for they had secured a place in the already existing trade routes between Europe and the East and far East (Arrighi, 1994). Their economies were significantly reliant on long-distance trade rather than on internal markets. Nonetheless, between the late 14th century and the early 15th, the expansion of the Ottoman Empire in the eastern Mediterranean and its increasing economic importance encouraged European states to turn towards the west and the Atlantic Ocean as a source of trade. Spain and Portugal were particularly successful in doing so, given their geographic location (Frieden, 2012). Italian city-states had a significant role in the expansion toward the Atlantic, which would lead to the discovery of the Americas in 1492. The wealth accumulated thanks to their position in European trade routes allowed them, specifically Genoa, to become the financial source of the expeditions throughout the Atlantic, and later of the structure of economic exploitation of the newly found lands. Spain and Portugal, in fact, relied heavily on Genoese money to finance the expensive cross-ocean expeditions needed to build the colonial regime (Arrighi, 1994). However, their investment in the Atlantic explorations of the early 15th century contributed at the same time to their decline by shifting the focus of global trade away from the Mediterranean. The discovery of the Americas led all the Atlantic countries — Britain, Spain, Portugal, France — to redirect their trade efforts towards the west, where there were vast lands easily exploitable, rather than the Mediterranian where they had to face the competition of the Ottoman Empire (Procacci, 1977).
The discovery of the Americas opened a period of hegemony for Spain based on the exploitation of the colonies in Latin America. As Eduardo Galeano (1975) argued, it was the beginning of the golden age of the Spanish Empire that was built upon the inconsiderate exploitation of Latin American lands and peoples. The system enacted by Spanish colonisers was, in fact, based upon the violent dispossession of natural resources (Galeano, 1975). The importance of Italian city-states in what would become a prominent example of colonisation should not be overlooked as the nucleus of what would later become a world economy. The interconnectedness between Italian bankers — notably Genoese — and the crown of Spain under the form of financial flows was the response to the financialisation of accumulated wealth that Italian city-states could not invest productively in the real economy: a scheme that, according to Arrighi (1994) and as it will be shown in the next sections, was repeated in later stages of the world economy. The new possibilities opened by the discovery of the Americas and of large-scale colonialism paved the way for what Frieden (2012) called the mercantilist era.
Spanish hegemony was not to last long, as it was the expression of a model, the middle-aged one based upon territorial capitalism, that was headed towards an end. The rigid structure of the Spanish state, which completely identified with the monarchy and the aristocracy, led the country to a slow and steady decline. As stressed by Arrighi (1994), the territorial state based on extractivism and land possession was being threatened by a new model, built upon extra-territorial mercantilism and economic connections. The hegemonic rise of Spain had also created the conditions for its decline, as the Dutch model of an oligarchic capitalist state led by the commercial elites was much better suited for the exploitation and the management of colonial rule. Such a model was based on trade rather than on the dispossession of the colonies: a commercial relation was thus established with the colony, which had to sell mainly primary goods at a price established by the coloniser. The Dutch war of independence against Spain, which had occupied the Fladries with Charles V, ended with the Spanish defeat and paved the way for the establishment of Dutch hegemony, based on a mercantilist approach (Arrighi, 1994). As argued by Cox (1987), internal relations of power are reflected in the international arena, and the Dutch model of merchants-led states found crucial consensus among the other European states.
The peace of Westphalia (1648), putting an end to the thirty years war between the United Provinces of the Netherlands and Spain, was the expression of such consensus and, according to Arrighi (1994), it marked the beginning of Dutch mercantilist hegemony. Mercantilism, with Spanish colonialism as its germ, was based on the economic exploitation of the colonies with the prominent involvement of the state. Economic expansion and trade were seen by mercantilist powers as a political means through which they could assert their dominance. A specific feature of this period was the growth of commercial companies such as the Dutch East India Company, a private enterprise that could rely on the full support of the state both in political and military terms. Economic policies were part of a broader national scope so that economic purposes and military ones overlapped and merged (Frieden, 2012).
It is during this period that the concepts of metropole and periphery emerge in the economic field. The coloniser countries bought commodities from the colonies at a preferential price for manufacture and then sold them in the national market and in the colonies themselves, which were not allowed to acquire manufactured goods elsewhere: it is possible to notice in this practice the difference with the Spanish model, which was based on bare appropriation and mere accumulation rather than trade (Frieden, 2012). The flourishment of the great colonial powers — the Netherlands, France and Britain — coincided with the underdevelopment of the peripheries, in which besides small elites, people lived in dreadful conditions and were exploited and enslaved in order to provide the metropolis with cheap commodities (Galeano, 1975). This metropole-periphery relation inspired later scholars, mainly from peripheral countries, to elaborate the so-called dependency theory, according to which the wealth of European powers was structurally linked to the dispossession of their colonies and the ruthless exploitation of their peoples (Prebisch, 1962). Even though mercantilism was characterized by the compenetration of economic actors and the state, the importance of a consistently developed world market must be stressed as it represents an important step towards the creation of what is today the global market. Even though it was an economy largely dominated by military power and served the interests of a few European countries, in its framework a variety of worldwide economic transactions were carried out (Frieden, 2012).
The flourishment of the Dutch United Provinces set a model to which other states looked as an example. According to Arrighi (1994), the Dutch set the rule and models to be followed but did not have the power to govern the system they had put in place with the Westphalian arrangement: the United Provinces did not have the political and military power to be the global hegemon for a long time, and roughly 50 years after the peace of Westphalia the signs of the Dutch decadence started to be clear (Arrighi, 1994). As in the case of Spain, the model proposed by the United Provinces was the source of their fortunes but also carried the germ of their decline. The United Provinces, in fact, never had the military power to actually govern the system they had created and promoted and, after a brief period of hegemony, other countries that had benefitted from the system started disputing the dominating position. Furthermore, the system proposed by France and Great Britain — the two powers that will contend for hegemony in the following two centuries — based on the establishment of the free market, was much more suited to the industrial economies that were growing after the industrial revolution (Arrighi, 1994).
The direction in which the Dutch directed the world powers was most notably toward the commercial expansion of companies overseas, strongly backed by the state’s military and naval power. However, from the late 17th and early 18th century, such a model was acting as an element favouring other countries that best adapted to the newly set conditions. Dutch leadership was a case of what Arrighi (1994) defined as “leadership against the leader” (p. 50), for as said before, it set the conditions for its decline in favour of Britain and France that were to contend the world hegemony in the following two centuries. Britain particularly managed to adapt to the mercantilist paradigm in an effective manner. As opposed to the Dutch that focused their efforts on securing ports for trade purposes, forcing the locals to respect their trade conditions, the British introduced the concept of settler colonialism. This consisted of the development of the private initiative in the colonies, promoting the growth of markets in the subjugated territories, and using African slaves to cope with the labour shortages that such development entailed (Arrighi, 1994).
The evolution of the industrial sector with the industrial revolution in the 18th century, accordingly to Cox’s argument (1987), resulted in prominent changes in the world order. The old mercantilist system based on state protectionism and tight relation between states and their colonies did not fit the claims of a rising industrial class that demanded the opening of the markets to increase the opportunities to sell industrial goods (Frieden, 2012). The result of this tension toward open economies was the period of “free trade imperialism” (Arrighi, 1994, p. 50). As claimed by Arrighi (1994), Britain, after a period of struggle with France, achieved the role of global hegemon by the end of the 18th century, promoting the free market as the way forward to economic development. The development of relatively important markets in the colonies allowed Britain to inculcate the idea within local elites that free trade was the path to pursue. However, when free trade was not accepted, or local communities refused some of its principles, threatening Britain’s commercial interests, the British military apparatus reestablished the order. The mobilisation of civilians to maintain the imperial rule was also a crucial aspect of this stage of the world economy, as previously economic interests were protected mainly by the employment of mercenaries: this notion demands an appreciation of the building of an imperial identity among British citizens. Indeed, the mobilisation of large shares of the civil population to defend imperial interests in the most remote corners of the world contributed to the creation of a sentiment of identification of the people with the empire itself. The same is true for the Napoleonic wars, during which civilians were mobilised to fight against the revolutionary principles that the French emperor incarnated (Arrighi, 1994). After the defeat of Napoleon at the battle of Waterloo in 1815, Britain secured its role as global hegemon for it had been the leader of a coalition encompassing the most powerful countries of the world to re-establish the Westphalian values that had been threatened by revolutionary France (Arrighi, 1994).
It is looking at this stage of capitalism that scholars elaborated on the world system theory, arguing that the unequal distribution of wealth among countries is due to the international division of labour. It was noted that in a free market regime the countries that had previously achieved a position of economic dominance through colonialism had a considerable advantage compared to the colonies themselves (Wallerstein, 2000). The imposition of the free market, in fact, gave a tremendous advantage to the already developed countries. With a similar focus, but from a Marxist perspective, Lenin (1936) argued that free trade imperialism was the latest stage of capitalism and that capital constantly needed to expand to reproduce itself, and free trade was the most suitable manner for it to join new markets worldwide (Lenin, 1936).
The hegemony of Great Britain would achieve spectacular peaks of economic and political power after the Napoleonic wars. Britain traded worldwide and the British empire extended its rule considerably to every corner of the world (Arrighi, 1994). Besides the imperial dominions, Great Britain maintained a consistent number of commercial connections with independent countries in Latin America, Africa and Asia that relied heavily on British commercial naval power and industrial products for their internal markets (Galeano, 1975). However, as in the case of Spain and the United Provinces, also British hegemony and the world order it proposed and upheld carried the germ of its crisis. The crisis of the imperial age would cause tremendous turmoils — e.g., WWI and decolonisation. British imperial rule entered a period of slow but inexorable crisis in the 1870s, which would lead to its decline (Arrighi, 1994). The characteristics and motivations of such a crisis will be addressed in the next article of this series. Another global power, as in the previous historical periods, would come out victorious from a phase of instability, achieving a dominant position and securing a place of hegemony: the United States of America.
Throughout this article, the main characteristics of the development of the world economy have been analysed. The nucleus of the international economy, represented by the activity of the Italian city-states, made it possible for the big powers of the time to establish a colonial regime known as mercantilism. The United Provinces of the Netherlands would be the hegemonic power during such a period characterised by tight economic links between colonies and the metropole. Mercantilism, however, slowly transformed into imperialism, characterised by the introduction of a free-market regime imposed by the country that, after the Netherlands, would become the world hegemon — i. e., Great Britain. The age of imperialism was initially one of competition for global hegemony between France and Great Britain, the latter imposing its rule after the defeat of the former, and thus becoming the global hegemon able to impose its model of free market imperialism. Great Britain, however, also was to suffer a period of decay, culminating with WWI and decolonisation. A new great power, that had been emerging from the free market regime, would benefit from the British decay: the USA. The next article will address the period of transition and the USA’s hegemonic era.
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