European Economic Development: The Contribution of the Periphery

Author(s): Patrick O'Brien

Source: The Economic History Review, New Series, Vol. 35, No. 1 (Feb., 1982), pp. 1-18
Published by: Blackwell Publishing on behalf of the Economic History Society
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THE
ECONOMIC HISTORY
REVIEW
SECOND

SERIES,

VOLUME

XXXV,

No. I, FEBRUARY

i982

SURVEYS AND SPECULATIONS, XIII

The
Development:
EuropeanEconomic
ofthePeriphery*
Contribution
By PATRICK O'BRIEN

Economic historyhas enjoyed a revivalin the studyof develop-

ofthecourseandcausesoflong-term
ment.Provocative
interpretations
of ImmanuelWallerstein,
growthcontinueto emergefromthe writings
is
1 Whilethebasicpurposeoftheirresearch
GunderFrankandSamirAmin.
to a "global
theircommitment
to exploretheoriginsofunderdevelopment,
intotheeconomic
has led themintowiderangingexcursions
perspective"
"Neitherthe
historyof WesternEurope because,to quote Wallerstein,
of any specificterritorial
unitcan be
nor underdevelopment
development
andsecular
without
itintothecyclical
rhythms
orinterpreted
fitting
analyzed
as a whole".2
oftheworldeconomy
trends
thecriticalperiod
to thenew schoolof development
history,
According
pathsofeconomic
partsoftheworldsetoffalongcontrasting
whendifferent
whichwitnessed
occurredbetweenI450 and I750-three centuries
growth
basedupon
of "Europeanworldeconomy
and consolidation
theemergence
The evolution
of tradeand commerce
modeof production".3
thecapitalist
economicorder(overlongcyclesofexpansion
underthisold international
and upswingagainfromthemiddleof
(i600-I750),
(1450-i600), stagnation
fordevelopment
andunderdevelopcreatedconditions
theeighteenth
century)
* In myattempt
from:
comments
watersofthistopicI wasguidedbyhelpful
theperilous
to navigate
TonyHopkins,
StanEngerman,
MarkElvin,PaulGootenberg,
AlanAngell,PaulBairoch,NickCrafts,
to
listening
Platt,RogerOwenandBarrySupple.I alsogainedfrom
Christopher
HerbKlein,BillParker,
andTapanRaychaudhuri
discusstheirpaperswiththeSt.
Fisher,Don McCloskey
Jande Vries,Stephen
History.
Economic
inInternational
Seminar
Antony's
Economy
World
(I979). A. G. Frank,
1 I. Wallerstein,
World
System
(I974) andTheCapitalist
TheModern
and Underdevelopment
Accumulation
I492-I 789 (I978) and Dependent
WorldAccumulation,
(I979). S. Amin,

(Hassocks,I976).
Development
Scale,2 vols.(NewYork,I974) andUnequal
ona World
Accumulation
onCore
2 I. Wallerstein,
Stagnation
Century
oftheSeventeenth
andPhase-B:Effect
'Underdevelopment
System
ofCapitalism
ed. TheWorld
inW. L. Goldfrank,
WorldEconomy',
oftheEuropean
andPeriphery
Hills,I979), p. 72.
(Beverley
3 Wallerstein,
p. 67.
System,
World
Modern
I

PATRICK

0 BRIEN

mentin the nineteenth

and twentieth
centuries.4
As theyperceiveit, the
ofAsia,Africa,LatinAmerica,and EasternEurope,
relativebackwardness
whichbecamevisibleafteri8oo, originated
in the mercantile
era when
WesternEurope turnedthe termsand conditions
forinternational
trade
heavily
in itsfavour.Throughthedeployment
ofmilitary
powerandsuperior
formsof stateorganization,
the Europeanseitherplunderedand colonized
territories
in Asia,Africa,andtheAmericas
orreducedweakereconomies
to
of dependency.
conditions
or encouraged
Theyactively
promoted
formsof
labourcontrol
attheperiphery
(slavery,
peonage,serfdom)
(sharecropping
in
whichmaintained
the semi-periphery)
the cost of producingexportsfor
WesternEuropeclose to the levelof subsistence
wages.Patternsof trade
evolvedin whichthemineralwealthand primary
oftheperiphery
products
forthemanufactured
wereexchanged
goodsandhighqualityfarmproduceof
thecoreon highlyunequalterms.Overtime,suchpatterns
ofspecialization
ofWestern
pushedtheeconomies
Europetowards
industrialization
andhigher
standardsof livingand the economiesof the periphery
towardsprimary
andfarlowerlevelsofpercapitaincome.5
production,
monoculture,
are simplifications,
and distortions
Summaries
occurin "boxing"scholars
therearesalientdifferences
in "schools".Obviously
inthetreatment
together
fromoneauthorto another
andcoverageofglobalhistory
andin theprecise
significance
imputedto the effectsof international
economicrelationson
the
new
school's
long-term
development.
Furthermore,
concernis
primary
oftheperiphery
withtheeconomicdevelopment
andthedistribution
ofgains
fromtradeandnotwiththeeconomic
ofWestern
history
Europe.ButI do not
theviewthatspecialization
onprimary
proposetoconsider
produceforexport
withthemodesoflabourcontrol
toEurope,together
utilized
bytheeconomies
of theperiphery,
towardsindustrialial
hamperedtheirlongtermevolution
to unravelthelogicalandempirical
societies.6
Nor willI attempt
difficulties
oftheconceptofunequalexchange
involvedin theapplication
to thehistory
betweennations.7For presentpurposesI can accepttheview
ofcommerce
offreemarkets
on theevolution
forlabourandimpediments
thatrestraints
to
ofresources
fromprimary
thereallocation
to
and
urban
production industry
towardsa moderneconomy.
hindered
services
Andtherecanbe no
progress
from
that
rewards
in
trade
were unequally
dispute
participation foreign
the
mercantile
era
when
distributed
force
formed
an integral
during
military
economicorder.My responseto thenewhistory
partoftheinternational
of
willbe rigidly
confined
totheviewsitsauthors
havepromulgated
development
forWesternEuropeofitsconnexions
aboutthe"significance"
withmarkets
4 Datesforlongcyclesvaryfromauthortoauthor.I havequotedWallerstein,
'Underdevelopment
and
p. 74.
Phase-BEffect',
areinfootnote
5Basic references
i, andthefollowing
collections
ofresearch
papers:B. H. Kaplan,ed.
World
ed. TheWorld
SocialChangeandtheCapitalist
Economy
(Beverley
Hills,I978). Goldfrank,
System,
ed. Studies
andE. Bergesen,
oftheModemWorld
System
(i980), as wellas issuesofTheReviewfrom
the
fortheStudyofEconomies,
Fernand
BraudelCenter
Historical
Systems
andCivilizations,
StateUniversity
ofNewYorkatBinghampton.
6 Forthemostclearstatement
ofthe"development
ofunderdevelopment"
hypothesis,
seeA. G. Frank,
inLatinAmerica
andUnderdevelopment
Capitalism
(NewYork,i967).
7 A. Emmanuel,
A StudyoftheImperialism
UnequalExchange:
ofTrade(I972) andP. A. Samuelson,
DoctrineofUnequalExchange'in D. A. Belsey,ed. Inflation
'IllogicofNeo-Marxian
TradeandTaxes
(Ohio,I976), pp. 96-I07.

EUROPEAN

ECONOMIC

DEVELOPMENT

The hypotheses,
andsourcesofsupplyat theperiphery.
whichareofcentral
ofWestern
importance
fortheeconomichistory
Europe,can be abbreviated
as follows:8
andtabulated
(a) the long-run
growthof WesternEuropein general,and Britainin
canonlybe meaningfully
particular,
analyzedon a globalscale;
(b) theexpansionof theinternational
economyforsomethreecenturies
whichbecamesteadily
afterI750 generated
moreconcensupernormal
profits
ofcertain
corestates;
trated
inthehandsofthecapitalists
madea "large"contribution
to theaccumulation
of
(c) theirinvestments
capitalin WesternEurope;and by theend of theeighteenth
century
this
whichleftotherpartsof
regionhadbeenplacedona pathofeconomic
growth
and the semi-periphery)
in conditions
of undertheworld(theperiphery
development.
and externalities
fromtradewiththeperiphery
(d) furthermore,
spinoffs
andtheacquisition
ofkeyimports,
particu(operating
through
specialization
theeconomicgrowth
ofWesternEuropein decisive
larlybullion)promoted
ways.
of Europe to analyzeconnexions
Clearlyit is necessaryforhistorians
era and theprogress
ofindustrialization
afterI750.
betweenthemercantile
tradeand whererelevant
theywilladopta
Theyhavenotneglected
foreign
But I wishto arguethatcommerce
"globalperspective".
betweencoreand
afterI450 proceeded
forthreecenturies
periphery
on a smallscale,wasnota
fieldofenterprise,
andwhileit generated
someexternaliuniquely
profitable
as decisivefortheeconomic
of
growth
ties,theycouldin no waybe classified
thecommerce
between
Western
Western
Europeandregions
Europe.In brief,
oftheinternational
attheperiphery
forms
aninsignificant
partofthe
economy
fortheaccelerated
rateofeconomic
bythecore
explanation
growth
experienced
afterI750. I proposeto conductmy argument
withinthe geo-political
worldsystems
and timespansadumbrated
by the
categories,
perspectives,
The debatehas beensetup in thesetermsand
ofdevelopment.
newhistory
at local,national,
andcontinental
willsurely
continue
levels.
Thisessaywillbe dividedintofourparts.SectionI attempts
tomeasurethe
of tradewiththeperiphery
forthegrowthof outputand the
contribution
of capitalat the core. The essay thentakesup the issue of
formation
movesontoanalyzetherangeofspinoffs
andexternalities
supernormal
profits;
therelationship
andexplores
generated
bytradebetweencoreandperiphery;
ofimported
bullionto themoneysupplyin Western
some
Europeandoffers
conclusions.
general
featureof the new history
of development
A striking
is the absenceof
statistical
forseveralof its basic hypotheses.
An
systematic
underpinning
omissionis its failureto measurethe economicsignificance
of
important
trade.YetforEuropeansinternational
tradeat thebeginning
intercontinental
8

See Wallerstein,
Capitalist
WorldEconomy.
Relevantand summary
quotations
are to be foundin

Wallerstein,CapitalistWorldEconomy,pp. i8-i9, ModernWorldSystem,pp. 83, 85, 96, 98, 99, I02,

i,

I20-

and'WorldSystems
Analysis:
Theoretical
andInterpretative
Issues',in Kaplan,ed. SocialChange,
pp.

220-2;

Amin,UnequalDevelopment,
pp. i56-8; Frank,WorldAccumulation,
pp.

238, 240-3

and 255-7.

PATRICK

O'BRIEN

erameantexchangeacrosstheboundaries
ofthemercantile
ofstateslocated
of Europe.Intercontinental
mainlyon the continent
tradewithAsia, the
MiddleEast, and Africa,althoughinflated
in valuetermsby silks,spices,
ofexports
jewels,gold,andsilver,formed
onlya tinypercentage
andimports.
thatproportion
Bythelateeighteenth
haddefinitely
century
increased
because
afterI492 tosupersede
tradewiththeAmericas
grewrapidly
tradewithother
continents
by a largemargin.For theI790s thegeographical
destination
of
ofEuropeanstateswas: to
commodity
exportswhichcrossedtheboundaries
otherEuropeanstates76 percent,to NorthAmericai0 percent,to Latin
AmericaandtheCaribbean8 percent,to Asia5 percentandtoAfricaI per
cent.The "periphery"
(of LatinAmerica,theCaribbean,Africa,and Asia)
purchasedabout I4 per centof Europe'sexportsand in i830 thesesame
Buttocomprehend
regionssuppliedsome27 percentofEuropeanimports.9
used in thispaperit shouldbe redefined
thetermperiphery
to includethe
NorthAmerica,
coloniesofBritish
whereAfrican
slavesworkedthe
Southern
10Then
theCarolinas,
ofVirginia,
andGeorgia.
tropical
plantations
Maryland,
theflowsof commodities
by theend of theeighteenth
century
transhipped
ofthe"modernworld
betweenWestern
Europeandregionsat theperiphery
and25 percentofimports.
system"
mightamountto20 percentofexports
ofsuchtradewouldhavebeenfarlessas we go
A fortiori,
theimportance
backin timeto theupswingofthe"longsixteenth
and decadesof
century"
"crisis"duringtheseventeenth
Nationalstatistics
fortradesinsugar,
century.
ofshipsclearedfrom
tobacco,coffee,
tea,slaves,andcottonandthetonnage
trade
Europeanportsindicatesthatthe real upsurgein inter-continental
theAmericas
theworldeconomy
occurred
afteri650. Although
entered
early
flowsofcommodities
in thesixteenth
acrosstheoceansoftheworld
century,
did notbeginto amountto a significant
of aggregate
percentage
European
the
tradebeforethe secondhalfof the seventeenth
century.Throughout
farmoremerchandise
eraEuropeanssoldandpurchased
from
each
mercantile
otherthantheydidfromothercontinents.
tradeformed
external
Furthermore,
onlya smallshareofeconomic
activity.
like4 percentofEurope'sgrossnational
AroundI780-90 whensomething
outputwas exportedacrossnationalfrontiers,
perhapsless thanI per cent
theCaribbean,
wouldhavebeensoldtoAfrica,
andthe
Asia,LatinAmerica,
of theyoungUnitedStates.1"A higherbut stilltiny
southern
plantations
oftotalconsumption
from
percentage
byEuropeanstooktheformofimports
countries
suchtradewouldbe
thesesamepartsoftheworld.For particular
moreimportant;
especiallyforsmallermaritime
powerssuchas Portugal,
Holland,and Britain,whereratiosof domesticexportsto grossnational
i0 percentbythesecondhalfoftheeighteenth
productprobably
approached
butless thanhalfofthesesalesoverseasconsisted
ofmerchandise
century;
oftheperiphery.
soldto residents
economies
Importsformaritime
perhaps
9 P. Bairoch,'Geographical
and Trade Balanceof EuropeanForeignTrade'.Journalof
Structure

EuropeanEconomicHistory,III (I974), pp. 560-I.

10The definition
boundaries
of the"periphery"
and geographical
variesfromauthorto author.The
fortheargument
underdiscussion
andisinlinewiththeconcept
definition
usedinthispaperis appropriate
deployed
byGunderFrankandSamirAmin.
II P. Bairoch,Commerce
etdeveloppement
de l'Europeau XIXe sikle (Paris, I976), p.
exterieur
&conomique

79.

EUROPEAN

ECONOMIC

DEVELOPMENT

fellwithina similarrangeof IO per centto I5 per centof grossnational

purchasedfromthe periphery.12
product,againwithsmallerproportions
as theydevelopedduringthemercantile
withtheperiphery,
Interconnexions
era, mighton thiskind of evidencebe dismissedas beingof no great
ofWestern
Europe.
importance
forthelong-run
growth
couldbe superficial.
Butthatobviousdeduction
National(or core)output
wasa productofhistory-ofall theforceswhichoverthelongrungenerated
a stockofcapital,a trainedlabourforce,a bodyoftechnology,
and a setof
to producethatoutputyearafteryear.Whatis germaneis not
institutions
oftradebutsourcesofprogress
overthepresimplytherelative
importance
takesplaceatthemargin,
industrial
andtheproblem
period.Economicgrowth
andmeasurewaysin whichtradegenerated
additions
to output.
is tospecify
is correct
ofdevelopment
tolocatethecontribution
of
Surelythenewhistory
locatedit-withinthe
tradewhereAdamSmithand KarlMarxfirst
foreign
invested
someportion
processofcapitalformation?
Europeansundoubtedly
withAfrica,
infixedand
oftheirgainsfromcommerce
Asia,andtheAmericas
addedsomething
totheacceleration
ofdomestic
circulating
capital,andthereby
and industrialoutputobservedduringthe "run up" to the
agricultural
was capitalformation
revolution.
forthe
industrial
But, how important
fromtradewiththe
economicgrowthof WesternEurope,and did profits
ofthefundsutilizedto finance
the
periphery
supplya significant
percentage
foreconomicgrowth
afterI750?
investment
required
correct
and commodity
trade
If Bairoch'sdatafori8oo are evenroughly
accountedfornotmorethan4 percentof the
betweencoreand periphery
(say50 per
aggregate
GNP forWestern
Europe,andifa veryhighproportion
accruedas profits
to
plusimports)
cent)ofthevalueofthatturnover
(exports
thenthe
and iftheyreinvested
corecapitalists,
50 percentoftheirprofits;
forthecontribution
ofthesetradesamountsto onlyI
outerboundestimate
percentofGNP. AndthatcouldperhapsequalnotmorethanIO percentof
Thesecalculations
fortheearlynineteenth
would
century
grossinvestment.
ratiosofprofits,
andinvestment
theupperlimitsofprobable
savings,
represent
era.
foranydecadeofthemercantile
withtheperiphery
thatcommerce
was significant
forthe
The assumption
be rendered
moreplausibleifitcouldbe
formation
ofcapitalatthecoremight
atsometurning
shownthatitwasimportant
pointoverthelongspanofhistory
is a cumulative
fromI450 to I750. Economicgrowth
process.Perhapsitcould
occurred
in responseto tradewith
be arguedthatsomecriticalleap forward
coreeconomiescontinuedto buildupon this
theperiphery
and thereafter
13 Here
industrial
andgradually
modern
initialstimulus
systems.
theyformed
does surfacein thenew
andtheretheBraudelianconceptof "conjuncture"
is neversustained
buttheargument
to
beyondtheadjectives
deployed
history
orvital.
historical
define
particular
sequencesas critical
ofprofits
A moredetailedlookat Britishdata,and myestimates
derived
12

offoreign
tradeto economic
growth
has beenanalyzedbyP. Bairoch,
ForBritain
therelationship

de la revolutionindustrielle
anglaise',Annales,ESC (mars-avrilI973), pp. 54I-7I
'Commerceinternational

settledby F. Crouzet,'Towardsan ExportEconomy:British

ExportsduringtheIndustrial
andfinally
in Entrepreneurial
History,I7 (i980), pp. 48-93.
Revolution',Explorations
13

'Industrial
in Englandand France',Economic
History
Revolution
byN. Crafts,
An ideadeveloped

Review,2nd ser. xxx (I977), pp. 429-4I.

PATRICK

O BRIEN

Table I. EstimatedFlows ofProfitstoBritishCapitalistsEngagedin Tradeand

Commerce
withthePeriphery
i.

Importsfromtheperiphery(c.i.f.)*

totheperiphery
Exports
(f.o.b.)t
ofproducefrom
3. Re-exports
theperiphery
(f.o.b.)t
4. Profits
from
imports
accruing
to:
firms
(a) Shipping
andCommission
(b) Brokers
Agencies||
(c) Insurance
Companies?
fromexports
to shipping
accruing
brokers
firms,
andcommission
5. Profits
2.

agencies,and insurancecompanies.+

6. Profits
from
totheabovegroups..
re-exports
accruing
7. Profits
toBritain
oninvestments
attheperiphery.*
remitted
8. Profits
from
thesaleofservices
totheperiphery.0
9. Profits
madeorgrownforexport
from
commodities
totheperiphery.o

I784-86

i824-26

I0.50

26.80
I5.90
9.60

?m.

6.oo
3.60

?m.

o.84
0.54
o.i6

I .39
0-35

0.90

2.4I

0.48

3.00

0.54
I .00
I.20

2.14

I.44

2.04

3.i8

io. Total flowsof profits(4+5+6+7+8+9)

5.66

I5.95

(annual averagesI78i-90, I82I-30)F

I0.30

34-30

iI.

Grossinvestments
at homeandabroadbyBritish
expenditures
investors

* Imports
(c.i.f.)in current
pricesfromtheNearEast,Africa,
Asia,theSouthern
StatesoftheU.S.A.
on a population
(estimated
basis),WestIndies,and LatinAmerica.Source:R. Davis, TheIndustrial

Revolutionand BritishOverseasTrade(Leicester,I979) table40.

listedabove.Source:Davis,Industrial
t Exports
(f.o.b.)incurrent
pricestotheregions
table
Revolution,
38. For I784-86I assumed6o percentofBritish
toSpainwerere-exported
exports
toSpanishcolonies.
: Re-exports
emanatedoriginally
fromthe
(f.o.b.) in currentprices.I assumedall re-exports
periphery-an
overestimate.
Source:Davis,Industrial
Revolution,
table39.
? 20 percentofthegrossrevenue
from
wasestimated
imports
as therevenue
ofshipping
firms.
Ofthis
40 percentwasassumedtobe profits.
The 20 percentfigure
is fromDavis,p. 82. The40 percentprofit
rateis from
R. P. Thomas,'The SugarColoniesoftheoldEmpire:Profit
orLossforGreatBritain?'
Econ.
Hist.Rev.2ndser.XXI (i968), p. 39. Davisputprofits
at26 percent.
wasestimated
revenue
as i8 percentofthef.o.b.valuesofimports.
aggregate
On
I Factorsandbrokers
thisrevenue
I calculated
at36 percent.Bothratiosarefrom
profits
Thomas,'The SugarColonies',p. 40.
? Grossinsurance
at 6 percentofgrossrevenue
revenuecalculated
to shipping
firms
accruing
plusa
fortheinsurance
ofships.Theirprofits
markup
wereestimated
at40 percentongrossrevenue.
Theratios
werederived
fromdatainThomas,The 'SugarColonies',pp. 39-40.
* I assumedtheprofits
on exports
cametoa comparable
totheprofits
percentage
received
byshipping
firms,
brokers,
commission
agentsandinsurance
forhandling
companies
imports-about
I5 percentof
turnover.
* Calculatedas flowsof profits
on thechargesmadeby shippers,
brokers,
commission
agentsand
ofcommodities
insurance
firms
forthere-export
valuedat?3.6m.and?9.6m.f.o.b.Britain.
I assumed
the
withimports
rateonthisturnover
andusedI5 percent.
profit
compared
* The calculations
forI784-86werebasedon thefollowing
assumptions:
overseas
investment
werelocatedintheperiphery;
(a) that8o percentofBritish
wasIO percent;
(b) thattherateofreturn
wereremitted
toBritain.
(c) that6o percentofthegrossprofits
Thevalueofoverseas
to
assets,according
wasabout?io million
Feinstein's
forI8oo. Feinstein,
estimates,
tableI5.
'CapitalFormation',
The estimatefor i824-26 is based on A. H. Imlah, EconomicElementsin thePax Britannica:Studiesin
BritishForeignTradein thei9th century
(Cambridge,I958), pp. 68-9. I assumed75 per centof thisflow

attheperiphery.
emanated
fromtheinvestments
salesof services
to theperiphery
by assuming
wereproportionate
to trade
(invisibles)
0 I calculated
In i824/26
withtheperiphery.
(exports
tradewaswiththeperiphery.
plusimports)
42 percentofBritish
I assumedthat50 percentoftheflowofinvisible
camefromsalesofservices
to theperiphery.
earnings
Accordingto Imlah,EconomicElements,
pp. 68-9,invisibleearningsfori824-26cameto ?I5 million.If half

intheperiphery
and40 percentofthatgrossrevenue
wasprofits
originated
thenataninformed
guessthis
flowofprofits
couldbe around?3 million.The "guess"forI784-86wasderivedbybackward
particular
extrapolation.
o I followed
Thomas,'The SugarColonies',
p. 4I andassumed
20 percentofvalueofexports
soldtothe
wereprofits.
periphery
tables7 andi6.
> Feinstein,
'CapitalFormation',

EUROPEAN

ECONOMIC

DEVELOPMENT

willreinforce
theargument
fromtradewiththeperiphery,
developedforcore
as a whole.Britain
notonlypassedthrough
economies
anIndustrial
Revolution
beforetherestofWesternEurope;it tradedwiththeperiphery
on a larger
Andcapitalformation
scalethananyothercorecountry.
playedan important
rolein thegrowth
oftheBritisheconomy
fromI760-i850. Thatroleshould
notbe exaggerated
to thepointwhereitis defined
as "themotorofeconomic
In modernindustries
development".
(such as textiles,metallurgy,
energy
emanated
morefromtechnical
supplies,andtransport)
growth
progress
and
thanfromcapitalformation.
organizational
efficiency
Takingthelongperiod
ofindustrialization
fromI760-I86o, recentexercises
in growth
accountancy
in Britain'sdomestic
suggestthataround35 percentofthegrowth
product
oftheworkforceandadditions
couldnotbe explainedbytheenlargement
to
inEuropethatproportion
thestockofreproducible
capital.14 Elsewhere
could
(ata guess)be as highas 50 percent.
Butthemainissueis nottheroleofcapitalbuttodetermine
whatcommerce
towards
ofitsaccumulation.
Putin
withtheperiphery
contributed
thefinance
financial
thatformtheproblemcannotbe solveduntilhistorians
construct

flowtableswhichrevealthe sourcesof fundsactuallyused to pay forthe net

and grossinvestment
whichoccurredin Britainfora century
expenditures
afterI760. Sincethatis notevena remote
possibility,
theestimation
ofprofits
is simplyan exerciseto revealpotential
gainedfromtradewiththeperiphery
ordersofmagnitude
andtheirrealsignificance
willremainconjectural.
Let us now speculateon thebasisof thesecrudenumbers.The overall
ratefortheBritish
savings
economy
amounted
tobetweenI2 percentand I4
percentfortheperiodI78i-I86o and scattered
evidencenowavailableon
reinvestment,
fromproperty
incomes,suggests
thatratesof20 percentto 30
ofthatperiod.Assuming
percentcouldbe on thehighsideforthecapitalists
thatinvestors
businesswereexceptionally
engagedinthistypeofinternational
it wouldthenfollow
frugal
men,and reinvested
30 percentoftheirprofits,
thatcommerce
or
withthe periphery
a flowof fundssufficient,
generated
finance
aboutI5 percentofgrossinvestment
potentially
available,to
expenditures
undertaken
Revolution.
duringtheIndustrial
II
on a farlarger
SinceBritaintradedwithand investedin othercontinents
scale thanany otherEuropeancountry(withthe possibleexceptionof
of world
Holland),it appearsthatthe conclusionsofferedby historians
andaccumulation
economic
on a worldscaleexaggerate
theimpactof
systems
in WesternEuropein theearly
inter-continental
tradeon capitalformation
Their
stagesof industrialization.
misplacedemphasishas arisenbasically
becausetheyfailedto considertheplaceoftradein relation
to thetotality
of
economic
andalsobecausetheyremainconvinced
with
thatcommerce
activity
theperiphery
(basedupon"exploitation",
"unequalexchange",
and"pillage")
musthavebeena uniquelyprofitable
fieldofenterprise.
To support
thisview
vividdescriptions
thenewschoolhas marshalled
oftropicaltrades,selective
14 C. H. Feinstein,
inGreatBritain',
'CapitalFormation
inP. MathiasandM. M. Postan,eds.Cambridge

EconomicHistory
ofEurope,VII, pt. I (Cambridge,
I978), pp. 82-7.

PATRICK

0 BRIEN

andseveralgraphic
quotations
fromAdamSmith,KarlMarx,
dataonprofits,
trio,itis fair
ofthatformidable
andMaynardKeynes.Despitetheauthority
have not been supportedby the evidence
to observethattheirassertions
whichEuropeancapitalists
todemonstrate
thataverageratesofprofit
required
and tradewithAfrica,Asia,and tropicalAmerica
derivedfrominvestment
abovetheratesofreturnwhichtheycouldhaveearnedon
rosepersistently
at homeorindeedelsewhere
in theworldeconomy.
feasible
investments,
collatedtogether
by
Whatstandsout fromthemeagrerangeof statistics
is theconsiderable
degreeofvariance
Dutch,French,and Englishhistorians
andfrom
oneyeartoanother.
Tropicaltradesappear
from
onetradetoanother
to have been riskyand the lucrativerewardsreapedin the favourable
into losses on
circumstances
of one voyagecould easilybe transformed
to
returns
come
with
ratesof
average
measure
up
another.15
Recentattempts
or
below
the
Io
cent
Furthermore,
run
around
mark.16
per
overthelong
profit
tobacco,andteaon
thelong-run
declineinthepricesofsugar,pepper,coffee,
and
overthesecond
markets
of
London,
Paris
Amsterdam,
thecommodity
does
not
were
that
abnormal
profits
suggest
century
halfoftheseventeenth
have
the
during
long
in
these
trades.
Whatever
happened
may
sustained
increased
of
carried
into
the
volume
tropical
imports
century, vastly
sixteenth
forced
down
of
their
after
to
fractions
original
prices
i650
Europeanports
oftherich.Elastic
weretheluxuries
levelswhensugarandtropicalproducts
of the kind
commodities
and competition
suppliesof fairlyhomogeneous
French
merchants
is not
between
and
conducted
English,Dutch,
Portuguese,
profits.
withthepersistence
ofsupernormal
normally
congruent
ofmonopoly
conditions
thestandard
forthemaintenance
On thecontrary,
in a diluted
trade
to
have
been
in
international
present
only
appear
profits
oftradesoperating
between
Europeandothercontinents
formforthemajority
era. To surveytheeconomicorganization
ofcommerce
overthemercantile
conductedby EuropeannationswithAfrica,Asia, and tropicalAmericais
and
commerce
withitsAtlantic
beyondthescopeofthispaper.ButifBritish
for
the
of
Caribbeancoloniesis a significant
hypothesis monopoly
example
of theNavigationActsand the
thenrecentresearchon theeffects
profits
17
ittobe unfounded.
oftheWestIndiesdemonstrates
profitability
on theslavetrade,
haveemerged
fromrecentresearch
Similarconclusions
to a wellpublicizedstatement
fromwhich,according
byDr. Eric
theprofits
ofcapital
ofthataccumulation
Williams,"providedone ofthemainstreams
A priori,ratesof
Revolution".18
in Englandwhichfinancedthe Industrial
15 J.de Vries,Economy
ofEuropeinAgeofCrisis,i6oo-I750

I976),ch.4.
(Cambridge,
I760-i8i0 (I975), pp. 47-57.The whole
Slave TradeandBritish
Abolition,
R. Anstey,
TheAtlantic
in a specialissueofRevueFrancaised'histoire
fromtheslavetradehas beenreviewed
issueof profits
in H. A. Gemery
recently
in severalpaperspublished
LXII (I975), nos.226-7, anddiscussed
d'outre-mer,
Market
(NewYork,I979).Seealso:J.R. Ward,'TheProfitability
eds.TheUncommon
andJ.S. Hogendorn,
in theBritish
WestIndies',Econ.Hist.Rev. 2ndser.XXXI (I978), pp. 208-9 andK.
ofSugarPlanting
I958),pp. 244-65.
Dutch-Asiatic
Trade,i620-I740 (Copenhagen,
Glamann,
infourshort
17 The controversy
Actswasfeatured
(andgains)oftheNavigation
relatedtotheburdens
byG. Walton,'The New
in theEcon.Hist.Rev. 2ndser.xxvi(i973), pp. 668-9i,andsurveyed
articles
16

EconomicHistoryand theBurdensof theNavigationActs', Econ. Hist. Rev. 2nd ser. (I971), pp. 533-42.

intheWestIndies,I768-I772',Expl.
ofImperialism:
British
Experience
P. R. Coelho,'The Profitability

Entrep.Hist. x (I973), pp. 253-80.

in theEighteenth
A
Century:
18 S. L. Engerman,
'The SlaveTradeand BritishCapitalFormation
Review(I972), pp. 430-2.
History
Thesis',Business
ontheWilliams
Comment

EUROPEAN

ECONOMIC

DEVELOPMENT

profit
obtainedfromtheexploitation
ofunfree
labourandthesaleofluxury
producefromtropicalAmericashouldhave been extremely
high.Indeed
"superexploitative"
profitswere made in the sixteenth
centuryby early
to thebusiness,particularly
entrants
thePortuguese.
Butbythesecondhalf
oftheseventeenth
century
(whentheoutputof sugar,tobacco,coffee,and
othertropicalproducerosedramatically
and theplantations
switched
from
indentured
toslavelabour)theslavetradeappearstohavebecomecompetitive
19
ateverystageofitsinhumane
chainofoperations.
likeIa-I I millionAfricans
wereforcibly
totheNew
Something
transported
in I492 and theabolitionoftheslavetradein
Worldbetweenitsdiscovery
i807. Two groupsreapedmostofthelong-term
gainsfromthiscrueltrade;
African
andArabtradersand Europeanconsumers
oftropicalproduce.For
Africatheslavetradeengendered
and heavysociallosses-a
privateprofits
of underdevelopment".20
horrifying
exampleof "the development
And if
hadbeencompelled
topaya "'free
market
Europeans
price"fortheirtropical
imports
(thatis to saya pricewhichreflected
therealcostofattracting
and
maintaining
"free"labourintheNewWorld)thenthepricesofsugar,tobacco,
andotherproducewouldhavebeenfarhigher.
spices,cotton,
indigo,coffee,
The termsoftradewouldhaveswungmassively
againstthemand theirreal
incomeswouldhavediminished.21
By howmuchremainsto be calculated.
Butwithsmallratiosofplantation
tonational
incomeanda relatively
imports
elasticdemandfortropical
produce,thefallinrealincome(whichwouldhave
a hypothetical
followed
from
British
edictabolishing
theslavetrade,letus say
in i607, ratherthantwo centuries
later)could not havemade thatmuch
tothelevelsofwealthandincomeachievedin Western
difference
Europeby
loss wouldcertainly
i807. Thoughtheconsumption
exceedtheproduction
loss.
III
tradeandgrowth
between
arenotexhausted
Connexions
bya consideration
of trade'simpacton the accumulation
of capital.And thenew historyof
isalsoproperly
concerned
withthegainsWestern
development
Europederived
ofspecialization
fromthepatterns
promoted
bytradewithothercontinents.
As Wallerstein
observed,"the inclusionof EasternEuropeand Hispanic
AmericaintoEuropeanworldeconomyin the sixteenth
not only
century
butalso liberated
provided
capital(through
bootyand highprofit
margins)
inothertasks.Theoccupational
somelabourinthecoreareasforspecialization
rangeoftasksin thecoreareaswas a verycomplexone. It includeda large
remnant
parallelto thosein theperiphery
(forexample,grainproduction).
But thetrendin thecorewas towardsvarietyand specialization
whilethe
19P. E. LovejoyandJ. S. Hogendorn,
'SlaveMarketing
in Africa'andD. Richardson,
'WestAfrican
and TheirInfluence
on the i8thcentury
Consumption
Patterns
EnglishSlaveTrade'in Gemery
and
Hogendorn,
TheUncommon
Market.
Bibliography
on theslavetradeis extensive.
To thereferences
listed
infootnote
7 shouldbe addedH. Klein,TheMiddlePassage(Princeton,
I978)andS. L. Engerman
andE.
D. Genovese,
intheWestern
eds.RaceandSlavery
Hemisphere
(Princeton,
I975).
20 R. P. Thomas
andR. N. Bean,'The FishersofMen:The Profits
oftheSlaveTrade',TheJournal
of
Economic
History,
(I974), pp. 885-914.
XXXIV
21 S. L. Engerman,
'SomeEconomic
andDemographic
ofSlavery
intheUnitedStatesand
Comparisons
theBritish
WestIndies'.Econ.Hist.Rev.2ndser.XXIX
(I976),pp. 26I-4.

PATRICK

IO

O'BRIEN

was towardsmonoculture"
trendin theperiphery
.22 But as tradewiththe
a smallshareoftotaltradeand a tinypercentage
periphery
formed
ofgross
product,unlessthattradegenerated
important
externalities,
its impact(on
specialization,
innovation,
institutional
change,and otherfactors
promoting
growthas thecore) wouldhavebeenin proportion
to itsrelationship
to total
economic
But a closerexamination
activity.
oftheimports
fromAsiaand the
Americasmightbringout particular
commodities
whichcreatednew and
forproduction.
significant
possibilities
Although
tablesofexports
andimports
brokendownintostandard
groupscannotbe drawnup, Mauro'sflowchart
revealsthatthepressures
towardsspecialization
derivedfromsuchimports
wouldhavebeenratherlimited.23
It is difficult
to see howthepurchaseof
spices,sugar,tea,coffee,
rice,tropical
hardwoods,
fruit,
dyestuffs,
gold,and
silverled to largegainsfromthereallocation
oflabourand otherresources
whichincreased
forproduction
incoreeconomies.
Tradebetween
possibilities
allowedEuropeans
thecontinents
simply
toescapefrom
a fixedendowment
of
naturalresources
and to consumea mixofexoticcommodities
whichcould
notbe grownor minedin WesternEurope.These cropsdid notcompete
withdomesticagriculture,
directly
exceptin so faras teaandcoffeereduced
demandforbeerand otherbeveragesmadefromgrain.Gainsfromtrade
consisted
basicallyofa preferred
ofconsumption-not
pattern
formassesof
Europeanswho livedduringthemercantile
era, but forthosegroupswho
could affordto buy tropicalproduce.Demandforsugar,tea, and coffee
provedto be both income-and price-elastic,
and consumption
of such
"luxuries"spreadslowlydown the social scale. But long-run
gainsfrom
thedivisionof labour,and theforcesof competition-all
specialization,
of
whichflowfrominternational
inexchanges
trade-originated
overwhelmingly
betweenand withinEuropeancountries
and farless fromtradewithother
continents.
Some"dynamic"
benefits
emanated
fromexports
totheperiphery.
certainly
For example,fromthebeginning
Europeansexchanged
manufactured
goods
forprimary
trade
produceandpreciousmetals.Theirgovernments
regulated
to promotethis tendencyby restricting
in theirimperial
manufacturing
possessions.
Europeansalso specializedin thesaleofshipping,
banking,and
insurance
services
toothercontinents
becausetheypioneered
technical
(partly
in thesespheresof business)but basicallyto obtainmeans
breakthroughs
(otherthangold and silver)to pay forthepersistently
adversebalanceof
tradewithIndiaandChina.The efficiency
commodity
ofChineseandIndian
nationstowardsspecialization
in commercial
industry
pushedthemaritime
services.24
Europeanshipscapturedan increasing
shareof thewaterborne
tradeon theIndianoceanand theChinaseasfromthefleetsofthe
carrying
a sizeableshareofEuropeanimports
Orient,andbytheseventeenth
century
fromAsiamayhavebeenfinanced
fromthesaleoftransport
andmercantile
services.Such patternsof specialization
stimulated
And the
shipbuilding.
ofbanks,insurance,
andshipping
development
to serviceoceanic
companies
22 Wallerstein,
TheModern
World
System,
p. I02,
23

andCapitalist
World
p. 38.
Economy,
F. Mauro,'Towardsan Intercontinental
ModelofEuropeanOverseasExpansion',
Econ.Hist.Rev.

2nd ser. xiv (i96i), pp. I-I7.

24

K. N. Chaudhuri,
TheTrading
World
EastIndiaCompany
ofAsiaandtheEnglish
(Cambridge,
I978),

pp. I53-60, 237-9.

EUROPEAN

ECONOMIC

DEVELOPMENT

II

which
and institutional
development
tradeare all partof the commercial
and urbandevelopment.
The direction
ofsucheffects
is
promoted
industry
thefeedbacks
toindustry
andshipbuilding
as well
notindoubt.Nevertheless,
arenotunderstated
tocommercial
bythe
development
as theobviousspinoffs
soldtoandimports
fromothercontinents.
purchased
smallratiosofexports
thecontribution
toEuropeanindustrialization
toconsider
It is alsorelevant
and industrial
of the importof "essential"raw materials,foodstuffs,
on long-run
supplyor
commodities-which
mighthavereducedconstraints
effects
whichled to theexpansionof production.
exerciseddemonstration
Long beforethe discoveryof the Americas,Europeanshad successfully
and silkwormsinto
cotton,citrusfruits,
rice,sugar,sorghum,
transplanted
France.FromtheAmericas
camea wholerangeof
Italy,Iberia,andSouthern
beans,tobacco,cocoa,
new cropsincludingmaize,potatoes,groundnuts,
to the
redpeppers,and chillies,whichaddedvariety
tomatoes,
pineapples,
intoEuropeanagriculture
contributed
Buttheirintroduction
Europeandiet.25
to the suppliesof caloriesavailablebeforeand duringthe
onlymarginally
Industrial
Revolution.
grewin botanical
Pineapples,cocoa,and groundnuts
and tobaccoand tomatoes
spreadslowly.Onlymaizeand potatoes
gardens,
to supportpopulationgrowth.Maize
raisedthe capacityof agriculture
did increasegrainsuppliesfromSouthernEuropebut its real
eventually
themid-nineteenth
Andalthough
thepotatohelped
cameafter
century.
impact
in Ireland,andto feedtheworking
peopleof
tostimulate
growth
population
the new vegetablewas nevera critical
England,Belgium,and Germany,
infoodsuppliesintheeighteenth
orindeedformostofthenineteenth
element
century.
thefinaltransformation
oftea,coffee
tobaccoprocessing,
Sugarrefining,
ofcotton
andcocoaintodrinkable
and,aboveall,themanufacture
beverages
tradewith
inWestern
Europethrough
beganandprospered
textiles
certainly
muslins,
The Englishcottonindustry
developedbyimitating
theperiphery.
Itfollowed
bytheEastIndiaCompany.
imported
nankeens,
andother"stuffs"
theclassicpattern
ofimportsubstitution
whereforeign
(in thiscase Indian
themarket,
and domesticsubandChinese)manufactured
goodspioneered
ofcourse,byprotection.
stitutes
Such
replacedimports-assisted,
gradually
withtheemployment
and profits
would
theygenerated,
industries,
together
without
an assuredsupplyofrawmaterials
fromAsia
havebeeninconceivable
the advantages
in the
and the Americas.Nevertheless
of othercontinents
cultivation
oftobaccoandsugarwerenotabsolute.Bothcropscouldbe grown
in Southern
in FranceandBritainhad been
Europe,and tobaccocultivation
ofthecolonies.BytheI830s sugarbeethadappeared
restricted
intheinterests
as a viablesubstitute
in FranceandGermany
forcanesugar.
theimportance
of industries
The cruxof thematteris reallyto quantify
rawmaterials.
forBritaincan
whichdependeduponimported
Herestatistics
estimates
forWesternEuropeas a whole.By
againserveas outer-bound
textilesacRevolution-cotton
i84i-a
yearwellintothe FirstIndustrial
countedforabout7 percentofgrossnationalproduct,and food-processing
added a
utilizingraw materialsimportedfromthe periphery,
industries,
25

Thetopicis surveyed
byG. B. Masefield,
'CropsandLivestock'
inE. E. RichandC. H. Wilson,eds.

The Cambridge
EconomicHistoryofEurope,Iv (Cambridge,i967),

pp.

276-99.

I2

PATRICK

0 BRIEN

I per cent.26SinceBritainindustrialized
beforetherestof Europe
further
Europehadbeenforcedtomanage
thereis no reasontoclaimthatifWestern
itsindustrial
output
without
imported
sugar,coffee,
tea,tobacco,andcotton,
A declineofnotmorethan3 or4 per
couldhavefallenbya largepercentage.
centin theindustrial
outputofthecorewouldseemto be thelikelyshort-run
ofimports.
Overtimethatimpactcouldbe mitigated
effect
froma totalcut-off
ofsubstitution
fortropical
foodstuffs
andrawmaterials
andbythe
bypatterns
oflabourand otherfactors
ofproduction
fromcottontextiles,
redeployment
and sugarrefining
tobaccoprocessing,
intoothertypesofmanubeverages,
Whilecottonwascertainly
amongthefirst
industries
to be
facturing
activity.
and thefactory
transformed
modeoforganization,
onlya
by mechanization
simplistic
growthmodelwithcottonas a leadingsectorand withBritish
as the engineof WesternEuropeangrowthcould supportan
innovation
cotton
thattheLancashire
wasvitalfortheindustrialization
industry
argument
to be checkedby
ofthecore.27Thatprocessproceededon toobroada front
acrossthe
thedefeatof an advancedcolumnwhosesupplylinesstretched
oceanstoAsiaandtheAmericas.

IV
hasbeensingledoutbythenewhistory
ofdevelopment
American
treasure
of thesepreciousmetals",claims
forspecialemphasis."The production
functional
contribution
oftheNewWorld
GunderFrank,"wastheprincipal
oftradein theworld,theaccumulation
ofcapitalin
regionsto theexpansion
and the development
of capitalism".28
the Europeanmetropolis
Bullion
theeffects
of otherimports
had an impactwhichtranscended
undoubtedly
an integral
becausesilverand goldformed
partofWesternEurope'smoney
betweenI450 and I750 whenthespreadofthe
supply.Andmoneymattered
transactions
marketand monetary
(bothwithinand betweenstates)accompaniedeconomicprogressachievedby thecore.Thus, whilethepotential
is notindoubt,theiractualimportance
hasnot
ofbullionimports
significance
elucidate
mechanisms
andthenewhistorians
beenestimated,
simply
through
As theydescribe
silverandgoldassistedeconomic
whichimported
growth.
it,
bullionfromtheAmericas:
constraint
on exchangeand
(a) relievedan actualor potentialmonetary
production;
tradebetweenWesternEurope
theexpansionofinternational
(b) facilitated
on theonehandandAsiaandtheBalticon theother;
(c) exercisedan upwardpressureon pricelevelsin coreeconomieswhich
workers
incomebetween
andcapitalists
andencouraged
trade
redistributed
ratesofinflation
within
andbetween
countries.
torespondtodifferential
ofbullionimports
claimsmadefortheall-pervasive
effects
To substantiate
ofrelevant
connexions
and a
a moreexplicitspecification
requires,
however,
26

P. Deane and W. A. Cole, BritishEconomicGrowth,i688-i959 (Cambridge,i962),

pp.

i67 and i87

data.
fortherelevant
27 Formycritique
ofEuropean
model,seeP. K.
basedonthediffusion
ofexplanations
industrialization
Growth
inBritain
andFrance,I780-i9I4 (I978), chs.I and7.
Economic
O'BrienandC. Keyder,
28 Frank,
World
Accumulation,
p. 44.

EUROPEAN

ECONOMIC

DEVELOPMENT

I3

togaugetheimportance
ofmoneyin thegrowth
greater
attempt
processthan
ofdevelopment.
foundinthenewhistory
To beginwiththeobvious
anything
ofsomei8i tonsofgoldand i6,oootons
question:howmuchdidtheimport
ofsilverbetweenI500 and i66o add tomonetary
stocksin Western
Europe?
Data formoneysuppliesdo notexist,but Braudeland Spoonerrejectthe
notionthat"theAmerican
minespouredtheirpreciousmetalsintoa deprived
a suddenchange"because"theaccumulated
Europeandsoprecipitated
stocks
intheOldWorldsinceearlytimesrepresented
a considerable
mass".
monetary
Theydoubt"iftheinflowof preciousmetalsfromtheNew Worlddid not
evenreachonehalf-on themostoptimistic
theold stockof
hypothesis-of
Europeanmoney. ."29 On theirownestimate,
as lateas i650 theinflow
hadaddednotmorethan25 percenttotheexisting
stockofsilverandgoldin
Europe.
offivebetweenI460
Europe'sownminesexpandedproduction
bya factor
relievedthe"silverfamine"
ofthelatefifteenth
and I530 andhadeffectively
ofAmerican
beforeanyrealquantity
treasure
arrived
in Spain.30In
century
addition,
paperorfictive
money"invaded"theeconomic
lifeofEuropeduring
a smallbutgrowing
themercantile
era,butit remained
partoftotalcirculation.31
corecountries
notreadyforpapermoney,
Although
were,apparently,
theirrulersutilizeddebasement
frequently
enoughtoobtainthemeanstopay
fortheirmilitary
and otherexpenditures.
Provideddebasedcurrency
exat pricesabovethe intrinsic
valueof the specie
changedforcommodities
inthecoins,thisdeviceaddedtothesupplyofcashfortransactions
contained
withinnationalterritories.
By the secondhalfof the sixteenth
century
ofdebasedcoinscloserto facevalueimproved,
forthecirculation
prospects
whenGovernment's
thatroyalcoinswouldbe acceptedat parin
stipulated
paymentfortaxes. As the royaltax base spreadinto the economythis
thelinkbetween
weakened
proclamation
specieandmoney.Coinsoftherealm
wereon thewayto becominglegaltender.32
within
Finally,thediffusion
andthedevelopment
offinancial
intermediaries
Europeofcreditinstruments
increasedthe velocityof circulation-alas,by someunknownpercentage.
"Whether
as coin or as billsof exchangemoneycascadedfrompersonto
tomoneymarket."33
personandfrommoneymarket
moremoneyforincreased
of
Western
Europedemanded
trade,thedivision
theshiftfrombartertransactions,
labour,population
growth,
urbanization,
ofpublicexpenditure.
and thegrowth
Butimported
speciewas onlyone of
severalmeansutilizedwithintheregionto cope witha potential
monetary
restraint
on internal
tradeand production.
Europe'sownsilverand copper
someofthemoney.Merchants
andfinanciers
provided
pushedup thevelocity
of circulation,
and by debasement
Europeanrulersreducedtheweightof
that
specierequiredforeachcoinofaccount.Therecan be no presumption
thesilverandgoldoftheAmericas
carried
mostofthemonetary
loadrequired
29 F. Braudel
'PricesinEuropefromI450to I750',inRichandWilson,eds.Cambridge
andF. Spooner,
Economic
History,
p. 446.
30 H. Miskimin,
TheEconomy
ofLaterRenaissance
Europe,1460-o600 (Cambridge,
I977), p. 32 and
J.Day,'TheGreatBullionFamineofthei sthCentury',
PastandPresent,
79 (I978),pp. 46-9.
31 Braudel
andSpooner,
'PricesinEurope',p. 386.
32 Miskimin,
TheEconomy,
pp. i56-62.
33 Braudel
'PricesinEurope',p. 448.
andSpooner,

I4

PATRICK

0 BRIEN

foreconomicexpansionafterI500 or thatEuropeanswouldhavefoundit
and costlyto developeitherpapersubstitutes
difficult
excessively
or a fiat
coinageifsilverfromMexicoandPeruandgoldfrom
NewGranadaandBrazil
hadremained
underground.
Moneywasa lubricant
nota sourceofpower-oil
butnotpetroleum.
For international
exchanges
speciecontinued
to be necessary,
particularly
forthe settlement
of adversebalanceswiththe Far East and the Baltic.
Western
Europe'sadversebalanceoftradewiththeEast was occasionedby
therelatively
low pricesof Indianand Chinesemanufactures.
Trade could
onlybe sustained
bythefamous
"drain"ofbullionfrom
Europe.34Apparently
thedeficitdiminished
overtimeas theEuropeanssold services,especially
shipping,
to theAsiansand as therelativecostsof goodsmadein thetwo
narrowed.
Butthepreciseimportance
continents
ofthistradehasalready
been
compared
to totaltradeandeconomicactivity
ofthecore,andwastinyeven
formaritimecountries.Wallerstein
recognized"whatAsia providedfor
Europeat thistimewas luxuries.Now luxuriesarenotto be sneezedat but
theytakesecondplacetofood. . . alsotobullion".35
True,andhemight
have
continuedwiththe observation
thatbulliondrainedfromone partof the
toanother
periphery
(America)
(Asia)inordertoproviderichEuropeans
with
luxuries.
Commerce
ofWesternEuropeandtheBaltic(Russia,
betweeneconomies
Poland,Prussia,Estonia,andScandinavia)
exceededtradewiththeEastbya
fromthisregion(grain,timber,
largemargin.Andimports
and otherintermediate
were"strategic"
forthelong-run
goodsforshipbuilding)
development
ofthecore.Notoneofthese"strategic"
commodities
formed
a largepercentage
of totalsupplyconsumedin WesternEurope. For example,Wallerstein
notmorethanI percentto 2 percent
guessedthatimported
grainprovided
oftotalconsumption
butpointedoutthatthisgraincouldhavebeencritical
forcertaincitieslikeLisbonandforDutchtowns.36
ofa core-periphery
andinthecontext
Furthermore,
framework,
therelevant
of theBaltic,but howfarAmerican
issueis nottheeconomicimportance
coreeconomies
torunan import
treasure
permitted
surpluswiththatregion.
of
fromthe
Roughly40 per cent therecordedvalueofcommodity
imports
Balticwerenotcoveredby commodity
was
exports,and partofthatdeficit
from
thesaleofDutchandEnglishshipping
financed
andmercantile
services.37
At a guess,perhapsa thirdof Balticimportswerepaid forin specie.But
therelatively
without
cheapsuppliesofbullionfromtheAmericas
European
andentrepreneurs
wouldperhapshavefoundothercommodities
merchants
to
exchangeforPolishgrain,Russianhemp,and Swedishtimber.Demandin
theBalticregionwas surelynotunresponsive
to a lowering
ofexportprices?
Somedegreeof shiftin thetermsof trademighthavesustaineda constant
recourse
totheexportofbullion.Suchpossibilities
leveloftradewithout
for
toadoptan agnostic
towardinflated
substitution
mayleadhistorians
position
in tradewiththeBaltic.
treasure
claimsfortheroleofAmerican
34 Chaudhuri,
World
ofAsia,pp. I53-80 and456.
TheTrading
35 Wallerstein, ModernWorldSystem,
p. 33.
36 Wallerstein,
p. 77.
System,
Modern
World
37 A. Attman,
inInternational
Trade:i5oo-I65o
RussianandPolishGrainMarkets

I72-3.

(Goteborg,
I973), pp.

EUROPEAN

ECONOMIC

DEVELOPMENT

I5

wouldbe preparedto denya correlation

betweenthe
Veryfewhistorians
in thegenerallevelof pricesthroughout
importof specieand movements
ofthisissuehasreallycentred
discussion
EuropefromI450 to I750. Extensive
to monetary
or realfactors,
bothin
to be attributed
aroundtheimportance
theinflation
the
andthenin sustaining
ofthelongsixteenth
century,
initiating
oftheseventeenth
andtheupswingin pricesfromI734 to
century,
deflation
dates).Thereis no needto go overthatdebate
i8I7 (to use Wallerstein's
untiltheproblemcan be specified
in ways
whichwillremaininconclusive
whichwill make the connexionbetweenbullionand pricesamenableto
ofdevelopment
Thenewhistory
hasnotaddedanything.
econometric
analysis.
a "partialgeneration"
of
Frankglossesoverthemajordifficulty
bypositing
AndWallerstein
evadestheissueby
inflation
goldand silver.38
byAmerican
arguing"it was notbullionalonebut bullionin thecontextof a capitalist
it"wasnotso muchthat
thatwascrucial"andin thatcontext
worldeconomy
theirfall".39
bullionraisedpricesbutthatitprevented
manner:"How specifiYetFrankposedthequestionin a straightforward
anditstransport
to Europe
outofsilverin theAmericas
callydidthedigging
to amassingcapitalin Europe"?One ofhis answersis "thatthe
contribute
and indirectly
ofcapital,
inflation
led directly
to theconcentration
resulting
andin theincreasein exploitation
thedivorcefromthemeansofproduction
ofmoreandlesswellpaidlabour".40 Howthisprocessworkedis notclarified.
ofdevelopment
whatthenewhistory
offers
is a revisedversion
of
Essentially,
famousthesisthatwageslaggedbehindpricesand redistributed
Hamilton's
from
workers
tocapitalists
andlandowners,
whichfostered
investment.
income
In several
coreeconomies
overthelong
wagesdidlagbehindprices,markedly
Thatlag
and perceptibly
century.
againin theeighteenth
sixteenth
century
inprimary
thaninindustry
orurbanservices
wasmorepronounced
production
infavour
ofagriculture
termsoftradeshifted
during
becausetheintersectoral
Butneither
in
and againduringtheeighteenth
century.
thepricerevolution
thatrather
mildinflations
ofthemercantile
norinhistory
is itallcertain
theory
foreconomicgrowth.If industrial
profits
era providedoptimalconditions
thenthemorerapidriseintheprices
sourceofaccumulation
weretheprimary
toreduceinvestment.
formed
an
ofprimary
If wageearners
produceoperated
formanufactured
ofthemarket
goodstheerosionoftheir
important
segment
thatmarket.
realincomesbyhigherfoodpricesnarrowed
If (as theclassical
and farmers
consumeda highshareofthe
economist
suspected)landowners
thentheoverallrateofinvestment
could
whichaccruedfrominflation,
profits
forindustrial
advanceat
notincreaseverymuch.Surelyoptimalconditions
inwhichagriculture
delivered
a rising
volumeoffood
thecorewasa situation
totownsat stableorfalling
andrawmaterials
prices?
for
ofthisissueis reallya secondstepin theargument
Buttheresolution
can onlybe understood
who insistthatEuropeandevelopment
historians
If thatcontext
forthecomprehension
is relevant
withina globalframework.
ofseculartrendsin pricelevels,thenlogically
theyshouldanalyzeandas far
as possiblemeasuretheimpactofAmerican
specieonprices.Ifthatconnexion
38

Frank,World
Accumulation,
p. 51 .

39 Wallerstein,
ModernWorldSystem,pp. 74-6.
40

Frank,World
Accumulation,
p. 245.

i6

PATRICK

0 BRIEN

thatAmerican
was weakthenthecounterargument
specieplayeda passive
role in bothpricemovements
and long-run
and subsidiary
growthgains
validity.
V

ofdevelopment
hasemerged,
A newhistory
stimulated
bythecontemporary
NorthandSouth.Forthemostpartitfallswithin
dialoguebetween
a tradition
of historical
where"theimpactof Europeon theworldseemeda
writing
thantheimpactof theworldon Europe,and is
subjectof greaterinterest
to
concerned
whichregardsEurope's
basically
challengea historiography
ontherestoftheworldas "transforming
andultimately
influence
beneficial".41
In thecourseof thatchallengeit has, however,grosslyoverestimated
the
of
relations
with
the
for
economic
the
significance
periphery
long-run
growth
of thecore. Even if we agreethatcontactwithWesternEuropepromoted
inAsia,Africa,
andSouthern
thatdoesnotimply
underdevelopment
America,
thatthegainswhichaccruedto Europedidmuchtopushitseconomies
on to
afterI750.42
pathsof sustainedindustrialization

becausethenewhistory
hasoccurred
Exaggeration
expandsmicroevidence
intomacrogeneralizations.
SomeEuropeancapitalists
engagedin commerce
made fortunes
withthe periphery
and investedtheirprofits
in domestic
assets.43Towns,such as Lisbon,Cadiz, Seville,Venice,Genoa,Nantes,
flourished
as their
Bordeaux,Amsterdam,
Bristol,and Liverpool,certainly
in commerce
acrosstheoceans.
businessmen,
ships,andcapitalparticipated
For somecitiesat someperiodsoftimeforeign
tradecouldbe describedas
Butfortheeconomy
ofWestern
crucialfortheirprosperity.
Europe,whatdid
thiscommerce
betweencontinents
reallyadd up to overlongcyclesbetween
I450-I750?

of
My essayhas responded
by arguingthattheclaimsofthenewhistory
onthenumbers".
"founder
Somethreecenturies
after
thevoyage
development
ofdiscovery,
stillformed
a verysmallpart
Europe'stradewiththeperiphery
Even formaritime
of totaleconomicactivity.
powers,likeBritain,closely
fromthatcommerce
engagedwithAsia,Africa,and LatinAmerica,profits
less thanI5 per centof grossinvestment
betweenI750probablyfinanced
mustbe regarded
as fartoohighan indicator;
it
I850. Andthatpercentage
totheI780s and I820S. Butdecadesbeforethelateeighteenth
refers
century,
inthestruggle
forempirehadalready
victories
concentrated
a "disproportionin thehandsof British
ate" shareof Europeantradewithothercontinents
capitalists.The IndustrialRevolutionwas underway and Britain'scost
overrivalproducers
hadalreadyemerged.
Forearlierperiodsthe
advantages
volumeofintercontinental
British
shareofa diminished
trademusthavebeen
andtheNew(Cambridge,
J.H. Elliott,TheOld World
I970), p. 3.
totheviewthatexternal
economic
relations
engendered
the
Forneo-classical
andMarxist
objections
see D. C. M. Platt,'Dependency
in Nineteenth
Century
Latin
"development
of underdevelopment"
America:An Historian
Objects',LatinAmerican
Research
Review,i5 (i980), pp. II3-28 and Frank's
reviewed
inhisbook,Dependent
Accumulation.
theoretical
debateswithMarxists
43 Bairochsuggests,
fromthiscommerce
did not,in general,
flowintosectors
however,
thatprofits
'Commerce
"strategic"
forgrowth-Bairoch,
International',
pp. 547-9.
41
42

EUROPEAN

ECONOMIC

DEVELOPMENT

I7

lowerand the flowof profitsless. Even on the unrealistic

premisethat
canbe conceived
in simplistic
Europeanindustrialization
termsas originating
ofBritish
industrial
to"follower"
on the
countries
inthediffusion
technology
withtheperiphery
stillremains
a highly
commerce
restricted
mainland,
part
fortheindustrialization
of France,Belgium,Germany,
of theexplanation
andotherpartsofWestern
Switzerland,
Europe.
ofa sectororinputto theoverallgrowth
thecontribution
of
Furthermore,
measuredas thedifference
is normally
it makesat themargin.
an economy
ofcommerce
withtheperiphery
shouldbe defined
as the
Thustheimportance
earnedbythecapitalists
ofWestern
incremental
profits
Europe,comparedto
have obtainedif theyhad investedtheir
whattheymight,hypothetically,
skillsin alternative
linesoftradeand production.
fundsandentrepreneurial
of thatextracontribution,
estimates
let us imaginea counterTo generate
withno tradebetweencoreandperiphery
worldeconomy
fromI492
factual
investedin
to I789; and let us assumethatcapitaland entrepreneurship
withtheperiphery
earnedratesofreturn
whichwere
commerce
consistently
in alternative
linesofenterprise.
doubletheratesobtainable
themarginal
returns
whichaccruedto British
On thesetwoassumptions
withtheperiphery
fromcommerce
couldbe calculated
as in Table
capitalists
2:

i.
2.

Returns
toBritish
Table2. Marginal
Capitalists
from
Commerce
withthePeriphery.*
ofprofits
Actualflows

flowfromcommercewiththePeriphery(50% of row i)
Incremental
rateof30%
3. Reinvestment

ofgrossinvestment
4. Row3 as a proportion
expenditure
* Sources:SeeTable i.

I780S

i820S

2.75

7.84

5.49

o.8o
7%

I5.68
2.30

7% .

Whatthisexercisein counterfactual
is thatiftheBritish
history
suggests
economyhad been excludedfromtradewiththe periphery,
grossannual
wouldhavefallenbynotmorethan7 percent.All
investment
expenditures
biasesin thesecalculations
(whichreferto decadesafterthe onsetof the
runin favourof thehypothesis
Industrial
thatthiscommerce
Revolution)
a largeshareofthereinvestible
toreiterate
provided
surplus;andBritain,
the
on a farlargerscalethanotherEuropean
point,tradedwithothercontinents
countries.44

no evidencein theadmittedly
Thereis, moreover,
poordatanowavailable
that"average"
ratesofprofit
earnedoncapitalincommerce
withtheperiphery
Overwideareasoftropical
were"supernormal".
tradescompetition
between
themerchants
ofseveralmaritime
toholdpricesofcommodpowersoperated
tocapitalbelowmonopolistic
itiesandthereturns
levels.Andthesignificance
oftheperiphery
cannotbe inflated
muchbeyonditsshareinnational
product
ortoimports,
toexternalities
as decisiveforthegrowth
described
byreference
ofthecore.Tradeintropical
producegaverisetofargreater
opportunities
for
forproduction,
thanpossibilities
and theviewthatAmerican
consumption
foreconomic
bullionwasindispensable
inWestern
progress
Europeis almost
untenable.
certainly
44Elliott,
TheOldWorld,
a FrenchessayofI792 whicharguedthatthesocial
p. 2, quoteswithapproval
returns
on investment
in theNewWorldwouldhavebeengreater
iftheresources
hadbeeninvested
in
Europe.

i8

PATRICK

O BRIEN

A correctperspective
on international
tradeis difficult
to achieve-not
merely
becausestatistics
arescarceandshakybutbecause,unlikeothersectors
oftheeconomy,
oceanictradehas leftan abundanceofrecordswhichhave
seducedgenerations
ofhistorians
eagertoreconstruct
thefascinating
storyof
exploration,
conquest,and rivalry
amongEuropeanstatesforthespoilsof
All thatmovement
ofmen,ships,andexoticcommodities,
discovery.
which
attracted
ofprincesandbecameinseparable
theattention
from
thedeployment
ofmilitary
powerforpolitical
andeconomic
ends,makesforreadablehistory.
Yet it is important
to place theglamourof long-distance
tradeagainstthe
landscapeofeconomicdevelopment.
Braudel,whois thefounding
father
of
does justthatin hisclassicstudyoftheMediterranean
globalhistory
in the
sixteenth
century.That greatbookis also fullof trade,ships,merchants,
bankers,
andtowns,as wellas violence
andrivalry
between
states.ButBraudel
wascareful
tobeginitallwitha longacountofthegeographical
on
constraints
and proceeds"to drawup a balancesheetoftheMeditereconomicactivity

ranean . . . to determinethe relativeproportionsand relationshipsbetween

sectorsofitsactivity".
In hisconclusion,
thedifferent
Braudelagainemphasisedhow"theMediterranean
in thesixteenth
wasoverwhelmingly
century
a
worldofpeasantsandofthetenant
farmers
andlandowners;
and
harvests
crops
ofthisworldandanything
werethevitalmatters
elsewassuperstructure,
the
resultofaccumulation
andofunnatural
diversion
towards
thetowns.Peasants
andcrops,inotherwordsfoodsupplies,andthesizeofthepopulation
silently
thedestiny
oftheage."45
determined
Such factors,to whichI would add improvements
to agriculture
and
technical
in industry,
continued
progress
to determine
thedestiny
ofEurope
themercantile
era. As longas oceanictraderemained
throughout
as a tiny
oftotaleconomicactivity
it couldnotpropelEuropetowardsan
proportion
industrial
arenotrequiredto comprehend
society.Globalperspectives
more
fortheprogress
thana tinypartoftheexplanation
achievedforthreecenturies
beforetheIndustrial
Revolution.
Linksacrosstheoceanswerebuiltup in thesixteenth
buttoreify
century,
ofthemercantile
commerce
theinternational
eraintoa "worldeconomy"
is to
a contemporary
for
misapply
our
own
conceptwhichreallyhasrelevance
only
times.Throughout
theearlymodern
eraconnexions
between
economies
(even
withinstates)remained
weak,tenuous,andliabletointerruption.
Exceptfor
a restricted
anddecayeverywhere
rangeofexamples,growth,
in
stagnation,
Western
toendogeneous
Europecanbe explained
forces.
mainlybyreference
suchas itwas,hardlyimpinged.
The "worldeconomy",
Ifthesespeculations
are correct,thenforthe economicgrowthof thecore,theperiphery
was
peripheral.
St. Antony's
College,Oxford
45F. Braudel,
TheMediterranean
andtheMediterranean
World
intheAgeofPhilipII (I972), pp. 420-I and

I24I.