Toward a World Economy

The economic developments of the late nineteenth century, combined with the transportation revolution that saw the growth of marine transport and railroads, fostered a true world economy. By 1900, Europeans were receiving beef and wool from Argentina and Australia, coffee from Brazil, nitrates from Chile, iron ore from Algeria, and sugar from Java. European capital was also invested abroad to develop railways, mines, electric power plants, and banks. High rates of return provided plenty of incentive. Of course, foreign countries also provided markets for the surplus manufactured goods of Europe. With its capital, industries, and military might, Europe dominated the world economy by the beginning of the nineteenth century. Trade among various regions of the world, of course, had taken place for centuries. As early as the first millennium c.e., China and the Roman Empire had exchanged goods through intermediaries on both the maritime route across the Indian Ocean and over the famous Silk Road through the parched deserts of Central Asia. Trade across the Eurasian supercontinent increased with the rise of the Arab empire in the Middle East in the ninth century and then reached a peak during the thirteenth and fourteenth centuries, when the Mongol Empire stretched from the shores of the Pacific to the borders of eastern Europe. Trade routes also snaked across the Sahara to central and western Africa and along the eastern coast from the Red Sea to the island of Madagascar. Not until the beginning of the sixteenth century, however, was a truly global economy created, a product of the circumnavigation of the globe by the Portuguese adventurer Ferdinand Magellan and the voyages of exploration that followed. With the establishment of contacts between the Old World and the societies in the Western Hemisphere, trade now literally spanned the globe. New crops from the Americas, such as corn, potatoes, and manioc, entered the world market and changed eating habits and social patterns as far away as China. Tobacco from the New World and coffee and tea from the Orient became the new craze in affluent circles in Europe and the Middle East. In the view of some contemporary historians, it was this process that enabled a resurgent Europe to launch the economic and technological advances that led to the Industrial Revolution. According to historian Immanuel Wallerstein, one of the leading proponents of this theory, the age of exploration led to the creation of a new “world system” characterized by the emergence of global trade networks dominated by the rising force of European capitalism. This commercial revolution, in fact, operated much to the advantage of the European countries. Profits from the spice trade with eastern Asia, along with gold and silver from the Americas, flowed into state treasuries and the pockets of private traders in London, Paris, and Amsterdam. The wealth and power of Europe increased rapidly during this period, thus laying the groundwork for the economic revolution of the nineteenth century.