19th Century Globalization: Causes, Treaties, and Economic Integration

The First Globalization Wave: 1850–1914

During the 19th century, the process of globalization accelerated on an unprecedented scale. While long-distance trade has existed since at least the beginnings of civilization, its importance grew enormously and rapidly in the 19th century, leading to significant integration of the world economy.

Key Features of the First Wave (1850–1914)

• Freer movement of commodities.
• Great increase in international movements of people.
• Great increase in the international movements of capital.

Causes of Accelerated Globalization

• The Industrial Revolution and the diffusion of industrialization processes.
• Improvements in transport technology.
• Increased international movements of products, people, and capital.
• Imperialism.

The Cobden-Chevalier Treaty of 1860

This Anglo-French Treaty was a landmark agreement promoting free trade.

• Definition: Britain agreed to remove all tariffs on imports of French goods, with the exception of wine and brandy (which were considered luxury products).
• France removed its prohibitions on the importation of British textiles and reduced tariffs on a wide range of British goods to a maximum of 30%.

The Most-Favored-Nation Clause

A major feature of the treaty was the inclusion of a most-favored-nation (MFN) clause. This meant that if one party negotiated a treaty with a third country, the other party to the treaty would automatically benefit from any lower tariffs granted to that third country.

Consequences of the Treaty

• International commerce increased significantly.
• Most of this increase took place in intra-Europe, but overseas trade also participated.
• The greater competition forced the reorganization of industry.

International Factor Mobility

Labor Mobility: Unprecedented Movement of People

There was unprecedented mobility of labor during this period. The most significant movement involved overseas migration.

• Destinations: The overwhelming majority went to countries with abundant land, including the United States, areas of the British Empire, and Latin America.

Beneficial Effects of Vast Migration

This vast migration had several beneficial effects:

• It relieved population pressures in the countries supplying the emigrants, thus lessening downward pressure on real wages.
• It provided the resource-rich, labor-short countries to which they went with a supply of willing workers at wages higher than they could have obtained in their native lands.
• It facilitated the transmission of accumulated knowledge.
• By means of human, cultural, and economic ties, it promoted the integration of the international economy.

Capital Mobility: Rapid Increase in Cross-Border Flows

There was a rapid increase in cross-border flows of capital, further strengthening the integration of the international economy.

• Although foreign investment had occurred in the 18th century and before, it reached unprecedented magnitudes in the 19th and early 20th centuries.
• Sources: The resources available for investment abroad resulted from the tremendous increases in wealth and income generated by the application of new technologies.
• Motive: The expectation on the part of the investor of a higher rate of return abroad than at home.