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Book Review
January 2024

Trade as a mover of world history

A Splendid Exchange: How Trade Shaped the World. By William J. Bernstein. Grove Press, 2009, 496 pp., $11.59 paperback.

If we look at our work laptop, we recognize it as a tool of the job. We do not see the various raw materials that were mined in different global locations and then used in the laptop’s production, nor do we consider the many different countries where its various parts were made. To us, this process is normal, everyday commerce. In A Splendid Exchange: How Trade Shaped the World, William Bernstein explains that trade was not always this fluid. The author divides the book into four parts, moving from the often-troubled origins of world trade to modern-day trade. Political stability, a precondition for profitable and viable trade, is a recurring theme in the book.

Bernstein begins with the birth of the arms race in 3000 B.C. in ancient Sumer. He tells the story of nomadic herders, who wore copper helmets, attacking Sumerian farmers. Upon learning of copper, Sumerians sought out ways to make their defensive weapons more lethal, while herders made their helmets thicker. These developments began the trade in exotic metals that still fuels the present-day arms race. From here, the author gives a detailed account of the history of trade from the Stone Age to the 21st century, informing the reader of the most important commodities that were traded; the geopolitical environment, costs, and transportation methods involved in that trade; and the technological advances associated with it.

Bernstein explains that, during the Stone Age, advanced farmers would trade grain and animals to hunter-gatherers for their animal skins and other goods. Besides telling readers what happened, the author also provides evidence that it did, indeed, happen. Looking back to 3000 B.C., he points to the remains of prehistoric trade markets on river islands and to Mesopotamian written records with information on the copper-grain trade of the time. The book is filled with many interesting facts: silver became a medium of exchange around 2000 B.C.; the earliest ancestors of camels and horses originated in North America; and, by 2000 B.C., trade was privatized in Sumer and shipment seals guaranteed that transported goods were untampered.

Waterborne commerce is a huge part of the history of trade. Explorers were always looking for more efficient travel routes and seeking to assert their dominance in the sea. From the Phoenicians (the first to engage in long-distance trade) to the ancient Greeks, trade powers looked to control sea lanes and critical chokepoints, an objective of all cultures that historically controlled world trade to some extent. Bernstein identifies and tells the story of different bodies of water and chokepoints that have been strategically important for thousands of years, including the Turkish straits (the Dardanelles and the Bosphorus), Bab el-Mandeb (a strait between Yemen and Africa), the Suez Canal, the Panama Canal, and more. The author then writes about Pax Romana, a period of relative political stability that started under Octavian, Rome’s first emperor. During this period, which lasted from 27 B.C. to 180 C.E., long-range trade flourished, allowing the West to “meet” and learn about other cultures.

After the fall of Rome, Indian Ocean trade gained prominence, becoming synonymous with Dar al-Islam (the world of Islam). The Muslims gained control of the eastern Mediterranean and banned Europe from the Indian Ocean until 1497. Of course, not all commerce was waterborne. The Silk Road was an alternative overland route, although geopolitical instability often made it costly and dangerous. During the 13th and 14th centuries, the Mongols provided relative stability to this route, making it more viable. This, unfortunately, gave way to the Black Death, the bubonic plague that accompanied trade with the West and killed 75–200 million people from 1347 to 1351. Egypt, whose city of Alexandria had once been the base of world trade, never recovered from the plague.

Bernstein details each century as the story moves along. In the late 15th century, Bartholomew Diaz rounded the Cape of Good Hope, giving Europe access to the Indian Ocean and India. Vasco da Gama entered the Indian Ocean and, before long, the Portuguese and Spanish ruled the world, and trade with it. In the 16th century, agricultural and labor markets changed forever as crops began to make their way around the world. Bernstein writes about how publicly held joint-stock corporations were introduced into trade in the 17th century, when the Netherlands founded the Dutch West India Company and the more successful Dutch East India Company. These are some of the many events that the author offers as evidence that globalization is not a new phenomenon; rather, it is a 5,000-year-old process.

Then, Bernstein starts the story down the homestretch with the rise of England. It is interesting to read the author’s description of 16th-century England as a “poor, weak, backward state that could not afford to not be pirates….” The English could not compete with the Dutch in the 17th century because they were hobbled by a monarchy that did not inspire confidence in their financial system. However, this changed when the Catholic monarchy of King James II was overthrown during the Glorious Revolution in 1688. The new king, William of Orange, made Parliament the decision-making power in England, which meant a much stronger rule of law. Parliament also instituted excise taxes that helped lower interest rates and promote commerce.

The English East India Company became involved in the cotton trade, and the company manipulated consumer preferences by making sure that royalty wore their cotton from India, which would inspire others to follow suit. Bernstein writes that this was the advent of “the fashion industry and consumer society as we know them today.” The author details the protectionist arguments made by domestic textile workers and the arguments made by mercantilists concerned with the trade balance. Bernstein says that many of the protectionist arguments made in the past are the same as those made today.

The author gives a front-row seat to innovation throughout the book. For example, after the English Parliament gave in to protectionist demands and banned the importation of plain Indian cloth in the early 18th century, innovators created new machines that eventually made cotton cheap and plentiful. At this point, Bernstein shifts to the history of economic thought, stating that Adam Smith, David Ricardo, and others argued against monopolies like the English East India Company and made free trade the preferred policy of the future. The author tells the story of the 19th-century trade revolution (the advent of the steamship, the railroad, the telegraph, systems of artificial and natural refrigeration, and a new process to produce cheap, high-quality steel) that “made the world richer during a time of crippling tariff barriers that should have choked off global commerce.” He then moves on to discussing the fight for free trade in the 20th century, detailing the removal of protectionist laws and the emergence of a new Pax Americana.

In the last part of the book, Bernstein asks about what we have learned from the history of world trade and how this knowledge can be applied to today’s debate about globalization. Some of this discussion concerns the future and seems more conjecture than fact. While Bernstein acknowledges that free trade creates both winners and losers, he does observe that the United States never would have flourished without free trade. He concludes that there is no better alternative to free trade. Given all the evidence he presents, this conclusion seems warranted, and I would absolutely recommend this book for those who want to take a detailed look at how trade has evolved over time and influenced the way countries trade today. However, the book was written in 2008, and the author’s predictions about the future may or may not hold up under current geopolitical conditions.

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About the Reviewer

Jonathan Yoe

Jonathan Yoe is an economist in the Office of Publications and Special Studies, U.S. Bureau of Labor Statistics.

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