Unit V: Trade and poverty: when the Third World fell behind (Williamson) Flashcards
What characterized the first global century (1820-1913)?
Unprecedented growth in world trade driven by pro-trade policies, the transport revolution, rapid economic growth in the core, and pax Britannica
This period marked significant changes in global economic dynamics.
What was the impact of the transport revolution on transportation costs?
Dramatically reduced transportation costs, facilitating trade in bulky primary products
Particularly significant for the periphery, including Latin America.
What was the income gap between the core and the periphery during the first global century?
The income gap widened, with periphery GDP per capita growth not keeping pace with core growth
This divergence began as early as 1820.
How did railroads impact Latin America during the first global century?
Integrated interior regions with ports, connecting them to the world economy
Especially important for countries like Argentina, Brazil, and Mexico.
Which geographic factors favored economic performance in Latin America?
Countries with accessible coastlines and navigable river systems, like Argentina and Uruguay, had better economic outcomes
Landlocked countries like Bolivia and Paraguay faced greater challenges.
What was the effect of the transport revolution on the terms of trade?
Freight rates fell more for bulky primary products than for manufactured goods, improving terms of trade for exporters
This created a disparity in benefits between primary product exporters and manufactured goods exporters.
True or False: The Industrial Revolution was the primary cause of the income gap between rich and poor countries.
False
The sources argue that the great divergence was already established by 1820.
What are the key factors that drove the unprecedented growth in world trade during the first global century?
- Adoption of free trade policies
- Transport revolution
- Rapid economic growth in the core
- Pax Britannica
These factors created a favorable environment for trade.
What was the significance of the abolition of the Corn Laws in 1846?
Marked a shift towards free trade policies in Britain, influencing other Western European economies
It was a pivotal moment in the liberalization of trade.
Fill in the blank: The term ‘Great Divergence’ refers to the widening income gap between the _____ and the _____.
[core], [periphery]
Core refers to Western Europe and its offshoots, while periphery includes Latin America, Asia, and Africa.
How did the sources suggest assessing a country’s openness to trade?
By examining the height of trade barriers rather than just trade ratios
This approach provides a more nuanced understanding of trade dynamics.
What was the relationship between world trade and the great divergence during the first global century?
A correlation existed, described as ‘seductive’ due to the potential misinterpretation of causal relationships
This raises questions about whether globalization contributed to the divergence.
What were two significant technological advancements in transportation during the first global century?
- Development of steamships
- Expansion of railroads
These advancements greatly facilitated trade, especially for primary products.
What does the text suggest is important to understand about trade’s impact on an economy?
Focus on changes in relative prices, such as terms of trade, rather than just trade volumes
Changes in relative prices influence resource allocation and economic growth.
According to the sources, did the periphery experience GDP per capita growth during the first global century?
Yes, but it did not match the growth rates of the core
Growth was evident, yet insufficient to close the income gap.
What were the two key characteristics of the world economic order in 1960?
A wide gap in per capita income and living standards between the rich industrial core and the poor pre-industrial periphery, and specialization in exports.
The poor periphery primarily exported agricultural and mineral products, while the rich core exported manufactured goods.
When did the ‘great divergence’ between Western Europe and the poor periphery begin to emerge?
Before the Industrial Revolution, with significant income per capita gap already present in 1820.
Evidence shows the poor periphery had only half the GDP per capita of Western European leaders in 1820.
What correlation does the text highlight regarding world trade and the great divergence during the ‘first global century’?
A correlation exists between the world trade boom and the accelerating great divergence, described as ‘seductive’.
Such correlations often invite causal interpretations, questioning if globalization contributed to divergence.
Why might measuring a country’s ‘openness’ to trade by its trade ratio be misleading?
High trade shares might reflect high income, or increases in trade shares might follow income increases.
A better measure of openness is the height of trade barriers, such as tariffs and transportation costs.
How did the first global century (circa 1820-1913) differ from preceding centuries in terms of global economic activity?
Rich European economies adopted liberal, pro-trade policies, experienced a transportation revolution, and saw steep economic growth due to the Industrial Revolution.
This period was also marked by relative peace, known as ‘pax Britannica’.
What key policy changes were undertaken by Western European economies in the early to mid-19th century?
Dismantling of mercantilist policies, lowering of tariffs, and removal of non-tariff barriers.
Britain’s abolition of the Corn Laws in 1846 and the Anglo-French Cobden-Chevalier Treaty of 1860 were significant steps.
Name two significant technological advancements in transportation during the first global century.
Development of steamships and expansion of railroads.
Steamships reduced the cost and time of overseas trade; railroads facilitated internal trade and connected markets.
What were the primary drivers behind the soaring demand for goods during the first global century?
The Industrial Revolution in Europe and its offshoots.
This led to increased demand for intermediate inputs, fuel, and luxury foodstuffs.
How did GDP per capita growth in the poor periphery compare to that of the rich core during the first global century?
Growth in the poor periphery was 0.51% per annum, lower than the rich core’s 2.41% per annum.
The periphery did experience growth, with an increase in growth rate over the period.
What factors were most influential in the rising world trade share in GDP between 1870 and 1913?
Establishment of the gold standard and significant decline in transportation costs.
These factors lowered exchange risk and facilitated trade.
Define ‘Per Capita Income’.
The total income of a country or region divided by its total population.
It represents the average income per person.
What is the ‘Great Divergence’?
The historical process by which the economic fortunes of Western Europe and its offshoots dramatically improved relative to those of other regions.
What does ‘Terms of Trade’ refer to?
The ratio of a country’s export prices to its import prices.
An improvement means a country can buy more imports for a given quantity of exports.
What is ‘Mercantilism’?
An economic theory emphasizing national wealth through accumulation of gold and silver and maintaining a positive balance of trade.
What does ‘Free Trade’ entail?
A policy where governments do not restrict imports or exports through tariffs, quotas, or other barriers.
What is the ‘Gold Standard’?
A monetary system in which the value of a currency is directly linked to gold.
What was the ‘Transport Revolution’?
Significant advancements in transportation technology that reduced the cost and time of moving goods and people.
What does ‘Pax Britannica’ refer to?
A period of relative peace in Europe and the world during which the British Empire was the dominant global power.
What is ‘Dutch Disease’?
An economic phenomenon where increased revenue from natural resource exports leads to a decline in the manufacturing sector.
Fill in the blank: The ‘Infant Industry Argument’ is a rationale for _______.
protectionist trade policies aimed at nurturing new domestic industries.
What does ‘ISI’ stand for?
Import Substitution Industrialization.
