The period from 1870 to 1914 represented the high-water mark of nineteenth-century globalization, which, as Chapter 4 in Volume 1 showed, had been developing since the end of the Napoleonic Wars. This chapter will explore several dimensions of this globalization, as well as its effects on the European economy. Since the topic is vast, our focus will be on the links between Europe and the rest of the world, rather than on the growing integration of the European economy itself, although that will be alluded to.
Nineteenth-century globalization involved increasing transfers of commodities, people, capital, and ideas between and within continents. The most straightforward measure of integration is simply the growing volume of these international flows, perhaps scaled by measures of economic activity more generally: for example, the ratio of commodity trade to GDP, or the number of migrants per head of population. Another measure is the cost of moving goods or factors of production across borders, and this cost will show up in international price gaps. Because it is less easy to measure integration in the international “markets” for ideas and technology, these flows are often not discussed in economists' accounts of globalization, but they are sufficiently important to be briefly considered here, problems of quantification notwithstanding.
Having documented the increasing integration of international markets in the late nineteenth century, we then discuss some of the effects of this unprecedented globalization.