The Progressive Economics Forum

Empire and Trade

Posted by Mel Watkins under economic history, economic thought, international trade.
February 10th, 2012
Comments: 14

Empires vary: of conquest, of settlement, of trade; contiguous and maritime. Empires abound: a long list, longer even than many books on empire admit to.

Wikipedia lists over 200 empires from the Akkadian Empire of Sargon the Great in the 24th century BCE to today’s American Empire. In terms of territory the largest are the Achaemenid, the Han and the Roman in ancient times, the Mongol and the Yuan Dynasty in medieval times, and the British, the Russian, the Spanish, the Qing and the French in modern times. Round up the above with the Incan and the Aztec from the Americas, the Mauryan in India, the Zulu in sub-Saharan Africa. It is evident that empire is a world-wide phenomenon, thriving in diverse cultures over the millenia. The nation-state is no more than a late arrival.

Yet economists still have difficulty with the word “imperialism,” and insist that trade is based on comparative advantage among independent countries. The real world is one riddled with asymmetries of power – that being inherent to empire- where politcal economy, precisely because of its explicit recognition of power, trumps orthodox ecoomics with its a-political methodology.

In fact, the rationale for empire is typically to monopolize trade. “Trade theory,” built on Ricardo’s two-country model – which pervades introductory economics textbooks – misleads students, and their professors, and needs to be rethought. Ricardo’s two countries, England and Portugal, were. as we all know, both imperial centres. Yet orthodox economics deems that irrelevant.

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Comments

Comment from Darwin O’Connor
Time: February 10, 2012, 10:43 am

So is China part of the American empire or is America part of the Chinese empire…?

Comment from Mel Watkins
Time: February 10, 2012, 10:48 am

Time will tell

Comment from Ghat andy
Time: February 10, 2012, 5:40 pm

From lack of education and general ignorance I would point to Aquinas’ obervation of all relationships being asymmetrical. I adore economic models, they help me to appreciate astrology

Comment from Paul Tulloch
Time: February 10, 2012, 10:34 pm

I have been studying Chinese industry of late, and one conclusion that may answer which is part of which’s empire comes down to tech. The typical development model in Chinese production since the 80′s, is transplant and adapt. That is accumulate the foreign tech, copy and adapt it to the local production culture. One expert estimates that almost 99% of new production since the 80′s is of this model. There has been little focus on R&D. That may be all changing now, but if the future of empire is based upon industrial might and monopolistic ends, then my economic instincts (as bad as they may be) would conclude that R&D are the drivers of innovation and if this qualitative is representative of the quantitative, then America will still sit atop the empire. (and this does not include the notion of militarism aspects of tech.)

I still like the analysis that looks at the relationships between the American and Chinese political and financial elites and the decisions being made at that level. Never take your economic eye off that massive exchange in terms of wealth generation.

China is a pretty cool study. Instead of credit they have long held customs of favours (I forget the Chinese term for it) and family ownership is still a predominant form that defines the culture of the business entity. They estimate that for companies with less than 100 million US dollars in annual revenue, familial management is prevalent. Above this size, the professional managers are brought in. Amazing!!

Paul

Comment from Purple Library Guy
Time: February 11, 2012, 2:41 am

It may indeed all be changing now. It was not so many decades ago that the Japanese were producers of cheap knock-offs, and everyone was sure that while they were amazing imitators they would never be innovators.
At that, just because the Chinese are transplanting and adapting technology, that doesn’t necessarily mean the tech they’re adapting is American. At this point it could be more Japanese, German, even Taiwan or Korean. I don’t think the US is the technological leader in civilian technology any more.
In any case quantity, as they say, has a quality all its own. It has been argued that Celtic craft technique, such as metallurgy, was superior to that of the Romans–yet one does not hear of the Celtic empire.

Comment from Paul Tulloch
Time: February 11, 2012, 9:40 am

@plg

For sure it is not all American tech transplanting, in fact if one could look at the distribution, I am sure the japanese may be on top of the americans in fdi and tech in China. However, the parallel between japan and china, may not be inevitable in this case. The political was much different in terms of empire, which was Mel’s point here. Is China merely the reserve army? With the cost of soe transplanted 2nd generation tech from the host being the cost of accessing the billion person market? That is my guess. I have been finding that the state has embarked on an ambition innovation strategy within china’sindustry, but so far the results have been questionable. At least that is what i have been reading. So i do wonder how far will empires help one and other?

Comment from Calvin Johansson
Time: February 11, 2012, 2:03 pm

In terms of China and the U.S., I think we are likely to see some shrinkage of the U.S. imperialism with the growth of Chinese imperialism. For example, China’s investments in Africa, South America and Europe.

As a Canadian, what is most discouraging is that our ruling class continues to develop a political economic strategy that keeps our economy in the staples trap. We will now sell our resources to the Chinese instead of the U.S. Soon, perhaps we will start to hear about the need to have a so-called free trade agreement with China.

Comment from Mel Watkins
Time: February 12, 2012, 11:35 am

It was our ruling elites that moved us effortlessly from the declining British empire to the ascendant American empire in the past

Comment from Glen
Time: February 13, 2012, 8:30 am

Ralph Gomory’s work in this area is a necessesary primer for any discussion.

forward.msci.org/articles/0707freshtake.cfm
http://www.pnas.org/content/92/4/1205.long

Comment from Mel Watkins
Time: February 13, 2012, 8:59 am

Thanks for the reference.

Comment from Keith Newman
Time: February 13, 2012, 10:01 am

@Calvin Johansson, re free trade with China.
Stephen Harper is already on it:
http://www.thestar.com/news/canada/article/1129811–harper-in-china-free-trade-agreement-with-china-in-canada-s-sights?bn=1

Comment from Paul Tulloch
Time: February 13, 2012, 10:20 am

Here is an excellent piece on the financial crisis and kind of empire. (and a book I intend to read) It was posted Naked Capitalism- Yves Smith a.k.a. Ms. Webber truly is a smart one and always seems to nail up the good stuff to the webpost.

http://www.nakedcapitalism.com/2012/02/the-global-minotaur-an-interview-with-yanis-varoufakis.html

Comment from Mel Watkins
Time: February 13, 2012, 10:30 am

Paul, thanks for the reference. I’ll check it out

Comment from Paul Tulloch
Time: February 13, 2012, 11:16 am

Sorry I should have stated it is an interview with Yanis Varoufakis on his book called the Global Minotaur. I believe the CCPA had him here in Canada promoting his ideas and book some time ago.