An Economic History of the World since 1400 by Donald Herreld
by Harrison Wendland November 27, 2019
Economics always interests me and I loved the opportunity to learn from this book. There were a number of courses that I have studied at the university but that was all theory. I took Microeconomics and Macroeconomics at the undergraduate level and Managerial Economics at the MBA level. They were a nice overview, but nothing as educational and insightful as this book. Beyond that, there was a 400 page supplementary document that came with the purchase of this book. Learning from someone with credibility like Donald Herreld has is what I enjoy and seek out. It's important to me that I don't just learn but that I learn from people who are much more well-versed than I am myself.
I wrote this a little differently than I have some other pieces I've published. What I did here was include all the headers and lecture titles and then shared my reflections below those before including the notes I picked up from the book.
Lecture 1: Self-Interest, Human Survival, and History
In overall economics, there is supply and demand, that's always the basis of it and the author of this program provided 3 for us to ask. I found them all essential and they framed the book perfectly.
Main questions to ask about the present and the past:
1. What was produced?
2. How is it produced?
3. How will what is produced be distributed?
This book covered more than 5 centuries of economic history and the journey through the time was incredibly interesting to me. The author once again provided to his readers a great preface of what the book was going to cover.
What to include when looking at the economic history of the past 500 years:
1. The development of productive agriculture.
2. The development of business contracts and agreements.
3. The expansion of trade.
4. The development of the idea of economic nationalism, or what Adam Smith would have called the mercantile system.
5. The development of science and technology.
6. The shift to industrial production.
7. Population growth and the demographic revolution that came with it.
8. Free trade and mass consumption.
9. Imperialism, colonialism, and warfare.
10. Economic development.
I was not surprised by the explanation of capitalism and the overall system. During my lifetime, I have seen well-intentioned economies but nothing has happened as ideally as it was intended to be. In my eyes, that is largely because people are the underlying parts of all systems. People are not perfect and while they may be operating within an idealistic system, they can still find ways to manipulate the system and use it for their own personal desires or agenda.
Capitalism could be drained as an economic system in which rational private property rights and enforceable contracts provide for the efficient functioning of markets that generate price signals and for which institutions exist to create incentives for participation in the system. In this general statement, private property rights refers to the ownership, control, and exchange of a resource, property, or good. Enforceable contracts are in place to minimize conflicts and disputes.
This represents more of an ideal rather than being a description of the economy at any point in the past.
Lecture 5: Late-14th-Century Guilds and Monopolies
This next lecture was one that I enjoyed learning about and one that I had studied previously during my AP European History course in high school. I did not recall, however, that largely because of the decreased number of peasants within the population, they were able to demand higher wages. This makes a ton of sense though as it's really just simple supply and demand.
Because the Black Death wiped out numerous peasants, they were able to demand higher wages and other things. The Black Death accelerated social change.
Lecture 6: European Discovery Routes: East and West
I found this part of the lecture compilation entirely awing. I was speechless at the revelation about the process of what happened during that time. The same thing is also happening throughout the world today but often with different results. For example, in Brazil MercadoLibre has created a payment-processing system that their platform was then built off of (source). While The US is one example of a place where a European country forced their system onto the area, integration today is seen differently than it was in the past.
In Asia, Europe integrated themselves into the commercial structure of Asia. In the America's, Europe was confronted by a commercial system unrecognizable to them. Rather than integrate, they created an entirely new commercial system to exploit the new world. They colonized to transform them into a series of NeoEuropes at the expense of the native populations.
Lecture 14: Why Didn't China Industrialize Earlier?
This chapter was particularly interesting to me. I wanted to understand this for myself as after listening to the first 13 lectures, this created a lot of curiosity for me. The population growth within the nation definitely seems to be one of the main reasons why they did not industrialize earlier. Yet, I ponder how differently the global economies would be if they were actually the first industrialized nation.
Chinese manufacturing methods which predominantly relied on handcrafted products were sufficient to meet demand and also generate a profit. Technologies did not need to change to keep production high because of the population growth. Some estimates suggest that as early as the 19th century, China produced almost 1/3 of the world's manufactured goods which is far more than any European country would until the middle of the 19th century.
Lecture 16: Industrial Revolution: The Textile Trade
The creation of the factory system interested me at a deep level. I found it extremely cool that the source of that system was the textile industry and that woolen goods comprised the most important industry. Wow how things have changed. I just learned so much from this part of the book and found it one of the greatest part of the books.
Photo by Trisha Downing on Unsplash
The water frame, invented by Richard Arkwright in 1768, was developed which improved upon the spinning frame. This shifted the location of textile production in a fundamental way because it was not hand-powered and needed a steady, reliable power source. Now, raw materials were not distributed throughout the countryside but rather the workers needed to travel to the mill. This then created the factory system. Spinning was the standard method of thread production by the end of the 18th century.
At this time, woolen goods were the most important industry. Cotton was a very small part of the textile industry. Perhaps its small size allowed it to be innovative in much the same way startups are innovative in the world today. British cotton producers were not constrained by the traditional methods and customs that governed the wool industry.
Lecture 17: British Coal, Coke, and a New Age of Iron
I knew that the railroads were a huge part of the economy in the 18th century but didn't know quite how important they were to the overall world economy. I'm curious how the world would have been different had China industrialized earlier and took hold of this industry as they have in many areas of the steel industry today.
The new techniques of smelting iron during the late 18th century contributed to the rise of iron. It became a practical substitute for wood and stone because of coke smelting, puddling, rolling and new finishing techniques that came into play. Great Britain led the way and by the middle of the 18th century, British industry clearly led the way. There was also a very large demand for iron because of railroad construction — both in Europe and the newly formed United States.
Lecture 19: A Second Industrial Revolution after 1850
They had flooded the market. Wow. And his patent had been infringed upon? That could never happen today. There are far too many patents and related lawsuits that take place each and every year. There are over 5,000 patent infringement cases each year (source). Of course, that was not always the case. While I am in support of some patents, I entirely believe that protective measures like an excess of patent infringement cases restricts innovation and competition rather than betters the economy and overall economic advancement.
American Elias Howe patents the first practical sewing machine. Trying to find buyers he went to Great Britain. Upon returning to the US, he found his parent had been infringed and sewing machines had practically flooded the market. Because of this, the American clothing production switched in only a few years from handicraft to a mechanized industry which drove prices way down. It is estimated that in 1860 the US had 15 times more sewing machines than Great Britain.
Lecture 20: Family Labor Evolves into Factory Work
I found this interesting. I was well aware of the change during this time but not the breadth of it. While children and their families were no longer working in the same space, someone now needed to be a caretaker for the children and as shared in the book, most often the women chose that role and were then able to have flexibility when moving throughout society.
In the pre-industrial world, women and their families worked in the same place. Now, industrialization in the 18th century forced women to choose their primary role in society. Most chose child rearing and jobs like household production, agriculture, retailing, and as servants allowed women to most easily move in and out of the workforce with ease.
Lecture 23: Speeding Up: Canals, Steamships, Railroads
I found this portion of the book fascinating. I always kind of wondered how time was managed throughout history but had not actually looked it up myself up until this point.
Photo by Nomadic Julien on Unsplash
Prior to railroads, each locality kept time based on the position of the sun hence the clock towers in the center of towns. Railroads had trouble keeping time and ensuring they could stay on the correct timetables. Standardized time with the use of time zones was just one of the changes that society had to make in order to travel and communicate faster and faster.
Lecture 26: Banks, Central Banks, and Modern States
The world's economy is a lot different today than it once was. Understanding the history of the gold standard was something that I was looking forward to after it came to this part in the book and I was unaware that there was also a silver and bimetal standard at one point. Over the course of history, I have read about what happened when the US went away from the gold standard but did not know the extent of other standards that countries adopted over the years.
The British established the gold standard in the Bank Charter Act of 1844. Used to make trading amongst complex relations with countries easier.
3 initial standards:
1. Gold Standard
2. Silver Standard
3. Bimetallism
Silver prices plummeted in the second half of the 19th century and bimetallism failed. After 1876, most industrialized nations adopted the gold standard. After that, all countries fixed their currency to the price of gold.
Lecture 28: Adam Smith's Argument for Free Trade
This has happened various times throughout history and all of the times that it has happened, innovation was disrupted and so was economic advancement in general. It's essential that there is not preference shown to certain people or companies, there is no incentive to advance or innovate if you cannot obtain market share regardless.
After the economic crisis of the 1870s, foreign competition became much more difficult to some domestic producers who felt they needed to guard against low-priced imports even as they themselves produced for exporting. Countries had levied tariffs as a result of this crisis.
Lecture 29: Middle-Class Catalogs and Mass Consumption
I found this interesting. The types of foods that were produced were largely a result of preferences from the middle class. This definition of the middle class is one that I really like also, between the working class and the upper class, that's the middle.
Photo by Austin Distel on Unsplash
The middle class was most important in determining what foods would be produced and sold. The middle class has grown considerably in size at the turn of the 20th century and its income had grown as well. Most sociologists define the middle class as people whose socioeconomic somewhere between the working class and the upper class (elites).
Lecture 33: The Trouble with the Gold Standard
This was absolutely crazy to me that no companies followed through but I guess I cannot be too surprised, it's human nature. People are inherently selfish and act in a way that reflects that — country leaders would do the same. But, it's crazy that so many countries acted in a protectionist way and ultimately hurt the possible innovation that could have taken place internationally.
Countries began to institute protective tariffs. In the 1920s, countries rejected free trade and instituted protective tariffs and import prohibitions. Several international conferences were held to convince countries to return to a more free trade environment. No countries followed through, even after signing agreements to move towards more free trade postures. Free trade really only helped the most advanced countries. France and Germany both nationalized railroad because they were seen as strategic assets necessary for security. Protective measures like tariffs, import quotas, and licensing of foreign trade were applied in the 1920s. They extended to the US which established itself as the leading industrial nation after the war. The US assumed a position of isolationism along with a series of protective measures.
I was mesmerized by all this information. Not only did limiting immigration hurt innovation, but so did the tariffs. Then, the trade deficit increased and the most important stock market in the world crashed soon after the London stock market did! Crazy. How did people not see this coming and why did many just ignore the signs? Maybe it was too new and they didn't understand the stock markets but maybe, far too many people were just ignorant.
In 1919, the US limited immigration for the first time and upset the balancing of wage equalization throughout the world. In 1929, the US placed tariffs on 20,000 items. US exports fell by at least half after retaliatory tariffs. The US market was experiencing great growth in its own and more and more people were investing in the stock market with increasing speculation — many invested on credit expecting that the good times were here to stay. US investment overseas dropped by about half in 1928. After the war, the NYSE had become the most important stock market in the world. The London stock market crashed in September 1929 after fraudulent activity was uncovered. On October 24, 1929, US markets crashed. More than $30 billion in value was lost in two days. Unemployment shot up to 25%. A run on banks happened around the world as people looked to withdrawal their accounts in cash. World trade continued to contract. Great Britain dropped the gold standard in 1931, US followed others in 1933, France followed in 1936.
As Rolf Dobelli wrote, there is never just one reason or cause for something. While I think all were important reasons for the Great Depression happening, I feel as though protectionism had a major influence on all the causes.
Causes of the Great Depression, no real consensus about which was most important:
— monetary problems
— irrational consumption and investment
— worldwide depression of agriculture
— unstable markets due to protectionism
Lecture 34: Tariffs, Cartels, and John Maynard Keynes
This to me is the most preposterous response to the Great Depression and the market crashes. But, it does show care for people within the home countries and for people who are not as informed or educated, they might be quite satisfied with the decisions that their nation's leaders have made, although the decisions negatively affected the world's economy.
In the 1930s, Europe created import quotas and some countries even went as far as banning certain goods to prop up domestic production.
Lecture 35: Japanese Expansionism: Manchurian Incident
Japanese exports were made more attractive, I can see how this would have happened though, of course, Japan could not sustainably continue this method and they struggled greatly after years of operating "similar to European style cartels."
Photo by Tianshu Liu on Unsplash
The growth of the Japanese empire happened after the Great Depression and were reporting labor shortages in 1938. They left the Gold Standard only a year after adoption. This allowed the yen to drop in value vs other currencies which made Japanese exports more attractive. They also utilized deficit spending to stimulate the economy (when government spending exceeds revenues and must be financed by borrowing). The government increased military expenditure and invested in construction and industry. Japan's increase in state involvement was the main driver of the economic boom. However, even with the capitalist economy, their industry was structured similarly to European style cartels, leaving much of Japan's economy in the hands of Japanese organizations.
Lecture 36: U.S. Aid and a Postwar Economic Miracle
I found this interesting. The United States was seeking a proposal of a sort and what was interesting to me was the information within the initial one. As request for aid was extremely high, the US was not quite pleased with the terms.
The Committee of European Economic Cooperation took the initiative that the US had asked for. The US sought a cooperative and integrated plan to assist Europe. Their first plan proposal was solely a summary of individual country's needs and their aid request was extremely high.
Lecture 38: Japan, the Transistor, and Asia's Tigers
I found this incredibly interesting. I noted the first paragraph and copied the portion in quotes from the supplementary material. This was just very educational for me and I liked learning all about what these four countries did during the middle of the 20th century to experience such unprecedented success.
Taiwan, South Korea, Hong Kong, and Singapore experienced unprecedented levels of industrialization in the 20 years following WW1. Developed highly free markets in the late 1950s and early 1960s, closely following Japan. Japan and the "Four tigers" industrialized so rapidly and experienced dramatic economic growth by doing the following:
"Japan already had a textile industry before World War II, and it was revived in the 1950s. Hong Kong developed a textile An Economic History of the World since 1400 296 industry in the 1950s, and Taiwan and Singapore did the same in the 1960s. But there were other low-tech industries that offered some of the same developmental benefits as textiles. For instance, toys, watches, and other small gadgets offered wide consumer appeal and required relatively low investment in technology and fixed costs. Japan promoted these industries in the 1950s, while Taiwan and Hong Kong developed them in the 1960s. Once these low-tech industries were assimilated, the Asian countries moved into steel, followed by chemicals and electronics. Eventually, the Asian economic miracle moved into the automotive and high-tech industries."
Lecture 39: The Welfare State: From Bismarck to Obama
I didn't like this at all. Frankly, it didn't work. At the same time, it was incredibly interesting to me and I liked learning about what these countries did — even if it did not end up being very effective as a whole.
Social welfare programs began after WWII. Governments throughout Western Europe were soon involved in state interventions that went far beyond the initial social welfare programs. These were programs or partial and full nationalization of key industries. Nothing new in capitalistic societies but was just thought to be a wartime imperative. The British had nationalized the coal industry during WWI and WWII. In 1946, one year after the end of the war, they did so again. They nationalized the coal industry as well as the railways and electrical power companies because they were generating losses under private ownership and each needed significant technological upgrades. Following the war, even though Great Britain was the birthplace of the industrial revolution, the notion was widespread that the government not the private sector could provide greater stability and productivity and better working conditions. France held this belief more closely than any country and nationalized the coal industry, railways, electric, banking, insurance, mining, and telecommunications industries. Large sections of manufacturing and telecommunications industries were also nationalized. Virtually all Western European countries nationalized industries to one degree or another. Nationalization did not mean government officials were actively running the companies but rather, they appointed overseers like the National Coal Board in Great Britain.
Lecture 41: Middle East: From Pawn to Power Broker
Crazy crazy crazy how this happened. I found this impactful and I learned a lot about the ripple effects that can result from one decision.
Photo by Charlie Hang on Unsplash
The Middle East enacted an embargo. By the late 1960s, continued strength of the American dollar was making American products less attractive abroad due to relatively high prices. In 1971, the US experienced a negative balance of trade (importa were greater than exports) for the first time since the late 19th century. President Nixon felt he had no choice but to take the currency off the gold standard. Oil prices spiked in 1973, upsetting international trade balances.
The price of a barrel of oil rose from $12 per barrel in 1973 to more than $40 a barrel in 1980. Saudi Arabia, shortly after this increase, which had been purchasing a larger and larger share of Aramco. By the end of the 1980s, the Saudi's had ejected their western partners from management and control of their oil fields. 1980–1982 recession was precipitated by a market shock, even while the wealth of oil-producing nations had skyrocketed. OPEC countries were now experiencing vast growth in wealth even without additional effort or output. As a result, there was extensive Arab investment in Western stock markets and banks. In 1998, after continued oil slides, the price of a barrel was as low as it had been since 1940.
Lecture 42: Germany, the European Union, and the Euro
Wow. A 248 article agreement? This of course, was later changed but hey, at least they started something and took the initiative. I particularly liked the important goals.
In May of 1957, the leaders of the 6 European coal and steel community countries signed the Treaty of Rome. The EEC (European Economic Community) was created. Massive document with 248 articles, 13 protocols, and 4 conventions which all needed to be hashed out over the coming years.
3 important goals:
1. Gradual elimination of import duties and other restrictions on trade and manufactured goods — expected to take 10 years.
2. Called members to establish common agriculture, transportation, and social welfare policies.
3. Included that members could not unilaterally renounce their membership. Was a challenge from time to time but over time, more European countries joined, though at its inception, there were 6.
Interesting to me that two groups were formed and not just one initially. The author did not go into a deep level of detail about the reasons for two initial free-trade groups but I would be very interested in understanding the reasoning there.
Photo by Joshua Fuller on Unsplash
Great Britain and 6 others including the Scandinavian countries banded together the European Free Trade Association. This sought to bring down tariffs on manufactured member goods. Great Britain and Denmark left in 1973 to join the EEC. Austria and Portugal left the next year.
Lecture 43: Free Trade: Global versus Regional Blocs
The trade deficit more than doubled?? I don't like this. Period. What does it encourage? I'm not sure honestly. I don't like the whole idea of regional blocs, I don't see the overall effectiveness. Once you remove the magnifying glass, does the positive still outweigh the negative?
When NAFTA went into effect in 1994, the expectation was that Americans would consume large quantities of things from Canadian and Mexican manufacturers. Policy leaders also anticipated that the agreement would discourage Asian and European investment in America. Trade more than tripled between the three partners after the agreement went into effect. Within 6 months of the agreement going into effect, America's trade deficit with Canada and Mexico more than doubled.
Lecture 46: China, India: Two Paths to Wealth Extremes
I loved this lecture. China and India both fascinate me, their populational rises and economical rises. Both are doing incredible things and in vastly different ways.
China is India's largest trade partner and Indus is China's largest Asian trade partner. India has become the service center of the world and China has become the manufacturing center of the world. In spite of their deep-seated social problems, these two will likely be leaders In the world economy for years to come.
Lecture 47: The Information Economy: Telegraph to Tech
I learned so much about this. Wow is history ever interesting. I couldn't even imagine being in the world that we are today without a modern price current. What would happen if the market in general was not aware of pricing? Buying power is so different around the world and so are exchange rates.
Three main reasons for publishing price currents (essentially a list of prices for goods) that started in the late 18th century:
1. It was a great way to advertise commerce to the cities of the world. More sellers and buyers were attracted to a city when they knew what prices and products were sold there.
2. Was a more efficient flow of information rather than the previously used couriers. The information was regular, reliable, and detailed.
3. A profit could be made by publishing those prices.
They started presenting and distributing price currents similarly to financial newspapers. The telegraph introduced in the 19th century also had a large impact on unifying markets both within a country and between countries.
Photo by Miguel Henriques on Unsplash
This was one of the most fascinating and insightful books that I've ever worked through. It was information dense, full of well-thought-out explanations, and LOTS of data (which I love). I always enjoy learning and bettering myself in all ways that I can and learning about the history of economics is one of the best ways I believe I can do that as I strive to become more and more influential and powerful in the business world. Stephen Schwarzmann's book, What it Takes, also shined some light on this and it was incredible how much influence Stephen has had over the state of America — beyond simply the economy. Overall, I just learned a lot a lot a lot. If you're looking to go more in-depth about the world's economy since 1400, THIS is the book; my notes are only surface-level but these are the things that most deeply impacted me.
I gave this book a 4/5