R

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de
r's
C
lu
b
M
as
oo
d
Al
iT
ha
hi
m
03
12
36
49
93
0
Key Ideas
• What’s in it for me? Learn about the ups and down of global trade over
the past millennia.
• Trade began in Mesopotamia with early agriculture and the materials for
simple tools.

0
• Trade began in Mesopotamia with early agriculture and the materials for

93
simple tools.

49
• Spices became hugely popular, while slavery and disease were

36
exacerbated by trade.

12
03
• Spanish and Portuguese explorers greatly expanded the known world
and its trade routes

m
hi
• The seventeenth century marked the start of worldwide trade, with
ha
Holland as the center of commerce.
iT

• Though England was once under the spell of mercantilism, free trade
Al

eventually won out.

d
oo

• Steamships and refrigeration revolutionized global and transcontinental

as

trade.
M

• The Great Depression was the result of protectionist acts that limited
b

free trade.
lu
C

• The United States embraced free trade in the post-war years, but
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globalization has also created dangerous inequality.

de

• The United States embraced free trade in the post-war years, but
ea

globalization has also created dangerous inequality.

R

• Final summary
 1
What’s in it for me? Learn about the ups and down of global trade over the past
millennia.
These days, the marvel of trade is often taken for granted. Take the device you
are reading these pages on; it is almost definitely a result of global trade.
Companies like Apple design their products in the United States, gather parts
from all around the world to be assembled into devices in China and sell the
finished products on the international marketplace. Global trade is a simple

0
93
fact of life, linked to countless aspects of our daily lives.

49
36
However, global trade has not always been this easy or ubiquitous. Before the

12
Industrial Revolution, long travel times and primitive technology hampered

03
efforts to expand international markets. However, since World War II, free
trade has blossomed and, in many senses, has become indispensable for

m
modern societies. It has produced both winners and losers, though, and many
hi
aspects of free trade indicate some possibly worrying times for the future.
ha
iT
Al

In these pages, you’ll learn

d
oo
as

• that the history of long-distance trade stretches back thousands of years;

M

• how a desire to speed up trade led to the discovery of the Americas; and
b
lu

• why protectionism helped exacerbate the Great Depression.

C
r's
de
ea
R
 2
Trade began in Mesopotamia with early agriculture and the materials for
simple tools.
At your local supermarket, you might find fruit and vegetables from places as
far away as Peru, New Zealand or Portugal; at Western appliance stores, you’ll
see TVs from Japan or Taiwan; and at the clothing store, you’ll find shirts
made in China or Bangladesh.

0
Today’s globalized trade touches every part of our lives – but we hardly notice

93
it anymore.

49
To get the full story of how we reached this point, we have to rewind several

36
thousands of years to Mesopotamia, where commerce began.

12
Some of the earliest trade routes formed around the Persian Gulf, where

03
agriculture was being developed and basic manufacturing methods were being

m
used to create advanced tools.
hi
ha
One of the earliest goods to be traded was obsidian, a black volcanic rock that was valued in
prehistoric times because it was easy to turn into a razor-sharp weapon or tool.
iT

Archeologists have found obsidian flakes in the Franchthi Cave in Greece that date back over 12,000
Al

years. And the only way for that obsidian to have ended up there was by having been transported
from somewhere else, most likely from Mesopotamia.
d
oo

The region of Mesopotamia is often called “the cradle of civilization.” The ancient and fertile land
as

was located between the Euphrates and Tigris rivers, two waterways that connect to the Persian Gulf.
M

Mesopotamia was rich in many goods, including barley, fish and wool. But it also lacked some vital
resources, including the timber, metals and stone needed to build weapons, boats and shelters.
b
lu

The benefit of trade thus quickly became clear, and the Mesopotamian nations
C

of Sumeria, Assyria and Babylonia used their surplus goods to trade for metals
r's

from Oman, marble from Persia and lumber from Lebanon. This is how the
de

Persian Gulf became an early center for trade and commerce by 3000 BC.
ea
R

As civilization slowly spread westward to Egypt and Greece, new trade routes
emerged in the Red Sea and the Mediterranean. Greece exported wine and oils
in exchange for the grains it lacked, like the wheat it imported from Egypt.
 3
Trade began in Mesopotamia with early agriculture and the materials for
simple tools.

At your local supermarket, you might find fruit and vegetables from places as
far away as Peru, New Zealand or Portugal; at Western appliance stores, you’ll
see TVs from Japan or Taiwan; and at the clothing store, you’ll find shirts

0
made in China or Bangladesh.

93
49
36
Today’s globalized trade touches every part of our lives – but we hardly notice

12
it anymore.

03
m
To get the full story of how we reached this point, we have to rewind several
hi
thousands of years to Mesopotamia, where commerce began.
ha
iT
Al

Some of the earliest trade routes formed around the Persian Gulf, where
agriculture was being developed and basic manufacturing methods were being
d
oo

used to create advanced tools.

as
M

One of the earliest goods to be traded was obsidian, a black volcanic rock that
b
lu

was valued in prehistoric times because it was easy to turn into a razor-sharp
C

weapon or tool.
r's
de

Archeologists have found obsidian flakes in the Franchthi Cave in Greece that
ea

date back over 12,000 years. And the only way for that obsidian to have ended
R

up there was by having been transported from somewhere else, most likely
from Mesopotamia.

The region of Mesopotamia is often called “the cradle of civilization.” The

ancient and fertile land was located between the Euphrates and Tigris rivers,
two waterways that connect to the Persian Gulf.
Mesopotamia was rich in many goods, including barley, fish and wool. But it
also lacked some vital resources, including the timber, metals and stone
needed to build weapons, boats and shelters.

The benefit of trade thus quickly became clear, and the Mesopotamian nations
of Sumeria, Assyria and Babylonia used their surplus goods to trade for metals

0
from Oman, marble from Persia and lumber from Lebanon. This is how the

93
Persian Gulf became an early center for trade and commerce by 3000 BC.

49
36
12
As civilization slowly spread westward to Egypt and Greece, new trade routes
emerged in the Red Sea and the Mediterranean. Greece exported wine and oils

03
in exchange for the grains it lacked, like the wheat it imported from Egypt.

m
hi
ha
4
iT

Spices became hugely popular, while slavery and disease were exacerbated by
Al

trade.
d
oo
as

When a Westerner buys a pair of sneakers, chances are they only have a vague
M

idea of where it was produced. China? Maybe India?

b
lu
C

The same thing applied to the spice trade, as European merchants in Genoa or
r's

Venice would be at a loss to name the precise origin of cinnamon or nutmeg.

de

All they knew is that it came from the East.

ea
R

The insatiable appetite for spices first took hold in Europe around 1000 AD,
during medieval times, when the demand for exotic spices soared. Since spices
were so ravenously desired by wealthy Europeans, merchants could charge a
pretty penny; in fact, their profits were usually well over 100 percent.
Even physicians and pharmacists fell under the spell of spices, prescribing
them for all sorts of ailments and adding them to their remedies. It wasn’t as if
these spices cured anything, but their presence made the drugs attractive in a
mysterious and exotic way.

But there was a far more sinister side to spices: the slave trade.

0
93
European merchants purchased their spices in Arab markets, like the ones in

49
Cairo or Alexandria, Egypt. As payment, the merchants often sold slaves,
mostly from the Balkan region, who would then be turned into Muslim soldier

36
slaves.

12
03
Unbeknownst to the European merchants, the spices they were buying were

m
usually obtained in China by Arabs who traded ivory and incense for the
hi
ha
sought-after ingredients.
iT
Al

Before long, another danger of global trade would appear: disease.

d
oo
as

The worst disease by far was the plague, or the “Black Death,” as it became
M

known, and the most gravely affected areas were port cities like Venice, Genoa
b

or Bruges, where a lot of trade happened.

lu
C
r's

Venice lost 60 percent of its population when the plague’s first wave hit in 1348.
de
ea
R

The disease is believed to have originated somewhere in China’s Himalayan

region. From there, infected rats crawled onto ships headed to Arabia, and
their fleas found their way into textile goods that were sent to Europe, where
both humans and pets became infected.
 5
Spanish and Portuguese explorers greatly expanded the known world and its
trade routes.

By the fifteenth century, the rising star of the trade world was Portugal. Having
developed a new and improved cargo ship called the caravel, the Portuguese
perfected the maritime technology that would allow Europeans to open their

0
own trade routes in the Indian Ocean.

93
49
36
Portuguese merchants set up strategic ports along the east coast of Africa, and

12
they were the first to make it all the way around South Africa and back up
toward the Indian Ocean.

03
m
hi
Spain was also growing in power, and a Spanish-Portuguese alliance moved
ha
boldly westward, into the vast open waters of the Atlantic.
iT
Al

By this time, educated people no longer fooled themselves into thinking the
d
oo

world was flat, but heading westward in the hopes of finding a quicker route to
as

India or China was still considered a dubious plan. Nevertheless, the Italian
explorer, Christopher Columbus, was able to sell this idea to Spanish royalty.
M
b
lu
C

While no one knew what the exact length of the western route to India would
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be, one could estimate by subtracting the length of the eastward route from the
Earth’s circumference. This was a distance that ancient scholars like Ptolemy
de

had already calculated, and they were surprisingly accurate in showing it to be

ea

several thousand miles longer than the eastward route.

R

Despite these predictions, Columbus was determined to pursue a westerly

route. In 1492, he reached the Caribbean, where he was greeted by natives that
he assumed were Indians. The New World of the Americas was now on the
European map.
In 1519, a Portuguese explorer named Ferdinand Magellan would further
expand the known world with the first complete voyage around the globe.

Setting out from Spain, Magellan sailed around the southern tip of the
Americas and reached the Philippines, where his voyage was cut short by an
angry native with a sharp Filipino spear. However, the Spaniard Juan Sebastián
Elcano became the ship’s new captain and continued the journey, sailing
along the coast of Africa and back up to Spain, completing the

0
93
circumnavigation of the world.

49
36
6

12
The seventeenth century marked the start of worldwide trade, with Holland as

03
the center of commerce.

m
hi
ha
With the amazing sea voyages of the sixteenth century, including those of
iT

Columbus and Magellan, humanity’s understanding of the world was

Al

expanding, along with the business of trade. It was now possible for a truly
global economy to take shape.
d
oo
as

We can trace today’s globalized market back to the seventeenth century.

M
b
lu
C

The first global-minded traders were the Spanish, the Portuguese and the
r's

Dutch. Their powerful governments had experienced sailors with a thorough

understanding of how to use the oceanic winds to their advantage. This useful
de

knowledge is what allowed their trading vessels to cross the world’s oceans
ea

with ease while others struggled.

R

By 1650, goods from all corners of the globe were crisscrossing through global
marketplaces. It was now possible to find products such as corn, wheat, coffee,
tea and sugar far from their native regions.
After the voyages of Columbus, sugar cane from the Spanish Canary Islands
was brought to the Caribbean, where large-scale cane production began. These
efforts were undertaken purely for the eager European merchants back home.

With the increase in global trade, some nations began looking to the mutual
benefit of corporate mergers. The two greatest powers at the time were
England, which operated the English East India Company, and Holland,
which operated the Dutch East India Company.

0
93
49
Over the course of the sixteenth century, both of these nations grew to become

36
global superpowers, with Holland becoming the most financially advanced

12
European country. By 1600, Holland’s interest rates were at a mere 4 percent,

03
which spurred widespread borrowing and tremendous economic growth. By
comparison, England’s borrowers were paying 10-percent interest on their

m
loans.
hi
ha
iT

What helped Holland’s economic might most of all was the fact that Dutch
Al

capitalists were eager to invest that money in trade corporations like the Dutch
d

East India Company.

oo
as
M

7
b

Though England was once under the spell of mercantilism, free trade
lu

eventually won out.

C
r's
de

While Holland may have been top dog in the 1600s, as the years went on,
ea

European economic supremacy shifted toward England.

R

By the eighteenth century, the world’s biggest corporate enterprise was the
English East India Company (EIC), which had supreme control of the highly
profitable cotton trade between India and Britain.
The EIC was a classic example of a powerful monopoly, so it’s no surprise that
it was an early target of scorn from free-trade advocates like the economist
Adam Smith. It seemed clear to Smith that the British government should be
supporting a variety of enterprises to promote healthy competition, instead of
running a state monopoly.

At the time, however, the prevailing economic theory was mercantilism, which
adhered to the belief that international commerce was basically a zero-sum

0
93
game. This meant that the EIC operated on the idea that there was only so
much wealth to go around. So if they were going to prosper, everyone else had

49
to suffer.

36
12
03
The theory of mercantilism also held that a nation’s gold and silver reserves
were a direct reflection of its wealth. In turn, this led mercantilist nations like

m
England to prohibit any spending on imports, while encouraging exports. In
hi
1721, if you were caught wearing imported cotton garments in England, you’d
ha
be subject to a £5 fine.
iT
Al
d

Meanwhile, free-trade advocates like Henry Martyn tried to convince people

oo

that it was actually the amount that a nation consumed, not possessed, that
as

defined its wealth.

M

It wasn’t until the nineteenth century that free trade theories began to take
b

hold.
lu
C

Adam Smith’s economic treatise, The Wealth of Nations, became highly

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influential and led England to encourage a multitude of businesses to compete

in order to provide the best product and price.
de
ea

David Ricardo’s Principles of Political Economy and Taxation from 1817 also
R

helped lay the groundwork for a new economy based on the law of comparative
advantage. Ricardo recognized that a nation should focus on manufacturing
goods that it can produce efficiently, while importing what it can’t.
In 1860, England’s Cobden-Chevalier Treaty removed import tariffs on goods
like French cotton and helped spread the spirit of free trade across Europe.
 8
Steamships and refrigeration revolutionized global and transcontinental trade.

Today’s manufacturing industry is like an elaborate dance with multiple

partners.
Different nations produce various pieces of cars, computers, TVs and stereos,

0
then they’re shipped off and assembled somewhere else entirely. Sections of

93
certain products might cross and recross two or more oceans before they

49
become part of a final product ready for purchase.

36
12
You might think this is a new way of doing business, but global manufacturing

03
actually dates back to the nineteenth century.

m
hi
ha
At the heart of this development were several breakthrough technologies that
made long-distance transport and trade far easier.
iT
Al
d

One of these technologies was the steamship, which became increasingly

oo

efficient until it finally surpassed sailing as the preferred means of shipping in

as

1890.
M
b
lu

The next development was the railroad, along with steam-powered

C

locomotives, which revolutionized transport over land, especially in the United

r's

States. Railroads made it possible for a wide range of goods to be transported

de

from one coast to the other regardless of the weather conditions.

ea
R

And then, in 1830, came refrigeration, which allowed cargo ranging from cut
flowers to beef to be kept fresh on long journeys. By the late 1800s, the United
States was sending several hundred thousand tons of beef to Britain each year,
thanks to refrigerated compartments.
By 1900, shipping costs were so cheap that transcontinental trade made good
business sense. American grain could now compete with European grain and
people around the world could buy tulips and eat strawberries year-round.

These developments were perhaps most important for bulk trade goods, like
coal and ore. England’s smelting factories imported ore from all over the globe,
including Spain, Cuba, Australia, Chile and Arizona, and sent back coal to
each of these destinations.

0
93
49
9

36
12
The Great Depression was the result of protectionist acts that limited free trade.

03
Heading into the twentieth century, free trade appeared healthy and
harmonious. But then came the events of the 1920s that sank free trade into an

m
abyss that eventually led to the Great Depression.
hi
ha
It all began in 1922, with the Fordney-McCumber Tariff, which set off a wave
iT

of protectionism in the United States.

Al

Signed into law by Republican President Warren G. Harding, the tariff was
d

designed to protect American factories and farmers by setting import tariffs for
oo

various goods at over 40 percent. When it was first enacted, the new law
as

seemed to work, leading to the happy-go-lucky times known as “the Roaring

M

Twenties.” But those highs soon became crushing lows.

b

The 1930s ushered in the Great Depression, and Republican politicians initially
lu

responded with even harsher protectionist efforts in the form of the Smoot-
C

Hawley Tariff Act, which raised import tariffs to even higher levels. Now, the
r's

average tariff on imported goods was close to 60 percent.

de
ea
R

To understand why the United States went in this direction, we need to look at
the trade developments of the nineteenth century. In 1870, the price of meat
was 93 percent higher in Liverpool than in Chicago. But in 1913, that difference
had shrunk down, like a piece of beef jerky, to a mere 16 percent.
This was the result of shipping costs becoming so cheap. The prices for
imported goods were converging with the price of local goods, and local
competition was suffering, particularly where American food products were
concerned. So, to protect their local businesses, merchants were calling for
protectionism.

What made matters worse was the reaction in Europe, which was one of pure
horror. European nations enacted their own import tariffs on American goods,

0
93
including cars or radios, which were well in excess of 50 percent.

49
36
Economists now look to the Smoot-Hawley Act as one of the primary triggers

12
for the Great Depression. But, as it turned out, the trend of protectionism

03
wouldn’t last long.

m
hi
ha
10
iT

The United States embraced free trade in the post-war years, but globalization
Al

has also created dangerous inequality.

d

While the United States may have put the kibosh on free trade at the start of
oo

the twentieth century, by the 1950s, it was embracing it with open arms.
as

This change of attitude happened in 1945, as World War II came to an end.

M
b

Since the United States was the last man standing at war’s end, the nation had
lu

little to fear in terms of foreign competition, so the doors to the free market
C

were once again open wide.

r's

Also helping matters were the advances that had been made in global
de

transportation. With the introduction of the combustion engine and improved

ea

airplanes, as well as new shipping containers, free trade was not only beneficial
R

– it made economic sense.

The prevailing attitude in the United States now held that if American t-shirts
could be produced at a slightly cheaper cost in another country, production
should be moved there tomorrow! And this was a strategy that brought a great
deal of wealth to the United States in the post-war years.
Statistics show that all free-trading nations experienced high growth rates
during the twentieth century – higher than non-free-trading nations. Data also
shows how free trade can allow a developing country to join the ranks of world
powers.

However, free trade has not benefited everyone.

0
93
Throughout the developed world, low-skilled laborers have seen very little of

49
the rewards from free trade that people in management and high-skilled
positions have experienced. Currently, the salary of the average worker in the

36
West has remained stagnant for a full generation, while executive salaries are

12
soaring.

03
m
It is patently clear that this income disparity and general inequality are among
hi
ha
the leading causes of social and political turmoil, which is why closing this gap
needs to be a big priority.
iT
Al
d

But instability isn’t just an issue of social and civic responsibility; it also
oo

discourages investment and slows economic development. So it really is in

as

everyone’s best interest to close the wage gap, and soon.

M
b
lu
C
r's
de
ea
R
 11
The United States embraced free trade in the post-war years, but globalization
has also created dangerous inequality.
While the United States may have put the kibosh on free trade at the start of
the twentieth century, by the 1950s, it was embracing it with open arms.

0
This change of attitude happened in 1945, as World War II came to an end.

93
49
36
Since the United States was the last man standing at war’s end, the nation had
little to fear in terms of foreign competition, so the doors to the free market

12
were once again open wide.

03
m
hi
Also helping matters were the advances that had been made in global
ha
transportation. With the introduction of the combustion engine and improved
airplanes, as well as new shipping containers, free trade was not only beneficial
iT

– it made economic sense.

Al
d
oo

The prevailing attitude in the United States now held that if American t-shirts
as

could be produced at a slightly cheaper cost in another country, production

M

should be moved there tomorrow! And this was a strategy that brought a great
b

deal of wealth to the United States in the post-war years.

lu
C
r's

Statistics show that all free-trading nations experienced high growth rates
de

during the twentieth century – higher than non-free-trading nations. Data also
ea

shows how free trade can allow a developing country to join the ranks of world
powers.
R

However, free trade has not benefited everyone.

Throughout the developed world, low-skilled laborers have seen very little of
the rewards from free trade that people in management and high-skilled
positions have experienced. Currently, the salary of the average worker in the
West has remained stagnant for a full generation, while executive salaries are
soaring.

It is patently clear that this income disparity and general inequality are among
the leading causes of social and political turmoil, which is why closing this gap

0
93
needs to be a big priority.

49
36
But instability isn’t just an issue of social and civic responsibility; it also

12
discourages investment and slows economic development. So it really is in

03
everyone’s best interest to close the wage gap, and soon.

m
hi
ha
Final summary
iT
Al

The key message in these pages:

d
oo
as

The Silk Roads first emerged when the trade routes in Persia and China
M

meshed and grew. East and West were now connected. The exact location and
b

extent of these Silk Roads have changed as humans have shaped the world
lu

around them. But the basic principle has remained the same: goods and ideas
C

have flowed through the Silk Roads and, consequently, the desire to control
r's

them has shaped the course of history and the world of today.
de
ea
R