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Growth and Trade: Some Hypotheses About Long-Term Trends

Published online by Cambridge University Press:  03 February 2011

Richard N. Cooper
Richard N. Cooper
Affiliation:
Yale University
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Extract

The relationship between long-term trends in foreign trade and long-term trends in income has long been a source of fascinating speculation for scholars. As early as 1821, Robert Torrens observed that “as the several nations of the world advance in wealth and population, the commercial intercourse between them must gradually become less important and beneficial.” He believed that trade was founded on the exchange of manufactures for foodstuffs and materials; as land became scarcer as a result of population growth, the basis for trade would disappear.

Type
Articles
Information
The Journal of Economic History , Volume 24 , Issue 4 , December 1964 , pp. 609 - 628
Copyright
Copyright © The Economic History Association 1964

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References

1 Torrens, Robert, Essay on the Production of Wealth (London, 1821), p. 288Google Scholar, quoted in Lipsey, Robert E., Price and Quantity Trends in the Foreign Trade of the United States (Princeton, N. J.: Princeton University Press, 1963), p. 37Google Scholar.

2 Robertson, Dennis, “The Future of International Trade,” Economic Journal, XLVIII (Mar. 1938), 1–14CrossRefGoogle Scholar, and reprinted in American Economic Association, Readings in the Theory of International Trade (Philadelphia: Blakeston, 1949); Sombart, Werner, Die Deutsche Volkswirtschaft in Neunzehnten Jahrhundert und im Anfang des 20. Jahrhunderts (7th ed.; Berlin: G. Bondi, 1927), pp. 368–70, 388Google Scholar; Keynes, J. M., “National Self-Sufficiency,” Yale Review (June 1933)Google Scholar; Hicks, J. R., “The Long Run Dollar Problem,” in Essays in World Economics (Oxford: The Clarendon Press, 1959)Google Scholar. Hicks' paper was first published in 1953.

3 Too many to be listed here. See, however, the excellent summary provided by Meier, G. M., International Trade and Development (New York: Harper and Row, 1963)Google Scholar, ch. ii, and the references there cited. Also, Johnson, Harry G., Money, Trade and Economic Growth (Cambridge: Harvard University Press, 1962)Google Scholar, ch. iv, and Bhagwati, J., “A Survey of the Pure Theory of International Trade,” Economic Journal, LXXIV (Mar. 1964), 1–84CrossRefGoogle Scholar.

4 I assume here that all production functions are linear and homogeneous. In the absence of this assumption, simple generalizations become quite impossible. See Hodjera, Z., “Unbiased Productivity Growth and Increasing Costs,” Oxford Economic Papers, XV (Nov. 1963), 244–65.CrossRefGoogle Scholar

5 See Vanek, J., The Natural Resource Content of United States Foreign Trade, 1870–1955 (Cambridge: The MIT Press, 1963)Google Scholar. Vanek discusses “natural resources,” including mineral resources, rather than “land” in the narrow agricultural sense alone.

The celebrated studies of W. W. Leontief seem to show that the United States, contrary to expectation, exported relatively labor-intensive goods in the late 1940's. But Leontief's study covered only inputs of capital and labor, not inputs of land. Recently, Peter Kenen has suggested that if one includes the capital “embodied” in labor in the form of education and training, Leontief's paradox succumbs. See Kenen's, “Nature, Capital, and Trade,”a paper presented to the Econometric Society,December 1963(mimeo.), p. 21.Google Scholar

6 See Habakkuk, H. J., American and British Technology in the Nineteenth Century (Cambridge [Engl.]: Cambridge University Press, 1962)Google Scholar, especially ch. iv.

7 Kenen, “Nature, Capital, and Trade.”

8 This view regards capital as a highly flexible substance, like putty, which can be easily substituted for other factors throughout its life. It is perhaps more realistic to conceive of capital as being initially flexible but hardening to clay once a real investment is made. If. capital is thus fixed, the important magnitude becomes gross investment, not the total capital stock.

9 League of Nations, Industrialization and Foreign Trade (Geneva: League of Nations, 1945), p. 87–90Google Scholar and appendices.

10 In 1879–1889, exports were 6.4 per cent and imports 5.3 per cent of GNP, in 1913 prices. In 1958–1960, the percentages were 6.5 and 5.3, respectively. See Lipsey, Price and Quantity Trends, p. 44.

11 Kuznets, Simon, Six Lectures on Economic Growth (Glencoe, Ill.: The Free Press, 1959), pp. 101–3Google Scholar. The data came from Rolf Piekarz, unpublished Ph.D. dissertation, Johns Hopkins University, 1958.

12 See Deutsch, Karl, Bliss, Chester, and Eckstein, Alexander, “Population, Sovereignty, and the Share of Foreign Trade,” Economic Development and Cultural Change, X (July 1962), 353–66CrossRefGoogle Scholar. Also Deutsch, and Eckstein, , “National Industrialization and the Decline of the International Economic Sector, 1890–1957,” World Politics, XIII (Jan. 1961), 267–99CrossRefGoogle Scholar. It is perhaps worth noting here that, as more and better current data become available for the less-developed countries, students of comparative economics can be expected to vie increasingly with economic historians in making broad-gauged empirical generalizations, based on cross-section comparisons rather than on comparisons over time.

13 Gottfried Haberler has distinguished three great periods of trade liberalization: the formative period of the present European nations, when internal barriers to trade were reduced; the free-trade movement in Europe following the repeal of the Corn Laws; and the period since 1950. See his “Integration and Growth of the World Economy,” American Economic Review, LIV (Mar. 1964), 1–22Google Scholar.

14 I have relied on labor force data rather than on output data because of the easier availability and greater accuracy of the former for the early observations. Since average labor productivity varies among industries, employment data distort some what the output structure for each region, giving greater weight to agriculture, for example, and insufficient weight to manufacturing. But these will not bias the measures of regional convergence toward the national composition of output unless trends in productivity by industry differ from region to region.

15 Richard Easterlin has put together regional data on the composition of the labor force as between agricultural and nonagricultural pursuits. His figures, summarized in an index of labor force industrialization, show a clear convergence of all regions toward the national average for the nonagricultural employment rate between 1880 and 1950. However, he neglected to compute a similar index for agricultural employment. If this were constructed in the same way as his index of industrialization, it would show growing regional divergence from the national average over the same period. Easterlin, Richard, “Interregional Differences in Per Capita Income, Population, and Total Income, 1840–1950,” in Trends in the American Economy in the Nineteenth Century, NBER Studies in Income and Wealth, Vol. XXIV (Princeton, N. J.: Princeton University Press, 1960), pp. 95 and 138–40.Google Scholar

16 Garver, F. B., Boddy, F. M., and Nixon, A. J., The Location of Manufactures in the United States, 1899–1929 (Minneapolis: University of Minnesota Press, 1933)Google Scholar, especially pp. 17, 33, 87. Their “index of concentration” is the percentage of total population living outside the states in which 50 per cent of the employment of each industry is located. For all manufacturing, this index fell from 74 per cent in 1899 to 68 per cent in 1929.

17 Fuchs, Victor R., Changes in the Location of Manufacturing in the United States Since 1929 (New Haven: Yale University Press, 1962)Google Scholar, especially pp. 282–83, 290. The “coefficient of scatter” is the smallest number of states needed to account for 75 per cent of the industry's total value added. Fuchs also shows that for manufacturing there is little error in using employment figures rather than value added. Ibid., pp. 177, 238.

18 The data used in the following paragraphs have been taken from the U. S. Census Bureau, Historical Statistics of the United States (Washington: Government Printing Office, 1960)Google Scholar. Complete time series are not usually available, so intertemporal comparisons are often approximate.

19 Passenger traffic is included in the total transportation index, but it grew less rapidly than freight traffic because of the switch from public transportation to the private automobile.

20 For evidence on this point, see Schmookler, Jacob and Brownlee, Oswald, “Determinants of Inventive Activity,” American Economic Review, LII (May 1962), 165–76.Google Scholar