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National Industrialization and the Declining Share of the International Economic Sector, 1890–1959

Published online by Cambridge University Press:  18 July 2011

Karl W. Deutsch  and
Alexander Eckstein
Karl W. Deutsch
Affiliation:
Yale University
Alexander Eckstein
Affiliation:
the University of Rochester
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Extract

About the beginning of the present century, the economic historian Werner Sombart proposed an interesting generalization. The share of foreign trade in total national income, he said, was bound to decline in every country as it became more industrialized.

Type
Research Article
Information
World Politics , Volume 13 , Issue 2 , January 1961 , pp. 267 - 299
Copyright
Copyright © Trustees of Princeton University 1961

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References

1 Sombart, Werner, Die Deutsche Volkswirtschaft im neunzehnten Jahrhundert, 3rd ed., Berlin, Bondi, 1913, pp. 368–76, 528.Google Scholar For some critical comments on Sombart's views, see Hirschman, Albert O., National Power and Structure of Foreign Trade, Berkeley, Cal., 1945, pp. 146–51.Google Scholar

2 For examples of the attention devoted to interest groups by recent students of politics and international affairs, see the volume edited by Macridis, R. C., Foreign Policy in World Politics, New York, 1958Google Scholar; and for particular countries, Almond, G. A., The American People and Foreign Policy, New York, 1950Google Scholar; Key, V. O., Politics, Parties and Pressure Groups, 4th ed., New York, 1954Google Scholar; Truman, D. B., The Governmental Process: Political Interests and Public Opinion, New York, 1951Google Scholar; Aron, Raymond and Lerner, Daniel, France Defeats EDC, New York, 1957Google Scholar; Breitling, Rupert, Die Verbände in der Bundesrepublik, Meisenheim, Hain, 1955Google Scholar; Eschenburg, Theodor, Herrschaft der Verbände?, Stuttgart, Deutsche Verlagsanstalt, 1955Google Scholar; Kaiser, J. H., Die Repräsentation organisierter Interessen, Berlin, Duncker und Humblot, 1956Google Scholar; Reigrotzki, Erich, Soziale Verflechtungen in der Bundesrepublik Tübingen, Mohr, 1956Google Scholar; Speier, Hans and Davison, W. P., eds., West German Leadership and Foreign Policy, Evanston, Ill., 1957Google Scholar; etc.

3 Cf. Lasswell, Harold D. and Kaplan, Abraham, Power and Society, New Haven, Conn., 1950, pp. 58–60, 83–84, 129.Google Scholar

4 Sir Angell, Norman, The Great Illusion, London, 1910, pp. 187–91Google Scholar, and The Foundations of International Polity, London, 1914, pp. 15–20. In these works Sir Norman assumed that the conspicuous nineteenth-century growth in international economic interdependence was still continuing at an undiminished or even at an accelerated pace. In a later essay, published in 1940, Sir Norman no longer argued that economic interdependence was rapidly growing, but ramer that it had not declined: “During the century. … [1815–1914], the world had become almost one economic unit. … When [World War I] came to an end, the trade movements could not be restored to the old channels. … More than one economist has pointed out that the ratio of exports to internal production shows over a long period a fairly constant ratio. In spite of the rising tide of protectionism since the 1870's, the average annual growth of world trade between 1883 and 1913 was 3.6 per cent, which is practically equivalent to the yearly growth of basic production during the same time—proportions which seem to have been maintained or even bettered in the post-war years. …” Sir Norman Angeli, “The Economics of War,” in Spahr, Walter, ed., Economic Principles and Problems, 4th ed., II, New York, 1940, pp. 616–17.Google Scholar

For an extreme assertion of growing international economic interdependence, see also Delaisi, Francis, Political Myths and Economic Realities, New York, 1927, pp. 75–140.Google Scholar For general implicit assumptions that economic contacts would automatically and naturally tend to cut across the lines of nation states, see also Clark, Grover, A Place in the Sun, New York, 1936Google Scholar, and The Balance Sheet of Imperialism, New York, 1936; Sulzbach, Werner, Nationales Gemeinschaftsgefühl und wirtschaftliches Interesse, Leipzig, Hirschfeld, 1929, pp. 24–29Google Scholar, and National Consciousness, Washington, , D.C., American Council on Public Affairs, 1943, pp. 57–61.Google Scholar In the latter work, however, Professor Sulzbach adds that “current economic tendencies” favor greater government control “and an increase of nationalism” (p. 159). Cf. also the more carefully qualified views of Quincy Wright: … On the whole, general technological and economic progress increases the interdependence of all peoples …,” but “the rise of the new nationalism and of new concepts of social justice makes restoration of such a cosmopolitan economy [as in the late nineteenth century] unlikely” (The Study of International Relations, New York, 1955, pp. 250, 258). A highly illuminating empirical discussion, with findings paralleling many of those in the present study, is given in Kuznets, Simon, Six Lectures on Economic Growth, Glencoe, Ill., 1959, esp. Table 11, pp. 101–3Google Scholar, with reference to Piekarz, Rolf R., “Proportion of Foreign Trade in National Product and Economic Growth,” unpublished doctoral dissertation (Johns Hopkins University, 1958).Google Scholar

5 Deutsch, K. W., “Shifts in International Communication Flows,” Public Opinion Quarterly, XX, No. 1 (Spring 1956), pp. 143–60.CrossRefGoogle Scholar

6 Sombart, op.cit., Cf. also the well-known books by Myrdal, Gunnar, An International Economy, Problems and Prospects, New York, 1956Google Scholar, and Rich Lands and Poor: The Road to World Prosperity, New York, 1958; and his articles, “Psychological Impediments to Effective International Co-operation,” Journal of Social Issues, Special Supplement, No. 6 (1952), and “Economic Nationalism and Internationalism,” Australian Outlook (Sydney), XI, No. 4 (December 1957), pp. 3–50.

7 Lerner, Daniel, “French Business Leaders Look at EDC: A Preliminary Report,” Public Opinion Quarterly, XX, No. 1 (Spring 1956), p. 220.Google Scholar

8 Cf. Rennie, Ysabel F., The Argentine Republic, New York, 1945, pp. 317–19, 327–28, 341, 379–80.Google Scholar Cf. also Wythe, George, Industry in Latin America, New York, 1945, pp. 84–87, 114–18.Google Scholar

9 For the notions of “power base” and “power potential,” see Lasswell and Kaplan, op.cit.,

10 The data given in Tables 13 and 14 should also correct an erroneous impression given in a chart by MrWoytinsky, W. in World Commerce and Governments (New York, Twentieth Century Fund, 1958, p. 67).Google Scholar In this chart Mr. Woytinsky plotted foreign trade ratios with per capita incomes for a large number of countries. He then drew, presumably by freehand methods, a curve of approximate fit, which suggested that the T/Y ratio ought to be low for poor countries, become high for countries in the middle-income range, and become low again for the very rich countries. The curve would indeed fit Mr. Woytinsky's tabulation, but the relationship which it summarized is in part fortuitous, since the very large countries, such as India, China, and the United States, happen to be concentrated at the ends of the income scale, thus bending the curve downward at both ends, while many of the high-trading countries of Western Europe happen to be near to the middle of Mr. Woytinsky's income scale.

11 United Nations, Economic Survey of Europe in 1957, Chapter VI, p. 22Google Scholar, Chart 3, and Appendix 66, Table XXXVII.

12 Ibid., p. 2, Table 1; and United Nations, Direction of International Trade, Statistical Papers, Series T, Volume IX, No. 7, New York, 1958.

13 New York Times, September 17, 1959, p. 18, col. 4. These data may serve to put in perspective the massive earlier shift toward intra-Soviet bloc trade between 1948 and 1951. Cf. Brzezikski, Z., The Soviet Bloc, Cambridge, Mass., 1960, pp. 126–27, 130–31.Google Scholar

14 Cf. also the illuminating comments by Albert O. Hirschman: “Imports play a dual role in the course of development. First, as we shall see, they bring with them powerful development stimuli. And yet this creative role is being performed in a manner worthy of ancient tragedy: once the stimuli have become sufficiently strong to result in effective development moves, the specific commodity flows from which they emanated in the first place are destined to wither and die. … Imports … reconnoiter and map out the country's demand; they remove uncertainty and reduce selling costs at the same time, thereby bringing perceptibly closer the point at which domestic production can economically be started. This point is of course again determined by the minimum size of plant, as well as by cost and location factors that jointly define the ‘domestic production threshold.’ … The gradual swallowing up of manufactured imports is certainly an everyday experience in developing countries. The defenders of traditional international trade theory lament it because they view it as a loss of real income caused by interferences with the price mechanism. The protectionists and advocates of industrialization are delighted by it because they see in it liberation from exploitation by the industrial countries. But both parties have failed to see the connection between the two phases, i.e., the manner in which the growth of imports induces domestic production” (The Strategy of Economic Development, New Haven, Conn., 1958, pp. 120–22).

15 The Contracting Parties to the General Agreement on Tariffs and Trade (GATT), Trends in International Trade: Report by a Panel of Experts, Geneva, October 1958, pp. 20–21Google Scholar, and Table 2, p. 20. The panel was chaired by Professor Gottfried Haberler and its other members were Roberto de Oliveira Campos, James Meade, and Jan Tinbergen.

16 For a highly relevant discussion of this problem, see Elliot, William Y., The Political Economy of American Foreign Policy: Report of a Study Group, New York, 1955, pp. 38–54.Google Scholar