The Three Flows of the World Economy

The world changed profoundly in the nineteenth century (1815–1914). Economists identify three types of movement or 'flows' in international economic exchange:

  1. the flow of trade — largely trade in goods (such as cloth or wheat);
  2. the flow of labour — the migration of people in search of employment;
  3. the movement of capital — for short-term or long-term investment over long distances.

All three flows were closely interwoven and affected people's lives deeply, though they could sometimes be broken (labour migration, for instance, was often more restricted than the flow of goods or capital).

The Corn Laws and a Global Agricultural Economy

In nineteenth-century Britain, self-sufficiency in food meant lower living standards and social conflict. Population growth had pushed up food-grain prices, and under pressure from landed groups the government restricted the import of corn — laws known as the 'Corn Laws'. Unhappy with high prices, industrialists and urban dwellers forced their abolition.

After the Corn Laws were scrapped, cheaper food could be imported than produced at home; British agriculture could not compete, land was left uncultivated, and people migrated overseas. To meet British demand, lands were cleared and food production expanded in Eastern Europe, Russia, America and Australia. Nearly 50 million people emigrated from Europe to America and Australia, and about 150 million in all left their homes worldwide. By 1890 a global agricultural economy had taken shape, and between 1820 and 1914 world trade multiplied 25 to 40 times (nearly 60 per cent being primary products). Closer home, the British built the Canal Colonies in west Punjab to grow wheat and cotton for export.

The Role of Technology

Technology — the railways, steamships and the telegraph — was essential to the transformed nineteenth-century world, though these advances were often the result of larger social, political and economic factors (colonisation itself stimulated investment in faster railways and larger ships).

The trade in meat is a good example. Till the 1870s, animals were shipped live from America to Europe and slaughtered on arrival — but live animals took up ship space, and many died or lost weight, so meat was an expensive luxury. The development of refrigerated ships allowed animals to be slaughtered at the starting point (in America, Australia or New Zealand) and transported as frozen meat. This reduced shipping costs and lowered meat prices, so Europe's poor could add meat to their diet — improving living conditions and support for imperialism.

Questions and Answers

Q1. What are the three flows of international economic exchange? Ans. They are the flow of trade (in goods such as cloth and wheat), the flow of labour (the migration of people for work), and the movement of capital (for short-term or long-term investment over long distances).

Q2. What were the Corn Laws and what happened after their abolition? Ans. The Corn Laws were British laws that restricted the import of corn to keep food prices high for landed groups. After their abolition, cheaper food was imported; British agriculture could not compete, land lay uncultivated, and people migrated overseas while food production expanded abroad.

Questions and Answers (continued)

Q3. How did refrigerated ships change the meat trade? Ans. Before refrigeration, live animals were shipped and slaughtered on arrival, which was costly and wasteful, making meat an expensive luxury. Refrigerated ships allowed animals to be slaughtered at the source and shipped as frozen meat, lowering costs and prices so that even the poor in Europe could eat meat.

Q4. Show how Britain's decision to import food led to migration. Ans. After the Corn Laws were scrapped, British agriculture could not compete with cheap imports, so land was left uncultivated and workers lost jobs and migrated overseas. To supply Britain, lands were cleared abroad, requiring settlers, so people migrated to America and Australia for work.