It is somewhat of a conceit to claim that globalization is a relatively recent phenomenon. In fact, globalization has a long and storied past that goes back to the first ships and land caravans. This past, like those in other domains, can be instructive, especially for large trading nations today. These authors, whose book on the origins of globalization has just been published, describe some of the important events and patterns that shaped globalization in another time.
Can Canadians in the 21st century gain anything from studying the economy of the ancient world? Many historians recognize that the postindustrial American global economy that arose in the 1980’s and 1990’s was the most recent one in a series of global economies. Its immediate forerunner dominated the late 19th and early 20th centuries. Canada played an important part in a free-trading global system that interlocked with the British Empire. Even this ‘industrial’ global economy was preceded by an agricultural global economy that began with the Age of Discovery in the late 1400’s, 1500’s and 1600’s. Quebec, then known as New France, played an important role in this global economy and in the four key wars between 1689 and 1763 that decided who would run its North American outpost.
Does globalization go back even further? Medieval traders linked Europe, Africa and Asia, and sent Vikings to Canada’s shores. Can the origins of globalization be traced back to antiquity, to the beginnings of trade and investment itself? We believe they can, but only if historians are careful. Ancient economies were very different from our own. The fur traders of New France, however, would easily have recognized their operations.
Modern economists usually ignore the businesses and trading networks of bygone centuries as having no lessons for us today. They were just too primitive and too different. Temples, gift exchanges, and subsistence farming seem to have little in common with a sophisticated economy with its scientific calculation of risk, profit, and productivity. The irrelevance of ancient economies for modern business was laid down by Sir Moses Finley in the 1970’s and became unchallenged orthodoxy in most universities.
Finley made a strong case for the Greeks he studied but he was on shakier ground when it came to the Romans. By the early 2000’s a group of mostly British scholars began to argue that some features of ‘primitive’ Roman economies did point to more ‘modern’ developments.
In our newest book, The Origins of Globalization we pose the question of whether a global economy existed in the ancient world. Clearly, Canada and Australia were not part of it, nor were the Olmecs in Mexico. When we consider Europe, Africa and Asia we are on much stronger ground in finding a ‘known world economy’. If we define globalization as ‘hemispherization,’ we can make a good case for the origins of globalization in a trading economy that stretched from Spain to China.
The history of ancient economies may be looked at as a series of baby steps towards the global economy of today. Each new development built upon previous ones. Long-distance trade traces far back into the Stone Age. Before 3000 BCE, city life rose up in Sumer in Southern Iraq. First the temple and then the royal palace became the public sector and trading posts were set up on the fringes of the Fertile Crescent. These were the first foreign, permanent establishments. Private merchants developed gradually over the long centuries and extended their trade to the Indus Valley, Egypt and the Aegean. By 1800 BCE, merchants and common people in the city of Ur were speculating on copper futures in Bahrein….and were wiped out in the first stock market crash.
The Assyrians set up family firms that ran profit-seeking subsidiaries many miles away, in Asia Minor and Babylonia. The House of Ashur-Imitti operated from northern Iraq with family members running branches in faraway cities such as Carchemish, Kanesh, and Hattusas, today in Syria and Turkey. This was the first step in the emergence of a multinational as we know it and this model soon became standard through the whole Middle East. Kingdoms signed treaties governing the acts of resident foreign merchants.
The Phoenicians of Ugarit and then Tyre, ancestors of the Lebanese, took the next step: maritime capitalism. Royal princes, private merchants and naval officers joined hands in managing overseas ventures. Markets were sought and establishments set up in Cyprus, Malta, Carthage, Sicily, Sardinia and in Spain. The axis of world trade shifted into the Mediterranean. Tyre, Inc. founded a network of establishments stretching from Cadiz in Spain to Nineveh in Assyria. Each of these establishments operated like a primitive version of the Hudson’s Bay Company. Much of this network later continued under Carthaginian supervision.
Greece, India and China
The Greeks started out much like other ancient peoples, with kings and managed palace economies that seemed more socialist than capitalist. Something unusual nevertheless happened among the hundreds of islands and peninsulae in the Aegean. The early kingdoms fragmented into over 1,000 independent states. Each of these states became an independent republic run first by landowners, then by tyrants. Some, like Athens, became the world’s first democracy.
The Greeks became history’s first entrepreneurial capitalists. Here there were no merchant princes, only independent traders competing in overseas markets. Ancient Greece bore a remarkable resemblance to the British Empire/Commonwealth. If Tyrian colonists behaved like the state-sponsored settlers of New France, the Greeks behaved like the English and others who came to Upper Canada and then the Prairies in the 19th and early 20th centuries. Farmers from city states such as Corinth founded whole new colonies, such as Syracuse in Sicily, that were completely self-governing. Sicily, Southern Italy, and the Greek colonies along the Aegean and Black Seas became the Albertas and Saskatchewans of the Greek world. The cheap grain they shipped back to their founding cities soon forced Corinthian and other farmers to adapt to globalization. Many became traders themselves or started growing wine, oranges and olives. Like the farmers of Ontario, they turned from grain to mixed farming.
The Greeks soon faced a challenge from Persia. The Persians unified a vast empire and adapted the infrastructure of Assyria and Babylonia as their own. This empire had everything from Babylonian bankers and Ionian Greeks to Indians. They took the first step in cross-cultural management. In effect they were linking Europe to Asia. India entered the global economy at a very early date. The well-planned cities of the Indus Valley developed a managed trading system not unlike that of their trading partners in the Middle East. Indian socialism, an economy of private managers and strong governmental supervision, itself has 4,000-year-old roots.
Did ancient India invent supply-side economics? One could make the case. A manual for economic planning and political policy known as the Arthashastra was written sometime around 100 CE. Business enterprise was to be run by the caste of the Vaishya, but heavily regulated by the local rajah in the interest of his kingdom. Kautilya, author of the Arthashastra, displayed little use for laissez-faire. Taxes were necessary to maintain the health of the kingdom. On the other hand, if taxes were too high, it would be the ruin of the kingdom. Any royal official who taxed his subjects to excess ought to be severely punished.
Unlike the Indian model, the earliest Chinese model forbade private enterprise. From 1800 BCE until well into the first millennium BCE, every aspect of the Chinese economy was subject to total state control. Unlike in the Middle East or India, private merchant princes and nongovernmental, voluntary organizations were suffocated by an all-powerful central government. Eventually, private entrepreneurs rose up in China but they did so in the only way they could in a low-trust society: in the context of the family. Extended Chinese families were huge and provided the markets for traders fearful of trusting anyone they did not know.
Despite its original lack of market freedom, China was nonetheless far ahead of the rest of the world in technology and management theory. Where much of Indian thought focused on the afterlife, Chinese thought was oriented to extreme practicality. When the Zhou dynasty crumbled around 600 BCE, thinkers wrestled with how best to manage society. Their theories could be applied to private as well as public management. Confucius argued for beneficial management. If you treated those under you well, they would love, revere and respect you. Laozi set up the philosophical basis for the free market: if you followed the laws of nature and left things alone and didn’t meddle, things would be better. Han Fei formulated the theory of fear management and absolute control. Shihuangdi, the feared Dragon Emperor, used Han Fei’s management style to unify China by mass terror and thought control. Centuries later Mao Zedong wrote poems in his honor. When the Dragon Emperor died, his successors freed up Chinese society and sought to end China’s isolation from the world.
On the other end of the Eurasian land mass the tribes of the Italian boot encountered the Greeks and the Tyrians and began to borrow from their business practices. If the Greeks paved the way for the British Empire, the Romans would pave the way for the American. Last year, Thomas Madden published a fascinating book called Empires of Trust in which he compared the United States to the Roman Republic. The Romans were to some degree a frontier offshoot of Greek civilization. They rebelled against their kings and drew up their own written constitution, the Twelve Tables. Limited government, family values, free enterprise, and a disdain for snobbish intellectuals became the heart and core of the Roman citizen ideal.
One did not find temple capitalism in Rome, where religion was a family matter. So was Roman business. We have tended to see Roman expansion as a premeditated plot to conquer the world. It was nothing of the kind. Most of Rome’s wars were defensive and preventive, and many of her rivals wanted to join her. By 291 BCE, Rome ruled most of Italy and had turned most of her former enemies into allies and protectorates. In 264 BCE, Rome was drawn into war with Carthage. The Punic Wars became a real clash of civilizations where the Latin culture of Rome faced the Near Eastern culture of Carthage.
The wars with Carthage forged a mighty Roman entrepreneurism and a Roman military-industrial complex. Roman agents captured a Carthaginian warship and Roman companies bid for contracts to reverse engineer it. One bright Roman engineer attached an iron bridge to the new Roman warship that let Roman centurions turn into marines and slaughter their enemies by boarding their ships. Rome won the first round and with it, Sicily.
War broke out again in 218 BCE when the famous Carthaginian, General Hannibal, marched across the Alps and ravaged Italy. Unlike Rome, Carthage could not supply its forces. Rome won the war by launching a seaborne invasion of Carthage. Carthage made one final attempt to even the score in 149 BCE but she was quickly destroyed. Rome now ruled the whole western Mediterranean and quickly found herself drawn into the eastern Mediterranean. She was called in to defend the Greeks from Macedonia and wound up taking them over. She inherited the entire Kingdom of Pergamum in Asia Minor and went on to absorb Syria, Judaea and Egypt. Most everyone wanted Roman protection.
The Greeks were small, free-standing entrepreneurs. The Romans became large-scale entrepreneurs. Roman law banned aristocrats from forming businesses but allowed knights to do so. Networks of knights, many of them related, formed huge partnerships and even elected a CEO. They were called societas republicanorum. A publican firm based in Italy hired agents to live in Greece or the Middle East and to represent it. According to Dr. Ulrike Malmendier of UC Berkeley, these publican companies were the first real corporations in history. They existed as legal persons with limited liability. They had shareholders and separated financial and managerial control.
The Romans had a strong private business sector. Markets were very important through the Roman Republic and the Roman Empire. Roman business history shows us that these markets were often created and sustained by government. The most lucrative markets for a Roman publican were war and tax collecting. All the armaments for the legions were produced by publican firms under contract with the Senate and People of Rome. Equipping a legion of 5,000 centurions could generate a contract worth about $C15 million. A major war could generate as much as $C300 million in contracts. Small wonder that the Roman business establishment took off and Roman knights became a force in the late Republic.
Tax collecting was just as profitable. During the last decades of the Republic, many publican firms merged into huge cartels. Rome had her own robber barons. Like many U.S. and Canadian firms today, Roman managers thought short-term. Middle managers had little job security, and staffs were as lean as possible. As publican firms shifted from market to market, downsizing was common and frequent. Knights were hired and fired as the manceps (CEO) and socii (partners) saw fit.
The rise of the publicans posed another danger for the Republic, when they began to finance the growth of private armies. Marius, Sulla, Crassus, Pompey, and Julius and Augustus Caesar all had legions loyal to them personally rather than to the Republic. These legions all had their publican supporters. By 27 BCE, Octavian was sole master of the Roman World.
Beginning around 120 BCE, all the pieces of the hemispheric economy started to come together. Rome absorbed all the territories around the Aegean and eastern Mediterranean. When she conquered Egypt she gained control of the trade routes along the Red Sea. These trade routes were dominated by Greek entrepreneurs who sailed to Ethiopia and Arabia. In 120 BCE, the Greek explorer Eudoxus learned of the Southwest Monsoon that could bring Greeks from Egypt to India and the Northwest Monsoon that carried them home and brought Indians to Africa.
Rome now inherited this market knowledge and Roman publicans busied themselves outfitting large, sturdy vessels that could carry as much as 300 tons of wine, silver and other Roman goods to India. Of course, they hired the Greeks to sail them. The same ships could carry back bulk shipments of Indian spices and Chinese silk. With 300 ships a year sailing between Egypt and India, this annual trade may have reached 300,000 tons. This was a staggering sum for its day and may even have triggered an anti-globalization movement. Pliny the Elder complained that perhaps $C5 billion a year of Rome’s money was being drained to the east. Even Tiberius Caesar complained that the imports desired by Rome’s ladies were draining the wealth of the empire.
Roman traders even set up permanent establishments on the Indian shore opposite Sri Lanka. The site of Arikamedu was filled with Roman coins and jugs for shipping wine. India’s own merchants became middlemen between the Yavanas, as the Greeks and Romans were called, and the Chinese who sailed west to meet them.
While Rome came east, China came west. Seeking allies against the ancestors of the Huns, the Han Emperor Wu sent overland expeditions far to the west. They reached Iran and encountered the rulers of the Parthian Empire. The Persian Empire had been conquered by the Macedonians and Greeks under Alexander and most of its territory passed to the rule of Alexander’s General Seleucus after his death. Between 248 and 150 BCE the lands of Iran and Iraq were conquered by a tribe of Scythian nomads called the Parthians. China and Parthia became trading partners. Next, Parthia came in contact with Rome and fought several wars with her until an uneasy truce took hold in the middle of the first century BCE.
The Parthians were fairly liberal and students of the Persian idea of cross-cultural management. They governed their conquered territories like dominions and left business in the hands of Babylonian bankers, Syrian long-distance caravan operators and Greek and Phoenician exporters. India managed the sea route in the hemispheric economy; Parthia the overland route. Caravans from Syria crossed Iraq, Iran and Central Asia to glass, textiles and horse to China and bring silk.
This ‘global’ economy was very limited by our standards but more extensive than anything that existed before. Just as today, when there is far more trade within NAFTA or the EU than between the two blocs, there was far more trade within the Roman Empire, The Indian Subcontinent and Han China than among them.
Then, as now, hemispherization/globalization was a fragile plant. Free trade depends on political stability. Political instability has doomed every ‘global’ economy in history. After 200 CE, the Han Empire broke apart. Parthia was overthrown by militant Zoroastrians who restored the Persian Empire and declared a holy war upon Rome. Rome herself began to totter under the weight of the Persians, Germans and unsustainable military expenditures. Business enterprise began to collapse. By 250, neither Rome nor China could afford to finance Indian or hemispheric trade.
Globalization is fragile
Then, as now, hemispherization/globalization depended upon political stability. By the third century CE that stability was failing. The Han Empire in China broke up into three rival states. This began to hamper China’s trade with the West. Rome suffered even more turmoil. The empire became overextended and began to suffer from political instability. Parthia was overthrown by a militant new Persian empire that waged religious warfare against the Romans. This closed most of the overland China trade to Rome. Rome in the third century CE faced a Persian-German threat and vastly increased her legions, equipping many with heavy cavalry. The new military expenditures triggered inflation. After the last Severan Emperor died in 235 the expanded legions produced a succession of thirty emperors in fifty years. The empire dissolved until reunited by Aurelian. In 284 Diocletian stripped the last pretenses of republicanism from Rome, controlled wages and prices and forged a despotism that lasted for another century. Roman companies could no longer finance direct Indian trade, and neither could China’s three warring kingdoms.
Globalization is a fragile plant and the lesson of history in both antiquity and our day remains that it can be easily torn apart by regional and national political forces. Today regionalism remains a strong force whether with NAFTA, the EU or other regional trading blocks and pure global economies remain just as theoretical as pure free markets. A change of regime or a war can easily cause a global trading network to come upon the shoals. We are hopeful that President Obama’s more multilateral approach will prove to be helpful in working in greater concert with other important economic powers to keep globalization a vital force even as it morphs into yet its next stage of evolution in its long and eventful history.