The Integration of Western Hemisphere Grain Markets in the Eighteenth Century: Early Progress and Decline of Globalization

In this work it is shown evidence supporting the idea that, if globalization is defined as the convergence of commodity prices between distant markets, the process started and advanced gradually in the eighteenth century instead of suddenly appearing after 1820, as claimed by the canonical version developed in a series of important works by O’Rourke and Williamson (1999, 2002, 2004). We use long time-series of grain prices for several markets in Western Europe and the Americas to explore the extent and dynamics of market integration across the Western Hemisphere throughout the eighteenth century. An innovative methodology, consisting in studying the standard deviations of the innovations in the ARMA model of pairwise relative prices between markets, is used. A general decrease in price dispersion is observed when the early eighteenth century is compared with the three decades preceding 1793. Neither Argentina nor Mexico participated in this general trend towards closer market integration across the Western Hemisphere. From 1793 to 1828 we observe a substantial increase in dispersion between markets. After this first backlash, globalization resumed at an unprecedented pace since it was favored by the transport revolution and other factors.