URSABLOG: Follow The Money

The coming trade wars – I assume there will be more than one as President Elect Trump seemed to have declared them against most of the world whilst he was campaigning – are dominating conversations in the shipping world at present, mostly because no-one has a clue how it will turn out, but also no-one wants to bet on what Trump will actually do when he walks back into the Oval Office. Personally I doubt whether he knows himself. The feeling appears to be that that this is all unprecedented, and this feeling is adding to a sense of nervousness and trepidation. How will it affect the markets? How will it affect shipping? But trade wars are nothing new, and  history is littered with examples of the long term effects of barriers to trade being erected, and the consequences – measured over centuries rather than electoral cycles – can be striking.

Let me say from the start that I think trade – the buying and selling of goods over time and distance – is fundamentally a good thing. In fact I think I can make a fairly good case that the miracle that was Classical Greece – the period from the 7th to the 4th centuries BCE – was unique because it was driven by trade between the πόλεις – the Greek city states – and between them and other cultures, and other political systems. Trade – through the transfer of wealth, people, ideas, technology and goods – was the catalyst that sparked the explosion of scientific, philosophical, artistic and political development and the economic growth that came from it, which in turn spread outside Classical Greece itself. Although there are political problems that come with the unfettered movement of capital and people, the problems generally tend to come from either a short-sighted view of what trade is for (and then manipulating it), or from economies not using the spoils of trade to invest in their societies, or others. Trade wars, and military ones for that matter, normally break out due to a sense of grievance – economically, politically, culturally, historically – from one party or another in response to a rise in emerging powers, or trying to address their own decline. It’s always easier to blame someone else rather than face up to your own shortcomings.

One of the puzzles of history which has tested some of the greatest historians and thinkers (including Montesquieu, Voltaire and Gibbon) over the ages is what caused the end of classical antiquity, the relative decline of Roman and Greek civilisations in the Mediterranean from the 5th  to the 10th centuries of our era, and the subsequent shift of political and economic activity towards northern Europe. It was long held that it was the invasion of Germanic invaders from northern Europe – the various flavours of goths and assorted vandals – that was the cause. But this way of thinking is a bit old fashioned these days, and current consensus appears to be that even though there was significant disruption caused by these waves of invasion, Roman institutions and commerce in the Mediterranean – east and west – continued to function pretty much as normal. Even the death of the proto-Byzantian emperor Theosodosius I in 395 that split the Roman Empire into separate eastern and western halves did little to diminish trade flows.

A more likely reason, at least according the historian Henri Pirenne, was the change of trade flows caused by the expansion of the Arab Caliphate along the southern Mediterranean coast and into the Iberian peninsular that disrupted commerce and political ties in the Mediterranean, and shifted energy, trade and resources northwards. Once the Caliphate reached the Middle Sea and started to increase their naval capabilities, they ended Byzantian naval control of the western Mediterranean and continually contested its control of east, with frequent raids on cities throughout the region.

According to Johannes Boehm and Thomas Chaney in their paper Trade And The End of Antiquity published in September this year, trade flows – measured by the distribution of coins found and dated by archaeologists over time – between the north and south coasts of the Mediterranean basically dried up once the Caliphate had control of the coasts on the bottom half. There was lot of east-west flows of coins – a measure of trade – between the Arab territories, but a hard border of religion, language, culture and violence was erected between them and ex-Roman and European territories. Capital – human and financial – in Europe had to turn northwards and led to the economic growth and urbanisation that led the creation of the medieval royal dynasties from Charlemagne onwards.

This hard border between Christian north and west and Islamic east and south caused the northern Mediterranean coast for many years – arguably until the Renaissance – to become a backwater, economically and politically, as northern Europe’s influence grew. This border remained in place – even after the Moors had been ejected from the Iberian peninsular – so that trade had to look for other places to grow into.

So trade had to be found elsewhere. Firstly the Portuguese went down Africa, and then onto Madagascar and India, and even further east. The desire for trade in the form of spices – an expensive and desirable but very light and portable cargo – brought rich rewards for those that traversed the oceans in search of them and brought them back.  Then the Spanish (who were also looking for spices in Asia when they accidently bumped in the Americas) to the west, globalisation – certainly colonialisation – arguably began because overland trade between east and west was blocked for centuries by this hard border erected at the eastern and southern edges of the Byzantine Empire and the Caliphate.

In the meantime, cities in Continental northern and western Europe, followed by the Italian peninsular, grew in size and wealth, whilst eastern Europe – especially after the fall of Constantinople – was absorbed into the Ottoman Empire, the successor of the Caliphate.

Boehm and Charney, by crunching a lot of old coin data, and by examining trends in economic and urban growth in Europe – conclude that the north got the better deal in between 700-900 AD. Conversely the Byzantine empire was getting poorer, and the population was either declining outright as in the case of Asia Minor and Cyprus, or experiencing anaemic growth in the cities of Greece, Thacia, Dacia, the Balkans. The Mediterranean became a backwater – more a cul de sac than a route to anywhere – diminished in stature and importance. This was not because of the superiority of the Franco-Germanic barbarian conquerors, but because capital is always in search of profit, and there was none to be found in trade with the east.

I find their conclusions convincing, even if I cannot follow some of their methods and calculations. Changes in flows of money, and trade, result in far reaching and long-lasting consequences. The ‘Great Man’ theory of history is a nice way to tell stories, but it masks the more fundamental flows of people and money that can change abruptly to the benefit or detriment of widely dispersed societies with no immediate borders, or even arguments, with each other.

Mohammed caused a fundamental change in the political systems, firstly of the Arabian peninsular and then further, much further afield. However you dress this up with religion, culture or other sociological or anthropological theories, it was the incompatibility of these two fundamentally opposed political systems that caused the birthplace of western civilisation to fade into irrelevance. The Middle Sea became mediocre.

The threat for me of the coming inauguration of Trump is what it represents politically, both internally within the US, and globally as the leader of various international institutions. The barriers going up are not just economic, they are political. Challenges – and I imagine – changes to the institutions of the US democracy will mean that countries will start looking elsewhere, at different systems and different ways of doing things for the solutions to their problems. China, and Russia, have completely different ideas about how to exist in the world, and their place in it, both now and in the future. The alliances that they have formed, and continue to develop, will shape more and more how societies behave – internally and in relation to each other – and this will affect trade flows, and international relationships, and in their train unintended, perhaps unimaginable, consequences.

China has built their current position of power through trade which, for at least twenty-five years, was not only encouraged, but aided and abetted, invested in by the west. China continues to consider itself as a trading nation and considers global trade as a necessary part of their identity. If the US continues to put up barriers to trade, future historians – and archaeologists for that matter – may well track the diminishing use of the US dollar in trade to trace the decline of a once great civilisation.

There were many stories to be told about the decline and fall of the Roman Empire – not just by Gibbon, but also by contemporary commentators of the time – concerning the personality defects, vices, perversions and vanities of various Roman emperors and their entourages long before – hundreds of years before – the cleaving of the Roman Empire into east and west. But life, commerce and civilisation went on. What caused the northern coasts of the Mediterranean to fall into irrelevance? Not the coming of the barbarians, but the erection of a trade barrier – and much, much else – between east and west. Many current conflicts can trace their source to those times.

War may be politics by other means, but trade wars are not necessarily a softer version of military wars, and can have far reaching – and longer lasting – consequences. Apparently the one thing that President Elect Trump fears the most is irrelevance. I hope that the trade wars he is expected to unleash do not lead to the irrelevance of the United States as a whole. You may think that this is impossible, but this would by no means be unprecedented. History – even ancient history – may not repeat itself, but there are always lessons we can learn. Hopefully some will be learnt until too much damage is done.

Simon Ward