7.1.2 History of global exchanges

Note to teachers and students: This section is somewhat longer than others in the book.

Long before modern globalisation, people were already linked through trade. Thousands of years ago, merchants and sailors moved goods across deserts, seas, and mountains, creating regional networks that connected distant communities.

In Afro-Eurasia, cities and empires exchanged silk from China, spices from India, ivory and gold from East Africa, and wine and glassware from the Mediterranean. Caravans crossed the Sahara with the help of camels, while ships carried goods across the Indian Ocean using steady monsoon winds.

No single group controlled the whole system, yet it connected much of the Eastern Hemisphere more closely than ever before. Meanwhile, other regional networks such as the trans-Saharan routes in Africa, the Austronesian sea routes in Southeast Asia, and the Mesoamerican exchanges across the Americas, continued to thrive independently. These diverse webs of exchange laid the foundations for the global connections that would emerge in later centuries.

In 1492, the Spanish-sponsored explorer Christopher Columbus sailed west from Spain, hoping to reach Asia. Instead, he reached the region we know call the Americas, a place unknown to Europeans until then. His voyages opened a permanent route between the Americas and Afro-Eurasia, connecting Europe, Africa, and Asia to the western hemisphere. For the first time, goods, people, and diseases could move between all these regions at once.

This new connection was built through colonies and forced labour. Spanish and Portuguese empires took control of land across the Americas. They forced indigenous communities to mine silver in Potosí and Mexico. Much of this silver was shipped to Europe, and from there to China, since China's rulers demanded payment in silver for their goods. This made silver the world's first global currency.

At the same time, European empires forced millions of Africans into slavery in Africa and abroad. About 12.5 million people were captured and forced onto ships bound for the Americas. Around 10.7 million survived the crossing to work on sugar and cotton plantations in the Caribbean and the Americas. Enslaved people were not only forced labourers. They were also treated as property and were used as collateral, or security, for loans. Slavery helped expand global credit and banking in the plantation economies and globally.

This new global economy created lasting inequality. Wealth and raw materials flowed toward Europe, while environmental damage, disease, and poverty remained behind in many places. Historians describe this pattern as core and periphery. The wealthy, industrialising core drew raw materials and labour from the colonised periphery, while the periphery became dependent on the core for manufactured goods and financial capital. Dependency theory argues that the periphery's underdevelopment was not a stage on the way to catching up, but a lasting result of its position in the global economy. Most historians and economists agree that these unequal exchange patterns began with colonial power and still influence global trade today.

Capitalism began around 500 years ago in England, through a process called enclosure. Landowners and the state fenced off common land and turned it into private property, pushing rural families off the land they had shared and used with others. Those families then had to move to towns and sell their labour for wages. Britain and other European colonial powers later extended this same process abroad through colonisation. They claimed forests, farms, and grazing lands that local and indigenous communities had managed together, taking land and other resources away from those communities to secure raw materials and cheap labour for themselves instead.

Industrialisation created a new stage of capitalism, centuries after enclosure began. In this stage, called industrial capitalism, production was organised around factories and machines. Wage labour became the main way people earned a living.

The industrial age expanded resource extraction. Coal mining destroyed landscapes and filled the air with soot. Monoculture plantations spread across Asia, Africa, and the Caribbean to meet global demand for sugar, rubber, and palm oil. The speed and volume of trade grew enormously. So did the gap in wealth and industry between the core and the periphery.

Industrialisation deepened dependence. Colonised territories often grew one or two export crops instead of growing food and materials for their own populations. This left them vulnerable to price swings and droughts. The links between power, technology, and trade were clear. Those with machines, finance, navies, and militaries set the rules of exchange and profited from them.

The system reflected the interests of those who designed it, and wealthy countries had disproportionate power and voting rights in these systems. They promoted a model of economic development based on industrialisation and ‘free’ trade, favouring high income countries that already had factories, capital, and shipping networks. Many nations in Western Europe and East Asia benefitted from these new rules. 

Around the same time, many countries in Asia, Africa, and the Caribbean gained political independence from European colonial rule. But political independence did not bring economic independence. Newly independent countries still exported raw materials and imported manufactured goods, much as they had done as colonies.

This pattern deepened older cycles of debt. When newly independent countries borrowed money from the IMF or World Bank to build infrastructure or stabilise their economies, they often had to repay loans using income from the raw materials they exported. Falling export prices or rising interest rates could trap them in a cycle of borrowing and repayment that limited local investment and development. Subtopic 7.3 and Subtopic 7.4 (coming soon!) explore how these debt issues and the calls for international financial reform.

From the 1950s onward, the global economy grew, but unevenly. Wealthy countries expanded fastest, while many periphery countries remained locked in cycles of debt and dependence. Expanding production and consumption also drove deforestation, pollution, and rising greenhouse gases, linking economic growth to planetary pressures.

Digital technology also affects the planet, and this cost falls unevenly. Data centres use huge amounts of energy and water to keep running. Batteries, solar panels, and electronics all depend on minerals such as lithium, cobalt, and copper, mainly mined in a small number of countries in the periphery. As the world shifts toward renewable energy and digital technology, demand for these minerals is rising fast. This risks repeating the familiar pattern where raw materials are extracted in the periphery, and the profits from turning them into finished products captured mainly in the core. Old electronics also often end up as waste in poorer countries, perpetuating the uneven negative consequences of global exchange (Section 7.3.3 - coming soon).

Globalisation today connects almost everyone, but not equally. The countries where critical minerals are found are not usually the same countries that control their extraction, or that capture the profits from turning them into finished technology. A small number of powerful companies and countries own the mines, the refining processes, and the technology and brands that use these minerals. This lets them capture most of the profits from global exchange, while the environmental and social costs of mining and manufacturing often remain in the countries where the minerals are found.

Globalisation is changing shape. Research from the IMF shows that global trade, measured as a share of world gross domestic product (GDP), has grown very little since the global financial crisis of 2007-08, and states have introduced more trade barriers since then. At the same time, new patterns of exchange are emerging. Countries are trading more within their own regions, building shorter supply chains, and expanding trade and investment between periphery countries themselves, a trend known as South-South cooperation (Subtopic 7.4 - coming soon). Global exchange is splitting into overlapping regional and political goups, rather than staying one single system.

Several changes explain this shift. Long global supply chains were fragile during the COVID-19 pandemic, when factories or ports in one country could halt production worldwide. Wages have also risen in countries that were once cheap manufacturing bases. Many companies no longer reduce costs by producing there. Many states and businesses now treat supply chains as a matter of security, not just cost. They are willing to pay more for supplies that are closer to home or come from trusted partners.

As states and companies weigh these risks, many countries are rethinking how closely they want to be tied to the global economy. When access to markets, money, or technology can change suddenly for political reasons, interdependence can become a weakness. Some states now try to reduce this risk by trading with more partners, strengthening regional connections, or developing their own trade and financial systems. Subtopic 7.4 (coming soon) explores these responses in more detail.

Globalisation, then, does not move in one direction. It grows in some ways and retreats in others, as technology, power, and limits change. Countries today are rethinking how to stay connected to the world without becoming too dependent on systems or partners they cannot control.

Now answer these questions, using the values you found above.

1. Using your values for 1800 and 1913, roughly how many times larger was world trade in 1913 than in 1800?

2. Using your values for 1950 and 2024, roughly how many times larger was world trade in 2024 than in 1950? How does this compare to your answer for question 1?

3. Choose one of the anomalies you identified above. Do you think this disruption affected core countries and periphery countries in the same way, or differently? Give a reason for your answer.

4. Look closely at the line from the early 1970s onward. How does the slope of the line change compared to the decades before it? Using what you have read about the Bretton Woods institutions and GATT, suggest a reason for this change.

5. Look closely at the years after the 2008-2009 dip. Does world trade return to its earlier rate of growth, or does it grow more slowly than before? Using what you have read in this section, suggest two reasons for this change.

6. Based on the whole graph, would you describe the growth of world trade since 1800 as steady, or as a series of different periods with different patterns? Support your answer with at least two examples from the graph.

Option 3: Case study on colonialism and extreme poverty in India

Time: 30 minutes

For most of history, there are no household surveys of poverty. To estimate poverty before the twentieth century, economic historians instead use records of wages and prices. Research using these methods shows that extreme poverty is often caused by economic systems, not just a natural feature of poorer societies. These systems can take labour and resources away from local needs and send them elsewhere for profit.

India shows this pattern clearly. Research by economic historian Robert Allen estimates that around 10 percent of the population could not afford basic needs such as food, clothing, and shelter in 1600, before British colonisation. By 1810, under East India Company rule, this had risen to around 23 percent. Continuous survey data becomes available from 1977 onward, showing extreme poverty at around 60 percent that year. It then fell sharply in the decades since independence (Figure 12).

Figure 12. Colonialism and extreme poverty in India, 1600-2011.

(Credit: Sullivan and Hickel)

The graph does not tell us the exact path poverty took between 1600, 1810, and 1977, since no data exists for these gaps. Historians believe poverty likely kept rising through the nineteenth and early twentieth centuries. It probably reached its highest point under colonial rule. It then began to fall as India gained independence. Labour and social movements also pushed for better wages and public services, which helped lower poverty further. Despite considerable economic growth since independence, extreme poverty in India remains higher today than it was before colonisation began.

Reflection questions

1. What do the three known data points, 1600, 1810, and 1977, tell us about the direction of change in extreme poverty over this period?

2. Why can historians not know the exact shape of the trend between these three points?

3. What does this case study suggest about the idea that colonisation brought development and progress to colonised countries?

4. India's extreme poverty rate remains higher today than it was in 1600, despite decades of economic growth since independence. What does this suggest about the relationship between economic growth and poverty reduction?

Option 4: Do institutions explain the wealth gap?
Time: 20 minutes

In 2024, three economists won the Nobel Memorial Prize in Economic Sciences for studying why some former colonies became rich and others stayed poor. Daron Acemoglu, Simon Johnson, and James Robinson found that the answer often depended on the type of institutions, meaning the laws, property rights, and systems of government, that European colonisers set up.

In some colonies, many European settlers could survive and live safely, often because local diseases were less dangerous to them. In these places, settlers built institutions that protected their own property and rights, since they planned to stay for generations. Examples include the United States, Canada, and Australia. Building these institutions often involved displacing indigenous peoples from their land, so these institutions protected the rights of settlers, not everyone living in the territory.

In other colonies, European settlers faced a much higher risk of death from disease. In these places, colonisers had little reason to build institutions for the long term. Instead, they built institutions designed to extract resources and labour as quickly and cheaply as possible, often through force. Examples include much of West Africa and parts of Central America.

Acemoglu, Johnson, and Robinson found that this early choice had lasting effects. Extractive institutions were often kept in place even after independence, since local elites could use the same systems to their own advantage. This helps explain why some former colonies became wealthy, while others remained poor, even long after colonial rule ended.

Questions

1. According to this research, what determined whether a colony ended up with extractive or inclusive institutions?

2. Why might extractive institutions continue to cause problems even after a country becomes independent?

3. Earlier in this section, you read about core and periphery, and about dependency theory. How is this institutions-based explanation similar to those ideas? How is it different?

4. Can you think of a strength or a weakness of using settler survival rates as a way to explain modern wealth differences between countries?

5. The countries described here as having inclusive institutions, the United States, Canada, and Australia, were themselves colonies once, part of the periphery. They later became wealthy core countries. What does this suggest about whether a country's place in the core or periphery is fixed, or can change over time?

Option 5: Development terminology
Time: 25 minutes

Economists and other writers have used several different terms to describe the divide between wealthier and poorer countries. Each term comes from a different time and serves a different purpose.

Core and periphery comes from economics. Dependency theory, developed in the 1950s, and world-systems theory, developed in the 1970s, used these terms to describe a structure, where one group of countries accumulates wealth and industry, while the other group supplies raw materials and labour. This pair of terms describes an economic relationship, not a location on a map.

First World, Second World, and Third World comes from the Cold War, the political conflict between the United States and the Soviet Union after 1945. First World meant countries aligned with the United States. Second World meant countries aligned with the Soviet Union. Third World meant countries aligned with neither side. This grouping sorted countries by political alignment, not by wealth. Once the Cold War ended in the early 1990s, the Soviet Union no longer existed, so "Second World" lost its meaning. "Third World" also increasingly became associated only with poverty and instability, rather than its original meaning.

Global North and Global South became popular from the 1990s onward, replacing the outdated Cold War terms. Unlike core and periphery, this pair of terms was also used to build political solidarity between countries in similar positions, and spread widely through diplomacy and the media. Despite the names, the division is not strictly geographic. For example, Australia is usually placed in the Global North despite its location in the southern hemisphere.

Developed and developing countries ranks countries by their level of industry and income. Critics argue that this assumes all countries are on the same path of development, simply at different points, with wealthier countries treated as the model every country should eventually follow.

Matching exercise

Match each term A-D to its correct description (1-4).
A. Core and periphery
B. First World, Second World, Third World
C. Global North and Global South
D. Developed and developing countries

1. Ranks countries by level of industry and income, assuming all countries follow the same path of development.

2. Became popular from the 1990s onward and is also used to build political solidarity, despite an inconsistent geography.

3. Describes an economic structure: who accumulates wealth and industry, and who supplies raw materials and labour.

4. Sorted countries by political alignment during the Cold War, not by wealth.

Reflection questions

1. Which of these four terms is the oldest? Which is the most recently popularised?

2. Core and periphery and Global North and Global South both describe the same basic divide between wealthier and poorer countries. Using what you have read, explain one difference between what these two terms emphasise.

3. Why do you think First World, Second World, and Third World stopped being useful terms after around 1990?

4. Choose one of these four terms. What is one strength and one limitation of using it to describe global inequality?

Ideas for longer activities and projects are listed in Subtopic 7.5 (coming soon)

• Why isn’t the whole world developed? Economic history and imperial interventions - CAGE, an economic history research centre at the University of Warwick, partnered with Discover Economics to produce a series of short videos for secondary school students. The series explores how colonisation and imperial interventions shaped the long-term economic development of Africa and India, drawing on research including the 2024 Nobel Prize-winning work on institutions. Difficulty level: easy.

  • • Did colonialism really cause poverty? – Economic historian Lakshmi Iyer explores why some former colonies became wealthy after independence, while others faced decades of poverty.

    • Why are some nations still paying the price of colonialism today? – An economist explains the research linking settler mortality, the type of institutions colonisers built, and long-term economic growth.

    • Why is Africa so poor? – Economic historian Nathan Nunn examines the long-term effects of Africa's slave trades on poverty today.

    • Are Africa's colonial borders holding it back? – Economist Stelios Michalopoulos discusses how European colonisers divided existing ethnic groups across national borders, and the lasting instability this caused.

    • Why India stayed poor until independence – CAGE Impact Director Bishnupriya Gupta discusses how European trade policy and a lack of agricultural investment held back India's economy until independence.

    • Did the slave trade make Britain rich? – Economists examine the connection between the transatlantic slave trade and Britain's Industrial Revolution.

    • Is colonialism responsible for medical mistrust in Africa? – Economist Sara Lowes explains how coercive colonial-era medical treatments have contributed to a lasting mistrust of modern medicine in some African communities.

• The Silk Road: Connecting the ancient world through trade – A short animated video from TED-Ed explaining how the Silk Road developed over centuries into a network connecting Greece, Egypt, India, and China. It covers how nomadic groups first linked isolated civilisations, and how the eventual rise of sea travel led to the Silk Road's decline. Difficulty level: easy.

• The Atlantic slave trade: What too few textbooks told you – A short animated video from TED-Ed, examining the scale and lasting legacy of the Atlantic slave trade, which forcibly transported more than 10 million Africans to the Americas. It covers the historical, economic, and personal impact of this system. Difficulty level: easy.

• History of Africa with Zeinab Badawi – A 20-part documentary series, based on UNESCO's General History of Africa project, following journalist Zeinab Badawi across the continent to explore African history from early human origins through to the struggle for independence. Difficulty level: medium.

• Is globalization an engine of economic development? – An article from Our World in Data examining the historical link between global trade, economic growth, and poverty reduction, while also addressing globalisation's effect on income inequality between and within countries. Difficulty level: medium.

• Imperial power – An article and data visualisation from the Global Inequality Project arguing that core states maintain their economic dominance partly through military power, foreign interventions, and economic sanctions against countries in the periphery. Difficulty level: medium to hard (contested academic framing, dense data visualisations).

• Silk Roads Simulation – A classroom role-play activity from the OER Project, in which students act as merchants trading goods, technologies, and beliefs along the Silk Roads across several rounds, to experience firsthand how exchange connected distant regions. Difficulty level: easy (activity-based).

• What Is Wrong With Globalization? – A 34-minute lecture by economist Ha-Joon Chang. He compares two periods of globalisation, 1870-1914 and today, and shows that both had advanced technology for their time, yet were controlled very differently by governments. He argues this shows globalisation is a policy choice, not something technology makes inevitable. He also presents data showing that Latin America and Sub-Saharan Africa grew much more slowly after adopting free-market policies in the 1980s. Difficulty level: medium.

Acemoglu, D., & Robinson, J. A. (2012). Why nations fail: The origins of power, prosperity, and poverty. Crown Business.

Allen, R. C. (2020). Poverty and the labor market: Today and yesterday. Annual Review of Economics, 12, 107–134. https://doi.org/10.1146/annurev-economics-091819-014652

Badawi, Z. (Host). (n.d.). History of Africa with Zeinab Badawi [Playlist]. YouTube. https://www.youtube.com/playlist?list=PLajyiGz4JeyPq2lpEt2skZRhQsAspIQCp

Bowring, P. (2019, July 2). Identity history: Austronesian Asia? YaleGlobal Online. https://archive-yaleglobal.yale.edu/content/identity-history-austronesian-asi

Ortiz-Ospina, E., Rohenkohl, B., Samborska, V., Van Teutem, S., Beltekian, D., & Roser, M. (2018). Trade and globalization. Our World in Data. https://ourworldindata.org/trade-and-globalization

Kaboub, F. (2026, March 25). Slavery is the gravest crime against humanity. Global South Perspectives. https://globalsouthperspectives.substack.com/p/slavery-is-the-gravest-crime-against

Kognity. (2017). IBDP Geography FE2019. https://kognity.com/products/ibdp/

Moatsos, M. (2021). Global absolute poverty: Present and past since 1820. In OECD, How was life? Volume II: New perspectives on well-being and global inequality since 1820 (pp. 186–215). OECD Publishing. https://doi.org/10.1787/3d96efc5-en

Patel, R. & Moore, J. (2020). A history of the world in seven cheap things: A guide to capitalism, nature, and the future of the planet. London: Verso.

Sherry, B. (2025). Long-distance trade in the Americas (Version 1100L) [Online article]. OER Project. https://www.oerproject.com/OER-Materials/OER-Media/HTML-Articles/Origins/Unit6/Long-Distance-Trade-in-the-Americas/1100L

Stanley, A. (2023, June). Globalization’s peak. Finance & Development. International Monetary Fund. https://www.imf.org/en/publications/fandd/issues/2023/06/pt-globalization-peak-stanley?path=Publications&path=fandd&path=issues&path=2023&path=06&path=PT-globalization-peak-Stanley

Sullivan, D., & Hickel, J. (2023). Capitalism and extreme poverty: A global analysis of real wages, human height, and mortality since the long 16th century. World Development, 161, Article 106026. https://doi.org/10.1016/j.worlddev.2022.106026

Sullivan, D., Hickel, J., & Zoomkawala, H. (2025). Global poverty. Global Inequality Project. https://globalinequality.org/global-poverty

UNESCO. (n.d.). The Slave Route Project. UNESCO. https://en.unesco.org/themes/fostering-rights-inclusion/slave-route

coming soon!