Tag Archives: Mozambique Island

“When did globalisation start?” A Response.

This question was posed in a blog post on The Economist web site on September 23. Why does the question matter? It matters because it forces us to think about the nature of globalization, its history, and its interpretation. And it forces us to address the question of whether globalization has benefited humanity over time. In that sense it is important to understand whether globalization started in Antiquity, around 1500, in the 19th century, or in the 1980s, as arguments can be made for all scenarios.

Economists like to connect globalization with a convergence and integration of markets, enhanced by a progressing division of labor and expanding trade systems. The great European discoveries around 1500 thus must be seen as a major incubator for globalization. Already Adam Smith argued that the influx of great amounts of silver from mines in Mexico and Bolivia in the 16th century profoundly affected the markets in Europe by dramatically lowering the price of silver–to which the value of European currencies was pegged–while accelerating inflation. Inflation only slowed around 1650, so the theory goes, “when the price of silver fell to such a low level that it was no longer profitable to import it from the Americas.”


The fact is that Europe suffered from serious inflation between 1500 and 1650 which had a destabilizing effect on European societies. Inflation was real, and it was feared. In church hymns of the time, inflation joined illness, hunger, disorder, celestial events, and the Turks as the most serious ills of the time that required God’s assistance. But did Columbus cause inflation?

While the story of American silver is a compelling one, there are a number of destabilizing factors after 1500 that contributed to inflation: the Protestant Reform, the transformation of a feudal society into a mercantilist one, the rapid growth of urban production with rising wages, the Little Ice Age, and the Turkish threat, to name just a few. Then there was the demographic collapse created by the arrival of the plague around 1350 which caused low prices, and the rapid rise of the population starting in the late 15th century which caused a rise in price levels and promoted a rapid expansion of the European trade system. Inflation was also driven by the Thirty Years War (1618-48) which created both shortages and high demand for weapons and provisions for soldiers. The 1648 Peace of Westphalia ended the high demand, and coupled with a massive population loss in the Empire it also ended inflationary pressures.

But there is a larger point to be made. Globalization is a way of thinking about the world and the role of the human in it. Around 1500, the way humans thought about space and the way they related to it changed profoundly. The earth now was thought of as a sphere that could be traveled on endlessly, the universe became infinite, and art marked the centrality of spatial relations through Leonardo’s innovation of the perspective. It is in this context that Columbus’s westward travels to Asia and Vasco de Gama’s travels around Africa and across the Indian Ocean became thinkable. So globalization reflects a state of mind which allows humans to see the world as a whole, to understand spatial relations, to make connections between its parts, and to act upon this insight. The transformation from the old T-O world map, printed as late as 1475, and the Waldseemüller world map of 1507 that first marks “America” indicates this intellectual leap.


Vasco de Gama may have stopped at this protected natural harbor on Mozambique Island in 1498. The Portuguese built their first fort here in 1507.

The second element in this globalization story is competition. It is no accident that Columbus and Vasco de Gama ventured out almost simultaneously to find a sea route to Asia. Both Spain and Portugal were in an open competition to find a commercially viable route to Asia to enhance their trade in high-value goods such as silk and spices. While quickly seizing the opportunities the newly discovered continent offered, the Spanish for three decades were feverishly looking for navigable passages through or around it.

The third element was that the discoveries were driven by commerce, not by sheer curiosity.  As opening a sea route to Asia had great economic promise, many merchants and investors financed expeditions to lands unknown. Voyages of discovery were financed by private venture capital under license from the Spanish and Portuguese crowns to a significant degree. Santo Domingo, the first Spanish hub in the Americas, became a city with stone buildings teeming with investors, entrepreneurs and adventurers within a decade of Columbus’s arrival. From there, the new Atlantic trade system evolved with breathtaking speed–which included mining and plantation operations in the Americas, the Transatlantic slave trade, and an intensifying trade with Asia. But it is the intellectual leap of seeing the world holistically which is the true moment of globalization, the evolving system of global trade just being its logical outgrowth.


The Calle de las Damas in Santo Domingo in 1502 became the first paved road built by the Spanish in the Americas, just 10 years after Columbus first arrived here. These stone buildings were built as investment properties around the same time. One tenant was Hernán Cortés.


“Strings of Chinese Pearls” of the Past

What do these three pictures have in common?


Bergen Bryggen, outpost of the Hanseatic League


Ilha de Moçambique: Fortaleza de São Sebastião


Port of Colombo, Sri Lanka (Source: The Economist, June 8, 2013)

All three images show attempts by a major power to expand its hegemonic sphere by expanding its own trade network.

Around 1360, the Hanseatic League established a Kontor (trade office) in the wharf of Bergen, a major Norwegian port city on the Atlantic coast. The Hanseatic League, based in Lübeck, was a trade and defense pact which dominated trade in the Baltic and North Sea from the 13th to the 17th century; at the peak of its power in the 14th century, it included 170 cities in Northern Europe. Over the next years, members of the Hanseatic Kontor bought all properties at the Bergen wharf which then was the city center, thus displacing the local traders and even forcing the city hall to move. The members of the Kontor, 2,000 strong at the peak, formed their own segregated society and system of governance that de facto ruled Bergen over centuries. It also controlled trade along the Atlantic coast of Norway. The Bergen Kontor only closed in 1754.

Access to the Asian spice and silk markets fueled a competition between Spain and Portugal to open a trade route to India and China during the first age of globalization. While the Spanish headed west but were slowed by this hitherto unknown continent that blocked access, the Portuguese traveled around Africa to reach Asia. Vasco de Gama landed on Mozambique Island probably in 1498. Subsequently, the Portuguese established a string of fortified outposts along the coasts of Africa, India, and China to secure their trade routes. By 1507, the Portuguese built a small fort on Mozambique Island. As the area was part of the Arabic and Ottoman trade systems, a more substantial fort was required. Between 1546 and 1583, the Portuguese built the Fortaleza de São Sebastião, the grandest of all European forts in Sub-Saharan Africa. Gradually, the Portuguese started to control territories and their populations on the adjacent mainland, predominantly to control the food supply for their trade posts. But the Portuguese did not assume full control over the territory referred to as Mozambique today until the 19th century when the major European powers started to carve up Africa into their own fiefdoms. Mozambique achieved independence from Portugal only in 1975.

These days, China is creating a shipping hub in Colombo, just 200 miles from India’s southern tip. A Chinese company is building a new container terminal which will be run by an entity controlled by another Chinese firm. The terminal opens this month and will be completed by April 2014. According to The Economist, this will make Colombo one of the world’s 20 biggest container ports. As the Economist article points out, the new Chinese hub in Colombo is part of a network of ports around the world that are at least in part controlled by Chinese interests, as the map below shows–which looks similar to the maps of the Hanseatic and Portuguese trade systems.


The Economist, June 8, 2013

Recently, Chinese investments in the ports of Piraeus and Karachi made the news–both times because they expand Chinese influence in parts of the world not traditionally considered in China’s orbit. The subtitle of the Economist article spells it out that “China’s growing empire of ports abroad is mainly about trade, not aggression.” But as the examples of the Hanseatic League and of Portugal show, this strategy of establishing trade outposts can serve to secure access and political power over long periods of time.

While the three images show three different historic periods and different parts of the world, they all illustrate the same pattern. They all represent the hegemonial aspirations of major powers which in all three cases are successfully implemented by securing trade posts far away from home and by creating expansive trade networks. Both the Hanseatic League and the Portuguese crown used their trade posts and their respective trade systems to gain political control over the areas in which they were active. It remains to be seen to what extent the Chinese strategy of creating a “String of Pearls” will translate into establishing hegemonic rule.