Is committing to a free trade policy enough? Evidence from colonial Africa

by Federico Tadei (Department of Economic History, University of Barcelona)


French map of Africa from 1898, showing colonial claims. Originally published as “Carte Generale de l’Afrique’. Available at Wikimedia Commons.

Recent Brexit negotiations have led to intense debate on the type of trade agreements that should be put in place between the UK and the European Union. According to Policy Exchange’s February 2018 report, the UK should unilaterally commit to free trade. The assumption underlying this argument is that the removal of tariffs has the potential to reduce consumer prices due to greater competition and lower protection of domestic industries, which would promote innovation and increase productivity.

But the removal of tariffs and protectionist policies might not be sufficient to implement free trade fully. My research on trade from colonial Africa suggests that a legal commitment to free trade is not nearly enough.

Specifically, it appears that during the colonial period the British formally relied on free trade encouraging competition between trading firms, while the French made use of their political power to establish trade monopsonies and acquire African goods at prices lower than in the world markets.

Yet the situation on the ground might have been quite different than what formal policies envisaged. Did the British colonies actually enjoy free trade? Did producers in Africa who lived under British rule receive higher prices than those living under the French?

To answer these questions, I measure the degree of competitiveness of trade under the two colonial powers by computing profit margins for trading companies that bought goods from the African coast and resold them in Europe.

To do so, I use data on African export prices and European import prices for a variety of agricultural commodities exported from British and French colonies between 1898 and 1939 and estimated trade costs from Africa to Europe. The rationale behind this methodology is simple: if the colonisers relied on free trade, profit margins of trading companies should be close to zero.

Tadei Figures

On average, profit margins in the British colonies were lower than in the French colonies, suggesting a higher reliance on free trade in the British Empire (see Figure 1). But if we compare the two colonial powers within one same region (West or East Africa) (Figures 2 and 3), it appears that the actual extent of free trade depended more on the conditions in the colonies than on formal policies of the colonial power.

Profit margins were statistically indistinguishable from zero in British East Africa, suggesting free trade, but they were large (10-15%) in West African colonies under both the French and the British, suggesting the presence of monopsony power.

These results suggest that, in spite of formal policies, other factors were at play in determining the actual implementation of free trade in Africa. In the Western colonies, the longer history of trade and higher level of commercialisation reduced the operational costs of trading companies. At the same time, most of agricultural production was based on small African farmers, with little political power and ability to oppose de facto trade monopsonies.

Conversely, in East Africa, production was often controlled by European settlers who had a much larger political influence over the metropolitan government, increasing the cost of establishing trade monopsonies and allowing better implementation of colonial free trade policy.

Overall, despite formal policies, the ability of trading firms in West Africa to eliminate competition was costly in terms of economic growth. African producers received lower prices than they would have in a competitive market and consumers paid more for imported goods. Formal commitment to free trade policies might not be sufficient to reap the full benefits of free trade.

Financial neoliberalism: British insurance and the revolution in the management of uncertainty

by Thomas Gould (University of Bristol)


Margaret Thatcher on a visit to Salford, 1982. Available at Wikimedia Commons.

What has been the relationship between the growth of finance and ‘neoliberalism’ in post-war Britain? My research shows that the drive towards popular capitalism and a property-owning democracy was not directly created by Thatcherism, which qualifies popular narratives about the impact of government reforms such as deregulation and privatisation.

Instead, away from the battlegrounds of mainstream economics and politics, a silent ‘neoliberal revolution’ developed deep within the financial industry before Thatcher came to power.

For example, between 1967 and 1980, the number of personalised life insurance policies directly linked to asset values increased from 81,000 to 3.5 million. This development marked a sea change in the way that society managed financial risk and uncertainty.

It had little to do with mainstream politics, and it was so powerful that by 1990 there were over 12 million of these unit-linked policies in force, showing that Thatcherite reforms merely accelerated the pace of change for developments that were already underway.

A cornerstone of traditional insurance, the objective of collective security, was superseded by the interests of individual fairness. The burden of financial risk was increasingly allocated to individual policyholders and the management of financial risk to the markets.

Together, unitised insurance policies and mathematical finance re-engineered the landscape of British capitalism by undermining the scientific foundations and appeal of traditional forms of protective insurance, such as industrial life insurance policies, annuities and defined benefit pension schemes.

Vast concentrations of personal wealth accumulated in institutional funds. The conduct and behaviour of firms became more diverse and complex as the science behind financial risk management was revolutionised. There were four key contours of change:

  • First, collective provision was increasingly superseded by considerations of individual equity.
  • Second, financial analysis and treatment of assets assumed greater importance than the management of liabilities.
  • Third, insurance and protection were increasingly displaced by savings and investment media.
  • Finally, traditional actuarial science was gradually substituted for a paradigm of financial economics.


Financial neoliberalism – the increased role and responsibility of financial markets and financial theories in the provision of economic security – redesigned the management of uncertainty and risk in insurance by changing the relationships between experts, individuals and the regulator within an increasingly sophisticated and competitive financial environment.

Risk-taking financial behaviour became an exigency. The presumption that financial uncertainty could, and should, be managed through financial markets gained saliency. The financial world, and its future, was increasingly understood through the lenses of advanced computing, mathematics and statistics.

Financial neoliberalism dramatically changed the ways in which the financial industry and government engaged with uncertainty; and it influenced the increasingly risk-based techniques, and forms of knowledge, through which they sought to manage and control that future.

Political philosophy may be thought to have represented the main attack on collectivism and the welfare state. Yet, removed from mainstream political discourse, the journals of the actuarial profession show how financial economics gradually displaced actuarial science as the principle scientific paradigm that managed financial uncertainty.

Furthermore, data compiled from the Association of British Insurers show that the attack on principles of collectivism were already underway in the late 1960s and early 1970s as individuals increasingly acquired these personalised insurance policies.

Thus, the practice of unitising the management of risk gradually merged with a new paradigm of financial economics that scientifically legitimised investment and savings rather than mutual protection and risk pooling. In this sense, many of the Thatcher government’s reforms geared towards promoting popular capitalism and property ownership simply pushed at an open door.

The Ruhr’s mining industry and its power struggle with the High Authority of the European Coal and Steel Community

by Juliane Czierpka (Ruhr-University Bochum)


Ruhr mining. Available at Pixabay.

Since the beginning of the Ruhr area’s industrialisation in the second half of the nineteenth century, the local mining industry has always been a powerful player. Controlling vast amounts of coal, the Ruhr’s mining companies held a huge share of the European coal market and were usually able to influence political decisions made by German governments.

One reason for the power of the Ruhr’s mining industry was of course the importance of the energy sector and the country’s dependence on its coal. But the local mining companies also used to present themselves as a unity, speaking with one voice and – even more importantly – selling their coals collectively.

In other words, the mining companies of the Ruhr had built a huge coal cartel, even though it wasn’t called a cartel or syndicate after 1945 – at least within the Ruhr area, everyone was quite keen on finding new names for the sales.

In the early 1950s, the newly constituted German government was desperately trying to reduce the Allies’ control. While Britain and the United States were willing to give the Germans back parts of their sovereignty and started to loosen the regulations on the production of steel and other goods, the French did not like this approach.

Naturally, after 1945 the French government not only felt threatened by the German heavy industry, which was seen as having made the war possible by quickly adapting to the production of arms in order to support Hitler and its troops, but also by the German mining industry’s market power, because the energy sector was closely linked to questions of national autonomy and security. Furthermore, the French steel industry depended on specific qualities of coal from the Ruhr area.

The specific combination of interests in Europe in the aftermath of the war – a French government trying to keep control over the German coal and steel sector and a German government that was trying hard to win back at least parts of its sovereignty from the Allies – led to the foundation of the European Coal and Steel Community (ECSC).

The ECSC’s principal goal was to merge the coal and steel markets of Germany, France, Belgium, Luxembourg and the Netherlands, thereby leading to a high degree of economic and political cooperation, and peace between the member states. These words were of course mainly tinsel and glitter, as every member state pursued its own national interests.

The High Authority, the ECSC’s supranational executive institution, is usually seen as a failure by historians and political scientists, because it did not succeed in enforcing the ECSC’s treaty against the member states’ national interests.

My research shows that the hypothesis of a weak HA is not generally true. Looking into the HA’s dispute with the Ruhr’s mining industry over the organisation of their coal sales, I show how the HA managed to break up the traditional structures in the Ruhr area, even though the mining industry fought fiercely for their cartel and was supported by the German government – which had initially sold the mining industry out for membership in the ECSC.

My research also sheds light on the relationship between businesses and national governments and shows how this relationship was changed by the emergence of a new player – the supranational HA. My research also shows that there would have been a very early Gerxit, which only was prevented by the pressure of the Allies, which forced the German government to be part of the ECSC regardless to domestic protests.

Price Shocks in Regional Markets: Japan’s Great Kantō Earthquake of 1923

by Janet Hunter (London School of Economics)

The paper was published on The Economic History Review and is available here on early view 

What do we know about how a market economy operates in the immediate aftermath of a major natural disaster such as an earthquake? Well, actually less than you might think. Specialists in disaster studies have understandably focussed on resilience, relief and reconstruction. The economics of disasters has offered limited frameworks for such addressing this kind of question, although major natural disasters have usefully served in analysis as exogenous shocks or natural experiments. Yet rebuilding economic activity following a major natural disaster must be helped by improving our understanding of the mechanisms whereby the disaster impacts on market activity, and the response of economic actors, both individual and collective. Our work builds on the idea that the analysis of markets in the short-term recuperation phase is best undertaken using the laws of supply and demand, an argument put forward in one of the classic works of the economics of disasters back in 1969.[1]

The Great Kantō Earthquake

The so-called Great Kantō Earthquake of September 1923 in Japan devastated the cities of Tokyo and Yokohama and much of the surrounding area. The location of the disaster is shown on the map.

Map of Japan showing the epicentre of the 1923 earthquake and the cities for which we obtained price data.

While significant damage was caused by the seismic shocks and subsequent tsunami, much of the destruction and casualties (well over 100,000 died) was inflicted by the fires that broke out following the earthquake. The physical destruction was immense, and affected not only the country’s political capital, but its largest urban conglomeration and its major export port. The Kantō plain was also in many respects the hub of an increasingly integrated national economy.

The city of Yokohama, Japan’s most important export port, following the earthquake and fire of September 1923

Our concern in this article has been to analyse the shifts in the availability of, and demand for, different commodities following the 1923 disaster, with a view to identifying the magnitude and duration of such shifts. We have done this through an analysis of price changes for different products over the period before and after the disaster, something that allows us to explore what economists have termed the ‘ripple effects’ of natural disasters.

Our data confirmed that the economic impact of the disaster was far from being confined to the area of destruction. Price changes were experienced across the Japanese archipelago. We did find, though, that the extent of any change tended to diminish the greater the distance from the capital area.

Proportion of the total increase in rice price due to the earthquake by distance

It was also clear that the impact on prices was somewhat stronger in the north and northeastern half of Japan, a region that had traditionally been more closely integrated with Tokyo, than was the case in the southwest, which had long been more closely integrated with the urban area around the city of Osaka. The variation and pattern of the price changes we identified conformed with what we know about patterns of market integration in Japan in the early 20th century. At the same time, the ripples were in many cases less than might have been expected, and certainly less than cotemporary reports suggested. Nor were they in most cases of a significant duration. While there were some initially significant price rises associated with a sudden demand for reconstruction goods, for example, price levels tended to fall again within a few months, suggesting a move back towards some kind of market equilibrium. The pattern of change varied according to the product; a diversity of factors affected supply and demand for different products, and understanding these factors, as well as the pattern of government and institutional intervention in some markets, requires further analysis. It is also the case that analysis of retail prices, for which data are much more difficult to obtain, might well show a somewhat different story from the wholesale price data set that we have been able to compile. Retail prices are, of course, much more difficult to control and a better reflection of what the consumer actually had to cope with.

Overall, though, our analysis confirms that at this time Japan was a relatively well integrated economy. Our findings that prices reverted relatively rapidly toward equilibrium are in line with most other economic indicators showing that there was a relatively rapid reversion to former trends. The disaster, in short, was a short-term exogenous shock from which Japan soon recovered. That does not mean that it did not matter. We still have insufficient knowledge of the factors accelerating or limiting the spread and duration of any price changes following a natural disaster of this kind, and, crucially, of any implications for the longer term consequences of such a shock for the economy as a whole. For contemporary disaster studies, understanding these factors is one of the keys to recovery and the building of resilience.

[1] D.Dacy & H.Kunreuther, Economics of Natural Disasters (New York, 1969).



War, shortage and Thailand’s industrialisation, 1932-57

by Panarat Anamwathana (University of Oxford)

This study was awarded the prize for the best conference paper by a new researcher at the Economic History Society’s 2019 annual conference in Belfast.


1954 Bangkok street. Available at Wikimedia Commons.

Thailand fell under Japanese occupation during the Second World War. The small agrarian country relied on imports from the West for consumer and industrial goods, and suffered shortages of everything from clothes to machinery between 1941 and 1945.

After the Japanese surrender, the Thai government learned from its trauma, adapted its economic approach and began domestic production of its own consumer goods – although at the cost of inefficiencies and rent-seeking.

Economic historians have expressed different perspectives on Thailand’s immediate post-war economic development and state-led industrialisation programme. Some, such as Hewison (1989) and Ingram (1971), mention the expansion of manufacturing capacity, despite government inefficiencies. Others, such as Suehiro (1989) and Phongpaichit and Baker (1995), are more critical of state involvement, saying that rent-seeking and corruption hindered any real progress.

Anyone familiar with state-operated enterprises might be suspicious of Thailand’s state-led industrialisation approach. To protect many of the country’s new industries, import tariffs and quotas were introduced. At the same time, a new class of capitalists emerged from an alliance of politicians and entrepreneurs. These people benefitted from favourable concessions, state-sponsored monopolies or being granted lucrative import licences. The question is: did anything come out of all this?

Since Thailand had no industrial census for the period, it is difficult to measure changes in the kingdom’s manufacturing capacity from before the war to after the war. To address this challenge, I have gathered statistical data on three industries: sugar, textiles and gunny bags (which are essential for transporting rice, Thailand’s most important export crop). These goods were three of Thailand’s most important pre-war imports, key to the wellbeing of the population and rationed during the war.

My data come from a variety of primary sources from the National Archives of Thailand, the National Archives at Kew, and the National Archives and Records Administration in Washington, DC. I also read previously unused qualitative sources, such as government reports, correspondence and old newspapers to build a more complete picture of wartime Thailand.

I find that Thailand was able to produce more of its sugar, textiles and gunny bags after 1945, and continued to substitute for imports as the decade progressed. This was achievable in part because the shortage of goods during the war reinforced the drive to diversify the economy. Government systems and infrastructure established under the Japanese occupation but hindered by wartime circumstances could then make use of importing machinery and international credit.

Finally, machines and facilities abandoned by the Japanese army could be used by the post-war Thai government and their capitalist allies. I also find that per capita consumption either plateaued or increased during this period, suggesting that Thais were not deprived of these products because of the government’s industrialisation programme.

Corruption and rent-seeking, however, were common and can easily arise from state-led industrialisation programmes with little transparency, like that in Thailand.

For example, the Sugar Organisation, the most important state-operated enterprise in this industry, played a large role in transporting sugar from both private and government mills to shops. Unfortunately, this organisation was completely corrupt. It embezzled, cheated farmers, sold sugar to fake agents and distributors, and was extremely permissive on check-ups and regulation. Although the state did revoke some of the privileges of the organisation, it continued to operate throughout all the scandals.

My study not only contributes to the historiography of Thai economic development, but also engages with studies of various models of economic growth, the efficiency and costs of state-operated enterprises, and the legacies of the Second World War in occupied territories.



Further reading

Hewison, Kevin (1989) Bankers and Bureaucrats Capital and the Role of the State in Thailand, New Haven.

Ingram, James C (1971) Economic Change in Thailand, 1850-1970, Stanford University Press.

Phongpaichit, Pasuk, and Chris Baker (1995). Thailand: Economy and Politics, Oxford University Press.

Suehiro, Akira (1989) Capital Accumulation in Thailand, Tokyo.

Trains of thought: evidence from Sweden on how railways helped ideas to travel

by Eric Melander (University of Warwick)

This paper was presented at the EHS Annual Conference 2019 in Belfast.



Navvies during work at Nybro-Sävsjöströms Järnväg in Sweden. Standing far right is Oskar Lindahl from Mackamåla outside Målerås. Available at Wikimedia Commons.

The role of rail transport in shaping the geography of economic development is widely recognised. My research shows that its role in enabling the spread of political ideas is equally significant.

Using a natural experiment from Swedish history, I find that the increased ability of individuals to travel was a key driver for the spatial diffusion of engagement in grassroots social movements pushing for democratisation.

In nineteenth century Sweden, as in much of Europe, trade unions, leftist parties, temperance movements and non-state churches were important forces for democratisation and social reform. By 1910, 700,000 Swedes were members of at least one such group, out of a total population of around 5.5 million. At the same time, the Swedish rail network had been developed from just 6,000km in 1881 to 14,000km in 1910.

Swedish social historians, such as Sven Lundkvist, have noted that personal visits by agitators and preachers were important channels for the spread of the new ideas. A key example is August Palm, a notable social democrat and labour activist, who made heavy use of the railways during his extensive ‘agitation travels’. And Swedish political economist and economic historian Eli Heckscher has written about the ‘democratising effect’ of travel in this period.

My study is the first to test the hypothesised link between railway expansion and the success of these movements formally, using modern economic and statistical techniques.

By analysing a rich dataset, including historical railway maps, information on passenger and freight traffic, census data and archival information on social movement membership in Sweden, I demonstrate the impact of railway access on the spread and growth of activist organisations. Well-connected towns and cities were more likely to host at least one social movement organisation, and to see more rapid growth in membership numbers.

A key mechanism underlying this result is that railways reduced effective distances between places: the increased ability of individuals to travel and spread their ideas drove the spatial diffusion of movement membership.

The positive impact of rail is only as a result of increased passenger flows to a town or city – freight volumes had no impact, suggesting that it was the mobility of individuals that spread new ideas, not an acceleration of economic activity more broadly.

These findings are important because they shed light on the role played by railways, and by communication technology more broadly, in the diffusion of ideas. Recent work on this topic has focused on the role of social media on short-lived bursts of (extreme) collective action. Research by Daron Acemoglu, Tarek Hassan and Ahmed Tahoun, for example, shows that Twitter shaped protest activity during the Arab Spring.

My study shows that technology also matters for more broad-based popular engagement in nascent social movements over much longer time horizons. Identifying the importance of technology for the historical spread of democratic ideas can therefore sharpen our understanding of contemporary political events.