Income from the forest
1)Explain the reasons for the existence of secular economic stagnation in pre‐industrial economies (also known as the Malthusian trap) and why it disappeared in modern economies. “DOES THE MALTHUSIAN TRAP STILL EXIST?”
Malthus’s model starts from three assumptions. The first is that each society has a birth rate determined by the customs that regulate fertility, but which increases along with the standard of living. The mortality rate in each society decreases when the standard of living increases. The standard of living worsens when the population increases.
In the Malthusian model, one of the factors of production is fixed, that is, its quantity cannot increase in the long run. By convention it is assumed that food production requires capital, labour and land, the latter factor being the one that remains fixed in the l/p. In the absence of technological change, land is essential to produce food, and its quantity does not change. Therefore, there is no way to double food production when population doubles because the amount of land does not change. There are diminishing returns as labour is added in a pre‐industrial economy. In the l/p the population increases and there is an inelastic supply of land, which results in the Malthusian Trap. The innovations of the 17th century had increased productivity and thus increased prosperity, but this improvement in living standards was temporary as the size of the population increased permanently.
Malthus was correct in thinking that population growth and declining marginal productivity of labour could create a cycle of economic stagnation and poverty. However, he was wrong in the fact that he believed that the situation would not change, as demonstrated by the improvements in technology with which it was possible to produce at a rate greater than population growth, cancelling out the effect of diminishing marginal productivity. From work. Therefore, the Malthusian trap no longer exists.
2) Was the desamortization a confiscation? Explain your answer. (UNIT 1)
‐ In the rural world, the liberal revolution consisted of a change in the rights of land ownership that often meant that it changed hands and, as a rule, that its owners had unlimited freedom of use. Therefore, the legal regime of agrarian property of the Old Regime, which generally converted it into shared property and in many cases linked or amortized, is demolished. In order for them to be transformed into individual, full and liberalized property, an agrarian reform had to be undertaken whose essential elements were: disentailment, abolition of the manorial regime and the separation of the possessions of the nobility, suppression of the tithe and cancellation of restrictive regulations on land use.
The civil and ecclesiastical confiscation was the most important component of the agrarian reform since it affected 40% of the arable land. The confiscation consisted of a nationalization of the lands belonging to the Church and the municipalities, followed by their privatization through an orderly sale in public auction to the highest bidder. The sale of the land before dead hands was concentrated in the periods of 1836 and 1844 and between 1855 and 1867. The main effect that this had was on the structure of the property since it tended to polarize the distribution of the property. // The small peasantry lost out in the confiscation, not only because they did not win anything by not being able to bid at auctions; was harmed because the economic viability of small economic farms was compromised by no longer having free or affordable access to Church and communal lands. //In terms of agricultural production, the area under cultivation was greatly expanded, to the detriment of pastures and forests, which led to an increase in the food supply. On the other hand, the confiscation helped to increase the supply of labour, by proletarianizing the lower layers of the peasantry. This, instead of being a stimulus for the growth of the agrarian economy, became a brake on agrarian development since the abundance of labour postponed for a long time the technical change in the agricultural exploitations, necessary for the improvement of the productivity of the land and to improve the purchasing power of the majority of consumers, which was an obstacle to industrial development.
3.Based on the knowledge acquired in the course, if you were one of the architects of the fiscal reform of 1845, would you be satisfied with the reform that was approved? Explain your answer in light of the information presented in the graph below. 
The new tax table approved in 1845 was a transcendental administrative reform for the future of the Spanish economy in tax matters. The Public Treasury constituted one of the most serious problems given its inability to meet the debts contracted, seriously disturbing the normal development of economic activity. The fiscal crisis could only be resolved by reformulating the foundations of the tax system.
The tax reform was based on five conditions: universality, equity, legality, sufficiency and systematicity. Yes, it complied with universality, legality and systematicity, but not with equity and sufficiency. The tax framework did not allow obtaining a sufficient volume of funds to finance public spending, synonymous with the inequity of the new tax system, which had serious consequences on the capacity of the State to supply social capital goods essential for economic development, especially economic stability and resource allocation. Indirect taxes prevailed over direct ones, which makes us see the scarcely equitable character given that they were concentrated on inferior goods.
Not only that, but the burden of taxes fell much more heavily on the backs of low‐income social strata than on those of high‐income sectors due to the way the Administration managed collection. Instead, a quota and distribution system was used where the Government set in the budget the global amount that would be collected by the tax. Needless to say, it was not successful since this formula entailed a tendency to freeze quotas and quotas, since local institutions resisted any increase in the assigned quota, preventing an increase in collection.
But above all it was the economic and political power of the elites that overcame the intentions of the finance ministers. Tax concealment and fraud reached higher levels of property tax. The control of the distribution of the quota, which was held by the local oligarchies, in particular by the landowners, allowed them to hide their wealth with impunity and shift the tax burden to small owners and producers. Tax evasion by the powerful had the reverse of relatively heavy tax pressure on modest farmers, which would become a heavy burden in years of depression. It was the fraud and the lack of flexibility and fairness of the tax system that caused its insufficiency. The ordinary income of the State was not enough to cover current expenses, which would cause a persistent and structural deficit throughout the second half of the 19th century.
4. The railway and the advantages it gave to late comers. (UNIT 1)
‐ The construction of railway networks in the mid‐nineteenth century in different parts of the world considerably lowered the cost of transport and unified the different national markets, both in Europe and in America and some Asian countries.
‐ In continental Europe, the railways significantly reduced the costs of land transport and promoted the creation of national markets, integrating themselves before the international market, because land transport costs fell more than maritime ones. Simultaneously, the railways also made it possible to transport heavy and bulky goods to the coasts for export, in the countries of the New World, and from the coasts to the interior, after their importation in Europe, and was decisive in allowing exports and reduce price differences between North American producer markets and European consumer markets for wheat and meat.
5.Name two important substituting factors in the industrialization process of continental Europe. Explain in detail the role of at least one of them
he State in the Russian case or the banks would be an example of substitute factors in the industrialization process:
THE STATE → the great economic backwardness in which Russia found itself extracted mainly from the fact that non‐institutional servitude survived until the emancipation of 1861. In a certain sense, the operation of a curious mechanism of economic backwardness can be attributed to this sole fact, especially which we are going to say a few words here. During the process of territorial expansion, which in a few centuries turned the small Moscow duchy into the huge land mass that constitutes modern Russia, the country engaged in continuous military struggles with the West. These highlighted the existence of a curious internal conflict between the tasks of the Russian Government ‐ which were modern in the sense in which the word was then used ‐ and the extremely backward economy of the country on which these military policies were to be based. As a consequence, Russian development adopted on numerous important occasions a rather peculiar sequential form, which can be summarized as follows: 1) The State, driven by its military interest, became the most important promoter of the country’s economic progress, 2) this subordination of development to military demands gave its course a particularly spasmodic character; fast or slow depending on whether military needs required it in one way or another, 3) This way of proceeding implied that whenever it was necessary for an increase in economic activity to take place, a very heavy burden would be imposed on the generation whose life coincides with the period of intense development, 4) in order to ensure that the required sacrifices were carried out effectively, the Government had to prevent the population, which was so unwilling to make them, from eluding them by escaping to the border regions of this and southeast, subjecting it to various measures of oppression, 5) due to the magnitude of government demands and the fact that the great efforts required exceeded the limits established by the physical resistance of the population, the inevitable consequences of these periods of rapid development were that were followed by long periods of economic stagnation .
THE BANKS → the difference between banks of the Crédit Mobilier type and commercial banks operating in the advanced countries of the time, that is, England, was absolute. Between the English banks designed specially to serve as a source of short‐term capital, and a Bank aimed at financing the long‐term needs and investment of the economy, there was an abyss. German banks successfully combined the basic idea of Crédit Mobilier with the short‐term activities of commercial banks. As a consequence, they were far safer institutions than those of Crédit Mobilier, with its huge industrial portfolio that far exceeded its capital and depending so much on a favourable development of events on the stock market to be able to continue its activities. Nevertheless, the German banks, and with them the Austrian and Italian ones, maintained close relations with the industrial companies. As was said, a German bank accompanied an industrial company from cradle to grave, from its establishment to its liquidation through all the vicissitudes of its life. /Through the idea of granting loans which, while formally short‐term in nature, were in reality long‐ term current account credits, and by having the institution of supervisory boards develop into one of the More powerful within corporate organizations, banks acquired such a tendency over industrial companies that they went beyond the sphere of financial control to reach management and company decisions. /English industrialization had taken place without any substantial use of banking for the purpose of financing long‐term investment. In this case, the more gradual nature of the industrialization process and the greater accumulation of capital, derived initially from the benefits obtained in trade and a more modern agriculture, later those achieved in industry itself, made it necessary to develop no type of special institution for the provision of long‐term capital. /On the contrary, in a relatively backward country, capital is scarce and diffuse, or there is considerable mistrust of industrial activities and, lastly, the extension of the industrialization movement in the productive branches in which the capital‐output ratio is relatively high, cause there to be a greater tendency towards large size, towards large‐scale rather than gradual development. To all this must be added the fact that entrepreneurial talent is often scarce in a backward country.
Mention at least two objectives of the Spanish liberalizing tariff reform of 1869 (the Figueroa tariff)
The Tariff Bases Law enacted this year, as a result of the new political context, definitively abolished all import and export prohibitions that still existed. Tariff rates were lowered substantially. In addition to this, the new legal framework established a horizon of progressive tariff dismantling, by virtue of which in 1881 the maximum tariffs would be set at 15% for imported products and the average tariff would be placed at the level corresponding to a tariff purely fiscal, devoid of protective function. //This scenario did not materialize due to political vicissitudes. The implementation in 1875 of the tariff reduction was suspended by the first Government of the Restoration. However, between 1875 and 1890 customs duties continued to be lowered. The rulers had as a priority objective in the commercial field the promotion of exports; the way to achieve this was the policy of trade agreements with the signing of bilateral treaties with other countries. In this way, Spain obtained facilities for the export of light, competitive products, while at the same time opening access to the Spanish market for the goods that the trading partners were most interested in selling abroad. The granting of the reciprocal most favoured nation clause between European countries resulted in a strong liberalization of international trade, although it should not be overlooked that the Spanish economy was much more closed to foreign trade than the economies of its environment.
Tariffs. Figueroa tariff 1869 Canovas tariff 1891. (UNIT 1) (UNIT 2)
‐ Spanish tariff of 1849 and Figueroa tariff of 1869. Bilateral treaties with other countries: the Spanish tariff of 1849 reflects the new winds of liberalization that were blowing in Europe in the middle of the century and that would end up giving way to an era of almost unimpeded international circulation of goods. The tariff law of 1849 drastically reduced the number of non‐importable articles that characterized the tariff of 1841. The most important thing is that from then on there was a gradual trend towards liberalization that would intensify notably after 1869, without completely abandoning the gradualist strategy. The Tariff Bases Law enacted this year, as a result of the new political context, definitively abolished all import and export prohibitions that still existed. Tariff rates were lowered substantially. In addition to this, the new legal framework established a horizon of progressive tariff dismantling, by virtue of which in 1881 the maximum tariffs would be set at 15% for imported products and the average tariff would be placed at the level corresponding to a tariff purely fiscal, devoid of protective function. This scenario did not materialize due to political vicissitudes. The implementation in 1875 of the tariff reduction was suspended by the first Government of the Restoration. However, between 1875 and 1890 customs duties continued to be lowered. The rulers had as a priority objective in the commercial field the promotion of exports; the way to achieve this was the policy of trade agreements with the signing of bilateral treaties with other countries. In this way, Spain obtained facilities for the export of light, competitive products, while at the same time opening access to the Spanish market for the goods that the trading partners were most interested in selling abroad. The granting of the reciprocal most favoured nation clause between European countries resulted in a strong liberalization of international trade, although it should not be overlooked that the Spanish economy was much more closed to foreign trade than the economies of its environment.
‐ Canovas Tariff of 1891. Tariff of 1906: the Castilian triggers, the Castilian textile industries and the Basque iron and steel industry formed a very powerful pressure group in defence of a protectionist tariff that would forever close the inheritance of the 1869 tariff. What ended up distinguishing Spain is not the protectionist turn in itself, but the intensity of this policy, the enormity of the tariff barriers raised. In 1894 there was no other European country that had levels of protection of cereals as high as Spain, which prohibited the importation of wheat. Consequently, cereals were also more expensive in Spain than anywhere else in Europe. It is explained that here the drop in food prices was much lower than in other countries and that, unlike these, prices recovered between 1895 and 1905 until they returned to pre‐crisis levels. In other words: the sharp increase in tariffs allowed farmers to receive a remuneration higher than that set by the international market. The 1891 tariff did not only protect traditional agriculture, but also, of course, the more consolidated industry, whose coverage would be reinforced by the 1906 tariff. Many more sectors of the industry request and obtain their increased protection, setting up a framework each increasingly restrictive for foreign competition. This strategy followed by the authorities gave rise to a dynamic in which businessmen dedicated a great deal of effort to pressuring them to free them from foreign competition. The defensive action of industrial entrepreneurs and farmers weighed down the growth of the economy by preserving inefficient productive activities that had no chance of becoming competitive, at the same time that it discouraged other activities that could innovate and reduce costs. To be competitive in open markets.
UNIT 2
1) What commitment do central banks have with the gold standard system? Explain your answer
The gold standard worked as a system of fixed exchanges, since the nations that adopted it established official parities of their currencies against gold. In addition, the central banks undertook to convert the banknotes into gold at the official parity at the request of the holders and to maintain, in their safes, a quantity of gold sufficient to ensure the convertibility of the banknotes issued. Gold prices converged in all the countries belonging to this club, lowering its general price level. Conversely, commodity prices increased in those nations that remained on the silver standard, due to the depreciation of silver against gold. The gold standard facilitated international capital movements because it eliminated exchange risk and because it forced the club countries to follow orthodox fiscal and monetary policies (balanced budgets and control of the money supply), which reduced country risk. Consequently, international financing was cheaper for members of the gold club, which helped them finance their industrialization.
2)Was the application of the gold standard during the first globalisation symmetrical between countries with balance of payments deficits and surpluses?
The gold standard theory says that the price of national currencies in the market differed from its official parity whenever there were imbalances in the balance of payments of the country in question. To rebalance external accounts and return the price to the official parity, the gold standard had three types of adjustment: 1) Changes in the interest rate; 2) Variations in the levels of production and employment; 3) Movements in the general level of prices, due to changes in the money supply:
-If there is a surplus in the balance of payments, the country’s reserves increase, which would force the central bank to issue more bills; the consequent increase in the money supply would raise domestic prices, causing an increase in imports and a reduction in exports, restoring equilibrium to the balance of payments. Additionally, the increase in the money supply would
-reduce interest rates, which would have a positive effect on production and employment.
-On the other hand, a foreign deficit implies a rise in the discount rate since the deficit would provoke an outflow of metallic reserves from the country. This would require an increase in interest rates, in order to stem the outflow of gold (and even attract its import) and to maintain parity, which was the basic objective of monetary policy among members of the gold standard. Well, the increase in the interest rate would reduce domestic demand, reducing the level of income and employment, and foreign demand, reducing the balance of payments deficit. Finally, the decrease in gold reserves would require a reduction in banknotes in circulation, which would lead to lower domestic prices and, consequently, boost exports and reduce imports of goods and services, until the balance is balanced. Of payments.
8. Was automatic adjustment responsible for the success of the gold standard between 1870 and 1913?
The success of the gold standard is fundamentally due to the fact that it relied more on the strength of the British pound than on gold. With the exception of the US, France, the UK and Germany, the other countries kept a large part of their reserves in currencies convertible into gold, which were also the ones used to settle international transactions. The success of the gold standard was based on the confidence offered by these hard currencies, in particular the British pound. It is important to highlight that this confidence in the pound was based more on political questions than on strictly economic foundations, because the liquid liabilities of the Bank of England and the Reichsbank were not conveniently covered by their gold reserves (not so the Bank of France given the great accumulation of gold they had). Another reason for the longevity of the gold standard was the well‐founded expectations held by speculators that the gold club governments would maintain the parity; therefore, their speculative bets, in the short term, tended to reinforce the parity and, therefore, the stability of currencies.
3.What effect did the gold standard have on international capital movements? (UNIT 2) –
The gold standard worked as a system of fixed exchange rates, since the nations that adopted it established official parities of their currencies against gold. In addition, the central banks undertook to convert the banknotes into gold at the official parity at the request of the holders and to maintain, in their safes, a quantity of gold sufficient to ensure the convertibility of the banknotes issued. Gold prices converged in all the countries belonging to this club, lowering its general price level. Conversely, commodity prices increased in those nations that remained on the silver standard, due to the depreciation of silver against gold. // —The gold standard facilitated international capital movements because it eliminated exchange risk and because it forced the club countries to follow orthodox fiscal and monetary policies (balanced budgets and control of the money supply), which reduced country risk. Consequently, international financing was cheaper for members of the gold club, which helped them finance their industrialization.
4.In the gold standard system, under what circumstances would the Central Bank raise its discount rate?What effects could this measure have on the economy?
In the gold standard, the price of national currencies in the market differed from their official parity whenever there were imbalances in the balance of payments of the country in question. In order to rebalance external accounts and return the price to the official parity, the gold standard theoretically had three adjustment mechanisms: 1) Changes in the interest rate; 2) Variations in the levels of production and employment and 3) Movements in the general level of prices, due to changes in the money supply. In practice, the effectiveness of these adjustment mechanisms depended on the central banks of each country and, fundamentally, on whether the governments wanted to apply the rules of the gold standard, which was not always the case. -If there is a surplus in the balance of payments, the country’s reserves increase, which would force the central bank to issue more bills; the consequent increase in the money supply would raise domestic prices, causing an increase in imports and a reduction in exports, restoring equilibrium to the balance of payments. Additionally, the increase in the money supply would reduce interest rates, which would have a positive effect on production and employment. -On the other hand, a foreign deficit implies a rise in the discount rate since the deficit would provoke an outflow of metallic reserves from the country. This would require an increase in interest rates, in order to stem the outflow of gold (and even attract its import) and to maintain parity, which was the basic objective of monetary policy among members of the gold standard. Well, the increase in the interest rate would reduce domestic demand, reducing the level of income and employment, and foreign demand, reducing the balance of payments deficit. Finally, the decrease in gold reserves would require a reduction in banknotes in circulation, which would lead to lower domestic prices and, consequently, boost exports and reduce imports of goods and services, until the balance is balanced of payments.
4. Did the protectionism of the 1880s succeed in slowing the rise of world trade? Explain the main reason why did or did not. (UNIT 2)
During the second industrialization, the role of the State in the economy was reinforced in relation to the previous minor intervention. The governments changed their trade policy, opting for a moderate protectionism that would be greatly tempered in its practical results by the trade treaties signed between nations, by the reduction of transport costs (steamboat and railway) and by the validity of the standard gold, which facilitated international payments. The development of transport was the determining factor so that the growth of world trade did not slow down. Not in vain, they allowed the integration of product markets and productive factors of geographically very distant countries. Technical and economic changes affected more sectors and countries, for which economic growth was higher and more widespread than during the first industrial revolution. European and international economic growth during the years analysed in the graph is greatly favoured by the generalization of a system of fixed exchange rates defined by the gold standard, and by the emergence of the Welfare State (as a result of the promotion of industries nascent and progressive taxes and expenses and social security are established).
5.Why, despite the increase in tariffs in the decades after 1880, world trade continued to increase? Explain your answer. (UNIT 2)
After 1870, the most outstanding factor of the first globalization was the transport and communication revolution, which, according to Williamson and O’Rourke, made possible the integration of continental and transoceanic markets, the international division of labour and the economic convergence of the main countries. As a result, during the second industrialization, technical and economic changes affected more sectors and countries, so economic growth was higher and more widespread than during the first industrial revolution. Not only did international trade grow, but also the generalized migration of workers and capital between nations multiplied, which increased global demand and productive capacity. These international movements of the factors of production also contrasted with what had happened in the first industrialization, when the export of technicians and machinery was prohibited. Other aspects that influenced the fact that the second industrialization was radically different from the first (which allowed for greater economic growth) were that: first, the technological innovations had a scientific basis; second, the large industrial company arises with the change in organizational, financial and commercial form that it implied; thirdly, the role of the State was transformed (moderate protectionism, interventionist industrial policy and the abstentionism of the liberal State in terms of income distribution is left behind); and, finally, the second industrialization took place in the context of the first globalization. European and international economic growth between 1870 and 1913 was greatly favoured by the generalization of a system of fixed exchange rates, defined by the gold standard, and by the emergence of the Welfare State. Not in vain, the real GDP per capita of the richest countries (which accounted for a sixth of the world population) grew at an average annual rate of 1.7% between 1875 and 1913, compared to 1.1% in the previous period (1820 ‐ 1875). International trade increased even more, at a rate of 3.3% per year.
6. What were the consequences of the increase in cheap American and Russian grain imports into Europe? Can you identify winners and losers from the phenomenon?
Globalization provoked political reactions from the social groups harmed by it. Faced with pressure from these groups, which were organized in unions and employers, the governments of European nations decided to change economic policy to protect their economies from foreign competition, coming from the invasion of cereal coming from the Argentine pampas or from the Russians. Ukrainians due to the transport revolution with the railway and the steamboat, made various European countries, starting with Germany, approve tariff increases in response to pressure from the large grain owners). It goes from free trade to the adoption of protectionism both in Europe and in the New World. Only the colonies and semi‐dependent countries continued to practice free trade, because they lacked tariff sovereignty, having been forced by Europe and the US to sign unequal trade agreements.
8.Based on the knowledge gained in the course, if you were a grain farmer in Great Britain, would you be satisfied with the abolition of the “Corn Laws” in 1846? (UNIT 2)
‐ Great Britain’s shift towards free trade began in 1846 with the abolition of the Corn Laws. GB had made the first industrial revolution and dispensed with protectionism in how much its flourishing industry and its powerful fiscal state gave it an unquestionable economic and military hegemony, the basis of its imperial policy. The abolition of the grain laws of 1846 (which was possible thanks to the loss of power of the landowners against the industrialists and which had clear effects on the rent of the land as shown by its enormous decrease) initiates a trend towards free trade that It is consolidated in 1860, with the signing of the Cobden‐Chevalier trade agreement between England and France, in which most of the tariffs are lowered.Therefore, as a grain producer within Great Britain, possibilities open up to carry out international trade with different parts of the world, but the productivity of the land I own would drop a lot and I would have a loss of workers who would go to the industrial sector (given that I have to lower wages by having less income from the land factor).
7.Looking at the figure below, how would you explain the increase in Germany ́s industrial production between 1870 and 1913? (UNIT 2) (gráfica world industrial rev %)
The most important event in Europe in 1870 was the invasion of cheap grain from the New World and the Ukraine, threatening farm incomes. In the New World, there were two important developments: the massive migrations from Europe, which constituted a threat to the living standards of the workers, and the competition that European manufactured exports posed for the nascent industry of the New World.
In this sense, Germany has a key date in 1879, when Bismarck opted for protectionism in both agriculture and industry. Specific tariffs started out low, at just 6% ad valorem on wheat and 8% on other cereals. Later they increased in 1885 and then in 1887, reaching the equivalent of 33% ad valorem on wheat and 47% on rye. Tariffs were lowered briefly, in the Caprivi era, from 1891 to 1894, but were raised again in 1902 after a decade of violent debates between protectionists and free traders.
German industrial policy focused on supporting business concentrations (with a view to creating large industrial groups) and the legalization of industrial cartels (formal agreements between companies in a sector to control prices and share the market), since 1890 This contributed to the development of basic industries, in particular the steel, chemical and metal processing industries. Tariff protection and cartels reduced risk and allowed companies to increase investment, which fuelled technological progress and lowered costs. This increased the international competitiveness of German industry. The mixed banks jointly developed commercial banking (short‐term) and industrial banking (focused on long‐term financing of companies). These banks contributed to the creation of companies, their subsequent management and, ultimately, helped to form cartels. The fact that the German Central Bank also intervened more than other European central banks in preventing banking crises, acting as a lender of last resort, was fundamental for the emergence and development of large emporiums in basic industries such as organic chemistry., electricity or steel.
10.Mention two causes of the increasing integration of goods markets during the first globalization (1870 ‐ 1914)
The construction of railway networks in the mid‐nineteenth century in different parts of the world considerably lowered the cost of transport and unified the different national markets, both in Europe and in America and some Asian countries. In continental Europe, the railways notably reduced the costs of land transport and promoted the creation of national markets, integrating themselves before the international market, because the costs of land transport fell more than maritime ones. Simultaneously, the railways also made it possible to transport heavy and bulky goods to the coasts for export, in the countries of the New World, and from the coasts to the interior, after their importation in Europe, and was decisive in allowing exports and reducing the price differences between the North American producer markets and the European consumer markets for wheat and meat. Maritime transport also progressed in the second half of the 19th century thanks to the fact that steamships ended up imposing themselves for two reasons, mainly with respect. The first was the opening of the Suez Canal, which shortened the route from Europe to Asia and Oceania and shifted routes from Europe to inland seas with less wind, which was detrimental to sailing ships. On the other hand, technical innovations in the iron and steel industry acted in favour of steamships (iron and steel hulls and propeller propulsion). .
Did the migrations of the 19th century affect the real wage in the countries of origin and in the countries of destination of the migrants in the same way? Explain your answer
The notable increase in the migration of productive factors, both workers and capital, and of international trade had the consequence of altering the distribution of income in the different countries. Immigration eroded wages in countries rich in natural resources and with scarce labour (America), while emigration increased them in countries poor in land and with an abundant workforce (Europe). In addition, imports of American agricultural products reduced the income of landowners and the income of peasants in the old continent. These declines in factor returns triggered a protectionist backlash led by the losing groups in globalization. This brought with it a return to protectionism, which allowed the recovery of the income of those groups. Indeed, the tariff protection at the end of the 19th century raised the demand for the scarce factor and, consequently, the price of its productive services. Thus, agrarian protectionism in Europe increased inequality by increasing landowners’ incomes and containing wages. In short, and as Stolper Samuelson established, Any interference that raises the price of imports (tariff) it benefits the factor of production (owners of the land factor in the case of cereals) that is used intensively in the production of goods that compete with imports.
Did Spain maintain the same relative position compared to the average of 3 European countries (Great Britain, France and Germany) and compared to the United States in terms of per capita income between 1850 and 1913? Explain your answer.
f we analyse the real GDP per capita we can highlight that the stagnation does not begin to be overcome until the second decade of the 19th century. From 1808 to 1827, the GDP per capita grew by 10% as a result of the strong agrarian expansion, facilitated by the collapse of transhumant cattle ranching that freed up many pasture lands. There was a stagnation of about 15 years, but since the beginning of 1840, GDP per capita began to grow gently again, reflecting the first impact of the expansion caused by the liberal agrarian reform and the first steps of industrialization in Spain. From 1850 to 1880 there is a significant acceleration that marks a visible inflection in the series. Throughout the rest of the century and until 1913, GDP grew at a moderate but persistent rate. This means that the level of economic well‐being of the Spaniards increased by more than double throughout the entire nineteenth century. The 20th century was a different story with an unparalleled increase that reflects that in its course Spain industrialized and achieved a high level of economic development. The previous century had been characterized by its regularity while this one is recognized by its irregularity, with discontinuities in the growth process. Between 1914 and 1929 the Spanish economy experienced a period of prosperity, growing more than twice as fast as in the period previous. The two subsequent decades are a contemporary Spanish disaster given that per capita income was 17% lower than in 1929. It meant a lost generation, an immense economic sacrifice in which the Spaniards suffered a significant decrease in their standard of living. After the disaster and after some 50 years of recovery comes the boom, through the Spanish economic miracle of the 1960s. Never before, even for a short time, had Spain enjoyed a comparable expansion. Behind these enormous growth rates was the recovery of the ground lost during the Great Spanish Depression of 1930 to 1950 and the leap forward in the process of economic development. Industrialization is definitively completed. Finally, as of 1975 a new stage was inaugurated with less growth due to the decade of crisis between 1975 (beginning of the Transition) and 1985 (integration into the EEC) and the strong expansion experienced as of 1986.
GOLD STANDARD
The gold standard system, prevalent during the first wave of globalization from 1870 to 1913, established fixed exchange rates where currencies were pegged to gold. Central banks committed to maintaining this system by backing their banknotes with gold reserves and ensuring convertibility at the official parity.*
The gold standard system led to price convergence and reduced general price levels in member countries, while nations on the silver standard experienced increased commodity prices. It facilitated international capital movements by eliminating exchange risk and enforcing fiscal and monetary discipline, thus lowering country risk and providing cheaper international financing for industrialization.*
The application of the gold standard was not always symmetrical between countries with balance of payments deficits and surpluses. It necessitated adjustments to restore currency prices to their official parity when imbalances in the balance of payments occurred. These adjustments included changes in interest rates, variations in production and employment levels, and alterations in the general price level through changes in the money supply. Central banks would raise the discount rate in case of deficits to prevent gold outflows, thereby reducing domestic demand and boosting exports. Conversely, surpluses would lead to increased money supply and reduced interest rates to restore equilibrium. While the success of the gold standard relied on factors like confidence in hard currencies
British pound. Confidence based more on political questions than on economic foundations, because the liquid liabilities of the Bank of England and the Reichsbank were not conveniently covered by their gold reserves*
And expectations of parity maintenance,
Speculative bets, in the short term, tended to reinforce the parity and, therefore, the stability of currencies*
.
Lo de que en los paises con silver standard subieron los precios y en los de gold bajaron*.
The gold standard facilitated international capital movements by eliminating exchange risk and enforcing orthodox fiscal and monetary policies, making international financing cheaper and aiding in industrialization efforts.
PROTECTIONISIM 1880SThe protectionism of the 1880s did not succeed in slowing the rise of world trade primarily. The development of transportation*
Main factor*, advancements in transport technology, such as steamboats and railways, significantly reduced transport costs and facilitated the integration of product markets and productive factors across geographically distant countries. This integration allowed for the continued growth of world trade despite moderate protectionist policies adopted by governments. So played a crucial role in ensuring that world trade continued to expand during this period.