Market Integration in the North and Baltic Seas, 1500-1800

Abstract

Ever since the time of Adam Smith, the attribution to foreign trade of the ability to affect the wholesale transformation of the productive powers of an economy has remained a very powerful concept in both economics and economic history. At the heart of this interpretation is the observation that improvements in productivity are generated by the expansion of trade through the spreading of fixed costs and an increasing international division of labour.

More recently, this so-called Smithian growth process has fallen under the rubric of market integration, the conversion of discrete and autonomous markets into an interdependent and unified whole. This concept of market integration is particularly relevant to the early modern era in Europe, in that the role of technological innovation in the growth process was severely circumscribed, leaving the expansion and intensification of trade as the only route to sustained productivity and output growth.

Many previous observers on early modern Europe, indeed, found signs of burgeoning market integration – albeit without necessarily adducing to it any profound influence on economic activity. However, more recently, there have been some calls for reevaluation of both the degree and evolution of market integration in early modern Europe. In this view, the apparent movement towards more highly integrated markets was simply that – apparent; data drawn from almost the entirety of Europe seem to bear no signs of inherent or even appreciable market integration in that significant price differentials appear to persist throughout the early modern age.

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