A Brief History of Trade – Part 2
In the Late 15th century, Vasco da Gama started to make his name known as an explorer and trader, establishing the European Spice trade where certain spices were viewed as being more valuable than gold. The spice trade, in turn, funded further journeys of exploration, contributing to a period in history that came to be known as the Age of Exploration. Prior to Vasco da Gama opening up the spice trade through Africa, it had been controlled by Islamic groups, most notably in Egypt.
By advocating the free movement of goods and not imposing exchange controls, Holland became the center of free trade in the 16th century. The East Indies (modern-day South Asia), was a prized region in terms of trade in precious commodities, and control of the trade routes linking the area with the rest of the civilized world changed periodically. Portugal had control in the 16th century, with the Netherlands (primarily in the form of the Dutch East India Company) dominating in the 17th century before the British rose to prominence in the 18th century.
Trade started to get really interesting in the early 19th century, where some basic principles were established which are still in use today. In 1817, English political economist David Ricardo (19 April 1772-11 September 1823) published a book called “On the Principles of Political Economy and Taxation”, in which he outlined the doctrine of comparative advantage which is widely considered to be one of the cornerstones of modern international trade. The doctrine states: “When an inefficient producer sends the merchandise it produces best, to a country able to produce it more efficiently, both countries benefit.” Comparative advantage was apparently originally developed by Australian Sir Robert Richard Torrens in 1815, before being elaborated on in Ricardo’s book with the conclusion being drawn that a country can gain by specializing in goods where it has the advantage (be it cost/raw material availability/labor) and then trading those goods with other countries that are working on the same principle.
Continued in Part 3