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Sunday, May 05, 2013

Generating the Wealth of Nations 7: Some Data on US Cotton Prices 1814-1860

Findlay and O'Rourke (in "Commodity market integration, 1500–2000," one of the suggested readings for Lecture 2) write: 

The literature on these issues is sparse, and to a large extent relies on qualitative evidence, or quantity data, rather than the price data we really need. In a classic article, Crouzet (1964) drew attention to the disruptive effects of the wars on Continental industry. The sea blockade by the British Royal Navy affected Atlantic-oriented export activities severely: shipbuilding, rope making, sailmaking, sugar refining, and the linen industry all suffered. Industrial activity shifted from the Atlantic seaboard to the interior, as import-substituting industries such as cotton textiles flourished behind the protection from British competition afforded by the Continental system.

One thing that does seem clear is that the export price of cotton in the US dropped quite dramatically immediately following the end of the Napoleonic Wars in 1815, from $141 per bale in 1816 to $44 per bale in 1827, a drop of almost 70% (data from D. C. North, The Economic Growth of the United States, 1790-1880, Table A-X, p. 257, and displayed in the following chart).  This is just the opposite of what Findlay and O'Rourke's argument would suggest would happen at the end of an essentially pan-European and pan-Atlantic war.  The price in the importing country would rise during the war because of increased shipping costs (insurance, risk of loss, etc.) and fall during the war in the exporting country (demand would have effectively decreased); these effects would reverse after the war.  So maybe something else was going on as well.

(Click chart to expand.)


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