The Periphery’s Terms of Trade in the Nineteenth Century: A Methodological Problem Revisited

There is a major downward bias in the trend of most existing estimates of the periphery’s nineteenth-century terms of trade. By using prices from the North Atlantic core as proxies for prices in the peripheral countries themselves, historians ignore the dramatic price convergence that took place during the nineteenth century. This has been reflected in Jeffrey Williamson’s recent work. Measured correctly, the periphery’s nineteenth-century terms-of-trade boom would appear considerably longer, greater, and more widespread than Williamson has suggested. His grand narrative about the relation between globalisation and the ‘great divergence’ would therefore be greatly reinforced. Many of the details of his narrative would, however, need to be revised. This is illustrated by the case of India

Resolving the Halperín Paradox: The Terms of Trade and Argentina’s Expansion in the Long Nineteenth Century

Since the pioneering work of Tulio Halperín Donghi, historians have tried to explain why Argentina experienced a dramatic pastoral expansion in the first half of the nineteenth century even though there were no price incentives for increasing output. Here this ‘Halperín paradox’ is resolved by correcting the methodological error that underlies it. Halperín Donghi made the mistake of looking at the nominal prices of Argentina’s exports in Britain, whereas he should have looked at their prices in Argentina deflated by the prices of the country’s imports – that is, its terms of trade. When this methodological error is corrected, a massive term-of-trade boom can be seen from the 1780s through to the First World War. It is likely that Argentina’s terms of trade improved by at least 2,000 percent over this period, so there were considerable price incentives for the expansion on the Pampas. With the Halperín paradox resolved, future research should look less at the Pampean zone and more at the effects of the terms-of-trade boom on the relatively land-scarce regions of the Interior