The Rise of Modern Market Systems

Modern international relationships are largely informed by the market. Debates over Brexit, NAFTA, and the formation of military alliances like NATO were intended to defend global economic flows. Though the economy has always influenced policy, today's dominance of an intricate market system has not always been in place. So, how did we get here?

Markets arise when two parties, one or both of whom have a surplus, want to exchange products. As early as ancient Sumer, the relationship between settled civilisation and its nomadic counterparts was defined by access to agricultural goods. The development of armed settlers further describes the dynamics that have formed today’s global market system: a combination of security and need, which we see in international relations today.

The first markets arose when ancient Sumerians, in today’s Levant, settled for the first time and developed agro-economies that could grow more food than was necessary. This surplus of food made them a target; nomadic groups saw their granaries as easier targets than hunting wild animals and foraging for food. Thus, supply and demand created a relationship between these two groups, making them participants in a market. Settled people were forced to develop defence capabilities against nomads, demonstrating how the threat of war can catalyse deals.

Before the development of modern communication and transport, the world was a much larger place. It made more sense to split control over resources across multiple regions. For example, in 1600, it made little sense for a London-based empire to extend its trade relationships and political arm all the way to Mumbai and New York. Instead, multiple hegemons coexisted and met only at their borders, focusing largely on internal systems. For example, before the rise of the Arabs, Persian rulers as far back as the Achaemenids held power. Similarly, European hegemons like the Romans dominated for hundreds of years. In large, densely populated regions like China, regional power remained largely out of reach for Persian shahs. These imperial economic systems functioned much like modern economic alliances. In Iran, a supranational leader – the Shahanshah – asserted authority over areas we would today consider independent countries. The fertile Levant, the coastal cities of the Persian Gulf, and the mines of Armenia were all united into one giant bloc, dealing directly with the Romans or Chinese rather than developing more complex trade relations with numerous individual actors. Though these regions expanded and collapsed over time, communication limitations often impeded globalising markets, leading to more localised interactions.

After the 18th century, global markets and their nature changed rapidly. Discussions often center around Western industrialisation and colonial expansion. At one point, 80% of the global landmass, excluding Antarctica, was under the control of what is now considered the West. This dominance allowed Western powers to reshape global markets and establish a world order that informs today’s dynamics. For example, the UK’s position as a major global exporter was a result of its massive imports of Indian textiles. Another example is the rise of financial services in London, with companies like Lloyd’s of London dating back to 1692. These companies, which brokered imperial trade networks and insured slaves transported along the Atlantic, brought significant returns to British investors and concentrated wealth in London’s administrative corporations. Transnational corporations dominating today’s global markets were first modelled on imperial companies like the East India Company. Companies like BHP, McDonald’s, and Nike now dominate the global market, their established transnational nature tracing directly back to the period when states supported individuals in expanding globally.

The most crucial factor in making today’s market possible was the rapid improvement in communication technology and the ability of states to project hegemonic authority globally through their navies and aircraft. Today’s economy often rests on US defence pacts and military reach, but executing war was not always as easy as pressing a button in Washington. By the early 1820s, the British navy adopted steam engines, liberating itself from the elements. These engines allowed easier travel and facilitated the export of violence. The introduction of telegraphs in 1870 sped up communication: messages that once took months now took five minutes. Undersea cables laid across the Atlantic seabed allowed American entrepreneurs to send messages to London and beyond to India. This precedent allowed global business deals and agreements, confirming shipments and negotiating on an international level. Today, nearly a million miles of cables are constantly expanded and repaired, defining markets reliant on vast logistical networks. The ability of a relatively small group like the Yemeni Houthis to threaten these cables highlights the crucial role of state-backed navies in maintaining these essential communication and transport links.

Therefore, market systems and exchange have historically gone hand in hand with military and communication systems. As states have sought to improve their positions and strengthen their relative power, they have redefined capital flows and solidified their positions using exchange rates and trade sanctions. Today, trillions of pounds are traded remotely daily, and rapid communication networks allow us to order Chinese-made, Swedish-designed goods from a company listed on the New York Stock Exchange. However, many find themselves asking a crucial question: would all this be possible without the war and colonial realities that have accelerated these developments?

Bibliography

Baylis, John, Steve Smith, and Patricia Owens, The Globalization of World Politics: An Introduction to International Relations (Oxford: Oxford University Press, 2023)

Keddie, Nikki R., and Mehrdad Amanat, 'Economy iv. From the Safavids through the Zands', in Encyclopædia Iranica, https://www.iranicaonline.org/articles/economy-iv [accessed 30 July 2024]

Undersea Cables Connect the World, but Are They Subject to Concern?, The Week, https://theweek.com/news/technology/955812/undersea-cables-connect-world-subject-concern [accessed 30 July 2024]