Globalisation and Democracy: Cycles of Expansion and Contraction

Social scientists and historians, citing examples from the 19th century and current economic crises, note the strong correlation between cycles of globalization and democracy. Our paper develops this research in a unique manner: an intensive, highly detailed, comparative, and historical, within and across case analysis testing these theories with quantitative and statistical models. The “most different systems” research design examines four cases at different locations in the 19th Century Atlantic economy: Britain, Italy, Argentina, and the US. The cases differ in wealth, factor endowments of Land (R), Labor (L), and capital (K), but all experienced the expansion of globalization and democracy after 1870 followed by the economic and democratic crises in the 1920s and 1930s: Each case contains from 100 to over 1,000 across-time, observations with detailed measures. One example illustrates the links between global and domestic dynamics: Italy, 1914-1920, experienced the contraction of the global wheat trade, the interruption of global migration, the government decision to suspend wheat tariffs during the war, and the effects of expanded suffrage. The consequences shifted returns to land and labor with land prices and rural wages skyrocketing. However, the resumption of the wheat trade in 1920, while migration remained closed, put downward pressure on land prices and particularly on the wages of the newly enfranchised labor. Labor and land were both antagonists and allies in the struggles leading to the rise of fascism and illuminating the crucial role of elite decisions and electoral institutions. The evidence from these four models clearly ties global and domestic changes to the expansion and contraction of democracy.