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.