Mediterranean Labor Markets in the First Age of Globalization

An Economic History of Real Wages and Market Integration

Paul Caruana Galizia

• Publisher: Palgrave Macmillan
• Year: 2015
• ISBN:
  9781137400840
• Topic: Economia
• Subtopic: Storia economica

Scholars have studied the nineteenth century's unprecedented labor flows in global and specific country contexts, but have lacked a comprehensive analysis of the world's old economic core, the Mediterranean. This work provides answers to important questions, such as: If the Mediterranean labor market really was integrated, then why did globalization affect the Western and Eastern Mediterranean so differently? Why did wage inequality rise in the East while it fell in the rest of the labor-abundant periphery? More broadly, was low emigration from Iberia and the East to blame for the Mediterranean's failed integration with the fast-expanding global economy? This ground-breaking research relates these questions to ongoing historical debates on the intensity of intra-Mediterranean integration in goods and labor, to current heated debates on North African emigration to Europe, and to discussions on European economic integration more generally.

CHAPTER 1

INTRODUCTION

This book is about the movements of Mediterranean people within their own region and beyond during the nineteenth century. Economic historians have done a lot of research to explain why 55 million Europeans left for the New World and what the effects were.¹ Historians have described migration around the Mediterranean.² Until now, the two strands of literature had not yet been brought together to provide a systematic explanation of the Mediterranean experience. Further, the flows of Europeans to the New World were so large that they have obscured the within-Mediterranean movements of many hundreds of thousands of French, Italians, Spaniards, Greeks, and Maltese to Egypt and to France’s North African colonies. Important patterns of regional seasonal labor migration are also lost, for example, Italian construction workers’ migration to Egypt.

A focus on the Mediterranean is timely and relevant and not just a matter of filling an academic gap. Fast-forward to the present, when most of the Mediterranean’s northern rim and islands are part of the affluent, free-movement European Union while the southern rim remains mired in poverty and civil strife. Thousands are fleeing Libya and sub-Saharan Africa via Libya, desperately seeking asylum in the European Union but often never making it. In October 2013, 319 people—mainly Somalis and Eritreans—drowned when their boat from Libya capsized before reaching the small Italian island of Lampedusa.³ The war in Syria has provoked similar movements. That same October, another boat capsized off Lampedusa; though 200 people—mostly Syrians and Palestinians—were rescued, at least 27 are known to have drowned⁴ and several hundred others, including some 100 sub-Saharan Africans who were locked out of sight in the boat’s hold, are missing and presumed dead.⁵

The numbers of migrants in these flows are small compared to those in the nineteenth century. As of 2012, for example, Malta was home to 8,248 refugees.⁶ In 1842, long before the notion of refugee status, Maltese emigrants numbered 9,500 in Algeria alone, with over 5,000 in Tunisia, 1,200 in what is now Libya, and 2,500 in Egypt. Some 15 percent of Malta’s population was scattered around the southern Mediterranean.⁷ Between 1882 and 1913, an average of 23,000 Spaniards left for Algeria each year.⁸ By 1882, French citizens resident in Algeria numbered 234,000—that is, 7 percent of Algeria’s population.⁹ While in both periods migrants were driven by domestic pressures and distant hopes, greater numbers in the nineteenth century should not surprise us, as migration policy was a lot more liberal then than it is today. Since its inception, the European Union has focused on increasing intra-Union labor mobility while simultaneously implementing external restrictions. Is this the right approach? As Hatton and Williamson wrote, “History is a good place to look for answers to these questions.”¹⁰

Between the fourteenth century and the turn of the sixteenth century, the Mediterranean moved in an orbit of its own, exerting a strong pull on the rest of the world but little affected by it. Its power was concentrated in the city-states of Venice and Genoa, which brought in sugar from Madeira, spice from Alexandria, silver from Bohemia, gold from Takrur, and silk from China.¹¹ Partly because of the circumnavigation of Africa, partly as a result of the ceaseless regional wars, and partly because of the new industrial technologies, which northwestern Europe developed in the nineteenth century, our view of recent Mediterranean history has been foreshortened. The Mediterranean mastered certain arts of trade, advancing our knowledge of bookkeeping and merchant finance, when the rest of the world was still ignorant of them. As with the Venetian merchants, who established a public tradable bond market in the twelfth century when England had a mint in every borough and suspended it after wars with Genoa when English merchants experimented with joint-stock companies, the Mediterranean surged ahead and then fell behind. Long an agent of civilization, in the eighteenth and nineteenth centuries, the Mediterranean—often, but not always, against its will—adopted the civilization of others. By the start of the nineteenth century, Britain de facto controlled Gibraltar, Malta, Corfu, the Ionian Islands, Cyprus, Egypt, and Palestine.

Industrialization, first in Britain and then in America, was the other side of this equation. The literature provides ample explanations of low levels of industrialization across most of the Mediterranean but, whatever the reason, Europe’s economic balance changed. The outside world came to the Mediterranean first as a trader, then as a colonizer, and finally as a tourist. By diplomacy and war, however, the Sea opened up to trade, with colonies following Britain’s free trade doctrine and weak Ottoman jurisdictions signing “unfavorable” free trade treaties. Small islands became entrepôts and the construction of the Suez Canal once again reoriented global trade through the Sea. Mediterraneans themselves, no longer threatened by pirates and corsairs, moved perhaps more freely during this new age. British foreign consuls were obliged to fund return voyages for their subjects and, in one episode, demanded that the regent of Tunis accept a shipload of “surplus” Maltese laborers into his city.¹²

However, usually policy was concerned with restricting emigration from Europe to the New World. Politically influential landowners in Italy and in Ottoman jurisdictions wanted to stem the outflows of cheap, abundant unskilled labor. They rarely succeeded; this certainly neither helped relieve population pressures—and so, poverty—at home nor did it facilitate the Mediterranean’s integration with the global economy. Indeed, low emigration might have even contributed to the region’s relative economic decline at a time of unprecedented globalization of labor, commodities, and capital. As the region declined, masses of would-be migrants were paralyzed by poverty, unable to afford the journey to the booming New World, and adding to the stock of poor, abundant labor at home. While some public and private initiatives to encourage emigration from the Mediterranean were set up, they were not enough.

These issues motivate this book. While my approach to the data is informed by standard economic theory and tested with quantitative techniques wherever possible, I have tried writing the book in a way that could appeal to economists as well as to historians, at the risk of confusing both. If we researchers are to justify the resources that society devotes to our work, we should not write exclusively for our own herd. This improves the ability of historical research to provide lessons for contemporary policy and serves that other function of history: providing antidotes to “presentist,” alarmist arguments—in this case, on migration.

CHAPTER 2

THEORETICAL AND EMPIRICAL FOUNDATIONS

Introduction

As transport costs decline relative to income levels, information flows improve, and institutional blockages are cleared, labor mobility increases and so there is a tendency toward labor market integration.¹ Consequently, previously segmented labor markets integrate within and between countries.

This book is about the integration of labor markets within the Mediterranean and the integration of Mediterranean labor with the global labor market over the nineteenth-century era of globalization. However, while there is a large literature on emigration from Europe to the New World and on within-country migration for a number of countries, so far, economic historians have scarcely covered the Mediterranean as a region.² We know that hundreds of thousands of Italians emigrated to the New World and the effects this had in Italy and in the immigrant countries, but we know comparatively little on emigration from the Ottoman eastern Mediterranean, and next to nothing about emigration from the Maghreb.³ In the research leading up to this book, I have collected new data for previously neglected parts of the region: Algeria, Cyprus, Gibraltar, Malta, and Tunisia. These countries’ data—along with existing data on Egypt, France, Spain, Turkey, Serbia, and Syria produced by tireless economic historians over the past two decades—allow for the widest geographic coverage of the region yet.⁴

If we know little about emigration from these neglected areas, then we know even less about the effects at home and away of that emigration. As Boyer and Hatton argue, migration does not necessarily imply labor market integration. Other variables also affect labor markets; so markets “could be perfectly integrated but exhibit little migration or they could exhibit high rates of migration but be poorly integrated.”⁵ A better measure of labor market integration is the real wage (nominal wage adjusted for inflation). The analysis of real wages paid in two different markets, under our conceptual priors of the “law of one price,” can indicate whether the two markets are integrated.

Law of One Price

If a market’s function is to link sources of supply and demand, a market’s efficiency in allocating labor critically depends on the communication channels linking employers and workers and on the institutions that facilitate the movement of workers in response to employment signals.⁶ It is difficult for economic historians to observe the actual networks of communication through which labor markets work; so most research in economic history is directed at the “observable consequences of integration.”⁷ Most of this research, in turn, is based on the “law of one price.”⁸ This law states,

Within an integrated market, the free flow of information and labor will ensure that wages (for the same type of labor, employed under the same conditions) at different locations will “tend to equality easily and quickly.”⁹

It is better to think of this law as a tendency for two reasons. First, there are always transport costs, information asymmetries, and general risk that drive a wedge between wages in different locations. Second, the ideal is to compare homogenous labor under the same conditions. In economic history, this ideal is always distant due to data constraints. While data on the same specific occupations across all countries is unavailable, we can work with a generic “unskilled labor” category. This has two advantages. First, nineteenth-century migrants tended to be unskilled, and became increasingly so as the century unfolded.¹⁰ Second, the skilled laborer premium “varied widely over time and across countries.”¹¹ Still, putting these issues of homogeneity and unobservable costs together, we must keep in mind that integration is a matter of degree not dichotomy and that differences in labor classes and location characteristics can affect that degree of integration.

Even if we ignore these issues, we cannot conclude with full confidence that the equalization of wages (or their convergence) implies an integrated labor market. Large demand or supply shocks can alter wage differentials, even within an integrated labor market. While we would expect migration from low- to high-wage regions to level off these shocks, it is not always the case—as was demonstrated by differential regional wage and unemployment levels during the 2010–13 Euro zone crisis. Among similarly developed economies, it is also possible that supply and demand conditions in two isolated labor markets produce similar wage levels despite any actual link between them. Then, why use real wages?

Why Real Wages?

While there are issues with using real wages, there are a number of reasons as to why they are a better measure of integration and convergence than other variables.¹² Williamson, whose work provided invaluable...

Table of contents

• Cover
• Title
• 1.  Introduction
• 2.  Theoretical and Empirical Foundations
• 3.  Historical Context
• 4.  Explaining Mediterranean Emigration
• 5.  The Globalization of Trade and Labor Markets
• 6.  Emigration and Wage Inequality
• 7.  Global Migration and Wage Convergence
• 8.  Conclusion
• Appendix: Data Sources
• Notes
• References
• Index