History, Geopolitics, Trade and Macroeconomics – the effect of the Silk Road and the rising sun from the East Part 1.

the-silk

I’m a big fan of macroeconomics and history and often tend to look the correlations between the past and future in macroeconomic level. At the moment the situation in the world is more than thrilling. One can see that the New World namely Americas is doing very well, the indexes are blowing out of the roof and unemployment historically low. The Old World instead, needs more clarification as the term was used to describe Europe, Africa and Asia. This area is however too big to be described as one area – the differences are too big. So let’s just use the current names as they define clearly the areas I’m talking about. The Silk Road, however, has everything to do with both of these and the Americas and the term has remained the same for a long time.

In the birthplace of civilization namely ancient Persia (current Iran area) in the lowlands of Mesopotamia, the situation is different. But let’s broaden the area bit and call it as the Middle East. There the high unemployment rates, energy exports (for the countries having it) and challenges to increase domestic markets and exports (for energy poor countries), poor governance and inclusive systems are urgent and need solutions. In this article/blog I don’t, however, concentrate on the Middle East that much as the short term situation for the energy-rich countries rests at least partly on the shoulders of OPEC and for the rest in changing the whole system. The Silk Road, however, has had and will have an effect on this area as well.

The birth of the Silk Road

Before concentrating to Asia, I want shortly open the term Silk Road. The Silk Road is an ancient road from China to Europe, but it was named the Silk Road in 1877 by Ferdinand von Richthofen, a German geographer. The origins of the road, however, date back to Alexander the Great, a Greek ruler who took the throne in 336 BC. Alexander was clear in his direction; it was East. First, he took power in ancient Persia in 331 BC with a decisive victory. Then city by the city he moved East – first Herat (Alexandria Ariana), then Kandahar (Alexandria Arachosia) and Bagram (Alexandria on the Caucasus) forming staging posts leading eventually to Huaxia confederation of tribes—living along the Yellow River. The concept of Huaxia became later known as the Chinese nation.

After Alexander’s sudden death there was a time of turbulence, which ended when new leader Seleucus took power. During his time a gradual Hellenisation, the move of ideas, themes and symbols were introduced to East. Even the Greek coinage and language spread along the route in Central Asia. Also, the cultural exchange to other direction was inevitable. It is also known that Greek knowledge of astronomy was widely accepted in India. During the Han dynasty 206 BC-AD 220 China took control of the Eastern part of the road by controlling the nomadic tribes by giving them luxury gifts – often Silk. It is an interesting thought that the globalisation actually started then nearly 2000 years ago!

During China’s control of the Eastern part of the Silk Road Rome had developed itself as the regional power of Europe by conquering Gaul (approximately the area of current France) and part of the western Germany. Even more wealth and tax revenue Rome credited after Mark Anthony conquered Egypt. This turned the ruler general Octavius something more; in 27 BC the man who returned back Rome was bestowed by the Senate and named Augustus – the first emperor of Rome.

This started the real success of the Silk Road from China to Europe – namely Rome, where silk was highly expensive and valued. The trade, however, was not directly dealt by the Chinese and Romans. The Chinese traders sold their silk to Persia. Persia then sold their commodities back to Chinese. Persia sold the Silk to Rome and gained a huge wealth in doing so. Eventually, Rome’s greed increased and they fixed their eyes firmly on Persia. This, however, led to bloody battles, which lasted nearly 300 years and resulted in even the death of a Roman emperor.

New Rome and Christianity

Finally, Emperor Constantine took action and built a new city in a strategically very important location – to the point where Europe and Asia meet. The city was built on the site of old town Byzantium and named the New Rome although it quickly became known as Constantinople – or Istanbul as we know it today. The city was not the only thing Emperor Constantine found, he also found God and surprisingly it didn’t come from Persia nor India, it came from a small province nearby New Rome – Christianity was born and about to start its own journey.
The Silk Road was not only a commercial route linking East to West; it also spread the religions across the road. The below picture shows the spread of Islam and Buddhism in 600 century AD, but also the below-mentioned religions were found across the road.

Islam and Buddhism along the Silk Road

• Zoroastrianism
• Nestorianism
• Manichaeism

The Silk Road was in full force until the fall of the Roman Empire in 476 CE. Rome was survived by its eastern half which came to be known as the Byzantine Empire and which carried on the Roman infatuation with silk.
In 1453, a Turkish Muslim army finally captured the last Christian stronghold in the Near East, Constantinople, and the Byzantine Empire came to an end. The Ottoman Empire closed the Silk Road and cut all ties with the west. After this, the political powers along the Silk Road became economically and culturally separated.
In 1492 Christopher Columbus set off across the Atlantic Ocean to try and reach China by this western route – so the New World, America, was found. Meanwhile, Portuguese explorers such as Bartolomeu Dias and Vasco da Gama had found a sailing route around Africa and the Indian Ocean to India. This route now linked up with the Spice Route from the Far East. The Europeans had at last found a way of trading directly with China and south-east Asia which avoided paying money to the middlemen conducting the caravans along the Silk Route.
Five centuries later, the current President of China has flagged the idea of a rebirth of the Silk Road, an Economic Belt linking East to West. In 2013 President Xi Jinping first made the announcement, but ironically it barely got a mention in the global media.

Two years later it’s a different story. As the centrepiece of the President’s foreign policy and an international economic strategy, it’s all systems go. The first China-to-Britain freight train arrived in London on Wednesday 18th of January 2017 after a 7,500-mile journey, marking a milestone in China’s push to build commercial links across Europe and Asia. The journey took 18 days, which is nearly half of the time required by the sea route. The route passed through Kazakhstan, Russia, Belarus, Poland, Germany, Belgium and France, finally crossing the English Channel into Britain.

Re-birth of the Silk Road

This was the re-birth of the Silk Road where one can see a big correlation to history.

Economically, diplomatically and militarily Beijing will use the project to assert regional leadership in Asia, say experts. For some, it spells out a desire to establish a new sphere of influence, a modern-day version of the 19th-century Great Game, where Britain and Russia battled for control in central Asia.
Whether true or not, the whole newly established ASEAN will definitely have a big use for the Silk Road in the future. The current five years plan states clearly in one of their focus areas “Opening up: Deeper participation in supranational power structures, more international co-operation” there is also one policy supporting the Silk Road; Made in China 2025.
This is where I will leave you this time. But Part 2. will be available sooner than you think (If I only find some time to put my thoughts on paper again).
Lenni Koivisto

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