Learning Objective
- The Pre-modern World
- The Nineteenth Century (1815-1914)
- The Inter-war Economy.
- Rebuilding a World Economy: The Post-war Era
The Pre-modern World
Globalization, a modern economic system, has deep historical roots in trade, migration, and capital movement. Since ancient times, travelers sought knowledge, opportunity, or refuge, linking civilizations through trade and cultural exchange. By 3000 BCE, the Indus Valley civilization traded with West Asia via coastal routes.
Silk Routes Link the World
The Silk Routes illustrate ancient trade and cultural connections across Asia, Europe, and Africa. Historians identify overland and sea routes linking these regions, facilitating exchange of textiles and spices from India for gold and silver from Europe.
Food Travels: Spaghetti and Potato
Food exemplifies extensive cultural exchange over long distances. Traders and travelers introduced new crops, like noodles from China evolving into spaghetti in the west. Five centuries ago, our ancestors were unfamiliar with staples like potatoes, maize, and tomatoes, which originated from the Americas through contact with Native American cultures.
Conquest, Disease and Trade
- The Indian Ocean was a hub of trade and cultural exchange for centuries, but European entry redirected flows towards Europe. America’s resources transformed global trade. Portuguese and Spanish colonization of America began in the mid-16th century.
- Europeans’ potent weapon was not military, but germs like smallpox. Poverty was widespread in Europe until the 19th century, while China and India were wealthy until the 18th century. China limited overseas contacts, leading to Europe becoming the center of world trade from the 15th century.
The Nineteenth Century (1815-1914)
- In the 19th century, various factors transformed societies and relations. Economists identify three key movements: trade in goods, migration for employment, and capital movement for investments.
A World Economy Takes Shape
- In the 19th century, Britain faced food shortages due to population growth and corn laws restricting corn imports. This led to urban migration and overseas emigration. Industrial growth in Britain increased incomes, allowing for more food imports.
- Other regions like Eastern Europe, Russia, America, and Australia expanded food production to meet British demand. London provided finance, and European emigrants supplied labor for agriculture.
- By 1890, a global agricultural economy emerged, driven by labor, capital, ecology, and technology changes. British Indian government’s irrigation canals in West Punjab and global cotton cultivation expanded to support British textile mills.
Role of Technology
- In the 19th century, inventions like railways, steamships, and the telegraph revolutionized global connectivity. However, these technological advancements were often driven by broader social, political, and economic factors.
- For instance, colonization spurred investments in transport, leading to faster railways and larger ships, facilitating cheaper and quicker movement of food from distant farms to markets.
- Live animal shipments from America to Europe until the 1870s also expanded dietary options, making meat more accessible to the European poor alongside bread and potatoes.
Late nineteenth-century Colonialism
- In the late 19th century, global trade and market expansion had both positive and negative implications. While it facilitated economic growth, it also led to the loss of freedoms and livelihoods for many.
- The 1885 Berlin Conference marked the completion of Africa’s colonization by major European powers like Britain, France, Belgium, and Germany. Additionally, the US emerged as a colonial power in the late 1890s, acquiring territories previously held by Spain.
Rinderpest, or the Cattle Plague
- In the 1890s, Africa faced a devastating cattle plague called Rinderpest, severely impacting local economies and livelihoods. The continent’s abundant land and resources attracted Europeans, who aimed to establish plantations and mines for export.
- However, a shortage of labor willing to work for wages emerged. Changes in inheritance laws limited land ownership to one family member. The arrival of Rinderpest, brought by infected cattle imported from British Asia, led to the destruction of African livelihoods.
Indentured Labour Migration from India
- Indentured labor in the nineteenth century illustrates both economic growth and widespread suffering. Indian laborers, mainly from regions like Uttar Pradesh, Bihar, and Tamil Nadu, were contracted to work in places like the Caribbean, Mauritius, and Fiji.
- They were also employed in Assam’s tea plantations. Despite promises of work, indentured laborers faced conditions akin to slavery. In Trinidad, cultural traditions like the Muharram procession evolved into the riotous Hosay carnival.
- Rastafarianism, a protest religion, is believed to have roots in Indian migrant culture. By the early 1900s, Indian nationalist leaders condemned indentured labor as exploitative, leading to its abolition in 1921.
Indian Entrepreneurs Abroad
Peasants relied on financiers like Shikaripuri shroffs and Nattukottai Chettiars to grow crops for the global market. These bankers and traders provided the capital needed for export agriculture in Central and Southeast Asia. They used their own funds or borrowed from European banks to support farmers.
Indian Trade, Colonialism and the Global System
India exported cotton to Europe, but tariffs on cloth imports in Britain reduced the inflow of Indian cotton. Instead, British manufacturers dominated the Indian market. India’s role in balancing Britain’s deficits was crucial, with India’s trade surplus helping cover various expenses like remittances, debt payments, and pensions for British officials.
The Inter-war Economy.
The First World War, fought primarily in Europe, had global repercussions. It ushered in economic and political instability worldwide, setting the stage for further conflict.
Wartime Transformations
- The First World War pitted the Allies (Britain, France, Russia, later joined by the US) against the Central Powers (Germany, Austria-Hungary, Ottoman Turkey). It lasted over four years, involving major industrial nations.
- This marked the advent of modern industrial warfare, with innovations like machine guns, tanks, and chemical weapons. Industries shifted production to support the war effort, and Britain’s borrowing from US banks transformed the US into a creditor nation.
Post-war Recovery
After the war, Britain faced economic challenges. Industries had advanced in India and Japan during the conflict, posing competition. Britain struggled to regain its dominance in the Indian market and compete globally against Japan. Massive external debts burdened Britain post-war. Anxiety and job uncertainty became common in the aftermath.
Rise of Mass Production and Consumption
- In the early 1920s, the US economy rebounded swiftly, marked by robust growth. Mass production, pioneered by Henry Ford, revolutionized industry. Ford’s Detroit car plant introduced the world’s first mass-produced car, the Model T Ford.
- This Fordist approach spread across the US and Europe, driving industrial efficiency. Demand surged for appliances like refrigerators and washing machines, often financed through loans. By 1923, the US resumed exporting capital globally, emerging as the leading overseas lender.
The Great Depression
- The Great Depression, starting around 1929 and lasting into the mid-1930s, brought widespread economic devastation globally. Agricultural areas suffered significantly, compounded by factors like overproduction.
- Many nations relied on US loans for investments, leading to dire consequences when these loans were withdrawn. The US, too, faced severe depression, with its banking system collapsing as numerous banks went bankrupt and shut down.
India and the Great Depression
- During the Great Depression, Indian trade suffered as agricultural prices plummeted, yet the colonial government maintained high revenue demands.
- Despite the economic downturn, India became a net exporter of precious metals, particularly gold. This exacerbated rural unrest, prompting Mahatma Gandhi to launch the civil disobedience movement in 1931 amidst widespread economic hardship.
Rebuilding a World Economy: The Post-war Era
- Two decades after World War I, World War II erupted between the Axis powers (Nazi Germany, Japan, Italy) and the Allies (Britain, France, Soviet Union, US).
- Lasting six years, the conflict spanned land, sea, and air, causing widespread economic devastation and social upheaval. Post-war reconstruction was influenced by two key factors: the rise of the US as the dominant Western power and the dominance of the Soviet Union.
Post-War Settlement and the Bretton Woods Institutions
- Two key lessons emerged from the inter-war economic period. First, mass production relies on mass communication. Second, a country’s economic ties with the world are crucial.
- The Bretton Woods conference established the IMF to manage member nations’ external surpluses and deficits, while the World Bank financed postwar reconstruction. Both institutions began operations in 1947.
The Early Post-War Years
Bretton Woods marked a new era of trade and income growth for Western nations and Japan. It also spurred global technology and enterprise expansion.
Decolonization and Independence
- After World War II, many regions remained under European colonial control. Initially focused on industrial nations, the IMF and World Bank later shifted towards assisting developing countries from the late 1950s.
- However, most developing nations did not benefit from the rapid growth seen in Western economies during the 1950s and 1960s. In response, they formed the Group of 77 (G-77), advocating for a New International Economic Order (NIEO).
- NIEO aimed to grant developing countries greater control over their resources, increased development aid, fairer raw material prices, and improved market access for their goods in developed countries.
End of Bretton Woods and the Beginning of ‘Globalisation’
- From the 1960s, rising costs of overseas commitments weakened US financial strength. By the mid-1970s, the international financial system changed, impacting industrial nations with unemployment.
- Multinational corporations (MNCs) shifted production to low-wage Asian countries, with China emerging as a key investment destination. Over the last two decades, countries like India, China, and Brazil have experienced rapid economic growth, reshaping the world’s economic landscape.
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