The Making of a Global World
- The making of the global world has a long history – of trade, of migration, of people in search of work, the movement of capital, and much else.
- From ancient times, travellers, traders, priests and pilgrims travelled vast distances for knowledge, opportunity and spiritual fulfilment, or to escape persecution.
- They carried goods, money, values, skills, ideas, inventions, and even germs and diseases.
- As early as 3000 BCE an active coastal trade linked the Indus valley civilisations with present-day West Asia.
- For more than a millennium, cowries (the Hindi cowdi or seashells, used as a form of currency) from the Maldives found their way to China and East Africa.
- The long-distance spread of disease-carrying germs may be traced as far back as the seventh century.
Silk Routes Link the World
- The name ‘silk routes’ points to the importance of West-bound Chinese silk cargoes along this route.
- There were many silk routs that traversed over land and by ses.
- They knitted vast regions of Asia and linking Asia with Europe and Northern Africa.
- These routes existed even before the Christian Era and lasted until the 15th
- Chinese pottery, textile and spices from India and Southeast Asia were transported through these routes.
- In return, precious metals – gold and silver – flowed from Europe to Asia.
- Trade and cultural exchange always went hand in hand.
- Buddhism emerged from eastern India and spread in several directions through intersecting points on the silk routes.
- Christian Missionaries and Muslim Preachers travelled in this route to spread their religion in Asia.
Food Travels: Spaghetti and Potato
- Food offers many examples of long-distance cultural exchange.
- Traders and travellers introduced new crops to the lands they travelled.
Spaghetti and noodles are good examples of food stuff that share common origin.
- It is believed that noodles travelled west from China to become spaghetti.
- Arab traders could have taken pasta to fifth-century Sicily, an island now in Italy.
- Similar foods were also known in India and Japan, so the truth about their origins may never be known.
- Many of our common foods such as potatoes, soya, groundnuts, maize, tomatoes, chilies, sweet potatoes were only introduced in Europe and Asia by the Portuguese.
- Christopher Columbus accidentally discovered the American continent. He learnt about these crops.
- In fact, many of our common foods came from America’s original inhabitants – the American Indians.
- Sometimes the new crops could make the difference between life and death.
- Europe’s poor began to eat better and live longer with the introduction of the humble potato.
- Ireland’s poorest peasants became so dependent on potatoes that when disease destroyed the potato crop in the mid-1840s, hundreds of thousands died of starvation.
Conquest, Disease and Trade
- The distance and the time taken to travel between continents reduced greatly when the Europeans discovered new sea routes to Asia and successfully crossed the Atlantic to the American Continent.
- The world began to shrink.
- For centuries before, the Indian Ocean had known a bustling trade, with goods, people, knowledge, customs, etc. criss-crossing its waters.
- The Indian subcontinent was central to these flows and a crucial point in their networks.
- The entry of the Europeans helped expand or redirect some of these flows towards Europe.
- America had been cut off from regular contact with the rest of the world for millions of years
- But from the sixteenth century, its vast lands and abundant crops and minerals began to transform trade and lives everywhere.
- Precious metals, particularly silver, from mines located in present- day Peru and Mexico also enhanced Europe’s wealth and financed its trade with Asia.
- Legends spread in seventeenth-century Europe about South America’s fabled wealth. Many expeditions set off in search of El Dorado, the fabled city of gold.
- Disease: European conquest was not just a result of superior firepower.
- In fact, the most powerful weapon of the Spanish conquerors was not a conventional military weapon at all. It was the germs such as those of smallpox that they carried on their person.
- Because of their long isolation, America’s original inhabitants had no immunity against these diseases that came from Europe.
- Smallpox in particular proved a deadly killer. It reached deeper parts of the continent even before the Europeans could reach there.
- It killed and decimated whole communities, paving the way for conquest.
Why did the Europeans migrate to America and Australia?
- Until the nineteenth century, poverty and hunger were common in Europe.
- Cities were crowded and deadly diseases were widespread.
- Religious conflicts were common, and religious dissenters were persecuted.
- So, thousands therefore fled Europe for America
Why did Europe emerge as the Centre of the World Trade?
- Until well into the eighteenth century, China and India were among the world’s richest countries. They were the centres of the World Trade.
- From the fifteenth century, China restricted overseas contacts and retreated into isolation.
- China’s reduced role and the rising importance of the Americas gradually moved the centre of world trade westwards.
- Europe now emerged as the centre of world trade.
The Nineteenth Century (1815-1914)
The Three types of Movements or Flows
- The first is the flow of trade which in the nineteenth century referred largely to trade in goods (e.g., cloth or wheat).
- The second is the flow of labour – the migration of people in search of employment.
- The third is the movement of capital for short-term or long-term investments over long distances.
- There was no uniformity in the flow of the above.
- Labour migration was less than the movement of goods or capital flows.
A World Economy Takes Shape
- Traditionally, countries liked to be self-sufficient in food.
- But in nineteenth-century Britain, self-sufficiency in food meant lower living standards and social conflict.
- Population growth from the late eighteenth century resulted in the increased demand for good products in England.
- As the Industries expanded, urban centres also expanded.
- This resulted in greater demand for food grains and the prices also went up.
- Under pressure from landed groups, the government also restricted the import of corn.
- The laws allowing the government to do this were commonly known as the ‘Corn Laws’.
- Unhappy with high food prices, industrialists and urban dwellers forced the abolition of the Corn Laws.
Rising demand for Food Grains – Movement of People and Capital
- After the Corn Laws were scrapped, Britain could import food grains.
- The imported food grains were cheaper than the food grains produced in Britain.
- Vast areas of land were now left uncultivated, and thousands of men and women were thrown out of work.
- They flocked to the cities or migrated overseas.
- Faster industrial growth resulted in higher income.
- The prices of food grains fell.
- Consumption of food grains increased in Britain.
- Vast areas in Eastern Europe, Russia, America and Australia were cleared to cultivate food grains to meet the rising demand.
- Railways were needed to link the agricultural regions to the ports.
- New harbours had to be built and old ones expanded to ship the new cargoes.
- More people were needed to cultivate the land.
- New buildings and houses were also required for settling these people.
- This required huge capital.
- Capital flowed from financial centres such as London.
- There was short supply of labour in American and Australia.
- People migrated to these places.
- Nearly 50 million people emigrated from Europe to America and Australia in the nineteenth century.
- All over the world some 150 million are estimated to have left their homes, crossed oceans and vast distances over land in search of a better future.
- Thus by 1890, a global agricultural economy had taken shape, accompanied by complex changes in labour movement patterns, capital flows, ecologies and technology.
- Food no longer came from a nearby village or town, but from thousands of miles away.
Changes in Punjab
- Some of the dramatic changes happened in Punjab.
- The British Indian Government built a network of Irrigation Canals.
- This transformed the semi desert region to fertile agricultural fields.
- These were meant to cultivate wheat and cotton for export.
- The Canal Colonies, as the areas irrigated by the new canals were called, were settled by peasants from other parts of Punjab.
Role of Technology
- Transformation in the 19th C was made possible due to rapid expansion of railways, steamships and telegraphs.
- Faster railways, lighter wagons and larger ships helped move food more cheaply and quickly from faraway farms to final markets.
- The trade in meat is a good example of this connected process.
- Till the 1870s, animals were shipped live from America to Europe and then slaughtered when they arrived there.
- But live animals took up a lot of ship space.
- Many also died in voyage, fell ill, lost weight, or became unfit to eat.
- Meat was expensive and the poor couldn’t buy it.
- Refrigerated ships changed all this.
- Now animals were slaughtered for food at the starting point – in America, Australia or New Zealand.
- Meat was packed and shipped on to the refrigerated ships.
- More meat could be transported and cheaper prices.
- Poor in Europe could now offer to add meat, butter and egg to their diet.
Late nineteenth-century Colonialism: Expansion of Trade – The Darker Side
- Most European super powers acquired colonies in Africa, Asia and Latin America.
- Britain and France expanded their territories in the late nineteenth century.
- Belgium and Germany became new colonial powers.
- The US also became a colonial power in the late 1890s by taking over some colonies earlier held by Spain.
- Expansion of market in these places were at the cost of local people and their lifestyle.
Rinderpest, or the Cattle Plague
- Africa had abundant land and a relatively small population.
- People rarely worked for wages as land and cattle population were abundant.
- There was no need to work for wages as there was plenty of land and livestock.
- In the late nineteenth century, Europeans were attracted to Africa due to its vast resources of land and minerals.
- They hoped to export crops and minerals to Europe.
- But there was this problem – Acute shortage of labour who worked for wages.
- Europeans employed various cruel means to force people to work for wages.
- Heavy taxes were imposed which could be paid only by working for wages on plantations and mines.
- Law of inheritance was changed. Only one member of the family could inherit ancestral property.
- Other members of the family were pushed to the labour market.
- Mineworkers were also confined in compounds and not allowed to move about freely.
- Then came Rinderpest.
- Rinderpest, a devastating cattle disease, arrived in Africa in the late 1880s.
- This disease was carried by imported cattle from British Asia.
- Very soon it spread to every corner of Africa.
- Rinderpest killed 90 per cent of the cattle population in Africa.
- The loss of cattle destroyed African livelihoods.
- The scarce cattle population was controlled by miners, planters and the colonial government.
- This forced the Africans into the labour market.
Indentured Labour Migration from India
- The example of indentured labour migration from India also illustrates the two-sided nature of the nineteenth-century world.
- The 19th Century world was a world of contrast.
- It was a world of faster economic growth as well as great misery.
- Higher incomes for some and poverty for others, technological advances in some areas and new forms of coercion in others.
- Thousands of people from India and China went to different parts of the World to work as labourers in mines, plantations, construction works etc.
- Most Indian indentured workers came from the present-day regions of eastern Uttar Pradesh, Bihar, central India and the dry districts of Tamil Nadu.
- In these regions, cottage industries declined, land rents increased, lands were cleared for mines and plantations.
- All this affected the lives of the poor: they failed to pay their rents, became deeply indebted and were forced to migrate in search of work.
- In India, indentured labourers were hired under contracts which promised return travel to India after they had worked five years on their employer’s plantation.
- The main destinations of Indian indentured migrants were the Caribbean islands (mainly Trinidad, Guyana and Surinam), Mauritius and Fiji.
- Tamils migrants went to Sri Lanka and Malaya as plantation workers.
- Many went to Assam to work in Tea plantations.
- These indentured labourers were recruited by agents on false promises of the destination and a promise of safe return to India after 5 years of work.
- Sometimes agents even forcibly abducted less willing migrants.
- 19th Century indenture has been described as a ‘new system of slavery’.
- On arrival at the plantations, labourers found conditions to be different from what they had imagined.
- Living and working conditions were harsh, and there were few legal rights.
- After the contract ended, many preferred to stay back in the land they migrated.
Indian Entrepreneurs Abroad
- Indian bankers and traders financed export agriculture in Central and Southeast Asia, using either their own funds or those borrowed from European banks.
- Indian traders and moneylenders also followed European colonisers into Africa.
Indian Trade, Colonialism and the Global System
- Historically, fine cottons produced in India were exported to Europe.
- After Industrialisation, cotton industries in England pressurised their government to protect their industry.
- Import duties on Indian cotton goods were increased and Indian weavers couldn’t export cotton goods to England.
- The English Cotton Industries began to sell their products in India. Indian weavers couldn’t survive.
- From the late 19th C, Indian export mostly consisted of Indigo for Manchester and Opium for China.
- British India’s import was much lesser than its export. Thus, there was Trade Surplus for the British.
- They used this Trade Surplus to balance trade deficit with other countries.
- Britain’s trade surplus in India also helped pay the so-called ‘home charges’ that included private remittances home by British officials and traders, interest payments on India’s external debt, and pensions of British officials in India.
The Inter War Economy
- The First World War was fought between two power blocs.
- On the one side were the Allies – Britain, France and Russia (later joined by the US); and on the opposite side were the Central Powers – Germany, Austria-Hungary and Ottoman Turkey.
- This war was thus the first modern industrial war.
- The fighting involved the world’s leading industrial nations.
- It saw the use of machine guns, tanks, aircraft, chemical weapons, etc. on a massive scale.
- All these were the products of modern large scale Industries.
- To fight the war, millions of soldiers had to be recruited from around the world and moved to the frontlines on large ships and trains.
- 9 million people were killed in the war and over 20 million people were injured.
- Most of the men killed and injured were of working age, which had an adverse impact on European economy.
- Household income reduced and women took up the jobs of men as they went to battlefield.
- Economic relationship between major countries collapsed.
- European countries borrowed heavily form US banks and US public.
- This transformed USA from being an international debtor to an International creditor.
- the US and its citizens owned more overseas assets than foreign governments and citizens owned in the US.
- Post-war economic recovery was very difficult.
- Britain which was a very strong economy suffered from a prolonged crisis.
- While Britain was busy with the war, industries in India and Japan expanded.
- Britain couldn’t recapture the Indian market or face Japanese competition in the International market.
- Britain had borrowed heavily from the US. Its external debt increased.
- During the war time, there was economic boom. Production, consumption of war related goods increased and employment also increased.
- But, after the war, most people became jobless.
- Many agricultural economies also faced crisis.
- Eastern Europe was the major supplier of wheat.
- During the war time, wheat production was halted.
- Canada, Australia and America expanded wheat production.
- When the war was over, eastern Europe, resumed wheat production but couldn’t sell wheat as the market was flooded with wheat.
- Prices fell, income of the farmers decreased and the farmers were caught in deep debts.
Rise of Mass Production and Consumption
- In the US, economic recovery was quicker.
- One important feature of the US economy of the 1920s was mass production.
- A well-known pioneer of mass production was the car manufacturer Henry Ford.
- He adapted the assembly line of a Chicago slaughterhouse to his new car plant in Detroit.
- He realised that the ‘assembly line’ method would allow a faster and cheaper way of producing vehicles.
- The assembly line forced workers to repeat a single task mechanically and continuously – such as fitting a particular part to the car – at a pace dictated by the conveyor belt.
- This was a way of increasing the output per worker by speeding up the pace of work.
- Standing in front of a conveyor belt no worker could afford to delay the motions, take a break, or even have a friendly word with a workmate.
- As a result, Henry Ford’s cars came off the assembly line at three-minute intervals, a speed much faster than that achieved by previous methods.
- Unable to cope up with the stress, many workers quit the job.
- Henry Ford doubled the daily wages to retain the workers.
- He recovered the loss by speeding up the process further.
- He later said that increasing the wages of workers was the major cost reduction step he had ever taken.
- Ford’s industrial practices soon spread in the US.
- They were also widely copied in Europe in the 1920s.
- Mass production lowered costs and prices of engineered goods.
- Higher wages enabled more workers to purchase durable consumer goods such as cars, refrigerators, washing machines, radios, gramophone players etc.
- People bought these industrial goods on installments.
- People also purchased houses on loans.
- Thus, there was an economic boom in USA.
The Great Depression
- The Great Depression began around 1929 and lasted till the mid- 1930s.
- Most part of the world witness rapid decline in production, income, consumption, trade and employment.
- Agricultural sector and the community were the worst hit.
- Prices of agricultural goods collapsed and lasted for long.
Causes of the Great Depression
First: Fall in Agricultural Products
- To increase their income, farmers expanded their production.
- But this resulted in flooding of food crops which couldn’t be sold.
- Crops glutted the market and began to rot.
- This pushed the prices further down
Second: Collapse of the Banking system
- In the mid-1920s, many countries financed their investments through loans from the US.
- Getting loan from US was easy.
- US overseas lenders began to panic at the first sight of trouble.
- They began to withdraw money from the market.
- Countries that depended crucially on US loans now faced an acute crisis.
- In Europe, it led to the failure of some major banks and the collapse of currencies such as the British pound sterling.
- The USA doubled its import duty to protect its economy. It affected world trade adversely.
- US banks had also slashed domestic lending and called back loans.
- Farms could not sell their harvests, households were ruined, and businesses collapsed.
- Faced with falling incomes, many households in the US could not repay what they had borrowed, and were forced to give up their homes, cars and other consumer durables.
- As people became jobless and homeless, they walked great distances to take up any job that came their way.
- Finally, the US banking system itself collapsed.
- Unable to recover investments, collect loans and repay depositors, thousands of banks went bankrupt and were forced to close.
- Lakhs of companies also collapsed.
India and the Great Depression
- In the nineteenth century, colonial India had become an exporter of agricultural goods and importer of manufactured goods.
- Import declined by half.
- Prices of food crops fell. Price of wheat fell by 50%
- Peasants and farmers suffered more than urban dwellers.
- Though agricultural prices fell sharply, the colonial government refused to reduce revenue demands.
- Peasants producing for the world market were the worst hit.
- Across India, peasants’ indebtedness increased.
- They used up their savings, mortgaged lands, and sold whatever jewellery and precious metals they had to meet their expenses.
- India became a major exporter of Gold.
- It helped the British economy to recover but did not help Indians.
- In the urban centres, land lords and those who worked for fixed income benefitted from the Great Depression.
- Everything was available at cheap price.
- Industrial investment also grew as the government extended tariff protection to industries.
The Second World War
- The Second World War broke out a mere two decades after the end of the First World War.
- It was fought between the Axis powers (mainly Nazi Germany, Japan and Italy) and the Allies (Britain, France, the Soviet Union and the US).
- It was a war waged for six years on many fronts, in many places, over land, on sea, in the air.
- Once again death and destruction was enormous.
- Over 60 Million people were killed and many more injured.
- Unlike in earlier wars, most of these deaths took place outside the battlefields.
- Vast parts of Europe and Asia were devastated, and several cities were destroyed by aerial bombardment or relentless artillery attacks.
- The war caused an immense amount of economic devastation and social disruption.
- Recovery was certainly going to be painful and time consuming.
Rebuilding a World Economy: The Post-war Era
- Two crucial influences shaped post-war reconstruction.
- The first was the US’s emergence as the dominant economic, political and military power in the Western world.
- The second was the dominance of the Soviet Union. It had made huge sacrifices to defeat Nazi Germany, and transformed itself from a backward agricultural country into a world power.
The Post War Settlement and The Bretton Wood Twins
- The main aim of the post-war international economic system was to preserve economic stability and full employment in the industrial world.
- The Bretton Woods conference established the International Monetary Fund (IMF) to deal with external surpluses and deficits of its member nations.
- The International Bank for Reconstruction and Development (popularly known as the World Bank) was set up to finance post- war reconstruction.
- The IMF and the World Bank are referred to as the Bretton Woods institutions or sometimes the Bretton Woods twins.
- The IMF and the World Bank commenced financial operations in 1947.
- Decision-making in these institutions is controlled by the Western industrial powers.
- The US has Veto power in these Institutions.
- The Bretton Woods system was based on fixed exchange rates.
- In this system, national currencies, for example the Indian rupee, were pegged to the dollar at a fixed exchange rate.
- The dollar itself was anchored to gold at a fixed price of $35 per ounce of gold.
The Early Post War Period
- Once the IMF and IBRD became operational, there was rapid economic development in the Western Industrial nations and Japan.
- There was economic stability in the World. World trade increased.
- World trade grew annually at over 8 per cent between 1950 and 1970 and incomes at nearly 5 per cent.
- For much of this period the unemployment rate, for example, averaged less than 5 per cent in most industrial countries.
- Technology spread and Trade expanded.
- Developing countries were in a hurry to catch up with the advanced industrial countries.
- Therefore, they invested vast amounts of capital, importing industrial plant and equipment featuring modern technology.
Decolonisation and Independence
- After the end of the II World War, many colonies became free.
- They were poor, lacked resources and their economy and society was in bad shape because of prolonged colonial rule.
- The IMF and the World Bank were designed to meet the financial needs of the industrial countries but not the poor countries that had been decolonised.
- As European countries and Japan observed rapid economic growth, they became less dependent of the IMF and the World Bank.
- The Bretton Wood twins then began to shift their attention more towards developing countries.
- The new independent countries needed to lift their population out of poverty.
- They looked up to these institutions controlled by their previous colonial masters.
- These erstwhile colonial masters still controlled vast amount of resources of their previous colonies.
- At the same time, most developing countries did not benefit from the fast growth the Western economies experienced in the 1950s and 1960s.
- Therefore, they organised themselves as a group – the Group of 77 (or G-77) – to demand a new international economic order (NIEO).
- By the NIEO they meant a system that would give them real control over their natural resources, more development assistance, fairer prices for raw materials, and better access for their manufactured goods in developed countries’ markets.
End of Bretton Woods and the Beginning of ‘Globalisation’
- Despite years of stable and rapid growth, not all was well in this post-war world.
- From the 1960s the rising costs of its overseas involvements weakened the US’s finances and competitive strength.
- Dollar no longer commanded confidence as the world’s principal currency.
- It could not maintain its value in relation to gold.
- This eventually led to the collapse of the system of fixed exchange rates and the introduction of a system of floating exchange rates.
- From mid 1970s financial system also changed.
- The developing countries were forced to borrow from Western Commercial Banks and Private Lending Institutions.
- This led to periodic debt crises in the developing world, and lower incomes and increased poverty, especially in Africa and Latin America.
- Unemployment began from mid 1970s and remained high till 1990s.
- MNCs were spreading their production to developing countries where cost of production, particularly very low.
- China had been cut off from the post-war world economy since its revolution in 1949.
- After the collapse of communist Russia, many countries including China came back to the established economic system.
- Wages were relatively low in countries like China. Thus, they became attractive destinations for investment by foreign MNCs competing to capture world markets.
- The relocation of industry to low-wage countries stimulated world trade and capital flows.
In the last two decades’ countries, such as India, China and Brazil have undergone rapid economic transformation