MAKING
OF GLOBAL WORLD
Department of Social
Science
HISTORY(X)
CHAPTER
04
INTRODUCTION
The various countries of the world are interconnected
through trade and through exchange of thoughts and cultures. The interconnectedness has increased dramatically in
recent times but the world was also interconnected even during the days of
Indus Valley Civilisation.
SILK ROUTE
The trade route which linked China to the western
world and to other countries is called Silk Route. There were many Silk Routes. The Silk Routes existed
before the Christian era, and persisted till the fifteenth century.
Chinese potteries travelled from China to other
countries through the Silk Route. Similarly, gold and silver travelled from
Europe to Asia through this route.
Religions; like Christianity, Islam and Buddhism
travelled to different parts of the world through the Silk Route.
FOOD TRAVELS:
Noodles
travelled from China to different parts of the world. The sevian; which are used in India are localized
form of noodle. Similarly, spaghetti of Italy is the European version of
noodles.
Many
common food of today; like potato, chillies, tomato, maize, soya,
groundnut and sweet potatoes were introduced in Europe after Christopher
Columbus accidentally discovered the American continents.
Potato
brought dramatic changes for the life of people of Europe. Because of
introduction of potato, the people in Europe could eat better and could live
longer. The peasants of Ireland became so dependent on potato that when
disease destroyed the potato crop in the mid-1840s, hundreds of thousands died
due to starvation. This famine is known as Irish Famine.
CONQUEST,
DISEASE AND TRADE
The
European sailors discovered the sea route to Asia and Americas in the sixteenth
century. The discovery of new sea
route not only helped in expanding the trade but also in European conquest over
other parts of the world.
America
had vast reserves of minerals and there was abundant crop in this continent. The food and minerals from America transformed the
lives of people in other parts of the world.
By the
mid-sixteenth century, the Portuguese and Spanish colonization of America began
in a decisive way. But the conquest could not be facilitated because of arms
and ammunition but because of a disease. Europeans had been exposed to small
pox and hence they had developed immunity against this disease. But
the Americans had been isolated from the world and they had no immunity against
small pox. When the Europeans reached there, they carried the germs of small
pox along with them. The disease wiped off the whole communities in certain
parts of America. And thus, the Europeans could easily get control of the
Americas.
Till
the nineteenth century, Europe was suffering from many problems; like poverty,
diseases and religious conflicts. Many religious dissenters fled to America for
the fear of prosecution. Those people utilised the opportunities in America and
could drama Till the eighteenth century, India and China were the richest
countries of the world. But from the fifteenth century onwards, China began
to restrict overseas contacts and went into isolation. Because of China’s
reduced role and America’s rising importance; the centre of the world trade
shifted to Europe.
THE
NINETEENTH CENTURY (1815 – 1914)
The
world had changed dramatically during the Nineteenth century. There were
changes in Social, Political, Economic and Technological factors in much
complex way during this period. The changes altered the external relations
beyond recognition.
Economists
identify three types of flows within international economic exchanges. These
are as follows:
- Flow
of trade
- Flow
of labour
- Flow
of capital
Changing
pattern of food production and consumption in Europe: Traditionally, countries
liked to be self-sufficient in food. But self-sufficiency in food meant a low
quality of life for the people of Britain.
There
was immense growth of population of Britain during eighteenth century. Due to
this, the demand for food had increased exponentially. Under pressure from the
landed groups, the government restricted the imports of corn. This further
aggravated the food prices in Britain. The industrialists and urban dwellers
forced the government to abolish the Corn Laws.
EFFECTS
OF ABOLITION OF CORN LAWS:
Abolition
of Corn Laws meant that food could be imported at much cheaper rate than at
what it could be produced in Britain. British farm produce was unable to compete with cheaper imports.
Vast
areas of land were left uncultivated and a large number of people became
unemployed. People migrated to cities; in large numbers; in search of work.
Many people also migrated overseas. Many people also migrated overseas.
Falling
food prices resulted in increased demand for food in Britain. Moreover,
industrialization also helped in increasing the income of the people. This
necessitated more import of food items into Britain. To fulfil the demand,
large tracts of land were cleared in Eastern Europe, America, Russia and
Australia.
The food
grains also needed to be supplied to the ports. For this, railway lines were to
be laid so that the agricultural hubs could be connected to the ports.
Moreover, new habitations also had to come up in agricultural hubs. For all
these activities, capital flowed from financial centres; such as London; to
these places.
There
was shortage of labour in Americas and Australia. The demand for workforce
resulted in large scale migration of people to these places. Nearly 50
million people migrated from Europe to America and Australia during the
nineteenth century. All over the world, about 150 million people
migrated to different place By 1890s, a global agricultural economy had taken
shape. This was accompanied by complex changes in labour movement,
capital flow and technological changes.
ROLE
OF TECHNOLOGY
Technology
definitely played an important role in globalizing the world economy during
this period. Some of the major technological innovations were the railways,
steamship and telegraph. Railways helped in connecting the
hinterland to the ports. Steamships helped in transporting goods in bulk across
the Atlantic. Telegraph helped in speeding up the communication and thus
facilitated better economic transaction.
Trade
in Meat: Trade in meat shows a
very good example of benefit of technology on the life of common people. Till
1870s, live animals were shipped from America to Europe. Shipping live animals
had its own problems. They took more space and many animals either died or
became sick during the transit. Due to this, meat remained a luxury item for
most of the Europeans.
Arrival
of refrigeration technology changed the picture. Now, animals could
be slaughtered in America and processed meat could be shipped to Europe. This
helped in better utilization of space in the ships. This also helped in better
availability of meat for the Europeans and thus prices fell. Now, even the
common people could afford to eat meat on a regular basis.
Better
availability of food promoted social peace within the countries. People of
Britain were now more receptive to imperial ambitions of the country.
LATE
NINETEENTH CENTURY AND COLONIALISM
While the expansion of trade improved the quality of
life of many Europeans; it had negative implications for people of the
colonized countries.
When you will carefully observe the modern map of
Africa, it would appear that most of the boundaries are straight lines. It appears as if someone had deliberately made those
straight lines. In 1885, the big European powers met in Berlin and
demarcated the African continent for respective powers. That is how boundaries
of most of the African countries appear as straight lines.
RINDERPEST OR CATTLE PLAGUE
Rinderpest is a disease which affects cattle. The
example of rinderpest in Africa shows that even a cattle disease can widely
alter the power equations in a geographical area.
Africa was the land of vast resources of land and minerals.
Europeans had come to Africa to make fortune out of mining and plantations. But
they faced a huge scarcity of labour. There was another problem and that was
that the local people were not willing to work in spite of being offered wages.
In fact, Africa was a sparsely populated continent and people’s needs could be
easily met with the available resources. There simply was no need to work for
wages.
The
Europeans applied various ways to force the people to work. Some of them are as
follows:
- Heavy taxes were imposed
which could only be paid by working on plantations and in mines.
- Inheritance laws were
changed and only one member of the family was allowed to inherit land.
This forced others into the labour market.
- Mineworkers were confined to
the campus and were not allowed to move freely.
Arrival
of Rinderpest: Rinderpest arrived in Africa in the late 1880s.
It came with the horses which were imported from British Asia.
Those horses came as reinforcements for Italian soldiers who were
invading Eritrea in East Africa. Rinderpest spread in the African
continent like the forest fire. It reached to western coast of Africa by 1892
and within five years after that, it reached to southernmost tip of the
continent. Rinderpest wiped off 90% of the cattle population of
Africa during this period.
Loss
of cattle meant loss of livelihood for the Africans. They had no choice but to work as labourers in
plantations and mines. Thus, a cattle disease enabled the Europeans to colonise
Africa.
INDENTURED LABOUR MIGRATION FROM INDIA
Indentured
labour is a bonded labour who is hired on contract for a specific employer for
a specific period of time. Many poor
Indians from modern day Bihar, Uttar Pradesh, central India and dry
districts of Tamil Nadu became indentured labours. These people were mainly
sent to the Caribbean Islands, Mauritius and Fiji. Many of them were also
sent to Ceylon and Malaya. In India, many indentured labours went to work
in tea plantations of Assam.
The
agents often gave false promises and the workers were not even told about the
place they were heading for. The condition in the alien land was quite horrible
for the workers. They did not have any legal rights and had to work under
tortuous conditions.
Form
the 1900s, the Indian nationalists began to oppose the system of indentured
labour. The practice was finally abolished in 1921.
INDIAN
ENTREPRENEURS ABROAD
Shikaripuri
shroffs and Nattukottai Chettiars
were among the groups of bankers and traders from India. They financed export
agriculture in Southern and Central Asia. They had their own sophisticated
system of money transfer to different parts of the world and even in India.
Indian
traders and moneylenders also ventured into Africa along with the European
colonizers. The Hyderabadi Sindhi traders ventured even beyond European
colonies. By 1860s, they established flourishing emporia (Large retail
store selling a wide variety of goods) at busy ports around the world.
INDIAN
TRADE, COLONIALISM AND THE GLOBAL SYSTEM
Historically,
fine cotton from India was exported to Europe. After industrialization, the
local manufacturers forced the British government to impose a ban on Indian
imports. This resulted in British manufactured cotton textiles flooding the
Indian market. The share of cotton textiles in Indian export was 30% in 1800.
It declined to 15% by 1815 and to 3% by 1870s. But from 1812 to 1871, the
export of raw cotton increased from 5% to 35%. During this period, Indigo
emerged as a major export item from India. Opium was the largest exported item
from India and it was mainly exported to China.
Although
export of raw materials and food grains from India to Britain grew manifold but
import of finished goods from Britain also increased. This resulted in a
situation in which Britain was having the trade surplus. In other words, the
Balance of Payment was in Britain’s favour. Income from the Indian market was
utilised by Britain to serve its other colonies and also to pay ‘home charges’
for its officials who were posted in India. The home charges also included
payment of India’s external debt and pension for retired British officials in
India.
THE
INTER-WAR ECONOMY
The First World War wreaked large scale havoc
around the world in many senses. About 9 million people died and 20
million people were injured in the wake of the war.
Most of the people who were killed or maimed were
people from working age. This resulted in a significant reduction in the number
of able-bodied workforce in Europe. Due to fewer earning members in the
families, the household incomes drastically reduced in Europe.
Most of the men were forced to engage in war and thus
women had to replace them in factory jobs. Women were now working in those jobs
which were earlier considered as male bastions.
The
war also led to snapping of ties between some major economic powers of the
world. Britain had to borrow from the US to finance the war. The
war transformed the US from an international debtor to an international
creditor. Now, US and its citizens owned more overseas assets than foreign
governments or citizens owned in the US.
POST-WAR
RECOVERY
While
Britain was preoccupied with war, industries developed in India and Japan.
After the war, Britain found it difficult to regain its earlier dominant
position in India. Similarly, it was unable to compete with Japan at the
international level. At the end of the war, Britain was under huge debts from
the US.
During
the war, there was increased demand for goods which resulted in economic boom
in Britain. After the war ended, the demand drastically fell to come in tune
with the peace-time economy. About 20% of the British workers lost their job
after the war.
Before
the war, Eastern Europe was a major supplier of wheat. But during the war,
Canada, America and Australia emerged as the leading suppliers of wheat because
Eastern Europe was involved in war. Once the war was over, the Eastern Europe
resumed the supply of wheat. This resulted in a glut of wheat in the market and
prices fell. This created havoc in the rural economy.
RISE
OF MASS PRODUCTION AND CONSUMPTION
The US
economy was quick to recover from the aftershocks of the war. During the 1920s,
the unique feature of the US economy was mass production. Henry Ford,
the founder of the Ford Motors was the pioneer of mass production in
factories. Mass production helped in increasing productivity and reducing
prices. Workers began to earn better in the US and hence had better disposable
income. This created huge demand for various products.
The
car production rose from 2 million in 1919 to 5 million 1929 in the US. Similarly, the production of white goods; like
refrigerators, washing machines, radio, gramophone, etc. increased manifold in
the US. There was a housing boom as well in the US market. The demand could
be further maintained because of the beginning of the hire purchase culture.
All of
this made for a prosperous US economy. In 1923, US resumed exporting
capital to the rest of the world and emerged as the largest overseas lender.
This also helped in European recovery and boosted the world trade for the next six
years.
THE GREAT DEPRESSION
Agricultural
Overproduction: Agricultural overproduction was a major problem during the
1920s. More supply of farm produce resulted in lower price. Farmers tried to
compensate by producing even more. This created a glut of farm produce in the
market; leading to further fall in prices. Farm produce rotted because of lack
of buyers.
Withdrawal
of US Loans: Many European
countries heavily depended on US loans. But the US lender panicked at the first
sign of trouble. In the first half of 1928, the US loan amounted to $ 1
billion. But within a year, it was just a quarter billion dollar. Withdrawal of
US loan affected many countries in various ways.
This
led to the collapse of many banks and currencies in Europe. The British Pound
Sterling also crashed during this period. The Agricultural market slumped in
Latin America.
The US
tried to protect its economy by doubling its import duties. It also had
deleterious effect on the world economy.
The US
was most severely affected by depression. Prices were falling and economy was
in bad shape. The US banks slashed domestic lending and called back loans.
Household incomes fell in many people were not in a position to repay the loan
which they had taken to buy homes and white goods. Unemployment level increased
and banks were unable to collect loans.
Thousands
of banks in the US went bankrupt. By 1933, over 4000 banks had closed. Between
1929 and 1932, about 110,000 companies collapsed in the US.
In
most of the economies, a modest recovery began by 1935.
INDIA
AND THE GREAT ECONOMIC DEPRESSION
The
Depression affected the Indian economy as well. Between 1928 and 1934, the
imports and exports of India became nearly half. During this period, the wheat
prices in India fell by 50%.
In
spite of falling prices of farm produce, the government continued to demand the
same revenue from the farmers. Thus, farmers were the worst sufferers in this
situation. Many farmers were forced to utilize their savings, sell their lands
and jewellery. Thus, India became a net exporter of precious metal during this
period.
The
depression proved less grim for the urban dwellers in India. With falling
prices, many urban landowners and salaried people found the life much easier.
Under pressure from the nationalist leaders, the industrial protection grew
which led to more investment in the industries.
THE
POST-WAR SETTLEMENTS
The Second World War was different than earlier wars.
There were more civilian casualties in this war and many important cities were
devastated beyond recognition.
The recovery after the Second World War was influenced
by two important factors:
- The
emergence of the US as the dominant economic, political and military power
in the west.
- Transformation
of the Soviet Union from an agrarian economy into a world power.
The
world leaders met and discussed to work for post war recovery. They focused on
two main objectives; which can be summarized as follows:
- Preservation of economic
stability and full employment in the industrial world.
- Controlling the influence of
the outer world on flow of capital, goods and labour.
BRETTON WOODS INSTITUTIONS
United
Nations Monetary and Financial Conference was held in July 1944 at
Bretton Woods in New Hampshire, USA. The Bretton Woods Conference
established the International Monetary Fund(IMF). This organization was established
to deal with external surpluses and deficits of its members.
The
International Bank for Reconstruction and Development was set up to finance
post-war reconstruction. This is popularly known as the World Bank. The IMF and
World Bank are often referred to as Bretton Woods Institutions. The post-war
economic system is also referred to as the Bretton Woods System.
The IMF
and World Bank began their operations in 1947. Western industrial
powers controlled the decision-making in these institutions. The US had an
effective veto right over key decisions made by these institutions.
The
Bretton Woods System was based on fixed exchange rate for currencies. The
dollar was anchored to gold at a fixed price of $35 per ounce of gold. Other
currencies were linked to dollar at fixed rates.
THE
EARLY POST-WAR YEARS
The
Bretton Woods System started an era of unprecedented economic growth in the
Western industrial nations and in Japan. Between 1950 and 1970, the world trade
grew annually at 8% and incomes grew at nearly 5%. The
unemployment rate averaged less than 5% in most of the industrialized countries
during this period; which speaks about the stable nature of economic growth
during this period.
DECOLONIZATION
AND INDEPENDENCE
Within
the two decades after the Second World War, many colonies became independent
and emerged as new nations. These countries were in deep economic trouble
because of their long history of exploitation. During the initial phase, the
Bretton Woods Institutions were not in a position to cope with the demands of
these new nations. Meanwhile, Europe and Japan quickly rebuilt their economies
and thus grew independent from the IMF and World Bank. From the late 1950s, the
Bretton Woods Institutions began to shift their focus on developing economies
of the world.
These
institutions were under the control of former colonial powers. Hence, most of
the developed countries still ran the risk of being exploited by the former
colonial powers; in the name of development. These countries organized
themselves into G-77 (Group of 77) to demand new international economic
order. They wanted real control over their natural resources, fairer price for
raw materials and better access to the markets in the developed world.
END
OF BRETTON WOODS AND BEGINNING OF GLOBALISATION
From
the 1960s onwards, US finances and competitive strength was weakening because
of its rising cost of overseas involvement. The dollar could not maintain its
value in relation to gold. Thus the system of fixed exchange rate collapsed and
the new system of floating exchange rate began.
From
the mid-1970s, the international financial system changed in many ways.
Earlier, developing countries could turn to international institutions for
financial assistance. Now they were forced to borrow from Western commercial
banks and private lending institutions. This led to periodic debt crises, lower
incomes and unemployment in the developing world. Many African and Latin
American countries suffered from such crises.
China
had been cut off from the world economy since its revolution in 1949. China
began to follow new economic policies and came back into the fold of world
economy. Collapse of the Soviet Union and that of Soviet style communism in
many Eastern European countries brought many countries into the fold of world
economy.
Wages
were quite low in countries; like China, India, Brazil, Philippines, Malaysia,
etc. These countries became preferred sourcing destinations for many MNCs.
India has also emerged as the most preferred hub for Business Process
Outsourcing. In the last two decades, many third world countries have grown at
a rapid pace and India, China and Brazil are their leading examples.
