The Pre-modern world:
When we talk of ‘globalisation’ we often refer to an economic system that has emerged since the last 50 years or so.
But 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.
All through history, human societies have become steadily more interlinked.
From ancient times, travelers, traders, priests and pilgrims travelled vast distances for knowledge, opportunity and spiritual fulfillment, 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 millennia, cowries 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.
By the thirteenth century it had become an unmistakable link.
Silk route links the world:
The silk routes are a good example of vibrant pre-modem trade and cultural links between distant parts of the world.
Historians have identified several silk routes, over land and by sea, knitting together vast regions of Asia, and linking Asia with Europe and northern Africa.
They are known to have existed since before the Christian Era and thrived almost till the fifteenth century.
In return, precious metals – gold and silver -flowed from Europe to Asia.
Trade and cultural exchange always went hand in hand.
Early Christian missionaries travelled this route to Asia, as did early Muslim preachers few centuries later.
Buddhism emerged from eastern India and spread in several directions through intersecting points on the silk routes.
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.
It is believed that noodles travelled west from China to become spaghetti.
Arab traders took pasta to fifth-century Sicily, an island now in Italy.
Such guesswork suggests the possibilities of long-distance cultural contact even in the pre modern world.
Many of our common foods such as potatoes, soya, groundnuts, maize, tomatoes, chillies, sweet potatoes, and so on were not known to our ancestors until about five centuries ago.
It was only after Christopher Columbus accidentally discovered America that these foods were introduced in Europe and Asia.
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.
When disease destroyed the potato crop in the mid 1840s, hundreds of thousands died of starvation in Ireland.
Conquest, Disease and Trade:
The pre modern world shrank greatly in the sixteenth century after European sailors found a sea route to Asia and also successfully crossed the western ocean to America.
For centuries before, the Indian Ocean had known a bustling trade, the entry of the Europeans helped expand or redirect some of these flows towards Europe.
From the sixteenth century, America’s vast lands and abundant crops and minerals began to transform trade and lives everywhere.
Mining of precious metals in present day Peru and Mexico enhanced Europe’s wealth and financed its trade with Asia.
Many expeditions set off in search of El Dorado, fabled city of gold.
The most powerful weapon of the Spanish conquerors in America 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.
Once introduced, it spread deep into the continent, ahead even of any Europeans reaching there.
It killed and decimated whole communities, paving the way for conquest.
Until the nineteenth century, poverty and hunger, crowded cities and deadly diseases, religious conflicts, religious dissenters being persecuted forced thousands to flee Europe for America.
From the fifteenth century, China, is said to have restricted overseas contacts and retreated into isolation.
China’s reduced role and the rising importance of America gradually moved the centre of world trade westwards.
Europe now emerged as the centre of world trade.
The nineteenth century (1815-1914):
The world changed profoundly in the nineteenth century, Economic, political, social, cultural and technological factors interacted in complex ways to transform societies and reshape external relations.
Economists identify three types of movement or ‘flows’ within international economic exchanges.
1. Flow of trade which referred largely to trade in goods (e.g., cloth or wheat).
2. The second is the flow of labour-the migration of people in search of employment.
3. The third is the movement of capital for short-term or long-term investments over long distances.
All three flows were closely interwoven and affected people’s lives more deeply now than ever before. It helps us understand the nineteenth-century world economy better if we look at the three flows together.
A world economy takes shape:
A good place to start is the changing pattern of food production and consumption in industrial Europe.
Population growth from the late eighteenth century had increased the demand for food grains in Britain pushing up food grain prices.
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.
After the Com Laws were scrapped, food could be imported into Britain more cheaply than it could be produced within the country.
British agriculture was unable to compete with imports.
Vast areas of land were now left uncultivated, and thousands of men and women were thrown out of work.
As food prices fell, consumption in Britain rose, faster industrial growth in Britain also led to higher incomes, and therefore more food imports.
Around the world lands were cleared and food production expanded to meet the British demand.
It was not enough merely to clear lands for agriculture.
Railways were needed to link the agricultural regions to the ports.
New harbours had to be built and old ones expanded, people had to settle on the lands to bring them under cultivation.
This meant building homes and settlements.
All these activities in turn required capital and labour.
Capital flowed from financial centres such as London.
The demand for labour in places where labour was in short supply – as in America and Australia – led to more migration.
Nearly 50 million people emigrated from Europe to America and Australia.
All over the world some 150 million moved vast distances in search of a better future.
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 food was not grown by a peasant tilling his own land, but by an agricultural worker, perhaps recently arrived.
It was transported by railway, built for that very purpose, and by ships which were increasingly manned in these decades by low-paid workers from southern Europe, Asia, Africa and the Caribbean.
Some change occurred closer to home in west Punjab.
Here the British Indian government built a network of irrigation canals to transform semi desert wastes into fertile agricultural lands that could grow 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.
Food, cotton, rubber cultivation expanded worldwide to feed British textile mills.
Between 1820 and 1914 world trade is estimated to have multiplied 25 to 40 times.
Nearly 60 per cent of this trade comprised ‘primary products’.
Role of technology:
Important inventions and technological advances, often the result of larger social, political and economic factors for example, colonisation, stimulated new investments and improvements in transport: faster railways, lighter wagons and larger ships helped move food more cheaply and quickly.
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 or became unfit to eat.
Meat was hence an expensive luxury beyond the reach of the European poor.
Development of a new technology, namely, refrigerated ships, enabled the transport of perishable foods over long distances.
Now animals were slaughtered for food at the starting point in America, Australia or New Zealand and then transported to Europe as frozen meat.
This reduced shipping costs and lowered meat prices in Europe.
Better living conditions promoted social peace within the country and support for imperialism abroad.
Late nineteenth century colonialism:
Trade flourished and markets expanded in the late nineteenth century.
In many parts of the world, the expansion of trade and a closer relationship with the world economy also meant a loss of freedoms and livelihoods.
Late-nineteenth-century European conquests produced many painful economic, social and ecological changes through which the colonised societies were brought into the world economy.
If we look at a map of Africa, some countries’ borders run straight, as if they were drawn using a ruler.
This is how rival European powers in Africa drew up the borders demarcating their respective territories.
In 1885 the big European powers met in Berlin to complete the carving up of Africa between them.
Britain and France made vast additions to their overseas territories in the late nineteenth century. Belgium, Germany & USA became new colonial powers.
Rinderpest, or the cattle plague:
In Africa, in the 1890s, a fast-spreading disease of cattle plague or rinderpest had a terrifying impact on people’s livelihoods and the local economy.
It shows how even a disease affecting cattle reshaped the lives and fortunes of thousands of people and their relations with the rest of the world.
Historically, Africa had abundant land and a relatively small population.
For centuries, land and livestock sustained African livelihoods and people rarely worked for a wage.
Africans possessed land and livestock and there was plenty of both – there was no reason to work for a wage.
In the late nineteenth century, Europeans were attracted to Africa due to its vast resources of land and minerals.
Europeans came to Africa hoping to establish plantations and mines to produce crops and minerals for export to Europe.
But there was a shortage of labour willing to work for wages.
Employers used many methods to recruit and retain labour.
Heavy taxes were imposed which could be paid only by working for wages.
Inheritance laws were changed and only one member of a family was allowed to inherit land, as a result of which others were pushed into the labour market.
Mineworkers were also confined in compounds and not allowed to move about freely.
Then came rinderpest, a devastating cattle disease, in the late 1880s.
It was carried by infected cattle imported from British Asia to feed the Italian soldiers.
Entering in the East Africa rinderpest moved west likes forest fire, killing 90 per cent of the cattle.The loss of cattle destroyed African livelihoods.
Planters, mine owners and colonial governments now successfully monopolised what scarce cattle resources remained.
It also enabled European colonisers to conquer and subdue Africa.
Indentured labour migration from India:
Indentured labour migration from India illustrates the two sided nature of the nineteenth-century world.
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.
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.
They came from the present-day regions of eastern Uttar Pradesh, Bihar, central India and the dry districts of Tamil Nadu.
These regions experience many changes cottage industries declined, land rents rose, lands were cleared for mines and plantations: they failed to pay their rents, became deeply indebted and were forced to migrate in search of work.
Their main destinations were the Caribbean islands, Mauritius and F in Closer home, Tamil migrants went to Ceylon and Malaya.
Indentured workers were also recruited for tea plantations in Assam.
Exploitation of Indentured Labour:
Recruitment was done by agents engaged by employers and paid a small commission.
Agents tempted the prospective migrants by providing false information about final destinations, modes of travel, the nature of the work, and living and working conditions.
Often migrants were not even told that they were to embark on a long sea voyage.
Sometimes agents even forcibly abducted less willing migrants.
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.
Labours developed new forms of individual and collective self-expression, blending different cultural forms, old and new.
In Trinidad the annual Muharram procession was transformed into a riotous carnival called Hosay (for Imam Hussain) in which workers of all races and religions joined.
Similarly, the protest religion of Rastafarianism (made famous by the Jamaican reggae star Bob Marley) is also said to reflect social and cultural links with Indian migrants to the Caribbean.
‘Chutney music’, popular in Trinidad and Guyana, is another creative contemporary expression of the post-indenture experience.
These forms of cultural fusion are part of the making of the global world, where things from different places get mixed, lose their original characteristics and become something entirely new.
Most indentured workers stayed on after their contracts ended, or returned to their new homes after a short spell in India.
Consequently, there are large communities of people of Indian descent in these countries.
Indian entrepreneurs abroad:
Shikarpuri Shroffs and Nattukottai Chettiars were amongst the many groups of bankers and traders who financed export agriculture in Central and Southeast Asia, using either their own funds or those borrowed from European banks.
They had a sophisticated system to transfer money over large distances, and even developed indigenous forms of corporate organisation.
Indian traders and moneylenders also followed European colonisers into Africa.
Hyderabadi Sindhi traders, however, ventured beyond European colonies, established flourishing emporia at busy ports worldwide, selling local and imported curios to tourists.
Indian trade, colonialism and the global system:
Historically, fine cottons produced in India were exported to Europe.
With industrialisation, British cotton manufacture began to expand, and industrialists pressurised the government to restrict cotton imports and protect local industries.
Tariffs were imposed on cloth imports into Britain.
Consequently, the inflow of fine Indian cotton began to decline: from some 30 per cent around 1800 to 15 per cent by 1815 to below 3 per cent by the 1870s.
From the early nineteenth century, British manufacturers also began to seek overseas markets for their cloth.
Indian textiles now faced stiff competition in other international markets also.
While exports of manufactures declined rapidly, export of raw materials increased equally fast.
Between 1812 and 1871, the share of raw cotton exports rose from 5 per cent to 35 per cent.
Indigo used for dyeing cloth was another important export for many decades.
Opium shipments to China grew rapidly from the 1820s to become for a while India’s single largest export.
The inter-war economy:
The First World War (1914-18) was mainly fought in Europe.
But its impact was felt around the world.
During this period the world experienced widespread economic and political instability, and another catastrophic war.
A. Wartime transformations:
The First World War was fought between two power blocs. The Allies – Britain, France and Russia (later joined by the US); and the Central Powers – Germany, Austria-Hungary and Ottoman Turkey.
First World War, the first modern industrial war
Fighting involved the world’s leading industrial nations which now harnessed the vast powers of modem industry to inflict the greatest possible destruction on their enemies.
It saw the use of machine guns, tanks, aircraft, chemical weapons, etc. on a massive scale.
These were all increasingly products of modern large-scale industry.
The scale of death and destruction – 9 million dead and 20 million injured – was unthinkable before the industrial age, without the use of industrial arms.
Impacts of the First World War:
Most of the killed and maimed were men of working age, reduced the able-bodied workforce in Europe.
Household incomes declined after the war.
During the war, industries were restructured to produce war-related goods.
As men went to battle, women stepped in to undertake jobs that earlier only men were expected to do.
Britain borrowed large sums of money from US banks as well as the US public.
Thus the war transformed the US from being an international debtor to an international creditor.
At the war’s end, the US and its citizens owned more overseas assets than foreign governments and citizens owned in the US.
B. Post-war recovery:
Britain, world’s leading economy in the pre-war period, faced a prolonged crisis.
During war, industries developed in India and Japan.
After the war Britain found it difficult to recapture its earlier position of dominance in the Indian market, and to compete with Japan internationally.
To finance war expenditures Britain had borrowed liberally from the US, at the end of the war Britain was burdened with huge external debts.
The war had led to an economic boom, when the war boom ended, production contracted and unemployment increased.
In 1921 one in every five British workers was out of work.
Indeed, anxiety and uncertainty about work became an enduring part of the post-war scenario.
Many agricultural economies were also in crisis.
During the war, wheat production in Canada, America and Australia expanded dramatically.
But once the war was over, production in Eastern Europe revived and created a glut in wheat output.
Grain prices fell, rural incomes declined, and farmers fell deeper into debt.
C. Rise of mass production and consumption:
In the US, recovery was quicker the US economy resumed its strong growth in the early 1920s.
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.
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.
Henry Ford’s cars came off the assembly line at three-minute intervals.
The T-Model Ford was the world’s first mass produced car.
At first workers at the Ford factory were unable to cope with the stress of working on assembly lines in which they could not control the pace of work.
So they quit in large numbers. Ford doubled the daily wage to $5 in January 1914.
At the same time he banned trade unions from operating in his plants.
Henry Ford recovered the high wage by repeatedly speeding up the production line and forcing workers to work ever harder.
Fordist industrial practices soon spread in the US.
Mass production lowered costs and prices of engineered goods.
Thanks to higher wages, more workers could now afford to purchase durable consumer goods such as cars.
There was a spurt in the purchase of refrigerators, washing machines, radios, gramophone players, all through a system of ‘hire purchase (ie.. on credit repaid in weekly or monthly installments).
There was a boom in house construction and home ownership, financed once again by loans.
The housing and consumer boom of the 1920s created the basis of prosperity in the US.
In 1923, the US resumed exporting capital to the rest of the world and became the largest overseas lender US imports and capital exports also boosted European recovery and world trade and income growth over the next six years.
All this, however, proved too good to last.
By 1929 the world plunged into a depression such as it had never experienced before.
D. The Great Depression:
The Great Depression began around 1929 and lasted till the mid-1930s.
During this period most parts of the world experienced catastrophic declines in production, employment, incomes and trade.
Agricultural regions and communities were the worst affected.
The depression was caused by a combination of several factors.
First:
Agricultural overproduction remained a problem, made worse by falling agricultural prices.
As prices slumped, farmers tried to expand production to maintain their overall income.
Thus pushing down prices even further.
Farm produce rotted for a lack of buyers.
Second:
In the mid-1920s, many countries financed their investments through loans from the US.
US overseas lenders panicked at the first sign of trouble.
In the first half of 1928, US overseas loans amounted to over $ $1 billion.
A year later it was one quarter of that amount.
The withdrawal of US loans affected much of the rest of the world.
In Europe it led to the failure of some major banks and the collapse of currencies.
The US attempt to protect its economy in the depression by doubling import duties also dealt another severe blow to world trade,
With the fall in prices and the prospect of a depression, US banks had also slashed domestic lending and called back loans.
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 unemployment soared, people trudged long distances looking for any work they could find.
Ultimately, 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.
E. India and the Great Depression:
In the nineteenth century, colonial India had become an exporter of agricultural goods and importer of manufactures. The depression immediately affected Indian trade.
India’s exports and imports nearly halved between 1928 and 1934.
As international prices crashed, prices in India also plunged. Between 1928 and 1934, wheat prices in India fell by 50 per cent.
Peasants and farmers suffered more than urban dwellers.
Peasants producing for the world market were the worst hit.
Peasants who borrowed in the hope of better times or to increase output in the hope of higher incomes faced ever lower prices, and fell deeper and deeper into debt.
Across India, peasants’ indebtedness increased.
In these depression years, India became an exporter of precious metals, notably gold.
Indian gold exports promoted global economic recovery.
They certainly helped speed up Britain’s recovery, but did little for the Indian peasant.
The depression proved less grim for urban India.
Because of falling prices, those with fixed incomes- say town-dwelling landowners who received rents and middle-class salaried employees- now found themselves better off.
Rebuilding a world economy: The post-war era:
The Second World War 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.
At least 60 million people, or about 3 per cent of the world’s 1939 population, are believed to have been killed, directly or indirectly, as a result of the war. Millions more were injured.
Many more civilians than soldiers died from war-related causes.
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.
A. Post-war settlement and the Bretton Woods Institutions:
Economists and politicians drew two key lessons from inter war economic experiences.
First,
An industrial society based on mass production cannot be sustained without mass consumption.
But to ensure mass consumption, there was a need for high and stable incomes.
Incomes could not be stable if employment was unstable.
Thus stable incomes also required steady, full employment.
Economic stability could be ensured only through the intervention of the government.
Second,
Lesson is related to a country’s economic links with the outside world.
The goal of full employment could only be achieved if governments had power to control flows of goods, capital and labour.
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 (popular, 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 post-war international economic system is also often described as the Bretton Woods system.
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 an effective right of veto over key IMF and Work Bank decisions.
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.
B. The early post-war years:
The Bretton Woods system inaugurated an era of unprecedented growth of trade and incomes for the Western industrial nations and Japan.
Work trade grew annually at over 8 per cent between 1950 and 1970 an incomes at nearly 5 per cent.
The growth was also mostly stable, without large fluctuations.
These decades also saw the worldwide spread technology and enterprise.
Developing countries invested vast amounts capital, importing industrial plant and equipment featuring modern technology.
C. Decolonisation and independence:
When the Second World War ended most colonies in Asia and Africa emerged as free, independent nations. They were, overburdened by poverty and a lack of resources.
The IMF and the World Bank were not equipped to cope with the challenge of poverty and lack of development in the former colonies.
But as Europe and Japan rapidly rebuilt their economies, they grew less dependent o the IMF and the World Bank. The Bretton Woods institutions began to shift their attention more towards developing countries.
Newly independent countries came under the guidance of international agencies dominated by the former colonial powers.
The former colonial powers still controlled vital resources such as minerals and land in many 2 their former colonies.
Large corporations of other powerful countries often managed to secure rights to exploit developing countries’ natural resources very cheaply.
Most developing countries did not benefit from the fast growth of the Western economies.
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 develop countries’ markets.
D. End of Bretton Woods and the beginning of ‘Globalisation’:
From the 1960s the rising costs of its overseas involvements weakened the US’s finances and competitive strength.
The US dollar now 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.
Earlier, developing countries could turn to international institutions for loans and development assistance.
But now they were forced to borrow from Western commercial banks and private lending institutions. This led to periodic debt crises.
The industrial world was also hit by unemployment.
From the late 1970s MNCs also began to shift production operations to low-wage Asian countries.
New economic policies in China and the collapse of the Soviet Union and Soviet-style communism in Easter Europe brought many countries back into the fold of the world economy. 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 the world’s economic geography has been transformed as countries such as India, China and Brazil have undergone rapid economic transformation.
