Globalisation is an economic system associated with the free movement of goods, technology, ideas and people across the globe.
Pre Modern World
Silk Routes in the World
There are several silk routes, overland and by sea, knitting together vast regions of Asia, and linking Asia with Europe and northern Africa.→ Famous Chinese silk cargoes used to travel through these routes.
Food Travels: Spaghetti and Potato
- Noodles travelled west from China to become spaghetti.
- Common foods such as potatoes, soya, groundnuts, maize, tomatoes, chillies, sweet potatoes were only introduced in Europe and Asia after Christopher Columbus discovered America.
Conquest, Disease and Trade
- Precious metals from mines of Peru and Mexico enhanced European trade with Asia.
- The Spanish conquerors used the germs of smallpox in the conquest of America.
- Until well into the eighteenth century, China and India were among the world’s richest countries.
- Until the nineteenth century, poverty and hunger were common in Europe.
The Nineteenth Century (1815-1914)
In the nineteenth century, economic, political, social, cultural and technological factors interacted in complex ways to transform societies and reshape external relations. Three flows or movements were identified by economists.
- The first is the flow of trade 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.
The Nineteenth Century
A World Economy takes Shape
- In the late eighteenth century, growth in the population increased the demand for food grains in Britain.
- The imported food into Britain more cheaply than it could be produced within the country.
- Industrial growth took place in Britain which led to higher incomes meaning more food imports.
- It was transported by railway and by ships.
- Food is only an example. Products such as cotton, rubber, coal also had same fate.
Role of Technology
- The railways, steamships, the telegraph were important inventions that transformed nineteenth-century world.
- After the introduction of new technology, namely, refrigerated ships animals were slaughtered for food at the starting point and then transported to Europe as frozen meat.
Late nineteenth-century Colonialism
- European conquests of Asia and Africa as colonies.
- Belgium and Germany became new colonial powers.
- The US became a colonial power in the late 1890s by taking over some colonies earlier held by Spain.
Rinderpest, or the Cattle Plague
- Rinderpest is a fast spreading cattle plague which hit Africa in the late 1880s.
- It was carried by infected cattle imported from British Asia and destroyed 90 percent of the livestock.
- The colonial governments now strengthen their power and to force Africans into the labour market.
Indentured Labour Migration from India
- Indentured Labour was a bonded labourer under contract to work for an employer.
- In the nineteenth century, thousands of Indian and Chinese labourers went to work on plantations, in mines, and in road and railway construction projects around the world.
- Recruitment was done by agents by providing false information about the work and location.
- On arrival at the plantations, labourers found living and working conditions harsh.
- It was abolished in 1921.
Indian Entrepreneurs Abroad
- Indian entrepreneurs, some bankers like Nattukottai and Chettiars financed the export of agriculture to Central and South-East Asia.
- They even followed the Europeans to Africa.
- Industrial Revolution in England changed the balance of trade between England and India.
- Indian handicraft and agriculture were destroyed and Britain enjoyed a trade surplus with India.
- Their exports increased and imports decreased.
Indian Trade, Colonisation and Globalisation System
- Cottons from India were exported to Europe. In Britain, tariffs were imposed on cloth imports. Consequently, the inflow of fine Indian cotton began to decline.
- Over the nineteenth century, British manufacturers flooded the Indian market. By helping Britain balance its deficits, India played a crucial role in the late-nineteenth-century world economy.
- 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 (1914-18) was 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.
War Time Transformation
- The First World war was the first modern industrial war.
- During the war, industries were restructured to produce war-related goods.
- The war transformed the US from being an international debtor to an international creditor.
- After the war was over, the production reduced and unemployment increased.
- In the US, war recovery was quicker.
- ‘Assembly line’ method introduced by Henry Ford soon spread to the US and were also widely copied in Europe in the 1920s.
- Mass production lowered the costs and prices of engineered goods.
- There was a housing and consumer boom in the 1920s, which ultimately led to the Great Depression of 1929.
- Markets crashed in 1929 and led to the failure of banks and the crisis affected other countries.
- By 1933, over 4000 banks closed and between 1929-32 about 110,000 companies collapsed.
Rise of Mass Production and Consumption
- The US economy recovered quicker and resumed its strong growth in the early 1920s. Mass production is one of the important features of the US economy which began in the late nineteenth century.
- Henry Ford is a well-known pioneer of mass production, a car manufacturer who established his car plant in Detroit.
- The T-Model Ford was the world’s first mass-produced car. Fordist industrial practices soon spread in the US and were also copied in Europe in the 1920s.
- The demand for refrigerators, washing machines, etc. also boomed, financed once again by loans. In 1923, the US resumed exporting capital to the rest of the world and became the largest overseas lender.
The Great Depression
- The period of The Great Depression began around 1929 and lasted till the mid1930s, most parts of the world experienced catastrophic declines in production, employment, incomes and trade.
- The most affected areas were agricultural regions and communities. Combination of several factors led to depression.
- The first factor is agricultural overproduction, second is in the mid-1920s, many countries financed their investments through loans from the US.
- The rest of the world is affected by the withdrawal of US loans in different ways.
- The US was also severely affected by depression.
- Unfortunately, the US banking system collapsed as thousands of banks went bankrupt and were forced to close.
India and the Great Depression
- India was also affected by the Great Depression.
- Indian exports and imports declined extensively, prices fell.
- Bengal jute growers suffered the most.
- Large scale migration took place from villages to towns and cities.
Rebuilding a World Economy: The Post-war Era
- The Second World War broke out a mere two decades after the end of the First World War and once again, it led to destruction.
- After the USA and the USSR emerged as superpowers.
Post-war Settlement and the Bretton Woods Institutions
Bretton Woods Institution
- To ensure a stable economy a framework was agreed upon at the United Nations Monetary and Financial Conference held at Bretton Woods in New Hampshire, USA.
- It established the International Monetary Fund (IMF) and the World Bank.
- 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 commenced financial operations in 1947.
- Bretton Woods System was based on a fixed exchange rate.
- National currencies were pegged to the American dollar at a fixed rate.
- Decision-making in these institutions is controlled by the Western industrial powers largely by the US.
The Early Post-War Years
An era of unprecedented growth of trade and incomes was inaugurated by the Bretton Woods for the Western industrial nations and Japan. During this decade, technology and enterprise were spread worldwide.
Decolonisation and Independence
- Many countries in Asia and Africa became independent nations, supported by UNO and NAM.
- Group of 77 or G-77 was organised by developing countries to demand a new international economic order (NIEO) which would give these countries real control over their national resources, raw materials, manufactured goods in their markets.
- MNCs or multinational companies were established in the 1950s and 1960s and operated in several countries.
End of Bretton Woods and the Beginning of ‘Globalisation’
- The US’s finance and competitive strength were weakened due to rising costs of its overseas involvements from the 1960s.
- In the mid-1970s the international financial system also changed and the industrial world was also hit by unemployment.
- MNCs began to shift their production to low-wage Asian countries.
- China became attractive destinations for investment by foreign MNCs.
- 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.