The Making of Global World Notes

The making of a Global World

1. The Pre-modern World

Pre modern refers to the economic system which emerged since 50 years.

We can see through history, Human societies are interlinked from ancient times by travellers, traders, priests and pilgrims travelled vast distances for knowledge, opportunity and spiritual fulfilment, or to escape persecution. They also carried goods, money, values, skills, ideas, inventions, and even germs and diseases.

In 3000 BCE an active coastal trade linked the Indus valley civilisations with West Asia. More than a millennia, cowries (the Hindi cowdi or seashells, used as a form of currency) found their way from the Maldives to China and East Africa. They traced spreading of disease-carrying germs in the seventh century.

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1.1 Silk Routes Link the World

  • The silk routes were example of vibrant trade and cultural links between distant parts of the pre-modern world.
  • The name “silk routes” emphasizes the significance of Chinese silk cargoes traveling westward along the routes.
  • Historians have identified multiple silk routes, both over land and by sea, connecting vast regions of Asia and linking Asia with Europe and northern Africa.
  • These routes existed since before the Christian Era and thrived until the fifteenth century.
  • Chinese pottery, textiles, and spices from India and Southeast Asia also travelled along these routes.
  • Precious metals, particularly gold and silver, flowed from Europe to Asia in exchange for these goods.
  • Trade and cultural exchange always went hand in hand.
  • Early Christian missionaries and Muslim preachers are travelled along these routes to Asia at different points in history.
  • Buddhism emerged from eastern India and spread through various intersecting points on the silk routes.

1.2 Food Travels: Spaghetti and Potato

  • Food has been an example and medium for long-distance cultural exchange.
  • Traders and travellers introduced new crops to the lands they visited, leading to the spread of foodstuffs.
  • Noodles are have travelled from China to become spaghetti or were taken to Sicily by Arab traders in the fifth century.
  • Similar foods were known in India and Japan, indicating the possibilities of long-distance cultural contact in the pre-modern world.
  • Many common foods today, such as potatoes, soybeans, groundnuts, maize, tomatoes, chillies, and sweet potatoes, were unknown to our ancestors until about five centuries ago.
  • These foods were introduced to Europe and Asia after Christopher Columbus discovered the Americas.
  • Many of these foods originated from the American Indians, the original inhabitants of the Americas.
  • The introduction of new crops, such as potatoes, improved the diet and lifespan of Europe’s poor.
  • Ireland was strongly dependent on potatoes that when the crop was destroyed by disease in the mid-1840s, hundreds of thousands of people died of starvation.

1.3 Conquest, Disease and Trade

  • European sailors in the sixteenth century found sea routes to Asia and America, which led to the shrinking of the pre-modern world.
  • The Indian Ocean was a hub of bustling trade, with goods, people, knowledge, and customs flowing through its waters.
  • The Indian subcontinent played a central role in these trade networks.
  • European sailors redirected and expanded some of these trade flows towards Europe after their entry into the Indian Ocean.
  • America, before its “discovery,” had been cut off from the rest of the world for millions of years.
  • From the sixteenth century onwards, America’s vast lands, abundant crops, and minerals transformed global trade and lives.
  • Precious metals, especially silver from Peru and Mexico, enriched Europe and financed its trade with Asia.
  • Legends about South America’s fabled wealth, such as El Dorado, spread in seventeenth-century Europe, leading to expeditions in search of gold.
  • The Portuguese and Spanish conquest and colonisation of America by the mid-sixteenth century.
  • The Spanish powerful weapon was not military.
  • It was conquerors carried germs, including smallpox, to which America’s original inhabitants had no immunity, leading to devastating epidemics.
  • Smallpox spread rapidly across the continent, paving the way for conquest.
  • European conquerors had an advantage in the form of immunity to these diseases.
  • Guns could be countered, but diseases like smallpox, to which the conquerors were immune, posed a significant challenge.
  • Poverty, hunger, overcrowded cities, deadly diseases, and religious conflicts were prevalent in Europe until the nineteenth century.
  • Thousands of Europeans migrated to America to escape these conditions.
  • Plantations in America, worked by African slaves, produced cotton and sugar for European markets by the eighteenth century.
  • China and India were among the world’s richest countries until the fifteenth century but China gradually restricted overseas contacts and withdrew into isolation.
  • The reduced role of China and the rising importance of the Americas shifted the center of world trade westwards.
  • Europe emerged as the new center of world trade.

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2. The Nineteenth Century (1815-1914)

  • The nineteenth century brought about profound changes in the world across economic, political, social, cultural, and technological aspects.
  • The factors interacted in complex ways to transform societies and reshape external relations during this period.
  • Economists identify three types of movement or “flows” within international economic exchanges: trade, labour, and capital.
  • The first is the flow of Trade primarily involved the exchange of goods such as cloth or wheat and played a significant role in the nineteenth-century economy.
  • The second is the flow of labour refers to the migration of people in search of employment opportunities.
  • The third is the movement of capital involved the transfer of funds for short-term or long-term investments over long distances.
  • All three flows (trade, labour, and capital) were closely interconnected and affected on people’s lives during this era.
  • The interconnections between these flows are sometimes be broken. Like labour migration, faced more restrictions compared to goods or capital flows.
  • Examining the three flows together provides a better understanding of the nineteenth-century world economy and its dynamics.

2.1 A World Economy Takes Shape

  • In nineteenth-century industrial Britain, self-sufficiency in food led to lower living standards and social conflict.
  • Population growth increased the demand for food grains in Britain, and driven by urban expansion and industrial growth.
  • The government was under pressure from landed groups, restricted the import of corn through laws known as the ‘Corn Laws.’
  • The abolition of the Corn Laws was demanded by industrialists and urban dwellers due to high food prices.
  • The scrapping of the Corn Laws led to cheaper food imports, making it difficult for British agriculture to compete.
  • Uncultivated lands increased, and many workers became unemployed, leading to migration to cities or overseas.
  • With falling food prices, consumption in Britain rose, driven by faster industrial growth and higher incomes.
  • To meet the British demand, lands were cleared and food production expanded worldwide, including Eastern Europe, Russia, America, and Australia.
  • Infrastructure development, such as railways and harbours, was necessary to connect agricultural regions to ports for shipping food.
  • Capital flowed from financial centers like London to support these developments, while labour migration increased in places with labour shortages.
  • A certain number of people emigrated from Europe to America and Australia in search of a better future, total around 150 million worldwide in the nineteenth century.
  • By 1890, a global agricultural economy had taken shape, accompanied by changes in labour movement, capital flows, ecologies, and technology.
  • The food from thousands of miles away, and agricultural work was performed by workers on large farms.
  • Transportation was done by railways and ships, with the latter increasingly employing low-paid workers from various regions.
  • Similar transformations occurred in west Punjab, where irrigation canals were built to turn semi-desert areas into fertile lands for growing wheat and cotton.
  • Regional specialization in commodity production, such as cotton and rubber, led to a significant increase in world trade between 1820 and 1914.
  • The majority of this trade consisted of agricultural products and minerals.

2.2 Role of Technology

What was the role of technology in all this?

  • Technological advancements played a crucial role in the transformation of the nineteenth-century world.
  • The railways, steamships, the telegraph were important inventions without which we cannot imagine the transformed nineteenth-century world.
  • Technological progress was often influenced by larger social, political, and economic factors.
  • Colonization stimulated investments and improvements in transportation like faster railways, lighter wagons, and larger ships.
  • These advancements in transport facilitated the movement of food more cheaply and quickly from distant farms to final markets.
  • The trade in meat offers a good example of this connected process.
  • Previously, live animals were shipped from America to Europe, but this method was inefficient and expensive.
  • The development of refrigerated ships enabled the transport of perishable foods over long distances.
  • With the introduction of refrigerated ships, animals could be slaughtered at the starting point (e.g., America, Australia, or New Zealand) and then transported as frozen meat to Europe.
  • This innovation reduced shipping costs and made meat more affordable in Europe, benefiting the European poor.
  • The availability of affordable meat, along with other perishable foods like butter and eggs, diversified the diet of the European population, promoting better living conditions and social peace within the country.
  • Better living conditions promoted social peace within the country and support for imperialism abroad.

2.3 Late nineteenth-century Colonialism

  • Trade flourished and markets expanded in the late nineteenth century.
  • This period also had a darker side, as the process of expanding trade and closer relationship with the world economy resulted in the loss of freedoms and livelihoods for many societies.
  • European conquests produce painful economic, social, and ecological changes in the colonized societies.
  • In 1885, European powers met in Berlin to complete the carving up of Africa between them, resulting in Britain, France, Belgium, and Germany acquiring vast overseas territories.
  • The United States also became a colonial power in the late 1890s by taking over some colonies previously held by Spain.

2.4 Rinderpest, or the Cattle Plague

  • In the 1890s, a disease of cattle plague or rinderpest had a terrifying impact on people’s livelihoods and the local economy in Africa, causing devastating consequences for people’s livelihoods and the local economy.
  • This example highlights the impact of European imperialism on colonized societies and even a cattle disease could reshape the lives and fortunes of thousands of people.
  • Historically, Africa had abundant land and a small population, with livelihoods primarily dependent on land and livestock for wage labour.
  • Europeans were attracted to Africa for its vast land and mineral resources, aiming to establish plantations and mines for exporting crops and minerals back to Europe.
  • There was a shortage of labour willing to work for wages in Africa, which led employers to impose heavy taxes and change inheritance laws to push people into the labour market.
  • The arrival of rinderpest, carried by infected cattle imported from British Asia, caused a devastating loss of cattle, destroying African livelihoods.
  • The scarcity of cattle resources allowed European colonizers to strengthen their power and force Africans into the labour market, as they monopolized the remaining cattle resources.
  • Control over the scarce resource of cattle enabled European colonisers to conquer and subdue Africa.
  • This example demonstrates the broader impact of Western conquest on other regions during the nineteenth century.

2.4 Indentured Labour Migration from India

  • In the nineteenth century, hundreds of thousands of Indian and Chinese labourers went to work on plantations, in mines, and in road and railway construction projects around the world.
  • Indentured workers from India primarily came from regions such as eastern Uttar Pradesh, Bihar, central India, and dry districts of Tamil Nadu, where factors like declining cottage industries, rising land rents, and land clearance for mines and plantations affected the lives of the poor.
  • The main destinations of Indian indentured migrants were the Caribbean islands (mainly Trinidad, Guyana and Surinam), Mauritius and Fiji. Closer home, Tamil migrants went to Ceylon and Malaya.
  • Recruitment of indentured workers was hired by agents, who often provided false information and sometimes resorted to forceful abduction.
  • Indentured labour has been likened to a “new system of slavery” due to the harsh living and working conditions and the limited legal rights of the workers.
  • Despite the challenging circumstances, indentured workers found ways to survive and express themselves, blending different cultural forms and developing new traditions.
  • 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.
  • The cultural influence of Indian migrants on the development of Rastafarianism and Chutney music in the Caribbean.
  • Many indentured workers stayed in countries after their contracts ended, leading to the establishment of large communities of people of Indian descent.
  • The abolition of indentured labour migration was advocated by India’s nationalist leaders in the early 1900s, and the system was officially abolished in 1921.
  • Descendants of Indian indentured workers often faced challenges and were seen as an uneasy minority in the Caribbean islands, as reflected in the works of authors like V.S. Naipaul, who captured their sense of loss and alienation.

2.5 Indian Entrepreneurs Abroad

  • Indian bankers, such as the Shikaripuri shroffs and Nattukottai Chettiars, played an important role in financing export agriculture in Central and Southeast Asia.
  • They using their own funds or 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 expanded their activities into Africa, following European colonizers.
  • Hyderabadi Sindhi traders, in particular, established successful emporia in busy ports worldwide from the 1860s onwards.
  • These traders catered to the growing numbers of tourists, who could travel safely and comfortably on passenger vessels, by selling local and imported curios.

2.6 Indian Trade, Colonialism, and the Global System

  • Fine cottons produced in India were historically exported to Europe, but with the expansion of British cotton manufacture during industrialization, the British government imposed tariffs and restrictions on cotton imports to protect local industries.
  • This led to a decline the flow of Indian cotton to Britain and increased competition for Indian textiles in other international markets.
  • The export share of cotton textiles from India decreased from around 30% in 1800 to 15% in 1815.
  • By the 1870s this proportion had dropped to below 3 per cent.
  • The export of raw cotton rose from 5% to 35% between 1812 and 1871.
  • Indigo used for dyeing cloth was another important export from India during this period.
  • opium shipments to China grew rapidly from the 1820s to become for a while India’s single largest export.
  • British manufacturers flooded the Indian market, leading to a trade surplus for Britain and a trade deficit for India.
  • India’s trade surplus with Britain helped balance Britain’s deficits with other countries, contributing to the late-nineteenth-century world economy’s multilateral settlement system.
  • The trade surplus with India also helped fund the “home charges” of Britain, which included remittances by British officials and traders, interest payments on India’s external debt, and pensions of British officials in India.

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3. The Inter-war Economy

  • The First World War was fought in Europe but had an impact on world.
  • The war lasted from 1914 to 1918 and caused widespread destruction, loss of life, and economic disruption.
  • The aftermath of the war led to a prolonged crisis that lasted for over three decades, encompassing the first half of the twentieth century.

3.1 – Wartime Transformations

  • The First World War was fought between the Allies (Britain, France, Russia, later joined by the US) and the Central Powers (Germany, Austria-Hungary, Ottoman Turkey).
  • The war began in August 1914 and lasted more than four years.
  • It was the first modern industrial war.
  • They use modern weapons such as machine guns, tanks, aircraft, and chemical weapons were employed on a large scale during the war.
  • Millions of soldiers were recruited and transported to the frontlines via ships and trains.
  • The war caused massive death and destruction with approximately 9 million deaths and 20 million injuries. This reduced the able-bodied workforce in Europe and affected household incomes.
  • Industries were restructured to produce war-related goods, and societies undertaken the changes as women took on jobs traditionally performed by men.
  • The war disrupted economic links between major powers. This lead to Britain borrowing large sums of money from US banks and the US public.
  • The war transformed the US from an international debtor to an international creditor, as it accumulated more overseas assets than foreign governments and citizens owned in the US.

3.2 – Post-war Recovery

  • Post-World War I, Britain faced a prolonged crisis and struggled to regain its pre-war economic dominance.
  • After the war Britain found it difficult to recapture its earlier position of dominance in the Indian market, and to compete with Japan internationally.
  • Britain had borrowed liberally from the US to finance war expenditures.
  • The war had led to an economic boom which increase in demand, production and employment.
  • The government reduced war expenditures to peacetime revenues and  leading to job losses and high unemployment rates, with one in every five British workers out of work in 1921.
  • Agricultural economies including wheat producers were also in crisis.
  • Before the war, eastern Europe was a major supplier of wheat, but disruptions during the war led to the expansion of wheat production in Canada, America, and Australia.
  • Once the war was overed, production in Eastern Europe revived, causing an oversupply of wheat and a decline in grain prices.
  • Rural incomes declined, and farmers faced increasing debt burdens.

3.3 – Rise of Mass Production and Consumption

  • The US get a quicker economic recovery compared to other countries after War.
  • Mass production became a characteristic feature of the US economy in the 1920s, with Henry Ford being a pioneer in implementing assembly line methods in car manufacturing.
  • Ford’s assembly line allowed for faster and cheaper production of vehicles, increasing output per worker.
  • Workers struggled with the stress of assembly line work, leading to high turnover rates. Ford doubling the daily wage to $5 in 1914 and banning trade unions.
  • Fordist industrial practices, including mass production, spread in the US and were adopted in Europe in the 1920s.
  • Mass production lowered the costs and prices of goods, making them more affordable for a larger number of consumers.
  • The demand for consumer goods, such as cars, refrigerators, washing machines, radios, and gramophone players, increased, supported by a system of hire purchase and loans.
  • The housing and consumer boom in the 1920s higher employment, income, consumption, and investment.
  • The US became the largest overseas lender, exporting capital to the rest of the world, which contributed to European recovery and world trade and income growth.
  • However, this period of prosperity came to an end with the onset of the Great Depression in 1929, plunging the world into an unprecedented economic crisis.

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3.4 – The Great Depression

  • The Great Depression began around 1929 and lasted till the mid-1930s and had a severe impact on world for production, employment, incomes, and trade.
  • Agricultural regions and communities were affected, as the fall in agricultural prices was greater and prolonged compared to industrial goods.
  • The depression was caused by a combination of factors, including agricultural overproduction and falling prices, leading to a surplus in the market.
  • Many countries had financed their investments through loans from the US, but the withdrawal of US loans created a crisis as lenders panicked and reduced lending.
  • The withdrawal of US loans affected different regions in various ways, such as bank failures and currency collapses in Europe and a slump in agricultural and raw material prices in Latin America and other areas.
  • The US banking system collapsed, with thousands of banks going bankrupt and closing, and numerous companies collapsing between 1929 and 1932.
  • By 1935, modest economic recovery was under way in most industrial countries, but the wider effects of the Great Depression on society, politics, international relations, and people’s mindsets were long-lasting.

3.5 – India and the Great Depression

  • The Great Depression had an impact on India, the interconnectedness of the global economy in the early twentieth century.
  • India’s exports and imports were nearly halving between 1928 and 1934, as international prices crashed.
  • Agricultural prices in India also plunged, with wheat prices falling by 50% between 1928 and 1934.
  • Peasants and farmers suffered the most, the colonial government maintained high revenue demands.
  • Jute producers in Bengal, who relied on exports of processed jute, experienced a significant decline in prices, with raw jute prices crashing by over 60%.
  • Peasants borrowed money and fell deeper into debt as they struggled to cope with lower prices and increased production costs.
  • Rural India faced widespread unrest during the depression, and Mahatma Gandhi launched the civil disobedience movement in 1931.
  • Industrial investment in India grew as the government introduced tariff protection for industries under nationalist pressure.

4. Rebuilding a World Economy: The Post-war Era

  • The Second World War broke out approximately 2 decades after the end of the First World War and involved the Axis powers (Nazi Germany, Japan, Italy) and the Allies (Britain, France, Soviet Union, US).
  • The war lasted for six years and was fought on multiple fronts, including land, sea, and air.
  • The death and destruction caused by the war were immense, with an estimated 60 million people, or about 3% of the world’s 1939 population, believed to have been killed directly or indirectly.
  • Unlike earlier wars, Many more civilians than soldiers died from war-related causes.
  • Europe and Asia were devastated and many cities destroyed by aerial bombardment and artillery attacks.
  • The war caused an immense amount of economic devastation and social disruption.
  • Two crucial influences on post-war reconstruction were the emergence of the United States as the dominant economic, political, and military power in the Western world and the dominance of the Soviet Union.
  • The Soviet Union had made sacrifices to defeat Nazi Germany and had transformed from a backward agricultural country into a world power during the years of the Great Depression when much of the capitalist world was struggling.

4.1 – Post-war Settlement and the Bretton Woods Institutions

  • Economists and politicians derived two key lessons from the economic experiences between the inter war.
  • The first lesson was that an industrial society based on mass production requires mass consumption, which in turn relies on high and stable incomes. Stable incomes necessitate steady, full employment.
  • The second lesson related to a country’s economic relations with the rest of the world. To achieve full employment, governments needed the authority to control the flow of goods, capital, and labour.
  • The post-war international economic system aimed to preserve economic stability and full employment in the industrialized world.
  • The framework for this system was established at the Bretton Woods conference in July 1944, held in Bretton Woods, New Hampshire, USA.
  • The conference resulted in the creation of the International Monetary Fund (IMF) to address external surpluses and deficits of member nations, and the establishment of the International Bank for Reconstruction and Development (World Bank) to finance post-war reconstruction.
  • The IMF and the World Bank are collectively known as the Bretton Woods institutions.
  • These institutions began their financial operations in 1947, with decision-making predominantly controlled by the Western industrial powers. The US holds significant influence, including effective veto power over key decisions.
  • The international monetary system, which connects national currencies and monetary systems, was based on fixed exchange rates under the Bretton Woods system.
  • In this system, national currencies were pegged to the US dollar at a fixed exchange rate, and the dollar was tied to gold at a fixed price of $35 per ounce.

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4.2 – The Early Post-war Years

  • The Bretton Woods system resulted in a remarkable period of trade and income growth for Western industrial nations and Japan.
  • Between 1950 and 1970, world trade experienced an annual growth rate of over 8%, while incomes grew at nearly 5%.
  • This growth was characterized by stability, with minimal fluctuations.
  • Unemployment rates in most industrial countries remained below 5% for a significant portion of this period.
  • The era also witnessed the global dissemination of technology and enterprise.
  • Developing countries were eager to catch up with advanced industrial nations, leading them to invest substantial capital and import industrial machinery and equipment featuring modern technology.

4.3 – Decolonisation and Independence

  • After World War II, many colonies in Asia and Africa gained independence from European colonial rule over the next two decades.
  • However, these newly independent nations faced significant challenges such as poverty and lack of resources, as well as the legacy of colonial rule.
  • The IMF and the World Bank, initially designed to address the financial needs of industrial countries, were ill-equipped to address the development challenges of former colonies.
  • As Europe and Japan rapidly rebuilt their economies, they became less dependent on the IMF and the World Bank, leading these institutions to shift their focus towards developing countries from the late 1950s.
  • Ironically, the newly independent countries, striving to alleviate poverty and develop their economies, came under the guidance of international agencies dominated by their former colonial powers.
  • Former colonial powers still retained control over vital resources, including minerals and land, in many of their former colonies.
  • Powerful corporations, particularly from countries like the US, often obtained rights to exploit natural resources in developing countries at low costs.
  • Developing countries, not benefiting from the rapid growth experienced by Western economies in the 1950s and 1960s, organized themselves as the Group of 77 (G-77) to demand a new international economic order (NIEO).
  • The NIEO aimed to grant developing countries greater control over their natural resources, increased development assistance, fairer prices for raw materials, and improved access to developed countries markets for their manufactured goods.

4.4 – End of Bretton Woods and the Beginning of ‘Globalisation’

  • From the 1960s, the rising costs of the US’s overseas involvements weakened its finances and competitive strength, leading to a loss of confidence in the US dollar as the world’s principal currency.
  • The system of fixed exchange rates collapsed, and a system of floating exchange rates was introduced.
  • From the mid-1970s, developing countries had to rely on borrowing from Western commercial banks and private lending institutions, leading to periodic debt crises and increased poverty in Africa and Latin America.
  • Unemployment rose in the industrial world from the mid-1970s until the early 1990s.
  • Multinational corporations (MNCs) began shifting production operations to low-wage Asian countries, contributing to the transformation of the world’s economic geography.
  • China had been isolated from the post-war world economy since its revolution in 1949, implemented new economic policies and opened up to international trade, attracting investment from foreign MNCs due to its low-cost structure and low wages.
  • The relocation of industries to low-wage countries, particularly China, stimulated world trade and capital flows.
  • Over the past two decades, countries such as India, China, and Brazil have undergone rapid economic transformation.

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