The Making of a Global World

The Pre-modern World

– Globalization encompasses a historical process of interlinking human societies through trade, migration, and cultural exchange.
– Throughout history, individuals traveled long distances for knowledge, opportunities, and religious purposes, carrying goods, money, values, skills, ideas, inventions, and diseases.
– Coastal trade between the Indus Valley civilizations and West Asia existed since 3000 BCE.
– Cowries (seashells used as currency) from the Maldives were traded to China and East Africa for over a millennium.
– The spread of disease-carrying germs can be traced back to the seventh century and became increasingly significant by the thirteenth century.

Silk Routes Link the World

– The silk routes were a network of trade and cultural connections that spanned vast regions of Asia, Europe, and northern Africa.
– These routes facilitated the exchange of goods such as Chinese silk, pottery, Indian textiles, spices, and precious metals.
– The silk routes existed since before the Christian Era and thrived until the fifteenth century.
– Cultural exchange was an integral part of trade, with early Christian missionaries and Muslim preachers likely traveling along these routes.
– Buddhism also spread through various intersecting points on the silk routes, originating from eastern India.

Food Travels: Spaghetti and Potato

– Traders and travelers played a crucial role in introducing new crops and foodstuffs to different regions, leading to long-distance cultural exchange.
– Noodles and spaghetti have uncertain origins, with theories suggesting they traveled from China to become spaghetti or were brought by Arab traders to Sicily.
– Many common foods like potatoes, soya, maize, tomatoes, chillies, and sweet potatoes were not known to ancestors until about five centuries ago.
– Christopher Columbus’s accidental discovery of the Americas introduced these new crops to Europe and Asia.
– The introduction of the potato significantly improved the diet and life expectancy of Europe’s poor, but the failure of the potato crop in the mid-1840s led to a devastating famine in Ireland.

Conquest, Disease and Trade

– The discovery of sea routes by European sailors in the sixteenth century greatly shrank the pre-modern world and expanded trade networks.
– America, previously isolated, became connected to global trade and transformed the lives and economies of various regions.
– Silver and other precious metals from Peru and Mexico enhanced Europe’s wealth and funded its trade with Asia.
– European conquest of America was facilitated by the introduction of diseases like smallpox, to which the native inhabitants had no immunity.
– Poverty, hunger, and religious conflicts in Europe prompted thousands to migrate to America, where plantations worked by African slaves produced cotton and sugar for European markets.
– China and India, once among the richest countries, gradually reduced their overseas contacts, leading to Europe becoming the center of world trade.

The Nineteenth Century (1815-1914)

A World Economy Takes Shape

– In the nineteenth century, industrial Europe experienced a changing pattern of food production and consumption.
– Population growth in Britain increased the demand for food grains, leading to higher prices and restricted imports of corn (Corn Laws).
– The abolition of the Corn Laws resulted in cheaper food imports, causing British agriculture to decline and leading to unemployment and migration.
– As food prices fell, consumption in Britain rose, and the demand for agricultural products expanded globally.
– The expansion of agriculture required the development of railways, construction of harbours, and settlement of people, fueled by capital and labor flows.
– Approximately 50 million people emigrated from Europe to America and Australia in the nineteenth century.
– By 1890, a global agricultural economy had emerged, accompanied by changes in labor movement, capital flows, technology, and ecological impacts.
– The transformation of agricultural lands and specialization in commodities such as cotton and rubber contributed to a significant increase in world trade.
– Approximately 60% of world trade during this period comprised agricultural products and minerals.

Role of Technology

– Technological advancements played a crucial role in the transformation of the nineteenth-century world.
– Inventions such as railways, steamships, and the telegraph were instrumental in enabling global trade and communication.
– Colonization stimulated investments in transport, leading to the development of faster railways, lighter wagons, and larger ships, facilitating the transportation of goods.
– The trade in meat exemplifies the impact of technology on food production and consumption.
– The introduction of refrigerated ships allowed for the transport of perishable foods, such as frozen meat, over long distances.
– This innovation reduced shipping costs and lowered meat prices in Europe, making it more affordable and accessible to the European poor.
– The availability of a varied diet, including meat, contributed to improved living conditions and social stability within countries.
– These technological advancements also supported imperialism abroad by providing resources and sustenance for expanding empires.

Late nineteenth-century Colonialism

– The late nineteenth century witnessed expanding trade and increased prosperity, but it had a darker side.
– The expansion of trade and closer integration with the world economy often resulted in the loss of freedoms and livelihoods for many societies.
– European conquests during this period led to painful economic, social, and ecological changes in colonized societies as they were brought into the world economy.
– European powers, such as Britain, France, Belgium, Germany, and the US, engaged in the carving up and colonization of Africa during the Berlin Conference of 1885.
– The drawing of straight borders on the map of Africa reflected the arbitrary division of territories among European powers.
– One example of the destructive impact of colonialism can be seen in the negative effects it had on the economy and livelihoods of the colonized people.

Rinderpest, or the Cattle Plague

– In the late 1880s, rinderpest, a cattle disease, spread rapidly in Africa, causing significant damage to livelihoods and the local economy.
– Africa had abundant land and livestock, sustaining livelihoods without a need for wage work.
– European colonization in Africa aimed to exploit its resources but faced a shortage of labor willing to work for wages.
– Europeans used various methods to recruit and retain labor, including heavy taxes and changing inheritance laws.
– Rinderpest, brought to Africa by infected cattle imported from British Asia, devastated African cattle populations, leading to the monopolization of remaining resources by planters, mine owners, and colonial governments.
– The loss of cattle strengthened the power of European colonizers and forced Africans into the labor market.
– Similar impacts of Western conquest can be seen in other parts of the world during the nineteenth century.

Indentured Labour Migration from India

– In the nineteenth century, Indian and Chinese laborers migrated as indentured workers to various destinations for plantation, mining, and construction work.
– Poor conditions and false promises characterized the recruitment process, with agents providing misleading information and sometimes resorting to abduction.
– Indentured laborers faced harsh living and working conditions, but found ways to survive and express themselves through cultural fusion and new forms of collective identity.
– Many indentured workers stayed in their destination countries after their contracts ended, leading to the establishment of large Indian diaspora communities.
– Indian nationalist leaders opposed indentured labor migration, which was eventually abolished in 1921, but the descendants of indentured workers continued to face challenges and a sense of alienation in the Caribbean islands.

Indian Entrepreneurs Abroad

– Shikaripuri shroffs and Nattukottai Chettiars were Indian bankers who played a significant role in financing export agriculture in Central and Southeast Asia.
– They used their own funds or borrowed from European banks to support large-scale plantations.
– These bankers had efficient money transfer systems and developed indigenous forms of corporate organization.
– Indian traders and moneylenders also expanded into Africa alongside European colonizers.
– Hyderabadi Sindhi traders established successful emporia at major ports worldwide, catering to the growing number of tourists facilitated by safe and comfortable passenger vessels.

Indian Trade, Colonialism and the Global System

– British industrialization led to the expansion of cotton manufacturing, prompting the government to impose tariffs on cloth imports from India, reducing the inflow of fine Indian cotton.
– Indian textile exports faced tough competition in international markets due to British manufacturers seeking overseas markets for their cloth.
– India’s export pattern shifted, with a decline in textile exports and a rise in the export of raw materials such as raw cotton and indigo.
– Opium became a significant export from India to China, providing funds for British tea and other imports from China.
– British manufactures flooded the Indian market, while India’s exports mainly consisted of food grains and raw materials.
– Britain had a trade surplus with India, which helped balance its trade deficits with other countries.
– India’s trade surplus with Britain contributed to the payment of “home charges,” including remittances, interest payments, and pensions of British officials and traders in India.

The Inter-war Economy

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 lasted more than four years despite initial expectations of a quick resolution.
– It was the first modern industrial war, with advanced weaponry like machine guns, tanks, aircraft, and chemical weapons used on a large scale.
– Millions of soldiers were recruited from around the world and transported to the frontlines.
– The death and destruction caused by the war were unprecedented, with 9 million dead and 20 million injured.
– The majority of casualties were working-age men, leading to a decline in the able-bodied workforce and reduced household incomes.
– Industries were restructured to produce war-related goods, and societal roles were transformed as women took on jobs traditionally done by men.
– The war disrupted economic ties between major powers, leading to borrowing by Britain from US banks and the transformation of the US into an international creditor.

Post-war Recovery

– Britain, the pre-war leading economy, faced a prolonged crisis in the post-war period.
– Industries in India and Japan had developed during the war, making it difficult for Britain to regain its dominance in the Indian market and compete with Japan globally.
– Britain had borrowed heavily from the US to finance the war, resulting in substantial external debts.
– The end of the war boom led to a contraction in production and an increase in unemployment in Britain.
– Agricultural economies, such as wheat producers, also experienced a crisis.
– Disruption in wheat supply during the war led to expanded production in Canada, America, and Australia, but once the war ended, revived production in eastern Europe created a surplus, causing grain prices to fall and rural incomes to decline.

Rise of Mass Production and Consumption

– The First World War involved the Allies (Britain, France, Russia) and the Central Powers (Germany, Austria-Hungary, Ottoman Turkey).
– It was the first modern industrial war, utilizing advanced weapons and causing unprecedented destruction.
– The war led to a massive loss of life and injuries, reducing the able-bodied workforce and impacting household incomes.
– Post-war recovery was challenging for Britain, which faced a prolonged crisis and struggled to regain its pre-war economic position.
– The US experienced a quicker recovery due to its economic boom during the war.
– The 1920s in the US were characterized by mass production, pioneered by Henry Ford, leading to increased output and lower prices.
– Higher wages allowed more workers to afford consumer goods, leading to a housing and consumer boom.
– The US became a major overseas lender, boosting European recovery and world trade.
– However, this prosperity would not last, as the world was soon hit by the Great Depression in 1929.

The Great Depression

– The Great Depression lasted from around 1929 to the mid-1930s, causing catastrophic declines in production, employment, incomes, and trade worldwide.
– Agricultural regions and communities were particularly hard hit due to the significant and prolonged fall in agricultural prices.
– The depression resulted from factors such as agricultural overproduction, falling prices, and the withdrawal of US loans.
– The withdrawal of US loans led to bank failures, currency collapses, and intensified slumps in agricultural and raw material prices globally.
– The US itself was severely affected, with banks collapsing, businesses failing, and unemployment soaring.
– The depression had a lasting impact on society, politics, international relations, and people’s mindset, despite a modest economic recovery by 1935.

India and the Great Depression

– The Great Depression had a significant impact on India due to the integration of the global economy.
– Indian trade was immediately affected, with exports declining and imports halving between 1928 and 1934.
– Agricultural prices crashed, causing hardships for peasants and farmers, who faced mounting debts and reduced revenue.
– Jute producers in Bengal, dependent on gunny bag exports, suffered greatly as prices plummeted by over 60%.
– Peasants faced increased indebtedness, leading to the liquidation of savings, mortgage of lands, and selling of precious metals.
– Indian gold exports aided Britain’s recovery but did little to alleviate the plight of Indian peasants.
– Urban India experienced some relief as falling prices benefited those with fixed incomes and industrial investment grew under tariff protection.

Rebuilding a World Economy: The Post-war Era

– The Second World War occurred just two decades after the First World War, fought between the Axis powers (Germany, Japan, Italy) and the Allies (Britain, France, Soviet Union, US).
– The war lasted for six years and involved various fronts and methods of warfare.
– The death toll was immense, with an estimated 60 million people, or about 3% of the world’s population, killed directly or indirectly.
– Unlike previous wars, civilian casualties exceeded military casualties, and extensive damage occurred in Europe and Asia due to bombings and artillery attacks.
– The war caused significant economic devastation and social disruption, requiring long and challenging reconstruction efforts.
– Two key influences on post-war reconstruction were the emergence of the US as the dominant global power and the Soviet Union’s transformation into a world power after defeating Nazi Germany.

Post-war Settlement and the Bretton Woods Institutions

– Two key lessons from the inter-war economic experiences were identified by economists and politicians.
– The first lesson emphasized the importance of mass consumption and stable incomes for sustaining an industrial society based on mass production.
– Stable incomes required steady, full employment, which necessitated government intervention to minimize fluctuations in price, output, and employment.
– The second lesson highlighted the need for government control over the flows of goods, capital, and labor to achieve full employment and economic stability.
– The post-war international economic system was established at the Bretton Woods conference in 1944, where institutions like the IMF and World Bank were created.
– The IMF was responsible for dealing with external surpluses and deficits, while the World Bank focused on financing post-war reconstruction.
– The IMF and World Bank are collectively referred to as the Bretton Woods institutions, and decision-making power is mainly held by the Western industrial powers, particularly the US.
– The Bretton Woods system was based on fixed exchange rates, with national currencies pegged to the US dollar, which in turn was tied to the price of gold at $35 per ounce.

The Early Post-war Years

– The Bretton Woods system led to a period of remarkable trade and income growth for Western industrial nations and Japan.
– Between 1950 and 1970, world trade experienced annual growth rates of over 8%, while incomes grew at nearly 5%.
– The growth during this period was characterized by stability, with minimal fluctuations, and low unemployment rates in most industrial countries.
– The era also witnessed the global diffusion of technology and entrepreneurship, as developing countries eagerly invested capital and imported modern industrial equipment to catch up with advanced industrial nations.

Decolonisation and Independence

– After the Second World War, many colonies in Asia and Africa gained independence but faced poverty and resource constraints due to long periods of colonial rule.
– The IMF and World Bank, initially designed for the financial needs of industrial countries, shifted their focus to developing countries as Europe and Japan became less dependent on them.
– Newly independent nations faced the irony of seeking guidance from international agencies dominated by their former colonial powers.
– Former colonial powers and powerful corporations often retained control over vital resources in their former colonies.
– Developing countries organized themselves as the Group of 77 (G-77) to demand a new international economic order (NIEO) that would provide them with control over resources, development assistance, fair prices for raw materials, and better access to developed countries’ markets for their manufactured goods.

End of Bretton Woods and the Beginning of ‘Globalisation’

– Rising costs of US overseas involvements weakened its finances and competitive strength, leading to a loss of confidence in the US dollar as the world’s principal currency.
– Introduction of a system of floating exchange rates due to the collapse of the fixed exchange rate system.
– Developing countries forced to borrow from commercial banks, leading to debt crises and increased poverty in Africa and Latin America.
– Unemployment rose in the industrial world from the mid-1970s to the early 1990s, while MNCs shifted production to low-wage Asian countries.
– China’s economic policies and the collapse of Soviet-style communism brought countries back into the global economy.
– Low-wage countries like China attracted investment from foreign MNCs, transforming the world’s economic geography.
– Rapid economic transformation in India, China, and Brazil reshaped global markets and trade flows.