Chapter 5.The Making of Global World.
Learning.
Page77
The Making of a Global World 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 as you will see in this chapter , 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 . As we think about the
dramatic and visible signs of global interconnectedness in our lives today , we
need to understand the phases through which this world in which we live has
emerged . All through history , human societies have become steadily more
interlinked . From ancient times , travellers , traders , priests and pilgrims
travelled vast distances for knowledge , opportunity and spiritual fulfilment ,
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 a millennia , conries ( the Hindi coudi or seashells ,
used as a form of currency ) 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 Fig . 1 - Image of a ship on a memorial stone . Goa
Museum , fenth century CE . From the ninth century , images of ships appear
regularly in memorial stones found in the western coast , indicating the
significance of oceanic trade .
Page 79 ( Here we will use America ' to describe North America , South
America and the Caribbean . ) In fact , 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 , Ireland's
poorest peasants became so dependent on potatoes that when disease destroyed
the potato crop in the mid - 1840s , hundreds of thousands died of starvation
1.3 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 , with goods , people , knowledge ,
customs , etc. criss - crossing its waters . The Indian subcontinent was central
to these flows and a crucial point in their networks . The entry of the
Europeans helped expand or redirect some of these flows towards Europe , Before
its discovery ' , America had been cut off from regular contact with the rest
of the world for millions of years . But from the sixteenth century , its vast
lands and abundant crops and minerals began to transform trade and lives
everywhere . Precious metals , particularly silver , from mines located in
present day Peru and Mexico also enhanced Europe's wealth and financed its
trade with Asia . Legends spread in seventeenth - century Europe about South
America's fabled wealth . Many expeditions set off in search of El Dorado , the
fabled city of gold . The Portuguese and Spanish conquest and colonisation of
America was decisively under way by the mid - sixteenth century , European
conquest was not just a result of superior firepower . In fact , the most
powerful weapon of the Spanish conquerors 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 .
Fig. 4 - The Irish Potato
Famine, Illustrated London News, 1849.
Hungry children digging for potatoes in a field that has already been
harvested, hoping to discover some leftovers.
During the Great Irish Potato Famine (1845 to 1849), around 1,000,000
people died of starvation in Ireland, and double the number emigrated in search
of work. Box 1 "Biological warfare?
John Winthorp, the first governor of the Massachusetts Bay colony in New
England, wrote in May 1634 that smallpox signaled God's blessing for the
colonists: ... the natives ... were neere (near) all dead of small Poxe (pox), so as the Lord hathe (had)
cleared our title to what we possess Alfred Crosby, Ecological Imperialism. The
Making of a Global World 79
Page 80
could be bought or captured and
turned against the invaders. But not
diseases such as smallpox to which the conquerors were mostly immune. Until the nineteenth century, poverty and
hunger were common in Europe. Cities
were crowded and deadly diseases were widespread. Religious conflicts were common, and
religious dissenters were persecuted.
Thousands therefore fled Europe for America. Here, by the eighteenth century, plantations
worked by slaves captured in Africa were growing cotton and sugar for European
markets. Until well into the eighteenth century,
China and India were among the world's richest countries. They were also pre - eminent in Asian
trade. However, 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 the Americas gradually moved the center of world trade
westwards. Europe now emerged as the
center of world trade,
STEVE Fig. 5 - Slaves for sale,
New Orleans, Illustrated London News, 1851.
A prospective buyer carefully inspecting slaves lined up before the
auction. You can see two children along
with four women and seven in top hats and suit waiting to be sold. To attract buyers, slaves were often dressed
in their best clothes.
New words Dissenter - One who refuses to accept established beliefs
and practices discuss what we mean when we say that the world 'shrank in the
1500s.
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2 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 . The first is the flow of trade which
in the nineteenth century referred largely to trade in goods ( c.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 . All three flows were closely interwoven
and affected peoples ' lives more deeply now than ever before . The
interconnections could sometimes be broken - for example , labour migration was
often more restricted than goods or capital flows . Yet it helps us understand
the nineteenth - century world economy better if we look at the three flows
together . 2.1 A World Economy Takes Shape A good place to start is the
changing pattern of food production and consumption in industrial Europe .
Traditionally , countries liked to be self - sufficient in food . But in
nineteenth - century Britain , self - sufficiency in food meant lower living
standards and social conflict . Why was this so ? Population growth from the
late eighteenth century had increased the demand for food grains in Britain .
As urban centres expanded and industry grew , the demand for agricultural
products went up , pushing up food grain prices . Under pressure from landed
groups , the government also restricted the import of com . 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 Corn 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 .
They flocked to the cities or migrated overseas .
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As food prices fell, consumption in Britain rose. From the mid nineteenth century, faster
industrial growth in Britain also led to higher incomes, and therefore metood
imports. Around the world - in Bastem
Europe, Russia, America and Australia - lands were cleared and food production
expanded to meet the British demand It was not enough only to clear lands for
agricultural railways were needed to link the agricultural areas to the ports
New harbors had to be built and old ones
expanded to ship the new cargoes. People
had to settle on the lands to bring them under cultivaton. This meant building homes and
settlements. All these activities in
turn required capital and labor. Capital
flowed from financial centers such as London.
The demand for labor in places where labor was in short supply - as in
America and Australia - led to more migration nearly emigrated 50 million
people from Europe to America and Australia in the nineteenth century. All over the world some 150 million are
estimated to have left their homes, crossed oceans and vast distances over land
in search of a better future.
Fig. 6 - Emigrant ship leaving for the US, by
M.W. Ridley, 1869.
Fig. 7 Irish emigrants waiting to board the ship
by Michael Fitagerald. 1874 82
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Thus 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 . It was not grown by a peasant tilling his own land ,
but by an agricultural worker , perhaps recently arrived , who was now working
on a large farm that only a generation ago had most likely been a forest . 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 Activity
Imagine that you are an agricultural worker who has arrived in America
from Ireland . Write a paragraph on why you chose to come and how you are
earning your living .
Some of this dramatic change , though on a smaller scale , occurred
closer 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 . Of course , food is merely an example
. A similar story can be told for cotton , the cultivation of which expanded
worldwide to feed British textile mills . Or rubber . Indeed , so rapidly did
regional specialisation in the production of commodities develop , that 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 ! – that is , agricultural
products such as wheat and cotton , and minerals such as coal .
2.2 Role of Technology What was the role of technology in all this ?
The milways , steamships , the telegraph , for example , were important
inventions without which we cannot imagine the transformed nineteenth - century
world But technological advances were 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 from faraway farms to
final markets .
Activity Prepare a flow chart to show how Britain's decision to import
food led to increased migration to America and Australia.
Page 84.
The Smithfield Club Cattle Show, Illustrated London News, 1851 Cattle
were traded at fairs, brought by farmers for sale. One of the oldest livestock markets in London
was at Smithfield. In the mid nineteenth
century a huge poultry and meat market was established near the railway line
connecting Smithfield to all the mear - referring centras of the country The
trade in meat offers a good example of this connected process. Till the 1870s, animals were shipped live
from America to Europe and then slaughtered when they arrived there. Bur live animals took up a lot of ship
space. Many also died in voyage, fell ill,
lost weight, or became unfit to eat.
Meat was hence an expensive luxury beyond the reach of the European
poor. High prices in turn kept demand
and production down until the development of a new technology, namely,
refrigerated ships, which 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. The poor in Europe could now consume a more
varied diet. To the earlier monotony of
bread and potatoes many, though not all, could now add meat and butter and
eggs) to their diet. Better living
conditions promoted social peace within the country and support for imperialism
abroad. Fig. 9 - Meat being loaded on to the ship. Alexandra, Illustrated London News,
1878. Export of meat was possible only
after ships were reingerated 2.3 Late nineteenth - century Colonialism Tradc
flourished and markets expanded in the late nineteenth century. But this was not only a period of expanding
trade and increased prosperity. It is
important to realize that there was a darker side to this process. 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 nincteenth - century European conquests produced
many painful economic, social and ecological changes through which the
colonized societies were brought into
the world economy.
Page 85.
Look at a map of Africa (Fig. 10).
You will see some countries' borders run straight, as if they were drawn
using a ruler. Well, in fact this was
almost 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 and Germany became new colonial powers.
The US also became a colonial power in the late 1890s by taking over
some colonies earlier held by Spain. Let
us look at one example of the destructive impact of colonialism on the economy
and livelihoods of colonized people.
Box 2 Sir Henry Morton Stanley
in Central Africa Stanley was a journalist and explorer sent by the New York
Herald to find Livingston, a missionary and explorer who had been in Africa for
several years. Like other European and
American explorers of the time, Stanley went with arms, mobilized local hunters,
warriors and labourers to help him, fought with local tribes, investigated
African terrains, and mapped different regions.
These explorations helped the conquest of Africa. Geographical explorations were not driven by
an innocent search for scientific information.
They were directly linked to imperial projects.
Fig. 10 - Map of colonial
Africa at the end of the nineteenth century.
The Making of a Global World
Fig. 11 - Sir Henry Morton Stanley and his retinue
in Central Africa, illustrated London News, 1871.
Page 86.
2.4 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.
This is a good example of the widespread European imperial impact on
colonized societies. It shows how in
this era of conquest 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. In late
nineteenth - century Africa there were few consumer goods that Wages could
buy. If you had been an African
possessing land and livestock - and there was plenty of both - you too would
have seen little 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 an unexpected problem a
shortage of labor willing to work for wages.
Employers used many methods to recruit and retain labor. Heavy taxes were imposed which could be paid only
by working for wages on plantations and mines.
Inheritance laws were changed so that India and the Contemporary World
86
1 Fig. 12 - Transport to the
Transvaal gold mines, The Graphic, 1887.
Crossing the Wilge river was the quickest method of transport to the
gold fields of Transvaal. After the
discovery of gold in witwatersrand, Europeans rushed to the region despite
their fear of disease and death, and the difficulties of the journey. By the 1890s, South Africa contributed over
20 per cent of the world gold production.
ans to
Fig. 13 Diggers at work in the
Transvaal gold fields in South Africa, The Graphic, 1875.
Page 87.
peasants were displaced from
larici only one member of a family was allowed to inherit land, as a result of
which the others were pushed into the labor market. Mineworkers were also confined in compounds
and not allowed to move about freely then came rinderpest, a devastating cattle
dinense. Rinderpest arrived in Africa in
the late 1880s. It was carried by
infected cattle imported from British Asia to feed the Italian soldiers
invading Eritrea in East Africa, Entering Africa in the cast, rinderpest moved
west 'like forest fire', reaching Africa's Atlantic const in 1892. It reached the Cape (Africa's southernmost
tip) five years later. Along the way
rinderpest killed 90 per cent of the cattle, The loss of cattle destroyed
African livelihoods. Planters, mine
owners and colonial governments now successfully monopolized what scarce cattle
resources remained, to strengthen their power and to force Africans into the
labor market. Control over the scarce
resource of cattle enabled European colonizers to
conquer and subdue Africa
similar stories can be told about the impact of western conquest on other parts
of the nineteenth -century world 2.4 Indentured Labor Migration from India The
example of indentured labor migration from India also 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 others, technological advances in some areas and new forms of
coercion in others. • 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. In India, indentured labourers
were hired under contracts which promised return travel to India after they had
worked five yenes on their employer's plantation Most Indian indentured workers
came from the present day regions, of eastern Uttar Pradesh, Bihar, central
India and the dry districts of Tamil
Nadu. In the mid - nineteenth century
these regions experienced many changes - cottage industries declined, land
rents rose, lands were cleared for mines and plantations. All this affected the lives of the poor: they
failed to pay their rents, became deeply indebted and were forced to migrate in
search of worki
New words indentured labor - A bonded labourer under contract to work
for an employer for a specific amount of time, to pay off his passage new
country or home to a
Page 88
The main destinations of Indian
indentured migrants were the Caribbean islands (mainly Trinidad, Guyana and
Surinam), Mauritius and Fri. Closer
home, Tamil migrants went to Ceylon and Malaya, indentured workers were also
recruited for tea plantations in Assam.
Recruitment was done by agents engaged by employers and paid a small
commission. Many migrants agreed to take
up work hoping to escape poverty or oppression in their home villages. Agents also 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. Nineteenth - century indenture has been
described as a 'new system of slavery'.
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. India and the Contemporary World
But workers discovered their own ways of surviving. Many of them escaped into the wilds, though
if caught they faced severe punishment.
Others 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. Like, 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, o returned to their new homes after a short spell in India. Consequently
there are large communities of people of Indian descent in these countries.
Have you heard of the Nobel Prize -
winning write
Fig. 14 - Indian indentured
labourers in a cocoa plantation in Trinidad, early nineteenth century.
Discuss the importance of language and popular traditions in the
creation of national identity. 7339 136
1366 111 Fig. 15 for
identification. Indentured laboureres
photographed for the employers, the numbers and not the names mattered.
Page 89.
V.S. Naipaul? Some of you may have followed the exploits of
West Indies cricketers Shivnarine Chanderpaul and Ramnaresh Sarwan. If you have wondered why their names sound
vaguely Indian, the answer is that they are descended from indentured labor
migrants from India. From the 1900s
India's nationalist leaders began opposing the system of indentured labor
migration as abusive and cruel. It was
abolished in 1921. Yet for a number of decades afterwards, descendants of
Indian indentured workers, often thought of as 'coolies', remained an uneasy
minority in the Caribbean islands. Some
of Naipaul's early novels capture their sense of loss and alienation. 2.5 Indian Entrepreneurs Abroad Growing food
and other crops for the world market required capital. Large plantations could borrow it from banks
and markets. But what about the humble
peasant? Enter the Indian banker. Do you know of the Shikaripuri shroffs and
Nattukottai Chettiars? They 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 organization. Indian
traders and moneylenders also followed European colonisers into Africa. Hyderabadi Sindhi traders, however, ventured
beyond European colonies. From the 1860s
they established flourishing emporia at busy ports worldwide, selling local and
imported curios to tourists whose numbers were beginning to swell, thanks to
the development safe and comfortable passenger vessels. 2.6 Indian Trade, Colonialism and the Global
System Historically, fine cottons produced in India were exported to
Europe. With industrialization, British
cotton manufacture began to expand, and industrialists pressurized 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 the early nineteenth century, British manufacturers also began to
seek overseas markets for their cloth.
Excluded from the British
Fig. 16 - A contract form of an
indentured labourer. Source A The
testimony of an indentured labourer
Source A
extract from the testimony of Ram Narain Tewary, an indentured
labourer who spent ten years on Demerara in the early twentieth century. ... in spite of my best efforts, I could not
properly do the works that were allotted to me ... In a few days I got my hands
bruised all over and I could not go to work for a week for which I was prosecuted and sent to jail for 14 days. new emigrants find the tasks allotted to them
extremely heavy and cannot complete them in a day, ... Deductions are also made
from wages if the work is considered to have been done unsatisfactorily. Many people cannot therefore earn their full
wages and are punished in various ways.
In fact, the labourers have to spend their period of indenture in great
trouble ... Source: Department of Commerce and Industry, Emigration Branch. 1916 ſa Global World I of a
Page 90
Fig. 17 - East India Company
House, London, This was the nerve center of the worldwide operations of the
East India Company
market by tariff barriers, Indian textiles now faced stiff competition
in other international markets. If we
look at the figures of exports from India, we see a steady decline of the share
of cotton textiles: from some 30 per cent around 1800 to 15 per cent by 1815.
By the 1870s this proportion had dropped to below 3 per cent. What, then, did India export? The figures again rell a dramatic story. While exports of manufactures declined
rapidly exports of raw materials increased equally fast. Between 1812 and 1871, the share of raw
cotton esports rose from 5 per cent to 35 per cent Indigo used for dyeing cloth
was another important export for India and the contempo
Fig. 18 - A distant view of
Surat and its river. All through the
seventeenth and early eighteenth centuries.
Surat remained the main center of overseas trade in the western Indian
Ocean. 90
Page 91
decades. And, as you have read last year, opium
shipments to China grew rapidly from the 1820s to become for a while India's
single largest export. Britain grew
opium in India and exported it to China and, with the money earned through this
sale, it financed its tea and other imports from China over the nincteenth
century, British manufactures flooded the Indian market. Food grain and raw material exports from
India to Britain and the rest of the world increased. But the value of British exports to India was
much higher than the value of British imports from India. Thus Britain had a 'trade surplus' with
India. Britain used this surplus to
balance its trade deficits with other countries - that is, with countries from
which Britain was importing more than it was selling to. This is how a multilateral settlement system
works it allows a national deficit with another country to be settled by its
surplus with a third country. By helping
Britain balance its deficits, India played a critical 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
officers in India. Bahan ADO Yarand The
Great An Hooghly Binder About Musa Madam Macha Mads Achen Word Bum Marami Sosu
Land Volume of aspargeport
Fig. 19 - The trade routes that
linked India to the world at the end of the seventeenth century.
Page 92
3 The Inter-war Economy The First World War (1914–18) was mainly
fought in Europe. But its impact was
felt around the world. Notably for our
concerns in this chapter, it plunged the first half of the twentieth century
into a crisis that took over three decades to overcome. During this period the world experienced
widespread economic and political instability, and another catastrophic
war. 3.1 Wartime Transformations The
First World War, as you know, was fought between two power blocs. On the one side were the Allies - Britain,
France and Russia Cater joined by the US), and on the opposite side were the
Central Powers - Germany, Austria - Hungary and Ottoman Turkey. When the war began in August 1914, many
governments thought it would be over by Christmas. Ir lasted more than four years. The First World War was a war like no other
before. The fighting involved the
world's leading industrial nations which now harnessed the vast powers of the
modem industry to inflict the greatest possible destruction on their enemies. This war was thus the first modern industrial
war. 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. To fight the war, millions of soldiers had to
be recruited from around the world and moved to the frontlines on large ships
and trains. The scale of death and
destruction - 9 million dead and 20 million injured - was unthinkablc before
the industrial age, without the use of industrial arms. Most of the killed and maimed were men of
working age. These deaths and injuries
reduced the able - bodied workforce in Europe.
With fewer numbers within the family, household incomes declined after
the war. During the war, industries were
restructured to produce war - related goods.
Entire societies were also reorganized for war - as men went to battle,
women stepped in to undertake jobs that earlier only men were expected to do.
Fig. 20 - Workers in a munition
factory during the First World War.
Production of armaments increased rapidly to meet war demands. 92
Page 93.
The war led to the snapping of economic links between some of the
world's largest economic powers which were now fighting each other to pay for
them. So 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. In other words,
at the war's end, the US and its citizens owned more overseas assets than
foreign governments and citizens owned in the US. 3.2 Post - war recovery Post - war economic
recovery proved difficult. Britain,
which was the world's leading economy in the pre-war period, in particular
faced a prolonged crisis. While Britain
was preoccupied with war, industries had 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, further, to finance war expenditures
Britain had borrowed liberally from the US.
This meant that at the end of the war Britain was burdened with huge
external debts. The war had led to an
economic boom, that is, to a large increase in demand, production and
employment. When the war boom ended,
production contracted and unemployment increased. At the same time the government reduced
bloated war expenditures to bring them into line with peacetime revenues. These developments led to huge job losses -
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. Consider the case of wheat
producers. Before the war, eastern
Europe was a major supplier of wheat in the world market. When this supply was disrupted 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. 3.3
Rise of Mass Production and Consumption in the US, recovery was quicker. We have already seen how the war helped boost
the US economy. After a short period of
economic
Page 94.
trouble in the years after the war, the US economy resumed its strong
growth in the early 1920s. One important
feature of the US economy of the 1920s was mass production. The move towards mass production had begun in
the late nineteenth century, but in the 1920s it became a characteristic
feature of industrial production in the US.
A well known pioneer of mass production was the car manufacturer Henry
Ford. He adapted the assembly line of a
Chicago slaughterhouse in which slaughtered animals were picked apart by
butchers as they came down a conveyor belt) to his new car plant in
Detroit. He realised that the 'assembly
line' method would allow a faster and cheaper way of producing vehicles. 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. As a result, Henry Ford's cars came off the
assembly line at three - minute intervals, a speed much faster than that
achieved by previous methods. 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. In desperation
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. So much so, he would soon describe his
decision to double the daily wage as the 'best cost - cutting decision' he had
ever made. Fordist industrial practices
soon spread in the US. They were also
widely copied in Europe in the 1920s.
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. Car production in the US rose from 2 million
in 1919 to more than 5 million in 1929. Equally, there was a spurt in the
purchase of refrigerators, washing machines, radios, gramophone players, all
through a system of hire purchase '(Ie,
on India and the Contemporary World 94
Fig. 21 factory.
T - Model automobiles lined up outside the ker yor
Page 95
repaid in weeldy or monthly
installments). The demand for
refrigerators, washing machines, etc, was also fueled by 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. Large investments in housing and household
goods seemed to create a cycle of higher employment and incomes, rising
consumption demand, more investment, and yet more employment and incomes. 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 would be plunged into a depression such as it had
never experienced before 3.4 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. The exact timing and impact of the depression
varied across countries. But in general,
agricultural areas and communities were the worst affected. This was because the fall in agricultural
prices was greater and more prolonged than that in the prices of industrial
goods The depression was caused by a combination of several factors. We have already seen how fragile the post -
war world economy was. First:
agricultural overproduction remained a problem.
This was made worse by falling agricultural prices. As prices slumped and agricultural incomes
declined, farmers tried to expand production and bring a larger volume of
produce to the market to maintain their overall income. This worsened the glut in the market, pushing
down prices even further. Farm produce
rotted for a lack of buyers, Seconds in the mid-1920s, many countries financed
their investments through loans from the US.
While it was often extremely easy to prise loans in the US when the
going was good, US overseas lenders panicked at the first sign of -
trouble. In the first half of 1928, US
Box 3 Fig. 22 - Migrant
agricultural worker's family, homeless and hungry, during the Great Depression,
1936. Courtesy: Library of Congress, Prints and Photographs Division. Many years later, Dorothea Lange, the
photographer who shot this picture, recollected the moment of her encounter
with the hungry mother: 'I saw and approached the hungry and desperate mother,
as if drawn by a magnet ... I did not ask her
name or her history. She told me
her age, that she was thirty - two. She
said that they (ie, she and her seven children) had been living on frozen
vegetables from the surrounding fields, and birds that the children killed ...
There she sat ... with her children huddled around her, and seemed to know that my pictures might help her, and so she
helped me ... From: Popular Photography, February 1960. The Making of a Global World 95
Page 96
Overseas
loans amounted to over $ 1
billion. A year later it was on quarter
of that amount. Countries that depended
significantly on U loans now faced an acute crisis. The withdrawal of US loans affected much of
the rest of the world though in different ways.
In Europe it led to the failure of som major banks and the collapse of
currencies such as the British pound sterling.
In Latin America and elsewhere it intensified the slump in agricultural
and raw material prices. The US attempt
to protec its economy in the depression by doubling import duties also deal
another severe blow to world trade. The
US was also the industrial country most severely affected by the
depression. With the fall in prices and
the prospect of a depression, US banks had also slashed domestic lending and
called back loans. Farms could not sell
their harvests, households were ruined, and businesses collapsed. Faced with falling incomes, many people in
the US could not repay what they had borrowed, and were forced to give up their
homes, cars and other consumer durables.
The consumerist prosperity of the 1920s now disappeared in a puff of dust. 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. The numbers are phenomenal: by
1933 over 4,000 banks had closed and between 1929 and 1932 about 110,000
companies had collapsed. By 1935, a
modest economic recovery was under way in most industrial countries. But the Great Depression's wider effects on
society, politics and international relations, and on peoples' minds, proved
more enduring World 3.5 India and the Great Depression if we look at the impact
of the depression on India we realize how integrated the global economy had become by the early ventieth century. The tremors of a crisis in one part of the
world were quickly relayed to other parts, affecting lives, economics and
societies worldwide. In the nineteenth
century, as you have seen, colonial India had become an exporter of
agricultural goods and importer of manufactures. The depression immediately affected Indian
trade. India's exports 96
Fig. 23 - People lining up for
unemployment benefits, US, photograph by Dorothea Lange, 1938. Courtesy:
Library of Congress, Prints and Photographs Division. When an unemployment census showed 10 million
people out of work, the local government in many US states began making small
allowances to the unemployed. These long
queues came to symbolize the poverty and unemployment of the depression years
.Page 97
imports nearly halved between
1928 and 1934. As internationa 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. Though agricultural prices fell sharply, the
colonial government refused to reduce revenue demands. Peasants producing for the world marker were
the worst hit. Consider the jure
producers of Bengal. They grew raw jute
that was processed in factories for export in the form of gunny bags. But as gunny exports collapsed, the price of
raw jute crashed more than 60 per cent.
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. Thus the Bengal jute
growers' lament grow more jute, brothers, with the hope of greater cash. Gosts and debts of jute will make your hopes
get dashed. When you have spent all your
money and got the crop off the ground, w traders, sitting at home, will pay
only Rs 5 a maund. Across India
peasants' indebtedness increased. They
used up their savings, mortgaged lands, and sold whatever jewelery and precious
metals they had to meet their expenses.
In these depression years, India became an exporter of precious metals,
notably gold. The famous economist John
Maynard Keynes thought that Indian gold exports promoted global economic
recovery. They certainly helped speed up
Britain's recovery, but did little for the Indian peasant. Rural India was thus seething with unrest
when Mahatma Gandhi launched the civil disobedience movement at the height of
the depression in 1931. 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.
Everything cost less. Industrial
investment also grew as the government extended tariff protection to
industries, under the pressure of nationalist opinion.
Discuss Who profits from jute cultivation according to the jute
growers' lament? Explain.
Page 98
4 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. It 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. Unlike in earlier wars, most of these deaths
took place outside the battlefields.
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
Reconstruction promised to be long and difficult.
Fig. 24. - German forces attack
Russia, July 1941 Hitler's attempt to invade Russia was a turning point in the
war two important influences shaped post - war reconstruction. The first was the US's emergence as the
dominant economic, political and military power in the Western world. The second was the dominance of the Soviet
Union. It had made huge sacrifices to
defeat Nazi Germany, and transformed itself from a backward agricultural
country into a world power during the very years when the capitalist world was
trapped in the Great Depression. 4.1
Post - war Settlement and the Bretton Woods Institutions
Fig. 25 - Stalingrad In Soviet Russia devastated
by the war. 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. But markets alone could not guarantee full
employment. Therefore governments would
have to step in to minimize
Page 99.
of price, output and employment
economic stability could be ensured only through the intervention of the
government the second lesson 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 labor. Thus in brief,
the main aim of the post - war international economic system was to preserve
economic stability and full employment in the industrial world. Its framework was agreed upon at the United
Nations Monetary and Financial Conference held in July 1944 at Bretton Woods in
New Hampshire, USA. 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 (popularly 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 World Bank
decisions. The international monetary
system is the system linking national currencies and monetary system. 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. 4.2 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.
World trade grew annually at over 8 per cent between 1950 and 1970 and incomes
at nearly 5 per cent. The growth was
also mostly stable, without large fluctuations.
For much of this period the unemployment rate, for example, averaged
less than 5 per cent in most industrial countries.
Fig. 26 - Mount Washington
Hotel located in Bretton Woods, US This is the place where the famous
conference was held. Discuss Briefly
summarize the two lessons learnt by economists and politicians from the inter -
war economic experience? Making of a
global world
Page 100.
These decades also saw the worldwide spread of technology and
enterprise. Developing countries were in
a hurry to catch up with the advanced industrial countries. Therefore, they invested vast amounts of
capital, importing industrial plant and equipment featuring modern technology
4.3 Decolonisation and independence when the Second World War ended, large
parts of the world were still under European colonial rule. Over the next two decades most colonies in
Asia and Africa emerged as free, independent nations. They were, however, overburdened by poverty
and a lack of resources, and their economies and societies were handicapped by
long periods of colonial rule. The IMF
and the World Bank were designed to meet the financial needs of the industrial
countries. They 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 on the IMF and the World Bank. Thus from the late 1950s the Bretton Woods
institutions began to shift their attention more towards developing
countries. As colonies, many of the less
developed regions of the world had been part of Western empires. Now, ironically, as newly independent countries
facing urgent pressures to lift their populations out of poverty, they came
under the guidance of international agencies dominated by the former colonial
powers. Even after many years of
decolonisation, the former colonial powers still controlled viral resources
such as minerals and land in many of their former colonies India and the
Contemporary World Large Corporations of other powerful countries, for example
the US, also often managed to secure rights to
exploit developing countries natural resources very cheaply. At the same time, most developing countries
did not benefit from the fast growth the Western economies experienced in the
1950s and 1960s. Therefore they
organized themselves as a group- the group of 77 (or G - 77) - to demand a new
international economic order (NIEO), by the NIEO they meania 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 developed countries' markets.
Box 4 What are MNCs?
Multinational corporations (MNCs) are Jarge companies that operate in
several countries at the same time. The
first MNCs were established in the 1920s.
Many more came up in the 1950s and 1960s as US businesses expanded
worldwide and Western Europe and Japan also recovered to become
powerful industrial economies. The
worldwide spread of MNCs was a notable feature of the 1950s and 1960s. This was partly because high import tariffs
imposed by different governments forced MNCs to locate their manufacturing
operations and become 'domestic producers' in as many countries as possible.
New words Tariff - Tax imposed
on a country's imports from the rest of the world. Tariffs are levied at the point of entry,
i.e. , at the border or the airport.
Page 101
4.4 End of Bretton Woods and the Beginning of 'Globalisation Despite
years of stable and rapid growth, not all was well in this post - war
world. 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. From the mid
- 1970s the international financial system also changed in important ways. 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 in the
developing world, and lower incomes and increased poverty, especially in Africa
and Latin America. The industrial world
was also hit by unemployment that began rising from the mid-1970s and remained
high until the early 1990s. From the
late 1970s MNCs also began to shift production operations to low - wage Asian
countries. China had been cut off from
the post - war world economy since its revolution in 1949. But new economic
policies in China and the collapse of the Soviet Union and Soviet - style
communism in Eastern 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. Have you noticed
that most of the TVs, mobile phones, and toys we see in the shops seem to be
made in China? This is because of the
low - cost structure of the Chinese economy, most importantly its low
wages. 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.
New words Exchange
rates - They link national currencies for purposes of international trade. There are broadly two kinds of exchange
rates: fixed exchange rate and floating exchange rate fixed exchange rates -
when exchange rates are fixed and governments intervene to prevent movements in
them flexible or floating exchange rates - these rates fluctuate depending on
demand and supply of currencies in
foreign exchange markets, in principle without interference by
governments
Raman's Classes
Chapter 5.The Making of the Global World.
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