Making of global world

MAKING OF GLOBAL WORLD
BY:- ANKIT THAKUR

THE PRE-MODERNWORLD
‘Globalization’ is an economic system that has emerged since
last 50 years with history – of trade, of migration, of people in
search of work, the movement of capital, etc.
From ancient times traveler, traders, priests and pilgrim travelled
vast distances for knowledge, spiritual fulfilment opportunity, or
to escape persecution.
They carried goods, money, values, skills, ideas, inventions and
even germs and disease.

Image of a ship on a Memorial Stone, Goa
museum,Tenth Century CE.

SILK ROUTE
 The trade route which linked China to the western world and to other
countries is called Silk Route.There were many Silk Routes.The Silk
Routes existed before the Christian Era, and persisted till the fifteenth
century.
 Chinese potteries travelled from China to other countries through the Silk
Route. Similarly, gold and silver travelled from Europe to Asia through
this route.
 Religions; like Christianity, Islam and Buddhism travelled to different
parts of the world through the Silk Route.

FOODTRAVELS:-
 Noodles travelled from China to different parts of the world.The sevian;
which are used in India are localized form of noodle. Similarly, spaghetti of
Italy is the European version of noodles.
 Many common food of today; like potato, chillies, tomato, maize, soya,
groundnut and sweet potatoes were introduced in Europe after Christopher
Columbus accidentally discovered the American continents.
 Potato brought dramatic changes for the life of people of Europe. Because
of introduction of potato, the people in Europe could eat better and could
live longer.The peasants of Ireland became so dependent on potato that
when disease destroyed the potato crop in the mid-1840s, hundreds of
thousands died due to starvation.This famine is known as Irish Famine.

Merchants from Venice and Orient Exchanging goods,
from Marco Polo, Book of Marvel, Fifteenth Century.

CONQUEST, DISEASE ANDTRADE
 The European sailors discovered the sea route toAsia and Americas in the sixteenth century.
The discovery of new sea route not only helped in expanding the trade but also in European
conquest over other parts of the world.
 America had vast reserves of minerals and there was abundant crop in this continent.The
food and minerals fromAmerica transformed the lives of people in other parts of the world.
 By the mid-sixteenth century, the Portuguese and Spanish colonization of America began in
a decisive way. But the conquest could not be facilitated because of arms and ammunition
but because of a disease. Europeans had been exposed to small pox and hence they had
developed immunity against this disease. But the Americans had been isolated from the
world and they had no immunity against small pox.When the Europeans reached there, they
carried the germs of small pox alongwith them.The disease wiped off the whole
communities in certain parts of America. And thus, the Europeans could easily get control of
the Americas.

CONQUEST, DISEASE ANDTRADE
SLIDE: 2
Till the nineteenth century, Europe was suffering from many
problems; like poverty, diseases and religious conflicts. Many
religious dissenters fled to America for the fear of prosecution.
Those people utilised the opportunities inAmerica and could
dramat.Till the eighteenth century, India and China were the
richest countries of the world. But from the fifteenth century
onwards, China began to restrict overseas contacts and went into
isolation. Because of China’s reduced role andAmerica’s rising
importance; the centre of the world trade shifted to Europe.

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 men in top hats and suit waiting to be sold.To attract buyers, slaves
were often dressed in their best clothes.

THE NINETEENTH CENTURY (1815 – 1914)
The world had changed dramatically during the nineteenth
century.There were changes in social, political, economic and
technological factors in much complex way during this period.The
changes altered the external relations beyond recognition.
Economists identify three types of flows within international
economic exchanges.These are as follows:
Flow of trade
Flow of labor
Flow of capital

A WORLD ECONOMYTAKES SHAPE
Changing pattern of food production and consumption in Europe:
Traditionally, countries liked to be self sufficient in food. But self
sufficiency in food meant a low quality of life for the people of Britain.
There was immense growth of population of Britain during
eighteenth century. Due to this, the demand for food had increased
exponentially. Under pressure from the landed groups, the
government restricted the imports of corn.This further aggravated
the food prices in Britain.The industrialists and urban dwellers forced
the government to abolish the Corn Laws.

EFFECTS OF ABOLITION OF CORN LAWS:
 Abolition of Corn Laws meant that food could be imported at much cheaper rate
than at what it could be produced in Britain. British farm produce was unable to
compete with cheaper imports.
 Vast areas of land were left uncultivated and a large number of people became
unemployed. People migrated to cities; in large numbers; in search of work.
Many people also migrated overseas. Many people also migrated overseas.
 Falling food prices resulted in increased demand for food in Britain. Moreover,
industrialization also helped in increasing the income of the people.This
necessitated more import of food items into Britain.To fulfill the demand, large
tracts of land were cleared in Eastern Europe, America, Russia and Australia.

EFFECTS OF ABOLITION OF CORN LAWS:
SLIDE:2
 The foodgrains also needed to be supplied to the ports. For this, railway lines
were to be laid so that the agricultural hubs could be connected to the ports.
Moreover, new habitations also had to come up in agricultural hubs. For all
these activities, capital flowed from financial centres; such as London; to these
places.
 There was shortage of labour in Americas and Australia.The demand for
workforce resulted in large scale migration of people to these places. Nearly 50
million people migrated from Europe to America and Australia during the
nineteenth century. All over the world, about 150 million people migrated to
different placeBy 1890s, a global agricultural economy had taken shape.This
was accompanied by complex changes in labour movement, capital flow and
technological changes.

ROLE OFTECHNOLOGY
 Technology definitely played an important role in globalizing the world
economy during this period. Some of the major technological innovations
were the railways, steamship and telegraph. Railways helped in connecting
the hinterland to the ports. Steamships helped in transporting goods in bulk
across the Atlantic.Telegraph helped in speeding up the communication and
thus facilitated better economic transaction.
 Trade in Meat:Trade in meat shows a very good example of benefit of
technology on the life of common people.Till 1870s, live animals were shipped
from America to Europe. Shipping live animals had its own problems.They
took more space and many animals either died or became sick during the
transit. Due to this, meat remained a luxury item for most of the Europeans.
ury item for most of the Europeans.

ROLE OFTECHNOLOGY
Arrival of refrigeration technology changed the picture. Now,
animals could be slaughtered in America and processed meat
could be shipped to Europe.This helped in better utilization of
space in the ships.This also helped in better availability of
meat for the Europeans and thus prices fell. Now, even the
common people could afford to eat meat on a regular basis.
Better availability of food promoted social peace within the
countries. People of Britain were now more receptive to
imperial ambitions of the country.

Meat being loaded on to the ship, Alexandra, Illustrated London News,
1878.
Export of meat was possible only after ships were refrigerated.

LATE NINETEENTH CENTURY AND
COLONIALISM
While the expansion of trade improved the quality of life of many
Europeans; it had negative implications for people of the colonized
countries.
When you will carefully observe the modern map of Africa, it would
appear that most of the boundaries are straight lines. It appears as if
someone had deliberately made those straight lines. In 1885, the big
European powers met in Berlin and demarcated the African continent
for respective powers.That is how boundaries of most of the African
countries appear as straight lines.

RINDERPEST OR CATTLE PLAGUE
Rinderpest is a disease which affects cattle.The example of rinderpest
in Africa shows that even a cattle disease can widely alter the power
equations in a geographical area.
Africa was the land of vast resources of land and minerals. Europeans
had come to Africa to make fortune out of mining and plantations. But
they faced a huge scarcity of labour.There was another problem and
that was that the local people were not willing to work in spite of being
offered wages. In fact,Africa was a sparsely populated continent and
people’s needs could be easily met with the available resources.There
simply was no need to work for wages.

The Europeans applied various ways to force the people to
work. Some of them are as follows:
Heavy taxes were imposed which could only be paid by working on
plantations and in mines.
Inheritance laws were changed and only one member of the family was
allowed to inherit land.This forced others into the labour market.
Mineworkers were confined to the campus and were not allowed to
move freely.

Arrival of Rinderpest:Rinderpest arrived in Africa in the late 1880s. It
came with the horses which were imported from British Asia.Those
horses came as reinforcements for Italian soldiers who were invading
Eritrea in East Africa. Rinderpest spread in the African continent like
the forest fire. It reached to western coast of Africa by 1892 and within
five years after that, it reached to southernmost tip of the continent.
Rinderpest wiped off 90% of the cattle population of Africa during this
period.
Loss of cattle meant loss of livelihood for the Africans.They had no
choice but to work as labourers in plantations and mines.Thus, a cattle
disease enabled the Europeans to colonise Africa.

INDENTURED LABOUR MIGRATION
FROM INDIA
 Indentured labour is a bonded labour who is hired on contract for a specific
employer for a specific period of time. Many poor Indians from modern day
Bihar, Uttar Pradesh, central India and dry districts ofTamil Nadu became
indentured labours.These people were mainly sent to the Caribbean Islands,
Mauritius and Fiji. Many of them were also sent to Ceylon and Malaya. In India,
many indentured labours went to work in tea plantations of Assam.
 The agents often gave false promises and the workers were not even told about
the place they were heading for.The condition in the alien land was quite
horrible for the workers.They did not have any legal rights and had to work
under tortuous conditions.
 Form the 1900s, the Indian nationalists began to oppose the system of
indentured labour.The practice was finally abolished in 1921.

INDIAN ENTREPRENEURS ABROAD
Shikaripuri shroffs and Nattukottai Chettiars were among the
groups of bankers and traders from India.They financed export
agriculture in Southern and Central Asia.They had their own
sophisticated system of money transfer to different parts of
the world and even in India.
Indian traders and moneylenders also ventured into Africa
alongwith the European colonizers.The Hyderabadi Sindhi
traders ventured even beyond European colonies. By 1860s,
they established flourishing emporia at busy ports around the
world.

INDIANTRADE, COLONIALISM ANDTHE
GLOBAL SYSTEM
 Historically, fine cotton from India was exported to Europe.After industrialization, the local
manufacturers forced the British government to impose a ban on Indian imports.This
resulted in British manufactured cotton textiles flooding the Indian market.The share of
cotton textiles in Indian export was 30% in 1800. It declined to 15% by 1815 and to 3% by
1870s. But from 1812 to 1871, the export of raw cotton increased from 5% to 35%. During this
period, Indigo emerged as a major export item from India. Opium was the largest exported
item from India and it was mainly exported to China.
 Although export of raw materials and food grains from India to Britain grew manifold but
import of finished goods from Britain also increased.This resulted in a situation in which
Britain was having the trade surplus. In other words, the Balance of Payment was in Britain’s
favour. Income from the Indian market was utilised by Britain to serve its other colonies and
also to pay ‘home charges’ for its officials who were posted in India.The home charges also
included payment of India’s external debt and pension for retired British officials in India.

 East India Company House, London.
 This was the nerve centre of the worldwide operations of the East India Company

The trade routes that linked India to the world at the
end of the seventeenth century.

THE INTER-WAR ECONOMY
 The First WorldWar wreaked large scale havoc around the world in many senses. About 9
million people died and 20 million people were injured in the wake of the war.
 Most of the people who were killed or maimed were people from working age.This resulted
in a significant reduction in the number of able-bodied workforce in Europe. Due to fewer
earning members in the families, the household incomes drastically reduced in Europe.
 Most of the men were forced to engage in war and thus women had to replace them in
factory jobs.Women were now working in those jobs which were earlier considered as male
bastions.
 The war also led to snapping of ties between some major economic powers of the world.
Britain had to borrow from the US to finance the war.The war transformed the US from an
international debtor to an international creditor. Now, US and its citizens owned more
overseas assets than foreign governments or citizens owned in the US.

 Workers in a munition factory during the FirstWorldWar.
 Production of armaments increased rapidly to meet war demands.

POST-WAR RECOVERY
 While Britain was preoccupied with war, industries developed in India and Japan. After the war,
Britain found it difficult to regain its earlier dominant position in India. Similarly, it was unable
to compete with Japan at the international level. At the end of the war, Britain was under huge
debts from the US.
 During the war, there was increased demand for goods which resulted in economic boom in
Britain. After the war ended, the demand drastically fell to come in tune with the peace-time
economy.About 20% of the British workers lost their job after the war.
 Before the war, Eastern Europe was a major supplier of wheat. But during the war, Canada,
America and Australia emerged as the leading suppliers of wheat because Eastern Europe was
involved in war. Once the war was over, the Eastern Europe resumed the supply of wheat.This
resulted in a glut of wheat in the market and prices fell.This created havoc in the rural
economy.

RISE OF MASS PRODUCTION AND
CONSUMPTION
 The US economy was quick to recover from the aftershocks of the war. During the 1920s, the
unique feature of the US economy was mass production. Henry Ford, the founder of the Ford
Motors was the pioneer of mass production in factories. Mass production helped in increasing
productivity and reducing prices. Workers began to earn better in the US and hence had better
disposable income.This created huge demand for various products.
 The car production rose from 2 million in 1919 to 5 million 1929 in the US. Similarly, the
production of white goods; like refrigerators, washing machines, radio, gramophone, etc.
increased manifold in the US.There was a housing boom as well in the US market.The demand
could be further maintained because of the beginning of the hire purchase culture.
 All of this made for a prosperous US economy. In 1923, US resumed exporting capital to the rest
of the world and emerged as the largest overseas lender.This also helped in European recovery
and boosted the world trade for the next six years.

T-Model automobiles lined up outside the factory

THE GREAT DEPRESSION
 Agricultural Overproduction: Agricultural overproduction was a major problem
during the 1920s. More supply of farm produce resulted in lower price. Farmers
tried to compensate by producing even more.This created a glut of farm
produce in the market; leading to further fall in prices. Farm produce rotted
because of lack of buyers.
 Withdrawal of US Loans: Many European countries heavily depended on US
loans. But the US lender panicked at the first sign of trouble. In the first half of
1928, the US loan amounted to $ 1 billion. But within a year, it was just a quarter
billion dollar. Withdrawal of US loan affected many countries in various ways.
 This led to the collapse of many banks and currencies in Europe.The British
Pound Sterling also crashed during this period.The Agricultural market slumped
in Latin America.

THE GREAT DEPRESSION
 The US tried to protect its economy by doubling its import duties. It also had
deleterious effect on the world economy.
 The US was most severely affected by depression. Prices were falling and
economy was in bad shape.The US banks slashed domestic lending and called
back loans. Household incomes fell in many people were not in a position to
repay the loan which they had taken to buy homes and white goods.
Unemployment level increased and banks were unable to collect loans.
 Thousands of banks in the US went bankrupt. By 1933, over 4000 banks had
closed. Between 1929 and 1932, about 110,000 companies collapsed in the US.
 In most of the economies, a modest recovery began by 1935.

INDIA ANDTHE GREAT DEPRESSION
 The Depression affected the Indian economy as well. Between 1928 and 1934,
the imports and exports of India became nearly half. During this period, the
wheat prices in India fell by 50%.
 In spite of falling prices of farm produce, the government continued to demand
the same revenue from the farmers.Thus, farmers were the worst sufferers in
this situation. Many farmers were forced to utilize their savings, sell their lands
and jewelry.Thus, India became a net exporter of precious metal during this
period.
 The depression proved less grim for the urban dwellers in India. With falling
prices, many urban landowners and salaried people found the life much easier.
Under pressure from the nationalist leaders, the industrial protection grew
which led to more investment in the industries.

THE POST-WAR SETTLEMENTS
The SecondWorldWar was different than earlier wars.There were more civilian casualties in
this war and many important cities were devastated beyond recognition.
The recovery after the SecondWorldWar was influenced by two important factors:
 The emergence of the US as the dominant economic, political and military power in the
west.
 Transformation of the Soviet Union from an agrarian economy into a world power.
The world leaders met and discussed to work for post war recovery.They focused on two
main objectives; which can be summarized as follows:
 Preservation of economic stability and full employment in the industrial world.
 Controlling the influence of the outer world on flow of capital, goods and labour.

BRETTONWOODS INSTITUTIONS
 United Nations Monetary and Financial Conference was held in July 1944 at BrettonWoods in New
Hampshire, USA.The BrettonWoods Conference established the International Monetary Fund.
This organization was established to deal with external surpluses and deficits of its members.
 The International Bank for Reconstruction and Development was set up to finance post-war
reconstruction.This is popularly known as theWorld Bank.The IMF andWorld Bank are often
referred to as BrettonWoods Institutions.The post-war economic system is also referred to as the
BrettonWoods System.
 The IMF andWorld Bank began their operations in 1947.Western industrial powers controlled the
decision-making in these institutions.The US had an effective veto right over key decisions made
by these institutions.
 The BrettonWoods System was based on fixed exchange rate for currencies.The dollar was
anchored to gold at a fixed price of $35 per ounce of gold. Other currencies were linked to dollar at
fixed rates.

MountWashington Hotel situated in BrettonWoods,
US.
 This is the place where the famous conference was held.

THE EARLY POST-WARYEARS
The BrettonWoods System started an era of
unprecedented economic growth in theWestern
industrial nations and in Japan. Between 1950 and
1970, the world trade grew annually at 8% and incomes
grew at nearly 5%.The unemployment rate averaged
less than 5% in most of the industrialized countries
during this period; which speaks about the stable
nature of economic growth during this period.

DECOLONIZATION AND INDEPENDENCE
 Within the two decades after the SecondWorldWar, many colonies became independent and
emerged as new nations.These countries were in deep economic trouble because of their
long history of exploitation. During the initial phase, the BrettonWoods Institutions were not
in a position to cope with the demands of these new nations. Meanwhile, Europe and Japan
quickly rebuilt their economies and thus grew independent from the IMF andWorld Bank.
From the late 1950s, the BrettonWoods Institutions began to shift their focus on developing
economies of the world.
 These institutions were under the control of former colonial powers. Hence, most of the
developed countries still ran the risk of being exploited by the former colonial powers; in the
name of development.These countries organized themselves into G-77 (Group of 77) to
demand new international economic order.They wanted real control over their natural
resources, fairer price for raw materials and better access to the markets in the developed
world.

END OF BRETTON WOODS AND BEGINNING OF
GLOBALIZATION
 From the 1960s onwards, US finances and competitive strength was
weakening because of its rising cost of overseas involvement.The dollar could
not maintain its value in relation to gold.Thus the system of fixed exchange
rate collapsed and the new system of floating exchange rate began.
 From the mid 1970s, the international financial system changed in many ways.
Earlier, developing countries could turn to international institutions for
financial assistance. Now they were forced to borrow from Western
commercial banks and private lending institutions.This led to periodic debt
crises, lower incomes and unemployment in the developing world. Many
African and Latin American countries suffered from such crises.

END OF BRETTON WOODS AND BEGINNING OF
GLOBALIZATION
 China had been cut off from the world economy since its revolution in 1949.
China began to follow new economic policies and came back into the fold of
world economy. Collapse of the Soviet Union and that of Soviet style
communism in many Eastern European countries brought many countries into
the fold of world economy.
 Wages were quite low in countries; like China, India, Brazil, Philippines,
Malaysia, etc.These countries became preferred sourcing destinations for
many MNCs. India has also emerged as the most preferred hub for Business
Process Outsourcing. In the last two decades, many third world countries have
grown at a rapid pace and India, China and Brazil are their leading examples.

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