The Making of a Global World Class 10 History Explanation, Question and Answers
The Making of a Global World Class 10, Explanation of CBSE Class 10 History Chapter 3 Notes of The Making of a Global World
CBSE Class 10 History Chapter 3 The Making of a Global World - Detailed explanation of the chapter 'The Making of a Global World' along with question answers. Given here is the complete explanation of the lesson, along with all the exercises, Question and Answers given at the back of the lesson.
By Puneet Kaur
Here we will talk about terms like Globalization, Economy, Trade etc. But the question arises how these terms came into existence? What led people to move to different places in search of work and how business and trade grew? These are some of the questions which we will discuss in this chapter.
The Making of a Global World Class 10 History Chapter 3 Includes Various Topics
The Pre modern World
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The Nineteenth Century (1815-1914)
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The Inter war Economy
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Rebuilding a World Economy: The Post-war Era
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Part 1 - The Making of a Global World
1.The Pre-modern World
In olden times, travelers, merchants, priests and pilgrims travelled to far off distances for knowledge, opportunity and spiritual fulfillment. These people used to carry along goods, money, values, skills, ideas, inventions and sometimes diseases also. Not only this, they also took various foods and cultural habits with them to the different places that resulted in the diversity of culture.
The movement of goods and people can be traced back to 3000 B.C ,where one can find the coastal trade links of the Indus valley civilization with the present day West Asia. During that period the currency used for carrying out trade activities was cowries or seashells. The trade links can be found between Maldives to China and East Africa. Even the spread of disease can be traced as far back as the seventh century.
So now we know that people, their skills, diseases and many other things were being transferred with them from one place to another for various reasons resulting in the establishment of various trade links. Now we will discuss the silk routes that linked the world.
1.1 Silk Routes Link the World
The silk routes serve as a good example of the pre modern trade and cultural links between the different parts of the world. Historians have found out various silk routes over land and through the sea. These routes were linked with the vast regions of Asia, Europe and Northern Africa. It is believed that these routes existed since before the Christian era and flourished till the fifteenth century. Not only silk but the Chinese pottery also travelled the same route. Similarly the textiles and spices from India and Southeast Asia went to different parts. In return the expensive metals like gold and silver moved from Europe to Asia.
Just like trade, there was cultural exchange also. Various Christian, Muslim and Buddhist preachers went to different parts and spread into different parts of the Asia.
As trade and culture travelled from one place to another so did the food material.
Food Travels: Spaghetti and Potato
Food is also a great example of cultural exchange. New crops were introduced to different places through traders and travelers. Various food items of the world sometimes share common origins. Take for example spaghetti and noodles. The belief about the noodles is that it travelled from China to west and became spaghetti. Some even say that pasta was taken to Sicily (island in Italy) by the Arabs.
Not only the specific ones but even our common foods such as potatoes, soya, groundnuts, maize, tomatoes, chillies, sweet potatoes were introduced in Europe and Asia after the discovery made by Christopher Columbus. These foods were only introduced in Europe and Asia after Christopher Columbus accidentally discovered the vast continent that would later become known as the Americas.
So, we can say that most of our common foods came from America’s original inhabitants- the American Indians.
Potatoes being cheap became an essential food for the poor of Europe. Ireland’s poorest peasants became so dependent on them that most of them died when the crop failed in the mid 1840s.
The criss cross of various cultures and people also resulted in the transfer of diseases. So, we can say that the pre modern world saw the transfer of various elements of humans’ society that also led to conquests and flourishing of trades.
Conquest, Disease and Trades
During the sixteenth century, the European sailors found a sea route to Asia and later on succeeded to cross the western ocean to reach America. Before this, for many centuries, the Indian Ocean was a famous trading centre. The Indian subcontinent was the center of exchange of goods, people, knowledge, customs etc. Later, the entry of Europeans led to the flow of all these things towards Europe.
America remained unknown to the world for millions of years. Its discovery in the sixteenth century led to the beginning of trade of its minerals and crops.
Valuable metals, especially silver from mines of present day Peru and Mexico increased the wealth of Europe that financed its trade with Asia. As these expeditions gained popularity in order to explore more trade and wealth centres, rumors and imaginations also became common. So, in the seventeenth century many expeditions set off in search of El Dorado, the fabled city of gold.
Soon various powers like the Portuguese and the Spanish started colonizing America in order to enhance their trade and increase their wealth. But conquering was not always done with the use of arms and ammunition but it also happened because of the spread of disease. Yes, it is true in the context of Spanish conquerors who took germs of small pox with them to America. The natives were not immune to deadly disease. This resulted in the death of a large number of the Native Americans and found the way of establishing Spanish control over the place.
Until the nineteenth century, poverty and hunger became a common problem in Europe. Not only this, cities became crowded and there was an outbreak of deadly diseases. Religious disputes became common and people were persecuted. Various people left Europe for America. During the eighteenth century, African slaves were captured to work in the sugar and cotton plantations to be sold into the European markets.
If we talk about China and India during the eighteenth century, both of these countries were the richest countries in the world. They were the leading countries in the Asian trade but it is also said that during the fifteenth century China restricted its overseas trade which resulted in decline of its importance in the trade world. America gradually gained an important position in the trade market and this led to the moving of the centre of the world trade westwards. Europe soon rose to be the centre of world trade.
So, now that we know about the pre modern time in which the trades began within the different continents, let’s see what new changes were experienced in the nineteenth century.
2. The Nineteenth Century (1815-1914)
During the nineteenth century various economic, political, social and cultural factors led to the change of the societies and the external relations.
In the nineteenth century three types of flow between the international economies were noticed. These were:
- Trade in goods
- Labor i.e. the migration of people in search of work
- Movement of capital for short and long term investments over long distances.
These three flows were interconnected in a way that affected the life of people in a deeper way than before. These interconnections were sometimes interrupted, for example labor migration was generally restricted as compared to the capital flows.
These flows resulted in the shaping of the world economy. But how this happened? Let’s discuss.
A World Economy Takes Shape
To start with, let’s talk about food first. During the eighteenth century the demand for the food grains increased in Britain. It was so because of the huge population of Britain. As the cities came up and the industrial sector grew, the demand for the food grains went up and so were the price of the food grains raised. The British government put restrictions on the import of goods due to the pressure by the various landed groups. Such laws came to be known as the Corn Laws. This led to the increase in food prices. The industrialists and the urban residents were unhappy because of this and hence forced the government to abolish the Corn Laws.
So, the government abolished the Corn Laws in Britain. This led to the import of cheap corn into the country creating a tough competition for the corn growers. Soon it was found that the lands were left uncultivated because growing corn in Britain was not profitable business any more. This led to the unemployment of laborers as they were thrown out of the work. Hence, these people were forced to move to the cities or to different countries for work.
Later on the food prices fell and the consumption of the same increased in Britain. From the mid nineteenth century, the rapid industrial growth increased the income of Britain. So, now Britain could import more food.
Around the world- in Eastern Europe, Russia, America and Australia lands were cultivating food to export it into Britain.
Not only the lands were cleared, but railway lines were also laid and new harbors were built to link the agricultural regions. Soon people had to get settled on lands in order to cultivate them. Therefore, the need of building homes and settlements arose. For this, there was a huge need for finance and labour. This led to flow of capital from London and supply of labour in America and Australia.
Such a situation led to the migration of about 50 million people from Europe to America and Australia in the nineteenth century. It is estimated that about 150 million people around the world left their homes for a better future.
So, by 1890, a global agricultural economy came into being. It was accompanied by the various types of labour movement patterns, capital flows, ecologies and technology. So, now food didn’t come from a nearby village or town but from a far off distance. The agricultural workers started working on the land and all the agricultural regions were linked by the railways, ports etc. The ships which took the food grains were generally manned by low paid workers from southern Europe, Asia, Africa and the Caribbean.
All these changes were also observed in the west Punjab but on a smaller scale. The British government developed the canal system in order to transform a semi desert area into fertile lands. It was done so in order to grow cotton and wheat in order to export it.
Not only food, but cotton and rubber were also cultivated to be used by Britain. The production of these goods increased rapidly. The world trade during 1820-1914 was estimated to have multiplied from 25 to 40 times. Around 60 percent of the trade comprised of primary products i.e. the agricultural products such as wheat, cotton and mineral like coal.
Now, we know about the role of agricultural products in shaping the world economy. Let’s talk about the role of technology in shaping up the world economy which we see today.
Role of Technology
Technology plays an important role in the growth of the world economy. The invention of railways, steamships and telegraph played an important role in transforming the nineteenth century world. The advancement in technology was due to the various social, political and economic factors. For instance, the colonization by various European powers increased the demand of improved t
ransportation such as faster railways, larger ships and so on as this would facilitate the quick and cheap movement of agricultural products to distant places.
The meat trade is one of the finest examples of this connected process. Earlier, the animals were shipped alive from America to Europe. This was not a profitable venture for most of the time for the following reasons:
- The livestock used to take up more space
- Most of them died, fell ill or caught diseases which resulted in their being unfit to be consumed.
- This resulted in the rise in price of meat.
During those days consumption of meat by the poor was almost an impossible thing. Soon this problem sorted with the introduction of ships with refrigerators. It had the following benefits.
- The meat could be shipped in large quantities resulting in the cost cutting of the transportation.
- Now, it was easy to handle the perishable meat for a longer time.
- The price of the meat reduced, this allowed the poor to consume meat as their daily diet.
So, we can say that the nineteenth century experienced exchange of goods, capital, labour and all such exchanges were further facilitated by the improvement in technology. But as the world was shrinking due to the improved transportation the growth of imperialism was also experienced during this time. Various European powers were establishing their colonies in different countries which would serve their businesses in the home country. Let’s see this
Late nineteenth –century Colonialism
During the nineteenth century, trade flourished and markets also expanded. But, this period is not remembered for the expansion of trade and economic prosperity only, but also for the darker side to this process. In many parts of the world, the growth and expansion of trade brought some of the disadvantages such as loss of freedoms and livelihoods. It was so because during this century Europeans gained control over various territories of the world and formed their colonies.
In 1885 the European powers after gaining control over Africa demarcated their respective territories. For this purpose, they met in Berlin to complete the division process of Africa between them.
Britain and France were the ones that had established their control over vast overseas territories in the late nineteenth century. Belgium and Germany rose as the new colonial powers. Later in 1890, US became a colonial power by gaining control over the territories held by Spain.
This colonization by the European powers led to a destructive impact on the lives of the people who were the residents of these colonies. So, how were their lives impacted? Let’s check this
Rinderpest or the Cattle Plague
As discussed earlier, the colonial rule impacted the lives of the various people who were the residents of these colonies. But the question arises as to how does this happen and what is Rinderpest we are talking about? Well, Rinderpest was a cattle disease which spread in Africa in the 1890s leading to a deep impact on the lives and livelihood of the Africans.
To understand this, we should first know how Africa used to be before its colonization. Historically, Africa had vast land and a relatively small population. For centuries, the African people were dependent on the land and livestock. As their needs were fulfilled with the land and livestock, none of them had ever worked for wages. So, when Europeans entered Africa, they were unable to get laborers for themselves because no one was ready to work for the wages.
So, in order to get laborers they started using forceful methods like increase in tax that could be paid only if the Africans work for wages. Later on the ownership rights of land were limited up to only one member, as a result other members were pushed into the labour market. Mineworkers were kept confined in the compounds and were not allowed to move freely.
While all this was on a go, the cattle plague or the Rinderpest arrived in Africa in the 1880s. It came with the infected cattle that were imported from British Asia in order to feed the Italian Soldiers invading Eritrea in East Africa. The Rinderpest disease very soon moved towards west from east then towards Atlantic coast in 1892. It reached the Cape five years later. It is estimated that Rinderpest killed 90 percent of the cattle.
As loss of cattle destroyed the livelihoods of the Africans this resulted into the increase in supply of wage laborers for the planters, mine owners and colonial government who can now monopolized the scarce cattle resource to strengthen their power.
Similar incidents happened in the other parts of the world that were conquered by the western countries.
Indentured Labor Migration from India
The story of indentured or the bonded labour also serves as a best example to explain the two sided nature of the nineteenth century world. On one side it shows the fast growing economies and on the other, it shows the great misery. Some were becoming wealthier and other poorer, there was technological advancement in some areas and new forms of coercion in other areas.
In the nineteenth century a large number of Indian and Chinese laborers went to work on plantations, mines and rails and roads construction projects around the world. The Indian indentured laborers were hired under contracts with the condition of return travel to India after the completion of five years at the employers’ plantation.
Most of these workers belonged to areas like east Uttar Pradesh, Central India, Bihar and dry districts of Tamil Nadu. The people of these areas were forced to indentured labour for number of reasons:
- Decline of cottage industries
- Rise in rent of lands
- Most of the lands were cleared for mines and plantations.
All the above things affected the lives of people so badly that they become deeply indebted and hence were forced to leave their home in search of work. Some of the most visited places by the Indian indentured migrants were the Caribbean islands like Trinidad, Guyana and Surinam or Mauritius and Fiji. Tamil migrants generally chose the nearby places like Ceylon and Malaya. Sometimes they were also recruited for tea plantations in Assam.
The recruitment was generally carried on by various agents who charged their commission for that. These agents tried to tempt the workers by showing them non real dreams about the good working conditions and good wages. So, the workers saw these jobs as an opportunity to come out of poverty and misery. But they were generally unaware about the real truth of harsh working conditions and low wages in these places of work. In some cases the workers were forcefully abducted to work by these agents.
As life at these places was harsh and full of difficulties, the workers discovered their own ways of surviving. Some of them escaped from these places. Those who were caught were severely punished. Others decided to be a part of the new culture prevailing at these places. For Example, In Trinidad the annual Muharram procession started receiving participation by the people of all races and religions. Likewise, the protest religion of Rastafarianism is also said to reflect the cultural links with Indian migrants to the Caribbean. Not only this, the popular chutney music of Trinidad and Guyana is another creative contemporary expression of the post indenture experience.
Such a crisscross of various cultures led to the stay of indentured workers at these new places even after their contracts were ended. Some of the other workers did come back to India but only for a short span and then left again for their new homes. That is why we still found people from Indian origin residing at these places.
Though they had started relating themselves with the new culture but still know that their lives were full of hardships. So, in order to protect the rights of such workers Indian nationalist leaders began opposing the system of indentured labour migration as abusive and cruel.
So, till now we know that colonization led to the bringing of the concept of indentured labour which forced workers to move to far off places in search of work. But the movement by people was not only due to the indentured contracts but also because they wanted to invest in the flourishing trade markets in order to earn a high fortune. So, who were they? They were the Indian Entrepreneurs.
Indian Entrepreneurs Abroad
As we have already read that food and crops were being grown by various countries to be exported, but this required capital. Large plantations could borrow it from banks and markets but what about the poor peasants?
These peasants used to borrow money from Indian bankers. Shikaripuri Shroffs and Nattukottai Chettiars were the important bankers or money lenders who used to provide money for export agriculture in Central and Southeast Asia. The funds provided by them were either their own or borrowed funds from European banks. They had a sophisticated system to transfer money over large distances and even developed indigenous forms of corporate organization. The Indian traders followed the European colonizers into Africa. Hyderabadi Sindhi traders went ahead of the European colonies. With the development of safe and comfortable passenger vessels, the Indian traders were able to establish their shops at busy ports worldwide through which they sell local and imported products to tourists and others.
So, now we know about colonialism, the flourishing of world trade under it, the adversities faced by the people and how the Indian traders and moneylenders began to benefit from it. Next we will talk about the Indian trade with respect to colonialism and world trade.
Indian Trade, Colonialism and the Global System
Historically, the fine Indian cotton was in huge demand in Europe but with the development of technology and growth of industries, British cotton manufacture began to expand. As British industrialists were facing tough competition from the Indian cotton so they forced the government to impose restrictions on the import of cotton in Britain. This resulted in the decline of the Indian cotton export.
In the beginning of the nineteenth century, British traders started exporting their products into various countries. This led to a tough competition for the Indian textiles or cotton producers as there were no taxes for the British producers. This led to a decline in the trade share of the Indian textile. For instance there was some 30 percent of share of Indian cotton in the trade market during 1800 which declined to 15 percent by 1815. By the 1870s this proportion dropped below 3 percent.
When India was experiencing decline in the export of furnished products it also saw the increase in export of raw materials. So, between 1812 and 1871 the share of raw cotton exports rose from 5 percent to 35 percent. Indigo used for dying cloth was another such product that was exported for many decades. The export of opium to china grew rapidly in 1820. Britain grew opium in India and exports it to China in order to earn income. This income was then used to import tea and other products from China.
The new thing which was observed in the nineteenth century was that the Britishers were importing products from India at low cost and exporting finished products at very high cost. Thus Britain had a trade surplus this means that its income was higher than its expenses. So Britain started using this surplus in order to cover its trade deficit with other countries. Britain’s trade surplus also helped in paying off the other expenses of Britain such as remittances, debts and pensions.
So, now we know how the world trade grew and took a new shape. Its association with forced labour and colonialization gave it a new shape. But soon this led to the war between various economies as now everyone wants to earn more and wants to have more share in the world trade. Such conflicts resulted in World War 1. So how does it impact the whole world? Let’s check this.
3. The Inter war Economy
The First World War (1914-18) was fought in Europe. But it impacted the whole world. The war created economic and political instability at a worldwide level. To understand this, we have to first know the facts of the war and then we will discuss its impacts.
The First World War was fought between two powers Allies and the central power. Allies were Britain, France and Russia. They were later joined by the US. On the other side were the central powers, Germany, Austria- Hungary and Ottoman Turkey. The war which was supposed to end within a few months lasted upto 4 years.
This war proved to be very destructive as it saw the use of machine guns, tanks, aircraft, chemical weapons etc. on a large scale. All these were the products of modern large scale industry. To fight the war, millions of soldiers were recruited from around the world and were taken to the actual place. The war took lives of around 9 million people and 20 million were injured. Such a large number of casualties were never seen in any of the war before.
Those who were killed or injured were generally the men of working age. These deaths reduced the workforce in Europe. As there were only a few members left in the families, household incomes declined after the war.
The war led to restructuring of industries into those that produce war related products and even the societies were also reorganized, Men went to battle and women stepped out to undertake jobs. As the war had increased expenditure so the Britain borrowed money from US banks as well as from the US public. This led to change in the position of US from debtor to creditor and also prosperity of the US citizens.
The war had generated a situation of economic crisis in various countries which had led to huge loss of men and money. So, now the question arises as to how did these economies recovered from it.
Post war Recovery
Post war economic recovery was not an easy task. Britain that was once a prosperous economy before the war was now in a situation of crisis. This was because when Britain was busy in war. The industries in Japan and India developed. So, after the war, Britain found it difficult to regain its control over the Indian market and also it was unable to compete with Japan in the international market. Moreover, Britain had taken huge amounts of loans from the US at very high rates of interest which resulted in the huge external debts on the economy.
During the war, the economy had experienced boom as there was an increase in demand, production and employment. But as the war came to an end, so did the boom period ended. So, now there was a huge population that was unemployed. Government had reduced its public expenditure after the war in order to cover up its losses. The situation during post war time was worse; you can guess it from the fact that in 1921, one in every five British workers was jobless.
Not only this, various agricultural economies also went into crisis. If we talk about wheat production, Eastern Europe was the major supplier of wheat in the world market. But during the war the supply was disrupted.
During this period, countries like Canada, America and Australia increased their wheat production. So, when the war was over, there was a huge supply of wheat from various parts of the world leading to fall in the price of wheat and rendering farmers into debts.
As some of the countries were bearing the brunt of the war and were trying hard to come out of the economic crisis. There were some countries that had recovered fast out of it. Here, we are talking about the US. So, what was the reason that led the US to come very fast out of this and how the country moved towards the mass production that led to the growth of the economy. Let’s discuss this
Rise of Mass Production and Consumption
So, in the US recovery was quicker. As we know that war helped in boosting the US economy therefore after a short period of difficulty the US economy resumed a strong growth in the early 1920s.
One of the reasons behind the growth of the US economy was the concept of mass production in the 1920s.
It was first used by a famous car manufacturer Henry Ford. He took this idea from the assembly line of a Chicago slaughterhouse where the slaughtered animals were picked apart by butchers as they came down a conveyor belt. So he applied this concept of assembly line to his new car plant in Detroit. His view was that the assembly line method will allow quicker and cheaper way of producing vehicles.
The concept of the assembly line would allow the worker to work in a set limit of time that would make the production process faster and allow the worker to gain expertise in a particular task. As it was assumed the production increased, Ford’s cars came off the line at a gap of three minutes. But the problem arose when workers refused to work as this was impossible for them to match the pace of the work. To encourage them Ford doubled their daily wage. Though it was a risky decision made by him that could lead him to the losses but it proved to be a profitable venture for him. He forced his workers to work hard. This resulted in high production which in return cut down its cost of production and Ford was able to earn huge profits.
The industrial practice used by Ford became an inspiration for other production houses in the US and Europe in the 1920s. Finally, mass production led to lowering down of the cost of production. Not only this, due to higher wages the living standard of the workers also improved. They could even buy cars now. This led to more sales of cars and so the car production in the US increased from 2 million in 1919 to more than 5 million in 1929. Similarly there was an increase in the demand of refrigerators, washing machines, radios, gramophone players by the hire purchase system. Hire purchase system means when you buy a product on weekly or monthly installments.
The increase in demand for houses and consumer goods brought the boom in the economy and led to the prosperity of the US. The demand and investment in housing and consumer goods created more chances of employment and income. So, in 1923 the US grabbed the largest share of overseas lending.
Though US export triggered the European recovery and world trade and income growth for next few years, it could not last longer. By 1929 the world was facing the economic depression that made a greater impact on the lives of the people.
So what was the great depression? Let’s discuss about it
The Great Depression
The great depression was a situation of economic crisis that was caused due to the crash of the stock market in October 1929. So, the great depression lasted up to the mid 1930s. During this period, different parts of the world faced decline in production, employment, income and trade. The exact time and impact of the depression varied across the countries. But the most affected were the agricultural regions and communities. It was so because of the fall in the prices of the food grains that prevailed for a long period.
The depression was an outcome of several factors. As we have read that agricultural overproduction was a main reason that led to the fall in the price of food grains, so in order to overcome the problem, the farmers began producing more to cover up their losses. But this proved useless for them as it led to the further reduction of prices of agricultural products. The second reason was the lack of interest in lending loans by the US. In the mid 1920s US was lending loans easily to the overseas borrowers but with the beginning of crisis the US investors became more cautious in lending loans. This can be understood with the fact that in the first half of 1928, US overseas loans amounted to over 1billion dollar and a year later it was only a quarter of it. So, the withdrawal of US loans created a huge problem for those countries that were dependent on the US for the loans. In Europe many major banks failed and currencies like pound and sterling collapsed. When the US tried to safeguard its economy by increasing the import duty, it led the world trade into a more troublesome situation.
Just like other industrial countries, the US was also badly affected by the depression. As the prices of every commodity were falling and the chances of depression were getting stronger therefore the banks stopped lending even the domestic loans. They stopped following the policy of easy loans. All this led to the following:
- Farms were not being able to sell their crops
- Households were ruined
- Businesses had collapsed.
As it was becoming difficult for the local residents to pay off their debts so they started selling their houses, cars and other durables in order to pay off the loans. The days of prosperity were no where the only thing left was the depression and its aftereffects. People were forced to go far off distances in order to search for work. As the banks were not able to recover their loans so finally the banking system of the US collapsed. By 1933 over 4000 banks had closed and between 1929-11932 around 110,000 companies shut down.
The great depression was not affecting only European nations but it had badly affected India too. Let’s have a look at this
India and the Great Depression
When we talk about the impact of the depression on India we can see how the economies of different countries have got integrated by the early twentieth century. So, if one part of the world was getting affected by the depression, the other part too was facing the same kind of challenge.
During the nineteenth century, India as a part of British colony was an exporter of agricultural goods and an importer of manufacturers. The depression led to the crash of the market and it severely affected India. India’s exports/imports reduced drastically from 1928-1934. As the prices of products in the international market fall, the prices in India also came down. The situation was so bad that the prices of wheat fell by 50 percent between 1928-1934.
The ones who suffered the most were the peasants and not the urban residents. It was so because the prices of the agricultural products had drastically reduced so there was no income for the peasants. On the other hand the British government had not made any reduction in the revenue. So, paying taxes without any income was not an easy task.
For example let’s consider the case of jute farmers. These farmers used to grow jute which was then processed in the factories and exported in the form of gunny bags. But as the exports for gunny bags collapsed, the price of jute also crashed more than 60%. Some of the peasants had borrowed to increase the output of the jute in order to earn more. But as the prices fell, they were not able to earn any income and soon fell into the vicious circle of loans.
The condition of peasants across India was not good. They had to rely upon their savings or had to mortgage lands and sell their jewellery or precious metals in order to meet their expenses. In these depression years, India came up as an exporter of precious metals especially gold. John Maynard Keynes, a famous economist, believed that Indian gold exports may help the world to recover from the depression. Britain certainly gets some help in this but the plight of the Indian peasants didn’t change. The Indians from rural areas were suffering badly from the depression. At this time Mahatma Gandhi launched the civil disobedience movement to help them.
The depression as said earlier proved less grim for the urban Indians as they were the Zamindars, salaried employees who received fixed income in the form of salaries or rents. They gained better position as the prices of each commodity had reduced. Industrial investments also grew as the government provided tariff protection to industries because of the pressure inserted on them by the nationalists.
So, now we know how businesses grew in the world market and how the situation changed due to the great depression but this didn’t remain for long. When the economies came out of this, they tried to rebuild themselves. So, how did this happen? Let’s see this.
4. Rebuilding a World Economy: The Post-war Era
As we all know that World War 1 proved very disastrous for the whole world. While the world was trying to recover from the aftermath of WW1, the Second World War broke after the gap of two decades of WW1. The Second World War (1939-1945) was fought between two powers, the Axis (mainly Nazi Germany, Japan and Italy) and the Allies (Britain, France, the Soviet Union and the US). This lasted for six years on many fronts, in many places, over land, on sea, in the air.
Once again the world was turned towards death and destruction. This time at least 60 million people or about 3 percent of the world’s 1939 population are believed to have been killed, directly or indirectly as a result of the war. Large number of people was injured.
This time, the difference was that the deaths that took place were that of civilians and not the fighters in the battlefields. Vast parts of Europe and Asia were destroyed by aerial bombardment or relentless artillery attacks. The war proved to be the biggest economic setback for many countries.
After this war two countries rose to their power. They were the US that emerged as the dominant economic, political and military power in the western world and the other was the Soviet Union. Soviet Union had made huge sacrifices to defeat Nazi Germany and had modified itself from agricultural economy to a world power during the very years when the capitalist world was trapped in the Great depression.
So, when the world economies found themselves again trapped in the depression, what steps did they took to come out of it? Let’s discuss.
Post-war Settlement and the Bretton woods institutions
The economists and politicians drew two conclusions after the war was over. The first was that for the sustainment of the industrial society mass consumption is equally important as the mass production. But here the problem was that for mass consumption, there was a requirement of appropriate and stable incomes. For this, there was a need for stable employment.
But again the problem was that markets alone could not guarantee full employment. Consequently governments would have to step in to minimize irregularity of price, output and employment. Only the government could restore economic stability.
The second was related to the country’s economic links with other countries. If the country wants to achieve full employment, it could only be done if the government controls the flow of goods, capital and labour.
So, in short we can say that the main agenda of the postwar international economic system was to maintain economic stability and full employment in the industrial world. So, a framework was designed for this at the United Nations Monetary and Financial Conference held in July 1944 at Bretton Woods in New Hampshire, USA.
The Bretton woods conference resulted into the following:
- Establishment of the International Monetary Fund (IMF) to deal with external surplus and deficit of its member nations.
- The second was the formation of the international bank for reconstruction and development also known as the World Bank to finance postwar reconstruction.
The financial operations of both the IMF and the World Bank began in 1947. Decision making process is handled by the western industrial powers. US possessed the right of veto over important decisions of IMF and World Bank.
The international monetary system links national currencies and monetary systems. The Bretton Woods system is based on fixed exchange rates. In this system national currencies are pegged to the dollar at a fixed rate.
The dollar here has a fixed price of $35 per ounce of gold.
So, now we know that IMF and World Bank were created in order to preserve the economic stability and full employment. Now we will see what economies experienced after the war.
The Early Post-war Years
The Bretton Woods system brought an era of growth of trade and income for the western industrial nations and Japan. It was an era of growth like never before. So, from 1950-1970 world trade grew annually at over 8% and incomes at nearly 5%. The growth in this time period was mostly stable. Like for example the unemployment rate for this period averaged less than 5% in most industrial countries.
During these decades, the world saw the invention of various new technologies and growth of enterprises. As developing countries wanted to match with the pace of the advanced countries, they made huge investments of capital and started importing plants and equipment featuring modern technology.
Though this period is remembered for growth of business and technology across the globe it is also remembered for the decolonization and independence of various nations. Let’s have a look at this
Decolonisation and Independence
Though the Second World War had come to an end still there were many countries that were under the European colonial rule. So, in the coming two decades most of the African and Asian colonies set themselves free from colonialism. But, these countries were suffering with the problems like poverty and lack of resources. They had turned into non developed economies because of the plunder they had born due to the colonial rule.
The IMF and the World Bank were formed to meet the financial demands of the industrial countries. They were still not equipped to tackle the problems like poverty and lack of development in the underdeveloped countries. During this period Europe and Japan became self sufficient, so now they were not in the need of IMF or World Bank’s help. Thus from the late 1950s the Bretton Woods institution shifted its attention towards the developing countries.
Though various colonies had acquired independence still they were under indirect control of various European powers. It was so because they took guidance and help from the rich dominating economies which in return got cheap access to their valuable natural resources. US serve the best example of it as it managed to exploit developing countries’ natural resources at very cheap rates.
As most of the developing economies were not growing as fast as the western economies did during the 1950s and 1960s. So, they organized themselves into G-77 nations and put a demand for a new international economic order (NIEO). By NIEO their main aim was to have a real control over their natural resources, fair prices for raw materials and better access for their manufactured goods in developed countries’ markets.
So, now we know that western world was developing day by day and the underdeveloped countries were making various attempts to bring growth and developments in their countries. Now we will discuss the concept of Globalisation and the end of the Bretton Woods.
End of Bretton Woods and the Beginning of ‘Globalisation’
Post war world had seen years of stable and rapid growth but it was not as good as it seemed. From the 1960s the US began to face the weakened finances and competition issues. It was because of the rise in cost of its overseas involvements. The US dollar failed in maintaining its value in relation to gold. This finally led to the collapse of the system of fixed exchange rates and the introduction of a system of floating exchange rates.
Not only this, the international financial system also changed in the mid 1970s. Previously, the developing countries could take loans from the international institutions but now they were forced to take loans from Western commercial banks and private lenders. All this led to the rise of debt crises in the developing countries. Regions like Africa and Latin America were now facing problems like low income and increased poverty.
From the 1970s till the 1990s, Industrial world also faced the problem of unemployment. It was so because MNCs began shifting their production operations to low wage Asian countries.
Though China had cut itself from the world economy after its independence in 1949, due to the new economic policies in China and the collapse of the Soviet Union and Soviet style communism in Eastern Europe brought the countries again into the fold of the world economy.
As the wage rate was low in China it became a popular destination for various foreign MNCs. The companies started shifting their production lines in China in order to cut their cost.
The shifting of industries to low wage countries have increased world trade and capital flows. In the past two decades, countries like India, China and Brazil have undergone rapid economic transformation.
Question and Answer
Q1- Give two examples of different types of global exchanges which took place before the seventeenth century, choosing one example from Asia and one from the Americas?
A1- The two examples of different types of global exchanges which took place before the seventeenth century are as follows:
- Food articles like spaghetti or noodles are believed to have been taken to the west from China. There is a myth that pasta was taken to Sicily by Arab traders in the fifth century. Other food items like potatoes, soya, groundnuts, maize, tomatoes etc were transported to Europe from America.
- Things like Chinese silk, pottery, Indian textiles and spices that were carried to Africa and Europe in exchange of gold and silver.
Q2- Explain how the global transfer of disease in the pre modern world helped in the colonization of the Americas?
A2- It is said that during the colonization of America by Portuguese and Spanish, weapons were not used to get control over the area. It was due to the germs of smallpox which were carried by the invaders to America. Americans had lived a life of isolation for long so they were not immune to the germs of smallpox. This led to the death of large number of people in America, clearing the way for its invaders.
Q3- Write a note to explain the effects of the following:
- The British government’s decision to abolish the Corn Laws.
- The coming of rinderpest to Africa.
- The death of men of working age in Europe because of the world war.
- The Great Depression on the Indian Economy.
- The decision of MNCs to relocate production to Asian countries.
- Due to the increase in the population of Britain during eighteenth century, the demand for the food grains rose. As there was Corn Law prevailing in the country that banned the import of corn into the country, the price of the food grains rose. All this led to a situation of difficulty for the residents. Soon, the British government was forced to abolish the law in order to fill the shortfall of crop. This led to availability of food grains in the country at nominal prices.
- Rinderpest is a cattle plague. In Africa the population was very less and most of them were dependent on their land and cattle for their livelihoods. So, when Africa was invaded by the Europeans none of the Africans were ready to work for daily wages. Rinderpest entered Africa with the Asian cattle that were taken there to feed the Italians. This causes the death of almost 90% of African cattle. As the residents were not left with any option to earn livelihood they were forced by the situation to work for wages in the plantations and mines of Europeans.
- World War 1 proved very disastrous. Most of the working age men died in the battlefields resulting in the lack of availability of manpower for Europe. So, because men were in the battlefields, the women stepped out to undertake jobs in order to support their families.
- The great depression laid a huge impact on the Indian economy. It can be easily understood from the fact that the import and export from India halved between 1928-1934. Prices of food grains fall leading to the miserable life for peasants. They were forced to use their savings, mortgage lands and sell their jewellery in order to meet their expenses.
- The low wage rate prevailing in various countries like China or some other Asian countries led to the relocation of MNCs to these countries. It was done in order to cut down the cost of production. This led to the economic transformation of countries like India, China and Brazil.
Q4- Give two examples from history to show the impact of technology on food availability?
A4- The impact of technology on food availability can be seen through the following instances:
- With the coming of faster railways, lighter wagons and larger ships, transport of food became cheaper and quicker to far off places.
- The manufacture of ships with refrigerators enabled us to transport perishable foods like meat to long distances in large quantities and at lower prices.
All this enabled people from different group of societies to purchase food items at low prices.
Q 5- What is meant by the Bretton Woods Agreement?
A 5- The Bretton Woods was a framework designed at the United Nations Monetary and Financial Conference held in July 1944 at Bretton Woods in New Hampshire, USA. It resulted into the formation of the International Monetary Fund to deal with external surpluses and deficits of its member nations and the World Bank to finance post war reconstruction.