What is Globalisation or The making of Global World
The
meaning of 'Globalisation' is a process in which the economic system emerged
since the last 50 years or so. This includes the long history of trade,
migration of people in search of work, the movement of capitals and many lot of
things.
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, cowries (the Hindi cowdi 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.
The
various countries of the world are interconnected through trade and through
exchange of thoughts and cultures. The interconnectedness has increased
dramatically in recent times but the world was also interconnected even during
the days of Indus Valley Civilisation.
Silk
Routes Link the World
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.
Food
Travels: Spaghetti and Potato
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.
Conquest,
Disease and Trade
The
European sailors discovered the sea route to Asia 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 from America 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.
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 in America and
could dramatTill 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 and America?s rising importance; the centre of the world trade shifted to
Europe.
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
(a)
Flow of trade
(b)
Flow of labor
(c)
Flow of capital
A
World Economy Takes 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.
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
of Technology
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.
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.
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:
(a)
Heavy taxes were imposed which could only be paid by working on plantations and
in mines.
(b)
Inheritance laws were changed and only one member of the family was allowed to
inherit land. This forced others into the labour market.
(c)
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 of Tamil 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.
Indian
Trade, Colonialism and the 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.
The
Inter-war Economy
The
First World War 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.
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.
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
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
and the 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
Second World War 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 Second World War was influenced by two important factors:
(a)
The emergence of the US as the dominant economic, political and military power
in the west.
(b)
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:
(a)
Preservation of economic stability and full employment in the industrial world.
(b)
Controlling the influence of the outer world on flow of capital, goods and
labour.
Bretton
Woods Institutions
United
Nations Monetary and Financial Conference was held in July 1944 at Bretton
Woods in New Hampshire, USA. The Bretton Woods 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 the World Bank. The IMF and
World Bank are often referred to as Bretton Woods Institutions. The post-war
economic system is also referred to as the Bretton Woods System.
The
IMF and World 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
Bretton Woods 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.
The
Early Post-war Years
The
Bretton Woods System started an era of unprecedented economic growth in the
Western 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 Second World War, 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
Bretton Woods 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 and World Bank. From the late 1950s, the
Bretton Woods 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 Globalisation
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.
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.
