o The world changed profoundly in the nineteenth

century.
Globalisation
o Economists identify three types of movement or ‘flows’
Refers to an economic system associated within international economic exchanges.

MAKING OF
with the free movement of goods, technology,
ideas and people across the globe.

Around 3000 BCE coastal trade linked the Indus o The first is the flow of trade which in the 19th century
valley civilisations with present-day West Asia. referred largely to trade in goods (e.g. cloth or wheat).

Cowries or cowdi or seashells, used as a form of

currency. GLOBAL WORLD o The second is the flow of labour – the migration of
people in search of employment.

o The third is the movement of capital for short-term

or long-term investments over long distances
1. THE PRE- o All 3 flows were closely interwoven and affected
Silk Routes Link the World MODERN WORLD peoples’ lives more deeply now than ever before.
The silk routes are a good example of vibrant
pre-modern trade and cultural links between
distant parts of the world A World Economy Takes Shape
The name ‘silk routes’ points to the importance o In 19th century Britain, self-sufficiency in food meant
of West-bound Chinese silk cargoes along this lower living standards and social conflict.
route.
o In the late 18th century, growth in the population
There are several silk routes, over land and by increased the demand for food grains in Britain.
sea, knitting together vast regions of Asia, and
linking Asia with Europe and northern Africa. o Under pressure from landed groups, the government
Conquest, Disease and Trade also restricted the import of corn. The laws allowing the
government to do this were commonly known as the
Precious metals from mines of Peru and Mexico ‘Corn Laws’
enhanced European trade with Asia.
Food Travels: Spaghetti and Potato o Unhappy with high food prices, Industrialists and
Many expeditions set off in search of El Dorado- urban dwellers forced the abolition of the Corn Laws.
Noodles travelled west from China to become the fabled city of gold.
spaghetti.
The Spanish conquerors used the germs of o After the Corn Laws were scrapped Imported food in
Arab traders took pasta to 5th century Sicily, an smallpox in the conquest of America. Britain became cheaper than it could be produced within
island now in Italy the country

Common foods such as potatoes, soya, o From the mid-19th century, faster industrial growth in
groundnuts, maize, tomatoes, chillies, sweet Britain also led to higher incomes, and therefore more
potatoes were only introduced in Europe and Indian Trade, Colonialism food imports.
Asia after Christopher Columbus discovered
Americas. and the Global System o Around the world – in Eastern Europe, Russia, America
o Historically, fine cottons produced in India were and Australia – lands were cleared and food production
exported to Europe. expanded to meet the British demand.

o With industrialisation, British cotton manufacture 2. THE NINETEENTH o Nearly 50 million people emigrated from Europe to
America and Australia in the nineteenth century.
began to expand & import of Indian cottons restricted.
CENTURY
o Tariffs were imposed on cloth imports into Britain.
Consequently, the inflow of fine Indian cotton began to (1815-1914)
decline. Role of Technology
o Exports from India, we see a steady decline of the o The railways, steamships, the telegraph were
share of cotton textiles from some 30 per cent around important inventions that transformed nineteenth-
1800 to 15 per cent by 1815. century world.
o By the 1870s this proportion had dropped to below 3 o After the introduction of new technology, namely,
per cent. refrigerated ships which enabled the transport of
perishable foods over long distances.

o Now animals were slaughtered for food at the starting

point – in America, Australia or New Zealand – and then
transported to Europe as frozen meat. This reduced
shipping costs and lowered meat prices in Europe.
Indian Entrepreneurs Abroad
o Indian entrepreneurs, some bankers like Nattukottai
and Chettiars financed export of agriculture to Central Indentured Labour Migration from India Late nineteenth-century Colonialism Rinderpest, or the Cattle Plague
and South-East Asia.
o Indentured Labour was a bonded labourer under o Trade flourished and markets expanded in the late o Rinderpest is a fast spreading cattle plague which hit
o Indian traders and moneylenders also followed contract to work for an employer for a specific amount of 19th century.
European colonisers into Africa. Africa in the 1890s.
time, to pay off his passage to a new country or home.
o European conquests of Asia and Africa as colonies. o It was carried by infected cattle imported from British
o Hyderabadi Sindhi traders, however, ventured beyond o In the nineteenth century, thousands of Indian and
European colonies. Asia to feed the Italian soldiers invading Eritrea in East
Chinese labourers went to work on plantations, in mines, o Belgium and Germany became new colonial powers. Africa.
and in road and railway construction projects around the
o Industrial Revolution in England changed the balance world. o The US became a colonial power in the late 1890s by
of trade between England and India. o Entering Africa in the east, Rinderpest moved west
taking over some colonies earlier held by Spain. ‘like forest fire’, reaching Africa’s Atlantic coast in 1892. It
o Recruitment was done by agents by providing false reached the Cape (Africa’s southernmost tip) five years
o Indian handicraft and agriculture were destroyed and information about the work and location. o There was a darker side to this process. In many parts
Britain enjoyed a trade surplus with India. later. Along the way Rinderpest killed 90 % of the cattle.
of the world, the expansion of trade and a closer
o On arrival at the plantations, labourers found living relationship with the world economy also meant a loss of o The colonial governments now strengthen their power
o Their exports increased and imports decreased. and working conditions harsh. It was abolished in 1921. freedoms and livelihoods. and to force Africans into the labour market.
 o The Second World War broke out two decades after
the end of the First World War and once again, it led to

MAKING OF
destruction.

o Fought between the Axis powers (mainly Nazi Germany,

Japan and Italy) and the Allies (Britain, France, the Soviet
Union and the US.
o The First World War (1914-18) was mainly fought in
Europe. But its impact was felt around the world.

o On the one side were the Allies – Britain, France and

GLOBAL WORLD o Once again death and destruction was enormous. At
least 60 million people, or about 3 % of the world’s 1939
population, are believed to have been killed, directly or
Russia (later joined by the US); and on the opposite side indirectly, as a result of the war.
were the Central Powers – Germany, Austria-Hungary and
Ottoman Turkey. 3. The Inter- o Two crucial influences shaped post-war reconstruction

o The First World War was the first modern industrial war.
war Economy 1. The first was the US’s emergence as the dominant
It saw the use of machine guns, tanks, aircraft, chemical economic, political and military power in the Western
weapons, etc. on a massive scale. world.

o The scale of death and destruction – 9 million dead and 2. The second was the dominance of the Soviet Union.
20 million injured – was unthinkable before the industrial
age, without the use of industrial arms.

o The war transformed the US from being an international Post-war Settlement and the
debtor to an international creditor.
Bretton Woods Institutions
o To ensure a stable economy a framework was agreed
upon at the United Nations Monetary and Financial
Conference held at Bretton Woods in New Hampshire,USA.
India and the Great Depression o It established:-

o India was also affected by the Great Depression. 1. International Monetary Fund (IMF) to deal with external
surpluses and deficits of its member nations
o Indian exports and imports declined extensively, prices
Post-war Recovery fell. 2. The International Bank for Reconstruction and
Development (known as the World Bank) was set up to
o Bengal jute growers suffered the most. finance post-war reconstruction.
o Post-war economic recovery proved difficult.
o Large scale migration took place from villages to towns o The IMF and the World Bank are referred to as the
o Britain faced a prolonged crisis. and cities. Bretton Woods institutions or Bretton Woods twins.
o While Britain was preoccupied with war, industries had
developed in India and Japan industries had developed in o The IMF and the World Bank commenced financial
India and Japan. operations in 1947.

o The war had led to an economic boom, that is, to a large 4. Rebuilding a o Bretton Woods System was based on a fixed exchange
increase in demand, production and employment. When the rate.
war boom ended, production contracted and World Economy:
unemployment increased. o National currencies were pegged to the American
The Post-war Era dollar at a fixed rate.

o Decision-making in these institutions is controlled by

the Western industrial powers largely by the US.

End of Bretton Woods and the

The Early Post-war Years
Beginning of ‘Globalisation’
o World trade grew annually at over 8 per cent between
o From the 1960s the rising costs of its overseas 1950 and 1970 and incomes at nearly 5 per cent.
Rise of Mass Production and involvements weakened the US’s finances and competitive
strength. o For much of this period the unemployment rate, for
Consumption example, averaged less than 5 per cent in most industrial
o The US dollar now no longer commanded confidence as countries.
o In the US, war recovery was quicker. the world’s principal currency.
o ‘Assembly line’ method introduced by Henry Ford soon o These decades also saw the worldwide spread of
o It could not maintain its value in relation to gold.
spread to the US and were also widely copied in Europe in technology and enterprise.
the 1920s. o This eventually led to the collapse of the system of fixed
exchange rates and the introduction of a system of floating
o Mass production lowered the costs and prices of exchange rates.
engineered goods.
Decolonisation and Independence
o There was a housing and consumer boom in the 1920s, o The industrial world was also hit by unemployment that
which ultimately led to the Great Depression of 1929. began rising from the mid-1970s and remained high until o After Second World War, Many countries in Asia and
the early 1990s. Africa became independent nations.
o Markets crashed in 1929 and led to the failure of banks
and the crisis affected other countries. o From the late 1970s MNCs also began to shift production
operations to low-wage Asian countries. o Group of 77 or G-77 was organised by developing
o By 1933, over 4000 banks closed and between 1929-32 countries to demand a new international economic order
about 110,000 companies collapsed. o Wages were relatively low in countries like China. Thus (NIEO) which would give these countries real control over
they became attractive destinations for investment by their national resources, raw materials, manufactured
foreign MNCs competing to capture world market goods in their markets.

o MNCs or multinational companies were established in

the 1950s and 1960s and operated in several countries.