World Economy from 1850 Until Today Essay
Analyze the development of the world economy from 1850 until present day - World Economy from 1850 Until Today Essay introduction. Constantly changing, the world economy will never be the same as it was a year ago, a month ago, or even a day ago. It might repeat itself in a similar manner or proceed in cycles but because of globalization it never stagnates and there is endless activity. Two hundred years in the past, our society and economy was radically different and went through multiple phases to reach where we are today. Though the boundaries of these phases cannot be specifically defined, the world economy from 1850 until present day can be roughly split up into three different stages.
The first stage being British dominance, the second being American domination, and lastly globalization from 1975 onwards. Britain was the first country to ever experience what history has sometimes called the most important development in economics and one of the most decisive revolutions ever: the Industrial Revolution. An amazing jump forward in the story of civilization, the Industrial Revolution has formed the world, as we know it today for better or for worse. To be able to achieve such greatness and climb to the top of the economic ladder, Britain had to have the talent, the desire, and the necessary requirements.
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A large labor force, abundant raw materials, food to sustain its population, capital to fund the revolution, reliable transport, and receptive markets were all necessary for this revolution to take place. Massive industrial cities like Manchester and Liverpool needed a large labor force to work in their factories whether cotton or textile. Due to agricultural advances with techniques such as alternating grains and replacing farmers with more productive and efficient machines, Britain quadrupled its food production thus inducing a rapid growth in population.
Along with these agricultural advances which entailed a more stable food supply, the vaccination was created also increasing the number of people living in Britain from about six million to roughly 20 million. The new farming techniques decreased the need for farmers who then found themselves unemployed and desperate to find a source of income in the rapidly booming economy. Consequently, their only choice was to join the industrial work force, the proletariats. More and more people moved from rural areas to urban cities to find work, and in 1851 for the first time in history, more people lived in urban settings than in rural settings.
It was not until the 1800’s that economies developed from mainly agricultural economies to more industrialized economies, with Britain as the pioneer of this revolution. With abundant raw materials such as iron and coal, Britain disposed of an advantage and was not hesitant to exploit it. The coal production rose from 110. 4 million tons in 1870 to 225. 2 million tons in 1890 and the steel production rose from 0. 7 million tons in 1870 to 4. 9 million tons in 1890. Iron was used to build industrial machines, railways, and bridges, and coal was used to power steam-driven engines.
However, the most crucial resource for Britain was cotton. Imported from their slave plantations in America and India, its boom resulted mainly from mechanization. Even through restrictions on imported cotton, numerous machines were created which eventually replaced hand weavers. Cotton weavers could no longer work at home and were forced to work in factories, as they could not compete with the efficiency of machines such as the cotton gin or the spinning Jenny. Thanks to another ingenious invention, the steam engine, the Industrial Revolution blossomed.
Used to provide new, more reliable means of transportation, the railway era was born. Not only a symbol of the Industrial age, the railway system could transport goods more easily than previous methods. In addition to railways, steam powered boats were also much more reliable, which allowed Britain to expand their markets. Producing abundant low-cost goods, Britain opened new mass markets making goods more affordable. More and more people started investing in industry producing a newfound wealth and a powerful new middle class.
This new rich middle class contrasted with the poor proletariat thus creating class divisions. However, despite this separation, the Industrial Revolution was blooming. Yet comparing the industrial revolution to a blossoming flower is almost grotesque and inhumane. The effects of the Industrial Revolution on people’s lives, namely the proletariat, were appalling. Living in such repulsive conditions the proletariat greatly suffered throughout the revolution. Workers were forced to move to the city if they wanted to find jobs and had to live in crammed shacks.
No longer working in their homes, the functioning of proletariat families was disrupted; mothers, fathers, and sometimes even children worked long hours and obviously were not allowed to decide when they worked. The working class was paid very little and worked very hard at their same repetitive jobs, they we re the exploited class. Conditions in the factories were also terrible and extremely dangerous, many people died from machine related accidents or diseases contracted from the factories they worked in, such as white lung. Streets were breeding grounds for diseases because of the pilling garbage and the lack of sewage draining.
Still, the Industrial Revolution continued its path to changing the economy and society of today. The Industrial Revolution created a capitalistic and consumerist society; one that is always in need for new markets and one that incites consumers to buy enormous amounts of products they did not even think they needed. Some even go to argue that investors and capitalists could not stop in Britain; they needed more markets and more raw materials. Indeed Europe colonized Africa and Asia only after the Industrial Revolution and European industries got a lot of raw materials from their colonies.
Reliable transportation and military technology from the Industrial Revolution made colonization a very easy task, thus leading to Imperialism. The ideas of Karl Marx, the founder of communism and an opponent of industrialization, blamed the capitalist society for imperialism; “imperialism is the highest form of capitalism”. Marx believed in a cycle, which would always lead back to a communist revolution because of the tension between the proletariat and the ruling bourgeoisie class. He wanted a “dictatorship of the proletariat” in which case the class divisions would disappear and everyone would be equal.
Nonetheless, Karl Marx was not the only influential figure who had his own opinions on how a country and its economy should function. Adam Smith, a philosopher of modern capitalism, had very different thoughts from Marx. His basic ideas revolved around minimum state intervention and maximum free trade. Smith was a free market capitalist and visualized a country where the government cuts it’s spending and lets the economy recover, grow, or fail. In the middle of these two poles lie the theories of John Maynard Keynes. According to him the government should invest money (unlike free market capitalists) so as to create more employment.
If people have an income they are more likely to spend money and consume, hence leading to the expansion and progress of the economy. Britain was the first country to industrialize and was far ahead of other countries though some did follow Britain’s lead. Yearning for it’s industrial superiority, governments in other countries reproduced the types of industries, technologies, and transportation Britain possessed. The first to catch up to Britain was Belgium in the 1830’s followed by France, Germany and most other European countries.
Although Britain and then the rest of Europe were the first to industrialize a new industrial giant, North America, was surpassing them. Having abundant natural resources and unlimited industry potential, North America rapidly became the world’s industrial leader. Rich supplies in coal, iron-ore, and oil and the spread of railways massively contributed to the rise to economic power of North America. The south being mainly agrarian gave way to the industrial ways of the North after the civil war leading to mass national industrialization.
Also North America’s population quickly increased, supplying a large workforce and many consumers. To protect the consumer society and ensure that American goods were being bought, the government imposed tariffs on imported material. Another factor that contributed to America’s economic growth were the new ways of producing: Fordism and Taylorism, introduced by Henry Ford and F. W. Taylor. With a moving production line, and Taylor’s concept of ‘time and motion’, American industries were becoming increasingly efficient.
Still it was not only the resources the land offered but also the combination of the resources and the desire, aggressiveness, competiveness, and effort Americans put into the industry that created this giant. The American dream and the spirit of enterprise pushed Americans and even foreigners to strive to be their best and work hard to achieve the newfound wealth, like for example Andrew Carnegie. Production in America soared, exceeding everyone’s expectations, and the ‘Roaring Twenties’ as they became known, commenced. The laissez faire government system was working.
New consumerist items such as radios, machines, refrigerators, motor-cycles, and especially cars, were available even to some well-off workers due to an increase in profit and therefore in their wages. Workers were able to buy luxury products also because of credits, allowing them to pay the item’s price over a period of time. In addition, the real catalyst of the consumerist economy was the motorcar industry; five out of six cars worldwide were made in America. This industrial nation produced and exported more than any other countries and in 1929 accounted for 34. % of total world production compared to Britain, 10. 4%, and Germany, 10. 3%. However, in 1929, America’s growth and success was suspended as a consequence of the Wall Street Crash. Banks and businesses were bankrupt, there was a considerable amount of unemployment, a fall in trade, a lack of demand for goods all caused by the lack of confidence in the future of this seemingly invincible country’s economy. Just as Marx predicted, markets became saturated and there was a cease of demand for industrial goods, it was a crises of overproduction.
Though Marx was wrong about one of his ideas; when he anticipated that a communist revolution would follow. Instead, America’s liberator was World War II. After the Wall Street Crash, which was only a symptom of the Great Depression, Franklin D. Roosevelt was elected president in 1933. The Great Depression was caused by domestic over-production; industries produced too much for the home market to be able to absorb so as not all the goods were being bought, manufacturers produced less.
This caused them to lay off many workers and seeing that there was no unemployment benefit, these men bought less, only aggravating the desperate situation. There was a failing demand for exports because the tariffs imposed by America on foreign products diminished the profit of overseas countries thus making American goods unaffordable to Europe. Lastly, speculation (the buying of shares in companies to get the dividend or make a quick profit) also worsened the circumstances because it encouraged rash moves, which ruined millions of investors.
In the depth of the Great Depression, Franklin D. Roosevelt quickly implemented the New Deal, relief, recovery, and reform programs to pull USA out of its drowning economy. The government temporarily took over the banks ensuring that investors would not loose their money if there was another crisis. This restored confidence and intensified the flow of money back into the banks. The Farmers Relief Act and the Agricultural Adjustment Administration helped farmers and almost doubled their income and the Civilian Conservation Corps provided jobs for young men in the countryside.
Moreover, one of the most significant programs was the National Industrial Recovery Act whose aim was to get people back to work permanently to stimulate the industry by building useful works. Similar to the National Industrial Recovery Act was the Works Progress Administration that also funded a diversity of projects (schools, hospitals, roads etc). In addition to these programs, working conditions improved with the instauration of a minimum wage and maximum working hours and labor unions became legal (helping to improve the working conditions).
FDR believed that government spending would help get his country’s economy back on its feet and a great deal was achieved with the New Deal; the government directly got involved in people’s lives with a goal to help them. Though the New Deal helped, the real catalyst was World War II. The USA remained officially neutral yet they supplied munitions to the allied forces, namely the UK. Accordingly, America’s military industry boomed and after the attack of Pearl Harbor, the USA declared war on Japan and Germany resulting in as many as 16 million men drafted or volunteering for military service.
The war effort also created 7 million extra jobs and by the end of 1942 there was almost full employment in America. As 1945 marked the end of the war, America was relatively untouched whereas Europe was completely destroyed and weak. European economies were suffering while America came out of the war stronger than ever, victorious. America’s economy was powerful and ready to expand even further, though this was not possible for them if Europe was still suffering from the effects of the war. In consequence, the IMF (international monetary fund) was created to help all the declining economies.
Its aim was to stabilize exchange rates, facilitate international trade, and promote high employment by making financial resources available to member countries. This organization along with the World Bank (for assisting developing countries) was beneficial to the countries in need and particularly to America’s economy because it meant that they now could trade with European countries, transforming Europe into an enormous receptive consumerist market. US trade escalated extremely quickly enhancing their stronghold on the world economy even more and making the US dollar the main currency of trade and especially a liable currency.
In 1947, the GATT agreements, regulating international trade with a purpose of reducing tariffs and other trade barriers, and the Marshall plan, giving monetary support (13 billion) to assist Europe in it’s recovery, also promoted international trade. America was then able to open new mass markets outside of the country’s border, favorable to their own economy once again. Despite the fact that America’s economy was thriving and prosperous, the USA was in a power struggle with the Soviet Union after World War II, causing the Cold War.
Both sides developed powerful nuclear arsenals and the Soviet Union and the USA engaged in Arms Race and a Space Race. On one hand this was good for industry because it meant that many people were getting employed to work in the military and space technology sectors, but on the other hand this signified that government money was not being spent on infrastructure or for social purposes. As a result, a lot of jobs were relying on the important military industry complex and many of the goods that the varied industries produced relied on cheap oil (to make them and to run them) for example the American car monopoly.
Not only America but also Western Europe relied heavily on cheap oil and as American oil was running dry, they were forced to import it from overseas, specifically from the Middle East. Inevitably, America became dependant on foreign oil. Though the consumerist way of the American economy and society was still functioning, in 1978 there was a greater buying power for ordinary people than in 1958, the world was catching up to America and its dominance of the world economy was shrinking.
Depending heavily on oil, America found itself in difficulty when OPEC (Organization of the Petroleum Exporting Countries) realized the power they had over economic giants and even the world economy. These countries raised the prices of their oil by 400% and kept these prices extremely high, which created economic instability and considerable unemployment and inflation. USA became anxious and nervous about the stability of their much need foreign oil and therefore increasingly involved in Arab politics to ensure their oil supplies.
America lost its grip and this maybe could be translated as the descent of American dominance and the rise of globalization. With the policies of OPEC causing problems, there is a reappearance of newly industrialized countries including Western Europe and Japan. Japan rose to the top of the economic hierarchy because of the quality of its products. Cameras, radios, and cars built up Japan’s reputation and economy. Japan got richer and thus the wages of the workers rose, generating wealth.
With such a profitable and successful economy and industry, Japan extended its influence to many parts of Asia, and dislocated many of their industries’ factories to countries like Singapore and Malaysia. The cheap labor of these countries helped Japan to grow and because Japan invested in these countries, they too grew considerably. From the 1960’s to the 1990’s there was a period of rapid industrialization in Asia, notably in Malaysia, Hong Kong, Singapore, South Korea, and Taiwan. These fast growing countries (growing more than 7% a year) called themselves the Asian Tigers.
These nations developed dominant international financial centers and are world leaders in manufacturing information technology. Besides the Asian Tigers, there was also the Triad (USA, Europe, Japan), largely dominating in the 1980’s. Both powers became even more successful when communism collapsed in 1991. Later, BRIC (Brazil, Russia, India, and China) started to appear in the economic world. Bit by bit the world was becoming increasingly globalized, no longer was one country going to be able to dominate as much as America did, and earlier, Britain. The time of a group of countries or a single country dominating the world economy was over.
Britain, America, the Triad etc, could no longer be at the summit of world because now the nature of economics and society was becoming progressively globalized. Globalization is the process of international integration arising from the free movement of people, money, and products. Globalization seems like a good concept in every way because of its global market (meaning prosperity for all), the way countries can trade without tariffs, how poorer countries can benefit and grow from the outside investment, and how goods will become cheaper as there is more competition.
Still, there are negative aspects about globalization that incite some countries and people to remain skeptical. Some of these negative aspects are, trade agreements usually tend to favor richer countries, some goods are cheaper only because of exploitation, the rapid movement of capital investment can destroy countries, and the local markets are eclipsed because of a greater global market.
The growth of low cost communication networks and the significant advances in transportation are major factors of globalization and today the world’s economies are all interdependent. It all started with the industrial revolution. One revolution completely redesigned and shaped the world as we know it. The Industrial revolution was critical in the making of our world today; our industry and modern economy would be nowhere without it. On account of the many innovations, policies, and even wars, we are now able to have a connected world.
Though some individuals may claim that the world would have been better without an industrial revolution or that the industrial revolution did not play a major role in setting the foundations of our modern society, they are mistaken. eOur once mainly agrarian civilization went through the industrial revolution and transformed itself into an international globalized market. As globalization continues, our world might occasionally encounter a few moments of difficulty (2007 crises), but overall can only progress and improve itself, always leading the right path to a brighter and more prosperous future.