Week 4: The historical development of the world economy: Industry, Empire and War: 1800-1945 Flashcards
How far back in history should we go to gain a better understanding of today’s patterns of inequalities and wealth generation?
According to Diamond, 11,000 years.
- Factors that privileged Europe and Asia: environmental and geographic factors, rates of migration and diffusion within and between continents and total area/population
size of continents
- Food production and domestication of animals helped the creation of civilizations to surpass civilizations with less advanced division of labor
How was the historical overview of the era of the emergence of a liberal and imperialist international economy in the 19th century?
- Wealth and power flowed to the elite of states
- Liberal market of the 19th century: distributed very unevenly
- very limited free trade:
- Britain pursued free trade unilaterally, other countries put protectionist barriers - Domestic arrangements for international order
- European Industrial Innovation: shifted the balance of power between Europeans and non-Europeans
- Competition between European States: leading to open warfare, tremendous human and financial losses
What was the Industrial revolution characterized by?
-The application of machinery to production
- the introduction of new energy sources to power the machines
- the reorganization of the labor force into factories
Overview of the First Industrial Revolution
-Started in Britain on mid 1700s-1800s
- It contained changes in the textile industry and advancements in the steel industry (railways)
- British competition with Dutch and Indian textile manufacturers
- Series of inventions helping raise British productivity
- 1790, use of steam power
- Factory system introduced
- Difficult working conditions
- 1805, lengthening of the working day, thanks to artificial lighting
Consequences of the first industrial revolution
- new economic relationship between people
- a new system of production
- a new rhythm of life
- a new society
- a new historical era
Primary elements of the First industrial revolution
- The industrial population was divided into capitalists, employers and workers
- Production was organized in the factory with specialized machines and specialized labour
- Economy becomes dominated by profit
What was the international dimension after the first industrial revolution?
- Supply side: use of slave labor
- Demand side: foreign markets created for western goods
Overview of the Second Industrial revolution
- Took place in 1870s
- New products and technologies
- Japan, Russia, Canada: copying the British example
- Some states are still not industrialized in the 21st century
- Coal Power
- Increasing railway spread
- US became the center of railway growth:
- Railways: divers of industrialization
- railways opened up vast new areas to
further economic activity
- Shipping experienced a transformation
-
Why this happened in Britain in that specific time?
- Knowledge and technology:
- Enlightenment
- advances in scientific method and research - The rise of the Liberal State:
- inspired by liberal ideology
- supported by a particular class alliance - Britain’s unique role in the international economy:
- naval supremacy
Who were the rivals of Britain?
- France
- Germany and the US:
- followed protectionist paths towards
industrialization
- US used British capital to finance its
industrialization
- Early 1900s: US introduction of mass production - Japan:
- State-led industrialization
- government-led companies
- Private enterprises following the
government’s lead
What is imperialism?
Definition: doctrine that consists in extending power by territorial acquisition or by extending political and economic control outward over other areas.
4 Developments in Imperialism and Why?
- Traditional european powers enlarged their empires (The Netherlands, Portugal, France, Britain)
- New states entered the colonial movement (Italy, Belgium, Germany)
- Non-western continental expansion
- Japan was able to adapt to the Industrial Revolution as the only Asian country
why?
- Underconsumption in Western States
- Industrialists and bankers sought new
- markets
- Domination through industrialization
- Racism through colonizing the world
What is Pax Britannica?
- Meaning: British peace
- 1815-1914 during the 2nd industrial revolution
- European-centered international system based on liberal principles that led to the rise of British industrial and military power through the: (1) gold standard, (2) free trade, (3) balance of power
- It failed because it failed to focus on European imperialism, ignored Africa and Asia, exaggerated the extent to which liberal principles govern the system, downplayed the flaws that led to its end, and ignored large-scale violence around the world.
What was the gold standard?
- 1875-1914 ended with WWI
- Required countries to fix their currencies in relation to gold
- To allow relatively free movement of goods across borders
- Currencies have a gold parity but can change in relation to one another
What were the pre-requisites for the gold standard?
(1) An international system of credit; ie. a location for conducting all the business (London in this case)
(2) Countries had to agree that their economy automatically adjusts to the amount of gold they have
What three issues should a monetary system address?
- The role of exchange rates: Fixed or floating?
- Nature of reserve assets: gold or foreign currencies
- The control of capital movement: does a state allow money to flow freely in and out of its borders?
Problem of Balance of Payments?
- Open economies: deflating currency, increasing competitiveness of
local product - Protected economies: restricting or increasing imports by
command
What were the “corn laws”?
- Tariffs and other trade restrictions on imported food and corn enforced in the United Kingdom
- Supported by the Ricardo’s liberal theory of comparative advantage: free trade was a universal good
- It was repealed due to widespread opposition and economic pressure in favor of free trade.
- Key date: 1846 – when Britain repealed the Corn Laws which had protected British aristocrats and farmers from imported corn
Industrialists and workers
What was the Liberal theory of comparative advantage?
- Developed by David Ricardo
- States that countries should specialize in producing and exporting goods in which they have a relative efficiency advantage while importing goods in which they are less efficient, leading to increased overall economic welfare and mutual gains from trade.
What is balance of power?
- Part of the Pax Britannica
- Conflicts need to be resolved before they turn into a system-wide war
- To this end, the “Concert of Europe” was created
- Eventually imperialist rivalry (secret alliances) and industrialisation of states such as Germany tipped the balance and divided Europe into two camps: Triple Entente (Fr/Br/Russ) and Triple Alliance (Ger/Aus-Hun/It)
Shortcomings / deficiencies of Pax Britannica?
- fails to focus on European imperialism
- disregards Africa and Asia
- overstates the degree to which liberal principles governed the system
- downplays the flaws that led to its demise
- ignores the large-scale violence taking place in several parts of the world
Explain New Imperialism from the 19th century.
- Economical purposes: Industrialists and bankers combined their interests in pursuing overseas markets
- Racism: moral obligation to civilize other parts of the world
- Industrialization: enabled Western states (and Japan) to dominate areas of the world that had previously been beyond their reach
which were the consequences of the first world war in IPE?
- Changed trade and financial patterns
- Weakened European states
- ended the international gold standard
- turned a number of debtor nations into creditors and some creditor nations into debtors
- Discrediting the balance of power
How was the first phase of the Interwar period?
- end of war until1920s
- domestically, states struggled to revive their economies
- Free-floating currencies and attempts to re-liberalize national economic relations
How was the second phase of the interwar period?
- mid 1920s until 1930s
- return to the gold standard and rising unemployment
How was the third phase of the interwar period?
- 1932 to the outbreak of the WWII
- Instead of international economy → Regional economies
Consequences of the WWII in IPE?
- Change in the world economy
- Altering the balance of global economic power
- Marking the shift from Europe to the US
- End of the Great Depression in the US war-time production
- European states prioritized building back domestic economies
- Creation of welfare states
- Shifted the relative power between Europe and the societies in its colonies
