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(2.) The 19th Century (1815-1914)

(i) The world changed profoundly in the 19th century as economic, political, social,
cultural and technological factors, interacted in complex ways to transform societies and
reshape external relations.
(ii) Economists of the 19th century identify three types of movements or ‘flows’ within
international economic exchanges

# The flow of trade refers to large trade in goods, e.g., England

started exporting machine made cotton pieces to Asian countries, especially to India.
#. The Flow of Labour Migration of workers in search of employment refers to the
flow of labour. This flow also included the indentured labourers who were employed
in plantations, mines and in road or railway construction projects.
# The Flow of Capital This includes movement of capital for short term or long-term
investments over long distances. All three flows were closely inter-connected and
affected people’s lives more deeply now than ever before.

2.1 A World Economy Takes Shape

(i) Population growth had increased the demand for food grains in Britain.
(ii) As urban centres expanded and industry grew, the demand for agricultural products
went up, pushing up agricultural prices.
(iii) The laws allowing the government to restrict the import of corn were popularly known
as the ‘Corn Laws’.

# Scrapping of the Corn Laws

(i) There was a very poor harvest in 1816. This caused food prices to increase rapidly.
(ii) Industrial workers started demanding higher wages due to higher food prices.
(iii) There were food riots all over Britain.

# Impact of Scrapping the Corn Laws

(i) After the abolition of the corn laws, food could be imported into Britain more cheaply
than it could be produced within the country. British agriculturists were unable to compete
with imports.
(ii) Vast areas of land were now left uncultivated and thousands of men and women were
thrown out of work. They flocked to the cities or migrated overseas.
(iii) Due to a fall in prices, consumption of food grains in Britain rose.
(iv) Many countries of the world like Russia, America and Australia and some Eastern
European countries started exporting food grains to Britain.

# Impact of Trade on England

(i) New harbours were built and the old ones expanded to ship the new cargoes.
(ii) Capital flowed from financial centres such as London.
(iii) Nearly 50 million people left Europe for America and Australia in the nineteenth
century.
(iv) By 1890, a global agricultural economy had taken shape.
(v) The food and other products were being transported by railways, built for that very
purpose, and by ships.
(vi) The British Indian Government built a network of irrigation canals to transform semi-
desert wastes into fertile agricultural lands.
(vii) The canal colonies, as the areas irrigated by the new canals were called, were
settled by peasants from other parts of Punjab.
(viii) Nearly 60% of the trade comprised of ‘primary products’ i.e., agricultural products
and minerals.

2.2 Role of Technology

(i) Railway, steam engine, ships, telegraph were important inventions.

(ii) Colonisation stimulated new investments and improvements in transport.
●​ The invention of the refrigerated ship had the following advantages
●​ This reduced shipping costs and lowered meat prices in Europe.
●​ The poor in Europe could now consume a more varied diet.
●​ To the monotony of bread and potatoes, now many, though not all, could add meat,
butter and eggs to their diet.
●​ Better living conditions promoted social peace.

Imperialism started……..

2.3 Late-nineteenth Century Colonialism: The process of globalisation

was responsible for colonialism.

#Impact of Colonialism
(i) Most of the colonies lost their political freedom.
(ii) The continent of Africa was divided on paper in conference halls in Europe.
(iii) It brought about many painful economic, social and ecological changes.
(iv) Belgium and Germany become new colonial powers

2.4 Rinderpest or the Cattle Plague

(i) In Africa, in the 1890’s Rinderpest, a fast-spreading disease of cattle plague,
transformed the people’s life. When Europeans arrived in Africa, they found that people
were not ready to work as labourers because
●​ Africa had abundant land and a relatively small population.
●​ In late 19th century Africa, there were few consumer goods that wages could buy.
Foreigners used the following methods to recruit and retain labour
Heavy taxes were imposed which could be paid only by working for wages on
plantations and mines.
Inheritance laws were changed so that peasants were displaced from land.
Mine workers were enclosed in compounds and not allowed to move about freely.

# Spreading of Rinderpest and its Impact

(i) Rinderpest arrived in Africa in the late 1880s.
(ii) This disease killed 90% of the cattle which were the main wealth of the African people.
(iii) Planters, mine owners and colonial governments now successfully monopolised
control over scarce resource of cattle. This enabled European colonisers to conquer and
subdue Africa.

2.5 Indentured Labour Migration from India

(i) The example of indentured labour migration from India also illustrates the two-sided
nature of the 19th century world.
(ii) Hundreds of thousands of Indian and Chinese labourers went to work on plantations,
in mines and in roads and railway construction.
(iii) Most of the indentured workers came from the present-day regions of Eastern Uttar
Pradesh, Bihar, Central India and the dry districts of Tamil Nadu.
(iv) In the mid-19th century due to the arrival of Britishers these regions experienced
many changes which forced the people to migrate in search of work.
●​ Due to industrialisation the cottage industries had declined.
●​ Due to commercialisation of agriculture, land rents rose.
●​ There was shortage of land as lands were cleared for mines and plantations.
(v) Most of the indentured workers migrated in the hope of a bright future but they were
exploited by the recruiting agents and by the employers.
●​ They had to pay a commission to the recruiting agent.
●​ The agents used to provide false information.
●​ Sometimes agents even forcibly abducted less willing migrants.
(vi) In the 19th century, indenture had been described as a ‘new system of slavery’
because of the following reasons
●​ Living and working conditions were harsh.
●​ Workers had no legal rights.
●​ They were paid less wages.
●​ They were treated as slaves.
(vii) Workers discovered their own ways for surviving and new culture
●​ Many of indentured labourers escaped into the jungles.
●​ They started celebrating festivals like ‘Hosay’ (for Iman Hussain).
●​ Many of the migrants joined or became part of the Rastafarianism.
●​ They started creating their own way of enjoyment like chutney music.
They developed a new culture which was a blend of the local culture with their
native culture.

2.6 Indian Entrepreneurs Abroad

(i) The small entrepreneurs looked for local finances.
(ii) The Shi Karipuri Shroffs and Nattukottai Chettians were amongst the many groups of
such entrepreneurs.

2.7Indian Trade, Colonialism and the Global System

British industrialisation had a double impact on the Indian textile industry.
Due to high rate of tariffs, the inflow of Indian textiles into Britain began to decline.
The British machine-made textile products.
+​ Tourist places and decorative items

#Importance of Indian Trade for the Britishers

(i) Britain had a trade surplus with India.
(ii) Britain’s trade surplus in India also helped to pay the so-called ‘home-charges’.

3 The First World War and the Inter War Economy

The First World War was fought from 1914-1918.
●​ On one side were the Allies-Britain, France and Russia.
●​ On other side were the central European powers of Germany, Australia-Hungary
and Ottoman Turkey.

# Major Characteristics of the War

(i) A World War: The fighting involved the world’s leading industrial nations, who now
harnessed the vast powers of modern industry.
(ii) Modern Industrial War: It saw the use of machine guns, tanks, aircrafts, submarines,
chemical weapons, etc.
(iii) Reduction in the Workforce: These deaths and injuries reduced the able-bodies
workforce in Europe.
(iv) New Social Setup: The war was responsible for reorganising the whole society and
economy.
(v) Emergence of America: as a Super World Power American companies and the
American people had floated huge loans to the Allies during the war.

3.2 Post-war Recovery

Post war recovery proved difficult as the heavy expenditure on the World War I weakened
the British economy. There were many factors due to which post war recovery proved
difficult for Britain
(i) While Britain was preoccupied with war, industries in India and Japan got a chance to
develop. So, after the war Britain had to face competition from these countries, especially
from Japan.
(ii) To finance war expenditure, Britain had borrowed liberally from the USA.
(iii) The war had led to an economic boom, i.e., to a large increase in demand,
 production, prices and employment. When the war boom ended, production contracted
and unemployment increased.
(iv) After the war government also controlled its expenditure which further led to fall in
production.
(v) All these developments led to a huge loss of jobs and low income for workers.
(vi) The war had an adverse impact on the agricultural economies also.

3.3 Rise of Mass Production and Consumption

The war gave a big blow to the economy of Britain but it boosted the US economy.
(i) One important feature of the US economy of the 1920’s was mass production i.e.,
production of goods on large scale by an automated mechanical process which had
begun in the late nineteenth century. However, in the 1920’s it became a characteristic
feature of industrial production in the US.
(ii) A well-known pioneer of mass production was the car manufacturer Henry Ford, the
founder of Ford Motor Company.
(iii) He adapted the assembly line approach of the Chicago slaughterhouse (in which
slaughtered animals were picked apart by butchers as they came down a conveyor belt)
to his new car plant in Detroit.
(iv) The assembly line method allowed a faster and cheaper way of producing vehicles.

# The Assembly Line had the Following Advantages

(i) It increased the output per worker by speeding up the pace of work.
(ii) It led to mass production i.e., a car came off the assembly line at three minutes
intervals.
(iii) Under this, a worker could not afford to delay the work because his work was linked to
all other workers.
(iv) It helped in job specialisation. (v) Now workers were getting higher wages i.e., $ 5 per
day.

3.4 The Great Depression

(i) By economic depression, it is meant that economic condition when a country records
an immense decline in production.
(ii) This state of economic depression started in the United States of America in 1929 and
engulfed the entire world; hence it is known as great depression.

# Causes of Economic Depression The following are the major causes

of the economic depression
(i) Conditions Created by War
●​ There was an immense industrial expansion in view of the increased demands
of goods related to the army during the First World War.
●​ After the war the industries produced at the same speed.
●​ However, the sharp decrease in demand for military and war products gave birth
to economic depression.
(ii) Overproduction in Agriculture
●​ Agricultural overproduction was another major factor responsible for the
depression.
●​ As the prices slumped and agricultural income declined, farmers tried to expand
production and bring a larger, volume of produce to the market to maintain their
overall income.
●​ This worsened the glut in the market, pushing down prices even further. The
farm produce rotted for lack of buyers.
(iii) Shortage of Loans
●​ In the mid-1920’s many countries financed their investments through loans from
the USA.
●​ While it was often very easy to raise loans in the US during the boom period, the
US overseas lenders panicked at the first sign of trouble.
(iv) Multiple Effect
●​ The withdrawal of lenders from the market had a multiple effect.
●​ In Europe, it led to the failure of some major banks and the collapse of
currencies such as the British pound sterling.
●​ The US attempt to protect its economy in the depression by doubling import
duties also deal another severe blow to world trade.

# Impact of the Great Depression on USA

(i) With the fall in prices and the prospect of a depression, US banks also slashed
domestic lending and called back loans.
(ii) Farmers were unable to sell their harvest.
(iii) Faced with falling income, many households in the US could not repay what they had
borrowed, and were forced to give up their homes, cars, and other consumer durables.
(iv) Industrial production registered a fall of 35%. (v) The number of the unemployed
started rising and in 1933 it touched 17 million.

3.5 Impact of Great Depression on India

(i) During that period, India had become an exporter of agricultural goods and importer of
manufactures.
(ii) The depression immediately affected Indian trade. India’s exports and imports nearly
halved between 1928 and 1934.
(iii) As international prices crashed, prices in India plunged. Between 1928 and 1934,
wheat prices in India fell by 50%.
(iv) The fall in prices had a big impact on the poor farmers. Though agricultural prices fell
sharply, the colonial government refused to give any relief to the farmers in taxes.
(v) Peasants producing for the world market were the worst hit.

# Impact of Great Depression on Indian Farmers

(i) Their indebtedness increased.
(ii) They were forced to sell or mortgage their land.
(iii) People were forced to sell their assets like gold and silver. (J.M. keynes)
(iv) Indian jute producers were the worst affected. (v) Industrial investment also grew as
the government extended tariff protection to industries, under pressure of nationalist
opinion.

4. Rebuilding a world economy: the post war era OR The Second World War
(i) The First World War came to an end in 1918.
(ii) Just after two decades the world fell into the cauldron of fire of the Second World War,
which proved to be ever more destructive than the First World War.
(iii) The Second World War was a ‘Total war’.
(iv) It was a war waged for six years on many fronts, in many places, over land, on sea
and in the air.

# Consequences of the War

(i) Death and Destruction More than 60 million people, or about 3% of the world’s
population, are believed to have been killed, directly or indirectly, as a result of the war.
Millions more were injured. Many big cities were reduced to ashes.
(ii) Use of Atomic Bomb for Destruction The atomic bombing of Hiroshima and
Nagasaki alone is estimated to have killed between 150,000 and 250,000 men, women
and children. The radiation effects of these nuclear weapons not only brought death for
millions, but also caused damage to kidney, ovary, nervous system, brain, muscles, skin
to the remaining population of these Japanese cities. Radiation also caused diseases like
cancer, blindness and sterility.
(iii) Damage to Agriculture, Trade and Industries World War II caused a great damage
to agriculture, trade and commerce. The terrible battles fought in different countries during
the war made large tracts of land infertile.
(iv) Increase in Soviet Russia’s Power and Prestige The Second World War boosted
the power and prestige of the Soviet Union.
(v) USA becomes a Super Power
(a) World War II made USA the supreme power of the world.
(b) By dropping atom bombs on Hiroshima and Nagasaki, it created a terror of its military
power in the world.
(c) After the war, no European country was either as powerful or as prosperous as the
United States of America
(d) The emergence of USA and Soviet Russia as new super powers influenced post war
reconstruction.

4.1 Post War Settlement and the Bretton-Woods Institutions

Economists and politicians learned two lessons from interwar economic experiences.
(i) Full Employment + govt. Intervention
●​ An industrial society based on mass production cannot be sustained without mass
 consumption.
●​ To ensure mass consumption, there was a need for a high and stable income.
●​ Income could not be stable if employment was unstable.
●​ Thus, a stable income also required a steady and full employment.
(ii) control over flow of goods and services
●​ Before the Second World War most of the economists believed the capitalist
economies or markets are self-sustaining i.e., there is no need for government
intervention.
●​ But the interwar period proved that markets alone could not guarantee full
employment.
●​ Therefore, government would have to step in to minimise fluctuations of price, output
and employment.
(d) Economic stability could be ensured only through the intervention of the government.

# Bretton-Woods Institutions / breton woods system

(i) The Bretton Woods Conference took place in July of 1944 at Bretton Woods in New
Hampshire USA.
(ii) Under this system, the International Monetary Fund (IMF) and the International Bank
of Reconstruction and Development, later on called as the World Bank (WB), were
Established. Bretton woods twins
(iii) The IMF was developed as a permanent international body.
(iv) The World Bank was created to speed up post-war reconstruction, to aid political
stability and to foster peace.

# The Main Terms of the Agreement

(i) To establish monetary co-operation amongst the various member countries.
(ii) To promote international trade by removing all obstacles.
(iii) The Bretton Woods system was based on fixed exchange rates. Under this system,
national currencies an gold were pegged to the dollar at a fixed exchange rate.

(iv) It was decided to establish International Bank for Reconstruction and Development
 (World Bank) and the International Monetary Fund. (v) All member countries were
required to subscribe to IMF’s capital.

4.2 The Early Post Ware Years

The Bretton Woods system worked smoothly for some years after the war.
(i) The Bretton Woods system ushered in an era of unprecedented growth of trade and
income for the Western industrial nations and Japan.
(ii) It provided a big boost to world trade.
(iii) The growth was also mostly stable, without large fluctuations.
(iv) The system also controlled unemployment which averaged less than 5% in most
industrial countries.
(v) These years also saw the worldwide spread of technology and enterprise.

4.3 Decolonisation(undoing the colonial powers) and Independence

(i) The Second World War provided a new impetus to the freedom movements in Asia
and Africa.
(ii) Over the next two decades, most of the Asian and African colonies emerged as free
and independent nations.
(iii) But these newly independent countries were overburdened by poverty and a lack of
resources, as their economies were handicapped by long periods of colonial rule.
(iv) The IMF and the World Bank were asked to meet the financial needs of the industrial
countries.
(v) Europe and Japan rapidly rebuilt their economies. They grew less dependent on the
IMF and the World Bank.
(vi) Thus, from the late 1950s, the Bretton Woods institutions i.e., IMF and the World
Bank, began to shift their attention more towards developing countries.
(vii) Group-77 (G-77).

4.4 End of Bretton Wood and the Beginning of Globalisation

After the collapse of the
Exchange rate
(i) fixed exchange rate system, it was replaced by the system of

(ii) floating exchange rates.

(i) The Decline of US Currency: After the 1960s, the USA was no longer the dominant
economic power as it had been for more than two decades.
(ii) Rise of Western Commercial Banks: Developing countries could turn to international
institutions for loans and development assistance.
(iii) New Powers: The European Economic Community (EEC) and Japan had become
international economic powers.
(iv) Rise of China and the Soviet Union: China had been cut off from the post-war
world economy since its revolution in 1949.
(v) Low-Cost Structure in China: Wages were low in China. (vi) Problem of
 Unemployment The unemployment that began rising from the mid 1970’s remained high
until the early 1990’s.
Globalisation has started …

Thanks……….