The Making of a Global World

This chapter opens Section II, Livelihoods, Economies and Societies, of India and the Contemporary World – II. NCERT’s argument: what we call globalisation — often dated to the last fifty years or so — has a long history of trade, migration in search of work and movement of capital. It follows four phases: the pre-modern world (silk routes, food, conquest and disease); the nineteenth century, 1815–1914 (a world economy takes shape, technology, colonialism, rinderpest, indenture, Indian entrepreneurs and India’s place in world trade); the inter-war economy (war, mass production, the Great Depression and India); and rebuilding the world economy after 1945 (Bretton Woods, decolonisation, the end of fixed exchange rates and the start of globalisation).

• Links within this book: jess301 and jess302 (nationalism in Europe and India — the Depression here is the background to Civil Disobedience); Chapter 4, The Age of Industrialisation, continues the story of Indian textiles and the deindustrialisation debate; Chapter 5 covers print. The economics book’s Globalisation and the Indian Economy (jess204) takes the story from the 1990s onwards.
• Live pages to pair with: kehs106 (displacing indigenous peoples — the Americas, Australia), kehs107 (paths to modernisation — China and the opium trade), lehs301 (colonialism and the countryside — indigo, cotton, revenue), keec101 (the Indian economy on the eve of independence — drain and home charges), keec103 (liberalisation and globalisation since 1991), leps104 (international organisations — IMF and World Bank today), leps107 and lesy206 (globalisation in politics and society).
• UPSC: GS1 covers world history from the 18th century (industrialisation, colonisation, the world wars) and the effects of globalisation on Indian society; GS3 covers the Indian economy and its global links. Prelims has asked about the Bretton Woods conference (2008), the home charges (2011) and crops brought to India (2012); Mains about why indentured labour was taken from India and whether the diaspora kept its culture (GS1 2018) and about the Bretton Woods twins (GS2 2013).

• Globalisation has a long history: Indus–West Asia trade, Maldivian cowries, the silk routes (goods, faiths such as Buddhism, germs).
• After 1492: potatoes, maize, tomatoes and chillies from the Americas; silver for Europe’s Asian trade; smallpox devastates native peoples; slavery; trade’s centre moves west.
• Three flows (1815–1914): trade, labour, capital. Corn Laws repealed → cheap food imports → land cleared abroad, London capital, ~50 million European emigrants; world trade up 25–40 times (1820–1914).
• Darker side: Africa partitioned (Berlin, 1884–85); rinderpest kills ~90% of cattle (1890s); indentured Indians to Trinidad, Guyana, Surinam, Mauritius, Fiji — ‘a new system of slavery’ — yet Hosay and chutney music.
• India in the system: cloth exports collapse, raw cotton and opium rise; Britain’s surplus with India settles its deficits and pays the home charges. 1920s: Ford’s assembly line, hire purchase.
• Great Depression (1929–mid-1930s): overproduction, US loans withdrawn; India’s trade halves, wheat −50%, jute −60%, gold exported. Bretton Woods (July 1944): IMF, World Bank, $35/oz gold; G-77 and NIEO; floating rates; MNCs to Asia.

Human societies have become steadily more interlinked. Travellers, traders, priests and pilgrims crossed vast distances for knowledge, opportunity, spiritual fulfilment or to escape persecution, carrying goods, money, values, skills, ideas, inventions — and germs. NCERT notes an active coastal trade linking the Indus valley with West Asia (it says as early as 3000 BCE); for more than a millennium cowries from the Maldives, used as currency, reached China and East Africa; and the long-distance spread of disease germs can be traced back to the seventh century, becoming an ‘unmistakable link’ by the thirteenth. The silk routes — several, over land and by sea — knitted Asia to Europe and northern Africa from before the Christian era until almost the fifteenth century. Chinese silk and pottery and Indian and Southeast Asian textiles and spices went west; gold and silver flowed from Europe to Asia. Trade and culture went together: early Christian missionaries and later Muslim preachers probably used these routes, and Buddhism spread from eastern India through their intersections.

Food travels. Noodles may have travelled west from China to become spaghetti — or Arab traders may have taken pasta to Sicily; similar foods were known in India and Japan, so the truth may never be known. Many common foods — potatoes, groundnuts, maize, tomatoes, chillies, sweet potatoes — reached Europe and Asia only after Christopher Columbus accidentally reached the Americas, coming from America’s original inhabitants. New crops could mean life or death: Europe’s poor ate better and lived longer with the potato, but Ireland’s poorest became so dependent on it that when disease destroyed the crop in the mid-1840s, vast numbers died.

Conquest, disease and trade. In the sixteenth century the world ‘shrank’ as European sailors found a sea route to Asia and crossed the western ocean to America. The Indian Ocean had long known bustling trade, with the Indian subcontinent at its centre; Europeans expanded or redirected some flows towards Europe. American silver, from mines in present-day Peru and Mexico, enhanced Europe’s wealth and financed its trade with Asia; expeditions hunted El Dorado. The Spanish and Portuguese conquest of America was under way by the mid-sixteenth century, but its most powerful weapon was not firepower: it was germs such as smallpox, to which the long-isolated original inhabitants had no immunity. Smallpox spread ahead even of the Europeans, decimating communities and paving the way for conquest; guns could be captured and turned against invaders, diseases could not. Meanwhile poverty, hunger, crowded cities, disease and religious persecution drove thousands from Europe to America, where by the eighteenth century slaves captured in Africa worked plantations of cotton and sugar for European markets. Until well into the eighteenth century China and India were among the world’s richest countries and pre-eminent in Asian trade; but from the fifteenth century China is said to have restricted overseas contacts, and with the Americas’ rise the centre of world trade moved west to Europe.

The world changed profoundly in the nineteenth century. Economists identify three flows in international economic exchange: trade (largely in goods such as cloth or wheat), labour (migration in search of work) and capital (short- or long-term investment over long distances). All three were interwoven, though labour migration was often more restricted than goods or capital.

Start with food in industrial Britain. Population growth from the late eighteenth century raised demand for grain and pushed up prices; under pressure from landed groups the government restricted corn imports through the Corn Laws. Unhappy with high food prices, industrialists and urban dwellers forced their abolition. Food could now be imported more cheaply than it could be grown at home; NCERT says British agriculture could not compete, land was left uncultivated and thousands were thrown out of work, flocking to cities or migrating overseas. As food prices fell, consumption rose; faster industrial growth from the mid-century raised incomes and food imports. Lands were cleared in Eastern Europe, Russia, America and Australia; railways linked farms to ports; harbours were built and expanded; settlers built homes — all requiring capital (from financial centres such as London) and labour, which drove migration. Nearly 50 million people emigrated from Europe to America and Australia in the nineteenth century; some 150 million worldwide are estimated to have left their homes. By 1890 a global agricultural economy had taken shape: food came from thousands of miles away, grown by recently arrived workers on large farms that a generation earlier had been forest, and carried by railways and by ships increasingly manned by low-paid workers from southern Europe, Asia, Africa and the Caribbean.

Something similar, on a smaller scale, happened in west Punjab, where the British Indian government built irrigation canals to turn semi-desert into land for wheat and cotton for export: the Canal Colonies, settled by peasants from other parts of Punjab. Cotton, grown worldwide for British mills, and rubber tell similar stories. So rapidly did regional specialisation develop that between 1820 and 1914 world trade is estimated to have multiplied 25 to 40 times; nearly 60 per cent of it was in primary products such as wheat, cotton and coal.

Railways, steamships and the telegraph were inventions without which the nineteenth-century world is unimaginable. But NCERT stresses that technological advances were often the result of social, political and economic factors: colonisation, for instance, stimulated investment in faster railways, lighter wagons and larger ships that moved food more cheaply. The meat trade shows the connection. Until the 1870s animals were shipped live from America to Europe and slaughtered on arrival; they took up space, and many died, fell ill or lost weight, so meat was a luxury beyond the European poor. Refrigerated ships changed this: animals were slaughtered in America, Australia or New Zealand and shipped as frozen meat. Shipping costs and prices fell; many of the poor could add meat, butter and eggs to a monotonous diet of bread and potatoes. Better living conditions, NCERT adds, promoted social peace at home and support for imperialism abroad.

Trade and markets expanded in the late nineteenth century, but there was a darker side: for many, closer links with the world economy meant a loss of freedoms and livelihoods, and European conquest brought painful economic, social and ecological changes. Rival European powers drew some African borders as if with a ruler; in 1885 the big European powers met in Berlin to complete the carving-up of Africa. Britain and France made vast additions to their territories; Belgium and Germany became new colonial powers; and the US became a colonial power in the late 1890s by taking over some of Spain’s colonies.

Rinderpest. Africa historically had abundant land and a relatively small population; land and livestock sustained livelihoods, and few people worked for wages — there was little to buy with them. Europeans came for land and minerals, hoping to set up plantations and mines, and faced a shortage of labour willing to work for wages. They used many methods: heavy taxes payable only through wage work; changed inheritance laws, so that only one family member could inherit land and the rest were pushed into the labour market; and confining mineworkers in compounds. Then came rinderpest, a devastating cattle disease. It arrived in the late 1880s with infected cattle imported from British Asia to feed Italian soldiers invading Eritrea; entering in the east, it moved west ‘like forest fire’, reaching the Atlantic coast in 1892 and the Cape five years later, killing some 90 per cent of cattle. The loss destroyed African livelihoods; planters, mine owners and colonial governments monopolised the scarce cattle that remained, strengthening their power and forcing Africans into the labour market. Control over cattle, NCERT concludes, helped European colonisers conquer and subdue Africa.

Indentured migration shows the two-sided nineteenth-century world: faster growth and great misery, higher incomes for some and poverty for others, technological advance and new forms of coercion. Hundreds of thousands of Indian and Chinese labourers worked on plantations, in mines and on roads and railways worldwide. Indian indentured labourers were hired under contracts promising return travel after five years on the employer’s plantation. Most came from eastern Uttar Pradesh, Bihar, central India and the dry districts of Tamil Nadu, where in the mid-nineteenth century cottage industries declined, rents rose and land was cleared for mines and plantations; the poor fell behind on rent, sank into debt and were forced to migrate. The main destinations were the Caribbean (mainly Trinidad, Guyana and Surinam), Mauritius and Fiji; closer home, Tamils went to Ceylon and Malaya, and indentured workers were recruited for Assam’s tea gardens (compare jess302).

Recruiting agents, paid a small commission, tempted migrants with false information about destinations, travel, work and conditions — some were not even told of the sea voyage — and sometimes abducted the unwilling. Indenture has been described as ‘a new system of slavery’: on arrival, conditions were harsh and legal rights few. But workers found their own ways to survive. Many escaped into the wilds, facing severe punishment if caught; others created new forms of self-expression. In Trinidad the Muharram procession became a riotous carnival, ‘Hosay’ (for Imam Hussain), joined by workers of all races and religions; Rastafarianism is said to reflect links with Indian migrants to the Caribbean; ‘chutney music’ in Trinidad and Guyana expresses the post-indenture experience — cultural fusion that is part of the making of the global world. Most workers stayed on or returned to their new homes after a spell in India, creating large communities of Indian descent: the Nobel laureate V.S. Naipaul, and West Indies cricketers Shivnarine Chanderpaul and Ramnaresh Sarwan, descend from them. From the 1900s India’s nationalist leaders opposed indenture as abusive and cruel; NCERT says it was abolished in 1921. Descendants, often called ‘coolies’, long remained an uneasy minority; Naipaul’s early novels capture their loss and alienation.

Indian entrepreneurs abroad. Growing crops for the world market needed capital; plantations could borrow from banks, but peasants needed others. Bankers and traders such as the Shikaripuri shroffs and Nattukottai Chettiars financed export agriculture in Central and Southeast Asia, using their own funds or money borrowed from European banks; they had sophisticated systems for transferring money across distances and even indigenous forms of corporate organisation. Indian traders and moneylenders followed European colonisers into Africa; Hyderabadi Sindhi traders went beyond the colonies, setting up emporia at ports worldwide from the 1860s to sell curios to the growing numbers of tourists on safe, comfortable passenger ships.

Fine Indian cottons were long exported to Europe. With industrialisation, British manufacturers pressed the government to restrict cotton imports; tariffs on cloth imports into Britain cut the inflow of Indian cotton. From the early nineteenth century British manufacturers also sought markets abroad, and Indian textiles, shut out of Britain, faced stiff competition elsewhere. The share of cotton textiles in India’s exports fell from some 30 per cent around 1800 to 15 per cent by 1815 and below 3 per cent by the 1870s, while raw cotton rose from 5 to 35 per cent between 1812 and 1871. Indigo was another important export for decades, and opium shipments to China grew rapidly from the 1820s to become for a while India’s single largest export — Britain grew opium in India and used the earnings from China to finance its tea and other imports from China.

Over the nineteenth century British manufactures flooded India while food grain and raw material exports grew. But the value of British exports to India was much higher than of British imports from India: Britain had a trade surplus with India, which it used to balance its deficits with countries from which it imported more than it sold — a multilateral settlement system. By helping Britain balance its deficits, NCERT concludes, India played a crucial role in the late-nineteenth-century world economy. The surplus also paid the so-called home charges: private remittances by British officials and traders, interest on India’s external debt and pensions of British officials in India.

The First World War (1914–18), fought mainly in Europe, plunged the first half of the twentieth century into a crisis that took over three decades to overcome. It pitted the Allies — Britain, France and Russia, later joined by the US — against the Central Powers — Germany, Austria-Hungary and Ottoman Turkey. Expected to end by Christmas 1914, it lasted more than four years. It was the first modern industrial war: machine guns, tanks, aircraft and chemical weapons on a massive scale; millions of soldiers moved by ships and trains; 9 million dead and 20 million injured, mostly men of working age, shrinking Europe’s workforce and household incomes. Industries were restructured for war, and women took jobs once reserved for men. Britain borrowed heavily from US banks and the US public, so the war turned the US from an international debtor into a creditor.

Post-war recovery proved difficult. Britain, the leading pre-war economy, faced a prolonged crisis: industries had grown in India and Japan during the war, so Britain could not recapture its dominance of the Indian market or compete with Japan; it was burdened with debts to the US. The war boom ended; production contracted and the government cut war spending; in 1921 one in five British workers was out of work. Agricultural economies were also in crisis: when Eastern Europe’s wheat supply was disrupted, production in Canada, America and Australia expanded; once Eastern Europe revived, a glut pushed down prices and deepened farm debt.

In the US recovery was quicker, and the 1920s were marked by mass production. Henry Ford adapted the assembly line of a Chicago slaughterhouse to his car plant in Detroit: each worker repeated one task at a pace dictated by the conveyor belt, with no time to pause or talk, and cars came off the line at three-minute intervals; the T-Model Ford was the world’s first mass-produced car. Workers could not cope and quit in large numbers, so in January 1914 Ford doubled the daily wage to $5 — while banning trade unions — and recovered the cost by repeatedly speeding up the line; he later called it his best cost-cutting decision. Fordist practices spread in the US and were copied in Europe; mass production lowered prices, and higher wages let more workers buy cars — US production rose from 2 million (1919) to over 5 million (1929) — and refrigerators, washing machines, radios and gramophones on hire purchase, alongside a loan-financed housing boom. In 1923 the US resumed exporting capital and became the largest overseas lender, boosting European recovery and world trade for six years. ‘All this, however, proved too good to last.’

The Great Depression began around 1929 and lasted till the mid-1930s, with catastrophic falls in production, employment, incomes and trade. Agricultural regions were worst hit, because farm prices fell further and for longer than industrial prices. NCERT gives two main causes. First, agricultural overproduction: as prices fell, farmers produced more to keep their incomes up, worsening the glut — produce rotted for want of buyers. Second, many countries had financed investment through US loans: in the first half of 1928 US overseas loans exceeded $1 billion; a year later they were a quarter of that. Withdrawal of US loans brought bank failures in Europe and the collapse of currencies such as the pound sterling, and deepened the slump in raw material prices in Latin America. The US, trying to protect itself by doubling import duties, dealt another blow to world trade. The US itself was the industrial country worst hit: banks cut lending and called in loans; farms could not sell; households lost homes and cars; unemployment soared; by 1933 over 4,000 banks had closed and between 1929 and 1932 about 110,000 companies collapsed. By 1935 a modest recovery was under way, but the Depression’s effects on society, politics and people’s minds lasted much longer.

India and the Depression. The crisis shows how integrated the world economy had become. Colonial India exported agricultural goods and imported manufactures. Its exports and imports nearly halved between 1928 and 1934; prices plunged, and wheat prices fell by 50 per cent. Peasants suffered more than town-dwellers, because the colonial government refused to reduce revenue demands; those producing for the world market were worst hit. Bengal’s jute growers saw gunny exports collapse and raw jute prices crash by more than 60 per cent; those who had borrowed to grow more fell deeper into debt. Across India peasants used up savings, mortgaged land and sold jewellery and precious metals: India became an exporter of gold. J.M. Keynes thought these gold exports promoted global recovery; NCERT comments that they helped speed Britain’s recovery but did little for the Indian peasant. Rural India was seething with unrest when Gandhi launched Civil Disobedience. For urban India the Depression was less grim: people on fixed incomes — town-dwelling landowners receiving rents, salaried middle classes — were better off as prices fell, and industrial investment grew as the government extended tariff protection under nationalist pressure.

The Second World War, between the Axis (mainly Nazi Germany, Japan and Italy) and the Allies (Britain, France, the Soviet Union and the US), lasted six years. At least 60 million people — about 3 per cent of the world’s 1939 population — are believed to have died, many more civilians than soldiers; much of Europe and Asia lay devastated. Reconstruction was shaped by two influences: the US as the dominant Western power, and the Soviet Union, which had sacrificed hugely to defeat Nazi Germany and had become a world power while capitalism was stuck in depression.

Economists and politicians drew two lessons from the inter-war years. First, mass production needs mass consumption, which needs high, stable incomes and therefore steady, full employment — which markets alone cannot guarantee, so governments must intervene to limit swings in prices, output and employment. Second, full employment requires governments to have power to control flows of goods, capital and labour. The framework was agreed at the United Nations Monetary and Financial Conference at Bretton Woods, New Hampshire, in July 1944. It created the International Monetary Fund (to deal with members’ external surpluses and deficits) and the International Bank for Reconstruction and Development (the World Bank, to finance reconstruction) — the ‘Bretton Woods twins’, which began financial operations in 1947. Decision-making is controlled by the Western industrial powers, and NCERT says the US has an effective veto over key decisions. The system rested on fixed exchange rates: currencies such as the rupee were pegged to the dollar, and the dollar to gold at $35 an ounce.

The system brought an era of unprecedented growth for the Western industrial nations and Japan: world trade grew over 8 per cent a year and incomes nearly 5 per cent between 1950 and 1970, with unemployment mostly below 5 per cent. Technology and enterprise spread; developing countries imported plant and equipment to catch up. Over two decades most colonies in Asia and Africa became independent, but they were burdened by poverty and the legacy of colonial rule. The IMF and World Bank, designed for industrial countries, were not equipped for development; as Europe and Japan recovered, from the late 1950s they turned more to developing countries. Ironically, newly independent nations came under the guidance of agencies dominated by former colonial powers, who still controlled vital resources in former colonies, while large corporations of powerful countries secured cheap rights to their resources. Most developing countries did not share the boom, so they organised as the Group of 77 (G-77) to demand a new international economic order (NIEO): real control over natural resources, more development assistance, fairer prices for raw materials and better market access for their manufactures.

The end of Bretton Woods. From the 1960s the rising costs of its overseas involvements weakened US finances; the dollar could not hold its value against gold, and fixed exchange rates gave way to floating exchange rates. From the mid-1970s developing countries had to borrow from Western commercial banks, leading to periodic debt crises, lower incomes and more poverty, especially in Africa and Latin America. Unemployment rose in the industrial world from the mid-1970s until the early 1990s, and from the late 1970s MNCs shifted production to low-wage Asian countries. China, cut off since its 1949 revolution, re-entered the world economy through new economic policies, as did Eastern Europe after the collapse of the Soviet Union; low wages made China attractive to MNCs — hence the TVs, phones and toys ‘made in China’. Relocation stimulated world trade and capital flows, and countries such as India, China and Brazil have been transformed.

The chapter’s side questions in order. Short outlines follow.

‘Write in brief’ (five questions, the third with five parts) and ‘Discuss’ (four questions), page 78.

Numbers

One-liners

• Globalisation has a long history of trade, migration and capital flows.
• Silk routes carried silk, pottery, spices, precious metals — and Buddhism.
• Potatoes, maize, tomatoes and chillies came from the Americas after 1492.
• Smallpox, not just firepower, helped Europeans conquer the Americas.
• Nineteenth-century exchange had three flows: trade, labour and capital.
• Repeal of the Corn Laws opened Britain to cheap imported food.
• Refrigerated ships made the long-distance meat trade possible.
• Rinderpest killed about 90 per cent of Africa’s cattle in the 1890s.
• Indentured Indians went chiefly to the Caribbean, Mauritius and Fiji.
• India’s cloth exports collapsed while raw cotton exports rose.
• Britain’s surplus with India settled its deficits with other countries.
• The First World War turned the US from debtor to creditor.
• Henry Ford’s assembly line made the T-Model the first mass-produced car.
• The Depression came from overproduction and the withdrawal of US loans.
• In the Depression India exported gold and its peasants fell into debt.
• Bretton Woods (1944) created the IMF, the World Bank and fixed exchange rates.
• The G-77 demanded a new international economic order.

Traps to avoid

• Soya is East Asian, not American; potatoes, maize, tomatoes and chillies are American.
• Arab rule in Sicily began in the ninth century — NCERT’s ‘fifth-century Sicily’ pasta story is doubtful.
• The Corn Laws were repealed in 1846; the big decline of British farming came from the 1870s.
• The Berlin conference (1884–85) set rules for partition; most partition came later.
• Indenture to Trinidad began in 1845 — Fig. 14’s ‘early nineteenth century’ is wrong.
• Indenture ended between 1917 and 1922; NCERT gives 1921.
• Hyderabadi Sindhi traders came from Hyderabad in Sindh, not the Deccan.
• Home charges did not include funds for British wars outside India (UPSC 2011).
• Civil Disobedience began in 1930, not 1931 as this chapter says.
• About 9,000 US banks failed in 1930–33, not just ‘over 4,000’.
• GATT was signed in Geneva in 1947, not at Bretton Woods.
• The IMF and World Bank began operations in 1947, three years after Bretton Woods (1944).
• Fixed exchange rates ended in 1971–73; G-77 dates from 1964 and the NIEO declaration from 1974.

Prelims — what UPSC asks

• Asked so far: the Bretton Woods conference (2008 — note the stem wrongly includes GATT); home charges (2011); crops not introduced by the English — tobacco and chillies came via the Portuguese from the Americas (2012); Gandhi and the end of indenture (2019, also on lehs303 — keyed ‘1 and 3’). Static facts likely in future: the IMF/World Bank twins and their dates, the $35 gold peg, G-77 and NIEO, Fordism, the three flows, rinderpest, the Corn Laws, indenture destinations, Chettiars.
• Use the trap list: soya, pasta, the Corn Laws’ date, Berlin 1884–85, the abolition of indenture, bank-failure numbers and 1930 for Civil Disobedience are the details most often mis-stated.

Mains — where it appears and how to answer

• GS1 society and history: indentured labour — why it was taken and whether the diaspora kept its culture (2018): push factors in UP, Bihar and Tamil Nadu, agents and contracts, plantation economies after slavery’s abolition; cultural survival and fusion (Hosay, chutney music, Ramayana and Bhojpuri traditions, Naipaul); present Tinker’s ‘new system of slavery’ alongside historians who stress migrant agency.
• GS2/GS3 economy: the Bretton Woods twins (GS2 2013) — origins, mandates (IMF: balance of payments, exchange stability; World Bank: reconstruction then development), governance and critiques (G-77, NIEO, structural adjustment). Globalisation questions (GS1 2015–2026, GS3) gain depth from this chapter’s long view: the three flows, the colonial drain debate (attribute Naoroji and Dutt versus revisionists), the Depression’s impact on India, and the post-1970s shift of production to Asia.

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