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Turning the tide

A brief history of technology, wars, and economic power across the world

Turning the tide

Historically, the centre of gravity of economic and political power shifted beyond imagination, every hundred to two hundred years depending on the waves of technological progress, innovations, and socio-cultural revolutions. From the 1st century onwards and up to 16th and 17th centuries, Asia was at the centre of world power and India and China together contributed to about 60 per cent of the world Gross Domestic Product (GDP). Agriculture prospered in Asia with vibrant trade in spices, gold, and traditional handicrafts during this era. But with the 1st industrial revolution in Europe from the 17th to early 18th century, Britain became the world power with rapid growth in industrial production, economic progress, and trade. Britain colonised most of the Americas, African and Asian countries during this period and came to be known as 'The Empire on which the sun never set' by the 19th century. However, the centre of world power shifted from Britain to the USA in the 20th century and speculations suggest that in the 21st century, power will shift once again to Asia from the USA with China and India playing the leading role. This shift is mostly facilitated by the largest and growing working population, skilled manpower with higher savings and investment rates of these two countries.

USA emerged as global leader

The industrial revolution started in the 18th century in Britain and spread to other European countries which transformed incomes, production, and trade. It was characterised by surplus production of industrial goods in European countries and search for raw materials and markets across the world during the 19th century. The search for markets across countries by western countries was one of the reasons for the two world wars (First World War from 1914 to 1918 and the Second World War from 1939 to 1945). During these wars, USA emerged a winner with an enormous military, money, and technological power. Post-war Germany, Japan, and USSR were also economic drivers in their own right with rapid technological progress and huge investments. Russia raised the hopes of proletariats in October Revolution 1917, its military power was next only to the USA, but disintegrated by 1991. With the disintegration of USSR, seventy years of Cold War ended with the USA emerging as the sole world power. There was a large scale migration of skilled manpower to the USA from across the world and it became a powerhouse in the military, economic growth, and turned into the intellectual capital of the world.

Gold to US dollar as international currency

Historians, as well as economists, are not able to predict these gigantic shifts as forces behind these shifts are more complex and beyond the capability of any sophisticated forecasting models. These are a result of a combination of long-run forces such as the discovery of gold which facilitated the gold as international currency which prevailed until the 16th century and expanded trade between Asia and other countries. Later on, many countries followed the gold standard from 17thcentury under which the government guarantees fixed exchange rate between paper currency and gold. Then during the First World War, gold standard was abandoned by Britain to give free hand to monetary authorities to print more money to meet the war expenses. Meanwhile, in the early 20th century, USA became more powerful and US dollar became world currency as it was widely used and circulated currency. After World War II, many countries had pegged their currencies to USD to bring in macroeconomic stability and credibility to their currencies.

First Industrial Revolution

The period of first Industrial Revolution from 1760 to sometime between 1820 and 1840 with a focus on coal mining, steam power, textile mills, machinery, railways, and shipbuilding helped Britain win the trade war with other countries and helped capture power in most of Asian, African, and other countries. With the discovery and widespread use of steam engines, new steel production processes facilitated mass production of steel in factories. The steel and steam engines were used in almost all factories, all machinery including boilers, motor-cars, railroads, and construction of houses and factories across Europe. The evolution of shipping industry and railways by using steam engines helped in searching new markets and also transportation of raw material and finished products between Europe, Asia, and Africa and facilitated the expansion of European colonies across the world.

Second Industrial Revolution

While the 2nd Industrial Revolution dated between 1870 and 1914 with the wider use of railroad networks, telegraph, telephones, electricity, gas and water supply facilitated an unprecedented level of mass production, movement of people and ideas, and urbanisation resulted in a new wave of globalisation. This was ended at the start of World War I.

USA surpassed Britain after World War I

Although World War I disrupted the world economy and social fabric, there was a boom after the war across in all countries, the USA became a world leader both in economic and military power. By 1916, USA's output overtook that of the entire British Empire. From then on, America played a greater role in the world's political, economic, and military matters.

Recession

However, after a few years of boom, in 1920-21 there was widespread economic depression as troops returning from the War were not able to get gainful employment and remained as unemployed for longer period with consequent stagnation in wage rates. There was also a decline in commodity prices due to overcapacity and supply during the post-War period.

The Great Depression

Electrification, mass production, and the increasing motorisation of transportation and farm machinery resulted in rapid growth in productivity and investment in manufacturing between 1923 and 1928 meant there was a considerable excess production capacity. The mechanisation displaced workers with huge unemployment resulted in the Great Depression between 1929 and 1939.

World War II

The Second World War started by the end of the Great Depression in 1939 and continued up till 1945. Most countries of the world participated in the War with the emergence of the USA as a world leader. The Soviet Union and the United States emerged as rival superpowers, setting the stage for the Cold War which would last for the next 46 years. Meanwhile, the influence of great European powers faded and the decolonisation of Africa and Asia began.

Third Industrial Revolution and re-emergence of Asia

The 3rd Industrial Revolution (digital revolution) started in Silicon Valley in the USA during the 1980s and a number of remarkable technologies began converging. The use of personal computers, internet, and information and communication technologies started becoming popular. They converted most of the manual process controlled by humans into automatic processes controlled by computers. Although started in the USA, it helped India and China and other Asian countries to a greater extent in catching up with the developed countries, given their large pool of English educated and skilled youth. When compared to the 1st and 2nd industrial revolutions, the 3rd industrial revolution was more widespread across many countries. The reach of the 3rd industrial revolution expanded to most of the developing countries in terms of use of mobile phones and internet and also online education. Although 3rd industrial revolution also accompanied by the dot-com bubble between 2000 and 2002 and the financial crisis of 2007 to 2008, the overall living standards of the population increased tremendously with significant benefits accrued to India and China. India is set to become the largest economy in terms of PPP by 2050, while PwC forecasted India will become 2nd largest economy just below China.

[The author is Director (Monitoring and Evaluation), National Institute of Agricultural Extension Management, Hyderabad. The views expressed are strictly personal]

A Amarender Reddy

A Amarender Reddy

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