Pre-World War I Economy - Coursework Example

Pre-World War I Economy. Name: Date: Affiliation: Pre-World War I Economy. The world economy shifts from time to time with each period having its unique characteristics. The period before the First World War was a period when the world had begun the globalization process, and more and more industries started to spring owing to the many inventions that were being made in Europe (World Trade Report, 2007).Advances made at this point in history resulted in various historical events including colonization and the First World War. This paper will take an in depth analysis for the period leading to the start of the twentieth century. Several key pointers will direct this study. First is that at the start of the twentieth century, many countries including the dominant economies today were poor compared to their economic status when the century came to a close. Second is that as the nineteenth century came to an end, the cost of transport had fallen significantly, and transport speeds had increased substantially to enable the shipping of people and goods wherever possible. Third is that the reduction in transport costs and had for the first time in human history created a possibility for a global economy (Bradford, 2007). In this kind of economy, the movement of goods and people across oceans and between continents was central to the thriving of the economy. Finally is that the economic history of the post-World War I era was concerned with the creation of economic, technological and economic logic that would see the first global economy. Patterns of migration, the division of labor, international investment and economic growth that were established decades before the First World War would not last after the war. They would be destroyed by war, technological changes, and politics during and after the war (Bradford, 2007). Production and Technology At the start of the Twentieth Century, the world was still not industrialized as such. Many people survived from farming; most people could not read. Despite the fuss created by the various technological advancements in Europe during the industrial revolution, not many people had used the steam engine or telephone. Life expectancy at this age was still very low. Britain at the time was one of the world’s most advanced economies. At 1870, the country had 76% literacy rate with 76% of the population having enrolled in primary school and 1.7% secondary school enrollment. Agricultural employment accounted 23%. By the start of the world war in 1914, the literacy rate was at 96%; there was a 100% primary school enrollment and a 5.5% secondary school enrollment. Agricultural employment was at 12% (Martin, 2015). In the United States and the rest of Europe, farmers were the largest occupational group and over half of the population lived in the rural areas. In Canada, New Zealand, Argentina and Australia was otherwise known as “regions of European Settlement”, agriculture was the main economic activity accounting for a huge chunk of the GDP. Farmers in these countries had also managed to accumulate a vast amount of wealth Among the major minerals that were produced at the time include coal. In Britain, 194 million tons of coal would be burnt in 1913. However, the major problem was that energy at this time was not used effectively. Railroad in the U.S carried people close to 35 billion miles. Steel production began in the second half of the twentieth century owing to the discovery of the Thomas-Gilchirst process and the Bessemer process. As of 1913, steel production stood at 70 Million tons per year worldwide. In France, the period would be marked by the construction of the Eifel tower that marked the restoration of great times in France. In Germany, chemical production was at a peak owing to many inventions and discoveries in German Universities and laboratories. By 1913, Germany was producing a quarter of the world’s chemical output (Broadberry, 2005). At the eve of the First World War, over 1.7 million passenger cars and 100,000 commercial vehicles were registered in the Unites States alone. Industries in the United States used internal combustion in the manufacture of their vehicles making them way ahead of European countries. There was quite a significant increase in the number of educated people in the years leading to the First World War. Many economies at the time made it their priority to have all children access elementary schooling. This made those the wealthy pursue higher education in a bid to differentiate themselves with the peasants. Industries would soon be flooded with a high quality workforce. This was reflected especially so in the United States and Germany, two countries that became highly productive in the industry during this period. Living standards at the time were quite low at the time, specifically for the upper middle class to the poor who were predominantly working class, slaves or peasants. At the period, most households boarders who ate and slept in the house. This provided by the housewife with an opportunity to make income. This, however, would make her life difficult and increase the number of chores she would do (Bradford, 2007). Not many families has access to running water, most families had to rely on faucets across the street which would then have to be heated. One of the luxuries That a working class family would afford is a laundress. This is because the maintenance of laundry was a difficult task that would consume an average of 10 hours per week. This would make it difficult for any married woman to have an independent career. Women that worked outside the home were majorly African-American, and they would still have to do their household chores (Bradford, 2007). Maintenance of certain fabric such as white fabric was only for the bourgeoisie class. At the period infant mortality was high and so was the mortality rate at the time. People that worked in factories had a high risk of death and disability since workers were not well protected. Staff welfare was not as developed as it is today. Compensation was rare also. The Homestead mill was one of the most lucrative jobs that would attract people to move for thousands of miles to look for. These jobs paid an average of $900 per year, which was quite a huge pay by both the US and World Standard. 2. International Trade. After the American civil war, the steam engine and the iron hull made it possible to export agricultural products such as cotton, sugar, meat, grain and wool from America to Europe. Plunder of gold and silver from the Americas has quite a huge effect on the European economy. Most gold and silver that arrived in Europe was converted to coins. This had an overall effect of Driving the price level of Europe since there was more money compared to the goods available.it also redistributed the purchasing power within Europe from developed countries like Germany Britain and Holland to southern European countries like Spain, where the treasure fleets docked. This converted Spain to a country dominated by soldiers and servants since the Spanish loyalty used their gold and silver to fund their armies and purchase luxuries. Britain and Holland, on the other hand, became countries dominated by sailors, craftsmen, and merchants (Bradford, 2007). Another effect caused by these treasure fleets was that they made goods from Europe very expensive to buy especially by people from Asia since the price level of commodities was spiraling upwards. On the other hand, Asian products like spices, textiles, tea and porcelains became cheaper for the European consumers. The Americas also produced tobacco and Sugar which were exported to Europe, rum and weapons which were exported to Africa and slaves who were exported to the Caribbean, commonly referred to as the Triangular trade (Martin, 2015). At the beginning of the nineteenth century, cheap American cotton produced by the use of free labor provided Britain with an excellent alternative as opposed to Egyptian and Indian cotton. The cotton gin produced by Eli-Whitney complimented this making production very low. By mid-nineteenth century, cotton alone accounted for between 15-60% of Britain’s GDP (Martin, 2015). 3. The First Global Economy. At the start of the nineteenth century, traditional canvas sails began to be replaced by the iron steam engine. As the century came to an end, the wooden hull had now been replaced by iron ores, on the other hand, message sloops had been replaced by submarine telegraph cables. There was the invention of new and more efficient methods of packaging and preservation which allowed the shipping of perishable commodities. By 1850, perishable organics were being shipped to Europe. By 1900, beef consumed in Europe was raised in Argentina, mutton and wool were produced in Australia while butter was produced in New Zealand (Lewis, 1981). The effect of these technological advancements supported by the industrial revolution made it very easy to conduct trade on a global front. Unlike the period preceding where international trade was limited to tobacco, tea, drugs and luxuries, people would now ship anything from anywhere. This led to the scramble and partition of Africa a period that lasted between 1881 and 1914. Africa provided an avenue for the European powers to acquire cheap labor and raw materials. Profits resulting from oceanic transport would increase at this period owing to two factors (Martin, 2015). First was the industrialization of North West Europe that allowed them to manufacture and export all kinds of transport. Iron and steel would increase the availability of natural resources. They made it very easy to extract agricultural and mineral products. Resources would be easily extracted and shipped; it became easier to manufacture goods and intercontinental transport costs were at an all-time low. All these would lead specialization among the manufacturers. Through specialization, the manufacturers would improve industrial technology to decrease the production costs (Broadberry, 2005). The British Empire had managed to produce various products like Coffee in Kenya and rubber in Malaysia. These products would be shipped to Europe for manufacturing, and then sent back to the colonies which had a huge market. This made the second half of the nineteenth century have a globalized economy.There emerged a sharp division of international labor owing to these developments. Temperate settler colonies such as Argentina, Canada, Western U.S and Australia became the main producers of leather, wool, grain, meat and other high valued agricultural products (Broadberry, 2005). On the other hand, tropical settler regions of Malaysia, Cuba, Brazil, Ghana and Columbia produced and supplies rubber, coffee, vegetable oil, cotton and sugar which were relatively low value. Prior to the First World War, 75% of British exports were manufactured goods. In America, 40% of the exports by 1900 were beverages, food and feeds. 35% accounted for industrial materials and supplies. This integrated world economy led to development of new crops and new industries. 4. Slow diffusion of Industrial Technology. There was minimal or no diffusion of industrial technology to the colonies and other regions that became the third world after the First World War such as China and India. These areas had the ability to produce high value agricultural produce yet did not have the ability to manufacture these products. This was due to several reasons. The first is that capital owners found these regions to have a lot of political risk. Some did not have stable leadership while other regions were characterized by frequent wars. This made it quite risky to set up industry in these regions. The second reason would have been the unavailability of resources such as a stable power grid. It was much more advantageous to the capital owners to keep their industries closer to the industrial core since it was cheaper to keep the machines running. For instance, it would be easier to repair a machine in England compared to in Malaysia (Martin, 2015). Finally, the workforce in the industrialized countries found it easier to operate the machines. It was found that it would take more men in the third world to operate these machines compared to in industrialized nations. 5. International Migration. During the period, the sharp decline in the cost of transport led to mass migration of people all over the world. This played a huge role in the equalization of material wealth all over the world (Bradford, 2007). Many people migrated from their continent of origin to seek a better life. Over fifty million people are estimated to have left Europe at this period to Australia and the Americas. On the other hand many other people left India and China to move to America, lands around the South China Sea, East Africa and Europe. There was a lot of tension between indigenous people and the immigrants which dominated the politics of the day during this period. Trade Policy Creation of free trade in Europe The period before World War I was characterized by robust economic growth that was driven by technological and industrial developments and increased trade on a global scale. This kind of network was initiated and supported by a network of bilateral trade treaties (World Trade Report, 2007). The Anglo-French treaty of 1860 was a pioneering trade treaty that led to the development of other treaties which would seek to diversify trade. Events in the second half of the 19th Century would see an increase of trade owing to advances in technology made in Europe. Various scholars had various views about foreign investments and immigration. Adam Smith and David Ricardo were in favor of unrestricted trade as opposed to American scholars such as Alexander Hamilton and German Friedrich list who called for government intervention to protect domestic industries (World Trade Report, 2007). In the United Kingdom, the Corn Laws were repealed in 1846 to allow increased trade in the region. The monarch also made bilateral trade treaties with other European nations increase trade. The United Kingdom became a world leader in industrialization and technology. It was the world’s leading exporter and importer. It was willing to make agreements with any country where it would export its manufactured products to. On the other hand, it was willing to accept raw materials and agricultural products for its industries in return. Trade policy in Europe at this time was liberal, market-oriented domestic economic policy. Since the United Kingdom had low trade barriers and provided the good market for raw materials and agricultural products, many countries found it worthwhile to trade with the economic giant. For instance, the Cobden-Chevalier Treaty allowed France free entry for selected goods into the United Kingdom and 80% off for wine. There was also an exemption for British coal exports. This treaty was followed by a load of other treaties all around Europe and even helped to win over the protectionist policy in Prussia leading to the treaty between Zollverein and France in 1865 (World Trade Report, 2007). Italy on the other hand would adopt a free trade policy as it eyed agricultural exports. Smaller European countries would make trade agreements with the French to allow their products to access the French market. All these would make Europe a low tariff zone. Decline in Free Trade. The era of free trade would come to a close when the renewal of trade agreements began in a different political and economic environment. The period of the Great Depression of 1873-1896 saw the prices of goods decrease by over one third. Although the United Kingdom would retain its low tariff policy, other European countries that had large agricultural sectors and a less developed industry began to increase their tariffs. There are several factors that resulted to the protectionist attitude. First is that with the end of the American civil war, the production of grain the United States rose sharply. Owing to the sharp decline in the transport costs, other European countries would also increase their grain production. There was an influx of imported grain in Europe which caused the price of grain to fall in Europe (Martin, 2015). Farmers from Europe that supplied Britain with wheat quickly lost their market to the United States. This contributed to a decline in the income of farmers who attributed to almost half of the population in continental Europe. Conclusion This fall in income would lead to sharp decline in the demand for both investment and consumer goods. Demands by agricultural lobby groups to seek protection against cheap foreign goods also prompted steel and iron industries to seek protection. This resulted in protectionist policies especially in Germany during this period. Since trade barriers had increased, the direction of trade switched to between the countries and the colonies which had proved to be more useful in terms of cheap raw materials and ready market. To justify trade restrictions, many countries would blame the behavior of other nations, for instance; the 1879 German Trade policy was based on grounds that the United States retained high tariffs on manufactured goods (World Trade Report, 2007). Economic boom characterized the period leading to the First World War. There was increased flow of goods around the world owing to increased innovations in Europe. The world has its first taste of globalization since the trade was now conducted internationally. Even with Europe having a protectionist attitude at the beginning of the twentieth century, economies continued to prosper owing to economic benefits of the colonies. References Bradford, J (2007). The Path from the Pre-Industrial World. Braford.net. Retreived from www.j-bradford-delong.net Broadberry, S. (2005). The Economics of World War I. London: Cambridge University Press. Lavergne, R. (1983). The Political Economy of US Tariffs: An Empirical Analysis. Toronto: Academic Press. League of Nations (1927). Economic and Financial Section, International Economic Conference, Documentation, ‘Tariff Level Indices’, Geneva. Lewis, A. (1981) The Rate of Growth of World Trade, 1830-1973, In Grossman and Lunderberg (ed) The World Economic Order. Past and Prospects. Madison, A. (1962). Growth and Flactuation in the world Economy, (1870-1960), Banca Nazionale del Lavoro Quarterly Review, No. 61, June. Milner, H (1988). Resisting Protectionism: Global industries and the Politics of International Trade, Princeton, NJ: Princeton University Press. Martin, H (2015). Economic Planning Before 1914. International Encyclopedia of the First World War. Amazon Publishers. New York city. Norbolm, J (1962). International Trade Statistics 1900-1960, (Unpublished Document of UN Statistical Office), New York. World Trade Report (2007). Six Decades of Multilateral Trade Cooperation: What have we learnt? The Economics and Economy of World Trade Cooperation, Genev Read More