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05 WORLD ECONOMY TO PRESENT
This study of Economic History will cover the following areas:
1500 to the Industrial Revolution
Industrial Revolution to World War I
World War I to the present
The main focus of this lesson is the political and economic systems in western Europe.
It is important to note that many civilizations were thriving around the world during this period of history. Please refer to the A+LS World History titles to expand your study of this material.
1500 to the Industrial Revolution
There is not a sharp dividing line between the economies of the Old World of the Middle Ages and the New World.
The economic system (feudalism) that had dominated western Europe for the previous three hundred years was basically intact.
Population in 1500 in most places was smaller than 150 years earlier and prices for products were very low.
The guilds were breaking up and merchants and journeyman were taking over the production and distribution of goods and services.
Towns had developed throughout western Europe because of an economy based on internal trade.
These economic and societal changes were taking place within the continent of Europe.
Other changes had occurred outside of Europe that would change the face of the modern world.
The world in 1500 had witnessed tremendous changes in technology, economics and culture.
Columbus sailing for Spain just eight years earlier had opened up the New World to the merchants and people of western Europe.
No longer would Europeans be required to use the dangerous overland route through hostile territory of the Mongol Empire.
The first country to gain a foothold in the New World was Spain, because of the voyages of Columbus.
Many other voyages of discovery by other European nations during the 1500s brought new claims to the territory in the New World.
It is important to note that these territories became colonies that brought wealth to Europe, the Old World.
The products from these colonies in the New World could be sold for tremendous profits.
In addition, the colonies provided raw materials that were needed for manufacturing in Europe.
All of these economics events stimulated the growth of population during the 16th century.
At the beginning of the 17th century the population of Europe had grown to about one million people.
Approximately one half of the people lived in countries that bordered on the Mediterranean Sea.
In 17th century England, the rise in population generated an increased demand for food and the necessities of life. This increase in demand led to the creation to a class of merchants or middlemen who used this opportunity to begin international trade.
Many historians believe that the changes in technology and business organization that had transformed economic life had been going on continuously for centuries.
Until the end of the eighteenth century the technological and economic changes had taken place too slowly to attract much attention.
These technological and economic changes had failed to modify the traditional agrarian or farming society of Europe.
The first real push to develop new technology was in the textile industry fueled by the demand for printed cotton and linen cloth for clothes.
The politics of nation-states in Europe in the 16th and 17th centuries had a dual purpose:
(1) to build up the economic power to strengthen the state.
Point to Ponder!
Do you think that the nations of today have the same political dual purpose as the western European nation-states in the 17th and 18th centuries?
The most significant improvements in technology involved the use of machinery and mechanical power.
The use of these power sources allowed people to perform tasks that had been done far more slowly and laboriously by human and animal power, or had not been done at all.
During the eighteenth century a notable increase in the use of water power occurred in such industries as grain milling, textiles and metallurgy.
Deliberate efforts to invent labor-saving machinery for spinning and weaving were made at least as early as 1730. In 1733, John Kay invented the flying shuttle: which enabled a single weaver to do the work of two people.
The spinning jenny invented by James Hargreaves in 1775 allowed one individual to do the work of several people.
The water frame, a spinning machine patented by
Richard Arkwright in 1769, led to the development of the factory system.
The factories needed water power and were built most often by streams in the countryside.
The most important invention in the spinning of textiles into cloth was Samuel Crompton's mule, so called because it combined elements of the jenny and the water frame.
Perfected between 1774 and 1779, the mule could spin finer and stronger yarn than any machine or hand spinner. The mule could also be adapted for steam power.
The invention of steam power meant that factories could be built in any location.
The second industry to be revolutionized was, unlike cotton, an ancient one in Britain.
Iron had been produced there from the early Middle Ages, but it was primarily a rural occupation.
In 1784, two men, Peter Onions and Henry Cort developed a process that made Britain the world's leading exporter of iron and iron wares.
The developments in the cotton and iron industries made Britain the leading industrial leader until the latter half of the 19 century.
Beginning in the 1780s, technical innovations in British industry stepped up remarkably the whole process of social change.
By the middle of the nineteenth century, Great Britain had been converted into the first industrial society.
This new industrialism also produced many social problems because people were now living in crowded conditions in cities.
The large power looms, invented by Edmund Cartwright in 1785, enabled the factories to produce more cloth than a person working at a hand loom in a small cottage in the country.
Technology had put these people out of work.
Point to Ponder!
The problem of people losing their jobs occurred throughout history.
We obviously do not have many people delivering blocks of ice to houses.
A century ago the delivery of ice to houses was a thriving business.
The block of ice was placed in early refrigerators, before the development of electricity.
Many of the occupations that existed in the first half of this century have either been replaced by modern machinery or a computer.
Some examples of jobs that have been eliminated or changed by technology:
Computers now automatically route most telephone calls, meaning fewer telephone operators are needed.
Many occupations are being replaced by robotics, especially assembly line jobs in factories.
We will further discuss the advances in technology in later lessons.
The spread of the new technology and machinery led other nations into industrialism including Belgium, France, and the United States.
By the end of the nineteenth century, Germany after an extremely rapid rise, joined the others in the forefront of industrial nations.
The basic form of industrialism that was spreading throughout Europe was substantially the same as it had been a century earlier.
The first advances of industry occurred in agriculture followed by textiles, especially in the production of cotton cloth.
The next stages of advancement were made in the process of making metals, machines, and chemicals.
The production of factories dramatically increased as a result of the improvement in technology.
This new technology began the development of a second Industrial Revolution.
The major changes brought on by this second Industrial Revolution focused of the following two areas: the conversion of electrical energy and its distribution and the invention of the internal combustion engine.
These two items would have a profound effect on the economies and societies of people around the world.
Electrical current was more versatile than steam power.
Electricity could be used not only to produce motion but also light, sound, and heat and that produced a revolution in communication.
This revolution led to the development or improvement of the following: telephone, telegraph, radio, television, radar, computers and eventually, fax machines and the internet.
There were also notable advances in chemical manufacturing that led to the development of many new products.
The twentieth century has witnessed the extension of industrial technology, sometimes creating tremendous political and social turmoil around the world.
During the 19th century, the nations of the world were competing with each other economically in an attempt to acquire the essentials of modern industry.
This economic competition would eventually become a military conflict that would change the power structure of the world.
The beginning of World War I in 1914 ended a distinct era of economic history and ushered in a period of instability and uncertainty that could hardly have been foreseen before the conflict began. The fighting of two world wars in the twentieth century had a devastating effect on the economies of the nations of the world.
The nations of the world had not experienced a major war for almost a century before the outbreak of World War I in 1914. (See map below.)
A modern war demanded the mobilization of all economic resources.
The leaders of modern governments had to assume control over all aspects of their economies.
These new government controls affected the market forces of supply and demand.
Following World War I, the nations of Europe experienced the most dramatic economic changes as they struggled to rebuild their economies.
This economic recovery depended on monetary assistance from the United States, which was now the financial center of the world.
The world economic center that had been located in Europe had now been dislocated by the war.
The decade of the 1920s brought a tremendous inflation rate to Europe as nations tried to rebuild their economies.
The crash of the United States Stock Market in 1929 had devastating economic consequences for every nation.
The Stock Market crash brought on the greatest and deepest world depression in history.
The Stock Market Crash will be discussed in later lessons.
In 1939, the world was again plunged into a war when Germany invaded Poland. The United States entered the war in 1941, after the bombing of Pearl Harbor.
At the end of the war, the nations of the world faced tremendous economic challenges. The factors of production had been destroyed in many nations and there was a need for food and shelter.
Following the war two new super powers emerged on the world scene.
On one side was the United States with its capitalist economy and republican form of government.
On the other side was the Soviet Union with its communist form of government and its socialist economy.
The rivalry of these two nations dominated the world scene from the end of World War II in 1945 to the fall of the Soviet Union in the early 1990s.
Please note the economic and political spectrums located at the end of this lesson.
In addition, the latter half of the twentieth century witnessed the emergence of many new nations as former colonies of European nations gained their independence.
A number of these countries are considered third world, because they have very little industry.
Many of the people in these countries are involved in agriculture because modern farming techniques are not available.
Summary
We will have a further discussion of our modern economies in the lesson on the global economy.
We are now ready to study economic history from the American point of view.