UNIT-1
ECONOMIC DEVELOPMENT OF UK, USA, RUSSIA AND JAPAN
As the century most associated with industrialization and capitalism in the West, the 19th century looms large in the history of economic policy and economic thought. The rise of strong nation states created conditions conducive to capitalism. It provided domestic markets free of barriers to trade, a uniform monetary system, contract and property laws, police and militia protection, as well as, basic transportation and communications infrastructure.
Initially absolute monarchs wrested power from feudal lords and town authorities and consolidated territory into nation states. Eventually, as the power of capitalists and the middle class or bourgeoisie rose, the monarchs ceded power to a more representative structure.
The British Empire grew rapidly in the first half of the century, especially with the expansion of vast territories in Canada, Australia, South Africa and heavily populated India, and in the last two decades of the century in Africa. By the end of the century, the British Empire controlled a fifth of the world's land and one-quarter of the world's population. So, the 19th century in general and the second half of the 19th century in particular was an era of great economic development, especially in Europe.
Population growth due to increase in the farm sector in technological as well as irrigated land coupled with the economic development due to industrial revolution and increase in international movements and trade reflected large family size as well as increasing trend of migration. Immigration was completely open during this time period.
Urbanization and an expansion of commerce and manufacturing generated new demands for public services and regulation. Greater density also increased the level of what economists call “externalities” which voters wanted regulated. Thus, at the same time that old trade barriers were eliminated, new regulations were adopted at state and national levels, and many government services increased.
Agriculture: More population led to more land under cultivation. Better plough systems and seeds were used. This increased the agricultural production both in absolute and in real terms.
Imperialism: The Islamic gunpowder empires were formally dissolved and European imperialism brought much of South Asia, Southeast Asia and almost all of Africa under colonial rule. During the 19th century, European imperialism increased tremendously. Colonization was the domination of Europeans over non-Europeans. A major factor that influenced colonization was competition between different countries. In the race for greater wealth, countries, like Britain, gained colonies in Africa and Asia that provided ports and even offered material resources such as oil, tin, gold, and diamonds. Also these gains helped European countries cut out the middleman. They did not need to trade because they now controlled the resources directly. So, the possible economic benefit of having colonies was a big motivation.
Flow of trade increased: Countries like the USA and UK started trading for both raw and finished goods. This brought prosperity in different parts of the world and a race for new methods to make trade even more profitable began. Many travellers travelled across countries and continents. They travelled along with their indigenous goods and culture. Hence, there was a rise in cultural exchange between people from different parts of the world. People’s engagement with outsiders increased as a result. Improvement in the transportation system played a major role in this as the transportation system helped people reach out to far distant lands of the world.
Labour movement: There was a rising trend in the movement of labour across the world. For better employment opportunities, millions of people from the UK moved to the US during the 19th century. Rise in religious persecution of minorities, increase in population and spread of diseases was a major thrust behind the movement of the labour.
Flow of capital: Rich entrepreneurs invested their money in other countries which brought industries from the developing countries of the time to the poorer countries of the time. Employment opportunities generated in those poorer countries integrated such countries with the already developing countries. As a result, the entire world saw a tweak in the growth of their respective economic prosperity.
Industrial growth: During this time, the textile industry grew by about 25 times, iron production by 30 times and coal production by about 20 times. The industrial growth increased both import of raw materials, especially cotton, as well as export of finished goods. This brought enormous profits to those countries, like the UK and US, which provided more monetary support to their industries to expand even further. Availability of jobs for people increased. This increased their purchasing power to some extent which further played an important role to increase demand for the goods.
Transportation improved: Thomas Telford built roads and canals in the early 1800s. Railway tracks were laid down across countries and their colonies as well. Improved railways provided for faster and reliable paths for the movement of goods from their sources to factories and from the factories to consumers. Shipping industry was also on a rise. UK, France, Spain and Germany were arch-rivals in the shipping industry. Ports were also being developed to support the shipping movement and maintenance. Shipping industry helped develop the international system of economy. Links were being made between different parts of the world.
Science and technology: The 19th century saw the birth of science as a profession. Understanding of thermodynamics led to an understanding of heat which helped industries for more innovations and ideas. The most important step in science at this time was electrical science which changed the face of physics and made possible for new technology and helped spread power and radio wave communication at the end of the 1890s.
High rates of growth per capita output and population: More population provided more labour for economic activities. Cheap availability of labour increased profit margins and created a room for more investments. More investments lead to more production and hence economic growth.
High rates of increase in total factor of productivity (TFP): When a country is able to increase its total factor productivity, it can yield higher output with the same resources, and therefore drive economic growth. Increase in technology and science helped economic activity with their productivity. They could generate more production with the same resources. Now, resources as well as their productivity both increased rapidly. Therefore, the economy as a whole grew manifold.
High rates of structural transformation of the economy: The economies were now being opened and capitalism was on a rise. This structure helped entrepreneurs change their approach as per the demand of the situation. More diversity was brought into the economic activities in terms of the availability of the methods. Direct control of the source of raw material abroad helped countries like the UK, France and the US reduce trade barriers like the middlemen.
High rates of Social, Political, and Ideological Transformation: After the renaissance and reformation movement in Europe and the war of independence in the US, people were moving more towards the idea of liberalism. They believed in more self-regulation than government’s interventions in their economic activities. They could move more freely than before and could garner employment activities comparatively easier than before.
Trade structure: The structure of trade had changed. Now leading countries focused on more export of finished goods and more import of raw materials. This idea of trade damaged the economies of the countries exporting the raw materials but it tremendously increased profits of the finished goods generating countries.
Human development index: though this term was not used back then, it played a major role in the development of the economies. Education was on a rise as there was an increase in science and science based theories. Life expectancy due to little development in medical science also increased.
References
Norman Lowe World History
