Question

explain the main steps that led to the creation of the global economy, including the role of the industrial revolution

Answer 1

Introduction:

Combination of globalization with industry revolution changed the normal growth rate to the Rapid Growth of economy and world. With the help of globalization countries move there steps towards new nations, they joined their hands for sharing technologies and materials to produce superior quality products at the cheapest cost.

Global Economy:

The global economy refers to the interconnected worldwide economic activities that take place between multiple countries. These economic activities can have either a positive or negative impact on the countries involved.

But creation of Global Economy isn't an overnight phenomenon. It went through various stages of evolution. Following are the steps that led to the creation of Global Economy:

1. Silk Routes (1st century BC-5th century AD, and 13th-14th centuries AD)

The very first step that led to the creation of world economy was proven to be in the 1st century BC because at that time a remarkable phenomenon occurred. For the first time in history, luxury products from China started to appear on the other edge of the Eurasian continent – in Rome. They got there after being hauled for thousands of miles along the Silk Road. Trade had stopped being a local or regional affair and started to become global. Silk was mostly a luxury good, and so were the spices that were added to the intercontinental trade between Asia and Europe. Global trade links were established, and for those involved, it was a goldmine.

2. Spice Routes (7th-15th centuries)

The second step acknowledges Islamic merchants. As the new religion spread in all directions from its Arabian heartland in the 7th century, so did trade. The founder of Islam, the prophet Mohammed, was famously a merchant, as was his wife Khadija. Trade was thus in the DNA of the new religion and its followers, and that showed. By the early 9th century, Muslim traders already dominated Mediterranean and Indian Ocean trade; afterwards, they could be found as far east as Indonesia, which over time became a Muslim-majority country, and as far west as Moorish Spain.

3. Age Of Discovery. (15th-18th Centuries)

It was in this era, from the end of the 15th century onwards, that European explorers connected East and West – and accidentally discovered the Americas. Aided by the discoveries of the “Scientific Revolution” in the fields of astronomy, mechanics, physics and shipping, the Portuguese, Spanish and later the Dutch and the English first “discovered”, then subjugated, and finally integrated new lands in their economies. The most (in)famous “discovery” is that of America by Columbus, which all but ended pre-Colombian civilizations. But the most consequential exploration was the circumnavigation by Magellan: it opened the door to the Spice islands, cutting out Arab and Italian middlemen.

Yet economists today still don’t truly regard this era as one of true globalization. The European empires set up global supply chains, but mostly with those colonies they owned. Moreover, their colonial model was chiefly one of exploitation, including the shameful legacy of the slave trade. The empires thus created both a mercantilist and a colonial economy, but not a truly globalized one.

4. First Industrial Evolution (19th century-1914)

This started to change with the first wave of globalization, which roughly occurred over the century ending in 1914. By the end of the 18th century, Great Britain had started to dominate the world both geographically, through the establishment of the British Empire, and technologically, with innovations like the steam engine, the industrial weaving machine and more. It was the era of the First Industrial Revolution.

When we come to the origins of industrial revolution, we see that drastic social and political changes in Europe in the 15th and 16th centuries opened the way to it. Reformation and enlightenment fundamentally transformed European societies whose consequences in economy paved the way for the rise of global market. Reformation decreased the power the Pope and led to national unifications, and enlightenment freed human reason from scholastic framework. The implications of these changes were so great, that is, innovations, new way of thought, development of physical sciences and the emergence of an unprecedented human adventure in history. In anyway it could be argued that most prominent impetus of globalization process is the capitalist world economy which was incited by the industrial revolution. It created its own structures all over the world based on capitalist mode of production, whose main components are production, consumption, international trade, rivalry and wars among competing states. While the motor of globalization is the capitalist world economy, its implications are currently felt in every field, such as culture, politics, society, environment, arts and way of life, all of which deserve further analysis on their own.

5. The World Wars

It was a situation that was bound to end in a major crisis, and it did. In 1914, the outbreak of World War I brought an end to just about everything the burgeoning high society of the West had gotten so used to, including globalization. The ravage was complete. Millions of soldiers died in battle, millions of civilians died as collateral damage, war replaced trade, destruction replaced construction, and countries closed their borders yet again.

In the years between the world wars, the financial markets, which were still connected in a global web, caused a further breakdown of the global economy and its links. The Great Depression in the US led to the end of the boom in South America, and a run on the banks in many other parts of the world. Another world war followed in 1939-1945. By the end of World War II, trade as a percentage of world GDP had fallen to 5% – a level not seen in more than a hundred years.

6. Second and third wave of globalization

The story of globalization, however, was not over. The end of the World War II marked a new beginning for the global economy. Under the leadership of a new hegemon, the United States of America, and aided by the technologies of the Second Industrial Revolution, like the car and the plane, global trade started to rise once again. At first, this happened in two separate tracks, as the Iron Curtain divided the world into two spheres of influence. But as of 1989, when the Iron Curtain fell, globalization became a truly global phenomenon.

In the early decades after World War II, institutions like the European Union, and other free trade vehicles championed by the US were responsible for much of the increase in international trade. In the Soviet Union, there was a similar increase in trade, albeit through centralized planning rather than the free market. The effect was profound. Worldwide, trade once again rose to 1914 levels: in 1989, export once again counted for 14% of global GDP. It was paired with a steep rise in middle-class incomes in the West.

7. Globalization 4.0

Globalization 4.0 is concerned with today's era. In a world increasingly dominated by two global powers, the US and China, the new frontier of globalization is the cyber world. The digital economy, in its infancy during the third wave of globalization, has now become a force to reckon with through e-commerce, digital services, 3D printing. It is further enabled by artificial intelligence, but threatened by cross-border hacking and cyberattacks. At the same time, a negative globalization is expanding too, through the global effect of climate change. Pollution in one part of the world leads to extreme weather events in another. And the cutting of forests in the few “green lungs” the world has left, like the Amazon rainforest, has a further devastating effect on not just the world’s biodiversity, but its capacity to cope with hazardous greenhouse gas emissions.