Industrialisation

Beginning of Capitalism

The renewal of city life and the commercial revival of Europe led to the use of money in economic life, thereby undermining the feudal order that had developed after the fall of Rome. The bonds of serfdom could not be preserved in the changing circumstances. Serfs, particularly in Western Europe, increasingly paid for their land with money rather than labour, so that feudal lords became landlords and serfs became free peasants. The weakening of serfdom was a prerequisite to the expansion of Europe. It created a more fluid society that could accumulate the capital, provide the organisation and free the manpower needed for the work of exploration, conquest and settlement. It is not accidental that among the European nations, the degree of success in overseas enterprise was in direct ratio to the degree of liberation from the bonds of feudalism.

Use of money undermined the feudal craft and merchant guilds in the towns. The guilds, with their strict regulation of workmanship, and pricing and trading practices, were geared not to making profit but to preserve a traditional way of life. Guild members were committed to the concept of 'just price', and profiteering at the expense of a neighbour was considered unethical and definitely un-Christian. These concepts and practices broke down with the coming of the entrepreneur. They avoided the guilds by purchasing raw material and taking it to underemployed artisans in the countryside, who laboured on a piece-work basis. The rationale of this 'putting-out' system was profit rather than 'just price'. The entrepreneurs paid as little as possible for the material and labour, and they sold the finished product as dearly as possible in order to secure maximum return on their capital investment.

Europe's economy changed not only by the growing use of money but also by the minting of standardised coins that were acceptable everywhere, and by the development of banks and of credit instruments. Florence led the way in 1252 with the gold florin, and other cities and states soon followed. Simple bills of exchange also appeared in Italy as early as the 12th century. Gradually, mighty banking families appeared, first in Italy and later in Northern Europe. The trend led inevitably to the abandonment of medieval Christianity's strong condemnation and ban on the charging of interest. For centuries, churchmen had preached against interest, as constituting usury. By the middle of the 16th century, quite a few of them were pleading for the recognition of a moderate and acceptable usury.

What was happening to Europe, then, was a historic shift to a fundamentally different type of economic system, the type known today as 'Capitalism'. It has been defined as a 'system in which the desire for profits is the driving motive and in which large accumulations of capital are employed to make profits by various elaborate and often indirect methods'. Its beginning was epoch making. For it affected not merely the economic but all aspects of life. While in the early Middle Ages, money had been peripheral and little used, by the late Middle Ages, it provided energy that was responsible for Europe's further meteoric rise. No earlier societies or economic systems had been based on the notion of growth.

Their aim had been only to maintain the material well-being of the past rather than to enhance it. Henceforth, with capitalism, the precise opposite was the case. Profits now were ploughed back to increase the quantity of capital available for production. 'Capitalising' of profits, in the sense that surplus was converted into more capital, is the rationale behind the term 'capitalism'.

The 'capitalist' was not content with making a living but was driven by the urge to enlarge his assets. He did not cease his efforts when his needs for consumption were satisfied. The new 'capitalist spirit' is epitomised by the statement of Jacob Fugger, the wealthiest banker of the 16th century, who said: 'Let me earn as long as I am able.'

As significant for Europe's economy as the flourishing banks were the new jointstock companies, the counterpart in early modern times of the multinational corporations of today. These new organisations were most effective instruments for economic mobilisation and penetration. Anyone who wished to speculate with a little bit of his money could do so without risking his whole future. He risked only the amount he invested in company shares, and he could not be held further liable for whatever losses the company might incur. Furthermore, there was no need for the individual investors to know or trust each other or to concern themselves with the specific conditions of the market and the policies of the company.

These details of management were entrusted to directors who in turn could choose dependable individuals to manage company affairs in the field. This arrangement made it attractive for all sorts of scattered individuals to invest their savings in individual ventures. In this way it was possible to mobilise European capital easily and simply, and vast amounts were invested in various overseas undertakings. No Eastern merchant, limited to his own sources or those of his partners, and choosing his managers from his family or circle of acquaintances, could hope to compete with the powerful and impersonal joint-stock company. It became the instrument for the operation of European capitalism on a global scale.

What is Meant by Capitalism? Capitalism, according to Hobson, 'is the organisation of business on a large scale by an employer or a company of employers possessing an accumulated stock of wealth wherewith to acquire raw materials and tools and hire labour, so as to produce an increased quantity of wealth which shall constitute profit.'

The distinguishing traits of capitalism, therefore, are:

(a)a money economy,

(b)a sizeable market,

(c)large scale operation of the means of production and distribution, privately owned,

(d)intense competition, and

(e)rational and precise business methods.

The complex phenomena which comprise the capitalist system have their roots in the Middle Ages. To appreciate its evolution, it is necessary to recall the limitations of medieval commerce. Trade was restricted by the medieval idea of local selfsufficiency and of production for use rather than for profit. From the later Middle Ages, however, a wider intercourse with the East and proliferation of intra-European commercial contacts tended to break down the manorial ideal and to provide opportunities for the exploitation of more extensive markets. The Crusades greatly contributed to the development of towns in Europe as well as to the wealth of the seaports which profited by them and were the first to recover from the general stagnation of trade and industry in the early Middle Ages.

When and how did it Come into Being? At the dawn of the 16th century both the manorial system and the guild system were in decay. Landlords were receiving money rents in place of exacting personal services and payments in kind. Merchant guilds were becoming exclusive and aristocratic. Craft guilds were facing competition from manufactures outside the guilds, and many a journeyman was sinking to the position of a hired laborer.

The rise of national monarchies went hand in hand with the revival of trade. For the national monarchs could forbid private warfare, eliminate local tariff barriers, maintain law and order and enact and enforce a uniform body of commercial law. Barter gave way to a money economy and whether the change arose from a reviving commerce or from the minting of increased quantities of hard money, the point is that it was the most significant aspect of the transformation of an essentially medieval economy into a modern one, and that it stimulated commerce. It is arguable that the Protestant ethic created the necessary mental atmosphere for the beginning and development of capitalism.

It was in towns that the new capitalist spirit was most in evidence. Certain guildsmen who had managed to accumulate personal wealth, outsiders who had settled in towns and amassed fortunes, members of the landed nobility who brought their wealth and settled in cities, wealthy officials of the state or the Church – all put their 'savings' (i.e., capital) in the extension of trade, and as trade increased, cities grew which, in turn, raised the value of city land and added an 'unearned increment' to their capital.

The Italian cities profited most from the expansion of commerce and it was there that banking, a great agency of capitalism, was first established. Florentine banking houses established branches in other parts of Europe, and independent banking developed in Venice, Genoa, etc. Interest rates in this period fluctuated between 10 and 50 per cent. Henry VIII of England fixed it at 10 per cent, and other monarchs followed suit. There also developed a host of capitalistic techniques such as the sea loan and the bill of exchange. The former enabled merchants to expand their operations, insured those operations, and opened an investment avenue for surplus capital. The latter eliminated the risk and expense involved in the transfer of money.

The emerging capitalist enterprise was both accelerated and accentuated by Europe's new relationship with Asia, Africa and America. It brought to Europe natural and human resources (slaves) and monetary treasures that it lacked. These were obtained in a variety of ways: by military plunder, as in Mexico and Peru; by forced and unequal trade, whether conducted by the Portuguese in India or by the Spaniards in the New World; and by imposition of taxes and tributes and trade restrictions on both natives and colonists abroad. Slavery was the overseas labor basis of rising European Capitalism.

Though for a time Lisbon and Seville supplanted Venice and Genoa as the leading commercial entrepots for Europe, the chief profits from overseas did not remain in Spain or Portugal, where only a small minority, principally from the bourgeoisie, concerned themselves directly with distant commercial and colonial undertakings. The masses were confined to agriculture which was backward.

Hence, the monarchs and prospectors of these countries had recourse to foreign bankers for the funds they needed for capital investment and the ultimate returns also went more to foreigners. The Italians too lost their pre-eminence to the Germans and the Netherlanders. The challenge posed by the Ottoman Turks and competition from Portugal and Spain in the matter of new trade routes adversely affected the Italians. Venetian trade suffered as Lisbon and Seville came into prominence and consequently Venetian manufacturing declined. On the other hand, bankers of Germany and Netherlands were in a position to supply needful capital and reap the rich rewards. They were badly affected by the advance of the Turks. They could freely develop their traditional trade with Russia, Scandinavia, England, etc. They had mineral stores which enabled them to improve and extend their manufactures. Nor were they rivals of the Portuguese and Spaniards. However, if the major capitalistic profits passed at once from Spain and Portugal to Germany and the Netherlands, a considerable share was dispersed by means of exchanges as that of Antwerp manufacturers and money lenders of other European countries.

Thus, by the end of the 16th century, capitalism was firmly rooted in European economy. This was aided and confirmed by the price revolution. Because wages usually tended to rise more slowly than prices, manufacturers could earn profits. The merchant too was helped, for the goods he had in storage or abroad ships tended to rise in price while he held them. In short, 'price revolution' helped to fix the capitalist system on Western and Central Europe.

Why did it Begin? By the beginning of the 16thcentury, both manorial system and guild system were in decay. For the landlords were receiving money rents from free tenants while hiring agricultural labour, and merchants and craft guilds were unable to function in the old fashion. The spirit of gaining financial profits was approved of even by Christian priests, particularly the Protestant. The emergence of towns as important centres of capitalist enterprise was another crucial factor. The inhabitants of these towns were not traditional guild leaders wedded to the concept of 'just price', but ambitious and enterprising persons intent on utilising their independence to amass wealth. Whatever deficiencies Europe suffered from, particularly lack of human and natural resources, were overcome by the new European contacts with the New World and Asia. Moreover, the economic practices and theories, known as mercantilism, completed the process of the emergence of capitalism by providing precious money from outside to help the evolution of currency, banking and financial institutions. The beginning of capitalism was also made feasible by the cumulative impact of several other developments such as the crusades, geographical discoveries, rise of national monarchs, accumulation of capital and spread of capitalist spirit, scientific developments like mariner's compass, astrolabe, telescope and new methods of ship-building.

What was its Outcome? The beginning of capitalism dealt a body blow to medieval agriculture. Nobles tended to become absentee landlords in trying to earn more profit from their estates. They substituted money rents for the traditional services payments in kind of their peasants. Manors were rented out. This was, without doubt, detrimental to the peasants' welfare. Many peasants, in fact, from a position of tenants, became agricultural labourers. The new capitalism also contributed to the 'enclosure' movement in England and to similar movements in other countries, all of which were directed towards an increased action of manufacturing staples, mostly wool, for important markets, and alongside towards a decreased employment of skilled farm labour.

It brought about significant changes in European industry as well. The guilds were already in decline and now they succumbed completely. They were forced to alter their status or to yield to destructive competition. They admitted capitalists to membership and under the latter's leadership changed themselves into corporations which adopted the domestic system. Or else, the remaining purely local entities, they sought employment with capitalist middlemen. Outside the guilds, the 'putting-out' system appeared, whereby a capitalist middleman bought raw material, put it out to artisans to be worked in their houses for wages, and sold the finished product.

Europe also experienced extraordinary social strains and stresses. The gulf between the rich and the poor widened; the rich became richer, and the poor poorer. There was an epidemic of peasant revolts against greedy landlords, and the towns suffered growing pains. The 'putting-out' system differentiated more sharply between capital and labour, debasing the latter. It tended to substitute, for the close tie between the master and apprentice, an impersonal relationship.

Particularly noteworthy was the rise of the capitalist bourgeoisie to hitherto unprecedented influence and distinction. In union with them, the kings overawed both nobility and clergy. Many of them married into the nobility or gained admission into the ranks of the nobility by rendering service to the monarch. Gradually, members of the nobility also realised the advantages of investing in trade and manufacture. Capitalistic agriculture allied itself with capitalistic commerce and industry, and laid the basis for the supremacy of the middle classes.

Agricultural Revolution

The beginning of the modern period in Western Europe was marked by, among other things, a considerable growth in agricultural productivity, which has been described as 'Agricultural Revolution'. Though agriculture has been the main occupation of the people for centuries, hardly any improvement was made in its technique as late as 17th century. The same methods and tools were used by most people as had been used for centuries. Few new crops were introduced in Western Europe until after the Crusades and the voyages of discovery. The fundamental cause for this lack of improvement was the absence of sufficient demands for agricultural commodities beyond home consumption. Almost everyone produced what they needed for themselves. Not until workers began to labour full time for an employer and large cities came into existence, was there a demand for agricultural products.

The so-called Agricultural Revolution was neither complicated nor far-reaching in its effects as was the subsequent Industrial Revolution. Yet it involved several great changes such as the introduction of machinery, new crops, drainage of waste lands, use of fertilisers, and improvements in stock-breeding. It also necessitated the enclosure of the common land and the concentration of land into large holdings. The main motive in these changes was increased production and the attainment of profit from the new adventure.

Of the many changes that took place during the Agricultural Revolution, few were more important than the Norfolk four-course system, characterised by the disappearance of the fallow year and by a new emphasis on fodder crops. Established in Norfolk County and in several other counties in England before the end of the 17th century, the new system became fairly general in much of continental Europe in the 19th century. In order to adopt this Norfolk system, it was first necessary to alter the 1000-year old layout of the arable fields. It was virtually impossible for an individual farmer to grow fodder crops on his strips of land in open fields; at certain seasons these fields were opened to grazing by the livestock of the whole community. On enclosed land, however, a farmer could cultivate fodder crops and benefit from his own efforts. Consequently, there was a rapid acceleration of the enclosure movement in England, and on the Continent it took place slightly later. The movement towards change was further intensified by the invention of new farm machines, improvements in farm implements, and scientific interest and new biological theories relating to farm and animal life.

What is Meant by Agricultural Revolution? Influence in society had long been dependent largely upon the possession of land. The great landed proprietor was considered superior to merchant or manufacturer, regardless of how much money the latter might control. Political prestige also was obtained through the control of land. This was one means through which the capitalist could rival the hereditary aristocracy, and he took advantage of it. Gentlemen farmers had personal pride in improving their land and became exponents of an improved agriculture. There was also the added possibility of making money in agriculture.

Wars, growth in the number of wage-earners, and increase in population raised the price of agricultural products to a point where profit could be made in raising them. Finally, the capitalist did more than anyone else to break down the medieval system, which had prevented progress in farming. Science was used in agriculture, as well as in industry, to produce more at less expense.

To consider the nature of the Agricultural Revolution, we have to answer two basic questions. First, was there really a profound change and break in the evolution of agricultural life in Western Europe? Secondly, if there was, when and where did it occur? It is a fact that an important break did occur in the technical conditions and hence in the productivity of agriculture in Western Europe between 1600 and 1800. From technical point of view, European agriculture in the early 17th century closely resembled that of the beginning of the modern era and was in any case not superior to that of the Roman world. Hence the level of agricultural productivity in Western Europe at the beginning of the 17th century was fundamentally no different from that of 20 centuries earlier, though there was some progress.

When did it Take Place? The break in Europe's Agricultural Revolution also becomes apparent with the almost total disappearance of famines in Western Europe from 19th century onwards. Thus, between 1600 and 1800, a definite break occurred in the evolution of agricultural production. We can assign the following approximate periods for the onset of the Agricultural Revolution in various West European countries:
1.England: 1690—1700
2.France: 1750—1760
3.Germany and Denmark: 1790—1800;

These periods should be taken as only approximate and subject to revision because there are few studies on the subject and also the regional differences in most of the countries are more marked. Though in the earliest stages of the Agricultural Revolution, England merely copied Flemish methods, local innovations nevertheless gradually gained the upperhand. From about 1730 down to the middle of the 19th century, it was England that became the Mecca of agricultural experts, and its example became the model for the Agricultural Revolution in the rest of Europe.

How did it Take Place? The Agricultural Revolution was characterised by a number of important developments and innovations such as the gradual elimination of fallow land by continuous rotation of crops, introduction and extension of new crops, enlargement of land holdings through 'Enclosure Movement', improvement of traditional farm implements and introduction of new implements, breeding of animals, and extension and improvement of arable land.

Prior to the Revolution, the European agriculture, in order to avoid exhausting soil, was on two main types of rotation: (1) Biennial rotation (i.e., a year of cultivation alternating with a year of fallow) and (2) Triennial rotation (i.e., two years of cultivation followed by a year of fallow). Now the soil was regenerated in a number of ways: (a) Through planting a sequence of crops, each of which had a different consumption, at a different depth, of various chemical substances from the soil; (b) Through the introduction of plants having a regeneration effect; and above all (c) Through lavish manuring which was furthered by the expansion of livestock rearing made possible by the inclusion of fodder crops in the system of rotation. This type of exploitation of the land, as it did an effective integration between farming and herding, led to the gradual elimination of the fallow lands and hence to an increase in the productivity of land.

The Agricultural Revolution is associated with the names of certain innovators who pioneered in the employment of new crops and techniques. Among them Charles Viscount Townsend of England is the most important. He experimented with various plants which could be rotated with grains, and discovered that by growing clover (which captures nitrogen from the air and returns it to the soil) and turnips (which loosened the soil), he could get a good return on a piece of land every year. He became a staunch advocate of using turnips in his rotation system. Among his innumerable disciples, Coke of Holkam standardised a four-crop rotation on the lines suggested by Townsend, a practice which became known as the 'Norfolk System'. In this system, wheat was grown in the first year, followed by turnips in the second, barley in the third, and finally clover and ryegrass in the fourth year. This new system was cumulative in effect, for the fodder crops eaten by the livestock produced large supplies of previously scarce animal manure. Introduced in the Norfolk county first and then in the countries of England by the close of the 17th century, it became fairly common on the newly enclosed farms by 1800. During the 19th century, it was also adopted in much of Continental Europe. Furthermore, non-England lands made important contributions of their own to Agricultural Revolution. Parmenlier, a Frenchman, did much to popularise potato upon the Continent by writing a book on its usefulness. A German chemist showed in 1747 that sugar can be obtained from beets, a discovery which was to have a profound impact on the sugar plantations of the West Indies in the course of the 19th century.

Englosure Movement in England

In order to adopt the Norfolk system, it was, however, essential to change the ageold layout of the cultivated and cultivable lands. Consequently, there was a rapid acceleration of the Enclosure Movement in England. Enclosures meant the rearrangement of formerly common or open-fields into self-contained private land units or the division of formerly common but uncultivated land into private property. From about 1760, landlords speeded up the process of converting the land into a patchwork of purely individual holdings by systematic use of the Acts of Parliament. Thus previously it was virtually impossible for an individual farmer to grow fodder crops on his strips of land in open fields, but now because of the enclosed land he could cultivate these crops and benefit from them. On the Continent, the tendency of the French and German peasants to keep their properties subdivided did not, however, check the expansion of the seigneurial properties. Besides, the enlargement of the lands in France and Germany never got out of hand, nor did it destroy the small and medium peasant land ownership. In Spain, the 16th century witnessed a strengthening of seigneurial landownership, both secular and ecclesiastical. The urge to expand the properties so as to benefit from the prosperous economic situation not only caused encroachments on communal lands and grazing grounds, but also prompted the big landowners to lay claim to peasant farms under conditions highly favourable to them.

The ploughs and farm machinery are probably of the Dutch origin. Rotherham plough, the main design of which has remained virtually unchanged to this day, was first put into use in the Netherlands, England and Scotland during the first half of the 18th century. The first factory for making ploughs was established in England in 1783. Though the problem of mechanising harvest work was not solved until the 19th century, fairly simple threshing machines were designed and put into use of 1800.

Similarly, a variety of machines for such tasks as preparing animal feed, chopping turnips and cutting chaff were designed and used. An Englishman, Jethro Tull, became famous for innovations in field husbandry like the horsedrawn hoe and seed-drill. Robert Bakewell, another Englishman, experimented widely with new agricultural techniques and new crops, especially grasses, but he is best known for his efforts to improve breeds of sheep, horses and cattle.

While new fodder crops were introduced into the rotation, more and better livestock were bread and kept. Animal size increased and meat development was greater. In cows, milk yield improved. Better breeding increased fleece and flesh production in sheep, and also increased the size of pigs' bread. In this sphere of livestock breeding, one cannot but remember the contribution of Bakewell and his efforts to improve breeds of sheep, horses and cattle. He engaged himself in selective and controlled breeding in an empirical way and achieved considerable success.

The process of land clearance, though a constant feature of agrarian history, was accelerated and new techniques were used to drain marshy areas in this period. Walter Blithe, a captain in Cromwell's army, was interested in land drainage and irrigation in the form of water meadows (i.e., pieces of low, flat land capable of being kept in fertility by being overflowed from some adjoining stream). During his life time, considerable drainage work was carried out in Eastern England. At the same time, water meadows were constructed in Southwest England. This system was wellknown and of longstanding in Germany. Similarly, there were sporadic attempts to drain wetlands in France and Italy. At this time, drainage of humid land was introduced and became much more widely practiced. Finally, the greater use of horse in agriculture, instead of oxen, consequently led to a corresponding rise in productivity in a great deal of farmwork.

What was its Outcome? Some profound social changes in England first and then in the Continent were due chiefly to the Agricultural Revolution during which the old order was de-established and new classes appeared. There was a new landed aristocracy, coming mainly from the mercantile class, who invested in land earnings that they made from trade. Besides, there was a mass of agricultural labourers, who had been deprived of their own holdings by the 'Enclosure' movement. Finally, there was considerable group of renters who tilled the land for the wealthy owners. The old Yeomanry (independent peasant) class disappeared from the farms, many of them being forced to seek employment in the cities. This change in agriculture was an integral part of the transformation of a society that was predominantly agricultural into one that was industrial. By means of the changes, productivity was greatly increased; but in the process of change, poorer agricultural classes suffered immensely.

The overall economic effect of the Agricultural Revolution was in removing the threat of famine in Europe, particularly Western Europe. To Europeans, the problem was no longer that of hunger but of obesity. Even during the worst droughts Europeans could produce more than what they needed. This agricultural progress generally raised the living standards of the people and led to increased birth rate. The prosperity in agriculture created demand for goods and services, and great fillip was given to the other sectors of economy, industry and commerce. Agriculture also helped industry in providing raw materials as well as in releasing labour force from the rural areas which could be employed in the industries.

Commercial Revolution And the Age of Mercantilism

Colonies were built in lands discovered by the explorers and worldwide markets and trade systems developed. Merchants and manufacturers in the home nations obtained new products and raw materials from the colonies. Europeans obtained new products and raw materials from the colonies. Finished products were sent for sale in the colonies. Europeans obtained spices, gems, porcelain and cloth from Asia. Tobacco, potatoes, cocoa and corn, were sent from America to Europe. Other American goods included furs, codfish, sugar and dyes. From Africa, Europe obtained ivory, gold and silver. The African slave trade soon became profitable with the expansion of trade. Europe had to develop many new methods of doing business. The entire period of change, from about 1500 to 1750, was called 'Commercial Revolution'.

Many changes were made in the business methods. Money was needed to pay trading expenses. Large banking systems, under control of individual families, developed and provided loans, often at high interest rates. The different coins used by different countries presented problems. Because the costs of sending trading expeditions were so great, joint-stock companies were formed. One such was the English East India Company, formed in 1600. Another was the Dutch East India Company formed in 1602. These two companies often paid dividends, or yearly profits of 50% to stockholders.

European governments adopted new ways to control trade that would increase their profits. These new methods and their justifications were called 'Mercantilism'. The main goal was to sell more goods to other countries than a nation bought from other countries. To control the flow of foreign goods or imports into its country, the home government charged high tariffs. This added to the cost of foreign goods and discouraged the home people from buying them.

Commercial Revolution

What is Meant by Commercial Revolution? During the period 1500–1750, the world witnessed the spawning of a large intercontinental trade. Prior to 1500, spices, silk, precious stones, perfumes, etc., were transported from Asia to Europe by Italian and Arab merchants. This limited luxury trade grew, by the middle of the 18th century into a massive trade based on the exchange of new and bulky necessities. Atlantic commerce became especially enormous, since the 'New World' plantations produced vast quantities of coffee, sugar, tobacco and other commodities sold in Europe. The plantations, in turn, had to import all their necessities such as grain, fish cloth and metal products since they were monoculture plantations growing only one commodity. Labour, too, had to be imported by these plantations. This led to a booming triangle trade—rum, cloth, guns and other metal products from Europe to Africa; slaves from Africa to the New World; and sugar, tobacco, coffee and bullion from the New World to Europe.

How did it Take Place? Trade with Asia too spawned during this period, though it did not equal the trade with the Americas. This was mainly because the European textile industries opposed the import of cotton goods from Asian countries. Foreign cottons, especially Indian, were popular in Europe as they were light, bright, inexpensive, and washable. They began to be imported in large quantities and objections were raised by native textile workers and by those who feared that national security was endangered by the loss of the bullion that was spent to pay for textiles. Pressure mounted on the respective government to secure the passage of laws for bidding or reducing the import of Indian cotton. Another reason was the difficulty in finding something that could be sold in the Asian market. Asia was uninterested in European goods, and Europe was reluctant to send bullion to pay for the Asian produce it wanted. This was a conundrum Europe could not solve until the development of power machinery at the end of the 18th century when Europe began to make cheaper fabric than was available in Asia.

Triangular Trade

The mid-18th century witnessed the birth of a new commercial world which had been in the crucible since the 16th century when the European-dominated world commerce began. It carried further the shift of economic gravity from Southern to North-Western Europe, from the Mediterranean to the Atlantic. Antwerp, the great commercial centre of the 16th century, collapsed in a few decades and was replaced by Amsterdam and London in the 17th century. In each case, an important trade based on a well-populated hinterland provided profits for diversification into manufacturing industry, services and banking. The baton of banking supremacy of the medieval Italian cities passed on in the 16th century to the Germans and then, in the 17th century, to bankers in Holland and England. The bank of Amsterdam and the Bank of England were international economic forces in the 17th century. Other merchant houses and banks clustered around them, undertaking operations of credit and finance. Interest rates came down and the bill of exchange, a medieval invention, underwent an enormous extension of use and became the primary financial instrument of international trade.

The 18th century saw the beginning of an increasing use of paper money, instead of metallic currency. The first European paper currencies and cheques were born and joint-stock companies generated another from of negotiable security, their own shares. The London Stock Exchange was founded and by the late 18th century such an institution existed in many other countries. New capital mobilisation schemes proliferated in London, Amsterdam and Paris. Lotteries too were popular for a while as were some spectacularly disastrous investment schemes. Despite this, the European world was growing more commercial, more used to the idea of employing money to make more money and was developing itself into a modern capitalist economy.

Occasionally, the interplay of commercial development seems to have thrown light on changes with deep implications. An example of this came when a 17th century English financier for the first time offered life insurance to the public. There had already begun the practice of selling annuities on a man's life. What was new was the application of actuarial science and the newly available statistics of political arithmetic to this business. A reasonable calculation, instead of a bet, was now possible on a mater of hitherto absolute uncertainty, viz. death. With increasing refinement men went on to offer protection from a range of disasters, at a price, of course. This was also, incidentally, another very important device for the mobilisation of wealth in large amounts for further investments. The timing of the discovery of life insurance at this time also suggests that the dimensions of economic change are sometimes very far-reaching indeed.

West Europe's most impressive structural development in commerce was the sudden new importance of overseas trade from the second half of the 17th century onwards. This was part of the shift of economic activity from the Mediterranean to the Atlantic observable even before 1500. In the late 17th century, though the closed trade of Spain and Portugal with their transatlantic colonies was important, overseas trade was dominated by the Dutch – the first great maritime trading nation – and their increasingly successful rivals, the English. Dutch commerce grew out of the supply of salted herrings to European markets and the possession of a particularly suitable bulk-carrying vessel, the fly-boat. With this the Dutch dominated the important Baltic trade from whose mastery they advanced to become the carriers of Europe. They were gradually displaced by the English in the 17th century, though they continued to maintain a vast network of colonies and trading stations, especially in the Far East. The English were the supreme masters in the Atlantic region and fish played an important role in this. The English caught the extremely nutritious and, therefore, valuable cod on the Newfoundland shore, dried and salted it ashore and then sold it in Mediterranean countries where fish was in great demand because of the practice of fasting on Fridays. Gradually, both Dutch and English diversified their trade and became dealers themselves. France was not to be left behind either, and her overseas trade doubled in the first half of the 17th century.

Thus, the 18th century saw the contours of an oceanic economy emerging. The trade to the Far East, which had been opened by the Portuguese, was soon being profitably exploited by the English, Dutch and French. The Spanish were involved in the Atlantic. By 1700, an international trading community came into existence which did business round the globe and in which slave trade played a key role. Most slaves were of black African stock, the first batch of whom were shipped across the Atlantic to Brazil, the Caribbean colonies and British settlements on the North American mainland. This slave trade, based on the buying of Africans from other Africans by the English, Dutch and French and their sale to other Europeans and the Americans, is a phenomenon whose repercussions have carried much further than the enslavement of Europeans by Ottomans or Africans by Arabs.

What was its Outcome? The first and foremost outcome of this development in trade was that, for the first time, international division of labour was achieved on a significant scale. The world economy was gradually but surely emerging as a single unit. The Americas produced raw materials, Africa the manpower, Asia an assortment of luxury products, and Western Europe conducted these global operations and concentrated increasingly on industrial output.

The demands of the new global economy raised the issue of supplying sufficient labour force to the regions producing raw materials. The New World plantations met this by importing African slaves. African populations are most numerous today, for this reason, precisely in those areas that had formerly been devoted to plantation agriculture – the Southern United States, Northern Brazil and the West Indies. The early Europeans' solution to their labour needs was to leave a bitter legacy. To the present day, these are areas besieged by racial discrimination and underdevelopment problems dating back to the colonial period. The racial conflict in American ghettos and Caribbean Islands is the result of over four centuries of slave trade. Likewise, the underdevelopment of Latin America is a continuation of the economic dependency of the Spanish and Portuguese colonies on Western Europe.

The greatest effect of the new advances in trade was felt in Africa. Over 12 million slaves were transported to the New World. The real horror of the slave trade was in the fact that approximately four times as many Africans were captured in the African interior than eventually arrived in the Americas. This amounted to a drain of 48 million people from Africa, almost all of them in the prime of life, and 36 million casualties were sustained in the course of the overland marches from the interior to the coast and then during the dreadful trans-atlantic crossings.

The effect of the slave trade varied from one part of Africa to another. East Africa and Angola suffered severely because their populations were relatively small to begin with, and their economies, near the subsistence level. For them, the depletion in population was devastating. In contrast, West Africa did not suffer so ruinously since it was more populated and economically advanced, so the devastation of slavery had a lesser effect. On the African continent, as a whole however, the effect on the population was not as great as might be expected because the slaves were taken over a period from 1450 to 1870 and from a total sub-Saharan population estimated at 70–80 million. Nonetheless, the slave trade had an unsettling and corrosive effect on the entire Africa coast from Senegal to Angola and for 400 to 500 miles inland. The appearance of the European slave traders with their cargo of guns and hardware set off a chain reaction of slave hunting and raids into the African interiors. Wars became frequent among groups vying for control of the lucrative and militarily decisive trade.

The least affected among all the continents by the activity of this period was Asia, as it was adequately strong militarily, politically and economically to avoid subjugation. In fact, most of Asia was quite unaware of the persistent and annoying European merchants appearing on their coast at this time. Only a few coastal areas in India and some islands of the East Indies felt the impact of Europe's early economic expansion. So far as Asia as a whole was concerned, its attitude was best expressed by the Chinese Emperor, Chien-lung, who replied to a message from King George III of England in 1793 asking for the establishment of diplomatic and commercial relations: 'As your ambassador can see for himself, we possess all things. I set no value on objects strange or ingenious, and have no use for your country's manufactures.'

The Commercial Revolution had its greatest effect on Europe and the effects of the new global economy for it were all positive. The Europeans were pioneer middlemen of world trade. They were the ones to open new trade routes and supply necessary capital, shipping and technical skills, so it was natural that they should have profited most. Some of the benefits trickled down to the European masses, as indicated by the fact that when tea was introduced in England in 1650 it was a costly item, but in a century it became an article of common consumption.

More than the effect on the living standards in Europe, the important effect was the stimulus European economy got from the new global commerce. The Industrial Revolution of the late 18th century, for instance, owes much to the capital earned from overseas enterprises and to the growing demand for European manufactures in overseas markets.

This was the period, then, that Europe got the boost it needed to forge ahead in the ascent to global economic primacy. The overall results were positive, because global division of labour led to increased productivity. The world was richer in 1750 than it was in 1500, and the economic growth has been sustained to the present day. Sadly, North-Western Europe has received, as the world's entrepreneur, most of the benefits at the expense of other regions and this was an extremely heavy price to pay. The current conflict of races, the gross discrepancy between rich and poor nations and the scars of slavery are reminders of the toll European prosperity has exacted on the world.

Mercantilism

What is Mercantilism? The period between 16th century and the middle of the 18th century has been characterised as the Mercantile era. During the period, the theory of Mercantilism developed along with the growth of modern nationstates. In the 16th century, people like Hobbes and William Petty popularised the notion of 'absolutism'. According to them, a modern nation-state should develop an international trade of a specific sort which would ensure the flow of bullion from other countries to it, while preventing the flow of bullion from it to other countries. This theory was called 'Crude Bullionism'. In the 17th century, however, an important change came in the doctrine of Mercantilism. Great emphasis began to be put on the importance of maintaining an excess of exports over imports so that a country without gold or silver mines could obtain a continuous net inflow of the precious metals which were regarded as essential to the national wealth and strength. This was so basically due to the widely held opinion in those days that the sum of prosperity in the world was constant and the aim of commercial policy was to secure for each nation the largest possible slice of the cake. This aim of commercial policy of a nation was expressed in such features as the customs and the navigation laws.

The essentials of Mercantilism can be listed as follows:
1.A policy should be framed and executed in strictly nationalistic terms.
2.In appraising any relevant element of national policy or foreign trade, great weight is always to be put on its effect on the national stock of precious metals.
3.In the absence of domestic gold or silver mines, a primary national goal should be attained of a large excess of exports over imports whereby the national stock of precious metals can be augmented.
4.A balance of trade in favour of one's country is to be sought through direct promotion by the authorities of exports and restriction of imports or by measures which will operate indirectly in these directions.
5.Economic and political foreign policies are to be pursued with constant attention to both plenty and power, as national objectives, each capable of being used as means to the attainment of the other.

Mercantilism was, therefore, a doctrine of state intervention in economic life, but of state interventionism of a special pattern and with some special objectives. It was in sharp contrast with the laissez faire doctrine and with some present day systems of state interventionism, such as socialism, communism and welfare state. In principle at least these do not have the accumulation of the precious metals, favourable balance of trade, etc., as central and ultimate objectives.

How was Mercantalism Affected? The modern nation-states, after their political consolidation, began to consolidate their economies by intervention. In the first place, economic consolidation was brought about by the establishment of state monopoly over gun-powder industry. Secondly, it was brought about by exempting certain industries and groups from taxes. The moderate policy of the Dutch Republic towards the Jews and their industries is a good case in point. Third type of intervention was the establishment of state-owned guilds to supply goods to the state. The saddle-makers in England, for instance, were asked to provide the Royal Cavalry with saddles. All these developments took place in England under the Tudors during the 16th century. In France these took place a little later, i.e., in the 17th century in the form of the famous 'Colbertain laws'. England, France and Holland were to be followed soon by other West European countries.

Though there were no major changes in the industrial organisation during the Mercantile era, some minor changes did take place. So far as technology is concerned, it virtually remained the same but for two changes, viz., the substitution of coal for wood as fuel and the improvement of ships and boats along with canals. The former was the result of improvement in the technology of mining. For example, the invention of improved pumps improved the drainage system early in the 16th century, which in turn encouraged the sinking of mines to greater depth. The latter facilitated the transportation of bulk goods easily and also cheaply. With the introduction of gunpowder and cannons, travel by sea also became safer than before.

In the market also there were some important changes. The demand for goods from the newly discovered lands, from the new bourgeoisie and the old aristocracy and also from the increasing urban population, all contributed to the expansion of both internal and external market. As a result, the old European handicraft and artisan industries received a boost.

Though the changes in technology did not change the pattern of production to any considerable extent, the changes in the market did effect some changes in the industrial organisation, like the introduction of the 'putting-out' system or the 'Verlag' system. In this system, the merchant is at the centre of the circle and is connected with different artisans. A cloth merchant, for instance, has connections with the spinners, weavers, dyers, etc. This kind of organisation leads to a division of labour or specialisation, and an increase in the production as well as in the dependence of the artisans on the merchant. Though in this system, the primary producer still possesses the means of production (because technology is not yet complicated), he increasingly becomes dependent on the merchant. This is the crucial difference between the old system and the new system.

According to Karl Marx, there are two types of 'putting-out' merchants, viz., rich artisans and pure merchants. In his opinion, if an artisan becomes a putting-out merchant, it is 'path-one'; if a pure merchant becomes a putting-out merchant, it is 'path-two'. To Marx, 'path-one' is the real revolutionary way, and it is the most popular one. But this point is doubtful. Since the 'putting-out' system was risky, the rich artisans usually did not take up the role of putting out merchants except in some cases. We have to keep in mind the fact that it was not at all very easy for a rich artisan to become a putting-out merchant, just as it was not for a journeyman to become a master-artisan.

Capital growth in the Mercantile era and the early Industrial period, according to Weber and his followers, took place along with cultural and social growth. According to their theory, with the spread of Protestantism, people developed a desire to save something and this led to some kind of capital accumulation. But according to some others, such as E.J. Hamilton, the clue to the growth of capital during the Industrial Revolution lay in the contacts between the New World and the Old World, i.e., in the flow of bullion from the newly discovered countries into Europe. In the Marxian concept, however, accumulation of capital means a transfer as well as a concentration of the ownership of titles to wealth into the hands of the bourgeois class.

The various ways in which a class may increase its ownership of property can be reduced to two main categories. First, this class may purchase property from its former owners in exchange, for the means of immediate consumption or enjoyment. Secondly, the bourgeoisie may acquire a particular sort of property when this happens to be exceptionally cheap, and realise this property at some later period when the market value of this property stands relatively high in exchange for other things such as labour power or industrial equipment which stand at a relatively lower valuation. Some influence is required here to depress the value of whatever happened to be the object of hoarding by the bourgeoisie during the phase of acquisition and enhance its value during the phase of realisation. It might occur as a result of a deliberate policy of the state, or it might occur as an incident in the break-up of an old order of society, which would tend to have the double effect of impoverishing and weakening those associated with the old mode of production and affording the bourgeoisie an opportunity of gaining some means of political power. In the case of the 15th and 16th century England, the new bourgeoisie was able to purchase land from both large feudal landowners and certain sections of smaller ones. Here force of circumstances in the form of economic distress and overt pressure are often merged. However, the same thing is not applicable to the Continental countries because the happenings there are different from those of England.

During the 16th and 17th centuries, money came to be of major importance to a rapidly growing number of people, yet simultaneously ready money became scarce. This was because there was a vast growth of the European economy and the various new and expanded economic activities (such as the emergence of new industries, the intensification of land use, the growth of trade, etc.) required money. Though there was a substantial increase in Europe's monetary stock due to the exploitation of silver mines of Europe and the inflow of bullion from Americas, it was not sufficient to meet the rapidly rising demand for means of payment. The letters and papers of merchants and ministers give us enough evidence to show that there was 'scarcity of coin' and the 'want of money'. Almost all financial centres, except perhaps Amsterdam, suffered temporary monetary inanition. This experience stimulated several innovations. Various attempts were made to transact business without resorting to gold and silver. The introduction of copper currency was one of them, but copper was suitable for only small denominations.

For large transactions, the only solution was to use 'credit instruments', such as loans, securities, bonds, credit transfers paper money and negotiable obligations. All these were employed on an increasing scale to avoid the use of precious metals. By 1730, the widespread use of credit was a feature of almost every European country. In some areas, indeed, a sophisticated and inter-locking system of multilateral commercial payments, controlled and secure credit, etc., grew, making it impossible to increase the monetary stock of Europe.

Industrial Revolution: Scientific & Technological Revolution; English Industrial Revolution & Its Impact

The years from 1760 to 1870 may be called the period of the first stage of Industrial Revolution, a period that changed manufacturing processes from slow, expensive hand production to faster, cheaper machine production. From 1870 onwards, we have the second stage of the Industrial Revolution which was characterised by the direct application of science to industry and by the development of mass production techniques. The Revolution began in England as a result of its need to fulfil growing demands for goods, both at home and abroad. England had the capital, or money to invest, the natural resources, and the labour supply to make the goods – but she needed better methods of production.

The textile, or cloth-making industry, was the first to experience the revolution. The demand for cotton cloth became so great that the old methods could not keep up, and many people began inventing cotton weaving machinery. One invention led to the need for others to keep production going, and step by step the textile industry underwent great advances. The revolution spread with the invention of better machines, new factories, use of steam, and increased output of coal and iron.

The steam engine advanced by steps and took an important place in industry. In the 1600s, Thomas Savery invented a steam pump to remove the water from mines. In 1705, Thomas Newcomen patented an early steam engine which was improved and patented by James Watt in 1769. By 1785, Watt's engine was used in cotton mills and other factories. Factories with steam engines were now free to locate anywhere; they were no longer dependent on a fast river or waterfall for power.

The cotton industry was by no means the only one which benefitted from the new spirit of invention and enterprise. More effective methods were discovered for manufacturing woollen goods and fabrics of various descriptions; the old method of smelting iron by means of charcoal was abandoned and the coal and iron industries which had up to this time been of comparatively little importance made much progress that they eventually became the chief industries of England; and finally, means of communications (roads, canals and bridges) were improved. In 1804, the first locomotive was made, and in 1830 the first passenger railway (between Liverpool and Manchester) was opened. After railways multiplied, and by the middle of the 19th century there was a network of them over Europe as well as England. The steam boat preceded the steam engine as a means of locomotion. Steam boat came in 1802 and in 1819, a steam boat crossed the Atlantic from Savannah to Liverpool, taking just 25 days for the voyage.

Still more wonderful, perhaps, were the inventions which arose from the investigations of Faraday and others into the properties and uses of electricity. In 1835, the first electric telegraph came into existence and 16 years later, the first undersea cable was laid between England and France. In few years, the telegraph system spread throughout the civilised world and news which had travelled slowly from place to place could be flashed with incredible speed from one end of the earth to other.

The improvements which had originated in England took firm and rapid roots in other countries too, until all the great nations of the earth were thoroughly industrialised. In a space of about 100 years, the world had been transformed. If it had been possible for a Roman of the times of Caesar to come to life in England or in France about the year 1750 he would have found little to surprise him in the industrial methods of the people. But if he had come to life a hundred years later (1850) he would have found himself in an altogether unfamiliar world with its busy cities, its factories full of complicated machinery, and its astonishing development of methods of communication.

Scientific and Technological Revolution

What were the Causes? Several ancient civilisations of the East are said to be the cradles of scientific thought. The scientific and technological revolution is, however, a unique product of Western civilisation. This is perhaps because science became a part of daily life in the Western society. Or, to say it differently, only in the West were the philosopher, scientist and artisan united so they stimulated each other. It was this union of science and society or scientist and artisan that contributed greatly to the unprecedented blossoming of science in the Western world.

Artisans through the ages of all civilisations developed certain skills and through their observation and experiments gradually improved their techniques which occasionally reached very high levels. The degree of success achieved by pre-modern societies was limited, as the artisans were interested in improving their technical skill without bothering to go into the chemical or mechanical principles underlying certain natural phenomena or products. They did not question the relationship between cause and effect. The artisans thus concerned themselves with the technological knowledge rather than scientific explanations.

At certain periods of history, scientists and artisans did work together to produce mechanical aids, but the fact remains that until recent times, the tendency was towards compartmentalisation. The contribution of the West lay in bringing them together. This fusion gave science the impetus that was to make it the dominant force that it is today.

The question arises as to why did this unique development took place in the West? One reason was the humanistic scholarship of the Renaissance scholars and artists and access to a wide variety of thought and studies. There was also the impetus that was given by the biological sciences. The favourable social atmosphere in Western Europe was another factor in the development of scientific thought in the West. In these times, the gulf between scientist and artisan was bridged. Artisans were no longer the despised lot of the classical and medieval times. In this age of renaissance (rebirth), respect was given to the practical arts of spinning, weaving, ceramics, glass making and, most importantly, to mining and metallurgy. All these crafts in Renaissance Europe were in the hands of freemen rather than slaves as in classical times. The freemen were not at such a great social and economic distance from the ruling classes as they were in classical ages. The higher status of the Renaissance artist allowed him to strengthen his ties with the scholar. Each had a role to play and contributions to make. The artisan added new skills and devices evolved during the Middle Ages to antique skills. Scholars produced new facts, speculations, and procedures of rediscovered antiquity and of medieval science. The two approaches fused slowly to produce an explosive combination.

An offshoot of this convergence of scientific and artistic thoughts was the union of physical labour and thought that was brought about by individual scholars. There was strong prejudice, in the ancient times, against combining creative pursuit with manual work. This prejudice which arose perhaps from the association of manual work with slavery, continued in medieval Europe long after slavery disappeared. Medieval philosophers drew a distinction between work done by the mind alone and work that involved a change in matter. Poets, mathematicians and logicians belonged to the first category while sculptors, glaziers, iron workers belonged to the second. This attitude led to the stalling of progress until a balance was struck between the two.

The discoveries of explorers and the opening up of new lands across the seas gave an added stimulus to the progress of science. New plants, animals, human beings and human societies were discovered, challenging ideas and assumptions held unchanged for centuries. The growth of commerce and industry led to technological advances which, in turn, were stimulated by science. Oceanic trade created an enormous demand for the ship-building industry and navigation. A new class of mathematically trained craftsmen began to make compasses, maps and other navigational instruments. Navigation schools were founded in Portugal, Spain, Holland and France and astronomy was studied seriously for its obvious utilitarian value.

The needs of the mining industry led to the invention of pumps and advances in power transmission. This marked the beginning of a new interest in mechanical and hydraulic principles. In a similar manner, metallurgy was responsible for progress in chemistry. As mining operation progressed new ores and even new metals like zinc and cobalt were discovered. Techniques had to be found to separate and handle them as well as refine them. In doing, so a general theory of chemistry began to take shape, involving oxidations and reductions, distillations and amalgamations. The new knowledge in all these fields was both circulated and stimulated by universities and printing press. The latter was especially important in the spread of new ideas and in the promotion of literacy.

Science initially received much more from the mine and workshop than it could contribute. At this stage, science was not an integral part of economic and social life and was used sporadically and sparingly. This was the case until the early stages of the industrial revolution in the late 18th and early 19th centuries. But by the end of the 19th centuries, things changed and science began to play an active role in society transforming old industries and even creating new ones.

How did it Take Place? How did science change social and economic life so radically in such a short while? The first major advance of modern science and technology occurred in the field of astronomy which was closely related to geography and navigation. This scientific leap was achieved in the 16th and 17th centuries, and the great names were Minolaj Kopernik or Copernicus (1473–1543), Galileo Galilee (1564–1642) and Isaac Newton (1642–1727). Copernicus took up the idea of some ancient philosophers that the sun, rather than the earth, was the centre of the universe and said that this provided a simpler explanation for the movements of the heavenly bodies than did the traditional Ptolemaic system. Galileo discovered the telescope which enabled men to see what actually was in the heavens thus giving empirical support to Copernicus theory.

The most outstanding figure of early science is Newton, a towering genius who in addition to his pioneering works in optics, hydrodynamics and mathematics, discovered the laws of gravitation. With this revolutionary explanation, Newton proved that a fundamental cosmic law existed which could be proved mathematically and applied to all matter. Nature indeed appeared at this time to be a gigantic mechanical object operating according to natural laws that could be found by observation, experiment and calculation. All branches of human knowledge could be broken down into simple uniform laws that rational persons could discover. People began to apply the analytical method of Newtonian physics to the entire field of thought and knowledge, to human society as well as to the physical universe.

When the Industrial Revolution got underway in the late 18th century, it affected and was affected by the Scientific Revolution. The development of the steam engine is an example. It provided the power needed to pump water out of mines. Using scientific knowledge and technical ingenuity, James Watt improved the steam engine to a reasonable level of efficiency. If the relatively unlimited power of the steam engine was not available, the Industrial Revolution may well have petered out. It might have amounted to a mere speed up in textile manufacturing as it happened in China where analogous technical advances were made centuries earlier.

The maximum progress was achieved in the field of chemistry during the first half of the 19th century partly because of its links with the then rapidly growing textile industry. A significant achievement in chemistry comparable to Newton's theory of gravitation was Antoine Lavoisier's (1743–1794) law of the conservation of matter.

Darwin was another dominant personality of the 19th century. He discovered what we call the Theory of Evolution. His doctrine of evolution holds that animal and vegetable species in their present diverse forms are not the fixed and unchangeable results to separate special acts of creation. They are different and are capable of change. They are the outcome of the common original source. He believed that the chief manner in which variation took place was by natural selection.

The details of Darwin's theories have been modified by later research, but his basic premise of evolution is accepted by all scientists now. However, when Darwin first let the world to know about his theory, there was bitter opposition from some quarters, especially the clergy. This was understandable since Darwin was denying the act of divine creation. Just as Copernicus deposed earth from its central place in the universe, Darwin seemed to dethrone human beings from their central place in the history of the earth.

Darwinism had a profound impact on the Western society despite the hostile reception from religious and conservative groups. Its emphasis on survival of the fittest and struggle for survival fitted in with the temper of the times. In politics, Bismarck was unifying Germany by blood and iron. Nationalistic admirers in all countries believed that Darwinism offered them support and justification. They held that in politics as in nature, the strongest are victorious and that war-like qualities decide who will win the international struggle for survival. In economic life, this was the period of free enterprise and rugged individualism. The upper and middle classes who were comfortably off stoutly opposed any intervention by the state for the promotion of greater social and economic justice. They used Darwinism to their advantage saying they deserved their prosperity because they had proved themselves 'fitter' than the 'worthless' poor. The absorption of smaller firms by bigger ones was justified by the same measure.

Newton

The late 19th century was a time of rapid colonial expansion and, here too Darwinism was used to justify imperialism. The argument was that great powers needed colonies for their prosperity and survival. Further the argument said that native people, judged in terms of worldly success were weak, inferior and in need of protection and guidance from the superior and stronger Europeans.

This kind of application of Darwin's theory to social science is known as Social Darwinism. Darwin himself perhaps never dreamt, let alone intended, that his findings would be exploited in this fashion. The fact remains that they were, for the simple reason that they seemed to offer scientific support for the materialism that was spreading over Europe at this time.

What was its Significance? By the close of the 19thcentury, science and technology became an integral part of Western society. From the peripheral role in the beginning of the century in the socio-economic life of Europe, science was soon playing a central role, making crucial contributions to the old established industries. At the end of the century, it was creating new industries, and was profoundly affecting the way of thinking and lifestyle in the West. The affects of science had far-reaching impact on the world in both direct and indirect ways.

The Scientific Revolution made Europe's domination of the world technologically possible, and determined to a large extent the nature and affects of this domination. It also provided the basis for the intellectual domination of the West. While the East was able to hold its own in art, religion and philosophy, it was unable to stand up to this scientific thought and principles of natural science. Only the West had mastered the secrets of nature and had exploited them for material advancement. The world recognised the importance of Europe's scientific and technological revolution. In the modern day, the aim of most former colonial peoples is to experience this unique revolution themselves.

English Industrial Revolution & its Impact

What is Industrial Revolution? The term Industrial Revolution is used to describe the radical changes that took place in Europe, mainly England, in the latter half of the 18th century, changing a primarily agricultural country into an industrial one. However, the term is used to describe a 'revolution' that began before the 18th century and, for all practical purposes, has continued to the present day. Obviously then, this was not a revolution in the sense of a spectacular change that began and ended suddenly.

Yet the fact remains that during the 1780s, a breakthrough did occur in productivity. More specifically, a mechanised factory system was created that produced goods in vast quantities and at rapidly falling prices, so it was no longer dependent on existing demand, but could create its own demand. An example of this is the now common but hitherto unknown phenomenon, the automobile industry. It was not the demand for automobiles which created the giant automobile industry today but the capacity to build cheap models, in large quantities, and the consequent mass demand for them.

Why did it Take Place in England? Why is it that the Industrial Revolution took place in England in the 18th century alone and not a few hundred years before or after? The answer lies to a large extent in the remarkable economic growth achieved by England in particular and Europe, in general, following the Commercial Revolution.

The Commercial Revolution contributed to the industrial revolution in several important ways. Firstly, it provided large and expanding markets for European products like textiles, firearms, ships and naval accessories such as sails, anchors, pulleys and nautical instruments. In order to meet the demand of these new markets, industries had to improve their technology and organisation. The Commercial Revolution also contributed large amounts of capital necessary to finance the construction of factories and machines for the Industrial Revolution. The capital in the form of profits poured into Europe from all corners of the globe. Thus the combination of profitable commercial enterprise, technological growth and institutional change helped the Industrial Revolution take off in the 18th century.

This leads us to the next question. Why was it England that happened to be the place of initial take off? An important advantage England enjoyed was that it had taken an early lead in the basic industries of coal and iron. England began using coal for heating and for smelting iron very early because its forests were being depleted very rapidly. By the time of French Revolution, England was producing about ten million tons of coal every year, while France was producing 700,000 tonnes. England, also pioneered the development of the blast furnace, which could in the contrast to the old forges, mass-produce iron. This meant that England was forging ahead in the production of goods for mass consumption, goods for which there was a ready and growing market. France, on the other hand, specialised more in luxury items of limited and fluctuating demand.

An additional advantage England had was the fluid capital available for the financing of the industrial revolution. More profits from commerce poured into England than any other country. The English court and military expenditure were lower than the French costs so that English taxation was lighter. Government finances too were in a better condition in England. Banking developed earlier and more efficiently in England providing pooled funds for individual and corporate enterprises.

Noteworthy also was the impressive managerial talent available in England. This is to be explained in part by outstanding contributions of non-conformists like the Darbys in the iron industry, the Brights in cotton milling and politics and Dalton and Eddington in science. The stress on personal responsibility and freedom from convention produced, among the non-conformists, a disproportionate number of experimenters and inventors, while their frugality led them to plough profits back into business rather than to squander them in luxuries.

Mobile and plentiful supply of labour was also an advantage England had over other countries. This supply of labour was made possible by earlier disintegrations of the guilds and by the enclosing of traditional strips of farmlands. The end of the guilds with their manifold restrictions made it easier to introduce the puttingout system to equip factories with power machinery. The land enclosures began in the 1500s and continued for three centuries. The small peasants were frequently forced to sell out because the enclosing of common and waste lands left them no land for grazing and fuel. The earlier enclosures were due to the rising price of wool, so that the land was used mostly for grazing. In the later period, the need to grow food for the rapidly growing cities was more important. So the enclosed land was cultivated according to the most efficient and up-to-date methods.

Land enclosure was an unsettling and unpleasant process, but as far as the Industrial Revolution was concerned, it fulfilled two essential functions—it provided labour for factories and food for cities. For this reason, the enclosures may be considered a pre-requisite to England's industrial supremacy in the early days. Enclosures took place in some other European countries too, but to a far lesser extent. In France, for example, the French Revolution provided peasants with more land, thereby reinforcing their attachment to their birthplaces and their unwillingness to leave.

How did it Take Place in Engand? Necessity is the mother of invention— this is an oft repeated saying which has been proved right often in the history of humankind. Inventors rarely invent without a strong stimulus—that of demand. Many of the principles that the new inventions of the industrial revolution were based on were known long before the 18th century, but were not applied to industry because a strong incentive was lacking. This was the case, for instance, with steam power. Although known in Hellenistic Egypt it was used merely to open and close temple doors. In 18th century England, when a new source of power was urgently needed to pump out water from mines and turn the wheels of new machinery, a series of inventions and improvements took place which led to the development of a commercially practical steam engine.

The pattern of demand leading to invention is plainly evident in the course of the Industrial Revolution. Inventions in one field created an imbalance and stimulated counter inventions in other fields. The cotton industry, for instance, was the first to be mechanised because cotton goods, originally imported from India, had become very popular with the English people. In fact, cotton was used so widely that the old and powerful woollen interests secured the passage of a law in 1700 prohibiting the importation of cotton textiles. The law, however, did not ban the manufacture of cotton cloth. This created an opportunity for local industry, and enterprising middlemen were soon exploiting it. The problem now was how to speed up the spinning and weaving enough to meet the demand of the large home market. Prizes were offered for inventions that would increase output and, by 1830 a series of such inventions had completely mechanised the cotton industry.

Among the outstanding inventions were John Key's flying shuttle (1773) which speeded up weaving; Richard Arkwright's water frame (1769) which spun fine strong yarn between rollers; James Hargreave's spinning jenny (1770) on which one person could spin eight, then 16, and finally over a 100 threads of yarn at once; and Samuel Crompton's spinning mule (1779), so called because it combined features of the water frame and the jenny. All these new machines were soon producing far more thread than could be handled by the weavers. Edmund Cartright, therefore, tried to redress the balance by patenting in 1785 a power loom operated first by horses and after 1789 by steam. By 1820s the hand weavers in the cotton industry were supplanted by the power loom.

This response of inventions and counter inventions to balance each other was seen not only in spinning and weaving industries but in other areas as well. The inventions seem like a chain reaction—one invention sparking off another. For example, the new cotton machines created a demand for more plentiful and reliable power than provided by the traditional waterwheels and horses. The response to this need was James Watt's multiple improvements on a primitive engine by Thomas Newcomen and by 1800, several Watt engines were in action; 33% of them pumping water and the remainder in supply of rotary power to textile mills, iron furnaces, flour mills and other industries.

This historical significance of the steam engine can scarcely be exaggerated. It provided a means of harnessing and utilising heat energy to furnish driving power for machines, thus ending this dependence on animal, wind and water power. With the availability of this vast new power, it was soon possible to tap the fossil fuels locked up in the bowels of the earth namely oil and gas. In this way began the trend that has led to enormous energy sources available to modern day industrialised nations.

The new machines of the 18th century needed an increased supply of iron, steel and coal. This need was met by a series of improvements in mining and metallurgy—Abraham Darby's substitution of coal for coke in smelting iron ore, Henry Cort's puddling process for removing impurities in smelted iron and the use of Watt's steam engine for operating ballows and hammers and for rolling and splitting. As a result of these developments, by 1800 England was producing more coal and iron than the rest of the world combined. Iron became cheap and abundant enough to be used for general construction purposes, and human society entered the Age of Iron as well as the Age of Steam.

A consequence of the expansion in the textile, mining and metallurgical industries was the need for improved transportation facilities to move bulky shipments of coal and ore. This led to a boom in canal building in England which was paralleled by a great period of road building. After 1750, a group of road engineers—Town Metcalf, Thomas Telfore and John Mac Adam—developed methods of building hard surface roads that would bear traffic throughout the year. After 1830 both roads and waterways faced a challenge from the rail road, whose inventor, George Stephenson, was a marine engineer. In 1830, his steam engine 'Rocket' pulled a train 31 miles from Liverpool to Manchester at an average speed of 14 miles per hour. Within a few years, the railroad dominated long distance traffic, for it could move passengers and freight faster and more cheaply than was possible by canal or road. The steam engine was also applied to water transportation. The pioneer was Robert Fulton who, in 1807, launched his 'Clemont' on the Hudson River. By 1833, the 'Royal William' steamed from Nova Scotia to England, and five years later, the 'Sirius' and the 'Great Western' crossed the Atlantic in the opposite direction. In 1840, Samuel Cunard established a regular transatlantic service, announcing before hand, dates of arrival and departure.

The industrial revolution was a revolution in communication as well. Hitherto a message could be sent to a distant place only by wagon, post rider or boat. But in the middle of the 19th century, the electric telegraphy was invented and, in 1866 a transatlantic cable was laid, establishing instant communication between the Old and New Worlds.

But it would be wrong to assume that the Industrial Revolution was a 19th century phenomenon ending with the rise of railroads or transatlantic steamships or telegraphic communication. It continues to the present day with certain discernible stages in its evolution. The first stage lasted to the middle of the 18th century and included the mechanisation of the cotton industry, of mining and of metallurgy, and the development of the steam engine and its application to industry and transportation. The second stage lasted through the latter part of the 19th century and was characterised by the more direct application of science to industry and by the development of mass production techniques. From playing a marginal role in industry at the beginning of the century, science became an integral part of all large industrial enterprises. A spectacular example of the practical applications of industrial research laboratories are the many coal derivatives that have been developed. Coal yield not only coke and a valuable gas used for illumination, it also gave liquid, or coal tar. Chemists discovered a veritable treasure trove in coal tar: dyes, aspirin, saccharin, disinfectants, perfumes, explosives, photographic chemicals, etc.

While Germany led the world in the 19th century in applying science to industry, the United States was the pioneer in developing mass production techniques. These were of two varieties. One was the making of standard interchangeable parts and assembling these parts into completed unit with minimum handicraft labour. The classic example is Henry Ford's endless conveyor belt along which car parts travelled and were assembled by the workers who were transformed into cogs of the great production. The other technique was the manipulation of large masses of material by means of advanced mechanical devices as is done in the steel industry.

English Industrial Revolution

What was its Impact on Europe? What was the impact of Industrial Revolution, which began in England, on the continent of Europe? Other countries too were growing in wealth and knowledge as was England and the impact was bound to be felt. The pattern of diffusion of the Industrial Revolution in Europe depended on various factors such as supply of natural resources and existence of a free and mobile working population, unencumbered by guild restrictions or feudal obligations. Belgium was the first country to be industrialised so that by 1870, majority of its population lived in cities and were directly dependent on trade or industry. France, Germany, Austria-Hungry, Italy and Russia soon followed suit. Meanwhile, non-European countries too were being industrialised; first the United States, then the British Dominions and Japan. Latecomers like USA and Germany had the advantage of beginning with newer and more efficient factories, so much so that England soon lost its original status as the industrial workshop of the world.

One of the effects of the Industrial Revolution in Europe was a further increase in population which had started earlier with the increased productivity in agriculture. Despite the emigration of millions of Europeans overseas during the 19th century, the European population in 1914 was three times that of 1750. This explosion had both medical and economic reasons. The substantial increase in productivity in agriculture and industry meant increased means of subsistence in terms of food, clothing, shelter and other necessities of life. Famine in most parts of Europe became a thing of the past. Even when crops failed, the new transportation facilities ensured supplies from outside.

Advances in medical science and the adoption of numerous public health measures also aided the spurt in population. While there was little or no increase in the birth rate, the death rate was sharply reduced by prevention or cure of diseases. Vaccination, isolation of patients with infectious diseases, safeguarding of water supplies, and knowledge of antiseptics – all served to reduce the death rate. Consequently, Europe's population jumped from 140 million in 1750 to 463 million in 1914. This was a much higher percentage of increase than in other regions of the globe and led to an alteration in the global population balance.

Urbanisation was another effect of the Industrial Revolution. The size of cities had traditionally depended on the amount of food that the surrounding land could produce. Thus the most populous cities were located in valleys and food plains. With the Industrial Revolution and the factory system, the new industrial centres were flooded with people. Large new urban populations faced no such problems as the cities of the past. With food supplies from all over the world being available, there was no problem of food supplies to hinder the growth of cities.

Medical and technological advances removed the threat of plagues that previously used to threaten cities. Availability of pure water, perfecting of centralised sewerage and waste disposal systems, ensured supply of food, and prevention and control of contagious diseases made city living relatively endurable and pleasant. All over, the cities grew at a rapid pace and by 1930 they contained one-fifth of the world's population. This is one of the most remarkable transformations in human history, for urban life was an entirely new way of life. By 1914 many Western countries, such as England, Belgium, Germany and the United States had a substantial majority of their people living in cities.

Productivity at levels unprecedented in history were made possible by the industrial revolution with its efficient exploitation of human and natural resources on a worldwide scale. England, which was the first affected, increased its capital from 500 million pounds in 1750 to 6000 million in 1865. The entire world felt the impact of the increasing productivity in the latter part of the 19th century.

The distribution of wealth generated by the industrial revolution has been surrounded by controversy and debate, while one group holds that all classes benefited to a greater or lesser extent, the other maintains that a few made huge profits while the majority were ruthlessly exploited and suffered declining standards of living.

There was, without doubt, much exploitation and social disruption in the early days of industrialisation. Tenant farmers were dispossessed, and the weavers and other craftsmen were wiped out by the overwhelming competition from the new, cheaper, machine-made goods. These people faced the strain of moving to the city, finding employment and adjusting to an unfamiliar environment both at work and home. They were totally dependent on their employees for they had no land, no tools, no capital and no home of their own. They had become mere wage-earners with nothing to offer but their labour. They found the work tedious with 16 hours at work quite common. Worse than the long hours were the deplorable conditions in the factories, and the discipline and monotony of tending machines in a factory.

Wages were pitiably low as employers naturally regarded their wage bill as an expense that should be kept as low as possible. As a result, many of them, especially in the textile industry, preferred to employ women and children, who were willing to accept lower wages and were willing to follow orders. The exploitation of women and children reached such proportions that a parliamentary committee which conducted investigations found shocking conditions.

But these horrors did not stop labourers from the countryside crowding into the cities. They were so poorly paid in the country that they continued to stream into cities. The population of England rose during these early days of the Industrial Revolution; a fact that does not agree with the usual picture of the unending misery. It is quite possible that most of the workers in these early factories enjoyed higher real incomes than their ancestors. Though we cannot be sure of the affect of the industrial revolution on working class living standards in the 18th and 19th centuries, we are quite certain that the standards rose substantially in the second half of the 19th century. The lower classes benefitted just as the upper classes did from the profits made from the huge overseas investments, though their benefits were relatively smaller.

The marked rise in national income did not mean, of course, that all classes benefitted equally. The proceeds of the general prosperity did trickle down, but they were mostly absorbed at the top. In England, for instance 4.93% of the people possessed over 60% of the wealth in 1911–1913. This meant there was a corresponding discrepancy in lifestyle too. The poor may no longer starve, but they lived in crowded tenements and subsisted on monotonous diets. In contrast, the middle classes could afford better living quarters and food, attend theatre and concert and educate their children. At the top, the wealthy lived in a style that was unimaginable to the masses at the bottom.

What was its Impact on the Non-European World? Since Europe's Industrial Revolution was fuelled by the overseas trade, the revolution was bound to have its effect on the rest of the world too. Prior to 1763, European powers had only a few footholds in Asia and Africa. But, after this, they established political control over large parts of Asia and almost all of Africa. In the Americas and British Dominions, they were able to do much more than this. Taking advantage of the sparse populations in these regions, millions of Europeans emigrated filling up relatively empty spaces.

The Industrial Revolution was mainly responsible for mass migrations. The sharp increase in population created pressure on European resources leading to overseas migration. Railways and steamships were available to transport people across continents and overseas. Political and religious persecution also stimulated migrations as did disasters such as Ireland's potato famine. The migrations from Europe reached proportions unprecedented in human history to that date.

The first wave of emigrations before 1885 took place from Northern and Western Europe. This was followed by emigrations from Southern and Eastern Europe. A rough pattern can be seen in the migration. Britishers mainly migrated to the Dominions and the United States, the Italians to the United Stated and Latin America, Germans to the United States, Spaniards and Portuguese to Latin America. Some Germans migrated to Argentina and Brazil, though this was a minor number. From the perspective of world history, this extraordinary migration is significant because it was all directed to the New World, with the exception of the rare flow to Asiatic Russia and the trickle to South Africa. The result has been Europeanisation of Siberia, the British Dominions excepting South Africa and Americas. The Indian population in Latin America barely managed to survive this onslaught and survived in a minority. This ethnic Europeanisation naturally and inevitably led to political, cultural and economic Europeanisation too.

The creation of huge European colonial structures in Asia and Africa was the result of the Industrial Revolution. Called 'New Imperialism', the post-1870 empire building activities of European powers changed a large part of the earth's surface into an appendage of a few European countries. The inter-relationship of the new imperialism and the Industrial Revolution was manifested in a growing desire to obtain colonies that would serve as markets for the rising volume of manufactured goods. Soon the industrialised countries were vying with each other for markets, in the process raising tariffs to keep out each other's products. Soon, an argument was being put forward that each industrialised country must have colonies to provide 'sheltered markets' for its manufacture.

The colonies served as investment outlets for the industrialised countries which had surplus capital. Colonies became an economic necessity. As more capital piled up at home, lower the profits fell, greater the need to find better investments in the first half of the 19th century made mostly in the Americas and Australia. But the trend changed in the latter half of the century and investments were made mostly in the relatively unstable countries of Asia and Africa. Thousands of small investors and large banking combinations in order to protect their investment in these countries preferred civilised administration—a euphemism for the exercise of European power. This led to the promotion of the new imperialism.

The Industrial Revolution also created a demand for raw materials to feed the machines. Many of these materials, jute, rubber, cotton, various metals, etc., came from the 'uncivilised' parts of the globe and needed heavy capital outlays for sustained production. This, in turn, led to the imposition of political control.

The last 19th century saw an unprecedented phenomenon—the domination of the globe by one small part of the world. Not only did European powers own the vast colonial territories outright, they also dominated those economically and militarily weak areas that were not actually annexed by them. China, the Ottoman Empire and Persia were all nominally independent but were, in fact, constantly humiliated and controlled in various direct and indirect ways. Though military action in Latin America was discouraged by the Monroe doctrine, the area was merely an economic appendage of the great powers. Thus, Europe's control extended not only over its far flung empires but also over the extensive dependent regions where more European capital was invested than in the colonies.

The massive European investments were safeguarded through various devices and pressures such as military missions that trained the local armed forces, financial missions that supervised and controlled local finances and extra-territorial and capitulatory arrangements that gave special privileges to Europeans residing or doing business in these regions. Thus, by 1914, most of the earth's surface and population had come under direct or indirect domination of a few European countries, including Russia and the U.S.A.

Industrialisation in Other Countries: Usa, Germany, Japan, Socialist Industrialisation in Ussr & China

Industrialisation in the USA

What is the Background? By the end of the 18th century, the United States was experiencing many of the same trends and developments as other nations of Western civilisation. It was influenced by Enlightenment ideas, experienced a revolution, and established liberal political institutions—a pattern familiar to France and other European nations. With the exception of the black slaves, almost all citizens of the new nation were from European stock. Most people worked the land, but there were some growing cities and early industrial establishments—again a pattern not too different from many areas in Europe.

There were some important differences too between the United States and other nations of Western civilisation in 1800. It had only recently emerged from colonial status and remained separated from Europe by the Atlantic Ocean. Politically and socially, the United States did not carry a strong legacy of monarchical rule or aristocratic distinctions. There was surplus of land; thanks to the willingness of American citizens to take from the Indians, and a supply of cheap, non-competitive labour, thanks to slavery.

How did it Take Place? Although the earliest factories were already present in the United States by the end of the 18th century, the growth of industrialisation during the 19th century was at first quite slow. The French and British blockades during the Napoleonic wars and the War of 1812 with England cut the United States off from British manufacturers and caused much American commercial capital to be diverted to manufacturing. By the middle decades of the 19th century, industrialisation was spreading, particularly in the North-East. However, it was not until the years immediately following the Civil War (1861–65) that the United States joined other Western nations as a leading industrial power.

In most ways, industrialisation in the United States proceeded much as it did in other Western countries. New machines and sources of power were applied to the manufacturing process. Large factories sprang up in the East and Midwest, turning raw materials into finished products in great quantities. Working class and urban populations connected with industrialisation grew, fed both by migration from rural areas and massive immigration from Europe. The United States proved subject to the same problems that plagued other industrialising nations: poor working conditions, low pay, child labour; urban slums, inadequate sanitation, and few social services.

However, there were a few elements that seemed to characterise the United States' growing industrialisation between 1865 and 1901. Above all, the degree to which business became concentrated in the hands of a few individuals and corporations was striking. Industrial capitalists such as Andrew Carnegie (steel), John D. Rockefeller (oil), Cornelius Vanderbilt (railroads), and J. P. Morgan (finance) amassed unbelievable fortunes and power. The corporations they founded, such as U.S. Steel and Standard Oil, soon gained monopolistic control over vast resources.

More than in most other nations, in America governmental policies during this period favoured business in general and these huge industrial firms in particular. Not surprisingly, then, in the United States the unionisation of labour was relatively slow to emerge. In part this result was due to the continued abundance of cheap land and the influx of cheap mobile labour from Europe. But unionisation was also deterred by the determined resistance of industrial capitalists backed by private and public police power, and by governmental policies and officials unsympathetic to unionisation. Despite some earlier beginnings in various trades (such as the Knights of Labour), it was not until 1886 that Samuel Gompers, an immigrant from Great England, organised the American Federation of Labour—the first successful national labour organisation in America.

What was the Role of Railroads? But industrialisation requires a transportation system that allows efficient movement of raw materials to factories and finished goods to markets. There was no such system in the United States in its early years, and thus there was no domestic market extensive enough to justify large-scale production. But efforts were under way that would ultimately remove the transportation obstacle. In river transportation, a new era began with the development of the steamboat. Meanwhile, the era that would become known as the turnpike era had begun too; toll roads ran from town to town. Although the railroads played but a secondary role in America's transportation system in the 1820s and 30s, the work of the railroad pioneers became the basis for the great mid-century surge of railroad building that would link the nation together as never before. Railroads eventually became the nation's number one transportation system, and remained so until the construction of the interstate highway system halfway during the 20th century.

The late 19th century belonged to the railroads. They were of crucial importance in stimulating economic expansion, but their influence reached beyond the economy and was pervasive in American society at large. The story of the Iron Horse in 19th-century America is one with many aspects and paradoxes and deserved a closer look. Which technological developments brought forth the railroads, and how were they managed once they grew beyond small companies? What role did they play in the turbulent times of the Civil War? How did they change the American landscape and its native people? What did the railroads mean to politicians, entrepreneurs, the working class, and immigrants? In short, what was the impact of the railroads on 19th-century American society?

Historians argue over the fact whether railroads determined the pace of economic development in 19th-century America. Robert Fogel, among others, tried to measure the impact of transportation innovations on American development using tools of new economic history, and concluded that the contribution of railroads was not as crucial as some had maintained. The issue is a controversial one, but the fact remains that the railroads came, saw, and conquered 19th century America in more ways than one.

They were liberating—increasing mobility and speed across the continent—as well as confining: they held the power of economic life and death over many communities; often abusing that power. The railroads played an important role in developing new concepts of management and brought forth giant corporations, but usually accompanied by obscure financial practices and greed. They provided employment for thousands and thousands of workers, but the conditions under which these labourers had to work and live made them revolt and informed the nation of the hardships of the working class. The railroads were also to a great extent responsible for the settlement of the West, but simultaneously helped extinguish the Native American population. They were a prize to be won for each part of the divided nation in the volatile years before the Civil War, yet linked the nation together with the first transcontinental railroad in 1869. They were born and raised on government money, yet eventually became the first and most heavily regulated segment of the private sector.

The importance of solving the question whether or not the railroads were the prime stimulus for American economic development fades when focusing on the effect they had on society as a whole. One cannot help but wonder how different America would have looked and functioned had it not been for the railroads.

What was its Impact? By the end of the 19th century, the United States not only was a major industrial power but also had outstripped the world in industrial production. The government and the economy of the country were still dominated by big-business interests that controlled the dominant 'Old Guard' wing of the Republican Party. Although the United States enjoyed enormous overall economic development, wealth was unequally distributed, causing widespread discontent. Western and Southern farmers had been clamouring for public regulation of the railroads, on which they were dependent. Small business, labour, and consumers demanded protection against the monopolistic practices and prices of the great trusts and corporations, which were protected by a prohibitively high tariff. The United States government remained behind almost all other industrial nations in its willingness to deal with social abuses stemming from industrialisation. Millions deplored the city slums, the corrupt spoils system in the civil service, and the squandering of natural resources by private interests. The forces of reform were growing and would break out in the two decades following the turn of the century.

Industrialisation in Germany

What is the Background? The process of industrialisation in Germany was dominated by the historic divisions of the empire of the German peoples. Before 1815, there were over 300 separate jurisdictional units within the empire, and after 1815 there were still more than 30. These included large advanced states like Prussia, Austria, and Saxony as well as small free cities and the personal enclaves of petty nobles who had guessed right during the Napoleonic wars. Political divisions had more than political impact. Each state clung tenaciously to its local laws and customs, which favored its citizens over outsiders. Merchants who lived near the intersection of separate jurisdictions could find themselves liable for several sets of tolls to move their goods and several sets of custom duties for importing and exporting them. These would have to be paid in different currencies at different rates of exchange according to different regulations of each state. It is no surprise that German merchants exhibited an intense localism, preferring to trade with members of their own state and supporting trade barriers against others. Such obstacles had a depressing effect on the economies of all German states, but pushed with greatest weight against the manufacturing regions of Saxony, Silesia, and the Rhineland.

Most of imperial Germany was agricultural land suited to a diversity of uses. The mountainous regions of Bavaria and the Austrian alpine communities practiced animal husbandry; there was a grain belt in Prussia, where the soil was poor but the land plentiful, and one in central Germany in which the soil was fertile and the land densely occupied. The Rhine Valley was one of the richest in all of Europe and was the centre of German wine production. The introduction of the potato was the chief innovation of the 18th century. While English farmers were turning farms into commercial estates, German peasants were learning how to make do with less land.

Agricultural estates were organised differently in different parts of Germany. In the East, serfdom still prevailed. Peasants were tied to the land and its lord and were responsible for labour service during much of the week. Methods of cultivation were traditional, and neither peasants nor lords had much incentive to adopt new techniques. The vast agricultural domains of the 'Prussian Junkers', as these landlords were called, were built on the backs of cheap serf labour, and the harvest was destined for the Baltic export trade, where world grain prices rather than local production costs would determine profits. In Central Germany, the long process of commuting labour service into rents was nearly completed by the end of the 18th century. The peasantry was not yet free, as a series of manorial relationships still tied them to the land, but they were no longer mere serfs. Moreover, Western Germany was dominated by free farmers who either owned or leased their lands and who had a purely economic relationship with their landlords. The restriction of peasant mobility in much of Germany posed difficulties for the creation of an industrial workforce. As late as 1800, over 80 per-cent of the German population was engaged in agriculture, a proportion that would drop slowly over the next half century.

Spread of Industrialization

How did it Take Place? Although Germany was well endowed with natural resources and skilled labour in a number of trades, it had not taken part in the expansion of world trade during the 17th century, and the once bustling Hanseatic ports had been far outdistanced by the rise of the Atlantic economies. The principal exported manufacture was linen, which was expertly spun and woven in Saxony and the Prussian province of Silesia. The linen industry was organised traditionally, with a mixture of domestic production managed on the putting-out system and some factory spinning, especially after the introduction of British mechanical innovations. Even the most advanced factories were still being powered by water, and thus they were located in mountainous regions where rapidly running streams could turn the wheels. In the 1840s, there were only 22 steam-driven spinning mills in Germany, several of them established by the Prussian government, which imported British machines and technicians to run them. Neither linens nor traditional German metal crafts could compete on international markets, but they could find a wider market within Germany if only the problems of political division could be resolved. These were especially acute for Prussia after the reorganisation of European boundaries in 1815.

Prussian territory now included the coal and iron-rich Rhineland provinces, but a number of smaller states separated these areas from Prussia's eastern domain. Each small state exacted its own tolls and customs duties whenever Prussian merchants wanted to move goods from one part of Prussia to the other. Such movement became more common in the 19th century as German manufacturing began to grow in step with its rising population. Between 1815 and 1865, the population of Germany grew by 60 per-cent to over 36 million people. This was an enormous internal market, nearly as large as the population of France, and the Prussians resolved to make it a unified trading zone by creating a series of alliances with smaller states known as the Zollverein (1834). The Zollverein was not a free-trade zone, as was the British empire, but rather a customs union in which member states adopted the liberal Prussian customs regulations. Every state was paid an annual portion of receipts based upon its population, and every state – except Prussia – increased its revenues as a result. The crucial advantage Prussians received was the ability to move goods and materials from East to West, but Prussia reaped political profits as well. It forced Hanover and Saxony into the Zollverein and kept its powerful rival Austria out. Prussia's economic union soon proved to be the basis for the union of the German states.

The creation of the Zollverein was vital to German industrialisation. It permitted the exploitation of natural advantages, like plentiful supplies of coal and iron, and it provided a basis for the building of railroads. Germany was a follower nation in the process of industrialisation. It started late and it self-consciously modelled its success on the British experience. British equipment and engineers were brought to Germany to attempt to plant the seeds of an industrial economy. German manufacturers sent their children to England to learn the latest techniques in industrial management. Friedrich Engels (1820–95) worked in a Manchester cotton factory, where he observed the appalling conditions of the industrial labour force and wrote, The Condition of the Working Class in England (1845). Steam engines were installed in coal mines, if not in factories, and the process of puddling revolutionised iron-making, though most iron was still smelted with charcoal rather than coke. Although coal was plentiful in Prussia, it was to be found at the Eastern and Western extremities of Germany. Even with the lowering of tolls and duties, it was still too expensive to move over rudimentary roads and an uncompleted system of canals.

Thus the railroads were the key to tapping the industrial potential of Germany. Here they were a cause rather than a result of industrialisation. The agreements hammered out in the creation of the Zollverein made possible the planning necessary to build single lines across the boundaries of numerous states. Initially German railroads were financed privately, with much foreign investment. Ultimately governments saw the practical advantages of rail transport and took an active part in planning and financing the system. Over a quarter of the track constructed in Prussia before 1870 was owned directly by the government, and most of the rest had been indirectly financed by the government, which purchased land and guaranteed interest on stock issues.

Germany imported most of its engines directly from England and adopted standard British gauge for its system. As early as 1850, there were over 3500 miles of rail in Germany, with important roads linking the manufacturing districts of Saxony and the coal and iron deposits of the Ruhr. Twenty years later, Germany was second only to England in the amount of track that had been laid and opened. By then it was no longer simply a follower. German engineers and machinists, trained in Europe's best schools of technology, were turning out engines and rolling stock second to none. The railroads transported a host of highquality manufactures, especially durable metal goods that came to carry the most prestigious trademark of the late 19th century: 'Made in Germany.'

Industrialisation in Japan

What is the Background? At a time when Western Imperialism was adversely draining the Asian countries, Japan was not only able to resist large scale foreign penetration, but was also able to lay the foundations for the emergence of a powerful state. The Meiji State (constituted in 1868 after the Meiji Restoration) abolished feudalism, and through other socio-economic and political reforms, sought to thrust Japan in the modern age. At the turn of the century, Japan astonished all powers by its rapid strides of progress.

Japan's emergence as a great power became possible, because she chose to westernise herself. The Japanese realised that the superiority of the West lay in their advancement in science and technology and its application. So, the Japanese government encouraged sending promising and brilliant students to Western countries to learn the scientific and technological know-how. Japan also invited foreign industrialists and scientists to set up industries and laboratories on her soil. In course of time, she completely shed its feudal features and accepted the ways of modern civilisation.

After getting modernised, Japan too, like the other imperialist powers, looked forward to establishing colonies. Her efforts bore fruit in this direction soon after the Sino-Japan War of 1894–95. She was considered a big power by England during the early years of the 20th century. The friendship between Japan and England culminated in a defence treaty—the Anglo-Japanese Treaty of 1902. This alliance was directed against a common enemy, Russia. In the Russo Japanese War of 1904–05, Japan inflicted a crushing defeat upon Russia. The defeat of this European giant at the hands of Japan surprised the whole world. With this victory, Japan emerged as a great power in the world.

How was the Industrialisation Done? After the Meiji Restoration, the Meiji Emperor in an address to his subjects said : 'At present when the world has greatly progressed and every nation is expanding right and left, only our nation remains remote from the rest of the world, abiding by the old traditions and customs … Therefore, we pledge … to … bring welfare and happiness to our one billion subjects and expand over the unlimited span of ocean and waves to bring forth our national influence, and put our nation on a foundation solid as a rock.' This address reflected the mood of the leaders of Restoration and indicated the trends that would transform Japan radically within the next few decades.

The first steps taken by the Meiji leaders were in the field of agriculture. Ban on the sale of land was removed in 1872, and this amounted to recognising the right of private ownership of land. In 1873, the regime put through a new taxlegislation which revised the land tax system from a harvest tax (assessed as a proportion of the harvest in rice or its equivalent in money) to a land value tax (assessed as a proportion of the land value at 3%). In this way, the regime guarded itself against possibility of a fall in revenue as a result of bad harvest. The government was thus assured of a fixed income from agriculture which could be used for developmental purposes.

The land tax played a crucial role in early capital accumulation. Between 1871 and 1875, it accounted for between 85% and 93% of total government revenue, and dropped to below 50% only after 1896. The state fostered the development of commercial relations in agriculture. The agrarian surplus made the availability of finance for business and industry possible. It accounted also for the flow of labour from the primary to the industrial sector.

After the Meiji Restoration, rulers decided that Japan must industrialise to be on equal footing with Western intruders. Huge investments were required, but private investment did not come forward. This made the government adopt a policy of subsidising basic investment in industry.

In the development of Japanese capitalism, we don't find clearly the genesis of the capitalist spirit or ethos, and also two other developments, viz. commercial capitalism and industrial organisation on capitalist lines. However, financial capitalism appears. The prime movers in the development of capitalism in Japan were the role of the state and the development of capitalist technology.

The main features of Japanese capitalist growth, therefore, are vigorous state intervention in the formation, accumulation and investment of capital; concentration in capital goods; state control over banking; state guidance and intervention in foreign trade; low expenditure on consumer goods and virtual absence of many social services.

The early Japanese capitalism was a hot-house variety growing under the shelter of state protection and subsidy. Big private capital cleverly remained in trade, banking and credit operations, and more so in the safe and lucrative fields of government loans. This point clearly reveals that few people who possessed the capital had the capitalist spirit of making more and more money, irrespective of any reconsideration. The Japanese state wanted to build the nation, but the Japanese capitalists wanted to accumulate wealth. Capital in the rural areas had no inducement to leave the countryside, since trade, usury and above all high rent (nearly 60% of tenant's crops) prevented rural capital from moving into industrial channels. Industrialisation did not pick up all of a sudden. Ships were built abroad. Till 1914, equipment needed for factories, mines and railways were imported. Till the end of 1870s, foreigners handled more than 9/10ths of all trade. But one point indicated that Japan was gradually picking up, i.e., in 30 years (from 1868 to 1897) imports of raw materials for Japanese factories increased five-fold, and in the same period, exports of finished goods rose more than 20-fold.

Logically from the early stages of Japan's modern history, the power of the financial oligarchy was increased. The state itself sold its enterprises, except military establishments, to private capitalists at ridiculously low prices. Few families such as Mitsui, Mitsubishi, Sumitomo and Yasuda grew in riches. There were more families like these, but these four constituted an important financial oligarchy, called zaibatsu. Such oligarchies developed their own capitalist enterprises. Often these big zaibatsu swallowed small industrial concerns. The policy of keeping military establishments under the state, while pampering the private sector continued till the Allied occupation of Japan in 1945.

One good outcome that came from the economy being monopolised by zaibatsu concerns was modernisation of technology. The state took its first steps in the form of compulsory education within the country and encouragement to young Japanese to learn from abroad, i.e., acquire skills. Large sectors of the economy were handled by able technicians and experts employed by the combines. This afforded a device by which industrial investment was accelerated ploughing back the huge profits accumulated to the owners.

The ability of the Japanese to learn about new techniques as well as to develop them has something to do with Japanese character itself. The Japanese cannot think of being second to anyone. This is an important factor to be remembered howsoever mundane it may seem. This innate pride could bear fruit because the Japanese have tremendous ability to adopt the techniques of others to suit their own needs, as for example, the electronics of today.

While the industrialisation program of the Meiji regime went ahead, the institutional structure needed for capitalism also came into existence. Modern transportation and banking system were established to support a wide range of heavy industries. In the process, large cartels and monopolies, based in some cases on the zaibatsu came into existence. Thus, within a matter of 50 years after the Meiji Restoration, Japan began to compete with the most industrially advanced countries of the world on equal terms.

How was the Society Modernised? The patriotic diamyos and the samurais, who formed the backbone of the feudal structure, led the Restoration movement, and most of the prominent reforms belonged to these classes. In 1869, the feudal chiefs of the great clans that led the Restoration, proposed the voluntary surrender of the feudal fiefs to the throne. In 1871, an imperial decree ordered the end of feudalism. With the end of feudalism, the old division of the public into four classes was abolished (four classes were samurai or the warrior class, peasantry, artisans and merchants). They were, however, not motivated by patriotism. The real power in the fiefs had already fallen into the hands of the ministers, and so in exchange for a handsome pension, they were willing to give up a shadowy power. Besides, they were mostly included in the expanded bureaucracy.

The reforms introduced in the field of education were quite revolutionary. Japan's enthusiasm for the new learning of the West recognised no barriers. Education in feudal Japan had been restricted to men of privileged society; now primary education based on American model was made compulsory in 1882, and by 1883, about 33 lakh pupils were receiving education. From primary schools, the system pyramided upwards through secondary schools to universities. Universities based on French model were established where professors from abroad were induced to accept important positions. Thousands of students were sent to Western countries for receiving higher education.

Newspapers, first published in 1869, multiplied rapidly, increasing to over a 100 by 1882. Books were translated in large numbers from foreign languages. All these efforts made Japan the most educated country in Asia and technically abreast of the modern mechanical world of science. Compulsory military service and the system of education tended to fuse people into a homogeneous whole, permitted with the same spirit of progress, optimism and patriotism.

In order to strengthen the enhanced emphasis upon the Emperor, the Shinto cult was revived and patronised. The revival of Shinto was an example that the revolution which followed the Meiji Restoration was in part a return to Japan's past. The bar on Christianity was also relaxed and the faith made some remarkable advance in the country.

How was the Polity Modernised? After the Restoration, the Emperor moved his residence from Kyoto to Yedo, now renamed Tokyo, which became the new capital. In 1868, the young Emperor read a 'Charter Oath' to his officials which contained vague promises of deliberative assemblies, decisions based upon public opinion and the search for wisdom and ability throughout the world. It was Japan's 'Declaration of the Rights' and was a clear sign that a new wind was blowing over the 'Land of the Rising Sun'.

The most urgent need after the Restoration was the establishment of a strong government in the centre which would be able to exert its authority over the whole country. A strong centralised government could, however, be established only after the abolition of feudalism. As mentioned earlier, the government itself played an important role in abolishing feudalism. Its abolition greatly helped in the unification of the country and the modernisation of its social pattern and administrative machinery. To divert the long-established narrow local interests into broader national channels of true patriotism, the Emperor was chosen as the rallying point.

The idea that the Emperor was the earthly representative of the sun goddess was not only emphasised, but stress was also laid on his being the source of all power and authority; an object of reverence, respect and undying devotion. The focussing of the national sentiment on the throne assisted the cause of unification and internal consolidation. It strengthened the authority of central government. In order to enforce the control of the centre, imperial officials were appointed in every province, and the country was reorganised into prefectures, roughly similar to the American states.

The bureaucracy was thoroughly reorganised to run the centralised state effectively. With the abolition of feudalism, the samurai class was relieved of its military duty. It now entered in large number in the state administrative machinery, and like the Prussian Junker, nobility became its backbone. Later on, competitive civil service examinations became the method of admission to the service.

The abolition of feudalism brought about significant changes in the character of Japanese army. It was no longer exclusively recruited from the samurai. The Japanese peasant, who had been denied the right of holding arms for more than 300 years and who had now been gradually freed from many galling restrictions, became the heart of the conscript national army under the reorganised military system. Thus, a national army was now created on the basis of compulsory military training for all. The army was first put under the French and then under German directions. It was modernised and its efficiency was proved in the suppression of the Satsuma rebellion (1877) that signified the last gasp of feudalism. The navy was also reorganised on British model.

The code of law, both civil and criminal, and the codes of judicial procedure were thoroughly remodelled after an exhaustive study of the western systems. This was stimulated by the desire to be freed from the galling restrictions of extra-territoriality. The Japanese hoped to do away with this humiliating inferiority by introducing the Occidental system of laws.

Three political parties arose in Japan during this period. These were: (1) Liberals, advocating popular representation; (2) Liberal Conservatives, favouring a gradual extension of franchise; and (3) Constitutional Imperialists who, while in favour of a constitution, were opposed to any action that would weaken the power of the Emperor.

The 'Charter Oath' foreshadowed some sort of parliamentary institution. In 1868, a kind of council of ministers on the existing Chinese model was formed. In 1874, a senate with deliberative powers and composed of representatives of nobility and bureaucracy came into existence. Its aim was to limit the powers of the group that surrounded the Emperor. By 1880, provincial assemblies were established. In the next year, the government promised a national assembly and a constitution latest by 1890.

In 1889, the constitution which was framed after four years of patient work was promulgated. This 'Constitution of 1889' resembled the corresponding document of Bavaria with some changes. The influence of English and American Constitutions can be seen in it. It first defined the powers and position of the Emperor, who was declared to be sacred and inviolable. Like the King of England, he was the fountain of power and his ministers must assume responsibility for his acts. But unlike the English monarch, his succession was outside the jurisdiction of the Diet (Parliament) and he himself was 'divine'. His executive power was exercised through two constitutional bodies—Council of Ministers and Privy Council. Both their members were imperial nominees and the Cabinet under constitution was solely responsible to the Emperor. The Imperial Diet was composed of two houses – the House of Peers and the House of Representatives. Both the houses enjoyed equal powers except that financial legislation had to be introduced in the lower house. The Emperor possessed an absolute veto power over all laws. Besides, the control over the purse was not completely given to the Diet. Finally, the constitution could be amended by the Diet only on imperial order.

The constitution also laid the foundation of the modern legal system. Unless public peace was threatened, public trials were to be held and all court sessions were to be summoned in the name of the Emperor. The rights and duties of the subjects were defined. Freedom of speech, religion and association were guaranteed. A subject could be arrested only according to the law and must be tried by legally appointed judges. However, the function of passing judgements on the constitutionality of laws and administrative actions was entrusted to the Privy Council and not to the Supreme Court.

With the promulgation of this Constitution of 1889, Japan entered the ranks of the constitutional states of the world. With all its drawbacks (such as giving too much power to the aristocratic elements like House of Peers, 'Genro' or the body of 'Elder Statesmen', Privy Council, etc., bias towards the executive branch in the separation of powers; leaving great scope for conflicts between the two houses of the Diet; denying the Diet complete control over the national purse; absence of Cabinet responsibility to the Diet; etc.), predomination of the constitution marked the beginning of a new stage in Japan's political life. In spite of the undemocratic and aristocratic bias, it made a real, though modest, advance towards parliamentary government.

Thus, in the second half of the 19th century, startling changes were made in Japan's social, economic, political and religious life. A new era had begun which the Micado (Emperor) himself described as the era of 'Enlightened Rule' and which affected a sweeping transformation of the country. Within an amazingly short period, Japan adopted the material and scientific civilisation of the West, and made herself in many respects a European state. Thus invigorated, she entered upon an international career which profoundly influenced the history of the Far East in subsequent years. This amazing transformation had intensified rather than weakened the traditional spirit and basic institutions of Japan. The revival of the Shinto cult and the focussing of the Emperor as the rallying point inspired nationalism and patriotism of the people.

How did Japan Emerge as a Great Power? Having modernised herself, Japan now launched herself on the imperialist road. Her recourse to imperialism signified her emergence as a great power. Besides, several factors were responsible for Japan turning into an imperialist country. Growing population, limited land, paucity of raw materials, and a search for market were some of the important factors. Imitating her Western counterparts, Japan looked forward to establishing her own colonies in Asia. The weakness of the Manchu government in China attracted her attention, and she put up her claim to Korea which owed allegiance to China. In the ensuing struggle (1894–95) for Korea, China was defeated with the result she gave up her claims to Korea. Besides, Japan received from China a huge war indemnity and a few islands on the Chinese coast including Formosa. At the turn of the 20th century, England for her own reasons developed intimacy with Japan which culminated in the Anglo-Japanese Treaty. It was directed against Russia. Meanwhile, Russian ambition in the Far East, particularly Manchuria, posed a threat to Japan's interests in Korea. Japan tried to settle this dispute with Russia through negotiations but failed. It resulted in a war, viz. the Russo-Japanese War of 1904–05. The Russians suffered ignominious defeat at Mudken and came to terms. The Treaty of Portsmouth (1905) was signed by which Russia recognised Japan's interest over Korea; transferred to her the lease of the Liao-Tung Peninsula, and gave Southern-half of the island of Sakhalin. Russia also agreed to evacuate Manchuria. Japan's inherent strength at beating a European giant like Russia surprised the whole world. Japan's success in this war encouraged other Asiatic countries under foreign rule to demand self-government.

Japan entered the World War I (1914–18) on the side of England with the hope of adding more territories to her empire from her weak neighbour, China. Taking advantage of the preoccupation of the European powers during the conflict, Japan sent an ultimatum to China in January 1915 to concede to her '21 Demands'. Japan also threatened China with a war if these demands were not accepted. Yuan Shi Kai of China privately accepted most of the demands with the hope of retaining his power. Most of these demands were related to territorial claims and economic concessions. America entered into the Lansing-Ishi Agreement with Japan by which she recognised the special claims of Japan over China. At the Paris Peace Conference, China and Japan clashed and put forward conflicting claims. Japan's claims over China were upheld by the peace conference, and China was very much disappointed. Japan was rewarded with the former German territories in China and a large number of islands. After the First World War, Japan's prestige as a world power rose to new heights, and she secured a permanent seat in the League's Council. Although she looked forward to expanding her empire at the expense of her weak neighbour (China), she was restrained from this course of action by the terms of the Nine Power Treaty to which she was signatory. At the Washington Conference (1921–22), the nine powers including Japan agreed to respect the Chinese territorial integrity and sovereignty. Therefore, for about a decade, i.e., till the rise of militarism in Japan and the Manchurian crisis (1931), Japan did not trouble China.

Japanese Empire

Socialist Industrialisation in USSR And China

Soviet Socialist Industrialisation

What is the Nature of its Industrialisation? The first challenge the Bolsheviks faced after coming to power was that of creating the new socialist society which they had preached for so long. But soon they discovered that it was not an easy task. They had no examples to emulate in history and had to resort to experiments. Initially, there was no scope for experiments because the struggle for survival took precedence over everything else. The so-called 'War Communism' that prevailed between 1917 and 1921 evolved out of the desperate measures taken to supply the battle front with essential materials and manpower. Under this War Communism banks, lands, foreign traders and heavy industry were all nationalised. Surplus agricultural produce too was forcibly requisitioned to feed the troops and the city dwellers. The original plan was to compensate the peasants with manufactured goods, but this proved impossible because all that was produced had to be sent to the front.

With end of the civil war, the necessity for the War Communism ended and it was promptly dropped. Lenin realised that concessions were unavoidable and this led to the adoption of the New Economic Policy, or NEP as it was popularly known, in 1921. It allowed a partial restoration of capitalism. Peasants could sell heir produce on the open market and individuals were allowed to operate small stores and factories. The peasants and new merchants could employ labour and retain any profits made.

Lenin died in 1924, and his successor, Joseph Stalin, launched in 1928 the first of a series of Five Year Plans. This was an unprecedented move because they provided a blue print and a mechanism for the reorganisation and operation of a nation's entire economy.

Stalin once said that the Kulak resistance to collectivisation of land was the most dangerous challenge he encountered. He had no choice but to force his plan on them, for collectivisation was the foundation of the new economy he had blueprinted. The Kulaks opposed collective farms for they had to enter on the same terms as the poor peasants who brought little with them. The Kulaks, in some instances, burnt the buildings of the collectives, poisoned cattle and spread rumours to frighten peasants. The government retaliated by uprooting thousands of Kulak families from villages, putting them in prisons and Siberian labour camps. Eventually, the government had its way so that by 1938, almost all peasant holdings had been combined into 242,400 collective farms or Kolkhozy, and 4,000 state farms or Soukhozy.

Collectivisation did not prove successful from the viewpoint of production but, nevertheless, it provided the central basis for the Five Year Plans. It eliminated the Kulaks who threatened the existence of the Soviet regime. The peasants too were no longer an independent political force and Soviet authority was firmly established in the countryside. This, in turn, enabled the Soviet Union to foist much of the losses of industrialisation upon the peasantry. Surplus produce was siphoned off by the state in the form of taxes, and then exported to finance industrialisation.

While most farms were run as cooperatives, factories were owned and operated by the government. Besides providing industry with the necessary capital, the government also employed a carrot and stick policy to stimulate production. Workers and managers were required to meet certain quotas failing which they faced fines or dismissals. Surpassing quotas, on the other hand, meant bonuses. Trade unions were allowed and recognised, but they were denied the right to strike – for strikes were incompatible with the goals and functioning of the Soviet economy.

By the end of the first Five Year Plan in 1952, the Soviet Union rose from the fifth to the second place in industrial output. This spectacular spurt was due not only to the increased productivity but also due to the decline in productivity in the West because of the Great Depression. Nevertheless, Soviet Gross National Product, which included the lagging agricultural as well as the industrial output increased three and a half times during the quarter century between 1928 and 1952 – a rate of growth surpassing that of any other country during this period.

What was Lenin's War Communism? With the onset of the civil war (between the White Army and the Red Army), the Bolsheviks abandoned the relatively gradual approach that they had taken in economic and social matters since the October Revolution, an approach characterised by Lenin as 'one foot in Socialism'. Beginning with the sweeping nationalisation of large scale industry in June, 1918, an attempt was made to transform Russian society directly into the classless communist ideal. At the same time, a pattern of centralisation and coercion was adopted to channel the country's efforts and resources into victory in the civil war.

Nationalisation was gradually extended to practically every enterprise of consequence, including small-scale as well as large-scale industry, and trading and service enterprises. Workers' control was now rejected by Lenin as a hindrance to production; instead, he favoured one-man management by paid experts, with tight centralisation of overall administration of each industry in the Chief Administrators in Moscow. Industrial production, already falling in 1917 as a result of the disruptions of the world war and revolution, continued to sag. Transportation was in a poor state, which contributed further to the stagnation in industry.

The break-up of large landholdings and inclination of the peasants to consume their produce or curtail production rather than sell it for worthless money caused a catastrophic drop in the food available for the urban sector and the army. The Soviet government responded by having grain 'requisitioned' by armed detachments, aided by 'committees of the village poor'. The result was further disruption of food production and total alienation of the majority of the peasants, to the point of armed insurrection against the soviet authorities in some districts of central Russia.

Soviet Union experienced its worst internal crisis after the end of the civil war. By the end of 1920, the experiment of war communism, coupled with war-time disruptions, had brought industry almost to a standstill. The countryside was seething with unrest over the requisitioning of food. Strikes, though outlawed by the Soviet government, erupted in the major cities. In March 1921, a serious naval mutiny occurred at Kronstadt, suppressed only through prompt action by Trotsky, who sent troops across the ice on the Bay of Finland.

What was Lenin's Nep? The above naval mutiny seems to have convinced Lenin that a new approach was needed to win back the wavering support of the peasants. Hence, he introduced the New Economic Policy (NEP). The decisive step marking the end of war communism and the beginning of the era of the NEP was the suspension of food requisitioning and the introduction of a tax in kind specifying the amounts that each peasant had to contribute. From this, there followed a series of measures putting the government on a more legal and orderly basis, while temporarily sacrificed the collectivist and egalitarian goals of the communist party.

The NEP was explained by Lenin himself as a retreat from the momentarily unattainable goal of communism to state capitalism:
1.Monetary system and the market economy were restored.
2.Peasants were allowed to dispose of their produce freely after meeting their tax obligations.
3.Most trading enterprises and much of small-scale industry were denationalised, permitting the rise of a new class of small businessmen, called the 'NEP-MEN'.
4.Large-scale industry, transportation, public utilities, the financial system and major natural resources were kept under state ownership.
5.Within state-owned sector also, there were further steps back towards capitalistic economic arrangements. Individual, professional management became the rule, and profit-and-loss account was restored. State-owned enterprises traded with each other and sought to grow by earning profits. Wages and salaries set to reflect effort and responsibility, an acknowledged reversion from the Marxist goal of equality. Economic planning was reduced to a modest effort at forecasting resources, rehabilitating war-torn plants and building up the infrastructure, particularly electric power.

The NEP quickly achieved a recovery in both agricultural and industrial production. By the mid 1920s, most branches of the economy reached pre-war levels. A major issue then developed over the manner of future development, an issue between the proponents of gradual growth in the pattern of market socialism on the one hand, and the advocates of more deliberate planning for a high tempo of industrialisation on the other. The issue was ultimately decided by the political succession struggle that characterised the Years of the NEP.

How Did Lenin Reconstruct Society? In literary and cultural matters, the communist regime during this period was generally content to suppress only political opposition allowing a variety of artistic schools to work out their ideas. Strictly speaking, the Soviet regime, while being dictatorial, was not yet totalitarian (it became totalitarian during Stalin's era); non-political areas were not subjected to the positive and exclusive dictates of official controllers.

During the period, arts and literature were distinguished by the emergence of a variety of extreme leftist groups, experimenting radically in their respective media and contending for the right to represent the proletariat and the new society.

In the field of education a doctrine of service to the proletariat was combined with serious attempts at experimentation. At the same time, great strides were made in expanding the basic primary and secondary school system, creating the machinery that substantially wiped out illiteracy among the younger soviet generation. In higher education, class principles required admission preference for children of workers and peasants, regardless of preparation, to the great detriment of the universities. Much was achieved, however, in the education of the working class through the so called 'rabbak' (workers' night courses).

What was Stalin's Role in Economic Reconstruction? Industrial expansion was tackled by a series of Five Year Plans, the first two of which (1928–32 and 1933–38) were said to have been completed a year ahead of schedule, though in fact neither of them reached the full target. The first plan concentrated on heavy industry—coal, iron, steel, oil and machinery, which were scheduled to triple output; the two later plans provided for some increases in consumer goods as well as in heavy industry. In spite of mistakes, the plans were a success. By 1940, the USSR has overtaken England in iron and steel production, though not yet in coal, and she was within reach of Germany.

The cash needed for the industrial expansion was provided almost entirely by the Russians themselves, with no foreign investment; some from grain exports, some from charging peasants heavily for use of government equipment and ruthless ploughing back of profits and surplus. Hundreds of foreign technicians were brought in and great emphasis placed on expanding education in technical colleges and universities and even in factory schools, to provide a whole new generation of skilled workers.

The problems of agriculture were dealt with by the process known as 'Collectivisation'. The idea was that the small farms and holdings belonging to the peasants should be merged to form large collective farms jointly owned by the peasants.

The programme of collectivisation was launched in 1929, and had to be carried out by sheer brute force, so determined was the resistance in the country side. There was no problem in collectivising landless labourers, but all peasants who owned any property at all, whether they were Kulaks or not, were hostile and had to be forced to join by armed bands of party members who urged poorer peasants to seize cattle and machinery from the Kulaks to be handed over to the collectives. Kulaks often responded by slaughtering cattle and burning crops rather than allow the state to take them. Peasants who refused to join collective farms were arrested and deported to labour camps or shot dead. In this manner, well over 90% of all farmland had been collectivised by 1937.

In one sense, Stalin could claim that collectivisation was a success. For, it allowed greater mechanisation which gradually increased grain output until by 1940, it was over 80% higher than in 1913. On the other hand, so many animals had been slaughtered that it was only in 1953 that livestock production recovered to the 1928 figure, and the cost in human life and suffering was enormous.

How did Stalin Reconstruct Society? The Stalin Era was characterised by the imposition of totalitarian regimentation in practically all realms of life. With his rise, the communist party had been subjected to strict centralisation of authority within its hands. After 1928, using the party as his primary agent of control, Stalin extended this pattern to most aspects of Soviet social, cultural and intellectual life.

The social pattern of the period was based above all on the subordination of the individual to the collective organisation. This was most apparent, as we have seen above in the elimination of individual economic enterprise among the Kulaks and ordinary peasants, but it also became the rule among writers, scholars and scientists.

At the same time, the old revolutionary impulse towards collective equality was suspended. Stalin put heavy emphasis on the development of individual responsibility, on the strengthening of the authority of organisers and managers, and on the expansion of wage and salary differentials on the basis of skill and effort.

The educational experimentation of the 1920s was abruptly suspended in 1929. The new emphasis, under the label of 'poly technicism', was heavily toward practical industrial skills. In his realm, the challenge of training uneducated peasants for the tasks and responsibilities of industrial life was a monumental one, but, through a complex network of technical schools and institutions and on-the-job training, the soviet government made a substantial breakthrough in the modernisation of its population.

Chinese Socialist Industrialisation

What is the Background? In 1949, when the communists took over, China's economy was in the doldrums. A period of 37 years of almost continuous warfare, from the time of the fall of the Manchu dynasty in 1912 until 1949, and floods and famines had thrown the Chinese economy out of gear. Between 1927 and 1937, the Nationalist Government under Chiang Kai Shek had undertaken a number of progressive measures in education and for the development of the railways and modem industries. All these achievements were wiped out during the SinoJapanese War between 1937 and 1945. The Communists themselves had caused much damage to industries and railways during this period. Dams, irrigation systems and canals were neglected and no repairs were carried out.

Manchuria, which was the most industrialised part of China, made some progress following the Japanese occupation in 1933, for Japan had put up modem industrial plants in that part of the country. But, in 1945, she withdrew when Russia invaded Manchuria and occupied most of its Northern part. When Russia had to vacate after the War, she dismantled all the industries worth two billion dollars and carried them away to Siberia. Therefore, when the Communists took over, they found that even in Manchuria, the industrial base of China had been shattered. Moreover, runaway inflation had completely demoralised the wage earner and had ruined the economy.

The Communist government was up against herculean task in putting China back on her industrial feet. She had to begin almost afresh. She had already done some basic work in agriculture in the Soviets, which she had organised in different parts of the country. Through these Soviets and the village councils established by the cadres, land reforms in China had been completed by 1953. Agricultural development was as vital for her as industrial progress. It was essential to increase agricultural output to feed the rapidly increasing population, which had already reached alarming proportions by 1949.

The Chinese Communist party took up the task of reconstructing the economy in right earnest. China had decided to follow the Russian pattern of socialised industrialisation. The emphasis in the first phase was on the development of heavy industries. The economic growth between 1949 and 1957 passed through two stages: (i) from 1949 to 1953, was the stage of recovery and rehabilitation; (ii) from 1953 to 1957, was the period of the First Five-Year Plan.

How was it done in the First Phase? In China, there was no capitalist society to precede the Socialist Revolution. The Communist Party of China was fortunate in the sense that the capitalist economy under the Kuomintang government did not become a well-developed economy. If it had been so, it would have discouraged the emergence of a socialist order, as it did in some European countries and Japan. In these countries, rapid industrialisation and economic growth which brought prosperity to the people and gave them a better standard of life removed the main cause of the emergence and spread of Communism, namely, tremendous suffering of the people arising out of their abject poverty and starvation. But the absence of industrial development in China had already led to impoverishment of people; a vast majority of whom lived on the borderline of starvation. Mao made use of their wretched condition to build up the Communist Party and bring about a Socialist Revolution. At the same time, however, the Communist Party was faced with an uphill task – it had to build up a backward economy.

In the cities, the properties including the industries of big capitalists had been confiscated. But the large petty bourgeoisie, comprising lakhs of small shopkeepers, factory owners and traders, was not touched. Instead, it was allowed to expand under government control which was exercised by regulating wages, prices, working conditions, and the supply of raw materials. In spite of this control, however, these petty capitalists had enough freedom to make profits and enjoy a bourgeois lifestyle. This is evident from the fact that between 1949 and 1953, the number of privately-owned industries increased from 123,000 to 150,000 and the number of workers in these industries went up from 1,644,000 to 2,231,000.

It is obvious from these facts that the communist government encouraged this kind of capitalism for the time being as a matter of expediency. A total nationalisation of industries in 1949 would have led to a breakdown of the economy. In order to reconstruct the war-torn economy of the country and to acquire a good economic basis to build upon, the communists needed the managerial skills and technical expertise which the bourgeoisie alone could supply. When this foundation had been laid, they ruthlessly wiped out all forms of capitalism. By 1956, state ownership of business and industry was complete. This is evident from the fact that private enterprise was allowed only in such inconsequential economic activities as those of peddlers, very small shopkeepers and selfemployed handicraftsmen.

How was it Done in the Second Phase? In order to build a strong socialist economy, Mao followed the Russian model of economic development. It was Lenin who had laid a special stress on the development of heavy industries with the help of a centralised political authority. Lenin's premise that rapid economic development would be possible by nationalising the means of production and that this 'would more or less automatically guarantee the arrival of a socialist society' was unhesitatingly accepted by Mao for two reasons. In the first place, China was dependent on Russia for technical know-how, machinery and personnel. No other country was prepared to offer economic aid to her on a scale which Russia gave. Secondly, Russian economic development had faced the very problems which confronted China – the problems arising out of her economic, industrial and technical backwardness. It was in recognition of these problems that the Sino-Soviet Treaty of Friendship, Alliance and Mutual Aid was signed in 1950 following Mao's first visit to Russia. In terms of this treaty, the Soviet Union agreed to set up 50 model industrial units in China and supply the necessary technical personnel to man them.

The Chinese adoption of the Russian model of economic development helped to strengthen the friendship between the two countries, for both were socialist and both were looked upon with apprehension by Western capitalist nations. It was in these circumstances that the First Five Year Plan (1953–57) was launched for the economic development of China.

First Five Year Plan: A Planning Commission was set up in 1952, which fixed Plan targets and quotas, and the method of achieving them. While 88.8 per cent of the state's capital investment in industry was earmarked for heavy industry, only 11.2 per cent was allotted to the production of consumer goods. This was done in the belief that a heavy industrial base would assist in the development of consumer goods industries and in the technological modernisation of agriculture. Despite many difficulties, China made astonishing progress during the first decade of the Republic in almost every field – industry, agriculture, communications, construction, education and public health. Her problems in regard to industrial development were similar to those of any economically underdeveloped country.

These problems were:

(a)Lack of financial resources

(b)Lack of technical know-how

(c)Shortage of natural resources

(d)Absence of hard work

(e)Corruption at all levels of the administration

The Chinese Government overcame all the difficulties. Mao Zedong ruthlessly created the right atmosphere by introducing strict control, internal peace, law and order and unity of purpose.

Russian Help: Russia came forward with aid on a massive scale and met almost every Chinese need in the initial stages of her growth. Moreover, there was tremendous enthusiasm among the people, who are ready for self-sacrifice and who were willing to work hard intelligently and with resourcefulness. They learnt the new techniques and methods of modern industry. Here, again, Russian help proved to be one of vital importance. For Russian technical and financial assistance, China, despite her intelligent and hardworking people, would have taken much longer to achieve what she did in the first 10 years. Russia not only gave financial assistance and technical know-how; she also sent the machinery and industrial plants to China because she believed that China would be under her political tutelage and that, with her help, she would be able to build a vast bulwark of communist opposition to the capitalist bloc. In 1957, however, Khrushchev realised that Mao was not the man to toe the Russian line blindly.

Rapid Progress: Russia's relations with China became somewhat strained. In 1960, she decided to withdraw all her aid and technical assistance. But, by that time, Chinese scientists and technicians had gained sufficient knowledge to be able to work on their own. China became technologically one of the advanced countries of the world, having exploded her first atomic bomb. She made her first guided missile with a nuclear warhead in 1956; exploded a hydrogen bomb in 1967, and launched an earth satellite in 1970. With her ICBMs, 2,500 military aircrafts, 10 million soldiers and a large naval force, she has emerged as one of the strongest nations, next only to the USA and the USSR.

Condition of Industries in 1950: In 1949, the modern industrial sector in China was small and mostly foreign-owned. Most of the industries, generally light industries, were situated on the Eastern coast and in Manchuria. Her steel production was not more than one million tons. There were hardly any machine manufacturing industries. Electric power stations were few, and production of electricity was limited. There were only, 12,000 miles of railways, which connected some of the important cities. Her industrial base and infrastructure were smaller than those of India in 1947.

Inflation Controlled: Before it did anything else, the government had to control inflation which was so terrible that a single meal cost a million dollars. Currency notes had become worthless paper. In 1950, the People's Bank was asked to take over the control of all paper money, limit its supply and restore its value. The other measures adopted to curb inflation were: (i) The government paid low wages to all its servants; (ii) Other employers provided the workers with daily necessities and gave them a few notes to purchase luxuries. At the same time, the prices of all necessities of life were controlled. These measures helped to reduce the amount of money in circulation. The value of the currency was stabilised.

State Control of Industries: The Communists took over control of banking, trade, railways, steel and other key industries. The assets of the 'Four Great Families' were also taken over. The property and assets of American firms were confiscated soon after the outbreak of the Korean War. Many foreign firms, which were involved in Communist-dominated labour disputes, sold their industries to the government. Those who were neither capitalists nor reactionaries were allowed to continue, so that their technical and managerial skills might be available to the Chinese, and the pace of production might be maintained. During the Korean War, the government launched five 'anti-campaigns' against bribery, corruption, tax evasion, fraud and theft of state property. Charges were brought against industries, which were heavily fined. Some of the owners of large plants had to sell their assets to the government. The remaining were compelled to take the government as a partner. In 1953, the government told them that it would gradually absorb all private enterprises. By September 1956, it reported that 98.7 per cent of industrial production in the country was controlled by the state. Whenever it took over an industry, it asked the managerial staff to continue until the communists were trained to take over.

Significance of Russian Aid: It may be pointed out here that China planned her whole industrial development around 156 large key industrial plants which Russia had helped her to set up. But Soviet loan covered only 31 per cent of the cost of equipment and supplies for these 156 industries. During the First Five Year Plan, Russian aid constituted only three per cent while the remaining 97 per cent came from China itself.

Russian knowledge of technology and experience in centralised economic planning, which was made available to the Chinese in abundance, proved to be more important than Russian financial help. Russians provided equipment for the installation of 156 industrial plants as well as the personnel to man them. They trained the Chinese for these jobs. What was even more significant was the fact that Russia supplied blueprint and technological information for a great variety of construction projects and industries. In the 1950s, nearly 6,000 Chinese students were educated in Russian universities in science and technology, while about 7,000 industrial workers went to Russia to receive training in a variety of skills. Moreover, about 12,000 Russian engineers and technicians were sent to China to set up and organise the various industries.

What was its Impact? The development of the steel industry received top priority. In 1949, China produced only 158,000 tons. The Japanese steel mills in Anshan in Manchuria, which produced 800,000 tons, had been dismantled by the Russians. By 1951, the steel industries in Anshan had been restored. At Anhui, Wuhan and Shanghai, major steel mills were built with the help of Russia. Between 1951 and 1957, steel production increased six times. In 1957, China produced 5,350,000 tons. By 1960, she had made considerable progress and had built several large furnaces, which included the modern Paotu plant. There were 73 small and big steel plants by 1960, which produced 18,500,000 tons of steel. This was five times more than India produced at that time. In 1959, she surpassed even the U.K. in the production of coal. In 1960, she produced 425 million tons of coal. Her coal, however, was of inferior quality.

China made good use of this tremendous increase in the production of steel and coal to build up metal-cutting machine tools, the production of which increased from 50,000 in 1958 to 90,000 in 1960. In two years, she had almost doubled her production. This helped her to manufacture her own trucks, cars, tractors, jet planes, etc., though not in sufficient quantities. Electrical goods, rolling stock and nearly eight per cent of the equipment needed for the manufacturing industry were also produced. The number of tractors increased from 2,719 in 1953 to 24,629 in 1957, which shot up to 110,000 in 1962. The production of cement increased from 141,000 tons in 1950 to 1,227,000 tons in 1959 and was estimated to have gone up to 16 million tons in 1960. China's locomotive industry, which was based in Dairen, produced 20 locomotives in 1952. By 1960, it reportedly produced 800 locomotives and 32,000 goods wagons. Her cotton mills increased their production from 2,790 million metres of cloth to 7,500 million metres in 1959. The production of electric power went up from 9,200 million kilowatt hours to 55,000 million kilo-watt hours in 1960.

Most of these statistics have been published by China, but there has been no way of verifying the accuracy of these figures. Various sinologists have tried to come to their own conclusions regarding the rate of the growth of industrial production by different methods of analysis. Most of them are of the view that the figures published by China are exaggerated. Even if we discount Chinese claims by as much as 30 per cent, the achievements are still fantastic. It may be pointed out here that there was a fall in the production of most of these articles between 1960 and 1964. For example, steel production went down from 18.5 million tons to 7 or 8 million tons; coal production dropped from 425 to l90 million tons; cement from 16 million to 6million tons; and the production of trucks decreased from 29,000 to 3,000. The reasons for this decline in production were the withdrawal of Russian help and unprecedented floods and droughts between 1959 and 1961. However, the production of all these items picked up again after 1964.

Chinese claims of industrial production at the end of the First Five-Year Plan were equally fantastic. Plan targets had been over-fulfilled. Industrial production more than doubled. The annual growth rate of industries reached 18 per cent, while the Plan target was only 14 per cent. The production of capital goods had increased by 204 per cent, with an average annual growth rate of about 25 per cent. During the First Plan period, the production of consumer goods had increased by 85 per cent; that of steel had gone up by 296.6 per cent; sugar production had increased by 247 per cent. The production of cotton yarn had increased only by 28.5 per cent because of the failure of agriculture.

With the development of industries in China, the number of industrial workers increased from 6 million to 10 million during the Plan period. Simultaneously, the number of cities increased, raising the urban population from 70 million to 100 million people.

All this industrial progress was achieved because the Chinese workers worked for longer hours without demanding higher wages. Their leaders told them that unless they were prepared to suffer hardships, the country would have no great future. Zhou Enlai told them to bear certain hardships and inconvenience in order that in the long run, 'we shall live in prosperity and happiness.' He urged them not to seek petty benefits now and 'never be able to shake off poverty and back-wardness.'

Industrialisation And Globalisation

What is the Meaning? Globalisation is one of the most charged issues of the day. It is everywhere in public discourse—in TV sound bites and slogans on placards, on websites and learned journals, in parliaments, corporate boardrooms and labour meeting halls. Extreme opponents charge it with impoverishing the world's poor, enriching the rich and devastating the environment, while fervent supporters see it as a high-speed elevator to universal peace and prosperity.

Amazingly for so widely used a term, there does not appear to be any precise, widely-agreed definition. Indeed the breadth of meanings attached to it seems to be increasing rather than narrowing over time, taking on cultural, political and other connotations in addition to the economic. However, the most common or core sense of economic globalisation surely refers to the observation that in recent years a quickly rising share of economic activity in the world seems to be taking place between people who live in different countries (rather than in the same country). This growth in cross-border economic activities takes various forms.

What is its Nature and Course?

International Trade: A growing share of spending on goods and services is devoted to imports from other countries. A growing share of what countries produce is sold to foreigners as exports. Among rich or developed countries, the share of international trade in total output (exports plus imports of goods relative to GDP) rose from 27 to 39 per cent between 1987 and 1997. For developing countries it rose from 10 to 17 per cent.

Foreign Direct Investment (FDI): Firms based in one country increasingly make investments to establish and run business operations in other countries. US firms invested US$133 billion abroad in 1998, while foreign firms invested US$193 billion in the US. Overall world FDI flows more than tripled between 1988 and 1998, from US$192 billion to US$610 billion, and the share of FDI to GDP is generally rising in both developed and developing countries. Developing countries received about a quarter of world FDI inflows in 1988–98 on average, though the share fluctuated quite a bit from year to year. This is now the largest form of private capital inflow to developing countries.

Capital Market Flows: In many countries (especially in the developed world) savers increasingly diversify their portfolios to include foreign financial assets (foreign bonds, equities, loans), while borrowers increasingly turn to foreign sources of funds, along with domestic ones. While flows of this kind to developing countries also rose sharply in the 1990s, they have been much more volatile than either trade or FDI flows, and have also been restricted to a narrower range of 'emerging market' countries.

What is its Impact and Significance? First, it is crucial in discussing globalisation to carefully distinguish between its different forms. International trade, foreign direct investment (FDI), and capital market flows raise distinct issues and have distinct consequences: potential benefits on the one hand, and costs or risks on the other, calling for different assessments and policy responses. The World Bank generally favours greater openness to trade and FDI because the evidence suggests that the payoffs for economic development and poverty reduction tend to be large relative to potential costs or risks (while also paying attention to specific policies to mitigate or alleviate these costs and risks).

It is more cautious about liberalisation of other financial or capital market flows, whose high volatility can sometimes foster boom-and-bust cycles and financial crises with large economic costs, as in the emerging-market crises in East Asia and elsewhere in 1997–98. Here the emphasis needs to be more on building up supportive domestic institutions and policies that reduce the risks of financial crisis before undertaking an orderly and carefully sequenced capital account opening.

Second, the extent to which different countries participate in globalisation is also far from uniform. For many of the poorest leastdeveloped countries the problem is not that they are being impoverished by globalisation, but that they are in danger of being largely excluded from it. The miniscule 0.4 per cent share of these countries in world trade in 1997 was down by half from 1980. Their access to foreign private investment remains negligible. Far from condemning these countries to continued isolation and poverty, the urgent task of the international community is to help them become better integrated in the world economy, providing assistance to help them build up needed supporting institutions and policies, as well as by continuing to enhance their access to world markets.

Third, it is important to recognise that economic globalisation is not a wholly new trend. Indeed, at a basic level, it has been an aspect of the human story from earliest times, as widely scattered populations gradually became involved in more extensive and complicated economic relations. In the modern era, globalisation saw an earlier flowering towards the end of the 19th century, mainly among the countries that are today developed or rich. For many of these countries trade and capital market flows relative to GDP were close to or higher than in recent years. That earlier peak of globalisation was reversed in the first half of the 20th century, a time of growing protectionism, in a context of bitter national and great-power strife, world wars, revolutions, rising authoritarian ideologies, and massive economic and political instability.

In the last 50 years, the tide has flown towards greater globalisation once more. International relations have been more tranquil (at least compared to the previous half century), supported by the creation and consolidation of the United Nations system as a means of peacefully resolving political differences between states, and of institutions like the GATT (today the WTO), which provide a framework of rules for countries to manage their commercial policies. The end of colonialism brought scores of independent new actors onto the world scene, while also removing a shameful stain associated with the earlier 19th century episode of globalisation. The 1994 Uruguay Round of the GATT saw developing countries become engaged on a wide range of multilateral international trade issues for the first time.

The pace of international economic integration accelerated in the 1980s and 1990s, as governments everywhere reduced policy barriers that hampered international trade and investment. Opening to the outside world has been part of a more general shift towards greater reliance on markets and private enterprise, especially as many developing and communist countries came to see that high levels of government planning and intervention were failing to deliver the desired development outcomes.

China's sweeping economic reforms since the end of the 1970s, the peaceful dissolution of communism in the Soviet bloc at the end of the 1980s, and the taking root and steady growth of market based reforms in democratic India in the 1990s are among the most striking examples of this trend. Globalisation has also been fostered by technological progress, which is reducing the costs of transportation and communications between countries. Dramatic falls in the cost of telecommunications, of processing, storing and transmitting information, make it much easier to track down and close on business opportunities around the world, to coordinate operations in far-flung locations, or to trade online services that previously were not internationally tradable at all.

Finally, given this backdrop, it may not be surprising (though it is not very helpful) that 'globalisation' is sometimes used in a much broader economic sense, as another name for capitalism or the market economy. When used in this sense, the concerns expressed are really about key features of the market economy, such as production by privately-owned and profitmotivated corporations, frequent reshuffling of resources according to changes in supply and demand, and unpredictable and rapid technological change. It is certainly important to analyse the strengths and weaknesses of the market economy as such, and to better understand the institutions and policies needed to make it work most effectively. Societies need to think hard about how to best manage the implications of rapid technological change. There is little to be gained by confusing these distinct (though related) issues with economic globalisation in its core sense, that is the expansion of cross-border economic ties.

The best way to deal with the changes being brought about by the international integration of markets for goods, services and capital is to be open and honest about them. Globalisation brings opportunities, but it also brings risks. While exploiting the opportunities for higher economic growth and better living standards that openness brings, policymakers—international, national and local—also face the challenge of mitigating the risks for the poor, vulnerable and marginalised, and of increasing equity and inclusion.

Even when poverty is falling overall, there can be regional or sectoral increases about which society needs to be concerned. Over the last century, the forces of globalisation have been among those that have contributed to a huge improvement in human welfare, including raising countless millions out of poverty. Going forward, these forces have the potential to continue bringing great benefits to the poor, but how strongly they do so will also continue to depend crucially on factors such as the quality of overall macroeconomic policies, the workings of institutions, both formal and informal, the existing structure of assets, and the available resources, among many others. In order to arrive at fair and workable approaches to these very real human needs, government must listen to the voices of all its citizens.

Globalisation and Liberalisation—Merits and Demerits

What do they Mean? The controversial catchwords of globalisation and liberalisation are interchangeable and appear to be the twin sides of the same coin, but the former has an international connotation while the latter has an essentially domestic context. Globalisation increases interdependence and economic integration among various countries through the enlarged flow of commodities, capital, finance and information across the globe. It removes barriers in the way of greater interdependence and global economic integration. Liberalisation involves dismantling of government control and regulations within the countries along with the privatisation of the public sector and public utilities. Government policies are restructured to ensure free competition.

Since World War II international trade has been greatly facilitated by agreements among trading countries on a set of rules for international trade, known as the General Agreement on Tariffs and Trade (GATT). These rules were developed through a series of international trade negotiations, through which export subsidies were banned on everything but agricultural products and tariffs on manufactured goods were reduced to inconsequential levels. The full-blown process became fully operative after the implementation of the GATT treaty of 1994 with the establishment of the World Trade Organisation (WTO) in 1995.

Globalisation is not only economic, but political, technological and cultural as well. Globalisation, in fact, is a complex set of processes, rather than a single one. They operate, not in a harmonious, but contradictory fashion.

What are the Merits? Globalisation and Liberalisation bring in a greater role for market forces than state planning and regularisation. They lead to greater fiscal discipline and reduction in subsidies for production, removal of protectionism and expansion in the production base. Even in agriculture, the scope of subsidies described as the Aggregate Measure of Support (AMS) is limited to 10 per cent of the value of the produce in developing countries and 5 per cent in the case of advanced nations.

Global market and international competition promote efficiency in production by weeding out the inefficient. The international competition and the inflow of new technology are considered engines of economic growth, modernisation and global integration. They enable us to obtain the best goods and services that some other country can produce at relatively lower cost than we can. In every country, each household's real purchasing power rises. Thus, their incomes stretch further because they can obtain at lower cost the goods and services they have been buying.

They benefit the country as a whole, too. When a country opens its borders to free movement of goods and services, the market provides incentives to move the country's resources—land, labour, and capital—into their highest value uses, thereby facilitating economic growth. Structural adjustments are needed to reap the potential benefits from globalisation, i.e., increases in both consumer purchasing power and potential GDP. The market must, therefore, be allowed to reallocate resources from the sectors that have lost competitiveness to sectors that can compete.

They create an environment in which export-led economic growth reduces poverty by hiking up wages in low income countries. As poor people's incomes rise, they gain purchasing power and become better markets for the products that others produce more efficiently. This has happened frequently, particularly in Asian countries like Taiwan, Korea, South East Asian countries, and is happening now in China and India.

The countries facing a balance of payment crisis are given loans by the IMF under the structural adjustment program (SAP) with the conditionality of restructuring their economies. The World Bank also provides the necessary support and ideas for this kind of policy shift. The Latin American countries were the first to accept the SAP of the Fund-Bank duo in the 1970s when they could not absorb the shock of the oil price hike. They were followed by Asian and African countries in the 1980s and early 1990s, and the East European and Central Asian republics of the erstwhile Soviet Union in the 1990s.

When Globalisation and Liberalisation occur, the gains of the gainers exceed the losses of the losers. In the process, the country as a whole benefits. Since the gains of the gainers exceed the losses of the losers, it should be possible to compensate the losers for their losses and still end up with a net gain to society as a whole.

They have made instantaneous communication possible from one side of the world to the other for the first time ever. Other types of electronic communication, more and more integrated with satellite transmission, have also accelerated over the past few years. Instantaneous electronic communication is not just a way in which news or information is conveyed more quickly. Its existence alters the very texture of our lives, rich and poor alike. The reach of media technologies is growing with each wave of innovation. It took half-a-century for radio in India to gain an audience of 50 million, but Internet needed much lesser time to reach 50 million Indians.

They have been influencing intimate and personal aspects of our lives. There has never before been a society, so far as we know from the historical record, in which women have been even approximately equal to men. This is a truly global revolution in everyday life, whose consequences are being felt around the world in spheres from work to politics. The debate about family values is very much part of the globalising influences. Traditional family systems are becoming transformed, or are under strain, in many parts of the world, particularly as women stake claim to greater equality.

The collapse of Soviet communism has added further weight to such globalising developments, since no significant group of countries any longer stands outside. That collapse was not just something that defies explanation. Globalisation explains both why and how Soviet communism met its end. The Soviet Union and the East European countries were comparable to the West in terms of growth rates until the early 1970s. After that point, they fell rapidly behind. Soviet communism, with its emphasis upon state-run enterprise and heavy industry, could not compete in the global electronic economy. The ideological and cultural control upon which communist political authority was based similarly could not survive in an era of global media. The Soviet and the East European regimes were unable to prevent the reception of western radio and TV broadcasts. Television played a direct role in the 1989 revolutions, which have rightly been called the first 'television revolutions'.

Globalisation is becoming increasingly decentered, i.e., it is not under the control of any one or group of nations, and still less of the large corporations. Its effects are felt just as much in the western countries as elsewhere. This is true of the global financial system, communications and media, and of changes affecting the nature of government itself. Examples of 'reverse colonisation' are becoming more and more common. Reverse colonisation means that non-western countries influence developments in the west. The best examples are the Latinising of Los Angeles, the emergence of a globallyoriented high-tech sector in India, or the selling of Brazilian TV programs to Portugal.

Presently, globalisation and liberalisation are no more perceived as choice, but as necessity, for a vast majority of the countries. Realising their necessity and acknowledging their inevitability, all governments are trying their best to make the process as smooth and advantageous as possible.

What are the Demerits? Globalisation and liberalisation are by no means wholly benign in their consequences. To many non-western nations, they appear to be Westernisation or even Americanisation, since the US is now the sole superpower, with a dominant economic, cultural and military position in the global order. Many of the most visible cultural expressions of globalisation are all American—Coca-Cola, McDonald's, etc. Most of giant multinational companies (MNCs) are based in the US too. Those that aren't all come from the rich countries, of the world. This non-western view of globalisation would consider it largely an affair of the industrial North, in which the developing societies of the South play little or no active part.

They are seen as destroying national cultures, widening world inequalities and worsening the lot of the impoverished. Globalisation creates a world of winners and losers, a few on the fast track to prosperity, and the majority condemned to a life of misery and despair. Indeed the statistics are daunting. The share of the poorest fifth of the world's population in global income has dropped from 2.3% to 1.4% over the past 10 years. The proportion taken by the richest fifth, on the other hand, has risen from 70% to 85%. In sub-Saharan Africa, 20 countries have lower incomes per head in real terms than they did two decades ago.

The agents of globalisation, the MNCs, represent monopoly capital and structurally would not allow percolation of the gains of productivity rise for the host countries and their poor people. These corporations use more controls over their production, technologies and location of operations through their networks than the centrally planned economies. Thus globalisation in the present phase is largely for unrestricted operations of MNCs, with unrestricted propagation of Western culture and ideas. It is not for the global movement of labour and free flow of knowledge and technology across the countries.

In many less developed countries, safety and environmental regulations are low or virtually non-existent. Some trans-national companies sell goods there that are controlled or banned in the industrial countries – poor quality medical drugs, destructive pesticides or high tar and nicotine content cigarettes. What is happening is not the growth of a global village, rather it is more like global pillage.

The security environment is deeply affected by the current process of globalisation and liberalisation. Once economic security and stability of a country are undermined, nothing can save its unity and integrity. One of the serious consequences is a greater threat to a country's economic stability is borne out by the bitter experience of different Latin American countries, such as Brazil, Argentina, Chile and Mexico. They were the first to accept the SAP of the IMF and borrowed petro-dollars from US commercial banks at commercial rates in the decade of the 1970s. They opened up and gave export orientation to their economies and were involved in a debt trap in the 1980s.

Opening up a country, or regions within it, to free trade can undermine a local subsistence economy. An area that becomes dependent upon a few products sold on world markets is very vulnerable to shifts in prices as well as to technological change. In the 1990s, East Asian countries suffered a major blow of destabilisation after they opted for opening up and greater integration with the global economy.

Contrary to the claims, globalisation has retained barriers, rather made stricter, for the movement of people, particularly from the developing to the advanced countries. A company, generally MNC, making investment abroad can deploy its manpower in the host country without facing any discrimination vis-a*-vis the local population. The migration of population would continue to be regulated by the emigration laws of the nations (advanced) concerned, which, faced with growing domestic unemployment, have made the migration from the developing countries quite tight and difficult.

Similarly, the flow of technology to the developing countries has also been made tighter. With the trade-related intellectual property rights TRIPS under the WTO, uniform global patent laws are coming into force. The patents have been extended to new plant varieties also. The use of new (patented) technology by noninventors necessitates the payment of royalty to the patent holders. This has allowed monopolisation of the use of new technology largely to MNCs in advanced countries, and restricted its flow to developing countries and to the non-inventors (largely non-MNC users).

The structural adjustments demanded by the globalising agencies are neither costless nor painless. They hurt people who have specialised skills that are salable only in the sectors that are in decline. They also hurt people who have made investments in specialised machinery and factories that are not useful in producing other things than those they were designed to produce. Firms that lose their competitiveness are likely to become bankrupt. Investors in the business suffer capital losses. In the agricultural sector, a loss in competitiveness means not a mere financial loss but social disgrace and eventual suicide.

When an industry becomes sick and closes, it is traumatic to the local community and to the individual employees. Change of work can be costly in both monetary and emotional terms. Changing one's line of work often requires reorientation and retraining, which may involve significant expenditure. Changing jobs may require a physical relocation, and involves the emotional cost of leaving family and friends behind and starting over in a new community.

Globalisation and liberalisation are indifferent to national borders. Nations have lost most of the sovereignty they once had, and national leaders have lost most of their capability to influence events. The era of the nation state is being threatened, and nations are sought to be transformed to mere 'fictions'.

They are dismantling the welfare systems and cutting back on state expenditures. What is happening is almost a reversion to how the world was a century ago, with unrestricted and unregulated capitalist exploitation. They are neither employment-friendly nor do they care much for the poor. Employment generation and poverty removal are no more seen as state responsibilities.

What is their Significance? How far a given economy should be exposed to the world marketplace must depend upon a range of criteria. Yet to oppose globalisation and liberalisation, and to opt for economic protectionism, would be a misplaced tactic for rich and poor nations alike. Protectionism may be a necessary strategy at some times and in some countries. More permanent forms of protection will not help the development of the poor countries, and among the rich would lead to warring trade blocs. It is pertinent on the part of the governments of the developing countries like India to be vigilant and careful while making decisions on the direction and doses of globalisation and liberalisation to be administered.

Issues like economic stability, growth, employment generation, poverty removal and food security cannot be left to the market forces and global economy. This can be done at the country's peril. Of course, globalisation and liberalisation have brought opportunities but with several risks and various kinds of insecurity for the economy. The opportunities have to be utilised, and the risks and insecurity to be avoided through appropriate policy measures.

With regard to their implications for the nation-state, one can say that nation-states are still relevant and political leaders have a large role to play in the contemporary world. Yet at the same time the nation-state is being reshaped before our eyes. National economic policy cannot be as effective as it once was. More importantly, nations have to rethink their identities now the older forms of geopolitics are becoming obsolete. Nations today face risks and dangers rather than enemies.

Globalisation and liberalisation are creating something that has never existed before, a global cosmopolitan society. We are the first generation to live in this society, whose contours we can as yet only dimly see. It is shaking up our existing ways of life, no matter where we happen to be. The powerlessness we experience is not a sign of personal failings, but reflects the incapacities of our institutions. We need to reconstruct those we have, or create new ones, in ways appropriate to the global age. We should come to grips with our rapidly transforming world. For globalisation is the way we now live.