Transcript The Global Economy - Part II

GS 1 – Introduction to Global Studies
Professor: Dr. Jean-Paul Rodrigue
Topic 2 – The Global Economy
A – Genesis of the Global Economy
B – International Trade and Transportation
C – Multinational Corporations
Hofstra University, Department of Global Studies & Geography
Towards a Global World: Major Phases of Socioeconomic Change
Neolithic
Tribe /
Village
Hunting and
gathering
Language
Feudalism
City-state,
Kingdom
Settled
agriculture
Writing
Industrial
Nation-state
Industrial
system
Printing
Global
Global
governance
Postindustrial
Information
technologies
© Dr. Jean-Paul Rodrigue
A – GENESIS OF THE GLOBAL ECONOMY
The Agricultural Revolution
Trade in Ancient Times
Mercantilism and Colonialism
The Industrial Revolution
© Dr. Jean-Paul Rodrigue
The Agricultural Revolution (Neolithic Revolution), 10,000 BC
(“The land between rivers”)
Domestification (crops & animals)
Sedentary lifestyle (property)
Irrigated agriculture (collective effort)
Agricultural surpluses (specialization)
Governments (states / stratification)
Metallurgy (weapons, instruments)
Wheel (transportation)
Pottery (storage)
Writing and numbers (taxation)
World’s population (5-10
million mostly nomadic)
© Dr. Jean-Paul Rodrigue
The Agricultural Revolution
■ The Feudal society
• A system of bonds and obligations:
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Power in land ownership.
Administrative/legal (Lord) and religious (Church) control.
Rent/Royalties from the serf to the lord (in kind or labor).
Fixation of the productive forces (tools and labor) in agricultural production.
Little socioeconomic changes over centuries.
• Economy:
• Small local markets (fairs).
• Low levels of productivity (subsistence level).
• Profits taken away by the lord/church, inhibiting any increases in
agricultural productivity.
• 80 to 90% of the population was in agriculture while the other share were
artisans and landowners.
• Different types of feudal societies (China, Japan, Europe).
© Dr. Jean-Paul Rodrigue
Ancient Trade Issues
Nature of trade
High value commodities (Silk,
spices, perfumes, gems, gold /
silver, ivory).
When maritime transport was
available, more bulky commodities
could be traded (grain, wine, olive
oil).
Many intermediaries.
Limiting factors
Capacity and speed of inland
transportation; Few roads.
Diversity of currencies and units of
measure.
Tariffs.
Unreliable navigation.
Insecurity / piracy.
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The Silk Road and Arab Sea Routes (8th to 14th Centuries)
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Mercantilism
■ The European origin of the global economy
• The fifteenth century marked the beginning of an expansion of
European control throughout the world.
• Europe progressively assured the development of the global
economy by an extension of its hegemony:
• Mercantilism was the first phase.
• The industrial revolution was the second.
• Over three centuries (1500-1800):
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The setting of capitalistic systems.
Limits of the world were pushed away.
A world where borders are drawn; a delimited world.
Establishment of vast colonial empires.
Waves of innovations and socio-economic transformations.
© Dr. Jean-Paul Rodrigue
The Pillars of Mercantilism
Nation-State
• Promotion of national wealth and power.
• Wealth measured by the amount of bullion (gold or silver).
• Projection of national sea power to control foreign markets.
Unequal Trade
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Rise of merchants, markets and fairs.
Encourage domestic production and exports, discourage imports.
Discovery and setting of new markets through colonization.
Positive trade balance with other countries under control.
Techniques
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Gunpowder and artillery.
Improvements in navigation, maritime shipping and transport.
Moveable type (mass production and marketing of books).
Mechanical clocks, instruments, increased skills of craftsmen.
© Dr. Jean-Paul Rodrigue
Early European Maritime Expeditions, 1492-1522
Exploration (inventory of territories and resources).
Setting of colonial empires (control of territories).
Setting of a global trade network.
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The Eastern and Western Maritime Routes to Asia
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Density of Ship Log Entries, 1750-1810
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Major Oceanic Gyres
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Mercantilism and Colonialism
■ Colonialism
• Quest for riches and profit
• The most important factor.
• Early colonialism was a capitalist venture.
• Religious and racist drive:
• A moral justification.
• Support of the church.
• Military technology advantages:
• Better guns.
• Better ships (artillery).
• Two waves of colonialism:
• First wave: Mercantilism (1415 – 1815); independence of the Americas.
• Second wave: Industrial revolution (1815-1969).
© Dr. Jean-Paul Rodrigue
Spanish and Portuguese Empires (1581-1640)
The Treaty of Tordesillas (1494)
Treaty of Zaragoza (1529)
Between Spain and Portugal (1,770 km west of Cape Verde).
Separate the newly discovered lands (and those to be
discovered) by a demarcation.
Specified the anti-meridian to the line of demarcation in the
Treaty of Tordesillas.
To sort the ownership of the “spice islands”.
© Dr. Jean-Paul Rodrigue
Mercantilism
■ Trade
• Changes in the nature of trade:
• More than 90% of the population was agricultural.
• Growing consideration to the “mass market”.
• Luxury goods were no longer the bulk of what was being exchanged
(spices, silk, etc.).
• “Consumer goods” such as grain, wine, salt, wool, cloths and metals.
• Changes in the relationships between Europe and the rest of the
world:
• From intermediaries (e.g. Venice, Arabs) to direct involvement.
• Control of the “global supply chain”.
• Transformation of foreign societies (colonialism, plantations, new
products).
© Dr. Jean-Paul Rodrigue
Dutch East India Company, Trade Network, 17th Century
© Dr. Jean-Paul Rodrigue
Colonial Trade Pattern, North Atlantic, 18th Century
© Dr. Jean-Paul Rodrigue
The Industrial Revolution
■ Nature
• Started at the end of the eighteenth century (1750-1780).
• Economic and social transformations first observed in England.
• Demographic transition of the population:
• Fast growth rate.
• Improvements in sanitary conditions and hygiene.
■ A “revolution” in the industry
• Why speak of “revolution” for a process occurring over on more
than 150 years?
• At the scale of the world’s economic history, the industrial revolution
radically changed the foundations of economic systems.
• It established the foundations of the global of the economy.
• Most of the technical innovations that modified the way to produce and to
transport took place on a short period, mainly between 1760 and 1800.
© Dr. Jean-Paul Rodrigue
The European Origins of The Industrial Revolution
Competition
• Political fragmentation (monarchies and republics).
• Divided into competing corporate entities (early
multinationals).
The Scientific Revolution
• 17th century breakthroughs in mathematics, astronomy,
physics, chemistry and biology.
• The scientific method.
The Rule of Law and Representative Government
• Private property rights.
• Representation of property owners in elected legislatures.
© Dr. Jean-Paul Rodrigue
The European Origins of The Industrial Revolution
Modern Medicine
• Breakthroughs in health care (19th and 20th centuries).
• Drop in death rates and increase in life expectancy.
Consumer Society
• Supply of productivity-enhancing technologies.
• Demand for more, better, and cheaper goods.
Work Ethic
• Combine more extensive and intensive use of labor.
• Higher savings rates; sustained capital accumulation.
© Dr. Jean-Paul Rodrigue
The Industrial Revolution
■ Technological innovations
• New methods of production by trials and errors:
• New materials (steel, iron, chemicals).
• Substitution of machines to human and animal labor.
• Usage of thermal energy to produce mechanical energy.
• Changes in the nature production and consumption:
• Textiles.
• Steam engine.
• Iron founding.
• Production (factory):
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The first factories appeared after 1740.
Division of labor.
Increased productivity within a factory system of production.
Location (initially waterfalls and then coal fields).
© Dr. Jean-Paul Rodrigue
Major Technological Innovations of the Industrial Revolution
Power Generation
Textiles
Metallurgy
Transportation
Thermal energy used Mechanization of
for mechanical energy spinning and weaving
Mass production of
steel (shipbuilding,
rails, construction and
machines)
Modern transport and
telecommunication
systems
First pump (1712) for
water in mines.
Watt (1769); significant
improvements.
Steam locomotive
(1824).
Electric generator (1831).
Steam turbine (1884).
Coke instead of coal for
iron production (1709).
Bessemer process
(1855).
Railroads (1825).
Telegraph (1834).
Steamship (1838).
Telephone (1876).
“Flying shuttle” (1733)
doubled weaving
productivity.
“Spinning jenny” (1765).
“Water frame” (1768);
hydraulic power.
“Spinning Mule” (1779);
steam power.
Sewing machine (1846).
© Dr. Jean-Paul Rodrigue
Major Inventors of the Industrial Revolution
Inventor
Invention
Date
James Watt
First reliable Steam Engine
1775
Eli Whitney
Cotton Gin, Interchangeable parts for
muskets
1793, 1798
Robert Fulton
Regular Steamboat service on the
Hudson River
1807
Samuel F. B. Morse
Telegraph
1836
Elias Howe
Sewing Machine
1844
Isaac Singer
Improves and markets Howe's Sewing
Machine
1851
Cyrus Field
Transatlantic Cable
1866
Alexander Graham Bell
Telephone
1876
Thomas Edison
Phonograph, Incandescent Light Bulb
1877, 1879
Nikola Tesla
Induction Electric Motor
1888
Rudolf Diesel
Diesel Engine
1892
Orville and Wilbur Wright
First Airplane
1903
Henry Ford
Model T Ford, Assembly Line
1908, 1913
© Dr. Jean-Paul Rodrigue
Annual Energy Consumption in England and Wales, 1560s to 1850s
(MJ)
100%
90%
80%
70%
Coal
Water
Wind
Firewood
Draught animals
Human
60%
50%
40%
30%
20%
10%
0%
1561-70
1600-9
1650-9
1700-9
1750-9
1800-9
1850-9
© Dr. Jean-Paul Rodrigue
Power Generated by Steam Machines (in thousands of
horsepower)
2500
2000
1500
Great Britain
France
Germany
1000
Russia
500
0
1840
1850
1860
1870
1880
1888
© Dr. Jean-Paul Rodrigue
Turnpikes in Great Britain, Late 18th and Early 19th Century
35,000
30,000
25,000
Km
20,000
15,000
10,000
5,000
0
1640
1660
1680
1700
1720
1740
1760
1780
1800
1820
1840
1860
© Dr. Jean-Paul Rodrigue
American Rail Network, 1861
© Dr. Jean-Paul Rodrigue
Global Telegraph System, c1901 (the Victorian Internet)
© Dr. Jean-Paul Rodrigue
Impacts of Maury’s Navigation Charts on Sailing Time, 1850s
© Dr. Jean-Paul Rodrigue
Cargo Carried by Steamship by Port City, 1890-1925
© Dr. Jean-Paul Rodrigue
The Industrial Revolution
■ Agriculture
• A second agricultural revolution.
• Introduction of new food sources:
• The potato could account for 22% of the post-1700 increase in population
growth.
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Crop rotation, selective breeding, and seed drill technology.
Less agricultural population.
Growth of the production of food.
Mechanization and fertilizers:
• Combine (McCormick, 1831).
• Scientific and commercial agriculture (crop rotation).
• Declining food prices.
© Dr. Jean-Paul Rodrigue
The Industrial Revolution
■ Social changes
• Significant urbanization:
• Migration from the countryside to cities.
• A shift from the dominance of Asian cities (e.g. China and India) to
Western Europe and North America.
• By 1870 more of the half of the population of the first industrial nations was
no longer in the agricultural sector.
• England had reached this stage since 1820.
• By1901, 75% of the English population lived in cities.
• Creation of a labor class:
• Exchange of labor for a wage.
• Development of the Marxist ideology.
© Dr. Jean-Paul Rodrigue
Share of the Population in Agriculture, Early Industrial Countries,
1820-1910
90
80
70
60
50
1820
1850
40
1870
1910
30
20
10
0
Great Britain
France
Germany
United States
© Dr. Jean-Paul Rodrigue
World’s Largest Cities, 1850
© Dr. Jean-Paul Rodrigue
The Industrial Revolution
■ Industrial revolution and globalization
• Setting of unequal trade relations:
• Between colonial powers and their colonies.
• Between industrial nations and developing countries (e.g. Latin America).
• Setting of high capacity maritime and rail transport systems.
• Consolidation of colonialism in late 19th century:
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First Opium War in 1839; occupation of coastal Chinese cities.
Opening of Japan in 1853.
Consolidation of the British Raj in 1858.
“The Scramble for Africa” in the 1890s.
© Dr. Jean-Paul Rodrigue
Impacts of Colonialism
Annihilation and displacement of indigenous populations
• Forced migration through slavery (Africa) or contract workers (Southeast Asia).
• 90-95% of the population died because of disease (e.g. smallpox) and wars.
Development of the primary sector
• Export-oriented plantations (sugar, cotton, tea, coffee, fruits, rubber, tobacco, etc.).
• Economic dependency; Suppressing industrialization
Dual society
• Ruling elite class (sometimes a minority).
• Population in servitude (e.g. taxation).
Artificial boundaries
• “Balkanization”.
© Dr. Jean-Paul Rodrigue
Colonies Controlled by Main Colonial Powers, 1500-2000
140
120
100
Netherlands
80
France
Britain
60
Spain
Portugal
40
20
0
1500
1550
1600
1650
1700
1750
1800
1850
1900
1950
2000
© Dr. Jean-Paul Rodrigue
Colonies by Main World Region, 1500-2000
180
160
140
120
Pacific Islands
100
North America
Asia
80
Latin America
Africa
60
40
20
0
1500
1550
1600
1650
1700
1750
1800
1850
1900
1950
2000
© Dr. Jean-Paul Rodrigue
Territories that Belonged to a Colonial Empire
Belgian
British
Danish
Dutch
French
Italian
Portuguese
Russian
Spanish
© Dr. Jean-Paul Rodrigue
European Control of the World, 1500-1950
1800 (37%)
1878 (67%)
1913 (84%)
© Dr. Jean-Paul Rodrigue
Decolonization
© Dr. Jean-Paul Rodrigue
Fordist and Post-Fordist Production Structure
Characteristics
Fordism
Post-Fordism
Production Mode
Mass Production
Mass Customization
Organization
Structured (Pyramidal)
Networked (Flexible)
Focus
Supply
Demand
Market Reach
Regional / National
Global
Expansion
Vertical or horizontal
integration
Outsourcing and offshoring
Core Resources
Physical Assets
Innovation/ Knowledge
Value Chains
Discontinuous
Integrated (continuous)
Inventories
Months
Hours
Production Cycle Time
Weeks / Months
Days
Information
Monthly / Weekly
Daily / Real-Time
Product Life Cycle
Years
Months
Quality
Affordable Best
Zero-Defect
© Dr. Jean-Paul Rodrigue
Major Phases of Demographic Change
Agricultural
Revolution
12,000 years
■ Agricultural Revolution
• Feudal society.
• Wealth from agriculture and land
ownership.
• Slow demographic growth.
■ Industrial Revolution
Industrial
Revolution
200 years
Post-Industrial
Revolution
• Wage labor society.
• Wealth from industry and capital
ownership.
• Fast demographic growth.
■ Post-Industrial Revolution
• Information society.
• Wealth from technological
development.
• Slow demographic growth.
© Dr. Jean-Paul Rodrigue