Historically, the centre of gravity of economic and political power was shifting every hundred to two hundred years, beyond imaginations depending on the waves of technological progress, innovations and socio-cultural revolutions. From 1st century onwards and Up to 16th and 17th century, Asia was the centre of the world power with India and China together contributed to about 60 per cent of the world Gross Domestic Product (GDP). Agriculture was prospered in Asia with vibrant trade in spices, gold and traditional handcrafts during this era. But with the 1st industrial revolution in Europe from the 17th to early 18th century, Britain became the world power with rapid growth in industrial production, economic progress and trade. Britain colonised most of the American, African and Asian countries during this period and it is known as ‘The Empire on which the sun never sets’ by the 19th century. However, the centre of world power shifted from Britain to the USA in the 20th century and many world forecasts suggest that in the 21st century power will shift once again to Asia from the USA with China and India playing a leading role. This shift is mostly facilitated by the largest and growing working population and skilled manpower and higher savings and investment rates of these two countries.
USA emerged as global leader
The industrial revolution started in the 18th century in Britain and spread into other European countries which transformed incomes, production, and trade. It was characterised by the surplus production of industrial goods in European countries and searching for raw materials and markets across the world during the 19th century. The search for markets across countries by western countries was one of the reasons for two world wars (First World War from 1914 to 1918 and the Second World War from 1939 to 1945). During these wars, USA emerged as the winner with enormous military, money and technological power. Post-war Germany, Japan, and Russia were also economic drivers in their own right with rapid technological progress and huge investments. Russia raised the hopes of the proletariat in October revolution 1917, its military power was next only to the USA, but disintegrated by 1991. With the disintegration of Russia, seventy years of cold war was ended with the USA emerged as the sole world power. There was a large scale migration of skilled manpower across the world to the USA and it became powerhouse in the military, economic growth and intellectual capital of the world.
Gold to US dollar as international currency
Historians, as well as economists, are not able to predict these gigantic shifts as forces behind these shifts are more complex and beyond the capability of any sophisticated forecasting models. These are all a result of a combination of long-run forces such as the discovery of gold which facilitated the ‘gold as international currency’ which prevailed until the 16th century, which expanded trade between Asia and other countries. Later on, many countries followed the gold standard from 17th century under which government guarantees fixed exchange rate between paper currency and gold. Then during the First World War gold standard was abandoned by Britain to give free hand to monetary authorities to print more money to meet the war expenses. Meanwhile, in the early 20th century, USA became more powerful and US dollar became world currency as it was widely used and circulated currency. After the Second World War, many countries were pegged their currencies to USD to bring in macroeconomic stability and credibility to their currencies.
First industrial revolution
First industrial revolution period from 1760 to sometime between 1820 and 1840 with a focus on coal mining, steam power, textile mills, machinery, railways, and shipbuilding helped Britain to win the trade war with other countries and helped in capturing power in most of the Asian, African and other countries. The discovery and widespread use of steam engines, new steel production processes facilitated mass production of steel. Place of work is shifted from small sheds in houses to large factories with assembly lines and large industrial furnaces. The steel and steam engines were used in almost all factories, all machinery including boilers, motor-cars, railroads, construction of houses and factories across Europe. The evolution of shipping industry and railways by using steam engines helped in searching of new markets and also transportation of raw material and finished products between Europe, Asia and Africa and facilitated the expansion of European colonies across the world.
Second industrial revolution
While the 2nd industrial revolution dated between 1870 and 1914 with the wider use of railroad networks, telegraph, telephones, electricity, gas, and water supply facilitated an unprecedented level of mass production, movement of people and ideas and urbanisation, resulted in a new wave of globalisation. This was ended at the start of World War-1.
USA surpassed Britain after 1st world war
Although the First World War disrupted the world economy and social fabric, there was a boom after the war across in all countries; the USA became the world leader both in economic and military power. By 1916, USA output overtook that of the entire British Empire. From then onwards, America played a greater role in the world political, economic and military matters.
However, after a few years of boom, in 1920-21 there was widespread depression, with troops returning from the war were not able to get a gainful employment and remained as unemployed for a longer period with consequent stagnation in wage rates. There was also a decline in commodity prices due to overcapacity and supply during the post-war period.
Electrification, mass production and the increasing motorization of transportation and farm machinery resulted in rapid growth in productivity and investment in manufacturing between 1923 and 1928 meant there was a considerable excess production capacity. The mechanisation displaced workers with huge unemployment resulted in great depression. This resulted in a great depression between 1929 and 1939.
Second World War
The Second World War started by the end of the great depression in 1939 and continued up to 1945. Most of the countries of the world participated in the war with the emergence of the USA as a world leader. The Soviet Union and the United States emerged as rival superpowers, setting the stage for the Cold War, which lasted for the next 46 years. Meanwhile, the influence of European great powers faded, while the decolonisation of Africa and Asia began.
Third industrial revolution and re-emergence of Asia
A Amarender Reddy
(The article explored the evolution of technologies, innovations and its relations to long-run economic growth cycles across the world since the 1st century until now and forecasted that India and China will be the future growth engines.)
The author of the article is the Director (M&E) of the National Institute of Agricultural Extension Management (MANAGE), Hyderabad and ICAR-Indian Agricultural Research Institute, New Delhi