Growth & globalisation since 1850

I. The economic growth and its different steps since 1850

(1) Growth was born with industrialization

Growth = increasing sustained and sustainable production of wealth (goods and services).

Growth is usually measured by the rate of growth of GDP (gross domestic product) from one year to the other.

Origin: growth is born with industrialisation from the United Kingdom at the end of the 18th century and spread in Europe and the United States.

Before the second half of the 19th century (1850), growth is weak in the European countries (of the order of 0.2% per year), but it increases then (from 2 to 3% per year between 1850 and 1930).

Key sectors ensuring the growth: textile and metallurgy, associated with innovation. E.g.: the machine steam => transformation of work: jump from workshop to factory = industrialization.

(2) The long cycles of Kondratiev (1926)

A Kondratiev cycle is an economic cycle in the order of 40 to 60 years. Highlighted as early as 1926 by economist Kondratiev, it presents two distinct phases: an ascending and a descending phase.

Sans titre

« Post war boom » (1945-1973):

=> Regular and strong growth during this period

-Industry: automotive, aerospace, nuclear, food…

-Agriculture

-Services: distribution (hyper-marches), tourism…

Factors of ‘Prosperity’: innovations, new organizations of work (Taylorism (chain) + Fordism (standardization of the products + high salaries)), baby boom, people better educated => more skilled, work employed women => largest workforce.

Limits: the training does not encourage young people to move into the industry; late 1960s: shortness of investments; not enough large corporations able to impose itself on the world market.

(3) Since 1973: crisis and growth differentiated

Factors of the crisis:

-Economic: oil shocks = 1973 Yom Kippur war, 1979 war Iran/Iraq, monetary shock in 1971 = Nixon stops processing of the dollar into gold: the 1944 international monetary system explodes.

-Structural: slowdown in innovation and productivity gains = increase in unemployment.

II. The world economies (or the stages of globalization)

(1) The economy British world from 1850 to 1914

Population dynamic and structured

-Population: 2% world population, strong growth, young population, level of high life (but large gaps between the rich and the poor)

-Strong demand stimulated by a large internal market.

-London: 5 million inhabitants; parliamentary monarchy, seat of government; stable, century of Victoria, Royal Navy powerful

Industrial Domination

-The United Kingdom is the cradle of industrialization.

-1860: 1/3 of world industrial production; 1/2 the world iron is consumed by the United Kingdom.

-Important mineral resources: abundant coal and inexpensive

Commercial Domination

-20% of international trade

-Transport and communications: ports, canals (Suez + UK) in 1880s, railway, Telegraph cables.

-Import of raw materials and agricultural products; export of industrial production

-Financial domination: the pound sterling is the international currency.

End of the hegemony

the United Kingdom does not want to reinvest.

Protectionism (imports are taxed to protect British industries).

(2) The world economy in the 20th century

Territory and population

-The territory expands: conquest of Amerindians + Mexico

-State continent: 9 M km² with developed railway.

-Wealth in raw material

-Dynamic population: 132 million inhabitants in 1940 + waves of migration.

-Stable political institution: Federal Republic.

Liberalism

-Definition: doctrine, which asserts the primacy of individual responsibility in the political and economic field (as opposed to the intervention of the State in the economy)

=> Promotes innovation

=> Taylorism and Fordism.

Commercial and cultural Domination

-Free trade

-1944: conference, which established the International Monetary System (SMI)

-1947: Marshall plan for the reconstruction of Europe after the war

-1947: GATT (General Agreements on Tariffs and Trade) for trade international and tariffs down.

-Model of « the American Way of Life ».

New York is home to the stock exchange and the headquarters of the companies.

Washington is the headquarters of the IMF (International Monetary Front) and the World Bank (the dollar is international currency).

Limits: competition (relocation), massive debt.

(3) A multipolar economy

Trade liberalization: almost all the States of the world are part of the WTO (World Trade Organization) founded in 1994.

Factors: development of the means of transport and communication, role of multinational firms, role of the WTO, opening of almost all countries in international trade.

Global rebalancing: 3 major economic poles = the North America, European Union, Asia Pacific (triad).