The Making of the Modern World Economy - Coursework Example

The Making of the Modern World Economy Role of the Core and Periphery Nations During the 19th century WesternEurope ended up being the wealthiest and most powerful nation leading to the term Great Divergence; thanks to the support from the New World and the East nations. Before it was termed the European Miracle, the core developed nations included the Middle East, India and East Asia. The difference in cultural and political settings of these nations highly necessitated the development of Western Europe (Pomeranz, 2011). After the invasions from the Muslim, Magyar and Viking; Europe began reaping the fruits of prosperity, increase in growth population and the expansion of territories. Commerce was revived with the expansion of specialization between its countryside’s and towns. Commerce and trade sprung in most parts of Western Europe especially in Venice and the Northern cities. During the time of exploration, the navigators discovered new paths to explore Asia and America. Commerce grew in these nations due to the establishment of financial companies and the merging of companies (Pomeranz, 2011). There was also the difference in coal availability between China and Europe. China had plenty of coal deposits which made it a huge potential to the West. During the industrial period, coke and coal were frequently used in the transportation. Coal was used to fire steam engines which turned out to be both cheaper and efficient in terms of use, as compared to charcoal. Even though China had used coal during the Ming and Song period, China later abandoned its use due to the Chinese industry shifting to the South. The shift caused the deposits to be far away due to the destructions of Jurchen and Mongol. The technological advancements made Europe to succeed in agriculture, trading, fuel and other resources (Pomeranz, 2011). Labor migration from the Chinese led to improved Agricultural systems in Europe. Most of the European land was idle and underdevelopment as compared with the Asian counterparts. Instead of Europe engaging in the expensive improvement of soil fertility, it embarked on the labor productivity. However due to the increased migration of people to the European nations, it caused food shortages. The problem was easily counteracted through the importation of fertilizers and appetite suppressants foods from America (Pomeranz, 2011). Europe’s success can also be contributed by aggressive persuasion of the imperialist and the mercantilist policies through which Europe used the military and protective methods to safeguard its industrialists based in China. The rise of Europe can also be noted through the exploitation of skilled and unskilled labor in Asia. The Asian laborers used to be paid in terms of silvers and the amount of grains based on the level of skill one had. The low payment of wages led to the decreased level of development for these states (Pomeranz, 2011). The periphery countries especially from Africa were majorly the producers of some products. The Western countries grew exponentially by the use of cheap resources from the periphery nations to advance their economic stability. Furthermore, Europe also used to trade their manufactured products with their colonies making the West countries more powerful (Pomeranz, 2011). Financialization on a Systematic Shift and the Importance of Liquid Capital Financialization refers to the dominance of monetary services in an economy. According to Finacialization is a procedural process where development is acquired in cycles. The cycles are initially characterised by the material growth of the global economy. The global material wealth is achieved through the production and maintenance of a stable environment by a hegemonic nation. The material wealth is accumulated through the expansion of a hegemonic nation in specialized sectors which it operates in (Arrighi, 1994). The first long century occurred during the fifteenth and sixteenth century where it was dominated in the Genoa. Later on, the second long twentieth century was experienced in the United States. After the shift, the regimes enter the crisis stage due to supplus accumulation, increased competition and decreased profits due to reduction of production and trade. This phase is marked by a shift in investments from trade and commerce to reduction in finance (Arrighi, 1994). Arrighi proposes the application of a new modern system which should be adopted across the globe in order to change the economy of nations. Finance has taken the center stage in the economic stability of capitalists’ nations. Arrighi explains that finacialization has been brought about by the social restructuring of capitalism. The social structure accumulation brings about profits due to its networked capital machineries. The social structures provide profits for a number of decades but later on it stops. After the stop, it enters a period of crisis which also brings about a new social structure accumulation and also starts its own cycle. Each social structure functions at the global economy and within the individual nations economies, though this may differ from one nation to another (Arrighi, 1994). After the world war two, the reconstruction was effectively completed between 1940 and 1973. The social structure accumulation was greatly pushed by active local government regulations between member states, the integration of capital and labor within the states and most importantly, the competition between large organizations. The postwar economic change created a diverse perspective from the past economic situation, where the individuals defended on themselves rather than from the government’s assistance (Arrighi, 1994). In the corporate world, securities represented credit status and ownership in general. The securities became tradable when the financial markets rose and the status of creditors or buyers could henceforth be bought. Nowadays, complicated securities are formed and traded whose value represents the face value of the securities (Arrighi, 1994). In the beginning of 1920, the US unregulated economy led to increased spread of fraud and excess in the economy. At the end of the year, the stock market and the banking sector had collapsed. The Great Depression later crouched in due to the accumulation of excess finance in the economy. By the start of 1970, the profits of financial institutions and the financial markets rose steadily. The foreign exchange profits increased to billions per day while the world trade in goods and services rose significantly (Arrighi, 1994). Why West Developed and the East Did Not During the nineteenth century, a number of factors contributed to the success of the West. They include property rights, markets, its population, the systems of the state and rationality. There existed different economic variables between the two nations. There were extreme pressures that existed between the two nations. Britain diverted itself from Asia and Europe certainly not because it had markets, capitalism, science or something else in abundance; but due to the pressures it faced. The combination of these variables plus its policies generated a revolutionary effect (Parthasarathi, 2011). One of the pressures that generated divergence was the competition for cotton which during the 18th century was the most significant commodity in the world trade. The product was widely consumed throughout America and Japan. The British later improved their production methods by copying the Indians textile design; making it to excel in the textile industry. The breakthrough in technological advancement changed the world economy and worldwide manufacturing from Asia which was the leader, to Europe (Parthasarathi, 2011). Asia also suffered lack of wood due to the effects of deforestation. The British conquered Asians superiority through the replacement of wood for coal which necessitated the introduction of steam engine. It also led to the advanced technologies in iron smelting and improvements in transport systems like the steamship and the railway system. However, the lack of wood and the global trade competition was not a problem for China. Britain’s achievements in coal and textile industry were solutions to challenges that did not exist in China. The only one problem that faced China was deforestation and the shortage of wood, which faced in China (Parthasarathi, 2011). In the eighteenth and nineteenth century, coal was being used in China though it did not provide an ecological solution to their problems. Therefore, the diverted change of British was uncalled for because Asia was facing major issues in economic, social and political needs. The other advantages that Europe possessed over Asia were the liberty of property rights and markets. The advantages are specially documented in the neoclassical and Marxian theories which stipulate the exceptional success of Europe (Parthasarathi, 2011). Europe enjoyed free market systems which made it have few restrictions on trading, making it acceptable to the states that uphold the rights of property. In return, Europe deployed its factors of production which enhanced their production level and their greater economic level. Chinese experienced ban on foreign trading that prevented international commerce and the immobility of occupations. The Asian emperors at the time also did not favor the rights to private properties leading to decrease in investments (Parthasarathi, 2011). The Europeans also had land property advantage. The Europeans experienced a greater improvement in agriculture favored by the use of laborers. Some parts of Europe which were agricultural producers had the benefit of supplying food to other nations, which Asia on the other hand could not due to lack of rights. The other advantage Europe had was the controlled birth rates. The controlled population made it to have a sustainable equilibrium between people and its resources. Asia experienced over population which led to famine, pestilence and depletion of resources (Parthasarathi, 2011). Reference list Arrighi, G. (1994). The long twentieth century: money, power, and the origins of our times. London, Verso. Parthasarathi, P. (2011). Why Europe Grew Rich and Asia Did Not. New York: Cambridge University Press. Pomeranz, K.(2011). The Great Divergence, 12, 4: 10-12. Read More