Evolution of Economy.docx

Embed Size (px)

DESCRIPTION

Evolution of Indian Economy across the agess

Citation preview

Evolution of the Worlds Economy Over the Past 2000 years

Indian POLICIES and ECONOMY Assignment 1

Evolution of the Worlds Economy Over the Past 2000 yearsA timeline of 5 economies Sabyasachi SahuJanuary 11 2016

Roll No: 1501100

Introduction:If we delve through the evolution of GDP through the years, starting from 1 AD, we find that India and China contributed to more than half of the worlds GDP. This trend though changed in the 18th and 19th century, a fact attributed to the Industrial Revolution in the European countries. The evolution of GDP was succinctly summarized by Derek Thompson as: Everything to the left of 1800 is an approximation of population distribution around the world and everything to the right of 1800 is a demonstration of productivity divergences around the world. 1 1000 ADIn this period, India and China contributed to more than 50% of worlds GDP because they had more than 50% of the worlds population. Besides, the graph in this time frame portrays a good picture of the Malthusian Trap, where the most important determinant of income was births and deaths rather than supply and demand. 1000-1820 ADIn this period, we see France and UK, protagonists of the then Western Civilization picking up in terms of production and income, thanks to the advent of some moderate sophistication and the agrarian organization of the economy. This led to the start of economic prosperity in Europe and was the start of divergence between the economies of Western Europe and that of the rest of the world. Also, in this period was the discovery of America and the colonization of India, two watershed events that had contrasting effects on the two economies. While Americas economy charted an upward course, Indias economy took the path south, because of its colonization by the British Empire.The Effect of Industrial Revolution (1820-1913 AD)Industrial Revolution was the transition of the European and American civilizations from a predominantly agrarian production method to manufacturing production method with the help of machines, chief among which were Steel, chemicals and guns. This too, was a watershed event in the history of the world, for these countries, armed with their sophistication and the concept of an industry increased their levels of productivity drastically to catch up with the GDP of the counties with a higher population. Its effect can be determined by the fact that per capita income rose more than eightfold and .population more than fivefold. Moreover, in these times life expectancy also increased by a significant number.1913-1945 AD This period consists of three crucial events viz. World War I (1914-1919), The Great Depression (1929) and World War II (1939-1945). We see that the France and UK, protagonists of the Allied Forces, suffered a decrease in GDP because of the loss to life and property during the war, which in turn is debilitating for the economy. During this time, these countries moved from a fixed exchange rate to a floating exchange rate, leading to significant devaluation of the debt that they had incurred because of the wars. USA, which was geographically isolated from the wars, should have higher growth of GDP, but because of the Great Depression of 1929 which affected the US economy the hardest. Irrespective, because of the wars which debilitated the European economy, USA emerged as an economic superpower1946-nowThis period saw unprecedented investments in R&D which led to rise of new technologies in all sectors, be it medicine or automobiles. It also gave rise to the advent of the electronics and telecommunications industry, the IT industry and unprecedented growth of financial markets. Because of a higher standard of living compared to erstwhile generations, consumption also increased and gave rise to more and more avenues of growth. Globalization of trade, liberalization of economies, outsourcing of jobs and a heightened manufacturing sector spurred Asian economies to new heights. It was simultaneously followed by a fall in GDP of Western Europe after they lost their colonies. USA drove the growth of the world with its superior technical knowhow and innovation, besides helping developing economies through International Monetary Fund and World Bank (USA funds majority of WB and IMF corpus). Besides, India on the back of its services led economy, China on the basis of its manufacturing led economy and Japan, on the basis of its electronics goods economy have also contributed significantly to the worlds GDP, a trend which is likely to continue. Conclusion: Over the long run, economic prosperity is a very recent achievement for humanity, more like achieved over the course of last couple of hundred years. Though some regions are more productive than others, every region is doing better than ever before much better.