Economic Revolutions Happen

We need history because the public memory is very short. We easily forget that the world in which we live today has undergone major transformations, involving great shifts in power and prosperity over the centuries. Most of these changes are results of economic revolutions happening in different parts from time to time. It also means economic revolutions can happen in future!
Economic Revolutions Happen
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The balance of power in the world and the might of great powers who dominate international politics has always been closely linked with their economic fortunes. More often, it is the rise in economic might that lead to rise in the military power of the State, which makes it important to understand how economic revolutions happen and where the next ones are likely to come from.

The Pre Industrialized World

Few people may be aware today of the fact that in 1740 A.D. more than half of the world's economy was contributed by India and China. And before we forget, the industrial

revolution was already in place by then, spurring increasingly greater surplus produced by machines, requiring new consumers and markets that forced first Columbus and later many others to find a safe sea route from Europe to India. Compare this figure of 50% with around 5%, the share of these two economies in 1940s, merely 200 years later!

It is these changes that are the essence of economic revolutions.

Between seventeenth and twentieth century, industrial progress created a great economic revolution in Europe and later North America, which was based on creation of mechanized production in highly organized industrial centers acting as efficient suppliers, while a new and competitive trading system gave rise to huge markets across the world. The fact that Europe virtually ruled the rest of the world is both a cause and an effect of this phenomenon.

The Communist Empire

In early twentieth century, a new economic revolution began under the communist government of Russia, which initiated the first planned economy in the world. The fact that this was the period of greatest recession in US and Europe was perhaps the greatest factor that contributed to it, as Russia could get huge skilled manpower from US and other countries to build its infrastructure and industries. Note that the biggest problem in a planned economy is a lack of incentives for excellence, but in the early years, this problem was solved with hundreds of thousands of skilled workers hired from the developed world. BY 1950s USSR was matching the United States and Europe, but once this inflow of skills stopped, so did the economic parity between the two opposite blocks of the cold war era.

In less than a century, it is difficult to believe that Russia was an economic powerhouse that matched the biggest powers of the world.

Japan and the Asian Resurgence

Economic revolutions can also be a result of strange co-incidences.

In early twentieth century Japan was facing several economic problems, but the initiation of First World War brought it out from an economic recession. Later, by the end of Second World War, Japan was devastated, and the United States, which practically ruled over it, hardly allowed it to indulge in any economic progression. Then in 1950s, the Korean War happened, and the circumstances led to United States looking at Japan as an ally, and allowing Japanese industries to take root in the post war world. That one step practically changed the economic history of Japan, which not only got on to

its feet, but also became the biggest competitor of US by the late 1980s.

It is another matter that with the burst of the real estate bubble in Japan, and the two lost decades thereafter, Japan has not able to replicate the same growth trajectory that it once enjoyed. At the same time, it can also not be denied that the Japanese involvement with East Asian economies was an important part of world economic history, and played a significant part in their rise in the later part of the last century. For all its economic stagnation, Japan still remains one of the leading economies of the world.

The Future: BRIC Countries

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A study on BRIC (Brazil, Russia, India and China) countries by Goldman Sachs in earlier part of this century predicted that these countries are also entering a phase of economic revolution today. China, of course, is already more than halfway through, and already destined to become the largest economy of the globe in a not too distant future, while India too is beginning to show some signs of justifying those economists. Though Russia and Brazil have not been growing as rapidly as these two Asian giants, one must not forget, that they already enjoy a high per capita income.

The Biggest Economic Revolution will be the Digital Economy

In the meanwhile, another great economic revolution has been on now for a few decades.

Just like industrial revolution changed the face of earth, the information revolution, dubbed the 'third wave' by Alvin Toffler in last century seems to be taking the whole global economy under its shadows. Most of the largest companies in the world today are those involved in digital goods and services. Some of them are already bigger than fairly large economies.

This is a revolution that may not be limited to the economies, it is also creating social networks across the world, giving rise to large human networks with a kind of influence never seen earlier. It is not political, but it affecting politics, both local and global in many ways. The Digital economy, or the digitalization of economy, as it is often called, is a more than economic phenomenon, which mean it might end up completely changing the way we live our individual and collective lives.

As this process moves forward, more disruptions will be inevitable, and most of them will have large economic consequences.

Economic revolutions happen. They are happening right now! Are you aware of them?



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