The First World War (1914-18) was mainly fought in Europe. But its impact was felt around the world. During this period the world experienced widespread economic and political instability and another catastrophic war.

Wartime Transformations

Resource Mobilization for War: World War I was a worldwide conflict that utilized modern industrial technology extensively.

• Millions of troops were enlisted globally and transported to battlefields via massive ships and trains. 
• Human Cost of War: World War I led to fatalities of nine million individuals and harm of an additional 20 million, predominantly men in their prime working years.
• Economic Consequences of War: This had a major effect on the economy of Europe, leading to a decrease in workforce and a drop in household incomes. 
  • The reorganization of industries and societies was a result of war, with women taking on roles that had traditionally been filled by men. 
  • War caused breaking of economic connections among top global economies, with the US becoming a debtor for the first time on an international stage.

Post-war Recovery

Economic Complications: Post-war economic recovery was difficult, especially for Britain. British industries faced competition from India and Japan, and the country was burdened with huge debts. 

• Unemployment and Agricultural Crisis: The end of the war boom led to job losses and unemployment, and agricultural economies were also in crisis due to a glut in wheat output.

Rise of Mass Production and Consumption

Rapid Economic Recovery:  The US economy recovered from the war more quickly than other countries.

• Mass Production: One important feature of the US economy in the 1920s was mass production, pioneered by Henry Ford. 
  • Mass production lowered costs and prices, and more workers could now afford to purchase durable consumer goods.
• Economic Boom Led Crisis: The housing and consumer boom of the 1920s created the basis of prosperity in the US, but it proved too good to last. By 1929, the world would be plunged into the Great Depression.

The Great Depression (1929-1930)

Causes: The Great Depression was a global economic crisis that began in 1929 and lasted until the mid-1930s. It was caused by a combination of factors, including,

• Agricultural overproduction, 
• Falling agricultural prices, and 
• The withdrawal of US loans from other countries. 
• Global Impact: The depression had a devastating impact on people around the world, with widespread unemployment, poverty, and bankruptcies. 
• United States: The US economy was particularly hard hit, with thousands of banks closing and millions of people losing their jobs. 
  • The Great Depression had a lasting impact on society, politics, and international relations.
•  India and the Great Depression: The Great Depression had a significant impact on India, which was by then an integrated part of the global economy. 
• Indian exports and imports nearly halved between 1928 and 1934, and agricultural prices crashed. 
• Peasants, who produced for the world market, were worst affected. They fell deeper and deeper into debt, and rural India was seething with unrest. 
• The depression was less grim for urban India, as those with fixed incomes found themselves better off, and industrial investment grew.

Rebuilding a World Economy: The Post-war Era

Second World War: The Second World War was a global conflict fought between the Axis powers (mainly Nazi Germany, Japan, and Italy) and the Allies (Britain, France, the Soviet Union, and the US).

•  It was a devastating war that resulted in the deaths of at least 60 million people, mostly civilians. 
• War’s Devastating Impact: The war caused widespread economic devastation and social disruption, and reconstruction was long and difficult. The war had two crucial influences on post-war reconstruction.
• Emergence of Superpowers: The US emerged as the dominant economic, political, and military power in the Western world, while the Soviet Union transformed itself from a backward agricultural country into a world power.

Post-war Settlement and the Bretton Woods Institutions

Post-war economic policy was based on two key lessons:

•  The need for full employment and economic stability, and
•  The need for governments to control economic flows. 
• Purpose of  Bretton Woods Institutions:  The Bretton Woods system was established to achieve these goals, with the IMF and World Bank playing central roles.
• •  The system was based on fixed exchange rates, with national currencies pegged to dollar and dollar anchored to gold.

The Early Post-war Years

Economic Boom in West: The Bretton Woods system led to unprecedented economic growth for Western industrial nations and Japan. 

• Rapid and Stable Growth: World trade grew by over 8% per year and incomes by nearly 5% per year between 1950 and 1970. The growth was also mostly stable, with low unemployment rates. 
  • Developing countries also invested heavily in modern technology to catch up.

Decolonization and Independence

The Bretton Woods institutions were designed to meet the financial needs of industrial countries, but they shifted their attention to developing countries in the late 1950s. 

• Resource Control in Post-Colonial Era: Many of the ex-colonial powers still dominantly owned key resources in their past colonies, while leading companies from strong nations frequently obtained permission to profit from these resources at a low cost.
•  Demand for a New Economic Order: Developing nations united as Group of 77 (G-77) to call for a new international economic order (NIEO) that would grant them genuine authority over their assets and fairer treatment in the worldwide economy.

End of Bretton Woods and the Beginning of ‘Globalization’:

• New Economic Challenges: Even with fast economic growth post-war, several challenges arose for global economy. 
  • The system of fixed exchange rates collapsed due to the depreciation of the US dollar. 
• Debt Crisis in Developing Countries: Less affluent nations were compelled to take loans from commercial banks in West, resulting in financial crises and reduced earnings.
• Economic Restructuring: Unemployment increased in industrialized nations, prompting MNCs to move manufacturing to countries in Asia with lower wages, including China. 
  • This boost in world trade and capital movements reshaped the international economic scene.

Conclusion

From ancient times to the present day, various changes have occurred in society, politics, economy, and technology. These modifications resulted in Colonization, two World Wars, the Great Depression, Poverty, and Unemployment. The Bretton Woods organizations played a role in restoring the global economy and introducing the age of globalization. Later, numerous former colonies of Europe gained independence.