First Industrial Revolution
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Introduction:
Between the First Industrial Revolution to First World War, there are a large number of transfers of capital, labor and trade in capital goods, commodities and consumer goods which normally called first wave of globalization. There is a massive development in the world economy, especially in Australia, Canada and American. But in 4 August 1914, the First World War was occurred which have a long effect for whole world. But the Great War was stopped at 1919 when the Treaty of Versailles was signed.
Background:
The First World War was begun at 20 June 1914 between Serbia and Austria-Hungary which because of the assassination of Archduke Franz by Serbia. The major battleground is Europe. There are two parties in this war. Allied Powers include France, United Kingdom, Russia, Italy, United States, Japan, Romania, Greece, Belgium, and Australia and so on. But Central Powers just have four countries, Germany, Austria-Hungary, Ottoman Empire and Bulgaria. Even 4 countries cause the greatest battle in Europe. There is about 65,000,000 people join the war. During the war, 10,000,000 people died and 20,000,000 get injured which cause a great economy loss for the world. The estimate loss of the war in world-wild is about 170 billion American dollars. In Australia history, the Australia government follows the United Kingdom join the Great War. The Andrew Fisher offer to support the United Kingdom on capital and human.
Causation of the end of first wave of globalization:
Before the Great War, the United Kingdom is the business center of world economy. Also the Pound is the great currency. There are two major arguments cause the end of the first wave of globalization. Since the First World War begun at 20 June 1914, Austria-Hungary and Serbia start the war. Then Russia joins the war help the Serbia at 1 August. Later the Germany attacks France at 4 August. Finally, the United Kingdom joins the war at 12 August. Those of countries involve in the Great War which will stop their treading to other countries and transfer the normal industry to military industry. And there is reasonable to see large number of people will join the war which decreases the productivity and the battle will block the trade line make nations hard to do business. Even keep trade will suffer a high economic loss.
Other argument is the German submarine activity in North Atlantic which makes the allied nations hard to trade with each other. Since German begun the submarine activity at August, the allied nation keep increase the damage on the marine transport. In the 1914, 5 months submarine activity damage 312,672 tons ships. And most of ship is shipping the food or goods. In May 1915, German increases the number of U-boat in the war. Allied nation try to control this passivity condition. But it did not change the battle. In the First World War, whole world have nearly 640 U-boats, and about 300 own by German. Especially in 1916, the total damage for allied nation increases 1,000,000 tons. Later, the submarine activity in 1917, the allied nations were loss 6,235,878 tons of ship which make the high risk of marine transport. So the difficulties of trade in allied nation make the trade patterns totally disrupted. Also cause the capital flows stopped. There is about 100 billion American dollar loss on submarine activity. As those two points for nation and world conditions cause the begun of the end of the first wave of globalization.
The main issue of end of first wave of globalization:
At begun of the Great War, most of people think it will finish at Christmas 1914. They argue the inventories of capital and material is enough for the war. But later, more and more countries join the war, from the Europe to Asia. The war becomes longer than the most of people think. They realize they cannot pay for the war and the inventories are not enough for the war. They need trade oversea. For example, Since United Kingdom get blockade from German submarine activity. The United Kingdom still bought higher quantities of Australia export during the war, and import from there declined. The balance of trade shifted in Australia. But the war effect for Australia still make Australia current account balance become deficit.
The reason of deficit is two main reasons. First is the loss in marine transport by German submarine activity. Another one is the high inflation and hard to get payback. From Burlin 1962 date shows from 1914 to 1918, the export in Australian keeps increase during the war and import have not change so much. But the economy in Australian keep deficit. During the war become longer, the nations cannot pay for the war. Most of countries sell their gold pay for the war. It causes them hard to value the good in international trade. So the went off the Gold Standard and pursuing an expansionary monetary policy. The government cannot trade to other countries to get profit. So the government just prints money to pay for the war which causes a high inflation on economy. During the war, people need 13 Pfennig for a loaf bread or 2.5 pound for potatoes, then 19 Pfennig for a loaf bread or 1.5 pound in 1916. At the end of the war, people need 5 pounds of potatoes or 22 pfennig for loaf bread.
Overall, the high inflation and high cost of war make government went off the gold standard and issue the expansionary monetary policy. Those action lead nations become an individual economy during the war.
Australia economy and the end of the first wave of globalization:
Negative effect fir