There’s a new saying now, as China goes, so goes the world. Since 1979, China has transformed the way it engages with the rest of the world and has become one of the largest economies. Furthermore, it is on its way to become the largest economy due to an annual average growth rate of 9.8 per cent for over three decades. Today, it is the world’s largest steel producer in the world, ranks first place in car manufacturing, and has surpassed the United States and India in terms of producing cotton. However, over a century ago, China’s GDP was reduced to 9% and had a limited economy focused on domestic industry.

Foreign intervention, treaties and concessions ultimately played significant roles in shaping the Chinese economy by the 1920’s. Prior to the Opium Wars of the mid-nineteenth century, China under the Qing Dynasty was once a world economic power and had an overall GDP of 32%. However, after signing a series of “unequal treaties” with Western powers, China lost much of its political and economic sovereignty. The decades between 1860 and 1920 were littered with foreign-imposed concessions and had a tremendous impact on the development of its economy during the late nineteenth and early twentieth century.

In addition, China was chronically in debt in the early 20th Century. This was subsequently a result of the Japanese and Boxer Protocol indemnities settled on her by these same powers – a condition that gave foreign nations more leverage in negotiations to expand their spheres of territorial influence. As a consequence, the terms of Chinese external loans led directly to a backlash against foreign ownership of Chinese capital and foreign encroachment on Chinese sovereignty This eventual led to a “battle for concessions” that almost led to China’s dismemberment and contributed to the manifestations of coups that finally overthrew the Qing Dynasty in 1911. Although foreign encroachment began to decline following the 1920’s, it left a lasting mark on China’s globalization. 

The Krupp Steel Works was the largest company in Germany. This picture shows the scale of steel production in Germany by 1910.

In light of the current European crisis, there has been a lot of coverage on Greece. However, it would be interesting to shift the focus to Germany, because despite many European countries having a difficult time, Germany is doing very well. Germany is Greece’s largest creditor, and has a dominant position in Europe. Now that Greece cannot pay Germany back, Greece is revisiting history and saying that German did not pay off its war loans after World War Two. In addition to the complex European situation, it is incredible how Germany joined as a latecomer in the global economy, go through two world wars, but then rebound as one of the world’s wealthiest countries today.

To understand Germany’s economy, it is necessary to trace back to the history of Germany’s economic development. Germany’s economy did not really start to develop until the unification of Germany in 1871. Frieden mentions that the theory of economic backwardness helped Germany’s economy grow rapidly. In other words, Germany was ready to adapt to the newest and most modern technology, which allowed Germany to develop faster. While that was true, other patterns of development such as labor and migration, specialization, and policies had also contributed to Germany’s growth.

There were two phases of industrialization. The first industrialization focused on infrastructure, railway, mechanical engineering, and heavy industries such as iron and steel. The second industrialization emphasized on electricity and chemical products. Even though Germany was the country of technology and machinery, it is important to note that Germany started out modestly by producing simple products like toys and then progressed to produce machines.

Compared to the other parts of the world, there was not much trade protection in Germany, but the government was involved in the iron and steel industry. The dominant firms in the iron and steel industry created cartels to keep prices high and the German government restricted imports of iron and steel.  Coal and Steel industries had also incorporated horizontal integration to allow their businesses grow faster. Germany grew to become one of the top three exporters in Europe before the First World War, but unfortunately everything collapsed after the war.

There is a saying that Denmark is a country with “more pigs than people”. While the country is now famous for its design, architecture and green technology firms, the saying still holds true. Today, just as it was a century ago, the Danish economy relies heavily on the agricultural sector, which produces pork and dairy products. Known for its long summer nights and dark winter days, the country’s short growing season makes it difficult to compete with the world grain market. The climate, coupled with historical economic activity and the needs of a small welfare state, make Denmark’s specialization in animal products both intelligent and necessary.

Between 1388 and 1814, Denmark controlled Norway, which provided raw materials in exchange for surplus Danish grain, which primarily grew in a territory that had, historically, belonged to Germany. As it became more expensive to grow domestically, than it did to produce livestock and simply import the necessary grains, farmers began to focus on dairy and pork products. This slow specialization became particularly vital in the wake of Germany’s rapid industrialization and their recapture of Denmark’s “grain basket” in 1864. Denmark had always been a sea-faring nation as well, with the city of Copenhagen tying Scandinavia to international trade routes and a small but stable ship-building sector provided trade vessels to transport produce.

The government took on a protectionist stance to allow some smaller industry to develop and a system of cooperative farming began, with individual producers sharing the costs of machinery and risk. The entire economy was aided by a historical sentiment of risk-aversion, and remained stable, with a slow steady growth, throughout the early 20th century. Out of these cooperative farms, some of Denmark’s largest brands, like Arla, Lurpak and Danish Crown, were formed and now sell their products world-wide. Because of its reliance on foreign imports, the Danish economy has remained a supporter of free trade, which provides both a world market for Danish products and access to items that cannot be produced within its small boarders.

When you think of Ireland, green fields, luscious sweeping countryside, quaint farmhouses and medieval castles probably spring to mind. Ireland is undoubtedly a beautiful country but, upon visiting there you might be surprised to come across a sprinkling of Starbucks coffee houses in many cities, an Abercrombie & Fitch store on an old cobblestone street in Dublin and countless branches of large multinationals such as Intel, Microsoft and Facebook nestled in industrial parks on the outskirts of almost all of Ireland’s major towns. With a highly competitive corporate tax rate of approximately 12.5% it is clear that Ireland is committed to the promotion of foreign industry investment and to being part of the world economy.

But Ireland wasn’t always so industrially focused – at least not the southern part of the country (the south of Ireland became the Republic of Ireland in 1931 upon gaining sovereign independence from Britain.) At the turn of the 20th century, southern Ireland’s economy still very much centered around agriculture. Interestingly, as much as the south of Ireland’s economy relied on agriculture, Northern Ireland’s economy in contrast relied heavily on industry – mainly shipbuilding. In fact, both Northern Ireland and the south of Ireland had opposite policy approaches to their respective economies in the early years of the 20th century. The south of Ireland had a free market policy towards agriculture and a protectionist policy towards its limited industry. In direct contrast, Northern Ireland adopted a free market policy perspective towards industry and a protectionist attitude towards agriculture!

Northern Ireland’s heavy reliance on the world economy for the success of its shipbuilding industry proved catastrophic economically during the Great Depression. However, because the Republic of Ireland was not as heavily engaged industrially with the world economy up to this point, it remained relatively unscathed by the Great Depression. The turning point for industry in the Republic of Ireland came in 1938 with the signing of the Anglo-Irish Trade Agreement between Ireland and England.  From this point, Ireland set about nurturing its infant industries via the promotion of more stringent protectionist policies in order to become more integrated with the world economy.

By: Fiona Logan

You will use this site for posting summaries of your research at mid-semester as well as a book review later in the semester.  It will give you a chance to practice “public writing” for a general audience and give you an insight into each other’s research.