Turning points in 20th century history
Gunpowder monopoly ends
Towards the end of 19th century, newly discovered nitrate deposits (sodium nitrate) in the Atacama desert of Chile came onto world markets. Chile’s nitrates were a crucial intermediate for gunpowder.
Chile’s nitrates broke the British monopoly over the trade in Indian saltpetre for the first time in modern history. French domestic production of saltpetre, barely enough for their own needs, could not challenge Indian saltpetre output that the British monopolized.
Indian saltpetre (potassium nitrate) could be simply refined and used directly in gunpowder – unlike Chilean nitrates. Also Chilean nitrates were limited natural deposits, whereas Indian saltpetre was produced on an industrial scale, accounting for some 70% of global production.
Germans quickly secured supplies of Chilean nitrates. A few years into the WWI, Germans brought the Haber-Bosch process from the laboratory stage to industrial production. The Haber-Bosch process for production of ammonia, gave Germans industrial capacity to produce gunpowder.
Causes for WW1
With this industrial capacity for gunpowder in place, Germany and Turkey, both non-colonial, industrialized powers challenged colonial powers, Britain and France, for access to world markets.
Against Britain and France, the then dominant world powers, with extensive colonies, were Germany, the Austro-Hungarian Empire and the Ottoman Empire out of Turkey. Once WWI started, US funded both Britain and France. The US plied the Anglo-French alliance with extensive supplies and credit.
Emergence of USA
While millions died in European trenches, the USA bided its time. With mud, blood and disease taking a heavy toll, Britain, France, Germany, Turkey and Russia were soon exhausted and prostrate into a stalemate by the end of 1916. As the fate of WWI hung in balance, USA finally joined the Anglo-French side to gain a share of spoils.
Financially unaffected, industrially strong, militarily effective, the US emerged on the world stage.
Soon after WWI, as Anglo-French colonies and markets started opening up, US products gained new customers. Indians started buying Chevrolets, Buicks, Packards in small numbers. Victrolas started playing music in India – and on India. Michelin’s radial tyres from France became a byword in India for long-life. Indian natural rubber started going to Italy’s Pirelli and France’s Michelin.
Impoverishment of India
But Britain, a victorious nation was deep in debt – to USA and Colonial India. US emerged as the largest creditor nation. To settle these wartime debts, debtor Britain and creditor USA worked out a debt-repayment ‘mechanism’. Nothing but financial jugglery, this mechanism slashed the amount due to Colonial India and actually transferred the debt-burden of WW1 onto the backs of Indian peasant.
To settle this debt, Britain took recourse to gold from India. To give impetus to this transaction US supplied Britain with silver – then in abundant supply, in the form of US silver currency coins. This silver was ‘sold’ to Britain at double the market price – under the guise of the Pittman Act. Britain paid its wartime debt to India with this silver – at this inflated Pittman Act price. Abundant silver coins were stuck by the Colonial Raj, which are still available across India in large quantities.
To settle loans taken from USA to fight WW1, Britain extracted scarce gold from India. While payments for Indian exports were made in overpriced silver, the Indian peasant was forced to pay for imports and taxes in under-priced gold.
Due to this overpriced silver-under-priced gold combination, a surge in gold outflows started from India. Soon the US banking system was flush with liquidity.
Expecting the closed markets of Anglo-French colonies to open up, US economy expanded trade relations and industrial capacity. This expansion in trade and production of industrial goods was funded partly on the back of inflows of gold from India through Britain.
Finally though, protective barriers did not come down substantially enough – creating industrial over-capacity and excess liquidity in USA. Seeing ‘irresponsible’ bankers, waste ‘hard-earned’ gold on ill-planned trade expansion and production capacities, the US Federal Reserve clamped down on liquidity.
Great Depression followed. To ‘save’ gold-reserves, Roosevelt went further and nationalized gold.
Crime in the 20th century
In turn, Roosevelt’s gold nationalization, sparked a global crime tsunami. Only after the easing of restrictions on gold ownership by 1990, did the crime tsunami subside. The axis of this tsunami of crime was gold smuggling into India and narcotics trans-shipment through India.
A tsunami that engulfed all major economies of the world.
Unresolved issues of WW1 triggered WW2. Germany hemmed in from all sides by British client-states, unable to find markets for its industrial production, reacted.
Germany, allied with Japan and Italy, proposed creation of larger ‘home’ markets. This was to be done by ‘expanding’ their own borders – to include neighboring countries. As first steps, on 3 October 1935 Italy invaded Abyssinia, now Ethiopia, Germany on 11-12 March, 1938, swallowed Austria; and Japan occupied Manchuria.
These militant powers shared the same disregard for human life. Britain wreaked havoc by creating The Great Bengal Famine. Some 40-50 lakh (4-5 millions) Indians died. Hitler rained the Holocaust on the Jews. Some 50-60 lakh (5-6 million) Jews died.
Three faces of stagnation
Production capacity of non-OECD world was destroyed by years of colonialism, WW1 and WW2. Economic conditions after WW2 improved due to relative peace and as countries of the world started rebuilding their economies in the last 60 years (1950-2010).
The last 60 years has seen significant increase in industrial capacity of non-OECD nations. US extended supplier’s credit – using the US dollar, the favored currency of the Bretton Woods system.
A significant portion of economic expansion of OECD economies during 1950-1980 happened as production capacity of the world was rebuilt. The same capacities that were destroyed by colonialism, WW1 and WW2 – especially during 1850-1950 period.
This creation of production capacity in non-OECD countries means economic stagnation and loss of political power for a few decades across OECD. With greater production capacity in the hands of non-OECD producers, production capacity in OECD-USA must shrink.
Or a WW3 will be ‘needed’ to destroy the production systems of the poorest countries – to ‘save’ the West-OECD.
To get around this ‘problem’ of stagnation, the West has created artificial ‘crisis’ situations.
- Population Explosion
- Global Warming and climate change
- Civil Wars in Africa
- Islamic Demonization
- Financial meltdowns
Complicating the current situation is the US currency mechanism, called USCAP (by 2ndlook) which favors selected US allies with advantageous exchange rates. China, Asian Tigers, Japan and NATO-Europe have gained significantly from the USCAP program.
The most notable loss due to trade distortion has been Africa’s.
During the 20th century, the world had to contend with an intolerable situation. The Anglo-Saxon Bloc (America, Australia, Britain and Canada) accounted for 80% of gold production (between 1200-1800 tons per annum) and controlled 80% of global gold reserves (around 100,000 tons circa 1920) also. Not even Chengez Khan had that kind of control over global economy.
Dawn of a new century
At the beginning of 21st century, gold reserves in the hands of all the nation-States, are at a historic low. All the Governments in the world own less than 20%, i.e. 30,000 tons from global gold reserves of 150,000 tonnes.
Another 5 years of aggressive gold buying by global consumers will see this down to possibly 15%-17%. This will severely limit the ability of any State to wage a prolonged war.
A collapse of the currency systems in the world is imminent – in the next 5-15 years. Gold may give super-normal returns in the face of such an event.
Desert Bloc – beginning of the end?
The 20th century possibly saw the Desert Bloc reach its high-point. The world fully understands the bankruptcy of the Desert Bloc – and it may take some time for the effects of Desert Bloc propaganda to wear off.
Celebrations may, however, be premature. The alternate to Desert Bloc politics – भारत-तंत्र Bharat-tantra is yet to regain traction.
- U.S. losing its grip on world (timesunion.com)
- Anglo-Indians: Some corner of a foreign field (economist.com)
- India Now and Then (3quarksdaily.com)
- Profile: Thomas Babington Macaulay a giant of the British Empire (telegraph.co.uk)
- New revelations in ammonia synthesis (scienceblog.com)
- Why trapped miners “unwilling to die in darkness” (cnn.com)
- Recycling animal and human dung is the key to sustainable farming (energybulletin.net)
- Science History of the Renaissance Period (brighthub.com)