How Economics Changed the World

How Economics Changed the World

Although it is generally thought of mainly as a theoretical academic subject, economics has been a driving force in society for thousands of years. The exchange of money and the way that financial systems interact has lead to some of the most profound changes to the everyday lives of human beings across the planet. To illustrate how the practice of economics has changed the world, today we'll look at the role of economics in Western history from the 6th century BC era up to the present day.

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How economics has changed the world

An early step: the introduction of coinage

In order to have a concept of economics, first, there must be a concept of money as an object in and of itself, with money existing independently of trading through barter. During the 6th century BC, precious metals were used in bars or bullion for trade, measured by weight. Most scholars agree that the Lyndians, a people from an area called Anatolia which is now Turkey, were the earliest to use coins. They first minted coins around 600 BC, although these early coins were of such high value that they would be used for saving and to pay for rare large expenditures rather than everyday expenses.

As trade between peoples promoted the concept of the coin, it was adopted by the ancient Greeks and Romans, and from there the idea spread throughout Europe and beyond. The coin was easily transportable and became one of the earliest pieces of shared understanding between different cultures, allowing trade between unknown parties on a scale which had been impossible before.

The beginning of modern economics: trade between nations

The widespread adoption of coinage facilitated trade at an unprecedented level during the ancient Greek and Roman eras. Large-scale trade between nations arguably began with the empire of Alexander the Great in 300 BC, who ruled Macedonia and expanded his reach through Asia and Africa to create one of the largest empires in this period of history. This empire created a shared economic and cultural understanding between nations that were hundreds of miles away from each other.

Following this period, the Greeks remained in Central Asia from 250 BC to 10CE, opening up a trade route between the East and West known as the Silk Road. Along this established route, people could trade goods more easily and smoothly than ever before, which allowed them access to new resources and ideas. The route was named for the precious silks that were exported from China to the Roman Empire in addition to jade, bird feathers, spices, tea, and what would have been new and exotic fruits and vegetables like carrots and pomegranates. In exchange, the Romans provided the Chinese with a great number of horses, as well as other items like gold, olive oil, and grapes. This long-standing trade relationship facilitated a cultural exchange between nations as well, marking the starting point of globalisation.

A revolutionary change: the industrial revolution

The next major development in the history of economics was the industrial revolution of the late 1700s to early 1800s. During this period, a transition was underway in the West to move away from hand production methods such as weaving or picking fruits by hand and towards automated production using machines to perform repetitive tasks. This changed occurred firstly and primarily in the area of textiles, but automation soon spread to other areas of production too and technological developments were used to increase the speed, efficiency, and accuracy of production.

In economic terms, the industrial revolution allowed greater production for lower effort, which over time raised the standard of living so that more people could afford first more essential goods, then eventually more luxury goods. The economies of scale made these goods more affordable and for the first time mass-produced goods were available to the masses as well as to the elite. The GDP per capita began to grow rapidly for the first time, signalling the most significant change to daily lives since humans first began relying on agriculture to produce their food. However, the turn towards automation was not uniformly positive in its effects across the board. Economic historians have argued that the workers on the lowest rung of the social ladder actually saw a reduction in their living standards as they suffered from the harms of industrialisation like pollution and long working hours without seeing the benefits: in affordable goods and services.

The twentieth century: population boom

During the 20th century, the growth following the industrial revolution continued and the global population exploded from 1.65 billion people at the start of the century to 6 billion people by the end. This was due to factors like improving medicine and healthcare that lowered mortality rates, particularly lowering child mortality and the likelihood of mothers dying during birth, and the wider availability of resources and goods thanks to economic forces. The population began to urbanise, congregating in smaller and denser city areas than the traditional rural way of living, due to jobs being located primarily in cities. This urbanisation made it easier to share resources and provide services like clean running water, heating, electricity, and education, and made distributing foods and other goods more efficient. All of this allowed people to live for longer and to have more children, resulting in the population boom.

In turn, this growing population provided a plentiful and cheap source of labour, allowing companies to produce more and to earn more. The two world wars in the twentieth century were economic drivers as well, obliging countries to increase their production of weapons and military goods and causing women to join the workforce in record high numbers. Over this century, GDP per capita grew by five times. This was particularly spurred by the development of shipping containers that were cheap to manufacture, standardised, and reusable. The standardisation of shipping containers made transporting goods in large quantities over the ocean cheaper and easier than ever before, pushing international trade to new heights.

The modern era: crises and environmentalism

At the turn of the twenty-first century, the Great Recession was a period of economic decline across the world. It was the most severe economic decline since the Great Depression of the 1930s, and was spurred on by a failure to regulate financial markets. Corporations and financial firms took on considerable risks and lent excessively to individuals who were unlikely to be able to pay the full amounts back, resulting in skyrocketing household debt and the bursting of a housing bubble. This period saw the global financial crisis of 2008 as well as the subprime mortgage crisis, both of which threw economics markets into disarray.

Economics has not only been tied to crises in the twenty-first century, however. A growing awareness of climate change has spurred on a popular interest in environmentalism, to which economics has contributed. One of the most realistic and broadly popular proposals for combating climate change is the introduction at either a national or an international level of a carbon tax, in which a fee must be paid when carbon-based fuels (i.e. fossil fuels) are burned. This tax would reduce the use of fossil fuels over the long term by making them more expensive and therefore less appealing than using renewable sources of energy. Carbon taxes of various kinds have been implemented in the UK, Ireland, Australia, Chile, Sweden, and other nations and have been debated in many more.

Conclusion

In many ways, the history of economics is the history of society, showing how resources were valued, traded, and consolidated across periods of time. Despite its reputation for abstractness as a subject, economics has had a formative impact on life in our society for thousands of years, and will likely only become more relevant in a future of increased globalisation.

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