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Industrial Age

The third stage of economic history, the industrial age, resulted from industrialization— the economic transition from small-scale labor-intensive production to large-scale capitalintensive production in factories and mills. Industrialization did not occur in all regions of the world simultaneously. Instead, widespread industrialization, which would soon be called the Industrial Revolution, began in Great Britain in the 1700s and spread to other European countries and the United States during the 1800s.

Great Britain was the catalyst for the epic economic and social changes brought about by industrialization. Great Britain was blessed with a wide variety of domestic resources such as navigable rivers and deep harbors, minerals such as iron ore and coal, and an abundance of inexpensive labor. Other resources, such as timber and cotton, were imported at low cost from Britain's colonial possessions in North America, Africa, and Asia. In addition, Britain's government was stable and, in many respects, far-sighted. For example, Britain was quick to recognize the economic benefits of establishing profitable trade relationships and a colonial empire—and of creating a formidable navy to protect its commercial interests.

During the industrial age a new model for the mass production of goods, called the factory system, was established. Under the factory system the size of production facilities grew, and production came to rely on the efficient operation of heavy machinery by unskilled labor. The factory system required workers to specialize in a specific task within a larger production process. This rigid division of labor often dehumanized the production process, forcing men, women, and children to endure sweatshop conditions in the factories, mills, and mines. It also dismantled the traditional domestic system—a production system in which people worked from their homes to make cloth, shoes, and other items.

The development of new technologies underpinned the growth of the factory system during the industrial age. During the 1700s and 1800s complex machinery was invented to produce items such as yarn or cloth. Steam was harnessed to power factories and mills, steamships, and locomotives. By the late 1800s electricity was being used to support basic infrastructure such as telephone communications, lighting systems, tramways, and railways. New technologies also expanded mass production techniques into entirely new industries, such as steel and the automobile as the industrial age matured. These technological advances increased national output in advanced economies such as Great Britain, Germany, and the United States. The industrial age also laid the foundation for a gradual improvement in workers' standard of living in the industrialized societies.

Information Age

The fourth stage of economic history, the information age, relies on information and communications technologies in the production process. Information and communications technologies (ICTs) are the technological advances that increase people's ability to collect, store, retrieve, and share information. The information age began during the final quarter of the twentieth century, but its roots were firmly planted in the technologies of the industrial age such as electricity, the telephone, early computers, and software. What is radically new about recent ICTs is the pace of their development and the degree to which they are integrated into business activity throughout the global economy.

The information age is grounded in several key technologies. The first is computer technology, which has progressed with lightning speed since World War II. In 1946 the Electronic Numerical Integrator and Calculator (ENIAC), the world's first functional electronic computer, was invented in the United States. Since that time, technological advances have allowed the computer industry to evolve from the use of vacuum tubes, to transistors, to integrated circuits, to microprocessors. Technology also broadened the appeal of computers by expanding the market from large mainframe computers, which were used mainly by big businesses, the government, and universities, to user-friendly personal computers. Second, the production of sophisticated software has complemented advances in computer technology, encouraging computer applications in homes, schools, and smaller businesses. Third, communications technologies, such as wireless telephones and other wireless devices, have accelerated exponentially in recent years.

The invention of the Internet in 1969 by the U.S. Department of Defense jump-started the process of connecting computer networks. The use of the Internet, or “internetworking of networks,” expanded during the 1970s and 1980s when a basic infrastructure was developed and conveniences such as email were added. The invention of the World Wide Web by Tim Berners-Lee in 1989 opened the floodgates to Internet use. Through the World Wide Web, the information age exploded as people were able to communicate and share information through a global network that was both easy to use and inexpensive. By 2013 an estimated 2.7 billion people around the world had ready access to the Internet.[1] The information age, like the earlier industrial age, has progressed at a different pace for countries around the world. High-income developed countries are better able to integrate the latest ICTs into their economies, while lower-income developing countries tend to lag behind. These technological inequities have created a significant ICT gap between richer and poorer countries, often called the digital divide. As a result, the poorest countries are further marginalized and are denied access to some trade and investment opportunities. In recent years a surge in Internet use in the developing world has narrowed the digital divide for some countries. From 2005 to 2013, for example, the number of Internet users in the developing world climbed from 408 million people to 1.8 billion people. This represents nearly one-third of all people living in the developing world. During this same period of time, Internet use climbed in the developed countries from 616 million to 958 million people, which represents 77 percent of all people living in these richer countries. While Internet use increased in all world regions from 2005 to 2013, it continued to lag in

Africa, where fewer than one in five people had access to the Internet.[2]

Microwave towers enhance communications and are an important feature of a country's economic infrastructure.

Microwave towers enhance communications and are an important feature of a country's economic infrastructure.

ICTs have transformed the conduct of business in today's fast-paced global economy, especially in the richer developed countries. Over the Internet, businesses scan the planet for low-cost resources, advertise, and sell their output to buyers. Business activity that takes place over the Internet reduces some of the brick and mortar costs associated with traditional production methods such as the construction of retail stores or other buildings. By the 2010s trillions of dollars of business-to-business (B2B) and business-to-consumer (B2C) electronic commerce took place annually in the global economy. In the United States alone the U.S. Census Bureau reported $4.1 trillion in ecommerce in 2010, of which about 90 percent were B2B transactions and the remaining 10 percent B2C transactions.[3]

  • [1] International Telecommunications Union, “Key ICT Indicators for Developed and Developing Countries and the World,” February 22, 2013; World Bank, “Internet Users per 100 People,” World Development Indicators (Statistical Annex)
  • [2] Ibid.
  • [3] U.S. Bureau of the Census, U.S. Department of Commerce, “U.S. Shipments, Sales, Revenues and E-Commerce: 2010 and 2009,” E-Stats, May 10, 2012, 2
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