After the turning point of 1870, there was no looking back for the West. Communication and transportation became interdependent in creating global demand on an unprecedented scale. London could get news from any part of the globe, and this fed British demand for foreign goods, for everything from Chicago wheat to Chinese tea to Argentine wool.
Science also fed economic growth. Whether or not you believe in the theory of evolution and Mendelian genetics, they were undeniably world-shattering events, as they provided a scientific basis for transplanting cash crops around the world rather than simply looking for natural resources. Rubber trees were introduced in Malaysia, tea became an Indian export, rice was introduced to the Americas, lambs to Australia and Argentina, etc. Europe reorganized the world by trade route and empire.
The maturation of economics, math, and statistics meant that people started caring about measures of economic growth. Issues like wages, unemployment, productivity, and living standards emerged as people slowly realized the implications of business activity. Adam Smith was finally proved to be mathematically correct that international trade provided a real basis for economic growth, as wages around the British Empire rose except in Australia.
However, you also begin to see the real implications of inequality and technology. Invention and factory tools meant that it was cheaper to buy steel from an American factory than from a bunch of Chinese laborers. Which meant American factory workers got rich while Chinese laborers desperately tried to find rides to America. Only in the early 20th century, when economies became increasingly industrialized and mechanized, do you start to see drifts toward cheaper labor again.
Weirdly enough, attempts to industrialize what is now the Third World failed everywhere except in Japan. Indians, Chinese, Mexicans, Egyptians, Malaysians, etc, simply could not grasp the modern institutions to sustain an industrial economy. In fact, many of them still don’t today. One of the issues in economic history is how these countries could produce a management class that specialized in plantation agriculture and so magnificently fail to produce management that could control an industrial workforce. After all, controlling a factory requires just a little more technical skill and brains but not nearly as much effort in monitoring and disciplining plantation workers. The best theory so far is that it is extraordinarily difficult to teach someone to do factory work if they have no familiarization with operating machines. It must also be noted that nativists in Europe and America largely won out in blocking immigration from Asia, severely slowing down the rate at which Asian populations could have familiarized themselves with Western laws and technology (all of Asia’s modernist leaders in the 20th century lived and were educated in Europe or the US, from Gandhi to Deng).
Again, we turn to the incredible failure of China as an example. It is surprising that industrial technology did not spread more quickly before World War I. After all, China had patent proof staring them in the face that an agricultural economy could never produce an army that could stand on the same battlefield as an industrial one. It obviously had nothing to do with race either, not when Meiji Japan bitch-slapped the Chinese navy and went on to take down the Russians. China’s leadership showed an absolutely incredible stubbornness in refusing to adopt steam engines, coal, screw propellors, iron hulls, cannons, or railroads. Part of the story can be explained by appalling corruption in the Qing bureaucracy and by an extreme skepticism of Europeans after the unequal treaty era. This led to the Qing dynasty perhaps holding China together only with a couple ass hairs, giving them little public capital to spend and no faith in Western investment after the last deal, when Europeans had traded all of China’s gold for opium.
The single personification of everything I just said is the gold standard. It required quick communication around the world, good reliable transportation of money, maturity in finance and math, and it quickly created global wealth and inequality. Gold made the haves and have-nots – America was a have because of the California gold rush, China was not because it traded all its gold for opium.
Pegging currency to gold was the only way to prevent arbitrage (manipulating currency spreads) and created discipline by governments around the world. In a multipolar world where everybody viewed other countries as rivals and didn’t trust anybody, bilateral economic deals were nonexistent and countries could only trade through their mutual faith in gold. For instance, Argentina found itself dissatisfied by having a currency overvalued in gold and tried to alter their peg. This resulted in immediate outcast from trade with the British Empire, which reduced Argentina from the 8th largest economy in the world in 1890 to just another broke-ass Latin American country by 1990 (with 27 defaults on its national debt).
However, gold had the downside of transmitting financial crises around the world as quickly as the telegraph cable could carry it. American railroad construction rose and fell with news from London about the status of gold, while American debates in the 1890s about a possible switch to a bimetallic economy (incorporating silver) caused a near-crash of the London stock exchange. Both of America’s big crashes in 1873 and 1907 were directly caused by news from Britain raising interest rates, drying up the supply of gold for capital investments.