Waves of Globalization

Globalization, in an economics context, refers to the freer cross-border movements of goods and services, labor, technology, real capital, and financial capital to create an integrated and interdependent global economy. The pillars of economic globalization are international trade, foreign direct investment, and cross-border financial flows. Broadly speaking, globalization also deals with cross-border flows of ideas, political and social values, language, and other components of culture. Today globalization is often associated with the flow of Western economic, political, and social beliefs and institutions to other world regions.

Over time economic globalization has had peaks and valleys. One mainstream analysis divides modern globalization into three great waves. The first of these waves spanned from 1870 to 1914. During the first wave international trade and foreign investment expanded as some trade barriers declined and new transportation and communications technologies were developed. It was during this first age that steamships joined steam-powered locomotives to speed the transport of goods and people, while the telegraph and telephone increased the convenience of global communication. These technological advances, along with new economic opportunities, also sparked a mass migration of labor from densely populated regions such as Europe and China to less populated regions such as North America.[1] The first age of globalization crumbled under the destructive weight of World

Great Britain spearheaded the first age of globalization from 1870 to the outbreak of World War I in 1914

Great Britain spearheaded the first age of globalization from 1870 to the outbreak of World War I in 1914. (PhotoDisc, Inc.)

War I (1914–1918), the isolationism and protectionism of the 1920s, the global depression of the 1930s, and the carnage of World War II (1939–1945).

The second great wave of globalization rose out of the ashes of World War II, extending from 1945 to 1980. This second wave also benefitted from international agreements and new technologies. Global trade and investment were supported by new organizations such as the World Bank and the International Monetary Fund. Successive trade negotiations, called trade rounds, were conducted under the guidance of the General Agreement on Tariffs and Trade (GATT). Postwar technologies in transportation and communications strengthened global business and financial linkages. Technological advances in highspeed railways, supertankers, supersonic aircraft, and motorized vehicles expanded opportunities for long-distance business enterprise. The new economic connectivity proved especially fruitful to advanced economies such as the United States, Japan, and the nations of western Europe. Most developing countries, on the other hand, tended to lag behind mainly as suppliers of low-cost primary commodities.[2]

The third great wave of globalization, from 1980s to the present, expanded on earlier efforts to liberalize international trade and investment. The third wave continued to harness new technologies as a means to integrate global economic activity. During the third wave the World Trade Organization (WTO) was founded to strengthen the rules of the global trading system. Rapid advances in information and communications technologies (ICTs) such as the Internet, World Wide Web, cell phones, and other wireless technologies accelerated global connectivity. Business-to-business (B2B) and business-to-consumer (B2C) electronic transactions, or ecommerce, expanded into the trillions of dollars. In addition, the third wave was marked by a greater inclusion and influence of developing countries—the so-called new globalizers—such as Brazil, China, India, and South Africa.[3]

The Globalization Debate in Brief

Proponents of globalization argue that open global markets enhance business efficiencies and profits, broaden consumer choice, and improve people's quality of life. Business efficiencies stem mainly from regional specialization. That is, businesses in open global markets are able to use resources based on their comparative advantage. These efficiencies increase production and enable producers to export surpluses to other countries. The increased flow of goods and services across national borders, in turn, expands consumers' access to a greater variety of products and at reasonable prices. Similarly, freer crossborder flows of real and financial capital efficiently allocate resources to regions with high profit potential. Proponents conclude that new global business activity creates jobs and prosperity. A rising global gross domestic product and a falling percentage of people living in extreme poverty bear witness to globalization's success.[4]

Opponents of globalization believe that globalization is neither desirable nor inevitable. Key concerns of the antiglobalization movement include the negative impact of globalization on human and worker rights, the growing income gap between globally connected and disconnected nations, the fragility of the current global financial architecture, and the negative environmental impacts of unbridled economic growth. Expressions of discontent with economic globalization have surfaced in recent years. In the vanguard of the antiglobalization movement are some nongovernmental organizations (NGOs) and civil society organizations (CSOs). In 1999 a loose coalition of NGOs, CSOs, and others disrupted the WTO's ministerial conference in Seattle, Washington. The success of the Seattle protest against the WTO encouraged similar outbursts against the World Bank, IMF, World Economic Forum, and other proglobalization institutions during the 2000s. Since the early 2000s social forums, sponsored mainly by CSOs and NGOs, have also voiced concerns about global economic topics such as poverty, health care, foreign debt, and migrations of workers.

  • [1] The World Bank, Beyond Economic Growth; Paul Collier and David Dollar, eds., Globalization, Growth and Poverty: Building an Inclusive World Economy, World Bank Policy Research Report (Washington, DC: World Bank and Oxford University Press, 2002).
  • [2] Ibid.
  • [3] Ibid.
  • [4] IMF Staff, “Globalization: A Brief Overview,” May 2008
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