LESSON III.

THE STRUCTURES OF GLOBALIZATION

Learning Outcomes
By the end of the lesson, you should be able to:

1. differentiate Global North from Global South;

2. enumerate and define the seven types of globalization; and
3. explain the role of international financial institutions in the creation of a global economy.

THE NORTH and SOUTH Divide

The North–South divide is a socio-economic and political division of Earth
popularized in the late 20th century and early 21st century. Generally, definitions
of the Global North include the United States, Canada, the United Kingdom, all
member states of the European Union, Russia, Israel, Japan, Singapore, South
Korea, Australia, and New Zealand. The Global South is made up of Africa, Latin
America, and developing Asia, including the Middle East, and is home to the BRIC
countries (excluding Russia): Brazil, India, and China, which, along with Indonesia,
are the largest Southern states.
The North is mostly correlated with the Western world and the First World, plus
much of the Second World, while the South largely corresponds with the Third
World and Eastern world. The two groups are often defined in terms of their
differing levels of wealth, economic development, income inequality, democracy,
and political and economic freedom, as defined by freedom indices. Nations in
the North tend to be wealthier, less unequal and considered more democratic
and to be developed countries who export technologically advanced
manufactured products; Southern states are generally poorer developing
countries with younger, more fragile democracies heavily dependent on primary
sector exports and frequently share a history of past colonialism by Northern
states. Nevertheless, the divide between the North and the South is often
challenged and said to be increasingly incompatible with reality.
In economic terms, as of the early 21st century, the North—with one quarter of
the world population—controls four-fifths of the income earned anywhere in the
world. 90% of the manufacturing industries are owned by and located in the
North. Inversely, the South—with three quarters of the world population—has
access to one-fifth of the world income. As nations become economically
developed, they may become part of definitions the "North", regardless of
geographical location; similarly, any nations that do not qualify for "developed"
status are in effect deemed to be part of the "South".

Blue (North), Red (South)

The number of countries in the world more than halved during the first wave of
globalisation, but then rose significantly during the second. Border changes have
been much more peaceful during this second wave, and this column asserts that
these observations are consistent with a theory in which political structure
adapts to expanding trade opportunities. Globalisation makes borders costly. In
its early stages, borders are removed by increasing country size, while in later
stages, the cost of borders is removed by creating peaceful economic unions,
leading to a reduction in country size.
 The World Wars
It was a situation that was bound to end in a major crisis, and it did. In 1914, the
outbreak of World War I brought an end to just about everything the burgeoning
high society of the West had gotten so used to, including globalization. The ravage
was complete. Millions of soldiers died in battle, millions of civilians died as
collateral damage, war replaced trade, destruction replaced construction, and
countries closed their borders yet again.
In the years between the world wars, the financial markets, which were still
connected in a global web, caused a further breakdown of the global economy
and its links. The Great Depression in the US led to the end of the boom in South
America, and a run on the banks in many other parts of the world. Another world
war followed in 1939-1945. By the end of World War II, trade as a percentage of
world GDP had fallen to 5% – a level not seen in more than a hundred years.

Second and Third Waves of Globalization

The story of globalization, however, was not over. The end of the World War II
marked a new beginning for the global economy. Under the leadership of a new
hegemon, the United States of America, and aided by the technologies of the
Second Industrial Revolution, like the car and the plane, global trade started to
rise once again. At first, this happened in two separate tracks, as the Iron Curtain
divided the world into two spheres of influence. But as of 1989, when the Iron
Curtain fell, globalization became a truly global phenomenon.
In the early decades after World War II, institutions like the European Union, and
other free trade vehicles championed by the US were responsible for much of the
increase in international trade. In the Soviet Union, there was a similar increase
in trade, albeit through centralized planning rather than the free market. The
effect was profound. Worldwide, trade once again rose to 1914 levels: in 1989,
export once again counted for 14% of global GDP. It was paired with a steep rise
in middle-class incomes in the West.
Then, when the wall dividing East and West fell in Germany, and the Soviet Union
collapsed, globalization became an all-conquering force. The newly created
World Trade Organization (WTO) encouraged nations all over the world to enter
into free-trade agreements, and most of them did, including many newly
independent ones. In 2001, even China, which for the better part of the 20th
century had been a secluded, agrarian economy, became a member of the WTO,
and started to manufacture for the world. In this “new” world, the US set the
tone and led the way, but many others benefited in their slipstream.
At the same time, a new technology from the Third Industrial Revolution, the
internet, connected people all over the world in an even more direct way. The
orders Keynes could place by phone in 1914 could now be placed over the
internet. Instead of having them delivered in a few weeks, they would arrive at
one’s doorstep in a few days. What was more, the internet also allowed for a
further global integration of value chains. You could do R&D in one country,
sourcing in others, production in yet another, and distribution all over the world.
The incidence of violence in the process of redrawing political borders shows
another reversal. Before 1950, more than one third of all territorial disputes were
decided by war, while after that date diplomacy prevailed in almost 90% of cases.
The forces of globalisation can help explain three salient phenomena in recent
history. First, the rise and subsequent fall in the size of countries observed since
the 19th century. Second, the seemingly contradictory trends towards more
political integration across countries and more political fragmentation within
countries in the second half of the 20th century. Third, the redrawing of borders
through war in the first wave of globalisation but through diplomacy in the
second. Our theory also raises important questions. Since the size of markets
grows rapidly while political borders tend to change slowly, it suggests that
globalisation is likely to put more pressure on the world’s political structure.
Designing political institutions that can optimally adapt may become one of the
major challenges faced by modern societies.
The result has been a globalization on steroids. In the 2000s, global exports
reached a milestone, as they rose to about a quarter of global GDP. Trade, the
sum of imports and exports, consequentially grew to about half of world GDP. In
some countries, like Singapore, Belgium, or others, trade is worth much more
than 100% of GDP. A majority of global population has benefited from this: more
people than ever before belong to the global middle class, and hundred of
millions achieved that status by participating in the global economy.

Globalization 4.0
That brings us to today, when a new wave of globalization is once again upon us.
In a world increasingly dominated by two global powers, the US and China, the
new frontier of globalization is the cyber world. The digital economy, in its infancy
during the third wave of globalization, is now becoming a force to reckon with
through e-commerce, digital services, 3D printing. It is further enabled by artificial
intelligence, but threatened by cross-border hacking and cyberattacks.
At the same time, a negative globalization is expanding too, through the global
effect of climate change. Pollution in one part of the world leads to extreme
weather events in another. And the cutting of forests in the few “green lungs”
the world has left, like the Amazon rainforest, has a further devastating effect on
not just the world’s biodiversity, but its capacity to cope with hazardous
greenhouse gas emissions.
But as this new wave of globalization is reaching our shores, many of the world’s
people are turning their backs on it. In the West particularly, many middle-class
workers are fed up with a political and economic system that resulted in
economic inequality, social instability, and – in some countries – mass
immigration, even if it also led to economic growth and cheaper products.
Protectionism, trade wars and immigration stops are once again the order of the
day in many countries.
As a percentage of GDP, global exports have stalled and even started to go in
reverse slightly. As a political ideology, “globalism”, or the idea that one should
take a global perspective, is on the wane. And internationally, the power that
propelled the world to its highest level of globalization ever, the United States, is
backing away from its role as policeman and trade champion of the world.
It was in this world that Chinese president Xi Jinping addressed the topic
globalization in a speech in Davos in January 2017. “Some blame economic
globalization for the chaos in the world,” he said. “It has now become the
Pandora’s box in the eyes of many.” But, he continued, “we came to the
conclusion that integration into the global economy is a historical trend. [It] is the
big ocean that you cannot escape from.” He went on the propose a more inclusive
globalization, and to rally nations to join in China’s new project for international
trade, “Belt and Road”.
It was in this world, too, that Alibaba a few months later opened its Silk Road
headquarters in Xi’an. It was meant as the logistical backbone for the e-
commerce giant along the new “Belt and Road”, the Paper reported. But if the
old Silk Road thrived on the exports of luxurious silk by camel and donkey, the
new Alibaba Xi’an facility would be enabling a globalization of an entirely
different kind. It would double up as a big data college for its Alibaba Cloud
services.
Technological progress, like globalization, is something you can’t run away from,
it seems. But it is ever changing. So how will Globalization 4.0 evolve? We will
have to answer that question in the coming years.

Seven Major Types of Globalization

1. Financial globalization. Interconnection of the world’s financial systems like

stock market. More of a connection between large cities than of nations.
Example: What happens in Asian markets affects the North American
markets.
2. Economic Globalization. A worldwide economic system that permits easy
movement of goods, production, capital, and resources (free trade facilitates
this).Economic globalization is the increasing economic interdependence of
national economies across the world through a rapid increase in cross-
border movement of goods, services, technology, and capital. Whereas the
globalization of business is centered around the diminution of international
trade regulations as well as tariffs, taxes, and other impediments that
suppresses global trade, economic globalization is the process of increasing
economic integration between countries, leading to the emergence of a
global marketplace or a single world market. Depending on the paradigm,
economic globalization can be viewed as either a positive or a negative
phenomenon. Economic globalization comprises: globalization of
production; which refers to the obtainment of goods and services from a
 particular source from locations around the globe to benefit from difference
in cost and quality. Likewise, it also comprises globalization of markets;
which is defined as the union of different and separate markets into a
massive global marketplace. Economic globalization also includes
competition, technology, and corporations and industries.
Examples: NAFTA, EU, multinational corporations

3. Technological Globalization. Connection between nations through

technology such as television, radio, telephones, internet, etc. It was
traditionally available only to the rich but is now far more available to the
poor. Much less infrastructure is needed now.

4. Political Globalization. Countries are attempting to adopt similar political

policies and styles of government in order to facilitate other forms of
globalization. It refers to the growth of the worldwide political system, both
in size and complexity. That system includes national governments, their
governmental and intergovernmental organizations as well as government-
independent elements of global civil society such as international non-
governmental organizations and social movement organizations. One of the
key aspects of the political globalization is the declining importance of the
nation-state and the rise of other actors on the political scene. William R.
Thompson has defined it as "the expansion of a global political system, and
its institutions, in which inter-regional transactions (including, but certainly
not limited to trade) are managed". Political globalization is one of the three
main dimensions of globalization commonly found in academic literature,
with the two other being economic globalization and cultural globalization.
Examples: move to secular governments, free trade agreements, etc.

5. Cultural Globalization. Merging or “watering down” of the world’s cultures

such as food, entertainment, language, etc. This is heavily criticized as
destructive of local culture This refers to the transmission of ideas, meanings,
and values around the world in such a way as to extend and intensify social
relations. This process is marked by the common consumption of cultures
that have been diffused by the Internet, popular culture media, and
international travel. This has added to processes of commodity exchange and
colonization which have a longer history of carrying cultural meaning around
the globe. The circulation of cultures enables individuals to partake in
 extended social relations that cross national and regional borders. The
creation and expansion of such social relations is not merely observed on a
material level. Cultural globalization involves the formation of shared norms
and knowledge with which people associate their individual and collective
cultural identities. It brings increasing interconnectedness among different
populations and cultures. Cross-cultural communication is a field of study
that looks at how people from differing cultural backgrounds communicate,
in similar and different ways among themselves, and how they endeavour to
communicate across cultures. Intercultural communication is a related
Example: The Simpsons is shown in over 200 countries in the world.

6. Ecological Globalization. It sees the Earth as a single ecosystem rather than

a collection of separate ecological systems because so many problems are
global in nature.
Examples: international treaties to deal with environmental issues like
biodiversity, climate change or the ozone layer, wildlife reserves that span
several countries
7. Sociological Globalization. A growing belief that we are all global citizens
and should all be held to the same standards and have the same rights.
Examples: the growing international ideas that capital punishment is
immoral and that women should have all the same rights as men
References:
Wikipedia
Gancia, Gino, Ponzetto, Giacomo, Ventura, Jaume. 26 July 2017. Changing Political Structures in
The Two Waves of Globalisation: Lessons for the EU