Origin and History

of Globalization
History of globalization
The historical origins of globalization (also known as historical globalization) are the subject
of ongoing debate. Though many scholars situate the origins of globalization in the modern era
(around the 19th century), others regard it as a phenomenon with a long history, dating back
thousands of years (a concept known as archaic globalization). The period in the history of
globalization roughly spanning the years between 1600 and 1800 is in turn known as the proto
globalization.

Thomas L. Friedman divides the history of globalization into three periods: Globalization 1.0
(1492–1800), Globalization 2.0 (1800–2000) and Globalization 3.0 (2000–present). He states that
Globalization 1.0 involved the globalization of countries, Globalization 2.0 involved the
globalization of companies and Globalization 3.0 involves the globalization of individuals.[1]

Klaus Schwab, founder and Executive Chairman of the World Economic Forum, Richard
Baldwin and Philippe Martin have divided the history of globalization into four eras:
Globalization 1.0 was before World War I, Globalization 2.0 was after World War II "when trade
in goods was combined with complementary domestic policies", Globalization 3.0, for which
other terms in use have included "New Globalization", hyper-globalization, the "global value
chain revolution", and the period of offshoring, refers to a more recent period of change in
global economic relationships, and Globalization 4.0 to current (2018 onwards) changes affecting
services in particular.[2][3]

Archaic globalization
Perhaps the extreme proponent of a deep historical origin for globalization was Andre Gunder
Frank, an economist associated with dependency theory. Frank argued that a form of
globalization has been in existence since the rise of trade links between Sumer and the Indus
Valley civilization in the third millennium BC.[4] Critics of this idea contend that it rests upon an
over-broad definition of globalization.

Even as early as the Prehistoric period, the roots of modern globalization could be found.
Territorial expansion by our ancestors to all five continents was a critical component in
establishing globalization. The development of agriculture furthered globalization by converting
most of the world's population into a settled lifestyle. However, globalization failed to accelerate
due to lack of long-distance interaction and technology.[5] The contemporary process of
globalization likely occurred around the middle of the 19th century as increased capital and
labor mobility coupled with decreased transport costs led to a smaller world.[6]

An early form of globalized economics and culture, known as archaic globalization, existed
during the Hellenistic Age, when commercialized urban centers were focused on the axis of
Greek culture over a wide range that stretched from India to Spain, with such cities
as Alexandria, Athens, and Antioch at its center. Trade was widespread during that period, and it
is the first time the idea of a cosmopolitan culture (from Greek "Cosmopolis", meaning "world
city") emerged. Others have perceived an early form of globalization in the trade links between
the Roman Empire, the Parthian Empire, and the Han Dynasty. The increasing articulation of
commercial links between these powers inspired the development of the Silk Road, which
started in western China, reached the boundaries of the Parthian empire, and continued
onwards towards Rome.[7]

The Islamic Golden Age was also an important early stage of globalization,
when Jewish and Muslim traders and explorers established a sustained economy across the Old
World resulting in a globalization of crops, trade, knowledge, and technology. Globally significant
crops such as sugar and cotton became widely cultivated across the Muslim world in this period,
while the necessity of learning Arabic and completing the Hajj created a cosmopolitan culture.[8]

Proto globalization
The phase is known as proto globalization. It was characterized by the rise of maritime European
empires, in the 15th, 16th and 17th centuries, first the Portuguese and Spanish Empires, and
later the Dutch and British Empires. In the 17th century, globalization also became a private
business phenomenon when chartered companies like British East India Company (founded in
1600), often described as the first multinational corporation, as well as the Dutch East India
Company (founded in 1602) were established.

The Age of Discovery brought a broad change in globalization, being the first period in which
Eurasia and Africa engaged in substantial cultural, material, and biologic exchange with the New
World. It began in the late 15th century, when the two Kingdoms of the Iberian
Peninsula – Portugal and Castile – sent the first exploratory voyages around the Cape of Good
Hope and to the Americas, "discovered" in 1492 by Christopher Columbus. Shortly before the
turn of the 16th century, Portuguese started establishing trading posts (factories) from Africa to
Asia and Brazil, to deal with the trade of local products like slaves, gold, spices, and timber,
introducing an international business center under a royal monopoly, the House of India.[10]

Global integration continued with the European colonization of the Americas initiating
the Columbian Exchange,[11] the enormous widespread exchange of plants, animals, foods,
human populations (including slaves), communicable diseases, and culture between
the Eastern and Western hemispheres. It was one of the most significant global events
concerning ecology, agriculture, and culture in history. New crops that had come from the
Americas via the European seafarers in the 16th century significantly contributed to the world's
population growth.[12]

Modern globalization
The 19th century witnessed the advent of globalization approaching its modern
form. Industrialization allowed cheap production of household items using economies of scale,
[citation needed] while rapid population growth created sustained demand for commodities.
Globalization in this period was decisively shaped by nineteenth-century imperialism. After
the First and Second Opium Wars, which opened China to foreign trade, and the completion of
the British conquest of India, the vast populations of these regions became ready consumers of
European exports. It was in this period that areas of sub-Saharan Africa and the Pacific islands
were incorporated into the world system. Meanwhile, the conquest of parts of the globe,
notably sub-Saharan Africa, by Europeans yielded valuable natural resources such
as rubber, diamonds and coal and helped fuel trade and investment between the European
imperial powers, their colonies, and the United States.[13]

The inhabitant of London could order by telephone, sipping his morning tea, the various
products of the whole earth, and reasonably expect their early delivery upon his doorstep.
Militarism and imperialism of racial and cultural rivalries were little more than the amusements
of his daily newspaper. What an extraordinary episode in the economic progress of man was that
age which came to an end in August 1914.

Between the globalization in the 19th and in the 20th, there are significant differences. There are
two main points on which the differences can be seen. One point is the global trade in this
centuries as well as the capital, investment, and the economy.

Global trade
The global trade in the 20th century shows a higher share of trade in merchant production, a
growth of the trade in services and the rise of production and trade by multinational firms. The
production of merchant goods in the 20th century largely decreased from the levels seen in the
19th century. However, the amount of merchant goods that were produced for the merchandise
trade grew. The trade in services also grew more important in the 20th compared to the 19th
century. The last point that distinguishes the global trade in the 19th century compared to the
global trade in the 20th century, is the extent of multinational cooperation. In the 20th century,
you can see a "quantum leap" in multinational cooperation compared to the 19th century.
Before the 20th century began, there were just Portfolio investment, but no trade-related or
production-relation Direct investment.

Commercial integration has improved since last century, barriers that inhibit trade are lower and
transport costs have decreased. Multinational trade contracts and agreements have been
signed, like the General Agreement on Tariffs and Trade (GATT), North American Free Trade
Agreement (NAFTA), the European Union (EU) has been hugely involved in eliminating tariffs
between member states, and the World Trade Organization. From 1890 and up to World War I
instability in trade was a problem, but in the post war period there has mostly been economic
expansion which leads to stability. Nations have to take care of their own products; they have to
make sure that foreign goods do not suffocate their domestic products causing unemployment
and maybe social instability. Technological changes have caused lower transporting costs; it takes
just a few hours to transport goods between continents to-day, instead of weeks or even months
in the nineteenth century.

By consideration financial crisis one key difference is the monetary regime. In the 19th century it
occurred under the fixed exchange rates of the gold standard. But in the 20th century it took
place in a regime of managed flexibility. Furthermore, in the 19th century countries had
developed effective lenders of last resort, but the same was not true at the periphery and
countries there suffered the consequences. A century later there was a domestic safety net in
most emerging countries so that banking panics were changed into situations where the debts of
an insolvent banking system were taken over by the government. The recovery from banking
crisis is another key difference. It has tended to begin earlier in the recent period than in the
typical crisis episode a hundred years ago. In the 19th century there were no international
rescue packages available to emerging economies. But in the recent period such rescues were a
typical component of the financial landscape all over the world.

The flows information was an important downside in 19th century. Prior to the Transatlantic
cable and the Radiotelephone, it used to take very long for information to go from one place to
another. So, this means that it was very difficult to analyze the information. For instance, it was
not so easy to distinguish good and bad credits. Therefore, the information asymmetry played a
very important role in international investments. The railway bonds serve as a great example.
There were also many contracting problems. It was very difficult for companies working overseas
to manage their operations in other parts of the world, so this was clearly a big barrier to
investment. Several macroeconomic factors such as exchange risks and uncertain monetary
policies were a big barrier for international investments as well. The accounting standards in the
U.S. were relatively underdeveloped in the 19th century. The British investors played a very
important role in transferring their accounting practices to the new emerging markets.[14]

Aftermath of World War I: collapse of globalization

The first phase of "modern globalization" began to break down at the beginning of the 20th
century, with World War I. The European-dominated network was increasingly confronted with
images and stories of 'others', thus, then took it upon themselves to take the role of world's
guardians of universal law and morality. Racist and unequal practices also became part of their
practices in search of materials and resources that from other regions of the world. The increase
of world trade before beginning in 1850 right before World War I broke out in 1914 were
incentives for bases of direct colonial rule in the global South. Since other European currencies
were becoming quite largely circulated, the need to own resource bases became imperative.
[15] The novelist VM Yeates criticized the financial forces of globalization as a factor in creating
World War I. [16] Financial forces as a factor for creating World War 1 seem to be partly
responsible. An example of this would be France's colonial rule over most of Africa during the
20th century. Before World War I broke out, there was no specific aims for the wars in Africa
from the French, which left Africans in a “lost” state. Military potential of Africa was first to be
emphasized unlike its economic potential...at least at first. France's interest in the military
potential of French Africa took a while to be accepted. Africans in the French army were treated
with feelings of inferiority from the French. As for the economic incentive for colonial rule came
in 1917 when France's was faced with a crisis of food supply. This coming after the outbreak of
the war which had left France without the ability to support itself agriculturally since France had
a shortage of fertilizers and machinery in 1917.[17]

Post-World War II: globalization resurgent

Globalization, since World War II, is partly the result of planning by politicians to break down
borders hampering trade. Their work led to the Bretton Woods conference, an agreement by the
world's leading politicians to lay down the framework for international commerce and finance,
and the founding of several international institutions intended to oversee the processes of
globalization. Globalization was also driven by the global expansion of multinational
corporations based in the United States and Europe, and worldwide exchange of new
developments in science, technology, and products, with most significant inventions of this time
having their origins in the Western world according to Encyclopedia Britannica.[18] Worldwide
export of western culture went through the new mass media: film, radio and television and
recorded music. Development and growth of
international transport and telecommunication played a decisive role in modern globalization.

These institutions include the International Bank for Reconstruction and Development
(the World Bank), and the International Monetary Fund. Globalization has been facilitated by
advances in technology which have reduced the costs of trade, and trade negotiation rounds,
originally under the auspices of the General Agreement on Tariffs and Trade (GATT), which led to
a series of agreements to remove restrictions on free trade.

Since World War II, barriers to international trade have been considerably lowered through
international agreements – GATT. Initiatives carried out because of GATT and the World Trade
Organization (WTO), for which GATT is the foundation, have included:

Promotion of free trade:

- Elimination of tariffs; creation of free trade zones with small or no tariffs

- Reduced transportation costs, especially resulting from development
of containerization for ocean shipping.
- Reduction or elimination of capital controls
- Reduction, elimination, or harmonization of subsidies for local businesses
- Creation of subsidies for global corporations
- Harmonization of intellectual property laws across most states, with more restrictions
- Supranational recognition of intellectual property restrictions (e.g. patents granted by
China would be recognized in the United States)

Cultural globalization, driven by communication technology and the worldwide marketing of

Western cultural industries, was understood at first as a process of homogenization, as the
global domination of American culture at the expense of traditional diversity. However, a
contrasting trend soon became evident in the emergence of movements protesting globalization
and giving new momentum to the defense of local uniqueness, individuality, and identity.[19]