The history of globalisation
History of Globalisation
The most recent wave of globalisation, which started in 1980, was spurred by a
combination of advances in transport and communications technologies and by large
developing countries who sought foreign investment by opening up to international trade.
This is actually the third wave of a phenomenon that started back in 1870.
The first wave lasted from 1870 to the start of World War I. Advances in transport and
reductions in trade barriers and the level of exports to world income doubled to 8% as
international trade boomed stimulated this.
It caused massive migration as people sought better jobs. About 10% of the world's
population moved to new countries. Sixty million people migrated from Europe to North
America and other parts of the New World. The same thing happened in densely
populated China and India where people moved to less densely populated countries like
Sri Lanka, Burma, Thailand, the Philippines and Vietnam.
The end of the First World War ushered in an era of protectionism. Trade barriers such as
tariffs were erected. World economic growth stagnated and exports as a percentage of
world income fell back to the 1870 level.
Following World War II, a second wave of globalisation emerged, lasting from about
1950 to 1980. It focused on integration between developed countries as Europe, North
America and Japan restored trade relations through a series of multilateral trade
liberalizations.
During this period there was a surge in the economies of the countries in the Organization
for Co-Operation and Development that participated in this trading boom. But developing
countries were largely isolated from this wave of integration, unable to trade beyond
primary commodity exports.
A few numbers in favour of globalisation?
A few numbers tell the story of the world's march toward globalization:
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Trade as a percentage of gross world product has risen from 15 percent in 1986 to
nearly 27 percent today.
In the past two decades, the stock of foreign direct investment assets has nearly
quadrupled as a percentage of gross world product.
More people than ever are crossing national borders - for business and pleasure.
On average around the globe, countries received just one foreign visitor for every
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100 people in 1950. By the mid-1980s there were six, and since then that number
has doubled to 12.
Since 1991, international telephone traffic has more than tripled. The number of
cell phone subscribers has grown from virtually zero to 1.8 billion - 30 percent of
the world population - and Internet users will soon hit 1 billion.
The economic logic is straightforward. Competition brings benefits to the public sector
the same way it does for the private sector. It makes government more accountable and
forces them to be more transparent and democratic.
Firms continue to seek the best workers for the money, wherever they may be found,
especially as advances in telecommunications, transportation and supply-chain
management bring the world closer together. Labor's best option in a globalised world is
to adapt, compete and get stronger
Today, money is probably the most mobile factor of production. In a nanosecond, it can
scurry to any part of the world with a squeak of a computer mouse.
Another opinion – it’s getting confusing!
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According to the World Bank (2007), the number of people living on $1 a day or
less declined from 1.5 billion to 1.1 billion between 1990 and 2001.
The International Monetary Fund (2002) reported that per capita incomes have
grown faster in globalising developing countries – 5 percent versus 2.2 percent in
the 1990’s.
An article in World Trade Magazine (2008) reports that globalization has
generated an increase in annual U.S. income of approximately $1 trillion, which
equates to average annual income gains of $10,000 per household (Manzella).
This chart shows the relationship between trade openness and gross domestic product
(GDP). As we become more open to trade, GDP increases.
Opening up to trade leads to more opportunity to export the products that we specialize in
and import foreign products at lower costs, and, as a result, the GDP will increase.
A possible unknown benefit of globalisation
Becoming more global has given the developing parts of the world more access to water
and has raised the health quality of poor nations.
Quotes on Globalisation
We cannot wait for governments to do it all. Globalization operates on Internet time.
Governments tend to be slow moving by nature, because they have to build political
support for every step. Kofi Annan. Former Secretary general of the United Nations
Globalization, as defined by rich people like us, is a very nice thing... you are talking
about the Internet, you are talking about cell phones, and you are talking about
computers. This doesn't affect two-thirds of the people of the world.” Jimmy Carter,
former US President
The great, unreported story in globalization is about power, not ideology. It's about how
finance and business regularly, continuously insert their own self-interested deals and
exceptions into rules and agreements that are then announced to the public as "free
trade."” Gerhard Schroeder, former Chancellor of Germany.
Contagion has become very much a phenomenon, and it's a phenomenon of globalization.
Lawrence Summers, former US Treasury Secretary
This is a basic requirement the meaning of globalization is that we should admit that the
economy of each country is dependent on the economy of all the others.
Richard Grasso, US businessman.
Concerns About Globalization
Much has been written about the possible negative consequences of globalization. Some
of the key concerns are summarised below.
Economic Leakage
Economic leakage refers to the movement of profit margins from primary, to
secondary, to tertiary markets.
Primary markets are oriented mainly toward the production of raw commodities
(e.g., food commodities, such as corn, wheat, soybeans; mined goods, such as raw
ore and minerals). Secondary markets focus mainly upon the further processing of
raw commodities (e.g., corn syrup, bread, soy-based oil products, steel, cut
minerals). Tertiary markets specialize in facilitating production and trade by
providing financing, access to markets, and access to information about markets
(e.g., the Chicago Mercantile Exchange, the LSE, Citibank).
Typically, the profit margin increases as goods move from primary to secondary
to tertiary markets. Thus, a nation whose economy focuses almost exclusively
upon primary commodity production will experience "economic leakage" of
potential profits to nations involved in secondary and tertiary markets because it is
not involved in these more lucrative ventures. It depends on how and where the
processing takes place as this adds value.
Perpetual Status
A concern expressed about the WTO and other organisations that govern international
trade is that nations involved in primary commodity production will find it very difficult
to develop secondary or tertiary markets. Suppose, for example, that Nation A, which is
involved mainly in primary commodity production, wants to build an industry that can
further develop its raw commodities. Such industrial development requires much
investment of capital. Thus, Nation A might want to provide over the short run
government subsidies to help the new industry bear the burden of start-up costs and
operating losses until it can become efficient enough to compete in world markets. Such
subsidies would be considered illegal under current and proposed WTO rules. Nations
not yet developed enough to enjoy the increased profit margins of secondary and tertiary
markets might never be able to do so under WTO regulation
Environmental Degradation
Another concern expressed about globalization is that nations wishing to
establish laws to protect their environmental quality might not be able to do so
under WTO regulations. Consider a case in 1996 when Venezuela brought a
claim against the United States alleging that the U.S. Clean Air Act unfairly
discriminated against Venezuela gas exports to the US because the act required
foreign gasoline sold in the US to be no more contaminated than the average level
of contaminants in US gas. The WTO ruled in favor of Venezuela. So, the US
rewrote the Clean Air Act to allow both domestic and foreign gas producers to
produce more contaminated gas. In another WTO ruling, Japan was forced to lift
its import ban on certain fruits that might bear dangerous insects, even though to
get rid of those insects Japan needed to use harmful pesticides.
Thus, in principle, any action taken by any country to protect its environment that might
be perceived as restricting free trade can be overturned by the WTO
Some countries have profited from globalization.
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China: Reform led to the largest poverty reduction in history. The number of
rural poor fell from 250 million in 1978 to 34 million in 1999.
India: Cut its poverty rate in half in the past two decades.
Uganda: Poverty fell 40% during the 1990s and school enrollments doubled.
Vietnam: Surveys of the country's poorest households show 98% of people
improved their living conditions in the 1990s. The government conducted a
household survey at the beginning of reforms and went back 6 years later to the
same households and found impressive reductions in poverty. People had more
food to eat and children were attending secondary school. Trade liberalization was
one factor among many that contributed to Vietnam's success. The country cut
poverty in half in a decade. Economic integration raised the prices for the
products of poor farmers—rice, fish, cashews—and also created large numbers of
factory jobs in footwear and garments, jobs that paid a lot more than existing
opportunities in Vietnam
But others have not.
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Many countries in Africa have failed to share in the gains of globalization. Their
exports have remained confined to a narrow range of primary commodities.
Some experts suggest poor policies and infrastructure, weak institutions and
corrupt governance have marginalized some countries.
Other experts believe that geographical and climatic disadvantage have locked
some countries out of global growth. For example, land-locked countries may find
it hard to compete in global manufacturing and service markets.
Over the last few years, there have been protests about the effects of globalization in the
United States and Europe. But in a lot of developing countries there is very strong
support for different aspects of integration—especially trade and direct investment,
according to a survey conducted by The Pew Center. In Sub-Saharan Africa, 75% of
households said they thought it was a good thing that multinational corporations were
investing in their countries.
Resources
http://youtube.com/watch?v=qFzui2YAX0I&feature=related
Exchange Rates and Globalisation
http://www.reversetrade.net/index.php/2010/04/hidden-face-of-globalization/
The hidden face of globalisation
http://www.globalvis.com/news/InfoMailQ3_05.shtml