Lesson 1.2: Drivers and a Short History of Globalisation

Introduction

In this lesson, we will explore the major drivers of globalisation and provide a brief historical context for how globalisation has evolved over time. Understanding these elements is crucial for grasping contemporary global issues. By the end of this lesson, you, students, should be able to:

• Identify the key drivers of globalisation: trade, technology, transport, communication, and capital flows.
• Discuss earlier waves of globalisation, particularly the role of empire and industrialisation.
• Describe the post-1945 global order, focusing on Bretton Woods, decolonisation, and the rise of world trade.
• Analyze the acceleration of globalisation after 1990, influenced by the internet, container shipping, and the rise of China.
• Recognise that globalisation is uneven, reversible, and historically shaped, rather than a predetermined outcome.

To engage your curiosity, consider how some businesses became global giants while others failed entirely. Understanding the drivers behind these changes will give you insight into our interconnected world.

The Drivers of Globalisation

Globalisation is driven by various interconnected factors that create a more integrated world economy. We'll discuss the five key drivers: trade, technology, transport, communication, and capital flows.

Trade

Trade is the exchange of goods and services between countries. It allows nations to specialise in the production of certain goods, which can lead to increased efficiency and innovation. Countries trade based on their comparative advantages—essentially, what they can produce more efficiently than others.

Example: Comparative Advantage

Consider two countries—Country A can produce wine at a lower cost than agriculture, while Country B can produce cloth more efficiently than wine. By specialising in these products and trading, both countries can enjoy both wine and cloth cheaper than if they tried to produce both independently.

In 1947, the General Agreement on Tariffs and Trade (GATT) was established to facilitate international trade by reducing tariffs and other trade barriers. This laid the groundwork for more extensive trade agreements, subsequently leading to trade blocs like the European Union.

Technology

Advancements in technology significantly enhance the pace of globalisation. Innovations in manufacturing, communication, and information technology have transformed how business is done, making it easier to connect, collaborate, and expand across borders.

Example: The Internet

The advent of the internet revolutionised communication and trade. For instance, Amazon.com started as a small online book retailer but grew into a massive ecommerce platform, allowing consumers to purchase from an array of sellers worldwide.

This digital transformation has allowed businesses to engage in global supply chains and reach international markets with relative ease.

Transport

The transportation sector has also undergone significant changes, facilitating globalisation by making it feasible to move goods and people across vast distances quickly. Developments in shipping technology, especially containerisation, have drastically reduced transport costs.

Example: Container Shipping

Container shipping, introduced in the 1960s, involves large intermodal containers that can be easily transferred between ships, trains, and trucks. This method has lowered shipping costs and increased the speed of goods traveling across oceans.

Communication

The evolution of communication technologies—from the telegraph and telephone to instant messaging and social media—has enabled faster, more efficient information sharing. This development has allowed businesses to operate on a global scale, managing teams and operations across different countries.

Example: Communication Technologies

Companies like Slack and Zoom provide tools that enable real-time communication and collaboration worldwide, making it possible for companies to have distributed teams that work across various time zones.

Capital Flows

The movement of capital across borders is a key driver of globalisation. Increased foreign direct investment (FDI) and portfolio investment have enabled companies to expand their operations globally, seeking higher returns on investment.

Example: Foreign Direct Investment

A notable instance is when a car manufacturer from Japan establishes a manufacturing plant in the United States. This investment creates jobs and contributes to the local economy while also allowing the company to reduce production costs.

A Short History of Globalisation

Globalisation is not a recent phenomenon; it has gone through various waves shaped by historical, political, and economic developments.

Earlier Waves of Globalisation: Empire and Industrialisation

The first recorded wave of globalisation occurred during the Age of Discovery in the 15th and 16th centuries, driven by European imperial expansion. Empires sought new markets and resources, laying the foundation for cross-cultural exchanges.

Example: The British Empire

The British Empire expanded significantly during this period, establishing colonies worldwide. This expansion led to the global exchange of goods, cultures, and ideas, influencing almost every aspect of daily life in the colonies and the metropole.

The second wave, driven by industrialisation in the 18th and 19th centuries, transformed economies around the world. Rapid advances in technology and manufacturing created new economic opportunities and necessitated international trade networks.

The Post-1945 Global Order

After World War II, a new global order emerged aimed at fostering international cooperation and economic stability. The Bretton Woods Conference in 1944 led to the establishment of institutions like the International Monetary Fund (IMF) and the World Bank to promote financial stability and economic development.

Example: Bretton Woods System

The Bretton Woods system established fixed exchange rates linked to the US dollar, which was convertible to gold. This created a framework for international trade and investment, fuelling economic growth.

Simultaneously, decolonisation began to reshape global economic relations. Former colonies gained independence, leading to the emergence of new nations that sought to participate in the global economy through trade and investment.

The Accelerated Globalisation After 1990

The collapse of the Soviet Union and global economic reforms in the 1990s marked a significant shift in globalisation. Countries like China embraced market-oriented reforms, transforming their economies and integrating them into the world markets.

Example: The Rise of China

China's entry into the World Trade Organization (WTO) in 2001 accelerated its economic growth, leading to it becoming a manufacturing powerhouse and a key player in global trade.

Additionally, the proliferation of the internet has further connected economies, driven by the rapid increase in e-commerce and digital communication.

Globalisation: Uneven, Reversible, and Historically Shaped

Despite the extensive levels of interconnectedness, globalisation is not uniform. It is shaped by various historical, cultural, and political contexts that create disparities.

Uneven Globalisation

While some regions have thrived due to globalisation, others remain disadvantaged. For instance, countries in sub-Saharan Africa often lag in terms of economic development, lacking the infrastructure and technology to fully participate in global markets.

Reversibility of Globalisation

Globalisation is also reversible. Political movements against global trade practices, such as Brexit, indicate that nations can choose to limit their integration into the global economy. For example, trade tensions between the United States and China have reignited debates about protectionism.

Historically Shaped

Finally, globalisation is historically shaped. Understanding the past helps us interpret current global dynamics. For instance, the legacies of colonialism continue to affect trade relationships and economic disparities today.

Conclusion

Globalisation is a complex and multifaceted process shaped by various driving forces and historical events. We began by examining the key drivers: trade, technology, transport, communication, and capital flows, and then explored the historical context through earlier waves of globalisation, the post-1945 order, and the acceleration after 1990. Ultimately, the nature of globalisation is uneven and reversible, influenced by various historical factors.

Study Notes

• Drivers of Globalisation:
• Trade: Exchange of goods and services based on comparative advantage.
• Technology: Advancements allowing better communication and efficiency.
• Transport: Innovations like container shipping reducing costs and increasing speed.
• Communication: Evolution from telegraphs to social media improving information sharing.
• Capital Flows: Movement of investment across borders facilitating business expansion.
• Historical Context:
• Age of Empire: Early globalisation driven by imperial expansion.
• Industrialisation: Growth of trade networks in the 18th and 19th centuries.
• Post-1945 Order: Establishment of Bretton Woods institutions fostering economic cooperation.
• Post-1990 Acceleration: China’s market reforms and digital globalisation domination.
• Nature of Globalisation:
• Uneven benefits across regions.
• Reversible trends, influenced by political choices.
• Historically shaped by past events and relationships.