Historical Precedents of Globalization (Internet, 2000)
The first steps towards globalization were taken in Europe in the 16th and 17th centuries, when the Portuguese and Spanish Empires reached to all corners of the world. Globalization became a business phenomenon in the 17th century when the first multinational was founded in the Netherlands. During the Dutch Golden Age, the Dutch East India Company was established as a private-owned company. It was the first company in the world to issue shares, an important driver for globalization.
Liberalization in the 19th century is often called “The First Era of Globalization,” a period characterized by rapid growth in international trade and investment, between the European imperial powers, their colonies, and later, the United States. Inequality between those states fell, as goods, capital and labor flowed freely between nations.
Globalization in the era since World War II has been driven by advances in technology which have reduced the costs of trade, and trade negotiation rounds, originally under the auspices of GATT, which led to series of agreements to remove restrictions on free trade. The Uruguay Round (1984 to 1995) led to a treaty to create the World Trade Organization (WTO), which would mediate trade disputes and trilateral trade agreements, including sections of Europe’s Masstrict Treaty and the North American Free Trade Agreement (NAFTA), which have been signed in pursuit of the goal of reducing tariffs and barriers to trade.
Benefits from Globalization (Pro-Globalism)
The arguments for globalization include the following:
- Efficiency gains from specialization between countries with different resource endowments.
- Benefits of economies of scale on an international level (Adam Smith)
- The stimulus to efficiency from increased competition (Leibenstein, 1966)
- The benefits of trade creation, scale and competition within regional groups (Viner, 1950; Balassa, 1961)
- The costs of protection in the form of rent-seeking behaviour (Bhagwati, 1998)
- Arguments for achieving benefits of specialization scale and competition through direct investment flows as well as trade.
- Spread of technology and ‘best practice’ through multinational companies (Grossman, 1991)
- White and blue-collar workers may go from one country to another to provide their services.
- Globalization produces intense competition as well as wider opportunities.
- Consumers, everywhere, have access to greater choice and lower costs.
- Workers of poor countries have greater opportunities as a result of their employers’ access to overseas markets.
- Globalization speeds up change and increases the visibility of strangers and their activities.
- Supporters of democratic globalization consider that the market-oriented globalization should be completed by a phase of building global institutions representing the will of world citizens.
- Supporters of free trade point out those economic theories of comparative advantage suggest that free trade leads to a more efficient allocation of resources, with all countries involved in the trade benefiting. In general, this leads to lower prices, more employment and higher output.
- Libertarians and other proponents of laissez-faire capitalism say higher degrees of political and economic freedom in the form of democracy and capitalism are both ends in themselves and also produce higher levels of national wealth. They see globalization as the beneficial spread of liberty and capitalism.
- The world increasingly is confronted by problems that cannot be solved by individual nation – states acting alone. Examples include cross-boundary air and water pollution, over-fishing of the oceans and other degradations of the natural environment, regulation of outer-space, global warming, international terrorist networks, global trade and finance, and so on. Solutions to these problems necessitate new forms of cooperation and the creation of new global institutions.
- Supporters of globalization argue that anti-globalization movement uses anecdotal evidence to support their view and that world-wide statistics, instead, strongly support globalization:
- The percentage of people in developing countries living below US$1 (adjusted for inflation and purchasing power) per day has halved in only twenty years (World Bank Research)
- Life expectancy has almost doubled in the developing world since WW II and is starting to close the gap to the developed world. Infant mortality has decreased in every developing region of the world (Guy Pfefferman, “The Eight Losers of Globalization”).
- Income inequality for the world as a whole is diminishing (David Brooks, “Good News About Poverty”).
- Democracy has increased dramatically from almost no nation with universal suffrage in 1900 to 62.5% of all nations in 2000 (Freedom House).
- Between 1950 and 1999, global literacy increased from 52% to 81% of the world. Women made up much of the gap. (Bailey, R. 2005).
- The percentage of children in the labor force has fallen from 24% in 1960 to 10% in 2000 (Oxford Leadership Academy).
- There are similar increasing trends for electrical power, cars, radios, and telephones per capita, as well as the proportion of the population with access to clean water (Science Direct).
However, some of these improvements may not be due to globalization, or may be possible without the current form of globalization or its perceived negative consequences, to which the self-styled ‘global justice movement’ objects.