History of Economic Globalization
Some say the process of globalization commenced with Christopher Columbus reaching the new world across the Atlantic. That may be a slight exaggeration, but the interdependence and integration of economies of various nations definitely began with the advent of colonization by European nations in the 17th and 18th centuries. The intermeshing of diverse cultures and economies we nowadays call globalization has been spreading for long, and can be said be the rather inevitable culmination of centuries-long trends in human history.
Some time after the Second World War, the world entered a new era of economic globalization. The Marshall Plan particularly was very instrumental in bringing this about. The War’s wide-reaching impact greatly damaged the economy of many a country across the world but not, strangely enough, that of the United States. Instead, the U. S. enjoyed unprecedented economic power, and consequently political superiority, after 1945. American industry took a new breath of life during the war years.
It may seem a paradox, but American people began to thrive and prosper right amidst a world torn apart by a brutal war waged on a colossal scale. The immense hardships undergone by the American people during the years of depression in the 30’s became a thing of past. The American government emerged from the war as the world’s major economic force, and became a key agent in Europe’s economic reconstruction. The Marshall Plan or the “Economic Cooperation Act” of 1948 was conceived and implemented (Hogan 1987).
Starting from July 1947, a massive amount roughly equivalent to $ 100 billion in today’s terms poured into Europe over the next four years. The European countries benefiting from this aid, including Germany, joined the Organization for Co-operation and Development. By the time the effort of the plan was completed, most of the Western European economies, with the possible exception of Germany, were not only standing firm on their feet, but were running ahead to new heights of progress and prosperity.
Though some have criticized the Marshall plan for having set a precedent of America going out of its way and helping out foreign nations with American taxpayers’ money, their argument is not valid, at least in the context of Europe. Because, in an increasingly globalized world, countries and their economies do not stand in comfortable isolation from each other. Indeed, as is commonly known, America had a policy of not interfering in European matters before Pearl Harbor and Hitler declaring war on America.
For a considerable time, America was reluctant to enter the War, but its illusions had to be shattered and it was in the end forced to become the most prominent player in the war effort. Since then there was no looking back for America. The trend of progress was towards globalization and internationalization, and America played a central role in actualizing this trend. The Marshall Plan can indeed be called the first systematic effort towards the realization of a new order of global integration of national economies, and during the time of its operation itself, it definitely brought a new sense of European solidarity.
As the outcome of the plan, Europe not only has been able to stand on it feet, but it stood more united and stronger than ever before. And of course, America in its turn stood to benefit from the development of European economies in a myriad direct and indirect ways. In that sense, the money flow involved the Marshall Plan cannot be seen as charity alone made on humanitarian grounds, but as an investment well made toward the end of American, European and global prosperity.
Further, in the post-war era, the rapid new developments in transport systems and communication technologies, as well as the increased and intensive use of sophisticated technologies in the process of industrialization, besides a host of other factors, led to companies seek expansion beyond the borders of their particular countries. During the 1960’s new avenues to globalization have opened up; the volumes of FDI (Foreign Direct Investment) and international financial flows (mainly through the agency of FIIs or Foreign Institutional Investors) began surging gradually, though the word globalization had not been coined yet.
With the falling of trade barriers, international trade was liberalized. Economic globalization, however, requires the predominant presence of capitalist economy. Inasmuch as there were a large number of socialist governments in the sixties and seventies, the pace of capitalism was hampered. In 80’s, with China opening up its what had been a thoroughly closed and communist economy, and similar developments in relation to South East Asian countries, the process of globalization got a massive boost.
However, globalization set afoot at full pace only during 1990’s with the fall of communism in Soviet-block countries, as well as opening up many huge economies like that of India (Murshed 2002). The coming of age of economic globalization was significantly facilitated by the radical onset of new technologies over the past few decades. The 1980’s electronics revolution and subsequently the computer revolution have changed the face of communications and human contact, besides ushering in the Age of Information.
They marked the beginning of a revolution that Alvin Tofler and others have called “The Third Wave” of human history, the first wave being the agricultural revolution and the second being the industrial revolution. Ever since, globalization simply has been going hand-in-hand with the spreading of information revolution. In the mid-1990’s the arrival of the Internet on the scene has dramatically accelerated this process, enabling people as well as businesses all over the world to communicate more easily and rapidly.
The spread of the Internet throughout the world is making it a prime agent of economic globalization, as well as globalization in cultural and other senses too. With the combined impact of explosion of computer technologies, the dismantling of trade barriers and the expanding political and economic power of multinational corporations, economic globalization took roots and has been rapidly gaining increasingly conspicuous presence in the past several years. Today, its pace seems unstoppable.