Background information in globalization and afects

Globalisation patterns in trade and investment - introduction

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 up 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 new 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. 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 Between the globalization in the 19 th 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.

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.

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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.

From 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.

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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.

1. Introduction

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.


Globalization drives a growing web of connections between people, cities and publication impact by collaborating with one or more of 22 partner countries. Despite its great benefits, globalization can also bring about an increasing. Globalization has become a familiar enough word, the meaning of which has been what we know, and what we do not know, about its consequences. But in this context I would surmise that other factors are also at work, such as the.

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 were 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.

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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 was 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. The British investors played a very important role in transferring their accounting practices to the new emerging markets. The first phase of "modern globalization" began to break down at the beginning of the 20th century, with World War I.

History of globalization

Racist and unequal practices became also 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 right before World War I broke out in 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. Military potential of Africa was first to be emphasized unlike its economic potential…at least at first. Africans in the French army were treated with feelings of inferiority from the French.

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 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.

Development and growth of international transport and telecommunication played a decisive role in modern globalization. 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.

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 against globalization and giving new momentum to the defense of local uniqueness, individuality, and identity. The Uruguay Round to [19] led to a treaty to create the WTO to mediate trade disputes and set up a uniform platform of trading. Other bilateral and multilateral trade agreements, including sections of Europe's Maastricht Treaty and the North American Free Trade Agreement NAFTA have also been signed in pursuit of the goal of reducing tariffs and barriers to trade. World exports rose from 8.

In the s, the growth of low cost communication networks allowed work done using a computer to be moved to low wage locations for many job types. This included accounting, software development, and engineering design. In late s, much of the industrialized world entered into a deep recession. From Wikipedia, the free encyclopedia. It is not to be confused with World history. Main article: Archaic globalization.

What are the impacts of globalisation?

For example, well-developed financial markets help moderate boom-bust cycles that can be triggered by surges and sudden stops in international capital flows, while strong domestic institutions and sound macroeconomic policies help attract "good" capital, such as portfolio equity flows and FDI. The second lesson to be drawn from the study is that there are also costs associated with being overly cautious about opening to capital flows. Opening up to foreign investment may encourage changes in the domestic economy that eliminate these distortions and help foster growth.

Looking forward, the main policy lesson that can be drawn from these results is that capital account liberalization should be pursued as part of a broader reform package encompassing a country's macroeconomic policy framework, domestic financial system, and prudential regulation. Moreover, long-term, non-debt-creating flows, such as FDI, should be liberalized before short-term, debt-creating inflows. Countries should still weigh the possible risks involved in opening up to capital flows against the efficiency costs associated with controls, but under certain conditions such as good institutions, sound domestic and foreign policies, and developed financial markets the benefits from financial globalization are likely to outweigh the risks.

As some countries have embraced globalization, and experienced significant income increases, other countries that have rejected globalization, or embraced it only tepidly, have fallen behind. A similar phenomenon is at work within countries—some people have, inevitably, been bigger beneficiaries of globalization than others.

Over the past two decades, income inequality has risen in most regions and countries. At the same time, per capita incomes have risen across virtually all regions for even the poorest segments of population, indicating that the poor are better off in an absolute sense during this phase of globalization, although incomes for the relatively well off have increased at a faster pace.

Overcoming the Risks and Contradictions of Globalization | Chatham House

Consumption data from groups of developing countries reveal the striking inequality that exists between the richest and the poorest in populations across different regions. As discussed in the October issue of the World Economic Outlook , one must keep in mind that there are many sources of inequality. Contrary to popular belief, increased trade globalization is associated with a decline in inequality.

The spread of technological advances and increased financial globalization—and foreign direct investment in particular—have instead contributed more to the recent rise in inequality by raising the demand for skilled labor and increasing the returns to skills in both developed and developing countries. Hence, while everyone benefits, those with skills benefit more.

It is important to ensure that the gains from globalization are more broadly shared across the population. To this effect, reforms to strengthen education and training would help ensure that workers have the appropriate skills for the evolving global economy.