We’ll be asking and trying to answer the question, is globalization new? In module one we looked at, what is globalization, and we try to answer that question and now we’re asking more of a question about timing.
I have here on screen a map of the world in the first century and you can see highlighted some trade routes between different parts of the world at that time.
We have seen plenty of periods in history when the world has interacted with itself across country, across countries, across political borders, and so it’s not a new phenomenon.
What we might ask then is, if it’s not new, and if we’re not so special then what is different, or is there anything different about this era of globalization that we’re living in? And the common answer that we give to that is, in today’s globalized world we are experiencing unbelievable growth rates in technological advances.
What we want to do now is we’ll have several parts to this module where we’ll talk about how we got to the point that we’re at in today’s globalized world in the 2010s, and talk a little more about developments that have occurred that have allowed a very globalized world to develop.
In our introduction, we looked at a map of the world over the period 1400 to 1800, and we saw that globalization is not a brand new phenomenon.
There has been a gradual, continual increase in trade, or interaction with the rest of the world, emanating from the United States.
It does give us a sense that, once again, globalization is not brand new, and that we expect at least for the short term, for this to continue because technology continues to advance and, the world seems to have embraced global trade.
What I want to do now is to think about the past hundred years and what the world has gone through.
One major event that occurred about a hundred years ago, is World War I. And we don’t often talk about World War I, but World War I played a very important role in the current era of globalization that the world is experiencing.
First of all, World War I was started by an act of, what we would call now, terrorism.
That led to a dip temporarily in the 1910s in world trade.
If you’ve seen films from that era one that comes to mind is The Great Gatsby you know that as the roaring 20s. And that was a time when trade continued to increase and the world continued to experience great growth for the most part.
It wasn’t concentrated in one country it was across the whole world.
The unemployment rates that we hear and read about occurred in many parts of the world.
What connection can we make between World War I and the Great Depression, and World War II? That is a very important question to ask, and that’s what we’ll look at in part two of this module two, is globalization new?
Last time we were talking about World War I, and its impact on globalization and the current era of globalization that the world is experiencing.
As we think about World War I as any war, there’s great destruction, there’s human loss, and it’s very tragic.
War is a horrible thing for the world to experience, and on the scale of a global war, that’s just magnified many times over.
So the economic crisis that Germany experienced, and then the whole world experienced as the Great Depression grew really led to the conditions being set for someone like Hitler to rise to power.
He promised to return Germany to a great position in the world.
As we can see, World War II came out of the Great Depression.
The Great Depression was a horrible period of human tragedy because of the suffering across the world.
In some ways, the Great Depression was made worse by political decisions made by people in power across the world.
The connection between World War I and The Great Depression in World War II is that World War I led to the rise of Hitler.
One thing that the world did that historians and economists have looked up and said we shouldn’t repeat, is that many countries in the world who were experiencing economic crisis looked inward.
Tariffs were increased in the United States, which made the Great Depression worse and cut the United States off from the rest of the world.
So when the time came for a World War II when World War II started the world was actually in a period of somewhat, what we would call isolationism.
The United States did not quickly get involved in World War II because people were focused inwardly on their own economic troubles, on their own depression in the United States.
So there is a link between World War I, the Depression, and World War II, and we’ll continue to examine World War II and what happened after World War II and how it’s connected to our current global era, in part three of this module two, of this course Global Business Environment.
We’ve been talking about how World War I was related to the rise of political leaders like Hitler and others across the world and led to conditions which made World War II almost a foregone conclusion.
You can see that on this graph which shows both world trade and world production.
So by the late 1930s, the world had increased some of its trade but, but this is the period when things are heating up leading to World War II. In fact, not to give you too much history, but September 1st, 1939 is the date that Germany invaded Poland, which is considered by many to be the official start of World War II. And many parts of the world, many countries including the United States of America were unwilling to become involved in the war.
The citizens of the country thought it was a distant war and had nothing to do with them and so, that war started and continued without involvement from many parts of the world.
World War II was also a horrific period in terms of human destruction and human tragedy.
By the mid 1940s the world had experienced in a short period of time two major world wars and a great depression.
The greatest minds and the leaders of the world decided to come together and try to figure out what could be done to prevent war.
Many factors were looked at, economic causes of wars, political differences nationalism, all types of factors that could’ve led to or perhaps prevented the conflicts involved in World War I and World War II. So in the aftermath of World War II, many of the world leaders came together in a place called Bretton Woods in the United States.
So the GATT is part of the, the important agreements or one of the important agreements that came out of the, the horrible tragedy of World War II. And, once again as we can see, there was great destruction and Asia and Europe for the most part, were in shambles.
What we saw at the end of World War II and after these agreements were signed in an attempt to create a better system for the world to have peace.
So that’s another part of this connection between World War I, the Great Depression, and World War II. This will end part three of module two.
In which we’re asking, is globalization new? And what we’ll do next time is, we will look at the post World War II period and what happened as the world entered a new war, or type of war, the Cold War and the major superpowers that remained and how they interacted.
So we’ve been talking about after World War II, there was this major push on the part of world leaders to bring peace.
The United States and the Soviet Union remained, at that time, as the only major superpowers, and part of the exploration for peace.
During that period, many countries embraced, at different periods different views on what was the best economic system to ensure growth for their citizens.
In that period, the United States embracing more of a free market model.
So there was a major boom in the 1950s in the United States economy, and exports from the United States boomed as well.
There was a lot of pent-up demand on that part of the world (a period where the world got back to work and stopped fight at least for a little while for the most part).
If you wanted to buy something in this world in the 1950s, like a refrigerator or a car, you had a good chance that if you were buying it in the open market, it was from the United States.
So this actually lead to a period of somewhat overconfidence in the part of the United States.
Because by the 1960’s and 70’s European economies and the economies such as Japan were rapidly growing, and had private companies producing goods and services.
So this ends Part Four of Module Two, Is Globalization New? Next time, we’ll look at the 1980s as the beginning point of the major boom in today’s globalized world.
What I want to do now is look at another graph that shows the world and world exports, not just one country like the United States.
To see the growth that occurred or has occurred since World War II. If you look back in the post war period that began in late 1940s early 1950s, you see this period of very limited exports from across the world.
By the 1960s, as, as we said last time, we saw great growth across the world as European and Asian economies began to recover from the war.
We saw gross domestic or product, or GDP around the world continued to grow as well.
As you lower those tariff rates, you’re embracing other parts of the world, embracing their their products and services.
Average tariff rates across the world, on the part of developed countries, has decreased from 25% in the aftermath of World War II, to by the early late 80s and early 90s to about, to I guess that’s about 5%. And so this is very important in understanding where we are.
Do we continue to embrace policies that are more market oriented for example lower tar, tariff rates that encourage exports? Do we embrace openness, open borders? And what will be the impact of that? And they did in fact do that; by the early 1980s, the world embraced increasingly for the most part more market oriented policies.
Another thing that happened in the 1980s and 90s was the formalization of the agreements that were wrapped up in the GATT, the general agreement on trade and tariffs, which came out of World War II. Those agreements were formalized into an organization called the World Trade Organization, in which many countries in the world, including China, for example, formed part and agreed to, certain changes in their policies, ways of, conflict dispute resolution when disagreements occurred over, trade and trade rules.
When we talked about the 1950s, 60s and 70s, the increase in exports and imports and trade that we saw across the world, really was was focused in the developed or industrialized countries of the world.
Most of the trade that occurred in the 1960s and 70s was between the wealthier countries of the world.
What we’ve seen since the 1980s with this major boom in globalization, is the increased involvement of the developing or emerging economies in this globalized world.
Those countries have changed their policies in many places towards their openness in borders, in tariffs, in in cultural norms related to interacting with the rest of the world.
For example if we look at China, we see that China since the late 1980s, has experienced exponential growth in their percentage or share of world trade.
The Chinese economy went from being completely closed off from the rest of the world for the most part, to embracing very open trade policies.
So what we’re seeing in today’s globalized world is a major interaction on the part of more and more countries, even the growing or emerging or developing economies, which has great promise for continued world peace, hopefully for economic growth as countries continue to interact.
