Economy

A Short History of Globalisation

Globalisation can be best defined as the amalgamation of a nation’s economy with other economies around the world, thereby bringing about global integration. As Marx and Engels stated in the Communist Manifesto, it brought about universal interdependence of nations. It is quite fascinating to note that international trade occurred as early as 1295, recorded by Marco Polo. He facilitated the silk trade between Europe and the East, bringing about developments in the trade of specialised goods. Since Marco Polo, scholars have come up with many accounts on globalisation.

An interesting theory by Janet Abu-Lughod dates the birth of globalisation to the thirteenth century. She described the emergence of a genuine world system, focusing on contact between parts of the Old World during 1250–1350. She discussed the transformation of the world market during the era. A capturing observation by Robertson is that the seeds of globalisation were sown in the fifteenth century. According to him, globalisation consisted of four stages, with each stage depicting a historical perspective. Globalisation was identified as a primary organising factor of the world growth rate by Angus Madison. Despite many theories regarding the origin of globalisation, scholars consider globalisation to have taken its shape in the nineteenth century. In my opinion, the real birth of globalisation occurred during this period.

World trade grew at an impressive rate of 3.5% per year post 1800s. In the nineteenth century, Europe eliminated export taxes and prohibitions. In 1824, Freedom of Emigration was granted to the workers. This increased the mobility of human capital. Globalisation was promoted here too, as citizens from one country could settle in another for work. Most importantly, there emerged a sort of free-trade movement in Europe during the 1850s with Netherlands removing the tariff on ship imports and Belgium adopting free trade policies. The initiation of reciprocal trade treaties between France, Germany, Italy, and Britain was another contributor to globalisation. This naturally provided greater scope for free trade movements between the countries. It is interesting to note that China and England had successfully established a robust interdependent relationship by this time, with China relying on Britain for cotton and woollen goods, and Britain importing tea from China.

Critical catalysts of globalisation such as the telephone, steam engine, electricity, telegraphy, and ironclad ships were invented in the nineteenth century. Intercontinental transportation and communication became simpler and cheap, thereby aiding trade. The construction of the Suez Canal in 1869 improved connectivity between Europe and Asia using steamships. Great technological improvements helped to decrease price and increase trade between Asia and Europe. It is interesting to note that European international trade grew at an impressive rate of 16.1% a year between 1830 and 1870. The growth of the European colonial empires reduced trade barriers and intercontinental trade was promoted.

The decrease in freight rates during this period led to the migration of about 60 million Europeans to the New World in the mid-nineteenth century. This led to an increase in the working population in America and an increase in labour productivity, thereby affecting the GDP positively. There was no evidence of intercontinental price convergence until the 19th century. Hence, there was vast price difference between countries. The huge price gaps between regions necessitated the initiation of price convergence. This was a result of the international demand and supply shifts. These shifts reflect a change in the import and export requirements.

The underlying appeal of globalisation is closely related to imperialism. After reading several reports, one realises that the British indulged in imperialism with the aim of increasing foreign trade and to fulfil their domestic requirements by exploiting the colonised countries. In the 1850s, the Mogul Empire, under which the East India Company functioned, fell. This created a sort of instability and power vacuum in India which the English seized quickly. They exploited India’s natural resources, including gold and other precious metals. The Navigation Acts of the colonial era ensured that the control of trade in the colonies remained in the hands of the British who dominated the world market at the time. England could decide what was to be exported or imported, and it governed trade routes and market conditions.

The World Wars too significantly contributed to the birth of globalisation. After the war several peace treaties were signed by great powers, while the transport revolution was taking place simultaneously. This led to the integration of the world economy, owing to technological advancements and the economic policies. The concept of globalisation gives real meaning to the theory of comparative advantage. To conclude, globalisation did make a remarkable breakthrough in the nineteenth century, owing to factors such as imperialism, free trade, colonialism, peace treaties, World Wars, new inventions, and price convergence among others. Although many scholars call the year 1492, when Christopher Columbus found America, as the year of the globalisation big bang, I strongly believe it was the 1800s when it took its pure form. Globalisation has helped increase cooperation between countries, thereby increasing competition and improving the quality of human capital. It has dramatically helped uplift countries, by uplifting the technological, educational and medical sectors, and it will only continue to do so.

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