Economic Globalization - History

History

International commodity markets, labor markets, and capital markets make up the economy and define economic globalization. Beginning as early as 4000 BC, people were trading livestock, tools, and other items as a means of money. People residing in Sumer, an early civilization in Mesopotamia, came up with a token system that was seen as one of the first forms of commodity money. Labor markets consist of workers, employers, wages, income, supply, and demand. Labor markets have been around as long as commodity markets. Labor markets grew out of commodity markets because labor was needed to grow the crops and tend to the livestock. The growth of commodity and labor markets grew into a capital market where companies and governments handle longstanding funds. The process of this blending of markets in the economy took thousands of years to become what it is today.

By the early 1900s, it was rare to come across a town that was not influenced by foreign markets—whether it be in labor, prices, or any other policy of business. With advances in ship building technology and the inventions of the railroad and telephone, communication with other parts of the country and world was readily available. Towns were no longer limited to what they alone could produce and what the next two towns over would trade with them. People everywhere had the accessibility and resources to obtain goods from the other side of the world. However, these great advances in economic globalization were disrupted by World War I. Most of the global economic powers constructed protectionist economic policies and introduced trade barriers that slowed economic growth to the eventual point of stagnation which can be seen as a precursor to the Great Depression in the late 1920s. This caused a slowing of world-wide trade and even led to other countries introducing immigration caps. Globalization of the economy didn’t fully resume until the 1970s. Today, advances in technology and computer networks, both as a way of sending and receiving information, have led to a worldwide globalization of the economy.

There are three suggested factors that accelerated economic globalization, and they are advancement of science and technology, market oriented economic reforms and finally contributions by multinational corporations.

A reduction of transportation and communication costs is what initiated globalization economies around the world, and this was possible mainly due to the advancement of science and technology. Ocean shipping costs half, airfreight costs 1/6th, and telecommunications costs 1% of what it did cost in the 1930s. This improvement has facilitated and encouraged international trade and investment. Under the GATT and WTO framework, many countries have cut down their tariff and non-tariff barriers. Along with this external influence, governments within its borders have shifted its economies from central planned economies to market economies. These internal reforms have provided commonalities among different world economies and thus helped integrate as a whole. multinational corporations that expand their businesses worldwide organize production and allocate resources all over the world. Not only are multinational corporations responsible for international financial transactions, but also for workforce distributions. By setting up branch offices, factories, and even outsourcing its services, MNCs are contributing to economic globalization.