When Did Globalization Start?

There is a fierce debate among scholars about when exactly globalization began. In the most general sense, globalization refers to the increasing integration of economies around the world. This heightened integration is the result of the movement of goods, services, and capital across borders, in addition to the movement of people and knowledge across international borders.

Economic globalization is a historical process driven by the dual forces of innovation and technology. Some argue that globalization as a phenomenon began with the earliest human migratory routes, or with Genghis Khan's invasions, or travel across the Silk Road. Conquering empires throughout history resulted in the sharing of ideas, mixing of cultures and people, and trade across those conquered lands.

The First Trading Networks

Some place the beginning of globalization at the Age of Exploration, when Europeans in the 1400s set sail across the Atlantic for shorter spice routes to China and India. Many mark the voyages of Christopher Columbus and other sea-faring captains for opening up commercial trade routes across the world as the beginning of globalization.

Other scholars view globalization as a far more contemporary occurrence. Many see it in its current form as a modern phenomenon, beginning no earlier than World War II. The term itself has been in common use since the 1980s.

Determining the start of globalization can also vary due to the different meanings of the word. It can be used as both a description and a political ideology; the latter is frequently used in a critical sense. Globalization is also used as a synonym for the continual creep of American dominance throughout the world.

Regardless of the differing definitions, at its core, globalization is the exchange of ideas, capital, and goods across the world. It is driven by new and developing technology, whether that technology is ships or the Internet.

Globalization and the Gold Standard

Many historians believe that the first wave of globalization began with the gold standard in the 1800s. Even though at the time there was mass trade across the Atlantic, chartered trading companies, and the slave industry, there was still no global price convergence .

Gold had been used as currency for thousands of years, with the value of those gold coins equal to the value of the gold that made them. It wasn't until the 1800s that England started fixing the value of its currency to specified amounts of gold.

Eventually, many countries followed suit or pegged their currencies to countries that followed the gold standard. Gold, therefore, became the international standard currency and could be bought or sold at a fixed price.

Globalization in the 20th Century

After World War II, many countries attempted to break down trade barriers, promote free trade, and set up global organizations. The Bretton Woods Conference in 1944 created the World Bank and the International Monetary Fund (IMF).

One view states that globalization cannot be backdated before the late 1940s—the post-war era when the United States established itself as the economic powerhouse of the world. In the latter half of the century, intergovernmental agreements like NAFTA and organizations like the World Trade Organization worked to reduce trading barriers between countries and facilitate a more uniform global market.

This definition of globalization argues that it is largely the work of powerful multinational corporations that have created a far-ranging set of consequences, both positive and negative, as they spread across the world. The unprecedented ease of travel around the globe and the development of modern communications are used to support this view of globalization.

Other scholars claim that the century-long trend toward globalization was reversed by the mid-20th century, citing the collapse of the international economy during the Great Depression, which created a fragmented global economy that persisted through World War II. According to Anne O. Krueger, former first deputy managing director of the IMF, by 1960, globalization and the degree of integration of the world economy was considerably less than it had been fifty years before.

Globalization Today

This trend has reversed again in the 21st century, an era of unprecedented global integration. Changes in technology and international economic policies have reduced many barriers to the free flow of goods, services, and capital.

Transport and communications costs have significantly dropped; at the same time, there have also been reductions in tariffs (and other barriers to international trade) that have opened up the global economy.

Labor costs have made goods produced in countries with very low labor costs, such as India and China, competitive in advanced economies such as the U.S. and Northern Europe. This has also led to the groundswell of labor looking to migrate to countries with higher wage rate scales. Many economists expect this issue to dominate the economic and political landscape for the next several decades.

The opening up of the global economy has led to an overall increase in international economic activity; consequently, the importance of international trade in the world economy has increased as well.

In addition to more market-friendly policies and an acceleration of economic growth, a second major evolution in the forces of globalization occurred as a result of a range of countries becoming more significant economic forces in the international economy. Many of these are Asian countries. In the middle of the 20th century, the United States was the primary economic force in the international economy. In the 21st century, however, the European Union (EU), Japan, China, and India all have global significance and impact. Many economists predicted that their importance will become even greater in the coming decades.

The Bottom Line

Many scholars argue that parts of the world have always influenced other parts and that the current state of affairs is a natural progression from earlier stages. The exchange of ideas and trade has, in one form or another, existed as long as humanity has existed.

The beginnings of modern globalization can be traced to different points in the 19th and 20th centuries, from the creation of the gold standard to the global integration of financial markets. In all instances, however, the rise of globalization was made possible by the creation and development of new technology.