Globalisation has been a phenomenon affecting world business and economy since Columbus and Da Gama started their voyages from the Mediterranean and the Cape of Good Hope. It is a part of world history, in the conduct of world trade and commerce, including political practices of nation-states. Globalisation is inherent to life while transmigration is a human characteristic.
Globalisation has gained attention and momentum these past decades due to the advent of high technology and effective means of communication. There are many other areas of interest that can be talked about when it comes to globalisation because this is a subject that covers various areas of discipline.
This paper will delve on economic globalisation and will conduct analysis of various researches and studies in this area. More particularly the paper covers globalisation in the late 19th century and in the early 21st century, and a comparison of the impact of innovations during these periods.
Dissertation includes different ideas and opinions of authors and scholars from several nationalities. I discuss studies and researches of American and European scholars as well as incorporating some ideas from Russian perspectives. By studying various literature, whether in printed material or from the web, I found that the more I acquired knowledge, the more my ideas became complex. Therefore I found that it is not possible to come up with an exact definition of globalisation. And most scholars agree with this point that there is no universally accepted definition of globalisation. The entire concept should be explained and understood. Thus, I will introduce variety of definitions and explanations of globalization from different academics rather than trying to produce my own definition.
Historically, globalisation began to influence man’s activities since voyagers started to find routes for commerce and trade. Political power was one of the ambitious considerations to go global. After the series of discoveries of lands and routes, from the Mediterranean and around the Cape of Good Hope, globalisation spread like wild fire, and influenced every activity of man.
Synonymous terms emerged such as internationalization, liberalization, competitiveness amongst businesses, and so forth. Communism and capitalism are two of the ideologies that shape how we perceive globalisation. The Russians, after the collapse of communism, view globalisation differently from the way authors of capitalist orientation look at it.
Globalisation is important in the understanding the development of economic and social systems in the world and the impacts on the overall human development. For instance, the integration of individual countries economies to the global economy has affected migration, trade balances and the uptake of technology by several countries.To get a clear understanding on the rise and spread of capitalism and communism ideologies, there is great need to have an insightful view of globalisation.
This topic is also imperative in figuring out the positive and negative impacts of globalisation in the developed and third world countries. The role of the innovations in perpetuating the impacts will be discussed with the aim of linking them to rapid development in western societies than in the eastern economies. The rapid spread of globalisation in the western societies has resulted in massive trade imbalances favouring the western economies.
This study is important for a clear understanding of how globalisation has been affected by the innovations in the last three centuries. This study will offer a comparative analysis of the impacts of innovations to the society and the international community. The topic is also imperative since it offers an in-depth review of the occurrences in the last three centuries with the aim of linking modernity and the past influences.
The dissertation will follow the following plan:
Chapter one will cover the introduction, context and the importance of the study.
Chapter two reviews the literature and outcome while the discussion of the results will be covered in chapter three.
Chapter four covers the conclusion and suggestions for future work.
In the historical perspective, globalisation started just after a series of discoveries of lands and routes leading to improvement and widening of commerce, trade, and political influences amongst people of the more civilized world. Wells (2003, p. 5) states that some historians point to the voyages of Christopher Columbus in 1492 and Vasco da Gama in 1498 as globalisation’s “big bang” because they made major and most noticeable till now discoveries of new lands and routes. As soon as routes were discovered, trade between countries started to grow rapidly. This trade was conducted by continents or big countries at the time, much different from trade conducted before the early land discoveries of Columbus and Vasco da Gama.
These events later led to the initiation of trade that was driven by the arrival of voyages in the farthest tip of the African continent, Cape of Good Hope. The voyages reached the eastern seas before finding their way through the Pacific Ocean and eventually accomplishing the mission of going round the globe. When the Old and the New Worlds met, globalization began. The concept was new but the practical application already started to be experienced by people conducting commerce and trade.
Although there is no empirical evidence on when exactly this economic globalization began, historians universally agree that it started in the 19th. Bairoch (2000) said that this was the “first phase of globalization” that “began as early as the second half of the 19th century and was completed with the beginning of the First World War” (p. 198).
From 1914 to 1944, the world was in a period of rapid economic de-globalisation. The era initiated and finished with World War II, combined with a global wave of anti-trade protectionism which goal was to cover nations from wide recurring economic recession. (Wells, 2003, p. 7)
But the present phase of globalisation is not clear among researchers. Some researchers, Bairoch states, point to either mid-1970s or the beginning of the 1980s. “For those emphasizing the generalization of the capitalist system, dating globalism is easier and prefers a later date: the collapse of Communism in the USSR and Eastern European countries, in other words, in 1989” (Bairoch, p. 198).
Russian scholars regard globalisation as a process which began in the last quarter of the 20th century as a result of a qualitative shift in the technological basis of humankind’s existence, one which marks the beginning of a transition to a postindustrial, information society. They speak of globalisation not as a world-historic process, but as developments that have been taking place recently, at imperialism’s highest point, in the political, economic and other spheres. They do not define globalization as a world event but as a way of ideology’s furtherance. (Rozanova, 2003, p. 650)
Nevertheless, an exact date is not important for this paper rather than the actual fact that we are currently in the era of the second phase of globalization, the era where globalization covers so many aspects that makes it a very difficult concept to understand. Thus, in the next section I will try to explain this concept by introducing definitions of globalization from the perspective of different academics.
There are conflicting ideas and concepts related to globalisation, while at the same time, there are positive and negative connotations and outcomes of globalisation; thus I am providing various definitions from different authors in this particular discipline. In the words of Bartelson (2000, p. 181), “Understanding the ambiguity of the concept of globalisation is crucial to understanding the emergence of globalisation as a fact. Yet this requires that we adopt an attitude to concepts slightly different from the underwriting practices of definition within the social sciences.”
First of all it is important to clearly see the difference between globalism, globalisation, and de-globalisation. Harvard professors Robert Keohane and Joseph Nye help to understand this difference (Wells, 2003, p. 1).
Globalism “is a state of the world involving networks of interdependence at multi-continental distances. These networks can be linked through flows and influences of capital and goods, information and ideas, people and force, as well as environmentally and biologically relevant substances” (Wells, 2003, p. 2).
Globalisation and de-globalisation can be explained in their positive and negative connotations – they represent an increase and decrease of globalism, respectively. Globalisation is believed to be the main driver in more complete globalism that interlinks all regions of the world. A more advanced globalism results in interconnectedness particularly of the various regions hence integrating the society (Wells, 2003, p. 3).
Now, after knowing what the terms explained above stand for, we can look at the various definitions by European, American and Russian academics.
Ideological interpretations of globalisation view it as “a process of cultural standardization in which a global media reinforces sameness and homogeneity around predominantly American models” (Giusta et al., 2006, p. xiii).
Another definition is by Giddens (1990, as cited in Giusta et al, 2006, p. xiii) who coined the term time-space distantiation, which refers to technological progress which “the friction of space has been overcome to accommodate social interaction.” Time and distance have been reduced by globalization through the emergence of the internet. Giddens (1990, p. 64, cited in Raab et al, 2008, p. 597) defines globalisation as “the intensification of world-wide social relations which link distant localities in such a way that local happenings are shaped by events occurring many miles away and vice versa.” This is stating the existence of the global world which can be interpreted as the virtual world.
Held (1999, p. 2, as cited in Giusta, p. xiii) described globalisation as the “widening, deepening and speeding up of worldwide interconnectedness in all aspects of contemporary social life, from the cultural, the financial, to the spiritual.”
McGrew (2000, p. 347) emphasizes that globalisation is a “worldwide connectivity and the deepening enmeshment of societies in a web of flows of capital labour, ideas, images, weapons, criminal activity and pollution” (Giusta et al, 2006, p. xiii).
Theorists like Held (2000, p. 55, cited in Raab et al., 2008, p. 597) and his colleagues conceptualize globalisation as “a process (or set of processes) which embodies a transformation in the spatial organization of social relations and transactions – assessed in terms of their extensity, intensity, velocity and impact – generating transcontinental or interregional flows and networks of activity, interaction, and the exercise of power.”
Robertson (1992) went deeper into analyzing globalisation and found that there are two main aspects of it which are “world compression and the intensification of global consciousness” (Giusta, 2006, p. xiii). World compression implies that the way we live our lives has immediate implications for people on the other side of the globe, while global consciousness is highlighted when we speak in terms of world order, international recessions and global biodiversity.
Kagarlitski and Dugin (Kagarlitski, 2001, cited in Rozanova, 2003, p. 51), who define globalisation in the context of the Russian experience, believe that “the very term globalisation, just like most other terms coined by the modern information media, is ambiguous, profoundly demagogical and fundamentally misleading.”
According to the Russian definition, globalisation “is an expression of the capitalist view because it attempts to impart objective character to reflect the positions of transnational corporations, which are trying to solidify their dominant position” (Rozanova, 2003, p. 51). Rozanova (2003, p. 650) supports the claim that “the concept of self-determination, and political self-determination in particular, is the key instrument in the analysis of Russia’s role and place in the globalizing world.”
Definitions of globalisation according to Russian scholars are influenced by the communist experience, and the subsequent collapse of communism in the USSR and Eastern European countries in 1989.
Some of the recent notions of this controversial term are as follows:
- “Contemporary business ideology pictures globalisation as a galloping homogenization of the world in which all now participate on equal terms” (Connell, 2007, p. 12). Globalisation widens the playing field for organisations and businesses.
- “Globalisation is the integration of the political, economic and cultural activities of geographically and/or nationally separated people; it is not a discernible event of challenge, is not new, but is accelerating.” (Wells, 2003, p. 2).
- Economists define it as the “international economic integration that can be pursued through policies of ‘openness’, the liberalization of trade, investment and finance, leading to an ‘open economy’” (Van Der Bly, 2005, p. 875).
After analyzing these definitions it can be clearly seen that globalisation has been perceived by different authors from various perspectives. These definitions of globalisation mainly differentiate by the areas they are specified on, such as cultural, economic, social, political or others. But if we will look at them closer we can note that all these definitions have something in common – they all have words “global” or “worldwide”. They all imply the fact of worldwide integration in one sense or another. This is why there is a phrase global village. Many authors and scholars would like to express it as saying that the world is now living in a global village, narrowed down or has been made small (but limitless) by the interconnectedness of things because of computers, the internet or the World Wide Web. Communication and the conduct of business can now be made possible to anyone anywhere for as long as he/she has a computer. Hence, the term worldwide integration is key for understanding concept of globalisation. It can be concluded that due to the fact that globalisation covers so many areas from socio-cultural to economic and political, it cannot be brought under one definition. Therefore to understand globalisation it is relevant to look at several definitions that we already did above.
As was mentioned in the above part of the paper globalisation covers many aspects. Therefore to make this paper more specific I would like to focus on only one – economic globalisation.
Globalisation is seen or perceived by many authors and scientists as economically orientated. Globalisation points to the economic environment of a particular place, or the world in general. Economic globalisation has been affected and shaped by many factors: technological innovations, new inventions, modern ideologies or ‘isms’, or what might be called innovations of ideologies.
Globalisation is characterized by economic interdependence of countries, transactions that ignore geographic borders, and “rapid and widespread diffusion of technology” (Citrin and Fischer, 2000, p. 19).
Bożyk (2006) briefly explains what economic globalisation is:
“Globalisation of the world economy denotes a process based on the formation of a single market for goods, services and factors of production, including capital, labour, technology and natural resources, covering all countries and economic regions. From a theoretical point of view, globalisation means an unlimited access to these markets for all interested businesses regardless of country of origin and economic region” (p. 1).
19th Century Globalisation
Before moving to analysis of innovations that took place in the 19th century economic globalization I would like to describe a bit the nature of globalization in this particular time.
Nineteenth century globalization has reference to what Milanovic (2003) called the “Atlantic economy”. Milanovic (2003, p 55) says that ‘Colonialism, pillage, and slavery became a part of globalisation much more important than migration of Irish peasants to the United States, or the voluntary transfer of British funds to Argentina.’
There were different economic perspectives in Europe and the New World during the 19th century: Europe was labour-abundant and land scarce, while the New World was labour-scarce and land-abundant. Therefore wages were low in Europe and high in the New World, at the same time land rent was high in Europe and low in the New World.
Williamson (1995, cited in O’Rourke, 2000, p. 45) said that during this time international real wage converged, meaning that European wages were catching up with the rest of New World wages. Unskilled New World workers were deteriorating, which meant that there was increasing inequality.
O’Rourke (2000, p. 45) argues:
“Between 1870 and 1913 the ratio of unskilled wages to GDP per capita declined at an annual rate of 1.22% in Australia, and 1.45% in the United States in a manner sharply reminiscent of the rising inequality levels which have been experienced recently throughout the OECD.”
In other parts of the world land prices increased tremendously – 400% in Australia between 1870 and 1910, and by over 250% in the United States, but there were subsequent drops in France, Sweden and Britain, by over 50%.
Overall, 19th century globalization refers to the exchange of goods, migration, and capital flows between Western Europe and Northern America that had implications to real wage convergence, increasing inequality and changes in land prices.
19th Century Innovations
Giving brief understanding of the nature of globalization in 19th century I would like to move to the analysis of the innovations in this period. In this section I will identify, describe and sometimes critique innovations and their effects on globalization that took place in the 19th century.
Steam ships and steam locomotives
The invention of steam engines made way for the generation of power useful in the industrial period. Of particular note, is the impact it had on the productivity of the industries in the United Kingdom. The application of steam engines in transport vessels such as boats and trains boosted the transportation of people and economic commodities. Although most industries relied on other forms of transport, the invention had significant improvements in the productivity and the technology. The efficiency in transportation opened up Europe thereby allowing the movement of technocrats from the European powers to their conquered territories. The instability in Europe ensured workers and raw materials had to be transported from the one part of Europe to another.
Crafts (2004) asserted that the overall effect of steam power in the economies was delayed by 40 years until 1930 when effective engines gained extensive application in steamships. The contribution to the labour productivity was estimated at 0.3-0.4 percentage points in the first 20 years of its usage. However, during this period, transatlantic trade was boosted by the introduction of large steam powered ships. The transport network boosted trade between several countries and also led into immigration of labourers to take up employment in the expanding industries particularly in North America..
Information sharing between several companies was enhanced paving way for speedy improvements and innovations of new commodities and cost effective measures. Steam powered locomotives ensured that raw materials reached their destinations in the urban centre where the industries were located. Steam locomotives and ships impacted greatly on the level of urbanisation by enhancing the transport of commodities, raw materials and human resources into the industrial hubs which later developed to major cities and towns in the United States (Kim, 2005, p.586).
More importantly, steam ships and locomotives had great impact in the development of improved economic theoretical frameworks about production and distribution of consumer goods. This was reflected in the global stage through the speedy spread of the economic theories based on Marxism and capitalism. Another impact was observed in the Great Britain where financial transactions became very fast thus boosting the way business was carried out between Britain, other European countries and its colonies in the South America region (Heilbroner, 2000). The sharing and extensive spread of production factors and some aspects of market functioning was also achieved thereby ushering in an era where economic growth in regional economies was enhanced and integrated.
Telegraph cables and railroads were built to bring the world closer and to accelerate the transfer of goods. In Cuba, the main producer of sugar, railroads were built before any existed in Italy or Holland (Bairoch, 1997, vol. 2, p. 574, cited in Milanovic, 2003, p 57).
The telegraph network became instrumental in global communication during the late 19th century. Communication between Europe and America was enhanced resulting in timely passage of news and the subsequent development in the news industry in the United States of America (John, 1995, p. 38). Imperialism and militarism also benefited from the invention through the telegraph. In particular, Great Britain became a super power based on its potential and advancements in communications (Bairoch, 1997, vol. 2, p. 567-578, cited in Milanovic, 2003, p 57).
Foreign capital flowed from the capital-rich England and France to the lands capital-poor, yet rich in opportunities, such as Argentina and Russia. (Milanovic, 2003, p. 57). Business transactions across the Atlantic Ocean could be completed in lesser time than it was earlier when physical contact of the participants was required for an effective business transaction to occur. The observed efficiency in the communication network was imperative in propelling the economic integration between the Americas, Europe and parts of Asia.
International trade became prevalent in the early 19th century particularly in Europe due to its first experience with the industrial revolution. Most of the European economies were reliant on raw materials imported from foreign markets while they exported their products to far flung countries. It is estimated that the world tonnage through ships increased by more than five times with highs of 30 million tonnes recorded compared to 4 million recorded in 18th century. The increased production in the agricultural and industrial sector was instrumental in influencing growth in commerce. For instance, the exportation of raw cotton to United States market recorded an unprecedented growth due to the rise in mechanisation particularly of textile production in Europe. Buoyed by the improvements in rail transport and steam ships, the industrialised nations became more engaged with each other while the producing countries became integrated in the markets through colonisation by the large European countries. India became more engaged with the European markets especially with Great Britain. Despite the domination of trade in cotton industry by Britain, India started enjoying foreign capital from other European countries thus leading to the development of cotton plantations and eventually infrastructure (Bansal & Bansal, 1983)..
Coal and iron mining increased substantially due to the effect the improved technology from Europe and the availability of skilled and unskilled labour from the other continents. The improvements in transport infrastructure meant that mining fields in Texas and Wyoming were opened up thereby resulting in the upsurge of mining activities in the United States. Wool industry was more prominent in the European markets with Germany and Britain acting as the lead exporters. In Prussia, the textile industry formed almost three quarters of the non –agrarian production. Wool production accounted for more than 37 % of the volume produced in the country. The German production relied mainly with exports due to obstacles in the home markets that hindered trade within. On the other hand, Britain exported their products to the Latin market thereby extending their technological advancements in the newly acquired territories. The interaction between the German and British factories resulted in the invention of more improved technologies.
Labour migration became a norm particularly during the supremacy battles that rocked Europe in the early and mid 19th century. The expansion of territorial boundaries through wars always required massive infrastructural investment. This prompted the influx of technocrats from Russia, Prussia, France and Italy into new acquired territories. This enhanced the expansion of European industries which was complemented by steam powered transport vessels and telegraph (Chossudovsky, 2003).
International trade was an earlier version of outsourcing since the technocrats were destined to provide technical labour that boosted production. This invention helped in the spread and distribution of specialised labour in the European countries thus resulting in the integration of technologies resulting in better improvements in the long run. International trade also resulted in the spread and integration of different ways of managing economies in these regions. This invention ensured savings due to cut on costs of labour and productivity in institutions and factories (Chossudovsky, 2003).
The exportation of technological advancements occurred between America and Europe thereby necessitating improvements in industries and factories while efficient forms of machinery were devised to replace the old ones used in extraction of raw materials. The number of immigrants was quadruple that of the slaves especially in mid 19th century. Chiswick and Hatton (2003, p.68), noted that more than 170, 000 immigrants entered America in the 19th century thereby bringing a lot of technological know how that spurred industrialisation in the country.
Mass immigration was driven by the high land labour ratio that was lacking in Europe. The workers were therefore assured of earning higher wages than their Europe and Australia.
Multinational corporations are mainly those businesses that have their influence in business operations in more than one country, either acting through subsidiaries or parent company. They are more concerned more on economic gains with much of the profits benefiting the country of origin. Multinationals are generally referred as among the earliest agents of civilisations. They played an important role particularly during the colonisation period. For instance, the creation of the British east India Company was an instrumental vessel that helped spread the British agenda to the Far East and opened those markets to the world.
The multinational corporations created in Europe in the 19th century provided massive trade opportunities that resulted in the improvement in productivity in Europe and Germany (Chiswick. & Hatton, 2003). This resulted in mergers and collaboration between several multinationals (Nicholas, 1998). The cooperation between the multinationals and subsidiaries resulted in unprecedented economic growth and development.
The relative peace in Europe especially at the end of the 19th century provided the much needed conducive environment for business. The informal and informal cooperation among the multinationals was responsible for the increased trade between Europe and other continents. Massive drop in trade barriers, the utilisation of currencies in the colonies and more effort in ensuring property rights in Europe were protected were among the factors that led to the increased economic globalisation in the 19th century (Mitchener & Weidnenmier, 2007). This enhanced the activities of multinationals thereby resulting in improved productivity between the countries.
20-21st Centuries Globalization
Globalisation in the 20th and early 21st century was mainly as a result of the expansion of the multinationals especially in Europe and North America. Several innovations were also evident with significant development in technology and science that resulted in production in a wide variety of commodities. The invention of the jet plane and the television in mid 20th century improved transport and communication networks. The creation of global networks through the invention of world wide network has greatly improved the outsourcing and e-commerce (Eltschinger, 2007, p. 2).
The internet is the single most important invention that is driving up the globalisation, with most economic activities such as banking, transport and communications finding application in it. Furthermore, mass media and television have resulted in the exportation of western cultural practices into other societies (Osterhammel & Petersson, 2005, p.8).
Development in key sectors such as telecommunications, transport and human resource management have impacted greatly in modern day globalisation. The containerisation, internet and the outsourcing have shaped the economic, social and political developments in the last few decades. The developments continue to propel the economies and provide more opportunities for globalisation that have positive and negative implications to the integrated economies (Eltschinger, 2007, p. 2-6).
Innovations in the 20-21st Centuries
The introduction of containerization in shipping products from one port to another is one of the greatest innovations in the twentieth century that has benefitted a number of industries and economies of nations. It made transfer of products faster, easier and safer. Subsequently, it had tremendous effect on the globalization in this period.
The technological revolution started with the era of containerization when Malcom McLean experimented in 1956 by loading truck-trailer vans by cranes on the deck of the ship named Ideal X. McLean had premised that total distribution costs could be reduced only by a streamlining of the entire distribution process. Thus detachable container vans were lifted from their chassis and stowed on the board ship.
Products are well secured inside the container which, upon arrival, would be moved onto a truck for delivery to the consignee. The process reduced costs, theft, and damage, and also provided savings in packaging, and resulted in more reliable service.
McLean’s original concept incorporated both containerization and intermodalism, and the experiment was so successful that it is usually taken to mark the real beginning of the container revolution. After that first voyage, another tanker was outfitted to carry containers, and plans were finalized to convert six regular dry-cargo ships to full containerships with on-board cranes for self-loading and unloading.
By mid-1958, Pan Atlantic was offering scheduled containership service between Newark and Puerto Rico, and then between Newark and Houston with intermediate port calls at Jacksonville and Miami. In 1960, Pan Atlantic changed to Sea-Land Service, which then began operating containerships between Newark and Long Beach-Oakland by way of the Panama Canal, using converted tankers that could carry 476 containers. Other navigational companies followed suit by experimenting on containerization after much research on ways to reduce cargo-handling costs. (Transportation Research Board Special Report 236, 1992, pp. 17-18)
This innovation has diffused between economies and industries with incredible speed allowing international trade for most of goods to move to another stage – faster, safer and cheaper. This had subsequent impact on the economic growth of the nations. But the major fact of our interest is that it remarkably had a significant effect on the economic globalization in the 20th century.
The Internet or the World Wide Web
The internet plays a major role in economic globalization. This is one of marvels of invention that has revolutionized communication. Most businesses and organisations employ the internet or the World Wide Web as a tool for conducting business or communicating with their branches wherever these maybe. With just a computer connected to the internet, anybody can connect to anyone in any part of the globe. Any organisation can construct its own website where customers can browse or communicate, ask questions, or interact with the organisation. Customers can purchase products and services through the firm’s website. The website acts as the organisation’s window to the world.
There is a question of national border which is not so clear when it comes to laws or codes of countries around the world. Goodwin (1974: 100, cited in Halavais, 2000, p. 8) defines national border as “an imaginary boundary tied strictly to geographical territory in which a state’s sovereignty may be exercised.” Global firms handle many branches but geographic consideration is different now. “It is the characteristics of globalization rather than the territorial dimension that makes a difference” (Sussland, 2000, p. 2).
Theodore Levitt says that “technological, social, and economic developments over the last two decades have combined to create a unified world marketplace in which companies must capture global-scale economies to remain competitive” (Bartlett and Ghoshal, 2002, p. 6). Through the internet, the company can employ other means and innovations to remain competitive. Among them is outsourcing which is explained in the following discussion.
These aspects that internet brought to the communication transformed our world into a different place. Some facts described above already point towards the effect internet had on the globalization. As was defined previously, one of the notions of economic globalisation is unlimited access to the markets for all interested businesses regardless of country of origin and economic region. Therefore, most importantly to note is that the internet made this access dramatically easier, cheaper and simpler than ever before, fostering economic globalization in the 20th century.
Outsourcing of products and services allow firms to use services of other firms, even if the outsourcing company is from other country. For example, automakers Toyota or GM outsource their products from China and India. This innovation saves time and cost. Moreover, it makes world economies more globalized and the fact that businesses from different countries are easily using each other services and even outsource some of the their manufacturing processes explains this.
Outsourcing is another trend amongst industries of the latter part of the 20th century, and up to the present time. It has revolutionized processes in the workplace, provided tools and valuable data and information to managers and employees, shortened workloads, and has done many things of great importance to businesses and organizations. In the 19th century, this was hardly possible to conduct because there was no internet, or communication was not yet fully developed. The telegraph was still in its infancy.
Eltschinger (2007, p. 2) says, “The progress made in the past 100 years is staggering: modern air connections ferry passengers from Beijing to New York in just over 13 hours; documents zip back and forth across the world in seconds; whole libraries of information can be searched in moments.” Additionally, the advancements in communication and the internet make it very easy to connect with people in the other side of the globe. The global age is here and will continue to dominate men’s activities – businesses for that matter – for many years ahead, centuries perhaps, with more and more industries emerging everyday as a result of new tools, innovations, and inventions made by man. Because of these advances, changes, innovations, or development, new industries are formed.
Outsourcing is defined as “the transfer of a commercial function to an outside service provider, subject to the customer’s retained authority and responsibility to third parties and shareholders for continued success of the customer organization” (Springsteel et al., 2004, p. 58). Almost every major player of any industry today uses outsourcing. Since the 1960s, the United States has been using outsourcing. American car makers such as Ford and GM used this to be more competitive with Japanese car manufacturers. They would source car parts, for example carburettors, from specialty sub-contractors.
Japanese counterparts also use the same method. Toyota and other car manufacturers outsourced their car parts from outside sources as an operational strategy to lower the cost of manufacturing. These companies have been successful in outsourcing; their finished products are mostly composed of outsourced products or components from their own valued suppliers (Lynch, 2008, p. 765-767).
Global companies use outsourcing to minimize costs and time in production. Outsourcing is not limited to one or a few countries. Many countries, especially the developing ones, are “implementing proactive strategies to attract jobs and industries. U.S. companies are encouraged to move work offshore because of the direct incentives these governments offer as part of their national industry strategy.” (Hira et al., 2008, p. 167)
Outsourcing involves servicing clients or companies whose customers ask information about products and product warranties. These companies use call centres stationed in Asia, and operators reply to clients’ call. Companies in the United States and other European countries also outsource supplies from China and other developing countries.
One disadvantage is with the present economic downturn in the United States and all throughout the world, unemployment is aggravated by this process of outsourcing, although this refers only to buyer countries. This is no answer to mass layoff of employees of many businesses.
To sum up, outsourcing by revolutionizing processes in the workplace, shortening workloads, saving time and costs has played an important role in emerging industries and world economies. Hence, this innovation to full extent had a significant effect on the development of economic globalization in this period.
Regional Integration (multinational organizations)
Integration is a territorially restricted form of globalisation, while globalisation is a spontaneous process that has not been programmed institutionally by countries subject to mechanisms regulating the functioning of the world economy. (Bożyk, 2006, p. 2)
Over the past half-century, transnational organizations have been founded to oversee global business activity and promote growth and stability in the global economy. These institutions have generally encouraged freer trade, FDI cross-border financial flows and other programs and policies to encourage participation in the global economy.
In the 19th century globalisation, there were no such groupings, but in the twentieth century up to the present, remarkable innovations came in the form of multilateral organizations: the World Trade Organization (WTO), the International Monetary Fund (IMF), and the World Bank Group. These institutional groupings were introduced after World War II to help economies of nations, or the world economy in general.
The International Monetary Fund was founded in Bretton Woods to stabilize the international monetary system. It functioned as a specialized agency within the United Nations system. By 2003, membership grew to 182 countries, each of which was obliged to contribute to the IMF quota. By 2003, the IMF’s total quotas topped $290 billion” (O’Connor, 2004, p. 281).
The World Bank Group is a multinational development organization, also founded at the Bretton Woods Conference in 1944. The International Bank for Reconstruction and Development (IBRD) is an organization under the World Bank Group whose initial goal was to help rebuild war-torn Europe which was ravaged by World War II. Today, the World Bank Group consists of five mutually supporting development institutions, and its financial resources come from the sale of securities in global financial markets, interest payments on past loans, and contributions from donor countries.
Due to the nature of the activities of these organizations, they had a great impact on the economic globalization in the 20th century. The WTO had a dramatic effect on the increase in international trade; the IMF has contributed to global economic integration in terms of converging monetary policies; the World Bank through various types of support and development policies significantly promoted participation of the countries in the global economy. All of these resulted in a much faster pace of economic globalization in this particular period of time.
Discussion / Analysis
Comparison of the 19th Century and 20th-21st Century Innovations
The 19th century witnessed the innovation of the telegraph, international trade, multinational businesses and steam ships and locomotives which were important in driving the industries. During the 20th and early 21st century, internet, regional integration, outsourcing and containerization have proved effective in modern day economy and globalisation. The innovations had great impacts in shaping globalisations in different ways.
The steam ships and locomotives provided the needed speed and efficiency in the transport of labour and raw materials particularly in Europe. The efficacy of the rail roads ensured speedy transportation of people and commodities around Europe. Crafts (2003) asserted that the impact of the steam engines was not immediately felt until the invention of efficient steam engines that found applications in steamships and industries. Increased productivity in labour and transportation of people and commodities was recorded in Europe during that period (Crafts, 2003). Significant drop in the transport costs due to this invention ensured faster integration of economies particularly in Europe thereby resulting in faster exchange of products. For instance, shipping costs from Europe to New York fell from 17 % to 4% of the total value of the shipment. The invention of steam ships and the eventual opening up of the Suez Canal also spurred the growth in international trade. Globalisation was evident when variation of wheat prices between Chicago and Liverpool in Britain fell from a high of 57.6 % to lows of 15.6%.
On the other hand, containerization has effectively transformed transportation in modern times leading to rapid transport of products resulting in high growth and development in the world. The duration of shipping commodities has greatly reduced compared to the era of steam ships. While both provided a platform of rapid transportation, the containers has perfected the act thus revolutionalising trade in the world. The use of technology in loading, computerisations and faster means has led to increased globalisation in the 20th and 21st century. The adoption and transportation of mechanised labour has also occurred through containerisation (. (Transportation Research Board Special Report 236, 1992, pp. 17-18).
The telegraph was the earliest form of communication that connected the global community. The invention allowed free flow of information between Europe and America without generally relying on newspapers. It saved time required to access information thus contributed greatly in globalisation.
British utilised the telegraph in business undertakings with its partners thereby becoming a major trade partner with several countries including its expansive colonies. Enhanced globalisation through cultural exchange occurred in Europe and America. Winston (1998, p.19-30) asserted that the developments in telegraphy were paramount in promoting trade across the Atlantic Ocean. Overall, economic and social development was greatly influenced by the telegraph.
The invention of internet in 1950’s and its improvements in subsequent years is the greatest technological advancement in the telecommunication sector that has single handedly transformed the way businesses are run. The customisation of information communication technologies applications have increased the speed of carrying out businesses. According to Sussland (2000, p.12), the internet has dismantled geographical boundaries thereby promoting exchange of information across the globe. Ecommerce and social networking have also increased over the years thus helping in cultural exchange and efficient business transactions.
Increased growth in the Australian exports was observed between 1985
and 1996 due to the improvement in technology communication and transportation networks as shown in table 1. Likewise, an upward trend was also observed in the trade volumes between Venezuela with her neighbours as shown in graph 2.
Globalisation has increased under during the eras of telegraph and internet due to the massive and holistic aspect of the telecommunication channels. Nevertheless, internet provides an important but insecure way of conducting ecommerce. Internet protection is therefore recommended in order to safeguard the privacy of the websites. Hackers and spammers have taken advantage of the
high utilisation of internet thereby distributing malicious malwares and cookies that may result in the damage of computers or loss of vital data.
Multinational businesses were the earliest form of regional integration. The multinational corporations provided a platform for increased trade due to the expansion of markets. Their expansion to new markets particularly in other continents not only resulted in increased profits but also enhanced diversification and sharing of technology with the foreign markets.
According to Chiswick & Hatton (2003), economic regulation practised by several countries affected the penetration of multinationals in these markets.
For instance, it was difficult for British multinationals to make leeway in German market due to the protectionist policies put in place by the government. That notwithstanding, the free atmosphere of executing business was pivotal thus leading to the proliferation of German products in Europe. Free movement of labour in Germany and Europe also contributed to globalization (Flandreau & Maurel, 2005, p.132).
Alliances between several multinationals ensured that economic activities and regulation could be applied in large scale thereby benefiting the citizens in these countries. For instance, the alliance between Russia, Prussia and Austria in early 19th century resulted in cohesiveness that ensured peace prevailed in Europe (Chiswick & Hatton, 2003). Financial resources were availed for reconstruction of destroyed towns during the supremacy wars involving the great powers in early 19th century.
The transfer of technology and manpower led to increased globalisation that put Europe ahead of the other continents in trade and strength of the economy. The World Bank has also been instrumental in transfer of technology through the provision of technocrats and development aid to the developing countries. Infrastructural development and monetary regulation has led to stabilisation in world economies. However, the Bretton Woods have also imposed unfavourable economic policies that have resulted in catastrophic implications for receiving countries. The structural adjustment policies curtailed the effective delivery of essential services to the masses particularly in Africa and Asia.
Lal (2004, p.125-154), asserted that multinational corporations was a form of progressive force that provided competition necessary for economic and political stability. Multinational corporations were imperative in the initiation and development of an open world economy (Ferguson, 2009, p.89). The cooperation enhanced international trade and the movement of labour across borders and continents considered the earlier advancements in transport networks. The expansion of the railroads boosted transport of raw materials in Europe while at the same time ensuring products reached consumers in time..
Regional integration and multinational corporations provided the greatest influence on world trade and globalisation. The reconstruction agendas after supremacy battles in Europe and Second World War provided foundation for greater cooperation and cohesiveness in the world economy (Bożyk, 2006, p. 12).
Business process outsourcing and international trade provided cheap labour to industries and multinationals in the face of decreasing profits. The proliferation of technocrats and technology in America resulted in exponential growth of the industrial sector paving way for the development of American economy. Outsourcing is the latest frontier invention that is being fuelled by the advancements in the internet and telecommunications. The utilisation of cheaper labour in India and other Far East countries has led to massive savings for the western multinationals.
Outsourcing of operational services and accessories is imperative in remaining competitive in the market. The involvement of Asia in outsourcing has led to increased globalisation through the opening up of the Asia subcontinent to investments and the interaction of human labour. Slavery and outsourcing have the same effect on the economies whereby increased productivity is achieved with minimal expenses incurred.
Nevertheless, both led to negative consequences particularly in the countries they were practised. International trade was associated with suffering that cost many lives and left thousands disabled. Mistreatment of workers particularly immigrants and lack of provision of basic amenities was common in America. Outsourcing is believed to result in job cuts in the country of origin of the parent organisation (Lynch, 2008, p. 765-767)
The impacts of regional integration, multinational businesses, outsourcing, internet and containerisation on globalisation have been felt in the last three centuries. The inventions in the 19th century did not result in much globalisation as witnessed in the 20th and 21st century.
Economically, proponents of globalisation expect it to increase growth, decrease inequality and poverty across people and countries. Politically, socially and culturally, they hope that it will decrease differences, reduce xenophobia and lead to a global consciousness where the nation state is no longer the main unit of identity for individuals. Opponents of globalization or those who oppose it for ideological reasons, argue that the socioeconomic costs of globalization are too high and the benefits are inequitably distributed. Politically, they claim that globalization has simply acted as a vehicle for American hegemony, and to a handful of powerful transnational corporations.
We still have to see whether the innovations brought about by globalization have benefited man, or that all these changes can bring him prosperity and glory. Many have noted that in this era of globalization, of fast-paced communication, computers and the internet, the poor have become poorer and the rich richer.
We have to be aware of the various challenges to globalization, such as the exploitation of human and natural resources by transnational corporations. Environmental degradation is one of the abuses that can result to a more severe climate change and global warming as a result of globalization.
One of the ill effects of globalisation is convergence of wages of wealth from one area of the globe to a single or concentrated area. In the early years of economic globalisation, international wages converged. Furthermore, there was increasing inequality as regards skilled labour.
With continuous technological innovations, globalisation will be improved or modified any moment or any time. Every second or every minute of our existence, we witness technological breakthroughs, and these breakthroughs seem to become ordinary course of events.
Recently, we witness the recent Apple announcement of Mr. Steve Jobs on the introduction of the ipad in their new line of electronic products. Probably, Microsoft will introduce another state-of-the art mobile communication equipment. Mobile commerce has been introduced to us years ago, but now this could be further enhanced.
The question now is: Will tomorrow bring us more surprises of exciting new inventions? Or will this turn the global world to its near end?
Some authors and church scholars have commented that in this era of globalisation, of fast-paced communication, computers, the internet and the information revolution, the poor have tremendously lagged behind where before their usual preoccupation was to look for something to eat, now they are more left because of the digital divide that has been created out of these new revolutions.
Globalisation will continually be influenced by the ever changing telecommunication technology. Quantitative analysis on the effects of technological innovations should be carried out to ascertain the overall impact to globalisation. Studies on the implications of globalisation in the social, political and economic aspects should be encouraged.
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