The Pace of Globalization II

In his bestselling book “The World is Flat”, New York Times columnist Thomas L. Friedman - one of my favorite authors - analyzes globalization and divides it into three eras:

“Globalization 1.0 (1492 to 1800) shrank the world from a size large to a size medium, and the dynamic force in that era was countries globalizing for resources and imperial conquest. Globalization 2.0 (1800 to 2000) shrank the world from a size medium to a size small, and it was spearheaded by companies globalizing for markets and labor. Globalization 3.0 (which started around 2000) is shrinking the world from a size small to a size tiny and flattening the playing field at the same time. And while the dynamic force in Globalization 1.0 was countries globalizing and the dynamic force in Globalization 2.0 was companies globalizing, the dynamic force in Globalization 3.0 — the thing that gives it its unique character — is individuals and small groups globalizing.”

http://www.greaterdemocracy.org/archives/000359.html

Globalization 1.0 started when the European explorer Christopher Columbus discovered the North American continent in 1492; which encouraged legions of European explorers, conquerors and tradesmen to take foreign lands into possession, establish trade routes around the world and bring the goods of the New World to the Old World and conversely, export the European lifestyle and goods to the New World. The Dutch East India Company which was founded in 1602 became the first trading company selling stock and built up a trade monopoly with Southeast Asia. Globalization 1.0 was primarily about raw materials, spices and fruits traded for textiles and machines.

In this post , however, I primarily want to focus on Globalization 2.0. The era that lasted from 1800 to 2000.

Globalization 2.0 was mainly about multinational companies driving global integration. The Industrial Revolution sparked the second great era of globalization; mechanization and economic reforms in China kept it progressing throughout the 20th century.

18th century inventions such as the spinning machine and James Watt’s steam engine kicked of the Industrial Revolution in Europe. The unchallenged power of the British Empire (Pax Britannica) after the battles of Trafalgar and Waterloo in the early 19th century created an environment in which British enterprises could easily evolve and expand globally, having seemingly inexhaustible resources to tap in British colonies.

British hegemony increased after the Opium Wars with China between 1839 and 1860. In the meanwhile, the world’s first railway line started operations between Liverpool and Manchester.

The independent United States of America also started playing a more important role, even though America’s focus of attention was building up a powerful nation and managing the huge masses of immigrants from Europe. The Great Potato Famine in Ireland pushed the number of immigrants to the U.S. to levels never seen before. Amongst these immigrants were also plenty of savvy technicians, inventors and businessmen who regularly challenged the technological leadership of the Old World. In 1840 for instance, the first telegraph message was sent from Baltimore to Washington D.C.

The role of the United States diminished, however, during the Civil War between 1861 and 1865.

In 1869, the opening of the Suez Canal suddenly made the world smaller and the world economy bigger by making Asia - Europe shipping a lot faster and cheaper.

From the beginnings of civilization, the Chinese economy has been one of the biggest. In fact, “China has been the world’s largest economy for 18 of the past 20 centuries” according to the Financial Times; and “until the end of the 15th century, it also had the highest income per capita - and was the world’s technological leader” (as the The Economist reported). In 1820, China’s economy accounted for a stunning 33% of the world’s GDP.

-> http://en.wikipedia.org/wiki/Economic_history_of_china

Despite the sheer size of China’s economy, the Middle Kingdom had no aspirations to conquer further territories outside of its boundaries. After the Opium Wars, China was suppressed first by the British, later by the Eight-Nation Alliance.

The first real world power that rose in Asia was the Empire of Japan. The Meiji Restoration which occurred in the latter half of the 19th century transformed the Japanese empire into a major industrial and military power and expanded its sphere of influence throughout East Asia.

Towards the end of the 19th century, the innovations that enabled Western countries to mass produce steel efficiently led to mechanization and the electric age which turned the pre-WWI era into a time of innovations and spreading prosperity. The modernization of the economies and people, however, didn’t go down well with the old-fashioned monarchs in Europe. Extreme nationalism and the vanity of the European monarchs wreaked havoc on the stability and progress achieved in the preceding decades. World War I (1914 - 1918) pushed Europe off the world stage, leaving the field to the new world powers: the United States of America and the Soviet Union. A bipolar world replaced the Europe-centered world of the countless monarchies. Destruction, radicalization and short-sightedness caused one crisis after another. Since Europe decided to dump Wilson’s 14 Points that were aimed at establishing long-term peace among European nations, the United States lost interest in the Old World. In 1919, the Treaty of Versailles was signed - which the French Marshal Ferdinand Foch prophetically called an “armistice for 20 years” (remember, World War II started 20 years after the signing of the Treaty of Versailles) - and Europe began its fragile recovery.

When the Great Depression of the 1930s caused hardship around the world, Europe fell into chaos, America turned inward and world trade came to a halt.

It was only after World War II broke out in Europe as German, Austrian and Italian fascists attempted to take over the continent that the United States intervened again, brought an end to the Nazi regime and took an active role in founding a new platform for international peace and stability.

In 1945, the United Nations Organization was founded in San Francisco.

Yet what followed as tensions amongst the allied forces occupying Germany increased was the Cold War.

The Soviet Union and the United States of America started a long-lasting competition for military and economic power.

In the U.S., a period of strong economic growth set in, mass production of automobiles, home appliances and aircraft raised living standards as these luxuries became affordable for ordinary Americans. The mass media were shaping popular culture.

At the same time, European power virtually disappeared. The process of decolonization freed much of Asia, South America and Africa from Western suppression. The patchwork of tiny nations which Europe had been began to set aside some of its tensions. Though divided by the Iron Curtain, the continent recovered from the destruction of World War II, and at least the Western half of the continent went through the early phase of European integration. Trade ties between European states intensified and prosperity spread.

The beginning of the final third of the 20th century was marked by the Moon Landing in 1969 and major improvements in computing hardware. This was the dawn of the Information Age.

In 1979, Deng Xiaoping, the leader of the Chinese Communist Party, started far reaching economic reforms and eventually led China to a market economy. In my opinion, this event was the most important step towards today’s truly globalized world. Until 2000, globalization had been driven by European and American countries, corporations and individuals. With the rise of China and other developing nations, however, globalization has reached a wholly new dimension. World trade has become fairer and prosperity is spread more equally now than during the dominance of Western powers.

When in November 1989 (>>> read my post: 11/9: turning points , http://www.whatmattersweblog.com/2009/11/09/119-turning-points/ ) the Berlin Wall came down, the Cold War ended, formerly suppressed Soviet republics adopted the capitalist model and hundreds of millions of people joined the global workforce to compete for jobs, goods and prosperity.

In the 1990s, shortly before the turn of the millennium, the Internet was commercialized and first slowly, soon therefafter at the speed of light transformed our world and lay the foundation for globalization 3.0.