The historical origins of globalization (also known as historical globalization) are the subject of ongoing debate. Though many scholars situate the origins of globalization in the modern era (around the 19th century), others regard it as a phenomenon with a long history, dating back thousands of years (a concept known as archaic globalization). The period in the history of globalization roughly spanning the years between 1600 and 1800 is in turn known as the proto-globalization.
Periodization Thomas L. Friedman divides the history of globalization into three periods: Globalization 1.0 (1492–1800), Globalization 2.0 (1800–2000) and Globalization 3.0 (2000–present). He states that Globalization 1.0 involved the globalization of countries, Globalization 2.0 involved the globalization of companies and Globalization 3.0 involves the globalization of individuals.Thomas L Friedman, "It's a Flat World, After All", New York Times Magazine, Apr 3, 2005
Klaus Schwab, founder and Executive Chairman of the World Economic Forum, Richard Baldwin and Philippe Martin have divided the history of globalization into four eras: Globalization 1.0 was before World War I, Globalization 2.0 was after World War II "[when] trade in goods was combined with complementary domestic policies", Globalization 3.0, for which other terms in use have included "New Globalization", hyperglobalization, the "global value chain revolution", and the period of offshoring, refers to a more recent period of change in global economic relationships, and Globalization 4.0 to current (2018 onwards) changes affecting services in particular.Schwab, K., Grappling with Globalization 4.0, published 5 November 2018, accessed 12 February 2023Baldwin, R., If this is Globalization 4.0, what were the other three?, World Economic Forum, published 22 December 2018, accessed 12 February 2023
Archaic globalization
Perhaps the extreme proponent of a deep historical origin for globalization was Andre Gunder Frank, an economist associated with dependency theory. Frank argued that a form of globalization has been in existence since the rise of trade links between Sumer and the Indus Valley civilization in the third millennium BC.Andre Gunder Frank, "Reorient: Global economy in the Asian age" U.C. Berkeley Press, 1998. Critics of this idea contend that it rests upon an over-broad definition of globalization.
Even as early as the Prehistoric period, the roots of modern globalization could be found. Territorial expansion by our ancestors to all five continents was a critical component in establishing globalization. The development of agriculture furthered globalization by converting the vast majority of the world's population into a settled lifestyle. However, globalization failed to accelerate due to lack of long-distance interaction and technology. The contemporary process of globalization likely occurred around the middle of the 19th century as increased capital and labor mobility coupled with decreased transport costs led to a smaller world.
An early form of globalized economics and culture, known as archaic globalization, existed during the Hellenistic Age, when commercialized urban centers were focused around the axis of Greek culture over a wide range that stretched from India to Spain, with such cities as Alexandria, Athens, and Antioch at its center. Trade was widespread during that period, and it is the first time the idea of a cosmopolitan culture (from Greek "Cosmopolis", meaning "world city") emerged. Others have perceived an early form of globalization in the trade links between the Roman Empire, the Parthian Empire, and the Han Dynasty. The increasing articulation of commercial links between these powers inspired the development of the Silk Road, which started in western China, reached the boundaries of the Parthian empire, and continued onwards towards Rome.
The Islamic Golden Age was also an important early stage of globalization, when Jewish and Muslim traders and explorers established a sustained economy across the Old World resulting in a globalization of crops, trade, knowledge and technology. Globally significant crops such as sugar and cotton became widely cultivated across the Muslim world in this period, while the necessity of learning Arabic and completing the Hajj created a cosmopolitan culture.John M. Hobson (2004), The Eastern Origins of Western Civilisation, pp. 29–30, Cambridge University Press, .
The advent of the Mongol Empire, though destabilizing to the commercial centers of the Middle East and China, greatly facilitated travel along the Silk Road. This permitted travelers and missionaries such as Marco Polo to journey successfully (and profitably) from one end of Eurasia to the other. The Pax Mongolica of the thirteenth century had several other notable globalizing effects. It witnessed the creation of the first international postal service, as well as the rapid transmission of epidemic diseases such as bubonic plague across the newly unified regions of Central Asia.Jack Weatherford, Genghis Khan and the Making of the Modern World, Crown, 2004 These pre-modern phases of global or hemispheric exchange are sometimes known as archaic globalization. Up to the sixteenth century, however, even the largest systems of international exchange were limited to the Old World.
Proto-globalization
Proto-globalization was characterized by the rise of maritime European empires, in the 15th, 16th and 17th centuries, first the Portuguese and Spanish Empires, and later the Dutch, British and French Empires. In the 17th century, globalization became also a private business phenomenon when chartered companies like British East India Company (founded in 1600), often described as the first multinational corporation, as well as the Dutch East India Company (founded in 1602) were established.
The Age of Discovery brought a broad change in globalization, being the first period in which Eurasia and Africa engaged in substantial cultural, material and biologic exchange with the New World. It began in the late 15th century, when the two Kingdoms of the Iberian Peninsula – Portugal and Castile – sent the first exploratory voyages around the Cape of Good Hope and to the Americas, "discovered" in 1492 by Christopher Columbus. Shortly before the turn of the 16th century, Portuguese started establishing trading posts (factories) from Africa to Asia and Brazil, to deal with the trade of local products like slaves, gold, spices and timber, introducing an international business center under a royal monopoly, the House of India.House of India, Encyclopædia Britannica.
Global integration continued with the European colonization of the Americas initiating the Columbian Exchange,Crosby, Alfred W., "The Columbian exchange: biological and cultural consequences of 1492", Greenwood Publishing Group, the enormous widespread exchange of plants, animals, foods, human populations (including slaves), communicable diseases, and culture between the Eastern and Western hemispheres. It was one of the most significant global events concerning ecology, agriculture, and culture in history. New crops that had come from the Americas via the European seafarers in the 16th century significantly contributed to the world's population growth."The Columbian Exchange ". The University of North Carolina.
Modern globalization
The 19th century witnessed the advent of globalization approaching its modern form. Industrialization allowed cheap production of household items using economies of scale, while rapid population growth created sustained demand for commodities. Globalization in this period was decisively shaped by nineteenth-century imperialism. After the First and Second Opium Wars, which opened up China to foreign trade, and the completion of the British conquest of India, the vast populations of these regions became ready consumers of European exports. It was in this period that areas of sub-Saharan Africa and the Pacific islands were incorporated into the world system. Meanwhile, the conquest of parts of the globe, notably sub-Saharan Africa, by Europeans yielded valuable natural resources such as rubber, diamonds and coal and helped fuel trade and investment between the European imperial powers, their colonies, and the United States.
Between the globalization in the 19th and 20th centuries, there are significant differences. There are two main points on which the differences can be seen. One point is the global trade in these centuries as well as the capital, investment and the economy.
Global trade
The global trade in the 20th century shows a higher share of trade in merchant production, a growth of the trade in services and the rise of production and trade by multinational firms. The production of merchant goods in the 20th century largely decreased from the levels seen in the 19th century. However, the amount of merchant goods that were produced for the merchandise trade grew. The trade in services also grew more important in the 20th compared to the 19th century. The last point that distinguishes the global trade in the 19th century compared to the global trade in the 20th century, is the extent of multinational cooperation. In the 20th century, you can see a "quantum leap" in multinational cooperation compared to the 19th century. Before the 20th century began, there were just Portfolio investment, but no trade-related or production-relation Direct investment.
Commercial integration has improved since the last century, barriers that inhibit trade are lower and transport costs have decreased. Multinational trade contracts and agreements have been signed, like the General Agreement on Tariffs and Trade (GATT), North American Free Trade Agreement (NAFTA), the European Union (EU) has been hugely involved in eliminating tariffs between member states, and the World Trade Organization. From 1890 and up to World War I instability in trade was a problem, but in the post war period there has mostly been economic expansion which leads to stability. Nations have to take care of their own products; they have to make sure that foreign goods do not suffocate their domestic products causing unemployment and maybe social instability. Technological changes have caused lower transporting costs; it takes just a few hours to transport goods between continents to-day, instead of weeks or even months in the nineteenth century.
By considering financial crises, one key difference is the monetary regime. In the 19th century it occurred under the fixed exchange rates of the gold standard. But in the 20th century it took place in a regime of managed flexibility. Furthermore, in the 19th century countries had developed effective lenders of last resort, but the same was not true at the periphery and countries there suffered the consequences. A century later there was a domestic safety net in most emerging countries so that banking panics were changed into situations where the debts of an insolvent banking system were taken over by the government. The recovery from banking crisis is another key difference. It has tended to begin earlier in the recent period than in the typical crisis episode a hundred years ago. In the 19th century there were no international rescue packages available to emerging economies. But in the recent period such rescues were a typical component of the financial landscape all over the world.
The flows information were an important downside in 19th century. Prior to the Transatlantic cable and the Radiotelephone, it used to take very long for information to go from one place to another. So this means that it was very difficult to analyze the information. For instance, it was not so easy to distinguish good and bad credits. Therefore, the information asymmetry played a very important role in international investments. The railway bonds serve as a great example.