History of Economics and Globalisation International Trade

Question: Describe aHistory of Economics and Globalisation for International Trade. Answer: Introduction Globalisation is a rapid growth of interaction between different countries of the world. Currently, the concept of globalisation has changed the business scenario in the global market. It is important to note that globalisation has long historical roots that began with regional inter-trade rather than global inter-connection. Globalisation is the key factor that leads to the formation of the world economy by interlinking different nations together to join hand and support expansion of trade (Cassis, 2006). Hence, the history of economics and globalisation refers to various stages that lead to the current phase of globalisation in the world market. Few authors described the term globalisation as archaic globalisation or proto-globalisation to present the earlier phases of globalisation. This paper has used the term convergence to present the integration processes that lead to contemporary globalisation and unity of trade among different parts of the world. The paper primarily argues t hat the forces of convergence that brought people together were much weaker than the forces of divergence that isolated people from one another. Globalisation began with the overtaking power of the convergent forces that brought the various nations of the world together to work for a common benefit of expansion of trade. It is important to note that the contemporary globalisation and historical antecedents have evident different forms of convergence. Hence, to understand the historical events of globalisation, it is important to consider various economic factors that changed with the inter-connection of nations across the world. The free flow of goods and currencies among different economies were the major factor supporting globalisation and growth of world economy in the earlier phases. Furthermore, several other factors helped the growth of globalisation and global economy (Choueiri, 2005). The first primary factor was the political renaissance in the Western Countries that promoted trade to new lands from the Far East. The development of legal systems, regulatory bodies and institutions served the growth of globalisation and international trade by settling disputes among various nations have a long history. The second factor is the non-economic globalisation that started with a mixture of cultural beliefs and practices in various parts of the world (Knox, Agnew and McCarthy, 2003). Notably, this was the beginning of the global civil society that has a long historical root in the contemporary globalisation era. Another factor is the named as the biological factor that involves the movement of people from one nation to another in search of a better living. Hence, it can be seen that all these four factors namely the economic, socio-cultural, political and biological factors have led to the development of contemporary globalisation and formation of a world economy. The study discusses the beginning of globalisation and major incidents such as industrial revolution and the rise of the west. Along with that, the paper presents the four phases of formation of the world economy and various turning points in the history of globalisation (Michie and Grieve Smith, 2009). The turning points in the history of globalisation present the supporting factors and impacts of early globalisation on the world economy. Arguments and discussions The beginning of globalisation The actual beginning of globalisation has been a debatable issue among the modern historians and academic economists. Social scientists and practitioners have suggested different starting points for globalisation though no explicit consensus has existed on this regard. Through the identification of different economic factors associated with globalisation, academic disciplines are voted for shorter timeframes. On the other hand, the historians have argued that globalisation is a longer process to be identified (Ghosh, 2016). In order to determine the correct starting point of globalisation, numerous debates have been raised among the economists and proclivities in particular. Ideologically, Marxism and Eurocentrism have been recognised as significant starting points of the history of globalisation. However, many scholars have connected the discussion of globalisation to underdevelopment, the rise of the western culture and terms of internationalisation. Evidently, three of the most si gnificant historical events have been suggested as the starting points of globalisation as mentioned bellow. The Industrial Revolution in 1800 AD Western Maritime Expansion in 1500 AD The amalgamation of Asia in 1000 AD or before. Furthermore, some recent arguments must have been taken into consideration to understand the relevant starting point of globalisation. Legendary Thomas Friedman has vowed that in the early 1990s, the dawn of globalisation was triggered. In the larger context, the 21st century has been popular as the beginning of modern globalisation (Friedman, 2015). Moreover, significant concept, arguments and debates have been featured on this topic to understand the original opening points of globalisation. The economists, historians and scholars have divided into many parts in identifying the time of globalisation. Industrial Revolution By identifying the trends of the economy during the discussion of a previous couple of century, Friedman has got the significant company to show how the development of the Western world and culture has contributed to economys growth (Sommer, 2015). To show the valid events and economic prosperity in the past couple of centuries, Historical Statistics of the World Economy and other significant works of Angus Maddison have been taken into consideration. By the statistics, the GDP of Europe has been seemed to be increased by 563% whereas in the past three centuries the increase of growth was registered around 363% (Aldcroft and Maddison, 2011). Also, only in the nineteenth century, the GDP of the United States of America has been increased by over 4000%. Moreover, the contemporary global convergence in the last century or so has shown that both the British Industrial Revolution and American Industrial Revolution have been considered as the turning point of the world economy (Badinger, 2 013). Both the historical events have been pointed out that the nineteenth century has been the game changer for a massive transformation of global economic status. Rise of the West The economists and historians have always shown an enormous respect towards the Industrial Revolution in accelerating the global economy. At the same time, some of the scholars and social scientists have provided significant evidence to prove that the global convergence was initiated way before the Industrial Revolution (Hargreaves Heap, 2016). By pointing out different metrics of events related to global convergence, the scholars have identified critical shift of globalisation around 1500 during the period of Western Maritime Revolution. The Iberian-led revolution connected the social, cultural and business mindset of Europe, Asia and some of the African countries with the American counterparts (Maddison, 2016). As a result of the consequences, a massive cultural change had been taken place to shift the circle of globalisation breaking geographical barriers. As of now, many of social scientists and modern scholars have identified the era of 1500 to be the turning point in globalisat ion. Such thoughtful transformation of knowledge and resources has given birth to modern globalisation process that has been continued since the era of 1500 (Cooper and Maddison, 2011). Through the identification of distinct evidence, international relationship build-ups can be seen during 1500 to 1800. Thus, the rise of the Western community can be marked as one of the turning points of modern globalisation and economic sustainability. Making a World Economy (Four Stages) Phase I: Mercantilist Restriction (1492 to 1820) The discovery voyages generated the transfer of animals, technology, plants and diseases on a high scale that was never evident earlier. The period of 1492 to 1820 was the mere beginning of globalisation that joined few countries together to promote trade and exchange of wealth. But, the period of da Gama and Columbus that promoted international trade is considered as a different concept than that of globalisation. This period was not considered as a globalisation era because it did not impact any of the economic factors but merely discovered new routes of international trade (Tomory, 2016). There was no evidence of price union or change in national GDP in both the nations. It was merely a monopoly trading mark-ups with no decline in trade barriers or global integration. The period ended up with increase in the income of European nations through invasion in the Eastern countries. It can be seen that the period of 1492 to 1820 brought forward various channels of trade that opened a path for globalisation. Though this period is not considered as a globalisation phase because of no changes in the economic factors, the discovery of new trade channels lead to a beginning of internationalisation in the first global century (Marshall, 2010). The phase started with high restriction on mercantilist movement and ended up with a mercantilist revolution in the western countries. Hence, this stage can be considered as a light over the path of globalisation and world economy. It is considered as a beginning of world economy that changed the concept of people to trade outside the geographical boundaries. Phase II: The First Global Century (1820 to 1913) The period of 1820 to 1913 resulted in a transportation revolution in the global economy that was named as watershed in the global evolution. The period evident a price convergence in the international commodity that named it as a watershed (Szostak, 2012). An epochal and powerful move towards liberal policy has been noticed in the period that manifested during the decade. Along with that, the period of 1820 to 1913 saw an agricultural depression in England and a peacetime revival from the Napoleon wars. Hence, this phase is considered as the beginning of the modern globalisation in the world economy. The fall in the transportation costs has been evident in this century prior to the First World War. The globalisation forces were quite powerful in the Atlantic Region, but were partially balanced due to the rising tide of protection. It can be seen that the fall in the price of transportation accounted to two-third in the commodity market between 1820 and 1870. Further downturn has been evident in the four decades after the 1870. Some parts of Asia, North Africa, Eastern Mediterranean and Latin America become colonies of free traders because of powerful gunboats and political influence (Howson, 2013). The joining of the Third World had shaken the price in the global economy that fired the process of globalisation in search of competitive policies. Hence, it can be seen that the world wide transport revolution and liberal take apart of mercantilism joined together to produce a global market. Along with that, this period also evident the mass migration of people from one part of the w orld to another in search of better living or due to enforcement of the government (Solomon, 2009). Along with that, the European investors found new prospects over the seas that brought up the concept of global capital market in demand. Phase III: Beating an Autarkic Retreat (1912 to 1950) The world economy fell apart since 1913 due to the interwar decades. The globalised world was dismantled through policies. This era did not evaporate the benefits of communication and transportation. It leads to increased policy barriers that created several problems for global trade (Holvino, 2014). Along with that, the new policy barriers restricted flee of poor population to another place in search of better living. Hence, it can be seen that the USA population for migrants feel from 14.6 percent to 6.9 percent after 1913. Along with that, the higher tariffs and barriers throttle off the benefits of global trade. Hence, different new policy barriers were the major diverging factors during the period of 1912 to 1950. This period divided the world into different groups due to the World Wars that highly impacted the global trade. Hence, a slow upward movement in the globalisation process can be evident from this period (Rockoff, 2011). Along with that, the new disincentives have resulted in reduced investment on new technologies across the globe. A fall in the foreign capital flow can be evident from 3.3 percent to 1.2 percent during this period. Hence, the interwar among the countries led to anti-global policies that led to financial downturn in the world economy. Phase IV: The Second Global Century (1950 to 2001) The fourth phase is known as the second global century that made the world economy evident an extreme globalisation in trade and economic policies. The concept of actual globalisation began after the Second World War and the development of technology with innovative ideas brought the world together to trade as a joined market (McLure, 2014). The migration factor was less impressive during this phase and globalisation process was enforced through different trade policies of international governing bodies. During this period, the European countries faced a downfall in their global power and the United States of America emerged to be a sole global power with its innovative ideas and globalisation policies. Hence, a turn in the globalisation process can be evident during this stage. Previously, the capital export percentage of GDP of the USA was smaller as compared to Britain before this stage. The US had a capital export percentage of 1.2 percent whereas Britain had a percentage of 4.6 percent to be precise (Hirsch, 2011). The scenario changed with the growing globalisation and by the end of 2001, the USA emerged to be the global power. Furthermore, a decline in trade barriers can be evident due to new channels and medium of trade. The cost of international trade gradually decreased during the phase, promoting international business and exposure to market leader. Turning points Global trading and internationalisation have opened up conventional business liberalisation to utilise the global platform as a business market. Understandably, the turnaround of globalisation has been initiated so much early though in the twenty-first century has seen the best of it. The process of globalisation has been influenced by significant elements and factors to change the tradition terms of trade (Warburg, 2006). The identified turning points in the event of globalisation and international trade have been presented as follows. The rise of contemporary United States of America as the worlds leading economy: the wage widening procedure of America has provided the urgent, energetic resources to go beyond the borders to increase the sources of globalisation. The trade-liberalising policies and the US outsourcing strategies have increased the demand of skilled labours within the industry. As a result of the consequences, globalisation of workforce can be seen. Also, the modern technological advancement in the Western and European countries has increased the demand of globalisation to strengthen the economic condition. The shift of technology in the US has created a massive boost in the industrial development. Such boldest attempts have generated historical globalisation procedure in an unexplained way (Efaw, 2013). Moreover, changes in globalisation patterns have been seemed to be increased as the US economy has become the largest economy at the economic centre stage at the global world by the nineteenth centur y. Massive Migration across the globe: Many of the social scientists and scholars have identified massive migration from the third world as one of the most sustainable turning points for globalisation. Since the beginning of global capitalism system, due to massive migration, cultural changes have been noticed among different economies around the globe. Hence, the superiority of the Western culture has been confirmed (Taylor, 2015). The links of globalisation have remained intact by focusing on learning from different cultures and borrow from other societies around the world. Primarily, the industrial revolution and trade demonstration have prompted massive migration from east to west resulting in globalisation. Inequality among the modern economies: The wage-inequity has prompted globalisation of workforce from different parts of the world. Since the dawn of globalisation, skilled labours have seemed to be shifted from different parts of the world to the industrial place. Along with that, the Industrial Revolution has opened up new channels and target markets for different economies in the Europe and the USA to be utilised at the global business front. Due to inequality in the economies, globalisation has become a part of modern development perspective. Conclusion The identification of economic history and globalisation has been a debatable concept since the last couple of centuries. The scale economies and industrial linkage effects have demonstrated significant propositions in support of globalisation. Modern economies of the countries such as the United States of America, Great Britain, China and other developed countries have come a long way to promote globalisation. The convergence of economies has resulted in the convergence of level of income. Understandably, agglomeration resources of distinct economies have delivered standard frameworks to support international trade and globalisation. In connection with the past, significant historical events such as the amalgamation of Asia, the Industrial Revolution and Iberian-led revolution in the West have led the foundation of modern globalisation. Due to development in infrastructure and technology, some of the business locations have established themselves as the hub of global industry. The traditional neo-classical business framework of modern global economies has prompted many other countries to go beyond geographical borders securing international trade. 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