New Concept, Old Reality

• Author: Harold James

New Concept, Old Reality Finance & Development, December 2016, Vol. 53, No. 4

Harold James

Globalization is a recent term, but the internationalization of markets, people, ideas, and cultures is nothing new

Globalization triggers odd responses. Although almost everyone who thinks about it today agrees that a revolt against globalization is underway, many consider the fundamental process both inevitable and irreversible.

Is that true? A look back through history helps us understand the dynamics of revolts against globalization—the movement of money, goods, people, ideas, technologies, and cultures across frontiers.

The term globalization—in its modern meaning—was coined in the 1970s to describe the internationalization of markets, especially financial ones, after the oil price increases of the decade, but it reflects a much older reality. The recent period of globalization that seemed ascendant, at least until the global financial crisis, is but one of many such periods—and reversals—that dot human history.

The global financial crisis taught us that it is misleading—and dangerous—to rely on the analysis of economic “trends” derived simply by extrapolating a short data period. We don’t know how unusual or exceptional those data are. We’re also not aware of the complex nature of global interconnection. The shock of the unexpected crisis thus produced a new interest in looking at patterns derived from much longer time periods. Those older and longer patterns can highlight vulnerabilities that help us discover how we should adjust the institutional framework to make globalization more stable, less dangerous—and more just.

Past globalizationDescribing the very dynamic global trade of the second half of the 19th and the early 20th centuries is now a standard part of economic historians’ repertoire (O’Rourke and Williamson, 1999). But that era was far from the only episode of globalization. Archaeological evidence points to the global reach of trade during the Roman Empire, when Roman coins were traded as far from the Eternal City as the coastal regions of Sri Lanka and Vietnam. There were numerous subsequent expansions of global trade and finance. During many of them, ideas from classical antiquity and from the Roman age of globalization (and global rule) were revived, as in the economic rebound of the late 15th and early 16th centuries (the economic backdrop to the Renaissance) or the 18th century, during which improved technology and increased ease of communication opened the way for global empires (for Britain and France).

Technology and globalization are intimately related: we could even describe the phenomenon as “technobalization.” The worldwide interconnection of the 19th century was driven by the steam engine. In railroad locomotives, steam engines opened up new continents and allowed farmers to produce agricultural staples for markets far from home. The steamship then linked continents, and a dramatic decrease in transportation costs spurred market integration. The coordination of transportation required unified information, and the telegraph—which was able to span oceans in 1865, when the first stable transatlantic cable was laid—could relay the information that markets needed to know.

Thanks to communication technology—in this case the spread of print and the newspaper—people were also able to find out more about other countries and compare the harsh realities they experienced in their daily struggle for existence with a mythical El Dorado of abundance and happiness. They were prepared to take on tremendous hardships to make precarious voyages. With a note of realism, they often thought that the promised land might not materialize for them, but was a real possibility for their children.

Safety valvesBut migration is more than a search for a better life by individuals. More broadly, it can act as valve to release social pressure in the countries migrants leave. Migration was an answer to problems brought about by technological changes—as well as by trade processes—that made whole...