What is globalization: how goods and people move across an ever-smaller world

Today, mentioning ‘globalization’ is a bittersweet experience. On the one hand, we all intuitively understand that we wouldn’t have access to cheap consumer goods, varied and exotic cultural items, or faraway vacation spots without it. On the other, we’ve all heard of, or seen, the economic hardship it can bring on communities as jobs and opportunities are exported to the lowest bidder.

Image via Pixabay.

But one thing most people will agree on is that globalization is a new thing, relatively speaking. Something that’s really only started taking root in the last couple of decades or so. Granted, some of the most visible elements of globalization (such as job outsourcing or the abundance of international trade) have been creeping up since the 1990s after the collapse of the Soviet bloc and its internal market. And, credit where credit is due: the process of globalization definitely did pick up steam all over the world in the last two to three decades.

The earliest steps of this process, however, have been around for much longer — thousands of years already. And, lucky you, we’re going to go through all of it here.

The basics

‘Globalization’, in general, refers to the process of individual groups, countries, or companies becoming integrated into a global whole, with all the upsides and downsides that entails. The term is most commonly used to refer to economic globalization, i.e. the integration of local markets or economies into the global one. However, one can argue that the process is in no way limited to money or jobs; the flow of data and information around the world is a major facet of globalization. As a non-American, I can also attest to how efficient entities like Coca-Cola and Hollywood were (and sometimes still are) in globalizing American culture, as well.

Still, the concept is closely intertwined with that of trade. One way to define trade is as an exchange of goods, services, or money between two or more parties. Another way to define it, one that’s a bit more useful for us right now, is that trade involves a good or service being produced in one place and consumed or used in another.

Demand — for raw materials, consumer goods, experiences, or services — is what fuels globalization. Practically speaking, not everything is available, can be produced, or can be produced for an affordable price in a single place. But everyone, everywhere, wants as high a standard of living as possible — so things need to be moved around, sometimes across the world.

And here we see what opposes globalization, the force that acts as its brakes: technology. Or rather, the lack of it. Our ability to quickly and reliably take one item from one place to another, whether it’s consumer goods, information, or whatever else is desired, acts as a hard cap on the process of globalization. Arguably, this is what kept trade local for most of human history, and what prevented globalization processes for the most part until the industrial era.

Now that we have a basic idea of what it is and why it appears, let’s take a look at how.

The stages of globalization

A souk or bazaar in Bern, Switzerland. Image via Pixabay.

In general, the process of globalization is separated into individual ‘stages’ to make it easier to conceptualize. Now, do be advised that while there is actual science being done on globalization, the stages we’ll be discussing right now are more ‘teaching aides’ than ‘rigorously defined concepts’. They can and will vary depending on your source, and where the focus of the discussion falls. Typically, however, most models include 3 to 5 stages of globalization.

One approach analyzes it through the relationship between where a given good (or service, etc, you know the drill) is produced, and where it is consumed. In this model, there are four distinct phases of globalization:

  • Phase 1 is what we’d consider hunter-gatherer societies. Here, demand or consumption (people that need to eat) follow production (natural resources of food that can be exploited).
  • Phase 2 are early agrarian societies. Here, production (farming) follows demand (people), but trade remains confined to relatively narrow areas due to difficulties in moving goods around.
  • Phase 3 started with the early industrialization of the 19th century. Mechanical energy made it economically viable to transport goods over large distances, so it became economically viable to consume items produced far away.
  • Phase 4, in which we currently live, involves the fracturing of the production process across different areas of the world to reduce costs. This only became possible due to very reliable shipping technology and safe trade lanes, as well as computers to keep everything delivered on time.

This 4-step model is the most commonly used, but I personally prefer the 5-step model, with a ‘Phase 2.5’ thrown in — more on that in a bit.

For now, however, these models provide an important tidbit of wisdom. While the particular ways societies or individual actors react to globalization can have good or bad outcomes for us personally, our communities, or our countries, the process itself isn’t willingly driven by any one of us. No government or cabal of central banks came together and decided the world was going to globalize. The process is the natural and quite obvious product of human nature and human ability: we all want stuff, and while we’re over here, some of the stuff we want is over there. Once we become able to go and carry it back, we’ll start trading with the people there in order to satisfy our needs.

Eventually, if you scale this process up, trade networks become global. Given enough time and reliability, new industries spring up that are completely dependent on these trade networks to survive (either by importing necessities such as raw materials and knowledge or for exporting their product).

Once that happens, a single ship can wipe out billions in trade value in just a few days. Image taken on 11 November 2009, via Wikimedia.

Most of us here today, probably all of us, live in societies that are more or less integrated into the global markets. That’s why you’re reading this article (written in Europe) on a device whose code was written in the US, with chipsets manufactured in Vietnam or some other South-Asian country using rare minerals mined in Africa, while wearing “made in China” clothing, and drinking or eating something likely from South America, such as a steak, coffee, or avocado toast.

In theory, the process of globalization is, quite ironically, not limited to the globe. Taken to its logical conclusion, the process of globalization could one day mean that someone on Earth can be telecommuting to a job in the Andromeda galaxy while listening to music made in some far-off system. The limitations to this integration process for any one item is whether we can reliably transport it, cheaply, over the distances required, and in the quantities needed.

But that’s talking about the far future. Let’s instead look at the past and see how globalization evolved throughout time.

The early days

Stone-age societies were very limited in their ability to change the environment to suit their needs. They didn’t have modern engines, they didn’t have modern materials, and very little finesse in their processing techniques. Another very important factor to keep in mind here is that they also lacked the numbers. We estimate that stone-age groups typically had 20 to 25 members.

Faced with these limitations, it simply made more sense for them to move demand (the people) to production (wild food). Even just tilling soil for crops is backbreaking labor if all you have are simple tools. What’s more, natural resources such as herds of prey or berry bushes tend to be quite limited up-front, but regenerate over time — so it made complete sense for groups to exploit one area then move to greener pastures.

At this time demand was quite modest, in both size and scope. Local resources were enough to keep these groups fed, and whenever the going got tough, they could just move away. Technology was still very limited, and for the most part, relied on raw materials that are present pretty much everywhere, like bones, wood, stones, pelts, special plants. The combination of small-scale demand that could be satisfied with local materials, the very poor technological background of the time, and the absence of money, meant that different groups wouldn’t need to engage in large-scale trade — and that they pretty much couldn’t, even if they did.

We also have pretty reliable evidence that early people had a different concept of ‘wealth’ than we do. They didn’t really accumulate it, or passed it down to their children. For hunter-gatherers, inheritance usually meant a sturdy, quality tool, and some skills. Possessions weren’t that common beyond practical items.

That being said, we do have evidence that trade did happen, even during this time, although quite limited in scope by today’s standards. Early traders seem to have dealt in technological goods such as grindstones and other tools, and it’s easy to see why all communities of the day would consider these valuable possessions. Whether or not they also traded in perishables we don’t know, as these wouldn’t really stand the test of time. Ideas were also very likely carried across these early stone-age trade networks, kind of like a very slow internet. It’s possible that people also took advantage of traders to move in-between groups.

An interesting idea is that these early traders served to unite different groups culturally through the ideas and people they carried along their routes. This can be seen as a very early, small-scale globalization of the disparate groups living in the same region.

Over time, populations grew and hardier tools were developed. The advent of metals such as copper for use in tools and weapons, in particular, had a profound effect on humanity. Crucially, it made cutting down trees, clearing out boulders, rocks, and digging, much easier and more reliable. Which was very handy since agriculture was putting its roots down, and people needed to clear land for it.

Agriculture

A particularly striking change for people living during these times was the transition from a nomadic to a sedentary lifestyle. Hunter-gatherers need to move around because they eventually exhaust the resources of any particular area. Farmers, in contrast, need to stay put. In fact, the more they stay put, the more food / wealth / stuff they can gain, since agriculture relies on fields being cleared, granaries being constructed, and infrastructure such as irrigation ditches — all of which take time to build. At the same time, food could be produced exactly where it was needed. For the first time in human history, production would follow demand, not the other way around.

Replica of a Bronze Age house, at the An Creagán Centre, Ireland. Image credits Kenneth Allen / geograph.ie

Yet, we know trade was picking up even during the very early days of the copper age. Our ability to transport goods over long distances didn’t massively improve compared to the stone age. So why were people trading more if farming was so great? Well, behind it was the proliferation of goods in this period to a much wider degree than previously seen.

Stone-age groups didn’t have access to many items. There was food, clothing, and medicine that everyone typically just produced for themselves. More advanced products, like tools, would be traded for — but they were generally also produced by the ones who would use them, if possible. By the copper age, however, agriculture allowed for food surpluses, which then freed up some people to specialize in professions other than ‘getting food’. Craftsmen, priests, scribes, and varied services would become available as a result.

Unlike before, it was not feasible to produce all of this in a single place any longer. Some natural resources like metals, silk, incense, and livestock were quite rare. The know-how and infrastructure required to process various resources weren’t necessarily available (even firing pottery is a complicated process that can easily fail), or there simply weren’t enough people available to do the work. So different groups and individuals within those groups would produce what they could and then trade for whatever else they needed or wanted. This turned communities that were previously cut off into intertwined (although, not yet interdependent) economies — a ‘localization’ process, similar to globalization on a more reduced scale.

The majority of transactions occurring worldwide at this time likely still took the form of barter. Coinage was an emerging concept, allowing for more complex and complicated trading networks to form where available. We have archeological evidence of pretty sophisticated trade mechanisms being used as early as three millennia ago. The infamous complaint letter to Ea-nasir is one example, mentioning contract-like agreements settling on a deal of copper “of good quality” to be carried out through middlemen at a later date, and people being dispatched “to collect the bag with my money (deposited with you [Ea-Nasir])” when the copper proved of poorer quality.

The complaint tablet. Image credits The Trustees of the British Museum.

That’s not to say foreign trade wasn’t taking place. The Harappans — an ancient civilization that flourished around the Indus river (today’s Afghanistan) between 5000 and 3000 years ago — were already building roads (for their newly-invented wheel), canals, and trade ports. Their wares were found as far as the Arabian Gulf, Mesopotamia (today’s Iraq-Kuwait-Syria area), and Central Asia. Interestingly, they managed this despite functioning as a barter economy entirely, although they did have fancy “standardized” weights.

Old-fashioned trade

Despite the limitations of the day, trade networks could grow to impressive sizes. But this relied on having a little luck or paying a spicy extra for your goods. This is that “Phase 2.5” I mentioned earlier: an in-between phase where mechanical solutions were not yet available, but some trade networks grew to sizes comparable to those of today.

The main reason our modern lives are so comfortable and goods so abundant is that we can use a lot of energy to alter the world around us. In essence, because we can perform a lot of physical work, quickly. Physical work is defined as the use of energy to apply a force to a particle over a certain distance — physics-speak for “moving things”, or for “doing something”. But for the majority of history, people were mostly limited to muscle power (theirs or their animals’) to do work.

In order to make a bagel, you need to clear a field, till it, plant and harvest the grain, mill it, sieve the dirt out, cut firewood, get water, mix the dough, and bake it. Every step requires physical work — the removal of trees and stumps, the grinding of grain, pumping water through pipes. Today we have machines totaling millions in horsepower doing that for us. In the Copper Age, it was just Ea-nasir, his ox, and a few slaves, at best, doing all of that.

It took exponentially longer. Image credits IFPRI / Flickr.

Trade suffered from the same limitation. You can’t sell something to those strange barbarians in the north if you can’t take it to them in the first place. You could take it there in small amounts or very slowly, but that’s not very good business. Especially when you can get robbed on the way.

One workaround for this, one which made people living along the Mediterranean coast very wealthy, was to trade by sea. Large cargo can be more easily and reliably transported over long distances on a ship, and sails can harvest the wind for free power. Not everybody could take advantage of the seas, however, as technology at this time was still limited and navigation, as well as the ships’ structural integrity, limited how much they could carry, where, and when. But the Mediterranean is pretty, relatively calm, and easily navigable. Peoples inhabiting its shores would be connected in one of the largest and most complex trading networks of antiquity, and the area remains a hotbed of trade to this day.

This area would eventually spawn the closest thing to interdependent markets ever seen until the modern age: at one point, the city of Rome, capital of the Roman empire, was completely dependent on imported grain to feed its population. The whole empire simply couldn’t produce and transport enough food to its capital, not until they annexed Egypt, which later served the city of Rome specifically as a breadbasket. This is a great example of why trade is such an important part of economies even to this day. Apart, Rome and Egypt suffered: one couldn’t feed itself, the other had too much grain and nowhere to put it. Together, however, they worked splendidly.

Rivers could serve the same purpose. Ancient Egypt is a great example. The civilization was quite literally dependent on the Nile for their food and water, and could not have existed without it. But the Nile also represented a reliable and safe trade route that connected the whole of Egypt. Blocks of stone, food, travelers, ideas, the Nile bore them all, on wicker ships. Their empire lasted thousands of years, and the Nile was what gave it cultural, political, and economic unity.

But the best example of globalized trade in ancient history is the Silk Road. This was a trade route including both overland and sea routes, which connected the ancient empires of China (Han) to Europe (Rome). Silk was one of the main items being traded along the route, hence its name. Due to its sheer length, trade over the Silk Road was done in steps. Each merchant would buy their items and take them part of the way, sell them in trade cities, and return. From there, a new trader would take them over another stretch of the road, and so on. Naturally, each one would slap their own premium on the price, so only luxury goods meant for very rich people were traded along the route.

We have evidence of silk being known to Romans since the first century BC, which they were exposed to by Parthian soldiers (that Roman soldiers killed and looted). This suggests that the Silk Road was already well established by this time, since only China really had the ability to produce meaningful quantities of silk back in the day. However, it never led to the Chinese and Roman empires actually meeting. Despite both making an effort to do so, the Parthians meddled with the whole affair, spreading disinformation to both — they wanted to keep acting like middlemen between the two, making bank in the process.

Map of the Route of the Silk Road. Image credits Patrick Gray / Flickr.

Trade along the Silk Road really picked up, ironically, under the Mongols. Despite being infamous as conquerors and bloodthirsty raiders, the Mongol empire was actually a pretty well-run place. Traders along the Silk Road were given seals that assured their protection across the route — for a fee, of course. Somewhat unbelievably for that time, the seals really did ensure that a merchant could travel as long as they pleased across the route and never have to fear bandits or thieves.

The Age of Discovery (between the 15th to the 18th century) was the closest we’ve got to globalization before the Industrial Revolution. During this time, ships would sail, laden with goods, between Europe, Asia, Africa, and the Americas. It also saw the Colombian Exchange, the single largest transfer of people, animals, and plant species in history. Since transporting goods over long distances was still quite hard and took a long time, it was still expensive. Spices and other luxury commodities were still the most traded items by this time, but bulk commodities such as beer or raw materials were also being shipped around the world.

The Steam Engine

The Industrial Revolution truly opened the way for globalization as we know it today to begin. The steam engine allowed for physical work to be done reliably, cheaply, and in large quantities. This made trade easier and faster, and allowed for factories to grow in size and output. At the same time, similar to what happened when agriculture first came around, there was an increase in the number and variety of commodities available for purchase — which also meant an increase in demand for raw materials.

The Watt / Boulton and Watt steam engine, one of the first reliable and relatively efficient steam engines. Image via Wikimedia.

During this time, trade was still seen as a zero-sum game. The whole point of it was to buy raw resources cheaply, process them, and sell the finished goods for a profit. Economies were still shackled by the use of the gold standard, which meant that every country tried its best to gain as much gold from others as possible, in order to expand their own economies.

The economics of the Industrial Revolution is a treat, if you’re into that sort of thing, and this period of time had a profound effect on globalization. You could argue that this was the era of its birth. Areas like China, Sub-Saharan Africa, and the Pacific Islands, which had been quite isolated before, increasingly became part of the world economy during this time.

But a lot of the elements that would eventually culminate in the process of globalization were already around, so we won’t dwell too much on this time. What the Industrial Revolution really brought to the table was, at long last, a way to unshackle ourselves from muscle power. The engine made the world smaller. People now had a much easier time in bringing goods from faraway lands to their markets, so they did.

Globalization, in the way we understand the term now, needed one or two more ingredients to be added in the mix. That would happen around the 1990s.

Information revolution

What really gave globalization wings was the digital revolution. Sure, our ships are more reliable and we have GPS and other fancy tech to help us move things along, but the computer is the single most influential element in regards to globalization of the last century.

It’s much easier to move money around now — they’re numbers in an electronic account. You can buy or sell certain currencies instantly. You can transfer money overseas, instantly. This makes international trading and investments hilariously easy compared to any other time in human history.

Data transfer is also lightning-fast today. For starters, this facilitates trade. I have whole websites with millions of products made half the world away that I can browse and order from at any time . The sheer ease with which I can find, purchase, and have something delivered to me from another hemisphere is borderline magical.

Back in the 50s most jobs weren’t outsourced, because how could a company reliably keep tabs on them? There was no internet, no underwater telephone cables linking different continents (there are, now). And having your middle management commute to South-East Asia wasn’t feasible, or acceptable.

Computers and the internet, however, make it possible to have the production process of a certain good distributed across several locations around the globe, without any hiccups in supply and with no surprise delay. Every step of the process can be monitored by a single person, any issues ironed out with a few clicks and an email. On the other end of the spectrum, any producer can know the price of raw materials and commodities instantly around the world and pick the best outlets and supply sources for their business.

The digital revolution was so profoundly important for globalization because it cuts through the main enemy of trade: uncertainty. Traders of yore would make their journey hoping they would make a profit — today, they don’t need to hope, they can simply know. You don’t need to spend a few days finding the best deal on a t-shirt in your city, you can find the best price on your continent instantly, and have it delivered to you within days.

Why it’s happening

We tend to think of globalization as a single force that’s reshaping society. But the truth is that it has been shaping our societies for a very long time now. It’s also not a monolith; it is legion. It’s a global process that is, fundamentally, the product of billions of individual choices. Today, we have the ability to purchase something made across the world from the comfort of our own home. Today, we can outsource a job to Vietnam to cut down on costs. We can watch a movie made by a whole different culture with a single click.

“Globalization” exists not because we have these options — it exists because we overwhelmingly, as individuals, choose them over other options. And we pick them because they make economic sense.

The harm sometimes caused by globalization is, sadly, part and parcel of the process. The simple fact is that when the world becomes a single, great market, everybody is suddenly in competition with everybody else. The dearth of manufacturing jobs is, ironically, exactly why we have cheaper goods. Lower prices are, ironically, the reason why more and more of us are struggling to make ends meet.

Anyone here who lived in the former communist bloc will know the immense economic shock their countries experienced after the transition to capitalism. Communist economies are top-down, command economies — someone makes the decision of where, how, and how much of anything gets produced. They don’t take feedback from consumers in the same way a free market does. An unprofitable enterprise, in communism, can simply be subsidized by profits from another. Under a capitalist model, enterprises have to adapt to their customers’ desires or get off the market. Needless to say, most of those communist-era enterprises didn’t make the cut during the transition, leading to massive losses of jobs and economic security for a while. Eventually, economies recovered, and new enterprises were established that could compete in these brave new markets.

Our gripes with globalization come from a similar process. It’s the same issue of the economic systems that were previously in place struggling once exposed to wider markets.

Sixty or seventy years ago, for example, an American factory would be in competition (for customers) with other American factories in the same field. An American employee would be in competition (for jobs and wages) with other American employees. This created a certain balance. Globalization broke that balance because now, the factory is in competition with all other factories producing the same goods worldwide. An employee in America is in competition with all those of similar skill and ability all over the world. The ill effects globalization can have are a transitional period, until a new balance is established.

On a personal level, that thought may not be much comfort, but globalization seems to be here for good. The pandemic did also show some of the flaws in our current interconnected system, mostly that it can be quite vulnerable to shocks. But judging from history, as long as we have the ability to trade with people all over the world, we will. And, as long as we do that, our economies will continue to inch ever closer together, becoming more intertwined and, at the end of the day, more dependent on one another.

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