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Thomas Moncrief
Midterm 2
November 10, 2006
Globalization
I.

Introduction

II.

How Globalization Came About

III.

Why Globalization Sustained

IV.

Advantages and Disadvantages of Globalization

V.

Conclusion

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Thomas Moncrief
Midterm 2
November 10, 2006
What is globalization? If you were to Google globalization, you would find
several varying definitions, but nearly every single definition would contain
the words integration and economies. In its simplest form, globalization is the
integration of economies on a global scale. However, globalization is much more
complicated than that, and involves more than just economic variables.
Globalization is a process of interaction and integration among the people,
companies, and governments of different nations, a process driven by
international trade and investment and aided by information technology
(Globalization 101 2006).
As Thomas Friedman put it, globalization has undergone three stages:
Globalization 1.0, Globalization 2.0, and Globalization 3.0. During Globalization
1.0 (1492-1800) the new world was discovered and countries competed to
accumulate power. This era of globalization was driven by horsepower and
steam power. During Globalization 2.0 (1800-2000) multinational companies
were becoming larger players. The first half of this era was driven by cheaper
transportation (e.g. the steam engine and the railroad), and the second half by
cheap telecommunications. The Globalization 3.0 (2000-present) era has just
recently come to be, and is driven by the fusion of personal computers with fiber
optics/broadband internet with advanced software. These let individuals create,
send, and share data all over the globe. Never before have individuals been so
connected on a global scale (Friedman 2006).

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How Globalization Came About
Trade and Transportation
Trade is the exchanging of goods and services. Globalization is driven by
international trade or trade among nations. As far back as the Roman Empire
states have been participating in trade. Ancient empires used trade routes to
transport not only [incense] but also spices, gold, ivory, pearls, precious stones,
and textiles (Met Museum 2006). These were specialized goods that were
unique to their territories, and were desired by the aristocrats of the ancient
empires. They were luxury items that were traded for gold or other luxuries.
Trade is driven by transportation. As Dr. Jean-Paul Rodrigue writes:
Even if international trade has taken place centuries before the
modern era, as ancient trade routes such as the Silk Road can
testify, trade occurred at an ever increasing scale over the last
600 years to play an even more active part in the economic life
of nations and regions. This process has been facilitated by
significant technical changes in the transport sector. (Rodrigue 2006)
The cheaper the cost of transportation, the cheaper the overall cost of a good. If
one orders a good from a catalog for $15.00, and pays $5.00 for shipping. Then
the overall cost of that good is $20.00. The same formulation is true in
international trade.
Industrial Revolution
Friedman makes particular note to 1800, the start of Globalization 2.0,
because this is the first watershed in globalization. In the late 18 th century, James
Watt improved upon Thomas Newcomens steam engine design and spurred the
Industrial Revolution. The steam engine not only took the place of man power,

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particularly in mining, but also gave way to cheaper, more efficient means of
transportation (Wikipedia 2006). In 1829, George Stephenson built the first
mainline, steam powered locomotive (Wikipedia 2006c). In 1838, the SS Great
Western was the first steamship with the purpose of crossing the Atlantic Ocean,
and by 1870, new inventions in maritime travel, screw propeller and triple
expansion engine, had made trans-Atlantic travel a cheaper and quicker mode of
travel (Wikipedia 2006b). As John Hobson wrote in 1904, The opening up of
world markets by modern facilities of transport hastransformed the character of
international commerce (Hobson 1904: 53).
With the Industrial Revolution came specialization, which is the
division of labor in whichparties specialize to make common or different
products (Nau 2007: 185). Think of specialization in terms of an assembly
line, made popular by Henry Ford. Before specialization, there might be one or
two people responsible for assembling a car. Each person would have to be
skilled in every aspect of the car to assemble it properly. Now with the assembly
line, each person is only responsible for one part of that same car. Now each
person only has to be skilled in one area versus every area. One person puts on
the doors; one person installs the engine, and so on and so forth. Apply that to
globalization, and each person is a state who specializes in making a particular
good or providing a particular service. A state could make its goods internally, but
it would not be able to make certain goods as advantageously as other states.
States need each other to produce or provide a cheaper good or service, and this
promotes trade among states.

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Why Globalization Has Sustained
The Industrial Revolution may have jump started globalization, and
improved transportation (diesel engines, airplanes, etc.) may have helped it grow
through the first half of Globalization 2.0. However, the second half of
Globalization 2.0 has seen a new wave of technological advancements that have
helped it grow progressively. The age of the personal computer and
telecommunications (e.g. the internet and fiber optic cables) has catapulted
globalization to epic numbers.
Personal Computer
The first personal computer was released by IBM in 1981, and the ever
popular Windows 3.0 equipped computers released in 1990 (Friedman 2006). In
fact, in 1990 16% of households had personal computers, and in 2001 that
number had jumped to 56% (Hojjati and Battles 2005). As Friedman notes, the
rise of the Windows-enabled PCeliminatedthe limit on the amount of
information that a single individual could amass, author, manipulate, and diffuse
(Friedman 2006: 55). Now that people had a new way of authoring material, they
needed a new way to connect with other computers/people. This new way was
telecommunications.
Telecommunications
Telecommunications is the act of [c]ommunicating information, including
data, text, pictures, voice and video over long distance (TechWeb 2006).
Telecommunications has done in recent years what the Industrial Revolution did
for globalization in the 18th and 19th centuries. The first commercial use of the

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internet happened in 1991 (PBS 1999). This marked a new era in information
technology and data transfer. Now more than ever people could not only author
their own material, but they could also share it with other people.
At first the internet was originally designed for scientists to share research,
but was mainly used for e-mailing purposes, but as the world wide web grew,
more and more telecommunications were spending money to improve the
internet. Fiber optics was a hot new technology that could transfer much more
information much faster than copper wire, and from 1996-2001,
telecommunication companies invested about $1 trillion in an effort to spread
fiber optics all around the world (Friedman 2006). With this increase of
information technology comes job outsourcing, particularly in information
technology. That is why India is a perfect example of the effect
telecommunications has had on globalization.
In 1991, Indias finance minister Manmohan Singh opened Indias
economy (Friedman 2006). In 1995, Indias gross domestic product (GDP),
which is the amount of goods and services produced in a country, was $327.4
billion, fifteenth in the world (IMD 1996: 348), but its gross domestic product
per capita (GDP per capita), which is the amount of goods services produced in
a country by each person, was $349, 46 in the world (IMD 1996: 349). Now 46 th
out of more than 200 is not bad, but when you are one of the most populated
states in the world, that performance is not good. However, with more and more
multinational companies moving and investing in India, their GDP and GDP per
capita have risen drastically. In 2003 Indias GDP was $574.4 billion, and its GDP

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per capita was $522 (IMD 2004: 250). Two years later, in 2005, Indias GDP was
$726.5 billion, and its GDP per capita was $656 (IMD 2006: 162). From 19962005 Indias GDP per capita rose 88%, and its GDP rose 122%. An even better
example of globalization in India is American tax returns. In 2004 112,500 tax
returns were outsourced to India, and an estimated 400,000 tax returns were
outsourced in 2005 (Boomer 2004: 48). Accountants upload their clients previous
returns, excluding personal information, onto a server in California, and a trained
accountant in India does the number crunching.
The trade, transportation, and telecommunications have driven
globalization, and have seemingly made the world smaller. With such
advancement come advantages and disadvantages.
Advantages and Disadvantages of Globalization
Advantages
Although there are many that spur from globalization, such as increased
trade, investment, and many other aspects that all lead to economic growth, but
there are other, less aggregate advantages that come with globalization, like
interdependence, co-operation, and the spread of culture.
As El-Algraa noted, Over the past three decades or so, the world has
experienced a growing interdependence of its economies (El-Algraa 1989: 1).
As countries increase trade and funding in developing countries increases, states
become more and more dependent upon each other. Globalization, thus, drives
interdependence, and with interdependence comes co-operation. The more

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states rely on each other, the more likely they are to co-operate. And the more
states co-operate, the less likely they are to go to war with the other.
With multinationals (McDonalds, Pizza Hut, Radio Shack, Starbucks,
etc.), particularly American multinationals, there is inevitably a spread of culture.
There are McDonalds in more than 119 countries on six continents
(McDonalds 2006). McDonalds is true blue Americana, and the success of
McDonalds worldwide is an indicator of the acceptance of a foreign culture. This
is one of the best advantages of globalization. Not because it is primarily
American culture that is being spread, but because once other countries are as
advanced as the United States is, they will be spreading their culture worldwide.
The more we know about each other and what we have in common, the more we
will co-operate. The first international McDonalds was opened in 1967
(McDonalds 2006b), not until 1999 did two countries, which had McDonalds, go
to war since opening their McDonalds (Ritzer 2004). However, with every good,
there is a bad, an alpha and omega.
Disadvantages
Interdependence does lead to co-operation, but constant interaction and
interdependence can lead to friction, like family. For example, one has a cousin
that he/she just cannot get along with, but they have to see each other every
birthday, Easter, Thanksgiving, and Christmas. The more time they spend around
each having to pretend, for everyones sake, that they like each other, the more
likely they are to battle.

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Globalization does put states, companies, and individuals on an even
keel, but so far we have looked at the facts through an assumption that the
technological advances of this century will only be used for good. Perhaps the
least advantageous aspect of globalization is that any advancement can be used
for good or for evil. As Friedman notes, My personal dread derived from the
obvious fact that[globalization] draws in and superempowers a whole new
group of angry, frustrated, and humiliated men and women (Friedman 2006).
Conclusion
In closing, countries have been trading goods since the Roman Empire.
Globalization, however, did not start until the new world was discovered, and the
European countries had colonized America. Then trade was truly global. Better
transportation helped countries cross the Atlantic quicker and more efficiently, the
steam engine spurred the Industrial Revolution, and specialization made
international trade almost a necessity. The advent of the personal computer and
the advancement of telecommunications have brought a new facet to
globalization, a development that seems to have an unlimited potential to shrink
the world.
There is much to be gained from globalization, both economic and social,
but the economics will work itself out. The social gains, though, are
immeasurable and as technology brings us closer, the spread and acceptance of
culture will ultimately bond us, and one day there will be a global society.

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Glossary
globalization- a process of interaction and integration among the people,
companies, and governments of different nations, a process driven by
international trade and investment and aided by information technology
gross domestic product (GDP)- the amount of goods and services produced in
a country
gross domestic product per capita (GDP per capita)- the amount of good and
services produced in a country by each person
specialization- the division of labor in which parties specialize to make common
or different products
telecommunications- communicating information, including data, text, pictures,
voice and video over long distance
trade- the exchanging of goods and services

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Thought Questions
1) What do you think is the most important aspect of globalization? Why?
2) What will be the next technological breakthrough to further shrink the
world?
3) Does globalization help prevent wars/conflicts?
4) Will globalization lead to a global society with a global government?
5) Does globalization benefit the entire global community?

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