{"id":25197,"date":"2019-03-14T16:34:54","date_gmt":"2019-03-14T14:34:54","guid":{"rendered":"https:\/\/www.getsmarter.com\/blog\/?p=25197"},"modified":"2025-10-10T14:32:12","modified_gmt":"2025-10-10T12:32:12","slug":"the-historical-impact-of-globalisation-on-economies-and-business","status":"publish","type":"post","link":"https:\/\/www.getsmarter.com\/blog\/the-historical-impact-of-globalisation-on-economies-and-business\/","title":{"rendered":"The Historical Impact of Globalisation on Economies and Business"},"content":{"rendered":"\n

Globalisation is a concept that, in the lead-up and after the turn of the millennium, has become a fierce and recurring topic of debate. Over the long history of the idea, it\u2019s been called a necessary, even inevitable, process that will cure all the world\u2019s ills, if only we embrace it. Others have seen it as a purely negative process, enriching the few while the many suffer.1<\/sup><\/p>\n\n\n\n

It is, however, undeniable that globalisation has (and continues to have) a profound effect on the world, in the way companies and even governments do business<\/strong>: according to World Bank data, trade accounted for more than 70 per cent of global GDP in 2017, from less than 25 per cent in 1960.2<\/sup> To understand these effects, and maybe glean an insight into the future of globalisation and its current impact on business, it is useful to cast our eye backward, to learn how the process started.<\/p>\n\n\n\n

Historical globalisation<\/h2>\n\n\n\n

The term \u2018globalisation\u2019 itself first appeared sometime in the late 1920s…<\/p><\/blockquote><\/figure>\n\n\n\n

Globalisation describes the ways in which \u201cnational and regional economies, societies, and cultures have become integrated through the global network of trade, communication, immigration and transportation\u201d.3<\/sup> The beginnings of globalisation are still debated, with some sources placing it as long ago as the bronze age, fully 4,000 years ago.4<\/sup> Others pin the date more reasonably in the period of global exploration kicked off by Christopher Columbus\u2019 discovery of America in 1592 \u2013 this marked the birth of the first global trade networks, pioneered by European powers.5<\/sup> This is generally considered the first wave of globalisation, in which business and trade crossed seas, and it lasted for more than a century.<\/p>\n\n\n\n

By the nineteenth century, the movement of globalisation entered a new phase; the advent of technologies such as the steam engine facilitated international trade further, quickening the pace and scope at which business could be conducted. A dearth of major wars (after the end of the Napoleonic wars in 1815)6<\/sup> aided rapid growth during this period,7<\/sup> which was characterised by, among other things, vast waves of immigrants expanding across the globe \u2013 more than 20 million people left Europe for other shores between 1850 and 1913.8<\/sup><\/p>\n\n\n

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The term \u2018globalisation\u2019 itself first appeared sometime in the late 1920s; a little over a decade and a half later, during and immediately after World War II, globalisation entered a new phase.9<\/sup> Near the end of the war, the German army developed V-2 rockets for use against London – after the end of the war, this technology would form the basis of modern communication, as nations began exploring the potential of rockets to send satellites, and eventually men, to the stars.10<\/sup> Alongside these technological developments came a range of institutional changes that served to integrate trade even further: the founding of the United Nations, in 1945, aimed to bridge the gaps between countries, with economic development a core tenet of the organisation.11<\/sup><\/p>\n\n\n\n

At the same time, the creation of broad trade agreements such as the General Agreement on Tariffs and Trade (GATT), \u201cthe first worldwide multilateral free trade agreement\u201d.12<\/sup> This agreement was specifically created to facilitate trade through the elimination of tariffs that were considered harmful to free trade. It was eventually succeeded by the creation of the World Trade Organisation.13<\/sup><\/p>\n\n\n

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These are the roots of the final, and the current wave of globalisation, in which computing also figures heavily: while computers have existed in some form since at least the 1940s, the creation of the first microprocessor, by Intel in 1971, marked the great leap forward towards modern<\/em> computing.14<\/sup> This began a trend which saw companies able to use computing to increase their access to information, and ultimately unlock economic potential.15<\/sup> This era \u2013 as all those before it \u2013 has had, and continues to have, enormous influence, not only on the large conglomerates and corporations who do business across borders, but on the small businesses who interact with them, and even many of those who don\u2019t.<\/p>\n\n\n\n

Modern globalisation<\/h2>\n\n\n\n

[I]n a 2017 comparison of the 100 largest economic entities in the world, only 31 spots were claimed by governments.<\/p><\/blockquote><\/figure>\n\n\n\n

The period after World War II saw rapid expansion and integration of global trade, as nations went about the task of rebuilding in the wake of the war.16<\/sup> This sudden uptick in the process of globalisation was fueled by the surge of business and technological innovation, that allowed cross border trading to flourish at a pace unseen previously. Ultimately, this resulted in an increase in trade value of over 4,000 per cent between 1913 and 2014, with the greater share of that increase occurring after 1950.17<\/sup><\/p>\n\n\n\n

The modern, post-war period saw an increase of another type, however: the rise of the modern multinational (or transnational) corporation.18<\/sup><\/p>\n\n\n\n

Large corporations with global ambitions had been around for quite some time: the various East India Companies traded between Europe and India from as early as the 17th century, even becoming involved in the politics of the day.19<\/sup> After World War II, however, new technologies and liberalised trade allowed corporations to grow far larger than ever seen in history \u2013 in a 2017 comparison of the 100 largest economic entities in the world, only 31 spots were claimed by governments. The other 69 entities were multinational corporations.<\/p>\n\n\n

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These corporations owed much of their growth to the facilitating role of trade agreements such as GATT, which made it possible to move goods around the globe much more cheaply.20<\/sup> Companies in the US, Europe and Japan were also beneficiaries of domestic trends in the middle of the century that saw banks invest heavily in industrial stocks, while encouraging mergers that concentrated capital stock.21<\/sup><\/p>\n\n\n\n

They were able to use technological advancements in transport and communication to take advantage of the newly opened markets that were quickly opening, and the technology allowed them to operate more effectively on those shores. The rapidly advancing process of globalisation also gave the corporations access to new, and cheaper, labour markets.22<\/sup><\/p>\n\n\n\n

Alongside the rise of the multinationals, international trade split into three broad groups:<\/p>\n\n\n\n