The historical origins of globalization (also known as historical globalization)

are the subject of ongoing debate. Though many scholars situate the origins of
globalization in the modern era (around the 19th century), others regard it as a
phenomenon with a long history, dating back thousands of years (a concept known as
archaic globalization). The period in the history of globalization roughly spanning
the years between 1600 and 1800 is in turn known as the proto-globalization.

Divisions of time
Thomas L. Friedman divides the history of globalization into three periods:
Globalization 1.0 (1492–1800), Globalization 2.0 (1800–2000) and Globalization 3.0
(2000–present). He states that Globalization 1.0 involved the globalization of
countries, Globalization 2.0 involved the globalization of companies and
Globalization 3.0 involves the globalization of individuals.[1]

Klaus Schwab, founder and Executive Chairman of the World Economic Forum, Richard
Baldwin and Philippe Martin have divided the history of globalization into four
eras: Globalization 1.0 was before World War I, Globalization 2.0 was after World
War II "when trade in goods was combined with complementary Globalization 3.0, for
which other terms in use have included "New Globalization", hyperglobalization, the
"global value chain revolution", and the period of offshoring, refers to a more
recent period of change in global economic relationships, and Globalization 4.0 to
current (2018 onwards) changes affecting services in particular.[2][3]

Archaic globalization
Main article: Archaic globalization
Perhaps the extreme proponent of a deep historical origin for globalization was
Andre Gunder Frank, an economist associated with dependency theory. Frank argued
that a form of globalization has been in existence since the rise of trade links
between Sumer and the Indus Valley civilization in the third millennium BC.[4]
Critics of this idea contend that it rests upon an over-broad definition of
globalization.

Even as early as the Prehistoric period, the roots of modern globalization could be
found. Territorial expansion by our ancestors to all five continents was a critical
component in establishing globalization. The development of agriculture furthered
globalization by converting the vast majority of the world's population into a
settled lifestyle. However, globalization failed to accelerate due to lack of long-
distance interaction and technology.[5] The contemporary process of globalization
likely occurred around the middle of the 19th century as increased capital and
labor mobility coupled with decreased transport costs led to a smaller world.[6]

The 13th century world-system

An early form of globalized economics and culture, known as archaic globalization,
existed during the Hellenistic Age, when commercialized urban centers were focused
around the axis of Greek culture over a wide range that stretched from India to
Spain, with such cities as Alexandria, Athens, and Antioch at its center. Trade was
widespread during that period, and it is the first time the idea of a cosmopolitan
culture (from Greek "Cosmopolis", meaning "world city") emerged. Others have
perceived an early form of globalization in the trade links between the Roman
Empire, the Parthian Empire, and the Han Dynasty. The increasing articulation of
commercial links between these powers inspired the development of the Silk Road,
which started in western China, reached the boundaries of the Parthian empire, and
continued onwards towards Rome.[7]

The Islamic Golden Age was also an important early stage of globalization, when
Jewish and Muslim traders and explorers established a sustained economy across the
Old World resulting in a globalization of crops, trade, knowledge and technology.
Globally significant crops such as sugar and cotton became widely cultivated across
the Muslim world in this period, while the necessity of learning Arabic and
completing the Hajj created a cosmopolitan culture.[8]

Portuguese carrack in Nagasaki, 17th-century Japanese Nanban art

Native New World crops exchanged globally: Maize, Tomato, Potato, Vanilla, Rubber,
Cocoa, Tobacco
The advent of the Mongol Empire, though destabilizing to the commercial centers of
the Middle East and China, greatly facilitated travel along the Silk Road. This
permitted travelers and missionaries such as Marco Polo to journey successfully
(and profitably) from one end of Eurasia to the other. The Pax Mongolica of the
thirteenth century had several other notable globalizing effects. It witnessed the
creation of the first international postal service, as well as the rapid
transmission of epidemic diseases such as bubonic plague across the newly unified
regions of Central Asia.[9] These pre-modern phases of global or hemispheric
exchange are sometimes known as archaic globalization. Up to the sixteenth century,
however, even the largest systems of international exchange were limited to the Old
World.

Proto-globalization
Main article: Proto-globalization
The phase is known as proto-globalization. It was characterized by the rise of
maritime European empires, in the 15th, 16th and 17th centuries, first the
Portuguese and Spanish Empires, and later the Dutch and British Empires. In the
17th century, globalization became also a private business phenomenon when
chartered companies like British East India Company (founded in 1600), often
described as the first multinational corporation, as well as the Dutch East India
Company (founded in 1602) were established.

The Age of Discovery brought a broad change in globalization, being the first
period in which Eurasia and Africa engaged in substantial cultural, material and
biologic exchange with the New World. It began in the late 15th century, when the
two Kingdoms of the Iberian Peninsula – Portugal and Castile – sent the first
exploratory voyages around the Cape of Good Hope and to the Americas, "discovered"
in 1492 by Christopher Columbus. Shortly before the turn of the 16th century,
Portuguese started establishing trading posts (factories) from Africa to Asia and
Brazil, to deal with the trade of local products like slaves, gold, spices and
timber, introducing an international business center under a royal monopoly, the
House of India.[10]

Global integration continued with the European colonization of the Americas

initiating the Columbian Exchange,[11] the enormous widespread exchange of plants,
animals, foods, human populations (including slaves), communicable diseases, and
culture between the Eastern and Western hemispheres. It was one of the most
significant global events concerning ecology, agriculture, and culture in history.
New crops that had come from the Americas via the European seafarers in the 16th
century significantly contributed to the world's population growth.[12]

Modern globalization

Animated map showing Colonial empires evolution from 1492 to present

19th century Great Britain becomes the first global economic superpower, because of
superior manufacturing technology and improved global communications such as
steamships and railroads.
The 19th century witnessed the advent of globalization approaching its modern form.
Industrialization allowed cheap production of household items using economies of
scale,[citation needed] while rapid population growth created sustained demand for
commodities. Globalization in this period was decisively shaped by nineteenth-
century imperialism. After the First and Second Opium Wars, which opened up China
to foreign trade, and the completion of the British conquest of India, the vast
populations of these regions became ready consumers of European exports. It was in
this period that areas of sub-Saharan Africa and the Pacific islands were
incorporated into the world system. Meanwhile, the conquest of parts of the globe,
notably sub-Saharan Africa, by Europeans yielded valuable natural resources such as
rubber, diamonds and coal and helped fuel trade and investment between the European
imperial powers, their colonies, and the United States.[13]

The inhabitant of London could order by telephone, sipping his morning tea, the
various products of the whole earth, and reasonably expect their early delivery
upon his doorstep. Militarism and imperialism of racial and cultural rivalries were
little more than the amusements of his daily newspaper. What an extraordinary
episode in the economic progress of man was that age which came to an end in August
1914.

Between the globalization in the 19th and in the 20th there are significant
differences. There are two main points on which the differences can be seen. One
point is the global trade in this centuries as well as the capital, investment and
the economy.

Global trade
The global trade in the 20th century shows a higher share of trade in merchant
production, a growth of the trade in services and the rise of production and trade
by multinational firms. The production of merchant goods in the 20th century
largely decreased from the levels seen in the 19th century. However, the amount of
merchant goods that were produced for the merchandise trade grew. The trade in
services also grew more important in the 20th compared to the 19th century. The
last point that distinguishes the global trade in the 19th century compared to the
global trade in the 20th century, is the extent of multinational cooperation. In
the 20th century, you can see a "quantum leap" in multinational cooperation
compared to the 19th century. Before the 20th century began, there were just
Portfolio investment, but no trade-related or production-relation Direct
investment.

Commercial integration has improved since last century, barriers that inhibit trade
are lower and transport costs have decreased. Multinational trade contracts and
agreements have been signed, like the General Agreement on Tariffs and Trade
(GATT), North American Free Trade Agreement (NAFTA), the European Union (EU) has
been hugely involved in eliminating tariffs between member states, and the World
Trade Organization. From 1890 and up to World War I instability in trade was a
problem, but in the post war period there has mostly been economic expansion which
leads to stability. Nations have to take care of their own products; they have to
make sure that foreign goods do not suffocate their domestic products causing
unemployment and maybe social instability. Technological changes have caused lower
transporting costs; it takes just a few hours to transport goods between continents
to-day, instead of weeks or even months in the nineteenth century.

By consideration financial crisis one key difference is the monetary regime. In the
19th century it occurred under the fixed exchange rates of the gold standard. But
in the 20th century it took place in a regime of managed flexibility. Furthermore,
in the 19th century countries had developed effective lenders of last resort, but
the same was not true at the periphery and countries there suffered the
consequences. A century later there was a domestic safety net in most emerging
countries so that banking panics were changed into situations where the debts of an
insolvent banking system were taken over by the government. The recovery from
banking crisis is another key difference. It has tended to begin earlier in the
recent period than in the typical crisis episode a hundred years ago. In the 19th
century there were no international rescue packages available to emerging
economies. But in the recent period such rescues were a typical component of the
financial landscape all over the world.

The flows information were an important downside in 19th century. Prior to the
Transatlantic cable and the Radiotelephone, it used to take very long for
information to go from one place to another. So this means that it was very
difficult to analyze the information. For instance, it was not so easy to
distinguish good and bad credits. Therefore, the information asymmetry played a
very important role in international investments. The railway bonds serve as a
great example. There was also many contracting problems. It was very difficult for
companies working overseas to manage their operations in other parts of the world,
so this was clearly a big barrier to investment. Several macroeconomic factors such
as exchange risks and uncertain monetary policies were a big barrier for
international investments as well. The accounting standards in the U.S. were
relatively underdeveloped in the 19th century. The British investors played a very
important role in transferring their accounting practices to the new emerging
markets.[14]