International economy phase IV?

By the end of the 1980s, commentators had invented a new vogue word: ‘globalization’. The international convergence of politics, business and culture, it was argued, had the power to transform human existence. Events overseas could no longer take place in ‘a far-off country’. As countries became, economically speaking, more markedly interdependent, national governments assumed the ‘inevitability’ of cross-border trade and finance being liberalized. The fall of the Berlin Wall in 1989 opened up Eastern Europe, Russia and Central Asia to international business, and policy changes in China increasingly drew a country that had espoused autarky into the global economy.

Foreign direct investment and trade expanded even more rapidly throughout the 1990s, and ‘globalization’ became, in popular usage, associated with the growing reach and seemingly unchecked activities of multinational enterprises. These ever-bigger businesses took greater responsibility for the cross-border movement of commodities and manufactures, and invented complex, more integrated cross-border management systems and operational practices. The scale and spread of their undertakings, it was argued, forced the international convergence of business systems, work methods, spending patterns, government policy and, ultimately, cultural values. Globalization meant, for many, expectations of regular air travel; it introduced new media technologies and sources of information; it transformed consumer expectations and home life, and symbolized the continuous growth of demand and big business; it affected the daily work of the New York banker, the Bangalore software engineer and the Shenzen factory operative.

Phase I of the global economy – approximately from the 1840s to 1914 – was marked by dynamic growth in trade and FDI; investment by leading industrialized economies in primary products and in developing and undeveloped territories was prominent; multinationals in trade-related and commodity-seeking activities took a lead in international business activities; and imperialism underpinned much of the international economic system and the flow of FDI. Following more than thirty years of world wars, economic depression and trade barriers, phase III of the global economy – approximately from 1950 – was marked by the return of trade and FDI as dynamic sources of growth; outside the Communist bloc, by the long-term lowering of tariff and investment controls; investment by leading industrialized economies markedly in manufacturing and in developed economies; and, lastly, the dominance of large-scale multinationals, with market-seeking strategies, based on the transfer of human, financial and technological resources to overseas subsidiaries they directly owned and controlled.