What makes today's globalization different?

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DanielMuff Posted: Mon, Mar 1 2010 3:25 PM

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What makes today's globalization different from previous periods of world trade? Is it the volume of trade? Is it the number of nations involved? Or is it something else? Is it a marketing scheme? Please discuss.

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Jackson LaRose replied on Mon, Mar 1 2010 6:23 PM

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Daniel Muffinburg:

What makes today's globalization different from previous periods of world trade? Is it the volume of trade? Is it the number of nations involved? Or is it something else? Is it a marketing scheme? Please discuss.

Mercantilism, maybe?  I honestly don't know much about this topic.

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Clayton replied on Mon, Mar 1 2010 6:50 PM

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Daniel Muffinburg:

What makes today's globalization different from previous periods of world trade? Is it the volume of trade? Is it the number of nations involved? Or is it something else? Is it a marketing scheme? Please discuss.

There was a mises.org daily on this subject sometime back... I recall the author differentiated between market globalization (which has been around for centuries, if not millenia), and political globalization. It is the latter that is unique in that no empire has ever straddled the entire geosphere.

Clayton -

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DanielMuff replied on Mon, Mar 1 2010 6:57 PM

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ClaytonB:

Daniel Muffinburg:

What makes today's globalization different from previous periods of world trade? Is it the volume of trade? Is it the number of nations involved? Or is it something else? Is it a marketing scheme? Please discuss.

There was a mises.org daily on this subject sometime back... I recall the author differentiated between market globalization (which has been around for centuries, if not millenia), and political globalization. It is the latter that is unique in that no empire has ever straddled the entire geosphere.

Clayton -

Yeah, I'm referring to market globalization.

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filc replied on Mon, Mar 1 2010 7:19 PM

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What about transportation technologies? What specifically are you looking for?

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DanielMuff replied on Mon, Mar 1 2010 7:22 PM

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filc:

What about transportation technologies? What specifically are you looking for?

We still use boats :p I want to know what makes today's globalization different from say pre-WII world trade, etc.

EDIT: Okay how bout this: have there been other periods in history which could be considered periods of "globalization"?

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filc replied on Mon, Mar 1 2010 7:31 PM

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Daniel Muffinburg:

filc:

What about transportation technologies? What specifically are you looking for?

We still use boats :p I want to know what makes today's globalization different from say pre-WII world trade, etc.

I guess the biggest change would be anything having to do with computing.

Primarily:

• Inventorying
• Accounting

Beyond that I would be guessing so thats my 2c!

Also since Pre-WWII hasn't global trade been generally more accepted? Even communist countries jumped into the market game.

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Esuric replied on Mon, Mar 1 2010 7:56 PM

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Daniel Muffinburg:

What makes today's globalization different from previous periods of world trade? Is it the volume of trade? Is it the number of nations involved? Or is it something else? Is it a marketing scheme? Please discuss.

The degree and sophistication of international economies of scale, via intra-industry trade. Economies of scale are gained when you outrun your fixed costs through production runs (entry into international markets facilitates this process). The sophistication and interconnection of capital and financial markets on an international level. When combined, you get massive efficiency gains which has elevated the standard of living all over the world (inflation distorts this process, obviously).

• A) We have global production networks which standardize products on an international level (cost cutting, facilitates economies of scale). Furthermore, multinational firms a segmented into a myriad of pieces which are decentralized all over the world in order to facilitate certain comparative advantages (engineering sector in Germany, manufacturing in China, research and development in the U.S., ect). The firms then trade within itself, and with other firms.
• B) These production networks  provide efficiency gains for firms which don't even participate in the international economy. Firms gain just by joining an industry with a global production network: the efficiency gains of other firms provides lower costs for all firms, a higher degree of innovation, more capital, and financial scale economies (inter-national equity and debt markets).
• C) Also facilitates product differentiation. Product differentiation undermines economies of scale, but vast international markets offsets this technical inefficiency. Thus, firms are able to balance both differentiation and standardization at a high level, satiating the demand for various goods at lower costs per unit (balancing game between the two).
• D) Also utilizes transportation scale economies; you lower transportation costs per unit by expanding output. This allows firms to spend extra revenue on decentralized global management (increase "local responsiveness"). Firms locate production facilities near major markets, which gives them a better understanding of local demand conditions (exposes them to various cultural preferences) and can satiate the demand of those markets in a timely fashion. 
• E) Kind of mentioned earlier, but you get international money and capital markets which finances investment ventures all over the world. Many nations have primitive financial sectors, and thus have a hard time getting access to capital. This problem is resolved by international equity markets, debt markets, and FDI (foreign direct investment). There's also a FOREX market which has 12 trillion dollars running through it every day (developing nations frequently borrow from this market). Sovereign wealth funds facilitate this process.