What Is Globalization?

%%And How Has the Global Economy Shaped the United States?%%

THE HISTORY OF GLOBALIZATION IS DRIVEN BY TECHNOLOGY, TRANSPORTATION, AND INTERNATIONAL COOPERATION

Since ancient times, humans have sought distant places to settle, produce, and exchange goods enabled by improvements in technology and transportation. But not until the 19th century did global integration take off. Following centuries of European colonization and trade activity, that first “wave” of globalization was propelled by steamships, railroads, the telegraph, and other breakthroughs, and also by increasing economic cooperation among countries. The globalization trend eventually waned and crashed in the catastrophe of World War I, followed by postwar protectionism, the Great Depression, and World War II. After World War II in the mid-1940s, the United States led efforts to revive international trade and investment under negotiated ground rules, starting a second wave of globalization, which remains ongoing, though buffeted by periodic downturns and mounting political scrutiny.

==1800 — 1899==

TECHNOLOGICAL BREAKTHROUGHS AND INDUSTRIALIZATION

Steamships, railroads, and the telegraph accelerate global commerce, along with industrialization and mass production. Rapid population growth increases demand for goods and services. England becomes first country to formally adopt gold standard—meaning currencies are convertible to a specific amount of gold—creating stability in exchange rates and facilitating trade and investment. Most developed nations follow suit. Western nations capitalize on natural resources provided by colonies and foreign markets, use force and economic pressure to open China and Japan.

==1900 — 1950==

RISE OF AUTOMOBILES AND AIRPLANES

New modes of transportation further link economies. The first transatlantic flight, from Berlin to New York, lands in 1938.

==1914 — 1918==

WORLD WAR I IGNITED BY NATIONALIST CONFLICT

The war wreaks havoc on global economies and trade. Defeated Germany is forced to make massive reparation payments to Britain and France.

==1920 — 1929==

GOLD STANDARD AND ECONOMIC BOOM

The United States and other countries adopt the gold standard along with protectionist policies. The US economy booms, spurred by a stock market bubble and mass production. Germany struggles to pay reparations and prints money to pay war debts, igniting hyperinflation. Countries retaliate against German manufacturing for delayed reparation payments.

==1929 — 1939==

GREAT DEPRESSION AND PROTECTIONISM

The 1929 US stock market crash ushers in the Great Depression. Many countries leave the gold standard and devalue their currencies to try to gain trade advantage. The United States adopts Smoot-Hawley Tariff Act in 1930; other countries retaliate with their own tariffs on US goods, deepening global economic downturn. Deteriorating German economy fuels rise of Nazi party. Regional trade blocs form, excluding Germany, Italy, and Japan. Axis powers launch imperialist conquests in Manchuria, Ethiopia, Austria, and Czechoslovakia. Britain and France declare war against Germany.

==1939 — 1945==

WORLD WAR II MOBILIZES ALLIES AGAINST AXIS POWERS

The United States, Britain, the Soviet Union, China, and others wage war against fascism and Nazism.

==1944==

BRETTON WOODS CONFERENCE SEEKS ORDER

The United States and soon-to-be victorious Allies parley, setting new postwar rules and institutions to liberalize trade and revive economic growth. The dollar and its peg to gold dominates the new global currency framework. The Soviet Union does not ratify the agreement. The Cold War (1945–91) deepens Soviet isolation from the Western trade order.

==1948==

GENERAL AGREEMENT ON TARIFFS AND TRADE (GATT)

The first worldwide multilateral trade agreement ushers in postwar era of more open trade.

==1950 — 1969==

COMPUTERS AND KENNEDY ROUND

Computers pave way for new commercial breakthroughs. Kennedy Round of the GATT talks accelerates trade liberalization.

==1970 — 1979==

END OF FIXED EXCHANGE RATES

Energy prices spike, set by the Organization of the Petroleum Exporting Countries (OPEC), triggering high inflation and unemployment throughout global economy. US inflation and trade imbalances compel Nixon administration to end dollar convertibility to gold for foreign governments. Most currencies eventually float in value.

==1980 — 1989==

DEBT CRISIS, FREE MARKET ECONOMICS, AND PLAZA ACCORD

The International Monetary Fund (IMF) and other institutions impose strict austerity and free market rules on Latin American countries in return for aid, causing backlash. President Ronald Reagan and UK Prime Minister Margaret Thatcher embrace free market economics. Wall Street and financial globalization rapidly rise. Rising US trade deficits, especially with Japan, lead to Plaza Accord, a major concerted foreign exchange intervention.

==1989 — 1991==

END OF THE COLD WAR

The collapse of the Soviet Union produces greater cooperation in international institutions, increasing trade and financial integration.

==1990 — 1999==

INTERNET CONNECTS WORLD

The internet begins its meteoric rise transforming global commerce. Powerful multinational corporations dominate the global economy.

==1993==

EUROPEAN UNION LINKS CONTINENT

The formation of the European Union solidifies the single market that began developing in the 1950s, leading to the creation of the euro currency in 1999.

==1994==

NORTH AMERICAN FREE TRADE AGREEMENT (NAFTA)

A major trade deal between Canada, Mexico, and the United States goes into force after bitter US debate. It is the first free trade agreement between the United States and a developing country.

==1995==

WORLD TRADE ORGANIZATION (WTO)

The modern trading system governed by rules is established, replacing the GATT.

==1997==

EAST ASIAN FINANCIAL CRISIS

Declines in Asian currencies spark crisis in the region, forcing austerity measures that revive hostility toward the IMF.

==2001==

CHINA AND THE WTO

China joins the WTO and becomes the world’s largest developing economy.

==2008==

GLOBAL FINANCIAL CRISIS IGNITES BACKLASH

An international banking crash along with a European debt crisis results in the worst global recession since the Great Depression. The Group of Twenty (G-20) nations serve as a steering committee for efforts to counter crisis effects, but their role produces backlash against globalization and US leadership.

==2016 — 2021==

BREXIT

The United Kingdom votes to leave the European Union, complicating cross-border movement and trade. A last minute deal between the two sides signed in December 2020 allows a continuation of tariff-free trade in goods, but UK-EU trade still falls sharply when Britain exits the European Union in January 2021, leaving many issues unresolved.

==2017 — 2020==

TRUMP PRESIDENCY UPENDS US TRADE WITH ALLIES

President Donald J. Trump disrupts the world trading and supply chain system by withdrawing from the Trans-Pacific Partnership (TPP), forcing a more restrictive rewrite of NAFTA, hampering the WTO’s ability to settle trade disputes, and threatening or imposing tariffs on allies like Canada, South Korea, and the European Union over dubious national security concerns.

==2018 –==

US-CHINA TRADE WAR

Trump ignites a tit-for-tat trade war with China, leading to tariffs covering over half of the goods traded between the two countries by September 2019. China pledges to expand purchases of certain US goods and services by an additional $200 billion by the end of 2021 under the “phase one agreement” of January 2020, but has largely fallen short of targets. The tariffs remain under President Joseph R. Biden Jr., as of mid-2021.

==2020 –==

COVID-19 PANDEMIC

The COVID-19 virus spreads worldwide, costing an estimated 4 million lives by mid-2021, disrupting global supply chains, and triggering a global recession. By the end of 2020, several vaccines are developed, but global vaccination efforts falter, with less than 30% of the world receiving at least one dose by July 2021. More transmissible variants spur additional outbreaks.