NATIONAL GEOGRAPHIC SOCIETY

Globalization is a term used to describe how trade and technology have made the
world into a more connected and interdependent place. Globalization also captures in
its scope the economic and social changes that have come about as a result. It may be
pictured as the threads of an immense spider web formed over millennia, with the
number and reach of these threads increasing over time. People, money, material
goods, ideas, and even disease and devastation have traveled these silken strands,
and have done so in greater numbers and with greater speed than ever in the present
age.

When did globalization begin? The Silk Road, an ancient network of trade routes
across China, Central Asia, and the Mediterranean used between 50 B.C.E. and 250
C.E., is perhaps the most well-known early example of exchanging ideas, products,
and customs. As with future globalizing booms, new technologies played a key role in
the Silk Road trade. Advances in metallurgy led to the creation of coins; advances in
transportation led to the building of roads connecting the major empires of the day; and
increased agricultural production meant more food could be trafficked between locales.
Along with Chinese silk, Roman glass, and Arabian spices, ideas such as Buddhist
beliefs and the secrets of paper-making also spread via these tendrils of trade.

Unquestionably, these types of exchanges were accelerated in the Age of Exploration,

when European explorers seeking new sea routes to the spices and silks of Asia
bumped into the Americas instead. Again, technology played an important role in
the maritime trade routes that flourished between old and newly discovered continents.
New ship designs and the creation of the magnetic compass were key to the explorers’
successes. Trade and idea exchange now extended to a previously unconnected part
of the world, where ships carrying plants, animals, and Spanish silver between the Old
World and the New also carried Christian missionaries.

The web of globalization continued to spin out through the Age of Revolution, when
ideas about liberty, equality, and fraternity spread like fire from America to France to
Latin America and beyond. It rode the waves of industrialization, colonization, and war
through the eighteenth, nineteenth, and twentieth centuries, powered by the invention
of factories, railways, steamboats, cars, and planes.

With the Information Age, globalization went into overdrive. Advances in computer and
communications technology launched a new global era and redefined what it meant to
be “connected.” Modern communications satellites meant the 1964 Summer Olympics
in Tokyo could be watched in the United States for the first time. The World Wide Web
and the Internet allowed someone in Germany to read about a breaking news story in
Bolivia in real time. Someone wishing to travel from Boston, Massachusetts, to
London, England, could do so in hours rather than the week or more it would have
taken a hundred years ago. This digital revolution massively impacted economies
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across the world as well: they became more information-based and more
interdependent. In the modern era, economic success or failure at one focal point of
the global web can be felt in every major world economy.

The benefits and disadvantages of globalization are the subject of ongoing debate. The
downside to globalization can be seen in the increased risk for the transmission of
diseases like ebola or severe acute respiratory syndrome (SARS), or in the kind of
environmental harm that scientist Paul R. Furumo has studied in microcosm in palm oil
plantations in the tropics. Globalization has of course led to great good, too. Richer
nations now can—and do—come to the aid of poorer nations in crisis. Increasing
diversity in many countries has meant more opportunity to learn about and celebrate
other cultures. The sense that there is a global village, a worldwide “us,” has emerged.

What is globalization?
Globalization is the process by which ideas, knowledge, information, goods and
services spread around the world. In business, the term is used in an economic context
to describe integrated economies marked by free trade, the free flow of capital among
countries and easy access to foreign resources, including labor markets, to maximize
returns and benefit for the common good.

Globalization is driven by the convergence of cultural and economic systems. This

convergence promotes -- and in some cases necessitates -- increased interaction,
integration and interdependence among nations. The more countries and regions of
the world become intertwined politically, culturally and economically, the more
globalized the world becomes.

How globalization works

In a globalized economy, countries specialize in the products and services they have a
competitive advantage in. This generally means what they can produce and provide
most efficiently, with the least amount of resources, at a lower cost than competing
nations. If all countries were specializing in what they do best, production should be
more efficient worldwide, prices lower, economic growth widespread and all countries
benefiting -- in theory.

Policies that promote free trade, open borders and international cooperation drive
economic globalization. They enable international businesses to access lower priced
raw materials and parts, take advantage of lower cost labor markets, and access larger
and growing markets around the world in which to sell their goods and services.

Money, products, materials, information and people flow more swiftly across national
boundaries than ever. Advances in technology enable and accelerate this flow and the

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resulting international interactions and dependencies. These technological advances
have been especially pronounced in transportation and telecommunications.

Among the recent technological changes that have played a role in globalization are
the following:

Internet and internet communication. The internet has increased the sharing and
flow of information and knowledge, access to ideas and exchange of culture among
people of different countries. It has contributed to closing the digital divide between
more and less advanced countries.

Communication technology. The introduction of 4G and 5G technologies has

dramatically increased the speed and responsiveness of mobile and wireless networks.
Increased speed and bandwidth are among the benefits of 5G technology.

Internet of things and artificial intelligence. IoT and AI technologies are enabling
the tracking of assets in transit and as they move across borders, making cross-border
product management more efficient.

Blockchain. This technology provides a transparent ledger that centrally records and
vets transactions in a way that prevents corruption and breaches. It facilitates the
secure access to data required in industries such as healthcare and banking. It has
also enabled the development of decentralized databases and storage that support
the tracking of materials in the supply chain.

Transportation. Advances in air transport and fast rail technology have facilitated the
movement of people and products. Changes in shipping logistics technology have
made it possible to move raw materials, parts and finished products around the globe
more efficiently.

Manufacturing. Advances in manufacturing, such as automation and 3D printing, have

reduced geographic constraints in manufacturing. 3D printing enables digital designs to
be sent anywhere and physically printed, making distributed, smaller-scale production
near the point of consumption easier. Automation speeds up processes and supply
chains, giving workforces more flexibility and improving output.

Why is globalization important?

Globalization changes the way nations, businesses and people interact. Specifically, it
changes the nature of international economic activity, expanding trade, opening global
supply chains and providing access to natural resources and labor markets.

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Changing the way trade and financial exchange and interaction occur among nations
also promotes the cultural exchange of ideas. It removes the barriers caused by
geographic constraints, political boundaries and political economies.

For example, globalization enables businesses in one nation to access another

nation's resources. More open access changes the way products are
developed, supply chains are managed and organizations communicate. Businesses
find cheaper raw materials and parts, less expensive or more skilled labor and more
efficient ways to develop products.

With fewer restrictions on trade, globalization creates opportunities to expand.

Increased trade promotes international competition. This, in turn, spurs innovation and,
in some cases, the exchange of ideas and know-how. In addition, people coming from
other nations to do business and work bring with them their own cultures, which
influence and mix with other cultures.

The many types of exchange that globalization facilitates can have positive and
negative effects. For instance, the exchange of people and goods across borders can
bring fresh ideas and help business. However, this movement can also increase the
spread of disease and promote ideas that might destabilize political economies.

For example, increased international trade and travel in the late 1990s led to West Nile
Virus being introduced to North America, likely as a result of infected species being
transported or people traveling there.

History of globalization
Although many people consider globalization a twentieth-century phenomenon, the
process has been happening for millennia. Examples include the following:
• The Roman Empire. Going back to 600 B.C., the Roman Empire spread its
economic and governing systems through significant portions of the ancient world
for centuries.
• Silk Road trade. These trade routes, which date from 130 B.C. to 1453 A.D.,
represented another wave of globalization. They brought merchants, goods and
travelers from China, through Central Asia and the Middle East, to Europe.
• Pre-World War I. European countries made significant investments overseas in the
decades before World War I. The period from 1870 to 1914 is called the golden age
of globalization.
• Post-World War II. The United States led the effort to create a global economic
system with a set of broadly accepted international rules. Multinational institutions
were established such as the United Nations, International Monetary Fund, World
Bank and World Trade Organization to promote international cooperation and free
trade.
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The term globalization as it's used today came to prominence in the 1980s, reflecting
several technological advancements that increased international interactions. IBM's
introduction of the personal computer in 1981 and the subsequent evolution of the
modern internet are two examples of technology that helped drive international
communication, commerce and globalization.

Globalization has ebbed and flowed throughout history, with periods of expansion and
retrenchment. The 21st century has witnessed both. Global stock markets plummeted
after the Sept. 11, 2001, terrorist attacks in the United States, but rebounded in
subsequent years.

More recently, nationalist political movements have slowed immigration, closed

borders and increased trade protectionism. The pandemic had similar effects on
borders and immigration, and it also disrupted supply chains. However, overall, the
early 21st century has seen a dramatic increase in the pace of global integration.
Rapid advances in technology and telecommunications are responsible for much of
this change, according to economists.

What is the G20?

The G20, or Group of Twenty, is an international forum that aims to foster international
cooperation by addressing global economic issues, such as financial stability and
climate change. The G20 is made up of 19 countries and the European Union,
including most of the world's largest economies.

The nations involved account for 80% of the planet's population, 75% of global exports
and 85% of world GDP. It was founded in 1999, following the 1997 financial crisis, and
has met every year since then.

Since 2008, the G20 has held an annual summit that brings together heads of state to
discuss important economic issues. The G20's president is selected annually on a
rotating basis, and that person's home country hosts the summit.

In 2021, the summit was held in Rome, Italy, and it addressed issues such as climate
change, vaccines, taxes, the global economy and development aid. The 2022 summit
was held in Bali, Indonesia. The main themes addressed were energy, governance,
health, industrial development, economics and investment, as well as countering
Russian aggression in Ukraine. The 2023 summit was held in New Delhi, India, with a
focus on similar issues as well as an agreement to dramatically expand sustainable
energy.

The members of G20 are Argentina, Australia, Brazil, Canada, China, France,
Germany, Japan, India, Indonesia, Italy, Mexico, Russia, South Africa, Saudi Arabia,
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South Korea, Turkey, the United Kingdom, the United States, the European Union and
the African Union. Spain is a permanent guest of the organization.

Types of globalization: Economic, political, cultural

• Economic globalization. This type of globalization focuses on the integration of
international financial markets and the coordination of financial exchange. Free
trade agreements, such as the North American Free Trade Agreement and the
Trans-Pacific Partnership, are examples of economic globalization. Multinational
corporations, which operate in two or more countries, play a large role in economic
globalization.
• Political globalization. This type covers the national policies that bring countries
together politically, economically and culturally. International organizations such as
NATO and the United Nations are part of the political globalization effort.
• Cultural globalization. This aspect of globalization focuses in large part on the
technological and societal factors that are causing cultures to converge. These
include increased ease of communication, the pervasiveness of social media and
access to faster and better transportation.

These three types of globalization influence one another. For example, liberalized
national trade policies drive economic globalization. Political policies also affect cultural
globalization, enabling people to communicate and move around the globe more freely.
Economic globalization also affects cultural globalization through the import of goods
and services that expose people to other cultures.

Effects of globalization
The effects of globalization can be felt locally and globally, touching the lives of
individuals as well as the broader society in the following ways:
• Individuals. A variety of international influences affect ordinary people.
Globalization can make it easier for people to access raw materials, products and
services. It can also lower the prices they pay and their ability to travel to other
countries.
• Communities. Globalization also changes how local and regional organizations,
businesses and economies function and interact. It affects who lives in
communities, where they work, who they work for, their ability to move out of their
community and into one in another area, etc. Globalization also changes the way
local cultures develop within communities.
• Institutions. Multinational corporations, national governments and other
organizations such as colleges and universities are all affected by their country's
approach to and acceptance of globalization. Globalization affects the ability of a
company to grow and expand, a university's ability to diversify and grow its student
body and a government's ability to pursue specific economic policies.

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While the effects of globalization can be observed, analyzing the net impact is more
complex. Proponents often see specific results as positive, and critics of globalization
view the same results as negative or somewhat ineffective. A relationship that benefits
one entity may damage another, and whether globalization benefits the world at large
remains a point of contention.

Internationalization
and localization are both product strategies used in globalizing industries.

Examples of globalization
Multinational corporations are a tangible example of globalization. Some examples
include the following:
• McDonald's had more than 40,000 fast-food restaurants in 118 countries and
territories in 2022.
• Ford Motor Company works with about 1,400 tier 1 suppliers around the globe.
• Amazon has expanded in recent years and now has nearly 10 million sellers
globally and employs approximately 1.5 million employees.

Multinational corporations influence the social and economic development of the

countries that host them. They also embody the contradictions of globalization. They
bring jobs, skills and wealth to the region they're investing or doing business in. But
they also can destroy local businesses, exploit cheap labor and threaten indigenous
cultures. The benefits they offer are often unsustainable because the loyalty of
multinationals is to their investors and bottom lines and not to the local people,
economies and cultures where they're doing business.

Another example of globalization is the response to the COVID-19 pandemic. Because

the world was able to communicate across boundaries, some nations worked together
to quickly produce vaccines for the virus. In addition, doctors traveled where they were
needed. For example, Cuba sent doctors to Italy at the beginning of the pandemic to
assist with the crisis as it developed there.

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However, countries also enacted strict travel restrictions, and many closed their
borders to cut down on the free movement of people and spread of the virus.

Benefits of globalization
Globalization enables countries to access less expensive natural resources and lower
cost labor. As a result, they can produce lower cost goods that can be sold globally.
Proponents of globalization argue that a global economy improves the state of the
world in many ways, such as the following:
• Solving economic problems. Globalization moves jobs and capital to places that
need these resources. It gives more developed countries access to lower cost
resources and labor, and less developed countries access to jobs and the
investment funds they need for development.
• Promoting free trade. Globalization puts pressure on nations to reduce tariffs,
subsidies and other barriers to free trade. This promotes economic growth, creates
jobs, makes companies more competitive and lowers prices for consumers.
• Spurring economic development. Globalization can give developing countries
access to foreign capital and technology they wouldn't otherwise have, thus bridging
the digital divide. Foreign investment can result in an improved standard of living for
the citizens of those nations.
• Encouraging positive trends in human rights and the environment. Advocates
of globalization point to improved attention to human rights on a global scale and a
shared understanding of the impact of people and production on the environment.
• Promoting shared cultural understanding. Advocates view the increased ability
to travel and experience new cultures as a positive part of globalization that can
contribute to international cooperation and peace.

Negative consequences of globalization

Many proponents view globalization as a way to solve systemic problems in the world
economy, but critics see it as increasing global income inequality. Among the critiques
of globalization are the following issues:
• Destabilizes markets. Critics of globalization blame the elimination of trade
barriers and the freer movement of people for undermining national policies and
local cultures. Labor markets in particular are affected when people move across
borders in search of higher paying jobs and companies outsource work and jobs to
lower cost labor markets.
• Damages the environment. The transport of goods and people among nations
generates greenhouse gases and all the negative effects it has on the environment.
Global travel and trade also can introduce, sometimes inadvertently, invasive
species to foreign ecosystems. Industries such as fishing and logging tend to go
where business is most lucrative or the regulatory environment is less restrictive,
which has resulted in overfishing and deforestation in some parts of the world.

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• Lowers living standards. When companies move operations overseas to minimize
costs, such moves can eliminate jobs, increasing unemployment in sectors of the
home country.
• Facilitates global recessions. Tightly integrated global markets carry a greater
risk of global recessions. The 2007-2009 financial crisis and Great Recession is a
good example of how intertwined global markets are and how financial problems in
one country or region can quickly affect other parts of the world. Globalization
reduces the ability of individual nations to use monetary and fiscal policies to control
the national economy.
• Damages cultural identities. Critics of globalization decry the decimation of unique
cultural identities and languages that comes with the international movement of
businesses and people. At the same time, the internet and social media are driving
this trend even without the movement of people and commerce.
• Increases the likelihood of pandemics. Increased travel has the potential to
increase the risk of pandemics. The H1N1 swine flu outbreak of 2009 and
coronavirus in 2020 and 2021 are two examples of serious diseases that spread to
multiple nations quickly.

Examples of deglobalization
Globalization critics promote deglobalization, where nations are skeptical of global
integration. Independence, particularly economic independence, is viewed as more
beneficial than interdependence on other nations.

For example, the COVID-19 pandemic's effect on global supply chains caused
bottlenecks and shortages of many goods, straining various nations' economies. To
proponents of deglobalization, a shift toward locally sourced raw materials and
products made sense.

However, it's not just countries that are becoming deglobalized. Companies are
disengaging from certain countries, as well. Many companies closed their offices in
Russia and suspended service in light of the Russia-Ukraine war. Others have partially
ceased operations there, as Sketchers did in suspending shipments to Russia but not
online sales.

In recent decades, companies in certain sectors -- particularly manufacturing -- have

outsourced operations to other countries to take advantage of lower labor costs. More
recently, there have been targeted efforts to reduce reliance on countries like China
and reshore U.S. manufacturing so that products can be sourced in the U.S. For
example, Intel is building two semiconductor plants in central Ohio, and Hyundai is
building an electric vehicle and battery manufacturing plant in Georgia.

Future of globalization
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Technological advances, particularly in blockchain, mobile communication and
banking, are fueling economic globalization.

Nonetheless, rising levels of protectionism and antiglobalization sentiment could slow

or even reverse the rapid pace of globalization. Nationalism and increasing trends
toward conservative economic policies are driving these antiglobalization efforts.

Global trade is also made more difficult by rising threats from other factors, such as the
following:
• Climate change.
• Decaying infrastructure.
• Cyber attacks.
• Human rights abuses.

The takeaway
Globalization is a longstanding trend that's in the process of changing and possibly
slowing. There are advantages to the open border and free trade that globalization
promotes, especially with technological advancements that facilitate international trade,
in terms of both imports and exports. There are also negative consequences.

In the post-pandemic world, individuals, businesses and countries must consider both
sides of the globalization issue. The fact that there are pros and cons to consider is
shaping how companies are rethinking global supply chains to avoid disruption while
still reaping some benefits of globalization.

SOURCES:
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