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Trade and Globalization

How did international trade and globalization change over time? What is the structure today? And what is its impact?

By: Esteban Ortiz-Ospina , Diana Beltekian and Max Roser

This page was first published in 2014 and last revised in April 2024.

On this topic page, you can find data, visualizations, and research on historical and current patterns of international trade, as well as discussions of their origins and effects.

Other research and writing on trade and globalization on Our World in Data:

• Is globalization an engine of economic development?
• Is trade a major driver of income inequality?

Related topics

Economic Growth

See all our data, visualizations, and writing on economic growth.

Economic Inequality

See all our data, visualizations, and writing on economic inequality.

See all our data, visualizations, and writing on migration.

See all interactive charts on Trade and Globalization ↓

Trade has changed the world economy

Trade has grown remarkably over the last century.

One of the most important developments of the last century has been the integration of national economies into a global economic system. This process of integration, often called globalization, has resulted in a remarkable growth in trade between countries.

The chart here shows the growth of world exports over more than the last two centuries. These estimates are in constant prices (i.e. have been adjusted to account for inflation) and are indexed at 1913 values.

The chart shows an extraordinary growth in international trade over the last couple of centuries: Exports today are more than 40 times larger than in 1913.

You can switch to a logarithmic scale under ‘Settings’. This will help you see that, over the long run, growth has roughly followed an exponential path.

The increase in trade has even outpaced economic growth

The chart above shows how much more trade we have today relative to a century ago. But what about trade relative to total economic output?

Over the last couple of centuries the world economy has experienced sustained positive economic growth , so looking at changes in trade relative to GDP offers another interesting perspective.

The next chart plots the value of traded goods relative to GDP (i.e. the value of merchandise trade as a share of global economic output).

Up to 1870, the sum of worldwide exports accounted for less than 10% of global output. Today, the value of exported goods around the world is around 25%. This shows that over the last hundred years, the growth in trade has even outpaced rapid economic growth.

Trade expanded in two waves

The first "wave of globalization" started in the 19th century, the second one after ww2.

The following visualization presents a compilation of available trade estimates, showing the evolution of world exports and imports as a share of global economic output .

This metric (the ratio of total trade, exports plus imports, to global GDP) is known as the “openness index”. The higher the index, the higher the influence of trade transactions on global economic activity. 1

As we can see, until 1800 there was a long period characterized by persistently low international trade – globally the index never exceeded 10% before 1800. This then changed over the course of the 19th century, when technological advances triggered a period of marked growth in world trade – the so-called “first wave of globalization”.

This first wave came to an end with the beginning of World War I, when the decline of liberalism and the rise of nationalism led to a slump in international trade. In the chart we see a large drop in the interwar period.

After World War II trade started growing again. This new – and ongoing – wave of globalization has seen international trade grow faster than ever before. Today the sum of exports and imports across nations amounts to more than 50% of the value of total global output. 2

Before the first wave of globalization, trade was driven mostly by colonialism

Over the early modern period, transoceanic flows of goods between empires and colonies accounted for an important part of international trade. The following visualizations provide a comparison of intercontinental trade, in per capita terms, for different countries.

As we can see, intercontinental trade was very dynamic, with volumes varying considerably across time and from empire to empire.

Leonor Freire Costa, Nuno Palma, and Jaime Reis, who compiled and published the original data shown here, argue that trade, also in this period, had a substantial positive impact on the economy. 3

The first wave of globalization was marked by the rise and collapse of intra-European trade

The following visualization shows a detailed overview of Western European exports by destination. Figures correspond to export-to-GDP ratios (i.e. the sum of the value of exports from all Western European countries, divided by the total GDP in this region). You can use “Settings” to switch to a relative view and see the proportional contribution of each region to total Western European exports.

This chart shows that growth in Western European trade throughout the 19th century was largely driven by trade within the region: In the period 1830-1900 intra-European exports went from 1% of GDP to 10% of GDP, and this meant that the relative weight of intra-European exports doubled over the period. However, this process of European integration then collapsed sharply in the interwar period.

After the Second World War trade within Europe rebounded, and from the 1990s onwards exceeded the highest levels of the first wave of globalization. In addition, Western Europe then started to increasingly trade with Asia, the Americas, and to a smaller extent Africa and Oceania.

The next graph, using data from Broadberry and O'Rourke (2010) 4 , shows another perspective on the integration of the global economy and plots the evolution of three indicators measuring integration across different markets – specifically goods, labor, and capital markets.

The indicators in this chart are indexed, so they show changes relative to the levels of integration observed in 1900. This gives us another perspective on how quickly global integration collapsed with the two World Wars. 5

The second wave of globalization was enabled by technology

The worldwide expansion of trade after the Second World War was largely possible because of reductions in transaction costs stemming from technological advances, such as the development of commercial civil aviation, the improvement of productivity in the merchant marines, and the democratization of the telephone as the main mode of communication. The visualization shows how, at the global level, costs across these three variables have been going down since 1930.

Reductions in transaction costs impacted not only the volumes of trade but also the types of exchanges that were possible and profitable.

The first wave of globalization was characterized by inter-industry trade. This means that countries exported goods that were very different from what they imported – England exchanged machines for Australian wool and Indian tea. As transaction costs went down, this changed. In the second wave of globalization, we are seeing a rise in intra -industry trade (i.e. the exchange of broadly similar goods and services is becoming more and more common). France, for example, now both imports and exports machines to and from Germany.

The following visualization, from the UN World Development Report (2009) , plots the fraction of total world trade that is accounted for by intra-industry trade, by type of goods. As we can see, intra-industry trade has been going up for primary, intermediate, and final goods.

This pattern of trade is important because the scope for specialization increases if countries are able to exchange intermediate goods (e.g. auto parts) for related final goods (e.g. cars).

Trade and trade partners by country

Above, we examined the broad global trends over the last two centuries. Let's now examine country-level trends over this long and dynamic period.

This chart plots estimates of the value of trade in goods, relative to total economic activity (i.e. export-to-GDP ratios).

These historical estimates obviously come with a large margin of error (in the measurement section below we discuss the data limitations); yet they offer an interesting perspective.

You can edit the countries and regions selected. Each country tells a different story. 7

In the next chart we plot, country by country, the regional breakdown of exports. India is shown by default, but you can edit the countries and regions shown.

When switching to displaying relative values under ‘Settings’, we see the proportional contribution of purchases from each region. For example, we see that more than a third of Indian exports went to Asian countries in recent decades.

This gives us an interesting perspective on the changing nature of trade partnerships. In India, we see the rising importance of trade with Africa—a pattern that we discuss in more detail below .

Trade around the world today

How much do countries trade, trade openness around the world.

The metric trade as a share of GDP gives us an idea of global integration by capturing all incoming and outgoing transactions of a country.

The charts shows that countries differ a lot in the extent to which they engage in trade. Trade, for example, is much less important to the US economy than for other rich countries.

If you press the play button on the map, you can see changes over time. This reveals that, despite the great variation between countries, there is a common trend: over the last couple of decades trade openness has gone up in most countries.

Exports and imports in real dollars

Expressing the value of trade as a share of GDP tells us the importance of trade in relation to the size of economic activity. Let's now take a look at trade in monetary terms – this tells us the importance of trade in absolute, rather than relative terms.

The chart shows the value of exports (goods plus services) in dollars, country by country.

The main takeaway here is that the trend towards more trade is more pronounced than in the charts showing shares of GDP. This is not surprising: most countries today produce more than a couple of decades ago , and at the same time they trade more of what they produce. 8

What do countries trade?

Trade in goods vs. trade in services.

Trade transactions include goods (tangible products that are physically shipped across borders by road, rail, water, or air) and services (intangible commodities, such as tourism, financial services, and legal advice).

Many traded services make merchandise trade easier or cheaper—for example, shipping services, or insurance and financial services.

Trade in goods has been happening for millennia , while trade in services is a relatively recent phenomenon.

In some countries services are today an important driver of trade: in the UK services account for around half of all exports; and in the Bahamas, almost all exports are services.

In other countries, such as Nigeria and Venezuela, services account for a small share of total exports.

Globally, trade in goods accounts for the majority of trade transactions. But as this chart shows, the share of services in total global exports has slightly increased in recent decades. 9

How are trade partnerships changing?

Bilateral trade is becoming increasingly common.

If we consider all pairs of countries that engage in trade around the world, we find that in the majority of cases, there is a bilateral relationship today: most countries that export goods to a country also import goods from the same country.

The interactive visualization shows this. 10 In the chart, all possible country pairs are partitioned into three categories: the top portion represents the fraction of country pairs that do not trade with one another; the middle portion represents those that trade in both directions (they export to one another); and the bottom portion represents those that trade in one direction only (one country imports from, but does not export to, the other country).

As we can see, bilateral trade is becoming increasingly common (the middle portion has grown substantially). However, many countries still do not trade with each other at all.

South-South trade is becoming increasingly important

The next visualization here shows the share of world merchandise trade that corresponds to exchanges between today's rich countries and the rest of the world.

The 'rich countries' in this chart are: Australia, Austria, Belgium, Canada, Cyprus, Denmark, Finland, France, Germany, Greece, Iceland, Ireland, Israel, Italy, Japan, Luxembourg, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, United Kingdom and the United States. 'Non-rich countries' are all the other countries in the world.

As we can see, up until the Second World War, the majority of trade transactions involved exchanges between this small group of rich countries. But this has changed quickly over the last couple of decades, and today, trade between non-rich countries is just as important as trade between rich countries.

In the past two decades, China has been a key driver of this dynamic: the UN Human Development Report (2013) estimates that between 1992 and 2011, China's trade with Sub-Saharan Africa rose from $1 billion to more than $140 billion. 11

The majority of preferential trade agreements are between emerging economies

The last few decades have not only seen an increase in the volume of international trade, but also an increase in the number of preferential trade agreements through which exchanges take place. A preferential trade agreement is a trade pact that reduces tariffs between the participating countries for certain products.

The visualization here shows the evolution of the cumulative number of preferential trade agreements in force worldwide, according to the World Trade Organization (WTO). These numbers include notified and non-notified preferential agreements (the source reports that only about two-thirds of the agreements currently in force have been notified to the WTO) and are disaggregated by country groups.

This figure shows the increasingly important role of trade between developing countries (South-South trade), vis-a-vis trade between developed and developing countries (North-South trade). In the late 1970s, North-South agreements accounted for more than half of all agreements – in 2010, they accounted for about one-quarter. Today, the majority of preferential trade agreements are between developing economies.

Trading patterns have been changing quickly in middle-income countries

An important change in the composition of exported goods in these countries has accompanied the increase in trade among emerging economies over the last half century.

The next visualization plots the share of food exports in each country's total exported merchandise. These figures, produced by the World Bank, correspond to the Standard International Trade Classification, in which 'food' includes, among other goods, live animals, beverages, tobacco, coffee, oils, and fats.

Two points stand out. First, the relative importance of food exports has substantially decreased in most countries since the 1960s (although globally, it has gone up slightly more recently). Second, this decrease has been largest in middle-income countries, particularly in Latin America.

Regarding levels, as one would expect, in high-income countries, food still accounts for a much smaller share of merchandise exports than in most low- and middle-income-countries.

Trade generates efficiency gains

The raw correlation between trade and growth.

Over the last couple of centuries, the world economy has experienced sustained positive economic growth , and over the same period, this process of economic growth has been accompanied by even faster growth in global trade .

In a similar way, if we look at country-level data from the last half century we find that there is also a correlation between economic growth and trade: countries with higher rates of GDP growth also tend to have higher rates of growth in trade as a share of output. This basic correlation is shown in the chart here, where we plot the average annual change in real GDP per capita, against growth in trade (average annual change in value of exports as a share of GDP). 12

Is this statistical association between economic output and trade causal?

Among the potential growth-enhancing factors that may come from greater global economic integration are: competition (firms that fail to adopt new technologies and cut costs are more likely to fail and be replaced by more dynamic firms); economies of scale (firms that can export to the world face larger demand, and under the right conditions, they can operate at larger scales where the price per unit of product is lower); learning and innovation (firms that trade gain more experience and exposure to develop and adopt technologies and industry standards from foreign competitors). 13

Are these mechanisms supported by the data? Let's take a look at the available empirical evidence.

Evidence from cross-country differences in trade, growth, and productivity

When it comes to academic studies estimating the impact of trade on GDP growth, the most cited paper is Frankel and Romer (1999). 14

In this study, Frankel and Romer used geography as a proxy for trade to estimate the impact of trade on growth. This is a classic example of the so-called instrumental variables approach . The idea is that a country's geography is fixed, and mainly affects national income through trade. So if we observe that a country's distance from other countries is a powerful predictor of economic growth (after accounting for other characteristics), then the conclusion is drawn that it must be because trade has an effect on economic growth. Following this logic, Frankel and Romer find evidence of a strong impact of trade on economic growth.

Other papers have applied the same approach to richer cross-country data, and they have found similar results. A key example is Alcalá and Ciccone (2004). 15

This body of evidence suggests trade is indeed one of the factors driving national average incomes (GDP per capita) and macroeconomic productivity (GDP per worker) over the long run. 16

Evidence from changes in labor productivity at the firm level

If trade is causally linked to economic growth, we would expect that trade liberalization episodes also lead to firms becoming more productive in the medium and even short run. There is evidence suggesting this is often the case.

Pavcnik (2002) examined the effects of liberalized trade on plant productivity in the case of Chile, during the late 1970s and early 1980s. She found a positive impact on firm productivity in the import-competing sector. She also found evidence of aggregate productivity improvements from the reshuffling of resources and output from less to more efficient producers. 17

Bloom, Draca, and Van Reenen (2016) examined the impact of rising Chinese import competition on European firms over the period 1996-2007 and obtained similar results. They found that innovation increased more in those firms most affected by Chinese imports. They also found evidence of efficiency gains through two related channels: innovation increased and new existing technologies were adopted within firms, and aggregate productivity also increased because employment was reallocated towards more technologically advanced firms. 18

Trade does not only increase efficiency gains

Overall, the available evidence suggests that trade liberalization does improve economic efficiency. This evidence comes from different political and economic contexts and includes both micro and macro measures of efficiency.

This result is important because it shows that there are gains from trade. But of course, efficiency is not the only relevant consideration here. As we discuss in a companion article , the efficiency gains from trade are not generally equally shared by everyone. The evidence from the impact of trade on firm productivity confirms this: "reshuffling workers from less to more efficient producers" means closing down some jobs in some places. Because distributional concerns are real it is important to promote public policies – such as unemployment benefits and other safety-net programs – that help redistribute the gains from trade.

Trade has distributional consequences

The conceptual link between trade and household welfare.

When a country opens up to trade, the demand and supply of goods and services in the economy shift. As a consequence, local markets respond, and prices change. This has an impact on households, both as consumers and as wage earners.

The implication is that trade has an impact on everyone. It's not the case that the effects are restricted to workers from industries in the trade sector; or to consumers who buy imported goods. The effects of trade extend to everyone because markets are interlinked, so imports and exports have knock-on effects on all prices in the economy, including those in non-traded sectors.

Economists usually distinguish between "general equilibrium consumption effects" (i.e. changes in consumption that arise from the fact that trade affects the prices of non-traded goods relative to traded goods) and "general equilibrium income effects" (i.e. changes in wages that arise from the fact that trade has an impact on the demand for specific types of workers, who could be employed in both the traded and non-traded sectors).

Considering all these complex interrelations, it's not surprising that economic theories predict that not everyone will benefit from international trade in the same way. The distribution of the gains from trade depends on what different groups of people consume, and which types of jobs they have, or could have. 19

The link between trade, jobs and wages

Evidence from chinese imports and their impact on factory workers in the us.

The most famous study looking at this question is Autor, Dorn and Hanson (2013): "The China syndrome: Local labor market effects of import competition in the United States". 20

In this paper, Autor and coauthors examined how local labor markets changed in the parts of the country most exposed to Chinese competition. They found that rising exposure increased unemployment, lowered labor force participation, and reduced wages. Additionally, they found that claims for unemployment and healthcare benefits also increased in more trade-exposed labor markets.

The visualization here is one of the key charts from their paper. It's a scatter plot of cross-regional exposure to rising imports, against changes in employment. Each dot is a small region (a 'commuting zone' to be precise). The vertical position of the dots represents the percent change in manufacturing employment for the working-age population, and the horizontal position represents the predicted exposure to rising imports (exposure varies across regions depending on the local weight of different industries).

The trend line in this chart shows a negative relationship: more exposure goes along with less employment. There are large deviations from the trend (there are some low-exposure regions with big negative changes in employment); but the paper provides more sophisticated regressions and robustness checks, and finds that this relationship is statistically significant.

This result is important because it shows that the labor market adjustments were large. Many workers and communities were affected over a long period of time. 21

But it's also important to keep in mind that Autor and colleagues are only giving us a partial perspective on the total effect of trade on employment. In particular, comparing changes in employment at the regional level misses the fact that firms operate in multiple regions and industries at the same time. Indeed, Ildikó Magyari found evidence suggesting the Chinese trade shock provided incentives for US firms to diversify and reorganize production. 22

So companies that outsourced jobs to China often ended up closing some lines of business, but at the same time expanded other lines elsewhere in the US. This means that job losses in some regions subsidized new jobs in other parts of the country.

On the whole, Magyari finds that although Chinese imports may have reduced employment within some establishments, these losses were more than offset by gains in employment within the same firms in other places. This is no consolation to people who lost their jobs. But it is necessary to add this perspective to the simplistic story of "trade with China is bad for US workers".

Evidence from the expansion of trade in India and the impact on poverty reductions

Another important paper in this field is Topalova (2010): "Factor immobility and regional impacts of trade liberalization: Evidence on poverty from India". 23

In this paper, Topalova examines the impact of trade liberalization on poverty across different regions in India, using the sudden and extensive change in India's trade policy in 1991. She finds that rural regions that were more exposed to liberalization experienced a slower decline in poverty and lower consumption growth.

Analyzing the mechanisms underlying this effect, Topalova finds that liberalization had a stronger negative impact among the least geographically mobile at the bottom of the income distribution and in places where labor laws deterred workers from reallocating across sectors.

The evidence from India shows that (i) discussions that only look at "winners" in poor countries and "losers" in rich countries miss the point that the gains from trade are unequally distributed within both sets of countries; and (ii) context-specific factors, like worker mobility across sectors and geographic regions, are crucial to understand the impact of trade on incomes.

Evidence from other studies

• Donaldson (2018) uses archival data from colonial India to estimate the impact of India’s vast railroad network. He finds railroads increased trade, and in doing so they increased real incomes (and reduced income volatility). 24
• Porto (2006) looks at the distributional effects of Mercosur on Argentine families, and finds this regional trade agreement led to benefits across the entire income distribution. He finds the effect was progressive: poor households gained more than middle-income households because prior to the reform, trade protection benefitted the rich disproportionately. 25
• Trefler (2004) looks at the Canada-US Free Trade Agreement and finds there was a group who bore "adjustment costs" (displaced workers and struggling plants) and a group who enjoyed "long-run gains" (consumers and efficient plants). 26

The link between trade and the cost of living

The fact that trade negatively affects labor market opportunities for specific groups of people does not necessarily imply that trade has a negative aggregate effect on household welfare. This is because, while trade affects wages and employment, it also affects the prices of consumption goods. So households are affected both as consumers and as wage earners.

Most studies focus on the earnings channel and try to approximate the impact of trade on welfare by looking at how much wages can buy, using as a reference the changing prices of a fixed basket of goods.

This approach is problematic because it fails to consider welfare gains from increased product variety, and obscures complicated distributional issues such as the fact that poor and rich individuals consume different baskets so they benefit differently from changes in relative prices. 27

Ideally, studies looking at the impact of trade on household welfare should rely on fine-grained data on prices, consumption, and earnings. This is the approach followed in Atkin, Faber, and Gonzalez-Navarro (2018): "Retail globalization and household welfare: Evidence from Mexico". 28

Atkin and coauthors use a uniquely rich dataset from Mexico, and find that the arrival of global retail chains led to reductions in the incomes of traditional retail sector workers, but had little impact on average municipality-level incomes or employment; and led to lower costs of living for both rich and poor households.

The chart here shows the estimated distribution of total welfare gains across the household income distribution (the light-gray lines correspond to confidence intervals). These are proportional gains expressed as a percent of initial household income.

As we can see, there is a net positive welfare effect across all income groups; but these improvements in welfare are regressive, in the sense that richer households gain proportionally more (about 7.5 percent gain compared to 5 percent). 29

Evidence from other countries confirms this is not an isolated case – the expenditure channel really seems to be an important and understudied source of household welfare. Giuseppe Berlingieri, Holger Breinlich, Swati Dhingra, for example, investigated the consumer benefits from trade agreements implemented by the EU between 1993 and 2013; and they found that these trade agreements increased the quality of available products, which translated into a cumulative reduction in consumer prices equivalent to savings of €24 billion per year for EU consumers. 30

Implications of trade’s distributional effects

The available evidence shows that, for some groups of people, trade has a negative effect on wages and employment opportunities; at the same time, it has a large positive effect via lower consumer prices and increased product availability.

Two points are worth emphasizing.

For some households, the net effect is positive. But for some households that's not the case. In particular, workers who lose their jobs can be affected for extended periods of time, so the positive effect via lower prices is not enough to compensate them for the reduction in earnings.

On the whole, if we aggregate changes in welfare across households, the net effect is usually positive. But this is hardly a consolation for the worse off.

This highlights a complex reality: There are aggregate gains from trade , but there are also real distributional concerns. Even if trade is not a major driver of income inequalities , it's important to keep in mind that public policies, such as unemployment benefits and other safety-net programs, can and should help redistribute the gains from trade.

Explaining trade patterns: Theory and Evidence

Comparative advantage, theory: what is 'comparative advantage' and why does it matter to understand trade.

In economic theory, the 'economic cost' – or the 'opportunity cost' – of producing a good is the value of everything you need to give up in order to produce that good.

Economic costs include physical inputs (the value of the stuff you use to produce the good), plus forgone opportunities (when you allocate scarce resources to a task, you give up alternative uses of those resources).

A country or a person is said to have a 'comparative advantage' if it can produce something at a lower opportunity cost than its trade partners.

The forgone opportunities of production are key to understanding this concept. It is precisely this that distinguishes absolute advantage from comparative advantage.

To see the difference between comparative and absolute advantage, consider a commercial aviation pilot and a baker. Suppose the pilot is an excellent chef, and she can bake just as well, or even better than the baker. In this case, the pilot has an absolute advantage in both tasks. Yet the baker probably has a comparative advantage in baking, because the opportunity cost of baking is much higher for the pilot.

The freely available economics textbook The Economy: Economics for a Changing World explains this as follows: "A person or country has comparative advantage in the production of a particular good, if the cost of producing an additional unit of that good relative to the cost of producing another good is lower than another person or country’s cost to produce the same two goods."

At the individual level, comparative advantage explains why you might want to delegate tasks to someone else, even if you can do those tasks better and faster than them. This may sound counterintuitive, but it is not: If you are good at many things, it means that investing time in one task has a high opportunity cost, because you are not doing the other amazing things you could be doing with your time and resources. So, at least from an efficiency point of view, you should specialize on what you are best at, and delegate the rest.

The same logic applies to countries. Broadly speaking, the principle of comparative advantage postulates that all nations can gain from trade if each specializes in producing what they are relatively more efficient at producing, and imports the rest: “do what you do best, import the rest”. 31

In countries with a relative abundance of certain factors of production, the theory of comparative advantage predicts that they will export goods that rely heavily upon those factors: a country typically has a comparative advantage in those goods that use its abundant resources. Colombia exports bananas to Europe because it has comparatively abundant tropical weather.

Is there empirical support for comparative-advantage theories of trade?

The empirical evidence suggests that the principle of comparative advantage does help explain trade patterns. Bernhofen and Brown (2004) 32 , for instance, provide evidence using the experience of Japan. Specifically, they exploit Japan’s dramatic nineteenth-century move from a state of near complete isolation to wide trade openness.

The graph here shows the price changes of the key tradable goods after the opening up to trade. It presents a scatter diagram of the net exports in 1869 graphed in relation to the change in prices from 1851–53 to 1869. As we can see, this is consistent with the theory: after opening to trade, the relative prices of major exports such as silk increased (Japan exported what was cheap for them to produce and which was valuable abroad), while the relative price of imports such as sugar declined (they imported what was relatively more difficult for them to produce, but was cheap abroad).

Trade diminishes with distance

The resistance that geography imposes on trade has long been studied in the empirical economics literature – and the main conclusion is that trade intensity is strongly linked to geographic distance.

The visualization, from Eaton and Kortum (2002), graphs 'normalized import shares' against distance. 33 Each dot represents a country pair from a set of 19 OECD countries, and both the vertical and horizontal axes are expressed on logarithmic scales.

The 'normalized import shares' in the vertical axis provide a measure of how much each country imports from different partners (see the paper for details on how this is calculated and normalized), while the distance in the horizontal axis corresponds to the distance between central cities in each country (see the paper and references therein for details on the list of cities). As we can see, there is a strong negative relationship. Trade diminishes with distance. Through econometric modeling, the paper shows that this relationship is not just a correlation driven by other factors: their findings suggest that distance imposes a significant barrier to trade.

The fact that trade diminishes with distance is also corroborated by data on trade intensity within countries. The visualization here shows, through a series of maps, the geographic distribution of French firms that export to France's neighboring countries. The colors reflect the percentage of firms that export to each specific country.

As we can see, the share of firms exporting to each of the corresponding neighbors is the largest close to the border. The authors also show in the paper that this pattern holds for the value of individual-firm exports – trade value decreases with distance to the border.

Institutions

Conducting international trade requires both financial and non-financial institutions to support transactions. Some of these institutions are fairly obvious (e.g. law enforcement); but some are less obvious. For example, the evidence shows that producers in exporting countries often need credit in order to engage in trade.

The scatter plot, from Manova (2013), shows the correlation between levels in private credit (specifically exporters’ private credit as a share of GDP) and exports (average log bilateral exports across destinations and sectors). 35 As can be seen, financially developed economies – those with more dynamic private credit markets – typically outperform exporters with less evolved financial institutions.

Other studies have shown that country-specific institutions, like the knowledge of foreign languages, for instance, are also important to promote foreign relative to domestic trade. 36

Increasing returns to scale

The concept of comparative advantage predicts that if all countries had identical endowments and institutions, there would be little incentive for specialization because the opportunity cost of producing any good would be the same in every country.

So you may wonder: why is it then the case that in the last few years, we have seen such rapid growth in intra-industry trade between rich countries?

The increase in intra-industry between rich countries seems paradoxical under the light of comparative advantage because in recent decades we have seen convergence in key factors, such as human capital , across these countries.

The solution to the paradox is actually not very complicated: Comparative advantage is one, but not the only force driving incentives to specialization and trade.

Several economists, most notably Paul Krugman, have developed theories of trade in which trade is not due to differences between countries, but instead due to "increasing returns to scale" – an economic term used to denote a technology in which producing extra units of a good becomes cheaper if you operate at a larger scale.

The idea is that specialization allows countries to reap greater economies of scale (i.e. to reduce production costs by focusing on producing large quantities of specific products), so trade can be a good idea even if the countries do not differ in endowments, including culture and institutions.

These models of trade, often referred to as “New Trade Theory”, are helpful in explaining why in the last few years we have seen such rapid growth in two-way exchanges of goods within industries between developed nations.

In a much-cited paper, Evenett and Keller (2002) show that both factor endowments and increasing returns help explain production and trade patterns around the world. 37

You can learn more about New Trade Theory, and the empirical support behind it, in Paul Krugman's Nobel lecture .

Measurement and data quality

There are dozens of official sources of data on international trade, and if you compare these different sources, you will find that they do not agree with one another. Even if you focus on what seems to be the same indicator for the same year in the same country, discrepancies are large.

Such differences between sources can also be found in rich countries where statistical agencies tend to follow international reporting guidelines more closely.

There are also large bilateral discrepancies within sources: the value of goods that country A exports to country B can be more than the value of goods that country B imports from country A.

Here we explain how international trade data is collected and processed, and why there are such large discrepancies.

What data is available?

The data hubs from several large international organizations publish and maintain extensive cross-country datasets on international trade. Here's a list of the most important ones:

• World Bank Open Data
• WTO Statistics
• UN Comtrade
• UNCTAD World Integrated Trade Solutions

In addition to these sources, there are also many other academic projects that publish data on international trade. These projects tend to rely on data from one or more of the sources above, and they typically process and merge series in order to improve coverage and consistency. Three important sources are:

• The Correlates of War Project . 38
• The NBER-United Nations Trade Dataset Project .
• The CEPII Bilateral Trade and Gravity Data Project . 39

How large are the discrepancies between sources?

In the visualization here, we compare the data published by several of the sources listed above, country by country, from 1955 to today.

For each country, we exclude trade in services, and we focus only on estimates of the total value of exported goods, expressed as shares of GDP. 40

As this chart clearly shows, different data sources often tell very different stories. If you change the country or region shown you will see that this is true, to varying degrees, across all countries and years.

Constructing this chart was demanding. It required downloading trade data from many different sources, collecting the relevant series, and then standardizing them so that the units of measure and the geographical territories were consistent.

All series, except the two long-run series from CEPII and NBER-UN, were produced from data published by the sources in current US dollars and then converted to GDP shares using a unique source (World Bank).

So, if all series are in the same units (share of national GDP) and they measure the same thing (value of goods exported from one country to the rest of the world), what explains the differences?

Let's dig deeper to understand what's going on.

Why doesn't the data add up?

Differences in guidelines used by countries to record and report trade data.

Broadly speaking, there are two main approaches used to estimate international merchandise trade:

• The first approach relies on estimating trade from customs records , often complementing or correcting figures with data from enterprise surveys and administrative records associated with taxation. The main manual providing guidelines for this approach is the International Merchandise Trade Statistics Manual (IMTS).
• The second approach relies on estimating trade from macroeconomic data , typically National Accounts . The main manual providing guidelines for this approach is the Balance of Payments and International Investment Position Manual (BPM6), which was drafted in parallel with the 2008 System of National Accounts of the United Nations (SNA 2008). The idea behind this approach is to record changes in economic ownership. 41

Under these two approaches, it is common to distinguish between 'traded merchandise' and 'traded goods'. The distinction is often made because goods simply being transported through a country (i.e., goods in transit) are not considered to change a country's stock of material resources and are hence often excluded from the more narrow concept of 'merchandise trade'.

Also, adding to the complexity, countries often rely on measurement protocols developed alongside approaches and concepts that are not perfectly compatible to begin with. In Europe, for example, countries use the 'Compilers guide on European statistics on international trade in goods'.

Measurement error and other inconsistencies

Even when two sources rely on the same broad accounting approach, discrepancies arise because countries fail to adhere perfectly to the protocols.

In theory, for example, the exports of country A to country B should mirror the imports of country B from country A. But in practice this is rarely the case because of differences in valuation. According to the BPM6, imports, and exports should be recorded in the balance of payments accounts on a ' free on board (FOB) basis', which means using prices that include all charges up to placing the goods on board a ship at the port of departure. Yet many countries stick to FOB values only for exports, and use CIF values for imports (CIF stands for 'Cost, Insurance and Freight', and includes the costs of transportation). 42

The chart here gives you an idea of how large import-export asymmetries are. Shown are the differences between the value of goods that each country reports exporting to the US, and the value of goods that the US reports importing from the same countries. For example, for China, the figure in the chart corresponds to the “Value of merchandise imports in the US from China” minus the “Value of merchandise exports from China to the US”.

The differences in the chart here, which are both positive and negative, suggest that there is more going on than differences in FOB vs. CIF values. If all asymmetries were coming from FOB-CIF differences, then we should only see positive values in the chart (recall that, unlike FOB values, CIF values include the cost of transportation, so CIF values are larger).

What else may be going on here?

Another common source of measurement error relates to the inconsistent attribution of trade partners. An example is failure to follow the guidelines on how to treat goods passing through intermediary countries for processing or merchanting purposes. As global production chains become more complex, countries find it increasingly difficult to unambiguously establish the origin and final destination of merchandise, even when rules are established in the manuals. 43

And there are still more potential sources of discrepancies. For example differences in customs and tax regimes, and differences between "general" and "special" trade systems (i.e. differences between statistical territories and actual country borders, which do not often coincide because of things like 'custom free zones'). 44

Even when two sources have identical trade estimates, inconsistencies in published data can arise from differences in exchange rates. If a dataset reports cross-country trade data in US dollars, estimates will vary depending on the exchange rates used. Different exchange rates will lead to conflicting estimates, even if figures in local currency units are consistent.

A checklist for comparing sources

Asymmetries in international trade statistics are large and arise for a variety of reasons. These include conceptual inconsistencies across measurement standards and inconsistencies in the way countries apply agreed-upon protocols. Here's a checklist of issues to keep in mind when comparing sources.

• Differences in underlying records: is trade measured from National Accounts data rather than directly from custom or tax records?
• Differences in import and export valuations: are transactions valued at FOB or CIF prices?
• Inconsistent attribution of trade partners: how is the origin and final destination of merchandise established?
• Difference between 'goods' and 'merchandise': how are re-importing, re-exporting, and intermediary merchanting transactions recorded?
• Exchange rates: how are values converted from local currency units to the currency that allows international comparisons (most often the US-$)?
• Differences between 'general' and 'special' trade system: how is trade recorded for custom-free zones?
• Other issues: Time of recording, confidentiality policies, product classification, deliberate mis-invoicing for illicit purposes.

Many organizations producing trade data have long recognized these factors. Indeed, international organizations often incorporate corrections in an attempt to improve data quality.

The OECD's Balanced International Merchandise Trade Statistics , for example, uses its own approach to correct and reconcile international merchandise trade statistics. 45

The corrections applied in the OECD's 'balanced' series make this the best source for cross-country comparisons. However, this dataset has low coverage across countries, and it only goes back to 2011. This is an important obstacle since the complex adjustments introduced by the OECD imply we can't easily improve coverage by appending data from other sources. At Our World in Data we have chosen to rely on CEPII as the main source for exploring long-run changes in international trade, but we also rely on World Bank and OECD data for up-to-date cross-country comparisons.

There are two key lessons from all of this. The first lesson is that, for most users of trade data out there, there is no obvious way of choosing between sources. And the second lesson is that, because of statistical glitches, researchers and policymakers should always take analyses of trade data with a pinch of salt. For example, in a recent high-profile report , researchers attributed mismatches in bilateral trade data to illicit financial flows through trade mis-invoicing (or trade-based money laundering). As we show here, this interpretation of the data is not appropriate, since mismatches in the data can, and often do arise from measurement inconsistencies rather than malfeasance. 46

Hopefully, the discussion and checklist above can help researchers better interpret and choose between conflicting data sources.

Interactive charts on Trade and Globalization

The openness index, when calculated for the world as a whole, includes double-counting of transactions: When country A sells goods to country B, this shows up in the data both as an import (B imports from A) and as an export (A sells to B).

Indeed, if you compare the chart showing the global trade openness index and the chart showing global merchandise exports as a share of GDP , you find that the former is almost twice as large as the latter.

Why is the global openness index not exactly twice the value reported in the chart plotting global merchandise exports? There a three reasons.

First, the global openness index uses different sources. Second, the global openness index includes trade in goods and services, while merchandise exports include goods but not services. And third, the amount that country A reports exporting to country B does not usually match the amount that B reports importing from A.

We explore this in more detail in our measurement section below .

Klasing and Milionis (2014), one of the sources in the chart, published an additional set of estimates under an alternative specification. Similarly, for the period 1960-2015, the World Bank's World Development Indicators published an alternative set of estimates similar but not identical to those included from the Penn World Tables (9.1). You find all these alternative overlapping sources in this comparison chart .

Leonor Freire Costa, Nuno Palma, and Jaime Reis (2015) – The great escape? The contribution of the empire to Portugal's economic growth, 1500–1800 Leonor Freire Costa Nuno Palma Jaime Reis European Review of Economic History, Volume 19, Issue 1, 1 February 2015, Pages 1–22, https://doi.org/10.1093/ereh/heu019

Broadberry and O'Rourke (2010) - The Cambridge Economic History of Modern Europe: Volume 2, 1870 to the Present. Cambridge University Press.

Integration in the goods markets is measured here through the 'trade openness index', which is defined by the sum of exports and imports as a share of GDP. In our interactive chart you can explore trends in trade openness over this period for a selection of European countries.

Broadberry and O'Rourke (2010) - The Cambridge Economic History of Modern Europe: Volume 2, 1870 to the Present. Cambridge University Press. The graph depicts the “evolution of three indicators measuring integration in commodity, labor, and capital markets over the long run. Commodity market integration is measured by computing the ratio of exports to GDP. Labor market integration is measured by dividing the migratory turnover by population. Financial integration is measured using Feldstein–Horioka estimators of current account disconnectedness.”

We also have the same chart but showing imports .

We also have the same chart, but showing imports .

This interactive chart shows trade in services as a share of GDP across countries and regions.

This chart was inspired by a chart from Helpman, E., Melitz, M., & Rubinstein, Y. (2007). Estimating trade flows: Trading partners and trading volumes (No. w12927). National Bureau of Economic Research.

We also have the same data, but as a stacked-area chart .

There are different ways of capturing this correlation. I focus here on all countries with data over the period 1945-2014. You can find a similar chart using different data sources and time periods in Ventura, J. (2005). A global view of economic growth. Handbook of economic growth, 1, 1419-1497. Online here .

The textbook The Economy: Economics for a Changing World explains this in more detail.

Frankel, J. A., & Romer, D. H. (1999). Does trade cause growth? American Economic Review, 89(3), 379-399.

Alcalá, F., & Ciccone, A. (2004). Trade and productivity . The Quarterly Journal of Economics, 119(2), 613-646.

There are many papers that try to answer this specific question with macro data. For an overview of papers and methods see: Durlauf, S. N., Johnson, P. A., & Temple, J. R. (2005). Growth econometrics. Handbook of economic growth, 1, 555-677.

Pavcnik, N. (2002). Trade liberalization, exit, and productivity improvements: Evidence from Chilean plants . The Review of Economic Studies, 69(1), 245-276.

Bloom, N., Draca, M., & Van Reenen, J. (2016). Trade induced technical change? The impact of Chinese imports on innovation, IT and productivity. The Review of Economic Studies, 83(1), 87-117. Available online here .

You can read more about these economic concepts, and the related predictions from economic theory, in Chapter 18 of the textbook The Economy: Economics for a Changing World .

David, H., Dorn, D., & Hanson, G. H. (2013). The China syndrome: Local labor market effects of import competition in the United States . American Economic Review, 103(6), 2121-68.

It's important to mention here that the economist Jonathan Rothwell wrote a paper suggesting these findings are the result of a statistical illusion. Rothwell's critique received some attention from the media , but Autor and coauthors provided a reply , which I think successfully refutes this claim.

Magyari, I. (2017). Firm Reorganization, Chinese Imports, and US Manufacturing Employment . US Census Bureau, Center for Economic Studies.

Topalova, P. (2010). Factor immobility and regional impacts of trade liberalization: Evidence on poverty from India . American Economic Journal: Applied Economics, 2(4), 1-41.

Donaldson, D. (2018). Railroads of the Raj: Estimating the impact of transportation infrastructure . American Economic Review, 108(4-5), 899-934.

Porto, G (2006). Using Survey Data to Assess the Distributional Effects of Trade Policy. Journal of International Economics 70 (2006) 140–160.

Trefler, D. (2004). The long and short of the Canada-US free trade agreement . American Economic Review, 94(4), 870-895.

See: (i) Feenstra, R. C., & Weinstein, D. E. (2017). Globalization, markups, and US welfare . Journal of Political Economy, 125(4), 1040-1074. (ii) Fajgelbaum, P. D., & Khandelwal, A. K. (2016). Measuring the unequal gains from trade . The Quarterly Journal of Economics, 131(3), 1113-1180.

Atkin, David, Benjamin Faber, and Marco Gonzalez-Navarro. "Retail globalization and household welfare: Evidence from Mexico." Journal of Political Economy 126.1 (2018): 1-73.

In the paper, Atkin and coauthors explore the reasons for this and find that the regressive nature of the distribution is mainly due to richer households placing higher weight on the product variety and shopping amenities on offer at these new foreign stores.

Berlingieri, G., Breinlich, H., & Dhingra, S. (2018). The Impact of Trade Agreements on Consumer Welfare—Evidence from the EU Common External Trade Policy. Journal of the European Economic Association.

Nobel laureate Paul Samuelson (1969) was once challenged by the mathematician Stanislaw Ulam: "Name me one proposition in all of the social sciences which is both true and non-trivial." It was several years later than he thought of the correct response: comparative advantage. "That it is logically true need not be argued before a mathematician; that is is not trivial is attested by the thousands of important and intelligent men who have never been able to grasp the doctrine for themselves or to believe it after it was explained to them."

(NB. This is an excerpt from https://www.wto.org/english/res_e/reser_e/cadv_e.htm)

Bernhofen, D., & Brown, J. (2004). A Direct Test of the Theory of Comparative Advantage: The Case of Japan. Journal of Political Economy, 112(1), 48-67. doi:1. Retrieved from http://www.jstor.org/stable/10.1086/379944 doi:1

Eaton, J., & Kortum, S. (2002). Technology, geography, and trade. Econometrica, 70(5), 1741-1779.

Crozet, M., & Koenig, P. (2010). Structural Gravity Equations with Intensive and Extensive Margins. The Canadian Journal of Economics / Revue Canadienne D'Economique, 43(1), 41-62. Retrieved from http://www.jstor.org/stable/40389555

Manova, Kalina. "Credit constraints, heterogeneous firms, and international trade." The Review of Economic Studies 80.2 (2013): 711-744.

Melitz, J. (2008). Language and foreign trade. European Economic Review, 52(4), 667-699.

Evenett, S. J., & Keller, W. (2002). On theories explaining the success of the gravity equation . Journal of Political Economy, 110(2), 281-316.

For more information on how the COW trade datasets were constructed see: (i) Barbieri, Katherine, and Omar M. G. Omar Keshk. 2016. Correlates of War Project Trade Data Set Codebook, Version 4.0. Available at http://correlatesofwar.org and (ii) Barbieri, Katherine, Omar M. G. Keshk, and Brian Pollins. 2009. TRADING DATA: Evaluating our Assumptions and Coding Rules. Conflict Management and Peace Science, 26(5): 471–491.

Further information on CEPII's methodology can be found in their working paper .

The chart includes series labeled by the sources as 'merchandise trade' and 'goods trade'. As we explain below, part of the asymmetries in trade data comes from the fact that, although 'merchandise' and 'goods' are equivalent in the dictionary, these two terms often measure related but different things.

For example, if there is no change in ownership (e.g. a firm exports goods to its factory in another country for processing, and then re-imports the processed goods) the manual says that statistical agencies should only record the net difference in value. You can find more details about this in an OECD Statistics Briefing .

This issue is actually also a source of disagreement between National Accounts data and customs data. You can read more about it in this report: Harrison, Anne (2013) FOB/CIF Issue in Merchandise Trade/Transport of Goods in BPM6 and the 2008 SNA, Twenty-Fifth Meeting of the IMF Committee on Balance of Payments Statistics, Washington, D.C .

Precisely because of the difficulty that arises when trying to establish the origin and final destination of merchandise, some sources distinguish between national and dyadic (i.e. 'directed') trade estimates.

For more details about general and special trade see the Eurostat glossary .

The OECD approach consists of four steps, which they describe as follows: "First, data are collected and organized, and imports are converted to FOB prices to match the valuation of exports. Secondly, data are adjusted for several specific large problems known to drive asymmetries. Presently these include “modular” adjustments for unallocated and confidential trade; for exports by Hong Kong, China; for Swiss non-monetary gold; and for clear-cut cases of product misclassifications. The list of modules is expected to grow over time. In the third step, adjusted data are balanced using a “Symmetry Index” that weights exports and imports. As the final step, the data are also converted to Classification of Products by Activity (CPA) products to better align with National Accounts statistics, such as in national Supply-Use tables." You can read more about it here . In addition to the OECD, other sources also use corrections. The IMF's DOTS dataset, for example, uses a 6 percent rule for converting import valuations (in CIF) into export values (in FOB). More information can be found in the IMF's (2018) working paper on 'New Estimates for Direction of Trade Statistics'.

For more details on this see Forstater, M. (2018) Illicit Financial Flows, Trade Misinvoicing, and Multinational Tax Avoidance: The Same or Different? , CGD Policy Paper 123.

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Globalization

Covering a wide range of distinct political, economic, and cultural trends, the term “globalization” remains crucial to contemporary political and academic debate. In contemporary popular discourse, globalization often functions as little more than a synonym for one or more of the following phenomena: the pursuit of classical liberal (or “free market”) policies in the world economy (“economic liberalization”), the growing dominance of western (or even American) forms of political, economic, and cultural life (“westernization” or “Americanization”), a global political order built on liberal notions of international law (the “global liberal order”), an ominous network of top-down rule by global elites (“globalism” or “global technocracy”), the proliferation of new information technologies (the “Internet Revolution”), as well as the notion that humanity stands at the threshold of realizing one single unified community in which major sources of social conflict have vanished (“global integration”). Globalization is a politically-contested phenomenon about which there are significant disagreements and struggles, with many nationalist and populist movements and leaders worldwide (including Turkey’s Recep Erdoğan, Hungary’s Viktor Orbán, and former US President Donald Trump) pushing back against what they view as its unappealing features.

Fortunately, recent social theory has formulated a more precise concept of globalization than those typically offered by politicians and pundits. Although sharp differences continue to separate participants in the ongoing debate about the term, most contemporary social theorists endorse the view that globalization refers to fundamental changes in the spatial and temporal contours of social existence, according to which the significance of space or territory undergoes shifts in the face of a no less dramatic acceleration in the temporal structure of crucial forms of human activity. Geographical distance is typically measured in time. As the time necessary to connect distinct geographical locations is reduced, distance or space undergoes compression or “annihilation.” The human experience of space is intimately connected to the temporal structure of those activities by means of which we experience space. Changes in the temporality of human activity inevitably generate altered experiences of space or territory. Theorists of globalization disagree about the precise sources of recent shifts in the spatial and temporal contours of human life. Nonetheless, they generally agree that alterations in humanity’s experiences of space and time are working to undermine the importance of local and even national boundaries in many arenas of human endeavor. Since globalization contains far-reaching implications for virtually every facet of human life, it necessarily suggests the need to rethink key questions of normative political theory.

1. Globalization in the History of Ideas

2. globalization in contemporary social theory, 3. the normative challenges of globalization, other internet resources, related entries.

The term globalization has only become commonplace in the last three decades, and academic commentators who employed the term as late as the 1970s accurately recognized the novelty of doing so (Modelski 1972). At least since the advent of industrial capitalism, however, intellectual discourse has been replete with allusions to phenomena strikingly akin to those that have garnered the attention of recent theorists of globalization. Nineteenth and twentieth-century philosophy, literature, and social commentary include numerous references to an inchoate yet widely shared awareness that experiences of distance and space are inevitably transformed by the emergence of high-speed forms of transportation (for example, rail and air travel) and communication (the telegraph or telephone) that dramatically heighten possibilities for human interaction across existing geographical and political divides (Harvey 1989; Kern 1983). Long before the introduction of the term globalization into recent popular and scholarly debate, the appearance of novel high-speed forms of social activity generated extensive commentary about the compression of space.

Writing in 1839, an English journalist commented on the implications of rail travel by anxiously postulating that as distance was “annihilated, the surface of our country would, as it were, shrivel in size until it became not much bigger than one immense city” (Harvey 1996, 242). A few years later, Heinrich Heine, the émigré German-Jewish poet, captured this same experience when he noted: “space is killed by the railways. I feel as if the mountains and forests of all countries were advancing on Paris. Even now, I can smell the German linden trees; the North Sea’s breakers are rolling against my door” (Schivelbusch 1978, 34). Another young German émigré, the socialist theorist Karl Marx, in 1848 formulated the first theoretical explanation of the sense of territorial compression that so fascinated his contemporaries. In Marx’s account, the imperatives of capitalist production inevitably drove the bourgeoisie to “nestle everywhere, settle everywhere, and establish connections everywhere.” The juggernaut of industrial capitalism constituted the most basic source of technologies resulting in the annihilation of space, helping to pave the way for “intercourse in every direction, universal interdependence of nations,” in contrast to a narrow-minded provincialism that had plagued humanity for untold eons (Marx 1848, 476). Despite their ills as instruments of capitalist exploitation, Marx argued, new technologies that increased possibilities for human interaction across borders ultimately represented a progressive force in history. They provided the necessary infrastructure for a cosmopolitan future socialist civilization, while simultaneously functioning in the present as indispensable organizational tools for a working class destined to undertake a revolution no less oblivious to traditional territorial divisions than the system of capitalist exploitation it hoped to dismantle.

European intellectuals have hardly been alone in their fascination with the experience of territorial compression, as evinced by the key role played by the same theme in early twentieth-century American thought. In 1904, the literary figure Henry Adams diagnosed the existence of a “law of acceleration,” fundamental to the workings of social development, in order to make sense of the rapidly changing spatial and temporal contours of human activity. Modern society could only be properly understood if the seemingly irrepressible acceleration of basic technological and social processes was given a central place in social and historical analysis (Adams 1931 [1904]). John Dewey argued in 1927 that recent economic and technological trends implied the emergence of a “new world” no less noteworthy than the opening up of America to European exploration and conquest in 1492. For Dewey, the invention of steam, electricity, and the telephone offered formidable challenges to relatively static and homogeneous forms of local community life that had long represented the main theatre for most human activity. Economic activity increasingly exploded the confines of local communities to a degree that would have stunned our historical predecessors, for example, while the steamship, railroad, automobile, and air travel considerably intensified rates of geographical mobility. Dewey went beyond previous discussions of the changing temporal and spatial contours of human activity, however, by suggesting that the compression of space posed fundamental questions for democracy. Dewey observed that small-scale political communities (for example, the New England township), a crucial site for the exercise of effective democratic participation, seemed ever more peripheral to the great issues of an interconnected world. Increasingly dense networks of social ties across borders rendered local forms of self-government ineffective. Dewey wondered, “How can a public be organized, we may ask, when literally it does not stay in place?” (Dewey 1927, 140). To the extent that democratic citizenship minimally presupposes the possibility of action in concert with others, how might citizenship be sustained in a social world subject to ever more astonishing possibilities for movement and mobility? New high-speed technologies attributed a shifting and unstable character to social life, as demonstrated by increased rates of change and turnover in many arenas of activity (most important perhaps, the economy) directly affected by them, and the relative fluidity and inconstancy of social relations there. If citizenship requires some modicum of constancy and stability in social life, however, did not recent changes in the temporal and spatial conditions of human activity bode poorly for political participation? How might citizens come together and act in concert when contemporary society’s “mania for motion and speed” made it difficult for them even to get acquainted with one another, let alone identify objects of common concern? (Dewey 1927, 140).

The unabated proliferation of high-speed technologies is probably the main source of the numerous references in intellectual life since 1950 to the annihilation of distance. The Canadian cultural critic Marshall McLuhan made the theme of a technologically based “global village,” generated by social “acceleration at all levels of human organization,” the centerpiece of an anxiety-ridden analysis of new media technologies in the 1960s (McLuhan 1964, 103). Arguing in the 1970s and 1980s that recent shifts in the spatial and temporal contours of social life exacerbated authoritarian political trends, the French social critic Paul Virilio seemed to confirm many of Dewey’s darkest worries about the decay of democracy. According to his analysis, the high-speed imperatives of modern warfare and weapons systems strengthened the executive and debilitated representative legislatures. The compression of territory thereby paved the way for executive-centered emergency government (Virilio 1977). But it was probably the German philosopher Martin Heidegger who most clearly anticipated contemporary debates about globalization. Heidegger not only described the “abolition of distance” as a constitutive feature of our contemporary condition, but he linked recent shifts in spatial experience to no less fundamental alterations in the temporality of human activity: “All distances in time and space are shrinking. Man now reaches overnight, by places, places which formerly took weeks and months of travel” (Heidegger 1950, 165). Heidegger also accurately prophesied that new communication and information technologies would soon spawn novel possibilities for dramatically extending the scope of virtual reality : “Distant sites of the most ancient cultures are shown on film as if they stood this very moment amidst today’s street traffic…The peak of this abolition of every possibility of remoteness is reached by television, which will soon pervade and dominate the whole machinery of communication” (Heidegger 1950, 165). Heidegger’s description of growing possibilities for simultaneity and instantaneousness in human experience ultimately proved no less apprehensive than the views of many of his predecessors. In his analysis, the compression of space increasingly meant that from the perspective of human experience “everything is equally far and equally near.” Instead of opening up new possibilities for rich and multi-faceted interaction with events once distant from the purview of most individuals, the abolition of distance tended to generate a “uniform distanceless” in which fundamentally distinct objects became part of a bland homogeneous experiential mass (Heidegger 1950, 166). The loss of any meaningful distinction between “nearness” and “distance” contributed to a leveling down of human experience, which in turn spawned an indifference that rendered human experience monotonous and one-dimensional.

Since the mid-1980s, social theorists have moved beyond the relatively underdeveloped character of previous reflections on the compression or annihilation of space to offer a rigorous conception of globalization. To be sure, major disagreements remain about the precise nature of the causal forces behind globalization, with David Harvey (1989 1996) building directly on Marx’s pioneering explanation of globalization, while others (Giddens 19990; Held, McGrew, Goldblatt & Perraton 1999) question the exclusive focus on economic factors characteristic of the Marxist approach. Nonetheless, a consensus about the basic rudiments of the concept of globalization appears to be emerging.

First, recent analysts associate globalization with deterritorialization , according to which a growing variety of social activities takes place irrespective of the geographical location of participants. As Jan Aart Scholte observes, “global events can – via telecommunication, digital computers, audiovisual media, rocketry and the like – occur almost simultaneously anywhere and everywhere in the world” (Scholte 1996, 45). Globalization refers to increased possibilities for action between and among people in situations where latitudinal and longitudinal location seems immaterial to the social activity at hand. Even though geographical location remains crucial for many undertakings (for example, farming to satisfy the needs of a local market), deterritorialization manifests itself in many social spheres. Business people on different continents now engage in electronic commerce; academics make use of the latest Internet conferencing equipment to organize seminars in which participants are located at disparate geographical locations; the Internet allows people to communicate instantaneously with each other notwithstanding vast geographical distances separating them. Territory in the sense of a traditional sense of a geographically identifiable location no longer constitutes the whole of “social space” in which human activity takes places. In this initial sense of the term, globalization refers to the spread of new forms of non-territorial social activity (Ruggie 1993; Scholte 2000).

Second, theorists conceive of globalization as linked to the growth of social interconnectedness across existing geographical and political boundaries. In this view, deterritorialization is a crucial facet of globalization. Yet an exclusive focus on it would be misleading. Since the vast majority of human activities is still tied to a concrete geographical location, the more decisive facet of globalization concerns the manner in which distant events and forces impact on local and regional endeavors (Tomlinson 1999, 9). For example, this encyclopedia might be seen as an example of a deterritorialized social space since it allows for the exchange of ideas in cyberspace. The only prerequisite for its use is access to the Internet. Although substantial inequalities in Internet access still exist, use of the encyclopedia is in principle unrelated to any specific geographical location. However, the reader may very well be making use of the encyclopedia as a supplement to course work undertaken at a school or university. That institution is not only located at a specific geographical juncture, but its location is probably essential for understanding many of its key attributes: the level of funding may vary according to the state or region where the university is located, or the same academic major might require different courses and readings at a university in China, for example, than in Argentina or Norway. Globalization refers to those processes whereby geographically distant events and decisions impact to a growing degree on “local” university life. For example, the insistence by powerful political leaders in wealthy countries that the International Monetary Fund (IMF) or World Bank recommend to Latin and South American countries that they commit themselves to a particular set of economic policies might result in poorly paid teachers and researchers as well as large, understaffed lecture classes in São Paolo or Lima; the latest innovations in information technology from a computer research laboratory in India could quickly change the classroom experience of students in British Columbia or Tokyo. Globalization refers “to processes of change which underpin a transformation in the organization of human affairs by linking together and expanding human activity across regions and continents” (Held, McGrew, Goldblatt & Perraton 1999, 15). Globalization in this sense is a matter of degree since any given social activity might influence events more or less faraway: even though a growing number of activities seems intermeshed with events in distant continents, certain human activities remain primarily local or regional in scope. Also, the magnitude and impact of the activity might vary: geographically removed events could have a relatively minimal or a far more extensive influence on events at a particular locality. Finally, we might consider the degree to which interconnectedness across frontiers is no longer merely haphazard but instead predictable and regularized (Held, McGrew, Goldblatt & Perraton 1999).

Third, globalization must also include reference to the speed or velocity of social activity. Deterritorialization and interconnectedness initially seem chiefly spatial in nature. Yet it is easy to see how these spatial shifts are directly tied to the acceleration of crucial forms of social activity. As we observed above in our discussion of the conceptual forerunners to the present-day debate on globalization, the proliferation of high-speed transportation, communication, and information technologies constitutes the most immediate source for the blurring of geographical and territorial boundaries that prescient observers have diagnosed at least since the mid-nineteenth century. The compression of space presupposes rapid-fire forms of technology; shifts in our experiences of territory depend on concomitant changes in the temporality of human action. High-speed technology only represents the tip of the iceberg, however. The linking together and expanding of social activities across borders is predicated on the possibility of relatively fast flows and movements of people, information, capital, and goods. Without these fast flows, it is difficult to see how distant events could possibly posses the influence they now enjoy. High-speed technology plays a pivotal role in the velocity of human affairs. But many other factors contribute to the overall pace and speed of social activity. The organizational structure of the modern capitalist factory offers one example; certain contemporary habits and inclinations, including the “mania for motion and speed” described by Dewey, represent another. Deterritorialization and the expansion of interconnectedness are intimately tied to the acceleration of social life, while social acceleration itself takes many different forms (Eriksen 2001; Rosa 2013). Here as well, we can easily see why globalization is always a matter of degree. The velocity or speed of flows, movements, and interchanges across borders can vary no less than their magnitude, impact, or regularity.

Fourth, even though analysts disagree about the causal forces that generate globalization, most agree that globalization should be conceived as a relatively long-term process . The triad of deterritorialization, interconnectedness, and social acceleration hardly represents a sudden or recent event in contemporary social life. Globalization is a constitutive feature of the modern world, and modern history includes many examples of globalization (Giddens 1990). As we saw above, nineteenth-century thinkers captured at least some of its core features; the compression of territoriality composed an important element of their lived experience. Nonetheless, some contemporary theorists believe that globalization has taken a particularly intense form in recent decades, as innovations in communication, transportation, and information technologies (for example, computerization) have generated stunning new possibilities for simultaneity and instantaneousness (Harvey 1989). In this view, present-day intellectual interest in the problem of globalization can be linked directly to the emergence of new high-speed technologies that tend to minimize the significance of distance and heighten possibilities for deterritorialization and social interconnectedness. Although the intense sense of territorial compression experienced by so many of our contemporaries is surely reminiscent of the experiences of earlier generations, some contemporary writers nonetheless argue that it would be mistaken to obscure the countless ways in which ongoing transformations of the spatial and temporal contours of human experience are especially far-reaching. While our nineteenth-century predecessors understandably marveled at the railroad or the telegraph, a comparatively vast array of social activities is now being transformed by innovations that accelerate social activity and considerably deepen longstanding trends towards deterritorialization and social interconnectedness. To be sure, the impact of deterritorialization, social interconnectedness, and social acceleration are by no means universal or uniform: migrant workers engaging in traditional forms of low-wage agricultural labor in the fields of southern California, for example, probably operate in a different spatial and temporal context than the Internet entrepreneurs of San Francisco or Seattle. Distinct assumptions about space and time often coexist uneasily during a specific historical juncture (Gurvitch 1964). Nonetheless, the impact of recent technological innovations is profound, and even those who do not have a job directly affected by the new technology are shaped by it in innumerable ways as citizens and consumers (Eriksen 2001, 16).

Fifth, globalization should be understood as a multi-pronged process, since deterritorialization, social interconnectedness, and acceleration manifest themselves in many different (economic, political, and cultural) arenas of social activity. Although each facet of globalization is linked to the core components of globalization described above, each consists of a complex and relatively autonomous series of empirical developments, requiring careful examination in order to disclose the causal mechanisms specific to it (Held, McGrew, Goldblatt & Perraton 1999). Each manifestation of globalization also generates distinct conflicts and dislocations. For example, there is substantial empirical evidence that cross-border flows and exchanges (of goods, people, information, etc.), as well as the emergence of directly transnational forms of production by means of which a single commodity is manufactured simultaneously in distant corners of the globe, are gaining in prominence (Castells 1996). High-speed technologies and organizational approaches are employed by transnationally operating firms, the so-called “global players,” with great effectiveness. The emergence of “around-the-world, around-the-clock” financial markets, where major cross-border financial transactions are made in cyberspace at the blink of an eye, represents a familiar example of the economic face of globalization. Global financial markets also challenge traditional attempts by liberal democratic nation-states to rein in the activities of bankers, spawning understandable anxieties about the growing power and influence of financial markets over democratically elected representative institutions. In political life, globalization takes a distinct form, though the general trends towards deterritorialization, interconnectedness across borders, and the acceleration of social activity are fundamental here as well. Transnational movements, in which activists employ rapid-fire communication technologies to join forces across borders in combating ills that seem correspondingly transnational in scope (for example, the depletion of the ozone layer), offer an example of political globalization (Tarrow 2005). Another would be the tendency towards ambitious supranational forms of social and economic lawmaking and regulation, where individual nation-states cooperate to pursue regulation whose jurisdiction transcends national borders no less than the cross-border economic processes that undermine traditional modes of nation state-based regulation. Political scientists typically describe such supranational organizations (the European Union, for example, or United States-Mexico-Canada Agreement, or USMCA) as important manifestations of political and legal globalization. The proliferation of supranational organizations has been no less conflict-laden than economic globalization, however. Critics insist that local, regional, and national forms of self-government are being supplanted by insufficiently democratic forms of global governance remote from the needs of ordinary citizens (Maus 2006; Streeck 2016). In contrast, defenders describe new forms of supranational legal and political decision as indispensable forerunners to more inclusive and advanced forms of self-government, even as they worry about existing democratic deficits and technocratic traits (Habermas 2015).

The wide-ranging impact of globalization on human existence means that it necessarily touches on many basic philosophical and political-theoretical questions. At a minimum, globalization suggests that academic philosophers in the rich countries of the West should pay closer attention to the neglected voices and intellectual traditions of peoples with whom our fate is intertwined in ever more intimate ways (Dallmayr 1998). In this section, however, we focus exclusively on the immediate challenges posed by globalization to normative political theory.

Western political theory has traditionally presupposed the existence of territorially bound communities, whose borders can be more or less neatly delineated from those of other communities. In this vein, the influential liberal political philosopher John Rawls described bounded communities whose fundamental structure consisted of “self-sufficient schemes of cooperation for all the essential purposes of human life” (Rawls 1993, 301). Although political and legal thinkers historically have exerted substantial energy in formulating defensible normative models of relations between states (Nardin and Mapel 1992), like Rawls they typically have relied on a clear delineation of “domestic” from “foreign” affairs. In addition, they have often argued that the domestic arena represents a normatively privileged site, since fundamental normative ideals and principles (for example, liberty or justice) are more likely to be successfully realized in the domestic arena than in relations among states. According to one influential strand within international relations theory, relations between states are more-or-less lawless. Since the achievement of justice or democracy, for example, presupposes an effective political sovereign, the lacuna of sovereignty at the global level means that justice and democracy are necessarily incomplete and probably unattainable there. In this conventional realist view of international politics, core features of the modern system of sovereign states relegate the pursuit of western political thought’s most noble normative goals primarily to the domestic arena (Mearsheimer 2003.) Significantly, some prominent mid-century proponents of international realism rejected this position’s deep hostility to international law and supranational political organization, in part because they presciently confronted challenges that we now typically associate with intensified globalization (Scheuerman 2011).

Globalization poses a fundamental challenge to each of these traditional assumptions. It is no longer self-evident that nation-states can be described as “self-sufficient schemes of cooperation for all the essential purposes of human life” in the context of intense deterritorialization and the spread and intensification of social relations across borders. The idea of a bounded community seems suspect given recent shifts in the spatio-temporal contours of human life. Even the most powerful and privileged political units are now subject to increasingly deterritorialized activities (for example, global financial markets or digitalized mass communication) over which they have limited control, and they find themselves nested in webs of social relations whose scope explodes the confines of national borders. Of course, in much of human history social relations have transcended existing political divides. However, globalization implies a profound quantitative increase in and intensification of social relations of this type. While attempts to offer a clear delineation of the “domestic” from the “foreign” probably made sense at an earlier juncture in history, this distinction no longer accords with core developmental trends in many arenas of social activity. As the possibility of a clear division between domestic and foreign affairs dissipates, the traditional tendency to picture the domestic arena as a privileged site for the realization of normative ideals and principles becomes problematic as well. As an empirical matter, the decay of the domestic-foreign frontier seems highly ambivalent, since it might easily pave the way for the decay of the more attractive attributes of domestic political life: as “foreign” affairs collapse inward onto “domestic” political life, the insufficiently lawful contours of the former make disturbing inroads onto the latter (Scheuerman 2004). As a normative matter, however, the disintegration of the domestic-foreign divide probably calls for us to consider, to a greater extent than ever before, how our fundamental normative commitments about political life can be effectively achieved on a global scale. If we take the principles of justice or democracy seriously, for example, it is no longer self-evident that the domestic arena is the exclusive or perhaps even main site for their pursuit, since domestic and foreign affairs are now deeply and irrevocably intermeshed. In a globalizing world, the lack of democracy or justice in the global setting necessarily impacts deeply on the pursuit of justice or democracy at home. Indeed, it may no longer be possible to achieve our normative ideals at home without undertaking to do so transnationally as well.

To claim, for example, that questions of distributive justice have no standing in the making of foreign affairs represents at best empirical naivete about economic globalization. At worst, it constitutes a disingenuous refusal to grapple with the fact that the material existence of those fortunate enough to live in the rich countries is inextricably tied to the material status of the vast majority of humanity residing in poor and underdeveloped regions. Growing material inequality spawned by economic globalization is linked to growing domestic material inequality in the rich democracies (Falk 1999; Pogge 2002). Similarly, in the context of global warming and the destruction of the ozone layer, a dogmatic insistence on the sanctity of national sovereignty risks constituting a cynical fig leaf for irresponsible activities whose impact extends well beyond the borders of those countries most directly responsible. Global warming and ozone-depletion cry out for ambitious forms of transnational cooperation and regulation, and the refusal by the rich democracies to accept this necessity implies a failure to take the process of globalization seriously when doing so conflicts with their immediate material interests. Although it might initially seem to be illustrative of clever Realpolitik on the part of the culpable nations to ward off strict cross-border environmental regulation, their stubbornness is probably short-sighted: global warming and ozone depletion will affect the children of Americans who drive gas-guzzling SUVs or use environmentally unsound air-conditioning as well as the future generations of South Africa or Afghanistan (Cerutti 2007). If we keep in mind that environmental degradation probably impacts negatively on democratic politics (for example, by undermining its legitimacy and stability), the failure to pursue effective transnational environmental regulation potentially undermines democracy at home as well as abroad.

Philosophers and political theorists have eagerly addressed the normative and political implications of our globalizing world. A lively debate about the possibility of achieving justice at the global level pits representatives of cosmopolitanism against myriad communitarians, nationalists, realists, and others who privilege the nation-state and moral, political, and social ties resting on it (Lieven 2020; Tamir 2019). In contrast, cosmopolitans tend to underscore our universal obligations to those who reside faraway and with whom we may share little in the way of language, custom, or culture, oftentimes arguing that claims to “justice at home” can and should be applied elsewhere as well (Beardsworth 2011; Beitz 1999; Caney 2006; Wallace-Brown & Held 2010). In this way, cosmopolitanism builds directly on the universalistic impulses of modern moral and political thought. Cosmopolitanism’s critics dispute the view that our obligations to foreigners possess the same status as those to members of particular local and national communities of which we remain very much a part. They by no means deny the need to redress global inequality, for example, but they often express skepticism in the face of cosmopolitanism’s tendency to defend significant legal and political reforms as necessary to address the inequities of a planet where millions of people a year die of starvation or curable diseases (Miller 2007; 2013; Nagel 2005). Nor do cosmopolitanism’s critics necessarily deny that the process of globalization is real, though some of them suggest that its impact has been grossly exaggerated (Kymlicka 1999; Nussbaum et al . 1996; Streeck 2016). Nonetheless, they doubt that humanity has achieved a rich or sufficiently articulated sense of a common fate such that far-reaching attempts to achieve greater global justice (for example, substantial redistribution from the rich to poor) could prove successful. Cosmopolitans not only counter with a flurry of universalist and egalitarian moral arguments, but they also accuse their opponents of obscuring the threat posed by globalization to the particular forms of national community whose ethical primacy communitarians, nationalists, and others endorse. From the cosmopolitan perspective, the tendency to favor moral and political obligations to fellow members of the nation-state represents a misguided and increasingly reactionary nostalgia for a rapidly decaying constellation of political practices and institutions.

A similar divide characterizes the ongoing debate about the prospects of democratic institutions at the global level. In a cosmopolitan mode, Daniele Archibugi (2008) and the late David Held (1995) have argued that globalization requires the extension of liberal democratic institutions (including the rule of law and elected representative institutions) to the transnational level. Nation state-based liberal democracy is poorly equipped to deal with deleterious side effects of present-day globalization such as ozone depletion or burgeoning material inequality. In addition, a growing array of genuinely transnational forms of activity calls out for correspondingly transnational modes of liberal democratic decision-making. According to this model, “local” or “national” matters should remain under the auspices of existing liberal democratic institutions. But in those areas where deterritorialization and social interconnectedness across national borders are especially striking, new transnational institutions (for example, cross-border referenda), along with a dramatic strengthening and further democratization of existing forms of supranational authority (in particular, the United Nations), are necessary if we are to assure that popular sovereignty remains an effective principle. In the same spirit, cosmopolitans debate whether a loose system of global “governance” suffices, or instead cosmopolitan ideals require something along the lines of a global “government” or state (Cabrera 2011; Scheuerman 2014). Jürgen Habermas, a prominent cosmopolitan-minded theorist, has tried to formulate a defense of the European Union that conceives of it as a key stepping stone towards supranational democracy. If the EU is to help succeed in salvaging the principle of popular sovereignty in a world where the decay of nation state-based democracy makes democracy vulnerable, the EU will need to strengthen its elected representative organs and better guarantee the civil, political, and social and economic rights of all Europeans (Habermas 2001, 58–113; 2009). Representing a novel form of postnational constitutionalism, it potentially offers some broader lessons for those hoping to save democratic constitutionalism under novel global conditions. Despite dire threats to the EU posed by nationalist and populist movements, Habermas and other cosmopolitan-minded intellectuals believe that it can be effectively reformed and preserved (Habermas 2012).

In opposition to Archibugi, Held, Habermas, and other cosmopolitans, skeptics underscore the purportedly utopian character of such proposals, arguing that democratic politics presupposes deep feelings of trust, commitment, and belonging that remain uncommon at the postnational and global levels. Largely non-voluntary commonalities of belief, history, and custom compose necessary preconditions of any viable democracy, and since these commonalities are missing beyond the sphere of the nation-state, global or cosmopolitan democracy is doomed to fail (Archibugi, Held, and Koehler 1998; Lieven 2020). Critics inspired by realist international theory argue that cosmopolitanism obscures the fundamentally pluralistic, dynamic, and conflictual nature of political life on our divided planet. Notwithstanding its pacific self-understanding, cosmopolitan democracy inadvertently opens the door to new and even more horrible forms of political violence. Cosmpolitanism’s universalistic normative discourse not only ignores the harsh and unavoidably agonistic character of political life, but it also tends to serve as a convenient ideological cloak for terrible wars waged by political blocs no less self-interested than the traditional nation state (Zolo 1997, 24).

Ongoing political developments suggest that such debates are of more than narrow scholarly interest. Until recently, some of globalization’s key prongs seemed destined to transform human affairs in seemingly permanent ways: economic globalization, as well as the growth of a panoply of international and global political and legal institutions, continued to transpire at a rapid rate. Such institutional developments, it should be noted, were interpreted by some cosmopolitan theorists as broadly corroborating their overall normative aspirations. With the resurgence of nationalist and populist political movements, many of which diffusely (and sometimes misleadingly) target elements of globalization, globalization’s future prospects seem increasingly uncertain. For example, with powerful political leaders regularly making disdainful remarks about the UN and EU, it seems unclear whether one of globalization’s most striking features, i.e., enhanced political and legal decision-making “beyond the nation state,” will continue unabated. Tragically perhaps, the failure to manage economic globalization so as to minimize avoidable inequalities and injustices has opened the door to a nationalist and populist backlash, with many people now ready to embrace politicians and movements promising to push back against “free trade,” relatively porous borders (for migrants and refugees), and other manifestations of globalization (Stiglitz 2018). Even if it seems unlikely that nationalists or populists can succeed in fully halting, let alone reversing, structural trends towards deterritorialization, intensified interconnectedness, and social acceleration, they may manage to reshape them in ways that cosmopolitans are likely to find alarming. Whether or not nationalists and populists can successfully respond to many fundamental global challenges (e.g., climate change or nuclear proliferation), however, remains far less likely.

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Library of Congress Catalog Data: ISSN 1095-5054

“Globalization, the Structure of the World Economy and Economic Development” *

Matthew C. Mahutga

Department of Sociology

University of California , Riverside

1226 Watkins Hall

Riverside, CA. 92521, USA.

[email protected]

Phone: (951) 827-5852 Fax: (951) 827-3330

David A. Smith

University of California , Irvine

3151 Social Science Plaza A

Irvine , CA. 92697 , USA .

This is IROWS Working Paper #52 and is available at https://irows.ucr.edu/papers/irows52/irows52.htm

Institute for Research on World-Systems (IROWS)

College Building South

University of California-Riverside

*We would like to thank Jason Beckfield, Susan Brown, Rob Clark, Katie Faust, Matt Huffman and the participants of the UC Irvine network research groups for helpful comments on earlier drafts.   Preliminary versions were presented at the Sunbelt Social Network Conference; the annual PEWS section conference, and an annual meeting of the American Sociological Association.   Send all comments, questions and correspondence to Matthew C. Mahutga, Department of Sociology, University of California at Riverside .   1226 Watkins Hall.   Riverside , CA., 92521, USA .   [email protected] .

“Globalization, the Structure of the World Economy and Economic Development”

How does the structure of the world economy determine the gains from participation therein?   Does globalization alter that relationship?   In order to answer these questions, we conduct a state of the art network analysis of international trade to map the structure of the international division of labor (IDL).   We regress cross-national variation in economic growth on positional variation and mobility of countries within the IDL from 1965 to 2000.   Our findings indicate that structure plays an extremely important role in the development trajectory of nations.   Specifically, we find that the highest rates of economic growth occurred to countries in the middle of the IDL over the course of globalization.   Second, we find that upper tier positions in the IDL are converging vis-à-vis each other, but diverging vis-à-vis the lower tier.   Thus, finally, we show that the mechanism underlying the rapid economic growth in intermediate positions was their uniquely high rates of upward mobility, in turn a function of their middling position.   Taken together, these findings suggest that a country’s long-term economic development is conditioned to a large extent by its position in the IDL.   We close by calling for new directions in the debate on the impact of globalization on economic growth in the world-economy.    

Keywords: Globalization, Economic Development, International Division of Labor, Inequality, Network Analysis.  

One of sociology’s most significant historical and contemporary contributions to the social sciences lies in the basic insight that social structure—the concrete relations between social actors—plays a causal role in shaping the life experiences of actors therein (Durkheim 1997; Granovetter 1973; 1985; Marx 1977; Weber 1978).   In the sociological study of the wealth and poverty of nations, there has been no bigger structural intuition than that of world-system theory.   Paraphrasing a major theme from this approach, a “country's world-system position, in a macro-structural sense, is considered the key determinant of the society's capacity for sustained economic growth and development” (Crowly, Rauch, Seagrove and Smith 1998:32).   The key relational insight is that the world-system is composed of a “single ongoing division of labor…based on differential appropriation of the surplus produced [such that] positions are hierarchically ordered, not just differentiated” (Evans 1979b: 15-16).   For nearly two decades after its emergence in the mid-1970s the world-systems perspective dominated the sociological study of economic development.

In spite of previous work that found support for the notion that world-system position is positively associated with economic growth (Nemeth and Smith 1985; Snyder and Kick 1979; Kick et. al. 2000; Kick and Davis 2001), their is a high degree of skepticism about the saliency of social structure as a determinant of development over the course of globalization.   One of the more important reasons for this skepticism may be that the purported key empiric one would expect given the existence of a world economic structure that causes differential appropriation—rising global income inequality—doesn’t square with a significant portion of the empirical evidence (eg. Firebaugh 2003; cf. Milanovic 2005).

            Indeed, many use the results of recent empirical work on global income inequality to suggest that changes associated with economic “globalization” are creating a world order in which a country’s role in the structure of the of the world economy no longer matters for economic development.   Robert Wade (2004) paraphrases this contention as “…country mobility up the income/wealth hierarchy is [no longer] constrained by the structure” (567).   An extremely popular and influential version of this perspective argues that there globalization “flattens out” the world and leads to economic dynamism everywhere, and particularly in the poorest regions (Friedman 2005).   In short, globalization leads to rapid economic development in the periphery, resulting in worldwide convergence in per capita output and incomes during the late twentieth and early twenty-first centuries.  

            As a point of departure, we argue that studies of global income inequality, while informative, are ill suited to understanding how the structure of the IDL impacts development.   In contradistinction, we revisit classic hypotheses regarding the distribution of economic rewards across the structure of the international division of labor.   Empirically, we conduct a state of the art network analysis that allows us to map the structure of the international division of labor on a large sample of countries across a fairly long temporal range, and examine the relationship between a country’s position and mobility in that structure and their subsequent growth trajectory.   The results indicate that structure matters in very significant ways.   In particular, intermediate positions in the international division of labor had significantly higher growth rates than other positions, which in turn is a function of their greater degree of structural mobility.   

            Our findings highlight the contingent nature of economic development, and suggest that recent studies showing convergence in terms of income shares are also consistent with persistent stagnation in the lowest positions of the IDL.   They challenge some contemporary views of economic “globalization” that posit the structure of the world-economy no longer conditions development processes, as well as those that see globalization as intensified exploitation of non-core countries.   The paper concludes that the patterns we find have implications for development theory and development policy.   Ultimately, we argue that our results warrant a fresh look at the structural contingencies that lead to growth and stagnation across the structure of the world-economy.

ENHANCING WELFARE OR ENTRENCHING HEIRARCHY?   THE INTERNATIONAL DIVISION OF LABOR, ECONOMIC GROWTH AND UPWARD MOBILITY                         

The story of winners and losers in the IDL remains an important and hotly debated topic in the social sciences.   In recent years the debate is often cast in terms of macro-level trends in global income inequality.   Readers of social science literature on trends in “total world inequality” are confronted with two distinct and contrasting views:   The first is that inequality increased over recent years (Dowrick and Akmal 2005; Kickanov and Ward 2001; Bourguignon and Morrison 1999; 2002; Chotikapanich, Valenzuela and Rao 1997; Jones 1997; Korzeniewicz and Moran 1997; Pritchett 1997).   A second body of literature reaches a very different conclusion, claiming that global inequality leveled off by the end of the 1990s, and is now beginning to decrease, in spite of rising within country inequality (Bhatta 2002; Firebaugh 2003; Firebaugh and Goesling 2004; Goesling 2001; Melchior and Telle 2001; Sala-I-Martin 2002; Schultz 1998).  

         One of the reasons for these contradictory findings is the inherent difficulty in obtaining valid estimates of individual income cross-nationally, coupled with the methodological challenge of approximating the person-to-person income distribution with state level aggregate data.   Thus, Milonovic (2006) asserts that previous attempts at measuring “total world inequality” should be “considered ‘ tatonnements ,’ groping for the global distribution” (6).   In addition to the methodological challenge of measuring global income inequality over time, its relevance to the question of how the world-economic structure impacts development outcomes is also in question because of the fact that one country—China—accounts for nearly all of the decreased inequality observed in studies that find a leveling / falling trend. [1]   In other words, the sensitivity of measures of contemporary global inequality to China’s rapid economic growth make these indices less relevant to understanding how the world-economy impacts development outcomes for less developed countries in general because China’s unique characteristics set it apart from the rest (Dowrick 2004).   Moreover, there has been no discussion to our knowledge of the role that China ’s structural position may have played in its exceptionalism.        

              SEQ CHAPTER \h \r 1 While the debate about world inequality may be of interest in and of itself, an important underlying issue is an old, very basic, one in comparative sociology and political economy: How does the structure of the world-economy impact economic development and the wealth / poverty of nations?   The key point of contention revolves around two views of the role that the international division of labor plays in the development of individual countries.   As Peter Evans (1995) argues, “the international division of labor can be seen as the basis of enhanced welfare or as a hierarchy” (7).  

            The “enhanced welfare” view claims that any one particular role in the IDL is not necessarily better than another, but rather that “compatibility with [a country’s] resource and factor endowments defines the activity most rewarding for each country” (Evans 1995: 7; also see the classic treatments of Ricardo [1817] 2004; Smith [1776] 2003).   This view informs classical economic growth models that predict “absolute convergence” across countries, as the returns to capital tend to diminish over time in capital-intensive wealthy economies.   Absolute convergence implies an inverse relationship between initial levels of GDP per capita—the average ratio of capital to labor—and subseqent economic growth across countries (Barro and Sala-I-Martin 1995; Solow 1956; Swan 1956).  

            Empirically, absolute convergence does not mesh well with observed growth trends across countries, which betray no negative bivariate correlation between initial levels of income and economic growth.   Thus economic growth theory focuses instead on the idea of “conditional convergence” (Barro and Sala-I-Martin 1995; Islam 2003).   In the context of cross-sectional regression, conditional convergence materializes when initial levels of GDP per capita have a negative relationship to subsequent growth only after controlling for variables that would be highly correlated with a variable that captures a country’s position in the IDL, such as measures of physical and human capital, levels of technology, certain types of institutions and so on (Barro and Sala-I-Martin 1995).   Holding these crucial variables constant, studies find that poorer countries grow faster than wealthier ones (Barro and Sala-i-Martin 1995; Islam 2003).  

The “enhanced welfare” position contrasts sharply with global political economy arguments that development outcomes vary by a country’s position in the IDL (Chase-Dunn 1998; Galtung 1971).   Indeed, the world-system perspective argues that the IDL conforms to hierarchically stratified zones with divergent types of production occurring across the various zones: “Core production is relatively capital intensive and employs skilled, high wage labor; peripheral production is labor intensive and employs cheap, often politically coerced labor” (Chase-Dunn 1998: 77).   In turn, they argue that core positions “generate a ‘multidimensional conspiracy’ in favor of development,” while peripheral ones do not (Evans 1995: 7).   Thus, while the conditional convergence hypothesis attempts to “hold constant” certain factors that vary between countries such as position in the IDL, others argue that cross-country differences in these factors cause divergent growth patterns between countries.     

Structure and Growth: Some Hypothetical Relationships

With respect to empirical expectations regarding the association between position in the IDL and economic growth, the “enhanced welfare” view presents a simple null hypothesis: if the structure of the international division of labor is simply “differentiated” rather than hierarchically organized, we would expect that cross-national variation in structural location should not be a significant predictor of economic growth.   On the other hand, the world-systems perspective offers two distinct hypotheses corresponding to different phases in the cycles of world-economic expansion and contraction.   The first is a linear hypothesis—the core grows faster than the semiperiphery and the periphery, and the semiperiphery grows faster than the periphery.  

The world-systems perspective is also consistent with a non-linear hypothesis—the semiperiphery grows faster than both the core and the periphery—corresponding to a particular phase in long term Kondratieff cycles of world-economic expansion and contraction (Wallerstein 1976).   During world-economic upswings—Kondratieff A phases—core countries reap the benefits of an expansionary economy and the association between position in the IDL and economic growth is linear.   However, Wallerstein suggests that the world-economy entered a down turn—and Kondratieff B phase—circa 1967, during which there was a “shift in relative profit advantage to the semi-peripheral nations” (Wallerstein 1976: 464; 1998).   According to Wallerstein’s depiction of Kondratieff B phases, select countries in the semiperiphery become the beneficiaries of the relocation of global industries to non-core countries.   In other words, the B phase represents the greatest possibility for growth owing to the greater openness of the system to the flow of mature technologies out from the core.  

In sum, there are three competing claims made the relationship between the IDL and development.   The first contrasts the “enhanced welfare” view with the “hierarchy view,” where the former argues that all roles in the IDL are conducive to growth and the latter argues that only “core-like” positions are.   These claims can be summarized with the following hypotheses:

Hypothesis 0: The structure of the IDL has no effect on economic growth, such that growth will be the same across positions of the IDL.   Hypothesis 1: The structure of the IDL has a positive effect on economic growth, such that core growth exceeds that in the semiperiphery, and semi-peripheral growth exceeds that of the periphery.   Finally, the non-linear claims can be summarized with Hypothesis 2: The structure of the IDL benefits countries in the middle during times of economic downturn and industrial migration, such that semi-peripheral growth exceeds that of both the core and the periphery .

Mobility in the IDL and Economic Growth

While Wallerstein’s explication of Kondratieff cycles leads to an expectation of rapid growth in the semiperiphery, the mechanisms behind this dynamism are less understood.   The mechanism we propose stems from the logical extension of the hierarchical view of the IDL: differential upward mobility in the international division of labor may explain why semi-peripheral countries gain in ways that peripheral ones do not.   In developing this argument, we draw on a large and growing literature on global commodity chains, which focuses on the way in which firms from the lower tier of the IDL link up with those at upper tiers of the IDL in order to “upgrade” their role in the chain at the firm level, and the IDL at the level of the national economy (Bair 2005; Gereffi and Korzeniewicz 1994; Gereffi et al. 2001; 2005; Gereffi and Memedovic 2003; Memedovic 2004).   Moreover, we develop our argument by progressing dialogically through two points of contention regarding the relationship between upward mobility and development.  

The first point of contention involves whether or not upward mobility generates positive development outcomes at all.   Some are willing to acknowledge that the “growth miracles” in countries such as South Korea , Singapore , Taiwan and Hong Kong stem from real upward mobility via the internalization of a growing share of manufacturing vis-à-vis core countries (Chase-Dunn 1995; 1998).   Others tend to argue that what appears to be upward mobility—the growth in manufacturing activity among non-core countries—actually reflects the desire of core firms to shift less profitable manufacturing activities onto more vulnerable firms at lower tiers of the IDL (Arrighi et al. 2003).   Thus, the counter argument is that upward mobility in the IDL is not a viable development strategy because it coincides with the “peripherlization” of formerly “core” production activities: “the very success of Third World countries in internalizing within their domains the industrial activities with which First World wealth had been associated activated a competition that sharply reduced the returns that previously had accrued to such activities” (Arrighi et al. 2003: 23).

  The second point of contention involves whether or not upward mobility is viable, stemming from disagreements, both within the world-systems community and outside it, over “the degree of mobility within the system available to individual states” (Chase-Dunn and Grimes 1995: 397).   Some argue that “it is highly unlikely that countries with little to no advanced industry can move up because they lack the necessary levels of capital, infrastructure, workforces skills and technical expertise to do so” (Mahutga 2006: 1865).   There is a sense that “(t)he poverty, dependence, and lopsided development of peripheral societies, perpetuated a problem, which made it more difficult for them to break out of this pattern” (Chirot 1986:104).   Classic dependency theory, exemplified by Andre Gunder-Frank (1969), presents an extremely “stagnationist” version of this position.   On the other hand, even within the Latin American dependista tradition, there is an interest in discovering how “dependency reversal” can take place leading to some form of more “autonomous” growth in relation to “external” global structures, promoting genuine economic development (Gereffi 1983: Chapter 1; Evans 1979a and b).   The idea of “dependent development” (see, especially Evans 1979a) explicitly theorized the possibility of upward mobility in the world-system, particularly among the newly industrializing countries (Caporaso 1981, Deyo 1987).

Empirically, there are examples of upwardly mobile countries that experience real development (e.g. Amsden 2001; Evans 1979; Gereffi and Wyaman 1990), those that seem to experience upward mobility without subsequent economic development (e.g. Schrank 2004), and still other cases that experience neither mobility nor development (e.g. Frank 1969).   As a resolution to these points of contention, we suggest that some unique characteristics of countries in the middle of the IDL may give us some theoretical leverage in understanding these disagreements.   First, most acknowledge that upward mobility—or industrial upgrading—stems, at least to a large degree, from the outsourcing decisions of, and / or technological diffusion from, firms in core countries (Bair 2005; Dicken 2003; Gereffi 1994; Gereffi and Memedovic 2003; Gereffi and Korzeniewicz 1994; Parente and Prescott 2000).   While, for the sake of simplicity, many economists assume that countries have equal access to the world stock of “usable knowledge,” or advanced production technologies developed exogenously, as well as the minimum infrastructural basis to implement advanced production technologies they do access (Parente and Prescott 2000), these assumptions seem unlikely from a sociological point of view.  

For example, semi-peripheral countries contain either “a relatively equal mix of core and peripheral types of production,” or “a predominance of activities which are at intermediate levels with regard to the current world-system distribution of capital intensive/labor intensive production (Chase-Dunn 1998: 77, 212).   Regardless of whether middle countries “average out” to intermediate skill levels and production capacity, or produce at an intermediate level economy wide, they should conceivably possess advantages over both the core and periphery in two respects.  

First, they should possess considerably lower production costs vis-à-vis the core because of their intermediate skill level.   Second, they should also possess considerably higher level of access to and ability to implement exogenous technology than the periphery, for two reasons.   On one hand, countries that gain experience and competence with one firm or industry often become more attractive to others, such that early experience leads to greater future access (Cohen et al. 2009).   Moreover, countries with a greater degree of manufacturing experience should have higher “absorptive capacity” in that firms that relocate to poorer countries must balance the expected gains from lower production costs against the amount of time required for the new location to produce comparable commodities to the home country, and more experience translates into a steeper learning curve (Thun 2008; Wood 1994: Chapter 9).        

In short, countries at intermediate positions of the IDL are much more likely to have the minimum level of experience and capability necessary to implement exogenously produced production technologies, while at the same time possessing wage levels low enough to access transnational corporate outsourcing behavior (Kaplinsky 2005; 2000).   Thus, the question of mobility’s impact on development may be resolved by arguing that mobility is a viable developmental path, but that middle countries occupy structural positions that encourage upward mobility more than others.  

            These debates over the effect of IDL mobility on economic growth can be summarized with our final set of hypotheses.   First, the debate over whether or not mobility has an effect on economic growth can be tested with our third hypothesis—Hypothesis 3:   Mobility in the IDL is positively associated with economic growth.   Second, our resolution to the quandary about the apparent cross-country variation in the association between mobility and economic growth can be tested with Hypothesis 4:   Economic growth in the semiperiphery and periphery will be equal, holding mobility constant.   We turn now to a discussion of our data and methodological strategy.  

NETWORK METHODS AND DATA

Roles and Positions in the IDL

Given our concern with the effect of a country’s position in the international division of labor on its development trajectory, we begin by mapping that structure and identifying the position of individual countries within it.   Our research strategy builds upon a solid foundation of previous research that attempted to characterize the structure of the world economy by analyzing patterns of cross-national relationships (Breiger 1981; Mahutga 2006; Nemeth and Smith 1985; Smith and White 1992; Snyder and Kick 1979; Van Rossem 1996).   Much of this work was motivated by a key relational insight in the literature, namely that uncovering the structure of the world-economy involves a “…shift from a concern with the attributive characteristics of states to a concern with the relational characteristics of states” (Wallerstein 1989: xi).   In short, because the international division of labor is a relational concept—firms and states play distinct roles in the IDL that achieve definition only in relation to other firms and states—relationships are the most theoretically appropriate type of data with which to model the IDL.  

We use network analytic techniques to identify both the global structure of the international division of labor and locate the position of individual countries within that structure.   Our approach follows the classic literature on the identification of roles and positions in network analysis (Wasserman and Faust 1999: 347-393; 461-502), implemented in a wide variety of empirical contexts (Anheier and Gerhards 1991; Boorman and White 1976; Mullins et al. 1977 White et al. 1976), and in studies of the structure of the world economy in particular (Alderson and Beckfield 2004; Breiger 1981; Mahutga 2006; Nemeth and Smith 1985; Smith and White 1992; Snyder and Kick 1979; Van Rossem 1996).  

At a conceptual level, the identification of roles and positions begins with the supposition that actors in similar structural positions should have relatively isomorphic patterns of relations to others.   Thus, the goal is to identify the latent structure of a set of relationships by determining the extent to which each dyad has interchangeable patterns of relationships and therefore structural positions.   The method starts with a relation or set of relations and then (1) estimates the degree of similarity between each actor’s relations to / from all others with an equivalence criterion, (2) uses these estimates as the basis for assigning actors to relatively equivalent structural positions (either categorically, continuously, or both), and sometimes (3) determines the role played by each of the equivalent groups by analyzing the relations within and between equivalent groupings (or “blocks” in the block model literature).   For the purposes of this paper, our network analysis is largely confined to the first and second steps above, but auxiliary analyses confirming unique core, semi-peripheral and peripheral role sets were entirely consistent with current understandings of the globalization of different types of industries and previous research (Gereffi 1999; Mahutga 2006; see note 3).      

The first step in our analysis follows previous research by obtaining the degree of regular equivalence between each country in our sample across five different trade relationships (see below) at each time point.   Regular equivalence is appropriate over other types of equivalencies because it is a more general measure of role similarity (Faust 1988; White 1984).   Regular equivalence locates actors who relate to other actors in a network in the same way.   Specifically, “the notion of regular equivalence formalizes the observation that actors who occupy the same social position relate in the same ways with other actors who are themselves in the same positions” (Wasserman and Faust 1999: 473).   More formally, “two points in a network are regularly equivalent if and only if for each tie one has with another point, the self-equivalent point has an identical tie with an other-equivalent point” (White and Reitz 1985: 12).   In the present analysis, the regular equivalence ( M t+1 ij ) between countries i and j at iteration t + 1 is:

where the denominator is the maximum possible value of the matches between the profiles of ik and jm that would occur if all of the ties between i and its alters ( k ) were perfectly matched to the ties between j and its alters ( m ), and all of k and m were regularly equivalent on each relation ( R ).   For each relation analyzed, the numerator determines the best matching of the ties between j and m for i’s ties to k weighted by the regular equivalence of k and m from the previous iteration (Wasserman and Faust 1999), while the denominator is the maximum possible value of the numerator for each pair of countries.   The algorithm above is an iterative process in which the regular equivalence of each dyad’s neighborhood changes and equivalencies are summed across all relations at each iteration.   We specify three iterations, with the third serving as the measure of regular equivalence for each pair of countries, as suggested in the literature (Faust 1988).  

In short, the above algorithm determines the best possible matching of ties between i and j , weighted by the equivalence of their alters, and divides that value by the maximum possible value of the numerator across all five relations.   It is highly unlikely that any two nations would be exactly equivalent, so our multi-relational regular equivalence analysis produces a single equivalence matrix consisting of an equivalence measure for each pair of countries between maximally dissimilar (0) and regularly equivalent (1) in each period.   Each trade matrix was transformed with the base 10 logarithm to reduce skew prior their joint submission to the REGE algorithm in UCINET.  

Having identified the level of regular equivalence between each country, our second step combines two complementary techniques—correspondence analysis and hierarchical clustering—to locate the position of countries in a low dimensional continuous “coreness space,” and to identify cut points along that continuum within which groups of countries occupy relatively equivalent IDL positions.   The “complete link” hierarchical clustering routine generates groups of countries that are approximately regularly equivalent by assigning actors to groups that maximize the within group similarity in regular equivalence (Borgatti 1994; Johnson 1967; Wasserman and Faust 1999).   However, the hierarchical clustering routine produces many possible sets of equivalent groupings that span the continuum from a trivial set in which each actor occupies its own position to another trivial set in which all actors occupy the same position.   In principle, an analyst could start out with some α criterion whereby actors i and j would be placed in the same group if RE ij > α.   However, there is no a priori theory that favors one level of α over another, large real world data sets are rarely broken down into discrete homogenous groups at any single α and the authoritative guide states simply that the “trick is to find the most useful and interpretable partition of actors into equivalence classes” (Wasserman and Faust 1999: 383).   Thus, we use the hierarchical clustering results in conjunction with correspondence analysis that we discuss below.

Correspondence analysis is one of a family of scaling techniques, including principal components analysis, factor analysis, and others, that draw upon the computational foundation of the singular value decompositions (SVD).   At a conceptual level, correspondence analysis allows us to represent the matrix of regular equivalencies in a low-dimensional Euclidian space by assigning coordinates to actors that place them close to those with whom they are similar and far from those with whom they are dissimilar (Greenacre 1984; Weller and Romney 1990).   Moreover, correspondence analysis is also useful for validating inter-group boundaries obtained from clustering techniques by superimposing the clustering solution onto the continuous spatial representation, as will be shown below.  

Computationally, correspondence analysis decomposes the information contained in a data matrix into three matrices: an N-1 dimensional U matrix summarizing the information in the rows, an N-1 dimensional V matrix summarizing the information in the columns, and an N-1 diagonal d matrix of singular values that summarizes the amount of variance explained in each dimension of U and V , where larger singular values correspond to higher explained variance.   Differences between correspondence analysis and, say, principal components analysis stem only from different data pre-processing techniques performed prior to SVD.   One can evaluate the adequacy of representation, or fit, for single or multiple dimensions with the following equation, analogous to R 2 :

where M is singular value 1, 2, 3, … M .   A high PRE indicates an adequate fit while a low PRE indicates a poor fit.  

In sum, correspondence assigns coordinates to each actor such that similar actors are spatially proximate and dissimilar actors are spatially distant.   Interpreting the results from correspondence analysis depends on the amount of variation explained by each dimension and the observed spatial pattern of objects in the Euclidian space.   Thus, one can have a relatively simple structure (few significant dimensions) or a complex one (many significant dimensions).   Because our correspondence analysis is standard, we refer the interested reader to orthodox texts for the technical aspects of the analysis (Greenacre 1984; Weller and Romney 1990).    

A major benefit to the dual use of hierarchical clustering and correspondence analysis is that the latter produces an objective scaling—any two analysts would produce the same result—that mitigates some of the subjectivity of choosing among the many possible clustering partitions (also see note 7).   The continuous scaling also allows us to develop a more refined measure of mobility (see below) compared to previous work because it captures variation both within and between categorical positions.   All network analyses were carried out with UCINET, version 6 (Borgatti, Everett and Freeman 2002).  

Commodity Trade Data

As discussed above, the measurement of roles and positions is based on the supposition that similarly positioned actors are defined by the similarity in their relationships to others in the network.   In the case of country level positions in the structure of the international division of labor, this supposition must account for the vast organizational variation across industries.   For example, while “core” nodes in labor intensive industries—or buyer-driven commodity chains—are identifiable by their tendency toward importing rather than domestic production, and to import from a geographically diffuse set of low-wage countries, “core” nodes in capital and technology intensive industries—or producer-driven commodity chains—are identifiable by their tendency to engage in scale intensive production with the goal of capturing a large share of the world market (Gereffi 1994).   In short, patterns of trade—imports and exports in this case—do not mean the same thing across different types of commodities because of differences in the way their production is organized, such that similarly positioned countries should have relatively equivalent patterns of trade relationships across different types of industries.

[Table 1: UN Commodity Categories Classified by Level / Type of Processing about here].

Our sample of countries is representative of all world-regions, and which contains a large number of less developed countries.   The 94 countries in our sample collectively account for between 92 and 98 percent of world GDP over time, between 96 and 99 percent of world trade over time, and roughly 80 percent of world population over time (see Table A1 in the appendix for a list of included countries). [4]  

HYPOTHESIS TESTING: DATA AND METHODS

Having delineated the global structure of the IDL and located the position of individual countries within that structure, we calculate the average rates of economic growth and mobility for each of our relatively equivalent groups, which serve as the first step in testing the hypotheses we develop above.   Subsequently, we test those hypotheses that remain plausible after an examination of the aggregate trends in growth and mobility with cross-national growth regressions.   Below we discuss the data and methods used for hypothesis testing.  

Dependent Variable

Economic growth

The dependent variable in the regressions that follow is the standard annualized growth rate of per capita gross domestic product (GDP) for each country (Barro and Sala-i-Martin 1995).   The annualized growth rate for country during period t 1 -t 0 is defined in Table A3.

Control Variables

In order to provide robustness for our hypothesis tests, we select a series of control variables that are shown to be correlated with growth, and which could serve as alternative explanations for any observed growth differences across countries.  

Initial GDP per capita

            Controlling for initial levels of GDP per capita has become fairly standard practice in neo-classical models of economic growth (eg. Barro and Sala-i-Martin 1995).   It accounts for any tendency towards diminishing returns to capital, and also serves as the variable of interest in tests for conditional convergence.   Moreover, controlling for it here allows us to differentiate between causal pathways that run from a country’s position in the IDL and those that run from a country’s aggregate capital intensity.  

Human Capital

Secondary education enrollment rates are seen as key determinants of growth insofar as they proxy for the cross-national variation in the stock of human capital (Barro and Sala-i-Martin 1995).  

Trade Openness

Trade openness plays a dual role in this analysis.   On one hand, trade openness captures either the effect of government induced open trade policy (IMF 1997), the potential for trade openness to induce technology and knowledge transfer (Krueger 1998), or the classic view of the efficiency promoting effects of producing / trading with respect to a country’s comparative advantage (Ricardo 1817).   On the other hand, because our structural positions derive from trade, including trade openness also controls for the potential conflation bias between it and a country’s structural position.  

Population Growth

It is also important to assess whether or not any slow economic growth we observe in non-core countries is an artifact of rapidly growing population.   Because population is the denominator of GDP per capita, a major explanation given for the universal finding of unweighted economic divergence between countries is the higher than average rate of population growth in poor countries: a high ratio of population growth to labor force growth slows down per capita growth by expanding the non-working age portion of the denominator faster than the working age portion can produce (Sheehey 1996).   Thus, in order to make sure these findings are not an artifact of population growth, we also control for it. [5]

Regional / Institutional Variation

            In addition to the standard growth covariates discussed above, we also integrate dummy variables to account for growth variation attributable to institutional and other unmeasurables that vary by region.   We create indicators for Africa (excluding North Africa), Central and Eastern Europe, Latin America (comprised of Mexico, Central America, the Caribbean and South America), Middle East (including North African countries), the “West” (Western Europe and Maddison’s (2001) “Western Offshoots”), and Asia (including East, South and Southeast Asia).   Table A1 shows which countries are in which regions.   Our decision to model these effects as fixed across institutional / regional groupings stems from several related points.   While some empirical work does find that certain institutional configurations are an important growth determinant among developed countries (e.g. Hicks and Kenworthy 1998), there is also increasing reason to believe that there exists a strong and growing tendency toward high institutional convergence within regions (Beckfield 2005; Kim and Shin 2002), creating greater variation between than within them.  

Second, while there are many proposed institutional covariates with growth—including political, economic and social institutions—the level of understanding with respect to the causal narratives varies greatly across institutional types, the robustness of many institutional covariates is not very high (e.g. Brady et al. 2005) and there is little agreement in terms of measurement strategies (e.g. Bollen 1990; Temple 1999), which is only compounded when including poorer countries in the analysis.   Thus, rather than trying to specify the plethora of potential institutional sources of variation, we follow Temple (1999) and simply control for time invariant ones accounted for by the approximate regional / institutional groupings discussed above, which will also capture other potential sources of time-invariant variation across institutional regions.

Finally, our decision to group western countries into a single category rather than separate regional groupings (North America, Western Europe and Oceania ) is based on substantive considerations.   First, geographical regions may, in and of themselves, be less than useful as a means by which to capture meaningful institutional variation.   For example, there is much reason to believe that the US and Germany have much more in common, institutionally, than does Mexico and the US , or Germany and Hungary , owing to commonalities such as their long-term membership in the Organization for Cooperation and Development (OECD).   Second, geographically based regional designations vary widely from one source to another (e.g. Kim and Shin 2002: 458-60; Taylor 1988).   Finally, the previous example also points to the “West” as a meaningful covariate in capturing institutional variation between developed and developing countries, as do the endless studies limited to “affluent democratic” countries (e.g. Alderson 1999; Brady and Denniston 2006; Western 1997).    

            Correlations and descriptive statistics appear in Table A2, data sources and further description appear in Table A3.

Regression Methods

In order to test the hypotheses we develop in sections two and three, we estimate regression models where economic growth is regressed on indicators for core and periphery (semiperiphery is the excluded category), IDL mobility, and a series of control variables.   In order to enlarge the statistical power of our models, we pool the observations across two growth periods (1965-1980 and 1980-2000).   Pooling these data also allow us to account for two types of omitted variable bias.   One type of omitted variable that could bias these analyses would vary across units but not over time (unit effect).   The most conservative technique for dealing with unit effects is the fixed effects model (FEM), which is equivalent to OLS but including a series of dummy variables for N-1 units.   Yet, research shows that, in the context of cross-national economic growth equations, “the results from fixed effects estimation are often found to be disappointing” (Temple 1999: 132).  

For example, while the FEM approach eliminates between country variation in the estimation of coefficients, most growth analysts are primarily interested in understanding how the between case variation in a given variable affects the between case variation in growth.   This is an important theoretical caveat that is reflected in the structure of our data: unreported analyses show that the ratio of between to within variance for our structural covariates is overwhelming significant, with more than ninety percent of the variance residing between cases.   Moreover, a byproduct of removing between case variation is that the consistency of the FEM approach is low in “short” panels, i.e. in panels where the ratio of cross-sectional observations to time-series observations is low (Halaby 2004; Wooldridge 2002).   Further, FEM models are unable to capture the effect of time invariant—or nearly invariant—covariates such as core, periphery and semiperiphery because they are perfectly, or near perfectly, collinear with the fixed effects, another counterpart to the elimination of between case variation.   Still, we do follow Temple (1999) and include the regional level fixed effects described above, which are likely to capture much of the meaningful variation attributable to unit effects that tend to vary more between than within regions, while maintaining a greater degree of identifying variation on each side of the equation (Koop et. al. 1995; Temple 1999: 132). [6]

Another type of omitted variable is one that varies over time but not over units (period effects).   We include a period specific fixed effect for the first period (1965-1980) in order to control for this source of bias.   Finally, pooled data of the type analyzed here are also often plagued with both heteroskedasticity and spatial contemporaneous autocorrelation.   Thus, standard errors are obtained using panel corrected standard errors (PCSE) (Beck and Katz 1995).   In our final models utilizing lagged mobility, standard errors are obtained with a heteroskedasticity consistent covariance matrix.   Because these data may violate some standard assumptions of regression analysis such as independent observations and random sampling, we also estimated all models using bootstrap standard errors (Snijders and Borgatti 1999), which were substantively identical.   All regressions were carried out with Stata 9.2.  

The Structure of the IDL

[Figures 1 – 3 about here]

Figures 1 – 3 graph the first and second dimensions from our correspondence analysis of regular equivalencies, with the first six groups from our hierarchical clustering results superimposed.     Previous research shows that a simple core/periphery structure will manifest high variation explained by the first dimension, with subsequent dimensions decreasing monotonically in terms of explained variance (Borgatti and Everett 1999; Boyd et. al. 2006b; Mahutga 2006; Smith and White 1992).   As Table 2 shows, the first non-trivial dimension—that displayed on the X-axis of Figures 1-3—explains nearly all the variance at each time point, suggesting that the role and position analysis is identifying a latent core / periphery structure.   Moreover, the ellipses in Figures 1 – 3 represent two-dimensional 95 percent confidence intervals centered on the mean location of each group.   The fact that they do not overlap nor contain any countries from other groups demonstrates that the hierarchical clustering results are locating more or less equivalent groups along the continuous first—“coreness”—dimension of the correspondence analysis. [7]

[Table 2: Explained variance of correspondence analysis by dimension and year about here]

The first dimension from our correspondence analysis—the “coreness” of each actor—moves from high to low as you move from right to left.   The origin of the Euclidean space from our correspondence analysis (the point at which the X and Y axes = zero) reflects the average regular equivalence profile in the network.   The most extreme positive group is the core.   There are two groups between the core and the origin that we’ve labeled (2) core-contenders and (3) upper tier semiperiphery.   Our fourth group—the strong periphery—is at or below the origin, and the two lowest groups—(5) weak periphery and (6) weakest periphery—correspond to an increasing distance from the core (see Table A1 in the Appendix for a listing of countries by group).   Thus, countries on the positive side of the origin comprise an “upper tier” and those on the negative side of the origin comprise a “lower tier” of the latent core / periphery structure.  

The core group is relatively homogenous, containing the strongest countries in the world and headed by the United States .   The core group contains the leaders of the “global triad” (Ohmae 1985).   The core-contenders are the most heterogeneous group in our set, made up of both developed European countries and many of the more dynamic economies of the developing world, including China (by 1980), Hong Kong, India, Brazil, South Korea and Singapore (by 1980).   The upper-tier semiperiphery contains most of the rest of the more dynamic economies in the developing world, including Indonesia , Ireland , Malaysia , Thailand , Singapore , and Turkey (Amsden 2001; Gereffi and Wyman 1990).   At the other extreme, our periphery contains poor countries commonly associated with the periphery, including the Central Africa Republic , Malawi , Samoa , Bahrain , Jordan , Bolivia and Trinidad / Tobago , and represents all geographical regions of the world.   The wealthiest countries in the periphery turn out to be major oil producing countries, such as Saudi Arabia , Kuwait and Iran .   Our classification is generally consistent with previous research (Mahutga 2006; Smith and White 1992), though our sample size is substantially larger.

In sum, our role and position analysis results reported in Figures 1-3 and Table 2 yields a two-tiered core/periphery structure with three groups in each tier.   Moreover, the increasing variance explained by the first dimension of our correspondence analysis implies that a simple core / periphery model—the single horizontal vector in Figures 1-3—accounts for variation in the role similarity between countries better as globalization proceeds, contrary to expectations from a growing body of literature in economics and sociology that suggest a more complex, differentiated or less hierarchical overall structure.

The Structure of the IDL and Economic Growth

[Table 3: Average yearly GDP per capita growth by group, about here]

Where do rapidly growing countries reside in the structure of the IDL?   Recall the three hypotheses developed above: the “enhanced welfare” view of the world economy suggests that there should be zero mean differences across positions in the IDL, whereas two political economy views predict either a positive-linear association, or a non-linear association.   As a first approximation in adjudicating between these hypotheses, we calculate the average economic growth rate for each of our six groups from 1965 to 1980, and 1980 to 2000.   As Table 3 suggests, there are two key points worth emphasizing.   First, in neither period was the greatest economic growth in the core of the IDL.   Rather, the most rapidly growing countries are found in our core-contending and upper-tier semi-peripheral groups.   In fact, the already high growth observed in our core-contending group is actually attenuated by the inclusion of the already wealthy / developed European countries in the second period, in which the average growth for the non-European core contenders was 5.23 percent per year.   On the other hand, our three peripheral groups grow the slowest in both periods, two had less than 1 percent annual growth in the second period, and one had negative growth in the second period.  

In sum, the hierarchical structure of the IDL appears to have a nonlinear association with economic growth that is skewed toward the upper tier: peripheral countries in the IDL grew the slowest and the middling upper tier countries outperformed everyone. [8]   This non-linear relationship between growth trends and IDL position is entirely consistent with the notion that, in the Kondratieff B phase of the period under study, the “intermediate elements” gain the most economic ground, while the “periphery” gains the least. [9]

While this growth summary suggests that the non-linear hypothesis is most consistent with observed growth trends, it remains to be seen whether or not this apparent association holds net of common growth mechanisms that may also differentiate among these cases.   Thus, we regress economic growth on dummy variables for the core, periphery (semiperiphery is the excluded category), a baseline model of secondary education, trade openness, population growth and initial GDP per capita, along with our institutional-regional and temporal fixed effects. [10]   We use one-tailed tests for significance because of the directional nature of the non-linear hypothesis.  

[Table 4 about here]

Table 4 reports the unstandardized regression coefficients for a baseline regression of economic growth on the core, periphery and temporal fixed effects.   As model 1 shows with respect to the baseline association, the semiperiphery grows significantly faster than does the periphery, while the growth difference between the core and the semiperiphery is in the expected direction but just under significance at the conventional .05 level (p<.06).   As discussed above, the semi-peripheral group’s growth is somewhat slowed by the inclusion of the western European semiperiphery.   Thus, model 2 controls for this group of countries, which increases the growth difference between the semiperiphery and both the core and periphery, which are both in the expected direction and significant at conventional levels.   Model 3 includes all of the control variables.   Compared to Asia , all but the West show slower growth, and both trade openness and population growth have a significantly negative association with economic growth.   More importantly, model 3 shows that the significant difference between the growth rates of the semiperiphery vis-à-vis the core and the periphery holds net of the additional controls.   In short, models 1 – 3 support the non-linear hypothesis discussed above.

Structural Convergence / Divergence in the International Division of Labor

While the above models provide empirical support for the non-linear hypothesis concerning the relationship between position in the IDL and economic growth, the third part of this analysis assesses the competing hypotheses concerning the effect of IDL mobility on growth, and whether or not differential patterns of mobility explain the growth divergence observed above with respect to the periphery and semiperiphery.  

  [Table 5: Structural Convergence / Divergence about here]

            Recall the essence of the debate over mobility: mobility is rare / common and is / is not consistent with economic growth.   Table 5 shows the average mobility scores for each group, and reveals a pattern consistent with that observed in Table 2: neither straightforward convergence nor divergence within the IDL. [13]   As with the growth analysis above, dynamism in terms of upward mobility is clearly expressed by our non-core upper tier.   Furthermore, excluding the developed Eastern and Western European countries from our core-contending group significantly increases the average mobility score. [14]   Overall, the non-core upper tier decreased its distance from the core, while the weakest segments of the periphery performed the worst in terms of mobility.   This begins to provide some empirical confirmation of our fifth hypothesis, that the rapid economic growth observed in our non-core upper tier groups is a function of their greater ability to move up in the IDL structure, and therefore upward mobility is a viable development strategy that is somewhat limited to countries that start out in the middle of the structure.  

[Table 6 about here]

Mobility and Economic Growth         

The apparent association between mobility and growth observed by juxtaposing Tables 2 and 5 suggests that the effect of mobility is significantly greater than 0, and that the mechanism driving the divergent growth of the upper-tier semiperiphery vis-à-vis the periphery lies in the upward mobility of the former.   In order to test these hypotheses, we constrain the second set of regression models to non-core countries and regress economic growth on an indicator for the periphery, the baseline model identified above, along with mobility.  

Table 6 reports results of regressions of economic growth on mobility, the periphery and the control model from above.   Model 4 in Table 6 reproduces the full model in Table 4 (model 3) for the non-core countries in our sample in order to rule out potential sampling effects induced by the exclusion of core countries.   Unsurprisingly, the results of model 4 are entirely consistent with model 3 in the sense that the periphery grows slower than the semiperiphery and the effects of the control variables are substantively identical to those estimated in model 3.   Model 5 introduces mobility into the equation, but omits the periphery indicator.   Consistent with the apparent association between Tables 2 and 5, and with hypothesis 3, mobility has a significantly positive effect on growth.   If the divergent growth between the semiperiphery and the periphery is a function of the greater upward mobility of the former vis-à-vis the latter, we would expect the negative effect of the periphery to drop out after controlling for mobility.   As model 6 shows, this is exactly the case as mobility retains its positive significance while the negative effect of the periphery becomes insignificant.  

            Finally, our last three models attempt to assuage concern over the potential simultaneity bias induced by modeling contemporaneous change scores on each side of the equation (i.e. regressing growth on mobility contemporaneously) by regressing growth in 1980-2000 on mobility from 1965-1980.   Thus, model 7 replicates model 4 by regressing growth in 1980-2000 on the 1980 peripheral category (1980 semiperiphery excluded) with human capital, GDP per capita and trade openness measured in 1980 and population growth measured from 1980-2000.   The growth deficit for the periphery vis-à-vis the semiperiphery is slightly larger in model 7 compared to model 4, and two of the regional fixed effects lose significance because of the smaller sample size.   Model 8 replicates model 5 but replaces contemporaneous mobility with lagged mobility, producing a coefficient that is larger than either of the contemporaneous ones, as is its ratio to its own standard error.   Thus, if simultaneity bias plagues these coefficients, it seems to create attenuation bias and thus works against significant effects.   Finally, model 9 replicates model 6 with lagged mobility, and likewise shows a significantly positive effect of mobility that is larger than that obtained in model 6, as well as an insignificant difference between the periphery and semiperiphery.   The robust effects of models 7-9 provide exceptionally strong evidence of the explanatory value of structural position and change, given their high level of saturation with a case to regressor ratio of less than seven.   In sum, models 5-9 suggest that variation in mobility explains the differential growth we observe between the middle tier countries and their peripheral counter parts, consistent with hypothesis 4.  

Debates about the impact of the structure of the world-economy on economic development are central to a sociological understanding of the wealth and poverty of nations.   We summarize these debates as consisting of a fairly pessimistic view predicting a positive and monotonic relationship between structure and growth, and a more optimistic but temporally bounded view predicting a non-linear association between structure and growth.   We juxtapose these structural hypotheses with the classic economic thinking of an “enhanced welfare” view of the IDL—a country’s position in the structure does not matter, but rather its ability to adjust its productive activity in congruence with its comparative advantage (Ricardo [1817] 2004) or resource and factor endowments (Evans 1995; Smith [1776] 2003).   Moreover, we extend these structural intuitions to their implications for the effects of mobility within the structure of the world economy, which led to two related hypotheses.   First, mobility has a positive effect on economic growth.   But, second, middling countries in the IDL enjoy a greater propensity for mobility vis-à-vis the periphery, and therefore the observed growth differences between the semiperiphery and periphery are a function of the greater mobility of the former.   

Our results tell us several things about the structure of the contemporary world-economy.   First, the findings in Tables 3 and 4 provide no support for the “enhanced welfare” view of the international division of labor summarized by Hypothesis 0, nor for the more pessimistic position exemplified by Hypothesis 1.   Rather, the most rapid economic growth accrues not to core countries, but to countries at intermediate positions in the IDL, at least in the last three and a half decades of the twentieth century.   Second, rather than finding an IDL structure that is less hierarchically organized over time, we instead find that we can explain nearly all the variation in trade relationships between countries with a simple core/periphery model, the fit of which increases as “globalization” proceeds (Table 2).   However, as our mobility analysis shows, the core contenders and upper-tier semiperiphery converged toward the core, but diverged from the periphery.   Moreover, the apparent association between mobility and growth suggested by Tables 3 and 5, as well as the regression models in Table 6 provide support for Hypothesis 3 above: mobility has a robust positive effect on economic growth.   Third, as we summarized with Hypothesis 4, the observed growth divergence between the periphery and the semiperiphery appears to be entirely a function of the greater propensity for upward mobility enjoyed by countries in the middle of the IDL vis-à-vis their peripheral counterparts.  

These findings speak volumes to current debates in the literature on globalization and development.   To recap, some argue that upward mobility is the best, and indeed only, strategy for long-term development (Amsden 2003; Firebaugh 2004; Gereffi and Memedovic 2003; Memedovic 2004).   Others argue that the highest returns to economic activity accrue increasingly to “intangible” aspects of production processes, rather than to production itself, such that “industrial upgrading” only gives the “illusion” of development (Arrighi et al. 2003).   Further, some analysts tend to argue that “upward mobility within the core/periphery hierarchy is exceedingly difficult and rare” (Mahutga 2006: 1882), while others note that even the current hegemonic core state resided in the periphery at one period in time (Chase-Dunn 1995).   As a resolution to this debate, we suggest that the following generalization: (1) upward mobility is a viable path toward true development, but (2) countries in the middle tier of the IDL also share advantages vis-à-vis their peripheral counterparts with respect to upward mobility.   In short, countries in the middle of the IDL have a structural advantage over those at the bottom during moments of industrial migration such as those witnessed over the course of economic globalization.   

  What do our findings suggest about development theory and policy?   First, while the preceding text is conversant with some classic structural hypotheses from the world-systems perspective, much of our rationale for the empirical patterns above departs from the perspective.   In short, we do not offer the classic exploitationist view of core / periphery linkages (see Evans and Stephens 1988; Frank 1969).   Rather, we suggest that much of the explanation for the slow growth observed in the periphery lie with its exclusion from the aggregate rise in global functional integration observed over the course of the late twentieth century that led greater interdependence between core and semi-peripheral countries.   In other words, as long as the behavior of capitalist firms is constrained by the need to generate profits, moments of industrial migration will tend to pass by countries that cannot offer both cheap and comparatively sophisticated production capabilities.   These exclusionary tendencies may become more pronounced given recent claims that the ascendancy of two countries—China and India—may preclude the broader integration of many poor countries because they can absorb a significant portion of present and future offshoring activity at the expense of other countries (Gereffi and Memedovic 2003; Kaplinsky 2000; 1998; Schrank 2004).   Thus, exclusionary tendencies in the structure of the world-economy are an important consideration in making predictions about long-term trends in the wealth and poverty of nations.  

At the same time, c asual observation implies that an active state played a predominant role in the success stories of our sample.   Four of the top five upwardly mobile countries—(1) China , (2) Spain , (3) Thailand , (4) South Korea and (5) Indonesia —are exemplars of state led development (Spain being the exception, see Abbot 2003; Biggart and Guillen 1999; Evans 1995; Evans and Rauch 1999; Hoogvelt 2001).   Moreover, these cases also illustrate the efficacy of state involvement when it is oriented toward improving the economy’s overall position in the international division of labor (e.g. Abbot 2003; Evans 1979; 1995; Gereffi 2009).   Yet, these states were all positioned within one of the two semi-peripheral groupings early on.   Thus, while we argue that the structural of the world-economy systematically favors some groups and excludes others, it is also likely that the structure simply sets broad structural constraints within which there is a significant degree of agency for social actors—whether they be within the state or civil society—to improve upon the country’s position, so long as these actors are attuned to the strengths and weaknesses such a position entails.  

Finally, moving the discussion from global inequality to national development, and from extremely difficult to measure income shares to economic growth trends, raises the possibility of the persistent social exclusion of a significant share of countries from the potential gains from globalization.   Thus, previous studies that find declining “total world inequality” do advance our knowledge about changes in the ability of the world’s population to secure goods priced according to their own domestic price structures, and do imply good news for a large proportion of the world’s poor.   However, by emphasizing a declining trend they potentially obscure the fact that globalization may be characterized by sluggish growth in most poor countries (Milanovic 2005), a finding that seems to apply to a growing number of countries in the periphery of the IDL (Pritchett 1997).   Thus, while China ’s dynamism necessarily attenuates the trend in “total world inequality,” the consistently slow and secularly declining growth we observe in the lower tier portends a systematic reproduction of the same stagnating positions in the world economy. [15]   Such a problem deserves attention, regardless of whether or not “total world inequality” might be decreasing or increasing.

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Table 1: UN Commodity Categories Classified in Relational Categories from Smith and Nemeth (1988)

Table 2: Explained variance of regular equivalencies by correspondence analysis across dimension and year.

Table 3: Average yearly GDP per capita growth by group.

Table 4: Unstandardized Coefficients from Regression of Economic Growth on Select Independent Variables.

Notes: Notes: Models 1-3 report unstandardized coefficients from OLS regressions where periods 1965-1980 and 1980-2000 are pooled and all independent variables are measured at the initial year except population growth, which is contemporaneous.   Numbers in parentheses are panel corrected standard errors.   *p<.05; **p<.01; ***p<.001 (one-tailed test). a semiperiphry is the excluded category; b Asia is the excluded category.

Table 5: Structural Convergence / Divergence

Notes: Mobility measured with the average of equation 3 for each group, excluding outliers.

Table 6: Unstandardized Coefficients from Regression of Economic Growth on Mobility and Select Independent Variables, 1965-2000.

Notes: Models 4-6 report unstandardized coefficients from OLS regressions where periods 1965-1980 and 1980-2000 are pooled and all independent variables are measured at the initial year except population growth, which is contemporaneous.   Numbers in parentheses are panel corrected standard errors. Models 7-9 report unstandardized coefficients from OLS regressions where mobility is measured from 1965-1980, economic and population growth are measured from 1980-2000, and all else are measured at 1980.   Numbers in parentheses are robust standard errors.   *p<.05; **p<.01; ***p<.001 (one-tailed test except the constant). a semiperiphry is the excluded category; b Asia is the excluded category; c non-core countries are excluded.  

Figure 1: Superimposition of Hierarchical Clustering and Correspondence Analysis of Regular Equivalencies, 1965.

Table A1: Country by IDL Equivalence Group and Region.

Notes: Countries arranged from highest to lowest across all periods.   *Group 1 = Core; Group 2 = Core-Contenders; Group 3 = Upper Tier Semiperiphery; Group 4 = Strong Periphery; Group = Weak Periphery; Group 6 = Weakest Periphery. Af = Africa, As = Asia; CEE = Central and Eastern Europe; L = Latin America; ME = Middle East ; W = West.

Table A2: Correlation Coefficients for Variables Included in Analyses.

Table A3: Variable Measurement and Source.

[1] In the most detailed analysis of weighted international inequality to date, Milanovic (2005) shows that the declining gap between the income of China, on the one hand, and the six largest OECD countries, along with Brazil Mexico and Russia, on the other, explain all of the observed decline in inequality between 1978 and 2000 (Chapter 8).

[2] Given an N х N matrix where cell ij represents the export from actor i to actor j , one can use either actor i ’s reported exports, or actor j ’s reported imports to measure j ’s import from i, or equivalently, i ’s export to j .   While export and import data are very highly correlated, reported imports tend to be more accurate because of the care taken by state agencies to record imports accurately for the purpose of tariffs (Durand 1953).   Thus, we use reported imports, measured in current US dollars, to measure both imports and exports between each country.      

[3] We want to state clearly that our role and position analysis is “agnostic” with respect to prior expectations as to what types of patterns we should observe across commodity groupings, and is therefore amenable to the notion that “core” activities vary both across industries and over time.   Indeed, unreported analyses demonstrates that our method detects the fact that “core” activities change over time, with garment manufacturing becoming increasingly peripheralized—moving to the periphery—during the period studied (Gereffi 1994).   In the interest of space we do not include these analyses but make them available upon request.  

[4] Two countries ( Czechoslovakia and Yugoslavia ) in our data set disintegrated over the period studied, and we imputed their values by either summing (in the case of trade and GDP) or averaging (in the case of percentage based attributes) across the newly formed constituent republics.

[5] Some may argue that domestic investment should be part of a baseline model of economic growth.   To accommodate this concern, we estimated all models including domestic investment, which was only available for approximately eighty percent of our sample.   All but one of models that included initial level of domestic investment were substantively identical to those presented here.   In the one model where differences were observed, coefficients performed identically but with less power, and we found that the weakened significance is attributable to sampling effects rather than omitted variable bias (i.e. a model that included only those cases with non-missing data on investment was identical to that which included investment).   These analyses are available upon request.

[6] Some authors estimate random effects models (REM) owing to some of the concerns we raise here.   While we do not see the added value in the REM approach when the assumption of uncorrelated unit effects is not met, and when we take alternative precautions, we did estimate a series of random effects models as added robustness test.   Unsurprisingly given the amount of variation residing between cases in our data, the coefficients and standard errors from the REM models we estimated were almost identical to those we report.   These analyses are available upon request.

[7] Many methods of evaluating a set of cut points have been suggested (Wasserman and Faust 1999).   For our purposes, we consider the robust correspondence analysis solution as a benchmark against which to evaluate our complete link hierarchical clustering groups.   Because the first dimension of our correspondence analysis explains 90 to 96 percent of the variance in regular equivalence between countries, this provides a straightforward evaluation of fit—the amount of variation on the first dimension we can explain with our group assignments.   These values are: 1965 = 94.9%, 1980 = 92.7%, and 2000 = 93.6%.            

[8] These interpretations only hold true if there is relative stability in the members of each group over time.   If poor countries move to the upper tier, and thus enjoy the faster economic growth of the upper tier, than there is little reason to suggest a diverging growth pattern.   Table A2 in the Appendix gives a correlation matrix, and shows that the correlation between the groups for 1965 and 1980 is .93, while that between 1980 and 2000 (five years longer) is .94.  

[9] It is very unlikely that this is simply a sampling effect.   In a study of the data available in the Penn World Tables, Lant Pritchett notes that “Of the 108 developing countries…11 grew faster than 4.2 per annum over the 1960 to 1990 period…sixteen developing countries had negative growth over the 1960-1990 period…Another 28 nations…had growth rates of per capita GDP less than .5 percent per annum from 1960 to 1990…and 40 developing nations…had growth rates less than 1 percent per annum” (Pritchett 1997: 14).

[10] Our decision to combine the semiperiphery and periphery into single indicators stems from two issues.   First, the small number of countries in some of the groups increases the standard error for the difference between their growth and a comparison group asymptotically, which raises the probability of a type II error.   Second, preliminary analyses reveal that there were not significant growth differences between any of the semi-peripheral or peripheral groups, but rather that the differences were between the major categories.

[11] This corresponds to an alternative operationalization alluded to by Borgatti and Everett (1999) “In a Euclidean representation, [“peripheralness”] would correspond to distance from the centroid of a single point cloud” (Borgatti and Everett 1999: pp. 387, also see Boyd, Fitzgerald and Beck 2006; Boyd et al. 2006a; 2006b).   

[12] Subtracting the average controls for the fact that the overall density of trade has dramatically increased since 1965, and in this way identifies upwardly mobile individual countries net of the “density effect” (see Butts 2006 and Mahutga 2006 for a full discussion).   Note that (3) precludes the identification of mobility for core countries.   We opt for this preclusion because 1) by definition, upward mobility is almost impossible once in the core and 2) we rely on reasoning drawn from the seminal work of Borgatti and Everett (1999) outlined above to conceptualize mobility.

[13] In order to make sure that outliers did not unduly influence our summary measure for each group, we utilized the applications available in SYSTAT to identify outliers and influential cases.   We found several outliers: in the 1965-1980 period, we found one positive outlier ( Spain ) from group 2, and two negative outliers: Angola from group 4, and Zambia from group 5.   In the 1980-2000 period, we found 2 positive outliers: Indonesia from group 3, and Turkey from group 4, and one negative outlier ( Malawi ) from group 6.   The substantive interpretations were generally the same with or without the outliers included.  

[14] The average upward mobility for our non-European core contenders in the 1965-2000 period is .418, while that observed in 1980-2000 is .272.   On the other hand, the developed, European core-contenders display downward mobility in both periods, which is consistent with a picture of the two groups switching places in the overall distribution of “coreness.”

[15] Understandably, one may wonder how population figures into this analysis.   Unreported analyses show that while the vast majority of the world’s population lives in the fast growth middling positions in the IDL, we also find that the slow growing peripheral groups are the only positions in the structure that experience a secularly increasing share of the world population (rising from 9 percent to 18 percent in the period under study), while core and semi-peripheral positions contain a declining share of the world’s population.   Thus, despite the huge population shares in the middle tier, an increasing number of countries / human beings are slipping into a slow growing periphery over time.  

ENCYCLOPEDIC ENTRY

Globalization.

Globalization is a term used to describe the increasing connectedness and interdependence of world cultures and economies.

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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 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.

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• Globalisation Essay

Essay on Globalisation

Globalization means the integration of economies and societies through the flow of information, ideas, technology, goods, services, capital, finance, and people. The true meaning of Globalization in a broad sense is connecting in all areas of human life. It is the process by which other companies or organizations enhance their international reputation or start operating internationally. 

Globalization began thousands of years ago when people and companies bought and sold in distant lands. In the Middle Ages, Central Asia was connected to China and Europe via the famous Silk Road. After World War II and the last two decades, governments of many countries have adopted free-market economies. They have greatly increased their own production potential and created countless new opportunities for international trade and investment. New routes and means to transport goods have been discovered, which has allowed the people to expand their business easily and efficiently. 

The government has reduced all trade barriers and concluded new international agreements to promote trade in goods, services and investment. This profitable action has created opportunities for international trade. In foreign markets, companies with these new opportunities set up new factories and establish production and marketing relationships with foreign partners. Hence, Globalization is defined as an international industrial and financial enterprise.

Overview of Globalization

Globalization means the assimilation of economics and societies through the flow of information, ideas, technologies, goods, services, capital, finance, and people. The real meaning of Globalization in a broad sense is connectivity in all aspects of human life. It is the process where the businesses or other organizations expand international authority or start operating on an international scale.

How the Existence of Globalization Came Into Being?

Globalization had started many thousands of years ago when people and corporations were buying and selling across lands at great distances. In the middle age, Central Asia connected with China and Europe through the famed Silk Road. After the Second World War II and during the last two decades, the governments of many countries have adopted free-market economic systems. They increased their own productive potential immensely and created innumerable new opportunities for international trade and investment.

The governments have reduced all barriers to commerce and established new international agreements to promote trade in goods, services and investments. These beneficial measures gave rise to opportunities for global trade. With these new opportunities in the foreign markets, corporations established new factories and started production and marketing alliances with foreign partners. Hence, Globalization is defined as an international industrial and financial business structure.

Advantages and Disadvantages

The frontiers of the state with increased confidence in the market economy and renewed policies in the private capital and resources, a process of structural adjustment spurred by the studies and with the support of the World Bank and other international organizations have started in many of the developing countries. Globalization has also brought in new opportunities to developing countries. Greater access to developed country markets and technology transfer has promised to improve their productivity and higher standards. 

At the same time, Globalization has also created challenges like growing inequality across and within nations, instability in the financial market and environmental deterioration. Globalization is a fascinating exhibition that can be understood as a global system of competition and connectivity. It has created tough competition among countries and global corporations.

Impact of Globalization in India

The British Colonial rule had destroyed the self-sufficient economy of India and left India to be the poorest Independent country. Our first Prime Minister gave preference to a mixed economy to boost the economic condition of the country. Public sectors were set up along with the private enterprises, but because of the socialistic model of the economy, the new strategy did not produce profitable results. Due to this, a number of public sectors became sick and the growth rates of production began to fall. 

During that time, the poverty of the people in India was increasing at an alarming rate and because of low domestic savings and acute balance of payment crisis, there was no adequate capital for investment. During that time of crisis, Prime Minister PV Narsimha Rao introduced the policy of liberalization, privatization to overcome the financial situation. 

India opened up to Globalization after the economic policy of 1991 came into force. Mounting debts and pressure from the International Monetary Fund drove the nation to go global. The process of Globalization has been an integral part of the recent economic growth of India. Globalization has played a very significant role in the growth of export, leading to the expansion of the job market in India. One of the major sectors of Globalization in India has been in the growth of outsourced IT and Business Process Outsourcing services. There has been an incredible increase in the number of skilled professionals in India employed by domestic and foreign companies to cater service to the customers globally, especially in the USA and Europe. 

There was not a doubt that Globalization in India brought a monumental change in the living standards of the people. People in India realized many benefits from Globalization. The establishment of multinational companies generating billions of jobs and access to umpteen numbers of brands and an increase in the forex reserves of the country took India to a higher platform globally. Despite this monumental change in the economy of the country, India also faced the challenges of severe competition from the foreign market and the domestic producers started fearing marginalization and pulverization because of the better quality products produced by the foreign producers.

Globalization had both desirable and undesirable consequences for India and the world. Even though it has accelerated progress in some countries, it has also widened the gap between the rich and the poor.

The impact of Globalization has been both positive and negative on the entire world, but we can surely hope for more advancement in the global economy due to this process.

FAQs on Globalisation Essay

1. How Did Globalization Help India to Improve the Economic Conditions?

Globalization generated umpteen employment opportunities for the people of India by establishing multinational companies. The policy of liberalization and privatization invited foreign traders to do business with India. This has increased the inflow of men, money, material, labor, technology, etc., from foreign countries to India. People have access to foreign brands and the living standards have improved drastically.

2. How is Globalization a Threat to Domestic Producers?

The domestic producers fear marginalization and pulverization because of the entry of foreign and better quality products.

3. What are the advantages and disadvantages of Globalization?

With increasing confidence in market economies and new policies on private capital and resources, many developing countries are beginning to adapt to developments with the support of the World Bank and other international institutions involved in research and development. Globalization also offers new opportunities for developing countries. Greater access to markets in developed countries and the transfer of technology will increase their productivity and demand.

At the same time, Globalization has created challenges such as increasing inequality between and within countries, instability of financial markets and environmental degradation. Globalization is an interesting exhibition that can also be seen as a system of competition and international relations. This has created intense competition between countries and international companies. 

4. What do you mean by Globalization?

Globalization means the integration of economies and societies through the flow of information, ideas, technology, goods, services, capital, finance, and people. The true meaning of Globalization in a broad sense is a connectedness in all areas of human life. It is the process by which other companies or organizations enhance their international reputation or start operating internationally. Globalization has its own benefits and drawbacks. We can learn more about Globalization and how to write an essay on it in detail on the Vedantu website, which has all the necessary materials that students need in order to write an essay on Globalization. 

5. How can Globalization help India improve its economic situation?

In our present times, Globalization has been a boon to many people as it not only allows companies to expand their business but also makes things accessible for everyone. In a simple sense, we can say that it helps in connecting people with the world. Globalization has created many job opportunities in India through the creation of multinational companies. Policies of liberalization and privatization have encouraged foreign traders to trade with India. This has increased the number of people, money, materials, labor, technology and so on—inflows from abroad to India. People have access to foreign brands and the standard of living has improved significantly.

6. How does Globalization threaten domestic producers?

Domestic producers are afraid of marginalization and due to the entry of foreign and better quality products into the market. Globalization can be associated with increasing income and wealth inequality. Many of the world's poorest people lack access to basic technologies and public goods. They are excluded from treatment. Some critics of globalization point to the loss of economic and cultural diversity as international multinational giants and brands dominate domestic markets in many countries. Globalization can hinder competition if international companies with dominant brands and high technology gain a foothold in key markets, be it telecommunications, the automotive industry, and so on.

7. What are the main industries that have grown tremendously because of Globalization?

The integration of national economies into the global economy is one of the most important developments of the last century. This process of integration, often referred to as Globalization, has manifested itself in a tremendous increase in cross-border trade.

The outsourcing business has grown exponentially due to Globalization. The main industries resulting from Globalization are trade and commerce. Automobile companies, clothing manufacturers and transportation, are the three main industries taken over as a result of Globalization.

Essay on Globalization for Students and Children

500+ words essay on globalization.

Globalization refers to integration between people, companies, and governments. Most noteworthy, this integration occurs on a global scale. Furthermore, it is the process of expanding the business all over the world. In Globalization, many businesses expand globally and assume an international image. Consequently, there is a requirement for huge investment to develop international companies.

How Globalization Came into Existence?

First of all, people have been trading goods since civilization began. In the 1st century BC, there was the transportation of goods from China to Europe. The goods transportation took place along the Silk Road. The Silk Road route was very long in distance. This was a remarkable development in the history of Globalization. This is because, for the first time ever, goods were sold across continents.

Globalization kept on growing gradually since 1st BC. Another significant development took place in the 7th century AD. This was the time when the religion of Islam spread. Most noteworthy, Arab merchants led to a rapid expansion of international trade . By the 9th century, there was the domination of Muslim traders on international trade. Furthermore, the focus of trade at this time was spices.

True Global trade began in the Age of Discovery in the 15th century. The Eastern and Western continents were connected by European merchants. There was the discovery of America in this period. Consequently, global trade reached America from Europe.

From the 19th century, there was a domination of Great Britain all over the world. There was a rapid spread of international trade. The British developed powerful ships and trains. Consequently, the speed of transportation greatly increased. The rate of production of goods also significantly increased. Communication also got faster which was better for Global trade .

Finally, in 20th and 21st -Century Globalization took its ultimate form. Above all, the development of technology and the internet took place. This was a massive aid for Globalization. Hence, E-commerce plays a huge role in Globalization.

Get the huge list of more than 500 Essay Topics and Ideas

Impact of Globalization

First of all, Foreign Direct Investment (FDI) increases at a great rate. This certainly is a huge contribution of Globalization. Due to FDI, there is industrial development. Furthermore, there is the growth of global companies. Also, many third world countries would also benefit from FDI.

Technological Innovation is another notable contribution of Globalization. Most noteworthy, there is a huge emphasis on technology development in Globalization. Furthermore, there is also technology transfer due to Globalization. The technology would certainly benefit the common people.

The quality of products improves due to Globalization. This is because manufacturers try to make products of high-quality. This is due to the pressure of intense competition. If the product is inferior, people can easily switch to another high-quality product.

To sum it up, Globalization is a very visible phenomenon currently. Most noteworthy, it is continuously increasing. Above all, it is a great blessing to trade. This is because it brings a lot of economic and social benefits to it.

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Structure of Globalization

This power point presentation explores the different structure of globalization and how it impacts the global community

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Niluka Kadurugamuwa

The term globalization has become almost a cliché in the present day world with its recurring presence in many contexts. It is referred to and discussed extensively in scholarly work as well as in political discourses and mass media. One may hear reference is frequently made to phrases such as ‘the impact of globalization’ or ‘the disadvantages of globalization’ in the said contexts, and may or may not give much thought to them. However, the frequent use of the term definitely gives one a broad idea as to how globalization has become a phenomenon that merits a deeper understanding and a careful study.

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The Effect of Globalization on a World Culture Essay

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Introduction

Globalization and culture.

Scientific innovations and inventions have accelerated the growth of globalization. Nations can easily trade, socialize, share ideas, and assist each other in different spheres of life.

Improved international relations have enabled the movement of factors of production among nations with minimal barriers to trade. The cooperation has led to social, political, and economical globalization; although neither of the above three classifications of globalization have been fully attained, their effects can be felt in economic, political, and social spheres of life.

Critics of globalization appreciate that it has positive effect on economic wellbeing of countries. However they are quick to point out that globalization has high culture and identity loss/costs (Sheila 56). They are of the opinion that modernization has the potential of running roughshod over the world’s distinctive cultures and creates a single world which resembles a tawdry mall. This paper discuses the effect of globalization on a world culture.

Culture is the identity of people that any member adheres to. It has some defined attributes, some of them are written and others are not. The set way of operation that is governed by some cultural, communal, and societal goals assists in holding people together and creates a norm in the community.

When people trade, socialize or interact with each other in a way it has been enabled by globalization, there is the tendency that they will lose their identity and inherit a system of operation or a certain mode of conduct that is generally accepted by the community (in this instance, the word community has been used to refer to the larger global community created by globalization).

According to Tyler Cowen, modernization and cultural globalization have resulted into the growth of creativity, innovation, and invention among communities. When people interact, they tend to learn the other parties’ way of operation and the difference is likely to trigger some creative mind for the benefit of the two parties.

The above observation by Tyler Cowen can be interpolated either negatively or positively; from a positive angle, modernization has created a room for invention and innovation. On a negative note, the world is utilizing the differences it has as failing to create more differences that future generation is likely to run out of creative mind, as there will be lack of motivation in the form of current culture differences.

For example, in the 1950s, Cuban Music and Reggae was produced in Cuba with the target consumers as American Tourists who visited the country. In Cuba, the style of music was part of their tradition that the Americans loved to sing along. With diffusion of culture and more exposure, the style of music has been adopted by the Americans, and today it is played in modern clubs and bars.

Today, if a Cuban was to visit the United States, he or she was likely to feel accommodated by the structures as there are some similar attributes that he/she gets. In either French or German restaurants, a shopper is able to buy Sushi (Japanese foods consisting of cooked vinegared rice (shari) combined with other ingredients (neta)). Such a move shows how Japanese have been accommodated in both European countries (Sheila 256).

With cultural globalization, people of different cultures, ethnicities, nationalities, religions, and values find themselves in the same atmosphere where no one has the freedom to fully adhere or practice his culture. With such kind of setting, the most probable thing that can happen is people to develop a set of culture that will assist them transact business despite their differences.

The net result is a global culture; the effect and extent that global culture has gone in the world varied among nations and continents; developed countries have their culture more diffused and uniformity can be seen from their way of operation. In developing countries, there is a tendency of resistance to change the culture, but the force therein is strong. Efforts to change the culture of people are not deliberate, but they are necessitated by the prevailing condition in the world.

In contemporary business environments, organizations hire employees of different nationalities, ethnic backgrounds, cultural believes, intellectual capacity, and age. The nature and mix of employees calls for management to develop policies and management mechanisms that will gain from the differences in their human capital; to manage the diverse personnel, business leaders need to adopt international human resources management strategy (IHRM).

The policies that organizations embark on should entail policies that address diverse human resource issues; organization stands to benefit from diversity if the right management policies are set in place, but there is the risk that the differences create uniform business practice. With diffusion of cultures, management can enact some common human resource policies that cut across its diverse human capital. However, care should be exercised since chances of repellence in the event policies seem to be confronting with culture of people.

When managing human capital of different nationalities, businesses leaders should make policies that can assist in tapping their organization’s personnel’s intellectual capacity, as it grows their talents and skills. Culture is likely to affect people in different spheres, thus when companies have diverse human resources, they have to ensure that their programs are sensitive to the differences in culture and beliefs.

When working in different countries, management should never assume that the human management style adopted in the country is fully-effective and applicable to another country; they should take their time, understand what the other country’s employee value and consider best. Management gurus continue to offer insights of how culture and ethnicity of a people affect their performance in their works; they have suggested culture intelligence to assist organization handle their employees effectively regardless of their nationality.

When making business decisions, the culture and exposure that someone has is likely to affect the kind of decision that he is going to make; people who are exposed to the right materials through televisions, the internet, and print media are likely to make more informed decisions. With culture globalization, there has been exposure to different settings and information is available through the assistance of communication channels; the resultant community is an informed community that can make quality decisions for the exploitation of available resources effectively.

Differences in norms and culture among different ethnicity, nationalities, and communities has been a hindrance to effective trade, to some extent, the differences have acted as non tariff barriers that has hindered the development of trade.

When people interact and change their cultural beliefs to adopt a uniform set of beliefs, they are breaking the unseen barriers of trade and create a room for more business, ideas, equality, and economic development. For example, among the Muslims, Women had been regarded as inferior to men and they could hardly be allowed to take leadership positions.

With the interaction with Christians and getting their take on the same, there has been a wave in the community that has enabled them to seek leadership positions like men have. The above case has shown how culture globalization has created opportunities to different people and enabled women to get more opportunities. In the developed worlds, the state and position of the woman had been respected long before the same was done in developing worlds.

As the developed and developing countries trade among each other, the developing countries are getting into the system and women have started to have their positions in the communities. Gender differences has been minimized by globalization, there has been the reduction on gender differences among communities were human beings can now relate more as people not on gender grounds as the case had been when culture globalization was not adhered to.

The rights of girl child campaigns have gained roots in different countries as culture diffuses to reinforce and create awareness to the need to protect women and reduce gender differences that have prevailed among communities for a lengthy duration.

When people of different cultures interact, they develop the sense of togetherness and there are shared common interests that are developed; globalization has enabled the interaction, as well as sharing of ideas, opinions, view points and ways of doing things in a way that facilitates trade. Trade prevails better when the trading partners have some common values, attributes, and beliefs.

Culture globalization has enabled people to have the same perception and attitude towards similar products; with the similarity, peace and harmony in doing and handling issues have been developed. When there is peace and harmony, business and trade prevail effectively.

When people share culture, it means that when someone is in a geographical location different from his or hers, coping will be easy as there will be likelihood that the person will get something that is the same with what he or she beliefs.

For example, although the Chinese food is different from American food, a Chinese visiting the United States only need to establish the restaurant selling Chinese food as the nature and the diversity has been accepted by both the communities. Sales and marketers have much to benefit from globalized world, they can easily develop new formats and marketing strategies developed can be similar and message passed remains the same.

According to Benjamin Barber, one of the main challenges that have been brought about by globalization is culture borrowing and culture mimicry; with the borrowing and mimicry people have lost their sense of identity that someone can manage to treat his brother wrongly and hide under the new system of global culture.

Although culture globalization has not been fully attained, there are moves that indicate that its full operation cannot happen. In areas like religion (religion is an aspect of culture), changing people’s religious believes have been a challenge. The existence of some elements that can hardly change results to the notion of global culture being a mere statement by advocators of the integration, the situation cannot be attained.

Some industries in the globe exist because of differences in culture of people, for example, the tourism industry is much dependent on the cultural differences of people in different places. With culture diffusion, the industry is likely to suffer a huge blow.

In Kenya, the East African country whose tourism is the second earner of the foreign exchange has multicultural where the tourisms from different countries visit to enjoy and learn the diversity of the country’s population.

The move to global culture is thus likely to injure some industries while supporting others. Culture within communities is supported by generally agreed attributes that passes from one generation to another. The “nature of passing” of modern global culture is challenging as people or the global community has not set mechanisms to pass the culture, reinforce, or even punish offender.

To pass the global culture, the materials that young generation become exposed to modern methods of passing information like television, radio, the internet, peers, and written materials. When such materials have been used to pass culture, there are high chances that young generation will get reinforcement of culture which is not good. Global culture is more likely to be for the larger global community benefit, but rarely does it address issue of an individual.

With the structures and development of global culture, there cannot be said to have an effective method of culture reinforcement or a system to punish offender. This means that the culture is vulnerable to changes and hicks ups. Any small attribute or change in the global world is likely to shake the culture of the people since it’s not based on a strong foundation.

With globalization, companies can work in different parts of the world as multinationals; however they have to be sensitive to the nature of products, services, and structure of employees they deploy. Multinationals generally have three main methods to get their employees on board, they use a localization approach, expatriates approach, and a third country approach.

To maintain quality and quantity workforce, the management should ensure that they are aware of the culture of people and manage them effectively. The challenge that multinationals have is putting the notion that with culture globalization, there is uniformity, thus there is no need to have culture intelligence and culture awareness programs.

For example, Pepsi has been a major competitor in the American industry as its style is more American, however the brand has not maintained strong competitiveness in African countries since its style of marketing and sales fails to meet the needs of the continents culture. The above example shows how the notion of global culture has been mis-interpolated (Sheila 256).

Other than human resources, department maintaining qualified and efficient human capital at the most affordable cost possible, they have the role of ensuring they combine their human capital in a manner that will benefit the entire organization.

Diversity and difference in culture by itself offers an organization rich knowledge, opinions, values, and experience, with culture globalization such important attributes to business competitiveness are lost; before an organization decides to fill a certain vacancy in its system, the human resources should liaise with the departmental heads to know exactly the kind of qualification that are sort for, in some instances, the management may advice for some age gap, nationality, gender, and experience.

It is through effective recruitment that an organization can build an effective team that meets its personnel requirement needs. When enacting empowerment and motivational policies or schemes, the management should ensure that the diversity of its employees has been considered.

There are people who are generally team-players, others prefer individualism, and others are charismatic leaders. When making decision, it is important to consider the diversity. Management gurus has continually advised companies to have culture coaches when operating in a country they are not very sure of the nature and the culture of the people; with the coaches, they can develop orchestrate teams and make products that meet the requirement of customers in the country.

Diverse human resource can be biennial to an organization is managed effectively; failure to manage diversity effectively means exposure to risks. Management gurus have continued to support the use of culture intelligence and culture awareness programs to support the culture awareness within organizations; those companies that have undertaken the advice are doing better than those who have not.

Although cultural globalization has build strong operating base through which trade can prevail, it has brought some challenges to the world and the people in general. The lack of identity has resulted into sharing of values likely to dilute societal values and norms.

When the community lacks strong values that are maintained with a certain mechanism, the result is a disintegrated society were social evils are the order of the day. For example, in developed countries, one of the vises that the countries are dealing with is use of drugs and substance abuse by young people.

Although this is taken as a normal condition or social evil, psychologists have suggested that lack of strong values and low behavior standards by young people can be to blame. When the blame is further analyzed, it is seen that parents are not able to raise morally upright children as they have less regard to their cultural beliefs and practices which they consider to have been eroded by globalization.

With diffusion of cultures, there is less emphasis on family and societal values, parents and the community in general seem to ignore the need to maintain, pass and transfer culture to younger generations. When culture is not transferred, children are exposed to new global culture that might be different from the norm.

The results are the families that have low moral standards and which values are questionable. Generally, organizations require physical, human, and informational resources for their operation; business-leaders should realize that human capital is the most crucial capital their organizations have.

In a modern globalized world, organizations have diverse human capital; to manage the capital effectively, companies need to adopt international human resources management strategy. The strategy assists an organization benefit from its personnel diversity as it mitigates risks associated with a diverse workforce. With culture globalization the workforce seems to have the same ideologies an attributes that hinder creativity, innovation, and invention (Sheila 56-78).

Globalization has resulted into culture diffusion, culture sharing, and multiculturalism; the uniformity in culture facilitates trade among nations and promotes international relations and understanding.

However, multiculturalism has been blamed of dilution of people’s cultural values, norms, and virtues. Multiculturalism has also been challenged as a mere statement by business philosophers that will not be attained in the near future as family structures vary among different parts of the globe.

Sheila, Lucy. Globalization and Belonging: The Politics of Identity in a Changing World . London: Rowman & Littlefield, 2004.

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IvyPanda. (2018, October 25). The Effect of Globalization on a World Culture. https://ivypanda.com/essays/globalization-and-culture/

"The Effect of Globalization on a World Culture." IvyPanda , 25 Oct. 2018, ivypanda.com/essays/globalization-and-culture/.

IvyPanda . (2018) 'The Effect of Globalization on a World Culture'. 25 October.

IvyPanda . 2018. "The Effect of Globalization on a World Culture." October 25, 2018. https://ivypanda.com/essays/globalization-and-culture/.

1. IvyPanda . "The Effect of Globalization on a World Culture." October 25, 2018. https://ivypanda.com/essays/globalization-and-culture/.

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IvyPanda . "The Effect of Globalization on a World Culture." October 25, 2018. https://ivypanda.com/essays/globalization-and-culture/.

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✍️Essay on Globalisation: Samples in 100, 150 and 200 Words

• Updated on  
• Oct 25, 2023

Globalisation means the combination of economies and societies with the help of information, ideas, technology, finance, goods, services, and people. It is a process where multinational companies work on their international standing and conduct operations internationally or overseas. Over the years, Globalisation has had a profound impact on various aspects of society. Today we will be discussing what globalisation is and how it came into existence with the essay on globalisation listed below.

Table of Contents

• 1 How Globalisation Came Into Existence?
• 2 Essay on Globalisation in 100 Words
• 3 Essay on Globalisation in 150 Words
• 4 Essay on Globalisation in 200 Words

How Globalisation Came Into Existence?

For all those unaware, the concepts of globalisation first emerged in the 20th century. Here are some of the key events which led to the development of globalisation in today’s digital world.

• The ancient Silk Route as well as the maritime routes led to the exchange of goods, ideas and culture in several countries. Although these were just trade routes, but later became important centres for cultural exchange.
• Other than this, the European colonial expansion which took place from the 15th to the 20th century led to the setting up of global markets where both knowledge and people were transferred to several developing countries. 
• The evolution and exchange of mass media, cinema and the internet further led to the widespread dissemination of cultures and ideas.

Also Read: Essay on the Importance of the English Language for Students

Essay on Globalisation in 100 Words

Globalization, the interconnectedness of nations through trade, technology, and cultural exchange, has reshaped the world. It has enabled the free flow of goods and information, fostering economic growth and cultural diversity. However, it also raises challenges such as income inequality and cultural homogenization. 

In a globalized world, businesses expand internationally, but local industries can suffer. Moreover, while globalization promotes shared knowledge, it can erode local traditions. Striking a balance between the benefits and drawbacks of globalization is essential to ensure a more equitable and culturally diverse global community, where economies thrive without leaving anyone behind.

Also Read: Essay on Save Environment: Samples in 100, 200, 300 Words

Essay on Globalisation in 150 Words

Globalization is the process of increasing interconnectedness and interdependence among countries, economies, and cultures. It has transformed the world in various ways.

Economically, globalization has facilitated the flow of goods, services, and capital across borders. This has boosted economic growth and reduced poverty in many developing nations. However, it has also led to income inequality and job displacement in some regions.

Culturally, globalization has resulted in the spread of ideas, values, and cultural products worldwide. While this fosters cultural exchange and diversity, it also raises concerns about cultural homogenization.

Technologically, globalization has been driven by advances in communication and transportation. The internet and smartphones have connected people across the globe, allowing for rapid information dissemination and collaboration.

In conclusion, globalization is a complex phenomenon with both benefits and challenges. It has reshaped the world, bringing people closer together, but also highlighting the need for responsible governance and policies to address its downsides.

Also Read: Essay on Unity in Diversity in 100 to 200 Words

Essay on Globalisation in 200 Words

Globalization, a multifaceted phenomenon, has reshaped the world over the past few decades. It involves the interconnectedness of economies, cultures, and societies across the globe. In this essay, we will briefly discuss its key aspects and impacts.

Economically, globalization has led to increased international trade and investment. It has allowed companies to expand operations globally, leading to economic growth in many countries. However, it has also resulted in income inequality and job displacement in some regions.

Culturally, globalization has facilitated the exchange of ideas, values, and traditions. This has led to a more diverse and interconnected world where cultures blend, but it can also challenge local traditions and languages.

Socially, globalization has improved access to information and technology. It has connected people across borders, enabling global activism and awareness of worldwide issues. Nonetheless, it has also created challenges like cybercrime and privacy concerns.

In conclusion, globalization is a double-edged sword. It offers economic opportunities, cultural exchange, and global connectivity, but it also brings about disparities, cultural tensions, and new global challenges. To navigate this complex landscape, the world must strive for responsible globalization that balances the interests of all stakeholders and promotes inclusivity and sustainability.

Related Articles

The movement of goods, technologies, information, and jobs between countries is referred to as globalisation. 

Globalization as a phenomenon began with the earliest human migratory routes, or with Genghis Khan’s invasions, or travel across the Silk Road.

Globalisation allows wealthy nations to access cheaper labour and resources, while also providing opportunity for developing and underdeveloped nations with the jobs and investment capital they require.

For more information on such interesting topics, visit our essay-writing page and follow Leverage Edu ! 

Malvika Chawla

Malvika is a content writer cum news freak who comes with a strong background in Journalism and has worked with renowned news websites such as News 9 and The Financial Express to name a few. When not writing, she can be found bringing life to the canvasses by painting on them.

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