Written by Maggie Parker, Girl Economics Global Development Reporter
There is no doubt that globalisation is a major factor contributing to the development of modern economies, but what does globalisation entail and is this process still occurring at such a rate? In the first of my fortnightly articles on global economic development, I will be exploring a brief history of globalisation and it’s importance, as well as the rise of ‘slowbalisation’.
Globalisation is the process of world economies becoming increasingly interconnected and interdependent, characterised by international trade. Since the beginning of recorded history humans have traded goods and services, only trade began in the form of bartering, exchanging goods and/or services without money. Since then, trade expanded from local, to regional, to global, with one of the first recognised global trade routes being The Silk Road.
The Silk Road was approximately 6400 kilometres long, spanning from East Asia to Southern Europe with a multitude of routes. Although the Silk Road facilitated trade between economies, it also played a crucial role in the exchange of culture and religious beliefs with many religions such as Islam, Buddhism and Christianity thought to have spread on the routes.
After the Silk Road, which closed in the 15th century, globalisation further progressed. The ‘Golden age of globalisation’ is said to have occurred from the late 1800s to the first World War. This period included drastic improvements in transport infrastructure including the introduction of railways and steamboats, allowing for increased global trade, as well as the invention of the telegraph which reduced constraints on global communication, aiding globalisation. After the second World War, policies were geared towards increasing international trade with 23 countries signing the General Agreement of Tariffs and Trade (GATT) which was designed to reduce or eliminate trade barriers between these counties. The world trade organisation estimates global trade volume in 2022 to be 45 times the levels in the beginning of the GATT .
The benefits of globalisation are widespread, including: higher economic growth, lower costs of goods and services, access to different talents, ideas and cultures. The European Parliament estimates Globalisation in Europe to support more than 38 million jobs, one in five. Moreover these export related jobs are, on average, 12% better paid, meaning globalisation does not just bring macroeconomic benefits of higher growth and lower unemployment but also benefits to individuals of more job choices, higher incomes, wider range of choices and lower prices.
If globalisation seems to be so beneficial, why is it potentially slowing down, and what is slowbalisation? Slowbalisation, or de-globalisation, is the process of diminishing interdependence and integration between global economies, a term increasingly used after the Financial Crisis of 2008. Despite the previously stated importance and benefits of globalisation, global trade statistics show slowing global trade of goods and services since the financial crisis, leading to global trade falling behind GDP growth.
Why could this be? In recent years there have been multiple supply side shocks, forcing governments and policymakers to reconsider dependencies. For example, after Covid-19 the UK experienced decreases in both imports and exports in 2020, compared to 2019, and world trade fell by 7.4%. These impacts of these supply side shocks show the vulnerability of export led growth. Additionally demand has been impacted, consumer habits shifted after Covid-19 with falling spending, reducing the need for interdependence with other economies. Although globalisation has slowed, the world remains interconnected and recent years have shown the importance of global cooperation in resolving global issues whether it be political, economic or environmental.
