Geography Reference
In-Depth Information
War. In fact, almost all domestic service industries in both the US and
European countries, and in particular the financial services industry, were
largely unaffected by global competitive developments until the 1960s. In
other words, globalization only really began to have impacts on US and
European services industries almost half a century after those within the
mass production manufacturing sectors.
6.3.3
The Post-Second World War Order
The initial stages of genuinely multinational corporate expansion from
the late nineteenth century through the early decades of the twentieth
century were altered dramatically by the three catastrophes of the First
World War, the Depression and, even more fundamentally, the Second
World War and the post-war reconstruction era. These disruptive events
had profound effects on the world economic order, as is clearly reflected
in the data.
In the period 1870‒1914, the levels of world trade and foreign assets to
GDP rose almost continually, peaking just on the eve of the First World
War. The ratio of trade to GDP at the worldwide level was 10 per cent
in 1870, reaching 21 per cent in 1914 (Estevadeordal 2003). Such a trend
was recorded in spite of the gradual return to protectionism experienced
by the major economies in continental Europe since the end of the 1870s.
Germany was the first to change its course by adopting the 'iron and rye'
tariff in 1879: raising tariffs and industrial protection followed in France,
Italy, Sweden, Russia, Austria-Hungary and Spain.
1
Apart from the
United Kingdom, only some small countries, such as the Netherlands,
Belgium, Switzerland and Denmark, remained relatively liberal. This may
be explained, among other things, by the much lower vulnerability of these
countries to the price and rent reductions which globalization had brought
about (Daudin et al. 2008). In other words, world trade might have grown
more slowly after 1914 than it did before even had the First World War not
intervened (Daudin et al. 2008, p. 18). Despite such regional trade trends,
the period 1870‒1914 was certainly characterized by unprecedented inte-
gration in international markets for goods and, even more markedly,
capital, and labour. According to Obstfeld and Taylor (2004, p. 55), the
ratio of the world stock of foreign direct investment to global GDP was 7
per cent in 1870, but it reached nearly 20 per cent in 1914. The same ratio
declined to only 8 per cent in 1930, 5 per cent in 1945, and 6 per cent in
1960. The 1914 figure was not attained again until the late 1970s (Crafts
2004)
2
: the ratio of foreign assets shot up to 25 per cent in 1980, reaching
49 per cent in 1990 and 92 per cent in 2000. As pointed out by Obstfeld and
Taylor (2004), capital market integration has traced out a U-shape over
