The highly controversial process by which the world economy is moving toward a more homogenous and unified structure dominated by the principles of capitalism and free trade.
The integration of the global economy has been under way for much of modern history, and the current incarnation of that process is called globalization. It is distinct from previous integration phases in several ways and has elicited a sizable amount of criticism.
Contemporary globalization involves spreading the economic structure of the industrial West—with capitalism and free trade as the underpinnings of that structure—to the rest of the globe. Not only are these principles quite different from the economic ideas and values traditionally practiced in much of the non-Western world, they are also different from the mercantilist policies (designed to economically benefit the mother country at the expense of a colony) and imperialist policies (which benefit the controlling national economy) used earlier by the West to control the world economy. Nevertheless, the effect of these policies is often similar to the effect of earlier policies, leading to a continuation of many of the earlier conflicts.
The contemporary phase of globalization emerged as the dominant force in international economic relations in the aftermath of World War II. American policymakers had great faith that capitalism and free trade would bring about the economic stability the industrial world so desperately craved after the deprivation and horrors of the Great Depression and World War II. Because the economy of the industrial world had long since become dependent on imported commodities and markets of the non-Western world, American policymakers believed that their ideals had to be extended to these areas as well. There was also an idealistic hope that the American way of organizing international trade would remake countries in the non-Western world into prosperous democracies that mirrored the United States in ways of living and political and economic values. To facilitate this, the United States helped create several international organizations and programs including the World Bank, International Monetary Fund, General Agreement on Tariffs and Trade (GATT), and the Marshall Plan.
The U.S. plan for globalization encountered opposition from the beginning. Communist countries balked at its presupposition that capitalism and market-directed free trade were the only acceptable bases for international economic activity. This disagreement became one of the underlying causes of the cold war. Other industrial countries were reluctant to give up special privileges they had in their empires or to reduce the tariff barriers that protected their domestic industries.
As the cold war came to dominate the tone of international relations, the United States was able to achieve limited success in its vision of globalization. The roughly one-third of the world’s population that was communist formally rejected participation in the global economy; however, trade was never completely cut off between East and West during the cold war, and by the 1970s communist countries were allowing controlled marketing of Western-made consumer goods in their countries.
America’s fellow capitalist countries proved reluctant about the U.S. plan as well. Many were slow to release their empires from the imperialist restraints they had established over them. Although they agreed in principle with the American idea of freer trade, they established economic blocs and customs unions like the British Commonwealth and European Economic Community (EEC), which went against the full spirit of the U.S. plan. Although the Europeans did not fully embrace the American vision of global free trade, they did take steps toward it. They cooperated with the tariff reduction agenda of GATT, and international organizations like the EEC—which became the European Union (EU) on November 1, 1993—did promote trade liberalization and economic integration among their members. Trade liberalization and economic integration were vastly different policies than the pre-World War II trade policy of industrial countries. Also, by the mid-1960s most colonial possessions of the industrial world had been granted at least formal independence, with some countries—for example, Australia and Canada—still functioning with the British monarch as head of state.
As the empires of the industrial world receded, new voices emerged in the non-Western world that also questioned the American vision. One of the greatest objections to globalization was that those in the non-Western world did not agree that capitalism and freer trade would lead to industrialization and prosperity; rather they saw them as solidifying the existing inequities between the industrial and nonindustrial worlds. Under capitalism and free trade, they argued, areas with the most capital, most highly developed markets and technologies, and most diverse economies are in a much better position to grow than others. This attitude led to calls from the non-Western world for preferential treatment in trade, for economic and technological development assistance, and for other types of aid from the industrial world, to which the industrial world responded with both direct foreign aid programs and international organizations such as the World Trade Organization and the International Monetary Fund.
Human rights and environmental groups also criticized globalization. Access to Western markets often led to an increasing push by ruling elites or dictators in non-Western countries to force populations to move from subsistence agriculture to sweatshop-style wage labor. As this occurred, dramatic changes occurred in the daily lives of people that many claim adversely affected people’s health and the environment. Urban areas swelled in population as people left rural areas to work in factories. Often governments paid little attention to housing and sanitation standards in these rapidly growing areas. In attempts to obtain much-needed foreign exchange (cash), some countries began aggressively exporting raw materials and engaging in large-scale slash-and-burn agricultural practices, wreaking havoc on sensitive ecosystems.
Toward the end of the twentieth century, criticism of globalization came even from within the industrial world. Social activists echoed many of the criticisms made by the non-Western world. Organized labor in industrial countries opposed the loss of jobs as some industries relocated factories to the non-Western world to take advantage of cheaper production costs.
It is difficult to make a normative judgment about whether globalization is a positive or negative development for the world. Certainly, for the industrial world, it has improved the quality of life in terms of diversity and quantity of goods available and living standards. Some non-Western countries have seen dramatic improvements in those measures as well, whereas others have experienced overwhelming social problems.
Despite these conflicts, globalization has pressed forward. The World Trade Organization, created in 1994 as a replacement for GATT, has become the primary vehicle driving the globalization process. At the same time, however, a trend toward regional, as opposed to global, economic integration has appeared, exemplified by NAFTA and the European Union. As the twenty-first century begins, scholars are torn as to whether globalization will triumph or there will be a retrenchment toward the development of regional economic blocs.
