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Globalization connects the world’s economies through trade, capital investment, and technology. The use of mineral resources in the 19th century lifted energy limits and connected countries, leading to the expansion of the global economy in the 20th century. The positive and negative effects of globalization are debated, with supporters claiming it promotes competition and improved products, while anti-globalists argue it causes environmental damage and human costs.
The world is connected to a global economy by various factors and for a variety of reasons. The term globalization is often used to discuss this connectivity. In a global economy, countries integrate features of other economies into their own and become increasingly dependent on one another for economic growth.
The global economy began in the 19th century, when humans began to use mineral resources instead of plants as the main source of energy and raw materials. Before 1800, plants and animals were the main source of food, labor, fuel, and fiber. Since energy use was defined by how much could be grown at a time, it greatly restricted the production and flow of energy.
Once the mineral resources began to be used, these energy limits were lifted. There was a seemingly unlimited amount being mined from the Earth itself. This energy was more efficient and had plenty of room for expansion into new technologies. At first, it was also cheaper to use. This seemed to be an entirely positive change, as land previously used to create energy could now be freed up to grow food, while cheaper fossil fuels lowered manufacturing and transportation costs.
Countries that did not use this new technology were in turn far behind those that did. In the early 1900s, the dominant countries that supposedly controlled 2/3 of the world economy were Great Britain, the United States, Germany, and France. The economically less favored countries traded with these more powerful ones to obtain part of the capital that flowed freely. This trade in mineral and fossil fuels, as well as the ease of transportation and communication, began to connect the world in ways never before imagined. Powerful countries with few natural resources depended on economically smaller countries to deliver the material that made them powerful in the first place.
The global economy expanded in the late 20th century with the advent of the Internet, lowering of trade barriers, and increased capital investment in foreign interests. Countries traded debt among themselves, both from the government level and as individual companies such as banks and financial institutions. The Internet also allowed for greater ease of trading on foreign stock exchanges.
At the beginning of the 21st century, the global economy was connected through significant capital flows. Goods and services can be exported and imported. Labor was exported to countries that could offer more competitive production costs, or was imported through migration. The capital was invested through global stock market investments or through debt swaps.
There is a great debate about the positive and negative effects of the global economy. Supporters of globalization claim that it distributes wealth to all and promotes competition and therefore improved products. Those who are anti-globalists say that it causes physical damage to the environment and has great human costs, such as unemployment and poverty. The future has not yet shown which side is correct.
Smart Asset.
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