NAME: UFOT ANYANIME DENNIS

MATRIC NUMBER: 16/SMS01/030

DEPARTMENT: ECONOMICS
COURSE CODE: ECO410
COURSE TITLE: GLOBALIZATION
LEVEL: 400

ASSIGNMENT
What is globalization?
After centuries of technological progress and advances in international
cooperation, the world is more connected than ever. Globalization is a term
used to describe the growing interdependence of the world’s economies,
cultures, and populations, brought about by cross-border trade in goods and
services, technology, and flows of investment, people, and information. As a
complex and multifaceted phenomenon, globalization is considered by some
as a form of capitalist expansion which entails the integration of local and
national economies into a global, unregulated market economy. Globalization
has grown due to advances in transportation and communication technology.
With the increased global interactions comes the growth of international trade
and commerce, exchange of business ideas, supply chain, and culture.
Globalization is primarily an economic process of interaction and integration
that's is associated with social and cultural aspects. However, conflicts and
diplomacy are also large parts of the history of globalization, and modern
globalization.
History of globalization
Silk roads (1st century BC-5th century AD, and 13th-14th centuries AD)
People have been trading goods for almost as long as they’ve been around. But
as of the 1st century BC, a remarkable phenomenon occurred. For the first
time in history, luxury products from China started to appear on the other
edge of the Eurasian continent in Rome. They got there after being hauled for
thousands of miles along the Silk Road. Trade had stopped being a local or
regional affair and started to become global.
That is not to say globalization had started in earnest. Silk was mostly a luxury
good, and so were the spices that were added to the intercontinental trade
between Asia and Europe. As a percentage of the total economy, the value of
these exports was tiny, and many middlemen were involved to get the goods
to their destination. But global trade links were established, and for those
involved, it was a goldmine. From purchase price to final sales price, the
multiple went in the dozens. The Silk Road could prosper in part because two
great empires dominated much of the route. If trade was interrupted, it was
most often because of blockades by local enemies of Rome or China. If the Silk
Road eventually closed, as it did after several centuries, the fall of the empires
had everything to do with it. And when it reopened in Marco Polo’s late
medieval time, it was because the rise of a new hegemonic empire: the
Mongols. It is a pattern we’ll see throughout the history of trade: it thrives
when nations protect it and falls when they don’t.
Spice routes (7th-15th centuries)
The next chapter in trade happened thanks to the Islamic merchants. As the
new religion spread in all directions from its Arabian heartland in the 7th
century, so did trade. The founder of Islam, the prophet Mohammed, was
famously a merchant, as was his wife Khadija. Trade was thus in the DNA of the
new religion and its followers, and that showed. By the early 9th century,
Muslim traders already dominated Mediterranean and Indian Ocean trade;
afterwards, they could be found as far east as Indonesia, which over time
became a Muslim-majority country, and as far west as Moorish Spain.

The main focus of Islamic trade in those Middle Ages were spices. Unlike silk,
spices were traded mainly by sea since ancient times. But by the medieval era
they had become the true focus of international trade. Chief among them were
the cloves, nutmeg and mace from the fabled Spice Islands, the Maluku islands
in Indonesia. They were extremely expensive and in high demand, also in
Europe. But as with silk, they remained a luxury product, and trade remained
relatively low volume. Globalization still didn’t take off, but the original Belt
(sea route) and Road (Silk Road) of trade between East and west was
established.
Age of Discovery (15th-18th centuries)
Truly global trade kicked off in the Age of Discovery. It was in this era, from the
end of the 15th century onwards, that European explorers connected East and
West and accidentally discovered the Americas. Aided by the discoveries of the
so-called “Scientific Revolution” in the fields of astronomy, mechanics, physics
and shipping, the Portuguese, Spanish and later the Dutch and the English first
discovered, then subjugated, and finally integrated new lands in their
economies.

The Age of Discovery rocked the world. The most infamous discovery was is
that of America by Columbus, which all but ended pre-Colombian civilizations.
But the most consequential exploration was the circumnavigation by Magellan:
it opened the door to the Spice Islands, cutting out Arab and Italian
middlemen. While trade once again remained small compared to total GDP, it
certainly altered people’s lives. Potatoes, tomatoes, coffee and chocolate were
introduced in Europe, and the price of spices fell steeply.

Yet economists today still don’t truly regard this era as one of true
globalization. Trade certainly started to become global, and it had even been
the main reason for starting the Age of Discovery. But the resulting global
economy was still very much partitioned and lopsided. The European empires
set up global supply chains, but mostly with those colonies they owned.
Moreover, their colonial model was chiefly one of exploitation, including the
shameful legacy of the slave trade. The empires thus created both a
mercantilist and a colonial economy, but not a truly globalized one.
First wave of globalization (19th century-1914)
Things started to change with the first wave of globalization, which roughly
occurred over the century ending in 1914. By the end of the 18th century,
Great Britain had started to dominate the world both geographically, through
the establishment of the British Empire, and technologically, with innovations
like the steam engine, the industrial weaving machine and more. It was the era
of the First Industrial Revolution.

The British Industrial Revolution made for a fantastic twin engine of global
trade. On the one hand, steamships and trains could transport goods over
thousands of miles, both within countries and across countries. On the other
hand, its industrialization allowed Britain to make products that were in
demand all over the world, like iron, textiles and manufactured goods. “With
its advanced industrial technologies,” the BBC recently wrote, looking back to
the era, “Britain was able to attack a huge and rapidly expanding international
market.”

The resulting globalization was obvious in the numbers. For about a century,
trade grew on average 3% per year. That growth rate propelled exports from a
share of 6% of global GDP in the early 19th century, to 14% on the eve of
World War I. As John Maynard Keynes, the economist, observed: “The
inhabitant of London could order by telephone, sipping his morning tea in bed,
the various products of the whole Earth, in such quantity as he might see fit,
and reasonably expect their early delivery upon his doorstep.”

And, Keynes also noted, a similar situation was also true in the world of
investing. Those with the means in New York, Paris, London or Berlin could also
invest in internationally active joint stock companies. One of those, the French
Compagnie de Suez, constructed the Suez Canal, connecting the
Mediterranean with the Indian Ocean and opened yet another artery of world
trade. Others built railways in India, or managed mines in African colonies.
Foreign direct investment, too, was globalizing.

While Britain was the country that benefited the most from this globalization,
as it had the most capital and technology, others did too, by exporting other
goods. The invention of the refrigerated cargo ship or “reefer ship” in the
1870s, for example, made it possible for countries like Argentina and Uruguay,
to enter their golden age. They started to mass export meat, from cattle grown
on their vast lands. Other countries too started to specialize their production in
those fields in which they were most competitive.

But the first wave of globalization and industrialization also coincided with
darker events too. By the end of the 19th century, the Khan Academy notes,
“most [globalizing and industrialized] European nations grabbed for a piece of
Africa, and by 1900 the only independent country left on the continent was
Ethiopia”. In a similarly negative vein, large countries like India, China, Mexico
or Japan, which were previously powers to reckon with, were either not able
or not allowed to adapt to the industrial and global trends. Either the Western
powers put restraints on their independent development, or they were
otherwise outcompeted because of their lack of access to capital or
technology. Finally, many workers in the industrialized nations also did not
benefit from globalization, their work commoditized by industrial machinery,
or their output undercut by foreign imports.
The world wars
It was a situation that was bound to end in a major crisis, and it did. In 1914,
the outbreak of World War I brought an end to just about everything the
burgeoning high society of the West had gotten so used to, including
globalization. The ravage was complete. Millions of soldiers died in battle,
millions of civilians died as collateral damage, war replaced trade, destruction
replaced construction, and countries closed their borders yet again.In the years
between the world wars, the financial markets, which were still connected in a
global web, caused a further breakdown of the global economy and its links.
The Great Depression in the US led to the end of the boom in South America,
and a run on the banks in many other parts of the world. Another world war
followed in 1939-1945. By the end of World War II, trade as a percentage of
world GDP had fallen to 5% – a level not seen in more than a hundred years.
Second and third wave of globalization
The story of globalization, however, was not over. The end of the World War II
marked a new beginning for the global economy. Under the new leadership,
the United States of America, and aided by the technologies of the Second
Industrial Revolution, like the car and the plane, global trade started to rise
once again. At first, this happened in two separate tracks, as the Iron Curtain
divided the world into two spheres of influence. But as of 1989, when the Iron
Curtain fell, globalization became a truly global phenomenon.
In the early decades after World War II, institutions like the European Union,
and other free trade vehicles championed by the US were responsible for
much of the increase in international trade. In the Soviet Union, there was a
similar increase in trade, albeit through centralized planning rather than the
free market. The effect was profound. Worldwide, trade once again rose to
1914 levels: in 1989, export once again counted for 14% of global GDP. It was
paired with a steep rise in middle-class incomes in the West.
Then, when the wall dividing East and West fell in Germany, and the Soviet
Union collapsed, globalization became an all-conquering force. The newly
created World Trade Organization (WTO) encouraged nations all over the
world to enter into free-trade agreements, and most of them did, including
many newly independent ones. In 2001, even China, which for the better part
of the 20th century had been a secluded, agrarian economy, became a
member of the WTO, and started to manufacture for the world. In this new
world, the US set the tone and led the way, but many others benefited in their
slipstream.
At the same time, a new technology from the Third Industrial Revolution, the
internet, connected people all over the world in an even more direct way. The
orders Keynes could place by phone in 1914 could now be placed over the
internet. Instead of having them delivered in a few weeks, they would arrive at
one’s doorstep in a few days. What was more, the internet also allowed for a
further global integration of value chains. You could do research and
development in one country, sourcing in others, production in yet another, and
distribution all over the world.
The result has been a globalization on steroids. In the 2000s, global exports
reached a milestone, as they rose to about a quarter of global GDP. Trade, the
sum of imports and exports, consequentially grew to about half of world GDP.
In some countries, like Singapore, Belgium, or others, trade is worth much
more than 100% of GDP. A majority of global population has benefited from
this: more people than ever before belong to the global middle class, and
hundreds of millions achieved that status by participating in the global
economy.
Globalization 4.0
That brings us to today, when a new wave of globalization is once again upon
us. In a world increasingly dominated by two global powers, the US and China,
the new frontier of globalization is the cyber world. The digital economy, in its
infancy during the third wave of globalization, is now becoming a force to
reckon with through e-commerce, digital services, 3D printing. It is further
enabled by artificial intelligence, but threatened by cross-border hacking and
cyber-attacks.
At the same time, a negative globalization is expanding too, through the global
effect of climate change. Pollution in one part of the world leads to extreme
weather events in another. And the cutting of forests in the few “green lungs”
the world has left, like the Amazon rainforest, has a further devastating effect
on not just the world’s biodiversity, but its capacity to cope with hazardous
greenhouse gas emissions.
Chinese president Xi Jinping addressed the topic globalization in a speech in
Davos in January 2017. “Some blame economic globalization for the chaos in
the world,” he said. “It has now become the Pandora’s box in the eyes of
many.” But, he continued, “We came to the conclusion that integration into
the global economy is a historical trend. It is the big ocean that you cannot
escape from.” He went on to propose a more inclusive globalization, and to
rally nations to join in China’s new project for international trade, “Belt and
Road”.
Technological progress, like globalization, is something you can’t run away
from, it seems. But it is ever changing. So how will Globalization 4.0 evolve?
We will have to answer that question in the coming years.

ADVANTAGES OF GLOBALIZATION
a. Providing an incentive for countries to specialise and benefit from the
application of the principle of comparative advantage.
b. Access to larger markets means that firms may experience higher
demand for their products, as well as benefit from economies of scale,
which leads to a reduction in average production costs.
c. In the long term, increased trade is likely to lead to the creation of more
employment in all countries that are involved.
d. Nations can access products and services that are of benefit under
emergency as witnessed during the Corona Virus pandemic of January
2020.
e. Mobility of labour is further enhanced.
f. International Trade barriers witnessed in the primitive days are broken
g. Enhances industrial competition
DISADVANTAGES OF GLOBALIZATION
a. Large multinational companies can also suffer from diseconomies of
scale, such as difficulties associated with coordinating the activities of
subsidiaries based in several countries.
b. Globalisation can also increase the pace of deindustrialisation, which is
the slow erosion of an economy’s manufacturing base.
c. Jobs may be lost because of the structural changes arising from
globalisation. Structural changes may lead to structural unemployment
and may also widen the gap between rich and poor within a country.
d. It can encourage the dumping of sub standerd goods and services on
one nation from another if not checked.
e. Diseases of the pandemic nature like corona Vires can easily spread
across continents with devastating effect as witness today.
f. It could pose balance of trade issues with poorly developed economies
g. Antitrust issues

CORE DRIVERS OF GLOBALIZATION

1) Technological drivers: Technology shaped and set the foundation for
modern globalization. Innovations in the transportation technology
revolutionized the industry. The most important developments among these
are the commercial jet aircraft and the concept of containerisation in the late
1970s and 1980s. Inventions in the area of microprocessors and
telecommunications enabled highly effective computing and communication at
a low-cost level. Finally the rapid growth of the Internet is the latest
technological driver that created global e-business and e-commerce.

2) Political drivers: Liberalized trading rules and deregulated markets lead to

lowered tariffs and allowed foreign direct investments in almost all over the
world. The institution of GATT (General Agreement on Tariffs and Trade) 1947
and the WTO (World Trade Organization) 1995 as well as the ongoing opening
and privatization in Eastern Europe are only some examples of latest
developments.
3) Market drivers: As domestic markets become more and more saturated, the
opportunities for growth are limited and global expanding is a way most
organizations choose to overcome this situation. Common customer needs and
the opportunity to use global marketing channels and transfer marketing to
some extent are also incentives to choose internationalization. (Ferrier, 2004)

4) Cost drivers: Sourcing efficiency and costs vary from country to country and
global firms can take advantage of this fact. Other cost drivers to globalization
are the opportunity to build global scale economies and the high product
development costs nowadays. (Ferrier, 2004)
5) Competitive drivers: With the global market, global inter-firm competition
increases and organizations are forced to “play” international. Strong
interdependences among countries and high two-way trades and FDI actions
also support this driver.

THE IMPACT OF GLOBALIZATION ON THE NIGERIAN ECONOMY

The main issues arising from globalisation for Nigeria are;
Growth
Assuming Nigeria maintains its competitiveness, globalisation is likely to
increase our growth in the long term because aggregate demand (AD) is likely
to increase through increased exports (X), and aggregate supply (AS) is likely to
increase because of higher levels of investment, both domestic and foreign
direct investment (FDI). However, growth in the short term may become more
unstable as the global economy becomes increasingly interconnected. The
recent economic pandemic is evidence that unstable growth is a possible
consequence of globalisation. Some economists have also argued that
globalisation has increased the process of deindustrialisation in some
developed countries.
Employment
Long term, jobs may be destroyed in the manufacturing sector and created in
the service sector, hence creating structural unemployment, which could
widen the income gap within countries. The net effect of the impact on
employment depends upon the speed of labour market adjustment, which
itself depends upon mobility and flexibility. Improvements in labour
productivity may be needed to close the productivity gap.
Prices
Increased competition is likely to reduce the price level, for traded
manufactures. Because Nigerian firms can source from around the world costs
may be held down, and this may be passed on in terms of reduced domestic
and export prices.
Trade
The volume of both imports and exports is likely to increase, with trade
representing an increasing proportion of GDP. The effect on the balance of
payments is uncertain and depends upon relative growth rates, inflation,
competitiveness, and the exchange rate.