Outside The Box
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“Globalization” is not a recent concept. The word seems to have made its first appearance in Belgium in 1929: physician and educator J. O. Decroly used “globalization” to refer to a young child’s developing attention to the broader world rather than itself alone. Over time, the term has had many other meanings: the idea that giant companies can sell the same product everywhere rather than different models in each country; the transmission of ideas from one country to another; the flag-waving enthusiasm of Americans and Kenyans and Chinese for English soccer teams led by non-British stars.1 The worldwide diffusion of religions is a form of globalization, as are the spread of disease and the large-scale migration of people in search of personal safety, political or social freedom, or greater economic opportunity. So, of course, is the increasing intensity of economic exchange across international frontiers.
World trade in manufactured goods rose 120 percent in the span of just seven years, from 2001 to 2008, as manufacturing surged in China—while during those same seven years, one in eight manufacturing jobs in Canada and the United States, and one in four in Great Britain, disappeared. It was hard not to draw a connection. The flight of factory jobs was followed by jobs in technology and service industries. As office buildings everywhere were cabled to the internet, a new industry called business-process outsourcing took hold: companies in Frankfurt and Paris moved their accounting work to lower-wage cities such as Warsaw and Prague, and agents in Manila answered customer-service calls for North American banks. By 2003, 285 of the 500 largest US companies were sending office work to India. “Thousands of white-collar jobs are going overseas,” a US congressman warned in 2004, citing “incontrovertible evidence that the U.S. is on the verge of adopting the economics of third-world nations.”
Globalization has transformed itself repeatedly over two centuries in response to technological change, demographic pressure, entrepreneurial ambition, and governmental action: someone speaking of globalization in 2020 was discussing an altogether different subject from globalization in 1980, much less in 1890. It treats the Third Globalization, the quarter-century or so between the late 1980s and the early 2010s, as a distinct stage in the world’s economic history, a stage unlike what came before and what is likely to come after. It emphasizes the roles of transportation, communications, and information technology in enabling firms to organize their businesses around long-distance value chains, a fundamentally different type of economic relationship from any that existed before.
The transatlantic slave trade, which began in the early 1500s, grew into a large and sophisticated business after 1750, with English merchants exporting guns, kettles, cloth, and shoes to their own trading posts on the coast of Africa, exchanging these wares for slaves, selling the slaves in the Americas, and filling their ships with sugar and tobacco for the return trip to England. The African slave trade was extremely profitable and thoroughly global, forcibly transporting an estimated 12.5 million enslaved people on at least thirty-six thousand transatlantic voyages and another half a million slaves shipped by sea within the Americas.
One indicator that the level of economic exchange was quite small: as late as 1820, the total carrying capacity of all the world’s ships was around 5.9 million metric tons. The corresponding figure in 2018 was 322 times higher—and those ships, traveling much faster, were likely to complete many more voyages in a single year.
Taxes had impeded foreign trade since the days when Greek city-states assessed a 2 percent duty on imports and exports. In 1203, King John of England, his treasury drained by war in France, created the first customs service, staffed by agents who required merchants to pay one-fifteenth of the value of imports or exports to collectors at each port. In many parts of Europe, local rulers and religious officials collected tolls each time freight crossed a river or entered a town. A Swiss trader in the late 1500s, when Germany was still a collection of duchies, counties, principalities, and independent city-states, reported paying thirty-one tolls between Basel and Cologne, and his descendants in 1765 would have faced duties imposed at almost five hundred locations in Bavaria alone. For more than two centuries, starting in 1635, Japan allowed European merchants to trade only in one place, Chinese merchants in one other; while this was intended to curtail the spread of foreign ideas, it also facilitated the collection of import taxes. China put a 20 percent duty on all imports in 1685, and in 1757 it required that all foreign trade pass through the customs office at the southern port of Guangzhou. Whether the trader paid those levies or went to extra expense to evade them, tolls and duties added to importers’ bills.