Economic Growth and Globalization since 1850

The Age of Globalization• Exponential change

I. Introduction: A. Global time line

1850-1914Industrialization and growth of

international trade

1918-1939Inter-war

years

1950-1990Liberalization and Acceleration of

trade/Development of Communist Economic

Model

B. Successive Shifts of Power19th-21st Centuries

1850-

1914

•British Hegemony

1914-

1990

•American Century

1990 -

2013

•Multipolar World

II. Stages of Economic Growth

• How did the world progressively enter into a system of production of wealth?

A. 19th CenturyEconomic Growth since 1850

• Since 1850, continual acceleration of technical progress and strong economic growth

• Sustained demographic growth

• Inequalities in development continue

3 stages of economic growth

1. Entering a world of intensive growth2. Increasing world growth after 19453. Capitalism in Crisis

1st Stage: Intensive Growth• From the 18th Century, western European

countries, facing rapid increase in population growth, begin industrializing

Intensive growth = wealth production surpasses basic needs of the population

Capitalism, well-established in the 19th c. in Europe, contributes to this trend

Despite the rise in global population, economic growth enabled improvement in standard of living.

2nd Stage: Increasing world growth after 1945

19th C industrialization accompanied by weak growth rates even for the most advanced countries

a. newest technologies extremely dynamic (e.g. textile, steel, railroads) b. continued importance of agricultural sector into the 20th c. c. low domestic consumption

2nd Stage: Increasing world growth after 1945

After 1945, world growth rate increases

•Stimulated by the gradual liberalization of trade

•From 1970’s by acceleration of globalization

•Between 1945 and 1975, growth originates mostly in the industrialized nations (western Europe and Japan)

2nd Stage: Increasing world growth after 1945

• Early 21st C. highest economic growth rates in emerging countriesBRIC nations (Brazil, Russia, India, China) + South Africa since 2011– Known for rapid growth of their industrial sectors– Capitalizing on their advantages (e.g. natural

resources, labour, infrastructure)– Strong state intervention

BRIC nations

3rd Stage: Capitalism in Crisis

3rd Stage: Capitalism in Crisis

Series of financial/economic crises highlight the limits of capitalism and the interdependence of the world– Stock market crash 1929, end of period of strong

growth of US economy, warning to speculators– Collapse of 1st economy in the world causes

contraction of international trade and massive increase in unemployment around the world

3rd Stage: Capitalism in Crisis

3rd Stage: Capitalism in Crisis

3rd Stage: Capitalism in Crisis

• Periods of Crisis enable capitalism to adapt and for new powers to emerge.– Slowing down of growth in Europe– Birth of multinational corporations– Progression of international trade– Appearance of new competition in Europe

(Germany) and outside of Europe (U.S. / Japan)

3rd Stage: Capitalism in Crisis

• Financial crisis in 2008 leads to growing intervention of international regulatory organizations– IMF– G20

The Global Power Shift

Key Words

• capitalism: economic system which relies on the private ownership of the means of production (e.g. factories, machines). Owning capital produces revenue. The end goal of the system is the accumulation of profit

• Growth: constant increase in the production of wealth. Prior to 1750, the rate is low, but demographic growth in Europe subsequently helps to increase the development of industry and services

Key Words

• Innovations: inventions which have industrial applications and which stimulate the growth of new sectors.

• Globalization: the process whereby – (1) economies and societies become interconnected; – (2) a global stage exists for the free exchange of

goods, services and information

• Globalization: the process whereby economies and societies become interconnected and a global stage for the free exchange of goods, services and information

Key Terms

• Emerging Countries: underdeveloped countries which have become more developed thanks to their successful integration in the globalized economy. By attracting foreign investors, they have been able to develop.

• Consumer society: According to the economist Rostow, the last stage of industrial development, characterized by the democratization of mass-produced industrial products (e.g. cars, appliances, etc.)