According to Nayyar (2006) the two period of globalisation, the nineteenth and twentieth century's are similar in four ways: 'the absence or the dismantling of barriers to international economic transactions; the development of enabling technologies; emerging forms of industrial organization; and political hegemony or dominance.' Nayyar (2006) also highlights important differences between both the phases of globalisation in respect of trade flows, Foreign Direct Investment (FDI) flows, financial flows and labor flows.
After the end of the Napoleonic Wars the first modern period of globalisation commenced and carried on up to World War I. This stage of globalisation is believed to have gained momentum during the 1870s where cross-border of movement of labor increased at an amazing rate, and financial flows and trade was impetus. Global economic integration advanced, more so, during the latter half of this period due to steady reductions in tariffs and cost of transport. The price of transportation decreased with the introduction of railway and steamships and the price of communications also fell due to innovation: the invention of telegraph.
During the first modern period policy measures that supported globalisation, included abolition of laws and as Britain unilaterally moved to free trade, a trade liberalization trend initiated in Europe. The variety of goods available had increased as a result of this expansion in trade. This period of globalisation was distinguished by free movement of capital almost entirely and an astonishingly free movement of the labor force. According to Nayyar (2006) 'there were no restrictions on the mobility of people across national boundaries. Passports were seldom needed. Immigrants were granted citizenship with ease.' The latter half of the nineteenth century, was a period of intense economic integration.
With the occurrence of World War I the favorable trading environment changed. There were widespread quantitative restrictions and tariffs among adversaries as the liberal global economic order collapsed. World trade and output plunged rapidly, with world trade declining much than output.
Trade flows, like capital flows were more afloat since the early nineteenth century. Great amounts of investible capital poured from the industrialized countries of Western Europe to Australia, Canada and Latin America, which were economies that were rapidly developing. Some countries that were developing and who were colonies of European economies got a flow of this investible capital as well. Private global capital movements did not undergo any restrictions and these financial flows took the shape of bond financing. They were used essentially; first, for the purpose of infrastructure building, mostly ports and railroads, and second, as foreign direct investment (FDI) in the newborn industrial sector in the capital-importing countries. The free flow of capital prior to 1914 was supported by the reality that much of the world pursued the gold standard, that is, national currencies maintained convertibility into gold. This also meant that countries could not use monetary policy instruments for stabilizing the domestic economies. Global capital movements had to come to a near standstill with the occurrence of World War I and did not hoist until 1970.
After 1980 the contemporary epoch of globalisation widened. Since this point in time governments in the prime industrial economies, and progressively more in the promising economies of the developed world began to promote laissez-faire macroeconomic fiscal policy administration that were generally supportive of globalisation. Liberalizing capital flows and curtailing trade barriers mirrored this mindset of policy-makers. Accordingly, simulated and policy-induced barriers to global transactions were brought down.
The policy ambience that began to build up since the early 1980s was that of lowering policy-driven and artificial barriers to international transactions, which fostered a generally liberal policy background for economic integration globally. Subsequent to 1990 the pace of global economic integration hastened, as a lot of governments reduced policy-induced barriers that hindered flows of investment and international trade. As a result, financial transactions and the quantity and value of global trade rose considerably. Technological advancements such as the advent of jet crafts, computer and satellites, underpinned the revival and were given a thrust by international economic policies, innate of multilateral co-operation.
One of the features of globalisation in the second phase is general policy shift towards greater reliance on market forces. Its distinguishing features were rapid growth in multilateral trade and global financial flows, including FDI. The distribution of FDI between developed and developing countries in the second phase were more uneven than in the first phase. However the 1990s witnessed an increase in the share of developing countries in FDI inflows although still behind the industrialized countries. In the early twentieth century foreign investment was only long term, two-thirds of it was portfolio, while one third of it was direct. Much of the long term investment in the second phase is direct although in the 1990s portfolio investment had risen sharply.
Nayyar (20006) points out that 'the only significant evidence of labor mobility during the last quarter of the twentieth century is the temporary migration of workers to Europe, the Middle East and East Asia. The present phase of globalisation has also found substitutes for labor mobility in the form of the trade flows and investment flows. For one thing, industrialized countries now import manufactured goods that embody scarce labor.'
One feature of contemporary globalisation is increased intra-firm cross-border alliance in the form of non-equity agreements, joint ventures, and minority participations which allow firms to engage in producing products or services that are beyond the individual technical and financial resources and capabilities of firms. Such alliances increased s steadily since the early 1980s. Large and capable firms in established industrial economies that are technology leaders often take initiatives in putting together such alliances. An increasing number of small and medium-sized firms have also begun taking such initiatives and formulating ways to shape cross-border inter-firm collaborative ventures.
Globalisation in the nineteenth century was distinguished by almost entirely free movement of capital. This era is also known for an exceedingly rapid global movement of the labor force. The scale of global integration through trade and financial channels during the contemporary era was unmatched by the previous phase of globalisation. Never in history had global integration involved so many countries and people both in absolute numbers and as a percentage of the global population.
The 2008 crisis and recession started as a full financial crisis in the developed countries. Trade, foreign direct investment (FDI), finance and the movement of people are all being impacted upon. Governments, institutions such as the International Labor organization (ILO) and World trade organization (WTO), and other non-governmental agencies are co-coordinating nationally and internationally to revive. However, even if the impact on these economic activities is short term and countries revive, the developmental impacts may be large and may outlast the crisis.
The global recession has impacted on the flow of migrants in the global economy. Failing prospects of employment in the developed economies for example Spain and the United Kingdom has curtailed the inflow of migrants. Though many migrants may seem to be cyclical/seasonally employed, they have decided to remain in their residing country. This is because they are aware of the dim chances they have in finding employment in their home country. This has resulted in the decline of remittances which has negative effects on the family unit as; these remittances are used to sustain basic needs such as food, health and education.
Global trade and output declined because when people became unemployed across the world they consumed less, thus they purchased less, reducing the demand for consumer and capital goods, thereby curtailing production and trade.
FDI also dropped. The organization's capability to invest has been reduced by a decrease in access to financial resources as firms are not making as much profits as they used to. Also the lower availability of finance and the cost of attaining finance are higher. In addition the tendency to invest has been negatively affected by economic prospects particularly in developing countries that received the full brunt of the recession. The impact of FDI is different between developed and developing countries. The former has been most affected with a decline in FDI inflows and the latter FDI continued to grow but at a much slower rate as compared to the previous year.
The rate at which the crisis and recession impacts on countries vary considerably as it would depend on the structure of the economy, policy constraints, and further specificities. When developing solutions to the crisis the social impacts are almost always forgotten and is not seen until the "dust settles". It is these impacts such as broken homes, poverty, inequality and sickness and diseases due to inability to financially seek improper health care that are the lasting o
