Two Waves Of Globalization Analysis

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“Two waves of Globalization: Superficial Similarities, Fundamental Differences” was written by the famous economists and research fellows at the CEPR (Centre for Economic Policy Research) Richard E. Baldwin and Philippe Martin in 1999. Their work analyses the two waves of globalization, showing both similarities but also (I would say especially) the differences.
I opted for this topic because I was interested in knowing more about how economic factors are linked to the historical evolution of society. I think that in order to understand better nowadays economy we should have intuitions on the mechanisms that cause the development of human activity.

The analysis of the two waves of globalization (first wave 1870-1914,
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Financial Crisis
It must be mentioned that financial crisis is an element that can be found in both waves of globalization, it is not, in fact, a newly developed symptom.

Trade, Investment, Migration and Factor Prices
The trade flows of two periods also saw an important change. Transport costs fall quickly in the first wave allowing a step forward in the development of trade and internal national development. The lower transportation costs continued in the second wave, with the addition that also communication costs fell sharply.
Tariffs were high at the end of the first wave, but both waves were characterized by a low rate at the beginning. Also Foreign Direct Investment and Multinational Corporation activities changed fundamentally. The focus of FDI shifted to manufacturing, services and outsourcing rather than the North-to-South investment in primary product sectors and railroads that, characteristic of the first
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The first wave of globalization took place during the protectionism of mercantilism. The anti-import attitude began to change after the intellectual developments of David Ricardo, Adam Smith, and others. In the late 18th century the liberal thought about free trade was commonly embraced by major economists, although it did not affect much the development of modern protectionism. The argument in favor of protectionism, protection in order to build a strong economy, was still alive.
In the late 1700s the first attempt of free trade development took place, but the effect was nearly absent due to the French Revolution. In the early 1800s, there was a stronger development of free trade (particularly in the UK) due to the industrial interests.
In 1860 free trade was largely developed, the lowering in transport costs and natural trade barriers pushed the economy forward. But a few decades after the economy saw a huge slowdown, leading policymakers to abandon free trade.
Protectionism went on until the end of the 1930s. World War II slowed the process of liberalization but in the post-World War period, the liberalization path was strongly embraced. The cold war environment pushed liberalization further due to the interest in the development of democratic societies.
Free trade in the second wave was strongly supported as it was, oppositely to the first wave, seen as an essential public good and worthy of support.


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