Globalization

The tendency of investment funds and businesses to move beyond domestic and national markets to other markets around the globe, thereby increasing the interconnectedness of different markets. Globalization has had the effect of markedly increasing not only international trade, but also cultural exchange.

Investopedia Says:
The advantages and disadvantages of globalization have been heavily scrutinized and debated in recent years. Proponents of globalization say that it helps developing nations "catch up" to industrialized nations much faster through increased employment and technological advances. Critics of globalization say that it weakens national sovereignty and allows rich nations to ship domestic jobs overseas where labor is much cheaper.

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Interdependence of buyers and sellers of financial instruments in financial centers around the world. This phenomenon is due mainly to several factors: (1) the maturation of the Eurocurrency markets since the 1960s; (2) dramatic changes in trading room technology in recent years, providing market makers with near instantaneous access to current market data on commodities and financial instruments; (3) a desire by financial institutions to expand lending and other activities beyond geographic boundaries; and (4) a desire to control balance sheet risk through Interest Rate Swaps and other financial swap agreements.

For example, the growing use in international financial markets of marketable debt instruments, principally in the Eurobond market, as opposed to traditional bank lending, as a financing vehicle for major corporate borrowers, and also sovereign governments. The shift away from bank credit instruments, such as Note Issuance Facilities, toward Floating Rate Notes and Eurocommercial paper began in the early 1980s, and was aided by the strong secondary market in Eurobond financings. Both commercial banks and investment banks participate in this market. Outside the United States, U.S. Commercial banks are not confined by Glass-Steagall Act limitations on securities underwriting, and are active participants in the Eurobond market.

Advances in Information Technology allowed traders in foreign exchange and other money market instruments to manage positions on a 24-hour basis, by moving their trading book to a different financial center at the close of trading. This practice, known as passing the book, permits financial institutions that make markets in New York, London, or Tokyo, for instance, to maintain a single trading book listing positions, limits, and exposures for the entire firm, rather than keeping separate books in each trading center.

Globalization is the process by which the economies of countries around the world become increasingly integrated over time. This integration occurs as technological advances expedite the trade of goods and services, the flow of capital, and the migration of people across international borders. The term has been used in this context since the 1980s, when computer technology first began making it easier and faster to conduct business internationally. Globalization can also refer to the efforts of businesses to expand their operations to new countries and markets.

According to a cover story in Business Week, globalization "has created millions of jobs from Malaysia to Mexico and a cornucopia of affordable goods for Western consumers. It has brought phone service to some 300 million households in developing nations and a transfer of nearly $2 trillion from rich countries to poor through equity, bond investments, and commercial loans. It's helped topple dictators by making information available in once sheltered countries. And now the Internet is poised to narrow the gulf that separates rich nations from poor nations even further in the decade to come."

Without a doubt, globalization has had a number of positive effects on nations and businesses around the world. Yet the concept—once regarded as almost universally positive—has undergone a bit of a reassessment in recent years. In fact, widespread protests against the World Trade Organization (WTO) and consumer boycotts arising from the practices of multinational corporations in developing countries have raised public awareness of the hazards of globalization. "The plain truth is that market liberalization by itself does not lift all boats, and in some cases, it has caused severe damage to poor nations," the Business Week article admitted. "What's more, there's no point denying that multinationals have contributed to labor, environmental, and human rights abuses as they pursue profit around the globe."

The Controversy Over Globalization

Globalization gives companies access to wider markets and consumers access to a greater variety of goods and services. But the benefits of globalization are not always shared by all of the parties involved in trade. Unfortunately, developing countries—which need the potential benefits of globalization the most—are often the losers. "The downside of global capitalism is the disruption of whole societies, from financial meltdowns to practices by multinationals that would never be tolerated in the West," the Business Week article noted. "Industrialized countries have enacted all sorts of worker, consumer, and environmental safeguards since the turn of the century, and civil rights have a strong tradition. But the global economy is pretty much still in the robber-baron age."

Some people view globalization in positive terms, as a key force in promoting worldwide economic development. But others believe that unrestricted global trade will only serve to increase the inequality between developed and developing countries. In reality, globalization offers both opportunities and risks for developing countries, and there is a great deal of variation in their experiences with it. Some regions, like Asia, have integrated into the global economy quickly and achieved economic growth as a result. But other regions, like Africa, have suffered from increased political instability, poverty, and environmental degradation since they became involved in international trade. "The real question isn't whether free markets are good or bad," the Business Week article stated. "It is why they are producing such wildly different results in different countries. Figuring out that answer is essential if businesses, government leaders, and workers are all to realize the benefits of global markets."

In the late 1990s, there was a great deal of debate about how advanced economies and multinational corporations could help developing nations to share in the benefits of globalization. Some experts claim that developing nations need debt relief, an increased flow of direct financial investment and technology, and unrestricted access to markets in advanced countries in order to begin catching up. Others claim that these measures are pointless unless the leaders of the developing nations show a willingness to establish a stable government and invest in the education of their citizens. "Before trade and foreign capital can translate into sustainable growth, governments first must deliver political stability, sound economic management, and educated workers," the Business Week article argued. Otherwise, foreign investment would likely lead to government corruption and the exploitation of workers.

The potential problems with globalization are not limited to developing nations, however. Some workers in advanced economies—particularly those in unskilled jobs and belonging to labor unions—feel that they are being increasingly displaced by low-wage competition in developing countries. Some of these workers are unable to make the transition to skilled jobs and service-oriented industries. Other critics of globalization claim that integration into a global economy reduces the sovereignty of nations, especially in regards to economic policy making. They worry that advanced nations will face limited choices in tax and monetary policies under the rules of world trade.

The concerns of developed and developing countries overlap to create a complex web of problems for globalization. Some countries will inevitably be viewed as trying to impose their values on other countries. "Balancing growth with environmental and labor regulations is wrenchingly complex in countries where people live on the margin," according to Business Week. "Many poor nations fiercely resist discussion of labor or environmental issues in the WTO because they feel the process will be hijacked by Western protectionists. The feeling is that Western unions will shield jobs at home by imposing standards that drive up labor costs in emerging markets to levels where developing nations can't compete."

The Role of the Wto

In the late 1990s, much of the controversy over globalization focused on the World Trade Organization (WTO). The WTO was established in 1995 to facilitate world trade and resolve disputes between nations. Headquartered in Geneva, Switzerland, the WTO had 134 member nations in 1999, three-quarters of which were developing nations. According to Simon J. Evenett in an article for Finance and Development, the WTO "serves the developing countries' interests by facilitating trade reform, providing a mechanism for settling disputes, strengthening the credibility of trade reforms, and promoting transparent trade regimes that lower transaction costs."

Shortly after it was established, the WTO became a lightning rod for controversy over globalization. "Seen through one lens, the World Trade Organization is a benevolent United Nations of trade, with just enough enforcement powers to help nations work out their differences," Steve Wilhelm wrote in the PugetSound Business Journal. "Seen through another lens, the WTO is a menacing, corporate-dominated world government of trade in which the legislative body and the courts operate outside the scrutiny of anyone who's not a government leader or corporate lawyer. From this viewpoint, the organization's power to adjudicate trade disputes also gives it the power to override national laws, including environmental protections. In a sense, it compromises the sovereignty of its member nations."

The two main issues embraced by anti-WTO activists are the rights of laborers and protection of the environment. "As production and consumption grow around the world, many impacts fall on the people who supply labor to produce things, and the environment that supplies the raw materials and absorbs the effluent," Wilhelm noted. Those who oppose the WTO worry that global free trade will threaten hard-fought labor and environmental victories in the United States and other developed nations. For example, activists protested that—under WTO rules—the United States could not prevent the import of shrimp caught in nets that also caught an endangered species of sea turtle.

Protesters were also concerned about the loss of American jobs overseas and the poor social and environmental records of multinational corporations operating in developing countries. "The heady, unrealistic days of globalization appear to be over," Business Week noted. "Where once it was promised that the simple spread of markets would melt poverty, dissolve dictatorships, and integrate diverse cultures, today the mere mention of globalization generates anger, discord, and accusations."

Four Levels of Globalization

Globalization most often refers to the increasing degree of connection between various countries and their economies. But another definition involves the efforts of businesses to expand their operations into foreign markets. This definition has gained importance with the advent of the Internet, which gives all companies the potential to achieve global reach in their operations.

As Jennifer Derryberry wrote in Sales and Marketing Management, businesses generally operate at one of four basic levels of globalization. The first level is a multidomestic company. At this level, the business consists of several independent units that operate in different countries, with little communication between them. The second level, an international company, maintains a headquarters in one country and operates branches in other countries. At this level, the company is likely to impose its home country bias on other markets rather than making a true effort to integrate into the global economy.

The third level of globalization, a transnational company, consists of loosely integrated business units in several countries. At this level, the company makes a greater effort to address the local needs of operations in each country. The fourth level of globalization is a truly global company. This type of business views the world as a single market, develops an overall strategy for its various operations around the world, and applies the lessons of each country to ensure its global success. Derryberry noted that this is the ideal level for a globalizing organization, but that it is not easy to achieve.

Further Reading:

Bates, Jenny. "Get Globalization Message—and Agenda—Right." Journal of Commerce and Commercial. April 27, 2000.

Bruce, Barnard. "A Brief History of the WTO." Europe. November 1999.

Derryberry, Jennifer. "What It Really Means to Go Global." Sales and Marketing Management. December 1999.

Evenett, Simon J. "The World Trading System: The Road Ahead." Finance and Development. December 1999.

Gilpin, Robert. The Challenge of Global Capitalism. Princeton University Press, 2000.

"Global Capitalism." Business Week. November 6, 2000.

"Globalization: Lessons Learned." Business Week. November 6, 2000.

International Monetary Fund. World Economic Outlook. May 2000.

Micklethwait, John, and Adrian Wooldridge. A Future Perfect: The Challenge and Hidden Promise of Globalization. Times Books, 2000.

Wilhelm, Steve. "Labor, Ecology Issues Are at Heart of Protests." Puget Sound Business Journal. November 12, 1999.

Woods, Bob. "The New Economy." Chief Executive. August 2000.

The increase in the volume, scale, and velocity of social (and environmental) interactions. Globalization is not new, pre-dating colonialism, and Massey (Geography 87) points out that the current manifestation of globalization is ‘not a force of nature…[but] a political and economic project which requires the…efforts of the World Trade Organisation, International Monetary Fund, United States of America, multinational corporations, World Bank etc., to push it forward’.

The recent swift progress of this ‘neoliberal’ globalization also results from vertical integration, the development of advanced information technology and communications, economies of scale in mass transport systems, and the liberalization of national and international regulatory frameworks. These now allow global corporations to locate wherever they wish, triggering world-scale flows, processes, and production systems. World investments are no longer geographically constrained, but can flow to places offering the best returns; foreign direct investment in the late 1990s grew twice as fast as world trade (though mostly in proximate states).

The result of this increased mobility of capital is a radical restructuring of the global economy. The core capitalist countries (USA, Western Europe, and Japan) have experienced a period of de-industrialization—most of their manufacturing jobs were shipped to less economically developed countries as transnational corporations took advantage of the cheaper labour, cheaper regulations, and hence cheaper production costs there (N. Henry, C. McEwan, and J. S. Pollard, Area 34), and these nation-states have lost some of their control of capital. Interestingly, the migrations of people become more problematic as the migrations of finance become easier; the ‘borderless world’ is not a reality for a would-be migrant from less, to more, economically developed countries.

Globalization has many detractors, who claim that global capital privileges profit over local interests and deplore the ‘Westernization’ of local cultures and what they see as the negation of local identities and autonomies. Others suggest that globalization is a dialectical process; although it invades local contexts of action, it doesn't destroy them. Instead, new forms of local existence and expression emerge (Bollywood as well as Hollywood; see creolization). Local products can be globally advertised via the World Wide Web, and newly agriculturalizing countries like Kenya can sell to Western supermarkets via global commodity chains, which have lowered the threshold of entry for smaller enterprises.

A central part of the rhetoric of contemporary world politics and the subject of increasing volumes of academic analysis. It resists any single or simple definition. Although often associated with claims that the present world system is undergoing transformation, it is an old idea. There is a long tradition of writers emphasizing the external economic constraints that act upon nation states and the transforming impact of global economic processes, with Marx being amongst the most powerful and prescient. Such themes were revived in the late 1960s and early 1970s when writers on interdependence and modernization argued that the rapid expansion of international trade and investment, the increased awareness of ecological interdependence, the declining utility of military power, and the increasing power of non-state actors (multinational corporations but also religious organizations and terrorist groups) constituted a systemic shift that would increasingly undermine the traditional role and primacy of nation states. The 1970s literature on interdependence faded under pressure from two sources. First, the reappearance of superpower confrontation and the second Cold War appeared to justify those who took a more Hobbesian view of international life, dominated by military confrontation rather than economic exchange. Second, within academia, statists and realists responded vigorously, arguing, for example, that multinational corporations were closely tied to states and to patterns of interstate politics; that the state was still the most important institution of international order; that military power had not declined in its utility; and, most important of all, that the international political system with its dominant logic of power balancing remained the most important element of any theory of international politics.

However, with the end of the Cold War, academic interest shifted back to the role of external or global economic factors, this time under the broad banner of ‘globalization’. It is far from easy to gather together the wide variety of meanings attached to the term globalization. At one level it appears simple. Globalization is about the universal process or set of processes which generate a multiplicity of linkages and interconnections which transcend the states and societies which make up the modern world system. It involves a dramatic increase in the density and depth of economic, ecological, and societal interdependence, with ‘density’ referring to the increased number, range, and scope of cross-border transactions; and ‘depth’ to the degree to which that interdependence affects, and is affected by, the ways in which societies are organized domestically.

In reality, much of the muddle and inconclusiveness of the debates on globalization stem from the ambiguities of the concept. Globalization is sometimes presented as a causal theory: certain sorts of global processes are held to cause certain kinds of outcomes; sometimes it is a collection of concepts, mapping (but not explaining) how the changing global system is to be understood; and sometimes it is understood as a particular kind of discourse or ideology (often associated with neo-liberalism). There are also important distinctions between economistic readings of globalization (that stress increased interstate transactions and flows of capital, labour, goods and services) and social and political readings (that stress the emergence of new forms of governance and authority, new arenas of political action (‘deterritorialization’ or the ‘reconfiguration of social space’), or new understandings of identity or community). Within economistic readings, there are distinctions between a traditional focus on interstate economic transactions and broader shifts in transnational production-structures and the emergence of new kinds of deterritorialized markets. Distinctions are also drawn between globalization, internationalization, westernization, and modernization. And there is the important distinction between the claim that globalization should be seen as the continuation of a deep-rooted set of historical processes and the view that contemporary globalization represents a critical break-point or fundamental discontinuity in world politics.

Perhaps the most important single idea concerns the growing disjuncture between the notion of a sovereign state directing its own future, the dynamics of the contemporary global economy, and the increasing complexity of world society. More specifically, there are three broad categories of claim that globalization is having a deep, perhaps revolutionary, impact. In the first place, it is widely argued that certain sets of economic policy tools have ceased to be viable and that states face ever increasing pressures to adopt increasingly similar pro-market policies. Because of the increasing power of financial markets, governments are forced into pursuing macroeconomic policies that meet with the approval of these markets. Increasing trade also places governments under pressure to adopt pro-market policies, avoiding policies which would imply the need to harm business by taxation, or to raise interest rates as a consequence of increased borrowing. They also find themselves forced to cut back the role of the public economy in order to attract inward investment from increasingly footloose multinational companies quick to punish governments who stray from the path of economic righteousness by exercising their exit option. Consequently, the range of policy options open to governments is claimed to be dramatically reduced.

A second cluster of arguments relates to the degree to which globalization has created the conditions for an ever more intense and activist global or transnational civil society. The physical infrastructure of increased economic interdependence (new systems of communication and transportation) and the extent to which new technologies (satellites, computer networks, etc.) have increased the costs and difficulty for governments of controlling flows of information, has facilitated the diffusion of values, knowledge, and ideas, and enhanced the ability of like-minded groups to organize across national boundaries. Transnational civil society, then, refers to those self-organized intermediary groups that are relatively independent of both public authorities and private economic actors; that are capable of taking collective action in pursuit of their interests or values; and that act across state borders. Globalization writers have laid great emphasis on the roles played by non-governmental organizations, social movements, and multinational corporations, but such activity also includes transnational drug and criminal groups and transnational terrorism. The analytical focus of much of this work has been on transnational networks—for example, knowledge-based networks of economists, lawyers, or scientists; or transnational advocacy networks which act as channels for flows of money and material resources but, more critically, of information and ideas.

A third cluster of arguments suggests that it is institutional enmeshment rather than economic transactions or the ‘reconfiguration of social space’ that has most constrained the state. On this view, states are increasingly rule-takers over a vast array of rules, laws, and norms that are promulgated internationally but which affect almost every aspect of how they organize their societies domestically. Proponents of this view highlight the tremendous growth in the number of international organizations; they point to the vast increase in both the number of international treaties and agreements and the scope and intrusiveness of such agreements; and they suggest that important changes are occurring in the character of the international legal system (the increased pluralism of the process by which new norms and rules emerge; the appearance of more and more ‘islands of supranational governance’ (such as the EU or the WTO); the blurring of municipal, international, and transnational law; and the increased importance of informal, yet norm-governed, governance mechanisms, often built around complex transnational and transgovernmental networks).

The critics attack along a number of fronts. First, they highlight the lack of clear and consistent definitions of globalization and the deep ambiguities as to what ‘globalization theory’ is supposed to involve or explain. Second, they point to the mounting empirical grounds for scepticism, for example: that levels of globalization are not higher or more intense than in earlier periods (especially the period before WW1); that there is no clear evidence of state retreat, of welfare states being cut back because of globalization pressures, of transnational capital standing in automatic opposition to social welfare, or of globalization being the most important factor in explaining levels of inequality in OECD countries. Whilst many of the changes and challenges of globalization are very real, the critics argue that they do not point in a single direction and certainly do not provide secure grounds for accepting the claim that some sort of deep change or transformation is under way. Third, the critics argue that globalization has been driven not by some unstoppable logic of technological innovation, but by specific sets of state policies, backed by specific political coalitions. This suggests that states themselves are not passive players and that the impact of globalization will often depend on national-level political and institutional factors. Equally, even where liberalizing effects can be attributed to globalization, it is not always the case that this implies state retreat—as in the process by which privatization and deregulation have involved re-regulation. Nor does globalization inevitably push governments towards declining state activism. It can, on the contrary, lead to increased pressure on government to provide protection against the economic and social dislocations that arise from increased liberalization and external vulnerability. Finally, the critics remain deeply unconvinced by the arguments for systemic transformation, highlighting the degree to which international institutions are created by states for particular purposes and the evident capacity of powerful states to resist or even abandon such institutions; the continued importance of military power controlled by states and of political boundaries and of national allegiances even in regions of dense economic and societal interdependence; and the very deep resistance of the United States as the global hegemon to contemplate giving up its own sovereignty and the capacity of the United States to both shape and resist the course of globalization.

— Andrew Hurrell

For more information on globalization, visit Britannica.com.

Globalization became a buzzword following the end of the Cold War, but the phenomenon has long been a factor in the foreign relations of the United States and has deep roots in history. To the extent that it meant the expansion of trade and investments, it can be defined as economic expansion, as in the transition from territorial expansion in the nineteenth century to the increasing internationalization of markets in the twentieth century. In the aftermath of World War II, economic internationalism, or the suggestion of growing interdependence of nations and the development of international institutions, seemed to capture the essence of what more recently has been termed globalization. But such usages are too limited; they do not adequately define a phenomenon that shaped American diplomacy and its constituent elements of economics and culture.

Definition and Conceptualization

"Globalization" is a fairly new term. Professor Theodore Levitt, a marketing professor at the Harvard Business School, apparently first employed it in a 1983 article in the Harvard Business Review. It is arguable, however, that the basic concept dates to the first humans. Defined broadly, globalization is the process of integrating nations and peoples—politically, economically, and culturally—into a larger community. In this broad sense, it is little different from internationalization. Yet globalization is more than this incremental process that over the centuries has brought people and nations closer together as technological innovation dissolved barriers of time and distance, and enhanced flows of information promoted greater awareness and understanding.

The focus, as the term suggests, is not on nations but on the entire globe. Consequently, a more sophisticated definition might emphasize that contemporary globalization is a complex, controversial, and synergistic process in which improvements in technology (especially in communications and transportation) combine with the deregulation of markets and open borders to bring about vastly expanded flows of people, money, goods, services, and information. This process integrates people, businesses, nongovernmental organizations, and nations into larger networks. Globalization promotes convergence, harmonization, efficiency, growth, and, perhaps, democratization and homogenization.

Globalization also has a dark side. It produces economic and social dislocations and arouses public concerns over job security; the distribution of economic gains; and the impact of volatility on families, communities, and nations. Many also worry about a growing concentration of economic power; harm to the environment; danger to public health and safety; the disintegration of indigenous cultures; and the loss of sovereignty, accountability, and transparency in government. These, too, are issues that have been topics of concern to American diplomats and foreign policymakers throughout the twentieth century.

There are two principal drivers to globalization: technological innovation and changing ideas about how to organize and regulate economic activity. Rapidly changing technologies for transportation and communications continue to dissolve the barriers of time, distance, and ignorance that once complicated long-range relationships. In the twentieth century some of the most important technological innovations that changed diplomacy were the jet plane, satellite communications, fiber-optic cables, and the Internet. Ideas also shape globalization, particularly the widespread belief that free trade, private enterprise, and competitive markets promote efficiency and economic growth. Another set of ideas also influences the globalization process: the belief among international lawyers that harmonization of standards, rules, and legal systems is the most appropriate way to resolve business conflicts. The impact of technology and ideas are the building blocks of globalization, and have shaped U.S. power, policy, and diplomatic conduct.

The globalization process has other independent drivers. In the history of the modern world, a rising population in less-developed areas frequently has triggered emigration to areas of economic opportunity, and this in turn has frequently produced a stream of remittances to family members who remained behind. Famine and malnourishment, as well as the need for energy and industrial raw materials to support advanced economies, also affect the globalization process, promoting greater flows of materials, food, and goods, and thus enhancing the interdependence of people and economies. Also, two World Wars, a Cold War, and the Great Depression disrupted in significant ways the ongoing globalization process through much of the twentieth century. Finally, leadership is an important element of all human activity. Had the United States, as the world's leading economic and military power in the twentieth century, not committed its public policy to promoting an open, and nondiscriminatory, international economic system, it is quite possible that the globalization process would have taken a different course—perhaps one that gave priority to regional blocs.

In explaining the emergence of globalization, it is almost trite to observe that the underlying forces of technology and economics have transformed the traditional nation-state system and compressed once-formidable barriers of time and space. But post–Cold War globalization did just that, although the process had roots in the late-nineteenth-century growth of American power. The concept, therefore, requires scholars of foreign relations to leap outside of the normal parameters of the nation-state and political-military affairs and take into account such elements as the flows of goods, services, and money; the increasing international mobility of people (and especially business professionals and skilled workers); the emergence and growth of large corporations that view the world as a single market in which they allocate resources, shift production, and market goods; the expansion of financial, legal, insurance, and information services; and the interconnections of cultures, customs, political processes, and ideas.

Mindful that the concept addresses historical transformations, scholars in political science, economics, linguistics, anthropology, geography, law, art, and film studies help to define the term. Political scientists, economists, and business historians have accurately identified techno-economic globalization as the precursor of other forms of globalization, such as transnational cultural exchanges. That is, the open and expanding market, in a synergistic relationship with technology (including scientific developments), has given rise to concomitant political, institutional, social, intellectual, and diplomatic changes. Economics and technology exert an enduring impact on international relationships, seemingly proceeding on their own separate tracks but not immune from events.

This calls into question the interpretation of economic determinists, for globalization complicates while it also complements Marxism, corporatism, and the like. To be sure, the power of markets associated with money, goods, services, and information facilitates international relationships, but it does so in diverse ways. Wealth is only one of the critical factors propelling the global economy. When viewed from a perspective of globalization, Marxism overemphasizes capitalism's contradictions of overproduction and underconsumption, diverting attention from the impact of economic and business concerns on diplomacy. Corporatists tend to discount the influence of strategic, humanitarian, and idealist considerations in government circles and within the private sector as well, while world systems theorists draw on an international lineup of states rather than global, private-oriented networks.

Traditional approaches to diplomatic history, including post-revisionism, also ignore the globalization construct in that they relegate economics and technology to a second tier in their levels of analysis. Globalization requires attention to nongovernmental actors, including religious and philanthropic organizations, consumer and environmental groups, workers, and unions, along with those active in business and finance. By including these groups, globalization lends an appreciation to the variety of concerns in U.S. foreign relations, from national security to advancing national ideals to humanitarian concerns.

Globalization is also not event or crisis driven, which are common foci for diplomatic historians. Instead, it explores the factors that are significant to diplomacy in the long run. For instance, the dispute between Guatemala and the United Fruit Company that led to the ouster of the government of Jacobo Arbenz Guzmán in 1954 is considered a crisis point in Cold War diplomacy. But just as important is discussion of the efforts of Carl Lindner, owner of United Fruit's successor, Chiquita Brands. He opened Western European markets to exports of Central American bananas by using the power of the purse to reward American politicians of both parties, thus placing his agenda at the cutting edge of U.S. trade diplomacy toward the European Common Market. Diplomatic history can account for such actions, which are often hidden by more traditional approaches, by placing the Guatemala episode and other flash points in the context of the globalized expansion of business and culture.

With its application to the many strands of the historiography of U.S. foreign relations, it is clear that globalization promotes new ways of explaining American diplomacy. And because globalization is a historical phenomenon, scholars and commentators can draw on it as an interpretive device to examine change and continuity across the world at various times. Technology and economics have long colluded with each other, beginning at least with the Industrial Revolution. Yet conquests, trade, slavery, and religious expansion, across the world as it was then known, have occurred farther back than that. The spread of Islam, the Crusades, the Roman Empire, and continuous agricultural revolution all represented the inexorable push of the market and technology that lay at the foundation of globalization. Economic globalization undergirded strife, growth, and interchange within and beyond local boundaries throughout history, but the globalizing economy, through the penetrating impact of technology, has also changed culture and politics. Globalization is of a synthetic quality in that it addresses the factors that comprise American diplomatic history; it helps group priorities in foreign relations and explain them in a coherent way.

First Era of Modern Globalization: to 1914

The current brand of globalization in American diplomacy can be traced back to the post–Civil War era, when internationalization and Americanization emerged in U.S. ideology and expressions of power. From this period to World War I, globalization came under the rubric of Anglo-American control of the transatlantic economy. From about 1850 to 1914 an international economy existed, managed by Great Britain, resting on free trade and open capital markets and reliant on colonies and developing areas as resource bases and on consumers in advanced nations. It was in the midst of this first international industrial economy that the United States rode to world power on the strength of its economic muscle and competed with Europeans, spurred on by production and technological inventions.

This period did not experience the revolutionary form of globalization that characterized the post–Cold War years, with their highly synchronized and integrated worldwide communications, transportation, and politics. In the earlier era, less production was attributed to foreign operations. Those affected by globalization were mostly of the elite, rather than the masses, in the early twentieth century. In the pre–World War I period, it was clear which nation controlled production, marketing, culture, and the like, while the multitrillion-dollar world market of the 1990s and beyond had no natural owners. The velocity of globalization in the pre-1914 years was immensely slower than at the end of twentieth century, as were the volume and the scope. The years before World War I did not witness the fundamental transformation in the global economy that started in the last century's final two decades.

Evident in the earlier era, however, were improvements in technology and a greater volume of world economic connections that indicated the influence of globalization on American power, diplomacy, and the economy. However, remarkable changes wrought by new business networks were not fully understood by diplomats back then. Some policymakers noted the importance of new technology and economic relationships; the presidents of these times, for instance, became more aware of global economic concerns. That was particularly true of William McKinley, known for the protectionist tariff with his name but actually a far-sighted globalizer. But they could not possibly foresee all of their applications. Movement toward globalization occurred, nascent and incomplete and interrupted by events of the twentieth century though it was. Thus, it is fair to argue that globalization offered, and offers, a new paradigm in which to view not only diplomatic history, but world history as a whole.

By the twentieth century, the United States had begun to replace Britain's colonial and trans-Atlantic systems of free trade and governmentrun transportation and communication networks. The new form of organization was a structured but open economic system of private enterprise and business-friendly public support for access to foreign markets, inventions, immigration, and adherence to international law. Private enterprise could export and produce abroad, the fruits of America's leadership in technology and intellectual property. People and ideas could move easily, facilitating the outward diffusion of America's political ideals and cultural values. America practiced an informal imperialism—in which investment and trade accompanied missionaries and, on occasion, the military—that gradually superseded British industrial and agricultural power.

The early era of globalization, before World War I, was greased by the technological leaps of transportation improvements like the steamship, and by marvels like the Suez and Panama Canals, which sped European and American commerce around the globe. Transatlantic cables, then direct telegraph links to Latin America and connections through British cable to Asia, allowed American investors and merchants to communicate faster abroad, thus expanding their markets. The great expositions of the age—in Chicago in 1893, Omaha in 1898, Buffalo in 1901, and St. Louis in 1904, as well as later gatherings in West Coast cities—publicized American achievements and the promise of empire based on progress in technology. Global connections shrunk the world itself.

Globalization was also driven by the emergence of America in the international economy. Capital exports, the plethora of inventions with American trademarks that were sold overseas, and a greater presence in financial markets boosted U.S. power. For instance, one of the most successful exporters was a capital goods firm, the Baldwin Locomotive Works of Philadelphia, whose engines came to symbolize power, speed, and the march of civilization. In 1900 Baldwin exported an average of one engine a day, shipping locomotives to South America, Africa, Asia, Australia and Europe. Exports soared after its engines gained recognition for their speed and for hauling weight up steep grades. At the turn of the twentieth century, Baldwin locomotives climbed Pikes Peak, hauled the Trans-Siberian Express, roamed the Argentine pampas, and whistled past the Egyptian pyramids. In the British Empire, American firms won contracts for building railroad bridges in Uganda and supplying rails for the construction of Cecil Rhodes's Cape to Cairo Railway, a project intended to develop British trade in Africa. Elsewhere, in the world's breadbaskets, Argentine, Australian, and Russian farmers used U.S. machinery to gather grain. Here were the companies that engaged in the international economy, as well as the privately run globalized market that was outside the realm of states.

Such economic connections promoted cultural ones as well. Thus, early signs of globalization in cultural exchanges were evident in sports (the Olympic Games), marriage, tourism, entertainment (Buffalo Bill's Wild West Show), the temperance movement, missionary work, and philanthropy. Regarding the latter, American-led internationalization in the years before World War I involved magnates like Andrew Carnegie and John D. Rockefeller, who turned to global philanthropy to counteract the label of "robber baron" and to advance their social concerns. Carnegie bequeathed millions to build public libraries in the United States and throughout the British dominions. For his part, Rockefeller established a huge foundation with a global mission to promote the well-being of mankind throughout the world. The oil baron personally contributed some $530 million to foundations and his son added another $537 million, which went for medical and scientific research, public health, education, and international exchange programs. The Foundation combated yellow fever and tropical African diseases. In China it established Peking Union Medical College to spread knowledge of medicine and sanitation, conduct research, and support the medical activities of Western missionaries. In addition, Carnegie's associate Henry Phipps in 1908 donated enough money so that Washington, D.C., could host the sixth International Congress on Tuberculosis, a disease that had killed thousands across the world. His contemporary, Darius Ogden Mills, funded an expedition to Chile in 1912 that measured over three hundred of the brightest stars in one-quarter of the sky surrounding the South Pole.

Besides the globalization of science and medicine, the fortunes of Americans were also spent on human rights causes. Jacob Schiff, the famous head of the banking firm Kuhn, Loeb and Company, turned his attention in 1906 to funding the American Jewish Committee, an organization dedicated to alleviating the persecution of Jewry at home and abroad. A host of banking, mining, and export firms, moreover, poured money into relief projects before World War I. For example, the New York Merchants Association raised $8,000 to help the victims of the Valparaiso earthquake of 1906, Guggenheim Sons, W. R. Grace and Company, and others more than matched this amount. In sum, the rich in America transferred some of their wealth to the international stage, in the process moving outside the realm of nations to influence the world economy. This is the essence of globalization.

Disrupted Globalization: 1914–1939

The period from the end of World War I to 1950 also experienced some elements of globalization as new technology joined expansion in finance, trade, investment, and culture throughout the world. Yet in a major sense this was an era of deglobalization: first, the international economic system malfunctioned or broke down; then, during the Cold War, the world divided along ideological fissures.

World War I accelerated the expansion of U.S. business overseas. American firms were especially successful in replacing dominant British firms in Western Hemisphere and Asian markets. In addition, war requirements created a soaring U.S. demand for raw materials, especially copper, iron, and other key mineral products. Soon American firms, with the help of their government, began scouring the world for essential raw materials. Rubber companies acquired plantations in Sumatra, sugar producers expanded operations in Cuba, and meat packers enlarged their operations in South America. Paper companies opened pulp and papers mills in Canada, while mining companies purchased nitrate, iron, and copper mines in Chile. Oil companies explored China, the Dutch Indies, and other remote regions and invested heavily in unstable Mexico. War needs drove much of this overseas expansion, but American business leaders were not oblivious to long-term opportunities.

President Woodrow Wilson left an enduring mark on U.S. foreign relations, especially in providing American leadership for the postwar economic and financial system. But if he was the father of internationalism, then he also presided over the disruption of globalization. The defeat of the Treaty of Versailles demonstrated the variations in thinking about globalization. Prevailing sentiment was not prepared to abandon nationalism even as the expansive course of global commerce and investment and America's role in the world maintained their momentum. Americans would not fully adopt Wilsonian ideals until after the Cold War. In addition, globalization took a backseat to revolution. Mexico's new constitution under the Carranza government of Venustiano Carranza provided for restrictions on foreign ownership of land and subsoil resources. This meant that American investors would be limited to oil reserves; at the broader level, the clash was between nationalism and international legalism, with the former winning out. In Russia, the Bolshevik government survived a shaky start, including a civil war in which Americans participated, to create a decidedly anti-capitalist regime. At first the Soviet Union promoted globalization of the masses but not capital, lashing out at the imperialist nature of capitalist globalization. Moscow then retreated to building a socialist state under Communist Party control at home. Thus, the world started to split ideologically and politically even as Wilson's vision reached its expressive high point.

Yet many bankers and administration officials still sought outward, long-term solutions to promote peace and prosperity. Because Europe had bought three-fifths of American exports before the war, freer trade was a national interest after World War I. More generally, policymakers embraced internationalism. Understanding that the Great War had caused an explosion in U.S. exports and imports, that suffering farmers could be aided by overseas expansion, and that America held a key role in global finance, Republican administrations of the 1920s did not separate the international from the domestic. They pushed for globalism, albeit a less political brand than Wilson's. Global disarmament indicated one side of Republican engagement in the world. This effort energized citizens, diplomats, and businessmen into even more cooperative, internationalist endeavors during this era than before the war.

Cultural internationalism grew stronger as nations created numerous associations designed to facilitate global ties. An International Office of Museums, and International Congress on Popular Arts, and an International Society for Contemporary Music fostered linkages and understanding. In the United States, political scientists began studying the causes of war and universities offered new courses in various national histories and languages, all a reflection of the need to understand the global context in which America operated. Americans organized hundreds of scholarly discussion groups, such as the Institute of Pacific Relations, a multinational association of journalists, academics, and businessmen based in New York City. The new Guggenheim Foundation funded artistic projects and scholarly research, focusing on Latin American intellectuals. The Institute of International Education funded and directed foreign students to universities throughout the United States. Asians were the main beneficiaries, but increasingly, Latin American and European youth traveled to America to study. In this globalized ethos, Americans believed in peace and prosperity wrought by international contact. The influence of such private activity on foreign policy was extensive, demonstrating that globalization continued to some degree. Disarmament was one arena, regional stabilization and multilateralism another, and arbitration yet another.

Business made global connections in the 1920s. Air transport and travel became a reality under the machinations of Pan American World Airways under the leadership of Juan Trippe. American trade and investment multiplied. Along with the spread of radio, cinema was not only an American phenomenon but a global one as well; people around the world listened and watched the new media and thus developed some common cultural markers. Hollywood stars such as Douglas Fairbanks and Mary Pickford were known worldwide, for example.

Nonetheless, the onset of the Great Depression and World War II dealt a setback to further globalization. The globalizers of the 1920s—the Republican presidents and bureaucrats, the business and banking establishments—were ultimately limited by their own ideology and by the powerful concentration of forces that elevated the domestic economy over the international order. The effort at privatizing decisions and policy ultimately grounded itself on the Smoot-Hawley Tariff and imperial trade preferences of the 1930s, which reserved British Empire markets for member states and excluded or discriminated against outsiders such as America. And politics could not be taken out of the economy; businessmen could not be trusted with, nor were they capable of, running the global system of trade and finance. The Republican governments promoted the ideology of technoglobalization but often refused to take responsibility through policies of running the world economy. They were unwilling to make the tough moves that involved political haggling at home—on matters like reducing war debts and tariffs, for instance—that were requisites to continuing their brand of internationalism. This proved especially so when economic times spiraled from prosperity to misfortune during the Great Depression.

Paradoxically, however, as governments turned away from efforts to harmonize and integrate the international economy to cope with domestic distresses, advances in technology continued to erode the barriers of time, distance, and ignorance that separated nations and people. Some of the most significant improvements in air travel and mass communications, particularly the movies and short-wave radio, took place during the 1930s. At a time when dire economic circumstances compelled most government leaders to think local, a few leaders in government and business dared to speak up for closer international economic cooperation. Thus, Thomas J. Watson, Jr., the head of International Business Machines (IBM) and the International Chamber of Commerce, mimicked Secretary of State Cordell Hull in proclaiming that freer international economic relations meant world peace, and that if goods did not cross borders, he feared that armies would.

A World Divided: 1940–1950

World War II further threatened Anglo-American-style globalization. The Axis powers—a loose coalition of Germany, Italy, and Japan—resorted to military force to overthrow the post-Versailles world order and to establish closed, regional systems dominated from Berlin, Rome, and Tokyo. The conflict afforded the United States a second chance to provide leadership and to promote its vision of a peaceful, prosperous, and united world. The Roosevelt administration pressed plans for international rules and institutions that would structure the post–World War II global economic and political system. In joining technology with national security, the war forged an enduring partnership among business, government, and science. Afterward, the new military-industrial complex would sustain America as an economic and military superpower, develop endless frontiers for scientific discovery, and speed the globalization process.

In effect, scientists and their laboratories, with government funding and direction, contributed in a major way to the success of the war effort, and in the process they developed many new products that had commercial applications which would transform the postwar world. Atomic energy, for instance, had many peaceful applications, particularly as a source of electrical power. The mass production of penicillin transformed the treatment of disease. Also, radar provided the basis for microwave cooking. The first computers appeared during World War II to assist the military with code breaking and long-distance ballistics calculations. ENIAC, one of the first, was a huge machine, occupying 1,800 square feet and using 18,000 bulky vacuum tubes. Not until the development of transistors and the microchips that resulted from them could cheap and reliable computing power be loaded into desktop and portable units. The transistor, which was developed in 1947 and 1948, grew out of wartime research on silicon and germanium at Bell Telephone Laboratories in New Jersey. The transistor led directly to the technology of the personal computer, which itself spawned the globalized information age in the last third of the twentieth century.

No industry benefited more from wartime cooperation and federal contracts than aviation. At the outbreak of war the Boeing Company of Seattle, renowned for its seaplanes and engineering skills, had fewer than two thousand employees and was on the verge of bankruptcy. From this inauspicious beginning the company flourished on the strength of its bombers (the B-17 Flying Fortress and the B-29 Superfortress). Employment rose to nearly forty-five thousand. At the end of the war Boeing, on the strength of its experience and reputation in military aircraft production, turned its attention to the civilian market, using the B-29 as the basis of the luxurious 377 Stratocruiser that Pan American used on Atlantic routes. It contained a spiral staircase and a downstairs bar, but was soon superseded by the four-engine 707 passenger jet, launched in 1954. The latter also had roots in military work to develop a jet tanker and from wind tunnel experiments with jet engines during World War II. Thus, with government assistance, American companies like Boeing, Douglas, and Lockheed would come to dominate the rapidly expanding world market for civilian aviation.

Growth was also in order for consumer goods, which were also foundations for later globalization. Robert W. Woodruff, who had taken over the Coca-Cola Company in 1923, aimed to make his beverage an ordinary, everyday item for Americans and people around the world. He built on his foreign operations, particularly in Europe, during World War II by having Coke accompany the military overseas. Soldiers not only identified with Woodruff's product during and after the war but heroes requested it—as did an American pilot who crashed in Scotland and asked, upon regaining consciousness, for a Coke. The beverage was so pervasive that the Nazis and Japanese denounced it as a disease of American society. By war's end the company ran sixty-three bottling plants across the globe, on every continent. Its net profits in 1948 soared to $35.6 million, elevating it to near-universal acceptance as the world's beverage of choice.

The Cold War dashed the hopes of internationalists who would have facilitated the globalization of the world economy, but still strides were made toward the technoglobal system, induced particularly by governments working through the United Nations. In these instances, officials instilled international law and arbitration processes in the international economy, yet another foundation of globalization. For instance, the International Civil Aviation Organization (ICAO) pushed for global rules to govern the dynamic medium of air transport and travel. The objective was to establish international law, as well as promote order, safety, and efficient development in aviation, although ICAO authority remained limited by national desires to control lucrative commercial air traffic. The ICAO, established on a permanent basis in April 1947, provided the framework for the vast expansion of commercial airspace after World War II. By the late 1960s its 116 member nations connected markets around the world more closely by integrating various technical aspects of airplane transport, such as air navigation codes, as well as by devising a mechanism to resolve civil disputes, promote simpler procedures at borders, and boost Third World development in civil aviation—all enhancing globalization through air transport.

The protracted Cold War struggle that divided the world into two spheres of influence—one led from Washington, the other from Moscow—prompted national security considerations, rather than invisible market forces, to define international relationships. Governments continued to regulate trade and financial exchanges, despite efforts to lower barriers and promote commerce. But America's technological advantage, adaptable production processes, and access to resources, so decisive in the struggle against Axis aggressors, helped win the conflict. Also, a new generation of U.S. political and corporate leaders, familiar with mistakes made at the end of World War I when the United States shunned overseas responsibilities, chose to accept this second opportunity to guide the world. Furthermore, as it turned out, these internationalists were also better salesmen than Soviet leader Joseph Stalin and his heirs, who presided over a decrepit, controlled Soviet economy unable to satisfy basic consumer wants. Aware that a troubled world had an insatiable appetite for American values, goods, and services, U.S. leaders exploited their comparative advantage in communications and marketing to advance the American dream of democracy, mass consumption, and individual enterprise. In the long Cold War, the formula of guns, butter, and liberal ideals eventually proved a winner that spread American values on a global basis. Without America's Marshall Plan, support for Japan, and containment of the Soviet Union, the history of the Cold War might have turned out quite differently, and likewise for the course of globalization. Had the USSR won the Cold War, Soviet-directed expansion would have been far different—far more capricious, authoritarian, and state-managed—than the American-led alternative based on the rule of law, democratic elections, open markets, and the relentless energy of technology and entrepreneurship. Thus, the era of globalization that began near century's end evolved, ironically, from the deglobalized structure of the Cold War.

Globalization Undercurrents: 1951–1972

The indicators of globalization were present throughout the superpower struggle. Prosperity and peace brought greater individual mobility. Before World War I an average of 1.5 million people arrived annually at U.S. shores, with about half that many departing. Travel lagged until after World War II and then revived. Two million people arrived in 1956, 10 million in 1970. Immigration, which fell to a low of 24,000 in 1943 and stagnated during the Depression and World War II, revived slowly after the war, reaching 327,000 in 1957. The largest numbers of immigrants—many of them war refugees—continued to come from Europe, and at this time particularly from Germany. Air travel also took off. Before the 1940s the typical traveler from abroad came by sea; after World War II the traveler arrived by air. On domestic routes the number of revenue passengers rose rapidly from 6.6 million passengers in 1945 to 48.7 million in 1957 and 153.4 million in 1970. On international routes the rise was equally dramatic: from 476,000 in 1945 to 4.5 million in 1957 and 16.3 million in 1970.

Despite Cold War crises and the further regionalization of the world economy, highlighted by the launching of the European Common Market in 1957 (which lured massive American investment), a revolution in critical technologies—including transatlantic telephone service, satellite communications, computers, and jet travel—accelerated the globalization process and ushered in a new era of rapid intercontinental travel, instantaneous communications, and economic interdependence. America's humbling experience in Vietnam, dollar woes, and the rise of oil exporting nations in the 1970s did not dampen globalization. Americans still enjoyed the benefits of unprecedented prosperity spurred by technology and economic expansion overseas. They bought new homes equipped with the latest labor-saving appliances, vacationed and studied abroad, and followed breaking news and sporting events abroad on new color television sets receiving signals transmitted via space satellites. Despite domestic political turmoil, technoglobalization continued to press forward, gradually transforming the world of separate nations.

Marshall McLuhan, a Canadian who analyzed the impact of mass media on society, made the metaphor of the "global village" famous in 1962 as a reference to the new electronic interdependence that had recreated the world. At the time, McLuhan was concerned largely with how noninteractive communications like radio and television were homogenizing the world: everyone watched the same sporting events, news, and soap operas. He identified a significant trend. The late 1950s was a period of enormous change as technical developments in aviation, transportation, and communications brought cost reductions and improved service. People, goods, and capital began to move across borders, creating interactive bonds among people and between nations. These flows integrated markets, harmonized tastes, and homogenized cultures.

Some of the most significant advances involved air transportation for people and freight. In 1957, Boeing, having gambled 25 percent of its net worth on development of a long-range passenger jet, launched the 707-120, designed as both a tanker for the air force and a civilian jet. Equipped with long-range Pratt and Whitney J-57 engines, it halved flying time across the Atlantic and opened the era of cheap air travel. The number of passengers departing internationally on scheduled airliners rose 340 percent (from 4.3 million to 18.9 million) from 1957 to 1973 as airlines introduced tourist-class fares. A round-trip flight, New York to London, fell to $487. The arrival of the wide-bodied Boeing 747 in 1969 further expanded capacity and drove down costs. Originally designed as a cargo carrier, it could accommodate two containers side by side that could be transferred to trucks; soon, high-value goods were moving swiftly by jet freighter. It also offered lower operating costs at a time when fuel prices were rising.

Thus, by the early 1970s improvements in air transport made it possible for business to source suppliers and serve markets globally. From 1957 to 1973 the number of revenue ton miles for air cargo on scheduled international flights rose 866 percent from 128.2 billion tons in 1957 to 1.2 trillion ton in 1973. It would be a decade before the full impact of these improvements worked their way through the marketplace. Air service continued to expand rapidly and airfares fell. Charter service grew rapidly on the transatlantic route and fares on scheduled airliners fell below $200 (New York to London) by 1970. Millions of college students read Arthur Frommer's best-seller, Europe on $5 a Day (first published in 1957), put on their backpacks, and set out to see Europe and learn about "foreign affairs." Meanwhile, improved engine design and weight reduction led to longer-range planes. In 1976 Boeing launched the 747 SP, which had the capacity to carry 233 passengers nonstop with full payload between New York and Tokyo. By 1989 Boeing was producing the 747-400; it could carry 412 passengers for up to twenty hours at subsonic speeds.

Along with the arrival of reliable, efficient jet freight in the late 1960s, other important cost-saving developments occurred in maritime shipping, including containerization. In the 1950s longshoremen could typically handle from ten to fifteen tons of cargo per hour. The use of truck-trailer, standard-size containers, brought productivity up to from six hundred to seven hundred tons per hour. This meant faster ship turnaround, better coordination, and lower transportation costs. Beginning in April 1956, when the trucking executive Malcolm McLean first moved loaded trailers between two U.S. port cities on an old World War II tanker, containerization took off. Grace and Matson lines adopted it in 1960 and the rush to containerization peaked in 1969, during the Vietnam War. In addition, the international shipping industry developed specially designed ships for automobiles (the first auto carriers could handle from one thousand to two thousand cars) and LNG (liquified natural gas) tankers after the 1973 war in the Middle East..

Improvements in communications also boosted the globalization process. Until the mid-1950s individuals could not communicate quickly and easily across the Atlantic and the Pacific Oceans. In 1927 commercial telephone service using high-frequency radio opened between New York and London. But this interactive advance was not designed for mass communications. Radio telephones were noisy, unreliable, and costly—forty-five dollars for the first three minutes. September 1956 brought the most significant improvement in communications in over a century when American Telephone and Telegraph opened the first transatlantic telephone cable (TAT-1) by using microwave amplification techniques. The number of transatlantic telephone calls soared—climbing slowly from 10,000 in 1927 to 250,000 in 1957, and then jumping to 4.3 million in 1961. Soon large corporations such as Ford began using the telephone cable to exchange information and coordinate their over-seas operations from their U.S. headquarters. While telephone cables improved business communications among metropolitan centers, large areas of the world could not take advantage of telephone communications. Starting in the 1980s, satellite communications ended this isolation and made the emerging global village truly interactive.

The arrival of jet planes and transoceanic telephones facilitated business expansion, but so did American scientific leadership. World War II and the early Cold War saw many technological advances, and U.S. firms moved quickly to commercialize products from military research. Between 1945 and 1965 the number of patents granted in America more than doubled, rising from 25,695 to 62,857. Five times as many patents went to U.S. firms as to foreign corporations. As late as 1967 the United States accounted for 69 percent of research and development in major countries. A good illustration was the transformation of IBM, which took its domination into the global marketplace.

The Cold War generated momentum for globalization in other ways, too. National Science Foundation, National Space and Aeronautics Administration, and Defense Department contracts spurred basic research throughout the 1960s, and space research particularly spun off growth in intelligence gathering, electronics and engineering, and weaponry. Laboratories hired thousands of corporate engineers to work on missile and aerospace projects, and clusters of companies and laboratories sprouted up near major academic institutions. The space program's budget steadily increased to $1.2 billion by 1962, and steps were taken to orbit a man around the earth (via the Mercury Project from 1959 to 1962), and eventually to send him to the moon (through the Apollo Project in 1969). These were the precursors to the space shuttle and satellite communications of the 1980s and beyond, which fueled the globalization of information.

Decentralization Accelerates: 1973–1989

From the mid-1970s onward the process of world political and economic decentralization, so essential to globalization, picked up momentum. The technological transformations allowed American and other multinational firms to escape national regulations, and also helped free ordinary people from the boundaries of the nation-state. In addition, the rise of the OPEC (Organization of Petroleum Exporting Countries) oil cartel shifted global economic power away from the West. Free exchange rates, unfixed from the gold-dollar standard, gave great flexibility to international investors. American businesses would weather the energy crises and the final phase of the Cold War in different ways. With U.S. tariff barriers continuing to fall and foreign competition surging into the American market, high-cost domestic industries such as steel, autos, and machine tools lost market share to new entrants from abroad. But many bigand medium-sized firms did well in a changing, competitive environment. Firms with leading-edge technologies took advantage of market-opening opportunities to expand abroad. In the era of jet travel and networked business communications, the battle for market share was increasingly fought on a global playing field, involving all of the world's major high-income markets—Japan, Europe, and North America. Companies and nations converged as global markets for standardized consumer products appeared; transnational companies now sold the same reliable, low-priced goods in Brazil as they did in Biafra.

Even as the economic changes occurred, however, and despite the re-ignition of Cold War tensions during the late Carter and early Reagan administrations, ideological shifts occurred that reflected the emerging age of globalization. One was a new international outlook encouraged by better communications, transportation, open borders, deregulation, and the revival of nineteenth-century, laissez-faire liberalism. Business leaders began to think globally and to develop global networks that could exert influence over national political leaders through money and ideas. During the energy crisis of 1973, America's corporate elite reached out to foreign business leaders. Led by Chase Manhattan's David Rockefeller, they formed the multinational Trilateral Commission in 1973, with members from business, politics, law, and academia in America, Western Europe, and Japan. The idea was to facilitate cooperation among resource-rich nations, but outside of government supervision. Similarly, European business leaders began to meet in Davos, Switzerland, in 1982 to develop a common international strategy for European business. This network expanded in the 1980s to include world business and political leaders. In those years it launched the annual World Economic Forum, held every January and bringing together the world's movers and shakers to network, deal, and discuss public policy issues. Similarly in America during the Carter and Reagan years, business lobbying expanded from initial efforts to contain unions to the pursuit of an active agenda of deregulating markets, cutting taxes, and promoting free trade.

The deregulatory business agenda reflected another important paradigm shift that encouraged globalization. The Washington consensus had stressed an active and expansive role for the federal government, but in the 1970s economic thought turned toward a less-regulated marketplace. Under the influence of academic economists Murray Weidenbaum and Milton Friedman, a neoclassical attack on Keynesian interventionism was launched during the Reagan years. It emphasized entrepreneurship, reliance on the Federal Reserve System and monetary policy to manage the economy, tax relief, labor-market competition, deregulation, fluctuating exchange rates, and free trade in goods. In time, this consensus came to include free trade in money, or capital account convertibility.

President Ronald Reagan can be credited with fostering the second era of techno-economic globalization by expounding on the possibilities for freedom, political and economic, under U.S. leadership. He was the first president to push openly for free trade and privatization of government services, and one of the first to appreciate how new technologies of communication were transforming the marketplace and weakening the authority of totalitarian regimes. As he left office the technoglobal revolution was accelerating, bringing major changes to economics and politics, and to culture and society as well. His successors wrestled with the implications of globalization at home and abroad. They initiated new integrative bodies that restructured the global economy, such as the North American Free Trade Agreement (NAFTA) and the World Trade Organization (WTO), institutions that emphasized a rules-based economic system and liberalization of international commerce and that further integrated business processes worldwide. The freer exchanges of goods, capital, and culture inherent in globalization arose from the Cold War's ashes and took America into a new era in which transnational contacts rivaled state power.

American-Led Globalization: 1990–2001

The Clinton administration perceived that globalization had the potential to harmonize behavior, customs, and politics and usher in prosperity, development, and democracy. As the world's only superpower, the United States would lead the way toward openness, free access, and political stability. Also, President William Jefferson Clinton's enthusiasm for globalization was not shared by all Americans; many wondered if globalization was both inevitable and desirable. As the new millennium began, the business community seemed united in support of globalization, but among ordinary people there were concerns about jobs, food safety, harm to the environment, sovereignty, cultural homogenization, and the like. Americans were as unsure about the costs and benefits of this second era of globalization as they had been during the first one before World War I.

The Clinton administration veered from postwar history and adopted the universalist, integrative, and democratic posture of globalization. Economics replaced security on the U.S. policy agenda; globalization was the focus. The administration tied free markets to democracy. After the Mexican peso crisis of 1994, the president placed economic diplomacy at the center of foreign policy, supporting the consolidation of market democracy throughout the world, an ideology that put him in stride with global business but at odds with many in his own party who were tied to the traditional big government, workerprotection liberalism of the past.

The outpouring of analyses of globalization grew during the mid-1990s. Scholars, journalists, and politicians focused on the concept and process, but above all, on its influence. The widespread use of the Internet (304 million people in 2000) brought the issue into homes throughout the world. When added to the Clinton administration's oftentimes single-minded purpose of expanding American trade and investments over-seas, the establishment of NAFTA and the WTO, and the soaring rebound of the U.S. economy from a recession early in the 1990s, globalization had a certain cachet among Americans of all political stripes and economic status.

Americans were not the only ones anxious over globalization. In western Europe and many developing countries, globalization was a dirty word, associated in the public mind with American sneakers, blue jeans, burgers, and videos. The French were most skeptical. In one poll, 65 percent said globalization increased the gap between rich and poor; 56 percent thought it threatened national identity. The French Ministry of Culture sought to rally Europeans and to restrict access for Hollywood films and American television programs.

Around the world, defenders of traditional values sought to block the spread of American-style pop culture, but globalization proved a worthy foe. Iranian religious fundamentalists raided homes to confiscate videos and satellite dishes, and in neighboring Afghanistan the Taliban closed movie theaters, burned films, and denied schooling to women. Try as they might, the fundamentalists could not eradicate this powerfully projected alien culture. Their efforts merely benefited smugglers and the flow of contraband. Many discreetly hid satellite dishes to access Western television. The failure of Islamic fundamentalists to stamp out Western influences, like the inability of state-controlled societies in Eastern Europe to block the appeal of Western democracy and consumerism, demonstrated the power of mass communications in the era of satellites and videocassettes. It also underscored the global appeal of American values to the young, the well-educated, and the affluent, an amorphous yet tangible element of U.S. power in the world.

Yet the argument that globalization led to American cultural dominance ignored the appeal of the competition. At the time anti-globalization demonstrators were protesting in Seattle against the WTO in December 1999, children throughout America were gripped by the Japanese fad game Pokemon. Film industries in India and Hong Kong presented competition to Hollywood, and MTV discovered the need to vary its formula in the world's various regional markets—providing, for example, Chinese music in China and Hindi pop in India. True cultural globalization, not just Americanization, was in effect.

Among the world's cosmopolitan elite—business leaders, government officials, academics, and media types—the requirements of globalization produced a convergence. English became the predominant language of commerce and transnational communications, and business and government leaders wore Western business suits, flew in the same airplanes, stayed in the same hotels, read the same newspapers (the Wall Street Journal and the Financial Times), and communicated with cellular phones and e-mail. The acceptance of American-style globalization reflected the success of U.S. business, the need to play by the rules of the world's largest open market, U.S. leadership in technological innovation and the information revolution, and the attraction of America's universal values. It also reflected the victories over fascism, militarism, and communism during the twentieth century that allowed the Anglo-American powers to establish the United Nations system, design the institutions of international economic and financial collaboration, and press for acceptance of common standards and the rule of law that were so crucial to globalization.

The post–Cold War era of economic globalization, however, also represented a synergistic dimension in which changes in technology, business strategy, and government policies combined to produce effects far more profound than the sum of incremental steps. The changes hinged on the integration of capital markets, the growing irrelevance of national borders, and the technological leveraging of knowledge and talent worldwide. As the Internet was empowering ordinary people with information, governance of the global system became more segmented in functional supranational institutions run by specialized elites. The International Monetary Fund (IMF), the World Bank, the WTO, and the Bank for International Settlements set the rules and handed out