Skip to 0 minutes and 8 secondsIn this step, I want to convince you that we can think about the history of globalisation in four grand phases. To organise this 200,000 years of history, from the emergence of modern humans in Africa to today, we need a very clear organising principle. And what I'm going to use is the definition of trade. Trade is what happens when things were made in one place and consumed in another. Now, what we're going to do when we look through history is we're going to focus on the relationship between production and consumption. The geographic relationship. In the first phase, consumption and production are going to be together. In the second phase, they're also together.
Skip to 0 minutes and 52 secondsThe third phase, they separate, and the fourth, they separate in a different way. What I want to do now is go through those, sort of an overview of these four phases, and explain why I view them as quite different. Try and convince you that that's a good way of thinking about things. And in the steps that come, we're going to go through each of these phases one by one. Here you have summary of phase 1 and 2. Stage 1 is about 180,000 years. A long time. Modern humans evolved in Africa about 200,000 years ago. And for the first, say, 130,000 years, they were still staying in Africa being hunters and gatherers.
Skip to 1 minute and 36 secondsAbout 80,000 years ago, humans left Africa across the Red Sea and started to colonise the entire world. That's what I call phase 1. Now, one way of thinking about that is consumption and production work together. Of course, production meant pretty much just food. And the way it worked was that humans would go to the food, consume it, and when it was used up, they'd move somewhere else. That was the hunter-gatherer lifestyle. And they expanded the range over the next 60,000 or 70,000 years to cover the entire planet. That was phase 1. Now, phase 2 comes when the climate warms.
Skip to 2 minutes and 18 secondsFor reasons that scientists don't really understand, the global climate warmed, starting from about 12,000 years ago-- to 12,000 years ago and then stabilised. Now, that allowed the emergence of agriculture. And agriculture changed the nature of globalisation dramatically, because in essence, humans stayed put and they brought the production of food to themselves. They were using agriculture to produce, in the same place, whatever they needed. That had dramatic effects, because it let people stay in the same place for quite a while and gather in groups or cities where civilizations could emerge. That was because production and consumption were happening together, but the people didn't have to keep moving around all the time like nomads.
Skip to 3 minutes and 7 secondsThat was phase 2, which lasted from about 10,000 years ago right up to the beginning of the 19th century.
Skip to 3 minutes and 16 secondsPhase 3 and phase 4 is what we would normally call globalisation. Phase 3 started in the early 19th century, say 1820 or so, and lasted up to 1990. The old globalisation was really triggered by the steam revolution and the dance that the steam revolution and the Industrial Revolution did. It radically lowered the cost of moving goods across borders. And what that did was made it feasible to produce things in one country and consume it in others. It made it economical to do that. The falling cost of moving trade. It was also triggered when Britain started imposing what we call Pax Britannica. In other words, freedom of the sea. The British Navy was something like the UN back then.
Skip to 4 minutes and 3 secondsBut the world became peaceful enough for trade to flourish. So that phase 3 is when production and consumption separated physically, or unbundled. Phase 4 comes a little bit later, and it is triggered by the information and communication technology revolution. What this did was lower the cost of moving ideas across borders. Now, what had happened in phase 3 was a great bunching up of production in factories and industrial districts. And what the information and communication technology revolution did was allow companies to split up those factories and offshore some bits to places where the production costs were more appropriate. In particular, lots of factories went from rich countries to poor countries.
Skip to 4 minutes and 53 secondsAnd that could all be coordinated because of the information and communication technology. That's what I call the new globalisation. Old globalisation was driven by falling cost of moving goods. New globalisation, driven by falling cost of moving ideas. So there we have four phases. And in between each of the four phases is a transition. Phase 1, modern humans leave Africa. That's the transition between phase 1 and phase 2. The transition between phase 1 and phase 2 is when the climate warms and stabilises and the agricultural revolution begins. The transition to phase 3 started with the Industrial Revolution and the steam revolution that started it.
Skip to 5 minutes and 37 secondsAnd the transition to phase 4 is when the ICT revolution made it possible to move goods and ideas across borders. So that's how I want to organise history. I want to convince you that this is a good way to think about history. And we're going to go through those phases one step at a time.
Four phases of globalisation
We cover an awful lot of history – about 200 thousand years worth – this week, so we are going to have to skip some less important details.
In such cases, it is important to be clear about what is important. Here we’ll use the definition of trade as the organising principle. Trade happens when something is made in one place and consumed in another. This suggests that keeping track of the geographical relationships between production and consumption will help us identify the really big shifts in the nature of globalisation.
This approach naturally leads to 4 phases of globalisation.
In Phase 1, consumption and production take place together because the “hunter-gather” lifestyle meant consumption moving to “production” (i.e. food sources).
In Phase 2, consumption and production remained together but it was because people “brought” the food to themselves by developing agriculture.
Phase 3 was when modern globalisation started in the 19th century. Steam ships and railroads (and world peace called Pax Britannica) made it economical to consume goods that were made faraway. With things being made in one country and consumed in another, trade boomed.
Phase 4 – the one we are in today – started when production itself got broken up and shifted around to different nations. This is known as offshoring and it radically transformed world trade and manufacturing.
The transitions between the phases – so-called ‘phase transitions’ – were marked by world-shaping changes.
Summary: Four phase transitions
- Transition 1: Modern humans leave Africa; Phase 1 begins: Humans colonise the world.
- Transition 2: Climate warms and stabilises; Phase 2 begins: Agriculture allows rise of ancient civilisations.
- Transition 3: Steam Revolution; Phase 3 begins: Trade costs drop, Old Globalisation starts, the Great Divergence appears.
- Transition 4: ICT Revolution; Phase 4 begins: International knowledge flows boom, New Globalisation starts, the Great Convergence starts.
Here is a summary of the four phases:
Phase 1: “Humanising” the globe (first 190,000 years)
Consumption moves to production.
Trade is rare.
Phase 2: “Localising” the world economy (12,000 BCE - 1820)
Bundling of production and consumption
Agriculture allows people to move production to consumers.
Trade is rare but regular.
Phase 3: The Old Globalisation (1820 - 1990)
Production & consumption separate geographically.
Trade increases massively.
Phase 4: The New Globalisation (1990 - Now)
Factories separate geographically (offshoring).
Trade and international knowledge flows increase massively.
Once you’ve finishes the video, move on to the next video which goes into a bit more depth on Phase 1.
© Richard E. Baldwin