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Globalisation defined

In this step, we provide a background to the development of globalisation.

Globalisation is often considered a modern phenomenon of the late 20th century.

In fact, the current wave of globalisation, which started in earnest in 1950, is a continuation of world growth that occurred from 1850 to 1914 (Hirst and Thompson 2009).

The influence of Adam Smith

Others consider the true start of our modern market-based global economy to be Adam Smith and his groundbreaking ideas presented in The Wealth of Nations, first published in 1776. It was Smith’s idea that countries should concentrate on trading goods that they had in abundance (for example, natural resources) and import goods that they could not easily make.

Britain at the time was using its abundance of coal to start the first industrial revolution, which was one of the drivers for the United Kingdom’s growing international trade empire Before that, in the 13th century, it was wool – and then using the abundance of forests in the 17th century to create a navy to protect traders. Smith’s book is the first rationale for a market-based economy, which most of the world’s nations now attempt to emulate.

Smith’s ideas prompted a move from a mercantile system of self-sufficiency and local protectionism to one of selling surpluses and trading with neighbours who have the goods you want. This, in turn, encourages a specialisation of labour, which helped encourage the efficient allocation of resources to manufacturing.

This increased the quantity of goods being made and lowered the unit cost of each item, enabling even more people to buy desirable goods that were normally only available to the rich. Adam Smith is often referred to as the ‘father of free trade’, which is the basis of the development of countries from mainly agricultural economies to industrialised and technological ones.

Globalisation today in a rules-based system

A current definition of globalisation needs to encompass the rules-based system that has developed following the end of the second world war, mainly encouraged by the USA.

Several global governance bodies were created, including the United Nations (UN), the World Trade Organization (WTO) and the International Monetary Fund (IMF) to ensure that all countries were treated fairly, trade terms and disputes could be settled and a country could remain solvent in times of financial crisis. There are numerous other agencies within the UN and many non-government organisations (NGO) that monitor specialist areas of global interest, such as health issues and the environment, and try to influence governments.

Without these global government agencies, many countries might resort to mercantile and protectionist policies on trade and economic activity, as happened between the two world wars in the 20th century and before the 1850s as the first industrial revolution took hold. It could be argued that the current success of globalisation is creating a similar backlash.

Your task

Search for academic and journal articles on definitions for globalisation and answer the following questions in the comments area:
  • Is globalisation redistributing wealth for countries?
  • Is it worth the effort for developing countries to take part in globalisation?


Hirst, P and Thompson, G (2009) Globalization in Question: The International Economy and the Possibilities of Governance. Cambridge: Polity Press

Smith, A. (1789) The Wealth of Nations. 5th edn

© Coventry University. CC BY-NC 4.0
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