The Second Globalization

The World Flattens Again

A second globalisation began in the 1980s, fundamentally changing what moves and how. While the first era (1870-1914) moved bulk commodities and people, the second moves components, tasks, and data.

Key drivers:

• Container shipping: Standardised boxes cut handling costs by 90% plus, making component shipping viable.
• ICT: Real-time communication made cross-border coordination feasible.
• Trade liberalisation: GATT, WTO, and regional pacts lowered barriers.
• China's opening: 800 million workers joined the global pool in 1978 and 2001.
• Capital liberalisation: Financial deregulation allowed freer capital flows.

Global value chains fragment production globally. Each stage goes where costs and quality are optimal, meaning $\text{Trade in tasks} > \text{Trade in goods}$.

Chains and Backlash

Winners and losers: Consumers gained lower prices and variety. Rich-country manufacturing workers lost wages to cheaper competitors, while emerging Asia saw historic poverty reduction. This distribution drives modern political backlash like Brexit and tariffs.

Limits: Geopolitical rivalry, pandemics, and security concerns now drive re-shoring and friend-shoring to relocate supply chains.

Tip: The container is the unsung hero: cutting handling costs by 90% made it profitable to ship parts, not just finished goods, enabling global value chains.