Economic Shifts: Decolonization to Globalization

Posted on Mar 16, 2025 in Business Administration and Management (BAM)

Economic Development and Decolonization

It also coincided with decolonization, changes in development strategies (industrialization and questioning trade), the prioritization of maximizing GDP, and a significant demographic transition and population boom.

The Impact of the Crisis

Oil-exporting countries increased their revenues, leaving them with a surplus of money they could not spend. Some developed countries borrowed this money, but those borrowing countries had difficulties repaying their debts. When private markets realized this, they stopped the flow of funds, putting these countries in a more difficult situation. GDP increased, but income per capita decreased.

Dramatic Growth in China and India, 1980-2007

China

  • End of centrally planned economy.
  • Fast-paced and structural change as a characteristic of growth.
  • Links with international economies through export boom and financing developed economies.
  • Improvements in quality of life and regional imbalances.

India

  • Acceleration of growth since 2003.
  • Different growth pattern (private consumption, investments, and increased export of services).
  • Weakness of public investments and financing growth.
  • Interpersonal and territorial inequalities.

The Evolution of Firms

Industrial Revolution

Technology and the cost of capital required centralization. Characteristics of firms included hierarchy, discipline, and division of labor.

The Second Industrial Divide

A new cluster of innovations and the globalization of markets affected production systems, leading to new business models.

State Intervention in the Economy and Public Policies

Characterized by:

  1. The classical orthodoxy: the Smithian minimal State and classical public finance.
  2. The macroeconomic Keynesian revolution.

Other factors driving the change in attitudes since 1945:

  1. The new economic policies:
    • Growth (fast and full employment) and stability (prices and exterior).
    • Equity (income distribution and social security) and structural policies.
  2. The liberal reflux from the 1980s (American and British liberal policies).

The Welfare State

Why did the Welfare State emerge?

  • Industrialization.
  • The questioning of the system by the socialist movement.
  • The transition to full democracy.
  • The demographic transition and sustained economic growth.

The First Globalization

Integration of Commodity Markets

In reality, markets are (more) integrated if:

  • Transport is cheap (including insurance, storage, etc.).
  • There are few artificial barriers to trade (prohibitions, tariffs, quotas, inspections, etc.).
  • Other transaction costs (e.g., for getting information on prices in foreign markets) are low.

How can we measure market integration?

  • Looking at volumes of trade (see above).
  • Looking at the convergence of prices (so, do the theoretical forces work?).

Main forces:

  • Reduction in transport costs.
  • Liberalization of trade policy.
  • International commercial treaties.

Trade in the First Globalization

Specialization according to comparative advantage: inter-industry trade.

Commercial Policies

The controversy between free trade and protectionism; the free trade agreements.

The New International Division of Labor

Exporters of manufactures, countries exporting primary products (the neo-Europes), countries exporting primary products (tropical countries).

The New International Division of Labor: The Center is Northwestern Europe

  • Scarcity of land, relative abundance in labor and capital.
  • Experiences industrialization, fast growth, exports manufactured goods (consumer and capital goods).
  • Directs labor and capital to the periphery.
  • Settlement periphery (Australia, Canada, Argentina): Abundance of land, scarcity of labor and capital. Specialization in the exportation of primary, land-intensive products (agricultural products, meat, wool, etc., consonant with Europe’s demand for food and raw materials); imports of manufactures, capital, and labor from the center.
  • Special case: USA: Also relatively land-abundant and receives much labor and capital (although it also starts to export capital at the beginning of the 20th Century), but due to the formation of demand centers in the country itself, foreign trade loses importance relative to the growing (and integrating) domestic market.